1. When entrepreneurs first start their business, they have to make a very important decision on what form of ownership they want to use. “The form they choose affects virtually every aspect of establishing and operating their firm, including the initial cost of setting up the business, the way the profits are distributed, the types of taxes (if any) the business must pay, and the types of regulations it must follow.” (Page 90). There are four forms of ownership most company choose from in the U.S. The first form is sole proprietorship, which is when a business is owned and managed by one induvial. All the debit and earnings fall under the owner. The second form is a partnership, which is an agreement between two or more people that act as
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We see franchises all around us, like McDonalds, 7-Eleven, and Orange Leaf. People usually open franchises to make money without having to come up with product, and they think there is less risk for the business to fail. The risk of failing may be low, but there are plenty of other risks and disadvantages when opening a franchise, for both the franchisor and franchisee “From the franchisor’s perspective, opening a business with perhaps thousands of semi-independent owner-operators can be complex and challenging.” (Page 105). The first disadvantage the franchisee will come across, is the cost to start the business. Most franchises will charge a starting fee, and also have to make up an agreement on how much you will owe the franchisor every month. Another disadvantage for the franchisee is lack of control over the franchisee because you must follow the franchisors rules. A high risk for both the franchisee and the franchisor, is the negative halo effect. This effect happens when, one franchise gets a bad reputation and the rest of the franchises reflect their same loss.
Chipotle had the negative halo effect when a couple of their franchises were caught with e-boil in their meat. This effected those franchises in particular and the others because everyone seemed nervous that the other franchises may be contaminated as
We see franchises all around us, like McDonalds, 7-Eleven, and Orange Leaf. People usually open franchises to make money without having to come up with product, and they think there is less risk for the business to fail. The risk of failing may be low, but there are plenty of other risks and disadvantages when opening a franchise, for both the franchisor and franchisee “From the franchisor’s perspective, opening a business with perhaps thousands of semi-independent owner-operators can be complex and challenging.” (Page 105). The first disadvantage the franchisee will come across, is the cost to start the business. Most franchises will charge a starting fee, and also have to make up an agreement on how much you will owe the franchisor every month. Another disadvantage for the franchisee is lack of control over the franchisee because you must follow the franchisors rules. A high risk for both the franchisee and the franchisor, is the negative halo effect. This effect happens when, one franchise gets a bad reputation and the rest of the franchises reflect their same loss.
Chipotle had the negative halo effect when a couple of their franchises were caught with e-boil in their meat. This effected those franchises in particular and the others because everyone seemed nervous that the other franchises may be contaminated as