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Accessing Resources for Growth from External Sources

Franchising offers a unique arrangement where the manufacturer extends distribution rights to independent retailers in exchange for royalties and operational standards. Understand the benefits, risks, and considerations of franchising, joint ventures, acquisitions, mergers, and negotiating strategies for business growth. Learn about different types of franchises and how to make informed investment decisions.

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Accessing Resources for Growth from External Sources

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  1. Accessing Resources for Growth from External Sources

  2. Franchising “An arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance of standardized operating procedures.”

  3. Franchising • Franchisee Benefits • Product Acceptance • Managerial Expertise • Capital Requirements • Money saving features • Knowledge of the Market • Operating & Structural Controls • Standardized suppliers

  4. Franchising • Franchisor Benefits • Expansion risk • Cost Advantage • Disadvantages • Franchisee v. Franchisor • Failure or Selling • Franchisor disadvantages

  5. Franchising • Types • Dealership • Cars • Name, image, method of doing business • Subway, McDonald’s • Services • Trends • Good health • Time saving or convenience • Environmental consciousness • Second Baby Boom

  6. Investing in a Franchise • Entrepreneurial Commitment • Factors • Proven v. unproven • Financial stability • Potential market • Profit potential • Collect Information • FTC’s Franchise Rule • Compare costs • Contact

  7. Joint Ventures • Definition • Types • Private-sector companies • Cooperative research • Industry-university agreements • Two problems • International joint ventures • Factors of Success • How to best manage entity re: ensuing relationships • Degree of symmetry • Expectation of results • Timing must be right

  8. Acquisitions • Considerations • Advantages • Established business • Location • Established market structure • Cost • Existing employees • More opportunity to be creative

  9. Acquisitions • Disadvantages • Marginal success record • Overconfidence in ability • Key employee loss • Overevaluated • Synergy • Structuring the Deal • Direct Purchase • Bootstrap Purchase • Locating Acquisition Candidates

  10. Mergers • Department of Justice • How does it take place? • Requirements • Determining value

  11. Leveraged Buyouts • Definition • Why buy? • Financing • Debt-to-equity ratio • Steps before buying • Is asking price reasonable? • Assess firm’s debt capacity • Develop appropriate financial package

  12. Overcoming Constraints by Negotiating • Two tasks • Distribution task • Divide up the pie • Integration task • Make the pie larger

  13. Negotiating • What will you do if no agreement is reached? • Reservation Price • What will the other party do if no agreement is reached? • Bargaining zone

  14. Negotiating • What are underlying issues for you? How important is each issue? • Trade-offs • What are underlying issues for other party? How important is each issue? • Understanding=Increased integration

  15. Negotiating Strategy • Build Trust and Share Information • Best outcome • Can it hurt the negotiations? • Ask Lots of Questions • Probe for preferences • Make Multiple Offer Simultaneously • Show what’s important based on choices • Used to Create Trade-offs that Result in Mutually Beneficial Outcomes

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