Franchising
The biggest difference is the cost of establishing and operating the business. With a franchise, there is a significant franchise free paid up front and then ongoing royalties
The parent company keeps very tight controls on every aspect of your business but they also provide lot of assistance in the management and marketing of your store.
Licensing
With licensing agreement, you have more freedom in the operation of your business than with a franchising situation, but also more responsibility.
You have freedom to set your own hours, charge what ever the prices you want, co-brand with whatever food you wish, offer whatever side dishes you prefer, set your own employment policies, etc. You must also make sure that your signs and marketing materials meet trademark specifications. That's all there is to it. It is however, your responsibility to know how to manage and market your restaurant business; Licensor provides you with the training necessary for you to produce a quality product but not how to run a business.
Monday, July 5, 2010
Mass Licensing of Software
Mass distributed software is used by individuals on personal computers under license from the developer of that software. Such license is typically included in a more extensive and end-user license agreement (EULA) entered into upon the installation of that software on a computer.
Under typical end user license agreement, the user may install the software on a limited number of computers. Eg: Microsoft Software
Under typical end user license agreement, the user may install the software on a limited number of computers. Eg: Microsoft Software
Friday, July 2, 2010
Licensing & Intellectual Property Licensing
The verb or grant license means to give permission
License may be granted by a party (Licensor) to another party (Licensee) as an element of an agreement between those parties.
Intellectual Property
A licensor may grant license under intellectual property laws to authorize a use (such as copying software or using a patent invention to a licensee sparing the license from a claim of infringement brought by the licensor
A license under intellectual property commonly has several component parts beyond the grant itself, including a term, territory, renewal provisions and other limitations deemed vital to the licensor
Term: Many licenses are valid for a particular length of time
Territory: A license may stipulate what territory the rights pertain to
Eg: A license with a territory limited to “North America” (United States/Canada) would not permit a licensee any protection from actions for use in Japan.
License may be granted by a party (Licensor) to another party (Licensee) as an element of an agreement between those parties.
Intellectual Property
A licensor may grant license under intellectual property laws to authorize a use (such as copying software or using a patent invention to a licensee sparing the license from a claim of infringement brought by the licensor
A license under intellectual property commonly has several component parts beyond the grant itself, including a term, territory, renewal provisions and other limitations deemed vital to the licensor
Term: Many licenses are valid for a particular length of time
Territory: A license may stipulate what territory the rights pertain to
Eg: A license with a territory limited to “North America” (United States/Canada) would not permit a licensee any protection from actions for use in Japan.
Examples for Franchisee Business
- KFC – Cargills is the Franchisee in
- McDonalds – Abans is the Franchisee in
- Pizza Hut – John Keels is the Franchisee in
- Alco – Buddy
- Diva Doghouse
- WSI
- Jackson Hewitt Tax Service
- H & R Block
- Auditel (
- Book-Keeping Network, The (
- Crunchers (
- AmeriSuites
- AmericInn
- Hilton Inns Inc.
- Wes-State Mortgages
- DHL
Disadvantages to the Franchisee
- Cannot enjoy the full income by him or herself
- Has to run the business under the rules of the franchiser
- Political problems among countries might create barriers for internationally expanded franchisee business
Advantages to the Franchisee
- Get the opportunity to run a famous business
- Can create customers easily for the business of its popularity
- Get the experience of running a business with necessary training and consultancy
Disadvantages to the Franchiser
- If the franchisee does not maintain proper quality it directly affects negatively to the demand, income, and image of the franchiser
- Franchisee can dominate the market even after the franchise agreement is over
Advantages to the Franchiser
• Can expand the business easily without that much of a cost
• Can create custormers from different parts of the country or from the world
• Various sources of income
Eg: agreement fee (once), Training and consultancy fee, Royalty fee
• Can create custormers from different parts of the country or from the world
• Various sources of income
Eg: agreement fee (once), Training and consultancy fee, Royalty fee
Franchising
This is an agreement where one party (Franchiser) sells the right to and other party (Franchisee) to market its products or services.
Normally franchiser is famous company and the franchisee can be a sole trader or a partnership or a company.
Both parties in law have separate legal identity, but the contract between them, makes their relationship interdependent.
When franchisee signs the agreement with the franchiser the franchisee should pay initial agreement free to the franchiser
The franchiser provides a franchisee package to the franchisee which normally contains
Recipes or list of raw materials
Methods or procedures
Training and consultancy
Associated suppliers
Prices
Promotional materials etc
The franchisee should pay royalty from his/her sales income, and also sometimes royalty from the profits.
Normally franchiser is famous company and the franchisee can be a sole trader or a partnership or a company.
Both parties in law have separate legal identity, but the contract between them, makes their relationship interdependent.
When franchisee signs the agreement with the franchiser the franchisee should pay initial agreement free to the franchiser
The franchiser provides a franchisee package to the franchisee which normally contains
Recipes or list of raw materials
Methods or procedures
Training and consultancy
Associated suppliers
Prices
Promotional materials etc
The franchisee should pay royalty from his/her sales income, and also sometimes royalty from the profits.
The Disadvantages of the Partnership
Unlimited Liability of at least one Partner
At least one member of every partnership must be a general partner. The general partner has unlimited personal liability, even though he/she is often the partner with the least resources.
Capital Accumulation
Although the partnership form of ownership is superior to the proprietorship in its ability to attract capital, it is generally not as effective as the corporate form of ownership, which can raise capital by selling shares of ownership to outside investors.
Difficulty in disposing of partnership interest without dissolving the partnership
Most partnership agreements restrict how a partner can dispose of his/her share of the business. Often a partner is required to sell his/her interest to the remaining partners. When the money is not available to purchase a partner’s interest the other partners may be forced to accept a new partner or to dissolve the partnership, distribute the remaining assets and begin again.
Lack of Continuity
If one partner dies, complications arise. Partnership interest is often nontransferable through inheritance because the remaining partners may not want to be in a partnership with the person who inherits the deceased partner’s interest. Partners can make provisions in the partnership agreement to avoid dissolution due to death if all parties agree to accept as partners those who inherit the deceased interest.
Potential for personality and authority conflicts
Making sure partner’s work habits, goals, ethics and general business philosophy are compatible is an important step in avoiding nasty business divorce. No matter how compatible partners are, frictions among them are inevitable. The key is having a mechanism such as a partnership agreement and open lines of communication for controlling it. The demise of many partnerships can often be procedure to resolve those conflicts.
At least one member of every partnership must be a general partner. The general partner has unlimited personal liability, even though he/she is often the partner with the least resources.
Capital Accumulation
Although the partnership form of ownership is superior to the proprietorship in its ability to attract capital, it is generally not as effective as the corporate form of ownership, which can raise capital by selling shares of ownership to outside investors.
Difficulty in disposing of partnership interest without dissolving the partnership
Most partnership agreements restrict how a partner can dispose of his/her share of the business. Often a partner is required to sell his/her interest to the remaining partners. When the money is not available to purchase a partner’s interest the other partners may be forced to accept a new partner or to dissolve the partnership, distribute the remaining assets and begin again.
Lack of Continuity
If one partner dies, complications arise. Partnership interest is often nontransferable through inheritance because the remaining partners may not want to be in a partnership with the person who inherits the deceased partner’s interest. Partners can make provisions in the partnership agreement to avoid dissolution due to death if all parties agree to accept as partners those who inherit the deceased interest.
Potential for personality and authority conflicts
Making sure partner’s work habits, goals, ethics and general business philosophy are compatible is an important step in avoiding nasty business divorce. No matter how compatible partners are, frictions among them are inevitable. The key is having a mechanism such as a partnership agreement and open lines of communication for controlling it. The demise of many partnerships can often be procedure to resolve those conflicts.
Thursday, July 1, 2010
The Advantages of Partnership
Easy to Establish
Like the proprietorship, the partnership is easy and inexpensive to establish. The owners must obtain the necessary licences and submit minimal number of forms
Complementary Skills
In successful partnerships the parties skills and abilities usually complement one another, strengthening the business managerial functions.
Division of Profits
There are no restrictions on how partners distribute the business profits as long as they are consistent with the partnership agreement and do not violate the rights of any partners
Larger Pool of Capital
The partnership form of ownership can significantly broaden the pool of capital available to a business. Each partner’s asset base improves the business’s ability to borrow needed funds.
Ability to attract limited partners
When partners share in owing, operating and managing a business, they are general partners. General partners have unlimited liability for the partnership’s debts and usually take an active role in managing the business.
Little government regulations
Like the proprietorship the partnership forms of operation is not burdened with red tape.
Flexibility
Although not as flexible as sole ownership, the partnership can generally react quickly to changing market conditions.
Taxation
The partnerships like the proprietorships, avoid the double taxation disadvantage associated with the corporate form of ownership.
Like the proprietorship, the partnership is easy and inexpensive to establish. The owners must obtain the necessary licences and submit minimal number of forms
Complementary Skills
In successful partnerships the parties skills and abilities usually complement one another, strengthening the business managerial functions.
Division of Profits
There are no restrictions on how partners distribute the business profits as long as they are consistent with the partnership agreement and do not violate the rights of any partners
Larger Pool of Capital
The partnership form of ownership can significantly broaden the pool of capital available to a business. Each partner’s asset base improves the business’s ability to borrow needed funds.
Ability to attract limited partners
When partners share in owing, operating and managing a business, they are general partners. General partners have unlimited liability for the partnership’s debts and usually take an active role in managing the business.
Little government regulations
Like the proprietorship the partnership forms of operation is not burdened with red tape.
Flexibility
Although not as flexible as sole ownership, the partnership can generally react quickly to changing market conditions.
Taxation
The partnerships like the proprietorships, avoid the double taxation disadvantage associated with the corporate form of ownership.
Standard Partnership Agreement
Name of the partnership
Purpose of the business
Domicile of the business
Duration of the partnership
Names of the partners and their legal addresses
Contribution of each partner to the business, at the certain of the partnership and later
Agreements on how the profits or losses will be distributed
Agreement salaries, drawing rights against profits for each partner
Procedure of expansion through the addition of new partners
IF the partners voluntarily dissolve the partnership how will the partnership’s assets be distributed?
Sale of partnership interest
Dissolution of the partnership
Alteration or modifications of the partnership agreement
When no partnership agreement exist, the Uniform Partnership Act governs a partnership
Purpose of the business
Domicile of the business
Duration of the partnership
Names of the partners and their legal addresses
Contribution of each partner to the business, at the certain of the partnership and later
Agreements on how the profits or losses will be distributed
Agreement salaries, drawing rights against profits for each partner
Procedure of expansion through the addition of new partners
IF the partners voluntarily dissolve the partnership how will the partnership’s assets be distributed?
Sale of partnership interest
Dissolution of the partnership
Alteration or modifications of the partnership agreement
When no partnership agreement exist, the Uniform Partnership Act governs a partnership
The Partnership
The partnership is an association of two or more people who co-own a business for the purpose making profit.
In a partnership, the co-owners (partner) share the business’s assets, liabilities, and profits accordingly to the terms of a previously established partnership agreement.
The law does not require a partnership agreement (also known as the articles of partnership) but it is wise to work with an attorney to develop one that spells out the exact status and responsibilities of each partner.
In a partnership, the co-owners (partner) share the business’s assets, liabilities, and profits accordingly to the terms of a previously established partnership agreement.
The law does not require a partnership agreement (also known as the articles of partnership) but it is wise to work with an attorney to develop one that spells out the exact status and responsibilities of each partner.
Disadvantages of Sole Proprietorship
Unlimited Personal Liability
This means that the sole proprietor is personally liable for all the business debts. In a sole proprietorship, the owner is the business. If unpaid business debts remain, creditors can force the sale of the proprietor personal assets to recover payments. In short the business’s debts are the owner’s debts.
Limited Skills and capabilities
A sole trader may not have the wide range of skills that running a successful business. Many business failures occur because owner’s lack skills, knowledge, and experience in areas that are vital to business success
Feeling of Isolation
Running a business alone allows an entrepreneur maximize flexibility, but it also crates feeling of isolation that there is no one else to turn to for help in solving problems or getting feedback on a new idea. Most sole proprietors will honestly admit that there are times when the feel pressure of being alone and being fully and completely responsible for every major business decisions.
Limited access to capital
If the business is to grow and expand, a sole proprietor generally needs additional financial resources. Proprietors, unless they have great personal wealth, find it difficult to raise additional money while maintain sole ownership. Most banks and other lending institutions have well-defined formulas for determining borrower’s eligibility. Unfortunately much sole proprietorship cannot meet those borrowing requirements, especially in the early days of operation.
Lack of continuity for the business
If the proprietor dies, retires, or become incapacitated, the business automatically terminates. Unless a family member or employee can take over .
This means that the sole proprietor is personally liable for all the business debts. In a sole proprietorship, the owner is the business. If unpaid business debts remain, creditors can force the sale of the proprietor personal assets to recover payments. In short the business’s debts are the owner’s debts.
Limited Skills and capabilities
A sole trader may not have the wide range of skills that running a successful business. Many business failures occur because owner’s lack skills, knowledge, and experience in areas that are vital to business success
Feeling of Isolation
Running a business alone allows an entrepreneur maximize flexibility, but it also crates feeling of isolation that there is no one else to turn to for help in solving problems or getting feedback on a new idea. Most sole proprietors will honestly admit that there are times when the feel pressure of being alone and being fully and completely responsible for every major business decisions.
Limited access to capital
If the business is to grow and expand, a sole proprietor generally needs additional financial resources. Proprietors, unless they have great personal wealth, find it difficult to raise additional money while maintain sole ownership. Most banks and other lending institutions have well-defined formulas for determining borrower’s eligibility. Unfortunately much sole proprietorship cannot meet those borrowing requirements, especially in the early days of operation.
Lack of continuity for the business
If the proprietor dies, retires, or become incapacitated, the business automatically terminates. Unless a family member or employee can take over .
Advantages of Sole Proprietorships
Simple to create
One of the most attractive features of a proprietorship is how fast and simple it is to begin. If an entrepreneur wants to operate a business under his / her own name he/she simple obtain necessary licenses from state, country, and local governments and begins operation. For most entrepreneurs it would not be impossible to start a proprietorship in a single day.
Least Costly form of ownership to begin
The proprietorship is generally the least expensive form of ownership to establish. There is no need to create and file legal documents that are recommended form partnerships and required for corporations.
Profit incentive
One major advantage of the proprietorship is that once the owner pays all the business’s expenses, he/she can keep the remaining profits. The profit incentive is a powerful one, and profits represent an excellent way of keeping score in the game of business.
Total decision making authority
Because the sole proprietor is in total control of operations, he/she can respond quickly to changes, which is an asset in a rapidly shifting market. The freedom to set the business’s course of action is a major motivational force. For those who thrive on the enjoyment of seeking new opportunities in business, the freedom of fast, flexible decision making is vital. Many sole proprietors simply thrive on the feeling of control they have over their personal financial future and the recognition they earn as the ‘owner’ of the business.
No special legal restrictions.
The proprietorship's is the least regulated of business ownership.
Easy to discontinue
If the entrepreneur decides to discontinue operations, he/she can terminate the business quickly, even though he/she will still be personally liable for any outstanding debts and obligations that the business cannot pay.
One of the most attractive features of a proprietorship is how fast and simple it is to begin. If an entrepreneur wants to operate a business under his / her own name he/she simple obtain necessary licenses from state, country, and local governments and begins operation. For most entrepreneurs it would not be impossible to start a proprietorship in a single day.
Least Costly form of ownership to begin
The proprietorship is generally the least expensive form of ownership to establish. There is no need to create and file legal documents that are recommended form partnerships and required for corporations.
Profit incentive
One major advantage of the proprietorship is that once the owner pays all the business’s expenses, he/she can keep the remaining profits. The profit incentive is a powerful one, and profits represent an excellent way of keeping score in the game of business.
Total decision making authority
Because the sole proprietor is in total control of operations, he/she can respond quickly to changes, which is an asset in a rapidly shifting market. The freedom to set the business’s course of action is a major motivational force. For those who thrive on the enjoyment of seeking new opportunities in business, the freedom of fast, flexible decision making is vital. Many sole proprietors simply thrive on the feeling of control they have over their personal financial future and the recognition they earn as the ‘owner’ of the business.
No special legal restrictions.
The proprietorship's is the least regulated of business ownership.
Easy to discontinue
If the entrepreneur decides to discontinue operations, he/she can terminate the business quickly, even though he/she will still be personally liable for any outstanding debts and obligations that the business cannot pay.
What Influence the Structure
It’s size
As an organization gets larger, its structure gets more complex.
It’s tasks (The nature of its work)
Structure is shaped by the division of work into functions and individual tasks. And how these tasks relate to each other. The complexity and importance of tasks will affect the amount of supervision required, and so the ratio of supervision to work.
It’s Staff
The skills and abilities of staff will determine how the work is structured and the degree of autonomy or supervision is required.
It’s legal, commercial, technical and social environment
New technology is reducing overall staff requirement.
It’s age (The time it has to develop and grow)
Whether it is very set in its ways and traditional, or experimenting with new ways of doing things and making decisions.
It’s culture and management style.
How willing management is to delegate authority at all levels, whether teamwork is favored or large impersonal (formal) structures are accepted by staff.
As an organization gets larger, its structure gets more complex.
It’s tasks (The nature of its work)
Structure is shaped by the division of work into functions and individual tasks. And how these tasks relate to each other. The complexity and importance of tasks will affect the amount of supervision required, and so the ratio of supervision to work.
It’s Staff
The skills and abilities of staff will determine how the work is structured and the degree of autonomy or supervision is required.
It’s legal, commercial, technical and social environment
New technology is reducing overall staff requirement.
It’s age (The time it has to develop and grow)
Whether it is very set in its ways and traditional, or experimenting with new ways of doing things and making decisions.
It’s culture and management style.
How willing management is to delegate authority at all levels, whether teamwork is favored or large impersonal (formal) structures are accepted by staff.
Informal Organizational Structure
Because organizations are made up of people, there is also an informal organization, the network of relationships, communication and ideas that link people.
This is loosely structured, flexible and spontaneous forms of organization, which alters according to it’s membership at any given time.
The informal organization is made up of:
People who form social group or cliques, or temporary networks, communication or alliance (grouping), colleagues who get together over coffee, or email each other at work
Informal customs and ways of getting things done which become unwritten rules or “the way we do things around here”
Informal channels of communications (sometimes called the grapevine) which by-pass official channels. This is often faster than official communication, though less accurate
This is loosely structured, flexible and spontaneous forms of organization, which alters according to it’s membership at any given time.
The informal organization is made up of:
People who form social group or cliques, or temporary networks, communication or alliance (grouping), colleagues who get together over coffee, or email each other at work
Informal customs and ways of getting things done which become unwritten rules or “the way we do things around here”
Informal channels of communications (sometimes called the grapevine) which by-pass official channels. This is often faster than official communication, though less accurate
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