Franchise Brokers Association BLOG

So, you want to start your own business?  You have heard about the benefits of working with a franchise and you’re interested in researching the opportunities out there for you.  Investing in a franchise over starting an independent business offers a wealth of benefits, including valuable support, tested and proven systems, discounts on products and services and more.

What is likely to be your first questions is “How much money can I make?”  Even though you have heard great things about franchising, you need to research each concept’s specific earning potential.

A percentage of franchisors provide a financial representation (also known as an Item 19) in their Franchise Disclosure Document (FDD), industry sources report between 20 – 35%.

Through their memberships, FBA members can offer their clients one complimentary hour of accounting consultation.  This can help you to uncover the financial stability of the franchise system you are investigating.  FBA members also provide a proforma which can help you identify your break-even point.  This provides you with an outline of your targeted sales before you even open your doors. 

Preparing yourself for a franchise purchase is the best way of ensuring your success, and researching your income potential and ROI is large part of being prepared.

If you are interested in speaking with our Accounting consultant, contact an FBA member here.

*Today’s post is from FBA Member Robert Slatkin on his recent deal with CertaPro Painters.

America’s Best Brand

By: Robert C. Slatkin, President

Vantage Franchises – FBA Member

A Division of Vantage Business Group, Inc.

We’ve all seen polls, articles, and studies trying to determine “America’s Best Brand.” Is it Apple, McDonalds, Coke, Google? The arguments go on and on, and each year the same top 5 names seem to just get switched around.

I would like to nominate a Brand that is often overlooked by almost everyone in these discussions, but could possibly be the most relevant one to those of you reading this article. The Brand I am referring to is David Brand. For those of you that don’t know David, you should make it a point to get to know him. He is the Regional Manager of Recruiting for CertaPro Painters; North America’s largest painting company, and a preferred Franchisor with the FBA. David and I just closed a challenging deal together. The way he conducted himself only solidified the high regard I had for him since we first met, and inspired me to write this.

David is what I call “a difference maker.” By that I mean someone who can have a materially positive impact on your business. If there is a problem, and there is a possible solution, he will find it.  He will go out of his way to satisfy your clients, and, because of all this, his knowledge, work ethic, and CertaPro’s attractive, segment leading Franchise, the bottom line is that he will put more money in your pocket (if that’s important to you).

Here are some specific reasons why, to me, David Brand stands out:

• He does what he says he will do. (Okay, this means he already stands above 80%-90% of “the pack”)
• He does not avoid issues, he deals with them.
• He provides intelligent and creative solutions.
• He acts with honesty, directness, and integrity.
• But, the biggest factor that, I believe, sets David Brand apart from other Franchisor Representatives, is that he truly becomes your Partner in the process like no one else I know.

I am not saying there are not some excellent people to work with throughout the franchise business. I know there are, and I have had the privilege of working with some of them. But, I am saying that with David, there are no ego battles, no attitude problems, and no antagonistic behavior, unless you are bringing it.  Again, working with David is a partnership. What a difference that makes! And what a pleasure! Without going into all the details, without David Brand, there is absolutely no way my recent CertaPro deal gets done. Period.

So, for all these reasons, he gets my recommendation and vote for America’s Best Brand!

Contact Information:

Robert C. Slatkin, President

Vantage Franchises

A Division of Vantage Business Group, Inc.

www.vantagefranchises.com

*I consider David my business partner when doing CertaPro deals, a trusted advisor, and a friend.

*I have no financial interest nor receive any kind of compensation for anything I have said or written here.

This is a franchise I would feel comfortable buying myself or putting my family into, that’s when I know I have a good one.

Since this client lived in my market I contacted several contractors to help him with staff.  I contacted several insurance companies and introduced my client.  I input him in my system to receive monthly small business and sales training.  I gave my client a schedule of calls that we are to have as a follow-up and offered to consult him whenever he had questions.  Every little bit counts.  New business owners are typically needier in their first several months, but as soon as they get acclimated to their programs and systems they advance on their own.  This is an extremely satisfying process for me and these are the ways that I go the extra mile.

I hope you enjoyed this blog about how franchise consulting can benefit a prospective franchisee.

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The below is a post from FBA Member, Andy Lamedman.  Andy joined the FBA in June of 2010 and has stood out as a true professional who upholds the integrity of the industry.  Thank you Andy for your insight and for sharing your experience.

Networking Pays… Big Commissions!

I have always believed in and heavily touted the power of networking.  And still do… even more so now as you’re about to find out.  For anyone that has ever wondered what the value of networking can mean to them, please continue reading.

Whether you go to a networking breakfast at 7:00 AM, or attend an evening cocktail mixer that starts at 6:30 PM, you’re investing extra time into your work day.  So why do it?  Here’s why:

A few months ago I attended an evening mixer and met a woman networking her business.  We engaged in the obligatory chatter and exchanging of business cards.  As is my custom, I followed up with a “nice to meet you email”, and my personal offer to learn more about her business in an effort to pass some referrals her way (I always start by giving).  I then put her name on my monthly “drip system” distribution list to begin sending her my newsletters and other e-blasts.

One day, out of the blue, I received a call from her saying; “Hi, remember me?”  Well, of course I do.  She indicated she would like to learn more about what I do, and how I could possibly help her find the business of her dreams. Unfortunately, she hastened to say, that she did not have the requisite finances to invest in such a venture.  However, she did say; she has a friend who might be interested in partnering with her as a financial investor to her “sweat equity” investment.  And so we began the process…

Fast forward now to the close.  We ultimately inked a deal where they are partnered in a Junk King franchise in Los Angeles, CA.  And, I received a commission approaching $30,000 at first blush, with much more to come on the back end based on the structure of the deal.

Junk King had wide open territory in Los Angeles County.  They sell their territories in blocks of 500,000 population sectors.  My clients purchased four-blocks totaling Two Million population.  We also negotiated the Right of First Refusal for the balance of Los Angeles County and the neighboring community Southeast of L.A. County known as the Inland Empire.  As they exercise that right and purchase additional territories, the Franchisor will continue to pay me my broker fee referral commissions (yes, we have this in writing).

Additionally, my networking pal (now client and friend) subsequently referred me to her neighbor who is about to be laid off from corporate America and receive a sizable severance package.  He too, is now looking to secure his future and we are taking him down the path to freedom, et cetera.

So, the moral to my story:  Networking Pays… Big Commissions! I met someone that had interest but no money.  She introduced me to someone with money.  They formed a partnership and closed a deal that paid me a sizable commission, with additional commissions yet to come as they develop their business.  Additionally, she introduced me to yet another lead that has potential to earn me more money yet again.  All of this from someone that I did not pay a nickel for in terms of “lead cost”.  This was a free lead… just from attending a networking event.

Further appreciation for closing this Junk King deal goes out to:

• Dennis Mulgannon, Franchise Development Director / Jung King:  Dennis is the consummate professional and was extremely easy to work with.  He’s efficient and very accommodating to both the client and broker requests.  Simply a joy to do business with.

• Tom Mc Donald, President / IRA Rollover Solutions: Within 45-minutes of the initial introductory call with my clients, Tom outlined his services and fees, took the application and credit card number from my client and was on his way to expediting the filing of  Articles of Incorporation with the State of California.  He also set up a 401(k) plan in the name of the new corporation for the client’s new business, secured a third party administrator for the 401(k) plan, and obtained the Federal Tax I.D. numbers, for both the Corporation as well as the new 401(k) plan.  Additionally, he handled all paperwork related to rollover funds making it easy and seamless for my client to gain access to his funds required to wire transfer to the Franchisor in a timely fashion.  Not only was Tom knowledgeable, efficient and effective, he pays a broker referral fee of $1,500, which is 50% higher than his competitors.

• Eric Riess, Legal Expert Extraordinaire / Greesnfelder, Hemker, & Gale, P.C.: Talk about a Master Class.  Eric provided the one-hour of free legal counsel we offer and within the first 30-minutes alone had fully educated my clients.  He answered their FDD questions, reviewed their Addendums to the FDD that had already been verbally negotiated with the Franchisor, and guided them on how best to structure their Joint Venture Partnership Agreement between the two of them.  

At the end of the day, all parties worked exceptionally well and in concert for the good of the ultimate result… putting a client in business!

Congratulations, Andy!

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Signing the Agreement

There were some complications before the closing that related to the referring entity.  My client was being charged a fee from them for a service that they were buying outside of being awarded a franchise.  The client didn’t feel comfortable with the amount of the fees and spent some time negotiating those which held the deal up for 2 additional weeks.  Once they had settled on a fee, the paperwork was sent and we scheduled a meeting to sign.

We scheduled another meeting to collect the check and sign the paperwork.  I also had the client sign an acknowledgment for my insurance and records indicating that they made their franchise decision on their own and did their due diligence to arrive at the decision to purchase a franchise.  Since the Franchisor would be doing a mail-away signature, the client signed the paperwork and we over-nighted it with the check.  The franchise was awarded and all parties gained from the transaction.  We created a win-win-win-win situation.  The next step for my client was arranging training which had already been penciled into the Franchisor’s calendar.  We called the Franchisor to tell him about the mailed package and to inform him of the confirmation of training.

My client was one step closer to opening his own STOP business!

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Final Meeting with Client and Franchisor

The next call we had with the Franchisor, my client came into the office.  He felt more comfortable with interactions in-person rather than over the telephone so I encouraged him to come back in.  He was pleased that I took the time out to see him in the office.  Once inside, we called the Franchisor for our final meeting.  We discussed the territory in detail and the adjustments that we made.  We went over the addendum changes again and confirmed that we were expecting the adjustments back from Eric Riess, our franchise attorney.   At the end of this meeting, my client and I discussed the transfer of funds to attend the next training.  The original training date was scheduled for October 11^th 2010, however the Franchisor indicated his trainer had a challenge with that date and needed to move the training to October 25^th, 2010.  We understood, however my client was extremely excited to start learning the materials.  He put in for the transfer and we made final arrangements to purchase his franchise.

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Discussing Franchise Territory Changes and Approving Agreement Modifications

I had my client come into the office to discuss the territory changes.  It seems his daughter had spoken with him as well and indicated that there were some bad areas in the territory he wanted to be in.  This was excellent because it was a consistent message to what I was telling him.  When we spoke I showed him the territory on the map and the extra areas I had carved out and requested from the Franchisor.  He agreed that the territory was great.  After all, we had negotiated a territory that was almost double of the size of what an average territory consists of with this franchise.  That meant my client has double the opportunity to make a great living with this franchise and that is what I aim for, giving the biggest advantage to my client up front while still being fair.

The attorney, Eric Riess, sent the modifications to the Franchise Agreement directly to the Service Team of Professionals.  Because the FDD was so fairly written, there were only a few things that he requested.  When the Franchisor received it, he said that everything Eric asked for was fair and that they would agree to our terms.  An addendum was created and added to the agreement.  By using our franchise consulting team, we got the client a bigger territory, a better royalty, an easy exit clause and extra protections in the case of business challenges.  It was a win for all parties and we were very excited to see the willingness of the Franchisor to help our client succeed.

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Get to Know Your Client to Ensure Their Success

My goddaughter wrote something on her Facebook page profile, she said, “Be kinder than necessary, because everyone you meet is fighting some sort of battle.”  This statement was really profound to me.  As I thought about it I thought of a visual representation.  Imagine a huge balloon.  This balloon is filled with all the memories, challenges, suffering and joy a person has known.  These things are swirling around constantly inside the balloon.  The outside of the balloon is what we let the world see of ourselves.  At any one moment, all an outsider or even a friend can see is the spot where the balloon is tied.  We are only seeing a very small fraction of the whole and yet that tiny spot is where we make our judgments and assessments of another.  It’s particularly astounding that we believe we have the answers and know exactly what someone else is doing or feeling and, in reality, we don’t even have a clue.

This is the exact same experience that happens when you work with your clients.  You get a few hours worth of phone calls in and you think you know the person, but the reality is we only get to see a tiny spot of the total picture.  This is why it is extremely important that you stay on the calls with the client through every aspect of the franchise purchase process.  You never know what hurdle may appear that you need to be there to help them handle.

You are just like a coach that is there to help his team members to succeed and win the game.  The more you allow your client to wander in the research and data the more lost they will get.  Buying a franchise is one of the biggest decisions of their life.  It can be scary for them and overwhelming.  They enlisted your services to protect them and to keep them safe.  It is your responsibility as a franchise consultant with the FBA to do just that.  Now be that coach for them.  Help them to handle their own fears and struggles, advise them on the ways to become the best player they can be.  This way everyone wins the game and that’s how we like it!

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Final Questions for the Franchisee

In the process of talking to the Franchisor after the attorney review, my client and I realized we didn’t have an answer that we were satisfied with on how a Franchisee accepts payment. We decided that we would call a handful of Franchisees and ask them what their experience was when collecting payment from customers.  Since my client was not available to do the calls with me, I was careful to write down the exact details of what the Franchisees told me, word-for-word. Since I was only asking three questions, it was easy to do. I have tools to help me keep precise records (Livescribe is great, so check it out!). The Franchisees gave me the information and I sent the exact quotes to Eric Riess (the attorney), Brian Clark (the Franchisor), and of course my client. The results were satisfactory in my opinion. It was also another example of a consistent message and system that all the Franchisees were actively using. From all angles, this Franchise is excellent.

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Choosing Your Franchise Territory

After speaking with our franchise attorney, my client and I discussed choosing his territory.  He was interested in the west side of Orange County, FL.  I was a bit concerned by this because I know the area and did not want the large population of low-income housing on the west side to hinder my client’s territory.  I explained that I would like to calculate the population of each side to ensure that my client was getting a good subsection of the county.  We had already negotiated nearly double the average territory for my client and I wanted to give him every opportunity to take advantage of this.

I used our demographics information to pull the population in each zip code and city of Orange County, FL.  I then chose major streets to help identify the lines of where the territory would begin and end.  I calculated the low-income areas and deducted that from the total of the territory.  I also calculated the other territory in the county to ensure that it was not only fair to my client, but also to future Franchisees  in that market.  This is not something that is typically in the scope of my work, however, I always have my client’s best interest in mind.  The Franchisor was not from this market and therefore wouldn’t know the important facts about the low income area; therefore, it was my responsibility to ensure that these details were not overlooked.  My top priority is to protect and serve my client and to ensure their success.

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Learn more about becoming a Franchise Broker or FBA Member here.