If you’re an emerging franchise brand trying to figure out how to find high-quality franchise owners, this episode is for you.
Dru is joined by long-time franchise insider, Andrew Horton. Andrew and Dru dive into 20+ years of experience in the emerging franchise development world. They share a number of different approaches emerging franchises have used to find the right franchise owners.
From recruiting franchise owner #1 to scaling to 100+ units across the country, this episode covers the entire spectrum of growth.
They also get into the realities of what it takes to grow sustainably, responsibly, and financially.
Listen to the podcast here
Franchise Development Secrets: How Emerging Brands Can Find The Right Franchise Owners With Andrew Horton
This is a special one for me because this is the first public announcement about a new venture that I’m involved with along with my business partner, Andrew Horton, who is joining us to talk about all things of how to find and recruit high-quality franchisees for emerging brands. Andrew and I have started a mini franchise sales organization. I use the word mini because we’ll define how that goes throughout this conversation. It’s Andrew’s first time on the show, welcome.
Thanks for having me.
As you can tell, Andrew and I have known each other for a very long time. We’ll talk about Excel and everything we do and dive into you what young franchise companies need to know about scaling, growing, and how to find good franchisees. Indirectly, we’ll talk to perspective franchisees as well about some of the stuff that are important for them to be aware of and look at with any franchises that they’re evaluating. Why don’t we kick it off with you sharing your story as a franchise lifer and how you got to this point?
Much like you, as you said, a franchise lifer, I got into the junior in college internship with Jeff Elgin who founded FranChoice, our broker network back in 2000. I was there and I got to be an sponge and learn franchising from one of the sharpest guys in the industry and most successful guys in our world, and then met hundreds of emerging franchisors by trying to vet them out for FranChoice.
I got to see a cool side of franchising by looking at brands and talking to their founders, the CEOs, and their franchisees every day. I got hooked immediately and joined the FranChoice corporate office. During that time, we became a franchisor. Out in Oregon, I went out there for a year plus. Buddy and I owned a CertaPro Painters franchise that he ran for a while. I’m a franchisee in the salon suites industry. I also do the same consulting work you do. I was helping people decide if franchising is a good path for them then Excel, which I’m very pumped about. For all this years that you and I are talking about it, it is off the ground and running. That’s my franchise story.
As a lot of people do, you probably didn’t go to school to study franchising. You fell into it accidentally.
I was an Entrepreneurship major, but I had no clue what it was. I asked a professor, “Does anybody need an intern?” I never had a real office job. I was like, “I’ve got to probably get one of these before I go into corporate world.” I then met Jeff Elgin and the rest was history.
How long ago was that?
In 2000. FranChoice went from full-dead startup with two consultants to do an over 1,000 placements some years across all different kinds of franchisors. It was an interesting perch to learn the industry and the lessons that we discussed. You and I get to watch it from a side seats, what works, what doesn’t work, emerging brands that crushed it, and the other ones that have a hard time. There’s a great perch to learn franchising from.
It’s tip of the spear in the emerging mainly non-food side of franchising. You can’t get into the belly of the beast any deeper in terms of the vantage point that you’ve had throughout your entire career, especially with FranChoice. That’s how you and I met. I’m sitting there, we’re working in AdvantaClean with Jeff Dudan. We’re trying to figure out like most emerging franchise companies. It’s like, “We’re franchising. Now what? We got the FDD. We got all the office stuff. We built this software platform. It’s great. We got a great business model. How do we find franchisees?”
It was two years of grind. Finally, we started to get connected with insiders and people were very open with sharing. We started like a lot of brands do with the entrepreneur source, Fran and Ned and some of these other broker networks. I always heard as I started getting into these circles that FranChoice was the place you wanted to be because they’ve always done a good job of having very talented consultants that can help brands get connected with the right type of perspective franchisee. Back then, and still is, it was super hard to get into FranChoice. Andrew was the freaking gatekeeper. I remember, I called you out of the blue one summer. I called the FranChoice phone number.
I’m like, “I’m going to call and see what it takes to get in.” You put me on the phone with a freaking intern. I’m like, “It’s Dru Carpenito with AdvantaClean.” He’s like, “What’s up? How are you?” Am I like, “How do we get in the inventory?” He’s said, “It’s not exactly how it works. It’s a little bit of invite-only.” He basically blew me off, and then a year later, I had to get Iric Wexler to send an email to all three of us to get you back on the phone. Finally, it ended up working. That’s how we met. That was probably 2009 or 2008.
It is nuts how much time flies. This goes for the franchisors, “Should I franchise or listen to these things?” Be picky. We were picky about who we brought in as consultants or as brands because if you’re going to try and grow and you want to have nights of good sleep versus sleepless nights running by how your owners are doing, you got to be picky. One thing that we learned is we would take a lot of brands up front then we give them 8 or 10 new franchisees and they would almost implode, “This is way too many. We’re not ready for this.” We learned at FranChoice that we need to do a better job of vetting out the franchisors. Do you have the capital? Do you have the humans? Do you have the technology systems?Be picky about who to bring in as consultants or as brands if you're going to try and grow and have nights of good sleep versus sleepless nights running by how your owners are doing. Click To Tweet
If we gave you eight new humans as franchisees the next year, you have four now. You do that for 4 or 5 years, could you handle that? If that’s a no, we’re probably not the right fit for you because you’re not able to keep up with the girls. A lot of our brands, we had a chat with maybe an intern or maybe me. It’s, “Come back when you’ve got these 4 or 5 things ready to go.” They would come back and we have a nice run. We learned and we can almost give them growth as an entity if they were in that emerging category and not ready for prime time.
The rate of growth is a massive thing to consider for any emerging franchise. For a long time, you were vetting brands, thousands of them. You’ve had an inside seat for this whole thing. As you think back through all the different franchise companies you’ve seen and worked with and haven’t worked with, are there certain things that have stood out in terms of what the franchise companies that have been able to 1) Successfully recruit good franchisees and most importantly 2) Help those franchisees be successful and be able to rinse and repeat that whole equation to grow from a couple of locations to a national brand in X amount of time? Are there certain things that stand out to you as you look back like, “These are the elements some of these brands have?”
There are. In our case, you mentioned non-food. We did a lot of non-food and a lot of non-sexy because those brands don’t do well on the internet or, back then, in the Wall Street Journal for running ads. We were helping a lot of less attractive brands on the surface get their growth. What you learn is the founder or somebody within the executing has to be ready and excited to go raise the kids, as our term for it. People think selling franchises are difficult. It’s the easiest part of the entire equation.
Getting them open and busy as soon as possible and through their first year, happy and successfully with maybe some bumps and bruises, but on the track toward their expectations, somebody has to raise the kids. A lot of franchisors didn’t have that person. If we gave a bunch of franchisees, once you have those humans as franchisees, there’s no time to catch up and go try and find a director of operations or a franchisee coach. That was one.
Do they had an office franchise ops folks? They need to have people in place to support and raise the kids and give them the same amount of love that they were getting through the whole franchise development process on the other side once they’re franchisees.
A lot of franchisors love selling franchises and say, “I don’t want to do that. I don’t want to get him through junior high school. That’s no fun. That’s a lot of work.” How do you know that? You talk to the franchisees. One big part of our process to vet the brand is I comb the FDD and the financials, but I talked to all their franchisees.
I probably talked to 8,000 or 10,000 franchisees. Not by choice because that’s how you learn what a brand is all about. I’ve learned franchisees will give you feedback good, bad, or otherwise, fairly unvarnish. As you and I look at brands for Excel, you have 4 or 5 franchisees. Your excitement goes up or down, depending on how their tone is. Are they partners with the franchisor? What culture have they built amongst their franchisee?
There’s a little bit of an art to having those conversations and asking the right questions when you’re talking to a franchisee to slowly extract more information versus, “Are you happy and making money?” That’s not how most people would approach it, but that’s the elephant the room. There’s a little bit of an art to get there and have those conversations. That’s the litmus test. That’s the foundation. If a brand has good franchisees, that is the foundation upon which they can grow.
When I help my candidates jump into validation calls of a franchise system or two, there’s a lot of coaching. Here’s how to break into those conversations. I always say buy them dinner first. Warm them up and get to know before you ask, “What’s your EBITDA? What’s your bottom line?” I’ve learned franchisees want to share because they were in your shoe’s months or years ago. They want to help you decide if it’s the right thing and a good decision or not.
A brand with very limited validation or not a lot of open season franchisees, at that point, those pioneering type is more buying the founder. How do you use a founder to tell the story and share their expectations? It gets more complicated the smaller the brand is in terms of trying to have that candidate get a true set of proper expectations for their time as a franchisee if they decide to move forward.
If I’m putting myself in the shoes of an emerging franchise company that maybe has 1 or 2 units, it’s like, “We’ve got a company store that’s successful. We’ve got a couple of franchisees and they’re happy.” At what point have you seen companies start to make that investment in franchise ops folks technology stuff to raise the kids if they want to accelerate the growth once they’ve got a couple of proof of concepts out there?
When you look at a brand, say it’s a franchisor, holding company, or second or third brand for a season franchise person, what they do is they say, “When we build brand one, we were behind on this, this, and this. We didn’t have marketing and a 90-day ramp program. We look up the item 72. What do we learn that we’ve screwed up on?” They build all that in. The biggest thing they do is they hire 1 or 2 head count ahead on the franchise tip-of-the-spear support people.
You don’t need to have a COO and two VPs. In that franchisees market and in their text messages when they have issues, that first six months of, “What I get myself into?” then now, “I’m open for the first six months,” is when all of your support effort goes into those people. You need to have the frontline people. They’re not expensive or hard to find. You have to be ahead of that.
You need your institutional knowledge and your education ingrained in them so they can impart it on those franchisees the way you want it to. Also, be a good culture fit, a good listener, and have a lot of empathy or life coaching and sometimes marriage counseling. The franchise operations people are massive in our world. They don’t get enough credit, but that is work. What you need is humans who are willing to take the call at 5:00 and take the stressed-out spouse call to help get that franchisee through the tough times.
As a young brand, you could build a pipeline of perspective franchisees. You start to get in a feel over the run rate and how many candidates will convert into franchisees. You have a little bit of leading indicator, but you’re still investing way ahead of profitability as a franchisor in terms of getting to royalty, self-sufficiency, and making money.
It’s a long game. Having access to the proper romantic capital which you can make these investments as you’re franchise system continues to grow, but you need to be prepared to make the investments. Having access to capital is a pretty big piece to the puzzle for a lot of the successful franchise companies that have gone from 1 to 400 units across the country.
You got to have dry powder ready to deploy. If you ask, we had springboard emerging franchisor conference. A lot of the topics are universal for emerging franchisors like, “I’m in my first year, should I franchise my idea or not?” The number you hear is it’s a $1 million adventure to go from starting out of franchise, getting an FDD, ramping up support operations, and fran dev to hopefully being royalty self-sufficient.
You have to have all these humans and systems to support owners before they’re ever giving you a whole lot in terms of royalty share because their AVs don’t kick high until you’re 2 and 3. Most franchisor books are upside down for the first 3 to 4 years depending on how quickly they can get them open because selling franchises doesn’t put anything to the bottom line for a franchise.
That’s all spent getting those franchisees off the ground. The real key is getting them open. It’s a million dollar plus adventure. Even to do a regional rollout, much less going the broker or going national, it’s still to do the operational side and have good human beings to support. It’s a seven-figure deal to launch a franchise company.
Spread out over 3 to 5 years, continually reinvesting as you see the growth continuing to happen. That royalty self-sufficiency numbers are a massive milestone to strive towards. You only get there if you have happy and profitable franchisees that are generating royalties. If I’m a young emerging franchise company and I’m geared up, “I got this. I want to go national. Let’s go,” is that the approach that you’ve seen a lot of the successful franchise companies take or has it been a different phase of growth or different phases?
If you are launching off of a platform and you have a multi-brand, you could probably go fast because you’ve already got systems and humans who have done it before. Let’s say you’re true emerging, “This is my first rodeo doing this.” Let’s say you wanted to get to 100 locations or territories in four years. I’ve seen both. Sell a bunch, open them up, spend 2 to 3 years of triage, and end up with 100 left after you sold 150. That is a stressful, expensive and, frankly, improper way to go about getting there. Whereas if you opened up like five year first year, say you got corporate locations and small staff. Get five, and then get ten. If you double that, love on those franchisees. Invest marketing in their market to make sure they’re happy and successful.
If the first ten are great, happy, and have great P&Ls, the next 90 are not that hard to onboard in itself. If out of the first 20, 10 don’t make it, feel neglected, or the math wasn’t thought through because you did ready, fire, and aim, that cleanup is way more expensive. Frankly, the enterprise value of that franchisor on the second plan, the crawl, walk, and run plan is way better. You don’t have as many sold and that opens. A private equity or a holding company would love to see that story versus, “We got some item twenty clean up.” That’s three years old now everything’s fine. That’s not the story you want to have. Frankly, you haven’t done right by those franchisees if you wing it like that. It’s not fair to them.
It’s full of friction like triage approach.
Sleepless nights and lawsuits. It’s terrible.
It stalls everything. Maybe you got to the number, but at what cost? Not just financially but also franchisees and lives.
Karma and being a good human.
Not to mention it is risky legally at some point. There’ll be some regulation even more so than there is in the franchise world. As a young, emerging brand, even if you’re a founder reading this, you’re getting our opinions. You also got all different types of people throwing their opinions at you. It’s hard to filter through some of this advice to understand what the right approach for your company is going to be. We’ve heard it from the brands that we’ve talked about. We’ve been talking with Excel. We’ll hop on a 45-minute call with a brand that’s not a fit for us. They will tell us that they’ve got more out of a 45-minute get down to it call than they had with the other years they have spent preparing for this moment to franchise. It’s wild. It’s my opinion.
If you’ve watched it happen enough through our chairs within FranChoice and you being an emerging franchisor and doing you’ve done, there are patterns to problems and success. It doesn’t mean you’re going to avoid all the problems. I do think a crawl, walk, and run approach for a very young brand so you can drive to most of your first ten franchisees or have a short flight.
The regional small organic rollout makes sense because it allows you to fix all things that could break within your franchise system because something’s going to break if you bring on a bunch of new franchisees. You can address it quickly because I don’t think franchisees get upset when there are problems. They get set of problems that are not listened to or addressed. It’s like, “We tried.” It’s not a good enough answer when they’ve put down $100,000 in franchise fees to buy three territories and blood, sweat, and tears and they’ve changed their lives.The regional small organic rollout makes sense because it allows you to fix all things that could break within your franchise system. Click To Tweet
What people forget too often is this is a major life-altering move for all these franchisees. While the whole thing is wealth creation and franchising, which should be creating wealth for them first, they’re taking the biggest risk. They may have done those before. Sometimes that focus on the franchisee and their best economic picture and that thing gets bumped down the priority list. If you put that priority is number one, your enterprise value and franchisor will be worth more financials cold-blooded math.
Also, you’ll have a happy and successful destiny. You like going to national conferences. Pick a point or two after your own royalty to help make them some more money. Pump some marketing into them as they launch to make sure they have happy first six months. It is those little things that you see the smart franchisors do go miles. If you do it early, your first ten people can be super happy. You got your own cheering section to sell the next 100 franchises. Open them up and they’ll help support those new franchisees. The whole thing becomes very positive culture and environment.
It’s a whole new dynamic starting to franchise your business as a founder because maybe you’re used to operating the business, but now you’re in a completely different dynamic with the franchisees who are self-employed entrepreneurs and have that empowerment and liberation. They’re going to talk to you a little bit differently than an employee would because you can’t fire franchisees and you shouldn’t be able to.
Honestly, if you boil it down, if you have a relentless focus on helping your franchisees be happy and profitable, happiness is different to all franchisees, and in profitability, everybody is going to have different financial goals. Some franchisees might want to scale and some might want to keep it lifestyle-friendly business. If you understand what their goals are, what their expectations are, and how that judge with your expectations, then it’s that simple. The execution of it is where you see it get fairly inconsistent from brand to brand in the emerging world.
Agreed. Too many people get stuck on, “Who can I sell a franchise to?” versus, “Who should I sell this franchise to?” They whittled down their item sevens to as low as I can possibly get it and put the minimum requirements as low as they possibly can. They oversell the economics. Maybe there were twenty-year-old corporate locations. They start talking about their numbers.
If they would have real sick expectations on investment, how much work it’s going to be in that first year, and what the true economic picture is, not some puffy either side of that, then people can decide, “Am I willing to get into this business with you as my partner under those assumptions or not?” When you oversell, over-promise, or make it more absentee than it is, that’s when people get upset because they’re sold a bill of goods.
That business is not designed to run that way. We sell a time in our world where brands are, “We got a promise semi absentee. We got a promise this and that.” The business doesn’t work that way. That is not what you want to do. You got to find different humans that have more net worth, more time, or whatever those needs are to do it right.
I watch a lot of franchisors boost their marketing and items seven or boost their first-year expenditures or whatever it is versus trying to cut them down because they know if the franchise is not ready to spend the money or can’t, they’re not going to make it to you. They’re going to run it lean and mean, fizzle out, or close their doors.
There are a lot of phases to taking a company and expanding it through franchising. It’s not easy, not cheap, and not quick. It’s none of those things.
To your point, if a founder have only done whatever their industry is, their business or whatever and they haven’t done a franchise before, somebody on their team needs to have seen and been through some of this, whether it’s a COO, an advisory board, or consultants just so they know what these dynamics look like. Running without your business, whether you’re painting houses or opening salons versus teaching other humans across the country to run that same business are too fully separate endeavors. You got to have people who know what they’re doing on both sides of it.
That was the genesis of where Excel came from. You’ve seen the rise of the big FSOs over the years. They’ve gotten to a point where they’ve proven that they can grow brands quickly. They need to have brands that are ready to grow quickly, but there’s a gap for super early emerging brands that wanted to take that crawl, walk, and run approach. That was how we created Excel. There’s the third partner who’s going to remain nameless for confidentiality reasons because it is still working.
It’s a big deal, that’s why.
That was the genesis. Here you have two franchise brokers that created an FSO. A big part of our belief and strategy to help young brands grow is to not work through franchise brokers, which is ironic. Maybe we can talk a little bit about, “I’m a young brand and got my FDD. I got my ops manual. I probably overpaid for my ops manual. Nobody’s going to read it anyways. Who cares? I’m ready. Where do I find my five franchisees?” If you put yourself in that shoes, what do they do? How do they start to find franchisees and vet them to know if they’re the right franchisees?
If you’re at that level, going brokers is tough because you only get one chance to make that first impression. If you’re not ready for it, you have to go back when you are ready for it. I help launch FranChoice, and I’m saying don’t use broker networks as your person if you have two franchisees because you have to be ready to go and do two deals a month.
It’s national. Brokers are great source for national but not the regional like what you’re talking about.
If you’re an Excel potential client or want the advice, you got a bunch of brand fans within your customer base. For a lot of franchisors, their first few come from friends and family or customers. They then roll out regionally. That’s a good place to do it. You can find referral sources that are out there if you hunt it down. Frankly, what you’ve built for Excel with the organic hyper targeted lead generation engine that you’ve got designed is a strong way.
You can maximize your dollars. I’m in national where I live now and I want to go regional. I’m going to choose Charlotte, Raleigh, Atlanta, Knoxville, and pick Florida and maybe Texas as my path towards expansion. You and I could work out a program. I want to add six new franchisees whatever your other month next year. What’s that spend look like? How do we do it? How do we target it?
There are people who can help a franchisor figure that out. It doesn’t mean you should never use brokers brand new stretch, but brokers are typically high volume like the large FSOs looking for high volume franchisor. If you’re not at that point in your development, organic is a great way to go. Paid leads are tough.
What you have built is rare and very valuable. If you’re brand has a little curb appeal, it’s cool and looks good online, it can be even easier. That way, you can get a handful of new franchisees in the markets you want them in for a reasonable cost per franchisee acquisition. In other avenues, you’re putting a lot of money up front and hoping for the best. We made a lot of franchisor which have done that to the tune of six figures. I got fourteen territory checks and no leads. One franchisor told us. They’re bummed, but they’re all so all that dry powder to find their first ten franchisees. There are some methods that you’ve built organically in a targeted fashion. Find that first handful would be my advice to them.
What I’ve figured out is taking me years of my life, but for the right company, it can work very well from a lead generation perspective. That’s one part of this equation because then, it’s not about just generating leads. It’s about generating high quality leads, not just because somebody inquires on your website about your franchise. There’s a whole other layer to this thing around process. What does your discovery process look like?
Some people call discovery or sales process. There’s the, “Who is running the sales process?” I can speak from personal experience of investing early in my life with AdvantaClean of grinding and out on the phones with no process. I could talk to people. That’s all I do. I would talk to them, “Here’s our FTD. What do you want to talk about?” There was no process. There’s been a couple of people that connected the dots. A process works. What do you have to say about what happens after you get a good quality inquiry on the website with somebody who’s interested in learning more about the franchise?
Two things you do prior to that is to have a well-defined avatar of who you want your franchisees to be, whether that’s financial, skillset, or outgoing salesperson. Whatever you need to have, you need to have that well thought through. You also need to decide, “What are we selling? Do we have good validation?” We have franchisees first private print money then lead with that. If you don’t, you’ve got one unit. They’re brand new and you’re probably going to lead with your founder and the story more.Have a well-defined avatar of who you want your franchisees to be. Click To Tweet
It is a more of a pioneering type candidate than, “I need a lot of research to make my decision or dad will make my choice.” You have to define who you want and what the end result you want them to end up in the process with is. Once you have that, you can design a sales process that gradually piques their interest as they go through it as you educate them. Also, barge them to get over, mutual evaluation process, whether it’s financials or skillset. “Is it a cultural fit? Will I enjoy working with this guy and girl for the next 7 or 10 years?” It’s a real thing most franchisors don’t think through.
The ultimate goal is to have them get their education, get their P&L built, talk to your franchisees or executive team, and have their interest piqued 6 to 8 weeks into that education or mutual evaluation process working together. You have to then make a decision, “Do you want to have those humans in your family?” There is a lot of art in how you package that messaging, when you use certain things, and how you create those levers to get over the bars and the leap over.
It’s a lot more nuanced than you think. Have a repeatable consistent process, you include the founder and operations team located. What we’re saying here in the sales process on what you are planning to deliver to these franchises and that all lines up is you can have a nice funnel that’ll pick out the best franchisees most often.
No development system is perfect. You’ll be fooled. You might miss a couple of great people that don’t like your process, but to run the best math and most efficient development process of the young franchisor is worth the pain of weeks of designing this very carefully and have your first two years be a pretty smooth pipeline of bringing new humans into your franchise family.
There’s a lot of thought that needs to go into how to design that mutual evaluation, sales, or discovery process. There’s also the person, too, that’s running that process with candidates. Rightfully so, this is a life-changing decision for a lot of franchise owners. Big decision should be big commitment on both sides. It’s like getting married. It’s not just about educating them because it’s a game in terms of all the other things that can go wrong from a spouse, not being on board, and not knowing that until the eleventh hour, which candidly can happen more often than you think.
They haven’t heard about until the eleventh hour from their spouses.
“Honey, we’re going to a discovery day.” “What? We’re buying a business?” “No, you’re not.” Rightfully so, if you do it like that, you deserve that answer. It’s part of this designing it to go smoothly and efficiently. It’s the person running that process is a big deal.
It typically shouldn’t be the founder. The founder could be focus on raising the kids. That’s their specialty. It’s probably the easiest component. I’m biased on this show with Excel. Outsourcing development is a pretty easy thing to do. If you do decide to outsource it to an FSO or a third party or bringing somebody you don’t know yet from the franchising world, don’t just leave it to them.
You need to get eyes on these candidates early. You need to have a very clear expectations as to who you want as franchisees and you got to say no to the ones you don’t have confidence in because that $50,000 no but not getting that franchise fee is worth two years. Who knows how much in pain you’re saving yourself by bringing in the wrong people?
Whether it’s cultural fit, improper expectations, and them want to tail wag the dog, who knows what it could be when you’re a young emerging franchisor? Don’t sell people whole markets. Give them what they can. No one needs news on all that land or Houston as your third franchisee. There are a lot of things that you can either get advice on from people like you or other folks out there. That’ll save that emerging franchisors a lot of pain and having to unwind that.
Think of how many brands we meet and you open that like, “Who helped you design this? Your item seven is wonky. Your territories make no sense,” or whatever they got going on. It’s so worth finding some advice. The cool thing about franchising is people want to help. This is since I was 21 years old. If you raise your hand and ask for it and go to some things, go to emerging franchise or conference, people do want to help you and give you good advice. Follow the right folks and get networked into the right resources in my experience.
If you just ask, you can start to piece together bits, pieces, and nuggets from different people and start to get calibrated on the different approaches and the pros and cons of different advice you’re getting from certain folks. Let me ask you this. How many times have you seen a good quality franchise brand? It is a great business model. You know they have happy and profitable franchisees. They figured out lead generation. They’re getting candidates who are interested. They’ve got a process, but they might not have the right person in the sea running that process. It’s unfortunate to see because you don’t even want to think about the opportunity cost of that.
It’s most annoying part of our job as franchise consultancies. You got an awesome opportunity, you need to tell your candidate, “Don’t mind that salesperson you talk to the next two months. Once you’re in your path now, don’t worry about salesperson A, B, or C.” You have to understand, when you ask. I ask my people after they decided to purchase. Why did you buy the franchise? It’s never investment size or margins.
It’s always like, “It felt right. I trusted the present.” That serve more like subtle thing if they’ve gathered to the course of process. The big part of that is how that salesperson represents your brand. If they’re abrasive, disorganized, talking down to people or blowing smoke up their skirts. Hoping to get a silk, they got to pay their rent next month because they’re desperate. All those different things can throw that out of whack.
That sales person is an extension of you and your brand 100%. Whether you outsource or to keep it in house, I like in house for younger brands too because you have more control over that a little bit. You hear what they’re saying to people. You have a little more control over what that messaging is. It’s a massive factor, especially if you only have like 2 or 3 franchisees. They’re buying that salesperson. They’re buying you way more than they’re buying any reality you have over twelve months of franchising with no item nineteen. It’s a big deal.That salesperson is an extension of you and your brand 100%. Click To Tweet
It’s so much more than, “Ready to franchise. Who’s ready to buy? Everybody’s locations and these units. Come on.” You see it. Franchise development continues to evolve. It changes.
The lead generation is evolves.
It’s a move in target and you got competition, a good quality brand. You will have people that are looking at multiple franchise concepts comparing your business to other franchises, your royalty fee, franchise fee, territory size, unit economics and systems. Very rarely is somebody focused on one franchise or maybe looking at existing businesses. Having competitive fee structure which we’ve been talking to one company. In our opinion, their fee structure is not very competitive but we don’t know if they see that yet. It’s not high compared to the market. It’s not an easy thing to get right but when you get it right, it helps you get to where you want to get to in the right way. When you get it wrong, it could set you back years. Not to mention the cost of it.
Most brands never get there. Most brands never get past 5 or 10 franchisees. They don’t only lose years. They never leave the starting blocks, they sell a couple to their brother-in-law and uncle. Maybe a customer like the cookies but then you never hear about those brands. You never hear them on a regional or national basis.
One thing, it always shocks me. If you ask a franchisor, when you put yourself in the shoes of a candidate, when you secret shot yourself essentially. Why would I do that? They’re asking people to trust you and buy into your brand and you haven’t checked up the competition. You asking me know, do you have other major competitors? There’s a couple of guys and find out there’s eight national brands. It’s putting yourself in the shoes of a candidate and what their mindset is.
Getting yourself out of your own business as an emerging franchisor as a very valuable use of time to know what you’re up against. The way people can get information now, unless they’re a rating fan of your location or your brand. They’re looking at other stuff. Once you start googling or looking at X on franchise. You’re going to get endless stuff and all sudden, their mindset wandering. You don’t have a captive audience very often unless they’re a referral from a current franchise.
Frankly, they should be looking another idea. A good candidate should compare and contrast. Not just fall in love with the workout or the kids’ class or the sandwich. Quiznos sold hundreds of locations and made many moneys because the sandwiches were good.
It is the other side of the coin. Our candidate goes through the mutual evaluation process or just the process. There’s a strong correlation to how they perform as franchisees. Are they asking good questions? Are they asking questions at all? Are they doing their homework? Are they quickly, getting back any information you’re asking for them? There are little things you can look forward to get a feel for how they’re behaving during that process. I don’t know what percentage it is, but there is a strong correlation of how they act during that process and how they’re going to be as franchisees.
Get feedback from your current franchisees. Call them, “Did you like them? Would you want to hang out from that convention next spring in Orlando?” Those simple things are very valuable. Also, if you have a handful of early franchisees, in fact, they’re a part of it, “We’re helping build this together,” you can create that environment. At some point, quit working with A-holes. If somebody has $20 million and they’ve been a franchise these six times over, they could be your biggest feather on your cap to have as your new franchisee, but they suck. Move on. Life is way too short to have those folks. The cultural fit when you’re in your first 8 or 10.
We validate with these potential brand partners for Excel and they have under ten franchisees. How those people interact in their vibe is massive. It’s almost as important as is the founder ready to take this on and have they build that culture. It’s a big thing. It’s a huge differentiator amongst brands that we see. Ones that have focused on that and have not. It’s communication and how to put in their franchisees first. They’re doing those two things well. You can have a pretty good vibe. If they don’t, you can tell in your first two phone calls.
That’s why we tell perspective franchisees to make sure you call a bunch of existing franchisees once our broker ads on.
It’s true, though. When you’re a candidate like, “This is exciting. I thought about this forever. What can I look at? Andrew has these three exciting brands I’ve never heard of. This is so cool.” I feel like the picture comes together for a candidate when they start talking to franchisees. It crystallizes, “I can do this. This fits for my family. I like this from a cultural, whatever those things are.” It doesn’t come together and make sense then.
They shouldn’t do it and they frankly very rarely do. Whatever you do to create your story with franchisees or franchisees cluster executive team to create a realistic picture. That’s why they buy or why they don’t. The sooner you get to the answer yes or no with proper information gathering. The better off both parties are. Trying to force it what the decision this big never works.
Again, if you want to distill it down to the two things it’s like if your franchisees are happy and profitable quickly. It becomes a lot easier at the end of the day. It’s been great. Do you have any final thoughts or nuggets you want to drop before we wrap up?
I got asked by a gentleman who’s looking to maybe franchise his business. We found a link to something like that. He said, “What would say the three things you have to have?” He doesn’t have any franchisees. He’s looking at how do I find a franchise? Very early on and the greenhorn stage. I’m like, “Do you have compelling unit level economics because if you don’t, the rest of it doesn’t matter. Do you have a bulletproof path to success for those franchisees to leave your training and get busy early?” You have to have that.
It takes care of so many other issues. Most importantly, whether it’s the founder like this guy or on the team, somebody has to want to raise the kids. We’ve learned with working with founders or small executive teams like when somebody in there is focused every day on how can I make these franchisees successful and happy? You got a great start to do it right as you learn, add more systems, tech and L&D. If you don’t have that person to lead that charge, the rest of it never comes in behind it. The franchisees get left behind.
Decide do you want to raise the kids if you’re an emerging franchisor because that’s the next four years of your life. The rewards are massive once you get past that point, but it’s real work. The money comes later. You got to be that servant, teacher, coach, or leader loving on people for a long time before the rewards come back to you as a franchisor.
Very well said. You take all this stuff and you boil down to a few key things.
It sounds daunting at first. We’re even starting from become a franchisor. What those first few key tenants aren’t as a part of you or a part of your business, then don’t. Open up four more locations and make it much money doing that. You can be a much happier person than trying to train a bunch of franchising. You and I, over the course of the year, tell way more people, “Are you sure you want to be doing this franchising thing?” We say yes, you should try and take this thing national. I bet it’s 2 or 3 to 1.
There’s no doubt. That’s probably why. I was talking with the wolf earlier. He came up with some stat. The median number of open franchise locations. Not the average, 38. Of the 3,000 or so, franchise concepts, including the Big Boys, and Chick-fil-A because I asked him if he included Chick-fil-A in those numbers and he did. We’re talking Marriott’s and McDonald’s.
Everything. The median number is 38. The average number was 22, but it’s skewed by those Big Boys. It’s not easy. Very few companies can get there.
Even our view is viewed with being in the inside FranChoice because a lot of our brands come in and they do well. They take off but what you don’t see, at least when I was there. Now Trent does it for us. You’ll probably looking at 24 or 25 brands to let one into the inventory. Where did the other 24 end up? Somewhere under that 38 number, or they never get out of the gates because they don’t have economics.
They’re poorly funded as a franchisor or whatever their issue is. If you’re a candidate trying to navigate where do I start looking for the right franchise for me or franchisor looking to start becoming a French learner and do it the right way? You got to spend some time doing your research because there’s a lot to learn. It’ll save you a mountain of time, pain and money, frankly, if you do that. That’s why this show that you’re doing it so valuable because you can get some of these nuggets and then, go to your own research and figure it out if you’re either one of those camps.
It’s possible. From a franchisee perspective, people go on to have a lot of success with certain franchises. The good ones get past that 38 number and get to royalty self-sufficiency then you got the private equity companies that start come and knocking. That’s why private equity companies are paying these insane multiples for franchise systems because the ones that can get past those critical milestones and truly expand nationally. It’s not a big pool of brands that get there.
I probably sound too doom and gloom with some of those comments, Drew, but you want to help them avoid the pitfalls and do the works you can avoid that stuff and be on the right path. Whether it’s you owning five club Pilates and being happy as a clam. Your retirements and kid’s college recover or if you’re a franchisor trying to get to 50, PE does think you’re rad and want to buy you.
There are so many humans in our world that will help you avoid the pitfalls along the way. You got ask and look into these topics in more detail. You can figure it out because a lot of people we know have made buckets of money as franchisors and franchisee. There’s plenty of opportunity. Entrepreneurship is a wonderful thing. Franchising is a less risky way to go about it, but it’s not with no risk. It’s not how it works.Entrepreneurship is a wonderful thing. Franchising is a less risky way to go about it. Click To Tweet
If you can arm yourself reading to episode, reading books, talking to franchisees and franchisor, you get calibrated. You get dialed in to what to look at because a lot of what you’ve shared is a franchise company even ready to franchise. Do they have a compelling case to franchise with unit economics, and the right people in place to raise the kids? What was the third one?
You want to get them out of the gates and successful quick. Do you have a ramp up plan to get them on board of the successful as quickly as possible?
If you look at those three things through the lens of a franchise candidate. Those are the same things. You should be evaluating franchise that you’re looking at through. It’s all one big ecosystem because everything so interconnected.
You ask a franchisor, where do you see yourself? Where do you see your role in the business in three years? They give you a dumbfounded look back. I get so nervous because there’s so much work to be done. Somebody needs to lead this charge. If you’re a candidate and the franchisor give you that blank stare. Run. Don’t walk. Find a different brand that you feel very confident in because when the tough times happen in that first year. You need to have that trust and relationship with that brand or those people to get you through it. You should be offering that same thing to your franchisees if you’re that emerging franchisor because they need it.
Well said. I’ve been waiting to ask this question. Thank you for joining. If people want to get in touch with you, Andrew, Cofounder of Excel Franchise Development. How can they do that?
There you have it.
Thanks for having me. This was fun. You and I have been having this conversation about something Excel for how many years. I’m excited to partnering it with you and help these younger franchisors career the game out the right way. It’s going to be a great adventure.
Do it the right way. I’ll let you roll. Thanks.
Be good. Talk to you soon.
About Andrew Horton
Andrew Horton is a franchise industry lifer. He has worked in or on every level of franchising. He has been a franchisee multiple times in both the service and retail sectors. He has been a franchisor and consulted with hundreds of the highest growth franchise operations over the last 15 years to assist them in their national expansion plans.
He also helped launch the most successful referral network in the industry with one focus in mind… create the best possible opportunities for would be franchise owners. Most recently, he’s partnered with Dru Carpenito to found Excel Franchise Development – a boutique franchise sales organization focussed on helping emerging franchise brands find the right franchise owners (and lots of them).