Lesson 1.4.1c

1.4.1c Franchising: advantages and disadvantages Quiz: Pearson Edexcel Business, Unit 4

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 1.4.1c, Franchising: advantages and disadvantages: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 4: Making the business effective, written with Revision Ninja.

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The 20 questions

  1. What business method involves paying a fee to trade under an established brand name?

    • Diversification
    • Privatisation
    • Franchising
    • Outsourcing

  2. Which of these is a key benefit for a franchisee starting a new business?

    • Guaranteed profit
    • Total independence
    • Proven business model
    • Zero start-up costs

  3. Which of these is a typical financial drawback for a franchisee?

    • Ongoing royalties
    • Corporation tax
    • Dividend tax
    • Import tariffs

  4. A franchisee pays a £20,000 franchise fee and 6% of sales as royalties. Sales are £150,000 in a year. What are the royalties?

    • £20,000
    • £12,000
    • £6,000
    • £9,000

  5. What is a main advantage of franchising for the franchisor business?

    • Lower brand awareness
    • Complete operational control
    • Higher tax rates
    • Rapid expansion

  6. What is a major disadvantage of franchising for the franchisor?

    • High wage costs
    • Brand reputation risk
    • Guaranteed profits
    • Low product quality

  7. What primary advantage does operating under an established brand name give a franchisee?

    • Instant brand recognition
    • Guaranteed annual profit
    • Zero start-up costs
    • Total operational freedom

  8. Why can a franchisee find it difficult to change operations?

    • Strict operating rules
    • Poor marketing
    • Lack of staff
    • High local taxes

  9. What does a franchisor provide in exchange for fees?

    • Free raw materials
    • Guaranteed customers
    • Tested business model
    • Unlimited business loans

  10. Who actually owns the brand used by a franchisee?

    • The government
    • The local council
    • The franchisor
    • The franchisee

  11. A franchisor earns a royalty of 5% on sales. Sales in one outlet are £240,000. What royalty does the franchisor receive?

    • £48,000
    • £12,000
    • £1,200
    • £24,000

  12. Why might an entrepreneur choose franchising over an independent start-up?

    • Higher profit share
    • Complete freedom
    • Proven business model
    • Zero risk

  13. Why do franchisors insist on strict quality standards across all outlets?

    • Increase tax efficiency
    • Reduce staff turnover
    • Protect brand image
    • Lower material costs

  14. What is the primary financial risk for a new franchisee?

    • Shareholder loss
    • High dividend tax
    • Poor sales
    • Unlimited liability

  15. What is a key benefit of franchising for customers?

    • Local ownership
    • Consistent quality
    • Cheaper prices
    • Free delivery

  16. What is an ongoing payment made by a franchisee to a franchisor called?

    • A dividend
    • A franchise fee
    • A royalty
    • A corporation tax

  17. Why might a business choose franchising as a growth method?

    • Lowers staff wages
    • Uses franchisees' capital
    • Eliminates competition
    • Avoids all risk

  18. What document sets out the rules and fees for a franchise?

    • Deed of partnership
    • Articles of association
    • Franchise agreement
    • Certificate of incorporation

  19. What type of risk does a franchisee face from high franchisor advertising costs?

    • Exchange rate risk
    • Unlimited liability
    • Uncontrollable costs
    • Supply shortage

  20. What are the two main parties involved in a franchise agreement?

    • Supplier and customer
    • Director and shareholder
    • Franchisor and franchisee
    • Partner and investor

All Pearson Edexcel Business quizzes