Franchising in 2010

Following a tumultuous 2009, what is going to happen to franchising this year?

This is a question that tinkers in many enthusiast minds...

Each year, some companies prosper and others fail, but 2009 was definitely the year that tipped the scales in franchising—and not in a good way. We watched as more companies experienced their toughest times with lead generation for franchise sales, difficulties with franchisee relations, tougher supplier negotiations, and negative consumer sales. Franchise companies were hit from all sides, and no one was exempt.

That brings us to the biggest question about franchising: What is really going to happen in 2010?

For us to really understand or predict what is going to happen, we could poll many opinions. These thoughts could come from the banking and lending companies, the franchise companies, industry executives, brokers, or consultants in the industry. Yes, each may have valuable opinions and substantial data to make such comments. But I ask you, are they the real source to learn what will happen to franchising?
I encourage you to look at a different source for information this year. Why? Because we no longer have the luxury to sell franchises or support franchisees as we have in the past. 2009 proved above all that the old ways do not work anymore.
So who is it that can tell us what is going to happen, and provide guidance on how franchisors need to evolve and improve? How about the franchise owners? As last year unfolded, I felt that we had to hear from franchisees, who hold a direct lifeline to growth for all franchise systems.
Since I actually spent more time with franchisees in the early part of my career than I did my corporate partners, this past summer I went back to the land of the franchisees. Instead of attending some industry meetings or spending time speaking at conferences, we went to smaller meetings and locally organized meetings, traveled, and had fun with franchisees. We connected again with small, mom-and-pop owners and large, multi-unit developers. It was clear that to truly understand what was going to happen this year, the answers could no longer come from the sources that we had leaned on previously.

What did we hear? In 2010, franchisees are not going to do business as they have in the past, either.

Here are our top three thoughts about changes to franchising in 2010:

New franchisees will enter the market through transfers of ownership. The legacy and older franchisees with no generation behind them will split up their units (if they have a high multiple) and sell to newer franchisees. Traditionally, the focus has been “the new franchise sale”—new restaurant growth. This is always a good strategy. However, the resale was basically ignored for the most part. In many companies, the team handling transfers of ownership (selling a current restaurant) was not part of the franchise sales team and not trained extensively to handle these types of transactions. In order to sign the best franchisees, franchise companies must be not only ready for this, but proactive about it. An example: Burger King has put a key person in place to oversee these types of sales.

A higher level of education will be demanded (and needed for future success). It will not just be about what support the franchise offers. The franchisees that stay in the system are going to push companies to revamp their training and support. The new franchisees want this as well. Both types of franchisees are more technology savvy than ever before, and will be more abreast of the latest developments and how to e-communicate to other franchisees. They will demand more business training. An example: Our company had an increase in 2009 of over 150 percent in requests to conduct our Educational Programs to franchisors and franchisees as an outsource vendor versus conducting these in-house.

The marketing jobs will be back—in a new way. Companies will need to focus on increased marketing activities and new areas of marketing. More experience (and I mean real experience) in social media will be needed. An example: One vendor to the industry (not a marketing company) held free conferences in 2009 for their clients and non-clients about social media issues.

Actually, 2010 is shaping up to be a great year. We may truly be back to the focus being about operations in the restaurant industry, and not just selling franchises.

Source: http://www.qsrmagazine.com/articles/outside_insights/138/2010franchising-1.phtml

Using the Power of Social Media to Grow a Franchise

Communication is powerful. Whether it’s through social media, speaking engagements, media relations, or contributed columns, the way we interact with one another to build and maintain relationships is an extremely powerful skill to master. This article is about "how you can use the power of different communication strategies to boost your brand and your bottom line".

Let’s begin by striking while the iron is hot and discuss using the power of social media. Immensely powerful right now, social media tools are changing the ways franchisees communicate with customers and the ways customers communicate with brands. With Facebook, Twitter, LinkedIn, YouTube, Flickr, Google Wave, Wikipedia, Slideshare, FriendFeed, Posterous, Delicious, WordPress, oh my!, it’s hard not to be overwhelmed and wonder how in the world you’re going to keep them all straight, let alone start using them.

But take a step back for one second. I’ll help you get a grip. There are 10 advantages to using social media. It:

1. Provides international exposure
2. Attracts like-minded people
3. Speaks directly to audiences thousands of miles away
4. Helps put out fires
5. Helps start fires
6. Beefs up your knowledge
7. Enhances partnerships
8. Exposes you to different ideas
9. Allows you to test or get feedback
10. Lets you meet and converse with new audiences

As if those reasons weren’t enough, according to the Cone Business in Social Media Study, 93 percent of Americans expect companies they do business with to have a social media presence. And 85 percent believe a company should not only be present, but also interact with its customers via social media.

The one secret about mastering communication that no one ever tells you is you must spend most of your time listening. Great communicators ask a lot of questions. They really listen to what you have to say. They inquire deeply into the answers you provide.

Social media offers another way to engage in conversation. To be a master at social media communication, you must spend most of your time listening.

Following are some tools to do just that so you can get started today.

• Go to Twitter Search and enter your name, your franchise name, any of your brand names, even your competitor’s names. You can subscribe to the RSS feed so you don’t have to do a search every day. 
• Or, if you’d prefer e-mail alerts, go to TweetBeep, enter the search terms, and set up your account that way. 
• Part of your listening should always include monitoring blog posts. But sometimes that’s not enough. What if someone is writing about your franchise (positive or negative) in a blog’s comments? Use BackType to search the comments and to search for specific people who might always try to bring you down. For instance, if “IMAJERK” always comments about you, you can set up BackType to track them. 
• BoardReader lets you monitor discussion groups and forums. This is great for knowing when a new group or discussion about your franchise begins. Likewise, if someone were to create an “I Hate Your Company” page or discussion group, you’d know it immediately through BoardReader. 
• I love Trendrr because it provides great charts and graphs. Trendrr allows you to track and compare the trend of any keyword, including your franchise, yourself, or your competition. You can then compare them to other keywords to figure out where the trends are and what you should be including in your communication strategy. 
• But if you do only one thing, use TweetDeck. This easy-to-download and free desktop application allows you to create searches. Just like you would do with Twitter search, this gives you real-time results right where you tweet. Anytime anyone tweets about anything you search, it automatically aggregates the tweets into columns in TweetDeck.

There is no right way or wrong way to get started using social media. If your corporate brand has already started a social media program, make sure you understand the company's policies and determine whether or not they want you populating your social networks with corporate information. If you’ve already started using social media on the local level, keep doing what you’re doing, but see if you can get your franchisor involved.

Source: www.allbusiness.com  

How to Boost Your Morale as a Franchisee

 It may have started slowly. A drop in sales as consumer confidence dipped, a disturbing absence when regulars stopped coming by. Then, the momentum began building as store closures made headlines; perhaps a franchise nearby closed its doors for good. No matter how it happened or in what order, 2009 was a tough year that left many franchisees feeling down and out. And while it is critically important for franchisors to maintain a gauge of franchisee morale, most franchisors either don’t do it at all or don't do a good job of it, according to John P. Hayes, a franchise consultant and author of several books on franchising.

So how do you give your morale a boost? You may be overwhelmed just thinking about it, but a little effort goes a very long way.

Put things in perspective in order to set realistic expectations. “Know what you can control and what you can’t control,” says Hayes. “Then get control of what you can and forget the rest.”

Reach out to other franchisees. One of the biggest advantages of being part of a franchise is that you have access to an instant network of people who are living through the exact same challenges as you. Organize a meeting of several franchisees or ask a franchisee who’s succeeding to evaluate your business and offer tips. Says Hayes, “Franchisees can be of tremendous help to one another.”

Find support groups in your community. Call your Chamber of Commerce to find out about local business support groups, advises Hayes. Sharing experiences and ideas can inspire and motivate you, and you may even find that you can form partnerships with local businesses to help market your own.

Talk to your franchisor. “Among the top franchisors, the executives are on the phone calling franchisees to find out how business is going and how the franchisees are holding up under current economic and social pressures,” says Hayes. However, if your franchisor hasn’t been in touch, don’t wait for the call. Instead, speak up. Tell corporate that you need some support and see what strategies they have in place to provide that support. It will benefit you as well as a whole network of other franchisees. Plus, your success as a franchisee directly affects the success of the franchise system as a whole.

Remember that you’re not alone and stay focused on the goal. You may feel, at times, as though it is a long, solitary journey but look around and you’ll see that others are sharing in the plight. Set achievable goals and keep moving forward.

What can franchisors do to help franchisees maintain their morale?

According to Greg Nathan, managing director of the Franchise Relationships Institute, an organization that helps franchisees and franchisors work together constructively, the most effective methods that franchisors have used to assist their franchisees to beat the recession are:

• Monitoring franchisee financial distress more closely. For instance, franchisor executives can visit franchisees in their businesses to discuss business health indicators such as debtors, product mix, and gross margin. 
• Collaborating more closely with franchisees and having more face-to-face contact with franchisees through forums and meetings. 
• Providing emotional support by maintaining an optimistic outlook when talking with franchisees about the future. 
• Providing franchisees with opportunities to share best practice with each other. 
• Coaching franchisees to engage in more aggressive local area marketing.

Source: http://www.allbusiness.com/franchises/13748667-1.html

Understanding the franchise interviews and negotiations

Once you've received all the required information from the franchisor, you will enter a preliminary negotiation stage before you sign.

This is the most critical period in your dealings with the franchisor. At this point, you’ll meet a representative of the franchisor and conduct interviews with as many franchisees as possible in order to evaluate the franchise package.

This provides an opportunity for both you and the franchisor to form first impressions and determine whether negotiations will proceed any further.

Franchisor interviews

On the day of the meeting it is important that you arrive on time and are well presented. After all, first impressions count.

Take a good look around the premises, so you can get a feel about the franchisor. For instance, if it is in a hotel or motel room, you will probably get a good indication that the franchisor might not be all they claim to be. However, if they are nice offices, and the receptionist seems busy taking telephone calls, the business might be the right one for you.

The representative of the franchisor may be one of four people: the franchise owner/company president, an in-house salesperson, a franchise broker (an outside salesperson retained by the franchisor to act as a representative), or a consultant.

No matter which one of these people you meet, he or she will want to know more specific information about you.

The franchisor is going to want to know more about your financial status, your experience and your general background. If the franchisor doesn’t ask these questions or show any interest in your previous background, that should be a danger signal to you.

When they do ask you questions regarding these topics, however, don’t feel they are prying into your personal life. They aren’t. They are just protecting their interests.

Be prepared with questions of your own about the company. You might even want to have your lawyer present or have a lawyer highlight areas of the franchise agreement that should be questioned. Don’t leave until you’ve been supplied with all the information that you need. This could take anywhere from a few hours to all day.

The primary goal here is to satisfy all your doubts so that you feel comfortable with the data provided.

Through your meeting with the franchisor, you’ll be discussing specific subjects that will affect your decision to purchase a franchise. Those subjects will be covered in both verbal and written form. Take notes and after the meeting, date those notes, detailing who you received the information from, their doc property “Chapter Title 0004”, etc.

Do this with any phone conversations you have with the franchisor as well. This will help you in the future should any problems develop.

Key questions to ask

During your interview, you really want to concentrate on some key areas that will help you determine the strength of the franchise:

• What is the special / unique process that they are selling and replicating?
• How did they start, and more importantly, do they have a pilot operation (and how does it perform)?
• Ask what the pre-tax net profits of existing operations are and compare this figure against the earnings statement or pro forma that the franchisor has already supplied you.
• Find out specifically what is included in the training program, field assistance, store design, premises construction, site selection, and feasibility studies.
• How will the initial franchise fees and investment be segmented?
• Will there be any additional working capital required after the initial fee and investment, and if so, how much?
• How will the franchisor arrange for the supply of product to the business? Ask to see a current price sheet.
• Ask the franchisor to detail exactly what the territorial restrictions and protections are.
• Find out how many franchises have been sold in the state you will be operating in during the last 12 months.
• Ask if the company has any plans for further expansion in the state. Has it identified any locations it plans to develop?
• If purchasing a current franchise, ask to see the operating books and records of the business for the past two years.
• What type of support will the franchisor provide once your franchise has opened its doors? Will the support be ongoing?
• Find out if any franchisees have been terminated. If some have, ask the franchisor to detail the reasons. Have any franchisees failed or gone bankrupt?
• What kind of financing is available from the franchisor, if any?
• Find out if there are any current lawsuits pending against the franchisor. Have them elaborate on any past judgments.
• Find out how disputes between the franchisor and franchisees are settled.
• Will the franchisor assist in site selection? It will be of enormous help if they do. Regardless of whether they do or don’t, do your own demographic study so you are familiar with the profile of the population within the market area.

Don’t be afraid to ask questions. And don’t be afraid that you’ll appear foolish, because very few people really understand the franchise agreement. Primarily, you’re trying to pinpoint any problems that may exist in a franchise. Don’t just settle on any franchise. That’s an easy way out and a very risky use of the capital you’ll be investing.

If you come across a franchisor who is reluctant to pass along a list of current franchisees, makes promises of earning a fortune on a limited amount of money invested, insists on deposits for holding a franchise unit, tries to convince you to sign before someone else does, or is full of empty advice when answering your questions, warning bells should ring.

Any secrecy on the franchisor’s part is not a positive sign, and you will probably be better off looking elsewhere. Crosscheck all the information supplied. Are the franchisor’s claims backed by performance? Are the advertising claims applicable at the store level? Are the profitability claims justified? You can check this information by contacting as many franchisees as possible

.

Franchisee interviews

As mentioned, some franchisees will be very supportive. After all, they were once in your shoes. However, some people may feel their business is none of yours. This could also be a danger signal. If a franchisee doesn’t want to talk to you, it might be an indication that the franchise isn’t doing nearly as well as expected.

Do all you can to convince franchisees to talk to you. Stress that the conversation will be kept confidential, and be as candid as possible to establish a good rapport. Remember, franchisees aren’t required to provide any information.

The more amiable and upfront you are with them, the better your chances of obtaining information. However, if a franchisee continues to be uncooperative, just move on to the next franchisee. Someone else will surely talk to you.

You want to ask the franchisees questions that will let you know whether or not the franchisor has been upfront with you. Try these:

• Is the franchisee happy with their investment, the support from the franchisor, and entry into the business?
• If a second franchise became available in their market area, would they purchase it?
• Do they feel they were well trained for the challenges of the business? 
• What is their income and what are their expenses? Compare them against the sample information provided by the franchisor. Find out if they have any cash-flow problems.
• What are sales patterns like? Are they seasonal? Ask them to describe the busy season.
• What type of ongoing assistance have they received from the franchisor?
• Are their advertising fees reflected in the marketing support received?
• Are the franchise and royalty fees fair and competitive with other franchises in the same industry?
• Is local market penetration in line with national figures?
• Were equipment, signage, logos, etc. provided for free or at an additional cost?
• What hidden costs, if any, have been incurred by franchisees?
• What degree of autonomy are franchisees allowed? How tightly regulated are they by the franchisor?
• Are there any disputes that are the subject of discussion among franchisees?
• What are the actual costs of the products, and are they competitive in the marketplace?
• Have they had any problems with product supply?
• Do they have any complaints about the franchisor?
• What were their initial start-up costs? What major hurdles did they experience during the first few months of start-up? How did they finance the business?
• How long have they been a franchisee and will they renew?
• Have franchisees encountered clauses in the franchise agreement that have caused them problems?
• How long are their workdays and do they take holidays?

You’ll gain a lot of valuable information from the franchisees, but don’t stop there. You should also check out all the bank references supplied by the franchisor to determine the solidity of its financial situation. Run a credit check on the company. Thoroughly check out any references supplied by the franchisor.

After you’ve completed a thorough evaluation of the franchisor, then you can make a truly informed decision and enter serious negotiations. Remember that you can negotiate items within the franchise agreement.

That’s why you’ve gone through a complete analysis of the company. When negotiating with the franchisor, it is a good idea to have your lawyer is present.

Negotiating tips

Once you’ve found a franchise you are interested in, don’t be the first person to mention price. Let the franchisor name the first figure and negotiate from there.

If there’s a broker involved, remember that brokers are selling agents who make their money from the commission the seller pays. Though it may not be necessary, consider hiring someone skilled in business acquisitions to represent your interests.

Settling on a price is only the first step in negotiating the sale. Actually, the structure of the deal is often more important than the actual price. Be prepared to pay between 30 and 50 percent of the price in cash and finance the remaining amount.

You may finance through a traditional lender, or the seller may be willing to function as a lender would, accepting payments over a specified period of time.

Remember, you can walk away from the deal at any point in the negotiation process before a contract is signed.

If you don’t like the franchise or if you don’t like the deal, you don’t buy. Just because you spent a month looking at a business, does not mean you have to buy it. You have no obligation.

Tips for Negotiating Franchise Agreements

• Ensure the Franchise Agreement complies with the Franchising Code of Conduct
• Ensure the Franchise Agreement does not contain elements that may constitute unconscionable conduct
• Outline in writing for the franchisor a list of objections to the franchise agreement and the changes that you seek. This will highlight the willingness of the franchisor to negotiate
• Make a note of all correspondence and communication with the franchisor.

Warning Signs

The following is a list of things to be aware of when considering buying a franchise:

• If the franchisor asks you to sign a disclaimer stating that you haven’t relied on any representations not contained in the written agreement. Such a requirement could indicate the franchisor doesn’t want to be held responsible for claims made by its sales representatives.
• Offers that depend on advertising which will not take place until after all the participants have signed up.
• Offers which are vague about exactly how the system will operate.
• Operators who claim that there franchising scheme has been approved by the Franchise Council of Australia, the Trade Practices Commission, or any other public agency. 
• An advertisement for a job vacancy that turns out to be a franchise.
• Offers to sell you manufacturing equipment with ‘guaranteed’ buyers for the goods produced.
• Operators who are not offering a true franchise package, but just a name and an idea.
• Promises of getting rich quick with little work.
• Huge fees
• Pyramid selling schemes
• Unrealistic income projections
• Franchisors giving you the hard sell
• Passing fads and trends (seasonality)
• Conflicts of interest
• Franchisors with no pilot operation
• Fee arrangements on a fixed basis rather than a percentage of sales.

By keeping a check on these prominent issues, your chances of becoming a successful franchisee will be greatly enhanced.

Source : http://money.ninemsn.com.au/article.aspx?id=265706

A franchise is a great way to take charge of your own destiny

Setting up your own business and taking charge of your own destiny could turn out to be the best move you ever make.
Being your own boss can mean working hours which suit you and the more you work, the more goes into your pocket, rather than simply boosting the profits of your employer.
But starting a business can be a huge risk with a variety of factors set to challenge you on the road to success.
A franchise is a great way to improve your chances, said small business expert, Cathryn Hayes of HSBC, right. “Going into business as a franchisee of a well-established, proven business will give you the best possible start.
“But it’s essential to do your research, making sure that it is the right one for you.”
There is a huge range of opportunities for potential franchisees from fast food outlets such as McDonald’s and Domino’s Pizza, through domestic cleaners such as Molly Maid or car -related businesses like Chips Away or Car Medic.
The key is to find a business that suits you – you don’t need to be an expert, but you will need drive and enthusiasm.
“It’s important to take your time when looking at different franchise opportunities,” said Hayes.
“Taking up a franchise is likely to be one of the most important decisions in your life and the life of your family.
“However enthusiastic you are, don’t be rushed, and do your homework. Remember all business involves risk, including franchising.”

She said people should take as much advice as possible – from banks, lawyers, accountants and from various franchise publications and bodies.
“Examine your strengths and weaknesses – what skills do you have? Does the franchisor provide training and back-up to help you overcome any weaknesses?” said Hayes.
One good idea is to talk to existing franchisees.

3 Simple Questions to Enjoy Your Business More

I wanted to give you three simple sets of questions for you to answer right now that are intended to help you enjoy your business more.

1.    What do I love doing for my business?  How can I make the time to do more of those things?

2.    What do I hate doing in my business?  How can I hand them off to someone else?  How can I design them out of my business?  If I can't get rid of them then at least how can I make them more fun?

3.    What one thing can I do different in my week next week that will help me feel more energized and engaged by my business?

Source:  http://www.allbusiness.com/real-estate/real-estate-investing/13632184-1.html

How to Select a Franchise Opportunity that Clicks

Without question, you should consider using established guidelines when shopping for a franchise opportunity. Also, you need to take into account personal considerations, as well as certain elements you are looking for in a franchisor.

Your own personal checklist might look like this:

* I have enough money (or can borrow enough money) to meet upfront fees and ongoing fees for at least 18 months.
* The day-to-day operations in this franchise are in sync with how I’d like to spend my time.
* The day-to-day management responsibilities are harmonious with my strengths, talents, and skills.
* I believe that the future of the franchise opportunity combines vision and practicality.
* The structure of the organization (private, public, soon to go public) is one I find acceptable.
* I know how many hours I’m willing to invest weekly in the business.

Also, you should formulate a checklist regarding the franchisor:

* The person at the helm of the franchise opportunity has a strong reputation and is personable.
* The culture of the franchise opportunity is in sync with my own values and style.
* The franchise organization is financially healthy.
* The litigation history is acceptable and has been explained satisfactorily.
* The organization has had consistent franchise growth.
* The organization has a strong franchise owners association that works in concert with management.
* Management shows openness to new ideas.
* Earnings claims are available and satisfactory — or if they are not available, franchisees are willing to help you to understand the financial picture.
* Franchisor does or does not require franchisees to work the business full time, and that requirement meets with my criteria.
* Franchisor is clear on whether and how it supports multiunit opportunities, and that framework meets with my long-term goals for the business.

As part of your due diligence, you should also:

* Review the organization’s franchise disclosure document, or FDD.
* Interview a varied group of franchisees with a list of questions you've thought through ahead of time.
* Visit a local unit or two.
* Visit the organization’s headquarters and meet with key management.
Finally, while I fully acknowledge the necessity of careful research and asking all the right questions, at some point a decision needs to be made. In my mind, the decision comes down to the "magic click". Questions to ask yourself include:

* Does this opportunity feel like the right fit for me?
* Do I feel comfortable conversing with management and fellow franchisees?
* Can I see myself becoming a member of this franchise family? A leader within the organization?
* Can I see myself having fun while managing this business?
* Do I see a values and personality fit with the key players?
* Do I see myself growing side by side with this organization?
* Are my instincts telling me this is the right business organization for me?

For years, I put my head together with prospective franchisees, who were examining our system for its solvency and future. My sales team and I answered question after question on their respective checklists, but when it came down to the final decision, I asked my prospects to check their heart and their gut.

Because the truth is, the partnership between franchisee and franchisor needs to “click,” and it needs to click for both parties. Trust me — if there’s any key answer to look for, it’s the one about the click. When it’s there, you know it, and you have a good chance of working successfully with that organization. Please, pay attention to your instincts before you sign on the dotted line.

Source: http://www.allbusiness.com/company-activities-management/company-structures-ownership/10753241-1.html