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Franchise Sales for the Established Franchisor

Mark Liston, CFE Director New Franchise Development – Valpak

Jeffrey Bevis, CFEExecutive Vice President – Comfort Keepers

Tim EvankovichPresident – The Cleaning Authority

February 26, 200710:15 a.m. – 11:45 a.m.

• Learn how resales can reenergize your company - Tim Evankovich

• Consider thinking differently about smaller markets – Mark Liston

• Structuring a sales department for a mature franchise company – Jeff Bevis

Goals of this program

Energizing Your Company Through

Resale’s

Tim Evankovich, PresidentThe Cleaning Authority

Resale Is Not A Dirty Word

• Misconception in many minds• Why do they have that connotation?• Bringing new life to the table• Unhappy Zees will rarely produce• Assessing Blame!

Preparing Your Franchisees

• Setting the tone early for the exit strategy• Helping them understand the value• Shutting doors helps no one• Ally not the enemy, even if they’re unhappy• Realistic expectations

– Timeframe, Legal, Price

Preparing Your Franchisees

• Providing a Resale manual• Franchisees need direction in the sale• How to help them Value the business• Local Brokers VS Franchise Brokers• How to structure the fees

– Exclusivity, Transfer, Who pays

Cont’d

Program Overview IntroductionPreparing Sales Related InformationValuing Your Business

Multiple of Gross SalesMultiple of Cash FlowReplacement Cost

Marketing Your BusinessAnother FranchiseeAssistance.Business BrokersFranchisee Promotes the Sale

Negotiating the SaleDue DiligenceLetter of IntentContract Completion

The Asset Purchase AgreementThe Bill of SaleThe Assignment and Assumption Agrmt.The Promissory Note

Closing the SaleAssignment of FranchiseFinancing the SalePhysical InspectionEmployee CommunicationExchange of Closing Requirements

Appendix 1 - Contract Form SamplesLetter of IntentAsset Purchase AgreementBill of Sale

Exhibit A1Assignment and Assumption Agreement

Exhibit B1Promissory Note

Appendix 2 - Franchise Administration, Requirements andForm Samples

OverviewAssignment PolicyRequired Forms and ProceduresRight of First RefusalAssignee QualificationsDisclosure of AssigneeRequired Supporting DocumentationFeesUpgrade RequirementsThe ClosingConsent to Assignment

• Assignment Policy

Resale Manual Table of Contents

Important Documents

• Letter of Intent• The Asset Purchase Agreement• The Bill of Sale• Termination Agreement.• The New Franchise Agreement

Resale = Revival!!

• Out with the old and in with the new• New life, new blood, new energy• Drink the Resale Kool-Aid – Refreshing!• You need a Revival in your mind• Get your sales department on-board

A Cohesive Resale

• Schedule regular resale meetings• Involve operational staff for their input• Is a site visit necessary?• Don’t assume all are on the same page• Develop a resale cheat sheet

City

S ta te

Asking Range

Date Open

Listed for Sale

Current Weekly

Revenue

Forecasted Annual

Revenue

Cust. Count

2006 Response

Rate

2006 Closing

%

2006 Weekly

Loss Notes

Rancho Cucamonga Jeff Krausman Jeff

C A $115K Dec-05 May-06 $5,623 $292,396 211 0.42% 63% 1.67%

San Mateo Janelle & Jennifer Jeff

C A $175K Jun-03 Sep-06 $12,102 $629,304 285 0.25% 52% 1.33%

Berthoud Jeff Rudd Nate

C O $135K Nov-04 Sep-06 $7,057 $366,964 175 0.10% 54% 2.18%

Palmetto John Benson Ron

F L $220K May-04 Jun-06 $11,633 $604,916 289 0.37% 57% 1.68%

Des Plaines Dan Sher Ryan IL $175K Jan-04 Oct-06 $9,515 $494,780 233 0.29% 51% 1.79%

Oswego Thron Nelson Ryan IL $165k Dec-03 Mar-05 $12,411 $645,372 318 0.29% 56% 1.51%

Warrenville Jim Strong Ryan IL

$250K - $300K May-04 Jul-06 $10,800 $561,600 254 0.29% 61% 1.63%

Andover Robinn Scholfield Nate

K S $250K Oct-04 Mar-06 $14,777 $768,404 307 0.31% 76% 1.16%

Westford Eileen Kelly Rob

M A $100K Sep-03 Apr-05 $9,400 $488,800 286 0.28% 72% 1.90%

Closing the Resale

• Communication is Key• Process for approving the candidate• Tense situations• Surprises and the 11th hour junk• Never assume everything is going fine!

After the Resale

• When are the fees paid• Leaving on good terms• Transferring after settlement• From the frying pan into the fire• The new beginning

Thank You!

Tim Evankovich, PresidentThe Cleaning Authority

Consider Thinking Differently About

Small Markets

Mark Liston, DirectorValpak

Consider thinking differently about smaller markets . . .

Your perception of small markets may change after today !

Do you have a belief that small markets mean 8 track people in an ipod nano world ????

Ever get one of these ???11/10/2006Todd, you should be sitting down when you

read this. . . Dude . . . and that is illegal and besides being a bad business practice . . .

. . . . .and that's just BUNK!-Dave Independent Valpak Dealer

Maybe you think the person running a small market will look different!

Valpak Overview – By Size• Macro –

– 11% of network . . . 40% of circulation• Large –

– 15% of network . . . 25% of circulation• Medium –

– 20% of network . . . 20% of circulation• Small –

– 20% of network . . . 8% of circulation• Micro –

– 34% of network . . . 7% of circulation

Smaller Markets

• Very integral to the success of our operation

• VASTLY different needs

• Expect to be treated the same as others – and should be– Not their fault they are in a small market

• Create programs / support JUST FOR THEM

Deep in my own thoughts . . .• Add “mini” markets . . . maybe

– Less frequent mailings– Valpak does “paperwork” corporately– Different wholesale pricing structure

• Goal:–Increase Coverage !

What is your model?

THINK . . .

• How do you expand your system?

• What products/services/locations could you add?

• If you could start over and do it again what would you do? Can you do it now knowing what you know today?

Look what DQ did

and what Radio Shack did . . .

and what YUM! is doing . . .

Or what Dunkin’ is doin’ . . .

Jeopardy category:

Small market success:

Final Answer:

ROGERS

Question:

Where, in 1962, did Sam Walton opened the first Wal-Mart

Discount City store ??

Rogers, Arkansas

Structuring a sales department for a mature franchise

company

It’s usually not the flash that makes your sales team excel!

Jeff Bevis, Executive Vice PresidentComfort Keepers

Keys to Consider• Communication and Goals• Coaching • Territories with Opportunity • New vs. New/Transfers • Process• Use of Pre-Qualifier

Communication and Goals• Take time• How often do you talk to each member

of your team?• Individual and Team direction• Communication inside and outside of

your department

Communication and Goals (con’t.)

• Establish team goals– By month, quarter, annual

• Establish individual goals that support team goals (expectations)

• In writing for each member, not for HR• Quarterly self-updates with each

member

CK Goals and Actual• Award 52 new

markets• Transfer 32 markets

• DD Close Ratio 70%• Cost per Sale $2200

• Achieved 65 new markets

• Achieved 49 transfers

• Achieved 65%• Achieved $1890

Coaching• Focused time with on W or EOW basis• People don’t leave jobs, they leave managers• Share their successes• Share their challenges• What are common metrics?• Value of self-tracking

Sales Territories• Give them their “own land”• Build market knowledge• Productivity

– geography– time zone(s)

• Impact on metrics and accountability

New vs. New/Transfers• Do you have new market specialists?

– new franchise awards only– transfers managed by others or outsource

• Do they also provide initial start-up or training support?

• Is there a fast-start benefit?

New vs. New/Transfers• Do you combine new market and

transfer market sales?• Advantages: Unify market knowledge,

leverage candidates by area• Disadvantages: May blur priorities, may

steal time from new sales efforts

Process• Define your new and transfer process• Does everyone follow it?• How many transactions per person?• How many admin or support staff are

needed to process total sales volume?• Do you measure sales cycle time?

Use of Pre-Qualifier• Pre-Q person can feed multiple

salespeople• Must enable your salespeople to be

more productive, increase sales volume• Often acts as “farm team” position for

sales• Works for both new and transfer pre-Q

Compensation• More than just base and commission• Consider team incentives• Consider tiered incentives • Include your admin team members to

help accelerate processing of sales• Travel benefits and luxuries of

convenience