100%(3)3 out of 3 people found this document helpful
This preview shows page 20 - 24 out of 88 pages.
Most franchise agreements run between 5-20 years. What if you want to transfer your rights to a family member or sell the franchise to someone else or terminate the agreement? Poor performance of other franchisees The poor performance of one franchisee can seriously affect your business as franchisees are looked as one unit because the implicit message from franchises is that “we are all alike” for good or badAdvantages to the franchisor Expansion with limited capital investmentThe franchiser expands his distribution sources with limited equity investment. Fees from the franchisee provide capital for the franchiser rather than having to borrow from lenders or attract outside investors.
CAM 206: ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT21 Multiple sources of revenue The franchise fee which is paid when the agreement is signed, a certain percentage of the franchisee monthly gross revenue and money earned from selling the necessary products and suppliers to franchisees earn the franchisor money from many sources. Motivated Franchisees Try their best to ensure the success of the business which translates to more money of franchiser. Bulk purchasing A centralized purchasing of products and supplies allows the franchiser to take advantage of volume discounts, since they are buying for all the franchise location. Disadvantages to franchisor 1. Loss of controlFranchisees who do not maintain their business to the required standards reflect poorly not only on other franchisees but also on the parent company, while the franchiser controls the business to the extent of the franchise agreement. Franchisees are still independent business people and franchiser must get permission on them before any products are changed, added or eliminated. 2. Profit sharing with the franchisee. 3. Disputes may arise over issues such as payment of fees, termination of franchisee agreement, method s of operation, etc. 4.9 Revision questions1)Outline the disadvantages of buying an existing business
CAM 206: ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT22 2)Highlight the advantages of starting a business from scratch 4.10 Summary In this lecture you have learnt: 3)The various ways of getting into self-employment 4)Advantages of buying an existing business 5)Disadvantages of starting a business from scratch 6)Advantages and disadvantages of franchising 4.11Suggested reading Kuratco & Hodgetts: Entrepreneurship theory, process and practice LESSON 5: IDENTIFICATION OF A BUSINESS OPPORTUNITY 1.1 Introduction
CAM 206: ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT23 Welcome to the fifth lesson on Entrepreneurship and Small Business Management. The lecture deals with the various factors that can help a potential entrepreneur to identify a business opportunity.