Accessing Resources for
Growth from External Sources
Franchising
“An arrangement whereby the manufacturer
or sole distributor of a trademarked
product or service gives exclusive rights of
local distribution to independent retailers
in return for their payment of royalties and
conformance of standardized operating
procedures.”
Franchising
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Franchisee Benefits
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Product Acceptance
Managerial Expertise
Capital Requirements
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Money saving features
Knowledge of the Market
Operating & Structural Controls
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Standardized suppliers
Franchising
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Franchisor Benefits
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Expansion risk
Cost Advantage
Disadvantages
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Franchisee v. Franchisor
Failure or Selling
Franchisor disadvantages
Franchising
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Types
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Dealership
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Name, image, method of doing business
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Cars
Subway, McDonald’s
Services
Trends
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Good health
Time saving or convenience
Environmental consciousness
Second Baby Boom
Investing in a Franchise
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Entrepreneurial Commitment
Factors
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Proven v. unproven
Financial stability
Potential market
Profit potential
Collect Information
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FTC’s Franchise Rule
Compare costs
Contact
Joint Ventures
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Definition
Types
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Private-sector companies
Cooperative research
Industry-university agreements
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Two problems
International joint ventures
Factors of Success
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How to best manage entity re: ensuing relationships
Degree of symmetry
Expectation of results
Timing must be right
Acquisitions
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Considerations
Advantages
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Established business
Location
Established market structure
Cost
Existing employees
More opportunity to be creative
Acquisitions
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Disadvantages
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Synergy
Structuring the Deal
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Marginal success record
Overconfidence in ability
Key employee loss
Overevaluated
Direct Purchase
Bootstrap Purchase
Locating Acquisition Candidates
Mergers
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Department of Justice
How does it take place?
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Requirements
Determining value
Leveraged Buyouts
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Definition
Why buy?
Financing
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Debt-to-equity ratio
Steps before buying
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Is asking price reasonable?
Assess firm’s debt capacity
Develop appropriate financial package
Overcoming Constraints by
Negotiating
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Two tasks
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Distribution task
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Divide up the pie
Integration task
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Make the pie larger
Negotiating
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What will you do if no agreement is
reached?
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Reservation Price
What will the other party do if no
agreement is reached?
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Bargaining zone
Negotiating
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What are underlying issues for you? How
important is each issue?
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Trade-offs
What are underlying issues for other
party? How important is each issue?
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Understanding=Increased integration
Negotiating Strategy
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Build Trust and Share Information
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Ask Lots of Questions
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Probe for preferences
Make Multiple Offer Simultaneously
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Best outcome
Can it hurt the negotiations?
Show what’s important based on choices
Used to Create Trade-offs that Result in Mutually
Beneficial Outcomes
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Accessing Resources for Growth from External Sources