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Evaluating franchises

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A 15minute overview on how to evaluate franchise opportunities

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Evaluating franchises

  1. 1. Evaluating Franchises<br />Presented By<br />Robert Glenister<br />(408) 689-2545<br />robert.esource@comcast.net<br />A 15min overview <br />On how best to <br />Evaluate Franchises<br />
  2. 2. The Quest for the Good Life<br />
  3. 3. What’s driving the interest in self employment? <br />Unemployment = 9.6%California = 12.4%<br />6.3M people have been out of work 6 months or longer9.5M Involuntary part time workers<br />US Bureau of Labor Statistics January 2010<br />
  4. 4. The Definition of Insanity ?<br />
  5. 5. The Definition of Insanity?<br />Doing the same thing over and <br /> over again and expecting a different result. - Albert Einstein<br />
  6. 6. Why Do Independent Businesses Fail?<br />The E Myth Revisited<br /> By Michael E. Gerber.<br />Fatal assumption #1: Doing what you know, love and enjoy will bring success.<br />Fatal assumption #2: By working hard in the business I will be successful<br />Fatal problem: By working ‘in’ the business instead of ‘on’ the business you in essence buy yourself a job and you run out of the time & energy needed to do the most important work of an owner- marketing, promoting and managing the business.<br />
  7. 7. What makes a franchise different?<br />Already successful<br />Systemized business operations<br />Transfer of knowledge and best practices between franchisor and franchisees and franchisee to franchisee<br />Team approach to running a business<br />
  8. 8. WHAT IS A FRANCHISE?<br />A franchise is the agreement or license between two legally independent parties which gives:<br />• a person or group of people (franchisee) the right to market a product or service using the<br /> trademark or trade name of another business (franchisor)<br />• the franchisee the right to market a product or service<br /> using the operating methods of the franchisor<br />• the franchisee the obligation to pay the franchisor fees for these rights<br />• the franchisorthe obligation to provide rights and support to franchisees<br />FRANCHISE AGREEMENT<br />Franchisor:<br />Owns trademark or trade name<br />Provides support:<br />• (sometimes) financing<br />• advertising & marketing<br />• training<br />Receives fees<br />Franchisee:<br />Uses trademark or trade name<br />Expands business with franchisor’s support<br />Pays fees<br />
  9. 9. Fees?<br />Franchise Fee: <br />Typically $15k - $50k<br />One time Payment to join the franchise<br />Royalties: <br />Typically 5-8% of Gross Income<br />Paid Monthly<br />
  10. 10. Broad Industry Perspectives<br />AAccounting/Tax Services Advertising/Direct Mail Automotive Products & ServicesB Beverages – Coffee / Juices <br /> Beauty Care & ServicesBusiness Services Business/Management Consulting CCell Phone Provider (Kiosk)<br /> Check Cashing/Financials Services Children’s Services (Education, Nannies)Clothing & Shoes Convenience Stores Computer/Electronics/Internet Services Construction – Materials, Services and Remodeling Cosmetics <br /> D<br />Disaster / Cleanup Services<br /> Dry CleaningDistribution and Vending – DVD, Ice Cream, Beverages Drug TestingDivorce Resolution ServicesEEducational Products & Services <br /> Elderly Care ServicesEmployment Services Environmental Services Equipment – Commercial Cleaning FFinancial Services Fitness Florist Shops Food - Baked Goods/Donuts/Pastries Food – Candy/Popcorn/Snacks Food – Coffee / Smoothie BarFood – Deli/Sandwiches/Subs/Wraps Food – Ice Cream / Yogurt Food – Pizza Food – Restaurants Food – Specialty Franchise Consulting <br />HHair SalonsHealth Care & Personal Care Services Home FurnishingsHome Inspection <br />Home Restoration / MitigationHotels/Motels JJanitorial & Commercial Cleaning Services JewelryKKids <br />LLawn ServicesLeasing- Equipment MMaid & Residential Cleaning Services Management & Training <br />Massage CenterPPackage Preparation/Shipping/Mail Services Painting Services Payroll Services Pet Services Photography<br />Photo/Video/Document to Digital<br />Pre-employment Screening Services Pressure Washing & Restoration Printing/Copying Services Publications <br />RReal Estate & Services Recreation – Equipment & Supplies Recreation – Exercise & Sports Retail Stores – Women <br />SSecurity Systems & Services Senior Care/Adult Care <br />Skin Care SpasSports & Services Solar Installation<br />TTanning CentersTelecommunication Services Tools & Hardware Transportation Services Travel Agents & Services WWeight Control <br />
  11. 11. What does a Franchise Provide that helps me Succeed?<br /><ul><li>A Proven Revenue Stream and a National brand name
  12. 12. Exclusive territory
  13. 13. In depth training plus on-going 1-2-1 coaching (weekly)
  14. 14. Your first 90 Days (varies) Action Plan to Jumpstart your business
  15. 15. Help to enable you develop and execute your business plan
  16. 16. Leads generated from national web site, 1-800# and possibly national contracts
  17. 17. On-going Marketing analysis
  18. 18. Virtual Office – Providing all your back-office needs
  19. 19. Email and phone support
  20. 20. Assistance with licensing requirements
  21. 21. Camera ready artwork
  22. 22. Pre-start marketing program
  23. 23. Your own web site
  24. 24. Assessment Tools
  25. 25. Operating Manuals</li></li></ul><li>Apart from Size what else would be good to know?<br />Cost<br />Franchisee Satisfaction<br />Average Gross / Net Income<br />Potential for continued growth<br />Franchisee Ratings<br />-Overall quality rating of franchisor - 92%<br />-Would you Recommend franchise to someone else - 94%<br />-How would you grade initial training - 96%<br />-How would you grade opening and launch support - 96%<br />-How would you rate quality of products/services - 93%<br />-How would you grade technical support by franchisor - 94%<br />vs.<br />
  26. 26. How much money do I need?<br />Franchises can range from less than $20k to over $4M with <br />most Home Based in the $50-$100k range. <br />Retail is typically $150k-300k<br />Typically you can borrow up to ¾ of Total Investment through SBA . (Total Investment includes the Franchise Fee + all expected startup costs)<br />Example Startup Costs:<br />Training<br />Computer and specialized software<br />Deposit and first 3 months rent for retail/commercial space <br />Outfitting of retail or commercial space <br />Leasing and outfitting of specialized car, van or truck<br />Initial cost of inventory for first 3 months of business<br />Initial marketing and advertising costs for launching business<br />Business License, Insurance and sundry expenses<br />Wages for staff for first 3 months<br />
  27. 27. Financial Assistance<br />Small Business Administrationwww.sba.gov<br />7 A<br />Community express<br />Benetrends – Self Directed 401k’s<br />www.benetrends.com<br />Peer to Peer Lending Sites<br />www.lendingclub.com/<br />Bay Area Local Finance Specialist:<br />www.michael-ryan.com<br />
  28. 28. Franchising vs. Independent BusinessesWhy is franchising so successful?<br />A proven system<br />Training and ongoing support<br />Being in business for yourself, but not by yourself<br />Win-win relationship … starts with mutual benefits and grows from there<br />
  29. 29. Questions to Ask Yourself<br />Am I willing to follow a system?<br />Am I willing to work hard?<br />Do I have access to startup capital?<br />Can I support myself during the early months?<br />Are family and friends supportive?<br />Will I do whatever it takes to ensure success?<br />Does the business model support my goals?<br />
  30. 30. But what if I fail?<br />Thomas Edison held 1093 patents – most of which proved to be commercial failures.“I have not failed. I've just found 10,000 ways that won't work.”– Edison<br />He did however have one or two successes that more than made up for it !<br />
  31. 31. Recommendations :<br />Richard Y Yang<br /> “Robert was an invaluable resource and help as a business and career coach when I was investigating starting my own business. The best thing I liked about Robert was that he had your interest at heart, and it was never about pushing you into something. It was a great experience working with him.” July 27, 2009<br /> Top qualities: Great Results, Personable, High Integrity <br />Ravi Fernando<br /> “Robert was excellent in coaching me through the franchise purchase process. His unbiased inputs and support throughout made the entire process manageable. Robert stayed in touch even after the transaction and introduced me to business networking to help move my new business forward. He is a great asset to have around during this major career transition …” July 23rd 2009<br /> Top qualities: Great Results, Personable, High Integrity <br />
  32. 32. “I hope you have enjoyed this brief presentation.”<br />“Your success isour only business”<br />Robert Glenister<br />To learn more visit: www.theesource.com/rglenister Phone:(408) 689 2545Email: rglenister@esourcecoach.com<br />

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