Does Your Franchise Program Contain the Elements of a Top Franchise?

Posted on May 25, 2022May 25, 2022 by Franchise Strategist

Here are 10 elements that you will find in the top performing franchise programs. If you are a franchisor and want to enhance your franchise performance, make sure these are a part of your franchise operation.

Does Your Franchise Program Contain the Elements of a Top- Franchise?

By Ed TeixeiraFranchise Expert, Author, Franchise Executive and Former Franchisee with 40 years of Franchise Industry Experience.

Ever wonder what sets the top franchise brands apart from the rest? There is a big difference between the indicators of a good franchise program and how the franchisor got to that stage. Whether a franchise system has 10, 100 or 1,000 units there are certain practices that separate the top franchise brands from the rest.
Here are 10 elements that you will find in the top performing franchise programs. If you are a franchisor and want to enhance your franchise performance, make sure these are a part of your franchise operation.

1. Stick to your franchisee profile
Have a franchisee profile and when franchise candidates do not fit the profile, say no! If using brokers, then remain in control of the franchise sales process.

2. Be candid with prospective franchisees
Provide prospective franchisees the tools they need to be a successful franchisee.

3. Have an effective training program, evaluate it, and continue training
Top performing franchisors have an effective training program that continues as an on-going activity.

4. If the franchise program needs adjusting, then do it
If certain marketing programs, products or services are not delivering the results then make changes.

5. Franchisee profitability must be a priority
The structure of the franchise program both operationally and financially must provide franchisees an opportunity for success that does not require extraordinary performance. If the franchisees follow the program and do not earn an ROI commensurate with their original investment, then the franchise is flawed. There must be balance between the earnings of the franchisor and its franchisees.

6. Franchisor leadership must be fully engaged in the franchise operation
Franchisor executive leadership must be totally involved in the franchise so that there is total awareness of successes and failures. There is no room for “surprises” when it comes to franchise operations. Whatever the forum, franchisee feedback must flow to franchisor leadership.

7. Solicit Franchisee input for important operational and marketing decisions
Whether through a Franchise Advisory Council, advertising committee or other representative body use them as a sounding board before making major operational decisions.

8. New products and services should be evaluated and measured by select franchisees before introducing
Obtain objective results from these franchisees, which will enable you to obtain a franchisee system buy-in when implemented.

9. Measure franchisee results on a regular basis
Use key performance indicators (K.P.I.s) to measure franchisee performance on a scheduled basis, whether monthly or quarterly. This enables a franchisor to know how its franchisees are performing.

10. Protect the integrity and standards of the franchise program
It is critical that the franchisor uphold the standards of the franchise. The franchisees that follow the program deserve it and the customers that use the product or services provided by the franchisees are entitled to consistency. Franchisors that do not protect their brand are not respected by their franchisees.
When franchisors have these elements in their franchise program, they can feel confident their franchise brand will be a top performer.

About the Author:
Ed Teixeira Franchise Expert, Author, Franchise Executive and Former Franchisee with 40 years of Franchise Industry Experience.Ed is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].

5 TOP ITEMS YOUR SMALL BUSINESS NEEDS ON ITS CYBERSECURITY TO-DO LIST

Posted on May 14, 2022May 27, 2022 by Franchise Strategist

No matter the size of your business, you can take practical steps to help defend against cyberattacks, which will save your company time, effort and money in the long term.

5 top items your small business needs on its cybersecurity to-do list

(BPT) – If you run a small to medium-sized business, you may think your risk of cyberattacks is slim to none. But just because your business is smaller and you have your data stored on-premises does not exempt you from risk. According to the Ninth Annual Cost of Cybercrime Study by Accenture, 43% of cyberattacks are now aimed at small businesses — but only 14% of those businesses are prepared to defend themselves. Since the pandemic, cybercrime has increased by 600%, according to Embroker.com. And the cost of cyberattacks — from business disruption and lost data to system downtime, damage to your company’s reputation and even legal liability — is higher than ever. Cyber defense needs to be a major component of your business strategy.

What can your business do to help prevent these attacks in the first place?

Types of cyberattacks

It helps to understand where cybercriminals are most likely to strike, which is at most companies’ biggest point of vulnerability — the human factor. The Ponemon Institute’s State of Cybersecurity Report has identified the most common types of cyberattacks on small businesses:

Social Engineering/Phishing (57%): This can take the form of an email that appears to be from a trusted source, like a co-worker or supervisor, asking for help and requesting you click a link or download something.
Compromised/Stolen Devices (33%): Devices without sufficient security safeguards in place can be vulnerable.
Credential Theft (30%): Hackers obtain usernames and passwords to access accounts. Having strong, unique passwords and multi-factor authentication to access accounts can help prevent unauthorized access.

Strategies to safeguard your business

No matter the size of your business, you can take practical steps to help defend against cyberattacks, which will save your company time, effort and money in the long term.

Here are 5 tactics that should be on your cyber defense checklist:

1. Educate your employees about security best practices

Make sure everyone in your business understands common cyberthreats, and is well trained on how to identify typical phishing and social engineering scams. In addition, help remote employees secure their home networks by offering training on setting up secure Wi-Fi.

2. Keep business and personal devices separate

Especially as many employees continue working remotely all or part of the time, reduce security risks by emphasizing the importance of everyone in your organization using only company devices for work purposes.

3. Beef up security measures for employee accounts and network access

Require only strong, unique passwords for employee access, as well as implementing multi-factor authentication practices for an extra layer of protection.

4. Get a unified software platform for security and patch management

Make sure your entire system is more secure by using a single, effective software platform that can manage identity, access and devices in the cloud — as well as managing security upgrades and patching. For example, JumpCloud offers IT admins at any business the ability to control and manage a wide variety of configurations with Zero Trust security to secure your organization.

JumpCloud provides an easy, frictionless solution for small to medium-sized business requirements to hedge against increasing cyberthreats, with several security features to help your business improve its security posture, including:

Multi-Factor Authentication
Single Sign-On
Device Management
Zero-Trust
Patch Management

Even better, JumpCloud lets customers use all premium features for free, for up to 10 users and 10 devices.

“Any business owner today needs to be aware of and take active measures to protect against cyberattacks,” said Benjamin Garrison, technical evangelist at JumpCloud. “For any size business, JumpCloud provides an effective solution, all in one place.”

5. Monitor for security breaches

In case of a cyberattack, your business will recover and overcome the loss much more quickly the earlier you can detect the problem. Set up a system for frequent monitoring of your network for any potential breaches, and keep working to defend against them with regular updates and trainings for all staff.

Don’t wait until a security breach happens to get serious about cyber defense. Being proactive about the security of your business will be well worth it to defend everything you’ve created.

JumpCloud gives IT admins a single cloud directory platform to secure all their users in any device environment, wherever work happens. Visit JumpCloud.com to learn more.

Franchisor Focus: The One Responsibility of Franchising Too Many Franchisors Overlook

Posted on March 21, 2022March 22, 2022 by Franchise Strategist

The relationship between a franchisor and their franchisees touches every aspect of a franchise operation ranging from developing the franchise system to franchisees participating in aggressive price promotions. A positive relationship can enable success while poor franchise relations can thwart it.

Franchisor Focus: The One Responsibility of Franchising Too Many Franchisors Overlook
Courtesy of Ed Teixeira

As I consider subject matter for my franchise blogs it’s sometimes challenging to come up with a stimulating topic. Because I direct content mainly to franchisors, it’s important to provide helpful and constructive information. Whether as a franchisee, franchisor executive or providing operational advice to franchisors I’ve always advocated that a franchisor should have a strong franchise relations strategy. Certain franchisors are familiar with the clichés often attributed to fostering a climate of positive franchise relations, including having profitable franchisees, responding promptly to their emails, telephone calls and requests for assistance. Unfortunately, some franchisors don’t give franchise relations the attention it deserves.

In 1992 I was fortunate to contribute to the first IFA Franchise Relations booklet, so I decided to review articles written by franchisor executives. Although the booklet was published 29 years ago, in terms of franchise relationship management very little has changed. The same principles and policies that were advocated then remain the same. No other component of the franchise business model has remained constant.

Here are four questions that franchisors need answered to appraise the state of their franchise relations.

Are the franchisees profitable?
Whether using Key Performance Indicators (“KPIs”) or franchisee financial statements to measure franchisee financial and operational performance, this is an important responsibility of every franchisor. Rather than obtaining an answer to this question many franchisors focus on identifying the franchisees that aren’t profitable. The problem with this approach is that the franchisor lacks key financial and operational data that pertain to their entire system and individual franchisees.

Are franchisee customers satisfied with the products or services?
Franchisors should have a method for obtaining franchise feedback regarding the level of customer satisfaction. Whether using customer satisfaction surveys, franchisee focus groups or surveying franchisees its important information that should be gathered. This data benefits the franchisor and its franchisees.

What are our franchisee competitors doing?
Franchisors that display an interest in the behavior of their franchisee competitors will receive high marks from their franchisees. Many franchisors rely upon their franchisees for competitive information, however when the franchisor plays an active role in this process it benefits the franchise system and enhances franchise relations.

Is the franchisor doing the best it can?
Whether using a third-party firm to survey franchisees or doing their own survey, a franchisor must have a method for measuring their franchisee satisfaction levels. When the results are tabulated, the franchisor will know which areas if any can negatively impact franchise relations and may require attention.

Despite the countless changes that have occurred in the franchise industry over the years, one constant is the importance of franchise relationship management. Franchisors should be focused on evaluating and managing their relationship with their franchisees.

About the Author: Ed Teixeira
Ed Teixeira is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].

Five Skills for Successfully Turning Ideas Into Reality

Posted on October 20, 2021October 20, 2021 by Franchise Strategist

5 skills for successfully turning ideas into reality

(BPT) – People across the world have tackled immense challenges since the start of the global COVID-19 pandemic, from social isolation to financial burdens, in a distanced and digitally enabled world. As a result, many important projects were put on hold. But at the same time, many people took the opportunity to make bigger and better plans — and are ready to make these dreams a reality.

In a recent global survey conducted by Project Management Institute (PMI), nearly four in five consumers (79%) said they consider 2021 to be a “do-over,” and an even greater number, 86%, plan to work harder this year to bring their ideas to life.

“The pandemic disrupted countless 2020 plans, but many leaders and innovative thinkers used the time wisely to map out their next moves,” says Mike DePrisco, chief operating officer for PMI. “As more communities and organizations across the globe cautiously turn to recovery and revival, teams are increasingly focused on turning their stalled projects into reality.”

But turning ideas into reality doesn’t come easy. Whether you’re looking to level up in your career, kick-start a new project or create a completely new business, PMI outlines the power skills you need to continue advancing:

1. Communication

Effective communication maximizes success and minimizes risk. It involves not only conducting outward-bound communication, but also listening, taking feedback, understanding nonverbal cues, and interpreting what is meant versus what is said. In a team setting, communication helps team members stay on the same page as they work toward success.

2. Empathy

Empathy allows team members to build greater trust and connections — with each other and with other stakeholders — by helping them understand the wide range of people and work styles they encounter. Empathy also strengthens teams by helping team members feel appreciated and heard.

3. Collaborative leadership

A collaborative leadership style is more effective in inspiring and bringing team members together in pursuit of a shared vision and common goals. Collaborative leaders recognize that each member of the team has something to contribute — in executing a plan and in helping shape objectives.

4. Innovative mindset

An innovative mindset ensures teams are applying new ideas and fresh perspectives to how they organize work and address the myriad obstacles that emerge when turning ideas into reality. An innovative mindset also allows teams to remain agile and pivot more quickly in the face of challenges.

5. Purpose-driven goals

Having a for-purpose orientation helps minimize risks and ensures the organization’s values and commitment to social good are infused in all aspects of project design and implementation. Clear goals also empower changemakers to use their skills to bring about positive social change within teams, companies and communities.

To learn more about these skills and effective project management, visit PMI .org/Make Reality, a virtual hub of inspiration with the tools you need to get started on your next big, bold idea. Find support and inspiration from changemakers across the globe turning their ideas into reality; determine your changemaker persona; and view PMI courses that help you take your project or idea and Make Reality, such as KICKOFF, a free, 45-minute digital course and toolkit that guides learners through the basics of project management with bite-sized content and downloadable templates they can quickly implement on the job.

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Learn more about turning your idea into a nationwide franchise click here: www.franchisegrtowthsolutions.com

FLAWED STRATEGIC THINKING THAT DRIVES SERIOUS FRANCHISE LEADS TO DISQUALIFY YOU

Posted on October 19, 2021October 20, 2021 by Franchise Strategist

Flawed Strategic Thinking That Drives Serious Franchise Leads to Disqualify You

By Paul Keiser
I Show Franchise Business Developers and Brokers How to Automatically Find Serious Leads

The leading reason we’ve found causing serious leads to disqualify brands and brokers from consideration is a lack of strategic thought, time and attention given to 21st Century aspects of franchise business development. As an industry, franchise business development methods are mired in tactics over 25-years old. It takes serious reflection and change to adapt to emerging 21st Century franchise buyer behavior and their very different expectations.

Here are five inter-related company cultural and strategic issues that, if ignored, cause serious leads to disqualify you from consideration.

Recognize Franchise Business Development is a Business within a Business
As they begin to scale, franchisors and brokers often struggle with business development. That’s because the knowledge and experience to do it well aren’t part of the operations or customer excellence skill sets of many owners and investors.

Franchise business development is actually a business within the larger franchise business with different needs. Recognizing this, and then properly staffing, funding and executing around a set of realistic goals can put you on a sustainable pathway to success.

Unfortunately, too many try to fix a faltering franchise business development program with band-aids; neglecting the thought needed to find the root causes of problems, not just surface symptoms.

Why…because it’s easy. Tactical solutions make everyone feel good. In fact, re-imagining a 21st Century version of franchise business development requires digging deeper.

To meet the challenge, three strategic areas critical to franchise business development must harmonize:

Storytelling
Finding and Nurturing Serious Leads
Intelligent Pipeline Management
Think of each of these areas as a leg of a stool. If the legs aren’t aligned, then the stool teeters and totters making it useless.

Do nothing and watch as serious leads disqualify you.

Inertia Kills Brands and Brokers
Many brands and brokers become paralyzed by the breadth and depth of change needed to adapt to the changing macro environment of franchise business development. The smaller the brand or broker the more daunting the challenges.

Smaller brands and brokers aren’t often blessed with tens of thousands of dollars laying around to “experiment” or try something new; so, fear stifles decision-making.

But time kills deals. Time also kills brands and brokers unwilling to adapt. It’s time to step up and either hire or develop the skills to upgrade franchise business development methodologies. The market isn’t waiting. Brands and brokers that grab an early mover advantage will prosper; while laggards will fall by the wayside.

Do nothing and watch serious leads disqualify you

Lack of Expertise
The skill sets needed to address both franchise business development technology and people’s evolving behavior doesn’t necessarily reside in most franchisors and brokers, who are often solo practitioners. Many franchisors have consumer marketing pros or agencies supporting franchisees. However, these same highly-talented people are inexperienced in the “black arts” of franchise business development and the psychological journey a serious lead embarks on in the Internet Age. You hired them to drive traffic into your stores and restaurants; not recruit franchisees. And likely they do a very good job for you.

Giving franchise business development insufficient support or forcing business developers to work with meager lead generation budgets or whatever software is around or cheap is commonplace. That’s a lazy approach and speaks to a lack of understanding of how to successfully grow a franchise business development powerhouse.

Ownership and leadership need to step up and either acquire or outsource the knowledge needed to reliably scale the business.

Do nothing and watch serious leads disqualify you.

The Internet Upends Traditional Notions of Franchisee Recruitment
Every generation from 1995 forward has been reshaped by the Internet. Consumers complete almost 75% of brand research for high-end goods and services on the web before making a call or a visit. They expect transparency. Your storytelling needs to meet a higher standard of excellence or these serious leads will just move on. So, ask yourself, do you tease or hide information or do you educate on your franchise business development website?

Text messaging has rapidly changed the franchise business development communication landscape. Today’s serious leads comfortably text back and forth with your business developer before engaging. What does that do to old-fashioned “dialing for dollars” models? Which leads are more engaged and serious?

Your franchise website is now expected to tell your whole story. It’s not just a brochure anymore or a landing page to get a form filled out. You’re forced to dig deeper to articulate your competitive differentiation. A test: if you can put your name on a competitor’s website, then something’s wrong with your story.

All brands are coming to grips with ever rising lead generation costs. Can we harness the vast potential of social media and online advertising to create affordable serious leads prospect? Can these newer channels become a game changer or are they just one more money drain? How do these leads convert into your pipeline compared to other channels?

Do nothing and watch serious leads disqualify you.

Leads Now Have the Power

Leads now control the research process. In fact, 75% of their research is already done before first contact. Serious leads expect complete and transparent information about brands. So, a solid story and a dedicated franchise business development online presence are now table stakes with serious leads. These serious leads engage when they’re ready; not before. So encourage them to do that by delivering a brand education experience that gets them emotionally and rationally invested in your franchise opportunity.

Do nothing and watch serious leads disqualify you.

Franchise Pipeline Solutions (FPS) helps new and emerging franchise brands find their most serious leads using an integrated pipeline management system. It combines enterprise-class CRM with multi-channel Marketing Automation, 1:1 and bulk text messaging, behavioral scoring and auto call scheduling. Our proven approach has been in worldwide use for over eight years.

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About the Author:
Paul Keiser has over 40 years of experience franchise development, social media and online lead generation, email nurture, marketing automation and brand storytelling. Today he makes his living giving precious time back to franchise brand business developers and franchise brokers by helping them find serious leads so they focus on more of the right people and do more deals.

FRANCHISORS AND FRANCHISEES MUST LEARN TO DEAL WITH CHANGE

Posted on October 18, 2021October 20, 2021 by Franchise Strategist

Franchisors and Franchisees Must Learn to Deal with Change

By Ed Teixeira

FRANCHISING, — Ed Teixeira is Chief Operating Officer of Franchise Grade and was the founder and President of FranchiseKnowHow, L.L.C. a franchise consulting firm.

If there is one thing that the Pandemic taught us, especially those in the franchise industry, is that certain events both large and small require change. It is a given that the recent Pandemic represents extraordinary change having last occurred 100 years ago. Franchise brands face frequent challenges requiring change including, a formidable new competitor, franchisee resistance to certain promotional programs, declining franchise system growth or a public relations problem like when the Subway Foot Long Sub, was found by a customer to be less than a foot long. When these situations arise, franchisors and franchisees must be equipped to implement change to meet the challenge.

Expect that franchisors will be required to implement changes to their franchise program from time to time some minor and some major. When a franchisor wants to make a change, based upon the magnitude of the change, it should be communicated to the franchisees before the change is implemented providing advance notice.

* Using the franchise advisory council as a sounding board

* Giving franchisees the courtesy of knowing about the change

* Providing the franchisee community an opportunity to respond

* Enlist select franchisees to help mold the change and avoid a confrontation

Some changes are routine in nature and can be implemented as per an existing policy. For example, a revision or clarification to a procedure in the franchise operations manual. Major changes that may have a direct impact on franchisees demand special attention. In certain cases, the change may not be that significant, but rather the perception by franchisees is that the change is the beginning of “more to come.”

Examples of Important Changes Include:

1.Changes to franchise agreements that significantly revamp contract terms, including renewal terms, royalty fees and default conditions. These changes may cause particular concern among franchisees that will be looking to renew their franchise agreement.

2. Changes in marketing or advertising programs which would represent a major departure from the current program.

3. Changes in the direction of the franchise strategy that involve applying resources to a new venture or business.

One of the most effective methods to establish and implement a major change is to involve the Franchise Advisory Council or marketing committee which includes franchisee and company representatives. These committees allow for a dialogue between the franchisor and representative franchisees which can help to foster positive franchise relations and establish a buy-in from existing franchisees.

When franchisors implement a major change that lacks franchisee involvement or advance notice it can be a recipe for trouble. To maintain positive franchise relations before implementing an important change the franchisor should gauge how the change could affect franchisees by obtaining feedback from franchisor field staff and select franchisees.

If feedback indicates a strong resistance to the change, the franchisor should consider the situation, and avoid unnecessary confrontations by being flexible. Change is an important aspect of all relationships especially in the world of franchising. It is important that the franchisor and franchisees conduct business within a climate of change that is positive and considers the needs and objectives of both parties.
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About the Author: Ed Teixeira
Ed Teixeira is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].
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FRANCHISE YOUR BUSINESS: www.franchisegrowthsolutions.com

franchise, royalties, profits, expansion — Click Here To Learn About Franchising Your Business

8 Key Costs To Consider When Opening A Restaurant

Posted on September 1, 2021September 3, 2021 by Franchise Strategist

8 Key Costs To Consider When Opening A Restaurant
By Gary Occhiogrosso – Managing Partner – Franchise Growth Solutions

Two of the most frequent questions I’m asked at a seminar, workshop, or when teaching a restaurant development course at New York University are; “how much money do I need to open a restaurant, and how do I get the money?” This is the first installment of a two part article answering those questions.

Before we can address how to fund your restaurant, we need first to understand what we’re building and its cost. The type of restaurant you’re opening will determine the amount of money you need. In addition, the kind of restaurant will affect the type of funding and who may have an interest in investing or supplying a loan. Additionally, you’ll need to evaluate how much of your own money you need to provide. That’s because part of the process necessary to convince an investor, banker, or private lender is that you’re genuinely committed to the project. You know the expression, “put your money where your mouth is”

For the sake of this discussion, let’s say you’re opening a fast-casual restaurant. Not a franchise but an independent concept that you have developed on your own. This type of project may require a conventional business loan or an SBA loan. In many cases, investors other than family and friends may not be interested in investing in a brand new concept with no track record of success. It becomes further complicated if this is your first foray into the restaurant industry.

Fast-casual restaurants typically cost between $250,000 and $400,000 to “turn the key” and open the doors for business. The various costs associated with opening a restaurant will range depending on factors such as location, size and condition of the space, everything from security deposits to the reserve capital you’ll need to carry possible shortfalls the first few months you’re open.

Investment Costs to Consider

* Professional fees: This is usually necessary to set up your business entity, whether a corporation or LLC. Also, you’ll want to have a lawyer review any lease you may sign to rent a space where you will construct your new restaurant.
* Security deposits: This may be one to three months of rent paid to your landlord. In addition, many utility companies require deposits to set up electric, water, and Internet connections.
* Equipment: The cost for all of your kitchen equipment. Items include hoods, grills, ovens, stoves, stainless steel prep tables, shelving, hot tables, cold tables, a Point of Sale (POS) system, and a walk-in refrigerator. In addition, small wares, things like scoops, ladles, fry baskets, flatware, dishes, glasses, and other small items you need to prepare your menu and serve your guests. Now let’s move to the front of the house. Additionally, you’ll be looking at furniture and fixtures, countertops, workstations, tables, chairs, decorative shelving, and other items. These are the items you use in the front of the house to create the environment that will best suit the concept you’ve created.
* Leasehold improvements: In most cases, this will be your most significant expense. Leasehold improvements are generally construction costs for electrical installations, hood venting, plumbing, heating, and air-conditioning. These items are referred to as “the mechanicals.” And let’s not forget building one and, in many cases, two ADA-compliant bathrooms. Also, installing the proper ceiling, flooring, millwork, painting walls, and other elements that we typically think of as construction. On a side note, you can take advantage of opportunities due to the abundance of restaurants that have closed during the pandemic. These empty restaurant spaces are referred to as “second-generation restaurant spaces.” You can save thousands of dollars if you find and secure a space that was formerly a restaurant. In many cases, you will find the mechanicals have remained in the building. These second-generation restaurant spaces help to reduces your cost if you don’t need to install a hood, venting, plumbing, electrical, and restrooms.
* Signage: Properly identifying your restaurant will mean you will need to sign for your storefront. Also, consider that you may need lighted signs in the windows and other signage throughout the restaurant.
* Start-up inventory: This is probably the most extensive inventory order you’ll ever place. This initial order is for food, paper, beverages, and other supplies you’ll need in your restaurant daily. You’ll replace these inventory items as you use them, but when you first start, you’ll need to stock your restaurant from scratch with every single thing for the first time.
* Grand Opening Advertising: This is an item that most restaurateurs neglect. You’ll want to launch your restaurant by making a big splash in the neighborhood. To do this, you need the proper budget for social media, print, and other forms of advertising & marketing so you can get the word out.
* Reserve Capital: As I mentioned earlier, you will need to reserve cash in the bank. This reserve cash is required to meet shortfalls that may occur when you first open your new restaurant. You may not break even for months. Therefore, it would be wise to be prepared to cover payroll, inventory, utilities, and other costs incurred as you operate.

Understanding the actual cost of opening your restaurant is vital. An investor or bank will want to see that you’ve applied critical thinking to the project by taking time to evaluate the start-up cost honestly. In addition, you will need to prepare a business plan and projections to secure bank financing or satisfy an investor. Properly evaluating the required investment will lead to accurate budgeting these key startup costs.

So now that you have an understanding of cost, you should be prepared for a banker or investor to inquire how much of your own money you’re willing and able to invest into your business. In many cases, the SBA, private lenders, or conventional loans through a bank will require that you supply somewhere between 15% and 25% of the total amount necessary. As an example, if you project a cost of $400,000 to open your new restaurant, you will need between $80,000 and $120,000 in cash. Your cash investment demonstrates to the bank or investor that you have “skin in the game. “I have never seen a bank or investor finance a new restaurant 100%.
Now that we’ve covered the investment information necessary to open a new restaurant, we’ll tackle the second question in our next article. We’ll dig into funding methods such as a conventional business loan with a bank, an SBA loan, a private investor, and of course, family and friends.

About the Author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with it’s founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com
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FRANCHISE YOUR BUSINESS TODAY: www.franchisegrowthsolutions.com

WHO BUYS A FRANCHISE?

Posted on August 1, 2021August 2, 2021 by Franchise Strategist

WHO BUYS A FRANCHISE?
By TOM SCARDA, CFE (Posted with permission)

A very high percentage of people who choose to invest in a franchise usually do it as a second, third or fourth career. Most franchise owners are corporate refugees who have escaped their cubical and the blight of corporate America to control their destiny and grab their piece of the American dream.
Many people also invest in a franchise as an investment vehicle and a way to diversify their investments and gain a tax shelter. Some franchises allow for keeping a full-time job as the franchise owner builds their franchise. These types of franchises are called manager-run franchises. A word to the wise, many companies will tell you that they can be run absentee or have a manager in place. However, they may be just trying to sell you a franchise. Ask for the percentage of franchise owners who are currently operating in that manner. Then ask for an email introduction to each one or at least a list of those owners so you can call them and validate that the operation works without them being there.

In addition, you don’t have to have experience in the industry of the operation you buy into. As a matter of fact, many times, the franchisor prefers if you have no experience or exposure to the industry. If you do, you will likely bring baggage and bad habits to your operation. An excellent franchise company will train you in best practices for their industry.
As an example, if you have a barber or beautician’s license, you may not be granted a franchise in a hair cutting concept. See, the franchise knows that if you can act in the worker’s role or be the technician, you’ll slowly slide into that position and not be the CEO or CFO of your franchise. Once that happens, you plateau in the business, revenues become flat, and you have essentially bought yourself a job.

Many people come to me and say, “I’m an accountant, I want to open an HR Block, or I love to bake, so I want to open a Nothin’ Bunt Cakes. Interestingly, Nothing Bunt Cakes want managers and leaders who can translate their corporate experience into building a significant franchise operation. They will then hire great bakers to do the daily grind. They do not want folks who like to bake.
Work on the business, not in the business

The phrase, ‘work on your business not in it,’ is the central tenet of franchising and successful business ownership, even outside of franchising. As you look at franchising, you’ll realize that the barrier to entry is low in many cases. However, the barrier to scalability is very high. Many non-franchised business owners own a store and make it happen every day. Many times, that owner is frazzled because they are good at a specific task in an operation. Whether it’s managing people, sales, marketing, or specific duties such as being the baker or the auto mechanic. It’s rare that any one person is good or can have the time in a day to be good at everything.

My advice is to drop employee mentality and start thinking like a business owner. Usually, an employee is focused on one or a few items within a business, and that is what they are paid for.
If you become a business owner, you are the Capitan of the ship, and you have deck hands running the operation of the boat.

Like the Capitan of a ship, a business owner focuses on the big picture and directs that ship toward the intended port or its goals in the case of business. The owner should have a leadership mentality and be or get comfortable delegating.

It’s said that the most valuable commodity to a human is time, and you can buy time. However, in a well-run business, you can buy time. You are leveraging other people’s time, thereby giving you time to do other things. Some of your time could be geared toward building the business by marketing or networking. Or having a staff ultimately gives you time for your family, extended vacations, or just enjoying your hobbies and passions. With a properly run business, you can really by time. I call that success.
#FranchiseOpportunities #controlyourdestiny #changeyourlifetoday

About TOM SCARDA, CFE
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Tom failed in a franchise. That is why you need to talk with him. Easily avoid the mistakes he made.

Tom is now a nationally recognized small business and Certified Franchise Expert (CFE), motivator and dynamic speaker. Tom has authored three books: Franchise Savvy, The Road to Franchise Freedom and The Magic of Choosing Uncertainty: How to Manage Change, Embrace Fear and Live a Fulfilled Life.

30 years ago, searching for his inner drive, Tom left college and submerged himself in the motorcycle underworld in lower Manhattan. This made his mother worry. It was the first time Tom chose uncertainty over the status quo.

After four years of life in the outlaw motorcycle subculture in NYC, Tom got a haircut, took a shower and landed a respectable job in the New York Subway system. After more than 13 years in the subway Tom became frustrated with the bureaucracy and politics. So he quit his job and left his pension behind to pursue his dreams of business ownership. This also made his mother worry.

In 2000, he purchased a smoothie franchise, which he built into three units and sold five years later for a considerable profit. He was the #1 franchisee of the year in Maui Wowi Smoothies in 2002. He purchased a second franchise in 2006 called Super Suppers and failed miserably in that franchise concept. The lessons he learned from failure is what makes him such an expert. Tom has owned and operated both franchised and non-franchised businesses and has years of knowledge and wisdom to share with you.

After selling his smoothie operation and closing down Super Suppers, Tom started helping people figure out if franchising is for them and not make the mistakes he made. Tom previously hosted “The Franchise Hour” radio show in New York City. He currently Hosts two Podcasts and has been featured in dozens of magazines and newspapers and is a sought-after radio and TV guest. His mom has stopped worrying.

Born and raised in Brooklyn, NY, Tom was named one of the top 50 business leaders on Long Island by Long Island Business News. Tom lives on Long Island, NY with his wife of 32 years, Gina, Darla the BernaDoodle and a few chickens. He is the proud father of two grown children and a new Grandfather. He enjoys flying airplanes in his spare time and still appreciates old school Harley-Davidson choppers and tattoos. (OK, mom still worries a little).

Tom’s mantra is “There are no wrong turns, just different experiences.” However, some folks just move in circles. Tom believes that everyone has a passion sleeping within his or her soul. Tom’s mission is to help people harvest their own passion for the betterment of the world. He inspires people to surf on the edge of their comfort zone and choose uncertainty over unhappiness.

🔑Education 🔑 insight 🔑 inspiration – Have you been working from home and don’t want to go back to your office? Have you tasted freedom and want out of the corporate rat race? We should talk. No Sales, No Kidding.

THE RESTAURANT INDUSTRY AT THE PANDEMIC’S ONE YEAR ANNIVERSARY – WHAT NOW?

Posted on March 9, 2021March 9, 2021 by Franchise Strategist

We thought that the last twelve months of performance for individual restaurant stocks might give us a hint as to where to focus going forward. Since some of the obviously large stock gains have taken place among those with the heaviest short position, we have focused on the “short interest ratio”, the number of shares sold short divided by the average daily trading volume.

THE RESTAURANT INDUSTRY AT THE PANDEMIC’S ONE YEAR ANNIVERSARY – WHAT NOW?

By Roger Lipton with permission

The last twelve months have been unprecedented, not only from a business/health standpoint, but from a fiscal/monetary standpoint. There has been more governmental stimulus as well as monetary accommodation than ever before, which has floated all kinds of boats. The Dow Industrial Average hit an all time high just this morning, and, though the NASDAQ index has retreated the last month or so, stocks from Apple to Tesla to Gamestop have written a new book in terms of valuation.

Based upon the new $1.9 trillion Covid bill, the likelihood of a new multi-trillion dollar infrastructure bill, as well as the Federal Reserve’s ongoing willingness to buy at least $120B of Treasury securities every month, there is every indication that the above trends will continue.

From a broad brush, it is shocking to see how large the moves have been from March 8, 2020 until now. It is interesting that several of the best performing “pandemic plays”, namely Domino’s, Wingstop and Papa John’s, which made very big moves over six to nine months, have retraced and are up more modestly now (zero, 56% and 47%, espectively).

This industry, by no stretch of anybody’s imagination is generally in a place that makes these companies “worth” from 50% to 90% more today than they were before the pandemic. There is somewhat less independent competition, and some companies may have learned how to serve off-premise diners better than before, but there are also a great many uncertainties. These include (1) the cost of labor with a new mix of in-store vs. off-premise (2) commodity inflation (3) other expenses to meet health requirements (4) unpredictable consumer spending (5) still substantial competition (6) ongoing high occupancy expenses, especially for new sites. There is also, in many cases, new debt to service.

Fundamentals aside: the stocks have done the following, ranked by today’s short interest ratio.

What do we see? The average gain among the fourteen stocks with the highest short interest ratio is 90%. The bottom fourteen stocks went up by 57%. Without our focus on individual company fundamentals, readers can scan the list and conclude for themselves which stock performance is most removed from the fundamental outlook.

Where do we go from here?

Before considering the above noted $1.9 trillion Covid bill and trillions more for infrastructure, the Treasury is sitting on $1.44 trillion (to be reduced to $500B by June 30th) that was returned from the Fed last year and the Fed is currently creating $120 billion per month. This means that almost $1.5 trillion of accommodation will be provided to the economy and the markets by June 30th, before the effect of the new $1.9 trillion. This also means that equities, including restaurant stocks, may well go a lot higher in the short term. There is just too much liquidity in the capital markets.

THE BOTTOM LINE

For investors: Other things equal, we would focus on the top portion of the table above. 90% is better than 57%

For companies: In almost all cases, we would sell company stock. Pay down debt and/or build your cash balance. It may be a long time before you see these valuations again.

For management: Lighten up. You can always grant yourselves some more stock options.

Roger Lipton

Click here to visit Roger’s website: https://www.liptonfinancialservices.com/2021/03/the-restaurant-industry-at-the-pandemics-one-year-anniversary-what-now/

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About Roger Lipton
Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .

He also invested in gold mining stocks and studied the work of Harry Browne, the world famous author and economist, who predicted the 2000% move in the price of gold in the 1970s. In this regard, Roger has republished the world famous first book of Harry Browne, and offers it free with each subscription to this website.

Good News for Franchisors: New Favorable Accounting Rules Go Live!

Posted on February 20, 2021March 10, 2021 by Franchise Strategist

Good news for franchisors: New favorable accounting rules go live!
By Michael Iannuzzi
Posted with Permission from Franchise News Wire

Who said accounting was boring? For the past two-and-a-half years the International Franchise Association’s Financial Accounting Standards Board (FASB) Task Force has been working with the FASB to issue guidance to help reduce some of the cost and complexity in applying Topic 606 — revenue recognition rules over initial franchise fees. On January 28, 2021, the FASB released Accounting Standards Board Update 2021-02 to Topic 606, an “expedient” that can be adopted by non-public franchisors on their December 31, 2020 financial statements. What does this mean for non-public franchisors?

During the year-end December 31, 2019, non-public franchisors that issued their financial statements prior to the FASB issuing an election to defer Topic 606 during June 2020, were tasked with the challenge of implementing Topic 606 for the very first time by following these steps:

Step 1 – Identify the contract with a customer (in our case, a franchise agreement)
Step 2 – Identify the performance obligations in the contract (training and the right to use the license, as examples)
Step 3 – Determine the transaction price (the franchise fee paid)
Step 4 – Allocate the transaction price to the performance obligations (determine the value to be received, more on this later)
Step 5 – Satisfaction of performance obligations (delivering the service)

The current method (prior to issuance of the expedient)
The struggle for franchisors was how to identify the performance obligations in Step 2 and how to value the transaction price to be recognized as revenue in Step 4. Using pre-opening training as an example, many franchisors offer training that is specific to their brand as well as generic training, such as how to use QuickBooks. The challenge was to separate the training into brand specific vs. non-brand specific trainings (Step 2), then to come up with a value to allocate (Step 4), and ultimately recognize a portion of the initial franchise fee as revenue and record the remaining initial franchise fee as deferred revenue to be recognized over the life of the franchise agreement. This proved to be very difficult and costly for franchisors of all shapes and sizes. There were assumptions made that the entire amount of the initial franchise fee should be deferred and bypass the steps above. That’s not to say that isn’t the case; however, you would have had to do the analysis to conclude that the entire fee should be deferred and not just default to that position.

In applying the practical expedient, “pre-opening services that are consistent with those included in a predefined list within the guidance may be accounted for as distinct from the franchise license.” What does this mean? The intent was to simplify Step 2. In Step 2, non-public franchisors can now look at most of their pre-opening activities and count them as one performance obligation, meaning they are delivering an upfront service to a franchisee. This would potentially allow them to recognize more of the initial franchise fee as revenue, creating an income pickup for franchisors compared to the amount being recognized based on prior rules, as they are now allocating more of the transaction price identified in Step 4 to these costs.

Even though we are in the middle of audit and registration renewal season, these rules could prove to be beneficial for franchisors. The expedient will allow for more representative income recognition and allow franchisors to adjust their opening equity for prior franchise agreements. Careful consideration needs to be given when adopting the expedient. Most importantly, this is meant to be general advice, and franchisors should always consult with knowledgeable franchise and accounting professionals before forming any conclusions.

Michael Iannuzzi is a partner and co-leader of Citrin Cooperman’s franchise accounting and consulting practice. The company provides audit and accounting, business consulting and advisory, and tax planning services to a wide spectrum of clients within the franchise community. Iannuzzi works with franchisors and multi-unit franchisees in a variety of industries, including, but not limited to, fitness and athletic centers, children’s entertainment services such as recreational youth programs and party providers, junk removal companies, mobile concepts, pet hotels, quick service restaurants (QSRs), and grocery stores. For more information, call 212.697.1000 x 1250 or email [email protected]