Transcript SCORE

SCORE
®
Counselors to America’s Small Business
Small Business
Planning
Workshops
Objective
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Write an effective plan for your business
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Learn to use business planning forms
Learn to conduct market research
Build a cash flow forecast spreadsheet
Write a persuasive executive summary
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Learn about financing options
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Create a decision-making tool for long-term
success
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Three Workshop Series
Workshop 1
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BUSINESS
PLAN
– Introduction
– What is a
business plan?
– Who needs it?
– 3-Step Process
– Overview of
major sections
– Planning
templates
– Starting Business
Checklist
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Workshop 2
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MARKETING
– Product or Service
Description
– Identify Target
Market
– Understand your
Customer
– Identify competition
and Your
advantage
– Marketing
strategies
– Sales and margin
forecast
Workshop 3
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MANAGING MONEY
– Test Financial
Feasibility using
Cash Flow
forecast
– Begin with four
budgets
– Breakeven
analysis and
fixed costs
– Three financial
statements
– Example
– What the lenders
want to see,
including 5C’s of
credit
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SCORE
®
Counselors to America’s Small Business
Write a Winning
Business Plan
What is a Business Plan?
Who needs it?
Three step process
Overview of major sections
Planning templates from SCORE
Starting Business Checklist
The Business
Business is the process of
taking materials, goods or services
from a beginning point
and adding value along the way
to the final user
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The Entrepreneur
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The entrepreneur is a capitalist, an innovator,
an employers and an owner…
… who manages the process of adding
value, organizes the business, creates jobs
and assume the risk for the sake of profit
What does it take to start your own business?
– A dream; Belief in yourself; Hard work; and
– A Plan
 Find an unmet need
 Figure out how to add value
 Figure out your unique advantage
 Organize resources
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Starting Business is a
Three Step Process
1.
THINKING ABOUT IT
– Do you have the right stuff
– Choosing your business vs opportunity costs
– Do you have the necessary funds
2.
PLANNING FOR IT
– Business plan
– Marketing plan
– Financial plan
3.
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DOING IT
– Creating your business
– Managing and Operating your business
– Marketing your business
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Step 1
Thinking About It
Before you start… Do you
have the Right Stuff?
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Characteristics of an Entrepreneur
1. Personal Characteristics
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self starter, strong work discipline, finisher,
integrity, physical and emotional stamina.
2. Social Characteristic
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ability to communicate, like meeting people,
uninhabited talking about your business,
honesty
3. Business Characteristics
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… Business Characteristics
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Can introduce and implement meaningful
managerial policies and directives
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Enact strong leadership disciplines
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Display good business “common sense”, integrity
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Make good decisions under pressure
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Good organizer.
And who must face and endure the “Entrepreneurial Shock”: The psychological realization by a
start-up business person that the “work-for-yourself” idea is accompanied by difficult decisions
and disappointments. Entrepreneurial Shock often occurs when a start-up business person has
worked in a corporate environment and was not exposed to all the complications of operating a
business.
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Choose The Right Business
Step 1
1. Start New
Business
2. Buy Existing Business
Select your new
business
Define your
business and
product/service
Understand your
target market and
competition
Prepare a business
plan
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– Conduct due diligence – ask for
3 years of past performance
– Know why business is being sold
– Prepare a business Plan
3. Buy Franchise
– Carefully investigate franchisor
– Read FTC Disclosure statement
– Read and understand franchise
agreement
– Prepare a Business Plan
Increasing possibility of success
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Choose the Right Business
Steps 2 &3
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Do you have the necessary funds?
– First determine what you can afford
– Then select an appropriate business
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Pick a business that
– you know something about
– have training or education in or
– feel passionate about
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Do You Have the
Necessary Funds?
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Equity from yourself
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Own savings
Informal borrowing from family and friends
Refinance your home or home equity loan
Borrow from pension funds (401K or 403B)
Use credit limits on personal credit cards
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Equity from Partners or Investors
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Debt*
Be
Cautious
* You must have at least 1/3rd of the capital necessary to start the business
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Step 2
Planning for It
Why Plan?
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Many things have to go “right” for a
business to succeed
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Right Idea
Right Market
Right Place
Right Time
Right Management
Right amount of Capital
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Planning doesn’t eliminate risk; takes time
now … but avoids costly mistakes
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The value lies in the process of researching
and thinking; not in producing a finished plan
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A Business Plan…
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Uncovers every facet of the business
being developed
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Explores new company’s strengths and
weaknesses
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Reveals ways to capitalize on the
strengths and minimizes the weaknesses
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Points to the best method for development
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Provides a structure for company’s pursuit
of ultimate success
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What is a Business Plan?
It is a written document that says:
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I know why my business exists
I know where I am and where I plan to go
I know my competitive advantage and why I
will succeed
I know the strategies that I plan to follow to
get from here to there
I know my business generates enough
profits to:
– Service debt
– Provide adequate return to attract investors
– Provide adequate return on my investment and
sweat equity
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Who Needs A Business Plan?
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Lenders
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Investors
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Suppliers
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YOU
You need a Business Plan
as a decision-making tool to start & successfully
operate your business over the long term
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Business Plan Outline
1.
The Title Form
2.
Table of Contents
3.
Executive Summary (complete last)
4.
Business Section
5.
Marketing Section
6.
Financial Section
7.
Supporting Documents
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The Title Page
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Company Name and address
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Telephone number, Fax number, e-mail
address
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Name of person preparing Plan
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Date Plan prepared
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Request return
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Mark Confidential
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Table of Contents
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Reference to major topics in plan
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Make it user friendly
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Indicates completeness
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Business Section
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Mission of your business
– Unmet need that you will satisfy better than competition
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Products / Services
Legal Structure
Ownership Structure; Management
Structure
Other topics you may need to cover:
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Facility
Technology
Management Information & Control
Manufacturing and Assembling
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Marketing Section
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Product and/or service (from customer’s view …
hopefully addresses an unmet need)
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Industry Description: size, growth, trends
Target market (your niche)
Characteristics of target buyer, unmet needs
Competitor Analysis (Strengths and Weaknesses)
Competitive advantage (why will a customer do business
with you?)
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Strategies (selling, pricing, purchasing, location and advertising)
Goals (sales volume & margins forecast; list key assumptions)
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Financial Section
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Your Personal Budget (only for lenders and you)
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Start-up Budget
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How you plan to finance the start-up
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Expense Budget
Sales Volume and Margin Budget
Cash Flow Projections
Break-even analysis and sensitivities
Pro-forma Financials
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– determines “Owners Equity”
– Land, facilities, capital equipment, inventory, other one-time costs,
and “working capital”
– Sources of equity and debt
– Income Statement – Balance Sheet
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Supporting Documents
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Personal resumes and other documents
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Owner’s financial statements & credit report
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Copy of leases, mortgages, purchase
agreements
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Contracts and Letters of reference
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Key Employee job Descriptions
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Licenses and permits required
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Attorney/accountants/insurance advisors
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Executive Summary
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Write this last
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1 page long … 2 max
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Include everything that you would cover in a
five-minute interview
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Make it readable, enthusiastic and
complete
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Must have What, When, How and Why
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Executive Summary
1.
What do you want to do?
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Describe your product and/or services
Describe your business and your niche
2.
When do you want to do it?
3.
How are you going to do it?
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4.
Why do you think you will succeed?
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Start up costs and timing
Funding (equity and debt)
Organization
Facilities and capital items
Mission and Objectives
Competitive advantage
Breakeven point and Risks
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Planning is Iterative
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At any point you may need to rethink, rework
or refine something you’ve already done
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Do not get stuck on any section or form – do
the best you can, move on and return to that
topic later
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Go back, review and improve what you
wrote previously
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Step 3
Doing It
Check List
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Create legal business
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Get Federal Employer Identification Number
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Get state employer I.D. or sales tax permit
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Obtain a business license or permit
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Obtain financing (equity & debt)
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Set up a business checking account
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Buy insurance
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– Establish a line of credit (if necessary)
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Legal Structure
Sole
Proprietorship
Partnership
LLC
S Corp
C Corp
Personal Liability
Protection
No
No
Yes
Yes
Yes
Franchise Tax
No
No
Yes
Yes
Yes
Double Taxation
No
No
No
No
Yes
High Cost of Startup
No
No
Yes
Yes
Yes
Member Restriction
Yes
No
No
Yes
No
Transfer of Shares
No
No
No
Yes
Yes
Easy Access to Capital
No
Yes/No
Yes
Yes
Yes
Attribute
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What Do Lenders Looks For?
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5 C’s
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Character
Collateral
Capacity
Conditions
CAPITAL
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Management Skills and Experience
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A Business Plan demonstrating the debt can
be satisfactorily serviced
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Doing It Check List (continued)
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Establish Credit / Check processing services
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Identify Personnel and begin recruiting
Line up suppliers
Set a starting date
Set up physical business
Order business cards and stationary
Order signage (Outside and Point of Sale)
Develop a website
Begin pre-opening advertising
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Wrap-up
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Think – Write the Plan – then Do it
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Choose the Right business, based on:
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Knowledge
Training
Experience
Passion
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Make sure you’ve got the funds
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Be honest with yourself
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Plan is for lenders, investors and YOU
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Use Free Counseling from
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Our mission is to help small businesses
succeed.
We accomplish this mission by
Educating
Counseling
Mentoring
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SCORE
®
Counselors to America’s Small Business
Congratulations
&
Thank You!
Keep in touch.
www.scorehouston.org
Back up
Buying a Business
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If possible, buy assets not stock
–avoids potential liabilities, unknown at the time of
purchase.
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Describe the existing business
Date business was originally started
List the present owners
Are the present owners the original start-up
owners?
Date present owners acquired business
Present Organizational form
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Buying a Business
Price
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Asking price
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Appraised value (see due diligence)
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Goodwill
–(difference between the price and book value)
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How and by whom were the assets appraised
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Buying a Business
Due Diligence
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Review Business History
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Review Operating History by major product lines
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Forecast sales and margins by major product lines
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Appraise the Business Value
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Verify Business Goodwill
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Why is the owner selling the business
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Attach itemized lists of assets & liabilities at book and appraised values
in the Appendix
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–3-year Financial reports
–3-year Income tax reports
–3-year Sales and Operating reports
–Verify Market value of inventory, receivables, capital assets, payables and debt
–Determine the value rules in your industry based on similar sales
–Compute business value using DCF Analysis based on forecasted sales and margins
and compare it to the rules above
–Business reputation – Positive or Negative
–Brand identity – Strong or Weak?
–Customer feedback – Positive or Negative
–Banker; Customers; Supplier; Broker
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Buying a Franchise
Is this a repeatable franchise?
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Is it listed in SBA Franchise Registry?
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How long has the franchisor been in business?
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Has the brand/product/service good market acceptance?
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What is the reputation and credit-worthiness of the
franchisor
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How many franchisees are presently operating?
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What is the rate of turnover and closings of the
franchisees?
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Contact several franchisees at random (not from a list the
franchisor provides)
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Carefully review Uniform Franchise Offering Circular
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Buying a Franchise
Is the franchise fee competitive?
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How much is the franchise fee and is it competitive
and reasonable?
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Are the “royalty fees” reasonable and competitive?
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Are the following included for these fees?
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Training program for franchisee and employers
Assistance in obtaining financing
Assistance in selecting and acquiring the right location
Assistance in facility design and layout
After start-up management assistance and performance evaluation
Co-op advertising, POS and sales promotion programs
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Buying a Franchise
Legal Issues
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What is the term of the agreement?
Under what conditions can the franchisor terminate this agreement?
Under what conditions can you terminate this agreement?
Can you sell the franchise to others without the franchisors permission?
What are your renewal rights?
Are your outside business activities limited?
Is the franchise territory protected?
Are there other “similar” franchisees located nearby?
Are there limits to the number of franchisees one can own and
operate?
Is the investment required all-inclusive?
How is the royalty fee used?
What co-op programs are you required to participate in?
Are there constraints on buying supplies and products from others?
Do you have the original and a copy of the franchise agreement and
other required legal documents, signed by both parties
Have an attorney carefully review the franchise contract or agreement
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