Introduction To Entrepreneurship: Bruce R. Barringer R. Duane Ireland

Chapter 1
Introduction to
Entrepreneurship
Bruce R. Barringer
R. Duane Ireland
Copyright ©2016 Pearson Education, Inc. 1-1

Chapter Objectives
1 of 2
1. Describe entrepreneurs, corporate entrepreneurship,

and the characteristics of entrepreneurial firms.
2. Discuss three main reasons people decide to
become entrepreneurs.
3. Identify four main characteristics of successful
entrepreneurs.
4. Explain five common myths regarding
entrepreneurship.
5. Describe three types of start-up firms.

Chapter Objectives
2 of 2
6. Discuss the changing demographics of

entrepreneurs in the United States.
7. Discuss the positive effects of entrepreneurship and
entrepreneurial firms on economies and societies.
8. Explain the entrepreneurial process.

Introduction to Entrepreneurship
There is tremendous According to the 2013 GEM

interest in study, 12.7% of Americans
are actively engaged in
entrepreneurship in the
starting a business or are
U.S. and around the world. the owner/manager of a
business that is less than
three years old.

Indications of Increased Interest
in Entrepreneurship
• Books
– Amazon.com lists over 36,900 books dealing with
entrepreneurship and 89,900 focused on small business.
• College Courses
– In 1985, there were about 250 entrepreneurship courses
offered across all colleges in the United States.
– Today, more than 2,000 colleges and universities in the
United States (which is about two-thirds of the total) offer
at least one course in entrepreneurship.

What is Entrepreneurship?
• Academic Definition (Stevenson & Jarillo)

– Entrepreneurship is the process by which individuals pursue
opportunities without regard to resources they currently
control.
• Venture Capitalist (Fred Wilson)
– Entrepreneurship is the art of turning an idea into a business.
• Explanation of What Entrepreneurs Do
– Entrepreneurs assemble and then integrate all the resources
needed – the money, the people, the business model, the
strategy – to transform an invention or an idea into a viable
business.

Corporate Entrepreneurship
1 of 2
• Corporate Entrepreneurship
– Is the conceptualization of entrepreneurship at the firm
level.
– All firms fall along a conceptual continuum that ranges
from highly conservative to highly entrepreneurial.
– The position of a firm on this continuum is referred to as its
entrepreneurial intensity.

Corporate Entrepreneurship
2 of 2
Entrepreneurial Firms Conservative Firms
• Proactive • Take a more “wait and see”
• Innovative posture
• Risk taking • Less innovative

• Risk averse

Why Become an Entrepreneur?
The three primary reasons that people become

entrepreneurs and start their own firms
Desire to be their own boss
Desire to pursue their

own ideas
Financial rewards

Characteristics of Successful Entrepreneurs
1 of 3
Four Primary Characteristics

2 of 3
• Passion for the Business

– The number one characteristic shared by successful
entrepreneurs is a passion for the business.
– This passion typically stems from the entrepreneur’s belief
that the business will positively influence people’s lives.
• Product/Customer Focus
– A second defining characteristic of successful entrepreneurs
is a product/customer focus.
– An entrepreneur’s keen focus on products and customers
typically stems from the fact that most entrepreneurs are, at
heart, craftspeople.
3 of 3
• Tenacity Despite Failure

– Because entrepreneurs are typically trying something new,
the failure rate is naturally high.
– A defining characteristic for successful entrepreneurs is
their ability to persevere through setbacks and failures.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful entrepreneurs.

Common Myths About Entrepreneurs
1 of 7
• Myth 1: Entrepreneurs Are Born, Not Made

– This myth is based on the mistaken belief that some people
are genetically predisposed to be entrepreneurs.
– The consensus of many studies is that no one is “born” to
be an entrepreneur; everyone has the potential to become
one.
– Whether someone does or doesn’t become an entrepreneur
is a function of their environment, life experiences, and
personal choices.

2 of 7
Although no one is “born” to be an entrepreneur, there are common traits
and characteristics of successful entrepreneurs
• A moderate risk taker • Optimistic disposition

• Persuasive • A networker
• Promoter • Achievement motivated
• Resource assembler/leverager • Alert to opportunities
• Creative • Self-confident
• Self-starter • Decisive
• Tenacious • Energetic
• Tolerant of ambiguity • A strong work ethic
• Visionary • Lengthy attention span
3 of 7
• Myth 2: Entrepreneurs Are Gamblers

– Most entrepreneurs are moderate risk takers.
– The idea that entrepreneurs are gamblers originates from
two sources:
• Entrepreneurs typically have jobs that are less structured, and so
they face a more uncertain set of possibilities than people in
traditional jobs.
• Many entrepreneurs have a strong need to achieve and set
challenging goals, a behavior that is often equated with risk taking.

4 of 7
• Myth 3: Entrepreneurs Are Motivated Primarily by

Money
– While it is naïve to think that entrepreneurs don’t seek
financial rewards, money is rarely the reason entrepreneurs
start new firms.
– In fact, some entrepreneurs warn that the pursuit of money
can be distracting.

5 of 7
• Myth 4: Entrepreneurs Should Be Young and

Energetic
– Entrepreneurial activity is fairly easily spread out over age
ranges.
– While it is important to be energetic, investors often cite
the strength of the entrepreneur as their most important
criteria in making investment decisions.
• What makes an entrepreneur “strong” in the eyes of an investor is
experience, maturity, a solid reputation, and a track record of
success.
• These criteria favor older rather than younger entrepreneurs.

6 of 7

7 of 7
• Myth 5: Entrepreneurs Love the Spotlight

– While some entrepreneurs are flamboyant, the vast
majority of them do not attract public attention.
– As evidence of this, consider the following question: “How
many entrepreneurs could you name?”
• Most of us could come up with Jeff Bezos of Amazon.com, Mark
Zuckerberg of Facebook, Steve Jobs of Apple, and maybe Larry
Page and Sergey Brin of Google.
• But few could name the founders of Twitter, YouTube, Netflix, or
DIRECTV, even though we frequently use those firms’ services.

Types of Start-Up Firms

Changing Demographics of Entrepreneurs
1 of 4
• Women Entrepreneurs
– While men are more likely to start businesses than women,
the number of women-owned businesses is increasing.
– There were 8.6 women-owned businesses in the United
States in 2013, generating over $1.3 trillion in revenue and
employing nearly 7.8 million people.
– In some industries, women control a significant share of the
business.
• Women-owned businesses account for 52% of all businesses in
health care.

2 of 4
• Minority Entrepreneurs
– There has been a substantial increase in minority
entrepreneurs in the United States.
– Between 2002 and 2007 (the most recent statistics
available), minority-owned firms outpaced the growth of
non-minority firms in gross receipts, employment, and
number of firms.
– In 2007, there were about 1.9 million African American-
owned firms in the United States, 1.5 million Asian
American-owned firms, and 2.3 million Hispanic-owned
firms.

3 of 4
• Senior Entrepreneurs
– The numbers of seniors (those 50 years old and older)
starting businesses is substantial and growing.
– In 2012, 20% of new businesses were started by people
between 50 and 59 years old, while another 12.5 percent
were founded by individuals 60 years old and older.
– This increase is attributed to corporate downsizing, an
increasing desire among older people for more personal
fulfillment in their lives, growing worries about the cost of
health care, and similar factors.

4 of 4
• Young Entrepreneurs
– A desire to pursue an entrepreneurial career is high among
young people.
– According to a recent Gallop survey, about 4 in 10 kids in
grades 5-12 say they plan to start their own business.
– About 59% of students in grades 5-12 say their school offers
classes in how to start a business.
– About one-third of young people say their parents or
guardians have started a business, which provides them a
firsthand look at the entrepreneurial lifestyle.

Economic Impact of Entrepreneurial Firms
• Innovation
– Is the process of creating something new, which is central to
the entrepreneurial process.
– Small innovative firms are 16 times more productive than
larger innovative firms in terms of patents per employee.
• Job Creation
– Small businesses create a substantial number of net new jobs
in the United States.
– Firms with 500 or fewer employees create 65% of new jobs
on an annual basis.

Entrepreneurial Firms’ Impact on Society
and Larger Firms
• Impact on Society
– The innovations of entrepreneurial firms have a dramatic
impact on society.
– Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
• Impact on Larger Firms
– Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.

The Entrepreneurial Process
The Entrepreneurial Process Consists of Four Steps

Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial firm.
Step 4: Managing and growing the entrepreneurial firm.

Steps in the Entrepreneurial Process
1 of 2
Step 1 Step 2
Developing Successful Business Ideas

Steps in the Entrepreneurial Process
2 of 2
Step 3 Step 4

Chapter 2
Recognizing
Opportunities and
Generating Ideas
Bruce R. Barringer
R. Duane Ireland
Chapter Objectives
1 of 2
1. Explain the difference between opportunities and

ideas.
2. Describe the three general approaches entrepreneurs
use to identify opportunities.
3. Discuss the personal characteristics of entrepreneurs
that contribute to their ability to recognize business
opportunities.
4. Identify and describe techniques entrepreneurs use to
generate ideas.

Chapter Objectives
1 of 2
5. Discuss actions to take to encourage continuous

development of new ideas in entrepreneurial firms.

What is an Opportunity?
1 of 2
An opportunity is a favorable
Opportunity Defined set of circumstances that
creates a need for a new
product, service, or business.

What is an Opportunity?
2 of 2
Four Essential Qualities of an Opportunity

Three Ways to Identify an Opportunity

First Approach: Observing Trends
1 of 2
• Observing Trends
– Trends create opportunities for entrepreneurs to pursue.
– The most important trends are:
• Economic forces
• Social forces
• Technological advances
• Political and regulatory change
– It’s important to be aware of changes in these areas.

First Approach: Observing Trends
2 of 2
Environmental Trends Suggesting Business

or Product Opportunity Gaps

Trend 1: Economic Forces
Example of Economic Trend

Creating a Favorable Opportunity
Economic trends help
determine areas that are • A weak economy favors
start-ups that help consumers
ripe for new start-ups and
save money.
areas that start-ups should
• An example is GasBuddy.com,
avoid.
a company started to help
consumers save money on gas.

Trend 2: Social Forces
Examples of Social Trends

Social trends alter how
people and businesses • Aging of the population.
behave and set their • The increasing diversity of
priorities. These trends the workplace.
• Increased participation in
provide opportunities for social networks.
new businesses to • Growth in the uses of mobile
accommodate the devices.
changes. • An increasing focus on health
and wellness.

Trend 3: Technological Advances
1 of 2
Examples of Entire Industries

Advances in technology that Have Been Created as the
frequently create business Result of Technological
Advances
opportunities.
• Computer industry
• Internet
• Biotechnology
• Digital photography

Trend 3: Technological Advances
2 of 2
Example: H20Audio
Once a technology is
An example is H20Audio, a
created, products often company started by four
emerge to advance it. former San Diego State
University students, that
makes waterproof housings
and earbuds for the Apple
iPhone.

Trend 4: Political Action and Regulatory
Changes
1 of 2
General Example
Political action and Laws to protect the environment
regulatory changes also have created opportunities for
provide the basis for entrepreneurs to start firms that
opportunities. help other firms comply with
environmental laws and
regulations.

Trend 4: Political Action and Regulatory
Changes
2 of 2
Specific Example
Company created to help OSHA is a government agency

that formulates and enforces
other companies comply safety, health, and
with the law. environmental regulations for
the workplace. Safety
Compliance Company was
started to help other companies
comply with OSHA regulations.

Second Approach: Solving a Problem
1 of 2
• Solving a Problem
– Sometimes identifying opportunities simply involves
noticing a problem and finding a way to solve it.
– These problems can be pinpointed through observing
trends and through more simple means, such as intuition,
serendipity, or change.
– Many companies have been started by people who have
experienced a problem in their own lives, and then realized
that the solution to the problem represented a business
opportunity.

Second Approach: Solving a Problem
2 of 2
• A problem facing the U.S. and

other countries is finding
alternatives to fossil fuels.
• A large number of
entrepreneurial firms, like
this wind farm, are being
launched to solve this problem.

Third Approach: Finding Gaps in the
Marketplace
1 of 2
• Gaps in the Marketplace

– A third approach to identifying opportunities is to find a
gap in the marketplace.
– A gap in the marketplace is often created when a product or
service is needed by a specific group of people but doesn’t
represent a large enough market to be of interest to
mainstream retailers or manufacturers.

Third Approach: Finding Gaps in the
Marketplace
2 of 2
Specific Example
Product gaps in the Tish Cirovolv realized there
marketplace represent were no guitars on the market
potentially viable made specifically for females.
business opportunities. To fill this gap, she started
Daisy Rock Guitars, a
company that makes guitars
just for women and girls.

Personal Characteristics of the Entrepreneur
Characteristics that tend to make some people better

at recognizing opportunities than others
Prior Experience Cognitive Factors
Social Networks Creativity

Prior Experience
• Prior Industry Experience

– Several studies have shown that prior experience in an
industry helps an entrepreneur recognize business
opportunities.
• By working in an industry, an individual may spot a market niche
that is underserved.
• It is also possible that by working in an industry, an individual
builds a network of social contacts who provide insights that lead
to recognizing new opportunities.

Cognitive Factors
• Cognitive Factors
– Studies have shown that opportunity recognition may be an
innate skill or cognitive process.
– Some people believe that entrepreneurs have a “sixth
sense” that allows them to see opportunities that others
miss.
– This “sixth sense” is called entrepreneurial alertness, which
is formally defined as the ability to notice things without
engaging in deliberate search.

Social Networks
1 of 3
• Social Networks
– The extent and depth of an individual’s social network
affects opportunity recognition.
– People who build a substantial network of social and
professional contacts will be exposed to more opportunities
and ideas than people with sparse networks.
– Research results suggest that between 40% and 50% of
people who start a business got their idea via a social
contact.
• Strong Tie Vs. Weak Tie Relationships
– All of us have relationships with other people that are called
“ties.” (See next slide.)
Social Networks
2 of 3
• Nature of Strong-Tie Vs. Weak-Tie Relationships

– Strong-tie relationships are characterized by frequent
interaction and form between coworkers, friends, and
spouses.
– Weak-tie relationships are characterized by infrequent
interaction and form between casual acquaintances.
• Result
– It is more likely that an entrepreneur will get new business
ideas through weak-tie rather than strong-tie relationships.
(See next slide.)

Social Networks
3 of 3
Why weak-tie relationships lead to more new business ideas

than strong-tie relationships
Strong-Tie Relationships Weak-Tie
Relationships
These relationships, which These relationships, which
typically form between like- form between casual
minded individuals, tend to acquaintances, are not as
reinforce insights and ideas apt to be between like-
that people already have. minded individuals, so one
person may say something
to another that sparks a
completely new idea.
Creativity
1 of 2
• Creativity
– Creativity is the process of generating a novel or useful
idea.
– Opportunity recognition may be, at least in part, a creative
process.
– For an individual, the creative process can be broken down
into five stages, as shown on the next slide.

Creativity
2 of 2
Five Steps to Generating Creative Ideas

Full View of the Opportunity Recognition
Process
Depicts the connection between an awareness of emerging trends
and the personal characteristics of the entrepreneur

Techniques for Generating Ideas
Brainstorming Focus Groups
Library and
Internet Research

Brainstorming
• Brainstorming
– Is a technique used to generate a large number of ideas and
solutions to problems quickly.
– A brainstorming “session” typically involves a group of
people, and should be targeted to a specific topic.
– Rules for a brainstorming session:
• No criticism.
• Freewheeling is encouraged.
• The session should move quickly.
• Leap-frogging is encouraged.

Focus Groups
• Focus Group
– A focus group is a gathering of five to ten people, who
have been selected based on their common characteristics
relative to the issues being discussed.
– These groups are led by a trained moderator, who uses the
internal dynamics of the group environment to gain insight
into why people feel the way they do about a particular
issue.
– Although focus groups are used for a variety of purposes,
they can be used to help generate new business ideas.

Library and Internet Research
1 of 3
• Library Research
– Libraries are an often underutilized source of information
for generating new business ideas.
– The best approach is to talk to a reference librarian, who
can point out useful resources, such as industry-specific
magazines, trade journals, and industry reports.
– Simply browsing through several issues of a trade journal
or an industry report on a topic can spark new ideas.

2 of 3
Examples of Useful Search

Large public and Engines and Industry Reports
university libraries • BizMiner
typically have access to • ProQuest
search engines and • IBISWorld
industry reports that would • Mintel
cost thousands of dollars • LexisNexis Academic
to access on your own.

3 of 3
• Internet Research
– If you are starting from scratch, simply typing “new
business ideas” into a search engine will produce links to
newspapers and magazine articles about the “hottest” new
business ideas.
– If you have a specific topic in mind, setting up Google mail
alerts will provide you with links to a constant stream of
newspaper articles, blog posts, and news releases about the
topic.
– Targeted searches are also useful.

Other Techniques
• Customer Advisory Boards

– Some companies set up customer advisory boards that meet
regularly to discuss needs, wants, and problems that may
lead to new ideas.
• Day-In-The-Life Research
– A type of anthropological research, where the employees of
a company spend a day with a customer.

Encouraging New Ideas
• Establishing a Focal Point for Ideas

– Some firms meet the challenge of encouraging, collecting,
and evaluating ideas by designating a specific person to
screen and track them—for if it’s everybody’s job, it may
be no one’s responsibility.
– Another approach is to establish an idea bank (or vault),
which is a physical or digital repository for storing ideas.
• Encouraging Creativity at the Firm Level
– Creativity is the raw material that goes into innovation and
should be encouraged at the organizational and individual
supervisory level.

Chapter 15
Franchising
Bruce R. Barringer
R. Duane Ireland

Chapter Objectives
1 of 2
1. Explain franchising and how this form of business

ownership works.
2. Describe steps entrepreneurs can take to establish a
franchise system.
3. Become familiar with the advantages and
disadvantages of establishing a franchise system.
4. Describe actions and issues associated with the
decision to buy a franchise.

Chapter Objectives
2 of 2
5. Explain the steps an entrepreneur goes through to

buy a franchise.
6. Identify and explain the various legal aspects
associated with the franchise relationship.
7. Discuss two additional issues—franchise ethics and
international franchising—entrepreneurs should
think about when considering franchising.

What is Franchising?
• Franchising
– Franchising is a form of business organization in which a
firm that already has a successful product or service
(franchisor) licenses its trademark and method of doing
business to another business or individual (franchisee) in
exchange for a franchise fee and an ongoing royalty
payment.
– Some franchisors are established firms (like McDonald’s)
while others are first-time enterprises being launched by
entrepreneurs (like Uptown Cheapskate).

Two Types of Franchise Systems
1 of 2
• Product and Trademark Franchise

– An arrangement under which the franchisor grants to the
franchisee the right to buy its products and use its trade
name.
– This approach typically connects a single manufacturer
with a network of dealers or distributors.
• For example, General Motors has established a network of dealers
that sell GM cars and use the GM trademark in their advertising
and promotions.
• Other examples of product and trademark franchisors include
agricultural machinery dealers, soft drink bottlers, and beer
distributorships.

Two Types of Franchise Systems
2 of 2
• Business Format Franchise

– An arrangement under which the franchisor provides a
formula for doing business to the franchisee along with
training, advertising, and other forms of assistance.
– Fast-food restaurants, convenience stores, and motels are
well-known examples of business format franchises.
• Business format franchises are by far the most popular form of
franchising, particularly for entrepreneurial firms.

10 Industries In Which Business Format
Franchises Predominate
1. Automotive
2. Business Services
3. Commercial and Residential Services
4. Lodging
5. Personal Services
6. Quick Service Restaurants
7. Real Estate
8. Retail Food
9. Retail Products & Services
10. Table/Full-Service Restaurants

Types of Franchise Agreements
1 of 3
Individual Franchise Agreement

2 of 3
Area Franchise Agreement

3 of 3
Master Franchise Agreement

When to Franchise?
• When Is Franchising Most Appropriate?
– Franchising is most appropriate when a firm has a strong or
potentially strong trademark, a well-designed business method,
and a desire to grow.
– In some instances franchising is not appropriate.
• For example, franchising works for Burger King but would not work for
Walmart.
• Each individual Burger King store is relatively small and policies and
procedures can be written for almost any contingency.
• In contrast, Walmart stores are much larger, more expensive to build, and
more complex to run compared to Burger King. It would be nearly
impossible for Walmart to find enough franchisees with the financial
capital and expertise to run its more than 11,000 stores.

Nine Steps in Setting Up a Franchise System

Qualities to Look for in
Prospective Franchisees
• Good work ethic.

• Ability to follow instructions.
• Ability to operate with minimal supervision.
• Team oriented.
• Experience in the industry in which the franchise competes.
• Adequate financial resources and good credit history.
• Ability to make suggestions without becoming confrontational
or upset if the suggestions are not adopted.
• Represents the franchisor in a positive manner.

Ways Franchisors Can Develop the
Potential of Their Franchisees
• Provide mentoring that supersedes routine training.

• Keep operating manuals up-to-date.
• Keep products, services, and business systems up to date.
• Solicit input from franchisees to reinforce their importance in
the larger system.
• Encourage franchisees to develop a franchise association.
• Maintain the franchise system’s integrity.

Advantages and Disadvantages of Franchising
as a Method of Business Expansion
Advantages Disadvantages
• Rapid, low-cost market expansion. • Profit sharing.

• Income from franchise fees and • Loss of control.
royalties.
• Friction with franchisees.
• Franchisee motivation.
• Managing growth.
• Access to ideas and suggestions.
• Differences in required business skills.
• Cost savings.
• Legal expenses.
• Increased buying power.

Buying a Franchise
From the Franchisee’s Point of View
1 of 3
• Buying a Franchise
– Purchasing a franchise is an important business decision
involving a substantial financial commitment.
– Potential franchise owners should strive to be as well
informed as possible before purchasing a franchise and
should be aware that it is often legally and financially
difficult to exit a franchise relationship.

Buying a Franchise
2 of 3
Answering the following questions will help

determine if franchising is right for you
• Are you willing to take orders? Franchises are typically

very particular about how outlets operate.
• Are you willing to be part of a franchise “system” rather
than be an independent businessperson?
• How will you react if you make a suggestion to your
franchisor and your suggestion is rejected?
• What are you looking for in a business? How hard do you
want to work?

Buying a Franchise
3 of 3
Answering the following questions will help

determine if franchising is right for you
• How willing are you to put your money at risk? How will
you feel if your business is operating at a net loss but you
will have to pay royalties on your gross income?

The Costs Involved With Buying a Franchise
1 of 3
• Initial Franchise Fee

– The initial fee varies depending on the franchisor.
• Capital Requirements
– The costs vary but may include the cost of buying real estate,
the cost of putting up a building, the purchase of inventory,
and the cost of obtaining a business license.
• Continuing Royalty Payment
– Is usually around 5% of monthly gross income.

The Costs Involved With Buying a Franchise
2 of 3
• Advertising Fees
– Franchisees are often required to pay into a national or
regional advertising fund.
• Other Fees
– Other fees may be charged for various activities, including:
• Training additional staff.
• Providing management expertise when needed.
• Providing computer assistance.
• Providing a host of other items or support services.

Advantages and Disadvantages of
Buying a Franchise
Advantages Disadvantages
• A proven product or service within • Cost of the franchise.

an established market. • Restrictions on creativity.
• An established trademark or • Duration and nature of the commitment.
business system.
• Risk of fraud, misunderstandings, or
• Franchisor’s training, technical
lack of franchisor commitment.
expertise, and managerial expertise.
• Problems of termination or transfer.
• An established marketing network.
• Poor performance on the part of other
• Franchisor ongoing support.
franchisees.
• Availability of financing.
• Potential for failure.
• Potential for business growth.
Seven Steps in Purchasing a Franchise

Watch Out! Common Misconceptions
About Franchising
• Franchising is a safe investment.

• A strong industry ensures franchise success.
• A franchise is a “proven” business system.
• There is no need to hire a franchise attorney or an accountant.
• The best systems grow rapidly and it is best to be part of a rapid-growth
system.
• I can operate my franchise outlet for less than the franchisor predicts.
• The franchisor is a nice person—he’ll help me out if I need it.

Legal Aspects of the Franchise Relationship
• Federal Rules and Regulations

– The offer and sale of a franchise are regulated at the federal
level.
• According to Federal Trade Commission (FTC) rule 436,
franchisors must furnish potential franchisees with written
disclosures that provide information about the franchisor, the
franchised business, and the franchise relationship.
• In most cases, the disclosures are made through a lengthy document
referred to as the Franchisor Disclosure Document (FDD).
• The FDD contains 23 categories of information that give a
prospective franchisee a broad base of information about the
background and financial health of the franchisor.

More About Franchising
1 of 2
• Franchise Ethics
– The majority of franchisors and franchisees are highly
ethical.
– There are certain features of franchising, however, that
make it subject to ethical abuse. These features are as
follows:
• The get-rich-quick mentality.
• The false assumption that buying a franchise is a guarantee of
business success.
• Conflicts of interest between franchisors and franchisees.

More About Franchising
2 of 2
• International Franchising
– International opportunities for franchising are becoming
more prevalent for the following two reasons:
• The markets for certain franchised products in the U.S. have
become saturated (i.e., fast food).
• The trend toward globalization continues.
– Steps to take before buying a franchise overseas:
• Consider the value of the franchisor’s name in the foreign country.
• Get a good lawyer.
• Determine whether the product or service is saleable in the foreign
country.
• Find out how much training and support you will receive from the
franchisor.


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Chapter 1

Copyright ©2016 Pearson Education, Inc. 1-1

1. Describe entrepreneurs, corporate entrepreneurship,

Copyright ©2016 Pearson Education, Inc. 1-2

6. Discuss the changing demographics of

Copyright ©2016 Pearson Education, Inc. 1-3

There is tremendous According to the 2013 GEM

Copyright ©2016 Pearson Education, Inc. 1-4

Copyright ©2016 Pearson Education, Inc. 1-5

• Academic Definition (Stevenson & Jarillo)

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Entrepreneurial Firms Conservative Firms

• Proactive • Take a more “wait and see”

• Risk taking • Less innovative

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The three primary reasons that people become

Desire to be their own boss

Desire to pursue their

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Four Primary Characteristics

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• Passion for the Business

• Tenacity Despite Failure

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• Myth 1: Entrepreneurs Are Born, Not Made

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• A moderate risk taker • Optimistic disposition

• Myth 2: Entrepreneurs Are Gamblers

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• Myth 3: Entrepreneurs Are Motivated Primarily by

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• Myth 4: Entrepreneurs Should Be Young and

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• Myth 5: Entrepreneurs Love the Spotlight

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The Entrepreneurial Process Consists of Four Steps

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1. Explain the difference between opportunities and

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5. Discuss actions to take to encourage continuous

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Four Essential Qualities of an Opportunity

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Environmental Trends Suggesting Business