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Why Franchisees Fail

Why Franchisees Fail (feat. Jim Vonderhaar of Griswold Home Care Houston Southwest)

Transcription:

As, you know, again, we’re talking to our listeners here that are kind of in this process, aside from the integrity, yeah, and we talked a little bit about making sure that the culture of an organization, and of a franchise lines up with your personal mission and your culture. What are some other things that you would encourage somebody to ask or to look for in a potential partnership as we talk about this?

Jim: Yeah, so a couple of things. You need to fully understand the support that they’re going to be able to provide you, so you know, ask, “What did it look like to get my business up and running and how are you going to help me do that?” So every business is different, but in this business, in most states at least, you’ve got to have a license. So what does it look like, how do you go about getting that license? And who’s going to help get the license, and what steps have to be taken, and what criteria do I have to meet? And what are the qualifications of me as an owner or me as a manager? What is the state going to require, is there a federal requirement? So ask as many questions as you can about the creation of your office. What kind of staff do I need to have to run my office? How quickly should I hire that staff, and what should the skill sets of that staff be? How much of an office do I have to have? Can I operate out of my home? What are the costs associated with setting up that office? What type of technology is involved? I mean, there’s just, gosh, just all kinds of questions to ask. And you know, one of the things that I got from Griswold was the very detailed plan of, “Here are the steps you need to take in order to get your business up and running, with a timeline.” And they assist in, you know, making sure I stayed on that timeline. I had somebody assigned to me full time to help me as I went through that process. Griswold has a very good training program, and you know, certainly you want to ask any franchise that you’re entertaining, what kind of training do they provide? And where is that training? Is it at my house, is it your house? Is it in corporate offices? You know, where does that training take place? What does it consist of? How long is it? Is there any type of certification that goes along with that training? What are the costs associated with getting your office set up? How much working capital do I have to have in order to sustain myself for the two, three, four months, however long it takes to get your office where it’s starting to produce revenue? Yeah, gosh, I can’t imagine all the questions I asked then.

But you know, one of the things I did, and I don’t know, you know, I may be getting ahead of myself, but I think this is true in any franchise, certainly true with the Griswold franchise. You have a couple of processes you go through, you have validation, where you have an opportunity to talk to current and former franchise owners. And then you have the discovery process, where you actually meet with the team, the corporate team. And this is another area where my franchise broker was extremely helpful in helping me come up with a list of questions for both of those processes. And you know, in the validation process, you want to make sure, you want to ask your franchisor, you want to make sure that you’re able to talk to current franchisees who have been in the system for, you know, five-plus years, a current franchisee who has only been in the business for a year or less. You want to, if possible, talk to a former franchisee to understand, you know, why they left. So you want to get as many different perspectives as you can on their operation, so that you go into it, you know, knowing full well what to expect.

Franchising is no different than starting any other business. This is a lot of work. Anybody who goes into it thinking that because it’s franchise it’s going to be easy, they’re kidding themselves first of all, and the franchisor is doing them a huge disservice if they allow them to think that. So it’s a lot of work, and it takes a lot of dedication, and so you need to be prepared, you need to ask a lot of questions, you need to do your homework. And that’s, again, I think where Griswold really did excel. They wouldn’t let me do it for a year, because I wasn’t ready to adhere to their timeline. They had a process, they were going to stick by that process. They didn’t care how much money I had or how much money I was going to give them upfront. They were going to make me stick to the process, and you know, kudos to them for doing that. And those are the types of questions that you want to make sure you ask before [inaudible 00:05:03].

And you know, for me, just one more thing, you know, in today’s world, and this is something that is just, maybe 20, 30 years ago this wasn’t as big a deal, but in today’s world, it’s commonplace. A lot, if not even most, of the franchisors out there, certainly in our industry, are owned by venture capital or some other sort of, you know, funding mechanism. And so for me, one of my key questions was, who is the venture capital, who’s the money behind the business? What are their goals? What other industries are they in? What is their timeline? You know, anybody that’s in venture capital, their goal is to make a profit some day on whatever their investments are. So what is their timeline? What’s their track record been with other businesses and other industries that they’ve been in? So do your homework on the financial backing of the company to make sure you understand what’s going on there too. And then for me, I happened to have come on board with Griswold at a point in time where they had just had a CEO change. So for me to be able to sit down and speak with that CEO and, you know, learn about where he’s coming from, why did he choose to come to Griswold. What’s his long-range plan, where does he want to be in five years? Where does he see the company in five years?

You know, when you go through the discovery process, you’re have an opportunity to meet the entire management team of the company and some of their support staff. Take advantage of that and ask those tough questions. These are the people who are going to make or break your business, they’re going to be there every step of the way to help you, so get to know them, get to learn who does what, who you can rely on, who you can call on for whatever it is that you need. You want to develop that personal relationship with them as you go through the process.

Amanda: Absolutely, Jim. And I just want to kind of revisit or maybe recap what you said, because there are so many questions. Right? You went down a whole laundry list of things that you should ask, or be aware of, or look for. But really, at the end of the day, you know, we talk a lot about this in home care specifically, that you’re going to somebody’s home and you’re going through this process with them. And you do this, you know, once a day, or couple times a day, or couple times a week, depending on how quickly your business is growing, but it’s the first time that that person is doing it, or potentially the second. Hopefully, home care is not something that folks have to purchase and sign up for a lot in their lifetime, but franchising is not that different. Right? And that you should, you know, to just kind of, again, recap what you said, is that franchisor going to take you on the journey? Are they prepared for that, are they going to make sure that you have all the checks, the balances, and the Ts are crossed and the Is are dotted along the way? Because this is new. You know, buying a franchise is not something that most people do in their lifetime at all, let alone multiple times, so I think that the trust that Griswold was able to instill in you in that process, to really make sure that you felt comfortable, that you were making the right choice and that they were going to have your back through the whole process, and to get you up and running, and then ongoing.

I want to revisit kind of that validation a little bit, because you talked about, you know, call somebody who’s been in the business for five years, and one year, and what does that look like? But I want to talk about that process for you specifically, and through those phone calls, what was some of the best advice that you received from an existing franchisee when your were making those calls?

Jim: Yeah. So probably the best advice I got was from the guy that I actually bought my office from, and I’m going to reiterate something I’ve already said, but he’s the one that told me this. This is not an easy business. If you’re looking for something that’s easy, then this is not the business for you. This is a very hard business to kind of get up and running. Once you do, it can be very successful, it can be very lucrative, and it will be one of the most rewarding things you ever do. But it’s not easy. So be prepared to work. And he went on to say, “But for those people who are willing to put in the time and effort that it takes to make it successful, then if you’re willing to do that, then you will be successful as well.” So just recognize that it’s not a cake walk. It takes a lot if work, it takes a lot of dedication, takes a lot of support from your franchisor. But if you’re willing to put in all those things, then you can be successful.

And you got different stories from different people, you know? It’s a shame, but I can’t remember everybody that I spoke with in the validation process. It’s been a few years ago. But you know, this is probably one of the other things that really attracted me to Griswold. I had several friends who have done franchising before, and to a man, to every single one of them, they had negative things to say about their relationship with their franchisor. Every single person I knew who had been in franchising, and none of them were in home care, they were other industries, but every single one of them, it was probably four of them, hated their franchisor. They felt like they were only in it for the money. Every two years, they were completely revamping their operation, just so they could get more money out of them. It was a very very negative relationship, and that was just the opposite as I was making my validation phone calls. And this is actually at a period of time where Griswold had gone through a couple of CEOs, and one of which, you know, a lot of franchisees didn’t have a really great relationship with that individual. But they brought in their new CEO, things had already turned around, and so in my validation process, you know, I talked to the folks, that’s one of the questions I asked. You know, “What’s your relationship like with the franchisor?” And a couple of them had some complaints, nothing major, but the ones who did have the complaints were very upfront with me. They blamed their issues on the former leadership, and in the short period of time that the new CEO had been there they’d already seen a change for the better. So that was having talked with my friends who had a very negative relationship with their franchisor, and then talking with Griswold franchisees who had some rough spots but overall were very happy with the franchisor, that weighed heavily on my decision to move forward with Griswold.

Again, goes back to that culture thing. I know I want to be doing that with people that I like being around and working with. There’s nothing more miserable than to hate your job or to hate your people. Hate’s a strong word, but you know, dislike the people that you are working with. That just makes life miserable. So that was a key factor for me, knowing that the existing franchisees had a good relationship, overall a good relationship with the franchisor, big big factor.

Amanda: And you’ve given us a lot of advice on just… I’m looking at my next question here that I have for you, and there’s been lots of nuggets of wisdom in here about, you know, culture, and those validation calls, and things to look for, and conversations to have. But is there any other advice other than what you’ve already given us, which is great information, that you would give somebody who is in that process, in the validation process? Whether it’s with Griswold Home Care or another franchise, but any advice you would give them on how to approach that validation process?

Jim: Yeah. You know, for me, it’s like every other aspect, planning is important. So before you start making those validation calls, have your list of questions ready. You know, most franchisors are going to give you three, four, five names of people to call, so have your list of questions ready, ask everybody the same questions so that you can kind of compare notes when you’re done. But the best advice is to have your list of questions, don’t just make the calls and not know what you’re going to say. Have your list of questions ready. And what I found was, and I actually went through validation, you know, the other franchise that I looked at as well, people are happy to answer your questions, even the numbers. I mean, obviously you’re going to make a significant investment in whatever franchise you choose to go into, you’re going to make a significant investment. So you want to know that you’re going to get a return on that investment, so ask the pointed questions about the dollars. You know, how long did it take you to break even? What does break even look like? How many clients do you think you have to have in order to break even? What are your revenue numbers? What kind of margin have you been able to achieve? Ask those questions. Most of them are willing to share that information with you. They may not give you exact numbers, but they’ll, you know, “It’s a 15% margin, it’s a 10% margin.” They’ll share those kind of things with you. So yeah, again, significant investment, so ask the same kind of questions you would make with any other investment that you were going to put your money into.

Amanda: Great. Sounds like preparation and planning is a big part of it, and not being afraid to ask those tough questions. Because you’re right, at the end of the day, it’s not a small investment, and you want to make sure that you are comfortable with it and you’ve got all the answers to the questions that you need to make that right choice for you, for your family, and your future. So we’ll transition a little bit through the process, because I know you had talked a little bit about Discovery Day processing, coming in and meeting leadership and the folks that are going to support you. Because you’re absolutely right, you know, as you learn the business, especially if it’s an industry that you’re not familiar with, you really are counting on those folks who have done this before to make sure that you’ve got everything in a row, and that you’ve got your licensure, and your building set up, and the employees, and learning the industry itself, which is a whole other podcast episode I feel like.

But let’s talk a little bit about the opening. So you’ve made the decision at this point, we’re a year into the things and you’ve called back, or we called you, or however that worked out, and you’re saying, “All right. I’m going to do this. We’re opening our doors.” So ongoing support as far as getting up to speed and ramping up, but then also you’re four and half years into this Griswold adventure, so what’s some ongoing support that is needed for somebody to be successful and what’s some advice that you would give to somebody who’s just getting started?

Jim: Yeah. So my situation was a little unique, in the sense that I bought an existing office. So I didn’t have the traditional opening that a new franchisee would have, but I did go through the same process, and I believe they call it the onboarding. So I went a lot of the same steps, and I had the person that was assigned to me, and that’s again another thing that Griswold does, is every new franchisee has a person assigned to them to help them go through that start up process. And so the person that was assigned to me was a 20-plus-year veteran of Griswold. In fact, the person had actually worked in an office before, so she knew every aspect of the Griswold operation, and so extremely helpful for me as she walked me through the process, even though I didn’t have to “open an office,” helping me to understand what’s being done, and why it’s being done, and why we do it that way was really really key. And I attribute my kind of quick success to the fact that I had somebody that really really knew the business and walked me through it. She had been there, done it, and it certainly made life a lot easier.

So you know, having that support, that was kind of the start up if you will. But one of the things that I would also encourage, and again, and I have friends who are in franchising. So the guy that I referred to that kind of told me about a franchise broker, he chose a different industry to go into. And he chose a company that was relatively new, and he and I get together and we compare notes to the type of support that I get from Griswold and the type of support that he doesn’t. And just from a marketing standpoint, and managing our websites, and the SEO part of that, he’s having to do all of that stuff himself, and I get all of that support from Griswold corporate. So the ongoing support, you know, make sure you understand what it is they’re going to be providing, because that can make a huge difference in your operation and your success of that operation. You know, we all have our strengths and weaknesses, and I recognize the areas that I’m not strong in and nor do I have a desire to be strong in those areas, but I also know that I can rely on corporate, the support team, to do the things that I can’t do. So understand what it is that they provide, what level of support, and kind of where are the lines drawn, you know, who’s doing what?

As you go through the process you’ll learn this, but a lot of the things that a franchisor does, can, or can’t do are dictated by the rules and laws, for lack of a better word. There are certain things that a franchisor can or can’t do. And so keep that in mind, there may be things you’d like for them to do but they’re prohibited from doing because of the FTD or otherwise, or maybe some reason why. So make sure you understand that as well. Where is that line drawn as to who can do what? But on an ongoing basis, yeah, the ongoing support is key. There’s so much that Griswold does for me that helps my office to run better and to help me grow my office in ways that I wouldn’t otherwise be able to do, or I’d have to spend a lot of money elsewhere to do it.

Amanda: Yeah, I think you talked about the statistic in the beginning of, again, I don’t know what the numbers are, but it sounds pretty close to spot on. You know, 75% of small businesses independently don’t survive their first five years, whereas 75% of franchises do. And would you attribute that to having that support network around you or…?

Jim: Yeah, absolutely. But the key to that, and you being the franchisor probably know this better than I, but I would be willing to bet, don’t know this, but I would be willing to bet that for those franchisees who take advantage of and listen to the support that they get from their franchisor, they are going to be more successful than those that go into it thinking they already have the answers and they don’t need the help of the franchisor. Franchisor does what it does for a reason. They’ve kind of been there, done that. There’s no reason to recreate the wheel. They’ve been there, done that, and they’ve proven that they’re successful. Well, first, why would you think that you can do it better? Why would you not just listen to their proven model? But secondly, you’re paying a lot of money in terms of the initial franchise fee as well as in royalties, you’re paying a lot of money for that expertise, why wouldn’t you use it? So yeah, the ongoing support is key. It’s one of the key reasons why I feel like my office has been successful, and I think it’s well worth the money that I pay.

Amanda: All right. So I have one final question for you, and then we’ll open it up if you have any other things you’d like to share. But if you could hop in your time machine and go back four and a half years, when you were making that decision to open your Griswold Home Care office or take over the existing office, what advice would you give yourself?

Jim: What would I give what? I’m sorry, I didn’t hear that.

Amanda: What advice would you give yourself if you could go back in time knowing now kind of that whole thing?

Jim: Yeah, so for me, probably the biggest…I don’t want to say surprise, but I guess unexpected thing, was the level of competition. I knew there was a lot of competition in this business, you know, just the demographics alone should point to that. I mean, there’s 10,000 people turning 65 every day in this country, so the demand for home care services is only going to continue to grow for the next 10 or 15 years at least. So I knew there’d be competition, I had no idea there would be as much competition as there is. In Texas anyway, you know, we are a state that’s licensed and we are subject to audits. And when I had my first audit, I was chatting with the auditor and I shared with her, you know, I’d always heard that there are more than 500 companies in the Houston area that do what I do. And that auditor just kind of chuckled, she said, “It’s more than 1000, and that’s just the ones who have a license.” She said, “We have no idea how many are out there that aren’t licensed.” So I mean, the competition is extremely fierce. I’m not saying that to scare anybody away, again, I’ve been successful and I guarantee you there’s not another city that had more competition than Houston does. So if we can be successful here, then you can be successful wherever you are. Just know that though, and be prepared for that, and try to set yourself up to deal with that from the get-go. That was my biggest surprise and that would be my biggest piece of advice, is just go into it with your eyes open and know that going in.

Amanda: Absolutely. And I’m going to circle back to what you shared about…you know, and it’s funny because I hear kind of some themes through our conversation, and you started in the beginning, you wanted to have more control over your investment and you wanted a business that you had more control over. And then to kind of tie things up with not being so bullish or stubborn and the fact that you have it all figured out, and to lean on your franchisor for that, and especially when it comes to the competition. Right? There’s lots of things that a good franchisor will do to help and support, whether it’s competition, or any other challenges that come up in different industries, or other things of that nature. So I think a good partnership and working together, you can be successful, like you said, in Houston and anywhere else. Anything we didn’t talk about that you want to share with our audience?

Jim: Yeah, I don’t know. We didn’t talk about it, but I would say that…I did allude to this early on, initially my wife was not going to be part of this. For a variety of reasons, she did, and I can’t imagine having had to go through this without my wife involved as she was. I’m not suggesting that your wife needs to be involved or your spouse, but what I am suggesting is that your family members, spouse and otherwise, need to be supportive of this effort, because it can be, you know, and it’s very demanding to start any business. It’s not unique to home care. To start any business can be very demanding, and so you want to have the support of your family as you go through that. So yeah, that would be kind of a key piece of advice, to make sure that your family’s on board with whatever your decision is.

Amanda: Absolutely. We talk about support from your franchisor, but you’ve got to have the support of people that are doing this right alongside with you. And especially in those early years, there’s a lot of uncertainty, and as you’re trying to ramp up a business, whether you’re taking over an existing office somewhere or starting things from the ground up, everybody’s got to be on the same page, and have the same goals, and same understanding. So family support or community support is just as critical. Thanks for sharing that. Well, anything else? No. All right. Getting the nod from Charlie here that we’re good, so Jim, thanks so much for being here. So much great information, learn something new every time I talk to you, and just appreciate you taking the time today to share all this great stuff with us. And enjoy the rest of your day.

Jim: No problem. Yeah, yep, thank you. Glad I could do it, and as we start entertaining potential franchisees I’m happy to chat with them.

Amanda: Awesome. Thanks so much for being here, and I’ll talk to you soon. Bye.

Jim: All right. Thanks. Bye.