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

2. Oklahoma State Use Program
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

3. Oklahoma State Use Program
Why are you here?
“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”
Brian Tracy is a leading self development author and coach in the United States of America. Tracy is a best selling writer with more than 40 books published, more than 300 video and audio programs produced, and a live audience of more than 250,000 each year. Tracy was born in Canada to a family that struggled financially and had very few luxuries in life. He was a high school drop out and started his career as a laborer, working in several physically demanding jobs during his teenage years. When Brian Tracy turned twenty, he left Canada to travel the world like he had always dreamed of. After driving to North America he got a ship to England and then cycled to France, Spain, and Gibraltar. Tracy also drove through the harsh and sometimes life threatening Sahara Desert with a couple friends, and eventually settled in Johannesburg, South Africa for two years where he worked and lived. After briefly returning to London to work, Tracy traveled through areas of Europe, Turkey, Iran, Pakistan, India, Malaysia, and Singapore. He then spent a further 2 years working and living in Thailand, Asia.
Oklahoma State Use Program

4. Overview of Franchising
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
To be covered by the Franchise Rule, a business arrangement must also satisfy the three definitional elements of a "franchise" set forth in the Rule: (1) the distribution of goods or services associated with the franchisor's trademark or trade name; (2) significant control over, or significant assistance to, the franchisee; and (3) a required payment of at least $500 within six months of signing of an agreement. 16 C.F.R. § 436.2(a)(1)(i).
Product Franchises. Manufacturers use the product franchise to govern how a retailer distributes their product. The manufacturer grants a franchisee the authority to distribute goods by the manufacturer and allows the owner to use the name and trademark owned by the manufacturer. The franchisee must pay a fee or purchase a minimum inventory of stock in return for these rights. Examples of Product Franchises include: Mobil, Goodyear, Baskin Robbins, and Ford Motor Company.
Business Format Franchising. This is the most popular form of franchising. In this approach, a company provides a franchisee with a proven method for operating a business using the name and trademark of the company. The company will usually provide a significant amount of assistance to the business owner in starting and managing the company. The franchisee pays a fee or royalty in return. Examples of Business Format Franchises include: McDonalds, Dunkin Donuts, Carvel, AMMCO and Fantastic Sam’s.
Manufacturing Franchise. These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor's name and trademark. This type of franchise is found most often in the food and beverage industry, but can be applied to other industries. Examples of Manufacturing Franchises include: Coca-Cola, and Sealmaster.
Oklahoma State Use Program

5. Overview of Franchising
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)
To be covered by the Franchise Rule, a business arrangement must also satisfy the three definitional elements of a "franchise" set forth in the Rule: (1) the distribution of goods or services associated with the franchisor's trademark or trade name; (2) significant control over, or significant assistance to, the franchisee; and (3) a required payment of at least $500 within six months of signing of an agreement. 16 C.F.R. § 436.2(a)(1)(i).
Significant controls over operations or promises of assistance may relate to:
· training programs;
· marketing assistance;
· site approval;
· location or sales area restrictions;
· hours of operation;
· types of products or services offered and how they are offered;
· personnel policies;
· accounting practices;
· providing a detailed operations manual;
Oklahoma State Use Program

6. Overview of Franchising
Historical Benefits of Franchise Strategy
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

7. Oklahoma State Use Program
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

8. Oklahoma State Use Program
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

9. Oklahoma State Use Program
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

10. Oklahoma State Use Program
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

11. Oklahoma State Use Program
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

12. Oklahoma State Use Program
Franchise Operations
Retail stores
Complexities include:
Site Selection
Lease Negotiation
Construction
Signage
Changing demographics, consumer trends
Economics
Local laws & jurisdictions
Oklahoma State Use Program

13. Oklahoma State Use Program
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

14. Oklahoma State Use Program
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

15. Oklahoma State Use Program
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

16. Oklahoma State Use Program
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

17. Oklahoma State Use Program
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

18. Leveraging Franchise Power…
Unique Aspects in Franchising:
Shared Risk – don’t reinvent the wheel
Communal Learning – concept enhancement
Association – education, R & D
Liquidity – documented higher resale value
Economies of Scale – buying power
Oklahoma State Use Program

19. Oklahoma State Use Program
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

20. Oklahoma State Use Program
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

21. 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

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

23. Oklahoma State Use Program
Thank you
Dr. Benjamin C. Litalien
Principal & Founder
Franchise Well, LLC
44 Mine Road, Suite 161
Stafford, Virginia 22554
Oklahoma State Use Program