Podcast
Questions and Answers
What is refranchising?
What is refranchising?
What is one of the advantages of buying an existing business?
What is one of the advantages of buying an existing business?
What is a turnkey business?
What is a turnkey business?
What is one of the methods for determining the value of a business?
What is one of the methods for determining the value of a business?
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What is one of the advantages of buying an existing business?
What is one of the advantages of buying an existing business?
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What is one of the steps involved in buying an existing business?
What is one of the steps involved in buying an existing business?
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What is a key consideration when creating a successful franchise operation?
What is a key consideration when creating a successful franchise operation?
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What is the primary purpose of a Partnership Agreement?
What is the primary purpose of a Partnership Agreement?
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What is one of the benefits of buying an existing business?
What is one of the benefits of buying an existing business?
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What is one of the advantages of buying an existing business?
What is one of the advantages of buying an existing business?
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What is a characteristic of a Limited Liability Partnership?
What is a characteristic of a Limited Liability Partnership?
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What is the main advantage of a franchise arrangement?
What is the main advantage of a franchise arrangement?
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What is the purpose of the Uniform Partnership Act?
What is the purpose of the Uniform Partnership Act?
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What is a key characteristic of a corporation?
What is a key characteristic of a corporation?
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What is the primary purpose of an S Corporation?
What is the primary purpose of an S Corporation?
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What is a key feature of a master franchise arrangement?
What is a key feature of a master franchise arrangement?
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What is the main objective of the Discounted Future Earnings Approach (DFEA)?
What is the main objective of the Discounted Future Earnings Approach (DFEA)?
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Which of the following is a disadvantage of the Capitalized Earnings Approach?
Which of the following is a disadvantage of the Capitalized Earnings Approach?
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What is the purpose of the fifth step in the Discounted Future Earnings Approach (DFEA)?
What is the purpose of the fifth step in the Discounted Future Earnings Approach (DFEA)?
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What is the main goal of the buyer in a business negotiation?
What is the main goal of the buyer in a business negotiation?
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Which of the following is NOT a step in the Discounted Future Earnings Approach (DFEA)?
Which of the following is NOT a step in the Discounted Future Earnings Approach (DFEA)?
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What is the main goal of the seller in a business negotiation?
What is the main goal of the seller in a business negotiation?
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Which of the following approaches estimates goodwill by calculating opportunity costs, extra earning power, and tangible net worth?
Which of the following approaches estimates goodwill by calculating opportunity costs, extra earning power, and tangible net worth?
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What is the purpose of the present value factor in the Discounted Future Earnings Approach (DFEA)?
What is the purpose of the present value factor in the Discounted Future Earnings Approach (DFEA)?
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What is the primary objective of preparing an advertising budget?
What is the primary objective of preparing an advertising budget?
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What type of advertising technique involves sharing the cost of advertising with the retailer?
What type of advertising technique involves sharing the cost of advertising with the retailer?
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What is the term for the area between the price ceiling and price floor?
What is the term for the area between the price ceiling and price floor?
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What is the term for advertising that is concentrated when customers are most likely to buy?
What is the term for advertising that is concentrated when customers are most likely to buy?
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What is the primary goal of selecting advertising media?
What is the primary goal of selecting advertising media?
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What is the term for a group of businesses that produce ads?
What is the term for a group of businesses that produce ads?
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What is the term for innovative ads located in unexpected areas?
What is the term for innovative ads located in unexpected areas?
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What is the primary goal of raising prices incrementally?
What is the primary goal of raising prices incrementally?
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What is the primary purpose of a balance sheet?
What is the primary purpose of a balance sheet?
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What is the relationship between assets, liabilities, and owner's equity?
What is the relationship between assets, liabilities, and owner's equity?
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What type of asset is a patent?
What type of asset is a patent?
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What is the purpose of a cash budget?
What is the purpose of a cash budget?
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What is the term for the owner's claim on a business's assets?
What is the term for the owner's claim on a business's assets?
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What is the difference between current and long-term liabilities?
What is the difference between current and long-term liabilities?
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What is the purpose of the 'Big Three' of cash management?
What is the purpose of the 'Big Three' of cash management?
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What is bootstrapping in the context of cash management?
What is bootstrapping in the context of cash management?
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What is one of the techniques for identifying business opportunities?
What is one of the techniques for identifying business opportunities?
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What is one of the benefits of owning a small business?
What is one of the benefits of owning a small business?
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What is one of the drawbacks of becoming an entrepreneur?
What is one of the drawbacks of becoming an entrepreneur?
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What is one of the top reasons businesses fail?
What is one of the top reasons businesses fail?
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What is one of the factors that led to the age of entrepreneurship?
What is one of the factors that led to the age of entrepreneurship?
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What is an important aspect of identifying business opportunities?
What is an important aspect of identifying business opportunities?
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What is a common characteristic of entrepreneurs?
What is a common characteristic of entrepreneurs?
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What is a key aspect of entrepreneurship?
What is a key aspect of entrepreneurship?
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What is the primary consideration for an entrepreneur when choosing a form of ownership?
What is the primary consideration for an entrepreneur when choosing a form of ownership?
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What is the main characteristic of a sole proprietorship?
What is the main characteristic of a sole proprietorship?
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What is the primary advantage of a sole proprietorship?
What is the primary advantage of a sole proprietorship?
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What is the main disadvantage of a sole proprietorship?
What is the main disadvantage of a sole proprietorship?
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What is the primary purpose of a partnership agreement?
What is the primary purpose of a partnership agreement?
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What is the main advantage of a partnership?
What is the main advantage of a partnership?
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What is the primary disadvantage of a partnership?
What is the primary disadvantage of a partnership?
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What is the key difference between a sole proprietorship and a partnership?
What is the key difference between a sole proprietorship and a partnership?
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What is the primary goal of an Employee Stock Ownership Plan (ESOP)?
What is the primary goal of an Employee Stock Ownership Plan (ESOP)?
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What is the purpose of due diligence?
What is the purpose of due diligence?
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What is the primary purpose of a balance sheet?
What is the primary purpose of a balance sheet?
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What is the main objective of the seller in a business negotiation?
What is the main objective of the seller in a business negotiation?
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What is the term for the process of adjusting a company's value?
What is the term for the process of adjusting a company's value?
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What is the primary goal of communicating with employees during a business transition?
What is the primary goal of communicating with employees during a business transition?
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What is the purpose of listening to employees during a business transition?
What is the purpose of listening to employees during a business transition?
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What is the primary goal of talking about the vision with stakeholders during a business transition?
What is the primary goal of talking about the vision with stakeholders during a business transition?
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What is the primary purpose of the Franchise Disclosure Document (FDD)?
What is the primary purpose of the Franchise Disclosure Document (FDD)?
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What is a key consideration when evaluating a franchise opportunity?
What is a key consideration when evaluating a franchise opportunity?
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What is the primary advantage of buying an existing franchise?
What is the primary advantage of buying an existing franchise?
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What is the typical provision in a franchise agreement regarding termination?
What is the typical provision in a franchise agreement regarding termination?
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What is the purpose of the seventh step in the process of buying a franchise?
What is the purpose of the seventh step in the process of buying a franchise?
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What is the primary characteristic of area development in franchising?
What is the primary characteristic of area development in franchising?
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What is the main advantage of conversion franchising?
What is the main advantage of conversion franchising?
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What is the primary purpose of the rights and obligations outlined in a franchise agreement?
What is the primary purpose of the rights and obligations outlined in a franchise agreement?
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What is the primary purpose of asking core questions to all candidates during an interview?
What is the primary purpose of asking core questions to all candidates during an interview?
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What is the main goal of building an organizational culture?
What is the main goal of building an organizational culture?
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What is the primary reason for not relying on candidates' self-descriptions during the hiring process?
What is the primary reason for not relying on candidates' self-descriptions during the hiring process?
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What is the main objective of motivating workers in an organization?
What is the main objective of motivating workers in an organization?
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What is the primary purpose of sponsoring a 'job shadowing' program for students?
What is the primary purpose of sponsoring a 'job shadowing' program for students?
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What makes a test valid?
What makes a test valid?
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What is the main goal of creating an environment of trust in an organization?
What is the main goal of creating an environment of trust in an organization?
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What is the primary purpose of communicating the company's values and vision?
What is the primary purpose of communicating the company's values and vision?
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Study Notes
Master Franchising and Cobranding
- Master franchising can be a good option in international markets
- Cobranding involves teaming up with complementary products or services, serving dual-career couples and aging baby boomers
Strategies for a Successful Franchise Operation
- A unique concept is needed to create a successful franchise operation
- The concept must be replicable
- Expansion plans are necessary
- Legal guidance is required
Types of Business Ownership
Sole Proprietorship
- The owner makes decisions alone
- The owner has unlimited personal liability
Partnership
- An association of multiple people who own a business together to make a profit
- A partnership agreement states the terms of ownership to protect the rights of each owner
- The Uniform Partnership Act arranges the law of dealing with partnerships in the US
Limited Partnerships
- One or more general partners and one or more limited partners
- Limited Liability Partnerships (LLPs) are a type of limited partnership where all partners are limited partners
Corporation
- A legal entity created by the state that can sue or be sued in its name, enforce contracts, transfer property, and can be liable if it violates the law
- An S-Corporation is a type of corporation made for tax purposes
- A Limited Liability Corporation (LLC) is an S-Corporation but is not subject to the same restrictions
Franchising
- Semi-independent owners pay fees to a company for the right to sell its products and services under the franchiser's trade name
- Refranchising involves reducing the number of company-owned stores
Buying an Existing Business
- Advantages include business continuity, guaranteed job, easier access to financing, increased experience, and the ability to purchase without changing the business model and products
- Methods for determining the value of a business include:
- Variation 1: Excess Earnings Method, which estimates goodwill and calculates opportunity costs, extra earning power, and tangible net worth
- Variation 2: Capitalized Earnings Approach, which calculates risk level
- Variation 3: Discounted Future Earnings Approach (DFEA), which estimates net income for several years and discounts the future earnings using the present value factor
Negotiating the Deal
- Tips for negotiating include:
- Developing a negotiating strategy
- Focusing on the issue, not the person
- Being a good listener
- Being patient and flexible
- Seller goals include:
- Getting the highest price
- Minimizing tax burden
- Maximizing cash from the deal
- Avoiding unreasonable contract terms
- Buyer goals include:
- Buying at the lowest price
- Negotiating a favorable price
- Avoiding the seller competing against them
- Minimizing payment upfront
Advertising on a Small Budget
- Selecting advertising media options include:
- Social media
- TV
- Radio
- Newspaper/magazine
- Word-of-mouth
- Preparing an advertising budget involves:
- Determining what is affordable
- Matching competitor's ad expenditures
- Using percentage of sales (past or future)
- Objective-and-task method
- Advertising strategies include:
- Comparative advertising
- Shared advertising
- Stealth advertising
- Repeating successful ads
- Concentrating advertising when customers are most likely to buy
Pricing Strategies
- The price range is the area between the price ceiling and price floor
- Communicating with customers and raising prices incrementally are important pricing strategies
Identifying Business Opportunities
- Techniques for identifying business opportunities include:
- Taking different approaches to a market
- Looking for creative ways to use existing resources
- Putting a new twist on an old idea
- Monitoring trends
- Realizing that all face the same problems
- Noticing what is missing in the market
Benefits of Owning a Small Business
- Benefits of owning a small business include:
- Control over one's destiny
- Making a difference
- Contributing to society
- Reaching full potential
- Reaping profits
- Doing what one enjoys
Drawbacks of Entrepreneurship
- Drawbacks of becoming an entrepreneur include:
- Uncertainty of income
- Risk of losing whole capital
- Long working hours
- Low quality of life at the beginning
- High levels of stress
- Complete responsibility
- Discouragement
Top 5 Reasons Businesses Fail
- Top 5 reasons businesses fail include:
- Bad location
- Insufficient capital
- Lack of experience
- Poor inventory control
- Lack of planning
Factors Leading to Entrepreneurship
- Factors that led to the age of entrepreneurship include:
- Shift to service economy
Choosing a Form of Ownership
- Issues to consider when choosing the form of ownership include:
- Control
- Managerial ability
- Business goal
- Taxes consideration
Sole Proprietorship
- Definition: ownership where the owner makes decisions alone
- Advantages:
- Simple to create
- Low cost to establish
- Encourages profits
- Only one to make decisions
- No legal restrictions
- Easy to stop and terminate
- Disadvantages:
- Limited access to capital
- Limited abilities and skills
- Feelings of isolation
- Lack of business continuity
Partnership and Corporation
- Partnership definition: association of multiple people who own a business together to make profit
- Advantages:
- Easy to establish
- Larger capital
- Strict operations
- Disadvantages:
- Authority conflicts
- Partners are bound by the laws
Franchising and the Law
- Franchise disclosure document (FDD) must be presented before any offer or sale
- FDD must be written in English and contains information such as:
- Business experience
- Franchise fees and costs
- Lawsuits involving the franchisor
The Right Way to Buy a Franchise
- 7 steps to buying a franchise:
- Evaluate yourself
- Research market
- Consider options
- Get a copy of FDD and study it
- Talk to existing franchisees
- Ask franchisors questions
- Make your choice
Franchise Contracts
- Govern the franchisor-franchisee relationship
- Example: rights and obligations
- Termination: franchisors can terminate “with or without cause” while franchisees can’t
- Renewal: franchisors usually have the right to renew or refuse contract renewal
- Transfer and buybacks: franchisees are usually not free to sell their business without approval
Trends in Franchising
- Trends in franchising include:
- Smaller, nontraditional locations
- Conversion franchising: offers instant name recognition
- Refranchising: reducing the number of company-owned stores
- Area development: offers exclusive rights to an area
- Employee Stock Ownership Plan (ESOP): a plan in which employees earn a part or the whole company
Due Diligence
- Definition: investigating, studying, reviewing, and verifying relevant information concerning the most attractive business candidates in greater detail
- Process involves:
- Adjusted balance sheet technique: a realistic method to determine a company’s value
- Employee Stock Ownership Plan (ESOP): a plan in which employees earn a part or the whole company
New Business Planning Process
- Conducting a feasibility analysis and crafting a winning business plan
- Elements of a business plan:
- What lenders and investors look for in a business plan
- The pitch: making the business plan presentation
The Entrepreneur’s Role as Leader
- 4 vital tasks:
- Hire the right employees and constantly improve their skills
- Build an organizational culture that allows one to reach potential
- Communicate the values and vision of the company and create an environment of trust
- Motivate workers
Hiring the Right Employees
- Poor hiring practices:
- Trusting candidates' self-descriptions rather than testing them
- Inconsistent, evidence-based selection process
- Not explaining the jobs they're hiring for
- Send recruiters to college students
- Creative recruiting techniques:
- Sponsoring a "job shadowing" program for students
- Invite college seniors to a company tailgate at a sports event
- Host job fairs
Valid and Reliable Tests
- Definition: a test that measures what it is intended to measure
- Reliable test: a test that measures consistently over time
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Description
This quiz covers franchising strategies, including master franchising, cobranding, and serving specific demographics, as well as the elements needed to create a successful franchise operation.