U'S' Franchising Industry Update

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U.S. Franchising Industry Update

• Presented by Steve Greenbaum
• Chairman, International Franchise Association

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History of U.S. Franchising

• 1820 - Singer Sewing company grants sales
  territories
• 1899 - Coca Cola sells its first franchise
• 1950 - KFC is established
• 1953 - One Hour Martinizing grants rights to
  Ecuador
• 1955 - McDonalds sells its first franchise

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General Market Numbers

• 2,900 Franchisors in 75 industries
• 900,000 franchised units
• 21 million jobs
• Annual sales of U2.3 trillion

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Sector Breakdown
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Food Sectors
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Maturity of Systems
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Size of Systems
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U.S. Legislation

• The FTC Franchise Rule requires the delivery of
  a disclosure document with 23points.
• Some States create the Uniform Franchise Offering
  Circular, UFOC, to comply with the FTC franchise
  rule.
• Some U.S. States require document registration.

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Amendments to the FTC Franchise Rule

• Electronic disclosure is allowed
• Disclosure must be done 14 days before the
  signing of an agreement
• The first personal meeting requirement is
  eliminated
• Brokers do not need to be listed
• A complete list of units over the past three
  years must be included

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Positive Aspect of U.S. Legislation

• Friendly attitude towards franchising.
• Very few business objectives fail because of
  legal complications.
• Laws are wide for both sides.
• Fairly transparent and straightforward legal
  system.

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Negative Aspects of U.S. Legislation

• Necessity to over-regulate translates into
  considerably high legal expenses in the
  production of disclosure documents
• Lawsuits and legal proceedings can be long and
  costly

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Considerations to Operate in U.S.

• Trademark registration
• Country City laws, permits
• Accounting system
• Patriot Act
• Labor Laws

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Current Consumer Trends

• Population ageBaby boomers
• Technology accessWireless
• Economic viability in revitalized areas
• Consumer habits
• Cultural gaps

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Current Franchise Trends

• Mergers and Acquisitions
• Ben Jerrys Unilever
• Fed Ex - Kinkos
• UPS Store - MBE
• Private Equity investment
• Roark - Carvel Cinnabon
• Texas Pacific Burger King

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Current Franchise Trends

• Co-Branding
• Exxon Mobil Subway
• Dunkin Donuts Baskin Robbins
• Safeway Starbucks
• Technology
• Online training
• Intranets
• Web sites

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Best Practices for Franchisors

• Investigate the potential market
• Research competition
• Determine best region to franchise
• Register trademarks and products
• Test concept locally
• Attend seminars and expos
• Comply with FTC and local laws

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Where to Begin?

• Local Franchise Association
• Local Trade Promotion Entities
• Franchise Expos
• Existing Franchise Operators

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International Franchise Association

• Founded in 1960
• Membership Includes, Franchisors, Franchisees and
  Suppliers.
• 75 Different Industries
• Protect the Environment of Franchising Worldwide
• Educational Foundation
• Multiple Publications
• Interactive Website

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Initial Response to Financial Crisis

• Most sectors cautiously assessing the situation
  and market, choosing consolidation over expansion
• Thriving sectors continue growing domestically
  and expanding internationally (senior care,
  hotels)
• Reduction in disposable income to address energy
  costs affecting low-end consumer patterns
• Customers responding to effective marketing,
  product and service enhancements.
• Value formulas key to continued growth.

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THANK YOU
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