forms of biz for start ups

8/9/2019 Forms of Biz for Start ups

1/112

Prof. R.S.Mathur

RetailFranchising

ManufacturingServices


2/112

Unit IEntrepreneurial rvolution and entrepreneurial

process, Analysing and evaluating businessopportunities.,Structural analysis of

industries.,Criteria for new venture screening, Unit II Resources one needs to start a new business, !or"s

of business ventures, Retail, !ranchising,

Manufacturing Service enterprise Unit III !inancial issues and resources in new venture

develop"ent, #ew venture tea", $he role of tea"s inentrepreneurial process.

February 5, 2015 Prof. R.S.Mathur 2


3/112



4/112

The Science ofReproducing Success



5/112

Franchisee An entrepreneur whose power is limited

by a contractual agreement with afranchisorFranchisor The party in the contract that specifies

the methods to be followed and theterms to be met by the other party



6/112

A franchise operation is a contractualrelationship between the franchisor and

franchisee in which the franchisor offers or

is obliged to maintain a continuing interest

in the business of the franchisee in suchareas as know-how and training; wherein

the franchisee operates under a common

trade name, format and/or procedure owned

or controlled by the franchisor, and in whichthe franchisee has or will make a substantial

capital investment in his business from his

own resources.

- Definition by International Franchise Association


7/112

A franchise is the agreement or license betweentwo legally independent parties which gives:

A person or group of people (franchisee) theright to market a product or service using thetrademark or trade name of another business(franchisor)

The franchisee the right to market a product orservice using the operating methods of thefranchisor

The franchisee the obligation to pay thefranchisor fees for these rights

The franchisor the obligation to provide rightsand support to franchisees

February 5, 2015 Prof. R.S.Mathur


8/112February 5, 2015 Prof. R.S.Mathur !


9/112

Product and Trade Name Franchise

rants the right to use a widely

recogni!ed product or name "usiness Franchise

Provides an entire marketing system and

ongoing guidance#

Piggyback Franchising The operation of a retail franchise within

the physical facilities of a host store

February 5, 2015 Prof. R.S.Mathur "


10/112

#$%ning a franchise allo%s the franchisee to go into business foryourself, but not by yourself.&

' franchise (rovi)es an establishe) (ro)uct or service %hichalrea)y en*oys %i)es(rea) bran) na+e recognition. his givesthe franchisee the benefits of custo+er a%areness %hich %oul)or)inarily ta-e years to establish.

' franchise increases your chances of business successbecause you are associating %ith (roven (ro)ucts an) +etho)s.

Franchises +ay offer consu+ers the attraction of a certain level

of uality an) consistency because it is +an)ate) by thefranchise agree+ent. ' franchise (rovi)es franchisees %ith a certain level of

in)e(en)ence %here they can o(erate their business.



11/112

Franchises offer important pre$opening

support: site selection design and construction financing (in some cases) %tandardi!ed operating procedures

Training Advertising grand$opening program



12/112

Franchises offer ongoing support training national and regional advertising operating procedures and operational

assistance ongoing supervision and management

support increased spending power and access to

bulk purchasing (in some cases)



13/112

The franchisee is not completely independent# Franchisees are re'uired to operate their

businesses according to the procedures and

restrictions set forth by the franchisor in thefranchise agreement# These restrictions usually

include the products or services which can be

offered pricing and geographic territory# For

some people this is the most seriousdisadvantage to becoming a franchisee#

# *n addition to the initial franchise fee franchisees

must pay ongoing royalties and advertising fees#



14/112

+# Franchisees must be careful to balance

restrictions and support provided by the

franchisor with their own ability to manage their

business#,# A damaged system$wide image can result if

other franchisees are performing poorly or the

franchisor runs into an unforeseen problem#

-# The term (duration) of a franchise agreement isusually limited and the franchisee may have little

or no say about the terms of a termination



15/112

%ac& of supportCost of the !ranchise

'nful(lled pro"isesRestrictions of the Contract Product or Service )*ered

%ine !orcing$er"ination



16/112

Saturation of the "ar&et%ac& of Security

E+cessive cost of operation ne*ectiveness of pro"otionE+aggeration of clai"s of success

February 5, 2015 Prof. R.S.Mathur 1/


17/112

There are two main types of franchises:$

Product .istribution Franchises#

#"usiness Format Franchises#



18/112

Si+(ly sell the franchisors (ro)ucts an) are su((lier)ealerrelationshi(s.

n (ro)uct )istribution franchising, the franchisor licenses itstra)e+ar- an) logo to the franchisees but ty(ically )oes not

(rovi)e the+ %ith an entire syste+ for running their business. he in)ustries %here you +ost often fin) this ty(e of franchisingare soft )rin- )istributors, auto+obile )ealers an) gas stations.So+e fa+iliar (ro)uct )istribution franchises inclu)e

Pe(si

For) Motor o+(any 'lthough (ro)uct )istribution franchising re(resents the largest

(ercentage of total retail sales, +ost franchises available to)ayare business for+at o((ortunities

February 5, 2015 Prof. R.S.Mathur 1!


19/112

$n the other han), not only the franchisee uses a franchisors(ro)uct, service an) tra)e+ar-, but also the co+(lete +etho)to con)uct the business itself, such as the +ar-eting (lan an)o(erations +anuals.

usiness for+at franchises are the +ost co++on ty(e offranchise.

10 +ost (o(ular franchising o((ortunities are in thesein)ustries

fast foo) retail- -service auto+otive- -restaurants +aintenance- -buil)ing an) construction retail6foo)- -business services lo)ging- -

February 5, 2015 Prof. R.S.Mathur 1"


20/112

%ingle$unit (direct$unit) franchise#

# /ulti$unit franchise:

Area development#

/aster franchise (sub$franchising)#

ingle-unit !direct-unit" franchise is an

agreement where the franchisor grants a franchisee

the rights to open and operate #$%franchise unit#

This is the simplest and most common type of

franchise# *t is possible however for a franchisee to

purchase additional single$unit franchises once the

original franchise unit begins to prosper# This is then

considered a multiple single$unit relationship#February 5, 2015 Prof. R.S.Mathur 20


21/112

is an agreement where the

franchisor grants a franchisee the

rights to open and operate /012T3AN 0N2 unit#

There are two ways a multi$unit

franchise can be achieved:

An Area .evelopment franchise or

# A /aster franchise#



22/112

4nder an franchise development

the franchisee has has the right To

open more than one unit during aspecified time within a specified

area# For instance a franchise may

be allowed to open five units within

a period of three years in a specified

territory



23/112

Gives the franchisee more rights than an areadevelopment agreement.

In addition to having the right and obligation to openand operate a certain number of units in a defined area,

the master franchisee also has the right to sell franchisesto other people within the territory, knownas sub-franchises.

Therefore, the master franchisee takes over many of the

tasks, duties and benefits of the franchisor, such asproviding support and training, as well as receiving feesand royalties



24/112

The two main franchising legal

documents are the:

the .isclosure .ocument whichmay be in the format known as the

4F05#(uniform franchise offering

circular)franchise agreement#



25/112

he (ur(ose of the 7F$ is to (rovi)e (ros(ectivefranchisees %ith infor+ation about the franchisor, thefranchise syste+ an) the agree+ents they %ill nee)to sign so that they can +a-e an infor+e) )ecision.

n a))ition to the )isclosure (art of the )ocu+ent, the7F$ inclu)es the actual franchise agree+ent as%ell as other agree+ents the franchisee %ill bereuire) to sign, along %ith the franchisors financial

state+ents. he 7F$ is )esigne) to give you so+e of the

infor+ation you nee) in or)er to +a-e an infor+e))ecision about investing in a (articular franchise



26/112

The franchisor The company6s key staff /anagement6s e7perience in franchise

management

Franchisor6s bankruptcy and litigation history *nitial and ongoing fees involved in opening and

running the franchise 1e'uired investment and purchases

Territory rights 1esponsibilities of the franchisor and franchisee 0ther franchisees in the system with contact

information



27/112

The franchise agreement is morespecific than the 4F05 about the terms of the

relationship between the franchisor and franchisee# A

typical franchise agreement may include specifics

about: The franchise system such as use of trademarks and

products Territory 1ights and obligations of the parties: standards

procedures training assistance advertising etc# Term (duration) of the franchise Payments made by the franchisee to the franchisor Termination and8or the right to transfer the franchise



28/112

&. 'se of trademarks.0ne of the main

benefits you receive when purchasing a

franchise is the use of well$known

trademarks# This section lists thetrademarks service marks or logos the

franchisee is entitled to use# 3as the trademark been in operation for a

significant amount of time and is it wellknown9

Are there any restrictions on its use by the

franchisor or franchisee9February 5, 2015 Prof. R.S.Mathur 2!


29/112

(. )ocation of the franchise.Thissection describes the e7clusive area

or territory granted to thefranchisee# .o you have e7clusive rights in a

certain territory9

February 5, 2015 Prof. R.S.Mathur 2"


30/112

*. +erm of the franchise.*n this

section the duration of the

agreement is specified#3ow long does the agreement last95an the franchisor purchase the

franchise before the agreement

e7pires9.o you have the right to renew the

agreementFebruary 5, 2015 Prof. R.S.Mathur 30


31/112

. enewal, termination and

transfer of franchise agreement.

+his section includesThe rights and obligations of a

franchisee upon termination#.escriptions about the transfer of

the franchise agreement#.escriptions about the renewal of

the franchise agreement#February 5, 2015 Prof. R.S.Mathur 31


32/112

. 0ranchisee1s fees and other

payments.*n this section all the

mandatory fees are described: *nitial fee and what the franchisee

receives for that fee# 1oyalty payment what it is based

on and when it is due#



33/112

# #bligations and duties of the

franchisor.This section describes

in detail all the services whichthefranchisor will provide: Training# 0perations support# Advertising#



34/112

;# #bligations and duties of

the franchisee# This section

describes the franchisee6sresponsibilities: 1e'uirements for training 1e'uirements for participation in the

business 1e'uirements for keeping and

submitting ade'uate recordsFebruary 5, 2015 Prof. R.S.Mathur 34


35/112

2. estriction on goods and services

offered# This section describes any

restrictions placed on the goods orservices offered including:

1e'uired 'uality standards Approved suppliers

Approved advertising 3ours of operation Pricing



36/112

Ma-e sure you have enough +oney. Follo% the syste+. 8ont neglect your fa+ily an) frien)s. e an enthusiastic franchisee.

Recruit the best an) treat the+ %ith res(ect. each your e+(loyees. 9ive custo+ers great service. 9et involve) %ith the co++unity6custo+ers li-e to

sho( in (laces that su((ort the+. Stay in touch %ith your franchisor an) other franchisees. :atch the )etails.



37/112

Franchisor *ndustry

Professionals0ther Franchiseesovernment AgenciesAdditional areas to *nvestigate



38/112

/ake sure you have enough money# Follow the system# .on6t neglect your family and friends#

"e an enthusiastic franchisee# 1ecruit the best and treat them with respect# Teach your employees# ive customers great service# et involved with the community


39/112

;ot rea)ing, un)erstan)ing an)


40/112

;ot analy=ing the local +ar-et in

a)vance;ot analy=ing the co+(etition;ot +a-ing thorough )ue )iligence of

the franchisor;ot choosing the right location


41/112

=hat businesses can be franchised9



42/112

3ow does one become a franchisor9

2stablish a prototype#

# Prepare the necessary information#+# *nvestigate the legal re'uirements#

,# .evelop a planned and standardi!ed

program of operations#

-# 0btain ade'uate financing#



43/112



44/112


45/112

Fundamentally, there are nodi*erences

between service and "anufacturingoperations1 2oth are concerned with3E4ciencyE*ectiveness

5ualityCost


46/112

Effectiveness>Right (rescri(tion>Right a)vice>Service availability

Efficiency

>;o. of servers>7se of resources

Quality>raining>?rror (revention>ontinuous +(rove+ent

Cost>nventory +anage+ent>ra)eoffs>Purchasing


47/112

ou can start a service businessright from home; with little or noinventory and operational cost.

Special areas of focus in serviceindustries3

6.u"an s&ills

7.Service 0uality issues and8.Capacity "anage"ent



48/112

Service Industries

(communications, health care, transportation, banking, insurance etc)

R&

esign

!upporting

!ervices

"legal#$

%anufacturingistribution

Repair

Government !upport !ervices

"roads, education, public safety$

Interme-

diary

rivate business

supporting services

'ommer-cial

'onsu-

mer


49/112

roducts (re )*undles+ ofGoods and !ervices

100%

Goods

100%

Services% goods

% services

consulting

autos

ho

tels

gro

ceries

retail


50/112


51/112

$angibility Concurrent Production and Consu"ption

of Service Product

eterogeneity 9 :ariability $as&s Products

Perishability Role of the Custo"er Process ; Product

Managements

tasks differ greatly

between goodsproduction and

service production


52/112

02


53/112

53

)ften direct interactionbetween the e"ployeeand the custo"er


54/112

54

onverting @u+an a(ital into

angible :ealth

@u+an a(ital

Employee

+nowledge

"kills

E,perience

Conversion

Process

-ntellectual Capitaluman Capital

.ole of . practices

in t!is conversion

process

Products

and

services

w!ic! !ave

market value


55/112

55

-ntangible

+nowledgebased

Customised

Professional

Measurement

"tandardisation

Performance

management

*reward

)raining and/evelopment

.ecruit and

retain

"taff

allocation

.enewal

0rganisational

commitment

1ature of

2ork Managerial

problem

.M issue


56/112

>e(ning service 0uality is "oredi4cult than de(ning "anufacturing0uality. E+pectation vs Perception

E+pectation vs Perfor"ance


57/112

Consu"er?s opinion of a product@s or abrand?sB ability to ful(ll his or here+pectations.

t "ay have little or nothing to do withthe actual e+cellence of the product, andis based on the (r"?s or brand?sB currentpublic i"age, consu"er?s e+perience

with the (r"?s other products, and theinuence of the opinion leaders,consu"er?s peer group, and others.



58/112

5uality of the >elivery Process versus5uality of the $echnical )utco"e

Ele"ents of the process "ay cue technical pro(ciency >i"ensions of Service 5uality Reliability: !elivering on "romises

Responsiveness: #eing $illing to %elp

Assurance: Inspiring Trust and&ondence

Empathy: Treating &ustomers asIndividuals

Tangibles: Representing the Service"hysically


59/112

Customer

Company

'ustomer erceptions

'ustomer pectations

Satisfaction Outcome Gap

!ervice elivery esigns

Gap 2

!ervice elivery

Gap

'ommunications

to 'ustomers

Gap !

erceptions of 'ustomer pectations

Gap1

!ource /eithaml & *itner


60/112

Customer

Company

'ustomer erceptions

'ustomer pectations

Gap "

!ervice elivery esigns

Gap 2

!ervice elivery

Gap

'ommunications

to 'ustomers

Gap !

erceptions of 'ustomer pectations

Gap1

!ource /eithaml & *itner


61/112

'ap () Customer Perceptions CustomerE!pectations

'ap *) "ot #nowing $hat Customers E!pect &ompany "erception of &ustomer +,pectations - .ctual

'ap /) "ot %electing the Right &esign%tandards Service !esign Standards - &ompany "erception of

&ustomer +,pectations

'ap 0) "ot &elivering to %ervice %tandards:

The 'perations (ap .ctual Service "erformance - Standards

'ap 1) "ot )atching Per*ormance toPromises .ctual Service "erformance - "romised "erformance


62/112

Dap 8a3 )perational >esign

People3 E"ployees, Managers, 9 Custo"ers

Process3 Role of Service 2lueprinting

E0uip"ent

Dap 8b3 )perational Control

Ensuring the 5uality of the )utco"e,

Especially hen 'sing nter"ediaries

Enhancing the )perational >esign $hrough

!eedbac&


63/112

Sta4ng and Scheduling Shortco"ings ne*ective Recruit"ent Role A"biguity 9 Role Conict

rong S&ills for Process F E0uip"entEle"ents

!laws in Evaluation 9 Co"pensationSyste"s

%ac& of E"power"ent 9 $ea"wor& ire F Retain F >evelop F Support

**


64/112

Custo"ers #ot Perfor"ing $heir Role in theProcess %ac& of 'nderstanding

%ac& of Ability %ac& of illingness A"biguity 9 'ncertainty About hat $hey ant

#o Reward for Dood Perfor"ance nteraction with )ther Custo"ers

"pact3 Customers +ntroduce ,ariability to an'peration

Solution3 -imit Control Customer+nvolvement Through Process &esign Technology

*0


65/112

Service 2lueprinting3 An E+tended ProcessMap >esign 9 >iagnostic $ool

E*ectively andling >e"and "pact of Rando" Arrival Pattern aiting %ine 5ueueB Con(gurations aiting %ine 5ueueB Manage"ent

Matching >e"and to Capacity $hrough

>e"and Manage"ent Pricing3 Gield Manage"ent Custo"er Co""unication Alternative Service >elivery Processes Co"ple"entary Products

*1


66/112

5uality Control Procedures

Measure )utco"es

Measure Processes

Controlling 5uality through the SupplyChain

nter"ediaries

>istributed >elivery #etwor& Enhancing the )perational >esign $hrough

!eedbac&

Properly "easuring custo"er perceptions


67/112

ire the right people.Educate and train the" well.Allow the" to (+ anything.RecogniHe and reward the"

regularly.$ell the" everything, every day.


68/112

Measure the costs%isten closely for co"plaintsAnticipate needs for recoveryAct fast$rain e"ployeesE"power front line

Close the loop


69/112

Service Encounters ; $ransactions ;

$as&s Poor 0uality in one tas& can taint the

perception of 0uality for the entirese0uence

Initiation iagnosis !ervice 0erify

Service "ransaction #Service"ransaction

$

Service"ransaction

## Service $ncounter ##


70/112

!rontFo4ce wor& re0uires custo"erpresence.

2ac&Fo4ce wor& does not re0uirecusto"er presence.

>ecoupling3 separating wor& intohighFcontact


71/112

1!ustomer Actions

1&'nStage !ontact Employee Actions

Line of Interaction

1&*ackstage !ontact Employee Actions

Line of Visibility

1Support rocesses

Line of Internal Interaction


72/112

!ompany(+anagement)

!ustomersEmployees

Efficiency vs.Autonomy

Efficiency vs.Satisfaction

erceived !ontrol

(dapted from Gronroos & 2otler


73/112

Level of Service

Ao% @igh

Expected

Cost

4ost of(rovi)ingservice

4ost of

:aiting

$(ti+al Solution

,otal 4ost


74/112

Aevel of Service

Ao% @igh

'cce(table levels of service

MaBi+u+acce(table%aiting ti+e

MaBi+u+acce(table cost

of (rovi)ingservice

ost of(rovi)ingservice

:aiting ti+e

!ource avis, 3443


75/112

'noccupied ti"e feels longer than occupied ti"e Provide "agaHines, a $:, or co*ee in a waiting area >Js for "usic while on hold on telephone

PreFprocess waits feel longer than inFprocess waits ave an initial reception ta&e so"e data

An+iety "a&es waits see" longer $ell custo"ers how long the plane will be late

'ncertain waits feel longer than &nown (nite waits

$ell custo"ers on a support hot line how long the waitwill be.


76/112

2ong Term 3 4i,ed &apacity !acilities, E0uip"ent.

Short Term 3 5ariable&apacity or&ers.


77/112

Product :ariations over ti"e S&i "anufacturer vs. S&i Area

Modifying $i"ing and %ocation of >elivery ave the facility open when there is de"and

for it ban&s1B. 'se "obile units to bring the service to the

de"and Pricing

!or di*erent "ar&et seg"ents based on

de"and >anger of cannibaliHing sales Co""unication with Custo"ers

Pea& ti"es. )*Fpea& special o*ers.


78/112

Pricing.

Advertising and Pro"otion.

Reservations.

Change the #ature of >e"and.


79/112

ocation of Capacity

*ackoftheouse -rontoftheouse

-ied !apacity add e/uipment tables in a restaurant cooking e/uipment checkout station

data entry stations telephone lines

0ariable !apacity cooks cashiers

typists bank tellers baggage handlers 1aitstaff


80/112

#ew service develop"entManaging service e+periences!rontFo4ce


81/112

Service 2lueprinting!ocus on "o"ents of truth

Servicescapes'tilityFbased Service >esign

Perceived utility to custo"erRelative i"portance of >i"ensions of

Service 5uality


82/112

ReliabilityResponsivenessAssuranceE"pathy$angibles

Parasura+an, et al., 1"!5

'S Sitehtt(


83/112

Custo"er Engage"entConte+t$i"e

Service 2lueprinting!ocus on "o"ents of truth


84/112

!rontFo4ce wor& re0uires custo"erpresence.

2ac&Fo4ce wor& does not re0uirecusto"er presence.

>ecoupling3 separating wor& intohighFcontact


85/112

February 5, 2015 Prof. R.S.Mathur !5

>Manufacturing is the +ost i+(ortant value adding

activity that (ro)uces (ro)ucts of all -in)s fro+ a (in

to a (lane an) a bric- to a battle shi(

>Peo(le across the %orl) nee) a vast variety of goo)s

an) shall continue to )o so in all ti+es to co+e

>It, therefore, follows that manufacturing will

continue to offer opportunities to

entrepreneurs for starting new ventures.

>)!e modern times witness addition of new and

innovative products wit! an astonis!ing pace


86/112

6anufacturing activity is subset of O"+R.TIO7S

.long with 6arketing Operationsis identied as any rm8s &OR+

function

February 5, 2015 Prof. R.S.Mathur !/


87/112

G :iley 200 !

t is a "anage"ent function

Organi9ation8s core function that

converts inputs to outputs of value

Every organiHation has

)M function

Service or 6anufacturing

!or pro(t or #ot for pro(t


88/112

G :iley 200 !!

Services ntangible product Product cannot be

inventoried

igh custo"ercontact

Short responseti"e

%abor intensive

6anufacturing$angible product Product can be

inventoried %ow custo"er

contact %onger response

ti"e Capital intensive


89/112

G :iley 200 !"

#oth use technology #oth have :uality productivity

where to locate a new factory>

whether to launch a new-productdevelopment plan>


100/112

100

$hese decisions are3 fre0uent, speci(c, dayFtodayand necessary if the ongoing production of goodsand services is to satisfy "ar&et de"andsthatare vulnerable to variationsB and provide pro(ts.

Tactical decisions must align withstrategic decisionsE+a"ples include deciding3 how much nished-goods inventory to carry

the amount of overtime to use ne,t week the details for purchasing raw material

ne,t month


101/112


102/112

102

nfor"ation about 36.)utputs,7.Conversion process and

8.nputs is fed bac& to "anage"ent.$his infor"ation is "atched with

"anage"entKs e+pectationshen there is a di*erence, "anage"ent

"ust ta&e corrective action to "aintaincontrol of the syste"


103/112

G :iley 200 103


104/112

G :iley 200 104

ndustrial revolution%ate 6NNsScienti(c "anage"ent Early 6ONNsu"an relations


105/112


106/112

6. $e+tiles7. !ood processing8. AutoF partsQ. Ayurved and conventional "edicines. Pac&aging. Sericulture. !loriculture

. $oysO. Recycling "aterials6N.Energy saving products



107/112

10

Purchasing planner


108/112

G :iley 200 10!

)M has the "ost diverse organiHationalfunction

Manages the transfor"ation process )M has "any faces and na"es such as/ :. P. operations, >irector of supply chains,

Manufacturing "anager Plant "anger, 5uality specialists, etc.

All business functions need infor"ation

fro" )M in order to perfor" their tas&s


109/112

G :iley 200 10"

So"e organiHations are a blend ofservice


110/112

G :iley 200 110


111/112

G :iley 200 111

6ost businesses are supportedby the functions of operationsmarketing and nance

The ma?or functional areas mustinteract to achieve theorgani9ation goals


112/112

6arketing is not fully capable of meetingcustomer needs if they do not understandwhat operations can produce

4inance cannot ?udge the need for capitalinvestments if they do not understandoperations concepts and needs

Information systems enables theinformation @ow throughout theorgani9ation

%uman resources must understand ?ob

re:uirements and worker skills .ccounting needs to consider inventory

management capacity information andlabor standards

forms of biz for start ups

Documents