Franchising: What is it?



The Business Plan is Licensed by the
Franchisor—The Franchisee pays for it
(initial fees from a few hundred to several
million dollars, plus royalties based on sales,
typically 4%-10%)
The business has a common trademark
The business receives initial training and
ongoing support from the franchisor
Franchising in the U.S.
First Franchise: Singer Sewing Machine in 1850
 There are 760,000 franchised businesses
 9.8 million Americans are employed by franchises
(1 of 12 businesses)—Payroll of $506 billion
 Economic output--$1.53 trillion
 Types of franchises—Dealerships, service and
product
 Largest franchise—Subway (23,669 outlets)
(Pricewaterhouse/Coopers, 2004/Ent. Mag., 2006)

Top 10 Franchises for 2006
Entrepreneur Magazine
1)
2)
3)
4)
5)
Subway
Quiznos
Curves
The UPS Store
Jackson Hewitt Tax
Service
6)
7)
8)
9)
10)
Dunkin’ Donuts
Jani-King
RE/MAX Int’l
7-Eleven
Liberty Tax Service
Network Marketing: What is
it?



Face-to-face selling outside a fixed retail
location
Distributors not only sell products but “sign
up” other distributors
Distributors make money on retail mark-ups
on what they sell along with residual income
from those in their down line
Why Use Network Marketing?






Low capital investment
Greater margins
Motivated sales force
Only pay for performance
Minimal monitoring costs
With new communications technologies it’s
easy to stay in contact with a dispersed sales
force
Model of NMO Performance
NMO Performance=
Recruitment X
Retention X
Consumption
Why Join an NMO?







Increase income
Want to own my own business
Want tax benefits
Enjoy selling
Enjoy social interaction
See it as a hobby
Want to work with spouse/family
Commission Schedule for
Excel Distributors—April 1996







> $100,000
$20k to 100k
$10k to $20k
$5k to $10k
$1k to $5k
$100 to $1k
Less than $100
9
77
163
455
4,641
39,072
109,505
Percentage of Population in Network
Marketing (selected countries)








Taiwan
Canada
U.S.
Japan
Mexico
Brazil
UK
Switzerland
10.9
4.1
3.4
1.9
1.3
1.1
.8
.07