Description
A REPORT BASED ON THE COMPARISONS ON THE WORKINGS OF AN ENTREPRENEUR AND A FRANCHISEE OWNER
A REPORT BASED ON THE COMPARISONS ON THE WORKINGS OF AN ENTREPRENEUR AND A FRANCHISEE OWNER
Entrepreneurial Development
Abhirami.S (Reg.no-0913104) Sayoni Roy (Reg.no-0913157) Bhanu Priya (Reg.no-0913117) N.Namitha Chordia (Reg.no-0913143) Haarini.S (Reg.no-0913127) Swetha Subash (Reg.no-0913166)
B.COM (MM) II YEAR
1
Table of Contents
ABSTRACT ............................................................................................................................................... 3
OBJECTIVES OF THE REPORT ................................................................................................................ 3
INTRODUCTION ............................................................................................................................... 4
ENTREPRENEUR VS. FRANCHISING .......................................................................................................... 7
INTERPRETATIONS ............................................................................................................................. 11
CONCLUSION ................................................................................................................................. 13
2
Abstract
The report contains information regarding an entrepreneur and a franchisee. It has been prepared based on the interviews that have been taken place previously. It contains the reasons why the entrepreneur and franchisee choose their business, what are the pros and cons to those, a comparison and also contains our own interpretation of both the business s working structure, investment etc.
Objectives of the report:
y To communicate the different between entrepreneurs and franchises y To inform about the progress in both fronts y To analyze the information acquired y To obtain a better understanding about the practice of entrepreneurs and franchises
3
Introduction
Franchise Definition: A form of business organization in which a firm which already has a successful products and services( the franchisor) into a continuing contractual relationship with other businesses (the franchisees)operating under the franchisor s trade name and usually with the franchisor s guidance in exchange for a fee.
Franchising is the practice of using another firm's successful business model. Franchising offers an excellent opportunity for you to be in business for yourself. When you hear the word "franchise" you probably think of fast food restaurants such as Burger King, McDonald's or Subway. But the truth is franchising is so much wider than that. In simple terms, franchising is where a successful business format is replicated. This involves developing all the systems and procedures the franchisor has found to be most successful. Anyone joining the franchise will be expected to operate the business using these tried and true systems. The features of franchise business are: Stable industry you need to be marketing something that will be profitable no matter the economy. One example is a disaster restoration franchise in which the franchisee organizes the clean-up process for businesses when fires or water damage occurs. As the franchisee, you are assured immediate payment by the insurance company to clean up the water damage or rebuild after a fire and those repairs need to happen immediately.
4
A necessary, recession-resistant product or service. Choose something those consumers either don t have time to do/make or despise doing or, thus, would rather pay someone else for. Stay away from fads, as they are unpredictable and don't provide longevity. The leader in its category. A major contributor to your potential success a franchisee is teaming with a franchise in which they are the undisputed leader. ENTREPRENEUR The dictionary meaning of the word entrepreneur is given as a person who starts a business. It also adds that an entrepreneur is a person who starts an
enterprise, business or a firm. H e works for him and also provides employment to others. He is his own boss. NEED, ROLE AND IMPORTANCE OF ENTRPRENEURSHIP Entrepreneur is the spirit of a person. It is a quality which may be inherent or developed. For the economic development of a country, entrepreneurial skills need to be developed. These skills lead to the development of business and ultimately, the result is seen in the economic growth of the country.
Entrepreneurship plays a very important role in terms of: y Generation of employment opportunities. y Its size and nature, it is more dynamic, flexible and capable of making quick decisions.
5
y Ensuring balanced economic development. Small enterprises need relatively low investment and can be easily undertaken in rural and semiurban areas. The advantages of entrepreneurial development are that it leads to freedom, flexibility, growth and development. It also develops leadership quality. CHARACTERISTICS FEATURES OF SUCCESSFUL INDIAN ENTREPRENEURS
Hard hours
work-long optimistic
independent
foresight
Time/speed Self reliance
Strategist Sound knowledge
Creativity Initiative
Conviction Dynamism
Communicator
Technical knowledge
Human relations
Courage
Motivator Initiative Discipline Will power
Self confidence Passion Flexibility assertiveness
Involvement Pride Adaptability values
High energy level Dreamer Determination Commitment
Entrepreneur vs. Franchise
6
Here we have compiled details and done a comparison on Subway and nibbles, were the entrepreneur s business is nibbles whilst the franchisee s is subway. Subway: Owner: Vipin Sachdev No 2 Crystal Lawns, Near Talwalkar Gym, Wallace Garden 2ND Street, Nungambakkam, Chennai - 600034 +(91)-(44)-45600600 +(91)-9841782929 www.subwayonthenet.com Subway is an American restaurant franchise that primarily sells submarine sandwiches (subs), salads, and personal pizzas. It is owned and operated by Doctor's Associates, Inc.
Reasons for choosing a franchise like Subway: y Personally he felt that it is better and safer to be a franchisee as the profits can be solely enjoyed by the franchisee and the loss is lesser in this field when compared to entrepreneurs. y Since Subway is a globally renowned food joint that caters to all the people. y Because all the trends are changing and people are open minded to continental food.
7
Pros and Cons of choosing Subway: Pros Financing for the business-for purchase of equipment. Recession Proof Market World Class Training - it is recognized as a premier franchising company around the world. Cons
y y
y y y
Cost - Subway's does not provide any incentives or offers.. No Absenteeism Subway franchises are open only to individuals who are
involved with the day-to-day operations of the restaurants-no absenteeism allowed. Nibbles: Owner: Nikhil Pipada No 15, 6TH Street, Gopalapuram, Chennai 600086 Ph.no -9840253028, Ph.no -9840218891 Nibbles is a food joint that was started by Mr.Pipada 17 years ago. He started the business to take care of his life. During that time there was not much awareness about franchising and he chose this route. He did not like to work below another person because of he found it too hard and because of social constraints.
8
Reasons for choosing nibbles: y The entrepreneur feels its better as he is his own boss and is not answerable to anyone and is not under anyone s control. y Unlike a franchise they did not have to share revenue or deposit a large sum as a security deposit. Pros: y Can take a leave of absence at his own wish and will. y He is not answerable to anyone and can make his own decisions. y He increases the profit level as he employees most of his family members and cuts down on the cost of paying employees. Cons: y High level of risk and the fear of failure curbs creativity of the entrepreneur. y Incentives can be given to employees only out of the employer s profits.
Criteria Average walk-ins
Subway 150-300 By the franchisor globally and locally so it cuts down the cost. The franchisee also advertises
Nibbles 100-150 By the entrepreneur only. Since the entrepreneur uses word of mouth no cost is incurred in
9
Advertising costs
through brochures and vehicular advertising. It is done by the franchisor. Every employee is to undergo a 2 week training Is required The franchisee pays 8% royalty to the owners every month and the profits earned are not being shared. Rs.2,00,000
advertising.
Training employees
Training is not required as it is family business and the hired employees are recruited only if they are well reputed. Not required The entrepreneur enjoys all the profits and does not share it with the employees Rs.40,000
Security Deposit
Profits
Monthly turnover
Location selection
The location is decided The franchisor plays a solely by the major role in selecting the entrepreneur. His location decision is final. The Franchisor finances the franchisee for equipments. 20 years and renewable The entrepreneur will have to finance all his costs. It is the permanent asset of the entrepreneur 3 hired employees and the remaining are family members
Financing
Terms of agreement
Number of employees
Minimum 6-10
10
Absenteeism
Employee absenteeism is not accepted
Will be accepted if previous intimation is given
Interpretation Subway:
Mr.Pipada took franchising of subway in the year 2000 after he quit his job as a manager. He chose franchising because he thought it was a safer route. The most important reason for choosing subway was, it was globally renowned and trained the employees well. It does not interfere with the workings of the business. It finances for its franchises and helps them. To start a subway franchise it cost Mr.Pipada Rs. 34, 20,000. Security deposit of an uncertain amount is to be paid to acquire the materials and business. Subway finances its franchisee for purchasing the equipments and is also flexible in choosing a good location. But once the business has taken off the franchisee will have to take up all the work. He should be the jack of all trades. At times he may even be asked to take care of customer care. He should work hard to carry forward the business to get a good profit. The franchisor does not give much incentive apart from the minorities incentives, so the inducement to work harder is less. The franchisee pays royalty of 8% to the franchisor and takes up all the profits so there is no revenue share.
11
Nibbles:
Nibbles is a food joint that was started by Mr.Pipada 17 years ago. He started the business to financially take care of his life. During that time there was not much awareness about franchising and he chose this route. He did not like to work below another person because of he found it too hard and because of social constraints. He invested about Rs.3, 00,000 to initiate the business. During the initial stage he employed his family to reduce the cost of paying an employee. They prefer the business to be taken care of themselves since they think that a third party may not be as careful as themselves. There was a stage where the business was going on the downside so they decided to hire reputed people to improve the quality of their products. They advertised during this time and later went back to word of mouth advertising. They do not have any plans on starting multiple businesses. Absenteeism is accepted when prior intimation is given, but not too often.
12
Conclusion
While franchising is a safer route into becoming an entrepreneur, it is not just a question of signing up and supervising a business. The franchisor will not do your work for you and cannot be expected to. What is supplied is a good reputation, training, a brand name, support and guidance. It will still be your hard work and skills that make your business successful. But most people choose franchise since they do not have marketing skills. Entrepreneurship is a permanent business which unlike franchising is not under a term of agreement. An Entrepreneur should have presence of mind because he is required to make a lot of decisions on the day to day basis. He should always fear the risk of failure because he alone is solely responsible financially. But an entrepreneur always has the freedom to choose his own preferences and is not controlled by another person. This helps him to achieve various levels of expertise. Compared to starting your own business from scratch, franchising can provide a relatively safe route into self employment.
13
doc_238777225.docx
A REPORT BASED ON THE COMPARISONS ON THE WORKINGS OF AN ENTREPRENEUR AND A FRANCHISEE OWNER
A REPORT BASED ON THE COMPARISONS ON THE WORKINGS OF AN ENTREPRENEUR AND A FRANCHISEE OWNER
Entrepreneurial Development
Abhirami.S (Reg.no-0913104) Sayoni Roy (Reg.no-0913157) Bhanu Priya (Reg.no-0913117) N.Namitha Chordia (Reg.no-0913143) Haarini.S (Reg.no-0913127) Swetha Subash (Reg.no-0913166)
B.COM (MM) II YEAR
1
Table of Contents
ABSTRACT ............................................................................................................................................... 3
OBJECTIVES OF THE REPORT ................................................................................................................ 3
INTRODUCTION ............................................................................................................................... 4
ENTREPRENEUR VS. FRANCHISING .......................................................................................................... 7
INTERPRETATIONS ............................................................................................................................. 11
CONCLUSION ................................................................................................................................. 13
2
Abstract
The report contains information regarding an entrepreneur and a franchisee. It has been prepared based on the interviews that have been taken place previously. It contains the reasons why the entrepreneur and franchisee choose their business, what are the pros and cons to those, a comparison and also contains our own interpretation of both the business s working structure, investment etc.
Objectives of the report:
y To communicate the different between entrepreneurs and franchises y To inform about the progress in both fronts y To analyze the information acquired y To obtain a better understanding about the practice of entrepreneurs and franchises
3
Introduction
Franchise Definition: A form of business organization in which a firm which already has a successful products and services( the franchisor) into a continuing contractual relationship with other businesses (the franchisees)operating under the franchisor s trade name and usually with the franchisor s guidance in exchange for a fee.
Franchising is the practice of using another firm's successful business model. Franchising offers an excellent opportunity for you to be in business for yourself. When you hear the word "franchise" you probably think of fast food restaurants such as Burger King, McDonald's or Subway. But the truth is franchising is so much wider than that. In simple terms, franchising is where a successful business format is replicated. This involves developing all the systems and procedures the franchisor has found to be most successful. Anyone joining the franchise will be expected to operate the business using these tried and true systems. The features of franchise business are: Stable industry you need to be marketing something that will be profitable no matter the economy. One example is a disaster restoration franchise in which the franchisee organizes the clean-up process for businesses when fires or water damage occurs. As the franchisee, you are assured immediate payment by the insurance company to clean up the water damage or rebuild after a fire and those repairs need to happen immediately.
4
A necessary, recession-resistant product or service. Choose something those consumers either don t have time to do/make or despise doing or, thus, would rather pay someone else for. Stay away from fads, as they are unpredictable and don't provide longevity. The leader in its category. A major contributor to your potential success a franchisee is teaming with a franchise in which they are the undisputed leader. ENTREPRENEUR The dictionary meaning of the word entrepreneur is given as a person who starts a business. It also adds that an entrepreneur is a person who starts an
enterprise, business or a firm. H e works for him and also provides employment to others. He is his own boss. NEED, ROLE AND IMPORTANCE OF ENTRPRENEURSHIP Entrepreneur is the spirit of a person. It is a quality which may be inherent or developed. For the economic development of a country, entrepreneurial skills need to be developed. These skills lead to the development of business and ultimately, the result is seen in the economic growth of the country.
Entrepreneurship plays a very important role in terms of: y Generation of employment opportunities. y Its size and nature, it is more dynamic, flexible and capable of making quick decisions.
5
y Ensuring balanced economic development. Small enterprises need relatively low investment and can be easily undertaken in rural and semiurban areas. The advantages of entrepreneurial development are that it leads to freedom, flexibility, growth and development. It also develops leadership quality. CHARACTERISTICS FEATURES OF SUCCESSFUL INDIAN ENTREPRENEURS
Hard hours
work-long optimistic
independent
foresight
Time/speed Self reliance
Strategist Sound knowledge
Creativity Initiative
Conviction Dynamism
Communicator
Technical knowledge
Human relations
Courage
Motivator Initiative Discipline Will power
Self confidence Passion Flexibility assertiveness
Involvement Pride Adaptability values
High energy level Dreamer Determination Commitment
Entrepreneur vs. Franchise
6
Here we have compiled details and done a comparison on Subway and nibbles, were the entrepreneur s business is nibbles whilst the franchisee s is subway. Subway: Owner: Vipin Sachdev No 2 Crystal Lawns, Near Talwalkar Gym, Wallace Garden 2ND Street, Nungambakkam, Chennai - 600034 +(91)-(44)-45600600 +(91)-9841782929 www.subwayonthenet.com Subway is an American restaurant franchise that primarily sells submarine sandwiches (subs), salads, and personal pizzas. It is owned and operated by Doctor's Associates, Inc.
Reasons for choosing a franchise like Subway: y Personally he felt that it is better and safer to be a franchisee as the profits can be solely enjoyed by the franchisee and the loss is lesser in this field when compared to entrepreneurs. y Since Subway is a globally renowned food joint that caters to all the people. y Because all the trends are changing and people are open minded to continental food.
7
Pros and Cons of choosing Subway: Pros Financing for the business-for purchase of equipment. Recession Proof Market World Class Training - it is recognized as a premier franchising company around the world. Cons
y y
y y y
Cost - Subway's does not provide any incentives or offers.. No Absenteeism Subway franchises are open only to individuals who are
involved with the day-to-day operations of the restaurants-no absenteeism allowed. Nibbles: Owner: Nikhil Pipada No 15, 6TH Street, Gopalapuram, Chennai 600086 Ph.no -9840253028, Ph.no -9840218891 Nibbles is a food joint that was started by Mr.Pipada 17 years ago. He started the business to take care of his life. During that time there was not much awareness about franchising and he chose this route. He did not like to work below another person because of he found it too hard and because of social constraints.
8
Reasons for choosing nibbles: y The entrepreneur feels its better as he is his own boss and is not answerable to anyone and is not under anyone s control. y Unlike a franchise they did not have to share revenue or deposit a large sum as a security deposit. Pros: y Can take a leave of absence at his own wish and will. y He is not answerable to anyone and can make his own decisions. y He increases the profit level as he employees most of his family members and cuts down on the cost of paying employees. Cons: y High level of risk and the fear of failure curbs creativity of the entrepreneur. y Incentives can be given to employees only out of the employer s profits.
Criteria Average walk-ins
Subway 150-300 By the franchisor globally and locally so it cuts down the cost. The franchisee also advertises
Nibbles 100-150 By the entrepreneur only. Since the entrepreneur uses word of mouth no cost is incurred in
9
Advertising costs
through brochures and vehicular advertising. It is done by the franchisor. Every employee is to undergo a 2 week training Is required The franchisee pays 8% royalty to the owners every month and the profits earned are not being shared. Rs.2,00,000
advertising.
Training employees
Training is not required as it is family business and the hired employees are recruited only if they are well reputed. Not required The entrepreneur enjoys all the profits and does not share it with the employees Rs.40,000
Security Deposit
Profits
Monthly turnover
Location selection
The location is decided The franchisor plays a solely by the major role in selecting the entrepreneur. His location decision is final. The Franchisor finances the franchisee for equipments. 20 years and renewable The entrepreneur will have to finance all his costs. It is the permanent asset of the entrepreneur 3 hired employees and the remaining are family members
Financing
Terms of agreement
Number of employees
Minimum 6-10
10
Absenteeism
Employee absenteeism is not accepted
Will be accepted if previous intimation is given
Interpretation Subway:
Mr.Pipada took franchising of subway in the year 2000 after he quit his job as a manager. He chose franchising because he thought it was a safer route. The most important reason for choosing subway was, it was globally renowned and trained the employees well. It does not interfere with the workings of the business. It finances for its franchises and helps them. To start a subway franchise it cost Mr.Pipada Rs. 34, 20,000. Security deposit of an uncertain amount is to be paid to acquire the materials and business. Subway finances its franchisee for purchasing the equipments and is also flexible in choosing a good location. But once the business has taken off the franchisee will have to take up all the work. He should be the jack of all trades. At times he may even be asked to take care of customer care. He should work hard to carry forward the business to get a good profit. The franchisor does not give much incentive apart from the minorities incentives, so the inducement to work harder is less. The franchisee pays royalty of 8% to the franchisor and takes up all the profits so there is no revenue share.
11
Nibbles:
Nibbles is a food joint that was started by Mr.Pipada 17 years ago. He started the business to financially take care of his life. During that time there was not much awareness about franchising and he chose this route. He did not like to work below another person because of he found it too hard and because of social constraints. He invested about Rs.3, 00,000 to initiate the business. During the initial stage he employed his family to reduce the cost of paying an employee. They prefer the business to be taken care of themselves since they think that a third party may not be as careful as themselves. There was a stage where the business was going on the downside so they decided to hire reputed people to improve the quality of their products. They advertised during this time and later went back to word of mouth advertising. They do not have any plans on starting multiple businesses. Absenteeism is accepted when prior intimation is given, but not too often.
12
Conclusion
While franchising is a safer route into becoming an entrepreneur, it is not just a question of signing up and supervising a business. The franchisor will not do your work for you and cannot be expected to. What is supplied is a good reputation, training, a brand name, support and guidance. It will still be your hard work and skills that make your business successful. But most people choose franchise since they do not have marketing skills. Entrepreneurship is a permanent business which unlike franchising is not under a term of agreement. An Entrepreneur should have presence of mind because he is required to make a lot of decisions on the day to day basis. He should always fear the risk of failure because he alone is solely responsible financially. But an entrepreneur always has the freedom to choose his own preferences and is not controlled by another person. This helps him to achieve various levels of expertise. Compared to starting your own business from scratch, franchising can provide a relatively safe route into self employment.
13
doc_238777225.docx