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  1. 1. Entrepreneurship<br />
  2. 2. Benefits of Buying Franchise<br />Management Training and Support<br />Leading cause of business failure is incompetent management.<br />Many franchisers provide training and counseling services.<br />These program teach franchisees the details they need to know and run for day to day operation successfully.<br />Training program can be in the form of in-class or on-site instruction.<br />Franchiser provide the necessary training to franchisees continuously.<br />Brand Name Appeal<br />Franchisees purchase right to use the brand name for product or service.<br />Because of brand name, franchisees get so many customers even they open the outlets in a short time.<br />
  3. 3. Benefits of Buying Franchise<br />Franchisees aware negative actions by franchisers or the others competitors.<br />Standardized Quality of Goods and Services<br />Because franchisee purchase license to sell franchiser’s product, the quality standard can be determined by franchiser.<br />If franchisee try to operate substandard lever, the entire process will be suffer.<br />Therefore franchiser has a right to terminate franchise contract if franchisee fail to establish required standard.<br />National Advertising Programs<br />Effective advertising programs is necessary for the success of franchise.<br />Regional or national advertising make benefits to franchisees.<br />
  4. 4. Benefits of Buying Franchise<br />Advertising campaign is organized and controlled by the franchisers. The franchisers but franchisees actually pay for campaign. <br />Many franchisers want franchisees to contribute the minimum amount for the advertising.<br />Financial Assistance<br />Franchisers don’t provide any financial help because they depend on their franchisees’ money.<br />But franchiser provide loan to pay for the initial franchise fees.<br />Financial assistance from franchiser take other forms than the direct loan.<br />Because of franchiser, franchisee can make good relationship with the bank, nonbank lenders.<br />
  5. 5. Benefits of Buying Franchise<br />Proven Products and Business Formats<br />Even there is a force to establish business, franchisee will follow the standard and business formats of the franchiser.<br />These standard procedures can make franchisee success and get more profits.<br />Franchisee don’t need to struggle to get brand recognition as much as the local competitors.<br />Centralized Buying Power<br />One of the benefit of franchisee is the participation of buying the large volume with the franchisers. <br />Economies of scale prevent business owner from competing head to head with franchise operation.<br />
  6. 6. Benefits of Buying Franchise<br />Site Selection and Territorial Protection<br />Location is critical for the success of small business.<br />Therefore becoming affiliate with franchisers is the best way to get the prime location.<br />Although choosing the location is the responsibilities of the franchisees, the franchiser have right to decide about the location.<br />Greater Chance for Success<br />Even investing franchise is risky, survey said that investing franchise is less risky than building of new business.<br />The success of franchise is depend on the franchisee’s management skills, motivation and experience.<br />
  7. 7. Drawbacks of Buying Franchise<br />Franchise Fees and Ongoing Royalties<br />Every franchisee needs to pay the fees and share of revenue to the franchiser for using the brand name, products and services.<br />Most franchiser ask the franchise fees for using the brand name however some ask the fees for location analysis, site purchase and preparation.<br />Franchisers also impose ongoing royalty fees as revenue-sharing device.<br />These ongoing royalties can increase overhead costs.<br />To avoid, franchisees should determine how much they need to pay and the benefit they can get from the franchiser.<br />
  8. 8. Drawbacks of Buying Franchise<br />Strict Adherence to Standardized Operation<br />Although franchisee owns the business, he don’t have the right to make decision about operation.<br />To protect brand image, franchisers want franchisees to follow their standard.<br />If franchise fails to meet with the minimum standard, the franchiser can eliminate the license.<br />Franchiser determines compliance of standard with periodic inspection and mystery shoppers<br />
  9. 9. Drawbacks of Buying Franchise<br />Restrictions on Purchasing<br />In order to control quality, franchiser requires franchisees to buy from the approved suppliers.<br />The franchiser can’t determine the retail price of the product for the franchisees but they can give the suggestions and advices to the franchisees.<br />Limited Product Line<br />There is an agreement in the franchise that the franchisee can sell only the products that was approved by the franchiser.<br />So franchisee to sell the products which is required in local market is restricted.<br />
  10. 10. Drawbacks of Buying Franchise<br />Contract Terms and Renewal<br />Because the franchise contract is written by the lawyer of franchiser, there is a favor for franchiser.<br />Some franchisers want to do the negotiation but the successful franchisers believe that they don’t have to.<br />Unsatisfactory Training Program<br />Major benefit of franchise is the training program which is supported by the franchiser to franchisees for the continuous success.<br />Before signing, the franchisee should find out the detail of training program to avoid unexpected problems.<br />
  11. 11. Drawbacks of Buying Franchise<br />Market Saturation<br />Franchisees reap benefits from the franchise but they also face the franchiser’s strategy: market saturation.<br />Franchisees are upset and claimed that their market are saturated and their sales volume are suffered.<br />Less Freedom<br />When franchisees sign the contract, they agree to sell the products of franchiser.<br />Franchisers make ensure the success of franchisee, so they monitor the performance of franchisee.<br />Therefore even franchisee can run their business freely, they need to report to the franchiser.<br />
  12. 12. The Right Way to Buy a Franchise<br />There is a problem because of dishonest franchiser.<br />Therefore you should think about the following facts<br />Evaluate Yourself<br />Before doing franchise you should ask yourself about goals, experiences, like or dislike and income requirement.<br />Knowing yourself will help you to narrow your search.<br />one point of successful franchise is do the jobs what you want to do.<br />Research Your Market<br />before doing franchise, you should research your market.<br />
  13. 13. The Right Way to Buy a Franchise<br />Take some times to know about your customers' requirements.<br />Knowing the fad and the long-time trend is the best one for success your business.<br />Consider Your Franchise Options<br />There are so many options to do franchise in the business magazines.<br />You can make a decision what is suitable for your investment.<br />Moreover there are franchise showcase sometime and try to attend these showcase can help you to get more information.<br />
  14. 14. The Right Way to Buy a Franchise<br />Get a Copy of the Franchiser's UFOC<br />You should contact each franchiser and ask to show copy of its UFOC.<br />It is the important one for evaluating the franchiser.<br />And then you should care about the franchisee turnover rate, rate at which the franchisee leave the system.<br />Another important aspect is the culture of the franchiser's organization.<br />
  15. 15. The Right Way to Buy a Franchise<br />Talk to Existing Franchisee<br />This is the good and cheap one for investing the franchise.<br />You should go and ask the people who are doing the franchise about cause and facts of franchising.<br />Make Your Choice<br />After doing research, you need to make a choice.<br />Moreover you should have the business plan that will help you as a guideline of your business.<br />You can manager your financial base on this plan.<br />
  16. 16. Benefits of Buying Existing Business<br />Successful existing business may continue to be successful<br />Purchasing the successful existing business with the reasonable price is good<br />New owner can find the new customers while there are still existing customers.<br />However it is difficult to modify the existing system.<br />Existing business may already have the best location<br />Getting the best location is the critical point for business success.<br />It is better to buy the existing business which already have the best location.<br />Location may be the biggest assets of existing business.<br />
  17. 17. Benefits of Buying Existing Business<br />Employees and suppliers are already established<br />Existing business already established good relationship with the suppliers.<br />In addition, existing business has the records of suppliers.<br />The suppliers still provide the things what you want and help to run your organization smoothly and successfully. <br />Equipment is installed and productive capacity is known<br />Buying the new equipments can increase the cost for the buyer.<br />Therefore the buyer should determine the condition of equipment and its capacity.<br />
  18. 18. Benefits of Buying Existing Business<br />Inventory is in place and trade credit is established.<br />Proper amount of inventory is required to control cost and provide sale volume.<br />Existing business know the inventory level that can overcome both problems.<br />Moreover previous owner has established trade credit with the suppliers can that can make benefit to you.<br />New business owner hits the ground running.<br />The person who purchase existing business can avoid the time, energy and cost required to start up a new business.<br />He/ She don’t need to invest for his/ her lifetime building a company.<br />
  19. 19. Benefits of Buying Existing Business<br />New owner can use experience of pervious owner.<br />New owner can easily know the costs and revenue of the business from the experience of previous owner.<br />And then the new owner can learn the mistake from the previous owner.<br />Moreover previous owner was helpful for unwritten and unmasked rules in the business area<br />Easier Financing<br />Attracting financing to purchase existing business is easier than finding for the new business.<br />
  20. 20. Benefits of Buying Existing Business<br />It’s a Bargain.<br />Some existing business may be real bargains.<br />More specialized business is that buyer can find bargain.<br />If special skills are required for doing the business, the number of potential buyer will be smaller.<br />
  21. 21. Drawbacks of Buying Existing Business<br />It’s a loser.<br />Business may be sale because it is struggling and owner don’t want to continue the business.<br />Business owner persuade the buyer by using the dishonest information and attractive financial status.<br />Buying existing business is very risky.<br />If there is a plan to improve the struggling business, the buyer should not think for buying.<br />Previous owner may have created ill will.<br />Improper business behavior can make ill will for the business.<br />Because of ill will, the long-term effects of business may not yet appear in the financial report.<br />
  22. 22. Drawbacks of Buying Existing Business<br />Employees inherited with the business may not be suitable.<br />Previous managers kept marginal employees because of their personal bias.<br />For this reason, employees do not welcome the new owner and they don’t be able to accept the management style of the new owner.<br />Business location may have become unsatisfactory.<br />Prospective buyer should evaluate the existing market area as well as the potential of expansion.<br />The important point is that they are buying the future not the existing one.<br />If business success has a link to the location, acquiring a business in a declining area is not the good idea.<br />
  23. 23. Drawbacks of Buying Existing Business<br />Equipment and facilities may be obsolete or inefficient.<br />Potential buyer sometime forgets to evaluate the existing equipment and facilities before they purchase.<br />Equipment and facilities should be ready and good for the business.<br />Change and innovation are difficult to implement.<br />It is easier to plan for change than to implement.<br />Rules and regulations defined by the previous owner may be difficult for the new owner to change what he/ she want to modify.<br />Potential buyer should think about the time and energy to change the ineffective procedures.<br />
  24. 24. Drawbacks of Buying Existing Business<br />Inventory may be outdated or obsolete.<br />Smart buyers know that by evaluating the inventory is better to trust than the balance sheet.<br />Therefore buyer must judge inventory by its market value not by its book value.<br />Account receivable may be worth less than face value.<br />Like inventory, account receivables may be worth their face value. <br />Buyer should age the account receivable to determine their collectibility.<br />The Business may be overpriced.<br />