Cynthia Mora FranNet of Houston • FranNet Associate • 26 years in Marketing and Sales • Business Owner – Advertising and Marketing Consulting firm for 9 years • Native Houstonian
Who is FranNet? • 30 year old International Franchise Consulting Firm • Over 70 Offices in North America • SBDC and SCORE – Only Consulting firm with National Partnerships • Provide education
What We Do • We match people who want to be in business with a franchise that meets their needs. • We Do Not Sell Franchises • We provide options • NO COST!
Topics for Discussion • Why Business Ownership? • Three options for going into business • Small business in the U.S. • Franchise Industry overview • Simplifying the search
Why Own Your Own Business? SUCCESS Fulfillment Flexibility Independence Control Financial Security No More Layoffs Money What is it for you?
Some of the Answers Risk: A job is safer than a business I’ll wait until the economy is better Money: A business costs a lot of money to start and run Knowledge: I don’t know where to start or how to find what I’m looking for Skills: Running a business takes specific talents and skills Fear of Failure
Perception of Risk: Job Is working for someone safe? Short term yes, but … • Can you be sure your job is safe? • Can performance determine security? • Will you meet your long-term financial goals of security and retirement? Risk Increases
Business Ownership At first, owning your own business can be scary, but ... • No one can take it away. You can’t be downsized, transferred or fired. • The longer you own your business, the safer it becomes Risk Decreases
Lower Your Risks Concerned about starting a business during poor economic times? Lower the risk by looking for businesses with specific market characteristics. Many businesses thrive in all economic conditions
What About The Economy? Growing markets driven by demographics • Ex: Senior Care, Residential Repairs, Cleaning, Education, etc. Essential services • Ex: Hair Care, Automotive, Damage Restoration, etc. Business that help other small businesses thrive • Business Coaching, Expense Analysis, Sales Training, etc. Many businesses thrive in all economic conditions
Business Ownership Options Buy an Existing Business Build your Own Business Buy a Franchise
Start Your Own Business Advantages • Total control • Make all decisions • Room for creativity • No predetermined rules • Large upside • Build a business from your passion • Disadvantages • Must create systems • Limited financial options • Slow to ramp up • High failure rate Advantages Disadvantages
Buying an Existing Business • Advantages • Cash flow • Good will • Actual financial results • Attractive to lenders • Market established • Customer base • Employees in place • Systems may be in place • Owner financing • Disadvantages • Cash flow • Bad will • May be overpriced • Hidden seller motives • Employee defection • Higher debt service • Poor training and support
Buying a Franchise • Advantages • Name recognition/ licensed trademark • Proven business system to start and operate • Training and support (initially and ongoing) • Marketing expertise / Purchasing power • Lower failure rate • Lower cost / Financing options • Location choices • Ability to conduct unbiased research • Disclosure • Franchise family
Buying a Franchise Disadvantages • Fewer industry options • Structured operating system in some franchises • Territory restrictions • Can only sell their products • Ongoing royalty payments • Little initial cash flow from start-ups
What is Franchising? The creation of a distribution channel to build brand identity and attain market dominance… QUICKLY!
Franchise is… A license to use: • Name and trademarks • Products • Business Systems In exchange for: • Initial franchise fee • Ongoing royalties
Government Disclosure: FDD • Franchisor Info • Time in business • Business experience • Bankruptcies • Litigation • Costs • Total Investment • Franchise fee • Other fees (Adv, Equipment, Supplies, Insurance, etc.) • Working capital • Royalties • Franchise Contract
Government Disclosure: FDD • Obligations for Franchisor& Franchisees • Territory • Listing and Contact Info For: • Current franchisees • Past franchisees • Earnings Claims • Financial Statements • Manager Policy • Renewal, Termination & Transfer Policies
Franchising Myth #1: “Only fast food”
Franchising Fact #1: FACT: • Over 3,400 different franchise companies • In more than 90 industries • With over 900,000 operating units
Franchising Myth #2: “Franchises succeed because of the quality of the product”
Franchising Myth #2: Can you make a hamburger? Is your hamburger better than McDonald’s? If it is not the product then what is it?
Franchising Fact #2: • FACT: • It is all about the Business System: • Marketing • Sales • Operations • Accounting
Franchising Myth #3: “Successful franchises emerge in a new industry with no new competitors”
Franchising Fact #3: FACT: Successful franchises emerge from well established industries by creating consolidation. • It’s The System • McDonald’s started when there was a burger joint on every corner.
Franchising Myth #4: “Franchises are expensive”
Franchising Fact #4: FACT:
Financing Facts: How Much Do I Need? Typically, 25-30% of the total investment will be your money. Financing is relatively easy to get for 70-75% of the total investment including working capital.
Financing Facts: Sources: • Personal savings • Friends, relatives or partner • Financial Institutions • Seller financing • 401K, IRA, etc.
Franchising Myth #5: “High return requires a high investment”
Franchising Fact #5: FACT: There is no automatic correlation between the cost of the franchise and the potential return. Service businesses require far less capital investments and frequently yield higher returns.
Franchising Myth #6: “Industry experience is required”
Franchising Fact #6: • FACT: • Franchisors want a person that can use THEIR system. • They want someone who will focus on being an owner • business and management skills • people and communication skills • Proven Process • Franchisor trains on how to use their system
Why Pay Royalties? • Good franchisors lose money in the short term on almost every franchisee • Small royalty payments • Support costs are high • They make money in the long term • Bigger royalty payments • Support costs are low
Why Franchising Proven, systematic approach to starting and staying in business • Experience • Simplicity • Initial Training & Ongoing Support • Name Recognition • Sales, Marketing & Operational Systems • Culture of Teamwork
Why Franchising You’re in business for yourself, but not by yourself…. Franchises are a hybrid between corporate executive and an entrepreneur.
How Do You Find a Business That is a Great Fit? • Separate the function of the business, • from the function of the business owner!
What Are Your Transferable Business Skills? Sales Customer Service Management Marketing
Determine Your Business Model 5 Years 20 Years 10 Years Identify your Financial & Lifestyle Goals
Your Business Model Employees Types of Customers Service or Product Budget Business Preferences Business Environment New or Established Industry Full or Part-time Hours Room for Growth Other Items? Number of Units
STEP 1: Complete your online profile, the Personal Franchise Assessment (PFA)
STEP 2: You will receive a copy of your PFA results to review
STEP 3: Meet with your consultant and get the full understanding of your PFA results and of your goals for business ownership, etc…
STEP 4: Together, we will develop your unique Business Model and establish the criteria for your ideal business
STEP 5: At this point, your consultant will recommend the businesses that fit your model and put you in touch with the franchise companies
STEP 6: Now the work begins!! You will be busy learning about each business – talking with Franchisor representatives and ultimately current franchise owners
STEP 7: Weekly coaching, with scheduled calls weekly to review your research. Our job is to help you gather the facts and decide if the businesses you are considering are the right ones. We can always change direction and companies if your model evolved.