Private limited companies

Benefits:
Raise capital from states of shares
Limited liability for shareholders
Separate legal identity
Continuity

Limitations:
Cannot sell shares to the public
Legal formalities
Accounts are available for public to see
Not easy to transfer shares

Public limited companies

Benefits:
Can sell shares to public
Rapid expansion possible/ specialist managers appointed
Limited liability
Continuity

Limitations:
Legal formalities
Disclosure of accounts and other information
Divorce between ownership and control
Expensive to ‘go public’

To the franchisor To the franchisee

Advantages ● The franchisee buys a ● The chances of business failure

licence from the are much reduced because a well-
franchisor to use the known product is being sold
brand name ● The franchisor pays for advertising
● Expansion of the ● All supplies are obtained from a
franchised business is central source - the franchisor
much faster than if the ● There are fewer decisions to make
franchisor had to finance than with an independent
all new outlets business - prices, store layout and
● The management of the range of products will have been
outlets is the decided by the franchisor
responsibility of the ● Training for staff and management
franchisee is provided by the franchisor
● All products sold must be ● Banks are often willing to lend to
obtained from the franchisees due to relatively low
franchisor risk
Disadvantages ● Poor management of
one franchised outlet
could lead to a bad
reputation for the whole
business
● The franchisee keeps
profits from the outlet
● Less independent than with
operating a non-franchised
business
● May be unable to make decisions
that would suit the local area, for
example, new products that are
not part of the range offered by
the franchisor
● Licence fee must be paid to the
franchisor and possibly a
percentage of the annual turnover

Advantages of joint ventures Disadvantages of joint ventures

Sharing of costs - very important for If the new project is successful, then the profits
expensive projects such as new aircraft have to be shared with the joint venture partner

Local knowledge when joint venture Disagreements over important decisions might
company is already based in the country occur

Risks are shared The 2 joint venture partners might have different
ways of running a business - different cultures