Franchising 101 for Veterans

• Degree in Business Administration

• Self-employed for 23+ years

• Suzy-Q Deli; Sole Proprietor

• Fantastic Sams (Franchisee; 2 stores)

• FranNet (Franchisee; CO, WY & MT)

• Mr. Handyman (Franchisee; 3 territories)

• CO Real Estate Broker license (resales)

Stacy Swift FranNet CO, WY, & MT

Who is FranNet?

• International franchise brokerage and consulting firm; celebrating 25 years in 2012!

• Over 70 Offices in U.S. and Canada

• Worked with the SBA, SBDC, and SCORE since 1987

• Proud contributor to Wounded Warrior Project

• We match people who want to be in business with franchises that meet their needs

• NO COST!

U.S. Census Bureau’s Business Dynamics Statistics (BDS) - 2010

Current Economic Outlook

• More than 1 million Vets returning home from Iraq & Afghanistan will re-enter workforce in

next 5 years.

• Unemployment rate for Vets is higher than the civilian rate—11.7%.

• 12.8 million currently unemployed.

• 2.6 million “under-employed” in jobs beneath skill set & fair pay scale.

US Labor Market

VetFran Program

• Founded in 1991 to support veterans transitioning back into civilian life after the Gulf War.

• More than 400 IFA member companies participate– Offer financial incentives, training, and mentoring for Vets interested

in starting their own franchise business

• “Operation Enduring Opportunity”– Campaign to recruit and hire 75,000 Veterans and their spouses and

5,000 Wounded Warriors by 2014– The IFA has partnered with the White House Joining Forces Initiative,

the SBA, and The US Chamber of Commerce in this unprecedented recruitment effort

– The program offers tax credits to employers who hire unemployed Vets

• “Help Veterans Own Franchises Act” (HVOF)– Establishes a tax credit for Vets to become franchise owners– Allows a tax credit of 25% of the Franchise Fee to offset start-up costs

• 1 in 7 franchises are owned by Vets– 66,000 Veteran owned franchises in the US provide 815,000 American jobs and

generate $41B in GDP

• Veteran success in Franchising is driven by:– Outstanding leadership and teamwork skills– Ability to implement and execute systems– Franchises provide extensive training– Franchises offer on-going business support

• More information is available on the IFA’s VetFran Directory– www.franchise.org/Veteran-Franchise.aspx– www.VetFran.com

VetFran Program

Why Own Your Own Business?

What is it for you?

ControlFinancial Security

No More Layoffs

Money

Fulfillment Flexibility Independence

SUCCESS

The Reality:

Yet … most people choose to work for someone else!

Some Misperceptions

Risk:A job is safer than a business.

Economy: I’ll wait until the economy is better.

Investment: A business costs a lot of money to start and run.

Knowledge: I don’t know where to start or find what I’m looking for.

Skills: Running a business takes specific talents and skills.

Perception of Risk: JobRi

sk

TimeJob (Then) Job (Now)

Risk Increases

Is working for someone safe? Short term yes, but …

· Can you be sure your job is safe?

· Can performance determine security?

· Will you meet your long-term financial goals of security and retirement?

Business Ownership

Risk Decreases

At first, owning your own business can be scary, but ...

• No one can take it away. You can’t be downsized, transferred or fired.

• You can grow the business at the pace you want.

• The longer you own your business the safer it becomes

Lower Your Risks

Many businesses thrive in all economic conditions.

Concerned about starting a business during poor economic times?

Lower the risk by looking for businesses with specific market characteristics.

What About The Economy?

Growing markets driven by demographics• Ex: Senior Care, Residential Repairs & Cleaning, etc.

Essential services• Ex: Hair Care, Automotive, Damage Restoration, etc.

Business that help other small businesses thrive• Business Coaching, Personnel Services, Sales Training, etc.

Many businesses thrive in all economic conditions

Business Ownership Options

Buy an Existing Business

Start a Business from Scratch

Buy a Franchise

Start Up Business

Advantages Disadvantages

• Must create systems• No one to turn to for

help• Limited financing

options• Highest failure rate

• Must create systems• No one to turn to for

help• Limited financing

options• Highest failure rate

• Total control• Make all decisions• Keep all profits• Biggest upside

Buy an Existing Business

Advantages Disadvantages• Cash flow & good will• Actual historical results• Attractive to lenders• Established location &

customer base• Employees in place• Systems may be in place• Owner financing

• What is the real cash flow?• What is the good will?• Hidden seller motives• Employee defection• Higher debt service• Poor training/support by the

former owner

A Franchise…

Advantages Disadvantages• A proven, time-tested business

model that works• Predictable future results• Very attractive to lenders• Transparent due diligence

process with the franchisor and existing franchisees

• Recognized brand name and turn-key operating systems

• An seemingly endless and overwhelming number of concepts to choose from

• Paying a franchise fee • Royalties• Reporting, compliance, and

mandatory attendance for training, annual conferences, etc.

What is Franchising?

The creation of a distribution channel to build brand identity and attain market dominance…

QUICKLY!

Franchise Headquarters

Franchise Operators

Customers

Franchise is…

A license to use:• Name and trademarks• Products• Business Systems

In exchange for:• Initial franchise fee• Ongoing royalties

Franchising Fact #1:

FACT: • Over 3,100 different

franchise companies • In more than 80 industries • With over 900,000

operating units

Popular Categories

•Education•Retail•Pet Care•Cleaning•Real Estate•Senior Care•Home Repair•IT Services

Franchising Fact #2:

Total Investment Percent

Under $100k 52.5%

$100 to $250k 32.7%

$250 to $500k 9.2%

Over $500k 5.6%

FACT:

52%33%

9%

6%

Under $100k $100 - 250k

$250k - $500k Over 500k

Franchise Times Magazine Survey, Franchising is All Right, Thank You

Financing Facts:

How Much Do I Need?

Typically, 25-30% of the total investment will be your money.

Financing is relatively easy to get for 70-75% of the total investment including working capital.

Financing Facts:

Sources:• Personal savings• Family, friends, or partner• Home equity line of credit• Financial Institutions• Seller financing – resale• 401K, IRA, etc.

Ideal for Veterans and other eligible members of the military community who want access to funds to start or expand a business

Business must meet SBA minimum guidelines (for profit, operating in the U.S.,etc.)

Credit amounts up to $500,000; faster turnaround time Terms: less than 7 years = prime plus 2.25%; greater than 7 years = prime plus

2.75% Collateral: bank will take a secured interest in business assets and/or a

mortgage on real estate Personal guarantees: required by all owners of 20% or more 85% guarantee: loans less than or equal to $150,000 75% guarantee: loans greater than $150,000 The program has been extended thru 2013

• Patriot Express Pilot Loan Program

Financing Facts for Vets

Franchising Fact #3:

FACT:

There is no automatic correlation between the cost of the franchise and the potential return.

Franchising Fact #4:

FACT:

Service businesses require far less capital investments and frequently yield higher returns.

Franchise Business Economic Outlook

• It is estimated that Franchises accounted for over 7,934,000 jobs in 2011.

• It is estimated that the Franchise Industry accounted for over 4.9% of the total US GDP in 2011.

2012 Forecast for Franchise Industry

• In 2012, franchising will

– Add 168,000 new U.S. jobs– Add 13,928 U.S. units– Grow contribution to GDP 4.8 percent =

$21 billion

Source: IHS Global Insight

The Benefits of Franchising

Proven, systematic approach to starting and

staying in business:– Experience– Simplicity– Initial Training & Ongoing Support– Name Recognition– Sales, Marketing & Operational Systems– Culture of Teamwork

Franchising Benefits

You’re in business for yourself,

but not by yourself….

How Do You Find a Franchise That is a Great Fit?

Separate the function of the business, from the function of the business owner!

Determine Your Business Model

32

Identify your Financial & Lifestyle Goals

5 Years

10 Years

20 Years

What Are Your Transferable Business Skills?

CustomerService

MarketingManagement

Sales

Your Business Model

Types of Customers

Service or Product

New or Established Industry

Room for Growth

Other Items?

Employees

Budget

Business Environment

Full or Part-timeHours

Number of Units

Business Preferences

Business Characteristics

• These are preferences

• It will not be perfect

• Expect some of your preferences to conflict

• Be clear about your few “must haves” versus your many “nice to haves”

Finding a Great Fit

Match your business model with franchisors who are looking for people with your characteristics, attributes, goals and business preferences.

Conducting Your Research

We'll coach you through a 4-Step Research Plan and you’ll determine if one of the franchises is the right fit for you.

Professional Advisors

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Additional Resources You Should UseAccountantFranchise Attorney

The Science of Psychology

Getting Started with FranNet

Visit our Website: www.frannet.com

Click on the Orange button:

Can YOU Relate?