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3 04, 2019

Special Legal Considerations for Home Services Franchisees

2019-04-03T15:39:03-04:00April 3rd, 2019|Tags: , , , , , |

Special Legal Considerations for Home Services Franchisees

By Jonathan Barber

If you plan to operate a home-services franchise, you’ve got some “legal-ish” things to look into. Cleaning, decorating, landscaping, moving and storing, renovating, repairing, and restoration franchisees work in and on customers’ homes, which probably means that specific insurance policies and state licenses will be necessary.

Getting these requirements squared away—as well as hiring trustworthy employees—can take a lot of time and money, which could affect your choice of franchise. Following are some areas you should examine in detail from the very beginning of your decision-making process.

Licensing Requirements

Does your state require a license to perform the tasks involved with a particular franchise? For example, state laws for general contractors vary widely. In some states, anyone who performs work costing a certain amount or more is considered a general contractor and must be licensed to perform that work. If you aren’t licensed, you could face serious consequences, including fines.

The first step in navigating this issue is to ask the franchisor what licensing is required for this particular business. The second step is to look into your state’s licensing requirements. If reading statutes isn’t your thing, find a local attorney who can give you some guidance on whether you need to be licensed. If licensing is required, you should factor the cost of acquiring it and the time involved into your franchise decision. You won’t be making money while you’re waiting on a license.

Insurance Requirements

States also may require certain types and amounts of insurance. Your franchise disclosure document should outline the franchisor’s insurance requirements. The franchise agreement should explain the insurance requirements in further detail.

You should speak with an independent insurance broker in your state to find out whether your state requires additional insurance — beyond what the franchisor specifies—for the type of business you’ll operate.

Employment Contracts

Today, most franchisors will not provide you with sample employment contracts because they try to avoid what’s called “joint-employer liability.” In other words, they don’t want to be considered an employer of your employees so they stay out of your hiring process as much as possible.

Make sure that your employment contracts are buttoned up because liability increases when your employees work at your customers’ homes. It’s best to follow the advice of a local attorney in getting your employment contracts in place.

You also should perform background checks on every employee. Obtain the employee’s written consent before performing a background check. Your customers and their property should be your No. 1 priority. One bad experience could really hurt your home-services franchise.

Choosing Your Franchise

The home-services market may seem to be so loaded with franchises that it’s difficult to select one. But great brands distinguish themselves from the competition by doing just one thing and doing it very well. So I suggest you consider a franchise that operates in a niche area with strong brand recognition and solid systems that are efficient and support you in every way. I’ve always said it’s better to be a Jack-of-one trade and master of it than to be a Jack-of-all-trades and master of none. (That’s why our firm handles only franchise law—no family law, real estate, estate planning, or criminal defense.) Doing one thing, and doing it well, is a terrific formula for success.

Jonathan BarberJonathan Barber exclusively practices franchise law as a partner at Barber Power Law Group, in Charlotte, North Carolina. He has assisted hundreds of clients world-wide with their FDDs and franchise purchases. Barber also represents emerging and established franchisors. Contact Barber at 980-202-5679 or jonathan@franchise.law

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3 04, 2019

Consider financing via your 401(k) even if your CPA advises against it

2019-04-03T15:37:10-04:00April 3rd, 2019|Tags: , , , , |

Consider financing via your 401(k) even if your CPA advises against it

by Tim Seiber, CFE

Most CPAs will discourage you from tapping your 401(k) to start or grow your franchise business. They usually give this advice because they’re either unfamiliar with the Rollover as Business Start-Ups (ROBS) program or are uncomfortable with the tax structure of a C corporation.

Generally, the benefits that franchisees receive from utilizing the ROBS program far outweigh any concerns. Since the IRS created ROBS through the ERISA Act of 1974, the program has been a great way for thousands of entrepreneurs to open their businesses debt free. So before you let your CPA persuade you that it’s a poor option, you should understand the specifics behind their negative view.

Defining a C corporation
Under the federal tax code, business entities are categorized as either pass-through or non-pass-through business entities, with the main difference being that pass-through entities are not required to pay corporate taxes. These include sole proprietorships, partnerships, and S
corporations.

C corporations are non-pass-through entities that are completely separate taxpayers from their owners and are subject to corporate taxes. This is often where pushback from a franchisee’s CPA comes in. Because income earned by the C corporation is taxed at the corporate level and any distributions made to stockholders (i.e., wages) are taxed at the stockholder’s individual tax bracket, the potential for double taxation scares off tax advisers who are unfamiliar with the other benefits of the ROBS program.

But this should not be the only consideration when looking at ROBS as a funding option, because while double taxation might occur, the
C corporation structure offers advantages for small business owners versus pass-through entities.

Advantages of a C corporation
Although pass-through businesses are not subject to federal corporate income taxes, they can still face a substantial tax burden from federal, state, and local taxes.

Last year’s new tax reform significantly reduced the tax disadvantage of utilizing a C corporation structure. The corporate tax rate decreased to 21 percent, which is lower than the tax rate for pass-through income, and because most individual tax brackets also decreased, distributions are taxed at a lower rate as well.

Operators of C corporations may also withdraw salaries from the corporation profits, which aren’t taxed at the corporate level. If the company pays its employees enough to offset the entire net profit, then no corporate income tax is due, eliminating the double taxation
potential.

The benefits of a C corporation extend much further than a lower tax rate, however. Other advantages include:

  • The opportunity to shift income and retain earnings within the company for future growth.
  • No requirement to make the fiscal year coincide with the calendar year.
  • The ability to deduct 100 percent of medical premiums.
  • Eligibility to deduct charitable contributions as a business expense.

And the most significant advantage of all? A C corporation is the only business entity that supports ROBS, which is often the only viable funding solution for many start-up businesses.

Tim SeiberWant to learn more about financing options for your franchise? FranFund designs smart all-in-one funding plans that grow with your franchise and set you up for long-term success. We are here to help if you are considering leaving your current job to start a new venture or if you are looking to expand your existing operation. Get started today at bit.ly/franfund-fd or email Tim at taseiber@franfund.com.

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3 04, 2019

Getting Real About Resales

2019-04-03T15:48:20-04:00April 3rd, 2019|Tags: , , , , , |

Getting Real About Resales

by Diana Capirano
Certified Franchise Consultant

As a specialist in franchise resales, I’ll go on record saying that you’re as likely to find a flawless resale as hit a mega-lotto jackpot. But people continue to search for the diamond in the rough. “I’m looking for a business with a motivated seller, with low investment/high return, excellent cash flow (mid-six digits), and seller financing.” Sound familiar? Newsflash: EVERYONE is looking for the same thing. Lightheartedly I respond, “Wow! That sounds great. I’ll take 10!”

Many resales fall into the distressed category, something like buying a house with good bones but needing work and TLC. Premium resales may never even hit the open market because they sell internally (within the franchise system) or to personal/professional referral networks. Most great resales that hit the web portals come and go very quickly.

Some business seekers who concentrate only on existing entities can search web portals as a full-time job for years, logging countless hours, only to get beat out and then feel beat up. I’m not saying this to discourage you from looking for resales, but to caution you to be realistic and consider using a reputable resale consultant who can inventively search for them and then help navigate and vet the opportunities (Part 2 of this article in next month’s issue).

Three Major Considerations

  1. Investment level: First, determine a comfortable investment level, the necessary profitability, and a desirable industry. Please understand that you will probably not get high cash flow from a low investment. Also, be aware that businesses with great value potential could fail to qualify for Small Business Administration (SBA) or other traditional loans, so have a backup plan for financing if you can’t pay cash. Additional sources of income, such as a spouse’s paycheck, rental property, etc., may help you qualify for a loan.
  2. Owner benefit: If you’re looking to replace income immediately, what’s the target amount? Remember that you’ll have to fund the sale and need more time and capital injection so this “benefit” number will change.
  3. Desired industry: What are the requirements of the business model? Can you be an owner-operator if the franchisor mandates it? And don’t discount the fact that you should like what you’ll be doing. If it’s just a passive investment, you still need to get connected with growing the business.

Resale vs. Start-Up

A resale may be a good fit if you:

  • Like to improve things and consider yourself a fixer who thrives on challenges.
  • Are adept at problem-solving and at adapting when the unexpected happens.
  • Don’t make a practice of blaming others.
  • Want to buy low and sell high, assuming you’re putting in the sweat equity to grow it.
  • Don’t mind—in some cases—overpaying for the foundation, good will, your opportunity value, or the extra work needed to right the ship.
  • Have the financial bandwidth for an additional cash injection (operating capital) and don’t need to finance with a traditional loan such as one from the SBA.
  • Have the time and wherewithal to complete granular due diligence and go the long haul.

A start-up may be better if you:

  • Don’t want to inherit others’ problems or put in the time required to right the ship.
  • Enjoy developing things from scratch.
  • Need to fund with a loan.
  • Feel there is better opportunity in an open franchise area.
  • Have other sources of income or enough for living expenses while you ramp up.
  • Are not prepared to do a deep dive into due diligence before investing.

Both resale and start-up franchises require you to undertake thorough due diligence, investment of time and financial capital, and full-on commitment. Following the franchise training and systems will be necessary in both cases, but may be even more important in a resale because the previous owner might have strayed from the proven process.

Diana CapiranoDiana Capirano, CFC, has an expansive career that includes corporate and franchise sales and development, marketing and operations, mergers and acquisitions, structuring and negotiations, and business ownership. As a highly respected consultant and mentor, Diana espouses a profound commitment to help prospective business owners and investors understand and navigate the process of deciding on a franchise business. Contact Diana at 941- 999-0095, email diana@focusfranchise.com, or visit www.focusfranchise.com.

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2 04, 2019

Why buy? Weigh everything in the franchise package

2019-04-03T15:52:51-04:00April 2nd, 2019|Tags: , , , , , |

Why buy? Weigh everything in the franchise package

by Geoff Batchelder

Should I purchase a franchise or go it alone with a business? This is a question every potential franchisee should think long and hard about—along with the franchises being considered—before deciding whether to buy.

Most of the potential franchise buyers I speak with think the answer is name recognition. While that’s something to be aware of, it’s not the most important benefit that a franchise can provide. Systems, training, support, and market development will often have a much bigger impact on your potential success than name recognition.

First, let’s talk about systems. Look for operational efficiencies that can speed your time to market, saving you money along the way and starting the flow of revenue in a time frame that you could not attain all by yourself. This benefit alone can offset the franchise fee.

Is there a “project launch” road map of steps to follow from the day you sign the franchise agreement to the day you hang out the open-for-business sign? This can be a huge benefit in helping you avoid costly, time-consuming mistakes.

Are there vendor arrangements in place? Often, the pricing received through a franchise offers a discount you could not get on your own.For instance, The Flying Locksmiths and WaveMAX Laundry have major purchasing discounts in place and pass the entire discounts through to the franchisee. Having these arrangements in place, rather than needing to line up your own suppliers, can be a huge time savings
even without a discount. How about service offerings that will benefit your customers? A call center to handle inbound calls and scheduling is a huge benefit for your customers and something you can’t provide on your own.

As for training, make sure you understand the topics to be covered. Assess the training. Once it’s completed, are you confident that you’ll possess the knowledge you need to be successful or on your way to success? Do different subject-matter experts deliver various parts of the training? Do you receive both classroom and on-the-job training?

Support may be even more important than training. Be sure to ask existing franchisees about support. After training ends, are the franchisees left on their own, or is there a steady stream of ongoing support and mentoring? Granted, different business models will require varied levels of support, so it’s not always an apples-to-apples comparison, but make sure the franchisees feel that they’re provided with all the support they need to continue growing their businesses and that any problems are dealt with on a timely basis.

quote

Finally, consider market development. How will you grow your business and beat the competition in your area? National advertising programs are not always the answer, and for many businesses, they don’t make sense. The business may be built on local networking and relationship-building. Maybe market development is accomplished through local advertising that’s targeted to specific demographics. Does the franchisor have any metrics in place to show what works? How do the existing franchisees feel about the market development programs?

If the franchise you are evaluating doesn’t have these benefits in place, you may want to check into alternatives.

GeoffBatchelderGeoff Batchelder has been a franchise consultant and franchise development expert for the last 10 years after spending 25 years focusing on business development in the high-tech industry. Contact him at 1-877-222-3722 or geoff@compassfranchisegroup.com, or visit www.compassfranchisegroup.com.

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31 03, 2019

April 2019: Featured Entrepreneur

2019-04-01T13:50:03-04:00March 31st, 2019|Tags: , , , , , , , |

An innovator who runs her business with passion

by Jill Abrahamsen

Sharon Estroff lives her brand. As the mastermind of Challenge Island®, she describes her unique franchise with the same playful enthusiasm that sparked her to start the innovative business in 2002. Estroff never intended to launch a leading franchise system with more than 90 locations worldwide. The growth and success of Challenge Island is a byproduct of her desire to make a difference—and she has.

A former teacher, Estroff created Challenge Island as an after-school program to get kids excited about learning. Inspired by her favorite reality TV show, she designed a curriculum that was fun and engaging, but at the same time helps kids develop important life skills such as collaboration, compromise, resilience, and critical thinking. “We turn the classroom into an island, divide students into tribes, and create challenges. Kids don’t realize they are learning. They are having too much fun,” she says.

Estroff and her team create and constantly add to the curriculum, which incorporates science, technology, engineering, art, and math (STEAM). “We have a blast coming up with new challenges,” Estroff says. Cross-curricular Island themes include Cool Carreers which is made up of whimsical engineering destinations like City Planner Speedway, Marine Biologist Bay, and Pet Emergency Room. The summer camp curriculum includes kid-approved themes such as Slime Squad Camp and Island Tube Camp.

Franchisees can customize their offerings by using the hundreds of themed lessons to run after-school enrichment classes, camps, birthday parties, scouting events, and even senior programs. “Our franchisees have a lot of creative freedom, which is something you don’t get in most franchise systems,” Estroff says.

While the brand attracts former teachers and corporate moms, you don’t necessarily need to be a parent or have a teaching degree to run this business. “Our owners come from a variety of backgrounds: former investment bankers, lawyers, marketing executives and everything in between. They all share a passion for working with children and a desire to make a difference as well as an income,” says Estroff. For more information, contact (985) 209-8430 or franchising@challenge-island.com.

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An innovator who runs her business with passion

by Jill Abrahamsen

Sharon Estroff lives her brand. As the mastermind of Challenge Island®, she describes her unique franchise with the same playful enthusiasm that sparked her to start the innovative business in 2002. Estroff never intended to launch a leading franchise system with more than 90 locations worldwide. The growth and success of Challenge Island is a byproduct of her desire to make a difference—and she has.

A former teacher, Estroff created Challenge Island as an after-school program to get kids excited about learning. Inspired by her favorite reality TV show, she designed a curriculum that was fun and engaging, but at the same time helps kids develop important life skills such as collaboration, compromise, resilience, and critical thinking. “We turn the classroom into an island, divide students into tribes, and create challenges. Kids don’t realize they are learning. They are having too much fun,” she says.

Estroff and her team create and constantly add to the curriculum, which incorporates science, technology, engineering, art, and math (STEAM). “We have a blast coming up with new challenges,” Estroff says. Cross-curricular Island themes include Cool Carreers which is made up of whimsical engineering destinations like City Planner Speedway, Marine Biologist Bay, and Pet Emergency Room. The summer camp curriculum includes kid-approved themes such as Slime Squad Camp and Island Tube Camp.

Franchisees can customize their offerings by using the hundreds of themed lessons to run after-school enrichment classes, camps, birthday parties, scouting events, and even senior programs. “Our franchisees have a lot of creative freedom, which is something you don’t get in most franchise systems,” Estroff says.

While the brand attracts former teachers and corporate moms, you don’t necessarily need to be a parent or have a teaching degree to run this business. “Our owners come from a variety of backgrounds: former investment bankers, lawyers, marketing executives and everything in between. They all share a passion for working with children and a desire to make a difference as well as an income,” says Estroff. For more information, contact (985) 209-8430 or franchising@challenge-island.com.

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31 03, 2019

April 2019: Franchisee of the Month

2019-04-01T13:40:20-04:00March 31st, 2019|Tags: , , , , , , , |

Going all-in on their next chapter

by Jill Abrahamsen

Stephanie Basile-Drileck and her husband Chuck did their due diligence before finally investing in a FASTSIGNS® business. The San Antonio couple looked at opportunities in every area of franchising—from food to fitness—and then weighed the pros and cons to each industry. Finally, they decided that drawing on their advertising and marketing backgrounds was the way to go.

“While we didn’t know anything about creating or installing signs, we did know how to help people market their businesses. Our advertising experience helps us help our customers. Collaborating comes naturally for both of us,” Chuck says. The couple ultimately chose FASTSIGNS above other brands because of franchisees’ comments about the company. “FASTSIGNS gave us a list of all their current store owners, not just the ones they wanted us to talk to,” Stephanie says. “Across the board, everyone we spoke to had great things to say.”

For Chuck and Stephanie, the process of looking and deciding took a couple of years. “This was a big investment for us and we wanted to make the right choice,” Chuck explains. “The FASTSIGNS brand is very strong and has a great reputation.”
Once the couple signed the agreement, the corporate team guided them through every step. “The support is amazing,” Stephanie says. “There are more than 120 people working in the corporate office to guarantee our success. That’s a great feeling.”

Besides wanting to invest in a solid business, another must-have for the Drilecks was a franchise that let them contribute to their community. “We get to do that with FASTSIGNS. We never turn down an opportunity to help people,” Stephanie says. They work regularly with the Petco Foundation and the Fisher House, providing signage for events and helping raise money. “It feels good to give back,” she adds.

The Drilecks love that they can customize the business to their market and to their strengths as business owners. “We can add on services as we wish, but don’t have to offer everything FASTSIGNS produces,” Chuck says. “We are able to scale the business at our own pace.” In fact, the Drilecks plan to open another location and will bring their daughter on board to help.

The Drilecks are thrilled with their decision to go with FASTSIGNS. “We get great joy from what we’re doing now. I only wish we had done this 20 years ago,” Chuck says.

For more information, visit www.fastsigns.com or call 214-346-5679.

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Going all-in on their next chapter

by Jill Abrahamsen

Stephanie Basile-Drileck and her husband Chuck did their due diligence before finally investing in a FASTSIGNS® business. The San Antonio couple looked at opportunities in every area of franchising—from food to fitness—and then weighed the pros and cons to each industry. Finally, they decided that drawing on their advertising and marketing backgrounds was the way to go.

“While we didn’t know anything about creating or installing signs, we did know how to help people market their businesses. Our advertising experience helps us help our customers. Collaborating comes naturally for both of us,” Chuck says. The couple ultimately chose FASTSIGNS above other brands because of franchisees’ comments about the company. “FASTSIGNS gave us a list of all their current store owners, not just the ones they wanted us to talk to,” Stephanie says. “Across the board, everyone we spoke to had great things to say.”

For Chuck and Stephanie, the process of looking and deciding took a couple of years. “This was a big investment for us and we wanted to make the right choice,” Chuck explains. “The FASTSIGNS brand is very strong and has a great reputation.”
Once the couple signed the agreement, the corporate team guided them through every step. “The support is amazing,” Stephanie says. “There are more than 120 people working in the corporate office to guarantee our success. That’s a great feeling.”

Besides wanting to invest in a solid business, another must-have for the Drilecks was a franchise that let them contribute to their community. “We get to do that with FASTSIGNS. We never turn down an opportunity to help people,” Stephanie says. They work regularly with the Petco Foundation and the Fisher House, providing signage for events and helping raise money. “It feels good to give back,” she adds.

The Drilecks love that they can customize the business to their market and to their strengths as business owners. “We can add on services as we wish, but don’t have to offer everything FASTSIGNS produces,” Chuck says. “We are able to scale the business at our own pace.” In fact, the Drilecks plan to open another location and will bring their daughter on board to help.

The Drilecks are thrilled with their decision to go with FASTSIGNS. “We get great joy from what we’re doing now. I only wish we had done this 20 years ago,” Chuck says.

For more information, visit www.fastsigns.com or call 214-346-5679.

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31 03, 2019

April 2019: Home-Service Franchises

2019-04-03T00:43:02-04:00March 31st, 2019|Tags: , , , , , , |

B.O.R. Restoration & Bio-One

You might think that owning two home-service franchise brands would be a conflict of interest, but for Nick Zamucen, it made good business sense. In fact, Zamucen launched Best Option Restoration (B.O.R.) as a complement to his first franchise offering, Bio-One, a biohazard and decontamination service. “After getting repeated inquiries for restoration services, I decided to explore the options and saw an opportunity. There’s a lot of synergy between the two businesses. It just made sense,” he says.

While Bio-One provides cleanup services for hoarding and in response to events like murders and suicides, B.O.R. helps customers who are victims of water and fire damage. “Both companies offer different specialty services, but both are in the business of helping people in a time of need,” Zamucen says.

Zamucen hired Jason O’Brien as CEO to run Bio-One so he could focus on B.O.R. “Jason started out as a franchise consultant who knew my brand inside out. It was a perfect fit. Now we have a healthy rivalry, which really isn’t a rivalry at all. I wanted to hire someone who was as passionate and motivated as I was to take over. Someone who could beat me at my own business,” Zamucen jokes.
Investors can start with either brand and have the option to add the other at a reduced fee when they are ready. “For franchisees, adding on is a great way to keep staff busy steadily and have backup support when needed. You just never know when a disaster is going to strike,” Zamucen says. “You can’t predict it, but the model solves that problem.” Working together as two separate companies allows for shared leads, cross-training of employees, and cross-marketing. “It’s a win-win,” he says.

Franchisees don’t require any restoration background but should be passionate about helping others and have a desire to make a difference while building a business. “Find me a person who wants to be successful, and we can teach them the rest,” Zamucen says.

For more information, visit www.BORestoration.com or call 720-204-2095.

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B.O.R. Restoration & Bio-One

You might think that owning two home-service franchise brands would be a conflict of interest, but for Nick Zamucen, it made good business sense. In fact, Zamucen launched Best Option Restoration (B.O.R.) as a complement to his first franchise offering, Bio-One, a biohazard and decontamination service. “After getting repeated inquiries for restoration services, I decided to explore the options and saw an opportunity. There’s a lot of synergy between the two businesses. It just made sense,” he says.

While Bio-One provides cleanup services for hoarding and in response to events like murders and suicides, B.O.R. helps customers who are victims of water and fire damage. “Both companies offer different specialty services, but both are in the business of helping people in a time of need,” Zamucen says.

Zamucen hired Jason O’Brien as CEO to run Bio-One so he could focus on B.O.R. “Jason started out as a franchise consultant who knew my brand inside out. It was a perfect fit. Now we have a healthy rivalry, which really isn’t a rivalry at all. I wanted to hire someone who was as passionate and motivated as I was to take over. Someone who could beat me at my own business,” Zamucen jokes.
Investors can start with either brand and have the option to add the other at a reduced fee when they are ready. “For franchisees, adding on is a great way to keep staff busy steadily and have backup support when needed. You just never know when a disaster is going to strike,” Zamucen says. “You can’t predict it, but the model solves that problem.” Working together as two separate companies allows for shared leads, cross-training of employees, and cross-marketing. “It’s a win-win,” he says.

Franchisees don’t require any restoration background but should be passionate about helping others and have a desire to make a difference while building a business. “Find me a person who wants to be successful, and we can teach them the rest,” Zamucen says.

For more information, visit www.BORestoration.com or call 720-204-2095.

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11 03, 2019

Q&A: Jessica Melendez on vetting franchisors

2019-03-12T10:55:11-04:00March 11th, 2019|Tags: , , , , , , , |

Woman on Phone

Q & A

Jessica Melendez on vetting franchisors

What are some important questions for a candidate to ask a franchisor?

Working as a broker, I put together a template of questions for my candidates to use when talking to franchisors. During the discovery process, most of those questions are answered, and my clients can check them off their lists. However, I insist that they get clear, in-depth answers on the following questions.

Regarding Training

  • What does your training program look like? What ongoing training do you offer?
  • Do you provide a mentor? For how long?
  • Do you assist in training my team?

Regarding Territory

  • What is my protected territory and how is it defined?
  • How many franchises have been awarded in my state? Have they all opened? If they haven’t, why not?
  • What are your plans to develop my state and how will that impact my franchise?

Regarding Cost

  • Can you give me a break down of all of the expenses associated with getting started?
  • How much additional capital will I need after I launch my franchise?
  • What goods or services do I have to purchase directly from you, the franchisor, and can I competitively shop for a better deal?
  • Is there a national advertising/marketing fund that I must contribute to?

Regarding Potential Earnings

  • What can I expect to earn if I join your franchise system, and does your franchise disclose this amount in your written materials?
  • Do you provide a pro-forma?
  • What is your average profit margin?
  • What is your average sales per month?

Regarding Franchisee History

  • How many franchisees have you added in the past year? How many have you lost?
  • How many franchised units have failed and why?
  • How have previous franchisee/franchisor disputes been settled?

What are some red flags to look out for?

  • Corporate takeovers: Pay close attention to item 20 of the FDD, which will give you information on the number of franchises transferred, canceled, or terminated; as well as the number of franchises that have not been renewed by the franchisor or have been reacquired by the franchisor. Corporate takeovers or terminations are red flags—possibly indicating there are failures due to training and support or infrastructure.
  • Resales: Are resales being sold at their prime for big profit? Or, are they selling to unload their business due to losses or no growth?
  • Unhappy franchisees: Another red flag would be several unhappy franchisees during validation calls. If you’re making validation calls and discover several unhappy validators, talk to the franchisor and see how he responds. Are they weak owners, or is the franchisor failing them?

How should you prepare for a Discovery Day?

Going through the buying process in its entirety is the best way to prepare for Discovery Day. By the time it arrives, you should have made your validation calls, reviewed the FDD to completion, had calls with the franchisor, and reviewed all materials/webinars provided. Discovery Day should be the day you meet the executive staff and see how they operate firsthand. At this point, you want to see if the brand and culture are a fit for you.

Discovery Day is also a good time to ask final questions regarding the FDD or validations, discuss attorney review and offerings, finalize territory maps, and ask about next steps. Take care of the following before you arrive to make your trip more efficient:

  • Confirm travel arrangements.
  • Arrive a day early, as most Discovery Days start first thing in the morning.
  • Ask about dress code—some franchisors prefer business casual.
  • Ask for an agenda.
  • Ask if you need to bring anything with you, such as financial information.
  • Prepare a list of final questions.

Jessica Melendez

A trainer and mentor for FranServe, Inc., the world’s largest franchise consulting firm, and the CEO of WestStar Franchise Group, Jessica Melendez coaches and educates prospective franchise owners and helps them find businesses that align with their personal and professional ambitions. As a franchisor and president of Dryer Vent Squad, Melendez has first-hand experience in all aspects of franchising, which makes her an excellent resource for prospective franchisees. Contact Melendez at 915-202-8272, email Jessica@weststarfranchisegroup.com, or visit https://www.weststarfranchisegroup.com.

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11 03, 2019

Tough Road Ahead

2019-06-02T13:44:44-04:00March 11th, 2019|Tags: , , , , , |

Man Looking Down Road

Tough Road Ahead

This antique car restorer didn’t let a bad credit score detour his plans.

by Diana Capirano
Certified Franchise Consultant

Like other Detroit natives, Anthony, a client of mine, worked at Ford Motor Company. Anthony, like prior generations of employees, had viewed positions at companies like Ford as secure, with a path to retirement. For 25 years, he felt his job was his safety net, but like many of you reading this magazine, he also aspired to own his own business through franchising.

On bad days, Anthony was committed to quitting, but he rationalized there were still goods days where he was content with stable pay, growing retirement savings, and a large pension—Middle America’s dream. Conflicted, he began an on-line franchise search, and in October 2016, one fateful click connected him to me.

Anthony shared his success as a prototype engine technologist and engineering tech for Ford, as well as his passion to restore classic and antique cars. He expressed a desire not only for “financial freedom,” but also the freedom that comes from owning your own business. He wanted a schedule with more time for family and hobbies. After years of designing and restoring cars, Anthony made a brave decision to re-engineer his life and his future.

Bumpy Road Ahead
Anthony’s story is not unique, but it’s highly inspirational. Along with mounting stressors at work, Anthony was caring for elderly parents in poor health, and he had just gone through a very ugly divorce. As a result of a damaging divorce settlement, his credit score plummeted more than 200 points to 560. Ouch! I knew that this would immediately disqualify him with franchisors and it would be impossible to secure a loan. Terrible credit is the “kiss of death” in our world, and his plans for an SBA loan were immediately crushed.

Certainly, this is not the first time I met someone with a disqualifying credit score, but it was the most impactful. Anthony never came off of the throttle. (For those who don’t yet know me, I’m a car enthusiast so pardon the metaphors). Anyhow, my client, a self-proclaimed pessimist and cynic suddenly became fueled with conviction and positivity. His original fears and doubts were now powered with purpose and focus to overcome this major bump in the road. For many, this would have been their jumping off point—a point of acceptance and giving up. Anthony’s innate problem-solving skills now defined his personal strength as he kicked into high gear.

Improving his credit to the targeted 700 score would not be easy, nor would it happen overnight. Still motivated to begin research for some great franchises, he began with the end in mind—freedom. He enlisted a credit-repair company and throughout the next 22 months, Anthony worked resolutely on building back his credit.

Over many months, he met with six franchises and he was transparent about his situation. Wanting to stay in his comfort zone (automotive), I convinced him to break out of that boundary to view other models. Most franchisors will not even engage a client with poor credit, but as they “looked under the hood,” they saw Anthony’s desire, determination, and drive—all qualities needed for a successful franchisee.

Anthony’s next key obstacle was adapting an employer’s mindset. After all, he had been an employee his entire life and a union worker for 25 years. Anxiety set in. Transitioning from receiving a guaranteed paycheck to being an employer who cut paychecks was worrisome.

By finding the right model with FISH Window Cleaning, he realized that a recurring revenue structure would create a more predictable income. Anthony became confident and excited for the freedom of a limitless paycheck. Here’s the best part…days after Anthony returned home from Discovery Day, he received an email that his credit score had reached 700. Finally, after all of that hard work, he was granted his loan and signed his franchise agreement with FISH Window Cleaning.

I hope Anthony’s story inspires you to take a path less followed. Anthony achieved his end goal—freedom, and in my opinion, his journey not only restored his credit, but also his credibility. He emerged just like one of his painstakingly restored cars—a total “classic!”

Diana Capirano, CFC, has an expansive career which includes corporate and franchise sales and development, marketing and operations, merger and acquisitions, structuring and  negotiations as well as business ownership. As a highly-respected consultant and mentor, Diana espouses a profound commitment to help prospective business owners and investors understand and navigate the process of deciding on a franchise business. Contact Diana at 941-999-0095, email diana@focusfranchise.com, or visit http://www.focusfranchise.com.

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11 03, 2019

With Age Comes Wisdom

2019-03-12T11:04:05-04:00March 11th, 2019|Tags: , , , , , |

Mature Couple

With Age Comes Wisdom

Why 50-somethings are at the perfect age for business ownership.

by Diana Capirano
Certified Franchise Consultant

Franchising is great for people of all ages, but men and women at mid-life are prime candidates for these opportunities. The 50-something life experience brings great value to business and the entire franchise system. If you’re not yet 50, keep reading—one day you will be and it comes sooner than you think.

One of the coolest things about franchising is that there is no age discrimination, but 50-somethings are prime candidates because often the kids are out of the house and they can focus on their own wants and goals. Even retirees are getting in on the action as business models are conducive to semi-absenteeism and allow a very flexible lifestyle balance. AARP and social security are just added bonuses.

As a franchise consultant, I help clients realize that along with business acumen, life experiences—personal and professional—are of huge value to franchisors. Stored applied knowledge, emotional intelligence, and transferrable skills from other careers can make a big difference in owning a business.

At age 50, you have better clarity as to what is missing in your life. Maturation somehow brings us to, “there must be more to my life than this.” The mindset shifts from what can we do for our employer to what value owning a business brings to us. We desire a higher form of our mid-life selves.

Statistically, the highest rate of entrepreneurship in the U.S. has been among 55 to 64-year old’s, and people older than 55 are twice as likely to launch successful new companies than those in the 20-to-34 age group. So it’s a misconception to think that only young people are risktakers and wildly innovative. Next time you think you’re past your prime, get inspired by Ray Croc (McDonald’s), Charles Flint (IBM), Bill Porter (E*Trade), and Bernie Marcus (Home Depot). Didn’t anyone tell you that 50 is the new 30?

WHY 50-PLUS WORKS

Although franchise models can be plug and play, the 50-plus age group has more to offer than you might think. Here are a few great perks that come with life experience.

Broad and deep life experience: Having had a wide range of experiences in the past, will help you handle new situations and relate to a broad group of people now.

Diversified knowledge and skills: People over 50 often have understanding in sales, operations, finance, training, and mentoring others. This builds confidence and flexibility.

Networks: The ability to leverage established professional networks can accelerate growth and provide recruitment opportunities.

Past failures: Likelihood of previous failures provides learning opportunities. It tends to make us less risk adverse and more motivated to succeed.

Accessibility: Now even retirement plans can be used to fund the business.

Diana Capirano, CFC, has an expansive career which includes corporate and franchise sales and development, marketing and operations, merger and acquisitions, structuring and negotiations as well as business ownership. As a highly-respected consultant and mentor, Diana espouses a profound commitment to help prospective business owners and investors understand and navigate the process of deciding on a franchise business. Contact Diana at 941-999-0095, email diana@focusfranchise.com, or visit http://www.focusfranchise.com.

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