1. State Use Vendor Training Conference April 1, 2014 Oklahoma City, Oklahoma Disability Service Provider Sustainability in the Ever Changing Marketplace: Welcome to the Era of the “Social Franchise”

2. 2014 © Copyright - Franchise Well, LLC Presenter – Dr. Ben Litalien Certified Franchise Executive 20+ Years of Franchise Management U.S. Franchise Manager, ExxonMobil On the Run Convenience Stores Principal, Franchise Well, LLC Strategic Advisor to Source America Georgetown University, Franchise Management Certificate Program Doctor of Management, Franchising Mountain Climber Oklahoma State Use Program

3. 2014 © Copyright - Franchise Well, LLC Introduction Oklahoma State Use Program "Your success in life isn't based on your ability to simply change. It is based on your ability to change faster than your competition, customers and business.“ — Mark Sanborn

4. 2014 © Copyright - Franchise Well, LLC Today’s Objectives  Take a look into the franchise sector  Developing an understanding of the “Social Franchise” concept  Considering how a nonprofit organization would benefit from owning a franchised business  Insights from other agencies on their franchise journey  Implications for nonprofits pursuing a Social Franchise Strategy Oklahoma State Use Program

5. 2014 © Copyright - Franchise Well, LLC  A marketing method in which the owner of a product or service, known as the “franchisor”, offers the right to operate and manage his product & service to others, the “franchisees”, in return for a fee and ongoing royalty payments. What is Franchising? Franchisee - Initial Fee - Royalty - Marketing Fees - Infrastructure Franchisor - Know-How - Support - Trademark - Network Regulated by Federal Trade Commission Oklahoma State Use Program

6. 2014 © Copyright - Franchise Well, LLC  A Brief History Lesson  The ‘roots’ of franchising  A progression through time  Modern day applications  The Current View & Trends  Business Format  Corporate Applications A Franchise Overview Oklahoma State Use Program

7. 2014 © Copyright - Franchise Well, LLC  Governed by the Federal Trade Commission  Patterned after SEC regulations  Governs the ‘offer and sale’ of franchises  Will respond to complaints of fraud, misrepresentation  Further Regulated by the States  15 States Have Additional Franchise Laws  May provide you with additional protection  Good to know the specifics in your State and where you plan to operate the business  Generally doesn’t matter whether the business is for profit or not for profit A Regulated Industry Oklahoma State Use Program

8. 2014 © Copyright - Franchise Well, LLC  International Franchise Association  Started in 1960, the IFA is the world’s oldest and largest organization representing this unique way of doing business  Mission: Enhance and safeguard the business environment for franchisors and franchisees worldwide  Currently have over 30,000 members, spanning 75 different industries, doing business in more than 100 countries  Excellent resource for prospective and active franchisees – www.franchise.org A Strong Community Oklahoma State Use Program

9. 2014 © Copyright - Franchise Well, LLCOklahoma State Use Program  More than 900,000 franchised businesses in the United States  The franchise industry accounts for nearly 10% of the private sector output ($1.53 Trillion )  Provides jobs for more then 18 million Americans  Franchising generates one out of every seven jobs in the private sector  Franchises exist in over 100 different industries …a franchise opens every 8 minutes of every business day… Franchising Stats

10. 2014 © Copyright - Franchise Well, LLC U.S. Franchise Market Oklahoma State Use Program

11. 2014 © Copyright - Franchise Well, LLC  A Visionary Step  Charting a course for nonprofit “community wealth” generation  A Pioneering Journey  Traveling together  Embracing the future What is a “Social Franchise”? Oklahoma State Use Program

12. 2014 © Copyright - Franchise Well, LLC  “A nonprofit owned franchised business…”  Generally a wholly owned subsidiary of the parent nonprofit organization  Can be “for” or “non” profit entity depending on: Underlying purpose of the entity Mission alignment  Business Success vs. Mission  Requires learning a new sector  A long-term business strategy What is a “Social Franchise”? Oklahoma State Use Program

13. 2014 © Copyright - Franchise Well, LLC The Process… Understanding Your Assets Creating The Criteria Finding The Right Match  Determine What You Can Leverage  Create a Positioning Strategy  Identify the Benefits to Your Organization  Create a SF Vision Consider the ‘Mission Fit’ Consider the ‘Culture Fit’ Determine the Financial Borders Identify Obstacles Evaluate Candidates Negotiate the Right Relationship Execute Franchise Agreement Consider Partnership Opportunities Oklahoma State Use Program

14. 2014 © Copyright - Franchise Well, LLC Select The Right Franchise Company 3,000Franchise Companies The Best Match Concept Fit with Nonprofit Mission Strong Overall Company / Concept Geographic Location Match / Expansion Required Investment Level Ability to Adapt to Nonprofit Requirements Willing to “Invest” in Partnership Oklahoma State Use Program

15. 2014 © Copyright - Franchise Well, LLC Growing the System  Economies of Scale  Increased Profitability Building the Brand  Creates Demand  Provides Better Liquidity for All  Generates Additional Revenue Opportunities Franchisor Goals Oklahoma State Use Program

16. 2014 © Copyright - Franchise Well, LLC A Compelling Case… Oklahoma State Use Program Opened Rocky Pop Popcorn at Denver Airport Acquired Auntie Anne’s  More stable job opportunity  Greater revenue potential “Just Like Any Other Franchise”  SBA loan; Completed training; Personal guarantees  Focus on bottom line Have Since Acquired Four More Locations  60% of employees are Platte River clients  Generating significant cash flow / net income  Raised organizational awareness nationally  Recently purchased Service Master franchise

17. 2014 © Copyright - Franchise Well, LLC A Challenging Case… Oklahoma State Use Program Opened over 40 Partner Shops in the past 15 years There locations still operating today  Lack of education on either side  Poor choice of concept by NPA’s  Poor choice of locations  Under-estimated level of support needed to sustain the business model  Lack of marketing and message integration to mission  Tremendous loss of disposable dollars and donor trust Virtually all issues were avoidable

18. 2014 © Copyright - Franchise Well, LLC Oklahoma State Use Program  Considered automotive, business services, staffing and printing  Focus on creating jobs for persons with disabilities  Secondary goal of diversified revenue streams  Board member of Source America; supportive of innovative strategies  Considering launching a franchise concept for nonprofits  Provides access to and insight on jobs in the region  Creates stronger connections to the business community  No personal guarantees; clear exit strategy  Providing additional support  Open since July ‘10 A Recent Example

19. 2014 © Copyright - Franchise Well, LLC Oklahoma State Use Program  Considered various job creation opportunities but landed on automotive  Focus on transitional employment for qualified offenders  Primary goal was a commercially viable business model  It needed to have the ability to scale to a significant size to support sustainability  Acquired the franchise rights to the entire State of Texas  Must open six owned locations; support franchisees  Share of revenues from all franchise operations  Influence franchise owners to consider hiring ex-offenders  Opening 1 st store mid-year 2014 A Recent Example

20. 2014 © Copyright - Franchise Well, LLC  Franchisors Don’t Understand the NP Sector  Requires educating them on the realities and the benefits  Creates potential for modifying the contract  NPA’s Must Leverage their Assets  Franchisors are not easily swayed from their model  Most NPA’s are exempt from the FTC rule  NPA’s must define and demand the support necessary for success with a Social Franchise Negotiating the Relationship Oklahoma State Use Program

21. 2014 © Copyright - Franchise Well, LLC What are the pros and cons of pursuing a franchise for your organization? What franchise do you think would be best for your organization? How did you come to this decision? What steps will you need to undertake to get this franchise up and running? What is your long-term social franchise strategy? How will you measure success? Questions You Need to Ask… Oklahoma State Use Program

22. 2014 © Copyright - Franchise Well, LLC ProsCons  Turn-key Systems  Training and Support  Brand Name/Value  Economies of Scale  Better Labor Model  Less Freedom  Additional Fees  Higher Start-up Costs  Complicated Contracts  Long-term Commitment Pros & Cons of a Social Franchise Oklahoma State Use Program Acquiring a franchise may cost more money, but often reduces the uncertainties and risk It is legal for nonprofit organizations to own/operate a franchise business, either ‘for’ or ‘not for’ profit

23. 2014 © Copyright - Franchise Well, LLC Evaluating Your Organization Established, Stable Organization Strong, Committed Leadership Mission Connection / Integration Entrepreneurial; Social Enterprise Desire Scalability (multi-unit and/or concept) Capacity to Support a New Venture …then the hard part Oklahoma State Use Program

24. 2014 © Copyright - Franchise Well, LLC Executing the Strategy Launch Phase Ongoing Operations  Performance Monitoring  Periodic Gap Analysis  Annual Business Plan Update  Marketing & Promotions  Ongoing Training Capitalization & Funding Site Selection Lease Negotiation Attending Training Hiring Staff Grand Opening Oklahoma State Use Program

25. 2014 © Copyright - Franchise Well, LLC  A Guarantee of Success  There are real risks to consider  For Every Organization  You need Leadership, Mission Fit  You need Capital and a Champion  A Short-Term Commitment  Average contract is 10 years Franchising is NOT... Oklahoma State Use Program

26. 2014 © Copyright - Franchise Well, LLC Summary  “Social Franchise” is an emerging sector opportunity, pioneering effort  Nonprofits can and do own franchise businesses, primarily for profit generation  Use a deliberate approach to determining if your organization is right, and if so  Use a disciplined approach to find the right franchise opportunities  Negotiate an agreement that reflects the unique aspects of your organization Oklahoma State Use Program

27. 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 22554 www.franchisewell.com ben@franchisewell.com