My Podner in this episode is Cheryl Mullin and she’s going to talk with us today about Financial Performance Representation! Man, if that doesn’t make you salivate then you are no franchisor in my books. This can be a very dense topic but I am confident that Ms. Cheryl help us demystify this topic and maybe even help us pull our heads out from underneath the covers every time it is mentioned. But who knows, she may even have us running for the hills even faster.

 

Time Stamps
Cheryl Mullin Intro	00:00:30
Segment 1	00:02:49
Get to know Cheryl Mullin
Segment 2	00:20:31
Topic Segment – Financial Performance Representation
Segment 3	01:57:46
Quickdraw Questions

Topics covered in this episode:

• History of the FDD
• What is a financial performance representation?
• Is it absolutely necessary for a franchisor include a financial performance representation in their FDD?
• Are there legitimate reasons that a franchisor wouldn’t make an FPR?
• If a franchisor wants to include financial information in its FDD, is there certain information that it must provide or a required presentation format?
• Why is it important to include financial information in an FDD?
• Does the Federal Trade Commission allow for any exceptions this disclosure of financial representations?
• Are there any rules or limits that apply to financial performance representations?
• Where do you see most franchisors get in trouble?
• What advice would you give to a franchisor?

 

Cheryl Mullin

Mullin Law PC

cheryl.mullin@mullinlawpc.com

www.mullinlawpc.com

972-852-1703

 

Kit Vinson

FranMan Inc.

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is Jordis Small and she’s going to talk with us today about branding. Branding is a word that is used in many contexts and sometimes misused and misunderstood. Jordis promises to clear all of that up for us today. This will be a fun ride

Note: Ms. Jordis is recovering from a nasty cold and she lost her voice. The voice is scratchy but the content is GOLDEN.

Time Stamps
Jordis Small Intro	00:00:32
Segment 1	00:02:42
Get to know Jordis Small
Segment 2	00:18:00
Topic Segment – Branding Your Franchise
Segment 3	01:14:12
Quickdraw Questions

 

Topics Discussed in this Episode

• What is your brand? 

  Most folks think it’s logo, fonts, colors... It’s much more

• Why do you need to know your brand better than your spouse? 

  Are you prepared to articulate your brand to potential franchisees?

• How to audit your own brand...

  Test your logo to see if it’s good, is everything in alignment with the vision of the company, will people understand it with you telling them?

• What makes a GOOD logo?

  Is your logo scalable, timeless, and appropriate for growth?

• Why do you need a robust brand guide before franchising?

  What is worth including, like color usage ect…

• How to set up your franchise for success through creating an asset library. Basically pre making various marketing materials for them so they don’t DIY.

• Why does this brand work now? Prepare for growth and longevity. 

Jordis Small

Stellen Design

www.stellendesign.com

jordis@stellendesign.com

310-418-6287

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is Tom Wells and he’s going to talk with us today about the challenges of scaling a brand over 50 units. It’s a moving target and things change, and he’s going to share some REALLY COOL stuff with us today.

 

Time Stamps
Tom Wells Intro	00:00:31
Segment 1	00:02:13
Get to know Tom Wells
Segment 2	00:27:05
Topic Segment – Challenges of Scaling to Over 50 Units
Segment 3	01:06:27
Quickdraw Questions

 

Topics Discussed in this Episode

Key areas franchisors miss in their first year:

• This ultimately comes down to People, Process, and Prioritization. Many entrepreneurs didn’t become entrepreneurs to focus on process and structure – the most successful ones hire around this need. 
  • People: You ave to get the best team and figure out where to hire over time. Requires culture of accountability which sounds easy but is difficult to implement. Additionally, the founder(s) need to manage their people, but also give them authority to execute. 
  • Process: What works at 10 units or 20 units, doesn’t work at 50+ units. A leader or team can run around putting fires out at 10 units, but you can’t do this at 50+ units. Many organizations never think about what process is needed to make better decisions over time. Additionally, need to want to get and understand the right data which is hard with limited resources.
  • Prioritization: Everyone has a day job; can only take on a few big strategic initiatives at a time. Most founders have a list of 20 major initiatives they want their team to do at any time. Some get done, some don’t – all of them are not done at the highest level. We spend a lot of time focusing each year on what are the main ones to provide the biggest benefit to the business (this is very hard) and then helping the teams focus on these items. Do this repeatedly and the business constantly evolves nicely.
• Being Ready to Grow: To grow from the concept stage, you need the below but I always start with “If it’s a great investment for the franchisee, the brand will generally do very well”:
  • Great unit economics: This is almost impossible to fix along the way. If the concept doesn’t work from the start, it’s unlikely to have better unit economics along the way. Our view is 3 year or better payback is top 25%. Anything better is best in class. We also look at store level margin as it provides insight into cushion for franchisee performance (ie: very low margin has limited room for error).
  • Differentiation: It’s important to have something that sets a brand apart from its competitors. This applies to all concepts regardless of industry. Tons of competition in restaurants, how are we getting a competitor to pick us vs their 100 other options (product, service, experience, technology). In services, there are tons of local companies that can do plumbing, why pick a franchise (marketing, service, answer phones, clean looking techs, technology, etc.)
  • Structure / Process : This is different from the process above. This is being able to sign franchise agreements knowing that you are growing a repeatable concept (ops manuals and guides, trade design, product, branding). You don’t want different menus at different locations, different store designs, etc. Key to have something where there is benefit of scale and franchising.
• How brands scale: Most grow without a lot of thought of who the franchisee is and where they are growing. Need to be thoughtful here.
  • Who the franchisee is: Over the first 10 or 20 locations, you really figure out who is the best operator for a brand. Additionally, you learn who is not a fit. These need to be addressed thoughtfully otherwise a brand will struggle with bad franchisees as it gets larger.
  • Where you grow: It’s easy to sign franchise agreements with interested franchisees that are far away. This depends on complexity of the concept. For example, restaurants require distributions centers and are hard for corporate to help with when far away. Generally easier to go concentrically with restaurants, especially with brand loyalty.
  • How you develop: Growth is great, but ultimately the franchisee needs to succeed. It’s better to make sure you have the right operator and right site, rather than compromising just to grow. We see so many brands that are great, but have struggling units where they compromised early – this doesn’t show up for a few years.

 

Books Mentioned

The Hard Thing About Hard Things

by Ben Horowitz

 

Unbroken

By Laura Hillenbrand

 

Tom Wells

www.10pointcapital.com

twells@10pointcapital.com

404-444-3110

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is Michael Peterson and he’s going to talk with us today about the mistakes that new franchisors typically make during their first year of operation. Some of these mistakes can be quite expensive, while others can lead to the death of your entire system. If you are a newly minted franchisor, or if you are about to start your journey, this is one that you won’t want to miss.

 

Time Stamps
Michael Peterson Intro	00:00:31
Segment 1	00:02:37
Get to know Michael Peterson
Segment 2	00:20:39
Topic Segment – New Franchisor Pitfalls
Segment 3	01:03:05
Quickdraw Questions

 

Topics Discussed in this Episode

Key areas franchisors miss in their first year:

Pre-launch

• Not getting the FDD to fully capture the business model. This leads to something so prevalent that I came up with a name for it; the 2nd year re-write. So many franchisors make massive changes to their second year FDD either because they didn’t capture the existing model in the first year, or they didn’t have someone walk them through the thought processes they should be going through on every item before they commit it to paper.
• Having “to be implemented” clauses in their agreements. The most common one I have seen here is a national ad fund, though I have seen tech fees quite a few times as well. When your franchisee #1 or #2 has been operating for 3 years, paying you your royalty only, and suddenly you decide your system is big enough to justify the advertising fund of 1-3%, believe me they will not be happy. Start taking this from day one, even if you turn around and spend it in their market.
• Cutting corners or coming in underfunded. This is probably the #1 cause of failure of young franchisors. Deciding to write an operations manual in-house, find the cheapest franchise attorney possible (or, worse yet, trying to do an FDD without a franchise attorney), not having quality marketing materials, not having funds set aside for franchise sales; these are so self-defeating.
  • A bad operating manual can lead to system problems and even litigation.
  • If you succeed as a franchisor you will end up using a good franchise attorney, if you start out with inexperienced or ineffective counsel, you’ll just pay in negotiation, litigation, or just headaches before you switch to better counsel.
  • Your marketing materials are your first impression, you have to make them count.
  • Franchise sales cost money, period. If you don’t have a good marketing budget you will struggle to grow. Think about this. Each year, you are going to spend between $6,000 and $25,000 on renewal, depending on how many registration states you go into and how complicated your audit is. I would guess the average is close to $12,000. If your lead generation spend results in one sale, then you have an extra $12,000 in costs for that sale. If you have a robust budget and someone solid handling franchise sales, and you award 3 franchisees, then the renewal is only adding $4,000 cost-per-close. Big difference.

Post Launch

• Hands down, the biggest mistake a franchisor can make is bringing in the wrong franchisee. If you have been doing all the ‘right’ things, spending money, having a professional franchise sales person either in-house or outsourced, reaching out to brokers to talk about your brand, and 6 or 12 or even 18 months in you don’t have a franchise sale, that can be frustrating. It also might happen; the first franchisees are the hardest to find (lets delve into that). I have seen this situation cause many franchisors to award a franchise to someone they shouldn’t and regret it for years to come.
• Not having a culture of compliance from day 1 is another seemly small issue that will come back to haunt you. If your FA calls for quarterly or annual financials from your franchisees, get them even if you don’t know what to do with them! If your franchisees have a required add spend, monitor it from day one. Or better yet, engage with them and help them spend it correctly, but either way make sure they are spending it. If there is a clause you are not enforcing from day one, throw it out.
• A problem many new franchisors think they wish they had; growing too fast. I have been in this position. I am talking about 4 stores open in January and 120 open that December fast! Trust me, you don’t want this kind of growth out of the gate.
• Compromising to get a deal. . . I put this one last because it very well may be something you need to do. As I mentioned, first franchisee is HARD! It may be may be reasonable, appropriate, or even necessary to ‘give’ on the first franchisee, maybe even on the first few. But be careful. If you are giving a bigger territory, are you really setting that franchisee up so that there is no chance of you putting someone into the same market and putting local brand awareness 100% on their shoulders? Are you offering a refund clause that you can’t really afford, from a capital cost of onboarding stance? Make sure your attorney is involved here and be careful. And again, don’t be afraid to say no and walk away.

 

Books Mentioned

Think Like a Freak

by Steven D. Levitt, Stephen J. Dubner

 

The Memory Illusion

By Julia Shaw

 

Eye of the World

Robert Jordan

 

 

Michael Peterson

www.franchisebeacon.com

michael.peterson@franchisebeacon.com

949-282-7304

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is Tom Portesy and he’s going to talk with us today about how to maximize the return on your investment at a franchise expo, how to avoid the pitfalls, and best practices that will help you represent your brand in the best light.

 

Time Stamps
Tom Portesy Intro	00:00:27
Segment 1	00:03:41
Get to know Tom Portesy
Segment 2	00:18:22
Topic Segment – The Franchise Expo
Segment 3	01:03:42
Quickdraw Questions

 

Topics Discussed in this Episode

• What is a franchise expo
• Short history of the expo
• How to manage realistic expectations of an expo
• Know your objective
• DOs and DON’Ts at an expo
• Take advantage of the free training offered by MFV
• Spend time developing your opening line
• Know the value of a lead
• Control how much time you spend with each person
• Which industries do better at an expo

 

Tom Portesy

MFV Expositions

tom.portesy@comexposium.com

https://www.franchiseexpo.com/

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

My Podner in this episode is Jackie Hoegger and she’s going to talk with us today about how to market to prospective franchisees. This conversation spans topics such as website design, digital marketing, even down to how you treat your existing franchisees. This is our first episode on the topic of marketing and we came out of the chute  with a GREAT one..

Time Stamps
Jackie Hoegger Intro	00:00:33
Segment 1	00:05:26
Get to know Jackie Hoegger
Segment 2	00:16:50
Topic Segment – Marketing to Prospective Franchisees
Segment 3	01:00:57
Quickdraw Questions

 

Topics Discussed in this Episode

1. Brand on Fire (00:21:49) - Elevate your brand as the key authority in the franchise world - Go beyond simple brand awareness and stand out….provide MORE value than your competitors.

• Know your “story”
• Know your passion and learn to convey your passion to the prospective franchisee
• This is a marathon, not a sprint
• Hone in on your God given skills
• What is it that makes your concept special
• Most franchisors will need help developing this point

2. Social All The Way (00:29:12) - Tell your story as a Franchisor on social media - your new franchisees are watching. Get them to trust you as a leader before they ever make the call or the link online to talk. 

• Social media is the best ROI on delivering your message
• Know the target profile of the perfect franchisee, then dial in your social media advertising
• Social media not only allows people to see you from the outside, it also allows people to be able to trust you

3. The Power of the Existing Franchisees (00:32:16) - Let them sing your praises! Let them garner the attention of YOU! 

• Your franchisees are your #1 asset. Nobody can credibly sing your praises better than your current franchisees
• Prospective franchisees are most interested in what your existing franchisees say about you, and the WILL ask.
• Coach your prospective franchisees before they make the validation calls so that they know how and when to ask follow up questions. If they talk to an existing franchisee who does not sing your praises, then teach them how to ask questions such as “How much do you spend on marketing?”
• Marketing isn’t just advertising, it is much more. It also includes soft skills such as how you treat your franchisees. Existing franchisees are a DIRECT arm of your marketing
• Communication is king

4. Web oh Web (00:37:02) - Your website needs to simply rock - It’s the front door to your business and future franchisees will go there FIRST! Make it EASY PEASY to find out how to gee a Franchisee.

• Spend money on your website – it IS marketing
• Spend money on a good CRM software that will allow you to grab a lead and not lose it
• Calculate the value of a prospective franchisee over the life of the contract to help you stay motivated NOT to lose a lead
• It may take several touches with a prospect before they decide to move to the next step. Use the CRM to maintain communication with a prospect.

5. Keep is Simple in a Complicated Process (00:46:00) - Give them a simple process from the first bite.  As you discover if they can fit into your culture ad family - make them feel welcomed!  Of course - Discovery Day is your wow factor!

• They should look back and thing, “This was the easiest thing I’ve ever done.”
• Make it fun, energetic, and educational
• Assign the prospect to one person and that person “owns” them. This makes the prospect feel special and prevents them from falling between the cracks

6. Eyeballs and Attention (00:49:04) - Optimize your Appeal and let them see the way you treat your current franchisees as true partners…..support programs - rapport with each other - and mostly - the dream to have multiple units. 

• Treat franchisees as true partners
• Franchisees are watching EVERYTHING you do, as if you were on a first date
• They pick up on kindness, humility, and compassion, and this is the best marketing you can do
• The power of corporate culture is under-appreciated
• You can do all the marketing you want, but at the end of the day, if your guest experience isn’t there, you are fighting a losing battle.

7,  Hire an Agency (00:55:21) - They can develop a 3 pillar strategy to drive conversions to your website which leads the first touch.

• Do what you do well, and hire done what you cannot do
• It’s OK if marketing is not your “gig”, but if it isn’t, you should hire it out.
• Have a marketing budget before you begin. Your marketing “war chest” should have $50K+. However, every marketing campaign is different.

 

Books Mentioned in the Episode

Crush It

By Gary Vanerchuck

 

Jackie Hoegger

Hoegger Communications

Jackie@TeamHoegger.com

www.teamHoegger.com  

940-631-7999

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is me, Kit Vinson (finally!), and I'm going to talk to you about what franchisors should know about their franchise operating manual.

Time Stamps
Kit Vinson Intro	00:00:29
Segment 1	00:02:15
Get to know Kit Vinson
Segment 2	00:13:30
Topic Segment – The Franchise Operating Manual
Segment 3	00:00:00
There are no Quickdraw Questions in this episode

 

Topics Discussed in this Episode

What’s Included in a franchise operating manual?

Every manual is customized to the industry of the company, but there are elements of a franchise operating manual that are common to all manuals.

• Introductory chapters
• Pre-Opening chapter
• Human Resource chapter
• Daily Operating Procedures chapters
• Marketing chapter
• Sales Chapter

 

What is the process for producing a franchise operating manual?

• Creation of the custom outline for the manual
• Legacy documentation review
• Identification of the content experts
• Information gathering phase
• Production phase
• Revision phase

Make the manual creation process fun so that you can start the flow of your team’s creativity juices.

 

How often does the typical franchise manual need updating?

Manual updates should be completed on a regular basis. Younger franchise systems will need to update their operating manual more frequently because their systems seem to evolve at a much faster pace than that of a mature franchise system.

If you do not keep your franchise operating manual updated regularly, you increase the probability of you having to explain to a judge why your manual isn’t up-to-date.

 

How are franchise operating manuals typically distributed to the franchisees?

• Hard copy (paper)
• PDF
• Web based platform (Wiki-style)

Hard copy manuals have extreme limitations. They are not secure. They are only a snapshot of your system on that day. Media limitations.

PDF manuals are searchable, but they are not secure. They are also a snapshot of your company’s system on that day.  They are relatively easily to update but you run the risk of having multiple versions of your manual floating around your system.

Web based, online operating manuals are secure, they are extremely easy to update, you can track your franchisees activity in the manual, and you can include multimedia content such as videos.

 

What are the functions of a franchise operations manual?

First, the Franchise Operations Manual is the authority document of the franchise System Standards. The System Standards are the standard procedures that a franchisor requires of all franchisees in order to duplicate the customer experience in every location. The customer experience is the driving force behind profitability. If you can duplicate a favorable customer experience, then you may have a business that you can franchise. If you have a well prepared Franchise Agreement, it will refer to the Franchise Operations Manual as the System Standard. This way, as your system grows and your System Standards change, you only have to update the manual instead of updating the Franchise Agreement.

 

Second, the Franchise Operations Manual is the most effective tool for protecting your Brand. A company’s Brand is one of its most valuable assets. The Brand is also the asset that is at most risk when a company decides to franchise. When you franchise a concept, you are putting your Brand in the hands of other people, all of whom likely have different ideas about the best direction for the company. A properly prepared Franchise Operations Manual, with well-defined and organized System Standards, will be one of the few tools you have to manage the Brand and control the franchisees when they try to act on their vision for what is best for your Brand.

 

Third, the Franchise Operations Manual will likely be the principal tool for training new franchisees. It is the “Your Company for Dummies” book. You have to assume that most of your franchisees will not have experience in your industry. They may not have any business experience at all. It is very common for a retired schoolteacher or a retired military person to invest in a franchise. This is not to suggest that schoolteachers or military personnel don’t have any business savvy, it is only to say that they were not formally trained in business and have not practiced it during their career. Your manual needs to be a document that not only trains them on your system of providing a favorable customer experience, but also one that brings them up to speed on how to manage a business.

 

Fourth, a well prepared documentation of the procedures that has helped make your company a success will help you sell your concept to potential franchisees. Put yourself in the shoes of a potential franchisee. If you received a Franchise Disclosure Document (FDD) that showed you that the company had a 50 page document describing all of its operating procedures, you might be a little concerned.

You will also take your Franchise Operations Manual with you when you meet with potential franchisees for the first time. In that meeting, you will attempt to sell the concept to the prospect. Like all good sales people, you will likely have a few sales tools to assist you. You will probably present a PowerPoint presentation of the concept, you will review the company’s performance in the FDD, and you will present the Franchise Operations Manual as your proof that you have a well documents system for success.

 

Fifth, you don’t get very many opportunities to convey your corporate culture to your franchisees. Initial training lasts a week or so. Annual conferences last a few days per year. Ultimately, it is the franchise operating manual that will have the most contact with your franchisees, so what better place to show them who you are.

 

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner in this episode is Brendan Charles and he’s going to talk with us today about what franchisors should be teaching their franchisees about site selection, real estate negotiations, and build-out. Bad decisions in these areas can be detrimental to the success of the location. Everybody has some skin in the game here. This discussion will benefit both new and seasoned franchisors.

Time Stamps
Brendan Charles Intro	00:00:28
Segment 1	00:02:44
Get to know Brendan
Segment 2	00:15:38
Topic Segment – Site Selection, Real Estate, and Buildout
Segment 3	01:25:10
Quickdraw Questions

 

Topics Discussed in this Episode

• You only get one chance to get the real estate right.
• Real estate is one of the three main controllable in a franchise business model but real estate is only a “controllable” until you sign the lease.
• If you don’t know what your break even is BEFORE you start looking for real estate, then your real estate decision could break you.
• #1 rule in site selection – Never fall in love with a space.
• The real estate brokers’ incentives are not necessarily aligned with yours – the more you pay in rent, the more the broker gets paid on commissions
• Know exactly what your site selection criteria are BEFORE you start your search
• How do you develop site selection criteria when you only have one location to go by?
• Utilize the free services of your real estate broker to provide the demographic reporting
• Once you have multiple locations in operation (data points), then you can compare performance with location attributes and fine tune your site criteria
• Onboard your broker about the brand – make sure they share the enthusiasm of the brand’s potential as they will be your #1 sales person when presenting the concept to potential landlords
• Spend a full day viewing all available locations in the “Market Tour”. Take copious notes on the good as well as the bad locations
• Boil your options down to 3-5 locations
• Time kills all deals. You have to move FAST after your market tour and get the letters of intent out quickly.
• The franchisor should be very involved in the site selection process – don’t sit on the sidelines
• Submitting a good letter of intent is the most important step in the whole landlord negotiation process – rent, term, tenant improvements, etc.
• If you don’t get the Letter of Intent right, there is no way you will get the build out right, and if you don’t get the build out right, you’ll be behind schedule and way out of budget
• Once the letter of intent is delivered, the landlord is on notice to respond, however, that doesn’t mean that you can stop looking.
• Always have backup sites in your pocket
• Use two LOIs to leverage the deals against each other.
• Once you reach the lease stage, the due diligence of the space continues – make sure that the space is exactly what the landlord advertised it to be. This is done with a site survey
• The drawings from the landlord aren’t always accurate so don’t rely on them
• It is best to utilize a national architect for every franchised location rather than local architects
• Floor plan design in a restaurant – the dining room is your money maker and should be maximized
• Familiarize yourself with the design review process – go down to the city offices and meet the people who will be doing the plan review
• Identify general contractor bid pool – qualify them – Have they built in the market you are in? – Do they have the relationships with the city officials, etc. Avoid too many GCs in the bid pool
• At the time of the build-out, the interests of the landlord are in line with yours because they get rent money once you open your doors for business, so they can be a good source of referrals of general contractors.
• Poorly planned design submitted to the city will stall the process
• Be aware of a TAP Fee – a fee by the city in order to tap into the utilities. This can be very expensive
• Ensure you have a plan to get your FF&E paid for and delivered on time according to the contractors timeline
• Qualify the bids by ensuring that everything in the bid is supposed to be there and nothing is there that isn’t supposed to be there. Be sure to clarify who will be responsible for what activities and purchases. Make sure there is a clear matrix of responsibility.
• No hammer can swing until the building permit is issued
• There is no return on investment for the franchisee to be on site every day once hammers start swinging, rather, they should be focused on the bigger picture of doing the activities in preparation for the opening day such as hiring staff and marketing for the grand opening

 

 

Brendan Charles

Red C Business Advocacy

www.redcadvocacy.com

Brendan@redcadvocacy.com

Phone -   303-333-3420

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

My Podner duo in this episode is Andy Erskine and Bob Gappa of Management 2000, and they’re going to talk with us today about the importance of customer loyalty, what drives it, and how to manage it. This discussion will benefit both new and seasoned franchisors.

Today’s episode will be unique. This will be the first time to have a returning podner with the GREAT, Mr. Bob Gappa. You may remember Bob Gappa from Episode #2 where we discussed the nature of the relationship between franchisor and franchisee.

Andy has been Bob’s Protégé for 8 years now as he’s been learning franchising from the master and taking Bob’s accumulated knowledge and adding his own flavor to it.

Time Stamps
Andy Erskine Intro	00:00:29
Segment 1	00:02:36
Get to know Andy
Segment 2	00:11:20
Topic Segment – Creating Customer Loyalty
Segment 3	01:05:10
Quickdraw Questions

 

Topics Discussed in this Episode

 

What is customer loyalty?

• Transaction count is NOT the same as customer loyalty.
• Another term for disloyalty (brand adultery)
• Customer loyalty is tightly woven into Brand, which is made up of the emotion that you create with your customers

 

What makes customers loyal?

• Loyalty is built around emotions and emotions come from the customer experience
• The way that you interact with your customer (operating system) is what creates positive or negative emotions.
• Repeat customers are a result of your team members creating an emotional bond with the customer through the delivery of your product or service.
• Brand standards should focus on creating the emotions that make customers want to talk about their experience with their sphere of influence and go back.
• The Operations Manual is in place to create customer loyalty.
• To understand what creates positive or negative emotions in a customer, we need to understand the customer journey.
• The customer journey is literally every interaction that a potential customer has with you before, during, and after doing business with you
• Visible versus invisible standards – both affect the customer and loyalty. Invisible standards are those not customer facing, like ordering a sufficient amount of material to deliver the product.
• The issue with system standards is that there isn’t enough forceful compliance when they aren’t being followed and there isn’t enough positive reinforcement when they are, and so they don’t seem important to either the franchisee or franchisor.
• Brand icons are as important to customer loyalty as brand standards. Brand icons are the aspects of your business that you are absolutely known for.
• Emptions are what create the brand rather than a well-known company.

 

How do you measure customer loyalty?

• Technology is how to track customer loyalty through cell phones and credit card transactions
• Knowledge is power. Know your customers behavior data and use that to create the emotional connection in them to make them loyal.
• By understanding what customers value, we can create customer loyalty
• Prism will segment your credit card transactions into demographics and behaviors

 

What do you do with customer loyalty data after you get it?

• Data helps you refine your message to your real customers – understanding what they value so you can deliver the value that they want, which in turn creates loyalty
• Don’t confuse frequency due to convenience with loyalty.

 

What should I be doing today as it relates to customer loyalty?

• Start enhancing what it is that the customer values by understanding who the customer is.
• Stop thinking of yourself as a franchisor and start thinking about yourself as a steward of a brand.
• Stop having a franchisee advisory council and start having a brand advisory council
• Answer three critical questions. Know who your customers are. Know what they value. Know how to enhance what they value.
• Know how to make their experience personal.
• Help the customer make a connection to your brand
• Select employees, don’t simply hire them.
• Focus on how to create a great place to work
• Team members should know that their job is to create an experience that makes the customer want to come back
• Training a team member is usually only focused on the activity, which is simply skills, knowledge, and abilities. In addition to that, you should focus on developing people’s understanding and emotional commitment to the purpose of their job, which is to get the customer to want to come back.

 

Andy Erskine

Management 2000

www.mgmt2000.com

M2000@mgmt2000.com

Phone -   800-847-5763

 

Kit Vinson

www.franman.net

kit.vinson@franman.net

214-736-3939 x 101

 

Books Mentioned in the Episode:

Love Marks

By Kevin Roberts

 

The Effective Executive

By Peter Drucker

 

Emotionomics

By Dan Hill

 

Retail is Theater

 

My Podner in this episode is Red Boswell and he’s going to talk with us today about how to generate franchisee leads. This is one of the hottest topics with franchisors. This discussion will benefit both new and seasoned franchisors.

Red is a unique character, and I mean that in a good way. This guy has been driven to make money ever since he was a kid. Starting in grade school when he was selling NFL pencils for a profit, into hos twenties when he build up a pet services franchise system  all the way up to 148 units. He’s been operating in the world of franchising practically his entire adult life. He’ll give us more details in just a few minutes.

Red now gets to fuel his business building passion as President of the International Franchise Professionals Group (IFPG), The World’s Largest and Most Respected Franchise Consultant Organization. .

Time Stamps
Red Boswell Intro	00:00:28
Segment 1	00:02:05
Get to know Red Boswell
Segment 2	00:29:45
Topic Segment – Franchisee Lead Generation
Segment 3	01:01:50
Quickdraw Questions

 

Topics Discussed in this Episode

The cost of a lead

• The average cost of a lead in 2019 is $10,000
• That number does not including commissions
• That number includes large companies that don’t need to spend anything for leads because their brand is so well knows that they don’t need to advertise to get leads
• Small companies usually pay a lot more to generate leads since their concepts usually don’t have any brand recognition

 

16 sources of leads

• Direct mail
• Print
• Online
• Brokers
• Referrals
• Consumer / Clients
• PR
• Industry / Conversions
• Prospecting
• Buying leads
• Live events / Expos
• Mobile / Roadside
• Upgrade / Multi-unit Operators
• Past leads
• Guerilla marketing
• TV Radio

 The marketing mix is a moving target and is different for every concept. There is no silver bullet, one size fits all solution for the marketing spend mix.

Do a lot – do it for a long time – test and measure

Every option will involve one or all of these three

• Time
• Money
• Resources

The trick is to utilize the options that require the resources you have the most of.

 

Red’s Favorite Five

Red says that every solution must be customized to the individual concept, but if he HAD to pick his favorite five, the would be:

Brokers

• Best option for any size franchisor
• You pay to be a member then pay a commission per close
• Many broker groups won’t accept smaller start-up concepts
• Big saver of time and resources

PR

• Hire a PR firm
• Find one who is familiar with the world of franchising
• IFA members a plus
• Validate with their past clients

Industry Conversions

• Converting existing business people who are struggling
• You never know who may be disenchanted with operating their own concept and who would love to convert
• These are cold calls usually

Live Events / Expos

• Usually between $5k and $10K per event
• Use common sense and work it hard
• Energy – follow-up – is key

Online

• You could make online all five
• PPC Pay per click / Banners
• SEO of your own franchise site
• Develop a GREAT portal that grabs and tracks leads and conveys the information well. Portals tend to generate  a lot of volume with lower quality, but still worth the spend
• Social media posting
• Big data targeting
• Job boards – make a job advertisement  with the tag “some investment required” – describes a dream job

Bonus Source: Guerilla Marketing

• Example: flyers on every windshield at the local franchise expo

 

Common mistakes made by franchisors as it relates to lead sources:

• Lack of infrastructure – be able to walk away from your business for 6 months
• Don’t try to run your business and franchise it all by yourself
  • Franchise Development person
  • Marketing person
  • Onboarding / Training person
  • Field support person
• Lack of good ops manuals
• Not charging enough for the franchisee fee in order to pay for the costs associated with lead generation and other expenses
• Negotiate a broker commission too low – nobody will show your system if the commission is too low
• Seek wise counsel

 

Books Mentioned

• Franchise Management for Dummies
• Becoming a Strategic Business Owner
• How to Win Friends and Influence People

 

 

My Podner in this episode is Rob Vinson and he’s going to talk with us today about Franchising 101 – Where to start when you backed into franchising by accident, and don’t know where to go.

Rob has been a franchise attorney for 26 years. He was a partner at the prestigious law firm of Strasburger and Price, which is now Clark Hill after an April 2018 merger. Over 13 years he worked his way from associate up to partner. In 2001, he started his own law practice of Vinson Franchise Law and has been doing that ever since. He works, and has worked, with clients all over the United States as well as internationally.

Rob is also a founding partner of FranMan Inc, a company that specializes in producing franchise operating manuals.

In 26 years Rob has accumulated a great deal of experience that he is going to share with us today.

Time Stamps
Rob Vinson Intro	00:00:27
Segment 1	00:02:00
Get to know Rob Vinson
Segment 2	00:22:32
Topic Segment – Franchising 101
Segment 3	01:06:50
Quickdraw Questions

 

Topics Discussed in this Episode

• What is Franchising?
• Business Format Franchising versus Product Distribution Franchising
• What is the difference between franchising and traditional licensing?
• What are the three elements that must be present in order to be considered a franchisor by the FTC?
• Just because you may not be considered a franchise by the FTC, you may still be considered a franchisor by the state government.
• Why franchise instead of expansion through company owned locations?
• What types of business lend themselves to franchising and which don’t?
• What elements of a business does Rob look at when advising a client on whether the business is “franchisable”?
• What resources are available to a new franchisor to help navigate the waters of franchising?
• How can a franchisor find a franchise attorney?
• What should the franchisor consider when selecting a franchise attorney?
• What services do franchise attorneys offer to franchisors?
• What is the FDD and Franchise Agreement?
• Why did the FDD come about?
• What are the dangers of a new franchisor using a template to create their own DFF and Franchise Agreement?
• How important is a well-documented franchise operations manual?

 

 

 

My Podner in this episode is Stan Friedman and he’s going to talk with us today about Customer Relationship Management software, or CRMs.

 

Time Stamps
Stan Friedman Intro	00:00:27
Segment 1	00:02:34
Get to know Stan Friedman
Segment 2	00:23:32
Topic Segment – CRM – Customer Relationship Management
Segment 3	01:07:51
Quickdraw Questions

 

Topics Discussed in this Episode

• Brief history of CRM
• What is CRM today
• How is CRM used in franchising
• Can a franchisor get by without CRM at first
• When does a franchisor need to graduate to CRM
• How to choose a CRM
• What is FRM Solutions
• The features of FRM Solutions
• The types of information a franchisor need to be managing
• the juggling act that a franchisor has to do when business gets that busy
• Sortable, Reportable, and Dashboardable,
• Candidate Gate – Franchisee Gate
• Gating the candidate experience versus free reign
• Managing beyond acquisition

 

Stan Friedman

FRM Solutions

sfriedman@frmsolutions.com 

404-936-8677

Skype - stanfriedman1

 

Kit Vinson

FranMan Inc.

kit.vinson@franman.net

214-736-3939 x 101

 

Books Mentioned in the Episode:

• Traction by Gino Wickman
• The E-Myth by Michael Gerber
• Seven Habits of Highly Effective People by Stephen Covey
• Spin Selling by Neil Rackham
• The Physics of the Impossible by Michio Kaku

 

My Podner in this episode is Art Coley and he’s going to talk with us today about how to develop a franchisee recruitment system that will attract higher quality franchisees to your system.

Time Stamps
Art Coley Intro	00:00:27
Segment 1	00:03:00
Get to know Art Coley
Bonus Segment	00:19:40
Near business failure – Art’s “E-Myth” moment
Segment 2	00:32:00
Topic Segment – Franchisee Recruitment System
Segment 3	01:25:29
Quickdraw Questions

 

Topics Discussed in this Episode

What is the founder’s trap that keeps many small business owners from growing to their Business?

Becoming royalty self-sufficient needs to be a franchisor’s #1 goal at first.

Most franchisors never understand that franchise recruitment is a separate business that requires a separate skill set.

The value of a franchised business in not built on selling franchises, the value is based on unit economics.

Traditional franchise recruitment systems - what’s good about them - what’s bad about them?

What do you mean when you say “Disillusioned” franchise system?

Franchising Statistics:

• 9% of all franchisors have ever made it past 200 locations
• 20% have ever grown past 100+ units

The secret to franchise recruitment is having a system and implementing the system properly

What is Recruitment Operating System all about?

Discovery Culture versus Sales Culture - what does that mean?

Why is “Executive Buy-In” so important to a successful franchise recruitment system?

Building a recruitment operating system isn’t for a bunch of wimps!

What are the 4 Pillars of the ROS System?

• Lead Generation
• Pre-Discovery
• 8 Step Discovery Process
• On-Boarding

Any franchisor who is not doing some sort of Discovery Day is making a massive mistake.

Managing the handoff to Onboarding – Why is that important?

When there is no communication between Onboarding and Recruitment teams, the quality of the new franchisees will never improve.

What are the three phases of the discovery process? What do they mean?

• Vision
• Grind
• Angst

What are some of the key metrics that every franchisor should be following regardless of what recruitment system they use?

What is situational leadership and what role does that play in the recruitment process?

• Unconscious Incompetence
• Conscious Incompetence
• Unconscious Competence
• Conscious Competence

What role does a good CRM play in the recruitment process?

Communication is key in every organization, but you say that communicating with existing franchisees is really important. Why?

 

 

 

Books Mentioned in the Episode:

 

 

 

My ponder on today’s show is Ms. Angela Angela Coté of Cultivate Advisors, and she is going to visit with us about Franchisee Compliance, or as she likes to call it, franchisee success.

Angela cut her teeth really early on in the world of franchising as the daughter of Max Voisin, founder of M&M Food Market. If you are listening from the U.S., you may not have heard of M&M but if you are from Canada, with about 500 locations in its prime, M&M Food Market is a BIG deal. She worked on both sides as both the franchisor and as a franchisee running three locations of her own.

Angela has been interviewed on shows such as Social Geek Radio, Franchising Rising Podcast, Tutor Doctor Podcast, and Own Up, Grow Up Podcast. She has been written about in multiple publications such as Global Franchise Magazine, Franchise Blast, Canadian Franchise Association, Douglas Magazine, The Franchise Voice Magazine, Franchise Canada, and a few more

 

Time Stamps
Angela Coté Intro	00:00:40
Segment 1	00:02:48
Get to know Angela Angela Coté
Segment 2	00:24:34
Topic Segment – Franchisee Compliance – “Success”
Segment 3	00:58:56
Quickdraw Questions

 

Topics Discussed in this Episode:

All franchisees should be as concerned about system-wide compliance as much as the franchisor because compliance to the system standards directly protects their investment.

Common reasons for lack of franchisee compliance are:

• Lack of buy-in
• Misunderstanding of why system standards exist
• Franchisor creates an “us vs them” mentality
• Poorly trained field consultants sometimes lack “soft skills” that are needed to manage the delicate relationship between franchisor and franchisee

 

How can a franchisor inspire franchisees to WANT to follow the system?

• Start the “system standards are good for your investment” education early in the relationship – pre-contract.
• Create and nurture a healthy “franchisees monitoring franchisees” system
• Regularly connect to the “Why” a franchisee became a franchisee in the first place. Remind them of their goals and how the system standards will help them achieve their personal goals
• Create easy and open opportunities for franchisees to collaborate with management
• Create an open and easy mechanism for franchisees to give feedback to the franchisor
• Utilize a mystery shopper service when it is needed

 

Angela Angela Coté

angela@cultivateadvisors.com

Cultivate Advisors

 

Kit Vinson

FranMan Inc

www.franman.net

kit.vinson@franman.net

214-736-3939 x101

My Podner in this episode is Justin Howe and he’s the president of a brand-new franchise concept called H-Tea-O. Justin has agreed to let us do a series of episodes as we follow him through the process of franchising his business. This will be the first episode of that series. This interview is one of the best ones I have done so far, and I am really excited about it.

 

Time Stamps
Justin Howe Intro	00:00:40
Segment 1	00:02:20
Get to know Justin Howe
Segment 2	00:26:05
Topic Segment – Franchising H-Tea-O Part 1
Segment 3	01:10:30
Quickdraw Questions

 

Topics Discussed in this Episode:

• Texas Tea – the birth of the concept
• Franchising H-Tea-O
• Proving the concept
• Supply chain challenges
• Trademark challenges
• Creating a solid infrastructure
• Putting together the perfect team
• Becoming a franchisee in order to be the best franchisor
• No Item 19 challenge
• Real estate is one of the most important elements
• Establishing a solid franchisee training program

 

Justin Howe

H-Tea-O

justin@jhowecapital.com

 

Kit Vinson

FranMan Inc

www.franman.net

kit.vinson@franman.net

214-736-3939 x101

 

Drue Townsend Show Notes

My Podner in this episode is Ms. Drue Townsend and she’s going to share with us A LOT of what she has learned from managing the MARKETING FUND at FASTSIGNS International.  The words “Marketing Fund” can create anxiety in many people and Ms. Drue will demystify the concept and teach you exactly what you need to know to make the most of your company’s marketing fund. Rob Vinson from Vinson Franchise Law joins the conversation to help us with some of the legal issues that are related to the Franchise Marketing Fund.

 

Time Stamps
Drue Townsend Intro	00:00:40
Segment 1	00:02:23
Get to know Drue Townsend
Segment 2	00:13:45
Topic Segment – Franchise Marketing Fund
Segment 3	00:59:10
Quickdraw Questions

 

TOPICS DISCUSSED IN THIS EPISODE:

What Is A Marketing Ad Fund?

It is a collection of money paid by franchisees and managed by the franchisor, to enact defined marketing and advertising initiatives and bring value to the brand and franchisees.  It is in addition to any Royalties paid by the franchisee to the franchisor. It is usually a percentage of gross sales (but could be a flat fee)

Marketing Fund By Laws:

There should be written By-Laws that outline how the fund can be used (what types of initiatives; pro-rata vs. major markets vs. national only), who makes decisions about it (as an example, highest ranking Marketing Person and CEO with Franchisee Ad Council input), who can sign contracts (often just the CEO and Marketing Person), where the money is kept (recommendation is that it is held in a different financial account with its own Profit and Loss Statement and Balance Sheet), who is providing the fiscal oversight and ensuring proper collection and use of the fund.

Sample Acceptable Uses of the fund

• Build and maintain the brand and location’s central website
• Create television ads
• Run paid social media ads
• Join a vertical industry association and exhibit at their trade show
• Agency fees or marketing team member salaries/benefits
• Marketing research projects

Unacceptable Uses

• Franchise Development advertising
• Legal fees for the new corporate office lease negotiation
• Create training and operations manuals about safety
• Pay for a convention cocktail party
• Collect just to rebate back to franchisees who do X and Y

How to Justify an Ad Fund to A Franchisee

• Use the dollars to protect and promotes the brand, which protects your investment today and should add value to your asset when you go to sell one day
• It builds brand awareness and brand consistency when marketing and advertising has the same messaging strategy and look/feel; easier to control and do when centralized
• Doing things “on your behalf”; things that you – or other franchisees - can’t, won’t or shouldn’t do on your own.
• Looking for economies of scale (having a customer satisfaction survey platform that all franchisees can be part of through the Ad Fund vs. having each one find their own; having one website managed and hosted by corporate; buying national cable television vs. having 30 franchisees by spot cable), things that require compliance (email marketing platform); , would reach beyond one’s area and impact other franchisees positively or negatively (joining a national association and advertising on their homepage), etc.

The Importance of Franchisee Involvement in the Marketing Fund

• Create a Marketing Ad Council (ours is called the National Advertising Council) and it has 6 elected Board Members representing the 650 locations in the US and Canada. Scale the number with growth; we started out with 3 and don’t have plans to increase beyond 6 anytime soon. Too many prohibits decision making.
• The National Advertising Council – or whoever works with the corporate team on Ad Fund projects – can be different than the Franchise Advisory Council, or one group of franchisees can provide guidance to the corporate team on both types of topics.
• You can have officers for the Ad Council, but because franchisees have their own businesses to run, we don’t have franchisees fill these roles and therefore then have to do the meeting minutes, organize administrative board events, etc.

What Should You Start Spending Money on Today From an Ad Fund

• Digital marketing
• A corporately managed website with micro-sites/location pages on it
• Google My Business page management
• Directory Listings management (so all information about a location gets propagated accurately and updated across the web)
• Brand social media sites (and organic content/ads on them)
• Creation of some brand materials (depending on your product/industry and how you go to market; could be an automated platform or just have the assets/materials available
• Videos
• Point of Purchase materials
• Print materials (brochures)
• Digital Asset Management software

Common Pitfalls with a Marketing Funds

• Don’t cap your Ad Fund fees; it will make future high-volume franchisees happy but it will keep your Ad Fund from growing (and you will have more locations to help)
• Try not to require yourself to spend pro-rata. It is very hard to do well and sometimes money needs to be spent in an area of the country or on something that doesn’t benefit all equally.  Ex:  a sponsorship that covers only 15 cities, but has regional television and a big online effort; a state listing on a website where 50% of your locations do business.
• Don’t collect money only to give it back through subsidies or rebates or matching. A lot of admin work, disagreements about what does and doesn’t qualify, etc.

Franchise Marketing Fund Tips

• Start an Ad Fund from the beginning (as you establish your brand/franchise). If you don’t have one, start one now with future agreements. Consult with your accountant and attorney to determine if it should be set up as a separate entity (and what kind), what the tax implications will be, if it is subject to any accounting regulations (ASC 606 deals with revenue recognition).
• If corporate can match any funds, it is a great way to soften the process of starting an Ad Fund
• Collect Ad Fund fees the same way that you collect Royalties (ex: EFT on the 5th of the month). If you don’t pay your Ad Fund fees, you are subject to the same compliance issues and penalties as you have if you don’t your Royalties on time/ever
• Encourage franchisees to spend money locally on things that make sense in their market – local pay-per-click, display ads on local websites, radio, joining associations, sponsoring events, etc. Don’t fund discounts in national promotions either (ex: $1 off sandwich promotion should be absorbed by the franchisee; not paid by the Ad Fund).
• Determine if an agency, freelance help or an in-house marketing team is best for your business. There are pros and cons for each, and in the long term, the best result is probably a mix of all three, but emerging businesses with small or no Ad Funds have to really stretch dollars.
• Have governance and be transparent with your franchisees. Review financials each month and have annual statements audited. Share categories of spending at big meetings.  Have a franchisee-elected Board of Directors that works with the corporate team to be a sounding board, communicator, tester, etc.
• Have protections. Require a small percentage of the funds to not be budgeted – to be held out of the budgeting process – in case sales decline or the Ad Fund is owed money by the franchisees. It’s easier not to budget for something than to have to cancel programs later.  As your system grows and your Ad Fund grows, have provisions in your guidance documents that allow you to reduce that percentage.  (We don’t, and our By Laws require a 5% hold back or carryover, which is now hundreds of thousands of dollars a year).
• Make your agreements broadly specific. Sounds like an oxymoron but give the brand room to expand what the Ad Fund can cover, but don’t make it too open-ended. 

How to Set Up a Franchise Marketing Fund

• Contact a franchise attorney and ask them for best practices in your industry, business and the way you market. See if they have sample drafts or if they can help you create an Ad Fund plan, By-Laws, content to include in your Franchise Disclosure Document and content to include in your Franchise Agreement.
• Determine and set up your collection amount, audit and governance processes, etc.
• Create a long range marketing plan – 3 to 5 years – based on estimated collected funds, and what those funds could buy. Prioritize the spending and share the big picture plan with franchisees and future franchise candidates so they know there is a plan, but clarify that this is based on assumed growth and that the plan is not contractually guaranteed.

 

Drue Townsend

FASTSIGNS International

drue.townsend@fastsigns.com

214-346-5797

 

Rob Vinson

Vinson Franchise Law

www.franchiselaw.net

rob@franchiselaw.net

775-832-5577

 

Kit Vinson

FranMan Inc

www.franman.net

kit.vinson@franman.net

214-736-3939 x101

 

My Podner in this episode is Robert Bilotti and he’s going to talk to us about franchisee onboarding and training.  We will dive deep into “training theory” and then wrap it all up with a step-by-step discussion on how a new franchisor needs to set up a training program for franchisees.

 

Time Stamps
Rob Bilotti Intro	00:00:40
Segment 1	00:02:31
Get to know Rob Bilotti
Segment 2	00:18:55
Topic Segment – Franchisee Training and Onboarding
Segment 3	01:14:03
Quickdraw Questions

 

Topics discussed in this episode:

The difference between a franchise system and a collection of mom and pops is “Training”

What is the difference between onboarding and training?

When do I need to hire a full-time trainer?

What to train versus how to train

Can a start-up franchisor use the operations manual as the training program at first?

Your first franchisees will be some of the most important validators of the concept, and if you skimp on training up front, it will come back to bite you.

Your most important franchisee is the first one after the former employee, friends, and family franchisees. That is the one that will really be the proof of concept. Be sure that you have a solid training program BEFORE that franchisee starts.

Invest in a learning management system (LMS) early

What is an LMS?

How does training change when you are in growth mode?

How to select an LMS right for your system

Moodle is a free, open source LMS

Look for a user-friendly system (from the administrative perspective) and a nimble system. Learn this by doing lots of demos and talking to other companies that use an LMS. Google is a great resource.

LMS support is probably one of the most important features. Usually, the more you pay, the more support you get.

What are the different modes of training (modality)?

• In person Instructor Led
• Virtual Instructor Led
• Virtual Learning
• Videos
• Print
• Audio
• Knowledge Sharing (wiki learning)

If you set up a mentoring program to help train new franchisees, be sure to invest in a training program for the mentors so they can be trained in how to train.

There is a difference between lecturing and facilitation when it comes to training.

There is not one modality that is best for everybody. There is not a “one size fits all” when it comes to training.

Survey your franchisees, and do it often, how you are doing with training. Don’t just capture “smile sheets”, rather actionable information. This should happen every 3 to 6 months.

You CAN measure return on investment in training, especially in a franchise system.

Use gust satisfaction surveys to draw training topics.

What are the steps that a start-up franchisor needs to follow to develop a training program?

Step1:

Document – document – document. What makes your business a success.

Step 2:

What can you expand on from that? Create actionable content from that documentation? This is the “what”.

Step 3:

Determine how you will take that information and disseminate it to the people who need it? This would be the franchisee and their employees. This is the “how”.

Step 4:

Determine how you will support your franchisees in their training efforts to their employees.

Step 5:

Establish a mechanism for measuring the results of the training.

 

Allow plenty of time to develop your training program. If you start developing your training program after you have signed your first franchisee then you have waited far too long.

 

Rob Bilotti

www.novitatraining.com

info@novitatraining.com 

 

Kit Vinson

FranMan Inc

www.franman.net

kit.vinson@franman.net 

214-736-3939 x1

My Podner in this episode is Ms. Lori Kiser and she’s going to talk to us about how to best utilize a franchise broker consultant company.  Everybody wants to know how to find the path to granting more franchises, and in this episode we definitely talk a lot about that.

Time Stamp

Lori Kiser Intro                                  00:00:40

Segment 1                                          00:04:30

Get to know Lori Kiser

Segment 2                                           00:24:19

Topic Segment – How to work with Franchise Broker Consultants

Segment 3                                           00:57:15

Quickdraw Questions

 

Topics discussed in this episode:

Franchise Broker Consultants are not business consultants in the traditional sense of the word. They specialize in producing qualified, vetted leads for franchisors.

A franchise broker consultant is not part of the sales team of the franchisor. They will not take the prospect through the franchisor’s sales process, though they will stay involved as the candidate passes through the process.

In order to be successful with a franchise broker consultant, a franchisor must have the following already in place and running within their concept:

• An in-house franchise development staff (sales team)
• A well-defined sales process
• The ability to go beyond the generic 6-step sales process, and know how to learn and understand the prospects dreams, desires, and business goals
• Unit economics that are positive and consistent
• A leadership team with a solid understanding of franchising

 

A typical start-up franchisor is usually not a good candidate for a franchise broker consultant group because the broker consultant is paid based on successfully bringing a prospect that eventually signs a contract with the franchisor. Because start-up franchisors typically don’t have the infrastructure in place to handle the lead volume, broker consultant groups are less likely to accept them as a client.

 

How to take your startup system and get it ready to be accepted by a broker consultant group:

1. Create a specific landing site for franchisees. This will demonstrate to the broker consultant group that you are knowledgeable and organized, and that you have a place to start a new prospect so that they don’t fall between the cracks once the prospect is delivered to the franchisor.
2. Create a sales process that works for your team and track the performance of the sales process and the development team. If you can’t prove that you can successfully close a prospective franchisee then a broker consultant group is not very likely to burn good qualified and vetted leads with your system.
3. Be able to show GREAT unit economics – meaning, be able to show that the franchisees are making money.
4. Demonstrate that all of the existing franchisees will validate well. Know that all of the franchisees are happy and that they will sell that happy story to a prospect who makes the validation calls.
5. Demonstrate that the franchise system has all (most) of the amateur mistakes out of the way so that the franchise broker group’s brand won’t be tarnished by referring leads to the franchisor client.
6. Have an FDD that is registered in al of the required states so that the franchise broker consultant will not be limited by geography. Similarly, be ready to offer and close franchise deals nationwide, including developing a nationwide support group to service the new franchisees.
7. Demonstrate that your system can handle the stresses of sales volume, such as being able to build out a location for multiple new franchisees while simultaneously walking a second set of prospective franchisees through the sales process, AND manage all existing franchisees at the same time. This requires a team that is in place and seasoned.

A typical franchisor broker consultant will sift through over 100 candidates before they find one that is worthy of passing on to the franchisor clients.

The Franchise Rule does apply to a franchise broker consultant, although the broker consultant shouldn’t be doing any selling of the specific system.

 

Once a franchisor is able to join forces with a franchise broker consultant group, what is the best way to manage that relationship?

• Think of the broker consultant as a talent scout, scouting players for your team
• The franchise broker consultant will act more like a brand ambassador to the candidate.
• Since the franchise broker consultant already an established relationship with the candidate, the franchisor should trust and utilize the candidate’s information from the broker consultant when the franchisor is brought into the relationship.
• Be open to adapting to the processes, nomenclature, personality, and style of the franchise broker consultant group, as well as to the type of candidate that they typically generate
• There are different types of consultant groups as well as different types of consultants within each of the groups. You will likely only work with a handful of consultants within a consultant group. That is normal.
• The best franchise broker consultants are not as enticed by your commission dollars as they are developing their referral network. These consultants rely heavily on referrals from happy candidates who eventually convert to franchisees. While it is important to pay consultants a fee that is competitive, understand that they need to like you and believe that your system is successful before they burn good leads on your system.

 

 

Lori Kiser

www.lorikiser.com

 

Kit Vinson

FranMan Inc

www.franman.net

kit.vinson@franman.net

214-736-3939 x1

My Podner on this episode is Tom Spadea. Tom and I will discuss the benefits of properly managing the FDD and the Franchise Agreement, from the beginning, making sure to keep the end in mind. The "end" he speaks of is a possible acquisition by an investment company. What will they expect to see when they look at your franchisees contracts in your files?

 

Time Stamp

Tom Spadea Intro                              00:00:40

Segment 1                                           00:03:22

Get to know Tom Spadea

Segment 2                                           00:24:40

Topic Segment – Managing Your Franchise Agreements with the End in Mind

Bonus Segment                                 00:57:15

Managing Franchisee Growth

Segment 3                                           01:02:50

Quickdraw Questions

 

Topics discussed in this episode:

Where do most franchisors get it wrong? Many franchisors and franchise attorneys focus mostly on the substantive issues of the and forget about procedural issues related to the process - managing latent defects

• Item 23 receipt page not being properly executed and filed
• Guarantees not properly executed
• Individual versus LLC signing FA/lease

You can have the best FDD and franchise agreement in the world, but if you don’t manage the process properly, it can cost you a lot of money in the short term with an unenforceable contract, and in the long run, upon exit.

It’s important to understand who the real audience of the Franchise Agreement is. It is the franchisee, but it is also a prospective private equity investment firm who may want to purchase your system in the future.

 

What is the process?

Step 1: Make sure that the franchise agreement is up-to-date

Step 2: Geographical Analysis - Ensure that the franchisor is registered in every registration state where the concept will be offered. That includes where the prospect is currently located as well as where they want to open a location. Both states must be registered if required by that state.  Deliver the correct FDD for the state.

Step 3: Ensure that 14 days pass between delivery and signing of the Franchise Agreement, not including delivery day and signing day

Step 4: Spend the time to ensure that names are all spelled correctly, along with middle intials. Check the address, LLC name etc

Step 5: Prepare a custom franchise agreement based on the specific agreements made between franchisor and franchisee – do not use the sample franchise agreement that is included in the FDD. Deliver the document to all required recipients and ensure proper signatures

Step 6: Ensure that the lease includes all of the required language as per the franchise agreement

 

There are many different software packages that can help you with each aspect of the transaction, but Spadea Law has the platform that hits every element. Compliance Map helps franchisors ensure that they are only offering the franchise in the proper states. The link to the Compliance Map software demonstration is below:

https://vimeo.com/260105446

If you haven’t managed the steps of the process well, then it is not too late. Review your documents and get the documents in line now, before you are approached by an investor.

 

Books:

Exponential Organizations

By by Salim Ismail and Michael S. Malone

 

Seven Habits of Highly Effective People

By Stephen Covey

 

The E-Myth

By Michael Gerber

 

Khan

Conn Iggulden

 

Podcasts:

Dan Carlin’s Hardcore History

 

Tom Spadea

Spadea Lignana

www.spadealaw.com

610-662-0192 (cell)

 

Kit Vinson

FranMan Inc.

www.franman.net 

214-257-7685 x1

 

Kit Vinson

 

My Podner on today’s show is Mike Pollock and he’s going to give us tips on how to build a franchise development system for your franchise. But it was more than just that because we also talked about how to take a warm lead through the process to close the deal.

 

Time Stamp

Mike Pollock Intro                              00:00:40

Segment 1                                           00:03:15

Get to know Get to know Mike

Segment 2                                           00:22:10

Topic Segment – Franchise Development 101 (Sales)

Segment 3                                           01:18:40

Quickdraw Questions

 

Topics discussed in this episode:

How to set up an efficient process for franchise development

·         Brand Overview Presentation (45 minutes to 1 hour long)

·         Develop a solid franchise prospect application that focuses on:

o   Background

o   Financial situation

·         Have the Unit Economics Call

o   FDD introduction call (15 minutes)

o   Unit Economics (45 minutes)

o   Receive signed Item 23 (Proof of receipt of FDD)

o   Password

o   Validation instructions

·         Validation Debriefing Call

·         Discovery Day

o   Brand Overview Review

o   Meet the Team

o   Lunch and dinner are the best opportunity to visit with prospects

o   Field Visits

·         Voting Process

It is best to have multiple prospects attend a discovery day (between 4 and 5)

If you are going to hire a company such as FranLift to manage the franchise development process, then it is best to get them involved earlier rather than later.

Have a marketing budget set aside in advance. It typically costs between 8K and 15K to bring 1 franchisee in the door.

 

Mike Pollock

FranLift Franchise Experts

mikep@franlift.com

214-551-0261

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

Kit.vinson@franman.net

214-736-3939 x1

 

In this episode, Doug Groves and I talk about insurance, specifically, what types of business insurance are out there, the importance of finding a rep that knows your industry, and what role does insurance play in the relationship between franchisor and franchisee.

Time Stamp

Doug Groves Intro                             00:00:40

Segment 1                                           00:02:41

Get to know Get to know Doug

Segment 2                                           00:16:17

Topic Segment – Insurance 101 for Franchisors

Segment 3                                           00:38:19

Quickdraw Questions

 

Topics discussed in this episode:

Basic coverage that all business owners should have:

• Property (property, fixtures, furnishings, and equipment)
• General liability (slips and falls)
• Workers’ Comp (employees injuries and lost wages)
• Auto (company owned vehicles)
• Employment Practices (HR related risks)
• Umbrella (covers over and above the above mentioned)

Every insurance policy has a purpose.

Umbrella policies are a cheap way to purchase vast amounts of insurance for a much lower price

When you are deciding on limits for each type of insurance:

• Property: The property limits should be equal to the replacement cost of the property it is covering
• All other: The rule of thumb is that you make the value of the insurance policy to be more attractive to a would-be plaintiff than your personal assets.

Best Practice: Select an insurance broker who has experience in providing insurance for companies in your same industry. They will know which questions to ask in order to recommend the right options for you.

The question is answered, why does this line appear in all franchise agreements and franchise operating manuals: ““All liability insurance policies must name us (the franchisor) and any subsidiaries that we designate as additional insured.”

We answer the question, why do franchisors require franchisees to carry certain levels of insurance.

What is the EZCert program and how does it help franchisors manage all of the insurance certificates from all of their franchisees – for FREE.

 

Doug Groves

Program Insurance Group

doug@pigbcs.com

512-848-7210

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

Kit.vinson@franman.net

214-736-3939 x1

 

Notable mentions in this episode:

Book: Killing the Sacred Cow

By Garrett B. Gunderson

Our culture is riddled with destructive myths about money and prosperity that are severely limiting the power, creativity, and financial potential of individuals. In Killing Sacred Cows, Garrett B. Gunderson boldly exposes ingrained fallacies and misguided traditions in the world of personal finance. He presents a revolutionary perspective that can create unprecedented opportunity and wealth for thoughtful, mission-driven individuals.

In this episode, Brian Schnell and I talk about Three Party Franchising – that’s using master franchisees and area developers to grow your franchise system. Many people misuse these two terms, or use them interchangeably – Brian’s going to clear it all up for us.

Time Stamp

Brian Schnell Intro    00:00:40

Segment 1                 00:02:28

Get to know Brian Schnell

Segment 2                 00:23:53

Topic Segment - Is Three Party Franchising Right for Your System?

Segment 3                 01:00:51

Quickdraw Questions

 

Topics discussed in this episode:

What is the difference between a Master Franchisee and an Area Developer

What is the Three-Party Franchise model?

Three Party Franchise model works very well internationally

Avoid the temptation of "0-100 franchisees quick" through three party franchising without a full understanding of what is involved. Don't try to sprint before you know how to walk.

The conversation about Three Party Franchising shouldn't take place without a full understanding of risks and benefits to all parties.

What is the necessary infrastructure before diving into a three-party franchising model? A full understanding of:

• Site selection
• Field support
• Unit economics

The infrastructure must exist somewhere; either on the franchisor side or the area developer side.

The functions of managing a franchise system are usually carried out by a team of corporate employees. It is not realistic to expect an area developer to fulfill the same functions plus operate a unit without the proper infrastructure.

Finding an area developer that is good at EVERYTHING is not likely. Try focusing on an area developer's core competencies and supporting the area developer in the areas where he/she is weaker.

Don't offload functions of managing a system to an area developer that can be more efficiently executed by corporate office.

After you sign a master franchisee or an area developer, the system DOES NOT go into autopilot. The franchisor must stay involved and active.

Trying to fix problems in the three-party franchise relationship are much easier to correct early on, so stay connected and involved.

Educate yourself before trying to utilize a three-party model by talking to attorneys and consultants who have experience.

Manage expectations up front through a well written agreement and ops manual

 

 

Brian Schnell

Faegre Baker Daniels

brian.schnell@FaegreBD.com

612-766-7699

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

Kit.vinson@franman.net

214-736-3939 x1

 

Notable mentions in this episode:

 

Faegre BD Franchise Summit

https://www.faegrebd.com/faegrebd-franchise-summit

 

Paul Rocchio - IFA

Procchio@Franchise.org

202-662-0790

Contact Paul for information about joining the International Franchise Association

 

Book: Dare to Serve

By Cheryl Bachelder

Servant leadership is sometimes derided as soft or ineffective, but this book shows that it's actually challenging and tough minded - a daring path. Bachelder takes you firsthand through the transformation of Popeyes and shows how a leader at any level can become a Dare-to-Serve leader.

In this episode, Nancy Friedman is going to share with us her experiences as a franchisor and what she believes were the reasons for its ultimate failure.  This is going to be a really good episode because we always hear about people telling us how they succeeded, but rarely do we get to hear from the other side of that coin. The episode is filled with great “take-aways” and is a must-listen for any emerging franchisor.

Time Stamp

Segment 1                                           02:54

Get to know Nancy Friedman

BONUS:                                              27:21

Free gift for listeners

Segment 2                                           28:33

Topic Segment – “Franchising Failure” A Case Study

Segment 3                                           50:00

Quickdraw Questions

 

In this episode, Nancy discusses the five steps to ultimately fail in franchising.

Step 1:

Proper vetting of prospective franchisees is key. Do your due diligence. Trust but verify

 

Sept 2:

Make sure you have the proper infrastructure in place before you begin the journey down the road of franchising. You can’t do everything all by yourself.

 

Step 3:

As a training document, a reference document, a master document for the system standards, as a sales tool, have your franchise operations manual in place. As a successful Startup ‘we’ make it look easy. It’s not.

 

Steps 4 and 5:

Don’t be too hot for the deal. Speed is not success. Have a growth plan in place. When you grant a new franchise, ensure that it fits into your well thought-out plan. A shotgun approach may have worked for some companies, but it doesn’t mean that it’s the easiest, most efficient, or best method of expansion. Franchising isn’t for everyone.

 

Nancy Friedman

The Telephone Doctor

www.nancyfriedman.com

nancy@telephonedoctor.com

314-291-1012

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

www.franman.net

Kit.vinson@franman.net

214-736-3939 x1

 

In this episode, Pete Baldine talks to us about how to build a solid, emerging franchise model. It is a very broad topic, but the episode is filled with great “take-aways” and is a must-listen for any emerging franchisor.

Time Stamp

Segment 1                                           03:01

Get to know Pete Baldine            

Segment 2                                           33:58

Topic Segment – Building a solid emerging franchise model                         

Segment 3                                           01:12:32

Quick-Draw Questions                                    

 

Topics discussed in this episode:

• Establish a solid, proven model
  • Running a business and being a franchisor are completely different
  • Prove the model by establishing good unit economics so you can develop a solid story of success
• Be capitalized well enough to build proper infrastructure and support new franchisees
  • New franchisee training
  • FDD / FA
  • Ops manual
  • Ongoing training programs
• Stage One franchise system growth – friends and family
  • Support friends and family franchisees and make them successful
  • Search your existing franchisee base for success stories and duplicate them
• Stage Two franchise system growth – professional candidates
  • Successful franchise sales requires a solid process
• What is a new franchisee worth – what are the costs
• The importance of establishing trust
• How to evaluate prospective franchisees candidates
• Don’t bury your franchisees with validation calls
  • How to manage the franchise validation process
  • Validation conference calls
• Listen to franchisees and build support program around that
  • Supporting single-unit operators versus multi-unit operators and area developers
• Don’t grow faster than you can support your system
• Tracking Validation
  • Communicating / Coaching franchisees before the validation call
  • “Download” meeting with prospect after the validation call
  • Evaluate how well candidate assesses information from validation call

 

Pete Baldine

Moran Family of Brands

pbaldine@moranbrands.com

708-297-2240

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

Kit.vinson@franman.net

214-736-3939 x1

In this episode I speak with Paul Rocchio of the International Franchise Association, www.ifa.org , as he discusses how the IFA is poised to be one of the most useful tools to all franchisors as they work to grow their franchise systems.

 

Segment 1                       Time Stamp

Get to know Paul Rocchio   02:25

Segment 2

Topic Segment – IFA         23:05

Segment 3

Quick Draw                       57:00

 

Topics discussed in this episode:

• “I wish I had joined IFA MUCH sooner than I did”
• FranShip Mentor Program
• FranSocial – Social media platform that only includes IFA members
• Franchise Business Network (FBN)
• Certified Franchise Executive (CFE)
• @ourfranhcise www.atourfranchise.org
• Francise Action Network – grassroots network
• FranPAC – Political Action Committee
• The staff is the most underutilized resource at the IFA
• How to make the most of the IFA convention

 

Paul Rocchio

International Franchise Association

procchio@franchise.org

202-662-0790

 

Kit Vinson

FranMan Inc. (Franchise Manuals)

Kit.vinson@franman.net

214-736-3939 x1