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Franchising and the Entrepreneur
The Franchising Boom!!! <ul><li>Sales of $1 trillion from virtually every product or service imaginable. </li></ul><ul><li...
Franchising <ul><li>Franchising – semi-independent business owners pay fees and royalties to a parent company in exchange ...
Types of Franchising <ul><li>Tradename </li></ul><ul><li>Product distribution </li></ul><ul><li>Pure (Business format) </l...
Why Buy a Franchise? <ul><li>Franchisees benefit from the franchiser’s experience. </li></ul><ul><li>Franchisees get a pro...
Benefits of Franchising <ul><li>Management training and support </li></ul><ul><li>Brand name appeal </li></ul><ul><li>Stan...
Drawbacks of Franchising <ul><li>Franchise fees and profit sharing </li></ul><ul><li>Strict adherence to standardized oper...
Ten Myths of Franchising <ul><li>Franchising is the safest way to go into business because franchises never fail. </li></u...
Ten Myths of Franchising <ul><li>I’ll use 80 percent of the franchiser’s business system, but I’ll improve upon it by subs...
Ten Myths of Franchising <ul><li>Anyone can be a satisfied, successful franchise owner. </li></ul><ul><li>Franchising is t...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team ...
Franchising and the Law <ul><li>Key protection is the Uniform Franchise Offering Circular (UFOC). </li></ul><ul><li>Franch...
Detecting Dishonest Franchisers <ul><li>Claims that the contract is &quot;standard; no need to read it.&quot; </li></ul><u...
Detecting Dishonest Franchisers <ul><li>Promises of future earnings with no documentation. </li></ul><ul><li>High franchis...
Detecting Dishonest Franchisers <ul><li>Claims to be exempt from federal disclosure laws. </li></ul><ul><li>&quot;Get rich...
How to Buy a Franchise <ul><li>Preparation, common sense, and patience are vital ingredients in choosing the right franchi...
What Should You Look For? <ul><li>A unique concept or marketing approach </li></ul><ul><li>Profitability </li></ul><ul><li...
How to Buy a Franchise <ul><li>Preparation, common sense, and patience are vital ingredients in choosing the right franchi...
Franchise Contracts <ul><li>Note clauses covering: </li></ul><ul><li>Termination </li></ul><ul><li>Renewal </li></ul><ul><...
Trends Shaping Franchising <ul><li>International opportunities </li></ul><ul><li>Smaller, nontraditional locations </li></...
Franchising Web Sites <ul><li>Entrepreneur’s  Franchise Zone  http://www.entrepreneur.com/Franchise_Zone/FZ_ FrontDoor /0,...
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SME Chapter 4

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Transcript of "SME Chapter 4"

  1. 1. Franchising and the Entrepreneur
  2. 2. The Franchising Boom!!! <ul><li>Sales of $1 trillion from virtually every product or service imaginable. </li></ul><ul><li>More than 5,000 franchisers operating some 600,000 outlets worldwide. </li></ul><ul><li>Franchise sales account for 50% of total retail sales. </li></ul><ul><li>A new franchise opens somewhere in the world every six-and-a-half minutes, and in the United States, every eight minutes. </li></ul>
  3. 3. Franchising <ul><li>Franchising – semi-independent business owners pay fees and royalties to a parent company in exchange for the right to sell its products and services under the franchiser’s trade name and often to use its business format and system. </li></ul>
  4. 4. Types of Franchising <ul><li>Tradename </li></ul><ul><li>Product distribution </li></ul><ul><li>Pure (Business format) </li></ul>
  5. 5. Why Buy a Franchise? <ul><li>Franchisees benefit from the franchiser’s experience. </li></ul><ul><li>Franchisees get a proven business system and avoid having to learn by trial-and-error. </li></ul><ul><li>Franchisees earn a great deal of satisfaction from their work. </li></ul><ul><li>Before buying, ask: “What can a franchise do for me that I cannot do for myself?” </li></ul>
  6. 6. Benefits of Franchising <ul><li>Management training and support </li></ul><ul><li>Brand name appeal </li></ul><ul><li>Standardized quality of goods and services </li></ul><ul><li>National advertising program </li></ul><ul><li>Financial assistance </li></ul><ul><li>Proven products and business formats </li></ul><ul><li>Centralized buying power </li></ul><ul><li>Site selection and territorial protection </li></ul><ul><li>Greater chance for success </li></ul>
  7. 7. Drawbacks of Franchising <ul><li>Franchise fees and profit sharing </li></ul><ul><li>Strict adherence to standardized operations </li></ul><ul><li>Restrictions on purchasing </li></ul><ul><li>Limited product line </li></ul><ul><li>Unsatisfactory training programs </li></ul><ul><li>Market saturation </li></ul><ul><li>Less freedom </li></ul>
  8. 8. Ten Myths of Franchising <ul><li>Franchising is the safest way to go into business because franchises never fail. </li></ul><ul><li>I’ll be able to open my franchise for less money than the franchiser estimates. </li></ul><ul><li>The bigger the franchise organization, the more successful I’ll be. </li></ul>
  9. 9. Ten Myths of Franchising <ul><li>I’ll use 80 percent of the franchiser’s business system, but I’ll improve upon it by substituting my experience and know-how. </li></ul><ul><li>All franchises are the same. </li></ul><ul><li>I don’t have to be a “hands-on” manager. I can be an absentee owner and be very successful. </li></ul>
  10. 10. Ten Myths of Franchising <ul><li>Anyone can be a satisfied, successful franchise owner. </li></ul><ul><li>Franchising is the cheapest way to get into business for yourself. </li></ul><ul><li>The franchiser will solve my business problems for me; after all, that’s why I pay an on-going royalty. </li></ul><ul><li>Once I open my franchise, I’ll be able to run things the way I want to. </li></ul>
  11. 11. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  12. 12. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  13. 13. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  14. 14. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  15. 15. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  16. 16. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  17. 17. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  18. 18. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  19. 19. What Do Franchisers Look for in a Franchisee? <ul><li>Experienced? </li></ul><ul><li>Hard Working? </li></ul><ul><li>Team Player? </li></ul><ul><li>Leadership & Management Skills? </li></ul><ul><li>Risk Averse? </li></ul><ul><li>Educated? </li></ul><ul><li>Financially Stable? </li></ul><ul><li>A Desire to Succeed? </li></ul>Yes No Maybe
  20. 20. Franchising and the Law <ul><li>Key protection is the Uniform Franchise Offering Circular (UFOC). </li></ul><ul><li>Franchisers must deliver a copy of UFOC before any offer or sale of a franchise. </li></ul><ul><li>The UFOC contains information on 23 topics, including: </li></ul><ul><ul><li>franchiser’s business experience </li></ul></ul><ul><ul><li>franchise fees and costs </li></ul></ul><ul><ul><li>lawsuits involving the franchiser </li></ul></ul>
  21. 21. Detecting Dishonest Franchisers <ul><li>Claims that the contract is &quot;standard; no need to read it.&quot; </li></ul><ul><li>Failure to provide a copy of the required disclosure documents. </li></ul><ul><li>Marginally successful prototype or no prototype. </li></ul><ul><li>Poorly prepared operations manual. </li></ul>
  22. 22. Detecting Dishonest Franchisers <ul><li>Promises of future earnings with no documentation. </li></ul><ul><li>High franchisee turnover or termination rate. </li></ul><ul><li>Unusual amount of litigation by franchisees. </li></ul><ul><li>Attempts to discourage your attorney from evaluating the contract before signing it. </li></ul><ul><li>No written documentation. </li></ul>(Continued)
  23. 23. Detecting Dishonest Franchisers <ul><li>Claims to be exempt from federal disclosure laws. </li></ul><ul><li>&quot;Get rich quick&quot; schemes, promising huge profits with minimal effort. </li></ul><ul><li>Reluctance to provide a list of existing franchisees. </li></ul><ul><li>Evasive, vague answers to your questions. </li></ul>(Continued)
  24. 24. How to Buy a Franchise <ul><li>Preparation, common sense, and patience are vital ingredients in choosing the right franchise. </li></ul><ul><li>Evaluate yourself - What do you like and dislike? </li></ul><ul><li>Research the market. </li></ul><ul><li>Consider your franchise options. </li></ul><ul><li>Get a copy of the franchiser’s Uniform Franchise Offering Circular (UFOC) and study it. </li></ul>
  25. 25. What Should You Look For? <ul><li>A unique concept or marketing approach </li></ul><ul><li>Profitability </li></ul><ul><li>A registered trademark </li></ul><ul><li>A business system that works </li></ul><ul><li>A solid training program </li></ul><ul><li>Affordability </li></ul><ul><li>A positive relationship with franchisees </li></ul>
  26. 26. How to Buy a Franchise <ul><li>Preparation, common sense, and patience are vital ingredients in choosing the right franchise. </li></ul><ul><li>Evaluate yourself - What do you like and dislike? </li></ul><ul><li>Consider your franchise options. </li></ul><ul><li>Get a copy of the franchiser’s Uniform Franchise Offering Circular (UFOC) and study it. </li></ul><ul><li>Talk to existing franchisees. </li></ul><ul><li>Ask the franchiser some tough questions. </li></ul><ul><li>Make your choice. </li></ul>
  27. 27. Franchise Contracts <ul><li>Note clauses covering: </li></ul><ul><li>Termination </li></ul><ul><li>Renewal </li></ul><ul><li>Transfers and Buybacks </li></ul>40% of New Franchisees Sign Contracts Without Reading Them !!! Contract
  28. 28. Trends Shaping Franchising <ul><li>International opportunities </li></ul><ul><li>Smaller, nontraditional locations </li></ul><ul><li>Conversion franchising </li></ul><ul><li>Multiple-unit franchising </li></ul><ul><li>Master franchising </li></ul><ul><li>Piggybacking (Combination franchising) </li></ul><ul><li>Serving aging baby boomers </li></ul>
  29. 29. Franchising Web Sites <ul><li>Entrepreneur’s Franchise Zone http://www.entrepreneur.com/Franchise_Zone/FZ_ FrontDoor /0,4670,,00.html </li></ul><ul><li>Subway Sandwiches and Salads http://www.subway.com/ </li></ul><ul><li>Auntie Anne’s Pretzels http://www.auntieannes.com/ </li></ul>
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