15-1

Chapter

15

Accessing Resources For Growth From External Sources

15-2

External Parties For Business Growth

Franchising Joint Ventures Acquisition Merger
15-3

Fastest Growing Franchises

(2003)

Company Since
Curves Subway 7-Eleven Taco Bell JaniJani-King
Source: Entrepreneur, 2003

Type
Womens Only Fitness Submarine Sandwich 2424-Hr. Convenience Mexican Fast Food Commercial Cleaning

# Stores
3,778 14,800 3,761 5,417 7,843
15-4

1995 1974 1964 1964 1974

Franchise System
Franchise Agreement Franchisor Franchisee
15-5

Franchising & Franchisee

Advantages
Reduced Risk Product Acceptance Mgmt. Expertise Buying Power Market Knowledge Financial Advice Controls

Disadvantage
o High Start-up Costs Starto Franchisor Unable To Perform o Franchisor Failure Or Sale

15-6

Franchising & Franchisor

Advantages
Quick Expansion & Little Capital Large Operation Yet Few HQ Employees Economies Of Scale Large Advertising Budget

Disadvantages
o Difficult To Find Quality Franchisees o Single Franchisee Failure Reflects On Entire System o Expansion Creates Loss Of Control

15-7

Franchise Capital Requirements

$Franchise/Royalty Fee $Construction Costs $Equipment Purchase
15-8

Franchisor Provides
Facility Layout Control Stock & Inventory Buying Power Advertising/Sales PromotionPromotion- Local & National

15-9

Franchise Types
1) Dealership 2) Name & Image & Method 3) Services
15-10

Franchising Opportunities
Health Time Saving & Convenience Environmental Consciousness Second Baby Boom
15-11

Franchising Risks
Unproven vs. Proven Franchise Financial Stability Of Franchise Potential Market Profit Potential

15-12

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

$$$$$
Franchisee

15-13

Franchisor
 Assigns Territory  Provides Financial Aid/Advice  Provides Training/Support

 Business  Offers Merchandise/ Expansion Supplies at Using O.P.M. Competitive Price

15-14

Franchisee
Pays Up-Front Costs UpMakes Monthly Payment to Franchisor Runs Business by Franchisors Rules/Procedures Buys Materials from Franchisor/ Approved Supplier
15-15

Joint Ventures
Types
IndustryIndustry-University International

Success
Assessment & Management Symmetry Realistic Expectations Timing
15-16

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

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

15-17

Acquisition Process
ValuationValuationSynergy Deal Structure Locating CandidatesCandidatesBroker
15-18

Merger
A. Motivation
1. 2. 3. 4. Survival Protection Diversification Gain

B. Leveraged Buyout
1. Reasonable Price 2. Debt Capacity 3. Appropriate Financial Package
15-19

Resource Negotiation
Tasks
Distribution Integration

Reservation Price- Bargaining PriceZone Assessments

No Agreement- Buyer & Seller? AgreementIssuesIssues- Importance?

15-20

Negotiation Strategies
1) Build Trust/Share Information 2) Ask Questions 3) Multiple Offers 4) Mutually Beneficial Trade-Offs Trade15-21