How to Choose a Franchise Opportunity
Amanda: I want to ask you both about how to choose a franchise opportunity. Franchising sounds great, there’s a lot of support around me there’s a lot of variables you can help me with and all that kind of stuff, but there’s also a lot of franchises out there that were around five, ten, fifteen years ago that I drove past and I don’t see anymore. So, let’s talk a little bit about that. As we get into if franchising is the right way to go for me then let’s talk about the Blockbuster that I used to drive by all the time and I don’t see anymore because I’m at home watching Netflix.
Mike Powers: That’s a great point. You’ve got to look to franchisors to see what kind of leadership they have, that’s so important. You mentioned Blockbuster as an example. Nothing negative against them, but they don’t exist today. Why don’t they exist today? They didn’t have the vision, the insight, to see where technology was developing. Also, looking at their audience or constituents to find out people were accessing videos and movies from their mobile devices. And they made no effort to make changes. And ultimately what happened you have the red box, and you have Netflix. People are accessing movies and just video in general via YouTube in different ways, which almost, you know, when you look at some of the changes that are happening now, even today, some of the major communications companies making change going to those, those types of streaming systems and activities, because that’s the way people are accessing information. And it’s true Blockbusters didn’t have the vision of the foresight to make those adjustments early on, or look at the landscape and how that was changing out there.
Mike Magid: Yeah. Mike talks about like, vision, strategy critical. I mean, planning critical so, you know As we try to help you through your journey Amanda and you help, you know, our loyal listening audience you know. We start with do I want to be a business owner right? So that part we’ve kind covered. Although I think that I think it’s critical to really spend some time on that. I mean, if you just look at business ownership in America, it’s a small percentage. I mean, franchising feeds a large portion of the economy, it’s a big portion of this economy in the revenues of generated. That aside though there is time you should spend evaluating whether ownership is right. Because in business ownership, and then I’ll get to back where we were, you everything know falls to you. It’s your investment. It’s your time. It’s your resources. And unlike what it’s what it feels like when you’re in a job, unless you own the company, you typically report up to somebody.
So, every time you hit a snag in your level position. You have somebody that you can go to to unblock things, or unclog what’s happening or to give you the perspective you need. And when you start searching business ownership, and that, that component is taken away from you, and now the buck really does stop with you, what happens when you hit a snag, when there’s an obstacle, when you don’t have the necessary clarity to get you, where you need to go and yet you’ve invested this money. You’ve got this business, and there’s nobody to report up to. So, when we go back to business ownership, that is a, that is a compelling reason to to truly dig into and investigate when it’s the right time, or if it’s the right time, to be a business owner. And, if you’ve gotten past that, and then you’re going to start to focus secondly, on industry and you talked about the blockbusters and the things that Mike was talking, industry is critical because not all industries are equal.
So you can say, for example, that if you owned a funeral parlor. Which is a very recession resistant business. Recession proof actually. If you had a franchise, that dealt with, you know, those that had passed on that this is going to be around as long as you want it to be around. There’s unfortunately people going to pass on, but to your point and what, Mike had talked about, like, your blockbusters not having the vision and strategy. Not seeing the technological changes. I mean, Blockbuster is isn’t here anymore because the industry changed. And the way people consume, you know movies, videos, changed and they didn’t change with it. And so, when you think about industries, and we talked about this in our last segment, we talk about recession resistancy. See, I think when you begin looking at industries. If you’re, if you’re real concern, or your true concern is to be in business for yourself, because you want to be your own boss and control your own destiny, build the equity in your life that you want, reduce your debt, you know, do all the things, you know, build wealth whatever you want to do by using business ownership as that vehicle. Then you have to really look very deeply and in a very detailed manner around what industry will allow you for that for that to happen. And so we can use, there’s plenty of examples in fact, I’ll throw it back to you, Mike, because I know you, you were, you wanted to, you know, you talked abouts Sbarros a lot and you know, how that’s changing what’s going on there and I can share other examples, but share the Sbarro example that you like to talk about.
Mike Powers: Yeah, So, Sbarro, I, which I like a lot is, as you can see. I’ve had the pleasure of enjoying their pizza too much, but, you know, when they look at mostly their been in, they relegated themselves to mall locations because, and, and, you know, here in the great state of Pennsylvania, we see them along the interstates where they have and even their retracting, because people are accessing those in the malls, we were just recently in Minnesota, where we were at the Mall of America. Great great mall and talking to some of the local folks Sbarro’s was there and now they’re gone to because of the amount of traffic and the way that people are accessing food fast food on the go. So it’s so important that the franchisor look down the road. I mean, we talked briefly before the show today about Uber, having to see at a recent event, where the cab’s were lined up out front. And the crowd was coming out of the show, and everybody was getting an Uber cars because it’s easy way to access. Same type of vehicles. It’s just the experience in that very thing. Because now, not only can you order an Uber, but you get to order food and have that prepared.
And you know, it suits the lifestyle and that’s really what it’s about. Being able to see down the road make those adjustments, be prepared for those adjustments, and then help the franchisees prepare for those changes that are coming.
Mike Magid: I watched a documentary recently. And it’s not, it’s not about business ownership, per se, but it underscores a point of industry and how important issues and how things change and the companies that are visionary, and then strategic around that vision and begin planning it out, they’re around for years and years. I mean, kmart’s reinvented themselves, walmart’s reinvented themselves. I mean, there’s lots of companies and then there’s others that you just don’t see anymore that around because they just couldn’t adapt or they didn’t have the strategy or vision at the top level.
But, talk about Sbarro’s in malls I mean, this documentary was so powerful. It was you know, about the plight of malls in America and in the 70s 80s and 90s malls were huge and these mega malls were being built all over the country. But how many people go to the mall today? And I mean, there’s still people going to the malls that’s why they’re still out there, but how many people are shopping, you know, online today and, you know, don’t have to ever go to a mall and deal with that mall experience. And so companies like S’barro you know that If they didn’t change such as like, a Domino’s, which has reinvented themselves. I mean, Domino’s to their credit in that industry, and food is an industry that will never go away, although it is a want not a need. So, if you don’t want an industry that is predicated on want and you’d rather have one predicated on need, because need is a much stronger longer term business plan then want, then, you know, maybe don’t go food.
But, to Domino’s credit their product isn’t any better today than it was ten, fifteen, twenty years ago and their product is not great. It’s not a knock on it, but they just don’t have the best pizza, but yet, you see, Domino’s commercials all over and then the recent stuff about now, you know, they, they’ve re-done their storefronts and they’ve made a more, you know, customer friendly, they’re doing painting of roads, I mean, they’re doing all kinds of promotional things and if I was a Domino’s franchise owner, and I’m watching the direction of the company, that Domino’s is going in, Domino’s gets a lot of play. And I’m feeling better as a franchise owner that the strategy and vision at the franchisor level is thinking that far ahead, to not be a Sbarro, it is not, I see don’t S’barro’s anywhere. I mean, honestly, I don’t see a lot of it. I don’t see what their change in strategy or vision was other than, you know, the name.
Mike Powers: As an independent, you know, just think about all the things you would need to gather information and the time it would take you to do that. The amount of money that capital you have to invest to get that information to plan where you’re going to be next year, three years, five years, down the road. It’s immense.
Amanda: That vision piece and, you know, being part of a company and a franchise and franchisor that that has that right? We talk about industry and recession proof. I mean, myself am a victim of the mall blight or plight of America, because that my career was retail management and I worked in a company that didn’t have that vision, and wasn’t able to adapt and it worked out for me in the long run, but it’s very, it’s a real thing right? And it’s something that as I consider this journey and look for things and that vision and strategy and that ability to adapt is important. Getting back to the industry piece of things, before we even talk about companies and Domino’s versus Pizza Hut and all those kinds of things, let’s talk a little bit about things that you want to keep in mind with industries. I mean, I see gym franchises popping up all over the place and smoothies and wellness is a big thing right now. But five, ten years ago, that wasn’t a thing. So when I’m looking for an industry, what are things that I really should consider? Then talk a lot about recession resistancy but what, what are some options that fall in that? If I’m not interested in say a funeral home as an example?
Mike Magid: Yeah. So, you know a couple come to mind one will sound self serving, but home care or health care. It’s always going to be around. It’s just we talked about it in our last podcast, you can’t replace a very hands on, human business, with robots and technology. People at a very ground level that are unhealthy need care. And so health care, home care, is a space that would you would consider very recession resistant.
Amanda: And I think that’s something that touches everybody. I mean, aging is as certain as death and taxes.
Mike Magid: 18 and up if you’re depending on, whether you don’t want to serve or or serve minors. Another one would be taxes. Right? So, you could have a Liberty Tax or an HR Block. Now, whether taxes is right for you, because you don’t want to be off X amount of months when taxes aren’t really going, and there’s not much to do. But you always going have to to pay taxes and so if you had a tax franchise, that is a very recession resistant business. Year in and year out, you know, you’re going to be offering that service and it’s a need that people are going to have. You know, as long as you’re around unless we change our government structure and how we’re able to fund everything through taxpayer dollars. So recession resistancy is critical and most of the time when you talk about recession resistancy it’s because you’re talking about industries that are truly based on need. The want industries are the fun industries, right? They’re that they’re the sexy industries. They’re the, you know, the Maui Wowie, the Cold Stone Creamery, is the, you know, that the food kind of stuff right? The Gymboree stuff, right? That when times get tough and people need to rein in dollars, that’s what gets hit because people aren’t going to go to a Gymboree and spend money if money is tight but, you know, people have to eat.
Now doesn’t mean all food is recession resistant. Because I’ll go to a food market. Because that’s where I got to get my food, but I might not go out to eat. And so even within an industry, there’s want versus need. We can’t unless, unless we’re homesteaders and we’re eating off the land and creating our own food. The, the majority of people in America are going to some food outlet. That’s a want kind of industry. But restaurants, you know, dessert places, they’re needs they’re wants not need. So, industry is critical because you have to differentiate between want and need and then within the industry, you have to differentiate the opportunities that are on the need side versus the want side. And I think when you drill down in industries, that’s what you’re looking for. I only know of the, I can only think of an I already mentioned it only one recession proof industry and that’s the funeral industry. I don’t know. I can’t think of any others Michael, I don’t know if you can that, you know, regardless because because to be fair on both sides. Even in healthcare, there are things that you don’t have to pay for if the family is willing to chip in and do it themselves.
So, that even has a segment of, you know, want versus need too. Because I may want to hire somebody, because I don’t want to do it, but if I can’t afford it, I may decide I’m doing it and so it’s really it’s really difficult to analyze the industries but if I was analyzing industries, I’d start with what I believe is recession. I look at whatever is in need and then within that industry, I’d separate out what I think is a want franchise versus a need franchise.
Mike Powers: I think looking at the size of the market and anything that you do. And as Mike said, the need is the need growing is it stable, or is it trending downward, when you look at? And I could speak to home care specifically by 2020 we’re looking at 65+ being about 50 million people in our population, and the 85+ is going to grow to be about 5 million. When you fast forward 10 years to 2030 those numbers for 65+ will be 72 million. And then the 85+ is going to grow to 8 million. So, when you look at that size of the market, and just take any community, wherever you are and you look at the percentage of the population. The 65+, and then you look at the adults who may need care from 18 to 64, there’s definitely a market out there and you can see trend lines. We do this in work with our franchisees. All the time where we do a total analysis of the marketplace, just to see the demographics and where they’re trending. So that we can prepare on an ongoing basis to go out to that market. That’s where you start to see whether there’s some resistance to the recession. This is Mike said, you know, when you talk about the wants, you know, I really want that piece of pizza. I really want that ice cream, but, you know, things get a little tight that disposable income goes towards other things. Whereas I need that care in order to sustain myself or or be be an active adult, you know, those things are important. And I think that’s something where those dollars will be, you know allocated.
Mike Magid: You talking about it, it took about from an industry perspective again, just look at as example the fast food industry and focus on the burger side of it. When Ray Kroc, you know, started McDonald’s, right? It’s a burger franchise, and that the most you know, iconic franchise in the history of franchising, is McDonald’s. They’ve done a great job worldwide not not not to plug McDonald’s because I try to eat healthy. But, even McDonald’s has reinvented themselves, multiple times throughout the years.
So, you sit there and go okay, Ray Krocs, gone, you know, ownership changes and whatnot but the strategy and vision never really changed. I mean, they’re doing things today that you would say, I could never, I never would have ever imagined McDonald’s doing. I mean, you know, they, they sell a ton of coffee. They’re known for coffee. And, you wouldn’t have thought that. They have done the breakfast menus and they have done the dollar menus. They’ve done the health conscious they pose calories now. Let me all the things that you would think a company we want to do do to promote itself, reinvent itself, to continue on an industry that primarily is a want industry, not a need industry, and yet be so successful that really starts, you know, at the top and how they’re approaching the way they the way they approached consumers as consumer habits changed. Like, Krispy Kreme, right? Which was the all the rave back then mean, I, Krispy Kremes were opening up and you were able to stand there and watch the donuts float. And greasy oil is there cooking the donuts and it was really cool. Until we went on a health kick in this country and started getting very health conscious and then all of a sudden, people weren’t going to for those, needless calories anymore and Krispy Kreme dried up.
Now, they, they’re trying to make a comeback, but, you know, it’s not easy once you lose your footing to try to make a comeback. The goal of an industry and with vision at the top, depending on companies, is to anticipate what you see where things are going to go, and remain in the game, not not fall out of it than try to get back into the game and there’s countless, you know, industries that you can see both good company examples and bad company examples. Those, that have gone away, and those that have had to reinvent themselves in some cases some multiple times.