Franchising – Is It a Strategy That Fits You?70%of All People Have Thought Seriously about Owning Their Own Business. Is it The Right Dream For You?
Common Reasons for Business Ownership Control your own financial freedom Build an asset for future sale Create more control and freedom for your time Fair reward - make money for yourself instead of the company Emotional fulfillment of building your own dream
Common Reasons forBusiness Ownership (continued) Satisfaction and happiness in day-to-day activities Build an asset to pass on to family members Create an opportunity to work with family Remove threat of job loss Replace lost income stream Other?
Franchising – What’s It All About? Franchising is not a business or industry itself Franchising is a business strategy Franchising is a strategy of the Franchisor designed to penetrate and dominate a marketplace Efficient distribution system Hamburger meat, muffler parts, coffee grounds Knowledge, training, software, databases Leverage growth through resources of stakeholders Knowledge, experience, effort, purchasing power, financial Similar goals & unified thinking among participants Strategic-Partnership
Elements of a Franchise Brand - the Franchise name associated with the products or services delivered in a memorable and satisfying experience Operating System – institutionalizes an excellent service delivered in a memorable experience so it can be done over and over again from unit to unit in a consistent manner Support System – helps the Franchisee get better and better at delivering the service in a memorable experience – helps a Franchisee improve their performance Franchisee – the individual motivations or reasons for being a part of a vibrant system
Value of Systems in a Franchise Reduced Risk – Proof of success is in place Operating System – Success Formula has been established for you You don’t have to re-create the wheel – or many wheels Other Franchisees with their ‘feet on the street’ – emulate the best Advice & support from the Franchisor – position of experience Collaboration – Share best and worst practices with similar people Systems continually adjusted, changed, & improved Training systems Sales & marketing strategies and systems Manuals & other documentation Letters, contracts, agreements, documents – all in place Development costs – shared resources Purchasing power Many others…
Entry to a Franchise System Franchise Fee The Franchise Fee is the cost of putting the Franchisee into the business of the Franchisor, not as a partner, but as a participant. Entry fee to the point of the completion of the initial training programs Access to all of the Franchisor’s systems Royalty Fee The Franchisor’s share of the customer’s money generated by each Franchisee using the Franchisor’s systems The oil that makes the engine run Advertising & Marketing Fee Used to build Brand presence to benefit all members Advertising campaigns, marketing campaigns, co-op programs, Search Engine Optimization, Creative Artwork, collateral development costs, etc
Evaluation – Making an Informed Decision System of discovery – two-way exchange of information Step-by-step qualification system should be in place Open & honest exchange of information 30 – 120 days to complete the due diligence process Should never feel pressure to move too quickly yet the information you need must be accessible – usually on a schedule set out by the Franchisor Includes open access to all Franchisees in the system The goal is to feel comfortable to make an informed decision about becoming Strategic-Partners
Franchisor Disclosure – Get All of the Pertinent Information Exchange information on a fair and equitable basis Formal Disclosure Documents No decisions – documents for 14 days Cooling off period – final documents for 7 days Full disclosure of all Franchisees Earnings Claims – most don’t, some do Financial performance data will be obtained from Franchisees
Important Consideration – Exit Strategy How will the business be valued at time of exit? Do the customers/clients carry an ongoing future cash flow value? How will the value be affected by changing demographic conditions? How will the value be affected by changing competitive environment? Franchisor should be willing to discuss
Facing the Fears – Realizing the Dream Common and expected fears – we all have them Fear of change, failure, unknown – perfectly natural Naysayers are everywhere – the ‘fire hose brigade’ Listen to advisors but trust yourself too Face it – feel it – blast past it – the only path to the dream It will never be the perfect time where all the stars line up Opportunity Finances Family Market Conditions Demographics Advisors
Franchise Broker/Consultant Value Delivery of Currencies of Value Money – help avoid wasting your resources pursuing less than optimal matches for you Time – spend my time to help you sort through thousands of Franchise options Security in decision making – help you eliminate systems that don’t fit for you and your characteristics Knowledge – apply my specialized Franchise knowledge and experience for your benefit
Franchise Broker/Consultant Value – continued Provide education about Franchising Interview/Profile/Discuss/Follow up Identify characteristics most important to you Help identify best options for you Match your qualifications to appropriate systems Help with selection of systems to learn about Introduction to appropriate personnel at those Franchisors Act as a buffer between you and Franchisor Help with information exchange process
Changed Results Will OnlyHappen if You Change Activities! Is It Your Time?