Francorp - Franchise Business Planning

Franchise Business Plans

Franchising a company is a big decision and a major change in direction for most companies. The good franchise systems are ones that plan appropriately and put together the pieces before they get into this game. As the saying goes, you either “when you fail to plan you are planning to fail”. The same holds true for franchising. Good franchise endeavors have great franchise business plans. So what constitutes a good franchise business plan?
The key ingredients include several pieces, like any good recipe, if some of the ingredients are left out the final product just won’t taste right, which in franchise business planning that means big problems. The franchise business plan sets the stage for a franchise expansion program. It literally acts as the foundation upon which the house will be built. Everything in the franchise program should have uniformity and continuity with what is defined and determined in the franchise business plan.
The franchise business plan should begin with goals and objectives. What is the purpose of franchising? What is the goal for the company and where do you plan on being in five years? These goals will set the standards for the plan and identify how you intend to get there. You then should establish the buyer profile, who will be purchasing these franchises and opening up locations of your operation? The better franchise plans have more specific descriptions. Bad example: “middle aged person with income around $100k”. Good example: Female, ages 35-45, experience with children preferable age ranges between 5-12 years old, married, existing capital of $100k, sales ability, work ethic, married at least 5 years….etc.”. Get specific in the franchise business plan, that means you are honing in on your targets.
We then need to define the business issues of the franchise model. What will a territory look like for the franchisees? We don’t want to overcrowd markets and we also don’t want to give away business. Franchising is about saturation, take advantage of all market opportunities. After the franchisees have been established it will be extremely critical to have an ongoing support program for the people who have committed their futures to this franchise organization. Good franchise business plans clearly identify the training programs, processes and materials that will be used to get franchisees up and running and then to keep them happy and successful once in the system. With this comes hiring management and support staff. The franchise business plan should clearly identify who, when and what role they will fill in the franchise organization. The type of business will dictate how many people and at what times in the franchise expansion they should be brought on board.
The franchise business plan should also go into specifics regarding the franchise fee structure. What will the franchise fee be for this model? What will the royalty percentage be……and why? Will there be an advertising budget set to build the brand and if so what is the buy in for the franchisee to be a part of that co-op ad fund? If there are products included in the franchise system that the franchisor would like to sell through franchisees what is the distribution structure for delivering and supporting that part of the franchise system? All of this should be clearly outlined in the franchise business plan.
In the end, a complete set of pro-formas and financials should be established to define the ROI for both the franchisee and the franchisor. This can be used as an investment tool, to raise capital and most importantly as a road map for running and operating the franchise operation as the system grows.

LPCW Offerring Franchises!

A Franchise that Celebrates Children and the Arts!

Filling the Gap
Early exposure to dance and theatre can have lasting benefits, including acquiring social and physical skills that will help children throughout their lives. Yet, dance professional Daune Pitman noticed two disturbing trends in dance classes for young children: either the little ones were being taught strict ballet, which was beyond their physical capabilities, or the classes were treated as playtime.
Seeking to establish a meaningful program, Daune developed Little People’s Creative Workshop (LPCW). LPCW classes are age-appropriate and taught by trained professionals. They are largely held in daycare centers and preschools, which puts them within reach of children who may not otherwise be able to take them.
Established in 1991, Little People’s Creative Workshop is now the largest organization teaching dance to children in the U.S. We’re augmenting our steady growth with expansion, via franchising. Our turnkey franchise program provides all you need to establish and grow a home-based business with multiple growth avenues!

The Strength of Franchising

Unlike the exciting cliff hanger football game that is a Mecca for mass-marketers,
franchised businesses again dominated in advertising buys in 2009. During
Super Bowl XLIII, companies engaged in franchising outspent all other
combined enterprises by an estimated $14 million dollars.

These numbers are even more dramatic when 23 NBC network promotional spots
and 7.5 NFL spots are added to the mix. Both NBC and the NFL have
franchised affiliates, and if the value of these 30+ ads are factored in the
amount balloons to more than $100 million. In all, 64% (81.5 ads) of some
128 ads that aired during the 4 hour game broadcast came from businesses
engaged in franchising.

According to American Association of Franchisees and Dealers (AAFD) Chairman
Robert Purvin, who launched the organization?s Advertising Super Bowl survey
22 years ago, ?Super Bowl advertising continues to demonstrate the power of
franchising. How else can small business owners afford to share their
messages with almost 100 million households at one time??

Financial markets have been paying close attention to the willingness of
advertisers to embrace the high ticket cost of advertising on network
television?s grandest stage, with many concerned the Super Bowl advertising
would be yet one more victim of an economic meltdown. If anything,
franchisors have seemed to ratchet up marketing efforts to fight back
against slowing sales.

NBC reportedly charged a record average price of almost $3 million per
30-second spot ($100,000 per second). The higher cost didn't seem to impact
advertiser demand as NBC reported it sold out the available 69 national
network spots. (Each local network affiliate franchise sold about 30 local
spots). The total number of spots played during the game earned NBC an
estimated $270 million dollars.

Yet for a single 30 second spot of $1.5 million, the advertising cost for a
ubiquitous franchise such as McDonald's (who aired two ads this year) breaks
down to under $100 per store when divided among the approximate 15,000 US
restaurants in the chain. ?The collective marketing power among franchised
businesses is formidable,? adds Purvin.

Among companies that market through franchising, those companies that
manufacture products that are distributed through independent dealer
networks (called ?product franchisors? in the trade) easily dominated the ad
buys. A robust 37 ads were placed by companies who sell cars, beverages,
cosmetics and insurance through independent networks.

Business format franchisors -- those businesses that consumers traditionally
associate with franchising ? accounted for 21 commercials (double the number
from 2008), including spots from McDonald's, Taco Bell, Cars.com, and
regional entries (on the West Coast where the survey was conducted) from
Jack-in-the Box. The business format segment was even more active in the
pre and post-game markets.

Budweiser again led all advertisers with 4 minutes of air time (about 8
spots), earning it exclusive rights to broadcast during the game and
shutting out competitors Miller Brewing and Coors (both of which advertised
in the pre-game).

After Anheuser-Busch, only six advertisers ran more than one or two
commercial spots. Pepsi was second to Budweiser, buying several minutes of
ad time among its franchised soft drink brands and its non-franchised
Frito-Lay brands (primarily Doritos). Hyundai ran several spots during the
game as well during the Pre-game show. Honda and Toyota each ran multiple
spots for various brands.

American car manufacturers were missing from the prime time telecast. For
the first time in years, cooperative networks such as the California Cheese
Association, Ace Hardware and the Almond Growers Association all stayed
away.

Between 2:00 p.m. and 10:00 p.m. Eastern time, consumers were ?treated? to
almost 2 hours and fifteen minutes of thirty-second ads (approximately 270),
64% of which were placed by companies engaged in franchising. This was
about the same ratio as 2007 and 2008.

Entertainment related ads, primarily motion picture promos, led the
non-franchised segment with 16 spots. Manufacturers slid to second place
with 13 ads, including electronics, food producers and pharmaceuticals.
Retailers fell off dramatically, with one ad each from Best Buy and Kay
Jewelers, as compared to 9 spots placed in 2008. On the flip side, on-line
retailers showed a dramatic increase, with multiple spots run by
Monster.com, GoDaddy.com and E-Trade, among several others.

During the game approximately 67 different companies advertised. In
addition there were two public service announcements.

This year?s crop of ads were less striking than past years, with no
candidate seemingly destined for the Super Bowl Ad Hall of Fame, although
E-Trade?s infant stock trader was quite clever. Three other memorable ads
were delivered by Budweiser (with a Clydesdale pursuing love and the
American Dream) and an office mate being thrown out of a third story
building for suggesting that his company save money by no longer providing
free Bud Light. Coca-Cola offered a clever ?reincarnation? of the famous
Mean Joe Green encounter with a young fan, with All Pro defensive back, Troy
Polamalu, tackling a Coca-Cola executive to avenge his young fan.

About the AAFD

The American Association of Franchisees and Dealers is the oldest and
largest direct member non-profit trade association representing the
interests of franchisees and independent dealer networks throughout the
United States. The AAFD was formed in 1992 with a mission to define and
promote collaborative franchise cultures that the AAFD describes as Total
Quality Franchising. Stressing market solutions and franchisee empowerment
through independent franchisee associations, the AAFD has grown to represent
more than 50,000 franchised businesses nationwide, with members in all 50
states.

The AAFD's Fair Franchising Standards, Fair Franchising Seal, Trademark
Chapters, and emphasis on marketplace solutions led to the Association's
recognition as a growing force in franchising. The AAFD?s Branded Partner
programs add a new dimension to the value of AAFD membership. The AAFD
provides a broad range of member services designed to help franchisees build
market power, create legislative support of interest to franchisees, provide
legal and financial support, and provide a wide range of general member
benefits.

For more information about the conference or the AAFD, please call toll free
? 610-209-3775 or visit www.AAFD.org.

Francorp Client DirectBuy

Bart Fesperman announced as DirectBuy's new executive vice president

DirectBuy, the home improvement and home furnishings club with direct insider prices, is pleased to name Bart Fesperman as its new executive vice president.

MERRILLVILLE, IN, February 26, 2009 /Franchise PR News/ -- Mr. Fesperman has been with DirectBuy since 2004 when he joined DirectBuy's executive team as vice president of sales & marketing. Fesperman has nearly doubled DirectBuy's annual membership enrollments each of the last two fiscal years.

Mr. Fesperman's career with DirectBuy dates back to February 1995 when he and his wife LeaAnn, along with partners Lynn and Tammy Corbin, opened their first franchise in Springfield, Missouri. In addition to being recognized as top performers in the network, the Fespermans and Corbins were the recipients of the prestigious Founder's Award in 1998 in recognition of their outstanding contributions to the company.

In July of 2002, the Springfield ownership team opened their second franchise in Johnson County, Kansas. In 2003, at DirectBuy's International Sales & Service Conference in San Diego, both franchises were recognized as Top 10 centers in the network for the conference year 2002-2003.

"We congratulate Bart and look forward to a prosperous future as he leads DirectBuy's sales organization to even greater levels of success," said DirectBuy President and CEO Scott Powell.

DirectBuy offers consumers thousands of items, including kitchen cabinets, flat-screen televisions and major appliances from more than a thousand top manufacturers and their authorized suppliers throughout North America. At more than 160 clubs throughout the United States and Canada, DirectBuy members enjoy a comfortable, welcoming setting and design center where they finally have the financial control of buying direct.

To assist members with their home renovation projects, DirectBuy also offers access to interior designers and product specialists who are specially trained in one of five areas of merchandise: Home Furnishings, Home Improvement, Flooring, Entertainment/Outdoor, and Accessories. Additionally, members benefit from the use of a children's play area, cafe and a member's lounge to relax while shopping.

DirectBuy members also have access to renowned designer Christopher Lowell. Lowell has designed twelve room settings - created exclusively with products available through DirectBuy - using his Seven Layers of Design. An innovative approach to home decor, The Seven Layers of Design keeps homeowners on budget and from feeling overwhelmed by their project.

DirectBuy Membership
Consumers who are interested in joining DirectBuy are encouraged to attend an exclusive Open House event, which is designed to educate families about DirectBuy's unique business model. The Open House also helps consumers better understand how DirectBuy members avoid traditional retail markup when purchasing brand-name merchandise.

To request a "Free Insider's Guide to Buying Direct" and a Visitor's Pass to learn more about the superior value and benefits of a DirectBuy membership, call 1-800-DIRECTBUY or visit www.directbuy.com.

About DirectBuy
For more than 37 years, DirectBuy has been showing thousands of consumers unparalleled ways to save as they shop for virtually everything for in and around their homes - from furnishings, home improvement and flooring, to entertainment and outdoor products, accessories and much, much more. With more than 160 locations in North America, DirectBuy offers its members access to approximately 700 brand-name manufacturers and their authorized suppliers in the US, and more than 500 brand-name manufacturers and authorized suppliers in Canada.

Consumers interested in seeing DirectBuy's savings, service and selection up close may obtain a Visitor's Pass to attend an Open House by visiting www.directbuy.com or www.directbuycares.com.

How to Franchise

The Rules: Restrictive CovenantsThe success of most franchises is based on the operating systems, methods, and products produced. For this reason, franchisors must protect their proprietary information and trade marks. In order to do this, they establish restrictive covenants for their franchisees. These covenants govern the things a franchisee can do.
For example, one restrictive covenant may state that the franchisee cannot operate another similar business that would compete with the franchised business during the term of the franchise agreement. These are called in-term non-competition covenants. There may also be post-term non-competition covenants that prohibit the franchisee from operating a similar business even after the terms of the franchise have expired. Each state, however, has its own laws regarding the enforcement of non-competition covenants. Often, in-term covenants can be more readily enforced than post-term covenants.

What is Franchising?

What is Franchising?

Imagine that you're opening your own McDonald's. To do this, you have to buy a McDonald's franchise. In order to qualify for a conventional franchise, you have to have $250,000 (not borrowed). Your total costs to open the restaurant, however, will be anywhere from $685,750 to $1,504,000, which goes to paying for the building, equipment, etc. Forty percent of this cost has to be from your own (non-borrowed) funds.

You'll pay an initial franchise fee of $45,000 directly to McDonald's. The other costs go to suppliers, so this is the only upfront fee you pay to McDonald's. Then, you'll go through a rigorous nine-month training period where you'll learn about the McDonald's way of doing things -- things like their standards for quality, service, value, formulas and specifications for menu items, their method of operation, and inventory control techniques. You'll have to agree to operate the restaurant from a single location, usually for 20 years, following their guidelines for decor, signage, layout and everything else that makes McDonald's McDonald's.

Once you've completed training and are ready to go, McDonalds will offer you a location they've already developed. The exterior of the building will be complete, but you will have to take care of interior additions such as kitchen equipment, seating and landscaping. You'll get constant support from a McDonald's Field Consultant, who can advise you on details and will visit regularly. You'll pay McDonald's a monthly fee of 4 percent of your sales, and either a flat base rent or a percentage rent of at least 8.5 percent of your sales. How much money you make depends on many things, including the location and its popularity, the efficiency of your operating costs, and your ability to manage and control the business.

Think of franchising as paying someone for his or her business strategy, marketing strategy, operations strategy, and the use of his or her name. That's pretty much what franchising is -- you are establishing a relationship with a successful business so you can use its systems and capitalize on its existing brand awareness in order to get a quicker return on your own investment. You are using its proven system and name, and running it by its rules.
Are you still your own boss? In some respects, no. You still have to answer to someone else and follow his or her direction. You don't really own the business; you own the assets you've purchased in order to establish the business.

The Francorp Difference

The Francorp Difference
Our first step is always to determine your franchisability. Francorp differs from other companies that are focused on selling their services. It's important to us that we work only with companies that are franchisable . We want you to be educated about the franchising process, and about how long you should expect the successful franchise offering to take .
Do you own one of those companies? Is your company ready to succeed? We can fast track the process without interfering with your potential to succeed.
And if you don't yet have a company, but do have the necessary funds, Francorp can help you develop a franchisable idea from the ground up.
All Under One Roof
Successful systems create successful franchises, and our unique Proven Method maximizes your chances of success and minimizes costly mistakes. We also offer an array of resources that speak to our leadership in the industry.
In franchising as in so many other fields, there is no substitute for experience. Francorp's professional staff is the largest and most experienced in franchising, and you get the benefit of our collective credentials. It's no accident we're considered the industry leader.
As a result, your services and franchise help are performed "in-house," not delegated to outside contractors who may have no expertise in franchising. We employ a full-time staff of professionals to create franchise structure, franchise documents, marketing strategies and materials, operations manuals, sales training, video presentations, and general consulting.
Information about each client is shared among the professionals involved in order to keep the work product consistent from department to department.
A Comprehensive Franchise Program
It's normal to be nervous about what to expect when you've never done this before. Francorp has developed a step-by-step procedure to support you through the franchising process.
When you first contact Francorp, you won't get a sales pitch. You won't be pressured at all. But by time you leave your first meeting with one of our consultants, you'll walk out with an action plan to either become more franchisable, or to start the franchising process.
Franchise structure - As a first step in creating a franchise program, Francorp consultants prepare a written franchise analysis based upon your business, its competition, and the franchise industry at large.
Franchise agreement - Francorp's in-house attorneys, with input from Francorp's operations, marketing, and strategic consultants, will draft the principal agreement that binds you to your franchisees.
Franchise offering circular - Francorp's legal department will draft an offering circular which will meet both Federal Trade Commission requirements and those of the states in which you intend to sell franchises.
State registration materials - Requirements of the states differ, and Francorp personnel will gather the proper materials and prepare the necessary forms required by each state where you wish to sell franchises.
Operations manual - Everything from company philosophy to advertising, from franchisee reporting to employee recruitment, from inventory acquisition to day-to-day operating procedures is included in your operations manual.
Marketing plan - To aid your franchise sales lead generation, Francorp's marketing department provides the media strategy, media budget, and media schedule. We also develop advertising copy and layouts, and/or direct mail materials, to generate interest among your target franchise prospects.
Franchise brochure - Because the prospect's first impression of your franchise is often created by a brochure, Francorp will design a brochure with special emphasis on exciting graphic design, and will describe in detail the elements of your franchise which make it attractive to prospective franchises.
Franchise sales training - During a two-day seminar, Francorp will instruct your franchise sales staff on all elements of the process, from legal considerations to closing techniques.
Implementation consulting – you'll always have ready access to professional assistance in all of Francorp's specialties during the critical period of franchise development.
Whenever problems or questions arise during this period, you may consult at no charge with any member of our project team.
Plus, you'll also receive a copyrighted 400-page manual covering all topics introduced in the franchise sales seminar in even greater detail.
Francorp's Track Record Of Success
Francorp has the most success stories of any franchise consultant. See our proven track record of client references who've succeeded with Francorp, and how we made a difference in their success. Learn the story behind our success to understand how Francorp came to be the franchising leader, and why it matters to you.
Attend an upcoming event to spend some time with Francorp's consultants. Or, visit our Chicago headquarters to see where it all takes place.
Every company is different, so we give you options for getting the process started. If you think you are franchisable, and that we can make a difference for you, call us to speak directly with one of Francorp's senior consultants. Perhaps you'd prefer to ask a question or inquire about our services online. Contact us and see how Francorp can assist your franchising efforts.
Francorp's difference can also be seen in our pricing structure. We understand the financial concerns of owner-operated companies, and offer you pricing and payment options to fund the future.

Francorp Client - Crepes A-Go-Go Featured

Crepes-a-Go-Go in Dupont Circle
The sweet banana and Nutella crepe. (Lois Raimondo - The Washington Post)

washington_po284:http://www.washingtonpost.com/wp-dyn/content/article/2009/02/03/AR2009020300572.html

» Links to this article Wednesday, February 4, 2009; Page F03
"This one is dangerous," one of our tasters declared after a bite of the cream cheese, salmon, egg and tomato crepe ($7.95). So were the cheddar and apple and, of course, the banana and Nutella crepes. And that was after a 20-minute walk in the icy cold back to the office.
Crepes shouldn't travel this well. And yet the ones from Crepes-a-Go-Go are good no matter where you eat them. The pancakes are crisp and lacy. The fillings are fresh, and all the crepes are made to order; sure beats that same old sandwich.
Mourad Kacimi opened his first Crepes-a-Go-Go, an outlet of a close friend's chain in California, in the Kentlands in Gaithersburg in November 2005. I recently visited his second shop, in Dupont Circle, which opened last April and has more than 70 combinations to choose from.
I like the tangy buckwheat batter for savory pancakes such as in the sauteed spinach ($7) crepe, a beautiful balance of sweet, salty and creamy with its just-wilted greens, caramelized onions, sun-dried tomatoes and feta cheese. The traditional ham and cheese ($4.95), which was generous but not overstuffed, is a classic for a reason; the cheddar cheese and apple ($5.75) should be considered a classic, too. Its cheese is sharp and the apple crunchy; it's a great alternative to usual vegetarian options.
On the sweet side, many will go for that banana and Nutella ($4.95), and you can't really go wrong there. But there's something about the crepes with cream cheese that has my attention. A thin layer of the white stuff balances the sweetness in, for example, the special brown sugar and cinnamon crepe ($5.95). It tasted like the cream cheese cinnamon toast my grandmother made, but better. (Sorry, Grandma!)
If you can, eat your crepe in the cheery cafe with its prerequisite music of French chanteuse Edith Piaf playing softly in the background. If you can't, the toaster oven back at home or the office is your friend. We reheated our crepes at 350 degrees for six to eight minutes. Flip them over halfway through to bring back the nice crispness on both sides.
Crepes-a-Go-Go also touts its house-made gelati and sorbets ($3.75 small, $4.45 medium, $4.95 large). But those aren't quite as authentic. The consistency of the gelati I tried was hard, rather than smooth, at first bite. The flavors have a slightly synthetic taste. Lemon was reminiscent of an Italian ice, the chocolate of chocolate pudding.
Not to worry, though. By skipping frozen desserts, you save room for more crepes.
-- Jane Black

Crepes-a-Go-Go 2122 P St. NW, 202-955-5655; http://www.crepes-a-gogo.com. Hours: Mondays through Thursdays, 8 a.m. to 10 p.m.; Fridays, 8 a.m. to midnight; Saturdays, 8 a.m. to midnight; Sundays, 8 a.m. to 8 p.m. In Gaithersburg (the Kentlands), 514 Main St., 301-519-9777. Hours: Mondays through Thursdays, 11 a.m. to 10 p.m.; Fridays, 11 a.m. to 11 p.m.; Saturdays, 8 a.m. to 11 p.m.; Sundays, 8 a.m. to 8 p.m.

Francorp Client Jimmy John's Honors Disciplinarian

Troublesome Student Makes Good, and Honors Disciplinarian

Peter Wynn Thompson for The New York Times
James J. Liautaud, right, founder of Jimmy John’s sandwich shops, with James Lyons, who was the dean of discipline at his high school, Elgin Academy in Illinois.
By DIRK JOHNSON

Published: December 30, 2008
ELGIN, Ill. — In the early 1980s, James J. Liautaud was a trouble-making student at Elgin Academy who ranked near the bottom of his high school class. He drank beer. He smoked cigarettes. He skipped class.

Alex Romanovsky/DLA Architects
Mr. Liautaud donated $1 million to his alma mater and insisted that the Liautaud-Lyons Upper School bear Mr. Lyons’s name.
Teachers at the academy, a private prep school, grew so exasperated with his antics that they finally voted to expel him. But the mischievous student had an unlikely defender: the dean of discipline.
The dean, James Lyons, recognized the rebellion as insecurity, and saw what others did not — a student from a financially struggling family, trying to fit in at a prestigious school among wealthier, more polished peers. The dean, who had a working-class upbringing himself, put his job on the line. “If he goes,” he told the faculty, “I go.”
Mr. Liautaud — better known as Jimmy John, the founder of a sandwich shop empire with some 800 restaurants — came back to the Academy this semester for the opening of a building that bears his name. He gave the school $1 million, with one condition: the building also had to bear the name of Mr. Lyons.
“It’s a real simple deal,” said Mr. Liautaud, 44, explaining the motive for his generosity. “Jim Lyons believed in me.”
On a bluff in this old city on the Fox River, the new building houses 12 classrooms, a theater and a library. The high school is now known as the Liautaud-Lyons Upper School.
John Cooper, the head of the school, said educators everywhere could tell stories of dismal students who turned out to be successful in business or the arts. But not many send such a gift.
“He called me up out of the blue and said, ‘Hey I’ve decided to give you guys a million bucks,’ ” Dr. Cooper said of Mr. Liautaud.
At first, Mr. Liautaud wanted only Mr. Lyons’s name on the building. But the school told the sandwich king that it wanted to use his name, too, since his story would inspire many students. There are still a few teachers around who remember Mr. Liautaud and his wild ways.
“It’s all in the permanent record,” Dr. Cooper said, smiling.
A big man with a streetwise charm, Mr. Liautaud delivered the commencement address last year, wearing a T-shirt, blue jeans and cowboy boots. He implored the students not to emulate his own academic and behavioral missteps.
Among students at Elgin Academy, Mr. Liautaud is regarded as something of a hero. One of them, Christopher Theodorou, 18, said he ordered food from a local Jimmy John’s restaurant for seven straight days after learning about the donation, a gesture of pride and gratitude.
“And besides,” Mr. Theodorou said, “it’s delicious.”
Mr. Lyons, 74, now retired, said he had spent many hours in the company of young Mr. Liautaud, often because he had violated some rule.
In those days, a disciplinary dean had a little more leeway, and Mr. Lyons was not afraid to capture a boy’s attention by giving his arm a bit of a squeeze. “You wouldn’t get away with any of that stuff today,” he said.
But he also had a gentleness that won over the troubled boy.
“I would just listen,” said Mr. Lyons, who learned that Mr. Liautaud’s parents were going through hard financial times while their son was in school. “He was able to confide in me. He was a pretty good kid. He was just struggling to find out who he was.”
The two men have stayed in touch. They got together for dinner just before Christmas. “You have a lot of students who become successful,” Mr. Lyons said. “But this is one who said thank you.”
Mr. Liautaud said he had “acted like a jerk” at Elgin Academy.
“I was at this fancy school and I felt out of place, so I rebelled,” he said. “But Jim Lyons put his arm around me. He cared about me. He’d say, ‘Jimmy, don’t say that; it’s not classy.’ And he’d tell me I could do whatever I wanted in life. He told me that a lot. And by the time I was a senior, I started to believe him.”
He made it through high school, but Mr. Liautaud said he was not exactly college material. “I didn’t have the grades, and my dad didn’t have the money for tuition,” he said.
He had always wanted to start his own food business. The financial picture at home improved enough that his father offered him a deal. He would lend the young man $25,000 to start a restaurant business. If he failed, he would have to join the Army.
Mr. Liautaud’s business model was to go to college towns and deliver inexpensive food to dormitories. Most restaurants in those days refused to deliver to dorms. He started his first restaurant in Charleston, Ill., near Eastern Illinois University. He now has stores throughout the country, but mostly in the Midwest and Southeast.
With his success, Mr. Liautaud could live in any fancy neighborhood he chose. But he and his wife and two small children live in the central Illinois university town of Champaign.
“You can’t forget where you came from,” he said.
The officials at Elgin Academy are thankful for that. Mr. Lyons, who said he was humbled by the gift, initially felt uncomfortable about having his name on the school building. But he liked the notion of linking a student’s name with an educator’s.
“We believed in each other from the start,” Mr. Lyon said. “And we never gave up on each other.”

Let's Hear It for the B Players

Let’s Hear It for B Players
Key ideas from the Harvard Business Review article by Thomas J. DeLong and Vineeta Vijayaraghavan
The Idea
Who’s most critical to your company’s success, especially during a weak economy? Who supplies the stability, knowledge, and long-term view your firm needs to survive? B players—competent, steady performers far from the limelight.
These supporting actors of the corporate world determine your company’s future performance far more than A players—volatile stars who may score the biggest revenues or clients, but who’re also the most likely to commit missteps. B players, by contrast, prize stability in their work and home lives. They seldom strive for advancement or attention—caring more about their companies’ well-being. Infrequent job changers, they accumulate deep knowledge about company processes and history. They thus provide ballast during transitions, steadily boosting organizational resilience and performance.
Yet many executives ignore B players, beguiled by stars’ brilliance. The danger? If neglected, these dependable contributors may leave, taking the firm’s backbone with them. How to keep your B players? Recognize their value—and nurture them.
The Idea in Practice
The Best B Players
Your most valuable B players are:
• Former A players. These highly skilled, focused professionals often jump off the fast track to balance work and family. They continue accomplishing A work—but on their own terms. Seasoned and sharp, they step up during crises.
• Truth tellers. Zealously honest in interactions with superiors, they pose challenging questions. Colleagues, recognizing their lack of ambition, highly value their opinions.
• Go-to managers. These power brokers compensate for second-rate functional skills with profound understanding of company processes and norms. They amass such extensive networks that everyone consults them when pushing initiatives through politically challenging terrain.
Corporate Backbone
During turbulent times especially, B players provide stability by:
• Accumulating organizational memory. B players remember how their company survived earlier crises—providing indispensable perspective during tough times.
• Adapting to inevitable change. Less threatened by restructuring, B performers adapt to change and have the credibility to dispense vital information. They mentor younger people through the trauma of change, cultivating a reassuring sense of emotional and psychological safety.
• Staying focused during management shakeups. Unlikely to be promoted or fired when a new CEO arrives, B players are usually the most secure people in any company. They ignore political infighting and get back to business, quietly completing projects while A players prepare to jockey for new positions.
Nurturing B Players
To keep your B players motivated:
• Accept differences. We’re all tougher on people who differ from us. If you’re an A player, avoid the temptation to undervalue B performers. Ask what they want from their careers, then match them with mentors who’ll help them get it.
• Give the gift of time. Track your communication patterns to ensure you’re not ignoring—and thus alienating—solid performers.
• Hand out the prizes. Since B players are promoted relatively infrequently, reward them in others ways. Even handwritten notes of appreciation can make them feel valued and motivated.
• Give choices. Rather than grooming only stars, allocate scarce resources—compensation, coaching, promotions—to high-potential B players. Promoting sideways can provide appealing career alternatives.
This HBR in Brief presents key ideas from a full-length Harvard Business Review article.

Francorp - Franchising Expert Witness

Franchisee Battles Quiznos Over Location PolicyBy: Daniel Del'RePublished September 2, 2005September 2, 2005

--Franchisees of sandwich chain Quiznos are fighting what they say are policies that allow the Denver, Colorado company to open too many franchises in a single market, leading to cannibalization of revenues.

On Aug. 26, a Los Angeles County judge told Quiznos it could not shut down a Long Beach, Calif. chain and ordered Quiznos into arbitration with Bhupineer "Bob" Baber and his wife Ratty Baber, who claimed that new stores in their area siphoned customers from their two Long Beach franchises. If the Babers win that round, Quiznos may not be able to open new stores in cases where sales are likely to cut into the business of existing franchises."There is an implied covenant of good faith and fair dealing that says you don't dump competition on top of your existing franchisees," said Fred Pardes, attorney for the Babers.Quiznos' franchise agreements do not restrict the company from opening franchises within the proximity of existing locations.But Don Boroian, a franchise consultant with Francorp, said franchisers like Quiznos have an obligation to prevent locations from encroaching on each other's territory.Boroian is serving as an expert witness in a separate lawsuit against Quiznos in which the plaintiff, Royce Gwin, is arguing that he was denied commissions for selling franchises.In 2004, Quiznos opened two franchises less than two miles from the Babers' Quiznos. Pardes said that within months, the Babers' revenue fell by one third and blamed it on the new competition.The Babers founded a not-for-profit last December to organize Quiznos franchisees with similar grievances. One month later, Quiznos revoked the Babers' franchise on the grounds of health code violations. The City of Long Beach said the chain passed all health code inspections.But the closure prompted the Babers to sue Quiznos.Quiznos would not comment on the allegations or the suit."We are moving forward with arbitration in California," wrote a Quiznos spokesperson in an e-mail. " We're not going to comment further regarding ongoing litigation."

Hurb's Burgers

Local BusinessWhen Irish guys are frying
Hurb's Burgers started out at Concrete Street, plans to expand in franchise deal
Fanny S. Chirinos Caller-Times
Sunday, May 14, 2006

Judging from the news photo framed at Hurb's Burgers on Chaparral Street, the burger joint in Decatur, Ill., was tiny. There was no place to sit.

A few screened windows for taking orders and catching a glimpse of the crowd, a large grill and fryers were all the tools Bill Krekels used to make his magic. That and a few fresh beef patties, cheese and a couple of buns.

"We all liked them and I'd always said I'd open a place where I could sell these burgers," said Gary Durbin, president of Hurb's Burgers Inc. "When I'd tell Bill, he'd say he would come down and eat one. He died before I opened my first store."

The type of double-cheeseburger Durbin, 48, ate as a kid now is enjoyed by hundreds on a daily basis at any of five Hurb's Burgers locations in Corpus Christi, Robstown and Mathis. The company started by selling burgers at Concrete Street Amphitheater more than five years ago.



Business takes off
Downtown: 705

Chaparral St. 884-4872. Opened St. Patrick’s Day, 2003 Weber/Saratoga: 6410 Weber Road. 855-4872. Opened Sept. 1, 2005 IH 37/McKinzie Road (inside Shell station). Opened Sept. 1, 2005 Robstown: (inside Valero station). Opened April 4, 2006 IH 37/Hwy 359 (inside Texaco station). Opened April 15, 2006
Gary's son, Patrick, helped start the business at the amphitheater and said he kept telling his dad they should open their own restaurant.
"People would come up to me and ask where they could get the burgers," said Patrick Durbin, 27. "They'd say they didn't care about the concert. They would pay for a ticket just to come eat a burger."

Two years later, they opened Hurb's Burgers on Chaparral Street. Since then, they've opened locations on Weber Road, in Annaville, Robstown and Mathis. Now the company is looking to expand throughout Texas and the United States. The Durbins have hired a consulting firm to help organize the company and franchise it.

The Hurb's burger is unlike most burgers you'll find. "We don't consider Whataburger a competitor because you're talking about two different products, really," Gary said. The thin patties, never frozen, grill fast. So fast, that the burger could be cooking while the customer is standing in line to order it. Patrick explains how:

"I'll lean back from the 450-degree grill and see the line of people. If I see five of them, I slap 10 patties on the grill. Most people order doubles and if they don't, I got a double to eat. Sometimes, I'll have the burger out before you finish filling up your drink."

At the downtown location, Patrick is the only person in the kitchen during the busiest hours of the day, between 10:30 a.m. to 2 p.m. He prefers it this way because people just get in his way, he says.

Laura Garcia's introduction to a Hurb's burger took place at the downtown location about two months ago. She's hooked.

"I don't know what it is about them other than they're juicy," said the 24-year-old Texas A&M University-Corpus Christi student. "You don't wait forever to get them and they fit in your hand. When you take a bite, you feel the melted cheese and can tell the patty's just come off the grill. It's kind of weird now that I think about it, but that's why I love them."

Garcia said she comes during lunch, even when she probably has to wait for a table. But it's worth it, she says. She has tried the onion rings, the fish sandwich and the hot wings but says it's the burger that keeps her coming back.

"I think the double cheeseburger ruins it for the rest of the menu items," she said. "You can get the other stuff at other places, but a Hurb's burger you can only get at Hurb's."

A family business

Sitting across from the bus terminal downtown, the first Hurb's Burgers to open is as diverse in its decor as in clientele.

Nailed to one wall are motorcycle parts that have served their purpose on a Harley Davidson, or came straight out of the box to serve their purpose on the wall. Exhausts, handlebars, seats and spokes are just some of the items that run the length of one wall in the eating area.

"My dad rode a Harley for 30 years and I have one now," Patrick said. "I spent two full days nailing bike parts. I even nailed a part my dad had bought for his bike. People will trade me their parts for mine or they just want a memento."

Opposite that wall is another showcasing large works of art from a family friend. Portraits and paintings of hog-riding enthusiasts are sold, literally, off the wall.

"The store has characteristics that reflect who we are," Patrick said.

The Durbins are hard-working Irish Americans who have embraced their Celtic heritage. Gary owns and leads the company while his wife, Cindy, manages the Annaville location and Patrick runs the downtown restaurant. Three-leaf clovers and the orange, white and green of the Irish flag adorn the restaurants.

"My mom bred it into our heads, 'You're Irish Catholic and don't you forget it,' " Patrick said. "We have Irish and English ancestry from both sides of the family and the Irish is what comes out in our pride, in our characteristics and our way of thinking."

It also comes out from their bodies. Cindy has one tattoo while the others are clad from shoulders to calves in body art. Between his shoulder blades, Patrick has a tattoo that says "Erieghn Go Braugh," which means Ireland forever.

The Durbins opened the first restaurant from money saved through their other business, Gulf Coast Graphics. The initial $30,000 investment earned profits to open a second and third restaurant last year and the rest this year.

The schedule has been seven days a week, 356 days a year to get the business where it is now, Patrick said.

"No one outside the family knows how hard we've worked to get this going," he said.

During the lunch hour, seats at any of the restaurants are hard to find. The popularity of the restaurants led Gary to move his business to the next level - franchising.

Going global

Francorp USA, a Chicago-based full-service consulting firm, is working on organizing Hurb's Burgers Inc. Within a year, the company hopes to introduce the world to Hurb's Burgers and begin franchising the company.

"We'll saturate the concept in Texas because there's a huge market," said Christopher Conner, a Francorp senior consultant. "Once a solid foundation is developed, we'll take it further."

In today's market, it is difficult for a business to begin franchising, Conner said. Of the 15,000 contacts the firm receives a year, Francorp works with fewer than 100. Of those, very few will expand beyond their state.

Hurb's, however, shows promise for several reasons.

"There's a low initial investment of about $100,000 or less, which is low compared to other chains like Burger King," Conner said. "(Gary has) developed a name for himself and he's got a great, fresh product. We've seen great upside potential on the revenue side."

Gary's goal is to open 200 to 300 locations in the United States. Conner said franchising is the quickest and least-expensive way to do it.

"If we can survive in a downtown location across the street from a bus station, we can survive anywhere," Gary said.

The other option is to raise about $200 million to open the locations plus 200 top-quality managers," he said. "It's difficult."

If and when Hurb's goes global, the Durbins said they won't change. The estimated $35,000 royalty fee per new location is not enough to change them.

"We're not suit-wearers," Gary said. "We don't even own suits. I'll probably keep promoting the franchises and let the managers mind the stores. Patrick will pass the grill to someone else and promote the franchises with me."

The Durbins won't be looking for anyone in particular to carry the Hurb's name to the next level, only that they be smart and hardworking individuals.

"I'm not looking for people with tattoos or body piercings just like I'm not looking for people in business suits," Gary said. "I'm looking for people who can dedicate the time to building a business like we did. After all, the name's riding on it."

On a recent Tuesday, Hurb's downtown was standing-room-only. People stood in line, looking around for the first available seat while they ordered their lunch and filled their drinks.

A district judge, an employee from the city of Corpus Christi's wastewater department, businessmen, students and a mix of about 25 other customers sat enjoying their food, mostly burgers and fries.

"You can come here wearing anything from a suit and dress to shorts and flip-flops and fit in," Garcia said as she waited to order. "Watch, someone will see the line and get up a minute sooner than they would at any other restaurant because there's an understanding among customers. We understand a hankering for a Hurb's burger."

Sure enough, a party of three got up to leave and Garcia claimed the table. As two more customers walked in, they looked around as they got in line to order. There was no place to sit, yet.

Contact Fanny S. Chirinos at 886-3759 or chirinosf@ caller.com

Dunkin Brands

Doughnuts and ice cream make sweet bedfellows at Dunkin' Brands. The company is a multi-concept foodservice franchisor, with more than 13,000 locations in 50 countries, including its popular Dunkin' Donuts and Baskin-Robbins chains. With more than 7,000 shops in 30 countries (4,400 of which are in North America), Dunkin' Donuts is the world's leading chain of donut shops. Baskin-Robbins is a leading seller of ice cream and frozen snacks with its nearly 6,000 outlets (about half are located in the US). About 1,100 locations offer a combination of the company's brands. Dunkin' Brands is owned by a group of private investment firms. More from Hoovers »
130 Royall St. Canton, MA 02021 USA +1-781-737-3000 (Phone)781-737-4000 (Fax)
Company website:http://www.dunkinbrands.com

Francorp International

Francorp's global offices continue to be praised for their development work and client relations.http://readnow.i.ph/blogs/readnow/For more information on franchising internationally visit www.francorp.com and visit the international office sites. Francorp covers the globe with leaders from different countries in each of the major markets.

Francorp Clients - Beadniks

Beadniks Joins Mall of America

Beadniks has recently closed a deal with the largest retail and entertainment complex, Mall of America.
After receiving a full development program from Francorp, Beadniks has become "one of the hottest new franchises in the U.S." according to the 2008 Bonds Franchise Resource Guide. Beadniks is one of the largest bead sellers in the world with seven locations including Martha's Vineyard, Chicago, and Santa Monica. Beadniks offers an inspiring and imaginative atmosphere in which customers can craft their own beaded works of art.

FastSigns

FASTSIGNS International, Inc. Establishes New Store Development Team




January 17, 2006 - (CARROLLTON, Texas) — To provide more comprehensive support for new FASTSIGNS® sign and graphics centers in the United States and Canada, FASTSIGNS International, Inc. has established an opening support team comprised of a director and three franchise business consultants (FBCs), the company said. FASTSIGNS International, Inc. is the worldwide franchisor of FASTSIGNS® centers; there are nearly 500 locations in six countries.

Beginning this month, the new team will support centers from the time the franchise agreement is signed until the center’s sales consistently exceed the break-even point, said Trent Lensch, the company’s vice president of operations. Lana Daley, a former FASTSIGNS® center employee and corporate FBC, is the director of the new store development team. She will be joined by Mike Richards, Tammy Coil and Robert Shipman, who all have worked as FBCs supporting established FASTSIGNS® centers.

“Over the last 12 – 18 months, the adoption of new technologies such as flatbed and solvent printers has significantly changed our business,” said Lensch. “The feedback we’ve received from new owners is one reason we established the new store team. Lana and her team, who have in-store and FBC experience, will provide the operations, marketing, technology, production and management support that the new center owner and the staff need to be successful.”

Although it is not unusual for franchise organizations to have dedicated teams that provide short-term help for new locations, FASTSIGNS International is providing longer-term dedicated support for new centers, Lensch said, who has managed operations and sales for other franchise companies.

Daley, who worked in property management before joining the FASTSIGNS® network, has sales, operations and general management experience. Coil’s background in day-to-day FASTSIGNS® center operations, Richards’ knowledge of technology, and Shipman’s general management and sales skills round out the store development team.

In addition to establishing the new center team, FASTSIGNS International has promoted Mike McCabe, who previously was an FBC, to director of operations for the eastern U.S. and Canada. Scott Watson will continue as the company’s director of operations for the western U.S. McCabe and Watson oversee teams of FBCs that support established centers and new centers that “graduate” from the new development team.

FASTSIGNS International, Inc. has territories available for new centers throughout the United States, Canada and the United Kingdom, as well as in Brazil, Mexico and Australia, where locations operate under the SIGNWAVE® name, said Bill McPherson, the company’s vice president of domestic franchise sales.

All new FASTSIGNS® centers open with large-format, full color printers and other new sign-making equipment, which makes each location capable of producing large-format prints, vehicle graphics, trade show graphics, banners, exterior and interior signs, floor graphics and many other kinds of signs and graphics. For more information, visit franchise.fastsigns.com or call 800-827-7446.

Starting a Business in a Down Economy

Starting Up in a Down Economy
Nobody loves a recession*. But many successful entrepreneurs say that, in retrospect, they were lucky to have launched their businesses in tough times.
By: Ryan McCarthy, Nadine Heintz, Bo Burlingham
Published May 2008

Case Study No. 1: How Method Weathered the Dot-com Bust
* A recession is commonly defined as two consecutive quarters during which the country's gross domestic product shrinks. It is too soon to say whether the economy is in a recession now.
When they look back on the early days of their start-up, Adam Lowry and Eric Ryan remember that a lot of potential investors laughed at them. The Bay Area, where they were living, was awash in Internet start-ups. Each week in 2000 brought another glitzy launch party or news that the scantest of business plans had attracted venture capital. Even office landlords were demanding equity from their dot-com tenants. Lowry and Ryan, who wanted to start a company to make -- of all things -- humdrum household products, were decidedly out of step with the times. "You had the sense that there was this real historical thing going on in the region, even if it was not going to end well," says Ryan.

Still, Ryan and Lowry felt they had a good idea. Method, their start-up, wouldn't sell just any household products. Its soap and cleaning supplies would be made from environmentally friendly ingredients and would come in chic packaging. Compared with the products of giants like Procter & Gamble (NYSE:PG) and Clorox (NYSE:CLX), Method's merchandise would be hip. So the partners passed on interesting and potentially lucrative job offers and pooled $100,000 in personal savings to get started.

You know what happened next: The go-go New Economy abruptly ran out of steam. Dot-coms ran out of money, layoffs were rampant, and the entire city of San Francisco seemed to suffer from an economic hangover. People started to worry openly about a recession.
Like most business owners facing hard times, Lowry and Ryan focused on their costs. They were expert bootstrappers, mixing cleaning solution in a bathtub, bottling it themselves, and driving around town to restock shelves. They would accost any store manager who would listen to their spiel. They returned to some stores three and four times before they got an order, and little by little their sales pitch improved. And the partners noticed something else: Compared with the situation a year before, when there seemed to be five start-ups for every idea for a business, the competition was relatively muted. "Starting a business in a recession is like vacationing in the off-season," says Ryan. "It's a little less crowded, and everything starts going on sale."
By spring of 2001, Lowry and Ryan had gotten small-batch production on track and had hired a CEO named Alastair Dorward. But Method's debt stood at $300,000, split among the three men's personal credit cards. Payments to their vendors were three or four months past due, and at one point Lowry and Ryan had just $16 left in the bank. "We had to appeal to the inner entrepreneur of each of our vendors," says Lowry. "We had to sell them on the fact that Eric and I could do something that had never been done before."

Lowry and Ryan also tried again to raise money, and with VCs falling out of love with dot-coms, they found that there was more interest in their idea. In early September 2001, the partners received a term sheet for $1 million -- a sum that would allow Method to get current on its bills and then begin to expand. They were set to close the round on September 11. Needless to say, the deal didn't go through right away; the partners finally closed in November. And there were some serious strings attached. Lowry and Ryan would receive $550,000 up front. Of that money, the legal fees associated with the transaction would eat up $110,000, and $300,000 would go to pay outstanding vendors' bills. That left Method with $140,000 in capital. To get their hands on the remaining $450,000, Lowry and Ryan were obliged to meet a key milestone: They would have to add distribution to 800 stores by March, which was just five months away.
The tenuous nature of Method's financial situation was underscored at the dinner Lowry, Ryan, and Dorward hosted to celebrate the deal. The partners gathered their investors plus their lawyers and accountants at an expensive restaurant in San Francisco. When the bill came, Lowry's credit card was declined. Then Ryan's card was declined. And Dorward's. Their backup cards were declined, too. "It's a good thing Eric knew the owner of the restaurant," says Lowry. "We convinced him we were good for it -- that that guy over there was about to give us a million bucks."

Method did make it into 800 stores by March -- though just barely. When Lowry and Ryan got the remainder of their Series A funding, they paid off old accounts and then jumped right back into fundraising mode. With the recession in full swing, venture capitalists were being very picky when it came to making new investments. But Method, which had been ignored barely 18 months earlier, was suddenly a Bay Area darling. "It was really interesting," says Lowry. "We used to be completely off investors' radar screen, but when the bubble burst, people were clamoring for us. Our business plan wasn't some sort of ad-based or online thing that was hard to understand. Our model was, 'Hey, we're going to make this cool product, and if you think we can sell a lot of it, then it's a good investment."

Being able to raise money in 2001 undoubtedly put Method on the growth path. By 2006, the company had $71 million in sales, and today the founders are pushing to reach $100 million. But Lowry and Ryan look at the period before they raised money, when they struggled and nearly drowned, as pivotal. In retrospect, the fact that they had to hone their pitch in countless meetings with store managers and vendors was fortuitous. They were practiced enough that by the time their big break came -- pitching Target for national distribution -- they didn't blow it. Which raises the question: Did the recession actually make Method better? The founders think so. As Ryan puts it, "The hungriest wolves hunt best."

Franchising in The United States

Definition of Franchising
www.francorp.com

In the United States, the Federal Trade Commission and state regulatory agencies have developed a formal set of disclosure requirements and franchise-specific prohibitions that franchisors must follow in their relationships with their franchisees. To determine whether or not a business meets the definition of a franchise, the Federal Trade Commission applies three definitive criteria that are summarized below:

1. Trademark -- According to FTC Rule 436, "This element will be satisfied only when the franchisee is given the right to distribute goods and services which bear the franchisor's trademark, service mark, trade name, advertising, or other commercial symbol." Note that it is the right, not the obligation, which triggers the first element of the franchise definition.

2. Use of "significant control or assistance" -- FTC Rule 436 lists 18 specific criteria in the area of significant control or assistance, any one of which may trigger the second element of the definition. Some of these elements include site approval, site design or appearance requirements, specified hours of operation, accounting practices, personnel policies, required promotional campaigns, training programs, and the provision of a detailed operations manual.

3. Required Payment -- According to Rule 436, "The franchisee must berequired to pay the franchisor (or an affiliate of the franchisor), as a condition of obtaining or commencing the franchise operation, a sum of at least $500 . . . within six months. . ." Required payments include franchise fees, royalties, or even from training fees, bookkeeping charges, payments for services, rent, or even from product sales (if they are sold above a bona fide wholesale price).

For additional information on legal aspects of franchise rules and regulations please visit Francorp's corporate site, www.francorp.com.

NonProfit Franchises

McNonprofit.
By McLaughlin, Thomas A.
Publication: The Non-profit Times
Date: Thursday, February 1 2001

You are viewing page 1
The growing power of franchises

The apparent products of franchises are etched in our consciousness. Mile after mile of strip malls and tacky signs. Endless come-ons and overuse of exclamation points. Deceptive advertising and shady operators. It's hard to imagine any business entity with a lower fondness quotient than franchises.
Yet the fact is that franchising has been one of the most powerful economic forces in our society in the past several decades. When franchises are seen solely as the cause of neon boulevards and cheap appeals to lowbrow tastes, their value as systems of business organization is being missed.
If franchising is so powerful, shouldn't nonprofits organize into franchise systems? Shouldn't nonprofits gain the benefits of local service delivery and national support structures? Shouldn't nonprofits find a way of building their values into a new model of business organization?
The answer to all of these questions is yes. In fact, nonprofits already do all of these things, they just don't use traditional business terms. Consider most of the names on The NonProfit Times' list of top nonprofits: The American Red Cross, YMCA, Salvation Army and Boys and Girls Clubs are just as much franchise operations as, well, McDonald's or Burger King. Moreover -- you heard it here first -- the issues of nonprofit franchise systems will be a major part of this field for the next decade or two.
It would help to define the terms. When saying "nonprofit franchise" it is any group of local or regional non-profit service providers operating within a single centralized and explicit framework. At a minimum, non-profit franchises consist of a recognizable "brand name," a coordinating entity (usually of the same name), and at least a handful of groups operating somewhat related programs and services. All of the groups mentioned earlier, and hundreds of others, fit this description.
The reason that nonprofit franchises are so important is that, as the nonprofit sector evolves toward collaboration -- not to mention the inevitability of an economic slowdown at some point in the future -- the incentive to deliver services within a larger framework will grow. Based on our work with many such organizations, we can say that the relationship between the coordinating entity and the various groups actually delivering the programs and services is poised to respond.

Typically in these systems there is a fundamental debate about the desired nature of the coordinating entity. Is it a trade association? An advocacy group? Or is it more akin to a traditional corporate office in the for-profit franchise world?
These are the wrong questions. The reason for the confusion is that these models are expressed in the language of for-profit business, while the nature of the task in nonprofits is different enough that we really don't have a term for it. The reality usually is that the coordinating entity performs one or more of these functions, but to slot it narrowly as one of these models is incomplete and misleading.
The new logic
Instead of attempting to shoehorn nonprofits into for-profit models, let's try to work through the logic of the nonprofit franchise relationship. A good starting point would be the nature of the exchange between the local organizations and the coordinating entity.
Rather than considering things like member dues or whether the entity is a trade association or lobbying arm, start with a fundamental assumption: the enduring relationship has to be an exchange of value. Local service providers -- also called affiliates, chapters, members, etc. -- pay dues to the coordinating entity; What do they expect in return for the money?
The most obvious thing is the right to use the franchiser's name. This transaction would be considered a licensing fee and would typically be calculated at 0.5 percent to 7 percent of total revenues in a for-profit context. It also means that one cannot characterize the nonprofit equivalent as a trade association, because pure trade associations are more or less random groupings of entities that create an entity to work exclusively for their own benefit. Trade associations do not require -- nor do they want -- members to use the same name for business purposes.
As funders emphasize performance and outcomes they will almost certainly come to rely on established systems to define and determine their own outcomes and quality delivery systems. Brand names swill then become far more important.

Each of the franchise-like groups in The NonProfit Times' top 100 list boasts a strong brand name. The right to use that name locally means a great deal to affiliates, so the first value that the coordinating entity can offer is the protection and development of the brand name. They pay dues to protect, preserve and promote the name and the marketing advantages that come with it.
Beyond that it gets tricky. The role of advocacy is a classic example. Theoretically, the coordinating entity could advocate with the public for general awareness of the cause, or it could advocate with the federal government or on the local level.
However, public advocacy is best carried out by single, often nationwide organizations. Only the second and third types of advocacy work well in a nonprofit franchise system, because most are composed of service providing members and in this kind of relationship the only viable, sustainable advocacy is on behalf of the members.
Standards of service are another area where nonprofit franchise systems can bring tremendous value, even if most such systems have been slow to realize the potential. An inherent problem with many nonprofit services is the lack of agreement over the definition of the services, let alone the quality with which they are delivered. Nonprofit franchise systems are the only player with widespread leverage and a vested interest in ensuring quality services.
The final and possibly most important area in which nonprofit franchises are creating new models is in governance. Governance is about power and control, and in a for-profit franchise there is not usually much question that it's the franchiser that has the ultimate legal and financial power, even if sometimes the franchisees have a lot of economic power.
But in most nonprofit franchises the members are free-standing nonprofit corporations, just like their coordinating entity. Since there are no owners of nonprofits, authority is diffuse and subject to shifts, which is a nice way of saying that, governance matters can be more about politics and personalities than about measurable outcomes.
For this reason nonprofit franchises are most decidedly uncorporate-like. Decision-making can be slow and skewed toward unrepresentative factions or concerns. Board members can be deeply conflicted about their roles, or out of touch with local concerns. Deciding not to decide can become a popular decision.

Much of this confusion is structural in a nonprofit setting, but the negative effects can be minimized by a relentless focus on strategy. This is why months-long planning processes and widespread participation are integral elements of using strategy to unify and focus the effective nonprofit franchise system.
Parenthetically, one of the areas where nonprofit franchise systems' coordinating entities are not going to excel is in administrative support to members. Most often, the greatest concentration of administrative excellence is in the members themselves, not the national office. Yet even here nonprofit franchise systems' coordinating entities will have an impact as they become brokers and facilitators of member collaboration. The net effect will be to strengthen their systems' overall administrative capacities and therefore their economic clout in the outside world.
Nonprofit franchise systems are already established, even though we don't usually recognize them in this way. What's more, they are poised to be a dominant factor in services for the next decade or two. And they'll do it without a single neon sign.

Thomas A. McLaughlin is a non-profit management consultant with BDO Seidman, LLP in Boston. He is the author of "Nonprofit Mergers and Alliances: A Strategic Planning Guide" and of the soon-to-be-published "Trade Secrets for Nonprofit Managers."

Investing in Franchise Companies

Interesting article on investing in franchise companies.

RCF 50 Index, Investing in Franchise Stocks vs S&P 500
By: One World Income Posting Time: Monday, January 28, 2008 8:25 AM

Sectors: Finance
Symbols:MCD, YUM
It is a known fact that franchise owners usually have a better chance of success as a business operator than an independent start up owner. The likelihood of success can be attributed to a proven and tested business model, existing market brand, support and training from the franchisor. The question is, are there advantages to investing in the public stocks of franchises?

Comparing the actual ownership and operation of a franchise to owning the stocks is like comparing apples to oranges. In terms of just an investment hypothetical, there are some clear advantages. We will take McDonald’s Corporation (NYSE:MCD) as an example.

The start up capital requirement for owning a McDonald’s franchise ranges from $500K-$1.6M. It would take a number of years to break even and turn a profit on the money invested. Since it is a franchise business, there are royalty payments to be paid and the time expenditure of running a business can be hefty.

On the other hand, you do not need much to really own a piece of McDonald’s; in fact you can be an “owner” for $54.10 (current share price). If you are independently wealthy and just happen to have an extra $500K at your disposal and bought MCD five years ago at $13 per share, today you are sitting on at least a cool $2M in profits assuming proper trailing stop loss management and you got out at the $63.69 high.

Not a bad ROI for about 20 minute’s worth of work placing trades and without all the hassles of running a brick and mortar business. Ok, ok I hear what you are saying. This was an ideal situation, hindsight is 20/20 and no one in their right mind would plop down half a million on just one stock.

The point of this exercise is to demonstrate the potential of publicly traded franchises as a unique class of stocks to invest in. Entrepreneur magazine just recently released their “2008 500 Franchise Rankings” of both private and public franchises. McDonald’s and Yum! Brands (NYSE:YUM) were among several of the many publicly traded franchises which made the top 20 on this list. Owning a carefully chosen basket of these stocks would have performed well.

The University of New Hampshire’s Rosenberg Center compiles an index that tracks the market performance of the top 50 U.S. public franchisors every quarter. Over 98 percent of the market capitalization of corporations involved in the business of franchising is represented by the RCF 50 Index. This composite index of franchisors has beaten the S&P 500 in the past 5 years as shown in the published 2007 3rd quarter report.

Professor Udo Schlentrich, director of the University of New Hampshire’s William Rosenberg International Franchise Center has this to say about the performance of the RCF 50 Index during and interview:

“Although the Fran 50 companies have out-performed the S&P 500 companies for the past 5 years, there is no guarantee that they will continue to do so in the future. We believe some of the reasons we have seen this growth is that franchising, as a business model, has become better understood and valued by the investment community. For example, franchised companies are, by their very nature, less capital intensive. In addition, the financial risk is largely borne by the individual franchisee. Also, franchisee-owned stores are seen to operate more effectively in a retail environment than corporate-owned stores — however, there is still some controversy on this subject. Finally, many franchise systems have been able to effectively penetrate international markets, thus achieving additional growth and spreading economic and political risk.” –Udo Schlentrich

Fourth quarter 2007 and this year may see an overall drop in the index because of recent franchisor consolidations, market volatility and uncertainty, but if past performances are of any indication, the trend in the RCF 50 Index may continue to outperform the S&P 500 –even in this downturn.

For more info on the RCF 50 Index: Senior Research Fellow Hachemi Aliouche and Director Udo Schlentrich of The William Rosenberg International Center of Franchising at the University of New Hampshire are available to discuss the latest Franchise 50 Index. Aliouche can be reached at 603-862-1884 or hachemi.aliouche@unh.edu. Schlentrich can be reached at 603-862-0137 or udo.schlentrich@unh.edu.