Franchises LEQ: What are the advantages and disadvantages of purchasing a franchise?

Franchises A franchise is an enterprise that uses the original company’s name to sell goods and services. The parent company or the company owning the name – is called the franchiser. The person or group opening the franchise is the franchisee.

Franchises The franchisee maintains day-to-day operations and receives the profits of the business. The franchisee pays a fee and percentage of the profits to the franchiser in return for operating assistance.

Franchises Examples include Holiday Inn, Century 21, and Burger King. Franchise agreements include requirements designed to uphold to reputation of the parent company. Franchisor often provides training for employees and pays for national advertising.

Advantages Your business is based on a proven idea. You can use a recognized brand name and trade marks. The franchisor provides training. Financing the business may be easier. Relationships with suppliers have already been established.

Disadvantages Costs may be higher than you expect. Restrictions on how you can run the business. The franchisor might go out of business. Other franchisees could give the brand a bad reputation. All profits (a percentage of sales) are usually shared with the franchisor.

Corporations LEQ: What are the advantages and disadvantages of forming a corporation?

Corporations A corporation is a business in which a group of owners, called stockholders, share in the profits and losses. Corporations are legally distinct from their owners and are treated as if they were individuals. Corporations can own property, hire workers, make contracts, pay taxes, sue and be sued, make and sell products.

Corporate Advantages Benefits for Stockholders Limited liability Can sell ownership at any time Benefits for Corporations Founders have limited liability Separation of ownership from management Easy to raise capital Longevity

Corporate Disadvantages Corporate Issues Corporate charters are expensive and difficult to obtain Federal and state governments regulate corporations Slow decision-making process

Corporate Disadvantages Stockholder Issues Earning profit without actually working for the company Lack of control Shared Issues Corporate profits are TAXED TWICE!! Corporate income Dividend income

Activity Select a corporation and complete the corporate stock project.