Asked by Lyndon Baines on Sep 24, 2024

​The owner of the local "Fatty Foods" chain of restaurants is thinking about retiring.He has two options: he can hire salaried managers for his stores or franchise them to local entrepreneurs.If the owner believes that there are high costs to monitoring the stores after he retires,what should he do?

A) ​Let the stores stay company stores
B) Sell them off as franchises
C) Shut down the business completely
D) ​Never retire

Monitoring Costs

Expenses associated with overseeing and controlling business operations or transactions to ensure compliance and efficiency.

Salaried Managers

Managers who are compensated with a fixed salary rather than hourly wages, regardless of the number of hours worked.

Franchise

A business model where a company (franchisor) allows an individual (franchisee) to operate a location using its brand, systems, and support in exchange for fees.

  • Comprehend the fundamental concepts of franchising and its advantages in comparison to corporate-owned establishments.
  • Analyze the implications of agency problems such as adverse selection and moral hazard in business operations.