Entrepreneurship:

Theory, Process,
Practice, 12e

Chapter 7: Pathways to
Entrepreneurial Ventures

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
 Chapter Objectives
7.1 Describe the major pathways and structures for entrepreneurial ventures.
7.2 Explain the newness dimensions involved in creating a “new venture.”
7.3 Discuss the elements involved in acquiring an established venture.
7.4 Outline 10 key questions to ask when buying an ongoing venture.
7.5 Describe the underlying issues involved in the acquisition process.
7.6 Define a franchise and outline its structure.
7.7 Outline the benefits and drawbacks of franchising.
7.8 Explain the franchise disclosure document (FDD) as a key item in
franchises.
7.9 Describe the elements involved with incubators, accelerators, and
entrepreneurial ecosystems.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
 Pathways to New Ventures for
Entrepreneurs
• Methods for Getting a Business Started
− Creating a new venture
− Acquiring an existing venture
− Obtaining a franchise

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
 Creating New Ventures
• Approaches to Creating a New Venture
– New-New Approach
▪ People’s awareness of their daily lives for developing new business
ideas.
▪ Notice annoying everyday experiences or problems of known products
or services.
– New-Old Approach
▪ Individuals “piggy-backing” on someone else’s idea by improving a
product or service in an area in which it is not currently available.
▪ Offer a product/service that is difficult to copy.
Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4
Trends in Creating Business Opportunities
Emerging Opportunities Emerging Internet Opportunities Automation Real-time analytics
Social and Environmental Responsibility Mobile Advertising Supply chains Edge computing
Gender-neutral products Micro-influencers Autonomous vehicles Cloud computing
Ethical products Influencer marketing Customer service chatbots Artificial intelligence
platforms Internet of Things Cybersecurity
Diversity and minority groups Podcast advertising platforms Voice-powered Virtual Environments
Locally made or locally sourced Affiliate marketing platforms technologies
products Real estate Metaverse
Organic food delivery Content marketing Smart cities Virtual and augmented
Reducing food waste e-Commerce realities
Health Care Mobile commerce Inventory management Virtual gaming/simulation
Mental health Social commerce platforms
Biopharma Groceries Supply chain management Human Resources
Telehealth Personal care Patient health monitoring Work-management
Niche Markets Home workout equipment platforms
Plant based Seasonal Senior care
Vegetarian and vegan Financial Services
LGBTQ+ Digital credit cards
Gamers Mobile banks
Source: Adapted from Steve Cooper, Amanda C. Kooser, Kristin Ohlson,
Remote workers Cryptocurrency Karen E. Spaeder, Nichole L. Torres, and Sara Wilson, “2007 Hot List,”
Environmentally conscious Data Processing and Storage Entrepreneur (December 2006): 80–93; and “The World’s 50 Most
Innovative Companies,” Fast Company (March, 2015).

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5
 A Newness Framework for New Ventures
• Different Dimensions of Newness
− Incremental market disruption
or
− Radical market disruption
• Leveraged by
− Incremental technological advances
or
− Radical technological advances

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6
 Entrepreneurial Newness Framework

Source: Donald F. Kuratko, Greg Fisher, James M. Bloodgood, and Jeffrey S. Hornsby, “The Paradox of New Venture
Legitimation within an Entrepreneurial Ecosystem,” Small Business Economics, 49 vol. 1 (2017): 124.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
 Examining the Financial Picture When
Creating New Ventures
• Upside Gain and Downside Loss Expectations; Profit Trend
– The profits the business can make and the losses it can suffer.
▪ How much money will the enterprise take in if all goes well?
▪ How much will it gross if operations run as expected?
▪ How much will it lose if operations do not work out well?
• Risk versus Reward Analysis
– Points out the importance of getting an adequate return on the
amount of money risked.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
 Checklist for Estimating Start-Up
Expenses (1 of 2)
Cash Needed to
Monthly Expenses Start the Business What to Put in Column 2
Estimate based on (These figures are estimates. The owner/ manager
sales of $___ per decides how many months to allow, depending on the
Item year (see column 3) type of business.)
Column 1 Column 2 Column 3
Salary of owner/manager $ $ 3 times column 1
Other salaries and wages 3 times column 1
Rent 3 times column 1
Advertising 3 times column 1
Delivery expenses 3 times column 1
Supplies 3 times column 1
Telephone and telegraph 3 times column 1
Other utilities 3 times column 1
Insurance 6 times column 1
Taxes, Social Security 4 times column 1
Interest 3 times column 1
Maintenance 3 times column 1
Legal and other professional assistance 3 times column 1
Miscellaneous 3 times column 1

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
 Checklist for Estimating Start-Up
Expenses (2 of 2)
Start-Up Costs
Item Estimate To Arrive at Estimate
Fixtures and equipment $ Determine what is typical for this kind of business; talk to suppliers.
Decorating and remodeling Talk to a contractor.
Installation of fixtures, equipment t Talk to suppliers.
Starting inventory Talk to suppliers.
Deposits with public utilities Talk to utility companies.
Legal and other professional fees Talk to a lawyer, accountant, or other professional.
Licenses and permits Contact appropriate city offices.
Advertising and promotion Decide what will be used; talk to media.
Accounts receivable Estimate how much will be tied up in receivables by credit customers and for how long.
Cash Allow for unexpected expenses and losses, special purchases, and other expenditures.
Other Expenses List them and estimate costs.
Total cash needed to start $______ Add all estimated amounts.

Source: U.S. Small Business Administration, “Management Aids,” MA. 2.025 (Washington, D.C.: U.S. Government Printing Office).

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
 Acquiring an Established Entrepreneurial
Venture
• Acquiring an Established Entrepreneurial Venture
– Personal preferences
– Examination of opportunities Sources include:
▪ Business brokers
▪ Newspaper ads
▪ Trade sources
▪ Professional sources
▪ Online sources

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
 Advantages of Acquiring an Ongoing
Venture
• Less fear about successful future operation
− Existing business has customers, control costs, profit
• Reduced time and effort
− Already has inventory, equipment, personnel, facilities
− Already has suppliers, bankers, accountants, lawyers
• A good price
− Owner may want to sell quickly
− Owner will, however, know the fair market value

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
 Evaluation of the Selected Venture
• The Business Environment
• Profits, Sales, and Operating Ratios
• The Business Assets
− Inventory
− Furniture, equipment, fixtures
− Accounts receivable
− Trademarks, patents, copyrights, business name
− Goodwill

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13
 Key Questions to Ask (1 of 2)
• Why is the business being sold?

• Is there a legal restraint of trade or noncompete agreement?

• What is the current physical condition of the business?

• What is the condition of the inventory?

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
 Key Questions to Ask (2 of 2)
• What is the state of the company’s other assets?

• How many of the employees will remain?

• What type of competition does the business face? Are there any
unscrupulous practices?

• What is the company’s profitability?

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
 Negotiating the Deal
• Factors Affecting Negotiations
– Information
▪ Company performance, competition, market, etc.
▪ Gather info from numerous sources; not just seller.
– Time
▪ Having more time than the other party can be beneficial.
– Pressure from others
▪ Partners, negotiators, etc.
– Alternatives
▪ Parties with no alternatives have an interest in concluding negotiations
quickly.
Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
 Considerations When Buying a Business
• Request that the seller retain a minority interest in the business
or establish the final purchase price dependent on the
performance of the business over a three-to-five-year span.
• Buyers should be wary of any promises made without written
corroboration.
• Spending time with the seller’s books, reconstructing financial
statements to determine how much cash is actually available, is
an absolute.
• Interview the owner, vendors, competitors, customers, and
employees.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
 Franchising: The Hybrid
• The Franchise
– Any arrangement in which the owner of a trademark, trade name, or
copyright has licensed others to use it in selling goods or services.
• Franchisee: The purchaser of a franchise.
• Franchisor: The seller of the franchise.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
 How Franchising Works (1 of 2)
• Franchisee Obligations:
− Make a financial investment in the operation.
− Obtain and maintain a standardized inventory and/or equipment
package usually purchased from the franchisor.
− Maintain a specified quality of performance.
− Follow a franchise fee as well as a percentage of the gross
revenues.
− Engage in a continuing business relationship.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
 How Franchising Works (2 of 2)
• Franchisor Provides:
1. The company name
2. Identifying symbols, logos, designs, and facilities
3. Professional management training for each independent unit’s staff
4. Sale of merchandise necessary for the unit’s operation, equipment
to run the operation, and the food or materials needed for the final
product
5. Financial assistance, if needed
6. Continuing aid and guidance to ensure that everything is done in
accordance with the contract

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
 Advantages of Franchising
• Advantages:
− Training and guidance provided
− Brand-name appeal and awareness
− A proven track record, so less risk
− Financial assistance from franchisor

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
 Disadvantages of Franchising
• Disadvantages:
− Franchise fees may be as high as $1million; must also pay royalty on
sales.
− Franchisor control to achieve uniformity
− Unfulfilled promises from franchisor

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
 Some of the Most Recognized Franchises
• Burger King
• Dairy Queen
• Days Inn
• Denny’s
• Dunkin’ Donuts
• H&R Block (Tax Preparation)
• McDonald’s
• Meineke Car Care Centers
• Papa John’s Pizza
• 7-Eleven
• Snap-on Tools
• Sports Clips (Hair Salons)
• Subway
• UPS Store (previously Mailboxes, etc.)

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
 The Cost of Franchising
1. The basic franchise fee
2. Insurance
3. Opening product inventory
4. Remodeling and leasehold improvements
5. Utility charges
6. Payroll
7. Debt service
8. Bookkeeping and accounting fees
9. Legal and professional fees
10.State and local licenses, permits, and certificates
Source:
DonaldDonald
F. F. Kuratko, “Achieving
Kuratko, the American Dream
Entrepreneurship: as a Process,
Theory, Franchise,” Small Business
Practice, 12Network 3 (July©1987):
th Edition. 2024 2 (updated
Cengage by author April 2012)
Learning, Inc.. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
 Franchise Law
• Franchise Rule governs franchise requirements.
• Franchise Disclosure Document (FDD)
− Divided into 23 categories that provide different segments of
information for prospective franchisees.
− Developed to provide guidance in complying with the Franchise
Disclosure Rule that requires franchisors to make full presale
disclosure about their franchises.
− Prospective franchisee must receive the FDD before signing a
contract.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
 Discussion Activity
• Students can go online and look for news articles on court cases
involving franchise arrangements.
• As they find a case, they can describe it to the class. If of
interest to others, they can form a group to learn more about
that case.
• The cases can then be presented and discussed as a class.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
 Evaluating Franchising Opportunities
• The Franchise Opportunity Decision
– Learning of Franchising Opportunities
▪ Sources: newspapers, trade publications, Internet, franchisors.
– Investigating the Franchisor
▪ Deal with a legitimate franchisor.
▪ Franchisor should also investigate prospective investors.
– Seeking Professional Help
▪ Consult an attorney with the contract.
▪ Consult a banker to review the prospectus.
▪ Consult an accountant to project income statements.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
 The Decision to Purchase a Franchise:
Process Model

Source: Patrick J. Kaufmann, “Franchising and the Choice of Self Employment,” Journal of Business Venturing 14, no. 4 (1999):
348.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
 World Wide Web Franchise Sites
Other Valuable Sites:
American Bar https://www.americanbar.org/groups/fran
Association Forum on chising.html
Common Sites Franchising
U.S. Small Business Administration https://www.sba.gov
Minority Business Entrepreneur magazine https://mbemag.com
Franchise Times https://www.franchisetimes.com
http://www.franchiseexpo.com Franchising.com https://www.franchising.com
National Restaurant Association https://restaurant.org
http://www.franchise.org Federal Trade Commission https://www.ftc.gov/tips-advice/business-
center/selected-industries/
franchises%2C-business-
opportunities%2C-and-investments
http://www.franchisedirect.com Franchise.com https://www.franchise.com
Franchise Solutions https://www.franchisesolutions.com
https://entrepreneur.com/franchises Franchise Opportunities Network https://www.franchiseopportunities.com
Franchise Mall http://www.thefranchisemall.com
FranchiseWire https://www.franchisewire.com
America’s Best Franchises https://americasbestfranchises.com
All USA Franchises https://www.allusafranchises.com
Franchise Chatter https://www.franchisechatter.com

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
 Incubators, Accelerators, and
Entrepreneurial Ecosystems
• Business Incubators
− Provide services such as management training and office space.
• Business Accelerators
− Offer support services and funding opportunities.
− Entrepreneurs offer equity in their company.
• Entrepreneurial Ecosystems
− Ecosystem: an agglomeration of interconnected individuals, entities,
and regulatory bodies in an area.
− Entrepreneurial Ecosystem: social and economic environment
affecting local entrepreneurship.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30
 Summary
Click the link to review the objectives for this presentation.

Link to Learning Objectives

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage Learning, Inc. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31