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Franchise Know-how & The Art of Reproduction. Ramon Vinay President, Francorp International. Francorp’s credentials. Created in 1976 Serving 40 countries Developer of more than 4 thousand franchise networks Consultant to more than 200 of the world’s top 500 franchises

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slide1

FranchiseKnow-how

&

TheArt of Reproduction

Ramon Vinay

President,

Francorp International

francorp s credentials
Francorp’scredentials
  • Created in 1976
  • Serving 40 countries
  • Developer of more than 4 thousandfranchisenetworks
  • Consultantto more than 200 of theworld’s top 500 franchises
  • Consultantto AMPM minimarkets, number 2 amongtheworld’s top 500 franchisesfor 2011, over McDonald’s*
  • *Entrepreneur 500 Franchises
slide3
Francorp Middle East:
    • Operatingsince 2006
      • Dubai, Kuwait, Kingdom of Saudi Arabia, Egypt, Jordan,Syria,Turkey, UnitedArabEmirates, Lebanon.
    • Over 100 franchisenetworksdeveloped in theregion.
partial client list
Partialclientlist

International

Middle East

what is a franchise
Whatis a franchise?
  • A license to exploit a business model and trademark, supported by the transfer of know-how on the run the business efficiently, based on the franchisor’s experience, accompanied with:
    • Policies and procedures
    • Permanent technical support and supervision
    • Leadership and full commitment to serve the system
the players in franchising
The players in franchising
  • Franchiseagreement
  • Trademarklicense
  • Training/Ops. Manuals
  • Operationalsupport
  • Marketing
  • Procurement
  • Otherservices

Franchisor

the players in franchising1
The players in franchising
  • Franchiseagreement
  • Trademarklicense
  • Training/Ops. Manuals
  • Operationalsupport
  • Marketing
  • Procurement
  • Otherservices

Franchisor

Franchisees

the players in franchising2
The players in franchising
  • Franchiseagreement
  • Trademarklicense
  • Training/Ops. Manuals
  • Operationalsupport
  • Marketing
  • Procurement
  • Otherservices

Franchisor

Franchisees

Customers

the players in franchising3
The players in franchising
  • Franchiseagreement
  • Trademarklicense
  • Training/Ops. Manuals
  • Operationalsupport
  • Marketing
  • Procurement
  • Otherservices

Franchisor

Franchisees

Customers

the four generations in franchising
The four generations in franchising
  • Imported foreign franchises
  • Local entrepreneurs start franchising in the same types of business
  • Local entrepreneurs start franchising in other types of business
  • Local entrepreneurs start exporting local franchise concepts
granting of a franchise
Granting of a franchise
  • The franchisee pays an Initial Franchise Fee
  • The franchisee pays a permanent fee (royalty) to the franchisor on a weekly basis
    • Percentage of gross sales or fixed amount (or both)
    • A fee to contribute to a national marketing fund
  • The franchisor provides know-how and permanent advice and services
    • Advertising –Training –Procurement +
why do businesses franchise
Why do businesses franchise?
  • Capitalize on existing network
  • Capitalize on production facilities/ - -Acquire captive outlets
  • Enter stock market
  • Managebranding vs bricks
  • Exploit sales opportunities
  • Add value to trade name
  • Internationalize
  • Religion
slide13

Franchisingsolvesthe 4 majorproblemsexperiencedbyevery single business, from a modest stand in a sidewalksellingfalafel, tothemonsterbusinesseswiththousands of outlets and employees.

the 4 major problems
The 4 majorproblems:
  • 1.- Financialresources
  • 2.- Staffing
  • 3.- Competition
  • 4.- Timing

Thesolution…

slide15

OPM

OtherPeople’s Money

motivations to buy a franchise
Motivations to buy a franchise
  • Permanent
    • Profits
    • Status
motivations
Motivations
  • Variable
    • Speculative investment
    • Expand investment portfolio
    • Patrimony
    • Occupational therapy
motivation
Motivation
  • Incidental
    • Productive use of candidate’s land
franchise structure1
Franchise structure

Strategic

Franchise

franchise structure2
Franchise structure

Legal

Strategic

Franchise

franchise structure3
Franchise structure

Strategic

Legal

Franchise

Operational

franchise structure4
Franchise structure

Strategic

Legal

Franchise

Marketing

Operational

define your goals
Define your goals
  • Trans-generational
  • Exit strategy
  • Market domination
  • Profits
certainty
Certainty
  • Strategic
  • Legal
  • Operational
  • Marketing
strategic planning
Strategic planning

Every single decision is made in advance

slide29
Everydecisionshouldhave a financial, organizational, logistical and politicalevaluation
legal documentation
Legal documentation

Everything you commit to -and everything your franchisees commit to- is feasible and profitable

operations manuals
Operations Manuals
  • Quality assurance
  • Operational efficiency
  • Operational effectiveness
marketing campaign
Marketing campaign
  • The RWA factor
    • Ready, willing and able
  • Qualified candidates vs simply interested parties
slide33
Step 1:

Franchisability

slide34
Determine franchisability
    • Financially viable?
      • Both parties should make money
      • Reproducibility
      • Every single angle of the business
    • Know-how transfer and services to the system
    • How competitive is your franchise offer in the open market?
slide35
Step 2:

StrategicPlanning

strategic planning1
Strategic planning
  • Vision, Goals and objectives
  • Competition
    • Other franchises- investment opportunities
  • Franchise formats
  • Franchisee profile
  • Costs
  • Services
slide37
Franchise market
    • Benchmarking
          • Initial fee, Initial investment, Agreement term, services
  • Consumer market
    • Know yourbusiness
    • Know your customer
    • Marketing / advertising
slide38
Formats to grant franchises
    • Joint venture
    • License
    • Master
    • Regional
    • Individual
    • Multi- unit
    • Area development
    • Conversion
    • Retro- franchise
    • Co-branding
slide39
Franchisee profile
    • Age
    • Resources
    • Shares business vision
    • Owner- operator / absentee
    • Investor
    • Attitude
slide40
Revenue sources protection program
    • Is the permanence of our trade name in the POS critical to our success?
    • If so, we should protect that permanence over and above all other considerations?
slide41
Revenue sources protection program
    • Operational
    • Site selection criteria
    • Strategic
      • Business sources protection
        • Store
        • Telephone numbers
        • @- commerce
        • Client data base
slide42
Territory
    • Boundaries
    • Criteria
      • Population
      • Distance
      • Socio – economic level
      • Level of sales
    • Stationary vs pro-active
slide43
System growth
    • Geographical definition
      • Business characteristics
        • Computers vs food
      • Marketing needs
        • Regional/ national
      • Service capabilities
      • Distance, staffing, communications, costs
slide44
Supply
    • Capabilities/limitations
    • Critical vs non-critical
  • Secondary
    • Commissary (virtual, administrative)
    • Time, price, quality
  • Designated suppliers
  • Authorized suppliers
slide45
Pricing, promotions, discounts
    • Criteria
    • Design
    • Costing
    • Participation
      • Institutional
      • Opportunistic
      • Local/ regional
slide46
Services to franchisees
    • Business plan
    • Site selection
    • Unit development
      • Remodeling
    • Soft / grand opening
    • Marketing
    • Training
slide47
Operations Manual
  • Administration Manual
  • Chart of accounts
  • Human Resources manual
  • Operational /administrative software
slide48
Training
    • Initial
    • Permanent
    • Permanent assistance
    • Centralized marketing
    • Other
      • Staffing to serve the system
slide49
Franchise fee
    • Recovery of investment in franchise program
      • Floor value
      • Ceiling value
      • Perceived value
slide50
Royalties
    • Percentage / flat fee
    • Gross sales / net sales
    • Incentives
      • (higher revenue-lower rate)
    • Proformas
      • Expenses
      • Re- investment
slide51
Advertising fee
    • Regional
    • Local
    • National
      • Media
      • Budget
      • Creative material
slide52
Committees
    • Operations
    • Marketing
    • Public Relations
      • Cement relations
      • Consolidate strength
      • Provide accurate feedback
slide53
Costs
    • Franchise program structuring
    • Operations Manuals
    • Software
    • Pre- operational assistance
    • Soft / grand opening assistance
    • Permanent assistance
    • Commissary
x factor
“X” factor

Royalties

$

Expenses

T

x factor1
“X” factor

Royalties

$

Expenses

LOSS

T

slide57
Absence of strategic planning
    • Anarchy / damage to prestige
    • Rushed decisions
    • Wrong franchisees
    • Lack of consistency in:
      • Territories
      • Fees
      • Controls
franchise structure6
Franchise structure

Strategic

Franchise

slide60
Step 3:

Legal documentation

slide61
Franchise agreement
  • Disclosure documents
  • Loan agreements
  • Rental/leasing agreements
    • (equipment, site, others)
  • Supply agreements
  • Others
slide62
The franchise agreement
    • Not negotiable (certainty)
    • Based on strategic decisions
    • Terms
    • Renewal (conditions- period – cost)
    • Prevent litigation
    • Eliminate conflicts
    • Sales tool
slide63
Legal documentation with no strategic base
    • Lack of protection
    • High risk of desertion
    • High risk of “system piracy”
    • Risk of franchisor breaching his own franchisee agreement
slide64

Strategic

Legal

Franchise

slide65
Step 4:

OperationsManuals

slide66
The Operations Manual
    • More than an attachment to the franchise agreement: a clause
      • Same strategic and semantic basis of franchise agreement
      • Operations guide
      • Audit guide
      • Textbook for training courses
slide67
Virtues of the Operations Manual
    • High efficiency in transferring know-how
    • Quality assurance
    • The franchisees must be able to carry 99% of the pre-operational functions without the direct involvement of the franchisor
    • No gaps – no traps
slide68
Virtues
    • Style
      • Understanding / Acceptance /Trust
    • Scope
      • ... To the last nut and bolt
slide69
O/M Outline (partial)

Site selection

Remodeling

Pre- opening

Administration

Marketing

HR

Maintenance

Advertising

Security

Recipes

Merchandising

Training

Customer service

Others

slide70
Absence of an Operations Manual
    • Anarchy
    • Impossible to audit
    • Lack of consistency
    • Excessive training time
    • Lack of control over initial investments
    • Risk of breaching your own franchise agreement
slide71
Training programs
    • Initial training
      • Unit manager
      • Staff
    • Permanent training
      • Frequency
      • Purpose
    • Training to replacement staff
slide72
Training
    • Costs
    • Training facilities
    • Materials
    • Diplomas / pins
slide73
Absence of training programs
    • Anarchy
    • Low productivity
    • High cost or corrective training
    • High turn around
    • Risk of breach of agreement
slide74

Strategic

Legal

Franchise

Operational

slide75
Step 5:

Franchise marketing and sales

slide76
Franchise marketing
    • Selling clothing vs selling boutiques
    • Franchise marketing is highly sophisticated
slide77
The only goal of a franchise marketing program is to generate :

ready, willing and able candidates

slide78
Providealltheinformationneededtoallowtheinterestedpartiesto decide tocontinue (ornot) withtheintentiontoacquirethefranchise (become a RWA)
  • “I havethemoney and I wanttoinvestitwithyou”
slide79
Marketing formula
    • Product = franchise
    • Market = franchise market
    • Competition = other franchises*
  • Motivations
      • Existing
      • Induced

*Competition will be any other investment opportunities in the open market

slide80
Marketing materials
    • Brochures, FAQ’s, Model P&L’s
    • Ads
    • Videos
    • Seminars / trade shows
    • Direct mail
    • Internet
slide81
Advantages of a professional marketing plan
    • Consistence between goals and actions
    • Optimize marketing investments
    • Measure results
    • Optimize the use of time
    • Focus on RWA candidates
slide82
Franchise sales program
    • Purpose:
      • To turn RWA candidates into franchisees
    • Requires effective strategy and execution
slide83
The franchise sales process
    • Refferto the Strategic Planning
    • Ensure operational profile
    • Determine motivations
    • Consider influences
      • Operator
      • Spouse
      • Others
    • Determine psychological profile
slide84
Process
    • Customize presentations
    • Ensure step by step understanding
    • Visits to operational units
    • Visits to headquarters
    • Empathy with the organization
slide85
Process
    • Franchises are not sold pounding on the table…
    • Your job is to help the candidate to achieve his goal of buying the franchise
slide86
Absence of a professional sales program
    • Lack or organized activities
    • Disorient the candidate
    • Unstable process
    • Sell to non- qualified prospects
    • Lose RWA candidates
franchise structure7
Franchise structure

Strategic

Legal

Franchise

Operational

Marketing

slide89
Professional planning of yourfranchiseprogramwillincreasethe chances of success
  • Professional planning of yourfranchiseprogramwillprotectyourinterests at all times
  • Professional planning of yourfranchiseprogramwillallowfor a healthy, constructive, litigation-free relationship
slide91

Thankyouverymuchforyour time, yourattention and yourpatience.

  • ramonvinay@francorpmexico.com