In short, most operators, with a great deal of effort, should be able to generate enough sales, on premise and off, to satisfy their landlords, who will have become their partners, dependent on sales. Store level expenses will be largely variable, including rent, and there should be less upward pressure on the fixed costs at store level.
RESTAURANT INDUSTRY IN TURMOIL, BUT THERE IS A WAY OUT! By Roger Lipton
The world, as we have known it, is seriously changed for the foreseeable future. Restaurant and retailers will have to cope with lots of new requirements that deal with social distancing and testing.
PAYROLL PROTECTION?? NOT QUITE!
One of the current priorities is to access the Payroll Protection Program. Unintended consequences are already coming into focus. Restaurant operators realize that business will be slow after opening, which is still weeks or months away. If they spend 75% of the money, mostly for payroll and rent, in the next eight weeks to qualify for loan forgiveness, they will not have the resources to carry the predictable losses when they first reopen, and those losses will likely last for months at least. They have the option of holding the money, which will then remain a loan rather than a “grant. However, while the two year term, at only 1%, seems cheap enough, there is no way that cash flow will be sufficient to pay back the loan that quickly.
Some operators will therefore let their ex-employees remain on unemployment insurance for the time being, use the government capital to cushion losses after reopening, and deal with the ramifications two years from now. Other operators, will take the money, never reopen, and walk away. There are no personal guarantees, after all.
At the least, therefore, the program must be changed to allow for a sufficient payback period to recoup losses. We suggest this will happen, because the problem, and the fix, is so obvious. There are, predictably, other unintended consequences of this huge program that was implemented with such a rush, but we will leave that for another day.
RENT – THE BIGGEST FIXED COST
We are all reading about various companies, small and large, holding back rent. It’s understandable under the circumstances, and landlords realize that their world has changed as well. At the end of the day, we believe that percentage rents will be the new normal. The lessors have no real option. Yesterday’s rent structure is gone, and their alternative in almost all cases is to have empty space for perhaps years.
OFF-PREMISE CONSUMPTION BECOMES CRITICAL
Even after vaccines and treatments are in place, it is going to be quite a while before consumers are comfortable in close contact with strangers. We can be assured that dine in traffic will be at a lower level than previously. It therefore becomes critical for restaurant operators to do everything possible to build their off premise activities. Drive-thru locations, where applicable, can help a lot, but delivery (with or without third parties), catering, curbside pickup, packaged products to go are all brand building alternatives that can help to carry the physical overhead.
OVER-STORED NO MORE
Stated most concisely: there will be more closures than we have seen in at least fifty years (from today’s huge base). Far fewer chains will be expanding. Survivors will have less competition.
LABOR COST PRESSURE WILL ABATE
When the stores open, there will be less upward wage pressure than we have seen in the last few years and that we were anticipating would continue.
The cost structure will be more variable than ever before. It will take a while for negotiations to take place but rent will be based on a percentage of sales. Cost of Sales is variable and Labor is largely variable. Other Operating Costs at the store level (waste removal, bank fees, insurance, property taxes, etc.) can be negotiated lower. (It happens that I am affiliated with a Company that can help in this regard, with no up front cost.) Corporate Overhead can be scaled for the new world we are all living within.
In short, most operators, with a great deal of effort, should be able to generate enough sales, on premise and off, to satisfy their landlords, who will have become their partners, dependent on sales. Store level expenses will be largely variable, including rent, and there should be less upward pressure on the fixed costs at store level. Store level cash flow may not approach previous levels but should be adequate to support, if not enrich, a reasonable level of corporate overhead. Regional operators will have an advantage, with their proximity to the store level and their ability to respond quickly and efficiently to changing circumstances. National operators should decentralize to whatever extent possible for the same reasons. Dedicated corporate management should be able, in most cases, especially if not burdened by excessive debt, to lead their companies to survive, and even prosper over the long term.
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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.
Workplace talent drives success. It is not products, not marketing, not demand that ultimately make a company competitive. Don’t fall victim to fear and culture failures during these times. It will inhibit the future health and growth of your company.
Beyond The Covid19 Shutdown, Returning Workers will be Judging “Workplace Culture”
By Gary Occhiogrosso Photo by Austin Distel on Unsplash
As companies continue to evaluate their business in these challenging times, one of the areas many small business operators, and CEO’s of large companies, are investigating is workplace culture. As we ramp back up, many companies will be seeking employees. Many workers will be very focused on how companies treated their employees, vendors, and customers during the pandemic shutdown. Returning employees will also want to know that they, their work, and their ideas, make a difference. Make no mistake; the job market will be so robust that workers have the opportunity to pick and choose for whom they will work. Companies should take this time to revisit, and if necessary, reinvent their workplace culture if they intend to compete for the most qualified employees. Workplace talent drives success. It is not products, not marketing, not demand that ultimately make a company competitive. Don’t fall victim to fear and culture failures during these times. It will inhibit the future health and growth of your company.
Please review this article in the Harvard Business Review. It clearly and expertly advances the concept of workplace culture and how to improve your approach and practices to best advance your company in the upcoming turnaround.
Excerpt:
Today’s workforce wants to know that they’re making a difference within their companies. While work cultures are unique to every organization, the foundation of what enables a culture to thrive is the extent to which employees are empowered to be engaged, feel valued, and be heard. This is where leadership comes in.
Look for trends in your sales—for example, busy days and hours versus slower times and days. For instance, if Tuesday afternoons are consistently slow, then consider cutting back on your hourly staff for that period…
In good times and not so good times, operating a profitable restaurant can be a daunting task. The high cost of rent, labor, and raw ingredients, often overlooked by guests seeking a fine dining experience at fast-food prices can make value perception and profitability difficult. Nonetheless, there are a few things every operator should be aware of, especially during tough economic times. Below I have listed six tips that when put into everyday practice, not only help save money and increase sales when times are lean but serve to maximize profits in better economic times.
Be Mindful Of Your Payroll
Payroll is the one thing in your operation that you have total control over. You determine it, and no one or anything else has a hand in the result. Knowing how to manage payroll is an essential element to success in the restaurant business.
Controlling labor during a slow business period can be tricky. If your businesses’ survival is dependent upon the need to terminate personnel, then managing the schedule of your hourly employees as well as your key people in a compassionate way must be your top priority. You’ll need to delicately balance the limiting of hours among your best employees. Whenever possible, spread the cutbacks out amongst as many team members as possible. That way you can lessen the impact to any one team member.
Be mindful that if you schedule less labor than you need, your restaurant may end up giving poor guest service. That will negatively impact the guest experience as well as your Social Media reviews. On the other hand, if you over-schedule your labor as a percentage of sales, then you’ll be out of line with acceptable budgets and typically lose money.
Look for trends in your sales—for example, busy days and hours versus slower times and days. For instance, if Tuesday afternoons are consistently slow, then consider cutting back on your hourly staff for that period. If you employ a salaried manager, have that person substitute in a station position. Labor is the most critical line item on your P&L. Oversee it, adjust it each day based on projected sales. Remember, unlike food inventory, which allows you to store it (in many cases) for another day, labor, once spent, is gone forever.
Engineer Your Menu To Reflect Current Goals
Sometimes bigger isn’t better. A smaller, more focused menu is often more profitable than the “be everything to everyone approach.” During a recession or slow season, use your menu to attract new customers as well as enticing your regular customers to visit more often. Adjust your menu by offering items that have more appeal in a budget-conscious climate. Understanding what guests want, what they can afford, and what you wish to sell them is a critical piece to menu engineering.
Also, position your lower food cost items in a prominent spot on your menu. That way, you can offer your guests lower-cost menu items and still make a profit.
And although it goes without saying, don’t forget to conduct a weekly inventory. Monitoring your food cost will help you manage cash flow most efficiently and accurately.
Stay In Front Of Your Customers
The saying “out of sight, out of mind” is never is more accurate than in a recession or slow period. You may not want to run your full Radio/TV or Print campaign. However, now is not the time to cut advertising to zero. Instead, increase your paid social media and your paid Google ads. Post photographs of guests in your restaurant, delicious-looking food items, and creative, fun graphics to entice and remind your guests how much they enjoy your restaurant and what you have to offer.
In addition, utilize the database you’ve collected of customer’s email addresses and mobile telephone numbers. You can use this data to send your customers special offers via email blasts and text messaging. Be proactive!
Promote Value, Not Price
During a recession or other tough times, offer your guests real value, not discounts. It is my opinion that you should never attach the price of the menu item to the item itself, for example, selling a hamburger for $1.00. Discounting your products creates a considerable problem for future sales of those items when you move them back to full price. Lowering the price of a menu item creates a product/price value perception, which may negatively impact the customer’s perception of value at a later date. Guests will connect the cost of the menu item to its overall value, now and in the future. Cutting prices for the sake of attracting customers or keeping up with a competitor is never the answer.
Instead, create reasons and additional “occasions to use” your restaurant in your guest’s mind. Then the guest will associate a discounted price with a particular promotion or event. For example, ladies’ night, or seniors day, or it could be the anniversary of the restaurant, and you’re rolling back prices, or National “whatever” Day. Whichever the case, offer real value by promoting events and Limited Time Offers (LTO’s) as a reason to create the “frequency of visit.” This method is also useful for attracting new guests or guests that haven’t visited your restaurant in a while.
Paying Attention To The Details Saves Money
Pennies add up! Keep a watchful eye on expenses. Monitor electricity and water usage, napkins, paper towels, cleaning supplies, and other items that often go unnoticed until you see the cost on your P&L. Be mindful and control those costs each day. Make your staff aware of things like shutting off lights, turning off water faucets, and how many paper towels they may be used to clean a counter. Get your team members “woke” to the idea and actual cost of everything in the restaurant.
One Final Note
Good times follow bad times, and bad times follow good times. Nothing is forever, so learn how to manage a restaurant through a rough patch you’ll be in a better position to maximize your profits when times are good.
Legal Issues and COVID29 – Excerpt – Other potential avenues also turn on the exact language of the lease. If the tenant’s obligation to pay rent is conditioned on the landlord’s ability to deliver to the tenant continued access to the premises, it would reasonable to conclude that rent can be excused while the premises cannot be accessed.
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Today’s post is written by New York attorneys Michael Einbinder and Richard Bayer of the law firm Einbinder & Dunn. They have years of experience handling a variety of legal work for businesses large and small. The post today reflects their thoughts and advice regarding how small businesses can deal with the current COVID 19 issue.
Whether you’re running the small independent business or are an independent contractor or if you are a franchisor or a franchisee, you will find the information contained in this post helpful. Of course, if you need greater detail or have questions, the contact information for Einbinder & Dunn is located at the bottom of the post.
We wish everyone to stay safe and look to the future as we move past this trying and critical time in our history.
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A Message About COVID-19 By Michael Einbinder and Richard Bayer-
Photo by Clay Banks on Unsplash
Recently, we have received numerous inquiries from clients, including those in the retail and hospitality industries, concerned about the impact that Covid-19 will have on their businesses. Although the landscape appears to be ever-changing, we wanted to send this email to offer you general guidance and practical considerations as well as to highlight important legislature to keep in mind. As a firm, we are deeply committed to assisting our clients through these trying times and we will hold that commitment steadfast while new developments unfurl.
More and more states, counties and other municipalities are issuing “shelter-at-home,” work from home mandates and other restrictions on gathering in groups larger than 10, 20 or 50. The impact of such mandates has been felt across the board and has been especially painful for restaurants, bars, nightclubs, gyms, movie theaters, retail businesses, barber shops, health and beauty salons and countless other consumer facing businesses.
Real Estate Lease and Other Contracts
It is not surprising that in this current climate, many businesses are seeking help to understand their lease obligations. Can they close their store, restaurant, or business? Can they stop paying rent? The short answer is likely yes, but not in every instance. Your lease may contain clauses that may allow you to close your business and/or stop paying rent. Additionally, applicable case law may also support your ability to close your business and/or stop paying rent.
You are likely seeing the terms force majeure and “Acts of God” appear frequently in articles, newsletters and other publications as more and more businesses are looking for ways to freeze performance under a contract or perhaps, terminate the contract altogether. A force majeure clause, which typically includes a reference to “Acts of God,” is one that permits a party to a contract to be relieved from performing under that contract during a time when, due to some event outside of its reasonable control, the party’s ability to perform is impeded, hindered or prevented. Generally speaking, there is a high bar for the invocation of a force majeure clause and whether or not it will apply will depend on the exact language of the contract and the law of the jurisdiction set forth in the contract. In the context of a commercial lease, if the lease contains a force majeure clause that specifically relieves performance in the event of a pandemic or similar event, a tenant may be permitted to close and stop paying rent. However, force majeure clauses can often be a frustrating dead end because: (i) courts apply it very strictly; (ii) leases frequently apply it to limited circumstances such as delays in construction and few if any reference pandemics; and (iii) many leases specifically do not permit force majeure to forgive payment of rent.
However, in some jurisdictions case law may provide a stronger argument (than a contract) for relief from a contract, including possibly permitting a tenant to close its business and/or stop paying rent. Two such doctrines found in case law are the: (i) discharge by supervening impracticability; and (ii) prevention by governmental regulation or order. As to the former, a supervening event (such as a pandemic) may allow a tenant to close and/or stop paying rent if an event occurs, the non-occurrence of which was a basic assumption upon which both parties made the contract. The event must have been unforeseeable. The standard is high. It is not enough that the business has been made difficult or unprofitable, it must have been rendered impracticable, which means incapable of being performed. In the context of a lease, if customers are legally restricted from visiting a business location due to unforeseen circumstances (a pandemic lockdown), a court may find that to be sufficient under the supervening impracticability doctrine to permit the tenant to close and/or stop paying rent.
Prevention by governmental order is self-explanatory and much easier to prove. As in the case of the recent order by the Governor of New York, if a business is simply prohibited from operating due to unforeseeable circumstances, which prevents it from operating according to the terms of a contract (in a lease situation, the business is prohibited from operating in the premises), then the party may be excused from performance (in the case of a tenant, remain open or pay rent). The businesses that were targeted in the original Governor’s Orders in New York, such as gyms and movie theaters, certainly can argue they fall into this category. There is a gray area if businesses, such as restaurants, are able to partially operate through takeout and delivery. Whether their level of operation is enough to make their businesses legally “operable” will probably have to be tested in court.
Other potential avenues also turn on the exact language of the lease. If the tenant’s obligation to pay rent is conditioned on the landlord’s ability to deliver to the tenant continued access to the premises, it would reasonable to conclude that rent can be excused while the premises cannot be accessed.
Assuming for a moment that applicable law does not permit the tenant to close its business and/or stop paying rent, many businesses will make the practical decision to do just that. What repercussions may follow from that will likely be specified in the lease and subject to state/county/local municipality mandates. Many jurisdictions have already announced moratoriums on commercial evictions.
Many of the legal principles that offer an avenue for tenants to close and/or stop paying rent under a lease may also be applied to other contracts, including force majeure, doctrine of supervening impracticability, prevention by government regulation as well as others including frustration of purpose). Again, whether performance can ultimately be excused will depend on the exact language of the agreement and the applicable jurisdictional law.
We are urging clients to review their leases and contracts for the types of clauses that we highlighted above. We can help if you like with the review and the development of a plan of action for the future. With a proactive approach and open dialogue with the other party (whether your landlord, supplier or other contracting party), you may be able to develop a plan of action that gives you relief now and provides for the continuation of your business after things normalize.
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Businesses with insufficient cash reserves or access to capital will likely struggle during this time and for many, unfortunately, this outbreak will result in their permanent closure. For companies suffering from or expecting to suffer from a cash shortage, obtaining a credit line or increasing one is critical. We strongly recommend that such businesses immediately contact their existing banking partners to see what opportunities for financing are available. If your current banking partners are unable to assist, please let us know. We have cultivated strong relationships with contacts in the banking and financing industries and may be able to make an introduction.
The U.S. Small Business Administration has implemented a disaster loan assistance program under which, small businesses that have suffered economic injury as a result of Covid-19 may qualify for low-interest federal loans. Loans of up to $2,000,000 may be offered for use to pay debts, payroll, or other bills that cannot be paid due to the impact of Covid-19. Here is a link to the SBA’s website: https://disasterloan.sba.gov/ela/ Other relief may become available and businesses should continue to search for grants and programs that may provide additional funding.
In addition to increasing your access to capital, you should be acutely aware of voluntary assistance initiatives being offered by your existing business partners. Numerous credit card companies are encouraging customers who are experiencing financial hardship due to Covid-19 to reach out and discuss available options, which may include fee waivers, temporary interest rate reductions, waived penalties for missed payments Con Edison, a provider of electricity and gas in New York, is offering to extend payment deadlines to customers without penalty, provided that customers apply for that assistance. Throughout the country, other business partners will be offering similar assistance initiatives.
Insurance
We are advising all clients to review their insurance policies carefully and especially, their business interruption coverage. Business interruption insurance is generally intended to cover losses from a direct interruption to a business. It typically covers lost revenue, and fixed expenses, such as rent and utilities. Some companies may have additional coverage in the form of a contingent business interruption policy which is intended to cover losses resulting from indirect disruptions, such as supply chain issues. Because many insurers excluded viral or bacterial outbreaks from standard business interruption policies as a result of the SARS outbreak, whether your policies will cover losses resulting from Covid-19 business interruption will turn on the exact language of the coverage.
These are extremely difficult times and businesses are forced to consider making equally difficult decisions regarding their employees. The White House has requested that states delay reporting lay off figures out of a fear that the skyrocketing numbers will set off another wave of panic in the stock market. Without a doubt, the number of layoffs will be staggering. Union Square Hospitality Group has already announced layoffs of 80% of its work force. Hotel and hospitality heavyweights such as Hilton, Marriott and MGM have furloughed tens of thousands of employees.
While not garnering the same media attention, small businesses will have to make the same decision. Principals will need to determine whether the business continue to pay staff their full wage during this outbreak or will it be forced to lay off employees, or short of that, furlough salaries until things recover.
Federal and state governments are keenly aware of this issue and are seeking to implement relief packages. Phase I included the Families First Coronavirus Emergency Response Act, which was signed into law on March 18th. The Act extends sick leave to workers diagnosed with or in quarantine due to Covid-19. A tax credit is made available to employers in an amount equal to 100% of the qualified sick leave wages paid by the employer. New York State has announced that employers are required to provide job protection and paid sick leave for individuals who have been quarantined as a result of Covid-19. New York City has enacted an Employee Retention Grant Program that offers assistance to New York City businesses with one to four employees that demonstrate at least a 25% decrease in revenue as a result of Covid-19. Other states and local municipalities may have similarly enacted assistance packages.
Further financial relief will required. As of today, potential recovery plans would give $1,200 to many Americans. Ongoing assistance will undoubtedly be necessary. New York has waived its seven-day waiting period to register for unemployment insurance and reports indicate that over 21,000 calls were made in a single day compared to approximately 2,000 the week before.
Government Support
In addition to the initiatives indicated above, the Federal government has extended the tax filing deadline until July 15, 2020. Tax payers will now have until July 15, 2020 to file and make tax payments that would have otherwise been due on April 15, 2020. If you are expecting a refund, you may want to file your Federal tax return as soon as possible. It is unclear when refunds will be issued, but those funds, if issued, would be helpful during this outbreak. New York State, at the moment, is silent on this issue, but we expect further guidance. We recommend that you keep abreast of state updates.
===================================== About Einbinder & Dunn
Our story begins in 1990, when Michael Einbinder and Terrence Dunn became partners. We shared a vision to offer clients real value—by providing personalized, yet cost-effective legal services. We also employ a team of professional, highly dedicated associate attorneys and two paralegals, in addition to other support staff, all of whom share the partner’s vision of a sophisticated yet personalized practice. Based in Midtown Manhattan, with offices in White Plains and Millburn, New Jersey, Einbinder & Dunn serves mid-size and larger companies as well as small businesses and entrepreneurs.
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DISCLAIMER
This post is not intended to constitute legal advice, which would require a full review of your agreements and further clarity on the government response, which is in constant flux. All information, content and links in this email are provided for general information purposes only. Information below may not constitute the most up-to-date legal or other information, as the same is continuously changing. This email contains links to other third-party websites. Such links are only for the convenience of the reader. We do not recommend or endorse the contents of the third-party sites. Readers should contact an attorney to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of this email without first seeking legal advice from counsel in the relevant jurisdiction. Only an attorney can provide assurances that the information contained herein, and your interpretation of it, is applicable or appropriate to your particular situation.
This approach is terrible not only because you have empty spots in your pipeline but also because an ebb and flow in the advertising plan sometimes may cause the “brand” to disappear for awhile and send the franchise buyers a less than confidence inspired massage. For a start-up or emerging brand, this is the equivalent of a jet airliner “pumping the brakes” to save fuel while attempting to “take off.” It usually leaves a mess at the end of the runway.
Lead Generation, Franchise Sales and Reality By Gary Occhiogrosso – Managing Partner – Franchise Growth Solutions, LLC.
Photo by Kees Streefkerk on Unsplash
The best way to get results in franchise lead generation is to remember that NOTHING works a lot, but everything works a little. What does that mean? It means for a start-up or an emerging brand (under 50 units), you need to try various lead sources to test which “streams” bring in the type of leads at the rate necessary to make your sales plan.
Look at all the factors in the game
Cost Per Lead and Cost Per Acquisition are only two KPI’s to look at when monitoring your program and its results. It is not as straightforward or revealing to limit your decision based on “how much did I spend and how many units did I sell.” The Reality is; it takes numerous elements to gain success. Such as time to build your pipeline (5-8 months), consistent follow up by a competent, highly trained, and relentless sales staff. As well as accepting the reality of the selling cycle
(about 120 to 180 days) and a realistic lead generation budget to pursue a professional and sustainable franchising recruiting effort. Your brand will NOT “sell itself.”
The Reality is that consistency in lead flow is also essential. I have seen many start-ups and emerging brands take a hiccup approach to franchise lead generation. This approach is terrible not only because you have empty spots in your pipeline but also because an ebb and flow in the advertising plan sometimes may cause the “brand” to disappear for a while and send the franchise buyers a less than confidence inspired massage. For a start-up or emerging brand, this is the equivalent of a jet airliner “pumping the brakes” to save fuel while attempting to “take off.” It usually leaves a mess at the end of the runway.
Royalties will make you the King or Queen
For me, the most important thing for a start-up or emerging brand to remember is the “value” of your franchisee over the lifetime of the franchise agreement. The Reality is; if you calculate the royalty return over that period, you will see the real reward of consistent lead generation and awarding a franchise. Calculate your Royalties on your AUV’s by the number of years you expect your franchisee to be in business, and it’s obvious. Do the math. Keep that in mind, and you won’t think the “Cost Per Acquisition” is too high unless you are attempting to “fund” your new franchise company from the upfront franchise fee collected. Funding your growth solely with the Initial Franchise Fees is never a good idea.
You should be in the franchising business for the royalties and the eventual exit, not the franchise fee. News Flash, focusing on the collection of Franchise Fees doesn’t work and often puts not only the franchisor in jeopardy of failure but also the franchisee. When you focus on the franchisee’s success, you will build a better organization, better equipped to support your franchisee. Successful franchisees paying long term, residual income from ROYALTIES is the way to BUILD YOUR BUSINESS.
A bigger “kiss” at the end
The Reality is; the sale of franchise companies (especially to Private Equity firms) have proven time and time again, that multiples paid on Royalty driven EBITDA at exit are more significant than the multiple typically offered on EBITDA derived from company operations. That’s because it’s scalable at a faster pace and with a lower cost.
Building a franchise business as a Franchisor requires a great concept, a comprehensive system, manuals and training, proven results, capital, planning and patience. If you remove any one of these components the journey may be an endless winding road with no clear direction.Talk to us to get started.
You have used the franchise system, brand, and people to build your business. Don’t be afraid to use them to exit.
They have a critical interest in a successful transition. Use them to help you close the deal.
In today’s post, Tom Spadea, Founder and Partner in Spadea-Lignana Franchise Law shares his thoughts on the best way to sell your existing franchise business. As you might imagine there are steps that you need to be aware of while moving through this process. Working with your franchisor is just one way to expedite and ensure a smooth transition. Selling your business is a big decision. If you’ve worked with the end in mind then it should be a payoff, not an act of desperation. The payoff after years of smart work should be reflected in the multiple paid on EBITDA from an eager buyer who sees value. One thing I’ll remind you; Buyers want “potential” but they don’t often actually pay for it. Smart buyers will pay based on a specific set of guidelines to determine “valuation” or “enterprise value” which directly equate to selling price and price paid. This article explores best practices and tips when selling your franchise.
Where Do I Start if I Want to Sell My Franchise or Buy an Existing Franchise?
By Tom Spadea – Spadea Lignana Franchise Law
If you have made the decision that now is the time to exit a franchise, you need to accomplish three critical things before placing your business on the market. If you are interested in buying an existing franchise, it’s also important to understand these three factors because it can affect how you move forward.
1. Discuss Future Plans
First, you should discuss with your franchisor what your plans are. All franchise relationships eventually come to an end. You are probably not the first and won’t be the last franchisee to exit the system. You have used the franchise system, brand, and people to build your business. Don’t be afraid to use them to exit. They have a critical interest in a successful transition. Use them to help you close the deal. If you have a specific reason why you think telling the franchisor will compromise your exit, then you should discuss that with your franchise attorney. If you don’t have an attorney that you are comfortable working with, please give us a call for a free initial consultation at 215-544-2452.
2. Gather Documentation
Second, you need to gather documentation and clean up any inconsistencies, errors or omissions in your paperwork. The list is extensive and you can never have too much documentation. Buyers will take lack of documentation or documentation they have to fight to get as a sign of trouble and it will break down the trust between you. Not only will it potentially affect your value, it will cause unnecessary delays.
In a small business transaction, the trust between the buyer and seller is critical. Without trust, the deal will not happen. The way you can build trust is by having all the documents readily available for any buyer who is serious about making an offer. You need to tell a story to the buyer, and that story has to be validated by documentation.
=================================================== About Tom Spadea
Tom Spadea spent more than 15 years in corporate and entrepreneurial positions before completing law school at Temple University’s Beasley School of Law. His undergraduate degree is in finance from Marquette University, where he graduated Cum Laude. Tom is a Certified Franchise Executive (CFE), a non-legal designation earned from the International Franchise Association. He has also been named a “Legal Eagle” by Franchise Times, a distinguished award recognizing Tom as a leader among his peers in franchising.
Tom is the founding member of the Philadelphia Franchise Association and is the current President and Chairman. The Philadelphia Franchise Association holds quarterly networking and educational meetings, bringing together franchisors, franchisees, and suppliers.
Read more about Tom here: https://www.spadealaw.com/attorney-profiles/tom-spadea
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If you’re considering selling your business or buying a business contact Franchise Growth Solutions.
We can help you sell you business quickly and at the highest possible price.
Contact: [email protected] and visit: www.franchisegrowthsolutions.com. We can help!
If you’re considering entering the world of “Self Employment” one of the best way to reduce risk is to purchase a franchise. A franchise affords you the opportunity to join a company with a proven business model and a track record of success. It’s better than “going it alone” …When you consider the number of “moving parts” connected with starting your own business, franchising makes all the sense in the world. You’ll get a business system along with the guidance and experience of the franchisor. Here are just three brands in our portfolio that are featured as our Top Picks this week.
By Gary Occhiogrosso – Franchise Growth Solutions
Photo by Sharon McCutcheon on Unsplash
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America has a real passion for pizza. Since the first pizzeria opened here in New York City in 1903, pizza has grown to the most popular food in America. An incredible 93% OF AMERICANS gladly admit they eat pizza at least once a month.
Our passion for pizza is staggering. The National Restaurant Association (NRA) indicates that pizza sales represent almost $38 BILLION IN AMERICA — over $100 BILLION worldwide. Where is our love for pizza heading? The trending is actually very clear.
The research firm Technomic® in their most recent “Pizza Consumer Trend Report” found that 41% OF AMERICANS say they would be happy to pay for healthier ingredients including ORGANIC TOPPINGS AND CRUSTS, as well as all-natural LOCALLY SOURCED ingredients.
What makes it SKINNYPIZZA®? We have spent years creating a thin pizza crust that has great taste and complements any topping. At the same time, we have carefully crafted our entire menu for those that are health- and environmentally conscious, as well as those that simply love great tasting pizza, salads and soups.
Our PIZZA CRUST is made with NO PRESERVATIVES or ADDITIVES. That alone is something that is incredibly rare, actually reserved to the top 1% of pizzerias. Our PIZZA SAUCE is made with 100% USDA CERTIFIED ORGANIC tomatoes.
But the SKINNYPIZZA® concept does not end there. Along with the best tasting pizza you will ever eat, we have carefully developed our menu to complement our healthy approach to great Italian fast-casual dining.
============================================================== It’s always a good day to…GOFER Ice Cream
IT’S ALWAYS A GOOD DAY TO …
GOFER ICE CREAM
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Our Brand is based on the simple premise of selling high quality American Style ice cream in clean and inviting retail environments, without the use of gimmicks or catering to the latest ice cream fad.We focus equally on hard hand-dipped and premium soft serve ice cream products. Our menu also includes fat free treats like “Gofer Lite” and new innovations like Plant Based ice creams and “Gofer Bites”. We also feature ice cream cakes, party boxes, online ordering and catering options for multiple income streams.Our shops are bright and family oriented.
Warm welcomes by our staff are often accompanied by the smell of fresh made waffle cones, which are created several times a day.The concept, from a franchisee’s point of view, is to be a quick service and efficient operation. The system allows for a typical shop to function with minimal staff led by a motivated owner operator.
We support our franchisee partners through the entire process. * Site selection
* Design and Construction
* Comprehensive training
* Grand opening
* Marketing Programs
* Benchmarking with industry experts
We teach you everything you need to know to open and operate your own Gofer Ice Cream shop.
Acai Express Be in the Business of Better… * Better for You
* Better for the Planet
* Better for Franchisees.
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Our Beginnings
Not long ago, I was just like you. Smart, savvy, and tired of working hard for someone else’s benefit. I spent 10 years in the traditional restaurant business and knew the hard work I was doing could be made simpler with a system, made more enjoyable and less complicated, and better fit my lifestyle. My dream was to be able to put my experience to work in an easy and fun restaurant concept and support my family doing something I love. Acai Express is that.
When Passion Turned to Profit
I’ve always been an active guy who loved surfing and perfecting Brazilian Jiu Jitsu in my native Puerto Rico, but finding healthy and delicious food on the go and at the beach was a challenge. So, I started selling my own homemade organic super food bowls and smoothies. I used only the freshest ingredients and the centerpiece of all my creations was the 100% organic Grade A acai berry, a rich anti-oxidant stone fruit that grows on trees in the Amazon river basin. I just knew then that it was packed with flavor and goodness, but today the acai berry is considered a benefit to all kinds of health and well-being: cognition, heart health, aging, and weight loss. My acai-based menu got so popular, I started adding to the menu and selling out of my own food truck. When the number of my trucks went from one to thirteen and were located throughout Puerto Rico, I knew I had a business concept that small business owners anywhere could use. And, one that could marry an active lifestyle and career with an appreciation of honest, organic and nutrient rich foods. That’s the best part of Acai Express for me. I was able to be successful on my terms without sacrificing my intrinsic values.
Join the Family
When you become a member of the Acai Express family, even though our system is simple and easy to follow, you’ll work one-on-one with me and my team of franchisees and employees to ensure your success. We’re not some faceless corporate giant, we are the guys who get it done, and like you, are committed to success. Because your success is our success. You’ll also benefit from our hard won knowledge of what works, how to market and what consumers want. And, you’ll be part of a healthy lifestyle movement that has quickly gone from trend to established consumer demand.
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Franchise Disclaimer
None of the communications on this website should be construed as an offer to sell a franchise. We will not offer any franchise for sale: (1) until your state has duly registered our franchise offering or duly exempted our franchise offering from registration, if your state requires registration or exemption; and (2) until we have duly delivered our franchise disclosure document to you in compliance with applicable law.
It’s essential that you develop a strong marketing strategy, which should include goals, tactics, and measurements. Having a plan can maintain you on a set course with an established style, and it can help you track your development
Using Technology To Build Your Brand By Veronica Lopez Siverio
Photo by Austin Distel on Unsplash
It’s widely known that technology and social media can basically “make or break” a brand. Every business owner has to think about ways to adapt the media to their company or restaurant.
A successful company does not see technology as only a way to brand itself or reach more audiences, but also to discover new ways of doing business.
How Digital Marketing Can Grow Your Audience
When a company is starting, usually, it doesn’t have a big marketing budget. Consequently, you have to be very wise about how you are going to spend it.
Communication is essential in the business world, therefore having an active social media presence can help your business, explains the Forbes Agency Council. Social media platforms like Instagram, Twitter, and Facebook are the best tools a company can use to track their audience, engagement, and growth.
Using platforms like Hootsuite, Google Analytics, and SEM Rush, marketing teams can strategize on content for social media and measure audiences, social media progress, engagement, and traffic.
It’s essential that you develop a strong marketing strategy, which should include goals, tactics, and measurements. Having a plan can maintain you on a set course with an established style, and it can help you track your development.
Now, the audience can be very visual. For that matter, it’s crucial that the content you portray on social media or your website be visually compelling. Meaning it should be thought out, planned, edited, it has to have a pattern, and it should always represent your brand and its identity.
Also, creating an outstanding website will contribute to your online presence. For a website to be successful, it should be user-friendly, optimized for search engines, updated every few months, and it has to be mobile responsive.
A platform that has an excellent performance is Google Ads. You can track conversions regarding how many people visited your page, from which outlets they were referred, and if they filled out an email subscription form.
Using Technology to Increase Productivity
For starters, using technology can increase productivity. Applying different software to specific departments of your company can help you see where you spent your time. It can help develop a productive filing system, and it makes communicating much simpler.
For example, cloud-based applications like DropBox can accelerate productivity by being accessible from different devices and locations at the same time.
Another critical element of a successful business is handing an excellent customer service experience. Soft ware like Customer Relationship Management (CRM) can contribute to data analysis to benefit the company’s interaction with current and potential customers.
There are many applications that great companies have adjusted to their needs and help them boost both productivity and efficiency.
Also, the use of mobile technologies has increased over the last few years. Using this technology can as well improve productivity and efficiency. For starters, these mobile devices can contribute to a happier staff. As many experts say, happy employees can be more productive, and this can minimize staff retention percentage.
This technology helps employees complete a wide range of tasks because they can do them from any location. The technology achieves more things, getting done, creating more significant opportunities for companies to grow and be even more successful.
========================================================= To Learn More About a Franchise Using Technology to Build Its Business, Click Here
When we embed corporate social responsibility initiatives into the culture of an organization, we create a culture of caring for employees and greater value and accountability to all business stakeholders.
Can a Company Be Great Simply By Doing Good? By Bizman
Photo by William White on Unsplash
Today we hear so much about corporate responsibility. Organizations focus on building sustainable products and taking a proactive interest in the communities where they operate. Many budget for initiative programs designed to ensure that the company is connecting and engaging the people they classify as “customers.” This shift to “Corporate Conscience” is due in part to how younger workers think about the world and choose the companies they decide to work for.
Corporate Mission With A Broader Approach
Companies now employ people who have a specific mission; to create and/or seek opportunities in the community whereby the company can connect and participate in outreach aimed at at supporting locally motivated programs.
When we embed corporate social responsibility initiatives into the culture of an organization, we create a culture of caring for employees and greater value and accountability to all business stakeholders.
Stakeholders can include any and all – customers, communities, employees, the environment, investors and shareholders.
It’s this conscientious business philosophy that can help companies not only in their pursuit of profits but also in leading and inspiring their people, customers, vendors and partners to greater responsibility, enrichment and sustainability.
In Conclusion:
* Corporate Conscience is not a fad or publicity narrative, rather it is a focused effort to give back to the community.
* Corporate Social Responsibility has grown into a more “grassroots” approach to creating a better work/life balance in and out
of the company.
*Corporate Conscience initiatives lead to increased customer engagement, employee moress , productivity and eventually ROI.
Franchising allows the silver economy to invest in themselves, and have an active hand in their own success.” Occhiogrosso adds, “Older Americans are one of the fastest-growing segment of franchise buyers. The percentage of adults 50+ who are franchise owners has grown from 20 percent in 2010 to an estimated 35 percent in 2020.
Photo by Simon Wijers on Unsplash
Franchising: The Best Investment Older Americans Can Make?
Over 10,000 Americans turn 65 every day (*1) and by 2030, it is estimated (*2) that the entirety of the Baby Boomer generation will be over the age of 65. For corporations, this older workforce presents challenges. An estimated 41% workers over the age of 60 choose to work well past age 65 for social or financial reasons (*3). Many companies would prefer to clear the way for younger, less costly employees, and as a result, more than half of older U.S. workers are being pushed out involuntarily, or are being asked to take a voluntary early retirement. (*4)
For these still active workers, and especially those with a large buy out in the bank, franchising may be a viable Act II. “Many adults by age 60-65 have an investment or retirement portfolio of stocks and bonds,” says Gary Occhiogrosso, Founder and CEO of Franchise Growth Solutions LLC, a New York-based strategic planning, franchise development and sales organization. “That means that for years mature adults have basically invested in other businesses, passively counting on the success of those businesses for their own financial success. Franchising allows the silver economy to invest in themselves, and have an active hand in their own success.” Occhiogrosso adds, “Older Americans are one of the fastest growing segment of franchise buyers. The percentage of adults 50+ who are franchise owners has grown from 20 percent in 2010 to and estimated 35 percent in 2020.”
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The appeal of a franchise for an older American looking to take an active role in their own business, includes:
Benefit from the success of an established business
– Almost like a business in a box, when you align with a successful brand you are buying the benefit of their established brand, and their marketing, distribution and supply chain.
Choose a franchise concept and size that works for you
– Today, there are franchises of every size and budget. Most important is to find a concept you can get behind and champion.
Take advantage of a franchisors image, marketing, and location services
– In addition to speed to market, when you invest in a franchise, you are buying into a proven concept and a proprietary operating system. Rather than DIY, a franchise means in-depth training and hands-on support in every aspect of the business: from financing and location to store design and local marketing.
Franchising lessens the obstacles of financing through a bank
Many franchisors are registered with the SBA (Small Business Administration) thus reducing SBA obstacles to getting financing. Lenders take into account the franchisor’s experience and reputation when deciding whether or not to lend money.
Work the system to make it work for you
– Many older workers have been successful by following a system or way of doing business. Adapting to a proven formula helps you avoid costly small business mistakes. Once you are up and running you are no longer working the system, the system will be working for you.
Long term growth
– Franchising can offer a shortened timeline to profitability. The structure a franchise offers lessens the learning curve, allowing you to get up to speed faster. Once you have the brands system working for you, you can think about expanding to become a multi-unit franchisee.
Fulfill a lifelong dream
– Nearly two-thirds of Americans would rather have their own business than to work for someone else. The idea of starting a business from scratch can be intimidating, but a franchise provides a proven model of success and unmatched support.
Create a legacy
– In addition to creating an asset, successful franchisees create a legacy for their families. Older franchisees can pass on their business to their children as a growth opportunity and enjoy continued income during retirement. If you do decide to sell, most franchisors will help you locate a new buyer and assist with the arrangements.
Occhiogrosso, who has over 30 years experience in selling and marketing brand name franchises, states, “As the saying goes; If you want to go into business for yourself but not by yourself, then franchising is a great option. This is especially true for experienced older people looking for an exciting and rewarding Act II.”
For more information on franchising over fifty, visit the Franchise Growth Solutions website at www.franchisegrowthsolutions.com or call 917.991.2465
ABOUT FRANCHISE GROWTH SOLUTIONS, LLC
Franchise Growth Solutions, LLC is a strategic planning, franchise development and sales organization offering franchise sales, brand concept and development, strategic planning, real estate and architectural development, vendor management, lead generation, and advertising, marketing and PR including social media. Franchise Growth Solutions’ proven “Coach, Mentor & Grow®” system puts both franchisors and potential franchisees on the fast track to growth. Membership in Franchise Growth Solutions’ client portfolio is by recommendation only.
For information on Franchise Growth Solutions or any of its franchise opportunities, please contact Marisa Rae at 917.991.2465 or via email at [email protected]
