Common Reasons for Business Ownership
- Being in control of your own financial freedom.
- Create an asset for the future that can also be sold or passed down to your family.
- Opportunity to work with your family.
- Control of your time.
- Quality of life.
- Build wealth.
- Eliminate debt and achieve real cash flow.
- Build your dreams.
- Eliminate the threat of job loss.
Franchising – What’s It All About?
- Franchising is not a business or industry itself – it is a business strategy.
- Franchisor designs a strategy to penetrate and dominate a marketplace…
- Leverage the resources of stakeholders who have similar goals and a unified way of thinking.
- Strategic partnership.
Elements of a Franchise
- Brand – it’s more than a name… it is the representation associated with the products or services delivered in a memorable and satisfying experience.
- Operating System – a world-class institutionalized service delivered in a memorable experience so it can be done over and over again from unit to unit in a consistent manner.
- Support System– what empowers a Franchisee to become better and better at delivering a memorable experience and drastically improve overall performance.
- Franchisee – the individual business owner who represents the Brand in their town.
Value of Systems in a Franchise
- Reduced Risk – Proof of success is in place
- Operating System – Success Formula has been established for you
- You don’t have to re-create the wheel – or many wheels
- Other Franchisees with their ‘feet on the street’ – emulate the best advice & support from the Franchisor – position of experience
- Collaboration – Share best and worst practices with similar people
- Systems continually adjusted, changed, & improved
- Training systems
- Sales & marketing strategies and systems
- Manuals & other documentation
- Letters, contracts, agreements, documents – all in place
- Development costs – shared resources
- Purchasing power
Entry to a Franchise System
- Franchise Fee
- The Franchise Fee is the cost of putting the Franchisee into the business of the Franchisor, not as a partner, but as a participant.
- Access to all of the Franchisor’s systems
- Royalty Fee
- The Franchisor’s share of the customer’s money generated by each Franchisee using the Franchisor’s systems
- The oil that makes the engine run
- Advertising & Marketing Fee
- Used to build Brand presence to benefit all members
- Advertising campaigns, marketing campaigns, co-op programs, Search Engine Optimization, Creative Artwork, collateral development costs, etc.
Evaluation – Making an Informed Decision
- System of discovery – two-way exchange of information
- Step-by-step qualification system should be in place
- Open & honest exchange of information
- 30 – 120 days to complete the due diligence process
- Should never feel pressure to move too quickly, yet the information you need must be accessible – usually on a schedule set out by the Franchisor
- Includes open access to all Franchisees in the system
- The goal is to feel comfortable to make an informed decision about becoming Strategic-Partners
Franchisor Disclosure – Get All of the Pertinent Information
- Exchange information on a fair and equitable basis
- Formal Disclosure Documents
- No decisions – documents for 14 days
- Cooling off period – final documents for 7 days
- Full disclosure of all Franchisees
- Financial performance data
Important Consideration – Exit Strategy
- How will the business be valued at time of exit?
- Do the customers/clients carry an ongoing future cash flow value?
- How will the value be affected by changing demographic conditions?
- How will the value be affected by changing competitive environment?
- Franchisors help with resale?
Facing the Fears – Realizing the Dream
- The fear of change, failure and the unknown are perfectly natural.
- Naysayers are everywhere, and we call them the “fire hose brigade”.
- Listen to advisers, but continue to trust yourself no matter what.
- Face it, feel it and blast past it.
- There isn’t a “perfect time” where all the stars align..
- Opportunity, financial resources, market conditions and demographics.