Tag: business

GROW LEADERS WITHIN YOUR RANKS

Posted on by Franchise Strategist

If you want to increase retention and expand diversity in the restaurant business in 2023 – especially in leadership, on boards and with founders of growing brands – start with education.
The restaurant industry has an information problem. Historically, most restaurant education is limited to on-the-job (OTJ) training, which presents numerous challenges.

Increase retention and expand diversity through employee education
By Lauren Fernandez

If you want to increase retention and expand diversity in the restaurant business in 2023 – especially in leadership, on boards and with founders of growing brands – start with education.
The restaurant industry has an information problem. Historically, most restaurant education is limited to on-the-job (OTJ) training, which presents numerous challenges.

Traditional restaurant OTJ training is fraught with issues such as a lack of budget, lack of time and no quality control standardization. Accessibility is also an issue: often we see that with OTJ training there is no way to accommodate different learning styles and languages, alienating non-English-speaking employees. A lack of training stems from many problems, such as categorically high turnover rates, high levels of attrition and a general lack of leadership training that plagues our industry.

I’m a Latina and a first-generation American, and my parents saw education as a means for me and my siblings to better our lives. They worked hard to make sure we received the best education in order to create more opportunities than they had.

While I followed a traditional educational path in law and business, my OTJ training operating our restaurants was undoubtedly the most impactful. Experience in the field as an operator taught me more about the restaurant industry than my previous education could, and it closed the information gap on what it takes to be a leader in our industry. But both my educations together – in graduate schools and on-the-job – have equipped me with a unique lens, and it informs my call to action: we as restaurant leaders can leverage education to overcome barriers and as a tool for growth.

When we champion education, we mean restaurant-specific training with a focus on operational excellence, profit and loss management, leadership development and more. Investing in people and their personal and professional development contributes to a culture where people are valued, and ultimately develops stronger leaders that will make the industry a better place to work. We must proactively nurture the next generation of restaurant workers who will see the industry as a long-term career rather than a temporary job.

And this isn’t as hard of a lift as you would think. While I was an operator, I hosted quarterly management team meetings where we not only focused on results and celebrated wins, but we focused on new leanings and sharing best practices. I taught high-level strategies like profit management, but we always-connected theory back to actual practice. These meetings created a collaborative and transparent environment where managers helped each other improve, and they were instrumental in improving the performance metrics of the group as a whole.

Restaurants nationwide employ nearly 12 million workers and account for 4% of the overall GDP in the United States. As an industry, we still suffer from very high turnover and attrition. Investing in education is one key to retention and building long-term, desirable careers in our industry. To address the challenges of turnover and retention, consider some of these additional ideas:

*Innovative incentive and rewards programs like matching payments on student loans. More than 43 million people in the U.S. owe money toward student loans, and the average federal student loan debt balance is nearly $38,000. Offering a program to help reduce that debt can be a huge incentive to draw good employees and keep them. In fact, one study noted that 86% of people between the ages of 22 and 33 would commit to an employer for five years if offered a student loan repayment program. And, through 2025, employers can offer up to $5,250 in student loan repayment benefits without paying any tax thanks to the Consolidated Appropriations Act, which was signed into law in 2020 as part of pandemic relief efforts.

*Volunteer days for a food-related cause like a community food bank. Many studies have shown that offering some sort of volunteer program can boost productivity, increase employee engagement and improve hiring and retention rates. Ask your employees to select a cause, or find something that ties into what your restaurant offers – not only are you giving back to your larger community, you’re also showing your employees that you are doing something worthwhile outside your restaurant’s four walls.

*Encouraging participation. Support your employees to seek out opportunities to learn and engage in the industry. It can also encourage them to grow and thrive in their potential hospitality career. That can be through culinary schools and events, volunteer board opportunities or speaking on panels and at conferences.

*Sponsoring conference membership and attendance. Encourage employees to attend conferences or pay for memberships to restaurant- or culinary-related organizations. This will help create networking opportunities for them, and they will bring back information that could help your business grow, too.

*Teambuilding retreats/exercises. Consider building a program that promotes your company’s mission, vision and goals while also creating an atmosphere for support and encouragement.
With education as the cornerstone of your efforts to retain good employees, expect it to play an even larger role in the future as labor challenges continue. To that end, Full Course launched a new 501(c)(3) nonprofit foundation, Full Course Learning Center, to ensure education and support are accessible to all in our industry, from back of house to operators. You can find educational tools and resources, including more ideas about employee retention, at fullcourse.com/education.

When it comes to employee retention, new ideas and approaches will continue to evolve. By implementing some thoughtful ways to address these challenges, you can make sure that not only will you find good employees, but that they stay and grow with you and your business, too.

Lauren Fernandez is the Founder and CEO of Full Course (www.fullcourse.com ), a non-traditional restaurant investment group created for operators by operators that is changing the way new businesses grow their brands. The company partners with restaurants in the early stages of development to optimize existing operations develop strategies for sustainable growth and bring the right investors or franchise partners to the table. Fernandez is a restaurant industry veteran with two decades of experience. She previously served as general counsel and head of franchise administration for FOCUS Brands, a multi-brand restaurant company with more than 4,000 restaurants (including Carvel, Cinnabon and Moe’s Southwest Grill) in over 15 countries, and was co-founder, president and operating partner for multi-unit franchise developer Origin Development Group, acting as a strategic growth partner for brands such as Chicken Salad Chick. She also is a frequent speaker in the areas of organic business growth, licensing and franchise operations across the country.

HOW TO SELECT THE OPTIMAL VALUATION TECHNIQUE FOR YOUR STARTUP

Posted on by Franchise Strategist

Revenue multiples are helpful for both private companies (which lack stock prices) and public companies (for which stock prices are readily available). They’re also beneficial for businesses with low sales because they’re less affected by fluctuations in gross margins and other financial metrics that may fluctuate based on industry trends or economic conditions during the analyzed period.

How To Select The Optimal Valuation Technique For Your Startup
By FMM Contributor, Johnny Dey

Introduction

It is simple to focus on the day-to-day operations of your business when launching a business. You should not spend too much time contemplating the value of your business or the amount you could receive if you sold it. However, valuing your venture is crucial to operating a successful business, as it helps you determine how much capital you need to raise to develop and sustain your business. When it’s time for an investor or potential acquirer to make an offer on your company, valuation is an essential part of the negotiation for the selling price.

The Market Strategy

The market approach is founded on the value of comparable businesses. Therefore, this method is optimal for entrepreneurs with a proven business model or who have already raised capital.

The market approach can be utilized to determine the value of either a startup or an established business. For example, an early-stage company has yet to achieve profitability. As a result, it may not have any revenue. In contrast, a mature company has already achieved profitability. As a result, it generates sufficient cash flow to pay its obligations and reinvest in itself without raising additional capital from investors.

Revenue Multiple

Revenue multiples are a straightforward strategy for valuing a business. The multiple revenue formulae divide a company’s annual revenue by its market capitalization, which is its stock price multiplied by its outstanding shares. For instance, if your company has $1 million in revenue and a comparable company has a market capitalization of $10 million, then your company would be valued at ten times revenue, or $10 million.

Revenue multiples are helpful for both private companies (which lack stock prices) and public companies (for which stock prices are readily available). They’re also beneficial for businesses with low sales because they’re less affected by fluctuations in gross margins and other financial metrics that may fluctuate based on industry trends or economic conditions during the analyzed period.

EBITDA Multiple

Multiples of EBITDA are based on a company’s earnings before interest, taxes, depreciation, and amortization. EBITDA is an excellent indicator of profitability because it is less affected by accounting decisions than net income.

The calculation for this multiple is as follows:
Earnings Before Interest Taxes Depreciation And Amortization (EBITDA) Multiple = (Earnings Before Interest Taxes Depreciation And Amortization) / Enterprise Value

Comparable Organizations Technique

The analogous companies method is the most prevalent method of valuation. It’s founded on the presumption that your venture is a “normal” business, so you can use other comparable companies to determine its value.

This method is very time consuming, as you must identify analogous companies and compare them to yours. In addition, this method needs to account for the risk and ambiguity related to your startup’s business model and product/service offering.

Pricing Strategy

The cost approach is a method of business valuation that compares your company to others in the same industry to determine its worth. This strategy depends on tangible and ethereal assets, such as technology, team, and brand, in addition to the customer base.

Identifying competitors with similar products or services publicly traded on Nasdaq or NYSE MKT is the first step in this process (formerly known as OTC Markets Group). Once you’ve identified analogous companies, you can compare their sales figures to determine whether yours are developing at the same rate or quicker. If they’re growing faster than you, this may indicate that there’s room for expansion in your own business; however, if they’re growing more slowly than you, investors may be able to demand better terms from them when negotiating funding rounds in the future, as they’ll know how much potential value lies within each share of stock sold today compared to tomorrow’s market price once news spreads about how well Q1 earnings season went!

Benefits Of An Asset-Based Strategy

The benefit of an asset-based approach to valuation is that it measures a company’s intrinsic value. This is because it emphasizes assets rather than liabilities. Subtract your liabilities from your assets, then divide the difference by one minus your tax rate to calculate this method (1 – T).

The disadvantage of this method is that it does not account for intangible assets such as goodwill or intellectual property rights; however, these can be factored into any potential sale price through negotiation with potential buyers or sellers during due diligence processes before finalizing the transaction.

The optimal method for valuing your venture depends on the specifics of the situation and its characteristics.

The market approach is the most straightforward and intuitive method for valuing a startup. It is based on the value of comparable companies in the same industry, so it can be used for early-stage companies that do not yet have a significant amount of revenue or earnings (if any). The disadvantage of this method is that it is challenging to locate comparable companies; you will need access to an extensive database of private company financials if you wish to employ this strategy.

Conclusion

The optimal method for valuing your venture depends on the specifics of the situation and its characteristics. If you have significant market potential and wish to transfer your company immediately, you should adopt a market-based strategy. The revenue multiple and EBITDA multiple are useful for valuing established firms. In contrast, the comparable companies method helps value smaller businesses with less complex operations. The cost approach can be used when estimating value based on assets or liabilities alone. In contrast, the asset-based approach is beneficial when evaluating a company’s goodwill value.

TIPS ON COMMUNICATING SUCCESSFULLY WITH YOUR EMPLOYEES

Posted on by Franchise Strategist

When you are in charge of anything, communication is a crucial aspect of the task, but its relevance increases if you are in a leadership role regarding employees. The method in which you interact with your employees may have a substantial impact on how they feel about their jobs and the quality of work they do. You want them to feel heard and appreciated.

Tips on Communicating Successfully With Your Employees

Introduction

When you are in charge of anything, communication is a crucial aspect of the task, but its relevance increases if you are in a leadership role regarding employees. The method in which you interact with your employees may have a substantial impact on how they feel about their jobs and the quality of work they do. You want them to feel heard and appreciated. You also want them to feel free to make mistakes without fear of censure or punishment. However, accountability for their actions should not be overshadowed by communicating in such a way that they are not aware of a mistake. It’s how you use the mistake to improve that count. This is why it is crucial to know how to communicate most effectively with them: you want them to feel heard and appreciated, but you also want them to feel comfortable speaking freely without fear of making a mistake.

Set The Tone

Set the tone by being a good example for people to follow. As your employees will mirror your behavior and emulate how you deal with them if you set a good example, it is crucial that you courteously communicate with them.

Preserve coherence to establish a tone. Ensure that every team member is aware of the expected behaviors while communicating with one another, whether through email or in-person meetings; then adhere to these standards in all of your communications. The use of proper words is critical to maintaining clear and professional communication, particularly in a workplace environment.

When dealing with employee disputes, you should set the tone by being kind and impartial (and even between managers). When there is a dispute between two individuals or teams at work, you shouldn’t let it develop into a full-scale conflict; instead, you should attempt to resolve the issue amicably before involving higher-ups if necessary. If you allow the situation to grow into a full-scale battle, you will only make matters worse.

Communicate In Person

Unquestionably, emailing your workers is an excellent way to stay in contact with them. Face-to-face engagement, on the other hand, cannot be compared to any other kind of communication in terms of delivering crucial information and managing workers’ emotions. When you are face-to-face with your employees, you can read their body language and assess how they respond to your words, and vice versa. You can also convey the tone of voice and facial expressions, which is far more complicated (or impossible), through email.

Due to recent improvements in videoconferencing technology, it is now possible for individuals on opposite sides of the globe who have yet to meet to want or need something from each other (such as comments on performance appraisals) to connect.

Ask Questions, Not Statements.

Ask open-ended inquiries. This can help you better comprehend the employee’s perspective and encourage them to respond more thoughtfully.
People sometimes do not like it when you answer a question with a question, but do it anyway. It conveys an interest in what the other person is attempting to communicate and your desire to truly understand them.

Whenever feasible, you should avoid asking yes/no questions and making “if/then” statements since these queries tend to be too binary for most situations. Instead, you should ask yourself: what else could this person possibly be thinking? What would be different from their vantage point? And what reaction would I get if I told them this?

People Should Be Allowed To Speak Openly

While communicating with your workers, you must allow them to express themselves freely. As a leader, it is crucial that you listen to what people have to say without interrupting or casting judgment on what they say. It is preferable to ask questions when something does not make sense rather than make assumptions or speculations.

It would be best to allow them space to express themselves without feeling compelled by your emotions interfering with the dialogue. For example, when a team member makes a mistake, you may feel angry or frustrated. Nevertheless, it would be best to refrain from responding emotionally since doing so will only exacerbate the problem and distract your teammates from what matters most: how effectively they execute their job.

Practice being an attentive listener (and observer)

The single most important thing you can do as a leader is to listen to the input supplied by your workers. You may decide not to execute on the suggestion, but at least it should be heard and considered

Listen to what they have to say and observe their behavior, not just in the workplace but also in other contexts. This entails studying closely how folks interact in person and through technological means such as email and text messages. You may find that some of your best ideas come from observing patterns of behavior that have not been explicitly brought up but are nonetheless significant (for instance, an employee may always respond to questions about a project with “I’m on it!”; this could indicate that she needs additional direction). Conversely, you may also discover that some of your finest ideas result from recognizing patterns of conduct that have not been expressly mentioned but are nevertheless significant.

Don’t Allow Job Titles To Distract You.

Keep job titles and responsibilities from distracting you throughout the recruitment process. Instead, please focus on the person, their achievements, and degree of competence. Focus on what they can do for your company and how they can help you achieve your goals.

It is easy to fall into the trap of focusing on resumes instead of people when filling a job quickly; this is particularly crucial for recruiting managers with limited resources and time restrictions. This is particularly critical when recruiting managers have limited money and time. Yet suppose everyone concentrates on credentials instead of personalities and character qualities. In that case, it becomes hard for candidates with tremendous potential but insufficient experience to distinguish themselves from others with more relevant expertise but less overall potential. This is because qualifications are objective, but personality characteristics and character traits are subjective (for example: if one person has worked as an assistant manager while another has worked as an entry-level employee).

Clear Communication Is King

One of the essential components of being a great leader is the ability to communicate with others, yet this can be challenging. Please remember that communication is a two-way street; if you want to get the most out of it with your employees, you must be open and honest.

Listening to what they are saying is crucial, so try asking questions such as “What do you think?” or “Can you give me some examples?” Listening more than speaking makes individuals feel more comfortable opening up about sensitive topics. Again, it is essential that you pay close attention to what they are saying. Consider asking, “What do you think?” or “Can you provide some examples?”

Not only does having clear expectations facilitate communication, but it also guarantees that everyone is on the same page regarding how they feel about any given issue or event. For instance, if you tell another individual which tasks must be completed by then, there will be a clear understanding when those dates come up again!

Conclusion

It is important to remember that communication is a two-way process. You cannot just lecture your employees; you must listen to what they say, observe their actions, and ask them questions. Doing this well helps employees feel acknowledged and allows them to provide feedback on what they think needs to be addressed at their workplace.

IS BUYING A FRANCHISE RIGHT FOR YOU?

Posted on by Franchise Strategist

Ideal candidates for franchising are those who are excited about operating their own business, have no experience in the field, and are willing to accept the duties and obligations of being their boss. Purchasing a franchise could be an effective means of launching a new business. Consider franchising if you have yet to gain experience in the industry and are passionate about running your own business, and are willing to accept the responsibility and accountability that come with being in charge.

Is Buying A Franchise Right For You?
By: Gary Occhiogrosso – Founder & Managing Partner – Franchise Growth Solutions

Introduction
While franchising is an excellent way to enter the business world, it is not the best option for everyone. Consider the answers to the following nine questions before deciding whether or not your business might benefit from becoming a franchisee.

Do You Intend To Pursue Franchising In The Future?
If you want to start your own business, franchising may be an excellent option. However, franchising is also suitable for you if you want to be your own boss and run the show, but lack the competence or skills
required to do it independently. But franchising is not for everyone; if these reasons make sense to you, especially if they inspire and excite you, you should consider franchising as the right decision.

Do You Have A Proper Financial Plan And Ability?
As you begin the process of purchasing a franchise, you must have a sound financial strategy in place.  You will need sufficient funds to cover the franchise fees and any other expenses that may emerge during the first phases of establishing your firm. Even though a particular franchise may be a solid investment, it may still need time and patience before it starts to pay off; you will also need to ensure that your cash flow can sustain your business moving forward.

Do You Have Previous Experience Leading Others?
The terms "management" and "leadership" are not synonymous. Leadership inspires people to come together and move forward with a single goal, while management is about efficiently doing tasks. Leaders take control of a situation, define a crystal-clear vision for it, and motivate others to strive toward achieving that vision with inexhaustible fervor and enthusiasm.  Because most successful franchises require strong leadership skills from the owner or manager at all levels of the organization, beginning with sales representatives and extending to upper management, franchising may not be the best business model for you if you do not feel comfortable in a leadership role.

Do You Have Sufficient Time To Manage Both The Workforce And The Business?
If you already have a full schedule, franchising may not be your ideal choice. Running a franchise requires a substantial expenditure of time and effort.  You must be able to devote a large percentage of your focus and energy to the organization.  Initially, there may be little room for vacations or even weekends off, and you may be obliged to work multiple days a week due to the long hours. There may be little room for either! Things might be challenging for both parties if you are already committed to another job or have family duties. In addition, managing employees might be challenging since each person has unique personality features. Also, suppose a corporate employee is terminated unexpectedly or quits due to a conflict with upper management or ownership within the parent company. In that case, this can cause problems within the franchise system due to a lack of consistency in the practices and policies established by the franchisor.

Is The Industry Category Stable?
You may ask yourself, "How stable is the franchisor and industry; The answer to this inquiry will help determine if acquiring a franchise would benefit you. If the franchise company you desire to join has a high failure rate and does not seem to be growing in the near future, it may not be worth your time and effort to become a franchisee of that company.  For example, if you've always wanted to open an ice cream shop, but there are already twenty comparable businesses in the neighborhood that are thriving, what gives you cause to assume that yours will be more successful?  Also, consider whether other franchisors are entering or leaving the market. That might negatively influence business; the present time may not be the best choice! If, on the other hand, the industry you have chosen appears stable and has ample room for growth and expansion over time (especially when macroeconomic trends are considered), that brand may be a good option for you, provided that other factors, such as the cost structure and overhead expenses, aren't too high when compared to revenue projections from previous years' earnings statements.

Are You The Only Franchisee In The Market?
Although franchising is an excellent business technique, it can also be helpful if other franchised units of the franchisor are already operating in the area. No one else may be familiar with the brand if you are the only franchisee in your area. If other franchisees are in the region, you will find it simpler to build your business. They can help with some legal difficulties and the  Last but not least, these multiple locations assist with advertising strategies and marketing techniques, which are the two most influential factors in determining whether clients would buy from your firm.

Are You & The Business Capable Of Paying The Fees And Royalties?
There are costs involved with franchise ownership, ranging from $10,000. to $1,000,000. You must additionally pay a monthly royalty fee that is computed based on your sales and other company information. The royalty is the fee the franchisor collects; it is usually a percentage of each week's total sales. Royalties are calculated as a percentage of your business's total revenue. 

How Much Support And Training Will You Receive?
You should anticipate a certain level of assistance from the franchisor throughout training and after that, but whether or not they give it primarily relies on the cost of their services and the nature of your connection with them after acquiring their brand name. 

* Training: If you are new to operating a business or need help getting started, you should examine if the franchise you are considering offers any training options.

* Advertising Costs: The costs associated with advertising can vary widely based on the advertising medium used (for instance, TV ads may cost more than flyers or social media ads), but in general, these expenses will likely be higher than those of non-franchised businesses.

How much input do you need and want in determining prices?
It would help if you understood how much influence you will have on the pricing.  While some franchisors allow franchisees to set their prices, others require franchisees to adhere to the same pricing structure as the company's flagship location. 

It would be best to consider whether the franchisor will allow you to alter your product or service, add new items, and make any other required adjustments. Profit is directly proportionate to the degree of operational and marketing control a franchisor offers franchisees. Ideal candidates for franchising are those who are excited about operating their own business, have no experience in the field, and are willing to accept the duties and obligations of being their boss. Purchasing a franchise could be an effective means of launching a new business. Consider franchising if you have yet to gain experience in the industry and are passionate about running your own business, and are willing to accept the responsibility and accountability that come with being in charge. Franchising is a tried-and-true business model that allows business owners to profit from the knowledge and experience of the franchisor while also gaining from their successes. The required investment requires substantial time, money, and effort, but if executed well, it can be rewarding.

Conclusion
Some individuals may find franchising an excellent entry point into the corporate sector.  Yet, not all individuals would profit from doing so.  Before making a final choice, evaluate if acquiring a franchise matches your long-term goals and lifestyle.

ARTIFICIAL INTELLIGENCE WILL HELP FRANCHISORS SPEED UP FRANCHISE DEVELOPMENT

Posted on by Franchise Strategist

In a report by Data IKU, Korn Ferry stated that 55 percent of staff believed AI had already changed the way their organization recruits. IBM receives about 8,000 resumes a day and is the most searched employer on Glassdoor, an employment site that includes employee ratings for their company. IBM uses an AI algorithm that can predict with 95% accuracy whether a worker is planning to leave his/her job.

For those of you who have followed Ed Teixeira’s articles on FranchiseMoneyMaker.com it is with deep sadness that we report he passed away last week. We will miss Ed’s insights, willingness to help and the kindness he brought not only to our publication but the franchise community and the everyone he touched.

Artificial Intelligence Will Help Franchisors Speed up Franchise Development
By Ed Teixeira

Franchise Consultant, Blogger and Freelance Writer. Co- Author of New Textbook Franchising Strategies The Entrepreneurs Guide to Success. Franchise Executive with 40 years of Franchise Industry Experience.

During the past several years, you have probably read or heard about the increased use of Artificial Intelligence (AI) and its applications. AI has already had a significant impact on Human Resource departments, especially recruiting job applicants. In a report by Data IKU, Korn Ferry stated that 55 percent of staff believed AI had already changed the way their organization recruits. IBM receives about 8,000 resumes a day and is the most searched employer on Glassdoor, an employment site that includes employee ratings for their company. IBM uses an AI algorithm that can predict with 95% accuracy whether a worker is planning to leave his/her job.

Related to AI is natural language processing (NLP) which enables computers to read text, hear and interpret speech and determine which parts are important, like Alexa. A report from Tractica predicts that NLP software solutions capitalizing on AI will grow from $136 million in 2016 to $5.4 billion by 2025.

AI and Franchise System Development
If AI resume software automates resume screening, then AI applications should offer franchisors a major opportunity to improve their franchise system development. Using AI to automate the screening of franchise prospect information could help spot qualified candidates much faster. Also, using phone call speech-to-text and NLP can provide more opportunities to gain information from candidate conversations. Service Score’s Qualifier Call Optimization (QCO) platform uses recorded prospect calls with an analysis engine powered by the latest AI tools to deliver opportunities for converting more calls to applications. A number of franchisors currently use the Service Score application.

Franchise Departments Should List Its Telephone Number
A number of franchisors fail to list their telephone number on their franchise page and require prospects to submit a form. This has become somewhat of the norm rather than offering two ways to contact the franchise department. Hiya’s annual State of the Call report found that more than 12,000 consumers and 2,000 businesses ranked the phone call No. 1 for remote interactions, beating out text, email, video calls, and chatbots.

 During my career I built three franchise systems in different business categories. In each case our phone number for the franchise department was available. I considered every franchise lead valuable and wanted our staff to be able to engage with potential franchise prospects as soon as possible. It was my experience, that individuals who called the franchise department before submitting a contact form, were eager to learn about our franchise opportunity and had important questions. In many cases it resulted in the person submitting a franchise application.

Top franchisors like Service Master Restore, BrightStar Franchising and Neighborly follow this process. Here is BrightStar’s Message: “Our friendly and experienced team is happy to help you get started. Call us at 872-xxx-xxxx or request a call from our team by filling out the form below.”

Franchisor’s Should Prepare for AI
Its time franchisors prepare for the increased use of AI applications in various franchise operations. This should include franchise development. Here are steps franchisors can take to begin the process:

* Compile data to construct a franchisee profile of top performing franchisees or the ideal franchise candidate.
* Incorporate franchisee profile data into contact form and franchisee application.
* Include franchise department contact telephone number.
* Franchisors should speak with several AI software companies to learn about the process and cost of using AI applications for franchise development. Mike Bidwell, president and CEO of Neighborly stated: “We believe employing AI will be key to gaining or even maintaining a competitive advantage in an increasingly informed and sophisticated marketplace.

About the Author:
Ed Teixeira
Franchise Consultant, Blogger and Freelance Writer. Co- Author of New
Textbook Franchising Strategies The Entrepreneurs Guide to Success.
Franchise Executive with 40 years of Franchise Industry Experience.

What To Consider When Purchasing A Franchise

Posted on by Franchise Strategist

Photo by Estée Janssens on Unsplash

Summary: To select the ideal franchise company to join, you should first find a company with a proven track record of success. A good franchisor will have been in business for at least two or three years and be able to demonstrate the growth potential of its products and services. The best way to do this is by looking at how many franchises they currently have in operation and are they profitable. A robust and growing network often indicates a successful brand.

10 Key Points To Consider When Purchasing A Franchise
Originally published in Forbes.
By Gary Occhiogrosso, Managing Partner Franchise Growth Solutions

If your goal is to purchase a franchise, choosing the right franchise brand to invest in is one of the most important decisions you’ll make as a business owner. It’s not just about finding a company with a proven track record but also finding one that fits your personality and lifestyle. Your first step, is knowing what to look for when you’re evaluating potential franchises. Here are some key areas to consider:

Franchise Fees
Franchise fees are one-time payments made when purchasing a franchise. These fees can range from $10,000 to $100,000 and are used to pay for the rights to use the name, the procedures and any systems developed by the franchisor. It is also used to cover costs for training and opening support by the franchisor to assist the franchisee with the opening of their franchise. Franchisors usually charge their franchisees up-front fee when the franchise is granted. In addition, post Covid initial “turnkey” investments may be higher than in the past due to supply chain issues, inflation, and increased cost of equipment and leasehold improvements between brands.

Royalty Fees
Royalty fees are the amount of ongoing money (usually a percentage of gross sales) you pay to the franchisor for using their brand name and ongoing support such as marketing and developing new products or services for the franchisee. As a franchisee, you are required to pay royalties based on a portion of your sales. This percentage may be fixed or fluctuate on a sliding scale based on sales.

Term Length
Franchise term length can be a good indicator of how much the Franchisor invests in their franchisees.
On average, depending on the type of franchise, home based vs a retail location, franchise brands have terms that last ten years or less. This means there’s plenty of time for the franchisee and franchisor to work together and develop a solid relationship. Still, it also means that the franchisee may not be allowed to retain the business if something doesn’t work out. If a franchisee is underperforming, the franchisor may not renew the franchise agreement once it expires, or may seek to terminate the franchise prior to the full term. In such a case, the franchisee must exit the business. In many instances, there will be a contractual obligation that the franchisee cannot open a similar business for a period of time within a certain distance from their original location. This is called a non-compete clause.

Consider Your Lifestyle.
* Consider the lifestyle you will have while running the business.
* Look at the hours of operation. You don’t want to buy an 80 work week.
* Review flexibility of franchisor with respect to new products, relocation and other variables.
* See if the location makes sense for you. You will need to manage the location or develop a team to manage the day-to-day operation for you.
* Check out the type of work needed to run the franchisee. Make sure it fits your skill set and interests, including whether it’s something you’d enjoy doing as a full-time job.
Seeking the advice of a professional franchise consultant can be an extremely useful method when evaluating if a franchise is the right business model for you. Scott Milas, a Certified Franchise Executive (CFC) and Certified Franchise Consultant (CFC) with The International Franchise Professionals Group recommends you consider these questions: “What is your “Know” and “Why?” Understanding “why” you are interested in owning your own business, and “knowing” who you are, are critical steps in choosing the right opportunity. A self evaluation and clear picture of your skill sets and eventual end game- exit strategy, will help ensure that you invest in the right opportunity. Better to “know” now then after you made the wrong decision. “Why” now?
An experienced franchise consultant can assist you in answering those questions and choosing a brand that’s a good lifestyle fit as well as one that offers opportunities to meet your business goals

Look For An Experienced Franchisor
To select the ideal franchise company to join, you should first find a company with a proven track record of success. A good franchisor will have been in business for at least two or three years and be able to demonstrate the growth potential of its products and services. The best way to do this is by looking at how many franchises they currently have in operation and are they profitable. A robust and growing network often indicates a successful brand. In addition, it demonstrates that customers value its products or services enough to pay for them again through multiple businesses.
The second thing you should look for when choosing a franchise is reputation—how well does your chosen brand stand up against its competitors? While there may be other similar businesses out there with similar business models, does you selected band have points of difference to separate itself from the competition. It’s essential that you choose one that utilizes high-quality materials, produces consistent results, and provides excellent customer service while maintaining competitive prices at all times.”

Know Your Competition
One of the steps to building a successful franchise business is to know your competition. What brands already exist in the market, and how do they compare? What is their customer base, and what can you learn from them? How do your offerings differ from theirs, and how do these differences help or hinder you as a company?
Tom Scarda a former franchisee and now a franchise coach and consultant offering advice to franchise buyers regarding evaluating the competition and what it may mean to their success as a franchisee “It’s smart to think about a product or service that is needed in your area and consider bringing that sort of business to the town. However, just because there are no batting cages in your town and you think it would do great because there are kids everywhere, you may be right. However, will it make money? Is there some reason why there is no batting cages in the area? When starting a business, you must, must do a comprehensive business plan before anything else. Learn about competition in the area. Understand the local county laws and regulations around the business you’re considering. Be real about the cost to start and run the operation. These are just a few items to consider in a business plan.”

Once you’ve got a handle on who’s out there, it will be easier for you to see where there are gaps in the market—and then fill those gaps with your unique brand identity.

Carefully Review The Franchise Disclosure Document.
Read the current franchise disclosure document (check the issuance date) and have it reviewed by a competent franchise attorney. Harold Kestenbaum, a noted franchise attorney with Spadea Law advises: “When considering the purchase of a franchise, I highly recommend retaining the services of an experienced franchisee attorney. Never contemplate purchasing a franchise without seeking the advice of an attorney who has reviewed FDD;s before. I also recommend that you do your due diligence. By that I mean that you should review Item 20 of the FDD and call all of the existing franchisees who are in your general area.”

There are additional factors to consider when reviewing the franchisor’s FDD. According to Richard Bayer, a Partner in the law firm Einbinder & Dunn LLP: “Purchasing a franchise for many first-time business owners will often be one of the top three expensive transactions the franchisee will ever go through in his/her lifetime. Given the severity of the investment, a franchisee must commit to doing due diligence. It starts with speaking with existing franchisees as well as those who left the system. Their contact information can be found in the FDD. The goals from these calls include gaining a better understanding of the economics of the franchise – is it profitable, when is break even reached, do costs (labor or otherwise) or revenues fluctuate significantly making it difficult to predict performance. Equally important is getting a sense of the franchisor’s temperament – is the franchisor supportive, does the franchisor go above and beyond legal obligations (imposed in the franchise agreement) to deliver for its franchisees, is the franchisor forward thinking and/or technology driven. The FDD is a great source of information about a system, but it is has gaps that can be filled in quite nicely by franchisees in the system and by those who left. Purchasing a franchise without speaking to as many franchisees as possible is a lost opportunity.”


Investigate The Franchisor’s Tenure And Track Record of Success
In addition to analyzing the franchisors’ financials, it’s also vital to examine their overall track record. While a strong balance sheet is an essential indicator of a business’s health and stability, it doesn’t tell you much about how they’ve fared over time. So, for example, if you’re looking at two franchises with similar books and financials, but one of them has been around for four years while the other has been operating since say, 1899, it would make sense to choose the latter in this case—even if everything else on paper looks the same.
This information can be gleaned from third-party sources such as Dun & Bradstreet or franchise trade magazines or by visiting the website of the International Franchise Association. Always go directly through your Franchisor before getting this data yourself so that they can confirm that everything is correct and up-to-date. In addition, it is vital that you speak with or meet as many existing franchisees as possible before you make your final decision.

What Are The Brand’s Training Programs And Support?
When you buy a franchise, you’re not just buying the rights to use its brand name. You also get access to training programs, mentoring, and support from the Franchisor. These must be proven and effective; otherwise, it can be challenging for your business to grow or stay profitable.
You want to ensure that your franchisor is committed to your success as a franchisee. That means offering in-person training (the better option) and or using phone or video calls if necessary. It also means regular advice on running your business and what strategies might help you reach more customers or increase revenue.

Review The Franchisor’s Marketing Plans.
A good franchisor will have a written marketing plan in place. The marketing plan should include a social media strategy and details about how the franchisor plans to use the funds provided through your advertising fees. If you ask for this document, they should be willing to share it with you.

Choosing The Right Franchise Brand Can Significantly Impact Your Success.
We’ve talked about screening potential franchise brands above. Still, there are some other factors that you should also consider when choosing where to invest your time and resources.
Tom Scarda goes on to say “We always hear the phrase, “If you love what you do you never work a day in your life.” That is true if you’re working a job. But a franchise is not a job. It’s a business that allows you to build a lifestyle. In the end, the service or product the business provides doesn’t matter. Of course, it must make sense for the community where you will operate and the concept must be something that you understand. However, you can be a vegetarian and own a burger joint. As the owner you are acting as the CEO and CFO, you’re not flippin’ burgers…well you shouldn’t be. If you are doing the tasks that the business requires then you bought yourself a job and your business will plateau and not be scalable. Scarda adds “Don’t buy a business because it has to do with your hobby. If you do, you will no longer have a hobby and you will probably resent the hobby if you’re trying to pay your mortgage with it. Instead, invest in a business that will give you the time and money to enjoy your hobby until your heart’s content.

Conclusion
It is important to consider all these factors when looking for a franchise brand. Some of them, like the fees and term length, are more straightforward than others. But, if you want to be successful in your franchise opportunity, it’s worth taking the time to research what makes each Franchisor unique thoroughly. A good franchisor will have invested in training programs and support systems that will help you understand how their business works.

Featured Franchise – HEALTH BENEFITS OF DANCE AND GYMNASTICS FOR YOUNG CHILDREN

Posted on by Franchise Strategist

A Bundles of Tumbles class in action in New Jersey

Summary: Dance and gymnastics are both excellent activities for children to participate in. Both dance and gymnastics help to increase muscular strength, flexibility, and coordination. In addition, dance involves a great deal of physical activity that improves the cardiovascular system of your child by increasing their heart rate and strengthening their muscles.

HEALTH BENEFITS OF DANCE AND GYMNASTICS FOR YOUNG CHILDREN
By: Marianne Ecanosti, Founder and President – Bundles of Tumbles

Introduction

We know that children need to be active and healthy to grow up well. But how do you get your kids off the couch and moving? Dance lessons are an excellent way for young children to get physically active. A study in the journal Pediatrics found that after only one week of dance lessons, children showed increased activity levels and improved their abilities at playing with others.

Research shows that children who participate in physical activity regularly are less likely to be obese and more likely to be healthier, fit, active, and self-confident.

Research shows that children who participate in physical activity regularly are less likely to be obese and more likely to be healthier, fit, active, and self-confident. Regular physical activity also helps reduce stress, promote good mental health and improve sleep quality.
And it’s not just about your child becoming healthy — it’s also great for you! Being active together can help you strengthen your bond with your child while staying fit at the same time.

The benefits of dance and gymnastics include increased muscular strength, flexibility, and coordination.

Dance and gymnastics are both excellent activities for children to participate in. Both dance and gymnastics help to increase muscular strength, flexibility, and coordination. In addition, dance involves a great deal of physical activity that improves the cardiovascular system of your child by increasing their heart rate and strengthening their muscles. In addition to these benefits, dance can also help with self-confidence as well as social skills development because it is an activity that encourages participation from others who may be performing alongside them.
Gymnastics teaches children how to control their bodies in motion, improving balance and coordination and overall health benefits such as increased bone density and muscle tone. In addition, gymnasts tend to have lower body fat levels than non-gymnasts due to the amount of exercise they do each week, which contributes towards an overall healthier lifestyle when combined with a balanced diet.

Learning rhythmic gymnastics movements can help children develop large muscle groups and learn spatial concepts.

Rhythmic gymnastics is a sport that combines dance, tumbling, and trampoline. This activity is excellent for improving your child’s balance, coordination and flexibility. It can also help improve their spatial awareness, control, and balance. These are all essential skills needed to perform well in school and sports like soccer or basketball.

Children enrolled in dance classes improve their spatial awareness, control and balance.

Dance and gymnastics classes are the most effective ways to improve your child’s spatial awareness, balance, and control. As a parent, you may be concerned that dance or gymnastics will make your child too hyperactive. However, research shows that children enrolled in a structured program of dance or gymnastics can lead to better self-esteem and lowered anxiety levels.
In addition to improving motor skills, these classes also help kids develop their sense of rhythm and timing. Many times when kids are dancing, they are also listening to music, so this helps them think about how the music makes them feel and how it affects their body movements and other people around them who might be dancing at the same time as well!

Children enrolled in dance lessons also have increased self-confidence, social skills, and awareness of their bodies.
This is very important in a child’s development.

• Increased self-confidence and self-esteem are significant benefits of dance lessons for young children. Dancing helps them grow into their bodies, learn about the world around them, and understand how to interact with others. By participating in classes that teach proper safety techniques (such as how to fall), they also learn about their physical limitations and boundaries for fearlessness.
A child’s confidence level can significantly affect their school experiences or extracurricular activities like dance classes. For example, the more confident a child feels about themselves, the more likely they are to try new things or speak up when they have an opinion on something important (like going out for recess!).

At Bundles of Tumbles, our mobile at-school program offers various classes that help with your child’s development through movement and music. Bundles Of Tumbles is here to help you achieve your goals with your children. Our training style is one on one, where we will work closely with you to create an individualized program for each child. We know that every child learns differently and will cater to each individual’s needs.
We offer classes for children as young as three years old, which include ballet, tap, jazz, hip-hop dance, and gymnastics classes. Courses help children develop physically, emotionally, and socially in a fun environment while building self-esteem!

Conclusion

As you can see, dance and gymnastics classes are a great way to help your child develop physical skills and self-confidence. At Bundles of Tumbles, we offer a variety of classes that help with your child’s development through movement and music.

ABOUT THE AUTHOR:
Marianne Ecanosti is the Founder and President of Bundle of Tumbles, Franchising Group, LLC.. She has teaching dance and tumbling for more than 25 years. My areas of expertise include ballet, jazz, tap and tumbling. I have taught all age groups throughout my career from toddlers through adult, but prefer to focus on pre-school through grade 5. I truly have a passion for what I do! My company, Bundles of Tumbles, is an on-site preschool gymnastics and/or dance enrichment program. We also offer online classes. Franchise opportunities now available! Find out more at https://www.bundlesoftumbles.com/

Mindset Over Muscle – Building A Solid Business

Posted on by Franchise Strategist

Photo by Andreas Klassen on Unsplash

As you can see, the mindset will get you to the top. It’s not about the muscle. While you may need some physical strength to push through a rough patch, your mindset will ultimately determine whether or not you succeed.

Mindset Over Muscle – Building A Solid Business
By Dom Hemingway

The world is changing, and you should also change… But if you’re looking for a way to stay relevant, you first need to change how you think. It’s not enough to go with the flow anymore; that can get your business stuck. Instead, it’s time for you to take charge of your future and start thinking like an entrepreneur. This means learning to build a solid business from scratch by developing the right mindset and skillset. This blog post will explore how changing your mindset can help grow your business by overcoming challenges and taking charge of your destiny as an entrepreneur!

The Growth Mindset
Mindset is the driving force behind your success. So if you want to build a solid business, you need to be able to think in ways that will help you succeed.
A strong belief that you can develop your mindset through dedication and mindset practice is called the “Growth Mindset” and is based on three core ideas:

* Your talents and intelligence can grow with effort

* You can develop skills through practice and instruction.

* The brain is like a muscle; it gets stronger with use.

The best way to improve is to stretch yourself and work on challenges slightly beyond your current abilities. The Growth Mindset is about continually expanding your capacity to be more effective in whatever you do and achieve more of the desired results.

Mental Mastery
Mental Mastery is the ability to control your thoughts and emotions. It’s the key to success in any area of life because it allows you to remain calm and focused. Mental Mastery works even when things don’t go your way, or others are trying to distract you from your goals.

The more you practice Mental Mastery, the better you will become at it—and there are many ways to do so: meditation, affirmations, reading self-help books, and journaling. But here’s a straightforward exercise you can do anywhere. First, close your eyes and imagine yourself having already achieved whatever you want (e.g., being a successful entrepreneur). Then describe what it looks like in as much detail as possible (i.e., how does your business look? How do you feel about yourself?).
This exercise will help you visualize your future and activate the Law of Attraction. Plus, it’s fun!

Mental Mastery is the ability to control your thoughts and emotions. It’s the key to success in any area of life. Mental Mastery allows you to remain calm and focused, even when things don’t go your way or when others are trying to distract you from your goals. The more you practice Mental Mastery, the better you will become at it—and there are many ways to do so: meditation, affirmations, reading self-help books, and journaling. Here’s a straightforward exercise you can do: close your eyes and imagine yourself having already achieved whatever you want (e.g., being a successful entrepreneur). Then describe what that looks like in as much detail as possible. Selling is an Attitude, Not a Skill Selling is an attitude, not a skill.
The more you sell, the better you will get.

I remember sitting in my office on my first work day at a small company. I was nervous but excited to start my new career as a salesperson! I remember thinking: “If they only knew how bad I was at selling!” However, it didn’t matter how good or bad a salesperson you were; what mattered was whether or not your attitude towards selling was positive or negative. It is all about mindset and being determined to succeed no matter what obstacles appear in front of you along the way!

The first day of work was a little nerve-wracking. I was very nervous and had no idea what to expect. I remember walking into the office that morning and being introduced to my manager and other salespeople in my territory. Everyone seemed much older than me, making me feel a little out of place at first. But after talking with them for some time, I realized that we had more in common than not—we all liked sports, cars, travel, and meeting new people!

The Law of Abundance
The Law of Abundance says that the universe is abundant and infinite, and you are a part of it. The energy of your thoughts creates your reality. The more you think about money, the more likely you will attract more money into your life.
The Law of Abundance works because when we focus on what we want in life (for example, wealth), we put ourselves in a positive mindset. It attracts things like opportunities, good luck, or others who share similar goals. So if you want to attract abundance into your life, start thinking about everything related to making money!

The Law of Attraction
The Law of Attraction is a theory that states you attract circumstances, events, and relationships into your life based on your thoughts. This isn’t new information, but it has gained popularity in recent years thanks to the book The Voice of Your Soul.
It’s not magic. It doesn’t mean that if you wish for something hard enough and it happens without any work on your part (other than wishing), then it’s The Secret at work. There are still steps to take for your wish to come true!

The Voice of Your Soul teaches us three steps:
1. Ask – Ask yourself what you want. What do I need? Think about what would improve my life and long-term goals that could benefit me now or down the road.
2. Next, believe – Believe that this will happen or already has happened, even though there may be no evidence.
3. Finally, receive – Be patient while waiting for the manifestation of what we asked for–it may take a while depending on how big of an issue we’re dealing with–and celebrate when something finally happens!

The Secret is a great way to interpret what is happening in your life. If you’re not getting what you want, ask yourself how you can change your thoughts to attract the right circumstances into your life. It may take some time before anything happens, but if it doesn’t, change your wish one more time until you get exactly what you want!
mindset, leadership, the law of attraction, entrepreneur Mindset, leadership, and the law of attraction are three things every successful entrepreneur has in common. These elements can be learned and mastered by anyone. Understanding these concepts will help you to build a solid franchise business.

The challenge for most people is that their minds have been programmed for years by teachers, parents, friends, or society. For example: “Don’t think about it too much; just do it!” “Be practical! You can’t change the world!” Or my favorite one: “How could you possibly make money doing what you’re doing? It’s not realistic!”

These messages may seem harmless enough, but they keep us stuck and prevent us from taking action on our goals because they make us feel like we cannot achieve them. They also create fear around our capabilities which stops us from trying new things and having fun in life – all potent tools for success!

If this sounds familiar, then take some time today to create new beliefs around your ability to achieve whatever goals you set yourself this year. Whether they’re small or big, you must start somewhere.
You can do it! Take one step at a time, and don’t let anyone tell you otherwise. Follow your dream, and don’t allow anyone to steal it!

Conclusion
As you can see, the mindset will get you to the top. It’s not about the muscle. While you may need some physical strength to push through a rough patch, your mindset will ultimately determine whether or not you succeed.

FRANCHISORS AND FRANCHISEES MUST LEARN TO DEAL WITH CHANGE

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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

DO YOU NEED A TAX ID? HOW TO OBTAIN AN EIN

Posted on by Franchise Strategist

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.

DO YOU NEED A TAX ID? HOW TO OBTAIN AN EIN
By TOM SCARDA, CFE Founder of FRANCHISE ACADEMY
🔑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.

After you incorporate or form an LLC, the IRS will issue a federal tax ID to your small business. This tax ID is also known as an employer identification number, or EIN.

What is an EIN? Let’s take a closer look at this federal tax ID, key areas where having an EIN may benefit your business, and how to obtain an EIN if you were not already issued this tax ID.

What’s an EIN?

An EIN is essentially a social security number (SSN) for a small business.

This tax ID is nine digits long, similar to that of an SSN, with a primary purpose of legally identifying your business. Entrepreneurs may use their SSN or an EIN on paperwork pertaining to their company. Some entity formations, like sole proprietors, use their SSN for business tax purposes. Incorporated formations, like limited liability companies (LLCs), have the choice to use their SSN or an EIN.

More often than not, incorporated businesses will use their EIN. This is because an EIN is slightly less sensitive than an SSN. As such, business owners may choose to use an EIN in lieu of an SSN. Choosing this tax ID acts as a safeguard to ensure the safety of their personal identity. It also helps to keep entrepreneurs in compliance with U.S. tax laws.

How Do I Know I Need an EIN?

There are several aspects of small business where it’s necessary to file for an EIN. Here’s where this tax ID can benefit your company.

Opening a business bank account. Having a business bank account allows small business owners to keep their personal and professional finances separate. Most U.S. financial institutions require a certified copy of an EIN prior to opening a business bank account. An EIN also makes it easier to establish a business credit profile, separate from the owner, and build business credit.
Forming an LLC. If you have already formed an LLC, then you were issued an EIN — and may skip ahead in reading. However, if you are planning to form an LLC keep in mind that the IRS will issue you an EIN. You will also need to obtain an EIN if you choose to incorporate as another entity formation, such as incorporating as a corporation or forming a partnership.
Hiring employees. Here’s where an EIN benefits both employees and the business owner. If your business plans to hire employees, it is a requirement to obtain an EIN. This allows the IRS to track your business and ensure it collects payroll tax. On the flip side of the coin, once a business has been incorporated the business owner is technically considered an employee. As such, you will need to obtain this tax ID — for future employees within the business as well as your own status within an incorporated business.
Besides the aforementioned three bullet points, EINs may benefit businesses in even more ways. You will need to obtain an EIN to establish pension, profit sharing, and retirement plans. This tax ID may also be used when filing annual tax returns. In the event you decide to change your organization type, filing Form 8832 Entity Classification Election will ensure your entity is able to retain its EIN, even if its legal structure has changed.

How Can I Obtain an EIN?

Obtaining an EIN is a fairly straightforward process. You can apply for an EIN online, through the mail, by fax, or even over the telephone with the help of MyCorporation’s trusted team of professionals.

Before you begin the filing process, however, please note that you must determine if your business is eligible for an EIN. The principal business must be located in the United States or its U.S. territories. The true principal officer or general partner must also possess a valid tax ID. This may be an SSN, an EIN, or an individual taxpayer identification number (ITIN). Finally, if your small business is not already incorporated or formed as an LLC then it must file to incorporate as a legal formation for their organization.

The Value of Having an EIN

Having a tax ID allows you to take your business to new, exciting heights while remaining in compliance with tax laws. As an added bonus, once you obtain an EIN you have it forever because EINs do not expire.

Conduct your due diligence prior to filing for an EIN and reach out to a legal professional prior to filing if you have any questions. Once you obtain your EIN, remember to treat it similar to that of an SSN. Keep this ID in a safe place to protect it and use it in areas required by your business.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.

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About Tom Scarda:
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.