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.