Small Business – A Profile. Small Business – one that is independently owned and operated for profit and is not dominant in its field. Small Business Sector. Small Business Administration (SBA) developed ‘smallness’ guidelines for US businesses.
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Small Business– one that is independently owned and operated for profit and is not dominant in its field.
People who risk time, effort, and money to start and operate a business.
See Figure .1, page 170.
Many small businesses started by finding new ways to do a job with less effort for less money. (Ford Motor Company, Polaroid, Xerox, etc.)
Personal Relationships with Customers and Employees
Ability to Adapt to Change
Retention of Profits
Ease and Low Cost of Going into Business
Ease of Ending Business
Ability to Keep Information Secret
Risk of Failure
Limited Ability to Raise CapitalPros and Cons of Smallness. . .
AFranchiseis a license to operate an individually owned business as though it were part of a chain of outlets or stores.
Examples:Pepsi, Coca-Cola, Ford, BMW, McDonald’s, Taco Bell, Dairy Queen, Costa Coffee, Hard Rock Café, etc.
Franchisingis the act of granting a franchise (license) to an individual or group.
Afranchiseris the individual or organization granting a franchise (license).
A franchiseeis a person or organization purchasing the franchise (license).
See Table 6.4, page 192.
Examples: passenger cars, trucks, farm equipment, shoes, paints, petroleum, etc.
Examples:common in soft-drink industry – franchise independent bottlers who then sell to retailers
Franchiser is concerned with quality control – development and marketing strategies.
Examples:Holiday Inns, McDonald’s, Burger King, Dairy Queen, Hertz Corporation, Avis, Kentucky Fried Chicken, Subway/TCBY, Radio Shack, Century 21 Real Estate, etc.
Gains fast and well-controlled distribution of its products without incurring the high cost of constructing and operating its own outlets.
Has more capital available to expand production and to use for advertising.
Can ensure, through the franchise agreement, that outlets are maintained and operated according to its own standards.
Since franchisee is likely to be very highly motivated to succeed, higher royalties will be paid to the franchiser.
Opportunity to start a business with limited capital and to make use of the business experience of others, as an outlet with an internationally recognized name has guaranteed customers as soon as it opens.
If business problems arise, the franchiser gives the franchisee guidance and advice.
Franchisee also receives materials to use in local advertising and can take part in international promotional campaigns sponsored by the franchiser.
Franchisee can save money on advertising, supplies and various business necessities by purchasing them with other franchisees.Advantages of Franchising. . .
Main disadvantage is that the franchiser retains a great deal of control.