Question

Sierra is interested in becoming a franchise owner, by opening and operating one of 50 Cactus Katie's Grills, a very successful fast food chain specializing in food dishes from the American southwest. Which of the following problems is Sierra most likely to encounter if she agrees to become a franchisee?

1) Difficulty in finding suitable location for the franchise
2) Lack of support and guidance from the franchisor
3) High initial investment and ongoing royalty fees
4) Limited menu options and customer preferences

Answer 1

Sierra is most likely to encounter the issue of high initial investment and ongoing royalty fees when opening a Cactus Katie's Grills franchise. Although franchises offer support and a proven business model, the financial commitment required can be significant.

Step-by-step explanation:

If Sierra is interested in becoming a franchise owner and opening one of the Cactus Katie's Grills, the problem she is most likely to encounter as a franchisee is high initial investment and ongoing royalty fees. A franchise involves purchasing the rights to start a business based on a model designed by the franchisor. While the franchisor usually provides training and support, the franchisee is responsible for the franchise fee and ongoing royalty payments, which can be substantial and thus impose a significant financial burden initially and over the longevity of the business operation.

Other potential challenges might include the difficulty in finding a suitable location, but this is typically a common hurdle for any business, not specific to franchises. Lack of support and guidance from the franchisor is possible, but reputable franchises provide extensive support. Limited menu options and customer preferences are inherent to the franchise model, ensuring brand consistency, but these limits are known beforehand and thus less likely to be encountered unexpectedly after the agreement.