State Use Vendor Training Conference April 1, 2014 Oklahoma City, Oklahoma Disability Service Provider Sustainability in the Ever Changing Marketplace: Break-out Session “Social Franchise”

2014 © Copyright - Franchise Well, LLC Session Objectives Give you perspective on the key elements of a franchise system Provide you with practical information about franchising Give you actionable ideas to consider pursuing a franchise To create more “students of franchising” Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Why are you here? Oklahoma State Use Program “Those people who develop the ability to continuously acquire new and better forms of knowledge that they can apply to their work and to their lives will be the movers and shakers in our society for the indefinite future.“ — Brian Tracy, Author of “Eat that Frog”

2014 © Copyright - Franchise Well, LLC Three Types of Franchising  Product Franchises Manufacturer allowed distribution of product(s) E.g. Goodyear, Ford Motor Company, Exxon  Manufacturer Franchises Right to manufacturer and sell (i.e. Coca-cola)  Business Format Franchise Predominant; focus of this presentation E.g. McDonald’s, Subway, Tru-Value, Radio Shack Overview of Franchising Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Business Format Franchising  Payment of a Fee One-time: franchise fee Ongoing: royalty, % of sales, markup on product  License to a Trademark Legal rights to common brand  Significant Control or Support Manuals, field support, compliance requirements  Ongoing Commercial Relationship Expectation of a “profit” (i.e. Goodwill Stores) Overview of Franchising Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC  Historical Benefits of Franchise Strategy Overview of Franchising  Building a Brand Creates liquidity and equity that could extend beyond “actual” value  Reducing System Cost Economies of scale Develops systemic knowledge base  Rapid Expansion Leverage local funding, sphere of influence and ownership effort Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Growth Strategies Single Site  The right to operate one franchise unit  Predominant strategy for franchising  Provides high-touch process  Numerous risks (competition, density) Key Considerations  What are your financial goals?  Can the franchise concept accommodate my goals?  What does the future look like? Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Growth Strategies Multi-Site  The right/obligation to operate multiple units  Provides better economies-of-scale  Can be good health predictor of franchisor  Numerous risks (capital invested, site economics ) Key Considerations  Can you manage multiple sites?  What is the make-up of the franchise system?  What does the future look like? Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Growth Strategies Area Development  This license usually grants the franchisee the right to open a certain number of franchises in a given area.  There is usually a production schedule where the area development franchisee must open a certain number of franchises during a certain period.  As long as the area development franchisee stays on track in opening franchises in the area, he/she has an exclusive area where no other franchisees are allowed to open a franchise.  Becoming very popular with franchise systems Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Growth Strategies Area Development, continued  Generally you pay reduced franchise and royalty fees but requires significantly more capital  Rapidly expanding concept but attractive primarily to “investors”  Provides for faster market penetration but can dilute the quality of single-site results Key Consideration  Can you afford it? Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchise Operations Two basic platforms  Retail stores Foodservice, Automotive, Education Requires a ‘location’ which drives up complexity and cost  Service providers Handyman, Residential/Commercial Cleaning, Pet care New energy in the sector driven by advances in technology Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchise Operations Retail stores  Complexities include: Site Selection Lease Negotiation Construction Signage Changing demographics, consumer trends Economics Local laws & jurisdictions Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchise Operations Service providers  Complexities include: Customer Service Customer Engagement Hiring & training of consistently competent staff Monitoring of authorized activities Compliance with system requirements Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchisee / System Support “After the Sale”  Franchise Launch critical time for relationship building big ‘let down’ time after training  Building the Business gradually gain independence franchisor must not ‘let go’ too soon  Ongoing Operations franchisee should assume leadership role try to stay ‘in the boat’ with franchisor Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchisee / System Support Home Office  Back-office support Accounting, call center, warehousing, procurement Advertising/marketing materials development Field Staff / Offices On-site, in-store, territory relationships Systemic evaluations Periodic Gatherings Convention, vendor meetings, special events Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC The Relationship “What does the franchisee want? What they would do for themselves if they weren’t running the business everyday!” -famous franchise expert Knowledge Transfer  Competition, industry know-how, regulation  Newsletter, bulletins, ‘data dumps’ System Development  Increased efficiency, growth, alliances Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC The Relationship It’s a matter of leadership  must be driven from the top  must permeate the entire organization  must be documented How can you know?  talk to several franchisees  visit corporate headquarters  read the Franchise Disclosure Document Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Leveraging Franchise Power… Unique Aspects in Franchising:  S hared Risk – don’t reinvent the wheel  C ommunal Learning – concept enhancement  A ssociation – education, R & D  L iquidity – documented higher resale value  E conomies of Scale – buying power Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Community Impact… Franchising Builds Community  Economic Development Expands the tax base Fills leasable space  Jobs Stimulate Appeals to workers at all levels  Bring Needed Products / Services Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Georgetown Program Certificate in Franchise Management Three 3-day Sessions  Building Blocks of Franchising  Managing a Franchise Business  The Future of Franchising Attracts Franchise Executives and Professional Worldwide Only Comprehensive Franchise Education Program a major University Top-notch Guest Speakers Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Social Franchise Workshop Research on Your Organization One-day Intensive Workshop  Tour of Facilities & Programs  In-depth Education on Franchising  Evaluation of Organizational Assets Comprehensive Recommendations Report with “Next Steps” Provided to over 100 Nonprofit Organizations Sets Foundation for Phase II Efforts Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Franchising is a powerful model… Summary “worthy of your time to learn more before moving ahead” “must be approached deliberately with your end goal in mind” “federally regulated and a strong community of interest” “can provide the opportunity for meeting mission sustainably” Oklahoma State Use Program

2014 © Copyright - Franchise Well, LLC Thank you Oklahoma State Use Program Dr. Benjamin C. Litalien Principal & Founder Franchise Well, LLC 44 Mine Road, Suite 161 Stafford, Virginia