Franchises, Joint-Ventures, and Social Enterprises (4.2)

Chapter 4 - Types of Business Organization

Lesson Objective: To understand franchises and joint-ventures

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Franchises which are nothing but a legal agreements between two firms, the Franchisor and the Franchisee (e.g. Tavan Bogd and KFC). This contract establishes that the franchisee has the rights to using the name, logo, and trading systems of an existing successful franchiser brand:

Franchise is not a type of business organization such as sole trader, partnership, or limited companies.

Franchisees and Franchisors can choose whichever structure fits them best.

Franchising is a great, quick, and cheap way to grow: the franchisee pays for day-to-day running expenses and still pays the franchisor a portion of the profits they make.

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Joint-Ventures is when two or more businesses work together on a business opportunity or project. Here are some examples:

The joint-venture between Starbucks and TATA creating TATA Starbucks with the focus on manufacturing and distributing bottled coffee beverages.

Google, Intel, and Tag Heuer formed a Joint-Venture to create a luxury smart-watch.

Here are the reasons for and against the formation of a Joint-Venture:

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Lastly, Social Enterprises:

Social Enterprises still need to choose between the four types of business organizations.

https://www.youtube.com/watch?v=C4AXv-jFszs

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To wrap it all up: there are many different business structures to choose from and the right choice depends on:

• Whether the business is new or existing (older);

• Business objectives (e.g. growth);

• Willingness to keep control;

• Attitude to risk (limited / unlimited liability);

• Market size (small market, small business).

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To-Do List:

• Chapter 4 Practice Questions #1 and #2

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Chapter 4 - Types of Business Organization