Brief summary of what franchising is and the services offered by thinkFranchising - What is Franchising? - Advantages of Franchising - Potential Disadvantages of Franchising - How to build a successful franchise - The Franchising Process - thinkFranchising services - Why use thinkFranchising? - What can we do for you?

1. think
Franchising
The Benefits of Franchising and
Services Overview
Keith Adams
thinkFranchising

2. think
Franchising
Agenda
• What is Franchising?
• Advantages of Franchising
• Potential Disadvantages of Franchising
• How to build a successful franchise
• The Franchising Process
• thinkFranchising services
• Why use thinkFranchising?
• What can we do for you?
Agenda

3. think
Franchising
What is a Franchise?
• Commercial relationship whereby a party (the
franchisee) sells goods or services to end
customers which are:
 Identifiable by a trade mark or other symbol
 Directly or indirectly required to meet quality
standards prescribed by another party (the
franchisor) where the franchisee operates
under the trade mark
What is Franchising?

4. think
Franchising
What is Franchising?
• Product format Franchising
 Company (Franchisor) develops trade name and business
operating system
 Franchisor licenses and contracts use of the name to
deliver products or services to end customers to a third
party (Franchisee)
 Usually bounded by a fixed (renewable) term and territory
 Examples - Coca Cola,
• Business format Franchising
 Company (Franchisor) develops brand name and business
operating system
 Franchisor licenses and contracts use of them to third party
(Franchisee)
 Usually bounded by a fixed (renewable) term and territory
 Examples - McDonalds, Regus, Subway
What is Franchising?

5. think
Franchising
Sectors utilising franchising
• Automotive • Hotels & Motels
• Business Services • Maintenance
• Children's Businesses • Personal Care
• Financial Services • Pets
• Food/Full-Service Restaurants • Recreation
• Food/Quick-Service Restaurants • Retail
• Food/Retail Sales • Services
• Home Improvements • Technology
What is Franchising?

6. think
Franchising
Advantages of Franchising – Selection and Incentives
• Better mechanism for selecting and incentivising franchisee than
employees
 Franchisees are highly motivated
• Business ownership
• Employment by choice
 Overcome issues of ‘Adverse Selection’
• Poor performance borne primarily by franchisee
 Easier to attract high performers
• High performers will achieve high earnings
 Staff retention v employees
• Franchisees won’t walk away easily
• Maximise benefits from investment in training
 Highly incentivised
• Profit motivation means increased efficiency, lower overhead, less waste
• Positive effects on the franchise brand
 Significant reduction in time to establish outlets
Advantages of Franchising

7. think
Franchising
Advantages of Franchising – Resourcing for Rapid Growth
• Efficiency in obtaining resources for Rapid Growth
 Finance
• Ease of raising growth finance via franchisees and network
 Franchise fees
 Management Fees
• Minimises (and often eliminates) debt
• Lower finance costs
• Efficiencies – benefits of economies of scale and market
leverage
 Human Resources
• Consistency of recruitment process
 Less management overhead
 Economies of scale
Advantages of Franchising

8. think
Franchising
Advantages of Franchising – Potential for Rapid Growth
• Potential for Rapid Growth
 Why?
• To benefit from economies of scale (e.g. advertising) and market
leverage
• To minimise development costs (e.g. application development)
• To gain early access to desirable outlet locations
• Add shareholder value!!!
 Fast Speed of Growth
• Synchronized with finances and human resources
 Increased efficiencies and competitive advantage
• What does/doesn’t work
 Ability to invest
• People
• New products
• Marketing
• Capital assets
 Ability to expand Internationally
Advantages of Franchising

9. think
Franchising
Advantages of Franchising – Financials & Management
• Lucrative Financial Model
 Financial Risk is minimised
• Proven model, risk shared with franchisee
 Return on Investment v company managed
• Fewer employees
• Reduced monitoring costs
• Lower working capital (can even be negative!!!)
• Smaller up-front investment
• Lower running costs - Franchisees pay for running of outlets
 Benefit from economies of scale
 Improved profitability due to learning from the expanded network
• Easier to manage
 Franchisees become effective and highly motivated managers
 Quality Control is relatively simple
 Allows franchisor to focus on business improvement
Advantages of Franchising

10. think
Franchising
Potential Disadvantages of Franchising
• Difficulty in defining how the business system works
• Legal framework is too complicated
• Poor franchisees
• Costs to setup franchise are too high
• Lack of expertise
• Cost to buy expertise
• Poor franchise network performance
• Too much work for Franchisor
• Difficult to find suitable franchisees
Potential Disadvantages of Franchising

11. think
Franchising
How to build a successful franchise
• Select the right industry
• Understand advantages of franchising
• Understand disadvantages of franchising
• Make sure the business concept can be franchised
• Adopt the right policies to manage the franchise system
• Find the right approach to franchise support and assistance
• Develop the right strategy towards franchisee territories
• Price the franchises appropriately
• Develop the right strategy towards system expansion
• Understand the legal and institutional environment of franchising
• Recruit, select and manage franchisees effectively
How to build a successful franchise

12. think
Franchising
The Franchising Process - Feasibility
• Feasibility Study
 Assess feasibility to franchise the business
 Ability to systemise
 Potential income and profitability
 Network Management Costs
• Feasibility Presentation and Report
 Report on feasibility study
 Contract proposal with thinkFranchising (If appropriate)
The Franchising Process

13. think
Franchising
The Franchising Process – Franchise Planning
• Develop Franchise Development Business Plan
 The opportunity
 History
 Products & Services
 Marketing – Segments, Competitors, Pricing
 Funding Requirements
 Financial Forecasts
• Secure Funding (if required)
The Franchising Process

14. think
Franchising
The Franchising Process – ‘Franchise Ready’
• Get Business ‘Franchise Ready’
 Training System
 Operations Manual
 Sales & Marketing Manuals
 Legal Agreements – Franchisee, Terms of Trading, Protect
Trademarks
 Business Support Systems – IT, Marketing, Legal, HR,
Finance, Accounting, Training etc
 Network Performance Management
 Franchisor System Preparation
• Setup and monitor Pilot Operation (if required)
The Franchising Process

15. think
Franchising
The Franchising Process - Recruitment
• Franchisee Recruitment
 Specification
 Advertising and Marketing
 Response Handling
 Response Analysis
 Interviews
 Contracts
The Franchising Process

16. think
Franchising
The Franchising Process – Network Support & Development
• Franchise Network Support
 Mentoring
 Training
 Networking
 Dispute Resolution
 Brand Marketing
 Advertising & PR
• Franchise Network Development
 New product Development
 Market Research
 Marketing Development & testing
 Efficiency improvements
 Technology
 Supplier Assessment
The Franchising Process

17. think
Franchising
thinkFranchising Services
• thinkFranchising provide all of the services required to
ensure the success of your Franchise
 Compile Feasibility Study
 Develop Franchise Development Business Plan
 Secure Funding (if required)
 Get Business ‘Franchise Ready’
 Setup and monitor Pilot Operation
 Franchisee Recruitment
 Franchise Network Support
 Franchise Network Development
thinkFranchising Services

18. think
Franchising
Why use thinkFranchising? – Client Benefits
• Long term Partner, not Supplier
 We work in partnership with you to ensure the success of
your franchising network (see ‘How to build a successful
franchise’)
• Performance related fees
 The vast majority of our fees are based on the
performance of your Franchise network
• Access to experts and best of breed services
 We partner with world class suppliers to give your
Franchisees access to ‘best of breed’ services
Why use thinkFranchising?

19. think
Franchising
Why use thinkFranchising? – Client Benefits
• Win, Win, Win system
 Because our fees are performance related, we ensure that
franchisees are effectively recruited, trained, managed and
developed
 Result is your franchisee wins, you win and we win!!!
• Minimal Financial Risk to you
 Only low, initial up-front development fees
 Any further fees to thinkFranchising directly relate to network
recruitment and performance
• Flexible remuneration mechanisms
 Subject to negotiation but can be based on any combination
of equity stake, % of gross profit, % of sales, &% of net profit,
fixed monthly fee
Why use thinkFranchising?

20. think
Franchising
thinkFranchising – What we can do for you
• Incorporate Franchising into your Business Model
 Compile Feasibility Study
 Develop Franchise Development Business Plan
• Setup Pilot Operation concurrently with you setting up the
business
 Get Business ‘Franchise Ready’
 Monitor Franchise Performance
 Suggest and Trial Improvements
• Once Pilot successful, Establish Franchise Network
 Franchisee Recruitment
 Franchise Network Support
 Franchise Network Development
thinkFranchising – What we can do for you