What goes through your mind when you hear the word, "franchise?"

Franchising 101:

Welcome

• Your Name
• What interested you in this topic?

what is it?

• To own a franchise is to own the right or license to use something
• Typically this involves products or services, a brand and a business system
• Most of the time this includes a geographic area

trivia

• What was the first franchise?

examples

• McDonald's
• Chick-fil-a
• Great Clips
• Arizona Cardinals
• Money Mailer
• Aamco Transmissions
• Sandler Sales Training
• College Hunks Hauling Junk & Moving
• American Title Loans

history

• Franchising dates back to the middle ages

American Colonies

German Beer

Sewing Machines

Auto Dealerships

McDonald's

• Discovered in 1954
• Over 500 units by 1963

Franchising is the greatest invention for small business ownership.
- Art Coley
Former President of AlphaGraphics
http://franchiseinterviews.podcastpeople.com/posts/46547

Why own your own business?

Get a job!

• Steady Income Every 2 Weeks - Salary
• Health Insurance
• Retirement Plan
• Vacation Time
• Benefits
• Benefits
• Security

own a business!

• Inconsistent income based on effort, market forces, competition, etc.
• No Health Insurance
• No Retirement Plan
• No Vacation Time
• No Benefits
• No Security

Why own your own business?

Almost 90 percent of workers are either “unengaged” or “actively disengaged” from their jobs.
- The Gallup Organization

own a business!

• Be own boss
• Freedom
• Control
• Creativity
• Passion
• Flexibility
• Purpose

Those who have a 'why' to live, can bear with almost any 'how'.
- Viktor Frankl,
Holocaust Survivor
(1905 - 1997)

fear

Costs & Fees

• Initial Franchise Fee & Startup
• Continuing Royalties
• Advertising
• Other (Training, Conferences, Consulting, etc.)

video: https://youtu.be/0JaPaeFYE5U

Self-Evaluation

Will i be successful?

• What skills have made me successful in the past?
• How much do I want to own my own business?
• What is my background?
• What type of work is most appealing?

Will i be successful?

• How do I respond to problems and challenges?
• How do I influence others to my point of view?
• How do I respond to the pace of the environment?
• How do I respond to rules and procedures set by others?
• Assessment tools

Goals

• Income
• Lifestyle
• Wealth
• Equity

income

• Money is not the 'Why' but we start here in order to capture what it takes to cover our basic needs
• What is your current income?
• What would you like your income to be one year from now?
• What would you like your income to be three years from now?
• Remember that income goals will change in different seasons of your life

lifestyle

• The idea here is to fit your career into your lifestyle instead of your lifestyle being dictated by your career
• What do you want MORE of in your life?
• What do you want LESS of in your life?
• This is where you want to try to articulate the, "WHY?"
• If you knew you couldn’t fail, what career path would you choose?

wealth

• If Income is near term then wealth is longer-term
• What assets do you want to own?
• 5 years?
• 10 years?
• 20 years?

equity

• Debt is often used to acquire assets
• Equity is your ownership after subtracting the debt
• What do you want your overall net worth to be in 5, 10, 20 years?

financial resources

• Liquid Cash in Checking and Savings
• Investments (Stocks, Mutual funds, etc.)
• Retirement
• Real Estate
• Other
• Liabilities
• Credit Score

financing Options

• Family, Friends, Angel Investors
• Loans: Equity, Commercial, Unsecured, SBA (registry)
• Retirement Rollover
• Equipment Leasing
• Often easier as part of a franchise than independent
• Don't give up!

Franchise Model Validation

steps

• Set aside time - make no decisions
• Express Interest
• Introduction
• Application
• Validation/Diligence/FDD
• Decision
• Sign

TIme

• Can take anywhere from 3-4 weeks to many months to explore and decide
• There are a lot of steps. The way you make it through all the steps is to look at it as a learning opportunity, not a decision

Express Interest

• Tell the Franchisor you'd like to learn more
• Each Franchisor has a different process, but you will need to meet and interact with an actual person in order to get all the info

Introduction

• In most cases they will schedule a phone call with you
• At this point the process becomes somewhat like interviewing for a job
• You are evaluating the business model as a potential investment
• They are evaluating candidates and trying to determine if you will make a good owner

Application

• Once they have made sure you're qualified at a high level, they will most likely want a more formal application
• No commitments or decisions yet, they may be testing your ability to follow a process

diligence

• Most call this validation because it sounds better than "diligence"
• Documents
• Current owners
• Former owners

Fdd

• Item 1: Franchisor's Background
• Item 2: Business Background
• Item 3: Litigation History
• Item 4: Bankruptcy
• Items 5-7: Initial and Ongoing Costs
• Items 8 and 12: Supplier, Territory and Customer Restrictions

Fdd

• Item 11: Franchisor's Advertising and Training
• Item 17: Renewal, Termination, Transfer and Dispute Resolution
• Item 19: Financial Performance Representations
• Item 20: Franchisee and Franchise System Information
• Item 21: Financial Statements

Decision/Award

• Everyone handles this differently
• At some point you'll realize you have all the information you can know
• They will let you know where they stand

Signature

• Make it official
• Celebrate!
• Now the work begins

potential earnings

• No Guarantees, just like any other investment
• Understand what the FDD says
• Talk to current and former franchisees at different stages in their lifecycle

trusted team

• SBDC - Business Counselors
• Banker/Lender
• Accountant
• Attorney
• Franchise Consultant

SBDC

• Eduction and Training
• One-on-One Counseling

Banker/lender

• Personal Bank
• Fran Fund
• Guidant Financial
• First Financial
• Benetrends Financial

Accountant

• Minimize tax liability
• Setup entity structure
• Ongoing accounting

attorney

• Minimize personal and professional liability
• Review franchise documents
• Make sure it is a franchise attorney

broker/consultant

• FranChoice
• FranNet
• FranServe
• The Entrepreneur's Source

Trust

other resources

• Entrepreneur Magazine
• International Franchise Association (IFA)
• Federal Trade Commission (FTC)
• Expos
• Book: Street Smart Franchising by Joe Mathews
• Book: E-Myth Revisited by Michael Gerber

Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t.”
- Anonymous

Don’t make the right decision; make the decision right.”
-- Ellen Langer

Questions?