Evaluating franchises

1. Evaluating Franchises Presented By Robert Glenister (408) 689-2545 robert.esource@comcast.net A 15min overview On how best to Evaluate Franchises

2. The Quest for the Good Life

3. What’s driving the interest in self employment? Unemployment = 9.6% (Jan 2011)California = 12.4% 6.3M people have been out of work 6 months or longer9.5M Involuntary part time workers US Bureau of Labor Statistics January 2010

4. The Definition of Insanity ?

5. The Definition of Insanity? Doing the same thing over and over again and expecting a different result. - Albert Einstein

6. Why do Independent Businesses Fail? Top 10 reasons why Businesses Fail Insufficient Capital Ineffective Marketing Strategy No Business Plan Poor Customer Service Growing too Fast Partnerships that turn Sour Insufficient Advertising and Promotion Out of touch with their Customers Prices too High vs. Competition Bad Location

10. Why do Independent Businesses Fail? Top 10 reasons why Businesses Fail Insufficient Capital Ineffective Marketing Strategy No Business Plan Poor Customer Service Growing too Fast Partnerships that turn Sour Insufficient Advertising and Promotion Out of touch with their Customers Prices too High vs. Competition Bad Location http://www.sba.gov

11. Success Rate of Franchises

12. Why Do Independent Businesses Fail? The E Myth Revisited By Michael E. Gerber. Fatal assumption #1: Doing what you know, love and enjoy will bring success. Fatal assumption #2: By working hard in the business I will be successful Fatal problem: By working ‘in’ the business instead of ‘on’ the business you in essence buy yourself a job and you run out of the time & energy needed to do the most important work of an owner- marketing, promoting and managing the business.

13. Why Do Independent Businesses Fail? The E Myth Revisited By Michael E. Gerber. Fatal assumption #1: Doing what you know, love and enjoy will bring success. Fatal assumption #2: By working hard in the business I will be successful Fatal problem: By working ‘in’ the business instead of ‘on’ the business you in essence buy yourself a job and you run out of the time & energy needed to do the most important work of an owner- marketing, promoting and managing the business.

14. Why Do Independent Businesses Fail? The E Myth Revisited By Michael E. Gerber. Fatal assumption #1: Doing what you know, love and enjoy will bring success. Fatal assumption #2: By working hard in the business I will be successful Fatal problem: By working ‘in’ the business instead of ‘on’ the business you in essence buy yourself a job and you run out of the time & energy needed to do the most important work of an owner- marketing, promoting and managing the business. Meetingthe Needs and the Goals of the Business

15. What makes a franchise different? Already successful Systemized business operations Transfer of knowledge and best practices between franchisor and franchisees and franchisee to franchisee Team approach to running a business

16. WHAT IS A FRANCHISE? A franchise is the agreement or license between two legally independent parties which gives: • a person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor) • the franchisee the right to market a product or service using the operating methods of the franchisor • the franchisee the obligation to pay the franchisor fees for these rights • the franchisorthe obligation to provide rights and support to franchisees FRANCHISE AGREEMENT Franchisor: Owns trademark or trade name Provides support: • (sometimes) financing • advertising & marketing • training Receives fees Franchisee: Uses trademark or trade name Expands business with franchisor’s support Pays fees

17. Fees? Franchise Fee: Typically $15k - $50k One time Payment to join the franchise Royalties: Typically 5-8% of Gross Income Paid Monthly

20. Broad Industry Perspectives AAccounting/Tax Services Advertising/Direct Mail Automotive Products & ServicesB Beverages – Coffee / Juices Beauty Care & ServicesBusiness Services Business/Management Consulting CCell Phone Provider (Kiosk) Check Cashing/Financials Services Children’s Services (Education, Nannies)Clothing & Shoes Convenience Stores Computer/Electronics/Internet Services Construction – Materials, Services and Remodeling Cosmetics D Disaster / Cleanup Services Dry CleaningDistribution and Vending – DVD, Ice Cream, Beverages Drug TestingDivorce Resolution ServicesEEducational Products & Services Elderly Care ServicesEmployment Services Environmental Services Equipment – Commercial Cleaning FFinancial Services Fitness Florist Shops Food - Baked Goods/Donuts/Pastries Food – Candy/Popcorn/Snacks Food – Coffee / Smoothie BarFood – Deli/Sandwiches/Subs/Wraps Food – Ice Cream / Yogurt Food – Pizza Food – Restaurants Food – Specialty Franchise Consulting HHair SalonsHealth Care & Personal Care Services Home FurnishingsHome Inspection Home Restoration / MitigationHotels/Motels JJanitorial & Commercial Cleaning Services JewelryKKids LLawn ServicesLeasing- Equipment MMaid & Residential Cleaning Services Management & Training Massage CenterPPackage Preparation/Shipping/Mail Services Painting Services Payroll Services Pet Services Photography Photo/Video/Document to Digital Pre-employment Screening Services Pressure Washing & Restoration Printing/Copying Services Publications RReal Estate & Services Recreation – Equipment & Supplies Recreation – Exercise & Sports Retail Stores – Women SSecurity Systems & Services Senior Care/Adult Care Skin Care SpasSports & Services Solar Installation TTanning CentersTelecommunication Services Tools & Hardware Transportation Services Travel Agents & Services WWeight Control

26. Exclusive territory

27. In depth training plus on-going 1-2-1 coaching (weekly)

28. Your first 90 Days (varies) Action Plan to Jumpstart your business

29. Help to enable you develop and execute your business plan

30. Leads generated from national web site, 1-800# and possibly national contracts

31. On-going Marketing analysis

32. Virtual Office – Providing all your back-office needs

33. Email and phone support

34. Assistance with licensing requirements

35. Camera ready artwork

36. Pre-start marketing program

37. Your own web site

38. Assessment Tools

96. Apart from Size what else would be good to know? Cost Franchisee Satisfaction Average Gross / Net Income Potential for continued growth Franchisee Ratings -Overall quality rating of franchisor - 92% -Would you Recommend franchise to someone else - 94% -How would you grade initial training - 96% -How would you grade opening and launch support - 96% -How would you rate quality of products/services - 93% -How would you grade technical support by franchisor - 94% vs.

97. How much money do I need? Franchises can range from less than $20k to over $4M with most Home Based in the $50-$100k range. Retail is typically $150k-300k Typically you can borrow up to ¾ of Total Investment through SBA . (Total Investment includes the Franchise Fee + all expected startup costs) Example Startup Costs: Training Computer and specialized software Deposit and first 3 months rent for retail/commercial space Outfitting of retail or commercial space Leasing and outfitting of specialized car, van or truck Initial cost of inventory for first 3 months of business Initial marketing and advertising costs for launching business Business License, Insurance and sundry expenses Wages for staff for first 3 months

98. Financial Assistance Small Business Administrationwww.sba.gov 7 A Community express Benetrends – Self Directed 401k’s www.benetrends.com Peer to Peer Lending Sites www.lendingclub.com/ Bay Area Local Finance Specialist: www.michael-ryan.com

103. Franchising vs. Independent BusinessesWhy is franchising so successful? A proven system Training and ongoing support Being in business for yourself, but not by yourself Win-win relationship … starts with mutual benefits and grows from there

108. Questions to Ask Yourself

109. Questions to Ask Yourself Am I willing to follow a system?

110. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard?

111. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital?

112. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital? Can I support myself during the early months?

113. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital? Can I support myself during the early months? Are family and friends supportive?

114. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital? Can I support myself during the early months? Are family and friends supportive? Will I do whatever it takes to ensure success?

115. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital? Can I support myself during the early months? Are family and friends supportive? Will I do whatever it takes to ensure success? Does the business model support my goals?

116. Questions to Ask Yourself Am I willing to follow a system? Am I willing to work hard? Do I have access to startup capital? Can I support myself during the early months? Are family and friends supportive? Will I do whatever it takes to ensure success? Does the business model support my goals?

117. But what if I fail? Thomas Edison held 1093 patents – most of which proved to be commercial failures.“I have not failed. I've just found 10,000 ways that won't work.” – Edison He did however have one or two successes that more than made up for it !

118. Recommendations : Richard Y Yang “Robert was an invaluable resource and help as a business and career coach when I was investigating starting my own business. The best thing I liked about Robert was that he had your interest at heart, and it was never about pushing you into something. It was a great experience working with him.” July 27, 2009 Top qualities: Great Results, Personable, High Integrity Ravi Fernando “Robert was excellent in coaching me through the franchise purchase process. His unbiased inputs and support throughout made the entire process manageable. Robert stayed in touch even after the transaction and introduced me to business networking to help move my new business forward. He is a great asset to have around during this major career transition …” July 23rd 2009 Top qualities: Great Results, Personable, High Integrity

119. “I hope you have enjoyed this brief presentation.” “Your success isour only business” Robert Glenister To learn more visit: www.franchisematch.com/rglenisterPhone:(408) 689 2545Email: rglenister@esourcecoach.com

Evaluating franchises

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