John and Beverly Hill have lived in Mayberry for over 15 years and have been inv

Question

John and Beverly Hill have lived in Mayberry for over 15 years and have been involved in the community. The town is located in a rural area and has a population of 10, 000. There are some tourists and contract workers who occasionally come to the town. They have dreamed of owning their own business and want to open a specialty ice cream store. The town has a Dairy Queen, a McDonald's and several local restaurants. One of the local convenience stores has ice cream by the dip. John and Beverly have come to you for advice. They don't know whether to start the business from scratch or purchase some type of franchise. Explain to them the pros and cons of a franchise. Make a recommendation whether they should seriously consider a franchise. Provide justification for your recommendation. Consider the context of the question such as the town characteristics in making your recommendations.

Explanation / Answer

Pros of a franchise

Cons of a franchise

Recommendation to John and Beverly – John and Beverly have lived in the area for over 15 years and they have been involved in community. Which means they have created a reputation for themselves in the local community, more so because it’s a rural area having a small population. Considering these conditions, my recommendation for John and Beverly would be to setup their own business instead of purchasing a franchise. Franchise is usually successful in urban or metropolitan area with large population, where you can market to a larger population. The setup cost involved in franchise would be very high plus recurring royalties would add to the burden and it will be difficult for them to breakeven and make profits at a small scale from a franchise business. They should rather capitalize on the reputation they have built over the years and setup a business in their name.

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