Franchising and the Entrepreneur

Assignment 10:  Chapter 7 Questions

Respond to the following Questions.  Students should complete this assignment after reading and reviewing the material for each chapter, attending class and taking lecture notes.  This assignment is designed to help students review material and prepare for exams.  Save a copy of your chapter questions for your review sheet to study for exams.  Students are expected to provide at least one paragraph (3-5 sentences) for each question.  Each question assignment submission is worth 20 points. 

1.     What is franchising?

         Franchising is a system of distribution in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchisor) in return for the right to become identified with its trademark, to sell its products or services and often to use its business format and system.

2.     List at least 4 advantages and 4 disadvantages of owning a franchise.

Advantages	Disadvantages
Management training and support	Franchise fee and profit sharing
Brand-name appeal	Strict adherence to standardized operations
Standardized qualify of goods and services	Restrictions on purchasing
National advertising programs	Limited product lines
Financial assistance	Unsatisfactory training programs
Proven products and business formats	Market saturation
Centralized buyer power	Less freedom
Territorial protection
Greater chance to success

3.     Describe the three types of franchising.

Trade-name franchising	:	A franchisee purchasing the right to become affiliated with a franchisor’s trade name without distributing its products exclusively
Product distribution franchising	:	Licensing a franchisee to sell products or services under the franchisor’s brand name through a selective, limited distribution network
Pure franchising	:	A selling a franchisee a complete business format

4.     Look for franchises on the internet to see if there is one similar to your business. If you cannot find a franchise that is similar, then pick a franchise that looks interesting to you.  Respond to the following questions 

1.     What is the franchise and what does it sell?

       The franchise is Kid to Kid. It sells new and used children's and maternity clothing and products

2.    What is the franchise fee?

Ongoing Fees

Initial Franchise Fee                                                             $25,000 - $25,000

Financing Options

         Kid to Kid has relationships with third-party sources which offer financing to cover the following: 
franchise fee, startup costs, equipment, inventory, accounts receivable, payroll

Veteran Incentives



$5,000 off franchise feeor you!

3.     What are the startup costs?

Initial Investment                                                        $258,160 - $448,660

Net-worth Requirement                                                               $200,000

Liquid Cash Requirement                                                               $75,000

4.    What is the royalty fee?

Ongoing Royalty Fee                                                                                  5%

Ad Royalty Fee                                                                                             0.5%

5.     Describe the franchiser support provided to the franchisee.

Ongoing Support

Purchasing Co-ops

Newsletter

Meetings

Toll-Free Line

Grand Opening

Internet

Security

Field Operations

Marketing Support

Co-op Advertising

Ad Slicks

Regional Media

Training Onsite: 40 hours

Training at headquarters: 88 hours

Additional Training: At existing location