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

www.francorp.com

SBA Franchise Program for Buying a Franchise

Buy a Franchise

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Franchising Overview

Buying a Franchise

An important step in the small business startup process is deciding whether or not to go into business at all. Each year, thousands of potential entrepreneurs are faced with this difficult decision; because of the risk and work involved in starting a new business, many new entrepreneurs choose franchising as an alternative to starting a new, independent business from scratch.

One of the biggest mistakes you can make is to hurry into business, so it's important to understand your reasons for going into business, and 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. But remember that hard work, dedication, and sacrifice are essential to 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 wishing 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 franchiser or that meet the franchiser's quality standards.

Franchising is based on mutual trust between the franchiser and franchisee. The franchiser provides the business expertise (marketing plans, management guidance, financing assistance, site location, training, etc.) that otherwise would not be available to the franchisee. The franchisee brings the

entrepreneurial spirit and drive necessary to make the franchise a success.

There are primarily two forms of franchising:

Product/trade name franchising and
Business format franchising.
In the simplest form, a franchiser owns the right to the name or trademark and sells that right to a franchisee. This is known as product/trade name franchising. The more complex form, business format franchising, involves a broader ongoing relationship 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.

To learn more about:

The advantages and disadvantages of franchising
The franchiser's responsibilities
What is contained in a franchise packet
Understanding the franchise contract
Read:

SBA's "Is Franchising for Me?" Workbook (.pdf file)
Franchise Registry
Franchise Directories & Evaluation
For additional information

Consumer Guide to Buying a Franchise

How to Succeed As a Franchisee

How to Succeed As a Franchisee
How-To

Pick a franchisee that matches your interests and abilities.Make sure you have enough money to operate without profits for the first few years.Research the opportunity carefully before committing.Related How-TosHow to Finance a Franchise PurchaseHow to Select a FranchiseFeedbackSend Feedback on this How-To Guide » While franchising’s prevalence in the U.S. economy indicates that franchisees can succeed, hundreds of franchisees fail each year. The most frequent causes: lack of funds, poor people skills, reluctance to follow the formula, a mismatch between franchisee and the business, and poor management. Often, it’s the small stuff that separates winners from losers.

A critical initial decision is picking a product you care about. Consider hiring a consultant to analyze whether you are a good fit with the business opportunity you are thinking about buying into. You also have to couple passion with discipline, avoiding too-fast growth at the expense of high-quality expansion.

Among the most common mistakes new franchisees make is signing on before adequately researching the business. Study what it will take to run the business successfully. And be realistic. Owning a franchise is rarely a get-rich-quick scheme.

Contact current and former franchisees to get their feedback, using names from the franchise circular from the franchisers. Never make a commitment based solely on information provided on the Internet or over the phone.

Sometimes, franchisers are to blame. Franchisers may be inexperienced themselves, a situation often found in very small systems. Or they may expand too aggressively, rendering them unable to service franchisees. Brokers or consultants selling concepts may be more interested in a sales commission than in making a good match between business and franchisee.

Another pivotal decision early-on is location. Think twice before locating a franchise using only your intuition. A location on the outskirts of town might be more affordable but may be too remote for customers to reach conveniently. Other factors may be at play. For example, one franchisee thought his spot on a college campus was perfect for his fast-food franchise. Students were a built-in source of employees and customers. And they were — when they were around. But they disappeared for football games and vacations. At the end of each semester, they had little spending money left for take-out or delivery. The location had no parking and so had no other customers. It eventually moved to a freestanding building with a big parking lot. It still delivers to campus, but now also serves families, whose average order is much higher than a typical student’s tab.

To find potentially successful locations, national chains use what’s called geographic-information-systems software that layers census and consumer-trend data upon every street and byway in the country. These tools can cost thousands of dollars. For a few hundred dollars, you can buy demographics reports for any ZIP Code in the country that will analyze population characteristics, income levels, lifestyle trends and even traffic patterns within about a mile of potential sites. You might want to pinpoint, for example, a high-traffic area with at least 40,000 cars a day, 50,000 people living within a two-mile radius, and retail locations nearby. Also consider whether adequate parking is available.

Another key to a franchise’s success is good customer service. That may include making additional investments to improve customer experiences, working overtime to satisfy customer time demands, and putting out extra effort to ensure products and services are done right.

While franchise systems offer pre-set business formats, flexibility and versatility help a lot. That’s especially true when it comes to marketing and promotion. To bring customers in the door, successful franchisees report using tactics such as discount coupons, free samples, direct-mail ads and fax blasts. No marketing job is too small or difficult for a franchisee determined to succeed. Many have success with community-based marketing initiatives, such as those involving schools.

For every franchisee chasing success, there are many competitors engaged in the same pursuit. Studying the competition by visiting their locations and looking for help-wanted signs signaling expansion plans, for instance, helps long-lived franchisees know when to initiate marketing plans to counter rivals’ efforts.

Franchisees can’t succeed without good employees. Winning franchisees treat employees well, so they will treat customers well. Some franchise businesses, such as fast food, have high employee-turnover rates. Providing corporate-style benefits such as medical, dental and retirement benefits can go along way to helping workers feel as though a franchise job is a career. Making sure employees are properly trained and executing according to the rules is vital.

That goes double for your managers. Franchisers say the No. 1 reason for a franchisee’s failure is that they don’t hire the right managers. Franchisees who lack management skills themselves might want to choose a business that could be run by just one or two people. Or, consider hiring someone skilled at motivating others.

Don’t forget: You have to follow the rules, too. Franchises aren’t designed for the independent-minded. They depend on a by-the-book execution of a business plan, adherence to time-tested systems, and a willingness to follow directions.

Insufficient funding is a prescription for failure in any business. With a franchise, the initial fee is clearly stated, but newcomers often underestimate operating costs. A slow beginning or unanticipated event can quickly drain and doom an undercapitalized franchise.

Unrealistic optimism also can be a recipe for financial distress. Borrowing to expand just before a downturn, for example, can lead to rapid bankruptcy. Franchisees need a financial cushion to weather unexpected situations. Experts advise new franchisees to have a nest egg for emergencies and assume they will lose money the first two years.

Franchisees who leave the management of their units to managers and who may or may not be on the premises every day are also less likely to succeed than owners who take a hands-on approach. They may not know if the help is showing up, what customers are complaining about, or whether employees are dipping into the till. Theft can be contagious and contaminate an entire organization if not stopped immediately.

Marketing a Business

Beauty Game:
Being Viewed
As 'Natural'
By ELLEN

Proving that your brand is more authentic than the competition's is always difficult for marketers. For the increasingly crowded category of "natural" beauty products, that task is particularly challenging. That's why Burt's Bees, owned by Clorox Co., and a handful of other brands that try to minimize their use of synthetic ingredients have developed a certification process by which they can officially claim their right to call their products "natural."


Burt's Bees
Mike Indursky of Burt's Bees

In August, Burt's Bees products, including lip balm and body oil, began hitting store shelves affixed with a Natural Products Association seal. The sticker promises that at least 95% of ingredients are natural or derived from natural sources, that they have no "potential suspected human health risks" and that development processes haven't significantly altered the effect of the natural ingredients, among other criteria.

Mike Indursky, Burt's Bees' marketing chief, led the brand's involvement in the certification. Prior to joining Burt's Bees, Mr. Indursky held senior marketing roles with L'Oréal's Garnier hair-care line and Maybelline cosmetics as well as Unilever's cosmetics. Below, he discusses shoppers' confusion with natural products, how his all-natural brand has been affected by being purchased last year by Clorox and his approach to maintaining a small-brand feel as business grows.

WSJ: Why does Burt's Bees need its naturalness certified?

Mr. Indursky: We did a study last year that found that 78% of women believe that when they see the word "natural" on a product, that some governing body is regulating what's in there. That's not the case. And 97% of women told us they want some sort of regulation. We felt we had a responsibility to explain to people what natural is, and what natural isn't, so they can make the most informed choice. We worked with the Natural Products Association and our competitors to develop the criteria.

WSJ: Many have attempted and failed to develop similar seals. Why do you think this one will work?

Mr. Indursky: You've got the Natural Products Association, a non-government, nonprofit, third-party organization that's leading this. Before, a lot of efforts were simply from manufacturers. Also, the companies that joined really are the leaders in natural personal care, so that's a big difference.

WSJ: Several European countries have natural label standards. Why is the U.S. so slow to adopt one?

Mr. Indursky: The trend of inner and outer well-being is more highly developed in Europe. The U.S. is slower, but it has picked up significantly -- if personal-care sales here are growing at 3%, natural personal-care sales are about five times that amount.

WSJ: Since the standards are devised by the participating companies rather than a government agency, isn't there a risk that this seal could be perceived as even more marketing hype?

Mr. Indursky: That would be risky if it weren't for the National Product Association's leadership over it, and their use of third-party certifiers. The brands have no inclusion over the certification process.

WSJ: How do you tackle shoppers' confusion with natural products?

Mr. Indursky: Right now anyone can have a bottle that is green with some flowers on it and call it "natural." Burt's Bees approaches this in two ways: We helped develop this certification standard, and we developed more education efforts through our Web site and an ad campaign that explains our ingredients and what a natural product really is.

WSJ: What's the ultimate goal of this certification?

Mr. Indursky: The endgame is to try to get to a point where all products are 100% natural. Unfortunately, certain ingredients give a benefit that you can't get naturally. For instance virtually every shampoo or conditioner has what you call a quat, which helps hair be soft and manageable. Without that your hair can become a bit straw-like. There's no natural quat available. On a positive note, a quat has no suspected human health risk. We're hoping by creating this certification, you're giving people the incentive to commercialize a natural quat so we can get away from the synthetic version. Where we do draw a very strong line is on any synthetic ingredient that has a suspected human health risk.

WSJ: Any examples?

Mr. Indursky: Parabens are a preservative used in many personal-care products, and studies have shown that they can lead to endocrine disruption and affect your hormone balance. There are plenty of natural alternatives to parabens. Our belief is that even though the FDA says that parabens are safe, a natural product shouldn't have them. When there's a natural alternative, that's what you should use.

WSJ: As a marketer, how do you balance your brand's natural stance with your parent-company's brand, which is synonymous with bleach?

Mr. Indursky: There's nothing to balance. Burt's Bees is doing what it has always done, regardless of Clorox owning us. Clorox has been a fantastic supporter of ours, and our levels of sustainability and natural ingredients have only increased since we've been acquired.

WSJ: How do you maintain a niche feel to your brand when it has become so widely distributed, now even in Wal-Mart Stores Inc.?

Mr. Indursky: We've been fortunate, every time we've opened in a new distribution, the gift stores and natural stores still keep us. We're rooted in authenticity, and our homey packaging has to maintain that. The worst thing we would do is repackage our product into something supermodern and scientific. But in merchandising, advertising and on our Web site we've gone more into the science that comes from nature -- all the stuff that our packaging on its own doesn't do.

WSJ: How has beauty marketing changed over the course of your career?

Mr. Indursky: In the 1970s and 1980s, it was always "hope in a bottle." People are now seeing that beauty does come at a cost. Health and well-being are becoming a larger part of the equation. Before, it was all about this magic ingredient. That doesn't fly anymore. Real education is important. Consumers don't want hope in a bottle, they want truth in a bottle.

Write to Ellen Byron at ellen.byron@wsj.com

Don Boroian Client - Lifeway Foods

#2: Lifeway Foods Inc.
By: H. Lee Murphy September 15, 2008
Independent directors are a bargain at Lifeway Foods Inc., where their total pay runs all of $4,500 a year. That's less than the after-meeting golf fees rung up by many larger companies' boards.

A maker of kefir and other cultured dairy products once marketed primarily as a health food, Morton Grove-based Lifeway is expanding its distribution to mainstream grocery chains. CEO Julie Smolyansky has said the company intends to franchise a chain of boutique-cafes to provide an additional sales channel.

First-half revenue rose 21%, to $22.6 million, but Lifeway's profits have been under attack. Raw milk prices zoomed in the second half of last year, and, though they've eased in recent months, costs continue to squeeze profit margins. Second-quarter earnings amounted to 5 cents a share, prompting analyst Jacklyn Rider of New York-based Lazard Capital Markets LLC to downgrade the stock from "buy" to "hold" and reduce her 2008 earnings estimate to 26 cents a share from 30 cents.

Howard Halpern, a Taglich Bros. Inc. analyst in New York, is more focused on revenue. "The top line is the best indication of where they are going," he says. "Margins may be squeezed at the moment, but if they can keep growing, eventually they'll get their leverage back and earnings will return."

As for the low director salaries, Mr. Halpern isn't surprised. "For companies this size . . . being a director is a labor of love for everyone involved," he says. "You don't do it for the money."


WHO'S MAKING WHAT
Non-executive board members
> Renzo Bernardi $1,500
> Pol Sikar $1,500
> Julie Oberweis $1,500
> Juan Carlos Dalto $0


THE BOTTOM LINE
> Three-year total shareholder return: 37.2%, period ended 12/31/07
> Total non-executive board compensation in 2007: $4,500

www.francorp.com

Francorp Client, Lifeway Foods

Lifeway Foods to Begin a Franchise Program for Its Starfruit, 'Kefir Boutique' Cafe
Mon Jul 7, 2008 3:48pm EDT Email | Print | Share| Reprints | Single Page | Recommend (0) [-] Text [+] Featured Broker sponsored link
Lifeway Foods to Begin a Franchise Program for Its Starfruit, 'Kefir Boutique'
Cafe

MORTON GROVE, Ill., July 7 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc.
(Nasdaq: LWAY), the country's leading manufacturer of kefir and a provider of
other natural and organic dairy products, announced today that it is
franchising its Starfruit "kefir boutique" cafe.
The new retail concept debuted April 15th at 1745 W. Division Street in
the trendy Wicker Park neighborhood in Chicago and serves as a prototype for
it's national franchise program. The shop offers several flavors of frozen
kefir with over 20 toppings as well as customized kefir parfaits, and
smoothie-style kefir drinks.
"Since announcing the initial opening of Starfruit, we have been bombarded
with requests for franchise opportunities from all over the country," said
Julie Smolyansky, President and CEO of Lifeway Foods, Inc. "Starfruit will
capitalize on the renewed popularity of frozen yogurt shops while offering a
healthier alternative with all the probiotic benefits of kefir and franchising
the concept can help us grow the brand quickly."
The expansion into retailing provides a new sales channel for Lifeway's
products, coincides with the resurgence in the frozen yogurt category and
offers an opportunity for Lifeway to promote the health benefits of its kefir
products beyond grocery shelves.
Those benefits include 10 live and active probiotic cultures that have
been shown in various studies to enhance the immune system, fight fatigue,
promote gastrointestinal health, aid in vitamin and mineral absorption, and
ease lactose intolerance. Yogurt has a similar taste and texture to kefir but
many of these frozen yogurt style shops do not use a real live and active
product and contain only two or three of these cultures if any.
"Starfruit will capitalize on the renewed popularity of frozen yogurt
shops while offering a healthier alternative with all the probiotic benefits
of kefir," said Julie Smolyansky, President and CEO of Lifeway Foods Inc. "We
have been pioneering leaders in the field of probiotics and kefir. This
leadership will translate into the quality of the Starfruit product line.
This is a promising diversification that will leverage our leadership in the
kefir market, familiarize a whole new group of consumers with kefir as well as
teach existing customers new ways to consume kefir, and provide a potentially
very lucrative new revenue stream."
Julie Smolyansky stated that the company is accepting applications for
individuals interested in becoming franchise partners for individual or
multiple locations. Lifeway has engaged Francorp, the world's leader in
franchise consulting, to develop their franchise program.
For more information, email franchising@starfruitcafe.com or call
847-967-1010.
About Lifeway Foods
Lifeway is America's leading supplier of the cultured dairy product know
as kefir and the country's only supplier of organic kefir. Lifeway Foods,
recently named Crain's Chicago 49th fastest growing Chicago Companies and
Fortune Small Business' 49th Fastest Growing Small Business, one of only 4
companies to ever be named to the list five straight years in a row.
Lifeway's kefir products include regular and organic kefir, a soy-based
version called SoyTreat, a new Indian variety known as Lifeway Lassi, organic
whole milk kefir, and a children's line of organic kefir products called
ProBugs(TM) packaged in a no-spill pouch. Lifeway also produces the La Fruta
line of drinkable yogurt marketed in US Hispanic communities, a variety of
cheese products and It's Pudding! organic pudding.
SOURCE Lifeway Foods, Inc.

Lifeway Foods, Inc., +1-847-967-1010, franchising@starfruitcafe.com

Wendy's Shareholders Approve Takeover

Wendy's, Triarc approve takeover deal
By LAUREN SHEPHERD – 2 days ago

NEW YORK (AP) — Shareholders of Wendy's and Triarc approved a $2.34 billion deal on Monday that will make the nation's No. 3 hamburger chain a part of billionaire investor Nelson Peltz's empire.

Triarc Cos. Inc. shareholders voted from New York while shareholders of Dublin, Ohio-based Wendy's International Inc. approved the deal from the company's headquarters. Directors of both companies had already OK'd the transaction.

Atlanta-based Triarc operates the Arby's fast food chain and is owned by Peltz. Triarc said in April it would buy Wendy's for $26.78 per share in an all-stock deal, after the chain known for its square hamburgers and the Frosty dessert rejected at least two earlier offers by Peltz.

Triarc said it will change its name to "Wendy's/Arby's Group Inc." and will trade under the "WEN" symbol on the New York Stock Exchange. Triarc's Chief Executive Roland Smith will take over as CEO of Wendy's and Kerrii B. Anderson, the current CEO, will step down.

Smith has said job cuts will likely be necessary, but he has yet to provide any details on those plans. He offered no new details in the company's statement but said more information would be forthcoming once the deal closes.

"We believe our combination represents a major strategic opportunity to create significant long-term value for all of our stakeholders, and we are working on a comprehensive integration plan and organizational structure to support enhanced operating performance at both brands," Smith said in the statement.

Smith has said Wendy's headquarters will remain in Ohio while Arby's will stay based in Atlanta.

Wendy's spokesman Denny Lynch said the company will "remain focused on running our business and doing the best we can to continue the turnaround at Wendy's."

The acquisition of the chain Dave Thomas launched in Columbus in 1969 comes as consumers increasingly cut back on discretionary spending and commodity costs take bites out of restaurant profits.

Wendy's has been hit harder than its fast-food competitors. Last month, the company reported lower second-quarter profit and sales, saying its results has been hurt by higher grain and fuel prices.

Under the terms of the deal, Wendy's shareholders will receive 4.25 shares of Triarc's Class A stock for each share of Wendy's stock they own. Each outstanding Class B share will be converted into one Class A share. Once the deal closes, expected on Sept. 29, the combined company will have only one class of stock.

Besides approving the acquisition, Triarc shareholders also voted to add a new member to its board and accepted the resignation of one of its current board members, Russell V. Umphenour Jr., to make room for two Wendy's directors — Janet Hill and J. Randolph Lewis.

Hill is vice president of corporate consulting firm Alexander & Associates Inc. and Lewis is senior vice president of distribution and logistics at Walgreen Co.

Wendy's shares fell 60 cents to $22.24 while Triarc shares dipped 12 cents to $5.26 in afternoon trading.

To Franchise or Not to Franchise?

To franchise or not to franchise: An analysis of decision rights and organizational form shares

Steven C. Michael, , 1

George Mason University, USA

For innovators and entrepreneurs in service businesses, franchising is frequently suggested as a way to succeed and grow. Academic research has provided little guidance for potential franchisors, however. This article provides a model to guide that choice of organizational form using results from agency theory. Analytically, franchising is a way to allocate decisions within the franchise system between the franchisor and the franchisee in order to promote efficiency and provide incentives. Franchisees make decisions regarding local operations, such as hours, prices, and locations, because they have the knowledge about local trading conditions. Franchisors make decisions regarding the product, its production, and associated marketing efforts that together create the standardization that the trademark signals. The revenue of franchise systems is divided to provide incentives to each party to support the allocation of decisions. Franchisors receive a percentage of gross sales, typically 5%, to compensate them for use of the trademark and associated services. Franchisees keep the unit's profits after paying royalties. These profits motivate the franchisee to make the good decisions that operate the unit efficiently.

But franchising has limitations as well. First, by making franchisees invest in a unit in a specific geographic area, the franchise system exposes the franchisees to business risk; it consists of local economic conditions beyond franchisees' control that could reduce or eliminate their capital. That risk could be eliminated by owning a geographically diversified portfolio of shares of units in different places, but then incentives are weakened. Second, the requirements of standardization under the common trademark constrain franchisees from the full use of their human capital, including their knowledge of local conditions. Some adaptations to the local market are prohibited by the requirement of standardization. So high levels of either business risk or human capital in an industry make franchising a less desirable choice of organizational form.

These ideas are tested with interindustry data using an econometric discrete choice model on the share of sales through franchise systems (termed organizational form share). The methodology is identical to market share models used in economics and marketing. Business risk, as measured by percent of units that have failed in the industry in the last 3 years, and human capital required in the industry, as measured by average wages paid, both negatively influence the share of sales through franchise systems.

The model can be applied by entrepreneurs considering franchising, especially in industries not traditionally associated with franchising. Using public data sources identified in the study, a prospective franchisor can research the industry to determine if industry conditions support franchising as the optimal choice of organizational form. The empirical texts also suggest a second managerially relevant conclusion: the decision of “should we franchise?” can be and should be separated from the decision of “how do we implement franchising?” Factors previously shown to influence the implementation of franchising, the degree of ownership of units within the system, do not influence organizational form share, thus suggesting that the strategic decision of whether to franchise is distinct from the operating decision of how to implement franchising.

Francorp Breakfast - West Coast Franchise Exposition

Each year Francorp holds a breakfast debreifing before every major franchise exibition around the country. These meetings are held for the specific purpose of working with clients to get them ready for the show that weekend and help strategize how to most effectively utilize your time as a franchisor at a large tradeshow.

The Breakfast Breifings are designed to focus on "booth tactics", booth design, tradeshow set up, staffing the show, collateral material design and handouts, managing a tradeshow and following up with prospective franchisees after the event.

This coming November Francorp will be holding the West Coast Franchise Breakfast on Friday, 11/07/08 at 7:30am. This meeting is for Francorp Clients only, but Francorp will also be exibiting at the Franchise Exposition as well at booth #325.

Show Dates & HoursFriday, November 7, 2008
10:00 am to 5:00 pm
Saturday, November 8, 2008
10:00 am to 5:00 pm
Sunday, November 9, 2008
10:00 am to 4:00 pm

Location:
Los Angeles Convention Center
1201 South Figueroa Street
Los Angeles, CA 90015
PH: 213-741-1151
Fax: 213-765-4266
Booth # 325

Register for Free before November 6, 2008 go to www.wcfexpo.com enter in source code GPEX8. Registration link: http://www.wcfexpo.com/registration.cfm

Francorp is the world leader in franchising and franchise development. Francorp has consulted with over 10,000 companies over it's 32 year history. For more information on the work and clients that Francorp has developed, visit the corporate site, www.francorp.com.