Principles of technopreneurship

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Techno 1 notes

FRANCHISING

Disadvantages
a) Unproven idea The idea maybe creative, but will it work Even after the most thorough research, anew business can only prove itself in practice. b) High failure rate The failure rate of startups is high less than 50% survive the first five years. Other methods e.g. franchising, have better track records. c) Hard, lonely work Unsociable working hours are often linked to feelings of being alone as, even in a partnership, there are no support departments and services in the firm. Entrepreneurs do it themselves. d) No market share or goodwill Compared to buying an existing business or franchising, the startup has the problem of establishing its name from scratch. The goodwill or loyalty of customers takes sometime to buildup. e) Barriers to entry There are many barriers to market entry. One-off startup costs can be significant. Legislation has to be considered, premises found, accounts with suppliers opened, creditworthiness proved, and many other obstacles have to be overcome before trading begins. f) Difficult to forecast With no track record, a startup is very hard to predict for financial and other outcomes. g) Difficult to finance Banks and other lenders are always keener to give money to proven concepts than to new ideas.

FRANCHISING
Franchising is a business arrangement in which one party (the franchisor) allows others the franchisees) to use a business name, or sell products, in such away that the franchisees can operate their own legally separate business. It is a form of business ownership created by contract whereby a company grants to a buyer the rights to engage in selling or distributing its products or services under a prescribed business format in exchange for royalties or share of profits. The buyer is called the franchisee and the company that sells rights to its business concept is called the franchisor. The producers develop their products and the goodwill associated with their trademarks the local distributor contributes local knowledge, contacts and effort. These arrangements are common in the oil industry, cars and drinks. Some businesses specialize as import agencies, often negotiating a number of agreements to import foreign goods and act as the national or regional distributor. If these goods are branded, the producer will usually attempt to protect their trademark by an agreement which not only outlines the terms and conditions of trade, but also sets minimum standards covering sales and after-sales aspects. In recent years, franchising provides a complete package which includes a) trade name, business style, logo, house colours

Technoprenuership1 27 b) detailed product or service specification c) analysis of location, and lease negotiation d) design of premises, and purchase of equipment e) financial advice to establish the business f) operating systems and manuals g) management control systems h) training and help to setup i) research and development j) National and local marketing etc.

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