Accessing Resources For Growth From External Sources

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Chapter
Accessing Resources For Growth From External
Sources
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External Parties For Business Growth

• Franchising
• Joint Ventures
• Acquisition
• Merger

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Fastest Growing Franchises (2003)
Source Entrepreneur, 2003
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Franchise System

• Franchise Agreement
• Franchisor
• Franchisee

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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

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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

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Franchise Capital Requirements

• Franchise/Royalty Fee
• Construction Costs
• Equipment Purchase

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Franchisor Provides

• Facility Layout
• Control Stock Inventory
• Buying Power
• Advertising/Sales Promotion- Local National

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Franchise Types

• Dealership
• Name Image Method
• Services

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Franchising Opportunities

• Health
• Time Saving Convenience
• Environmental Consciousness
• Second Baby Boom

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Franchising Risks

• Unproven vs. Proven Franchise
• Financial Stability Of Franchise
• Potential Market
• Profit Potential

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

Franchisee
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Franchisor

• Assigns Territory
• Provides Financial Aid/Advice
• Offers Merchandise/ Supplies at Competitive Price

• Provides Training/Support
• Business Expansion Using O.P.M.

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Franchisee

• Pays Up-Front Costs
• Makes Monthly Payment to Franchisor
• Runs Business by Franchisors Rules/Procedures
• Buys Materials from Franchisor/ Approved Supplier

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Joint Ventures

• Types
• Industry-University
• International
• Success
• Assessment Management
• Symmetry
• Realistic Expectations
• Timing

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Acquisitions

• Advantages
• Established Business
• Location
• Established Marketing Structure
• Cost
• Existing Employees
• Opportunity For Creativity

• Disadvantages
• Marginal Success Record
• Overconfidence
• Key Employee Loss
• Over Valued

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Acquisition Process

• Valuation- Synergy
• Deal Structure
• Locating Candidates- Broker

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Merger

• Motivation
• Survival
• Protection
• Diversification
• Gain
• Leveraged Buyout
• Reasonable Price
• Debt Capacity
• Appropriate Financial Package

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Resource Negotiation

• Tasks
• Distribution
• Integration
• Reservation Price- Bargaining Zone
• Assessments
• No Agreement- Buyer Seller?
• Issues- Importance?

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Negotiation Strategies

• Build Trust/Share Information
• Ask Questions
• Multiple Offers
• Mutually Beneficial Trade-Offs