} Voted #1 Franchise Consulting Firm in North America in an Independent Survey of over 900 Franchisors for the fourth year in a row
} More hands-on experience than any other firm
◦ Consultants with over 800 years of franchise experience
◦ 98 out of the top 200 franchise companies
◦ Offices in Chicago, Dallas, Los Angeles, Miami-Fort Lauderdale, Atlanta, Toronto, Dubai, UAE & Riyadh
} More “senior level” experience
◦ Hands-on experience at start-up and established franchisors
◦ Former CEOs, CFOs, EVPs of more than 50 franchise companies
Adia (now Adecco), Armstrong Tile, Auntie Anne’s, Dunkin Donuts, LINE-X, Pearle Vision, McDonald’s, PIP Printing, Schlotzsky’s, Snap-on Tools, Snelling & Snelling, and other national brands
} The ability to bring more resources
◦ Faster completion
◦ Ability to provide assistance in several areas simultaneously
} Breadth across four functional areas
◦ Strategic planning
◦ Quality control
◦ Marketing
◦ Organizational development
} Franchise experience in 50+ countries
} Numerous awards and publications
} TopFire Media
◦ Nation’s first fully integrated media firm SEO, PPC, Social Media, Blogging, PR, and Website Design and Development
◦ Both brand/consumer focused and franchise lead generation
◦ Recent honors and awards:
Best new agency (Ragan & PR Daily Ace Awards)
Best Website Finalist (PR News)
Best Media Relations Campaign Finalist (PR News)
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} FTC Rule 436 cites three elements that legally define a franchise:
◦ The use of a common trademark
◦ The provision of assistance to (or exercise of control over) the franchisee
◦ The collection of fees, royalties, mark - ups or other monies from the franchisees
} If you have all three elements, you are a franchise, regardless of what you call it
} Some state definitions vary, but are similar
Do not have to use the “f-word”
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2013-2023 iFranchise Group. All Rights Reserved.
}
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} Franchisee typically pays
◦ Franchise fee average about $25,000 - $35,000
◦ Royalty range between 4% - 10%
◦ Advertising range between 1% and 2%
◦ Franchisor will often sell product to the franchisee
◦ Franchisee makes the entire investment in operations
} Franchisor typically provides
◦ Initial training
◦ Operations manual and systems
◦ Ongoing supervision and support
◦ Other support services
◦ Trademark & Trademark Maintenance
2013-2023 iFranchise Group. All Rights Reserved.
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© 2013-2023 iFranchise Group. All Rights Reserved. } Successful prototype } Credibility } Differentiation } “ Sizzle ” } Buyer appeal } Value Proposition } Affordability } Profitability TheKeyisCreatinga “Win-Win-Win”Scenario Sell? Clone? Succeed? R.O.I.? } Market trends } Capital } Management } Teachability } Adaptability } Systemization 5
} NOT a legal requirement
} A practical requirement for almost all franchisors
◦ Exceptions: Direct sales of a proprietary product, prototype operations that may differ from the franchise offering but provide prototype operational knowledge, etc.
} Five reasons you need a prototype
◦ Credibility in the sales process
◦ A venue to train your franchisees
◦ A venue to test operational refinements (new products, marketing, etc.)
◦ Defense against accusations of misrepresentation
While not legally required, failed franchisees could sue for fraud
If you do not have an operating unit (and presumably no FPR) they can claim fraud even if you never said a word
If you show no units or unprofitable operations, a jury may be more likely to side with your franchisee
◦ “I saw the angel in the marble and carved until I set him free.” Michelangelo
2013-2023 iFranchise Group.
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} Prospects will not buy unless you make them believe they can succeed
◦ That said, 40% say joining a “known brand” is not vital
◦ And 40% prefer a known brand but are open to new concepts
◦ In fact, some franchisees are looking for “the next new thing”
} Credibility can be demonstrated in a variety of ways
◦ Years in operation
◦ Number of units
◦ Financial performance
◦ Management and staff credentials
◦ Look and feel of the operation
◦ Press clippings, awards, and other notoriety
◦ Perception of customer acceptance
} Credibility can be improved through
◦ Strong franchise marketing materials
◦ Professional website design
◦ Franchise sales videos
◦ Operations manuals, training videos, Learning Management Systems, etc.
◦ Testimonials
◦ Use of a design firm
◦ Use of a public relations firm
◦ Strong social media campaigns
◦ Use of a Financial Performance Representation
◦ Hiring strong staff, well-known lawyers and consultants, etc.
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2013-2023 iFranchise Group. All Rights Reserved.
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} Why buy from “the new kid on the block” if there is a bigger and betterestablished competitor who does the exact same thing?
} What makes you BETTER?
} Differentiation can be achieved in a number of ways
◦ Unit design, look and feel
◦ Unique recipes
◦ Product assortment
◦ Ad campaigns and message, consumer positioning
◦ Price
◦ Service
◦ Investment level
◦ Business economics
◦ And many other means…
} “Copycat” can work as a strategy if done right
◦ Speed of expansion – need for additional care
◦ “Fortress Strategy”
© 2013-2023
Group. All Rights Reserved.
iFranchise
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© 2013-2023 iFranchise Group. All Rights Reserved. Source: McMillan|Doolittle Black Hole
Where undifferentiated concepts go to die” Hot“est” (Fashion) Big“est” (Best Assortment) Cheap“est” (Lowest Price) Easy“est” (Service) Quick“est” (Speed) 10
“
The Fortress Strategy
© 2013-2023 iFranchise Group. All Rights Reserved.
EarlyToMarket LateToMarket 11
} You sell the “sizzle,” not the steak – franchise sales is an emotional decision
} Sizzle, sex appeal, hot concept – the buyer wants to be part of something that they perceive as “fun,” enjoyable, happening, cutting edge, or that will otherwise appeal to their self image } “Sizzle” can be achieved in a number of ways
◦ Unit design, look and feel
◦ Franchise marketing materials
◦ Perceived consumer acceptance
◦
Messaging
} Differences of opinion make horse races – Mark Twain
◦ What you think is sexy may be a terrible opportunity for others
◦ Almost anything can be given sizzle with good marketing and good messaging
2013-2023 iFranchise Group. All Rights Reserved.
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} Who will buy your franchise?
} Appeal to a specific buyer
◦ Dentist for a dental franchise
◦ Restaurateur for a restaurant offering
◦ Someone who loves pets
◦ Someone who loves the outdoors
} Advantages of a well-defined buyer
◦ Don’t have to compete for franchisees in the “general franchise marketplace”
◦ Can focus on the emotions that your buyer will have
} Create a strong value proposition
◦ Branding and brand advertising
Two units are better than one
Your brand may be stronger than you think
◦ Operations Manual and Training
◦ Purchasing power
◦ Information technology
◦ Research and development (recipes, products, services, etc.)
◦ Assistance provided to your franchisees
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} Teachability
◦ Train in three months or less
◦ McDonald’s has a one year training program
◦ Train the business, not the technical expertise
Medical franchises
Real estate
Complex restaurant operations
} Adaptability
◦ Will your success translate to other markets?
◦ Factors to consider include geography, location, climate, regional tastes, laws and regulations at a state or local level
} Systemization
◦ Every business has systems
◦ Need to get them out of your head and onto “paper”
◦ Brand consistency is imperative
◦ Tools
Operations Manuals
Formal Training Programs
Train-the-Trainer Programs
Training Videos
Learning Management Systems
Systemized onsite support
◦ Assistance provided to your franchisees
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2013-2023 iFranchise Group. All Rights Reserved.
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} The franchisee should make a return on the time they invest
◦ No different than if they were to go out and get a job
◦ Salary should be “ market rate”
} The franchisee should make a return on their investment
◦ No different than if they invested in a stock
◦ Return should be commensurate with what they would make if they were to make an investment of similar risk
◦ Ability to sell back their investment at the end of the term
} Franchisees expect that they will need to build their business
◦ Will expect these returns in three years or less
} Annual Cash - on - Cash R.O.I at the unit level – our criteria
◦ 15% for Owner Operators
◦ 20% for Area Developers (who will support additional overhead)
} Occasional exceptions
2013-2023 iFranchise Group.
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© 2013-2023 iFranchise Group. All Rights Reserved. CosttoOpenaNewUnit $ 150,000 Add a Franchise Fee $ 25,000 AddWorkingCapital $ 25,000 Franchisee Estimated Investment $ 200,000 Estimated Franchisee Revenue Year Three $ 500,000 Current Profit afterOwner’sCompensation $ 70,000 AdjustOwner’sCompensation +$ 15,000 One-TimeOnly/CapitalInvestment +$ 5,000 Tax MinimizationStrategies +$ 5,000 Shared Overhead +$ 5,000 Interest and Debt Service +$ 5,000 DepreciationandAmortization +$ 5,000 SubtractRoyalties,Fees&PriceAdjustments ($ 30,000) EstimatedFranchiseeProfit(adjusted) $ 80,000 DividedEstimatedProfitbyEstimatedInvestment
Estimated Franchisee Return
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$80,000/$200,000
40%
} Business plan/strategic direction
} Legal documents and registrations (requiredbylaw)
} Operations manuals
} Training program
} Quality control mechanisms and systems
} Effective marketing plan
} Website and web-based marketing
} Franchise collateral materials
} Advertise
} Design and implement a sales strategy
} Staff an organization to implement the plan } Capital
©
All Rights Reserved. 22
2013-2023 iFranchise Group.
} Consulting and legal costs vary based on franchise company’s situation:
◦ Desired speed of growth influences services needed
◦ Ability to do work internally
} Do not go into franchising undercapitalized
◦ Legal fees: $15,000 to $35,000+
◦ Consulting and Development: $40,000 to $250,000
◦ Organizational expenses: $10,000 to $25,000
◦ Franchise Marketing: $8k - $10k per sale (six months)
◦ Personnel: varies widely
Can bootstrap growth
Can spend hundreds of thousands
©
All Rights
2013-2023 iFranchise Group.
Reserved.
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} Not every successful business can be franchised
} Speed of growth is a function of:
◦ Franchise marketing
◦ Ability to service franchisees
} The key to successful franchising is making sure your franchisee succeeds
© 2013-2023 iFranchise Group. All Rights Reserved.
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