How to Find the Right Franchise for You Jerry Pollio 1800.866.826.0103
What is Franchising and Is It for Me?• Most people associate the word “franchise” with fast food restaurants. But there are many more types of franchise businesses, including everything from advertising to automobile repair, printing services to adult care and many more.• Franchising is a network of interdependent business relationships that 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 people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors. Franchising requires the same attributes needed to run any successful business, leadership, passion and willingness to do whatever it takes to succeed!
Franchise Statistics• Franchise businesses account for nearly 50% of all retail sales in the United States.• There are an estimated 5,000 franchise companies operating in the U.S. doing business through nearly 500,000 retail outlets.• A 2009 study by the United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
Franchise Statistics• A U.S. Department of Commerce study conducted from 1971 to 2007 showed that during that time less than 5% franchise business were closed each year.• Total sales by franchised business are projected to reach $1.7 trillion, this year.• 1 out of every 12 business is a franchised business.• In 2008, the median gross annual income, before taxes, of franchises was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year.• 90% of franchise businesses are still operating after 10 years, whereas, 82% of independent businesses have failed according to the U.S. Dept., of Commerce.
Legal Factors to be Considered a FranchiseFranchising is defined by state and federal laws as a commercial relationship in which three factors are present:1. A licensed trademark2. A prescribed marketing plan3. The payment of a franchise fee for the right to participate in the program.When these three factors exist, the relationship is regulated as a franchise by state and federal laws.A “Business Opportunity” is similar to a franchise without the restrictions and royalties. This can be an advantage with SOME industries. Brand recognition would not be a factor.
Advantages of Buying a Franchise In Business for yourself, not by yourself!• Lower Risks with predictable results• Established product or service• Experience of Franchisor (learning curve is diminished)• Group purchasing power• Name recognition with national leverage• Efficiency of operation• Management Assistance• Business Plan• Start-up Assistance• Assistance in Franchising• Proven System of Operation• 70% of Americans prefer to Buy Veteran(www.buyveteran.com)
Disadvantages of Buying a Franchise• Payment of Franchise Fee: “or advantage?”…best rate for business consultant• On-going Royalty: “or advantage?”… paid by customer• Conformity to Standard Operating Procedures• Inability to make changes readily• Underfinanced, inexperienced, weak franchisor• Duration of relationship• Dependent upon franchisor’s success
The E-Myth Revisited by Michael Gerber• The Turn Key RevolutionRight to a Business SystemThe real “product” is the sales technique rather than what you sell• Development Processes of a BusinessStrategic ObjectiveOrganizational StrategyManagement StrategyPeople StrategyMarketing StrategyHere’s a link to a pdf summary on the book: E-Myth Revised
Who Am I• A Franchise Advisor is simply a “matchmaker”. I am licensed with one of the nations most respected franchise advisory firms in the nation with more than 25 years of franchise expertise, resources and industry partnerships.• I take your goals and match them to companies that should meet those goals. (This may mean identifying what your goals and objectives are.)• I reduce your time and aggravation researching franchises….how do you pick?!!• I am objective and unbiased with no sales rhetoric.• I work with over 250 companies that have been screened, analyzed, and reviewed.• My services are paid by the franchise community and at no cost to you! I find the right business for you and you purchase that business, the company pays the SAME if you work directly with them or with me.• I can also help you locate funding options that can save you thousands of dollars.
Business Model versus Business Name• How many employees do you want?• How many days and hours do you want to be “open”• What are your income goals…. Needs?• Do you want a home based business, traditional retail, or mobile products & services?• Are your assets covering the full start up costs or do you want funding?• Do you want one location or many?• Do you want ownership to be hands on, passive, part time, full time?• What are your “must haves” in your business?• What do you feel are your primary strengths and weaknesses?
The Right Fit• Same Company with “like” locations….. How does one have better results than others?• The “Natural” choice for you? How to find it.• The risk factor = the research factor. How do you get the information you need to make a smart franchise decision?• Plan with your “end game “ in mind. Realize that in your ramp up phrase money will be tight so planning and being prepared is critical.• Bottom Line, a franchise purchase is a life changing event when done right it will bring you years of security for you and your family. Done wrong it could ruin your life!
Financial FoundationCan you afford a franchise?– Research process …. Know what you can afford and what your willing to invest before you start lookingIs financing available:– Credit Score? www.creditchecktotal.com. Cost $1.00 no hard inquiry– Use the Franchisor or Consultant referrals– Talk to your BankerFinance Options?– SBA Loans + Vet programs “Patriot Program”– 401K conversions with no penalty or distribution
Franchise Types Single Unit Franchise Multiple Units Area Developer Master FranchiseSome franchise systems will only offer single units while others only area developersopportunities.
Franchise Categories• Account / Tax Services • Florist Shops • Pest Control Services• Advertising / Direct Mail • Food/Restaurants • Pet Sales/ Supplies & Svcs.• Auto & Truck Rentals • Golf Eqt, Prod & Svcs • Photography• Automotive Prod. & Svcs. • Greeting Cards • Printing / Copying Svcs.• Batteries – Retail & Comm. • Hair Salons & Services • Real Estate Services• Beverages: Special • Health Aids & Services • Recreations Svcs.• Business Consultants • Home Furnishings • Rental Eqt & Supplies• Business / Mgmt Consultants • Home Inspection • Retail Stores• Campgrounds • Hotels and Motels • Security Systems• Check Cashing / Fin’l Svcs. • Insurance • Senior Care• Children’s Services • Janitorial Services • Sing Products & Services• Clothing and Shoes • Jewelry • Tanning Centers• Computer / Electronics / Internet • Laundry & Dry cleaning • Telecommunication Svcs.• Construction Mat’ls & Svcs. • Lawn / Garden / Agriculture • Transportation Services• Consumer Buying Svcs • Maid & personal Services • Travel Agents• Convenience Stores • Maintenance • Vitamin & Mineral Stores• Cosmetics • Marine Services • Weight Control• Dating Services • Optical Aids & Services• Drug Stores • Packaging / Ship / Mail Svcs.• Educational Prod & Svcs. • Painting Services• Employment Svcs. • Paralegal Services• Finess • Payroll Services
Partial Franchise List• Maaco • Budget Blinds• Alphagraphics • Nationwide Floor & Window• Closet & Storage Concepts • A-Pro Home Inspections• Kitchen Tune-Up • Fantastic Sams• Tutoring Club • Planet Beach• It’s A Grind • Closet Taylors• Action Coach • 1-800-Dry-Clean• Express Personnel Services • Molly Maid• Global Recruiters Network • Doc Popcorn• Carvel Ice Cream • Crestcom• W.G. Grinders • The Alternative Board• Great Wraps • Aussie Pet Mobile• Maui Wowi • Handyman Matters• FastSigns • Homecare Alliance• Wild Birds of America
Established versus Newer Franchises Established Franchises:1. Name Recognition2. More regional and national advertising3. More costly to get in4. More refined training and support Newer Franchises:1. Cutting Edge Concepts2. More affordable3. Lower cost4. More flexibility5. Opportunity for emerging companies
Process in becoming a Franchisee1. Analyze Lifestyle Needs 15. Obtain Real Estate2. Analyze Business Goals 16. Franchise Initial Training3. Analyze current financial position and future 17. Complete Construction goals 18. In Store Training4. Help determine type of business 19. Open for business5. Obtain confidential questionnaire 20. On-Going support6. Research applicable Franchises7. Obtain Franchise Packet & FDD8. Return Receipt of FDD9. Speak in-depth with Franchise10. Interview existing Franchisees11. Second interview with Franchise12. Consult with Attorney & Accountant13. Visit Franchise Headquarters14. Enter into A Franchise Agreement
Pre-Sale Disclosure – FDD Franchise Disclosure Document1. Description of the franchisor, predecessors and 16. Restrictions on sale of goods and services affiliates 17. Renewal, termination, transfer and dispute2. Identity and business experience of officers and resolution of the franchise directors 18. Endorsements by public figures3. Litigation history 19. Earnings claims4. Bankruptcy history 20. Names, addresses, and telephone numbers of5. Initial franchise fee current and former franchises6. Additional costs and fees 21. Financial statements7. Initial investment 22. Contracts and agreements8. Restrictions on sources of products & services 23. Receipt9. Franchisee’s obligations Exhibits10. Financing arrangements for franchisees • Franchise Agreement11. Franchisor’s obligations • Equipment Lease12. Territorial Protection • Premise Lease13. Trademarks, service marks and trade names • Loan Agreement14. Patents, copyrights & proprietary information • Others15. Franchise requirement to operate the business
Validation Process• Questions…..ask…ask….ask!!! You are the one that validates!• The goal is to know what to expect the day you open the doors!• Every franchisor is different with how they help you through the process…. One is NOT better than the other. You are the one to validate.• Very Important! These successful owners may one day be your business partners so treat them with care and respect as you speak with them. Remember at one time, they too where validating the business just like you!
Questions to ask the Franchisee• How long are you in business?• Would you do it again?• How is corporate support?• Are your earnings meeting your expectations?• What is your biggest challenge?• How long do you plan to stay in this business?• What do you wish you would have known when you started?• What is the best thing about this company? What would you like to change if anything?
Questions to ask the Franchisor• What training will I have?• What short term and long term support is available?• Are there any national accounts? Will I have an opportunity with those accounts in my territory?• How many income streams?• Do you help with projections?• What is expected COGS?• Have there been failures with franchisees? Why?• What is success rate of franchisees?• How are you different than other “like” companies?• Give me your success and failure profile in your system.
Case Study #4• Business to Business Model (B-2-B)
The Future of Franchising You are in the right place at the right time.• People are disenchanted with corporate jobs, because of the dot.com failures and the corporate scandals.• 20-34 year olds are going into business for themselves three times as frequently as 35-55 year olds, many looking at franchising.• The “Baby Boomers” are retiring from their jobs, but are too young to truly retire.• Women are going into business twice the rate of men, and many looking at franchising.• Minorities – another fast growing group going into franchising• Veterans and military personnel are disciplined, focused and well trained with transferable skills that execute well in a successful business system. Many transition and or explore their options for when they will retire from the military.
Frantrepreneur (fran*tre*pre*neur) n.A cross between a traditional entrepreneurand a modern franchise owner. Onepossessing the desire to be a business ownerwithout the desire to recreated the wheel.The ability to follow a proven system for thebenefit of personal and professional goals.
Franchise Phrases “Be in business for yourself, but not by yourself”.“ Learn from the success and failure of others.”“Franchising is a process of bottling success and giving it to other people for use in developing their own successful business.”“Why would you spend years and the investment required to establish a successful brand when you could buy a franchise which would give you immediate access to a successful business system and a brand name which others already have made successful?”“Why work for someone else when you can work for yourself and reap the rewards of your efforts?”
Remember….. A dream is just a dream.A goal is a dream with a plan and a deadline! From Dr. King:Many men die at 22-23 years old but are buried at 60-70!
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