Entrepreneurship 2

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  1. franchise
    a business that markets a product or service developed by a franchisor, typically in the manner described by the franchisor
  2. franchising
    the system of operating a franchise governed by a legal agreement between a franchisor and franchisee
  3. two main catergories of franchising
    by the federal trade commision are product and trade-name franchising and business-format franchising
  4. product and trade-name franchising
    the licensing of the product or production of the product and the ise of the trademark, logo, or other identity of the franchise; supplier-dealer, auto dealerships
  5. business format franchising
    a form of franchising in which the franchisee secures the product and trade name benefits but also theoperating, quality assurance, accounting, marketing methods, and support of the franchisor
  6. master franchise
    a specific type of franchise that allows individuals and organizations to buy the right to subfranchise within a delineated geographic territory
  7. area franchise / multiple-unit franchise
    type of franchise that gives exclusive rights to open franchise-operated units within specified areas
  8. franchise pros
    • start-up assistance
    • instant recognition
    • purchasing power
    • advertising and promotional support
    • operating guidelines and assistance
    • record of success
  9. cooperative advertising fee
    a fee paid by franchisees to a shared advertising fund that is seperate from its royalty fees
  10. franchise cons
    • constraints on creativity and freedom
    • costs
    • standards and termination
  11. internet franchises
    a type of franchise company that does not depend upon physical location for the delivery of its products or services; virtual business
  12. conversion franchising
    when an existing or standalone business or local chain becomes part of a franchise operation
  13. piggy-backing or co-branding
    two franchises share locations and resources
  14. Franchis diclosure document
    the primry source of information for prospective franchisees regarding franchises
  15. FDD includes:
    • overview and background
    • fees and costs
    • territory
    • financial performance
    • data regarding existing units
    • financial statements and contracts
    • procedures
  16. franchise agreement
    contract that determines the specific parameters of the relationship betweenthe parties ina franchise
  17. included in franchise agreement are:
    • length of time
    • standards of quality and performance
    • royalties
    • noncompete clause
    • "hold harmless clause" to protect franchisor
    • intergration clauses to block franchisee from suing
    • choice of venue
    • clauses regarding termination, renewal, transfer
    • territories
  18. steps to select franchise
    • self reflection
    • what branch
    • research
    • narrow your list
    • broker or no
    • visit chosen franchise
    • contact franchise
    • perform due dillagence for qualifications
    • finance
    • make the decision
    • make it work
  19. franchise broker
    third party consulting company that prescreens prospective franchisees and matches them with franchisors, fees generally paid by franchisors
  20. what is the structure of the franchise industry?
    • large franchisors control most of the industry
    • types include internet franchises, conversion franchising, and co-branding
  21. legal aspects of franchising:
    • FDD is essential
    • state and federal regulations govern franchising
    • a franchise agreement and other legal documents will be involved
    • use good counsel
Card Set:
Entrepreneurship 2
2011-09-17 23:35:46

chapter 2
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