Buisness Notes: Possible pitfalls of operating as a franchise

Pitfalls of operating as a franchisee

  • Specific contracts
  • Have to pay a large franchise fee and other expenses
  • Loads of competition
  • Takes most of the risk
  • If the franchise fails you fail

Pitfalls of operating as a franchisor

  • Have to provide the equipment
  • Has to train the franchisee
  • May get a bad reputation
  • Franchise may grow too fast

– Esjae x

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Business Notes: Benefits of operating as a franchise

Benefits for the franchisee:

  • Get provided with the equipment
  • Already have a customer base
  • Become apart of an established business
  • Don’t have to start from scratch
  • Training and on going support
  • Benefit from marketing campaigns
  • Know costs

Benefits for the franchisor

  • Benefits from the growth
  • Fairly low risk
  • Become more well known in a wider geographical area
  • Reputation
  • Rapid growth

Franchisee is the individual who buys the franchise
Franchisor is the person selling the company

– Esjae x

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Business Notes: What is a franchise?

A franchise occurs when one business (the franchisor) sells the right to use and sell its products and/or services to another business (the franchisee).

Examples include Burger King and Mcdonalds.

– Esjae x

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Business Notes: Identifying a product or market niche

A niche is something that is specialise or unique.

For most entrepreneurs, identifying a broad business idea is relatively easy. But it is more difficult to identify the exact product to be made and the market niche to be occupied.

For example, someone setting up a Bed and Breakfast business has to decide whether to go upmarket or downmarket, and whether to aim at holiday or business people.

Business Link, the government organisation set up to help small businesses, suggests that a new business idea should be checked against the following criteria:

  • What can the entrepreneur bring to the business in terms of relevant experience and expertise?
  • Is there a market for the product? Does it serve a need and will customers pay for it?
  • How big is the market and how can it be reached?
  • Who will the main competitors in the market be?
  • Is there something special about the idea? Or will it be a similar product to what is already in the market place?
  • How will the business be funded?
  • What are the risks involved and what can go wrong?

– Esjae x

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Business Notes: What is opportunity cost?

Opportunity cost is giving up something else to buy something at the cost of the alternative forgone.

EXAMPLE:
An entrepreneur’s social life and career may need to be given up when starting a business.

– Esjae x

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Business Notes: What are some of the other potential risks and rewards of starting a business?

Risks:

  • Failure
  • Potential of personal debt
  • Not gaining/ having support
  • Gaining a bad reputation
  • Not haing enough skills
  • Having too high hopes
  • Gambling everything
  • Loss of personal life
  • Personal credit rating
  • Health/ Stress

Rewards:

  • Profit/money
  • Success
  • Good reputation
  • Satisfaction
  • Qualifications
  • Skills
  • Being the best in a specific field
  • Being able to afford luxuries
  • Enjoying your job
  • Gaining a status
  • Gaining experience

Obviously this isn’t a complete list of the risks and rewards associated with starting a business and is only a limited list.

– Esjae x

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Business Notes: The importance of risks and rewards such as profit

In the UK, people tend to be risk averse and afraid of failure. As the majority of new businesses fail, such fears are well-placed. Business failure can occur because of:

  • Lack of skills
  • Poor infrastucture
  • Finance shortages
  • Complexity of regulations, or red tape (paperwork)

If a business fails, it may leave debts to be paid off. The entrepreneur may have borrowed money to finance the buiness. However, most entrepreneurs are happy to take risks if the potential rewards are great enough. Of course, this depends on them doing their research to ensure that all reasonable steps are take to minimise the possibility of failure. The outcome of successful risk-taking will be a profitable venture. One business writer has described this balance of risk and potential reward as ‘smart luck’, or taking a gamble when you know the odds.

– Esjae x

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Business Notes: What are the qualities and characteristics of an entrepreneur?

What are the qualities and characteristics of an entrepreneur?

  • Confident
  • Open to advice
  • Creative
  • Good at public speaking
  • Risk taker
  • Able to learn from their mistakes
  • Opportunistic
  • Able to work to deadlines
  • Smart
  • Has belief in themselves and their idea
  • Ambitious
  • Determined
  • Able to work in a team and individually
  • Organised
  • Responsible
  • Hard working
  • Patient
  • Has leadership skills
  • Good with numbers
  • Passionate
  • Has some specialist knowledge

This list is by no means a complete list and it doesn’t mean an entrepreneur should possess all of the qualities and characteristics. This list only contains some of the common qualities and characteristics that entrepreneurs possess.

– Esjae x

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Business Notes: What is the difference between an inventor and an entrepreneur?

An inventor introduces a new product/ idea but lack business skills where as an entrepneur is a person who puts the idea into practice.

– Esjae x

Follow me on Twitter: http://twitter.com/esjaeofficial
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