The 3 Biggest Lessons in Franchising, According to the Industry's Top Podcasters
This story appears in the January 2018 issue of Entrepreneur. Subscribe »
Want advice about franchising? Talk to someone in the business. Or better yet, talk to people in the business…whose side business is talking to other people in the business! Franchise podcasters have a particularly valuable perspective: They bring their own experiences to the mic and then learn through regular conversations with the best minds in franchising. That’s why we asked three of the industry’s chat masters for the most salient lesson they’ve learned over the years.
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Lesson 1: Consider the market, not just the concept
Tom Scarda, host of The Franchise Academy Show, got lucky early. He entered franchising in 2000 when he bought a Maui Wowi franchise in New York City; five years later, he sold it for enough money to semi-retire at 41. “But I learned nothing from that,” he says. Then, in 2006, he bought a Super Suppers franchise. The company was basically a food-prep area: People could come in to make meals in bulk, then freeze them and take them home to feed their families for days.
That’s when Scarda’s real lessons in franchising began.
“We had small kids, and my wife was working -- we thought it was the greatest thing for moms. But in 19 months, we were out of business,” he says. The franchisor ceased operations in 2011. The problem? Super Suppers was offering a service far too unfamiliar to most parents. “What we learned is that it takes a lot of time, money and marketing to change people’s habits.”
Now Scarda often cautions prospective franchisees against jumping in too quickly. “So many people buy franchises for the wrong reasons -- they love the food, or are infatuated with the franchise,” he says. “Some buy because of what they perceive is a lack of competition: ‘There’s no XYZ franchise in my town.’ It might be a great fit for the town but wrong for the person. People ask me, ‘What’s the hottest franchise out there?’ You want to run from those, because they’re usually a fad. Or people think having a big brand name is important. But if you already know the brand, chances are all the good locations are gone. In some ways it’s like trying to pick a good stock that’s a match for your lifestyle.”
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His biggest takeaway: Consider everything around a franchise, and not just the franchise itself. Nobody wants to be the next Super Suppers.
Lesson 2: Get over yourself
John P. Hayes hears the same thing over and over again: People say they want to quit their jobs and escape their bosses, but they don’t want to buy a franchise because then they’ll have to answer to corporate headquarters. “If I buy ABC Franchise, I have to do it the ABC way, and I don’t want to do that,” they’ll say to him. To which he responds: “OK, that’s a problem.”
Hayes is a franchise coach, an author, and the former CEO of HomeVestors -- a.k.a. “We buy ugly houses” -- and he hosts How to Buy a Franchise Show. (Can you guess what it’s about?) He has also taught a course on the basics of buying a franchise at the International Franchise Association’s expos for 27 years. And in that time, he has offered a consistent message to people who don’t want to do things the ABC Franchise way: You’re missing out!
“I spend a lot of time teaching people why businesses go out of business: They don’t know what to do to build a successful business because they don’t have a system,” he says. But a successful franchise brand does have a good system, and all it asks is that franchisees follow it. “So get on your knees and say a prayer for the franchisor who gives you the system that leads you to profits and success.”
Bottom line, Hayes says: “If you say you don’t want to do it someone else’s way, then keep your job. They’re not going to change for you. The number one challenge is giving up the control issue.”
Lesson 3: Don’t be afraid to get your hands dirty
For his podcast Franchise Today, Paul Segreto has spent the past eight years talking to people who have launched successful franchises. But the conversation that sticks in his mind the most these days was with Jimmy John Liautaud, founder of Jimmy John’s Gourmet Sandwiches, who had great insight on what to do when your business starts to wobble.
“Jimmy John’s story was that he had gotten up to 200 units; of those, 170 were franchised, and he realized the majority of those weren’t performing the way the corporate units were,” says Segreto, who is also CEO of the franchising consulting firm Franchise Foundry. “He put a hold on further franchising and told the then president, ‘We’re going out on the road, and we’re going to turn these locations around before we start franchising again.’”
Liautaud knew that success didn’t come by just opening new stores. It came from customer service -- and that’s what he needed to go out there to instill in his franchisees. “You walk in the door, they greet you and by the time you finish ordering your sandwich and walk over to the register, the sandwich is made,” Segreto says. “Plus, they’re one of the only [fast-food restaurants] that has a true delivery system; they aren’t delivering through a third-party system like Uber Eats.”
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Segreto likes this story because it captures franchisors’ most common lesson: “The biggest learning experience they always come back to is to spend the time on the front end building and perfecting your system before you cast that net out and decide to try to franchise everyplace.”