Preparing for your future: Investing significant sums in a franchise of your own should not be taken lightly. We strongly suggest that you begin an extensive review of opportunities that may be of interest to you. Over the years, we have discovered that the majority of franchise companies’ stories are much different than they appear at first review. You should obtain marketing materials and begin the research process now, even if your plans are to purchase your franchise a year from now. As mentioned in the FDD article, its important that you have actually read several Offering Circulars before you conclude that your favorite company’s contracts are acceptable and not imposing uncommon regulations or omitting significant services that others provide to their franchisees.

Each year, The Franchise Doctor speaks at a number of Franchise Seminars, college classes, business meetings, and outplacement seminars. Many of these speaking engagements are “closed” to the general public. If you are a member of a Chamber of Commerce, civic or religious group or club, The Franchise Doctor would be happy to speak to a group of 15 or more. Locally, there would be no cost. If travel is involved, expenses and time away from the office will have to be addressed. Please call 770-587-2538 for information.

In a recent survey of our readers, many requested that we provide deeper insight into the Franchise Offering Circular that must be provided to each buyer. This document includes several important sections that help a prospect gain a great deal of knowledge about the franchising company. The major portion of the document is a plain-English description of the company offering franchise licenses, the business that will be created, the costs involved and the restrictions placed on the franchisee. In addition, the franchisor’s promises to the licensee are enumerated. The company’s latest Profit & Loss Statements and Balance Sheets are included for the buyer’s review, as is a copy of the actual license agreement that will be signed if the parties agree to join forces.

Reviewing this article should help you choose between franchisors and protect your investment.

Since the Federal Government instituted a set of disclosure laws in 1979, all franchisors have been required to submit a Franchise Disclosure Document to each and every prospective franchise buyer at least 14 days before any contracts are signed or any money changes hands. Today, most franchisors will ask that you complete their Franchisee Qualification (or Application) Form before they give you their Disclosure Document. Any reluctance on their part to give you this document or any pressure they exert to get you to sign it quickly should be viewed as a warning sign.

The Federal law stipulates that copies of all documents that you would be expected to sign during the relationship should be included with a full description of the franchise, the costs, the company offering the franchise and the terms under which you will operate. If financing is involved, a copy of the note you will sign should be included. Some states have added regulations in addition to the Federal Government’s and if you are in one of these states (see the current list at the end of this newsletter) you should have an extra page or two indicating compliance with the state regulations.

A common mistake made by franchise buyers is ignoring the wealth of information that is in an FDD/C. Although the structure of the circular is mandated by law, what it contains (and how the franchise system is run) is far less regulated. If you are buying a franchise, you should gain experience reading these documents, since you will be able to gain “a feel” for the company’s approach to franchising by reading the various sections of the FDD. If there are two or more companies offering a similar franchise, you should endeavor to obtain a circular from each company and compare. Philosophy may be more important than license and royalty fees. A good, long term franchise relationship is almost a partnership and more than just the name must be shared between the franchisor and the franchisees.

Even though FDD’s range from 60 to 175 pages, we strongly encourage you to review several closely so that you can enter into your business relationship with both sides understanding the rules and regulations. We suggest that you have your advisors review this as well and demand that someone from the franchisor answer any questions that may arise.

There are 21 sections in each FDD. These are the headings required by statute:

TABLE OF CONTENTS

1. The Franchisor, and Any Parents, Predecessors and Affiliates

2. Business Experience

3. Litigation

4. Bankruptcy

5. Initial Fees

6. Other Fees

7. Estimated Initial Investment

8. Restrictions on Sources of Products and Services

9. Franchisee’s Obligations

10. Financing

11. Franchisor’s Assistance, Advertising, Computer Systems, and Training

12. Territory

13. Trademarks

14. Patents, Copyrights and Proprietary Information

15. Obligation to Participate in the Actual Operation of the Franchise Business

16. Restrictions of What the Franchise May Sell

17. Renewal, Termination, Transfer and Dispute Resolution

18. Public Figures

19. Financial Performance Representations

20. Outlets and Franchisee Information

21. Financial Statements

22. Contracts

23. Receipt

Exhibits

A. Financial Statements

B. Closing Acknowledgments

C. Schedule of State Agencies

D. Loan Agreement and Addenda

E. Franchise Agreement and Addenda

The Franchise Doctor will cover each of these headings in this and a subsequent Newsletter.

The Cover Page contains a description of the franchise offering and a summary of the costs involved. It must also include warnings of the risks involved that the government deems appropriate. Obviously, you recognize that your investment is not guaranteed. The most important ingredient in your eventual success is YOU. The cover page usually also notes that legal actions between the parties must be filed in the home state of the franchisor. Since most franchisors encourage mediation of any disagreements, and Arbitration after that, they hope that this will ever become an issue.

Section 1. covers The Franchisor and any Parents, Predecessors and Affiliates.This gives you the history of their corporation and their franchising activities. As you’re evaluating joining any company, you should determine if they operate a unit similar to yours–that they don’t just focus on franchising. As the industry changes, those who operate “company stores” will be “on the field of battle,” addressing the issues in their daily operation of the headquarters-owned units–not reacting to calls from franchisees who have encountered problems that will impact the entire industry.

Section 2. gives details regarding the identity and Business Experience of the individuals involved with the Franchisor. The company is asked to reveal the work history of each of their principals and any key employees for the last five years. You should judge the suitability of their background as you would a potential partner. Have they been in this industry for several years (five minimum)? Is there depth? What if one person becomes ill or retires? Who would step in to fill the gap?

Section 3. covers company Litigation. The government requires that they disclose if either the franchisor, its predecessor, any person identified in item 2 or an affiliated company offering franchises under the franchisor’s principal trademark:

A. has an administrative, criminal or material civil action pending against that person or business alleging a violation of a franchise, antitrust or securities law, fraud, unfair or deceptive practices, or comparable allegation;

B. has during the 10 year period immediately before the date of this disclosure document been convicted of a felony or pleaded nolo contendere to a felony charge; or been held liable in a civil action by final judgement or been the subject of a material action involving violation of a franchise, antitrust or securities law, fraud, unfair or deceptive practices or comparable allegation; or

C. is subject to a currently effective injunctive or restrictive order or decree relating to the franchise or under a federal, state or Canadian franchise, securities, antitrust, trade regulation or trade practice law resulting from a concluded or pending action or proceeding brought by a public agency.

Anyone who reads the paper realizes that Americans love to sue people. If there are one or two suits reported per 100 franchisees, that’s probably not a problem. However, if there is page after page of litigation, and all seem to be over similar issues, you should begin to be concerned.

The next Section, 4., discloses any filings under the Bankruptcy laws. Here, they report that:

Neither the Franchisor, its predecessor, nor any of the parties listed in Items 1 or 2 of this offering circular during the 10-year period immediately before the date of this offering circular;

A. filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code;

B. obtained a discharge of its debts under the bankruptcy code; or

C. was a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U. S. Bankruptcy Code or that obtained a discharge of its debts under the bankruptcy code during or within 1 year after the officer or general partner of the franchisor held this position in the company or partnership.

Again, if someone who is involved in managing the company has had a similar position in the past that led to bankruptcy, you should ask further questions and decide if their explanation is plausible.

In Section 5. the FDD begins to address some very important information: Franchisee’s Initial Fees  Today, Initial Franchise Fees usually range from a low of $10,000 to a high of $35,000. This is usually payable in full at the time of the signing of the license. It allows you to go through headquarters training and open your unit. (A franchisor willing/able to finance a portion of your initial fee is usually a good sign–they’re confident that you’ll succeed and pay the balance over time. However, opening your new venture with too much debt is very dangerous and should be avoided whenever possible.) In retail, restaurant or site-based franchise systems, this fee is usually the same for all franchisees. However, in some systems, (usually service businesses) the franchisor may offer two entry levels, depending on the size of your hometown. Small towns with a population up to a certain size, (let’s use 175,000) will cost less for a Minor Market License. They may sell two such units in towns with populations up to 350,000. In larger cities they may sell Major Market licenses for a higher fee. They may make a commitment that they will never sell more than one license per 350,000 residents and that they will not allow offices to open within a 5-mile radius of each other. Should you wish to open another office in the future, many systems will ask you to pay only a percentage of the license fee in place at that time.

Section 6. discloses Other Fees Here you begin to see some of the unique factors that separate the franchise you are reviewing from others. (Remember, we suggest you review at least three FDD’s before choosing the system you’ll join.) Almost universally, franchisors charge Ongoing Royalties from their franchisees.

They are willing to begin sharing with you their successful system for doing business and give you ongoing consultation and assistance for a low initial licensing fee. No company would sell this knowledge for such a low entry fee if there was no ability to participate in the ongoing success of the new venture. This royalty allows the franchisor, as your “partner,” to receive an ongoing benefit from your success. It ensures their motivation to give you all the assistance you desire. Without a royalty, their license fee would exceed $100,000–so, you could think of these payments as a kind of financing for your purchase (similar to an “earn out” in the purchase of a business).

The great majority of franchisors charge a set percentage of all sales you generate in your business. In retailing, 6% is common, in fast food 4% to 5% are widespread, and some service businesses charge up to 10% of sales. Some franchisors charge a declining royalty fee. You might pay 6% of your gross receipts on the first $250,000 of sales you generate each year; 5% of the gross receipts between $250,001 and $500,000; and 4% of all receipts in excess of $500,000. They recognize that, the lower your revenues, the more help you need from headquarters. The greater your sales, the less you’ll be calling on the franchisor for assistance. Therefore, they lower the effective percentage they charge as your revenues grow. Recognize that this is adjusted monthly based on the sales, year to date. Everyone would pay 6% in January–the goal is to reach the break points as early in the calendar year as possible. Many companies have you calculate the monthly sales and remit by the 10th of the following month. Some ask you to submit weekly reports and they debit your checking account weekly.

Determining the effect of the Royalty Fees on your personal income as a franchise owner is important. If an industry typically provides only a 15% Net Pretax Profit, giving 10% to the franchisor cannot be justified unless they are providing inventory, advertising, or some other benefits at a great discount, unavailable to your independent competitors. On the other hand, some food franchisors are able to provide such great discounts on food, supplies, equipment and construction costs, that their 4 or 5% royalty could almost be considered free!!

Depending on the industry, a great advantage to franchising is the benefit of national advertising and name recognition. Is there anyone in America who doesn’t recognize the names McDonald’s, Burger King, and Wendy’s? This power allows franchisees to build their sales much quicker than an independent and unit sales almost always (99% of the time) exceed the sales of an independent. Still, not all industries require mass advertising. In these cases, you should question the need for a national advertising fund. Most systems charge 2% of sales to fund this program. You will have to spend additional monies in your local area to promote just your unit.

Included in your Initial Franchise Fee are rights for you and your staff to attend headquarters start-up training. Should you decide that you wish to have others attend this training (which is often only for Owners or General Managers) you will be charged for each person who attends this class which runs from 1 to 4 weeks.

If you, or your estate, decide to sell your franchise, someone will have to pay a Transfer Fee to offset the franchisor’s expenses associated with training a new franchisee in the system. You will be building equity in your new business. Some franchisors charge up to 50% of the Initial Franchise Fee being charged new franchisees at the time of the sale. This will cover their costs associated with training the new owners (who receive several seats in training).

When your license expires, (typically after 10, 15 or 20 years) a Renewal Fee will be due. Some companies charge as much as 50% of the original Franchise Fee as a renewal fee. Most feel it doesn’t make sense to charge a good franchisee a significant sum to continue operating within the franchise system.

Since some franchisees have tried to hide revenues to avoid royalties, most franchisors now stipulate that, if they feel that your Royalty Reports are not a true reflection of the Revenues of your franchise, they will try to determine the correct information. If this proves to be insufficient, they reserve the right to have a professional audit conducted and pass the cost of the audit, interest on underpaid royalties and a penalty on to you but only if the audit shows an underpayment of at least some significant percentage of Gross Receipts (3 or 4% is often the deciding value).

[To be completed in the next Blog Post.]

“Opportunities are never lost. The other fellow takes those you miss!”

Everyone dreams of owning their own business. “Firing their boss,” “breaking through the glass ceiling,” “earning what they’re worth,” “building an equity,” and “taking charge of their financial future,” are all motivations commonly cited by people as they begin their search. Unfortunately, many never achieve their goal and spend their careers in unfulfilling jobs. They, and their families, suffer when their unhappiness and low income impacts the relationships they have with their spouse and children. I meet many of these searchers in their early stages and try to make them understand that the job of finding the right venture is a tough, time-consuming task. Just as finding an outstanding managerial job takes weeks to complete–reviewing marketing brochures, talking with salesmen and researching franchise opportunities takes weeks of dedicated study. Have you begun investing 10 hours a week to the project? (If you’re unemployed, it should be 40 hours.)

Too often, franchise buyers postpone making a decision, waiting to find the “perfect” business for them. Those that take the same approach to house hunting spend their lives in apartments. Very few things in life are perfect! When we’re buying a home, we may trade off the spacious family room in one house for the better school system associated with another. Similar concessions must be made when reviewing business ventures.

You need to get started on your entrepreneurial path NOW! Solve your financial needs and start building an equity today! DON’T expect to find the best business in the world for you–in all probability it will not be the only company you ever own. Most people run the same business for only 5 or 7 years and then hire a manager or sell it and move on to something bigger or more challenging.

Are you frozen at “home plate” just watching ads whiz by? Pick up the phone and call 5 to 10 companies for their marketing materials. (You’ve made it to first base.) Choose the three that you think will best fit your needs and fill out and submit the company’s “Qualification Form.” (This will open discussions with a sales representative and places you firmly on second base.) Now continue your research by closely reviewing the Franchise Offering Circulars sent to you, and visiting or calling as many franchisees as is reasonable. If you’re gaining a comfort level, you’re rounding third and should have an attorney or accountant review the agreement to be sure you fully understand it. When you’ve made the commitment to sign the license, join the franchise network and begin your entrepreneurial career, you’ve made it to home plate! The crowd (or at least your family and friends) are cheering, and you’re on your way!

Often you’ll have to repeat these steps because you get “stranded” on second or third base. But reading ads in a magazine and looking a dozens of franchisors’ web sites is no way to seriously approach the task!! Good Luck!!

A PRESCRIPTION FOR YOU

On our Home Page, we recommend 14 books for your review. Have you taken entrepreneurship seriously enough to begin making improvements in you? Have you hired and managed people before? Most franchises will grow to the point of employing 3 to 30 employees and your responsibility will be to interview and hire winners and then motivate and manage them. These tasks may sound easy but most of us can learn better skills. Remember that dreadful bore you worked for a few years ago?

Do you know what to look for in a new employee? How do you coach them? Motivate them? Guide them in time management? Handle grievances? Terminate them? Are you confident all of these methods are still legal in your state?

Check with local sources for classes or check with Fred Pryor Seminars or Career Track Seminars, two national companies. The more you know about hiring and managing people, the better your franchise will run.

THE DOCTOR IS IN

In this section we answer questions commonly posed by franchise buyers. To submit a Query, please E-Mail us.

Q. Can you explain “declining royalty” schedules?

A. Many progressive franchisors are now reviewing their franchise royalty schedules to reflect a more accurate balance of the franchisor/franchisee relationship. When a new unit is opened, the franchise owner may call headquarters daily with questions. A year later, the demands on head-quarters may drop to weekly contacts and by the second anniversary requests for help may drop to one or two a month. At the same time revenues continue to rise as the franchisee takes more responsibility for his own success.

Franchisors say that, “A franchisee who grosses $100,000 annually does so almost solely because of our system. One that grosses $1,000,000 does so because of their superb implementation of our system–while putting less demands on our headquarters staff. Therefore, we feel we should earn less of a percentage on the high-performer than the smaller operation.”

If you plan to be a top producer in any franchise network, a declining royalty structure will be a great advantage to your profitability.

WHAT’S NEW IN FRANCHISING?

Franchisors continue to recognize that communications with their franchisees is one of the most critical aspects of building a successful team. There’s nothing more frustrating for a franchisee than to learn of a new marketing idea, product or service approved by the franchisor that hasn’t been introduced in his area. Many successful companies are now using technology to spread the word. One franchise network with over 300 units sends an Owners’ Update email to every licensee each Wednesday.

Another service franchisor has developed its own proprietary “chat room” on the Internet where franchisees meet weekly to discuss common problems and solutions. A technology-based company with hundreds of products sends 2 or 3 emails weekly with new solutions to customer needs. Others are using video, CD or software-based presentation tools to help their licensees introduce new clients to their services and products. More HQ’s offer direct mail, telemarketing, accounting and other services to their networks.

The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800-220-8256

Most people considering buying their first franchise spend a lot of time fighting self-doubt and fear of failure. The stakes are high and everyone you care about will be watching. Many say they “know someone whose friend knows a guy” who had a bad experience in franchising. This causes a good deal of concern that they might make a bad choice and buy the wrong franchise.

A short investigation of franchising will produce the quote that over 60% of independent small businesses fail within the first 3 years while over 90% of franchised businesses are still open for business 5 years after opening! While these statistics came from a Department of Commerce study, it often seems that there are more “former franchise owners” in the marketplace than this study predicts. Yet, we almost never see a failure among the largest chains–who have thousands of opportunities to “get it wrong.”

While the product or service sold; the training; the marketing and advertising are critical to a new franchisee’s accomplishments, the most important ingredient is still the ability of the franchise owner. In fact, the smaller the operation, the more pivotal is the competency of the owner. It’s crucial then, that ensuring a good match between the franchise system and the entrepreneur is addressed by both parties.

Who’s screening whom?

My belief is that the best franchise systems do a better job of “screening out” buyers who they feel will not be successful. When you’ve opened a thousand or ten thousand units, you begin to recognize the winners from the losers. Managers in a mature system, would rather miss a sale than have a unit open offering inferior products or services because the franchise owner is unhappy in his/her choice and is now unwilling or unable to follow their system. Unfortunately, younger franchise systems may miss the signals that predict an “unhappy marriage” with a potential owner. Sometimes a macho (spelled naive) franchisor believes that the new buyer can be molded (“whipped in to line”) to become a successful franchisee. Worse yet, sometimes the franchisor has cash flow needs that encourage him to allow a marginal candidate to buy a unit.

This is not said to discount the incredible benefits provided by a proven system including superb start-up training and ongoing support from an outstanding home office team. But sometimes, all the help in the world can’t make the proverbial silk purse out of a sow’s ear.

Having served over 18 years in the franchise industry, I’ve met a number of people who have had bad experiences in their own franchise and I’m always searching for the cause of franchise failure, whether it results in a closing or the resale of a unit at a price that was unfavorable to the original owner.

How Does One Judge Franchisee Fitness?

A major breakthrough that can minimize failure in franchise systems lies in the topic of several recent best selling books including: “Emotional Intelligence, Why It Can Matter More Than IQ” in which author Daniel Goleman identified the three domains of excellence as Technical Skills, IQ and EQ. While searching for reasons why so few top academic achievers in high school and college were highly successful in their careers, he defined Emotional Intelligence (abbreviated EQ) as one’s command of self-awareness, motivation, self-regulation, empathy and social skills. Goleman points out that these elements greatly impact success in all areas of life–especially in one’s career. He even states that EQ is twice as important as IQ and Technical Skills combined when predicting achievement on the playing field of life.

The Key to Entrepreneurial Success

An exciting aspect of EQ is that it can change–unlike IQ, which is stable after age five. Discovering one’s behavioral traits and then sharpening them into skills that are a part of Emotional Intelligence, can help an individual gain control over his life.

It seems obvious that someone who has a well developed EQ would be well prepared to make the correct critical choice when evaluating franchise systems. Since he would truly know himself, by asking the right questions of the franchisor and existing franchisees, he’d find a franchise system where he would excel by maximizing his innate attributes. Whether it’s a job, or entrepreneurship, when you find the “Perfect Fit” for you, you cannot fail!

When you love what you do, when it “feels right,” every day is an exciting opportunity to excel. If you feel out of place, you question your capabilities, you wonder why “you don’t get it,” and then every day is a dreaded experience and you seldom achieve your true potential. It’s like going to work in a suit that’s four sizes too large, or worse yet, one that’s four sizes too small. You have behavioral traits that will make you a “natural” when you find the franchise system that rewards your unique personality mix.

Many buyers, when they’re beginning their search for a business of their own call and ask me “What’s hot?” I believe they’re better off discovering more about themselves so they can seek out a franchise career where they’ll be “The Perfect Fit”–where they’ll be a “natural.” When you have a clear understanding of your strengths and limitations, you’ll be better prepared to evaluate yourself in comparison to the superstars in any franchise system that you evaluate.

Are you positively sure you know “what makes you tick?”

Typically, most adults feel they have a good idea of “what makes them tick” but many times their spouses, friends and co-workers have a much different view. This is an area where the cliche “can’t see the forest for the trees” truly applies. Do people say that you have a great deal of untapped potential? Have you ever wondered why you haven’t achieved more in life? Is it really the boss’s fault? Are you still searching for the right opportunity? Are you sure you know the venue in which you can achieve your ultimate success? You’re convinced that when you find it you’ll know–it will be a “natural fit.” Still, you may not be looking in the right places.

Gaining the clearest focus possible on your “natural talents” is a critical step to finding the best franchise for you. Just as you wouldn’t take a job if you felt you weren’t qualified, you shouldn’t buy a franchise that requires a daily focus on skills that are uncomfortable to you. When you’re sure of the areas where you’ll excel, then you’ll be confident in selecting the franchise system where your talents will be rewarded. With over 3,000 companies offering franchises, the real goal is finding your best match and this is well worth the effort.

Who Should Be Responsible for Making the Right Choice–the Franchisor…or You?

In an ideal world, every franchisor would seek to insure that their new franchisees are well suited to their system. Until that becomes the norm, I’d suggest that the buyer (who has the most at risk) should inventory his or his behavioral competencies to help select a job description, then an industry and ultimately a franchise system where these traits will flourish. If one needs to convince a spouse, a partner or a banker of his fitness for a particular franchise, a candid assessment of his talents can be an invaluable tool.

After a careful study of a number of career placement surveys, earlier this year, The Franchise Doctor began offering a FranchiseFit Entrepreneurial Matrix at no cost to help readers obtain a clearer understanding of the strengths they possess and how these will impact their success in operating their own business. After answering a short survey on the internet, a report is generated and E-Mailed to them within 2 or 3 days. This is all available at The Franchise Doctor’s website along with a number of informative articles on franchising. By gaining new insights into their strengths and limitations, readers are better able to match their attributes to a franchise opportunity where they’ll shine.

The Franchise Doctor has also developed expanded job descriptions for the owners of typical franchises, by industry. You should never invest in a franchise where you are unsure of the daily activities of a franchise owner and how suited you are to perform these. This database of job descriptions, when matched with your talent survey will be an invaluable tool helping you find your Perfect Fit in franchising.

by Jim Deitz & Bruce King

Reprinted from BIZ Magazine September, 1999

If you have noticed a scarcity of major fast food franchises in your area, it probably means the population and their income won’t support a successful venture. Be cautious, and do your homework before you invest. Don’t let “the fever” cloud your judgment.

CHECKING YOUR FITNESS FOR FRANCHISING

Everybody dreams of owning their own business, working on their own and becoming financially secure. Today, more than 550,000 have achieved that goal by owning a franchised business. If you’ve been doing your homework, but still haven’t taken the steps toward ownership, possibly self-doubts are a factor.

Not everyone is fit to become a franchisee. Check any of these traits that apply to you:

• ___ I tire easily
• ___ I prefer to work alone.
• ___ Dealing with people is often a pain.
• ___ I can’t stand my boss. Nor my last boss, either, for that matter.
• ___ I perform best when left alone.
• ___ My current job has me under too much pressure.
• ___ My current money problems keep me awake at night.

Any of these traits that you’ve checked are cause for concern. Starting any new business will be an exhausting experience. After you pay your fees and complete training, there will be many steps to complete before you open. Dealing with pressure is a necessity. Even if you own a one-person, home-based business, you will be working with many other people. You must deal with the franchisor, vendors, and customers. Too often, people wishing to be alone neglect the marketing efforts that are critical to the success of any venture.

If you lack the stamina and personality to deal with people and pressure, maybe you should rewrite your resume and seek another job. The Franchise Doctor has developed a comprehensive Self-Evaluation Survey to help you and your spouse determine if franchising fits you. It’s called the FranchiseFit Entrepreneurial Matrix. Follow this link for a free overview and the opportunity to obtain a thorough 20 page report, specifically designed for you. http://www.franchisedoc.com/FranFit.html

A PRESCRIPTION FOR YOU

Speaking of fitness Any good Doctor will prescribe reading materials for his patients. The better informed you are, the more you will take the steps necessary to effect a cure. The Franchise Doctor is no different. On our Home Page, we recommended 14 books for your review. How many have you read?? Do you regularly read INC and Success Magazines? Are you sure you are serious about investing your family’s savings in a business? Are you just dreaming? Have you paid for a self-improvement seminar in the last year? We respectfully suggest you get serious or quit wasting your time dreaming without taking the steps necessary to prepare yourself.

The Dr. is IN.

{In this section we will answer questions commonly posed by franchise buyers. If you would like to submit a Query, please E-Mail us.}

Q. What do you view as the Number 1 qualification for success?

A.Commitment.

If you do your home-work and find a quality franchisor, they will prevent you from buying a unit if you are undercapitalized (a major killer of small businesses). They will train you and support you so that you can offer a quality product or service in your area at profitable margins (lack of operational knowledge slays many more small businesses). A good franchisor will ensure that your marketplace can support your unit and provide the marketing systems that will bring you a good quantity of customers (yet another destroyer of young companies). You, and you alone, will determine your franchise’s success. If pressure slows you down, if your golf handicap is more important than your business, if a bad day causes you to “sleep in” the next–failure may overtake you.

Dr. Robert Schuller, sometimes asks, “What would you do if you knew you could not fail?”

With a commitment from you that says “I cannot fail!” your franchisor will help you succeed. If you follow their plan and put in the hours necessary, you will succeed!

Who is this “Franchise Doctor?”

Our Founder, President and Editor, is Jim Deitz, President of Andover Franchising, Inc, in Atlanta.

Jim utilizes lessons learned in his career of 30 years in entrepreneurial ventures. In the 60′s he developed credit reports on the business community for Dun & Bradstreet. During the 70′s, as a bank officer, Jim helped many small businesses borrow from his bank and the SBA. For several years he ran a company providing marketing services. In the 80′s, Deitz traveled and trained business brokers in seven Southeastern states for a national franchisor. Later he founded a regional business brokerage franchisor and since the 90′s he has helped many companies begin franchising their successful ventures.

The warm reception Jim gets guest lecturing at several local colleges, encouraged him to offer his insights into franchising on the Internet and now hundreds are receiving our Newsletters and other information through The Franchise Doctor web site. For more information about our founder–and a mug shot–visit: http://www.franchisedoc.com/about.html

The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800-220-8256

How to Find Your Perfect Fit in Franchising is an article written by The Franchise Doctor and published in BIZ magazine in September. It discusses ways to match your core behavioral traits to the franchise industry and specific franchise system where you will find your Natural Fit. When you feel “in the zone,” its easy to reach your full potential. To read more about finding your Perfect Fit, Click Here

How Your EQ Predicts Your Future Success was published in BIZ. EQ is the study of one’s Emotional Intelligence and is depicted as the factor most important for achieving one’s life goals. Click here to read this article.(Don’t forget your “Back” button when you’re done.)

Permission Marketing by Seth Godin

Today, according to the author, we are constantly bombarded with advertising messages intent on “interrupting” us. When a business builds a relationship with a customer, or potential client, the company should ask for “permission” to send messages about the company’s products or services. This can be in the form of a Newsletter, brochure, E-Mail, phone call, or even a salesman! (Sound familiar?) This message is well received by the prospect and generates more sales and a stronger bond between the business and its customer. With the advent of the Internet, this type of marketing reaches new heights for conversion at new lows in cost. Godin predicts that the best businesses in the future will establish relationships with their customers and ask for permission to tell them about their latest offerings. While you’re thinking about it, Ask Amazon to send a copy.

The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800-220-8256

We’ve spent months evaluating different assessment tools and now the FranchiseFit Matrix is posted on The Franchise Doctor’s website The FranchiseFit Entrepreneurial Survey for FREE!

Spend 10 minutes answering 48 questions truthfully and press the Submit key. In less than 30 seconds you’ll have the Matrix on your screen. You’ll see where your strengths and weaknesses lie on six different traits that have been deemed critical to entrepreneurial success. You’ll also receive a list of job positions that you should avoid-because you’ll never excel the way you can when you match your strengths to a franchise system that capitalizes on your unique “personality skill set.”

If you recognize how accurate this Matrix is in discovering “what makes you tick,” we suggest that you purchase the full FranchiseFit Report. In approximately 20 pages, it will give you specific recommendations of how each of your six behavioral traits will impact your performance as an Entrepreneur and in 10 additional job functions that are critical to most franchise systems, including Management, Sales, Administration, Production, Technical Skills, Training, and more!

This report will be useful in determining how good a match you are for each franchise system that you review. In addition, you can show it to the selection team at the franchisor to gain their concurrence that you will be an asset to their organization. If you’ll be seeking investors or loans, the decision-makers will appreciate your frankness in evaluating you against the franchisor’s criteria for success.

The decisions you make trying to find the best franchise for you are very critical to your future happiness-and financial security. The FranchiseFit Report can help you make the right choice. When you love what you do, when it “feels right,” every day is an exciting opportunity to excel! If you feel out of place, you question your capabilities, you wonder why “you don’t get it,” and then every day is a dreaded experience and it’s almost impossible to achieve your true potential. You have behavioral traits that will make you a “natural” when you find the franchise system that rewards your unique personality mix.

Just as you wouldn’t take a job if you felt you weren’t qualified, you shouldn’t buy a franchise that requires a daily focus on skills that are uncomfortable for you. When you’re sure of the areas where you’ll excel, then you’ll be confident in selecting the system where your talents will be rewarded.

Take the FranchiseFit Entrepreneurial Survey NOW. http://www.franchisedoc.com/FranFit.html (When you’re done, hit your “Back” button to return to this page.)

WILL THIS BE YOUR YEAR?

How long have you been thinking (dreaming) about owning your own business? A year, two, three, five years, ten? What steps have you taken to get you moving?? Are you still just flipping through magazines looking for the perfect match?

Maybe it’s time you took a closer look at yourself and try to use your discovery to find a business venture.

One great way is to determine what the perfect Job Description for you would be. Sit down with a sheet of paper and write down your dream position.

Start with a brief narrative description of the job. List all specific fundamental duties and responsibilities, in order of importance. Add in other duties or responsibilities that may be done infrequently or could be delegated to others as you grow.

Now list features of the working conditions of your dream job. What hours would you work? How many days a week? Where would you work? Indoors/Out? Office, warehouse, store, restaurant? How much travel would be involved? overnight stays? What do you work with? Computers, cash registers, hand tools, heavy machinery? Who do you interact with? Employees, customers, vendors, the franchisor? What would be your pace? Crises and decisions on an hourly basis? daily? weekly? seldom? Other than money, how would you recognize success? (Happy customers? Completion of a project? Praise from the community? Satisfaction of seeing others succeed?)

When you’re done, you’ll be better prepared to expand your search. Now, get on the phone and call some franchisors and review their brochures. How close to your ideal Job Description do you think their franchisees are? Remember, the better matched you are to the position you are asked to fill, the better job you’ll do.

As a “natural,” you’ll enjoy every day and success will come easily to you.

For more on how to understand where you’ll find your greatest success, review these two recent articles written by The Franchise Doctor for BIZ Magazine.

(Don’t forget your “Back” button when you’re done.)

The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800-220-8256

Beginning a new year gets most of us evaluating our lives and making plans for improvement. We often suggest the Ben Franklin Method of evaluating opportunities: Grab a pad of paper and write “Pro” on the top left corner and “Con” on the top right. Then list the positives and negatives in their appropriate columns.

If “earning what you’re worth,” “building an equity,” and “taking charge of your financial future” are on your list; if your “job security has evaporated,” you’ve been “passed over for promotions,” “feel your pay or bonus are below par,” or find it impossible to “break through the glass ceiling,” we hope you’ll aggressively pursue your ability to improve your life and career through franchise ownership.

As you review options, you’ll discover that today’s down-sizing craze leaves too few job opportunities for the thousands of people over 45 looking for a new employer.

Starting a new business is very risky with government statistics showing that over 55% close their doors within two years. Those who have never started a business before are well advised to look for a partner or a franchisor who has!

Set goals today! Look for industries that interest you, research their future stability, then look for franchisors that service that niche. The January issue of Entrepreneur Magazine is perfect for beginning your search since they publish their rating of the Top 500 Franchises and list another 400+ who are newer, less-established companies.

Call for marketing materials and start doing your homework. (Emphasis on “work”). It’s not easy making a smooth transition–but it will be less stressful and more successful if you cover your bases. For more steps to take on your road to success, review the Franchise Doctor’s web site.

A PRESCRIPTION FOR YOU

Are you ready to be a winning franchisee?

There are hundreds of aspects of a business that must be addressed in order to succeed. The great strength in franchising is that a good franchisor has encountered these many times before and is ready to help you make the right choices.

One of the most critical is site selection. If you choose the wrong location for a business requires your customers to come to you, you’ll quickly discover that they won’t “beat a path to your door” and you’ll suffer. Signing the franchise license and paying your licensing fees will open the educational process on how to choose the best location. In most systems, the franchisor will give you guidelines and then ask you to research your town and submit your favorite 2 or 3 sites for acceptance. Then the final choice will be yours.

Even before signing an agreement, most franchisors will give you general guidelines so that you may begin the search. Do they suggest a stand-alone building? A strip center? A mall? What about traffic patterns? Near homes? schools? Office buildings? Near competitors?

Check now with local departments of transportation and determine who offers traffic counts in your area. Talk to commercial Realtors and mall managers to get a feel for the availability of space in you town and its cost.

The Dr. is IN.

{In this section we answer questions commonly posed by franchise buyers. To submit a Query, please E-Mail us.}

Q.What are some of the most common “red flags” that should warn one away from a particular franchise system?

A.While the Franchise Doctor believes that buying a franchise is the best business decision for most aspiring entrepreneurs, there are some systems that seem to disregard the needs of their franchisees.

A quick check of their “corporate culture” can be as simple as measuring the time needed to respond to your inquiries. If calls from a buyer are not returned promptly and courteously, you may have discovered a lack of attention to their franchisees.

Another way to analyze their culture is the system’s approach to their fee structure. Some systems charge very high licensing fees (up to $50,000!), then “pile on” fees for using their proprietary computer software (to $15,000 per year) and then demand 8 to 10% royalties on every dollar you produce. While their salesman may provide a great pitch that these fees will not slow your growth, we’ve found that most franchisees feel these fees are a heavy burden 2 or 3 years after opening.

A very critical concern is called infringement. When a franchisor sells many franchisees the rights to open within a small geographic area, customers will typically frequent each unit equally and therefor reduce sales in each. Some food franchises now grant a license to operate “within these walls”–clearly warning that another unit may be placed across the street. Some food franchises today sell their products through grocery stores. If a consumer can buy frozen tacos or gourmet ice cream at the store, will they frequent your unit more or less often? The franchisees of Taco Bell and Ben & Jerry’s Ice Cream seem divided on the benefit/liability of these alternative distribution systems.

Franchisees will usually share their experiences with you if you call and explain your interest in joining their system. If many say they would consider selling their operation at low prices (compared to the start-up investment), you may have discovered a problem. You’ll find an extensive list of suggested questions on our Home Page in the article “How Should You Evaluate a Franchise Opportunity?”. The clincher is, “If you knew then, what you know now, would you still buy this franchise? Why or why not?”

Do your homework and be sure you’re joining a network where franchisees are seen as very valuable partners in the system.

by Bruce King & Jim Deitz

Reprinted from BIZ Magazine

Emotional Intelligence (EQ) is defined as one’s mastery of

the five elements of: Self-Awareness, Self-Regulation,

Motivation, Empathy and Social Skills.

Choosing the franchise system that will help you reach your true potential is a challenge for almost every buyer. One client depicted it as “The most gut-wrenching decision I’ve ever made.” We believe that understanding one’s Emotional Intelligence before the purchase and then utilizing that knowledge during the management of a business, can ease the buyer’s fears when making a choice and help insure top performance thereafter.

For decades, schools and colleges have maintained that achieving high scholastic achievement predicts success in all future endeavors. Those with good grades in high school found the doors of many colleges open before them, and scholarships and loans were readily available. When one graduated near the top of his or her college class, businesses of all kinds sought their services and offered outstanding starting salaries. Yet a study completed in the early nineties proved that the most successful in their careers were rarely the best in academia.

A New Tool for Predicting Success

Daniel Goleman, the leading author on this phenomena (“Working With Emotional Intelligence”) discovered that a high Intelligence Quotient (IQ), or the measured ability to learn and apply information, did not often correspond to those leading their fields in their occupation. Further investigation revealed that even a high level of technical skill in an occupation did not necessarily correspond to top performance. What the study did disclose was the presence of five attributes that he grouped under the title Emotional Intelligence and that has come to be known as EQ.

If choosing the right franchise to buy is both challenging and risky, it stands to reason that those interested in improving their odds for success would want to examine their EQ as it relates to their work and investment.

Self-Awareness

The first segment of one’s Emotional Intelligence is defined as self-awareness. As we mentioned in last month’s article, you can’t map your journey unless you know from what point you’ll start. Evaluating yourself to gain a clear understanding of your strengths and limitations allows you to search for a franchise system where you’ll optimize your strengths while you hire others to handle areas that will be a challenge for you. Just as an athlete will test his skills at the start of each new season to determine where he should invest his time fine-tuning his skills, anyone making a major career change should evaluate what areas of his or her core behavioral traits should be the rock-solid foundation on which to build his future success.

Self-regulation

The second area to assess and develop is that of self-regulation. A common weakness here is evidenced by those making inappropriate comments to employees and customers. “Inappropriate” here, does not mean “wrong”–only that they may be ineffective or counter productive because the other party sees things from a different perspective than the speaker. Likewise, being aggressive is a great benefit for those in a sales role, yet knowing when to back off is critical to long-term success. The tendency to be detail-oriented is of great benefit in many roles, yet someone who optimizes his skills of self-regulation will know when he should delegate detail work to others because, as the owner, he must move on to more critical areas of management.

Self-motivation

The third segment to evaluate for strengthening is one’s self-motivation. The ability to get yourself moving toward a goal is invaluable to an entrepreneur. Most systems help their owners establish growth and financial goals during headquarters training. The superstars reach these objectives in record time–because they’re using their strengths and hiring for their deficiencies. Even if motivation has been a challenge for you in the past, it may have resulted from a poor job fit. Choosing the right industry—the one where your activities seem “natural”–should make every day a joy because your work is more like recreation than labor. At that point, the weekend is just a chance to rejuvenate yourself for the next week’s challenges.

Empathy

Only after you gain a strong sense of self-awareness, can you begin to look outside yourself. The person with a high EQ displays a great deal of empathy. This is the ability to see things from the other person’s perspective and adjusting your actions so that both you and your employee (or customer) work together to achieve common goals. The inability to see peoples’ differences and the willingness to bridge the gap will hinder success. A shortfall in empathy should point a potential franchisee in the direction of “solo” ventures, where one produces the majority of the company’s products or services with a minimal interaction with employees or customers.

Social Skills

The last focal point of EQ is that of social skills. These include the business competencies of communications, team cooperation, the ability to influence others and effect change, and the ability to lead and manage others. Most of these social skills are determined by the behavioral traits needed to build and manage a business. These are easily measured by today’s modern behavioral assessment tools (including our FranchiseFit Survey). Again, discovering one’s strengths and shortcomings will be critical in focusing on a franchise organization where the positives can be put to good use and the negatives can be outsourced.

The Building Blocks of Success

One of the most exciting things about understanding your EQ is the realization that improvement is easy. Once you clearly understand these five critical areas, you can start your journey toward achieving a higher pinnacle of success. Author Goleman states that EQ is twice as important in achieving great things as the combination of IQ and Technical Knowledge. By understanding the needs of his field, one can determine what areas should be developed to meet the challenges.

Surely, you’ll want to match your natural behavioral traits to your daily work by purchasing a franchise that calls heavily on your current strengths. Then you should address areas which need improvement in order to guarantee that you achieve the levels of success that are only the dreams of others.

Bruce King is President of Professional Development Resources, Inc. in Atlanta. His company specializes in assisting people and companies with job selection, performance evaluation and training.

Jim Deitz is President of Andover Franchising, Inc in Atlanta. Through the company’s website, The Franchise Doctor, helps people discover their fit in franchising with the “FranchiseFit Entrepreneurial Matrix offered free at their site.

Click Here if you’d Like to Take the Test

The ideal gift “For the Person Who Wants Everything:” The Franchise Doctor’s ebook, Insider’s Secrets to Buying a Franchise–at Half Price!!

Readers and critics alike are agreeing that Insider’s Secrets contains information never before found in print. Step-by-step instructions on how to find a franchise that meets your personal and financial needs; dozens of tips on “danger zones;” and a complete guide to preparing your own Franchise Review of your target franchise system which The Franchise Doctor regularly produces for $1,950 each.

If you’ve been postponing your purchase, here’s your chance. Two copies of the ebook, Insider’s Secrets to Buying a Franchise for the price of one!!

GREAT LAST MINUTE GIFT!

We’ll email you your copy of the book with your passwords and give you permission to email a copy to a friend and we’ll set up their passwords for them. If you prefer, we can email your gift ebook directly to your friend and tell them you’ve sent it. We will try to respond to all order requests every 4 hours (8 AM to 8 PM) from now till Christmas. We’ll fill all orders received by 8:00 PM, Atlanta time Christmas Eve (12/24) and resume shipments on the 26th. Remember, all these ebooks are formatted for proper printing by the user.

Hurry, this Special Christmas Gift Sale ends 12/31/10. On our Secure Order Form place the words Holiday Special on the line requesting your Fax Number, the name of the recipient of your gift on the space for “Shipping Name” and their email address where it asks for their “Shipping Address.” If you prefer to forward a copy of the ebook, fill in “I’ll deliver” on the Shipping Address blank. We’ll send you both passwords. You may want to save the file to a disc, wrap it and put it under the tree!

If you choose to have us deliver the ebook, you’ll know when you receive your copy, that your friend has received their’s and you can call or send them a Holiday Greeting of your choosing.

Follow this link to explore Insider’s Secrets further. http://www.franchisedoc.com/insidersbook/InsiderBook.html

FIND YOUR FRANCHISE NOW!!

Why haven’t you invested in your own franchise yet? Maybe you haven’t discovered the best industry for you. {Might we recommend our ebook, “Insider’s Secrets” above?} Maybe you haven’t amassed the capital you’ll need to get started. {Check some of the ideas at http://www.franchisedoc.com for borrowing the balance needed.}

Have you ever considered a “previously owned” franchise unit? Most of our readers recognize that the benefits of a franchise overwhelm any temptation to start your own independent business. The few negatives of buying a franchise center on finding the best territory or the best site for your unit. The largest issue is often the time your family has to forgo your income as you get the franchise open and reach profitability. Most franchisors suggest that you plan for 6 to12 months before you draw cash out of your new venture. This certainly raises the amount of cash you need to get started and increases the risk (and resulting fear) to making your move.

HELP IS ON THE WAY!!

The Franchise Doctor recognizes your need to maintain a stable income stream as you make the transition into Entrepreneurship. In addition, we recognize that there are thousands of franchise units across America that are no longer meeting the needs of their owners.

For this reason we’re developing another whole segment to our business–helping you find franchise owners who’s goals have changed and now wish to sell their units. We are now counseling owners that are facing an illness, partnership dispute, burnout, or need to relocate to another city on the best way to sell their successful franchise to you! Our service is called the Franchise Resale Program and our new site is http://www.franchisesforsalebyowner.com At this site we’re posting articles especially useful for people considering the purchase or sale of an existing franchise. We also are profiling units whose owners have recognized that “knowledge is power” and are learning from The Franchise Doctor how to price and position their business. When you visit our new site, you’ll discover short profiles of the ventures we’re assisting, listed by state. If you have an interest in learning more about any specific franchise, we’ll request that you sign a non-disclosure agreement–promising not to tell others that the unit is for sale. Then we will forward to you a Marketing Brochure typically containing 15 to 20 pages of details about the history of the franchise unit, it’s local demographics, the motivation for selling and the price and terms established by the seller with The Franchise Doctor’s help. Once the buyer has reviewed this information, we suggest that the seller and buyer meet to “tour” the business and answer questions about how a potential sale might be consummated.

An exciting benefit to both buyers and sellers under this “Coaching Program” is the fact that The Franchise Doctor does not act as a broker in the transaction—thus saving the seller thousands of dollars in costs–that are often passed on to the buyer.

In most cases, our costs (paid by the seller) are only 10% of those charged by business brokers.

Be sure to check out this exciting new concept in franchising. Right now, we have a home-based business that is 14 years old, a regular member of its franchisor’s “President’s Club” for outstanding performance. Because the current owner has inherited income-producing property, the motivation for managing a high-volume franchise is waning. A moderate investment will give you exclusive control of a major portion of one of America’s fastest growing cities–in the Sunbelt!!

You should make this site a “favorite” or “bookmark” it for frequent follow-up until your venture comes along. http://www.franchisesforsalebyowner.com

You may also email us with “requests” for the type of franchise you’re seeking and your city of preference. Then you’ll be “the first to know” when we find your franchise unit.

THE MOST RECENT LIST OF FRANCHISES

Entrepreneur Magazine‘s January issue has hit the mailboxes of subscribers. It should be at your local bookstore by Christmas. It’s a great “catalog” of who’s who in franchising and gives you a simple way to compare similar concepts as to number of units, costs, and recent growth rates. The copy and the adds are full of superlatives: “best,” “biggest,” “fastest growing,” “hottest,” “ideal,” “perfect,” “simple,” etc. Remember, these are all sales and marketing hype aimed at the masses. Your situation, your needs, your skills, and, therefore, your best franchise are unique to you. When you’ve finished reading Insider’s Secrets, you’ll understand how to pick the best system for you.

YOUR NEW YEAR’S RESOLUTION

As we pause for the holiday season and we reflect on the past year, I hope you’ll consider setting a Resolution to devote 8 hours a week to investigating a franchise of your own. It’s fun to daydream, set goals and plan for the future, but it takes work to accomplish your goal.

If you’re going to make the big step into entrepreneurship, you need to be prepared. Look at our suggested reading list. (http://www.franchisedoc.com/ReadingList.html)

Visit your library, or a bookstore and find resources to get you prepared. Pay the price, and by this time next year, you’ll be plotting expansion plans for your unit.

“What Color is Your Parachute,” by Richard Bolles, has excellent suggestions on how to determine where you can excel in the business world. Our FranchiseFit Entrepreneurial Report is another tool to help you discover hidden talents on which you can capitalize in your new venture. (http://www.franchisedoc.com/FranFit.html)

Success occurs when opportunity meets preparation.

Make next year–YOUR YEAR!!

The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800 220-8256