Franchises

Intro To Business

Do Now

• Please write your response on the guided notes sheet:

• Your answer will be based on viewing the next slide.

What do these have in common?

These are not franchises

Standard

5.5 Identify and describe the characterisitics of various entrepreneurial opportunities.

Today’s Goals

• Define terms used in franchising.• Identify business skills necessary to run a successful franchise.• Explain the benefits of franchising.• Determine how franchising is an effective type of business and

examine how each franchise maintains a form of ownership.• Summarize franchise opportunities in the local area.• Research and calculate royalty fees and start up costs on a

franchise investment.• Examine various laws relating to franchise agreements and

determine which areas of a franchise agreement are significant.

Franchisor

• a person or company that grants a franchise.

Franchisee

• a person or company to whom a franchise is granted.

Franchise

• The right or license granted by a company to an individual or group to market its products or services in a specific territory.

• It is in the form of a written agreement

Why franchise?

• Stable brand name

• Brand Name has a customer base(loyalty)

• Company gives you training

• Company has national advertising exposure

• Feeling of belonging to a national company

Fees

• Royalty Fees- usually between 3-6% of – Sales to cover advertising expenses

• Initial start-up fee- the more renowned– the franchise, the higher the fee

• Required Net Worth-how much money you– have. Franchisees must avoid bankruptcy.

• Please calculate on your own: Five Below sales $100,000 per month. 5% royalty fee. What is the amount owed to the franchisor at the end of the month?

• Please show your work on the guided notes sheet.

Answer

• $100,000 * .05= $5,000 monthly fees

• $5,000* 12= $60,000

yearly fees

Not a Form of Ownership

• A franchise is not a form of ownership however…

• It may be run as a sole proprietorship

• Partnership, LLC etc.

• Corporation(multiple locations i.e. Dunkin Donuts located in close proximity.)

Activity 1

• Students will work in groups of 3.

• You will pick 3 of the listed 6 franchise ideas.

• Research the 3 companies and record your answers in the chart.

• You will then select the franchise that you find most appealing.

Activity 1(continued)

• Summary

• Which franchise did you choose and why?

• What type of investment or other financial data are required?

• Is there a location that you find appealing and discuss the territory size or space you desire.

• Does your franchise advertise? Examples

Review Question 1

• What is the name of the person receiving the benefits of the franchise?

• A. Franchisor

• B. Franchisee

• C. Franchise

• D. Entrepreneur

Review Question 2

• One main reason to pay royalty fees is:

• A. Run up the expenses

• B. Make the owners wealthy

• C. Overcharge customers

• D. Company has national advertising exposure

Review question 3

• One goal of a franchise agreement is to set forth:

• A. Vacation time

• B. Who will be Ronald McDonald

• C. Determine territory size

• D. Make 0 profits

Review question 4

• Initial start up fees would most likely include:

• A. Licensing for business

• B. Cost of materials or equipment

• C. Training costs

• D. All of the above

Review question 5

• Predict your required net worth for Taco Bell to accept you as a franchisee:

• A. $10,000

• B. $50,000

• C. $1,000,000

• D. $200,000,000

Review question #6

• All of these franchises have the same characteristics except:

A. Strong brand name

B. Offer franchisees training

C. Have a stable customer base

D. are only run by managers and assistant

managers.

Exit Ticket

• What business skills are necessary for successful franchising?