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Franchises: Options for Today Justin Lamsa Principle Advisor Liberty Franchise Advisors www.libertyfranchiseadvisors.com [email protected] 978-668-5380

Franchises: Options for Today

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Page 1: Franchises: Options for Today

Franchises:

Options for Today

Justin Lamsa

Principle Advisor

Liberty Franchise Advisors

www.libertyfranchiseadvisors.com

[email protected]

978-668-5380

Page 2: 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

Page 3: Franchises: Options for Today

History of Franchising

The word Franchise comes from old French meaning privilege or freedom.

In the middle ages a franchise was the granting of a privilege or a right.

In 1960, the International Franchise Association (www.franchise.org) 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.

Page 4: Franchises: Options for Today

How Does A Franchise Consultant Help You?

Defining your goals– What is important to you? – Income, equity, lifestyle, other?

Finding the franchise that meets those goals– Help you to focus on goals, not just industries– Enable thinking “outside the box” for your franchise options– Avoiding “hype”, “short term trends”, and franchises that don’t

make sense for you– Saves you time in finding the ideal franchise

Understanding your financing options Staying on track and following a process Your consultant provides their services at no cost to you

Page 5: Franchises: Options for Today

The Search Process

Information Gathering (1 to 2 telephone meetings)– Analyze Lifestyle Needs– Analyze Business Goals– Analyze current financial position and future goals.– Help Determine Type of Business

Matching (1 week)– Research Franchises– Match client to franchise– Identify franchise territories

Presentation (1 meeting)– Present 2 – 4 franchises– Determine best fit or back to step 2

Connect client to the franchise representative– Client begins the discovery process– Franchisor begins the interviewing process– Your franchise consultant is there throughout the process for

independent advice

Page 6: Franchises: Options for Today

Process from Prospectto Franchisee

First meeting with franchisor– Informational teleconference– Time to ask questions!– Your franchise consultant may also

attend Receive Franchise Disclosure

Document (FDD)– Return Receipt of FDD– Client MUST have 10 business days

before entering ANY agreement– Includes copy of Franchise

Agreement Due diligence– Speak in-depth with Franchise– Interview existing Franchisees– Do all research – Consult with franchise attorney and

accountant

Second Interview with Franchise

Discovery Day!– Visit Franchise Headquarters – Meet senior management Enter Into A Franchise

Agreement Preparation– Obtain Real Estate– Franchise Initial Training– Complete Construction– In Store Training Grand Opening! On-Going Support Congratulations!

Page 7: Franchises: Options for Today

Franchise Categories

Accounting/Tax Services Advertising/Direct Mail Auto & Truck Rentals Automotive Prod. & Svcs. Batteries-Retail & Comm. Beverages: Special Business Consultants Business/Mgmt Consultants Campgrounds Check Cashing/Fin’l Svcs. Children’s Services Clothing and Shoes Computer/Electronics/Internet Construction Mat’ls &Svcs. Consumer Buying Svcs Convenience Stores Cosmetics Dating Services Drug Stores Educational Prod & Svcs. Employment Svcs.

Fitness Florist Shops Food/Restaurants Golf Eqt, Prod & Svcs Greeting Cards Hair Salons & Services Health Aids & Services Home Furnishings Home Inspection Hotels and Motels Insurance Janitorial Services Jewelry Laundry & Dry Cleaning Lawn/Garden/Agriculture Maid & Personal Services Maintenance Marine Services Optical Aids & Services 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

Page 8: Franchises: Options for Today

Partial Franchise List – we represent over 400 franchises

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 SignWorld

1-800-DryClean AAMCO Transmissions Ace Hardware Great Clips Planet Beach Comfort Keepers Senior Care Molly Maid The Maids Business Cards Tomorrow Street Corner News Carpet Network Golf USA

Page 9: Franchises: Options for Today

Why Join a Franchise System?

Name recognition in a national brand

Assistance from Experienced Management

Business Planning and start-up Assistance

Lowered Risks Through Proven Business Methods

Established product or service

Group purchasing power

Franchisees are able to follow a proven, successful system

Page 10: Franchises: Options for Today

Perceived Disadvantages

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

Page 11: Franchises: Options for Today

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 a lot of the hard work: finding a location negotiating a lease hiring reliable contractors doing everything on-time and within budget

Page 12: Franchises: Options for Today

Reasons to Buy a Franchise

Proven System in Place When you buy a franchise you buy a system. All

franchises have an already-established system in place that you must follow.

These systems are designed to improve the overall productivity and increase sales of each franchise.

Having a proven system already in place eliminates the guesswork and errors a common business owner would normally face.

Page 13: Franchises: Options for Today

Reasons to Buy a Franchise

Higher Likelihood of Success Buying a franchise is very different from starting a

mom-and-pop business. Since there is an already established system in

place, there is a higher likelihood of success. If you follow the system the franchisor has put in

place, you should be on your way to running a very successful business.

Page 14: Franchises: Options for Today

Reasons to Buy a Franchise

Corporate Image and Brand Awareness If you buy into a franchise system that is

already established the corporate image and brand awareness is already recognized.

Customers are usually more comfortable purchasing items they are familiar with and working with companies they already know and trust.

Page 15: Franchises: Options for Today

Reasons to Buy a Franchise

Easier to Obtain Financing Lenders are usually very comfortable financing the

purchase of a franchise because they already have a proven track record.

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.

Some franchise systems even provide in-house financing and/or leasing options.

Page 16: Franchises: Options for Today

Reasons to Buy a Franchise

Training Most franchise companies offer a 1-4 week training program

that is usually held at their corporate offices or at an actual franchise location.

This is what makes franchises stand out from every other business or business opportunity.

The franchisor will train you to run your franchise exactly the same way their other franchise locations are run.

This will ensure that you are running your business efficiently and will help to eliminate any common mistakes a new business owner usually faces.

Page 17: Franchises: Options for Today

Reasons to Buy a Franchise

Ongoing Support When you buy a franchise you are never alone. You will always have the support of the franchisor

and the support of knowing you are part of a growing family.

You will always be able to pick up the phone and ask questions to the franchisor or even to other franchisees.

Page 18: Franchises: Options for Today

Reasons to Buy a Franchise

Marketing There is usually no need to worry about advertising

your franchise. The franchisor usually takes care of handling all of

the marketing. 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.

Page 19: Franchises: Options for Today

Reasons to Buy a Franchise

Exclusive Territory When you buy a franchise you are also buying an

exclusive territory in which to do business. Franchisors will only allow a certain amount of

franchises to be open within a certain geographical region.

You will be entitled to a certain area and no other franchises (within your franchise system) can be open within that area.

Page 20: Franchises: Options for Today

Reasons to Buy a Franchise

Own Multiple Locations Being a part of a franchise system will always offer you more

opportunities to grow within the system. 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.

Multi-unit franchise owners manage more than one location and are able to sometimes double their income by taking on more than one location.

Owning multiple franchise locations can be very lucrative.

Page 21: Franchises: Options for Today

Future of Franchising

Franchising continues to grow!

Within a decade or less, franchising Will comprise over 50% of the retail economy Will employ millions of people Will enable hundreds of thousands to realize the

American dream of successful business ownership.

Page 22: Franchises: Options for Today

Franchise Types

• Single Unit Franchise

• Multiple Units

• Area Developer

• Master Franchise

Page 23: Franchises: Options for Today

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…

Page 24: Franchises: Options for Today

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.

Page 25: Franchises: Options for Today

Questions to Ask the Franchisor

Can you provide an overview of your franchise? How many franchises are there in your system? How many do they expect to add in the next 12 months? How many were added in the 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?

Page 26: Franchises: Options for Today

Next Steps

What are your next steps?

Your consultant is there to help!