Franchising usa T he ma g a z ine for franchisees
Issue 2 - dec 2012
RadioShack Success Through Service
100 Best
Top Franchisee
Social Media Sites
Retail Tips for the
Holiday Season LATEST NEWS
FINANCIAL ADVICE FROM THE BANKS
$5.95 www.franchisingusamagazine.com
Franchises for Veterans
TOP LAWYERS’ ADVICE
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Franchising usa T he ma g a z ine for franchisees
FRANCHISING USA VOLUME 1, ISSUE 2 DECEMBER 2012 publisher: Colin Bradbury. colinbradbury@shaw.ca
EDITOR: Christie Hall. christie_hall@shaw.ca
SALES DIRECTOR: Vikki Bradbury. vikki.bradbury@shaw.ca
SENIOR SALES EXECUTIVE: Jenn Dean. jenndean@shaw.ca
PRODUCTION: Joanne Tuffy. production@cgbpublishing.com.au
DESIGN: Jejak Graphics. jejak@bigpond.com
COVER IMAGE: Photo Courtesy of RadioShack
CGB PUBLISHING 676 Wain Rd. Sidney, BC V8L 5M5 CANADA www.franchisingusamagazine.com Proud member of the IFA:
SUPPLIER FORUM International Franchise Association 1501 K Street, N.W., Suite 350 Washington, D.C. 20005 Phone: (202) 628-8000 Fax: (202) 628-0812 www.franchise.org
from the
Editor Happy Holidays from Franchising USA! It’s definitely a busy time of year for all of us, so we appreciate you taking some time to read our December issue of Franchising USA. You’ll be happy that you did! We’re excited to bring you some great news updates, information, and expert advice articles from the world of franchising this month. We also take a look at franchising from the inside out, with a Franchisor in Depth piece featuring Dogtopia, and our cover story featuring Radio Shack. And of course, right in the middle of the shopping rush, we have some tips for a successful holiday season in our Retail Feature. I love the holidays. But I’ve found in the last few years that I have less and less time to enjoy the celebrations. Last year it all started to feel like a bit of a chore to be honest. I’m sure a lot of you know what I mean. As franchisees and business people, our lives are busy during a regular month. When December rolls around, our lives go from busy to full-on chaotic. But I’ve decided to not just make the best of the holidays this year, but to actually take some time to enjoy the festive season. If you’re interested in joining me, here’s my plan: • Cross things off your to-do list. I know that sounds scary, but I guarantee there are a few things that you could
do away with, without ruining the holidays. Hand-made cards for friends and family? Not this year. Cookies delivered to all the neighbours? Not happening. • Limit the celebrations. There are times when the last place I want to be is at another holiday party. Give yourself a get out of jail free card, and skip one (or more) of the holiday parties on your calendar. One less cup of eggnog never hurt anyone. • Slow down. I know that sounds counter-productive, but it’s hard to feel festive at 90 miles per hour. Take at least one evening this month to slow down, relax, and enjoy. Stroll through the neighbourhood to check out the lights. Or stay in where it’s warm and cozy, turn on your favourite holiday music, and relax by the fire with a hot drink, under the glow of your holiday lights and candles. That’s what I call holiday bliss! Instead of wearing ourselves out over the holidays, let’s look at it as a time to be thankful for a successful year as it comes to an end, and to look ahead to the coming year with optimism and excitement. From all of us at Franchising USA, we wish you a peaceful and joyous holiday season, and a prosperous New Year. Christie Hall Editor
The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher. The publication is sold subject to the terms and conditions that it shall not be copied in whole or part, resold, hired out, without the express permission of the publisher.
Franchising USA
december 2012
On the Cover 10 Cover Story
20 Are You Socially Savvy? Top Sites for
Radio Shack: Success Through Service
12 Today’s Top 100 Franchises
Franchisees Navigating Social Media Jenna Kantrowitz, Fish Consulting
37 The Most Wonderful Time of the Year:
Rated by Veteran Business Owners
Retail Franchising in the Holiday Season
52
Molly Rowe, Franchise Business Review
44
20
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Contents
In Every Issue 06 What’s New!
Announcements from the industry
24 Franchise Focus Sport Clips
37
30 Franchisor In-Depth Dogtopia 37 Feature Article The Most Wonderful Time of the Year:
Retail Franchising in the Holiday Season
42 IFA Franchise Business Index 58 Franchisee in Action Color Tyme Franchising USA
48
Expert Advice 12 Today’s Top 100 Franchises
Rated by Veteran Business Owners
Molly Rowe, Franchise Business Review
16 “C” LEVEL EXECUTIVES AND FRANCHISING
A CONFLUENCE OF NEEDS
Steve Rosen, FranNet
Top Sites for Franchisees Navigating Social Media
Jenna Kantrowitz, Fish Consulting
26 So Your Employee was Injured at Work? Now What?
Brianne Mooney & Gary Kalina, Lamb, Little & Co.
42
20 Are You Socially Savvy?
34 Changing Expenses for Retiring Franchisees.
Can You Afford Not to Have Long Term Care?
John Geenen, Waterfront Financial Group
44 SHOULD YOUR FRANCHISE USE FOURSQUARE? Alex Porter, Location3 Media
48 Making the most of Section 179
Robyn Gault, Direct Capital Franchise Group
30
52 Are You Ready For Franchising?
Jason Miller, ZorSource
54 From Franchisee to Franchisor
Carl Khalil & Sada Sheldon, Khalil & Sheldon
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what’s new! ORANGE LEAF FROZEN YOGURT CELEBRATES 200TH STORE OPENING In celebration of the opening of its 200th store, which is located in Canton, Mass., Orange Leaf Frozen Yogurt rewarded all customers with double points on their Ounce Back loyalty cards for one day only. “Growing Orange Leaf to 200 stores in two years has been an incredible experience and we wanted to thank our loyal customers for their support,” said Reese Travis, CEO of Orange Leaf. “We’re all looking forward to what the next year holds – from new stores to new flavors to new experiences – and hope to continue to reward our customers in unique and fun ways.” Travis’ group acquired Orange Leaf in April 2010 with only 15 stores in operation. Just over a year later, Orange Leaf opened its 100th store and soon opened its first international location in Australia in December 2011. Ranked one of the fastest growing limited service chains by Technomic in 2012, Orange Leaf has more than 95 planned additional stores across the U.S. and is poised to become the largest franchise in the self-serve frozen yogurt industry.
Orange Leaf’s pro-franchisee culture encourages owners to become a part of their communities and provides them with the necessary ingredients for success. Orange Leaf offers a multitude of delicious, traditional and original flavors, including no-sugar-added, gluten-free and lactose-free alternatives. Contact: www.orangeleafyogurt.com
Maaco Launches New Incentives for Multi-Store Operators Reduced Franchise Fees, Royalty Rates Put in Place. Maaco, the nation’s leading paint and collision service provider, is targeting multi-unit operators for growth with a new multi-store operator (MSO) program. The incentives include lower license fees and royalty reductions for additional locations. The price of one Maaco license is $30,000 under the new program with more discounts for each additional store. Two licenses are $45,000, three are $55,000, four are $60,000 and five are $65,000. After the fifth license, each additional license is $5,000. Opening multiple stores also comes with royalty reductions for the additional stores for
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the first three years. Royalties will be 2 percent for the first year, 4 percent for the second and 6 percent for the third. “Multi-unit operators are an excellent way for franchise systems to grow and we wanted to make sure we were offering incentives to entice these kinds of owners,” said Jason Barclay, vice president of franchise development
for Maaco. “We want to build on the success our existing multi-unit operators have had by making it easier for new franchisees to get more than one license. We think there are a number of potential franchisees interested in expanding quickly that will appreciate these MSO incentives.” Contact: www.maacofranchise.com
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Co-CEO Karen Pitts Inducted into ASA Leadership Hall of Fame According to the ASA (American Staffing Association) the award was created in 1985 to recognize outstanding individual contributions made through dedicated service to ASA and the staffing industry.
Karen Pitts, Co-CEO of Link Staffing Services, Inc., has earned a spot amongst an elite group of individual leaders in the staffing industry with her induction into the ASA Leadership Hall of Fame. As the 39th inductee, Karen becomes only the 9th female to be recognized.
Pitts launched her first staffing service, Nurses PRN in 1976; which she grew to seven offices in six states within three years. She then served as VP of MedStaff Inc, a medical staffing company until, in 1980, she joined with her husband and Co-CEO, Bill Pitts to create Link Staffing Services. The company first launched from a small office in downtown Houston and has since grown into a nationwide operation with 50
locations that service 14 states. When asked how she felt about the award, Pitts responded, “It’s very humbling to have my name placed alongside those who have inspired and led our association!”. Founded in 1980, Link Staffing Services provides staffing and productivity solutions to businesses and industry. Link Staffing specializes in skilled crafts and trades, light industrial and general labor positions. Based in Houston, Texas, Link Staffing has 50 locations nationwide. Contact: www.linkstaffing.com 1-800-848-LINK (5465)
Children’s Apparel from EmbroidMe Meets Safety Standards Among the many things that parents must be aware of is the safety of children’s clothing. EmbroidMe understands the importance of child safety and is committed to offering products that meet the manufacturer standards set by the U.S. Consumer Product Safety Commission (CPSC). The CPSC serves as a watchdog for manufacturers, and it frequently orders recalls for possible hazards with children’s clothing and toys; however, it is still important for parents to be proactive in this area. EmbroidMe offers only flame-resistant children’s pajamas that meet CPSC standards. Small children instinctively put things in their mouths so detachable snaps, buttons, zipper heads, bows, and rhinestones are all possible choking hazards. It is important that parents proactively check all children’s garments for possible hazards. EmbroidMe is especially committed to providing the affordable
and safe merchandise of the highest quality to its customers. “Parents want to know that their children are safe, whether it be at home, at school, or at play,” said Christine Marion, MAS, director of retail operations for EmbroidMe. “EmbroidMe offers only merchandise that meets the safety standards of the Consumer Product Safety Commission.” With hundreds of Resource Centers around the world, EmbroidMe is the most comprehensive source for promotional apparel, premiums, and advertising specialties, providing its promotional partners with full-service custom embroidery and screen printing for apparel. Contact: www.embroidme.com
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what’s new! Wendy’s Transformation Producing Positive Results Company Unveils New Contemporary Brand Logo Wendy’s® is in the midst of a comprehensive transformation to contemporize the brand and dramatically improve the customer experience. Consumers are responding, as evidenced by: • Five consecutive quarters of positive same-store sales at Company-operated restaurants*
• 2012 ZAGAT SURVEY® rating Wendy’s as the Top Overall Mega Chain
• Wendy’s top ranking for customer satisfaction among hamburger chains in the “limited-service” category by the American Customer Service Satisfaction Index™ (University of Michigan survey)
• Wendy’s No.1 speed-of-service ranking in the 2012 QSR Drive-Thru Survey, a proprietary report by QSR® “We are improving the total customer experience, with bold restaurant designs, fresh product innovation, more engaging advertising and digital media advancements,” said Emil Brolick, President and Chief Executive Officer. “The transformation is already resonating with consumers and we’re building momentum, especially with our Image Activation restaurants that position our brand as ‘A Cut Above’ the competition. We are unveiling the first Wendy’s brand logo change in nearly 30 years, and next March we will introduce it across all of our consumer touch points. This is a very exciting time for Wendy’s.” The ongoing brand transformation will
extend to Wendy’s new logo in March 2013, when a contemporary look will be introduced on packaging, advertising, crew uniforms, restaurant signage, menuboards and websites. * Same-store sales at Company-operated restaurants through the second quarter ended July 1, 2012. ** Fresh beef is available in the contiguous United States and Canada. Trademarks are the property of their respective owners. Contact: www.wendys.com
Southeast’s Largest Franchise Show Comes to Miami Beach Jan. 11-13, 2013 Franchise Expo South Connects Franchisors with Entrepreneurs from South Florida, Latin America and the Caribbean Want to know what the future of franchising holds? From Jan. 11-13, 2013, thousands of prospective franchisees from South Florida, Latin America and the Caribbean will have the opportunity to meet face-to-face with industryleading franchisors to discover their ideal investment opportunity at the 7th Annual Franchise Expo South on Miami Beach. Sponsored by the International Franchise Association, the Expo will be held at the Miami Beach Convention Center and features hundreds of the world’s leading franchise brands on the exhibit
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hall floor plus educational seminars and conferences that will examine the latest issues affecting the industry and further define the impact that franchising has on the economy. “South Florida is a high value growth market for many concepts and also serves as the gateway to Latin America and the Caribbean,” said Tom Portesy, president of MFV Expositions, producers of Franchise Expo South. “Franchise businesses have created 1.1 million Florida jobs, while contributing $119 million to the state’s economy, demonstrating that franchising continues to have a significant impact on those who live and do business in the region.” Franchise Expo South is designed
specifically to enable prospective franchisees to determine which types of businesses match their needs. The expo floor will feature hundreds of exhibitors from food to professional service franchises including McAlister’s Deli, Kiddie Academy, Sizzler USA, Inc., SignA-Rama, Cinnabon, EmbroidMe, and Wireless Zone, among other concepts. Contact: www.franchiseexposouth.com.
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Firemans Contractors Sees Increased Opportunities For Highway Marking and Maintenance Industry Annual transportation study shows dire need for expanding, improving, and maintaining Texas roads and highways: delays cost drivers nearly $3 billion in 2011. “New statistics on the high economic cost of traffic congestion in Texas should lead to implementation of state plans to expand and improve highways and increased contracts for companies in the highway marking and maintenance industry,” says Renee Gilmore , CEO of Firemans Contractors, Inc. Firemans Contractors provides professional road and pavement improvement, maintenance, and repair services to commercial and government clients in Texas and across the country. The publicly-owned company, founded by a firefighter, sells locally-owned
franchises nationally and donates a percentage of its profits to local Firefighters’ Associations. The Texas State Department of Transportation (DOT) recently released its annual study of “The 100 Most Congested Roadway Segments in Texas.” The 2011 cost in lost time and wasted fuel for Texas drivers and businesses was nearly $3 billion.
“Repairing and improving our broken road system in Texas leads not only to business opportunities for Firemans but also to personal and business savings and increased employment,” says Gilmore. Contact: www.firemanscontractors.com 1 -800- 475-1479
Projects are already underway or in the works. Firemans CEO, Renee Gilmore points to a DOT announcement last week of a tentative deal with a non-affiliated private developer worth $1.6 billion to expand Interstate 35W in north Fort Worth, the most congested roadway in the state. The new work on Interstate 35W is expected to begin in mid-2013 and be completed by mid-2018.
Zagat® Survey Awards SUBWAY® Restaurants In Three Categories Health Options, Best Service And Most Popular Restaurant In The Mega Chain Category For Fourth Straight Year! For the fourth consecutive year, SUBWAY® restaurants, the world’s largest restaurant brand, emerged as the mega chain leader in three categories – “Healthy Options,” “Most Popular” and “Top Service” – according to the recently released 2012 Zagat® Fast-Food Survey. Zagat® Survey is the world’s leading provider of consumer survey-based information on Where to Eat, Drink, Stay and Play Worldwide. “Four consecutive years of being #1 in key Zagat’s ratings is an accomplishment our entire system can celebrate with pride. From our sandwich artists on the front lines to the many dedicated team members who ensure that consumers have an abundance of fresh selections, everyone shares in this winning streak,” said Tony Pace, Chief Marketing Officer, SUBWAY® Franchise World Headquarters.
Since first promoting the healthier aspects of its menu in the mid-1990s, the brand has continued to make choosing a healthier meal easier for adults and children. Today, SUBWAY FRESH FIT® meal choices feature 9 sandwiches under 6 grams of fat and provide low fat and low saturated fat alternatives with customizable sandwich combinations, servings of vegetables, apples slices, yogurt, or Baked! LAY’S® Potato Crisps, and a selection of low-fat milk, diet soda, or bottled water beverages. Contact: www.subway.com.
Franchising USA
cover stroy
RadioShack
RadioShack: S uccess T hrou g h S ervice
There are certain things that have been with us for so long, which feel so familiar, that they become a part of our American culture, like baseball, apple pie, and Radio Shack. Amidst the break-neck innovations in consumer electronics and personal technology, RadioShack has steadfastly maintained its position as an enduring American brand for over ninety years, combining the personal touch of a neighborhood merchant with the purchasing power of an international retailer. Originally opened in 1921 by a pair of
brothers from Boston, RadioShack first supplied ship radio equipment and “ham” radios. The business name was a reference to the small wooden structures used to house radio equipment on board ships. Some ninety years later, RadioShack employs over 34,000 associates in a retail network that includes 7,300 locations in 29 different countries, of which 20 percent are franchise units. How does a company become so successful, and maintain that level of success over so many years? RadioShack credits their staying power to a customer-oriented approach, which combines carefully selected product with the convenience of a small retail space, and highly personalized service. Marty Amschler, Vice President of Franchise, explains “RadioShack provides a unique opportunity with its Franchise offering both in the USA and abroad. RadioShack is able to acquire
new franchisees that do not have prior experience in the consumer electronics (CE) business. When RadioShack carefully administers its system for success to include training, product selection, site selection, store development and then layer in our private brands and private label we are able to create a competitive retail brick and mortar storefront in the CE marketplace. In addition, the RadioShack concept works in all demographics due to the product being tailored to fit those individual demographics’ needs.” RadioShack is committed to giving customers what they want, and staying at the forefront of the rapidly evolving consumer electronics market. In the field of consumer electronics, change occurs quickly and often. The ability to anticipate consumer needs has made RadioShack a trailblazer in the consumer electronics arena. RadioShack has built a solid reputation for providing the newest consumer electronics to the retail marketplace. In 1959 RadioShack sold its first Realistic CB Radio. With a Level II Basic Operating system created by Bill Gates, RadioShack introduced the first mass-marketed, fully assembled personal computer, the TRS-80, in 1977. In 1984, RadioShack introduced mobile phone technology into its selection of electronics. RadioShack, one of the nation’s most powerful retail brands, offers a franchisee the opportunity to associate with an iconic brand and provides a
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complete solution for opening their own consumer electronics retail store. Today, RadioShack, has relationships with a number of mobile technology carriers, including Verizon, the nation’s largest wireless carrier, AT&T and Sprint, as well as many other nationally recognized brands. In addition, RadioShack features exclusive, high-quality private brands that provide excellent value including Gigaware® personal computing hardware accessories; PointMobl® accessories that protect, power and enhance the mobility experience; AUVIO® precision audio and video technology; and Enercell® batteries and power products. With all of this history behind the brand, and sales of $4.3 billion in 2011, RadioShack is a clear choice for someone looking for a solid franchise opportunity. A RadioShack franchise brings with it brand-driven store traffic, superior brand recognition, national advertising, a large support system and a variety of top-quality products that customers want and need. Currently RadioShack is offering franchise opportunities across the country, with multiple unit franchise agreements encouraged, and the company is also looking for international master franchisees. If you are someone with previous business experience, growth capability, ability to develop and execute a business plan, entrepreneurial spirit, financial management skills, and the ability to manage, then a RadioShack franchise might be your next career move and a wise investment in your future. The RadioShack Franchise Program is one of the best values in the entrepreneurial franchise market as it is an extension of the thousands of company-operated RadioShack stores nationwide. As a franchise owner, you benefit from the buying power of a major retail network in the purchase of fixtures, in-store signage, and other necessities for starting up a new retail business. Initial investment costs start from approximately $150,000. While RadioShack franchisees are not required to manage the day-to-day operations of their locations, franchisees
“RadioShack credits their staying power to a customer-oriented approach, which combines carefully selected product with the convenience of a small retail space, and highly personalized service.” do need to maintain an active knowledge of the business and ensure they have qualified management on staff. Every franchisee is encouraged to attend RadioShack’s training seminars that are offered in multiple formats as they grow and develop in their business. In addition, RadioShack offers franchisees support personnel, including dedicated field and home office support. RadioShack also has a skilled and helpful advertising, merchandising and marketing staff looking out for the brand all year round. A highlight of RadioShack’s training is RadioShack University. With over 40 years of experience, they have built a best-in-class franchise training program that benefits new franchise owners with an accelerated learning curve of in-store and classroom training. RadioShack understands the importance of supporting their franchisees in every possible way. Their goal is to ensure that every franchisee has a high degree of expertise and confidence from day one. Training begins as soon as you sign your first franchise agreement with pre-opening support to ensure you are starting your business off the right way. It is reinforced
with in-store training for hands-on learning in the store environment and continues well-beyond your grand opening. With this year’s holiday shopping season in full swing, RadioShack demonstrates its commitment to brand and franchisee support in their advertising and marketing program. National Television, mailed flyers and newspaper inserts are all a part of the promotion and advertising plan this year,” RadioShack also recognizes that many consumers are browsing and shopping from their mobile devices and tablets. Holiday advertising also features digital, social, and other media types that target consumers wherever they make their purchasing decisions. This awareness of retail technology is in keeping with RadioShack’s proven customer-oriented approach. And from the country’s leader in consumer electronics, we would expect nothing less. For More Information: Phone: 817- 415-5400 Email: Franchise.Opportunity@ radioshack.com Web: www.franchiseradioshack.com
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ex per t advice
Molly Rowe, Editorial Director, Franchise Business Review
T O D AY ’ S
Top 100 Franchises
R ated by V eteran B usiness O wners
ongoing support specifically designed for veteran franchisees. Some brands, like ActionCOACH, have even offered free franchises to veterans as part of their recruitment efforts.
Excerpts from a Special Report by Franchise Business Review Much has been written about the natural fit between military experience and franchise ownership. Franchising, like the military, is centered around clearly defined systems, a set structure, discipline, and teamwork. Because of this, people who’ve had successful military careers may excel in the world of franchising. Many franchise companies offer special incentives for franchisees from the Armed Forces. These incentives may come in the form of discounted franchise fees, financing assistance, or
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With all of the special offerings and opportunities available to a vet, the search for a franchise may seem overwhelming. This report is designed to help make that process easier. Franchise Business Review is the only researcher to look at which franchise opportunities are the most veteran-friendly based on franchisee satisfaction and performance—perhaps the most telling data of all. Veterans & Franchising is the true story behind what franchise brands say they will do for veterans and what they actually do.
Methodology The data for this report was compiled as part of Franchise Business Review’s Veterans & Franchising 2012 study, which recognizes the top vet-friendly brands based on overall veteran franchisee satisfaction. To compile the data for this report, we surveyed nearly 3,500 military-trained franchisees, representing 265 brands. We also interviewed senior executives and franchisees at several brands for their first-hand perspective. From this data, we identify our list of Top 100 Franchises for Veterans, which includes companies with above average satisfaction among the veteran franchisees we surveyed.
Vets in Franchising The same traits that make for a successful military career (the ability to follow directions, work in teams, and lead) can make for very successful franchisee. Franchisors told us that franchisees who have had successful military careers often outperform non-military franchisees. “Franchisors offer a business model, operating systems, and procedures. We find that veterans are often better at following that system than those who haven’t had that kind of experience and training,” said Catherine Monson, CEO of FASTSIGNS. “When you open a new business, it’s going to be longer hours and harder work—than just having a job. Our folks who have served in the military are not afraid of hard work. That kind of perseverance and commitment is what it takes to own a business.”
Researching a franchise Researching and deciding on a franchise from the thousands of opportunities available can be overwhelming for anyone, but for an active soldier, especially one stationed abroad, it can seem nearly impossible. Signal 88 CEO Reed Nyffeler says it can take twice as long for active military personnel to research and start up a franchise because they begin researching their opportunities while stationed abroad and can only conduct their in-person research while on leave. At Signal 88, the typical sales cycle for an enlisted prospect
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is close to year, compared with 90 days for non-military franchisees. This extended research cycle may be necessary for candidates to complete their due diligence and to save enough money to fund the endeavor. For an enlisted prospect, it’s not easy to pick up the phone and call a franchise development person or to call 20 current franchisees for validation. They need online tools—ondemand webinars, a PDF of franchisee satisfaction reports, easy-to-access educational materials—that they can look at wherever and whenever they want. If a franchise doesn’t offer these materials on their site, prospective franchisees should ask for them. As one Signal 88 franchisee told us, email may be the primary mode of communication for vets considering a franchise and the way they conduct the majority of their due diligence.
It’s important to note that, although many companies aggressively recruit veterans through discounts and other special offers, not all of them provide great opportunities for vets. Thorough due diligence—especially research into how other vets have fared in the system-is still a requirement for any prospective franchisee.
Concepts/Sectors Our research on veterans in franchising falls closely in line with our research on franchising in general – the most successful franchisees don’t necessarily have direct experience in their particular industry sector. And in the case of those with military experience, they aren’t necessarily drawn to sectors or services that match their military specialties. This was certainly true of Sport Clips franchisee Chris Parker, who spent 22
years in the Air Force before becoming a franchisee. Parker and his wife Karen ended up buying a Sport Clips franchise after working with a business ownership coaching firm and researching dozens of franchise opportunities. “It was a giant step for us because neither Karen nor I had any experience in either business or hair care. For us to do this, we needed to make sure we were comfortable enough to execute the game plan,” Parker said. Of course, many vets are drawn to handson concepts—such as Signal 88, Snap-on Tools, Auto Appraisal Network, and TeamLogic IT —that require skill sets similar to what they did in the military. The military breeds a lot of younger vets that are mechanical or technical or they specialize in other areas that require hands-on “hard skills.” Many of these
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ex per t advice
Molly Rowe, Editorial Director, Franchise Business Review
“Franchisors told us that franchisees who have had successful military careers often outperform non-military franchisees.”
Top 100 Franchises for VETERANS Advertising & Sales
veterans would not be attracted to a retail or food franchise because of the skills required to run those businesses. When it comes to our Top Franchises for Veterans, the top companies on our list are split across several franchise sectors: Advertising & Sales (1 company), Automotive (6 companies), Business Services (4 companies), Child Services (2 companies), Cleaning & Maintenance (12 companies), Finance & Tax (5 companies), Fitness (2 companies), Food & Beverage (15 companies), Health & Beauty (2 companies), Home Services (8 companies), Pet Services (1 company), Real Estate (4 companies), Retail (4 companies), Senior Care (6 companies), Services (21 companies), and Sports & Recreation (2 companies), Technology (2 companies), and Travel (3 companies).
Investment Levels Our research on investment levels most popular with veteran franchisees once again falls in line with trends across all of franchising. Veteran franchisees, like their non-veteran colleagues, are drawn to a wide range of investment opportunities. Franchise Business Review’s 2012 Top 100 list includes a diverse group of investments, starting as low as $5,675 for a Sit Means Sit dog-training franchise and exceeding $4 million a food concept like Quaker Steak and Lube.
Franchisee Satisfaction In our recent survey of close to 3,500 military trained franchisees, we found ten brands that especially stand out when it comes to franchisee satisfaction: Heaven’s Best Carpet Cleaning, CertaPro Painters, Sotheby’s International Realty, American Poolplayers Association, Cruise Planners, Home Instead
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Senior Care, FASTSIGNS, TeamLogic IT, Miracle Method Surface Refinishing, and Jan-Pro. Not surprisingly, many of these names are the same brands that top our annual list of Top Franchises for all of franchising. It makes sense that brands focused on overall franchisee satisfaction would also have high satisfaction among franchisees who are veterans.
Proforma
Summary
Tint World
Hundreds of franchise brands offer special discounts and incentives to prospective franchisees with military experience, making it an excellent time for veterans to consider a franchise opportunity. Franchise brands recognize the significant strengths and related skills that veterans can bring to a business—especially a franchising business, which is built around systems, teamwork, and following a step-by-step protocol. Franchisees with military experience aren’t necessarily guaranteed success, but they may have more characteristics for success than non-veterans. From the perspective of a potential franchisee, veteran or not, it’s always important to carefully research a particular brand before investing. Even though a number of franchise brands offer special incentives to franchisees with military experience, these brands should still be thoroughly vetted to ensure a good fit. Prospective franchisees (especially those stationed abroad) should ask franchisors for online company materials and financials, franchisee satisfaction reports, webinars, and anything else you need to make the research process easier from afar. Perhaps most importantly, you should contact existing franchisees who are veterans to get the true picture of how well the system supports vets.
Automotive Auto Appraisal Network Christian Brothers Automotive Color Glo International LINE-X Snap-on Tools
Business Services ActionCOACH FASTSIGNS International FocalPoint Coaching Sandler Training
Child Services The Goddard School Mathnasium
Cleaning & Maintenance AdvantaClean Aire-Master of America Anago Cleaning Systems (Master Franchisors) Buildingstars DKI (Disaster Kleenup International) Heaven’s Best Carpet Cleaning Jan-Pro (Master Franchisors) MaidPro Martinizing Dry Cleaning Office Pride Oxi Fresh Carpet Cleaning The Maids
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Finance & Tax
Pillar To Post
Unishippers
Cash Plus
Surface Specialists Systems
Weed Man
Liberty Tax Service Murphy Business & Financial Padgett Business Services Tax Centers of America
Fitness Brickhouse Cardio Club Koko FitClub
Food & Beverage Auntie Anne’s Charley’s Grilled Subs Checkers & Rally’s Culver’s Firehouse Subs Ground Round Happy and Healthy Products Jack in the Box McAlister’s Deli Papa Murphy’s Penn Station Quaker Steak & Lube Simple Simon’s Pizza Uno Chicago Grill Yogurtland
Health & Beauty European Wax Center Sport Clips
Pet Services Sit Means Sit
Window Genie
Specialty Retail Aaron’s
Real Estate PropertyGuys.com Sotheby’s International Realty United Country Real Estate
Big Frog Custom T-Shirts Interstate All Battery Center Wild Birds Unlimited
Value Place
Sports & Recreation
Senior Care
Kampgrounds of America/ KOA
BrightStar FirstLight HomeCare Home Instead Senior Care Homewatch CareGivers Right at Home Visiting Angels
Services 1-800 Water Damage 1-800-GOT-JUNK? Boulder Designs Caring Transitions Fish Window Cleaning Services GoWaiter.com Molly Maid Mosquito Squad Paul Davis Emergency Services Paul Davis Restoration Pestmaster
Home Services
PostNet
ASP - America’s Swimming Pool Co.
Precision Concrete Cutting
Budget Blinds
Precision Door Service
CertaPro Painters
Ram Jack
Five Star Painting
Signal 88 Security
HouseMaster
Truly Nolen of America
Miracle Method Surface Refinishing
Two Men and a Truck
American Poolplayers Association
Technology Computer Troubleshooters TeamLogic IT
Travel Cruise Planners CruiseOne Expedia Cruise Ship Centers Molly Rowe joined FBR in 2010 to lead the company’s editorial efforts both on the research side and in marketing. In this role, she manages the publication of FBR’s many special reports; authors industry articles, blogs, and newsletters; and oversees FBR’s marketing content. A former journalist, she also handles all media outreach for the company and has greatly increased FBR’s exposure in both the mainstream media and industry publications. Prior to joining FBR, Rowe was executive editor at HCPro, a publisher of compliance, training, and management information for the healthcare industry, and a writer for HealthLeaders magazine. For More Information: Web: www.franchisebusinessreview.com Full Report: http://franchisebusinessreview. com/content/files/FBR_Top_Franchises_ Veterans_2012.pdf
Franchising USA
ex per t advice
Steven A. Rosen, Chairman Emeritus, FranNet
“C” Level Executives and Franchising A CONFLUENCE OF NEEDS
“For the outsourced executive, employment options are limited as more and more corporations eliminate levels of management as a means of increasing profitability since controlling expenses is easier than increasing revenue in a sluggish economy.” For more than 20 years, I have met with and consulted with talented C Level Executives who have sought my assistance in helping them evaluate franchise opportunities.
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In each case, they were seeking to find an opportunity which met their personal goals and business objectives. Why is this noteworthy, and worthy of discussion in this article? In and of itself, the answer is “Nothing”. What is noteworthy is the composition of the individuals; their motivation for consulting with me; and their decisionmaking process. They are individuals with the same sort of managerial backgrounds as those who I met earlier.
But the external factors which have caused them to explore business ownership have changed in a major way. Today is not the first time that corporate executives have been downsized, and are willing to consider all options in their career transition. Nor is it the first time that employed executives have explored business ownership as a strategy to increase and diversify their current income and build wealth and equity for themselves and their family in the same way they
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might consider any other investment. In both cases, franchising is a very viable option for reasons discussed later. As a result of working together one on one with a client, we create the business model which defines the business goals and objectives of each unique client. We identify franchises which seemed to fit the model, we make a thorough investigation of those franchises by doing the research and due diligence which anyone would do in making such an important decision, and then move to a final decision of whether to move forward or not. Our goal, of course, was and is to gather all of the pertinent information necessary to make a well thought out and well informed decision. It is axiomatic to conclude that some of the people I have consulted with have decided to join a franchise system, while others did not.
The Changing Economy So, what has changed and why is the decision process and the dynamics of reaching a decision different? The answer has to do with the changes in the nature of our economy and the options open to even the most experienced executive to remain in or return to the corporate suite. Even if the downsized executive is fortunate enough to secure a new position, upward mobility and the opportunity to build personal wealth is much more limited than in the past. For the outsourced executive, employment options are limited as more and more corporations eliminate levels of management as a means of increasing profitability since controlling expenses is easier than increasing revenue in a sluggish economy. That person may also find that the positions which are available pay a lower salary than the salary they earned in the past with less upward mobility, and may also require relocation of family. For
those executives who are still employed, upward mobility is also an issue as is job security and the fear of corporate restructurings and reorganizations. These are the categories of people I meet with and attempt to help. I help them explore alternatives. It isn’t that this never happened in the past, but it is a different dynamic than the person who met with me because they had a goal of being their own boss and were prepared to risk their capital to become an entrepreneur. Of course, there are still such people and they are very motivated to explore new opportunities. But there are many more “involuntary entrepreneurs� who want to take a risk because they fear that the corporate universe will not provide them and their family(s) the chance to have the income and security they want. For each of these people, owning their own business is a viable option, either as a new career option for the executive in transition or as a supplemental investment for an executive who is still employed but interested in hedging against the
uncertainties of employment. In both cases they seek to take control of their career and not leave their future in the hands of others. The decision works for those seeking a new career, or those who want to build wealth by investing in a business and perhaps having a strategy in the event their employment status changes voluntarily or involuntarily.
Franchising As an Option For all of these people, franchising offers options and becomes a way of utilizing the skills acquired and honed in the corporate world and using them to build something which is owned and controlled by the new business owner. And just as those skills are put to use to build a valuable asset and give the new business owner the ability to create the business they are in control of, they are the same skills which a franchisor is looking for in a new franchisee. Of course, quality franchisors have to offer a good product or service to be successful in the marketplace. But it is as important to find someone who can follow the system which the franchisor has created and
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ex per t advice
Steven A. Rosen, Chairman Emeritus, FranNet
apply the managerial skills which have been developed in corporate settings. For the new business owner, it represents an opportunity to take advantage of what they have developed as an employee and apply it to successfully start and develop his or her own business. It is, in short, the marriage of the needs of both franchisor and franchisee and it becomes the basis of the new partnership of the two. The franchisor has perfected a system which has been accepted in the marketplace and is willing to license it to a new franchisee in return for the new franchisee risking capital to start the business and executing the business plan developed by the franchisor. The new franchisee, in return for risking capital and executing the plan and following the system, owns a business that can give him or her control and security which cannot be had working for someone else. By following the system which has proven to be successful in the marketplace, the probability of success increases significantly. Moreover, from a franchisor’s perspective, there is a partner with a vested interest in success and the franchisor is incented to make sure that success in the marketplace is current and ongoing. That is the definition of the franchise relationship, irrespective of the franchise or the industry. When we hear in the media that it will be small businesses that create the jobs of the future and generate growth in the economy, many of these are new franchise locations. Franchisees are entrepreneurs taking a risk by starting and building a business and hiring employees as the business grows.
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The Franchise Selection Process Franchising takes many forms and covers multiple areas of business. I represent more than 90 quality franchise concepts which use my services to find new franchisees for their system. They range from food concepts, to automotive repair, education, senior care, business to business services, retail establishments and consumer or end-user services. If it were me, most of these businesses would be of no interest. Not because they aren’t good businesses. In fact all of them have been thoroughly vetted and they are quality companies. But they don’t meet my particular business model which is, by definition, different from the model of others. My interests, skills, risk tolerance and business goals will determine the business which would be of interest to me. That is why developing the business model is so important. It will begin to define what type of business I should begin to investigate. How soon must I
begin to generate income? Do I want to be a full time or part time semi-absentee owner? Do I like sales, or am I looking for a business in which the customer buys from me because of my location versus me visiting them? Can I handle managing many employees, or do I want to have few employees? Am I looking for a business which will enable me to own multiple operating units or even an area to develop, or do I want a business in which I have a single unit or territory so long as it gives me the income and satisfaction I seek? All of these questions go through the mind of my candidate in an attempt to find the “right” business. And, of course, can I handle the risk? Also, how is this opportunity better or worse than other opportunities I am considering?
Finding the Right Opportunity Today, I consult with individuals who have been downsized and are looking into owning a business because it is an attractive alternative to their other options. However, they have to replace an income
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and will probably need income sooner than someone who is still employed. But I am also consulting with individuals who are still employed and cannot give full time and attention to a business if they start one. Current income is desirable but not pressing. The latter may be more interested in a semi-absentee business which can be operated by managers and employees, with the overall oversight of the business owner. Finding the “right� business is usually a personal decision determined by the needs and goals of the owner and knowing that starting a new franchise is statistically less risky than an independent start-up operation. Steven A. Rosen is Chairman Emeritus of FranNet, an international franchise consulting firm and President of Sunbelt Business Brokers of Pennsylvania. For the last two years, FranNet has been designated one of the fastest growing small companies in America by INC magazine. Sunbelt is the largest brokerage firm in the world and is engaged in the most transactions. As past President of the Pennsylvania Business Brokers Association, Steven has shown leadership in his field. Steven is a member of the following organizations: American Bar Association, Pennsylvania Bar Association, International Business Brokers Association, International Franchise Association, Pennsylvania Business Brokers Association and M & A Source. For More Information: Phone: 610-941-2195 Email: srosen@frannet.com Web: www.frannet.com/srosen
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ex per t advice
Jenna Kantrowitz, Senior Account Director, Fish Consulting
are you
Socially Savvy? T op S ites for F ranchisees N avi g atin g S ocial M edia
“Small businesses need to become more proactive in monitoring their Internet presence because with new social media tools, every person online is potentially a writer and influencer regarding your product or service.”
As a franchisee and small business owner, you can’t afford not to explore the social media space because over the last 10 years there has been a significant shift in the way people access information about you and your business.
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The Internet has forever changed the way we communicate, the way we buy and the way we interact with content and other people. It has made the whole world into a networked marketplace; and what truly makes it different from any other form of communication is that users are now actively looking for information about you – they are starting the communication cycles. Did you know that approximately 70 percent of all Internet users are finding their news about a company or product online? Tapping into this qualified audience just makes good marketing sense. Social media, networking and bookmarking is allowing your customers to interconnect like never before and share both good and bad information about your business. With this shift in media consumption, your online visibility and brand perception
should be an integral component of your overall marketing mix. Small businesses need to become more proactive in monitoring their Internet presence because with new social media tools, every person online is potentially a writer and influencer regarding your product or service. With that said, below is some of what we believe are the top social media sites to help you get involved. The trick is to navigate through the clutter and find the ones that will work best for you.
Facebook Clearly the 800-pound gorilla with 1 billion active users, Facebook is a must for any small business owner. Franchisors differ in their Facebook strategy and guidelines for their franchisees, so be sure to understand these thoroughly before venturing into the Facebook world. Regardless, Facebook provides franchisees and their teams a widely used virtual
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marketing tool to reach your customers. They are on Facebook, so should you. We’ll skip the basics of how to set up
your page, but Facebook is your chance
to extend your local presence online and
communicate with your past, present and future customers. You should consider
Facebook your virtual storefront, where
you can share (and justify) your expertise, differentiation and product/service to
your customers. Don’t just slap discounts and commercialized promotions on your Timeline, build a relationship with your
“likes” and get them to engage with your brand. Empower the mavens to be your
ambassadors in the community. On social
media, it is as much about the ROE (return on engagement) as the ROI.
Twitter It’s hard to turn a corner these days without hearing about Twitter and its impact on businesses and social media. Twitter is about conversation. It’s about finding people talking about you and what you sell and engaging them in conversation because they are your business influencers. One of the most underutilized aspects of Twitter for most business owners is the Advanced Search feature that allows you to search for specific keywords around a particular zip code. It gives you the power to address complaints head on, answer any consumer questions and create an awareness of your brand in your specific city. For example, say you own a boutique wine shop and you’re looking for new wine club members. You can perform a search
for “wine near: 33021 within 25” and find people 25 miles outside of Hollywood, FL who are talking about wine.
Yahoo Answers There are quite a lot of question & answer sites out there, but Yahoo Answers stands out because of its large contributor base and its ability to put you in contact with people who are asking the question specific to your location. For example, there might be gentleman in Denver looking for print and digital copy services, or someone in San Antonio who is trying to find out about the best salad restaurant in his town. These are opportunities for a small business owner to reach out and respond directly to a targeted customer’s request. You just have to get out there and
Franchising USA
ex per t advice
Jenna Kantrowitz, Senior Account Director, Fish Consulting
do it. Yahoo Answers is also valuable because you can brand yourself as an expert source in your community by answering questions relevant to your business category.
to them on a more personal level. There are a number of blog platforms to get you started including Wordpress and Google’s Blogger, among others.
Blog
LinkedIn is a social networking site that exists to help you make better use of your professional network and help the people you trust in return. LinkedIn is an interconnected network of more than 175 million experienced professionals from around the world where you can find, be introduced to, and collaborate with qualified professionals that you can work with to accomplish your goals. When you join, you create a profile that summarizes your professional expertise and accomplishments. You can then form enduring connections by inviting trusted contacts to join LinkedIn and connect to you. Your network consists of your connections, your connections’ connections, and the people they know, linking you to a vast number of qualified professionals and experts. Through your
A blog is a differentiator between you and your competition. It not only acts as a customer information and educational tool, but also encourages customers to interact with you. It puts a human voice to your business and allows you to become more intertwined with the online community. A corporate blog will allow you to proactively participate in conversations and affords you the chance to interact more with other blogs and websites. This flexibility to interact in the wider online customer community means additional benefits in the areas of higher search engine rankings and exposure to new audiences. In addition, a blog can serve as an excellent crisis management tool as well. A blog is your space to show your customers who you are and to listen
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network, you can find and be introduced to potential clients, service providers, discussion groups and subject experts who come recommended to you. You can also engage your connections to endorse or recommend you based on your business experience with them. Social media remains a cost effective way for many small businesses to reach out and interact with their customers. It will allow you to create more targeted, more manageable online communities that can help convert sales both online and off. The trick is not to try and be everywhere, but instead to be where your customers are. Jenna Kantrowitz, is Senior Account Director at Fish Consulting. She helps franchise clients promote, protect and grow their brands. For More Information: Email: jkantrowitz@ fish-consulting.com Web:
www.fish-consulting.com
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Join a Certain Industry in an Uncertain Economy The rent-to-own industry is a $7 billion business, and it is growing. With an economic climate that is uncertain, consumers are turning to rent-to-own to get the appliances, furniture and electronics they want and need at prices they can afford. ColorTyme is the nation’s most experienced rent-to-own franchisor, and there’s never been a better time to become part of the ColorTyme team with in-house financing, multiple markets available, low franchising fees and many more advantages.
RENT TO OWN
Appliances Electronics Furniture Scan for more information
972.403.4905 Franchise.ColorTyme.com
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f ra nchise in focus
Spor t Clips
Sport Clips: A n M V P C oncept
Occasionally you come across an idea that makes you step back and ask yourself, “Well, why didn’t I think of that?” Sport Clips Haircuts is one of those ideas. In the early ‘90s, Sport Clips Founder and CEO Gordon Logan recognized the huge potential, and relative lack of competition, in the men’s and boys’ haircut market. To take advantage of this, Logan assembled a top management team and developed the unique Sport Clips Haircuts concept, which included groundbreaking new haircutting systems, operating procedures and marketing programs, designed to fully capitalize on this large, underserved market. Sport Clips’ rapid, yet controlled growth, has become a textbook example of how to do things right. With the first location opening in 1993, and franchising beginning in 1995, Sport Clips is now the nation’s leading men’s and boys’ hair care provider with more than 950 stores in 42 states. The mission of Sport Clips is to “create a championship haircut experience for men and boys in an exciting sports themed environment.” They offer quality male hair care services and are known for their “MVP Experience” that includes a precision haircut, invigorating scalp massage with Tea Tree shampoo, a classic hot steamed towel treatment, and a
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relaxing neck and shoulder massage. But Sport Clips is not just another place to get a haircut. It’s a guy-friendly alternative to traditional salons and spas. Everything about Sport Clips is designed to be comfortable and non-threatening for boys and men, from the decor, to the products and services, to the language, and let’s not forget the flat screen televisions throughout each location, all tuned to sports of course! Sport Clips is more than a million dollar idea. It’s a billion dollar idea, having reached a “billion dollars in haircuts” earlier this year, after only 16 years of franchising. “We started Sport Clips to meet an underserved niche in the market, and reaching this milestone affirms that the vision is now very much a reality,” says Logan. “Our continued growth as a successful franchise opportunity and service provider is made possible by our clients across the country who choose Sport Clips for their hair care needs and our team members who have chosen Sport Clips for their investments and their careers.” The Sport Clips concept continues to grow, with 128 new stores open this year to-date, and plans to reach 1,000 by the end of 2012. Expansion into the Canadian market is planned to begin in early 2013. Sport Clips has made a name for itself in the business world, through its rapid and solid success. The franchise has ranked in the top 50 “fastest growing” for the seventh straight year in Entrepreneur Magazine’s “Franchise 500”, in the top 10 in Forbes’
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“Top 20 Franchises To Start”, and in the top 50 in Dun & Bradstreet’s AllBusiness. com “2011 AllBusiness AllStars”. Long before staking his claim in the business world, Logan served as an Aircraft Commander in the U.S. Airforce from 1969 to 1976. His commitment to the military is reflected in the commitment of Sport Clips as the “Official Haircutter” of the Veterans of Foreign Wars (VFW). Through their “Help a Hero” program, Sport Clips has become the VFW’s largest “free call days” sponsor for Operation Uplink, raising more than $1.3 million since 2007 and providing almost 2 million phone calls home for hospitalized and deployed U.S. soldiers. “Our generous clients and team members have helped make our Help A Hero program a true success,” says Logan, a lifetime member of the VFW and VFW Foundation board member. “An average of more than 30,000 calls have been made by
“Sport Clips is more than a million dollar idea. It’s a billion dollar idea, having reached a “billion dollars in haircuts” earlier this year, after only 16 years of franchising.” our hospitalized veterans and active-duty service members – many on their second, third, or even fourth deployment - during our sponsored call days so far this year.”
extends into the sports world as well,
Veterans interested in owning a Sport Clips get a $5,000 discount off Sport Clips’ franchise fee of $49,500 through participation in the Veterans Transition Franchise Initiative, also known as VetFran, which was created in 1991 during the Gulf War. Sport Clips was also recently listed on Franchise Business Review’s Top 100 Franchises for Veterans, in a survey of 3500 veterans across the country.
partnerships with several teams in the
The generosity of the Sport Clips franchise
which seems only fitting. Sport Clips is a proud sponsor of Joe Gibbs Racing’s
NASCAR driver Denny Hamlin, and holds National Basketball Association (NBA), Major League Baseball (MLB), and National Hockey League (NHL).
This is a franchise concept that is fun,
successful, and unique. You may not have thought up the idea of Sport Clips. But you can still own a piece of it. For More Information: Web:
www.sportclips.com
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ex per t advice
Brianne Mooney & Gary Kalina, Lamb, Little & Co.
So Your Employee was Injured at Work? N ow W hat ? ? ? Step #1: Have a basic understanding of how Workers Compensation coverage works so that you can be assertive in explaining it to injured employees.
As business owners you are extremely busy with your day to day activities as you try to run a profitable operation.
juggling act and, perhaps, a chainsaw just
You have a number of balls in the air including your efforts to provide a safe environment for your staff and customers. One day an employee informs you that they have been injured at work thereby throwing several more balls into your
keep them from running to an attorney?
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to elevate the degree of difficulty.
What do you do? How do you help your employee get back to their normal job
duties? What can you do to ensure their
Workers’ Compensation benefits are issued to them timely and properly? How do you This article is designed to answer these
questions and more while providing you
with simple steps and some helpful hints to help navigate this scenario
There is a major misconception among small business owners that the availability of Workers’ Compensation benefits should be shrouded in secrecy after an employee has been injured at work. The thought process is that proactively informing your injured employee is tantamount to pushing them towards the Workers’ Compensation system. This can’t be further from the truth. Think about it…when your employee is injured on the job they are hurt and probably scared. Whether the injury is big or small, chances are they do not know what to expect. They are concerned about their ability to keep their job, their ability to provide for themselves and their family…and frankly, they are concerned about damaging their relationship with you. As their employer, they are looking to you for your guidance. So we suggest
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be all that it takes to ease the mind of your injured worker. Medical Benefits: Cover the medical expenses to treat the injury. These expenses are paid directly to medical providers by the Workers’ Compensation insurance carrier. There are no out of pocket expenses such as co-payments or deductibles for your employee to worry about. Indemnity Benefits: Can be classified under two different types: “Lost Time” indemnity pays your injured worker a portion of their Average Weekly Wage (AWW) while they are off work. “Settlement” indemnity is considered the resolution of the claim and, in theory, is payment to your employee for the injured part of their body that presumably will never be back to100%. TIP: If an employee has payroll deductions such as 401K, health insurance, etc., please note that these deductions are not paid by the insurance carrier while the injured worker is on temporary total disability. Temporary total disability is a non-taxed benefit. Penalty benefits: Though rare, penalties can be paid in a situation where benefits are not paid to the employee in a timely fashion. This can be the result of a claim that is not reported timely by an employer or if the insurance carrier causes a delay in benefits. It is important to understand that each state has a different structure as it relates to these benefits. that you make understanding Workers’ Compensation benefits a priority, so that you can explain them to the injured employee. Let me rephrase that last paragraph in a more blunt fashion – if you can’t provide your injured employee with the peace of mind they are seeking, there are countless attorneys that advertise they will… oh… and those attorneys don’t beat around
the bush. They’ll come right out and ask “Have you been hurt at work today?” Which leads me to this: Hard Truth: If your injured employee hires an attorney to help them wade through the Workers’ Compensation waters, you can count on that claim taking longer and settling for more money. Understanding the core Workers’ Compensation benefits in your state could
TIP: Did you know most states have their own Workers’ Compensation website? For example, the Illinois Workers’ Compensation Commission website has an Employee Handbook of which is a cliff note version of the Illinois Workers’ Compensation Act. Let your employees know they can Google their state site for more detailed information. You may also want to take a look at the site to be familiar with your specific state benefits.
Franchising USA
ex per t advice
Brianne Mooney & Gary Kalina, Lamb, Little & Co.
Step #2: “Freeze the Facts” by carefully performing your own official investigation of the claim. It’s called Workers’ Compensation because it is a system designed to benefit the Worker. Unfortunately, it is also a system that can be easily manipulated by the worker. That is why we recommend a multi-point, written accident investigation of any claim scenario in order to “Freeze the Facts”. When your employee comes to you to report a work related injury, have them complete, or complete with them, an accident investigation report (of course, you can have it completed at a later date if emergency treatment is a necessity). It is also a good idea to have this report in other languages to accommodate a diverse workforce. Make sure this report is signed and dated. When they sign and date the report, the facts are frozen. Additionally, have the injured employee’s supervisor complete and sign a “supervisor’s report” so that their understanding of the incident is on record. The same holds true for a “witness report” for any coworkers who witnessed the incident. Freeze those facts!!! Some claims are difficult and can take years to resolve through litigation. During this time memories can fade and a critical party’s story can change. These forms can provide evidence of what was initially reported or even remind a party what happened at the time. In short, a proper initial investigation will allow the insurance carrier to effectively confirm the compensability of a claim or, on the flipside, to effectively dispute a fraudulent claim. A nice by-product of having a comprehensive, multi-point accident investigation procedure is that, in addition to, “freezing facts” you are also uncovering good information to help build strategies to prevent similar injuries from happening.
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Your insurance broker or carrier should be able to provide you with accident investigation forms. TIP: Ever have an employee walk in on a Monday morning and tell you they sustained an injury from an accident on Friday but you know very well that your employee is in a weekend softball league or had planned on moving furniture over the weekend? Or have you ever received a claim 2 years after the fact without any documentation it happened? Think about whether a weekly or monthly timesheet signed by your employees to indicate they had a safe work day can be worked into your everyday policies and procedures.
Step #3: Report the claim to your Workers Compensation Carrier. OK, you have already thoroughly investigated the claim and have frozen the facts. Now it is time report the claim. Typically this is done via a toll free number provided by your insurance carrier. Early claims reporting can have a huge impact on the success and cost of a Workers’ Compensation claim. Once you report the claim, the insurance carrier should complete a three point
contact which consists of contacting you, the injured employee, and their medical provider within 24-48 hours upon receipt. Reporting the claim early leaves most of the accident information fresh and gives the adjuster greater control over medical treatment. The adjuster will have a better handle on the claim from the beginning. Fact: Studies show that even reporting claims 8-14 days after the injury has occurred can increase the value of a claim by 4%. If the injury to your employee necessitates that they need time off from work, it is a good idea to check in with them now and again. Don’t forget to remind them that they are a valuable member of the team and that you look forward to having them back when they are ready. Remember, a good employee will usually only seek attorney representation if they feel that their livelihood is threatened or that their employer is not looking out for their best interest during their claim. All that said, insurance carriers do not want injured workers making a habit of staying at home watching daytime TV, and neither do you. The cost of ”lost time” benefits that we discussed earlier can be very expensive. This is why
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your insurance carrier prefers that as an employer you have a light duty program capable of bringing an injured worker back to some variation of work. A physician can release an injured worker back to work with specified restrictions. Whether it is a lifting, ergonomic, or hours worked restriction, try to accommodate them to the best of your ability. Sometimes this is in a role different than the one they left. Perhaps filing or answering phones or some other office work that needs catching up. There have been a few carriers who have even placed light duty work through not-for-profit programs such as the Salvation Army. Remember, the idea of light duty is for it to be temporary, until the injured employee is fully healed. TIP: You don’t have to be able to accommodate light duty on a full time basis or full wage basis. The difference of the wages would be paid through the claim by the carrier. Check about the Temporary Partial Disability laws with your state. Even a couple hours of work a day can reduce claim costs.
Step #4: Set-up regular claim reviews with your insurance broker and insurance carrier. We are in the information age and many of us have switched to communicating primarily via voice-mail, e-mail and text messages. However, claims can be long, complicated and ever-changing. That is why we recommend that you set-up claim reviews with your agent and insurance carrier. A claim review brings all parties together to openly discuss the current status and plan of action to resolve a claim. We suggest that these claim reviews be performed in person or on a conference call because it’s a great way to meet your adjuster and develop a relationship with them. Is there attorney involvement? Invite the carrier defense counsel. While everyone is talking to one another, ideas can be formed that might be overlooked in an email.
“Understanding the core Workers’ Compensation benefits in your state could be all that it takes to ease the mind of your injured worker.” Hard Truth: Insurance carrier claims adjusters can have hundreds of open claim files in their workflow at any given time. It is only natural that some items may slip through the cracks. You don’t want one of those items to be an open claim reserve that could have been reduced or closed completely. A seasoned Claims Manager at your insurance brokerage can “talk the talk” to get these changes made more effectively. Hopefully, you can be prepared the next time an employee comes to you with an injury. You can stop them from running to an attorney. You can control the costs. You can weigh in on the outcome. In this litigious society, following these steps will help to keep your injured employees on your side. Ms. Mooney has been working in the insurance industry for 15 years. The last 12 years has been focused on Workers Compensation with two insurance carriers. Ms. Mooney enjoyed claims administration for a vast account history including construction, healthcare and manufacturing. The claims that come from these clients have been from the smallest laceration to major catastrophic issues. Ms. Mooney is the Claims Manager with Lamb Little & Company. She uses her claim handling experience to act as an advocate for the clients. She is responsible for monitoring and trouble shooting issues on large, complex claims. She also performs regular claim reviews to make sure that the reserves are appropriate and to ensure that the insurance carrier adjusters are handling the claims properly. Ms. Mooney lives in the South Suburbs
of Chicago with her husband and two sons. Gary Kalina has been in the insurance industry for over 10 years. As a Commercial Insurance professional, he is charged with providing his clients, and prospective clients, with a fullservice solution to risk transfer, risk financing and insurance placements. His philosophy is that a commercial insurance program is not a commodity that can be simplified into solely a “market price”. Instead, his goal is to work with his company partners to affect his customer’s bottom lines. While this includes providing programs that are sensibly priced it also includes implementing safety prevention strategies to mitigate costly claims from occurring; Providing claims management reviews and consulting in order to mediate claims that do happen so they are closed swiftly and accurately; And reviewing client contracts from an insurance angle to inform his clients if they are contractually putting themselves at risk. Gary is a Vice President at Lamb Little & Co, a full service insurance agency in the Chicago area that has a national reach. Gary is also active in the Claims Advisory Boards of his insurance carrier partners. He lives in the Chicago area with his wife and two small children. For More Information: Phone: Email: Web:
847-230-3218 bmooney@lamblittle.com gkalina@lamblittle.com www.lamblittle.com
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f ra nchisor in depth
Dog topia
L ive , L ove , & P lay with
Dogtopia Amy Nichols founder and CEO of Dogtopia, was an avid dog lover and business woman when she opened the first Dogtopia in 2002 in Tysons Corner, VA. It was the first dog daycare business in the area. She saw a need for busy professionals who loved their dogs and needed alternatives to leaving them home alone during their long work days. Dogtopia was an almost instant success.
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In 2004 Dogtopia of Tysons Corner grossed more than $1 million and Amy knew there was unlimited potential! In 2005 she franchised the concept nationally, and to date there are 24 Dogtopia franchise locations across the country and three corporate stores. We wanted to find out a bit more about Amy, about Dogtopia, and about franchising opportunities with this unique and successful company. Amy was kind enough to answer some questions for us.
How did you come up with the idea of Dogtopia? I was working 12-hour days and felt guilty that my Boston terrier, Griffin, was home by himself all day long. One day I came home and he was eating a pair of my favorite shoes! After a long day at the office, he wanted to play and I was exhausted. I started looking into dog daycare because I realized he needed the socialization and exercise while I was at work, but there were no options near my house. I started researching the open play business model and recognized a real need for it in the area where I lived. I did a ton of research, including attending multiple dog behavior seminars, and set about creating a business plan to open my own dog daycare. A few months later I decided to leave my corporate job to pursue it full time. After looking at dozens of buildings (and having dozens of Landlords tell me no), and being turned down by 12 banks for a business loan, it all finally came together at the beginning of 2002 and I opened the first Dogtopia in Tysons Corner, Virginia. It was an exercise in perseverance to be sure.
What services do you offer dog owners? Our main service is dog daycare, which generates about 65-70% of revenue. On average, daycare customers come twice
a week. Demand for boarding usually increases during the summer and the holidays when people tend to travel. There is a strong need for dog daycare. According to the 2011-2012 APPA National Pet Owners Survey, 62 percent of U.S. households own a pet, which equates to 72.9 million homes. We look at the number of dog owners who want our services and recognize this market is very underserved. Nowadays people are really busy. What better way to exercise and entertain a dog than with other dogs?
What makes Dogtopia different from other dog daycare service providers? Dogtopia locations combine a unique combination of pleasing aesthetics such as our ceramic tile lobbies with corian countertops, and important safety considerations such as our recycled rubber flooring and the use of solid walls and separate playrooms rather than fencing. We want the owners to feel good about where they are leaving their dog to play and we also want to have the safest environment possible. Dogtopia owners benefit from four distinct revenue streams: dog daycare, boarding, spa and grooming,
and retail. With multiple revenue streams, Dogtopia is able to uniquely serve the pet service marketplace. We place more emphasis on our spa and grooming services than our competitors and make it a beautiful focal point at the front of our stores. Clients can see their dogs being bathed or groomed through a large window at most of our locations. Each Dogtopia location also has its own microsite so that customers can easily find the information they need, including pricing, services, contact information, photo galleries, and even webcams to view the dogs while playing. We also have and encourage our Franchisees to have an active social media presence.
How many locations does Dogtopia currently have? What are your expansion plans? Today we have 24 franchised locations and three corporate stores, for a total of 27 locations operating in the U.S in 11 states including Virginia, Maryland, Deleware, New Jersey, Texas, North Carolina, Tennessee, Colorado, Nebraska, Indiana, and California. Two additional locations are in development for a total of 29 units to be operating by year end. We recently
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f ra nchisor in depth
Dog topia
announced a strategic partnership with Thomas Franchise Solutions (TFS) and plan to expand to 400 locations across the United States and Canada over the next seven years. We’re targeting major metropolitan areas in the United States and Canada for expansion via Regional Developers. Some of these areas are Chicago, San Francisco, Dallas, Phoenix, South Florida and British Columbia. We are also focused on adding locations in areas where we already have at least one Dogtopia location. With our new partnership with TFS, we have unlimited potential to expand.
What makes an ideal Dogtopia franchisee? We’re seeking regional developers and franchisees who love and care about dogs, but most importantly are focused on owning and managing a business. It is also critical that all regional developers and franchisees share and uphold Dogtopia’s core values. Candidates should believe in the values of honesty, integrity, and responsibility and be passionate about serving our clients – the dog and their family – and have a strong desire to be active members of their community.
What training and support do you offer Dogtopia franchisees? Dogtopia franchisees own their own business, but are never in business alone. From signing to opening, Dogtopia’s hands-on team provides the proven training programs and necessary resources to ensure its franchisees’ success. Franchisees receive comprehensive training in all aspects of owning and operating a Dogtopia, including mandatory two-week training at the home office. Franchisees are encouraged to bring at least one employee who also learns how to operate the business. In addition, franchisees also receive ongoing training and support in customer service, sales, human resources and overall
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“We’re seeking regional developers and franchisees who love and care about dogs, but most importantly are focused on owning and managing a business.” employee management. Dogtopia also provides franchisees with access to a powerful marketing program that includes professional branding, customizable local marketing materials and collateral, as well as national advertising and public relations designed to build brand awareness and drive customer traffic. Since we own three corporate locations we always have our finger on the pulse of the industry and the challenges faced daily within our stores. The original store is now over 10 years old. We own a store that just turned 6 years old, a two year old store and a brand new store we are opening in Baltimore, MD. This has really kept us tuned into the needs of our franchisees – we experience what they are experiencing and we use the corporate locations as testing facilities for any new services or programs prior to rolling-out to the rest of the system. Dogtopia’s philosophy of live, love, and
play extends beyond their clients into the community. Charitable giving and active community service are extremely important to Dogtopia. The company sponsors foster dogs, and offers a first day of care free to dogs rescued from shelters. Dogtopia’s annual K9 Support Dog Wash raises funds to support military, rescue, and service dogs.
Dogtopia – Our Philosophy We live with honesty and integrity, because you’re entrusting us with your precious canine family member. We love supporting the communities that support us by actively seeking opportunities to give back. We play with unabashed, passionate enthusiasm! For More Information: Web:
www.dogdaycare.com
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®
Sport Clips may be the perfect EXIT STRATEGY from Corporate America. At Sport Clips, it’s good to be a guy. But it’s GREAT to be an owner! Our semi-absentee owner/manager-run franchise model is perfectly suited for your new life as an entrepreneur. We help you build a stable financial future while you keep your present job until you’re ready to transition to financial and personal independence. Sport Clips has an industry-leading success rate and is on track to have 1,000 stores open by year-end.
s 91 Sport Clips Opened Last Year - with No Store Closings! s Already Over 100 Opened in 2012 - Opening an Average of 3 Each Week! s Outstanding Training and Support s No Haircare Experience Required - You Can Even Keep Your Present Job s Recession Resistant – Same Store Sales Growth Over 10% in 2011! s Franchise Opportunities Available in United States and Canada s Fun Concept that Complements Your Family’s Lifestyle Learn more at SportClipsFranchise.com or call:
1-800-872-4247 Ext: 1
RANKED IN THE
TOP 100 FRANCHISES AND
#18 FASTEST GROWING Franchising USA
ex per t advice
John Geenen, Managing Partner, Waterfront Financial Group
Changing Expenses for Retiring Franchisees
C an Y ou A fford N ot to H ave L on g T erm C are ?
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Estimating expenses over the duration of one’s retirement is a fundamental part of a franchisees retirement planning. Yet, there’s surprisingly little agreement among financial planners about spending behaviors. Some suggest that retirement spending rises as we age, due to accumulating health care expenses. Others suggest that expenditures decrease as retirees reduce their spending in areas such as travel and entertainment. Still, others suggest that retirement spending stays relatively level and simply keeps pace with inflation. The long-term impact of inflation is a fundamental risk for franchisees who will retire. Yet most individuals never adjust their portfolio withdrawals each year for inflation. Instead, the checking account bears the brunt of inflation which means funds need to be replenished. To determine how much inflation you are experiencing, you must look at changes in the checking/savings account balances over time, preferably over one year. A recent article by Wade Pfau, Director of the Macroeconomic Policy Program at the National Graduate Institute for Policy Studies, Tokyo, Japan, examined the question of, “How do spending needs evolve during retirement?” It concludes that most people’s spending patterns change over the course of retirement. Expenses look very different at age 90 than at age 65. He cites a paper by Californian Lutheran University professor Somnath Basu, “Age Banding: A Model for Planning
Retirement Needs,” which discussed post-retirement spending patterns. Basu considered a 30-year retirement divided into three 10-year intervals. Rather than assuming a constant rate of inflation for expenses in retirement, he divides spending into four general categories: taxes, basic needs, health care, and leisure. Within these categories, he investigated the spending patterns by age and made allowances for differential inflation rates among these categories. For example, he noted that retirees spend more on leisure (7 percent inflation rate) in the early part of retirement and more on health care later. Health care expenses, which had an inflation rate of 7 percent, were adjusted upward by 15 percent at age 65, 20 percent at 75, and 25 percent at 85. Taxes and basic living expenses were assigned an inflation rate of 3 percent, and 7 percent for health care and leisure. This methodology provides a useful
tool for planning long-term franchisee retirement budgets. Having a system to track your expenses is a must. Make it a habit each year to review where your money is going and what increased and decreased. Your expenses will change during retirement. One large expense may be the long-term care. The first Baby Boomers reached age 65 in 2011. In this bracket are many first generation franchisees. While many boomer franchisees are looking forward to retirement, they may not be prepared for some of the less welcome aspects of aging. For example, according to recent research, smaller family sizes and rising divorce rates may limit the availability of family care providers for aging Boomers, and increase their need for paid long-term care services. Since long-term care is the leading source of catastrophic outof-pocket medical costs, which have the potential to impoverish, it is important for
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ex per t advice
John Geenen, Managing Partner, Waterfront Financial Group
provided in a nursing home is custodial care so, while Medicare provides limited coverage, out-of-pocket expenses may be sizeable. Once long-term care patients exhaust all of their assets, they may qualify for coverage under Medicaid. However, individuals and their families have little choice about the care received.
Learn more about long-term care options A long-term care policy can help ensure your financial well-being by preserving your assets and enabling you, or your family, to choose the level and type of long-term care received in the future.
“While many boomer franchisees are looking forward to retirement, they may not be prepared for some of the less welcome aspects of aging.” most people to consider long-term care insurance.
What is long-term care? Long-term care is provided to people who are physically or mentally unable to care for themselves. It may include medical or non-medical services, such as assistance with daily activities, nursing care, and skilled nursing services. Home health care, adult day care, respite care, assisted living, and nursing home care may all fall into the long-term care category.
Who needs it? While studies estimate that more than two-thirds of people over age 65 will need long-term care at some point, approximately 40 percent of the people who currently receive long-term care services are between the ages of 18 and 64. In fact, the proportion of people under age 65 who bought long-term care insurance policies tripled between 1990 and 2006,
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increasing from one-quarter to two-thirds of all individual buyers. Coverage is critical for people of all ages, and it can be more economical to purchase coverage at a younger age.
What about health insurance, Medicare, and Medicaid? Health insurance policies and government programs, like Medicare and Medicaid, don’t provide the coverage that longterm care policies can provide. Health insurance policies typically do not cover the cost of nursing homes or assistedliving facilities, nor do they pay for adaptive equipment, special transportation needs, or home modifications. When a patient is discharged after three days of hospitalization, Medicare will pay for care in a skilled nursing facility. However, Medicare does not pay for custodial or intermediate care, which includes assistance with dressing, eating, and moving around. The majority of care
John Geenen is a Financial Advisor and Managing Partner with the Waterfront Financial Group in Minneapolis. He has been advising clients since 1984 offering strategic guidance to business owners in the areas of wealth management, retirement plans and generating lifetime retirement income. John is also a Certified Franchise Executive (CFE) with the International Franchise Association. For more information: Phone: 952-236-1755 Email: john.geenen@ waterfrontfinancialgroup.com Web:
www.waterfrontfinancialgroup. com
Securities Offered through LPL Financial Member FINRA/SIPC Urban Institute, Meeting the Long-Term Care Needs of the Baby Boomers: How Changing Families Will Affect Paid Helpers and Institutions, May 2007 (http://www.urban.org/publications/311451.html) U.S. Department of health and Human Services (http://www.longtermcare.gov/LTC/Main_Site/ Understanding_Long_Term_Care/Basics/Basics. aspx#risks) America’s Health Insurance Plans, Who Buys Long-Term Care Insurance, April 2007 (http:// www.ahipresearch.org/PDFs/LTC_Buyers_Guide. pdf)
Retail Franchising in the
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feature
The Most Wonderful Time of the Year
The 2012 Holiday season is upon us! And in between the holiday parties, family events, and celebrations large and small, there’s one thing that’s on everyone’s mind: shopping! The retail festivities start off with a bang during the Thanksgiving weekend blitz. The National Retail Federation (NRF) reported that Thanksgiving weekend sales were up between 2010 and 2011, further proof that we’re coming out of that national economic slump. There were an estimated 226 million shoppers on Thanksgiving weekend in 2011, increasing from 212 million the previous year. And each of those 226 million customers had a bit more money to spend. Average sales per customer over the 2010 Thanksgiving weekend was about $365, increasing to just under $400 in 2011. Overall, that leaves us with total retail spending of $52.5 billion for the 2011 Thanksgiving weekend. Retailers across the country are giving thanks for these encouraging numbers! For US retailers, a successful holiday shopping season can make or break their bottom line for the year. As much as 40 percent of retail revenue is directly related
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to holiday shopping. So it’s important to get it right and do it well. Planning ahead for the holiday season with proper marketing and advertising is crucial. You want your brand to by synonymous with the holiday season. As part of a franchise, you will benefit from national advertising campaigns which are a huge bonus. Make sure your retail location is easy to navigate; with enough inventory in stock, but not so much that it overwhelms your space and makes it difficult for customers to find what they are looking for. Most importantly, make sure your staff are well-prepared for the busy weeks ahead, and that you have enough staff to serve every one of your customers. Recent US–based research has shown that for every $1 invested in retail payroll, there is a $4-28 increase in sales. Invest in your staff, by hiring enough people, paying them well, and providing proper information and customer service training. It will pay off. There are many examples from the retail world where the tendency is to cut back on staffing at the first sign of a sales drop. It makes the numbers look better for awhile, but in the long run, it’s not productive. You end up with a staff shortage, or staff who are not trained to represent your brand properly. This doesn’t work in franchising. Your best investment as a franchisee will be loyal, well-trained, knowledgeable staff.
Kevin Graff, a Retail Performance Specialist with Graff Retail, has compiled some key selling tips that you’ll want to share with your staff in his Retailer’s Guide to a Successful Holiday Season. 1. Move Fast – In a store full of customers, the ability to multi-task and manage multiple customers at once is crucial. You need to sell to the speed of the store first, and the speed of the customer second. That may mean giving a customer some options to look at and then asking them to wait for you for a moment while you attend to the next person waiting for help. 2. Add-on Strategies – There are a few key questions that you can ask each of your customers in the course of your conversation. There may be other people on their list that you could recommend a gift for. They may want to buy something for themselves. They may have some holiday entertaining needs. And small
stocking stuffer items are always a
great addition to a sale, and will help your customer as well.
3. Encourage Gift Card Purchases –
Gift cards are great for the customer who just doesn’t know what to buy
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feature “As much as 40 percent of retail revenue is directly related to holiday shopping. So it’s important to get it right and do it well.”
for someone. They also make a great last-minute gift, or a stocking stuffer. However, Graff suggests always focussing on a product sale first, and using the gift card as back-up. 4. Dealing with Men – Men approach shopping from a different angle than women, generally speaking. They enter a store with a single purpose in mind, and it can be difficult to open them up to other possibilities. The best way to make a sale in this case is to be quick, efficient, and to know your product so you can make the best recommendation possible. 5. Create a Lasting Impression for Your Customers – Each year during the holiday season, you’ll have an influx of new customers to your store. This is a great opportunity to make sure they have a great experience with your brand, so that they will return throughout the year. You can find out more about Kevin Graff, or view the full presentation, here: www. graffretail.com
Retailer’s Guide to a Successful Holiday Season It’s no secret that, although we may love the holiday season, it doesn’t come without stress. We take our already busy lives, and then add a full social calendar and a giant to-do list. It’s a fool-proof recipe for stress. For many people, holiday shopping is not enjoyable. They do it because it’s an expected part of our culture. But as retailers, you, along with your staff, can take the stress out of the shopping, and add to the general sense of holiday cheer around us. Make your store location a haven in the midst of the chaos. Keep the shelves and aisles tidy regardless of how much over-
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stock you have piled up. Have enough staff on hand for every shift no matter how busy it gets. Play holiday music that is festive without grating on the frayed nerves of your customers and staff. Greet and smile at every customer, especially the stressed out Grinchy types. Most of all, have fun and enjoy yourself. Treat the holiday season like a fun event, not as though you are preparing for battle. Heading into the New Year, retailers often experience a slump. With the Boxing Day sales behind you, what are some ways to boost sales through the long winter months? January and February are great times to re-evaluate a few things in your retail location. • Clean up your space – Get rid of the holiday leftovers. Gather up discontinued product and sell it from one sale location. Look at your store with fresh eyes and look for ways to make it more appealing to your customers when they walk in. • Boost your online presence – With folks hunkered down inside during the cold months, look to online branding to give your store a boost. If you have a bit more time in the office, spend some time getting your social media up to date. Look for some free or inexpensive advertising options. • Boost employee morale – Have your Christmas party after the holidays are over. Look at it as a chance to celebrate a successful and profitable holiday season, and as an opportunity to thank your employees for their hard work throughout the busy time. It’s often more affordable to book a party in January, than it is in December, and it’s easier to get everyone together now that all the other holiday parties are out of the way! • Training – Take the time while it’s
a bit quieter in your store to catch up on training, for yourself, and your employees. Evaluate what worked during the holiday season and make some notes for next year. Learn some new software. Brush up on customer service skills. Set some goals for the year ahead. • Increase sales – Just because your customers aren’t lined up out the door doesn’t mean you can’t have a profitable first quarter. Now is a great time to look at what sells and what doesn’t. Make notes as you look ahead at your ordering for the coming months. Working within your franchise framework, you may be
able to find ways to move more product by offering package deals, or similar offers. Adjust prices, where feasible, to your advantage.
Retail Franchises Featured in This Issue: ColorTyme.................................................. 23, 58 Dogtopia............................................................. 30 East Coast Wings. .......................................... 61 RadioShack....................................................... 10 Red Mango...........................................................2 Sport Clips..................................................24, 33
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abou t f ra nchising
International Franchise Association
Franchise Business Index Reaches Highest Yearly Gain Since Recession & CEO Steve Caldeira. “The year-overyear gain is certainly welcome news. Yet more consistent and accelerated long-term growth could be achieved in franchising if Congress enacts a short-term deal to avert the Fiscal Cliff and commits itself to tackling comprehensive tax reform and addressing America’s excessive spending on entitlements”
The franchise industry posted its highest yearover-year gain since the beginning of the recession in September, up 2.2 percent since Sept. 2011. The increase of 0.5 percent was the second monthly increase in a row, after declining slightly in June and July. A drop in the
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unemployment rate and an improvement in small business credit conditions contributed most to the September gain in the index. The composite indicator of employment in franchise-intensive industries also continued to make a positive contribution to the index. “The franchise model continues to demonstrate its resiliency as a business model, consistently outperforming other sectors in new business formation and hiring, particularly in the restaurant, retail and service sectors,” said IFA President
Designed to provide more-timely tracking of the growing role of franchise businesses in the U.S. economy, the Franchise Business Index was developed by IHS Global Insight on behalf of the IFA Educational Foundation. The FBI combines indicators of growth in the industries where franchising is most prevalent and measures of the general economic environment for franchising. Among other components of the index, consumer spending in franchise-intensive categories of goods and services increased for the third month in a row, although by small amounts each month. The small business optimism index was down slightly in September after a strong gain in August. “The franchise business sector continues to outperform the rest of the economy,” said IHS Global Insight Senior Economist James Gillula. “However, the lingering
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uncertainty surrounding the direction of federal tax and spending policy poses a significant risk to sustaining this recovery.” According to IFA’s 2012 Third Quarter Franchise Business Economic Outlook, prepared by IHS Global Insight:
“Direct employment in franchise establishments will increase by 2.1% in 2012, from 7.9 million to 8.1 million, or 167,000 new jobs.”
• The number of franchise establishments in the United States will increase by 1.5 % in 2012 (down from the initial forecast of 1.9 % growth), to 736,114, or nearly 11,000 (10,955) new businesses. This growth compares to a decline of 3,984 establishments in 2011 and is the first time since 2008 the industry will add new units. Since 2008, the industry lost more than 23,000 establishments due to the recession and its lingering effects on consumer confidence, the housing market, credit access, and jobs. • Direct employment in franchise establishments will increase by 2.1% in 2012, from 7.9 million to 8.1 million, or 167,000 new jobs. This growth compares to 150,000 new jobs in 2011. The rate of job growth compares favorably to the overall private sector, with an estimate of only 1.8 % in 2012.
About the IFA Franchise Business Index The Franchise Business Index is a measure of the economic environment for franchise business activity constructed with timely economic indicators that provide a current reading of the industry’s health. It combines indicators of the growth or decline of industries where franchise activity has historically been concentrated with measures of the demand for franchise business services and the general business environment. The components of the IFA Franchise Business Index for the U.S. include: • Employment in Franchise-intensive Industries* (BLS) • Number of Self Employed* (BLS) • Unemployment Rate* (BLS) • Consumer Demand in Franchise-
Intensive Services* (BEA) • Small Business Optimism Index* (NFIB) • Small Business Credit Conditions Index* (NFIB) Research for the IFA Franchise Business Index and the quarterly forecast reports is underwritten by a generous grant from Jani-King International to the IFA Educational Foundation. *For more information about the components and the methodology, click here:
About the International Franchise Association The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA
works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development. For More Information: International Franchise Association: www.franchise.org IHS Global Insight: www.ihsglobalinsight.com
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ex per t advice
Alex Porter, President, Location3 Media
SHOULD YOUR FRANCHISE
Use Foursquare? “See which locations receive the most checkins. Typically, these stores are performing well because they are offering a high-quality, consistent product and providing excellent customer service.”
However, as user adoption of these apps begins to eclipse other local marketing channels (namely Yellow Pages), and as consumers place even greater importance on personal recommendations, LBS is gaining influence and attention.
Franchises have continued to have an ever-growing interest regarding mobile check-in apps—Foursquare and Facebook Places—also known as location-based services (LBS) or localmobile-social solutions. Advertising agencies have been touting their advantages for brands for some time, but there has not been widespread interest by franchise and multiunit companies.
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It’s not just for local mom and pop shops either. According to research conducted by Beyond, 63% of LBS users are more likely to interact with large brands compared to 37% with small businesses. Leveraging these LBS channels doesn’t have to be a large undertaking. Franchises and other multi-unit businesses can take advantage by following these steps:
1. ENSURE ACCURACY OF LISTINGS It’s likely that your business already has listings on these sites, some of which may contain inaccurate information because they were created by users. Ensure that each of your listings contains accurate and up-to-date information. Include the
basics: address, phone number, business description and business category. Depending on whether it’s Facebook or Foursquare, other details include hours of operation, vanity URL, payment method, Twitter link and more. Facebook Places and Foursquare are the top channels (90% of LBS users are on Facebook Places and 22% on Foursquare, according to Beyond); others include Path, SCVNGR and some 6,000 more.
2. CLAIM YOUR LISTINGS Work with your Facebook and Foursquare representatives to claim all of your listings, remove duplicates and update data on a frequent basis. Claiming venues on both Facebook and Foursquare creates a parent-child hierarchy, whereby all local pages (a.k.a., child pages) are linked to the main brand page (a.k.a., parent page). This provides access to managing and measuring pages at scale.
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3. ENHANCE PROFILES Enhance your profiles with additional details that are helpful for consumers and provide other avenues for engagement. Foursquare allows you to set a manager for each venue and add employees. Facebook Places pages function much in the same way as regular Facebook business pages, and can be optimized with additional information, such as email, Twitter account, hours, custom landing tabs and more.
4. ADD SPECIALS When check-in apps first starting gaining in popularity, they weren’t much more than a game—users could tell their friends where they were bee-bopping around town, vie for the most total points earned by checking in at various spots and receive fun badges to showcase adventures. The novelty of the game is starting to wear off now, and users are looking for more value, namely specials and discounts. According to the Beyond study, 54% of LBS users are motive by discounts or coupons. And why not reward these users—they’re endorsing your business and helping to spread the word at no cost! Foursquare and Facebook Places allow you to add specials, which can only be unlocked after checking in a certain number of times or with a certain number of people. While the two companies have different names for the types of specials, they fall into two categories—reward existing customers or attract new ones: • Mayor Specials – Reward the Mayor of any one venue, the single most loyal customer at that location • Loyalty Specials – Reward consumers for visiting your store frequently; Mayor
Special or “every X check-in.” • Frequency – Reward consumers for checking in every X number of times. • Check-in Special – Reward consumers every time they check in. • Flash Special – Reward a specific number of people within a select time frame • Newbie Special – Reward consumers on first check in. • Group Deal – Reward consumers when they check in together; Swarm or Friend Special on Foursquare and Friend Deal on Facebook. • Charity – Facebook allows businesses to pledge a charitable donation when users check in.
5. PROMOTE SPECIALS Tell your customers about the special both online and off: add in-store signage that encourages users to check-in and view the special; post it on Twitter and Facebook, and engage with users that share their check-ins via these channels; and add details on your website.
6. USE LOCAL UPDATES Back in July, Foursquare launched Local Updates, which allow multi-unit and franchise businesses to communicate with customers through messages that include specials, news and/or photos. These no-cost updates are managed through the merchant dashboard, and can be published to all locations, near a single location or near a group of locations to drive more visits from loyal customers, create awareness and visibility and drive in-store traffic.
7. MEASURE SUCCESS Both Foursquare and Facebook provide basic stats on the performance of your special campaigns. Stats include checkin quantity, basic demographics, views of specials, unlocked specials and sharing data. This information helps you understand consumer awareness and interest. To understand fulfillment, you must include a unique discount code on the special, and incorporate into your POS system. Be sure every member of your staff at each location is trained on how to fulfill these specials.
8. ADVANCED INSIGHTS If you’d like to have a better understanding of how geo-social campaigns impact brand awareness, engagement with customers and other marketing campaigns, you can use advanced analytics software such as MomentFeed (disclosure: we have invested in this company). MomentFeed’s data
ex per t advice
Alex Porter, President, Location3 Media
for weekly meetings, and most check-in and post photos of the group each time. This would make for a fantastic story about how Peet’s was instrumental in facilitating community change.
• Engagement score and rate – Understand engagement trending overall, by market,
by location and by social media channel. goes beyond the basic check-in volume provided by Foursquare’s platform, allowing for a deeper understanding of success and cross-channel impact, and continued engagement with loyal customers. Following are some of the top features and benefits:
both sites, to understand which network is being utilized most with specific demographics and in specific markets.
• Top 10 most loyal customers – This data allows you to acknowledge and reward customers that check in the most. After integrating your Foursquare account with MomentFeed, it’s possible to learn more about these customers and connect with them via other channels.
• Aggregate view of Foursquare tips and photos – Customers frequently leave tips and photos on venues to either endorse a store or warn others about a negative experience. Rather than visiting each venue and manually scanning through these tips, MomentFeed compiles tips and photos left at each location. This is beneficial for customer and employee relations, evaluating sentiment and curating content.
• Facebook Check-ins and Likes – While Foursquare shows the number of users that pushed their check-in to Twitter or their Facebook Wall, MomentFeed shows actual check-ins and Likes on Facebook Place pages. This allows brands to compare check-in volume on
• For example, a book club that meets at a local Peet’s Coffee every week has been growing larger and larger. The numbers grew so large that the club members decided to expand their focus and do some charity work with the local library. They continue to visit the same Peet’s
• Top 10 most engaged locations – See which locations receive the most
check-ins. Typically, these stores are performing well because they are
offering a high-quality, consistent product and providing excellent
customer service. You can rewards
these stores for their performance, and reward the customers engaging with these stores as well.
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• Visitor trending data – See new versus repeat check-ins by day and overtime, and frequency of check-ins. This will help you to understand the impact of specials and other marketing initiatives. Running specials on Foursquare is a cost-effective way for franchises and other multi-unit businesses to market on a localized level. Measuring success is simple with new tools, like Foursquare’s insights and MomentFeed. And let’s not forget the ancillary perks such as content curation, customer service and market research. Consumers have an overwhelming number of choices when it comes to location-based products and services. They have the upper-hand in the marketplace, but that doesn’t mean businesses are helpless to their whims. By allowing your business to be found where consumers are looking, providing them with attractive deals on quality products and services, and making it simple for them to spread the good word about your company, you’re creating a marketing campaign that is practically self-sustaining while gaining access to valuable data that can allow you to further customize your approach and achieve even greater ROI from both new and existing customers. Alex Porter is president of Location3Media (www.location3. com), a digital marketing partner built to increase brands’ findability and performance. Through strategic design, search marketing expertise and the application of analytics, Location3 helps to raise brand awareness and generate response across all digital platforms. For More Information: Web:
www.location3.com
Franchising USA
ex per t advice
Robyn Gault, Vice President of Strategic Accounts, Direct Capital Franchise Group
Section 179
M akin g the most of
As we approach the end of 2012, now is a great time to start thinking about not just last minute equipment purchases, but also tax time. So, if you’re in need of any new kitchen equipment or a business vehicle, don’t put off that purchase any longer – not only because 2013 is right around the corner, but also because the benefits of the Section 179 tax deduction is expected to reduce
Franchising USA
significantly at the end of the year.
What is Section 179? Section 179 probably sounds more complicated than it really is. It really is just a simple tax deduction in the IRS tax code that has been around since 1981 and was developed as an incentive for businesses to invest in their own growth. While it has been revised numerous times over the years, the most recent changes took effect January 2, 2012 and allow franchisees to immediately deduct up to $139,000 on qualifying equipment and software purchases, with the maximum
amount that can be spent being raised to $560,000. This type of incentive can yield substantial cash savings for a franchise while helping to provide access to equipment that is needed for recommended equipment upgrades, an expansion, or to replace broken equipment. The deduction isn’t automatic, however, and franchisees need to do the proper paperwork. It’s easy to take advantage of these savings, provided you know how to go about it. While we aren’t tax professionals and you shouldn’t consider this tax advice, we have learned quite a bit about Section
Page 49
equipment must be purchased AND put into operation during the tax year. Some examples of qualifying purchases include: • Capital equipment • Business Vehicles (gross weight in excess of 6,000 lbs.) • Computers • Software • Ovens & other Kitchen Equipment
Is the Section 179 deduction automatic? No! You will need to complete Part One of IRS form 4562, a relatively simple form but one you’ll need to track down on the IRS website. Make sure to work with your tax professional to take advantage of this lucrative incentive for your franchise and ensure they have experience with Section 179.
How much can I write-off? For the 2012 tax year, businesses may take a 100 percent deduction on purchased or leased equipment, as long as the total is below $139,000. This is in contrast to previous years, when the total was as high as $500,000. We’ll discuss this in more detail in the next section.
How was Section 179 affected by the various Stimulus Acts? 179 over the years. Below are answers to some of the most common questions we hear regarding Section 179.
What Qualifies for Section 179? The best part of the Section 179 deduction is that it can be used for a whole host of qualifying equipment purchases, whether they’re required or recommended upgrades, or to replace a broken or worn out essential equipment. From new soft serve ice cream machines, ovens, POS systems, or even computer hardware and software, almost any equipment purchase is included. The catch is that the
The last six years have seen significant changes in the Section 179 Deduction due to various Stimulus Acts enacted by congress – most specifically related to the dollar limits of the deduction. The limits by tax year: 2007 Deduction Limit: $125,000 2008 Deduction Limit: $250,000 2009 Deduction Limit: $250,000 2010 Deduction Limit: $500,000 2011 Deduction Limit: $500,000 2012 Deduction Limit: $139,000 Deduction decreases dollar-for-dollar after equipment purchase totals exceed the following:
2007 Total equipment purchases: $500,000 2008/2009 Total equipment purchases: $800,000 2010/2011 Total equipment purchases: $2,000,000 2012 Total equipment purchases: $560,000
How was Section 179 affected by the Tax Relief Act of 2010? This act impacted the Bonus Depreciation available to businesses under Section 179. In 2012, there is 50 percent Bonus Depreciation available for new equipment purchases once the $560,000 limit is reached (or for businesses reporting net losses in 2012).
What will happen to the dollar limits of the deduction in 2013? The current law states that the deduction will decrease again to $25,000 in 2013. This number could be changed by Congress if they tackle it in the next legislative session.
When can I take advantage of Section 179 deductions? The deadline for the purchase and deployment of eligible equipment is December 31, 2012. You will make the deduction as you are filing your tax return for the year. Remember, it’s possible that the amount will decrease next year, so you’ll want to take advantage of this deduction as soon as possible!
Franchising USA
ex per t advice
Robyn Gault, Vice President of Strategic Accounts, Direct Capital Franchise Group
(Equipment Cost – Total Savings) $42,250
In this example, you’d save a whopping
$22,750. That’s the kind of sizable saving that many franchisees miss by failing to file for this deduction.
Is it better to purchase or lease to take advantage of Section 179? Ultimately the buy vs. lease will depend on your businesses situation, but an
important fact about leasing is this: with
the Section 179 deduction, you can write off 100 percent (up to $139,000) of the
price of your qualifying equipment but you don’t have to spend 100 percent.
This means that with a properly structured lease, your tax deduction can actually be more than your first year of payments.
Don’t forget, the limits for this deduction have been dramatically decreasing over
the years and will decrease again in 2013, likely to as little as $25,000. There is no
guarantee that the total will increase above that in the future. So, if you’re thinking
you may be in the market for some new
equipment, now is the time to jump on it. For more information, be sure to contact your local tax advisor to discuss your
“It’s easy to take advantage of these savings, provided you know how to go about it.”
specific situation.
Robyn Gault is the Vice President of Strategic Accounts for Direct Capital
50% Bonus Deduction*
Franchise Group. Direct Capital
percent *only for new equipment
lender with 20 years of experience.
Total First Year Deduction
to provide competitive financing
Deduction) $65,000
remodels, relocations, store acquisitions,
Total Savings
For more information:
How do I determine my deduction?
(Equipment Cost – Deduction) x 50
Franchise Group is a national direct
Easy! You can use this online Section 179 calculator.
$0
The firm partners with Franchisors
Let’s take a look at some example savings, assuming an equipment purchase totaling $65,000. Your Equipment Cost: $65,000 Section 179 Deduction (up to $139,000): $65,000
Franchising USA
(Section 179 Deduction + Bonus
(Total Deduction X 35 percent Tax Rate) $22,750
Equipment Cost After Savings
to support new store development, equipment upgrades, and more.
Phone: 603-433-9476 Email: rgault@directcapital.com Web:
www.directcapital.com
Franchising USA Page 51
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Nick Hudson, National Franchise Manager Australia – New Zealand, Snap-on Tools profiles makes it a useful and informative resource for prospective franchisees.” Contact Jenn Dean, Senior Sales Executive, for global
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ex per t advice
Jason Miller, Brand Manager, ZorSource
A re Y ou R eady
For Franchising?
“Being in a franchise is like being in business for yourself, but not by yourself.”
More and more individuals are looking to take control of their own destiny in this ‘New Career Economy®.’
Franchising USA
As our economy improves it is becoming clear that there simply won’t be enough jobs created to absorb the long term unemployed. Real income levels are declining and the jobs that are being created are not at the salary levels they once were. Careful consideration of even recent labor statistics indicate that a large portion of the jobs that are being created are part- time. In fact, in our world today a new term has been coined, “giggers.” Economists and staffing experts have coined the term giggers to mean those individuals who balance several part time gigs to make ends meet. There is a lot of talk about what the “real” unemployment rate is due to those who are underemployed. All these factors lead
many to seek other forms of employment, such as being self employed. Many are asking, “Can working a job today build a future for me and my family?” Job growth will continue to be stubborn, regardless of the outcome of the election. One thing is for certain, the economy will improve and GDP growth will accelerate faster than the job market. Certainly most economists agree that we are likely to see stronger consumer spending before the job market improves. Companies have figured out they can do more with less in the ‘new economy.’ Employers have been less loyal to employees and employees are therefore less loyal to employers. 51 percent of Americans feel behind on savings for retirement, a figure that has risen sharply
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over the last decade. Savvy individuals have already figured out that the way to build Income, Lifestyle, Wealth and Equity (ILWE) is to take control of their own future.
Taking Control Through Franchising How are they taking control? Many individuals are doing that through franchising. Franchising offers a proactive, proven solution to creating ILWE freedom. We coach many transitioning corporate executives on what their options are for the next chapter in their lives. The glaring reality is that the majority of their options are reactive and are dependent on outside sources. They may be waiting to find another job, waiting to sell their home, or maybe they are hanging on to their money to see what happens after the election. Investing in a franchise allows someone to invest in a business that comes with a proven plan, a proven system, and a support infrastructure to help them be successful. The individual can be their own boss, while having a partner with them to ensure their business is running on all cylinders. There is organizational assistance, operations assistance, marketing assistance, and the list goes on. Franchising offers a road map to financial freedom that you can control. For franchisors to be successful they must have successful franchisees.
invest in to meet your goals, needs and expectations. • Are you committed to making your business a success? Ramping up a business takes dedication, time and professional persistence. Ultimately a business can provide you a lifestyle that you may have only dreamed of; however, you must be willing to put in the effort first to build your business before you start living the lifestyle. Can you be your own boss and hold yourself accountable? • Are you able to follow a system? Franchising is successful because of many things, none the least of which is the “proven, operating system.” People who are successful in franchising follow the system the franchisor prescribes. Franchisors have institutionalized the end user buying experience and make it repeatable. If you’re a maverick, then maybe you are part of the rare breed that starts an independent business. Being in a franchise is like being in business for yourself, but not by yourself. Be open to coaching from the franchisor. That’s what you paid for.
Risk and Reward Is there risk in starting a business?
Absolutely. But where there is risk there is reward. And we know this, that there is risk staying in the job market today as well. Underemployment, or being downsized in the corporate world is a way of life today. They are teaching at university today that kids will have 8-10 jobs by the time they are 40! For those that have a desire to take control of their own destiny there is a world that awaits you. It’s time to take charge and go for it! Jason is the Brand Manager for ZorSource, a division of FranchisESource Brands International, a well recognized organization in the franchise community. ZorSource offers a variety of valuable services from helping franchisors to find motivated franchise buyers, to offering proprietary coaching programs to assist franchise companies in becoming high performance organizations. Jason is a graduate of Georgetown University’s Franchise Management Program and is a speaker at major universities where he lectures on entrepreneurship as a career path. Jason will be a 2013 Certified Franchise Executive Candidate. For more information: Phone: 203-405-2142 Email: jmiller@zorsource.com
Ask Yourself These Questions Often times, people will ask us, what advice do you have for aspiring franchise owners? We suggest you consider the following items as you look at franchise ownership: • What do you want the business to do for you? Many people look at businesses through the eyes of the consumer vs. a business owner. You may like a product or service, however that may not mean it’s the best product for you to
Franchising USA
ex per t advice
Carl Khalil, Esq. and Sada Sheldon, Esq.
F rom
FranchiseE Franchisor to
franchise concept that peaks at a different time of year, your current franchisor may support your venture and offer it for sale to current franchisees as a co-branding opportunity.
Sufficient Capital
Being a franchisee exposes one to small business ownership, entrepreneurial and management skills, and puts you out in the business world, surrounded by other businesses, mentors, suppliers, and customers. From this experience, an idea may spark in you to become a franchisor of a business concept, or someone else may give you such a tip. If you decide to try and flip from bring a franchisee to becoming a franchisor, or attempt to do both simultaneously, here are some pointers to consider.
Franchising USA
Non-Compete Agreement with Current Franchisor First, it is important to examine any non-compete clause you have with your current franchisor to determine if your proposed franchise venture would run afoul of the terms of your non-compete. And, commonly, â&#x20AC;&#x153;in-term non-compete agreements,â&#x20AC;? in effect during the term of your franchise agreement, will be more broad than a post-term non-compete that only takes effect after you have left the franchisor. Practically speaking, you would want to avoid starting a venture in an adversarial way with a current franchisor, and it may be wholly unneeded. In fact, your current franchisor may be a strategic ally worth cultivating in a win-win situation. For example, if you are a franchisee for a franchisor with a highly seasonal business, and you come up with a complimentary
As we discuss in further detail below, the start-up of a franchise system entails costs for such items as Trademark Registration, development of initial training materials and an Operations Manual, preparation of financial statements, and preparation and possible registration of a Franchise Disclosure Document. In addition, these legal minimums do not bring a franchise system to life. A franchisor also needs some type of franchise advertising, sales, accounting system, operational support, and consumer marketing apparatus. All of this requires capital. So, if you are thinking of launching a franchise, it is imperative to make sure you have sufficient capital to properly launch the business.
A Working Prototype The very nature of a successful franchise is one based upon a proven operating system. And there is no better proven operating system than a fully functioning prototype that is generating profits. To
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experiment on franchisees to develop a working profitable concept can lead to legal troubles and be harder to sell. A wise franchisor starts off with a successful prototype in operation.
Trademark Selection and Registration From the public’s point of view, the very hallmark of a franchise is the particular brand name under which it operates. So, if you do not already have a federally registered trademark, you should work up a name and logo with nationwide appeal and submit it to the United States Patent and Trademark Office for registration. This process takes time so it is best to start as soon as you know what your mark will be. Failure to have a registered trademark can lead to a warning in the Franchise Disclosure Document (‘FDD”) that you will have to use to offer and sell franchises as to the risk that franchisees may have to change names.
“A successful franchise concept depends upon many individual franchise owners successfully running outlets under a chosen brand name, and doing so in a consistent and quality manner.” Operations Manual By its very nature, a franchise is a uniform system of operation. So the second cornerstone of a franchise is an Operations Manual that contains the system. Indeed, one of the items that the FTC Franchise Rule requires be included in the FDD is the Table of Contents and page count of an Operations Manual. So drafting of a Manual makes a good early step for a business owner because it is not only required, but allows you to fine tune your system of operations as you see it come to life in writing. And, since you should have a working prototype before considering franchising, you have an actual model to work from to make it
easier to reduce the system to a written Manual.
Develop an Initial Training Program A successful franchise concept depends upon many individual franchise owners successfully running outlets under a chosen brand name, and doing so in a consistent and quality manner. Therefore, quality training and initial training is essential to ensure a consistent delivery of services. Additionally, this is part of what attracts potential franchisees to franchising, knowing that someone is going to tell them what to do and how to do it. And, once again, the itinerary
Franchising USA
ex per t advice
Carl Khalil, Esq. and Sada Sheldon, Esq.
of the initial training program and a list of trainers are required to be in the franchisor’s FDD, so sufficient care should be given to this important aspect of your franchise system.
Audited Financial Statements Under the FTC Franchise Rule, a start-up franchise system needs to only include an unaudited opening balance sheet in its FDD, if it is in its first partial or full fiscal year selling franchisees. But certain states go beyond this Rule and require audited financial statements. Audits of course require time. Therefore, it is important to consult with franchise counsel as to the financial statement requirements in the states where you intend to offer or sell franchises and make sure to have your CPA work on preparing the appropriate financial statements.
Prepare an FDD and Register While it may seem like you are already juggling many balls, another important step is to hire a competent attorney who will work with you on the preparation and
Franchising USA
registration of your FDD. This is a step that you should not save until you have finished all the prior tasks. We generally work with our clients on timing so that everything comes together at once. Once you have your completed FDD you can immediately begin selling in the Non-Registration States. Then there are other states that require a “notice filing.” There may be up to a one-month delay in your ability to sell in these states. Finally, some states are what we call “registration states.” These are states that review your FDD filing and may issue comment letters asking for changes to certain text.
Conclusion Taking the first steps to launch a franchise is an exciting time. You may be developing a brand and brand name that will become a part of American culture. There are many details to attend to, from training, financial statements, and legal requirements. Hopefully, this article has given you a good overview of some of the first steps to take to launch a franchise.
Carl Khalil is a Partner in the law firm of Carl Khalil and Sada Sheldon, PLC. He has 17 years of franchise law experience and previously worked as Corporate Counsel for Jackson Hewitt and Liberty Tax Service. During his tenure at Liberty Tax Service, it grew from 35 offices to nearly 4000 offices and 100+ Area Developers. Contact: Phone: 757- 263-4596 Email: carl@khalilsheldon.com Web: www.Carl-and-Sada-Law.com Sada Sheldon is a Partner in the law firm of Carl Khalil & Sada Sheldon, PLC in Virginia Beach, Virginia, a nationwide franchise and trademark practice. She is admitted to the State Bars of both California and Virginia. She is a member of the ABA Forum on Franchising. Contact: Phone: 757-263-4596 Email: sada@khalilsheldon.com Web: www.Carl-and-Sada-Law.com
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Franchising USA
f ra nchisee in action
C olorTy me
ColorTyme M akin g B usiness P ersonal
“ColorTyme has always given personal attention to us, which you don’t usually see in the franchising world. You don’t become just a number here.”
Franchising USA
This is how Harry Pappas III sums up his experience with ColorTyme, a furniture, appliance, computers, and electronics rentto-own (RTO) franchise company. Pappas has been with ColorTyme since January 2010, after being a franchisee of a sandwich franchise for 11 years. He is in partnership with his father, Harry Pappas Jr., who brings with him a background in accounting, banking, and franchising,
his wife, Susan Pappas with 25 years at DuPont, and also his brother-in-law, Scott McHale, whose background is in retail furniture. Together, their team currently has three ColorTyme locations: Sharon Hill, Pennsylvania, Aberdeen, Maryland, and Elkton, Maryland. The personal attention that Pappas and his team have enjoyed is nothing unusual for ColorTyme franchisees or customers.
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Making business personal has been at the heart of ColorTyme since 1979, when founder Willie Talley, who pioneered the ColorTyme idea of rent-to-own with Curtis Mathes, offered a payment plan for customers who could not afford a new television in one payment. Today, ColorTyme is a wholly owned but completely independent subsidiary of Rent-A-Center, the world’s largest RTO company in an $8 billion industry.
energies on running a business, instead of worrying about financing.
Everything Falls Into Place For Pappas and his partners, becoming ColorTyme franchisees was a matter of having all the pieces align at just the right time. They were looking at the possibility of an RTO franchise and heard about ColorTyme through their research.
ColorTyme’s focus is on making ownership simple – for both customers and franchisees. For customers, that means giving access to brand name furniture, appliances, computers, and electronics on a rent-to own basis, with no credit checks and considerable flexibility in payment plans.
“We were looking to get into something different – looking at other industries outside of what we were currently working in,” says Pappas. “The timing aligned that I was getting out of the restaurant industry, which had similar operations features with rent-to-own. Another factor was that we had the combined talents of the family at that time, which aligned perfectly as well.
For franchisees, ownership is made easier through ColorTyme’s in house financing. Prospective franchisees need only have a minimum of $80,000 in cash or liquid assets, a net worth of $350,000, and a solid credit score. ColorTyme also offers inventory financing. Royalty fees are on a sliding scale from four percent to as low as two percent. All of this financing assistance helps franchisees focus their
“We chose ColorTyme because we could get a territory for our store within our desired area, and could get a market closer to where we live. One of the reasons we chose them is that flexibility in the available markets. Also, they allow franchisees to be their own business through a franchise system, without the constraints or restrictions that could hinder our success.”
ColorTyme assists its franchisees with market availability and site selection through demographics studies, and traffic flow pattern analysis. Franchisees generally operate within their own neighbourhood, which is advantageous for everyone involved. Franchisees are close to home, and customers are dealing with neighbors and friends, not an uninterested corporate entity.
Next Steps ColorTyme offers a variety of support to their franchisees through every step of the franchising process, beginning even before the franchise agreement has been signed, and carrying on through the new location’s opening and beyond. Pappas recounts their experience: “After we signed the franchise agreement, we began to work with the ColorTyme Franchise Consultants to begin the process. One of the benefits of our research prior to joining ColorTyme is that we had spoken with current franchisees and gained a lot of knowledge about the first steps after signing with ColorTyme. We also spent time training in three or four current ColorTyme stores before
Franchising USA
f ra nchisee in action
C olorTy me
opening our first location, to give us more experience in the RTO industry. “We attended ColorTyme University, which is a four-day training session in which we learned about some of the factors that contribute to being successful with ColorTyme. We work very closely with the Franchise Consultants, and more recently, have received a lot of support from the corporate office, including CEO Cathy Skula and COO Fred Mattox. We also work a lot with other franchisees.” In addition to the ongoing training, ColorTyme also offers support to their franchisees in the form of buying power. Because ColorTyme is such a large player in the RTO industry, they have a team dedicated to finding and purchasing top quality products at great prices. Marketing is an additional area where ColorTyme supports franchisees in every way possible. Their award-winning in-house marketing department invites customers to shop at ColorTyme through direct mail, broadcast media, web advertising, point of purchase display materials, promotional guides and calendars, Yellow Pages advertising, and more.
Happy and Successful Franchisees Pappas and his partners have been really impressed with the level of personal attention and ongoing support that they have received over the past two years from the corporate level at ColorTyme. “During our Discovery Day, when we came to visit prior to joining the company, we got the chance to meet the entire staff at the corporate office. With some companies, you only meet with the sales staff or a few people, but at ColorTyme,
Franchising USA
“With some companies, you only meet with the sales staff or a few people, but at ColorTyme, everyone is there to help. You don’t usually see that in the franchising world.” everyone is there to help. You don’t usually see that in the franchising world.
questions, and talk to as many franchisees as you can.”
“We have access to a lot of personal attention from industry experts, in the corporate officeand with fellow franchisees. For someone new to the industry, this is very important.”
Also, in terms of the work/life balance of a franchisee and being successful as a franchisee, Pappas says, “I’ve found that you get out of it whatever you put into it. You must have a good worth ethic to be successful.”
Words of Advice With previous franchising experience in addition to his years with ColorTyme, Pappas has certainly learned a few things about navigating the franchising process. His best advice for someone interested in joining ColorTyme, or any franchise system? “Do your due diligence, ask a lot of
Pappas and his three partners have found success in franchising with ColorTyme. If ColorTyme’s commitment to franchisee and customer support sounds like what you are looking for in a franchise, contact them today to get started! For More Information: Web: www.franchise.colortyme.com
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How’s Your Bottom LIne? Average Unit EBITDA: *$264,805 in 2010 *$265,405 in 2011
The Bancorp Financing of $7.5 Million Available an FDIC-Insured Commercial Bank
Segment Leader in Casual Dining & Franchisee Development s s s s s
* ‘09 vs. ‘11 Same Store EBITDA Growth 58% **Franchisee Funding Available at 6% Interest Rate * 35 Consecutive Quarters of Same Store Sales Growth Superior Bank Credit Report* Nationally Ranked #5 in 2012 out of all Franchise Companies Surveyed for Franchisee Satisfaction
Join the leader of casual dining in the Buffalo wing space. Contact Dan Collins, CFE dan@eastcoastwings.com or 954-263-2056
www.eastcoastwingsfranchise.com This advertisement is not an offering of a franchise. An offering can be made only by prospectus. We only sell franchisees in states where our offering is registered. Figures reflect same unit average as reported by units operating in ‘09-’11. *EBIDTA as submitted by our full service franchised restaurants operating in 2010 & 2011 as published in item 19 of our April 2012 Franchise Disclosure Document. Figures reflect Franchisee submitted on unaudited P&L’s. Individual financial performance will vary. Bank Credit Report developed by Fran Data. **Unit financing opportunities for qualified candidates offered to Franchise America Finance, LLC.
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