1. Franchising: A Dynamic Business Model 2013 Rehabilitation & Transition Conference Inclusion. Choice. Employment. April 10 - 12 | The Osthoff - Elkhart Lake, WI

2. 2013 © Copyright - Franchise Well, LLC Presenter – Dr. Ben Litalien Certified Franchise Executive 25 Years of Franchise Management U.S. Franchise Manager, ExxonMobil On the Run Convenience Stores Principal, Franchise Well, LLC Professor UMUC, SNHU and GU Georgetown University, Franchise Management Certificate Program BBA, MBA and Doctor of Management Social Franchise Model

3. 2013 © Copyright - Franchise Well, LLC As We Get Started… Social Franchise Model "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. 2013 © Copyright - Franchise Well, LLC  What is a “Social Franchise”?  Why should you want one?  How do you get one?  Are you ready for a Social Franchise? AGENDA Social Franchise Model

5. 2013 © 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”? Social Franchise Model

6. 2013 © 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 Social Franchise Model

7. 2013 © 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 Social Franchise Model

8. 2013 © 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 Social Franchise Model

9. 2013 © 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 Social Franchise Model

10. 2013 © Copyright - Franchise Well, LLC U.S. Franchise Market  Over 3,000 Franchise Concepts  More than 100 Industries Social Franchise Model

11. 2013 © Copyright - Franchise Well, LLC A Recent Example Social Franchise Model  Considered automotive, business services, staffing and printing  Focus on identifying jobs for persons with disabilities  Secondary goal of diversified revenue streams  Supported by Paul Atkinson, Board member of NISH  Undertook disciplined approach with franchise consultant  Provides access to and insight on jobs in the region  Creates stronger connections to the business community  No personal guarantees required; clear exit strategy  Providing additional support  Opened in January 2011

12. 2013 © Copyright - Franchise Well, LLC Social Franchise Model  In depth engagement to study their organization and the marketplace  Evaluated numerous assets to leverage  Primary goal of diversified revenue streams  Sought partnership with franchise company that could embrace mission  Concept was strong based on broad menu offering, flexibility  Company was eager to partner with YWCA and provided flexibility in contract negotiations  Agreed to substantial support  Opened in 4 th Quarter 2010 to strong sales / results A Recent Example

13. 2013 © Copyright - Franchise Well, LLC Social Franchise Model  Existing franchisee in the local market looking for buyer  Company was eager to partner with nonprofit(s)  Willing to be flexible in contract negotiations  Agreed to substantial support and ongoing development  Took over the franchise in 4 th Quarter 2010  Executive Director attended Franchise Well seminar at Peckham, Inc., hosted by MARO  Goal to generate jobs in the community  Desire to reduce dependence on outside funding  Sought partnership with franchise company that could embrace mission A Recent Example

14. 2013 © Copyright - Franchise Well, LLC  Initial Franchise Fee  70% of franchise systems have a fee of $30,000 or less  Start-up Costs  75% of franchise systems require start-up capital of less than $250,000  Royalty Payments  Typically 3-8% of monthly gross sales  Pays for trademark usage, training, etc. Average Franchise Costs Social Franchise Model

15. Must Consider Each Area:  Growth Strategies  Franchise Operations  System / Franchisee Support  Franchisor / Franchisee Relations Formulate an integrated approach  Consider each element for each franchise  Look beyond the surface and the emotion Franchise Building Blocks Social Franchise Model

16. 2013 © Copyright - Franchise Well, LLC 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? Social Franchise Model

17. 2013 © Copyright - Franchise Well, LLC 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? Social Franchise Model

18. 2013 © Copyright - Franchise Well, LLC 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 Social Franchise Model

19. 2013 © Copyright - Franchise Well, LLC 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? Social Franchise Model

20. 2013 © Copyright - Franchise Well, LLC Franchise Operations Operations is the backbone of the system  Extensive documentation on operating the concept Must be attractive to ‘non-experienced’ operators Must be able to create success within a reasonable time frame  Creates the necessary ‘web’ to connect all the franchise system components Eliminates ‘guessing’ by franchisees and support staff Social Franchise Model

21. 2013 © Copyright - Franchise Well, LLC The Value of Your Time “A franchise system must allow an owner to ‘stick to the knitting’ of the business. Many entrepreneurs simply spend too much time on tasks not associated with their overall mission.” - Fred DeLuca, founder of Subway Social Franchise Model

22. 2013 © Copyright - Franchise Well, LLC 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 Social Franchise Model

23. 2013 © Copyright - Franchise Well, LLC Franchise Operations Retail stores  Complexities include: Site Selection Lease Negotiation Construction Signage Changing demographics, consumer trends Economics Local laws & jurisdictions Social Franchise Model

24. 2013 © Copyright - Franchise Well, LLC Franchise Operations Service providers  Complexities include: Customer Service Customer Engagement Hiring & training of consistently competent staff Monitoring of authorized activities Compliance with system requirements Social Franchise Model

25. 2013 © Copyright - Franchise Well, LLC Operational Elements Manuals  Critically important for consistency  Often tied to Franchise Agreements Information Systems  The communications ‘web’ connecting all operational elements Training & Ongoing Development  Dedicated versus Outsource Social Franchise Model

26. 2013 © Copyright - Franchise Well, LLC 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 Social Franchise Model

27. 2013 © Copyright - Franchise Well, LLC 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 Social Franchise Model

28. 2013 © Copyright - Franchise Well, LLC The Relationship “What does the franchisee want? What they would do for themselves if they weren’t running the business everyday!” Knowledge Transfer  Competition, industry know-how, regulation  Newsletter, bulletins, ‘data dumps’ System Development  Increased efficiency, growth, alliances Social Franchise Model

29. 2013 © Copyright - Franchise Well, LLC The Relationship It’s a matter of leadership  must be driven from the top  must permeate the entire organization  must be documented in FDD How can you know?  talk to several franchisees  visit corporate headquarters  read the FDD Social Franchise Model

30. 2013 © Copyright - Franchise Well, LLC  What is a “Social Franchise”?  Why should you want one?  How do you get one?  Are you ready for a Social Franchise? AGENDA Social Franchise Model

31. 2013 © Copyright - Franchise Well, LLC Sustainability is Hard “By golly, gentlemen, I believe we’ve found it – the Fountain of Funding!” Social Franchise Model

32. 2013 © Copyright - Franchise Well, LLC  Sustainability is critical to mission achievement  Sustainability requires stable income  Needs are outpacing philanthropic dollars  Capital markets are inefficient  Social enterprise is emerging as a powerful strategy An Imperative for Many… Social Franchise Model

33. 2013 © Copyright - Franchise Well, LLC Why Consider a Franchise? 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 It is a compelling business strategy… Acquiring a franchise may cost more money, but often reduces the uncertainties and risk It is “mainstream” to own/operate a franchise in today’s business sector Social Franchise Model

34. 2013 © Copyright - Franchise Well, LLC …a franchise opens every 8 minutes of every business day… Franchising Stats  There are 828,138 franchised businesses currently operate in the United States  Franchised businesses provide 9,125,700 jobs, or 6.2 percent of the U.S. private nonfarm workforce  Franchised businesses supply an annual payroll of $304.4 billion, or 4.2 percent of all private nonfarm payrolls in the United States  Franchised businesses produced goods and services worth $802.2 billion, or 3.4 percent of private nonfarm output in the United States  Franchised businesses contributed $468.5 billion to GDP, or 3.9 percent of all private nonfarm GDP in the United States *International Franchise Association, 2011 Social Franchise Model

35. 2013 © Copyright - Franchise Well, LLC Strong Intersection of Values Franchisor Nonprofit Creates Growth Create mutually beneficial relationship to cross promote Unrestricted Revenues Job Training PlatformDevelops Brand Allows both parties to have a stronger impact on the communities they serve Social Partnership Social Franchise Model Systems to Follow

36. 2013 © Copyright - Franchise Well, LLC  What is a “Social Franchise”?  Why should you want one?  How do you get one?  Are you ready for a Social Franchise? AGENDA Social Franchise Model

37. 2013 © Copyright - Franchise Well, LLC  International Franchise Association  Convention, Classes, Seminars  Georgetown University  Certificate in Franchise Management 6 days of instruction (Thu/Fri/Sat) Comprehensive overview of franchising Engaged program with franchisors CFE Certification  Consider Hiring a Consultant  NISH, TIBH, Eggleston Service, YWCA, Goodwill Become Educated… Social Franchise Model

38. 2013 © 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 Social Franchise Model

39. 2013 © Copyright - Franchise Well, LLC Select The Right Franchise Company 3,000 Franchise 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 Social Franchise Model

40. 2013 © Copyright - Franchise Well, LLC  What is a “Social Franchise”?  Why should you want one?  How do you get one?  Are you ready for a Social Franchise? AGENDA Social Franchise Model

41. 2013 © 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… Social Franchise Model

42. 2013 © Copyright - Franchise Well, LLC Evaluate 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 Social Franchise Model

43. 2013 © 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 Social Franchise Model

44. 2013 © Copyright - Franchise Well, LLC  A Guarantee of Success  There are real risks to consider  Franchises sometimes fail  For Every Organization  You need Leadership, Mission Fit  You need Capital and a Champion  A Short-Term Commitment  Average contract is 10 years  Can be difficult to exit Franchising is NOT... Social Franchise Model

45. 2013 © 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 job creation or both  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 Social Franchise Model

46. 2013 © Copyright - Franchise Well, LLC Questions / Comments Social Franchise Model Dr. Benjamin C. Litalien Founder & Principal Franchise Well, LLC 44 Mine Road ■ Suite 161 Stafford, VA 22554 www.franchisewell.com ben@franchisewell.com 540.657.1427 cell 540.845.2885