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Franchise Know-how & The Art of Reproduction. Ramon Vinay President, Francorp International. Francorp’s credentials. Created in 1976 Serving 40 countries Developer of more than 4 thousand franchise networks Consultant to more than 200 of the world’s top 500 franchises
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FranchiseKnow-how & TheArt of Reproduction Ramon Vinay President, Francorp International
Francorp’scredentials • Created in 1976 • Serving 40 countries • Developer of more than 4 thousandfranchisenetworks • Consultantto more than 200 of theworld’s top 500 franchises • Consultantto AMPM minimarkets, number 2 amongtheworld’s top 500 franchisesfor 2011, over McDonald’s* • *Entrepreneur 500 Franchises
Francorp Middle East: • Operatingsince 2006 • Dubai, Kuwait, Kingdom of Saudi Arabia, Egypt, Jordan,Syria,Turkey, UnitedArabEmirates, Lebanon. • Over 100 franchisenetworksdeveloped in theregion.
Partialclientlist International Middle East
Whatis a franchise? • A license to exploit a business model and trademark, supported by the transfer of know-how on the run the business efficiently, based on the franchisor’s experience, accompanied with: • Policies and procedures • Permanent technical support and supervision • Leadership and full commitment to serve the system
The players in franchising • Franchiseagreement • Trademarklicense • Training/Ops. Manuals • Operationalsupport • Marketing • Procurement • Otherservices Franchisor
The players in franchising • Franchiseagreement • Trademarklicense • Training/Ops. Manuals • Operationalsupport • Marketing • Procurement • Otherservices Franchisor Franchisees
The players in franchising • Franchiseagreement • Trademarklicense • Training/Ops. Manuals • Operationalsupport • Marketing • Procurement • Otherservices Franchisor Franchisees Customers
The players in franchising • Franchiseagreement • Trademarklicense • Training/Ops. Manuals • Operationalsupport • Marketing • Procurement • Otherservices Franchisor Franchisees Customers
The four generations in franchising • Imported foreign franchises • Local entrepreneurs start franchising in the same types of business • Local entrepreneurs start franchising in other types of business • Local entrepreneurs start exporting local franchise concepts
Granting of a franchise • The franchisee pays an Initial Franchise Fee • The franchisee pays a permanent fee (royalty) to the franchisor on a weekly basis • Percentage of gross sales or fixed amount (or both) • A fee to contribute to a national marketing fund • The franchisor provides know-how and permanent advice and services • Advertising –Training –Procurement +
Why do businesses franchise? • Capitalize on existing network • Capitalize on production facilities/ - -Acquire captive outlets • Enter stock market • Managebranding vs bricks • Exploit sales opportunities • Add value to trade name • Internationalize • Religion
Franchisingsolvesthe 4 majorproblemsexperiencedbyevery single business, from a modest stand in a sidewalksellingfalafel, tothemonsterbusinesseswiththousands of outlets and employees.
The 4 majorproblems: • 1.- Financialresources • 2.- Staffing • 3.- Competition • 4.- Timing Thesolution…
OPM OtherPeople’s Money
Motivations to buy a franchise • Permanent • Profits • Status
Motivations • Variable • Speculative investment • Expand investment portfolio • Patrimony • Occupational therapy
Motivation • Incidental • Productive use of candidate’s land
Creating a franchise program of the highest professional level in 5 easy steps
Franchise structure Franchise
Franchise structure Strategic Franchise
Franchise structure Legal Strategic Franchise
Franchise structure Strategic Legal Franchise Operational
Franchise structure Strategic Legal Franchise Marketing Operational
Define your goals • Trans-generational • Exit strategy • Market domination • Profits
Certainty • Strategic • Legal • Operational • Marketing
Strategic planning Every single decision is made in advance
Everydecisionshouldhave a financial, organizational, logistical and politicalevaluation
Legal documentation Everything you commit to -and everything your franchisees commit to- is feasible and profitable
Operations Manuals • Quality assurance • Operational efficiency • Operational effectiveness
Marketing campaign • The RWA factor • Ready, willing and able • Qualified candidates vs simply interested parties
Step 1: Franchisability
Determine franchisability • Financially viable? • Both parties should make money • Reproducibility • Every single angle of the business • Know-how transfer and services to the system • How competitive is your franchise offer in the open market?
Step 2: StrategicPlanning
Strategic planning • Vision, Goals and objectives • Competition • Other franchises- investment opportunities • Franchise formats • Franchisee profile • Costs • Services
Franchise market • Benchmarking • Initial fee, Initial investment, Agreement term, services • Consumer market • Know yourbusiness • Know your customer • Marketing / advertising
Formats to grant franchises • Joint venture • License • Master • Regional • Individual • Multi- unit • Area development • Conversion • Retro- franchise • Co-branding
Franchisee profile • Age • Resources • Shares business vision • Owner- operator / absentee • Investor • Attitude
Revenue sources protection program • Is the permanence of our trade name in the POS critical to our success? • If so, we should protect that permanence over and above all other considerations?
Revenue sources protection program • Operational • Site selection criteria • Strategic • Business sources protection • Store • Telephone numbers • @- commerce • Client data base
Territory • Boundaries • Criteria • Population • Distance • Socio – economic level • Level of sales • Stationary vs pro-active
System growth • Geographical definition • Business characteristics • Computers vs food • Marketing needs • Regional/ national • Service capabilities • Distance, staffing, communications, costs
Supply • Capabilities/limitations • Critical vs non-critical • Secondary • Commissary (virtual, administrative) • Time, price, quality • Designated suppliers • Authorized suppliers
Pricing, promotions, discounts • Criteria • Design • Costing • Participation • Institutional • Opportunistic • Local/ regional
Services to franchisees • Business plan • Site selection • Unit development • Remodeling • Soft / grand opening • Marketing • Training
Operations Manual • Administration Manual • Chart of accounts • Human Resources manual • Operational /administrative software
Training • Initial • Permanent • Permanent assistance • Centralized marketing • Other • Staffing to serve the system
Franchise fee • Recovery of investment in franchise program • Floor value • Ceiling value • Perceived value
Royalties • Percentage / flat fee • Gross sales / net sales • Incentives • (higher revenue-lower rate) • Proformas • Expenses • Re- investment