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THE THE ABC’S ABC’S OF OF FRANCHISING FRANCHISING
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THE THE ABC’S OF FRANCHISING
FRANCHISES FRANCHISES
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Protect yourself yourself Protect from your your business— business— from wetell tell you you how. how. we
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Are rowing rowing machines sexy? sexy? Meet an THE ABC’S OF FRANCHISING FRANCHISING THE entrepreneur entrepreneur who thinks so. so.
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Fund your your dream dream with with Fund your retirement retirement plan. plan. your
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Is there there aa recession-proof Is recession-proof franchise franchise model? model?
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con·tents
kən�tents/ noun
1. Your August lineup of stories and features 2. An amazing resource for franchisees
26 23 DEPARTMENTS
11 12 19 22 24 26 28 58 60 62
16
Letter from the Editor Buzzword What’s trending now.
Update
Franchising’s latest headlines.
Franchisee of the Month
This Orangetheory Fitness owner knows a good thing when he sees it.
Legal Advice
Protect yourself from your business
Funding
Launch your dream with ROBS funding
Entrepreneur
Enabling the next generation of business owners.
Interview
Holly Ford on buying a resale business.
Spotlight
Trending businesses you want to know about.
Last Word
Shining a light on home care.
August 2018 7
con·tents
16 FEATURES
40
33 Confessions of an Exercise Addict 34 Niche Fitness Franchises Do you get cranky when you miss a workout?
Fitness franchisors are getting creative with boutique brands.
44 Pumping up Pocketbooks
It’s a great time to invest in a fitness franchise.
46 Feel the Burn 48 Breaking Down the FDD 50 Could Franchising Mean Job Security? 52 Seven Steps to Finding the Perfect Franchise 54 Franchising Beyond Profits 56 Franchises that Work Health and fitness brands are in high-growth mode.
The first in a six-part series on the Franchise Disclosure Document.
Investing in a franchise is a way to control your destiny.
What’s the right fit for you?
The perks of franchise ownership go way past ROI.
These business models promise to succeed in all financial climates.
8
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42
www.ReviewMyFDD.com Providing you
PEACE OF MIND when buying into a franchise!
DECEMBER 2018
on the cover
FranchiseDictionary FranchiseDictionary fitness FranchiseDictionary FranchiseDictionary FranchiseDictionary AUGUST 2018
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THE ABC’S OF FRANCHISING
NICHE
THE ABC’S OF FRANCHISING
FRANCHISES
THE ABC’S OF FRANCHISING
Protect yourself from your business— we tell you how.
THE ABC’S OF FRANCHISING
Are rowing
machines sexy? Could franchising Meet an THE ABC’S OF FRANCHISING mean job security? entrepreneur who thinks so.
Breaking down the FDD
40
A beached-themed fitness brand turns heads.
26
Fund your dream with your retirement plan.
56
Is there a recession-proof franchise model?
Boutique fitness brand CITYROW’s “sexy” rowing machines.
Game-Changer Franchises
FranchiseDictionary Publisher/Editorial Director: FranchiseDictionary Jill Abrahamsen FranchiseDictionary editor@franchisedictionarymagazine.com FranchiseDictionary Executive Editor: Mary Lynn Mitcham Strom FranchiseDictionary THE ABC’S OF FRANCHISING
THE ABC’S OF FRANCHISING
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THE ABC’S OF FRANCHISING
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Associate Editor: Maria Tattoli
Know a business that’s a game changer? Nominate it here
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Web Designer: Audra Defalco Contributors: Jonathan Barber, Christopher Conner, Holly Ford, Nancy Friedman, Ed Horowitz, Michelle Hummel, Faizun Kamal, Dallas Kerley, Sarah McCafferty, Nicole Micklich, Eric Schechterman, Susan Scotts, Doug Stout, Lisa Welko Director of Sales: Madhavi Patel (888) 315-9549, ext. 507 madhavi@franchisedictionarymagazine.com
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let·ter
\�le-tər \ noun
1. A welcome note from our editor 2. A brief overview of what’s in this issue
Sorry, folks: There’s no room for excuses when it comes to missing workouts. Franchisors are making exercise so fun and convenient that there’s no reason to skip out on the gym. Think you have no time? On-demand personal-training services, like GYMGUYZ, bring the gym to your house or workplace. Can’t endure high-impact exercises? Not a problem. Many new brands offer effective, low-impact options that deliver results. Take a class at CITYROW, for example (featured on the cover), and get a “high-intensity sweat with a low-impact burn.” Think exercise is boring? Not anymore. Creative franchisors, like Surf’s Up Fitness, make workouts inventive and fun. This beach-themed studio keeps members coming back by offering great workouts in playful environments. Any more excuses? We didn’t think so. If you’re considering investing in a franchise, there’s no excuse for overlooking sports-and-fitness brands. Can’t afford it? Think again. Inexpensive options are coming on the scene. With simple build-outs and low square-footage (many requiring less than 1,500 square feet), ownership is easier than you think. We feature some very affordable brands in “Niche Fitness Franchises,” which starts on page 34. Think fitness is just a fad? It is here to stay. The industry is booming and is projected to keep growing. See “Pumping up Pocketbooks” on page 44 to learn more. And if you think you know nothing about franchising, you won’t be able to use that as an excuse, either. This issue is chock full of practical information, from legal advice to tips on funding, to help get you pumped about investing in your own franchise business. All the best,
Jill Abrahamsen Publisher/Editorial Director editor@franchisedictionarymagazine.com
August 2018 11
buzz·word
\ 'bəz-'wərd \ noun
1. A compilation of franchising trends 2. What franchise experts are talking about
Is fear holding you back from business ownership?
IT WAS A BEAUTIFUL DAY IN THE MOUNTAINS. THE SNOW was perfect for skiing and I, overwhelmed with enthusiasm, followed my father-in-law to the top of a double black diamond trail. It would be my first double black diamond, and at the mountain peak it looked, well, daunting. Suddenly, my father-in-law looked back at me and said, “Doesn’t it look like you are skiing off the end of the world?”
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Then just like that, he was gone. Fear set in. Lots of it. It did look like I was skiing off the end of the world. Had my fatherin-law led me into a place where I could not come back? Would I see my wife and daughter again? There was no way off the mountain, except to ski down the slopes. But I’d have to tackle my fear first. QUESTIONING YOURSELF Business ownership is a lot like that moment at the top of the mountain. Looking into business ownership for the first time, whether it is a franchise, business resale, or a new business you create, it’s common to feel a lot of fear. Am I going to be successful? What will my family and friends think and say? Remember how your cousin Bert or your wife’s friend Emily started businesses and did not make it? Why would it be different for you? I tell my clients to think of FEAR as “False Evidence Appearing Real.” To counteract it, you’ll need to do some research. Instead of letting your gut determine if you’ll be successful, let your research lead the way. Does your research tell you there’s a need for your business in your market? Does it show that other franchisees have been successful working with your franchisor? A professional coach can help you understand things. Let him help you identify goals, needs, and expectations for business ownership. Let him help you determine if your fear is grounded. SUPPORT SYSTEM Franchisors want you to succeed. Franchising is government regulated by the Federal Trade Commission. You get to talk to any franchisee you want in the system and ask them the hard questions. Again, a franchise coach can help guide you through these times. As for me, at the mountain top, I ran through some facts, too: My father-in-law would never leave me alone where I couldn’t ski. I had great skills as a skier. My brother-in-law would be skiing behind me. So leaving my fear behind, I headed downhill without looking back. As a result, I saw beautiful scenery and conquered some challenging twists and turns. Business ownership works the same way. Conquer your fear and you can find yourself on a wonderful journey. Doug Stout has a passion for helping people to achieve their dreams of business ownership. His experience in franchising includes ownership, coaching, mentoring, process development, consulting and development. You can reach Doug at Doug@TheFranchiseConsultingCompany.com
Show Time UPCOMING SHOWS Visiting trade shows is a great way for investors to meet franchisors face-toface. It’s not too soon to start making your fall trade show plans. The Franchise Show September 7-8, 2018 www.franchisingexpo.com Tampa Convention Center Tampa, FL Franchise Expo Midwest franchiseexpomidwest.com September 14-15, 2018 Donald E. Stephens Convention Center Rosemont, IL Use promo code FRANDICT for free admission. The Great American Franchise Expo www.franexpousa.com September 15-16, 2018 Santa Clara Convention Center San Francisco, CA The Franchise Show September 28-29, 2018 www.franchisingexpo.com Pennsylvania Convention Center Philadelphia, PA The Great American Franchise Expo www.franexpousa.com October 6-7, 2018 Mesa Convention Center Phoenix, AZ
August June 2018 13
buzz•word
THE KEYS TO FRANCHISEE SUCCESS After investing in a franchise business, you want things to run smoothly. Here are some tips for successful franchise ownership.
1. Follow the system
The beauty of franchise ownership is that you’re buying into a proven business model. The franchisor went through all the trial and error, so you don’t have to. By following the system, you preserve the brand and protect your investment.
2. Live the brand
Be the biggest fan of your business. Passion shows customers and employees that you care. Hire staff people who are enthusiastic.
3. Embrace the community
Getting involved in the community is an excellent way to market your business. Join the local chamber of commerce, sponsor sporting events, and attend community events.
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Choose Words Carefully Some only serve to drive customers away.
The key ingredient in customer service is the customer. Each one should feel heard, understood, and like a company’s highest priority. But sometimes even well-intentioned customer service reps use words or phrases that can be turn-offs. Negative words and phrases help make your customers— and your potential customers— veer away from the important points of the conversation, and can affect how they view your business. Here are a few phrases to eliminate.
need to respond with the gold standard: “You’re welcome.”
“No Problem” Overused and abused, “no problem” appears to be a big problem with customers. The customer thinks, “Am I a problem?” When someone says, “thank you,” you simply
“Yes, but…” The minute we use “yes, but” as an answer, the client knows something negative is coming. Keep the conversation positive, so customers know you are working with them.
“Calm Down” When a person is told to “calm down,” the next words are usually: “Don’t tell me to calm down.” The response is understandable, as it’s not up to us to tell anyone how to act. There are times when a client may need to vent. As a customer service representative, your job is to listen and respond with sympathetic and empathetic wording.
Nancy Friedman is a former franchisor and a popular customer service speaker. She is founder and president of Telephone Doctor Customer Service Training in St. Louis, MO. Contact Nancy at nancy@telephonedoctor.com or visit www.nancyfriedman.com
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Take Your Business To Go • Unique In-Demand Business • Low Investment • Fast Startup • Mobile Business • Hands-On Training • Recurring Revenue Streams • Continued Marketing Support
Franchise Opportunities Available
John@theshoeshineguys.com • (734) 645-2286 • www.theshoeshineguys.com
August 2018 15
buzz•word
3 TIPS TO DEVELOP A POWERFUL SOCIAL MEDIA STRATEGY Create a Customer Profile
Creating a customer profile can help you best define your ideal customer. Questions to answer: How old are they? What is their income? Do they have children?
Research your Competition
You can learn a lot from your competition on social media. List three or four of your top competitors and study their social media strategies.
Build Your Content Strategy
Develop a strong content marketing plan that drives engagement. Delivering fresh content with a mix of blogs, branded posts, infographics and videos. Michelle Hummel is CEO of www.webstrategyplus.com
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Franchise Terms to Know Absentee ownership: The potential to manage and own a franchise without active involvement in the day-to-day operations. The franchisee will purchase the franchise unit but will hire someone else to manage and run the unit.
formation, which includes the buy-in costs and initial startup expenses, is packaged in a 150-page document.
Owner-operator: The franchisee will run the franchise unit him or herself and be hands-on during day-to-day tasks.
Franchise agreement: The actual contract which includes the responsibilities of the franchisor and franchisee.
Discovery day: The opportunity to visit a franchise’s corporate headquarters in order to meet the management and support team and learn more about the franchise.
Franchise fee: The initial upfront fee a franchisee pays for the right to purchase a franchise and use the trademark and business system. This is typically paid at the signing of the franchise agreement.
Franchise Disclosure Document (FDD): The Federal Trade Commission mandates that franchisors provide detailed information about the franchisor. This in-
Franchisee: The person or entity that purchases and is granted a franchise.
Franchisor: The franchise company and owner of a franchise system’s trademark brand that provides usage rights to a franchisee.
Susan Scotts is an alternative career coach at The Entrepreneur’s Source. Contact her at 561-859-9110 or coach@susanscotts.com For a more extensive list of franchise terms, check out our resources tab and look under “Franchising 101” or click this link http://franchisedictionarymagazine.com/words-to-know/
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contactus@webstrategyplus.com
June 2018 17
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up·date
\�əp- dāt\ noun �
1. The latest headlines in the franchise industry 2. Quick news bites to inspire you
Free Franchise
»
PUROCLEAN TO AWARD A FREE FRANCHISE TO A U.S. MILITARY VETERAN PuroClean, a leading restoration and remediation franchise, is offering military veterans the opportunity to win a free PuroClean franchise. Through the PuroVet program, one lucky veteran will have his or her initial franchise fee covered, opening the door to a new and financially secure future. This is the first time the company is offering veterans this kind of opportunity. Veterans, including all active duty, reserve, honorably discharged or retired personnel, can apply or be nominated by members of the public at BeAPuroVet.com by September 10, 2018.
August 2018 19
up•date In brief WAY TO GROW
Let the Sun Shine Known for clever ad campaigns and an innovative business model, The Patch Boys drywall repair franchising company is experiencing explosive growth as it introduces its concept across the nation. It’s no surprise. The Patch Boys provides homeowners, landlords, property managers and business owners with a valuable, in-demand wall-patching service. These are jobs that are too small for contractors and ones that most homeowners don’t have the skill or time to do themselves. The franchisor now has more than 60 locations in 28 states, including 19 that just opened this year. These include new territories in Denver, CO, Salt Lake City, UT, Ft. Worth, TX, Dallas, TX, Virginia Beach, VA, Little Rock, AR, Austin, TX, and Raleigh, NC. “The growth of our brand is very exciting and the quality of owners we attract is simply flattering,” says Leo Goldberger, Founder and CEO. For more information, visit https://thepatchboys.com
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MINUTEMAN PRESS INTERNATIONAL GOES SOLAR WITH SUNATION SOLAR SYSTEMS Minuteman Press International, a business marketing and printing franchise, has launched an initiative to move business operations in a more environmentally sustainable direction. The company has converted to solar energy, enlisting SUNation Solar Systems of Ronkonkoma, NY, for the project. SUNation manages the project through all phases including engineering, installation, and maintenance
of the system. “Minuteman Press will benefit from an array of advantages by entrusting SUNation with this project,” says Scott Maskin, CEO of SUNation.“SUNation’s solar grid system ensures a secure investment, with fixed energy costs that allow businesses like Minuteman Press to more efficiently forecast their operating expenses and allocate additional funds to other vital business functions.
Keep Moving HEALTHSOURCE LAUNCHES CAMPAIGN HealthSource, America’s leading franchise group of wellness clinics, offering non-surgical and non-prescription treatments to address pain, has launched a campaign encouraging those dealing with pain to fight it and stay active. The integrated branding campaign features cyclists,
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tennis players, runners, walkers, and others in their daily exercise routines. Kieran McCauley, VP of Marketing at HealthSource, believes the campaign message will resonate with consumers. “We’ve essentially flipped the focus to active living from pain management,” said McCauley.
Thinking about buying a franchise? Call us rst. “Just like a realtor can help you nd a home, the experts at The Franchise Consulting Company can help you nd and understand your franchise options.”
WHAT WE DO We help you identify, investigate and get educated about franchise businesses. Like a realtor, our services are free of charge to you as our fees are paid by the seller. MARKET LEADER The Franchise Consulting Company is the market leader for entrepreneurs structuring a comprehensive investigation to analyze the franchise options available to them. EXPERIENCE With over 2000 years of collective experience helping individuals purchase, operate and exit franchise businesses, we invite you to leverage our knowledge of franchising. FREE OF CHARGE If you are thinking about owning a franchise, reach out to us and we will connect you with one of our 100+ local consultants across the USA. Free of charge. SPECIAL OFFER Reference this ad to your consultant and receive a FREE copy of The Franchise MBA - the #1 Bestseller Refe and Amazon’s highest reviewed book on franchising.
800-846-5405 | info@TheFranchiseConsultingCompany.com | www.TheFranchiseConsultingCompany.com August 2018 21
fran·chi·see \ fran-chī-zē, -chə-\noun
1. An outstanding franchise owner 2. Knowing a good thing when you see it
JAMIE WEEKS ORANGETHEORY FITNESS
J
By Jill Abrahamsen
amie Weeks knows a good thing when he sees it. So after going for his first Orangetheory Fitness workout, he was hooked. “Orangetheory is inviting for everyone. The company gets it,” he says. A big fan of group fitness, he watched many boutique brands coming on the scene, but Orangetheory interested him because it offered a unique workout everyday that could apply to anyone, no matter his fitness level. Coming from the investment industry, Weeks recognized a great opportunity and started buying territories shortly after that first workout back in 2014. Now an owner of 25 locations, Weeks took on a business partner, employs more that 350 people, and is still growing. “What I love about this business is being able to help people change their lives through fitness. Our workouts are geared for success. It’s great to be surrounded by people who are energized and feeling happy. That’s what the program does for our members,” Weeks says. The science-based, full-body workout uses technology to measure perfor22
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1
2 mance so members can see results. In a 60-minute class, members target at least 12 minutes in the “Orange Zone” to raise their heart rates and jump-start metabolism. The result is an increase in calorie burn post-workout. “After 12 minutes of hard work in the “Orange Zone,” your body burns additional calories as you recover over the next 36 hours.” Weeks explains. The business is also making a difference for
Jamie Weeks uses his Orangetheory Fitness business to help people in need and to contribute to Orangetheory’s overall fundraising efforts. Weeks and his team, along with club members, exercise to raise money for Rally, a charity that funds childhood-cancer research (1 and 2). The Orangetheory team makes sandwiches for MUST Ministries, which helps people in poverty (3).
3 people in need. Through ownership, Weeks has raised money for The Rally Foundation, which funds childhood cancer research and MUST ministries, which helps people in poverty. “Our employees and members really enjoy making a difference. It’s amazing what you can accomplish as a team,” says Weeks. For more information, visit www.orangetheoryfitness.com
August 2018 23
le·gal·ese /lēgə’lēz/noun
1. The formal and technical language of legal documents that is often hard to understand. 2. Straight talk from Jonathan Barber
I
Protect Yourself: Form an Entity
f you’re buying into a franchise, you’re probably about to make one of the biggest investments of your life. You’re likely spending hundreds of thousands of dollars and taking a great leap of faith. Maybe you’re taking out a small business loan or rolling over your retirement funds. Maybe you’re using your parents’ hardearned money that you just inherited. Regardless of how much skin you’ve got in the game, you’re heavily invested in this new venture and there is a ton of risk involved. Forming an entity is one way to protect your personal assets and limit your risk. LIMIT YOUR LIABILITY When John Smith signs a contract in his own name, John Smith is personally liable if things go south in that deal. However, if John Smith forms Smith Holdings, LLC, and signs a contract as Smith Holdings, LLC, he is generally not liable for the obligations of that contract. The limited liability company that John Smith formed is responsible for performing the terms within that contract. This scenario applies directly to franchising. Before you sign your franchise agreement, you could form a business entity such as a corporation or a
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limited liability company. Then, if you sign that franchise agreement on behalf of your entity, you have greatly limited your personal exposure. Most franchise agreements require that the franchisee sign a personal guaranty. This isn’t a deal-breaker, it’s an industry standard. A personal guaranty will make you liable even if you sign the franchise agreement on behalf of an entity. Almost all franchisors require this, because they need to ensure their franchisees are all-in with the franchise. If a franchise doesn’t require franchisees to sign a personal guaranty, those franchisees could essentially walk away halfway through their terms with no consequences. With an entity in place, however, you’re still largely protected. For instance, if a man slips and falls in your store, he most likely won’t be able to take your house and the clothes off your back if you have an entity in place. He could sue your entity for negligence, but
“Don’t be thrown off
by a personal guaranty in your franchise agreement because that’s the industry standard.” as long as you didn’t do anything malicious, he will likely only be able to get to the entity’s assets. Likewise, if your entity enters into contracts with vendors or employees, those parties would really only have claims against your entity—not you individually. The “limited liability” aspect of corporations and LLCs literally limits the liability of an entity’s owner. Some states are different though, and you should consult with a business attorney within your state for further guidance. By purchasing a franchise, you are putting your business and personal assets on the line, and it’s impossible to completely eliminate your risk. However, you can balance that level of risk against the potential
reward your franchise offers. You can also limit your personal risk for non-franchise issues like personal injury and negligence by forming an entity—and the low cost of doing so is worth the personal protection. Jonathan Barber exclusively practices franchise law as a partner at Barber Power Law Group, in Charlotte, North Carolina. He has assisted hundreds of franchisees with their FDDs and buying into franchises all over the world. Barber also represents emerging and established franchisors. Contact Barber at JBarber@barberpowerlaw.com or by calling 980-202-5679. Visit www.barberpowerlaw.com
August 2018 25
fun·ding /‘fəndiNG/noun
1. The action or practice of providing money for a particular purpose. 2. Sound advice from Dallas Kerley
A retirement plan may be all you need to launch your dream
E
ntrepreneurs are dreamers, innovators, and go-getters. They are driven enough to start their own businesses. Many, however, lack the funding needed to open the doors. Or, do they? There are plenty of ways to fund a franchise. Yes, you can borrow from the bank or find investors; of course, that means you’ll be starting your business in debt. But what if you had a pile of cash that allowed you to start your franchise cash-rich and debt-free? If you have money in a qualified retirement plan, you are cash-rich and can fund your franchise with a process known as Rollovers for Business Start-up (ROBS). HOW DOES ROBS FUNDING WORK? A Rollovers for Business Start-up plan lets you use existing qualified retirement account funds, such as a 401(k), 403(b) IRA, or other qualified retirement vehicle, to fund your franchise tax-deferred and penalty-free. Because of the way a ROBS is structured, you can still contribute funds to a tax-advan26
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taged retirement account as your business grows, enabling you to continue to plan for your retirement. HOW DO I GET STARTED? Using retirement funds for your start-up involves four key steps: Step 1: Establish a Corporation. In order to be eligible for a ROBS arrangement, you must form a new corporation. Step 2: Create a New Retirement Plan. The corporation will sponsor a new retirement plan that has provisions allowing investments in the parent corporation stock. Step 3: Transfer Retirement Funds. Once the plan is established, your existing retirement funds will be rolled over to the new plan. Because the funds are rolling from one qualified plan to another, no taxes are due and there are no withdrawal penalties. Step 4: Launch the New Business. Once stock is purchased in the new corporation, you now have the cash to invest in your new franchise.
“What if you had a pile of
cash that allowed you to start your franchise cash-rich and debt-free?”
THE ADVANTAGES Tax Benefits. Under the ROBS plan, you maintain tax-deferred status and do not face any early withdrawal penalties. Flexibility. The funds can be used for many different purposes. The money can be used as a cash injection for an SBA loan (Small Business Administration), to pay franchise fees, build or renovate a site, or buy equipment. You can even use the funds to pay yourself a salary. If you don’t need the money, don’t spend it—you aren’t required to use all the funds you’ve transferred. Ease and Speed. In some cases, you can get access to your funds in as little as 10 days. Funding isn’t dependent on your credit. Unlike other borrowing options, a
ROBS doesn’t impact your personal credit. If you borrow any money for your business, your personal credit may suffer. Plus, if you have issues with your credit, you can still use the ROBS for your franchise. Peace of Mind. Using your retirement plan means you are not incurring additional personal debt. And you’re spared the headache of negotiating with lenders for funding. Need help figuring out how to best fund your franchise? Benetrends helps entrepreneurs make their dreams a reality. The ROBS program, known as the Rainmaker Plan®, provides guidance and support, so you can focus on your business. To learn more, visit www.benetrends.com or email Dallas at dkerley@benetrends.com
August 2018 27
ki d
en·tre·pre·neur änn-trə-p(r)ə-'nər\noun
1. One who manages and assumes the risks of a business 2. Enabling the next generation of business owners
M
By Jill Abrahamsen ost parents can’t even get their kids to clean their
rooms, much less get a job. So when you hear about an 11-yearold entrepreneur, it seems impossible right? Not in the case of Kaelan Fisher. The now-14-year-old rose to the occasion and became a self-proclaimed “kid-trepreneur” at the age of 11. Kaelan was looking for ways to earn extra money. His father, Bradd, an entrepreneur himself, saw an opportunity to connect with his son. “I feel strongly that kids should be able to take on responsibility by doing simple jobs,” Bradd says. “Having them feel accomplished is extremely important.” They decided on a simple service: “The Pooper Picker Upper Kids.” As the name suggests, they come to a customer’s house, clean and remove dog droppings. Older sister Taytum (16) soon came on board to help organize the business. The siblings worked with app developers to streamline billing and scheduling. “Everything is done through an app. Customers are notified before the job begins and when it’s complete. Billing and scheduling are automated,” says Bradd. With success and a proven system in place, the Fisher family plans to offer very low-cost franchise opportunities. “The
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all-in cost is under $1,000, so “kid-trepreneurs” can quickly pay back the money with earnings,” says Bradd. Under their father’s guidance, Taytum and Kaelan worked with designers and programmers to create training videos and manuals—for both parents and kids. Although the concept is for the kids to run the business, technically, franchisee parents become sole proprietors and their children work the business as “employees.” “Kids can make around $700 a month, depending on the amount of time they put in,” says Bradd. As a true “kid-trepreneur,” Kaelan is glad for the experience. “It was really cool learning how to run a business. Picking up poop wasn’t as embarrassing as I thought it would be,” he says. Taytum just graduated high school and is going to focus on franchise training and development full time. “I’m so excited for the future of this business,” she says. For more information, visit www.pooperpickerupperkids.com
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1. Kaelan Fisher, started running Pooper Picker Upper Kids at the age of 11. 2. The Fisher family and their large group of aspiring “kid-trepreneurs” 3. T-shirts are just some of the “swag” Pooper Picker Upper Kids get as part of the business. 4. Recent high school graduate Taytum Fisher plans to run the franchise full time. 5. Cute cartoon characters are used in training videos to appeal to young franchisees.
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I can. I will. End of story.
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CONFESSIONS OF AN EXERCISE ADDICT
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By Jill Abrahamsen get cranky if I don’t work out on a regular basis. My family
knows it and they fully support my gym membership. If I get too wrapped up in work or personal commitments to exercise, I become a person no one wants to be around. So, as much as my husband would rather not hear my alarm going off in the wee hours so I can squeeze in a workout, he prefers it over dealing with a grumpy wife for the rest of the day. I’m certainly not an athlete or in exceptional shape, but breaking a daily sweat is a necessity for my well-being. Humans are made to move. Exercise makes us feel good. When those endorphins are released, we are happier and more productive. In fact, some of my best ideas have come to me in the middle of a kick boxing class or while pumping iron. Like most of the workforce, I spend a good part of my day in front of a computer. It takes a toll on the body, but finding time to exercise can be challenging. Smart employers know the merits of regular exercise and some offer fitness memberships as part of their benefits packages or even have gyms in their office buildings. But for the rest of us, we need to figure out a way to squeeze in exercise. Luckily, franchisors have recognized this need and they’re answering it with some interesting options. Niche fitness brands are popping up everywhere, offering the kind of convenience that leaves no
room for excuses. From personal-training services that come right to your house to gyms that stay open for 24 hours, franchisors are making it easier to get that workout in. And with targeted exercise and well-researched exercise routines—often written by experts in a corporate office— gym-goers get what they came for: Results. Whether you’re in for hardcore sports training, Pilates, or gentle stretching, there’s something out there for everyone. For investors, this is just the beginning. Knowing that regular exercise lowers the risk of heart disease, stroke, cancer, dementia, and other chronic illnesses, using exercise as a preventive health tool is a growing trend. More and more doctors are recommending fitness plans. There are fitness franchises for every budget. Some can be run out of a home, while others require just a small studio and minimal equipment, and of course, there are big fitness centers for large investors. And just think of the perks. With fitness opportunities all around you, you’ll always get your workout in—so there’s no reason to be cranky.
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COVER STORY
fitness NICHE
FRANCHISES
Fitness franchisors are getting creative with boutique brands.
“I
By Jill Abrahamsen
nvesting in a big-box gym isn’t the only option in fitness franchising today. Boutique fitness brands are popping up everywhere. They offer a community-type environment and efficient workouts. They are also affordable, with many that only need 1,200 square feet of space. That means less expensive leases, fewer employees and fewer members needed for the business to be profitable. Here, we talk to leaders of some innovative fitness brands and learn the inspiration behind their businesses. Take CITYROW, for example. Founder Helaine Knapp launched CITYROW after suffering injuries from overdoing it at a high-impact gym. The studio offers a high-intensity sweat with a low-impact burn. A terrible accident was the driving force behind Pilates Proworks. After suffering for years with a crippling injury, founder Oscar Sanin turned to Pilates and got life-changing results. He was so thrilled with his recovery, he was inspired to open his own studio. Whatever the inspiration, fitness franchising is a hot market. On the following pages you’ll find some very interesting concepts. Could one of them be for you?
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CITYROW
HELAINE KNAPP
YOU DON’T HEAR TOO MANY PEOPLE REFERRING TO EXERCISE EQUIPMENT as sexy. But if you talk to Helaine Knapp, founder and CEO of City Row, you may just take a second look next time you’re at the gym. Filled with passion for her business, Knapp refers to her water rowers as “organic and sexy.” Working in the hectic world of tech startups, Knapp put in crazy hours and had little time for exercise. She fell in love with boutique fitness gyms for the convenience and the high-intensity workouts they offered. Unfortunately, at just 25, Knapp’s workouts led to three herniated discs. “I thought I was doing something good for my body, but I really didn’t know how much I was hurting myself with high-impact workouts.” At her doctor’s advice, Knapp searched for a low-impact workout. “In doing research, rowing kept coming up as a low-impact, total body workout, but I thought it was old school,” Knapp says. Soon she realized many benefits. Knapp saw a business opportunity and opened the first CITYROW in January 2014, which incorporated rowing with free-weight and body-weight exercises. “No one wants to row for an entire hour,” Knapp says. “It was the first of its kind. It’s a smart and effective workout that incorporates cardio and toning. It’s a high-intensity sweat with a low-impact burn.” With a huge following, proven systems and a partnership with Franworth, CITYROW started franchising in March. While absentee ownership is an option, Knapp prefers to partner with people who are passionate about fitness and want to be involved in the business. For more information, visit www.cityrow.com
August 2018 35
COVER STORY
Pilates Proworks
OSCAR SANIN
A TERRIBLE ACCIDENT IN 1994 CHANGED EVERYTHING FOR OSCAR SANIN. Although grateful to survive a plane crash, he suffered a lot of injuries and endured years of back problems. “I didn’t address the problem properly, and by 2003, I could barely walk,” he says. Not wanting to undergo back surgery, he sought several medical opinions until one of the leading back surgeons in his area suggested he try Pilates. “It was unbelievable. In just a little more than a week, I was able to tie my own shoes again. The results were life-changing,” Sanin says. Sanin became obsessed with Pilates and hired an engineer and architect to design a customized reformer, now known as the “FitFormer.” It’s a more comfortable and user-friendly version of the classic reformer. Using his new machines, he opened the first Pilates Proworks in 2009, in San Francisco. Proworks offers a variety of classes, including the “Pilates Pro,” a Pilates-based workout, the “Matbox,” a mix of kick boxing, Pilates, and yoga, and the “Tone and Flow,” which combines yoga and Pilates, so members never get bored. All classes deliver a low-impact workout with great results. “Members enjoy improved posture, weight loss, and better health,” Sanin says. Now with 17 locations internationally, Pilates ProWorks has enjoyed steady growth and continues to expand. “We give franchisees all the tools they need to be successful,” says Sanin. “Our most successful franchisees are owner/operators. If you take care of this business, it will take care of you.” For more information, contact www.pilatesproworks.com
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i9 Sports
BRIAN SANDERS
NAVIGATING A CHILD THROUGH THE WORLD OF YOUTH SPORTS IS a sport of its own. Parents run kids around like a taxi service. Kids feel pressured to specialize in one sport at an early age and work on it year-round. Young athletes are often over-scheduled, with too many games and practices. There’s favoritism from some parent coaches (“Daddyball,” anyone?). And let’s not forget about those overzealous parents who take the games too seriously and make an activity that was supposed to be fun, stressful and discouraging. Enter i9 Sports. Created to instill a love of sports in children, this home-based franchise offers youth sports leagues, camps, and clinics that are more fun than competitive and focus on sportsmanship. “In our programs, no child will ever be excluded by a try-out, be made to feel like they aren’t good enough by a league draft, ride the bench for an entire game, or be cut from a team,” says Brian Sanders, President and CEO of i9 Sports. Instead of having the overhead of brick-and-mortar locations, franchisees rent space and run activities on fields and in community centers. The program offers instruction and play for kids ages 3 to 14 in sports, including flag football, soccer, basketball, baseball, and lacrosse. “We have created a fun way to help kids develop athletic ability, a love of team sports, and an understanding that how you play a game is as important as the score,” says Sanders. “This is a feel-good business for anyone who likes to be around children and develop relationships,” says Sanders. “Many of our franchisees were customers first. That says a lot about us.” For more information, visit www.i9sportsfranchise.com
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COVER STORY
ALEJANDRA FONT
The Camp Transformation Center ALEJANDRA FONT ALWAYS HAD AN ENTREPRENEURIAL SPIRIT, BUT HER early days as a business owner didn’t really excite her. “I was in housewares. It was profitable, but it wasn’t for me. It was just a means to an income,” she says. What Font did enjoy was exercise and fitness. So in 2008, she closed the doors on her business in order to monetize her passion. “I wanted to do something with fitness. I quickly realized that there was a void in the weight-loss area,” Font says. In 2010, Font opened the first Camp Transformation Center, a six-week exercise-and-nutrition program. “When you follow this program, you get results. Period,” she says. “The program is addictive. Once people start seeing the results, they are encouraged and want to keep going. So they will roll into a new challenge.” She turned to franchising in 2017 in order to keep the brand consistent as she scaled the business. With more than 106 locations, members everywhere can encourage and support each other through a private Facebook account. “We’ll have upwards of 6,000 members all starting a challenge at the same time. It’s encouraging for members to get that kind of support,” she adds. Font is looking for franchisees who have business acumen and are passionate about fitness. “So many of our staff members have become employees. They see how they can change lives while making a great living. It’s the ultimate validation for me,” she adds. For more information, visit www.thecamptc.com
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August 2018 39
COVER STORY
Surf’s Up Fitness
CHARLES HEATH
AS THE OWNER OF A CONSTRUCTION COMPANY THAT BUILT MORE THAN 300 gyms, Charles Heath had insight into the fitness business—so much so that he became inspired to create his own brand. “I learned what to do and what not to do. Often, operation training meetings were going on while we were on site, and I would hear about what worked and what didn’t work for all different brands,” he says. With an advertising background and a mind for business, Heath launched a unique concept: Surf’s Up Fitness, a total body workout, in a fun environment. “Classes are for all fitness levels, and you can burn up to 1,200 calories per class,” he says. “The workouts are designed to enhance balance, coordination, endurance, and flexibility.” The beach theme is taken pretty seriously. Fitness trainers are called “lifeguards,” and the locker room is known as “The Pier.” Real sand (approximately 28 tons in each studio), is brought in for a beachy feel. Surfboards are used for most workouts. They create an unstable surface, which works the core and is particularly good for balance. Suspension Body Training (SBT) is incorporated into some of the workouts, and there’s also a spin section. “We made a big investment in technology. Through our app, members get a report after each visit telling them which workout they did and how many calories they burned in order to track progress. They can schedule classes on our website,” he says. “We are very customer focused and add little touches like free, cold-water bottles, and towels.” He didn’t miss a detail when it comes to his franchisees, either. “This is a turnkey franchise. It includes everything you need to run the business, from soup to nuts,” Heath says. You don’t have to be a fitness expert to run Surf’s Up, but business experience is preferred. “Look at me. I’m a 64-year-old fat man with a white beard. See what I mean?” For more information, visit www.surfsupfitnesswoodstock.com
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August 2018 41
COVER STORY
BODYBAR Fitness YOU MAY NOT THINK OF PILATES AS A HIGH-INTENSITY WORKOUT, BUT BODYBAR Fitness founder and CEO, Laurie Gatlin will convince you otherwise. She designed her program as a modern twist on the traditional Pilates method. The program offers something for everyone, from classes that target specific body parts to fastpaced full-body workouts. They even have a 40-minute express class where the goal is clear: “Get in. Kick butt. Get out.” Founded in 2012, the family-owned business now offers franchise opportunities. Gaitlin is looking to partner with franchisees who want to be owner-operators and feel passionate about the business and helping people. For more information, visit bodybarfitness.com
Athletic Republic BEING THE FIRST TO CROSS THE FINISH LINE OR A STARTER ON A competitive sports team doesn’t happen by accident. It takes hard work and talent. But sometimes that’s not enough—it requires that extra edge. That’s the whole philosophy behind Athletic Republic, a science-based training center with programs designed to bring athletes to the top of their games. The foundation of their success comes from their test-teach-train approach to athlete development which helps improve speed, power, agility, and stamina. Working with students and professionals, trainers help athletes achieve peak athletic performance. There are also programs for athletes recovering from injury and active adults who want to improve fitness levels. Two franchise formats are available—a training center or training clinic. For more information, visit www.athleticrepublic.com 42
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August 2018 43
Pumping up pocketbooks: Fitness Franchising by Lisa Welko, Certified Franchise Executive “Going to the gym is great for your body, but it’s also great for your mind,” said golfing superstar Rory McIlroy. And judging from a robust fitness market in the U.S., Americans are learning firsthand just what Mcllroy meant. The United States fitness market currently brings in about $31 billion annually—and, according to market research firm IBISWorld, one in 10 of those dollars comes through a franchise. IBISWorld predicts the fitness market will grow by 1.6 percent to $4 billion between now and 2023—and franchise growth is out-pacing the industry overall. In fact, IBISWorld predicts that franchise brands will grow about twice that fast, as they become stronger and entrepreneurs look for more turnkey opportunities. Looking for an investment? A fitness franchise might be just what you need to pump up your bank account. WHY THE GROWTH SPURT? Obesity is the leading health epidemic in the United States, and exercise is a good start in fighting it. Thus, America needs more gyms, fitness clubs, personal trainers, and nutrition coaches to help people stay in shape and lead healthier lifestyles. Over the past five years, gym and fitness franchises have benefited from many public health initiatives. Exercise is key to fighting not only obesity, but also diabetes, heart disease, and other health issues. The easier we make it for people to do, the more they do it. These days, fitness franchises are as varied as the people who use their services. Some have instructor-led classes that can include treadmills, rowing machines, and free weights. Others offer boot camps, climbing and yoga facilities, cycling studios, kick
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boxing, dancing, or ballet barre workouts. There are even virtual on-line classes. Of course you can also find standard gym environments, which include exercise equipment and weights so you can work out on your own. Whether they’re specialized gyms or one-size-fits-all facilities, they’re all making health and fitness a priority. Even new moms without childcare can have a fitness outlet. Mom-focused fitness franchises allow you to workout with your baby. For kids, it’s important to make exercise a part of life early on. Many franchises target children with customized multi-sports programs, or specialized workouts like ninja fitness programs. BENEFITS OF OWNERSHIP Why are fitness franchises making such gigantic strides? First, they are businesses that make a real difference in people’s lives. Fitness franchises make people physically healthier, reduce stress, and help build self-esteem.
Secondly, the majority of fitness franchises are turnkey operations that provide owners with the blueprint for success. Owners get help with financing, location selection, equipment leasing, and marketing. When the business opens its doors, everything is ready to go. Next, fitness franchises provide many revenue streams. In fact, according to The Global Community of Health and Fitness Professionals (IHRSA), ancillary revenue accounts for a quarter of a club’s total revenue. These services, which are not included in a club membership dues, include things like personal-training, special group classes, apparel, and amenities like day care, tanning, and saunas. Finally, the fitness health club industry is not as demanding as other traditional franchises. Owners hire a dedicated staff to ensure the business runs smoothly, and revenue is generated through automatic payments. With a little guidance, your business should run itself.
Listen to Lisa: Stand Out With 11 years of fitness industry experience, I have a soft spot for fitness franchising. Judging by the popularity in this franchise category, it’s becoming a top choice for many entrepreneurs. Here’s how to stand out from the crowd.
Utilize PODS AND POPS: Points of difference (PODS) are the things that separate you from others. Find your own unique hook—an introductory membership, a special class, a nutrition program— that brings people to your establishment. Points of parity (POPS) are the things that make you equal to your competitors, such as refund policies and convenient hours. Make sure you’re keeping up, so your business stays competitive in your market.
Run it like a business: Passion for fitness is important, but a business needs to be run like a business. If it’s a hobby, keep it your hobby.
Get professional financial advice: Financing can actually be broken up a bit when you’re looking at a fitness franchise, since equipment can be leased, instead of purchased. That keeps initial out-of-pocket costs lower. When working in this category, you should definitely work with a professional who specializes in funding franchises. Lisa Welko helps aspiring business owners determine which specific franchise opportunities align with their strengths, goals, and values. For more information, visit www.integrityfranchisegroup.com
August 2018 45
FEEL THE BURN Sports and Fitness Franchises Are in High-Growth Mode. Here’s why.
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by Christopher Connor
veryone, no matter what their age, seems to be focused on healthy living these days. Fitness, of course, is a big part of that. With an increasing demand for overall well-being, the franchise market segment for sports and fitness seems to be growing at an all-time high. Modern, boutique fitness studios are replacing one-size-fits-all mega gyms, and they’re taking far more creative approaches to health and exercise than the treadmill ever did. People are doing fun and even odd things to get in shape (who doesn’t like creative approaches to business?)! A great example of this is the Italian-born women’s fitness franchise, Figurella, who uses “bubble workouts” and detoxing pods to help women boost metabolism and shape their bodies 46
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while being contained in specially designed chambers. Talk about innovative! One thing I’ve seen over the years is that the franchise investors who succeed in fitness franchising tend to have a personal interest in health and fitness as well. If this is a market segment that appeals to you, look at your personal interests and lifestyle and see whether your passion lines up with your business interests. Opening a boutique gym certainly has its benefits, starting with a significantly lower average initial investment that’s required to open a fitness franchise. The boutique’s smaller space, lower amount of equipment, and workouts that don’t rely on equipment has brought the fitness franchise investment
range down to $150,000-$250,000, giving fitness franchises a lower financial bar. WHAT’S HAPPENING NOW Fitness franchising has gone “community based.” People are enjoying working out and getting in shape together now more than ever before. My firm, Franchise Marketing Systems, is seeing this firsthand with the incredible fitness brand, Rockbox Fitness. Rockbox is the brainchild of Roger Martin and Steve Halloran, of Charlotte, North Carolina. They leveraged Halloran’s background in fitness and gym management and Martin’s strategic business experience to create not only a great workout experience, but also an incredible business model. Rockbox has taken a boxing and kick boxing workout and injected it with blasting sound systems, cool lighting, and targeted equipment like sleds, which you don’t find at every gym. The key to Rockbox’s success has been getting people together in a room where they interact and have fun together. The group becomes it’s own best advocate and starts keeping people accountable for showing up and putting their best into each workout. Brands like South Beach Boxing, Better Body Bootcamp, TITLE Boxing Club, and 9Round Fitness,
have followed Rockbox’s fitness model and experienced similar success. This incredible trend could possibly be attributed to the wild success by brands such as Orangetheory and F45 Fitness, which also combine targeted workouts with interesting environments and community. These franchise systems proved that people enjoy the community side of fitness and chose to work out with others in a class setting, instead of opting for a big-box brand like Gold’s Gym and Powerhouse, who had essentially gone out of favor in the last decade. From a franchise perspective, what makes the sports and fitness market so appealing is also the lifestyle side of working in the fitness market. When you find a franchise brand and business model that works, you can feel great going to work every day helping people live healthier lives. The day-to-day responsibilities of a fitness franchise mirror those of other fixed-location businesses, but the interaction with customers, the product you are selling, and the work atmosphere is a lot more fun. Conner leads the Franchise Marketing System’s team in business consulting and franchise development projects. For more information, contact Chris.Conner@FMSFranchise.com
August 2018 47
SPECIAL SECTION: PART 1
Breaking Down Y
the FDD
Item 7: Estimated Initial Investment
ou’ve heard it before: Be sure you understand your Franchise Disclosure Document (FDD) before you buy into a franchise. The advice makes sense—after all, the document is there to protect you by listing everything the Federal Trade Commission (FTC) believes you need to know about your franchisor. But given that it’s a 150-page legal document, many prospective franchisees aren’t always clear on the details. It’s complicated, we get it. So, to help you understand the finer points of the FDD, we’ve enlisted Nicole Micklich, a franchise attorney. In the next six issues of Franchise Dictionary Magazine, she will highlight some common misunderstandings about the document and clarify them. Here, we launch with the topic that everyone needs to be clear on: Money. Item 7 requires franchisors to use a table like this to set out a franchisee’s entire estimated initial investment. Franchisors must list to whom payments are made. When payments are due must be noted. Franchisors must disclose the method of payment Franchisors must disclose the amount of payment The table should disclose all expenses included in the franchise agreement that a franchisee has to pay to open for business, including those that are to be paid to third parties, like rent.
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Some of the costs set out in the Item 7 table may be difficult for the franchisor to estimate and the franchisor may use ranges or variables
Under the FTC Franchise Rule, in Item 7 of the Franchise Disclosure Document, the franchisor must provide an estimate of the likely initial investment costs a franchisee will incur. Don’t confuse Item 7 with Item 5. Item 5 only discloses the initial fees that must be paid to the franchisor or affiliate. Item 7 should be more detailed than Item 5. Item 7 requires franchisors to use a table to set out a franchisee’s entire estimated initial investment. The table is supposed to disclose all the expenses required by the franchise agreement and all other costs necessary for a franchisee to open for business, including those that are to be paid to third parties, like rent. The Rule does not dictate a complete list of the types of fees or expenses that must be shown in the table. The Rule provides suggestions of the typical expenses franchisees will incur. Franchisors should also identify and itemize other specific required payments franchisees must make to start operating. Item 7 covers the period that ends when the franchisee opens for business. It also requires franchisors to include in the table “additional funds” for the time during the “initial period” of operations. The “initial period” can vary depending on brand, and franchisors must disclose the specific initial period used in the FDD. For each item listed in the Item 7 table, the franchisor must disclose: • The amount of the payment • The method of payment • When the payment is due • To whom the payment is to be made Some of the costs set out in the Item 7 table may be difficult for the franchisor to estimate and the franchisor may use ranges or variables. Franchisors use footnotes to provide more information about the Item 7 expenditures. If the franchisor offers different types of outlets, like restaurants that offer both stand-alone units and units in convenience stores, the franchisor might use more than one table. As you consider the purchase of your franchise, you and your advisors should carefully and cautiously use Item 7 and other information provided by the franchisor to prepare a financial model for your start-up costs. —Nicole Micklich is a franchise attorney with Garcia & Milas. Contact her at 203-773-3824 or nmicklich@garciamilas.com
The Cost of Franchising
There are numerous costs associated with starting your franchised business, including: • The initial franchise fee • Training • Travel and living, to re-locate or for training, until business becomes profitable • Organizing and registering a business entity • Banking • Obtaining business licenses and permits • Negotiating a lease or purchase of real property (franchisor may require a real estate consultant) • Security deposits, utility deposits • Rent or mortgage payments • Insurance, including renter’s, auto, workers’ compensation, commercial general liability, officers and directors • Remodeling, leasehold improvements, and decorating • Advertising and marketing, both required and optional, and grand opening • Payroll, including pre-opening payroll during employee training • Equipment • Fixtures • Vehicle(s), truck(s), trailer(s), and/or vehicle wraps or paint • Gasoline/Fuel • Signage • Bookkeeping • Computer hardware • Computer software, including POS • Telephone system • Promotional items • Opening inventory • Cash on hand
August 2018 49
Could Franchising Mean Job Security? by Ed Horowitz
I
n the mid-20th century, professionals worked for the same company for 30 years or more, earning an income and likely, a pension for retirement. Today, things are different. The average person is in the same job for 5.1 years. The company pension has been replaced by the 401k—which uses the employee’s money—or, there is no retirement fund at all. It’s become commonplace to take a job, learn the job, and be out of a job within a few months or years. It’s routine to find a working person who has been laid off at least once, and many have been laid off multiple times. TODAY’S WORLD Technology is changing nearly every job in every industry. Recent years have seen elimination of countless jobs through automation. For example, Applebee’s and Chili’s have reduced their wait staff by implementing iPads for ordering and paying the check. Can other restaurant chains be far behind? Millions of cab, bus, train, and truck
drivers could eventually be out of jobs if driverless vehicles become a reality. Oxford University researchers forecast that, within 20 years, computerization will eliminate almost half of all of jobs. How can you secure your financial future? Investing in a franchise is one way—and a franchise consultant can help. Investing in a franchise is a great way to take charge of your destiny. Many people feel like owning their own businesses offers more job security than a corporate career—and there are reasons to believe they’re right. Professionals find their way to franchising for a variety of reasons. Some are in the midst of a career transition. Others are fed up with Corporate America and want to make a change. Some investors even keep their day jobs, yet invest to diversify or build equity in a manager-run business. No matter which category you fall into, a franchise consultant can help you figure out which businesses match up to your skills, goals, and lifestyle expectations, and ultimately, which franchise is a perfect fit for you.
With more than 30 years in sales, marketing and business ownership, and over 14 years in franchising experience, Ed Horowitz provides coaching, mentoring, support and guidance to those interested in pursuing success through franchising. To reach him, call 425-785-1837 or email ed@thefranchiseconsultingcompany.com.
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THE #1 BEST SELLER
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This comprehensively researched and deftly written franchise guide brings together experience and fact to give you the tools you need to understand which franchise is right for you. With insights from respected franchise leaders and a thorough knowledge of franchising, this book will help you understand and master the 4 Critical Steps to finding the Ideal Franchise.
www.TheFranchiseMBA.com
August 2018 51
Finding your “Perfect-Fit” Looking for a franchise? With so many options to choose from, how do you find the perfect fit? It’s a process—and you have to take each part seriously. Here are seven steps to consider when going through your search.
by Faizun Kamal 1. Work with a franchise consultant. Would you buy a house without using a Realtor? Would you make a bold career move without the help of an executive recruiter? Expert advice helps when you’re buying a franchise, too. Find a reputable franchise consulting company and choose a franchise consultant with whom you’re comfortable. This expert will help you hone in on specific goals, strengths, weaknesses, and clue you into opportunities that you might not have known exist. Even better: The service is free to you— the franchisor pays the consulting fee when the client is awarded a franchise.
2. Know yourself—well. Take an honest inventory of who you are. What are your skills and strengths? What are your weaknesses and blind spots? What comes naturally to you? What feels like pulling teeth? These are all good indicators of skills you do (and don’t) bring to the table. Different franchises require different strengths, and you need to understand how your skill set aligns with a specific franchise model.
me
Doggie Grooming
3. Identify franchise models. There are more than 3,000 franchises in the United States alone. Some are home-based; others are brickand-mortar businesses. Some require hands-on management, while others absentee ownership. Using the personal assessment and customized business model built by your franchise consultant, you can start to narrow down options and see which companies might be a fit and which companies to cross off the list. 52
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4. Begin due diligence. Here’s where your franchise consultant introduces you to a handful of franchises that may be a fit based on your personal, financial, and lifestyle goals. Each franchise will then introduce you to current franchisees in their system so you can start to get a granular feel for what it’s really like to run a particular business. You will be able to ask questions and understand what daily life at a company is really like. This is possibly the most invaluable part of your research.
5. Evaluate franchise documents. Each franchise will share with you what is known as the Franchise Disclosure Document (FDD). This legal document is comprised of 23 items, which give you a comprehensive overview of the financial state of the franchise, including any outstanding litigation against them and earning claims of existing franchisees. The Franchise Agreement lays out the responsibilities of each party—the franchisor, the franchise company, and you, the franchisee.
6. Attend Discovery Day. Most franchisors hold regular Discovery Days at their corporate headquarters. These are opportunities for a company to interview a potential candidate and see if he’s a good fit. You should also take this as an opportunity to learn more about the company and the team—your extended work family for years to come.
7. Become a franchisee. If you have done your research diligently and have attended Discovery Day, you are in a position to make a decision. Either you want to move forward into ownership, or you know why you don’t. The decision to move forward must sit comfortably on an emotional, business, and financial level. With the help of your franchise consultant, you should have found your “perfect fit” franchise.
Want to find out about franchises that may be the “perfect fit” for you? Email: faizun@thefranchiseconsultingcompany.com
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FRANCHISING BEYOND PROFITS
I
By Sarah McCafferty
f you’re thinking about buying a franchise, you’re probably scrutinizing the financials, considering the purchase price as well as the potential profits you might make. Knowing the financial risks and rewards is obviously a prudent and necessary part of due diligence, and a huge factor in a purchase decision. Yet, other aspects of a business can be just as attractive because they can offer a more impactful and rewarding lifestyle than financial success alone.
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“Businesses that directly
provide to the community can help fellow neighbors, property values, as well as other businesses.” Whether it’s providing a service that makes an area more attractive or creates more jobs, a business can offer an owner fulfilling rewards beyond the profits. A franchise consultant who knows your personality and understands your motivation can help you find a business that suits you beyond making money. Thinking of buying a franchise? The biggest rewards might have nothing to do with your paycheck at all. BUILDING COMMUNITY Owning a franchise can help enhance a community. Franchise owners often live in the communities in which they buy franchise territories—or at least in a nearby location, so their businesses become part of their extended communities. They are likely already involved in civic organizations, religious affiliations, PTA, and so on. By being part of the social fabric of the community, a business will improve and serve the area and thus has a greater chance at success. Businesses that directly provide to the community can help fellow neighbors, property values, as well as other businesses. Along with strengthening a local economy, a good concept can make an area a more desirable location for people to live. Buying into concepts in health, wellness, food, tutoring services, and retail, to name a few, can enhance the local experience and provide a strong sense of ownership pride, which is an important trait in achieving overall business success. CREATING JOBS Being in the position to create jobs is another fantastic benefit that many franchise owners
experience in addition to P & L alone. Offering members of the community a chance to earn a living is rewarding. It takes good management skills, but also the desire to mentor and help employees be successful. PROVIDING A NECESSARY SERVICE One way to build community is to keep residents in it. By bringing in businesses that offer daily necessities, like food, home services, dry-cleaning, hair salons, or other retail shops, residents have fewer reasons to leave. These conveniences make a community more desirable and make life for residents less stressful. Sarah McCafferty is highly-regarded as a trusted franchise match-maker with a keen ability to dive deep, surface key goals that ensure success for her clients. Contact Sarah at 415-529-0040 or Sarah@TheFranchiseConsultingCompany.com
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Franchises THAT WORK Eric Schechterman As a franchise consultant, I’m often asked, “What is the hot, new franchise category?” While some say fitness or food or pet care or education and so on, for me, the hot franchise category is the one that allows you to make the most money over the long haul. To that end, I advise clients to look for franchises that are Amazon- and recession-proof. While 100-percent foolproof businesses simply don’t exist (though wouldn’t that be nice?), certain franchise models have proven to succeed in all economic climates—and in the face of fierce online competition. Believe it or not, there are a few brands and certainly services that aren’t available via Amazon delivery. These products and services promise to remain steady in tough times and grow in good times, which, by the way, makes them the hot franchises for me. DEMOGRAPHIC-FOCUSED BUSINESSES These franchise models target a specific group as primary customers. The most commonly-targeted groups are seniors, children, and believe it or not, pets. Studies show that no matter what the economy is doing, people still continue to spend the same money (or more) on their elderly parents, their children, and even their four-legged friends. For seniors, in-home senior care and assisted-living placement services are thriving. Preschools and daycare centers, in-home tutoring, even swim schools and enrichment programs are all doing well. Meanwhile
mobile grooming, dog daycare (and boarding) help keep the pet category booming. ESSENTIAL SERVICES FRANCHISES Franchise models that offer a product or service that is considered a necessity are referred to as essential services. Take haircuts, for example. Regardless of the economy, hair will always grow and will always need to be cut. Another example is home services. Homes need inspections, gutters cleaned, chimneys swept and all kind of repairs and upkeep, no matter what the economy is doing. BUSINESS-TO-BUSINESS (B2B) FRANCHISES Businesses that provide services to other small businesses are known as B2B franchises. According to the SBA, there are almost 29-million small businesses in the U.S. and almost 65 percent of them have four employees or less. The thing is, these small businesses still have the same needs as big businesses. Small businesses need IT support, staffing services, marketing and website support. Since they can’t afford to hire in-house staff, they outsource these services. Professional B2B franchises are in high demand because of the growing needs of these small businesses. They’re also very attractive options to potential franchisees because they’re owner-operated and carry a low investment.
As part of FranNet of Boston, Eric Schechterman works closely with clients to understand their goals, values, lifestyles, and interests. He coaches them through the franchising process and helps determine if franchising is a good fit. For more information, contact Eric at eschechterman@frannet.com 56
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“Certain franchise models have proven to succeed in all economic climates�
August 2018 57
in·ter·view
\�in-tər- vyü \ � noun
1. A Q&A session with an industry expert 2. Holly Ford on buying a resale business
Holly Ford is an award-winning franchise developer and
Q
founder of Zarian Firm, an international business brokerage. As a consultant at The Franchise Consulting Company, she empowers her clients with the tools to unshroud hidden value as well as reveal the potential mine fields of a brand. Contact Holly at Holly@TheFranchiseConsultingCompany.com or 513-828-9810.
What are the pros and cons of buying a resale business?
A
When you buy an existing franchise, it’s known as a resale. Generally, you can buy one that is successful and making money, or you can buy one that is in trouble. Either can be an opportunity if you know what you’re getting into.
The Pros 1. You are buying a business that has already invested in the start-up costs—including initial marketing and customer acquisition—so you don’t have to. 2. The organization is established. Systems and procedures are in place. 3. All of the job descriptions, hiring, negotiations, and training of employees are complete. 4. The business is generating revenue, giving you immediate cash-flow. 5. Location has been established and contracted, and all details of the facility design and construction are complete and operational. The Cons 1. If the business isn’t working due to a bad product or service, inattentive customer service, or slow delivery, you can be starting with a less-than-stellar reputation. 2. Systems and procedures may not be working efficiently enough to achieve profitability. 3. ‘Inheriting’ inefficient employees can be problematic, though curable. More concern should be in preparing for an inevitable 10-15 percent attrition rate when purchasing the business. 4. There may be a declining trend in profitability. 5. A lease agreement that is too high for profitability, or a location that does not attract or retain customers is difficult to change.
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QA
What should sellers do to prepare a business for sale? There are three main areas of focus for Sellers to create a validated business resale; Valuation, Unique Selling Points and Marketing Package.
Q
Valuation: This process determines the value of a company. The most effective method for businesses grossing under $2 million is a Seller Discretionary Earnings (SDE). (Businesses with revenue exceeding $2 million should use EBITDA). You will need to provide your broker with a variety of documents, including taxes, P&L’s, income statements, list of assets with depreciated replacement cost, list of liabilities, etc. So make sure that your books are in order. Unique Selling Points: What factors separate you from your competitors? These can be industry, market, or business specific. Generally these items are used as factors to create the business’s multiplier. Marketing Package: Create a business marketing package that includes the business’s results (including SDE), projection of future results, information about the industry and market, location and map, and facts about the franchisor. Also, prepare three years of P&L’s, the lease agreement, and the franchise agreement to go into this detailed package.
How do you, as a seller, get top dollar for your business?
A
Hire a broker. A good broker often charges an upfront fee for the time and fees associated with the preliminary valuation, industry research, packaging, and lead generation. It’s well worth it. I have been involved in deals that sold for more than double what the seller thought the business was worth. There is much more to the value of a business than cash flow. Businesses have five critical areas to evaluate: The Industry, The Market, The Business Results, The Product Differentiation, and The Forecast. A good broker will look at these factors when creating the prospectus to attract more buyers and help them see the big picture.
QA
What’s your advice for buyers? A franchise resale can be an excellent investment. The major costs and work of build-out, initial customer acquisition and retention, hiring and training employees, etc. has already been done. The ROI can be magnificent. A franchisee also has the support of the franchisor, who wants to ensure that the business transitions well so the brand’s reputation isn’t tarnished by a termination, and the royalty stream isn’t affected by a declining franchisee. But I would definitely advise buyers to consult with a franchise resale professional. This expert can help distinguish the best brands and fit and validate both the business and the franchise.
August 2018 59
spot·light
\�spät-�līt \ noun
1. Trending franchise businesses you want to know about 2. A great place to show off your franchise
Snapology® WE GET THE LINT OUT
Deck Medic® Since 1990, Deck Medic has established itself as the number one outdoor wood restoration company in the Chicagoland area. Deck Medic® has its own line of proprietary cleaners, strippers, and 100-percent oil-based stain that can only be purchased by franchise owners. Excellent customer service and the trademark Five-Step Wood Restoration Process sets Deck Medic apart. For more information, visit www.mydeckmedic.com
Looking for a homebased franchise with a low investment and high return? Snapology® provides the tools to operate and manage a thriving business. Based on collaborative principles, Snapology® has a flexible model that allows business to grow while incorporating your goals. Snapology® is a partner for STEAM programs, offering fun, hands-on learning classes in schools, community centers, and homes. For more information, visit www.snapology.com
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Dryer Vent Squad®
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®
Dryer Vent Squad® provides a valuable, inexpensive service to homeowners that saves time, money—and could potentially save homes and lives. Since approximately 80 percent of all U.S. households have a clothes dryer, there is a huge base of potential customers. Dryer vents need to be cleaned and maintained on a regular basis. Dryer Vent Squad® takes away the worry and lets families reclaim time and money. For more information, visit www.dryerventsquad.com
The Waffle Experience® The Patch Boys®
Midtown Chimney Sweeps® The hearth industry is one of the fastest growing franchise opportunities in the United States. By investing in Midtown Chimney Sweeps®, you are not only purchasing a proven business model and marketing system, you are ensuring that you get and keep customers. The hearth industry is currently worth more than $2 billion, with 52 percent of all U.S. households having at least one fireplace. Midtown Chimney Sweeps® is the first chimney sweeping franchise in the U.S. to meet that demand. For more information, please call 844-SWEEP-NOW or visit the website, www.midtownsweeps.com
Named as a must-try in MSN’s 50 Best Things to Eat Before You Die, The Waffle Experience is on the fast lane for franchising success. With a cultlike following, customers are standing in long lines to try TWE’s decadent dishes, which are made from locally sourced natural and organic ingredients and paired with flavor-infused waffles. A favorite, “Praise the Lard” features house-braised pork belly, a cage-free egg, arugula, roasted tomato, ricotta, cracked pepper, agave syrup with a lardon-studded herb waffle. Franchisees enjoy a family-friendly schedule, low investment, and protected territories. For more information, call 916317-6057 or visit
Want to run a homebased business with low overhead and high profit margins? Check out The Patch Boys®. America’s most trusted drywall-repair company, The Patch Boys® takes care of damaged drywall caused by clumsy accidents or water damage. These jobs are usually too small for contractors, and most homeowners don’t have the time or skill to take care of drywall repairs themselves. When you join The Patch Boys® family, you become a part of an entrepreneurial community that works together to advance the brand. For more information, call 844-99-PATCH, or visit www.thepatchboys.com
www.thewaffleexperience.com
®
® August 2018 61
last word
\ last \ \ wərd \ noun
1. Great advice for any new business 2. FirstLight HomeCare’s formula for success
Going the extra mile What FirstLight Home Care does right 1. Make a difference. Many older people want to remain at home as long as they can. FirstLight helps them do that by providing assistance with household duties and help with individual needs such as bathing and hygiene. FirstLight’s Readmission Rescue Program prevents and reduces hospital stays. 2. Keep franchisees happy. FirstLight offers a low-cost business with a flexible schedule. The brand is consistently recognized as a leader in franchisee satisfaction. 3. Diversify: FirstLight offers assistance to folks who need help at home including busy moms, people with disabilities, veterans, and those recovering from surgery or injury. 4. Care about the customer. FirstLight prides itself in offering an excellent customer experience. The brand is dedicated to client happiness, peace of mind, and quality of life. The ClientFirst program matches caregivers to clients based on interests and hobbies, so the initial transition goes smoothly. 5. Stay on top of technology: Family members can access a Web-based tool to monitor the schedule and details of the in-home care loved ones are receiving. For more information, visit www.firstlighthomecare.com 62
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May 2018 63
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