Franchising: What is Franchising: What is it?it? The Business Plan is Licensed by the The Business Plan is Licensed by the

Franchisor—The Franchisee pays for Franchisor—The Franchisee pays for it (initial fees from a few hundred to it (initial fees from a few hundred to several million dollars, plus royalties several million dollars, plus royalties based on sales, typically 4%-10%)based on sales, typically 4%-10%)

The business has a common The business has a common trademarktrademark

The business receives initial training The business receives initial training and ongoing support from the and ongoing support from the franchisorfranchisor

Franchising in the U.S.Franchising in the U.S.

First Franchise: Singer Sewing Machine in First Franchise: Singer Sewing Machine in 18501850

There are 760,000 franchised businessesThere are 760,000 franchised businesses 9.8 million Americans are employed by 9.8 million Americans are employed by

franchises (1 of 12 businesses)—Payroll of $506 franchises (1 of 12 businesses)—Payroll of $506 billionbillion

Economic output--$1.53 trillionEconomic output--$1.53 trillion Types of franchises—Dealerships, service and Types of franchises—Dealerships, service and

productproduct Largest franchise—Subway (23,669 outlets)Largest franchise—Subway (23,669 outlets)(Pricewaterhouse/Coopers, 2004/Ent. Mag., 2006)(Pricewaterhouse/Coopers, 2004/Ent. Mag., 2006)

Top 10 Franchises for Top 10 Franchises for 20062006Entrepreneur Entrepreneur MagazineMagazine1)1) SubwaySubway

2)2) QuiznosQuiznos

3)3) CurvesCurves

4)4) The UPS StoreThe UPS Store

5)5) Jackson Hewitt Jackson Hewitt TaxTax

ServiceService

6)6) Dunkin’ DonutsDunkin’ Donuts

7)7) Jani-KingJani-King

8)8) RE/MAX Int’lRE/MAX Int’l

9)9) 7-Eleven7-Eleven

10)10) Liberty Tax Liberty Tax ServiceService

Network Marketing: Network Marketing: What is it?What is it? Face-to-face selling outside a fixed Face-to-face selling outside a fixed

retail locationretail location Distributors not only sell products Distributors not only sell products

but “sign up” other distributors but “sign up” other distributors Distributors make money on retail Distributors make money on retail

mark-ups on what they sell along mark-ups on what they sell along with residual income from those with residual income from those in their down linein their down line

Why Use Network Why Use Network Marketing?Marketing? Low capital investmentLow capital investment Greater marginsGreater margins Motivated sales forceMotivated sales force Only pay for performanceOnly pay for performance Minimal monitoring costsMinimal monitoring costs With new communications With new communications

technologies it’s easy to stay in technologies it’s easy to stay in contact with a dispersed sales forcecontact with a dispersed sales force

Model of NMO Model of NMO PerformancePerformance

NMO Performance=NMO Performance=

Recruitment XRecruitment X

Retention XRetention X

ConsumptionConsumption

Why Join an NMO?Why Join an NMO?

Increase incomeIncrease income Want to own my own businessWant to own my own business Want tax benefitsWant tax benefits Enjoy sellingEnjoy selling Enjoy social interactionEnjoy social interaction See it as a hobbySee it as a hobby Want to work with spouse/familyWant to work with spouse/family

Commission Schedule Commission Schedule for Excel Distributors—for Excel Distributors—April 1996April 1996 > $100,000> $100,000 99 $20k to 100k$20k to 100k 7777 $10k to $20k$10k to $20k 163163 $5k to $10k$5k to $10k 455455 $1k to $5k$1k to $5k 4,6414,641 $100 to $1k$100 to $1k 39,07239,072 Less than $100Less than $100 109,505109,505

Percentage of Population in Percentage of Population in Network Marketing Network Marketing (selected countries)(selected countries) TaiwanTaiwan 10.9 10.9 CanadaCanada 4.1 4.1 U.S.U.S. 3.4 3.4 JapanJapan 1.9 1.9 MexicoMexico 1.3 1.3 BrazilBrazil 1.1 1.1 UKUK .8 .8 SwitzerlandSwitzerland .07 .07