Franchising

An entrepreneur can opt to set up a new independent business and try to win customers. An alternative is to buy into an existing business and acquire the right to use an existing business idea. This is called franchising.

A franchise is a joint venture between:

• A franchisee, who buys the right from a franchisor to copy a business format.
• And a franchisor, who sells the right to use a business idea in a particular location.

Many well-known high street opticians and burger bars are franchises. Opening a franchise is usually less risky than setting up as an independent retailer. The franchisee is adopting a proven business model and selling a well-known product in a new local branch.

There is one more type of business organization that is different from the above ones. A non-profit corporation is usually created with a specific purpose, such as for educational, charitable, civic or artistic. Nonprofits are generally exempt from federal and state taxation on their income.

D. Choose the correct answer according to the information from the text:

E. Complete sentences using information from the text:

1) If you are sole trader you can …

2) The main advantage of partnership is …

3) Shareholders are the …

4) To have limited liability means …

5) If you go into business alone, it’s called …

6) Educational, religious and charitable institutions are …

7) In a private limited company all shareholders must agree before …

8) To have unlimited liability means …

9) Having a partner you don’t have to …

10) Sleeping partners are …

F. Fill in the table and in groups compare and contrast types of businesses.

Reading 2: Types of organization structure