Looking for a Franchise? The Good, the Bad, the Ugly

1. Looking for a Franchise?The Good, the Bad, the Ugly By Jim Smith and Bob Vitamante, SCORE Counselors, Santa Barbara Chapter of SCORE www.sbscore.org

2. GOALS/Promises FOR TODAY • An overview of Franchising • The major components • The principal areas of conflict • Prepare future franchisees for decisions to move forward

3. You will help direct today’s meeting • This will be interactive – ASK Questions! • Where are you in your Decision cycle • Just Curious? Exploring Concept? Actually Searching? • Goals: Have them? • Who is today’s audience? • (Potential) franchisee? • Franchisor

4. First, a little about Us Bob Vitamante (a Franchisor) Jim Smith (a Franchisee) A franchisee Ice cream, yogurt, etc Consulting & accounting A Franchisor Development, training and sales 0 to 22 locations in 4 years A business owner/operator Printing company • Olsten Temporary Services • 3rd Largest temp biz in US as a Franchisor and biz operator • Responsible for all support companywide • Reacquired franchises and trained new owners & licensees • Pinkerton’s & Select Temps • CPA with KPMG, Peat Marwick

5. What is the franchise business? • A business arrangement where the owner of a product/service(the franchisor) licenses another (the franchisee) to market his product or service in a defined territory following the franchisor’s guidelines. • There is virtually no product or service that is not available through a franchise business.

6. Types of Franchises? • Product/ Trade name Franchise • CocaCola, BMW, Mercedes • Business Format Franchise A complete package is offered: product, trade name, operating systems, quality standards, training, support and facility design. • Express Temporaries • Mail Boxes • Jiffy Lube • Molly Maids

7. The GOOD (Pros) of Franchising • Proven business system & track record • Name Recognition • Training & Support • Site Selection • Financing and (possibly) lower financial risk • Advertising

8. The BAD (Cons) of Franchising • Risk of investment • No Control over Franchisor support • Ongoing Franchise Fees & Royalties • No Control of Franchisor actions • Limits on Franchisee ability to change

9. The Ugly of Franchising

10. The Ugly of Franchising Franchisee has little control • Franchisee wants to expand • Franchisee wants to work differently, use own ideas, sell new products or services • Franchisee wants to sell business to others • Franchisor wants to expand • Franchisor’s Brand becomes negative

11. The Ugly of Franchising Franchisor support is inadequate • Systems don’t work, or function poorly • Promised advertising and Branding is poor • Training is inadequate or not timely • Franchisor’s support team collapses • Royalties and fees are not adjusted ‘fairly’ • Product costs rise, higher than local area

12. Selecting a Franchise - Some considerations • Demand? - Is there a product/service demand? Fad? Seasonal? Does it generate repeat business • Competition? - Similar businesses in your area? Internet impacts? Is your product competitive? • Name Recognition? - Is there brand recognition? How long has Franchise been in business? Any complaints? • Training offered? Initial training? Where? How long? Online or in person? Ongoing learning opportunities? • Support?– Advertising, Processing, Supplies, Equipment, Location and Business advice, Penalties for ‘non performance’?

13. Disclosure Statement!!!! Get it! • Franchisor background and Business Background • Litigation History and Bankruptcies • Ongoing franchise costs • Restrictions • Training • Termination Policy • Advertising • Current and former Franchises, & related associations • Earning data:Incomes per size, average income, gross sales and geographics

14. It’s okay to disagree!

15. General Principle #1 Know thyself • Strengths • Weaknesses • Special skills & Talents • Passions • Likes & Dislikes

16. Principle #2 Know thy (Personal) Goals What are your personal goals for business • To lead or to follow? • To work alone or with others? • Inside or outside? • Creative expression? • Contribute to society? • Make a living for self and family? • Very little stress? Safety? • To build? • To get rich? By when?

17. Principle #3 Know thy (Business) Goals • What results do you want? • Must be specific, actionable and measureable • Must be time bound • What is your business cycle - Daily? Weekly? Monthly? • Why? • What needs do you want fulfilled? If you don't know where you are going,you'll end up someplace else.Yogi Berra

18. Principle #4 Need Help figuring this out? Get a mentor! Who or What is a Mentor? A Quick History

19. Principle #4 Characteristics of a Mentor • Real life experience • Subject matter expertise • Demonstrated achievement • Cares about you and your growth • Objective, neutral • Honest and open, and knows their limits • Solution oriented • Can meet you where you are; been there, done that • 'Reduced ego' - Limited personal investment of 'self' • Big picture oriented

20. To Summarize Our focus was on becoming a franchisee: • How they work and your role • Your business priorities • Your planning, goal setting, etc Your external team – Mentors – Don’t go it alone, contact us at www.sbscore.org

21. Thanks for your attentionGood Luck!