ITPEC FE Subject A April 2026 Question 50

Franchising — independent owners trade under the company's brand and standards, paying royalties for the brand and the support.

The scenario contains every element of the model: the franchisor supplies the brand, the quality standards, the store-management rules and business support; the franchisee invests its own capital, runs the store and pays royalties. Expansion costs the franchisor little because the outlets are financed locally.

Answer (b)

Why not others:
- (c) Licensing — grants the right to use intellectual property such as a patent or trademark, but the licensor does not dictate store management or supply ongoing operational support
- (a) Direct distribution — the company sells to customers through its own channels, with no independent owners
- (d) Wholesaling — buying in bulk and reselling to retailers; the wholesaler does not operate under the producer's brand and standards

Key rule: Franchising bundles brand plus operating system plus ongoing support in exchange for royalties. Licensing hands over rights alone, which is the distinction the exam tests here.

AI-generated — may contain errors