Franchising Your Businessby

Agenda

1. The History of Franchising

2. What Makes a Good Franchisor

3. Turning Your Business into a Franchise

4. Why Use Franchise Connect / Signature Franchising

– The Process5. Questions and Answers

The History of Franchising

• What Is Franchising?

• Why Franchises Are So Successful.

Edward ClarkSinger Sewing Machine Company

The First Franchisor

What is a Franchise?

A franchise is a business model created by an individual or a team of individuals, called the franchisor, that grants the right to someone to sell the business model’s proven or well-recognized goods or services under a pre-defined set of terms and conditions, also known as a “system.”

The relationship between a franchisor and franchisee is held together by a contract called a Franchise Agreement which outlines the privileges, terms, conditions, restrictions and other details of the system.

I’ll Bet You Didn’t KnowThe Indian Chamber Of Commerce says…

• Over 75% of Indian’s dream of owning their own business! – but few every buy! Fear drives them away.

• Estimates that franchised businesses have a 90% success rate within 5 years of opening.

• Non-franchised businesses have only a 48% success rate within their first 6 years.

The Four Elements of a Franchise• Brand

– Brand - the name associated with the services delivered in a memorable and satisfying experience to the customer

• Operating System– Operating System - institutionalizes the excellent service delivered in a memorable

experience so it can be done over and over again from Franchise to Franchise in a consistent manner

• Support System– Support System - helps the Franchisee get better and better at delivering the service in a

memorable experience & helps a Franchisee improve their performance

• Franchisee  – Franchisee - the individual motivations or reasons for being in a good system, as well as

the talents and experience delivered to the business.

Franchise Statistics

• Franchise business account for approximately 12% of all businesses.

• Franchise businesses account for about 40% of all retail sales in the India.

• A new franchised business is opened every day of every business day. 10

• There are an estimated 1,200 franchise companies operating in India doing business through more than 1,20,000 retail outlets.

Franchise Statistics

• It is estimated that franchise businesses were responsible for over $1.5 trillion in economic output.

• Over 10 million people are employed globally by businesses within the franchising industry.

Franchising WorksA recent Gallup poll of 994 franchise owners:  produced the

following snapshot of the field.

• 94% considered their franchises successful. (How many employees would  say their companies were succeeding?)

• 75%  said they'd "do it all again". (Most employees seem dissatisfied with their work, pay and prospects for advancement.)

• 6% reported unhappiness with their franchisor (No industry is perfect, but the  media's reporting of unfairness seems overrated.)

Top 10 Reasons Why Franchises Are Purchase?

1. People want to buy into an idea that’s already proven to be successful.

2. The management of the business has already been formulated.

3. The support network is already in place.4. The chances at receiving business financing are greatly

improved.5. They buy a company has a “Brand Name.”6. Collective buying power.7. Local and national advertising.8. Supervision, training programs and consulting.9. Managerial, operational and accounting systems.10. Stay current with legal issues.

All Franchisors Assume Two Things

1. Their new franchisees don’t know

anything about their business.

2. This the first time their franchisees have been in business.

Franchise Investments

• There are franchise investments that range from

Rs 1,00,000 to Rs. 5 Cr +

• Franchise companies average between 50 and 100 units.

Why do people buy franchises?

• Assurance of adequate capitalization.

• Ongoing product research and development.

• Protected location.

• Franchisor has a vested interest in their success.

• In a franchise you are in business for yourself, not by yourself.

Reasons Prospects Open a New Business Now

• In Five Years They Could Have Something to Sell.

• With a job they have uncertainty

Turning Your Business Into a Franchise

• Key Issues to Determine

• Transformation – Business Owner to Franchisor

• How Do I Make Money

Franchisors Revenue Streams

• Franchise Terms between 5 and 20 years.

• Initial Franchise Fee. Rs.1,00,000 to Rs.1,00,000 average

• On Going Royalty fee of 5 - 10% of sales.

• Monthly Advertising fee of 2 – 5% of sales.

2 Key Points

1. Not All Franchises are Created Equal!

2. Not All Franchisees are Created Equal!

Basic Types of Franchises

• Single Unit Franchise

• Multi Unit Franchise

• Multi Exclusive Area Unit Franchise

• Region / Area Developer

• Master Franchise

Single Unit Franchise

• Just, as it sounds. The franchise owns one unit.

Multi Unit Franchise

• A purchase to the rights of 3 or more units at once.

• Often this is done with new to the area food concepts.

Multi Exclusive Area Unit Franchise

• The franchise is given the “rights” to open as many units as they want in a defined area.

• The size of that area could be a city, a county or even a complete metropolitan area.

Region / Area Developer

• Operates one or more units

• Responsible for selling licenses and product to prospective franchisees

• Receives a portion of all fees

• A great business for the Executive who has experience in management, sales or human resources and training.

Master Developer

Examples of some of the Franchisors offering Master and Area Developers

Key Issues To Determine

• Your Own Franchise Goals.

• Locations and Protected Territories.

• Ability to Expand.

• Pricing

• Use of Advertising Dollars.

• Restrictions on Products and Services.

• Obligations / Operating Standards.

Key Issues To Determine

• Earnings Claims – if any.

• Company Growth Plans.

• Target Prospects.

• Training Programs

• The strength of the competition.

– Locations, Marketing, Operational Abilities.• What makes your franchise better?

10 Signs of A Great Franchisor

10. In Demand Products & Services

9. Responsiveness During the Initial Process

8. Outstanding Operational Training (accounting systems, CRM etc.)

7. Continued Training From Franchisor

6. Continued Support From Franchisor

10 Signs of A Great Franchisor

5. Site Search Assistance

4. Build Out Assistance

3. Financing Assistance

2. Proven Marketing Programs

1. Happy Franchisees

Is Your Business Right for Franchising?

Do It Right the First Time

• It highly important to have your franchise set up properly by an expert.

• Once you become a franchisor you are transformed from business owner to franchisor.

Why Us Franchise Connect / Signature Franchising

• The Process• Packages & Services• Final Product – The Franchise

Signature Franchise Program

Franchise Connect /

Signature Franchising

Is Here to Help

Client’s Initial Meeting:

• The Client and Signature Franchising team will discuss the franchise development of the Client. The initial discussions are for the purpose of reviewing the company’s history, operations, and goals, as well as identifying Client’s principal franchise strategy. Subsequently, in meetings with individual departments, issues related to developing a customized franchise program will be discussed in detail, and preliminary schedules for completion of work product will be established.

Concept Research and Review for Client’s Segment of Franchising:

• Signature Franchising’ personnel will examine the basic concept, operational format, and general marketing characteristics of Client’s business. Each will be benchmarked against those of comparable franchisors and businesses in various industries and will be evaluated in terms of their overall effect upon the franchise program. This review will encompass types of products and services offered; types and sizes of locations utilized; total investment for establishing an outlet; and sales and earnings of the corporate entity and franchising concept.

Analysis of Client as a Franchise

• A Signature Franchising’  Consultant will analyze the operations of Client to review its operational characteristics and recommend policies and procedures aimed at retaining or improving those suitable for franchising and altering or eliminating those that are not. The Signature Franchising’ Consultant will also identify operational elements of the business critical to the legal, operations, and marketing aspects of the franchise program, and relay this information to appropriate Signature Franchising’ personnel.

Client’s Franchise Structure• Signature Franchising’ will make recommendations

relating to the critical business decisions that become the foundation of the franchise program for Client’s and that are incorporated into the legal, operations, and marketing documents and strategies. These issues include policy formulation, market potential, speed of expansion, the franchise structure best suited to Client’s situation, and current company resources available to meet franchise goals.

Client’s Franchise Owner Profile

• The ability to identify specific characteristics of the target franchisee is essential to structuring a franchise program. Qualifications, such as financial resources, previous experience, and business skills, will be addressed, based on the needs of Client and Signature Franchising’ knowledge of the franchise marketplace. Proper education and training as a service person within the subject industry may be a requirement for ownership of this franchise model.

Type of Franchise Offered • Client’s may offer individual franchises (Single Territory),

multi-unit franchises (Larger Area, multiple units), or sub-franchises (Brokerage Structure) – or all three – depending on such factors as unit investment, complexity of operation, cost and nature of support programs, and expansion goals. In addition, Client may offer a start-up franchise or a conversion franchise (to a compatible existing business) or both. Signature Franchising’ will recommend a franchise program designed to meet Client’s needs and to most effectively accomplish the company’s goals.

Determination of Territory for Client’s Franchisees

• Based on the nature of the Client’s business, competition and other factors, Signature Franchising’ will suggest whether or not the franchisee needs an exclusive territory and the degree of exclusivity. If it does, Signature Franchising’ will analyze available territorial and demographic data from Client existing business and prioritize appropriate criteria, such as population, competition, income levels, size of the market needed to support a franchise, industrial base, or business base. It is critical that we accurately establish the size and scope of each of the franchisee’s territories.

Franchisee Support Programs

• Signature Franchising’ will identify the type and scope of services to be provided to Client franchisees, including initial training, supervisory visits, site selection, and advertising support. In this manner, a comprehensive support program can be planned and the cost of that program anticipated

Internal Staffing

• Signature Franchising’ will assess human resource needs for implementing the franchise program and will determine how best to meet the needs, whether by expanding the roles of current employees, or by creating new positions. Signature Franchising’ will also review Client’s organization structure, assess its adaptability to franchising, and recommend changes, if necessary.

Franchise Revenue Sources for Clients Franchise Holdings:

• Signature Franchising’ will review Client’s revenue options and recommend appropriate revenue sources that may contribute to the new franchise organization’s income and profits. The available revenue sources are outlined on the following slides

Initial Franchise Fees:• Franchise fees will be determined after weighing

various factors, among them the marketability of the franchise at various price levels, competition from other business opportunities available to potential buyers, and the cash flow produced by the business. The recommended initial franchise fee will be structured in light of a number of factors, such as front-end selling expenses, advertising, commissions, training, site and start-up assistance costs, market needs, and other variables.

Royalties:Royalties will be recommended after a review of Client’s

business and in light of the needs of franchisees and current industry practices. They will be based on the need to maintain sufficient corporate cash flow, to support general and administrative costs and franchise services, and to provide ongoing income for the continuing operation of the franchise. They must also be affordable for franchisees while being profitable for the franchise entity. Signature Franchising’ will develop a structure for collection and management of royalty income for the Client Franchise entity.

Advertising Fees:• Local, cooperative, and corporate advertising fees will be

recommended after an evaluation of the amounts currently spent for advertising in operating units and the type of advertising needed at the unit level. Corporate advertising fees required of franchisees will be based on the need for finished advertisements in their various forms. Although Client currently uses very little advertising dollars for promoting the business, we will want to establish a program for the franchisees that we can hold them to in their respective markets.

Other Income for Franchisor:• Some franchisors derive income from other sources as

well, including the sale of products and services that Client’s may wish to distribute to the franchisees. Signature Franchising’ will assist the Client in determining which sources are appropriate and practical.

Client’s Franchise Structure Planning:• Following the Signature Franchising’ Consultant’s analysis, team members

assigned to the Client project will review all critical decisions and weigh the impact of these decisions on key aspects of the franchise program. Signature Franchising’ will prepare detailed pro-forma and financial projections, including a five-year cash flow analysis of both individual units and the Client franchisor organization. In addition, Signature Franchising’ will make recommendations relating to the operational, legal, and marketing characteristics of the business that may impact the success of the franchise program for Client.   Signature Franchising’ will make recommendations relating the operational and marketing characteristics of the program:   This plan provides key franchise business decisions, assumptions, and financial projections needed to set short and long term goals. Client could use this plan in presentations for financial institutions or for corporate planning.

Franchise Agreement• Signature Franchising will draft and submit to the Client’s

attorney for review and approval, a Franchise Agreement defining the contractual relationship between the Client’s corporate entity and the new Client’s franchisees. This Agreement will be developed in conjunction with input received from Signature Franchising’ program analysis and recommendations, and will be based on current industry practice and recent developments in franchise law.

Franchise Registrations and Filings: • After the Client attorney has approved the final drafts of the

Franchise Agreement and Disclosure Document, Signature Franchising’ will prepare the franchise registration applications required by the client’s state regulatory agencies. Applications will be based on information provided to Signature Franchising’ by Client and will be submitted to Client for submission to the state regulatory agency. Included in these applications are materials such as the Uniform Franchise Registration Application, Supplemental Information Form, Salesman Disclosure Form, Uniform Consent to Service of Process, and Corporate Acknowledgment and Certification Page, as well as copies of advertising materials and the Disclosure Document.

Client’s Manuals:• Initial Analysis and Outline: Signature Franchising’ will

develop an outline that identifies and describes the topics that should be covered in the comprehensive Client’s Franchise Operations Manuals. Based on discussions at the initial Client meeting and material supplied by Client’s team, this outline will reflect Signature Franchising’ initial understanding of the issues relevant to the franchisee and will be specifically tailored to the franchise concept. The Operations Manual will then be designed and developed to be used specifically for the Client's franchise business.

Operations ManualsSignature Franchising will develop the following Manuals for

your Franchise Business

• Pre-Opening Manual

• Human Resource Reference Manual

• Suggested Employee Manual

• General Operations Manual

• Business Resource Manual

Franchising Website:• Signature Franchising web designers have the creative talent to

appeal to your sense of style when designing your franchise web presence. The training and knowledge of current web development standards and practices will enhance your ability to turn your Franchise Program into reality!

• If you presently have a website, then our web designers will

develop additional pages devoted to the Franchising arm your of your business and add/link them to your present website. If you do not have a website, then our Signature Franchising website designers will create a complete Franchising website specifically for your franchise sales.

Franchise Brochure• Franchise Brochure: Signature Franchising will have its'

professional brochure designers prepare a full color brochure for distribution to Clients potential franchise prospects. The brochure will ready to print in whatever quantities requested by Client. The cost of printing the Brochure will be at the expense of Client and Client may select printer of their choosing. Signature Franchising will print the Brochure for Client, if requested, but the printing cost is not included in the program.

Consulting One Year General Consulting: For one year, beginning at the time Client’s

initiates the development program with Signature Franchising’, members of Signature Franchising’ professional staff assigned to the Client project, will be available on a consulting basis to advise and assist in the implementation of Client’s franchise program and to supply useful information concerning current practices in the industry and in franchising in general. Signature Franchising’ personnel can be consulted, via mail, electronic mail, or telephone. These consultation services may be used to discuss franchise issues, review the Client’s marketing and sales performance, monitor development of the Operations Manual, refine growth objectives, or for any other consulting purpose, provided that these services do not constitute creation or revision of actual work product beyond that specifically described in this Proposal. If Signature Franchising’ attendance is required at meetings elsewhere than at Signature Franchising’ headquarters, the Client will be charged for reimbursable expenses, as specified at the end of this Proposal. Client will have the option of extending the Consulting Program with Signature Franchising after the one year period.

Consulting Clients

Below is a partial list of the products and services we offer with the Signature Franchising Program

for accepted companies.• Franchise Agreement prepared for you.• Marketing, Advertising, and Sales by our Franchise marketing

specialists• Website Development for your company exclusively• Franchise Sales Brochures in full color• Established Franchisor Assistance with updates and marketing• Area Development Program for multiple Franchise Sales• Trademark Registration by our Trademark Attorney• Pay Per Click, Search Engine  Advertising Programs • Franchise Broker Sales Program to sell your Franchise• Operations Manuals completed exclusively for your business• The Signature Franchising Program includes preparation of legal

documents, operations manuals and marketing materials. All of these are created by Franchise professionals assigned to your program that works closely with you to create a Franchise that can deliver results for you.

Let us Guide you on the trip of a Lifetime Thank You

www.franchiseconnectindia.com

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