On this week's episode of the podcast, the guys talk about franchising myths and debunk them.
If you have any preconceptions about franchises, this episode will help you discover what is correct and what isn't!
Pete: All right, Nat, I'm pretty excited about today's podcast. But I got to tell you, you know the day is starting out well when you get ready for the podcast, and every single headset that you have for the podcasting is gone. Your wife has taken everyone out of your office. So I know the day is off to a good start.
Nat: Is she busy watching Netflix? Or what's going on?
Pete: Well, she's watching a lot of stuff, yes. But we all are watching a lot of content. And funny you say that right, so I was walking around the house the other day, and all of sudden I caught my kids, and they were because they're always looking for new content. They're watching; you remember the TV show Mythbusters?
Nat: Oh yes, I like that show. They're like blow stuff up.
Pete: Yes. So they're watching I go, holy cow, I haven't seen that in ages. I think it's been off there for like seven years, but they seem to have found it, right?
So I thought today what we do, is in kind of the concept of this whole myth-busting, is why don't we talk about myth-busting and franchising, or myths that people think about with franchising. That sound like a good plan for today?
Nat: I love that. Do you have any ideas, or where do you want to start?
Pete: Well, we'll start with the, I think, my favorite one. And I get up there, and I'm giving speeches, or I'm doing presentations on franchising, and people say well, franchising, they think of McDonald's subway, and Dunkin donuts all that kind of stuff, and I go there's so much more to franchising than just fast food and coffee and stuff like that.
Nat: Yes, that actually is totally true. I think it's because of just top-of-mind awareness, where you have like Starbucks or McDonald's all these brands are like on the corner of main street and main street.
I remember when I bought my senior care franchise, I got that started, and I just had an office kind of in an office building, and there was no signage or anything. And then, over the years, I realized wow, about 20 or 25% of franchising's like service companies or businesses that are very much behind the scenes. But just a huge part of the economy, and employ tons of people.
Pete: Well, yes, I think they employ over 8 million people franchises, right? Eight hundred thousand established. It's funny; I use the example of my book Nat of franchising touches every aspect of our life.
Nat: Well, I've never heard that before, Pete.
Pete: But I use the example like where you get up in the morning you go work out, yes that's a franchise. And you stop off and get a cup of coffee afterward; that's a franchise. And on your way home, you pick up your dry cleaning; yes, that's a franchise.
And you pick up your kids at the house; you take them to martial arts class; that's a franchise. You pick up a sub sandwich afterward; it's a franchise. You basically get home, there's a window washing franchise in your driveway, they're washing the windows of your house. So franchising touches every aspect.
Nat: Yes.
Pete: Interesting thing I find is that a lot of people again, they can't get past that it's just beyond food. But it is, it's touching every, and they're really kind of taking over mom and pops, do you see that? Where franchises are taking over mom and pop organizations?
Nat: Oh yes. I always kind of say or teach people how franchising a lot of times is consolidation of mom and pop industries.
You can even think about like, I don't know painting as an example, right? It's become a very high-tech business, and they use a lot of technology to do their quotes, proposals, sales and marketing, call centers, all that kind of stuff.
So it's hard for mom and pops to kind of keep up with that kind of horsepower at the franchise corporate level. So it's. Definitely, service franchises are growing exponentially.
Pete: Yes, and even facility-based ones, right? They bring in new technology. I was at a franchise where they do stretching, right? And they had this really cool machine. You stand in front of the machine, and it will literally tell you where your body's tight.
Nat: So, did you basically break the machine?
Pete: I did; I broke the machine, right? But I'm like, well, how do I buy one of these? In the back of my head, I'm like, my wife's never going to let me buy one of these. But I'm thinking that's a really cool machine. And the average Joe is not going to be able to afford that or have that level.
Nat: Yes. Just have the research and development to even connect those dots.
Pete: Yes.
Nat: That's awesome.
Pete: So I think we've busted this myth, don't you think?
Nat: It is officially debunked.
Pete: Debunked, all right. So we've debunked that myth. Let's talk about another one; you got another myth?
Nat: I think kind of along the lines of fast food and all that. I think a lot of people I talk to, they're like, I don't want to be stuck behind the counter.
So I think in their head, they're kind of thinking like being the guy at subway that's taking the orders and working 12 or 16 hours a day, or kind of at the post, remember those like mailbox or post office type franchises.
Where you'd go in there, and the owner was always behind the counter. And I think that kind of freaks people out because they're like, I don't want to just buy myself a job that's 16 hours a day.
Pete: Yes, right. And if you're a corporate executive, you're a VP, and you're making $250,000 a year. It's really hard to go be the person standing behind the counter making sub sandwiches, right? You're destined to build something bigger.
And I think that's true, it's that when we talk about franchising, there are people and I use the example of the subway that was here in my town downtown, you know the owner was there every day, that kind of stuff, right? But you look at those franchises in other parts of the country, and you got people that own 75 of them. So I think it's really, in many cases, the business model and how the owner wants to be involved in the business.
Nat: Yes. That's kind of what I like about franchising; it can kind of meet you where you're at. And also, you have to have some executive-level skills of team building and managing KPIs, and focusing on growing. So the guys that that's their focus, they're able to kind of put together a portfolio of locations.
And guys, frankly, some guys do just want to kind of kick back and go to the store every day. And, of course, there's those franchises. But it's not just like if you buy a franchise, it's not just you go to the store, and you have to work at the cash register. It's definitely much more scalable, like you said.
You know, we all know guys that own 75 subways or even hundreds of burger kings or things like that. There's a lot of opportunity to kind of grow, grow your portfolio.
Pete: Yes. And even like service-based businesses, right? You think about service-based; as an owner of a service-based business, you don't have to be the one doing whatever the business is, right? So if it's [Inaudible 00:07:30.08]. We had a window treatment franchise come out to help us with some window treatments.
And the owner didn't ever come out; they had their salesperson come out and do all the measuring, do the estimates, and all that kind of stuff. And then the installation person came, we never saw the owner, and that's a great example of a service-based business where you don't have to be the artist.
Nat: Yes. I think, sometimes I ask my people I'm working with like, hey, when you go to like great clips or sports clips or someplace like that, do you ever see the owner there? And no one has ever, I think, said yes, the owner's always there.
So just a very kind of a concrete way to debunk that myth is you don't have, if you own a franchise, actually the better owners are probably not there because you want to really build a team so that you can scale it up a little bit.
Pete: Yes. Well, it's hard, and I use the example junk removal. I knew a guy that went into junk removal, and I talked to him after a month. I said, what are you doing? He goes, I'm on the truck, and I said, okay, you got it, I understand you got to learn the business.
So I called him a month later, so now he's two months into it, and I said, what are you doing? He goes I'm on the truck. I said, what are you doing on the truck? You know you could pay somebody 12 bucks an hour to be doing that, moving all the stuff.
You need to be out there building your business. And if you are the artist and working in business, it's really hard to scale and grow it to your point.
Nat: Yes. Well, then again, like we were talking earlier, franchising can meet you where you're at. So if you really just kind of like being on the truck, I guess you could do that.
Because ultimately, when you own your own business or your own franchise, you have the ability to kind of create, do what you want, and create your own job, job description and have other people do stuff that you don't like. So would you say that we officially debunked the behind-the-counter?
Pete: Yes, we have debunked that, yes, all right.
Nat: Because I was thinking as we were talking about that, I was thinking a little bit about job security, right? So like just being able to have, be empowered to create your own job description essentially. Whereas when you're at corporate, you know like yes, what you got hired to do and all that.
But especially with pandemics and everything else, who knows what what's going to happen with your position. Corporations are downsizing, they're relocating, and all that. But if you own your own local business, you really have the ability to write your own job description, and roll up your sleeves and get to work.
Pete: Well, I think you use the example is when you have a job, you're renting your income. And so when we talk to people, they go well, job, I've got a paycheck, right? That's security, got a paycheck, I got benefits, right?
But as we're all learning, there could be times like 2008 that the great recession or even today in the pandemic, where yes, you may have had jobs and security. But when they come in and say we're furloughing you, we're letting you go, that's gone, your income is gone.
So I look at it is there's no more security in corporate America in a job, right? Because at any point something can happen, and they can walk you out or give you a package, or they're going a new direction, and you're out, your income is gone.
Nat: Yes. When you own your own business, you're not really going to fire yourself, right?
Pete: Well, I'm going to be the last one standing.
Nat: Exactly, right?
Pete: Absolutely. I mean that's the real benefit. And then, the other thing people say is well, but I get health insurance with my corporate job.
Nat: Yes, I know. I've had my own company since 2001. It's easy to kind of get wound around the axle with all that stuff, but there's really a lot of good health programs on the open market now. You got to pay; you got to write that check every month. But kind of having that security, and also having that freedom to have your own business, that's what I like. And then you also have all the tax benefits too, so.
Pete: Yes. And you can pick the health insurance you want; I mean, we're the same thing. We've found that it's pretty easy to go find dental and health insurance stuff like that, and you certainly have to pay. But even in the corporate world, they're shifting the expense of health care to a lot of the employees, right?
So what used to be where you got 100% of your health care paid for by a company. Now they're covering 50% of what the costs are. So that's kind of shifting too. But bottom line is as an owner, you control the benefits, the security that you have, and nobody else can take that away from you.
Nat: Yes. And I think that a lot of, we're finding, I think we're seeing that a lot of franchises are actually doing well. They're holding their own in the "pandemic" and all that. And they're really adapting and evolving quickly.
They're using technology a lot too, which I think kind of helps you have more security when you own your own franchise. Because you have all those resources behind you to problem solve. You think about like a Panera, where they have the delivery app.
You can pick up your food; you can have it delivered. There's all those different options, and they're just, you know they're probably doing great right now if I had to think about it.
Pete: Yes. You're really seen people leverage a franchise, the leadership helping them get through the tough times, but also the application of technology or the investment of what they put in there. I was thinking about a yoga franchise, right? And nobody's walking into a yoga studio at this given point yet.
I know they're starting to open them up. But the idea of a confined area, extra heat, and all that kind of stuff. But the idea was that they went right to virtual classes, where members could take virtual classes, and I think that's the real benefit of a franchise.
Nat: Yes. I think a lot of people keep their membership just because they like to be a part of it. And then, like you said, they get the on-demand classes and what have you, even with some of the massage franchises.
I know people are keeping their memberships because they're just going to accrue the massages. And once things get back, they go back; you know they'll have three or four in the bank.
Pete: I'm ready; I'm really tight, so I definitely could use a massage right now, so okay.
Nat: All right. So I think that giving up job security has officially been debunked.
Pete: Debunked. It is debunked. All right, what's the next one? What other myth do you know about?
Nat: So, like when I bought my first franchise, it was a senior care franchise. And I was kind of concerned because I wanted to be involved, developing marketing materials and all that. So I think a lot of people are kind of like that, where they're like, I don't want to just be a robot. Like being a franchise is very cookie-cutter, there's not a lot of room for personal expression or individuality.
And what I learned through that was actually, you're already wearing 12 hats when you start your own business, right? So it's kind of nice to take a bunch of those things off your plate at the corporate level. I can actually not have to worry about the website, not have to worry about marketing materials.
Not have to worry about what software to use and all that because that's actually what you're paying for, ironically. But where I found I was able to really dig in and express my individuality is just building relationships in the community. And kind of solving those kind of problems.
Senior care is very, it's kind of a b to b, but it's also a little bit b to c. So business to business, and also business to consumer. So just developing relationships, sales, and marketing, problem-solving. I think that gives you lots of areas to kind of be put your fingerprint on the business if you will.
Pete: Yes. I think a little bit about your example, right? You've got a great business model, it's proven from that standpoint, and then you bring your personality to it, right? You put your personal touch. I think about a buddy of mine; he owns some salon suite concepts. And what he realized with these salon suite concepts is the artisans, the hairstyles that we're leasing the spaces from.
Every night they would have to take all their dirty towels home, wash them, dry them and fold them, right? And he said, hey, listen, I know it's not part of the business model. But he went out and bought a whole bunch of towels, hired a towel masseuse, and that person collects the towels every night, washes and dries and folds, and puts them back in everybody's suite.
Part of the business model? No. But was it something he added his personal touch to the business? That's really kind of innovative, very cool thinking.
Nat: Yes. I always say nothing happens till somebody goes and sells something. So sales and marketing, and just also problem-solving. I think that's so, and just being a team building is a really huge part of franchising.
And that kind of, I think, building relationships and solving problems. There's just tons of opportunity; every day is really different when you own your own business, I have to say.
Pete: Yes. But to the point, you can put your own spin on it. As long as you're following the system, it can be successful, and you can take it to the next level by making it.
Nat: Yes, you don't want to reinvent the wheel. You think about like five guys as an example, right? It's like they've got the burgers, and you walk in the store, and they've got the boxes of potatoes and the nutshells on the floor, peanuts, I guess. Actually, I'm thinking something. Is it outback? What was that restaurant that had the peanuts on the shelves?
Pete: No, that's five guys, right? So they have the things of you just grab a basket of peanuts, and you eat them and throw the shells on the floor.
Nat: So it'd be kind of weird if all of a sudden they, I don't know like they had something else on the menu that no other store had. So it's kind of nice to just have like some structure in place, and then that customers know what to expect. So that's what I like about franchising.
Pete: Yes, absolutely.
Nat: So yes, I think there's lots of room to put your fingerprint on your own business. I always think of franchising as being hyper-local. So even actually, a lot of times, you'll see retail places, they'll have kind of like the local, they might have the Denver and whatever city or town you're in, and just have lots of pictures and things like that on the wall.
Pete: Yes. There's some that I think about; it was I think it was a pizza place, where they let you customize it to like the university that was in your, and that kind of stuff with a protein. So certainly, you can personalize it.
Nat: Yes.
Pete: So, do you think we've debunked that myth?
Nat: I think we've officially debunked that.
Pete: All right, very good. Well, what about this idea when we talk about? One of the myths that I hear is that people go well; I want a brand that's been around for a very long time. I want that brand that everybody knows the name. You hear that myth a lot?
Nat: Ironically, I was thinking about five guys because I remembered a few years ago, I was getting asked about five guys like all the time. Because they had grown fast, they had a lot of stores open, so they're kind of getting that brand recognition.
So then people that were thinking about franchising would ask about it, and I kind of always felt a little bit bad because I just had to kind of explain to people five guys is a great brand, but most of the U.S. is actually already sold out. Like here in Chicago, I think there was, I don't know, seven or eight stores open.
So you'd think, oh, there's more territory. But what happens a lot of times, guys, you know owners buy the rights to open up three or four or five locations. So territory was all sold out, they had their first one open, and they're kind of in development, so they're opening up more and more all the time.
So sometimes what I think is strategic is kind of can we go in the way back machine, and try to find something that's up and coming or emerging, so that way you're able to kind of get the territory that you prefer in your own backyard.
Pete: Yes. I think the myth is that hey listen; I got to have a brand that is established. And the problem is to your point is, it's really hard to find the territory available with a franchise that's, or another way to say it as I say. If you know the name of a brand, you've probably missed the opportunity, right?
Nat: Yes.
Pete: And so there's that trade-off at some point.
Nat: Yes. Every once in a while, I get guys that are like, oh, I'll relocate. I had a orange dairy guy that, he was so hot to try on orange theory, and so basically, U.S. is sold out. So he's like he had in his head, I'm going to open up ten orange series in London, England.
I'm like, holy cow, that is, what's the right word? Like just really love that brand. To move your family to another country to open up. But I think that that's great; I love to see people get excited about, you know, some of these different brands.
Pete: Yes, there's trade-offs, right? So you could relocate. But a lot of times, what you can do is find the next one that's emerging in that area, right? So you take orange theory, right?
There's other brands that are kind of taking that model and spinning it and putting a little different mix on it, right? So the idea is that maybe you find that new brand that's coming up, where you can get territories or locations that maybe are open.
Nat: Yes. I always think there's only upside if you can kind of open up where you already have a network because franchising really is hyper-local. Even with like an orange theory or some sort of fitness.
A lot of times, not surprisingly, you're kind of your personal network are some of your first members and all that too. As you're kind of building it and growing it and everything.
Pete: Yes, I think that's right. It takes that kind of a hometown business, and it makes it where it's more sophisticated. But it's still a hometown business, right? You're out there in the community engaged.
Nat: Yes. So as far as the best franchise being the, having huge brand recognition. I think that that's always a good strategy, but I think we kind of debunked that, that sometimes it might be better to get the preferable territory in your backyard. So that you can leverage your personal network and just have more of a hyper-local approach.
Pete: Yes. Getting something that's emerging, opposed to established right absolutely, so debunked.
Nat: All right.
Pete: All right, what's the next one?
Nat: Well, speaking of like some of these fitness places, people are probably like, oh my gosh, that seems like really expensive to open up one of those. So I think a lot of times, people have the perception that they cannot afford to start a franchise, especially like a retail franchise. It's too expensive.
Pete: Yes. I think of people that they come and say I want to own a franchise, but I don't have a million dollars to open up a McDonald's, right? And the truth of it is that when we look at franchising, there's all types of different investment levels required with the franchise.
So bottom line is that there's many different ways in which you can leverage your capital to get into a franchise. And so the investments can be different levels, and there are different ways in which you can capitalize that business. What you really have to get into is understanding what are the capital requirements for a franchise; how much liquid capital do you have to have?
Because all franchises require you have so much liquid capital. And they require you to have so much net worth. And so the combination of those two also tied with different things like funding. There's many different ways to capitalize a franchise.
Nat: Totally. And actually, right now with, I think there's a lot of good, great real estate options too, because a lot of businesses, there's going to be a lot of transition after this pandemic. So I think that there's going to be a lot more open or available real estate to get started, so that would be great too.
Pete: Well, and even resale opportunities, right? Where you're able to pick up something where it's established, it's going, but they're done, they're ready to move on. And so there might be some opportunities there too.
Nat: Yes, awesome. So franchising is not too expensive.
Pete: Myth busted. Myth debunked.
Nat: Awesome.
Pete: What about? I know one of them myths that I hear all the time is, hey, the franchisor is going to find all my customers, right? They're going to bring all the customers to me. I don't have to do anything, they're just going to bring them to me. Do you hear that?
Nat: Well, that would be really great. Like can I invest just a little bit of money, make a lot of money and not do any work. I'll take 10 of those.
Pete: Yes, absolutely. So I think with franchising, right? Is that you, to your point, have to do the work, right? The idea is they have the system; they know the customers you're looking for, they know how to go find those customers. But ultimately, it's your responsibility as the owner to go get those customers and, most importantly, to close them. Won't you agree?
Nat: 100%. I was talking to a guy that owned some subways, and he was telling me about this one location that he had that was like the worst location. But instead of just sitting on his hands waiting for customers to come to him, and this was like years ago. So this was kind of, I thought, innovative.
He actually started going out and doing like b2b, so he started really marketing the catering and all that. Which I don't think was quite as prevalent like ten plus years ago. But he went out and started marketing to schools and sports teams and all that, and he ended up that subway was one of his best-performing ones, just because he literally kind of built like a b2b, you know he went out and built the business manually, and then they delivered the catering.
A lot of times, one of my favorite sayings is nothing happens until someone goes and sells something. And when you think about a subway, you think for sure, oh yes, no brainer, open location customers come to me. But I think the owner; I think always you have to be prepared to go sell something if you have to, it's ultimately up to you as the owner.
Ideally, you follow the system and the processes, but sometimes you just have to be willing to really get innovative, and problem solved, which I think is; I personally like that because I like to be involved.
Pete: Well, as a nature of an entrepreneur, you solve problems, right? And a franchise can have the systems the processes in terms of marketing to help find customers. But at the end of the day, you've got to execute, right? So you've got to leverage the system. And if it's not working, you got to tweak it; you got to do what you need to do to drive that business. And most importantly to your point, is once you get that customer, you've got to actually close them.
Nat: Exactly.
Pete: Either do the lawn service or buy the sub sandwich.
Nat: Yes. So kind of along the lines of that, in franchising, there really no guarantee of success.
Pete: But wait, was that debunked? I just want to make sure we debunked that last myth.
Nat: The franchisor will find all your customers?
Pete: Yes, is that debunked?
Nat: That is officially debunked.
Pete: All right, very good, thank you. Now go on to the next one; I just want to make sure we debunked it.
Nat: Awesome. I was thinking about successes guaranteed, and a lot of times, I'm working with my guys, and I always kind of tell them that the only guarantee, like when you think about yourself if you've been successful in other areas of your life. I always say like past performance is a good indicator of future success.
And so with franchising, just like taking a new corporate job and everything else, you're kind of betting on yourself. You can stack the ads in your favor by finding a good franchise. But really, there's no guarantee of success. The buck always kind of stops here.
Pete: Success is earned, right? Whether you're in sports or you own a business, success is earned. And just by being on a team, just by owning a specific business or a specific franchise doesn't mean success, right?
And so you have to go out there and make it happen. I think sometimes people lose that, right? But franchises is a set process. You have, I think, increased odds of success. But you still got to make it happen. You got to show up every day and drive that business and be successful.
Nat: Well. Just think you could be kind of cruising along on cruise control for a couple of years. And then, all of a sudden, we got the coronavirus, and it's like whoa, in a matter, really in probably less than three weeks, you kind of have to figure out a new way of doing business; otherwise, you're going out of business.
So I think as an entrepreneur and a business owner, there is no guarantee of success. You still have to be able to be nimble, adapt to the times, adapt to the labor market, all those types of things. But like you said, I actually really like with a franchise, you have the corporate kind of watching out for you.
But you also have a good network of other franchise owners. I know with my senior care franchise, we would do monthly co-op meetings, and we were always working together to be successful. And there's just so much camaraderie in those systems.
Pete: Yes, between the systems and the support and your fellow colleagues, the other franchisees, there is improved rights. But at the end of the day again, you earn success, right? It's on you. I think about when I used to wrestle in high school; I know that's hard to believe.
But the thing is, when you get out on that mat, you're out there, and it's you, right? There's no baloney. I mean it's just you are wrestling somebody else, and there's nothing else to fall back on; success is determined of what you do on the mat.
Nat: Yes, 100%. So success is guaranteed, true or false?
Pete: Myth debunked.
Nat: Nice. What else do you want to talk about, Pete? What other myths are you talking about?
Pete: You know, I get people that sometimes say, you know, I want to invest in an industry that I know, right? Or a field that I know, right? My experience is I'm an engineer; I'm a mechanical engineer. I want something in the mechanical engineering space.
And what I tell people is that listen, with the franchise or any business, as long as you have some business acumen, you got some business acumen, you've got some leadership skills, the idea behind is you apply that leadership skills and the business acumen into a business model.
You don't necessarily need to know the industry, but you do need to have business acumen, leadership skills to go drive that business, follow that system to be successful.
Nat: 100%. I think I probably said to at least once a week to somebody that we kind of go in-depth on this. And they're like, oh, I don't know XYZ, and I'm like, that's perfectly fine. I didn't know anything about senior care when I got started either.
I went to corporate for a week of training, came home this was kind of almost before, we didn't use computers that much back then, but came home with a bunch of three-ranked binders and a phone number of corporate. And I was just on the phone trying to figure out how to set up payroll and hire people, it's just.
But that's the nice thing. There's lots of training and support, and again there's other franchise owners that you can always talk to. But you're able to leverage what you're awesome at, which is typically corporate executives are great at team building. They're great at kind of following a system, quite honestly.
Following a process and managing KPIs. So all those are very transferable skills. And I don't know if you really want to be the guy like there's, say, a Locksmith franchise; I don't know if you really want to be the guy starling locks and deadbolts and things like that.
Pete: Well, most executives don't know every single role, right? Within their organization. They understand it enough to be able to drive the business, but they don't need to do that.
Nat: Exactly.
Pete: I agree with you 100%.
Nat: And keep your focus on growth, acquiring new customers, sales and marketing, building a good team and good culture, all that kind of stuff.
Pete: Yes. Most of the people I work with, if they do invest in a franchise, it's not an industry they've been in the past, right? So I mean, I think that one is debunked.
Nat: Yes, that is actually totally true. I don't know if I've ever; yes, I don't think I've ever worked with somebody that bought a franchise in something they were an expert in.
Pete: All right.
Nat: Interesting.
Pete: Myth debunked.
Nat: Awesome. Well, I think that kind of wraps up our podcast for this week, Pete.
Pete: As we go out there, we look at things; I mean, the idea is just get past those preconceived notions. Because a lot of times, those preconceived notions can be debunked.
Nat: Awesome. You guys have a great week.
Pete: You too.
