978-1259912191 Chapter 14 Solutions Manual Part 1

Chapter Fourteen: Franchising and Purchasing an Existing

Business

Review Questions – p. 279

1. How does a franchise work? Franchising can be viewed as the new business

2. How do the franchisee and franchisor differ? The franchisor is the firm that

3. What is the benefit of buying a franchise versus starting your own business?

Are there any drawbacks? The franchisee receives the use of the franchise name,

4. What are the questions a person should ask herself before she starts a

5. What is typically included in a franchise? Usually included are the rights to an

6. What is the UFOC? What are its major provisions? The UFOC is the Uniform

7. Why would someone buy an existing business? Buying a business has the

8. How do you locate a business that you would like to purchase? Businesses for

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Chapter Fourteen: Franchising and Purchasing an Existing

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9. Once you actually busy the business, how do you make sure that you are

successful? The new owner should develop a plan of operations, meet and discuss the

Class Activities and Sample Assignments

1. Ask students to discuss the elements of franchising. Next, ask students to list four

ways that a franchisor makes money. (LO 14-1)

2. Ask students to discuss the process of buying a franchise. Next, ask the students to

discuss the regulations related to the purchase of a franchise. (LO 14-2)

3. Divide the students into five groups and assign each group a general issue as it

relates to the general franchise questions. Ask students to pick an industry and

answer each issue. Then ask them how their analysis would change if they were in a

retail business, a technology business, and a restaurant business. (LO 14-2)

4. In groups, ask students to brainstorm and develop a list of all possible business

opportunities. Next, ask the students to list the four unique aspects of purchasing a

business. (LO 14-3)

5. Ask students to discuss which franchise industry they would consider working in and

why. (LO 14-2)

6. In groups, have students discuss the advantages and disadvantages associated with

the use of a business broker to purchase a franchise. List their responses on a

blackboard or a flip chart. (LO 14-3)

7. Ask the students to discuss the franchise process. Next, ask the students to discuss

how this process is similar to starting a business from scratch. What are the

differences? (LO 14-2)

Discussion Questions for Online/Hybrid classes

1. Ask students to compare new small business opportunities with franchise

opportunities. Which do you believe is better? Explain why. (LO 14-1)

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Chapter Fourteen: Franchising and Purchasing an Existing

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2. What are the Government Requirements for the Franchisor/Franchisee

Relationship? Why are these requirements important in the franchise industry? (LO

14-2)

3. What are some of the resources that an individual can use to purchase a business?

Who can an individual use to assist with this business purchase? (LO 14-3)

4. What are the specific issues to consider in examining which franchise to purchase?

Be specific. (LO 14-2)

5. What are the processes associated with the purchase of a franchise? (LO 14-2)

6. What is the process associated with a change in ownership from the former owner to

the new owner? Describe the tasks that should be completed during the transition

time period. (LO 14-3)

7. What is the difference between a franchisee and a franchisor? (LO 14-1)

8. What is the function of a business broker? How can a business broker assist an

individual to purchase a franchise? (LO 14-3)

9. How does an entrepreneur develop a new mission for a business? (LO 14-3)

10.What is the risk associated with the purchase of a franchise? Be specific. (LO 14-1,

14-2)

Discussion Questions for Online/Hybrid classes

1. Ask students to compare new small business opportunities with franchise

opportunities. Which do you believe is better? Explain why. (LO 14-1)

2. What are the Government Requirements for the Franchisor/Franchisee

Relationship? Why are these requirements important in the franchise

industry? (LO 14-2) Government requirements include the UFOC (Uniform

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Chapter Fourteen: Franchising and Purchasing an Existing

Business

3. What are some of the resources that an individual can use to purchase a

business? Who can an individual use to assist with this business

purchase? (LO 14-3) Resources include personal funds, loans from family,

4. What are the specific issues to consider in examining which franchise to

purchase? Be specific. (LO 14-2) Issues include the reputation of the

5. What are the processes associated with the purchase of a franchise? (LO

6. What is the process associated with the change in ownership from the

former business to the new business? Describe the tasks that should be

completed during the transition time period. (LO 14-3) The new owner

7. What is the difference between a franchisee and a franchisor? (LO 14-1)

8. What is the function of a business broker? How can a business broker

assist an individual to purchase a franchise? (LO 14-3) A business broker

9. How does an entrepreneur develop a new mission for a purchased

business? (LO 14-3) The new owner discusses the new mission with the

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Chapter Fourteen: Franchising and Purchasing an Existing

Business

10.What is the risk associated with the purchase of a franchise? Be specific.

Lecture Links

Lecture Link 14.1: The International Franchise Association (IFA)

(LO 14-1)

According to the International Franchise Association, franchise businesses create jobs

faster than other businesses.

Visit the IFA (International Franchise Association IFA)i website at

http://www.franchise.org/ and study the resources that are provided to enhance

franchise ownership. Would you become a member of the IFA?

Lecture Link 14.2: The Small Business Franchise Act (SBFA)

(LO 14-1, 14-2, 14-3)

The Small Business Franchise Act (SBFA) was implemented to establish uniform

standards between a franchisor and small business entrepreneurs. There are many

details to an agreement between a franchisee and a franchisor. It is critical for an

individual to understand the details of a franchise prior to the purchase of the franchise.

To learn more about the franchises, visit the American Franchise Association and review

the Small Business Franchise Act of 1999 ii(The American Franchise Association) at

http://www.franchisee.org/legislative.htm and study uniform standards of conduct in

franchise relationships between franchisors and small business entrepreneurs.Lecture

Link 14.3: Buying A Business

(LO 14-1, 14-2, 14-3)

The authors in the text discussed that an entrepreneur and potential franchisor benefits

from market analysis. Visit the website www.bizbuysell.com and discover what

businesses and franchises are available in your area. Which ones interested you?

Bonus Internet Exercises

Bonus Internet Exercise 14.1: Discovering the New Franchise Opportunity

(LO 14-2, 14-3)

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Chapter Fourteen: Franchising and Purchasing an Existing

Business

This chapter discussed the potential resources that an entrepreneur can utilize to

purchase a new business, an existing business, or a franchise. Perform a search using

your favorite search engine and locate a business or franchise for sale in your area.

1. What resources did you discover as a result of your research?

2. What was the business or franchise that you found listed for sale?

3. Did the resource provide a listing of the terms associated with the sale of the

business or franchise? What did it reveal?

4. What is the outcome of your research? Did you discover a new industry,

business, or franchise that you might pursue? Be specific.

Bonus Internet Exercise 14.2: Current Franchise Trends

(LO 14-1, 14-2, 14-3)

The authors in the text revealed that there are numerous resources available for an

entrepreneur to analyze in order to discover dynamic new business opportunities. An

innovative entrepreneur conducts research and then discovers opportunities that are

interesting.

Entrepreneur magazine publishes an annual list of the top franchises. Go to

www.entrepreneur.com and find the top twenty franchises.

1. Did you notice a trend in the top twenty franchises?

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Chapter Fourteen: Franchising and Purchasing an Existing

Business

2. Which ones require the least capitalization?

3. If money is no object, which franchise would you buy? Why?

Bonus Internet Exercise 14.3: Links to Franchising

(LO 14-1, 14-2)

There are many resources available to an individual who wants to discover pertinent

data about the fun and exciting world of franchising. For an extended variety of

resources, Visit the Franchise Handbook (The Franchise Handbook, 2017)iii website at

http://www.franchisehandbook.com and click on “View Listings”.

1. What are the most viewed franchises?

2. What information did you learn about franchising?

3. How will you use the information that you discovered in this handbook?Critical

Thinking Exercises

Critical Thinking Exercise 14.1: Franchise Questions and Support Criteria

(LO 14-2)

As we know from the text, the purchase of a franchise is a process. There are various

elements of a franchise to consider prior to the purchase of a franchise. An entrepreneur

who intends to pursue a franchise opportunity investigates the franchise, reviews the

specific elements of the franchise, and discovers the type of support that is provided.

1. What are the five general franchise questions that an entrepreneur should ask

about the franchise?

2. What are the specific questions that an entrepreneur should ask about the

franchisor’s support of the franchise opportunity?

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Chapter Fourteen: Franchising and Purchasing an Existing

Business

3. What are the five specific support areas of the franchise that an entrepreneur

learns to evaluate prior to the purchase of any franchise? What are the

advantages to the entrepreneur who discovers this information prior to the

purchase of any franchise?Critical Thinking Exercise 14.1: Franchise Questions

and Support Criteria -Notes

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iInternational Franchise Association (IFA). http://www.franchise.org/. Retrieved on February 25, 2015

iiThe Small Business Franchise Act (SBFA). (2009). The American Franchise Association.

http://www.franchisee.org/legislative.htm. Retrieved on February 25, 2015

iiiFranchiseHandbook.com (2009). http://www.franchisehandbook.com/ Retrieved on

February 25, 2015.