South-Western - Management  
Franchisees Buy Into Job Security
Topic Entrepreneurship
Key Words Franchise, layoffs
InfoTrac Reference CJ112485623
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News Story

As the fear of a layoff got stronger, Matt and Katie Bauer decided to take things into their own hands. Matt kept his job as a stockbroker, and they bought a KaBloom flower franchise that Katie runs. They plan to open four more locations in the next three years. Matt sees the franchise as a safety net in case he wants or needs to leave the corporate world.

They are not alone. With more than 2.3 million jobs cut from the U.S. economy in the last three years, more people are looking for more control over their careers. The International Franchise Association said the number of U.S. franchise businesses continues to grow steadily. Many budding entrepreneurs view franchise businesses as an easier path to financial freedom than starting from scratch. Owning a franchise business is not the same as being a true entrepreneur, however. Franchisees are still part of a larger company, and subject to decisions made by the parent company.

Many companies franchise because they don't have the money to expand. Their franchisees help finance the expansion for them.

Still, many people believe franchising is the easiest way to start a business. Some feel it is a better investment than the stock market.

Banks prefer to loan money to couples who keep one outside income so they can keep the business going even if it is only breaking even.

Some franchises require at least one owner to operate the business, but others allow outside managers to be hired.

Questions
1.

What reasons are given for why people decide to buy franchises?

2.

What is the advantage to the parent company of offering franchises?

3.

Explain the statement, "...launching a franchise is not like being a true entrepreneur." What is a "true entrepreneur"?

Source "Franchisees Buy Into Job Security," Knight Ridder/Tribune Business News Jan. 23, 2004.
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