Business Studies 0450/23 May/June 2025: question paper and mark scheme

Mark scheme

1(a) Explain two advantages and two disadvantages to Jemi of buying a 8 franchise. Award 1 mark for each advantage/disadvantage (max 2 advantages/max 2 disadvantages). Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage of buying a franchise which must be applied to this context. Relevant advantages might include: • Risk of business failure to the franchisee is much reduced – because the brand is well-known with people who like eating vegan meals • The franchisor pays for national advertising – reducing the costs of promotion for the restaurant • Supplies are obtained from central sources / quality will be assured as already checked by the franchisor – less need to research suppliers of plant-based ingredients • Fewer decisions to be made • Training for employees and management is provided/arranged by the franchisor • Banks may be more willing to lend as risk of failure is lower Relevant disadvantages might include: • Less independence than when operating a non-franchise business / franchisor will impose strict controls over what is allowed – which meals to sell • May be unable to make decisions to suit the local areas – and some local vegetables may be more popular than others nationally • Licence fee must be paid to the franchisor – costs $50 000 • Local advertising will still have to be paid for by the franchisee • Royalty payment made to franchisor each year For example: The risk of business failure is much reduced (1) because the brand is well-known with people who like eating vegan meals (app). Application could include: restaurant; vegan target market; plant-based ingredients; meals; fruit and vegetables; $50 000; chefs; working 40 hours a week; 12 employees; increasing trend for people eating vegan meals; eating less meat is good for the environment; menus; recipes. 1(b) Using Appendix 1 and other information, consider the following two 12 applicants for the position of chef at Jemi’s new restaurant. Which applicant should Jemi employ? Justify your answer. • Tianna • Vea Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both applicants. Well-justified recommendation. Candidates discussing both applicants in detail, in context and with a well-justified recommendation, including why the alternative applicant was rejected, should be rewarded withthe top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one applicant. Judgement with some justification/some evaluation of choice made. Candidates discussing at least one applicant in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the applicants with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining both applicants in context should be rewarded with the top marks in the band. 0 No creditable response. 0 1(b) Relevant points might include: Tianna • Wage costs are $4 per hour more than Vea • Working 40 hours a week will mean wage costs will be $480 compared to $320 for Vea • On-the-job training required by a chef at another franchise restaurant – cheaper to train than Vea at $1000 rather than $10 000 • Training specific to franchise meals – training more appropriate and focused on VV needs – only requires a short period before ready to start work – 2 weeks • Already qualified chef with many years’ experience – should settle to the VV job quickly – may have good ideas from working in several restaurants over 20 years – may be able to improve efficiency – reducing unit costs of meals Vea • Wages are cheaper at $8 per hour than Tianna at $12 per hour – working 40 hours then wage cost is $320 – maybe helping to reduce total costs and increase profit • Off-the-job training at a chef training centre – may teach the latest techniques – so brings new ideas to the restaurant – may lead to increases in efficiency • Will be 10 weeks before they can start work as a fully qualified chef and this may delay the opening of the restaurant – delaying the inflow of revenue from customers • Only part-qualified so may not be as efficient and may produce lower quality meals • Has worked for 10 years assisting chefs in other vegan restaurants – may have more experience of producing these types of meals and the ingredients required Recommendation Justification might include: • Tianna should be employed to be the chef at the new vegan restaurant. She is fully qualified and will not take as long to be trained and working to produce franchise meals. Vea is not suitable as she is only part-qualified and will take a lot longer at 10 weeks before she can start to work in the restaurant which may delay the opening. • Vea should be employed as she is a lot cheaper to employ than Tianna at $8 per hour giving a lower wage cost of $320 per week.

Mark scheme

2(a) Explain two benefits of market segmentation for VV. 8 Award 1 mark for each benefit (max 2). Award a maximum of 3 additional marks for each explanation of the benefit of market segmentation – one of which must be applied to this context. Relevant benefits might include: • Gain more sales – by appealing to the specific needs of customers in this segment – better meets customer needs • Attracts new customers – may find it easier to fill a gap in the market currently not being met by other businesses • May be able to charge higher prices – as customers willing to pay higher price for specific product – increases revenue • Increases customer loyalty – service can be designed to meet the exact customer needs of the market segment • May make it easier to compete with businesses that serve the mass market • Marketing budget may be used more effectively – marketing strategies can be focused on the specific target market For example: VV may be able to charge higher prices (1) for the vegan meals served in the restaurant (app) because customers may be more willing to pay a higher price for specific products that meets their exact needs (1) which may lead to higher revenue for VV (1). Application could include: restaurant; vegan target market; plant-based ingredients; meals; fruit and vegetables; $50 000; chefs; working 40 hours a week; 12 employees; increasing trend for people eating vegan meals; eating less meat is good for the environment; menus; recipes. 2(b) Using Appendix 2 and other information, consider the following three 12 possible locations for Jemi’s new restaurant Which location should Jemi choose? Justify your answer. • Location A • Location B • Location C Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more locations. Well-justified recommendation. Candidates discussing all three locations in detail, in context and with a well-justified recommendation, including why the alternative locations were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one location. Judgement with some justification/some evaluation of choices made. Candidates discussing two or more locations in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the locations with little/no explanation. Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining all three locations in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Advantages Disadvantages Location A • May be able to charge • May be seasonal a higher price for demand from tourists meals – area visited – high revenue at by large number of certain times of the tourists – higher year but lower at other revenue times of the year – • On a main road in the may cause cash flow city centre makes it problems easily accessible – • High rent in city centre likely to have good leads to higher costs transport links may • High competition in enable a wider range the area so may have of potential to keep prices lower – employees as can could reduce revenue easily get to the and increased costs restaurant may mean this is a • May attract workers less profitable location in the city – as in the • Low unemployment centre which makes it – may make it more easily accessible as difficult to recruit near to where they employees work Location B • No other restaurants • Only open 06:00 to in the mall so no 18:00 each day so competition – may be limited opening hours able to charge higher for the restaurant – prices – leading to may reduce revenue higher revenue as fewer customers • Many families visit • No restaurants in the the shopping mall mall so people may leading to many not expect to eat there potential customers – larger groups increasing revenue • Low unemployment – people have more income to spend – increases demand for meals in restaurants 2(b) Advantages Disadvantages Location C • Likely to be less • Local people are main competition than in customers – may not the city centre be high number of • High unemployment customers – lower may make it easier to revenue recruit staff – at lower • High unemployment wage rate – lower may mean incomes wage costs overall are lower in the town • Likely to have lower – leading to lower rent as in a town not a demand for restaurant city meals • Several restaurants in the town so competition in the area – may lead to lower prices and/or lower revenue Recommendation Justification might include: • Location A should be chosen as it is likely to have the highest number of customers as it is in a tourist area and in the city centre. Location B has limited opening hours so will reduce revenue earned and location C is in a small town reducing the likely number of customers. • Location B should be chosen as it is in a shopping mall and is visited by families. Therefore, there are likely to be many families wanting to eat at the restaurant as meals containing fruit and vegetables were reported to be healthier for children leading to larger groups and high revenue. • Location C should be chosen as it is visited by people who live in the town and should have customers all year round and the hours it can open are not limited so can open later in the evening to serve more customers and gain more revenue.

Mark scheme

3(a) Explain four sources of external finance a business could use. 8 Award 1 mark for each source of external finance (max 4). Award a maximum of 1 additional mark for each explanation of thesource of external finance. There are no application marks for this question. Sources of external finance might include: • Bank loans • Bank overdraft • Grants (or subsidies) from government • Sale of shares • Hire purchase • Leasing • Trade credit • Micro-finance • Crowdfunding • Mortgage For example: Bank loan (1) is a fixed sum of money borrowed for a set-period of time / repaid in monthly instalments (1). 3(b) Consider why the profitability and liquidity ratios for her restaurant will 12 be important to Jemi. Which is likely to be the most important for the success of Jemi’s restaurant? Justify your answer. • Profitability ratios • Liquidity ratios Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both profitability and liquidity. Well-justified conclusion. Candidates discussing both profitability and liquidity in detail, in context and with a well-justified conclusion, including why the alternative was rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of either profitability or liquidity. Judgement with some justification/some evaluation of choice made. Candidates discussing profitability and/or liquidity in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the profitability and liquidity with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining profitability and liquidity in context should be rewarded with the top marks in the band. 0 No creditable response 0 3(b) Relevant points could include: Profitability • Shows the measure of profit made for the value of sales ratios achieved – profit is just a measure of amount made from sales – but profitability can show the amount of profit made on each meal sold • Can use gross profit margin which can show if the business is keeping its cost of ingredients under control or if Jemi needs to manage her cost of sales more carefully • Can use profit margin to show whether the restaurant business is keeping expenses under control • Can be used to compare with other businesses – to see why there are differences • Compare with different years to see if the business will be operating more or less profitably – how well costs are being managed over time • Can be used to compare the profit relative to the capital of $50 000 to buy the franchise invested in the business using the measure of ROCE – is an indicator for Jemi whether the business is worth investing in or not Liquidity • Shows the ability of the restaurant to pay back its short- ratios term debts – if these debts cannot be paid back then the business may be illiquid and may have to cease trading • Measured using the current ratio to show the amount of current assets to current liabilities – ratio should be about 1.5 to 2 to be at a satisfactory level so the business has up to twice as many current assets to current liabilities and can comfortably pay its short-term debts such as to suppliers of ingredients • Can also be measured using the acid test ratio to show an ability of a business to pay its short-term debts not including inventory – a measure around or just below 1 is a satisfactory level that shows that a business should be able to pay its short-term debts even if it cannot quickly turn inventories into cash • It can be used to indicate whether the business needs to hold less inventory if it has a low acid test ratio then it may be holding too much inventory • It can also be used if Jemi needs to borrow as banks can assess the risk of lending to the vegan restaurant and whether it is likely to repay the loan / whether to grant the loan 3(b) Conclusion Justification might include: • Profitability will be most important as it will tell Jemi if she is getting a good return for her investment in the vegan restaurant business. If the return is low, then she may be better saving her money in the bank where there will be less risk of losing it all. As long as she manages her cash flow forecast carefully then liquidity should not be a problem and will be less important. • Liquidity will be most important as if the business is not liquid then Jemi will not be able to pay her debts and trade payables will force her to close the restaurant and sell the assets to repay the debts owed.

Mark scheme

4(a) Explain two ways the information in the government report outlined in 8 Appendix 3 might affect Jemi’s restaurant. Award 1 mark for each way (max 2). Award a maximum of 3 additional marks for each explanation of the way the information in the government report might affect Jemi’s restaurant – one of which must be applied to this context. Relevant ways it could affect the restaurant might include: • Increase in number of families demanding vegan meals – because the report suggests that eating more fruit and vegetables is healthy – especially for children and therefore may attract more families to the restaurant • Increase in demand for vegan food from the general population – as increased from 10% to 25% of the population eating only vegan meals – trend forecast to increase in the future so likely for demand to keep increasing leading to growth in the market • May increase competition with other restaurants adding vegan meals to their menus / new restaurants opening up – which may lead to fewer sales for Jemi’s restaurant • Finding suppliers of fruit and vegetables may become more difficult – increased transport costs from buying from suppliers further away – more time taken to fetch deliveries • Increased demand from more restaurants serving vegan meals increased demand for ingredients – possibly higher prices for ingredients – higher costs / higher prices For example: Increase in the number of customers (1) as there is likely to be an increase in demand for vegan meals (app) because the government report suggests that eating more fruit and vegetables is healthy (1) especially for children and therefore may attract more families to the restaurant resulting in an increase in revenue (1). Application could include: vegan target market; plant-based ingredients; meals; fruit and vegetables; $50 000; chefs; working 40 hours a week; 12 employees; increasing trend for people eating vegan meals; good for the environment; menus; recipes. 4(b) Consider the following two methods of motivation that Jemi could use. 12 Which method should Jemi choose to use? Justify your answer. • Job enrichment • Discount on meals in Jemi’s restaurant Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both methods of motivation. Well-justified recommendation. Candidates discussing both methods of motivation in detail, in context and with a well-justified recommendation, including why the alternative method of motivation was rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one method of motivation. Judgement with some justification/some evaluation of choice made. Candidates discussing at least one method of motivation in detail and applying it to the case should be rewarded with the top marks in theband. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the methods of motivation with little/noexplanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining both methods of motivation in context should be rewarded with the top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: Job enrichment • Workers in the restaurant to carry out additional tasks that require more skill or responsibility so makes the job less boring – more customers served per hour – reducing average costs • Workers may become more involved in decision- making in the restaurant – makes them feel more valued by the business • May not want to take on additional responsibility – which may demotivate employees – leading to poorer customer service • May not have the skills to carry out the additional tasks – additional training likely to be required – increases costs Discount on • Encourages employee loyalty – by giving the 12 meals in Jemi’s employees the incentive to eat in the restaurant restaurant with family and friends – increases sales • Likely to encourage lower labour turnover – if employee values the discounts • Lower revenue after discount applied to meals – reduces gross profit margin on meals served to employees • May be too low to have any impact / employee does not want to eat at the restaurant as does not like vegan food Recommendation Judgement might include: • Job enrichment should be chosen as the business is new and may not be able to afford to give a discount. It might be better to add additional tasks that require more responsibility to the job to try to make it more interesting and maintain increased motivation for a longer period of time. A discount may only motivate the 12 restaurant workers for a short time as they may get fed up with the meals at the restaurant. • Discounts on vegan meals in the restaurant will be the best way to motivate employees as it will save them and their families money when eating at the restaurant which will encourage loyalty.