Everyone is aging it is an unavoidable faith of life in general. But aging is not necessarily a burden. We can make the aging process easier to bare, life more happier and extend life into its limits. The only way to reach this goal is to control the negative side of the aging process.
The International Age Control Foundation (or in short IACF), based in the Netherlands is well-known for its years of effort in this area. In the Netherlands people are not only the tallest on earth, they spend a great deal of time in exercise and have one of the longest lifespan on this planet.
Healthy living, social happiness, balance between work and entertainment, relax and stress just to name a few daily passing choices. Everyone in the entire world is facing them. Also your future customers.
The Age Control Concept created by the IACF is based on balancing body and mind. A part active and passive approach of life.
Asia is developing fast. Pollution, stress, wrong feeding, work, a changing love life and complete change of values is changing society to its core.
These external influences has a direct effect on the aging process and most of the consumers (this include everyone) suffer from these disastrous effects. In stead of aging slower all these factors lead to a faster aging process.
We can control the process but cannot stop it in any way. It is impossible to “stop the clock” and even more to turn it back. There is not such a thing as retrieving stolen time.
How to start your Age Control Shop
An Age Control Shop (in short ACS) must be an oases of peace and tranquility in the pool of today’s stress. All elements in your formula must target the consumer to stay inside your place as long as possible.
In an ACS we target all senses and bring the consumer to a more relaxed state of mind and body. A person in stress is not adaptive and does not open up for external vibes that can change someone’s look on life itself.
Starting an ACS needs a good preparation and stricken follow of guidelines enclosed in this booklet. Also the back up of the knowledge center of the IACF is very important for new developments, implementation of proven treatments, sales of professional products and your back up in difficult times.
Not everyone can start an ACS. You must have the right attitude and personality to start and work with the many customers in the future.
Age Control is a complex product. Be aware that the aging process has many sides and thru such you need many adjustments for each person. An ACS must apply to your target group (=.30 yrs of age), but also give space to youngsters who wish to purchase your services.
How to start the ACS in seven steps (also she PLANNING);
• Select the right place. To select the right place you need details on the surrounding and peoples build up. Your main target group is over 30 yrs. Old, with a carrier, regular stress, medium to high income and willing to invest in health.
• Select the right size of your shop. ACS is built in different levels depending on the available ground space, financial possibilities for investment, amount of cooperation partners and future planning.
• Find the right cooperation partners. To decrease financial risks an ACS shop consist of several segments that work “undependably” See for details “Planning”
• Use the international prepared promotional campaign structure to proof your international recognized identity.
Interior of the ACS
Unlike other shops each ACS shop is designed the same way all over the world. This consistency in design gives the customers the assurance that treatment and quality is everywhere the same. Opening a ACS also means to adapt this international rule.
The ACS shop architecture consists of following points ;
1. Specific color range of interior, it is not allowed to use other colors nor add new structures, colors or designs onto the basic formula
2. Sound, in all ACS special music is brought to hearing for the sake of harmony and stress release of your customers. All music has a proven record to do so, it is not allowed to turn other nor adjust the existing formula. For each day of the week we have different programming
3. Fragrance, for every day of the week an ACS will have a different “smell”. Each smell is chosen in harmony with the sound and colors of the interior
4. Light, an ACS need variable light structure to emphasize with points 1 to 3. A light structure is something completely individual for each ACS. The reason for this individuality is the location of the ACS and shape of the shop itself.
5. Splitting in different compartments, each shop is divided in so called “shop in shops”, a basic shop is divided in
• book and music section
• supplement & health food section
• cosmetic section
• Age Control intake & advise section
• Massage section
• Nail & beauty section
6 The entrance of the shop and shop window must follow also a specific attractive design structure. The design is made and delivered by the headquarters in Netherlands and depends on the amount of used compartments within the shop. Sample ; if a shop does not have massage in the segmentation we cannot display this on the shop window !
“DEPARTMENTS” within the shop formula
Each shop has different so called departments. A department is a segment in the shop with a specific product or service range.
o The book and music department. Books are the source of relaxation for many people, it is also considered a strong base for knowledge and understanding. The topic of the books is carefully chosen but vary by country. Each country has specific important values, religious background, traditions and writers. In some shops it is also important to emphasize the international aspects of the ACS and English works could be added.
o Music is chosen on nearly the same basic values as the books. In the music section all the music heart in the shop is available. A specific title structure is found in the guide book for “retail products”
o Supplements are chosen on basic of health and age related values. A selection of supplements is found in the guide book for “retail products”
o Health food products are an important part of the sales. We do consider many of this products as fast selling items that also must fit the convenience lifestyle of the customers. Products are so called convenience products and can be made to ready with water (hot or cold), short cooking period (cooled or frozen fresh food), healthy drinks (such as teas, herbal drinks etc.)
o Cosmetic products. A combination of international Age related brand products and local brandings must be made. It is important that all products in ACS shops are the same.
o Age Control intake and advise section. In this area at least two persons need to be seated on a table with customers with a separation between them. Total 4 persons. For details of Intake & Advise see booklet
o Massage section. In this area at least 1 or 2 persons need to be seated for foot massage and when applying body massage space must be enough for two massage tables and suppuration “walls” between the tables with space for the masseur to move around the tables. Details can be found in ground plan drawings.
o Nail & beauty section. If only a nail section is used not more than space for two working tables have to be selected. Each table has a working space of 55 x 150 cm. with a seat on each side. See floor plan. When also a beauty service is used a larger space is needed. For beauty treatment nearly the same space is needed as for a full body massage table.
WERKLIJST EURASIA NEDERLAND
– er moet een kompleet design van de look worden gemaakt van de winkel, complete met interieur en kleur stellingen
– er moeten bouw / afmeting tekeningen worden gemaakt waarop duidelijk de maten van de diverse panelen is af te lezen en de zogenaamde verkoop en non-verkoop gronden
– een vraag en intake lijst moet worden opgesteld tevens de antwoorden / doorverwijzingen, dit moet in de vorm van een uitgebreide handleiding worden gemaakt
– er moet een dranken automaat in de zaak komen
– muziek moet worden klaargemaakt
– supplementen en health food lijst maken
– lijst met cosmetica wat wel en niet verkocht mag / moet worden
– essentiële oliën voor geur in winkel uitzoeken en sisteem maken om gehele winkel de hele dag te voorzien van de geuren
– licht plan en armaturen uitzoeken die gebruikt moeten worden ook spelen met kleuren
– massage stoel met virtual reality cap
– actie beleid in verband met klant wervingen
– lokaal en internationaal reclame beleid
– internationale marketing back up
– service plan ten behoeve van klant / leverancier / samenwerking partner
– bedrijfs positionering
– SWAT analyse
– Cleaning service
– Afvoer afvalstoffen
– Personeels beleid
– Garantie regelingen intern / leveranciers
– Waarborg aan klanten voor vaste kwaliteit
– Klanten verwachtings patroon
– Management plan
– Klachten afhandelings procedures
– Interne en externe trainingen & opleidingen
– Eten & drinken systeem
– Mobiel centrum ???
– Hard or soft franchise – is vraag die duidelijk moet worden beantwoord in teksten
– Draaiboek, formule boek, receptenboek en werkboek
– Website en lokale positionering op de site
– Verkoop van verzekeringen b.v. levensverzekering & health insurances
Lights are one of the most important parts of the shops settings. In normal shops only one kind of light is used. White or yellowish light, the standard system. In ACS we use also other colors. Colors are used to focus and relax the mind setting of the customers.
We always use following colors ;
– yellow (also differentiated in hard, medium and soft )
– blue (soft and hard)
– red (soft and hard)
– orange (soft)
– green (soft and hard)
Light must follow a planning. In your interior drawing we will focus on the light system by using light spots. Each light is effective within a certain area. As we use the shop-in-shop system the light effectively is used to borderline each shop and distinguish one from the other.
Light also has an identification function. Each shop will use the same colors for the same product range all over the world. This is easy for the customers so were ever they enter an ACS shop they instinctively find the right shop of interest.
To make a light plan we need to clarify ;
– available electricity sources and main power potential
– electricity wire plan of the building
– local rules & regulations concerning safety and installation (or certification)
– other light sources in neighborhood
– light calculations (each light has different strength)
– available light sources (lamp fittings etc.) at the local market
– opening hours of the shop
1. Definition of franchising
2. Guiding principles
3. Recruitment, advertising and disclosure
4. Selection of individual franchisees
5. The franchise agreement
6. The code of ethics and the master-franchise system
This European Code of Ethics is the up-to-date version of the Code first elaborated in 1972 by the European Franchise Federation (EFF).
Each National Association or Federation member of the EFF has participated in its writing and will ensure its promotions, interpretation and adaptation in its own country.
This Code of Ethics is meant to be a practical ensemble of essential provisions of fair behaviour for Franchise practitioners in Europe.
1. Definition of Franchising
Franchising is a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent untertakings, the Franchisor and its Individual Franchisees, whereby the Franchisor grants its Individual Franchisee the right, and imposes the obligation, to conduct a business in accordance with the Franchisor’s concept.
The right entitles and compels the individual Franchisee, in exchange for a direct or indirect financial consideration, to use the Franchisor’s trade name, and/or trademark and/or service mark, know-how (*), business and technical methods, procedural system, and other industrial and/or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose.
2. Guiding principles
2.1 The Franchisor is the initiator of a franchise network, composed of itself and its Individual Franchisees, of which the Franchisor is the long-term guardian.
2.2 The obligations of the Franchisor:
the Franchisor shall
• have operated a business concept with success, for a reasonable time and in at least one pilot unit before starting its franchise network
• be the owner, or have legal rights to the use, of its network’s trade name, trade mark or other distinguishing identification
• provide the Individual Franchisee with initial training and continuing commercial and/or technical assistance during the entire life of the agreement.
2.3 The obligations of the Individual Franchisee:
the Individual Franchisee shall:
• devote its best endeavours to the growth of the franchise business and to the maintenance of the common identity and reputation of the franchise network
• supply the Franchisor with verifiable operating data to facilitate the determination of performace and the financial statements necessary for effective management guidance, and allow the Franchisor, and/or its agents, to have access to the individual Franchisee’s premises and records at the Franchisor’s request and at reasonable times
• not disclose to third parties the know-how provided by the Franchisor, neither during nor after termination of the agreement.
2.4 The ongoing obligations of both parties:
Parties shall exercise fairness in their dealings with each other. The Franchisor shall give written notice to its Individual Franchisees of any contractual breach and, where appropiate, grant reasonable time to remedy default;
parties should resolve complaints, grievances and disputes with good faith and goodwill through fair and reasonable direct communication and negotiation.
3. Recruitment, advertising and disclosure
3.1 Advertising for the recruitment of Individual Franchisees shall be free of ambiguity and misleading statements.
3.2 Any recruitment, advertising and publicity material, containing direct or indirect references to future possible results, figures or earnings to be expected by Individual Franchisees, shall be objective and shall not be misleading.
3.3 In order to allow prospective Individual Franchisees to enter into any binding document with full knowledge, they shall be given a copy of the present Code of Ethics, as well as full and accurate written disclosure of all information material to the franchise relationship, within a reasonable time prior to the execution of these binding documents.
3.4 If a Franchisor imposes a Pre-contract on a candidate Individual Franchisee, the following principles should be respected:
prior to the signing of any pre-contract, the candidate Individual Franchisee should be given written information on its purpose and on any consideration he may be required to pay to the Franchisor to cover the latter’s actual expenses, incurred during and with respect to the pre-contract phase; if the Franchise agreement is executed, the said consideration should be reimbursed by the Franchisor or set off against a possible entry fee to be paid by the Individual Franchisee;
the Pre-contract shall define its term and include a termination clause;
the Franchisor can impose non-competition and/or secrecy clauses to protect its know-how and identity.
4. Selection of individual Franchisees
A Franchisor should select and accept as Individual Franchisees only those who, upon reasonable investigation, appear to possess the basic skills, education, personal qualities and financial resources sufficient to carry on the franchised business.
5. The Franchise agreement
5.1 The Franchise agreement shall comply with the National law, European community law and this Code of Ethics and any national Extensions thereto.
5.2 The agreement shall reflect the interests of the members of the franchised network in protecting the Franchisor’s industrial and intellectual property rights and in maintaining the common identity and reputation of the franchised network. All agreements and all contractual arrangements in connection with the franchise relationship shall be written in or translated by a sworn translator into the official language of the country the Individual Franchisee is established in, and signed agreements shall be given immediately to the Individual Franchisee.
5.3 The Franchise agreement shall set forth without ambiguity, the respective obligations and responsibilities of the parties and all other material terms of the relationship.
5.4 The essential minimum terms of the agreement shall be the following:
the rights granted to the Franchisor
the rights granted to the Individual Franchisee
the goods and/or services to be provided to the Individual Franchisee
the obligations of the Franchisor
the obligations of the Individual Franchisee
the terms of payment by the Individual Franchisee
the duration of the agreement which should be long enough to allow Individual Franchisees to amortise their initial investments specific to the franchise
the basis for any renewal of the agreement
the terms upon which the Individual Franchisee may sell or transfer the franchised business and the Franchisor’s possible preemption rights in this respect
provisions relevant to the use by the Individual Franchisee of the Franchisor’s distinctive signs, trade name, trade mark, service mark, store sign, logo or other distinguishing identification
the Franchisor’s right to adapt the franchise system to new or changed methods
provisions for termination of the agreement
provisions for surrendering promptly upon termination of the franchise agreement any tangible and intangible property belonging to the Franchisor or other owner thereof.
6. The code of ethics and the master-franchise system
This Code of Ethics shall apply to the relationship between the Franchisor and its Individual Franchisees and equally between the Master Franchisee and its Individual Franchisees. It shall not apply to the relationship between the Franchisor and its Master Franchisees.
(*) “Know-how” means a body of non patented practical information, resulting from experience and testing by the Franchisor, which is secret, substantial and identified;
“secret” means that the know-how, as a body or in the precise configuration and assembly of its components, is not generally known or easily accessible; it is not limited in the narrow sense that each individual component of the know-how should be totally unknown or unobtainable outside the Franchisor’s business;
“substantial” means that the know-how includes information which is of importance for the sale of goods or the provision of services to end users, and in particular for the presentation of goods for sale, the processing of goods in connection with the provision of services, methods of dealing with customers, and administration and financial management; the know-how must be useful for the Franchisee by being capable, at the date of conclusion of the agreement, of improving the competitive position of the Franchisee, in particular by improving the Franchisee’s performance or helping it to enter a new market.
“identified” means that the know-how must be described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantiality; the description of the know-how can either be set out in the franchise agreement or in a separate document or recorded in any other appropriate form.
Advantage #1 – The Experience of the Franchisor
When an individual buys a franchise, he purchases the years of experience and the proven methods of the franchise system, also known as the franchisor. One franchisee expressed it this way: “What I have learned from the franchisor was worth ten times what I paid for the franchise.” In any new business, much time and money are preset in trial and error. A Proven franchise may eliminate many of the start-up problems. This reason permits one to open a franchise business with little or no previous experience in a given industry.
Advantage #2 – Training
A franchise system will provide training for the new franchisee. This is a usually done at the home office and the franchisee’s place of business. This training should prepare the new owner in all facets of the business.
Advantage #3 – Buying and Advertising
Most small-business people cannot afford to inventory products in bulk or do extensive advertising. The franchisee buys this advantage when he or she purchases the right to use the franchise system’s purchasing power and advertising. Most systems provide advertising help and direction. Furthermore, as the number of franchisees increases, so does public awareness of the franchise. This can be a tremendous advertising advantage. Also, franchisees that are located near one another can advertise together, thus reducing costs.
Advantage #4 – Ongoing Advice, Research and Development
Franchisees need assistance throughout the term of their business endeavors. The franchise system’s staff of experts can give this needed help in all aspects of the business. The franchisor is also in a position to provide on-going research and development. Thus, new products and services will be brought to the attention of the franchisee.
Advantage #5 – Business Synergy
The word “synergy” refers to the idea that the sum of the whole is greater than the separate parts. This principle can be applied to franchising. Those who buy a franchise become part of a “family” where all members work together for the good of the whole. Indeed, there can be support and assistance in a franchise organization that assists everyone in becoming successful. Often, some of the most effective ideas come from franchisees who in turn share their ideas with the corporate office and with other franchisees.
Challenge #1 – Working Within the System
People who have difficulty following directions or who dislike working within a system may find franchising extremely frustrating. Conformity to the franchise system is critical if consistency among franchises is to be maintained. However, there are areas such as marketing where a franchisee can be creative.
Challenge #2 – The Risk
While it is true that purchasing a franchise has less risk than starting an independent business, there still are risks. Because you own the business, you, to a great extent, determine the success of your venture. The franchisor may have a great program and a respected name, but in the final analysis much of the risk is in your hands.
Challenge #3 – Working With the Franchise System
Buying a franchise can be closely compared to entering into a marriage. Both are legally binding relationships that can last for a long time. Your relationship with the franchise system and its staff will be extremely important. Get to know the franchise system through the following methods: a. Visit the corporate headquarters. Seek to get a feel for the staff and how smoothly the operation runs. B. Talk to other franchisees. Ask what their relationship with the franchisor is like. C. Read as much about the franchise as possible.
Challenge #4 – False Expectations
Some people enter franchising expecting instant success. Perhaps the reason some expect this is the tremendous success achieved by some franchisees. However, this success did not come without hard work and great effort. Franchising, like any other business, requires tremendous time, initiative and industry. Obtain from the franchisor as realistic a picture as possible as to what is required in operating that particular franchise.
Challenge #5 – Managing the Business
Some individuals are more prepared to manage a business than others. They have some business experience and have learned to get along well with people. Other individuals may find that managing a franchise is a tremendous burden. You must honestly assess your preparation to run a business. If you find that you have little or no experience, you may want to seek special assistance from the franchisor in business management
Why buy a franchise?
Franchising is an excellent way to be in business for yourself, but not by yourself, because the franchisor is always there to help. The franchise system, also known as the franchisor, provides a method of doing business that has been tested over time in the marketplace. The system provides its expertise, experience and continuous advertising and market support.
What is a disclosure document?
Every franchise system is required by the Federal Trade Commission to prepare an extensive disclosure document for each potential franchise purchaser. Perhaps no other business is required by law to provide as much information to prospective buyers as franchises. Over twenty different items of information about the franchise are included in the disclosure document. These items include information about the history of the company, required fees and investment costs, information about the franchisor, and any litigation in which he or she has been involved.
‘When you are given the disclosure, you will be asked to sign and date a statement that you received it. No monies can be taken by the franchise system for 10 working days from the time that you signed the disclosure. The 10 days affords you the time to study, evaluate and prepare your financing. (This time period may vary from state to state.) The disclosure document should be studied carefully.
What are the government regulations?
Federal regulations require every franchisor to prepare an extensive disclosure document and give a copy to any prospective franchise purchaser before he or she buys a franchise. Within the disclosure document are 20 different categories of information about the franchise, including many just mentioned. Required fees, basic investment, bankruptcy and litigation history of the company, how long the franchise agreement will be in effect, a financial statement of the franchisor, earnings claims (if the company makes them)…all are presented in this disclosure document. But here again, the International Franchise Association (IFA) recommends that you have both an attorney and an accountant review the material.
Even though inaccuracy and misrepresentation carry civil and sometimes severe criminal penalties, there is no way to be absolutely sure. With the FTC disclosure document, however, fraud and deception are less likely, because at the very least, the franchisor has prepared and attested to his statement and has answered a variety of very important questions you can use to judge the offer.
The history and reputation of the company and its officers are also extremely important in this regard. IFA recommends that you carefully consider the information provided and evaluate the material with the assistance of your lawyer and accountant. Also make sure you talk to others who already have franchises from the company you’re considering, and ask them to verify any information you question. Learn if they are “satisfied customers” of the franchisor.
Fifteen states (California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin) have enacted laws regulating the offer and sale of franchises. With the exception of Oregon, all of these states require the franchise system to register with the appropriate state administrator prior to the offer and sale of franchises. Through so-called “business opportunity laws,” certain other states offer protection to “business opportunity” purchasers, these statutes may regulate the offerings of newer franchise companies whose trademarks aren’t yet federally registered.
Each of these laws is designed to present essential information to a potential franchisee or business opportunity purchaser. It’s up to a potential buyer to take advantage of this information and thoroughly investigate the offer. Companies lacking a federally registered trademark are clearly subject to Connecticut, Maine and North Carolina business opportunity laws.
What financial help is available?
One of the major challenges any potential franchisee will face is financing. Start-up costs for franchises range from a low of $5,000 to a high of more than $1 million depending on the type. In some cases the franchise system will assist with financing, but generally that is left to the buyer. Five steps will assist you in qualifying financially.
Step 1 – Determine your net worth.
Net worth is figured by determining your assets and liabilities. Most banks or lending institutions have a printed form to assist individuals in preparing this analysis.
Step 2 – Determine your credit potential.
Some loan officers recommend that potential buyers of a business carefully consider the four C’s of credit:
• Credit Rating. This is a record of your credit history over the past few years. Poor credit history is the number one reason for many loans not being approved. Obtain a copy of your credit rating by asking your banker whom to contact.
• Capacity. Lending institutions will want to know if your business has the earning capacity to pay back the loan.
• Capability. Are you capable of managing the business you are under taking? What skills do you have that will aid in its success?
• Character. Have you demonstrated integrity in you r business dealings?
Step 3 – Develop a business plan.
Before going to a lending institution, prepare the following in written form:
• A resume of your past business experience. (Include past positions held and any management experience.)
• An estimate as to what you expect your income and expenditures to be for the first year of your business.
• A marketing plan that outlines how you will generate business. (See Sample Business Plan outline in Step 5.)
Step 4 – Consider carefully the major sources of financing available to you.
• Friends and relatives.
• Second mortgage on home, savings and loan institutions.
• Borrowing against insurance, stocks and securities, or a loan from the Small Business Administration.
Step 5 – Select the most probable source of financing available to you.
• Take your business plan with you.
• Be prepared to discuss the four C’s of credit.
• Have available your statement of net worth.
A Sample Business Plan Outline
A. A description of the business.
• Brief description of the franchise
• Nature of the business.
B. An analysis of the competition.
• What other businesses will be your competition.
C. Reasons why this business will succeed.
• Population factors.
• Other similar businesses that offer a comparison.
D. Methods for generation business.
• How you will sell your product or service.
• Special advertising or marketing methods.
E. An estimate of income and expenses for a 6-12 month period.
F. A resume of your past business experience.
How do fees and royalty payments work?
Most franchises – especially entire business system franchises – require monetary contributions by franchisees consisting of some or all of the following; an initial franchise or license fee; training costs (tuition and/or room, board and transportation) and on site start-up aid and promotion charges (some or all of which may be included in the initial franchise or license fee or may in whole or in part be separately stated); periodic royalties or service fees and an advertising contribution (usually payable monthly or weekly and based on a specified percentage of sales).
Sometimes there is a charge for centralized bookkeeping, accounting and data processing services. There may also be initial payments for premises, equipment, supplies and opening inventory, if acquired from franchisor. (If acquired from other approved sources, the payment for them is nonetheless part of your initial opening cost.) Get specific details on all cost items: amount, time of payment, financing arrangements.
Terms like “initial cost,” “initial fee,” “total cost” and royalties should be specifically defined and made quite clear to you. The terms “cash required,” “initial cash required,” “investment,” “down payment” and “equity investment” mean different things in different offerings.
“Initial fees” probably do not include any equipment or product inventory down payment.
Make certain your investigation is complete and your understanding clear in the following areas:
a) Initial license fee.
• Is there one? How much is the total fee? Is it payable in a lump sum or in installments? If in installments, with or without interest? Is it refundable? Is it non-recurring?
• If the initial license fees are not the same for each franchise concurrently granted, on what factors are the differences based?
• Does an initial license fee include compensation in full for any or all of the following? Does it include use of the then current operation manual, training and start-up aid, including personal on site and promotional assistance, at franchisor’s cost? It does not in many cases. The understanding should be clear, the contract explicit.
b) Continuing regular fees.
• Are there periodic royalties? How much are they? How determined? In business format franchising, generally, there is a periodic royalty (usually payable monthly or weekly) commonly based on a percentage of sales.
• How and when are sales and royalties reported and royalties paid?
• Royalties are not only payment for use of a trademark and trade name (and, where available and applicable, other commercial symbols, patents or formulas) but may also constitute a fee for services to be performed by franchisors. If the periodic payment is in part a service fee, what on-going services are you to receive from the franchisor? Are accounting services included or available? Are they computerized? Will updated merchandising services, operating manuals and training be furnished without additional, or at nominal, cost? services are you to receive from the franchisor? Are accounting services included or available? Are they computerized? Will updated merchandising services, operating manuals and training be furnished without additional, or at nominal, cost?
c) Other fees.
What other fees and charges, if any, are payable (for example, advertising and promotion)?
d) Total cost.
Do not confuse “initial fees,” “initial cash required,” “initial investment” or “initial costs” with total cost. Initial cost or initial investment may require computation and inclusion of some or all of the following, in addition to initial franchise or license fees and royalties, concerning which inquiry should be made:
• Are you required to purchase or rent business premises? Who is its cost to you as purchaser or lessor? How is it to be financed, if purchased?
• Does “initial” cost or investment include an “opening” inventory of products and supplies; a down payment on equipment and fixtures; a lease security payment; or all or part of the franchise fee? What amount is attributable to each such item?
• Don’t confuse down payment or initial cost with ultimate cost. What are deferred balances? Who finances any deferred balances? At what interest? If the franchisor doesn’t, is help in finding a source of financing offered? Have you received commitment for financing offered? Have you received commitment for financing sources or is use of the franchisor or its designated source mandatory? (It should not be.)
• What, if any, are construction, remodeling and decorating costs, security deposits, if any, and initial equipment and inventory requirements costs?
• In determining total costs, check every aspect of the deal. Do not overlook the cost of finding, buying or leasing, and improving and equipping a business location, and obtaining zoning licenses for the operation at that location and the financing costs involved. In determining total opening costs do not overlook working capital and rent (where applicable), inventory, payroll, insurance and your own promotions and salary during the first year. Know what your monthly debt service will be under your deferred payments fiancing.
What is the FTC Franchise Rule?
It’s a regulation issued by the Federal Trade Commission (FTC) which requires every franchise system to prepare an extensive disclosure document and give a copy to any prospective franchise purchaser before he or she buys a franchise. Within the disclosure document are 20 different categories of information about the franchise. Required fees, basic investment, bankruptcy and litigation history of the company, how long the franchise will be in effect, a financial statement of the franchisor, earnings claims (if the company makes them)… all are presented in this disclosure document. But here again, IFA recommends that you have both an attorney and an accountant review the material.
Survey Provides Portrait Of ‘Average’ Franchisee
Recently the International Franchise Association Educational Foundation released the “National Franchise Owner Study,” a report prepared by The Gallup Organization of Lincoln, NB. The report was based on market research conducted by Gallup in September and October, 1997, for the purpose of determining “franchise owners’ attitudes and opinions toward the franchise experience.”
The Gallup study turned up many interesting findings about the nation’s franchisees, but perhaps the most interesting one is that nine of 10 franchise owners said they considered their franchise to be either somewhat or very successful.
“Of those franchise owners who have been in the business 11 years or more, nearly six of 10 indicated their franchise was very successful, while an additional four of 10 said it was somewhat successful,” the report states. “The perceived success ratings increase as the number of years in business increases.”
Overall satisfaction among franchise owners was high in the Gallup survey.
The report also found that overall satisfaction in owning a franchise business was high among the more than 1,000 franchise owners polled. “Nine of 10 respondents’ expectations were either exceeded (18%), mostly met (48%) or somewhat met (24%),” Gallup reports. “This level of satisfaction reflects the business relationship over a substantial period of time. Nearly half (46%) indicated they had been franchise owners for six years or more. On average, respondents said they had been in business as franchise owners for slightly more than seven years (7.55).”
The franchisees surveyed in this Gallup poll reported substantial levels of gross income, defined as the amount of money remaining after expenses are paid but before paying taxes. The average gross income reported was $91,630, and 25% of franchise owners reported grossing $100,000 or more in the past year. In general, the longer franchisees in the survey had been in business, the higher their level of gross income was. Respondents who owned multiple franchises tended to report higher gross incomes than single-unit franchisees, as might be expected.
“The respondents’ high ratings of both satisfaction and success of their operation did not come without hard work,” the report states. “Seventy percent of the respondents reported their expectations were met or exceeded in regard to the number of working hours required. However, in comparison to other businesses owned or operated, or other jobs held, nearly six of 10 said they had worked more hours as the owner of this franchise.”
More than 80% of the franchisees surveyed reported they were actively involved with their franchise operation on a day-to-day basis, while only 4% said they were either rarely or not at all involved on a daily basis.
ALL HARD WORK
While the franchisees in the survey work hard, they also believe that their franchisors are working hard, too. Almost 75% of those polled said that the level of assistance provided by their franchisor either met or exceeded their expectations.
“Due to the high satisfaction ratings, it is not surprising that nearly two-thirds of the franchise owners said they would purchase or invest in this same franchise business again if given the opportunity,” Gallup reports. “Those respondents likely to repeat their franchise investment included a majority of respondents with annual gross incomes of $50,000, respondents who owned multiple franchises and respondents who had been in the business five years or less.”
Disadvantages include payment of royalties and lack of support and freedom.
Even among those franchisees who said they would not purchase the same franchise again, there appeared to be solid enthusiasm for the franchise method of doing business. Among that group, 43% said they would consider purchasing a different franchise business. Two-thirds of that group also said they would have been less successful if they had tried to open the same type of business on their own and not as part of the franchise system.
The same group of franchisees—those who would not purchase the same franchise again—in six of 10 cases said that relative to other businesses they had owned or operated, or jobs they had held, they were more satisfied with their experience as franchise owners.
“The reason for this high level of satisfaction is due to the many advantages of being associated with a franchise system,” the report says.
“The most mentioned advantage to being associated with a franchise system is ‘name recognition,’ followed closely by ‘support’ and, at lower levels, by ‘knowledge/expertise’ and ‘advertising’.”
The Gallup survey did turn up some disadvantages in being associated with a franchise system identified by the franchise owners it polled. The three that were mentioned most frequently were “payment of royalties,” “lack of support” and “lack of freedom.”
“Despite these disadvantages, half of the respondents said they would be very likely to recommend to someone who wanted to open a business to consider purchasing a franchise rather than opening an independent business of their own,” the report states. “An additional four of 10 reported they would be somewhat likely to recommend purchasing a franchise.”
Success in owning a franchise comes with a price tag: hard work.
The franchisees surveyed for this report represented a good cross-section of the franchise community, with 53% having been in business five years or less, 46% six years or more. Among franchisees with gross annual incomes of $150,000 or more, only about one third had been in business for five years or less, while 63% had been operating their franchise for six years or more.
SUCCESS AND LONGEVITY
Perceived level of success was highest among those franchisees who had been in business the longest. For example, while only 36% of respondents who had owned their franchise for five years or less considered themselves to be “very successful,” 44% of those in business six to 10 years and 57% of those operating 11 or more years rated themselves very successful.” Fully 96% of those owning their franchise 11 or more years said they were very or somewhat successful, as did 94% of those in business six to 10 years and 88% of those in business five years or less.
A similar pattern is evident in the relationship between perceived success and gross income. While just 19% of those making less than $50,000 a year considered themselves “very successful,” 72% of those making $150,000 or more felt that way. In the group making between $50,000 and $150,000 a year, 97% said they were very or somewhat successful, almost the same as the 98% among the $150,000-plus group and considerably higher than the 83% among the under-$50,000 segment.
Franchisees with the highest incomes reported highest satisfaction levels.
In terms of the amount of money they made with their franchises, more franchisees (20%) reported that their expectations were not met than those who reported their expectations were exceeded (15%). The largest group, 36%, said the amount of money they made met most of their expectations, and the second-largest group, 27%, said some of their expectations were met in that regard.
About half of the franchisees surveyed said the number of hours they had to work met most of their expectations, and 17% said it met some of their expectations.
When it comes to personal satisfaction in the operation of their franchise, 23% said that measure exceeded their expectations, 48% said it met most of their expectations, 19% said it met some of their expectations, and just 8% said it did not meet their expectations. Generally speaking, franchisors fared well when franchisees were asked to rate the level of assistance they were being provided. “Met most of expectations” was the response given by most franchisees regarding the level of assistance received from the franchisor, with 37% responding in that manner. Another 26% felt some of their expectations were met. Among single-unit owners, 38% felt most of their expectations were met, 26% felt some were met. Among multi-unit owners the numbers were 34% and 27%, respectively.
Reprinted with permission from International Franchise Association
WHAT IS FRANCHISING?
Franchising is both an old and a new concept. The term from the French originally meant to be free from servitude. Its meaning in the context of present-day promotions is the opportunity for an individual to own his or her own business, even if he or she is inexperienced and/or lacks adequate capital. During recent years, franchising, as a type of business operations, has been expanding rapidly and entering into new areas of application. The most recent industry study estimates that franchised businesses accounted for $803 billion in annual sales in 1992. Retail (business format) franchising is estimated to account for 35% of total U.S. retail sales. More than 8 million people are employed by franchise establishments.
WHAT IS FRANCHISING?
Franchising is a form of licensing by which the owner (the franchisor) of a product, service or method obtains distribution through affiliated dealers (the franchisees). The holder of the right is often given exclusive access to a defined geographical area.
The product, method or service being marketed is identified by a brand name, and the franchisor maintains control over the marketing methods employed, or assists the franchisee in the operation of the business.
In many cases, the operation resembles that of a large chain with trademarks, uniform symbols, equipment, storefronts and standardized services or products. The franchisor maintains uniform practices as outlined in the franchise agreement.
The International Franchise Association, the major trade association in the field, defines franchising as “a continuing relationship in which the franchisor provides a licensed priviledge to do business, plus assistance in organizing, training, merchandising and management, in return for a consideration from the franchisee.”
In a way, the franchisee is not his own boss. . .
Franchising has been described as “a convenient and economic means for the filling of a drive or desire (for independence) with a minimum of risk and investment and maximum opportunities for success through the utilization of a proven product or service and marketing method.” The owner of a franchised business, however, must give up some options and freedom of action in business decisions that would otherwise be open to the owner of a non-franchised business.
In a way, the franchisee is not his own boss, because in order to maintain the distinctiveness and uniformity of the service and to insure that the operations of each outlet will reflect favorably on the organization as a whole and protect and build its goodwill, the franchisor usually exercises some degree of continuing control over the operations of its franchisees and requires them to meet stipulated standards of quality. The extent of such control varies. In some cases, franchisees are required to conduct every step of their operation in strict conformity with a manual furnished by the franchisor. In other cases, the franchisor may allow considerable latitude on the part of the franchisee.
In return for following the franchisor’s guidelines, the individual franchisee can share in the goodwill built up by all of the other franchised outlets bearing the same name.
A company that depends upon the successful operation of franchised outlets needs individual franchisees who are willing to learn the business and who have the energy for a considerable amount of effort. The franchisor can supply the other essentials for the successful operation of the outlet. Among the services the franchisors may provide to the franchise operators are: (1) location analysis and counsel; (2) store development aid, including lease negotiation; (3) store design and equipment purchasing; (4) initial employee and management training and continuing management counseling; (5) advertising and merchandising counsel and assistance; (6) standardized procedures and operations; (7) centralized purchasing with consequent savings; and (8) financial assistance in the establishment of the business.
Reprinted from an article by the U. S. Department of Commerce, Minority Business Development Agency, October 1994.
This is the second most-asked question.
There is no simple answer to this question. Many pundits will suggest that a franchisor have several years of experience with the prototype operation before commencing the sale of franchises. One rule of thumb that we have seen offered is that the franchisor be in business no less than two years with two outlets run by managers.
In our fast-paced economy however, it is not always feasible to wait this long.
Frankly, we think the more important question to ask is whether you, as a potential franchisor, have done the necessary upfront preparation for a franchisee. Proper pre-franchise planning includes the following:
• Do you have the $10,000 to $30,000 to cover the expenses of franchising your business?
• Have you identified the attributes of your business that account for its success?
• Have you developed an operations manual for use by your franchisees?
The difficult issues that must be addressed in developing a manual will assist in fashioning responses to hard questions before they arise in real life.
• Do you have a well-developed system for training new franchisees, as well as an adequate location?
• Have you developed a detailed understanding of the precise location requirements for the franchised outlets? (This is a very important issue.)
• Have you developed a detailed business plan, including the method in which you intend to expand (single-unit franchises, area franchises or master franchises)?
• Have you developed a strategy for recruiting franchisees and head office staff?
• Have you spent the time to develop a complete financial plan for your franchise, including potential problem areas?
• Have you arranged the necessary financing?
• Do you have a definite idea as to the type of individual you want as a franchisee? If you do not have the expertise to select such individuals, have you identified a competent recruiter/screener to perform that important function?
• Do you have a thorough understanding of the business you are in? This involves having a clear understanding of your “concept”, and taking all necessary steps to strengthen and protect it
Choosing the Right Partner For a Successful Business Relationship
by Marvin Snider
All relationships are partnerships. Many entrepreneurs just starting out in the business world choose to launch their venture with the help and support of a partner, and when they do so, they are entering into a relationship-one that has the potential to play a very important role in their future success.
While starting a business in partnership with another person may be somewhat less common in franchising than in the independent sector, it is a trend that is on the upswing in both arenas. Financial considerations generally play an important part in the decision to go the partnership route, but having the support and sense of shared commitment that comes with a partnership is also attractive to many people.
There are 10 dimensions that define partnership. Knowledge about which characteristics apply in a given partnership can make the difference between a successful business partnership and a difficult one.
The importance of making a rational assessment can be difficult to grasp for prospective partners in some cases. Often, they are irresistibly drawn to one another in the glow of a shared vision and the promise of financial prosperity.
That’s not unlike the situation where a couple fall in love and marry on the strength of passion. But potential partners who are able to look beyond their initial enthusiasm and attend to serious consideration of their compatibility will be rewarded by a heightened probability of a successful franchise partnership.
Characteristics that warrant careful attention include:
Accountability. A successful partnership depends on each partner’s ability to follow through on commitments in a timely way. Partners need to be responsible for the consequences of their behavior-to be pleased with success and to own and correct mistakes. People who exhibit the following characteristics are a poor partner risk:
• Those who apply a double standard to their behavior and that of others.
• Those who are quick to blame others.
• Those who are insensitive to the needs of others.
Compatibility in values and beliefs. Values are a guide to behavior, a road map to a desired goal. Beliefs are a statement of one’s perception of reality, a declaration of current conditions.
Partnerships have a better chance of success when the partners share common values and beliefs. That sets the basis for a capability to resolve major differences that could negatively impact their ability to work together.
Dealing with difference. A potential partner should be able to respect difference without passing judgment. He or she needs to have a commitment to searching for consensus on issues where differences exist.
GIVE AND TAKE
A desirable partner is one who views compromise as an investment in a relationship and not as a deprivation. A person who has to be right or needs to be in control generally will not make a good partner.
Judicious risk-taking. The venture into any new business presents risk, and risks naturally involve making mistakes. People who view making mistakes as failure will never be successful entrepreneurs.
Success comes precisely from taking calculated risks and learning from one’s mistakes. The hackneyed maxim “no risk, no gain” is a reality reminder of a basic truism. Of course, adequate homework must be done before taking risks so that the uncertainty, number, and severity of consequences in taking risks will be minimized.
Also of concern is whether the consequences of failure are manageable. Included in the assessment of risk is whether the desired goal is warranted in terms of time, money and/or energy.
Managing emotions. Learning to manage one’s emotions is as important as developing one’s intellect. Productive partners pay as much attention to the development of constructive management of their emotions as they do to development of their intellects.
Their capability is enhanced when they learn to balance intellect and emotions so that they work in concert with one another. They also recognize that when emotions run too high, it will short-circuit their ability to use their intellect.
Financial considerations are only one factor to be considered in choosing a partner.
An example is a person who allows his or her emotions to dominate decision making so that he or she is unable to adequately assess the consequence of doing so. It is best to avoid a people who have a short fuse when it comes to managing their emotions.
Personal characteristics. Potential partners should get to know each other well enough to determine whether the positives in their relationship offset any negative characteristics. Partners who like each other and get along well will have an easier time managing their partnership.
It is important to gain knowledge about a person’s work ethic, any behaviors that would enhance the relationship and those that might have negative impact, such as alcohol or use of drugs. Examination of lifestyle becomes important when it impinges on the partnership.
Also of interest is knowledge of outside interests that are likely to be an asset or interfere with the needs of the partnership. For example, a person may become highly involved in community activities, believing those activities will enhance the image of the business relationship. The partners need to evaluate whether the benefits of such activities are sufficient to offset the absence of the partner from the business.
Stable and supportive personal life. The demands of conducting business require the concentrated attention of a partner. A potential partner who is having significant personal difficulties is vulnerable to distraction and ultimately to poor judgment.
Consideration should be given to conditions that could potentially enhance or interfere with a partner’s ability to attend to relevant partnership responsibilities. Items to consider include:
• The presence of a supportive spouse or a stressed marriage.
• The presence of a chronic debilitating illness among a parent, spouse or child.
• Parenting demands.
Communication skills represent one of the most critical variables for success in a partnership. They are the cement that binds the various parts of a business effort into a productive whole. Desired characteristics include:
• Good listening skills.
• Good use of language.
• Awareness of how one’s behavior impacts others.
• Utilization of “I” instead of “you are” statements.
• Ability to give positive acknowledgment appropriately.
• Predictability and stability in ethical behavior.
• Patience, commitment and respect for the feelings and views of others.
Work history. Prior work history is a strong predictor of future behavior. It is important to be mindful that the presence of any of the characteristics below can be an asset or create problems in a partnership.
The following characteristics may not be immediately evident in the early stages of considering a partnership, but their relevance usually can be determined through a careful evaluation of a prospective partner’s past work history:
A potential partner should be able to respect difference without passing judgement.
• Quality of work relationships.
• Track record of successful accomplishments.
• History of successful decision-making.
• Success in coping with conflict.
• Ability to manage political skills.
• Ability to define and pursue priorities to completion.
• Ability to learn from mistakes.
• Ability to follow through on commitments.
Selection of a business partner deserves the same attention given to selecting a marriage partner. Both involve long-term commitments. The success or failure of the partnership is likely to have a major impact on the lives of all who are affected by it.
The Right Strategy To Boost Profits For Both Franchisees and Franchisors
by Deborah A. House
Struggling to maintain current revenue, cash flow and profit levels while balancing the interests of franchisees and franchisors can be challenging. The task is further complicated by the seemingly opposing interests of franchisors and franchisees.
For any franchise system to be successful, everyone must get a fair share and work to enlarge the profit pie. That means no partner in a franchise relationship maximizes profits at the expense of the other-not an easy detente to reach.
Intangible assets and emotions make the profit-splitting equation extremely difficult to formulate. To maximize revenues and profits, both franchisor and franchisee must clearly understand and respect each other’s goals.
Initial discussions about the Uniform Franchise Offering Circular and the Franchise Agreement give both parties important insight into each other’s goals. Items likely to be of greatest importance to the franchisor during negotiations include:
Revenue growth. Franchisors are rewarded for profitably running a franchise system, not a single location. That revenue focus results in decisions aimed at driving total revenue growth, such as increasing the number of outlets.
Focusing on revenue growth rather than the combination of revenue and profits leads to strategic decisions different than a franchisee might make. For example, adding new units increases overall volume but could actually decrease the average revenue and margin per location.
Scalability of business model. Franchising is a popular growth strategy because it uses other people’s capital, hard work and business skills to give a new brand a national presence quickly. Franchising brings semi-passive revenue, diversification and shared risk to a business expansion strategy.
Building brand equity. Increasing brand equity by obtaining a national presence through franchising is a common strategy. An outstanding brand is an intangible asset, but it still drives revenue. The franchisee is likely to have different priorities in the negotiation process, such as:
Profit focus. All franchisees want to grow the revenue line, but they can only take home and spend the bottom line. Franchisees must keep a constant vigil on the combination of revenue and profit growth. Since it’s easier to throw money at a problem than to solve the underlying issue, an exponentially growing top line can actually decrease overall profits as productivity slips.
Controlled revenue growth nearly always results in maximizing profits, since it allows franchisees to insure that the profit margin on incremental revenue is at least equal to or higher than the base revenue. This situation illustrates economies of scale in action and a business model based on variable rather than fixed costs.
PAIN = GAIN
Sweat equity. Most American business owners believe that hard work is rewarded by financial gain. In a franchising system, the franchisee works day (and night) and has control over day-to-day operations. However, the franchisor gets a “big” piece of the revenue cash before expenses and without the daily grind.
When a franchisee is sending off 15 or 20 percent of revenues each month to an “invisible” partner, it can be difficult to remember why joining a franchise system seemed like such a great idea.
Control and independence. High-potential entrepreneurs join a franchise system to have control over their financial future-especially given recent experience in corporate America. However, their future is inextricably tied to decisions made by the franchisor with little or no input from any individual franchisee.
Common examples include a poorly designed or even offensive advertising campaign and allowing other franchisees to operate with sub-par quality. Poor quality and customer service at other locations-even across the country-reflect on every location.
With so many opposing goals, the burning question is, how do franchisors and franchisees work together to maximize profits?
To be successful, both parties must recognize and accept that they are in this together. Franchisees will never do business the exact same way the franchisor would, and franchisor support will always seem inadequate to some extent.
No partner in a franchise relationship should maximize profits at the other’s expense.
In order to develop a profitable growth strategy, choosing between maximum revenue growth and increased profitability is required, because out-of-control growth disregards profits to attract volume.
Drs. Kaplan and Norton of Harvard Business School have found that only 15 percent of management teams spend more than one hour per month discussing strategy.
Here are four components of an effective growth strategy that increases both the franchisor and franchisee’s revenue and profits:
Overlapping focus. For a franchising system to even exist there must be a subset of common interests and goals-that’s where the money is!
If a franchise system isn’t designed to create overlapping revenue and profit goals, it’s doomed to fail because no one benefits from joining.
Of course, any group of high-performing individuals will have numerous ideas on how to reach common objectives. Both groups must recognize that their relationship is not adversarial but a partnership.
Nevertheless, exploring various strategies to increase system profits will usually lead to conflict of some sort. The key is to focus on the desired results, not the strategy or tactic. This mindset promotes flexibility and the development of contingency plans, turning conflict into creativity. With this organizational backdrop, everyone’s bottom line will grow.
KEY TO ACTION
Actions driving the bottom line. Determining what problem a customer is solving by doing business with your franchise is the key to identifying actions affecting the bottom line.
For example, tax preparation franchises recognized that people who need their tax refunds very quickly are willing to pay outrageous fees and interest charges. Overall franchise system revenues increased as a result of offering a refund loan program.
Even organizations that monitor and track results don’t always know what specific actions cause them; front-line employees and supervisors are especially lacking in this knowledge. Without it, the ability to repeat those critical actions is missing.
Make the profit pie bigger. The methodology used to split the profit pie between the franchisor and the franchisee is always contentious. Regardless of the formula, increasing one partner’s piece always decreases the other’s share.
Innovation. Making the profit pie bigger is the answer, and it is most often driven by innovation. For example, sustainable increases in both revenue and profits for McDonald’s franchisees and the company have always followed the launch of a new day-part, delivery system or product.
Everyone in the system experienced increased revenue with the addition of drive-through windows, dining room seating, a breakfast menu, Happy Meals and the new premium salads. Even as initial volume boosts start to wane, baseline revenue has shifted permanently upwards. The profit pie became bigger, and now there are more profits to be divided, regardless of the pay-out formula.
The key to equitably addressing profit concerns is to grow the overall profit pie.
Of course, it’s impossible to state with certainty which innovation will create this “pie-growing” effect. Since most great new ideas originate from franchisees interacting with customers, the partnership between franchisors and franchisees is critical.
Getting franchisors and franchisees to see how their individual revenue and profit goals overlap can be likened to “herding cats.” Extremely successful franchise systems have discovered that everyone must be accountable for increasing the profit pie, or everyone loses. If a franchise can adopt this one principle, its profit pie will grow continuously and exponentially
Franchises for 21st Century Lifestyles: Focus on Education, Health and Aging
by Michael J. McDermott
This installment of The Franchise Handbook’s ongoing look at franchise opportunities suited to 21st century lifestyles runs the gamut, covering the full circle of life. It examines trends in supplemental education, a field targeting primarily-but not solely-younger children; health and nutrition, a topic of interest to people of all ages; and home health care, an industry where aging and elderly people are the principal consumers of services.
Some children need more instructional time than others to master the curriculum.
To get an idea of the growing emphasis on supplemental educational services in the U.S., one need look no farther than the Department of Education. “Although the term ‘supplemental educational services’ is enjoying newfound prominence, its meaning is as old as education itself: tutoring,” said Rod Paige, U.S. Secretary of Education last May.
Paige made his observation while introducing “Creating Strong Supplemental Educational Services Programs,” the second report in the Innovation in Education series the agency has created as part of the No Child Left Behind Act. He noted that this provision of the act would provide eligible low-income parents with the same opportunities more-affluent parents had long sought out for their children.
Chief among those opportunities, according to the Secretary of Education, are “the chance to engage a highly skilled tutor or access other forms of academic enrichment to help their children catch up if they have fallen behind.”
The report spells out the case that supplemental educational services franchise owners have been making to their customers and prospective customers for many years. “The common sense notion that some children need more instructional time than others to master the curriculum is supported by research and theory,” the report states.
“Studies show that students who continue to struggle in school without intervention compound their learning losses into a larger deficit that is difficult to remediate,” it continues. “In contrast, carefully tailored learning interventions can yield quite remarkable and swift progress in overcoming learning obstacles.”
While the government report focuses mainly on struggling students who could benefit from supplement educational services, there is robust demand for those services in other quarters as well. Parents frequently seek out additional help for average and even superior students, especially for specific subjects such as mathematics, science and foreign languages.
Demand for computer training is also on the rise, and a number of franchise systems specialize in providing it. From computer classes for toddlers to practical computer skills training for older students and adults, franchise offerings in this segment cover the entire spectrum of demand.
The market base of good candidates for supplemental education services is expanding.
Much has been made about the tremendous increase of elderly Americans looming on the horizon as the vast baby boom generation begins moving into its senior years, and rightly so, as discussed later in this article. Often overlooked, however, is the substantial growth taking place among the school-age population, a trend that is driven primarily by immigration.
“In the last few years, a good deal of attention has been focused on the dramatic increases in enrollment experienced by many school districts across the country,” Steven Camarota, director of research at the Center for Immigration Studies, said in testimony to the U.S. House of Representatives Subcommittee on Immigration.
“The Department of Education recently reported that the number of children in public schools has grown by nearly 8 million in the last two decades. While it has been suggested that this increase is the result of the children of baby boomers reaching school age-the so-called baby boom echo-it is clear from the Current Population Survey that immigration policy explains the growth in the number of children in public schools,” he said.
Because a higher proportion of female immigrants are in their childbearing years and because immigrant families tend to have more children than other demographic groups, this trend is likely to continue well into the future, Camarota observed. For supplemental educational services franchises, that means an expanding market base of students likely to be good candidates for their services.
A quarter of Americans are involved with the care of an elderly person in some way.
The federal government made almost $2 billion available to pay for supplemental educational services (SES) to low-income students in 2004, underlining the increasingly mainstream status SES has achieved. That raised level of awareness regarding the benefits SES provides should contribute to increasingly favorable market conditions for franchised SES businesses for many years to come.
CARING FOR THE ELDERLY
Middle-aged baby boomers have been described as the “sandwich generation,” a reference to the conflicting obligations many feel toward their aging, and sometimes ill, parents and their college-age or college-bound offspring.
Along with providing for the care of elderly parents and paying for the education of their own children, they are often pulled in several other directions-by the need to save for their own retirement, by career pursuits and pressure at work, and by spousal relationships, just to name a few.
“More than 25 percent of Americans are involved with the care of a parent or other elderly person in some way,” said Carol Abaya, author of “The Sandwich Generation,” a nationally syndicated newspaper column. “The challenges accompanying that new responsibility cannot be simply identified, nor are they easy to fulfill. The emotional challenges faced by people who find themselves in this situation are big, but so are the financial ones.”
Today there is much more available in the way of resources for those faced with the prospect of meeting the needs of elderly parents than was the case not too many years ago, including a growing number of franchised businesses serving the market’s needs.
That’s a good thing, because the number of people who find themselves in that situation is huge-and with life expectancies continuing to climb, it’s going to get even bigger. According to the Census Bureau, those in the 85-and-over age bracket now represent the fastest-growing segment of the U.S. population.
Between 10 million and 15 million U.S. households having one or more adults aged 30-60, regardless of income, are composed of dual-earner, sandwich generation couples, according to a study by researchers at Portland State University.
The typical household consists of a 43-year-old white male and a 41-year-old white female married almost 18 years, each with about 15 years of schooling. The median household income is $62,500, and there are two children aged 18 or younger at home, with the youngest child about 10 years old.
It is difficult to put a dollar figure on the costs incurred in caring for elderly parents by a sandwiched generation household, but there is little doubt the financial impact can be significant.
Researchers at the National Alliance for Caregiving and Brandeis University’s National Center on Women and Aging pegged average out-of-pocket expenses for caregivers at $19,525 over a period of two to six years, and lost wages and benefits of almost $660,000 over their lifetimes.
The PSU study reflected care-giving’s impact on sandwich generation members in terms of their ability to generate income and savings, as well. In that study, 31 percent of wives reported reducing the number of hours they worked, and 27 percent refused or limited travel.
Also, 24 percent had chosen a job that gave them more flexibility to meet family demands, and 21 percent had decided not to work toward promotion. Among husbands, 23 percent had refused or limited travel and 17 percent had reduced the number of hours they worked.
Caring for both children and an elderly relative can be the equivalent of a second full-time job-but with no pay, of course. A survey conducted in 2003 by ComPsych Corp., a Chicago-based provider of human-resource support services to Fortune 500 companies, found that sandwich generation members who cared for both children and elders spent a total of 36 hours per week on those activities.
TWO AREAS OF FOCUS
The top two items that must be addressed in planning for an elderly parent’s needs are how living arrangements for the elderly parent or relative are going to change as his or her needs change and how medical care will be provided. A variety of franchised businesses addressing both those needs already exist, and new ones are being added all the time.
“As people age, their ability to care for themselves can degrade. I saw this with my own mother,” said Phil Cook, a Certified Financial Planner with a practice in Torrance, CA. “First her home became too much for her to handle, so we moved her to a retirement community. As she required more intensive care, we had to move her to an assisted-living residence and then to a secure facility where the residents’ movement is monitored and restricted.”
That kind of progression is not unusual, according to the National Council on Aging, which estimates that up to 10 million sandwich generation members are caring for their parents from a long distance.
The number of Americans in elder-care facilities is expected to double by 2020.
A survey it sponsored with The Pew Charitable Trusts found that long-distance caregivers live an average of 300 miles from the care recipient and spend 35 hours per month on care-giving duties. As the elderly person’s needs increase, he or she is often transitioned to new living arrangements, sometimes in the caregiver’s home. That is creating more demand for the services provided by home health care franchises.
The National Institutes of Health estimates there are currently about 2 million Americans in nursing homes and another 1.5 million in assisted-living facilities and homes for adults. Those numbers are expected to double by 2020, and at least 40% of the population over age 75 is predicted to need extensive health care services late in their lives.
And that’s just the tip of the iceberg, according to Abaya. For every person requiring long-term care services in a nursing home or similar facility today, three more are living in private residences-often the home of a son, daughter or other relative. It all adds up to a long-term growth market for franchised businesses offering services targeted to that population segment.
Needless to say, sandwich generation members are subject to inordinate amounts of stress, making them particularly good candidates for the products and services offered by franchised businesses in the health, wellness and nutrition segment.
There is a revolutionary shift underway in how people view their personal health.
Consumers have adopted a revolutionary new definition of health as the union of mind, body and spirit, according to a survey conducted by OnHealth Network Co. More than half (53 percent) of those surveyed said they would consider using a holistic approach to treating an illness, with holistic defined as the combination of traditional medical treatments with alternative treatments.
“These findings confirm that a health revolution is underway, and that it is more expansive than any traditional health definition we have seen in the past,” said Rebecca Farwell, general manager of OnHealth Network.
“There is a shift in how individuals view and approach their own personal health,” she said. “While traditional medicine is clearly a part of it, today the balance has shifted to include mind, body and spirit.”
Among the areas where market watchers see emerging opportunities is weight management. “Until very recently, this had been ignored and neglected as a health issue,” said a spokesman for the American Obesity Association.
The eating habits of many Americans remain dismal. “Despite widespread national campaigns to educate the public on guidelines for healthy behaviors, we continue to gain weight, get less exercise and live even more stressful lives,” he said.
There are many weight management and exercise franchise opportunities available, and a looming development may bode well for them. In July of 2004, Health and Human Services Secretary Tommy Thompson announced that Medicare would begin recognizing obesity as an illness, something many health professionals felt was long overdue.
“Obesity is a critical public health problem in our country that causes millions of Americans to suffer unnecessary health problems and to die prematurely,” Thompson said. “With this new policy, Medicare will be able to review scientific evidence in order to determine which interventions improve health outcomes for seniors and disabled Americans who are obese.”
It is yet to be determined exactly which treatments for obesity Medicare will agree to cover, but analysts expect lifestyle-change approaches such as diet and exercise programs to be included, along with more radical interventions such as gastric bypass surgery.
Vitamins, minerals and other nutritional supplements are the keys to a healthier lifestyle for a growing number of consumers, and there are plenty of opportunities available to prospective franchisees interested in profiting from that trend. About three quarters of Americans now use supplements on a regular basis, according to a study published in the American Journal of Preventive Medicine.
“We have evidence that people are taking up to 16 supplements a day, although on average most people were taking two to three supplements,” said Jessie Satia-Abouta, lead author of the study and an assistant professor of nutrition at the University of North Carolina at Chapel Hill.
Medicare classification of obesity as a disease may create new franchise opportunities.
The researchers found that 75 percent of participants in the study regularly took a vitamin or mineral supplement. More than half were taking a multivitamin, and the most popular single supplements were vitamins E and C, calcium, folate and selenium.
Those most likely to use supplements tend to be older, female, highly educated, Caucasian and with a normal body mass index, the study concluded. “Education correlates with income, and supplements are not necessarily cheap,” said Satia-Abouta. “These people probably have more money, and they know more about trends.”
Is Franchising for You?
by John P. Hayes
Franchising has been a successful path to business ownership for hundreds of thousands of people, but it is not for everyone, and it may not be for you.
Many people have .the idea that because it’s a franchise, someone else runs the business for you. Someone else makes the decisions, builds the business, hires the people, sells the products,and services, and the franchisee collects the money. It does not work that way. Successful franchisees work hard. You should be prepared to work hard, too.
Just because it’s a franchise, and it’s safer than other forms of business, that doesn’t mean that franchising comes with any guarantees. Franchising requires an active, thinking person who can make decisions and who has the ability (with the franchisor’s training, support and guidance) to build and operate a business. It is not an auto pilot business.
If you are up to the challenge of owning a franchise business, the hard work starts even before you buy your franchise. My new eBook (electronic book), Franchise Pre Investment Checklist (FPIC), includes a number of checkpoints consisting of action items or recommendations that can help in that regard.
For example, in Part III: Focus On The Company, one checkpoint instructs: “Ask the franchisor for a copy of the Uniform Franchise
Offering Circular (UFOC), or Disclosure Document.” This section describes the UFOC and this is important explains how you can get a copy of the document.
You want to get the disclosure document as quickly as possible while researching a franchise company, but it may not be easy to get it. However, federal and state laws require franchisors to provide disclosure documents to prospective investors, and they also set the conditions by which they must comply with the laws. If a franchisor determines that you’re not qualified financially or otherwise to buy one of their franchises, they may not have to give you their disclosure document.
The book opens with Part 1: First Things First. The goal of this section is to urge prospective franchisees to read and learn more about franchising. EPIC is not a textbook about franchising, but it’s important for prospective franchisees to learn as much as possible about the subject. Look in local libraries and online for educational materials, and, of course, use The Franchise Handbook as an important resource.
You must understand that franchising is a system of distribution. There are lots of wrong ideas about franchising. You’ll hear it said that franchising is an industry, but that is not so. There are, however, more than 70 industries that use franchising as a system of distribution.
IT’S A SYSTEM
Most people seem not to understand that franchising isn’t a business, but rather a system for distributing (marketing and selling) products and services. It is extremely important for prospective franchisees to evaluate the franchisor’s system before investing money in a franchise.
Part II: Focus On You encourages potential franchisees to think about their futures. What do you want to do? Do you see yourself working in a retail business, from home or out in the field working from a van? Do you want to sell products or services? Do you want to market products and services as well as manage a business? I cannot over emphasize the importance of knowing what you want to do and what you’re capable of doing.
Numerous companies offer personality assessments that measure skills, desires, attitudes, work habits and aptitudes. Many franchisors use these tools to evaluate franchise prospects. You may be asked by a franchisor to take such an assessment. If so, do so!
If the franchisor doesn’t offer an assessment, you can get one on your own. Some good assessment tools are available online from Profiles International at www.profilesinternational.com, and from the FranchiZe Profile at www.franchise-profiles.com.
Part II also includes information about how to find franchise opportunities using all forms of media including magazines, newspapers, Web portals and franchise expositions. You should think about how much money you want to invest in a franchise before you start your search. The book explains how prospective franchisees may be able to tap the U.S. Small Business Administration for help in borrowing money to invest in franchises.
To be a successful franchisee, you must be prepared to work hard.
In Part 111: Focus On The Company, we discuss how to request information from franchise companies, how to evaluate a company’s overall potential for success, and how to make sense of specific issues, such as territory.
All franchise opportunities are not created equal. Keep in mind that some franchise opportunities are better than others. You may need to compare two, three or more companies to find the one that’s best for you.
You should also make an effort to compare the value of each franchise brand. How well is it known? How well is it known in the area where you plan to open your business? Likewise, be sure to compare systems. You might feel more comfortable operating one system over another.
It is very important to ask the right questions of existing franchisees prior to investing in a franchise. Some of those questions are:
• What’s the franchisor’s greatest strength?
• What is its greatest weakness?
• How good is the training?
• How helpful is the operations manual?
• Do you get answers from the franchisor when you need them?
• Do you plan to renew your franchise agreement?
• What’s the secret to your success?
For more questions to ask franchisees, franchisors, and even vendors of franchise companies, check out “92+ Questions To Ask Before You Invest In A Franchise,” a free report available on my Web site: www.HayesWorldwide.com.
Part IV Focus On The Financial Requirements provides explanations about fees, including the franchise fee, royalty fee, and the advertising or marketing fee. Prospective franchisees will find this section most helpful when they can reference a franchisor’s disclosure document.
This section of the book explains many of the items that franchisors are required to address in the disclosure document, for example, Item 7: Initial Investment. Here the franchisor itemizes the various fees and expenses that you will be expected to pay initially and in the startup phase of your business.
The list includes estimated cost, when the money is to be paid, and to whom it’s to be paid. Item 7 not only lists all the financial requirements, but it also totals the expenses so that you have a snapshot view of how much money you’ll need to start your business.
One of the checkpoints in this section advises potential franchisees to look closely at the numbers. Is your franchise of choice worth the risk? Does the business make sense, financially? Will you get a satisfactory return on your money?
Building a business, any business, is hard work. However, if you’re going to work hard only to build a mediocre business, or a marginal business, or one that merely survives, then it’s time to reevaluate your plans. Be sure to get whatever help you need in evaluating a business’ risk.
Determining the value of a franchise brand should be a key part of your search.
The final section of the book, Part V Ask For Help! But Seek It Wisely, points to advisors who can help you select a franchise opportunity. But don’t expect these advisors to do your homework or make important decisions for you. Ultimately, it will be your franchise, your business, and your life. So rely on yourself to make the important decisions.
Before investing, aspiring franchise owners should consult with a franchise attorney and an accountant who understand franchising.
Checklist for Comparison Shopping
by Suzanne Kauss Jensen
According to the U.S. Department of Commerce, buying a franchise is the average persons most viable avenue to owning a business. Before you make your investment, be absolutely certain that the organization is capable of delivering the support that will insure profitability for your franchise. If you are serious about investing in a franchise, shop around and compare the merits of one franchise against another. When doing so, make sure that the following questions get answered to your satisfaction.
________ 1. Do the officers and directors of the franchisor demonstrate a high degree of business and franchising experience? If the master franchisor is inexperienced, it is using its service fee dollars literally to learn a business, a lesson that is unfair to the franchisee and could certainly render the franchisor insolvent or make it necessary to recapitalize, thereby risking the investment of the franchisee.
_________2. Is the franchisor totally centralized or structured so as to be able to provide local support? A regional type structure allows the individual franchise owners to get more personalized attention, which, in turn, allows them to grow their franchises more efficiently and profitably. Hands-on training and agency evaluation visits should be readily available.
_________3. Did the representative of the franchisor state a requirement to meet with existing franchise owners or avoid that issue? When you are looking over a franchise organization, being able to talk to people who are already working within the existing system gives you the opportunity to find out how the system works in reality. Most importantly, let your representative take you to franchise owners who are properly implementing the program so that you can be the judge of how doing it right translates into your bottom line.
_________4. Does the representative of the franchisor exhibit a high degree of sales professionalism? While the representative deals with you, he IS the organization. His professionalism–or lack of it–mirrors that of the organization. Examine closely how the representative makes his presentation and what types of materials he presents to you.
_________5. Does the franchisor closely question the qualifications and suitability of prospective franchise owners? The master franchisor owes it to the other franchise owners in the system to accept only the most highly qualified applicants. Just accepting anyone may swell the numbers, but ultimately the professional reputation of the franchise suffers. What they should be looking for is your entrepreneurial drive coupled with the ability to be a team player.
_________6. Does the representative of the franchisor encourage or discourage prospects from showing the agreement to an attorney prior to execution? The franchise agreement details the mutual responsibilities of the franchisor and the franchisee. Encouragement to show the agreement to a franchise attorney is an indicator of the confidence the franchisor has in the system. A desire on the part of the franchisor to have the potential franchisee fully understand the commitment he will be making is a positive sign.
_________7. Is it obvious that the franchisor conducts a thorough investigation into a prospect’s background? The master franchisor owes it to you to do so in order to determine the suitability of you for the franchise system and of the franchise system for you. In fact, quality control and a performance clause should be written into the franchise agreement. The franchise owners who are suited to the system will succeed in performing to standards and be an asset to the overall system. Make sure that the franchisor has the right to protect the strength of the system, the integrity of the franchise agreement and the rights of the other franchise owners by terminating non-performers.
_________8. Has the nature and extent of the franchisor’s training been clearly explained, especially the cost issues? On-going training and updated programs should be available to you at no charge. Part of buying into a franchise system is having regularly scheduled training classes that the franchise owner and staff can attend, held in close proximity to their business. A commitment to frequent monthly training is another tool toward profitability.
_________9. Does the franchisor have specific programs in place for the location and/or approval of suitable site and staff? Such programs are an indicator of the franchisor’s commitment to insuring maximum profitability for its franchisees right from the start. Be careful that your franchisor does not have an uneven program, heavy on opening programs but with no consistent support throughout the term of the contract.
_________10. Is the franchisor purely a franchisor or are there company-owned outlets? Company-owned outlets can place the master franchisor in the somewhat contradictory position where it is in competition with its own franchisees. That could result in divided loyalties on the part of the franchisor, with its primary loyalty lying with the company-owned stores and franchisees coming in second-best. (Editor’s note: Although Ms. Jensen’s point of making sure that the franchisor’s first concern is the success of its franchisees is well taken, many franchise experts feel it is important that a franchisor maintain some company-owned outlets. These allow it to research and develop new products and services and work out the bugs in new programs, without putting its franchisees at risk.)
_________11. Does the franchise organization have a substantial track record of growth, and, if so, how can this be harnessed to my advantage? The master franchisor must grow the system to benefit the franchise owners. The protection and enhancement of the franchisee’s investment means adding outlets, thus harnessing for the franchisees the advantage of strength in numbers, also known as “clout” and brand name image. The franchise system that does not consistently expand, in a controlled manner, is doomed to failure.
_________12. Does the franchisor provide a system of localized on-going business consultation for franchisees? On-going business consultation “hands-on” and by telephone should be part of the support system provided by the master franchisor to help move the franchisees toward profitability. Such consultation often eliminates problems before they develop and resolves existing problems before they become unmanageable. Make sure the franchisor and its staff have expertise in sales, marketing, internal operations and management.
_________13. Does the franchisor provide localized on-going training for franchisees for the length of their contract? Monthly classes held in close proximity to the franchise assure the franchise owner that profitability tools are easily within reach. On-going training insures that the owner can return anytime he wishes to refresh himself on the latest marketing tools at his disposal.
_________14. Do the franchisees have a mechanism for two-way communication with the franchisor through local franchise owners’s associations? Franchise owners’s associations provide a forum for owners to solve problems collectively and decide the best course of action on items that affect all the franchises. Franchisor and management staff should be in attendance at all meetings.
_________15. Does the franchise provide for a strong image-building program at both a local and national level? Nationwide identity begins from the first day a franchisee opens the business under the franchise agreement. An on-going goal and commitment of the master franchisor is to provide an image that becomes more well-known nationally with every passing day through intelligent use of the advertising fund. The franchisee pays into this advertising fund to create awareness of the name and services with which he is associated. People equate success with size. The franchise owner expects the value of his investment to be enhanced by consumer awareness of the franchise name both nationally and locally. Most successful franchises also provide for the franchisor to contribute to the advertising fund.
Having all these questions answered to your satisfaction will give you the information you need to select the franchise that will best provide you with the opportunity to achieve the success you seek. After you have identified the organization that best suits your needs, interests and objectives, the rest is up to you. Following the prescribed program established by the franchisor then gives you the best chance of realizing your personal and professional goals. Good luck, and good shopping