Andy, an entrepreneur, plans to open a bakery in his neighborhood. He notices there are no branded bakeries in the locality, only independent ones. He approaches Soft Bakes, an international bakery chain, and signs an agreement to open a bakery using Soft Bakes' name and management methods.

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

a) Franchising
b) Market penetration
c) Licensing
d) Direct marketing

Question

13-01-2024
Business

High School

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Andy, an entrepreneur, plans to open a bakery in his neighborhood. He notices there are no branded bakeries in the locality, only independent ones. He approaches Soft Bakes, an international bakery chain, and signs an agreement to open a bakery using Soft Bakes' name and management methods.

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

a) Franchising
b) Market penetration
c) Licensing
d) Direct marketing

Answer :

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Final answer:

Andy is using the franchising method to open a bakery shop by partnering with the international bakery chain Soft Bakes, leveraging their established brand and business model.

Explanation:

In the scenario described where Andy signs an agreement with Soft Bakes, an international bakery chain, to open a bakery shop using their name and management methods, Andy is engaging in franchising. This business method allows Andy to operate his bakery using a proven business model and benefit from the franchisor's established brand, operational support, and supply chain. In return, Andy would typically pay an initial franchise fee and ongoing royalty fees. This method is quite different from strategies like market penetration, licensing, or direct marketing, as it involves a partnership and brand-sharing arrangement between the franchisor and the franchisee.