Transcript CONOPS Elements - Mississippi State University

Mississippi State University
MGT 3323
Entrepreneurship
Daniel T. Holt
Assistant Professor of
Management
“The people’s university”
-- Dr. Mark Keenum
Feasibility Analysis
• Includes…
• First phase (due 5 Mar—resubmissions returned today)
• Analysis of the Industry
• Analysis of competitors & how you’re different
• Analysis of the target market (requires first hand data from customers—we’ll talk
about this today)
• Second phase (returned today)
• Financial feasibility
• Final phase (due 16 Apr)
• Revisions & improvements to first two phases
• And…
Suppliers
Distribution channels
Location analysis
Technology and service analysis
Extra Credit Opportunity
• Winner’s Circle Event (can earn up to 3 points toward
final grade)—due at the Final
• Attend one of the several business plan competitions
(Wed, 25 April)
• An assignment guide to be published by the end of next
week
• Summarize the ventures that were pitched
• Assess feasibility of the ventures (opportunity viability; competitor
analysis; target market demand; financial feasibility)
Planning Process
Intellectual Property
• Patents, trademarks, copyrights, or trade secrets
secured relative to the products you are developing
• Intellectual property
• Any product of human intellect that is intangible but has
value in the marketplace
• Trade secret
• Any formula, pattern, physical device, idea, process, or
other information that provides the owners of the
information with a competitive advantage in the
marketplace
Patents
• Patents are expensive
• Range from $5,000 to $50,000
• Require application within one
year of the product being first…
• Offered for sale
• Put into public use
• Described in any printed publication
(such as a concept statement)
If not, or the right to file a patent
application is forfeited
Ownership Structure
• Ownership structure
• Compensation
• Options Pool—An inventory of
company stock which is set aside
for future employees
Ownership Options
• Sole proprietorship
• Business owned by one individual (complete
control)
• For tax and liability purposes, business and
individual are one in the same
• Dissolves when proprietor ends the venture (or
dies)
• General Partnership
• Business owned by two or more individuals—
control & decisions based on agreement (if not
specified, control distributed equally)
• For tax and liability purposes, it is treated as a
proprietorship
• Unlimited liability for each partner
• Earnings are distributed based on the partnership
agreement
Ownership Options
•
Limited partnership (unlimited number of partners)
•
•
Hybrid form of organization with general and limited
partners (no voice in management & legally liable for
capital contributions)
General partners…
• Assume management responsibility
• Have unlimited liability
• Have at least a 1 % interest in profits and losses
•
•
Liability of limited partners capped at their investment
C Corporation (think of the of the common
corporation; unlimited partners)
•
•
The firm is treated as an individual (i.e., it can be
fined, taxed, or sued)
Control and decisions based on governance structure
(i.e., board of directors)
Ownership Options
• S Corporation (up to 100 partners)
• Must be a domestic firm deriving at least 20% of its revenues from US
sources
• Tax status is the same as a partnership
• Partners, however, have liability protections granted to corporate
shareholders
• Control and decisions based on governance structure (i.e., board of
directors)
• Limited liability corporation (unlimited numbers can be
involved; known as members)
•
•
•
•
Can have one or more owners, known as members
Separate legal entity from its owners
Members have limited personal liability
Unlimited life unless dissolved
Advantages & Disadvantages
Advantages
Sole
proprietorship
Partnership
Disadvantages
Simple to organize
Full Liability of the owner
One level of taxation
Cannot raise outside equity
capital, thus limiting potential
size of the business
Can bring additional talent and
personal capital
Full liability of partners (in
limited partnership liability
limited to financial investment)
One level of taxation
Capital limited to the pockets of
the partners
Geographical dispersion
Unless addressed through the
partnership agreement,
dissolves with the death or
withdrawal of any partner
Advantages & Disadvantages
C corporation
Advantages
Disadvantages
Theoretically capable of attracting
equity capital through share ownership
Complex to set up and operate
Preferred form of venture capitalists
Income subject to double
taxation
Shareholders enjoy limited liability
Able to deduct many benefit payments
to employees
S Corporation
Like a proprietorship and partnership,
subject to only one level of taxation
Complex to set up and operate
Shareholders enjoy limited liability
Limited number of
shareholders (up to 100)
Geographical dispersion
Venture capitalists cannot be
share holders
Franchising
• Singer Sewing Machine – first franchise (mid-19th
century)
• Automobile (e.g. Ford), petroleum products (e.g.
Shell), soft drinks (e.g. Coca Cola)
• Food and restaurants (e.g. McDonald’s, Starbucks)
Brief Outline
• What is franchising?
• Types of franchising
• Why franchise? Why is franchising important to
SMEs?
• Considerations for franchisor/franchisee
• Pitfalls/Be careful
• Singapore Experience
What is franchising?
“A franchise operation is a contractual relationship
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 such
areas 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 which the franchisee has or will
make a substantial capital investment in his business
from his own resources.”
- Definition by International Franchise Association
What is franchising?
• Legal and commercial arrangement concerning the
successful business of a franchisor
• Use of franchisor’s trade name, format, system
and/or procedure under licence
• Means to raise capital and expand quickly
• Assistance to franchisee
• Marketing, management, advertising, store design,
standards specifications
• Payment by franchisee by way of royalty, licensee
fee or other means
What is franchising?
• Franchising is more than distributorship
• Extends to an entire operation or method of business
• Greater assistance, control and longer duration
• Distributor merely re-sells products to retailers or
customers
• Main types of franchise:
• Product distribution franchise;
• Business format franchise; and
• Management franchise.
PRODUCT DISTRIBUTION
FRANCHISES
• A product distribution franchise model is very much
like a supplier-dealer relationship
• Typically, the franchisee merely sells the franchisor’s
products. However, this type of franchise will also
include some form of integration of the business
activities
PRODUCT DISTRIBUTION
FRANCHISES
• Examples of famous product distribution franchise:
PRODUCT DISTRIBUTION
FRANCHISES
Produces the
syrup concentrate
Sells the syrup
concentrate
FRANCHISEE
Produces the final
drink
Retail Stores
Restaurants &
F&B Outlets
Vending Machine
Operators
BUSINESS FORMAT
FRANCHISING
• In a business format franchise, the integration of the
business is more complete
• The franchisee…
• Distributes the franchisor’s products and services under the
franchisor’s trade mark
• Implements the franchisor’s format and procedure of
conducting the business
Famous Examples
BUSINESS FORMAT
FRANCHISING -
outlet in
Sale, Australia
outlet in
Marseille, France
MANAGEMENT
FRANCHISE
• A form of service agreement.
• The franchisee provides the management expertise,
format and/or procedure for conducting the business.
Famous Examples
Why is franchising important
to SMEs?
•
•
•
•
•
•
•
Leveraging on a recognised brand name
Enhancing business image
Ensuring consistent quality
Attaining higher productivity/better motivated staff
Access to good locations
Economies of scale
Reducing risks of failure
WHY FRANCHISE?
• Franchises offer important pre-opening support:
•
•
•
•
•
site selection
design and construction
financing (in some cases)
training
grand-opening program
WHY FRANCHISE?
• Franchises offer ongoing support
• training
• national and regional advertising
• operating procedures and operational
assistance
• supervision and management support
• increased spending power, access to bulk
purchasing and economies of scale
Common considerations of
franchisors
•
•
•
•
Developing franchise concept
Market research
Familiarity with local laws and regulations
Providing training and support to franchisees
Common considerations of
franchisors
•
•
•
•
Criteria for choosing franchisees
Control over franchisees
Supply of products/materials to franchisees
Intellectual property rights issues, e.g. trade mark
registration
Common considerations of
franchisees
• Demand
• Profitability of franchise, and length of time required
to recoup investment
• Track record of franchisor
• Support rendered to other franchisees
• Experience and profitability of other franchisees
• Existence of competition
• Capital required
• Demands of franchisor, e.g. income projections,
deadline to open more franchise outlets
Franchisor–Franchisee
relationship
Regulated by contract which usually covers:
•
•
•
•
•
•
•
•
•
Initial fee
Royalty fee/Management fee (on-going fee)
Advertising relationships (on-going fee)
Capital required from franchisee (capital on-hand
requirements)
Involvement of Franchisee
Territory/Area of operation
Duration of license and renewal
IPRs
Termination
Questions, Comments, or
Criticisms?
33