Franchise Brokers Association BLOG

Demographics Studies for Opening a Small Business

Small businesses are hugely important to our current economy.  Small business contributes to our GDP, increases the number of available jobs, and enrich our local communities.  It’s hard to find someone who is not a big supporter of small business, and increasingly we are finding more and more people who are interested in being entrepreneurs.  Business ownership is very appealing, it makes you the decision maker.  You are the last to get laid off and the first to know when problems are on the horizon.  You can approve your own vacation time, raises, perks and schedule.  You also get the advantage of choosing your coworkers, if you even want coworkers.

Once you get excited about the idea of owning your own business, there is the understandable question of can my business survive in my area?  Do I have the audience and the clientele to support the business I want to open?  Franchise Brokers can help with that.  Franchise businesses are great at helping their franchisees choose the best businesses and locations for them and their region.  You know the old adage “more is less?“  Well, when it comes to information more is, well, more…and better.  In addition to the assistance and support of the franchisor to choose the best location for your business, members of the FBA can also provide you with access to demographics reports and studies that can help you determine the viability of your business in your location.  What’s the makeup of your community, age groups, gender, income levels, population density, etc.?  Would a sports bar and grill thrive in your area?  How about a clothing boutique, sandwich shop, marketing firm, or B2B business?  Demographic reports can give you great insight into the future success of your company.  It’s important to have the help of a professional when reviewing this information, as well.  Having the information is the first step, deciphering it and understanding how it impacts your business in the next.  Brokers and consultants are the professionals that can help you glean the information you need from these materials.

Interested in looking at the demographics for your region?  Contact one of our members by going here and filling out a request for information form.

It’s pretty remarkable how many different types of franchised businesses there are available.  When most people think of a franchise, images of McDonald’s, Burger King and Subway come to mind.  But less often do people think of the other business concepts the franchising industry has to offer, like:

• Clothing boutiques
• Day Spas
• Hair Salons
• Business Services and Coaching
• Childcare and Development
• Tutoring and Education
• Financial and Loan Services

There are thousands of franchise and business opportunities to invest in.  And, while many people initially say “I want to own a restaurant” or “I want to own a gym” there are important factors than can help you choose the very best business option for you.  Are you looking for:

• Flexible schedule
• Home office based operations
• Low investment level
• High return on investment
• Quick start up
• Small office or small number of employees

This is where a franchise broker can provide you with valuable guidance and assistance.  Their purpose is to not only match you with the best industry for you, but also the best business model.  Your work-life balance and your business goals are taken into consideration when researching your franchise options.  Do you want to:

• Make a difference
• Operate a green company
• Work with other businesses and professionals
• Provide job opportunities

It is important to take all of these items into consideration when investigating franchise and business opportunities you are interested in.  While these things can be daunting, having an experienced partner in your research process can prove immensely helpful (and stress reducing).

If you’re interested in talking to someone about your options or want to learn more about the benefits of using a franchise broker, click here and fill out an Information Request Form.

Throughout the 2011 Franchise Broker Conference and Expo, Dan Durney and the wonderfully accommodating owner at the Woodhouse Day Spa in Orlando, Allison Murphy, provided tours of the spa to conference attendees.  38 brokers and consultants participated in the tours; tours not only gave a peek inside the plush and luxurious treatment rooms but also provided a look inside the day-to-day life of an owner and why they decided to invest in the Woodhouse franchise.

The Woodhouse Day Spa is a lavish and well-appointed, resort-style spa with unique services, including the only Shirodhara massage in Orlando.  The spa offers franchisees multiple streams of revenue, including upscale spa services, private party packages, and retail sales.  The scent filling the spa caught everyone’s attention, a signature scent developed by Woodhouse Day Spa’s corporate company that is a big seller and a must-have for many clients after their initial spa experience.  Incentive programs encourage clients to make follow-up appointments before they leave the spa, further promoting multiple visits per client.

The location of the Orlando spa is placed within an affluent area of the city, but also conveniently located near upscale tourist hotels and attractions.  The franchisee uses a third-party company to encourage customers of local hotels and resorts to become clients of the spa, and they highly recommend that practice to other franchisees.

Allison spoke very highly of the brand, the training and support offered by the franchisors as well as the marketing collateral and branding efforts they’ve put into this concept.  She knew she wanted to open a spa, but once she came across Woodhouse and flew out to meet the team, she knew this was the franchise for her.

This is a wonderful concept that provides their franchisees with everything they need in the expanding and popular spa market.  The FBA is very much looking forward to working with Dan, Brandchise and the Woodhouse Spa team.

Shirodhara Oil Pot and Stand	Facial Treatment Table
Massage Treatment Room	Vichy Shower Treatments

Seeing a franchisee’s operation first-hand is truly eye opening.  You get to see the day-to-day life of a franchisee in a given system and can give your clients an honest description of what they can expect when they invest in this franchise or business opportunity.

The FBA is so pleased to announce this opportunity to franchise brokers and consultants who are attending the FBA’s upcoming Convention.  Signworld has graciously invited 2011 Convention attendees on a private tour of a local Signworld operation.  The tour will take place November 9^th from 12:00 – 2:00 pm, travel between the Convention hotel and the licensee’s location and lunch is provided.

This is an excellent occasion to see the operations of the notable Signworld opportunity, meet and ask questions of a Signworld licensee and see why this is a fantastic investment for your client.

 Registration for the Convention and an RSVP for the tour are required. 

For details on the event click here.

For questions or to RSVP, please contact Andrea at andrea@franchiseba.com.

Each year, we are inspired by all the amazing results that stem from the best brokers, consultants and franchisors coming together to meet, network and learn at the FBA’s Annual Convention. Relationships (and deals) are made each year, and we want to share a few of these phenomenal success stories with you.

At the 2009 convention one of the exhibiting franchisors met one of our top consultants. They forged a relationship and continued to stay in contact after the event ended. The consultant was offered an opportunity to work internally with the franchise. He has since helped them strategize and execute their growth plan.

At the 2010 convention, a franchisor met one of our brand new brokers. Shortly after the event, the broker was speaking with a new client and chose to show the franchise that he had recently formed a strong relationship with. The client ended up purchasing four territories and is planning on buying more! After this placement we featured this success story on our weekly Executive Director’s Forum call. Soon after, several other consultants targeted and sold this system, all from the relationship built at the convention.

The small investment to attend or exhibit at the Convention can be an invaluable investment in the growth and success of your business.

Want to network and build valuable connections? Join us at the 2011 Franchise Brokers Association Convention, taking place November 9 – 11, 2011 at the Wyndham Orlando Resort. Click here for details.

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.

Bast via Flickr

When you research buying a franchise, one of the most important parts of your due diligence process is asking the Franchisees questions.  Franchisors provide you with names of past and present Franchisees of their system as well as their contact information.

Questioning the Franchisee is about so much more than asking if they are happy with the franchise and the business.  It’s talking to the people who are working in the business, the business that you are looking to invest in, and digging into the benefits and issues that they – and you will – face every day.  It’s analyzing the system beyond the obvious and finding out if the business will fit your lifestyle and goals.

In addition to questioning the Franchisees, you can access surveys from independent third parties that will provide insight into the franchise system.  They ask all Franchisees in a system the hard questions about support, financial opportunity and the relationship with the franchise.  These findings will provide great insight into the franchise system and whether or not it is a good system for you to become a part of.

Due diligence is the most important part of your purchase process.  You want to make sure you are making the right investment for you, your family and your future.  Talking with the Franchisees and learning about their experiences are a pivotal part of the process.

Contact us to get a list of questions to ask Franchisees and to obtain information on Franchisee surveys.

Build Wealth With Businesses

How many millionaires can you think of?  Of those, how many of them have owned and built their own business to become a millionaire?  The book The Millionaire Mind by Thomas J. Stanley reports that 2/3 of all millionaires are business owners.  Why is that?  The simple answer is that businesses have two equity streams.  You earn a living with a business just like you do with a job, but you also build equity.

If you have ever looked into purchasing an existing business that is for sale, you will find that it is much more expensive than starting a business from scratch.  In fact, one of the franchises that we work with costs around $50,000 to get up and running.  By the fifth year in business the average Franchisee is grossing over $600,000 and many of them have hit the million dollar mark.  When a Franchisee goes to sell that business, they can charge between half to two times the gross sales.  That works out to be $300,000 in the worst case scenario and $1.2 million in the best case, assuming you only make $600,000 per year.  That is up to 24 times your original investment, and remember while you were working on your business and building equity, you were also taking a salary.  Show me a stock that can give you that kind of return!

There is risk in business just as there is in any other investment.  When you consider franchising with the RIGHT franchise system, your risk is dramatically reduced.  You will start with the end in mind, and think about what kind of return on your investment you want.

Franchising isn’t a magic pill, but with the right research, hard work and dedication to your system, a positive ROI on your business is absolutely within your reach!

*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.

Basic Franchise Vocabulary

There are a lot of terms, acronyms and abbreviations in franchising, most of which you won’t know unless you have experience in the industry.

Knowing these terms can be very helpful when doing your research on which franchise is the best match for you.  Here’s a quick outline of some basic franchising terminology and definitions.

Area Development Franchise – under an Area Development franchise, a Franchisee has the right to open more than one unit during a specific time, within a specified area. The Franchisor grants the Franchisee exclusive rights for the development of that territory.

Business Format Franchise – this type of franchise includes not only a product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals.

Business Opportunity - (also known as a ‘Biz Opp’) involves the sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin a business. The Licensor, or seller of a business opportunity, usually declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee. This is different from the sale of an independent business, in which there is no continued relationship required by the seller.

CRM - (Customer Relationship Management) is an industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, an enterprise might build a database about its customers that describes relationships in sufficient detail so that management, salespeople, people providing the service, and perhaps the customers can directly access the information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer has purchased, and so forth.

Franchise – a license that describes the relationship between the Franchisor and Franchisee, including use of trademarks, fees, support and control.

Franchise Agreement – the legal, written contract between the Franchisor and Franchisee which tells each party what is required of them.

Franchisee – (also known as a ‘Zee’) the person or company that gets the rights from the Franchisor to do business under the Franchisor’s trademark or trade name.

Franchising – a method of business expansion characterized by a trademark license, payment of fees, and significant assistance and/or control.

Franchisor – (also known as a ‘Zor’) the person or company that grants the Franchisee the right to do business under their trademark or trade name.

Master Franchise – a Master Franchise agreement gives the Franchisee more rights than an Area Development agreement. The Master Franchisee has the right to sell franchises to other people within the territory, known as sub-franchises. Therefore, the Master Franchisee takes over many of the tasks, duties and benefits of the Franchisor, such as providing support and training, as well as receiving fees and royalties.

Multi-Unit Franchise - a multi-unit franchise is an agreement where the Franchisor grants a Franchisee the rights to open and operate more than one unit.

Net Worth – the difference between the assets and liabilities of an individual or an entity. If an investor owns stocks, bonds, a house, and other assets worth $2 million and has liabilities of $500,000 (including mortgage amounts and accrued taxes on appreciated assets stated at fair market value), then the investor has a net worth of $1.5 million. Similarly, if a company owns land, buildings, computers, and other tangible and intangible assets with a cost basis for financial statement purposes of $10 million and has liabilities of $9 million, then the company has a net worth of $1 million.

Product Distribution Franchise – a franchise where the Franchisee simply sells the Franchisor’s products without using the Franchisor’s method of conducting business.

Royalty – the regular payment made by the Franchisee to the Franchisor, usually based on a percentage of the Franchisee’s gross sales.

SBA – (Small Business Administration) an independent agency of the United States government that protects the interests of small businesses.  The SBA ensures that they receive a fair share of government contracts, offer loans and provide counseling to small businesses.

Single-Unit (Direct Unit) Franchise – this is the simplest and most common type of franchise. A single-unit (direct-unit) franchise is an agreement where the Franchisor grants a Franchisee the rights to open and operate ONE franchise unit.  It is possible, however, for a Franchisee to purchase additional single-unit franchises once the original franchise unit begins to prosper. This is then considered a multiple, single-unit relationship.

Trademark – the Franchisor’s identifying marks, brand name and logo that are licensed to the Franchisee.

UFDD – the Uniform Franchise Disclosure Document, UFDD, is one format for the disclosure document which provides information about the Franchisor and franchise system to the prospective Franchisee.

Are there other terms you came across that you had to look up?