1. An Introduction To Franchising
FranSelect Presents
An Introduction To
Franchising

2. What is Franchising?
Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company’s products and services can help them. It is a method for distributing products and services that satisfy customer needs. Franchising is a network of interdependent business relationships that allows a number of people to share: • A brand identification • A successful method of doing business • A proven marketing and distribution system In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.

3. Legal Factors to be Considered a Franchise
Franchising is defined by state and federal laws as a commercial relationship in which three factors are present: 1. a licensed trademark 2. a prescribed marketing plan 3. the payment of a franchise fee for the right to participate in the program. When these three factors exist, the relationship is regulated as a franchise by state and federal laws.

4. Franchise Statistics
Franchise businesses account for nearly 50% of all retail sales in the United States.
Franchise businesses employ more than 14 million Americans
There are an estimated 3,000 franchise companies operating in the U.S. doing business through nearly 500,000 retail outlets.
Seventy-Five (75) industries use franchising to distribute goods and services to consumers.
The United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business. 3

5. Franchise Statistics (cont.)
A U.S. department of commerce study conducted from 1971 to 1997 showed that during that time less than 5% franchise businesses were closed each year.
Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non franchised businesses closed within the first 6 years of their existence due to failure, bankruptcy, etc.
Total sales by franchised businesses are projected to reach $1.7 trillion, this year.
1 out of every 12 business is a franchised business. 3

6. Franchise Statistics (cont.)
A new franchised business is opened every 8 minutes of every business day.
The median gross annual income, before taxes, of franchisees was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year. 3

7. Franchise Types Single Unit Franchise Multiple Units Area Developer
Master Franchise 3

8. Franchise Categories Accounting & Tax Services
Advertising & Direct Mail
Auto & Truck Rentals
Automotive Services
Beverages: Special
Business Consultants
Children’s Services
Clothing and Shoes
Computers & Internet
Construction
Convenience Stores
Cosmetics
Dating Services
Drug Stores
Educational Services
Employment
Financial Services
Fitness
Florist Shops
Food/Restaurants
Greeting Cards
Hair Salons & Services
Health Aids & Services
Home Furnishings
Home Inspection
Hotels and Motels
Insurance
Janitorial Services
Laundry & Dry Cleaning
Lawn/Garden/Agriculture
Maid & Personal Services
Maintenance
Optical Aids & Services
Packaging/Ship/Mail
Painting Services
Paralegal Services
Payroll Services
Pest Control Services
Pet Services
Photography
Printing/Copying
Real Estate Services
Retail Stores
Security Systems
Senior Care
Sign Products & Services
Sports & Recreation
Tanning Centers
Telecommunications
Transportation Services
Travel Agents
Vitamin & Mineral Stores
Weight Control 3

9. Partial Franchise List
Precision Tune
AAMCO Transmissions
AIM Mail Centers
AlphaGraphics
Archadeck
House Doctors
Mr. Handyman
Crestcom International
Focal Point Business Coaching
Sandler Sales Institute
FasTracKids
The Cleaning Authority
Maid Brigade
DUCTZ
Jantize America
Budget Blinds
Fruit Flowers
Nerd Force IT
Money Mailer
Roni Deutch Tax Centers
Blimpie
Cold Stone Creamery
Chill Bubble Tea
Great Wraps
Maui Wowi
Nestle Toll House Cafe’
Sport Clips
Jon Ric International
Planet Beach
Snap Fitness
Aussie Pet Mobile
Foot Solutions
Home Care Assistance

10. Advantages of Buying a Franchise
Lower Risks
Established product or service
Experience of Franchisor
Group purchasing power
Name recognition
Efficiency of operation
Management Assistance
Business Plan
Start-up Assistance
Assistance in Franchising
Proven System of Operation
In a franchise you are in a business for yourself, not by yourself 3

11. Process from Prospect to Franchisee
Analyze Lifestyle Needs
Analyze Business Goals
Analyze current financial position and future goals.
Help Determine Type of Business
Obtain Confidential Questionnaire.
Research Applicable Franchises
Obtain Franchise Packet & Disclosure Document
Return Receipt of FDD
Speak in-depth with Franchise
Interview Existing Franchisees
Second Interview with Franchise
Consult with Attorney & Accountant
Visit Franchise Headquarters
Enter Into A Franchise Agreement
Obtain Real Estate
Franchise Initial Training
Complete Construction
In Store Training
Open For Business
On-Going Support 3

12. Franchise Disclosure Document
Description of the franchisor, predecessors and affiliates
Identity and business experience of officers and directors
Litigation history
Bankruptcy history
Initial franchise fee
Additional costs and fees
Initial investment
Restrictions on sources of products & services
Franchisee’s Obligations
Financing arrangements for franchisees
Franchisor’s obligations
Territorial protection
Trademarks, service marks and trade names
Patents, copyrights & proprietary information
Franchisee requirement to operate the business
Restrictions on sale of goods and services
Renewal, termination, transfer and dispute resolution of the franchise
Endorsements by public figures
Earnings claims
Names, addresses, and telephone numbers of current and former franchisees
Financial statements
Contracts and agreements
Receipt
Exhibits
Franchise Agreement
Equipment Lease
Premise Lease
Loan Agreement
others

13. The Future of Franchising
You are in the right place at the right time.
People are disenchanted with corporate jobs, because of the dot.com failures and the corporate scandals.
20-34 year olds are going into business for themselves three times as frequently as year olds, many looking at franchising.
The “Baby Boomers” are retiring from their jobs, but are too young to truly retire.
Women are going into business at twice the rate of men, and many looking at franchising.
Minorities – another fast growing groups are going into franchising.
*20-34 year old info comes from “Tips and Traps When Buying a Franchise, by Mary Tomzack page 41
*Women quote in same book, on page 36, quoted from a Department of Commerce study.

14. Questions to Ask the Franchisor
An overview of their franchise?
How many current franchises ?
How many do they expect in next 12 months? Last 12 months?
Do they have a Discovery Day?
Describe their training and ongoing support
Do they provide site selection and lease negotiations
Do they provide any Grand Opening support?
Ask the current fees: franchise fee, royalty, advertising
Are there any other fees, such as territory, training or marketing?
Does their FDD provide an earnings claims?

15. Financial Resources
Tradition Lending
SBA Loans
401k Rollovers

16. Speak with your FranSelect franchise advisor!
Additional Advice
Speak with your FranSelect franchise advisor!