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Franchising usa

Issue 9 - july 2013

T he ma g a z ine for franchisees

$5.95 www.franchisingusamagazine.com

Yo u T u b e Marketing Tips

Franchising Information for Veterans

H e a lt h a n d Wellness Franchise F e at u r e Top Opportunities

Under 100K LATEST NEWS

FINANCIAL ADVICE FROM THE BANKS

TOP LAWYERS’ ADVICE


FRANCHISE FRANCHISE AVAILABLE FRANCHISE AVAILABLE FRANCHISE AVAILABLE AVAILABLE

Nontraditional Nontraditional Nontraditional Nontraditional

OPPORTUNITIES OPPORTUNITIES IN NEW AREAS! OPPORTUNITIES IN NEW AREAS! OPPORTUNITIES IN NEW AREAS! IN NEW AREAS!

Location Location Location Location

Opportunities Opportunities Opportunities Opportunities

Available Available Available Available

THE LARGEST CARRY-OUT PIZZA CHAIN IN THE LARGEST CARRY-OUT PIZZA CHAIN IN AMERICA AND THE FASTEST GROWING THE LARGEST CARRY-OUT PIZZA CHAIN IN AMERICA AND THEINFASTEST GROWING PIZZA CHAIN THE WORLD!* THE LARGEST CARRY-OUT CHAIN IN AMERICA THEINFASTEST GROWING PIZZAAND CHAIN THEPIZZA WORLD!* AMERICA AND THEINFASTEST GROWING PIZZA CHAIN THE WORLD!* For more information, visit PIZZA CHAIN INcall THE800-553-5776 WORLD!* For more information, visit LittleCaesars.com or *“Fastest growing pizza chain in the world” based on the net number of stores added 2008-2012. ©2013 LCE, Inc. 38990_pd

*“Fastest growing pizza chain in the world” based on the net number of stores added 2008-2012. ©2013 LCE, Inc. 38990_pd

*“Fastest growing pizza chain in the world” based on the net number of stores added 2008-2012. ©2013 LCE, Inc. 38990_pd

LittleCaesars.com or call 800-553-5776 For more information, visit For more information, visit LittleCaesars.com or call 800-553-5776 LittleCaesars.com or call 800-553-5776 *“Fastest growing pizza chain in the world” based on the net number of stores added 2008-2012. ©2013 LCE, Inc. 38990_pd

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Franchising usa T he ma g a z ine for franchisees

FRANCHISING USA VOLUME 1, ISSUE 9 JULY 2013 publisher: Colin Bradbury. colin@cgbpublishing.com

EDITOR: Christie Hall. christie@cgbpublishing.com

SALES DIRECTOR: Vikki Bradbury. vikki@cgbpublishing.com

SENIOR SALES EXECUTIVE: Jenn Dean. jenn@cgbpublishing.com

DESIGN: Jejak Graphics. jejak@bigpond.com

COVER IMAGE: Yeh! Yogurt

CGB PUBLISHING 676 Wain Rd. Sidney, BC V8L 5M5 CANADA Sales: 778-426-2446 Editorial: 778-426-3452 www.franchisingusamagazine.com

Proud member of the IFA:

SUPPLIER FORUM International Franchise Association 1501 K Street, N.W., Suite 350 Washington, D.C. 20005 Phone: (202) 628-8000 Fax: (202) 628-0812 www.franchise.org

from the

Editor Courage and Confidence You may be ready for a departure from the corporate world. You may be working in an industry that you enjoy, but are ready for a new challenge and the opportunity to earn more. You may be nearing retirement, but want to ensure a flow of income. You may be a Military Veteran transitioning to civilian life, and ready for a new challenge. Whatever your reasons, you have picked up this latest issue of Franchising USA because you know that franchising is a great option for you. Courage and confidence are required as you enter this next phase of your professional life: courage to take a leap, and confidence in your ability to land on your feet. I recently watched my daughter completely steal the show in a musical performance of Disney’s The Jungle Book. There she was, one of the smallest ten year olds I’ve ever met, striding across the stage with such confidence that one could only assume she had years of experience, when in reality, this was her first time. In the role of Shere Khan, the jungle villain, she declared in a loud booming voice that she was the king of the jungle, punctuating her proclamation

with a roar that bounced off the back walls of the theatre. My jaw dropped. She possesses not only the courage to step on stage, but the confidence to commit 100 percent to the task. We could all take a page from her script. As you take on the exciting world of franchising, find within yourself the courage to keep taking the next steps, and the confidence to commit 100 percent to whatever challenges you encounter. Franchising USA Magazine is with you every step of the way on your franchising journey. This month’s Expert Advice writers share with you their accumulated knowledge and expertise on subject matters ranging from how to choose an accountant, loss prevention, finding the best franchise opportunities, and timely digital marketing advice, as well as a special report from Franchise Business Review high-lighting the top low-cost franchises. We also continue to bring you news, advice, and profiles specific to Military Veterans in our well-received Veterans in Franchising section. Wishing you courage and confidence as you take the next steps towards becoming a franchisee. Christie Hall Editor, Franchising USA

The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher. The publication is sold subject to the terms and conditions that it shall not be copied in whole or part, resold, hired out, without the express permission of the publisher.

Franchising USA


july 2013

On the Cover 35 Veterans in Franchising Supplement

10 Cover Story Yeh! Yogurt: The premium self-serve experience

68

21 Health and Wellness Franchise Feature

In Every Issue 06 Franchising News Announcements from the industry 12 About Franchising – from the IFA SBA Lending to Franchises Jumps 60 Percent 21 Feature Article Health and Wellness Franchise Feature 32 Women in Franchising Nancy Bigley, Bottle & Bottega

Franchising USA

21

60 YouTube Marketing: The Power of

Online Video

Kelly Maguire, AviaTech

70

26

f ra nchising usa

Contents


26

Expert Advice 14 Independent Franchisee Associations and Franchisee Groups Julie Lusthaus, Einbinder and Dunn 26 To App Or Not To App Dan Kim, Red Mango 30 Advertising For The Multi-Screen World Tim Miller, Location3 Media

54 How Do I Find The Best Opportunities? Daniel Brunell, Dearborn West

18

50 Low-Cost Franchises: Today’s Top Opportunities Under 100K Franchise Business Review

60 YouTube Marketing: The Power of Online Video Kelly Magure, AviaTech 68 Real Estate Agent: Friend or Foe? Dale Willerton, The Lease Coach 70 Buying a Franchise: New Systems vs. Mature Systems Edward Levitt, Aird & Berlis LLP 76 How to Choose an Accountant for Your Franchise Peter Knight and Kate Groom, Smart-Franchise

Franchisor in Depth 18 Johnny Rockets 72 Active Rx

57 Anytime Fitness

Franchise Profile 66

54

Franchisee in Action

Red Mango Franchising USA


f ra nchising usa

what’s new! Total Woman Gym + Spa Announces First Franchise Program Expansion to Take Place Throughout the US

project alongside private equity group

California-based Total Woman Gym + Spa is planning to expand nationwide under the leadership of two industry veterans.

have previous experience developing

Gene LaMott, CEO and chairman of Total Woman Gym + Spa, and Ben Amante, executive manager of franchising, have taken the helm of the new development

“As the gym and spa industries continue

RLH Equity. La Mott and Amante both health and fitness brands, including work expanding Gold’s Gym.

to deliver world-class experiences and

consumers flourish, Total Woman Gym +

Spa provides an unmatched opportunity,”

said LaMott. Total Woman Gym + Spa currently has 15 company owned and operated locations across California. The 48-year-old chain offers modern fitness equipment, group classes and personal training, along with state-of-the-art spa facilities. It also provides locker rooms and babysitting services. ““The opportunity to get in on the ground floor of our business and benefit from our team’s experience is phenomenal,” said Amante. “Total Woman Gym + Spa is planning an expansion outside California through our franchise program that empowers business people who have the qualifications and passion for encouraging, uplifting and supporting women to live their best life.” Total Woman Gym + Spa has its headquarters in Westlake Village, California. Contact: www.totalwomanfranchising.com

Advantage Rent a Car to Partner with Europcar further expansion and brand awareness for “We are delighted to partner with both companies.

Franchise Services of North America Inc. has announced that the Advantage Rent a Car, the fourth largest car rental company in the US, is forming an international partnership with global rental giant Europcar. The move allows rentals to be serviced and received between companies, and means

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“This partnership is an extremely exciting opportunity for us,” said Tom McDonnell, Chairman and CEO of FSNA. “Advantage customers will now be able to reserve and rent cars globally. The transaction will transform our brand from the fourth largest car rental company in North America to a global provider of auto rental.” Advantage currently has 75 locations in airports across the US and has a collective fleet of around 23,000 cars in various makes and models. The business is considered part of the leisure car rental market.

Advantage and make a strategic move for both our companies,” said Roland Keppler, CEO of Europcar. “We share the same values and client-oriented attitude. Both our teams are fully committed to deliver excellent customer service and innovative solutions. We will actively cooperate to share best practices, while developing together mobility projects.” Europcar has a presence in over 130 countries and has repeatedly won the World Travel Award which recognizes green transport solutions. In 2012, Europcar also received Europe’s Responsible Tourism Award. Contact: www.advantage.com


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Ignite Restaurant Group Inc. Prepares to Franchise Brick House Tavern + Tap Ignite Restaurant Group Inc. has filed franchise documents with the intent of franchising its restaurant, Brick House Tavern + Tap. Ignite’s chief executive, Ray Blanchette, said at a recent conference that franchising would help accelerate growth. The expansion comes on the heels of the company’s recent acquisition of Romano’s Macaroni Grill, a franchise-oriented restaurant. “When you look at the sort of bar-andgrill segment of casual dining and try to predict where it is headed, it’s very clear to me that this sort of next-generation, sort of polished bar and grill is going to be an enormous segment,” Blanchette said. The Brick House Tavern + Tap brand currently has 16 locations across the US. Parent company Ignite is based in Houston, Texas. Contact: www.igniterestaurants.com

Struggling Bruster’s Real Ice Cream Moves Indoors Bruster’s Real Ice Cream has made the decision to cut investment costs and increase revenue by moving from stand-alone buildings to smaller inline units. Based out of Bridgewater, Pennsylvania, the franchise has experienced difficulties in recent years. The estimated $1 million cost of opening a stand-alone location was only offering average unit volumes of $310,000 per year. Current plans reduce the startup investment by 75 per cent to $250,000. It would also take less time to open a new location. The plans also mean that there is more potential for revenue as there will be less dependency on the weather to entice customers. CEO Jim Sahene estimates that unit volumes could average $400,000 at the new locations. As a bonus, rainy days will no longer mean standing outside to wait for your ice cream. A franchisee will be opening one of the new prototypes in Panama City, Florida. Contact: www.brusters.com

Franchising USA


f ra nchising usa

what’s new! Dental Fix RX Announces Incentive for Franchisees Program Initiative Offers Refund of Franchise Fee as Guarantee.

that we do not collect royalties, will attract new franchisees.”

repair, equipment maintenance, and new

Dental Fix RX is offering to refund the franchise fee to franchisees signing development agreements for the rest of 2013 if they do not serve at least 40 clients during their first year.

The plan comes amidst vast growth for the franchise, with current plans to expand by 300 territories over the next four years. There are more than 50 mobile units offering on-site hand-piece

Canada.

equipment services across the US and

Dental Fix was founded in 2009 and has its headquarters in Davie, Florida. Contact: www.dentalfixrx.com

The franchise, which provides mobile dental equipment repair, announced the new program in March of this year. “With the launch of this program, we are offering a win-win opportunity to prospective franchisees,” said David Lopez, CEO, Dental Fix. “There is tremendous potential for success when Dental Fix owners follow our step-by-step operating program. We are so confident in our program that we are guaranteeing our business owners a rare level of comfort in their business decision, and we believe that this program, coupled with the distinguishing features Dental Fix offers, such as protected territories and the fact

Jan-Pro Recognized as Top 100 Global Franchise Commercial cleaning company Jan-Pro Franchising International Inc. was selected in June as a Top 100 Global Franchise in Entrepreneur Magazine. Founded over 20 years ago in Providence, Rhode Island, Jan-Pro has offices in 11 countries worldwide and has experienced rapid expansion over the last decade. “We are delighted that Jan-Pro has been recognized as a leading franchise worldwide,” said Rich Kissane, JanPro’s president and CEO. “Being a global leader means solving commercial cleaning problems in markets all over the world. The fact that the Jan-Pro Brand is established globally makes us

Franchising USA

very proud of our systems, our products, and of course, our international team of professionals.”

within the next three years. This growth can be appealing for new franchisees.

Commercial cleaning has grown to a

Jan-Pro has over 10,000 franchise owners worldwide and is often rated among the top franchises in the industry.

expectations to climb to $175 billion

Contact: www.jan-pro.com

$160 billion industry worldwide, with


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SUBWAY® Plans Massive Expansion SUBWAY ®, the quick service restaurant franchise with the greatest number of stores worldwide, has is talking about expanding to 100,000 locations by 2030, according to a report by Bloomberg Businessweek. SUBWAY ® has already experienced a growth of over 11,000 locations within the last six years. The sandwich franchise has almost 40,000 locations around the globe, with a goal to expand by another 10,000 restaurants over the next few years. “We have a real goal of getting to 50,000 stores by 2017,” Don Fertman, chief development officer for SUBWAY ®, told Bloomberg. “And we have a goal of—not a goal, but what we call a possibility—we have a chart that shows the possibility of us getting to 100,000 stores by 2030.” The growth strategy has already paid off, and according to researcher Millward Brown, the company is ranked fifty-first for brand value, up from 80 in 2007. It has a current estimated brand value of $16.7 billion. Contact: www.subway.com

Franchise Sector Continues to Outperform According to the International Franchise Association, the franchise sector will enjoy continued growth, outperforming the economy and other businesses. The findings were released in the IFA’s second quarter update to The Economic Outlook for Franchise Businesses Report. “Franchise growth continues to outpace other sectors of the economy as franchising remains the fastest way to grow and scale a business, despite the still uneven economic recovery and the onerous public policy environment facing our members and the small business community,” said Steve Caldeira, CEO and President of the IFA. Franchise establishments are projected to increase by 1.3 per cent this year, and jobs in franchise businesses are expected to grow by 2 per cent. The report analysed information by grouping franchise businesses into 10 general sectors. The top performers in terms of franchise employment and establishment growth are the business services and commercial and residential services sectors. Contact: www.franchise.org

Franchising USA


cover stroy

Yeh ! Yogur t

Yeh! Yogurt:

T he P remium S elf - S erve E x perience Starting operation in 2008, the original Yeh! Yogurt was a small 600 sq ft shop located on St Laurent Blvd in Montreal. Despite its size, the launching pad became the place where the brand, signature pink color, cool urban environment and yogurt taste became widely known. Situated near busy restaurants and clubs, and not far from McGill University, Yeh! became a hot spot for many students and young people to indulge in fresh frozen yogurt and relax with friends. Through word of mouth the yogurt café drew the attention of people from all over the city as “the first self-serve frozen yogurt shop in Montreal,” says co-CEO Jon Gurman. CEOs Jon and Marvin, also known as “the Gurman twins”, have been in the branding, licensing and marketing industry for over 35 years, specifically the apparel business. With a trademark slogan of “You Go, You Get,” the dynamic duo holds retail partnerships with many corporate giants including Walmart, JCPenny and Sears. Tracing its roots to South Korea, the frozen yogurt trend first caught the eyes of

Franchising USA


the Gurmans in Los Angeles, California. Upon trying the yogurt, the twins fell in love with the concept. And thus, a new era of Yeh! Yogurt began. Named after a partner of the CEOs who they refer to as “The Great Yeh,” the Gurmans explain how the name stuck. “It worked well with ‘Yay,’ ‘Yeah,’ ‘Yeh! Yogurt.’ It’s fantastic. I don’t think we could have chosen a better name,” says Jon. “It’s happy, it’s cool, it’s hip; it seems to work well with the branding,” adds in Managing Director Craig Stein. Made on site daily, the Gurmans claim their product to be “the healthiest yogurt in the world!” While many competing companies receive frozen supplies from large factory kitchens to thaw and serve, our yogurt is made on site with fresh milk and yogurt, a powder mix and their flavoring, guaranteeing it’s always fresh, explains Marvin. Other yogurt shops are like ice cream shops. We’re more of a cool, fun café experience. The ever-changing selection of flavored non-fat frozen yogurt is accompanied by a selection of over 40 toppings to choose from, including both fresh fruits and sweets. “It’s fresh, it’s healthy and it’s creative. You get to make your own yogurt, add your own toppings,” says Stein.

“People don’t like to fill up self serve gas, but people love to self serve yogurt.” The success of the frozen yogurt shop was not just the taste, but also the fact that the serve yourself concept was a completely new idea. “It took people like, ‘wow’,” says Jon. “People don’t like to fill up self serve gas, but people love to self serve yogurt.” In 2009 Yeh! Yogurt began franchising; the first shop was in Burlington, Massachusetts. To date there are 15 stores open and running, a number which will double by the end of 2013. “Eight of the 30 will be corporate run, and the rest franchises,” explains Jon. With locations in Nova Scotia, New Brunswick, Quebec, Ontario, California and New York, the brothers are on the look out for new locations to build and expand. An ideal Yeh! franchisee needs to be entrepreneurial, have a passion for the business, experience in the restaurant industry and have enough start-up capital for the franchise fee ($30,000) and the store costs, which include equipment, labor, and professional fees ($250,000$350,000 depending on sq ft). Yeh! franchisees receive full training and the opportunity to work hands-on in a

corporate store while their shop is being built. Once their store is up and running, training crews are sent into the store to work alongside new owners for a few weeks to ensure through training in all aspects of the job. Franchisees are also supplied with all the marketing materials needed. “It’s a total team effort. They’re on board; we’re on board. Franchisees are our most important asset,” says Stein. “Their success is our success. We love our franchisees,” adds Jon. Today Yeh! Yogurt is aligning with athletes of the Canadian Olympic team to convey the healthy, active lifestyle their product offers. Fan Alex Bilodeau, a 2010 Olympian, is an avid supporter of Yeh! His voice is very vocal on twitter and instrumental in recruiting fellow athletes on board. “We are the Starbucks of the yogurt business,” says Jon. “When you walk into a Yeh!, the experience is to lounge, you want to spend time there, the atmosphere is very inviting, it’s clean, it’s a lifestyle.” For more information: Web:

www.yehyogurt.com

Franchising USA

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S B A L endin g to F ranchises

Jumps 60%

A ccordin g to N ew I ndustry R eport

A new report released at the start of the International Franchise Expo in New York City shows that U.S. Small Business Administration (SBA) lending to franchising increased more than 60 percent over the previous year, shrinking a credit access gap that has been the focus of industry efforts since the financial crisis. The report, co-authored by the Coleman Report, the National Association of Development Companies (NADCO) and the International Franchise Association (IFA), showed that nearly 3,300 SBA loans went to franchises in 2012 for a total of over $3.8 billion, an increase of 34 percent in number of loans delivered and a 60 percent jump in dollar volume. SBA financing for commercial real estate, equipment and leasehold improvements known as “504 loans” increased even more – 67 percent in 2012 to $2.5 billion in total project finance. 504 loan volume nearly doubled between 2010 and 2012, while 7(a) volume ticked up nearly 12 percent.

Franchising USA

“The dramatic increase within the SBA 504 commercial real estate and equipment loan and 7(a) programs demonstrates the continued ability of the franchising industry to create jobs and generate economic growth,” said IFA President & CEO Steve Caldeira. “While there are clearly still some gaps in accessing capital, especially for the first-time entrepreneur, IFA’s ongoing efforts to better educate the lending community about franchising, has led to significant progress for our industry since the recession.” “Larger loan sizes supported by NADCO, IFA and SBA as part of the Jobs Act of 2010, combined with our joint franchise lending campaign, have

enabled us to nearly double 504 loan volume to franchising since 2010,” said NADCO President & CEO Beth Solomon, representing the nation’s 270 SBA Certified Development Companies (CDCs), which facilitate small business loans. “We are very pleased to see the franchise industry getting financing to create the jobs America needs.”Each $65,000 in 504 loan volume creates one job. Franchising was a major user of 504 loans, securing nearly 15 percent of the total $2.5 billion 504 project finance volume and 9.5 percent of the number of 504 loans delivered. The franchise industry captured just over 9 percent of 7(a) loan volume, or


About the International Franchise Association The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.

ABOUT NADCO

about 5.3 percent of all 7(a) loans. The brands receiving the most SBA loans 2010-2012 were Subway (573), Dairy Queen (182), Jimmy John’s (176), Dunkin’ Donuts (166), Anytime Fitness (154), Choice Hotels (136), Sport Clips (130), Ace Hardware (125), Days Inn (119), Little Caesar’s Pizza (112), Culver’s Frozen Custard (108) and Holiday Inn Express (107). “SBA loans have become increasingly popular as a franchise finance solution,” said Coleman Report CEO Bob Coleman. “The smartest franchise concepts are the most aggressive in employing this powerful franchise expansion tool.”

NADCO hosted the first-ever “Bank

Financing Pavilion” at the International Franchise Expo June 20-22. At the

Pavilion, New York Business Development Corporation, New Jersey Business Finance Corp., Bank of America, Citibank and TD Bank offered SBA financing options to

potential and existing franchisees as well as brand development leaders to further increase SBA lending to franchising.

The 504 loan is a 10 percent down, 10- or

20-year fixed rate loan up to $5.5 million. The 7(a) working capital loan up to $5 million may be variable or fixed-rate, short- or long-term.

The National Association of Development Companies (NADCO) is the trade association of Certified Development Companies (CDCs) - nonprofit companies that have been certified by the Small Business Administration (SBA) to provide financing for small businesses under the SBA 504 Program. NADCO represents nearly 270 CDCs, serving all 50 states. In 2012, the industry provided $6 billion to nearly 10,000 U.S. small businesses.

ABOUT BOB COLEMAN Coleman is the leading provider of information to small business bankers to help them make less risky small business loans. His weekly industry trade newsletter, The Coleman Report, began in 1993 and provides critical analytical information for today’s small business lending professional. For more: http:// www.colemanreport.com For More Information: Web:

www.franchise.org

Franchising USA

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ex per t advice

Julie Lusthaus, Einbinder & Dunn

INDEPENDENT FRANC H ASSOCIATIONS a n d FRANC H ISEE GROUPS

“Although conflic that brings about th association, indepen best in repres membership when a con collaboration is c

Franchising USA


ct sometimes is the catalyst he formation of a franchisee ndent associations function senting the interests of their nstructive and businesslike created with the franchisor.�

In order to level the playing field, it is often in the best interests of franchisees to organize themselves into a franchisee association or group. An independent franchisee association is a trade association formed by franchisees within a single brand or system. It is different from an advisory council which is sponsored by the franchisor and therefore not an independent organization of franchisees. An alternative to the franchisee association is a franchisee group which is a less formal organization consisting of a smaller number of franchisees who want to accomplish specific shared goals in an efficient and cost-effective manner. Whether you are part of a franchisee association or franchisee group, working together with other franchisees offers many benefits.

Goals of the Independent Franchisee Association Independent franchisee associations are formed to pursue a number of goals on behalf of the franchisees in the system. These goals include: enhancing leverage in negotiations with the franchisor; potentially negotiating more favorable terms with outside vendors and contractors; educating franchisees on the state of the franchise system; and creating opportunities for franchisees to share information about best practices in their businesses. Independent franchisee associations can provide an unfettered channel of communication within the franchisee community that is not regulated by the franchisor. As indicated above, a franchisee association may permit the franchisees to create leverage in

connection with their suppliers and provide the franchisees with the ability to create purchasing power. Franchisee associations also serve to educate the franchisees on the state of their franchise system as well as well as legal and legislative developments which may affect their rights and responsibilities as franchisees. The association provides a forum for sharing the benefits of this knowledge through a variety of means.

Typical Issues Addressed by the Association Franchisee associations are formed to address issues with the franchisor on a system-wide level. These issues may include those relating to the use of the advertising fund by the franchisor; concerns about particular suppliers; costs associated with implementing new requirements such as upgrades to computers; and concerns about the addition of a new product or supply required to be offered by franchisees. By forming an association, franchisees can work with the franchisor to address their concerns on behalf of the system as a whole.

Formation of the Association Franchisee associations are typically formed by a core group of franchisee leaders who determine that such an association is needed to protect the interests of franchisees. More often than not, the decision to form an association is the direct result of a crisis in the franchise system. Such a crisis acts as a catalyst to the formation of the association. The association is often benefitted by being formed at the earliest possible stage so that the organization and mechanisms for communicating with the franchisor and among franchisees are in place. This will undoubtedly be a tremendous benefit if a crisis in the system occurs and will allow franchisees to deal with such a crisis proactively rather than reactively.

Franchising USA

ex per t advice

H ISEE

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ex per t advice

Julie Lusthaus, Einbinder & Dunn

as a whole, or when there is a disparity between the group and the position of a franchisee association. Forming such groups, whether they consist of two, three or more members, means franchisees can address their concerns in the manner of their choosing and without association approval. It also affords franchisees the opportunity to share all related costs.

Conclusion If you are looking for a voice in your system that becomes exponentially magnified then an independent franchisee association or franchisee group is a necessity. There is indeed strength in numbers and only through an association with others can your voice be heard. Associations are often created with the assistance of legal counsel who can create the necessary business entity, advise on procedures to be used by the association and assist the core group with the development and growth of the association. Once the association is created, the core group of leaders will begin communicating with fellow franchisees to advise that the association has been created, to provide franchisees with the opportunity to join the association, further advise of the general goals of the association and to request feedback regarding the key issues and concerns of the franchisee community. The leaders will then review the issues identified to create a list of short term goals and long term goals for the association. Thereafter, an organizational and informational meeting will be scheduled and all franchisees should be urged to attend. The meeting should be scheduled at a convenient time (give franchisees at least several weeks notice) and at a location that is accessible to all franchisees. Frequently, counsel for the association will attend and assist the leaders with presenting the specific goals of the association and the methods which will be used to attain those goals. Counsel can also assist by answering questions that members and

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prospective members may have about the association, its goals, the franchisor’s expected response, and the obligations of membership in the association.

The Franchisor’s Response Some franchisors initially react with concern to the creation of an independent franchisee association. However, it is not necessary for independent franchisee associations to function in an adverse or hostile relationship vis-a-vis the franchisor. Although conflict sometimes is the catalyst that brings about the formation of a franchisee association, independent associations function best in representing the interests of their membership when a constructive and businesslike collaboration is created with the franchisor. Indeed, there are a large and growing number of franchisors that have independent associations in their systems and actively welcome their participation in system affairs.

A Partner of Einbinder & Dunn, Julie Lusthaus has been practicing law since 1996 in the areas of franchise and business law. She is a frequent speaker on franchise issues for the American Bar Association Forum on Franchising and has been asked to share her insights in the area of franchise law at the International Franchise Association Legal Symposium. Ms. Lusthaus is also a member of the American Bar Association Law Practice Management Section, the New York State Bar Association Committee on Franchise Distribution and Licensing Law and the International Franchise Association. For More Information: Web:

www.ed-lawfirm.com

Franchisee Groups There are times when a group of franchisees may wish to address some concerns under a less formal structure. Such situations occur when a number of franchisees have very specific issues not relevant to the franchisee association

Julie Lusthaus


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f ra nchisor in depth

Johnny Rockets

Johnny Rockets:

An All-American Original

At Johnny Rockets, the commodity is Americana, and the currency is in the form of juicy 1/3-pound hamburgers, crispy American fries, classic sandwiches, and rich, delicious hand-dipped shakes and malts.

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Ronn Teitelbaum first dreamed of the Johnny Rockets concept in 1943, when he was just five years old. His imagination was sparked by coffee shop and drive-in scenes he witnessed from the back seat of his parents’ car. Many years later, with a career as an award-winning men’s fashion retailer, Teitelbaum brought his dream to life, launching the first Johnny Rockets on June 6, 1986, on Melrose Avenue, in Los Angeles, California. The name Johnny Rockets originated by combining the timeless Johnny Appleseed story with the classic Oldsmobile Rocket 88. Together, these concepts embody the concept of classic Americana and the promise of the future. With that philosophy as a driving force in the business, Johnny Rockets has become known as a place where guests can escape from today’s complicated world and experience

the uncomplicated goodness of classic Americana. “There are lots of options for people to eat great hamburgers,” says Johnny Rockets International President, Steve Devine, “But we feel great products and service are key to success. We want our guests to leave with the memories of a great experience. We are very family- oriented; for example when a waiter brings your shakes, he will twirl the straw fountain on the table for you to pick your straws. The ketchup is served on a plate as a smiley face, which we hope brings a smile to our guest. And you never know when the crew will break out into song and dance. It is a great experience.” Twenty seven years later, Johnny Rockets is well established and thriving with over 300 restaurants in 32 states, as well as 83 restaurants in 20 countries worldwide, including Nigeria, Russia, and Mexico, just to name a few. The company began franchising in 1988 and currently has 65


“The best franchisee is someone who knows the restaurant business and our brand, someone who develops a love of the franchise.”

Steve Devine

what they do.” Johnny Rockets also offers owner-sponsored domestic Financial Assistance to qualified US Franchisees, as well as market research, and access to real estate, architecture, design and equipment experts.

4. Enthusiastically serve our Guests and meet or exceed their expectations at all times.

Once the location is open, the support continues. “The support for franchisees is ongoing and we have a group of support managers who work closely with franchisees to ensure they get the help needed and to help them grow through marketing and business development.” Ongoing communication is a key factor to ensuring franchisee success. Johnny Rockets provides a dynamic online communication portal with easily accessible tools and discussion boards. Along with weekly and month corporate communications and an elected Franchise Leadership Council, franchisees get all the information and input that they require to do well in the business.

The Johnny Rockets franchisee training program is extensive and thorough, according to Devine, and puts franchisees in the optimum position to achieve success. “We offer a very intense four week training program to the new franchisee covering every aspect of the restaurant. Initially it is training with the crew and then intensive management training. When we are ready to open the restaurant, we send our training team to them for ten days to help train staff so everyone is fully aware and confident at

Each Johnny Rockets location has a clean, contemporary design and an ambience that is nostalgic and reminiscent of feel-good America, without being tied to a specific decade or era. The franchise has found a home a wide range of locations. In addition to malls, strip centers and street fronts, Johnny Rockets restaurants can also be found in airports, aquariums, casinos, amusement parks, campuses, military bases, cruise ships, sports arenas and seaports. Notable locations include highly visible and popular destinations,

domestic franchises and 25 international franchise locations. A Johnny Rockets franchise location starts at $500,000 but that number can vary according to geographic area, site selection, etc.

franchisees and employees that is based on a set of four guiding principles which are crucial to the company’s success.

Johnyy Rockets is always looking to develop and build their brand by adding new franchises under the leadership of people well-equipped for success in the business. “The best franchisee,” says Devine, “is someone who knows the restaurant business and our brand, someone who develops a love of the franchise. Our ideal candidates have restaurant experience and a passion for people. We also have a number of veterans who have made very successful franchisees. One of the great endorsements is more than 50 percent of our franchisees own multiple systems. For example, we have a lifelong franchisee who now has 16 restaurants.”

2. Serve great all-American food in a timeless and fun environment.

The mission of the company is to establish Johnny Rockets as the leading global restaurant chain providing a classic allAmerican experience. This mission is accomplished by providing training to

1. Provide a great work environment and treat each other with respect and dignity.

3. Apply the highest standards of excellence to the purchasing, preparation and delivery of our products.

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f ra nchisor in depth

Johnny Rockets

“We feel great products and service are key to success. We want our guests to leave with the memories of a great experience.” including Ocean Drive, in Miami’s South Beach; 3rd Street Promenade, in Santa Monica; South Street Seaport, in New York; and Universal CityWalk, in Los Angeles. Regardless of the location, great service and hospitality are key for each and every guest experience, and Johnny Rockets encourages franchisees to focus on building lifelong relationships with their guests. Devine, who first got involved with Johnny Rockets in 2001, is celebrating 12 years with the company, after many previous years of leadership in restaurant operations. His current involvement is in developing international franchise partners, entering new territories, and seeing the Johnny Rockets brand thrive through proven sales and operations methods, as well as effective brand building and leadership skills. “Currently our main bulk of focus is on the international program and developing the American Dream. ‘I can do more and be more.’ Our next step will be to develop Europe.” With over 6000 people employed by Johnny Rockets, the franchise serves 17 million hamburgers, 11.3 million soda pops, 8.3 million Shakes and Malts, 8 million pounds of Fries, 2.1 million orders of Onion Rings and 815,000 gallons of ice cream annually. That equates to a lot of satisfied guests, guests who come back over and over to enjoy the great hospitality, fun atmosphere, and delicious all-American fare. Johnny Rockets continued growth and success can be attributed to these three factors. “When someone decides to get into business,” says Devine, “you only have to look at Johnny Rockets power and brand to see why they are successful.” For More Information: Web:

www.johnnyrockets.com/ franchise-with-us

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Health and Wellness Franchise Feature

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“I’m No Doctor, But…” Recent Trends Me an Huge Potential in He alth and Wellness Franchising There’s something universal about wanting to lend a helping hand. For whatever reason, altruism just feels good, whether in our personal or professional lives. Why else do you think teachers claim some of

the highest levels of job satisfaction, while retail workers claim some of the lowest? Even though teachers have a tough job, with plenty of unpaid overtime, they can see the impact of their work reflected in the progress of their students. It can be much harder to see your contribution to society when your job is to keep the khakis organized.

Of course, not every job can provide the same level of satisfaction as nurturing young minds. We all have to pay the bills somehow. Fortunately, franchising in the health and wellness industry does offer a unique opportunity to combine strong business performance with sound corporate citizenship. With franchises available in areas ranging from health food to sports equipment, to fitness centers and massage therapy, and even homecare, the health and wellness industry is as diverse as it is rewarding. But is a wellness franchise right for you? What forces are driving the market today, what risks and advantages are associated with the industry, and how can you find the franchise that suits you best? This issue of Franchising USA highlights a select few franchisors and franchisees making a difference in the world of health and wellness. But before we get into that, let’s look at a few current trends which are shaping the industry today, and into the future.

OUT OF THE HOSPITALS, INTO THE GYMS Of course, we can’t discuss health and wellness in the U.S. without mentioning the recent, sweeping changes made to health care legislation. The passage of the Affordable Care Act (ACA) has ushered in a new era of health care in America. In an effort to keep Medicare spending

“Fortunately, franchising in the health and wellness industry does offer a unique opportunity to combine strong business performance with sound corporate citizenship.” Franchising USA


AMERICA’S WAISTBAND: A GROWING CONCERN low, a strong new emphasis has been placed on ‘proactive’ versus ‘reactive’ health initiatives – more simply, keeping people healthy so they don’t wind up in hospital. Study after study has shown that every dollar spent on nutrition or physical activity programs yields big savings on medical expenses down the road, so these new policies from the ACA make strong fiscal – and ethical – sense. Perhaps more importantly to franchisees, however, the passage of the ACA opens up some golden opportunities in the health and wellness industry. Because hospitalization is a costly and unattractive outcome, health care providers are searching for ways to encourage their members to participate in healthier lifestyles. Similarly, many employers now offer incentives to their employees for gym memberships, massage therapy and other proactive health programs. As we try to move away from hospital-centric ideas of health care, opportunities in the ‘satellite’ health care industries abound. It’s an important point for any potential franchisee, but certainly not the only one.

Across the country, the number of obese and overweight Americans continues to rise. According to the Centers for Disease Control and Prevention, 69.2 percent of all adults in the U.S. were either obese or overweight as of 2010, with rates increasing according to the most recent Gallup polls. Americans are increasingly concerned with the statistics, and while it’s true that a number of of factors effect obesity – lifestyle, income, socioeconomic status, genetics – the fact remains that proper diet and exercise are often the best prescription for dealing with obesity. With the associated health risks, projected costs to the health care system, and the American Medical Association recently recognizing obesity as a disease, the push is on to combat the obesity epidemic. Franchisees in the health and wellness industry can be at the forefront of this fight. Whether it be through a health food franchise, a diet franchise, a fitness club franchise, a sporting goods franchise, or some other business, franchisees in the health and wellness industry can target an ever-increasing audience of Americans looking to take back control in the new Battle of the Bulge.

THE BOOMER CONSUMER Of course, there’s much more to health than just the number you see on the bathroom scale. Another major development on the horizon is our rapidly aging population. The Baby Boomers aren’t babies anymore,and America’s senior population is exploding. Over the next 20 years, that demographic is expected to rise steadily, with one in five Americans being over 65 years old by the year 2030. An aging population is sure to place greater strain on our nation’s medical and health care resources, as the task of caring for an older generation falls upon the younger. As such, franchising opportunities abound for those looking to work with America’s aging population to meet their continuing health goals. The perks are numerous: a stable customer base is virtually guaranteed, start-up costs can be very low (depending on the exact business), and of course, income is relatively stable due to multiple revenue streams. Perhaps most importantly, however, owning a franchise focused on senior health care is a great way to improve the standard of living for the aging in one’s community. For prospective franchisees, senior care offers a perfect blend of financial and civic benefits.

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feature “Owning a franchise focused on senior health care is a great way to improve the standard of living for the aging in one’s community.” including franchise descriptions, contact information, and startup investment figures: try looking into FranchiseHelp, Entrepeneur, Kiplinger, and Franchise Business Review, just to name a few. And of course, it’s always a good idea to tap into your social network: get in touch with other franchisees, business owners, friends and family for any leads they may have.

MORE THAN A PRODUCT Now that we’ve discussed the overweight and the elderly, there is one other key demographic in the health and wellness market we should mention: everybody else. During an interview earlier this month, ActiveRx CEO Matt Essex said: “In all my time [working in wellness], I’ve never once met anybody – never once – who said they don’t care about their independence, or they don’t care about their longterm health.” Indeed, there may not be a single person in this country who isn’t searching for some way to improve their health. The single greatest advantage for health and wellness franchisees may be this: you aren’t selling a product, you’re selling an idea, a vision of what the client can achieve with the help of your services. After all, no matter how good of shape we might be, we always feel that we could do a little better. And, if we really have hit our peak, then it’s going to take work to stay at that peak level. Customers will approach their health in a variety of ways – some focused on diet, others on exercise, still others on traditional or holistic medicine – and for almost every approach, there is a franchise opportunity available. Any prospective

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investor would be hard-pressed to find a field with more universal appeal than the health and wellness industry.

THE HARDEST PART? If you’ve read this far, you’re no doubt curious about a future in health and wellness franchising. It’s all sounding good: the power to combine successful business with care for others, the wealth of service options available, and the increasing demand brought on by health concerns, changing demographics and federal legislation. It’s no exaggeration to say this may be the best time in history to look into your own franchise in the field. But now that we’ve looked at some of the current and future trends, and you’ve decided to look a little further, where do you go from here? How can you find a business perfectly suited to you, and where can you learn more? With such a wide range of offerings and services in the health and wellness industry, we can’t possibly list all of your franchising options here. As mentioned before, this issue of Franchising USA takes a close look at a few innovators in the market, so it may be best to start right here, within these pages. You can also find some excellent resources online,

A final thought: no choice to enter into a franchise agreement is easy. You must be very certain of the work you’re getting into, and the brand you choose to represent. But when it comes to franchising in health and wellness, the hardest part may be simply deciding how you want to contribute to an industry teeming with possibilities. Still, once you’ve got an idea of where you want your search to take you, and how you want to work in this field, you’re bound to find a franchisor offering exactly what you’re looking for. And if you can’t, then maybe you’d better start looking into developing that idea yourself! Happy hunting!


DON’T MISS OUR NEXT ISSUE!

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Mobile Franchises

Want to learn more about trends and growth industries in franchising? Need help making the big decisions? Every edition we feature advice from the experts to help you on your franchising journey.

Find out more about Mobile Franchises in the August edition of Franchising USA. Franchising USA


ex per t advice

Dan Kim, Red Mango

To App Or Not To App 3 bits of advice to help determine whether or not your business needs a mobile app

Red Mango does not have its own mobile app. Yep, it’s true. At the time of this writing, I had not developed a proprietary app for the company I started over 5 years ago. Franchising USA


“Make sure that the customer need-states that your app will fulfill are not being met by more popular apps to which people are already deeply attached -- such as Instagram and Foursquare.” You might find this strange and surprising if you know how much l love talking about technology and social media. It’s even surprising to me, because Red Mango is frequently recognized in the restaurant industry for being at the forefront of new media, which is largely driven by technology. And yet, the 230-unit national chain that Red Mango has become doesn’t even have an app. Hmmm…. Those of you who are familiar with both restaurants and social media would likely characterize Red Mango as a leading innovator in that space where these two industries intersect (yes, a Venn diagram comes to mind). At the end of 2012, Red Mango was ranked by Nation’s Restaurant News as one of the top 10 brands in what is known as the Restaurant Social Media Index (“RSMI”, http://nrn.com/ meet-restaurant-social-media-index), alongside the likes of much larger and well-established chains like Starbucks and Chipotle. And when it comes to technology, which is a prerequisite to social network citizenship, Red Mango is equally well versed and forward thinking. Solutions like a fully integrated cloudbased POS system, a cutting edge digital guest loyalty program, and systems that can profile customer activity across online and offline channels, are all part of the our brand’s DNA. Yes, technically, there currently is an app that bears the Red Mango name, the simple one that was released last year for iPhones and Android devices. But it is really a generic white-label app that Red Mango doesn’t own. This app was developed and is managed by Paytronix, the Massachusetts-based company that runs our guest loyalty programs for Red Mango as well as other multi-unit retail

chains. Paytronix did this on behalf of us retailers in an effort to make it easier for customers to signup for our loyalty programs. But during the past 5 years, which was a time when the app industry grew exponentially, I intentionally held back on developing a custom Red Mango app. Customers and franchisees always asked me why I wasn’t developing an app, especially since “everyone else” was doing it. Even my own management team challenged me in the same way. The typical dialogue I had with those who asked me why Red Mango did not yet have an app was actually the only way for me to dissipate the energy, excitement and passively aggressive criticism with which this question was asked. The conversation would go something like this:

Q A Q A Q A Q

: Hey Dan, why don’t we have a Red Mango app? Everyone else has one. : Oh yea, that would be cool. But what would you want our app to do? : Well, you know, things… like finding a Red Mango store… and stuff. : Hmm, okay. But can’t you use Google, Foursquare or Yelp for that? Oh, and our mobileoptimized website does the same thing. : Well, yea, but, um, the app could also list store hours and stuff. : Just like Google, Foursquare, Yelp and our own website, right? : Okay. Well, our app could let people post reviews about our stores.

Dan Kim

A Q A Q A

: Just like Google, Foursquare and Yelp? : Fine. But then our app could also let our customers take pictures of their yogurt and share them with their friends. : Kind of like what they already do on Twitter, Facebook and Instagram? : Okay, fine. But listen, what our app could really do is allow our customers to place and even pay for orders with their phones! How cool is that? : Yea, that’s a cool feature. But who would make sure that the app could properly communicate with our POS system and credit card processors, and ensure that the transaction is PCI compliant? Is the ops team prepared for fulfilling digital orders? Can’t we team up with Grubhub or Seamless to do a lot of the same thing?

This real-life transcript honestly represents the hundreds of conversations I’ve had with people who wanted Red Mango to have a Red Mango app for no reason other than for wanting Red Mango to have an app so that they could say Red Mango had an app. Even though I appreciated their brand enthusiasm, the likely possibility that their perceived need for an app might well be driven by ego or envy was reason enough for me not to develop an app without better reasons.

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Dan Kim, Red Mango

It wasn’t until the beginning of this year that I started to develop a proprietary Red Mango app. The decision to do so made many of my colleagues very happy and excited, but they also did not understand why we had waited so long. Some even said that we were too late, and that because of this delay, our customers would not be interested or impressed with a Red Mango app. Some even lost interest in having an app, mainly because apps are so common these days. The proprietary Red Mango app that I’ve been working on over the past 5 months is scheduled to be released in a month or so after the time of this writing. And despite the fact that we may be late to the game, I believe the reasons why we waited as long as we did will be the same reasons why our app will be successful and well received by our guests and fans. I can summarize these reasons with three bits of advice:

Tip #1: Clearly define an important yet unique purpose for the app. Identify the specific needs that the app will meet. Most companies develop custom apps to make things easier for their customers, or to improve user experiences with their brands. Make sure that the customer need-states that your app will fulfill are not being met by more popular apps to which people are already deeply attached -- such as Instagram and Foursquare. The Red Mango app I’ve been working on has been designed to provide basic information like store locations, menu and hours. But the reason why we developed the app has nothing to do with these features; rather, the most compelling reason we built the app was to solve for an unmet need which we recently learned is incredibly important to our guests, which is real-time information about the frozen yogurt flavors that are currently available at any Red Mango store at any given moment. I am not aware of any existing third-party solution that could process and facilitate this type of information for our

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stores, so we built the solution ourselves as an important and unique feature of our app that we know our guests will find valuable.

Tip #2: Make sure that there is complete organizational alignment, support for and understanding of your app. Meet with all of your company’s functional groups to make sure that your team understands the purpose of the app, and how it will benefit your brand and customers. Confirm that your company can deliver on all of the app features, especially if they require participation and support from different parts of your organization. The last thing you want to do is build an app that promises to do things that your company is not prepared to or willing to do. This could happen if only one functional group (such as a Marketing or Information Technology team, for example) designs and develops the app from start to finish without involvement from other parts of the organization that need to be involved in order to enable all of the app’s features. One of the things we wanted the Red Mango app to do is process orders and payments for delivery or catering transactions. Although it

would have been fairly straightforward to program our app to offer this feature, we knew that our delivery and catering infrastructure would not be ready until the end of this year and as a result, decided to defer the integration of this specific feature into a future app update.

Tip #3: Make sure that your company is prepared to keep the app fresh and current. Smartphone apps are living and dynamic digital personifications of your brand, so one of the worst things a company can do is treat them like one-time projects with static start and end dates. Keeping an app dated and stale will not only guarantee its obsolescence, but will also cause unnecessary confusion. Before we started to build the Red Mango app, we wanted to make sure that important information about Red Mango stores – such as store hours, menu, and contact information – would be consistent across all of our digital media channels. The last thing we wanted was store-level information to be inconsistent across our website, mobile app, and third-party sites, so we had to create a companywide information system that would synchronize all of this data in one location.


We had to create something that would allow us to enter store information into one central database that could automatically propagate all other databases; any other method that would require the active management of disparate databases would have been extremely difficult to maintain, which was a clear threat to the integrity and usefulness of our app. As you can see, developing an app involves much more that deciding whether or not you want one and then coming up with a list of what you want the app to do. It requires a thoughtful and thorough analysis of how your business currently meets the various need-states of your customers, if and how those need-states could be better met, and then figuring out whether or not a digital app can help you do that in a unique and compelling way. For companies like restaurants where real-time information is important to customers, a mobile app makes a lot of sense, but only if that information is not already being delivered by more popular services. For others like electronics retailers, the only reason for an app may be to replicate their web store experiences into a mobile-friendly environment -- in such cases, an app is not really an option but rather a necessary part of doing business competitively. But there are many other businesses where an app may not make a lot of sense, and where developing one just to have one would be a waste of money and time. Take a watch repair service. The owner of this repair shop may be tempted to build an app that tells people where his store is located, what he’s good at doing, and what customers say about his work. But this kind of information can be found on popular and more trustworthy platforms such as Yelp or Angie’s List, which would render a custom app to useless. So before you embark on your journey to develop an app for your business, be sure to look at it from all angles, especially from the perspective of your customers. And if after doing so, you firmly believe your company (or your franchise system) really does need a mobile app, go ahead

and unleash your inner Apple (or Android) and repeatedly ask those corporate decision makers, “why we don’t have an app, even though everyone else has one”, until they finally deliver.

fb.com/frozenyogurt.

Dan Kim is the Founder and Chief Concept Officer of Red Mango, a leading national frozen yogurt and smoothie franchise with over 200 units. He regularly engages with his 1.7+ million followers with his Twitter accounts @ dankimredmango and @redmango, and has a combined Facebook fan base of nearly one million fans for /redmango and /dankimredmango. He is also active on his personal Facebook account,

regularly engages with his 1.7+ million

Dan Kim is the Founder and Chief Concept Officer of Red Mango, a leading national frozen yogurt and smoothie franchise with over 200 units. He followers with his Twitter accounts @ dankimredmango and @redmango, and has a combined Facebook fan base of nearly one million fans for /redmango and /dankimredmango. He is also active on his personal Facebook account, fb.com/frozenyogurt. For more information: Web:

www.redmangousa.com

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ex per t advice

Tim Miller, Certified Franchise Expert, Location3 Media

The Digital Market

“ A dvertisin g for the M ulti - S creen

Google’s 2011 eBook Winning at the Zero Moment of Truth has been downloaded over 200,000 times to date. While brands of all shapes and sizes around the globe are embracing this as the critical moment for strengthening their bottom lines, most brand marketers are left to wonder just how to get started? Franchising USA


ting Brief

creen W orld ”

Here’s the good news; Google followed up their 2011 version with the ZMOT Handbook, providing very practical tips on how to apply these principles to your strategy. So what’s the bad news? For several franchise brands, these principles haven’t been implemented yet. However, this bit of bad news also spells opportunity and a win-win for you and the right marketing partner, to offer a positive perspective. Google talks a lot about the multi-screen world we live in today; their largest move to date supporting this shift is about to come down when Enhanced Campaigns takes full effect across AdWords on July 22nd. This migration of desktop and mobile campaigns from the current capabilities, in theory, is designed to make it easier for marketers to reach their customers across all devices. What do I mean by this? For franchise and multi-unit brands, the local consumer path to purchase within today’s multiscreen world takes on a set of challenges of their own. This brings up the obvious “national vs. local” conversation, and what is required of franchise systems in finding the right balance between the two. It’s probably safe to assume no one needs any more education around the importance of a brand’s findability and performance at the local store level. This message has been engrained in the minds of all parties involved. The same could be said regarding a true mobile strategy. So why do most franchise systems in high growth mode continue to miss the mark? Budget deficiencies? Lack of a national ad fund? Both? Perhaps this question should be placed directly on the desk of every CFO

“It’s critical to implement these strategies in order to remain competitive, as well as to both retain and grow market share. We all have a bottom line to manage, and I promise you I understand that. However, the franchisee is the one who has the most at stake here.” and CEO of franchise systems under 200 active units who fall into this bucket. It’s critical to implement these strategies in order to remain competitive, as well as to both retain and grow market share. We all have a bottom line to manage, and I promise you I understand that. However, the franchisee is the one who has the most at stake here. At risk of over-plugging my friends in Mountain View, a recent case study regarding the way in which American Apparel increased mobile conversions by 100% with their early upgrade to Enhanced Campaigns should frankly speak for itself. The summer season is upon us, ripe for outdoor activities, active wear and sports & fitness business unit growth. I see plenty of opportunities amid the multi-screen channels for the sports & fitness vertical specifically. Some strong up-and-comers such as Orange Theory Fitness are really embracing this philosophy, while enjoying some monstrous growth at the same time. Meanwhile, more established and recognizable brands such as Gold’s Gym are moving in the right direction of achieving similar or better results. Regardless of your industry or vertical your customers, both current and future - are searching for you, and it’s not via the hard copy of Yellowbook.

Tim Miller

The data is to support this is virtually everywhere. Mobile, local and social consumer engagement continues to climb at an astronomical rate. The old days of remaining on the sidelines while your competition gobbles up new customer conversions is over. Get in the game. Your franchisees will thank you, I promise. Tim Miller is a Certified Franchise Executive and the Director of Sales and Business Development for Location3 Media, a digital marketing partner built to increase your brand’s findability and performance across all digital platforms. Phone: 720.763.3150 Email: tmiller@location3.com Web: www.location3.com

Franchising USA

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women in f ra nchising

Nancy Bigley, Bottle & Bottega

N ancy B i g ley :

Building a Brand with Bottle & Bottega As with most of life’s great adventures, Nancy Bigley’s successful career in franchising started by accident. Nearly twenty years ago, with a BS in Business Management from California Polytechnic University, Bigley was working in the retail sector. She had never even heard of franchising, but through a friend she got connected with American Leak Detection Inc. in California, and thus began Bigley’s introduction to franchising. In the twelve years that Nancy worked with American Leak Detection Inc., she saw the company grow from 45 to 175 franchise locations. At that point Bigley, in the role of Vice President, was firmly hooked on the franchise model as a successful means of doing business. “I loved the business model. I loved working with franchisees, and helping other people become successful.” Following her successful start in franchising with American Leak Detection Inc., Bigley went on to work with Mr. Electric, one of the Dwyer Group’s very successful brands. She later became a Senior Director with Dunkin’ Brands. By any measure, Bigley had a very successful franchising career. And then things got really interesting! In 2010, Bigley connected with Stephanie

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King-Myers, who was the owner of Bottle & Bottega, a studio that combines art and wine in a fun, social atmosphere. The Chicago business had blossomed, and Bigley recognized immediately the opportunity and potential for a successful franchise system. Joining the Bottle & Bottega team as Co-Owner and CEO in 2011, Bigley and King-Myers got right to work on establishing their franchise model and systems, in preparation for franchisees across the nation to take on the challenge of opening their own Bottle & Bottega location. 2011 was an exciting year for Bottle & Bottega, as they worked on their infrastructure, strategy, and branding. Bigley and King-Myers put a lot of energy

into testing the model. It was important for them, as Bigley says, “to find out who we were” as a franchise. With their official launch out of the way, Bottle & Bottega was on its way to becoming one of the hottest new franchise opportunities available. Currently there are eight Bottle & Bottega locations in four states, with many opportunities available for the brand to grow and expand into a wider range of territories from coast to coast. The concept is elegant in its simplicity. Bottle & Bottega sets the stage for creativity, laughter, and fun by offering a location for clients to create art, have a drink, and enjoy time with friends, family, co-workers, or couples. Clients select the event they would like to attend, and then


an onsite artist guides them through a project, while they enjoy a glass of wine in a low-key, fun atmosphere. Private parties and corporate events can also be booked. Bottle & Bottega franchisees are, like Bigley and King-Myers, outgoing individuals with proven success in the business world. Franchisees run the dayto-day operations of the studio, so solid management, marketing, and sales skills are all keys to a successful location. Most importantly, franchisees provide a great experience for clients in a fun, friendly and chic location. It should also be noted, that no previous artistic skill or experience is required on the part of the franchisee. There are currently incentives available for new Bottle & Bottega franchisees, and a military discount is offered. Bigley is excited by the growth of Bottle & Bottega, and very thankful for the people who have helped her along the way, not only with this new brand, but through her entire franchising career. When asked about the people who have had the greatest impact on her career she replies by saying, “There are too many too count,” and speaks with great fondness about the

community that exists in the franchising world, listing each of her previous bosses as mentors and influencers who allowed her to run with her ideas. She learned along the way about the importance of building trust-based relationships with franchisees. From vendors, she also learned a great deal about the operational side of franchising. That industry community has been a huge support throughout the process of building the Bottle & Bottega brand. Bigley has reached out to a number of friends for input and advice, strategy, and sharing of ideas. All of her various networks, as well

as the IFA, have been hugely supportive. In recognition of what the franchising community has given to her throughout her career, Bigley also contributes back to the community when she can. She has been involved in the IFA since 1998 and currently serves on the Membership Committee, Women’s Franchise Committee and as an IFA Ambassador and Mentor. Previously, Bigley served on the Technology Committee, 50th Anniversary Task Force, Convention Committee, and was Vice Chair of the Membership Committee. Bigley also eagerly shares her best advice

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women in f ra nchising

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womem in f ra nchising

Nancy Bigley, Bottle & Bottega

with new franchisees. She speaks again about the importance of the trust-based relationship between a franchisor and franchisee, and about getting to know your franchisor really well ahead of time. That way you can be sure that the franchisor is going to follow through on their end of the deal. “You should never have to go back to your contract,” says Bigley. Bigley admits that while franchising has been a great fit for her, it is not for everyone, so you need to sort that out ahead of time, and be sure that you are prepared to work within the structure of the particular franchise brand that you are signing with. Once you move forward and join a franchise system, Bigley reiterates the importance of the franchise community, and the need to get involved. Being based in California while Bottle & Bottega is headquartered in Chicago presents some logistical challenges for Bigley, but it’s nothing she can’t handle. While growing a company like Bottle & Bottega definitely keeps her busy, she is quick to talk about how much she loves her current role, so much so that she has had to

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“In recognition of what the franchising community has given to her throughout her career, Bigley also contributes back to the community when she can.” “be intentional about planning fun stuff” either at home in California, or when she is in Chicago. She puts the burden of scheduling her down-time on her family and friends, and says that her husband is a huge help in keeping her balanced. Bigley is looking forward to continuing to build the Bottle & Bottega brand over the next number of years. They are committed to slow and steady growth in key markets, and eventually expanding into the international market. Bottle & Bottega is very careful in their franchisee selection process, wanting to ensure that they select franchisees who are the right fit. So far that has proven to be a good strategy, and Bigley says one of her favourite parts of her job is writing personal notes each month to franchisees who have reached their targets. The Bottle & Bottega brand seems

especially well-suited to female franchisees and has been a good fit for the women who have joined the company. Part of the reason that Bigley and KingMyers felt it was important to franchise their brand was based on their larger vision of creating an amazing opportunity for other women to join a business that was fun, interesting, and successful. As the brand continues its steady and successful growth phase, Bigley talks about their desire to bring art into different communities, in a way that is accessible and fun. And Bigley will be there, along with King-Myers, to see it happen. “I can’t wait,” she says, “to get Bottle & Bottega into so many other markets!” For More Information: Phone: 760-322-9353 Email: nancy@bottleandbottega.com Web: www.bottleandbottega.com


feature

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Veterans in Franchising www.franchisingusamagazine.com

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Liberty for Veteran Franchisees

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V eterans in F ranchisin g S upplement J uly 2 0 1 3 Our Veterans in Franchising special supplement has become a regular feature of Franchising USA. To share your story in the August issue, please contact Jenn Dean, Senior Sales Executive Phone: 250-590-7116 Email: jenn@cgbpublishing.com

Contents 38 Liberty for Veteran Franchisees Liberty Tax 40 VetFran: Meeting the Needs of Today’s Veterans Gordon Logan, Sport Clips

46 VetFran Joins SBA Administrator Mills to Announce Veteran Lending Initiative VetFran 48 Serving in the Military Saved My Life Greg Tanner, Aaron’s

42 Financing Your Start-Up Business or Franchise (Part 2) Richard Ashe, Veteran Franchise Centers

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V e t era ns i n Fra nch isi ng

L i b ert y Ta x

Liberty for Veteran Fran It all started several years ago at a hockey game in Buffalo, NY. The anthem, star spangled banner, and the soldiers. “Wouldn’t it be great if we could help these people who have served our

country,” discussed CEO John Hewitt and Chief Marketing Officer Martha

O’Gorman. Touched by the display the

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pair deemed it a fitting tribute to be able to offer these individuals the opportunity to get into business for themselves. Starting operation in 1997, Liberty Tax has grown from zero locations to 4,500 in a short 16 years; making it the third largest and fasting growing tax preparation franchise. Their plan is “to add several hundred more”, says O’Gorman. CEO John Hewitt is the most experienced CEO in the industry with over 40 years experience in the tax business. “We have a lot of different kinds of people

in our organization. They come from all walks of life,” O’Gorman explains. “We have people with backgrounds with CPAs and accounts, people who have been tax preparers with other major companies, and people who look at the opportunity and see the value and potential in it and understand it’s a good business opportunity.” One factor that makes Liberty Tax so appealing is their unconventional marketing. Where most tax preparation business spend millions on television


“If you want to get into a business where you can make money by helping people and changing their lives, this is it.”

nchisees advertising and media that is “generally not effective anymore,” O’Gorman explains how Liberty Tax put their feet on the street to connect with the community. Known for their Lady Liberty wavers, their number one way of generating new customers, Liberty Tax doesn’t wait for customers to come to them, they go to the customers. Delivering coupons and baked goods to neighboring companies and attending community events is their method of a high profile, low cost way of doing business.

Another asset of Liberty Tax is their nimbleness. Referring to their biggest competitor as “the 800lbs gorilla,” O’Gorman says the competition’s size enables them to change as quickly as Liberty can.

decisions as to how many stores to get, where to put the stores and how much advertising money they’re going to need,” says O’Gorman. “Each person is different so we try to customize our packages based upon the needs of the person.”

Working alongside the International Franchise Association with their VetFran program, Liberty Tax offers special incentives to veterans to get them into the system. Designing specific packages and programs to fit their needs, offers include various grand opening advertising, start-up compensation, help with leasing equipment, signage and office space.

Since 1997 U.S. Navy retiree Chief of Boat John Taylor and his wife have owned and operated two Liberty Tax franchise offices in Virginia Beach.

“When in military, part of the drill is following orders and rules, the franchise organization is similar in that we have a prescribed method of doing business,” explains O’Gorman. “Somebody who understands the value of following a system and understands that rules are there for a reason tend to make much better business owners than somebody who is very entrepreneurial in nature and really just wants to do their own thing.” In a franchise where 20 percent of their basis is vets, Liberty Tax offers a deal with their start-up capital. Where the start-up costs for a regular prospect ranges from $56,800 to $69,900 in the US, Liberty Tax helps veterans with the capital needed through leases and promotional programs. “Our goal is to help them [veterans] evaluate their goals, make the right

“If you want to get into a business where you can make money by helping people and changing their lives, this is it,” says Taylor. Becoming a Liberty Tax franchisee is rewarding opportunity. The value of being a seasonal business means you work hard for four months but it offers “a great quality of life,” explains O’Gorman. In the offseason franchisees have the opportunity to spend time with family, pursue other interests, hobbies or businesses. “It’s lucrative to be making a years worth of income in a four month period of time.” A proud sponsor of the IFA Vet Program, Liberty Tax was named a “military friendly franchise” by G.I. Jobs and Vetrepreneur Magazine in 2011. Liberty Tax appeared on the Forbes “Top 20 Franchises for the Buck” list in 2012, and USA Today listed Liberty Tax in their “Top Franchises for Military Veterans” list posted June 2013. For more information: Web:

www.libertytaxfranchise.com

“When in military, part of the drill is following orders and following rules and the franchise organization is similar in that we have a prescribed method of doing business.” Franchising USA

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V e t era ns i n Fra nch isi ng

Gordon Loga n, CEO a nd fou nder, Spor t Clips

VetFran:

M eetin g the needs of today ’ s veterans “Today almost 600 franchisors offer incentives to Veterans to help them get started in a business of their own under the VetFran program.” The 1960s were great in some ways and chaotic in others. We were embroiled in a no-win conflict in Viet Nam, and it was no wonder many young men and women weren’t anxious to go halfway around the world to fight an enemy we couldn’t tell from our friends. Yet many answered the call and went to fight for their country, many if not most drafted and many volunteers. After answering the call of duty, returning soldiers were often not treated well, a

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memory those Veterans carry with them to this day. The past 10+ years we have once again been engaged in conflicts against elusive enemies who have been able to inflict serious damage to our troops with relatively primitive weapons and devices. Yet this time our soldiers are all volunteers, who willingly lay their lives on the line for their country. And thankfully, this time the country is grateful for their and their families’ sacrifices. Those of us who benefit from their devotion to duty have contributed millions to various charities that have been established to help ease their burden, yet there remains much to do. One of the most difficult challenges they face is the transition from the military to civilian careers. The IFA has had a Veterans outreach program for over 20 years, thanks to the efforts of Don Dwyer. Recently, this initiative has been re-vitalized, and much

credit must go to his daughter Dina Dwyer Owens and Mary Kennedy Thompson, who is a Marine Veteran and President of one of the Dwyer Group family of franchises. Today almost 600 franchisors offer incentives to Veterans to help them get started in a business of their own under the VetFran program. And, the IFA Operation Enduring Opportunity has been tremendously successful in helping Veterans to make their career transition….. over 65,000 Veterans have joined franchises in various capacities, including 5,000 or so who are now franchisees. Many of the franchisors who are involved with these efforts are Veterans themselves, and it has been documented that Veterans are more likely to hire Veterans. Yet many are not Veterans, but feel the calling to reach out and give back to those who have given so much for us. Several franchises now have Veterans Affairs Officers (or similar titles) whose primary responsibility is to liaison with Veterans and Veterans organizations like the VFW and Wounded Warriors Family Support. Two of the largest corporate sponsors of the VFW Foundation are a franchisor and its franchises (Sport Clips), and a group of franchisees of Burger King who have


raised hundreds of thousands of dollars to support Veterans causes. There are many other examples of those in the franchise community who are supporting Veterans causes. The needs of our Veterans are shifting: More and more troops are brought home from overseas, and millions are scheduled to be separated from the service in the next few years. The pressing need over the next few years are 1) supporting our Wounded Warriors who are struggling with not only their transition from military to civilian careers but are also having to deal with serious injuries of all types they suffered while serving, and 2) providing opportunities for integrating these brave troops back into civilian careers. Scholarship programs to supplement the

GI Bill are needed to ensure that Veterans are able to enter into career fields with long-term opportunities, which may well include a career in franchising. Both areas need continuing and increased support from the franchise community, which has indicated by its actions that we are ready to answer these needs. If you are (or know of) a Veteran who may be interested in pursuing a career in franchising, go to (or encourage them to go to) the VetFran website (www.VetFran.org)

to learn more about the opportunities and support provided by IFA members who are dedicated to helping our Vets. By taking advantage of the Mentor Program, they can be paired with an experienced VetFran franchisor executive who can help guide them through the process of learning about franchising and making an informed decision about their future. Our Vets have given us so much, it’s our responsibility to do what we can to say “Thank you!� to such an amazing group of men and women.

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V e t era ns i n Fra nch isi ng

Richa rd Ashe, President, Vetera n Fra nchise Center s LLC

F IN A NCING Y O U R S TA RT- U P B U S INE S S O R F R A NCHI S E BEFORE Y OU RUN OFF TO T H E BANK . . . Before going to ask for a loan you should know a couple of things: 1. You need good credit. A credit score of 700 is the magic number to be considered for a loan. Depending on how long and how well you know your banker may help you get away with a 650. 2. If you have some smudges on your credit report the bank will want to see that you’re current on all your debt, that any derogatory marks on your credit report from the past are at least a couple of years old and that you have a reasonable explanation as to what happened. If you have a bankruptcy it must be 4 - 6 years old, no late payments or charge-offs or collections since the date of your filing. 3. The bank is going to want to see an equity injection of 30%. If it takes $100,000 to start your business, you will need to come with $30,000 and request a loan for $70,000.

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4. You will need collateral to secure the loan in most cases. There are some credit based loans under $50,000 that do not require collateral. If you are looking for a larger loan and are a start up business, you generally will need some collateral. Weak collateral can be mitigated by a co-signer willing to guarantee the loan. Existing businesses with positive cash flow may be eligible for a loan without collateral or co-signer. Even when you use an SBA lender and Uncle Sam is guaranteeing the loan, it’s the banks money and they want to know that you have assets for collateral so they can get paid even if your business should crash and burn. The best form of collateral is real estate. You will be required to pledge your assets to secure the loan. Business assets, autos, inventory and whatever is purchased with loan proceeds can also be used to secure the loan. 5. You need a business plan - You’ve reviewed your credit, identified

Richard Ashe

collateral and all is good. Now you need to take your idea and bring it to life by turning it into a plan that you can present to the lender. You will not get any money without a detailed business plan that will demonstrate how you will take the money you get and turn it into more money for your investors.

WHAT YOUR INVESTORS WANT TO KNOW First, you have some decisions to make. Are you starting a business from scratch, buying an existing business or buying a franchise. Once you’ve decided the type of business, you need to decide on a structure. The structure you choose will have both legal ad tax implications. For example a Corporation (C Corp)


is much more complex than a Limited Liability Company, (LLC). LLC’s provide the limited liability features of a corporation but with much fewer tax implications. Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. Members report profits and losses on their personal federal tax returns, just like the owners of a partnership would. Other business structures include Cooperative, Partnership, S Corporation, Sole Proprietorship. It is important to research and understand which business structure is best for the type of business your planning. Now that you’ve decided type of business and the structure there’s lots of paperwork. You must make sure your business is in compliance with federal, state and city regulations, register your business, get tax id, obtain any necessary licenses and permits and prepare your business plan to take to your investors. Your business plan should include the following sections: 1. Executive Summary: A one-page summary of your business plan. There are no second chances to make a first impression and I think this is the most important part of a business plan. The Executive Summary is your opening pitch and it’s usually the only section investors will read to determine if they should even spend the time to have a conversation with you. The executive summary should focus on what problem in the market your start-up solves, why it represents a real opportunity, and what value it represents for an investor. 2. Product and/or services: What are you selling and what is your “mojo?” How is your product different, better, and be effective in the market? 3. Market analysis: This should be hard data points demonstrating that there is a real market for your product or service, that interest in your industry/product/

service is growing, and that you’re capable of gaining a sufficient market share to become profitable. 4. Strategy: Here you must clearly demonstrate financially how you will reach your milestones. If you can show investors that you know what you’re doing by detailing how you’ll reach key financial metrics that are realistic only then will they open their wallets. 5. Management team: This is your opportunity to sell yourself and any partners. The investors want to know that you have the skill and experience to run the business. 6. Financial projections: Before you can get the money you have to show them the money. This is a spreadsheet with detailed key calculations such as per unit economics, sales metrics, profit and loss, and cash flow. It needs to show time to revenue, expected growth, and where the money will come from to repay your loan.

PURCHASING A FRANCHISE? You still need a business plan: The good news is much of the information needed for the business plan for a franchise business can be found in the Franchise Disclosure Document (FDD). If the

franchise has a successful track record of franchise ownership most of the financial details on earnings, costs, and other factors likely to affect future financial performance needed buy the lender can be found in Item19. You can also leverage the knowledge and experiences of existing franchisees for what’s needed to present to the bank. In some cases franchises are already SBA Approved. The SBA-approved franchises are select business opportunities whose agreements have been accepted by the SBA. When it comes to securing an SBA-backed loan, those applying for an approved-franchise have it easier and quicker. Applicants for SBA-approved franchises benefit from a streamlined review process that expedites their loan application. Because the particular franchise is pre-approved, the loan review is less complex and focuses on specific aspects of your business plan. If the franchise is not SBA Approved, it is not a negative thing. There are reasons franchisors do not appear on the list. If they are not on the list the SBA and commercial lender may need to review the franchise and its financial information more closely, which of course will add more time to process and approve the request.

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V e t era ns i n Fra nch isi ng

Richa rd Ashe, President, Vetera n Fra nchise Center s LLC

EMERGING FUNDING ALTERNATIVES Crowdfunding, which was signed into law by President Obama in April 2012. leverages today’s technology and social media and enables you to take your venture directly to the people to raise capital to start your business. Several companies have sprung to life that offer you the opportunity to create your pitch and broadcast it through various social media channels. Generally, those who contribute to your venture do so because they want to contribute to but do not receive equity in the business. Crowdfunding can also refer to the funding of a company by selling small amounts of equity to many investors. I recommend using Crowdfunding to raise additional operating capital, but not as your initial stake. The funds raised take the form of income and are taxed. Make sure you consult a CPA when you structure your business if you are considering this option.

“When it comes to securing an SBA-backed loan, those applying for an approved-franchise have it easier and quicker. Applicants for SBAapproved franchises benefit from a streamlined review process that expedites their loan application.” this: Banks don’t lend money to help you achieve your dreams, they lend money to help achieve their dreams of making more money from the money they invest. It takes a lot of determination, hard work, research and perseverance to get your business started, finding money is one of the most challenging processes. Even when you’ve done all your homework the bank may still say no. Don’t be discouraged, if you want it and believe in it, and are confident in its success, explore all you options and continue to move forward to the next, and the next until you find the solution that will help you achieve your dream. “A dream doesn’t become reality through magic; it takes sweat, determination and hard work.” General Colin Powell

THE BOTTOM LINE

For lots of free information and resources to get your business launched go to:

Whichever route you decide to go to get financing for your business, remember

http://www.sba.gov/category/navigationstructure/loans-grants

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About Veteran Franchise Centers Veteran Franchise Centers’ sole mission is to provide free help and counseling to veterans, spouses and their direct family members who are seeking franchise ownership. Through our nationwide network of veteran-operated offices and our deep relationship with the franchise community, we can help find out which franchise opportunity is best suited for your goals and lifestyle! As part of our consulting process, we will provide you with free franchise education, veteran financing resources, and expert


assistance. Your Veteran Franchise Centers consultant will provide you with:

• Expert advice that is 100% free.

• Determine the best business fit for your unique goals and skills.

Richard Ashe served in the Marine Corps from 1976 to 1983 in the infantry and then as part of a joint Marine, Navy, and Air Force top secret intelligence project. After serving in the Marines, he worked as an electronics technician for a communications company. Over the next 30 years, he worked his way through the civilian ranks to the position of vice president of global marketing for an international software company and received his degree in marketing.

• Basic financing information, finance options and resources available.

During his civilian career, Ashe has worked for and helped companies

• Understanding the pros and cons of owning a franchise business. • Learning about the business of franchising. • Learning about different levels of franchises available. • “Free tools” to help you in your franchise evaluation process.

such as Xerox, Compaq, and HewlettPackard expand or start new businesses. He also participated in four software startups and started two businesses on his own – a computer training firm, ComputerTutor, and a network consulting firm, LANDesign. Ashe is a Certified Franchise Consultant and a member of the Texas Veterans Chamber of Commerce. He serves on the VetFran committee. For More Information: Phone: Email: Web:

713-849-9642 rich@ VeteranFranchiseCenters.com veteranfranchisecenters.com

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VetFran Joins SBA Administrator Mills to Announce Veteran Lending Initiative The Small Business Administration (SBA) recently announced the Veteran Pledge Initiative. The initiative is a commitment by top SBA national, regional and community lenders to collectively increase their lending activity to veterans by five percent per year for the next five years.

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“The goal of this initiative is to close the lending gap, a problem which is preventing many otherwise worthy veterans from becoming franchisees and leaders in the civilian economy.”

Joe Lindenmayer with past Chairman of the National Association of Development Companies (NADCO) Chairman Scott Davis, President & CEO of Mountain West Small Business Finance and Charlie Cleary of Self-Help Ventures, a leading Certified Development Company (CDC) based in Durham, NC. The nation’s CDCs delivered 10% of their $6 billion in loans to veterans in 2012 and pledged to increase that volume 5% per year for the next five years.

VetFran Committee Chair Joe Lindenmayer of TSS Photography and VetFran Committee member Rich Bradshaw of TD Bank joined the SBA’s Administrator Karen Mills and representatives of the SBA lending community, the U.S. Army, and transitioning service members interested in small business ownership at Ft. Bragg. VetFran was invited to speak on behalf of existing and prospective veteran franchise owners as well as franchisors eager to add veterans to their systems. In his remarks during the announcement, Joe Lindenmayer expressed “Today, VetFran boasts a record 579 franchise companies offering financial incentives, training and mentoring to veterans

interested in franchise ownership and there are no shortage of veterans interested in franchising, with the VetFran Directory receiving over 44,000 hits a month. Where the equation all too often breaks down is access to credit. The goal of this initiative is to close the lending gap, a problem which is preventing many otherwise worthy veterans from becoming franchisees and leaders in the civilian economy.” With the support of SBA’s top 20 national lending partners, and approximately 100 additional regional and community lending partners across the United States, SBA expects to assist an additional 2,000 veterans obtain loans to start or expand small businesses by increasing lending

The initiative complements IFA’s access to credit campaign including Small Business Lending Summits in 2011 and 2012. Rich Bradshaw, the head of SBA lending at TD Bank, said franchises are an especially popular choice for veterans and that most of the franchise loans TD expects to make as part of the initiative will be under $150,000. Veterans have a proven track record in franchising, with one in seven U.S. franchise businesses being veteran-owned. Lindenmayer said “As a franchisor, Chair of the VetFran Committee and most of all as a proud Marine veteran, I commend the SBA, and its lending partners for stepping in to fill this void and provide essential financing”.

by $475 million over the next five years. This equals a five percent increase above historic veteran lending activity by the SBA. “Our service men and women have made incalculable contributions and sacrifices for our country, and supporting them as they pursue their dreams to start or grow their own business is one of SBA’s highest priorities”said SBA Administrator Karen Mills, a consistent VetFran supporter. “Through this partnership with national lending partners and regional and community lenders across the U.S., we stand ready to serve veteran entrepreneurs with loan-guarantees, entrepreneurial training, and resources that are critical tools to help them start businesses, drive the local economy and create jobs for themselves and their communities.” For More Information: Web: www.vetfran.com

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V e t era ns i n Fra nch isi ng

G reg Ta nner, N ational Director – Fra nchising, A a ron’s

Serving in the Military Saved My Life lingerie. But, I was proud to serve in the Army in the military police. I learned—and you might say the hard way—discipline, chain of command, systems, leadership, accountability, honor and integrity.

Greg Tanner

When I graduated from high school, I was full of myself: headstrong, fearless and a maverick. I was ambitious, too, but I didn’t know where to apply my energies. I had no plans. Then Uncle Sam sent me a draft notice. It was the height of the Vietnam War. Our country was coming apart. Good people were questioning our role in Southeast Asia—angry at the military, rebelling against authority, and burning

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I’ve been in franchising for more than 40 years as a franchisor, franchisee and franchise development executive. I have a beautiful wife of 45 years, three grown children, five grandchildren, a spacious house on a golf course, a condo on the beach and a fulfilling job. Everything I have I owe to my military service. The military gave me the skills to succeed. However, when I got out, I remember service men and women coming home to a thankless nation and hostile mobs. There were no respectful crowds cheering and applauding at airports. There were no “Welcome Home” banners across driveways. And, there were no organizations like Buy A Soldier Breakfast to show support for our troops. Today, our country appreciates that the military is made up of patriotic men and women who are doing their jobs to protect our freedom. You don’t have to support war to support our troops. I’m proud to say that the International Franchise Association (IFA) is out front opening doors for veterans in their quest to find employment in the civilian workforce. That’s why with the endorsement of Aaron’s EVP Franchising Todd Evans, I chose to serve on the IFA’s VetFran

Committee. It’s my opportunity to give back to the franchise industry and to thank our brave men and women for their duty and courage. Since I became a member of the committee in 2011, I have met many dedicated people, and we have accomplished a great deal. In November 2011, the franchise community under the leadership of Beth Solomon, then VP Strategic Initiatives & Industry Relations for the IFA, introduced Operation Enduring Opportunity (OEO) with the goal of recruiting and hiring as franchise owners 75,000 military veterans and spouses and 5,000 wounded warriors by 2014. Where else are we going to find individuals who were willing to take a bullet for their last employer? In Atlanta, we assembled a team of franchisors and franchisees and helped launch OEO November 10 from the steps of the Georgia State Capitol. Our media coverage was extraordinary reaching more than 3.3 million readers and viewers throughout North Georgia. On November 21, 2011, I was invited to our nation’s capital to witness President Obama sign the American Jobs Act that offers tax credits to businesses that hire veterans. I was the only franchisor who attended the White House signing, and I had an opportunity to meet Vice President Biden. I knew 2012 would be a busy year after I was named one of the Top 20 People


“When you raise your hand to serve, you also have to do the work. And when it comes to our veterans, I can’t think of a more worthy cause.”

to Watch by Franchise Times Magazine. In February, I participated on the IFA’s Panel of the Pros at its Florida convention. On March 28, I was in New York City aboard the USS Intrepid for The Today Show’s “Hiring Our Heroes” initiative and met with New York Mayor Michael Bloomberg, Dr. Jill Biden of the White House Joining Forces effort, and Medal of Honor recipient and Marine veteran, Dakota Meyer. I was back in Washington, D.C. at the White House April 17, to lobby for Hiring Our Heroes on behalf of the rent-to-own industry. On September 10, I was in Washington again to attend the IFA’s Public Affairs Conference, where our “Lady Liberty” video won the “Franchising Votes” award for best Public Service Announcement. On November 8, we returned to the Georgia State Capitol to update the community on the progress of Operation Enduring Opportunity. Less than a week later on November 14, I represented Aaron’s in Washington as a finalist at the U.S. Chamber of Commerce 2nd Annual Hiring Our Heroes Awards gala. As you can see, I’ve spent a lot of time

in Washington. On December 10, I was invited by the IFA to attend the Ninth Annual Financial Services “Good Scout” Award ceremony.

successful endeavor, it’s more about

This year I intend to be even more committed to help the IFA reach its OEO targets. Along the way, recognition is always welcomed. At the IFA’s annual convention in Las Vegas in February, I was acknowledged for the good work we are doing. In April, I was back in Las Vegas for the Franchise Times Franchise Finance & Growth Conference enlisting support from franchisors and vendors for Operation Enduring Opportunity.

to serve, you also have to do the work.

the “we” getting the job done than the

individual contribution. The point I want to make is that when you raise your hand

And when it comes to our veterans, I can’t think of a more worthy cause.

Of course there is much more work to

be done—more hours, miles and smiles. I’m certain that under the leadership

of my friend and VetFran Committee

Chair, Joe Lindenmayer, President of TSS Photography, and IFA Senior Manager Josh Merin, Research & Strategic

In Atlanta on May 1, I was the first-ever interviewee on the “Sensible Franchising” radio program hosted by franchiseindustry veteran Stan Friedman, CFE and President of FRM Solutions, and aired from the EpiCenter—the home of the Entrepreneurship Hall of Fame. Less than a week later, I was the guest interviewee of Mitch Schlimer, franchise leader and founder of the Entrepreneurship Hall of Fame, on his “Let’s Talk Business” radio program.

Initiatives, we will reach our goal. Putting

There are a few more “I’s” in this article than I am accustomed to say. In any

Web:

www.tannerisms.com

www.aarons.com

veterans and their spouses to work in our industry will strengthen our franchise

community and give hardworking, loyal and inspiring veterans the opportunity to enjoy the lifestyle rewards of small

business ownership and to secure their family’s financial future—to live the

American Dream that they have helped to preserve and to protect.

For More Information:

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Franchise Business Review

S pecial R eport : L o w - C o s t F r a n c h i s e s

Today’s Top Opportunities Under 100K

Excerpts from a full report by Franchise Business Review, available at www.franchisebusinessreview.com

Models, Concepts, and Services The low-cost segment has traditionally been very service-oriented because these concepts don’t usually need a big office space, inventory, or other resources that require lots of capital. Service brands like U.S. Lawns, Window Genie, and Weed Man have been on our list of top low-cost franchises for several years. We’re also seeing an increase in the popularity of businesses related to the home, either real estate franchise concepts like Help-U-Sell or companies that offer home services like Budget Blinds. Home healthcare, fitness and recreation, and travel planning all continue to be popular industries for lowcost investments. Food franchises, which typically require a big investment in real estate, equipment, and supplies, don’t usually have much of a presence on our list. However, some mobile food concepts, like Repicci’s Italian Ice and Happy and Healthy Products, fall under the low-cost umbrella and offer franchisees the opportunity to run a food-related business without the large up-front investment. Some higher-investment franchise companies have created low-investment sub-brands to increase the pool of eligible franchisees. Paul Davis Restoration, for example, which requires an average initial investment of approximately $210,000, launched Paul Davis Emergency Services

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several years ago as a low-cost alternative. “Essentially what we did was take one of our service sectors out of our offering and created a franchise model built around it, along with building some very new lean technology with the focus being on high profit, fast cash turnaround, and allowing the business to start out home-based, which we have never done before. It’s gone incredibly well for us and the timing couldn’t have been better,” said Robb King, vice president of operations for Paul Davis. Prospective franchisees may be surprised by the companies and brands that fall under the “low-cost” umbrella—art studios, children’s consignment “parties,” commercial security companies—because they provide niche services that aren’t typically considered in the mainstream definition of “franchise.”

Investment The companies represented in this report have an average initial investment of less than $100,000, but within the different brands, there is great variety. Some opportunities can be started for less than $5,000, while others cost $90,000. In the past few years, franchisors at all levels have taken steps to reduce the financial burden of running a franchise. Some franchisors have reduced their initial franchise fee, and many have taken strides to reduce the cost of opening the business

by eliminating the need for office space and branded car wraps, for example. “In the last couple of years, we have invested heavily in tools that will help franchisees with their technology and keep more profits in their pocket. Above and beyond a basic level of support, we have a very in-depth action plan for virtual support and onsite support that they get on an ongoing basis,” said Ron McCoy, Help-U-Sell’s vice president of business development. “We try to leverage the buying power of the network,” added Paul Davis’s King. “We have vendor relationships that give very healthy discounts to franchisees. And we also allow franchisees to do their shopping at the local level if they can find a better price.” Franchisees must ensure that they have enough liquid capital to run the business in the first six months. Franchisors told us this is sometimes a challenge in the low-cost space because franchisees have just enough cash to fund the initial start-up but not enough cash to cover expenses early on. Signal 88 Security, a commercial security company, offers franchisees a company-branded credit card with a line of credit up to $35,000 (depending on the franchisee’s credit rating) and no interest for the first six months. This provides franchisees with the early cash they need to get the business up and running. Prospective franchisees need to make


absolutely sure that their franchisor is realistic and upfront about expenses involved in the business. People considering any franchise opportunity should ask the franchisor and current franchisees about the company’s costcutting initiatives that directly relate to franchisees and what efforts they’ve made to ensure franchisees are wellcapitalized for start-up and economic ups and downs. The Item 7 in the franchise disclosure documents (FDD) outlines the expenditures needed to establish a business, but all Item 7s are not equal. Some companies will outline the necessary working capital, but others— who might want to keep the stated investment level as low as possible— don’t. Any investor should understand and plan for the fact that it might cost three to four times more to actually run the business than is listed in the Item 7. We also recommend that where possible, all potential franchisees thoroughly review and understand a company’s Item 19, if included, so they have a better idea of what to expect in the way of profitability. Not all franchise companies provide an Item 19 as part of their FDD because

it’s not required, and, like the Item 7, every Item 19 is different, but they can provide invaluable information related to profitability if the franchise company publishes accurate revenue and cost figures. “Candidates today are looking for the Item 19 even more, and if it’s not there, it’s a real red flag,” said FirstLight HomeCare president and CEO Jeff Bevis. It is critical that you truly understand what you’re looking at within the Item 19. It’s up to the franchisor how detailed they

get or which franchisees’ profitability information they include, so you want to make sure that you’re looking at a good representation of all the franchisees and what they earn and spend. Paul Davis Emergency Services offers ongoing financial education—known as “financial roundtables”—to ensure franchisees stay on track to be profitable. “We offer what we call phase training, so as the business matures, we have different levels of training to project what their cost/ profits are going to be,” King said.

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The franchise sector as a whole has faced a difficult few years in terms of financing and accessing capital. Lowercost concepts (those costing less than $50K) were less affected, but the higher end of the low-cost segment (opportunities costing more than $50K) face more lending challenges because franchisees aren’t always able to fund their business out-of-pocket. To help offset this, some brands like FirstLight HomeCare have added staff specifically to help franchise candidates navigate the lending waters. Other franchise companies have created their own in-house finance offerings. Help-U-Sell launched its own lending program a year ago because they struggled to find financially qualified franchisees. Now, franchisees can borrow all but $2,500 of the franchise fee, interest-free, and they don’t have to start paying it back until they actually start selling. “A year ago, the prospects we were seeing were afraid to get into business or spend any money. Most of them had very little resources to get started, and it was hard finding financially qualified prospects given the economy. We decided that, in order to broaden the prospective base of available franchise prospects, we needed to be a little more creative,” said Help-USell’s McCoy.

Summary The lower-risk nature of the low-cost franchise space is increasingly popular with all levels of investors, and the number of opportunities and types of businesses within the space increases every day. However, as we caution with every franchise model at every investment level, not all franchises are equal—and not all “low-cost” opportunities are as good as they sound. It is important to do your homework, talk to current franchisees, and be sure your expectations are realistic. Most importantly, make sure that franchisee satisfaction and performance across the board is solid. Undoubtedly,

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“In the past few years, franchisors at all levels have taken steps to reduce the financial burden of running a franchise. Some franchisors have reduced their initial franchise fee, and many have taken strides to reduce the cost of opening the business by eliminating the need for office space and branded car wraps, for example.” you will run into a few unhappy franchisees in any franchise brand, but broad satisfaction research, like the independent reports provided by Franchise Business Review, is that must-have, 3rdparty validation required before moving forward with a franchise opportunity. When talking to any franchise company, ask to see their satisfaction report.

Why Satisfaction Matters By all accounts, this is a great time to buy a franchise. Franchise brands are outperforming non-franchised businesses, franchise units are experiencing healthy returns, and many people who’ve been considering franchise opportunities for several years are finally committing to their dream business. But, no matter how rosy things look for franchising as a whole, nothing guarantees a franchisee or a franchise concept will be successful. Prospective franchisees must thoroughly research every opportunity they are considering to determine if the concept is viable and the right fit for them. One of the best ways to know if a franchise opportunity is really as good as it appears is to look at its franchisee satisfaction data. Not all brands survey their franchisees, but those who do offer a wealth of information on the system’s leadership, culture, training and support, financial outlook, and franchisee community.

Who We Are Franchise Business Review is a national market research firm that performs independent research of franchisee satisfaction. Our products include

franchisee satisfaction reports, economic impact studies, customized surveys, sector studies, and other projects and services focused on driving franchise performance.

What We Do To compile the data for this report, we surveyed over 11,000 franchisees, representing more than 145 low-cost brands and 29,585 franchise units/ locations. We contact all active franchisees within a franchise system and ask them to complete our satisfaction survey. Franchisees answer 33 benchmark questions ranking their franchise system in the areas of financial opportunity, training and support, leadership, operations and product development, core values (e.g., honesty and integrity of franchisor), general satisfaction, and the franchisee community. An additional 16 questions ask franchisees about their market area, demographics, business lifestyle, overall enjoyment running their franchise, and role in the franchisee community. From this data, we identify our list of franchises with above average satisfaction. It is important to note that all Franchise Business Review research studies are open to any North American-based franchise companies with at least 10 operating franchisees at absolutely no cost. The franchise companies listed in our reports are based solely on franchisee satisfaction ratings. For more information, or to download the full report: Web:

www.franchisebusinessreview. com


Best of the Best: Today’s Top Low-Cost Franchises with the Highest Owner Satisfaction Advertising & Sales

Education

Money Mailer

Mathnasium

Proforma

UCMAS Mental Math

Our Town America Welcomemat Services

Automotive Auto Appraisal Network Color Glo International Snap-on Tools

Business Services

THE TUTORING CENTER

Finance & Tax American Prosperity Group Liberty Tax Service

Tax Centers of America

Fitness 9Round Kickboxing

ActionCOACH

Baby Boot Camp

BlueGrace Logistics

FIT4MOM

Bevintel

Brickhouse Cardio Club

Estrella Insurance

Fitness Revolution

FocalPoint Coaching FranNet

InXpress

Murphy Business & Financial RTOWN Communications Sandler Training

The @WORK Group

Child Services Amazing Athletes CompuChild

Drama Kids International i9 Sports

Images 4 Kids JumpBunch

Soccer Shots

TGA Premier Golf & Tennis Young Rembrandts

Cleaning & Maintenance Aire-Master of America

ASP - America’s Swimming Pool Co.

Food & Beverage Happy and Healthy Products Kona Ice

Repicci’s Italian Ice

Home Services Budget Blinds

Five Star Painting

HandyPro Handyman HouseMaster

Miracle Method Surface Refinishing Mr. Rooter Plumbing Pillar To Post ShelfGenie

Surface Specialists Systems The Glass Guru

Pet Services G’Day! Pet Care Pet Butler

Sit Means Sit

United Country Real Estate

Retail Just Between Friends

Kid’s Closet Connection Mainstream Boutique

NYS Collection Eyewear Rhea Lana’s

Senior Care Always Best Care Senior Services CarePatrol

Caring Senior Service FirstLight HomeCare

Home Instead Senior Care Homewatch CareGivers Qualicare

Right at Home Stay at Home

Synergy HomeCare Visiting Angels

Services A All Animal Control

Bin There Dump That Boulder Designs Complete Music

Creative Colors International Critter Control

Paul Davis Emergency Services Pop-A-Lock Safe Ship

Signal 88 Security

The Traveling Photo Booth Truly Nolen of America U.S. Lawns Weed Man

Window Genie

Sports & Recreation

Buildingstars

Real Estate

MaidPro

Help-U-Sell

Travel

Showhomes Home Staging

CruiseOne

Heaven’s Best Carpet Cleaning

G.J. Gardner Homes

Office Pride

Realty Executives International

OMEX International

American Poolplayers Association Cruise Planners

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ex per t advice

Daniel Brunell, President, Dearborn West, LLC

How do I find the best opportunities? Answers are easy; the hard part is knowing which questions to ask. Having a sense what you should be looking for and what to avoid is an important first step. As a franchise consultant, I am often asked “What is the hot franchise?” This is a fair question, but it illustrates the point well. You should never be looking for a “hot” franchise. The designation of being “hot” is a dubious honor and you should remember that it is easy to get burned when dealing with hot things. Often, what is considered hot is usually determined by media outlets that are trying to fill space around their advertising. While their writers may intend to provide good

Franchising USA


information, they want to have sensational stories to tell. Often these stories can make something out of nothing or overlook serious red flags. The industry press is often impressed by the number of franchise units the franchisor is selling. This is a fair measure of success for the franchisor, but for a prospective franchisee, it is much more important to know about the success of the operating units. Who cares if the parent franchisor is making money if the operating units are not? The resale market is littered with businesses formerly considered hot that did not live up to the expectations of the original franchisees. The truth is that if something is considered hot, it is most likely either too early or too late for it to make sense for most investors. It may be too early to get into a hot franchise if it has opened too few locations or if it has less than three years of operating history. Anything this new is unproven and it will take a big leap of faith for the prospective franchisee. Conversely, it may be too late due to a lack of territory availability or the costs to buy in may have already risen so high that it no longer makes financial sense. The real question is not, what is the best or hottest franchise, but what franchise will be best for me? This of course is only answerable after a careful examination of your unique skills and objectives. Assuming you have gotten that far already, and you are proceeding based on well established goals, you can begin a productive search. Keep in mind when you buy into a franchise system the value is not in it being the newest or the best known brand. The real value is in the system for doing business - the business model itself is what you are buying. The

“Remember that a growing franchise with a brand name that is not yet recognized in your market often represents the best opportunity.� purpose of a business model is to make money and preferably for a long time. So it is imperative that you find a model with good long term potential that can be replicated in your location. If you look to what is currently considered hot, you run the risk of owning a business that will be a liability a year or two down the road. Buying into a franchise system is a lot like investing in a stock. Up and coming franchises are typically the best value for prospective franchisees. Often, the best time to get into a franchise is when there are between 50 and 200 locations. By the time a franchise has been successfully replicated in 50 locations and can show a positive track record that spans at least three years, you can reasonably assume that they are doing some things right and that you can repeat their success in your market too. Also, at this stage of a franchise company’s development, they have built and refined their vendor relationships, have well established franchisee training and support systems and they know how to launch new business units properly. They also have a vested interest in the success of each and every operating unit, so they will commit the resources necessary to help their franchisees succeed. So where do you find these up and comers? Well, most people will use the internet to shop for a business opportunity. This is a reasonable method for gathering information and there are many excellent franchise information portals at your disposal, but be careful not to let these

Daniel Brunell

define your entire range of options. This is a common mistake and it is easy to get caught in that trap. Most information sites only show a fraction of what is available and they all tend to have the same information. Additionally, not all business opportunities are created equal and their success is always predicated on having the right fit between the model and the operator. In business there is no substitute for talking to people. With franchises, having two way discussions with the franchisors and franchisees is essential to understanding the relative virtues of a given model. Also talking to other business owners can reveal a treasure trove of useful information. Remember that a growing franchise with a brand name that is not yet recognized in your market often represents the best opportunity. Because of this you can also take your search out of your local market to find options. A great

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Daniel Brunell, President, Dearborn West, LLC

strategy is to identify a market that is demographically similar to your own and study the businesses in that market. This could be a couple of cities over from where you live or in other states, but the key is finding similar demographics. This can be done easily on line with tools like www.referenceusa.com, www.city-data. com and your favorite search engine. Look for businesses that you think would serve a need in your community and fit your unique objectives then talk to those owners. You can only gain the subjective information that will make a difference to you personally by speaking with people who operate these businesses. Business for sale sites on the internet are also a great tool, but maybe not in the way that most people think. If you see lots of businesses for sale of a particular type or of a specific franchise brand, that might be a red flag. By contrast if you rarely see another type of business for sale, maybe that is a sign that you should look into that industry. Also pay attention to websites and magazines dedicated to multiunit franchise owners. These folks represent the top of the food chain in the franchise world. Find out what brands these people own. If they own several of the same concept, that should tell you some things about the quality of that brand. Speaking with business attorneys, CPAs and brokers or consultants is another very powerful way to find opportunities. The key here is to find professionals with substantial experience and market knowledge. Attorneys and CPAs often know of companies that will be going up for sale before they are on the block. Finding opportunities before everyone else knows about them is crucial. Business

Franchising USA

brokers are an obvious resource, but don’t let them limit their search to what is currently listed for sale. Tell him what you are looking for and they can proactively go find it for you. The best brokers will approach owners and ask them if they are ready to sell on your behalf saving you a lot of trouble. Franchise recruiters or consultants can be a huge help too. A competent franchise consultant will know the national marketplace and will have a good system for evaluating your potential. They will know about confidential resales within franchise systems and usually have access to hundreds of companies. These people know from the inside out, which

franchise systems are good investments and which ones are not. In any case, the most important thing to remember when searching for a business opportunity is to leave no stones unturned, so use all the resources you can find. Dan Brunell is President of Dearborn West, LLC, an international business opportunity brokerage headquartered in Southern California. For More Information: Phone: 951-587-6929 Email: dbrunell@dearbornwest.com Web: www.dearbornwest.com


The Right Time for Anytime

S teven C ross brin g s personal , hands - on approach to V ir g inia fitness market It’s a story that’s all too familiar for most of us. One morning, after 20 years working with a national gas company, Steven Cross woke up to find himself out of a job. “I never thought I would leave that job,” he remembers, “I had moved my way up, I was making good money... But at 40 years old, I had to start over again, And that was tough.” A lifelong fitness buff and certified personal trainer, Steve found work at the local Gold’s Gym in Newport News, Virginia., Shortly afterwards, he was asked to come on as one of their sales managers. When a new location was planned on the other side of the James River, Steve and his family pulled up stakes and moved south, so he could assist with the preparations. Weeks passed, then months,

but the second gym never got off the

“One of my fellow sales managers told

Steve now had to deal with the commute to

Anytime Fitness,” he continues. “I started

ground. Now, on top of his other worries, and from the previous location, including five miles across the James River Bridge.

me to look into this franchise called

looking into it, making some phone calls, making contacts, scouting areas...but I

It was on one of those long commutes from

had my heart set on that location before

noticed a shopping center going up. “I

franchise.”

he says, “ and I just thought [the shopping

Anytime Fitness inside the shopping center

Carrollton to Newport News that Steve

I purchased that territory through the

had always wanted to open my own club,”

In June of 2008, Steve opened his first

center] would be a great area.”

he had passed so many times driving to

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f ra nchisee in action

A ny time Fitness

and from work. He opened another club two years later... and another two years after that. Today, he runs three successful Anytime Fitness clubs throughout Virginia – in Hampton, Suffolk, and Carrollton – boasting thousands of satisfied members. Franchising USA caught up with him earlier this month to discuss his path to ownership, working with Anytime Fitness, and advice to franchisees.

WORKING (OUT) WITH ANYTIME FITNESS Both as an owner and a member, Steve says that Anytime Fitness was a perfect fit for him. The Anytime Fitness model is built around the idea of a ‘24-hour’ gym and tanning salon, with members having access to a clean, secure, and comfortable club at any time, day or night. “With other gyms,” Steve says, “as an owner, you have to deal with a lot of closing and opening procedures, with smoothie bars, issues with front-desk personnel, child-care facilities... Anytime Fitness doesn’t have any of that. It takes the fitness experience to another level...you’re focused on being like a neighborhood gym; members can come in, work out, and get on with their day.” Another aspect that appealed to Steve was the more personalized relationship he could have with his members with an Anytime Fitness franchise. “Your lowcost gyms,” he explains, “they’ll offer memberships at ten bucks a month, and that’s great...but they’ve got to have 8 or 10 thousand members, and there would never be space for all of them. We have more of a personal touch [at Anytime Fitness], we know each other by name, and it really makes a difference. You’re able to have a relationship with your members, see them more often, help them attain their goals... it’s a better all-around experience, for the owner and the members.”

Franchising USA

“It’s been a rocky road for Steve, but that doesn’t bother him . In fact, he wouldn’t have it any other way: “I feel very fortunate, very blessed, that I’ve had this opportunity.” When asked about his working relationship with Anytime Fitness, Steve is quick with praise. “You know,” he says, “dropping that check in the mailbox to purchase my territory... at the time, that was a tough thing to do, it was scary. But that June, I went to their new franchisee training in Minnesota, and it was wonderful. The information was great, and they made me feel important. They had us meet all the vendors, we got to meet other owners, each of us was able to meet with a franchise representative...it was fantastic.” Beyond the initial training, Steve mentions Anytime Fitness’ ongoing support: “I have someone who stays in contact when I have any questions, keeps me up-to-date with upcoming trends and events.” He also mentions Anytime’s online franchisee

support, and local three-day training seminars known as ‘Vitals’. “[Anytime] has great training, and they keep you abreast of the latest updates,” he says, “but it’s all about what you put into it. You can buy a franchise, you can lease the space, buy the equipment and start a gym, but if you don’t stay engaged with what’s going on, your chances of success aren’t that great. You can’t rest in this business.”

“PEOPLE WANT TO SEE THE OWNER” Steve stresses that in this sort of franchise, you need to get your hands dirty if you want to see success. “There’s that old saying, that if you build it, they will come. Well, that’s not necessarily true,” he says with a laugh. “The fitness industry is changing, and to be successful, you really


need to change with it, and see first-hand what your customers are looking for... Retention is very important, and if you keep your members happy, they’ll start to bring you referrals, and it makes a big difference” “I’ve been a very hands-on owner, I go to my clubs constantly., I sit in on the presales when I can, so I’m meeting with the members as they come in... and you know, people want to see the owner! After they sign up, they still want to see you around the club.” Because of the hands-on involvement needed, and the personal connection necessary to running a successful club, Steven has some simple, yet invaluable advice: “I would tell anyone going into this sort of work that if they don’t have experience – if they’re not going to be

at the club, if they’re not going to be engaged – then they really need to have someone experienced working for them as a manager,” he says. “You can’t just buy [a club] as an investment, you need to make it your full-time occupation.”

to get this thing going. A lot of people

TAKING CHANCES, GIVING THANKS

It’s been a rocky road for Steve, but that

Throughout our interview, Steve expresses genuine and heartfelt gratitude for everyone who has helped him along the path to where he is today. To his wife, his son (who now runs the Hampton location of his franchise), his staff and team members, his colleagues at Anytime, and even to his old boss at Gold’s Gym. “He knew what I was doing three months before I did it,” he laughs, “and he gave me that time, still working at his gym,

would let you go once they found out you were looking someplace else, so I really appreciated that. I just called him up

today, actually... I still get a lot of advice from him, and we’re still good friends.”

doesn’t bother him . In fact, he wouldn’t have it any other way: “I feel very

fortunate, very blessed, that I’ve had this opportunity,” he says. “I never thought I

would leave the gas company, and to lose that job and have to start over at 40...but

I’ve taken a couple of chances, and things have worked out really well.”

“I’ll tell you,” he adds, again with a laugh, “now that I look back, I’m glad I did lose that job!”

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ex per t advice

Kelly Maguire, Sr. Director of Digital Strategy, AviaTech

YouTube Marketing:

T he P ower of O nline In a digital landscape where dynamic and rich media are quickly becoming not only the norm, but an expected luxury amongst consumers, YouTube reigns supreme as a delivery vehicle for such content. Nothing draws in and engages a user quite like a good video. Franchising USA


“Like any other effort, the key component is making sure what is being done is delivering a value to who it is intended for. When brands accept this, they can begin to understand that entering the world of online video marketing is not quite the challenge it initially seems.”

Kelly Maguire

V ideo Like Television before it, online video is a way to convey a message in a dynamic way and offers many different variations on how that message can be delivered. It is not only for these inherent qualities that people tend to prefer video as a message platform but also because video is no longer just within the domain of large content producers. Due to technology advancements and networks like YouTube

and Vimeo, video is being produced at a massive scale from almost everyone. Some of the most subscribed to and watched channels on YouTube are those of individual “YouTube Celebrities” who more often than not are just lone bloggers producing their content on simple home equipment. With access to this medium so easily available, it is no wonder that consumers have come to expect brands to be able to produce video quality at least at the same scale as bloggers and they appreciate the brands that offer them good content in a medium they enjoy. The challenge of video is a difficult one for brands to tackle because many brands still view it along the same lines as television, complete with full production requirements. While brands are expected to and should be capable of producing higher quality content, it is not always required that said content be a full production. Many brands can benefit greatly from lower end production that highlights quality content and focuses on delivering a worthwhile message above a

high end production value. Like any other effort, the key component is making sure what is being done is delivering a value to who it is intended for. When brands accept this, they can begin to understand that entering the world of online video marketing is not quite the challenge it initially seems. Brands can develop a variety of different video types that offer value such as product demo videos, corporate culture videos, tutorials, brand advocate campaigns, and even simple humorous videos that show the lighter side of the business. People and customers like to connect with brands on a level other than business and video is a great way to do this. When developing your video, it is important to remember the “5 second hook” rule, whereby you have 5 seconds at the beginning of the video to capture the interest of your viewer before they decide to continue watching or not. While production value doesn’t have to be at a high level, the content does, this is the art of the process. Videos can be done with full production plans, loose production plans, and even simple handheld and cell phone devices. As long as it serves a purpose and has good content it is worth doing. Now if a brand does decide to commit to leveraging online video for its marketing and branding efforts, there are many things it can take advantage of. Beyond developing a simple YouTube channel and uploading videos, there are several ad services that can drive exposure for the content being produced and ads can even be run against other people’s videos with relevant content. Like Google AdWords, YouTube has a powerful ad engine capable of robust targeting and detailed optimization to deliver campaign efficiency. YouTube is considered the 2nd largest search engine based on activity and therefore holds a large repository of activity that brands can take advantage of. The best format for doing so is to be

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Kelly Maguire, Sr. Director of Digital Strategy, AviaTech

At the end of the day the web is making significant shifts, many of which are focusing on better content such as photos and videos. Consumers are being spoiled with content and it is up to the brands that want their attention to keep pace and begin to offer the content that their customers crave. The appetite for dynamic content is only going to increase and brands that accept this and embrace it by identifying resources and solutions to help them enter the world of content and video production will greatly benefit from the connections and brand image these tools are able to facilitate. involved in the platform with your own content, but even in the absence of that, the network still has plenty to offer. Unlike Television, online video offers a wide array of measurement tools that allow marketers to truly measure the impact and return on their campaigns. Instead of guessing the reach of the campaign, online video provides measurement into views, view duration, frequency, reach, clicks, traffic generation, and much more, making it a n extremely valuable tool in the marketers repertoire.

YouTube Advertising Options • TrueView Video – advertisers pay only when viewers choose to watch their video. This is a great way to increase exposure for content on your channel. There are several variations to this ad including: o In-Stream - where the ad is displayed before or after another video. o In-Slate - where viewers can choose to view the video instead of commercials. o In-Search - where the ad appears within search results. o In-Display - where the ad appears alongside other videos. • Google AdWords YouTube Video

Franchising USA

Targeting – this option allows advertisers who do not have a channel or video content to offer, to deliver their ad message utilizing relevant content that already exists on YouTube and utilizing targeting criteria to ensure the ad reaches the proper target audience.

Online Video Production Tips • Do not only focus on large production material, simple video content can be just as useful and impactful if done properly. • Look for internal resources who may be capable and even excited to help develop video content, often employees and even customers are willing to participate and their content can often be the most valuable. • When good content is produced, look for ways to increase the exposure of it through promotions and advertising, content is no good if it isn’t seen. • If you are going to start doing online video, plan for it to be an ongoing effort, you don’t want to cultivate an engaged audience only to lose it because you do not have fresh content to offer. • Do not be intimidated by the idea of video, embrace it for the opportunity it represents.

Since joining Aviatech in 2010, Kelly Maguire has played a leading role in adding new services to the agency’s core capabilities, including the development of award-winning advergames and sweepstakes initiatives, digital PR, and paid social advertising. He has overseen the implementation of new technologies to help streamline departmental operations, and supervised a departmental expansion as it grew by more than 50%. Kelly has also contributed to the agency’s thought leadership with published articles and appearances at seminars and client conferences. Kelly’s former positions include Strategist at Omnicom network OMD, the world’s top global media brand, where he was involved in developing the emerging media department; and Senior Program Manager at Performics while owned by Google, where he interfaced directly with all major social networking sites. His work with Facebook directly impacted the introduction of cutting edge applications to their ad platform. Kelly holds a Bachelor of Science degree in Business Management from DePaul University of Chicago. For More Information: Web:

www.aviatech.com


2 0 1 3 I n t e r n at i o n a l Franchise Expo Pa r a l l e l s I n d us t r y, E c o n om i c G r o w t h N e a r ly 2 0 , 0 0 0 v i s i t o r s , m o r e t h a n 4 0 0 e xh i b i t o r s flock to NYC

Hosted in New York City for the second year in a row, the 2013 International Franchise Expo (IFE) marks the biggest in the event’s 22-year history. From June 20-22, nearly 20,000 visitors from more than 90 countries explored 413 franchise exhibitors at the Javits Center – from well-established name brands to emerging, fast-growing concepts. The success of this year’s IFE, put on by MFV Expositions, is further proof that franchising plays a significant role in the recovering economy. As a testament to the industry, this year’s expo kicked off with a breakfast announcing the findings of the inaugural ADP National Franchise Report, created in collaboration with Moody’s Analytics to identify trends and insight into the sector’s impact on the labor market. The report shows private-sector franchise jobs increasing by 19,160 during the month of May, with restaurants, food retailers and business services showing the largest increases. Approximately 150,000 jobs were added over the past twelve months through the franchising industry. “The ADP report was the perfect start to this year’s expo as it helped solidify franchising’s position as an essential driver of small business and the U.S. economy,” said Tom Portesy, president and CEO of MFV Expositions. “This was further

“More than 50 industries were represented at the expo, including everything from restaurant and education to health care and children’s services, representing North American-based companies looking to expand abroad as well as international brands looking to enter the U.S. market.” evidenced by the quality of attending potential franchise owners as more than 30 percent planned to invest between $100,000 - $500,000 in a new franchise business.” More than 50 industries were represented at the expo, including everything from restaurant and education to health care and children’s services, representing North American-based companies looking to expand abroad as well as international brands looking to enter the U.S. market. “As a first-time exhibitor and a relative newcomer to franchising, we weren’t sure what to expect,” said Scott Nelowet, founder of Florida-based French Fry Heaven. “We were thoroughly impressed not only with the sheer volume of foot traffic, but of the variety and quality of prospects we met. We spoke with people from all over the world who had a genuine interest in our simple French-fry-only concept. It’s hard to put a price on the kind of value you get from an event like the IFE.” Attendees learned best practices from industry experts who hosted educational

symposium geared toward every stage of the journey. Among these opportunities, one of the best attended was the International Symposium which included 13 symposia and seminars on essential topics from how to begin franchising internationally to how to choose the right markets. In addition, the IFE hosted a Private Equity and Finance Conference of four in-depth sessions led by the industry’s key players who shared insights on the state of financing in franchising and how private equity affects a franchise brand. Attention from media organizations was high too, giving exhibitors opportunities to get their brands in front of consumers and investors beyond the show floor. FOX & Friends, CNNMoney, TheStreet.com, The Wall Street Journal, Telemundo, The New York Post, Entrepreneur Magazine, WPIX-TV, Black Enterprise Magazine, Associated Press, and CBS Evening News were just some of the news organizations interested in exhibitors. Next year’s IFE will be held June 19-21, 2014 at the Javits Center. For more information, please visit http://www. ifeinfo.com.

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I FA F ra n c h i s e E x p o 20-22 June, 2013 Ready, Set, Grow a Franchise! In the City that Never Sleeps, The New York IFA Franchise Show hit the ground running with thousands of attendees, and over 400 Franchisors and Suppliers exhibiting in Manhattan’s Javits Convention Center. There were Food Franchises to tempt your taste buds, allowing potential franchisees to sample delicious yogurt, pretzels, pizza, cakes, chocolates and even Asian cuisine. If you were looking for a Franchise that’s right for you, the IFA Franchise Expo delivered on a variety of niche businesses from Food, Sports, Learning, Auto, Financial to Technology, Retail and Beauty. There was a

business idea for everyone’s taste buds. Besides visiting the Exhibition Hall, international and domestic potential franchisees were educated on new business concepts and took advantage of consultant seminars to better their current franchise. The Suppliers Section also offered great resources for business owners and franchisors alike to support their successful operations. The IFA Franchise Expo offers a great forum to network with fellow franchisees and franchisors and become the business owner, you always dreamed about. Follow your passions in life, do what you love, and love what you do. For more information about the IFA Franchise Expo and local events near you, visit www.ifeinfo.com.

Inspiring you Beyond the Big Apple Franchising USA magazine extends a warm and friendly welcome to all its new readers who signed up within its booth in the Supplier Section at the IFA Franchise Show. We look forward to inspiring and informing everyone from New York as well as those potential franchisees who have subscribed through our online portals, also looking for more information about a business that’s right for them. We spoke with many current and potential franchisees about the pulse of their industry, their appetite to learn more, and their drive to build a successful first time franchise or even expand on their current network of franchises. Thank you for your positive feedback in our Booth, website, and throughout our social circles online. The Show was a great opportunity to connect closely with our readers, writers and franchisors, which will continue to build strong bridges for solid business partnerships and growing franchises. It was a fantastic experience to celebrate the enthusiasm and entrepreneurial spirit of many looking to find their own franchise solution. What better time to read Franchising USA online magazine to help guide you in your franchising process, and gain the expert advice you need before you buy. Please visit us www. franchisingusamagazine.com. Jenn Dean, Director of Business Development, Franchising USA

IFE Opening Ceremonies - Left: Jim Mastandrea, Group Show Director, MFV Expositions; Center: Steve Romaniello, Managing Director, Roark Capital & Chairman International Franchise Association; Right: Thomas Portesy, President & CEO, MFV Expositions

Franchising USA


“The growth in the number of franchisors and suppliers from 2012 to now was impressive. This event required a vast amount of coordination and the gathering sponsored by a number of suppliers at Clyde Frazier’s was a great time for the franchisors and suppliers to bond.” Diane Rosenkrantz, Tenet Financial.

Jenn Dean, Director of Business Development – with Rockin Jump (Our June 2013 Front Cover) and other Franchisors at the Exhibitor Party

Jenn Dean, CGB Publishing’s Director of Business Development, at the Franchising USA Booth. Franchising USA

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Combine a passion for business with healthier food options, package them in stylish destinations that deliver a true experience, and change the dining landscape with a business motto to “Treat Yourself Well.� That’s the recipe for success for one of the fastest-growing franchises in America: Red Mango. When Founder Dan Kim opened his first Red Mango store in 2007, an entrepreneurial dream was launched which would defy the economy, win legions of fans online, create demand for hundreds of locations and reveal a growing desire that consumers want healthier foods. The dream to share that great business with others then became a reality through Red Mango Franchising. Today, with more than 210 locations across North America, Red Mango has championed a new era, delivering a menu that offers all-natural, gluten-free frozen yogurt that is kosher and rich in probiotics. Add to that a network of franchise owners and food operators who embrace the same passion for business, and the healthy bottom line has translated into a brand of amazing growth. Red Mango has perfected a franchise system that offers training and marketing support from some of the most successful leaders in the industry and has established the most popular brand with traditional, self-serve, kiosk and store-in-store opportunities to meet escalating demand. The company credits its dedication to a healthy menu as the cornerstone to that success; serving fresh fruit daily, maintaining a rotating line of more than 50 frozen yogurt flavors, and offering a choice of all-natural toppings and craveable smoothies have been the key drivers of this feat. Together, it creates a brand power that resonates with smart consumers who want to know exactly what they are getting and will show their loyalty in return. With locations from coast to coast across the U.S. and international expansion in Central and South America, Red Mango has proven to be the real deal and plans to double in size in the next couple of years. For more information, visit www.redmangousa.com. Franchising USA

Red Mango Founder Dan Kim

A PASSION FOR THE BUSINESS.


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ex per t advice

Dale Willerton, The Lease Coach

R eal E state A g ent :

Friend or Foe? F ranchise T enants M ust U nderstand the R ole of the C ommercial B roker Prior to becoming a Lease Consultant in 1993 and exclusively working for tenants, I was both a mall manager and the landlord’s typical leasing agent so I can speak from experience. Agents/brokers are deal driven, not detail driven. Whatever rent you pay per square foot matters less to an agent than whether the deal actually gets done. After all, agents/brokers are only paid if a Lease Agreement gets signed and the deal closes. People who take a commission for work performed are salespeople – they are NOT advisers, coaches or professional consultants.

Franchising USA


Franchise tenants are entitled to know if the agent is being paid a commission and how much. All you have to do is ask. In most cases, the agent’s commission will be five or six percent of the Base or Minimum Rent (not Operating Costs). So, if you are leasing 3,000 square feet (times) $28.00 per square foot (times) five years (times) six percent, the agent’s commission would be $25,200 for the first five years. If you lease for a ten-year term, this amount is doubled. If you are not inclined to take the advice of a car salesman who makes a $200 commission when selling you a car, how much more guarded should you be when the commission is thousands of dollars on a real estate transaction? When doing site selection, be careful if you let one agent show you around town. What I mean by this is never let one single agent show you another agent’s listings. If you want to look at space for lease in one particular building, contact the listing agent whose name appears on that building’s “For Lease” sign. A franchise tenant may know an agent whom they feel comfortable with and let that agent show them other buildings listed for lease by other agents. This creates commissionsplitting and may make you less desirable to the listing agent than another tenant who may be dealing directly to the listing agent. It’s never a good idea for the landlord’s agent to know what you are thinking about for all the properties that you’ve shortlisted. Some agents won’t care which property you lease at all, as long as you do the lease deal through them. You may have heard the term, “Tenant Rep”. This is a fancy name agents take on when they want you to believe they are working for the tenant while they are collecting a commission from the landlord. In fact, the term “Tenant Rep” is so misused that even seasoned tenants with multiple locations and franchisors are

“People who take a commission for work performed are salespeople – they are NOT advisers, coaches or professional consultants.” fooled by this seemingly idealistic solution to their problems. Well-intentioned franchisors who turn their franchisees over to local real estate agents tell us they do so for several reasons. It can be that the franchisor doesn’t have the time, money or in-house expertise to take on the enormous job of site selection and lease negotiation. Some franchisors have specifically told us that they don’t want the liability for placing their franchisees in a poor location or a poor lease deal. By referring the franchisee to a locally licensed agent, the franchisor may not be as active in the process. Other franchisors say that it’s for the tenant’s own benefit and that the local agent will work hard for them and get them a great deal (a theory which can still be challenged). Real estate agents typically don’t stick their neck out by telling the tenant they will be successful in a certain location as they don’t want the liability in case the tenant’s business fails. Even if the agent is aware of a landlord’s questionable reputation, the franchise tenant may not be tipped off to that. Nor will the agent review formal lease agreements, opting instead to advise a tenant to consult a lawyer on that matter. Even if the agent is aware of some nasty clauses in the lease documents, the agent doesn’t want to get on the landlord’s bad side by appearing to help the tenant. In closing, I well remember a franchisee who had bought a franchise and after waiting up to a year, the franchisor had not been able to produce a location for her. The franchisor referred her to a local real estate agent who showed her

Dale Willerton

locations available. When this franchise tenant called The Lease Coach, she asked, “Why did this agent only show me only his listings?” My answer was that, “Well, he can get a full commission from the landlord if you lease one of his listings.” The franchisor was not even aware that the agent was only introducing his properties to the franchisee. For a free copy of my CD, Leasing Do’s & Don’ts for Franchise Tenants, please e-mail me to DaleWillerton@ TheLeaseCoach.com. Need a speaker for your next franchisee convention? Bring in The Lease Coach and help your franchisees. Dale Willerton is The Lease Coach, a Commercial Lease Consultant and author of “Negotiating Commercial Leases and Renewals FOR DUMMIES” appearing in bookstores spring 2013. Got a leasing question? Need help with your new lease or renewal? For more information: Phone: E-mail: Web:

1-800-738-9202 DaleWillerton@ TheLeaseCoach.com www.TheLeaseCoach.com

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Edward Levitt, Sr. Partner, Aird & Berlis LLP

Buying a Franchi

N ew S ystems vs . M ature S Buying power, name recognition, expertise (both in the business and in the business of franchising), advertising clout and research and development are some of the benefits prospective franchisees expect when buying a franchise. Franchising USA

With the newer systems, these benefits may not materialize for several years, if at all. There is no question that the risks for franchisees in the start-up franchises are higher than with the mature franchises.

penetration by the franchisor and the franchisee’s proximity to the franchisor’s established markets, there may even be a significant name recognition value for the franchisee.

However, advantages can be found in the newer systems. For example, the prospective franchisee will have many more locations and territories to choose from in a franchise system that has not grown enough to reach saturation in prime areas. The entry costs may be lower and the rules less strict, which may appeal to the more entrepreneurial franchisee. Depending upon the depth of market

In all successful franchise systems, the franchisor has developed substantial expertise in the core business and in the business of franchising. Even the new franchisor may have a well-developed business model, but it will be impossible for the prospective franchisee to know how the franchisor will grow the franchise system and react to issues that impact upon its franchisees. With the


“One of the most important investigative tools is to ask as many existing franchisees as possible how the franchisor runs the system and responds to the needs of its franchisees.” insights about the franchise offering whether or not the franchise system is new or mature, as all franchisors in Alberta, Manitoba, Ontario, Prince Edward Island and New Brunswick must deliver such a document to prospective franchisees.

ise

S ystems older systems, there are many ways a prospective franchisee can investigate the franchisor’s all important franchise skills, before making the investment. One of the most important investigative tools is to ask as many existing franchisees as possible how the franchisor runs the system and responds to the needs of its franchisees. In the newer systems, the number of existing franchisees are small and the ones that do exist may be far to new themselves to be able to give a clear picture of the franchisor’s strengths and weaknesses. A careful review of the franchisor’s disclosure document will provide valuable

Many franchise systems operate in the retail sector, where the location of the store is critical to the franchisee’s success. Again, this is where there are differences between new and mature franchise systems. The more developed the franchise system, the more likely the landlords will be willing to deal with franchisees in the system and the more likely the franchisee will be able to acquire desirable locations on more favourable terms. When it comes to lease negotiations and negotiations on renewals, the mature franchisor will provide greater expertise and market knowledge to the benefit of the franchisee. Assuming that the prospective franchisee accepts the greater risk of purchasing a franchise in a newer system, in order to gain the advantages, then what can be done to make the investment a little safer? While it is an accepted fact of life that franchise agreements of mature franchisors are non-negotiable, this is not necessarily the case with the new franchisors. In fact, there are important changes that should be made to the franchise agreement, for the very purpose of reducing the risks. New franchisors, anxious to start growing the system and wise enough to know that quality franchisees are necessary all the time, but especially at the beginning, will be amenable to changes to the franchise documentation that will not be tolerated later in the franchise growth cycle. Control of the location by the franchisee, reduction or elimination of the franchisor’s discretionary powers, freedom to purchase inventories and supplies anywhere, more

Edward Levitt

limited post-termination obligations of the franchisee, are but a few of the areas of possible and valuable change. It is not just how large a franchise system is that matters, but how quickly the franchise system has grown. A large number of franchises sold over a very short period of time, may, in fact, indicate a troubled system, as rapid growth without attention to growing the franchisor support structure and the system culture may create problems for every franchisee in the system. While purchasing a franchise in the “best” system may be a worthy objective, what is “best” for one franchisee, may not be “best” for another. The wise approach is take stock of yourself first, assess your tolerance for risk, determine what industries you find most fitting, then investigate, investigate and investigate more. Edward (Ned) Levitt is a senior partner of Aird & Berlis LLP, Toronto, Canada, and chair of its franchise law group. He served as General Counsel to Canadian Franchise Association from 2000 to 2007 and, as a member of the Ontario Franchise Sector Working Team, was instrumental in the creation of Ontario’s franchise legislation. Among his many publications is Canadian Franchise Legislation published by Butterworths/ Lexis Nexus. For More Information: Phone: 416-865-4628 Email: nlevitt@airdberlis.com

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f ra nchisor in depth

ActiveR x

STAYING STRONGER, LONGER

ActiveR x a Pioneering Franchise in Senior Wellness Let’s face facts: you’re not getting any younger. Then again, you’re not alone; on the whole, America’s population is aging faster than ever. As of the 2010 Census, more than 38

million of us were over the age of 65. In 2011, the first of the Boomer generation – 76 million in all – began hitting the

Franchising USA

65-year mark, and every seven seconds, another person celebrates their 65th birthday in the United States. Often, along with that milestone come worries about the future – worries about growing old, failing health, and most of all, the loss of our independence. For many in the 55-plus crowd, growing old means “letting nature take its course.” Our life expectancies continue to grow longer, but many of us are pessimistic about the quality of our lives during our final years.

This month’s Franchisor in Depth,

ActiveRx, is looking to change that

perception. To their members, ActiveRx offers a unique and innovative path to

making “The Golden Years” exactly that. To potential franchisees, they offer an

opportunity for rapid expansion, combined with the chance to improve the quality of

life of our aging population. Franchising

USA recently spoke with company founder and CEO Matt Essex from his office in

Chandler, Arizona to learn more about this exciting new franchise.


LONGER FROM THE CLASSROOM TO THE WEIGHTROOM During his graduate studies at Arizona State University, Essex was keenly interested in exercise and wellness, particularly geriatric research focused on physical activity and the importance of strength and its impact on health and aging. While at ASU, Essex directed a multitude of research projects and worked closely with Dr. Wayne Phillips, one of the nation’s most prominent experts on strength and aging. It was already well-known that physical strength deteriorated greatly as we age: usually 30 percent by the age of 65, and another 30 percent every decade thereafter. At the time, however, it was unknown whether strength training might combat those sharp losses. “At that time,” Essex recalls, “little research had been done, but conventional wisdom suggested that you couldn’t really counteract that. You’d get to a certain age and you’d just do nothing but lose strength and muscle mass.” However, Essex, and Dr. Phillips, discovered evidence that supported quite the opposite. “What we were seeing in our initial studies,” he says, “was that yes, you absolutely could regain that strength, not just small amounts, large amounts, regardless of age, or even health status. I saw with my own eyes how much our subjects improved, not only physically, but emotionally, and confidence-wise.” Further research has shown that strength training in older adults cannot only help prevent debilitating slips and falls due to muscle weakness, but also has a positive impact on heart disease, arthritis, diabetes, depression, and osteoporosis. All of these findings had a profound impact on the young Essex. “As a young man, seeing

“ActiveRx is more than a typical gym or rehab clinic – providing its members the optimal environment, system and tools necessary to truly choose how they age.” this [research] had a great impact on me. It was – in reality – life changing,” he says. “I didn’t know exactly what I wanted to do [in healthcare], but after seeing these rersearch results I knew I had found my calling.”

and resources needed to realize his vision, came together. In 2008, the first ActiveRx “Active Aging Center” was launched, offering its unique research-based system, which Essex describes as “more of a lifestyle than a program.”

Upon leaving academia, however, Essex found that the importance of strength in aging was virtually non-existent within the healthcare system and even the health and fitness industry to a large degree. “It takes a long time for research to make its way into the mainstream,” he explains, “and this was over 10 years ago, so there was nothing really...with a focus on aging. I guess, at the time, I got pretty discontent, because it led me to get out and try to design a model that would fill the void.”

“Before ActiveRx,” he says, “we felt what was missing was a place to go in the community for people to systematically tackle their age-related health challenges and accomplish long-term, meaningful lifestyle changes. So our model includes not only Strengtherapy™, but also cutting edge evaluations to create a plan for you moving forward, as well as Active Physical Therapy and behavioral change elements to deal with the issues that often restrict people from living an active lifestyle.” ActiveRx is more than a typical gym or rehab clinic – providing its members the optimal environment, system and tools necessary to truly choose how they age.

Over the next several years, Essex served in various senior leadership, business development and practice management positions, and even worked as a physiologist and clinical nutritionist within an integrative medical-wellness model that he helped to create. But he always desired and intended to return to his roots when the timing was right. Through “divine intervention” as he says, the contacts, team

The company claims that through its system – and with an investment of just one percent of a person’s time – the average member can recover 10 or more years of lost strength and function at its Centers. It’s a bold claim, as Essex would

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ActiveR x

ONE CAMPUS TO ANOTHER be the first to admit. Still, he stands by it: “We’re able to say that because we’ve done the research, we’ve published the research, and we’ve put the research into practice all over the country.” Indeed, the company’s own scientific advisory board boasts over a century of collective expertise in healthcare and wellness.

THINK YOU’VE GOT WHAT IT TAKES? Since that first Active Aging Center in 2008, the ActiveRx concept has taken off, with Centers popping up in Arizona, California, Colorado, Illinois, Michigan and Texas. By year’s end, Essex and his team expect to see more than 20 franchisee-owned centers open across the United States. While the growth rate is impressive, it’s hardly surprising when one considers the service ActiveRx provides, the rapidlyexpanding market for senior wellness, and the work put in by the entire ActiveRx team. Combined with the low overhead and patient volumes, it’s a promising investment opportunity for franchisees with an eye to health and wellness. Of course, along with a unique business such as ActiveRx comes a unique set of challenges to the would-be franchisee. “We’re not selling franchises in the traditional way,” Essex says, “with individual units to individual people

Franchising USA

all across the country. We are first and foremost finding very high-qualified regional developers, to serve as local support for the franchisees in their territories. “We built a system that’s very focused on quality,” he continues, “and we have worked hard to establish credibility in the medical community. Many of our referrals come through doctors and healthcare practitioners. So we need to be very selective in terms of whom we award franchises to. Because of the necessary connections and familiarity in the medical community, it’s helpful for prospective franchisees or regional developers have a healthcare background, although it’s not required. At present, most ActiveRx regional developers have come out of the medical device industry with strong regional sales and management experience.” Even so, the company is prepared to train the right candidates. According to company COO Michael Hutta, the crucial requirement for would-be franchisees is that they be qualified – professionally and financially, but most importantly dedicated to the ActiveRx mission. He elaborates: “We’re looking for committed professionals who have a heart for aging adults and a passion for providing solutions to some of our country’s most important healthcare challenges.”

Essex is eager to discuss a new development within the company, the “ActiveRx on Campus” initiative. Oftentimes, older adults living in senior communities – those who could benefit most from the ActiveRx continuum of care – don’t have access to the standalone Active Aging Centers. So, the company began approaching the owners and developers of senior living communities, to bring the ActiveRx system to those campuses directly. “There are literally thousands of these communities throughout the country,” Essex says. “They want to create a strong resident experience, while also preventing people from losing their independence prematurely.” Talks are underway with senior communities throughout the country, and by all indications, the concept has everyone excited. For Matt Essex and others on the ActiveRx team, though, the excitement goes beyond just the prospect of new business. As he explains, “Often, senior living communities are plugged into hospitals and other health providers, so our system is starting to make its way into healthcare in an even greater way.” It seems that practice and public perception are starting to catch up with research when it comes to senior health, and for ActiveRx, nothing could be better than that. For more information on ActiveRx, and inquiries regarding franchising, visit www.activerx.com.


Extend your reach north of the border...

Contact Jenn Dean, Senior Sales Executive, for global solutions on your multi-media advertising approach. Email: jenn@cgbpublishing.com Phone: 250-590-7116

www.canadianfranchisemagazine.com

With a range of mobile platforms for any device, when potential franchisees search for new possibilities, they’ll find you here.

Contact Jenn Dean, Senior Sales Executive, for global solutions on your multi-media advertising approach. Email: jenn@cgbpublishing.com Phone: 250-590-7116

www.franchisingusamagazine.com


ex per t advice

Peter Knight and Kate Groom, Smart Franchise

How to Choose an Accountant for your rranchise When you are looking for an accountant to work with your franchise, it’s useful to bear in mind there are essentially three types of accountants. There are those that focus on tax, others that focus on the business and there are others that have expertise with franchising. Franchising USA


“For a franchise, two of the most important areas to get ‘right’ at the start are your start up costs and the ongoing costs to operate the business day-to-day. This includes your own income. You should work closely with your accountant so these are as accurate as possible.” We’ll discuss the typical characteristics of each of these accountants and highlight their key points of focus. This will let you see the differences between them and help you decide which will best suit your needs.

Tax Accountants The majority of accountants work in tax and compliance. This covers income tax, GST, preparing Business Activity Statements, other tax obligations and lodging the tax returns with the Australian Taxation Office. They also prepare financial statements, which include the balance sheet and profit and loss statement. These show the results for the business at the end of the year. Tax accountants are also involved in tax planning, which is finding ways to legitimately reduce the amount of tax that clients pay. Increasingly, many are also involved with Self-Managed Superannuation Funds, assisting clients with their own personal super fund. Most will help their clients with bookkeeping and record keeping, so the accountant can prepare their financial statements, balance sheets, profit and loss statements, and tax returns. Some offer assistance with software, help their clients work with MYOB, Xero, Quickbooks and other small business software packages. However, tax accountants tend to keep their focus mainly on the tax issues. Most don’t analyse the figures, they just prepare them, and offer little in the way of specific business advice.

Business Accountants Business accountants focus more on the review and appraisal of the business performance and look for ways to improve it. They will typically be involved in preparing budgets and cash flow forecasts with their clients. This leads to management accounting which looks at how the results compare with targets, and why the business did not perform as expected. A business accountant will often help clients prepare loan proposals and the cashflow forecasts to support these. Business accountants may be asked to prepare business valuations and are often involved in getting the business ready for sale. Many work in the specialised areas of estate and succession planning, which is increasingly important as our population ages. In short, the typical characteristic of a business accountant is that they are actively involved in providing business advice to their clients.

Edward Levitt Peter Knight

Kate Groom

agreements typically run for a fixed period of time and there may be special provisions relating to the future sale of the business. There are usually specific franchise obligations which must be met, particularly in regard to the purchase of supplies and equipment, fit-out and refurbishment, and the systems and intellectual property of the franchisor.

Franchise accountants have particular expertise in working with franchises. They are familiar with the special characteristics of franchising, which are not found in every business. These can affect business and tax planning, as well as the general operation of the business.

These all need to be considered and factored into any projections and cashflow forecasts prepared for your franchise, particularly if you need bank finance. Your accountant can also advise on the most appropriate structure for your finance and loans. They should also check if there are requirements to provide reports to the bank, or franchisor on a regular basis.

For instance, franchise businesses have a contractual relationship between the franchisor and the franchisee. Franchise

For a franchise, two of the most important areas to get ‘right’ at the start are your start up costs and the ongoing costs to

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ex per t advice

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ex per t advice

Peter Knight and Kate Groom, Smart Franchise

operate the business day-to-day. This includes your own income. You should work closely with your accountant so these are as accurate as possible. If these projections aren’t done well, it can lead to funding stress and anxiety once you’re up and running. Your franchisor should be able to provide details relating to costs, and your accountant can give you an independent perspective.

What to consider when choosing your accountant Whichever accountant you choose, it is important that you can communicate freely and openly with them. It works best when there is the free exchange of ideas and information between the two of you. Your accountant should be able to outline your financial exposure and the risk of being financially committed to

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the franchise you are investing in. It is important they can and do work with you on preparing your projections and cashflow for the business. This will help you have a clear idea of what’s ahead and the targets you need to achieve. They should also advise you on the most appropriate tax structure for your situation as well as be able to handle your tax and compliance obligations. Finally, check their experience in franchising and what other franchises they work with. This will give you some comfort they can handle your needs. So, how do you choose? As you can see, there’s no such thing as a ‘standard’ accountant. Each will have different specialities and experience as a result of clients they have worked with. So, to choose the best accountant, you need to think carefully about what you are

looking for and the specific areas you need help with. Then seek out an accountant who you believe can provided you with the assistance you need.

About us Peter Knight, FCPA and Kate Groom specialise in the financial side of franchising. In their business, Smart Franchise, they offer advisory services, training and workshops for franchisees and franchisors. Peter is an accountant with over 25 years in professional practice advising business owners. Kate has worked with and run franchise businesses for almost 20 years, focusing on strategy, planning and business improvement. For More Information: Web:

www.smartfranchise.com.au


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