State Use Vendor Training ConferenceApril 1, 2014
Oklahoma City, Oklahoma
Disability Service Provider Sustainability in the
Ever Changing Marketplace:Welcome to the Era of the
“Social Franchise”
2014 © Copyright - Franchise Well, LLC
Presenter – Dr. Ben Litalien Certified Franchise Executive 20+ Years of Franchise Management U.S. Franchise Manager, ExxonMobil
On the Run Convenience Stores Principal, Franchise Well, LLC
Strategic Advisor to Source America Georgetown University, Franchise
Management Certificate Program Doctor of Management, Franchising Mountain Climber
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2014 © Copyright - Franchise Well, LLC
Introduction
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"Your success in life isn't based on your ability to simply change. It is based on your ability to change faster than your
competition, customers and business.“
— Mark Sanborn
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Today’s Objectives Take a look into the franchise sector Developing an understanding of the
“Social Franchise” concept Considering how a nonprofit
organization would benefit from owning a franchised business
Insights from other agencies on their franchise journey
Implications for nonprofits pursuing a Social Franchise Strategy
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2014 © Copyright - Franchise Well, LLC
A marketing method in which the owner of a product or service, known as the “franchisor”, offers the right to operate and manage his product & service to others, the “franchisees”, in return for a fee and ongoing royalty payments.
What is Franchising?
Franchisee- Initial Fee - Royalty- Marketing Fees- Infrastructure
Franchisor- Know-How - Support- Trademark- Network
Regulated by Federal Trade
Commission
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A Brief History Lesson The ‘roots’ of franchising A progression through time Modern day applications
The Current View & Trends Business Format Corporate Applications
A Franchise Overview
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Governed by the Federal Trade Commission Patterned after SEC regulations Governs the ‘offer and sale’ of franchises Will respond to complaints of fraud, misrepresentation
Further Regulated by the States 15 States Have Additional Franchise Laws May provide you with additional protection Good to know the specifics in your State and where
you plan to operate the business Generally doesn’t matter whether the business is for
profit or not for profit
A Regulated Industry
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International Franchise Association Started in 1960, the IFA is the world’s oldest and
largest organization representing this unique way of doing business
Mission: Enhance and safeguard the business environment for franchisors and franchisees worldwide
Currently have over 30,000 members, spanning 75 different industries, doing business in more than 100 countries
Excellent resource for prospective and active franchisees – www.franchise.org
A Strong Community
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2014 © Copyright - Franchise Well, LLCOklahoma State Use Program
More than 900,000 franchised businesses in the United States
The franchise industry accounts for nearly 10% of the private sector output ($1.53 Trillion )
Provides jobs for more then 18 million Americans
Franchising generates one out of every seven jobs in the private sector
Franchises exist in over 100 different industries
……a franchise opens every 8 minutes of every a franchise opens every 8 minutes of every business day…business day…
Franchising Stats
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A Visionary Step Charting a course for nonprofit
“community wealth” generation
A Pioneering Journey Traveling together Embracing the future
What is a “Social Franchise”?
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“A nonprofit owned franchised business…” Generally a wholly owned subsidiary of the parent
nonprofit organization Can be “for” or “non” profit entity depending on:
Underlying purpose of the entity Mission alignment
Business Success vs. Mission Requires learning a new sector A long-term business strategy
What is a “Social Franchise”?
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The Process…
Understanding Your Assets
CreatingTheCriteria
FindingThe RightMatch
Determine What You Can Leverage
Create a Positioning Strategy
Identify the Benefits to Your Organization
Create a SF Vision
Consider the ‘Mission Fit’
Consider the ‘Culture Fit’
Determine the Financial Borders
Identify Obstacles
Evaluate Candidates Negotiate the Right
Relationship Execute Franchise
Agreement Consider Partnership
Opportunities
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Select The Right Franchise Company
3,000FranchiseCompanies
The Best Match
Concept Fit with Nonprofit Mission
Strong Overall Company / Concept
Geographic Location Match / Expansion
Required Investment Level
Ability to Adapt to Nonprofit Requirements
Willing to “Invest” in Partnership
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Growing the SystemEconomies of Scale Increased Profitability
Building the BrandCreates DemandProvides Better Liquidity for AllGenerates Additional Revenue
Opportunities
Franchisor Goals
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A Compelling Case…
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Opened Rocky Pop Popcorn at Denver Airport Acquired Auntie Anne’s
More stable job opportunity Greater revenue potential
“Just Like Any Other Franchise” SBA loan; Completed training; Personal guarantees Focus on bottom line
Have Since Acquired Four More Locations 60% of employees are Platte River clients Generating significant cash flow / net income Raised organizational awareness nationally Recently purchased Service Master franchise
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A Challenging Case…
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Opened over 40 Partner Shops in the past 15 years
There locations still operating today Lack of education on either side Poor choice of concept by NPA’s Poor choice of locations Under-estimated level of support needed to
sustain the business model Lack of marketing and message integration
to mission Tremendous loss of disposable dollars and
donor trust
Virtually all issues were avoidable
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Considered automotive, business services, staffing and printing
Focus on creating jobs for persons with disabilities
Secondary goal of diversified revenue streams
Board member of Source America; supportive of innovative strategies
Considering launching a franchise concept for nonprofits
Provides access to and insight on jobs in the region
Creates stronger connections to the business community
No personal guarantees; clear exit strategy
Providing additional support Open since July ‘10
A Recent Example
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Considered various job creation opportunities but landed on automotive
Focus on transitional employment for qualified offenders
Primary goal was a commercially viable business model
It needed to have the ability to scale to a significant size to support sustainability
Acquired the franchise rights to the entire State of Texas
Must open six owned locations; support franchisees
Share of revenues from all franchise operations
Influence franchise owners to consider hiring ex-offenders
Opening 1st store mid-year 2014
A Recent Example
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Franchisors Don’t Understand the NP Sector Requires educating them on the realities and the
benefits
Creates potential for modifying the contract
NPA’s Must Leverage their Assets Franchisors are not easily swayed from their model
Most NPA’s are exempt from the FTC rule
NPA’s must define and demand the support necessary for success with a Social Franchise
Negotiating the Relationship
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What are the pros and cons of pursuing a franchise for your organization?
What franchise do you think would be best for your organization? How did you come to this decision?
What steps will you need to undertake to get this franchise up and running?
What is your long-term social franchise strategy?
How will you measure success?
Questions You Need to Ask…
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Pros Cons Turn-key Systems Training and Support Brand Name/Value Economies of Scale Better Labor Model
Less Freedom Additional Fees Higher Start-up Costs Complicated Contracts Long-term Commitment
Pros & Cons of a Social Franchise
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Acquiring a franchise may cost more money, but often reduces the uncertainties and risk
It is legal for nonprofit organizations to own/operate a franchise business, either ‘for’ or ‘not for’ profit
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Evaluating Your Organization
Established, Stable Organization
Strong, Committed Leadership
Mission Connection / Integration
Entrepreneurial; Social Enterprise Desire
Scalability (multi-unit and/or concept)
Capacity to Support a New Venture
…then the hard partOklahoma State Use Program
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Executing the Strategy
LaunchPhase
OngoingOperations
Performance Monitoring Periodic Gap Analysis Annual Business Plan
Update Marketing & Promotions Ongoing Training
Capitalization & Funding Site Selection Lease Negotiation Attending Training Hiring Staff Grand Opening
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A Guarantee of SuccessThere are real risks to consider
For Every OrganizationYou need Leadership, Mission FitYou need Capital and a Champion
A Short-Term CommitmentAverage contract is 10 years
Franchising is NOT...
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Summary “Social Franchise” is an emerging sector
opportunity, pioneering effortNonprofits can and do own franchise
businesses, primarily for profit generationUse a deliberate approach to determining if
your organization is right, and if soUse a disciplined approach to find the right
franchise opportunitiesNegotiate an agreement that reflects the
unique aspects of your organization
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2014 © Copyright - Franchise Well, LLC
Thank you
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Dr. Benjamin C. Litalien
Principal & FounderFranchise Well, LLC
44 Mine Road, Suite 161
Stafford, Virginia 22554
www.franchisewell.com
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