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Chapter 4.2 Own a Franchise or Start a Business

Chapter 4.2 Own a Franchise or Start a Business. Mrs. Leonard Entrepreneurship. Franchise Ownership. A ______________ is a legal agreement that gives an individual the right to market a company’s products or services in a particular area Ex. Jiffy Lube stations, McDonald’s

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Chapter 4.2 Own a Franchise or Start a Business

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  1. Chapter 4.2 Own a Franchise or Start a Business Mrs. Leonard Entrepreneurship

  2. Franchise Ownership • A ______________ is a legal agreement that gives an individual the right to market a company’s products or services in a particular area • Ex. Jiffy Lube stations, McDonald’s • ________________ is a person who purchases a franchise agreement • ________________ is a person or company that offers a franchise for purchase • More than ____________ people in the U.S. own franchises • Franchising opportunities are available in every field, from motels to pet stores

  3. Sources for finding out about Franchise Ownership and Opportunities • Franchise Opportunities ______________ – publication of the U.S. Department of Commerce • Lists more than 1,400 franchise opportunities by category • Provides information about costs and capital requirements • ___________ Guide to Buying a Franchise • Publisher by the Federal Trade Commission • Books on franchising available at your public library • The ________________________ • Magazines such as ____________, Barron’s Business Start-Ups, Entrepreneur, and Inc

  4. Operating Costs of a Franchise • _______________ Franchise Fee – fee the franchise owners pays in return for the right to run the franchise • Fee can run anywhere from a few thousand to a few hundred thousand dollars (usually _______________) • ______________ Costs – costs associated with beginning a business • Include the costs of renting a facility, equipping the outlet, and purchasing inventory

  5. Operating Costs of a Franchise • _____________ Fees – weekly or monthly payments made by the owner of the franchise to the seller of the franchise • Payments usually are a percentage of your franchise’s income • ______________ fees – fees paid to support television, magazine, or other advertising of the franchise as a whole

  6. Advantages of Owning a Franchise • An entrepreneur is provided with an _____________ product or service • Allows entrepreneurs to compete with giant companies • Franchisors offer _______________, technical, and other assistance • On-site ____________ or classes, aid with starting the new business and handling daily operations, and tips on crisis management • Offer help on everything from site selection and building design to equipment purchase and recipes • Most maintain a toll-free telephone number that franchises can call for ______________

  7. Advantages of Owning a Franchise • Equipment and supplies can be less _________________ • Because franchises are part of large chains, they can purchase in bulk • A guarantee of ____________________ attracts customers • Franchise contract mandates a certain level of quality, consumers know what they can walk into a franchise anywhere and receive the same product and service

  8. Disadvantages of Owning a Franchise • Franchises can cost a lot of ____________ and cut down on profits • Initial ________________ is needed to purchase a franchise business is high • Some of the profits you earn as a franchise owner are returned to the franchisor as royalty fees • Owners of franchises have less _______________ to make decisions than other entrepreneurs • Many business decisions have already been made • Products and services, prices set by franchisors

  9. Disadvantages of Owning a Franchise • Franchisees are dependent on the performance of other franchisees in the chain • If other franchises run sloppy operations, customer opinions of the chain will decline – which will make customers stop going • The franchisor can _____________ the franchise agreement • If franchisee fails to pay royalty payments or meet other conditions, the investment in the franchise could be lost • If the franchise ____________, the franchisor can choose not to renew the agreement

  10. Evaluating a Franchise Ask these questions to evaluate a specific franchise • What is the projected _____________ for the franchised product or service in the area I want to locate in? • Will I be guaranteed an exclusive ______________ for the duration of the franchise term, or can the franchisor sell additional franchises in the territory • What are the costs and ____________ fees associated with the franchise • How _________________ have other franchises in the area been? What do other franchisees think of the franchisor?

  11. Evaluating a Franchise • How long has the franchisor been in business? How ____________ is the franchisor? • What services does the franchisor provide? Will the franchisor help me with ____________, merchandising, and site selection? • Are benefits provided by the franchisor worth the loss of _________________ and the ________ of purchasing the franchise? • What happens if I want to cancel the franchise agreement?

  12. Evaluating a Franchise • Some franchisors make _________ or misleading claims about their franchises • Carefully ________________ the documents the franchisor gives you • Be suspicious of any company that will not back up its claims with ____________ financial statements • Beware of high-pressure sales tactics – never allow yourself to be _______________ into making the decision to quickly • Consult an ______________ before signing a franchise agreement, these are complicated documents • Who is interested in starting a franchise? • On page 88 look at table of top 10 Franchises – which would you want to open?

  13. Starting your own business • As an entrepreneur, you might want to establish a business of your own • Who wants to start their own business?

  14. Advantages of Starting your own Business • Entrepreneurs who start their own business get to make _____________ about everything from where to locate, prices to charge, and employees to hire • They are completely ______________ and create their own destinies • Entrepreneurs find great ______________ in starting their own business • Attracted to the challenge of creating something new • Feel triumph when their business turns a __________

  15. Disadvantages of Starting your Own Business • There is no _____________ that customers will purchase what you offer –you must estimate the demand for your product or service • Must make _____________ that other types of entrepreneurs need not make • What product/service to offer, the location, what employees to hire

  16. 4.2 Assessment • Thinking Critically 4.2 (p.91) • Questions 1-3 • Type the questions and your answers (answer in bold) • Save! • 4.2 true/false and multiple choice worksheet • Put in your notebook

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