Franchises Options for Today What is Franchising

Franchises Options for Today

What is Franchising? Duplication of successful business model Pairing of 2 entities for the purpose of business expansion Mutually shared goals (increase gross sales, market penetration, and brand expansion) Shared resources and experiences Reduced costs through group buying power

History of Franchising l l The word Franchise comes from old French meaning privilege or freedom. In the middle ages a franchise was a privilege or a right. In 1960, the International Franchise Association was created with the specific intent of uplifting the entire industry. The IFA works closely with the US Congress and the Federal Trade Commission on improving how the industry relates to the franchise owners.

Reasons to Buy a Franchise Buying a franchise can be a life-changing experience. There are many reasons why you should fulfill your dream of becoming your own boss and open a franchise. The following reasons to buy a franchise will help you to understand why it will be a great investment.

Reasons to Buy a Franchise Turnkey Business There are many entrepreneurs that have exactly what it takes to run a successful business but don’t have what it takes to get their business up and running. Whether it be financing, negotiating lease terms or even the confidence it takes to quit their job and start their own business. Buying a franchise eliminates all the hard work: l finding a location l negotiating a lease l hiring reliable contractors l doing everything on-time and within budget

Reasons to Buy a Franchise Proven System in Place l When you buy a franchise you buy a system. All franchises have an already-established system in place that you must follow. l These systems are designed to improve the overall productivity and increase sales of each franchise. l Having a proven system already in place eliminates the guesswork and errors a common business owner would normally face.

Reasons to Buy a Franchise Higher Likelihood of Success l Buying a franchise is very different from starting a mom-and-pop business. l Since there is an already established system in place, there is a higher likelihood of success. l If you follow the system the franchisor has put in place, you should be on your way to running a very successful business.

Reasons to Buy a Franchise Corporate Image and Brand Awareness l If you buy into a franchise system that is already established the corporate image and brand awareness is already recognized. l Customers are usually more comfortable purchasing items they are familiar with and working with companies they already know and trust.

Reasons to Buy a Franchise Easier to Obtain Financing l Lenders are usually very comfortable financing the purchase of a franchise because they already have a proven track record. l Bankers usually look at successful franchise chains as having a lower risk of repayment default and are more likely to loan money based on that premise. l Some franchise systems even provide in-house financing and/or leasing options.

Reasons to Buy a Franchise Training l Most franchise companies offer a 1 -4 week training program that is usually held at their corporate offices or at an actual franchise location. l This is what makes franchises stand out from every other business opportunity. l The franchisor will train you to run your franchise exactly the same way their other franchise locations are run. l This will ensure that you are running your business efficiently and will help to eliminate any common mistakes a new business owner usually faces.

Reasons to Buy a Franchise Ongoing Support l When you buy a franchise you are never alone. l You will always have the support of the franchisor and the support of knowing you are part of a growing family. l You will always be able to pick up the phone and ask questions to the franchisor or even to other franchisees.

Reasons to Buy a Franchise Marketing l There is usually no need to worry about advertising your franchise. l The franchisor usually takes care of handling all of the marketing. l If the franchisor does not handle the marketing, they will have an outline for you to follow and sometimes specific vendors that will have systems in place for you to use.

Reasons to Buy a Franchise Exclusive Territory l When you buy a franchise you are also buying an exclusive territory in which to do business. l Franchisors will only allow a certain amount of franchises to be open within a certain geographical region. l You will be entitled to a certain area and no other franchises (within your franchise system) can be open within that area.

Reasons to Buy a Franchise Own Multiple Locations l Being a part of a franchise system will always offer you more opportunities to grow within the system. l Once you have become a successful franchise, owner the next step is to become a multi-unit franchise owner. After you have one successful franchise open with a great management team you can focus time on opening a second location. l Multi-unit franchise owners manage more than one location and are able to sometimes double their income by taking on more than one location. l Owning multiple franchise locations can be very lucrative.

Future of Franchising Within a decade or less, franchising will comprise over 50% of the retail economy, will employ millions of people, and will enable hundreds of thousands to realize the American dream of successful business ownership.

Franchise Types • Single Unit Franchise • Multiple Units • Area Developer • Master Franchise

Franchise Categories l l l l l l Accounting/Tax Services l Advertising/Direct Mail l Auto & Truck Rentals l Automotive Prod. & Svcs. l Batteries-Retail & Comm. l Beverages: Special l Business Consultants l Business/Mgmt Consultants l Campgrounds l Check Cashing/Fin’l Svcs. l l Children’s Services l Clothing and Shoes Computer/Electronics/Internet l l Construction Mat’ls &Svcs. l Consumer Buying Svcs l Convenience Stores l Cosmetics l Dating Services l Drug Stores l Educational Prod & Svcs. l Employment Svcs. l Fitness l Florist Shops l Food/Restaurants l Golf Eqt, Prod & Svcs l Greeting Cards l Hair Salons & Services l Health Aids & Services l Home Furnishings l Home Inspection l Hotels and Motels l Insurance Janitorial Services l Jewelry l Laundry & Dry Cleaning l Lawn/Garden/Agriculture l Maid & Personal Services l Maintenance l Marine Services Optical Aids & Services l Packaging/Ship/Mail Svcs. Painting Services Paralegal Services Payroll Services Pest Control Services Pet Sales/Supplies & Svcs. Photography Printing/Copying Svcs. Real Estate Services Recreations Svcs. Rental Eqt & Supplies Retail Stores Security Systems Senior Care Sign Products & Services Tanning Centers Telecommunication Svcs Transportation Services Travel Agents Vitamin & Mineral Stores Weight Control

Partial Franchise List l l l The Alternative Board Aussie Pet Mobile Mr. Handyman Maaco Fabulous Floors Closet Factory Villa Fresh Italian Kitchen Sonoma Coffee Cafe Elevation Burger Extreme Pita Maui Wowi Sign. World l l l 1 -800 -Dry. Clean AAMCO Transmissions Ace Hardware Great Clips Planet Beach Bright. Star Healthcare Molly Maid The Maids Business Cards Tomorrow Street Corner News Carpet Network Golf USA

Why Join a Franchise System? l Name recognition in a national brand l Assistance from Experienced Management l Business Planning and start-up Assistance l Lowered Risks Through Proven Business Methods l Established product or service l Group purchasing power l Proven System of Operation

Perceived Disadvantages l l l l Payment of Franchise Fee On-going Royalty Conformity to Standard Operating Procedures Inability to make changes readily Underfinanced, inexperienced, weak franchisor Duration of relationship Dependent upon franchisor’s success

Process from Prospect to Franchisee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Analyze Lifestyle Needs Analyze Business Goals Analyze current financial position and future goals. Help Determine Type of Business Obtain Confidential Questionnaire. Research Applicable Franchises Obtain Franchise Packet & FDD Return Receipt of FDD Speak in-depth with Franchise Interview Existing Franchisees 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Second Interview with Franchise Consult with Attorney & Accountant Visit Franchise Headquarters Enter Into A Franchise Agreement Obtain Real Estate Franchise Initial Training Complete Construction In Store Training Open For Business On-Going Support

Common Franchise Terms Acknowledgement Of Receipt: The last page of an Offering Circular, signed to indicate you received the documents on a certain date. Advertising Fee: A fee paid by the franchisee to the franchisor for corporate advertising expenditures; It is often less then three percent of the franchisee's annual sales and typically paid in addition to the royalty fee. Capital Required: The amount of cash you are required to have available. Earnings Claims: Representations made by franchise companies that their franchisees have achieved specific levels of sales or profitability. Territory: The "territory" granted to you by a franchise company, which restricts the franchisor from establishing any other franchise or company store within your area. Continued…

Common Franchise Terms Franchisor: The person or company that owns or controls the right to grant franchises for a specific "brand". FTC Rule 436: The law passed in 1979 that regulates the franchise industry, and sets the requirement for "disclosure" requirements. Initial Investment: Generally, the initial cash investment required of you to buy and open a franchise. This can include the franchise fee and other initial start-up costs and expenses you may incur, but may not be reflective of your total investment. Liquid Capital: Also known as, liquid assets, quick assets, and realizable assets. Assets held in cash or in something that can be readily turned into cash. Net Worth: Total assets less your total liabilities. Non-Compete Clause: Upon termination, non-renewal, or other sale or transfer, some franchise agreements prohibit you from competing in any way with the franchised company.

Questions to Ask the Franchisor l l l l l An overview of their franchise? How many current franchises ? How many do they expect in next 12 months? Last 12 months? Do they have a Discovery Day? Describe their training and ongoing support Do they provide site selection and lease negotiations Do they provide any Grand Opening support? Ask the current fees: franchise fee, royalty, advertising Are there any other fees, such as territory, training or marketing? Does their FDD provide earnings claims?

How Can A Franchise Broker Help You? l l l Goal Defining. What do you want to accomplish and what franchise can help you get there? Thinking outside the box when considering what type of franchise you should consider. Understanding your financing options. How will fund your new venture? Avoiding “hype”, “short term trends”, and franchises that don’t make sense for you. Staying on track and following a process.

Next Steps What are your next steps?