You are interested in becoming a franchisee? Awesome! You are about to take a huge step in owning your income instead of renting it. But, do you know where to start?
Most people don't.
Enter Google. But it's the wild west out there. Everyone is vying for your attention and you don't know what is right or wrong, or how to even start.
Nat and Pete are here to help and will walk you through what the process should look like for you.
Here's a Full Transcript of Our Podcast Episode on Becoming a Franchisee
Nat:
Hey, Pete. This was really impressed on me the other night, I've been in the entrepreneurial world basically, all my life. I bought my first franchise in 2001. And I had a buddy of mine, we actually coached our kids and baseball together and he reached out to me on LinkedIn.
He's like, “I was at your HIRE YOURSELF website and it just really spoke to me. I was downsized and this has been happening like every four or five years. I'm just not going to dust off my resume and go interview again." So, he had actually downloaded our franchise guide. He'd read through it thoroughly had tons of questions. And it really was impressed on me how much pain these guys are in the corporate world.
They start to realize that maybe owning my own business or becoming a franchisee is an option or is an alternative for me. And we sat down and we were having coffee and we're talking a little bit about, what do you want when you're thinking about owning a business? Like what would be a good fit for you? There are so many choices out there. So, we were just kind of talking a little bit about that and, and just learning a little bit more, what he was looking for himself and his family. I'm sure you kind of run into guys in similar situations to Pete.
Pete:
Well, yeah, sure. Work with a lot of executives that they're, they've got a successful 30-year career and they're just trying to run it to the very end. But unfortunately, they're getting pushed out like your friend, right?
In our last podcast, we talked a little bit about this idea is 50% of people in their fifties get pushed into retirement before they're ready and, and you've got options, right? You can go explore, another executive role, but most likely in four years, you're going to get tapped again. Cause then you're in your late fifties, you can go come up with a big idea, but you know how hard that is coming up with the idea of figuring out who your customer is, what the product is, finding the right people, how do you get to the market. This is where franchising and franchising creates a great opportunity!
We've used the term, I think in some of our content where it's entrepreneur lite. It's [franchising] an easier way to do it. When I talk to executives about this idea of exploring franchises, as one of their many options, it's really important you have a clear understanding of what you're looking for in a business. So, maybe what we do is we talk a little bit about what are some of the things that they should be focusing on as they try to find the right franchise. So sound good?
Nat:
Yeah, I think that makes a lot of sense. With my buddy, I was asking him how engaged he wanted to be in the business: is he going to want to be fairly active in the day-to-day? Or was he kind of thinking more, I'm going to deploy my resources and have my money work for me and be more semi-absentee manager run.
For him, at this stage of the game, having recently been downsized, he's like, “Oh, I would love to be actively involved and build something and be all in over the next, three or four or five years and eventually kind of get to be semi-absentee manager run.”
Pete:
I think there are different levels of engagement, right? So, some people, they don’t want to be the artisan. They want to work in the business, right. If it's a fertilizing business, they want to be the one fertilizing and own a little truck and go fertilize the next place.
Others, they want to be involved in the business full-time, but they have no desire to be standing behind the counter or spraying lawns. They want to be managing the manager, planning, the marketing, all that kind of stuff. So, I suspect your buddy is really kind of focused on that executive model. Full-time engaged, forty to fifty hours a week building, and leading the business, is that right?
Nat:
Yeah, I think most guys are because, they've been successful at corporate and, managed huge P and L's, and so they really kind of embrace, or like that idea of, this is kind of a natural progression out of corporate, get to make a big impact locally in my community, own my own business, have my customers, build a great team, provide lots of jobs.
So, I think that they're kind of seeing it as a natural progression. Not too many people that I'm working with they are really wanting to be like the “Chuck in the Truck” or the “Man in the Van” at this point. They would love to build a team and kind of have a whole fleet of guys doing that.
Pete:
And I think we're seeing a growing trend of people that do want that executive model semi-absentee, where they have multiple different businesses, or they want to keep their corporate job and to start a business on the side, kind of that idea. As you get the business going, you have a manager in place, you watch over that manager, fifteen or twenty hours a week at least, with this idea you don't have to be there every day.
So, it sounds like, the candidate you're working with, most likely will probably evolve to that where you've got multiple locations in multiple territories and is doing more kind of semi-absentee with each of the locations.
Nat:
Yeah, totally. I think that's always important, if you're not growing, you're dying, right. So, people love to be able to grow and also just, improve the opportunity for their family and with their trade, more income, supercharge their retirement, I know we talk about that a lot. Owning a franchise is great way to kind of supercharge your retirement. So, you have your stocks and your different investments, but you also have your business generating income too. Right?
Pete:
I use the term progression sometimes with people, right. And where you're, you're, you're putting together a plan. We use the term a lot, this idea of a franchise can be a bridge to escape the corporate world. So, you're putting together a plan where you can progress and move forward.
One of the things that people they talk about is growth. I mean, your buddy probably wants to build something, right? Build something that's got multiple locations or multiple territories.
Nat:
Yeah. He's got some younger kids and all that, but just for them to be able to be involved with the business one day, maybe even take it over. I hear that quite a bit too. People like that concept of building a legacy or a family business.
Pete:
Absolutely. The idea that you can create future wealth for your kids or the next generation is important. What about, as I work with candidates, I always ask them, “Hey, listen, as you look to invest in a franchise, do you want it to create a primary income or replace that corporate-level income? Or do you want it to create a secondary income?”
Nat:
Well, my answer is always primary. I always think it's a good idea to replace as much as possible. But, talk about the secondary income, Pete. I'm not sure I'm super familiar with it.
Pete:
So, you know the secondary income when we work with people, it's this idea that I keep the corporate job. I have another business on the side, or I'm doing other things I'm on a board and I want to start this franchise on the side. It's creating a supplemental income. And at some point, in time, maybe it becomes this primary income after it's built.
That's the key thing as we talk about this when we're looking to replace a corporate level income, it takes time and scale, right? So, you can't replace a two, three, $400,000 corporate-level income next week. It takes years to build it. And it's going to be done through opening up multiple locations or multiple territories. That's what it takes to do it. And you're building an asset. Nobody can take away once that business is making you $400,000 a year. That's not a job where you're renting your income, that's yours and it's an asset that you can eventually sell it. You can do this by becoming a franchisee.
Nat:
There's definitely that tipping point. A lot of times, if you're keeping your corporate income and you're building something that's brick and mortar, you're going to be reinvesting a lot of the profits into management and the second location, third location, but the tipping point is three or four or five years down the road.
Once you have multiple locations open and you're not building more locations and you kind of have management in place, all of a sudden, the business starts to generate a nice amount of cash flow. And that's where that secondary income hopefully can become your primary income.
Pete:
It’s the bridge to escape the corporate world. I guess I also think about when I'm working with candidates is, where do you want to have the business? Do you want to stay where you're at? Or are you looking to retire in Florida and have a business where you create an income where you want to kind of have your last retirement?
Nat :
I get asked that question a lot. Especially since we live in Illinois, it seems like a lot of people are kind of thinking about moving to warmer climates or different…
Pete:
Tax-friendly States, I think is what you're trying to say.
Nat:
Yeah. I'm trying to, walk the line a little bit, but I think the location is key. I always kind of try to start like, “Hey, let's start in our own backyard, and then we can see.” Let's figure out what's available here. If there are some things that you like, maybe then also you can scale up and open up in other regions or geographies or things like that. That's an important driver for people.
Pete:
I had one guy that I worked with that lived in Florida. He opened up locations in Florida. He had a daughter in college in California, so he opened up locations there so he could go back and forth as a business expense.
Nat:
I was going to say that it's probably had some tax advantages there.
Pete:
Absolutely, At least, travel expenses, for sure. Let's talk a little bit about status, right. It’s important to figure out how important is status to you when owning a franchise. What do other people think about the business?
Nat:
A lot of times I think I have guys that are kind of more spreadsheet guys. So, they're like, I don't care what it is as long as it makes money. They want to put it into a spreadsheet and if it makes money, they're like very interested, they don't care. It could literally be a porta-potty business or, dog waste removal.
I have other guys that are like, “You know what, it's important to me that kind of like a pillar in the community. And it's something that I can be really proud of.” That might be more kind of like that OrangeTheory or something like that, where they want to have something that's kind of new, something that's innovative, something that they can be super proud of.
Pete:
I generally see with people, as long as the business provides a value needed in the community, they could really care less what the business does as long as it's a good ethical business. They're doing something right for people.
Nat:
I feel like I consistently get guys when we get on our first phone call, that they're thinking like one thing that it seems like they're trying to avoid is actually fast food, which I always tell them, “Well, yeah there are probably easier ways to make money.” Having a business that's open that many hours and has that many revolving doors of employees and all that is tough. So, I think it's important to kind of know what you're, what you like, what you don't like.
Pete:
Food's just tough. I mean, we've had that discussion before. How about this idea that as we look at investing in a franchise business or looking to own a franchise, do you plan to involve family? Are you going to provide opportunities for your kids to work in it, or are you going to work together with your spouse? I see the lot where people, as they get into their fifties, they want to finally do something with their spouse, and do the business together.
Nat:
Yeah. I always tell people that's a great way to diversify is to get your spouse involved.
Pete:
That would never work in my household. My wife has no desire to be in a business with me. But I think the idea is great. Your boys have learned a little bit about being entrepreneurs working in your business, right?
Nat:
Oh yeah. We always are having them do stuff. That way we can have them on the payroll. It doesn't matter even, you know when they're little, whether it was shredding papers or, now they can help out with some social media, or things like that.
Pete:
My kids, when I started my business, they were young and my youngest was four or five years old and I gave her a job title. She was the Chief Fun Officer of the business, got her little $10 business cards and the whole thing.
So, this idea is, I think our kids are growing up in a gig economy and they're going to have to learn how to be entrepreneurs. And so, if you can use the business to teach them entrepreneurial skills or expose them to it, I think it's a leg up as they go forward.
Nat:
You can't just make money playing video games.
Pete:
Well, my son did want to, at one point in time be a professional gamer, so we've got him off that now.
Nat:
Okay, good.
Pete:
Talk a little bit about like schedule, right? People come and say, “Hey, I'd like to have a flexible schedule.” I want to be able to coach soccer like your buddy or, or whatever, maybe.
Nat:
Oh yeah. I always tell people being an entrepreneur is great. You only work half days. And then of course the punchline is twelve hours a day.
I think you have to be willing to work a lot, especially when you're starting something. But what's the beautiful thing about it is that you control your own schedule. Like this morning I was at the office at 5:30 AM, working on the podcast, but if I need to take off a little bit early, pick the kids up from school, of course, I can do that. I don't have to ask anybody. That's really empowering and just kind of like, I don't want to say a spiritual journey, but it's just kind of like a nice evolution to have, control and, and be the boss.
Pete:
I had so many years in the corporate world and I'd missed soccer games. And so now if I want to go to a soccer game at four o'clock I can. It just means that maybe I'm starting a little bit earlier or I come back after the soccer game and work, but it's, it's under my control. And every Tuesday night I go on a date with my wife. Regardless of what's happening at six o'clock, I shut my computer off and we go on a date. So, it's nice to be able to have that and be present.
Nat:
And you're not doing quite as much travel these days either.
Pete:
Yes. That's always nice. I don't have any frequent flyer miles, but the flip-side is, I don't have to mess around with all the travel.
Another big one is the purpose where people come and say, “listen, I want to make a difference in the community. I want to create jobs, or I want to be able to give back to my community. I've been kind of in the corporate world where I haven’t been able to do that. Now I'd like to be able to be in a position where my business makes a difference in people's lives."
Nat:
I think that's a real differentiator is just being able to, people working with people kind of coaching and mentoring them is huge. Your kids are watching you, too. While you're building your business, your kids are kind of watching that journey or that path. So, it really does give you a sense of purpose and, people are depending on you.
A few years ago, when I was thinking about starting my senior care business, one thing that was kind of resonated with me was to build something that I wanted to be a part of, because I had gotten kind of burned out with some of the other things I was doing. So, the concept of like, “Hey, I can go start something and create the culture and build something that I want to be a part of” was so empowering for me during that time.
Pete:
Yeah, and you're making a difference with your in-home care business? Or this idea is that you're creating opportunities for a lot of people that are creating income and also take care of families, helping them with a loved one.
Nat:
Exactly.
Pete:
The other thing when we look at investing in a franchise is this whole tolerance towards risk. I mean, how much money are you willing to put into it? What's your tolerance to being able to invest in a business and be comfortable?
Nat:
You have to be properly capitalized, number one, and then you have to be willing to go find the money or convert some money into working capital. I feel like a lot of times we're investing in ourselves as business owners or entrepreneurs. So sometimes actually feel like, “Hey, this is not that risky because I know I'm going to figure it out.” But you have to kind of have a strategy or plan, for all those scenarios.
Pete:
You have to maybe leverage personal assets like your 401k or part of your house or your valuable cash reserves, or in many cases, you're signing a guarantee on a facility, if you're going to build up.
The other piece of it is, is that it's a two-way street when we look to invest in a franchise. So, it's important that what you're looking for in the business, but on the flip side is the franchisor is also looking for certain characteristics in a good franchisee.
It's very much the mutual approval process. It's almost like dating from a standpoint, so you know what you want and you're looking for that from the franchise company. But on the flip side is they're looking for certain things. What are some of the things you think about as, as franchisors evaluate people looking to invest in their franchises?
Nat:
You're bringing up a really good topic. I was just talking to somebody, one of our colleagues in the franchise world. And they were like, have you ever had a candidate rejected from XYZ franchise? And I'm like, yes, actually I have, they're pretty tough.
I think, a lot of what a lot of times franchise owners are looking for is they're looking for people that are decisive, good decision-makers. They're looking for people that are kind of positive, like glasses, half-full versus glasses, half empty. They're looking for good team builders. A lot of franchising is, somewhat sales-oriented. I like to say nothing happens until somebody goes and sells something.
It's that business acumen, no matter what business it is, you're probably not going to just be able to sit in your office and look at the computer and be on a spreadsheet. You're going to have to build a team. You're going to have to talk to people and have some drive.
Another big thing is just, again, going back to that past success. Do you have the drive to be successful? And the franchise is looking to partner with you because as you grow as a business owner, they grow with you and their royalty stream grows, too. From their perspective, they're looking for owners that really can grow the business. That creates a win-win situation.
Otherwise, what happens is they just have underperforming storess or location and all that. They’re looking for motivated people that are willing to really get out there and go.
Pete:
I tell a lot of people that have been in the corporate world, you may invest in a franchise if you don't know anything about the industry, but if you've gained that business acumen from the corporation, and I think that's a good characteristic. You're gaining that business acumen. You're gaining those leadership skills. It's a great training platform to set you up, to go into any franchise business.
You got to have drive. If you're not willing to work hard, it won’t work. I tell people when they invest in a franchise, you have to work like every day like it's your last day. You have had to have that sense of urgency. Takes a lot of power to get a business off the ground.
Nat:
That is totally true. I mean, the franchisors are going to be looking for you to hit the ground running. That's why it's so important to be good, you want to be a good partner for them too, and show leadership.
Pete:
And Integrity is another big one. Do you have a history of being an honorable person, living up to what you say you're going to do, kind of that reputation?
Nat:
What's interesting about that we've talked a lot about franchising being so process-driven, but what's interesting about that integrity is they actually, I don't think people realize, but they're paying attention when you have these scheduled calls with the different brands.
And so, if you're late or you don't show up or you're riding your bicycle during a phone call, they're like, “This guy is not, this is not impressive, right?” If you can't make phone calls on time, how the heck are you ever going to get your location open? I do think it's having integrity. You and I are kind of old school. We’re always about Lombardi time. Right? So, if we show up on time, we're actually late, but showing up and doing what you say you're going to do. It's huge.
Pete:
And showing up as a leader is also another important thing, right? It’s that you can be a manager, but a leader raises up the entire organization. As you own a business, you have to be a leader. You have to bring that organization, lift them up, get them to the next level, show presence.
Nat:
A lot of the franchise companies, at the corporate level they have an ownership council. That's another huge leadership opportunity for these different franchise unit owners. As the system grows, they'll have an owner leadership council. That'd be kind of the top performers.
So, it'd be kind of handpicked and come to corporate and have influence over decisions that they're making at the corporate level and all that too. So, it is amazing, just the different opportunities that you have and also leadership opportunities at home in your community, but even in your franchise system, you're going to have leadership opportunities too.
Pete:
Yeah, absolutely. And I think they look for this idea of, can we work together, right? Are you cooperative because it's, it's a partnership and if you're kind of a lone wolf and it's my way or the highway, it's not a good fit for anybody, it's about working together to be successful to grow that business, so everybody's happy!
Nat:
That's awesome. What else should we be thinking about when becoming a franchisee, Pete?
Pete:
Well…investment. They're going to want to make sure you're qualified that you have enough liquid capital to own a franchise and you have enough in that work, to qualify, to invest in the franchise.
Nat:
Yeah. That’s the old saying undercapitalization is the number one reason for failure in businesses. I think still true, no matter if it's independent or a franchise, you have to be properly capitalized. You need to keep some powder dry, keep some in reserve. You need to be smart.
It's kind of counterintuitive, but with the franchise and a lot of times you can kind of compress the time to get open and to ramp up. And a lot of these franchises are really got good at pre-sales. You might actually have revenue coming in by the time you open your doors and all that. So, there's a lot of different strategies, but you definitely want to be properly capitalized. And you definitely want to have a realistic expectation about what you're going to need to do as the owner, like literally your time, your, day-to-day, week to week, month to month to be successful.
Pete:
Yeah, I think it's about having a good proforma: a plan. And the plan is the minute the business starts, it's no good, but the idea, the power of building the plan, that proforma knowing where you want to go is so important. And I think the other thing is that there's a lot of great resources out there to help people figure out, “Okay, if I'm going to invest in a franchise, how do I best leverage my capital?” There are some awesome resources. And, as we think about investing in a franchise, your buddy, he was smart to come to you.
There are so many different franchises out there, nearly four thousand. This idea is that it's a crazy world. And so, it's always best to have somebody help you, a good franchise consultant to help you work through. What's important to you. What do you want to accomplish with the business? And more importantly, help you position yourself as you go to these franchise companies so that it is a good match for both you as well as the franchisor.
Nat:
That's really what we're trying to accomplish in the franchise is a win-win situation, and you and I are trying to help candidates find good franchises. And we're also trying to help franchisors, the companies, find good franchisees. So, it's a win-win.
Pete:
You could call us matchmakers.
Nat:
There you go, I like that, franchise matchmakers. I wonder if that URL is available?
Pete:
Well, you just gave it away to everybody. So, you better go buy it now, buddy.
Nat:
Well, HIRE YOURSELF is much better anyways.
