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Franchising Overview

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LEARN THE SECRETS TO Finding the Right Franchise for You!

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  • 1. LEARN THE SECRETS TO Finding the Right Franchise for You!NameThe Entrepreneur's Source AddressCity State ZipEmail Address phone

2. Congratulations. Youve just taken the first step toward taking control of your success.Whether youre the seasoned business professional looking to add a franchise to your existing portfolio, an up-and-coming entrepreneur or simply a person looking to be their own boss, we are here to help.This guide was designed with you in mind giving you the basic information you need to identify the franchise opportunity thats perfect for you. Well help you understand the industrys terminology and share with you the breadth of businesses offering franchise opportunities, so that youll know the best questions to ask the franchise you are investigating. Well even help you with complex, personal items, such as assessing the kind of lifestyle youd enjoy and calculating your net worth.This guide is sponsored by our franchise partners and they are eager to help you realize your entrepreneurial goals and share their opportunities with you. These partners are the top franchises in their industries. They represent thousands of people just like you... enterprising individuals who had the courage and the drive to take the first step to realizing their dreams. When our partners contact you, please take advantage of this great opportunity to learn not only about their unique offering, but also about yourself. THE ROADMAP TO SUCCESSFUL FRANCHISING 3. WITH A FRANCHISE, THE ODDS ARE IN yOUR FAvOR. Why is it that the majority of independent businesses fail, whereas the majority of franchise businesses succeed? When most entrepreneurs go into business for themselves, they often know how to do the technical work of the business but may not know as much about the strategic parts of developing a profitable business. On the other hand, a franchise business allows you to invest into proven business systems and strategies that have worked for many other business people, just like you.The franchise concept lets you apply a proven method that, when followed correctly, will yield strong, predictable results. The experience the franchisor gives you is invaluable, as is the help youll receive with things like site-selection, employee training, marketing and inventory. A franchise gives you a proven system that is already working for others. It reduces the learning curve and helps prepare you to be as successful as possible.Can franchising be as big as it appears to be? The Economic Impact of Franchised Businesses, conducted by PricewaterhouseCoopers, calculated the total I had a desire to be directly rewarded economic impact of franchise systems at $2.3 trillion. for the effort I put into my job. Yes, thats trillion with a T! This accounts for over 11 million jobs from over 900,000 businesses.But dont focus on just the numbers, because this is a very personal decision. Think carefully about your skills, as well as the lifestyle you want and type of work youre most passionate about. Franchising lets you follow your dream by doing something you love, while eliminating much of the risk and guesswork that usually accompanies a new business start-up. 4. 1. Name Recognition Everyone knows about4. A Proven Method Your franchisor gives you aSubway or McDonalds. How many people know proven model that has been successful for othersabout your local hardware store or video rentallike you, eliminating the guesswork and minimizinglocation? Not many. Think about how long it took the risks associated with going it alone!to build the brand and the benefits associated withthem. 5. Access to Capital Youll likely need to borrowmoney to start your business or expand your 2. Strength in Numbers You probably arentoperations. Many successful franchisors havethe only franchisee. By having a network of peoplefinancing programs already in place for qualifieddoing the same thing youre doing, you can shareapplicants or existing owners. If they dont haveideas and get quick feedback to help solve problems direct financing, the franchisor can help you secureand strengthen your market position.financing, simply with the strength of their brand.3. Improved Buying Power Its simple economics:the more you buy, the cheaper the price. Havingtens or hundreds of partners buying the samegoods will significantly reduce the price. THE FIvE STRENGTHS OF FRANCHISING 5. yOUR SUCCESS bEGINS by ASkING THE RIGHT qUESTIONS. In order to determine which franchise is the right fit for you, start by asking the right questions. First, think about your personality, then ask about specific franchises and compare the answers to find the best franchise for you. Self EvaluationFranchise The WinningAssessmentMatch Part One: Will you be a successful franchisee? The desire to own your own business is undoubtedly the most important reason to invest in a franchise. This allows you to be independent, control your own future and attain financial success. However, before purchasing a franchise, you should ask yourself the following questions to determine if franchising is right for you.Your personality 1. Are you a motivated self-starter? Thriving franchisees are persistent, confidentand driven. These individuals tend to have highenergy levels and are usually more sales directed.Also, they are eager to follow the establishedprocedures that have worked for franchiseesbefore them. If youre not willing to follow theproven franchise system, this is not an investmentyou should make.2. How much do you want to run your own business? Building and managing a business is not easy. Its I wanted freedom to build my own team to move the business forward. important that you have effective people skills, because you will be interacting with employees, customers and vendors on a daily basis. Being a people person is key to running a successful franchise. 6. That some achieve great success, is proof to all that others can achieve it as well.-Abraham Lincoln 3. What is your background? Any previous experience working in retail, customer service or any other business where youinteracted with the public is a solid foundation for a successful franchisee. Skills such as bookkeeping,computer knowledge or other technical expertise are also a plus. These skills, combined with yourpast employment and education, can help determine if you are suited for a specific franchise industryor franchising in general. (Just remember that many franchisors do not require specific industryexperience, as many have in-depth training sessions and are willing to work with you.)4. What type of work is most appealing? What type of work makes you happy? This is an extremely important question, since you will beintimately involved in running this business every day. Make sure your needs are compatible with therules and restrictions established by the franchisor.Your desired lifestyle 1. Are you willing to relocate? Some franchises may or may not have an opportunity for you in your area.You should have the answerto this question prior to speaking with any franchisor.2. How many hours are you willing to work? Certain franchise structures will require longer hours than others and a more hands on approach.Deciding how much time and effort you are willing to commit is significant in choosing a franchisesystem.3. Are you comfortable managing others? Franchises differ by industry, but many require hiring employees. Determining how many people, if any,you would like to manage will help decide the franchises that are best for you. There are franchises thatdo not require any employees and allow you to work alone, if you choose.4. Owner-operator versus owner-investor? Before beginning your investigation, you should ask yourself if youre looking to run the businesseveryday or want someone else to run it for you. Determining how involved you would like to be in thebusiness is essential. Franchisors may or may not allow someone to be an absentee owner and this canhelp narrow your search. I wanted to build financial security and didnt want to be subject to company downsizing, mergers or buyouts. 7. Your financial resources Most franchisors screen and qualify based on financial resources such as assets, liabilities, net worth and sources of income. Below is a work sheet to help assess your financial situation to understand where you fit, financially, with each opportunity you investigate. FINANCIAL WORkSHEETNet Worth CalculatorAssetsLiabilitiesCash on hand $ _________Notes payable to banks$ _________Stocks and bonds $ _________Mortgage$ _________Retirement plans $ _________Automobile(s) loans $ _________Real estate$ _________Credit cards$ _________Automobile(s)$ _________Other: _______________$ _________Money due to you $ _________Other: _______________ $ _________Total Assets $ _________Total Liablities$ _________Total Net worth (total assets minus total liabilities): $ _________ Annual Income CalculatorSources of IncomeAnnual salary: self $ _________Annual salary: spouse $ _________Bonus: self $ _________Bonus: spouse $ _________Dividends and interest$ _________Real estate income$ _________Other: _______________$ _________Total Annual Income $ _________Part Two: Evaluating the franchise opportunity There are hundreds of franchisors within many different categories. Trying to find the right one can seem over- whelming. Finding the answers to the following questions can help make the decision-making process easier for you.1.What type of franchise is it? When thinking about franchising, most people think strictly of owning just one unit, in one city. However, there are many different types of franchising methods and understanding them prior to investigating can save you a great deal of time. The following is a list of the most common types of franchises:Single-Unit Franchise You purchase a franchise from the franchisor and operate thisindividual business in one location or area.Sequential Franchise You purchase additional franchises after the initial single-unit franchise.These additional units are approved on an individual basis and you will most likely need to hiremanagers to run the units.Area Developer You own the rights (for a fee) to a specific area and will be expectedto develop a certain number of franchise units within an agreed time frame.You may also beresponsible for running the units but will need to hire mangers to assist you.Subfranchisee You own a single-unit or multiple units, but instead of reporting to thefranchisor, you report to a subfranchisor or master franchisee.Subfranchisor or Master Franchisee Similar to a franchisor, you are responsible forassisting subfranchisees in a given territory. Within this territory you are expected to provideon-going support to the owner-operating franchisees. 8. 2. What industries offer franchises? Name an industry you are interested in and, most likely, theres a franchise opportunity for you. Heres a chart that shows the top 18 industries providing franchise opportunities. As you can see, virtually the only limits you have are your own desires.Whether you want to sell childrens clothing, run a plumbing service, operate a restaurant or provide sales training to executives, there are franchise opportunities for you. Franchise Opportunties by IndustryTravel1%Sports & RecreationAutomotive 2% 6% Baked GoodsService Businesses 2% Building & Construction 11%5% Business Services 5% Retail 11% Child-Related3%Education-Related2% Retail Food5%Restaurants8% Fast Food20% Real Estate 5%Lodging3% Printing 1% Maintenance Services8%Personnel Services 2% 9. 3. What franchise industries are growing the fastest? FRANdata, the leading source of information and analysis concerning franchising, provided the followingdata to the IFA citing which franchises are growing the fastest, based on the number of new franchiseconcepts entering the marketplace.Not only are there opportunities in almost any industry you can think of, each industry is growing. The tremendous growth rates in franchising meanmore opportunities for you to evaluate. 10. Franchise Categories 4.What costs are associated with starting a franchise?Advertising Initial capital investment varies based on the industry and the Automotivetype of franchise business. Total start-up costs can range from$20,000 to over a million dollars, depending on the franchise, Bridal location and cost of real estate. In addition to the start-up costs,there are often continuing royalty fees that typically range fromBusiness Servicethree to eight percent of gross revenues. Its important to examineall expenses involved prior to purchasing a franchise to help discoverChildrens Business any hidden overhead. The following is an itemized list of coststypically associated with owning a franchise:Cleaningo Advertising fees Franchisors may require you to contribute a Computer/Internetpercentage of your sales to an advertising fund for nationally-runcampaigns. In addition, franchisors may also ask you to spend a specific Financial Services amount of money on local advertising per month. Food/Restaurant o Opening inventory Many franchisors will require you to purchasesupplies and inventory directly from them rather than an outsourced Health/Fitness company. The opening inventory usually consists of enough supplies torun your business for at least two weeks. Home Improvementso Equipment and signage Different equipment is needed for various Lodgingbusinesses. Generally, payment plans can be arranged for most largeequipment purchases. In addition, franchisors have signage packages toMaintenance keep their brand streamlined. Manufacturingo Working capital You will need a specific amount of initial workingcapital to operate your business. This is needed to pay for employees, Personal Careoperating expenses and additional miscellaneous costs until you start Petsproducing revenue. Photography/Video o Real estate/leases You will need to purchase or lease a property andthese costs will either go to your franchisor (which is uncommon) or toReal Estate a real estate agent. Retailo Training fees To attend training programs, you may have to pay fortravel, lodging and meals. These costs are usually not covered by the Securities franchise fee and can add up quickly if you need to take others totraining with you. Security/Investigationso Insurance It is necessary to have health insurance (for you and your Senior Care Serviceemployees) as well as fire, occupancy, inventory, burglary, workerscompensation, accident and general liability insurance. Sports/Recreationo Operating licenses, permits, deposits and prepaid expenses These Travel miscellaneous costs are determined by the franchise and the area fordevelopment. Vending Wholesale/Distribution 11. 5.What are the benefits of a specific franchise? When looking at different franchises, it is important to look at what they offer you as a potential franchisee.The most important benefit, of course, is having a standardized franchise system. But its important todetermine what other benefits are being offered, like:o Operational and management trainingo Employee trainingo Site selection and demographic researcho Real estate construction and assistanceo Grand opening assistanceo Marketingo Advertisingo On-going supportObviously, in order to find a franchise that best fits you, it is essential to do as much research as possible.We recommend starting your search online by visiting the companys website.Then check with the Federal Trade Commission (FTC), Better Business Bureau (BBB) and the International Franchise Association (IFA) for any possible red flags. Once you have narrowed your search down to a specific franchise, pay attention to their responsiveness to your inquiries.This will show you how they work on a day-to-day basis. Also, many franchisors are required by specific states to provide prospective franchisees with their Franchise Disclosure Document (FDD).To find more information on FDDs, check your state government office.You should read their disclosure document closely, as it contains information regarding the companys past business experience, franchisees and legal history.Also, it is wise to visit the companys headquarters and, if possible, attend one of their staff meetings prior to signing the franchise agreement.You can see firsthand how they treat their employees and get a feel for attitude and culture. Another way to gain insight ino the opportunity is to talk to current franchisees to get the true insiders view.Part Three: Choosing the perfect franchise The screening process for a franchise is a two-way street; you need to interview the franchisor just as much as the franchisor needs to interview you.Working through the first two parts of this section will give you a head start toward what you are looking for and what a franchise provides.Ideally, for you to be successful, the franchise you choose should match with your financial resources, experience and personality traits. It must also be a business that is well suited for your talents and strengths and complements your goals, lifestyle and interests.Finding a franchise is not easy, just as owning a business isnt easy. Asking the right questions and doing the right research will help you immensely. And by reviewing this guide, you have taken the first step toward your success. 12. IMPORTANT TERMS yOU SHOULD kNOW Advertising fee: The fee that is paid annually orFTC (Federal Trade Commission): A federal monthly by the franchisee to the franchisor to assistagency charged with enforcing antitrust laws and in the corporate advertising expenses. prohibitions against false, deceptive or unfair trade or BBB (Better Business Bureau): An organizationadvertising practices. that acts as a trusted intermediary betweenIFA (International Franchise Association): consumers and businesses.Founded in 1960, is a membership organization of Discovery day: A day to visit a franchises corporatefranchisors, franchisees and suppliers. office to learn more about the offer, meet key players Liquidity: Assets that can quickly be turned into and top management, and get a feel for the corporate cash without a significant loss such as checking culture. accounts, savings accounts and money market FDD (Franchise Disclosure Document): The accounts. Federal Trade Commissions mandated disclosure Net worth: Total assets minus total liabilities of an document that gives a wealth of information aboutindividual. the franchisor.Owner-investor: The franchisee will purchase the Franchise: Authorization of a right or brand namefranchise unit but will hire someone else to manage to a person to sell or distribute the companys goodsand run the unit, otherwise known as absentee or services. ownership. Franchisee: The one who is granted a franchise.Owner-operator: The franchisee will run the Franchise agreement: Positions the nature of the franchise unit him or herself. business and the expectations of the franchisor. Renewals: Franchise agreements generally expire Franchise broker: An agent between the buyer after 10-20 years. After the initial agreement, the and the seller. Can represent either the buyer or thecontract can be renewed but not always under the seller.same original conditions. A renewal fee is usually less Franchise fee: An up-front fee for the right tothan the original franchise fee. purchase a franchise.Royalties: The franchisor receives a cut of the sales Franchise termination: A franchisor can endyour franchise generates usually on a percent basis. your franchise agreement, usually occurring if the SBA (Small Business Administration): An franchisee does not pay the royalties or abide by theindependent agency of the federal government to franchise restrictions.aid, counsel, assist and protect the interests of smallbusiness concerns.