Name: Acal, Karina M.

Section: BSHM 3A

Questions
1. Would you prefer to start and organize an entirely new business than buy an
existing firm? Discuss.
- Financial budget is a big factor in establishing a business, if I don’t have billions of
money I can’t buy an existing firm because in buying the name of the establishment
it will already costs millions, other expenses are not yet included there just like
buying a parcel of land where I can build my establishment, the labor cost, taxes and
other permits related to business and equipment that will need in the business. So
to answer the question, I would just prefer to organize an entirely new business than
to buy an existing one because I can customize it whatever I want. I don’t need
billions just to establish it especially when I just want a small business and try to
figure out what are the needs and wants of people that I can offer in my business.
2. What are the advantages and pitfalls of Franchising?
- The advantages of franchising are the following: possibility of failure is lessened,
increase in new market location through urbanization of local areas, customer tends
to patronize a specific franchised service or product, customer loyalty and
preference for a successful brand name, better management through training
provided by franchisor, technical and other assistance is easily accessed from the
franchisor, it is easier and faster to build good reputation and gain recognition, and a
better assurance that the business will be profitable.
- The pitfalls of franchising are the following: high cost of Franchise, operation is
controlled by the Franchisor, presence of fierce competition, pressure to
continuously make the product acceptable to the market, and problems associated
with the expiration of the franchise
3. What are the two types of Franchising? Explain
- The two types of franchising are Product and Trademark Franchising— is an
arrangement under which the franchisor grants to the franchisee the right to buy its
products and use its trade name; and Business Format Franchising— an
arrangement under which the franchisor provides a formula for doing business to
the franchisee along with training, advertising, and other forms of assistance.
4. What are the different format of franchising? Explain
- The different format of franchising are the following: Individual Franchise
Agreement – involves the sale of a single franchise for a specific location; Area
Franchisee Agreement – allows a franchisee to own and operate a specific number
of franchises in a particular geographic area; and Master Franchise Agreement –
allows a franchisee to own and operate a specific number of franchises in a
particular geographic area and provides the franchisee the right to sell to others
(subfranchisees) who find and manage their own franchises.
5. What are the cost implicated in entering a franchising venture?
- The cost implicated in entering a franchising venture are Cost of investment such as
initial franchise fee, capital requirement, royalties, advertising fees, and other fees.
Franchisee’s preference and interest, location of the franchise, reputation of the
franchise organization, franchise support and assistance, and possibility of obtaining
a master franchise are also included in the cost implicated when planning to
franchise a business.