Is Franchising The Right Business Opportunity For You?

Presented by Marc Romanow, Romanow Advisors

Franchising is…

• A strategy for the growth and expansion of a business, in which a company (franchisor) licenses to a new business owner (franchisee), for a period of time, the trademark, operating & business plan and other proprietary information. In terms of distribution, the franchisor can also serve as a supplier that allows an operator to capitalize on the brand to distribute the supplier’s goods. In return, the operator pays the supplier a fee and/or recurring royalties.

What is Franchising?

• There are an estimated 3,000 different franchisors (franchise business companies) operating in the U.S. today.

• It is estimated that there are over 7,000 franchise businesses in the U.S. which provide nearly 18 million jobs and generate over $2.1 trillion to the economy.

• According to the IFA (International Franchise Association) almost 4% of all small businesses in the USA are franchises. There are more than 300 different industries and business categories that use the franchising business model as a means to distribute goods and services.

• It is estimated that the franchise industry accounts for more than 50% of all retail sales in the US.• Approximately one out of every 12 businesses in the U.S. is a franchise business.• Over 350,000 franchises are sold every week. A new franchise business opens every 8 minutes of every

business day.• Most franchise companies have fewer than 100 units.• The average royalty fees paid by franchisees range from 2% to 7% of monthly gross sales.• The average initial franchise investment is $250,000- excluding real estate.• More than 85% of all franchises opened in 65 industries during the past 5 years are still under the same

ownership.• The average length of a franchise contract is 10 years.• Top franchise business industry - Fast Food.• Top franchise company - McDonalds

Franchising Facts

What Are Your Options?

• Company Owned

• Joint Ventures

• Franchising

Expanding Your Business

The primary barrier to expansion faced by today’s business owner is capital.

• Franchising allows companies to expand without the capital expense or time commitment of company owned units.

• You do not need large amounts of capital to develop and implement a franchise expansion program.

• Affordability has made franchising an attractive method of business expansion.

Expanding Your Business

In Fact Franchising Is The Most Efficient Way

to Expand a Business!

• Franchisee Capital Investment

• Motivated Owner/Operators

• Recurring Revenue

• Personal Satisfaction

Benefits of Franchising

• Rapid expansion of the franchise network

• Franchisees assume most of the financial risk.

• A franchise company can realize a higher return on its capital.

• Franchise network can realize economies through joint procurement.

Franchisee Capital Investment

• Franchisees are driven business owners who want to make money, distribute quality products and provide excellent customer service.

• Franchisees are idea/information resources for the franchisor.

• A franchising company has a simpler and more efficient management structure.

Motivated Owner Operators

• Franchisees pay royalties to franchisor based on their gross revenue for the life of the business.

• Royalties typically range from 2% to 7% of gross revenue.

• Sometimes franchisors will wholesale their products to franchisees.

• Franchisees also typically contribute anywhere from 1% to 4% of gross sales for brand advertising.

Recurring Revenue

• Personal satisfaction from teaching and assisting others to successfully establish and operate a business

• Tremendous pride working with people who are building successful businesses and helping the franchisor become a successful company

• Extending the legacy of the company

Personal Satisfaction

• Are you credible?

• Are you sufficiently different?

• Can your knowledge be transferred?

• Can your business concept be adapted from one location to another?

• Is your system proven, documented and affordable?

• Will your franchisee receive a return on investment?

• Do you have the capital to franchise?

• Do you have a commitment to building relationships?

Are You a Franchise Candidate?

Franchising is a 4 Phase Process

• Legal

• Operations & System Development

• Marketing & Awarding of Franchises

• Growing a Franchise System

How To Franchise

• Franchise Disclosure Document – Uniform legal document required by Federal Trade Commission

• Franchise Agreement – Governs relationship with your franchisees• State Registrations and Filings• New Business Entity• Trademark filing with USPTO• Annual updates

Legal

Operations Manual

• Playbook for your franchisees

• Outlines policies and procedures for day to day operations

• Typically 12 to 15 Chapters and around 300 pages

• Must disclose Table of Contents in Franchise Disclosure Document

System Development & Documentation

Marketing & Selling Franchises

Comprehensive Sales and Marketing Plan

• Average annual marketing cost = $4,000 - $5,000 to sell each franchise; Average annual advertising expense for franchisees = 2% of gross sales

• Press Releases• Brochures• Franchise page on website• Open House• Broker networks• Internet, Print & Broadcast Advertising• Trade Shows• PR Firms

• Managing the franchisor/franchisee relationship

• Understanding obligations

• Developing resource pool

• Acquiring/learning effective management tools

• Ongoing training

• Advertising and marketing

Becoming a Franchise Company – Keys to Successful Duplication

My franchise clients include: Wing It On! ‘the Malted Barley’ Mist Essentials Rich Farm Ice Cream Rangoli Grill Dee-O-Gee Contact me to discuss your business in greater detail or to obtain

information that will help you make an informed decision.

Marc Romanow: 860-793-8441 marcromanow@gmail.com

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