Entrepreneurship,

Franchising,
and Small Business
Chapter # 3
Part-1
Introduction to Business
Md. Golam Mostofa
SECTION: A2 A4
Chapter Contains:

Entrepreneurship
Franchising
Small Business
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ENTREPRENEURSHIP
Some define the entrepreneur simply as one
who starts his or her own new and small
business.

Entrepreneur
A person who takes the risks necessary to
organize and manage a business and receives
the financial profits and nonmonetary rewards.
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Intrapreneur
A person with entrepreneurial characteristics
employed by a corporation and encouraged to
be innovative and creative.
ENTREPRENEURSHIP
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Growth-Oriented
Entrepreneur
Need for achievement

Growth-oriented entrepreneurs have a high need for achievement:
they need to succeed, to achieve, to accomplish challenging
tasks. The strong desire for achievement leads to a desire for
independence.

Low need to conform

Growth-oriented entrepreneurs listen, but they are able to ignore
others advice. They are able to handle generally accepted rules
and standards. Taking the unpopular course of action, if they
consider it best, is the way they do business.
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Growth-Oriented
Entrepreneur
Determination

Growth-oriented entrepreneurs are persistent (refusing to give
up), doing business with determination for it to succeed. They
work hard on the details and uncompromisingly attempt to find
ways to become more profitable.

High Energy Level

The capacity for continued effort requires a high energy level. All
the necessary work---planning, organizing, directing, creating
strategy and finding funds can only be accomplished on a
demanding schedule.
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Growth-Oriented
Entrepreneur
Risk taking tendency

It is said that, people with a high need for achievement tend to
take risks. Growth-oriented entrepreneurs believe so strongly in
their ability to achieve that they do not see possibility of failure.
They thus accept risk and find it motivating.

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Risks of Entrepreneurship
The failure rate among new ventures is comparatively high.

Besides business risk, entrepreneurs face significant finance
risk, if they typically invest most if not all of their financial
resources in the business.

They may take a career risk by leaving a secure job for a
venture with a highly uncertain future.

They may also incur family and social risks because the
demands of starting and running a young business leave little time
for attention to family and friends.
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Reasons for Business Failure
1. People fail because they jump into a business too quickly.
They throw or get into a business enterprise very quickly ,
without doing their homework. They do not analyze their own
strengths and weaknesses.

2. Businesses also fail due because they run out of money. If
you cannot pay your bills and other expenses, you are out of
business. Realistic planning for the money needed is critically
important. Estimates of cash requirements are a top priority
before starting the venture.

3. Failing to plan is an obvious mistake. A detailed business plan
forces the entrepreneur to think ahead, to reflect, to decide on
how to proceed.
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FRANCHISING
An attractive business opportunity for many people is to obtain a
franchise and become the owner of a restaurant, motel or other
business.

Franchise
The right to use a specific business name and sell its good
or services in a specific city, region or country.
Example: Pizza Hut, Mc Donalds, KFC


Franchising:
A system for selective distribution of goods and services
under a brand name through outlets owned by independent
business owners.
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FRANCHISING
Franchisee (Person):
The independent owner of a franchise outlet who enters into
an agreement with a franchisor.

Franchisor (Company):
The licensing company in the franchise agreement.
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FRANCHISING
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FRANCHISING
The Description of a Franchise system points out
the crucial elements of a franchise business.

A Contractual Agreement between a Franchisee and a
Franchisor
A Branded Good or Service (eg. Car, Food, etc.)
Operation, by a businessperson for the purpose of earning
a profit.
Monitoring by the Franchisor so that standard procedures
and a standardized product or service are used.
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Advantages of Owning a
Franchise
Guidance

Many franchisors try to overcome managerial deficiencies or
inexperience by providing some sort of training to the individuals.

Brand Name

The investor who signs a franchise agreement acquires the right
to use a nationally or regionally promoted brand name. National
promotion brings these features and characteristics to the
attention of the potential customers.
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Advantages of Owning a
Franchise
Proven Product

The franchisor can offer the franchisee a proven (established)
product and method of operating the business. The product or
service is known and accepted by the public.

Financial Assistance

By joining a franchise company, the individual investor may be
able to secure financial assistance. Start up costs of any business
are often high and the prospective investor usually has limited
funds.
Association with a well established franchisor-through its
reputation and its financial controls- may enhance the investors
credit rating with local banks.
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Disadvantages of Owning a
Franchise
Costs

Franchisees must pay franchise fees. In return, the franchisor can
provide training, guidance and other forms of support that would
otherwise cost money. Thus the franchisee pays for the
opportunity to share in these forms of support.

External Control
A person who signs a franchise agreement looses some
independence. The franchisor, in order to operate all the franchise
outlets as a business, must exercise some control over
promotional activities, financial records, hiring, service procedures
and managerial development. The franchisee is semi-
independent. In a sole proprietorship, the owner is totally
independent.
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Disadvantages of Owning a
Franchise
Weak Training Programs

Some franchisors have developed excellent training programs.
Even competitors admit that KFC, Pizza Hut, etc have outstanding
training programs. But sometimes promoters promise sound
training programs and never deliver. Training programs are brief
and staffed by trainers who do not have instructional skills. The
facilities are sometimes unsuitable for proper learning and
development.

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