FRANCHISING TEST lesson 2
give the disadvantage in Starting a New Business (4) ????
1. Requires more time and energy 2. High risk of failure 3. Takes longer to become profitable 4. Financing may be more difficult to obtain
What are the Options to Begin Your Searchz (3)?????
1. Start a New Business 2. Buy a New Franchise 3. Buy an Existing Franchise
the Key Criteria for Selecting a Franchise? (8) Before buying any business, you must carefully consider many factors that are critical to your success.
-Cost -Your Abilities -Demand -Competition -Brand Name -Training and Support -Franchisor's Experience -Expansion Plans
give the disadvantage in Buy a New Franchise???
-Costs more (fees, royalties, supplies) -Smaller profit margin -Lack of independence and freedom -Difficult to achieve redress if -franchisor fails to meet obligation -A franchisor's problem may become your problem
give the disadvantage in Buying an Existing Franchise (intangible) (6)???
-Customer or employee ill will -Pricing problems -Inadequate procedures -Lease problems -Potentially higher costs to buy -Legal liability in inheriting lawsuits
Two (2) most important FINANCIAL STATEMENT you need to review
1. The Balance Sheet 2. Income Statement
give the advantage in Starting a New Business (4)????
1. Usually lower start-up cost 2. Independence and creative freedom 3. Freedom with location and procedures 4. No inherited problems from existing business
Steps for Beginning a Franchise
1. What business? 2. Is there a Market? 3. Can you afford it? Can you m 4. Can you make enough money to make it worthwhile?
give the advantage in Buy a New Franchise???
-Reduced risk of failure -Proven methods and products -Start-up assistance -On-going training and support -Local, regional and national advertising -Collective purchasing power -Research and development -Association and synergy with other franchisees -Easier to obtain financing
what is the title of this chapter ???
Aspects of franchising
It reports the financial condition (solvency) of the franchisor.
Balance Sheet
This section provides information about the franchisor and any management who have gone through a (?).
Bankruptcy.
Only 30 to 40 percent of all franchisors provide prospective franchisees with information about financial performance.
Financial Performance Representation
The next best thing to do is to talk to existing franchisees about sales and earning potential.
Financial Performance Representation
Here the franchisor is allowed, but not required, to provide information on unit financial performance.
Financial Performance Representations.
give the advantage in Buying an Existing Franchise???
-The business is already up and running -Risk and uncertainty may be reduced -The basic infrastructure is in place Establish location -Existing customers and reputation Employees -Vendors -Policies and procedures Cash flow -Easier to obtain financing
Reminder that the financial condition of the franchisor not only affects its ability to run a financially successful operation in the future, but it also determines whether it may go under and you would be left "holding the bag".
Financial Statements
are the track record of the franchisor, You should be given copies of the franchisor's last three years (?) statements. Take them to an accountant who specializes in franchising to evaluate.
Financial Statements
Audited financial statements for the past three years are included in this section.
Financial Statements.
Take them to an accountant who specializes in franchising to evaluate.
Financial statements
This item describes the terms and conditions of any (?) arrangements offered by the franchisor.
Financing.
Initial feed and what the franchisee receives for that fee
Franchisee's Fees and Other Payments
Royalty payment, what it is based on and when it is due
Franchisee's Fees and Other Payments
all the mandatory fees are described:
Franchisee's Fees and Other Payments
This item provides a reference table that indicates where in the franchise agreement franchisees can find the obligations they have agreed to.
Franchisee's obligation.
This section provides a description of the company and its history
Franchisor
This section describes the services that the franchisor will provide to the franchisee.
Franchisor's Assistance, Advertising, Computer Systems and Training.
Be sure you know what services you will receive after you begin operating your business such as Training, Advertising, and, Operation
Franchisor's Obligations
Be sure you know what services you will receive for your grand opening such as Marketing, Advertising and Field support
Franchisor's Obligations
Be sure you understand the services you will get before you open such as Site selection, Training, and, Development assistance
Franchisor's Obligations
Pay particular attention to those services the franchisor is obligated to provide and the services they may provide.
Franchisor's Obligations
An (?) reports a company's profit or loss. It shows a company's income, expense and (?) - also known as the "bottom line" or earnings.
Income Statement
An (?) reports a company's profit or loss. It shows a company's income, expense and net- income - also known as the "bottom line" or earnings.
Income Statement
This section provides information about the (?) and the range and factors that determine the amount of fees.
Initial Fess.
Some of these costs are averages or estimates and may vary in your area.
Initial Investment.
Talk to other franchisees who have been in the system for a year or more to see:
Initial Investment.
This item is presented in table format and includes all the expenditures required by the franchisee to make to establish the franchise.
Initial investment.
This section provides relevant current and past criminal and civil (?) for the franchisor and its management
Litigation
This section describes the obligation of the franchisee to participate in the actual operation of the business.
Obligation to participate in the actual operation of the franchise business.
Requirements for keeping and submitting adequate records
Obligations and Duties of the Franchisor
Requirements for participation in the business
Obligations and Duties of the Franchisor
Requirements for training
Obligations and Duties of the Franchisor
This section describes the franchisee's responsibilities:
Obligations and Duties of the Franchisor
This item provides a description of all other recurring fees or payments that must be made
Other Fees.
Examine how many units the franchisor has taken back and resold.
Outlets and Franchise Information
If this number is high, this could indicate churning (when the franchisor take back failed locations and remarkets them over and over).
Outlets and Franchise Information
Pay attention to the contact information of the franchisees who have left the system. These are people you definitely want to talk to.
Outlets and Franchise Information
This section provides locations and contact information of existing franchises.
Outlets and Franchisee Information.
This section gives information about how the patents and copyrights can be used by the franchisee.
Patents, Copyrights, and propriety information.
If the franchisor uses (?) (celebrities or public persons), the amount the person is paid is revealed in this section.
Public Figures.
Prospective franchisees are required to sign a (?) that they received the FDD.
Receipts.
Description about the renewal of the franchisea greement
Renewal, Termination and Transfer of Franchise Agreement
Descriptions about the transfer of the franchisea greement
Renewal, Termination and Transfer of Franchise Agreement
The rights and obligations of a franchisee upont ermination
Renewal, Termination and Transfer of Franchise Agreement
Pay particular attention to any non-compete provision and your obligations when the franchise relationship ends.
Renewal, termination, transfer and dispute resolution.
Take your time to understand what rights you will have and what rights are you giving up.
Renewal, termination, transfer and dispute resolution.
This section tells when and whether your franchise can be renewed or terminated and what your rights and restrictions are when you have disagreements with your franchisor.
Renewal, termination, transfer and dispute resolution.
This section includes the restrictions that franchisor has established regarding the source of products or services.
Restriction on sources of products and services.
This sections deals with any restrictions on the goods and services that the franchisee may offer its customers.
Restriction on what the franchisee may sell.
example of; - Required quality standards - Approved advertising Approved suppliers - Hours of operation - Pricing
Restrictions on Goods and Services Offered
the duration of the agreement is specified
Term of the Franchise
This section provides the description of any exclusive (?) and whether territories will be modified.
Territory.
A (?) is a snapshot summary of how much a company is worth on an given day.
The Balance Sheet
shows a company's income, expense and net-income ALSO KNOWN AS?????
bottom line OR EARNINGS
any parents, predecessors and affiliates.
franchisor
This section provides biographical and professional information about the franchisors and its officers, directors and executives.
Business experience
Make sure that the agreements listed are attached to the FDD- and read every one of them.
Contacts
This item provides of all the agreements that the franchisee will be required to sign.
Contacts.
give the disadvantage in Buying an Existing Franchise ( tangible)???
Design problems Location problems Merchandise problems
Make a decision as to whether you think you can make enough money to make the entire venture worth your time and energy.
Determine if you can make enough money
Think about the amount of time and energy it will take to make the business successful.
Determine if you can make enough money
This section provides information about the franchisor's (?), service marks and trade names.
Trademarks.