What is the amount of equity being invested by Burger King worldwide to buy Tim Horton’s?
Burger King is investing an approximate $11 billion dollars in buying Tim Horton's (Jargon, 2014).
What is the benefit of this acquisition to Burger King?
One of the benefits to Burger King is that the deal will allow the company to minimize their taxes as the headquarters are moved to a lower tax Canada (Jargon, 2014). Secondly, Burger King will be able to enhance its ability to get new opportunities for growth. By targeting such an area, Burger King seeks to expand its opportunities as the current U.S. market is almost saturated (Jargon, 2014). Furthermore, Burger King will be able to collect income through royalties’ checks and will be less involved in sourcing capital to expand the brand in the new markets (Jargon, 2014).
Using examples from the case, explain how does the franchisee model help a restaurant to expand overseas?
Through franchising, the restaurant can provide a franchise license to the franchisee business to be able to trade in an environment that the franchisee business already knows the associated risks of the business. As such the franchise is able to expand and enjoy additional income through royalties (Jargon, 2014). In this case, Tim Horton’s has the ability to expand internationally, using Burger King since Burger King is more widely recognized than Tim Horton. Further, the capital investments are sourced from the franchisees’, and this allows expansion on a global scale (Jargon, 2014).
What are the disadvantages of the franchisee business model?
The franchisees’ have to pay certain fees to acquire the franchise license, and also, they will have to pay royalties to the franchise. The franchise license is normally costly and can be a huge expenditure for the franchisee business.
Reference
Jargon J. (2014). Burger King, Tim Hortons: Growth through Hands-Off Franchising. Retrieved from http://www.wsj.com/articles/burger-king-tim-hortons-growth-through-hands-off-franchising-1409093953
