Meet Jania Bailey & Amanda Berry
FranNet CEO Jania Bailey’s Background
FranNet CEO, Jania Bailey, shares her professional background. Bailey discusses what FranNet is and how they help people leap into business ownership. Similar to what an executive headhunter does in the job market, FranNet’s mission is to match the right people with the right franchise concepts.
FranNet Consultant, Amanda Berry’s Franchise Fit Story
Amanda Berry, FranNet Consultant, and Kentucky Market President, served as a Federal Government employee for over 10 years. So how did she end up owning a franchise? Learn more about what led her down the path of business ownership and how she ultimately decided that a FranNet franchise was the right fit!
Advice to Future Franchisees
A Piece of Advice to Future Franchisees
Jania Bailey, CEO of FranNet, discusses why she believes franchising is a phenomenal business model for people who want to go into business for themselves but not by themselves. She discusses failure rates, why no two franchises are alike, and the importance of due diligence in finding the right franchise fit.
Return of Investment & Find Your Fit
Amanda Berry, FranNet Consultant, and Kentucky Market President, explores franchise investment levels vs. ROI. Learn more about why you shouldn’t let the price tag of a business be the key determinant of what the actual earning potential is. Berry also discusses the importance of finding the perfect franchise fit. Make sure that you possess qualities of a successful business owner in the franchise system of your choosing.
Funding Your Franchise Purchase
Cost of a Franchise
So how much does a franchise really cost? Amanda Berry, FranNet Consultant and Kentucky Market President, explains why you need to look beyond the franchise fee and dig deeper into Item 7 of the FDD. Learn more about everything that goes into opening a business — from staffing to payroll, equipment, training, and more! Gain a better perspective on what the all-in investment would look like.
Funding a Franchise
Most people don’t have $50k lying around to invest in a business, so many will turn to small business loans. Amanda Berry, FranNet Kentucky Consultant and Kentucky Market President, says that buying a franchise is somewhat similar to buying another house. When looking at financing options, you realistically need to have about 20-30% for a down payment.
How Much Money Can a Franchisee Make?
Part of franchise law is that the franchisor cannot make an earnings claim. Amanda Berry, FranNet Consultant and Kentucky Market President, explains why this law was put into place and how system-wide validation of a franchise can help you gain a better idea of what your potential could look like.
Fundamentals of the FDD
Importance of the FDD
A 200+ page Franchise Disclosure Document (FDD) can be intimidating. However, it’s crucial to your due diligence process and your success with a franchise system. Jania Bailey, CEO of FranNet, encourages you to whip out that highlighting pen and get to studying! Remember that a FranNet Consultant is standing by to help make this research process a lot less daunting for you!
Why is it Important to Understand the Financial Health of the Franchisor?
A lot of people get excited about a franchise brand, but fail to examine the financial health of that company. Jania Bailey, CEO of FranNet, warns against signing a 10-year contract with a brand that doesn’t have a strong balance sheet. You must feel confident that they will be around for another 10 years. Bailey gives advice on where to look and what to look for in the FDD.
FDD Item 7: Advising Clients on Initial Investments
FranNet CEO, Jania Bailey, reviews the things you need to be aware of while looking at Item 7 in an FDD. At FranNet, we advise our clients to compare that initial investment estimate with existing franchisees that are in markets similar to yours. Important factors to consider are things like lease or build-out costs — these things will vary greatly from state to state. Figure out where you fit in on that scale and conduct validation accordingly.
FDD Item 19: Financial Performance Representations
FranNet Consultant and Kentucky Market President, Amanda Berry discusses the importance of the optional Item 19 in an FDD. For some businesses, it doesn’t make sense to include it. For others, it’s quite necessary. Your FranNet advisor can help you decipher whether or not this item is actually crucial to the concept you are exploring.
The Importance of the Item 19 in the Decision Making Process
About 80% of franchisors now will have an Item 19 in their FDD, but it’s not required. It’s important to understand that a franchisor legally cannot tell you, “Here’s how much money you’ll make in our system.” Jania Bailey, CEO of FranNet, has a background in banking, so she implores you to dig deeper and talk to franchisees for validation on what your potential could be.
Are There Any Requirements for Financial Statements the Franchisors Must Provide in the FDD?
FranNet CEO, Jania Bailey explains that it is a requirement to have three years of audited financial statements in the FDD. The exception to that rule might occur when you are dealing with a new franchise brand that hasn’t been around for 3 years. In those cases, you might only see an unaudited balance sheet. However, if the franchise has 1-year operating results, it now requires an audit. Remember that the FDD is a requirement of the Federal Trade Commission, so these things are not optional.
FDD Item 20: Signed But Not Open
FranNet CEO, Jania Bailey, examines what it means when you see “sold but not open” in a franchisor’s Item 20. Some franchisors sell multi-unit packs and they should have a development plan in place. When you see a lot of “sold but not open” reports in the FDD, this might be a red flag. Jania outlines what questions you need to be asking. Don’t be left waiting for a year or more to get your new franchise location up and running.
Pulling Back the Curtain
What is a Royalty Self-Sufficient Franchise?
A franchise system that is royalty self-sufficient is essentially generating enough income from franchisee royalties to cover their overhead. Royalty self-sufficiency happens at different times with franchisors. Some hit it at 50 units open, some at 100+. Beware of franchise systems that are dependent on another franchise sale to cover payroll. FranNet CEO, Jania Bailey encourages you to take the time to get behind the numbers and understand what’s really going on.
The Role of Large Investment Firms
It’s not uncommon for large investment firms to buy franchisors. These firms may own upwards of 20+ franchise companies. Jania Bailey, FranNet CEO, explains that even though a brand by itself might have a weak balance sheet, you can find solace in the fact that the firm behind it has the capital and robust experience to optimize the franchise system.