Franchise Perfection

Identifying Investment Worthy Franchise Opportunities

Evaluating Investment Worthy Franchise Opportunities

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Jim Coen April 23, 2015 Leave a Comment

It is All About the Franchise Business Model

Business plan chalkboardA strong business model is the most important component of an investment worthy franchise system. The business model is the method or means by which a company captures value from the business and shares that value with its stakeholders.

The business model in Franchising is crucial to establish how the franchise owner, franchisor, vendors, employees, investors and customers gain value from the company. The franchise business model may include many different aspects of the business, such as how it makes, brands, distributes, prices, markets, or advertises its products.

Each and every franchise system has a different business model. The Franchise Disclosure Document (FDD) discloses many business mi. The FDD was not designed to identify the value proposition. It was designed to communicate critical information and legal obligations in the franchise agreement.

The franchise business model is about value creation. It is also about the core strategy to generate economic value for all stakeholders. Understanding the franchise business model is critical in determining whether that franchise system is investment worthy and how capable the franchise can compete in the marketplace and make money.

The franchise business model exposes how the company converts franchisee capital, brand value, and vendors participation into a return that is greater than the opportunity cost of the capital. This means that a franchise business model’s success will create returns that are greater than the (opportunity) cost of capital, invested by its franchise owners, shareholders, and bondholders.

Business models are an essential part of strategy – they provide the fundamental link between markets and the consumers. Any resilient business model must be able to create and sustain returns for its franchise owners and stakeholders over time. Otherwise, it is likely to go out of business or fashion.

Filed Under: Franchise Business Model, Franchise Owners, Franchising, Franchisors Tagged With: balance, Balanced franchising, Business Model, Franchise Business Model, franchisee, franchisees, Franchising, franchisor, Value, Value Proposition

Jim Coen September 22, 2014 Leave a Comment

Help SB610 become law in California!

california-state_sealOn August 21st, the California state senate voted 23 – 9 in favor of SB 610, a bill that strengthens franchisor good faith relations with franchisees. In order the turn this important piece of legislation into law, it is crucial that all franchisees express their support of the bill and ask the Governor to allow SB610 to become law. He can sign it into law, veto it, or let it to become law automatically on September 30th. Franchisor advocates are bringing substantial pressure on the governor in a last ditch effort to defeat SB610.

This is an important time for all franchisees in every state. SB 610 offers significant protection for franchisees and will set a precedent for Governors throughout the US that California has become the best state to invest in a franchise. It’s about time that “good faith and fair dealing” becomes law protecting franchisees and their investment. SB 610 overcomes greed and ruthlessness that many franchisors utilize against their franchisees.

Here is a link to a word file that you can use to post a message to California Governor Brown.

This will take you only a few very important moments, but could be of significant step to protect your franchise equity in whatever state you operate.

Filed Under: Franchising Tagged With: balance, Balanced franchising, franchisee, franchisees, Franchising, Independent Franchisee Associations

Jim Coen May 25, 2014 Leave a Comment

Seeking Balance in Franchise Relationships

people on blackboardNo relationship is perfect, it doesn’t matter whether the relationship is personal, business or institutional there are always going to be both good things and bad things about any relationship. One of the keys to a long and prosperous relationship is balance. Mutual advantage is the key to sustaining the relationship. Relationships prosper when each party derives worthwhile benefits and subsequent returns. Often this requires a give and take.

Complicated institutional relationships such as labor, government, and business like franchising often require independent organization of the parties involved to insure that each stakeholder has the resources to obtain proper representation.

In our government the US Constitution utilizes “checks and balances” to protect US citizens. The key objective for the drafters of the constitution was to ensure that no one branch became too powerful. Each branch “checks” the power of the other branches to make sure that the power is balanced between them, and ultimately the United States is stronger for it.

One of the keys to a successful franchise system is one in which stakeholders share mutually in the rewards and are mutually involved in the process. That way all parties benefit from a stronger brand and share in the success. Franchise systems require checks and balances to ensure the growth of the brand for all stakeholders.

Each party to a franchise has several interests to protect. The franchisor is most involved in securing protection for his trademark, controlling the business concept and securing his know-how. The franchisee often has significant capital and family resources invested in the system.

As a result of the inherent differences between a franchisee and its franchisor with respect to negotiating power, resources and access to information pertinent to the operation of the franchise system, many franchise systems look to independent franchisee associations, advisory boards and supply chain organizations as a means to address these inequities for the inevitable evolution of the franchise system.

Independent Franchisee Associations (IFA) provide franchisees, a needed check to the balance of power in the franchise relationship. By franchisees organizing their own independent trade organization they are acquiring the power and resources, to defend, protect and guard against imbalance in the relationship.

Franchisors may be resistant to the formation of a franchisee association. In some cases, franchisors may refuse to deal with the association or to recognize the association as a representative entity of the franchisees. In other situations, franchisors may be more aggressive in promoting the use of the advisory council in an effort to dispel the belief that another avenue of communication between the franchisor and its franchisees is required. These institutions are fine. The other opportunities franchisees and franchisors have to discuss different scenarios and business cases the better is is for all stakeholders.

As franchising continues to evolve, the power of franchisees, as well as their financial means, continues to grow. In many systems franchisees own multiple units and the franchisor is a corporation with other holdings. This change in the balance of power between franchisors and franchisees makes franchisee participation in an Independent franchisee association, inevitable and vitally important for all parties.

Each franchise system should have an independent franchisee IFA to defend the interests of the franchisees and provide balance in the relationship for long term viability and success of the brand and the entire franchise system.

It’s up to the franchisees to make that happen.

Franchise Perfection specializes in helping independent franchisee associations to organize, gain members and establish an infrastructure that sustain the organization for years to come.

Contact Franchise Perfection for More Information

This article was also posted at Blue Maumau.

Filed Under: Franchisee Associations Tagged With: balance, franchisees, Independent Franchisee Associations, independnet franchise associations

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