sales force automation

Getting Started: Franchisees Share Their Experiences

2011-01-24T15:19:00.000+08:00

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The Franchise Disclosure Document '' Understanding the Latest Regulations

2011-01-24T07:31:00.000+08:00

The New Franchise Disclosure Document (FDD) Regulations Settle in on Franchising Andrew Caffey, a leading franchise legal expert, updates you on the changes in the Franchise Disclosure Document and the impact it's having on the industry.

Chris Bjorklund: You’re listening to an Allbusiness podcast. I’m Chris Bjorklund. If you’re buying a franchise, chances are you’ve heard about the franchise disclosure document. Disclosure rules have changed recently so we’ve asked a leading franchise attorney to join us to give us an update on the impact of those changes. Andy Caffey is chair of the American Bar Association Forum on Franchising and a former general counsel for the International Franchise Association. Andy, we’ve read about the new disclosure document and that it became mandatory about a year ago. We’ve been using it for about a year and it replaced that old uniform franchise offering circular known as the UFOC and it’s now called the franchise disclosure document or FDD, I guess that’s what we’ll be referring to it as today. This new document was a long time in coming, Andy wasn’t it?

Andrew Caffey: Oh hi, Chris, yes it was. Believe it or not, the FDD has been in the works at the Federal Trade Commission since October of 1999 so many years of consideration went into this set of changes and the FTC did an admirable job, I thought, of drawing comment from all corners of the franchise community, not just franchisors and their lawyers but franchisees, their representatives, their associations, and individual players in the franchise community. The FTC held a series of hearings, gathered all the information and then finally, nine years into the process, they issued a new FDD.

Bjorklund: Well public policy takes a long time to hash out especially when there’s so many competing interests.

Caffey: Well, that’s right and it’s important to hear from all sides in the community like a franchise community which is generally, there are two basic sides, franchisors and franchisees and the Commission did a good job of listening to everyone. As it did, the first time the rule went into effect in the late 1970s but I think with this round of changes, it was probably the most thoughtful and mature approach to this regulation and I think it shows with the results of the FDD that we’re using and what it’s meant for everyone.

Bjorklund: Well, this leads me, of course, to my next question which is whether the new format has been a good development for franchising both for the franchisors and the franchisees.

Caffey: Well, I think it has been a good development. The new FDD follows in the footsteps of the old UFOC and I think it’s important to understand what we didn’t see with this new approach to franchise regulation. We didn’t see a more intrusive form of regulation. You know, the UFOC has been in place, it’s been used for 30 years and by UFOC, I don’t mean just the format but the whole approach to regulation. The UFOC is delivered in a pre-sale setting and there is much of the responsibility for disclosure, all of it really is left to franchisors. There is not a federal or even a state agency that has inserted itself into the franchise relationship to determine whether a particular offer is fair or equitable. It is a more sort of arm’s length regulation of the marketplace. The decision was made originally by the Federal Trade Commission that what the franchise marketplace needed was an informed investor. We needed better information in the hands of decision makers so that when someone decides to buy a franchise, he or she has all of the material information on hand that is important in making the decision to buy or not buy a franchise and the FDD that became mandatory last year has continued that tradition and as I say, I think it’s the absence of more intrusive regulation that has indicated the health of franchising and I think one of the reasons that the FDD is as welcome as it is.

Bjorklund: What about the changes? Do they favor one side or the other? I mean, you would know.

Caffey: Well, I would say that arguably there are changes to the disclosure format and the rules surrounding it that benefit both franchisors and franchisees. I think that franchisors benefit because there are more clarifications in the guidelines that have been provided by the Federal Trade Commission and by the states. The FTC has dropped an awkward requirement of its delivery timing and that is the first personal meeting rule has been dropped. Electronic disclosure is one of the biggest changes in the FDD but the Federal Trade Commission has wholeheartedly embraced the idea that franchisors can deliver disclosure to franchisees electronically but they are leaving to franchisees the option of selecting the form of disclosure that they want to receive so that if a prospective franchisee doesn’t have a computer and is handed a CD-ROM with a copy of a disclosure document, that prospect can say, “Wait a minute, I can’t read this. I’d like a paper copy, please.” And I think the franchisors will deliver that. I’ve found that while we’re on this point of electronic disclosure, several of my clients have mentioned that they have found resistance in the marketplace to electronic disclosure. A lot of people do want to receive a paper document and so many franchisors are staying with paper and delivering a paper FDD because that’s what a lot of people want to receive. It is wisely, I think, the FTC has left flexibility for franchisors to consider how, what format the disclosure is going to take and they put power in the hands of prospective franchisees to say, “I want another form. I want another format that I can read, that I’m comfortable with.”

Bjorklund: Good to have flexibility built in.

Caffey: It is and let me mention that for franchisees, this FDD is overall is easier to read and I think easier to understand than the old UFOC. Like the UFOC, the FDD has to be written in plain English so it is accessible to the average person who’s going to be reading it and the FDD has a wider scope of the people that it is providing disclosure about. There are a wider scope of the people that are executives with the franchisor or are otherwise involved in the franchise sale that are going to be included in an FDD that under the old rules would not have been included in the UFOC. So this is the sort of change that I think is not going to be immediately evident to a prospective franchisee reading an FDD but it is an improvement to the format. I think it does benefit franchisees. The new FDD closed a few loopholes in the format so that franchisors have to provide disclosure about say their parent companies when the parents are financially backing the franchisor entity. So that in the FDD, there is less of a form over substance and the FTC has made it clear to franchisors in its regulations that it wants substantive disclosure and doesn’t want the form of these guidelines to overcome what is important and material to a prospective franchisee so franchisors are delivering more disclosure about more people. The statistical information about the franchise system that appears in item 20 of the FDD was a complete redesign over the UFOC. We now have a set of five tables to statistically lay out the number of franchisees that have been opened or closed or terminated over the last three years in a very easy-to-read format and that is probably the most obvious difference if you put these two documents side by side. Look at item 20 and you’d see that there is a new set of tables that are very easy to read and understand and tell you instantly what has been going on in the franchise system as a whole over the last three years. There is one last thing I would mention that I think is a benefit to franchisees and that is there is a new category of litigation that now must be disclosed by franchisors and that category is enforcement actions that have been filed against franchisees so that if a franchisor files a lawsuit against say a terminated franchisee to enforce the post term requirements of the franchise agreement, under the old UFOC, that doesn’t have to be disclosed because there were no counterclaims brought by the franchisee and that was the trigger that required litigation disclosure. Now that we have this new category, you will see in item 3 of the disclosure document a mention of enforcement cases brought in the past fiscal year against franchisees so a lot of these changes are technical and they’re not going to be obvious to the reader but there are some distinct advantages for franchisees. I think there are a few for franchisors as well but particularly they will benefit franchisees.

Bjorklund: Now, does the FTC review the facts as stated by the franchisor in the FDD? How do I know the company’s telling me the truth?

Caffey: Well, in fact, there is no government agency that reviews the FDD to determine whether it is a good deal or whether the information being provided is truthful. There are certainly serious legal consequences to a franchisor if it is determined that it is not being truthful in its disclosures but you don’t know as prospective franchisee upfront whether a particular statement is true or not. The Federal Trade Commission requires that these disclosure documents be delivered to prospective franchisees in a timely fashion but the Federal Trade Commission never sees this disclosure document. In fact, even the registration states that we’ll about in a minute, I hope, will see these disclosure documents but certainly don’t make a determination whether the information provided is truthful. As I say, there are serious legal consequences if a franchisor is caught offbase in some fashion or is misleading in some fashion and a lot of the state investment laws put power in the hands of franchisees who perhaps have been misled to bring a private action and of course, state officials can bring enforcement actions against franchisors so there is very heavy legal weight behind the creation of an FDD but it is important to remember that no government agency has vetted this information. It is generated exclusively by the franchisor without review by a government agency.

Bjorklund: I think that’s an important point and also, we’re talking here about being an informed investor so that maybe you can also get some legal advise as you review this document yourself. Most people, I think, may not be able to fully review it on their own.

Caffey: Well, there are two professional advisors that are important in the franchise situation. One is a lawyer who can help you understand the franchise agreement because the franchise agreement, of course, is part of an FDD but it does not have to be written in plain English. It can be the most dense legalese possible and can be very hard to understand and it is, in fact, the operative legal document between a franchisor and a franchisee. So number one, it is really helpful to have a lawyer go through the FDD and especially the franchise agreement with you; and the second professional who is essential, I think, is a good accountant, who can help a prospective franchisee understand the investment. Now there is some information on FDD that can be used by an accountant and that is there is information in item 5 about the initial fees that are going to be paid by the prospect, item 6 all the other fees of the franchise system have to be laid out and then item 7 is key. That provides an estimate of the total investment that the franchisee is going to be asked to make from soup to nuts and those three items 5, 6, and 7 can be taken by a good accountant and it could be very useful in putting together the business plan and the financial projections for this particular franchise that an investor wants to buy.

Bjorklund: You touched on earlier these franchise registration states. You said there’s 14 of them. What about any changes going on there?

Caffey: Well, first of all, can I just mention quickly what the 14 states are so that our listeners know what we’re talking about and if they’re located in one of these states, it’s going to be important for them to know that. The 14 franchise registration states are California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. Now those 14 states require franchisors to go one step further than the Federal Trade Commission does. Not only must the franchisor have a disclosure document but they have to register that disclosure document with the state officials in these 14 states. A franchisor has to register its offering and every year, update and renew that offering if it wants to continue offering franchisees. So this is a very important part of the world of franchising for a franchisor. It has to make that it is in full compliance with the requirements of these 14 states and they can be quite demanding. Now the 14 states, the good news for franchisors is that the 14 registration states have very quickly adopted the new FDD format so that the disclosure format is the same across the country and it is accepted by all of the states. This is news and a great development that simply didn’t apply with the old UFOC. So now we have all of the registration states accepting the FDD format and the other big change from the registration states is that they have started to require franchisors when we submit to the states to not only submit a paper copy of the FDD but an electronic copy on disk and there are a copy of states now, Rhode Island and Indiana that want disks only and tell franchisors not to submit paper. There is one other state, Wisconsin has announced that sometime later this year, it will put in place a fully electronic submission system for franchisors. This is less important to franchisees, of course, but for franchisors, this is very big news. In my law practice, we represent franchisors. We used to…the whole force used to go down with the paper that would be generated just for the filing among the states and now the amount of paper has been reduced to a fraction of what it was. The states are modernizing their systems so that they can receive electronic filing and I think over the next few years, we’re going to see more and more states take this direction. The advent of the new FDD has been a little bumpy among the states and now that we’ve been through the spring 2009 renewal, it’s not quite as bumpy as it was with the 2008 renewal but this is the first renewal after use of the FDD became mandatory. The states have been scrambling, of course, we’re in a recession. The states have been very hit hard by this recession and a lot of the franchise offices that we found are understaffed and they simply don’t have the budget to have the people involved with processing the applications and a lot of franchisors I know are frustrated because they’re hung up in states where they may have 2 or 3 months where they can’t offer franchises. They’ve done everything they can. They’re simply waiting for the state to approve an annual renewal and prospective franchisees will hear this and become very frustrated. I’m getting a lot of feedback from my clients of the frustrations they have in states where they’re having trouble renewing. So, it’s just something to be aware of if you’re a prospective franchisee that in some states, there is a real difficulty in getting the annual renewal completed so that an offer can be made. A lot of prospects who were interested in investment are being told, “Well, you have to wait. It may take a few more weeks.”

Bjorklund: You know, I’ve read Andy that all an investor needs to do to receive the FDD from a franchisor is just ask for one. Is that correct?

Caffey: Well, that is partly correct and it is partly correct because the franchisor is obligated to deliver an FDD when it’s reasonably requested and there’s the trap, the word “reasonably”. And the FTC has made it clear in fairness to franchisors that they need not deliver a disclosure document to everyone who requests an FDD but they are required to deliver an FDD to a prospective franchisee where there has been substantial discussion about the purchase of a franchise or if a prospect has been through the qualifying process that many franchisors will impose. And if there have been substantial discussions about the purchase of a franchise at some point of reasonableness, I suppose the franchisor has an obligation to deliver an FDD on request. So to someone who’s looking at a franchise investment, I would say, be aware of that. If you’re going through the qualification process, by all means request the FDD. In fact, there is new information that not a lot of franchisors are in step with compliance. This is one of the little fine points of the new FDD rule where franchisors are required to deliver information on their websites and on their application materials advising prospective franchisees when they can expect to receive a disclosure document. So I don’t see a lot of companies complying with that but that will come, I think, as franchisors now are designing and tweaking and adjusting their compliance programs and their lawyers are reminding them that they need to put some statements in their application brochures, on their application forms, and on their websites to tell a prospect when he or she can expect to receive an FDD.

Bjorklund: I would think the early you disclose that, the less…the fewer problems you’re going to have with that down the line.

Caffey: Well, yes that’s true. This is part of one of the largest changes that has affected franchisors and that is the rule surrounding the timing of when a disclosure document must be delivered, the one with the old UFOC rule, it was 10 business days or at the first personal meeting for the purpose of discussing a sale of a franchise. Now there were lots of questions and problems with determining how we count business days and when we start counting them. Do we count the day that the document is actually delivered to a prospective franchisee? We didn’t know. We had to make sort of our own reasonable judgments as lawyers looking at these rules and advising franchisor clients. Now, the FTC has scrapped the whole idea of a first personal meeting rule and has also changed the 10-business day requirement now saying a franchisor must deliver an FDD at least 14 calendar days before a binding contract is signed or a prospective franchisee pays money to the franchisor. Now, I think that’s a good change. The FTC has also clarified how we should count, we being franchisors and their lawyers, how to count those 14 calendar days. We don’t count the day of delivery and the day of actually signing a franchise agreement, for instance. So we need 16 days. So there’s the full 14 calendar days to review an FDD and that’s a fair and reasonable approach. The timing requirements are confused somewhat now because there are a handful of states that have older rules on their books. Maryland and New York and Rhode Island, for instance, still have a first personal meeting requirement that is required by state law. So if you’re a prospective franchisee in my home state of Maryland, then that first personal meeting is going to be the time when I receive a disclosure document. I think Maryland is considering changing its rules but it hasn’t happened yet and I don’t know if there are efforts under way in New York and Rhode Island. Michigan, Oregon, and Washington also have on their books a measure of 10 business days rather than calendar days so there’s some technicalities that franchisors at least must be aware and you can overcome these technicalities by giving a disclosure document at an early point in discussion so that there is a generous time for a prospective franchisee to review it. But what I have found in advising franchisors is that there is a slow process by which these new rules are understood. We’ve lived with the UFOC under the old rules for nearly 30 years and it’s taking an immense education effort, I think for franchisors to understand and comply with the new rules.

Bjorklund: You sure know your stuff, Andy. Before we wrap up here, one last question and that is changes on the horizon. Are you making any predictions there with your looking out into the future?

Caffey: Well I think the number one change that we can anticipate, it’s at the top of the list and that is that electronic disclosure and the use of electronic documents and electronic submission among the franchise registration states over the next two or three years is going to become universal and I think that’s a great development. I’m delighted to see it. I think we’ve all benefited from our facility with generating documents and these documents will be 150 to 180 pages long by copying them onto disks for delivery or merely posting disclosure on a website so that it’s available to our prospect and I think we will see down the road a lot of progress in this area and in a few years, we will start to associate these big fat paper documents with the old UFOC and maybe the prior century. I think we are finally and it was frustrating waiting for the FTC to go through this nine-year review process. We all had computers. We could have generated documents but now we have an FTC that has fully embraced this direction and I think it’s going to spell an important part of the future of franchising.

Bjorklund: Andy Caffey, thanks for talking to us today. I really appreciate it.

Caffey: It’s a pleasure, Chris. Thank you.

Bjorklund: Andy Caffey is a franchise attorney practicing in Maryland and a blogger for Allbusiness. To find out more about other aspects of franchising, go to our franchise center at Allbusiness.com. I’m Chris Bjorklund, thanks for listening.

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Is Business Identity Theft the Newest Threat to Small Business?

2011-01-24T00:25:00.000+08:00

Do you think?you and your company’s identity are safe?

Are you one of those of people who think that would never happen to me?

Well the fact is over 10 million people each and every year are victims of identity theft and the numbers continue to grow at a rapid rate.

It’s hard to imagine that one out of every 20 people is at risk of being a victim this year alone.

But what’s even more alarming is consumers?are no longer the only ones being targeted by these criminals. Now small business owners like you and I have a new kind of threat to be concerned about known as business identity theft.

It’s the newest threat to small businesses all across America and can cause a whirlwind of devastation to a victim’s company.??

Imagine if?a criminal seized your company’s identity, used it to acquire credit in?your company’s name,?and then went on a spending spree buying electronics, office equipment, gift cards, and any other items that can be sold for cash.

What type of damage would this have on your business?

Here are five tips that can help you prevent and detect business identify theft:

Develop a prevention plan –Design a step-by-step plan to protect your company’s identity at the same time putting in place an action plan in the event that you do become a victim. Protect company records – Keep all your company documents and records in a safe and secure place. Get rid of any unnecessary information by using a micro cut shredder for the highest level of security. Also, never provide your company’s federal tax identification number, financials, or bank statements to anyone unless you have made the initial contact. Keep your company safe on the web – One of the sure fire ways to put your business at risk is by using sensitive information like an employer identification number (EIN), account numbers, financial documents, or personal information via email or the web. If you must provide this information for a specific reason like applying for credit then make sure the site is secure and its security certificate is up to date. Monitor your business credit report – One of the fastest ways to detect a possible identity theft is to monitor your company’s profiles with DNB, Business Equifax, and Business Experian. You can accomplish this by subscribing to their business monitoring services which give you access to your files 24/7. Avoid the “master” user – You should avoid creating any type of “master” user account and password where an employee or individual can gain access to all your company information. Taking the following precautions can dramatically improve your chances of avoiding business identity theft. If you believe your business is a victim you should contact your local law enforcement agency, the business credit bureaus, as well as your company’s credit and bank providers to report the theft. Also, initiate a business credit repair plan so you can get your company back on track.

As a business owner you should always remain vigilant in protecting your company’s identity. You’ve worked hard to build your business to where it is today and you should work equally as hard in protecting it.

What other ways do you protect your business identity?

Marco is founder of the Business Credit Insiders Circle, a step-by-step business credit building system. You may contact Marco directly at: marco@businesscreditblogger.com Follow Marco on Twitter @MarcoCarbajo and read more of his insights on building business credit.?

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Bonding for Small Businesses

2011-01-23T17:19:00.000+08:00

Bonded and insured. You’ve probably seen this phrase printed on business cards and in online and newspaper advertisements for all kinds of businesses, ranging from tree trimmers and locksmiths to commercial painters and janitorial services. But what exactly is bonding? And is getting bonded something that’s critical for your business?

A bond is a type of guarantee that usually provides a way to recoup losses. There are a number of different types of bonds that serve various purposes. The following are the main types a small business might use.

Commercial Bond

In many industries, commercial bonds are legally required before a company can operate a business. These industries typically include travel agencies, car dealerships, collection agencies, gyms and health clubs, and telemarketing firms, to name a few.

Also referred to as license or permit bonds, these bonds help prevent consumer fraud by keeping unscrupulous and unqualified businesses out of the marketplace. They are obtained by businesses from their state or local government, which verifies that the business is operating in compliance with its industry’s specific regulations.

Surety Bond

The purpose of a surety bond is to ensure that contracted work is performed according to agreed-upon specifications. There are three participants to the agreement: the principle, or the company that is contracted to perform the work; the obligee, or the entity for whom the work is being performed; and the surety, which is providing the bond.

A surety bond is purchased by the principle on behalf of the obligee. If the principle fails to complete the work per the terms of the contract, or causes any kind of damage or loss while performing the job, the surety will pay the amount of the bond to the obligee. Construction, maintenance, information technology, security and alarm, and janitorial companies often must purchase surety bonds in order to be considered for jobs, especially government contracts.

While the surety is usually an insurance company, a surety bond is not insurance; rather, it is a form of credit in which the principal is responsible for reimbursing if any claims arise as a result of not abiding by the terms of the bond. The alternative to a bond would be to post cash or secure a letter of credit. Bonding is generally preferable though because it typically requires no collateral, thus freeing up capital for other more productive uses.

Fidelity Bond

Fidelity bonds are more similar to insurance policies because the principal, rather than the obligee, is the beneficiary of the bond’s proceeds.

There are two types of fidelity bonds. One protects employers from employee fraud and embezzlement, while the other protects employers from theft committed by employees while they are performing work on a customer’s premises. The former will reimburse a business if an employee is convicted of fraud or embezzlement, while the latter will enable the business’s customer to recover claims if the business’s employee is convicted of theft or other wrongdoing.

One common example is a janitorial services bond, which provides protection for customers of cleaning businesses whose employees have easy access to their customers' assets and personal belongings. Similar types of bonds are available for other businesses whose employees perform work on their customers’ premises, such as computer repair consultants and commercial painters.

Tax Bond

This type of bond is used to obtain release of an Internal Revenue Service tax lien placed on a business’s property. The lien will be lifted within 30 days of the IRS accepting the bond. It is typically used by companies that do not have sufficient liquid funds to pay off the tax debt themselves.

Don Sadler is a freelance writer and editor specializing in business and finance.

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The New Year's Hottest Trends for Entrepreneurs

2011-01-23T09:44:00.000+08:00

With better economic times widely predicted for 2011, there's likely to be a renewed interest in starting new businesses. But what business ideas offer the most opportunity?

To help answer that critical question, AllBusiness.com has put together a visual countdown of the 10 hottest trends for entrepreneurs in the new year. Whether you're planning to start a brand-new small business or looking to revamp an existing one with innovative ideas, the following list is a great place to look for inspiration.

-- Julie Pitta

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Despite Recovery, Small Businesses Still Mired in Recession

2011-01-23T02:44:00.000+08:00

The economy as a whole may have emerged from the recession in the summer of 2009, but for small businesses, the downturn is now entering its thirty-sixth month. Weak sales remain the top problem, according to the National Federation of Independent Business (NFIB). Until that changes, hiring and spending on capital projects will remain stagnant.

"The hope for a pickup in the small business sector did not materialize, but new weaknesses did not appear either," said NFIB Chief Economist William C. Dunkelberg, commenting on the organization's latest survey of small business members. "Overall, owners remain stubbornly cautious and uncertain about the future course of the economy and their business prospects."

The problem can be summed up in a word: jobs, or the lack thereof. Until the economy starts putting people back to work, small businesses will remain hunkered down, neither spending nor hiring. The issue is critical because small businesses have traditionally produced the lion's share of new jobs and have led the economy back to health in every previous recession.

But it's not happening this time. Although the economy has been adding jobs for the past 12 months, the rate of growth doesn't even cover the number of new people entering the job market, let alone the millions of Americans who have been thrown out of work.

The economy logged another month of job gains in December, according to the latest Department of Labor figures, which President Obama praised this week. But a new analysis by the Economic Policy Institute, a Washington-based think tank, found that the numbers don't reflect the true nature or depth of the problem.

Though the seasonally adjusted unemployment rate dropped to 9.4 percent from 9.8 percent in December, half of the improvement occurred because 260,000 people stopped looking for a job. When that happens they are no longer counted in the statistics. In fact, the labor force participation rate, 64.3 percent, is at its lowest level since the recession began.

"Incredibly, the U.S. labor force is now smaller than it was before the recession started, though it should have grown by over 4 million workers to keep up with working-age population growth over this period," the analysis noted. "The bad news is that -- three full years after the recession officially began -- the U.S. is still near the bottom of a deep crater."

How deep?

The institute estimates that about 4.4 million workers make up this invisible army of unemployed dropouts. If just half of them were counted as "officially" unemployed, the real jobless rate would be 10.7 percent.

But the problem doesn't end there; it also extends to those who are working. The Labor Department figures don't reflect the underemployment rate, made up of millions of people who want full-time jobs but have had to settle for part-time jobs with less pay.

Although those numbers declined slightly in December as well, the underemployment rate is 16.7 percent. And that doesn't include the legions of workers who are underemployed because they have taken jobs that are below their skills, training, or experience level, according to the analysis.

When all those factors are taken together, more than 26.1 million workers are either unemployed or underemployed. Of those, 6.4 million workers have been unemployed for longer than six months. While the numbers seem staggering, the task of digging out of the economic crater is equally formidable.

The economy is still 7.2 million payroll jobs short of where it was at the start of the recession three years ago. In addition, the economy would need to add 3.7 million jobs just to cover those who entered the workforce for the first time since then. "This means the labor market is now nearly 11 million jobs below the level needed to restore the pre-recession unemployment rate" in December 2007, which was 5.0 percent, according to the analysis.

Indeed, we remain near the bottom of a very large crater. But what's worse, our capacity to dig our way out is also hampered, because real wages and hours worked are essentially stagnant. The average work week held steady in December at 34.2 hours, barely higher than the recession's low point of 33.7 hours in October 2009. Meanwhile, wages are growing at only a 1.8 percent annualized rate. The meager growth of paychecks has all but taken consumers out of the equation as a "driving factor of the recovery," the analysis states.

To get back to the December 2007 unemployment rate, the economy would need to add 300,000 jobs every month for the next five years. Obviously, the 103,000 jobs added in December pales by comparison. Looking forward, the picture isn't much brighter.

In November there were 4.6 workers for every job opening advertised, according to a separate report by the U.S. Bureau of Labor Statistics. That's an improvement from the depth of the recession, when the ratio was 6.3-to-1 in July 2009, but still well above the 2007 average of 1.5 workers for every job. In short, no jobs exist for three out of four unemployed workers. And if the underemployed and dropouts are added, the ratio swells to 7.4 workers for every job.

As things now stand, the economy is unlikely to grow its way out of this hole on its own. The World Bank estimates that the U.S. economy will grow 2.8 percent in 2011, compared with a mean forecast for 2.7 percent growth by economists polled by Reuters. That's "too soft" to put a meaningful dent in the jobless rate, the bank concludes. On the high side, the U.S. Chamber estimates that the economy will expand by 3.2 percent and add 2.4 million jobs. Either way, it's not enough.

So the question becomes, What needs to happen to get the economy going? The Small Business Jobs Act, signed into law by President Obama in September, contains $12 billion in tax breaks for businesses, but no direct incentives for hiring. The administration is counting on stimulating capital investments and certain other actions to spur businesses to create new jobs. But given the size of the problem, that's not nearly enough.

If the nation ever hopes to dig its way out of the job crater, lawmakers need to get far more serious about creating jobs, to the point of creating a Roosevelt-era public jobs program. And they need to devote far more resources to small and startup businesses. Otherwise, the economy will remain in a deep crater for years to come, creating a lost generation of young people and an increasingly impoverished older generation.

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Employee Volunteers in the Community; Today and Throughout the Year

2011-01-22T19:03:00.000+08:00

Individuals throughout the U.S. responded to the call to perform community service today in honor of Martin Luther King's Birthday. Many of these volunteer hours were coordinated and organized through corporate efforts. I was greeted by a team of orange sweatshirts emblazoned with company logos at a nearby library this past Saturday. It was hard to miss the busy helpers cleaning shelves, reorganizing books and taking care of tasks that had an immediate impact.

Lend a Hand When Needed
There is no doubt that the coordinated efforts make a difference. The contribution and value in numbers send a clear message about the importance of giving back. Volunteer days for company groups do not have to be limited to participation in nationwide initiatives. Community action days often pull together volunteers from a variety of backgrounds. New York Cares Day has been described as the largest day of service in New York City putting people in more than 100 public schools to paint murals, refresh classrooms, update libraries and brighten playgrounds. The event pools high school students, individuals, clubs and companies together in shared effort. I have been part of a corporate team for one of these days, the energy and outcomes are pretty amazing.?

Community members affected by weather emergencies and local disasters are frequently beneficiaries of this concerted activity. There's no reason to wait for the worst or seek out a city wide program to get employees involved. Many organizations commit manpower to volunteer days spreading out to a variety of projects or working in a larger team on a designated day. I am a board member of Furniture Sharehouse, a local non-profit that helps furnish need families. We welcomed a team of employees from a Pepsi bottling facility who cleaned, organized and painted one of the areas in the warehouse we rent.

Volunteer Days as an Employee Benefit
Paid time off to volunteer can be an attractive benefit, particularly to Millenials who are passionate about a cause. With a few guidelines a day off that meets the non-profit needs and employee schedule can send a message of support. In The Employee Benefits Answer Book I described an employer who even labeled the time as VTO (Volunteer Time Off).

Guidelines should not make the prospect daunting but should ask that employee's devote the time to specific work with a recognized non-profit. A faith based organization or initiative could fit in but it could get really tricky if employees are using sanctioned volunteer time off to work on a political campaign. One way to avoid this is to designate the time for work that meshes with the company mission and profile in the community. A policy could, for example, allow the time off engaging in activities that provide direct services to youth, needy families or the environment. This will help keep political debates out of the equation. Employees can use other time off for these more partisan activities.

The Hand Does Not Have to be Big
The level of involvement can start on a smaller scale for one time events held during the weekend.? Walkathon's and fairs always look for volunteers. They usually seek sponsors too. Financial and in kind donations are usually the best way to ensure that the company name and logo is on the t-shirt. A food drive for a local food pantry does not take a great deal to organize.? Follow up a successful collection with a trip to the warehouse or distribution point to help pack or sort donated items.

Whatever you choose don't forget your camera. Pictures of smiling employees helping others never seem to get stale or not worth having.

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How to Choose a Tax Professional for Your Small Business

2011-01-22T11:03:00.000+08:00

Tax preparation and filing?isn't?easy at the best of times, but with business ownership comes new responsibilities.

Whatever your business type, you may decide that you can benefit from the services of a tax professional to help you get your ducks in a row or help you complete your return.

Not getting the right help can expose you to potential tax return errors, which can lead to costly penalties and time lost down the line. And because each business is different it’s important to get the right help based on your needs.

When selecting a tax professional, here are four areas you need to cover:

What are Your Options?

All tax professionals specialize and come in many forms, including tax franchises, tax attorneys, and certified public accountants (CPAs are licensed by the state and are suited to complex tax issues) and enrolled agents (an enrolled agent has passed an IRS test plus an IRS background check, they focus exclusively on tax accounting).

As you build a shortlist of potential candidates, ask around for referrals and focus on identifying tax professionals who have experience working with businesses of a similar size and type to yours? Is the professional familiar with your particular line of business?

What Type of Services do they Offer?

Some tax professionals (particularly the walk-in franchise tax preparation services) are great at helping you get your taxes done quickly. But if you need long term tax planning help you may want to consult a CPA or enrolled agent – they actually don’t charge a whole lot more than the franchise tax experts and can specifically help businesses understand how to realize tax efficiencies.

Other things to look out for are accuracy guarantees (many offer this as a protection against potential penalties in the event of an audit), willingness to amend the return in the event of errors, and assist you in any dealings with the IRS.?

Don’t be afraid to ask questions that help you get a better picture of your needs – your situation may be less or more complex than you are aware, and an initial consultation can help you better gauge your needs (many tax preparation offices will do this for free in the hope of winning your business). ?Bring your records, last year’s return, and any other documentation that gives a quick snapshot of your circumstances.

How Will they Bill You?

Call around a few local tax offices to scope out the pricing and billing policies. Most fees depend on the complexity of your tax return and you can expect to pay either by the hour, or a flat fee. Ask lots of questions about what is included in these rates and any potential extra fees you may incur. Are there any ways you can keep your fees to a minimum by doing as much preparation and good record-keeping yourself in advance.

If the IRS queries your return or audits you, will the tax professional assist you? Are they authorized to represent you to the IRS?

Ask for References

In the rush to get your return done, don’t disregard the importance of references. Ask your shortlist of tax professional candidates for a list of clients who are close to your business profile, and follow up with these before you make your decision.

Related Resources

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Unusual, Strange, and Downright Weird Franchises

2011-01-22T03:57:00.000+08:00

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Innovation and Franchising

2011-01-21T20:25:00.000+08:00

A restaurant franchise introduces a new menu item, a senior care franchise develops a new program to serve the needs of their clients, a junk removal franchise creates an intranet network so that franchisees can communicate with one another. These changes sound like they’re all for the better — but are they? It’s often stated that the most successful franchises are those that run based on well-tested and established systems. So exactly what kind of role does innovation play when it comes to franchising? Is there room for change and, if so, to what extent is change a good thing?

We posed the question to Jeff Elgin, CEO of FranChoice Inc., a network of franchise referral consultants; Tim Howes, principal of Spyglass Strategies, a franchise consultancy practice; and Christian Faulconer, CEO of Franchise Foundry, a franchise development firm, and came away with one resounding opinion: Innovation is good, but when it comes to franchising, there are a few caveats.

Innovation needs to be done correctly; otherwise, it can be costly. “In a franchise system, it is important to analyze the costs and benefits of implementing a change,” says Faulconer. “I've seen franchises make systemwide changes to save small amounts of money. Had they considered all of the costs associated with the change, they would have left things as they were.”

Nor should change be made solely for the sake of change. “Everyone wants to be more innovative, but innovation for innovation’s sake is a slippery slope,” says Howes. “If innovation is ‘the introduction of something new,’ then just because something is new doesn't make it great.”

Innovation can take on different shapes and forms, so don’t overlook subtle, yet effective, innovation. “Every business needs to be innovative, but that doesn't mean that you can't build a franchise around something that’s common,” says Faulconer. “Five Guys Burger and Fries is a franchise concept built around burgers, and you could argue that burgers aren't innovative. But Five Guys helped to create a better burger trend, and that was innovative. There is nothing wrong with doing something that has been done before as long as you innovate to make what you are doing better, faster, or cheaper.”

So how can innovation and change best be introduced into a franchise system? Three words: Testing, testing, testing. As commonsense as it may seem, testing is one factor that’s often overlooked. Says Elgin, “There are lots of examples of companies that impose changes on an entire system without much or any testing and without being able to show the franchisees actual data on how the additional investment to enact the change will benefit them.”

So for potential investors who are looking for a franchise that works hard to keep the company’s brand fresh and new, remember that it’s not just a question of how innovative a franchise system is, but how thorough the franchisor is in testing out and implementing the proposed change and at what cost to the franchisees. Does the franchise have enough company-owned locations that they can test out any changes without affecting franchisees, or do they need franchisee participation? “Franchisees don't always make the best guinea pigs,” says Howes. “They have to be open to change before you can inflict change on them.”

And don’t get caught up in the excitement around innovation. Dig deeper to discern the reality from the hype. “The challenge is that every company claims to be innovative,” says Elgin. “It’s like claiming to be ‘green’ – even if it’s nonsense, most companies claim to be innovative or green because it is what they think prospective franchisees want to hear. You need to ask for specific examples so you can determine the degree of actual innovation within any system.”

Measuring Change

How can you tell if change is a good thing? According to Howes, innovation must do one or more of the following:

1. Create positive ROI that compensates for the risks involved with the innovation

2. Create an additional discernible difference versus the competition

3. Improve the customer experience

4. Make operations more efficient

Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at wilson.sara@gmail.com

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Rental Property Owners See 1099 Changes this Year

2011-01-21T13:11:00.000+08:00

Although the widely publicized requirement for businesses to report payment to individuals and other businesses for annual payments over $600 per year begin January 1, 2012, owners and managers of rental properties will see changes in the rules this year.

Beginning January 1, 2011, owners and managers of rental property must report total annual payments in excess of $600 for services or products provided during 2011. Prior to January 1, 2011, owners of rental properties were not required to report payments of any amounts.

The provisions affecting rental property owners were included as part of the Small Business Jobs Act passed in September 2010.

How does this affect rental property owners?

If you own rental property of any kind, you need to start collecting the information necessary to make 1099 reporting before you must issue them in January 2012. The easy way for you to do this is to ask vendors who provide services, materials, or equipment to provide you an IRS Form W-9 when you first begin doing business with them this year which provides you the information necessary to accurately file the 1099. Keep this information on file and don’t issue any payments to a vendor until you have the W-9 on file.

If you are a vendor that sells any kind of product or service to owners and managers of rental properties, you should make sure you provide a W-9 form with your first invoice of the year. It is also wise to put your IRS EIN on your invoices when you submit them for payment.

If you operate your business as a sole proprietorship and you have been using your social security number as your company taxpayer identification number, you should request a new Employer Identification Number from the IRS online. It is simple, fast, and lessens the chance of your social security number being available for identity theft.

The IRS lets you request your EIN online and can provide you a PDF copy that can be downloaded within a few minutes of requesting one.

Though there is some momentum to attempt a repeal of the changes to 1099 reporting requirements for other businesses, this one affecting rental property owners is not likely to be challenged in this year’s congress.

Sam Thacker is a partner in Austin Texas based Business Finance Solutions.

Direct email: sam@lesliethacker.com
Twitter: SMBFinance

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AllBusiness AllStar Franchises

2011-01-21T05:12:00.000+08:00

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How Franchising Can Help You Expand Your Business, Recession or Not

2011-01-20T21:30:00.000+08:00

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How Franchising Can Help You Expand Your Business, Recession or Not

2011-01-20T14:17:00.000+08:00

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AllBusiness AllStar Franchises

2011-01-20T06:31:00.000+08:00

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Measuring the Health of a Franchise Program

2011-01-19T22:59:00.000+08:00

A franchise system has many of the qualities of a living creature. If its various operating systems are not kept healthy, it can weaken and become ill. Ultimately, if its health problems are unchecked, it can go out of business forever. If you are considering joining a franchise program, it’s a good idea to give the franchisor a full check-up, something like an annual physical. If the doctor were to give your franchise program the once-over, how would the company measure up?

Training, Supply and Knowhow: The internal skeletal features of every franchise program are of primary concern to the health of the business: training and franchisee supply. Every strong franchise system does an excellent job of transferring knowhow through initial training, opening assistance, continuing training, and systemwide meetings (see Item 11 of the Franchise Disclosure Document (FDD) for a description). Also of vital importance: strong inventory supply arrangements in place for the benefit of franchisees (Item 8). Aggressive supply arrangements save the franchisee by offering prices that are not available to independents, offsetting the costs of the system’s royalties. If these supportive internal structures are not in place, carrying information and value to all corners of the system, it could be a sign of serious problems.

Low or No Growth: Growth and expansion are the life force of a healthy franchise program, and like breathing, the absence of growth will quickly threaten a franchise system’s survival. Check Item 20 of the company’s FDD to measure its expansion or contraction over the past three years.

The Mark of a Winner: The trademark of any franchise system is at the heart of the rights granted to franchisees; the trademark must be rock solid if the franchise system is to stay healthy. Item 13 of the FDD will give you an idea of the health of the trademark -- whether it is federally registered with the United States Patent and Trademark Office (insist on it) and whether there have been any problems, lawsuits, or contractual limitations on its use around the country.

Even-Keel Relationships: The mental health of a system is important as well. Are franchisees in the system pleased to be there, do you find some misgivings, or is there deep discontent among franchise owners? If there are recurring problems, you will want to learn about them as soon as you can. The only way to accurately gauge a system’s psychological health is to talk it through with franchisees. Contact them using information in the FDD (Item 20), put them on the couch, ask a lot of probing questions, and listen well. Also look for reliable third-party certification of franchisee opinions, such as FranSurvey.

Defensive Strength: A healthy system is able to resist attacks on its stability. Has your franchise system been tested by its competition, overcome supply problems, defended an attack on its intellectual property, or responded well to a failing franchisee? What about litigation listed in FDD Item 3 – how are legal confrontations handled by the company? As with any organization, a strong franchise program will handle adversity better than weaker systems. How has the franchise program fared in the recession? (Go easy in your assessment on this point, as many businesses were thrown on their backs financially by the market gyrations of the past couple years through no fault of their own.)

Financial Standing of the Franchisor: A franchisor system without solid financial standing puts a lot of people and franchised businesses at risk. The FDD always includes recent financial information about the franchisor; the basic requirement is to include the past three fiscal years of financial statements, audited by an independent CPA, although younger franchisors may not have as much to disclose, and their financials may not be audited. Take the financial statements to an accountant or other financial advisor, and determine if the franchisor has the financial health to succeed in the long run.

Franchise systems span the full range of health, from the robust new up-and-comer to yesterday’s concept now approaching death’s door. If you need to evaluate the stability and longevity of the franchisor and its current health, crack open the FDD and run your own checkup of the entire franchise system.

Andrew Caffey is one of the nation’s leading franchise legal specialists and he represents franchisors across the United States. Caffey served as General Counsel of the International Franchise Association, a member of the Governing Committee of the ABA Forum on Franchising, and Chair of the ABA Forum on Franchising. He also is a member of the bar in Maryland and the District of Columbia, and a member of the Panel of Neutrals of the American Arbitration Association. Caffey has appeared on numerous franchise programs and is a frequent speaker and author on subjects of franchise and business opportunity regulation.

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Unusual, Strange, and Downright Weird Franchises

2011-01-19T15:37:00.000+08:00

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Signs of Life: Franchise Industry Heads into 2011 with Cautious Optimism

2011-01-19T07:40:00.000+08:00

In 2008, the recession began. In 2009, the franchise industry started to feel the impact as credit dried up and money was short. Franchisees started closing up shop and even some franchisors started throwing in the towel.

At first glance, it might seem that 2010 was nothing but more of the same doom and gloom. Money -- and qualified investors -- has still been hard to come by and when exactly that will ease up is hard to predict, leaving franchisors in uncharted territory leading into 2011 and beyond.

Look closer, though, and you can see that this dynamic industry is just that -- dynamic. While economic uncertainty weighs heavy, many of the franchising industry's key players are actively working to make the best of difficult times.

Some are hoping for help from the controversial Small Business Jobs and Credit Act of 2010, but smart franchisors are taking matters into their own hands, improving support for franchisees, building innovative lending programs; upgrading facilities when times are slow, and even engaging in "co-opetition" to share costs and benefits. And even as some sectors struggle, some lucky franchises find themselves perfectly positioned to take advantage of today's trends.

Government Aid

When the recession first swept through the nation and thoroughly dried up access to capital, small business waited for government to step in and offer some kind of assistance. First, the Economic Stimulus Plan shined high as a beacon of hope, of some kind of relief. However, now, nearly two years after the Plan officially passed, the assistance has been minimal.

"The stimulus was not targeted at helping small business," says Ronald Feldman, CEO of Siegel Financial Group, a company that specializes in placing financing for startup, expansion, and acquisition of franchised and independent businesses with loans ranging from $250,000 to $10 million. "Less than 1 percent of the stimulus was designated for SBA programs. All in all, it had little impact on franchising."

Now, hopes are pinned on the Small Business Jobs and Credit Act of 2010, which passed into law in September and is designed to drive economic recovery and create jobs with the help of a $30 billion small business lending fund and $12 billion in tax breaks. Feldman, who personally lobbied for the bill for two years, believes that it "could have a profound positive effect on franchising. Many multi-unit operators have the ability to grow, but have not been able to get conventional lending due to the market," he says. "SBA lending could be a great solution to support their growth efforts."

However, with the midterm elections putting Republicans back in control of the House of Representatives, there is a possibility that GOP representatives will push to alter the bill, which many of them believe will be more costly than beneficial.

Franchisors Fight Back

But at some point along the way, franchisors stopped waiting and started doing. Restricted by limited capital, many franchisors shifted their focus in 2010 from quantity to quality. Instead of striving to grow in terms of number of units, they turned their attention to growing from within. They focused on building better intranets to better communicate with -- and thereby better support -- their franchisees; they proactively developed their own lending programs; they took advantage of the down time to remodel; and some even joined forces with competitors to remain strong in tough times.

AlphaGraphics and Allegra Network, for example, are joining forces to host a joint Technology Expo next year, a notable first in franchise print history. Likewise, PremierGarage Systems, a garage flooring and organization franchise, and Closet Tailors, an in-home organization franchise, combined forces to launch a new concept this year, Tailored Living, which specializes in both interior and garage space enhancement. Dan Tafoya, senior vice president of Business Development for Home Franchise Concepts, the parent company of Tailored Living, reports that the partnership has helped his company weather the choppy economic waters and believes that the franchise industry will be seeing more such alliances in the future, which should help reduce the amount of competition.

Meanwhile, some franchise categories are blessed by the favorable demographics. For example, Senior Helpers, a franchise specializing in in-home care for the elderly, started franchising in 2005 and has opened over 250 U.S. offices since then. The company saw system-wide revenue swell by 225 percent as the number of locally owned franchises in operation grew by more than 25 percent in 2009 alone. "Recession-averse [sectors] like medical and health care have been doing better and will continue to grow moving forward," says Peter Ross, founder and CEO of both Senior Helpers and Doctors Express.

Others have adapted and found the winning formula needed to grow in this new economy. Some franchise opportunities, for example, are actually benefitting from investors' lack of cash. AllBusiness.com's AllStar research revealed that more than one-fourth of our AllStar winners could be run from home, and over one-third could be started for under $100,000.

Dan Rowe, president of Fransmart, a franchise development company, notes that the segments of the restaurant franchise industry that are especially popular are those offering lower-cost formats such as gourmet food trucks, kiosks, and carts: "I think these lower-cost formats are here to stay and allow a brand to penetrate a market more than single-format growth strategies."

Meanwhile, other franchises are taking a different approach. Fantastic Sams actually started buying back development territories in an effort to strengthen the brand and ensure uniformity. In Northern California, the franchise bought back 13 of its franchises and announced that it will not seek new franchisees until it's ready to do so.

A New Reality

Survival mode brings both positives and negatives. As Darrell Johnson, president and CEO of research company FRANdata, discussed at the 2010 Franchise Leadership & Development Conference, consumers are spending less and the market pie isn't growing, creating a pitched battle for sales and market share. Meanwhile, franchises are under careful surveillance by potential investors, the banks, the media, and existing franchisees. Together, these factors are forcing franchises to run lean and efficient.

"With the downturn, it seems that companies -- at least smart ones -- are focusing their attention on improving operations and focusing on profitability for their franchisees," says Lorne Fisher, CEO/Managing Partner of Fish Consulting, a national communications consulting company. "This will create a better business."

At the same time, franchisors are becoming much more selective in who they select as franchisees. No longer do they have the luxury of accepting second-rate applicants; they need candidates strong enough to get approved for a bank loan as well as knowledgeable enough to start and run a franchise in a difficult economy.

Ironically, as the bar rises on the franchise recruitment process, so will the success of new franchises. Tomorrow's franchisees will be of a whole new caliber. "Franchisors are developing and executing more strategic franchisee recruitment programs," says Fisher. "Their marketing is less about quantity of leads, but quality. They are seeking more qualified leads by focusing on their ideal prospect target audience and crafting more impactful messages to attract candidates to invest in their system."

Further roiling the waters is the looming threat of acquisitions. In the largest restaurant acquisition in a decade, 3G Capital took over Burger King in 2010 for a total of $3.3 million after the fast-food franchise suffered a two-year slump in sales.

Jeff Johnson, founder and CEO of the Franchise Research Institute, worries about what these kinds of leveraged acquisitions could mean for existing and future franchisees, since capital investors aren't always focused on building a long-term, sustainable brand. "Most investors don't understand the interconnected relation between franchisor and franchisee. Thus they believe that franchisees are 'indentured servants,' and this leaves very little room for win/win resolution of conflicts -- and there are always conflicts," he says. "In the short run, [acquisitions] will pump money in and allow some franchisors to cash out, thus encouraging more entrepreneurs to franchise, which is good. But in the long run it will not be positive. Heavy-handed franchisors wanting to get their way often turn to litigation as a means of conflict resolution, which is bad."

Looking Forward

So what lies ahead for the franchise industry? While most are cautious in their predictions, FRANdata's Johnson estimates that there will be economic uncertainty for the next three-plus years. Others are confident that the worst is over.

Either way, this is a major test of the industry's ability to adapt to difficult times. Even as the weak players are weeded out, the industry as a whole has the opportunity to grow stronger.

And somehow, someway, the entrepreneurial spirit lives on through franchising. The research behind this year's AllBusiness AllStar Franchise list makes it clear that independent businesses are still launching new franchise opportunities.

Why?

Because that's what entrepreneurs do. It's in their DNA. Indeed, now, more than ever, a multitude of entrepreneurial-minded people -- many who've lost their jobs -- are busy strategizing their next moves. And franchising continues to offer a relatively safe, low-risk option to build a business in an established system rather than tough it out alone. So even though the industry took a nasty hit from the Great Recession, it's already starting to do what it has always done: help pull the economy out of troubled waters.

"Every newly born franchise employs 10 people on average and an additional 10 indirectly," says Tom Scarda, a franchise consultant with consulting firm FranChoice. "If we can put many of the highly experienced corporate refugees into franchises, we'll have many little economic engines revving all over the country, providing jobs and tax revenues."

Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at wilson.sara@gmail.com

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6 Steps to Improve Performance Evaluations in 2011

2011-01-19T00:37:00.000+08:00

Performance evaluations, appraisals, reviews, whatever you call them people have strong opinions about the process. Whether you love them, hate them or fall somewhere in between they are a policy requirement for many organizations. The process can be viewed with trepidation and about as much enthusiasm as a nasty medical procedure or facilitated with forethought and preparation.

Here are six steps for both fans and foes to improve evaluations in 2011.

1. Know the Program

Review any policy that describes the appraisal process, time line, approvals and how results are used. If something is not consistent with practice ask about it. When there is no written policy follow up to identify the expectations. Ask for due dates, formats and flow.

2. Understand the Rating Scale

What does an outstanding rating mean? Is a 3 on a 1 to 5 scale a good rating or merely mediocre? Look for definitions of rating scales and ask questions to make certain you are applying them correctly. Be wary of the philosophy that no one can achieve the top grades. Why have a system that rates from unacceptable to excellent if no employee can be excellent?

3. Do Your Homework

Check all available records and results for documentation, both positive and negative, to back up ratings and comments. Looking at last year’s evaluation is a good place to start, particularly if you were not the manager at the time. If previous evaluations seemed inflated, or overly harsh, pull the team together and explain your philosophy and the tools you will use for the process.

4. Think About the Outcome

What are you trying to accomplish with the performance evaluation conversation? Do you want to motivate the employee to pump up performance, prepare them for a promotion or help them continue to excel? Think about the broader picture and not simply the document on the desk. This is also the time to be ready for possible reactions to good news and reminders of less than stellar results.

5. Make it a Conversation

"Here is your evaluation, sign it," is not an appraisal discussion. (Although I have heard this.) This is your opportunity to sit down with staff and devote time to talking about their performance. Use it wisely and make certain that it is a conversation that helps to build a relationship of trust.

6. Start Planning for 2012

Don’t wait until the 2012 procedure is issued to plan for the next evaluation. Talk to employees throughout the year about performance results, keep notes of your conversations and document the good and the bad. Starting now will make the process easier in the future.

If you need some extra help and hints it’s not too late to sign up for today’s web conference, How to Conduct Motivating and Legally Sound Performance Appraisals. Take the time to prepare and you will improve the experience and results.

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Signs of a Top Food Franchise

2011-01-18T16:44:00.000+08:00

If you say the word “franchise” to someone, chances are the first thing that will pop into their heads is McDonald’s or Subway. Food franchises are one of the best-known franchise categories, and restaurants in general are part of a $580 billion industry. In fact, on any given day, more than 130 million people in the U.S. will be dining out.

Walk down the main boulevard in most U.S. towns and you’ll see a Wendy’s, KFC, or Taco Bell. At the local mall, you can dine at Johnny Rocket’s or Denny’s. Even when you need a quick snack on a road trip, you can find a Subway or Burger King at the gas station or travel center.

But when you’re in the market for a food franchise, what makes one franchise better than another? In making that decision, you need to do the typical due diligence that every potential franchisee should complete. But beyond that, there are five traits that set the best food franchises apart from their competition:

1. They have good brand recognition.

The importance of brand recognition cannot be discounted in a marketplace crowded with restaurants and quick-service food franchises. “If customers are already familiar with the brand, that bodes well for your success,” says Blair Chancey, editor of QSR Magazine. “It will at least point you in the right direction.”

2. They’ve got forward momentum.

It’s all well and good if a company is hot today, but when signing a multi-year contract, you want to make sure that company is going to stay hot. For forward momentum like that, you need not just a strong brand name, but a strong company behind the name.

“A franchisee should believe that unit-level economics — returns, profits, how much money they make vs. how much they put in — will remain strong going forward,” says Steve Romaniello, managing director of Roark Capital Group and chairman and former president of FOCUS Brands, a multibrand franchisor of more than 2,200 units under the brands Carvel, Cinnabon, Seattle’s Best Coffee, Schlotzsky’s, and Moe’s Southwest Grill.

Romaniello says a number of elements contribute to the type of forward momentum franchisees desire: A good management team at headquarters; whether the company is involved with a food trend “with the wind at its back;” a good owner who has capitalized the brand correctly; investment in a strong training program; and good customer service, both at the unit level and at headquarters.

3. They continously evolve.

Another trait crucial in the food business is a continual effort to evolve the brand. “Successful food companies tend to be innovative with new products and new ways to interface with the guests, whether via technology or otherwise,” says Romaniello.

For this reason — and many others — the franchisor should be well capitalized. “Is the system not burdened by an incredibly heavy debt load? Are they able to withstand the ups and downs of the marketplace and still invest in the brand?” says Romaniello. “They have to evolve.”

4. They’re smart about site selection.

Site selection is crucial, says Russ Umphenour, current president of FOCUS and a former CEO of RTM Restaurant Group, which owned 775 Arby’s units. How selective is the franchisor you’re considering when it comes to location? “The great franchisors do a good job of training. They also do a good job of marketing,” says Umphenour. “But both of these things are irrelevant if you choose the wrong location.”

5. They’re picky about partners.

While it may sound counterintuitive, Umphenour says you should seek food franchisors that are picky about potential franchisees. “So many franchisors are willing to take money from anyone who comes through the door,” he says. For example, at FOCUS Brands, all franchisees must have solid restaurant experience; if not, they must complete an internship at a restaurant, learning every task, before being considered for franchise ownership.

How can you tell if a food franchisor is choosy enough? One way is to evaluate how they evaluate you. This isn’t a test you necessarily want to breeze through; you should appreciate thorough due diligence and welcome the opportunity for extensive training.

While franchise growth is generally a good thing, sometimes, there can be too much of it. Asks Umphnour: “Is this franchisor just selling franchises, or [are they] always trying to do the right thing for the brand?” Take this consideration into account, and you’re more likely to choose a food franchise that will lead to a successful future.

Laura Tiffany is a writer from Southern California who specializes in small-business issues.

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Is There Money in Accommodating Early'Stage Shoppers?

2011-01-18T08:46:00.000+08:00

You carry a cellular telephone. You're reasonably happy with the service, the rate, even with the quality of your phone calls. Still, the phone you purchased two years ago was already proven technology by those standards, and is now considered old. Plus, you're seeing the ads on TV for the newer touch screen phones, and you're getting curious.

You're vaguely aware that your two year commitment to your current carrier is drawing to a close, and you keep seeing all those ads for the newer touch screens. You head out to the mall. It seems a good idea to quiz a couple of salespeople at the cell phone kiosks.

You've just become an early-stage buyer.

Salespeople have names for early-stage shoppers: "lookie loos," "tire kickers," "time wasters." Early-stage shoppers, very aware of their own ignorance, would feel much more comfortable at this point if salespeople were removed from their buying process. Early-stage shoppers say things like, "I'm just looking."

Shoppers identify themselves by the questions they ask.

Early-stage shoppers don't know what they don't know. They are are becoming aware of an itch, but don't know yet how (or where) to scratch. Early-stage shoppers tend to ask questions about the process.

Current early-stage questions in the cellular industry are along the lines of "What's Wireless-N," "Are you telling me I can use my phone to connect my laptop?" and "What exactly is a 4G Network?"

Whether conscious of it, or not, mid-stage shoppers have eliminated the offers which don't solve their problem, and are honing in on the solution which is exactly right for them. Mid-stage shoppers ask questions about specific equipment and its implementation.

Middle-stage questions sound like, "How good is reception on this phone?" or "What's the battery life on the Model 22XJ?"

Late-stage shoppers are ready to buy. If they're talking to you, there's an excellent probability that you'll get the sale. Late-stage shoppers ask questions about pricing and purchase terms.

Late-stage questions might be "What's the total price including the upgraded memory chip and sales tax?" or "Can you give me a better price on the hardware if I accept a longer service commitment?"

Salespeople pray for late-stage shoppers.

To most salespeople, selling will always be a numbers game. "Pitch" the offer to a large number of people and a few will purchase. If those few spend enough money, salespeople are rewarded for all of the time they spent with those who didn't buy.

If you show signs of buying, salespeople will pay close attention to you. Show the opposite signs and they will move on to better prospects. They call this process "qualifying the lead."

But, suppose you're one of those ideal customers the cellular companies lust over. You buy expensive phones which lead to expensive add-on services, you buy the additional warranty, and you never invoke early termination. You're not a tire kicker or a time waster. You're a highly-qualified early-stage buyer who has very real questions about changes in technology and services since you last upgraded.

Wouldn't you be more likely to trust someone who helps you understand the alternatives rather than pushing you to make an immediate purchase? Isn't this the basis of relational selling?

Nurturing shoppers through the stages.

Put yourself into the mindset of an early-stage shopper for anything. If you found a reliable source of information, wouldn't you automatically be more inclined to buy from that source when you've decided to purchase?

So far, the best side-by-side comparison I've seen for cellular service and phones is offered by c/net. The sad part of this analysis is that c/net doesn't sell telephones or cellular service.? Any cell company could publish this information.? It is widely available.

Of course, the danger of inviting side-by-side comparisons between your company and your competitors is the risk of not being competitive. Maybe that's why the cellular providers not only hide this information, they all bundle services differently which makes comparisons even more difficult.

But some businesses understand how to grow new customers.

Distinctive Kitchens Culinary Arts Center in Pensacola, Florida is a family business that for 80 years has sold premium appliances, and more recently wines and culinary accessories. Distinctive Kitchens offers demonstrations, classes, and in-store experts. Shoppers new to gourmet cooking or experienced cooks brushing up on new technique will find the answers they need, and a great source of product, too.

Sweet Maria's Coffee in Oakland, California offers all of the information any coffee drinker could possibly want, from reviews of various equipment, to articles, to instructional videos, to selections of green coffees from all around the world. Plus, Sweet Maria's hosts a community forum in which members discuss their opinions of coffees, roasting, brewing methods, blending, storing, and the selections of green coffees. Care to bet they have very little customer turnover?

Home Depot has a series of in-store workshops designed to give customers hands-on experience using materials, tools, and supplies in their Home Improver Club.

Think about the number of gallons of premium paints, glazes, and other supplies you can sell over the customer's lifetime once you teach a homeowner how to apply a faux painting technique.

Can your business offer early-stage information while competing for late-stage shoppers?

Why not?

Could your insurance agency create a checklist for homeowners, listing all of the common furnishings, and leaving space for the homeowner to estimate the replacement cost of each? Could your photography store set up “good, better, best” packages of cameras, lenses, flash attachments, and instructional videos? Could your HVAC company produce a chart that shows how quickly a new furnace or air conditioner will pay for its self in savings due to higher efficiency? Could your furniture store create a layout grid with scale pictures of common furnishings and help shoppers envision their home with new sofas, beds, and entertainment centers? Could your music store create posters which explain the advantages of specific guitars in the performance of specific genres of music? Of course you could. It only takes a little planning, and a little time. When you give early-stage shoppers the basic information they need, those shoppers will come to you now, and are likely to return as they move through the buying stages.

When you give early-stage shoppers the basic information they need, those shoppers will come to you now, and are likely to return as they move through the buying stages.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about attracting customers at different buying stages may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Getting Started: Franchisees Share Their Experiences

2011-01-18T01:24:00.000+08:00

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A Look Ahead for the Franchise Industry

2011-01-17T17:36:00.000+08:00

IFA members are more energized than at any point in the 50-year history of the organization in their desire to support candidates who will advance pro-growth policies that create jobs and strengthen the economy. As we work to enhance our grass-roots advocacy; increase receipts for IFA’s political action committee, FranPAC; and promote the economic impact of franchising among lawmakers, I am confident that the franchise industry will continue to have a significant influence on the outcome of new laws and regulations and ensure a sound business environment for franchising.

The first decade of the 21st century has been a decade of incredible growth in the franchise industry and, as a result, game-changing growth for the International Franchise Association (IFA). Over the past decade, economic output increased by an astounding 40 percent in the franchising industry, and IFA membership and assets have grown significantly.

This growth in resources has allowed IFA members to increase their presence and influence in Washington, DC, to protect, enhance, and promote franchising. The strong financial performance of the IFA and the industry has occurred despite several economic downturns and the more recent financial crisis. However, the anti-business, pro-regulatory agenda over the past two years has tested the grass-roots and advocacy resolve of the franchise industry, clearly threatening our ability to sustain the growth we have experienced. And we will continue to face many challenges in 2011.

In 2010, the nation witnessed an historic midterm election in which more than 100 new members were elected to Congress. The Republican Party swept into majority control of the U.S. House of Representatives and significantly narrowed the gap of control in the U.S. Senate.

The IFA’s clear and consistent message to Congress throughout the 2009-2010 election cycle was for lawmakers to focus on policies that will incentivize growth and investment in small business. This message closely matched the feelings of voters, and in the election, they demonstrated their discontent with the anti-growth agenda and voted out those whom they felt ignored their concerns on jobs, spending, and health-care reform.

Outlook for Key IFA Issues

The playing field has changed for several issues of particular importance to the franchise industry. With a divided government, the business community has a chance to make an impact on some of the key issues waiting for the next Congress.

Taxes and Spending: Members of Congress clearly heard the concerns of the franchise small business community when they voted to extend the current tax rates. In September, more than 500 franchise business leaders visited their members of Congress during the IFA’s 11th Annual Public Affairs Congress and carried the message to their elected officials that extension of these tax cuts was critical to providing economic certainty so they could continue growing their businesses and create jobs.

While the extension is great news for franchise small businesses, the extension is only for two years. The IFA believes the best solution for franchise small businesses is a permanent extension of the current tax rates, and we will work aggressively with the new Congress to meet that goal.

Deficit reduction is also a top priority. The IFA expects some movement to pass laws to control federal spending when Congress convenes in January. The IFA strongly supports controlling spending over increased taxes as an important step in reducing the growing deficit, and will work to educate the new Congress on why this is so important to the success of small franchise businesses.

Health Care: Many in the business community are hopeful that the newly energized Republicans in Congress will push for repeal of many of the most controversial components of the new health-care law, notably the 1099 reporting issue, as well as individual and employer mandates. House Republicans will also work at the committee level to provide increased oversight into the development of new health-reform regulations and will seek to use the appropriations process to slow down various provisions. The IFA will aggressively work for repeal of the 1099 reporting requirement and work to ensure that any new health-care rules that are implemented minimize the economic impact on franchise businesses.

Immigration: We expect some efforts to revisit immigration reform may find a place on the agenda of the new Congress. The IFA will continue to work on fair immigration laws that help to ensure an adequate and affordable work force for franchise businesses.

Card Check: Card-check legislation did not make much headway during the first two years of the Obama Administration, which is contrary to the expectations just two years ago. We do expect proponents of Card-Check to work closely with the Obama administration to seek regulatory remedies through the National Labor Relations Board. The IFA will continue to oppose these efforts to ensure that small business owners are able to operate on a level playing field when it comes to workplace labor issues.

The Outlook for 2012

The IFA’s small-business jobs agenda remains on target as the country moves into preparation for the 2012 election cycle. Voters favor small business owners, and they see local businesses as the key to progress on jobs and economic recovery.

Ken Walker, CFE, is chairman of the International Franchise Association and chairman and CEO of Driven Brands.

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Truth, Trust, and the Masks We Wear

2011-01-17T09:44:00.000+08:00

“No, Paul, I didn’t spend any time prospecting yesterday.? I woke up and just didn’t feel enthused; didn’t want to be here.? Whenever I force myself to prospect when I feel that way, I always feel like I’m wearing a mask trying to be someone I’m not.? If I can’t be true to who I am, I’m not serving my clients, my company, or myself well.”

Dana (not her real name) is one of my newest coaching clients.? She is a strong producer selling relationship management software to small to mid-size companies in the northeast part of the country.? She finished the year well ahead of quota.? She isn’t the only salesperson I’ve spoken to who has an ethical issue with “being someone I’m not.”? In fact, she’s not the first seller who has referred to feeling like they’re being insincere, false, or lying when acting one way while thinking or feeling another way.

We may as well get the truth laid out on the table right now—we ALL wear masks.? We wear them a lot.?

Society demands we wear them.?

Professionalism demands we wear them.?

We want to wear them.?

While talking with Charlie Green of TrustedAdvisor.com and Jeb Brooks of The Brooks Group about this article, both pointed out a book written in the 50’s by Erving Goffman titled The Presentation of Self in Everyday Life where Goffman contends that we are always, 100% of the time wearing some kind of a mask.

Although I’m not sure I buy the idea that our whole life is nothing but a continual, uninterrupted series of masks, I do believe that the concept that we all wear masks at times—especially in business--is pretty self-evident.

The question isn’t whether we wear masks, the question is: are the masks we wear ethical?? And if they’re ethical, do they inhibit trust?? At an even more basic level, are they designed to lie or to help us tell the truth?

Certainly we are all familiar with the mask so often associated with salespeople—that of the fake friend, our false ally who is going to help us get the best deal possible, fighting for us against his or her unreasonable manager, all the while lying and double-dealing without shame in order to maximize the sales price and, thus, their commission.

That mask of lies is what many salespeople associate with our profession and consequently they try to distance themselves from that image by inventing all kinds of titles (masks) for themselves that are designed to communicate they are NOT salespeople—they’re ‘advisors,’ ‘consultants,’ ‘customer advocates,’ ‘customer guides,’ ‘account managers,’ and dozens of other, mostly meaningless, titles.

Fortunately, although still used by hucksters and con artists, the mask above is slowing being forced out of the legitimate sales world as more prospects become educated about their potential purchases long before engaging a salesperson.? For most of us that clich?d mask isn’t in our hip pockets any longer.?

But many other masks are.?? A few examples:

The, “Ms. Prospect, I’m really excited to speak with you this morning” mask when in actuality we feel crappy and would rather be doing anything other than speaking with her.? This is the one that Dana feels would be being dishonest with her prospects if she put it on when feeling like she’d rather be anyplace else than on the phone prospecting.

The, “yes, I understand how grievous a transgression it is being 5 minutes late to the meeting.? I’m sorry, it will never happen again” mask when in actuality we’re thinking “geeze, are you kidding?? The transgression is your pathetic excuse for a meeting that sucks the life out me and everyone else.”

The, “I know that your budget is tight and this is a tough decision, but my solution will increase your sales and put significant dollars on your bottom-line” mask when you’re actually thinking “OK, you have more money than you know what to do with, you cheapskate; knock it off with the games and let’s get down to business.”

Certainly salespeople aren’t the only ones who wear masks.? Sales managers wear their own masks, especially when dealing with their sales team and upper management.

Typical sales manager masks are:

The, “Bryan, man, just apply what we’ve been working on and you’re going to be just fine.? I know it’s been tough, but I have every confidence that you can be a great producer” mask while thinking “Man, what was I thinking when I hired this dimwit? What a goofball, it’ll take a miracle for him to last another month.”

And the “yes, sir, I talked to the team this morning and we’re on it.? You’ll see results by the end of the week” mask while thinking “Last week the crisis was to sell the XB2 systems and this week the future of the world depends on us forgetting about everything else and pushing the YS add-on.? You guys have no idea what you’re doing, do you?”

And, of course, there are a million other masks that we wear for our prospects, a different set for our clients, another set for our managers, and an even different set for our colleagues and co-workers.

Mask after mask is put on and taken off every day.?

Are we justified in wearing them?? What happens to trust if we’re caught wearing one by our prospect or client??

These are really tough questions because, as Charlie pointed out in our discussion, a mask is by its very nature deceitful—at a minimum it’s hiding something we don’t want seen or is projecting something we don’t feel at the moment; and certainly most of us would consider being deceitful as bad.? Quite a dilemma—how can we be doing something that is considered bad and call it good? ?Would Dana have been engaged in unethical activity if she had put on that “great to connect with you” mask when she didn’t feel like prospecting?

Tough questions.? My initial reaction to Dana was that the issue isn’t whether it is right or wrong to put on a mask because the mask itself is neutral—neither good nor bad.? The determining factor as to whether a particular mask is ethical or unethical is its intended purpose—why we put the mask on in the first place.

Was our intent to help build a relationship--or to manipulate someone into doing something they might not otherwise do??

Were we trying to be sociable and considerate--or were we simply trying to catch someone off guard in order to slip something by them??

Was it with the intent of being constructive--or with the intent of destroying?

As I thought about this issue over the next few days, I decided to ask a couple of friends what their thoughts were; thus my conversation with Charlie, Jeb, and Daniel Waldschmidt of EdgyConversations.com.

There seems to be two central points of agreement between the four of us:

1)??? Masks are an absolute necessity.? As Charlie pointed out, without masks the very concepts of etiquette and manners cease to exist.? Or if we consider the deception of masks to be bad, then we would have to condemn the concepts of manners and etiquette since conforming to the rules by putting on the appropriate masks would be bad acts in and of themselves.? He sees that we put on masks for one of two reasons: either out of fear or out of respect, politeness and etiquette.

I’ll add a third: to acquire something we want that we don’t believe we can get without being someone or something we aren’t. (To be fair, I suspect Charlie would file this as just another form of a fear based mask.)?

Certainly no one would want to live in a world without rules governing how we act with one another.? In the 60’s, many of us of the Boomer generation decided that we needed to be “true to ourselves.”? We took that to mean that doing anything we didn’t feel like doing—or not doing that which we wanted to do—was a disingenuous act, conforming to the bourgeois norms of a crass and corrupt society.? We dispensed with much of society’s rules of behavior (and unwittingly adopted our own rules of behavior which we rationalized by “believing” the socially accepted acts we conformed to within our group were our own spontaneous actions that emanated from the real “me”).? It wasn’t pretty.?

Most of us eventually grew out of it (a few, sadly, have been permanently lost in a stupor of blue smoke while clinging to their hookah) as we realized the masks of broader society were not only necessary unless we were willing to live in a minor subculture, they were more comfortable and in many ways more genuine than the masks we adopted when we were just ‘being true to ourselves.’ As Dan Waldschmidt put it, “Being sanctimonious about ‘not wanting to be who you're not’ isn't cool for pedophiles, rapists, or molesters. Why would sales execs claim any exception?”? (Or sanctimonious 60’s youth for that matter.)?

So, no less in our professional life, as our social life, masks are mandatory.? Business etiquette demands we treat our prospects, clients, and business associates with respect—even if we don’t like or respect them.? Professional ethics demand that we perform at the highest level and with complete courtesy even with a prospect or client who is rude and hateful.?

Business success demands that we interact and deal with our prospects, clients, and company associates with dignity and respect—and total professionalism even when we don’t feel like it.? Just try going a week being “true to who you are” and see how successful you are.

2)??? Most masks are ethically neutral—it’s your underlying reason for putting the mask on that determines whether the mask is ethical or not.

Certainly some masks, such as the stereotypical seller mask introduced above, aren’t ethically neutral because they’re designed for one purpose—to defraud someone by making them think they are getting something they aren’t (usually a better or product than they’re really getting) or to coerce them into buying something they don’t want to buy.

What about the other masks we identified above?

But what about the mask Dana felt was trying to be someone she isn’t?? Is that mask bad or good?? Actually it could go either way.? In Dana’s case the intent isn’t to harm but rather to be able to efficiently utilize her time prospecting even when she doesn’t “feel” like prospecting.? Her intent is, as Jeb put it, to “increase the comfort level” of the people she’s speaking with.? She has a “genuine intent of getting the most out of an interaction.”

If, on the other hand, Dana’s intent was to open a door by appearing to be something she isn’t with the intent to harm, whether through fraud, lying about the product or service to get a sale, or for any other illicit reason, wearing the mask would be unethical because it is being worn with bad intent.

Let’s look at the mask warn by the sales manager who encouraged his salesperson to apply what they’ve been working on together and he’ll be just fine even though the sales manager doubts the salesperson will make it.? Again, this mask can go either way ethically.? If the manager’s intent was to try to encourage the salesperson with the hope, no matter how small, that the salesperson will get it in gear and turn things around, the mask is ethical as the intent is to produce a positive outcome.

On the other hand, if the intent of the mask is simply to get the salesperson out of the sales manager’s hair until the manager can work out the details of firing the person, the mask is unethical as it’s only intent is to deceive the salesperson into believing he is working to save his job when in fact the decision to fire him has already been made.? Unfortunately, this unethical mask is worn by many, many sales managers every day.

The next few masks are a bit more difficult to deal with.

The, “yes, I understand how grievous a transgression it is being 5 minutes late to the meeting.? I’m sorry, it will never happen again” mask would certainly seem to be hiding not only the salesperson’s feelings about the value and content of the sales meetings they are required to attend, but possibly a general disrespect for his or her sales manager.? If it is simply a mask hiding their evaluation of the value of the sales meetings, I think the mask ethical in order to maintain civility and out of respect for their manager (although I would certainly think they should have a discussion with their manager about their perceived value of the meetings).? If, on the other hand, the mask is really one of many that are covering their attitude toward their manager, the mask is unethical because, to borrow a phrase from Charlie, “there’s too much of an honesty gap.”

I believe the mask where the sales manager questions to himself whether or not senior management has a clue as to what they are doing is in and of itself unethical, again for the reason that there is simply too much disrespect being hidden.?

In both of these instances the individual must take action to correct the honesty gap—either a discussion with the sales manager or senior management to clear the respect issues (uh, yeah, that probably won’t happen) or moving to an organization where they do respect their management.

The salesperson who questions the lack of available dollars to purchase his or her product or service has, in my opinion, a far different issue—making the assumption that the prospect is lying.? This certainly isn’t an infrequent reaction—a great many of us instinctively make this assumption as soon as we hear monetary objections.? But are we justified in making the assumption?? In most cases, I doubt it.? Are we justified in masking our belief?? Yes, I think so.? If one of the valid reasons for adopting a mask is with, as Jeb said, the “genuine intent of getting the most out of an interaction,” then masking our suspicion is justified and ethical.? That doesn’t mean, however, that the suspicion itself might not be an indication that we need to take a close look at how we view our prospects and clients.? Although the mask itself may not be unethical, our view of our prospects and clients might.

OK, so we’ve narrowed it down to the idea that masks are necessary and for the most part whether or not a particular mask is ethical is dependent upon the reason the mask has been put on.?

What does that mean for us as sellers—if anything?

If we all are wearing masks, what’s to keep us from wearing the mask that will get us what we want, even if that mask is unethical?? What happens if we are caught by a prospect or client wearing a mask?

At its core, understanding that we are usually--if not always--wearing a mask gives us the ability to gain some control over the masks we wear.? It gives us the opportunity to make some ethical decisions we might not otherwise make and that we might wish not to make by forcing us to analyze the reasons we put on the masks we wear.? Are we putting a particular mask on in order to better serve a prospect--or to better serve our desire, no matter the ethical cost?

Charlie gives a great summary of the role masks play in our professional lives, so I’ll quote him at length:

Fear-based masks:

“If I wear a mask in front of you out of fear, it is to protect myself from you. ?Perhaps to project myself from your judgment, or to keep you from taking something I have, or to keep you from getting something I want. ?Inherent in fear-based use of masks is a bad intent: to keep you from seeing some truth about something (usually some truth about me). ?

“So fear-based masks are inherently oppositional--they are rooted in trying to keep one party from knowing what's going on with another.

“So--what does a fear-based mask do? ?It triggers every fear both a buyer and seller feel. ?What is he really saying? ?Does he actually mean that? ?What am I not hearing here? ?What's the real thought balloon? ?How do I know he's not saying something different to someone else? How do I know he's not taking all my good stuff and spreading it around to my competitors?

“The fear-based response triggered by a mask leads to suspicion, counter-lies, deceit, covering up, shading of meanings, white lies, and a host of other modes of deception that result in more of the same reciprocally in the other party.”

Respect-based mask:

“The other reason for masks is as a sign of respect, politeness, etiquette. ?I rise as someone I respect enters the room; I smile at an elder (or a child); I nod my head in a sign of acknowledgement when I listen to a prospect describe his or her needs. ?It may well be that I don't feel like standing up, or smiling, or even that I disagree with someone--but politeness, respect, etiquette dictate a larger social reality--that we have evolved hundreds of little social rituals by which we acknowledge the legitimacy of the Other, the person in front of us, whether it is elderly Aunt Mildred, the head of sales at Xerox's copier division, or a stranger on the street (in most towns, anyway).

“By contrast: respect-driven masks are an elaborate social ritual we go through to recognize our commonality, rather than our differentness. ?They break down barriers, rather than erecting them. ?They make it possible to live both as a corporate representative and as a human being, by emphasizing the things we have in common. ? ?The 'masks' include our business card stock; the cut and fabric of our clothing; our choice of ties; and all this of course is before, ‘Oh, you grew up in the Ozarks too, eh?’ Or the East Coast, because the locale doesn't matter.”

I’m in general agreement with Charlie—but with the recognition that there are those exceptional mask wearers who are so comfortable in their fear-based or illicit acquisition-based masks they don’t create the typical response in their victims-- Bernard Madoff and Allen Stanford quickly come to mind.

As sellers we must be ever mindful of why we put on the masks we do.? Are we sincerely trying to connect with our prospect or are we trying to manipulate them?? Are we acting out of respect and desire to communicate or are we acting out of a desire to create a particular beneficial outcome for ourselves no matter the cost to the prospect or client?

The masks we wear telegraph our intent and thus can either help establish and strengthen a bond of trust with the other person or they can create a feeling of unease, caution and suspicion.?

The question isn’t are you going to wear masks; the question is are you going to consciously put on ethical masks that build trust and communication or are you going to put on unethical masks designed to manipulate and control your prospect for your gain irrespective of the cost to the prospect?? It’s your choice.? Sooner or later you’ll reap the true value of the masks you wear—just ask Madoff and Stanford.

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8 Common Franchise Myths and Realities

2011-01-17T02:19:00.000+08:00

When it comes to the franchising industry, some beliefs are touted so often that they have become widely accepted as facts. In reality, however, they’re common misconceptions about the industry and can be dangerously misleading -- especially for those who fail to do further research. With help from franchise consultants Tom Scarda and Joel Libava, we got to the bottom of eight of the most common franchise myths and are setting the record straight about them once and for all. Some may surprise you.

1. It’s best to buy a franchise with a well-known brand name. “Although a household name will draw customers in, it does not guarantee success,” says Scarda. Equally, if not more, important than the power of the brand, he says, are factors such as the hours of operation, the number and type of staff required, the daily tasks involved, the type of investment required and the return on investment.

“Forget the brand at first,” agrees Libava. “It’s more about fit than it is about brand - although the brand is important. Personally, I’d rather buy a franchise that’s not really that well-known but is really a great fit for me, than buy a heavy-duty brand-name franchise that is a poor fit, and one I can’t wait to sell, or close, because I can’t stand the work.”

2. Buying a hot franchise that’s in a growth spurt is a good opportunity. “On a daily basis, people ask me what the hot franchise is right now,” says Scarda. “To me, it’s like asking who is the best-looking actor or actress today. Beauty is in the eye of the beholder and is subjective. When looking at franchises, take note of what it will be like to live with that business every day for years to come. The franchise that looks fantastic from the outside may be a bear to live with.”

“Sometimes, ‘hot’ franchises can get cold really fast,” agrees Libava. “It’s kind of like a hot stock tip; by the time you’re ‘tipped,’ it’s too late. Folks should invest in a franchise that closely matches their skill sets, budget, and lifestyle wants and needs.”

3. Food franchises are great investments because they are recession resistant. After all, everyone has to eat. “It’s true; everyone does have to eat, and that’s why food business are everywhere,” says Scarda. “However, because food is everywhere, the competition is steep, so the returns and margins are tight. Again, do the numbers and have an open mind. Compare and contrast your favorite food business to any other business that is not a food concept in terms of numbers and the lifestyle the industries offer.”

4. A “turnkey” business means that all you have to do is “turn the key.” “Untrue,” says Libava. “One must be willing to work really, really hard to get the business up and running, and to get it profitable. The franchisor is not alongside [you] every day.”

5. Being in a franchise requires long hours and a lot of money. “This is not always true,” says Scarda. “With more than 3,000 franchises in 75 industries, there are many that are well under $100,000 all-in investment and entail operating during regular business hours with weekends off. These are typically in the service arena and operate in the business-to-business environment.”

6. If you invest in a franchise, you have a high chance of succeeding. “It amazes me how many franchise websites are still touting really old franchise success rates,” says Libava. “Folks need to realize that they can fail in a franchise business, too. There are absolutely no guarantees.”

7. My town has no widget franchise. There’s no widget for 30 miles in each direction. If I open one, it will be successful because there is no competition. For a novice businessperson, this seems like an ideal situation but, in reality, it could mean disaster ahead. “There may be a great reason why there’s no widget franchise in your area,” says Scarda. “Perhaps the demographic or the cost of doing business in the area wouldn’t support the operation.” Many times having no competition is a red flag. “On the other hand, perhaps the widget is needed in your town and it will perform greatly,” says Scarda. “However, do you want to be married to that particular widget?”

8. Buy a franchise that speaks to your passion. “It’s true you should love what you do, especially in your second career, which is what a franchise is for the majority of buyers,” says Scarda. “If your passion is about giving back to the community, that’s great, and you can find franchises that will enable you to do that. However, I caution [against] buying a business because it’s your hobby. For instance, if you love golf, don’t buy a golf franchise. I can almost guarantee that you’ll hate golf within six months if you’re trying to pay your mortgage with it. Instead, find a franchise that will afford you the opportunity to play golf to your heart’s content. I would count that as being successful.”

Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at wilson.sara@gmail.com

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