Perfect Fit Franchises

The Franchise FDD is Required Reading

Traditionally, the three Rs stand for reading, ‘riting and ‘rithmetic. But when it comes to partnering in business, they stand for risk, reward and responsibility. If you are going to go into business with a partner, you want someone who will minimize the risk, maximize the reward and share the responsibility to make the enterprise successful. Realistically, most people choose a friend, a spouse or a relative – a partner they believe is predisposed to make an equal and positive contribution to the business. At times, however, such business partnerships have ended friendships – even marriages – and close relationships were lost as the businesses failed.

While it would be unusual indeed for someone to partner with a complete stranger, what qualities would you look for in such a new relationship? You’d want a partner who is hard working, has a successful track record and good relationships with previous partners, and operates on an honest and ethical basis. You’d also want someone whose talents and abilities would complement your own – whose strengths balanced your weaknesses and vice versa. While finding such an individual partner might be a challenge, finding such a company is not – at least when it comes to franchises.

That’s because franchises fully disclose all the information you need to know in order to determine if they are the right partner for you. In fact, the franchise industry is highly regulated in this regard and is mandated by the federal government to provide full disclosure. This is made through their FDD (Franchise Disclosure Document, formerly know as UFOC), a document every franchise is required to make available to serious candidates. The FDD contains all the critical details you need to fully evaluate the business opportunity and the company that stands behind it.

Because every FDD contains 23 standard items, we’ve seldom seen one that’s less than 100 pages. And while a FDD is not exactly exciting reading, it should be viewed as required reading by anyone seriously considering a franchise. Here are the federally-mandated items every FDD contains:

* Items 1 through 4: The franchiser’s background, the experience of key executives and the company’s litigation and bankruptcy history
* Items 5 and 6: All the fees charged by the franchiser
* Item 7: An estimate of the total investment needed to establish the business
* Item 8: Restrictions on the purchase of products to be used and sold in the unit
* Item 9: The franchisee’s obligations
* Item 10: Financing that the franchiser makes available
* Item 11: A summary of the services, such as training and site selection, that the franchiser provides in relation to the franchise program
* Item 12: Territorial protections
* Items 13 and 14: The status of the trademarks, copyrights and patents associated with the program
* Item 15: Obligations of the franchisee to participate in the actual operation of the franchised business
* Item 16: Restrictions on what the franchisee can sell
* Item 17: Renewal, termination, transfer and dispute resolution provisions
* Item 18: Public figures used to promote the franchise
* Item 19: A description of how well the franchises perform financially
* Item 20: System statistics and lists of franchisees and former franchisees
* Item 21: Financial Statements
* Item 22: Contracts
* Item 23: Receipt

Clearly, that’s a lot of information to digest, but it’s critical that you take the time to do so. In fact, the Federal Trade Commission (www.ftc.gov) ensures that you have that time by enforcing a minimum waiting period of 14 business days before any money is paid and any agreement to purchase is signed.

As a legal document, the FDD can be daunting, and while some items are shorter and easier to understand by the average person, others may warrant a review by your accountant or attorney. And while no single item should be considered unimportant, some will be of particular interest – like Items 19 and 20.

Item 19 addresses financial performance, and may answer the question every franchisee candidate wants to ask: “How much money will I make?” It is here that the franchise may state earnings claims based on the average financial performance of existing franchisees. Two important things to keep in mind. First, most franchises do not publish earnings claims in their FDD (though for those that do, it should be viewed as a positive reflection of the company’s confidence and consistency).

Secondly, franchises are strictly prohibited from making any earnings claims (verbally or in writing) that are not included in their FDD. Important note: Telling you “Our top 3 franchisees grossed more than $400,000 last year” is not an earnings claim. Saying “You can expect to gross $400,000 per year on average” is an earnings claim. And if it’s not printed in the FDD, the franchise cannot and should not communicate it in any other way.

If a FDD does not explicitly state earnings claims, then Item 20 provides the details that enable you to ascertain financial performance. It is here that the franchise lists current and former franchisees. And unlike personal or professional references one might include in a resume, the franchise is required to list all franchisees, not just the best ones. If you’re a serious candidate, you’ll want to contact as many of these people as possible to inquire about their individual financial success.

A few additional points to remember: First, a franchise is not required to provide their FDD to just anyone who requests it. Most will want to have at least an initial conversation with you and possibly have you submit a formal application. That’s because they qualify you as you qualify them. If you see them as a prospective business partner, they want to see you as a serious candidate as well.

Secondly, never acquire a FDD from any source other than the franchise itself. A franchise will never charge you for the document, but there are third-party companies that claim to provide FDDs for a fee. However, such companies may not have the most current version since franchises regularly update their FDDs – some as often as very 12 months.

There is no benefit to researching a franchise in “stealth mode”, so never hesitate to talk with the franchise directly. It is absolutely the best way to get all your questions answered, and it is the only way to secure a free copy of their current FDD. Also, don’t assume the company views the dialogue as a sign that you are ready to move forward. They understand that they are likely one of many opportunities you are investigating (just as you are one of many candidates they are considering).

****************************************

In conclusion, while the FDD is perhaps the single most comprehensive resource in finding the best franchise business partner, it’s not the only one. There are many other factors, not the least of which is taking the opportunity to meet the franchise management face to face. Almost all franchises regularly schedule candidate visits to their corporate headquarters, commonly called “discovery days”, because it’s these events that allow you to talk with top level management, get real insight to training and ongoing support, and personally meet those with whom you may be working for years to come. Meanwhile, think of the FDD as the franchise’s resume – a very large one indeed – and use it to determine if it’s time for a formal interview.

Perfect Fit Franchises provides no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and financial means. We offer hundreds of business opportunities in a multitude of categories.

We are an affiliate of Business Alliance, Inc., the world’s largest franchise network with more than 25 years experience helping entrepreneurs like you find and own their own businesses.

Contact us at 1-866-391-3134 or moreinfo@perfectfitfranchises.com.

PFF BUSINESS JOURNAL
VOLUME 105

Prepare Now for the 2009 Economic Downturn

For more than 15 years, New York Times best-selling author Harry S. Dent, Jr. has been uncannily accurate in predicting the financial future. He predicted the financial recession of the early 90s, the economic expansion of the mid-90s, and the financial free-for-all of 1998-2000.

As early as 1993, Dent forecast a generally positive trend, reflected in his book “The Great Boom Ahead”. The next 5 years went exactly as he had predicted. And in 1999, Dent repeated and extended his forecast in his book “The Roaring 2000s”*.

What makes Dent more accurate than other economists? Simply this: Dent concedes that there are many factors that affect the economy (including extreme variables like 9/11 and the war in Iraq), but he believes one factor is most important. While traditional economists look at interest rates, money supply and other financial benchmarks, Dent’s theories are based on population trends. For Dent, it’s people that drive the economy. The more people, the more money is spent. And more spending creates more jobs, more growth and a more robust economy.

If Dent continues to be accurate, there is both good news and bad news ahead. First, the good news. The next few years promise to be extremely healthy, with an expanding and healthy economy.

And now the bad news: Dent believes that 2009 will bring one of the biggest economic downturns in the last 50 years – at least here in the United States. When he first predicted this in 1993, it was viewed with passing interest. But in the intervening decade, Dent’s forecasts have been right on target, and now 2009 is only 4 years away.

The Argument for a Recession

While Dent’s theory may seem simplistic on the surface, his successful track record warrants a closer look at the underlying data. And that data is compelling, to say the least.

First, as reflected in Figure 1, Dent’s extensive research on spending trends show that consumers reach their peak spending power in their mid 40s – at age 46.5 on average. And Dent has looked closely at what people buy at what age.

He knows, for instance, that men become fathers at age 27 (on average). Thus, spending on potato chips and other junk food peaks at age 41, when their children begin to reach their early teens.

Spending on veterinarian services peaks about the same time, since pets usually join a family shortly after children arrive. And spending on roof repairs peaks around age 68, roughly 25 years after most people build a new home. So as you might expect, Dent’s research is especially interesting to those looking for the best sectors and industries to invest.

Peak spending becomes a crucial
factor when one considers birth rates. In Figure 2, we see those birth rates reflected from the early to late 1900s. Not surprisingly, the “Baby Boomer” generation is easy to detect. That generation began in the mid-40’s and continued through the early 60s – until 1962 to be exact. At that point, there was a significant and prolonged decline in birth rates until the mid-70s. So what is the effect of that birth rate on the future economy?

Figure 3 completes the picture. Here, the same birth rates are reflected, but have been adjusted forward 46.5 years to accommodate the average age for peak spending. Also in this figure, the Dow Jones Industrial Average (adjusted for inflation) is superimposed over the ages. Incredibly, the DJIA has tracked almost exactly with the baby boomers. And as baby boomers have approached their peak spending years, the economy has grown as well – and at almost an identical rate.

So that’s it in a nutshell. If births peaked in 1962, spending power (and thus the economy) will do the same in 2009. And with a sharp decrease in birth rates after 1962, we can expect to see a corresponding dramatic decline in the economy after 2009.

According to Dent, there will be a full recovery (again based on population trends) and, in fact, he believes the economy will move significantly higher than 2009 levels. Unfortunately, that won’t happen for at least a decade.

What This Means for You
First, it’s important to realize that there’s no escaping the effect of the economy, whether you are an investor, an employee, a business owner – or even just a consumer.

As we said earlier, Dent’s forecasts are of significant potential value to investors since his books contain some very specific advice on how and where to invest in 2009 and beyond. As the US economy declines, there are alternative opportunities to leverage growth elsewhere in world.

If you are an employee — working for someone else and determined to continue — we strongly recommend you evaluate how recession-resistant your current company is.
* Does it offer a vital product or service?
* If consumer-based, does it cater to a growing segment of the population?
* Is it price-competitive?
* Does it have aggressive competition and will its research and development enable it to stay ahead of that competition?

If the answers to most of these questions are “no”, this might be a good time to consider a career change. If Dent’s predictions are accurate, many of today’s jobs will disappear 4 years from now. Finding a recession-resistant employer may be the best way to ensure that your job isn’t one of them.

If you currently run your own business, we recommend you apply the same questions to best determine if this is the time to expand your business portfolio or to move to a completely different enterprise. At Franchise Consultants, Inc. we regularly get inquiries from those whose businesses have suffered from the difficult economic trends of the last few years.

Finally, if you have always dreamed of starting your own business but haven’t yet taken that step, this is probably the ideal time to do so. Starting now will enable you to both choose a business that is recession-resistant and one that you will have 4 years to build and make successful.

What Makes a Business Recession-resistant?
And how do you choose such a business? First, it’s important to note that any business or industry is, at best, recession-resistant — not recession-proof. Its success depends on many factors, including on how well the business is run.

As an example, many years ago I ordered a “waterproof” diver’s watch that (as proof) was shipped to me in a vial of water. I probably shouldn’t have been surprised when the watch stopped working a month later when it fell on the floor. Obviously, the ongoing successful operation of the watch depended on many factors – not just its ability to withstand moisture!

Businesses are the same, but it is possible to identify those with recession-resistant qualities. In general, the following characteristics reflect spending trends in difficult economic times. Customers (both consumers and businesses) will:
* cut back on discretionary expenses (example: travel)
* spend less on conveniences (drycleaning)
* curtail spending on products and services they can provide themselves (home repair)
* delay buying products and services they cannot provide for themselves (car maintenance)
* look for products and services that save money vs. what they are now spending (professional business services)
* opt to rent vs. buy (business equipment leasing)
* opt for used vs. new (autos)
* demand low-priced alternatives (fast food vs. gourmet dining)
* continue to buy vital products and services (health care)

In general, customers in a tough economy will look for “better, cheaper, faster” — the same approach NASA adopted when tight budgets curtailed spending on the nation’s space program in the early 90s. If they can make it, do it, or fix it themselves – they will. If they can do without it or delay the need for it – they will. If they can save money – they will.

Additionally, look carefully at the following factors:
* Age – products and services geared for the baby boomer generation as they age have significant promise.
* Population – businesses that get the product or service out to the customer (vs. a retail storefront approach) are particularly valuable in rural areas with dispersed populations.
* Demographics – selling air conditioners in Anchorage or furnaces in Miami is not likely to be anymore successful than selling ice cubes to Eskimos or opening a surf board shop in a retirement community.

***************************

In conclusion, it’s probably important to note that, despite Harry Dent’s gloom vs. boom forecasts, there will be many very successful businesses operating in 2009 and beyond. And most business consultants will tell you that there is never really a bad time to start a business. In fact, knowing what the future will bring makes today perhaps the best time to start a business, because we believe that the window of opportunity will grow narrower as 2009 approaches.

Working in a recession-resistant industry will increase your chances of surviving the Recession of 2009. Owning your own recession-resistant business will better ensure your survival. At Franchise Consultants, Inc., we help entrepreneurs investigate and find businesses that ensure their economic success and financial freedom. We welcome the opportunity to be of service to you.

* all statistics and charts herein reflecting the opinions of Harry S Dent, Jr. are the intellectual property of Harry S. Dent, Jr.

Perfect Fit Franchises provides no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and financial means. We offer hundreds of business opportunities in a multitude of categories.

We are an affiliate of Business Alliance, Inc., the world’s largest franchise network with more than 25 years experience helping entrepreneurs like you find and own their own businesses.

Contact us at 1-866-391-3134 or moreinfo@perfectfitfranchises.com

PFF BUSINESS JOURNAL
VOLUME 104

Overcoming the “FUD Factor” is an Important First Step

Reality TV. Over the last five years, producers of these shows have treated viewers to a steadily growing diet of bungie-jumping, insect-eating and love-starved thrill seekers. Why is this programming phenomenon so popular? Perhaps it’s because audiences enjoy celebrating those who succeed in the face of insurmountable odds. Or maybe viewers also find comfort in the knowledge that “Average Joes” usually fail at tasks they themselves would never accomplish or even attempt. Whatever the attraction, all these shows have one common characteristic: They prey on the fear, uncertainty and doubt of the contestants – and ultimately – of the viewing public.

This was never more apparent than last year when TV producer Mark Burnett teamed up with Donald Trump to create The Apprentice. They banked on their belief that FUD (Fear, Uncertainty and Doubt) runs rampant in the business world. And anyone who has worked for a company knows that Bennett and Trump were right on target. Today more than ever, Corporate America is the world’s biggest FUD breeding ground, and even those who may never hear “You’re fired!” live in constant fear that they will. In fact, a better name for the hit show might have been FUD Factor!

Of course, fear, uncertainty and doubt are not reserved only for those who work for others. Entrepreneurs who want to own their own business always suffer an acute case of FUD, at least at the beginning.
* They FEAR failing
* They are UNCERTAIN what it is they want to do
* They DOUBT their own abilities

Ironically, it is these factors that keep them from moving
forward at all — and thus prevent them from changing their
circumstances for the better. Thus, overcoming the FUD factor is usually a necessary
first step to achieving business success.

Ask any business owner. They will admit to dealing with FUD when they began, and they will also tell you that they still feel it from time to time – even after years of being in business. After all, business conditions – just like job circumstances – constantly evolve and change.

At Perfect Fit Franchises, we always ask clients how long they have been searching for a business to own. We often hear “4-5 years” or “it’s been a lifelong dream”. In reality,

these clients haven’t actually been searching for a business for that long; they’ve been thinking about it. Unfortunately, to think too long about doing something often becomes its undoing. We know that they’ve imagined owning a business for a long time, but fear, uncertainty and doubt have kept them from actually taking themselves seriously. Thus, they are absolutely correct on the second point: It will be a lifelong dream – never a reality – until they overcome the FUD factor.

So how have successful business owners done that, and how can you achieve it as well? Let’s break it down. FUD (when applied to owning a business) is usually comprised of many factors that STOP people in their tracks. We’ve listed them here along with reasons why each factor may be more myth than reality:

I DON’T WANT TO FAIL!
A U.S. Small Business Administration study conducted from 1978 to 1998 found that 62% of non-franchised businesses failed within the first 6 years. A 1999 study by 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. Additionally…
* Franchise businesses account for about 50% of all retail sales in the US and employ more than 14 million Americans.
* More than 75 industries use franchising to distribute goods and services to consumers.
* Total sales by franchised businesses are projected to reach $1.7 trillion this year.
* One of every 12 businesses is a franchise and a new one opens every 8 minutes of every business day.
* In 2000, 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.

No one wants to fail and few can even afford to. The bottom line: Franchises have a 97% success rate. Most people can’t even predict that they can keep their jobs with a 97% certainty! Can you?

I CAN’T AFFORD IT!
Any business requires some investment, no matter how small. And to a certain extent, it is true that it takes money to make money. However, keep a few things in mind.

First, most people assume that going into business for themselves will take a lot of money. Though that’s possible, it’s not always the case. We know of many businesses – legitimate ones, for sure – where the investment is as little as $10,000.

Another myth suggests that the amount of money one makes from a business is directly related to how much they invest. Again, not true. You can spend very little and make a fortune. Or you can invest huge sums and make little to nothing. The profitability of your business depends on many other factors.

Finally, remember that few businesses are started solely with available cash. In franchising, an average of 75% comes from loans secured from the Small Business Administration, the franchise itself, or from other lending institutions. And those sources are usually happy to finance franchise businesses, because they know they are investing in a proven business model that is successful 97% of the time.

IT’S NOT THE RIGHT TIME!
Change is just downright scary for most people. No matter how unsatisfactory their circumstances are, at least they know what the negatives are. So they are happy to take Mark Twain’s advice: don’t put off until tomorrow what you can put of until the day after tomorrow! And though many experts advise that there is never really a bad time to start a business, most people pretend there is never a good one. Or if there is, it’s not now.

In 2001, a cute romantic comedy, Serendipity, told the story of a young couple who missed a fleeting chance to be together. For years afterwards, everything they saw and did reinforced that they should be together, and by the end of the movie – they were.

Unlike books and movies, such signs seldom happen in real life. Unfortunately, those who wait for divine guidance or a bolt from the blue to tell them the time is right to start their own business will have a very long wait.

But here’s the good news: it’s never too late to start your own business, no matter how old you are or how long you’ve put it off. Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending. Just remember, putting off an easy thing makes it hard; putting off a hard thing makes it impossible.

I HAVE NO IDEA WHAT I CAN DO!
People who do their jobs well (for others) often lose confidence when it comes to doing that job for themselves. And it’s certainly possible that what you’ve done as a job is not, by itself, a viable business. What’s important, however, is that your skills are transferable. Are you organized? Good with people? Energetic? Those are all great skills in running any business.

Rest assured that franchises do not insist that you have specific industry experience (and some even prefer you don’t!). In fact, more often than not, franchisees choose businesses that reflect their interests – not their professional backgrounds. And the very nature of franchises – a proven system with excellent training and ongoing support – makes this possible. In fact, here’s how a florist business we represent describes it:

“Our Franchisees have diverse backgrounds: military, construction, law, nuclear power, engineering, hotel, teaching, pilot, finance, marketing, high-tech, retail, & more. Educational degrees range from high school to PhDs, although none is required.”

OTHERS HAVE DISCOURAGED ME!
People are always happy to share their opinions, even when you don’t ask for them. Sometimes those opinions are valid and helpful. At the same time, they can be discouraging.

When considering a business of your own, always seek the opinions of others and always consider the source. And always remember that the world is full of both optimists and pessimists, and people sometimes have a vested interest in being one or the other.

Input from friends is valuable, but can be discouraging if they are jealous that you are making positive changes that they not willing to make themselves. Input from immediate family members is valuable, but can be discouraging if they depend on your current income. Input from relatives is valuable, but can be discouraging if they suspect you will ask them to help finance the business.

The most valuable input you can solicit is from people who already own their own successful businesses. These opinions tend to be accurate, realistic and without bias. They also tend to be optimistic and positive. In fact, people who have started their own business usually have one common regret: that they didn’t do it ten years earlier. If these people already know you – even better. Then they’ll be able to compare your strengths and weaknesses with those they know are needed to run a business.

***************************

You can likely identify with the FUD factors we’ve listed. And hopefully, the descriptions we’ve included will help minimize your own fear, uncertainty and doubts. But let’s be realistic. Though the first letter of FUD stands for Fear, a certain amount of that trait isn’t all bad. Just remember two things:

1. There is a middle ground between being fearful and foolhardy
And that’s called being cautious. Starting a business is a big step, but there comes a time when big steps are required. After all, you can’t cross a chasm in two small jumps. But big steps should be made carefully and cautiously. Evaluate all your options. Take the time you need. Be patient. Be sensible.

Most of all, just be cautious. Vision without action is a daydream; action without vision is a nightmare.

2. There are good reasons not to own a business
Just make sure they are reasons – not excuses. It’s been said there are 3 types of people: those who make things happen, those who watch things happen, and those who wonder what the heck’s happening. If you are not the first type, then you have a good reason not to own a business.

Also, face the fact that there is work involved. And there’s no faking it as a business owner. Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don’t turn up at all. Again, if you’re not the first type, you have another good reason. As Vince Lombardi once said, the only place success comes before work is in the dictionary.

In summary, FUD — if allowed to prevail — only breeds one thing: more FUD. The measure of your success usually comes down to who wins the battle
that rages between the two of you. The ‘you’ who wants to procrastinate, give up or take it easy, and the ‘you’ who chooses to beat back that which would stand in the way of your success — fear, uncertainty and doubt.

Goals are actually dreams with deadlines. For others, owning a business will be a lifelong dream. For you, it should be a goal — one that you can reach this year. Here’s wishing you a successful and prosperous 2005!

Perfect Fit Franchises provides no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and financial means. We offer hundreds of business opportunities in a multitude of categories.

We are an affiliate of Business Alliance, Inc., the world’s largest franchise network with more than 25 years experience helping entrepreneurs like you find and own their own businesses.

Contact us at 1-866-391-3134 or moreinfo@perfectfitfranchises.com

PFF BUSINESS JOURNAL
VOLUME 103

Optimize Your Chances for Business Success

Life is full of choices. Easy vs. hard. Simple vs. complicated. Free vs. expensive. With options like these, the choices would seem quite evident, and while life seldom involves such clear cut choices, choosing a franchise business is – or should be – a bit easier. To illustrate, here’s a real life story of an entrepreneur who made many wrong choices…

“I was long overdue to leave corporate America and began the process of researching business opportunities. I surfed the internet and contacted about twelve franchises, requesting information from each. I didn’t hear back from about half of them and wrote them off because they were obviously unresponsive. I continued talking with the others, doing my own research, making all the calls and handling the communications myself. It took a long time –about 6 months –but eventually I settled on a franchise I felt suited my skills and interests. I believe I made the right choice. It was pretty time-consuming – I figure about 300 hours total – but less expensive than using a franchise consultant.”

What’s wrong with this picture? Well, let’s start with false assumptions.

First, this person assumed that the franchises he didn’t hear back from were unresponsive and thus not good to do business with. More likely, those companies were very good to do business with and thus inundated with more requests than they could possibly handle. And he might have been a good candidate, but he was unable to raise the visibility of his interest from the rest of the masses.

Secondly, he also assumed that enlisting the help of a franchise consultant would be too expensive. In reality, such assistance is (or should be) available at no cost at all. Let’s start by taking a closer look at these two factors to investigate the value of franchise consultants.

THE PRIMARY VALUE

Estimates on available franchises vary, but there are literally thousands, and new ones enter the market every day. Entrepreneurs are faced with a dizzying array of opportunities – even if they have a pretty good idea of what kind of business they are interested in. Likewise, the confusion for the franchises themselves is also high. Popular ones receive hundreds or more requests for information every week – far too many to process. They don’t want to be unresponsive, but they are ill-prepared to field every request. Understandibly, many franchises have out-sourced the pre-qualification process to consultants to ensure they are working only with the best-qualified and most interested candidates.

Thus, one of the most valuable services a franchise consultant provides is to raise your visibility and credibility. A franchise consultant understands what types of candidates franchises are looking for and is duty-bound to provide the best ones. Allowing a consultant to introduce you to franchises ensures that the franchises view you as pre-qualified. In essence, you are moved to the front of the queue.

And what about the cost misconception? Bottom line: franchise consultants are paid by the companies they represent. Thus, there is never a cost for their consulting, research and recommendations. As well, using a franchise consultant should never increase the cost of investing in a franchise. While other broker models have a built-in cost – such as with real estate, mortgages and traditional business brokers – using a franchise consultant is truly a zero-cost option. You will pay the same as if you did all the research and handled all the communications yourself.

ADDITIONAL BENEFITS

So you have increased credibility at no cost, but it doesn’t end there. Here are some of the other services you can and should expect from a franchise consultant. He or she should:
* Take the time to understand your background, skills, interests and objectives
* Understand your financial limits and risk tolerance
* Help you define your qualifications so that you don’t waste your time and energy on opportunities that are not right for you or for which you are not qualified
* Offer a wide variety of franchises to provide you the most options
* Take an unbiased approach to helping you achieve your goals, never trying to “fit a square peg in a round hole”
* Be able to provide valuable insight on franchises that you might have not found on your own
* Significantly reduce your time, trouble and frustration
* Help present your qualifications to franchises (through a single process vs. a separate one for each) and stay involved to assist in the dialogues
* Guide you on proper ways to conduct due diligence on any franchise opportunity that you consider
* Be able to refer you to other professionals you may need at certain points in the process, such as a franchise attorneys, CPAs, lenders, commercial realtors and financial planners.

WHAT YOU CAN DO

As with any resource, being an educated consumer will ensure that you get optimal benefits from using a franchise consultant. Thus, it’s important to understand that the consultant actually serves 2 masters: you and the franchise – and he can only be successful if he does a good job for both. Here’s how you can optimize the value:

* DISCLOSE
The consultant’s commitment to you is to present top-notch franchises that match your needs and have 1) successful track records 2) excellent training and support 3) an opportunity for equity growth, and other important characteristics. This is possible because the franchises he represents have disclosed significant details about their opportunities, and the consultant has the best and most up-to-date details.

His commitment to the franchise(s) is to present only the best, most qualified and interested franchisee candidates. These companies have disclosed a significant amount of information because they know that, by doing so, it enables the consultant to do the best possible job for them. Likewise, the more information you can provide the consultant, the better the chances that he will do the best possible job to represent you as well. This should include all details concerning your current business, employment, financial status, family commitments, time constraints and other factors. The franchise consultant will treat all your information with the strictest confidence and will only provide it to franchises in which you have expressed an interest.

* SHARE THE OBJECTIVE
Also understand that while the consultant should be very knowledgeable on each franchise in his portfolio, he cannot (due to sheer volume) be an expert on any one company. His objective is to eventually put you in touch with franchises in which you are interested. Don’t begin the process unless this is also your objective. Be ready to turn what (for you) may have been a life-long dream into a short-term reality. Speaking directly with the franchises is indeed the very best way to get all your questions answered and should enable you – through a short conversation – to validate or discount each opportunity.

* KEEP AN OPEN MIND
One of the most valuable services a franchise consultant can provide is to make you aware of opportunities you may never have thought of or found on your own. The consultant should provide one or more concepts that meet your original goals, but he may also present horizon-expanding opportunities that offer both significant success through new and exciting avenues. Thus, even if you begin with a very specific concept, keep an open mind.

* REMEMBER WHAT THE “C” STANDS FOR
The “C” stands for consultant, not counselor. A franchise consultant can do many things for you, but convincing you that running your own business is the right thing to do is not one of them. He can and should help you understand that franchising offers the greatest chance for your success through the least amount of risk (based on actual statistics), but only you alone can determine if the time is right. He can’t and shouldn’t try to convince you of that or accelerate the process beyond your comfort level. Decide that you are ready to own a business – even if you have no idea what that business should be – and then contact a consultant.

**********************************************

In conclusion, if you are truly serious about owning your own business – or expanding your current business portfolio – there is really no reason not to use a franchise consultant. Proceed with confidence that the consultant will do everything possible to meet your objectives – with complete confidentiality – all at no cost to you.

Perfect Fit Franchises provides no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and financial means. We offer hundreds of business opportunities in a multitude of categories.

We are an affiliate of the world’s largest franchise consulting network with more than 25 years experience helping entrepreneurs like you find and own their own businesses.

Contact us at 1-866-391-3134 or moreinfo@perfectfitfranchises.com.

PFF BUSINESS JOURNAL
VOLUME 102

Perfect Fit Franchises
Finding the Perfect Business for You!

This presentation is intended solely to inform and educate entrepreneurs about franchising — the process, benefits, drawbacks and available resources.

Only the individual entrepreneur can determine if franchising is right for him.

What is Franchising?

Franchising is a method of distributing goods or services to consumers. The franchise system owns the right to the trademark of the business. The franchisee purchases the right to use the trademark and operating system.
 
Most people associate the word “franchise” with fast food restaurants. But, there are many more types of franchise businesses, including everything from advertising to automobile repair, printing services to party supplies and many more.

Categories of Franchises

* Accounting/Tax Services
* Advertising/Direct Mail
* Auto & Truck Rentals
* Automotive Products/Services
* Batteries-Retail & Comm.
* Beverages: Special
* Business Brokers
* Business/Mgmt Consultants
* Campgrounds
* Check Cashing/Financial Services
* Children’s Services
* Clothing and Shoes
* Computer/Electronics/Internet
* Construction Materials
* Consumer Buying Services
* Convenience Stores
* Cosmetics
* Dating Services
* Drug Stores
* Educational Products/Services
* Employment Services
* Fitness
* Florist Shops
* Food/Restaurants
* Golf Products/Services
* Greeting Cards
* Hair Salons & Services
* Health Aids & Services
* Home Furnishings
* Home Inspection
* Hotels and Motels
* Insurance
* Janitorial Services
* Jewelry
* Laundry & Dry Cleaning
* Lawn/Garden/Agriculture
* Maid & Personal Services
* Maintenance
* Marine Services
* Optical Aids & Services
* Packaging/Ship/Mail
* Painting Services
* Paralegal Services
* Payroll Services
* Pest Control Services
* Pet Sales/Supplies
* Photography
* Printing/Copying
* Real Estate Services
* Recreational Services
* Rental Equipment & Supplies
* Retail Stores
* Security Systems
* Senior Care
* Sign Products & Services
* Tanning Centers
* Telecommunications
* Transportation Services
* Travel Agents
* Vitamin & Mineral Stores
* Weight Control

Well-Known Franchise Names

* McDonald’s
* Subway
* Curves
* Alphagraphics
* 7-Eleven, Inc.
* Barbizon School of Modeling
* Baskin Robbins
* Big O Tires
* Blockbuster
* Century 21 Real Estate
* Courtyard by Marriott
* Dairy Queen
* Dale Carnegie
* Dunkin’ Donuts
* Kentucky Fried Chicken
* Fuddruckers
* Gold’s Gym
* Great Clip’s
* H& R Block
* IHOP – International House of Pancakes
* Jenny Craig
* Kwik Copy
* MAACO
* Molly Maid
* New Horizon’s Computer Learning
* Once Upon A Child
* Papa John’s Pizza
* Radio Shack
* Seattle’s Best Coffee
* Taco Bell
* Wild Bird Centers of America

What is a Franchisee?

“Frantrepreneur”
(fran*tre*pre*neur) n.

One possessing the desire to be a business owner — without the desire to recreate the wheel — by following a proven system for the benefit of personal and professional goals.

The Frantrepreneur Mentality

“I’m in business for myself, but not by myself”.
“I have the opportunity to learn from the success and failure of others.”

“I want a ‘bottled’ process for success that I can use in developing my own successful business.”

“Why would I work for someone else when I can work for myself and reap the rewards of my efforts?"

"Why would I spend years and the investment required to establish a successful brand when I could buy a franchise which provides immediate access to a successful business system and a brand name which others already have made successful?"

Franchise Options

TYPE:
* Traditional retail
* Mobile products/services
* Work from home

OWNERSHIP:
* Hands-on
* Passive
* Part-time/full-time

OWNERSHIP:
* Single unit franchise
* Multiple units
* Master franchiser
* Area developer

PRODUCT/SERVICE:
* 75 categories – an endless array of possibilities
* Something to match anyone’s background, skills and interests

Franchise Statistics

* Franchise businesses account for about 50% of all retail sales in the United States.
* 1 out of every 12 business is a franchised business.
* A new franchised business is opened every 8 minutes of every business day.
* Franchise businesses employ more than 14 million Americans.
* There are an estimated 6,500 franchise companies operating in the U.S. doing business through more than 316,000 retail outlets.
* More than 75 industries use franchising to distribute goods and services to consumers.
* A 1999 study by 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.
* 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.
* In 2000, 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.

Franchise Success Rate

Franchises have a 97% success rate. Most people can’t even predict that they can keep their jobs with a 97% certainty.

Advantages of Buying a Franchise

* Franchiser business practices are tightly regulated by the federal government
* Franchisers have a vested interest in your success.
* The marketplace has already been checked out by the franchiser and determined the system to be successful.
* The franchiser utilizes collective buying power and passes on the discounts to you.
* Local and national advertising for the franchise operation as a whole is supplied by the franchiser.
* Supervision, training programs and consulting are readily available from the franchiser.
* Managerial, operational and accounting systems are in place to facilitate your success.
* Ongoing research and product development is provided by the franchiser.

Disadvantages of Buying a Franchise

* You have to pay the franchiser royalties.
* The contract with the franchiser must be renewed after a certain period of time.
* There is a lack of flexibility because business methods are dictated by the franchiser.
* The franchiser’s problems are also your problems.
* You may be obliged to buy products supplied by the franchiser rather than the most cost-effective product available.
* You don’t get to make all of the decisions in how to run your business.
* In some ways, owning a franchise is like a cross between business ownership and employment.

Established versus Newer Franchises

Possible Advantages of Established Franchises:
* Name recognition
* More regional and national advertising
* Experienced management
* More refined training and support
* Better purchasing power with established price discounts

Possible Advantages of Newer Franchises:
* Exciting, cutting-edge concepts
* Business may have been designed to avoid mistakes made by older franchises
* Lower cost of entry and royalties
* More opportunity to share in equity growth of the company
* More flexibility and latitude in working with franchisees

Questions To Ask Yourself

* How much capital do you have to invest?
* How much liquid assets do you have?
* Do you require a specific level of annual income?
* Are you interested in pursuing a particular field?
* Are you interested in retail sales or performing a service?
* Do you want a part-time or fulltime opportunity?
* How many hours are you willing to work?
* Do you want to operate the business yourself or hire a manager?
* Do you want to have employees?
* Do you want to have inventories?
* Do you want to have Accounts Receivables?
* Will franchise ownership be your primary source of income or will it supplement your current income?
* Would you be happy operating the business for the next 10 years?
* Would you like to own several outlets or only one?

Questions to Ask a Franchiser

* Determine what assistance the franchiser provides. Do they assist with training, store design, location construction, site selection, and feasibility studies?
* Do they have any access to demographic studies to get an understanding of the audience within the market area?
* What types of support will the franchiser provide once your franchise has opened its doors?
* After the initial investment, will there be additional financial obligations requiring working capital?
* Does the franchiser offer any form of financing?
* Ask the franchiser how many franchises have been sold in the state you will be operating in during the last 12 months, and how many have been opened for business?
* What types of territorial restrictions and protections have been set up by the franchiser?
* Is the franchiser planning on expanding within your state? Are they focusing on any specific locations?
* What arrangements are established through the franchiser in terms of product supply?
* Ask if the franchiser has been forced to terminate any of its franchisees and detail the reasons for this decision. Have any franchisees failed or gone bankrupt?
* Are there any current lawsuits pending or past judgments against the franchiser? What steps are taken to settle disputes between the franchiser and franchisees?

Questions to Ask Franchisees

* How long have you owned your franchise?
* Is your franchise profitable?
* In which month did you reach your breakeven point?
* Have you made approximately the same profit that was forecast in the disclosure document?
* Were your opening costs consistent with the original projections in the disclosure document?
* Are you satisfied with the franchiser?
* Are you satisfied with the product or service?
* Is the operations manual, clear, up-to-date and adequate?
* Are you satisfied with the marketing and promotional assistance provided by the franchiser?
* Was the initial training and ongoing support sufficient for you to operate your business?
* What was your background prior to buying your franchise and was it beneficial to your success?
* Are deliveries of goods provided by the franchiser timely and competitively priced?
* Is the franchiser fair and amicable to work with?
* Does the franchiser listen and help you with your concerns?
* Have you or other franchisees had any disputes with the franchiser? What was their nature? Were they resolved fairly?
* Do you know of any disputes between the franchiser and the government?
* Do you know of any disputes with competitors?
* Who are the major competitors?

Common Mistakes of Prospective Franchisees

* Not reading, understanding or asking questions about the UFOC, franchise agreement and other legal documents
* Not understanding the responsibilities of the franchisee and the obligations of the franchiser
* Not seeking sound legal and financial advisors
* Not verifying oral representations of the franchiser, representatives or brokers
* Not contacting enough current franchisees
* Not contacting closed, sold or changed franchisees and confirming reasons
* Not having enough working capital
* Not recognizing the need for financing
* Not knowing how to make a proper loan request
* Not developing true and accurate budgets/forecasts and financial statements
* Not meeting the franchiser’s key management and support personnel
* Not analyzing your market in advance
* Not developing your marketing strategy
* Not determining dollar amounts necessary to implement marketing strategy including advertising and promotional programs
* Not choosing the right location
* Not analyzing the competition

Should You Use a Consultant?

A Franchise Consultant should…

* never charge you for their services
(they are paid by the franchisers, but they recognize that this only happens if they provide you excellent service and present you the right opportunities)
* take the time to educate you on the franchise industry
* help you define your qualifications so that you don’t waste your energies and time on franchises that are not right for you or that you are not qualified for
* be able provide you valuable insight on franchises that you won’t find on your own
* help you present your qualifications to a franchise
* take an unbiased approach to helping you achieve your goals

Pre-Sale Disclosure — UFOC
(Uniform Franchise Offering Circular)

Any UFOC contains 23 standard items – this is an important — if not the most important — part of your validation process of the franchise company.

* Description of the franchiser and its predecessors
* Identity and business experience of officers and directors
* Litigation and bankruptcy history
* Bankruptcy history
* Initial franchise fee and additional costs and fees
* Franchisee initial investment
* Other fees
* Requirements to purchase or lease from designated sources
* Requirements to purchase from approved suppliers
* Financing arrangements for franchisees
* Franchiser’s obligations
* Territorial protection
* Trademarks, service marks and trade names
* Patents and copyrights
* Franchisee requirement to operate the business
* Restrictions on sale of goods and services
* Renewal, termination or transfer of the franchise
* Endorsements by public figures
* Earnings claims (optional)
* Names, addresses, and telephone numbers of current and former franchisees
* Financial statements
* Copies of the franchise agreement and other contracts and agreements
* Receipt of the UFOC

Common Elements of a Franchise Agreement

* Grant of Franchise
* Term of Franchise
* Name of Franchise
* Location of Franchise
* Obligations of Franchise
* Initial franchise fee
* Franchise service fees; reporting and audits
* Advertising fund
* Training assistance
* Operation of the business format
* Representations by franchiser
* Representations by the franchisee
* Relationships of the parties
* Renewal and renewal fee
* Assignment
* Termination
* Procedures after termination
* Remedies for breach and methods of enforcement of the agreement
* Attorney Fees
* Amendment
* Waiver
* Approvals
* Construction and venue
* Severability
* Binding to successor
* Exclusive property

Directories & Books

* Franchising for Dummies – Dave Thomas & Michael Seid
* Tips & Traps When Buying a Franchise – Mary Tomzack
* Guide to Negotiating a Business Lease – Keith J. Kanouse
* The Franchise Opportunity Guide
* Bond’s Franchise Guide
* The Franchise Annual
* The Franchise Handbook

Associations

* International Franchise Association
* American Association of Franchisees and Dealers
* American Franchisee Association
* Canadian Franchise Association

“If you don’t follow your dreams, you’ll be working for
someone who did.”

Perfect Fit Franchises

Finding the Perfect Business for You!

Brad Eazarsky
phone: 866-391-3134
brad@perfectfitfranchises.com

Common Terms

* Acknowledgement Of Receipt: The last page of an Offering Circular, signed to indicate you received the documents on a certain date.

* Advertising Fee: An annual fee paid by the franchisee to the franchiser for corporate advertising expenditures; It is often less then three percent of the franchisee’s annual sales and typically paid in addition to the royalty fee.

* Capital Required: The amount of cash you are required to have available.

* Earnings Claims: Representations made by franchise companies that their franchisees have achieved specific levels of sales or profitability.

* Exclusive Territory: The "territory" granted to you by a franchise company, which restricts the franchiser from establishing any other location within your area.

* Federal Trade Commission (FTC): The federal agency in Washington, DC that regulates various trade practices including the franchise industry.

* Franchise Agreement: An official document that sets forth the expectations and requirements of the franchiser. It describes the franchiser’s commitment to the franchisee, and includes information about territorial rights of the franchisee, location requirements, training schedule, fees, general obligations of the franchisee, and general obligations of the franchiser.

* Franchisee: The owner of one or more franchises.

* Franchise Fee: The initial fee you pay to a franchiser to acquire a franchise.

* Franchising: Neither an industry nor a business, but a method of doing business within a given industry. At least two parties are involved in franchising: the franchiser and the franchisee.

* Franchiser: The person or company that owns or controls the right to grant franchises for a specific "brand".

* FTC Rule 436: The law passed in 1979 that regulates the franchise industry. It set forth "disclosure" requirements and prohibited franchisers from making earnings claims.

* Initial Investment: Generally, the initial cash investment required of you to buy and open a franchise. This can include the franchise fee and other initial start-up costs and expenses you may incur, but may not be reflective of your total investment.

* Liquid Capital: Also known as, liquid assets, quick assets, and realizable assets. Assets held in cash or in something that can be readily turned into cash.

* Master Franchisee: Describes an individual or company owning the exclusive rights to develop a particular territory for the franchising company.

* Net Worth: Total assets, once you’ve subtracted your total liabilities.

* Non-Compete Clause: Upon termination, non-renewal, or other sale or transfer, some franchise agreements prohibit you from competing in any way with the franchised company.

* Offer: An oral or written proposal to sell a franchise to a prospective franchisee upon understood general terms and conditions.

* Protected Territory: A designated area or geographic boundary granted to the franchisee by the terms of a franchise agreement. The franchiser promises not to open another franchised or company-owned business of a similar nature within the franchisee’s protected territory.

* Qualification Questionnaire: A document prepared by the franchiser to be completed by the prospective franchisee, which provides initial information to the franchiser in order to assist in determining whether or not the prospect is capable and motivated enough to own a franchise. Often a financial statement is included in the questionnaire format.

* Registration: A requirement in several states that specific information be submitted and approved by state regulatory authorities before franchises may be offered in that state. It is quite extensive in the information required and may ask for: a bond, fingerprints and pictures

* Start Up Costs: The required amount of money the franchiser will request that a new franchisee have to invest in the new franchise unit in its earliest stages of development.

* Total Investment: The amount of money estimated for complete set up of a franchisee’s business, including the initial investment, the working capital, and any additions to inventory and equipment deemed necessary for a fully operational and profitable business.

* UFOC – Uniform Franchise Offering Circular: Provides background information in over 20 categories as well as a copy of the proposed franchise agreement. Also know as, the “Circular”, “Offering Circular” and “Disclosure Document”.

PFF Business Journal
Volume 101