Is Franchising Right for You?

Presented by:

Marcelo AlvarezAt FEI Chicago ChapterCareer Management Group MeetingMarch 4, 2010

“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change. “

Charles Darwin

Agenda

Is Business Ownership Right for you?

Franchising 101

Is Franchising

Right for you?

Finding the Right

Franchise for You

Is business ownership right for you?

Are You Looking for:– Security/self-sufficiency (eliminate possibility of downsizing)?– The ability to control your destiny and schedule?– A way to build equity and diversify your investments?– A more direct correlation between your efforts and the end result? – To create a beacon and possible career option for your children?

Are you self-motivated?

Can you get past “perceived” security of a paycheck?

Perception RealityToo much competition or it won’t work in my market

Facts and information exist to make an informed assessment, if one is willing to make an effort to gather information

Too Risky 90% of franchise units are in business after 7 years

Too much capital Franchise investments are as low as $30K

I’m not qualified Most franchisors are not looking for any previous experience in field

Takes too long to recoup investment; replicate former income

Our clients have replicated former income by Year 2

Someone they trust told them it was a bad idea or knew someone who failed

Should do your own due diligence

75% of us want self-sufficiency, but only 5% ever achieve it. Why?

FEAR = False Evidence Appearing Real

Department of Commerce study shows higher success rate for franchises than independents

Independents are often working IN the business Franchisees are trained to work ON the business

Franchisee - Owner Working ON the business

“How do manage and grow the pieces of the business pie”

Independent Technician Working IN the business

“How do I make the best pies?”

From Michael Gerber’s Book:The E-Myth Revisited

What is Franchising?

• Franchising:– Is NOT a business or an industry.

– Is a method of distributing products and services to consumers.

– Utilizes a network of local owners (“locally owned and operated”) operating under a shared brand.

• Franchisees:– Pay the franchisor for the right to do business under

the shared brand

– Operate under a specified, controlled business method or format

• Franchisors:– Provide significant initial and on-going support

Franchises aren’t just about Burgers & Subs

Automotive, 6%Baked Goods, 2%

Bldg. & Construction, 5%

Business Services, 5%

Child Related, 3%

Education-Related, 2%

Fast Food, 20%

Lodging, 3%

Maintenance Services, 8%Personnel Services, 2%

Printing, 1%

Real Estate, 5%

Restaurants, 8%

Retail Food, 5%

Retail, 11%

Service Businesses, 11%

Sports & Recreation, 2%

Travel, 1%

• There are over 6000 franchises in 75 different industries• Not Starbucks. • Home based, vehicle based and retail based• From a $30K investment to $2.5MM+ investments

Franchise Structures & Examples

Structure Owner’s Role Location Other Examples

Self Employment

Individual Contributor Home based Most Flexible

Service Hire and manage service providers

Home or office based

Scale up over time

Small Box Hire and manage employees

Strip malls or standalone

Location is KEY

Semi-Absentee

Manage a manager Strip malls or standalone

Multi-unit

Master/Area Developer

Oversee and develop an area

States or large metros

Strategic role

Conversions Buy and convert existing business

Retail or office

Leverage existing cash flow

Why is franchising so successful?

• A proven system

• Training and ongoing support

• Being in business for yourself, but not by yourself

• Win-win relationship … starts with mutual benefits and grows from there

Advantages & Disadvantages for Franchisee

Advantages• Proven System

• On-going support

• Training

• Constant Improvements

• Purchasing Power

Disadvantages• Following someone else’s rules

• Upfront fee

• On-going royalty

• No guarantees

Is Franchising right for you?

Are you willing to leverage a proven system?– Mavericks need not apply, however, still room for franchisee creativity

Are you willing and able to make a 5-10 year commitment?– Financially

– Emotionally/family support

– Work hard, especially 1st couple of years

Are your goals consistent with business ownership?– Tradeoff between freedom/control and “steady paycheck”

– Willing to run as a business, not be the person who “makes the donuts”

What is today’s HOT franchise?

There is no such thing!

So how do you find the right business?Determine what you want the business to do for you

Inputs:

• Experience

• Finances

• Time

Goals:

• Lifestyle

• Professional

• Financial

Business

If you only consider things you “like” or have done before, you are

boxing yourself in

An Open Mind & Objective Approach are Critical for Success in Researching/Finding a Franchise

• Step outside your comfort zone and explore concepts you are not drawn to

• You don’t need to love a product/service to capitalize from it

• Most successful franchisees have no prior industry experience

• Focus on understanding the business and the role of the owner

• Stay objective and gather facts and information

Information is the antidote to FEAR (False Evidence Appearing Real)

Ultimately you need to answer the following questions for yourself

1. Will I do and enjoy what is required of me as an owner of this business?

2. Will I be successful as an owner of this business?

3. Will this business allow me to meet my personal and professional goals?

4. Will this business provide the return on investment that I need?

If so, you have found the right business! If not, keep looking!

3 Clients Illustrate Variety in Circumstances and Options

• Cathy and Hope – Business partners– Long time co-workers who were laid off from corporate jobs – Focused on finding a recession proof business – Opened a SERVPRO cleaning and restoration business in Addison– Celebrated their one year anniversary in business last fall

• Joe – Sales coach– Unhappy working for someone else– Wanted a low overhead business with short sales cycles– Opened CLIX on-site photography business in Wheaton last January– Business is doing very well – broke even in first year– Joe is very happy

• Paul– Paul, former Navy Chief and laid off Service Manager– Wanted to have more control over his life and have flexibility to travel – Opened a Fruitfull – Happy & Healthy Wholesale snack distribution

business in Aurora in August– Secured over 40 accounts in his first month– Continues to grow business and enjoy his flexibility

“Change is the essence of life. Be willing to surrender what you are for what you could become.” - Anonymous

Thank You!

Marcelo Alvarez530 Mark Lane

Downers Grove, IL 60516(630) 324-8293

Marcelo.esource@comcast.nethttp://www.theesource.com/Malvarez

Questions?