Identify an accurate statement about franchising.
A franchisor enables a rapid expansion while maximizing the funds invested in that expansion.
Specific information on the profitability of individual franchises does not have to be shared with the franchisor.
An entrepreneur spends more of his or her resources than if he or she had to start a new business from scratch.
A franchisor continues research and development on the products and processes that a small single business cannot afford to pursue.
The Correct Answer and Explanation is:
The correct answer is: A. A franchisor enables a rapid expansion while maximizing the funds invested in that expansion.
Explanation:
Franchising is a business model that allows a company (the franchisor) to expand its brand and product/service offerings by granting licenses to franchisees, who operate their own businesses under the franchisor’s brand. This system has several advantages that make it an attractive option for both franchisors and entrepreneurs.
Option A is accurate because one of the primary advantages of franchising is that it enables rapid business expansion with minimal capital investment from the franchisor. Since each franchise unit is typically financed and managed by the franchisee, the franchisor can grow the business geographically without taking on significant financial risk. The franchisee pays fees and royalties, which can be reinvested into the system to support further growth, training, and marketing.
Option B is incorrect because while detailed profitability data may not always be mandated, many franchisors require performance reports and financial disclosures from franchisees to maintain standards and monitor success. Transparency helps the franchisor ensure consistency and quality across the network.
Option C is misleading. In fact, an entrepreneur often spends less time and fewer resources in a franchise model compared to starting a business from scratch, because the franchisor typically provides support in training, branding, and operations.
Option D contains some truth, as franchisors do engage in research and development to improve the system. However, this is not unique to franchising and is not the most accurate or defining benefit of the model when compared to Option A.
Therefore, Option A best captures a fundamental advantage of franchising and is the most accurate statement among the choices given.
