Franchising: What is it? The Business Plan is Licensed by the Franchisor—The Franchisee pays for it (initial fees from a few hundred to several million dollars, plus royalties based on sales, typically 4%-10%) The Business Plan is Licensed by the Franchisor—The Franchisee pays for it (initial fees from a few hundred to several million dollars, plus royalties based on sales, typically 4%-10%) The business has a common trademark The business has a common trademark The business receives initial training and ongoing support from the franchisor The business receives initial training and ongoing support from the franchisor

Franchising in the U.S. First Franchise: Singer Sewing Machine in 1850 First Franchise: Singer Sewing Machine in 1850 There are 760,000 franchised businesses There are 760,000 franchised businesses 9.8 million Americans are employed by franchises (1 of 12 businesses)—Payroll of $506 billion 9.8 million Americans are employed by franchises (1 of 12 businesses)—Payroll of $506 billion Economic output--$1.53 trillion Economic output--$1.53 trillion Types of franchises—Dealerships, service and product Types of franchises—Dealerships, service and product Largest franchise—Subway (23,669 outlets) Largest franchise—Subway (23,669 outlets) (Pricewaterhouse/Coopers, 2004/Ent. Mag., 2006)

Top 10 Franchises for 2006 Entrepreneur Magazine 1) Subway 2) Quiznos 3) Curves 4) The UPS Store 5) Jackson Hewitt Tax Service Service 6) Dunkin’ Donuts 7) Jani-King 8) RE/MAX Int’l 9) 7-Eleven 10) Liberty Tax Service

Network Marketing: What is it? Face-to-face selling outside a fixed retail location Face-to-face selling outside a fixed retail location Distributors not only sell products but “sign up” other distributors Distributors not only sell products but “sign up” other distributors Distributors make money on retail mark-ups on what they sell along with residual income from those in their down line Distributors make money on retail mark-ups on what they sell along with residual income from those in their down line

Why Use Network Marketing? Low capital investment Low capital investment Greater margins Greater margins Motivated sales force Motivated sales force Only pay for performance Only pay for performance Minimal monitoring costs Minimal monitoring costs With new communications technologies it’s easy to stay in contact with a dispersed sales force With new communications technologies it’s easy to stay in contact with a dispersed sales force

Model of NMO Performance NMO Performance= Recruitment X Retention X Consumption

Why Join an NMO? Increase income Increase income Want to own my own business Want to own my own business Want tax benefits Want tax benefits Enjoy selling Enjoy selling Enjoy social interaction Enjoy social interaction See it as a hobby See it as a hobby Want to work with spouse/family Want to work with spouse/family

Commission Schedule for Excel Distributors—April 1996 > $100,0009 > $100,0009 $20k to 100k77 $20k to 100k77 $10k to $20k163 $10k to $20k163 $5k to $10k455 $5k to $10k455 $1k to $5k4,641 $1k to $5k4,641 $100 to $1k39,072 $100 to $1k39,072 Less than $100109,505 Less than $100109,505

Percentage of Population in Network Marketing (selected countries) Taiwan 10.9 Taiwan 10.9 Canada 4.1 Canada 4.1 U.S. 3.4 U.S. 3.4 Japan 1.9 Japan 1.9 Mexico 1.3 Mexico 1.3 Brazil 1.1 Brazil 1.1 UK.8 UK.8 Switzerland.07 Switzerland.07