Incorporation Option and Foreign Investment Remifications

July 22nd, 2009

Dan Richards, with Dan, Dan, The Carpet Man, returned as moderator for this evening’s event with 32 persons attending.  Dan spoke about picturing your goal in your mind, whether it be a tangible product like a sports car, or a less tangible quantifiable goal (like economic stability).  In picturing such a goal you will need to eliminate any obstacles that may get into your way.

Jeff Ginsburg a CPA with Precision Financial Accounting in Clermont, FL presented on Foreign Investment.  What are the main things to look out for with foreign investors.  You can’t be in a S-Corp and be a foreign national, so they have to be put in as a LLC or partnership.  There are three main ways to set up  a foreign entity for real estate investment.  One is to have the foreign national buy the real estate directly, which is taxed at the personal tax rate and is liable for estate tax.  The foreign national can utilize a foreign corporation to purchase the real estate that negates any estate tax and income is taxed at the corporate tax rate, however, there will be a 30% tax on the earnings not reinvested in the United State   The most complicated but may potentially realize most tax savings is to have the foreign national set up both a foreign and states side corporation.  This will allow the investment to be taxed at a corporate level while negating any estate and branch taxes.

Joanne Mei Peytremann of Metlife spoke on the value of having life insurance was emphasized as a component of you estate planning.  Currently, a beneficiary of an estate just has 9 months to come up with the tax payment (48%) on any assets they claim.  The life insurance policy is taxed free and can bridge that tax gap without a beneficiary having to sell any assets (sometimes at a fire sale level) in order to pay Uncle Sam.

Brett Jones, Esq spoke on the topic of having synergy of all the professionals who create and service your corporation.  Your attorneys, CPAs, and consultants will all need to be managed and integrated in order to make sure your corporation has the best short term and long term strategy.

The two main questions you should ask when purchasing an entity are: When was your last sales tax audit?  (as you are liable for any assets that had never paid a sales tax, even if bought over internet) Do you have an 941 tax issues? (you will be liable for any past unpaid payroll taxes)

For estate plaining there are very specific details in order to be valid. Examples are who has to sign and pages to witness the witness.  Unfortunately, the economical LegalZoom and other services may not catch all these state specific clauses.  Additionally, an estate will still need to go to probate in order to maximize payouts, as a typical probate can take more than twelve months.  There are ways for middle-class persons to also mitigate probate issues by setting up trusts with primary and secondary trustees.

Fred Kriss then closed with the FranchiseRight updates.  This will be the last Legacy Club meeting at the current location because we have out growned the facilities.  FranchiseRight would like to thank all of those who have made Legacy Club and FranchiseRight such a great local success.  We will look to make a formal announcement of the new locaiton shortly.  In the meantime, FranchiseRight is gearing up for the October Boot Camp.  Additionally, we have procured new software that will allow us to better communicate via email and video conferencing with our network.

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Lasting Legacy Entrepreneurs - Business Consultant David Acosta - Model for Venture Success

July 19th, 2009

Dan Richard, owner of Dan, Dan the Carpet Man returned as moderator for this week’s Tuesday evening session that was attended by 32 entrepreneurs and business professionals.

Pizza was served, delivered by Grub Taxi, which is owned by attendee Al Giammattei and his partner Dominick Abitino. FranchiseRight provided a selection of wines purchased from FranchiseRight Partnership Program participant Ann Kogut’s winemaking company Legacy Wines.

Following a brief, upbeat welcome Dan introduced Fred Kriss, architect of the FranchiseRight system, who reiterated the purpose of the Legacy Club meetings – to encourage open and informative dialogs among business people and to foster an environment of mutual assistance and support.

Fred then briefly outlined the tenets of sponsor FranchiseRight’s system of successful franchise development and the application of methods and systems which allow entrepreneurs to excel, expand and profitably exit their businesses through franchising.

The FranchiseRight system differs from traditional franchise development programs in several important ways. Rather than accepting the entrepreneur’s prototype business at face value it seeks to analyze then optimize the business prototype to ensure maximum profitability and ease of duplication by the franchisee.

FranchiseRight trains franchisors to be effective franchise company leaders, able to serve as advocates and inspiration for their franchisees and customers. It allows them to work on their business not in it; an e-myth principle of Michael Gerber.

The FranchiseRight system also offers qualifying entrepreneurs access to both the necessary $1.5 million in investment capital required to launch a successful franchise, and provides them with best-of-class franchise applications and an experienced franchise management team.

The multiple benefits of “franchising right” include being able to do so with just a single successful unit, a $0 net investment requirement, continued ownership of one’s existing business and the ability to sell the resulting franchise company for up to 10 times earnings after just five years.

Fred then shared with the group FranchiseRight’s plan to move to new headquarters since it has already outgrown the Legacy Place offices because of high levels of response and attendance.  He also announced a second FranchiseRight Boot Camp to be held in October.  FranchiseRight is also making available to Lasting Legacy attendees who wish to participate, a cross-referenced on-line networking directory, an email sent out in PDF format, and a hard copy, as well.  We need members wishing to participate in the directory to forward a picture, company logo, and company description to donna@franchiseright.net.  This will facilitate members in cross referrals.

After brief introductions by all those present, Dan Richard introduced guest speaker David Acosta, president of the Venture Clarity Group. For the past 25 years, David has been advising corporate and government decision-makers on critical enterprise transitions — including strategic planning, acquisitions, expansions, downsizing, capital formation, exit strategies and post-acquisition consolidations.

David then shared his Venture Clarity Model with the group. That model advocates a careful, 7 step-process of developing a new business that proceeds from Evaluation to Launch in the following sequence:

Evaluate: Look internally: perform SWOT analysis (strengths, weaknesses, opportunities, threats), etc.
Discover: Look outward: understand competitors, prospects, market opportunities, etc.
Model: Create the business model that takes maximum advantage of the identified market opportunities – align your strengths with those opportunities – determine pricing, positioning, channels, etc.
Envision: Critically important and often overlooked step. Long term goal formation and exit strategy. What is the entrepreneurs’ “destination”? Family business? Sale to corporation? Franchising? Etc.
Plan: Carefully craft and formalize the actual business plan.
Integrate: Bring together your people, your facilities and your capitalization.
Launch: Only now do you “pull the trigger” and move forward.

David then pointed out that the Discover, Plan, Model and Integrate processes are ongoing and constantly subject to re-evaluation and change based on the prevailing business and social context.

David next dealt with the overriding importance for business entrepreneurs to build a “brand” beyond themselves.

This process proceeds in a hierarchy that begins with a new business brand that is unknown. Ideally, through positive and consistent reinforcement of brand messaging and company performance, a company’s brand becomes recognized, then trusted and, at the highest level, preferred. This desired ascendance from unknown to preferred relates to corresponding changes in consumer perceptions of your business that move from low to high.

David also presented a four-quadrant analysis that demonstrated how the degree of brand development affects purchasing behavior. As a brand moves successfully from inception to brand power its standing/perception in the marketplace rises from entrant to participant to leading and, hopefully, to the dominant position.

As the brand grows in market importance, consumer purchasing behavior grows from a starting point of no action to engagement, then consideration, acceptance, active pursuit and, finally, customer loyalty.

Arguing for a marketing rather than a strict sales approach, David pointed out that while price-centric strategies are capable of moving a segment of consumers from no action to loyalty, it requires a brand-centric approach to attain market-wide leadership or dominance.

In response to audience questions David provided a summary approach to business success that includes:

Carefully defining your target audience
Crafting your message development to speak to that audience in terms that are meaningful to them
Delivering that messaging in carefully selected media targeted to your prospect audience
Effecting positive and continuous interaction and transactions with your customers
Carefully charting the return on investment from your marketing dollars and continuing the process of re-discovery through close examination of the metrics (data-mining, etc.)

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Lasting Legacy Entrepreneur’s Club - Franchising Methodology Past and Present

July 14th, 2009

Max Salinas, owner of The Ten Minute Gym, a participant in the FranchiseRight Partnership Program, returned as moderator for this week’s Tuesday, July 7th, evening session that was attended by 29 entrepreneurs and business professionals.

After brief introductions by all those present a lively discussion ensued prompted by one of the business consultants asking how the world of franchising, as approached today by host sponsor FranchiseRight, differs from the traditional model.

Fred Kriss architect of the FranchiseRight system summarized some of those differences as follows:

Traditional franchise development accepted the entrepreneur’s prototype business at face value and generated the necessary documentation to replicate that model. The FranchiseRight system first seeks to analyze then optimize the business prototype to ensure maximum profitability and ease of duplication by the franchisee.
While traditional approaches to franchising were often one-sided favoring the franchisors’ interests above those of the franchisee, franchising success today demands commitment to mutuality of interests and an open and continuous dialog between the two parties. The franchisor must accept fiscal responsibility for the successful implementation of his system by the franchisee and be properly trained as a leader who can effectively serve as an advocate and inspiration for his franchisees and their customers. FranchiseRight offers training designed to accomplish this.
Many traditional franchise systems suffered from both insufficient capitalization and poorly conceived plans and operations. Adequate capitalization today requires approximately $1.5 million and successful franchise systems require the incorporation of best practices across the board. To properly serve the needs of investors, franchisors, franchisees and their customers, the FranchiseRight system offers qualifying entrepreneurs access to both investment capital and best-of-class franchise applications.

It was pointed out that small business guru and best-selling author Michael Gerber counsels all small business owners to design and run their businesses like a franchise prototype — even if they never intend to franchise. The point being, that for a small business to excel, it must develop the same disciplines and optimized procedures and operating systems required of a successful franchise prototype.

Suzanne Godfrey, public relations director for Artist Tree Entertainment, asked how some of the thinking embodied in the FranchiseRight development system applies to the world of performing arts. Among the points discussed were:

·         The need to treat your “product” (the performer or entertainer) as a business
·         The need to precisely determine your target audience (data mining, response-tracking, etc.)
·         The need to develop a unique emotional proposition to attract and retain your audience
·         The need to monetize your intellectual property through target marketing and re-marketing
·         The need to take advantage of the splintered nature of today’s media and its insatiable need for content
·         Ultimately, the need to be responsible for your own business rather than subservient to traditional channels and trade practices

Tony Phelps, owner of Allied DVD Productions, briefly mentioned his new project “Studio Commons” and the “Orlando Arts Incubator”, one of the unique concepts inside the Studio Commons building currently planned as part of the Legacy Franchise Park complex and how this unique facility will ultimately enable performers to interact directly with potential investors. The Orlando Arts incubator will be the first franchisee of The Ultimate Music Company, a digital music distribution technology company that permits independent artists and legacy performers to monetize by selling their music online on a song-by-song basis. Protecting the digital goods (songs) using Microsoft DRM (encryption), The Ultimate Music Company facilitates music sales directly from the artist’s website allowing the artist to retain all rights to their music and receive up to 75% of the gross sale of each song or music collection. The Ultimate Music Company is expected to launch in 2010.

Fred Kriss underscored the importance of such a venue (Studio Commons) especially since individuals and privately owned companies can only solicit investments from people with whom they have a previous relationship (an SEC rule).

A brief discussion of the role of creativity in successful entrepreneurship took place and the meeting concluded with a live musical performance. Local artist Sean Dennison sang three original compositions and accompanied himself on the guitar to the applause of an appreciative audience.

In closing, moderator Max Salinas suggested the following opening topic for discussion at next Tuesday’s meeting: “How do you keep people (employees) properly motivated?

We hope you will join us each Tuesday evening to share your thoughts.

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Lasting Legacy Entreprenuers Group - Q&A with Franchise Attorneys

June 24th, 2009

Max Salinas of The Ten Minute Gym moderated this weeks Tuesday evening meeting.  The attendance was about 20 with the meeting kicked off with a short introduction by the attendees.  The two primary guests were franchise attorneys Keith Kanouse Sr of Kanouse and Walker, PA (www.kanouse.com) up from Boca Raton and Biff Godfrey of B.F. Godfrey, PA (www.godfreylegal.com).

The topics ranged from common mistakes business owners make trying to franchise and what makes a good franchise opportunity.  The most common mistakes is undercapitalization and then trying to cut corners to make create the franchise.  This can range from trying to create a license relationship with new investors to inability to perform due diligence beforehand to make sure you have a business plan to franchise.

A common issue a new Franchisor has is to decouple themselves from the initial business into CEO role of the new franchise organization.  Franchisors are entreprenuers and as entreprenuers they tend to want to have their hand into every decision that affects the business.  However, when they franchise their business and then have multiple franchisees with whom becomes their partners, they will need to take their role form the micro to the macro role.

Biff Godfrey spoke of how current franchise operates in which it takes substancial capital and multiple operating locations before one can realisticly franchise.  There are times where a entreprenuer wants to franchise their single operation because a customer of theirs tells them that they should.  This person may not have a business plan, process documentation, marketing strategy, scalable or unique product which would allow Biff to recommend his attorney services of putting together a FDD (Franchise Disclosure Document).

Keith Kanouse started his 20+ years in the franchise industry with mainly franchisor clients.  However, since he launched his own firm 12 years ago, he has focused on the franchisee side more.  He discussed the situations in which a franchisee would come to him after they purchased a franchise opportunity which had no substance behind the FDD.  He discussed how franchisees would not hire an attorney before the major investment of a franchise and then get turned.

Both attorneys agree that ideal franchisor\franchisee relationship should be contracted and run as a partnership.  The franchisor needs to make sure that they provide such services, unique intellectual property, economies of scale, and branding that the 5% royalty a franchisee would dwarf the benefits the franchisor would provide.  The first franchisees of a franchise are the true salespeople for the franchise.  If they are not taken care of and satisfied, then they franchise will not grow since any future franchisees would reference them in their decision making.  Finally, a good test of a fair FCC to the franchisee is to have the franchisor put themself in the franchisee’s shoes to see if they would enter into such an arangement.

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Inaugural Boot Camp Week - Friday (Capital Raising Compliance and Strategies)

June 19th, 2009

Fred Kriss (www.franchiseright.net) then spoke on Capital Raising Compliance and Strategies.
Smart investors do not and should not sign a Non-Disclosure Agreement (NDA) upfront but rather after they formally engage with you.  There is too much liability to the investor if they sign the agreement upfront especially if they do not know any idea of your business idea is.  They may already have ideas in that industry or do a industry related concept later that you could bring a suit against them.

If you are looking for investors, make sure to tell them the high level details that could fit into once sheet of paper.  For example, tell them the time, not how the watch is made.  Once they have interest in the idea, then it is the time to have them sign a NDA before getting into the details.

When talking to a possible investor, you should find out if she’s an accredited on unaccredited investor herself or someone who might know people who are investors.  You need to have a prior relationships with the person before in person solicitation, so you can’t do a general announcement in a Chamber of Commerce about an investment opportunity.  If you are in an investor club you can assume the people are qualified and since multiple investment opportunities are presented.

For your web page, you can have an investment section, but it needs to be password protected given only to prior contacts of yours.

Make sure to use a work-for-hire contract with contractors who produce your intellectual property (graphics, photography, logos, software).

Different states have rules on using 3rd party brokers on raising capital.  FL can allow it, but TX does not.  Series 7 brokers usually do not even touch private company stock because of lack of liquidity (since it has to be held at least a year).

A new franchisor can only be sold from their Owner or Officer\Director.  However, a person cannot be hired and given a Director when raising capital is the primary responsibility.

For the Board on a small investment it should consist of two principle Directors, then add three more paid Directors once in year one (month 13) for a total of five.  For an advisory Board (given stock, but no salary), you can have unlimited amount of people (usually around ten).  These advisors are not liable and they just offer suggestions.

There needs to be a 65 item Private Placement Memorandum that is divided into the following categories:  Offering Overview, Offering Summary, Restrictive Legends, Risk Factors, Management, Offering, and Subscription.  You give this to the investor as giving a business planning would be illegal.

FranchiseRight has partnered with The Capital Steps (www.thecapitalsteps.com) to provide initial orientation, certified training, and ongoing support to FranchiseRight staff, their franchisors partners staff and outside referral companies.  The Capital Steps will provide an SEC Compliance Plan that includes a complete listing of the forms that you will be using plus how to use each document as well as the Capital Step’s proprietary online system.

This allows these subscribers 3rd party verification of ofering compliance with core services that include the printing, recording, distribution, and recall of sequentially-numbered investor documents related to maintaining an exemption under the SEC guidelines for raising monies for non-public companies as well as investor registration; contracting and orientation of capital team members; recruiting, rewarding and retaining advisory boards members; and the control and logging of investor meetings.

You do not have to give a formal stock certificate to investors.  However, it is recommended to do so including putting it in a frame, as it makes for a great way to market.  That way, your hypothetical investor doctor could have it hanging in their office and if another colleague of theirs makes a comment, the doctor is free to discuss the company and possible investment opportunity.

Top Ten Reasons Why your Deal is Not Being Funded…
1.Flawed Concept
2.Market Timing
3.Presenter
4.Ego Issues
5.Presenting to the wrong people
6.Incomplete Management Team
7.Unrealistic Expectations
8.Due Diligence
9.Preparation
10.Structure

The FranchiseRight Model is to break up Capitalization Table of the initial $1.5M to launch a franchise company into 15M shares of stock split between Private Offerings, Incorporator Reserve, Voting Trust, Incubator, Management Team Reserve, Offering Share Reserve, Board of Directors and Advisors, and of course, the Founder’s LLC (a 51% share for majority authority).

Patrick Donnally (FranchiseRight Certification Program Director)

Patrick gave back the Baldrige Leadership assessment to the class and went over had their answers lined up with the national average.

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FranchiseRight Boot Camp Thursday Afternoon - Why Should You Franchise and Security Enforcement Issues

June 18th, 2009

Fred Kriss on Why Franchise Your Business

Expansion through franchises is capital from the franchisee to the franchisor in return for use of their business intellectual property.  The franchisee has the local marketing knowledge and the passion only an owner operator can provide.   The franchisor should have their system so that the franchisee does not think of money paid to the franchisor not as an expense for and investment.  For example, if the franchisee needs to pay a 5%, they should be gaining 15% in profit that the franchise system would provide.

There are few alternatives for small business for growth other than franchising and they all have their downsides in brackets.  Some are multi-level marketing (no upfront fees or control), open company-owned outlets (commitment of capital/management), license your IP (sacrifice brand and quality control), establish dealers/distributors (possible violation of franchise law), seek partnerships (no unilateral relationships – investment), and form association or cooperative (no upfront fee or residual income).

The best reasons to franchise are:
lack of capital to open additional company-owned stores
opportunity for greater profits from operations and exit strategy
rapidly expand your company to dominate domestic markets before competition seets in
increase brand penetration into specific markets to create operational efficiencies
reduction of risk principals and investors
lack of personnel to expand organically
multiple purchasing and advertising power
ability to immediately capitalize on continued R&D
facilitate responsible international expansion

Does your business generally these franchise prerequisites?
transferability
differentiated
documented
marketability
adaptability
systemization
competitive
sustainability
economy
profitability

As a franchisor, can you fill the following roles?
Leader
Educator
Trainer
Coach
Evangelist
Psychologist
Parent
Friend
Mentor
Scapegoat

Top 10 Business Strategies Franchising Provides
1.Organization
2.Double Exit
3.Investment
4.Financing
5.Brand Building
6.Domestic Expansion
7.International Growth
8.Residual Income
9.Market Penetration
10.Unit Sales Increase

The main disadvantages to Franchising can be non-issues in most operations
cost and time for conversion
reluctance of independents to join
regulatory and state registration issues
monitoring for quality control
rapid expansion can dilute quality

It is better to under promise and over deliver than the other way around.

A franchise Company is:
a Training Company
a Coaching Company
a Public Relations Company
a Product Development Company
a Community-service Company

Franchising is a method doing business not a business in and of itself.

What are the prerequisites to Franchise:
1.Analysis
2.Documented Research
3.Franchisor Business Plan
4.Great Documents
5.Capital
6.Strategic alliances
7.IP Protection
8.Experienced Management
9.Roll-out Strategy
10.Franchise Sales Staff

Primary Revenue Streams
Franchise Parameters (Franchise Fees, Royalties, Software License)
Core Services (Proprietary and non-proprietary Products, Marketing Collateral)
Additional Training (Re-Training, Advanced Training)
Store Openings (Modular Themed, Signage, Equipment Package, Turn-key Store Construction)
Centralized Services (Telephone, Account Management, Fleet Management, Design/Build)

6 stage development phases process for the FranchiseRight Franchise System
1.Concept Development
2.Capitalization
3.Strategic Planning
4.Franchise Development
5.Operations Roll-out
6.Acceleration

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Security Enforcement Issues

SEC Attorney Ken Gluckman 15 years of practice in downtown Orlando.  His focus is with people starting and growing their businesses.

The SEC regulations will need to be complied with when franchisors look to raise capital.  It is against the law to sell stock or other securities without a license.

There are exemptions that deal with how much money are you going raise, where you are going to get the money from.

Regulations D exemptions (mainly for small businesses)
There are different rules if you have accredited investors (200K+ salary or over $1M in net worth) versus non-accredited investors.  You can work with non-accredited but can only take 35 of these type of investors and courts will require higher standards and disclosures.  These shares are restricted (not freely tradable and must hold a year)
Public Filing (200K – 400K in legal\accounting fees)

Biggest don’t in raising capital:
false or incomplete documentation.  Do not overextend yourself.    Be honest on what you hope to do rather than what you say you are going to do.  You can make ‘puffery’ but don’t make promises.
Do not advertise or general solicitation.  Watch emails with Documents that then someone else can forward on to others.  One idea is to put it in a personalized, read-only PDF.

The main Federal Laws are Securities act 1933 (before public) and 1934 (after public).  The SEC usually gets active after an investor complaint and do have enforcement capability.  You do have individual liability when selling securities.  The SEC does care about foreign investment.

Under State Blue Sky law they have a similar scheme to SEC, but every state is different.  Even if the offering is for your home state business, you need to file in each state where you investor originate.  Most states do charge for filing and vary by size of offering.  States do not care about foreign investment.

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Thursday morning - Legal Compliance

June 18th, 2009

The morning was kicked off with Professor Marvin Rooks of Barry University School of Law and also currently practicing franchising attorney of nearly 30 years.   He teaches only one of three franchise law classes in the nation.

Franchise law is basically about expansion.  Is partnership the right way to go but could face issues.  What is a franchise?  Two ways to describe it…  a glorified usage of a trademark which is the foundation of the franchise, the other is renting a business.  As a franchisor, you must make sure you have something to rent…  a product, a business plan, an accounting system for the royalties (the real money is made through royalties not the franchise fee).

Franchising is very lucrative as 4 out of every 10 commercial sales come from a franchise unit.  It is regulated by the Federal Government by the Federal Trade Commission (FTC).   You must meet the test of what the FTC considers a franchise:  1) Fee of over $500 over 6 month period  2) license of trademark  3) significant assistance or control.

To satisfy the Feds you need a Uniform Franchise Disclosure Document (UFDD).  Attached to it is a generic Franchise Agreement.  The best way to focus on a UFDD is to contrast it to a sale of a business where you may not ever see the person after a sale.  Whereas with a franchise agreement, you will stay in constant communication with the franchisee after the UFDD is enacted.  So to speak, think of the UFDD as a pre-nupt of what you might need legal protection over the life of the franchise agreement. It should cover what happens when someone dies, gets divorced, and even a break away franchisee.

A break away franchise who after franchised then they change minor details to run the business on their own and doesn’t pay royalties.  A non-compete should also be enacted by the two parties at franchise formation to protect against break away franchisees.

States can pass laws as long as they do not conflict with Federal laws.  FL is a non-registration state where all you need is your UFDD and the Dept of Agriculture regulates it in FL.  Compared to CA, where they will make “suggestions” on what you need to change.  You will then get a certification from the CA Secretary of State.

Make sure your attorney knows Business Opportunity Laws (vending machines, pay phones).  Some states drafted laws to cover these items, but also may have covered franchises.  Most times you can get around it if you have a registered trademark.

Some of the questions to ask an attorney…
What and when was the last franchise deal you put together and was it successful?
Did it go national?
Do they have experience with registration states?
Do they have the “Bible” Commerce Clearing House Franchise Guide (CCH)?

The first ten franchisees you sell, you need to cherry pick.  They will make or break you.  In the UFDD you need to put all the franchisee info with their contact info.  Up until recently, there were such restrictive rules on giving out earning claims (financial performance results).  The Franchise attorney should help you properly document their earnings.

–

Ed Becker from Orphans Coffee (www.orphanscoffee.com).  FranchiseRight requires all partners to have a non for profit counterpart or sponsor cause marketing.  A consumer is more often to support a business who has a cause marketing over their counterpart who does not have one.  So in addition to being the right thing to do, it also makes business sense.

FranchiseRight supports Orphans Coffee with Ed Becker giving a presentation.  They had been marketing high-end automated coffee machines that provides a variety of coffee (cappuccino, espresso, etc.) at the touch of a button.  Three years ago Ed and his wife Winnie, decided to make his coffee business adopt the cause of assisting Orphans within their business.

In addition to the machines, Orphans Coffee sells bags of coffee that groups (business, schools, churches) can use for fundraiser.  In addition to any additional amount the organization wants to donate to the cause, seventy cents of every bag goes to the charity.  The charity can spend the money at a targeted group whether it is Orange County Foster homes or Uganda refuges.

Orphans Coffee can also customize the packeting for personal or corporate clients.  The corporate clients can then use these branded coffee bags for gifts for their own clients.

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Wednesday - Compliance and Risk

June 17th, 2009

Franchising in Compliance

Fred Kriss went over at a high level the compliance paperwork in the FranchiseRight binder that a business owner will need to know and complete before they can franchise.
First goal is to get a Federally Registered Trademark which is a good rule for your standalone business and is required to then franchise.  Go to www.USPTO.gov to see if your trademark and register.
A Franchisor cannot force a franchisee to buy all their goods from them.  However, they can dictate the specifications that can be so hard to recreate that it or the franchisor has such economy of scales that it is ultimately cheaper to buy from the franchisor.  The franchisor can take a cut from this amount.

Helen Vella of Vella Associates (www.vellaandassociates.com) spoke and expert in Neural Linguistic Programming (NLP).

Helen presenting on Are You Ready for Franchising by focusing on the Psychology behind making a decision.  The presentation is made to be interactive with group participation.  One big concern for individuals looking towards franchising their business is common place among most Entrepreneurs, that is Risk.  With the economy and some looking towards retirement in the not so different future, a concern is not making a mistake and not being in a financial place to retire.

Taking a Risk is not about failing but is about planned growth.  Success or Failure is not something cut and dry, but rather an experience that can teach you for future actions.

The class then participated in a survey about your Time Wasting habits.  On a scale of 1 (Always) to 4 (Never) on twenty plus items such as “Do I make Lists?” and “Do I accumulate unnecessary paperwork?”’

The group discussed the biggest fears people have:  Exposure, Success, Failure, Death, Unknown, Rejection, Opinions, Compliance.  The only fear someone is born with is Failing, the others are learned.  The number one fear a person has is walking into a room of strangers and second is public speaking.

Just because you are a great Leader does not mean you are a great Person.   The key is to be both.  You need to have smart, specific goals for your business.

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Tuesday Afternoon - Marketing and Prospecting

June 16th, 2009

Jennifer Thompson of Insight Marketing Group (http://www.insightmg.com/)

Jennifer provided a one hour snapshot of Insight Marketing Group’s 9 hour marketing boot camp.

- Why every company should have a Universal Selling Proposition (USP).  This is typically a 3-5 word motto for your organization.  Examples are “You get younger looking skin” - Oil of Olay; “Drinkability” - Bud Light; “I’m Lovin It” - McDonalds.
- It’s more than just a motto as you need to have a product behind it.  The more unique the product the better.  A product that someone may think afterwards,  “How did I ever live without this product before?”;  A product that may have minimal competitors and can differentiate themselves from such competitors such as a Nintendo Wii or Red Bull.
- This USP should reinforce your niche and help someone identify, understand, and remember your position.  Speak to someone emotions, not something variable that could change (price, location, etc.)

- Jennifer then discussed the strategy of getting that motto and message out.  She recommends a multi-media push focusing on a geography or demographic you are targeting.  Spreading your message over time without a focus may just bleed out you budget.
- With any marketing push, make sure you have the resources to handle the influx of traffic.  You do not want to compromise quality and long-term growth just for a short-term gain.
- You will need a way to measure the ROI of the effort trough a Personal 800#, Personal URLs, Sweepstakes, Coupon Codes, POS Analysis
- A direct mail typically has a 1-3% response rate and that is 20% from how creative the add is and the other 80% from the actual offer.
- For Trade Shows make sure you have a plan for both B2C and B2B.  Have a pre and post plan. Decide how to capture data and how you might stand out from the crowd.
- Email marketing is not the mass media people may of thought earlier.  However, it is great for a targeted, permission based audience that is cost effective and highly track able.

Michelle Hentzell of Insight Marketing Group (http://www.insightmg.com/) Promoting Your Business Through Public Relations

- The best thing about using PR for your business is that is generally is free.  It can offer high credibility, it can people off guard and help dramatize a product or company.
Business Increasing PR (new, innovate idea or product that can be ‘news worthy’), Fundraiser PR, Enhancing Public Image, Public Information
A typical marketing budget is 2 to 10 percent of projected annual gross sales.
Making a human interest angel with a personal testimonial can make the PR news worthy.
Content is key:  Start Strong, do not embellish, quote permissibly, and be grammatically correct
Insight Marketing runs a Boot Camp in July for 3 hours every Friday
Greg Brewer of Sandler Sales Institute (http://www.sandler.com)
Think of the difference between marketing and sales… “Marketing is working outside the door, while sales is working inside the door.”
Sandler has 220 offices in NA and in 19 countries.  Largest sales and management training sales organization in the world.  The trainers are also in sales as well.
Sales is usually a career that a person backs into.  It is rare to have a twelve year old want to grow up to be a salesperson.
People tend to gravitate towards what they are comfortable.  There is only 10% of people who like to prospect so most of us just do it our of necessity.

What are the types of Prospecting?
Networking
Cold Calls (Walk-in, phone)
Referrals
Customer Lists
Dead Files
Trade Shows Expeditions
Partnering /  Strategic Alliances
Articles / Books
Free Talks
Paid Talks
Word of mouth
30 second ‘Elevator Speech’
Letters
Chamber of Commerce
Social Networking
Competitors

Suggests to go to a networking event for the purpose of giving at least two leads and contacts.  This will build a rapport.  The person will remember you as a person who helped and made things happen.  This will leave you in the front of their brain the next time they might have work that in your discussion your services might apply.  If you go with a partner, split up and hit the opposite sides of the room.  Come together halfway to compare who you spoke with and they hit the other half of the room.

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Posted in Boot Camp, Inaugural Boot Camp - June 15-19 - 2009 | No Comments »

FranchiseRight Open House Preview (Tuesday Morning)

June 16th, 2009

Every Tuesday morning is an open house for a FranchiseRight preview.  Fred Kriss is delivered the presentation discussing what FranchiseRight is, what type of entrepreneurs and business it can help, the relationships FranchiseRight has with investors and vendors.   FranchiseRight follow the Michael Gerber  (author of The E-myth) that every business should be run as if it would be franchised and also you should work on and not just in your business.  Franchising is America’s number one business export.  FranchiseRight allows you to Excel, Expand, and Exit your business.

FranchiseRight allows a zero net investment.  This does not mean that you do not have to put any money into the venture, but that at the end of year one, this money will be paid back to you, and at no time is their existing operation affected.  There are also other programs for clients that have the capital and allows them to keep the equity in the newly formed franchise organization.

Things that make a good franchise is having a sustained differential advantage, which generally is more than just having the lowest cost.  This requires you not just having a propriety business process but also a unique emotional proposition.   Great customer service is a key to a successful franchise.  The intellectual property of a business cannot just be in the head of the owner\operator, but rather needs to be extensively documented so that potential franchisees can follow the model.  FranchiseRight follows the Six Sigma principles of well defining processes so that it can be duplicated without errors.

In this tight economy and investors looking to reduce risk, Franchising can excel.  The 3 year failure rate of a restaurant is 90% whereas the success rate of a new franchise is 90%.   Banks are more easily able to lend capital to new business that show a 90% success rate rather than a 10% rate.

Additionally franchisees are typically from the community they operate their franchisees.  They rely on resources already native to the area they operate and tend to keep their profits within this community.  It is rare to see any community uprising when a new franchise comes to town.  Whereas, take a Walmart that some may see as an outsider coming in an taking local jobs\businesses and this wealth just goes their eight founding members and the national shareholders.

A franchisor needs to be diligent on selecting their franchisees.  A typical franchisor is an entrepreneur who invents new idea\processes, however, a franchisee should not.  This is because a franchisee is paying the franchisor for their business system and should look to follow this system to a tee.   A typical solid franchisee is an ‘A’ student who is very detailed and structure oriented.  That is not to say that a franchisee cannot work the franchisor on new products and processes, but should be in a formalized way and the franchisor would retain that new intellectual property.  This is how the Filet of Fish came about.  A McDonald’s operator in a prominently Catholic neighborhood was losing business on Fridays and wanted to offer a non-meat alternative, and since necessity is the mother of invention… we all now have the Filet of Fish sandwich.

A standalone business typically recieves one to two times annual profit when it is sold.  One hundred thousands dollars is a good after salary income on a restaurant so the owner can hope to get two hundred thousands when they sell.  Does anyone think that you can retire today on two hundred thousand dollars?  Whereas, a franchisor can look to get up to ten times annual income (which is already higher than a standalone operation) on of the organization on sale.

FranchiseRights main focus is on those exisitng businesses with one and maybe up to three operations.  The way it currently works, a company cannot franchise unless they have at least a handful of operations going for years and $150 thousand dollars of capital.  They would then franchise their concept but no one would really look at whether their current business is right for franchise and\or how it can be approved before it is franchised.  FranchiseRight is not looking to compete with these people, who I would refer to as contractors. FranchiseRight is not a contractor to put together paperwork, but rather a Franchise architect that puts together the blueprint that the franchisor will have put together that the contractors will then build out.  If you are looking to build your dream home, would you hire the building contractors to architect it out too?  Of course not.  Putting together the blueprint is a totally different role of the process and you would hire an architect.  That is what FranchiseRight is… your franchise architect.  It is a open blue water organization with no competitors (and compliment the existing franchise industry).

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Posted in Boot Camp, Inaugural Boot Camp - June 15-19 - 2009 | No Comments »

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