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Sonic Franchise

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In 1954, Troy Smith established Sonic as a sole proprietorship under another name and latter went on to start up a partnership with Charlie Patton. There are four types of business ownerships, sole proprietorship, general partnership, franchise, and corporation. What are the differences between the four types of business ownerships? If Sonic had remained a sole proprietorship, would it have grown as large as it is today? What advantages and disadvantages did Sonic go through in each form of business ownership? What makes one eatery franchise more successful than other eatery franchises in the fast food industry? Sole ownership is when no more than one person owns and operates the company they have completed said regarding the business (Nickels 2013). In a sole proprietorship should the company be unsuccessful, the owner is fully responsible and suffers full loss. In a general partnership, both owners are accountable for the running and success of the business. Should the company not succeed, both are responsible for the bills/operating expense of the company.

When it comes to franchising, several different people own franchised businesses but have to abide by the rules set out by the proprietor/creator of the company. If one of the franchises should fail, the company may lose a percentage of money they have been receiving from that store, but only a portion from that particular franchise. The person who franchised, or bought into the company loses what they put into the company to begin their franchised business. Corporations are a whole other story, if they fail, the investors and everyone else involved stand to lose a great deal of money not only from their stocks because they will be worthless, but because the owner/s of the company are not held liable for any of the businesses loses. If Sonic had remained a sole proprietorship, it would not have become as large as it is at this time. They would not have been capable to contain access to the capital needed to grow and expand. They would have been able to grow by a small number of stores; and they would not have been able to grow at the swiftness they did. Sonic went through advantages and disadvantages when they went through each form of ownership.

The advantages of sonic being a sole owned business are the owner enjoyed the benefits of being his own boss, retention of profits, and no special taxes (Nickels 2013). The disadvantages are he had limited finances, unlimited liability, and limited growth potential. With general partnership, the advantages were shared finances, shared liability, and better growth potential. The disadvantages of general partnership were unlimited liability to both partners, division of profits, and difficulty of termination. The advantages Sonic has had with franchise is a name recognized throughout the country, personal ownership, financial advice assisting, and help with management and marketing. The disadvantages of franchising are regulating the managers, restrictions on selling, high start-up fees, and profit sharing. Sonics’ advantages of incorporating are size, separation of ownership from management, ease of ownership, limited liability, and the ability to raise money for investment.

The disadvantages of incorporating are double taxation, extensive paperwork, initial costs, and possible conflict with the board of directors and stockholders. The thing that makes one eatery more successful than other eateries would be, location, marketing, word of mouth, food quality, service, price, and the people representing the company. Location is important because if the restaurant is out of the way, it will be harder to find and less likely to be visited by travelers. Marketing is important because it helps to promote the company. Word of is even better than customary advertising because if you here the food is high quality from someone who has eaten there you are more probable to visit and see for yourself.

Service is important because if you as a customer do not like the service, you will not return and are more likely going to tell others about the poor service you received causing them not to visit the establishment as well. Price is also a factor because there are many more lower income families than higher income out there. Meaning the lower income families can only afford to eat out at certain establishments that offer great food at affordable prices with their families. In conclusion: sonic has been in business since 1954 and has grown from sole ownership into a successful public held corporation. They have been successful in part because of they are able to provide great food at reasonable prices so most people are able to afford to eat out. They have a low overhead because their dinner is your vehicle, so they do not have to worry about the clean up from their customers.


Nickels, (2013) Understand business 10th ed., cp.5, pgs. 134, 117, 119 Video Case (Dec, 7) Sonic is booming!

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