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 ________________ 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 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 _______________ 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 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 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 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 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 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 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 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 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 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 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 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 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