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How to Choose and Buy the Right
FranchisePresented by William Adler
The Entrepreneur's Source 1
Franchising facts
How to buy a franchise
Franchising myths
The Entrepreneur's Source 2
Derived from the French words “Franchiss” & “Franchir” that mean to free oneself from servitude.
A way to expand a business and/or distribute goods and services through a licensing relationship.
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The franchisor grants the license to the franchisee for the use of:
Trade name/trademark Products & services Operating system Marketing/advertising Education/training
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2017:
745,290
Projected Growth
1.9%
2018:
Estimate
759,206
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A new franchise
opens every 8 mins.
3% of our economy
from franchise industry.
Accounts for 12.5% of private
sector payroll.
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2017 Sales
Increasing by 5.6%
To $757 Billion
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2016: 7,654,000 employed
2017: 7,881,000 employed
2018: Estimate adding 291,000 jobs totaling 8,172 million
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Accounting/Tax Services Employment Services Hotels & Motels Printing/Photo Copying Services
Advertising/Direct Mail Environmental Services Insurance Publications
Assisted Living Equipment Leasing & Financing Janitorial Services Real Estate Services
Auto & Truck Rentals Estate Planning Jewelry Recreation: Equipment & Supplies
Automotive Products and Services Auction Consignment Event Planning Laundry & Dry CleaningRecreation: Exercise/Sports/Entertainment/Products
Batteries: Retail/Commercial Financial Services Lawn, Garden & Agricultural Recycling Products & Services
Beverages Fitness Maid & Personal Services Rental: Equipment & Supplies
Bookstores Florist Shops Maintenance, Cleaning & Sanitation Retail Stores: Specialty
Business Brokers Food: Baked, Goods/Donuts/Pastries Marine Services Security Systems
Business Services Food: Candy/Popcorn/Snacks MedSpa Senior Care
Business Management Consulting Food: Caribbean Metal Senior Living Communities
Check Cashing/Financial Service Centers Food: Ice Cream/Yogurt Online Sign Products & Services
Chemicals & Related Products Food: Meal Preparation Optical Aids & Services Tanning Centers
Children’s Services Food: Pizza Other Telecommunication Services
Clothing & Shoes Food: RestaurantsPackage Preparation/Shipment/Mail Services Tools & Hardware
Commercial Lighting Food: Specialty Painting Services Transportation Services
Computer/Electronics/Internet Services Franchise Consulting Paralegal Services Travel Agents
Construction: Materials, Service & Remodeling Golf Equipment, Products & Services Payroll Services Video/Audio Sales & Rentals
Consumer Buying Services Hair Salons & Services Pest Control Services Vitamin & Mineral Stores
Convenience Stores Handyman Services Pet Services Water Conditioning
Cosmetics Health Aids & Services Photography & Supplies Wedding Planning
Dating ServicesHome Appliances: Sales Rental & Repair Pre-Employment Screening Services Weight Control
Drug StoresHome Furnishings: Retail, Sales & Rental Pressure Washing & Restoration Wildlife Management Control
Educational Products & Services
Home Inspection/Radon Detection
Products and
Services for
Seniors
Early Childhood Education
Green Products
and Services
Services for the Two-
Income Family
Business Services
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T
R
E
N
D
S
G
R
O
W
T
H
Growth Areas Percent
Home-based 36.30%
Senior and Childcare 28.08%
Business Service 18.49%
Environmental Services 10.27%
Janitorial and Home Improvement
6.85%
Average Investment in
FranchisesPercentage
Under $50,000 13%
$50,001 to $100,000 17%
$100,001 to $250,000 28%
$250,001 to $500,000 23%
$500,001+ 18%
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7 Questions to ask Yourself
1. Am I willing to work hard?
2. Am I willing to follow a system?
3. Do I have access to start-up capital?
4. Can I support myself during the early months?
5. Are family & friends supportive?
6. Will I do whatever it takes to ensure success?
7. Does the business model support my ILWE goals?
Finding the Right
Franchise
• Learn about business ownership options
• Understand your goals, needs and
expectations
• Be open-minded
• Conduct an in-depth study of several
business models
• Base decisions on facts not emotions
• Speak to people who can help you get
started
Location, Location, Location
Demographics are important to understand
Criteria for a successful territory
Can I negotiate territory?
• Proven business system
• Initial training
• On-going support
• Business software
• Marketing campaigns and materials
• Equipment
• Site location assistance
• Build-out assistance
• Future vision & operational growth plans
• Possible financing assistance
Legal Structure
Two Main Franchising Documents:
• Franchise Disclosure Document (FDD)
• The Franchise Agreement (contract)
1. The Franchisor, its Predecessor & Affiliates2. Business Experience3. Litigation4. Bankruptcy5. Initial Franchise Fee6. Other Fees7. Initial Investment8. Restrictions on Sources of Products/Services9. Franchisee’s Obligations10. Financing Available11. Franchisor’s Obligations12. Territory
Topics covered in Franchise
Disclosure Documents (FDD)
Topics covered in Franchise
Disclosure Documents (FDD) 13. Trademarks
14. Patents, Copyrights & Proprietary Information
15. Obligations to Participate in Operations of Franchise
Business
13. Restrictions of What the Franchise May Sell
14. Renewal, Termination, Transfers, & Disputes
15. Public Figures
16. Earnings Claims
17. List of Franchise Outlets
18. Financial Statements
19. Contracts
20. Receipt
KEY SUBJECTS IN FRANCHISE
AGREEMENT
Use of Trademarks
Location of Franchise
Term of Franchise
Franchisee’s Fees and Other Payments
Obligations & Duties of Franchisor
Restrictions on Goods & Services Offered
Renewal, Termination & Transfer of Agreement
1. Independently Wealthy
2. Win the Lottery
3. Borrow from family and friend
4. Borrow from Bank
5. Liquidate Assets
6. Crowd Funding
7. Home Equity Loan
8. SBA Loan
9. Convert your 401(k)/IRA
10. There are no grants
Financing – How do I pay for my
Franchise
Franchisor Perspective
Franchisee Perspective
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Pros: Franchisor Perspective
Potential for quicker growth, capture of market share
Owners are “Motivated Managers”
Sharing of risk
Focus on business and future, not daily operations
Revenue streams other than unit sales
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Cons: Franchisor Perspective
•Over Franchisee
•Growth based on investment of individuals
Lack of control
Disparity in performance of units
Finding quality candidate owners
Geographic / International differences
Regulations
Litigation/Arbitration
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Pros: Franchisee Perspective
Access to information – “pre-investment”
Cooperative buying power
Instantaneous Goodwill
Proven formula
Quick “turn-key” operations
On-going support
Networking with other owners
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Cons: Franchisee Perspective
Not a “Partnership” – Royalties on revenue
Long term agreements vs. market trends
Franchisor management vision vs. market trends
Customer experience at any unit dictates overall reputation
Less control and independence than independent business ownership
Finding the right business will make you successful.
The secret of success is finding a career doing something you love.
You will know the right opportunity when you see it.
I can’t be in this business, I know nothing about it.
Corporate HQ will dictate everything. I will not have any control.
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I can’t be creative in a franchise.
A franchise requires more money than I can afford.
It is best to buy a well know brand name.
Buying a red hot franchise that is in a growth spurt is a good opportunity.
Food franchises are great investments because they are recession resistant.
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If you invest in a franchise, you have a high chance of succeeding.
My town does not have a widget franchise. If I open one, it will be successful because there is no competition.
Buy a franchise that speaks to your passion.
You must know every aspect of your business.
Franchisees own their own franchised business.
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55 to 61% of all Americans want to own their own business
37% of all American households are involved in a small business
Currently 1 out of 25 working adults are starting their own business
Presented by:
William Adler
SCORE/The Entrepreneur’s Source
901.761.0250
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