MBA P715
Entrepreneurship
Week 7
Marvin Ryder
Assistant Professor, Marketing
& Entrepreneurship
Business Life Cycle
Phase 0
Idea to
Start-up
Phase 1
Phase 2
Phase 3
OwnerOwnerTransition
Operator
Manager
Phase 4
Phase 5
Emerging
Functional
Transition
Management
Owner as Operator Owner as Manager Functional Management
Emergence of the
General Management Role
Types of Franchising Agreements
1) MANUFACTURER  RETAILER
(Car Industry)
2) MANUFACTURER  WHOLESALER
(Soft Drink Industry)
3) WHOLESALER  RETAILER
(IDA, IGA, Home Hardware)
4) SERVICE SPONSOR  RETAILER
(Restaurants, Clothing Stores)
Pros/Cons for the Franchisor
Advantages
Disadvantages
Ability to grow quickly
Difficult to retain control
Growth with little franchisor
capital or human resources
Can lose credibility and
image due to franchisees
Can share cost of activities Hard to develop uniformity
Franchisees more motivated Hard to introduce change
than company-hired managers
to all franchises
Local knowledge of franchisee
Additional insights from
franchisees
Pros/Cons for the Franchisee
Advantages
Disadvantages
Economies of purchasing
Support system – marketing,
bookkeeping, location, layout
National/regional promotion
Proven/tested business
concept – 80% success rate
Can start with limited skills
and experience
Some loss of independence
Contracts restrict freedom of
expansion and sourcing
Share revenues – royalties
Hard to make changes to
respond to local consumers
Failure elsewhere in system
can be reflected nearby
Checklist for Buying a Franchise
Item
Measures
Basis for Judgment
Objectives
Desired rate of return
Desired lifestyle
Personal goals
Self-Assessment
Business Concept
Market niche
Unique product appeal
Stage in life cycle
Opportunity window
Royalties & terms
Franchise prospectus
Market research
Publications/journals
Track Record
Actual rates of return
Product quality/appeal
Market share/position
Demonstrated innovation
Financial statements
Rating services
Franchise shows and
associations
Support System
Training support
Promotional support
Accounting systems
Management policies
Operations manual
Visit current outlets
Employee/franchisee
comments
Franchise prospectus
Toronto, Ontario • February 26 & 27, 2011
Toronto Congress Centre, North Building,
Hall H 11:00 a.m. – 5:00 p.m.
Adele
Country Style
Kodan Flooring
Pita Pit
Baskin Robbins
Dairy Queen
Kumon Centres
Quizno’s
Beef O’Brady’s
Fatburger
M&M Meats
Signarama
Boston Pizza
Fruits & Passion
Massage Addict
Smoke’s Poutinerie
Casey’s Grill & Bar Hickory Dickory
Decks
Minuteman Press U Weight Loss