The Virginia Department of Business Assistance partnered with the City of Roanoke, Roanoke County, Virginia Western Community College, Roanoke Regional Partnership and Roanoke Regional Small Business Development Center to conduct the 5th Entrepreneur Express Workshop with a special section on franchising.
2. Small Business Impact – U.S.
• Represent 99.7% all employer firms
• Employ ½ of all private sector employees
• Pay 44% of total U.S. Private Payroll
• Generate 64% of net new jobs over past 15 years
• Hire 40% of high tech workers
• Are 52% home-based and 2% franchises
Source: U.S. Dept. of Commerce & U.S. Dept.
of Labor
3. Small Business
in Virginia
Small Businesses constitute
99% of all Virginia
businesses.
Small Businesses create
over 60-80% of all new
jobs.
Small Businesses account
for half of the
Commonwealth of Virginia’s
contribution to the U.S.
Gross Domestic Product - a
whopping $160 billion.
Virginia is for Business Lovers
4. Virginia is for Business Lovers
• Virginia ranked #1 state for business by
Forbes.com last four years.
• Ranked #1 most business friendly state by
Pollina Corporate Real Estate, Inc. last two
years.
• Named #1 best states for business by CNBC.
Ask VBIC = 866-
248-8814
5. How to Start and
Franchise
Operate a Business
Presented by: Tom Tanner
Roanoke Regional Small Business Development Center
18. U.S. Small Business Administration
SBA’s Role in providing Financial assistance
• SBA does NOT provide grants
• SBA does NOT make DIRECT loans
• SBA DOES PROVIDE:
Loan Guaranty on loans made directly by banks
with the SBA’s backing.
of 12
19. Financial Assistance
SBA General Eligibility Criteria
♦ Must be for profit
Not engaged in lending, real-estate development,
investments or speculation
♦ Must have a sound business purpose
♦ Good Credit www.annualcreditreport.com
♦ REASONABLE Equity Investment
of 12
20. U.S. Small Business Administration
• 7(a) Loan Program
♦ Express Loans – up to $350,000
♦ Patriot Express – up to $500,000
♦ Term Loans – up to $2,000,000
• 504 Loan Program
♦ Real Estate and Fixed Assets
• Micro-Loan Program
♦ Up to $35,000
♦ Handled locally by Business Seed (TAP)
24. Local SBDC Office
Roanoke Regional Small
Business Development Center
210 South Jefferson Street
Roanoke, VA 24011
540-983-0717
www.rrsbdc.org
www.sba.gov
26. The Virginia Department
of Business Assistance
VDBA supports economic development in the
Commonwealth by working with new and existing
businesses to provide business and economic
development communities with:
• workforce incentives
• financing
• business information and counseling
• state procurement assistance
• incubator counseling and
• educational opportunities
27. Formula f o r S ucc e s s
n
ation for decisio
- Critical inform
making
ful
- Well tr ained and plenti
workforce
cture
- Approp riate capital stru
Ask VBIC = 866-
248-8814
28. Business Information Services
To help businesses get started and to grow.
Formation Assistance
Virginia Business Information Center (VBIC) 1-866-248-8814
Bridges the 26 state agencies, over 100 programs and over 300 forms that
may touch a Virginia business
Virginia Central Business Portal (www.business.virginia.gov)
Covers registration, taxation, licensing
Interactive Business Plan CD
5 Step process to a business plan
Entrepreneur Express Events
100 Events – 5,000 Trained
29. Virginia’s Business One Stop
Are you starting a business?
Virginia’s Business One Stop system can help
Winner of the you determine your business formation requirements and can
2009 pre-fill your business registration forms.
Governor's
Technology
Visit http://www.virginia.gov/bos/index.html to
Awards
access the Business One Stop System.
Create a Business One Stop account.
Answer a few brief questions about your business.
Receive a list of action items and pre-filled business
registration forms.
Questions? Contact the Virginia Business
Information Center
1-866-248-8814 (804) 371-0438
vbic@vdba.virginia.gov
31. Entrepreneur Workshops
• Launched October 2006
• Partnership with Service
Providers and localities
• Provide information on
available resources to
start and grow a
business
• Statewide Program –
Over 7,500 reached
• Free – ½ Day Session
• www.vastartup.org
32. Growing Your $ales Workshops
Business Sales Growth Program
Market Research and Expansion
Financing
Growth Management
Partnered events for SWAM certification and
eVA registration
Networking of businesses and decision-
makers
33. Growing Your $ales - State
Governor’s Executive
Order 33
$5 billion market
Access to buyers from 171
state agencies
Additional $5 billion from local
governments
575 localities using eVA
system.
Small Business Goal – 40%
Over 41,490 registered
suppliers
Over 13,065 participating
buyers
Ask VBIC = 866-
248-8814
35. One–on-One Counseling
Sessions
• Need Based:
– Accessing New Markets/Sales Growth
– Tailored Sales Development Solutions
– Financing Resources
To schedule an appointment, contact:
Sandy Ratliff, Business Services Manager
276-676-3768
Email: sandy.ratliff@vdba.virginia.gov
36. Virginia Jobs
Investment Program
• Workforce recruiting and training
– Create minimum 25 net new jobs within 12 months and
capital investment of at least $1,000,000
– Minimum entry-level wage of $10.00/hr required. Only full-
time jobs are eligible.
• Small business workforce recruiting and
training
– 250 employees or less, hiring at least 5 new full time
employees within 12 months of operation and capital
investment of at least $100,000
– Minimum entry-level wage of $10.00/hr required. Only full-
time jobs are eligible.
• Retraining
– Small businesses that are retooling and installing new
technologies
– Company must retrain minimum 10 full-time employees.
37. Financing Programs
• Direct Lending: In partnership with banks
and other lenders, we provide direct loans in
economic development transactions. We also
provide direct loans under specific programs
designed to promote environmental
stewardship and assist licensed daycare
centers and family home providers.
• Indirect Lending: We provide loan
guarantees or other types of credit
enhancements to commercial banks in order to
increase access to capital for businesses.
• Conduit Financing: We are the statewide
conduit issuer of tax-exempt industrial
development bonds for manufacturers and
501c3 organizations.
38. The VSBFA Does Not Give…
• Grants
• Loans or guaranties of loans without
collateral
• Loans or guaranties of loans without
personal guaranties from all significant
owners
39. “Counselors to America’s Small Business”
Live Your Dream. SCORE Can Help.
SCORE is a national nonprofit association.
SCORE’s mission is to provide small
business counseling and training to help
America’s entrepreneurs succeed.
Local business workshops and seminars
Face-to-face counseling in 389 offices
Online counseling www.score.org
Free and confidential business advice
for entrepreneurs
40. Virginia Business Incubator
– 9 Available in Southwest Virginia
– 30 Within Commonwealth
– Business Incubator Benefits
• Facility designed to assist businesses to
become established and sustainable
• Benefits
– Shared premises and business
services
– Business advice and mentoring
assistance
– More details - http://www.vbia.org/
41. Business Incubator
Commercial Kitchen
Light Manufacturing Space
Shared Amenities
42. Virginia Tourism
Corporation
• More than 55 million annual visitors
• $18.7 billion in economic impact
• 210,000 employed in tourism businesses
• $4.3 billion salaries & payroll Visit www.vatc.org
• Tax revenue generated from domestic travelers
reached $2.4 billion
– $1.2 billion in federal taxes
– $529.2 million in local taxes
– $731.6 million in state taxes
• VTC Tourism Development Division:
– Marketing Plans
– Business Plans
– Research
43. OTHER AVAILABLE RESOURCES
• Virginia Department of Labor –
Apprenticeship Program
– Combination of on-the-job training and
classroom instruction.
– Purpose = Company have skilled workforce and
reduce turnover.
– http://www.doli.virginia.gov
• Virginia Department of Agriculture &
Consumer Affairs
– Virginia’s Finest Trademark = Marketing
program that promotes foods and foods
products grown in Virginia.
– Facilitates expansion of agricultural businesses.
44. OTHER AVAILABLE RESOURCES
• Virginia Economic Bridge, Inc.
– Non-profit organization to promote the economic vitality
of SWVA and the Commonwealth.
– Virginia’s Business Pipeline – Online
searchable database of more than 23,000
Virginia based companies, business to business
marketing & RFP resource
www.VirginiaBusiness.org
– Virginia’s Linked Workforce Showcase –
Designed to create business partnerships
yielding contracts between SWVA and Northern
Virginia by connecting companies in specific
industry sectors.
www.LinkedWorkforceShowcase.org
45. Starting and Growing a Business
• Business Formation Assistance
– Small Business Development Center Network =
www.virginiasbdc.org
– SCORE = www.score.org
– Virginia Business Information Center = 866-
248-8814
– Virginia Central Business Portal =
www.business.virginia.gov
– Virginia Business Incubator Association =
http://www.vbia.org/
46. Marketing Resources
• SCORE = www.score.org
• Virginia Tourism Corporation = www.vatc.org
• Virginia Economic Bridge, Inc. =
www.virginiabusiness.org
• Virginia Department of Agriculture – Virginia’s
Finest Trademark = www.vdacs.virginia.gov
47. If you always do what you’ve always done,
You will always get what you’ve always got!
48. Lets CONNECT at:
Sandy Ratliff
Virginia Department of Business Assistance
276-676-3768
sandy.ratliff@vdba.virginia.gov
Online:
Twitter: http://twitter.com/sandyratliff
Facebook: http://www.facebook.com/sandy.ratliff
LinkedIn - http://www.linkedin.com/in/sandyratliff
49. Top Ten Things To Do
Before Approaching
A Lender
Harold McLeod
Roanoke President
51. 1. Be Prepared to Tell Your Story
Why is your Business successful and what will
sustain it’s success.
Have a ‘Business Plan’.
Know how you compare to industry / peer
groups and be able to articulate this and any
significant deviations.
52. 2. Introduce Your Management Team
Who is the management team, and what are
their roles?
Who makes the business decisions, and how are
they made?
Do you have a management succession plan?
Who will manage the banking relationship?
53. 3. Know How Much You Need
To Borrow and Why
What is truly driving the need to borrow?
What is your source of repayment, and what
collateral is available if needed?
Know the limitations of your capacity to borrow.
Debt Service Coverage
Leverage
Collateral
54. 4. Get Your Financial House in Order
Obtain the assistance of a reputable CPA, if one
is not already in place and/or hire a dedicated
bookkeeper or CFO, if warranted.
Internal Accounting Systems (general ledger,
A/R and A/P agings, inventory tracking,
contracts-in-progress report, etc).
Clear Credit Bureaus.
55. 5. Understand Your Internal / External Historical
Cash Flow Sources
Understand your company’s historical Cash
Flow.
Prepare a projected 12-month cash flow
statement using “most likely” and “worst case”
scenarios.
Does your company / stockholders have
alternative sources of funds that are available,
should the need arise?
56. 6. Prepare A Capital Expenditure Budget
Prepare a capital expenditure budget for at least
the next 12 months.
Identify your ongoing equipment needs, the
anticipated timing, and how you plan to pay for
the purchases.
You should also indicate if this is routine
replacement or planned expansion.
57. 7. Know What You Owe
Know what sums you presently owe other
institutions and what approximate levels of
operating deposits you maintain.
Be prepared to discuss the terms and conditions
of your other borrowing arrangements, to include
interest rates, scheduled payments, collateral,
and personal guarantees.
58. 8. Expect to Provide the Following as
Part of your Credit Request Package
Completed loan Application and Cover Letter
addressing the need for bank financing and
sources of repayment.
3 years business and personal financial
statements and tax returns.
Listing of terms, commitments, and outstandings
on existing loans and lines of credit.
59. There’s more….….
Recent Interim Financial Statement – especially if 6
months from FYE.
Projected Cash Flow Statement covering the next
12 months.
Accounts Receivable and Accounts Payable
Agings.
For Contractors, a work-in-progress report.
Brief History of the Company.
Resumes on all key Management.
60. 9. The Unmentionables
If you’ve ever filed personal or business
bankruptcy, had unsatisfactory personal credit
reports, or incurred any company operating loss
during the last 3 years, be prepared to explain in
detail and offer mitigating arguments.
Also be prepared to discuss if you are a party to
any lawsuits (as plaintiff or defendant).
61. 10. Be Prepared For The Meeting
The meeting with the banker should include your
Senior Management Team, your CPA, and be
conducted at your place of business.
Allocate sufficient time to discuss your business
plan, credit request, and conduct a plant tour
(a picture is worth a thousand words).
62. 1. Be Prepared to Tell Your Story
2. An Introduction to Your Management Team
3. Know How Much You Need To Borrow and
Why
4. Get Your Financial House In Order
5. Understand Your Internal/External
Historical Cash Flow Sources
6. Prepare A Capital Expenditure Budget
7. Know What You Owe
8. Complete Credit Request Package
9. The Unmentionables
10. Be Prepared For The Meeting
65. Michael E. Lind
• More than 20 years in corporate
world with Fortune 500 company and
spinoff from same firm
• Joined FranNet in 2009 after
evaluating other franchise
opportunities
• MBA, Averett University
• BS, Virginia Commonwealth University
• Member:
– Business Network International
– Greater Richmond Chamber
– MENSA
– The Venture Forum
– The Virginia Career Network
66. Who is FranNet?
• International Franchise Consulting
Firm in business over 20 years
• 70 Offices in North America,
Europe, Asia
• Worked with the SBA since 1987
• We match folks who want to be in
business with a franchise that
meets their needs.
• Clients pay no fee for our services
71. Create a Start‐Up
Advantages Disadvantages
• Total control • Must create systems
• Make all decisions • No training or support
• Keep all profits • Fewer financing options
• Biggest upside • Time to breakeven
• Highest failure rate
72. Buy an Existing Business
Advantages Disadvantages
• Cash flow & good will • What is the actual cash
• Actual historical results flow?
• Attractive to lenders • What is the good will?
• Established location & • Hidden seller motives
customer base • Employee defection
• Employees in place • Higher Debt Service
• Systems may be in place
• Training and support?
• Owner financing
73. Buy A Franchise
Advantages Disadvantages
• Systems provided • Forfeit some control
• Training and support • Revenue is shared
• Record of success
• Faster start‐up time
• Growth path
• Reduce risk
76. Beware of Statistics
• Big franchisors skewed the percentages
because they had few failures
• Not all units are still run by the founder
• There are no average franchises
• You should only care about your success
• Make sure the franchise is a great fit for
you and your business and personal goals
77. About Franchising
• Understanding Basic Franchise Terminology
– What is a franchise?
– What is a franchise disclosure document (FDD)?
• Evaluating Franchise Opportunities
– What is your reality?
– What is the best franchise opportunity?
• Avoiding Pitfalls
– Planning
– Due diligence
79. What is a franchise?
• A franchisor is a company that grants
(sells) the right to use its name and
trademarks, offer its product or service
and use its business system
• A franchisee is a businessperson who
buys the right to use a name and
trademarks, offer products and services
and use a business system
80. What is the FDD?
• The Franchise Disclosure Document
(FDD) is an extensive document a
franchisor must present to any
prospective franchisee disclosing certain
information in compliance with the
Federal Trade Commission’s standards
• The source of information for the FDD is
the franchisor
81. What is the FDD?
The FDD covers 23 areas including:
• Franchisor information • Business restrictions
• Business experience • Franchisee’s obligations
• Litigation history • Franchisor’s obligations
• Bankruptcy • List of franchisees
• Initial franchise fee • Territory
• Other fees • Earnings claims
• Initial investment • Renewal/Termination
• Term • Dispute resolution
82. Other Terms
• The franchise fee is the non‐refundable
purchase of the right to use the franchisor’s
name and trademarks, offer its product or
service and use its business system
• A royalty is a percentage of your revenue paid
to the franchisor for the duration of your
business relationship
83. Other Terms
• Other fees may include a percentage of your
revenue paid to the franchisor for:
– Advertising/Marketing
– Technology
• A renewal fee is the fee paid at the end of the
term of the franchise agreement to sign a new
agreement
84. Other Terms
• A territory is the area where you will conduct
your business.
• An exclusive territory is the area where you,
and only you, will have the right to represent
your franchise concept.
• Typically territories are defined geographically
(zip codes) using various demographics
(population, businesses)
86. The Question
What is the best
franchise opportunity?
87. The Answer
• The one that:
– Fits the role you want to have in a business
– Requires the resources you have to invest
– Fills the demand for a “need” and not a “want”
– Meets your business goals
– Meets your personal goals
• There is neither a “one size fits all” nor a
perfect, risk‐free franchise opportunity
98. Franchising Fact #4:
Total Investment Percent
Under $100k $100 ‐ 250k
$250k ‐ $500k Over 500k
Under $100k 52.5% 6%
9%
$100 to $250k 32.7%
$250 to $500k 9.2% 33% 52%
Over $500k 5.6%
Franchise Times Magazine Survey,
Franchising is All Right, Thank You
103. Avoiding Pitfalls
• Planning
– Know what you have
• Skills, experience, training
• Financial resources
– Know what you want
• Separate the function of the business from the function of the
business owner
• Create a model of the business you want
– Know your strategies
• Short term
• Long term
• Exit
104. Avoiding Pitfalls
• Due Diligence
– Talk with franchisors
– Review the FDD
– Validate with franchisees
– Visit the franchisors
– Consult with professional advisors
• Accountant
• Franchise attorney
105. Franchise Selection
Business
Model Do not rush through the discovery and
due diligence tasks as these are crucial
Due to finding the concept right for you.
Diligence
Discovery
No
Financing
Great
fit?
Yes Launch
Planning
111. Franchises Are Not
All the Same
• Many Units versus Fewer Units
• Older, well established versus Newer
• Structured versus Flexible Systems
• Expensive versus Inexpensive
112. Define Your Unique
Business Model
Identify your:
• Business preferences
• Business goals
• Personal goals
• Core competencies
113. DefineYour Business
Model
Business Preferences
• Employees
• Budget
• Business environment
• Full or Part‐time & Hours
• Number of units
• Type of customers
118. What does a great fit look like?
Does it have room for growth?
Can I develop a strategic market advantage?
Is it in a stable, not fad driven industry?
Can it meet my financial and personal goals?
Do I have the support of my family?
NEVER settle for something that does not fit your business model!
125. Read!
• Read the Franchise Agreement
– Understand how the agreement impacts your
business model
– Understand negotiation is very unlikely
• Read the Franchise Disclosure Document
– Use as a starting point for a business plan
– Understand clearly any earnings claims
– Validate with franchisees
128. What About The Economy?
Growing markets driven by demographics
• Residential Repairs & Cleaning
• Senior Care
Essential services
• Automotive
• Hair Care
• Damage Restoration
Business that help other small businesses thrive
• Business Coaching
• Expense Analysis
• Sales Training
136. Entrepreneurial Panel Discussion
• Chris Head (Home Instead Senior Care) = 540-537-1277
chris.head@homeinstead.com
• Scott Fleming (CertaPro Painters) = 540-819-6473
scottfle@gmail.com
• Jamie Davis (Donatos Pizza) = 614-416-7772
davis@donatos.com
• Mike Pietrzyk (Firehouse Subs) = 540-890-8962
mpietrzyk@firehousesubs.com
137. Survey Completions
Please take a moment to complete our survey!
Ask VBIC = 866-248-8814
138. CONTACTS
• Sandy Ratliff, Virginia Department of Business Assistance
= 276-676-3768 or VBIC = 866-248-8814
• Tom Tanner, Roanoke SBDC = 540-983-0217
• Randy Rose, Virginia Tourism Corporation = 276-988-
6067
• Jill Loope, County of Roanoke = 540-772-2124
• Lindsay Hurt, City of Roanoke = 540-853-5405
• Harold McLeod, Wachovia = 540-563-7675
• Michael Lind, FranNet = 804-363-3217
• John Hunter, SCORE = 540-857-2834