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Date Created: 09/19/15
How Franchising Works by Lee Ann Obringer What is Franchising Imagine that you39re opening your own McDonald39s To do this you have to buy a McDonald39s franchise In order to qualify for a conventional franchise you have to have 250000 not borrowed Your total costs to open the restaurant however will be anywhere from 685750 to 1504000 which goes to paying for the building equipment etc Forty percent ofthis cost has to be from your own nonborrowed funds You39ll pay an initial franchise fee of 45000 directly to McDonald39s The other costs go to suppliers so this is the only upfront fee you pay to McDonald39s Then you39ll go through a rigorous ninemonth training period where you39ll learn about the McDonald39s way of doing things things like their standards for quality service value formulas and specifications for menu items their method of operation and inventory control techniques You39ll have to agree to operate the restaurant from a single location usually for 20 years following their guidelines for decor signage layout and everything else that makes McDonald39s McDonald39s Once you39ve completed training and are ready to go McDonalds will offer you a location they39ve already developed The exterior ofthe building will be complete but you will have to take care of interior additions such as kitchen equipment seating and landscaping You39ll get constant support from a McDonald39s Field Consultant who can advise you on details and will visit regularly You39ll pay McDonald39s a monthly fee of 4 percent of your sales and either a flat base rent or a percentage rent of at least 85 percent of your sales How much money you make depends on many things including the location and its popularity the efficiency of your operating costs and your ability to manage and control the business Think of franchising as paying someone for his or her business strategy marketing strategy operations strategy and the use of his or her name That39s pretty much what franchising is you are establishing a relationship with a successful business so you can use its systems and capitalize on its existing brand awareness in order to get a quicker return on your own investment You are using its proven system and name and running it by its rules Are you still your own boss In some respects no You still have to answer to someone else and follow his or her direction You don39t really own the business you own the assets you39ve purchased in order to establish the business McDonald39s Franchise Hamburgers chicken salads McDonald39s brand is in 122 countries around the world Thirty thousand locations serve 51 million customers each day More than 70 percent of McDonald39s restaurants around the world are owned and operated by independent local businesspeople In addition the company operates Boston Market It also has a subsidiary Redbox which in 2003 started as 18 foot wide automated convenience stores but as of 2005 has focused on DVD rental machines Most standalone McDonald39s restaurants offer both counter and drive through service with indoor and sometimes outdoor seating The Drive Thru Auto Mac or McDrive as it is known in many countries often has separate stations for placing paying for and picking up orders though the former two steps are frequently combined In some countries quotMcDrivequot locations near highways offer no counter service or seating In contrast locations in high density city neighborhoods often omit drive through service Please Note The operators of McDonald39s may not have verified the accuracy of the franchise information contained within this website For accurate up to date information customers are strongly recommended to visit the official McDonald39s website Startup Costs amp Franchise Fees How much does it cost to open a McDonald39s franchise Total Investment 655750 1225000 Initial Franchise Fee 45000 Royalty Fee 125 Advertising Fee NA Term of Agreement 20 years Renewal Fee 45K Dunkin39 Donuts Franchise Doughnut shop In 1946 William Rosenberg founded Industrial Luncheon Services a company that delivered meals and snacks to workers in the Boston area The success of Industrial Luncheon Services convinced Rosenberg to start the Open Kettle a doughnut shop in Quincy Massachusetts Two years later Open Kettle changed its name to Dunkin39 Donuts Today Dunkin39 Donuts serves a variety of doughnuts muffins bagels coffees and fruit drinks at its locations in more than 40 countries Dunkin39 Donuts is a subsidiary of Allied Domecq parent company of Baskin Robbins and Togo39s Franchisees may operate combination stores co branding Dunkin39 Donuts with Baskin Robbins or Togo39s Please Note The operators of Dunkin39 Donuts may not have verified the accuracy of the franchise information contained within this website For accurate up to date information customers are strongly recommended to visit the official Dunkin39 Donuts website Startup Costs amp Franchise Fees How much does it cost to open a Dunkin39 Donuts franchise Total Investment 255700 1100000 Initial Franchise Fee 40000 80000 Royalty Fee 59 Advertising Fee m will in mma um KFC and McDonald39s a model of blended culture em Yodzv updzkdnnntn snl 1mm 0s Amerma Trmun cmpat Restaurants tne grgup at gwn KFC and przza Hut prgrngtes fradrtrgnat Pekmg Chmken RDH at a KFC restaurant m snangnar At present tnere are rngre tnan Luna KFC restaurants m Chma and tney are rnereasrng at annua rate gf 2 u A new KFC restaurant g ens eyery gtner d Western munterpart anna d s a sg egntrnues tg expand rts prernrses Havmg arnyed gn tne mam and m tne ear y 199DsMDnnad s nas rngre tnan EDD restaurants m near y mu Emes A thnugh tnere naye peen fewer gmden arenes m Amerma rts natwe eguntry m tne past twg years Chma s MEDDnaM s naye grgwn at a rate gfmu restaurants per year fne tgtat mmme gffast fggd restaurants m Chma ngw stands at JED pman yuan RMB and KFC and anna d s agegunt fgr e nt pereent wnat kmd Dfmagmhas prgugnt tnern suen sueeess m Chma7 ng dd tney sustam grgwtn rates7 fnerr standardrzed busmess Dperatmn apart tne key rs exceHent ntefrcmtufa management Western Fast Fund 7 Chinese style AHurwg g nrrr r rrr rm nmaap and t r rn r p p was new y enaeted fast fund was emtreauy fgrergn engugn tg wnet Chmese penp e s eurrgsrty apgut tne gutsrde Warm Managers tank adyantage gftnrs py chargmg tne fe atwe y nrgn prmes gf 1n yuan fur a narnpurger and 5 yuan fur a Cake ay tne mtdrlgg s tnere were mu fast fggd restaurants argund Beumg tne canvemence F6 r JDwa fans Of ce ankefs erunyed grabbmg a qmck prte gn tnerr way tg Wufk and frrends erunyed fe axmg dyer a Cake ngeyer certam eag ereyed managers ngtreed tnat sgrne e neyer drgpped m wnen tney passed py sgrne eustgrn ers camp amed tnat fast fggd t d tnerr n tnatrttaeked M n w M restaurants were a mnst ern pty durmg tne tradmn Mtdrautumn Festwa wnde Chmese restaurants we nat ce ebratmns DfSprmg Festwa and re neayed and bust ed e reasur Cu tufa drfferenees Fast fggd restaurants Mk2 KFC and MEDDnaM s are drstrnet Am erman prands Drfferenees petween Chma and US pnhtms ecnnnmms sgdat deve npm ent and den ngy peearne gpstades tg mtematmna enterpnses Uperatmg m Chma cgrpgrate r n n u m wnere cu tufe p ays a cruma fu e MeD una d s atqu sad gn tne Huangpu Rwer e summary was g Deeprruuted m tne Chmese an t t adapt wnen m Rgrne dd as tne Rumans egnsddusness rs tne tradrtrgnat cu tufe gffggd and dfmk tnat features cmuf fragranee flavor and variety Fast food simply does not compare Now that curiosity had faded people returned to their own more extensive cuisine Under such circumstances the only way out was to combine the two different cultures Fast food restaurants have been learning to absorb elements of Chinese culture Since the summer of 2001 KFC has introduced many Chinese items onto their menus Preserved Sichuan Pickle and Shredded Pork Soup was one of the first Consumers felt their traditions were being respected when they could taste Chinese cuisine at a foreign restaurant The soup proved a success and Mushroom Rice Tomato and Egg Soup and Traditional Peking Chicken Roll were soon added to the menu KFC also serves packets of Happy French Fry Shakes that contain beef orange and Uygur barbecue spices Not content to lag behind McDonald39s Vegetable and Seafood Soup and Corn Soup were introduced and the company worked to modify the restaurants39 design During the 2004 Spring Festival McDonald39s on Beijing39s Wangfujing Street attracted many people with a traditional Chinese look decorating their interiors with paper cuts of the Chinese character Fu Happiness magpies and twin fishes all auspicious symbols Intercultural Management Mode KFC and McDonald39s have absorbed the Chinese cultural elements of showing respect recognition understanding assimilation and amalgamation while maintaining the substance of the Western culture of efficiency freedom democracy equality and humanity This inter cultural management mode with American business culture at the core supplemented by Chinese traditional culture provides reference for international enterprises which need to adjust enrich and reconstruct their corporate culture to enhance local market flexibility There are however certain conditions essential to inter cultural management mode On the objective side there must be similarities in environment in order for the two cultures to connect and synchronize KFC and McDonald39s embody an accommodation of the fast tempo of modern life a product of development and a market economy Their resultant speed and efficiency are only meaningful in countries with a market economy China39s rapid economic development offered the environmental conditions corresponding to fast food culture Services offered by fast food chains express their full respect for freedom an American value as well as the psychological statement of Chinese open minded ness that yearns to understand and experience the Western lifestyle Two cultures proactively crashed connected and assimilated KFC and McDonald39s use the localization strategy to re express American business culture with profound traditional Chinese cultural emblems catering to local customs on the basis of standardized management PROSPECTUS 3300000 Shares IL TEGHNOLOGY 0 Common Stock This is PLX Technology Inc s initial public offering of common stock Prior to the offering no public market existed for the shares The common stock has been approved for listing on the Nasdaq National Market under the symbol PLXT Investing in the common stock involves risks which are described in the Risk Factors section beginning on page 4 of this prospectus Per Share Total Public Olfering Price 900 29700000 Underwriting Discount 63 2079000 Proceeds before expenses to PLX 837 27621000 The underwriters may also purchase up to an additional 495000 shares at the public offering price less the underwriting discount within 30 days from the date of this prospectus to cover over allotments Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete Any representation to the contrary is a criminal offense Merrill Lynch amp Co NationsBanc Montgomery Securities LLC Wit Capital Corporation The date of this prospectus is April 5 1999 TABLE OF CONTENTS Prospectus Summary Risk Factors Forward Looking Statements Trademarks Information in Prospectus Use of Proceeds Dividend Policy Capitalization Dilution Selected Consolidated Financial Data Management s Discussion and Analysis of Financial Condition and Results of Operations Business Management Transactions Between PLX and its O icers Directors or Signi cant Stockholders Principal Stockholders Description of Capital Stock Shares Eligible for Future Sale Underwriting Legal Matters Experts Where You Can Find More Information Glossary Index to Consolidated Financial Statements INTENTIONALLY LEFT BLANK PROSPECTUS SUMMARY This summary is not complete and does not contain all of the information that may be important to you You should read the entire prospectus carefully including the nancial data and related notes before making an investment decision PLX Technology PLX develops and supplies semiconductor devices and software that accelerate and manage the transfer of data in networking and telecommunications enterprise storage imaging and industrial equipment This equipment is typically controlled by internal computers commonly referred to as embedded systems PLX offers a complete solution consisting of three related types of products semiconductor devices software development kits and hardware design kits Our semiconductor devices simplify the development of data transfer circuits in high performance embedded systems and are compatible with microprocessors such as IBM s PowerPC Motorola s PowerPC Intel s i960 IDT s MIPs and Hitachi s SH Our software development kits and hardware design kits promote sales of our semiconductor devices by lowering customers development costs and by accelerating their ability to bring new products to market Demand for networking telecommunications and other equipment that transmits stores and processes information rapidly has dramatically increased due to the 0 growth of the Internet deployment of high speed networking and proliferation of multimedia Suppliers of this equipment are changing the way they design their products to reduce product development time and to use their scarce engineering resources more ef ciently Until recently these suppliers typically developed their own system components and the connections between the components Now however they are increasingly building their equipment based on industry standard connection methods and they are purchasing components supplied by other companies that comply with these standards By doing so they reduce the time and resources required for product development Consequently there is a growing demand for standards based components that connect systems together such as our semiconductor devices The majority of PLX s products are based on Peripheral Component Interconnect or PCI a standard that is widely used in our markets Our objective is to expand our advantages in data transfer technology by focusing on high growth markets delivering comprehensive solutions including semiconductor devices software development kits and hardware design kits 0 extending our technology advantages by incorporating new functions and technologies driving industry standards and strengthening and expanding our industry relationships PLX Technology Inc was incorporated in California in May 1986 In March 1999 our state of incorporation was changed to Delaware Our principal executive of ce is located at 390 Potrero Avenue Sunnyvale California 94086 and our telephone number at this address is 408 774 9060 We maintain a World Wide Web site address at wwwplxtechcom The reference to this World Wide Web site address does not constitute incorporation by reference of the information contained therein The O 39ering Common stock offered 3300000 shares Common stock outstanding after this offering 21665551 shares1 Use of proceeds We intend to use the offering proceeds for working capital and general corporate purposes Nasdaq National Market symbol 1 Excludes 1500000 shares of common stock reserved for issuance under our 1998 Stock Incentive Plan and 1000000 shares of common stock reserved for issuance under our 1999 Stock Incentive Plan See Description of Capital Stock Authorized and Outstanding Capital Stock and Note 5 to Consolidated Financial Statements Summary Consolidated Financial Data 1994 Consolidated Statement of Operations Data Net revenues 4043 Gross pro t 2238 Income from operations 49 Net income 71 Historical basic net income per share Pro forma basic net income per share1 Historical and pro forma diluted net income per share1 Shares used to compute historical basic net income per share Shares used to compute pro forma basic net income per share1 Shares used to compute historical and pro forma diluted net income per share1 002 000 2848 16653 Consolidated Balance Sheet Data Cash and cash equivalents Working capital Total assets Long term debt Total stockholders equity Year Ended December 31 1995 1996 in thousands except per share data 9316 9813 3805 5287 1016 893 1049 891 036 028 006 005 2897 3137 16768 17287 1997 1998 17534 26276 10558 16605 1991 3383 1924 2766 058 077 016 011 015 3293 3601 17340 17758 18405 December 31 1998 Actual Adjusted 2 in thousands 5638 32559 6116 33037 11766 38687 7760 34681 1 Pro forma information is based on the conversion of all outstanding shares of our preferred stock into shares of common stock 2 As adjusted to re ect the sale of 3300000 shares of our common stock based on an initial public offering price of 900 per share the application of the net proceeds therefrom and the conversion of all outstanding shares of our preferred stock into shares of common stock upon the closing of the offering See Use of Proceeds RISK FACTORS You should carefully consider the following factors as well as other information contained in this prospectus before deciding to invest in shares of the common stock Our Operating Results May Fluctuate Signi cantly Due to Factors Which Are Not Within Our Control Our quarterly operating results have uctuated signi cantly in the past and are expected to uctuate signi cantly in the future based on a number of factors many of which are not in our control Our operating expenses which include product development costs and selling general and administrative expenses are relatively xed in the short term If our revenues are lower than we expect because we sell fewer semiconductor devices delay the release of new products or the announcement of new features or for other reasons we may not be able to quickly reduce our spending in response Other circumstances that can affect our operating results include 0 our ability to develop introduce and market new products and technologies on a timely basis 0 the timing of signi cant orders order cancellations and reschedulings changes in our pricing policies or those of our competitors or suppliers including decreases in unit average selling prices of our products introduction of products and technologies by our competitors shifts in our product mix toward lower margin products 0 the availability of production capacity at the fabrication facilities that manufacture our products purchasing patterns related to the Year 2000 and o the availability and cost of materials to our suppliers These factors are di icult to forecast and these or other factors could adversely affect our business Any shortfall in our revenues would have a direct impact on our business In addition uctuations in our quarterly results could adversely affect the market price of our common stock in a manner unrelated to our long term operating performance Our Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected Revenues Our customers typically perform numerous tests and extensively evaluate our products before incorporating them into their systems The time required for test evaluation and design of our products into the customer s equipment can range from six to twelve months or more It can take an additional six to twelve months or more before a customer commences volume shipments of equipment that incorporates our products Because of this lengthy sales cycle we may experience a delay between the time when we increase expenses for research and development and sales and marketing efforts and the time when we generate higher revenues if any from these expenditures 4