Small Firms Get Local Loans

By ANJALI CORDEIRO
When Amy Loera was looking for a loan to expand her family's Mexican-restaurant business earlier this year, she applied at nine different banks. They all turned her down.
Many of the banks accepted her initial application but simply didn't take things any further, she says. Some raised concerns about the nationwide downturn in the restaurant industry in refusing her request. And some told her that if she had applied a year ago, she would have had no problem.
So Ms. Loera turned to a local lender, Arrowhead Credit Union in San Bernardino, Calif., after a business acquaintance told her the credit union had given loans to other businesses in the community. She was approved for a $643,000 loan this summer.
Ms. Loera, who runs the restaurant chain, Tio's Mexican, with her husband and brother-in-law, believes that since Arrowhead was based in the region, it was easier for her to make a stronger case about the health of her business.
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"They were local," she says. So "they were able to see that because we are a family-owned restaurant and because we had a very good formula to keep our overhead [costs] low and prices reasonable, we are picking up the slack from [fancier restaurants] around us and are not feeling a big hit from the current economic situation."
Small businesses have been having increasing trouble getting loans as the credit markets have seized up. But some, such as Tio's Mexican, are finding that smaller community banks and credit unions are more open to offering financing. For one thing, many smaller lenders are in relatively strong financial shape because they didn't make the types of investments that got many of their larger brethren in trouble.
In addition, private local lenders may be more familiar with a region's business climate, so they are better able to look beyond national trends to base their decisions on the more immediate factors affecting an individual business.
"Often times," says Sandy Baruah, acting administrator of the Small Business Administration, "the larger institutions will rely more heavily on the credit score, whereas sometimes community banks will take a much closer look at the business plan. And especially if they are based in the region or the community, they will make a decision based on their overall comfort with the business plan and presentation."
" But still, credit ratings matter," Mr. Baruah says.
All About Cash Flow
When applying for loans, Ms. Loera says she highlighted the fact that her restaurants are based in so-called bedroom communities like Rancho Cucamonga, Calif. -- where people commute some distance to work, are strapped for time, and look for a place where they can eat an affordable family meal at the end of the day.
She presented a three-inch-thick binder filled with financial statements showing the historical results of the company's existing restaurants as well as the fact that they were debt-free. The Loeras had credit ratings in the 750 range, she says.
She also gave a projection of how much money the new restaurant would bring in over the first 12 months, and a business plan that included details such as the number of employees the new location would have and the intended menu.
Ms. Loera says all that data didn't affect the decision of the banks -- but it did Arrowhead's.
Jon Parks, a vice president at Arrowhead, says the credit union approved Ms. Loera's application because the family showed they already had experience managing restaurants and were able to prove that their existing locations were financially successful.
The fact that the new eating place is being planned as an affordable family restaurant makes it more likely to succeed in the current economic environment, he says.
'Behind the Scenes'
"We are not score-driven in the business-lending side, and choose to look behind the scenes," Mr. Parks says.
He says a strong credit score -- one above 700 -- can be helpful. But the one metric that often trumps all others is cash flow. Since it indicates the amount of cash generated and used by a business over a certain time frame, it can be a key indicator of a borrower's ability to pay back the loan.
Lenders also try to gauge how a small business will do going forward. Heath Chapman, vice president, commercial banking at Morrill & Janes Bank in Merriam, Kan., which is still lending to small businesses, says companies increase their chances of getting a loan if they give financial forecasts that look realistic.
He suggests that owners include a best- and worst-case scenario for their revenue projects and for forecasts on how they will repay the loan.
For a banker, "having all those questions already answered helps," he says.
Case by Case
Certain industries that have been particularly hard hit by the weakening economy may face added pressure to prove that their earnings are strong enough to withstand the downturn. But institutions that are still lending to small businesses tend to take each application on a case by case basis.
"Those industries that have been hit the worst -- construction, auto dealerships -- we are going to look at with a logical eye and understand what we are up against the next 12 to 18 months," in terms of the outlook for the overall industry, says Mr. Parks.
"It doesn't mean we are not going to lend to them if the numbers dictate and everything makes sense," Mr. Parks says.
He believes there could be pockets or individual businesses that continue to do well even within such sectors because they have some kind of a niche offering.
Some community lenders aren't completely dismissing even those businesses that face some financial hiccups. Mr. Chapman says he is asking small-business clients to come to him as soon as possible with financial problems or difficulty funding losses.
He says he is willing to consider lending to small businesses that face some difficulties if they have a history of overcoming problems in the past.
Write to Anjali Cordeiro at anjali.cordeiro@dowjones.com

McDonald's urging franchisees to oppose card-check bill Email warns of dangers of pro-union legislation; 'will impact the McDonald’s system'

McDonald's urging franchisees to oppose card-check bill Email warns of dangers of pro-union legislation; 'will impact the McDonald’s system'
By David Sterrett

December 8, 2008 1:29 PM ET(Crain’s Chicago Business)—McDonald’s is mobilizing its U.S. restaurant owners to fight a measure in Congress supported by President-elect Barack Obama that would make it easier for workers to unionize. In a Nov. 25 memo, McDonald’s USA President Don Thompson urged 2,400 franchisees to “contact your U.S. senators and representatives to oppose” the Employee Free Choice Act. The EFCA, or “card-check” bill, would enable unions to organize a workplace by obtaining the signatures of a majority of workers on authorization cards. Current law requires secret ballots. In addition, the legislation would establish a bargaining process that could lead to binding arbitration for labor contracts. Mr. Thompson warns franchisees of the “gravity of the issue,” saying the legislation, “if enacted, will impact the McDonald’s system.” Binding arbitration, he adds, would result in worker contracts “being written by government-appointed arbitrators who are not familiar with our business and don’t have long-term accountability for the decisions they make.” With more than 600,000 U.S. restaurant workers, many earning less than $10 an hour, the chain makes an attractive target for union organizers. Unionized employees could demand higher pay and stricter work rules in McDonald’s kitchens. “This bill is a huge threat to fast food and has the ability to impact the long-term health of the industry,” says Rick Berman, a lobbyist in Washington, D.C., for the restaurant industry. Oak Brook-based McDonald’s has formed an internal “response team” to help franchisees “actively participate in the opposition to EFCA,” Mr. Thompson’s memo says. The company also is a member of the National Restaurant Assn., which, in turn, belongs to the Coalition for a Democratic Workplace. The latter group is running ads saying the card-check bill would inhibit job growth. As it fights the bill, McDonald’s must take care not to antagonize customers who may belong to or support unions. It also needs to maintain good relations with Mr. Obama and the new Democratic power structure in Washington. The company’s political action committee—which received contributions from top executives and hundreds of franchisees—distributed $197,000 to candidates during the past election cycle, government records show. As of Oct. 15, 65% of McDonald’s contributions had gone to Republicans. The remaining 35% went to Democrats, the highest portion McDonald’s PAC has given to that party since at least 1980. Mr. Thompson personally contributed $29,500 to Mr. Obama and supporting groups. McDonald’s CEO James Skinner contributed $19,800 to Republican candidate John McCain and his supporting organizations. In a statement, McDonald’s says it is “neither anti-union nor pro-union,” but declines to comment further. Unions have been almost nonexistent in fast food in the past 25 years. Labor made numerous attempts to organize McDonald’s employees in the 1970s without success. Mr. Thompson tells franchisees to reach out to employees to “build a more confident and committed team.” Removing the secret ballot requirement would have a particularly strong effect on the fast-food industry because of its high turnover rate and large percentage of young workers who may be more easily pressured by co-workers to sign union cards, Mr. Berman says. Starbucks employees have had some success organizing in the past four years with the Industrial Workers of the World. The union represents a small number of employees in six cities, including Chicago. “We would be thrilled to have an opportunity to work with McDonald’s employees on organizing,” says a spokesman for the Cincinnati-based union.
Write to the editors at fw_editor@financialweek.com.

Jamba Juice Bringing in Oatmeal

Jamba Juice joins oatmeal bandwagon

December 18, 2008
BY CHERYL V. JACKSON cjackson@suntimes.com
Jamba Juice wants to bowl over customers with its newest breakfast product. The smoothie company begins sales of oatmeal in Chicago this morning in advance of a national launch of the item next month.
Jamba, with about 700 stores, earlier this year introduced a breakfast menu nationwide.
Jamba Juice begins sales of oatmeal in Chicago Thursday morning in advance of a national launch of the item next month. (AP file)
With the oatmeal, it tries a product that's proved successful for coffee slinger Starbucks. Since its September addition oatmeal has become one of the best-selling food items in the Starbucks system, the company said.
Jamba and Starbucks join companies such as Potbelly and Corner Bakery in serving the product, playing to consumers looking for healthier, inexpensive and quick dining options.
The steel cut oatmeal, will sell for about $2.95 and come topped with sugar crumbs and bananas or apple-cinnamon or blueberry-blackberry blends.

Franchising in a Down Economy

By Jeff McKinney • jmckinney@enquirer.com • December 19, 2008
Downsized by the mortgage meltdown, Al Cooper suddenly was forced to find a new job.
Cooper, formerly vice president and director of operations at Fidelity Mortgage for five years, lost his job in November 2007 after the subprime debacle led to liquidation of the company. Cooper, a divorced dad with three boys, needed work and to stay here.
He used about $25,000 in savings last month to launch Caring Transitions, a home-based franchise that offers estate sales and other services for senior citizens and their families.
Cooper, 50, said he liked Caring Transitions because its business model was less risky than other companies and offered more potential growth with baby boomers aging.
"I also was concerned I would not be able to find another job in the corporate world due to my age and experience," Cooper said.
Welcome to the franchising world in a sour economy. Cooper joins other former executives from around the country who have decided to become franchisees.
When you buy into a franchise business, you get marketing, advertising and training support you typically do not get with an independent business, said Alisa Harrison, spokeswoman at the International Franchise Association in Washington.
She said a franchised business allows an entrepreneur to take advantage of a proven business model and a proven brand.
"In good times and bad, a franchise allows you to go into business for yourself but not by yourself," Harrison said.
And with a recession-like economy, entrepreneurs say franchises allow you to be your own boss and control your destiny.
In a weak economy, Harrison said, you have a workforce that's been laid off, and many of these people are taking their severance to start up franchises.
But potential franchisees also should be cautious before jumping into business.
Chuck Matthews, executive director of the University of Cincinnati's Center for Entrepreneurship, said one of the cons of buying into a franchise are the initial costs, including the franchise fee, investment cost and royalty payments.
But on the other hand, he said, a franchisor often will provide financial assistance to a qualified franchisee to start the business.
He said potential franchisees also should be careful with such things as restrictions on their sales territory, what items they actually can sell and shared costs tied to marketing support.
"It's critical that you do your homework before starting a franchise, particularly in a weak economy." Matthews said.
Jody Wallace, formerly a stay-at-home mother, and her husband, DeWight, opened a Pump It Up franchise 3½ years ago in West Chester Township.
The business offers a giant, indoor, inflatable playground that offers private parties for children.
The couple invested about $400,000, including franchising rights, equipment and build-out for the business. DeWight still works for a large local company.
Jody said the business allows her to do her part in generating income for the family, while using her event-planning skills to help make kids happy.
She said the franchise allows her to offer services she could not provide with her own business, including an art camp for kids and corporate team building for adults.
"A franchise offers you the support you need in one package."
Also wanting more financial security, Becky Gabbard turned her love for animals into a business. She invested $10,500 to launch a Fetch! Pet Care franchise in October.
The business provides professional at-home pet-sitting, dog-walking and other services.
"It's a very lucrative business and it provides a service people need regardless of the economy," she said.
Harrison said her group represents franchisees ranging in age from 25 to 85, and franchises that range from pet-sitting services to automotive stores like Jiffy Lube.
She said individuals can open a franchise for as low as $20,000 and high as $2 million. Harrison said the figures include upfront costs.
Harrison said the biggest challenge facing potential franchisees now is getting credit and affordable financing.
Author Jim Coen, who has been in the franchising business for 25 years, agreed.
He said the recession could be limiting the number of franchisees because of the credit crunch.
"It's not as easy today to get a deal financed as it was a year or two ago," he said.

Franchise India ties up with Francorp

Franchise India ties up with US-based Francorp
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New Delhi, Dec 2 (IANS) City-based Franchise India Holdings Ltd Tuesday announced it has entered into a partnership agreement with the global franchise consultant major Francorp Inc of the US to attract more companies to India through the franchise model.
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New Delhi, Dec 2 (IANS) City-based Franchise India Holdings Ltd Tuesday announced it has entered into a partnership agreement with the global franchise consultant major Francorp Inc of the US to attract more companies to India through the franchise model.
Announcing the licensing agreement here, Franchise India president Gaurav Marya said: 'We are in talks with a number of international brands' to bring them to Indian market.
The new partnership company will be called Francorp India and will open four offices in Delhi, Mumbai, Chennai and Chandigarh.
'There are a lot of companies in the services sector that are actively looking at India to set up their franchise operations,' Francorp International president M.F.M. Ramon Vijay said.
Talking about the growing popularity of franchise model among Indian business men, Marya said: 'Earlier people used to park their funds either in the stock markets or buy real estate to get a decent 30 percent return. Now because of the economic slump, these avenues won't get them such high returns and people are now looking at less risky ventures to invest. Franchise is such a business.'

Don Boroian Client - Maui PlayCare

Kid relief
Maui PlayCare offers stress-free child care
By Adam ElrashidiAs published in: Franchise Times - November-December 2008
A Montana transplant to Hawaii hopes that parents and franchisees will say "Aloha!" to her drop-in day care franchise.Hawaii gave the world hula dancing, macadamia nuts and Don Ho. Now you can add stress-free, drop-off childcare to the list, thanks to Bonnie McCarthy's franchise, Maui PlayCare.
A Montana-transplant, McCarthy quit her job in construction safety and office management to become a stay-at-home mom shortly after her last two children were born, but found that she had less time for herself. "It just became a way of life where I didn't even have a minute to even think," says McCarthy.
McCarthy didn't like the idea of leaving her kids with babysitters and didn't want to pay the membership fees and high rates at day-care centers when she only needed an hour or two a day. So in 2002 she came up with the concept of Maui PlayCare - a center where parents can leave their children for an hour or two, or for the full day.
The concept is simple: Maui PlayCare provides parents running to the grocery store or a doctor's appointment with a place they can safely leave their children for a short amount of time. There's no reservations. No membership fees. No unadjusted hourly rates. Maui even provides parents with a to-go pager for an added sense of security.
Bonnie McCarthy's own child care problems led her to create Maui PlayCare in 2002.Maui PlayCare is structured around the "Aloha Spirit" - an attitude akin to "Southern Hospitality" that emphasizes community service, fun and relaxation.
Additionally, Maui provides children with a fun environment they can enjoy at their own pace. Children play in secured-access playrooms that are monitored by attendants. Kids are given healthy snacks, and can participate in activities as they wish.
The company also has a program to help kindergarten-age children transition from being home all day to being in the classroom. Children are left in Maui's care for intermittent periods of time, allowing them to learn that even though their parents are gone, they will be back.
"By the time school comes around and they drop them off, the child is used to it - they know mommy is coming back, it doesn't disrupt the teacher or the classroom," said McCarthy. The franchise's main location cooperates with a local community college to provide tuition assistance for college students with children.
McCarthy began franchising the concept last year after receiving numerous inquiries from tourists who were able to take advantage of her services while on vacation. "I had people from Texas, from Florida, from New York coming to me and saying there's nothing like it (on the mainland)," said McCarthy. "I had people asking me, 'Is this a franchise?' 'Do you sell franchises?' - so I started educating myself on franchising, and I decided that this was something I wanted to do."
At a glance
Initial Investment: $137,000-$221,000
Franchise Fee: $40,000
Royalty: 7 percent
Ad Fee: 6 percent local
Units: 1Maui PlayCare has a no-brainer sales pitch to prospective franchisees - each unit comes with its own trip to Hawaii. McCarthy trains new franchisees herself at the company's Maui headquarters.
That's not the only reason Marilyn Alexander, a retired child welfare worker, was interested in the concept. The Oklahoma City franchisee said the concept allowed her to begin working with kids again.
"If I would have had something like this when my kids were growing up, I would have used it - a lot," said Alexander. "Just thinking about going to the supermarket (now), and looking at some of these moms who are so stressed out because they've got three kids hanging off them, wanting this, wanting that; and these moms are just barely making it through."
Currently, Maui PlayCare has two units in development, one in Oklahoma City and another in Scottsdale, Arizona. McCarthy said she plans to have 20 more units signed in 2009, with roughly 10 to 15 open or under construction by the end of that year, plus another 50 deals signed by the end of 2010.

Francorp Client - Jersey Mike's Subs

Here is a great interview with Francorp Client Peter Cancro, CEO of Jersey Mike's Subs. Jersey Mike's recently surpassed 400 units and continues to redefine the sandwich franchise segment.

Having Words Peter Cancro Founder and Chief Executive, Jersey Mike’s Subs
By Dina Berta

Having Words Peter Cancro Founder and Chief Executive, Jersey Mike’s Subs(Nov. 17, 2008) Football has played a major role in the life of Peter Cancro, founder and chief executive of Jersey Mike’s Subs, based in Manasquan, N.J. From Pop Warner leagues to playing for his high school team, the sport and the coaches he encountered taught him valuable lessons about teamwork and leadership—and helped him pursue his entrepreneurial dreams.Cancro started working at Mike’s Sub Shop in the seaside town of Point Pleasant, N.J., when he was 14. Three years later, he bought out the owners. His football coach, who was also a banker, helped him get a loan to finance the deal. Cancro, who was president of the class of 1975 at Point Pleasant High School, was also the only graduate to own his own sub shop. He was an owner at 17, before he could legally use a slicer.After graduating from high school, he married his wife, Linda, and they opened more outlets, changing the name to Jersey Mike’s Subs to stress the chain’s origins along the New Jersey shore. Cancro eventually formed Jersey Mike’s Franchising Systems Inc., and began franchising in earnest. Over the years, he has never forgotten the leadership lessons he learned from football and teaches those concepts to Jersey Mike’s managers and franchisees.It’s pretty amazing that at the age of 17 you bought a restaurant.Looking back on it, I really don’t comprehend it. I started working very early, mowing lawns when I was 10 and 11. It was not that big of a deal to buy when I was 17. I had worked there four years. I did not think of failure at that age. I did not have any worries.FAST FACTSAGE: 51HOMETOWN: Point Pleasant Beach, N.J.EXPERIENCE: Began working in a local sub sandwich shop at age 14 and bought it three years later, before graduating from high school; built Jersey Mike’s Subs to a nearly 400-unit chainPERSONAL: married; four childrenHOBBIES: snow shoeing, running and playing tennisNow you take things slowly, methodically. I sort of leapt back then. Along the way we lose the ability to leap. That’s probably a good thing.Was it your high school football coach who helped you buy the restaurant?No. My Pop Warner coach, Rod Smith. I played for him before high school. I was quarterback of the team, and we won the championship of that league.I always stayed in touch with him, and he came to my [high school] games.When the owner of Mike’s put it up for sale in 1975, I started knocking on doors, trying to raise capital. It was a Sunday night at 9:30 when I came over to his house.He came to our annual meeting in May 2006. It was very emotional. He cried. I cried.Did you play any college ball?I hung up my spikes on Thanksgiving Day my senior year, after winning the championship, but I’ve carried on that [sports] mentality. You are not so much pushing people but pulling them along. Any great coach does not push. You show them the way and invite them in. That’s the way I was coached.Were you ever a coach?I coached my daughter’s soccer team and baseball [team]. The sports involvement is the same with music and activities out of school.When you are a teenager and young, there are certain teachers and coaches that influence you. It’s neat to take that into business—the philosophy of acting as a team, yet celebrating individual victories, mentoring and coaching and giving back and supporting each other.

For more information on franchisising and Francorp Clients, visit www.francorp.com

Francorp Opens Office in India

PRESS RELEASE


FOR IMMEDIATE RELEASE FOR INFORMATION CONTACT:
Francorp
(800) 372-6244

Francorp Expanding Into India


(Olympia Fields, IL) – Francorp Chairman Don Boroian announced today that Francorp has awarded Franchise India Holdings Limited the Francorp India franchise.

The contract was signed between Don Boroian, Francorp India U.S.A. Representative Atul Bhatara, and President of Franchise India Holdings Limited Guarav Marya.

“Franchise India Holdings Limited has already paved the way with franchise expos, franchise and business publications, and franchise consulting in India,” shares Boroian. “We are honored to have them as part of our team.”

Franchise India Holdings Limited has been Asia’s leading integrated franchise consulting company since 1999, with an authority on franchising, licensing, retailing, real estate, and marketing. With its strategically formed divisions, Franchise India Holdings Limited has created its own niche as the pioneers of the franchise industry and a small business authority in India.

According to Marya, “Francorp India will help boost investor confidence by providing professionally managed franchise consulting and development support, all under a common one-step gateway to facilitate entry into India and vice-versa.”

India is home to over a billion people, with a flourishing class of urban consumers possessing considerable amount of disposable income. With the continued growth of the economy, India has strengthened its claim to be a viable and beneficial destination for a foreign franchisor.

Since its beginning in the early 90s, the franchise industry has grown in leaps and bounds in the Indian sub-continent, and there is still much to explore. Based on the successful growth of many franchise brands in India, the future of franchising in India is highly promising.[1]

This promising future of the Indian franchising industry is backed up by an equally powerful market report that shows statistics of this thriving sector.
According to reports, for the past five years the Indian franchise market has recorded a steady growth of 30 to 35% per annum. Also, the annual turnover of the Indian franchise industry soared to 3.3 billion USD and is projected to soar higher in the coming years.[2] “We are very excited about the opportunity to enter the Indian market at a time when the concept of franchising is experiencing tremendous growth and acceptance,” noted Boroian.

For over 30 years, Francorp has been the leader in the franchise consulting industry. They have assembled a team of experts whose talents are coordinated seamlessly to create customized materials that fit the specific needs of their clients. As an international company, Francorp has the global reach to help clients expand their business, with a local presence to adjust their business to fit each country’s unique culture and laws. Headquartered in Chicago, IL, Francorp has assisted more than 10,000 companies for expansion, and has developed more than 2,000 franchise programs throughout the U.S., Japan, South Africa, Middle East, Central America, Malaysia, Philippines, Argentina, Chile, and Mexico.

For more information, visit www.francorp.com or call (800) 372-6244.

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[1] Franchiseek, Indian Franchise Statistics and Information. November 17, 2008, available at www.franchiseek.com.
[2] Franchiseek, Indian Franchise Statistics and Information. November 17, 2008, available at www.franchiseek.com.

Don Boroian Refocuses Francorp Team

The economy provides interesting obstacles for any company right now. It takes exceptional leadership to guide an organization through times like we face right now. Don Boroian has been through many difficult economic times and has risen to take on the challenge. Francorp continues to lead their industry and help make clients successful throughout the economic challenges. Francorp is behind Don Boroian and the employees support their leader and stand behind Don. Francorp has had a great year up to this point and Francorp clients have benefited from all of the support and guidance they continue to receive from the industry leader. It is times like this that the quality of the advice and support a new franchise receives is absolutely critical. Francorp has the infrastructure and talent to deliver that level of guidance that is needed for a new franchise system to be successful.

www.francorp.com

Don Boroian - Francorp at the Midwest Franchise Exposition

Francorp is the world leader in franchise development and franchise consulting. Don Boroian founded the firm over 32 years ago with the express goal of helping business owners build and grow their company's throughout the U.S. and abroad. Francorp has 15 offices including the corporate headquarters based out of Chicago, IL. Francorp is the only in-house fully staffed franchise development firm and has worked with over 2,000 successful franchise systems.
Francorp works very closely with each of the franchise exibitions across the country and around the world. Francorp clients benefit by having a presence and a sales team at these shows advertising for them. For more information on Francorp and the development work that the firm has done please visit the corporate site, http://www.francorp.com/.
Seize The Opportunity! Become Your Own Bossat the Midwest Franchise & Business Opportunities Expo
CHICAGO, Illinois (May 21, 2008) – North America’s largest Franchise and Business Opportunities Expo returns to Chicago – November 22nd & 23rd, 2008 at the Schaumburg Convention Center. Over 1,800 potentialentrepreneurs - looking to become their own boss or who are in search of the perfect business partner - will explore the most opportunities ever showcased in the Midwest.
“In a recent survey, conducted by careerbuilder.com, over 84% of Americans are dissatisfied with their jobs”, states Fred Cox, President of National Event Management. “We wanted to produce an event that gave Americansand business owners the chance to meet face-to-face and explore how to make their dreams of becoming their own boss a reality.”
Showcasing over 100 proven, successful franchise and business opportunity concepts in Chicago – “The Heart of the Midwest”, the event also provides valuable educational resources and a wide range of advisors and suppliersfor future business owners. Free daily seminars from reputable and insightful professionals have information that entrepreneurs need to know. Topics include: “How to Find the Business That’s Right For You”, “Legal Aspectsof Buying a Franchise”, and “IRS Requirements When Starting a Small Business.”
The Midwest Franchise and Business Opportunities Expo takes place Saturday, November 22nd & Sunday, November 23rd at the Schaumburg Convention Center. Hours of operation are Saturday 10am-4pm and Sunday11am-4pm. For more information, visit http://www.chicagofranchiseshow.com/.The Franchise & Business Opportunities Expo is produced by National Event Management. National Event Management is the largest producer of business ownership events across North America with 27 annual FranchiseExpos showcasing over 1,700 businesses to 65,000 prospective business owners annually. For more information on National Event Management visit http://www.nationalevent.com/.
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Don Boroian Continues to Lead Francorp Growth

Francorp's Chairman, Don Boroian held a meeting three weeks ago with the entire staff of 60 people at Francorp. The meeting was focused on the economy and the direction of our business, country and global economy. Mr. Boroian is extremely well read, he goes through 6 papers every day and reads numerous publications focusing on the economy and economic news.

He voiced some of the concerns that every American is going through right now. Where is the light at the end of the tunnel here? What is tomorrow going to look like? When could I possibly retire with all these swings in the market? Don Boroian has not acheived all of the successes and accolades he has compiled in his 55 years of business by being one of the "flock". Mr. Boroian expressed an extreme displeasure with the media and their focus on the negative aspects of our economy. Mr. Boroian spoke of the negative effects. "When an average consumer hears a news report that talks of doom and gloom, they don't go on that vacation or buy that car they were thinking about getting." It is a vicious cycle, the consumer's behavior is driven by the information they have, right now it is all negative information about the economy.
We see many companies downsizing and shrinking their businesses as a result. We then have less employment and therefore less spending. Mr. Boroian pointed out that of course there are some deep underlying economic issues at hand here, but the fact is that we create our own destiny. If we succomb to the media and the swirl of negative publicity, then we ourselves will fall into that trap.
Don Boroian is a bold person. He throughout his life has made decisions and moves with his business and clients that others would not have the gumption to do. As a result, he is Chairman of the world's largest franchise consulting firm, Francorp. Prior to Francorp Mr. Boroian created an industry in the music business by franchising a chain of music operations. He also did the same in the restaurant industry. It is this temperment for tumultuous times where most business owners are "pulling in their horns" that Don Boroian makes aggressive moves.
It was announced at the Francorp meeting that we would be bringing on some new staff. Could this really be true? That when all the news and publicity is saying that every company in America is faltering and Francorp is hiring new people?
Mr. Boroian mentioned, that now, more than ever, Francorp clients need the resources and attention of Francorp staff. Look at the world's most successful investors, they make their moves when the market is down...not when it's up! Having been in business for almost 33 years, Francorp has seen several recessions and market downturns, this is nothing new to Don Boroian.
Francorp has recently hired Gail Doonan on full time as Regional Director Administrator. Ms. Doonan brings over 30 years of business experience to Francorp and Francorp clients. She has owned her own businesses and successfully managed client projects for some time. Ms. Doonan will be working closely with the Francorp Regional Directors, who are a nationwide network of franchise brokers and franchise sales people.
Francorp also recently brought on Tiffany Franco as a full time person. Ms. Franco works closely with Mr. Christopher J. Conner, Vice President of Francorp Consulting. Ms. Franco brings over 10 years of business experience to the consulting firm.
Francorp will also be adding some additional staff to support and manage client development. Mr. Boroian closed the meeting with Francorp Staff with a final thought. "As long as we can continue to develop successful clients who sell franchises, Francorp will continue to sit at the top of it's industry. Everything we do is to be of the highest quality workmanship and nothing leaves this building without every bit of our effort and attention. At Francorp, the client is king."
http://www.francorp.com/
http://www.francorpconnect.com/

Immigrants as Franchisees

A key target for a franchise owner is an immigrant. As this article from the Wall Street Journal points out, immigrants tend to be ideally suited for to be a franchise owner. For more information on how to franchise a business or franchise development, go to www.francorp.com.

OCTOBER 13, 2008FranchisingChain ReactionFor many immigrants, owning a franchise is the path to the American dream

By RICHARD GIBSONhttp://online.wsj.com/article/SB122347728915015415.html?mod=djkeywordLike many immigrants, Lyudmila Khononov turned to a franchise to fulfill her American dream.When she was 10 years old, Mrs. Khononov's family left Odessa, Ukraine, for the U.S. in search of a better life. "There was a lot of discrimination against Jews," she recalls of their exodus 30 years ago.As they began anew in this country, "we had nothing except a dream," Mrs. Khononov says. "But our parents told us we could be anything we wanted to be."After marrying, Mrs. Khononov and her husband, Gregory, ran a diner in Queens, N.Y., for six years. But when it came time to think about expansion in 2001, they borrowed money from a bank and friends and turned to a franchise instead.Mrs. Khononov says she spotted "tremendous growth potential" for the Subway fast-food concept in neighboring Brooklyn, where there were only a handful of the outlets, primarily in gas stations.She says they considered it a fairly easy concept to operate since "you don't have to prepare all the food from scratch" and the franchiser's big marketing campaign would give their business instant recognition. Her husband, also an immigrant, adds that it would have been much harder for them to expand the diner on their own.The decision has paid off. The Khononovs now operate four Subway stores in Brooklyn. And this past summer, Subway, a unit of Doctor's Associates Inc., named Mrs. Khononov its top multistore franchisee in North America, among 12,200 competitors.Built-In HelpMany immigrants look to establish themselves by running their own business. And the chance to start afresh after enduring hardships and adversity in another country often stokes their resolve to succeed. But starting -- and successfully running -- a small business is hard enough without the language and cultural barriers that immigrants can encounter.So, many immigrants turn to a franchise concept. With its proven track record, name recognition and built-in marketing, a franchise can take out a lot of the uncertainty of running a business. And immigrant entrepreneurs often are able to tap their own immigrant community for customers, as well as use the franchise name to broaden that base.A 2006 study by the Ewing Marion Kauffman Foundation of Kansas City, which advocates entrepreneurship, found that immigrants are 30% more likely to become entrepreneurs than are native-born Americans.One reason so many immigrants gravitate toward running their own business may well be because of their experiences with risk, often starting from scratch, says Vivek Wadhwa, an executive in residence at Duke University in Durham, N.C., who has written several papers on immigrants for the foundation and who, after emigrating from India, founded two software companies in the U.S."They've learned what it's like to lose everything," Mr. Wadhwa says. "Once you've done that, you're less afraid of doing it again."Hospitality BusinessThe number of foreign-born franchisees operating in the U.S. businesses isn't known. The International Franchise Association, the sector's leading organization, and major franchisers say they don't keep count.What is known is that some franchised concepts are particularly attractive to immigrants. For example, nearly half of the hotel and motel units in the country -- most of which are franchised -- are run by first- or second-generation East Indians and Pakistanis, according to Fred Schwartz, president of the Asian-American Hotel Owners Association.Anil Chagan is one of them. Raised in South Africa by Indian parents, he immigrated to the U.S. in 1978 at age 24, in part because of the apartheid then embroiling South Africa, where he ran a men's clothing store.Mr. Chagan initially worked at a brother-in-law's motel in East Oakland, Calif. But after two years, he sought to acquire his own. "I couldn't see myself working for somebody else," he says.He purchased a motel in Visalia, Calif., that wasn't affiliated with any of the big national brands. After five years, he converted it to an EconoLodge, a unit of Choice Hotels International Inc., at the chain's invitation. Today, Mr. Chagan's company, Infinite Hospitality, operates two hotel-motels in central California and is building three more. All are franchised, but with various franchisers.Being a franchisee "has been a very significant part of my success," Mr. Chagan says, adding that the affiliation with a national brand helps in obtaining loans and various construction permits.Getting the Message OutOne of the biggest challenges immigrant business owners face -- especially those unfamiliar with local customs -- is understanding what the market wants and then effectively getting their message out."With a franchise," though, says Duke University's Mr. Wadhwa, "that's already done for you."It was RE/MAX International Inc.'s built-in Internet marketing that convinced Shawn Nam, a South Korea native, to sign on with the big real-estate franchiser. When looking up properties on a specific area on the franchiser's Web site, the local franchisee's address pops up. Mr. Nam figured that constructing his own site -- and the marketing to go with it -- would cost him thousands of dollars.Now 39 years old, Mr. Nam immigrated to the U.S. with his parents when he was in high school. "We were looking for a better life," which, he says, included freedom of speech. He worked for his father's janitorial company before enrolling in Rutgers University in New Jersey, dropping out after three years to help support his family. He then set out for a career in real estate.Helping HandThe Situation: Many immigrants look to franchises when opening a business.The Appeal: With its proven track record, name recognition and built-in marketing, a franchise can take out a lot of the uncertainty of running a business.No Guarantees: Cultural and language barriers can still be a challenge.He got a job as an agent at the Prudential Fox & Roach real-estate agency in Voorhees, N.J., and quickly became one the office's leading producers, focusing on the area's large South Korean community, says Paula Goldberg, the agency's vice president. After three years with the Prudential affiliate, Mr. Nam left to start his own agency under the RE/MAX banner, with the Korean community his primary customer target.Mr. Nam had a rough start, though. He believes that several of his agents quit because "they didn't want to work for a Korean. They didn't tell me," he says. "But I can feel it." Today, he counts Koreans, Chinese, Filipinos and East Indians among his agency's employees. Its president is a Palestinian.Making the CutShahin Urias was spurred by the opportunity to do something few women in her native Iran enjoy -- own her own business.Mrs. Urias, who survived bombings and, for a time, lived with her young children in a mud basement-shelter in Tehran during the Iraqi-Iran war in the 1980s, came to the U.S. as a refugee 16 years ago.Her early years here were hardscrabble. She worked in a Luby's cafeteria in Austin, Texas, where, after six months, a cafeteria manager encouraged her to pursue her desire to own a hair salon. At first, Mrs. Urias's poor English kept her out of beauty school, but with her children's help her linguistic skills improved. After 11 months of study, she earned a degree in cosmetology.She started working at a Sports Clips Inc. hair-care franchise in Austin as a part-time stylist. After moving her way up to manager, Mrs. Urias, by then remarried, moved to Tucson, Ariz., and purchased her own Sports Clips franchise -- the first one in that area. While she could have opened an independent shop, Mrs. Urias says she saw advantages in going with a proven concept with a solid market niche and "policies and procedures in place. All the hard work is done."Also, Sports Clips, she says, is a known national brand. So, people who either move to Tucson or are passing through are familiar and comfortable with the brand.Mrs. Urias acknowledges finding bookkeeping and some other aspects of running a business unfamiliar, but says help from Sports Clips is only a phone call away. "Without their support, I would be lost."Although she has had her shop only a few months, Mrs. Urias, 45 years old, has plans to open two more. "I think I'm doing great," she says. "My numbers may not be up there yet, but I'm definitely on the right path."—Mr. Gibson is a writer in Des Moines, Iowa.Write to Richard Gibson at reports@wsj.com

Talk to Me: Good Communication As a Business Strategy

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081010/BIZ/810100325/1001

September 2008 Franchising World
The cornerstone of franchisee communications is field support.
By Joe Schumacher and Robin Posey
Franchises depend a lot on trust. Like any relationship, they require open, honest communication. A good franchise relationship is a valuable business asset to be nourished and developed. By providing consistent, quality communication and field support, the franchisor creates a reservoir of good will. The ability to tap into this reservoir when something new or difficult comes along can be invaluable. The successful franchisor places great emphasis on structuring the relationship in a way that supports the needs of the franchisee consistently asking, “What information does the franchisee need from me to be successful?”
Similarly, effective franchise communication is a two-way street. Franchisors must ask, “What information do I need from the franchisee to be successful?” In many organizations, these questions are asked and answered by the field staff with the support of a team at the home office. It’s important to identify the key roles and responsibilities of effective field teams that specialize in guiding franchisees through every phase of their development. The field organization must also have counterparts at the home office to support their efforts, such as a help desk or franchise relations specialists. Careful coordination of field level and home office resources allows a franchisor to keep channels of communication open and ensure that franchisees feel supported. Equally important, successful franchisors leverage the field team as ambassadors of the franchisor’s business philosophy, culture and mission.
Support The cornerstone of franchisee communications is field support. In addition to helping the franchisor keep a finger on the pulse of its franchise community, field operations support is one of the greatest resources a franchise system can provide to its franchisees. An added benefit is that, through face-to-face visits, phone calls and e-mails, the field team can help ensure that each location is running according to the system. Coach the field staff to make the most of every phone call and in-person visit: ask good questions; bring new, useful information; take an interest in each franchisee and location; and carefully document and communicate any problems or issues.
Communication As a franchise grows, communication, especially with geographically distant franchisees, can make or break the relationship. Communication with franchisees should be clear and consistent. Reach out by phone, e-mail and in-person on a regular basis to share ideas and identify issues before they become larger problems. A franchisor’s worst nightmare is to hear, “How was I supposed to know you changed the logo?” Regular company newsletters with “It Worked for Me” tips and franchise milestones are useful, but don’t forget the personal touch. Dust off company stationery and send a handwritten note congratulating a franchisee on an accomplishment or thanking them for a great idea.
Franchisees who don’t have someone to turn to with questions and problems often find their own, less desirable answers. This can also lead to a “no one at the home office ever listens to me” attitude. Providing help desks and other points of contact for franchisees to turn to with their challenges and successes can help foster goodwill with franchisees. Make active listening a priority. Franchisees should feel comfortable picking up the phone with any concerns, at any time. Train home office personnel to listen patiently and identify solutions. As always, documenting this communication is a key step. Here’s the bad news: there will sometimes be conflict between franchisees and franchisors. Resist the urge to bury your head in the sand and hope the problem will disappear. It probably won’t. Conflicts often go from bad to worse when field staff and home office personnel ignore concerns from the field. It’s easy to call the most satisfied franchisee, but it’s the consistent and open communication one has with an unhappy franchisee that can save the brand time, dollars and frustration in the long run.
Gatherings Regional meetings can be fun and informative. Annual conventions provide a great opportunity for the franchisor to communicate with franchisees about policy changes, best practices and new ideas. These types of events also give franchisees the chance to share issues and successes with their fellow franchisees, a valuable opportunity. Goddard Systems Inc. takes advantage of the annual convention to recognize its top franchisees through recognition and awards for their efforts. Gatherings give the franchisor a platform for introducing new staff, vendors and ideas to the franchisee community. Lastly, gatherings are a way to build momentum with new products, services, programs and initiatives.
Innovation One of the franchisor’s greatest responsibilities is to keep the product or service fresh and to keep franchisees informed of trends in their field, as well as trends in business management. This can be accomplished through research and development, focus groups and through partnerships with industry experts. Is your company flexible and open to change? Technology is here to stay. Use it to enhance franchisee communication through e-mail, e-newsletters and blogs. Company Web sites or Web portals can be used to streamline reporting, make forms and templates readily available and answer frequently-asked questions.
Philosophy If a company culture is not franchisee-focused, it’s time to start shifting. Respect for franchisees, coupled with positive day-to-day interactions between field staff and franchisees, combine to create great franchise relationships. Even inspections by the franchisor can be a positive experience, when a company has established trust and respect with franchisees. Always be sure to recognize what’s good at the franchise, even if areas of improvement need to be highlighted. Franchisees want to know that the franchise organization sees the entire picture, not just the negative. Also, build some flexibility into inspections. If something truly unusual happened recently, the field inspector should be able to account for that in scoring.
Develop core company values, and coach field staff to put them into practice. For instance, at GSI, all phone calls and e-mails from franchisees must be returned within 24 hours. Employees also know that it’s their job to “close the loop.” The advertising executive knows that if a franchisee asks a question about construction, it’s his responsibility to get the franchisee to the right person and to make sure the question gets answered. It’s a cliché, but is your franchise a team? It is essential that both franchisee and franchisor understand that the success of one depends on the success of the other. Franchisees should know that their opinions are needed and valued. Encourage feedback, especially around big shifts and new programs. Ask the best of the best in your franchise for their input on issues big and small, and then enlist their support as new programs are rolled out. Tap successful franchisees to mentor new or struggling franchisees. Maintaining healthy franchise relationships is a full time job. Keep current, stay flexible and promote positive interactions. Home office employees with clear communication, good listening habits and open minds ultimately make for happy, successful franchisees. Joe Schumacher is chief operating officer and Robin Posey is franchisee liaison of Goddard Systems, Inc. They can be reached at jschumacher@goddardsystems.com and rposey@goddardsystems.com.

Francorp Client - American Prosperity Group

American Prosperity Group, the First Retirement and Estate Planning Franchisor, Exceeds First-Year Franchise Goal
Last update: 11:19 p.m. EDT Oct. 9, 2008
WAYNE, N.J., Oct 09, 2008 (BUSINESS WIRE) -- American Prosperity Group (APG), headquartered in Wayne, NJ, is the first and only retirement and estate planning organization to be franchised. Nine APG franchises are now operating in cities in the eastern United States, two more than the company's 18-month objective. More are planned.
APG is the creation of Mark E. Charnet, a Certified Annuity Specialist. For over 26 years, he has been helping people solve their individual problems of successful retirement and estate planning. APG does this by implementing those parts of a total retirement and estate planning system needed to meet each client's needs.
The APG system has been so successful for over a decade that Mr. Charnet has turned his precepts and product offerings into the first-ever retirement and estate planning franchise. The current franchises are operated by:
-- Bill Romeo, Matthews, NC
-- Dawn Sarnoski, Closter, NJ
-- Shane Couturie, Bryn Mawr, PA
-- Peter Murphy, Santa Fe, NM*
-- Mark Timmick, Ellicott City, MD
-- Mike Linker, Totowa, NJ*
-- Kevin Lynch, Belle Mead, NJ
-- Ari Cohen, Bergenfield, NJ*
-- Holly Sikora, Sicklerville, NJ*
"Now, we are offering additional franchises," Mr. Charnet said. "The franchisees we seek are ideally situated in metro or suburban areas with average or higher senior populations. APG is a relatively low-overhead franchise, with an investment under $100,000. Our present franchisees are well on the way to paying off their franchise investment--and some have already done so within their first few months of operation.
"What we look for in a franchisee is entrepreneurial spirit. Financial know-how is not as important as the ability to be a good presenter, speaking to small and medium-sized groups. Empathy--the talent for caring about peoples' needs--is a must, as is a good sense of organization. This is an excellent opportunity for those with sales experience, but that experience need not include finance."
For franchisees, Mr. Charnet has fine-tuned APG's systems, products and operating procedures developed over his years of experience. Now, others can present his proven system to good effect. "It's all worked-out, step-by-step," he said. "Also, every franchisee receives complete coaching, supervision and assistance from me and my staff. The APG precepts are teachable, portable and repeatable--the keys to any successful franchise."
As for success, Mr. Charnet is a sterling example. During and after college, he built one very successful career in insurance sales, only to lose everything due to the insurance company's dramatic management change. Beginning again with virtually nothing, he developed the proven retirement & estate planning methods taught exclusively by APG. In aiding others in building and retaining income, he has built lasting success for himself.
Those interested in an APG franchise should contact APG at 1-973-831-4424. On the Web: www.apgfranchise.com
*(offices scheduled to open within 90 days)
SOURCE: American Prosperity Group Serpente & Co. Inc.
Joe Serpente, 856-275-6931

Francorp Client - Plains & Prints

Plains & Prints sets sights on Asian market
Plains & Prints was established in November 1994 by Roxanne and Erickson Farillas. Then known as Prints & Plaids, the first boutique opened in Shoppesville, Greenhills. The company’s first products were lace-edged towels and basic polo shirts.
Later on, the brand ventured into women’s apparel, carrying the concept of classic and stylish, which became a hit with teenagers and young professionals.
In 2002, Plains & Prints took on Gretchen Barretto as endorser and this move brought the brand to the national consumer’s consciousness.
Plains & Prints has strengthened its position as a major player in women’s apparel by providing stylish and classic apparel. The present product line includes shoes, handcrafted bags, belts, Bread and Butter (basic tees), Down Under (underwear), Eve (eau d toilette), and Intuitions (body spray).
In terms of brand recall and market share, Plains & Prints ranks among the top 5 local women’s apparel brands. The brand has become synonymous with quality clothing for women with style.
Plains & Prints offers franchise opportunities to entrepreneurs who wish to own and operate their own Plains & Prints boutique. Plains & Prints has been franchising since November 2002 and has franchised outlets in Cebu City, Bacolod, Iloilo, Davao City, Cagayan de Oro, Baguio, Dagupan, Cabanatuan, Marilao and Valenzuela.
Plains & Prints was awarded the Most Promising Filipino Franchise (retail category) in the 2004 Franchise Excellence Awards. The company’s franchise program was developed by Francorp, a leading international franchise consultancy firm with offices in the Philippines, Malaysia, Japan, United States and South America.
The brand now embarks on a bold expansion move that, hopefully, will introduce the Plains & Prints concept to the Asian market.
Leading the expansion plan is the introduction of new collections that highlight the creativity and ingenuity of local fashion designers. Plains & Prints has collaborated with designer Rajo Laurel for its high-end R.A.F. (Rich and Famous) line.
Roxanne explains that the new collection highlights Laurel’s avant-garde approach to fashion, featuring designs that incorporate architecture, romance and luxury.
Another major leap for Plains & Prints is its choice of Thai-British model Paula Taylor as its image model.
“With Paula as the model of our new campaign, we are confident that Plains & Prints will be given more exposure globally and hopefully, discovered as a brand that provides a new twist on classic fashion,” says Roxanne.
Next on the brand’s agenda is opening stores in key cities in Asia, starting with Thailand and Malaysia. The brand has 49 stores in the Philippines, including the newly opened branch at the fifth level of the Shangri-La Plaza Mall. Aside from its Asian expansion, Plains & Prints also wants to open more branches in prime locations in the country.
“Despite stiff competition from international brands, Plains & Prints still emerged as a top local brand which Filipino women prefer,” says Roxanne. “The next step is really to move forward and introduce Filipino fashion to the world. Now that we’ve been given an opportunity to do so, we have big plans to make our mark in the international fashion community.” Dinna Chan Vasquez

www.francorp.com

www.francorpconnect.com

What's Up Dog! To Expand Through Franchising

What’s Up Dog to Expand Through Franchising
San Francisco, CA, October 01, 2008 --(PR.com)--

What’s Up Dog has announced they will be launching an aggressive expansion program through franchising.For over five years, What’s Up Dog has offered the hot dog enthusiast a variety of gourmet hot dogs and sausages within the San Francisco area. Their tantalizing menu consists of old carnival favorites like the corn dog, chili cheese nachos and garlic fries. But the eclectic selection of frankfurters and sausages (“Lemon Chicken”, Veggie Tofurky”, “Kielbasa”) has reinvented an American favorite.Americans eat an estimated 20 billion hot dogs a year, with 150 million consumed on Independence Day alone.

We love hot dogs so much that the U.S. Chamber of Commerce actually dubbed July as National Hot Dog Month over 50 years ago.It was this shared love for hot dogs that inspired What’s Up Dog owner King Lei to open his own hot dog shop. To ensure that he only offered the best, he visited hundreds of hot dog stores from Los Angeles to New York. And his research resulted in rave reviews. “People love our name and products,” remarks King.This response has led What’s Up Dog to Francorp, the world’s leader in franchise consulting, to assist them in the development of their franchise program.

For more information about What’s Up Dog, call (415) 864-3707
or visit www.whatsupdogs.com

###

Franchising - The #1 Way to Expand Your Business - Francorp Partner

Business Insight
FRANCHISING – The #1 Way To Expand Your Businessby Kent Boxberger
I was talking with a client of mine the other day, who has 2 company owned locations in the home services business, and he asked me how to grow his business without borrowing lots of money from his bank and hiring more employees. I told him that most businesses who want to grow successfully, have to find extra money and then fund themselves into their growth, to make enough profit to service the debt, which on average takes 2-3 years to turn a profit on the expansion. His next question was, “How can we do it quicker than 2 or 3 years?” The answer is Franchising.
In today’s business climate, companies are looking for more ways to expand their sales and operations. It takes more money and more people. Franchising your business, solves both of those challenges. By franchising your business, you solve the problem of borrowing or using your own money, by partnering with others who invest their money in your business model. Secondly, you solve the personnel problem, because your partner (franchisee) hires and manages the staff to run the business. Picture for a moment, your business having 50 or more locations. Can you fund those locations and employ all those people? In addition, how long do you think it will take to establish those 50 locations? Even if you can, still there’s the risk, red tape and time involved in running the operations successfully. Franchising makes having those 50 locations a much easier task. You don’t fund those locations yourself, nor do you manage and hire the employees, plus the time establishing those 50 locations, is greatly reduced and accomplished with much more ease.
What types of businesses are candidates for Franchising? There are literally thousands of businesses that are franchised and growing. Historically, we think of fast food businesses like McDonald’s, Burger King etc., however, restaurants is only a small percentage of the types of businesses that franchise. Companies such as H&R Block, Ace Hardware, John Deere, Payless Car Rentals, as well as services businesses in the healthcare, medical, advertising, education, high tech, automotive, data processing, financing, real estate, business services and home services arena’s, have also franchised successfully.
To Franchise your business, there are typically only a few requirements to get started. The concept of franchising, is about taking a proven business model that is profitable and duplicating that model successfully. Start-up businesses are not candidates for franchising, due to the fact that there is no financial concept that is proven, nor any history of success. People who buy businesses are looking for a proven system of success that they may invest in, thereby eliminating most of the flaws, risks, mistakes and learning curve that comes with starting a business from scratch. This becomes increasingly important when you consider that according to government statistics, 95% of all start-up businesses in this country fail. This pales in comparison to franchises, which have a 70% record of success.
From an investment standpoint, you have a 70% chance of business success when buying any type of franchise, as opposed to a 5% chance of success, when starting a business on your own from scratch, regardless of how good your idea is, how much money you have or what experience you may bring to the table. Franchises are regulated and have strict requirements by the FTC (Federal Trade Commission). They’re also regulated by most states, which helps protect the Franchisor and Franchisee to bring about the likelihood of more success. Businesses also consider Licensing their business model, as a way of expansion, but in many cases these licensed companies are operating illegally as a franchise. There are specific differences between Licensing and Franchising, that even many good attorneys misinterpret. As with any franchise, still there are risks that accompany any business, no matter what factors are in place – there are failures, as well as great success stories.
The franchise industry concept has been especially strong and growing rapidly, since the 1970’s. The reason, is that it affords people the opportunity to be in business for themselves, run their own ship…………..and have a partnered foundation of associates to work with, who’ve claimed the experience to be successful. If you want to expand your business in the quickest and most economical way possible, then maybe it’s time to consider Franchising. There are hundreds of topics to consider before you do, so be diligent in getting the professional advice required, from franchise experts who have years of experience and success under their belt. Your long term success depends on it.

MarketCorp International, Inc. “The Franchise Experts”
ww.MarketCorp.net
678.462.8646
Atlanta, GA USA

Economy Bailout

McCain’s bailout gambit
By Alexander Bolton and Mike Soraghan
Posted: 09/24/08 08:27 PM [ET]
The decision by John McCain to suspend his campaign is giving panicky GOP lawmakers political cover and appeared to inject new life into negotiations on a proposed $700 billion bailout of the financial markets.
At press time, Senate Democrats emerged from a meeting with Treasury Secretary Henry Paulson and reported a conceptual deal they hoped could receive a vote before markets open on Monday.


Majority Whip Dick Durbin (D-Ill.) said a bill could be produced as early as Thursday, with debate and a vote likely over the weekend.
Ideally, Durbin said the Senate would finish the bill before Monday.
Republicans have emerged as the chief obstacle to swift passage of President Bush’s bailout proposal, and House Speaker Nancy Pelosi (D-Calif.) and Minority Leader John Boehner (R-Ohio) held a summit Wednesday with Paulson to try to calm the revolt among lawmakers.
The administration has pulled out all the stops to win support for the package.
President Bush was to address the nation about the bailout on Wednesday night, and lobbying groups with deep ties to Republicans earlier in the day circulated letters urging their allies to support the president’s plan.
Paulson also indicated that the administration was dropping its resistance to limiting the multi-million dollar severance packages offered to executives of firms that take advantage of the bailout.
“The American people are angry about executive compensation,” Paulson said. “We must find a way to address this in the legislation, but we must do so without undermining the program.”
Yet Rep. Tom Cole (Okla.), the chairman of the House Republican campaign committee, declared the only way to save the bailout would be for McCain and Sen. Barack Obama (D-Ill.) to take the lead, and for the Senate to vote before the House.
“These guys are more influential than their votes at this particular time,” Cole said.
He said McCain and Obama were the voices that would matter most to lawmakers wrestling with a difficult vote just weeks before presidential and congressional elections.
“I think they should deal with it first,” Cole said of the Senate. “They have both of the presidential candidates, and it’s hard to see anyone voting for a package if the nominee of their party doesn’t.”
Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee who has participated in talks on the bailout, said Republican senators discussed the need for the upper chamber to take the lead during a private meeting Wednesday afternoon.
“Maybe it would be best at this point for the Senate to take the lead,” said Corker, who said this sentiment is “growing” among his colleagues.
Paulson squeezed the meeting with Pelosi and Boehner between two appearances before congressional committees, at which many Republicans expressed opposition to the rescue plan, while Democrats seemed more accepting, but interested in making changes.
Wall Street markets did not plunge for a third straight day, although the Dow Jones industrial dipped by 29 points. The NASDAQ, the largest U.S. electronic stock market, was up for the day.
Republicans are the key to passing the bailout because Pelosi has told members of her caucus she won’t bring the package to the floor unless there is substantial Republican support. But conservative Republicans have rallied against the plan, and former House Speaker Newt Gingrich (R-Ga.) said earlier this week that Republicans should vote against the it.
House Financial Services Committee Chairman Barney Frank (D-Mass.) said his staff was working with the staff of Sen. Chris Dodd’s (D-Conn.) Banking Committee to reach agreement on a single bill, rather than separate House and Senate versions.
Frank added that he believes Pelosi has a minimum threshold of Republican votes necessary to bring the bill forward, but he said he did not know what that number was.
“They’re not even close to having enough votes,” said Rep. Jason Altmire (D-Pa.), a freshman facing a tough reelection. “This has to be bipartisan.”
Senate Majority Leader Harry Reid (D-Nev.) pleaded for Republicans to support the package, which conservatives have roundly criticized as too expensive and an overreach of federal power.
Reid said Tuesday that only one Republican on the Banking panel could be counted on to support the proposal first floated by Paulson and Federal Reserve Chairman Ben Bernanke.

Several conservative Republicans continued to voice opposition on Wednesday.
Rep. Jeb Hensarling (R-Texas) complained that the bailout plan was a “slippery slope to socialism.” He said there are more free-market options, such as a suspension of the capital gains tax, that would bring relief to financial markets without intervention.
“The markets are panicking,” added Rep. Gresham Barrett (R-S.C.). “The government doesn’t need to panic too.”
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But senior Republicans on the Financial Services Committee were more supportive, urging lawmakers to work with Paulson and Bernanke.
With support apparently slipping, businesses and trade groups not directly affiliated with the financial services industry on Wednesday began to lobby more forcefully in favor of the rescue package, an effort that participants hoped would provide additional political cover to members worried that voters will view the plan as a taxpayer-funded bailout of rich Wall Street investors who made bad bets.
The National Association of Wholesaler-Distributors, a group that counts 40,000 members, urged Congress “in the strongest terms possible” to approve the administration’s plan.
“This is one of the hardest letters that I’ve ever written, because normally we’re against government intervention in the marketplace,” said Jade West, NAW’s vice president for government relations.
But the crisis warranted sweeping government action, West said, because the fallout of the credit crunch will soon begin to affect the broader business community.
“This is a Main Street, not a Wall Street, position.”
Now the message NAW’s members want carried to Capitol Hill is, “Do something, damn it,” West said.
Lobbyists for the U.S. Chamber of Commerce, the Real Estate Roundtable, the National Federation of Independent Business and the International Franchise Association all urged Congress on Wednesday to act.
David French, vice president of government relations for the International Franchise Association, said franchisees were already reporting difficulty in getting credit.
“Stuff that was available two years ago is just not available today,” French said.
“From our perspective, this is much more than a Wall Street problem.”
Several Democrats said the administration and Bush himself needed to do a better job of explaining to the public the consequences of not passing the bailout.
“I get the why,” said Rep. Mel Watt (D-N.C.). “But my constituents are asking me why, not how. The administration has to be honest with America about the ‘why.’ ”Jim Snyder contributed to this article.

Entrepreneurs in Today's Economy

Inside Entrepreneurship: Turmoil likely to make angels cautious
By SUSAN SCHRETERSPECIAL TO THE P-I
Q: Getting investors for my startup is essential to moving forward. In your opinion, will the recent roller-coastering of the stock market and the economy in general make finding independent investors more difficult? Or are potential investors looking for alternatives to the stock market?
-- M.P., Seattle
A: Entrepreneurs usually are a highly optimistic and confident breed. But judging from the letters I've received this week, their mood has become more cautious.
Prospective entrepreneurs are questioning the timing of their startups. They ask, "Should I bother to start up in this economy?" or, "If I work at my startup on weekends, can my employer make any claims on my technology?"
I like this wry commentary best: "Susan, since banks and investors have turned me down, can you give me the government bailout address to rescue my failing business?"
While it's clearly too early to make many useful forecasts, I do believe that recent financial market turmoil will affect the psyche of independent angel investors for some time to come.
Unlike venture capital fund managers, angel investors are not paid a salary to invest in entrepreneurial companies. It is a discretionary hobby to them. Further, they invest their own money rather than act on behalf of other institutional investors. This means that the amount of money they budget for new venture deal investments is directly related to the value of their retirement accounts, real estate and security portfolios. If their liquid net worth has plunged dramatically, then expect angels to write fewer checks to young companies.
This is not good news for most startup entrepreneurs, who usually are not far enough along in business development to qualify for venture capital or more traditional asset-based financing offered by commercial lenders.
During the past few days, I've spoken to angel investors from around the country. The most common sentiment expressed by them was a need to get a better handle on the stock market, the overall economy, the fiscal demands on the U.S. government and the value of their portfolios. More active angels suspected that they would have to allocate more money to existing investments that might struggle during a slow economy rather than invest in new opportunities.
Here are some likely responses from venture investors.
Expect angels and venture capitalists to use the current market conditions as an excuse to bring down company valuations. Investors will want to build in "more room" to make money by starting with the lowest valuation possible.
Expect investors to demand more onerous liquidation multiples and preferences like they did in the aftermath of the dot-com meltdown.
Expect investors to favor startup companies that can reasonably reach cash flow break-even sooner rather than later. First-round technology development investors will worry that entrepreneurs may never secure second-round investors needed to finance product introductions. Entrepreneurs will have to look further down the road in developing their financing strategies.
Expect investors to favor entrepreneurs who have a really practical answer about how investors will ultimately get their money back. IPOs will get tougher. Corporations will become more selective in their buyout activities.
To your last question, will angel investors eventually view privately held, high potential companies like yours as a better deal than the seemingly more volatile public markets? Certainly it's a good talking point.
You can strengthen your appeal by looking for every possible way to reduce the perceived risk associated with investing in your company. This means pursuing operating partners to speed progress. It also means lowering your cost structure and checking the credit-worthiness of customers. Like investors, you, too, have to protect every penny you have.
Susan Schreter writes about startup planning and small-business financing for the Seattle P-I. She has an investment banking and buyout background and serves as a coach to entrepreneurs and consultant to corporations. Find more Inside Entrepreneurship columns at seattlepi.com/venture. Send questions about small-business management or raising money for your business to susan@insideentrepreneurship.com or by mail to Inside Entrepreneurship, c/o Seattle P-I Business Section, 101 Elliott Ave. W., Seattle, WA 98119.

Blockbuster to Stick to the Bricks

Blockbuster sticks to the bricks
06:29 PM PT, Sep 23 2008
The instant gratification of video-on-demand and the novelty of movies by snail mail may get many a consumer more excited than an old-fashioned trip to the corner store, but for Blockbuster Inc., the store is still the thing.
The Dallas-based video rental and retail chain, which closed hundreds of stores over the last year, plans to revamp many of its remaining outlets, expand its movie and game offerings, and add more rental and download kiosks.
But it’s still keeping an eye toward increasing Internet-based downloads through Movielink, the digital movie site it acquired last year, and attracting more movie-thru-mail subscribers. Critics say stores are passé, but Blockbuster notes that its mail customers also have the convenience of returning or trading-in their mail-ordered movie at stores — something which Netflix can't do because it doesn't have brick-and-morter outlets (just in case an Ingmar Bergman flick showed up in the mail when you were more in the mood for "Sex and the City").
“Most people read a lot of interesting headlines, and we enjoy the headlines, about Netflix, Amazon, Apple, so forth,” says Tom Casey, Blockbuster’s chief financial officer, during a presentation at Thomas Weisel Partners’ Annual Consumer Conference on Tuesday. “But what you need to understand is we really have a market that we address that’s nearly $36 billion in size. Video-on-demand is actually pretty small.”
That $36-billion figure is the total market for DVD's and game sales — where Blockbuster has been expanding — and movie rentals. Blockbuster has a 40% share of the $9.6 billion movie rental business, of which in-store rentals account for more than half the total revenue, followed by mail subscription and video-on-demand, according to the company.
Blockbuster reported a loss of $44.7 million, or 23 cents a share, in the second quarter, ended June 30, compared to a $34.2 million loss in the same period last year. But same-store revenue rose 9%, and the company reaffirmed that it expects a profit for the year.
“Traffic tends to transfer to a nearby Blockbuster whenever they close a store,” says Arvind Bhatia, an analyst at Sterne Agee & Leach, Inc., adding that he estimates a “normal attrition” of about 150 store closures in the U.s. this year and next. Blockbuster now has about 8,000 stores worldwide.
"Financially, they're doing well," he adds.
Blockbuster plans to increase its stock of rental and retail movies and games at each store as well as pay for store refurbishing, from paint and carpeting to adding Blu-ray kiosks. Some stores have already undergone a broader remodeling, complete with gaming stations and cafes.
“Too many of the stores still look like the old blue-and-yellow 90s VHS stores,” Casey says.
And analysts think Blockbuster still has life left in its stores — particularly on the retail market — before the Internet or video-on-demand becomes the dominant delivery system.
“We all have the idiot friends who have collections of hundreds of DVDs. Nobody is going to collect 100s of DVDs on their hard drives,” said Wedbush analyst Michael Pachter. “And the movie studios don’t make as much" on rentals or on-demand services, where the profit margins are smaller.
Pachter notes that as long as Blockbuster gets customers in stores and studios release movies on DVD before they allow video-on-demand and streaming online, the company will thrive.
“Blockbuster says, why not buy a movie while you’re in here? What else can they sell? Popcorn, video games, maybe a TV or an iPod,” Pachter said. “They’re merchandising better, and that’s absolutely working.”
— Swati Pandey

Yum! Donates $80 Million to WFP

Yum! Donates $80 Million to WFP
2008-09-25 — The Clinton Global Initiative today recognized Yum! Brands (NYSE:YUM - News) for its worldwide commitment to raise and donate $80 million over the next five years to help the World Food Programme (WFP) and others provide 200 million meals for hungry school children in developing countries. In addition, Yum! pledged over the next five years to donate 20 million hours of hunger relief volunteer service in the communities in which it operates; $200 million worth of its prepared food to hunger agencies in the United States and use the company's marketing clout to generate awareness of the hunger problem, and convince others to become part of the solution.
President Bill Clinton announced Yum's commitment during a special Plenary Session that made school feeding a top priority in the fight to end global hunger. The commitment will mean that 1 million children could come to school every day for an entire year and receive a nourishing meal.
The funds will be raised through Yum! Brands World Hunger Relief campaign, the world's largest private sector hunger relief effort to help end world hunger. World Hunger Relief supports the United Nations WFP and other hunger relief agencies.
"Hunger is unacceptable. As a society, we should not and can not tolerate the fact that nearly 925 million people are starving and go to bed hungry every day. As the world's largest restaurant company, we believe it is our privilege and responsibility to find a meaningful solution to this critical problem," says David C. Novak, Chairman and CEO of Yum! Brands.
Global hunger has reached epic proportions--reaching nearly 1 billion people--due to the convergence of higher commodity and global food prices; increased competition for products that produce energy; severe droughts and floods due to climate change and increasing demand from growing economies in Asia and South America.
"We hope to move millions of people from hunger to hope through our efforts," said Novak. The company's employees and franchisees will be volunteering their time around the globe at hunger relief agencies, food banks, soup kitchens and launching fundraisers. The Yum! Foundation also will be donating to the cause by covering the WFP's administrative fee so that funds collected from customers and employees will go directly toward feeding people. Funds raised for WFP go directly to the areas of greatest need, feeding poor school children in the developing world and helping villages become self-sustainable. Every U.S. dollar raised during World Hunger Relief 2008 will provide 4 meals for hungry children all over the world.
During this year's World Hunger Relief campaign, Yum! plans to generate the equivalent of nearly $50 million in awareness of the hunger issue through television and print advertising, public service announcements, public relations, web-based communications and in-restaurant posters and signage. In addition, the company is leveraging the power of the internet to reach millions of people through the www.fromhungertohope.com Web site and other on-line activity.

Sonic Franchise Units Outperform Company Owned Units

Sonic says comps fell for co. units, rose for franchisees

OKLAHOMA CITY (Sept. 24, 2008) Sonic Corp. said late Tuesday that systemwide same-store sales were “slightly negative” for its fourth quarter ended August 31, as franchised restaurants posted gains but corporate or joint-venture locations recorded “significantly negative” results.
Analysts that follow Sonic, the operator or franchisor of more than 3,400 drive-thru restaurants, 20 percent of which are Sonic owned, pegged the corporate same-store sales decrease between 5 percent and 7 percent. The latest result was a deceleration from third-quarter trends when corporate same-store sales dipped 3.9 percent. For the full fiscal year, also ended Aug. 31, Sonic’s systemwide same-store sales were positive, the company reported, led by franchised locations.
In addition to weaker sales, Sonic reported that increased commodity and labor costs led to “unfavorable” restaurant margins for the quarter and year. Yet, with franchisees new unit openings, rebuilding, and remodeling the company expects to post a small increase in annual per-share earnings, Sonic said.
Full fourth-quarter and fiscal 2008 results are expected Oct. 16.
Sonic also said it would refine its current growth and operating strategy by starting a refranchising initiative to reduce the number of corporate locations to between 12 percent and 14 percent of the system. The company will seek to sell underperforming locations to franchisees.
“The performance of our partner drive-ins has lagged well behind that of our franchisees,” said Sonic’s chairman and chief executive, Cliff Hudson. “Reducing the number of partner drive-ins we operate will allow us to improve sales and operations for remaining partner drive-ins while we continue to emphasize new store development, promotions and other initiatives to drive sales for the entire system.”
For the current fiscal year 2009, Sonic said it expected the opening of between 155 and 165 franchised locations, between 20 and 25 corporate restaurants and positive same-store sales growth for the system, even with flat same-store sales at corporate locations. Earnings per share are expected to increase between 12 percent and 14 percent in 2009, the company said.

L. Patrick Callaway - President of Francorp, Inc.

People often ask me about franchise brokers. On the surface, the idea of a franchise broker seems simple enough. Brokers put buyers and sellers together so whether a buyer or a seller, brokers would seem to be a very important component in the equation.The fact is, brokers get paid to put buyers and sellers together. After all, they need to get paid too.

Thus, by the pure nature of that relationship, they typically have a biased opinion. Odds are, they are representing a party that pays them upon procurement of a sale. So, let us look at this from both perspectives, the franchisor and prospective franchisee.

For you franchisors or perspective franchisors - Brokers fill a void as a nice additional franchise sales outlet, but do not make the mistake in thinking that brokers are going to be your only source of sales for your franchise company.We have found that companies that sell their own franchises have the greatest success in the long run. The reason for this is that a company selling their own franchises has to live with them for the term of the contract. This causes in house sales teams to have more stringent criteria placed on them. Thus, my advice is to first deploy an in-house sales initiative. In order to be successful with an in-house sales force, they will need to deploy a marketing program in order to generate leads for those sales people to follow up with. This strategy needs to address the following marketing opportunities:

1. Internet
2. Trade Shows
3. PR / Publicity
4. Print
5. Direct mail

Francorp believes that this multi-pronged approach is the best way to address franchise sales and marketing. As a secondary plan, brokers can add additional prospects to the equation. Though, be weary of deploying a marketing program and sending all of your leads to outside brokers.I would not recommend that strategy. Your leads are then likely to be distributed among that brokers other franchisor clients in the event that they have a qualified franchisee prospect that is not interested in your particular business off hand.

My advice would be to only use brokers that generate their own leads. In addition, be careful not to enter into an exclusive broker arrangement.For those of you that are prospective franchisees, be weary of brokers steering you to a particular business in which they are obtaining a commission. Not all franchise companies pay commissions. What happens if you work with a broker and they do not show you a particular franchise that you are interested in learning more about? GO DIRECTLY TO THAT COMPANY. There are many brokers that are great people and and help people find their dream business. Though, brokers are not for everyone. I am not aware of any large national brokerage networks that are paid directly by the buyer. All of the brokers that I have met are paid by the actual franchise companies upon the sale of a franchise. In a perfect world, you perspective buyers should work with a broker for a fee that you pay so that your interests are being represented, not those of a hand full of franchisors.Now you sellers and prospective buyers are in a better informed position to be able to find the right opportunities that are out there for you all. You heard it here from Francorp, the franchising leader.

L. Patrick Callaway
President
Francorp, Inc.
http://www.francorp.com/

Don Boroian - Franchise Sales Strategies

Franchise Sales Strategies:
Christopher James Conner
Vice President
Francorp Consulting

As the Franchise World continues to move towards technology like all other industries, more and more sales processes become automated, it becomes easier and easier to forget and lose the most critical ingredient of what has made salespeople successful for centuries, "Building Relationships."

People still buy from people they like and that they can relate to. Technology can't create this, it can only enhance what we as salespeople do during the process. To most potential customers, all the "fluff" becomes white noise and people don't read or listen to mass emails and bombardment of marketing materials.

It is up to the franchise sales professional to create a feeling of caring for the potential franchisees future. The sales process should evoke a sense of "mutual exploration" for both the candidate and the sales person.

Initial contact for a franchise sales person needs to be through the phone. I have never awarded a franchise solely through email contact. This is an enormous decision for most franchise buyers, a cold email and information requests don't convey very much sincerity to a prospective franchisee. Most franchise buyers are refinancing homes or closing out 401k's to make this possible, they must feel very confident in the franchise sales person to pull the trigger on a decision as big as this.

It is important for the franchise sales person to combine emails with phone calls, the prospect should know your voice as well as personal background about the franchise sales person....after all, isn't that what "building a relationship" is all about!?! The franchise sales person should think of themselves as a consultant, work with the franchisee by taking a personal interest in their success.

The initial phone call should be to set an appointment, don't jump into the sale! A franchise sale sis very different from most sales where you are providing a traditional good or service. This is a partnership we are selling now. The first call should be an explanation as to what the next call will cover.

The first phone appointment is about the customer! Remember you should be doing no more than 25% of the talking! If you find that you are doing most of the talking during the call....it probably isn't going very well. Key points to cover during this appointment, timing, why should they be looking at franchising now? Background, what is your level of interest in franchising and why? Goals, what would you like to achieve through franchising? Where, what locations would you like to consider opening the franchise? When it comes down to it, people really don't care about how smart you are until you show concern for their well being and interests.

Here is an acronym we use at Francorp when describing franchise sales. The franchise sales person should strive to be a "Star".

S - Support - Family, Friends and Peers
T - Timing - Now is the right time for Franchising
A - Assets - Building wealth through owning your own business.
R - Recreation - It's fun and exciting!

Building a relationship with a potential franchisee unlocks unbiased information from a franchise candidate, this allows the franchise sales person to make legitimate recommendations. Typically the most guarded area of information will be in regards to financial well being - franchise buyers will not be up front about financial facts until they fell comfortable with a franchise sales person. It is impossible for you as the sales person to provide valuable assistance for them without accurate information! Build the relationship first, then the information will be unbiased and your recommendations will be authentic.

Franchise buyers, much like any other buyer want to feel that they are getting involved with people who are like them. A big part of the franchise sale is drawing connections with the buyer and making examples of existing franchisees who are similar to the prospective buyer. Throughout the sales process, it is important for franchise sales people to remember that the franchise opportunity they are selling is just that....an opportunity. People who are awarded the right to operate as a franchisee will unlock their financial future, this should be about helping people!

www.francorp.com

www.francorpconnect.com

Is Franchising Right for Me? SBA Workshop

WORKSHOP INTRODUCTION
IS FRANCHISING FOR ME?
WORKBOOK

Training Module - 1
Workshop Objectives
By the end of this workshop, you should be able to:
* Define franchising.
* Determine whether franchising is the best business option for you
- evaluate your skills and experience
- identify your reasons for purchasing a franchise
- personal characteristics
- personal conditions
- experience.
* List
- advantages of franchising for both the franchisor and franchisee
- disadvantages of franchising for both the franchisor and franchisee
* Identify franchisor's responsibilities.
* Determine what is contained in a franchise package.
* Understand the franchise contract
- legal implications
- your rights and obligations as a franchisee
- financial statements, contracts and receipts
- trademarks and copyrights
- restrictions on goods and services to be offered by franchisees
- renewal, termination and sale of the franchise
____________________________________________________________________________________________
_
BUSINESS FORMATTING - WHAT IS FRANCHISING?
Deciding whether or not to go into business is a very important step in the business start-up process for new and
potential small business owners. Each year, thousands of entrepreneurs and potential entrepreneurs are faced with
this difficult decision. Because of the risk and the amount of work involved in starting a new business, many new
and potential small business owners choose franchising as an alternative to starting a new, independent business.
Although the success rate for franchise-owned businesses is significantly better than the success rate for many
independent businesses, there is no formula to guarantee success. One of the biggest mistakes you can make is to
be in a hurry to get into business. That's why it's important to understand your reasons
for going into business, and to determine if owning a business is right for you.
If you are concerned about the risk involved in a new, independent business venture, then franchising may be the
best business option for you. Remember, however, that hard work, dedication and sacrifice are key elements in the
success of any business venture, including franchising.
WHAT IS FRANCHISING?
A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name or
advertising symbol and an individual or group seeking the right to use that identification in a business. The
franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods
or services supplied by the franchisor or sells goods or services that meet the franchisor's quality standards.
Franchising is based on mutual trust between the franchisor and franchisee. The franchisor provides the business
expertise (i.e., marketing plans, management guidance, financing assistance, site location, training, etc.) that
otherwise would
not be available to the franchisee. The franchisee brings to the franchise operation the entrepreneurial spirit and
drive necessary to make the franchise a success.
While forms of franchising have been in use since the Civil War, enormous growth has occurred in franchising
only recently. By the end of 1985, 500,000 establishments in 50 industries achieved gross sales of over half a
trillion dollars and employed 5.6 million full and part-time employees. Franchising created 18,500 new businesses
in 1991 and approximately 108,000 new jobs to the economy. Business format franchises experienced sales growth
of 8.9 percent from $213.2 billion in 1990 to 232.2 billion in 1991. Industries that rely on franchised businesses to
distribute their products and services touch every aspect of life from automobile sales and real estate to fast foods
and tax preparation. Thus, we can see that franchising can be is a viable, lucrative business alternative.
There are primarily two forms of franchising:
* product/trade name franchising and
* business format franchising.
In the simplest form, a franchisor owns the right to the name or trademark and sells that right to a franchisee. This
is known as "product/trade name franchising." In the more complex form, "business format franchising," a broader
and ongoing relationship exists between the two parties. Business format franchises often provide a full range of
services, including site selection, training, product supply, marketing plans and even assistance in obtaining
financing.
____________________________________________________________________________________________
_
SELF-PACED ACTIVITY
During this activity you will:
* List at least three reasons for going into business.
* Identify the type of business you are interested or may be interested in operating.
____________________________________________________________________________________________
_
IS FRANCHISING FOR YOU?
As with any business, the first step in determining whether or not to enter into the venture is to assess your reasons
for going into business. If you feel you need a change, or you're tired of having other people tell you what to do,
then you should reassess your decision before investing your time, money and energy because operating a business
requires more than a need for a change, or the desire to do as you please. Purchasing a franchise like any other
business requires a total commitment of your time, energy and financial resources. If you are not prepared to invest
these qualities and resources into your franchise, then you
should stop at this point.
EVALUATING YOUR SKILLS AND EXPERIENCE
Identify Your Reasons
As a first and often overlooked step, ask yourself why you want to purchase a franchise. This question, although
basic, is an excellent way of evaluating your reasons for going into business. List every reason you identify, no
matter how farfetched it may seem. Divide your list into two separate components. Separate the viable reasons from
the trivial reasons and categorize them accordingly. It isn't unusual for reasons to range from the desire to be your
own boss to the desire to be a billionaire. Whatever your reasons, remember that your future is at stake so try to be
objective. Your checklist should include reasons such as these (check each that applies to you):
YES
* Freedom from the 9-5 daily work routine ______
* Being your own boss ______
* Doing what you want when you want to do it ______
* Improving your standard of living ______
* Bored with your present job ______
* Have a product or service for which there is a demand ______
Some reasons are better than others, none are wrong; however, be aware of tradeoffs. For example, you can escape
the 9-5 daily routine, but you may replace it with a 6 a.m. to 10 p.m. routine.
After assessing your reasons for going into business, next conduct a self analysis to determine if you possess the
personal characteristics needed to be a successful franchise owner. Consider questions such as:
Personal Characteristics
YES NO
1. Are you a leader? _____ _____
2. Do you like to make your own decisions? _____ _____
3. Do others turn to you for help in making
decisions? _____ _____
4. Are you willing to accept managerial assistance
from the franchisor? _____ _____
5. Are you willing to comply with the provisions
outlined in the franchise contract? _____ _____
6. Do you enjoy competition? _____ _____
7. Do you have will power and self discipline? _____ _____
8. Do you plan ahead? _____ _____
9. Do you like people? _____ _____
10. Do you get along well with others? _____ _____
Personal Conditions
These questions cover the physical, emotional and financial strains you will encounter operating a franchise.
YES NO
1. Are you aware that running your own franchise
will require working 12-16 hours a day, six days
a week, and maybe even on Sundays and
holidays? _____ _____
2. Do you have the physical stamina to handle the
work load and schedule? _____ _____
3. Do you have the emotional strength to
withstand the strain? _____ _____
4. Are you prepared, if needed, to temporarily
lower your standard of living until your
franchise is firmly established? _____ _____
5. Is your family willing to go along with the
strains they, too, must bear? _____ _____
6. Are your prepared to invest, and possibly lose,
your savings? _____ _____
Answering "yes" to any of these questions means that you have some of the skills needed to operate a successful
franchise; a negative answer means that you may have to acquire these skills or hire personnel to supply them.
Experience
Certain skills and experience are critical to the success of a business. Since it is unlikely that you possess all the
skills and experience needed, you'll need to hire personnel to supply those you lack. There are some basic and
special skills you will need for the particular franchise you purchase. By answering the following questions, you
can identify the skills you possess and those you lack (i.e., your strengths and weaknesses).
YES NO
1. Do you know what basic skills you will need to
operate a successful franchise? _____ _____
2. Do you possess those skills? _____ _____
3. When hiring personnel, will you be able to
determine if the applicants' skills meet the
requirements for the positions you are filling? _____ _____
4. Have you ever worked in a managerial or
supervisory capacity? _____ _____
5. Have you ever worked in a business similar to
the franchise you want to purchase? _____ _____
6. Have you had any business training in school? _____ _____
7. If you discover that you don't have the basic
skills needed for your franchise will you be
willing to delay your plans until you've
acquired the necessary skills? _____ _____
When you complete your self-analysis, discuss your results with your family and financial advisor. Their feedback
can help you make the right decision. If you all agree that you have most of the skills needed to operate a successful
franchise, then you should feel comfortable proceeding with your plans. If, however, they feel you lack most of
these skills, then you may need to consider delaying your plans until you are better prepared. Above all, be honest
and objective with yourself; after all, it is your future.
A more detailed self-analysis, the "Small Business Entrepreneur's Checklist," is located in Appendix I. This
checklist is designed to assist you in determining what you actually know about operating a business, and the skills
you will need to do so. Review it carefully before deciding whether or not to purchase a franchise or to go into
business. If you discover that you lack many of the skills needed to operate a successful franchise, you may need to
take some training courses or hire personnel to compensate for these deficiencies.
Once you are certain that your reasons for going into business and the franchise you've selected are viable, gather
the information that you will need to make an informed decision from sources, such as: 1) a directory of franchises,
e.g., the Franchise Opportunities Handbook (published by the U.S. Department of Commerce), 2) the disclosure
document, 3) current franchisees, 4) other references, such as U.S. Small Business Administration (SBA), Federal
Trade Commission (FTC), Better Business Bureau, local chambers of commerce and 5) professional advisors.
Many new small business owners choose franchising over starting a new business because it provides easy access to
an established product, reduces many of the risks involved in opening a new business, provides access to proven
marketing methods and in some instances provides assistance in obtaining start-up capital from financing sources.
Franchising can be advantageous as well as disadvantageous to both the franchisee and franchisor. A few of the
advantages and disadvantages are listed below. Study these factors carefully before choosing the franchise option.
FRANCHISEE
Advantages Disadvantages
- established product or service - failed expectations
- technical & managerial assistance - service costs
- quality control standards - overdependence
- less operating capital - restrictions on freedom of ownership
- opportunities for growth - termination of agreement
- territorial franchisee
- right of subfranchisees
- operating franchisee no rights - performance of other franchisees
FRANCHISOR
Advantages Disadvantages
- expansion - company-owned vs franchised units
- limited risk
- limited capital
- equity investment
- motivation - problems with recruitment
franchisee highly motivated
- operation of non-union business - communication
- bulk purchasing - freedom
- cooperative advertising
____________________________________________________________________________________________
_
SELF-PACED ACTIVITY
During this activity you will:
* Determine if franchising is for you by listing at least five reasons why you should choose franchising over
starting a new, independent business.
* List sources where you can gather information to help you make an informed decision on choosing
franchising as an alternative to starting a new business.
* Determine if you have the skills needed to own and operate a successful franchise.
____________________________________________________________________________________________
_
IDENTIFYING THE FRANCHISOR'S RESPONSIBILITIES
An important step in making an informed decision about purchasing a franchise is to know the responsibilities the
franchisor is legally obligated to fulfill. One of the toughest decisions any entrepreneur faces is whether or not to
purchase a franchise. And while buying a franchise means obtaining a complete system of
doing business, there is no guarantee for success.
Being aware of the franchisor's responsibilities takes some of the guess work out of the decision making process.
Learn as much as you can about the franchise and the franchisor's obligations before entering a purchase
agreement, or even before meeting with the franchisor or his or her representative to discuss the possibility of
purchasing a franchise.
Fourteen states have franchise disclosure or registration laws that require the franchisor to prepare documents for
submission to state authorities. The FTC requires in all states that a lengthy disclosure document, as well as
financial statements, be given to franchisees before purchasing the franchise. In addition to state filing fees,
printing and accounting and legal expenses, the franchisor must develop internal controls and policies to ensure
ongoing compliance with regulations.
Franchisors are obligated to:
1. Give you a copy of the Uniform Franchise Offering Circular (UFCO) at least 10 days before you sign the
agreement. If you meet face to face with the franchisor's representative and have serious discussions
concerning the purchase of the franchise, the UFCO also must be given to you at this time.
2. Give you a copy of the franchise agreement, other contracts and the franchisor's financial statements. The
franchisor, however, cannot, under federal law, make claims concerning the amount of money you will
make. The UFCO will disclose estimates of all initial start-up costs.
3. Provide one week of training to you, the franchisee, and your manager in one of the parent stores, the
operational manual and ongoing support and assistance to you and other franchisees.
4. Provide guidelines on audits and assignment procedures and any extra franchisor criteria for approving an
assignment (e.g., ownership rights - franchisee rights to sell the franchise if it becomes successful).
5. Provide information on franchisee's initial fees and other costs (e.g., royalties, promotional fees).
Franchisors should:
6. Provide a marketing plan, promotional materials and area site selection assistance to franchisees.
7. Provide adequate insurance coverage for franchises.
Insurance coverage generally includes:
- fire insurance
- inventory insurance
- burglary insurance
- workmen's compensation
- accident and health insurance
- use and occupancy insurance
- general liability insurance
- automobile insurance (may be optional depending on franchise type)
8. Provide a trademark or service mark that is known, or will be known through advertising in the
geographic area of use.
9. Provide guidelines on the purchase of inventory and equipment, requirements on restrictions on goods
sold and the terms of agreement and renewal.
Most of these responsibilities are or should be included in the UFOC document, but since there are no uniform
regulations governing the operation of franchises in any given state, make sure the UFOC document complies with
the FTC's regulations, and the regulations of the state in which you plan to purchase the franchise. Review the
UFOC document carefully with your attorney before signing the purchase agreement.
____________________________________________________________________________________________
_
SELF-PACED ACTIVITY
During this activity you will:
* Identify issues you need to be aware of as a franchisee.
____________________________________________________________________________________________
_
DETERMINING WHAT THE FRANCHISE PACKAGE CONTAINS
After gathering all the information you will need to make an informed purchase decision, carefully examine this
information with your attorney, accountant or business advisor ensuring that it is addressed in the franchise
contract. Think carefully about the level of independence you will maintain as a franchisee and how comprehensive
the operating controls will be. Be very clear about the cost of purchasing the franchise and the documents that
make up the franchise package.
You can obtain information on franchising from: 1) a directory of franchises, 2) the disclosure document, 3)
current franchisees, 4) other references, such as SBA, FTC, Better Business Bureau, local chambers of commerce,
5) professional advisors and 6) reference materials on franchises from the local library.
Your franchise package should contain the following information:
* The full initial costs and what they cover.
* Licensing fees.
* Land purchase or lease.
* Building construction or renovation.
* Equipment.
* Training.
* Starting inventory.
* Promotional fees.
* Use of operations manuals.
* Continuing costs related to the franchisor.
* Royalties.
* Ongoing training.
* Cooperative advertising fees.
* Insurance.
* Interest on financing.
* Requirements regarding purchasing supplies from the franchisor, and if the prices are
competitive with other suppliers.
* Restrictions as they apply to competition with other franchisees.
* Terms covering renewal rights and resale of the franchise.
In reviewing the franchise contract with your attorney, familiarize yourself with the language. Be aware of terms
such as hold harmless clauses, integration clauses and choice of venue or choice of law provisions. These terms
may favor the franchisor over you if improprieties arise during or after the settlement process.
Hold harmless clauses - may require that you release the franchisor from specific acts or
violations of state laws.
Integration clauses - may prevent you from successfully suing for any deceptions preceding the
signing of the contract.
Choice of venue or choice by law provisions - are especially important if the franchisor has
headquarters in another state. These clauses may dictate that you settle all disputes in your
franchisor's state of residence and settle your claim under laws favorable to the franchisor.
Other important clauses to consider deal with severance, renewal and transfer of the franchise.
Again, use professional help when examining the franchise contract. And, remember some of the contract terms
may be negotiable. Find out which terms are negotiable before you sign; otherwise, it will be too late.
____________________________________________________________________________________________
_
SELF-PACED ACTIVITY
During this activity you will:
* List some of the information that should be contained in the franchise package.
* Identify sources where you can obtain information on what the franchise package should contain.
____________________________________________________________________________________________
_
UNDERSTANDING THE FRANCHISE CONTRACT
The franchise contract, like the UFOC, is a very important document. The contract is probably the most important
document in the transaction process. It is a legal commitment which is binding on both the franchisor and
franchisee. In the franchise contract, the franchisor's promises must be presented to the franchisee in writing and
subjected to careful scrutiny. During this stage of the buy/sell process, the franchisee must have competent legal
advice regarding the meaning and effect of the contract.
When reviewing the contract, you and your attorney will need to determine if it confirms what you have been told.
If you find improprieties in the contract at this point, you may decide to withdraw from the transaction before
committing your time, energy and money to an agreement that may not be beneficial for you. If, however, you
choose to continue with the process, you may be able to negotiate favorable terms, but remember by signing the
contract, you are legally bound by the provisions of the agreement.
The franchise contract consists of two main parts: 1) the purchase agreement and 2) the franchise or license
agreement. For convenience, occasionally the franchise transaction is split into two stages. When this happens,
some franchise companies have two contracts, one for each stage, rather than a single contract. While it isn't
necessary to have two contracts, it can be the better method where there is a comprehensive equipment and initial
services package.
The purchase agreement of the contract covers:
* the franchise package
* the price
* the services to be provided.
The franchise or license agreement covers:
* the rights granted to the franchisee
* the obligations undertaken by the franchisor
* the obligations imposed upon the franchisee
* trade restrictions imposed upon the franchisee
* assignment/death of franchisee
* termination provisions.
A brief explanation of each agreement follows.
PURCHASE AGREEMENT
1. The franchise package. Consists of an equipment or inventory list. This list must contain all the items the
franchisee has been told to expect. Some franchise companies regard this list as being confidential and
stipulate in the contract that it must be so treated.
2. The price. The price and the manner of payment will be specified. This may be cash on signature,
although rare. More often a deposit is required on signature with payment of the balance to follow on
delivery of the equipment or at other stages of the transaction.
3. The services to be provided. This section outlines or lists the franchisor's responsibilities to the franchisee.
Those services the franchisor is required to provide the franchisee before he or she is ready to open for
business are called the initial services. Those services the franchisor provides periodically are called
continuous services. A more detailed explanation of the services provided by the franchisor are included in
the next section on the license agreement.
FRANCHISE OR LICENSE AGREEMENT
1. The rights granted to the franchisee. The franchisee will be given the right as it applies to particular
circumstances. As a franchisee there are certain rights that are extended to you.
Your rights include:
* use of trademarks, trade names and patents of the franchisor.
* use of the brand image and the design and decor of the premises developed by the franchisor.
* use of the franchisor's secret methods.
* use of the franchisor's copyright materials.
* use of recipes, formulae, specifications and processes and methods of manufacture developed by
the franchisor.
* conducting the franchised business upon or from the agreed premises strictly in accordance with
the franchisor's methods and subject to the franchisor's directions.
* guidelines established by the franchisor regarding exclusive territorial rights.
* rights to obtain suppliers from nominated suppliers at special prices.
2. The obligation undertaken by the franchisor. This item in the contract tells prospective franchisees what
the franchisor will do for them both before and after start-up. That is why this item frequently refers to
specific contractual obligations detailed in the franchise agreement, which is attached to the UFOC.
3. The obligations imposed upon the franchisee. Certain obligations are required of you by the franchisor.
These obligations include:
* to carry on the business franchised and no other business upon the approved and nominated
premises.
* to observe certain minimum operating hours.
* to pay a franchise fee.
* to follow the accounting system laid down by the franchisor.
* not to advertise without prior approval of the advertisements by the franchisor.
* to use and display such point of sale advertising materials as the franchisor stipulates.
* to maintain the premises in good, clean and sanitary condition and to redecorate when required
to do so by the franchisor.
* to maintain the widest possible insurance coverage.
* to permit the franchisor's staff to enter the premises to inspect and see if the franchisor's
standards are being maintained.
* to purchase goods or products from the franchisor or his designated suppliers.
* to train your staff in the franchisor's methods to ensure that they are neatly and appropriately
clothed.
* not to assign the franchise contract without the franchisor's consent.
4. Trade restrictions. The restrictions imposed upon a franchisee may prohibit him or her from carrying on a
similar business except under franchise from the franchisor, taking staff away from other franchisees,
carrying on a similar business in close proximity to other franchised businesses within that chain, and
continuing, after termination of the franchise contract, to use any of the franchisor's trade names, secrets,
and so forth.
5. Assignment/death of the franchisee. The franchisee should ensure that in the event of death his/her
personal representative or dependent will be able to keep the business going until one of them can qualify
as a franchisee, and that arrangements can be made to keep the business going until a suitable assignee
can be found at a proper price.
6. Termination provisions. The termination of a franchise is an event heavily regulated by the franchise laws
of 17 states. Franchise relationship laws in many states specify the conditions under which a franchisor
may terminate or refuse to renew the franchise, imposing a standard of "good cause," "reasonable cause"
or "just cause" as defined by those laws. Minimum advance notice usually has an opportunity to cure the
default and avoid termination; notice ranges from five days to 90 days. Many states also specify
circumstances under which the standard notice and cure requirements need not be met.
In view of the close working relationship that must exist between the franchisee and franchisor all provisions must
be stated clearly in the contract. In this transaction, no small print should exist. Make sure, if possible, the
franchise contract contains provisions that are favorable for both you and the franchisor.
____________________________________________________________________________________________
_
SELF-PACED ACTIVITY
During this activity you will:
* List at least four rights and four obligations you as the franchisee are entitled to and required to fulfill.
____________________________________________________________________________________________
_
APPENDIX 1
SMALL BUSINESS ENTREPRENEUR'S CHECKLIST
A. Business Planning and Management Limitations
B. Market Analysis
C. Marketing Strategy
D. Financial Controls
E. Personnel Function
F. Operation, Organization and Special Areas
____________________________________________________________________________________________
_
SMALL BUSINESS ENTREPRENEUR'S
CHECKLIST
A. Business Planning and Management Limitations
1. Do you know your own personal management assets and liabilities?
_____ yes _____ partially _____
no
2. Do you have a written small business plan covering 1 to 5 years?
_____ yes _____ partially _____
no
3. Can you concretely define what product or service franchise you are in?
_____ yes _____ partially _____
no
4. Can you describe in writing what business franchise you are in?
_____ yes _____ partially _____
no
B. Market Analysis
5. Do you know in detail what factual market conditions and government requirements impact on
your franchise?
_____ yes _____ partially _____
no
6. Do you know your specific geographic and demographic market areas?
_____ yes _____ partially _____
no
7. Do you know your market area business and franchise competitor by name, organization, size
and gross sales?
_____ yes _____ partially _____
no
8. Can you describe in writing the strengths and weaknesses of competitors in your defined market
areas?
_____ yes _____ partially _____
no
C. Marketing Strategy
9. Can you identify in a written business plan what advantages your franchise's products or services
have over specific competitors?
_____ yes _____ partially _____
no
10. Based on the guidelines from the franchisor, can you describe in writing how your products and
services are distributed or sold?
_____ yes _____ partially _____
no
11. Based on the guidelines from the franchisor, do you know what sources of supplies and costs are
required to operate your franchise?
_____ yes _____ partially _____
no
D. Financial Controls
12. Can you detail the specific monthly cash and credit requirements of your franchise?
_____ yes _____ partially _____
no
13. Do you maintain a file of and stay aware of the advantages of small business computer planning,
accounting, financial management and marketing controls?
_____ yes _____ partially _____
no
14. Do you use Standard Financial Industry Ratios as a guide to measure your franchise's annual
performance?
_____ yes _____ partially _____
no
15. Do you maintain written costs of sales, breakeven analyses, profit and loss statements and
appropriate accounting journals?
_____ yes _____ partially _____
no
E. Personnel Function
16. Do you know how much personnel money your franchise spends on human resource development
as compared to competitors?
_____ yes _____ partially _____
no
17. Do you know exactly what employee benefits cost your franchise?
_____ yes _____ partially _____
no
Do you know the impact when compared with industry standards?
_____ yes _____ partially _____
no
18. Based on guidelines from the franchisor, do you have a detailed personnel plan for the
management staff, clerical and specific labor (i.e., part-time, union) required to operate your
franchise?
_____ yes _____ partially _____
no
F. Operation, Organization and Special Areas
19. Based on guidelines from the franchisor, do you have a detailed building or facility plan which
documents the space required to operate the business?
_____ yes _____ partially _____
no
20. Do you know why your business is a franchise and the legal limitations or advantages of this
business form?
_____ yes _____ partially _____
no
21. Do you use specialized consultants on a pre-planned basis for accounting, legal, tax, insurance,
employee benefits and other critical business operational areas?
_____ yes _____ partially _____
no

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