Franchising and the Economy
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Franchising and the Economy



FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3 choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of our ...

FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3 choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of our first consultation. Guaranteed.



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Franchising and the Economy Franchising and the Economy Document Transcript

  • ==== ====FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of ourfirst consultation. Guaranteed. ====A Franchise System can be a very effective way to open and operate a small business, especiallyfor those without a lot of experience in operating and owning their own business. There are manyadvantages in using a Franchise System, such as, turn-key operations, marketing and businessplanning; large corporate support; lower learning curve; established accounting, cost control andmanagement systems; brand identification; training programs; national and regional advertising;customer service programs; market trend responsiveness; supplier and vendor discounts; amongothers. However successful Franchise Systems are expensive. The fees / costs consist of afranchise fee, royalty fees and start-up costs. So it is very important to have a solid due diligenceprocess in place to determine if a particular Franchise Opportunity is right for you, and whether thecosts to establish and run the franchise match the effectiveness of the Franchisers PackageOffering.TYPES OF FRANCHISING SYSTEMSProduct / Service and Trademark FranchisingThis is an arrangement which the franchisee is granted the right to sell a well recognized brand.Most franchisees concentrate on one franchisers product/ service line, identifying their businesswith the franchise. Examples include: Automobile Dealerships, Gas Stations, Soft Drink Bottlers,etc. The franchiser exercises little control over the franchisees business, with the product/ serviceintegrity being the biggest concern of the franchiser.- Structure and Responsibilities-- Franchiser provides a Standardized Product-- Franchisee Pays Franchise Fees and Responsibilities include:* Marketing* Training* Control System* Operating System* Accounting System* Building, Equipment, SignageBusiness Format Franchising
  • Franchisee is granted the right to use a turn-key marketing system, with substantial assistanceand guidance from the franchiser. Types of franchises include Restaurants, Retail, Hotels,Business Services; Automotive Products, Parts and Services; Convenience Stores; EntertainmentCenters and so on.- Structure and Responsibilities-- Franchiser provides:* Building Plans* Equipment & Signage* Marketing System* Business Plan* Operating System* Training Personnel* Accounting System* Control Systems-- Franchisee provides:* Fees* Compliance* ReportingHOW TO DETERMINE IF A FRANCHISE IS RIGHT FOR YOUFollow a Franchise Analysis Checklist-- About The Franchise- Has your attorney approved the franchise contract?- What legal grey areas have been identified?- Will you have exclusive territory?- Does the franchiser work with any other franchise handling similar products and services?- What are the Franchise Contract termination penalties?- If you sell your franchise, will you be compensated for goodwill?-- The Franchiser- What is the franchisers number one focus?- How have franchisees in the past run into trouble? Difficulties?
  • - What skills franchisees need most?- How are conflicts resolved?- Request the bios of Top Management. Do they have entrepreneurial backgrounds?- Do the franchisers earnings claims differ from their Franchiser Disclosure (FDD)?- Has the Franchiser executed detailed due diligence on your qualifications?- How many years has the Franchiser been operating?- Does the franchiser have a reputation among the franchisees, competitors and business worldfor honesty, integrity, accountability and fair dealing?- Has the franchiser shown you certified and audited financials on franchisees in your region andarea which you can validate?- Does the franchiser provide Executive Management and Personnel Training Programs?- Does the franchiser provide any Capital or Credit?- What merchandising Programs and Training does the franchise offer?- Will the franchiser assist with site location?- Does the franchiser have adequate financing to implement its Franchisee Plan?- Does the Franchiser have a highly trained and experienced management team?- What can the Franchiser bring to the table which you cant adeptly do yourself?- Has the franchiser complied with State Laws in the past? What State Laws are in place regardingFranchise Sales?-- The Franchisee- How much Equity Capital will you need to:- Purchase the Franchise?- Operate until Break-Even?-Where will you get the Equity Capital?- Are you prepared to give up some independence for the advantages offered by the Franchiser?- Do you believe you have the qualifications to succeed as a franchisee? What other Personnel
  • resources can you provide?- Are you prepared to spend a majority of your business life with this franchiser?-- The Market- Does an adequate market exist in your area?- Will the market support the price level of the franchisers products and services?- What are the population demographic trends for your territory over the next 5 years?- What will be the demand for your product and service in 5 years?- What is the non-franchise and related franchise competition in your territory and region?EXAMINE FRANCHISE OPPORTUNITIES CLOSELY- Determine which franchises are growing fastest.- Research market growth possibilities.- Consult Entrepreneur Magazine for its comprehensive Franchise 500 Listings.- Utilize the U.S. Commerce Departments Franchise Opportunity Handbook, which is publishedannually.- Contact the International Franchise Association for assistance.Determine What the Franchise Can Do for YouTYPICAL FRANCHISER SERVICES- Start-up help, to include market analysis, site location, financial advice; building and equipmentdesign and purchase.- Successful Operational System.- Accounting and Cost Control System.- Monthly operating results support; performance standards; financial auditing; franchisee financialcomparative analysis.- Financial Assistance: land, building, equipment, inventory and working capital.- Site purchase assistance.- Standardized Construction, Design and Signage.
  • - Training Programs.- National and Regional Advertising Program.- Brand Recognition Promotion.- Customer Services Standards and Program.- Responsiveness to market changes.- Supplier discounting via large volume ordering.FRANCHISE DUE DILIGENCEExamine more than one franchise and compare / contrast through a standardized checklist (seeprevious section). Investigate franchises in the same line of business.SPEAK WITH EXISTING FRANCHISEES- Contact several franchise owners listed in the FDD, as well as, not referenced by the Franchiserto solicit their experiences.- Seek out franchisees that have been in the business over 5 years.- Talk with experienced franchisees about what to expect during the first year of operation- thetypical success or failure period for a franchise.- Ask franchisees to share their Business Plan with you. This gives you an inside track on theoperational and planning expectations for a typical franchise, along with keys to success.- Ask franchisees what the Franchiser does to justify all the fees charged.- Determine how well prepared franchisees were when opening the franchise. Surprises?Franchiser weaknesses?- How effective are the Marketing, Promotion, Branding and Advertising Programs? Do they bringthe right customer to franchisees?- Determine the real financial numbers. How much to open a franchise? How quickly a franchisestarted making money? Get the real story and compare it to the Franchisers disclosure todetermine credibility.- Do your research and homework prior to meeting with Franchisees so you dont waste their timeand you appear serious.- Make a good, professional impression on franchisees as they often will report their impressionsto the Franchiser.
  • -Understand where the franchisee is coming from: i.e. Someone close to your territory may giveyou faulty information if he feels competitively threatened. Or, a franchisee may overstate his/ hersuccess.- If allowed by the FDD, consider a Joint Venture with an experienced Franchisee. An 80/20relationship can make a lot of sense to both the new and experienced franchisees in a proximateregion or area.- Try to spend an entire day with each Franchisee. This is the only way to get a true fell for thefranchise and determine why the franchisee is successful (or conversely, why he/ she is blowingsmoke). Build a relationship with franchisees, and you will be more apt to receive honest, diligentand detailed feedback.- Ask franchisees if the franchiser encourages the franchisee to share feedback, ideas, successes,failures and whether these experiences get incorporated in the field.- Is the franchisee happy with their life post franchise opening? Is the business enjoyable?- For more ways to get a franchisee to open up to you, visit Entrepreneur.comSEEK PROFESSIONAL ADVICE- Franchise Attorney and Accountant- Franchising Consultant- Business Consultant- Finance ConsultantUNDERSTAND YOUR LEGAL AND EHTICAL RESPONSIBILITIES- The International Franchise Association serves Franchisers in more than 50 countries and has acode of Franchisers Ethics and Obligations to Franchisees.- Franchiser members pledge to comply with all laws and make complete, accurate, non-misleading disclosure statements and documents.- Franchiser members pledge to only accept franchisees that meet prescribed qualifications.- Understand your rights if the Franchiser attempts to buy back the franchise.- Issues to explore:-- Captive Supplier Pricing-- Inadequate Service-- Slashing Support Services-- Fraud-- City and State Laws & Regulations regarding Franchises
  • Frank Goley is a business consultant, business turnaround consultant and business coach forABC Business Consulting. He is an expert in developing, writing and implementing businessplans, business funding plans, marketing plans, strategic plans and business turnaround plans. Healso offers complete solution business consulting, business turnaround consulting, and web SEO,marketing and development consulting. Frank is author of a business plan book, TheComprehensive Business Plan Workbook - A Step by Step Guide to Effective Business Planning,and he writes the Business Success Strategies Blog.Article Source: ====FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of ourfirst consultation. Guaranteed. ====