Increase Profits by Growth Through Franchising!

1. Increase Profits by Growth Through Franchising!

2. About SCORE • Successful and experienced business owners and executives acting as volunteers • Free ongoing mentoring: • One-on-one • E-mail • Signup on our website – Mentoring Tab • Seminars, workshops and Meetup Group • Resources for small business: manasota.score.org Douglas S. Cavanaugh

3. Introductions . . . Your Expectations? • Introduce yourself • What business are you in? • What are your expectations for the meeting today? • Record . . . End of the meeting feedback: Expectation Gaps Outcome

4. Key Growth Considerations Strategic (Growth) Vision for Your Company Where is My Company Headed? Survival? Thriving? Direction by Default? Company Owned Franchisee Owned Business Owners / Management - responsible for the framework which guides those choices that determine the nature and direction of an organization

5. Franchising for Profitability Two Reports Show 2014 Franchise Growth Expected to Increase at Fastest Rate in Five Years • FRANdata, which has been analyzing franchising activity for more than 25 years, reports that demand for franchise units is expected to increase by more than 12 percent this year, the highest rate of increase since 2009. • Separately, IHS Global Insight reported in its June update to the IFA Franchise Business Outlook that the franchise sector will lead the nation’s economic rebound by creating an estimated 220,000 jobs this year.   • Complete article is attached with your handout.

6. What is Franchising? • A Method of distribution for a product or service that includes: • Licensing of a trademark and tradecraft • Payment now and forever • Franchise fee • Royalties and advertising fees • A proven business system • Training & ongoing support • Win-win business relationship • Regulatory Oversight

7. 12 Criteria of Franchisability • Credibility – To sell franchises, a company must first be credible in the eyes of its prospective franchisees. • organization size, number of units • unit economics • years in operation • look of the prototype unit • publicity • consumer awareness of the brand, demographics • strength of management

8. 12 Criteria of Franchisability 2. Differentiation – In addition to credibility, a franchise organization must be adequately differentiated from its franchised competitors. • industry leading unit economics • differentiated product or service • reduced investment cost • unique marketing strategy • different target markets.

9. 12 Criteria of Franchisability 3. Transferability of knowledge – • ability to teach a system to others • short period of time - three months • Some more complex franchisors offset this handicap by targeting only franchise prospects that are already "educated" in their field (e.g., a medical franchise targeting only doctors).

10. 12 Criteria of Franchisability 4. Adaptability – Next, measure how well a concept can be adapted from one market to the next. • do not adapt well over large geographic areas • varying state laws • very unique location • unique abilities or talents of the individual • based on years of perseverance and relationship building

11. 12 Criteria of Franchisability 5. Refined and successful prototype operations – A refined prototype is necessary to demonstrate that the system is proven. • instrumental in the training of franchisees. • testing ground for new products, new services, marketing techniques, merchandising and operational efficiencies. • unit economics model

12. 12 Criteria of Franchisability 6. Documented systems – All successful businesses have systems. But in order to be franchisable, these systems must be documented in a manner that communicates them effectively to franchisees. • policies, procedures, expectations • systems, management processes • forms, tools, specifications • business practices in a comprehensive and user-friendly operations manual and/or computer-based training module.

13. 12 Criteria of Franchisability 7. Affordability – Affordability merely reflects a prospective franchisee’s ability to pay for the franchise in question. This criterion is as much a reflection of the prospective franchisee as it is of the actual cost of opening a franchise. For example, a multi-million dollar hotel franchise is affordable to real estate developers, whereas a franchise with a $100,000 start-up cost that targets prospects with clerical experience might not be.

14. 12 Criteria of Franchisability 8. Return on Investment – This is the real acid test of franchisability. • profitable • allow enough profit after a royalty for the franchisees to earn an adequate return on their investment of time and money. • measured against other investments of comparable risk that compete for the franchisee’s dollar • achieve a ROI of at least 20 percent by the second to third year of operations. 

15. 12 Criteria of Franchisability 9. Market trends and conditions – While not an indicator of franchisability as much as a general indicator of the success of any business, these trends are key to long-term planning. • Is the market growing or consolidating? How will that affect your business in the future? • What impact will the technology have? • Will the franchisee’s products and services remain relevant in the years ahead? • What are other industry franchised and non-franchised competitors doing? • Will the competitive environment affect your franchisee’s likelihood of long-term success.

16. 12 Criteria of Franchisability 10. Capital – While franchising is a low-cost means of expanding a business, it is not a "no cost" means of expansion. • one or two franchised units, the necessary legal documentation may be completed at costs as low as $15,000 • For franchisors targeting aggressive national expansion, however, start-up costs can run $100,000 or more. And once the costs of printing, audits, marketing, and personnel are added to the mix, a franchisor may require a budget of $250,000 or more to reach its expansion goals.

17. 12 Criteria of Franchisability 11. Strength of management– The single most important aspect contributing to the success of any franchise program. is the strength of its management. • most common contributor to the failure of start-up franchisors lack of experience at the management level. • understaffing - new franchisors will try to take everything on themselves. • franchise marketing • lead handling, franchise sales • ad fund management • training • multi-unit operations management.

18. 12 Criteria of Franchisability 12. Commitment to relationships– Successful franchisors focus on building long-term, rewarding relationships with their franchisees that are truly mutually rewarding. • Unfortunately, not all franchise organizations understand the link that exists between relationships and profits. • sell franchises more effectively= validation • introduce needed changes into the system more easily • motivate franchisees and their managers to provide a consistent level of products and services to their customers • True desire to help others succeed!

19. Phases of Franchising The Legal Compliance Phase The Franchisee Marketing Plan Phase The Franchisee Training Phase The Franchise Organization Phase

20. Phases of Franchising The Implementation Phase For clients wanting more, there are organizations that provide: • Recruiting franchisees and professional staff. • Undertaking international expansion. • Ensuring continuing compliance with State and Federal Regulatory policies. • Introducing franchisee advisory councils and mediating franchisee disputes. • Keeping you abreast of new issues, laws and business growth opportunities. • Modifying and creating short term and long-term strategies. • Negotiating mergers and acquisitions, private placements, venture capital and other capital raising measures.

21. Assessing Your Business The SCORE Business Needs Assessment, it is in your packet. Download at: http://tinyurl.com/8j7fkgw It will help you assess the current state of your business in 5 key areas: • Management • Marketing • Sales • Finance • Operations Decide what additional sessions to attend Develop a customized business improvement plan

22. Business Needs Assessment - Operations

23. Help Us, Help You Please fill out the evaluation form Your feedback is important to help us improve our programs!

24. References The Executive Guide to Strategic Planning book by Morrisey / Below / Acomb The Executive Guide to Operational Planning book by Morrisey / Below / Acomb The E-Myth Revisited book by Michael Gerber Improving Performance book by Rummler and Brache

25. Outside Enrichment Programs Where to get external mentoring, training and education? • Online • Vendors • Industry/professional associations • Colleges and universities • Adult education/continuing education • Training companies/consultants • Business coaches • State Economic Development Department • Chamber of Commerce • American Express OPEN Forum • SCORE.org