Follow this outline to determine if a franchise may be the right one for you.
By Joe Mathews, Don Debolt and Deb Percival
The first step in finding the right franchise system is to look inward--to determine what you really want from this investment and the qualities you seek in a franchisor that will help you attain the lifestyle you desire. This includes making a list of your goals and categorizing them into "wish to have" and "must have" lists.
The business may seem sexy, the products or services cool, the customers enjoyable, the business model resilient, and you fit in well. But if the franchise opportunity won't deliver your desired results with a high degree of probability, it is the wrong franchise for you.
Below are six steps for researching and comparing franchise opportunities against their ability to deliver your "must have" and "wish to have" goals. The criteria you will use to compare and contrast businesses, regardless of whether they are in the same industry, are their ability to deliver your desired lifestyle.
Step 1: The Initial Interview
The first interview and presentation of the franchise concept is most likely conducted by telephone and sometimes in person with a franchise sales representative. This is a "getting to know each other" step, where you help the franchise sales representative understand who you are, what makes you successful, and what you are looking to accomplish. The franchise sales representative in turn helps you understand who the franchisor is, what makes the franchise opportunity unique and who makes a successful franchisee. You both begin the process of determining whether your skills and aptitudes match the skills and aptitudes required to succeed within the franchise.
Step 2: Qualification
At this stage, the franchisor will seek to gather and offer more specific details, including whether you have the financial capital to undertake this business opportunity. The purpose is to determine if there is a fit from the franchisor's perspective. This interview may be conducted by telephone or in person, if the franchisor has a sales representative local to you. If you create an open and honest dialogue with the franchise rep, he or she will probably see the potential fit before you do because an insider's perspective on what it takes to win in the system.
Step 3: FDD and Franchise Agreements Review
Most buyers at this phase conduct a business review of the terms and conditions of the FDD (Franchise Disclosure Document) and make sure you and the franchisor are in agreement on all major points. Some states may require additional disclosure information in the FDD.
There are two ways to look at a FDD. The first is from a business perspective. Does the disclosure make sense? Can you live with the terms and commitments of the agreement? The second perspective is legal. You can bring the FDD to an attorney, though at this data-gathering stage, that might be premature and an unnecessary expensive. Once you have established the fit, then it will be time to conduct a legal review.
However, now is the time to become aware of what the business commitments look like and whether you are willing to honor those commitments. If for whatever reason there are commitments or obligations in the franchise agreement you can't live with, end the process here. If you can honor these commitments with integrity, proceed to the next step.
Step 4: Franchisee Research
Once you've made it this far, now is time to interview franchisees, gather data, compare the information you receive from franchisees with what you received from the franchisor, and determine whether you will produce your desired results with a high degree of probability.
Ideally, this is a period of intense data gathering and heavy analysis. Here is where you test the veracity of the franchisor's systems and determine whether the franchisor is skilled and has a profitable business model positioned for the long haul. If the franchise appears to produce your desired lifestyle with a high degree of probability, it's time to invest in professional advice. You need to have a franchise attorney review your FDD and an accountant review your business plan.
Step 5: Visiting the Franchisor's Home Office
Never do business with people you have not met. Franchising at its best is a highly personal relationship. You are entrusting your dreams and capital to the care of the franchisor leadership. Decisions made on the executive level have an impact on whether you'll be able to meet your personal objectives. Go to the corporate offices, meet the decision makers, shake their hands, look them in the eye, and ask tough questions. You have already evaluated the business model against its ability to produce your desired results. Now it's time to evaluate your trust level of the franchisor's leadership and key management.
Step 6: The Yes/No Decision
It's time to make up your mind about whether you design a new life and career of your choosing or to go back to the way it was.
See the article here.
Thursday, July 28, 2011
Wednesday, July 20, 2011
Are You Still Working For Money? Network Marketing—It’s an Asset, Not a Job
Network Marketing—It’s an Asset, Not a Job
This passage is excerpted from The Business School for People Who Like Helping People,by Robert T. Kiyosaki, with Sharon Lechter, CPA, authors of Rich Dad, Poor Dad.
I am sometimes asked, “Why do so few people make it to the top of their network marketing system?”
The truth is, the top of the network marketing system is open to everyone—unlike traditional corporate systems, which allow only one person to reach the top of the company. The reason most people do not reach the top is simply because they quit too soon. So why would someone quit short of the top?
Most people join only to make money. If they don’t make money in the first few months or years, they become discouraged and quit (and then often bad-mouth the industry!). Others quit and go looking for a company with a better compensation plan. But joining to make a few quick dollars is not the reason to get into the business.
The Two Essential Reasons to Join a Network Marketing Business
Reason number one is to help yourself. Reason number two is to help others. If you join for only one of these two reasons, then the system will not work for you.
Reason number one, means that you come to the business primarily to change quadrants—to change from the E (Employee) or the S (Self-employed) quadrant to the B (Business owner) or I (Investor) quadrant.
This change is normally very difficult for most people—because of money. The true E or S quadrant person will not work unless it is for money. This is also what causes people to not reach the top of the network marketing system: they want money more than they want to change quadrants.
A B quadrant or I quadrant person will also work for money, but in a different way. The B quadrant person works to build or create an asset—in this case, a business system. The I quadrant person invests in the asset or the system.
The beauty of most network marketing systems is that you do not really make much money unless you help others leave the E and S quadrants and succeed in the B and I quadrants. If you focus on helping others make this shift, then you will be successful in the business.
As a B or an I, sometimes you don’t get paid for years; this, a true E quadrant or S quadrant person will not do. It’s not part of their core values. Risk and delayed gratification disturb them emotionally.
Delayed Gratification and Emotional Intelligence
One of the beauties of network marketing is that it focuses on developing your emotional intelligence as well as your business skills.
Emotional intelligence is an entirely different matter from academic intelligence. In general, someone with high emotional intelligence will often do better than someone with high academic intelligence but low emotional intelligence. That explains, in part, why some people do well in school but not so well in the real world.
The ability to delay gratification is a sign of higher emotional intelligence. In a recent study of emotional intelligence, it was found that people who could delay gratification often led more successful lives than those who could not.
This is why the educational system inherent in a good network marketing opportunity is so important. It’s the emotional education or emotional intelligence aspect of their programs that I find so valuable for people.
Many people write me and tell me they loved my book, Rich Dad, Poor Dad, but I fear that many of them don’t get the most important point of the book: Lesson #1, “The rich don’t work for money.”
Once I have built or bought an asset, that asset works hard to make money for me. But I will not work for money—I will work only to build or buy assets. Those assets make me richer and richer, while I work less and less. That is what the rich do. The poor and middle class work hard for money, and then buy liabilities instead of investing in assets.
What Kind of Asset is a Network Marketing Business?
Remember, there are two reasons required to be successful in network marketing: to help yourself, and to help others. Reason number one means helping yourself get to the B side of the quadrant. What about reason number two
The beauty of most network marketing systems is that you don’t really make much money unless you help others leave the E and S quadrants and succeed in the B and I quadrants. If you focus on helping others make this shift, then you will be successful in the business.
If you only want to teach yourself to be a B quadrant and I quadrant person, then a true network marketing system won’t work for you. You may as well go to a traditional business school, which focuses only on your becoming a B quadrant person.
The beauty of a network marketing business is that your goal is to create assets, which are other B’s working under you—and their job is to create other B’s working under them. In traditional business, the focus is for the B to have only E’s and S’s working for them.
The type of business I was taught to build is a business with me at the top and E’s and S’s at the base. I really don’t have room at the top for many other B’s, which is why in my businesses, I strongly recommend that all my employees look into network marketing as their own part-time businesses.
The traditional corporate system really is a pyramid, because there are a few B’s and I’s near the top, and more E’s and S’s at the base. A network marketing system is a reverse pyramid: its primary focus is to bring up more and more B’s to the top.
One type of pyramid, the traditional type, has its base on the ground; the other type has its base in the air. It’s a pyramid that pulls you up instead of pushing you down. A network marketing business gives everyone access to what used to be the domain only of the rich.
This passage is excerpted from The Business School for People Who Like Helping People,by Robert T. Kiyosaki, with Sharon Lechter, CPA, authors of Rich Dad, Poor Dad.
I am sometimes asked, “Why do so few people make it to the top of their network marketing system?”
The truth is, the top of the network marketing system is open to everyone—unlike traditional corporate systems, which allow only one person to reach the top of the company. The reason most people do not reach the top is simply because they quit too soon. So why would someone quit short of the top?
Most people join only to make money. If they don’t make money in the first few months or years, they become discouraged and quit (and then often bad-mouth the industry!). Others quit and go looking for a company with a better compensation plan. But joining to make a few quick dollars is not the reason to get into the business.
The Two Essential Reasons to Join a Network Marketing Business
Reason number one is to help yourself. Reason number two is to help others. If you join for only one of these two reasons, then the system will not work for you.
Reason number one, means that you come to the business primarily to change quadrants—to change from the E (Employee) or the S (Self-employed) quadrant to the B (Business owner) or I (Investor) quadrant.
This change is normally very difficult for most people—because of money. The true E or S quadrant person will not work unless it is for money. This is also what causes people to not reach the top of the network marketing system: they want money more than they want to change quadrants.
A B quadrant or I quadrant person will also work for money, but in a different way. The B quadrant person works to build or create an asset—in this case, a business system. The I quadrant person invests in the asset or the system.
The beauty of most network marketing systems is that you do not really make much money unless you help others leave the E and S quadrants and succeed in the B and I quadrants. If you focus on helping others make this shift, then you will be successful in the business.
As a B or an I, sometimes you don’t get paid for years; this, a true E quadrant or S quadrant person will not do. It’s not part of their core values. Risk and delayed gratification disturb them emotionally.
Delayed Gratification and Emotional Intelligence
One of the beauties of network marketing is that it focuses on developing your emotional intelligence as well as your business skills.
Emotional intelligence is an entirely different matter from academic intelligence. In general, someone with high emotional intelligence will often do better than someone with high academic intelligence but low emotional intelligence. That explains, in part, why some people do well in school but not so well in the real world.
The ability to delay gratification is a sign of higher emotional intelligence. In a recent study of emotional intelligence, it was found that people who could delay gratification often led more successful lives than those who could not.
This is why the educational system inherent in a good network marketing opportunity is so important. It’s the emotional education or emotional intelligence aspect of their programs that I find so valuable for people.
Many people write me and tell me they loved my book, Rich Dad, Poor Dad, but I fear that many of them don’t get the most important point of the book: Lesson #1, “The rich don’t work for money.”
Once I have built or bought an asset, that asset works hard to make money for me. But I will not work for money—I will work only to build or buy assets. Those assets make me richer and richer, while I work less and less. That is what the rich do. The poor and middle class work hard for money, and then buy liabilities instead of investing in assets.
What Kind of Asset is a Network Marketing Business?
Remember, there are two reasons required to be successful in network marketing: to help yourself, and to help others. Reason number one means helping yourself get to the B side of the quadrant. What about reason number two
The beauty of most network marketing systems is that you don’t really make much money unless you help others leave the E and S quadrants and succeed in the B and I quadrants. If you focus on helping others make this shift, then you will be successful in the business.
If you only want to teach yourself to be a B quadrant and I quadrant person, then a true network marketing system won’t work for you. You may as well go to a traditional business school, which focuses only on your becoming a B quadrant person.
The beauty of a network marketing business is that your goal is to create assets, which are other B’s working under you—and their job is to create other B’s working under them. In traditional business, the focus is for the B to have only E’s and S’s working for them.
The type of business I was taught to build is a business with me at the top and E’s and S’s at the base. I really don’t have room at the top for many other B’s, which is why in my businesses, I strongly recommend that all my employees look into network marketing as their own part-time businesses.
The traditional corporate system really is a pyramid, because there are a few B’s and I’s near the top, and more E’s and S’s at the base. A network marketing system is a reverse pyramid: its primary focus is to bring up more and more B’s to the top.
One type of pyramid, the traditional type, has its base on the ground; the other type has its base in the air. It’s a pyramid that pulls you up instead of pushing you down. A network marketing business gives everyone access to what used to be the domain only of the rich.
Wednesday, June 1, 2011
Is This a Pyramid or Legitimate? By Jeffrey A. Babener
The Inevitable Question
OK, you have either been recruited for a network marketing opportunity or you are the one doing the recruiting. Inevitably, this question will come up: Is this a pyramid scheme or a legitimate business opportunity?
This Tuna's for Selling
Although this is a complex legal area, a simple story draws a clear line in the sand.
Party No. 1 sells Party No. 2 a case of cans of tuna fish for $10. Party No. 2 sells the same case to No. 3 for $20 and so on until No. 9 sells the case to No. 10 for $500. No. 10 opens the case and opens one of the cans, which turns out to be rancid.
He goes back to No. 9 who refers him to No. 8 and so on until No. 10 goes to No. 1 to complain. "I have major problem," he says.
"So, what's your problem?" says No. 1.
"Well," says No. 10, "the tuna is rancid, it's inedible."
"So, what's your problem," No. 1 says again.
No. 10 says, "Like I said, this tuna is no good."
"Well," says No. 1, "the way I see it, you don't really have a problem."
"What do you mean?" says No. 10, "this stuff is worthless."
"You don't understand," said No. 1, "this tuna is for selling, it's not for eating!"
And there lies the difference.
Distributors in a network marketing program that are merely buying product to buy into the deal as opposed to an intention of really making a market for it, are really working a pyramid scheme, not a legitimate direct selling business. Remember, when you offer this opportunity to your next-door neighbor or your best friend, it's your credibility that's going to be on the line for years to come.
What to Look for - A Checklist
So, what do you look for with respect to legitimacy vs. pyramid? Here's a good checklist to consider.
1. Product and Price: Does the company offer a high quality product for which there is a strong demand in the real world marketplace? Can the product be demonstrated, and does it stand out when you show it to friends? Is the product proprietary to the company, and available only through its distributors? (Have you ever noticed that you can't buy Avon products in stores or Shaklee vitamins at pharmacies?) Is it backed up with a customer satisfaction guarantee? Is post-sales service or customer assistance available? Do the people who participate in the program buy the product enthusiastically based on its own merits, even if they don't participate in the compensation program?
2. Second, Can you participate in the company's program without having to make any investment other than purchasing a sales kit or demonstration materials sold at company cost?
3. Purchase and Inventory Requirements: Does the company's compensation plan discourage inventory loading? Garages and backrooms filled with product serve no useful purpose to anyone.
4. Sales Commissions Sources: Are sales commissions paid only on actual products or services sold through distributors in the network to the end-user or ultimate consumer? (This means that products don't end up in basements and closets. They are used, because they have genuine value.) Does the compensation plan avoid paying commissions or bonuses for the mere act of sponsoring or recruiting? (If it pays headhunting fees, it is illegal.)
5. Buy-Back Policy: Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states that have adopted multilevel distribution statutes.)
6. Retail Sales: Is there an emphasis on actual retail sales to end-consumers? Can the company demonstrate efforts to market products to the ultimate consumer? Do the company's distributors have ongoing retailing requirements to qualify for commissions? What is a "retail sale?" The industry and many MLM statutes include both sales to nonparticipants and purchases in reasonable amounts for personal use by distributors. Some regulatory groups, including the FTC, have historically rejected personal use as a legitimate retail sale. Stay tuned as this debate continues. The legislative trend is definitely supportive of the industry position.
7. Active and not Passive Role for Distributors: Are distributors in the company required to actively participate in the development and management of their networks? (Many of the MLM statutes require that distributors perform bona fide, supervisory, distributing, selling, or soliciting functions in moving product to the ultimate consumer.)
8. Earnings Misrepresentations: Do the company's literature and training materials scrupulously avoid claims of income potential that is promises of specific income levels other than demonstrations of verifiable income levels within its program? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)
9. Good Training: Does the company offer its independent distributors solid training opportunities in sales and recruitment? Are different levels of training offered to match the increasing levels of experience and responsibilities of distributors?
The Journey Begins
OK, is this the end of your journey? Obviously not. You have now looked at some legal issues and its time to move on to some solid business analysis. But it's a great start.
A Checklist 1. Product and Price 2. No Investment Required 3. Purchase and Inventory Requirements 4. Sales Commissions Sources 5. Buy-Back Policy 6. Retail Sales 7. Active Role for Distributors 8. Earnings Misrepresentations 9. Good Training
Jeffrey A. BabenerBabener & Associates121 SW Morrison, Suite 1020 Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad. www.mlmlegal.com
MLM Legal || Babener & Associates
OK, you have either been recruited for a network marketing opportunity or you are the one doing the recruiting. Inevitably, this question will come up: Is this a pyramid scheme or a legitimate business opportunity?
This Tuna's for Selling
Although this is a complex legal area, a simple story draws a clear line in the sand.
Party No. 1 sells Party No. 2 a case of cans of tuna fish for $10. Party No. 2 sells the same case to No. 3 for $20 and so on until No. 9 sells the case to No. 10 for $500. No. 10 opens the case and opens one of the cans, which turns out to be rancid.
He goes back to No. 9 who refers him to No. 8 and so on until No. 10 goes to No. 1 to complain. "I have major problem," he says.
"So, what's your problem?" says No. 1.
"Well," says No. 10, "the tuna is rancid, it's inedible."
"So, what's your problem," No. 1 says again.
No. 10 says, "Like I said, this tuna is no good."
"Well," says No. 1, "the way I see it, you don't really have a problem."
"What do you mean?" says No. 10, "this stuff is worthless."
"You don't understand," said No. 1, "this tuna is for selling, it's not for eating!"
And there lies the difference.
Distributors in a network marketing program that are merely buying product to buy into the deal as opposed to an intention of really making a market for it, are really working a pyramid scheme, not a legitimate direct selling business. Remember, when you offer this opportunity to your next-door neighbor or your best friend, it's your credibility that's going to be on the line for years to come.
What to Look for - A Checklist
So, what do you look for with respect to legitimacy vs. pyramid? Here's a good checklist to consider.
1. Product and Price: Does the company offer a high quality product for which there is a strong demand in the real world marketplace? Can the product be demonstrated, and does it stand out when you show it to friends? Is the product proprietary to the company, and available only through its distributors? (Have you ever noticed that you can't buy Avon products in stores or Shaklee vitamins at pharmacies?) Is it backed up with a customer satisfaction guarantee? Is post-sales service or customer assistance available? Do the people who participate in the program buy the product enthusiastically based on its own merits, even if they don't participate in the compensation program?
2. Second, Can you participate in the company's program without having to make any investment other than purchasing a sales kit or demonstration materials sold at company cost?
3. Purchase and Inventory Requirements: Does the company's compensation plan discourage inventory loading? Garages and backrooms filled with product serve no useful purpose to anyone.
4. Sales Commissions Sources: Are sales commissions paid only on actual products or services sold through distributors in the network to the end-user or ultimate consumer? (This means that products don't end up in basements and closets. They are used, because they have genuine value.) Does the compensation plan avoid paying commissions or bonuses for the mere act of sponsoring or recruiting? (If it pays headhunting fees, it is illegal.)
5. Buy-Back Policy: Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states that have adopted multilevel distribution statutes.)
6. Retail Sales: Is there an emphasis on actual retail sales to end-consumers? Can the company demonstrate efforts to market products to the ultimate consumer? Do the company's distributors have ongoing retailing requirements to qualify for commissions? What is a "retail sale?" The industry and many MLM statutes include both sales to nonparticipants and purchases in reasonable amounts for personal use by distributors. Some regulatory groups, including the FTC, have historically rejected personal use as a legitimate retail sale. Stay tuned as this debate continues. The legislative trend is definitely supportive of the industry position.
7. Active and not Passive Role for Distributors: Are distributors in the company required to actively participate in the development and management of their networks? (Many of the MLM statutes require that distributors perform bona fide, supervisory, distributing, selling, or soliciting functions in moving product to the ultimate consumer.)
8. Earnings Misrepresentations: Do the company's literature and training materials scrupulously avoid claims of income potential that is promises of specific income levels other than demonstrations of verifiable income levels within its program? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)
9. Good Training: Does the company offer its independent distributors solid training opportunities in sales and recruitment? Are different levels of training offered to match the increasing levels of experience and responsibilities of distributors?
The Journey Begins
OK, is this the end of your journey? Obviously not. You have now looked at some legal issues and its time to move on to some solid business analysis. But it's a great start.
A Checklist 1. Product and Price 2. No Investment Required 3. Purchase and Inventory Requirements 4. Sales Commissions Sources 5. Buy-Back Policy 6. Retail Sales 7. Active Role for Distributors 8. Earnings Misrepresentations 9. Good Training
Jeffrey A. BabenerBabener & Associates121 SW Morrison, Suite 1020 Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad. www.mlmlegal.com
MLM Legal || Babener & Associates
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