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Initiating Entrepreneurial
Ventures
Chapter 7
Pathways to
Entrepreneurial
Ventures
2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated,
in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
Chapter Objectives
1. To describe the major pathways and structures for
entrepreneurial ventures.
2. To present the factors involved in creating a new
venture
3. To identify and discuss the elements involved in
acquiring an established venture
4. To outline ten key questions to ask when buying an
ongoing venture
5. To examine the underlying issues involved in the
acquisition process
6. To define a franchise and outline its structure
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 72
Chapter Objectives (contd)
7. To examine the benefits and drawbacks of
franchising
8. To present the franchise disclosure document
(FDD) as a key item in franchises
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The Pathways to New Ventures
for Entrepreneurs
Pathways to New
Ventures
Obtaining a
Franchise
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Creating New Ventures
Approaches to
New-New New-Old
Approach Creating a New Approach
Venture
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Table
7.1 Trends Creating Business Opportunities
Emerging Opportunities
Green Products Health Care Niche Consumables Home Automation and
Organic foods Healthy food Wine Media Storage
Organic fibers/textiles School and govt.- Chocolate Lighting control
Alternative Energy sponsored programs Burgers Security systems
Solar Exercise Coffee houses Energy management
Biofuel Yoga Exotic salads Comfort management
Fuel cells Niche gyms Entertainment systems
Energy conservation Children Networked kitchen
Nonmedical appliances
Pre-assisted living
Assisted living transition
services
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Table
7.2 Checklist for Estimating Start-Up Expenses
Source: U.S. Small Business Administration, Management Aids MA. 2.025 (Washington, DC: U.S. Government Printing Office.)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 79
Table
7.2 Checklist for Estimating Start-Up Expenses (contd)
Source: U.S. Small Business Administration, Management Aids MA. 2.025 (Washington, DC: U.S. Government Printing Office.)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 710
Acquisition of an Established Business Venture
Personal
Preferences
Acquiring an
Examination of Established Evaluation of
Opportunities Entrepreneurial the Venture
Venture
Asking Key
Questions
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Advantages of Acquiring an Ongoing Venture
Buying an
Ongoing Venture
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Evaluation of the Selected Venture
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Key Questions to Ask
Why is this business being sold?
What is the current physical condition of the business?
What is the condition of the inventory?
What is the state of the other assets of the business?
How many employees will remain with the business?
What type of competition does the business face?
What does financial picture of the business look like?
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Negotiating the Deal
Information
Time
Factors Affecting Pressure
Negotiations
Alternatives
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Considerations When Buying a Business
Request that the seller retain a minority interest
in the business or make the final purchase price
dependent on the performance of the business
over a three-to-five-year span.
Be wary of any promises made without written
corroboration.
Spend time reconstructing financial statements to
determine how much cash is actually available.
Interview the owner, vendors, competitors,
customers, and employees.
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Franchising: The Hybrid
Franchising
Any arrangement in which the owner of a trademark,
trade name, or copyright has licensed others to use it
in selling goods or services.
Franchisee
A purchaser of a franchise
Franchisor
The seller of the franchise
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How Franchising Works
Franchisee Obligations:
1. Make a financial investment in the operation.
2. Obtain and maintain a standardized inventory
and/or equipment package usually purchased
from the franchisor.
3. Maintain a specified quality of performance.
4. Follow a franchise fee as well as a percentage
of the gross revenues.
5. Engage in a continuing business relationship.
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How Franchising Works (contd)
Franchisor Provides:
1. The company name that provides drawing power.
2. Identifying symbols, logos, designs, and facilities.
3. Professional management training for each
independent units staff.
4. Sale of merchandise necessary for the units
operation, equipment to run the operation, and the
food or materials needed for the final product.
5. Financial assistance, if needed.
6. Continuing aid and guidance to ensure that
everything is done in accordance with the contract.
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Franchising
Advantages Disadvantages
Training and guidance Franchise fees
Brand-name appeal Franchisor control
A proven track record Unfulfilled promises
Financial assistance of franchisor
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Table
7.3 The Cost of Franchising
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Figure
7.2 The Decision to Purchase a Franchise: Process Model
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Table
7.4 World Wide Web Franchise Sites (contd)
American Bar Association Forum on Franchising www.abanet.org
U.S. Small Business Administration www.sba.gov
Statistics USA www.stat-usa.gov
Entrepreneur Magazine www.entrepreneur.com/franchises/bestofthebest/index.html
Minority Business Entrepreneur Magazine www.mbemag.com
Franchise Times www.franchisetimes.com
Franchise Update www.franchise-update.com
Restaurant Business Magazine www.restaurantbiz.com
Source Book Publications www.worldfranchising.com
Federal Trade Commission http://www.ftc.gov/bcp/franchise/netfran.shtm
Franchise.com http://www.franchise.com/
World Franchising http://www.worldfranchising.com/
Franchise Solution http://www.franchisesolutions.com/
Franchise Opportunities http://www.franchiseopportunities.com/
Franchise Trade http://www.franchisetrade.com/
The Franchise Magazine http://www.thefranchisemagazine.net/
Franchise Info Mall http://www.franchiseinfomall.com/
Franchise Advantage http://www.franchiseadvantage.com
US Franchise News http://www.usfranchisenews.com/
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Evaluating Franchising Opportunities
The Franchise
Opportunity Decision
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Key Terms and Concepts
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