A-LevelBusiness StudiesBusiness and its environment9609/22 · May/June 2017 · Q130 Marks

Paul is a chef. He is looking to set up a new pizza restaurant in his local town in country A. He has done some research into the pizza market in this country. [Figure 1: Percentage of total pizza market sales in country A for 2016] Paul is considering whether he should set up his own independent pizza restaurant or enter into a franchise agreement with Perfect Pizza (PP), a national chain of pizza restaurants. Paul has calculated that an independent restaurant will cost $25000 to set up. This includes all of the furniture and signs required for the restaurant. It also includes some below the line promotion in the local area. Paul has obtained the following information about opening a PP franchise restaurant. • It would cost a total of $40000 to set up • PP would provide all furniture and signs, branded with the PP logo • Paul will have to pay a 5% royalty of his monthly revenue to PP • PP will provide national above the line promotion • PP has policies for diversity and equality that Paul can use to help with human resource management. Paul will manage the kitchen. However, he will require a restaurant manager to be in charge of customer service, inventory management and to supervise the non-kitchen employees. Paul has set up a meeting with his bank manager to discuss a suitable long term source of finance that could be used for this investment.

(a)(i)Define the term 'long term source of finance' (lines 18–19).[2]
(a)(ii)Briefly explain the term 'diversity and equality' (line 14).[3]
(b)(i)Refer to Fig. 1. The total value of market sales in country A in 2016 was $50m. Calculate the total value of sales for the three largest businesses.[3]
(b)(ii)Explain two appropriate methods (other than market share) that could be used to measure the size of PP.[3]
(c)Analyse two factors Paul should consider when selecting a restaurant manager.[8]
(d)Evaluate whether Paul should enter into a franchise agreement with PP.[11]

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Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

[2] A correct definition should cover: Understanding of 'source(s) of finance' – any reference to where money/capital/cash etc. comes from i.e. reference to a source of finance, such as a mortgage or equity (i.e. shares, debentures); Understanding of 'long term' – this can be reference to any time period more than a year.
[2] Exemplar: When a business gets money from a bank for more than a year.
[2] Exemplar: Finance for more than a year, e.g. Mortgage.
[1] Exemplar: Money that the business gets from a bank that does not need to be paid back quickly. (Understanding of source of finance but too vague about long term).
[1] Exemplar: A way to get new cash into the business that does not have to be paid back for a long time. (Understanding of source of finance but 'long time' is too vague and partly tautological).

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