Simmonds & Simmonds FAQ (PDF)

Simmonds &Simmonds  Simmonds PAGE 2 &Simmonds FAQ What is a franchise? A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks, t...

Simmonds &Simmonds  Simmonds PAGE 2 &Simmonds FAQ What is a franchise? A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the franchisor's business name. One of the largest and most successful franchise operators in the world is McDonalds. A brand we have all heard of and is instantly recognisable. Over 80% of all McDonalds are franchises. With many of the chains we recognise and love also franchises. In the UK a typical McDonald’s franchise makes on average £4.5million per annum. Making them one of the most successful businesses available for purchase. What is a bond? A bond is a contract that offers a rate of interest in return for a loan. Before equity was ever sold, bonds were sold. A bond is noted as the oldest financial instrument in the global economic system. A country does not sell equity, however every country issues bonds. In its simplest form a bond is a fixed income investment created by governments and companies to gather capital in return for a commitment to pay interest and the return of the initial investment on an agreed date of maturity. What is a franchise bond? A franchise bond is where a franchise agrees to pay an investor a fixed return and their capital back on a pre set maturity date. The advantage of a franchise bond is that they often carry security and insurance and the underlying business is often a blue chip company with strong revenues.  Simmonds PAGE 3 &Simmonds FAQ What is the yield A yield is another term for the level of income or interest that a bond pays to the investor, often expressed as an annualised percentage of the bonds original value. For example a bond could have a 5% yield, this would mean you would receive 5% of your original investment over an annual period. Do I make capital growth? All bonds have an element of capital growth even those with fixed maturity values have capital growth as they pay an income. Whilst we only work with bonds that have a fixed maturity, it is still possible to make added capital growth on top of the yield, especially if you purchase a bond that is or becomes listed. Is it secure? Bonds have varying degrees of security and whilst they are designed to be more secure than an equity holding. The ultimate security of a bond is dependent on the underlying company. Unlike with equity, bonds can carry insurance and special levels of security to give investors ultimate peace of mind. All bonds we work with offer full coverage insurance from the Zurich insurance group, the 22nd largest insurance company globally. How is it secured? Bonds are secured in a number of ways. Firstly they can be secured on capital or assets held by the company. Secondly they can be insured or underwritten giving complete security.  Simmonds PAGE 4 &Simmonds FAQ How safe is my money? Franchise bonds have enjoyed exceptional popularity in the last two years, having been featured on Bloomberg and Forbes as the fastest growing investment in North America in the last 18 months. One of their main benefits is that they are offered by companies that carry large capital reserves and very good trading prospects, which means that investor capital can be insured, therefore meaning if the capital could not be paid back, then the insurance would pay. When can I access my capital? Each bond has its own maturity date and different points of accessing capital. In some casesbonds are listed and can be traded or sold at any time. As a Company we only deal with bonds that offer capital access of at least 12 months from purchase. But many Companies we work with offer access after 4 months. What is the minimum and maximum investment? This very much depends on the terms of the bond. Our most popular bond of the previous year was in McDonalds and had a minimum investment of £100,000 and a maximum investment of £950,000. Do I pay tax on my income? Yes you should pay tax on your income and this can be taxed at source or paid gross. There are some bonds that offer tax advantages, such as a capital gains tax bond that offers capital gains tax deferral. Who do you work with? We work with the largest franchises in the world. Mac Donald’s, Starbucks, Pizza Hut, Wendy’s etc. we do not work with any small franchises. All franchises we work with have to be approved by the GFA. Simmonds &Simmonds