Module 4 Topic 1:

The Pathways to
New Ventures
for Entrepreneurs
The Pathways to New Ventures for Entrepreneurs

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Creating New Ventures

Approaches to
New-New New-Old
Approach Creating a New Approach
Venture

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Trends in Creating Business Opportunities
Emerging Opportunities

Green Products Health Care Niche Consumables Home Automation and Media
Organic foods Healthy food Wine Storage
Organic fibers/textiles School and govt.- Chocolate Lighting control
Alternative Energy sponsored programs Burgers Security systems
Solar Exercise Coffee houses Energy management
Biofuel Yoga Exotic salads Comfort management
Fuel cells Niche gyms Entertainment systems
Energy conservation Children Networked kitchen
Nonmedical appliances
Pre-assisted living
Assisted living transition
services

Emerging Internet Opportunities

Mobile Advertising Virtual Economies
Cell phones “Online auctions”
PDAs Educational Tutoring
Concierge Services Human Resources Services
Niche Social Networks “Matchmaking”
Seniors “Virtual HR”
Music fans “Online Staffing”
Groups of local users
Pet owners
4Dating groups
Sources of New Business Ideas Among Men and Women

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Examining the Financial Picture
When Creating New Ventures

▪ Upside gain and downside loss expectations

▫ The profits the business can make and the losses it can suffer.
▫ How much money will the enterprise take in if all goes well?
▫ How much will it gross if operations run as expected?
▫ How much will it lose if operations do not work out well?
▪ Risk vs. reward analysis
▫ Points out the importance of getting an adequate return on the
amount of money risked.

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Checklist for Estimating Start-Up Expenses

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Checklist for Estimating Start-Up Expenses (cont’d)

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Acquisition of an Established Business Venture

Personal
Preferences

Acquiring an
Examination of Established Evaluation of
Opportunities Entrepreneurial the Venture
Venture

Asking Key
Questions
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Advantages of Acquiring an Ongoing Venture

Less fear about

Reduced time Purchasing at
successful future
and effort a good price
operation

Buying an Ongoing
Venture

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Evaluation of the Selected Venture

Factors Affecting Sale of the

Venture

The business Assets of the

environment venture
Profits, sales, and
operating ratios

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Key Questions to Ask

▪ Why is this business being sold?

▪ What is the current physical condition of the business?
▪ What is the condition of the inventory?
▪ What is the state of the company’s other assets?
▪ How many employees will remain?
▪ What type of competition does the business face?
▪ What does financial picture of the business look like?

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Negotiating the Deal

Information

FACTORS AFFECTING
Time NEGOTIATIONS
Pressure

Alternatives

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Considerations When Buying a Business

▪ Request that the seller retain a minority interest in the

business or establish the final purchase price dependent on
the performance of the business over a three-to-five-year
span.
▪ Be wary of any promises made without written
corroboration.
▪ Spend time reconstructing financial statements to
determine how much cash is actually available.
▪ Interview the owner, vendors, competitors, customers, and
employees.

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Considerations When Buying a Business

▪ Request that the seller retain a minority interest in the

business or establish the final purchase price dependent on
the performance of the business over a three-to-five-year
span.
▪ Be wary of any promises made without written
corroboration.
▪ Spend time reconstructing financial statements to
determine how much cash is actually available.
▪ Interview the owner, vendors, competitors, customers, and
employees.

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Franchising: The Hybrid
▪ Franchising
▫ Any arrangement in which the owner of a trademark, trade
name, or copyright has licensed others to use it in selling
goods or services
▪ Franchisee
▫ A purchaser of a franchise
▪ Franchisor
▫ The seller of the franchise

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How Franchising Works
▪ Franchisee Obligations:
1. Make a financial investment in the operation.
2. Obtain and maintain a standardized inventory and/or
equipment package usually purchased from the franchisor.
3. Maintain a specified quality of performance.
4. Follow a franchise fee as well as a percentage of the gross
revenues.
5. Engage in a continuing business relationship.

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How Franchising Works (cont’d)

Franchisor Provides:
1. The company name
2. Identifying symbols, logos, designs, and facilities
3. Professional management training for each independent unit’s staff
4. Sale of merchandise necessary for the unit’s operation, equipment to
run the operation, and the food or materials needed for the final product
5. Financial assistance, if needed
6. Continuing aid and guidance to ensure that everything is done in
accordance with the contract

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Franchising
▪ Advantages ▪ Disadvantages
▫ Training and guidance ▫ Franchise fees
▫ Brand-name appeal ▫ Franchisor control
▫ A proven track record ▫ Unfulfilled promises of
▫ Financial assistance franchisor

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Franchise Law
Franchise Disclosure Document (FDD)
▪ Divided into 23 categories that provide different segments of
information for prospective franchisees
▪ Developed to provide guidance in complying with the Franchise
Disclosure Rule that requires franchisors to make full presale
disclosure about their franchises

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FDD 23 categories (FDD different segments)
1. The Franchisor and Any Parents, Predecessors, 13. Trademarks
and Affiliates 14. Patents, Copyrights, and Proprietary Information
2. Business Experience 15. Obligation to Participate in the Actual Operation
3. Litigation of the Franchise Business
4. Bankruptcy 16. Restrictions on What the Franchisee May Sell
5. Initial Fees 17. Renewal, Termination, Transfer, and Dispute
6. Other Fees Resolution

7. Estimated Initial Investment 18. Public Figures

8. Restrictions on Sources of Products and Services 19. Financial Performance Representations

9. Franchisee’s Obligations 20. Outlets and Franchisee Information

10. Financing 21. Financial Statements

11. Franchisor’s Assistance, Advertising, Computer 22. Contracts

Systems, and Training 23. Receipts
12. Territory
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The Cost of Franchising
1. The basic franchising fee
2. Insurance
3. Opening product inventory
4. Remodeling and leasehold improvements
5. Utility charges
6. Payroll
7. Debt service
8. Bookkeeping and accounting fees
9. Legal and professional fees
10. State and local licenses, permits, and certifications

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World Wide Web Franchise Sites
American Bar Association Forum on Franchising www.americanbar.org/groups/franchising.html
U.S. Small Business Administration www.sba.gov
Entrepreneur Magazine www.entrepreneur.com/franchises/
Minority Business Entrepreneur Magazine www.mbemag.com
Franchise Times www.franchisetimes.com
Franchise Update www.franchising.com
National Restaurant Association www.restaurant.org/tools/
Source Book Publications www.franchisordatabase.com
Federal Trade Commission www.ftc.gov/bcp/franchise/
Franchise.com www.franchise.com/
World Franchising www.worldfranchising.com/
Franchise Solutions www.franchisesolutions.com/
Franchise Opportunities www.franchiseopportunities.com/
Franchise Know How www.franchiseknowhow.com/
The Franchise Magazine www.thefranchisemagazine.net/
Franchise Mall www.franchismall.com/
Franchise
23 Advantage www.franchiseadvantage.com
Evaluating Franchising Opportunities

The Franchise
Opportunity Decision

Learning of Seeking
Investigating the
Franchising Professional
Franchisor
Opportunities Help
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Key Terms
▪ business broker ▪ legal restraint of trade
▪ company’s profitability ▪ new-new approach
▪ franchise ▪ new-old approach
▪ Franchise Disclosure ▪ non-compete agreement
Document (FDD) ▪ profit trend
▪ franchisee ▪ risk versus reward
▪ franchise fee ▪ unscrupulous practices
▪ franchisor ▪ upside gain and downside loss
▪ franchisor control
▪ goodwill

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 THANK YOU

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