State Use Vendor Training Conference April 1, 2014 Oklahoma City, Oklahoma

State Use Vendor Training ConferenceApril 1, 2014

Oklahoma City, Oklahoma

Disability Service Provider Sustainability in the

Ever Changing Marketplace:Welcome to the Era of the

“Social Franchise”

2014 © Copyright - Franchise Well, LLC

Presenter – Dr. Ben Litalien Certified Franchise Executive 20+ Years of Franchise Management U.S. Franchise Manager, ExxonMobil

On the Run Convenience Stores Principal, Franchise Well, LLC

Strategic Advisor to Source America Georgetown University, Franchise

Management Certificate Program Doctor of Management, Franchising Mountain Climber

Oklahoma State Use Program


Introduction


"Your success in life isn't based on your ability to simply change. It is based on your ability to change faster than your

competition, customers and business.“

— Mark Sanborn


Today’s Objectives Take a look into the franchise sector Developing an understanding of the

“Social Franchise” concept Considering how a nonprofit

organization would benefit from owning a franchised business

Insights from other agencies on their franchise journey

Implications for nonprofits pursuing a Social Franchise Strategy



A marketing method in which the owner of a product or service, known as the “franchisor”, offers the right to operate and manage his product & service to others, the “franchisees”, in return for a fee and ongoing royalty payments.

What is Franchising?

Franchisee- Initial Fee - Royalty- Marketing Fees- Infrastructure

Franchisor- Know-How - Support- Trademark- Network

Regulated by Federal Trade

Commission



A Brief History Lesson The ‘roots’ of franchising A progression through time Modern day applications

The Current View & Trends Business Format Corporate Applications

A Franchise Overview



Governed by the Federal Trade Commission Patterned after SEC regulations Governs the ‘offer and sale’ of franchises Will respond to complaints of fraud, misrepresentation

Further Regulated by the States 15 States Have Additional Franchise Laws May provide you with additional protection Good to know the specifics in your State and where

you plan to operate the business Generally doesn’t matter whether the business is for

profit or not for profit

A Regulated Industry



International Franchise Association Started in 1960, the IFA is the world’s oldest and

largest organization representing this unique way of doing business

Mission: Enhance and safeguard the business environment for franchisors and franchisees worldwide

Currently have over 30,000 members, spanning 75 different industries, doing business in more than 100 countries

Excellent resource for prospective and active franchisees – www.franchise.org

A Strong Community


2014 © Copyright - Franchise Well, LLCOklahoma State Use Program

More than 900,000 franchised businesses in the United States

The franchise industry accounts for nearly 10% of the private sector output ($1.53 Trillion )

Provides jobs for more then 18 million Americans

Franchising generates one out of every seven jobs in the private sector

Franchises exist in over 100 different industries

……a franchise opens every 8 minutes of every a franchise opens every 8 minutes of every business day…business day…

Franchising Stats


U.S. Franchise Market



A Visionary Step Charting a course for nonprofit

“community wealth” generation

A Pioneering Journey Traveling together Embracing the future

What is a “Social Franchise”?



“A nonprofit owned franchised business…” Generally a wholly owned subsidiary of the parent

nonprofit organization Can be “for” or “non” profit entity depending on:

Underlying purpose of the entity Mission alignment

Business Success vs. Mission Requires learning a new sector A long-term business strategy

What is a “Social Franchise”?



The Process…

Understanding Your Assets

CreatingTheCriteria

FindingThe RightMatch

Determine What You Can Leverage

Create a Positioning Strategy

Identify the Benefits to Your Organization

Create a SF Vision

Consider the ‘Mission Fit’

Consider the ‘Culture Fit’

Determine the Financial Borders

Identify Obstacles

Evaluate Candidates Negotiate the Right

Relationship Execute Franchise

Agreement Consider Partnership

Opportunities



Select The Right Franchise Company

3,000FranchiseCompanies

The Best Match

Concept Fit with Nonprofit Mission

Strong Overall Company / Concept

Geographic Location Match / Expansion

Required Investment Level

Ability to Adapt to Nonprofit Requirements

Willing to “Invest” in Partnership



Growing the SystemEconomies of Scale Increased Profitability

Building the BrandCreates DemandProvides Better Liquidity for AllGenerates Additional Revenue

Opportunities

Franchisor Goals



A Compelling Case…


Opened Rocky Pop Popcorn at Denver Airport Acquired Auntie Anne’s

More stable job opportunity Greater revenue potential

“Just Like Any Other Franchise” SBA loan; Completed training; Personal guarantees Focus on bottom line

Have Since Acquired Four More Locations 60% of employees are Platte River clients Generating significant cash flow / net income Raised organizational awareness nationally Recently purchased Service Master franchise


A Challenging Case…


Opened over 40 Partner Shops in the past 15 years

There locations still operating today Lack of education on either side Poor choice of concept by NPA’s Poor choice of locations Under-estimated level of support needed to

sustain the business model Lack of marketing and message integration

to mission Tremendous loss of disposable dollars and

donor trust

Virtually all issues were avoidable


Considered automotive, business services, staffing and printing

Focus on creating jobs for persons with disabilities

Secondary goal of diversified revenue streams

Board member of Source America; supportive of innovative strategies

Considering launching a franchise concept for nonprofits

Provides access to and insight on jobs in the region

Creates stronger connections to the business community

No personal guarantees; clear exit strategy

Providing additional support Open since July ‘10

A Recent Example


Considered various job creation opportunities but landed on automotive

Focus on transitional employment for qualified offenders

Primary goal was a commercially viable business model

It needed to have the ability to scale to a significant size to support sustainability

Acquired the franchise rights to the entire State of Texas

Must open six owned locations; support franchisees

Share of revenues from all franchise operations

Influence franchise owners to consider hiring ex-offenders

Opening 1st store mid-year 2014

A Recent Example


Franchisors Don’t Understand the NP Sector Requires educating them on the realities and the

benefits

Creates potential for modifying the contract

NPA’s Must Leverage their Assets Franchisors are not easily swayed from their model

Most NPA’s are exempt from the FTC rule

NPA’s must define and demand the support necessary for success with a Social Franchise

Negotiating the Relationship



What are the pros and cons of pursuing a franchise for your organization?

What franchise do you think would be best for your organization? How did you come to this decision?

What steps will you need to undertake to get this franchise up and running?

What is your long-term social franchise strategy?

How will you measure success?

Questions You Need to Ask…



Pros Cons Turn-key Systems Training and Support Brand Name/Value Economies of Scale Better Labor Model

Less Freedom Additional Fees Higher Start-up Costs Complicated Contracts Long-term Commitment

Pros & Cons of a Social Franchise


Acquiring a franchise may cost more money, but often reduces the uncertainties and risk

It is legal for nonprofit organizations to own/operate a franchise business, either ‘for’ or ‘not for’ profit


Evaluating Your Organization

Established, Stable Organization

Strong, Committed Leadership

Mission Connection / Integration

Entrepreneurial; Social Enterprise Desire

Scalability (multi-unit and/or concept)

Capacity to Support a New Venture

…then the hard partOklahoma State Use Program


Executing the Strategy

LaunchPhase

OngoingOperations

Performance Monitoring Periodic Gap Analysis Annual Business Plan

Update Marketing & Promotions Ongoing Training

Capitalization & Funding Site Selection Lease Negotiation Attending Training Hiring Staff Grand Opening



A Guarantee of SuccessThere are real risks to consider

For Every OrganizationYou need Leadership, Mission FitYou need Capital and a Champion

A Short-Term CommitmentAverage contract is 10 years

Franchising is NOT...



Summary “Social Franchise” is an emerging sector

opportunity, pioneering effortNonprofits can and do own franchise

businesses, primarily for profit generationUse a deliberate approach to determining if

your organization is right, and if soUse a disciplined approach to find the right

franchise opportunitiesNegotiate an agreement that reflects the

unique aspects of your organization



Thank you


Dr. Benjamin C. Litalien

Principal & FounderFranchise Well, LLC

44 Mine Road, Suite 161

Stafford, Virginia 22554

www.franchisewell.com

[email protected]

State Use Vendor Training Conference April 1, 2014 Oklahoma City, Oklahoma

Documents

franchise manager

franchise sectordeveloping

franchise journeyimplications

additional franchise

business environment

product service

active franchisees

franchisees worldwidecurrently