Looking for a Franchise?
The Good, the Bad, the Ugly
By Jim Smith and Bob Vitamante, SCORE
Counselors,
Santa Barbara Chapter of SCORE
www.sbscore.org
GOALS/Promises FOR TODAY
• An overview of Franchising
– The major components
– The principal areas of conflict
• Prepare future franchisees for decisions to
move forward
May 7, 2014
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You will help direct today’s meeting
• This will be interactive – ASK Questions!
• Where are you in your Decision cycle
– Just Curious? Exploring Concept? Actually
Searching?
– Goals: Have them?
• Who is today’s audience?
– (Potential) franchisee?
– Franchisor
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First, a little about Us
Bob Vitamante (a Franchisor)
• Olsten Temporary Services
– 3rd Largest temp biz in US as a
Franchisor and biz operator
– Responsible for all support
companywide
– Reacquired franchises and
trained new owners & licensees
• Pinkerton’s & Select Temps
• CPA with KPMG, Peat Marwick
May 7, 2014
Jim Smith (a Franchisee)
• A franchisee
– Ice cream, yogurt, etc
– Consulting & accounting
• A Franchisor
– Development, training and
sales
– 0 to 22 locations in 4 years
• A business owner/operator
– Printing company
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What is the franchise business?
• A business arrangement where the owner of a
product/service (the franchisor) licenses
another (the franchisee) to market his product
or service in a defined territory following the
franchisor’s guidelines.
• There is virtually no product or service that is
not available through a franchise business.
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Types of Franchises?
• Product/ Trade name Franchise
– CocaCola, BMW, Mercedes
• Business Format Franchise
A complete package is offered: product, trade name,
operating systems, quality standards, training, support
and facility design.
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Express Temporaries
Mail Boxes
Jiffy Lube
Molly Maids
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The GOOD (Pros) of
Franchising
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Proven business system & track record
Name Recognition
Training & Support
Site Selection
Financing and (possibly) lower financial risk
Advertising
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The BAD (Cons) of
Franchising
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Risk of investment
No Control over Franchisor support
Ongoing Franchise Fees & Royalties
No Control of Franchisor actions
Limits on Franchisee ability to change
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The Ugly of Franchising
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The Ugly of
Franchising
Franchisee has little control
• Franchisee wants to expand
• Franchisee wants to work differently, use own
ideas, sell new products or services
• Franchisee wants to sell business to others
• Franchisor wants to expand
• Franchisor’s Brand becomes negative
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The Ugly of
Franchising
Franchisor support is inadequate
• Systems don’t work, or function poorly
• Promised advertising and Branding is poor
• Training is inadequate or not timely
• Franchisor’s support team collapses
• Royalties and fees are not adjusted ‘fairly’
• Product costs rise, higher than local area
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Selecting a Franchise - Some considerations
• Demand? - Is there a product/service demand? Fad?
Seasonal? Does it generate repeat business
• Competition? - Similar businesses in your area?
Internet impacts? Is your product competitive?
• Name Recognition? - Is there brand recognition? How
long has Franchise been in business? Any complaints?
• Training offered? Initial training? Where? How long?
Online or in person? Ongoing learning opportunities?
• Support?– Advertising, Processing, Supplies,
Equipment, Location and Business advice, Penalties for
‘non performance’?
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Disclosure Statement!!!! Get it!
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Franchisor background and Business Background
Litigation History and Bankruptcies
Ongoing franchise costs
Restrictions
Training
Termination Policy
Advertising
Current and former Franchises, & related associations
Earning data: Incomes per size, average income, gross
sales and geographics
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It’s okay to disagree!
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General Principle #1 Know thyself
Strengths
Weaknesses
Special skills & Talents
Passions
Likes & Dislikes
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Principle #2 Know thy (Personal) Goals
What are your personal goals for business
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To lead or to follow?
To work alone or with others?
Inside or outside?
Creative expression?
Contribute to society?
Make a living for self and family?
Very little stress? Safety?
To build?
To get rich? By when?
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Principle #3 Know thy (Business) Goals
• What results do you want?
– Must be specific, actionable and measureable
– Must be time bound
– What is your business cycle - Daily? Weekly?
Monthly?
• Why?
• What needs do you want fulfilled?
If you don't know where you are going,
you'll end up someplace else.
Yogi Berra
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Principle #4 Need Help figuring this
out? Get a mentor!
Who or What is a Mentor?
A Quick History
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Principle #4 Characteristics of a Mentor
•Real life experience
•Subject matter expertise
•Demonstrated achievement
•Cares about you and your growth
•Objective, neutral
•Honest and open, and knows their limits
•Solution oriented
•Can meet you where you are; been there, done that
•'Reduced ego' - Limited personal investment of 'self'
•Big picture oriented
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To Summarize
Our focus was on becoming a franchisee:
– How they work and your role
– Your business priorities
– Your planning, goal setting, etc
Your external team – Mentors – Don’t go
it alone, contact us at www.sbscore.org
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Thanks for your attention
Good Luck!
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