1. Strategies for Managing a Franchise presented by Benjamin C. Litalien, CFE Doing Business 2.0: Starting and Growing a Franchise February 9 th, 2012

2. 2012 © Copyright - Franchise Well, LLC Today’s 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” “Strategies for Managing a Franchise” Doing Business: 2.0

3. 2012 © Copyright - Franchise Well, LLC Must Manage Each Area:  Growth Strategies  Franchise Operations  System / Franchisee Support  Franchisor / Franchisee Relations Formulating an integrated approach  Getting easier everyday! Franchise Building Blocks “Strategies for Managing a Franchise” Doing Business: 2.0

4. 2012 © Copyright - Franchise Well, LLC Growth Strategies “Strategies for Managing a Franchise” 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? Doing Business: 2.0

5. 2012 © Copyright - Franchise Well, LLC Growth Strategies “Strategies for Managing a Franchise” 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? Doing Business: 2.0

6. 2012 © Copyright - Franchise Well, LLC Growth Strategies “Strategies for Managing a Franchise” 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 Doing Business: 2.0

7. 2012 © Copyright - Franchise Well, LLC Growth Strategies “Strategies for Managing a Franchise” 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? Doing Business: 2.0

8. 2012 © Copyright - Franchise Well, LLC Franchise Operations “Strategies for Managing a Franchise” Operations is the backbone of the system  Extensive documentation on operating the concept Must be able to attract ‘non-experience’ 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 Doing Business: 2.0

9. 2012 © 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, “Strategies for Managing a Franchise” founder of Subway Doing Business: 2.0

10. 2012 © Copyright - Franchise Well, LLC Franchise Operations “Strategies for Managing a Franchise” 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 Doing Business: 2.0

11. 2012 © Copyright - Franchise Well, LLC Franchise Operations “Strategies for Managing a Franchise” Retail stores  Complexities include: Site Selection Lease Negotiation Construction Signage Changing demographics, consumer trends Economics Local laws & jurisdictions Doing Business: 2.0

12. 2012 © Copyright - Franchise Well, LLC Franchise Operations “Strategies for Managing a Franchise” Service providers  Complexities include: Customer Service Customer Engagement Hiring & training of consistently competent staff Monitoring of authorized activities Compliance with system requirements Doing Business: 2.0

13. 2012 © Copyright - Franchise Well, LLC Operational Elements “Strategies for Managing a Franchise” 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 Doing Business: 2.0

14. 2012 © Copyright - Franchise Well, LLC Franchisee / System Support “Strategies for Managing a Franchise” “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 Doing Business: 2.0

15. 2012 © Copyright - Franchise Well, LLC Franchisee / System Support “Strategies for Managing a Franchise” 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 Doing Business: 2.0

16. 2012 © Copyright - Franchise Well, LLC The Relationship “Strategies for Managing a Franchise” “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 Doing Business: 2.0

17. 2012 © Copyright - Franchise Well, LLC The Relationship “Strategies for Managing a Franchise” 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 Doing Business: 2.0

18. 2012 © Copyright - Franchise Well, LLC A Consumer Perspective "That's the name of the game... pleasing the customer. If we ever lose sight of that fact, we've lost the ball game." -Ray Kroc “Strategies for Managing a Franchise” Doing Business: 2.0

19. 2012 © Copyright - Franchise Well, LLC Leveraging Franchise Power… Unique Aspects in Franchising:  S hared Risk – don’t reinvent the wheel  C ommunal Learning – concept enhancement  A ssociation – education, R & D  L iquidity – documented higher resale value  E conomies of Scale – buying power “Strategies for Managing a Franchise” Doing Business: 2.0

20. 2012 © Copyright - Franchise Well, LLC Influence is Local… Your most powerful position Leverage of your franchise “We find that large cascades of influence are driven not by influential's but by a critical mass of easily influenced individuals.” -Journal of Consumer Research “Strategies for Managing a Franchise” Doing Business: 2.0

21. 2012 © Copyright - Franchise Well, LLC Franchising is NOT... A Guarantee of Success o There are real risks to consider o It’s easier to get in than out of a franchise For Everyone o You must be willing to give up some personal preference for the good of the system o You need plenty of working capital A Short-Term Commitment o Average contract is 10 years Doing Business: 2.0 – Starting a Franchising

22. 2012 © Copyright - Franchise Well, LLC Thank you! Ben Litalien, Principal Franchise Well, LLC www.franchisewell.com ben@franchisewell.com 540.657.1427 cell 540.845.2885 Doing Business: 2.0 – Starting a Franchising