Introduction To Business / Franchise Ownership

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  • 1. Introduction to Business / Franchise Ownership Control Your Destiny… “Always bear in mind that your own resolution to succeed is more Important than any one thing” -Abraham Lincoln-This presentation is intended solely to inform and educate individuals about franchising -- theprocess, benefits, drawbacks and available resources. Only the prospective business owner candetermine if franchising is right for him / her. Prior to buying any franchise or business opportunity, athorough due diligence should be conducted, including consultation with a CPA / Accountant and aFranchise Attorney. Copyright © 2012 All Rights Reserved
  • 2. Franchise Quest…Franchise Search Consultants Larry S. Powell, PresidentFranchise Quest, a franchise search consulting firm that recruitscandidates for a wide variety of franchise / business opportunitiesfrom small to large and startups to nationally recognized.Over 36 years experience encompassing both the corporate andfranchise worlds.Prior to Franchise Quest, the original owner and operator ofHandyman Connection, a home improvement franchise in SanAntonio, TX from 2001 to 2008.Formerly, the Vice President, Human Resources for ThePsychological Corporation / Harcourt Assessment. A graduate of The University of Texas at Austin with a BBA degreein Management.
  • 3. Franchise Quest…Franchise Search Consultants Larry S. Powell, PresidentIn addition to his 25 years in corporate America, Mr. Powell’sexperience has taken him through the “life-cycle” of business /franchise ownership:Involvement with a franchise consultantDetermining business and lifestyle goals, objectives and needsReviewing various franchisesPerforming due diligenceSelecting and buying a franchiseSuccessfully owning and operating a franchise for 6+ years, andgrowing the business to about $1M annual revenueExiting the business through a franchise re-sale
  • 4. Franchise Quest…Franchise Search Consultants Larry S. Powell, President Why am I here today? Outplacement Assistance….another “alternative” Your Options… Be Unemployed Go to School, or other activity Find Other Employment…another job Explore Self-Employment Start an Independent Business Business Opportunity…low-cost-of-entry business Franchise
  • 5. What is Franchising?Franchising is a method of distributing goods orservices to consumers. The franchise system ownsthe right to the trademark of the business. Thefranchisee purchases the right to use the trademarkand operating system.Most people associate the word “franchise” withfast food restaurants. But, there are many moretypes of franchise businesses, including everythingfrom advertising to laundry/dry cleaning, maidservices to printing/copy services, real estate toweight control and many more.
  • 6. What is Franchising?•Franchising is a network of interdependent business relationshipsthat allows a number of people to share:• A brand identification• A successful method of doing business• A proven marketing and distribution systemIn short, franchising is a strategic alliance between groups of peoplewho have specific relationships and responsibilities with a commongoal to dominate markets, i.e., to get and keep more customers thantheir competitors.
  • 7. Legal Factors to be Considered a FranchiseFranchising is defined by state and federal laws as acommercial relationship in which three factors are present: 1. a licensed trademark 2. a prescribed marketing plan 3. the payment of a franchise fee for the right toparticipate in the program.When these three factors exist, the relationship is regulatedas a franchise by state and federal laws.A “Business Opportunity” is similar to a franchise withoutthe restrictions and royalties. This can be an advantagewith SOME industries. Brand recognition would not be afactor.
  • 8. What Is A Franchise?Business in a Box, that:-Includes complete set of instructions… -- Franchisor has worked out the kinks…-- Proven Turnkey Business Model-- Operational Methodology & Systems-- Initial Training & On-going Support-- Location Selection-- Set-up & Build-out-- Hiring & Training Assistance
  • 9. What Is A Franchise?--Marketing Strategy & Implementation--Mentoring & Collaboration-- Group Purchasing Power--Entity Identification-- Rights To Use The Brand, Trademarks & Trade Names
  • 10. Franchise Types• Single Unit Franchise• Multiple Units• Area Developer• Master Franchise• Business Opportunity… “Biz-Op”
  • 11. Categories of FranchisesAccounting/Tax Services Fitness Packaging/Ship/MailAdvertising/Direct Mail Florist Shops Painting ServicesAuto & Truck Rentals Food/Restaurants Paralegal ServicesAutomotive Products/Services Payroll Services Golf Products/ServicesBatteries-Retail & Comm. Pest Control ServicesBeverages: Special Greeting Cards Pet Sales/SuppliesBusiness Brokers Hair Salons & Services PhotographyBusiness/Mgmt Consultants Health Aids & Services Printing/CopyingCampgrounds Home Furnishings Real Estate ServicesCheck Cashing/Financial Services Home Inspection Recreational ServicesChildren’s Services Hotels and Motels Rental Equipment & SuppliesClothing and Shoes Insurance Retail StoresComputer/Electronics/Internet Janitorial Services Security SystemsConstruction Materials Senior Care Jewelry Sign Products & ServicesConsumer Buying ServicesConvenience Stores Laundry & Dry Cleaning Tanning CentersCosmetics Lawn/Garden/Agriculture TelecommunicationsDating Services Maid & Personal Services Transportation ServicesDrug Stores Maintenance Travel AgentsEducational Products/Services Marine Services Vitamin & Mineral StoresEmployment Services Optical Aids & Services Weight Control
  • 12. Well Known FranchisesMcDonald’s Gold’s GymSubway Great Clip’sCurves H& R BlockAlphagraphics Handyman ConnectionServPro Jenny CraigCleaning Authority Kwik CopyBaskin Robbins MAACOBudget Blinds Molly MaidMaui Wowi Money MailerCareMinders Home CareCourtyard by Marriott Express Personnel ServicesLenny’s Sub Shops Papa John’s PizzaFocalPoint Coaching Radio ShackDunkin’ Donuts Sport ClipsFantastic Sams Taco BellFuddruckers Wild Bird Centers of America
  • 13. Established versus Emerging FranchisesMature Franchises:Name RecognitionMore regional and national advertisingMore costly to get inTerritories may be smaller and limited in some marketsMore refined training and supportNewer Franchises:Cutting Edge ConceptsCost-of-entry may be lowerMore flexibilityTerritories may be larger and available in more marketsOpportunity for emerging companies
  • 14. What is a Franchisee? “Frantrepreneur” (fran*tre*pre*neur) n.One possessing the desire to be a businessowner -- without the desire to recreate thewheel -- by following a proven system for thebenefit of personal and professional goals.
  • 15. Are You A Potential Franchisee?What Do Franchisors Look For In a Prospect?
  • 16. Are You A Potential Franchisee?Financial Qualifications…Liquid Capital & Net WorthBusiness & Financial AcumenManagerial SkillsCustomer Service OrientationEnthusiasticEntrepreneurial SpiritWork Hard / SmartTeamwork Oriented…franchises are collaborative workingenvironments. Follow a system.Decisive…make sound decisions within a reasonable time frame
  • 17. Wanted…Military VeteransFranchisors understand Vets have demonstrated: Discipline Teamwork Ability to follow a system Leadership skills Military & Franchises are similar structures, built onsystem methodology & execution Many Franchisors participate in VetFran Program
  • 18. The Frantrepreneur Mentality “I’m in “I have the opportunity to business for learn from the success andmyself, but not failure of others.” by myself”. “I want a ‘bottled’ process for success that I can use in developing my own “Why would I work successful business.” for someone else when I can work for myself and reap the "Why would I spend years and the investment rewards of my required to establish a successful brand when I efforts?" could buy a franchise which provides immediate access to a successful business system and a brand name which others already have made successful?"
  • 19. Franchise Options TYPE: • Office OWNERSHIP: •Traditional retail • Hands-on • Mobile products/services • Passive • Light Industrial • Part-time/full-time •Work from home SCOPE:PRODUCT/SERVICE:• 75 categories - an endless • Single Unit Franchise array of possibilities • Multiple Units• Something to match anyone’s • Master Franchise background, skills and • Area Developer interests
  • 20. Franchise StatisticsFranchise businesses account for about 50% of all retail sales inthe United States.1 out of every 12 business is a franchised business.A new franchised business is opened every 8 minutes of everybusiness day.Franchise businesses employ more than 14 million Americans.There are an estimated 3,000 franchise companies operating inthe U.S. doing business through more than 500,000 retailoutlets.More than 75 industries use franchising to distribute goods andservices to consumers.A 1999 study by The United States Chamber of Commercefound that 86% of franchises opened within the last five yearswere still under the same ownership and 97% of them were stillopen for business.
  • 21. Franchise Statistics (continued)A U.S. department of commerce study conducted from 1971 to1997 showed that during that time less than 5% franchisebusinesses were closed each year. Compare that to a U.S.Small Business Administration study conducted from 1978 to1998, which found that 62% of non-franchised businessesclosed within the first 6 years of their existence due to failure,bankruptcy, etc.Total sales by franchised businesses are projected to exceed$2.3 trillion, this year.In 2000, the median gross annual income, before taxes, offranchisees was in the $75,000 to $124,000 range, with over30% of franchisees earning over $150,000 per year.
  • 22. Franchise Success Rate Franchises have a 90% + success rate. Most people can’t even predict that they can keep their jobs with a 90% certainty.
  • 23. Advantages of Buying a FranchiseOffers the greatest success potential, with the least amount of RISK!Franchisors have a vested interest in your success.The marketplace has already been checked out by the franchisor anddetermined the system to be successful.The franchisor utilizes collective buying power and passes on thediscounts to you.Local and national advertising for the franchise operation as a whole issupplied by the franchisor.Supervision, training programs and consulting are readily available fromthe franchisor.Managerial, operational and accounting systems are in place tofacilitate your success.Ongoing research and product development is provided by thefranchisor.
  • 24. Disadvantages of Buying a FranchiseYou have to pay the franchisor royalties.The contract with the franchisor must be renewed after a certainperiod of time.There is a lack of flexibility because business methods aredictated by the franchisor.The franchisors problems are also your problems.You may be forced to buy products supplied by the franchisorrather than the most cost effective product available.You don’t get to make all of the decisions in how to run yourbusiness.In some ways, owning a franchise is like a cross betweenindependent business ownership and employment.
  • 25. Questions To Ask YourselfWhat are my reasons for wanting a business of my own?Do I have the necessary attributes to be self-employed?Do I have the total support of my spouse / family for buying abusiness?When I find the “right” franchise / business opportunity, am I thetype of individual who will be ready, willing and able to “pull thetrigger” and move forward with a new life?
  • 26. Questions To Ask YourselfHow much capital do you have to invest?How much liquid assets do you have?Are you interested in using 401K / IRA to fund the business?Do you require a specific level of annual income?Are you interested in pursuing a particular field?Are you interested in retail sales, food service, or performing aservice?Do you want a part-time or fulltime opportunity?How many days / hours are you willing to work?
  • 27. Questions To Ask YourselfDo you want to operate the business yourself or hire amanager?Do you want to have employees?Do you want to have inventories?Do you want to have Accounts Receivables?Will franchise ownership be your primary source of income orwill it supplement your current income?Would you be happy operating the business for the next 5-20years?Would you like to own several outlets or only one?
  • 28. Due Diligence… ValidationQuestions…….ask….ask….ask!!! You are the one thatvalidates!The goal is to know what to expect the day you open the doors!Every franchisor is different with how they help you through theprocess. You are that must conduct the due diligence todetermine if the franchise / business concept validates.
  • 29. Due Diligence… ValidationWhen Exploring Business Ownership…Do Your Homework …The best source of information is the existing franchisees /business owners. – Listen carefully and read between the lines in terms of not just what they are saying, but also how they are saying it.Personally, select a reasonable number of existing owners tocall. Do not settle for calling only the ones recommended by thefranchise rep.Don’t make it easy for the franchisor to steer you. If you arelooking for variety in the characteristics of the existingfranchisees, ask the franchisor or your coach for assistance. assistance
  • 30. Due Diligence… ValidationVisit with some franchisees who are struggling. No system hasall their franchisees in perfect alignment all the time, so therewill undoubtedly be a few who are struggling or upset aboutsomething.Remember, one of the primary reasons for making validationcalls is to gather additional facts and information you can use inyour evaluation, but it is also to develop a sense of the cultureand attitudes of the system.Prior to buying any franchise or business opportunity, athorough due diligence should be conducted, includingconsultation with a CPA / Accountant and a Franchise Attorney.
  • 31. FundingConsult with the Franchisor regarding available funding optionsBenetrends…401(k) / IRASBA Loans – Patriot Express Pilot Loan Initiative: http://www.sba.gov/content/express-programs – Other SBA Loan Programs: http://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans
  • 32. Process to Becoming A Franchisee1. Identify Goals; Objectives; & Lifestyle Needs.2. Review Current Financial Position And Future Goals.3. Complete Confidential Questionnaire.4. Teleconference To Discuss Questionnaire.5. Search for Franchises / Business Opportunities.6. Discuss Options That Align With Goals.7. Initial Teleconference With Franchise Rep.8. Receive Franchise Packet & FDD9. Additional Teleconferences / Webinars With Franchise Rep(s).
  • 33. Process to Becoming A Franchisee10. Validation Process…Talk / Visit Franchisees.11.Consult with Attorney & Accountant.12.Visit Franchise Headquarters…Discovery Day.13.Obtain Funding.14.Sign Franchise Agreement15.Obtain Real Estate, if necessary.16.Franchise Initial Training17.Complete Build-out, if necessary18.Local Training19.Open For Business20.On-Going Support
  • 34. Should You Use a Consultant?A Franchise Consultant... will take the time to educate you on the franchise industry will help you define your goals & objectives, so that you don’t waste your energies and time on franchises that are not right for you or that you are not qualified for can provide you valuable insight on franchises that you won’t find on your own will help you present your qualifications to a Franchiser is paid by the Franchisers, but he / she recognizes that this only happens if he / she provides you excellent service and presents to you the right opportunities will take an unbiased approach to helping you achieve your goa ls
  • 35. Franchise Quest … Franchise Search Consultants Larry S. Powell, President Recruit & Match Candidates for Top-Quality Franchises; Business Opportunities [Biz Ops]; Low-cost-of-entry home- based businesses.1. Our goal is NOT to convince you that business ownership is the right thing for you.2. COACH….don’t sell.3. Assist with the various decision-making processes that may lead to business ownership:
  • 36. Franchise Quest…Franchise Search Consultants Larry S. Powell, President Help candidate understand pros & cons of business ownership Edu. Background; Work Exp; Personal Attributes; Interests; Preferred Bus. Model; Lifestyle Needs; Financial Resources Help candidate determine and list those career & personal lifestyle objectives, goals, & needs which he / she wants business to help him / her attain Introduce to appropriate options by identifying franchise / business opportunities that align with those goals Franchise Business Opportunity [Biz Op] Low-cost-of-entry home-based business
  • 37. Remember…A dream is just a dream. A goal is a dreamwith a plan and a deadline!
  • 38. “If you don’t follow your dreams, you’ll be working for someone who did.” -anonymous Larry Powell 210-479-2491 888-479-2491…Outside San Antonio franchisequest@sbcglobal.net www.franchise-quest.comCopyright © 2012 All Rights Reserved