How to Choose and Buy the Right Franchise€¦ · How to Choose and Buy the Right Franchise ... It...

How to Choose and Buy the Right

FranchisePresented by William Adler

The Entrepreneur's Source 1

Franchising facts

How to buy a franchise

Franchising myths


Derived from the French words “Franchiss” & “Franchir” that mean to free oneself from servitude.

A way to expand a business and/or distribute goods and services through a licensing relationship.

4The Entrepreneur's Source

The franchisor grants the license to the franchisee for the use of:

Trade name/trademark Products & services Operating system Marketing/advertising Education/training


2017:

745,290

Projected Growth

1.9%

2018:

Estimate

759,206


A new franchise

opens every 8 mins.

3% of our economy

from franchise industry.

Accounts for 12.5% of private

sector payroll.


2017 Sales

Increasing by 5.6%

To $757 Billion

The Entrepreneur's Source8

2016: 7,654,000 employed

2017: 7,881,000 employed

2018: Estimate adding 291,000 jobs totaling 8,172 million


Accounting/Tax Services Employment Services Hotels & Motels Printing/Photo Copying Services

Advertising/Direct Mail Environmental Services Insurance Publications

Assisted Living Equipment Leasing & Financing Janitorial Services Real Estate Services

Auto & Truck Rentals Estate Planning Jewelry Recreation: Equipment & Supplies

Automotive Products and Services Auction Consignment Event Planning Laundry & Dry CleaningRecreation: Exercise/Sports/Entertainment/Products

Batteries: Retail/Commercial Financial Services Lawn, Garden & Agricultural Recycling Products & Services

Beverages Fitness Maid & Personal Services Rental: Equipment & Supplies

Bookstores Florist Shops Maintenance, Cleaning & Sanitation Retail Stores: Specialty

Business Brokers Food: Baked, Goods/Donuts/Pastries Marine Services Security Systems

Business Services Food: Candy/Popcorn/Snacks MedSpa Senior Care

Business Management Consulting Food: Caribbean Metal Senior Living Communities

Check Cashing/Financial Service Centers Food: Ice Cream/Yogurt Online Sign Products & Services

Chemicals & Related Products Food: Meal Preparation Optical Aids & Services Tanning Centers

Children’s Services Food: Pizza Other Telecommunication Services

Clothing & Shoes Food: RestaurantsPackage Preparation/Shipment/Mail Services Tools & Hardware

Commercial Lighting Food: Specialty Painting Services Transportation Services

Computer/Electronics/Internet Services Franchise Consulting Paralegal Services Travel Agents

Construction: Materials, Service & Remodeling Golf Equipment, Products & Services Payroll Services Video/Audio Sales & Rentals

Consumer Buying Services Hair Salons & Services Pest Control Services Vitamin & Mineral Stores

Convenience Stores Handyman Services Pet Services Water Conditioning

Cosmetics Health Aids & Services Photography & Supplies Wedding Planning

Dating ServicesHome Appliances: Sales Rental & Repair Pre-Employment Screening Services Weight Control

Drug StoresHome Furnishings: Retail, Sales & Rental Pressure Washing & Restoration Wildlife Management Control

Educational Products & Services

Home Inspection/Radon Detection

Products and

Services for

Seniors

Early Childhood Education

Green Products

and Services

Services for the Two-

Income Family

Business Services


T

R

E

N

D

S

G

R

O

W

T

H

Growth Areas Percent

Home-based 36.30%

Senior and Childcare 28.08%

Business Service 18.49%

Environmental Services 10.27%

Janitorial and Home Improvement

6.85%

Average Investment in

FranchisesPercentage

Under $50,000 13%

$50,001 to $100,000 17%

$100,001 to $250,000 28%

$250,001 to $500,000 23%

$500,001+ 18%



7 Questions to ask Yourself

1. Am I willing to work hard?

2. Am I willing to follow a system?

3. Do I have access to start-up capital?

4. Can I support myself during the early months?

5. Are family & friends supportive?

6. Will I do whatever it takes to ensure success?

7. Does the business model support my ILWE goals?

Finding the Right

Franchise

• Learn about business ownership options

• Understand your goals, needs and

expectations

• Be open-minded

• Conduct an in-depth study of several

business models

• Base decisions on facts not emotions

• Speak to people who can help you get

started

Location, Location, Location

Demographics are important to understand

Criteria for a successful territory

Can I negotiate territory?

• Proven business system

• Initial training

• On-going support

• Business software

• Marketing campaigns and materials

• Equipment

• Site location assistance

• Build-out assistance

• Future vision & operational growth plans

• Possible financing assistance

Legal Structure

Two Main Franchising Documents:

• Franchise Disclosure Document (FDD)

• The Franchise Agreement (contract)

1. The Franchisor, its Predecessor & Affiliates2. Business Experience3. Litigation4. Bankruptcy5. Initial Franchise Fee6. Other Fees7. Initial Investment8. Restrictions on Sources of Products/Services9. Franchisee’s Obligations10. Financing Available11. Franchisor’s Obligations12. Territory

Topics covered in Franchise

Disclosure Documents (FDD)

Topics covered in Franchise

Disclosure Documents (FDD) 13. Trademarks

14. Patents, Copyrights & Proprietary Information

15. Obligations to Participate in Operations of Franchise

Business

13. Restrictions of What the Franchise May Sell

14. Renewal, Termination, Transfers, & Disputes

15. Public Figures

16. Earnings Claims

17. List of Franchise Outlets

18. Financial Statements

19. Contracts

20. Receipt

KEY SUBJECTS IN FRANCHISE

AGREEMENT

Use of Trademarks

Location of Franchise

Term of Franchise

Franchisee’s Fees and Other Payments

Obligations & Duties of Franchisor

Restrictions on Goods & Services Offered

Renewal, Termination & Transfer of Agreement

1. Independently Wealthy

2. Win the Lottery

3. Borrow from family and friend

4. Borrow from Bank

5. Liquidate Assets

6. Crowd Funding

7. Home Equity Loan

8. SBA Loan

9. Convert your 401(k)/IRA

10. There are no grants

Financing – How do I pay for my

Franchise

Franchisor Perspective

Franchisee Perspective


26

Pros: Franchisor Perspective

Potential for quicker growth, capture of market share

Owners are “Motivated Managers”

Sharing of risk

Focus on business and future, not daily operations

Revenue streams other than unit sales

27

Cons: Franchisor Perspective

•Over Franchisee

•Growth based on investment of individuals

Lack of control

Disparity in performance of units

Finding quality candidate owners

Geographic / International differences

Regulations

Litigation/Arbitration

28

Pros: Franchisee Perspective

Access to information – “pre-investment”

Cooperative buying power

Instantaneous Goodwill

Proven formula

Quick “turn-key” operations

On-going support

Networking with other owners

29

Cons: Franchisee Perspective

Not a “Partnership” – Royalties on revenue

Long term agreements vs. market trends

Franchisor management vision vs. market trends

Customer experience at any unit dictates overall reputation

Less control and independence than independent business ownership

Finding the right business will make you successful.

The secret of success is finding a career doing something you love.

You will know the right opportunity when you see it.

I can’t be in this business, I know nothing about it.

Corporate HQ will dictate everything. I will not have any control.


I can’t be creative in a franchise.

A franchise requires more money than I can afford.

It is best to buy a well know brand name.

Buying a red hot franchise that is in a growth spurt is a good opportunity.

Food franchises are great investments because they are recession resistant.


If you invest in a franchise, you have a high chance of succeeding.

My town does not have a widget franchise. If I open one, it will be successful because there is no competition.

Buy a franchise that speaks to your passion.

You must know every aspect of your business.

Franchisees own their own franchised business.



55 to 61% of all Americans want to own their own business

37% of all American households are involved in a small business

Currently 1 out of 25 working adults are starting their own business

Presented by:

William Adler

SCORE/The Entrepreneur’s Source

901.761.0250

[email protected]


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