This document provides an overview of entrepreneurship, franchising, and small businesses. It defines entrepreneurs as individuals who take on the risks of starting and managing a new business. Growth-oriented entrepreneurs have traits like a strong need for achievement, high energy levels, determination, and a willingness to take risks. While starting a business presents opportunities, it also carries risks such as high failure rates, financial risks, career risks, and family/social risks. Common reasons for business failure include acting too quickly without planning, running out of money, and failing to create a detailed business plan. The document also defines franchising as a system where franchisees pay fees to a franchisor in exchange for using the franchisor's brand name,

1. - BBA 1101 -
INTRODUCTION TO BUSINESS
Summer 2014-15
Faculty: Shama Islam

2. Entrepreneurship, Franchising,
& Small Businesses
Chapter # 3
LECTURE 3

3. Entrepreneurship
Some define the entrepreneur simply as one
who starts his or her own new and small
business.
 Entrepreneur
A person who takes the risks necessary to
organize and manage a business and
receives the financial profits and
nonmonetary rewards.
 Intrapreneur
A person with entrepreneurial characteristics
employed by a corporation and encouraged
to be innovative and creative.

4. Growth-Oriented Entrepreneurs
 Need for Achievement
Growth-oriented entrepreneurs have a high need for
achievement: they need to succeed, to achieve, to
accomplish challenging tasks. The strong desire for
achievement leads to a desire for independence.
 Low need to Conform
Growth-oriented entrepreneurs listen, but they are able
to ignore other’s advice. They are able to handle
generally accepted rules and standards. Taking the
unpopular course of action, if they consider it best, is
the way they do business.
 High Energy Level
The capacity for continued effort requires a high
energy level. All the necessary work -planning,
organizing, directing, creating strategy and finding
funds can only be accomplished on a demanding
schedule.

5. Growth-Oriented Entrepreneurs
 Determination
Growth-oriented entrepreneurs are
persistent (refusing to give up), doing
business with determination for it to
succeed. They work hard on the details
and uncompromisingly attempt to find
ways to become more profitable.
 Risk Taking Tendency
It is said that, people with a high need for
achievement tend to take risks. Growth-
oriented entrepreneurs believe so strongly
in their ability to achieve that they do not
see possibility of failure. They thus accept
risk and find it motivating.

6. Risks of Entrepreneurship
The failure rate among new ventures is
comparatively high.
Besides business risk, entrepreneurs face
significant finance risk, if they typically
invest most – if not all of their financial
resources in the business.
They may take a career risk by leaving a
secure job for a venture with a highly
uncertain future.
They may also incur family and social
risks because the demands of starting
and running a young business leave little
time for attention to family and friends.

7. Reasons for Business Failure
 People fail because they jump into a business
too quickly. They throw or get into a business
enterprise very quickly , without doing their
homework. They do not analyze their own
strengths and weaknesses.
 Businesses also fail due because they run out of
money. If you cannot pay your bills and other
expenses, you are out of business. Realistic
planning for the money needed is critically
important. Estimates of cash requirements are
a top priority before starting the venture.
 Failing to plan is an obvious mistake. A detailed
business plan forces the entrepreneur to think
ahead, to reflect, to decide on how to proceed.

8. Franchising
An attractive business opportunity for many people is
to obtain a franchise and become the owner of a
restaurant, motel or other business.
Franchise
The right to use a specific business name and sell its
good or services in a specific city, region or country.
Franchising:
A system for selective distribution of goods and
services under a brand name through outlets owned
by independent business owners.
Franchisee (Person):
The independent owner of a franchise outlet who
enters into an agreement with a franchisor.
Franchiser (Company):
The licensing company in the franchise agreement.

9. Franchise: Examples

10. Franchising
The Description of a Franchise
system points out the crucial
elements of a franchise business.
- A Contractual Agreement between a
Franchisee and a Franchiser.
- A Branded Good or Service
(eg. Car, Food, etc.)
- Operation, by a businessperson for
the purpose of earning a profit.
- Monitoring by the Franchisor so that
standard procedures and product or
service are used.

11. Franchise: Advantages
 Guidance
Many franchisors try to overcome managerial deficiencies or inexperience by providing some sort
of training to the individuals.
 Financial Assistance
By joining a franchise company, the individual investor may be able to secure financial assistance.
Start up costs of any business are often high and the prospective investor usually has limited funds.
Association with a well established franchisor-through its reputation and its financial controls- may
enhance the investor’s credit rating with local banks.
 Proven Product
The franchisor can offer the franchisee a proven (established) product and method of operating the
business. The product or service is known and accepted by the public.
 Brand Name
The investor who signs a franchise agreement acquires the right to use a nationally or regionally
promoted brand name. National promotion brings these features and characteristics to the attention
of the potential customers.

12. Franchise: Disadvantages
 Costs
Franchisees must pay franchise fees. In return, the franchisor can provide training, guidance and
other forms of support that would otherwise cost money. Thus the franchisee pays for the
opportunity to share in these forms of support.
 External Control
A person who signs a franchise agreement looses some independence. The franchisor, in order to
operate all the franchise outlets as a business, must exercise some control over promotional activities,
financial records, hiring, service procedures and managerial development. The franchisee is semi-
independent. In a sole proprietorship, the owner is totally independent.
 Weak Training Programs
Some franchisors have developed excellent training programs. Even competitors admit that KFC,
Pizza Hut, etc have outstanding training programs. But sometimes promoters promise sound
training programs and never deliver. Training programs are brief and staffed by trainers who do not
have instructional skills. The facilities are sometimes unsuitable for proper learning and
development.