What to Look for in a Franchise
Amanda: Alright, so Mike what are some things, we talked What about industry and whether business ownership is right for for us as a whole. But, when we really get down to the level of selecting a company within that industry that we’ve chosen, what some are things that we should be looking for? Tell me what to look for in a franchise.
Mike Powers: That’s a great question. I think there’s a lot of aspects if I were in your shoes, I would be looking to see to learn a little bit about the company. And there’s a variety of different things, I think, that you’re going to discover in that journey, which might be first, let’s look at the legal aspect, and we talked in our last show about an FDD, which is, you know, the franchise disclosure document tells you a lot about a company from the legal aspects who the leadership is, what kind of background they have, their business acumen, all the things that you would want to know about as well as, you know, their financial stability, how long they’ve been in business, should they have any legal challenges in the 22 items that are outlined in there? I think are really critical to learn from a legal aspect.
Amanda: The leadership piece I want to touch on real quick, because we talked a lot about vision strategy and you want folks who are are very well versed the in industry. And the world of business, when you’re identifying, you know, those folks who are going to be those visionaries and strategies and helping lead the company.
Mike Powers: That’s an excellent point. When you think about that, let’s just get, we roll back a little bit to Blockbuster, had their leadership had the vision to look down the road at the landscape. They may have made some changes that would maybe resulted in making a right instead of a left, which may have kept them in business a lot longer. But it’s true. Leadership is important. I think the leaders that have vision that understand or are seeking to understand the business landscape in that specific industry, and then in business in general are better prepared to make informed business decisions on behalf of their franchise owners and help prepare them for those landscape changes that are coming, right? I mean, if Blockbuster had, not to pick on them, but if they had made changes with their franchise members, and they changed their format, and the way they delivered movies and other types of entertainment, they probably would be around today. So that’s, that’s a great question and a good point.
Leadership is so important. We value here at our organization because that drives where we’re going, our strategy, our initiatives, and how we take action and prepare our franchise owners out there. So.
Mike Magid: I might add just on the leadership piece. So, it’s part of the, as part of your discovery of companies that you select, you’ll have an opportunity during that process before you ever sign an agreement, pay money, to meet that team. Meet the leadership. And that’s important to then be able to sit and talk with either the President and CEO of the company or the leadership team and ask what their vision is? What do they see for the company? Where do they see things in 10 years? And in that answer, you’ll know whether or not, they have any strategy or vision behind it, because they’ll be putting things out there to you, that you probably haven’t even thought about and that most people don’t. That’s why they’re in the position they’re in, and the good ones that for years do well in their career, because they’re very strategic very visionary people. But, in that meeting before you ever sign an agreement to pay money, you’ll have a chance to pick the brain of that individual at the top and that individual’s leadership team to know whether or not, they’re seeing things that you hadn’t considered. If they are, you know you’re on the right path.
Mike Powers: Yeah, I think every franchise should have a process that should take you through the exploration of what you can anticipate. And every step of the way will help validate for you if you’re making the right decisions. For example, we have a process a seven step process that includes walking you through getting to know you, you getting to know us, getting to know the leadership from a personal standpoint, and also getting to know the support mechanisms by interacting with, not only other franchise owners through validation conversations, but also getting know the support team here and that’s very important. And then getting a firsthand look through a discovery day, where you actually are in the corporate headquarters of the franchisor, getting to know, as Mike said, on a personal level, what the vision is what, what strategies, tactics, that they have employed? Not only for today, tomorrow, but five years down the road looking at how the business is going to evolve, and how you as a business owner can evolve with that.
And then obviously the financial aspect is, you know, what, what can I, what can I gain personally all my specific goals such as building equity, building well, you know, having a good sustainable long term profitable business. You’ll gain a lot of that as you go through the process. I think someone in your your shoes, as you were exploring, you actually hurt yourself, when you don’t take that journey through this process, because you’re missing pieces to the puzzle that could give you a real clear picture. Now one regard, you may get a chance to meet with the leadership, and not feel good about them and their direction. And then you have a business decision to make if that’s the right option for you, or you may say franchising is not for me. I think I can maybe want do to this on my own, but you need to go through that process in order to really answer those questions that you have because each one will cause you to have other questions and that’s where, you know, you’re getting all the information you need to make that really good solid business well informed decision.
Amanda: Well, Mike, I think I love what you said about, you know, it is a whole journey, right? And you’re not doing yourself, any favors by jumping in at some point down the line, right? Because I heard, there’s a great opportunity with a home care company, or with a fast food joint, or whatever the case may be, but really taking some time with yourself to figure out what you’re looking for. What’s important to you. And that’s really going to help feed those conversations and form them and figure and what out questions you want to ask. Mike, when you get to the point of speaking with the leadership team and and you talked about what’s your 10 year goals look like and for the company and the vision, what are some other questions that I might ask whether it’s of leadership or just another points in that journey what are some things I want to know?.
Mike Magid: So I was is going to go exactly where you’re at right now, Amanda. I think that before I’d even talk to a company, I would already have my own little vision strategy for my life and where I want to be, what I want to accomplish, where I see myself in three, five, ten years now, right? So. You know. Much like the CEO of a company that you might be investigating, you got to treat yourself as a CEO of your business. And so, before I can really ask the right questions, before I can start talking the companies, I have to understand what I want for myself. So if I was your concierge, or mentor, in this personal journey and going buying a business, and I was going to begin the process of talking to companies. I would figure out what is most important to me. And again, not just the recession resistancy piece we talked about, but do you want tried and true? Do you want cutting edge? Do you want something that’s on the leading edge, whether it’s in design or in technology or in health care in automotive whatever whatever is important. What kind of income am I looking for? What kind of lifestyle do I want to live? And does that business afford me the ability to live that lifestyle? And then maybe not in the beginning, but as I become successful, right? What kind of wealth am I looking to accumulate? What kind of equity opportunities when I’m ready to sell this business and retire? What are my equity opportunities with all the good will I build up and the income that I have accumulated? What kind of equity opportunity do I have in this business and how is this business going to help me reduce my debt going into retirement? So that I can live my retirement years on my terms and not on the Government’s terms, or not on anybody else’s terms. And so, you’ve got to figure those things out, because that will shape your questions.
Amanda: It’s important to have a really clear, before you even talk to companies, ‘cause there’s a lot of great things out there and it will be really easy I feel like to have a conversation, but I thought that sounds great but it’s important to have your feet glued to the ground and figure out what it is that that I’m looking for as somebody who’s pursuing buying a franchise and this life investment here that we’re talking about to make sure that that lines up. So it’s good to take that time and really figure out what it is that you want for your goals.
Mike Magid: You said what type of questions? They will generate the questions you need to ask once you understand what you want, what is most important, what you’re looking for. I mean, the typical things the typical things that we’ll hear from people investigating businesses of they want to be their own boss, they want to control their own destiny, they want to build equity, they want to make, you know, $300,000 a year, they want to pay back their loan in a year. Right? They, you know, etc. Etc. Etc. And every company is going to have a different perspective on how you can accomplish those things. So, it’s not so it’s some of its about what you want short term. And some of us about what you want long term. And the reason I say that is, because you may look at companies that can provide you the short term, and not necessarily long term and that’s risky. Because most people need the short term to pay bills, to put kids in school, to put food on the table, to live a lifestyle that they’re used to living. And that’s why most people that are working jobs, or unemployed, go back to working a job, or continue to work jobs because they have that we’ll call it “the guarantee” or “fake guarantee” that they’re going to have this income coming in and they don’t have to change it.
So the part of what you have to investigate with companies is what does the short term look like, what are the pain points? So if I’m coaching you, what are those pain points? Do I want to live those pain points in that short term? Because over here, five years out ten years out, I’m getting everything I could have ever dreamed, or imagined and more. Now that’s a really, really tough analysis, but if you want to truly be a business owner, you have to separate your short term goals from your long term goals. And then you’ve got to look at companies that can meet both short term and long term, but more importantly, you know, you’ve got to make sure that the company that’s going to present that opportunity, both short term and long term, is ethical. And that’s where in the process, you get to meet with them and ask some pointed questions, are they transparent about how they operate? How do I know that stuff? I talked to franchise owners, and they tell me what their relationship is with the people, the leadership, that’s running the company, right? I can find those things out by talking to that people that have charted that path long before I decided I want to chart that path right? So, let rely me on them in the validation process, you know. Ultimately there’s a lot of things once you set that up for yourself, that before you start talking to companies will lead you in the direction you need and ask the right questions to get the answers you want, but I think it’s very, very critical to understand that there are two plans you need to be able to build out and be able to sustain, short and long term, because there is pain in the short term. And if the gain in the long term isn’t what you thought it was going to be, even if it’s more attractive in the short term, I can get you to break even in six months, I can get you break even in two years. I want the six month plan. Because I, I need to make money. But long term over here, I can build a can build an empire. I can have the lifestyle I want with the one that took me two years versus I’ve leveled off in years two, three and four. I can’t get what I want anymore even though I got there quicker I can’t get what I want anymore and so I would challenge you, or anybody is going through the journey that you’re considering to go through to think about those things when they’re engaging companies.
Mike Powers: Yeah, I think I would use one word as multiple things. One word to focus on that can you expect from the company would be education. We as franchising professionals I think if you combined our years of experience where we’re plus 50 years in the franchising business, but education our goal as franchise professionals is to help educate you looking at a business through the process, making sure that each step of the way that you’re getting your questions answered, you’re feeling good.
And the other part of that is look at the education, once you become, envision yourself being a franchisee with that company because education is it, there’s the desk there’s the phone go get them Tiger, you’re on your own? Or is it, you know, a really diverse comprehensive education and development program? We happen to have one of them very proud of, and I know you would say the same thing, because it’s not only imparts knowledge on you but because we have an interactive put-you-to-work OJT immersion. Everything is in there. It’s kind of the Prego of, it’s all in there, but it’s interactive, and it’s a quality education that leads such a solid foundation for a business owner in our industry. As other franchisors should, that that you can be prepared to succeed from day one. So education, I think is so critical to business owners, because if you’ve never been a business owner, and if you’re doing it on your own, we talked about the variables right? They can really throw you off track, but being prepared from the franchisors perspective, we prepare you through our education, learning, and development they’re really better than just comprised by education, but it’s an ongoing basis. So, I know that we invest a great deal in our leadership at the learning and development level, quality people, bring quality results and I think that’s so so important. So if I were to sum, it up, that’s just one word, but I know there’s other factors. That we can talk about as well.
Mike Magid: If I can, you know, kind of bring this full circle. You know, look at and read about the company and understand what their mission or purpose is and does that resonate with you? Understand what their values are. So ask them to present that stuff to you, see what kind of cultural norms they have that govern the culture and their company. Understand those things. Understand it at a very personal level, because when you buy it becomes very personal. It’s a real relationship. And, you’re in it sometimes, for 5 years, 10, years, or longer but you’re in it. And so understand at the core of the company who and what they stand for. What they value, what culture they breed, what they believe a franchisor/franchisee relationship should be like, and how each side should treat each other, right? What should be shared, you know, what risks do they share? Those kinds of things are important and, you know, for our company specifically, we did something that I’ll let our CEO, Matt Murphy talk about it. When he, when he joins us here in a minute, but we did something incredibly unusual.
I’ve never seen it in franchising. Four years ago, we stopped selling franchises, because of all the industry changes and regulations. I won’t steal his thunder. Let him talk about the stories and why but I would investigate that with him because how does a franchise company that is private equity owned and has a board governing that that company stop selling franchises for four years? Because it was the right thing to do. When you investigate that with Matt and you and your loyal listeners hear that story, you sit there and go now that’s an ethical company. That’s a transparent company, because you can’t hide the fact that you’re not selling franchises. People want to buy and we, you have to say to them, we’re not offering right now and so when you complete your journey with companies, I would want to know the struggles they had, what they’ve been through, why they’ve been through them, how they responded to them, how they’ve come out stronger and better because of it, what their franchisees feel about how they about those experiences because they had a live it they, they’re under the brand right? Those are the things that I’d be investigating if I was looking at companies.