1. © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

2. Accessing Resources For Growth From External Sources15
Chapter
Accessing Resources For Growth From External Sources

3. External Parties For Business Growth
Franchising
Joint Ventures
Acquisition
Merger

4. Fastest Growing Franchises (2003)
Company
Since
Type
# Stores
Curves
1995
Women’s Only Fitness
3,778
Subway
1974
Submarine Sandwich
14,800
7-Eleven
1964
24-Hr. Convenience
3,761
Taco Bell
Mexican Fast Food
5,417
Jani-King
Commercial Cleaning
7,843
Source: Entrepreneur, 2003

5. Franchise System
Franchise Agreement
Franchisor
Franchisee

6. Franchising & Franchisee
Advantages
Reduced Risk
Product Acceptance
Mgmt. Expertise
Buying Power
Market Knowledge
Financial Advice
Controls
Disadvantage
High Start-up Costs
Franchisor Unable To Perform
Franchisor Failure Or Sale

7. Franchising & Franchisor
Advantages
Quick Expansion & Little Capital
Large Operation Yet Few HQ Employees
Economies Of Scale
Large Advertising Budget
Disadvantages
Difficult To Find Quality Franchisees
Single Franchisee Failure Reflects On Entire System
Expansion Creates Loss Of Control

8. Franchise Capital Requirements
Franchise/Royalty Fee
Construction Costs
Equipment Purchase

9. Franchisor Provides Facility Layout Control Stock & Inventory
Buying Power
Advertising/Sales Promotion- Local & National

10. Franchise Types
Dealership
Name & Image & Method
Services

11. Franchising Opportunities
Health
Time Saving & Convenience
Environmental Consciousness
Second Baby Boom

12. Franchising Risks Unproven vs. Proven Franchise
Financial Stability Of Franchise
Potential Market
Profit Potential

13. Branded Product/Service
Franchise Contract
Franchisor, Inc.
Branded Product/Service
Performance
Monitoring
$$$$$
Franchisee

14. Franchisor Assigns Territory Provides Training/Support
Provides Financial Aid/Advice
Offers Merchandise/ Supplies at Competitive Price
Provides Training/Support
Business Expansion Using O.P.M.

15. Franchisee Pays Up-Front Costs Makes Monthly Payment to Franchisor
Runs Business by Franchisor’s Rules/Procedures
Buys Materials from Franchisor/ Approved Supplier

16. Joint Ventures Types Success Industry-University International
Assessment & Management
Symmetry
Realistic Expectations
Timing

17. Acquisitions Advantages Disadvantages Established Business Location
Established Marketing Structure
Cost
Existing Employees
Opportunity For Creativity
Disadvantages
Marginal Success Record
Overconfidence
Key Employee Loss
Over Valued

18. Acquisition Process Valuation- Synergy Deal Structure
Locating Candidates- Broker

19. Merger Motivation Leveraged Buyout Survival Protection Diversification
Gain
Leveraged Buyout
Reasonable Price
Debt Capacity
Appropriate Financial Package

20. Resource Negotiation Tasks Reservation Price- Bargaining Zone
Distribution
Integration
Reservation Price- Bargaining Zone
Assessments
No Agreement- Buyer & Seller?
Issues- Importance?

21. Negotiation Strategies
Build Trust/Share Information
Ask Questions
Multiple Offers
Mutually Beneficial Trade-Offs