1. Looking for a Franchise? The Good, the Bad, the Ugly By Jim Smith and Bob Vitamante, SCORE Counselors, Santa Barbara Chapter of SCORE www.sbscore.org

2. GOALS/Promises FOR TODAY An overview of Franchising – The major components – The principal areas of conflict Prepare future franchisees for decisions to move forward May 7, 20142

3. You will help direct today’s meeting This will be interactive – ASK Questions! Where are you in your Decision cycle – Just Curious? Exploring Concept? Actually Searching? – Goals: Have them? Who is today’s audience? – (Potential) franchisee? – Franchisor May 7, 20143

4. First, a little about Us Bob Vitamante (a Franchisor) Olsten Temporary Services – 3 rd Largest temp biz in US as a Franchisor and biz operator – Responsible for all support companywide – Reacquired franchises and trained new owners & licensees Pinkerton’s & Select Temps CPA with KPMG, Peat Marwick Jim Smith (a Franchisee) A franchisee – Ice cream, yogurt, etc – Consulting & accounting A Franchisor – Development, training and sales – 0 to 22 locations in 4 years A business owner/operator – Printing company May 7, 20144

5. What is the franchise business? A business arrangement where the owner of a product/service (the franchisor) licenses another (the franchisee) to market his product or service in a defined territory following the franchisor’s guidelines. There is virtually no product or service that is not available through a franchise business. May 7, 20145

6. Types of Franchises? Product/ Trade name Franchise – CocaCola, BMW, Mercedes Business Format Franchise A complete package is offered: product, trade name, operating systems, quality standards, training, support and facility design. – Express Temporaries – Mail Boxes – Jiffy Lube – Molly Maids May 7, 20146

7. The GOOD (Pros) of Franchising Proven business system & track record Name Recognition Training & Support Site Selection Financing and (possibly) lower financial risk Advertising May 7, 20147

8. The BAD (Cons) of Franchising Risk of investment No Control over Franchisor support Ongoing Franchise Fees & Royalties No Control of Franchisor actions Limits on Franchisee ability to change May 7, 20148

9. The Ugly of Franchising May 7, 20149

10. The Ugly of Franchising Franchisee has little control Franchisee wants to expand Franchisee wants to work differently, use own ideas, sell new products or services Franchisee wants to sell business to others Franchisor wants to expand Franchisor’s Brand becomes negative May 7, 201410

11. The Ugly of Franchising Franchisor support is inadequate Systems don’t work, or function poorly Promised advertising and Branding is poor Training is inadequate or not timely Franchisor’s support team collapses Royalties and fees are not adjusted ‘fairly’ Product costs rise, higher than local area May 7, 201411

12. Selecting a Franchise - Some considerations Demand? - Is there a product/service demand? Fad? Seasonal? Does it generate repeat business Competition? - Similar businesses in your area? Internet impacts? Is your product competitive? Name Recognition? - Is there brand recognition? How long has Franchise been in business? Any complaints? Training offered? Initial training? Where? How long? Online or in person? Ongoing learning opportunities? Support?– Advertising, Processing, Supplies, Equipment, Location and Business advice, Penalties for ‘non performance’? May 7, 201412

13. Disclosure Statement!!!! Get it! Franchisor background and Business Background Litigation History and Bankruptcies Ongoing franchise costs Restrictions Training Termination Policy Advertising Current and former Franchises, & related associations Earning data: Incomes per size, average income, gross sales and geographics May 7, 201413

14. It’s okay to disagree! May 7, 201414

15. General Principle #1 Know thyself  Strengths  Weaknesses  Special skills & Talents  Passions  Likes & Dislikes May 7, 201415

16. Principle #2 Know thy (Personal) Goals What are your personal goals for business – To lead or to follow? – To work alone or with others? – Inside or outside? – Creative expression? – Contribute to society? – Make a living for self and family? – Very little stress? Safety? – To build? – To get rich? By when? May 7, 201416

17. Principle #3 Know thy (Business) Goals What results do you want? – Must be specific, actionable and measureable – Must be time bound – What is your business cycle - Daily? Weekly? Monthly? Why? What needs do you want fulfilled? If you don't know where you are going, you'll end up someplace else. Yogi Berra May 7, 201417

18. Principle #4 Need Help figuring this out? Get a mentor! Who or What is a Mentor? A Quick History May 7, 201418

19. Principle #4 Characteristics of a Mentor Real life experience Subject matter expertise Demonstrated achievement Cares about you and your growth Objective, neutral Honest and open, and knows their limits Solution oriented Can meet you where you are; been there, done that 'Reduced ego' - Limited personal investment of 'self' Big picture oriented May 7, 201419

20. To Summarize Our focus was on becoming a franchisee: – How they work and your role – Your business priorities – Your planning, goal setting, etc Your external team – Mentors – Don’t go it alone, contact us at www.sbscore.orgwww.sbscore.org May 7, 201420

21. Thanks for your attention Good Luck! May 7, 201421