Tag Archives: Franchise Fred

What Does Customer Relationship Management Mean to You?

We Build Relationships Concept

Customer Relationship Management or CRM means software developed to store and manage your customer, prospect, leads, business partners and business contacts information. CRM is generally tied to large companies, though software including Zoho CRM , TeamSupport, Pipedrive, Prophet and more claim to work well for smaller companies.

The advent of CRM solutions means that consumers expect companies, no matter what size, to understand the relationship they want and meet those desires. Consumers expect any brand to meet their expectations although, many companies do not.  Often, companies are good at capturing data like gender, age, income and maybe even matching customers with purchasing information. Companies like this may think of customers as resources to upsell or cross sell to rather than as individuals seeking meaningful interactions.

Customer Relationships

B to C companies often blunder when relating to customers. They may treat those seeking a simple exchange of money for goods or services like a friend and interact with a customer wanting to be treated like a friend as a transaction.

Blow are examples of three firms that used CRM data, yet made relationship mistakes:

·       A loyal on-line retail customer was frustrated by a policy of requiring signatures for home deliveries occurring while she worked. Managers were not flexible to her concerns and one blew it by offering her a $200 gift card. She promptly canceled a $7,000 order.

·       A plus-size clothing store repositioned itself to be more relevant to younger, thinner customers only to find themselves alienating established customers who felt disrespected and betrayed.

·       A dedicated customer of a grocery delivery startup sent in suggestions to fix operational glitches. However, the only responses he received were promotional emails urging him to order more frequently. The customer cut back his patronage believing the company did not want a relationship on his terms.

29 Customer Types

One research firm identified 29 distinct types of buyer-company relationships which is more eye-opening and more valuable than demographics. For example, there is the customer that likes the basic exchange. They seek product / service dependability and don’t want to think too much about it. Another is the customer wanting recognition as a business partner. These types want to work with the company long term to solve problems. The buddy customer wants an interaction but doesn’t want to be tied into a close relationship that limits freedom.

It’s up to the business owner to figure out which type matches the customer by developing “relational radar” to hone in on customer signals and then deal with them accordingly.

Fred franchises Postal Connections of America stores: http://www.postalconnections.com/

Franchise Forecast 2016

The International Franchise Association’s (IFA) state of the industry report for 2016 suggests a positive outlook for the franchise industry.

Growth forecast concept up

The report, compiled by IHS Economics, a well-known forecasting firm, projects that the franchise sector will outperform the overall economy next year by posting a 5.1% gain against a projected US gross domestic product increase of 3.1%.

Out of the 10 major franchise sectors IHS tracks, the following six will see the most growth:

         Personal Services: This includes businesses such as spas, childcare, tutoring, hair salons and specialty niches like learning-to-paint franchises. The growth is tied to the growing disposable income of the aging population.

         Lodging: With travel increasing because of the improving economy, many of the major hotel and motel chain franchises are expanding across the US.

         Business Services: Business services including tax franchises, staffing companies and pack and ship stores are also in a growth mode fueled in part because of the increasing number of self-employed workers who do not operate out of offices.

         Fast-Service Restaurants: Consumers are looking for better quality food served quickly. Franchises in this sector include Panera Bread and many of the fast food chains. This category is responsible for 40% of franchise employment and has 20% of all franchisees.

         Retail Products and Services: Stores including 7-Eleven, Pearle Vision and GNC are all niche stores that are posed for more growth in 2016 because of the country’s economic growth.

         Residential and Commercial Services: Along with the increase in business in general, places that service businesses like Service-Master will also grow.

2016 appears to be another good year for the franchise sector. Along with the built-in advantages of the franchise system, franchising might be the right choice for many aspiring entrepreneurs.

Deciding on a Franchise Product or Service to Sell

It’s a big decision deciding what you want to sell, what business or franchise product or service speaks to you and will also make you money when you decide on what type of franchise to buy or business to own.

Private Or Public Directions On A SignpostHave you ever thought about why stores in your neighborhood sell what they sell? For example, a Postal Connections in Islandia, New York, is an agent for U-Haul and a store in Redmond, Oregon, sells greeting cards and locally made gifts and crafts.

How did they and how do other local stores decide what they want to sell and what would also work in their markets? Here are 15 points to consider when making this decision:

  • Do you like the product you’re considering selling to the point that you would buy it yourself?
  • Would you champion it to a friend or family member?
  • Does it look like the product or service has staying power…will it still be moving over the next five to ten years?
  • Can the product be advertised and sold for a reasonable COGS (Cost of Goods Sold)?
  • Can you make money selling it?
  • Is there a demand for the product in your local area?
  • What problem does the product resolve for your customers… how does it improve their life?
  • Who will you be selling it to…what are the demographics?
  • Do you like the customers who will be using this product or service?
  • How will the product or service by promoted and sold?
  • Does the need exist for the product?
  • What is the guarantee, service process or replacement procedure?
  • Name three ways the product is superior to its competition in the area.
  • Is the product priced lower and/or of better quality than similar products?
  • How is the product or service manufactured or produced?

To sell a product or service, everything has to be right: price, timing, demand, supply and especially your contentment in selling it.

The importance of Pre-qualification to a Franchise Investment

Postal Connections

Similar to buying a home, it is vital that a perspective franchise buyer has realistic expectations, preparation and know cash flow capabilities to make a franchise investment.  For years, mortgage companies have pre-qualified borrowers to establish a price range for the home they would lend to.  The benefits are many, including a pre-qualification provides tremendous buying power and the right guidance on lending ratios—debt to income level, for example. This knowledge gives the buyer confidence for making purchase decisions.

Investing in a franchise is very similar.  The amount financed to own a franchise is an important consideration—debt service is a fixed cost that must be paid every month. Realistic business expectations, solid revenue and cost estimates, are critical to purchasing a franchise opportunity. The Franchise Disclosure Document [FDD], a FTC filing, is where you’ll find this. With this Document and your current financial records are what’s needed to easily achieve a funding pre-qualification.

Once a franchisor knows you have the financial capabilities, the more eager they will be to advise you in many areas such as site selection, space lease payment levels, potential sales territory and marketing plans even before you join their network. At Postal Connections we are able to guide people to funding sources and offer advice to make qualifying easier.

Here are some simple tips:

  • Be able to prove your financial status (Borrowing from your rich uncle, unless documented is not a serious financial status)
  • Be prepared to have funds available buy the franchise, run the franchise for several months and pay your bills at home.
  • Work with the Franchisor to understand financial requirements from signing an agreement (most franchises require payment of a fee), installation cost for the business, marketing cost from Grand Opening to reaching break even.
  •  Use borrowing or leasing to an advantage. Borrowing can get you into business now and interest rates are at historic lows. Leasing does not impact your credit scores and if “closed-end” you own everything after the last payment.
  • Have enough money to advertise. A start-ups always need funds to build awareness and advertise incentives to try your business.
  • Understand how to use leverage and avoid over-extending. This aspect is very important and your chosen Franchise should be willing to give you straightforward and specific advice.

We’ll help you determine the best match for financing and cash management.  Franchising is an active investment that requires ongoing work and capital.  But the rewards are tremendous, as long as you finance properly based on thoughtful business expectations and a realistic plan for paying back the borrowed money.

Alan George, Postal Connections Franchise Development

Locking into the Franchise Formula

One of the main differentiators between buying an independent business and purchasing a franchise is the franchise formula. But what is a franchise formula? It is a proven model for marketing and operating a business from lawn care to garage door installations to educational systems to cupcake shops to a fast food restaurant.

Independent businesses also have a formula, but their model is about that specific operation and how the current owner works the business. It is not a proven formula beyond its current state because there is no proof of it working in another locale or under a different owner.

Asset Value

When you own a franchise business over many years you are continuing to pour value into your business and the franchise as a whole. As a result, the ability to sell if/when the time comes appears to be much greater. This is due to the fact that the franchise business is working in other locations among other owners.

What you’re really doing when you buy a franchise is investing in its formula. The impact of that can be seen in the business support you receive. (Remember, when you buy an independent business, the owner usually leaves after a short period of time and you’re on your own.)

Franchise support is typically extended to:

  • Marketing to target customers or protected territories
  • Operations support that starts with a complete description (manuals) of how the business works
  • Training, ongoing support and business concept updates
  • Financial sourcing and planning in support of the business’ progress
  • Site selection if the business is location specific
  • Brand identity

FM franchise direct

Due Diligence

Of course, not all franchises are created equal. And it is the individual’s duty to perform due diligence and confirm that the franchisor is meeting the basic expectations of the franchise formula. This is done by reviewing the franchisor’s claims, investigating current franchisee performance and carefully studying the Franchise Disclosure Document [FDD].

The final step in validating the franchise formula is having a personal meeting with the franchisor. This is where you get to probe about the business philosophy and the company operational practices. See if they’re realistic and most importantly, if they fit your expectations and personality.

(Image from Franchise Direct)

What Does a Franchise Cost and What is the Money For?

FM logo 3As one who offers franchise opportunities, typically the first question asked by interested people is how much does it cost to become a franchisee and what does this include? To answer this question it needs to be understood that a franchise is a system—usually including proprietary methods, training, a brand name and support from experts—for operating a proven business concept.

With franchising, no matter what your initial buy-in is, you should be able to make money. The franchise cost of entry and how fast you reach an ROI, greatly depends on what franchise you choose, what you can afford and the ongoing cost for operating the business. But where the initial investment money goes is similar for most franchises.

Below are the main initial costs:

Franchise Fee- This is what must be paid to become part of the franchise system. It is for the tried and true business concept, the expertise of the franchisor and the chance to become part of a money-making opportunity. This fee can run from a few thousand dollars to more than $100,000 for greater opportunities of revenue and for the higher end, well known franchises. It usually includes the rights to use proprietary materials and systems as well as the cost of training, initial marketing packages, software and website access.

The franchise fee also can be based on the size of the territory (population) that you will service and how much support will be provided by the franchisor. For example, the iSold It franchisor offers both an at-home and a brick and mortar location franchise system. The franchise fees are different due to territories defined and training.

Build Out and/or Business Set-Up Expenses- These are expenses needed to make any modifications to the physical space to conform to the franchise standards. They include equipment, software (if needed), branding décor, sales materials, supplies, freight to deliver items, training, and other expenses the franchisor might incur to set-up your business.

For example, if you are opening a retail business, it would be flooring, cabinets, counters, sales inventory, equipment, signage, etc. It also includes construction costs, fees for any local licenses and materials needed to bring the store up to standard.

For a home based business it typically includes equipment needed to market and sell things, products, business supplies, and branding materials (whether online or printed). Typically, the franchisor is heavily involved in assisting you in this important process.

Liquidity or Operating Reserve- It will take some time before the franchise turns a profit so franchisors usually require new franchises to have cash-on-hand to take them through that period. This could be needed for as little as six months to over a year. It is the money needed to keep the business going until you pass a breakeven point. This is the financial number, often called fixed cost of the business, that you need to “keep the doors open” whether or not one sale is made.

Once you become a franchisee, your franchisor should spend time with you determining exactly what your breakeven point is. He should also help you plan several years out about how much sales revenue will come to you as wages or profit distribution.

These categories of cost, called Total Initial Investment, are the amount you should expect to invest in the new franchise. Every franchisor is required by the Federal Trade Commission to accurately report the Total Initial Investment to people considering purchase of the franchise in their Franchise Disclosure Document [FDD] and in any advertising stating the initial cost.

Example: Postal Connections Initial Investment

FM Chart 2

Click on this chart to enlarge it

But there is another potential expense for start-up not part of the initial investment that we encourage every franchise prospect to consider:

Professional Costs- In making a life-changing purchase like buying a franchise, you may want to hire an attorney to help you make a sound decision. The attorney will review all of the franchise documents to make sure they comply with local and state laws as well as to ensure you understand the franchisor’s and your obligations stated in the language of the franchise agreement.

If you need to set up a corporation and need help setting up your books, you may need to hire an accountant also.

Hire professionals who are familiar with the way franchises work.

Obviously, it’s important to understand what you will initially pay out and be comfortable about where that money is going and how it will come back to you with a profit. Never be too embarrassed to ask as many questions as it takes for you to fully understand what you’re paying for.

Five Reasons to Buy a Business

The franchise business has weathered the recession better than most industries and it shows considerable promise moving forward. Plus, this is the time when more people are patronizing local shops allowing for the flourishing of family capitalism rather than big business capitalism.

Good reasons to buy right now include:

Seasonality: Be ready to take advantage of the seasonal spikes that occur during the holidays. This can make a huge difference in revenue if you time it right. For example, Postal Connections of America does 2 to 2.5 times their average monthly volume between Thanksgiving and Christmas. That might be the best time to buy that franchise.

Financing: Not only may sellers and franchisors be more willing to finance but other funding options such as SBA loans, penalty free 401k funding and using unsecured credit are being made more readily available. This trend is definitely headed in the right direction especially when compared with a few years ago.

Buyer’s Market: Right now, prices on business and the equipment to run them (including real estate) are lower than usual. As with the stock market, it’s good to buy low and sell high which makes now a fertile business buying time.

When it comes to leases, landlords are open to negotiating favorable terms on prime space for a new franchise operation.

In addition, interest rates are at all-time lows. If you have a good credit history, you will be able to find excellent interest rates. Keep in mind that as the economy continues to heat back up, so will expenses.

Job Market: In addition to it being a buyer’s market for opportunities, it’s a good market for hiring qualified employees. Because individuals in all sectors are experiencing layoffs and downsizing, it’s highly probable that you will be able to get the right individuals to help your business prosper.

Risk: If you are concerned about the risk of going it on your own, an established franchise system reduces the worries of business ownership entry. In fact, it’s one of the big advantages of franchising. You build on the experience of a franchisor and established franchisees that can support and guide you through the process. Another positive is that a franchise system offers the buying power, efficiencies of scale and training you need to build a successful operation.

If you have a dream to be a business owner now is the time to go out there and make it happen.

8 Steps to Take Prior to Buying a Franchise- Franchise Fred

As with any major purchase, especially one that will become your life’s work, perform your due diligence. Below are eight steps you need to take prior to buying a franchise:

  • Make sure your own finances are in order. Franchisors will want to know that you are financially secure before awarding you a franchise.
  • Carefully review the Franchise Disclosure Document (FDD). This document is a treasure chest of information about the Franchisor. Among other things, check for any litigation issues, your obligations to the franchisor and vice versa and any financing the franchisor may provide.
  • Understand exactly what the franchise fee covers. Some franchise fees cover for all of the start-up costs and some exclude marketing and training. Make sure you know what you will have to pay in addition to the fees to get a good start in your business.
  • Ask about support. Find out what level of support you will receive from the franchisor. Will they create ads for you? Assist you with hiring? Provide continual training?
  • Talk to current franchisees. Ask them about any disputes, if the franchisor does what they say they’re going to do and how long it took them to get to their break-even point.
  • Make sure there is a territorial clause in the franchise agreement you will be signing. This is defined as an exclusive territory around the business location. The agreement will specify that no other franchisee will be allowed to open in that territory. The territory could be stipulated by zip codes, the number of households in the area, highway boundaries or any number of other definitions.
  • Check for the existence of franchisee advisory groups and associations. In general, franchise advisory groups are organized by the franchisor. They are comprised of franchisees and representatives of the franchisor. An association usually is independent of the franchisor. As a franchisee, you may have to pay dues to join so the group can be funded. The presence of one or both of these groups generally indicates that the franchisor welcomes input and closely listens to franchisee concerns.
  • Know the franchisor. Any agreement is only as good as those who make it. Do your research on the internet and elsewhere about the franchisor. Check the franchisor’s employment history, how long they have been managing franchisees and any litigation history they may have been a party to.

Finally, consider retaining the services of an experienced franchise attorney to review the franchise agreement with you. This will help ensure you have a clear understanding of all of its contents.

The Impact of Franchising in America

Periodically, the International Franchise Association Educational Foundation publishes a study developed by PwC that measures the contributions of franchising to the US economy.  The key economics measured in the study were jobs, payroll output and GDP establishments. It’s exhaustive research that even presents the impact on a state by state basis.

Following are some of the findings from that study (2007 data, the latest data available):

More than 828,000 establishments operated out of US franchise systems. They produced the following:

  •  9.1 million jobs
  • $304.4 billion in payroll
  • $802.2 billion of economic output
  • $468.5 billion to the GDP

In addition, franchised businesses were 2.8% of all non-farm business establishments and their output contributed to 3.4% of the total US GDP.

Job Data

Franchising is a prolific employer. This is how jobs generated by franchising stack up compared to other sectors of the economy:

  • Durable goods manufacturing 9,171,500
  • Franchised businesses 9,125,700
  • Financial and insurance 8,801,600
  • Real estate and rental and leasing 7,765,500
  • Wholesale trade 6,582,600
  • Transportation and warehousing 5,949,900
  • Nondurable goods manufacturing 5,300,300
  • Information 3,556,900

Jobs generated by franchising are number two to durable goods manufacturing.

FF pie chartThis pie chart from the report that shows how franchising jobs are distributed among the different businesses.

When you break it down by state the number of people employed because of franchised businesses was the greatest in New York, Illinois, Florida, Texas and California. On total jobs in a state, franchising had the greatest impact in Mississippi with 15.8% of Mississippi’s private sector jobs related to franchising. In fact, in every state franchising ranked over 10% of private sector jobs except in New York, Rhode Island, Massachusetts and the District of Columbia.

This data underscores the considerable contribution franchising systems make to the US economy. You can read a PDF version of the study at http://www.buildingopportunity.com/download/Part1.pdf.

Fred Morache has spent many years in the franchising business and is currently the managing franchisor partner for iSold It and Postal Connections of America franchises

How to Decide Between an Independent or Franchise Business

FF te-deum blogspot.comHow to Decide Between an Independent or Franchise Business

When you decide to buy a business, one of the first decisions you will face is whether to purchase an independent or a franchise business. People succeed in both kinds of enterprises but there are significant differences between the opportunities. A big part of the choice may also be how well either one meshes with your personality. Talk with family, friends and trusted advisors to help get insights to this major career choice. Here are some points to consider:

Business Model

As an independent business you can change, add or eliminate products and services as you assess what works best in your market or even determine what your personal feelings are about what you sell.

A franchisor usually makes those decisions for a franchisee.

However, an independent business owner does not possess the security knowing that product lines and services have already been tested and maximized for the market. Franchisees give up the decision-making independence but reap the benefits of the tried and true.

Costs

In most cases, franchises have lower total investment expenses, especially up front. But, they have to pay ongoing royalties and may have little say in the timing and scope of other investments and renovations.

If an independent business owner is having a cash flow issue, expansion can be delayed. The owner can dictate the terms of any projects they pursue.

Brand

This can be a big advantage for franchise buyers. If the brand is well known and constantly cultivated, they will benefit from that exposure. It’s unlikely that an independent business owner will have the advantage of brand recognition unless it has been proactively marketed.

Resources

Franchisees have the advantage of a business system, a network of suppliers, marketing support and other services. These are especially helpful to those who might be lacking formal business education and experience.

Independent business owners are on their own. They have to develop their own supplier network, set price points and develop marketing strategies, all vital and daunting tasks, particularly for the novice. It can also result in a lot of trial and error to help figure out what works best which costs time and money. The independent business owner, however, retains complete control.

Support

Who can an independent business owner call in times of trouble? Maybe an outside advisor. A franchisee can call other franchise owners knowing they are experiencing the same situation. They can also call the corporate headquarters to get assistance in everything from training to troubleshooting.  That can bring a significant degree of comfort to the entrepreneur taking the business ownership plunge for the first time.

At the end, make sure whichever opportunity you select matches your personality.

Fred Morache has spent many years in the franchising business and is currently the managing franchisor partner for iSold It and Postal Connections of America franchises. 

(Pic from Te-deum blogspot)