2. and explain the role of leveraged buyouts and taking a firm
private.Outline the advantages and disadvantages of franchises,
and discuss the opportunities for diversity in franchising and
the challenges of global franchising.Explain the role of
cooperatives.
*
ANNE BEILER
Auntie Anne’s
5-*Started selling pretzels when her family was living paycheck
to paycheck.Now Auntie Anne’s has over 1,200 locations and
brings in over $410 million!Beiler sold the company in 2005 to
start focusing on charity work.
*
NAME that COMPANY
5-*
In 2013, this company became the largest firm in terms of
revenue to be taken private through a leveraged buyout. After
closing the $25 million deal, the founder now controls a 75%
stake of the company he started in his dorm room.
3. Name that company!
Company: Dell
*
MAJOR FORMS of OWNERSHIP
5-*Sole Proprietorship -- A business owned, and usually
managed, by one person.Partnership -- Two or more people
legally agree to become co-owners of a business.Corporation --
A legal entity with authority to act and have liability apart from
its owners.
More than 600,000 businesses are started each year.
*
FORMS of
BUSINESS OWNERSHIP
5-*
Although corporations make up only 20 percent of the total
number of businesses, they make 81 percent of the total
receipts. Sole proprietorships are the most common form (72
percent), but they earn only 6 percent of the receipts.
*
4. Source: Forbes, www.forbes.com, accessed November 2014.
ETHNIC BUSINESS CENTERS
Cities with the Most Minority-Run Firms
5-*
Photo Credit: James RintamakiAtlanta, GABaltimore,
MDNashville, TNHouston, TXMiami - Ft. Lauderdale, FL
This slide presents Forbes’ top 5 U.S. cities for minority-run
businesses. Most of these cities are situated in the South.
However, we tend to hear a lot about the high population
numbers of Asians in San Francisco or Hispanics in Los
Angeles.Milwaukee, WI was listed last at #40 in ethnic
population growth. To promote discussion, ask the students:
Why do you think these cities attract minority-run companies?
Don’t just focus on the businesses, also look at the total
population and customer base.
*
MAJOR BENEFITS of SOLE PROPRIETORSHIP
5-*
LO 4-1Ease of starting and ending the businessBeing your own
bossPride of ownershipLeaving a legacyRetention of company
profitNo special taxes
See Learning Objective 1: Compare the advantages and
disadvantages of sole proprietorships.
5. This slide helps students understand why sole proprietorships
account for the largest number of businesses in the United
States.
*
DISADVANTAGES of SOLE PROPRIETORSHIPS
5-*
LO 4-1Unlimited Liability -- Any debts or damages incurred by
the business are your debts, even if it means selling your home,
car or anything else.Limited financial resourcesManagement
difficultiesOverwhelming time commitmentFew fringe
benefitsLimited growthLimited life span
See Learning Objective 1: Compare the advantages and
disadvantages of sole proprietorships.
Since the main advantage of sole proprietorships is the ease by
which they can be started, this slide gives students the reason
why this form of ownership only accounts for such a small
percentage of overall total revenue. Special emphasis should be
given to the disadvantage of unlimited liability (personal assets
at risk), and to the time commitment (24 hours, 7 days per
week, and 365 days per year).
*
Source: Inc., www.inc.com, accessed November 2014.
WORK-LIFE BALANCING ACT
5-*
6. % of small business owners
Work over 80 hours per week
Work over 40 hours per week
See Learning Objective 1: Compare the advantages and
disadvantages of sole proprietorships.
Many students are not aware of the effort it takes to be a small
business owner.This slide shows us the amount of hours per
week some owners spend in their businesses. To promote
discussion, ask the students: How many hours a week did you
think owners spend at work? Do many take holidays off? How
much time would you dedicate to your business?
*
Chart10.130.87
% of small business owners
Sheet1% of small business owners13%87%3rd Qtr1.44th
Qtr1.2To update the chart, enter data into this table. The data is
automatically saved in the chart.
Chart10.430.57
% of small business owners
Sheet1% of small business owners43%57%3rd Qtr1.44th
Qtr1.2To update the chart, enter data into this table. The data is
automatically saved in the chart.
TEST PREP
5-*
Most people who start businesses in the U.S. are sole
proprietors. What are the advantages and disadvantages of sole
proprietorships?Why would unlimited liability be considered a
major drawback to sole proprietorships?
7. The primary advantages of sole proprietors are: Ease of starting
and ending the business, being your own boss, pride of
ownership. leaving a legacy, retention of company profits, no
special taxes. Disadvantages include: Unlimited liability,
limited financial resources, management difficulties,
overwhelming time commitment, few fringe benefits, limited
growth, limited life span.
2) With unlimited liability, the sole proprietor is liable for all
debts and obligations of the business and must pay them even if
it means selling your home, car, or whatever else you own.
*
General Partnership -- All owners share in operating the
business and in assuming liability for the business’s debts.
MAJOR TYPES of PARTNERSHIPS
5-*
LO 4-2Limited Partnership -- A partnership with one or more
general partners and one or more limited partners.
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
Each type of partnership has advantages and disadvantages. In a
general partnership resources are pooled and liability is spread
among all partners. However, in this type of partnership there is
the possibility for disagreement and/or personality conflicts. A
limited partnership is made up of a mixture of general partners
and limited partners. Limited partners cannot actively take part
in business dealings.
8. *
TYPES OF PARTNERS
5-*
LO 4-2General Partner -- An owner (partner) who has unlimited
liability and is active in managing the firm.Limited Partner --
An owner who invests money in the business, but enjoys limited
liability. Limited Liability means that liability for the debts of
the business is limited to the amount the limited partner puts
into the company; personal assets are not at risk.
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
The limited partner is not able to exercise any management
control over the partnership, but maintains limited liability. A
limited partner’s liability is limited to the amount invested in
the partnership.
*
OTHER FORMS of
PARTNERSHIPS
5-*
LO 4-2Master Limited Partnership -- A partnership that looks
9. much like a corporation, but is taxed like a partnership and thus
avoids the corporate income tax.Limited Liability Partnership --
Limits partners’ risk of losing their personal assets to the
outcomes of only their own acts and omissions and those of
people under their supervision.
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
There are two less common forms of partnerships outlined in
this slide: master limited partnership and the limited liability
partnership. The master limited partnership is unique because it
combines the tax benefits of a more traditional partnership and
the liquidity of a publicly traded security. One example of a
master limited partnership is Kinder Morgan Energy Partners
which is engaged in energy storage and operates 75,000 miles of
pipelines.
*
ADVANTAGES of
PARTNERSHIPS
5-*
LO 4-2More financial resourcesShared management and
pooled/complementary skills and knowledgeLonger survivalNo
special taxes
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
10. disadvantages of partnerships.
Partnerships have some distinct advantages. The key advantage
is that partnerships have access to more resources, such as
financial resources, management skills and knowledge.
*
DISADVANTAGES of
PARTNERSHIPS
5-*
LO 4-2Unlimited liabilityDivision of profitsDisagreements
among partnersDifficult to terminate
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
Like the sole proprietorship, a partnership has some serious
disadvantages such as unlimited liability and division of profits.
One disadvantage that students might not consider is
disagreement among partners.
*
There is no such thing as a perfect partner but ask these
questions when you try to find your best match:
PICKING YOUR PARTNER
5-*
11. LO 4-2Do you share the same goals?Do you share the same
vision for the company?What skills does he/she have? Are yours
the same?What can he/she bring to the business?What type of
decision maker is he/she?Do you trust each other?How does
he/she problem solve?
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
Successful partnerships start with a shared vision. In order to
develop a successful partnership, all partners must be honest
with each other and bring a variety of different skills to the
partnership. Suggestions to discuss with students regarding
partnerships:Partnership agreements must be in writing!Each
individual’s responsibilities to the company must be in writing
and included as part of the contract.Make certain that provisions
are in place if one or more partners want to terminate the
agreement. Information outlining the terms and conditions of
terminating any agreement, should be outlined in the original
contract.
*
What do you think you should do?What will be the
consequences of your decision?
GOOD BUSINESS,
BAD KARMA?
5-*
Imagine you and your partner own a construction company. You
receive a subcontractor’s bid you know is 20% too low. This
12. could potentially put the subcontractor out of business.
Accepting the bid will improve your chances of getting a big
job. Your partner wants to take the bid:
See Learning Objective 2: Describe the differences between
general and limited partners, and compare the advantages and
disadvantages of partnerships.
*
TEST PREP
5-*
What’s the difference between a limited partner and a general
partner?What are some of the advantages and disadvantages of
partnerships?
1) A general partner is an owner who has unlimited liability and
can be active in managing the firm. A limited partner is an
owner who invests money in the business, but does not have any
management responsibility or liability for losses beyond his or
her investment.
2) Some of the advantages of partnerships are: More financial
resources, shared management and pooled/complementary skills
and knowledge, longer survival, no special taxes. Disadvantages
of partnerships include: Unlimited liability (for general
partners), division of profits, disagreements among partners,
difficulty of termination.
*
13. CONVENTIONAL
CORPORATIONS
5-*
LO 4-3Conventional (C) Corporation -- A state-chartered legal
entity with authority to act and have liability separate from its
owners (its stockholders).
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
You don’t have to be big to incorporate. Incorporating may be
beneficial for small businesses as well.
*
ADVANTAGES of
CORPORATIONS
5-*
LO 4-3Limited liabilityAbility to raise more money for
investmentSize Perpetual lifeEase of ownership changeEase of
attracting talented employeesSeparation of ownership from
management
See Learning Objective 3: Compare the advantages and
14. disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
The major advantage of corporate ownership is limited liability
protection (personal assets are protected).
Interesting facts regarding incorporating a business: the cost for
a business to incorporate ranges from about $50 to over $300,
plus states’ fees. Over half of Fortune 500 companies choose to
incorporate in Delaware because the state’s laws make the
process easier than it is in other states.
*
HOW OWNERS AFFECT MANAGEMENT
5-*
LO 4-3
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
*
Source: Fortune, www.fortune.com, accessed November 2014.
The BIG BOYS of BUSINESS
America’s Largest Corporations
5-*
15. Photo Credit: Walmart Stores
LO 4-3WalmartExxon MobilChevronBerkshire HathawayApple
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
This slide presents Fortune’s 2014 top 5 U.S. corporations. Ask
the students: Several of the companies in the top five deal with
similar products/services; how are the products/services these
companies sell similar? (Exxon Mobil and Chevron are both oil
companies.)
*
Source: Forbes, www.forbes.com, accessed November 2014.
PRIVACY PLEASE
The Ten Largest Private Corporations in the U.S.
5-*
LO 4-3
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
This slide presents America’s top 10 private companies in 2014.
Ask the students to debate why a company may want to remain
private. (Some of the reasons may be control, privacy, no
16. external pressure, and preference.)
*
DISADVANTAGES of
CORPORATIONS
5-*
LO 4-3Initial costExtensive paperworkDouble taxationTwo tax
returnsSizeDifficulty of terminationPossible conflict with
stockholders and board of directors
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
Double taxation is a major disadvantage of corporations. A
corporation is taxed on income earned, and then shareholders
are taxed on any dividends the company may pay.
*
Source: Bloomberg Businessweek, www.businessweek.com,
accessed November 2014.
EVEN the BIG GUYS
MAKE MISTAKES
5-*
17. LO 4-3
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
Even the Big Guys Make Mistakes This slide presents examples
of mistakes made by big corporations. Sometimes mistakes can
be rectified (as in the case of Coca-Cola withdrawing New
Coke), but sometimes they contribute to the company going out
of business.
*
B CORPORATIONS LET SUSTAINABILITY SET SAIL
5-*
Michael Dimin saw tons of fish were left to rot after fishermen
caught too much.Registered his company, Sea2Table as a
benefit corporation.B-corporations are judged on how they meet
their own set of socially or environmentally beneficial goals.
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
*
18. WHO CAN INCORPORATE?
5-*
LO 4-3Anyone - truckers, doctors, plumbers, athletes
and small business owners can incorporate.Normally stock is
not issued to outsiders when individuals incorporate, so the
advantages and disadvantages are not exactly the same as for
large corporations.Major advantages are limited liability and
possible tax benefits.
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
*
OLDIES BUT GOODIES
America’s Oldest Corporations
5-*
LO 4-3
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
This is an interesting slide that identifies companies that have
been in business for over 200 years. A few facts you may wish
19. to address with the students:JE Rhoads & Sons is the oldest
company in the U.S. and started off tanning leather for Buggy
Whips.Philadelphia Contributorship Insurance was formed
based on a suggestion by Benjamin Franklin regarding the
establishment of a volunteer fire brigade, which eventually
developed into an insurance company.The Bank of New York,
New York’s first bank, was opened for business in Lower
Manhattan on June 9th, 1784, only a few months after the
departure of British Troops from American soil. (Bank of New
York merged with Mellon Financial Corporation of Pittsburgh
and was renamed Bank of New York Mellon in 2007.)
Environmental changes in the business world will always
happen; those companies that embrace change and provide
quality goods and services will continue to profit. Discuss with
the students the significant amount of commitment a company
must have to stay in business. (Some areas that must
continually be addressed are changes in societal culture,
competition, economy, laws/politics, and technology changes.)
*
S CORPORATIONS
5-*
LO 4-3S Corporation -- A unique government creation that
looks like a corporation, but is taxed like sole proprietorships
and partnerships.S corporations have shareholders, directors and
employees, plus the benefit of limited liability.Profits are taxed
only as the personal income of the shareholder.
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
20. between C corporations, S corporations, and limited liability
companies.
An S corporation looks like a corporation, but is taxed like a
sole proprietorship or partnership. The primary advantage of an
S corporation is that it avoids the double taxation of a C
corporation. Approximately 3 million U.S. companies operate
as S corporations.
*
WHO CAN FORM
S CORPORATIONS?
5-*
LO 4-3Qualifications for S Corporations:Have no more than 100
shareholders.Have shareholders that are individuals or estates
and are citizens or permanent residents of the U.S.Have only
one class of stock.Derive no more than 25% of income from
passive sources.If an S corporation loses its S status, it may not
operate under it again for at least 5 years.
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
Originally to qualify as an S Corporation, the number of
shareholders was limited to 75. This has now been amended to
no more than 100.
*
21. LIMITED LIABILITY COMPANIES
5-*
LO 4-3Limited Liability Company (LLC) -- Similar to an S
corporation, but without the eligibility requirements.Advantages
of LLCs:Limited liabilityChoice of taxationFlexible ownership
rulesFlexible distribution of profits and lossesOperating
flexibility
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
The biggest advantages of LLCs are limited liability and
flexibility.
*
DISADVANTAGES of LLCs
5-*
LO 4-3No stock, therefore ownership is nontransferableLimited
life spanFewer incentivesTaxesPaperwork
See Learning Objective 3: Compare the advantages and
disadvantages of corporations, and summarize the differences
between C corporations, S corporations, and limited liability
companies.
22. Primary disadvantages from entrepreneurs’ perspectives would
be limited life span and paperwork.
*
TEST PREP
5-*
What are the major advantages and disadvantages of
incorporating a business?What’s the role of owners
(stockholders) in the corporate hierarchy?If you buy stock in a
corporation and someone gets injured by one of the
corporation’s products, can you be sued? Why or why not?Why
are so many new businesses choosing a limited liability
company (LLC) form of ownership?
Advantages of incorporating a business include: Limited
liability, ability to raise more money for investment, size,
perpetual life, ease of ownership change, ease of attracting
talented employees, separation of ownership from management.
Disadvantages of incorporating are: Initial cost, extensive
paperwork, double taxation, two tax returns, size, difficulty to
terminate, possible conflict with stockholders and board of
directors.
2) Stockholders do not have to be employees of the corporation.
They are investors who have limited liability. Stockholders
elect the board of directors of a company who select the
management to control the company.
3) Stockholders in a corporation have limited liability meaning
as owners they are responsible for its losses only up to the
amount they invested. The corporation could be sued and forced
out-of-business but the stockholder would only lose what he/she
23. invested.
4) Limited liability companies have become a popular way to
form a business since all fifty states now recognize LLCs. Some
of the advantages of LLCs are: Limited liability, choice of
taxation (can be taxed as a partnership or corporation), flexible
ownership rules, flexible distribution of profit and losses,
operating flexibility.
*
Merger -- The result of two firms joining to form one company.
MERGERS and ACQUISITIONS
5-*
LO 4-4Acquisition -- One company’s purchase of the property
and obligations of another company.
See Learning Objective 4: Define and give examples of three
types of corporate mergers, and explain the role of leveraged
buyouts and taking a firm private.
*
TYPES of MERGERS
5-*
LO 4-4Vertical Merger -- The joining of two firms in different
stages of related businesses.Horizontal Merger -- The joining of
two firms in the same.Conglomerate Merger -- The joining of
firms in completely unrelated industries.
24. See Learning Objective 4: Define and give examples of three
types of corporate mergers, and explain the role of leveraged
buyouts and taking a firm private.
There are three types of mergers. Horizontal mergers take place
in the same industry (i.e., one competitor merging with
another). An example of this would be Daimler Mercedes Benz
merging with Chrysler to create DaimlerChrysler in the 1990s.
Vertical merger takes place between companies in a value chain,
for example a supplier and a distributor merging. Conglomerate
merger has no relationship between companies; both Tyco and
General Electric operate as conglomerates.
*
LEVERAGED BUYOUTS
5-*
LO 4-4Leveraged Buyout (LBO) -- An attempt by employees,
management or a group of investors to buy out the stockholders
in a company.LBOs have ranged in size from $50 million to $34
billion and have involved everything from small businesses to
giant corporations.In 2012, foreign investors poured $166
billion into U.S. companies.
See Learning Objective 4: Define and give examples of three
types of corporate mergers, and explain the role of leveraged
buyouts and taking a firm private.
*
25. FRANCHISING
5-*
LO 4-5Franchise Agreement -- An arrangement whereby
someone with a good idea for a business (franchisor) sells the
rights to use the business name and sell a product or service
(franchise) to others (franchisees) in a given territory.More than
770,000 franchised businesses operate in the U.S., employing
approximately 8.5 million people.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
Source: Entrepreneur, www.entrepreneur.com, accessed
November 2014.
MAKE WAY for the NEWBIES
Top New Franchises
5-*
LO 4-5
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
26. New franchise opportunities pop up all the time and this slide
shows the top 10 new companies from Entrepreneur’s 2014
Franchise 500.Take notice that all the listed companies here are
in the service sector. This can promote discussion on the
evolution of American business.Ask students: Why do you think
there is growth in these service franchises, such as fitness?
*
ADVANTAGES of FRANCHISING
5-*
LO 4-5Management and marketing assistancePersonal
ownershipNationally recognized nameFinancial advice and
assistanceLower failure rate
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
Franchising has a lower failure rate because the franchisee has
support from the franchisor. This support can range from
marketing to financial.
*
DISADVANTAGES of
FRANCHISING
5-*
27. LO 4-5Large start-up costsShared profitManagement
regulationCoattail effectsRestrictions on sellingFraudulent
franchisors
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
THE BUILDING BLOCKS of FRANCHISING
5-*
Bricks 4 Kidz was created as a way to help kids understand
engineering and construction.Since the business was low cost
and easily reproduced, this led to over 200 franchises in the
U.S. and 11 other countries.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
Women own about half of U.S. companies, yet ownership of
franchises is about 21%.
WOMEN in FRANCHISING
5-*
28. LO 4-5More women are becoming franchisors. Auntie Anne’s
and Jazzercise and are owned by women.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
MINORITY-OWNED
FRANCHISES
5-*
Photo Credit: Tom Magliery
LO 4-5DiversityFran is an initiative to build awareness of
franchising opportunities within minority
communities.Domino’s Pizza launched a minority franchise
recruitment program called Delivering the Dream.Over 20% of
franchises are minority-owned.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
HOME-BASED FRANCHISES
29. 5-*
LO 4-5
Advantages:Relief from commuting stressExtra family timeLow
overhead expenses
Main Disadvantages:IsolationLong hours
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
Benefits of a Home-Based Franchise
Home-based businesses are growing at an enormous rate. This
slide helps clarify some of the reasons why. Share with the
class some tips on getting started: Decide on business idea
Set goals for the business How many hours do you want to
work? How many employees do you want? How much money
will you need to get started?
Visit www.e-myth.com for more online information regarding
start-ups.
*
Source: Entrepreneur, www.entrepreneur.com, accessed
November 2014.
HOME SWEET HOME
Top Home-Based Franchises
5-*
LO 4-5
30. See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
Many franchisees are looking toward home-based
businesses.These ten franchises have held their own despite the
recent economic crisis.Some of these companies, like
Jazzercise, require franchisees to rent space for client-based
activities. However, the businesses can be run from the home.
*
E-COMMERCE
in FRANCHISHING
5-*
LO 4-5Most brick-and-mortar franchises have expanded
online.Many franchisors prohibit franchisee-sponsored sites
because conflicts can erupt.Sometimes “reverse royalties” are
sent to franchisees who believe their sales were hurt by the
franchisor’s site.Other franchises are solely based online.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
31. GIVING ENTREPRENEURS OPTIONS with DIGITAL
FRANCHISING
5-*
Chris Jeffrey created OrderUp shortly after graduating
college.OrderUp links up restaurants with hungry patrons and
allows people to order online while OrderUp takes a small
commission.For a startup fee of $42,000 franchisees receive
software and training to launch OrderUp in their area.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
*
GLOBAL FRANCHISING
5-*
LO 4-5Canada is the most popular target for U.S.-based
franchises. China, South Africa, the Philippines and the Middle
East are becoming popular despite high cost.International
franchising goes both ways – some foreign franchises have
come to the U.S.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
Franchising is successful when the product is convenient, high
32. quality, great service is included and the franchisee adapts to
the region.
*
Source: Richard Gibson, Wall Street Journal, www.wsj.com,
accessed November 2014.
WHAT to CHOOSE?
Picking Franchises that May Survive a Recession
5-*
LO 4-5Focus on tried-and-true name brands.Stick to core goods
and services.Be choosy about the site.Don’t pinch pennies.Have
a fallback choice.Don’t assume the franchise will pay off.
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
What to Choose? This is valuable information that must be
examined by anyone wishing to purchase a franchise. The
number-one reason why franchises fail is due to miscalculation
of start-up costs and operating costs. Examine all costs
carefully. It is important to understand that all franchise
opportunities are not created equal. Suggest to the class that
anyone interested in a franchise should also follow these
additional guidelines:Have an attorney experienced in franchise
contracts review the agreement.Hire a CPA to review all
financial statements. This is commonly referred to as
performing a “due diligence.”Interview other franchise
owners.Have experience in the industry.
33. *
Source: Entrepreneur, www.entrepreneur,com, accessed
November 2014.
HIGH FLYERS
Ten High-Performing Franchises
5-*
Photo Credit: Innisfree Hotels
LO 4-5Anytime FitnessHampton HotelsSubwaySupercutsJimmy
John’s7-ElevenServproDenny’sPizza HutDunkin Donuts
See Learning Objective 5: Outline the advantages and
disadvantages of franchises, and discuss the opportunities for
diversity in franchising and the challenges of global
franchising.
This slide lists ten high-performing franchises. As mentioned
earlier, not all franchises are created equal and require careful
investigation before considering an investment. Websites like
www.franchise.com provide information such as the cost of
thousands of franchise systems. Ask students: What makes an
effective franchisor? (Answers will vary, but should include
name recognition, financial stability, innovative product and
effective business management.)
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COOPERATIVES
5-*
34. LO 4-6Cooperatives -- Businesses owned and controlled by the
people who use them– producers, consumers, or workers with
similar needs who pool their resources for mutual gain.
Worldwide, co-ops serve one billion members!Members
democratically control the business by electing a board of
directors that hires professional management.
See Learning Objective 6: Explain the role of cooperatives.
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TEST PREP
5-*
What are some of the factors to consider before buying a
franchise?What opportunities are available for starting a global
franchise?What is a cooperative?
1) Before buying a franchise be sure to check a company’s
(franchisor’s) resources and reputation. There are many
franchising scams. The checklist in this chapter gives advice
about things to consider before buying a franchise.
2) Successful franchising in global markets offers the same
opportunities as in domestic markets. However, franchisors
must be careful to adapt to the region where they wish to
expand. McDonald’s for example has more than 33,000
restaurants in 119 countries.
3) A cooperative is a form of business that is owned and
controlled by the people who use it—producers, consumers, or
workers with similar needs who pool their resources for mutual