franchising is more than just french fries
DESCRIPTION
Franchising is an all-American business model that has enabled tens of thousands of veterans to become small business. Join Stacy Swift, owner of FranNet Colorado and a franchise industry expert, to learn how to separate the myths from the facts. What is a franchise? What are the requirements? How do you find the “best” one for you? By: Stacy Swift, FranNetTRANSCRIPT
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Franchising 101 for Veterans
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• Degree in Business Administration
• Self-employed for 23+ years
• Suzy-Q Deli; Sole Proprietor
• Fantastic Sams (Franchisee; 2 stores)
• FranNet (Franchisee; CO, WY & MT)
• Mr. Handyman (Franchisee; 3 territories)
• CO Real Estate Broker license (resales)
Stacy Swift FranNet CO, WY, & MT
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Who is FranNet?
• International franchise brokerage and consulting firm; celebrating 25 years in 2012!
• Over 70 Offices in U.S. and Canada
• Worked with the SBA, SBDC, and SCORE since 1987
• Proud contributor to Wounded Warrior Project
• We match people who want to be in business with franchises that meet their needs
• NO COST!
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U.S. Census Bureau’s Business Dynamics Statistics (BDS) - 2010
Current Economic Outlook
• More than 1 million Vets returning home from Iraq & Afghanistan will re-enter workforce in
next 5 years.
• Unemployment rate for Vets is higher than the civilian rate—11.7%.
• 12.8 million currently unemployed.
• 2.6 million “under-employed” in jobs beneath skill set & fair pay scale.
US Labor Market
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VetFran Program
• Founded in 1991 to support veterans transitioning back into civilian life after the Gulf War.
• More than 400 IFA member companies participate– Offer financial incentives, training, and mentoring for Vets interested
in starting their own franchise business
• “Operation Enduring Opportunity”– Campaign to recruit and hire 75,000 Veterans and their spouses and
5,000 Wounded Warriors by 2014– The IFA has partnered with the White House Joining Forces Initiative,
the SBA, and The US Chamber of Commerce in this unprecedented recruitment effort
– The program offers tax credits to employers who hire unemployed Vets
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• “Help Veterans Own Franchises Act” (HVOF)– Establishes a tax credit for Vets to become franchise owners– Allows a tax credit of 25% of the Franchise Fee to offset start-up costs
• 1 in 7 franchises are owned by Vets– 66,000 Veteran owned franchises in the US provide 815,000 American jobs and
generate $41B in GDP
• Veteran success in Franchising is driven by:– Outstanding leadership and teamwork skills– Ability to implement and execute systems– Franchises provide extensive training– Franchises offer on-going business support
• More information is available on the IFA’s VetFran Directory– www.franchise.org/Veteran-Franchise.aspx– www.VetFran.com
VetFran Program
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Why Own Your Own Business?
What is it for you?
ControlFinancial Security
No More Layoffs
Money
Fulfillment Flexibility Independence
SUCCESS
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The Reality:
Yet … most people choose to work for someone else!
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Some Misperceptions
Risk:A job is safer than a business.
Economy: I’ll wait until the economy is better.
Investment: A business costs a lot of money to start and run.
Knowledge: I don’t know where to start or find what I’m looking for.
Skills: Running a business takes specific talents and skills.
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Perception of Risk: JobRi
sk
TimeJob (Then) Job (Now)
Risk Increases
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?
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Business Ownership
Risk Decreases
At first, owning your own business can be scary, but ...
• No one can take it away. You can’t be downsized, transferred or fired.
• You can grow the business at the pace you want.
• The longer you own your business the safer it becomes
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Lower Your Risks
Many businesses thrive in all economic conditions.
Concerned about starting a business during poor economic times?
Lower the risk by looking for businesses with specific market characteristics.
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What About The Economy?
Growing markets driven by demographics• Ex: Senior Care, Residential Repairs & Cleaning, etc.
Essential services• Ex: Hair Care, Automotive, Damage Restoration, etc.
Business that help other small businesses thrive• Business Coaching, Personnel Services, Sales Training, etc.
Many businesses thrive in all economic conditions
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Business Ownership Options
Buy an Existing Business
Start a Business from Scratch
Buy a Franchise
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Start Up Business
Advantages Disadvantages
• Must create systems• No one to turn to for
help• Limited financing
options• Highest failure rate
• Must create systems• No one to turn to for
help• Limited financing
options• Highest failure rate
• Total control• Make all decisions• Keep all profits• Biggest upside
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Buy an Existing Business
Advantages Disadvantages• Cash flow & good will• Actual historical results• Attractive to lenders• Established location &
customer base• Employees in place• Systems may be in place• Owner financing
• What is the real cash flow?• What is the good will?• Hidden seller motives• Employee defection• Higher debt service• Poor training/support by the
former owner
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A Franchise…
Advantages Disadvantages• A proven, time-tested business
model that works• Predictable future results• Very attractive to lenders• Transparent due diligence
process with the franchisor and existing franchisees
• Recognized brand name and turn-key operating systems
• An seemingly endless and overwhelming number of concepts to choose from
• Paying a franchise fee • Royalties• Reporting, compliance, and
mandatory attendance for training, annual conferences, etc.
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What is Franchising?
The creation of a distribution channel to build brand identity and attain market dominance…
QUICKLY!
Franchise Headquarters
Franchise Operators
Customers
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Franchise is…
A license to use:• Name and trademarks• Products• Business Systems
In exchange for:• Initial franchise fee• Ongoing royalties
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Franchising Fact #1:
FACT: • Over 3,100 different
franchise companies • In more than 80 industries • With over 900,000
operating units
Popular Categories
•Education•Retail•Pet Care•Cleaning•Real Estate•Senior Care•Home Repair•IT Services
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Franchising Fact #2:
Total Investment Percent
Under $100k 52.5%
$100 to $250k 32.7%
$250 to $500k 9.2%
Over $500k 5.6%
FACT:
52%33%
9%
6%
Under $100k $100 - 250k
$250k - $500k Over 500k
Franchise Times Magazine Survey, Franchising is All Right, Thank You
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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.
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Financing Facts:
Sources:• Personal savings• Family, friends, or partner• Home equity line of credit• Financial Institutions• Seller financing – resale• 401K, IRA, etc.
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Ideal for Veterans and other eligible members of the military community who want access to funds to start or expand a business
Business must meet SBA minimum guidelines (for profit, operating in the U.S.,etc.)
Credit amounts up to $500,000; faster turnaround time Terms: less than 7 years = prime plus 2.25%; greater than 7 years = prime plus
2.75% Collateral: bank will take a secured interest in business assets and/or a
mortgage on real estate Personal guarantees: required by all owners of 20% or more 85% guarantee: loans less than or equal to $150,000 75% guarantee: loans greater than $150,000 The program has been extended thru 2013
• Patriot Express Pilot Loan Program
Financing Facts for Vets
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Franchising Fact #3:
FACT:
There is no automatic correlation between the cost of the franchise and the potential return.
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Franchising Fact #4:
FACT:
Service businesses require far less capital investments and frequently yield higher returns.
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Franchise Business Economic Outlook
• It is estimated that Franchises accounted for over 7,934,000 jobs in 2011.
• It is estimated that the Franchise Industry accounted for over 4.9% of the total US GDP in 2011.
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2012 Forecast for Franchise Industry
• In 2012, franchising will
– Add 168,000 new U.S. jobs– Add 13,928 U.S. units– Grow contribution to GDP 4.8 percent =
$21 billion
Source: IHS Global Insight
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The Benefits of 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
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Franchising Benefits
You’re in business for yourself,
but not by yourself….
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How Do You Find a Franchise That is a Great Fit?
Separate the function of the business, from the function of the business owner!
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Determine Your Business Model
32
Identify your Financial & Lifestyle Goals
5 Years
10 Years
20 Years
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What Are Your Transferable Business Skills?
CustomerService
MarketingManagement
Sales
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Your Business Model
Types of Customers
Service or Product
New or Established Industry
Room for Growth
Other Items?
Employees
Budget
Business Environment
Full or Part-timeHours
Number of Units
Business Preferences
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Business Characteristics
• These are preferences
• It will not be perfect
• Expect some of your preferences to conflict
• Be clear about your few “must haves” versus your many “nice to haves”
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Finding a Great Fit
Match your business model with franchisors who are looking for people with your characteristics, attributes, goals and business preferences.
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Conducting Your Research
We'll coach you through a 4-Step Research Plan and you’ll determine if one of the franchises is the right fit for you.
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Professional Advisors
Ad
Additional Resources You Should UseAccountantFranchise Attorney
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The Science of Psychology
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Getting Started with FranNet
Visit our Website: www.frannet.com
Click on the Orange button:
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Can YOU Relate?