Franchising and Business Broker Lecture

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Franchising and Business Broker Lecture

• EBD 481, Galbraith
• Fall 2009

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FRANCHISING

• Buying
• system,
• good will,
• training,
• quality control
• Costs can be substantial
• franchise fee
• overriding royalties (3-10)
• Cooperative adv.

Versus
Burgers
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FRANCHISING
Burgers

• Advantages
• lower failure rates
• access to financing
• Trade Credit Important
• established idea
• Disadvantages
• loss of control (inputs, management, pricing)
• are you a partner or the customer?
• exclusive territory

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FRANCHISE EXPENSES
Burgers

• Application Fee
• Franchise Fee
• Overriding royalty on revenues
• National advertising fees
• Cooperative advertising fees

• Required training
• Required equipment leases
• Required internal purchases
• Financing fees
• Capital requirements
• Liquidity requirements

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Example Port City Java
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(No Transcript)
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The investment required for a Cafe ranges from
approximately 178,000 to 335,000. For a Double
Drive-Thru the investment ranges from
approximately 140,000 to 214,000. What is the
Net Worth Requirements?Prospective Franchisees
must have a Net Worth of 350,000 and a Liquidity
of 100,000. What is the initial Franchise
Fee?It is 27,500.00 per Cafe or Double
Drive-Thru.Do you offer Area Development
Agreements? Yes, we will discuss these
possibilities with you in person. Are there
ongoing fees? Yes, royalties are 5 of the gross
weekly sales. This allows Port City Java to
continue to support your store, develop new
products and programs, and hone our customer
service skills through ongoing training. Is
there a marketing fee? Yes. To properly market a
store, you will currently need to dedicate 50.00
per week to marketing. This marketing can be
accomplished through in and out-of-house
programs. Do I get help with my Marketing?
Yes. This is only a part of the service and
support that Port City Java offers it's
franchisees.
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Do I get help with my Marketing? Yes. This is
only a part of the service and support that Port
City Java offers it's franchisees. Do I have
direct Competition? Yes, there is always
competition. However, we believe that our concept
is a unique concept combination of several
different concepts the coffee house segment,
juice bar/smoothie segment, and the quick casual
sandwich segment. As a result, by offering a
concept designed to penetrate several segments of
the hospitality market, we hope to minimize the
impact of our competitors who offer only one of
these concepts. The keys to competing
successfully are offering superior product and
impeccable service. Port City Java's products and
systems will enable you to compete effectively in
this growing market. Is my vendor pricing
secure and competitive? Yes, we have locked in
national pricing on our food items with US Foods.
For coffee, syrups, logo cups, chocolate, chai
and teas, we are Master Distributors, and offer
our Franchisees volume pricing. In addition, we
have national pricing on equipment from Edward
Don and Company, a national equipment supplier.
Having these systems in place relieves the
Franchisee from having to obtain product codes
and specs, as this has already been put into
place. Where do I receive my training? You
will receive your training at our Corporate
Offices, in our company stores and in our
Roasting Facilities in Wilmington, NC and at your
stores. Training is crucial to the success of the
Brand and we will train you or your
representative to our level of operating
knowledge.
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INTERNET SITES
Burgers

• Franchising information resource. Franchise.org
• http//www.portcityjava.com Port City Java

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Business Brokers

• Licensed by State, also professional association
  licensing
• Transaction brokers
• Facilitator, does not represent either party
• Dual Agency
• Represents both parties
• Some states only represent one party
• Payment
• Hourly
• Retainer
• Success (5-12)

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Services of Brokers

• Assist client in establishing a MPSP Value - Most
  Probable Selling Price Valuation the techniques
  used by individual brokers can vary greatly in
  this process
• Develop a comprehensive Information Memorandum on
  the company normally a 15-30 page document
  outlining the business for potential buyers
• Conduct buyer searches
• Exposure - Marketing the business to prospective
  buyers
• Screen buyers for ability to complete a purchase
• Coordinate negotiations and provide deal
  structuring advice
• Provide overall deal management to guide the
  client through the entire process
• Help maintain confidentiality of the sale
• Hourly Consulting for a fee, based on the
  client's needs