Franchising

What is a Franchise An or license between parties which gives a person or group of people (the __________) the rights to market a product or service using the trademark of another business (the _________).

Two Types 1. 2.

“Business Format Franchising” The ___________is duplicated Provide the franchisee use of __________and logos, as well as a _______ _______of doing business Assist the franchisee with site selection, interior layout and design, hiring and training, advertising and marketing, product supply and more The franchisee pays an up front franchise fee and agrees to pay continuing royalties to the franchiser Examples: quick service restaurants, automotive services, lodging, real estate agents, convenience stores and tax preparation services.

“Product Franchising” The _______ is duplicated, not the location Associated with industries such as make-up, jewelry, etc. Does not include royalty fees The franchiser provides trademarks and logos, national advertising campaigns, but most importantly, product T he franchisee sells goods or services which are supplied by the franchisor or a person affiliated with the franchisor

Is it EASY? Franchising may seem like an easy way to start ones own business and many times it is just that Caution: Investing in a franchise is no guarantee that you will be successful. Success will depend on three key factors; –1–1 –2–2 –3–3.

Draw Backs 1 2 3

Fees Initial _______ _______is paid by the franchisee when the franchise agreement is signed _______ ______ (franchising fees) is paid on an ongoing basis once the franchise business is up and running. –most often based upon a percentage of the ‘gross revenue’ or sales of the franchisee after deducting taxes –no set formula and in some cases it might even be a flat monthly fee, or a minimum purchase requirement of the franchisors goods that the franchisee sells from its franchised location

Fees Continued Advertising Fee are used to advertise the franchise system. –based upon a percentage of gross sales or net sales (though it can sometimes be a stated amount). –typically range from 1% to 5% of gross sales. Other Fees –Training fees, initially and on-going Consulting fees, Site selection fees, Leasing fees, Blueprint and specification fees, Grand opening fees, Auditing fees, Accounting fees, On-site management fees, Application fees, Exclusive territory fees, Renewal fees, Transfer fees

Company Owned vs Franchised Franchised units – – Company-Owned Outlet - An outlet operating under a franchise company brand, but that is owned by the ________ as opposed to a franchisee. –Company-owned outlets are often used by franchisors to trial new ideas and systems before implementing them across the franchised outlets within the network.

Capital Requirements

Other Key Terms Financing Options- Third Party- Assets- Liquid- Profit/Loss Statements-