• How Franchising Works
Alternatives • Quality Control
Legal Aspects of Franchising
Structural Decisions
Financial
Organizational Development
We are going to try to cover a great deal of information, so we are asking that you hold your questions until the end of the session unless they are on a particular slide.
More hands-on experience than any other firm
• Consultants with over 900 years of franchise experience
• 98 out of the top 200 franchise companies
• Offices in Chicago, Dallas, Atlanta, Miami, and Dubai
More “senior level” experience
• Hands-on experience at start-up and established franchisors
• Former CEOs, CFOs, EVPs of more than 50 different franchise companies
Adecco, Armstrong Tile, Auntie Anne’s, Capriotti’s, Dunkin Donuts, LINE-X, McAlister’s Deli, Pearle Vision, McDonald’s, PIP Printing, RE/MAX, Snap-on Tools, and other national brands
The ability to bring more resources
• Hands-on experience at start-up and established franchisors
Breadth across four functional areas
• Strategic planning
• Quality control
• Marketing
• Organizational development
Franchise experience in 50+ countries
Six years in a row, voted the #1 Franchise Consulting Firm in North America in an independent survey of over 1,100 franchisors Numerous Awards and Publications
A Premier fully-integrated public relations and digital media agency specializing in franchised businesses
• Public Relations
• Search Engine Marketing
• Content Marketing
• Social Media Publishing
• Pay-Per-Click Advertising
• Website Design & Development
Proprietary AI driven ”Look-Alike” model that drives leads at less than half the national average CPL Team with Hands-On Franchise Experience
• Real world experience with nearly two dozen brands
• Efforts have resulted in tens of thousands of franchise leads
• And many hundreds of franchise sales
Recent honors and awards:
• Top supplier from Entrepreneur five years in a row
• Best New Agency (Ragan & PR Daily Ace Awards)
• PR Agency Elite –Mission: Fit to Own (PR News)
• Best Website Finalist (PR News)
• Best Media Relations Campaign Finalist (PR News)
• Best SEO Finalist (PR News)
© 2025 iFranchiseGroup. All Rights Reserved.
A premier franchise development and sales organization
Helps emerging brands realize their full potential
Placed over 1,100 units with more than 600 franchises
Beyond sales, serves as an outsourced development partner with a consultative process
Support brands across diverse sectors
• Residential and Commercial Services
• Automotive
• Quick-service Restaurants
• Fitness
• Health and Wellness
• Beauty
• Pet
• Youth Enrichment
• And more
Recent honors and awards:
• Top Supplier Award from Entrepreneur
• Employee Satisfaction Award from Franchise Business Review
• FTC rule 436 cites three elements that legally define a franchise:
The use of a common trademark
The exercise of control or provision of assistance
The collection of fees, royalties, mark-ups, or other monies from the franchisees
• If you have all three elements, you are a franchise, regardless of what you call it
• Some state definitions vary, but are similar
• Do not have to use the “f-word”
Franchisee typically pays
• Franchise fee average about $25,000 to $35,000
• Royalty range between 4% and10%
• Advertising fees range between 1% and 2%
• Franchisor will often sell product to the franchisee
Franchisor typically provides
• Trademark and branding
• Initial training
• Operations manual and systems
• Ongoing supervision and support
• Other support services
• Leverage Capital
• Speed of Growth
• Motivated management
• Reduced risk
• Few operational concerns
• Higher quality
• Organizational leverage
• Must “share profits” Cons
Franchise unit will usually generate less profit than a profitable unit
But far more profit than an unprofitable company-owned operation
• Less Control
• Good relations with franchisees take work
• MYTH: Litigation
The decision should be goal-driven
• Distance
• Speed
• Obstacles
• Risk tolerance
Don’t decide to franchise!
Instead, decide:
• Do I need a third-party distribution channel?
• Do I want that channel to be branded?
• If it is branded, do I want to control quality?
• How do I want to be paid?
A Volvo or a Rocket Ship?
You don’t have to choose only one vehicle!
The law (or your lawyer) should neverdictate your good business decisions
Proven
Credibility Differentiation
The franchisee should make a return on the time they invest
• No different than if they were to go out and get a job
• Salary should be “market rate”
The franchisee should make a return on their investment
• No different than if they invested in a stock
• Return should be commensurate with what they would make if they were to make an investment of similar risk
• Ability to sell back their investment at the end of the term
Franchisees expect that they will need to build their business
• Customized by employee
• Document what is reviewed and test scores
• Lowers on-site training time and costs for both the franchisor and the franchisee
• 15% for Owner Operators
• 20% for Area Developers (who will support additional overhead) Occasional exceptions
• If you have perfected your business, SELL IT!
• If you are standing still, someone is gaining
• McDonald’s in 1955
• If you are going head-to-head with more established competition and your business model is not highly differentiated –be sure to refine first
• More unique, the sooner you should franchise
• Risk: Someone with a camera and a notepad
• First mover advantage
• Who was the first . . . ?
• You are entering a new business.
• Goals drive your business.
• Start with support and cost structure.
• What do you need to do to help your franchisees succeed?
• Don’t rely on guesswork: The future of your business is at stake.
• Financial analysis is essential.
• Reverse engineer your success.
There are certainly a large number of neophyte franchisors who take a “Ready-Fire-Aim” approach
• Often rely on guesswork
• Or analysis of what comparable franchisors are offering to make major decisions
“Copying” is not a strategy –it is a recipe for disaster!
• Uniqueness is important to success, whether achieved through the business model, marketing, support, structure, fees, or marketing.
• Copying assumes that business economics are the same, support is the same, and that a new franchisor will simply differentiate themselves based on great franchise marketing
• But established franchisors often have many advantages not shared by newer franchisors
• So, the copycat strategy that is taken by many new franchisors can be responsible for their failure
Imagine the impact of a 1% mistake on your royalty
• If a single franchisee generates $500,000 in revenue
• 1% = $5,000 off the bottom line
• But franchisees will never tell you that they are paying too little and often inertia will keep the royalty where it is at for years
$10,000,000
$5,000,000
• Many people think franchises have lower level of quality –just the opposite is true
• The Quality Trade-Off
• More difficult to control
• Higher Caliber
• More highly motivated
• Longer term
• Studies show franchisees outperform
• Anecdotal evidence
• Franchisee Selection
• Documentation & Training –the Tools
• Support
• Legal Documents and Compliance
• Role as a sales tool
• Role as a training tool
• Role as a reference tool
• Role as in reducing liability
• Extension of the legal documents
The Table of Contents is a Required Disclosure Item
Discussions with Key Stakeholders
Review existing material, forms, & documentation
Develop preliminary outline
Determine gaps in current documentation
Assign responsibility for content creation
Identify Subject Matter Experts for gaps
Interview Subject Matter Experts
Onsite observation of units & documentation
Resolve Best Practices Conflicts
Draft material to cover all identified gaps
Edit all material into common style & “voice”
Revise first draft of Operations Manual based on client & legal input
Disclosure document with 23 items
Disclosure fourteen days prior to sale
Final Franchise Agreement seven days prior
Consistency with Franchise Disclosure Document
Financial Performance Representations
State Regulations
14 registration states Regulate advertising
Business opportunity states
Some remnants of the “Old FTC Rule” remain
Determining applicability (even definitions vary –NY)
States having no franchise or filing requirements
States having franchise registration requirements
States where franchisors must file to comply with business opportunity laws
•Within Indiana, Michigan and Wisconsin, registration is effective immediately upon the application being filed.
•Florida, Nebraska, Kentucky, Utah and Texas require a simple exemption filing. Once that is filed, a franchisor can begin tooffer franchises.
•South Carolina provides an exemption if the franchisor has filed a State trademark registration.
•Connecticut, Maine, South Carolina and North Carolina provide an exemption if the franchisor has obtained a Federal registrationof its trademark
•Six States require registration of advertising prior to use. (CA, MD, MN, NY, ND, WA)
•New York, Oklahoma and Rhode Island require the FDD be provided to a prospective franchisee at the earlier of (i) the 1st personal meeting held to discuss the franchise or (ii) 10 business days before any agreements are signed or any monies paid (including fully refundable deposits).
•Michigan and Oregon require the FDD be provided to a prospective franchisee 10 business days before any agreements are signedorany monies paid (including fully refundable deposits).
•Many states also have State Relationship Laws that impact issues such as franchise termination or non-renewal. Your franchise legal counsel can advise you on relevant issues involving these states.
•Check with your franchise legal counsel for additional details and updates which are available.
Cannot provide Earnings Claims unless in Item 19
• No information on sales
• No information on earnings
• Limited information on expenses (costs as a percentage of total costs are ok)
• Start-up costs are included in Item 7 and must be disclosed
Advantages and disadvantages
• Must be appropriate
• Sell faster?
• More or less litigation?
Some choose not to do Earnings Claims
• For good reasons, bad reasons, or bad information
• Selling franchises in the face of no FPR
• Some industries more important than others (food vs. direct sales)
Start locally, then regionally
• Cluster support
• More effective franchise advertising
• Consumer advertising economies
• Brand building
• Buying economies
Don’t expand faster than your support capability
• Quality control is key
• Nothing sells franchises as well as happy and successful franchisees
• Three-hour drive time
Different franchises require us to target different types of franchisees –affecting the media and message used for effective marketing.
Identify your prospect as narrowly as possible
• Survey Competitors
• Background
• Hot Buttons
• Media
• Survey Top Franchisees
• Characteristics of top performers
Are we selecting the right lead generation strategies?
Is the advertising message appropriate for our targeted franchisee profile?
Are we targeting the right prospects and using the right media based on our development strategy?
(Media Dollars Per Sale Excluding Broker Fees)
• Most franchise companies do not have an unlimited marketing budget
• Circumstances will be very different
• Goals
• Budgetary restrictions
• Geographic focus
• Profile of your franchisee and your customer
• Quality of existing websites and materials
• In-house resources and their capabilities
• Competitors
• Need to allocate resources based on an integrated lead generationstrategy
• A canned approach will notwork
Franchise marketing is very different from consumer marketing
The Five Sales:
• Go into business for yourself
• Franchising is the way to go
• Our industry is best
• Our company is best
• Now is the time
Franchise marketing is highly regulated
Tools:
• Your web page should be your first concern
• An ebrochureis essential for credibility –different message from web
• Video and other recent tools
Be sure to have your attorney and registration states review all materials
Unique process unlike any sale
• Quit your job
• No more benefits, paid vacations, 401ks
• Put your trust in someone you have never before met
• To invest your life’s savings
• In a business in which you have no experience
• And to which they are making a “lifetime” commitment
And, oh, by the way, I can’t tell you how much you may make
Stage 2: Qualify/Convert
PROSPECTS (100)
LEADS (1000)
Stage 3: Customer
Stage 1: Generate/Assign A good concept +The Right Message +Marketing Plan +Adequate marketing budget +Good sales technique
Older studies indicate the average new franchisor will sell:
• An average of 9, 11, and 13 franchises in their first three years
• Median sales of 4, 5, and 6 sales in their first three years = leads = meetings = franchise sales
• First lesson of franchise sales: Nobody ever “sold” a franchise
• Psychology of “the award”
• Two-way street, you must qualify
• If you do qualify, you are special
• You must follow our rules
• This psychology must permeate your thinking and your technique –we are not salespeople, we are facilitating an award
• “Buy” vs. “Invest” in a franchise
• “Franchise Support Center” vs. “Headquarters” or “Director of Franchise Development” vs. “Franchise Salesperson”
Lead Received, Input and Qualified Electronic or Print Brochure Sent to Candidate Confidential Questionnaire (CQ) Received
Personal Interview Scheduled –Concept Review Call
FDD Sent to Client for Review and FDD Review Call Scheduled Background, Criminal, and Reference Checks FDD Review Call, Unit Economics Call Scheduled
Unit Economics Call Held, Support Call Scheduled Support Call Held –Territory Call Scheduled
Call Held Finance Call Scheduled
Discovery Day Held at Franchisor’s HQ Decision is Made on Candidate’s Approval PRELIMINARY Approval is Granted Franchise or Site Selection Agreement Signed
2024 iFranchise Group.
• Be selective
• Hire the best you can afford
• Maintain personal involvement
• Let brand maintenance and the potential for franchisee success be your guideposts
• Train your sales staff
• Measure everything
• And, most of all, be sure a standard process is in place for handling each prospect
Strategic
We can modify our programs to meet the needs of any company getting into franchising. Our fees can range from $20,000 to $200,000+.
Consulting and legal costs vary based on franchise company’s situation:
• Desired speed of growth influences services needed
• Ability to do work internally
Do not go into franchising undercapitalized
• Legal fees: $15,000 to $35,000+
• Consulting and Development: $40,000 to $200,000
• Organizational expenses: $10,000 to $15,000
• Franchise Marketing: $8k -$15k per sale (six months)
• Personnel: varies widely
• Can bootstrap growth
• Can spend hundreds of thousands
• Franchising is a means of duplicating success, not creating success
• Thrives by creating win-win situations
• You must be selective
• Franchising is a new and different business
• Is not the right solution for every business
• Provides one of the most powerful business expansion models ever developed
