Full Transcript for Why Certain Brands Close Deals Like Clockwork

franchisor, and that's just not the case. 00:05:43.086 --> 00:05:56.290 Now, I know that we've talked about this in the past, but what should a franchise expect to spend on average an emerging brand to go from starting to where your royalties are paying for everything? 00:05:58.505 --> 00:06:07.454 Well, that royalty self-sufficiency is obviously where everybody's trying to grow, because once you get there then you can exponentially grow up larger from there. 00:06:07.665 --> 00:06:18.733 But typically a brand needs to probably have a half a million dollars that they are going to need to be able to utilize over the time that they start until they reach that. 00:06:18.733 --> 00:06:26.831 If they have franchisees that do lower gross sales and higher margin, then it could be a million dollars. 00:06:26.831 --> 00:06:35.490 So every franchisee is going to be different depending on what their franchisees are really going to produce for them. 00:06:35.490 --> 00:06:46.093 So trying to give you a feel for that, if a franchisee has high gross revenues, then they're going to make more royalty. 00:06:46.093 --> 00:07:14.134 When a franchisee develops and grows, if the business is smaller, maybe less expensive to get into and has low gross sales but high margins for the franchisee, then that causes the franchisee typically to have to invest more money to grow the business because they're going to need more people to support lots more franchisees that do lower gross that are paying in lower royalty. 00:07:14.134 --> 00:07:20.848 So those are some of the things that we help franchiseeers figure out when they're looking to develop. 00:07:22.192 --> 00:07:32.862 Right, because they're going to make less money, because it's lower gross sales and they're going to have to have more people because they're serving more franchisees Makes total sense. 00:07:33.790 --> 00:07:39.721 Yeah, and that's something that most emerging concepts don't really understand. 00:07:39.721 --> 00:07:48.122 They'll grow into that, but you have to plan accordingly, and that's a big factor in it all. 00:07:49.692 --> 00:08:13.182 Right, because I actually see that when I work with an emerging brand versus a well-established brand, the well-established brands they'll have webinars, They'll have a five-step sales process where they go through financials and the support and everything else and then they go through a discovery day and awarding, whereas some of the young brands, especially, they try to do it on their own. 00:08:13.182 --> 00:08:19.057 They're just happy to get on the phone, they give their elevator pitch and they're like do you have any more questions? 00:08:19.057 --> 00:08:26.221 Let me send you the FDD and let's talk in two weeks, which just isn't an effective sales process. 00:08:26.221 --> 00:08:35.222 Why is not having the structure and just talking about it not lead to franchisee interest? 00:08:36.990 --> 00:08:46.399 I think probably the biggest focus with that, Lance, is you're not completing the investigation of the categories that are within the business that they need to learn. 00:08:49.029 --> 00:09:04.457 If the franchisor is just having conversations, a conversation sends them the FDD, goes over the FDD and then tries to bring them in for a discovery day, the potential franchisee is really coming in with very little knowledge. 00:09:06.029 --> 00:09:10.441 It's better to reverse that and break the business down into categories. 00:09:12.072 --> 00:09:13.977 So let's just say staffing. 00:09:13.977 --> 00:09:28.820 What you want to do is you want to help them understand every aspect of staffing who they're going to need, what approximately they're going to have to pay them, how they're going to recruit them, all the different aspects of those things. 00:09:28.820 --> 00:09:41.494 And then, when you're finished with that, you can basically ask them do you think you've got a pretty good handle on staffing and, with our systems that we have, do you think you can implement this? 00:09:41.494 --> 00:09:43.816 And they're either going to say yes or no. 00:09:43.816 --> 00:09:48.461 If they say no, then there's more to cover right to get them comfortable. 00:09:48.461 --> 00:10:00.974 If they say yes, then you can have a checklist and check that off and then move on to real estate or whatever other categories that the brand really needs to have to be able to go through those things. 00:10:00.974 --> 00:10:06.581 Then, once they've gone through every category, they have a good understanding of the business. 00:10:06.581 --> 00:10:16.158 Even it's time for a virtual discovery day or a discovery day, whatever the brand really needs to do to implement their system, to finalize it. 00:10:17.782 --> 00:10:21.729 Right, right, and you already kanske want to repeat it a little bit. 00:10:21.729 --> 00:10:28.163 Some of the things that I've seen you do have been very interesting to me. 00:10:28.163 --> 00:10:49.620 I watched how you had this one logo that I loved and then you guys changed it and I didn't love it as much, but you told me that you had to remove a bunch of the details and colors from it because it made it drastic improvement in the cost of producing that logo for that business throughout everywhere it touches, which was very interesting to me. 00:10:49.620 --> 00:10:52.860 I wouldn't think of little things like that, but I mean you guys have it all dialed in. 00:10:53.871 --> 00:11:01.701 Well, there's a lot of pieces to the pie, so what we're really trying to do is look for the most effective way for the brand to succeed. 00:11:01.701 --> 00:11:16.453 So if you, let's say, you've got a, an emerging concept that has three or four different units and they're all in different sized space, right, let's say, it's retail. 00:11:16.453 --> 00:11:36.700 What we really want to do, then, is we want to look at what is the most, the very most effective space size and square footage, and then hone in on that

size and do just that, not try to have a wide variable to open it up to. 00:11:36.700 --> 00:11:46.764 And so what that does is it really helps franchisees get the best, get the best of both worlds. 00:11:46.764 --> 00:12:01.481 In other words, the franchisee or tested right, and now we know which one is most effective, and then we focus on that side, and that could be done with staffing, real estate, marketing, all the different things that need to happen. 00:12:02.572 --> 00:12:09.315 Doug, what are some of the things that you guys do that really keep the the sales process moving for people? 00:12:10.190 --> 00:12:15.533 Well, there's, there's a lot of different things that are involved in an investigation of a franchise, right? 00:12:15.533 --> 00:12:27.778 And so what you're really trying to do is deliver that information not not in a week, right, not in a two week period. 00:12:27.778 --> 00:12:35.078 Really, you want to give it to them, spread out a little bit so that you can make sure that they're absorbing everything that you're giving them. 00:12:35.078 --> 00:12:40.240 So, on the average, you know, some brands are going to need around a month. 00:12:40.240 --> 00:12:45.692 Others may need six weeks to take them through the categories of what you need to take them through. 00:12:45.692 --> 00:12:54.873 So what we think works best is to talk with them and discuss certain things and then have them go learn. 00:12:54.873 --> 00:13:12.535 In other words, do homework in between calls, not feed them every time you're you're talking to them all the information, so that when you're talking with them they're learning, but when you're not talking with them, they're just sitting and waiting right For the next time they talk with you. 00:13:13.629 --> 00:13:25.052 So by utilizing these types of systems, it helps the perspective franchisee really figure out what we all want to know, them and us. 00:13:25.052 --> 00:13:27.418 Are we a good fit for each other? 00:13:27.418 --> 00:13:38.956 Because if we are fantastic right, they'll come into the system much more educated, better prepared, all the different aspects of what it is right. 00:13:38.956 --> 00:13:50.120 If they are not a good match, we'll know it relatively quickly and then they can focus on what's going to be a better fit for them, right? 00:13:50.269 --> 00:14:03.363 So a lot of times in scenarios, lance, when people are looking to get into a franchisee business, they have a tendency to focus in on things they like, right? 00:14:03.363 --> 00:14:10.623 So I like to use the example I like to eat sandwiches, so I should own a subway, right? 00:14:10.623 --> 00:14:14.940 So that's really not how it should happen. 00:14:14.940 --> 00:14:25.201 What you're really trying to figure out is what's the business model and what of my skill sets fit this business model best, right? 00:14:25.201 --> 00:14:36.716 And if I like to eat sandwiches but I'm not really good at recruiting and managing people, then that's not for me, right? 00:14:36.716 --> 00:14:37.952 Not even close. 00:14:37.952 --> 00:14:43.562 But if I am good at those things, then that brand can work for me, right? 00:14:43.562 --> 00:15:04.251 So you're really trying to see and give that franchisee what they need for whatever type of model they're looking at, so that they can make a good educated I don't want to call it guess, but a good educated decision on whether they think they can fit in that franchise or not. 00:15:05.655 --> 00:15:13.995 Right, and you know one of these things when you're breaking this up into these categories, doug, it seems like what you're doing is you're doing a couple things. 00:15:13.995 --> 00:15:22.701 One thing is you're handling objections, because they're going into this thing that would be like site selection type stuff, and they're like well, I don't know if I can find a site. 00:15:22.701 --> 00:15:25.995 Well, as you go through that module, they're learning how to do it. 00:15:25.995 --> 00:15:32.928 So you're one handling the objection and two, you're teaching them how to think about how to make this work. 00:15:32.928 --> 00:15:37.080 Right, they're envisioning well, here's how I make it work. 00:15:37.080 --> 00:15:38.961 So they're playing this active role. 00:15:38.961 --> 00:15:46.571 Like that homework is having to play this active role in figuring out the problems and visualizing themselves figuring this out, which makes it not as scary. 00:15:48.216 --> 00:15:50.418 That's very accurate, right? 00:15:50.418 --> 00:16:08.803 So in the best systems, right for franchise development and growth, you already know where they're going to have concerns, and so you build a system that already answers those potential concerns before they ever even get there. 00:16:08.803 --> 00:16:23.889 Right, so that when they do have concerns it's not a laundry list, right, it's something small that you can focus on and help them find the answers on whether that answer is good for them or bad for them. 00:16:23.889 --> 00:16:28.899 And they realized this is good for me as a brand or this is not good for me as a brand. 00:16:28.899 --> 00:16:40.431 So by strategizing how you're going to build the franchise investigation process, you're really using those categories so you can focus. 00:16:40.995 --> 00:16:48.725 So, typically, what we like to do is we want to focus on the stuff that would seem most scary for somebody, right? 00:16:48.725 --> 00:17:02.995 So let's say it's a retail business, right, and most people that would look at it had never developed out a retail storefront before, let alone go, found a lease negotiated and all those types of things. 00:17:02.995 --> 00:17:09.544 So in that brand we would start, right after an introduction call, with real estate. 00:17:09.544 --> 00:17:22.759 That way we can help them understand how we're going to help them and the system they're going to get, but also what their responsibilities are, so that they know

they can handle that. 00:17:22.759 --> 00:17:34.790 Then most likely, in that type of scenario, you're moving into staffing, next then marketing, then technologies, whatever it is that you really need to cover as a brand. 00:17:36.615 --> 00:17:57.086 Right and putting the biggest rocks or hurdles at the beginning and it seems like by you getting in front of it they'll spend less time dwelling on it and that puts less of that fear into their bones, because we're just handling it right away and the further you go you're really handling smaller and smaller objections along the way. 00:17:59.276 --> 00:18:19.092 Yeah, you're sliding down into the things that are managed a lot for them, or at least assisted heavily for them, so that they can realize the heavy lifting that they would have to do early in the investigation, rather than putting it at the end and surprising them with it. 00:18:19.092 --> 00:18:27.162 They really want to help them understand it early so that they can know they could have, they could do it Right. 00:18:27.162 --> 00:18:34.309 They have to know they can do it in their own mind and then once they realize they can do that, then you move on to the next category. 00:18:36.194 --> 00:18:38.798 I know that you don't work with just anybody. 00:18:38.798 --> 00:18:49.671 You definitely weed through people and find the brands that you're willing to commit to, and so I think it's good for people to understand if I'm a brand or I want to become a franchise. 00:18:49.671 --> 00:19:01.974 These are some things that I better have dialed in, because you know, if a franchise organization like yourself would pass on that, they should know that they're not in an optimal state yet. 00:19:01.974 --> 00:19:03.242 What are? 00:19:03.242 --> 00:19:04.570 What do you look for in a brand? 00:19:06.678 --> 00:19:10.246 First, it would probably be the unit economics of the brand. 00:19:10.246 --> 00:19:33.525 So if they've opened multiple units and financially they just do okay, then that's going to be something that probably we wouldn't be able to help, because once you factor in royalty, brand funds and different things along that lines, it would make it so that it was a lower revenue producing business. 00:19:33.525 --> 00:19:43.521 So a lot of times we get people that come to us with a brand that has a lot of promise but it's not all the way there yet. 00:19:43.521 --> 00:19:51.641 In other words, they may need another year or two of growth to show where they can really go financially. 00:19:51.641 --> 00:20:00.882 So a lot of times a new franchise concept comes from customers and I want to explain that. 00:20:01.134 --> 00:20:14.987 So let's say that you go to a restaurant and you're sitting in there and you love the food in the atmosphere, and so, as a customer, the owner happened to come by and ask how you're doing. 00:20:14.987 --> 00:20:19.925 You tell them you love it and you say you should franchise this. 00:20:19.925 --> 00:20:21.698 People would love it. 00:20:21.698 --> 00:20:27.224 That is a trigger for an owner that gets them thinking about that. 00:20:27.224 --> 00:20:41.324 But what it really does is it makes a false impression of what people really would need to do it, because the customer's just giving you the customer point of view. 00:20:41.324 --> 00:20:46.002 They don't know what it costs to do it, they don't know how much time commitment the owner has. 00:20:46.002 --> 00:20:51.221 They don't even know if they're making money, they just like the product or service. 00:20:52.835 --> 00:21:08.025 So that's a catalyst for an owner to then really look at what they are financially and then that can tell them whether they can franchise, because franchisees have different costs than independent businesses do. 00:21:08.025 --> 00:21:11.922 They have royalty, brand fun. 00:21:11.922 --> 00:21:14.982 They got a franchise fee to get into the brand. 00:21:14.982 --> 00:21:19.285 So the unit economics needs to be pretty good to be able to do that. 00:21:19.285 --> 00:21:25.406 And then, once you can see where your unit economics are, you pull the PNLs. 00:21:25.406 --> 00:21:28.663 Then that will tell you what you can backdoor into. 00:21:28.663 --> 00:21:37.520 And then you can relate that to the item seven on the high end of the item seven and then you know what it is. 00:21:37.520 --> 00:21:39.480 Here's what the business is and does. 00:21:39.480 --> 00:21:46.423 Here's what it's going to cost somebody to get into and here's what the business has produced in the past in income. 00:21:46.423 --> 00:21:48.739 That paints the picture. 00:21:50.296 --> 00:22:07.862 Right, and sometimes I see these companies that become a franchise and, instead of having something that is unique and has a good brand that has a good feel, they're just normal, and that makes it harder for them to stand out. 00:22:07.862 --> 00:22:12.505 There are things that make something like a cohesive brand. 00:22:12.505 --> 00:22:14.160 You just love it there. 00:22:14.160 --> 00:22:17.338 It has a theme, it's unique, and things where they're just. 00:22:17.338 --> 00:22:20.486 I mean, it's just the same thing you see everywhere. 00:22:20.486 --> 00:22:24.144 What are the components that really make that stuff stand out? 00:22:25.156 --> 00:22:27.263 Well, you've really got two types of businesses out there. 00:22:27.263 --> 00:22:35.624 You've got the unique business that there's not a lot of or hardly any of that people would gravitate towards because there's less competition. 00:22:35.624 --> 00:22:45.105 And then you've got the old, tried and true businesses that have been around forever but the demand is gigantic and you're going in and carving out yours. 00:22:45.105 --> 00:22:49.826 So in both those cases you still need the same thing. 00:22:49.826 --> 00:22:56.165 You need heavy marketing, right, because if people if it's unique people don't know it exists, right. 00:22:56.165 --> 00:23:01.527 So

your marketing efforts are more on awareness, to get people educated with it. 00:23:01.527 --> 00:23:02.980 I like that style. 00:23:02.980 --> 00:23:10.797 And if you're in something that's very prevalent, then you're really not educating them on what the business is. 00:23:10.797 --> 00:23:23.317 You're educating on them, to them, that you're out here, right, and that you have good staff, good systems, bonded, licensed, sure, all those types of things. 00:23:23.317 --> 00:23:27.125 So there's a variety of different ways to attack it. 00:23:27.125 --> 00:23:39.261 I don't, you know, if it's unique, then there's some attributes that you can have, and if it's not unique but very, very established, there's attributes to that too. 00:23:39.261 --> 00:23:40.881 So both can work. 00:23:43.669 --> 00:23:55.768 And what are some of the biggest mistakes that you probably see brands doing as their, I would say, first, emerging brands and second, like major brands that just aren't getting the traction they want. 00:23:57.605 --> 00:24:06.434 I think for an emerging brand right out of the gate, that one of the mistakes that they made is they're not diving into their franchise disclosure document. 00:24:06.474 --> 00:24:16.496 Well, right, they're going out finding an attorney, the attorney's developed it, gives it to them and now they think they are ready to go. 00:24:16.496 --> 00:24:19.731 Right, that's really not the way it works. 00:24:19.731 --> 00:24:30.288 You want to help craft your FDD into something that works for both the franchisee and the franchisor. 00:24:30.288 --> 00:24:41.655 It builds the strategy into what you're doing, whether it's a territory-driven system or a market penetration strategy, or a true area developer or a master. 00:24:41.655 --> 00:24:47.977 Those are different things that you can use, lance, to make yourself unique in the model, right. 00:24:47.977 --> 00:24:50.192 So you're trying to use these different things. 00:24:50.345 --> 00:25:03.115 So I would say the FDD not being used as a tool, just being implemented as a hurdle they need to get through is a tough part For a more established brand that becomes even more critical. 00:25:03.115 --> 00:25:10.848 Right, because you're crafting your FDD as you grow every year, because you're probably moving things around. 00:25:10.848 --> 00:25:13.451 You're moving your item 19,. 00:25:13.451 --> 00:25:23.154 Right, because you have more businesses in that you can put in, and you're moving your item 7 as you learn more as a brand Right. 00:25:23.154 --> 00:25:33.938 So franchisors are constantly working on those things every year and I think that's probably one of the things that doesn't get enough focus with the brand. 00:25:33.938 --> 00:25:38.669 It just is a headache that they want to try to get out of the way and they really don't realize. 00:25:38.669 --> 00:25:47.992 That's your tool, that's your strategy, and your strategy needs to be implemented through your FDD and then you can go implement that in your sales process. 00:25:49.365 --> 00:25:53.474 Right, Well, Doug, I appreciate you. 00:25:53.474 --> 00:26:01.175 I want to thank you for joining us and I just wanted to say, if you want to connect with Doug I've known him for many years. 00:26:01.175 --> 00:26:12.474 You can tell he's one of the extremely smart guy, knows what he's doing, been on the franchise sore side, franchisee side, development side If you want to work with him, there's a button right next to this. 00:26:12.474 --> 00:26:13.207 You can click here https://Franpro. 00:26:13.247 --> 00:26:15.775 vip/GoRhino7 and get connected with Doug. 00:26:15.775 --> 00:26:17.147 Thanks, Doug. 00:26:17.825 --> 00:26:19.153 We appreciate the time today.