Robert is a sole trader who owns a shop selling motorcycles.

Mark scheme

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

1. [1] Unlimited liability
2. [1] Owned by one person / one person business
3. [1] Easy to set up
4. [1] Own boss / in control / not answerable to anyone / take holidays when they want
5. [1] Makes all decisions / quick decision-making
6. [1] All profits are for the owner
7. [1] Accounts are private / no published accounts
8. [1] Personal contact with customers
9. [1] A sole trader has unlimited liability
10. [1] in the event of bankruptcy, the owner is responsible for all the losses
11. [1] will lose all their invested money
12. [1] and have to sell personal possessions
13. [1] Private limited companies have limited liability
14. [1] do not face the same risk
15. [1] If the sole trader dies the business is closed/ends
16. [1] whereas in private limited companies there is continuity of existence
17. [1] the business continues trading
18. [1] and can be passed on to others
19. [1] Sole traders suffer from a lack of capital
20. [1] preventing them from modernising or providing services that customers require
21. [1] making it difficult to compete against the better services / lower prices of a private limited company
22. [1] as it has more shareholders who can provide more capital
23. [1] All decision-making down to one person (sole trader)
24. [1] whereas directors can pool their expertise to come up with possibly better decision-making
25. [1] The repair service will provide an income from repair fees
26. [1] The repair service will offer after-sales service
27. [1] which will be an additional selling point when persuading customers to buy his motor cycles
28. [1] increasing the chances of them becoming loyal customers
29. [1] returning for future purchases / repeat business
30. [1] Robert will be competitive over other businesses
31. [1] gaining word of mouth recommendation
32. [1] so gaining new customers / more sales
33. [1] There will be costs involved in providing a repair service
34. [1] extra labour such as a mechanic's wages
35. [1] and equipment that must be bought
36. [1] Extra workload
37. [1] Robert will have to carry out selling and repairing
38. [1] it will put extra pressure on him
39. [1] Robert must balance the costs of providing the service against the profits made and the less tangible effect it will have in persuading the customers to buy
40. [1] As long as the repair service is efficient, it will probably be beneficial to the business
41. [1] A franchise is a way of running/marketing a business
42. [1] with a franchise agreement
43. [1] where a business / the franchisor sells rights to other businesses / the franchisees
44. [1] allowing them to use their name/logo/trademark
45. [1] to sell their goods/services
46. [1] providing the standard of service / using the operating methods of the franchisor
47. [1] The franchisee will pay a sum up front to acquire the rights
48. [1] and an on-going fee (royalty) usually based on their sales
49. [1] A sole trader keeps all the profits of the business, while a franchisee has to share the profits with / pay royalties to the franchisor
50. [1] A sole trader works independently while a franchisee operates under a franchisor
51. [1] A sole trader can sell his business at any time, while there are restrictions on the franchisee selling his business
52. [1] A sole trader pays all initial costs whereas some initial costs, such as advertising might be paid by the franchisor
53. [1] A sole trader obtains their own goods, where a franchisor supplies the franchises with stock
54. [1] A sole trader can decide / be more flexible on what he/she wants to do, but a franchisee has to do what the franchisor wants / e.g. has to buy all supplies from franchisor
55. [1] A sole trader has few documents/formalities, whereas a franchisee has many legal documents
56. [1] A brand is a name put on a business's products to distinguish it from other similar products.
57. [1] The manufacturer of the motor cycle will establish the brand and Robert will sell the motor cycles with this brand name.
58. [1] Motor cycle manufacturers will try to associate their brand with a particular attribute which they think the customers will want, for example performance or reliability.
59. [1] The brand name is important but so is the reputation of Robert and his sales ability.
60. [1] The reputation will be enhanced by his after sales service.
61. [1] Advertising is another factor to consider because you will need to obtain enough customers to sell the brand.
62. [1] Branding is possibly the most important single factor because it is backed by a large advertising budget of the manufacturer.