1- Describe the three types of franchising and provide an example of each. Initi
ID: 351494 • Letter: 1
Question
1- Describe the three types of franchising and provide an example of each. Initial discussion and peer response posts should demonstrate critical thinking skills, engagement, and contain references.
2- Review the “Search Stage” Starbucks business in Georgia. Explain and discuss how you would use this search criterion to male your existing business purchase decision
3- What advantages can an entrepreneur who buys a business gain over one who starts a business from scratch?
4- How would you go about determining the value of the assets of a business if you were unfamiliar with them?
5- Why do so many entrepreneurs run into trouble when they buy an existing business? Outline the steps involved in the right way to buy a business.
Explanation / Answer
1 Ans:- There are 3 types of franchising:-
a. Product distribution franchise:- This is kind of suppplier dealer relationship in which franchisee is required to sell only franchisor's product. For example: Exxon, Ford motor
b. Business format franchise:- This kind of franchise has business intergegration between franchisee and franchisor. There is legal contract between both the parties to follow centrain processes and procudure mentioned in legal contract. For ex:- McDonalds, KFC, Starbucks
c. Management franchise :- In this case franchisee provides the managment expertise and processes to run the business. For ex: Hilton, UPS store
2 Ans:-
3 Ans:- Entrepreneurs who buys a business have some advantages over one who starts business from scratch:-
a. Existing business can provide a customer base which new business doesn't have.
b. Existing business has an established brand value but for new business one need to establish the brand.
c. Existing business has already employee set up, supplier set up, vendor set up and other technological expertise which is required to run a business
4 Ans:- If one is unfamiliar with the business then there are various criteria to determine the value of business:-
a. Profitability of business in past years
b. Return on investment generated
c. Financail ratios like Current ratio, quick ratio, solvency ratio
d. Growth opportunity in thats sector
e. Peer comparison
5 Ans:- Enterpreneurs run into triuble when they buy an existing business because they also inherit both advantages and disadvantages of existing business. Some of the disadvantages may be:-
a. Negative brand image in market
b. Particular kind of work culture
c. Loans carried by business from which return is yet to be generated
There are right steps to buy a business:-
a. Financial analysis of balance sheet
b. Peer comparison
c. Growth prospect in future
d. Brand valuation
e. Assessment of strength, weakness, threats and opportunities
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