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Sample Question Nowadays franchising is a common way to go into a business. From the perspective of a franchisee, discuss the major benefits and drawbacks of operating a coffee shop under franchise. (20 marks)

A franchising is a licensing agreement that permits an individual to own his or her business while benefiting from the know-­‐how, trademarks, and reputation of the established firm.

The first advantage of operating a coffee shop is under franchise wide name recognition. A franchisee may have an instant appeal of a national or regional reputation. It is unnecessary to spend years building up goodwill or working out the coffee shop. For example, being a franchisee of Starbucks coffee shop in Mong Kok, he can indeed enjoy the company’s potential customers, including students, white-­‐collar workers and elderly etc. The franchisee will be benefit a lot from this area.

The second benefit is access to big business management skills. The franchiser of coffee shop may provide an established accounting system and cost control so that the franchisee can enjoy the well developed management system without putting many efforts. To cite an example, the franchisee will know clearly about their expenditure and cost of operating a coffee shop beforehand like costs of coffee beans from different countries, coffee-­‐making tools, etc.

The third benefit is training and support. Training courses will be provided to the franchisee and the newly employed staff. An individual may start his own business even though without any prior business experience. A franchise will most likely to assist the

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franchisee in solving business problems. For example, Starbucks will provide resources and train their new franchisees, such as teaching them the recipes of making coffee and to identify different names of the coffee and the like.

The forth benefit is lower costs. As all franchisees have to buy raw materials, parts or materials from the franchiser like coffee beans, the franchise may buy in bulk and resell them to franchisees at a lower cost or discount. Also, there may have group insurance benefits, including business, health, and recruitment insurance, that may have at considerably lower cost than if the business were by itself. In addition, cost incurred to source a large variety of suppliers can be saved.

However, there are some drawbacks. The first drawback is considerable start up expense. Investment in a franchise usually requires a large amount of capital. A fee for site evaluation, site selection, or site preparation, and after the premises are completed, a monthly lease payment on the coffee shop and its equipment are also levied. For example, if the franchisee opens a coffee shop in central districts like Mong Kok, the rental payment for it will be several hundreds of thousand dollars a month.

The second drawback is monthly payments to the franchiser of coffee shop. In addition to the initial fee, the franchiser will usually require a payment of a percentage of gross sales. This payment is known as royalty. For example, the franchisee of Starbucks is required to pay royalty every year to the franchiser no matter he suffers from a loss or earn a profit.

The third drawback is constraints on independence. Coffee making equipment, raw materials used like coffee beans, inventory and services offered must be strictly approved by the franchiser. Also, there is an involvement by the franchiser in the daily operation of the unit. A franchisee must manage the coffee business strictly according top the elaborate operation manual.

The forth drawback is no guarantee success. Although the risk of being a coffee franchisee is lower, many franchisees have seen their investments disappear because of poor locations, rising costs, or lack of continued franchiser commitment. The local franchisee is vulnerable to changes in the national or even the international reputation of the franchiser. In addition there is the risk that the chain itself could collapse once an

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accident happens, e.g. a cockroach is found in a cup of Starbucks coffee will affect its reputation and therefore all the franchisees will be adversely affected.

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SAMPLE QUESTION

特 許 經 營 是 現 今 進 入 一 個 行 業 的 普 遍 方 法 。 是從特許權使用人的角度,討論以特許經營方式營運咖啡店的主要優點及缺點
(20)

特許經營是指一方允許另一方同時受益于技術訣竅、 商標和已建立的信譽及擁有他的
業務的授權合約。那麼採用專營權去經營一家咖啡店的第一個優勢,當然就是享用特許
權擁有人的知名度以及聲譽。 特許權使用人可能在一個國家或地區的聲譽即時提升, 亦省下資金建立咖啡屋的知名度及聲譽。 例如,一間於旺角開業的星巴克咖啡屋的特
許權使用人,便可享有星巴克龐大的潛在客戶。這都是因為星巴克的知名度早已遍佈亞
洲和歐美市場,星巴克亦受各個年齡層的人士(如學生,白領,老年人等)歡迎,特許使
用人在這方面受益不淺。

第二個好處是可學習大企業的管理知識及管理系統。 咖啡店的經銷商可能會提供一個
既定的會計制度和成本控制,使特許權使用人可以享受經已發展良好的管理系統,而無
須付出大量資金和時間去研究當中一二。 舉個例子,星巴克的特許權使用人將會清楚
知道有關他們咖啡店的開支和成本預算,如咖啡機的營運費用,咖啡原料如咖啡豆的價
錢,需要多少侍應,薪金應該多少等資訊,特許權擁有人都會提供。

第三個好處是培訓和支援。 特許權使用人及新聘用的員工將會接受特許權擁有人提供
的培訓課程。
特許權使用人即使沒有任何事先開業經驗仍可順利營運自己的業務。 專
營權極有可能協助特許權使用人解決業務問題。
例如星巴克提供資源,培養他們的特
許經營者,並教他們煮咖啡的秘訣,辨別咖啡不同的名稱,和辨識來自不同國家的咖啡
豆,務求保證服務質素的同時,亦能讓特許權使用人輕易地營運咖啡店。

Tomlaw

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最後一個好處是低成本。 由於所有特許權使用人要向咖啡豆特許權擁有人購買咖啡原
料及有關物料
,特許權擁有人通常大量購買這些物料,以享有數量折扣,並以低過市
價的價錢再銷售給特許權使用人。特許權使用人的營運成本大大減低。此外,特許權使
用人或可享有團體保險的好處,包括業務、 僱員和安全保險,可能比特許權使用人本
身去申請保險的成本更低。
此外,特許權使用人省下時間成本去尋找可信任的保險公
司。

但是,特許經營也存在一些缺陷。

第一個缺點是龐大的開業費用。 投資于一項專營權通常需要大量的資金。例如一間於
中環開業的特許經營的咖啡店,它所需的開業成本,包括了選址費用,裝修費用如聘請
裝修師父和購買特許權擁有人提供的桌椅等。即使選址及裝修完畢後,每個月的租金支
出都十分龐大。於中環開設咖啡店的每月租金,已可高達數十萬元,對特許權使用人絕
對是一個負擔。

第二個缺點是特許權使用人必須支付特許經營費。 特許權使用人須定期暗營業額某個
百分比,給予特許權擁有人此費用。
特許權擁有人甚至會要求特許權使用人于繼續該
營系統前,必須向特許權擁有人繳付一定數額的續約費,不管特許權使用人那年是遭受
損失或賺取利潤。

第三個缺點是對獨立的約束。 咖啡製造設備,咖啡豆、庫存量和提供的服務都必須經
特許權擁有人嚴格批准。
此外,特許權擁有人亦可能介入特許經營商的日常運作。特
許權使用人于咖啡店的裝修都要跟隨特許權擁有人的指令 如桌椅的擺設 招牌的顏色,


大小,擺放位置很可能都要經特許權擁有人的事先審核才可獲批。

最後一個缺點就是特許經營並不能保證成功。 雖然營運一間特許經營的咖啡店比由零
開始的風險低、但外在因素如不當的選址,都會令特許權使用人蒙受損失。
特許權使
用人或會受到連鎖效應的負面影響。即使一間特許經營的咖啡店營運得怎樣出色,只要
另一方發生過一次事故,如一隻蟑螂掉進於一杯咖啡裡,都會影響所有特許經營商的聲
譽,因此所有該特許經營者將會受到不利的影響。

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