Chapter 10
Acquiring Businesses
Starting a Business
Inorder to start a business, the entrepreneur must plan carefully. They must
purpose a business plan
Buying an existing business
When an entrepreneur uses an existing business to start there venture, by
buying a franchise
Franchising
This is a system where the franchisor enters into an agreement with the
franchisee to distribute the product on certain agreed upon rules.
Characteristics Of Franchising
● Franchising is a marketing system, not a form of ownership.
● Franchising is a good experience for inexperienced entrepreneurs
● Good opportunity for franchise to start venture with the pre-existing
success of the franchisor
● Training of franchisee
● The business is owned by the franchisee, they will pay a fee on
commission, to franchisor
Cost To The franchisee
● Turn key operation : Franchisor assist with the setup
● Royalties : between 5% to 10% of turnover/profit is payed to franchisors
● A monthly advert levy is paid by the franchisee.
, Advantages from point of view of
Franchisee
● Good chance of success
● Franchisee has access to advise from franchisor
● Franchise agreement protects franchisee with legal protection
● It's easier to raise borrowed capital from banks as business is well
known
● Franchisors and franchisees work together
Advantages from point of view of
Franchisor
● To expand business quickly, without a large capital outlay
● Franchisees will be more committed to making a success as there
working for profit not salary
● Each entrepreneur is incharge of day to day responsibilities
disadvantages from point of view of
Franchisee
● The cost to establish the franchisee is costly on top of that the
monthly royalties
● The entrepreneur has to stick to strict rules and regulations
● The franchisor may not give constant help
● The franchisee may become bord
disadvantages from point of view of
Franchisor
● It's hard to keep giving constant training and guidance
● Franchisor dosnt have direct control over franchisee
● Administrative duties involving collecting royalties and
controlling the brand
Acquiring Businesses
Starting a Business
Inorder to start a business, the entrepreneur must plan carefully. They must
purpose a business plan
Buying an existing business
When an entrepreneur uses an existing business to start there venture, by
buying a franchise
Franchising
This is a system where the franchisor enters into an agreement with the
franchisee to distribute the product on certain agreed upon rules.
Characteristics Of Franchising
● Franchising is a marketing system, not a form of ownership.
● Franchising is a good experience for inexperienced entrepreneurs
● Good opportunity for franchise to start venture with the pre-existing
success of the franchisor
● Training of franchisee
● The business is owned by the franchisee, they will pay a fee on
commission, to franchisor
Cost To The franchisee
● Turn key operation : Franchisor assist with the setup
● Royalties : between 5% to 10% of turnover/profit is payed to franchisors
● A monthly advert levy is paid by the franchisee.
, Advantages from point of view of
Franchisee
● Good chance of success
● Franchisee has access to advise from franchisor
● Franchise agreement protects franchisee with legal protection
● It's easier to raise borrowed capital from banks as business is well
known
● Franchisors and franchisees work together
Advantages from point of view of
Franchisor
● To expand business quickly, without a large capital outlay
● Franchisees will be more committed to making a success as there
working for profit not salary
● Each entrepreneur is incharge of day to day responsibilities
disadvantages from point of view of
Franchisee
● The cost to establish the franchisee is costly on top of that the
monthly royalties
● The entrepreneur has to stick to strict rules and regulations
● The franchisor may not give constant help
● The franchisee may become bord
disadvantages from point of view of
Franchisor
● It's hard to keep giving constant training and guidance
● Franchisor dosnt have direct control over franchisee
● Administrative duties involving collecting royalties and
controlling the brand
