Chapter 2- Generating and Proctecting Business Ideas

Question 0

What is meant by the term “franchising”?

Answer 0

When a business (franchisor) gives another business (the franchisee) the right to supply its product or service.

Question 1

Sources of business ideas

Answer 1

• by spotting trends and anticipating their impact: Innocent Drinks saw the growing desire for healthier lifestyles
• identifying a market niche: Bigger Feet LTD for size 13 or above shoes
• copying ideas from other countries: Starbucks copied the coffee bar culture in Italy
• taking a scientific approach: James Dyson

Question 2

How does a franchise operate?

Answer 2

The franchisee sells the franchisor’s product or service, trades under franchisor’s trademark and benefits with franchisor’s help and support.
In return, franchisee pays an initial fee and pays percentage royalty on sales.
Franchisee owns outlet he/she runs but franchisor has control as to how their products are sold.

Question 3

What are the benefits of operating as a franchise?

Answer 3

• less risk for the start up business
• franchisor’s usually have an established brand name with a proven record of success
• banks are willing to lend money to a franchisee buying a franchise with proven reputation than to a new business
• low advertising and promotional cost
• franchisee gets experience and make relationships (with suppliers)
• free support and training

Question 4

What are the disadvantages of operating as a franchise?

Answer 4

• mistakes by the franchisor or not a strong enough brand name
• costs may be higher than expected; initial fees, ongoing royalties and franchisee may be forced to buy all their products- may limit franchisee’s profits
• other franchisee’s may give the brand a bad reputation which will impact entire business
• franchisor gives many restrictions which prevents franchisee to make changes to suit local market
• franchisee can’t set up competing businesses in franchisor’s industry for a long time

Question 5

How do we protect business ideas?

Answer 5

By using copyright, patents and trademarks.

Question 6

What is “copyright”?

Answer 6

Legal protection against copying for authors,composers and artists.
Lasts 70 years after the death of the artist. (50 for sound recording artists)
There is no requirements to register an author’s copyright.

Question 7

What is a “patent”?

Answer 7

An official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified period.

Question 8

What is a “trademark”?

Answer 8

Signs, logos, symbols or words displayed on a company’s products or on its advertising, including sounds or music which distinguish its brand from those of its competitors.
They are strong marketing tools.