Archive for March, 2010

Franchise Amortization

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The Big Business Of Professional Football

Professional American football may as well be the most profitable sports in the world, having earned an income of $17.8 million from $204 million revenue in 2006. Nearly three out of four Americans watch at least one NFL game on television every season, and considering it’s scheduled on primetime, it beats out any other sport when it comes to having the most views.

From humble beginnings to a multi-billion business

American Football started out pretty unassuming, with a bunch of college students deviating from the English sport rugby and soccer. The first intercollegiate football game between Rutgers and Princeton happened in 1869 and from then on, American football went on to become a national (and even international) pastime. Today it has evolved into a professional sport and a multi-billion dollar business.

Worldwide audience

NFL is now available for worldwide viewing and is not only enjoyed in the United States but has fans worldwide. Even high school and college football games have big fans and are broadcast on cable television every Friday and Saturday afternoons during football season. Professional football games are broadcast every Sunday and Monday nights, and during the football season, a dozen games are broadcast every weekend. At the end of NFL season, the national championship is determined in the Super Bowl where the champions from the National and American conferences finally meet. Played in January, the NFL Super Bowl has been called “the most watched sporting event of all time.” It is televised around the entire planet, gathering a worldwide audience, and with dozens of foreign translations.

The NFL revenues

NFL and its franchises get its revenue from sponsors and television commercials. The competition among the networks for the game’s coverage rights also contributes to the high value of the NFL franchises. In the 1920s, a franchise cost merely $100. By 1960, each franchise was worth about $2 million. When NFL decided to expand and sold teams to Jacksonville, Florida and Charlotte, North Carolina in 1993, the cost of the franchise was $140 million dollars. Also in that year, the NFL signed a four-year, five-network television contract and totaled almost $4.5 billion dollars in revenue.

The most valuable franchise in the NFL

The Dallas Cowboys, NFL’s most valuable franchise, is building a $1 billion stadium which is set to finish by 2009. Because of this stadium that is financed by both private and public money, the Dallas Cowboys is now worth $1.5 billion. Such teams as the Jacksonville Jaguars, Atlanta Falcons, and Buffalo Bills are complaining that the several millions they earn every year are insufficient to keep them competitive against richer teams like Washington, New England, and Dallas. The NFL has a salary cap that limits the player salaries to 57% of the total league revenue but teams can go beyond this limit by signing bonuses which get amortized only after the life of the contract. Cowboy’s star player, Jones is worth more than $1 billion and because of this new stadium, can lure a lot more money and thus inflating his bank account.

About the Author

Rick Grantham is an avid sports fan. Most of Rick’s articles focus on
tailgating
. Many articles are related to
mlb merchandise
and other sports related topics. Rick is a contributing author to BooYah Village

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Franchise Restaurants For Sale

Due Diligence – On Yourself as a Restaurant Buyer

This ten step questionnaire will help you define what you want and more importantly, what fits your lifestyle before you go on the search for the perfect restaurant.  This is vital to the buying process and the step that most buyers overlook.  Prepare first, since once you being to make inquiries, multiple opportunities will surface.  It’s also important to do your homework up front since you can’t be taken seriously when you inquire about everything from $55,000 asset sales to $2.5 Million dollar waterfront properties with real estate. We Sell Restaurants features listings of every price point but know what YOU want first is key to a thoughtful and successful transaction.

1)  The answer to this question lies with whether you need an immediate income (in which case only the first answer is an option for you) or whether you have the capital (and risk tolerance) to invest and building earnings over time.  Consider that it will take between 18-24 months for a GOOD operator to perform a turn around or begin seeing profit from a start up so plan accordingly.
I am interested in:
a)  An operating restaurant – profitable
b)  A turnaround situation
c)  A closed restaurant
d)  Franchise Restaurants
e)  New Space

2)  The answer to this question lies within your financial situation.  Landlords will require both good credit and a personal guarantee on the lease in most cases.  If you plan to lease and don’t have both, you may want to consider something with real estate so you can leverage the purchase of the real property with a lender. If you’re purchasing real estate to convert, it’s going to take a lot of capital
I am interested in
a)  Restaurant and Real Estate
b)  Restaurant Only – with Lease
c)  Real Estate Only – I’ll convert

3)  The answer to this question may lie with your background or experience.  You may also have personal values or other criteria which would stop you from looking at certain concepts. 
I am interested in
a)  Upscale/Fine Dining Restaurant
b) Bar-B-Que Restaurant
c)  Pizza Restaurant
d)  Italian Restaurant
e)  Sports Bar Restaurant
f)  Asian Restaurant
g)  Deli/Sandwich Restaurant
h)  Franchise Restaurant
I)  Take Out/Delivery Only Restaurant

4) The higher the net income of a restaurant (which typically sells for 2- 2.5 times earnings, the higher the purchase price.  What you can afford will drive the answer to the following question.
I am interested in
1)  Earnings of  under $50,000
2)  Earnings of between $50,000  and $100,000
3)  Earnings above $100,000

5)  The answer to the following question is straightforward.  It may be very relevant to an owner that may finance a portion of the purchase or landlords and lenders who may turn away candidates without background and experience.
I do have or I do not have Restaurant Experience

6)  This question affects your future lifestyle and time with your family.  It’s a good one to discuss with other family members before you begin looking at sports bars open until 2am each night.
I prefer a restaurant that is
a)  Open any hours
b)  Open until early Evening (11pm)
c)  Open Late Night/Early morning hours (2am)
d)  Open for breakfast and lunch only

7)  The highest profit margin in a restaurant is made on alcohol sales so the alcohol ratio will drive the net profit on a business up or down depending on how much is served.  Local and state restrictions on the type of alcohol licenses generally dictate a ratio.  The answer to this question is NO alcohol if you have a felony conviction in your background as you will not qualify for a liquor license in most states.
The most desirable alcohol ratio for me is:
a) Low to No Alcohol/High Food
b) Mid Alcohol/Mid Food
c)  High Alcohol (bar levels)/Low Food
d)  No Alcohol

8)  This is a good place to try and take a break and articulate to yourself or another person why you are motivated to buy a restaurant.  The answer may determine whether you continue on this quest or decide on another type of business. 
My motivating factor to buy a restaurant is
a)  Investment/Money making potential
b)  Restaurant Experienced/now I want my own place
c)  Seems like a good idea
d)  I’m not sure

9)  This question is incredibly important in major metro areas.  Decide up front how far you will travel or if you will move to acquire the right restaurant.  Changing your children’s school is a family decision.  The right business in the wrong location may not be an option for you.
When it comes to finding a restaurant, these are my criteria from my current home
a)  I am willing to travel _________ miles from my current home to my business
b)  I am willing to move _________ miles from my current home to my business

10)  The last question to ask yourself before you go shopping is what you can afford. You wouldn’t shop for a house without a pre-approval or a budget and you shouldn’t start shopping for a restaurant without the same.  Who’s paying for the business? Will you need financing?  Are you looking for owner financing?
My financing plan is:
a)  I will not require financing or capital
b)  I have loans or investors secured up to __________
c)  I need the owner to finance ____% or $______ but I can find $__________ to put down

If you seriously consider all ten of these questions before you buy a restaurant, you will be equipped to meet sellers and brokers with a clear strategy for your own success. Consult an expert at www.wesellrestaurants.com for more information on this topic and all others related to buying a restaurant.

About the Author

Eric Gagnon is the founder and President of We Sell Restaurants and www.wesellrestaurants.com. We Sell Restaurants is one of the nation’s largest restaurant brokerage firms. We are nationally known for our expertise. We Sell Restaurants is designated as a national industry expert by the Business Brokerage Press. Our leaders serve on the Executive Board of the Georgia Association of Business Brokers as well as holding membership in the Florida Business Brokers Association, the International Business Brokers Association and the Georgia Restaurant Association.

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Las Vegas Franchise

las vegas franchise

Buying a Franchise – Evaluating Franchise Investments and Franchise Disclosure Documents – Tips From a Franchise Expert and Franchise Attorney

Millions of people dream about owning their own business. Having the independence that being your own boss brings, the security that no one can fire you, enjoying a good income – and for the most successful – the accumulation of wealth and prosperity. Unfortunately, the cards are stacked against a new small business making it big – or making it at all. An endless stream of problems makes competition from large, sophisticated chains too intense. Many new start-ups end as failures.

Buying a franchise represents a different approach to starting a business.  For an upfront franchise fee plus ongoing royalty payments, the parent company teaches its business model and methods to the franchised-operator who shoulders all operating and financial responsibilities of the outlet. Some statistics are impressive: it is said over 40% of all U.S. retail sales are through franchised establishments. While franchise giants like McDonalds, KFC, H&R Block and Radio Shack are familiar, household names, franchises are available in a wide range of industries. The list of 3,000-plus companies selling franchises span over 100 different industry categories.

American Dream … Or Nightmare?
But just as franchising represents a chance to get rich, it’s also a chance to get stung. An alarming number of franchised operators make less than the minimum wage, working seven days, sixty to eighty hours a week, pursuing an expensive and elusive American Dream that turns into a nightmare. Since the ongoing franchise royalty payment comes right off the top, as a percentage of gross sales or a fixed minimum amount, the franchise company gets an assured revenue stream, even if its franchised units are operating unprofitably and are sold over and over again to new, unsuspecting buyers. The internet is filled with comments of the many people who lost $250,000 and more on concepts like eBay Drop off stores (iSold It), 30 Minute Fitness concepts (Curves), The UPS Store, etc. Yet many of these companies continue to sell and resell franchises over and over again. How do they accomplish that? Because there are enough people who think they can “believe” their way to success, even with a concept or business that’s not working in the marketplace. As discussed below, in many cases franchise investment decisions are incredibly based on emotionalism, not on business logic or even common sense.

Ownership And Being Your Own Boss?
Pride of ownership and being your own boss are highly touted phrases in franchise recruitment ads. But these are more fantasy than reality. Although you get all the financial exposure, headaches and stress of business ownership, what do you really own? A franchise owner is merely licensing a trademark (or service mark) from a company that dictates every detail of business operations. So the real boss isn’t you, but the company that sells you their franchise rights . . . and sea of franchise obligations.

Equity Build up?
But at least you’re building up equity, the ownership value of the business as a going concern beyond your investment of money, to compensate for all those years of hard work and long hours – right? Wrong – at least in the world of franchising. The franchise company reserves rights to acquire your entire business at below wholesale prices if their contract is not followed precisely. The acquisition rights provide for predetermined asset-based valuations, like book or liquidation value. These valuation methods provide bare minimum compensation (the used value of some file cabinets, office furniture, equipment, etc.) and are not generally used to determine the selling price of any business.

Absolutely no compensation is paid for established goodwill, the value of a business that is generating $X in profit or cash flow every month after years of effort, investment and expense – thus eliminating the most valuable ownership asset. Of course, you may be able to sell your franchise to a third party for a sales price that includes an earnings-based valuation. But that’s possible only if:
(a) you can find a buyer who is willing to live within the complexities of a franchise relationship, and
(b) you happen to own a franchise that’s showing healthy profits.

What follows is a bottom-line franchise checklist and tips compiled by franchise attorney and franchise expert, Mr. Franchise, based on reviewing over 500 franchise offering circulars and twenty-eight plus years of experience in the franchise industry – including ownership of a very successful franchise. These factors to consider in making a franchise investment will help you eliminate 95% of the companies you are considering. Then, you can concentrate your efforts on the 5% “cream” of the crop” companies that may deserve consideration. This franchise checklist assumes you’re suitable for and willing to live within the confines of a franchise relationship. It also assumes the franchise company:

(1) has itself successfully operated the concept being franchised for at least five years at multiple locations;
(2) is not plagued by franchise litigation and franchise lawsuits from disgruntled franchise owners;
(3) does not have unusually high franchise attrition rates (owners who have “left the system”); and
(4) has a balanced, fair franchise contract.

SOLD It – An American Dream That Turned Into A Nightmare

An example of a franchise company in trouble that failed to meet basic threshold standards is iSOLD It, an eBay drop-off store franchise. The company started its one and only company-owned store in November of 2003. Just weeks later, on December 10, 2003 they filed an application to sell franchises. The California Department of Corporations didn’t say “What are you thinking? You’ve only been in business a couple weeks, how can you even consider selling franchises?” Nor did they require this be disclosed as a risk factor on the cover page of the Franchise Offering Circular, as it should have. Disclosure responsibilities ultimately rest with the company (and its attorneys), and this will become one of many issues in future franchise litigation.

Instead, the Department simply collected its $675 filing fee and issued an order declaring the franchise registration effective the next day – on December 11, 2003. Then the magic of franchise marketing  took over. By 2006 the company had nearly 200 franchised drop off stores in operation and was touted by Entrepreneur Magazine as #1 in their list of “Top New Franchises for 2007” and #17 on their “Hotter Than Hot” franchise list. Entrepreneur Magazine, which requires franchise companies to submit their FOC’s (Franchise Offering Circulars) for supposed review each year before they’re listed, didn’t consider the high attrition rate (franchise owners leaving the system) or the fact that the audited financials in their FOC showed the company hadn’t operated profitably since 2004 as serious negatives and awarded iSold It the #1 listing for Top New Franchises of 2007. How did all of this happen? It’s yet another bizarre reality in the world of franchising.

The franchise company’s audited financial statements for the year ended 12-31-05 showed an operating loss of $1.1 million. Nine months later, in September of 2006, the net operating loss mushroomed to over $4 million.

In its November 3, 2006 Franchise Offering Circular, the table in Item 20 disclosed a total of 10 franchise owners leaving the system, yet a hand count of Exhibit D-3’s “Former Franchisees” revealed a significantly different number – 44. A similar “discrepancy” exists about franchise transfers. Item 20 says 12 transfers whereas Exhibit D-3 discloses 27.

In a long overdue letter distributed to franchise owners on April 5, 2007, CEO Ken Sully painted a dire picture of an American Dream that had turned into a nightmare. Mr. Sully’s letter admitted the company has not been profitable since 2004 (according to the audited financials, the company showed its one and only operating profit of $356,286 in 2004 before the precipitous downward spiral of 2005 and 2006). Over 60 franchised stores have closed and many more are struggling for survival. Mr. Sully observed “Tragically, many individuals who believed passionately in the potential for the category have lost sizable investments, including homes and retirement savings.”

Lost homes and retirement savings? How could such a travesty happen? I counseled a number of persons considering an iSold It franchise and warned all of them against the investment. Fortunately, they followed my advice. The concept was never proven in the marketplace before franchise efforts began, violating the most basic Franchise 101 precept. I also felt the management team lacked strong franchise credentials and the five-day training program was woefully inadequate. Finally, the franchise company was operating increasingly in the red and had a high attrition rate (owners leaving the system). It didn’t take a lot of brain power to see this was an accident waiting to happen. I predicted the bubble would burst and, sadly, it did.

Common sense could and should have prevented so many people from losing so much. Unfortunately franchise sales persons appeal to emotions (passions and potential, to use Mr. Sully’s terms) and strive to keep common sense and business logic out of the buying equation. If a franchise company is able to obtain a ranking on a media list, the sale is even easier. Reprints of high rankings on lists, like Entrepreneur Magazine, are included in the package given to franchise buyers, who are lulled into a false sense of security and begin to stumble over each other in a rush to sign up before someone else takes their desired territory (another favorite closing technique used to sell franchises).

iSold It! amended its FOC at the end of May, 2007 to add some long overdue risk factor language to the cover page of its Franchise Offering Circular. Hmmmm… maybe they read my comments above and did a little research. The new FOC cover page risk factor language says their “franchise system is still new and unproven.” That’s very interesting. How can they say a franchise system, that’s approaching its fourth anniversary, is “still new?” Maybe they’re looking at things from a ‘how old is our universe’ perspective? The word “unproven” is another play on words. The system is most certainly proven in the sense that many people, to quote Mr. Sully, “have lost sizable investments, including homes and retirement savings.” So why not use this quote directly in their Franchise Offering Circular? Answer: can’t sell any franchises that way.

In an August 31, 2007 Business Week article, CEO Sully claimed it wasn’t necessary to disclose these risk factors in the FOC. His reasoning: “We told everybody that this is sort of like the wild, wild West” he says. “It’s a brand-new concept and nobody knew for sure where it was going.” Disclosure was added to the UFOC recently, he says, “because of the number of stores that weren’t understanding the complexity of the business.” Hello? You don’t tell your franchise investors after the fact what you were required to disclose in the FOC before they bought so they could make an informed investment decision. That’s the purpose of franchise disclosure laws. And claiming written disclosure of risk factors in the FOC is not necessary if a prospective buyer hears a salesman’s verbal wild, wild West story ignores franchise disclosure responsibilities and is really an admission the company failed in this regard. With its amended FOC, the company incredibly continues marching forward with franchise marketing efforts.

Now, let’s consider the franchise checklist and factors to consider before any leap into franchising.

INDUSTRY TREND
Is the franchise in a cutting-edge industry that is doing well currently and is projected to do well in the future despite any economic slowdown? Education and home-improvement services are stable categories. Food is over-saturated generally and, except in exceptional circumstances, is not worth the high investment, long hours, headaches and marginal income.

TOTAL INITIAL FRANCHISE INVESTMENT
In general, don’t expect a franchise that requires a five-figure initial franchise investment to produce a six-figure income. As with most things in life, you get what you pay for. On the other hand, don’t assume a six-figure investment will lead to a six-figure income level. Be realistic and conservative. Is the total initial franchise investment range (including working capital) $125,00 or less; and the maximum investment less than $200,000? You can find solid companies in this investment range if you’re willing to look around.

Don’t forget to consider long-term financial commitments, particularly the real property lease (see discussion below under “LEASING AND LOCATION”). Also, the working capital estimate (called “additional funds” in Item 7 of the company’s franchise offering circular) does NOT cover operations up to the break-even point. It only covers a short initial phase (usually only three-months) of operating costs As the break-even point (where revenues cover all operating costs) may not happen for one, two or more years, knowing only what it’s going to take to get you through the first 90 days is not helpful – in fact it may set you up for financial suicide. In many cases, reaching the break-even point can require more reserve funds than the total initial capital investment. Don’t ever forget the name of Item 7 in the Franchise Offering Circular: “Initial Investment.” If you don’t have enough reserve capital to reach the critical break-even point, your entire investment will go down the drain and franchise failure occurs.

One franchise owner in a relatively low investment and low operating cost window cleaning franchise said his biggest surprise was how long it actually took his franchise to be profitable. Going in, he thought it would take 12 to 15 months. It ended up taking twice that time. Fortunately, he had enough reserve capital to make it there, but declined to say what his actual franchise profits or income level were once he reached “franchise profitability.” If you’re operating just above the break even point and making less than minimum wage, is that anyone’s definition of success?

REAL BUSINESS
Is this a legitimate retail business, as opposed to a “work out of your home” operation? The vast majority of work out of your home concepts produce marginal income at best.

FRANCHISE MANAGEMENT EXPERTISE
Does the management team of the franchisor (the company selling you the franchise) have executives with demonstrated past achievement and experience in operating a franchise company (not just persons who have sold franchises)? If not, this is a big RED FLAG. Many companies enter franchising and fail to realize they are in a brand new business – one requiring entirely different management skills and abilities to navigate franchise relationships. A seasoned franchise management infrastructure must be in place. If the franchise management team lacks strong franchise credentials, or does not receive ongoing advice from qualified individuals, you might as well take a trip to Las Vegas with the money you’re intending to invest. Your chances of making vs. loosing money are roughly equal.

NORMAL WORKING HOURS AND DAYS; SUFFICIENT FRANCHISE INCOME LEVEL
Will the nature of the business allow you to work a normal five-day, forty-hour workweek? Life is too short for the seven-day, sixty to eighty hours a week, workaholic lifestyle that destroys health, family and pocketbook. Financially, we’ve calculated the true hourly rate for franchise owners who work these workaholic hours and discovered many are making far less than the minimum wage. One couple who operated a $200,000 fancy pizza franchise in an upscale mall were shocked to discover they were making fifty cents an hour each. Hardly an income level to recoup or justify the franchise investment. Many more fast-food franchise operators make even less, or operate at a loss until their funds, retirement savings, homes, etc. are exhausted. Buying a franchise in a non-food industry doesn’t necessarily improve the franchise profit picture. In a 2006 article “Mail Boxes Etc. Owners Fighting UPS Conversion,” a Mail Boxes, Etc. franchise owner who operated his franchise since 1993 reported profits for a typical MBE store like his were $16,000 per year after paying royalty and advertising fees to the franchise company. That calculates out to about $8.33 per hour for a forty-hour work week, approximately the wage of an entry fast-food worker.

Another major shortcoming of disclosures in the Franchise Offering Circular is not telling you how much money the franchises in the network are making. Instead of answering what is the most important question in a franchise investment decision, the franchise disclosure laws make this “optional” for the franchise company to answer or not. If they do answer this critical question, it will be found in Item 19. But don’t hold your breath – more than 90% of franchise companies “decide” not to answer this question. It’s another bizarre reality in the world of franchising. Although they collect complete monthly (and in many cases, weekly) financial profit and loss statements from their franchise owners, and know exactly how much their franchises are making (or losing), more than 90% decide not to share this information before you buy one of their franchises. A number of franchise salespersons have told persons asking this question: “the franchise laws don’t allow us to answer that question.” Nothing could be further from the truth.

And just because you’re a business executive making a 6-figure income now, don’t assume this income level will be duplicated in a franchise investment just because the company “approves” your application. One such executive, despite a plethora of negative feedback from current and past franchise owners who’d lost everything, marched forward with her franchise investment in a 30-minute fitness concept. Despite her 6-figure income, she didn’t invest a dime in professional franchise evaluation advice and stated she was taking a leap of faith, hoping to build her wings on the way down. Build her wings on the way down? Sound’s (and is) crazy, but this happens all the time. Due to the ploys of the franchise salesperson, too many franchise investment decisions are based on emotionalism. Prior business skills, business sense (and even common sense) are short-circuited. Needless to say, if this business executive made a similar investment decision for her corporate employer paying the 6-figure salary, she would be promptly fired.

MINIMUM NUMBER OF EMPLOYEES
Can you operate the franchise business with 6 or fewer employees? Managing dozens (or in the case of some fast-food operations – hundreds) of minimum-wage teenagers who are constantly quitting or simply not showing up for work is a royal pain in the ….. Well, you know what we mean.

LEASING AND LOCATION
For most retail franchises, the triple net lease of the location is the biggest financial commitment, larger than the total franchise investment. Yet, the typical real estate lease and its ramifications are not required disclosure in any Franchise Offering Circular (FOC). For example, an estimate that you’ll need 2,000 sq. feet of space with expected rental of $5 to $10 a foot per month is normally disclosed in the Franchise Offering Circular’s initial investment table as Leased Real Estate $10,000 to $20,000. A footnote to the investment table may say “assumes 2,000 sq. ft. at $5 to $10 a foot.”

But, that’s only the beginning of a much longer story. The lease is normally a 5 to 10 year triple-net lease. So, the financial commitment made when the lease is signed is at least $600,000 (at $5/foot for 5 years) to $2,400,000 (at $10/foot for 10 years). And this doesn’t include substantial, additional obligations to pay all of the landlord’s yearly property taxes, insurance, common area operating expenses, etc. With hundreds of thousands (or even millions) of dollars in financial obligations at stake, personal guarantees and other risks, more than just a warm, fuzzy feeling that everything will work out is necessary.

Key questions to ask here:

(a) is the franchise you’re considering one that can be operated in a low rent commercial business zone? Avoid franchises requiring the costly expenses and triple-net leases of a visible retail storefront and the extravagant rent associated with areas of high foot traffic, like shopping malls. You’ll sleep much better at night.

(b) What’s your total financial commitment under the lease?

(c) Do you have sufficient liquid assets (or a willing, sufficiently liquid third party guarantor) to meet the landlord’s lease qualification standards?

If you don’t, you might as well forget about investing in the franchise. Or even worse, getting involved in a questionable franchise and business model, then realizing you’ve made a big mistake – and discovering you’re on the hook personally for a $500,000+ lease obligation.

A related real estate variant is securing a lease with a sufficient term (with renewal options) to recoup your investment and make a profit. In July, 2005, an attorney in her mid-forties purchased an existing ice cream store franchise for $375,000 believing it to be a “once-in-a-lifetime opportunity.” Trading her briefcase for an ice cream scoop, she attended the company’s 11-day Ice Cream University and assumed operations of the ice cream store. Turned out it was an opportunity – but only to inherit a store with numerous problems. These problems included (but were not limited to) a lease that would expire the following summer and a landlord who’d previously announced the lease would not be renewed. Rather than pay the $100,000-plus in relocation costs, the attorney returned to the practice of law, but is still paying off $350,000 remaining on the loan taken out to buy the once-in-a-lifetime franchise opportunity. Although there’s a franchise lawsuit pending, it’s yet another case of “franchise fever” – this time attacking a professional no less. Who would ever commit to paying $375,000 for an existing retail franchise without checking out the l-e-a-s-e? Sound’s like another bad attorney joke, but I can guarantee she’s not laughing. Business fundamentals were ignored or forgotten in the rush to acquire the opportunity of a lifetime. And I’m willing to bet not a dollar was spent on competent, pre-investment franchise advice.

IMAGE AND LIFESTYLE
How does flipping burgers, scooping ice cream and cleaning restrooms fit the image of what you want to do for a living? Investing in a franchise will be the most important financial and psychological decision you ever make. Many prospective franchise owners fail to realize they’ll be wearing virtually every hat at some point, from salesperson to bad-debt collector, from firing employees to bathroom janitor. The franchise owner is usually the first one to arrive in the morning – and the last one to turn out the lights late at night. And you’ll need to forget about corporate perks like paid vacations, paid holidays and sick pay. In their place, substitute financial pressures, unexpected events and money draining out of your savings and retirement accounts. Does the typical working day and responsibilities of the franchise you are considering fit your personal image and desired lifestyle? You can experience some of this BEFORE you invest by working for a couple weeks in an outlet owned by one of the existing franchise owners.

TRUE FRANCHISE VALUE
Buying a franchise from a “blue chip” franchise company that has spent decades and hundreds of millions on advertising to develop their brand can make a lot of sense. These companies have “true franchise value” that compensates for the long-term disadvantages of ongoing royalty and advertising fund payments. Often these additional payments literally mean the difference between earning a profit and operating at a loss. In unknown franchise chains with little or no brand recognition, you the franchise buyer are building their brand from scratch, and are saddled with severe, long-term competitive disadvantages.

In these unknown franchise chains, you have to ask yourself a simple, common sense question. What value is the company giving you that you couldn’t learn on your own by working at one of their locations as an employee for a couple months? Franchise truth be told, what most unknown franchise companies are selling is just a business opportunity – teaching you how to get into a new business venture. But unlike a business opportunity seller that charges a one-time fee to help get you into business, they call it a “franchise” and charge ongoing royalty and advertising fees like they’re a McDonalds or other blue chip franchise company.

The reality is they’re not a McDonalds type franchise – not even close to one. In the majority of these lesser-known franchise chains, you’d be much better off starting an independent business on your own. You can learn most or all of their so-called “secrets” in the franchise interviewing process and by talking to (and possibly working a short time for) existing franchise owners.

FRANCHISE PROFITABILITY & “SUCCESS”
Dr. Timothy Bates’ study released in 1993 by the Entrepreneurial Growth and Investment Institute in Washington, DC (and another study published in 1996) was the first to compare start-up costs, franchise profitability and franchise failure rates for franchised vs. nonfranchised firms. In his analysis of some 7,270 firms over the test period, Dr. Bates found that startup capital for a franchised business averaged $85,293 compared with average startup capital for nonfranchised firms of $30,156. In 1987 nonfranchised firms reported average pre-tax net income of $19,744 as compared to a loss of (-$1,548) for franchised firms. Dr. Bates concluded “Despite their larger revenues, much better capitalization, and their supposed advantages of affiliation with a franchisor parent firm, the franchisees lag behind cohort young firms in profitability and rates of survival.”

The franchise companies ignore both studies by Dr. Bates, pretending they never happened. Instead, other techniques are employed. For example, some franchise companies use misleading success statistics to sell their franchises. Their promotional materials say franchises generally enjoy a 90% success rate, compared to less than 20% for independent firms. These figures are based on unverified information supplied thirty years ago by a select, non-representative group of franchise companies. A full third of the companies receiving “questionnaires “ elected not to participate. There was no verification of any of the information supplied by the franchise companies, not even random, spot checking. Nor was any effort made to identify franchise companies who, along with the franchise owners in their chain, had gone out of business.

Even more recent “studies” saying nine out of ten franchise owners (90%) consider their franchise to be somewhat or very successful also suffer from serious methodological flaws. These were simply telephone surveys of franchise owners who were still in business and asked to say (with absolutely no definition of the term “successful”) whether they felt their business was “very unsuccessful,” “somewhat unsuccessful,” somewhat successful” or “very successful.” Franchise owners who had gone out of business or bankrupt were not included in the survey.

Even if terms are defined and a representative sample obtained, franchise owners can be a quirky group. Hence the need, as in Dr. Bates’ studies, for review of financial data. I remember evaluating an existing franchise for a client. I asked the current owner of the franchise if his business was successful. He said it was very successful. But his financial statements revealed a different picture. He’d never taken a dollar out of the business for himself, never made a profit in two years of operation, and was on the verge of bankruptcy. Another owner of a bakery franchise, interviewed by Business Week, says being successful in franchising means “adjusting your definition of success.” He says he makes a profit, but declined to say what it is, or if he’s ever recouped his $250,000-plus initial franchise investment. Incredibly, he insists he’s in business “for lifestyle reasons, not profit reasons.” Huh? Probably a quote from the company’s franchise recruitment materials. In the world of franchising “success” and “profitability” are very subjective terms.

FRANCHISE BROKERS WHO FIND YOUR PERFECT MATCH?

Does the franchise you are considering have its own in-house marketing department, or does it utilize outside franchise brokers? The use of franchise brokers is a definite red flag. First, it indicates the franchise company is not very serious about who it lets into the franchise network, or even worse, they’re desperate to sell franchises. Second, franchise brokers receive a substantial commission up to 50% or more of the franchise fee you’re paying the franchise company. Franchise Broker Realities: (1) Their service is definitely not “free” despite these and other similar misrepresentations. It’s really common sense – how could anyone offer a “free” service and survive in business? Unfortunately, the common sense part of the brain tends to short circuit when the franchise brainwashing process begins. The simple truth is if you buy one of the franchises they’re hawking, your money goes to the franchise company, then into the broker’s pocket. If anyone ever calculated how much time they spend to collect their $15,000 or $20,000 commission, it’s probably a lot more than a brain surgeon earns. (2) Franchise brokers definitely do NOT have your best interests in mind. They will do or say whatever they have to in order to close a deal and earn their commission.

Many franchise brokers claim they will help you find a franchise company that is the perfect match for you. In the beginning it sounds good. There’s some personality testing and review of your personal finances. At the end of the day, it turns out they only represent (and steer you towards) a handful of small franchise companies you’ve never heard of before. A detailed analysis often reveals these highly touted franchises produce mediocre or even below minimum wage financial performance. Yet franchise brokers don’t mention this, and individuals continue to rely on their recommendations, believing the broker represents them. Nothing could be further from the truth.

Also, many franchise brokers call themselves franchise consultants. A franchise consultant is usually an independent adviser who offers advice to others (usually franchise companies or firms that want to franchise their business) for a fee. This makes their advice more impartial in theory as long as they are not compensated by third parties. Because they are not legally required to disclose actual or potential conflicts of interest, it’s important ask questions. For example, if you’re using a franchise consultant who is recommending the “best franchises,” are they paid anything by the companies on their list? This could be a commission, kick-back or consulting fee. As mentioned, many franchise brokers call themselves “franchise consultants” to hide their true identity. So, make sure if you’re dealing with a franchise consultant, he or she is not really just a franchise broker in disguise.

FRANCHISE DISCLOSURE LAWS
The franchise disclosure laws, while requiring franchise companies to give you certain, limited information, don’t come close to protecting your interests. For example, as discussed above, Item 7 of the Franchise Offering Circular only requires an estimate of additional funds for 90 days as part of the investment information. But economic reality is you need to know the additional funds you’ll need to reach the break-even point, which can be years away, or your entire “initial” investment will go down the drain. You’d think this type of information would be required by franchise disclosure laws, but it’s not.

FRANCHISE REGISTRATION LAWS
Don’t ever assume that because a company has registered its Franchise Offering Circular in your state, someone at the state has approved or reviewed the document in your favor. Franchise registration is obtained by simply forwarding documents and paying a filing fee – period. In most cases, franchise offering circulars are given an extremely limited review to ensure state-specific disclaimers are present.

I remember filing a registration application for a new franchise company in a state with a reputation for being one of the “toughest” franchise registration law states in the country. After the three-week review period set forth in the statute had gone by, and not hearing anything, I called the examiner assigned to the application. After looking through his files, he finally found my client’s offering circular and application. He apologized for entirely misplacing the file and promised to immediately review the application and call me back. Ten minutes later, he called to say he’d finished and was making the registration effective that day. Ten minutes of review and the franchise company was given the state’s green light. This is not an isolated case – it happens all the time.

WHAT STANDARDS MUST A FRANCHISE COMPANY MEET TO SELL FRANCHISES; ARE THERE ANY REQUIREMENTS TO FRANCHISE A BUSINESS?
Incredibly, the answer is – none. There are no minimum standards or requirements to franchise a business except preparing a Franchise Offering Circular. It’s yet another bizarre reality in the world of franchising.

You and I could have no background in any business, form a new corporation or LLC, capitalize it with only $1, put together a Franchise Disclosure Document and file it with any franchise registration state. While the offering may be subject to an impound or escrow requirement because of the low capitalization ($1), we’d still get “registered” and be able to sell as many franchisees as we want.

In these 14 franchise registration states, we may not be able to receive any money until each franchise actually opened, but simply posting a bond would alleviate this difficulty in the franchise registration states. And in the vast majority of states there are no franchise registration laws, so we’d be able to sell franchises and collect fees with impunity once we compiled our Franchise Offering Circular. The federal FTC Franchise Rule doesn’t protect against this risk either – it only requires disclosure (i.e. provide a Franchise Disclosure Document) and has no registration component or minimum standards for franchise companies.

Basic investor protections and requirements found in both federal and state securities laws for over 50 years were never carried over to franchise investments. While most non-blue chip franchise companies could never even qualify to sell you a single share of stock in their company, they are entirely free to collect unlimited franchise fees, ongoing royalties, equipment and other purchases, as well as cause you to incur financial obligations totaling hundreds of thousands of dollars, or even millions in some cases. This isn’t information you’re likely to find in the glowing articles about franchising and franchise companies prevalent in the media.

CLOSING REMARKS
Remember, you are the only guardian when it comes to your franchise investment. It’s definitely an environment where the phrase “Buyer Beware” applies. So, before you sign on the line and make what will undoubtedly be the most serious financial and emotional commitment of your life, get all the facts and figures.

One couple I counseled after-the-fact, invested $2 million in a new franchise company. The contract they signed gave them no right to terminate, no matter what the franchise company did or didn’t do. Of course, the contract gave the franchise company unlimited termination ability, a right it had exercised. The franchise company’s management team had no one with experience in running a franchise company. Incredibly, the couple had not spent a dime on legal or business advice before investing $2 million. The once friendly franchise company had transformed into a formidable foe and was poised to take over their franchise. Sadly, this happens too frequently in franchise investments. Decisions are made on fuzzy feelings and emotionalism. In an effort to save a couple thousand dollars, franchise investors risk homes, retirement savings, everything they have. Then they scratch their heads in amazement later on after inevitable and often horrific problems develop, wondering how they could have been so nearsighted.

Another indispensable level of inquiry is whether you’re getting true franchise value and whether you’d be better off doing the business on your own. In the overwhelming majority of franchises touted by unknown companies, franchise value isn’t there and doing the same thing independently makes better economic sense and actually decreases the risk of failure.

Finally, and this applies to franchise investments as well as investing in any business venture, develop a plan to succeed but also plan a franchise exit strategy that minimizes financial risk in case things don’t work out. Both plans need to be thought through before the investment is made. Don’t wait until problems develop to start thinking about a franchise exit strategy – by then it’s usually too little, too late.

For more information, visit the Franchise Foundations Website.

© 1990-2008, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

About the Author

Known in the industry as Mr. Franchise, Mr. Murphy is an internationally-known franchise attorney, franchise expert, author, and instructor. For the past twenty-eight years he has specialized exclusively in the franchise industry and owned a very successful franchise in the home improvement field. He has written over 30 publications, including four books on franchising and one book on trade secrets. Mr. Franchise has drafted, reviewed and negotiated more than 500 franchise offering circulars and instructs franchise company personnel in best franchise practices. He also teaches franchise, licensing and intellectual property courses to attorneys. Mr. Franchise is a franchise attorney and Director of Operations for Franchise Foundations a San Francisco-based professional law corporation.

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Car Detailing Secrets

car detailing secrets

A Car Leasing Guide to Buying Cars

If you know that you will be buying a car as your next major purchase, then you also have to know your car lease options. This car leasing guide shows different places where you can purchase (or lease) a car. Although there may be several ways to choose how and where to purchase cars, they each have their advantages and advantages.

First off, let’s start with dealerships. Now as far as a car leasing guide goes, there really isn’t anything wrong with going for a car lease at your local dealer. In fact, depending on the model and make of the car, you just might strike a bargain with your local dealer. They have a wide selection of cars to choose from and you can lease or buy them brand new or even try out some second-hand cars as well (depending on the dealer you visit). Perhaps the best thing of all is that a dealer can help you out when it comes to matters of car ownership and legal protection.

However, some dealers still do have a few tricks up their sleeves, like when they “forget” to mention the hidden charges behind a particular car lease or how they omit extra information regarding insurances, etc. Car leasing guide advice here is to be very meticulous when visiting a car dealer.

Second, if you are going to buy a car from another owner, there are two things you have to ask yourself. Are they selling something that they put their heart and soul into as far as maintenance is concerned? Or are they merely selling something because it is not in any satisfactory working condition at all? Now, the advantage of buying from a private owner is that you will actually have more control over the purchase than if you went to a dealer. You can also negotiate your own payment terms and conditions. You also stand the chance of buying a private car very cheaply. Of course, cheap doesn’t mean that its of great quality.

Third, you can go to a public auction. It is important to know your public auction basics. First of all, small auctions may be great because not so many people are there and you stand the chance of bidding and winning a car at a low price. However, this gives owners who are auctioning their cars the opportunity to take advantage of you if they see that you have no auction skills. Larger auctions, on the other hand, may be safer as there are more people around and a varied selection of cars to choose from. However, your chances of making a winning bid are lessened and you might end up leaving disappointed.

Now, if you are still wondering where you are going to make your next car lease or purchase, our car leasing guide advice says that you study up on the different things you want to know about your purchase and go with a car lease with your local dealer instead. Not only will you be assured a brand new car every 2 or 3 years. Equipped with the right questions to ask, you will be able to make a smart lease instead of risking your money on something plastered with hidden charges and secrets.

To avoid lease complications, find information on some of the best and most transparent dealers around the country. Check out a car leasing guide site like Car Leasing Secrets to get you started on your lease today.

About the Author

Daniel Lamb is an avid fan of prototype vehicles and likes to read about the latest cars in the market. Find out more about best car lease deals on Car Leasing Secrets site.

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Top Franchise Opportunities

top franchise opportunities

Why Not Try Franchise Opportunities?

If you are thinking of setting up a small business but you are perhaps still unsure of what exactly you want to do, or are scared of not being able to generate good business, then you should try looking into franchise opportunities and pick the one that will most suit your taste and budget. You should assess your ability to actually run your chosen franchise opportunity efficiently and successfully; this is an important consideration.

The “EmbroidMe” franchise opportunity is one of the most popular nowadays, whereby you can create custom-made apparel as well as merchandise which has embroidery on it. EmbroidMe is outfitting their customers with creatively customized apparel for both work and play. They have the tagline “Casually Dressing the World” in their retail showrooms and they aim to make their company known through all forms of medium, in corporate marketing programs as well as online. EmbroidMe also offer all sorts of promotional merchandise as well as advertising specialty items.

The EmbroidMe franchise opportunity has gained a sudden commercial boom and this is its biggest selling point. It is a highly new and fresh revolutionary industry concept; its organized system allows the brilliant opportunity of being your own boss. According to the president of the EmbroidMe company (Ray Titus), they are looking for willing entrepreneurs who are hoping to run and manage their own business but in spite of just having a small business, they are well equipped with many benefits that a stable global company can offer them – not to mention, great advertising, and in particular, mass purchasing power.

EmbroidMe has grown significantly and now has over 250 stores all over the world. It has been rated as the number one in the industry for four consecutive years and Entrepreneur Magazine has voted it as one of the 50 fastest growing franchise opportunities.

In regards to staff training and support, the EmbroidMe company will assist in the demographic studies of the area that you are hoping to put up your franchise. A study on your site selection as well as assistance on lease negotiations will be conducted. The EmbroidMe company also organize with you about renovations that will be done on your store. This franchise opportunity also provides a 4-week training program for you and your staff. The franchise opportunity will assist you in conducting interviews, hiring and training perspective employees. As this is a service oriented franchise opportunity, every employee must be able to comply and adhere to EmbroidMe’s strict rules and regulations.

Advantages of this franchise opportunity are as follows: turn key, it is not a seasonal type of franchise opportunity, no experience is needed, it is not a seasonal type of franchise opportunity, it needs only two employees, it is a business to business franchise opportunity and it is part of a $20 billion plus industry.

Another excellent franchise opportunity is the “SIGN*A*RAMA” franchise opportunity which is the largest and full service sign franchise in the world; it has over 700 stores in 30 countries and Entrepreneur Magazine has rated it number one in the industry for six years running. “SIGN*A*RAMA” is very similar to EmbroidMe and is also headed by Ray Titus. “SIGN*A*RAMA” is scouting for willing and able entrepreneurs who wish to have their taste of being their own boss whilst also having the amazing opportunity of being part of a well-known company.

This franchise opportunity will assist franchisees in choosing their desired franchise location, the marketing aspect of the business, and their lease.

About the Author

James Copper is a writer for
http://www.newcareerskills.co.uk

Top Franchise Opportunities with Franchise Direct

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Car Detailing Ri

car detailing ri
Im 28, born and still living in Rhode Island. Can I sue my father now for back child support? Read details?

My dad was separated when he and my mom dated. They got engaged, and planned to have me. After I was born, he chose to go back to his wife without telling my mom, all the while dating my mom on the side. He broke up with mom a few years later. He “tried” to see me but was an alchoholic and never showed. He later got clean and shut off total contact with us. My question; Im 28, born and still living in Rhode Island. Can I sue him now for back child support owed to me? My mom never took legal action cause she loved him. We lived in poverty, on welfare and still struggle. He has 2 houses (in RI & FL) and spends his time on his boat or at the golf club. He provided all of his legitimate children & grandkids with comfy lives, tuition, cars etc. All I wanted was a loving father. Ive reached out to him many times, never wanted it this way. My mom now has MS and needs help. She worked hard to give me a good life, being my mom and dad in a time where 2 parents were the norm. What can I do?

No. Child support is like it states, to support the child. With you being and adult, you are not entitled to it.

In regards to your mother having MS, she should try to apply for social security disability or any other State benefits that may assist her.

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2010 Franchised Players

2010 franchised players

WCWC Web Match of the Week! 2/1/2010

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Franchise Players Nhl 10

franchise players nhl 10
NHL’s Western Conference has its way with Eastern Conference yet again
TORONTO – Roberto Luongo was trying to be polite.
4/5 NHL Charity Shootout Episode 2

Card Franchise

card franchise

Franchise Football Frenzy- Wild Card Weekend- Layeth The Smacketh Down!!! KABLAM!

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Wholesale Car Detailing Products

Learn About The Most Reputable Companies For Wholesale Car Dvd Products

Wholesale car DVD marketers enjoy a major position inside making sure which clients get vehicle leisure techniques and also, ensure that they are content with the automobile audio tracks products. Marketers get products in big amounts as well as provide these to the sellers or perhaps retailers. They’re buying these types of goods coming from manufacturers or even wholesale suppliers that handle huge consignments. You need to purchase from suppliers who have produced an excellent title for themselves available. The actual suppliers use a relatively low cost to the goods and they help to make their own money via massive sales. You will find suppliers which promote worldwide and searching the world wide web will reveal a global of possibilities with regard to sellers. Wholesale car DVD distributors deal with numerous brands that are recognized across the world.

The particular brand names include Alpine, Infinity, Sony, Kenwood and thus various well-known and also unidentified brand names. Sometimes in the past, distributors appreciated monopolies however with the particular growth in technologies, more and more people have joined up with the business enterprise that is considered the multi-million dollar company. Distributors require great relations together with traders so that you can increase the efficiency to get these products in order to buyers. The very huge marketers tend to be generally known as master suppliers. It is because they will use a big capacity to touch vehicle audio tracks products. They frequently type clubs that provide a possibility on their behalf in order to system with each other. They will discuss tips as well as obtain additional possibilities to conduct business. This co-operation is definitely very essential regarding improvement operational.

In order to become the Wholesale car DVD wholesale drop shipper, you should study on the many character of the profession as well as possessing theoretical knowledge is merely insufficient. You should be cast with time so that you can handle all of the issues in which present on their own. The very best place being placed has any pemasok who has elevated the business for a while. If you possibly could outlay cash to become an newbie, it is really worth this. If you can obtain free of charge training then count number yourself very fortunate. A lot of people have got spent a lot cash in the commercial just to drop. As well as the explanation for their failing is not having less marketplace however, bad choices within supervision.

If you’re currently in the commercial, some patience will dsicover your time and efforts rewarded. The actual gold guideline nevertheless would be to produce great goods within the most courteous way. Wholesale car DVD suppliers who’ve had the oppertunity to find out the game continue to enjoy the dividends so that as you need to do the survey on the web you’ll discover that several have created empires that are merely potent causes in the business. Sketchy distributors might enter enterprise however, that by no means lasts. The reason being laws for many countries specifically the particular created types happen to be patterned to dissuade outlawed purchases. The particular suppliers have got put in so much funds as well as work to ensure you enjoy your car or truck leisure as well as, hence , it is good to identify all of them being a crucial section of the actual modern society. The company will continue to bitter to be able to greater heights.

About the Author

I have been in the wholesale business since 2000. I became one of the largest <a href=”http://www.dhgate.com/wholesale/car-vehicles-parts-and-accessories/c21.html”>wholesale car DVD</a> importer in China.

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