Avenues of Acquiring businesses

• Profitable: making or likely to make a profit
• Established business

  • already went through all the legal requirements, won't take as long
• Established Customer Base

  • Already has customers that are buying from the store
• Established name and reputation

  • people stick to brand names, even with new ownership
• Known Market

  • Market research done, new owner uses it so make future plans
• Mentorship

  • old owner may stay a bit to mentor incoming owner
• Cash Flow

  • Customers, cashflow, security of working capital, improve cash flow sooner
• Financing

  • Years of profitable financials, easier to secure other sources of funding
• Current Staff

  • Trained staff, smooth transfer and process
• Market position

  • New owner can increase marker position, customer base, market share and resources
• Franchising: the franchisor licenses the use of its business model, brand, and intellectual property to a franchisee
• Franchising

  • license to use the name, idea and processes of an existing business
  • franchisor and franchisee
  • right from franchisor to use name and trademark to sell products
• Franchisor: person or company that own the business model and related trademarks
• Franchisee: pays a fee to the franchisor for the right to use the trademark and proprietary knowledge
• Advantages of Franchising

  • other forms of finance available
  • cheaper than start up
  • based on proven idea
  • Reduced long-term risk
  • Suppliers give bulk discounts
  • Use recognised brand name and trademark
  • Established reputation and business image
  • small business ownership supported by benefits of big business network
  • staff and training support
• Disadvantages of Franchising

  • expensive initial layout
  • difficult to sell or terminate contract
  • initial cost makes it difficult to buy into agreement
  • restrictions on how to run the business
  • brand gets bad reputation through other franchises
  • Franchisees pay royalties to franchisers
• Royalties: payment to owner/ creator of asset for its use
• Contractual Implications of Franchising

  • policies than govern product/service
  • royalties and date of payment
  • form of ownership
  • operation specifications
  • termination clause, when parties may end the legal relationship
• Outsourcing: an agreement in which one company hires another company or person to supply goods/services that could be done internally by company's employees
• Advantages of Outsourcing

  • continuity during staff turnover
  • focus on important business activities
  • staffing flexibility making use of cyclical demands
  • reduce staff, remuneration, control and operating costs
  • focus on vision, goals, apply staff more effectively
  • Access to resources, equipment and skilled people
• Disadvantages of Outsourcing

  • loss of management control can lead to staff frustration
  • lack of personal care and quality
  • hidden costs
  • confidential issues at risk
  • outsource company dictates contract
  • current staff feel threatened
• Contractual Implications of Outsourcing

  • responsibilities and rights of both parties
  • length of duration of contract
  • confidentiality clause to protect privileged information
• Leasing: contract outlining the terms under which one party agrees to rent goods or services owned by another party
• Lessor: someone who grants a lease to someone else, owner of the asset
• Lessee: a person who rents property or land from a lessor
• Advantages of Leasing

  • no financial outlay, cost spread over time
  • lessor covers maintenance fees and replaces asset
  • assets returned to lessor
  • Operating costs are tax-deductible
  • easier to finance for
  • lessor company reputation at stake
• Disadvantages of Leasing

  • lessee not owner of asset
  • no tax advantages for lease expenses
  • payments treated as an expense
  • Reduce net income of business
  • Lessee responsible from proper use of asset
  • complex process and proper examination is required
  • lessee bound by contract
• Contractual Implications of Leasing

  • right to occupy an asset
  • right to use asset
  • responsibility to keep asset in good condition or order
  • no changes without lessor's consent
  • if asset needs to be insured, lease agreement must state so.