Intranets, Extranets, and Private Exchanges OPEN QUIZ ON CHAPTER 1 What are the basic forms of business ownership? What is franchising? How many types of franchising? Why should we buy a franchise? What should we look for from franchisers? How to buy a franchise?What are the advantages of franchising? What are the disadvantages of franchising?

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BASIC FORM OF BUSINESS OWNERSHIP FORM OF OWNERSHIP Sole TraderProprietorshipPartnership General partnership Limited partnership Corporation Private Limited company Public limited company

WHAT IS FRANCHISING? Franchising: semi-independent business owners pay fees and royalties to a parent company in exchange for the right to sell its products and services under the franchiser’s trade name and often to use its business format and system 7

HOW MANY TYPES OF FRANCHISING? 8 Trade name Product distribution Pure (Business format)

9 Figure 4.1 The Franchising Relationship The Franchiser The Franchisee Oversees and approves; may choose site Provides prototype design Makes general recommendations and training suggestions Determines product or service line Can only recommend prices Establishes quality standards; provides list of approved suppliers; may require franchisees to purchase from the franchisor Develops and coordinates national ad campaign; may require minimum level of spending on local advertising Sets quality standards and enforces them with inspections; trains franchisees Provides support through an established business system Chooses site with franchiser’s approval Pays for and implements design Hires, manages, and fires employees Modifies only with franchiser’s approval Sets final prices Must meet quality standards; must purchase only from approved suppliers; must purchase from supplier if required Pays for national ad campaign; complies with local advertising requirements; gets franchisor approval on local ads Maintains quality standards; trains employees to implement quality systems Operates business on a day-to-day basis with franchiser’s support Site selection Design Employees Products and services Prices Purchasing Advertising Quality control Support Element Source: Adapted from Economic Impact of Franchised Businesses: A Study for the International Franchise Association, National Economic Consulting Practice of PriceWaterhouseCoopers, (IFA Educational Foundation, New York: 2004), pp. 3,5.

10 WHY BUY A FRANCHISE? Franchisees are buying the franchiser’s experience “Going into business for yourself but not by yourself” Franchisees get a proven business system and avoid having to learn by trial-and- error Before buying, ask: “What can a franchise do for me that I cannot do for myself?”

11 WHAT SHOULD WE LOOK FOR FROM FRANCHISERS? A unique concept or marketing approach Profitability A registered trademark A business system that works A solid training program Affordability A positive relationship with franchisees

12 HOW TO BUY A FRANCHISE Evaluate yourself – What do you like and dislike? Research the market Consider your franchise options Talk to existing franchisees Ask the franchiser some tough questions Make your choice

WHAT ARE THE ADVANTAGES OF FRANCHISING? Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate Standardized quality of goods and services Site selection and territorial protection 13

WHAT ARE THE DISADVANTAGES OF FRANCHISING? Large start-up costs Shared profit Management regulations Coattail effects Restrictions on selling Fraudulent franchisers 14