CFA Level I · CFA Level I Exam · Business Models
A restaurant brand grants independent operators the right to use its name and operating system in return for an initial fee and ongoing royalties. Relative to the brand owning all outlets, this franchise model will most likely:
The franchise model most likely gives the brand owner less control over day-to-day operations. Franchisees operate the outlets and fund capital spending, while the owner collects fees and royalties instead of keeping the full outlet profit.
- Arequire the brand owner to fund more capital expenditure
- Bgive the brand owner less control over day-to-day operationsCorrect
- Cleave the brand owner with all outlet-level operating profit
Explanation
Franchisees run outlets, so the franchisor has less operating control, though it uses less capital and receives royalties rather than full outlet profits. Options A and C therefore describe company-owned outlets.
Did you get it right without looking?
One question tells you little. A timed set on Business Models shows your real accuracy, how long you take and where you lose marks.
More Business Models questions
- An analyst reviews a subscription software firm that has shifted from perpetual licences to annual subscriptions. In the first year after th…
- A company positions its products as the lowest-priced in its market and focuses on high volume and tight cost control. Which value propositi…
- A company sells printers at a low price, near cost, and earns most of its profit from proprietary ink cartridges that customers must keep bu…
- A business model describes how a company creates, delivers, and captures value. Which of the following is most likely a component of a compa…
- A budget airline offers the lowest fares on its routes by flying one aircraft type, using secondary airports and charging separately for bag…
- A start-up gives away a basic version of its app and charges a fee for advanced features used by a small share of its users. Which of the fo…