ReportWire

Tag: Franchisees

  • 5 Ways Franchises Can Benefit From Leveraging Offshore Talent | Entrepreneur

    5 Ways Franchises Can Benefit From Leveraging Offshore Talent | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Emerging franchise brands are laser-focused on growth, and rightfully so. However, growth consumes a lot of cash, and many are undercapitalized and unable to staff adequately in the initial stages of the business. A more nuanced approach to talent acquisition can facilitate success.

    Leveraging offshore talent is a lesser-utilized growth strategy for emerging franchise brands. Outsourcing no longer fills just junior or customer service roles — a common misconception in today’s landscape. Now, high-value, skilled workers are available around the globe to support completing higher-level work. Offshoring helps franchisors proactively hire as part of their growth strategy, instead of staying reactive while conserving cash.

    Historically, I have seen very few brands leverage outsourced labor. However, that is beginning to shift as franchise leaders begin to understand the benefits of having an international talent strategy. There are compelling reasons that fast-growing franchisors can benefit from leveraging offshore talent.

    Related: Your Most Pressing Offshoring Questions, Answered

    1. Access to a broader talent pool

    Talent scarcity persists as a substantial issue that won’t soon go away. It’s becoming harder to find, afford and retain top talent. A ManpowerGroup report revealed that 75% of employers say they have difficulty filling roles, and a study by Korn Ferry found that by 2030, there could be a global talent shortfall of 85 million people — to the tune of $8.5T in unrealized annual revenues if the issue is left unaddressed.

    A shift in the talent procurement process is necessary to address this scarcity. Offshoring provides access to a much broader, global talent pool. Franchises need access to a wide range of skills and expertise that may be limited or fiscally prohibitive in their local markets. Offshoring can be particularly beneficial for more specialized roles within the business.

    2. Cost efficiency and scalability

    A significant outsourcing advantage is cost savings. Offshore talent carries a much lower expense compared to local hiring, with significantly reduced budgets for wages and benefits. With the right offshore talent, work quality won’t be sacrificed. This can be crucial for franchisors that need to maximize their resources during periods of rapid growth.

    It takes a long time for a franchise brand to become royalty-sufficient, which is why growth is especially important for new businesses. As franchises grow, the need for broader skills and additional staff rises. Offshoring provides the flexibility to expand or contract the workforce as needed, without the expense or complexity of hiring locally.

    3. Quality improvement

    Any business in growth mode struggles to hire ahead of the demand curve. Hiring proactively can help franchisors expand their capacity ahead of that curve to maintain high quality, brand value and customer satisfaction. Often, they delay hiring crucial roles or bring on less experienced workers to reduce costs. These are not mutually exclusive.

    Most people think of outsourcing as transactionally delegating low-level tasks that no one wants to do. Instead, franchisors should consider offshoring, hiring skilled workers to fill roles earlier than they could otherwise with domestic workers.

    For example, leveraging offshore talent could mean that domestic employees can take on new roles, such as management responsibilities, expanding capacity and facilitating greater business value.

    4. Round-the-clock operations

    Offshore teams often operate in different time zones. Meaning, they can complete their work outside of the franchise’s local business hours, effectively enabling 24/7 operations.

    Operating with longer hours can significantly increase project turnaround times and improve customer satisfaction.

    5. Leadership focus

    Within growing companies, executives often get mired in operational or administrative details. Through offshoring, franchise executives can affordably find support that relieves operational burdens and allows them to focus on core activities, such as franchise development and strategy and management, which spur growth and expansion. Offshore teams can handle repetitive and time-consuming tasks, which in turn increases organizational efficiency and productivity.

    With this level of support, leaders can expand their bandwidth and add strategic value to the organization.

    Related: Hiring Offshore Talent? Here Are the Top 10 Countries to Recruit From.

    Investing in offshore talent allows room for franchises to grow. Businesses gain access to a wider range of skilled talent, and they can upgrade internal teams and foster leadership capacity and effectiveness. Cost-efficiency and 24/7 service provide much-needed relief to young franchise businesses — and customer service and profitability don’t suffer in the process.

    Offshoring helps growing franchises increase organizational value. The flexibility that engaging today’s offshore talent provides creates a skilled global workforce that fulfills more roles than customer service.

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    David Nilssen

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  • 6 Key Metrics Top Franchise Restaurants Use to Measure Potential | Entrepreneur

    6 Key Metrics Top Franchise Restaurants Use to Measure Potential | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When it comes to measuring potential, it often feels a lot like guessing. We use vague sayings like, “Go big or go home,” or “You can either be a big fish in a small pond or a small fish in a big pond.” It’s either big or small. Successful or not. Worth it or worthless.

    How come we’re only measuring potential like it’s purely black or white?

    For under-appreciated small giants with limited resources, this is too simplistic. If you have limited resources, time and energy, scaling takes thoughtful strategy — something that franchise restaurants have long learned the hard way.

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    Thalia Toha

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  • McDonald’s Is Raising Its Franchise Royalty Fee on January 1 | Entrepreneur

    McDonald’s Is Raising Its Franchise Royalty Fee on January 1 | Entrepreneur

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    McDonald’s is increasing the royalty fee for new franchisees to buy and operate a restaurant, the company announced on Friday. It’s the first such increase for the brand in nearly 30 years.

    Starting on January 1, the fees will rise from 4% to 5% in U.S. and Canada. However, the increase will not apply to existing franchisees running current operations, those purchasing franchised locations from other operators, rebuilt existing locations, or restaurants transferred within family members.

    The higher rate will only apply to new franchisees, buyers of company-owned restaurants, relocated establishments, and other scenarios involving the franchisor.

    “While we created the industry we now lead, we must continue to redefine what success looks like and position ourselves for long-term success to ensure the value of our brand remains as strong as ever,” Joe Erlinger, McDonald’s U.S. president, told franchisees in a message viewed by CNBC.

    Related: Thinking of Buying a Franchise? These Four Industries Are Flaming Hot Right Now

    McDonald’s also added that the uptick in fees probably won’t affect a majority of its current market, given that the 5% fee is standard in other countries, and the 4% fee was only used in North America.

    “Because the royalty rate is currently at 5% in all owned markets, except for the U.S. and Canada, this royalty rate increase will not apply to a majority of the existing restaurant portfolio,” McDonald’s wrote in the announcement.

    Franchise royalty fees are a percentage of monthly earnings that a franchisee pays to a franchisor. According to the International Franchise Professionals Group, the average royalty fee for a franchise typically ranges from 4% to 12% or more, depending on the type of franchise.

    For food franchises, since they are high-volume businesses, franchisees typically pay lower royalty rates, making the 5% fairly standard for the industry.

    As of 2021, there are over 13,400 McDonald’s locations in the U.S., 95% of which are operated by franchisees, according to Global Data.

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    Madeline Garfinkle

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  • Crafting a Brand Story: The Secret Ingredient That Will Set You Apart From Competitors | Entrepreneur

    Crafting a Brand Story: The Secret Ingredient That Will Set You Apart From Competitors | Entrepreneur

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    The following excerpt is from franchise expert Mark Siebert’s book The Multiplier Model. Buy it now.

    Take a moment to think about this question: What is it about your brand that would make a customer want to do business with you instead of your competitors?

    A big part of success is that the customer picks you because of your story.

    If you’re looking to duplicate your business, you need to have a compelling story to tell, you need to tell it in a memorable way and you must embrace it as the crux of your success. Here’s how to get started.

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    Let your slogan tell your story

    One way successful brands tell their story is through their brand slogan. Let’s look at one of our nation’s most iconic brands—Dunkin’ Donuts—which has recently been rebranded to Dunkin’.

    The “America Runs on Dunkin”” slogan, adopted in 2006, speaks to fast-moving consumers. The story this conjures up is a mixture of the following:

    • Compelling: We’re here for busy people.
    • Logical: You need coffee and fuel—and we’ll get it to you quickly.
    • Emotional: We’re Americans, and we’re in this together.

    Note that the slogan does not even mention coffee or doughnuts, and I suspect that’s because it would change the underlying brand story too much. As Dunkin’ has evolved into a beverage-first, on-the-go brand, their core story is the same—fast, accessible and reasonably priced bakery items and beverages for busy people.

    In their own words, it’s “part of our guests’ everyday routine.” Their story and how they communicate it is why they are consistently a leader in the quick-service restaurant space.

    Your slogan should be emotionally moving

    While this is not a how-to article about writing your company slogan or tagline, consider the emotions of some of the best-known slogans. The Walmart story has consistently revolved around selling more for less—and its slogans have reflected this, from “Always Low Prices, Always” to the current “Save Money. Live Better.”

    Consider some of the examples below and what they tell you about the brand’s unique story, its emotional appeal to customers and its implied call to action:

    • Papa John’s: “Better Ingredients, Better Pizza” invokes a feeling of a high-quality eating experience.
    • Planet Fitness: “Judgement Free Zone” relieves the anxiety of working out in a gym, especially if you are new to a fitness journey.
    • Jimmy John’s: “Freaky Fast” assures its consumers of rapid service.
    • Southwest Airlines: “You’re Now Free to Move About the Country” and, more recently, “Low Fares, Nothing to Hide” gives its customers a sense of trust when traveling.
    • Big Blue Swim School: “Life’s Big Moments Start Here” invokes happiness and pride when learning how to swim and taking that with you for the rest of your life.

    Related: How to Finance Your Franchise

    Position your franchise as the best option

    The goal when telling your story is to convey that consumers should choose you because in some way you are the best option. Taco Bell has succeeded at that with its “Think Outside the Bun” campaign.

    I expect many of you have never heard of McDonald’s early competitors: Burger Chef, Dee’s Drive-In, Sandy’s, Red Barn and Druther’s (which began its life as Burger Queen). How about Geri’s Hamburgers or Wetson’s?

    But I’ll bet you all know about Burger King and Wendy’s. Why is it that Burger King and Wendy’s have thrived while the others didn’t?

    One reason is that Burger King positioned itself as the “Have It Your Way” burger. When introduced in the early 1970s, this message was compelling (“Fast-food ordering doesn’t have to be so strict.”), logical (“Why would I buy something that wasn’t exactly what I wanted?”) and emotional (“You deserve this.”).

    Instead of following a copycat strategy (which almost never works in business expansion), Burger King’s message told consumers they had a choice. As a practical matter, McDonald’s could not compete with this at the time because it would have required a reworking of its kitchen operations.

    Wendy’s, meanwhile, survived by appealing to an older audience through its Clara Peller ads, which told its story through the voice of an octogenarian with an emphasis on good old-fashioned hamburgers.

    Whatever route you take, own it

    Using your slogan is a quick and straightforward option to market your franchise and tell your story about why you are the right choice in a world of competition. As seen with the plethora of success stories of other franchises, it’s perfectly attainable to be concise in your words while leaving a prospective consumer empowered, relieved, thankful, trustful, eager or any other emotional verb.

    If your marketing strategy is strong, consumers will automatically think of you whenever they conjure up that specific feeling—and hopefully, sign up, purchase or eat with your franchise.

    Get started with The Multiplier Model

    Going from small business to successful startup to scalable growth takes more than good luck. It takes a system. Over the last 34 years, franchising consultant and growth expert Mark Siebert has been sought out by more than 70,000 executives looking to expand their companies. Out of those 70,000, only 5,000 had the right systems in place to go from successful to scalable. In The Multiplier Model, Siebert discusses the factors that determine if an entrepreneur is ready to scale their venture — and the best ways to get started. Read more.

    Related: Find Out Which Brands Have Ranked on the Franchise 500 for Longest, Earning a Spot In our New ‘Hall of Fame’

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    Entrepreneur Staff

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  • Boost Your Franchise With This Innovative Marketing Solution | Entrepreneur

    Boost Your Franchise With This Innovative Marketing Solution | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Franchising has become increasingly popular in 2023. There are a number of positive predictions, according to the 2023 Franchising Outlook Study, and forecasts show it will continue to grow. In fact, it will add more than a quarter-million jobs and another 15,000 new independent businesses this year. Franchising is an amazing business model, regardless of the product or service, from The Lube Center (for cars) to Diaper Services to Diamond Brokers, that can be reliably exercised by trained staff while minimizing the need for innovation.

    Ultimately, it creates a template for a successful business model, delivering a replicated product that consumers understand and rely on for a known quality, a known experience and a known price — without concern for the location, time of day or staff.

    But the success of a franchise lies in attracting the “best of the best” franchise owners and operators who represent the most compelling characteristics of our American spirit: motivated entrepreneurs willing to invest and commit to creating their own American dream as a business owner. A franchise must compete for these valuable franchisees by demonstrating their franchise provides a clear path to success with support and tools, making it an ideal investment choice.

    This article will explore a new franchise value that is obtainable, demonstrable and turnkey, that will not only influence the potential operator but will catapult existing franchise operations to new levels of success. This value is applicable to all forms of franchises in any industry — literally, any franchise that needs or would benefit from building loyal customers — but for the sake of providing examples, this will focus on the food service industry.

    Related: 5 Ways to Freshen Up Your Franchise Marketing in 2023

    Gain a competitive edge with a successful marketing solution

    Franchisees desire success just like you do, and beyond furniture and fittings, or supply chain operational challenges, it’s important to support all locations with critical marketing and sales support that sets them up for profitability from the start.

    However, the work doesn’t end once the franchisee has a successful launch. Across the entire franchise, from locations in operation for years to the newly opened store, consistent, reliable and valuable guest engagement and direct marketing are as important as the decision to standardize fries delivered directly from Idaho.

    Embracing a new, innovative approach to engaging the guest and leveraging the success of the individual locations for the success of the franchise will position both the franchisee as well as the franchisor to new levels of growth.

    So, to gain a competitive edge and to attract not only potential franchisees, but investors, integrating an ongoing and successful marketing solution into your franchise operations is a “must.”

    The role of integrated WiFi marketing in a franchise

    Effective marketing for a franchise requires the right technology to maximize return on investment. Studies show that 96% of customers prefer a business that offers free on-site WiFi (Cisco), and an overwhelming majority of customers are happy receiving promotions and messaging while connected to the WiFi. However, only a small percentage of franchises have turned their WiFi presence into a successful marketing solution, which can be accomplished through integrated WiFi marketing technology.

    This technology is actually a set of technologies that include WiFi, text, social media and digital displays integrated to execute a marketing campaign. And it provides a single operational point to oversee franchise-wide marketing campaigns, while also empowering operators to leverage those same technologies for localized campaigns.

    With integrated WiFi marketing, customers can access the free WiFi by providing their phone number or by logging in with Facebook, Google or email, and this builds a simple, consistent and reliable communication link directly to the device in the customer’s hand. This link allows the franchise to recognize the device and record their visits and general behaviors, such as the days they come in, times of day, duration of the visit, typical frequency and more. With this new data, the franchise is now able to hyper-target customers with messaging that resonates uniquely with their interests.

    With the customer data, personalized SMS messages with specific offers can be sent, and the franchise can track when a customer enters a new location and send them a message such as, “We’d love to hear of what you think of our Fresno location (link to survey), and for your time, we’ll upgrade your choice of combo meals.” Or it could even be something more fun like a link to the social presence of that specific store’s events page and asking for a “check-in.”

    Related: Is Your Customer Communication Actually Effective? Here’s How to Avoid the Limitations of Common Tactics

    Tying It all together for optimal success

    Since the goal of this article is to demonstrate a way a franchisor can provide value to attract top-performing franchisees, let’s look at a fully integrated example of WiFi marketing that ties in a WiFi greeting with social media, digital displays, text messaging and use of a QR code — all while customer data is being filtered and the messaging targeted — for revenue-generating results:

    1. A customer who has visited before and provided their information to access the free WiFi walks into the restaurant location and the device is recognized. The customer immediately receives a greeting via text message: “Thanks for visiting us again. How do $5 margaritas and $2 tacos sound with prizes and entertainment? We’re having a 4th of July fiesta. Learn more here (link to event on Facebook).”

    2. The customer goes to the Facebook event with a single click and (hopefully) “likes” the post and RSVPs to the event. While there, the customer learns that those who join the loyalty program get a free pint glass at the event and can reserve EXCLUSIVE VIP seating in advance — an offer only made to WiFi loyalty customers.

    3. The event and loyalty program benefits are further promoted on the digital display signage that has the following message: Get VIP status at our annual 4th of July fiesta. Sign up for our loyalty program by texting FIESTA to XXXX.” The digital display signage also has a QR code that can be scanned for more information on the 4th of July fiesta and a call-to-action to RSVP.

    4. The customer has now received messaging that accomplishes several important steps. First, the customer has been enticed to attend the 4th of July event. Second, the customer has been driven to the restaurant’s social media posts where they can engage, which in turn, ensures Facebook’s algorithm shows the posts more prominently. Third, the customer has been “encouraged” to join the loyalty program which, in turn, motivates the customer to become not just a repeat customer, but a loyal customer. And fourth, the digital display messaging and QR code further reinforce event attendance, loyalty program participation and social media engagement.

    Combined, this integrated approach to marketing the restaurant’s event and loyalty program translates to the customer attending and spending money at an event they may otherwise have not paid attention to or known about, and most importantly, the customer has transitioned from being a one-time customer to a loyal, revenue-generating customer.

    For the franchise, this is valuable because the solution is centralized, and all the marketing elements can be uniform, distributed in a timely manner and not be reliant on the individual franchise locations for compliance with the program. Additionally, since it can be automated, replicated and distributed across the entire franchise with the click of a button, the underlying marketing campaigns are synchronized and executed for maximum results.

    While for the franchisee, the campaigns are no longer a burden and allow the franchisee to focus on their operations, staffing and profitability driven by powerful marketing that drives repeat business and event attendance. Also, the franchise and franchisee both are able to see the tangible, black-and-white results of the effectiveness of the complete marketing campaign in real time.

    Related: How Franchises Can Utilize Technology to Change Consumer Behavior

    Effective marketing is essential to growing a franchise business, and the incorporation of integrated WiFi marketing technology can maximize ROI and help achieve business goals — while providing the franchise with a unique and revolutionary discriminator in the competition for the most desirable franchise operators.

    By offering Integrated WiFi marketing technology as part of franchise operations, franchisees can capture customer data, send targeted SMS messages, leverage social media, utilize digital displays and access real-time reports across the entire franchise. Overall, providing this technology can increase the franchise’s overall brand image, boost franchise success and contribute to overall brand growth.

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    Stephen Gould

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  • 4 Reasons You May Not Qualify For a Franchise | Entrepreneur

    4 Reasons You May Not Qualify For a Franchise | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Not everyone can or should become a franchise owner. It may seem like franchisors are overly aggressive in trying to sell franchises to new owners; however, a good franchise company is not looking to award a franchise to any random candidate who can afford the franchise fee.

    Like any good business, a good franchise company knows it can only succeed with great people in the system. And every franchise system has a preferred profile for who will make a strong franchisee — typically based on analyzing successful prior franchisees and creating an ideal avatar for success.

    The value of any good franchise system is a strong, consistent brand. A franchisor looks for franchisees who are a great fit for the services they offer and can provide consistency through business skills and acumen. For example, some franchises require more emphasis on sales leadership, while others succeed more through the execution and delivery of the service through team members.

    As you proceed with the franchise investigation process, you should expect that a franchisor will have as many questions about you as you do about them. It is true that many franchisors desire to grow quickly — after all, many of them are new emerging companies also. Growing units more quickly allows them to invest in the infrastructure, assets and personnel to support a strong franchise network. But a good brand will be very careful to only award franchises to candidates who pass stringent criteria and they expect to be the best representation of the brand.

    I always tell my candidates to treat the investigation process like a job interview. Once you get the offer, you have choices, but you need to put your best foot forward to get awarded a franchise. These companies are not selling used cars. Because they have to talk to sometimes dozens or even hundreds of candidates to sign a qualified franchisee, it may feel like you’re going through a slick sales process — and you are, for efficiency’s sake. But it is still selective. I have had multiple candidates rejected at Discovery Day when they don’t present well after meeting the founders and management team.

    Here are some common reasons you might not qualify or get awarded a franchise.

    Related: 7 Things You Need to Know Before Becoming a Franchise Owner

    1. Lack of capital

    Every franchise has a minimum liquidity and net worth requirement. There are many avenues to finance your business, and franchise companies will often put in place special financing programs — especially if they have unique equipment needs, fleet vehicles, etc. But at the same time, the franchisor wants to confirm you have adequate reserves for working capital, achieving positive cash flow and covering your living expenses while you ramp up. If you are undercapitalized, they want to avoid setting you up for failure.

    2. Lack of business acumen

    Harvard Business Review researchers found that the average age of entrepreneurs at the time of their company’s founding is 42. Franchisees likely skew even a little older, with many coming from corporate management backgrounds. As a franchisee, you don’t need industry experience, but you should have a strong foundation of leadership and management experience. Knowing you can lead a team, work with others and be a good partner are traits every good franchisor wants to see in a candidate.

    3. Lack of availability

    Many franchises have full-time requirements, which is not usually a problem if that matches the candidate’s needs. But I’ve had many franchise candidates who want to keep their corporate jobs and start a franchise on the side. There are a large and growing number of franchise companies that allow that and are structured to be run by a manager. However, there is no such thing as a truly passive franchise. If you are looking only for investment and have no interest in running a business, you won’t be a strong candidate for a franchise. Even for semi-absentee models, you need to have enough flexibility to be available to your general manager and handle the occasional business issue during regular work hours.

    Related: Go Beyond the Interview: How to Get a True Feel for a Franchise

    4. Poor attitude

    I’ve never told a franchise candidate that starting a business is easy. It’s not. So, it’s even more important that candidates have an abundance mindset and the mental fortitude to overcome obstacles. If a franchise candidate is negative and pessimistic before even getting started, how are they going to hold up emotionally when the inevitable challenges come up when starting a business? A franchisor wants to see a true entrepreneurial spirit in candidates before awarding them a franchise.

    If you investigate a franchise company that is simply looking to add franchisees without any standards or qualifications, watch out for that brand. It’s not common, but like anything else, there are good franchise companies and bad franchise companies. If you have a hard time filtering all of the brands out there, you may want to engage a franchise consultant to help you focus on strong brands that will be invested in a long-term partnership to help you achieve your goals.

    Nearly every franchisor wants to grow and add more franchisees. But the good brands are focused only on adding highly qualified and value-added franchisees. Having the right mindset as you go into the process will help you avoid seeing it as a one-way street. Yes, they are selling you the franchise opportunity, but you also need to sell yourself as a valuable and productive partner in their system. Make sure your capital, skills, time and attitude all line up with the prospective franchise system and put your best foot forward to be awarded a franchise.

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    David Busker

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  • How to Determine Your KPIs and Achieve Profitability | Entrepreneur

    How to Determine Your KPIs and Achieve Profitability | Entrepreneur

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    The following excerpt is from franchise expert Mark Siebert’s book The Multiplier Model. Buy it now.

    One of the most important things you can do to help ensure the success of your business is to determine your key performance indicators (KPIs).

    KPIs are the inputs into your business system. Each KPI has a target range that, if achieved and combined successfully with other KPIs, will allow you to manufacture the output of your business profitability.

    Read on for what you should know about KPIs and how you can apply these practices to your own business.

    Related: Busting Franchising Myths and Choosing the Right Opportunity

    KPIs can be industry-specific

    KPIs vary substantially depending on the industry. For restaurants, a few of the many important KPI measurements include the sales-to-investment ratio, food costs, labor costs, average ticket, table turns and occupancy costs.

    If you’re in the hotel business, some important KPIs include overall occupancy rate and average revenue per occupied room.

    If you’re a manufacturer, you’ll certainly want to look at things like the product return rate and net promoter score.

    If you’re in the business of selling advertising, you may want to focus on sustaining your customer base — so KPIs like customer retention rate, customer churn and repeat purchase ratio might make your list.

    And if you are in a membership-based, fee-for-service business, like a massage or fitness operation, you may want to monitor metrics like revenue growth per customer and time between purchases.

    KPI targets can differ within the same industry

    KPI targets can be different within the same industry, too. For example, in the restaurant industry, a steakhouse might aim for food costs in the range of 35%, while for a pizza restaurant, that number might be closer to 30%. But shoot for those numbers at a pretzel shop, where 20% would be considered high, and you could have a disaster on your hands.

    Different types of businesses in the same broad category (restaurants, in this example) can have very different target KPIs because of other changes in the business model.

    A pretzel shop generally has significantly lower sales than a typical steakhouse. They also may rely on impulse purchases in a high-traffic location, so they don’t need to spend the same amount on advertising as a steakhouse would. In addition, because its footprint is much smaller, a pretzel shop can pay less in rent (although it’s often higher when calculated on a per-square-foot basis).

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    Be aware of KPI repercussions

    When determining your KPIs and target ranges, you should also consider that any changes you make may have implications in other areas of your business.

    Going back to our restaurant example, the logical assumption is that we want to keep our food costs down. After all, each percentage point saved on food costs, all else being equal, will translate to a significant increase in profitability. But everything is not always equal.

    If you can reduce your food costs by eliminating waste, improving portion and inventory controls or establishing better systems for pricing or purchasing, then you could improve your Money Machine.

    On the other hand, if you had to sacrifice quality, raise prices unreasonably high or make your portions so small that your customers left dissatisfied, your reduced food costs KPI could have a severe negative impact on your overall profitability.

    In other words, anyone can decrease food costs down to 2% if they charge $50 for a burger. But how many will they sell?

    Likewise, you could reduce your labor costs in your restaurant by simply hiring fewer people. But if that results in poor service and unhappy customers, you may have missed the point of the exercise. So as you start identifying the KPIs and target numbers that will ultimately drive your business, bear in mind that changes to your KPIs may have unintended consequences.

    Categorize your KPIs

    Generally speaking, the KPIs for a small business can be grouped into several major categories: marketing metrics, sales metrics, production and financial metrics, and client satisfaction metrics. And these KPIs generally occur in that approximate order.

    Marketing drives sales. Sales drive production. Production drives client satisfaction. And client satisfaction (and the word-of-mouth it can deliver) drives repeat and new business. Effectively categorizing your KPIs, determining your target ranges and developing the right strategies to hit them will put you in a good position to achieve and maintain profitability.

    Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.

    Get started with The Multiplier Model

    Going from small business to successful startup to scalable growth takes more than just good luck. It takes a system. Over the last 34 years, franchising consultant and growth expert Mark Siebert has been sought out by more than 70,000 executives looking to expand their companies. Out of those 70,000, only 5,000 had the right systems in place to go from successful to scalable. In The Multiplier Model, Siebert discusses the factors that determine if an entrepreneur is ready to scale their venture — and the best ways to get started. Read more.

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    Entrepreneur Staff

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  • 4 Things to Know About Private Equity Investors in Franchises | Entrepreneur

    4 Things to Know About Private Equity Investors in Franchises | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Do you hope to someday bring on a private equity (PE) partner to accelerate your franchise business? If you’re a franchisor, this simple list should be at the root of every decision you make going forward as you build your enterprise, from now until you’re ready to sell or bring on a PE partner:

    1. Private equity buyers want proof of franchise model quality, specifically strong unit-level economics and positive franchisee validation

    This means to get top dollar, it’s not enough to have a strong franchise value proposition for franchisees. You must track system metrics and show positive trends over time. Collect franchisee profit and loss statements from the beginning. Standardized point-of-sales systems can help collect unit-level performance information that buyers will want to see. Franchisee satisfaction surveys should be implemented. If franchisee feedback isn’t strong, move quickly to address issues and communication gaps.

    Related: Thinking of Selling Your Franchise to a Private Equity Firm? Here Are 9 Ways to Build a Valuable Reputation

    2. There must be additional evidence of brand momentum through new unit openings, same-store sales growth, significant open whitespace and other growth opportunities yet available

    The operating model must be replicable, and there must be proof. For example, can you demonstrate that you open 100% of the units you sell? Are franchisees ramping to profitability within 18 months or fewer? That is much more valuable and important than selling a bunch of multi-unit licenses that never open. Do franchisees experience a solid cash-on-cash return? Buyers especially get excited when they see existing franchisees returning to buy new expansion units.

    Private equity sponsors want to see strong growth potential within their own planned hold period. But they also want a terrific growth story for the next sponsor as well to command a good exit price. Franchise businesses can trade between private equity (PE) sponsors multiple times. Technically, this is called a “secondary buyout” (whether it’s the second PE-to-PE transaction or the tenth). I prefer to think of it as the PE Profit Ladder. At each step, new sponsors need to see a compelling long-term growth story for the business to command premium enterprise value.

    3. If No. 1 and No. 2 are missing or weak and if the evidence doesn’t match the hype, PE quickly moves on

    While you may be selling franchise licenses, that in and of itself doesn’t make your business attractive. It validates that you’re good at selling franchises, not that PE will find your company attractive. You may have even received (or paid for) flattering press coverage. Are you starting to believe your own press? Buyers may be calling you with effusive, “We’d love to talk about your business,” messages. After basking in the warmth of some positive market attention and getting these phone calls, the transition to engaging seriously with a seasoned PE buyer who assesses your business with a swift, clinical eye can feel like suddenly walking into a freezer. Where did the love go?

    Related: Is This the Right Time to Sell your Franchise to a Private Equity Firm?

    4. This is where your franchisee-franchisor relationship karma will finally catch up to you

    Your franchisees have tremendous power over your sale outcome. If that idea strikes fear into your heart, you know where your work begins. Call it “turnabout is fair play,” “revenge of the franchisees” or whatever you like.

    If you’re a franchisor, your ability to sell your company to private equity at a high price with great terms depends on the quality of your relationship with your franchisees, strong return on investment for franchisees and the quality of operators you attract to your system. I’ve seen this collapse of the hype-machine dawn on sellers far too late. PE’s brutally cool, fact-based assessment and the importance PE attaches to franchisee satisfaction, profitability and positive references about their franchise experiences can be jarring to some sellers. If you’re used to acting independently as a founder, it can feel like turning in your high school math test and getting it back with a bunch of red pen mark-ups. Whatever attention you are, or are not, currently investing to ensure strong franchisee profitability, the market will one day hold you accountable.

    Most PE sponsors want growth stories, not turnaround projects ripe with risk and headaches. Turnaround projects in franchising carry significant extra risks and uncertainties because of franchising’s distributed ownership model. For many private equity investors, franchise turnarounds just aren’t worth the effort within the available time or will only be considered at a steeply discounted price by specialist firms.

    If you or your banker diligently advertise that your business is for sale and months pass with no deal, this well-meaning effort effectively spreads the word to the buyer community that you tried to sell the business but have no takers. This creates a negative impression that you will have to walk back if you decide to wait and go to market again later. It’s like that house that didn’t sell and is finally taken off the market. Two years later, prospective buyers watching the neighborhood see it listed again and remember that it didn’t sell the first time around. They wonder, “What’s wrong with that house? What’s changed since the last time it was on the market?” If you land here, you need to hear the market feedback and make meaningful changes to improve the value proposition for franchisees.

    You are much better off fixing your franchise model first and only going to market when you have something truly valuable to sell. Franchising is a brilliant wealth creation model that performs optimally when franchisees can create a rock-solid return on their investment. If you remain focused on promoting and growing unit-level profitability, you will build a truly valuable system that will stand up to PE buyer scrutiny.

    Related: A Beginner’s Guide to Private Equity

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    Alicia Miller

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  • Why Laid-Off Tech Employees Make the Best Franchise Candidates | Entrepreneur

    Why Laid-Off Tech Employees Make the Best Franchise Candidates | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Layoffs are making headlines in 2023, with the tech industry feeling the biggest effects of this national trend. According to TechCrunch, layoffs in this sector, year to date, exceed the total number of tech layoffs in 2022. Other industries are streamlining employee payrolls as they look to a future of job automation through artificial intelligence. Even though getting laid off is a tough situation, there can be a bright side — a chance to embark on a meaningful path to entrepreneurship.

    This endeavor may seem daunting at first, especially if you don’t have a unique business idea, but that makes franchise ownership a particularly attractive option. With a proven, successful business model, a built-in support system and brand recognition, a franchise offers a much easier way to jumpstart an investor’s business ownership dreams.

    In order to attract this pool of potential franchisees, business concepts should highlight how their franchise, in particular, is a financially viable option and how it will continue to benefit the professional development of a prospective franchise owner. Former tech executives and aspiring entrepreneurs, in turn, should widen their lens when looking for their next career opportunity.

    Related: Aspiring Entrepreneur? Consider Perfecting Something That’s Already Built

    Franchising is a good fit for an opportunity-seeking entrepreneur

    The unique advantage franchising offers is an established business model with a blueprint that has been refined over many business units and many years of successful operation. With that comes a brand identity that is already recognizable to consumers. Building a brand-loyal customer base is one of the most difficult aspects of starting a business from scratch. With an established franchising concept, you get brand interest, excitement and trust already built in.

    The franchising business model comes with a corporate team equipped to help franchisees with support services relating to marketing, operations and business analysis, training and more. At Kiddie Academy Educational Child Care, we help our franchisees with all these aspects plus financing, real estate and construction, just to name a few. High-quality tools and technology systems afford franchisees access without the hassle of setting it all up on the front end. Finding a franchise organization that helps facilitate setup through pre-existing relationships with entities like lenders or real estate developers is key to success.

    Because of all the resources available to franchisees, they often find they have more freedom as business owners than they did in the 9-to-5 (or 24/7) job they just left. Different franchise concepts have different time requirements. Potential franchisees can choose what best suits them.

    Flexibility is always an added benefit in the workplace, and transitioning to franchise ownership offers many new options. Franchisees can build their business closer to home or start a new leaf in a place with a growing market. When you own your own business, you’re in control of your destiny — you don’t have to worry about the insecurity of working for someone else.

    Newly laid-off professionals make the best franchise candidates

    A laid-off tech professional can make a very strong franchise candidate. Franchisors who show potential franchisees how their skills can be transferred into a new career path can help grow their organization while providing an opportunity for qualified candidates who are looking to excel. It’s a mutually beneficial relationship.

    Regardless of their background, successful business professionals who have had the unfortunate experience of being laid off usually have a strong work ethic and a desire for continuous learning and development, making them a perfect fit for a franchise organization. Job-seeking entrepreneurs should consider the growth opportunities — both personal and professional — that come with opening a franchise location.

    Most franchise organizations are “no-prior-experience-necessary” opportunities because of the infrastructure and support systems in place to help their owners excel. Even if you don’t have a background in a field like educational child care, for example, with the right amount of passion and franchisor support, you can still become a successful business owner. Franchise ownership opens the door to experiencing an entirely new industry using the business expertise a potential franchisee has already developed in a previous career.

    Related: 6 Tips to Consider When Searching for a Franchise for the First Time

    Franchise ownership allows professionals to live a life they love. Entrepreneurs can seek out opportunities in unique markets where they’ve always wanted to live and consider franchising as a means to relocate. There are also significant work-life balance benefits with franchising. Maybe franchise ownership for a particular organization means only working in the mornings or afternoons — or maybe not even showing up to an office at all. These benefits differentiate the franchising experience in a positive way.

    Business professionals experiencing a layoff and franchisors can both benefit from taking a close look at how they can work together. Franchising isn’t for everyone, just like business ownership isn’t for everyone, but for those who are looking for career advancement, it’s a solid model to consider.

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    Jeff Brazier

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  • How Making This Critical Hire Will Improve Your Franchise | Entrepreneur

    How Making This Critical Hire Will Improve Your Franchise | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Many franchise founders (and even multi-unit franchisees) hope to one day sell their businesses to private equity. PE’s significant interest in the franchise sector is undeniable. Sellers have benefitted from the activity of these well-capitalized buyers through added deal competition and increasing prices. Even in our current market where valuations have cooled from the heady prices of late 2021 and early 2022, multiples for great franchise businesses are still strong and often exceed middle-market averages for similar-sized companies.

    No matter what your long-term objectives are, it is important to maintain a sale-ready stance as much as possible. This doesn’t just mean keeping your documentation up to date and refreshing an online data room with updated financials and franchise documentation — that’s a given. More important is having the right finance leader in place to be a strategic thought partner both to you as the founder and to your franchisees.

    This makes your Chief Financial Officer one of the most important roles in your business. It’s also a role that, especially for emerging brands, can be one of the weakest in the organization. Bootstrapped companies may not be able to afford top financial management. When private equity later comes calling, immaturity in that role specifically decreases buyers’ willingness to pay because of all the downstream impacts a vacuum in that key position creates in how the business itself is managed.

    Today’s franchise marketplace is extremely competitive for new brands. It is more expensive than ever to launch and create enough visibility to recruit top franchisee candidates. Emerging brands end up stuck in an expensive competition that often leads them to make heavy investments in franchise marketing and recruiting, including high-cost external sales channels. Little may be left over for support infrastructure, including the finance department.

    It is difficult to recruit top finance talent as a small franchisor. Small franchisors may not even have the capacity to collect and meaningfully analyze franchisee P&Ls. Without this visibility, the franchisor can’t properly track or support system health. How will your operations team know what they should be focused on during franchisee coaching conversations? How can your team create and share reports with franchisees demonstrating key metrics and the impact on profitability?

    Related: 4 Key Functions of a Chief Financial Officer

    How a strong CFO can improve your franchise

    Key areas where a strong CFO can improve your business value and exit options include:

    • Strategic thought partner for the entire management team

    • Maintain focus on corporate and unit-level profitability and growth

    • Guide the creation of training materials to help franchisees improve their financial acumen and manage a more profitable business

    • Financial modeling and scenario planning that ensures resources are invested in the highest pay-back initiatives

    • Ensure data reliability and create a cadence for collecting and analyzing business financials

    • Drive supply chain improvements and better vendor pricing

    • Evaluate debt options to fund growth and delay taking on a private equity partner

    • Establish lending programs to support franchisee expansion

    • Team leadership; build financial acumen across the business

    • Support for operations team; track operational KPIs back to financial impact at both the franchisor- and franchisee-level

    • Work with the operations team to establish a common chart of accounts for franchisees and support mechanism for ongoing profitability coaching

    Sometimes emerging franchisors try to “save money” by under-hiring for this key position. Don’t make this mistake! I recognize that for smaller brands, this is an expensive hire. Find the very best talent you can afford, and consider the ultimate payback. One strategy is to hire a fractional CFO and complement that talent with in-house administrative support until the business is large enough to comfortably afford a full-time hire.

    If you are positioning your business for an eventual sale to private equity, the CFO role is ironically most at risk. PE firms typically either have financial resources in-house or outside executives they know and are comfortable with. In the case of a platform, financial planning and reporting functions may already be consolidated. Either way, while the CFO is a key enabling role to help create a sale-ready stance and drive higher enterprise value, ironically, it may be the first position to be replaced or eliminated post-acquisition. You may need to get creative with compensation, such as creating a bonus structure in the event of a successful transaction, in order to recruit the best talent.

    Related: 3 Signs It’s Time to Hire a CFO

    Key attributes in emerging franchise CFO hire

    • Previous senior finance leadership experience — minimum 5 years

    • Strong references, especially as a strategic thought partner for the founder, senior team and franchisees

    • Experience working with private equity, preferably as CFO or VP of Finance for a brand that was sold to private equity or owned by private equity

    • Experience working in a startup environment

    • Franchise or multi-unit experience is a plus

    • Accounting background preferred over finance background

    • Good financial modeling skills

    • Experience at one of the large accounting firms is a plus

    • Ability to build a strong, profit-focused team

    If your franchise system is primarily first-time business owners, make financial acumen at the operating level a priority for your finance lead in partnership with your operations lead. A strong CFO can assist operations to develop tools and coaching that help franchisees understand the major financial levers in their business and key activities that improve profitability.

    Don’t wait until you’re selling the business for prospective buyers to point out all the low-hanging fruit that you could have captured and monetized yourself by helping franchisees improve their businesses. Strong attention to unit-level profitability also signals to franchisees that their profitability is a priority for your management team. This should attract better franchisees in the first place and validate well.

    Related: The CFO Of The Future (No, They Are Not Just The “Finance Guy”)

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    Alicia Miller

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  • Want Your Boss’s Job? Here’s How 8 Employees Became Franchisees. | Entrepreneur

    Want Your Boss’s Job? Here’s How 8 Employees Became Franchisees. | Entrepreneur

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    Image Credit: Zohar Lazar

    At some point in their career, every worker has probably thought: I wish I were the boss.

    In franchising, people often achieve that dream. They might start as a cashier, manager, or in some role at the corporate office, and then rise up to buy a unit of a brand themselves.

    This is no accident. Franchises are always looking for qualified franchisee candidates who appreciate their brand and are dedicated to its success, and many of them encourage their best employees to pursue that path. It’s part of the DNA of franchising. Some brands even have apprenticeship or financing programs to help their team members achieve the dream of business ownership.

    So, what’s it like to go from employee to boss? And what’s required to make the leap? On the following pages, eight people share the biggest lesson they learned — and what enabled them to finally say what so many others want to say: “I’m the boss!”

    Related: 10 Tips to Go From Employee to Boss, From Franchisees Who Did It

    Lesson 1: Ask for more.

    Sam Cleavenger’s first job, at age 16, was with Jeremiah’s Italian Ice. He worked his way up from prep boy to general manager and then marketing manager for the brand. When he turned 24, he partnered with his dad and opened a store of his own. Today, he’s working on opening more stores and has 12 partners underneath him opening stores, too.

    “Something that separated me from my peers would be always asking what you can do to excel,” he says. “I would always ask my manager what I could do to have more responsibility. Before I became a general manager, I said I felt like I was doing great, and I wanted something more. I said I wanted to take on more leadership. I think it’s the simple fact of asking. A lot of people sit back and wait and think people are going to ask them. I think you have to vocalize that you want to grow.”

    Lesson 2: Be creative, within boundaries.

    “Everybody has their own creative style,” says Bonnie Alcid. But as she’s learned, creativity alone won’t drive success. It must be focused and harnessed.

    For example, she started her career in design and printing, but really started flourishing once she became the aquatics director for British Swim School. In that role, she says, she was able to think creatively, but toward a very focused goal — helping craft lesson plans for new franchise owners and their aquatics directors. Then she became the school’s first franchisee, and creativity took on a whole new meaning.

    She learned to hire people who can have fun, and then teach them how to be instructors within the school’s boundaries. “I can teach a child how to swim, and I can teach an adult how to deliver a swim lesson,” she says, “but it’s their personality that’s going to be able to come out and connect with kids and make them successful.”

    Related: Are You Ready to be the Boss of Your Own Restaurant Franchise?

    Lesson 3: Grow alongside everyone else.

    Tracy Welsh has grown a lot since the pandemic. But she’s also realized: If she’s the only one growing, she’s failing.

    Her journey began at Massage Heights, where she was the director of two locations. Both had to shut down at the beginning of the pandemic, and she worried about losing her job. Then, to her great surprise, her boss presented her with a different opportunity: Would Welsh want to buy the franchises where she worked? “I thought, My gosh, there’s no way that this could ever happen,” Welsh says. She was worried about financing, but after meeting with a bank, she realized she could do it.

    “It made me grow in a way that I never thought was possible,” she says. Then, as she built her team, she realized she was now in a position to help others grow too. “You can’t just grow yourself,” she says. “You have to have the mindset that you want to grow other people at the same time, growing employees, growing guests, growing members. Doing the same old thing and never changing it up is not the way to go as an entrepreneur. You have to grow and evolve.”

    Lesson 4: Make smart lease deals.

    Ivette Escobar was assistant to the founder of Sweet Paris Crêperie & Café in 2012, and ultimately became the brand’s chief development officer. When she and her husband opened their own location, she knew the lease terms were a key — because if she couldn’t control the environment her business was in, she couldn’t ensure its success.

    “We will not take a location that will not let us do our facade,” she says. “If they just want us to put up a sign, we say no.” If you’re looking for a space yourself, she has advice: Ask for tenant-improvement money to upgrade the space. “If it’s a second-generation space, they give you less money, but that’s where you have to have a really good broker to negotiate and advocate for you, to show them what you’ll be doing for them and the traffic you’ll be bringing, so their investment will pay off. If it’s a first-generation space where it’s brand-new construction, or a shell with four walls and you’re going to be doing absolutely everything inside the space, that’s where you can negotiate more.”

    Image Credit: Zohar Lazar

    Lesson 5: Be the start of a virtuous cycle.

    Joe Jaros started delivering for a Marco’s Pizza in high school, became a shift manager at 18, and told the owner he wanted to become a franchisee at 21. Eventually, they became partners — and Jaros now owns five stores. Now he wants to keep the cycle going, by being the boss that helps the next generation of franchise owners thrive.

    “I decided that I was going to have my own apprenticeship program where I take great operators and turn them into franchisees,” he says. But he does it in a very particular way: He selects some of his best employees and helps them buy a piece of his own stores. To him, it’s just good business. “If it’s going to take me seven years to pay off a store, and the average general manager lasts about a year, I’m taking a lot of chances,” he says. “If I know I have a great operator to last the whole seven years, my risk factor is much lower. I figured, if I just make a little less on each store, but I mitigate my risk, I’m going to come out ahead in the end.”

    Related: Is Business Ownership Right for Me? 4 Questions to Consider Before Taking the Plunge.

    Lesson 6: Take smart risks.

    Kelli Amrein had spent years in childcare, including director positions where her job was to manage teachers and schedules. After she joined the staff of Celebree School in 2011, she eventually got to see the business side. “They gave us full access to payroll and budgeting and all the financial reports that we could analyze to see where the business was growing,” she says. “I really liked that challenge.”

    When Celebree started franchising, she was 41 with three kids — but she took a chance and became the brand’s fourth franchisee. “I really would not have taken this leap if it was in an industry that I didn’t know enough about,” she says. “I knew all of the risks that happen inside the building, outside the building, the marketing, how many hours a day it would take to do things. I knew I’d have to be available to answer questions after-hours — I knew the risks, I knew the industry.”

    Lesson 7: Ask for help when others won’t.

    Matt Peters was 16 when a friend got him a job knocking on doors, offering homeowners a free estimate for Weed Man’s fertilizer and weed control. At first, it was a bust — he was too socially awkward and didn’t know how to sell. “I had to fall flat on my face a number of times,” he says.

    Instead of giving up, he started asking others for help. That included talking a lot to the supervisor who drove him and his fellow salespeople around. By taking their advice, Peters blossomed into a winning salesman — and at 24, he bought his first franchise. Today he’s 32 and owns two locations. “I still see other people that I think are much more talented than I am,” he says, “but I learned from good people who were patient enough to teach me and cared enough to give me advice and feedback and coaching. They either saw potential in me or encouraged me to do it and supported me.”

    Lesson 8: Make data-driven decisions.

    Austin Clark was playing college football and had just finished his kinesiology degree when he had a career-ending wrist injury. So he changed paths: He got an MBA, became general manager at D1 Training’s headquarters, and then eventually went on to become a D1 multi-unit franchisee.

    How does he grow his business? By constantly tracking key performance indicators: “Say, marketing: I know what my cost per lead is, my cost per 1,000 impressions, my funnel converts, the percentage of my customers that come through the marketing funnel and end up scheduling with us. By tracking those KPIs in the data, and being in a franchise system with other people tracking those same things, I can see the areas where we’re struggling. I can lean into the franchise and see who has figured those marketing pieces out. Who’s done a really good job generating more leads for less dollars on Facebook and Instagram? I can then go and look for people who are great at that.”

    Related: Find Out Which Brands Have Ranked on the Franchise 500 for Longest, Earning a Spot In our New ‘Hall of Fame’

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    Kim Kavin

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  • 8 Rules to Live By in Franchise Marketing, According to Top CMOs | Entrepreneur

    8 Rules to Live By in Franchise Marketing, According to Top CMOs | Entrepreneur

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    When it comes to franchise marketing, the best CMOs find ways to strike a balance between protecting, growing and enhancing the brand at the national and global levels while still allowing for customization at the local level.

    “It’s our responsibility as a franchisor to provide tools, resources and support for our franchisees that allow them to stay within our overarching strategy but also exercise freedom in their local marketing, understanding what resonates best in their market (using the tools and guidelines set),” says Ashley Mitchell, senior vice president of marketing at Streamline Brands.

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    If you’re an aspiring franchise CMO or looking for new strategies to elevate your franchise’s marketing and branding, this one’s for you. We spoke with franchise marketing executives across industries to explore what it takes to succeed.

    Step one? Recognize that franchise marketing is unlike any other type of marketing. From there, it’s all about taking a hybrid approach, adapting to market conditions and creating strong personal connections.

    “Working in franchising, you also have to check your ego at the door and realize that some of the best ideas are going to come from your community — lean into that and truly partner with your franchisees to ensure you are able to hear those great ideas, polish and elevate them to the next level and share widely,” Mitchell adds.

    Related: Want to Become a Franchisee? Run Through This Checklist First.

    1. Don’t compare franchise marketing to other types of marketing

    “Your stakeholders, strategies, objectives, KPIs — they all are highly dependent on your business model, the markets you’re working in and the goals of both the franchisor and franchisee. A lot of franchise marketers learn quickly that what might have been successful in a previous, non-franchise role won’t work or will need to be heavily modified. This is what excites most of us, but also, at times, can be physically, mentally and emotionally exhausting!” — Will Fraker, vice president of marketing at FranNet

    2. Take a hybrid approach

    “Your franchisees didn’t get into business to be full-time marketers. You need to be their strength wherever their weakness lies, and for many of your franchisees, it is likely to be in marketing. At MassageLuXe, we ask ourselves ‘Does this need to be localized to their market?’ If the answer is no, we do the marketing for them. If it does need localization, we provide easy-to-use guides and templates so that they can activate easily. Take a hybrid approach to brand and local marketing in the franchisees’ favor to ensure you are taking into account the unique needs and characteristics of each local market while maintaining a consistent brand image and messaging.” — Kristen Pechacek, chief growth officer at Massage Luxe International

    Related: Everything You Need to Know About Franchise Law.

    3. Adapt to unique market conditions

    “To succeed in franchise marketing, it’s essential to navigate the tension between centralized brand control and adapting to the unique market conditions of each franchise location. Juggling these competing priorities requires a deep understanding of both franchisor objectives and franchisee requirements, as well as the ability to effectively leverage a range of marketing channels to reach and engage customers. That balance requires a combination of art and science to pull it off effectively.” — Mike Millett, vice president of marketing at Stratus Building Solutions

    4. Create a strong personal connection with customers

    “Franchise marketing is about creating a strong emotional bond between your brand and the people within your local communities — and that relationship is most effectively established at the local level, with support from national brand marketing. The franchisor should have proven local marketing programs in place for the franchisee, making it easy for them to execute (or executing it on their behalf where possible), but allowing the franchisee to customize the program so that messaging is authentic and targeting is optimized. If the franchisee is not a ‘people person,’ they should hire someone to be the face of their business in the community. The closest thing to the mythical silver bullet in marketing is having a strong personal connection with customers and prospective customers.” — Angela Z. Paules, chief marketing officer at Buzz Franchise Brands

    Related: 6 Questions to Ask Before You Begin Your Franchise Search.

    5. When in doubt, embrace simplicity

    “Focus on establishing a strong national foundation where you as the franchisor can ensure there is a consistency of message and augment with a keen insight driven by localization of elements and tactics. In essence, you use local to showcase your media expertise and connection to the community while using national to drive overall system-wide performance.” — Doug Zarkin, vice president and chief marketing officer at Pearle Vision

    Related: Busting Franchising Myths and Choosing the Right Opportunity

    6. Anticipate your customers’ needs.

    “For successful franchise marketing, it’s crucial to conduct both primary and secondary research on your customers. By becoming an expert on their preferences, you can anticipate their needs and tailor your strategy and messaging accordingly. This approach builds trust and loyalty, as customers feel heard and understood. I learned early in my career, ‘If you ask the customer, they will tell you what to do.’” — Brooke Janousek, Fractional CMO

    7. Protect and grow the brand

    “Franchise marketing is all about protecting and growing a brand at the same time. This is done most successfully by providing franchisees with an easy-to-follow system (plan or program) that they understand and believe will help them grow their business, provide a return on their investment and deliver the brand experience. Franchisees are not inherently marketers, so they need to believe in the brand promise and the marketing behind the brand so they can execute their local marketing effectively. Happy and profitable franchisees sell franchises, and ultimately, marketing programs for both growing the brand and the franchise rely on this every day.” — Marci Kleinsasser, vice president of marketing at Home Franchise Concepts

    8. Lean into the community

    “Franchising is the only industry I’ve worked in that has such open and genuine people who truly want to help each other. I have an amazing network of franchise friends that I know I can reach out to at any time with any question or challenge I’m having and they will be happy to share and provide guidance. It’s truly an amazing support system to have.” — Ashley Mitchell, senior vice president of marketing at Streamline Brands

    Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.

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    Clarissa Buch Zilberman

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  • What Should a Franchise Agreement Contain? | Entrepreneur

    What Should a Franchise Agreement Contain? | Entrepreneur

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    If you’re in the process of becoming a franchisee or curious about what it entails, then you should familiarize yourself with the ins and outs of a franchise agreement — and that starts with what it contains.

    First, let’s review some basics: A franchise agreement is a legal contract between the franchisor and the franchisee. It outlines all the terms and conditions of the franchise relationship before it officially starts. Both parties must understand the terms of the agreement before signing — or else either side runs the risk of some serious consequences.

    Read on for everything that should be included in a franchise agreement, so you’re prepared before it’s too late.

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    Franchise fees and ongoing royalties

    The franchise agreement should specify the initial franchise fee, which is the upfront payment to the franchisor for the right to use its trademark and business system. Think of it as the price you pay for not having to build a business system from scratch.

    This fee might be paid in a lump sum or installments, and it typically covers the initial training and support the franchisor will provide.

    The franchise agreement should also include the ongoing royalties that the franchisee is required to pay to the franchisor. Royalty fees are typically a percentage of revenue, and they can be flat or on a sliding scale. The royalty fees can be paid weekly, monthly or quarterly and cover the franchisor’s continued support, marketing and advertising.

    Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.

    Territory and exclusivity

    One of the benefits of franchising is the ability to expand into different areas, cities and even countries. To avoid conflicts between franchisees in the same area, the franchise agreement defines the territory in which the franchisee is authorized to operate the franchised business.

    This could include a specific geographic area, a particular city or a specific address or location. It should also specify whether or not:

    • The franchisee has the exclusive rights to operate the business within a territory
    • Other franchisees can operate in the same area or nearby
    • The franchisor can open additional franchises in the same territory

    Operating standards and training

    An important aspect of franchising is a uniform training and operating model. This can include product quality, customer service, advertising, training and more. The franchise agreement should specify the operating standards the franchisee must abide by to align the individual franchise with the integrity of the larger brand.

    The franchise agreement should also specify what the franchisor will provide in terms of the type and amount of training and operating support. That said, franchisors must provide appropriate training to ensure the franchisee understands and effectively implements the franchise standards.

    Related: 10 Tips to Go From Employee to Boss, From Franchisees Who Did It

    Intellectual property rights

    It might go without saying, but one of the reasons a franchisee embarks on a franchising journey is to use the franchisor’s trademarks, logos and other intellectual property. The franchisor grants the franchisee a license to use this intellectual property exclusively for the franchised business.

    These stipulations should all be in the franchise agreement. The franchise agreement should also outline the restrictions on the franchisee’s use of intellectual property to protect the franchisor’s brand.

    Term and renewal

    The franchise agreement should specify the term of the franchise relationship. The term is the length of time that the franchisee is legally allowed to operate the business. Terms can range from several years to several decades, and they can vary from location to location. The franchisor has the right to offer a renewal option that allows the franchisee to renew the franchise agreement for another term.

    The franchise agreement should contain the renewal conditions, such as meeting key performance metrics, paying all necessary fees or meeting other goals. The franchisor also has the right not to renew the agreement if the franchisee fails to meet the conditions for renewal.

    Related: The 4 Biggest Myths About Franchising

    Termination and default

    The franchise agreement should specify the conditions under which either party can terminate the franchise agreement to avoid having to wait until a term ends. Terminations can be due to contract breaches, insolvency, failure to meet performance standards or just by mutual agreement and should be defined in the franchise agreement.

    The franchisor should also include a default clause in the franchise agreement to protect itself. Default clauses outline the remedies available to the franchisor in the event of contract breaches or early terminations.

    Related: Never Buy a Franchise Without Researching These 5 Sources

    Financial disclosures and obligations

    A breakdown of financial disclosures and obligations should be listed in the franchise agreement, such as initial investment costs, ongoing expenses and financial reporting requirements. The franchisee should have a clear understanding of the costs and financial obligations associated with the ongoing operations of a franchised business.

    Advertising and marketing

    Franchises typically run national advertising campaigns, so individual franchisees are not responsible for television commercials or other marketing strategies. But to pay for this, the franchisee is required to pay ongoing advertising and marketing fees to the brand’s national advertising fund, outlined in the franchise agreement.

    There may be opportunities for franchisees to conduct their own advertising in their local territories, which can also be outlined in the agreement.

    Key takeaways and what to do next

    Franchisees should have a clear understanding of what a franchise agreement entails before signing the dotted line — and they should be wary if the contract is vague. To better understand the terms and conditions, franchisees should seek the advice of a franchise legal professional before moving forward.

    Related: Busting Franchising Myths and Choosing the Right Opportunity

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    Clarissa Buch Zilberman

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  • How Marketing Automation Can Boost Your Franchise | Entrepreneur

    How Marketing Automation Can Boost Your Franchise | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When running a multi-location restaurant or franchise, owners and operators don’t have an excess amount of time to think about marketing. And not all franchise marketing solutions are created equal. Many “canned” marketing programs save time but are built on brand recognition only and will do little to drive revenue and increase loyalty to a specific location. It can feel challenging to implement marketing unique to one location over another when there are many surface-level similarities. Luckily, times have changed.

    Marketing through the use of integrated technologies such as WiFi, texting and digital displays provides the option for full automation while providing the delivery of highly targeted marketing messages that result in greater guest traffic and drive higher revenue at each franchise location. No, this isn’t a science-fiction hypothetical — it’s a reality with the use of innovative, integrated marketing technology.

    By gathering valuable customer data through onsite WiFi, franchises can build a fully automated and personalized experience for each customer while understanding what works and what doesn’t for a business’s marketing strategy. This article will discuss what integrated WiFi marketing automation is, how it works for multi-location restaurants or franchises and how to implement highly targeted marketing campaigns that generate more revenue.

    Related: Evaluating a Franchise’s Marketing Program

    What is marketing automation, exactly?

    Centralized multi-location restaurant or franchise marketing automation is accomplished by synching a location’s WiFi to a customer’s device (through free WiFi access) and then collecting the customer’s valuable data. From there, customers are then filtered, organized and analyzed individually by artificial intelligence (AI) to identify the behaviors of a customer and what message would most likely appeal to them.

    The data gathered and retained over this process also continues to grow as much as the business desires and as much as the customer is willing to participate — as customers can also partake in surveys or other key touchpoints for gathering qualitative information. Even if a customer decides they don’t want to participate in something such as a survey, their schedule behaviors for frequency, time of day, day of week or month, duration of their visits and other data remain to help provide them an experience tailored to their wants and needs.

    Should a customer go to several locations of the same multi-location restaurant or franchise over the course of their weekly or monthly routine, that information will also be retained. This enables the business to see which location is most efficient for that customer and incentivizes their visit to specific locations. By incentivizing their visit with a coupon or offer code for a free drink, sandwich or another item, it can direct a customer to a specific location that needs to increase guest-flow efficiency, ultimately helping the bottom line for that location as well. With marketing automation through integrated WiFi marketing technology, routine marketing tasks can be handled without the need for human supervision or hand-holding.

    To accomplish all this, it of course necessitates a willingness on the business owner’s part to accept the technology and implement it across their multi-location restaurants or franchises. This way, data can be stored and disseminated across locations and ensure a customer going to a location in North Dakota on a Monday can get the same personalized message that day as they would on a Tuesday in California. While the idea of machine learning and other buzzwords can sound intimidating, intelligent AI in automated marketing means a closer and more personal relationship with customers.

    Related: 5 Ways to Freshen Up Your Franchise Marketing in 2023

    How will I see it enhance my business?

    If a franchise or multi-location restaurant owner wants to take the next step and provide an immersive, personalized experience for their customers, integrated WiFi marketing and automation are the best option. According to a report from PWC, 82% of consumers would share some of their personal information to receive a more personalized customer experience. A personalized experience was also noted by 87% of respondents to PWC’s survey as one of the most important elements of the buying experience to them — meaning, people want to have an experience that only they can have, not the same cookie-cutter, one-size-fits-all approach many businesses take in messaging their customers.

    Using SMS messaging, email, social media and digital online displays, a business can send personalized messages that let their customers know individually that their wants and needs are seen and heard.

    For example, if a customer regularly purchases breakfast sandwiches and coffee in the mornings from a location, that franchise or multi-location restaurant can send an SMS message along the lines of, “Thanks for choosing us to start your day! Here’s a free coffee on us [link to post on social media for social gravity boost!]” Additionally, the AI in integrated WiFi marketing and automation recognizes that customer retention and re-acquisition are pivotal and will provide each customer type — including new, returning, regular and lost customers — an experience that best speaks to them.

    With lost customers vs. new customers, it’s important to remember there is a 60-70% chance of making a sale to a former customer — which, according to the book Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, is much higher than the 5-20% chance a business has of converting a sale with a prospective new customer.

    Related: The Basics of Multi-Location and Franchise Marketing

    Marketing automation through integrated WiFi technology may sound and seem futuristic, but surprisingly, 76% of businesses have already adopted basic WiFi technology. However, most are missing out on the value of the integration of texting and digital displays for a comprehensive messaging solution. Inefficient spending of funds for marketing becomes a thing of the past with intuitive AI used in integrated WiFi marketing.

    In the digital age, businesses have an opportunity unlike any other time in history to make deep, lasting connections with their customers. Integrated and automated solutions allow WiFi and SMS messaging to engage the customer instantly and display on their social media and other online platforms to further the lines of communication and understanding between customer and business.

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    Stephen Gould

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  • The 19 Covenants of a Standard Franchise Agreement | Entrepreneur

    The 19 Covenants of a Standard Franchise Agreement | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The following excerpt is from Rick Grossman’s book Franchise Bible. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound

    The franchise agreement is the contract between the franchisor and franchisee, but it’s not a “standard” or “form” agreement. The format of the contract differs from one franchise system to another.

    While each franchise agreement will differ in style, language and content, all franchise agreements have covenants, each of which describes a promise, right or duty that the franchisee or franchisor owes to the other or that benefits the franchisor or franchisee. The following is a list of those covenants that one most often sees in a typical franchise agreement. (The franchise agreement on our companion website will have the specific language that addresses each covenant.)

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    1. Grant of franchise

    The “Grant” section lets franchisees know that the franchisor is granting them the limited, non-transferable, non-exclusive right to use the franchisor’s trademarks, logos, services marks (called generally the Marks) and the franchisor’s system of operation (often called the System) for the period of time defined by the franchise agreement. The franchisee receives no ownership rights to the Marks or the System, and the franchisor always retains the right to terminate the franchisee’s grant-of-license because of a breach of the franchise agreement.

    2. Opening date, territory limitations, build-out and similar rights

    This covenant describes the franchisee’s territory (be it exclusive or not) and sets up a time schedule by which the franchisee must find a brick-and-mortar location, must have the plans for the unit approved and must be built-out and opened. This section may also disclose other matters such as the computer equipment needed to operate the business and the like.

    Related: The 23 Items That Make Up the Heart and Soul of the Franchise Disclosure Document

    3. Fees and required purchases

    This section will disclose the fees more specifically described elsewhere in the agreement. The fees include the initial franchise fee, any fees paid to the franchisor prior to opening, any fees paid to the franchisor during the term of the franchise, all advertising fee obligations and the like.

    4. Advertising

    In this section, the franchisor should repeat the franchisee’s advertising obligations as they’re stated in Item 11 of the franchise agreement (and the fees for which are identified in Items 5, 6, 7, 8 and 11 — as applicable).

    5. Term and renewal

    This covenant spells out the term (length of time) of the franchise agreement measured from the date the franchise agreement is signed to the date that the franchise agreement expires. If renewal rights are granted, this section will also spell out the prerequisites of this arrangement.

    6. Services offered by franchisor

    Though not all franchisors will repeat the pre-opening and post-opening services that they offer the franchisee in the franchise disclosure documents, sound drafting principals will require that these matters be repeated in the franchise agreement. Including them in the franchise agreement, however, removes the specter of litigation as a way to insert rights into the contract that aren’t otherwise stated.

    7. Protection of proprietary information, marks and other intellectual property

    As discussed in the “Grant of Franchise” section earlier, the franchisor is granting only a temporary license to the franchisee. Most franchisors will enforce this understanding by adding specific language that identifies each item that makes up its proprietary, confidential and trade-secret information and by then stating the limitations that are placed on the franchisee’s right to use such information. It is important protection for the franchisor and is not usually a covenant missing from the franchise agreement.

    Related: When Evaluating a Franchise, Ask These Questions

    8. Training

    This section should disclose any training offered by the franchisor, including any additional training, seminars, meetings or the like that the franchisor will either require or urge the franchisee to attend.

    9. Quality control

    As the name suggests, franchisors will address the franchisee’s specific quality-control requirements. This is sound franchising and is necessary to insure that the goods and services offered throughout the system meet the franchisor’s minimum requirements.

    10. Transfers

    Virtually all franchise agreements control the franchisee’s right to transfer their interest in the franchise relationship. This section will list the prerequisites to a transfer.

    Related: The Anatomy Of A Franchise Disclosure Document

    11. Defaults, damages and complaint limitations

    All franchise agreements will contain some recitation of the violations of the franchise agreement that will be treated as a breach. These violations may be divided into those breaches that result in the immediate termination of the franchise agreement, for which no cure is given, and those violations for which cure is provided.

    12. Obligations upon expiration or termination

    Once the franchise relationship has ended — either because the term has naturally concluded and no renewal has occurred, or because the franchise agreement was terminated — it is typical for the contract to list a series of steps that the franchisee must take to “de-identify” the business and the franchisee’s association with the franchise system.

    13. Franchisor’s right of first refusal

    Most franchise agreements give the franchisor the option, but not the obligation, to exercise a first right refusal to purchase the franchisee’s business — in the case where the franchisee seeks to transfer the business, or the first right to purchase the franchisee’s assets at the time that the franchise agreement expires or is terminated.

    14. Relationship between the parties

    Franchisees are always treated as independent contractors of the franchisor. This has several important implications. An independent contractor is not an employee or agent of the principal. Instead, the independent contractor is in business for themselves. The parties to this relationship pay their own taxes, hire on their own, are responsible for their own employees and generally operate independently of the other in carrying out the contract between them.

    Related: How Franchisees and Franchisors Can Master Their Relationship

    15. Indemnification

    All franchisee agreements will contain an indemnification covenant, which means that the franchisee will reimburse the franchisor for any losses it suffers as a result of some negligent act or wrongdoing of the franchisee. These covenants are almost always one-sided in favor of the franchisor — which is fair, given that the franchisee and not the franchisor is responsible for the day-to-day operation and maintenance of the business.

    16. Non-Competition covenant and similar restrictions

    A non-competition covenant is one that seeks to prevent the franchisee from opening a business that would compete with the franchised business. Virtually all franchise agreements will have non-competition covenants. The covenant is often broken into two parts: the “in-term” covenant; and the “post-term” covenant.

    As the name suggests, the in-term covenant prevents the franchisee from competing against the franchisor and any other franchisees while the franchise agreement is in force. Typically, this covenant covers a geographic area around each franchised, company-owned and affiliate-owned business. The post-term covenant covers the former franchisee after the franchise agreement expires or is earlier terminated because of an uncured breach.

    Related: The 5 Items in Your Franchise Disclosure Document That Can Make or Break a Real Estate Deal

    17. Dispute resolution

    This covenant spells out the methods the franchisor uses to resolve disputes with franchisees.

    Most often one will see at least a nonbinding-mediation requirement followed by a binding-arbitration requirement. In other cases, these two methods of resolution will be preceded by the requirement that the parties first meet face-to-face.

    18. Insurance

    All franchise agreements will require the franchisee to obtain insurance to cover its business operations. In all cases, each of the franchisee’s insurance policies will require that the franchisor be named as an “additional insured,” meaning that the franchisor enjoys the same coverage as does the franchisee, even though the franchisor is not paying for the coverage.

    19. Additional or “miscellaneous” provisions

    This is kind of the catch-all section of the franchise agreement that contains what some call “boilerplate” language, meaning that it is “usual” that such language be included in any contract. In virtually all franchise agreements, you’ll see covenants that cover mergers, modifications or amendments, non-waiver provisions, state-specific addenda and more.

    Related: 8 Steps to Finding the Right Franchise

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    Rick Grossmann

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  • The 23 Items That Make Up a Franchise Disclosure Document | Entrepreneur

    The 23 Items That Make Up a Franchise Disclosure Document | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The following excerpt is from Rick Grossman’s book Franchise Bible. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound

    The heart and soul of the disclosure portion of the Franchise Disclosure Document (FDD) — and indeed its very purpose — is set forth in the Items. Each Item is given a specific title (which cannot be altered), and within each Item, the franchisor is required to provide the answers to a myriad of FTC-mandated questions. For a complete list of the questions in each Item, take a look at the NASAA Guidelines on our companion website.

    Following is the list of Items, along with a brief description of the content to be found there.

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    Item 1: The franchisor, any parents, predecessors and affiliates

    Item 1 gives you the franchisor’s background and that of any parent company, predecessors and affiliates. A predecessor is defined as “a person from whom the franchisor acquired directly or indirectly the major portion of its assets.” An affiliate is defined as “a person controlled by, controlling, or under common control with the franchisor.”

    Item 2: Business experience

    This Item gives you the past five years’ worth of the personal business experience of the franchisor’s directors, trustees, general partners, officers and any other individuals who’ll have management responsibility relating to the offered franchises.

    Item 3: Litigation

    In this Item, the franchisor must disclose any material litigation involving the franchisor and predecessor, parent and affiliate, if the litigation involves claims about the franchisor’s sales process, their performance under the franchise documents and claims of antitrust, fraud, unfair or deceptive trade practices, or comparable allegations. The franchisor must also disclose any franchisor-initiated litigation against its franchisees and any other business litigation (even if it’s not franchise-related) if, at the end of the day, the litigation negatively impacts the franchisor’s financial condition or their ability to operate a franchise.

    Related: Why You Should Buy a Franchise Instead of Starting Your Own

    Item 4: Bankruptcy

    This Item must disclose any bankruptcy in the past ten years that involved the franchisor and any parent, predecessor, affiliate, officer or general partner of the franchisor, or any other individual who will have management responsibility relating to the sale or operation of the franchise.

    Item 5: Initial fees

    Here, the franchisor (and any of their affiliates) must disclose all of the initial fees they charge to the franchisee before opening. Such fees include the initial fee paid to purchase the franchise rights (often called the “initial franchise fee” or IFF), computer or point-of-sale equipment that must be purchased only from franchisor or their affiliates, and similar fees.

    Item 6: Other fees

    This section of the FDD advises you of any other fees you’ll have to pay to the franchisor or an affiliate as well as costs that are collected by the franchisor for third parties, or that are otherwise imposed. Line items include a statement of the royalties, advertising fees, service fees, training fees, renewal fees and other similar one-time or ongoing charges.

    Item 7: Estimated initial investment

    In this section, the franchisor must disclose a range of the minimum and maximum of all fees, costs and expenses that the franchisee will incur prior to opening the business, including the initial franchise fee, real property expenses such as rent and construction costs, the cost for computer equipment and similar line items. The expenses must include both pre-opening expenses and those incurred during the “initial phase,” which is at least three months or a reasonable period for the industry.

    Item 8: Restrictions on sources of products and services

    Franchisors require franchisees to buy the goods and services needed only from approved vendors. This section lists the approved vendors and also calls out the franchisor’s specifications for permitting a new vendor into the system. It will identify any revenue the franchisor receives from the required purchases, including rebates received by the franchisor from any supplier.

    Item 9: Franchisee’s obligations

    This Item lists your obligations as a franchisee, with references to the sections of your franchise agreement that contain the obligations. The purpose of this is to identify your principal obligations under the franchise agreement and other agreements.

    Related: Are You a Good Franchise Candidate?

    Item 10: Financing

    If the franchisor sponsors financing for new franchisees, it will be spelled out in this section.

    Item 11: Franchisor’s assistance, advertising, computer systems and training

    This is one of the more lengthy and important disclosure Items. In this Item, the franchisor must disclose:

    • The services they’ll provide to the franchisee before and after opening.
    • All advertising expenditures you’re expected to assume.
    • The average time it takes a franchisee to open.
    • The type of computer and similar electronics necessary to operate the business.
    • A detailed description of the training you can expect to receive.
    • The table of contents of the operations manuals.

    Item 12: Territory

    The franchisor must disclose whether it offers franchisees an “exclusive territory” within which to operate the business. With an exclusive territory, the franchisor promises that it won’t permit another franchisee to locate within the territory and that it will also refrain from putting a company-owned or affiliate-owned business there. This Item must also disclose whether you can relocate, and if so, what the criteria are for your move and whether you have any rights to purchase additional units.

    Related: The Anatomy Of A Franchise Disclosure Document

    One of the more important disclosures in this section is whether you’re required to meet a quota or perform in some other manner as a way of insuring either your right to an exclusive territory, or your right to continue in business at all. This Item will also disclose the franchisor’s reservation to itself of certain marketing and sales rights either within or outside any territory.

    Item 13: Trademarks

    This section must identify each principal “Mark” (trade name, trademark, service mark, service name or logotype) to be licensed to you, and must state whether the franchisee is required to modify or discontinue use of a mark under any circumstances.

    Item 14: Patents, copyrights and proprietary information

    The section spells out the patents and copyrights held by the franchisor.

    Item 15: Obligation to participate in the actual operation of the franchise business

    This section discloses whether the franchisee must personally participate in the operation of the franchise. If there’s no such requirement, this section must state whether the franchisor recommends such participation, whether the person who’s handling day-to-day operations must complete the franchisor’s training program and whether this person must own an equity interest in the franchisee entity.

    Related: 6 Questions to Ask Before You Begin Your Franchise Search

    Item 16: Restrictions on what the franchisee may sell

    In most cases, the franchisor will require the franchisee to sell only the goods and services that are part of the franchised business. This section spells out those restrictions.

    Item 17: Renewal, termination, transfer and dispute resolution

    Item 17 contains a cross-referencing table to the franchise agreement for 23 separate line items. It’s different than Item 9 in that it includes a concise statement of the content of the particular franchise-agreement covenant as well as the location of the covenant in the agreement.

    Related: 8 Steps to Finding the Right Franchise

    Item 18: Public figures

    This section requires the franchisor to disclose whether it uses a famous person to endorse the franchise. If so, it must disclose the compensation paid or promised to the person, the person’s involvement in management or control of the franchisor and the amount of the person’s investment in the franchisor.

    Item 19: Financial performance representations

    In layperson’s terms, a Financial Performance Representation (FPR) is any document, chart, arithmetic calculation, math formula or other representation that would allow a potential franchisee to determine what they could earn. The only way the franchisor or its sales staff or brokers can offer an FPR is if it’s stated in this Item 19. If no such information is found in Item 19, any claims made by the franchisor as to your potential earnings are in violation of the law.

    Related: The 6 Best Financing Options for Franchising a Business

    Item 20: Outlets and franchise information

    This section provides information regarding existing outlets in the franchise system. It covers outlet transfers — and the status of franchised and company-owned outlets — for the past three fiscal years, as well as projected openings for the next fiscal year. It must also provide information regarding any reporting changes, any confidentiality clauses signed by franchisees during the past three fiscal years (“gag clauses”), and information about certain trademark franchisee associations.

    Related: Know Before You Buy: These Are The Costs Associated With Purchasing and Operating a Franchise

    Item 21: Financial statements

    The FDD must contain an exhibit with the franchisor’s audited financial statements for the prior three fiscal years. If the franchisee has been open less than three years, the FTC allows the franchisor to phase in audits. The franchisor is also required to provide a separate, audited financial statement for a company controlling 80 percent or more of the franchisor.

    Item 22: Contracts

    This section requires the franchisor to attach to the FDD a copy of all form contracts the franchisee will sign, including the franchise agreement, leases, options and purchase agreements.

    Item 23: Receipt

    In this final section, the franchisor is required to include as the last page of the FDD a form for the prospective franchisee to sign to acknowledge receipt of the FDD.

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    Rick Grossmann

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  • 5 Items in Your FDD That Can Make or Break a Real Estate Deal | Entrepreneur

    5 Items in Your FDD That Can Make or Break a Real Estate Deal | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    A Franchise Disclosure Document (FDD) provides information about the franchisor, the franchise system and the franchise agreement terms. This legal document must be provided to potential franchisees by the franchisor and read back and forth by potential franchisees — it is recommended that a potential franchisee have a franchise attorney review.

    The FDD helps potential franchisees make informed decisions about investing in the franchise. Therefore, all items in the FDD are essential. That said, here’s my list of the sections in the FDD that can make or break getting to lease your desired real estate space.

    Related: 7 Things Not to Miss in the FDD

    Item 1: Business experience

    This section provides information about the franchisor’s key executives, including their business experience and any bankruptcy or litigation history litigation. Most landlords will ask you for details on not only your background but the franchisors as well. So make sure the franchise you purchase has a good story.

    Also, ask to see the franchisor’s marketing materials prepared for landlords. These materials should contain the company’s success stories, details on the current state of the brand, and information on the growth plans of the brand.

    Additional information should include the following:

    • Specifics on existing locations.
    • High-quality images of existing locations.
    • High-quality images of product or food photography

    Related: ‘My Brain Is Literally Going To Explode’: Viral Video Sparks Debate Over Whether or Not Renters Should Tip Landlords

    Item 7: Estimate initial investment

    Item 7 covers what the franchisor believes will be your estimated initial investment. This item will be relevant to a landlord since they want to know how much money you will spend on your build-out. Once you share that number, the landlord will want proof of funds.

    If the money comes from your savings, your bank account statements will be proof of funds. If the money comes from a loan, you must show at least a pre-approval letter from your bank.

    Item 12: Territory

    This section provides information about the territory where the franchisee will be allowed to operate the franchise. Some franchisees are particular on territory, while others are not. Having a defined territory is excellent since you have protection and the right to open where others can’t.

    If you don’t have a defined territory, it can be advantageous since you have a larger pool of real estate to search for your location. However, this often means you might compete with other franchisees for the same sites.

    Related: The 23 Items Your Franchise Disclosure Document Must Include

    Item 17: Initial franchise term, renewal, termination, transfer and dispute resolution.

    Many essential elements can be found in Item 17, but I will focus on franchise length and renewal. Regarding the length of your initial franchise, you must pay close attention to ensure your lease mirrors the time you have confirmed rights to the franchise. Signing a lease longer than you control the franchise will be precarious. Remember that your initial franchise period needs to be considered when factoring in your total investment costs. For example, if your total build-out costs are $750,000 and the franchise will only give you the rights for five years, purchasing the franchise may not make sense. You will also want to ensure you have renewal options for the franchise and are comfortable with the renewal options.

    Related: How Your Business Can Be Its Own Landlord

    Item 19: Financial performance representation

    This section is optional, meaning franchisors are not required to provide financial performance information in the FDD. However, if a franchisor chooses to provide financial performance information, they must follow specific guidelines set forth by the Federal Trade Commission (FTC).

    The purpose of Item 19 is to help potential franchisees evaluate the potential financial benefits and risks of investing in the franchise system. Suppose a franchisor chooses to include financial performance information in Item 19. In that case, it must provide specific details about the performance of its franchisees, including any average or median sales figures, expenses, profits, or other financial metrics. It’s important to note that the financial performance information provided under Item 19 must be based on actual data from the franchisor’s franchisees. The franchisor must also clearly explain how the data was collected and any assumptions or limitations that may apply to the data.

    Related: 23 Questions to Ask a Franchisor When You Meet Face to Face

    Because Item 19 is optional, it’s not included in every FDD. However, if financial performance information is provided, it can be a valuable tool for potential franchisees in evaluating the possible return on investment and profitability of the franchise system. Many landlords will ask you to provide details on the average sales of the franchise.

    These sales help the landlord decide to lease to your franchise brand. On a side note, it is also important to understand that these sales also help the landlord know what type of rent you could pay. Thus I recommend you keep this information to yourself unless you feel it will help the landlord’s decision on picking your brand.

    When purchasing a franchise, remember that once you buy the franchise, you must sell the franchise concept to potential landlords. Most landlords think about a use for their center just as much as they factor in terms of the deal. Therefore, if your franchise has a use that landlords do not favor, or it is a brand actively closing stores, it might be difficult for you to secure a real estate location of your choosing.

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    Roxanne Klein

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  • From Opening a Gym on a Whim to Partnering With Floyd Mayweather | Entrepreneur

    From Opening a Gym on a Whim to Partnering With Floyd Mayweather | Entrepreneur

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    Jessica Yarmey never planned to open a kickboxing gym — let alone a fast-growing franchise that would gain the attention of world champion boxer Floyd Mayweather Jr.

    But today, less than three years after debuting the first-ever KickHouse Fitness, her brand has been acquired by Mayweather Boxing + Fitness and grown to nearly 30 locations across the country — with more on the way.

    The secret? A Warren Buffett quote, says Yarmey: “Be fearful when others are greedy, and be greedy when others are fearful.”

    “Brick-and-mortar fitness was heavily affected in the pandemic, but I thought there was an opportunity to get in,” Yarmey says. “I’m a big believer in changing people’s lives. I knew it was a down time, but I was confident that it wouldn’t be down forever.”

    Related: 3 Common Obstacles of Franchisors

    Leading with branding

    Pre-pandemic, Yarmey was the chief marketing officer at Club Pilates, where she helped the company expand to more than 615 locations. With her background in marketing and branding, she felt comfortable building a memorable, relatable concept that could be replicated anywhere.

    “Every single person had their own journey and fear through Covid-19,” she says. “It’s the same individualized approach we bring to the mat. Every person who comes in brings their own expectations and challenges. And that’s the power of brick-and-mortar fitness.”

    “My goal was to create something that could be put anywhere and would still connect and resonate,” she adds. “What I see many franchisors missing are the elements of a brand that will allow someone to connect immediately [and] emotionally with what you’re doing.”

    Related: Four Factors Influencing a Franchisor’s Success

    Reintroducing the world to kickboxing

    Though it wasn’t in her five-year plan to open a fitness franchise, she says, Yarmey identified a gap in the kickboxing world and felt there was no better time to jump in. That’s when KickHouse was born.

    “I’ve always been athletic,” she says. “I grew up playing soccer, was a personal trainer and even took the Club Pilates teacher training when I was the chief marketing officer. The fact that I am very much a beginner in kickboxing helped me create a format that can be executed by a beginner.”

    Together with an investor partner, Yarmey’s first step was to design KickHouse as a place she would want to go. “Despite being an ex-athlete and working in fitness, I’ve still felt intimidated walking into studios,” she says. “I’ve also felt insecure when I couldn’t figure out exactly what I was supposed to be doing during class. I worked closely with my director of programming Gwen Dannenbaum to ensure that the coaches and the workouts would start at the beginner level and progress from there so anyone could do the workout.”

    Representation matters

    Two-and-a-half years in, Yarmey feels an obligation to not only share her appreciation for kickboxing but also shed light on her entrepreneurial pursuits with fellow aspiring franchisors and franchisees.

    “I have felt the benefit of kickboxing to power my tough days,” she says. “To give that toolset to other female entrepreneurs, there is no greater sense of reward.”

    That might explain why 40 percent of all KickHouse franchisees are women, and the entire central support team are women too. Another 10 percent of franchises are Black-owned, and Yarmey hopes to only increase those numbers.

    “Representation matters, and our diversity evolved as the brand evolved,” she says. “I didn’t go into this feeling like I would gain a platform to speak to women entrepreneurs. But the more I share, the ones who are connecting most to my story are other females trying to figure out what they’re going to build themselves.”

    Related: 9 Factors to Consider When Choosing a Franchise Attorney

    Finding good partners

    As Yarmey looked to continue KickHouse’s rapid growth, she began to pursue additional funding and other creative solutions to help scale. In October 2022, MW Fitness Holdings announced it had acquired KickHouse. “At the end of the day, the goal is growth and the reality is you can get to growth in a variety of ways,” she says. “The partnership with Mayweather Boxing is going to accelerate the growth of both brands.”

    By joining Mayweather Boxing, KickHouse has gained support in franchising aspects like development, build-outs and site selection, while Yarmey has stepped in to help Mayweather with marketing and sales. Since the acquisition, Yarmey has signed four new KickHouse agreements. “We are seeing the business accelerate, and we are seeing the economies of scale that we had modeled out on paper,” she says.

    When it comes to franchise success, Yarmey attributes self-awareness as a major player. “Understanding what we do very well and what we are missing or not doing as well — KickHouse leads with marketing and sales, and the Mayweather team leads with development and support functions. The ability to combine strengths is something we both saw as an opportunity.”

    “Both of our goals are to have strong global brands with strong central support structures,” Yarmey says. “It helps our brands take a step forward by combining resources and leveraging each other’s strengths.”

    Looking back, Yarmey knows that starting a business is one of the scariest things a person can do. But if you have that entrepreneurial bug, it might be worth the risk, she says.

    “Say you’re a good people leader, but you’re not strong in operations — that’s where a franchise makes a ton of sense,” she says. “It de-risks entrepreneurship. You go in with built-in partners, people to work with you to make it less daunting.”

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

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    Clarissa Buch Zilberman

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  • For Franchise Business Growth, Embrace Technology or Bust | Entrepreneur

    For Franchise Business Growth, Embrace Technology or Bust | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Technology is a pervasive part of our lives and businesses. But that’s not a new concept — we’ve been adapting to technology every day for decades now. What’s important to note these days is the importance of staying on the cutting edge of tech as competition in the franchise industry continues to grow more than ever before.

    The franchise model not only creates the necessity for the franchisor to stay in-the-know on current trends and advancements but also to keep its franchisees up to date as well. This is because, at the end of the day, staying on top of technology attracts both franchisees and customers. In the current world in which we live, franchisors are responsible to their franchisees and customers to find new tech as well as to maintain, update and fortify existing systems.

    Related: Smart Tips for Growing Your Franchise

    Franchisors must keep a finger on the pulse—and disseminate accordingly

    The focus of technology for a franchisor should be adding value and making business easier for the customer and the franchisee. To do this, franchisors must keep up with advancements in the tech sphere, adopt relevant developments and then pass them through to the franchisee and/or customers.

    Every part of franchise operations has a technological element, from training software and point-of-sale systems to social media, mobile apps and digital payment platforms. Figuring out which emerging operational tech is going to succeed and is worth investing in is where it can get tricky. However, franchisees rely on their franchisor to seek out and weed out these opportunities on a regular basis. Industry conferences, continuous research and curiosity about how other industries are engaging new tech are all ways franchise organizations can learn and grow in this space. A robust IT department headed up by a Chief Technology Officer can be key in passing along new information and training franchisees as well.

    Franchisors have to determine the usefulness of different technologies available and discern what is going to be effective from top to bottom of the organization in order to use it competitively.

    Using technology to attract franchisees

    When potential investors meet with a franchisor, a major discussion topic should include what technology the system is currently using and what its goals are for the next three to five years. Franchisors who make it a priority to guide unit owners in developing their building design with flexibility for future technology are going to keep a competitive edge when recruiting franchisees as well. In my experience at the educational child care franchise system, Kiddie Academy, many of our franchisees have a tech background and know what to look for and expect when it comes to selecting a business opportunity that knows what’s what when it comes to the latest developments. It’s also smart for franchisors to focus on scalability when it comes to selecting technology that will attract franchisees so as to offer solutions that are cost-effective and add value across the board.

    Another reason to stay current on trends to recruit franchisees? Younger generations rely on technology more than any other generation and have high expectations for its use. If your technology isn’t updated, you may be missing out on some great young entrepreneurs. Overall, if franchisees feel like the technology in place helps them market to customers, make sales and run a successful business, everyone benefits.

    Related: The Best Software Solutions and Tech Providers in the Franchising Industry

    Using technology to attract customers

    The goal of using technology in franchising is to solve needs for both franchisees and for customers. Because the customer experience is so important to earning and keeping business, it’s important to make sure that the technology in place is simple to use and effective.

    As a child care franchisor, my company is constantly assessing the needs in our customer experience that aren’t being addressed in our industry — one of which is allowing self-scheduling for center tours. With self-scheduling, we can allow parents to schedule a tour of a Kiddie Academy location quickly and easily, bypassing many manual steps that used to occur in the process and would potentially throw up barriers for prospective customers. Now, busy parents can go onto our website and secure a time for a tour (and reschedule or cancel a tour) instantaneously.

    Other technologies that consumers have come to expect include mobile payment options, relevant email marketing tactics, classroom cameras, robust mobile apps and an engaging social media presence. At the end of the day, parents and customers in general are looking for ways companies are using technology that will make their lives easier and the purchasing process quicker.

    Tech maintenance and security are of the utmost importance

    Once you have sophisticated technology for your organization in place, maintaining the systems and keeping customer data safe is key to continued success. Network security issues and the rise of system failures means that businesses must protect information and data as securely as possible. It’s best to spend time and money upfront to head off a failure or breach and to have backup plans in place in advance. Some industries, like child care, have more sensitive information on file than others and should be managed appropriately. Without constant vigilance, workflow and trust can be negatively impacted for customers and franchisees alike.

    Related: This Innovative Technology Will Level Up Your Franchise Businesses

    Technological innovation is important to all industries today, especially the franchise industry, as it helps attract both franchise investors and customers to the business. Make sure the tech your company focuses on is worth the effort and that the time will be available to protect and maintain it.

    How will you know if your new tech is a success? If your usage and satisfaction are high. Make technology seamless (to the point where it becomes so integrated, it virtually disappears) for your company and its stakeholders, and your business will reap the benefits.

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    Jeff Brazier

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  • Here’s What You Need to Know About Funding a Franchise | Entrepreneur

    Here’s What You Need to Know About Funding a Franchise | Entrepreneur

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    The following excerpt is from franchise expert Mark Siebert’s book The Franchisee Handbook. Buy it now.

    When it comes to funding a franchise, how much is enough? The answer is simple — more than you need.

    Consider this: More startup businesses fail because of undercapitalization than for any other reason. So where do you start? You need to determine how much you can invest and how much you are willing to invest. You might find those two numbers are different.

    Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

    How much can you invest?

    This answer lies in your net worth. To determine that, you should create your own personal balance sheet.

    Start by adding up all your assets to determine how much you own: cash, checking accounts, investments, home value, personal property, retirement accounts, business interests and other assets of value. Next add up everything you owe (called liabilities): credit card debt, mortgage debt and other loans.

    Your net worth figure represents an approximation of the capital available for you to invest in a franchise. You must next decide how much of that you are willing to risk on the franchise.

    The amount of capital you are willing to risk is not necessarily the same as the amount you have to invest. You may choose to invest only a fraction of your net worth in the franchise, or you may choose to invest more using the sometimes dangerous magic of leverage.

    Related: Owning a Franchise Could Be Your Fastest Route to Business Ownership. Here’s What You Need to Know to Succeed.

    Leverage is like wine — wonderful if you know your limit

    In quantifying how much you are willing to risk, you must understand the concept of leverage. Leverage, or your ability to use borrowed money for an investment, is like wine — it’s great in the right quantity, but too much can kill you. While leverage increases your potential return, it also increases your risk.

    To understand the power of leverage, let’s use the everyday example of buying a home. If you were to purchase a $200,000 home today, you might be able to buy it with 10 percent down. With monthly payments of perhaps $900 per month (without taxes and insurance), you figure you can afford it because you and your spouse each take home $2,000 per month.

    Over the next three years, let’s say you increase your paid-in principal by about $9,000. Thus, the average equity you have in that home will be a little over $24,500.

    Related: 23 Questions to Ask a Franchisor When You Meet Face to Face

    If you then decide to sell the home, the selling price is dictated based on the market, regardless of your equity position. Thus, if real estate has been booming, you may be able to sell your property for $230,000. Without factoring in closing costs or commissions for the sake of this analysis, your three-year return on your total investment of $200,000 is around 15 percent. But your three-year return on the $24,500 in average equity you invested will be $30,000/$24,500 — or about 122 percent!

    That’s great news, but things don’t always work out that well. Anything can happen, from unexpected medical bills to natural disasters. What if you or your spouse is laid off? Can you still afford that home on only $2,000 a month?

    Apply this same principle to your investment in a franchise. Perhaps you have a net worth of $500,000. But since a lot of your capital might be tied up in your home and retirement savings, you only have $100,000 to invest in your franchise. You will need to decide whether to leverage yourself into a higher investment with a higher potential return.

    So how much is too much?

    There are two factors influencing the answer to that question. The first is you — how much of an appetite for risk do you have? Remember, your banker is going to take a security interest in your assets.

    So even though you invested $100,000 of your capital out of pocket, if your franchise business fails, they may go after your house or other assets. While your equity investment may only be $100,000, your total investment will include the money lent to you by your bank.

    The second part of this equation is your banker or other lender. Generally speaking, bankers and/or Small Business Administration (SBA) lenders like at least 30 percent of the initial investment to come from your personal equity. So conceivably, you could leverage a $100,000 investment up to $300,000 or so.

    Related: The 4 Biggest Myths About Franchising

    Your ability to leverage your investment will be dictated by a variety of factors:

    • Any collateral you can offer in the business
    • Anticipated cash flows
    • Your credit score
    • Other sources of income (e.g., passive income or spouse’s earnings)
    • Your banker’s opinion of the franchise
    • Your banker’s opinion of you as a franchisee

    Meet with your banker

    One step you can take early in the process is to speak candidly with your banker. While you will certainly need to have a more detailed conversation once you have chosen your franchise, your banker (or several bankers, if you have the time to speak to more than one) can give you a great idea of acceptable risk.

    At this stage, the one thing you cannot show them is your projected earnings or the operating costs of the franchise. Bring what you have to your banker and ask for advice on how much you could reasonably afford to borrow.

    Once you have met with your banker and have a good feel for your available capital, your risk tolerance and your ability to leverage your way into a franchise, you are ready to begin the screening process to help you narrow the field.

    Related: Which Franchise is Right For You? Follow These Steps

    Get started with The Franchisee Handbook

    In The Franchisee Handbook, franchise expert Mark Siebert walks you through the process of vetting and buying a franchise, helps you ask the right questions of franchisors and yourself, and gives you the resources you need to decide if franchising is right for you. Siebert shows you how to do your homework before making what could be the greatest financial decision of your life. You will learn how to:

    • Accurately assess the risks of buying a franchise
    • Determine if a franchise is a good fit for your personal goals
    • Research and vet potential franchise opportunities
    • Create a startup plan that meets your business goals
    • Prepare your franchise for success

    Why dream about owning a franchise when you can take concrete steps to make it happen today? With The Franchisee Handbook as your guide, you have the power in your hands to start your own franchise journey right now.

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    Entrepreneur Staff

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