Summary
Summary Unit 7 - Business Decision Making
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It is about what franchising is and the benefits. I have described a chosen business and have to explain how franchising would work best for the business.
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Business Decision MakingInduction Homework:
A franchise is a kind of license that a person has to get in order to have access to
another business’ trademark, which will allow that person to sell a product or provide a
certain service under that business’ name. E.g. McDonalds, Domino’s, Starbucks, etc.
A sole trader is someone who is the only owner of the business and is allowed to keep all
the profits after tax has been paid but is also liable for any losses. E.g. electricians,
plumbers, gardeners, etc.
If Julie Allen were to use to use the franchise option to start up her own car valeting
business, the start-up costs would be £9,950 for the marketing campaign as well as the
cost of the initial franchise. However, if she were to use the sole trader option, the start
up costs would be half as much. It would be £5,600, for the cleaning equipment, website
and for the development of the brand/advertising launch.
The monthly inflows for choosing the franchise would be £4,600 for car valeting and
£250 for the Sparklecar Plc Products. But for the sole trader option, the inflows would be
£3,400 for car valeting and £200 for the cleaning products. In my opinion, Option 1
would be better for Julie as it would bring in more money to the business.
The monthly outflows for choosing the franchise option would be £2,470 for the
franchise fee, purchase of Sparklecar products to use for valets, purchase of Sparklecar
products to sell and for the local promotion. However, the monthly outflows for the sole
trader option is much less for the rent and rates, purchase of cleaning products to use
for valets, purchase of cleaning products to sell and local promotion would be £1,675.
In conclusion, I think Julie Allen should choose the sole trade option as she would be
able to make decisions herself. I believe that it would benefit her more, for instance, it
would be cheaper to start up than the franchise option. Also, even though the inflows of
the sole trader option are less than the franchise option, it does not mean it will be
terrible for the business. This is because the outflows of the sole trader option are less
than the franchise option. This better for the business as they would be losing less
money. In addition, the net cash flow for the sole trader option would be £1,925,
however for the franchise option it would be £2,380. Even though more money available
is better, a low net cash flow will not be bad for the business as it can improve it in the
future.
Franchise Sole trader
Costs (£) Costs (£)
Start up 9,950 Start up 5,500
Inflows 4,850 Inflows 3,600
Outflows 2,470 Outflows 1,675
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