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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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franchise ownership
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
sources for finding out about franchise ownership and opportunities
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
operating costs of a franchise
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
operating costs of a franchise1
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
advantages of owning a franchise
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 ______________
advantages of owning a franchise1
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
disadvantages of owning a franchise
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
disadvantages of owning a franchise1
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
evaluating a franchise
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?
evaluating a franchise1
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?
evaluating a franchise2
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?
starting your own business
Starting your own business
  • As an entrepreneur, you might want to establish a business of your own
  • Who wants to start their own business?
advantages of starting your own business
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 __________
disadvantages of starting your own business
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
4 2 assessment
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