How To Franchise Your Business - EJ May 2025

How To Franchise Your Business

 More hands-on experience than any other firm

◦ Consultants with over 900 years of franchise experience

◦ 98 out of the top 200 franchise companies

◦ Offices in Chicago, Dallas, Los Angeles, Boca Raton, Miami-Fort Lauderdale, Atlanta, Toronto, Dubai, UAE, and Riyadh

 More “senior level” experience

◦ Hands-on experience at start-up and established franchisors

◦ Former CEOs, CFOs, EVPs of more than 50 different franchise companies

 Adia (now Adecco), Armstrong Tile, Auntie Anne’s, Dunkin Donuts, LINE-X, Pearle Vision, McDonald’s, PIP Printing, Schlotzsky’s, Snap-on Tools, Snelling & Snelling, and other national brands

 The ability to bring more resources

◦ Faster completion

◦ Ability to assist in several areas simultaneously

 Breadth across four functional areas

◦ Strategic planning

◦ Quality control

◦ Marketing

◦ Organizational development

 Franchise experience in 50+ countries

 Six years in a row, voted the #1 Franchise Consulting Firm in North America in an independent survey of over 1,100 franchisors

 Numerous awards and publications

 A Premier fully-integrated public relations and digital media agency specializing in franchised businesses

◦ Public Relations

◦ Digital Lead Generation

◦ Search Engine Marketing

◦ Content Marketing

◦ Social Media Publishing

◦ Pay-Per-Click Advertising

◦ Website Design & Development

 Both franchise development and consumer branding

 Team with Hands-On Franchise Experience

◦ Real world experience with nearly two dozen brands

◦ Efforts have resulted in tens of thousands of franchise leads

◦ And many hundreds of franchise sales

 Recent honors and awards:

◦ Top supplier from Entrepreneur five years in a row

◦ Best New Agency (Ragan & PR Daily Ace Awards)

◦ PR Agency Elite – Mission: Fit to Own (PR News)

◦ Best Website Finalist (PR News)

◦ Best Media Relations Campaign Finalist (PR News)

◦ Best SEO Finalist (PR News)

 Considering franchising your business?

 Franchising less than one year?

 Franchising more than one year?

Wearehappytosendyouacopyofthis presentation,soyoucanlimityournotetakingif yousodesire. Also,happytosendacopyofa videoandabookifinterestedinexploring further.

 FTC rule 436 cites three elements that legally define a franchise:

◦ The use of a common trademark

◦ The exercise of control or provision of assistance

◦ The collection of fees, royalties, mark-ups or other monies from the franchisees

 If you have all three elements, you are a franchise, regardless of what you call it

 Some state definitions vary, but are similar

 Do not have to use the “f-word”

 Franchisee typically pays

◦ Franchise fee average about $35,000 to $45,000

◦ Royalty range between 4% and10%

◦ Advertising range between 1% and 2%

◦ Franchisor will often sell product to the franchisee

 Franchisor typically provides

◦ Use of trademark

◦ Initial training

◦ Operations manual and systems

◦ Ongoing supervision and support

◦ Marketing support

◦ Other support services like purchasing, R&D, etc.

 Leverage Capital

 Speed of Growth

 Motivated management

 Reduced risk

 Few operational concerns

 Higher quality

 Organizational leverage

 Must “share profits”

◦ Franchise unit will usually generate less profit than a profitable unit

◦ But far more profit than an unprofitable company-owned operation

 Less Control

 Good relations with franchisees take work

 MYTH: Litigation

Credibility

Differentiation

“Sizzle”

Buyer appeal

Value Proposition

 The franchisee should make a return on the time they invest

◦ No different than if they were to go out and get a job

◦ Salary should be “market rate”

 The franchisee should make a return on their investment

◦ No different than if they invested in a stock

◦ Return should be commensurate with what they would make if they were to make an investment of similar risk

◦ Ability to sell back their investment at the end of the term

 Franchisees expect that they will need to build their business

◦ Will expect these returns in three years or less

 Annual Cash-on-Cash R.O.I. at the unit level – our criteria

◦ 15% for Owner Operators

◦ 20% for Area Developers (who will support additional overhead)

 Occasional exceptions

 Perfecting the business

◦ If you have perfected your business, SELL IT!

◦ If you are standing still, someone is gaining

◦ McDonald’s in 1955

 Quick vs. Slick

◦ If you are going head to head with more established competition and your business model is not highly differentiated – be sure to refine first

◦ More unique, the sooner you should franchise

 Risk: Someone with a camera and a notepad

 First mover advantage

 Who was the first . . . ?

 Business plan/strategic direction

 Legal documents and registrations

 Operations manuals

 Training program

 Quality control mechanisms and systems

 Effective marketing plan

 Franchise collateral materials

 Website and web-based marketing

 Advertise

 Design and implement a sales strategy

 Staff an organization to implement the plan

 Capital

 You are entering a new business.

 Goals drive your business. Start with support and cost structure.

 What do you need to do to help your franchisees succeed?

 Don’t rely on guesswork: The futureofyourbusinessisat stake.

 Financial analysis is essential.

 Reverse engineer your success.

 There are certainly a large number of neophyte franchisors who take a “Ready-Fire-Aim” approach

◦ Often rely on guesswork

◦ Or analysis of what comparable franchisors are offering to make major decisions

 “Me-Too” is not a strategy – it is a recipe for disaster!

◦ Uniqueness is important to success, whether achieved through the business model, marketing, support, structure, fees, or marketing.

◦ Me-Too assumes that business economics are the same, support is the same, and that a new franchisor will simply differentiate themselves based on great franchise marketing

◦ But established franchisors often have many advantages not shared by newer franchisors

◦ So the Me-Too strategy that is taken by many new franchisors can actually be responsible for their failure

 The impact of a 1% royalty mistake

◦ If a single franchisee generates $500,000 in revenue

◦ 1% = $5,000 off the bottom line

◦ But franchisees will never tell you that they are paying too little and often inertia will keep the royalty where it is at for years

Franchise Legislation Within the US 2024

States having no franchise or filing requirements

States having franchise registration requirements

States where franchisors must file to comply with business opportunity laws

Notes:

• Within Indiana, Michigan and Wisconsin, registration is effective immediately upon the application being filed.

• Florida, Nebraska, Kentucky, Utah and Texas require a simple exemption filing. Once that is filed, a franchisor can begin to offer franchises.

• South Carolina provides an exemption if the franchisor has filed a State trademark registration.

• Connecticut, Maine, South Carolina and North Carolina provide an exemption if the franchisor has obtained a Federal registration of its trademark

• Six States require registration of advertising prior to use. (CA, MD, MN, NY, ND, WA)

• New York, Oklahoma and Rhode Island require the FDD be provided to a prospective franchisee at the earlier of (i) the 1st personal meeting held to discuss the franchise or (ii) 10 business days before any agreements are signed or any monies paid (including fully refundable deposits).

• Michigan and Oregon require the FDD be provided to a prospective franchisee 10 business days before any agreements are signed or any monies paid (including fully refundable deposits).

• Many states also have State Relationship Laws that impact issues such as franchise termination or non-renewal. Your franchise legal counsel can advise you on relevant issues involving these states.

• Check with your franchise legal counsel for additional details and updates which are available.

Franchise Program for Aggressive Growth

Approximate Development Activity Schedule

Benchmarking

Initial Planning Session

Strategic Planning & Gap Analysis

Financial Sensitivity Analysis

Disclosure Document

Franchise Agreement

State Registration Process

Operations Manual & Revisions

Training Program

Train-the-Trainer

Training Video Scripts

SkyManual Online Operations Manual

Research / Profiling / Brief

Franchise Marketing Plan

E-Brochure

Mini-Brochure

Website Development

Franchise Sales Video Script

Franchise Sales Visual Aids

Franchise Sales Training & Manual

Franchise Implementation Strategy

Field Consulting Manual

Implementation Consulting Strategy Legal Documents

Legal

Coordination

Quality Control

Franchise Marketing Sales & Implementation

The iFranchise Group does not provide legal services but instead works through outside legal counsel

Franchise Program for Moderate Growth Approximate

Development Activity Schedule

Benchmarking

Initial Planning Session

Strategic Planning & Gap Analysis

Financial Sensitivity Analysis

Disclosure Document

Franchise Agreement

State Registration Process

Operations Manual & Revisions

Research / Profiling / Brief

Franchise Marketing Plan

E-Brochure

Mini-Brochure

Website Development

Franchise Sales Training & Manual

Franchise Implementation Strategy

Implementation Consulting Strategy Legal Documents

Franchise Marketing

Sales & Implementation

Legal to sell in 36 non-registration states

With registration, legal to sell in all states

 Franchising is a means of duplicating success, not creating success

 Thrives by creating win-win situations

 You must be selective

 Franchising is a new and different business

 Is not the right solution for every business

 Provides one of the most powerful business expansion models ever developed