"There are 3-4k brands in America that franchise, and there's hundreds of new brands every year. Which is wonderful, but it's also a little bit dangerous because a lot of those new brands really don't know franchising. You may have a great concept - a pizza shop, a coffee shop, a shoe shine stand - I don't care what it is, you can franchise a lot of things. But once you do that you're in a different business - you're no longer in the haircutting business, you're in the franchising business and it happens to be haircutting."- John W. Francis
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Why to Listen | Sponsors | Selected Resources | Transcript & Time Stamps
John W Francis runs Next Level Franchise, Inc in Minnesota, where he helps franchisors, franchisees and supplier companies with their business issues by offering perspective, experience, advice and connections to help move them forward. He started back in 1980's helping in his family business, The Barber’s Inc, which was the franchisor of Cost Cutters, City Looks, and We Care Hair Salon. Over the next 15+ years he helped to grow the business internationally, eventually selling to the Regis Corporation in 1999. Since then he has directly worked with franchises, as well as served as an advisor, board member, consultant, and speaker to many people and companies in the franchise world. He is known as “Johnny Franchise” and is a Franchise Expert.
Why to Listen:
A while back I had Matt Miller on the show, and in episode BTU #60 he talked about his experience starting the franchise School Spirit Vending. In episode BTU #115 Ray & Sam Allen talked about Direct Marketing and how it is business with some training and assisting to help people like veterans.
Both of these got me thinking about franchises, and how this is really well suited to veterans who want to start a business and have drive, determination, and discipline, but may not have a killer business idea or a background in business.
So, I took to Google and it did not take me long to find at the top of the list when it comes to franchises, my guest today, John W. Francis. John is not a veteran, but he has an immense amount of experience with and knowledge of franchises, and has graciously offered to come on the show to help me - and all our BTU listeners - better understand franchises and why this may be an appealing entrepreneurial vehicle to veterans
Selected Resources:
VetFran is an incredible resource to help veterans better understand franchises and how they can get involved
John recommends the following vendors to assist in finding your next Franchise:
John's blog has all sorts of helpful information related to franchises
John also recommends Franchise Times and Franchise World as two helpful publications
Fathers Eve is a side project John has started to both raise funds for charitable organizations, as well as connect men who want to be great fathers.
Transcript & Time Stamps:
What is a franchise? (4:33)
A franchise is an opportunity that can take on a number of different dimensions. Typically it’s a business. You’ve got a model and a brand that you want to operate. Most people are familiar with the big brands like McDonald’s and Burger King and huge retail and national restaurants. There’s franchising all around. It works and it works well when it’s done properly.
(5:20)
There’s a lot of things included in a franchise. What I would suggest for veterans and anyone else is to do your homework. Take your time and learn about it. You don’t want to make a decision like this in hurry. You want to make sure it’s a good fit.
(5:40)
In a franchise, it’s usually a brand, a name, that has some value. And then there’s a system, a series of systems. A system of operating that business, of marketing and advertising in that business. Training programs as well.
(6:00)
There’s a lot of things that come with franchising and they’re not all the same. They come in all shapes and sizes. It’s not a one size fits all but it’s a tremendous way to do business in a way that leverages people’s motivation and talents. And if it’s done well, I believe there’s no better way to create mutual success. When everyone does their piece of the puzzle. Franchising wins at all levels.
In your experience, what kinds of things cause a franchise to fail? (7:37)
The problem starts in the beginning when someone convinces themselves that they should buy something that isn’t a fit.
(8:05)
For example, I used to franchise hair salons. It’s a great business. People have been cutting hair the same way for 5,000 years-- with sharp instruments. It’s a business that is resistant to technological obsolescence.
(8:30)
If you’re a hairdresser or barber, there are regulations and rules that you need to follow. But as an owner, if the owners don’t understand the business they’re in, it’s not going to work. In the salon business, there’s a lot of things you need to execute well in order to have success in a hair salon business. It’s not the same as every other business. You need a different skill set in every business.
(9:05)
So when I was selling the hair salon franchises. The first thing was can this person afford it? But a big part of it was a personality fit. Do I think this person is going to be successful working in this environment. Helping people recognize that they might not be a fit for a certain business without insulting them is huge. Because if it’s not a fit, you want to move on.
(10:18)
There’s thousands of brands in America that franchise. And there’s hundreds of new brands every year which is wonderful. But also a little bit dangerous because a lot of the new brands, they really don’t know franchising.
What are qualities found in a successful franchise owner? (13:15)
A couple things immediately come to mind. First, the ability to work hard - when you're the owner, you have a different attitude about things. You can't just work there. Ownership is a lot of responsibility and opportunity and liability. When you have others investing in your deal and you have employees, it raises the bar. You have to have a lot of commitment and a willingness to never give up.
(14:16)
The other trait that is often underutilized is connectivity. In a franchise brand, you can connect with other owners or the Franchisor. They've got marketing people, training people, leadership people, etc. You can connect with these people - you're part of the family, part of the network. There are people running this company all over the country and you want to do what they're doing in a way that makes it successful. Asking for input on what to change - a different attitude and approach.
(15:14)
The worst mistake I often see is when someone wants to change something - they want to change the part of the brand. I say, “We don't sell tires at the hair salon”. You don't change the model. When a franchisee starts to tweak things or they say "my market is different" - that's a red flag. You need to talk to people at this point - share the idea and talk about it before you start doing it. Often times, you’re moving yourself away from true profitability.
(16:52)
The third thing is hiring people. You need to make sure you get the right people. It always comes down to people. Often times franchisees have never hired or trained anyone. Hiring and keeping the right people is key.
How much capital is needed to buy into a franchise? (20:30)
Franchises come in all shapes and sizes. There are franchises that are $50,000 or less, which is where most brands begin. That would be a total investment - a one time franchise fee, legal costs, training, travel, contracts to sign, setting up a corporation. If it's a $50,000 investment, many times you can finance the equipment, and for a lot of franchises that are veteran friendly there are discounts on those fees. There is a program called VetFran that is organized through the International Franchise Association. You usually pay the fees in cash and the rest are in financing.
(22:20)
Good advice is to have half of what you borrow - otherwise you're just working for the bank. Try not to borrow more than 50% of the investment. So you'll need some cash - savings, earnings, sold something else, or people go to friends and families and ask for investments or a loan. A loan is easier than an investment, but you need to make sure you write it down. you can borrow from a friend or family member, and when you pay it off that goes away. But an investor is different because they get equity and they get a say in what decisions you make and may feel entitled to participate at a level you didn't expect.
(23:55)
A lot of people start with vending machines are common. They’ll do it for a year or two and then sell it and buy a franchise. You can start with a single vending machine, and it's a lot of hard work but it's a starting point. Then you can sell it and buy and franchise where you're managing employees.
What is the ideal progression of franchise ownership over time? (25:15)
The ideal is to eventually hire someone who can do the day-to-day activities, but at first you'll likely be doing all of it. You can eventually own the place and not work there. Many times starting a franchise can be like buying a job - it takes a lot of work and feels like just a giant obligation. But if you can grow it you can be the owner and hire a manager, and then your job is to own the place. Do the advertising, maybe some sales, manage cash flow, and maybe even start a second or third franchise. But they usually start somewhere much smaller.
(26:49)
Because veterans are used to systems and checklists this is a great fit for franchises. If you have the right attitude and it's a fit - there's a lot of examples of success with veterans in franchises. And franchises have welcomed them through program like VetFran.
(28:25)
A lot of franchisees get stuck thinking they have to do everything - that is the beginning of the end. When companies cut back advertising because cashflow is tight, it's the worst you can do. When things are tight financially - who doesn't get paid is a tough decision. This is when a franchisee needs to call the corporate office or another franchisee to see where to go from there.
(29:30)
One of my favorite sayings in business is, "If it doesn't make dollars it doesn't make sense." This is such great advice. You have to know what you're spending and what you get for it and if it's the right thing to spend on. Ideally you can pay yourself sooner or later, and you have to be careful about continuing to invest all your money in the business indefinitely. Some people will use a franchise as an inheritance vehicle - the parent can make the investment and the child does the work and over time the child buys the franchise from the parent, or the parent gifts shares to the child.
(33:15)
Find something you're passionate about, and something you can get excited about. If you don't like people, you shouldn't get into a hair salon. But other business I work with have different skill sets. The good news is there are lots of franchises out there, but you have to know yourself and what you would be interested in.
What resources - books, movies, etc - would you recommend to someone interested in the franchise industry? (34:30)
Franchising is a big area today. There are over a million franchise outlets and over 3,000 franchises. There are groups who work as a matchmaker (a broker or agent) just like a real estate agent selling a house. There are companies that sell franchises this way. They don't charge the franchisee - the franchisor pays a referral fee to the person who brings the deal in.
Recommended Vendors:
There are 5-10 more who are like this. Their speciality is to get to know you as the buyer and line you up with brands they know and trust and think will be a good fit. They help you understand what you have and educate you on why it is a good fit and you'll have to decide.
(36:40)
They'll turn you onto three concept and then sell you the franchise. They prepare you and if you buy they get a referral fee- it's a fair deal and a great value. It does take time and takes a commitment and the consultants only really know a handful of brands. They are familiar with 15-30 - how many can you really know? So there may be others out there that would be a better fit but you may never hear about them because that franchise is not part of the inventory.
(37:40)
Still, the risk is manageable because it's a helpful way to see what's out there, find their strengths and weaknesses. Just be very careful and make a good choice - do your homework on the brand. You want to validate the idea - check it out and make sure the franchise works the way it is supposed to. Before you write a check - go spend a day with someone running the unit and shadow them for the day and make sure you're comfortable.
Is there anything else you can share regarding the franchise industry? (40:40)
There are a lot of great people and great opportunities. Find a good brand with good people and a business you really, truly enjoy. You're willing to work harder for something you believe in and people you like. Get to know the business and really take the time to know what it will take to be successful.
My blog has all sorts of things on it
(41:30)
There are books and magazines - the Franchise Times, Franchise World Magazine - all sorts of Expos and shows and seminars. Take as much time as you can. It's a great way to go - if you get into a good one follow the model, ask for help, pay attention, and follow the system. Engage fully in the brand.
(42:17)
If your franchise has a Franchise Advisory Council - get involved in it. If they host a workshop go to it, never miss an annual convention. Most brands have a big conference for all the owners to come together every year - you need to be there. Make that investment in yourself and your business.
(42:50)
Fully immerse yourself and follow the good ones. Meet the people who are successful - find the last Franchisee of the Year for the last five years and go talk to them. You want to be the next one!
What is Father’s Eve? (43:35)
Father’s Eve is my giveback project. I'm a dad of two girls and I'm lucky that I can do my fatherhood the way I'd like. This started as an accident - I got together with other fathers the night of Father's Day. Then we turned it into a charity event and raised a lot of money. Then we licensed it - everything is a franchise to me - we did it in 12 cities last year. This year we expanded and we did it in 42 cities. We had sponsors and raised more money for charities.
(44:45)
Next year we're trying to turn this into a celebration for dads. Father's Day is for dads and their families - we don't want to change that. Father's Eve is just for the dads the night before, a dad’s night out. We do a countdown - we can't stay up until midnight, so at 8pm we do a local toast to the dads.Some places we do charity functions and auctions, and bag tosses, or poker or golf. One person did an archery event. It's hosted all over the county. Connecting dads to each other to celebrate being a dad and connecting them and learn how to be a better father is so important.