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Good afternoon, and welcome to the VetNet Live Session on how to make an educated decision when evaluating and buying a franchise. My name is Elvis Avdic, and this session is brought to you by the Institute for Veterans and Military Families, IVMF, here at Syracuse University. IVMF has a portfolio of programs in entrepreneurship and in creating educational programs that help veterans move to the next level or help them start a business. We also are involved highly in community work and research as well. So if you're looking for more information on IVMF please visit our ivmf.syracuse.edu website. Today our guest speaker is Stephen Maeker from Texas and I'm going to let Stephen introduce himself, and talk a little more about evaluating a franchise before you make the decision to buy it. If we could put the presentation up that would be great. First of all, thank you to each one of you for what you do for our country in service to the military. My wife and I are deeply appreciative. In the next 45 minutes, my job is to educate you on the proper way to evaluate buying a franchise and ultimately help you assess if franchising is the right thing to do as you exit the military and pursue your next professional step. So, with that said let's look at the table of contents. This will give you an overview. I want to spend a couple of minutes just talking about myself and my past corporate and educational background. I'll give you a flavor for some of the past folks that I've helped over the past 5 and a half years as a nationally published franchise consultant with FranChoice. We'll define franchising, I want to talk about candidate motivations. I want to talk about the good and the bad of franchising and who it specifically can be for, and equally as important, who it's not for. One of the things you're going to hear me say is statistically, military veterans outperform non-military veterans when it comes to franchising and I'll explain why I say that. We're then going to give you a high-level overview of what a franchise disclosure document looks like, and focus on some of the key items in that document. We'll talk about the ways to analyze potential income, I'll speak to franchise costs, and then I'm going to define the what I consider the 4 quadrants of franchising. You'll hear that there are about 3,000 franchises out there in the United States, and they can all be defined or allocated in one of four quadrants. I'll show you the franchise investigation process that my wife and I use to purchase one of the franchises that I represent. I represent about a hundred out of more than 3,000. So my wife and I are living and breathing franchisees, and I'll give you our story there. And then last but not least, I'll talk a little bit about financing and then give you my contact information. You'll learn that my service is free and I hope people all over the world in terms of taking the education-based approach to evaluating and buying a franchise. So if we could move to the first slide that would be great, Elvis. I start first and foremost with my family. That is my daughter in the upper left-hand corner. She is an incoming freshman at the Cleveland Institute of Music and Case Western, she will double major in cello performance and pre-med at Case Western. She spent the last 2 years at one of the most prestigious music boarding schools in the country, Interlochen, and has made the most of her opportunity. So she departs from Texas on August 19th, and my wife and I will be heading up there Labor Day to see the campus. My son in the far-right-hand corner is 17th, in that picture he's 14. But he's 17 and he is a fisherman. We just got back from Alaska a couple weeks ago, and his objective next summer before entering college is to spend the summer in Alaska as a fishing guide. Below, in the middle, is my wife, Christy. My wife has just been promoted to Director of Counselling Services for KDISD. She has ultimate responsibility for over 80,000 students and all of the counselors and registrars in the school district. Additionally, my wife handles the social media marketing of our franchise, and I handle the operations and customer support. My educational background is an undergraduate at the University of Texas in Austin, BBA finance management. MBA the University of Southern California, 1996, in entrepreneurial ventures and marketing. I'm proud to say that I professionally practice what I went to school for in terms of entrepreneurial ventures. I'm not only an entrepreneur as a franchise consultant, but one as a franchisee. My corporate career has been a blessed one. I've spent the first 6 years in the oil and gas industry with Exxon Mobile, the industry leader. Worked various stages of a progressive level of franchise responsibility and company-operated responsibility. From there I transitioned into the restaurant industry, where I worked for 3 industry leaders. One with the biggest casual dining company on the planet, at which time I oversaw global financial reporting and strategic planning for over 140 franchise restaurants in 40 some odd countries. Spent some time running a bunch of restaurants and then also on the franchise sell stent. So the restaurant industry, I know it well and I'm here to say it's not for everybody. But for those people who have cash and know how to run a restaurant, it can be a fun thing. The last 5 and a half years I have been a nationally published franchise consultant with an organization called FranChoice. Hands-down the premiere group of franchise consultants in this country. I've consistently been one of the top performers, and I am nationally published. I work with people by providing a free service both locally, regionally, nationally and internationally. And my job is to take people through the step-by-step process that helps them evaluate whether or not a specific franchise is the right fit for them. Last but not least, my wife and I put our money where our mouth is. So one of the hundred franchises that I represent, we bought! We opened in December 2015, we are in the Salon Suite space. If someone would have told me three years ago I was going to be in the Salon Suite space I would have said, "You're crazy, I don't even know what that is!" But, the business has been an outstanding investment for us. We operate in College Station, Texas, which is about 80 minutes away. And last year, we were one of three franchisees in a116-franchisee system that received multiple awards at the annual conference and I'm proud to say that we were one of the top performers in that system. Okay, that's a bit of my overview, let's go to the next slide Elvis. And let's take a little bit of a look at people in the past that have come to me and if you look at that slide, what you're going to see is just a range of people. Ranging from an immigration visa which I've down multiple of these, to you know, a husband and wife from Coca-Cola that were directors in Venezuela, to Senior Vice Presidents or COOs, to somebody who has owned 30 Hardy's before. They all come to me with different shapes and walks of life. Each one of them had their different motivations and this is just a small sampling of people that I've helped in the past. I show this to you to get a flavor for different people who have different motivations and different backgrounds. And the key is to leverage the background and transferable skillset to a franchise that's a direct fit to the model, which we'll talk about in a bit. Okay Elvis, let's go to the next slide and talk a little bit about what Franchising is. A couple of years ago, the University of Texas asked me to fly out to Mexico City to meet with Mexico MBAs, well-capitalized Mexican national citizens. This is a slide from the presentation. And when I showed this slide, I forget the particular model that this is from Latin America, but some of the folks knew her, and at the core, franchising is a model for doing business. You pay a franchise fee upfront, one time to follow a proven model. Another thing that a franchise is (my wife's a good cook), is a recipe. It's a recipe for potential success. And I like the potential because nobody can guarantee your success. Nobody can guarantee a certain level of financial performance. It is ultimately up to the candidate making an education-based decision, accessing fit and determining if that franchise and it's model are in congruence with the candidate's model. And the last thing that I share with you, is that by no means, not all franchises are created equally. They're not. In this, you'll learn different ways to see that and to learn that. A few of the reasons why we bought what we bought, was the franchise we bought every principle in the company is a multi-unit franchisee. I value that, they put their money where their mouth is. Secondly, with over 350 units open, there's never been a failure. I submit to you, a franchise that has 350 units open, in absence of a failure, or in absence of litigation--they're doing something right. So our takeaway when we went through the investigation was if we simply follow the model, if we simply follow the recipe, we will maximize our probability of success. And I will tell you, that's been a good move for Christy and I. Alright, let's look at the next slide. When you look at it, there's 2 key statistics that I cite. And I taught a seminar 2 days ago, here in Houston at the Small Business Development Center, and one of the attendees in the audience knew the Thomas Stanley book, The Millionaire Next Door. One of the key things that the book highlights is that only 18% of households in the United States are headed by self-employed people. Yet that 18% of self-employed people are 4x more likely to be millionaires. That's a statistically significant stat. The second stat comes from the International Franchise Association, and admittedly this is a study that was multiple years, that is outdated. It was done in the early to mid-90's I believe, and it was a rolling study for the IFA evaluated, hundred of non-franchise owners compared to franchise business owners. And one of the key statistics that they learned was that I believe it was after 5 years of being open only 10% of non-franchise business owners were still open. I.E. 90% failed. Compared to 90% of franchise business owners still open over the same time period. That is statistically significant and it goes back to the fact that in maximizing the probability of success with a proven business model and a proven recipe can be a very good thing. Out of the next breath, the study needs to be updated admittedly, but it's statistically significant in terms of the finding. Let's look at the next slide. And let's talk about some of the motivations. One of the things that I love in what I do for a living as a franchise consultant with FranChoice is literally on a daily basis, I'm not sure who I'm gonna talk to. The only given is somebody is gonna get connected to me through different referral sources. So, when somebody connects with me, the first question that I ask them is what is your primary motivation in terms of finding a great franchise. And these are 5 of the most popular reasons that I find. You know, here in Texas the price of oil is under $50, and when the price of oil is under $50, downsizing happens in the oil and gas industry. And unfortunately a lot of times people don't see it. So one of the primary reasons is people get downsized at a 40, 50-year-old age, they've made a nice 6-digit income, now they're downsized in an industry that's not hiring. What do they do? Do they leverage their transferable skillset in a franchise? Another reason, and a primary motivation for Christy and I, was to diversify. I think yesterday the stock market hit an all-time high. The only given is, in my professional opinion, is what comes up will come down. And one of the reasons why we diversified into the Salon Suite franchise we bought, was to have more ability to potentially control the results. When the stock market crashes or when the bond market crashes, there's absolutely nothing we can do for it. I took a call from my financial advisor 2 days ago who let me know that 2 of my stocks in one day went down 10%. Well what I didn't know about it, and the bottom line is, there's nothing I can do about it. Within the business that we bought, we know that if we followed the model, and if we treated our people respectfully, and over-promised and over-delivered, we would maximize the probability of doing well. For us, we diversified. Another reason I hear often is change. I did a consultation yesterday with a gentleman who has been in banking for 41 years and he is tired of it, he and his wife are ready for a change and he's planning for his next professional step. Another driver of what Christy and I did what we did was legacy. You know, one day 10 years from now, our dream is to have maybe 4 or 5 of these and be able one day to hand these to our children and say, "This is your business now, what do you want to do with it?" You can run it, you can sell it, but it will be their call. Another big motivation that I've seen is, I help on the E2 immigration visa side, the L1 visa, the EB5 immigration visa. There's about 80 countries we have reciprocal treaty arrangements through the United States with on an E2. And somebody that's not a US citizen can come in and with a slight investment over $100,000 and hiring a few employees out of the gate can maximize the potential for visa approval. So people come to me with all different types of motivations. And that's a key for me in helping understand what it is they're seeking, what they're trying to accomplish at that stage in life. Let's go to the next slide. This is a handful of advantages of owning a franchise, and I've picked out half a dozen. Proven systems can equal fewer mistakes. Again, I shared the statistic with you, that what we bought, 350 open stores have never had a failure. I submit to you that's not luck, I submit to you that is strong franchisees following a proven business model. It's not to say that we don't make mistakes, everybody makes mistakes, the key is to learn from them. But the proven system helps to maximize making less mistakes. The business partnership and peer group. We joined our business in the Salon Suite space because of the corporate leadership. Additionally, one of the wonderful side effects is that our franchisee peer group are some of the neatest people I've ever had the privilege of working with in my life. As a franchise consultant with FranChoice, I'll tell ya, that I adore my peers. They're some of the sharpest people that I've ever met in my life in franchising. Tax ramifications. Just because you're self-employed, and as long as you generate a minimum amount of income, you have the ability to do a $54,000 SEP, Self Employment Plan, every year. Several years ago, I had the ability to buy a 3-ton vehicle and I was able to write $25,000 off of it in year one. Simply because it was over 3-tons and met a tax code credit. Asset creation. We are doing this as a partial reason for legacy and to scale a multi-unit and create an asset. National brand recognition and buying power. We have a long-term lease in our business with McDonald's. 10 McDonald's buy hamburger cheaper than the independent. When McDonald's puts a sign up, do they have national brand recognition? Of course they do. The business that we got into was a pioneer 5 years ago, and today with over 350 stores open it dominates the space. We have strong national brand recognition and they're able to aggregate buying power with our cabinets, etc. Real estate and marketing expertise. One of the things that we learned and validated when we had the opportunity to connect with other franchisees, were the specifics of the real estate marketing pieces. And we learned that if he had corporate help guide us in terms of the site selection, and then if we got the lease done, that if we followed the marketing checklist, i.e. probably the most important piece of paper that we got out of training, out of the standard operations manual, was if we followed that marketing checklist, when we opened the doors, we would have the chance to maximize success. These are just a handful of advantages of franchise ownership, but some very good ones. Now Elvis, let's look on the other side of the coin, let's talk about disadvantages. And, years ago, I was quoted in one of the national newspapers to something of this effect: "If you're not somebody who likes to play nicely in the sandbox, franchising is not for you." What do I mean by that? Well, we have signed a franchise agreement. So if we do not uphold to the standards in Item 9 of the FDD, the franchisee obligations, we can ultimately be non-renewed or even terminated. So we signed up knowing we had certain commitments we had to make and we follow the rules, we follow it step-by-step. And when we come up with a best practice, we share that with the system. Now, with that said, if you're somebody that likes to color out of the lines or that is more of a, "I'm not gonna follow procedure and protocol," I'm here to tell you this might not be for you. The other thing that I've shared, and you can research this on your own, but statistically military veterans out-perform. Why? One of the key reasons you'll learn is that military vets known how to follow standard operating procedure. That's all about a franchise. Following protocol. Additional things that you'll hear: I have to pay a franchise fee--yes, you do, in the Item 5 it stipulated for a single or multi-unit or territory it's payable when the agreement is executed. I have to pay royalties. Well, yes you do, and the Item 6 will be the royalty percentage and the format in which that is paid. So this is just a part of the cost of doing business and buying a franchise. And then you're gonna see the checklist again, they are not all created equally. And there are ways that you can determine this in the franchise disclosure document, based on litigation, based on franchisees exiting the system and based on validation. When you have the chance to talk to franchisees, and one of the questions you ask them is: "Are you happy with your decision? Does the franchiser support you?" Let's go to the next slide. Franchise disclosure document. Couple key things here. First of all, annually published by the FTC. So what is it? Every year a franchiser has to publish the franchise disclosure document. A few things about this, and first and foremost, in terms of the investigation it is certainly one of the most important pieces of the puzzle that you're going to get. You're gonna see that when you get one that there are 23 Items. They're consistent, they're uniform. If you got 2000 FDDs and you line the table of contents up, you'll see that they're all the same. So if you can read one, you can read any of them. The language is consistent. The language is uniform. It is written protective in terms of the language for the franchisor. Now, let's take a look and let's look at a few of the key items. And again, there are 23 but I've specifically picked out--Elvis if we could go to the next slide--a few of the key ones. If you want to understand the expense side of the business, items 5, 6, and 7. Item 5, the initial fee paid to the franchisor. This is payable upfront when you execute your agreement. Oftentimes, franchisors will incent multi-unit behavior by having the first fee at A, and the second, third incremental ones maybe at a reduction. That's one of the incentives potentially for multi-unit behavior but that is also completely up to the franchisor. Other fees, things such as royalties. In our franchise we pay a certain percentage of our gross income due by the 10th of each month. We simply go to the internet, I upload my gross fees, it automatically calculates the royalty and the national advertising fund, and then it's pulled from our bank account the same day of the month. The estimated initial investment: these are itemized costs in tabular formats the same way Item 6 is, which will show the low to high range. So in our business that we bought, the low to high range was nearly a variance of $7,000 back in 2013. Well, I don't know about you guys but that's a big, big difference. So one of the things that we had to understand in our investigation was what is the driver of that variance and what we learned was ultimately it was driven by the square footage of the building. The Item 9, franchisee obligations. What do we have to do to stay in good contractual standing to have our franchise agreement renewed when it expires. In our cast, it expires in 10 years. We on good faith did a 15-year lease, with 2 five year renewal options. Well, our full expectations were to be able to renew at 10 years and to again be upstanding, superstar franchisees, which today we are, and I'm proud to say that. Item 11, the franchisor's assistance. You're gonna pay a fee to the franchisor, this is what you're paying it for. What do they do for marketing, for site assistance, for grand openings, for training. This is where all of that is spelled out in the Item 11. In terms of territory, the Item 12--how is territory defined? Is it contiguous, is it by zip code, is it exclusive, this is how all of that is handled. The obligation to participate in the Item 15, is this a hands-on, full-time business that you are required to be daily involved in? Is it a semi-absent, part-time manager-run model? Typically that lends itself toward a retail brick and mortar business. Does it have the potential to even be an absentee business? This is where your obligation to participate is stipulated. The Item 19, does the franchisor make a financial performance representation? If they do, great! Might help you make certain financial assumptions a bit easier. Again, they can't guarantee your performance. You will see a system and a range of performances. But if they do make performance representations, in our case we were able to see cost per square foot based on company units, we were able to see market rents based on individual sites. So those pieces of the puzzle kind of helped us in better understanding key pieces of the business and furthermore more importantly, we were able to validate certain things when we were able to speak to the franchisees we spoke with. Item 20, outlets and franchisee information. How many people in the year the franchise document was produced are in the system? In one of the tables will have every franchisee in the system that is currently an active franchisee. You can pick up the phone and you can talk to whoever you want to. In our particular case, we spoke with 4 people directly and I'll share what we learned when we get to the football field analogy. Lots and lots of good information there. Let's go to the next slide. So in terms of analyzing income, one of the ways that you can do that is whether or not the franchisor makes a financial performance representation in the Item 19, and then you can use that as part of your analysis. In the Item 5, 6, and 7--you know the franchise fee in the Item 5, the royalty fees in the item 6, and the Item 7 that's cost range low-to-high. You want to validate with franchisees, and you're gonna hear me say [that] and again, this is something that doesn't take place until you get to a certain stage in the investigation process, and we'll use the football field in a minute to see that. Then, some of the franchisors will send out spreadsheets and models. And in our particular case, we use the model and we were able to make conservative, realistic, and aggressive projections. It kind of gave us a feeling for what happens if we knock it out of the park versus what happens if we don't. And ultimately you have to be at peace with all of those scenarios as part of your educated buying decision. Let's go to the next slide. In terms of analyzing potential income, just some sample questions that you can potentially ask franchisees, and the stipulation that I make is that some franchisees will know this to the decimal point. In our particular case, if someone is approved int0 validation by the franchisor and if somebody wants to ask me how long it took for me to break even, my wife and I to break even, I can tell them because I'm a franchisee in that system. Not until they're approved into validation. If somebody wants to know net sales, or net income, I know my return on assets, I know my return on investments, I know my capitalization, I know the amount of working capital it took me to get open to the decimal point. I know my numbers. Understand that not everybody's gonna know the numbers to that level, and not everybody's gonna be as comfortable sharing this with you, but again this are potential questions you can ask, certainly amongst others to help you get to making certain financial assumptions. Again, that no franchisor can guarantee you, and that no franchisee can guarantee the success. It's all about making educated-based decisions and assumptions. Elvis, let's go to the next slide please. Franchise costs. Well now, we know there's a franchise fee payable in the Item 5 when you execute your agreement. We know that there's ongoing fees found in the Item 6. Highly important: working capital. So after you open the doors, do you need 3, 6, 9 months a year, how much working capital do you need to sustain your lifestyle, to sustain your mortgage, your car payment, your children--very, very important. Last but not least, franchisors that I represent will each have a minimum net worth and liquidity number. Some of them will substantiate that, some of them will not. The bottom line is, is a franchisor wants to bring you in, that you're an outstanding fit to their business model, and that you have the capitalization--that you meet the minimum net worth and you exceed the net worth and liquidity requirements to maximize probability of success. Let's look at the next slide please. 4 quadrants of franchising. Statistically, there are approximately 3,000 franchises--let's go with that number. And let's make an assumption, which is a generalized assumption that maybe they're slotted evenly into these 4 quadrants. So 2 of them are retail, I.E. brick, and mortar, as differentiated between simple and complex, where the investment is less than or greater than $250,000. The other 2 are service-based, where you're primarily targeting consumer, I.E. in their home or residence, and/or a business to business play. So let's look at the next slide, and let's kind of see some differences in terms of what that might look like. On the simple retail, the upper left-hand corner, you see the hair care industry. We're in the Salon Suite space, which ultimately we have 22 stylists at 8 salons and they pay us a weekly rent. Ultimately, their industry is hair care. Now, for us, we're landlords, we're in the commercial real estate business, but hair care is a needs-based recession-proof business. It is a business that will not be displaced by the internet. The only way somebody's not going to get their hair taken care of is if they go bald, that was another reason we got into it. Certain food concepts you can get into for under $250,000. Certainly, others are going to cost substantially more than $250,000, it just depends on the square footage and the model. The fitness--boutique fitness, a huge revolution in the industry, putting out, displacing big box, traditional fitness concepts. Many of these you can get into for under $250,000. If you look at the greater than $250,000 side, that's a picture of our French Bulldog, Carol. Pet care--where I live, 74% of the households have a pet. When people go on vacation they need a place to board their animals. You look at automotive repair, talk about a needs-based recession-resistant business. Somebody's car breaks down, they need to have it fixed. Medical weight loss--the obesity rate in the United States is unreal, and unfortunately, it's getting worse literally on a daily basis. Medical obesity is the fastest growing problem in the country with respect to healthcare. If we look at the bottom left-hand corner, business to consumer--things such as pests, the non-medical home healthcare, where 10,000 people turn 65 a day. In the last statistic that I saw, in less than 1% of that industry is currently represented, It's a huge business, but it's a business that's not for everybody. Financial planning is another example. If you look on the business side, things like mold and water damage here in Houston, which has been unreal, parts of Houston out near where I live have been flooded twice in the past 15 months. It creates huge opportunities for franchisers in that business. Power washing, commercial cleaning, residential cleaning. So when somebody comes to me, one of the things I'm looking for is what they've done in their career, and what is that transferrable skill set. And ultimately, do they have interests in one of these specific quadrants, and we dive into that much more deeper on a consultation which I explain. Out of 3,000 franchisers, there are about 100 different industries represented. This is just a handful of 12. Let's go to the next slide, Elvis. The investigation process. Again, when somebody talks to me--why are we talking? What's the primary motivation? With the wonderful people on this webinar, God bless you, many of you will have fulfilled your military commitment, be honorably discharged, vets. You're looking for that next professional chapter. We know that vets perform statistically well in franchising, so if your motivation to transition from the military into an entrepreneur route to a proven franchise. When we talk about characteristics, this is a whole bunch of different things. What is the targeted geography? What is the investment? Do you want a single or a multiunit play? What's your philosophy on employees--do you want a lot, do you want more? Do you want an easy, a hard operation? If you have employees, do you want 1099 or W2 contractors? What's your philosophy on sales? Do you want to cold call? Or do you prefer a warm lead? Do you prefer a pioneer franchise that might have been in business for years, but has only started franchising which is what we got into several years ago. Or do you want a more mature franchise? There's all different types of things to consider here--do you want a needs-based business or do you want more of a wants based business? There are a lot of things to filter through, and again, what's your vision 5 or 10 years from now? Are you comfortable with 1 unit or are you an empire builder, maybe you want 5 or 10. All this, factors into the investigation. Let's look at the next slide. Now, anybody here that's ever been to Austin, Texas, that is a Texas Longhorn--which, by the way I did my undergrad at Texas, I've also been a professor for the University of Texas in the business school for the A&M system and the University of Houston--so, one of the ways that I like to give back to the community is by teaching. And one of the ways that I give back to people that are interested in franchising is by being able to do these types of seminars. So what happens is, when I do a candidate's model, and I check territory for that candidate through the franchisers that I represent, what happens is when those territory checks come back as available then I know the potential fit to the candidate. And I'm gonna kick the ball off to that candidate and that candidate's gonna get the football, on the introductory call. So when I introduce the candidate, I'm gonna introduce their model, we're gonna go over all the key characteristics, and then I'm going to introduce that franchisors business model in direct relationship to the candidate's model. The far majority of the time, the candidate would not have thought of the target franchise. I would not have known of the Salon Suite space, but when we looked at our model in direct relationship to what we got into, it was a dream fit. Now the one thing I didn't say, is earlier on I showed a picture of my wife Christy--I met Christy through eHarmony, a Christian-based website. My wife and I are both senior elders at our church. We believe heavily in giving back. And the ironic thing about how Christy and I met, through eHarmony, is directly parallel to what I do. It's simply through matching principles. It was matching us with key characteristics we wanted to look for in a soulmate. I match the candidate's model with that in a franchisor's business model and direct alignment as a way to maximize probability of success. So what happens is, when I introduce the candidate, I then connect the candidate to the franchise sales headperson. They get the model, they get the completed questionnaire. So what happens is, is that candidate has a good baseline for the franchisor's business model and now the franchisor has a good feeling for the candidate. That starts marching towards the 50-yard line. Which includes a sequence of events at one point, that will include the FDD being disseminated, the introductory call, a unit economics, marketing, and operations overview. So by the time somebody gets to the 50-yard line, they should start visualizing themself in the concept. If they can't, then its probably not gonna be the right fit. When they can and when they do, is when at that point they have a good baseline, so they get into validation. And validation is when the franchisor lets the candidate validate with existing franchisees. Different franchisees will have a different culture of validation. So as an example, in our case, once we had gotten the baseline and the understanding of the franchisor, our franchisor sent an email to all the franchisees saying, "Hey, this is Stephen and Christy, they're in College Station, they're looking at buying a franchise--if they reach out to you, please take a few minutes out of your day." In our particular case, we reached out to 4 of the franchisees. And what we were looking for, was answers to 6 questions that were primarily quantifiable. And we were looking for a range of performance. We were able to talk to a superstar, and we were able to talk to a non-superstar. And the biggest thing that we learned, was the superstar, the day that they took possession of the building and started the buildout, started hammering the marketing checklist. The person that was not a superstar, did not. They sat back, they waited for the doors to open under the assumption they would come. So our learning was, was if we hammer the marketing effort once the buildout starts, we can maximize the probability of success. It can't be guaranteed, but if we follow the recipe, if we follow the model, we'll maximize the chance of a strong launch, which is exactly what we did. Now, as you're going into Validation, at some point when both parties are seeing mutal fit, is when a Discovery Day invitation would happen. That's when you fly to the corporate headquarters, at this time you need to have your funding strategy in place, you need to have (if you need to have a review done) a review done because you want to make sure that you're dotted the I's and crossed the T's. When you go to the Discovery Day you might have the chance to not only meet the executives and the team, but you might have the chance to interact with the franchisee--you know, if its a franchisee or a corporate owned unit, go see it, go talk to the people. Find out their satisfaction levels. Now, at the end of the discovery day, in our case, it was on a Friday afternoon, and what happened was our franchisor on Monday set us up with a decision call, and it was simply this: Congratulations, you have been unanimously approved. Are you in or are you out? Our answer was, "We're in." Send the franchise agreement, they were sent the next day, sign and call took place--at that time those were paper agreements, now there's an evolution more towards docusign, it's easier. But the bottom line is, we executed our agreements, we sent them back with the funds, and at that time the franchisor was able to execute and countersign. Hence, we became the newest franchisee in the system. Now, to get to that buying decision is all about this football field analogy. It's about from the introduction all the way to the decision to execute and fund. There's a lot of work that has to go into this, in our case I think it took us nearly 2 months. I've had candidates that have done deals in a month, and I've had candidates that have done deals that have taken quite a bit longer. All that matters is if a candidate is making the education-based decision. And one thing that I did not say, which I should have, is many of the franchisors that I represent will have discounts on franchise fees for honorably discharged military veterans. That's a great incentive for military vets. So, I wanna look at the next slide--let's talk about what happens before the introduction. So, to get to an introduction, a questionnaire has to be sent out, the Franchoice questionnaire. Now, I get referred to people through all different types of sources. On Tuesday, I had 8 people in my seminar that took two-and-a-half hours. And that evening, one of the 8 called. I sent them my introductory email, and I sent them the FranChoice Questionnaire, which had taken them nearly 30min to complete, in our case it took us 22 minutes. That questionnaire begins to touch on the key characteristics that the candidate deems most important in an opportunity. That leads to the next step, the most important step, the 45-minute phone or in-person consultation if they happen to live in Houston, or Skype consultation if they prefer. For international I do a lot of Skype. 45-minute consultation, where I'm asking you questions that you probably haven't thought of and the output of that is the next business day, me writing your model. I email it to you, I ask you to validate the accuracy of the model. If I'm missing something, you're not going to hurt my feelings, let me know. The typical response that I get is how did you do that, you've nailed this. That's because I'm gonna ask a lot of questions. That leads to the match, which is the introduction. If we go back to the last slide, Elvis, if we can, of the football field. The match is what happens when we get to the goal line on the introduction. That's where the football field starts, ok? If we forward that again, we go to the next slide, there in the investigation is when you see the various steps. Different franchisors will have different sequences of events. But the bottom line is that they're all aimed at making educated based decisions. And making mutually positive decisions to move forward. Understand that the evaluation of a franchise is a mutual process. You're looking at them the same way they're looking at you to assess fit and probably of maximizing success. Let's look at the next slide. Now, with respect to funding. In 2008, when funding dried up, it was tough. So about the only way you were going to get funds was if you had them yourself. So now today, the banks might not have learned, because funding is a lot looser, and and I'm here to tell you that people that have credit ratings in the high-600's, low-700's, anybody with a credit rating north of 800 is going to have a lot of opportunities potentially, everything else being equal. So debt funding mechanisms, things tied with an interest rate, third-party banks, your local bank, your SPA lending, asset-backed, different types of lending. And then when I talk about self-funding, and by self-funding I mean if you have cash on your own, or one of the biggest instruments that's taken place since the recession is being able to use an IRA. So somebody that's got a 401K that's was displaced and converted to an IRA--under an IRA, C-corp rollover, you have the ability to use a pod of dollars by incurring a one-time engagement fee, and then you're able to use those dollars tax-free to invest in your business. So in our particular case, the first one-third of the capitalization and investment cost, we used a rollover. And after the one-time fee, we were able to use those dollars towards the fees that were incurred, in the first incremental third and paying the general contractor on the debt down. I have relationships with three national funding partners, service up there is free as well, and I specifically use one of our three. So that is another additional service that if somebody needs access to funding, based on their personal situation, I'll make the necessary recommendation there as well. Let's look at the last slide. We're right on track. So, with that said, should someone want my assistance, what I tell people is, that is my cell phone--please call me, let me know what you learned, let me know a little bit about yourself. Additionally, follow up with an email, but please also call me. My spam is set very high so if I don't get back to you the same day it's possible you got spammed. That's my personal website, feel free to check it out. When you reach out to me I will email you my introductory email, and I'll set a 15min call-up with you to talk to you. After that, I will send out the questionnaire which begins the process that we've now defined. The one thing that I do ask, is you don't go to the Franchoice website directly, because if you register there, you're not ultimately going to get sent to me. You're gonna get farmed out, so that's the only thing that I ask. So if you feel that I can help you, and if you feel that the timing in life is right for you, to take an education based approach and look at how to buy a franchise, it will be more than a pleasure to help you. And Elvis with that said I think our goal was to have a presentation for about 50 minutes and to use the last 10 minutes in a Q&A format. So I'm gonna turn this back to you if you want to share the screen I'll do my best to answer any questions that have surfaced if any have. And if I don't know the answer my commitment will be to get back to you with an answer. So with that said let me let you take it over. To answer your question, the football field analogy shows the sequence of events that need to take place relative to making an educated buying decision. To get to that step, the process I showed was it starts with an introductory call, getting to know one another, it leads to the questionnaire, then leads to the consultation, which leads to the candidate's model. This is all about going from 3,000 franchisers down to a certain quadrant of 750, down to a certain hundred or so that I represent, down to 25 if they're evenly distributed within a matter of about an hour and a half of work, which is the beauty of this. There's no throwing a dart on a board, this is about eHarmony characteristic-based matching, which helps whittle down 3,000 down to a maximum of 3 compare and contrast in a matter of a couple hours. So sometimes, let me give you an example, sometimes people come to me with a word. And I'll give you an example: Subway. "Stephen, I've gotta have a Subway." Okay, now, first of all, I don't represent Subway. And our CEO Jeff Elgin is the founder of Subway which is a phenomenally successful worldwide brand. So this is the conversation as a generalization as it takes place. "So, you've gotta have a Subway, why?" "Because when I go by it at lunch there's a line." "Great, why else?" "Because when I see the brand people know who it is." "Excellent, it's a true brand. Why else?" And you'll get static. "I don't know Steve, I gotta have a Subway." Okay, let's spend 60 seconds on that. And I'll ask a series of questions--have you ever run a restaurant before? The typical answer is no. Have you ever dealt with food cost variances? Have you ever dealt with labor and overtime? A high turnover rate amongst hourly employees? Have you ever dealt with a bathroom that's messy or an irate customer or food missing or cash shortages or inventory shortages or having to cover a shift on a Friday afternoon when the high school shift leader doesn't show up? Now that took me about 45 seconds to ask those questions, and the typical response is, "Well, heck no. I don't want any of that." The ironic thing is, is 2 minutes before they told me they wanted Subway. The ironic thing is the last thing in the world they wanted was Subway. But what they told me was they wanted a mature brand, that's transactionally driven, that is non-24/7, that's a relatively easy operation for food it is, that is the utilization of both blue and white collar, semi-absent manager-scalable-run with a proven, mature brand, on a reasonable transaction average. They told me Subway, but the last thing they wanted was Subway. What they're looking for are the characteristics that I just defined. Okay, and every once in a while somebody will come to me and say "I gotta have this," and son-of-a-gun, when we go through the process, guess what? They were right. And when they're right, and when that type of business is geographically available, that's fun. [Question: if the franchise requires 500k in net-worth, and I only have 100k, can I still buy that franchise?] My answer to that is, first of all, I don't represent the franchise, second of all I'm not familiar with that franchise. Now it's my understanding if their minimum net worth criteria is 500k, and if the candidate's net-worth is only 100k, by definition they would not meet the minimum criteria. Even if they were able to get x-amount of loans--say in this example you've got a $400,000 loan which is an asset, but that's offset because that's a liability on the books. So in the example that the candidate just gave, in my professional opinion, the candidate would not meet the minimum criteria. [Question: What's the cheapest franchise to buy?] That's an outstanding question, the most basic question that I ask somebody is in the 4 quadrants of franchising, do you want the customer to come to you? I.e. retail brick and mortar. Starbucks, MacDonald's. Or do you want to go to the customer, and if so do you want to go to their home and/or place of business service. Now, many of the service concepts that I represent, you can get into for under 100k. I think the lowest ones start at about the 50k range, and typically the franchisor is gonna want you, and the lender, is gonna want you to have skin in the game. So as a general rule of thumb, you know, 25-30% is your cash injection, minus whatever third party other funding mechanism you might have. So with respect to service-based concepts, because they're home-based, or light industrial suite based, you might not have the cost infrastructure that you would have in a retail business. Least cost, where you're potentially gonna have inventory--so, the majority of our retail concepts, many of them, if you've got 250k, you can get into some pretty neat experiences. I think on the lower end of retail is about the 150-175k space, and that would include working capital defined by the franchisor. So to answer your question, if someone was cash-constrained and net-worth and liquidity restrained, it's gonna be most likely easier for them to get in on a service-based franchise. That's a very good question. Elvis, any others? Elvis: Um, I have nothing else. I guess this is it, so I just wanna say thanks so much, Stephen, for doing this presentation. We appreciate you being here with us and for the audience watching there, I'm going to be sending this out to you with the recording link as well. So thank you all very much for being here, and Stephen thank you so much as well. And thank you to our vets for what they do for the country. Thank you guys, God bless you.