There are many reasons to become a franchisee. Nat and Pete think a major one is to achieve career security and income security. They have learned that a fantastic option is franchise ownership.
As they set their goals for the upcoming year, they are offering you a way to set a major goal. Listen to this episode of the podcast to hear a recent webinar that can really help you control your future.
Pete: Good morning Nat, welcome to the podcast.
Nat: Thanks for having me, Pete.
Pete: Oh, it's always great. This is my favorite part of the day right here, so I can't believe we're getting towards the end of the year from that standpoint. And I guess Thanksgiving has been canceled, right?
Nat: So it feels like we have a little bit of breathing space coming up, right? Because you have a few days for Thanksgiving.
Pete: Yes. So as we end the year, right? One of the things that I always do, and I know you do too, is we set our goals for the next year, 2021. Have you started that process yet?
Nat: Yes. I've been thinking about that, I was getting some emails about some goal setting, and actually, I pulled the trigger and bought a course from the one thing. They have an online course for goal setting, so I'm going to plan on doing that next week over the holiday.
Pete: Yes, that's great. Yes, I do that every year, too, both personally as well as for my business, right? I spend the time, got the discipline from a business coach I had for a long time. So goal setting is big, and as we talk about 2021, a lot of people were in these crazy times, right? And we just talked about that on our webinar.
And the webinar that we had was really designed for people to look at as we go forward to 2021. How to create career and income security, right? And so maybe what we do for today's podcast is we share that webinar, share that content. And as people think about their goals for 2021, maybe one of them is creating current income security. And in finding a way, in one of the paths to do that as a franchise, and we talked about how that can be done, yes. What do you think?
Nat: I like that. I think a franchise also can kind of tie into some people even do like a 10-year plan or like a decade plan. So if people are thinking like a 2030 goal setting or planning, this could kind of help them out with that too.
Pete: Yes. I think decade planning, I need to do a better job with that, right?
Nat: It goes fast.
Pete: So it just keeps flying by, right? But certainly for sure. So why don't we share the webinar, some great stuff in there? And we'll have a great week.
Nat: All right, rock and roll, Pete.
Pete: All right.
Nat: All right, well, thank you for joining us today. Anybody that knows me and Pete knows that we're very timely. We caught Lombardi time; we like to start on time or early. So I know it's a busy week with Thanksgiving coming up today or coming up next week. So we're going to kick this off, and it's going to be like drinking out of a fire hose.
If you have any questions, you can type them into the QnA anytime, and we'll be sure to answer them, mostly at the end. And be sure to stay to the end of the webinar for some awesome resources. Pete and I both have franchise background; I got my start in franchising when I was in my 20s. I was looking for a caregiver for my wife's grandmother, and I discovered senior care. And as I was researching that, I realized, hey, it's actually a franchise, and so I decided to learn a little bit more about it. Fortunately, I didn't overthink it; I was young, didn't have any kids.
So I ended up starting that franchise just a few months later. And then from there, that was kind of my launching pad to starting several other companies over the next few years. And then I finally sold my senior care business in 2009.
And that's right about when Pete and I met; we had a mutual friend that ironically I had met through my senior care franchise and Pete had met through his junk removal franchise. And he connected us, and then Pete had his, was a corporate executive for 20 plus years. Had four kids, moved practically every other year all over the country, and was looking for more control over his life.
And so when we met, we realized, hey, we have franchising in common and two completely different approaches, and so that's kind of what got us thinking about the hire yourself concept. And helping people as they're going through career transition and wanting to learn about their options.
So that's why we have put together the hire yourself platform. So with that, if you guys are ready to drink out of a fire hose and learn a lot about franchising, I'll turn it over to you, Pete.
Pete: Awesome, all right. Sean, could you take the poll down, please. So again, my name is Pete Gilfillian, and I'm really excited to be here today. And as is part of our process, we've got a big promise for you.
And this is what we're going to do today. We're going to give you some compelling reasons to explore franchises, we're going to teach you about franchising, we're to answer all your common questions about franchising. We're going to encourage you to create income and career security, and we're going to give you some super awesome resources at the end.
So what are we going to cover in our time together today? So we're going to talk a little bit about, hey, what if you were a 50-plus corporate executive? Should you be worried? We're going to talk about that. We're going to talk about why more corporate executives are taking the path of franchise ownership?
We're going to talk about what is franchising? What's trending with franchise businesses? What are the capital requirements if you want to become a franchisee? What are good sources of capital? Can I replace my corporate-level income with a franchise? Is franchise ownership right for me? How do you find the right franchise? And what are the advantages and disadvantages of franchise ownership?
So we've got a lot of stuff to cover today; I'm super pumped up. So let's talk about this, are you a 50 plus corporate-level executive? Are you a corporate executive that, or do you want to learn why more corporate executives are taking the path of franchise ownership? So let's talk about the future of the corporate executive.
So I believe going forward, we're going to see more layoffs and downsizing, especially as we talk about the corporate levels side. And you're going to see more corporate executives that are going to be going into, they're going to be underemployed, they're going to do consulting, they're going to do contract work, which in many cases is the new reality.
Because it's basically employers giving up the obligation of having employees, and they're using as-needed contract work. There are a lot of employees that are changing jobs now. When I started with ford, you were expected to work for 30 years. Now people are changing jobs every four years, and that's significant when we're in our 50s. And there is more age and unemployment discrimination out there today.
And if you don't know what unemployment discrimination is, if you've been out of work for more than six months, a lot of times, companies will dismiss you. They would rather go with somebody with less experience that is employed than somebody that's got a ton of experience that has been out of work for more than six months.
And here's a scary stat, right? If you're 50 plus and you're a corporate executive, you have a 50 percent chance of getting thrown into retirement before you're ready. Now here's even a scarier point to that, is if you're one of the 50% of 50 plus corporate executives that get thrown into retirement before you're ready, only 10 percent get the same or higher income with their new job.
So I always like to use the quote from Jack Welch control your own destiny or someone else will. And I think the next few years are going to be tough for senior-level executives. The job listing for executive positions is down 30 percent versus 2019. Sixty percent of corporations say that their headcount reductions, they're going to be making them through 2021.
So fewer staff, fewer executives. And as I mentioned before, there is still unemployment and age discrimination out there. And the higher-paying jobs are declining, where the lower-paying hourly jobs are exploding. Think of the amazons that are hiring tens or hundreds of thousands of people. And remote operations is really leading to a need for fewer managers.
And so you're seeing consolidations of positions in the leadership ranks or management roles, and there are a lot of times aligning them to the lower pay rate. And 28% of medium to large businesses have announced new pay cuts for executives. So many people are out there exploring their many different options, and you have many options, right? You can do more of the same.
You can go get another corporate executive position; you can kind of start something from scratch, whether it's your own consulting business or you come up with a big idea. You can start with an existing revenue stream, buy an existing business or franchise business. And you can do what I call entrepreneur light, and that's investing in a franchise business.
Maybe an easier path. I do know that now is the time to create income security. So if you are in career transition, I encourage you to explore your many different options of which one of them is franchise ownership.
The second thing is, if you are currently employed, keep your corporate job and create a secondary income through semi-absentee franchise ownership. Or, simply put, create a bridge to escape the corporate world and a safety net for the future. I believe jobs are no longer income security. In fact, as a business owner, you will not be laid off, you will not be given a separation package, and you will not be furloughed.
You will have income security when you're your own boss, or you have your own business. And you know what, franchising as we talk about it is a booming. So when I get up and I talk about franchising, everybody thinks of subway and Dunkin donuts, and McDonald's. But you know what? According to the IFA, there were over 3,000 franchise companies out there in 75 different industries, and it touches almost every aspect of your life.
And I use the example in my book, hire yourself, where somebody gets up in the morning on a Saturday, and they go do a workout. Yes, that's a franchise. And when they get done with their workout, they stop off and get a cup of coffee; yes, that's a franchise. And on their way home, they pick up their dry cleaning; yes, that's a franchise. And they get the oil changed; yes, that's a franchise.
They pick their kids up, take them to their martial arts class; yes, that's a franchise. When they get done, they go get a sandwich afterward; yes, that's a franchise. When they get home, there's a van in the driveway, they're washing the windows of their house; yes, that's a franchising. Franchising touches every aspect of your life, and it's a huge part of the United States economy.
So there are nearly 800,000 franchise establishments in the United States today, they're employing nearly nine million people, and the GDP contribution for franchising is nearly a half a trillion dollars. So why are more corporate executives taking the path of franchise ownership? And I always ask them, why are we talking?
Why would you consider investing in franchise? And what people tell me is Pete, I want to take control of my destiny, or I want freedom. I want to create an income; I want to build an asset that I can sell or someday transition to my kids, can be a legacy. I want to be my own boss; I want to make the decisions.
I want to make a difference; I want to make an impact. I want to have that purpose; I want to be engaged. One guy I was working with, he says Pete, I'm in my 60s, but I still got gas in the tank. I need to be engaged, I need to be doing something, and I want to stay young. Many people say, Pete, I just want to create current income security. I don't want anybody to be able to determine that for me.
I don't want somebody to walk in and say I've been thrown in the career transition; I've been downsized. People want to be rewarded for their hard work; they say, you know Pete, I work hard, and I don't want the big corporation to get the reward for that. I want to get rewarded for my hard work. I want to build lead, and I'll even say mentor a team. I want to be happy, I want to be satisfied, I want to be proud. I want to create a family business where I include my spouse or my significant other my kids, and I want to leverage my personal capital. So I've got a capital available; I want to put it to work in something I'm building.
And I want to beat ageism; I don't want somebody to age me out of being able to have an income. So what is franchising? And what's trending in franchise businesses? So first, a franchise here's the definition. But simply put, you will be a franchisee; you are buying the rights as a franchisee to use the systems of processing procedures and support from a franchisor.
You will pay a franchise fee, call it 40, 50, 60, $70,000, for the rights to use that business model for a period of time. Again the systems, the process, procedures, the brand you will pay to use that. And you will, on the terms of the agreement is you also get ongoing support and training. And they will basically charge you what is called a royalty. Think of a royalty as a percentage of your revenue.
So you're buying the rights to use this business model for a period of time, they're providing the support, you're paying a royalty for that, it's a great way to get started. Now we're seeing a lot of trends in franchising, and when we talk about franchising, there are two basic business models. There are service-based franchises, so think of businesses that go to people's homes or businesses.
So we call those b2c or b2b businesses. And then there are facility-based franchises, so think of that strip mall down the street. Somebody takes 2,000 square feet; they convert it into a place where I can get a haircut, I can get a sub sandwich, get a massage, whatever it may be, right? So service-based franchises, we're seeing a lot trending, especially in the last seven months, where home improvement.
So people are sitting in their homes, they decide hey, listen up, I'm going to be stuck in my house, I want to get stuff done. I want new carpet; I want the house painted. I want to get this junk out of here, right? I'm finally getting this stuff out. There's also seeing a lot of trend in regards to professional services. The things I think a little bit about are like the commercial cleaning, restoration.
So, for example, restoration companies now they're helping sterilize facilities like Walgreens or that Costco, they're having companies come in and sterilize those in the off-hours. Those are the kind of things we're kind of seeing trending. And we're also seeing personal services like in-home care, right? Maybe my mom doesn't want to go live in her sister living place; she just wants to stay in her house, right? Need to have people come in.
And then we're also seeing a good trend in regards to facility-based franchises around health and wellness. Somebody once told me that when we talk about during tough times, and certainly the last seven months have been tough. Is that people? They can't necessarily control COVID, they can't control if they're employed, but they can control how they feel about themselves.
Whether it's fitness and spa's and weight loss and stuff like that, so they really kind of focus on things that they can control and that also ties to beauty, right? How I feel, and my hair, my nails, facials, extensions, all that kind of stuff, really are trending. Well, and then children, we're always going to invest money in our kids good times or bad times, and you're certainly seeing that with like things like tutoring.
Because I think a lot of kids are getting left behind, and they're needing a little extra help. But certainly, I've been leveraging tutoring for my kids from some point. And we're seeing a growing movement in franchising. So franchise ownership is where people want to work on the business versus work in the business.
And they really just want to set the overall direction of the business, make the key decisions while overseeing a manager and managing the business. So when we talk about investing in a franchise, there are three levels of engagement. So one side of it is some people want to invest in a franchise, and they want to be the artisan. They want to work in the business; they want to be the guy or girl.
So if it was a lawn fertilizing business, they want to be the ones fertilizing lawns. And they get a little truck and fertilize the next lawn, or if it's a facility-based concept, they want to be one behind the counter seven days a week making sub sandwiches. And if a girl is great, but they're really just about kind of creating a job for themselves.
The most of the people that I work with fall within the executive franchisee model engagement, and that's really where they want to work on the business, and they want to scale it over time. So when we talk about the executive model, you can be involved in the business full-time. Although you're not spraying lawns, you're not making sub sandwiches, you're involved in the business 40 or 50 hours a week, so full time but not as the artisan.
The growing trend is the other one, where we call it the executive model semi-absentee. And that's where somebody maybe have a corporate job, they have another business, or they want to scale something large. And they do the executive model semi-absentee. So they get the business going, they put a manager in place, they watch over that manager 15 or 20 hours a week.
In both cases, whether it's full-time or semi-absentee, they're looking to do multi-unit to build up multiple territories or locations to build a larger business. So as we talk about this idea of the executive model semi-absentee where we're seeing a lot of trending, that's really what this idea is that you can keep your corporate position while starting a franchise on the side.
And so you can kind of leverage it to create this side business. You can keep your corporate position while starting the franchise, and after the business is established, you get it going; you can have this manager operate it at 15 or 20 hours a week. You're overseeing them, but the idea is you do not have to be there every day, that's that point. Now some people more time, some people less.
Now, what do you need to know about kind of semi-absentee ownership? Well, first, it takes a lot of hard work and effort to get that business off the ground. Number two is finding and leading an operation manager will be critical to the success of your business. Meaning you got to find the right person, then you've got to lead them because they're going to be there when you're not there.
And you always have to keep in mind you're watching over them 15 or 20 hours a week. Now, if you're really good, it might be less than that. If you're not so good with leadership, it may be more time in time management, all that kind of good stuff. But the idea is you need to be minding your business. Your leadership and time management skills will have a major impact on the performance of the business.
So if we're thinking about a franchise, what are the capital requirements for franchises? And what are good sources for capital? So when we talk about looking for franchises, all franchise companies have a profile of franchises they're looking for. And in these profiles, they'll list two criteria. They'll say, hey, to be eligible for our franchise, one you have to have so much liquid capital. And liquid capital is loosely defined; it could be cash, it could be stocks, it could be bonds.
It could be equity that you have in your home; it could be retirement dollars instead of investing stocks and bonds investing in your business. Simply put, money that's not borrowed. So you need a minimum of 75 to 100,000 liquid capital at a minimum to get into a franchise business.
The second thing they look for is your overall net worth. Because if you have a certain level of net worth, a landlord or a leasing company, equipment leasing company will know that you have means. So we know that net worth is defined as assets minus liability, so you're going to have to have a minimum net worth of at least a hundred thousand dollars. Minimum of a hundred thousand dollars, something greater than that.
Now when we look to invest in franchises, there is a significant range in investment levels. But as we talk about kind of service service-based franchises and facility-based franchises, for a service-based franchise again a business that goes to people's homes or business that provides a product or service, you'll find that you need a minimum or the minimum investment for a service-based business will be a hundred thousand dollars.
So it could be a hundred and ten thousand, it could be 180,000 really depends on the size of the territories, the type of equipment, working capital requirements. Now when we look at the total investment to get into a facility-based concept, those numbers jump up because you're building out that facility.
And so it depends on the size and the type of build-out and certainly the working capital. So you can expect a facility-based concept to be something greater than a 200,000 investment. So it could be 250,000, it could be 500,000, it's something greater than two hundred thousand from some point.
The difference between the two, the total investment of facility-based concept of like two hundred thousand, liquid capital requirement of a hundred, well you could go do borrowing, and there are many different funding sources out there today. So as we talk about funding of a franchise business, bottom line is one of the big things that people use is SBA loans, small business administration loans.
And this is pretty popular because you can get anywhere from 50 to 50,000 up to 5 million dollars. And an SBA loan is a variable rate, so it's prime plus something from that standpoint. And bottom line is that no matter what you do, you're going to have to put a down payment of 20 to 30 percent down.
There are origination fees, closing fees, guarantee fees, so there's all kinds of fees. But SBA loans are a great way to get some capital for a business. There are also a subset of SBA loans, so they call them SBA stress loans. They're usually a derivative of the SBA; it's a smaller amount, a max of 150,000. Less paperwork, don't have all the details, but it's a nice subset to the SBA loan.
There are also traditional loans, think of commercial or conventional loans. Again they're a variable rate off of prime a lot of times from that standpoint. In all cases, you have to have some experience in in the industry to get a traditional or a commercial loan. Some franchisors will offer in-house financing, or they'll have third-party financing arranged for the franchisees to make it easier for them.
A lot of people are leveraging home equity; why? The rates are really low right now. So you could take that frozen capital that you have in your house, and you can leverage it to open up a business. Some people use friends and family money, sometimes people use outside investors, a lot of people are using their retirement dollars through what is called a Rob's program.
A tax compliant way that instead of your retirement dollars investing in stocks and bonds, it actually invests in your business. So your retirement account owns your business, and you are actually an employee of your retirement account, crazy stuff. And some people have brokerage or stock portfolios where they take a line against those. So many different places in which we can leverage our capital to get a business going.
One of the questions that people always ask me is this, can I replace my corporate-level income with a franchise? And my answer to them is, the financial performance of your business is 100 percent dependent on you. It is you; you own it. It reminds me when I used to wrestle in high school, right? And I was a terrible wrestler.
But I do remember you get out of the mat, and it was just me against my opponent. It was 100% the performance or my performance in that match was on me, and that's when you own a business; it is 100% on you. I have a fun thing, and I'll tell you, is that as you look to replace a corporate income with a franchise, again, it's up to you. But it takes time and scale to replace a corporate level income.
And only you can determine how much time and scale it's going to take you to achieve your financial goals with a franchise. So this chart that I'm going to give you, this is not for investment decisions. This is all fictitious numbers. But I'm just going to give you some fun examples.
So let's just say on the left-hand side, you're somebody that you believe a corporate job is security, and you're in current transition, you decide to take another corporate job. And the first year you get a salary of 200,000, you're lucky enough to get a little raise each year, and you build it up over five years, your salary is $240,000.
But in year five, okay, the company decides that you're going into retirement, they're done, they're reorganizing. You are now in career transition. You'll find that you've just rented your income; you basically don't have an asset. So you rented that $240,000, so you have nothing to show for that income.
Now let's say that the same person decided that hey, I'm going to go into franchising, I'm going to invest in myself, and I'm going to start building a business. And I'm going to open up three locations or develop three territories for a franchise.
And so maybe the first year as you launch your business, you just keep reinvesting money back into the business, you don't take any salary. And year two, let's say okay, unit one or first location, you pay yourself a salary fifty thousand dollars, you get unit two open. And then year three okay, take a little bit more salary, Seventy Five thousand the first unit.
You start paying yourself the second unit fifty thousand dollars, unit three you just get open. And then your four, bottom line is you increase your salary a little bit more, a hundred thousand. Unit two a little bit to seventy-five thousand, and unit three okay, start taking a salary of fifty thousand dollars.
Well, now you are at 225,000, you're right on where you'd be at the salary. Now it gets interesting. Let's say you're five, you essentially, unit one you pay yourself a salary of 125,000, unit two 100,000, unit three 75,000, you've now just created a total income of three hundred thousand dollars, plus you've created an asset.
And if the business isn't just you and you've built this asset, this business you can sell it for multiple. So you have a salary that nobody can take away from you, and you've built this asset. Now, remember we talked about the executive model semi-absentee? Let's say that somebody decided to do that.
So I'm going to have that corporate job, I'm going to, at your five, have a salary of $240,000. I started the franchise on the side, the executive model semi-[Inaudible 00:24:33.01] I still had to mind my business. But I created a secondary income, a side income of $300,000, and I built an asset.
That's the power of the executive model semi-absentee. Now is franchise ownership right for me? Well, first, you got to determine what characteristics are important to you, right? What level of engagement or involvement you want in the business? Do you want to be the artisan? Do you want the executive model full-time semi-absentee?
What's your desired income and cash flow with the business? Are you comfortable managing and leading people? Do you want to grow and scale? Do you want one location, one territory? Do you want to grow into five territories? Geographically, where do you want the business? How important is status to you?
Do you care what other people think about your business, as long as it's a good, honest business is making money? Are you comfortable with business development sales? Are you comfortable talking to people from a standpoint? What kind of customers do you like? Are you comfortable going to people's homes if they invite you to tell them about the business?
Or are you comfortable talking to businesses, right? Going in and talking to a business owner that has invited you in to tell them about your product or services. Or do you like the idea that somebody walks through the door of your facility and asks you I want get a haircut or get a sub sandwich, whatever it may be?
So what's your comfort level in terms of business development? Family. Are you involving your spouse, your significant other, your kids in the business? What kind of schedule do you want? Do you want a flexible schedule? Do you want a lifestyle business, a Monday through Friday business, or are you comfortable with the 24/7 365 business?
What's your tolerance to risk? How long do you want to own the business? You also need to know your skills and your strength, right? So are you good at sales and business development? Are you comfortable managing leading people? Do you have the ability to follow a process?
Do you have experience satisfying customers or a passion to satisfy customers? And can you process change and evolve over time. Business is always evolving. Can you go with that change or that involving? So when I was at ford in their franchising the market rep department, we used to award the ford franchise to two candidates.
And we would look at what we called the four C's when I wrote the book, higher yourself I added a fifth C. But we would look at a candidate to see if they had the capacity to, they have a business background or experience that would make them a good franchisee. We looked at their character.
Did they live a life of good character from a standpoint? Did they have the capital necessary to be a successful franchisee? Did they have a history or a passion to be satisfying customers? And then I added the fifth C, which is cooperation, can they work with others. Because a franchise, investing in a franchise is a partner. You're partnering with the franchisor; you must work with your business partner, you must cooperate on both sides from the standpoint.
Also, when we look to invest in a franchise, you want to ask yourself do I have the traits of a successful business owner. Am I disciplined? Am I confident? Am I open-minded? Am I a self-starter? Am I competitive? Am I creative? Am I determined? Am I passionate? Do I have strong people skills? Do I have a strong work ethic?
So how do you find the right franchise, well finding a franchise that fits you first, you got to know the characteristics of what you're looking for in a business? You got to know what you want to accomplish with the business. You want to leverage an investigation process; we call it the franchise investigation procedure process.
But you want to use a process to do your due diligence of the franchise. You always want to keep an open mind as you're exploring or learning about franchise opportunities. And I tell people to have fun, and most the time, we don't get a chance to go explore a new path. And as you explore franchising, right? You haven't committed to invest in franchise.
All you've done is committed to have some conversations with some great people, learn about some cool businesses. So always have fun as you're exploring or learning about franchises. And remember, don't turn your hobby into a business from a standpoint. The definition of a hobby is something you do outside of work.
And if you all of a sudden make your hobby work, it's no longer a hobby. And there's a great example in the book revisited, where they share an example somebody that loved baking, and she opened up a bakery, and it wasn't a hobby anymore, right? It became a business and ruined her hobby, I suspect.
Now finding a franchise that fits you, there's good, better, and the best way to find a franchise. So a good way to find a franchise is maybe you go some of these sites, and you can click boxes for franchises you want to get more information on, and you're going to get lots of information and about many companies, if you choose.
The problem is that your information may be sold to the franchise companies that may be sold to franchise consultants. And so, by the end of it, you may want to shut off your phone to get rid of your email; you might get an inundated. A better way is maybe go find a franchise that you're interested in or business that you're interested in and go to their website and inquire about franchising from that standpoint.
To see if there are opportunities. That's a very direct way, but also, you don't really have anybody that's helping you; you're going directly into the sales funnel. Nobody's helping you through the process. The best way is leveraging a franchise consultant, generally speaking, it's a free service, and they can connect you to potential franchise matches or franchise lines with your interest.
And then ultimately, you have to do your due diligence, but the idea is somebody's there by your side as you're going through the process. So example, how Nat and I assist candidates on their journey to explore franchises, right? So again, it's your due diligence, it's your process.
But what we do is when somebody says, hey, listen, I'm interested in exploring franchises. We have you fill out a simple question; it takes about 10 minutes, that's pretty basic. Then we do a consultation call, that's generally about 75 minutes.
And we just get to know you, ask questions, we listen, and you'll find that we'll get a very good understanding of what's important, what you'd want if you were to invest in a business. We'll actually create a written summary of your interest, we'll call that a model.
And then we'll leverage a company called fran-choice, they've been around for 20 years, they've been screening franchise companies. So we'll leverage their screening, we'll come back with some franchises that align with your interest. We'll connect you to those companies, and then you start your due diligence, your investigations of the franchises.
Now when you're going through your investigations, were they by your side? We're educating you, we're giving you resources, and we're also helping you through kind of the tough times of the fear when we start getting close to making a decision, lots of fear comes, and we kind of help you work through that.
Now, as you're investigating franchises, some things to consider. You want to kind of understand the experience and leadership team of the franchise companies that you're looking at. You understand the support and training that you'll get when you launch your business. You want to find out if franchisees are satisfied, are they happy? And you'll get a chance to do that through what is called validation.
What's the image and reputation of the franchise system? What's the size? Are there five franchises or 500 franchisees from that standpoint? Is it a upcoming concept or an established concept, right? So had they been around for six months, or have they been around since 1982. What's the culture and the feel of the organization? Do they feel like you're joining a family, or you're joining a fortune thousand company?
What's the marketing model that you'll utilize to find customers? What's the ongoing support? Do they have an ops person that checks in with you every week, or what does that look like? What's the level of assistance if it's a facility-based concept? How do they help you find the site and build out the location?
And then what's the financial strength of the franchise company? So when we talk about this process of investigating franchises, your due diligence, we call it the franchise investigation procedure. So certainly, on the left-hand side, can help you figure out the characteristics and what you want to accomplish the business. We can help you kind of determine what level of engagement, that kind of stuff.
But then ultimately, you're connected to franchise companies, and you start your due diligence, the franchise investigation procedures, and this is on you. Nobody else can do this for you. There are four core steps; most people do this over about a six-week period time. Some people four weeks, some people 12 weeks, but it's really four core steps. The first step is the introduction call, so that's the first major call.
You'll get a chance to get a great explanation of the business model or overview of the business model. You will get to ask questions; you guys will start developing a relationship because these are potential business partners, it's a mutual approval process. The second step is what we call a franchise disclosure document; the acronym is FDD.
And bottom line is the FDD is designed to ensure that it's an informed investor, it's a standard format of 23 different items. They're over 200 pages long. It has everything you need to know is in this document. You'll get a copy of that, and they'll review it, and you can certainly ask questions.
Third step, in my opinion, is the most important part; it's your chance to talk to actual franchise owners. This is really once you build rapport; you can ask them if they're happy, they're making money. You can ask them any question, as long as you've done a good job of building their rapport and being polite and all that kind of stuff. You can really find out some good things through validation.
And again, it's the most important part of the whole process. The last step is what we call a discovery day, meet the team day. This is at the kind of towards the end; this is more about the relationship side of the business, right? You get a chance to meet the leadership team, meet support staff, and many KCD operations.
Now all franchise companies have other little steps in between these four core steps; they may have you take a personality test. They may have a marketing overview call. So many different things, an interview with the president of the franchise system. So many little steps, but these are the four core steps that you'll go through as you do your due diligence of the franchise opportunity. So when we talk about franchises, there are advantages and disadvantages of franchising.
And when we talk about the disadvantages or the cons, well, first of all, with the franchise, you have startup costs, you have a franchise fee, so you're going to be paying to use that business model for a period of time. So again, you're going to have startup costs. And then for that ongoing support, you are going to pay royalties.
You're going to give up a percentage of your revenue each month. Three percent, four percent, five percent, six percent, seven percent something like that you're going to give up for that ongoing support. And franchise companies have restrictions, so they want to protect their brand.
So you can't go and change their branding that kind of stuff. Now you must follow this system, but you can make it better, right? So at a minimum, you follow the system, so you'll be successful, but you can make it better. And then a franchise is a long-term commitment; it is an agreement, it's a legal agreement.
You're basically entering into an agreement, for it could be ten years from that standpoint, so it's a long-term agreement. And with all business, there is risk, so you can never get rid of risk. We hope with the franchise that we're mitigating that risk because we've got all the support, the systems, the process of procedures, and support, but there will always be risk with it.
And like with marriage, the wrong match can be very painful. So if you pick the wrong partner, it can be a painful experience. Again, just like marriage. Now when we talk about franchising, I use the term entrepreneur light in my book. So some of the advantages of a franchise is, as you're kind of looking at a business, they're providing the operating system, the system to follow.
And it's like a business in a box, right? It's turnkey. Do A, B, C, D, E from that standpoint. And they provide ongoing training and support, so they're always there. And the cool thing is, as you join a franchise, not only do you get the support from the franchisor, but you're also being part of a network of other franchisees.
So, for example, I was just talking to a franchisee the other day, and he said I'm working through this issue. I called another franchisee to get her thoughts on it, right? So the idea behind is you've got that whole network of other franchisees you can drop on. So I believe with franchising you have an improved chance of success.
A franchise can save you time; it can save you capital in coming up or developing the business. And they've already kind of proven out and refined the business. So franchising again can be very much like entrepreneur light.
Now, as we live in this COVID-19 world, a lot of people say to me, is now the right time to invest in a franchise or the near future? And what I tell them is that the lens that we look through today, hopefully, the lens will be better as we're going forward. But I believe there are eight reasons why now is the time to consider becoming a franchisee. So one is we want to put in place something that protects us in case we're going to get laid off.
So we already made the case that there's going to be more pain for senior-level executives going forward. And so we want to leverage that business, leverage a franchise to become an entrepreneur, to start this business. And a franchise going forward will allow us to diversify our assets and income.
So we're in control of our income, our assets from that standpoint. And prior to COVID-19, we were in a very tight labor market. Now that we've went through or are going through COVID-19, the labor market's loosened up a little bit. There are people eager for work from that standpoint.
So in many cases, people are top grading the talent of their team, so they're using this time with a little looser labor market to bring in higher quality people. But certainly, from step one. This is a little bit under stress, we're seeing a lot of opportunities like with Amazon and stuff like that where they're hiring tens or hundreds of thousands of people from that standpoint.
So there is a little bit of pressure on it, but still, there are people that are eager for work often at some point. And we're seeing a potential softening in the real estate market. The feedback I'm getting is that landlords are sitting, get a little bit more aggressive about filling up some of these spaces that may be empty from the standpoint. What that means to you, if you're looking to find space, is that you may get more tenant improvement money.
Money to build out the facility from the landlord. Or you may get free rent abatement or free rent for a period of time. So it seems to be shifting more towards opportunity with real estate. So more available, and maybe better terms. There is a lot of pent-up demand in with franchising. And we talked a little bit about the b2c business to consumers going to their homes. I want my house painted; I want my carpet.
My neighbor who wanted to put a sprinkler system in this summer basically was told that hey, you got to wait till next spring where there's so much demand. I'm told in parts of the country, if you want to put a new pool in, it's a two-year wait. There's lots of pent-up demand, I think people are taking money that they would normally do on travel and other things like that, and they're putting it towards investing in their homes and stuff like that.
And then we also have a great opportunity COVID-19 the last seven months or so is really giving us a turbulent time. And as you validate franchises going forward, you can really validate how the franchisor did stepping up to help franchisees during these troubling times. Did they help adapt the business model? Do they do things to help the franchisees make it through this time?
So does the business partner stand up and help the franchisees? The other thing you can do is you can validate how the business model handled the last seven months, right? So as you talk to franchisees, you can find out how the business model held up during these crazy times. And another term I use is how did the ship weather the storm. So it's a great opportunity to validate franchise concepts.
I believe there are going to be more resale opportunities out there going forward. And so there might be opportunities there. And then I believe there's going to be more economic resources. So very similar to what we had earlier this year, special SBA programs, I think we'll see more and more of that going forward to help small businesses.
So lots of opportunities going forward, and those are the eight reasons why maybe now is the time to consider a franchise business. So why do people go through investigating franchises? And they choose not to invest in a franchise? So for some people, they go through this, and they decide, you know what, franchising ownership isn't for them, and that's perfectly fine, that's cool, right?
If it's not for you, it's not for you. For some people, it's a lot of work to evaluate franchises. To find the right business partner, it takes a lot of work from that standpoint, and they don't want to put all that work into finding the right business. Some people just get caught up into fear and anxiety; it stops them from following their dreams. Again, that false evidence appearing real fear stops them.
Some people just don't have the capital, and if you believe it or not, some people still think a job equals income security. Hopefully, we busted that paradigm today. Some people have a maverick mentality, it's my way or the highway; they would not be a good franchisee from the standpoint
And then some people, their friends, and family will kill their dream of owning a business. One candidate I worked with, his family, decided they were going to have a family vote on if they were going to allow him to invest in a business, and they voted the business down. And some people are not capable of making decisions; they get so locked up at the end, they can't make a decision.
So not being able to make a decision is a decision, it's a no-decision. So hopefully, today, you've learned a lot, and if you have more questions, you can certainly request a consultation call, so you can request a call, and we'll discuss a little bit more about your situation. And see if investigating or exploring franchise ownership might be right for you. And we've got an awesome resource for you.
We have the higher yourself investment guide. It's an awesome 60-page digital resource a lot of great information in there, a lot of the stuff that we've shared with you today, so some good stuff. So you just go to Hireyourself.com/November-offer and get some information. As we think about this, we started out with this idea, how do you create career and income security in this very crazy world?
And franchising may be one of the past to do it. And I'd strongly encourage you, again, there's no obligation to go explore and learn about franchising. But we want to protect ourselves because we're going to have more crazy times, and we want to be in control.
We do not want an employer to be in control; we want to have career and income security. So with that, Nat, I'm going to turn it over to you to let you lead the QnA.
Nat: Awesome, Pete, great job. We did have a couple of questions come in, and if anybody would like to use the QnA or chat somewhere in, we'll be happy to try to answer those. Pete, maybe if you want to take this one, someone asked how many franchisees do you usually connect people with?
Pete: Yes, so great question. So what we're trying to do is really kind of narrow it down. And so we'll spend a lot of time getting to know what you're looking for, your interest, things like that, what you want to accomplish the business. And we'll go off and look for three franchises, three or four franchises that align with your interests.
With this idea that it's a lot of work to get into exploring franchises. So we're going to go through pretty diligent process to kind of get a good understanding where you're at. We're going to go leverage fran-choices that I mentioned earlier to find franchises align with your interest.
We're going to connect you to three franchise companies, and then we're by your side as you do your due diligence.
Nat: Excellent. A couple questions came in on financing and funding and all that. I thought maybe it would be helpful we can kind of point people towards some of those podcasts we've done in the last month or so that has all the most recent and up-to-date information.
We've also, on those podcasts, we had some guests on that were specialists in that area that might be helpful.
Pete: Yes. And I think the other thing Nat is that as part of the process, we'll connect them with people that can educate them. So we'll get them connected with people that can teach them about SBA loans or if they want to learn about the robs program. So that's part of our process, is to get him the resources, the people that can teach them all that kind of stuff.
Nat: Got you. And then one last question was just how long does it typically take to get, like the doors open retail versus service business?
Pete: Okay. So let's take a step back a little bit. So let's say you want to investigate franchises; what I would tell you is that like if we started the process today, you can most likely be in a position if you're like most people, where you could make a decision in early January to invest in franchise.
So it takes a couple months. So let's just say that you decided to invest in January, and it's the perfect business. And it is a service-based franchise. Well, if you invested, you signed the franchise agreement, you paid your franchise fee in January. Well, most likely, if it's a service-based business, you're going to training in January or early February.
And when you get back from training, you open up your business. So you literally could be in business in February of 2021. Now, if you were investing in a facility-based concept, same decision time. Let's say you go through this process; you do your due diligence, you decide to invest in the franchise.
It's the perfect franchise in January, and it's a facility-based franchise; well, then you would cite, start looking for your site selection process. And you'd start be looking. And looking for real estate or your site for your franchise facility-based concept is going to take some time. Now it could take four months; it could take 12 months, but let's just say it is six months.
So that would mean you find the right location in July of 2021, it's going to take a couple months to build it out. So most likely, if you invested in a facility-based franchise concept in January of 2021, most likely, you're opening up in the third or the fourth quarter of 2021 would be reasonable in terms of a timing.
Nat: Yes. Which when you think about COVID and all that, I think a lot of guys I've been talking to lately are taking advantage of the real estate, kind of loosening up, and then kind of figuring whatever going through with COVID and the vaccines and all that. By the time you get to Q3 2021, should be pretty good shape.
Meanwhile, you kind of locked up your real estate and got a huge deal on that. David had a quick question about what are some of the hot service franchises now I know. I think we talked a little bit about that.
Anything to do with home services? You think about like how lows in home depot, stock has been doing super good. So painting, flooring, anything to do with home services. Anything else that you're thinking about Pete for service franchises?
Pete: Well, also professional services like I mentioned during our presentation, right? So like for example, I was just talking to a restoration company. So they usually take bad stuff out of people's homes or businesses, right? I've got water or smoke damage; they take stuff out.
Well, I come to find out they had pivoted, so they're using their teams to go do the sterilization, sterilizing like retail center like Costco, or I don't know which is exactly what it was. But so you're seeing a lot around this activity where they're taking COVID-19, it's actually a business opportunity for them.
Nat: Yes. I think like surf pro those type of guys, have you see their advertisements that they're certifying locations that they've cleaned them.
Pete: Yes.
Nat: And I think even, anything to do with the drive-through, we did a podcast about that a week or two ago. Anything with a drive-through is actually doing really good right now.
Pete: Yes, that's very interesting, right? I mean, you talked about that during that podcast. Where some of these drive, these facilities that have drive-through, their business is actually up even though their restaurant portion of it is shut down, which is crazy.
I just read something that McDonald's who's been in the drive-through business forever. They're working on ways to increase the speed which people go through the drive-through because they're figuring they've got to funnel more revenue through there.
Nat: Exactly. That's interesting times that we're living in right now for sure. All right, well, I think that about wraps it up. I appreciate you guys spend a little time with us on a Thursday. And we'll be sure to let you know about our December webinar. And if you guys have any requests, be sure to email or chat requests for topics for next month.
Pete: Yes. And I encourage everybody to take the time request a quick call and take advantage of those resources. Again 15 minutes, we can kind of get a good understanding of what you're looking for and kind of give you a little bit more of how we can help you. And again, just set yourself up to be in a good position going forward.
Nat: That's the fun part is having conversations and kind of learning about people and what they're looking to accomplish.
