American Marketing Group, Inc.
Consulting - Coaching - Mentoring…since 1978!
"Coaching Winners...Mentoring Success!"
"Are you considering expanding by franchising
your firm? AMG has been a franchisor, a franchisee
and a franchise agent for ourselves and clients since 1978."
If you have a universal business concept, operate at least five successful locations, have been in business for a minimum of five years and have a management team that can train and support active owner-operators using your business model you may have the ability to expand by franchising. If you want to consider the idea of franchising you'll not only need a team of professionals that can train and support each individual franchisee in your system, but you will also need a trademark attorney, a franchise lawyer, a Certified Public Accountant and a franchise marketing team. They all must understand the pluses and minuses of dealing with franchisees and the ramifications of using 'other peoples money' to expand your company and increase your own bottom line profit. Even though its normally safer to buy a franchisors learning curve and open their franchise, versus starting from scratch on your own, you need to always be aware of the fact that there is absolutely no guarantee that you will succeed...as a new franchisor or new franchisee.
The franchise logos you see below, which are protected by the laws of the U.S. Patent and Trademark Office, are very familiar to most everyone because of the their continued advertising campaigns that have been viewed by the public on television, radio, newsprint and internet marketing. The logos have intrinsic value because they can be immediately identified by the consumer, which adds to the value of their entire franchise system. Because of the legal protection of their logo, tag line, slogan, song, mascot, etc. each individual franchise unit builds value in the fair market value of their business, which is a major benefit when a franchisee is ready to sell their business. All that name recognition is important to a franchise system, but it does not guarantee the success of any one franchisee.
However, if you had the opportunity to purchase a new franchise unit from Remax, Subway or KFC there's a better chance of success.They have already built a successful franchise chain with a trusted name, product and service..."there's strength in numbers." Plus, the franchisor can train and support you on a continued basis, as well as offer chain buying power, advertising clout and plenty of press. But, there's always a chance that the franchise business you bought may in fact not be right one for you. And, if you don't operate their franchise exactly in accordance with what you learned in basic and advanced training and always follow the Franchise Operations Manual (FOM) you're heading for trouble. So be prepared to "do it the franchisors way...or hit the highway" as the saying goes. You can click on the above logos to visit their websites.
In the franchise world there's another saying that states "you're in business for yourself, but not by yourself'', because each franchisee is surrounded by their peers and can ask for help from other franchisees in their local market and their franchisor at any time. It is no doubt safer to buy, own and operate a well-known and already successful franchise with name recognition, but you must always be willing to work within the parameters of the franchise system and be eager to absorb the continued training and on-going support given to you. Since each franchisee has their own built-in 'peer group advisory board' they can call upon like-minded franchisees and/or experts from the franchisors headquarters to ask questions and get answers...again,there's safety in numbers on the franchise business journey.
Successful franchisors have the mindset to 'under-promise and over-deliver' to their franchise system...they want a win-win for all involved. A good franchisor will always go out of their way to try and help each franchisee because they know that their "chain will be as strong as their weakest franchisees.' The system has to work properly in order to create repeat customers.
"We want this franchise opportunity to work for you
and our firm because we know that a chain is as strong as its
weakest link. It has to be a 'win win' for everyone to be successful."
Everyone wants to see their business idea and plan succeed and a new or mature franchisor can't afford failures or their system won't grow to become a successful chain. To keep success rates high and failure rates low the franchisor must use solid business sense and follow specific laws in regards to selling, training, supporting a franchise system. They need to go to great lengths to help each and every franchisee achieve their goal of success. If they have a franchisee that's simply not making it they need to get them out of the chain quickly, legally and keep the franchisees losses to a minimum. The franchisor can either purchase the unit themselves, offer the location to one of their already successful franchise operators or sell it through a business broker to a qualified outsider that has the money and manpower to make it work the franchisors way. In our litigious society a franchisor must be aware of the consequences of failing to abide by the letter of the Federal Trade Commission (FTC) law and all of the franchise laws enacted by seventeen individual states that go above and beyond the FTC laws to protect their states residents. Franchisors are legally bound to always follow their franchise agreement, fulfill basic training, give advanced training, continually support each unit, create effective advertising campaigns, perform research and development or new ideas and follow their own Franchise Operations Manual to a tee. Franchisor owned and operated units must be treated in the very same manner as the franchisees in the system. Plus, a franchisors in-house office administrators and in-field support staff must have good common business sense and great people skills because they are dealing with individuals who have invested their money and are owners of a business...they have skin in the game. The last thing a franchisor needs is a lawsuit from a new franchisee because their employees didn't follow their own agreement and system to take care of individuals who have spent thousands of dollars to purchase their franchise and join their franchisors team.
When AMG determines that your business model is able to be franchised you will need capital to engage a team of experts that will help you every step of the way and to keep you on the right track. Franchising requires an investment of not only capital, but will take a great deal of time, effort and energy to get you packaged and launched properly. You're starting a new business and AMG has the experience and can help you.
"Remember, it takes money to make
money and you will always get what you pay for."
First, you'll need a trademark attorney to make sure you have the absolute legal rights to your franchise name, logo, tag line, song, mascot, etc in the arena that you plan on franchising your system. You need to file this information and get it approved by the U.S. Patent, Copyright & Trademark Office before holding your franchise out to the public and claiming ownership to these items. Secondly, you'll need to hire a seasoned franchise attorney that has a complete understanding of the Federal Trade Commissions (FTC) 'Franchise Rule' that governs the packaging, marketing, advertising, promotion and sales of franchises. This law was enacted in October of 1979 and has become not only the legal guideline for franchising your business in the U.S., but a very strong consumer protection law that guards the rights of the individuals purchasing your particular franchise opportunity. Also, you need to know that there are seventeen separate states in our country that have their own rules and regulations that go above and beyond the FTC's rules, regulations and laws that require separate filing and approval before you can advertise and sell your franchise. Your attorney needs to know exactly what states you plan on marketing your units in so you are in compliance with all the federal and state requirements. In essence, the FTC is the guiding light and great consumer protector in the franchise world just as the Security & Exchange Commission (SEC) is in the world of stock, bonds and mutual funds brokerage. Full and complete disclosure must be given to each prospective franchisee during the first personal meeting, which is done with a Federal Disclosure Document or FDD. Also, you're required to give them a copy of the actual franchise agreement that you'll be asking them to execute, audited financial statements for the new franchise company along with other required data. When you franchise your concept you're dealing with the general public, which is heavily protected by privacy and consumer protection laws. Everything you always wanted to keep totally confidential must become completely transparent to prospective franchisees.
So, now that you know that it takes both the proper amount of both money and time to franchise your concept legally you will need the services of a reputable CPA.They will help you compile an accurate investment range for a potential franchisee, as well as audited financial statements that your new franchise company must provide prospective franchisees in accordance with the FTC and state laws.
"It takes the proper amount of both
money and time to franchise your business model successfully."
Next, you need to hire a CPA who can prepare audited financial statements for your new franchise company...it's the law. Plus, you should consider creating an 'Earnings Claim Document' (ECD) and release your company-owned locations income and expense statements to prospects so they can compile a financial projection on their new franchise location based on real income and expense statements. An ECD will assist them in securing silent investors and bank financing because the franchisee is basing their five year financial projections on the track record of the units that are owned and operated by the franchisor. Many new franchisors are unwilling to provide an ECD, but would you ever purchase any independent business or new franchise blindly and without any knowledge of what to expect in terms of low, average and high income and expenses for a new franchise start-up? This is not a requirement for a franchisor, but only makes sense that they legally disclose the last three fiscal years of financial data so a prospective franchisee can create a five year business plan, a five year financial projection, can attract possible investors and secure bank financing. So, a franchisee needs to know how much it will cost them to open a new unit, plus have some idea about the amount of gross revenue it will take to achieve a weekly break-even for their new business...it just makes sense to know.
You will get a migraine if you try to do everything yourself when it comes to packaging, advertising, marketing, launching, training, and supporting your new franchise program...hire a team of experts to help you. It's a major decision to become a new franchisor, as well as a new franchisee. You must abide by the FTC and state laws that govern franchising, so hiring experienced and qualified franchise marketing professionals is a very smart investment...AMG can help.
"You are asking for a migraine if you
attempt packaging and selling your own franchise."
Buying a franchise is a very big decision for a prospect that is vetting different business models and franchise systems. So, marketing your firms franchises requires people skills, business acumen and knowledge of the FTC and state laws...not salesmanship. In fact, qualified prospects are never sold a franchise. They end up making the decision to buy your concept if it's right for themselves and their spouse, partner, banker, attorney, accountant, consultants, etc...get the point? They will need the correct amount of capital and the right group of employees to help them become successful. Prospective franchisees have more of their family and friends saying "you're crazy...don't do it" than supporters who are encouraging them by saying "quit your job and become a franchisee." If they make it through the gauntlet of peer intimidation and hearing "don't do it", have their questions answered to their satisfaction, feel that the opportunity is right for them and can get the proper funding then they will buy your business opportunity...but, never be sold.
Locally our firm is best known for the franchise expansion efforts of The Pasta House Co. Italian restaurant chain in Missouri and Illinois. On a national scale AMG was heavily involved in expanding VR Business Brokers from 75 offices in New England to over 650 in North America before their Initial Public Offering in the mid eighties. In 2005 AMG also helped launch the national expansion program for Information Protection Solutions of America (IPSA) across the United States. This firm initially had a single unit paper and product shredding operation in downtown Chicago. With AMG's help they very quickly grew to over 140 IPSA licensees in the United States that were existing full service shredding and product destruction companies...they became the Century 21 in the shredding industry. In 2011 their shareholders sold their stock to a Fortune 500 company.
Individual's who want to participate in the American dream, leave the firm they currently work with and become their own boss can have a rude awakening if they try to embark upon an initial journey on their own and without professional help. Owning and operating a start-up and brand new franchise opportunity requires you to wear many hats, which you've never done because you worked for someone else.
Here are some very basic questions to answer
before you terminate your employment to become a franchisee.
1) What is my very first step to becoming a franchise owner?
2) Should I start my own independent business or buy a new franchise?
3) Should I buy an existing business or buy an existing franchise for sale?
4) Do I need a lawyer, accountant, banker, active partner or silent investor?
5) Should I hire a consultant or join a peer advisory board to help me?
6) Should I start my new business part time while I still keep my job?
7) Should I leave my job and start full time launching my new business?
8) Should I work out of my home or use an executive office suite part time?
9) What kind of furniture, fixtures and office equipment do I need?
10) What kind of computers, tablets, software and technology do I need?
11) Should I join networking sites like Linkedin, Twitter or Facebook?
12) Do I need a company trademarked name, logo and tag line?
13) Do I need business cards, letterhead, envelopes and brochures?
14) Do I need a business email address, website, internet or satellite service?
15) Do I have a universal or niche' concept that will work for my clients?
16) Do I need a 90 Day Action Plan for my business quarterly periods?
17) Do I need a business plan with financial projection to raise capital?
18) Do I need a power point to make individual or group presentations?
19) Do I need a personal financial statement showing my net worth?
20) Do I have the appropriate amount of capital to launch the business?
21) Do I need investors capital that is a loan or an equity investment?
22) Do I need a Private Placement Memorandum to legally raise money?
23) Do I need a bank loan and can I get one during these economic times?
24) Do I need an SBA guarantee for a bank loan?
25) Do I need to sign a personal guarantee for funding, franchise or lease?
26) Can I take the firm through lean financial times during the first year?
27) How much income do I need to survive personally during my first year?
28) Should I hire a manager, employees or start by myself?
29) Who's my target market and how do I reach them?
30) What kind of advertising should I do?
31) How do I drive people to my website?
32) Do I need to conduct a focus group study for my product or service?
33) Who are my competitors and what am I up against?
34) Should I offer a better product or service?
35) What makes my product or service better than my competitors?
36) Should I offer a 'lowest price' guarantee to get my initial customers?
37) What am I selling, where do I sell it and how will I sell it?
38) Should I be a sole proprietor or incorporate my firm?
39) Most businesses fail due to lack of funds and poor management...will I?
40) How do I check out the right franchise system for me?
41) Am I ready to put everything I own on the line and risk it all?
42) Should I just keep my job and forget about buying a franchise?
43) Do I believe in myself enough to make the move to entrepreneurship?
In the case of purchasing a new or existing franchise for sale you are buying the franchisors name, logo, business system and recipe for success. In essence you're buying their 'learning curve' of the franchisor so you find out what to do...and more importantly what not to do. Franchisees are protected by the Federal Trade Commission (FTC) and their own State Franchise Division with numerous franchise rules, regulations and laws that the franchisor must adhere to in order to conduct business. The laws are there to give the consumer protection and keep franchisors on a very legal and auditable track. It's similar to the rules, regulations and laws established by the Security & Exchange Commission (SEC) to protect investors in the stock, bond and mutual fund market. On the first personal meeting to check out buying a franchise the franchisor must review a Federal Disclosure Document (FDD), a copy of the actual franchise agreement and audited financial statements to be in compliance with the FTC. As an example, in the U.S. a franchisee will normally pay an up-front franchise fee that typically ranges from $10K to $50K for basic training and the rights to the franchisors name, tag lines, songs, mascot, system and the Franchise Operations Manual (FOM). Also, each franchisee pays an on-going weekly or monthly percentage of their gross sales, which can range from 3% to 8% in order to receive on-going and continued support. Additionally, franchisees agree to participate in a local, regional and national couponing, discounting, advertising and PR campaigns, which can range from 1% to 5% of their gross revenues.
A successful franchisor has an entire management team and administrative staff dedicated to their franchise system in order to answer franchisees questions and give the franchisee immediate support. And each franchise gets the benefit of a professional advertising campaign, which is financially fed by the entire franchise system in order to build brand name and logo recognition like Subway, Remax, KFC, McDonald's, Century 21, etc. Finally, franchisees are the beneficiary of not only advertising clout, but chain buying power and research and development to keep the system on the leading edge and ahead of their direct competitors. If you've read this and still want to open your own company or buy an independent business then check out the list of things to ponder above...and be honest with yourself and all involved.
"There is a light at the end of the tunnel and
we can help you get through it successfully."
Cicardi A. Bruce & Richard T. Pisani