FEATURE PAPER

Starting a New Business: Franchising vs. New Venture

The following paper was written by Dianne H. B. Welsh from The University of North Carolina at Greensboro, Shawn M. Carraher of Indiana Wesleyan University, and Lottie Sledgel of Cameron University . It was presented at the 2012 Small Business Institute National Conference.

Abstract

Many individuals consider starting a small business, for practical reasons like they wish to be their own boss or more personally fulfilling ones like the desire to follow a long-time dream. There are a series of decisions that need to be made at the beginning of any entrepreneurial implementation process. This paper will look at some of the aspects of becoming a franchisee versus the starting up of a new business venture and some of the considerations that accompany each venture.

Introduction

Franchisor's Agreement

Most franchisers have performed the bulk of the marketing tests and market research prior to fielding applications from potential franchisees. Some aspects of the business are required and followed by all of the company's franchisees. That is how consistent service is maintained for franchises, no matter the locale in which the business is placed.

Cheeseburgers from McDonald's will taste identically regardless of the locale, and customer will be able to rely on this standard. It is very important that the product is standard and that it must be the same in every McDonald's restaurant that a customer patronizes. The McDonalds Company does not set menu prices, but it is very important and strongly encouraged that all of the franchisers support the same ideals and value-meal strategies (York, 2008).

The International Franchise Association (IFA) hosts conventions in which franchisees gather to exchange ideas and sharpen their skills. It is also a great opportunity for the franchisees to network with their peers, and includes new franchisers as well as franchisers that are more experienced and have been in the system for an extended period of time. The franchisers can collaborate on ways to strategize and form ideas on ways to expand their company's brand (Shay, 2008).

At these conventions, the franchise owners and operators work side by side in developing business plans and that impact each of the individual franchises. In this way, the business owners have input into the decision making process, and have some say in how they run their individual businesses.

The business owners have the ability to run their businesses the way that they wish, although there are some aspects that are non-negotiable, unless the owners and franchisors agree - across the board - to the changes.

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TIP OF THE WEEK

How Inflation Can Hurt Small Business Owner

Inflation is the gradual, continuous increase in the prices of products and services, usually resulting from an increase in the amount of money in circulation in an economy. It can be the enemy of the small business owner: circulation in an economy. It can be the enemy of the small business owner. If you save $600 per year to buy new table and chairs (which cost #3000 the last time you bought them) for your restaurant, but you find at the end of five years that the cost of replacing them has risen to $5000 because of inflation, your business could be in trouble if you cannot get the additional $2000. Savvy entrepreneurs keep up with economic trends by reading the financial section in the newspapers, as well as financial magazine and Web sites. By staying up to date on what is happening, you can invest wisely and plan effectively for the future.

Using Accounting Records to Track Fixed and Variable Costs

Now you are ready to set up your financial records. Nothing that you learn as an entrepreneur will be more important than keeping accurate records of the money flowing in and out of your business. The systematic recording, reporting, and analysis of the financial transactions of a business (keeping statistical records of inflows and outflows) is calledaccounting. It is the primary language businesspeople use to communicate. When you talk to an investor or supplier about your business, you will need to use accounting terms. He or she will want to see the financial statements for your business that describe its performance at a glance.

Before you can create financial statements, however, you must be able to keep track of your daily business transactions. If you develop record keeping into a habit, you will be well ahead of the many business people that tend to get careless when it comes to keeping good records consistently.

Three Reasons to Keep Good Records Every Day

1.Keeping good records will show you how to make your business more profitable.Perhaps your profits are down this month over last. Did you expenses go up? Maybe you need to try lowering your costs. Did your sales drop? Maybe you are not spending enough on advertising. Use accurate records as a base to constantly improve your business.

2.Keeping good records will document your business profitability and cash position. If you want people to invest in your business, show them that it is profitable. Keep accurate records to create financial statement and ratios that prove your business is profitable. Keep accurate records to create financial statements and ratios that prove your business is doing well. Remember, you willalwaysneed to maintain your business's financial statements so that you will be up to date on your company's performance.

3.Keeping good records proves that payment have been made. Accurate, up-to-date records help prevent arguments, because they prove you have paid a bill or that a customer has paid you. Records can also prove that you have paid your taxes-the fee charged (levied) by a government on an income, product, or activity that is imposed on an individual or legal entity (corporation). Sometimes the Internal Revenue Service, the federal agency that collects taxes, will visit a business and check its financial records in a process called anaudit. If you keep good records and pay your taxes in a timely fashion, you will have nothing to fear from audits.

ANNOUNCEMENTS

International Journal of Business and Social Science

The International Journal of Business and Social Science is now taking manuscript submissions. All manuscripts must be submitted electronically through the e-mail to the editor ateditor@ijbssnet.com, oreditor.ijbss@hotmail.com. For more information,click here.

Call for Panelists

The Marketing Management Association is accepting panelists for the Fall Educators' Conference on Sept 19-21, 2012 by the Mall of America in Minneapolis. Panelists are needed in the following areas:

. Effectively Using Social Media to Enhance Student Learning
. Building Information Literacy in Classroom Instruction
. Mentoring Junior Faculty: Expectations and Outcomes
. Wiki Class Applications
. Productivity in a Small or One-Person Department
. Activities to Prepare Students for the Job Placement Process
. The Millennial Mindset: Constructive Faculty Responses
. Using LinkedIn as a Teaching Tool
. Interdisciplinary Instruction: Reaching Across Business Disciplines
. Active Learning Innovations
. Managing Millennial Expectations in Team Activities
. Assurance of Learning and Student Internships
. Class Apps with Twitter, Tumblr, StumbleUpon
. Using Teaching Evaluations Effectively
. Advances in Teaching with Simulations
. Innovations in Case Instruction
. Business Ethics: Classroom Exercises with Personal Application
. Teaching Sustainability Across the Business Curriculum
. Student Learning in Undergraduate Research
. Teaching Base of Pyramid Marketing: Global Perspectives on Developing Countries
For more information, you can e-mail Dr. Brian A. Vander Schee at bvanders@aurora.edu or click here.

BABSON

The registration deadline is rapidly approaching for Family Entrepreneurship: Growing the Family Business Across Generations. This new Babson Executive Education program will take place from May 16-17, 2012. We encourage you to register, if appropriate, and to forward this message to colleagues and family members who would benefit from participating.

Built upon Babson's deep experience with family businesses, the program content covers key aspects of entrepreneurship and entrepreneurial leadership and will include a combination of lectures, case studies, and action learning projects. For more information,click here.

NASBITE International

2012 marks a special year for NASBITE International who has been assisting trade professionals, educators, and government in bridging the gap in trade education and promotion for 25 years! Portland, Oregon, "The City of Roses" will be a memorable location. As the second largest city in the Pacific Northwest, it is known for its scenic beauty, sustainable business focus, and lively music scene. The conference will be held at the Nines Hotel. Rooms are still available at the Nines on April 20 and 21. For more information,click here.

ICSB 2012 Public Agencies Forum

How can government bodies - such as policy departments, advisory services, regulators and service agencies - develop the most effective means of engagement, communication and information sharing with small businesses?

CONFERENCES

CALLS FOR PAPERS