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Andy, an entrepreneur, plans to open a bakery in his neighborhood. He realizes there are no branded bakeries in the locality, though there are many independent bakeries. He approaches Soft Bakes, an international bakery chain, and signs an agreement with them to open a bakery shop using Soft Bakes' name and management methods.

In this scenario, which of the following business methods does Andy use?

1) Franchising
2) Merger
3) Acquisition
4) Licensing

Answer :

Final answer:

Andy is utilizing the franchising method to open a bakery shop, which involves paying a franchise fee and royalties to the franchisor Soft Bakes in return for the right to use the brand and business model.

Explanation:

In the scenario described, Andy is using the franchising business method by signing an agreement with the international bakery chain Soft Bakes. This allows him to use the Soft Bakes name and management methods, indicating a business relationship where the franchisor (Soft Bakes) grants the franchisee (Andy) the rights to operate a business under its brand and utilize its established business model.

In return for this, Andy likely pays an initial franchise fee and ongoing royalty fees. Franchises are prevalent in many sectors, with fast-food restaurants being one of the most recognizable examples of this business strategy.

The franchisor typically provides support such as training, supply chain management, and assistance with setting up operations. This model can provide a valuable opportunity for entrepreneurs like Andy who want to run their own businesses while benefiting from the proven systems and brand recognition of established chains.

Learn more about Franchising here:

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