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Franchising: What is it?

Franchising: What is it?. The Business Plan is Licensed by the Franchisor—The Franchisee pays for it (initial fees from a few hundred to several million dollars, plus royalties based on sales, typically 4%-10%) The business has a common trademark

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Franchising: What is it?

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  1. Franchising: What is it? • The Business Plan is Licensed by the Franchisor—The Franchisee pays for it (initial fees from a few hundred to several million dollars, plus royalties based on sales, typically 4%-10%) • The business has a common trademark • The business receives initial training and ongoing support from the franchisor

  2. Franchising in the U.S. • First Franchise: Singer Sewing Machine in 1850 • There are 760,000 franchised businesses • 9.8 million Americans are employed by franchises (1 of 12 businesses)—Payroll of $506 billion • Economic output--$1.53 trillion • Types of franchises—Dealerships, service and product • Largest franchise—Subway (23,669 outlets) (Pricewaterhouse/Coopers, 2004/Ent. Mag., 2006)

  3. Subway Quiznos Curves The UPS Store Jackson Hewitt Tax Service Dunkin’ Donuts Jani-King RE/MAX Int’l 7-Eleven Liberty Tax Service Top 10 Franchises for 2006Entrepreneur Magazine

  4. Network Marketing: What is it? • Face-to-face selling outside a fixed retail location • Distributors not only sell products but “sign up” other distributors • Distributors make money on retail mark-ups on what they sell along with residual income from those in their down line

  5. Why Use Network Marketing? • Low capital investment • Greater margins • Motivated sales force • Only pay for performance • Minimal monitoring costs • With new communications technologies it’s easy to stay in contact with a dispersed sales force

  6. Model of NMO Performance NMO Performance= Recruitment X Retention X Consumption

  7. Why Join an NMO? • Increase income • Want to own my own business • Want tax benefits • Enjoy selling • Enjoy social interaction • See it as a hobby • Want to work with spouse/family

  8. Commission Schedule for Excel Distributors—April 1996 • > $100,000 9 • $20k to 100k 77 • $10k to $20k 163 • $5k to $10k 455 • $1k to $5k 4,641 • $100 to $1k 39,072 • Less than $100 109,505

  9. Percentage of Population in Network Marketing (selected countries) • Taiwan 10.9 • Canada 4.1 • U.S. 3.4 • Japan 1.9 • Mexico 1.3 • Brazil 1.1 • UK .8 • Switzerland .07

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