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Franchise, Family Business, New Business, or Existing Business?

Franchise, Family Business, New Business, or Existing Business?. What are the advantages of purchasing an existing business?. Already set up May get training with the sale Prior records Financial arrangements may be easier. What are the disadvantages of purchasing an existing business?.

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Franchise, Family Business, New Business, or Existing Business?

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  1. Franchise, Family Business, New Business, or Existing Business?

  2. What are the advantages of purchasing an existing business? • Already set up • May get training with the sale • Prior records • Financial arrangements may be easier

  3. What are the disadvantages of purchasing an existing business? • May not be making a profit • Problems might come with the business • Need to have money to buy the business

  4. Where might you look to find businesses for sale? • Newspaper • Use a business broker • Ask other people • Management consultants • Small Business Administration • Chamber of Commerce • Bankruptcy announcements

  5. Why would someone want to sell a business they started? • Insufficient sales or profits • New competition • Fear of changing economic conditions • Retirement • Partner disputes • Death or illness of a partner • Desire to do something different

  6. What are the steps involved in purchasing a business? • Write and identify objectives • Meet to investigate • Observe the business in operation • Ask for financial records for past three years • Ask for information in written form • Decide how you will finance the purchase • Get expert help to determine the value and price to offer

  7. What is a franchise? • Legal agreement that gives an individual rights to market a company’s products or services in a particular area

  8. How many people own franchises in the United States? • 770,000 people own franchises and the number is growing

  9. List sources where you are able to find information about franchises. • Franchise Opportunities Handbook • US Department of Commerce • Consumer Guide to Buying a Franchise • Federal Trade Commission • Books at the library • The Wall Street Journal • Magazines

  10. What are the costs associated with starting and operating a franchise? • Initial franchise fee • amount owner pays in return for the right to run the franchise • Startup costs • Costs associated with starting a business • Rent • Inventory • equipment

  11. What are the costs associated with starting and operating a franchise? • Royalty • Weekly and monthly payments made by the local owner to the franchise company • Usually a percentage of income • Advertising fees • Paid to the franchise company to support advertising as a whole

  12. Activity • Complete the franchise research and FTC rules sheet • Turn in the paper when you finish • Lemonade Stand practice • Reminders: TEST Thursday • Test retakes must be completed before the next test

  13. Reminders • Ad or brochure due Monday • Retakes • Get out your notes • Log in at the beginning so the computer will be ready when we need it

  14. What are the advantages of owning a franchise? • Established product or service • Management, technical, and other assistance • Equipment and supplies can be less expensive • Guarantee of consistency attracts customers

  15. What are the disadvantages of owning a franchise? • Fees can be costly and cut down on profits • Owners have less freedom to make decisions than other entrepreneurs • Depend on the performance of other franchisees in the chain • Franchisor can terminate the franchise agreement

  16. What percentage of the US economy is family businesses? • 90% of all business in the US are family businesses

  17. What are the advantages of owning a family business? • Pride and sense of mission • Business remains in the family • Enjoy working with relatives

  18. What are the disadvantages of owning a family business? • Hold senior management positions regardless of ability • Some make poor business decisions • May be difficult to hire employees because they are not members of the family • Family politics • Blurred lines between business and personal

  19. What are the advantages of starting your own business? • Get to make decisions about everything • Independent • Create their own destiny • Challenge • Feeling of triumph

  20. What are the disadvantages of starting your own business? • Many risks • No certainty • Make more decisions • Have to start with nothing (no employees, no customers, no suppliers, etc.)

  21. Disclosure • In 2007, UFOC changed to the FDD (Franchise Disclosure Document) • Provides necessary information to the potential franchisee so that a knowledgeable purchase may be made • Must be provided at least 10 business days before commitment to purchase

  22. Why do you need an FDD? • Contact information for at least ten purchasers who live nearest to you • Fully audited financial statements • Background of executives • Cost of sharing and maintaining • Responsibilities of you and the seller

  23. What happens if you don’t get an FDD? • Ask why • Verify any explanation with an expert

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