1. Own a Franchise or Start a Business

2. Franchise Ownership
Franchise- legal agreement that gives an individual the right to market a company’s products or services in a particular area
Franchisee- person who purchases franchise agreement
Franchisor- person or company that offers the franchise for purchase
More than 500,000 people in the United States own franchises

3. Franchise opportunities can be found:
Consumer Guide to Buying a Franchise- published by the Federal Trade Commission
Books on franchising from the public library
The Wall Street Journal
Magazines such as; Forbes, Business Start-Ups, Entrepreneur, or Inc.

4. Operating Costs of a Franchise
Initial franchise fee- paid in return for the right to run the franchise
Ranges from a few thousand to a few hundred thousand
Start-up costs- costs associated with beginning a business
They include the costs of renting a facility, equipping the outlet, and purchasing inventory

5. Royalty fees- weekly or monthly payments made by the owner to the franchisor
Usually a percentage of the franchise’s income
Advertising fees- paid to support television, magazine, or other advertising of the franchise as a whole

6. Advantages of Owning a Franchise
An entrepreneur is provided with an established product or service- allows entrepreneurs to compete with giant companies
Franchisors offer management, technical, and other assistance- onsite training, aid with new business and handling daily operations, tips on crisis management, site selection, building design, equipment

7. Equipment and supplies can be less expensive- because a franchise is part of a large chain, they are able to purchase in large quantities to receive discounts
A guarantee of consistency attracts customers- franchise contracts mandate a level of quality so customers can trust the business

8. Disadvantages of Owning a Franchise
Franchises can cost a lot of money and cut down on profits- initial capital to purchase is high and profits are lost to royalty fees
Owners of franchises have less freedom to make decisions than other entrepreneurs- decisions that entrepreneurs make themselves have already been made by the franchisor
Must offer certain products and charge set prices

9. Franchisees are dependent on the performance of other franchisees in the chain- successes of other locations can benefit the entrepreneur and failures of other locations can harm their business
The franchisor can terminate the franchise agreement- if the franchisee fails to pay royalty fees or meet other obligations, the investment in the franchise may be lost

10. Checkpoint>>
Personally, what do you feel is the greatest advantage and worst disadvantage of owning a franchise? Explain your answer. A- D-

11. Evaluating a Franchise
What is the projected demand for the franchised product or service in the area I want to locate in?
Will I be guaranteed an exclusive territory for the duration of the franchise term or can the franchisor sell additional franchises in the same area?
What are the costs and royalty fees associated with the franchise?
How profitable have other franchises in the area been? What do other franchises think of the franchisor?

12. How long has the franchisor been in business
How long has the franchisor been in business? How profitable is the franchisor?
What services does the franchisor provide? Will the franchisor help me with marketing, merchandising, and site selection?
Are the benefits provided by the franchisor worth the loss of independence and the cost of purchasing the franchise?
What happens if I want to cancel the franchise agreement?

13. Checkpoint>>
In your own words, why is it important to ask the above questions before entering into a franchise agreement?

14. Starting Your Own Business
Sometimes, joining a family business or operating a franchise may not be an option. To be an entrepreneur, you must start your own business.

15. Advantages of a Starting Your Own Business
Make own decisions
Completely independent and create own destiny
Challenge of creating something entirely new
Triumph when business earns a profit

16. Checkpoint>>
Personally, what do you feel is the greatest advantage of starting your own business? Explain your answer.

17. Disadvantages of a Starting Your Own Business
Demand for product
Customers may not be interested in what you are selling
Responsible for all business decisions and the consequences for the decisions

18. Checkpoint>>
In your own words, why is it more difficult to start a new business than to take over an existing business or purchase a franchise?

19. Assignment
THINK CRITICALLY
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