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How I Built My Small Business
Lauren Vermette — How to Invest in a Franchise on the Side (Without Quitting Your Job)
00:46:56
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- [00:00]
Ann McGinty
Foreign welcome to How I Built My Small Business. I'm your host, Ann McGinty. Today's guest is Lauren Vermette, founder and CEO of Franchisee Insight. Lauren has dedicated her career to bridging the gap between franchisees and franchisors, offering a unique perspective on the franchise industry. She truly understands the challenges and rewards that come with franchise ownership. Having successfully built and sold multiple units in her own portfolio, now Lauren's mission is to guide aspiring entrepreneurs through the journey of self discovery, helping them take that first step toward business ownership and ultimately toward wealth and independence. Just like an insurance broker, Lauren's services are completely free to you as the franchisee. She's compensated by the franchisor for connecting the right people with the right opportunities. If you'd like to speak with her directly, there's a link in the show notes. Before we get started, don't forget to follow the show. I work hard to bring you a lineup that is interesting and unique with hopes that you take away something meaningful from every single episode. I'm an indie show and following the show and sharing episodes really helps me grow. Let's get started.
- [01:40]
Host
Lauren, thanks so much for being here. It's so great to see you.
- [01:43]
Lauren Vermette
You do? Thanks so much for having me. I love your podcast.
- [01:47]
Host
Thanks, that's really sweet. So can you take us back to your career franchising? What made you want to start looking for something else?
- [01:56]
Lauren Vermette
Yeah, happy to share. So after undergrad, I got into the advertising industry. I worked at different agencies and then I went into publishing side, went into digital space and worked for larger publishers. So I was in kind of the corporate advertising media realm and loved the camaraderie, loved the industry, loved the way the career was going. And then during my last tenure at one of the companies, one of my corporate companies, I got my mba. And through that process, I understood the challenges of building my own business. And I'll step back for a minute. I grew up in a family of entrepreneurship where my dad started his own business and I was exposed to what it takes. But as a kid, you really don't know much beyond that. Working in corporate pushed me into my mba, where I wanted to understand a little bit more about owning my own business. So I had that intrigue. But through that process, ironically, I recognized that my strengths were more as an operator. I didn't have the idea, I didn't have the cool concept. A lot of people say, I have this idea, I don't know how to execute it. I was kind of the opposite. So it led me to the self discovery of that and also that I could lead a team and execute on a playbook, which was really what drove me into the franchising world versus starting my own business. So that's kind of where it started. And I got into my first two franchises, I still own them today, 10 years later. And then a couple years later I got into two different modalities and multi unit locations of which I sold a couple of years ago.
- [03:30]
Host
And for any of these, were you still working full time?
- [03:34]
Lauren Vermette
Yes. So it's a great question. And I work with a lot of people now who said, how do you straddle it? And there are so many opportunities in the franchising world right now. I mean, the age old recognition of a McDonald's or a Jiffy Lube or a Taco Bell is kind of the reputation of what a franchise is. But there are so many different modalities and different levels of involvement that you can be as an owner. And I got into a model, it's called a executive model. Sometimes it's called semi passive. And what that means is as an owner, you're not necessarily the direct operator or the day to day in the business. You're more on the business. So I got into my first concept was a salon suite concept. And that is really in essence like a. We work for beauty professionals. So whether it's a hairstylist, a barber, esthetician, registered nurse, there's a lot of different fields within the beauty industry. And a lot of those people are extremely talented in their profession, but don't necessarily have either the capital or the business acumen to get in and start their own or have their own storefront. So this is a model that allowed people to come in and rent space while operating their own business. And we took care of the facility, but from a friend model, it was tested and it was the playbook that I could follow and have a manager on site without actually having to be there. So I straddled my career at the time and started these while doing the same. So there's a lot of opportunities out there that look similar or have an ownership involvement like that.
- [05:06]
Host
So you say you had a manager, did you hire the manager straight off the bat? And how much time does it take to you to manage those two franchises today?
- [05:17]
Lauren Vermette
Yeah, that's a great question. Now there's always a build. You know, sometimes the executive model is called semi absentee. And I always shy away a little bit from the word absentee because, you know, the realities are that any business that you Own, you're going to have some time and spend and you're invested in it. Right. A lot of times you want to learn the model before you deploy it to management or staffing. And in this case, I didn't hire the manager right away. It's because with a brick and mortar type of franchise, there's other components that you have to get established first. So I didn't want payroll before we actually even had a building up and operating. So you know that, that process and with the franchisor support and the franchisor playbook, there's real estate investigation, finding the right spot architecture, building it out, construction. So there's a window of time, anywhere between six and 18 months, depending on the size of your facility or the size of your brick and mortar location that it takes to get that up and going. Towards the end of that process, when I knew when I really had a, an open date in line, I hired my manager. And oftentimes the franchisor has a training process that can help train the manager. So it's not just on you to train the staff. And we got some of the basics of the business up and going, you know, LLC established and payroll company established and some of those small pieces up. But I still have this almost 10 years later. I still have the same district manager for my two locations. And she's wonderful. I mean, she's there on site on her normal business hour, working hours, and I visit on occasion and talk to her on occasion. But we've gotten the machine, so to speak, well oiled enough that she really runs it. And there's different levels of autonomy and ownership in some of these where you can structure your salaries or your incentives and things like that with your staff. So I love leading a team and I love mentoring. And so that's been really fulfilling. And all while really looking at the bigger picture of getting into this was because I wanted to own something, I wanted to build something, but I didn't want it to take on so much more of my time. So fast forward, I was laid off by that corporate company, which was interesting. And then because I had established the business and had it open, I was able to stay home with my young kids and work, I mean, a fraction of what I was working before and quite frankly making more money than I made in corporate. So I didn't sacrifice income, I didn't sacrifice a level of stimulation that I had for my career, but had the freedom and flexibility that allowed me to be home with my family at that stage in my life.
- [07:56]
Host
That sounds Almost serendipitous the way that it worked out. Yeah, you're lucky that you had had put that in place. So these salon suites, how many square feet are we talking?
- [08:08]
Lauren Vermette
I have one location that has 47 suites and that's about a 9,000 square foot location. And then my other location is about 6,000 square feet, and that's about 33 suites in there. So 33 separate business owners.
- [08:21]
Host
So it's like a combined franchise and real estate play.
- [08:25]
Lauren Vermette
Exactly. I mean, some people say it's more of like a glorified landlord. We provide services and upkeep the facility. So it allows the suite operators to run their business without the other components and overhead of actually owning, you know, a storefront or another business or another location of their own.
- [08:45]
Host
And how many hours do you think that you work on this?
- [08:48]
Lauren Vermette
Oh, that's a great question. The salon suite model is really at the other end of the spectrum in terms of time spent in. If you are early in it, you can spend a lot more time because it's setup involvement. But as a real estate play, a salon suite is really light. I mean, a couple hours a week. At the end of the month, I run the QuickBooks and I make sure, you know, my CPA has enough data for income and tax component of it. But I have a really good relationship with my manager and I believe in hiring the right people. And if the right people are in place, with the right structure and the right incentives and the right relationships, she has a level of autonomy that I, you know, she has my full trust. And. And so I don't have to be there. I mean, there's times I'm there a couple times a month. There's times I'm not there more than once every two months. Wow. So it really depends. And that's for two locations. So.
- [09:39]
Host
And for those other two franchises which you exited recently, were they in the same industry or different ones? Can you tell us anything about those?
- [09:48]
Lauren Vermette
So ironically, I got into a boutique fitness concept. And similarly, I did not have a fitness background nor a fitness passion, but I loved the brand. It's called Rumble Boxing and it's a really inspiring, inclusive, fun, boutique fitness concept. And that was a big pivot because again, it was another brick and mortar. So we had to site select. We had to look at the addressable market outside of that location cost to build all those pieces that go into the business. But I ended up selling those. It was interesting because in hindsight, while operationally in the business itself was a success. I don't necessarily deem it as a success because it took so much more time and involvement that it was kind of veering away from my lifestyle goals and values. So, you know, fast forward now and I'll get into that. I'm now a franchise consultant and what that is is really guiding people to understand their personal goals, their lifestyle goals, their financial goals, and really aligning brands with what matches them. And I didn't do a good job of assessing myself and saying I don't want to be up at 4am Getting to a shift or doing this or that with my business. And while it was manager led, I had a fantastic manager. It was not the lifestyle that I was looking, so I was, I wouldn't say burnt out. It was too much of a heavy lift to balance all the other components of my life. So I was able to successfully sell those. They're still doing very well, but I'm no longer involved and no longer the owner.
- [11:21]
Host
And looking back on that, it sounds like you wish that you had thought a little bit more about your why behind, why you wanted to purchase this franchise or that one instead of just a profit play. Is there anything else that you wish that you had known before you jumped into any of these?
- [11:38]
Lauren Vermette
Sure. I mean, there's so many components of a franchise that you have to understand. And in my second location, there are some variables that I didn't pay too close attention to. And some of that is cost of construction. You know, what does that look like in your market? Not just countrywide, what does that look like in your market? And then of course there's the financial component. If there is a larger investment at stake, are you leveraging loans? And if so, what do the rates look like? What does the current market condition look like? So I think it's really important to look at current market conditions before looking at the model. So there's so many business characteristics that have to align with making the right choice for you for that time and for your market.
- [12:21]
Host
As you were mentioning financing, I wanted to go ahead and just jump on that one a little bit because listeners may be sitting here going, okay, well this sounds all great and wonderful, but I don't know if I can do that. I don't know if I can afford it. What does it really require as far as a down payment goes and then as far as financing goes, are there a wide plethora of options available for this type of a structure?
- [12:47]
Lauren Vermette
Yes, there are. And that's a great question because I think there's a misconception. I mean, right, you See Shaquille o' Neal, and he's huge into franchising. But it's almost unattainable to an average person that is looking to diversify their income in terms of funding. There's a lot of options out there. It's important to recognize there's a couple pieces, the investment in and your return. Right. So there's, there's risk components of what you're willing to put in and how much a specific franchise can require to build out or to get it up and going at your initial cost to get going. And then there's a lot of funding options to support those. So because the franchising industry has evolved from those just plain brick and mortar that you can associate with franchising into other service models, the investment levels vary widely. So it's a lot more accessible to people that may not have either lots of money or you know, let's say for example, a million dollars to build out a big studio or something like that. Even if those loans are, even if they're leveraged with loans, there's a lot of opportunities that the initial cost to get up and going is only a minor fraction of that. Because it's a service related business where you don't necessarily need a home office. They refer to it as home based. And then financing options. There's so many out there now that are really great options. I mean, some are Small Business association, the sba, so they have small business loans. Some of them are robs, programs or ways that you can tap into borrowing against your retirement funds that you already have and that's basically used as collateral. And then, you know, sometimes it just makes sense to borrow against a HELOC because you have the equity in your home. So every person's so individual and what their risk tolerance is or what their financial portfolio or outlook looks like. But I will say that there are so many opportunities out there that have made it accessible to people with either starting their career or with not necessarily the wealth or the expendable liquid funds that it used to take to run a franchise. So it's exciting because I think there's a lot of people with skill sets and aspiring business owners that can enter into this world that they may not have known was was possible.
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Host
At a minimum, is it like purchasing a home where you need to have at least 10 or 20% down?
- [15:11]
Lauren Vermette
Yeah, that's a great question. So there's a couple components to going in, in that initial franchise fee. So your franchise fee for, for lack of a better term, in essence buys your territory and it holds your spot within the franchise. Now oftentimes that franchise fee it can vary, but that's, that's oftentimes well under $100,000. There's ranges that vary depending on the number of territories you purchase or the type of business model that you're purchasing. But the franchise fee is just that startup fee and holding your territory, sometimes it also includes like your initial training and your training of your staff. It could also include technology fees or software fees for the first couple months and some operational pieces in there. But beyond that we look at total project cost. So total project cost is really what does it take to get this up and running? So if it's a salon suite, it's going to be more significant than if it's just a service run gutter company. For example, there's a lot of home services, there's a lot of other pieces that are less required to have inventory or a physical location that's a lot lower of a barrier entry in terms of costs. And then beyond that there's always franchising is based on royalties. So royalties percentages can vary based on brand to brand, but those are ongoing fees that help keep the franchisor support and team in place that come off of your gross revenues. So the incentive for the franchisor support is the better that you do, the better that they do. So there's a little bit of a collaboration team incentive to keep things operationally efficient and successful.
- [16:44]
Host
And while we're just on this topic, I know you might need to give us a wide range on this, but what is the range of cost to purchase and get the doors open or your total cost in, as you were saying, from the very low end, the lowest that you've seen to the high end?
- [17:02]
Lauren Vermette
Yes, it will be a huge range depending on the model. I would say from 100,000 all in to several million.
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Host
Okay.
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Lauren Vermette
But even that 100,000 can be leveraged too. So there's opportunity if people don't have that hundred thousand to then take loans off of that 100,000. And there are some franchisors who offer financing within the franchisor. So you're not going to banks or other institutions to borrow. And it really just depends on a quick examination of your portfolio. And the exciting part is even if you have the portfolio, it doesn't necessarily mean that the multi millions make sense for you. I work with people now, some that are towards the end of their career and they're looking for what's next and they don't want to stop even though they're done their career and they want to still be involved in something. Some that keep their career and just want to diversify their income beyond the market volatility or beyond other components. Some that want to create legacy wealth to pass on to their family. Some just like me. It's an uncertain time in some careers. AI is getting a big attention and there's technology that's replacing labor costs and so there's layoffs and things and they want to get into more of a recession proof or more a business that can have longevity to it. You know, I have parents looking to if their why is more of that time flexibility. It's what kind of models will allow me to have more time instead of, you know, owner, operator or anything like that without sacrificing a career. Some people, you know, are as simple as hey, I commute into New York an hour and a half every day and I'm sick of the commute and I want something else. What else is there? And so we kind of explore that. Some people are looking to replace their income and some people just want to side revenue stream to build on their wealth.
- [18:48]
Host
So this is fascinating to me because I personally have never considered purchasing a franchise. Listening to you talk, I'm like oh, maybe I should. But it sounds approachable for people. Maybe like a bridge between a person who is full time employed and maybe dreams of being an entrepreneur, but like a plan for them to get them started in a proven model. Like what you're saying. So are there any prerequisites that one needs to have before being considered as a candidate to purchase a franchise? Like do they need to take accounting classes? Do they need to have any sort of degree in a specific field? Are there any that you know of?
- [19:28]
Lauren Vermette
That's a great question. There are certain franchises that require a certain skill set, but there's skill sets for every level. You know, there's people that really enjoy mentoring people. There's people that can lead a team. There's people that were engineers. There's, you know, a number of different skill sets. You don't need to have a business degree to get in. And that's kind of the beauty of it. You do have a tested model. I would advise that one of the pieces that is tends to be somewhat natural is that people tend to gravitate towards their personal interests. And while that may work, it's not always the best way to investigate if a franchise is going to be good for you. So for example, I have some people I love to work Out I go to all these classes. I definitely want a fitness brand that may work. But just because it's your personal interest doesn't mean that's going to be the best fit for you and those business characters or any of your goals that you identify. You know, inversely, there may be someone who says, I want flexibility of time or I want semi passive income. I hear that a lot. But they don't care what the business model is. And so it could be something that they know nothing about. And the beauty of a franchise is that you're not required to know anything about that industry. If you have the skill sets to either run a team to operate, you know, a business business, or you know, it might be that you're in sales and you have a great sales acumen and the owner of this franchise, you're that business development person, you're making relationships in your community. And it's not necessarily the intricacies of, you know, looking at your P and L or operating a business in that way, because the system is set up to understand that. And they have controls and they have guidelines on what your costs should be and what your labor pool should look like and what the pricing is of your services. So there's things that have been tested and kind of iterated on and improved. And it's not to say that some of those you can't improve on yourself. And there's certain franchise brands that allow a level of autonomy or uniqueness to your market, let's say. But by and large, there's usually a general outline for it that doesn't require you to know that industry.
- [21:32]
Host
That is so interesting to me because I again just have never thought about the potential to own a business that you know absolutely nothing about. And hearing you speak about how it's possible, it shows that people should really broaden their perspectives on what they're considering when wanting to maybe dabble in business. What inspired you to shift from being a franchise owner to a franchise consultant? Like, why not just keep on buying more franchises?
- [22:07]
Lauren Vermette
That is funny you say that, because that is the biggest challenge in my current career as a franchise consultant is that I'm exposed to a lot of these brands and a lot of these models. And it's, you know, everything in me to say I'm going to try that. I could do that. Let me get into that one. But I have to keep that, that level head. You know, this, this, I love this, this role. It's so fulfilling and it's so fun. I speak to people at all different stages of their life and career and help them investigate the right way. So I'm not aligned with any particular brand. I am aligned with the candidate to really understand everything about them, to be able to then guide them through the process of finding the right fit for them. So it's all about fit. Some of it is understanding not only what you're good at, but what you like doing. You know, some people say I'm fantastic at sales, but I hate doing sales. So you don't want to get into something that's not going to be, you know, aligned with what you want. So it's really defining those attributes and the model that can be the best fit for them. So, and it's so individual, so it's, it's inspiring to see people make the leap from corporate. That comfort of hey, I have a paycheck, I have benefits, I know this, this is all I've known. It's inspiring to see them years later come back and say, wow, what a lifestyle change. I mean there's always risk. There's risk in every business. You know, I think only 35% of small businesses survive past 10 years. So there's risk in small business. Franchise at least has a little bit more tested model. I'm always transparent. It doesn't guarantee success. Right. There has to be that level of involvement and it has to be the alignment to make sure it fits with you. But there's ways to validate that with other franchisees and say, you know, how did they perform, what were their struggles? And so not only do you have the support of franchisor, but you have a built in network of other owners that are non competitive, that use each other as a support network to guide with either challenges or successes and they all learn from each other. So that's kind of the other piece that you're not buying or paying into. You're just all on the same, you're all on the same team and you're representing a certain brand or service or product. So it really opens your doors to have another level of support so you're not in it on your own as a small business.
- [24:15]
Host
Yeah, that sounds ideal. So if anybody was working a full time job right now and they're listening to this and they're feeling inspired, they want to know whether or not they have the potential to do this on the side, what are you going to advise them to do next?
- [24:29]
Lauren Vermette
Yeah, that's great. I think there's a lot of people say I want to learn more. I just don't know if I can So I would welcome the chance to talk to them. And it starts with learning about them and say, what do you like and what are your skill sets? What are your goals? Do you want to get into this? Do you want to test the waters and grow it before you leave? Do you have intentions of eventually being in it? And it's okay if you don't know. It's just, let's explore that. Let's get to know you and really get to know your why. And so then I can do research on my end with my relationships with hundreds of the franchises out there to make sure it's a in their territory, there's availability and that those business characteristics align with what they want. So it's very possible, and I welcome the chance to kind of walk them through what it could look like and introduce them to a couple brands that would be worth investigating, right? We're just investigating. We're just learning what it means and then I can help explain the industry a little bit more and what that means to them and what it could look like for them.
- [25:25]
Host
Is there a fee to this investigation? Like, how do you earn your income?
- [25:29]
Lauren Vermette
The beauty of what I do is that I think of it like an executive recruiter. Right. So I will have a candidate and I am lock stock in line with the candidate, not with the franchisor. I've worked with hundreds of franchisors. Executive recruiter is the reference. Because if I bring that candidate along the process where they're investigating them directly with the franchise and they choose that franchise to go into and that franchisor accepts them into their model, then part of the franchisor's marketing fee goes to pay me a commission. So there's no cost involved. It's really just, you know, a couple hours of time for each business model to really investigate. And I'd say the average is between four and eight weeks. Should give you enough information with our calls and your investigation with the brands to get you to a point to have enough information to make an educated choice of saying, yes, this is for me, I want to dive deeper, I want to go in, or no, this doesn't work for whatever reason. So there's a lot of people that say, I've always wanted to explore it, but I don't know where to start. Or they go on Google and say, top performing franchises. But that's so hard to understand because you don't know the criteria that goes into those lists. You don't know what that means. It could be top performing, but that just could mean they're growing fast. It doesn't mean the profitability is good. Or it could mean that they're great in profitability, but they don't necessarily have the franchisor support. And you have to be an owner operator. Those lists can be valuable and they can start you somewhere. But, you know, you would have to go out and interview hundreds of these franchises to even understand if there's availability in your territory. The goal is really to make the process more efficient and fun. I mean, there are brands that we throw out there that people are like, I would never have thought that. No. You know, I have a candidate who really was. Wanted to be involved in the community and really wanted to help people. She ended up going into a restoration company, and she loves the feedback of, you're in that emergency situation and you're helping people and you're guiding them through the process. You're taking care of the insurance, you're getting the mold mitigation, taken care of the water cleanup, whatever it is. And she said, I would have never in a million years thought I'd be in a restoration company and this would give me the fulfillment I was looking for. But so it's fun to see what, you know, what people end up aligning with, even though that's nothing to where they would have ever envisioned their life going.
- [27:49]
Host
That is so fascinating. And again, it's making me just wonder for myself. I'm not in a point right now where I feel like starting another business or buying a business, but you never know. I know. You never know. How many franchise systems exist across the United States?
- [28:08]
Lauren Vermette
Yeah, there's. I don't know the exact number, but it's between 5,000 and 6,000.
- [28:13]
Host
Okay.
- [28:14]
Lauren Vermette
So there's a lot of opportunities. They don't all make sense, and they're not all attainable or some of them, you know, there are some that are sold out. They've done so well. They're still a franchise system, but you can't buy into them any longer because they've been sold out across the country. So that narrows it down. And then, you know, there's a number of different sectors, you know, from home services to senior care to youth enrichment, pets, fitness, beauty, food, even B2B, which is so interesting because there's B2B models that you wouldn't necessarily assume it was a franchise, but they've got the system in play the model down well, even.
- [28:46]
Host
Like the one that you were mentioning, the Salons by jc I. I had never heard of that type of a franchise system before. I would have assumed that it was not a franchise and it was more of a real estate situation.
- [28:58]
Lauren Vermette
Yeah.
- [28:59]
Host
So how realistic, and I know we touched on this before, but how realistic is it for someone to be semi absentee or fully absentee? Does that actually work?
- [29:10]
Lauren Vermette
Yeah, that's a question I get a lot because I think if you're looking for a passive, and I mean purely passive way to invest or diversify your income, I would not recommend a franchise. It's just like any business that does require your time and attention on some level. To what degree that level is depends on the business model. Right. So there can be some. I mean there's three different, really three different owner involvements. It's owner operator, where you're the actual operator and you're in the business day to day. Then there's the semi absentee, as you mentioned, which is called the executive model and that gives you a little more flexibility. And those can run from anywhere from 10 to 30 hours a week, depending on the model. And then there's the investor model and that's a little more hands off. But it definitely can change the dynamics of the financials because the more hands off you are, the more you require employees or staff to operate and run it. So you just in and some of those are completely possible to get decent margins and a good return, you just have to factor in, if you are not in it, someone else has to be. So, you know, on your expenses, your payroll is going up. But depending on the margins and depending on the model, that's definitely possible.
- [30:16]
Host
And then what are some of the questions that you'll ask somebody when they call in and they say, hey, I want to consider this. What are some of the questions that you would ask them?
- [30:26]
Lauren Vermette
Yeah, I usually try to get to their why. I think it's really important because at the end of the day there's a lot of fear and anxiety into trying something new or the unknown. So why do you want to get into business? Is it something you've always, you've always wanted to have the pride of owning something? Is it you're tired of the corporate grind and you want to build something on your own? You want uncapped potential where you're in a career where you can't see yourself doing much more? So really understanding the why. I mean, some of what I go through is talk about their background, talk about their experience. What is it about your current job and your past jobs that you've loved? So I try to get to that point of it to understand really what their why is moving forward like we talked about, is it they want a little more time, flexibility because they may have young kids or they're at the end of their career, like, what does your goal look like? And I always fast forward and say, what does your goal look like in 5 to 10 years? A fun question I ask about is, does the status of the business matter to you? And you know, oftentimes people are like, oh no, not at all. And I said, okay, so you're at a college reunion five years from now and someone says, what are you doing? And you say, I'm a franchisee of a Porta Potty company. Does that matter to you? And I use it as a joke. We actually don't work with any Porta Potty companies, but I use it as a joke. Some people say, oh well, not that I don't want to do that. And others are like, I don't care what it is, that'd be fine, I'll say it, as long as it's making money, you know, so those are the fun pieces of it to understand. Like I don't want to match them with something that looks good if that's going to matter to them. So we really kind of just get into it and it's fun. It's really a self discovery process too of what your life could look like, you know, and what does this investment, how does it change your life?
- [32:05]
Host
I just can't believe that I never even did any research on this on franchising. You know, I was more of the idea person and more of the initiate, get started, build the branding and websites, you know, so you and I are, we've got the opposite sort of skill sets.
- [32:20]
Lauren Vermette
We could go into business together.
- [32:23]
Host
Maybe we should. So how do you evaluate, you know, you've got these thousands and thousands of franchises that probably pass your desk. How do you evaluate whether one is a good opportunity? What are you looking at?
- [32:36]
Lauren Vermette
Yeah, there's again a number of components there that. And again, if it's all about the alignment with the candidate, one franchise could not be a good fit for one and while the other on a completely other end of the spectrum can be a great fit. So it's not that there is exact measures of what makes a franchise good or not, it's what makes them good for that person. So, you know, we look into franchisor support. What does that look like? What level of involvement does a franchisor have? What teams do they have in place? Whether it's a marketing team, a financial, you know, there's A training component. So you look at the franchisor support, you look at track record, you look at track record of profitability, track record of closings, track record of failures. You know, there are some people that say, hey, I don't want to go too much into an emerging brand. I'd rather be with something that's tested and true and has been working for 10 plus years. So you look at history, longevity, you look at growth rates. There's a number really, business factors that go into it from a financial and business end, but also from a psychographic end. Is this the type of franchise you have to make sure that when you're evaluating a franchise yourself, is that, are these the type of people that I want to work with? Do I work well with them? Is their style what I resonate with? And so those are kind of the intangibles that you could look on paper or look at a spreadsheet and say, okay, these numbers look good, but is this the type of business I want to align with based on who's operating it, what the founder story was, and what it looks like in the future?
- [33:58]
Host
And I really like to keep the show approachable. Right. So for I'm thinking in my mind, okay, what about the listeners? Again, they're more on the lower end. They're looking at $100,000 franchise all in. What could they really make? If they're going all in on a franchise and it's only 100 grand before they open their doors, what kind of profit can they look at?
- [34:18]
Lauren Vermette
Yeah, I get this question a lot too, because the question is sometimes people say, hey, I have 100 or 200 grand, let's say. And I want to make sure that this franchise gives me more than what I could make in the market and just wipe my hands of it and let it ride. So it's about seeing if I can get a brand that would a cover their return how quickly. So there are models that take a year or two to build and there's others that can get to profitability in 60 to 90 days. So how quick is it to ramp and then what are the returns beyond that? So sometimes that return could be exactly what you put into it, and sometimes there's scale that you can get into another or another. And now you have multiple territories or multiple locations. That's triple, quadruple, 10x what you put into it. So it's a combination of understanding the time that it takes you to get your return back and then what your overall ROI is long term. So there's I really look at those two. And, you know, people have different thresholds. Some people say, hey, if I'm leaving my corporate career, I understand it takes time to build, but I need to be at a reasonable point in year two to be able to cover my income. And then we look at models. And while I don't guarantee success because I can't and I don't know how you're going to operate the business, and while I can't guarantee returns, I don't go into the financials. They learn all of that from the franchisor direct. But I can align with businesses that I've seen the track record and understand what the history of their profits are, and I can understand that they're in that range to get them to where they want to be. Does that help?
- [35:52]
Host
Yeah, you're matchmaking on fit, and then at that point, the person is working directly with the potential franchisor.
- [35:59]
Lauren Vermette
Yeah.
- [36:00]
Host
Do you stay involved at that point?
- [36:02]
Lauren Vermette
Yes, I do. Great question. So until the end, until they sign, I stay involved and then I'll stay involved afterwards, just to check in. And, you know, I have contacts in the industry that can help with a variety of things. I can help introduce you to funding components that could really help them, even not even to go with a bank, but just to really assess what would make sense for them. So every step of the way, even through their investigation with the franchisor, I'm there. What is your feedback? I set expectations with them. On your next call, they're going to be going through this. And so here's how you can prepare for that. And I'll give them guidelines. I give them documents, I give them cheat sheets, some articles, things that would really help them understand and be prepared for the next call. So that their investigation isn't just about listening. It's about getting the questions answered that they really want to know. And again, the ultimate goal is to get them enough information that allows them to make a best decision. So every step of the way in the franchisor investigation, I'm with them and guiding them to make sure that it's coming back to, hey, you said this. You said this was your goal. Are we sure we're getting in the right place? And sometimes those can pivot right. Sometimes people can say, hey, I need to keep my career. And then they come across an opportunity. They're like, I want in. I want to go in. And sometimes it's the opposite. They say, hey, listen, I may be owner, operator, but I just want to leave my options open. And, you know, Tell me what's out there. So we explore both scenarios and then they put themselves in the seat of an owner and say, does this look realistic for what I want to do?
- [37:25]
Host
When you're looking at the stats on the franchise, what are you comfortable with as far as their percentage of closures?
- [37:34]
Lauren Vermette
Yeah, that's an interesting one. I think it depends on closures can happen. And there are times where a franchisee closed, but the franchisor bought it back. So it doesn't show that it was a closure. So while there may have been closures, it doesn't show closures. So it doesn't look like there's closures because a franchisor has the right to buy it back. So you have to just look into that and say if there are a number of closures within a certain time frame. Was this five years ago? Was this last year? There's a number. Couple things you have to kind of really dig into a little bit deeper to understand what the real story is. But franchises are federally regulated in terms of they have to provide every year a franchise disclosure document. It's called an fdd. And what that is is it's really the entire history of the company from bankruptcies, which can be funny because they have to disclose any bankruptcies of the management team. And sometimes there's one on there and someone says, sorry, I was 22 and that happened, but it's unrelated to the business. Right. So. So it's just peeling back the onion a little bit and understanding. But that discloses a lot. And then some states go beyond that and they're state regulated, so they have a different level of disclosure. And that's everything from style to management, to placement, to what ifs, to financials and beyond. So the beauty of that being regulated in that way is that everyone has a little bit of a. I can lift under the hood and see what, what it's made of. And they're current and they're updated so you can look at averages for last year, which is more important than saying, hey, where was it 10 years ago?
- [39:01]
Host
So it's not like they're going in blind. They actually have all of the data to make a great educated decision.
- [39:08]
Lauren Vermette
Yeah. And like I said, it still takes work, it still takes grit, it takes perseverance, it takes risk. You know, I personally, I always look at the upside and the downside and say, what's my best case scenario? What's my worst case scenario? And if the worst case scenario is palatable and it's worth that risk, then it's something that I'm more likely to entertain or move forward with. In these, you have a little bit more of a crystal ball, if you will, because you've seen it happen repeatedly over different markets that you can compare to your market.
- [39:37]
Host
Which models are you personally the most intrigued by right now that you have seen and thought, maybe I should buy this?
- [39:46]
Lauren Vermette
Yeah. I mean, some of those that I get so excited about, they're across different sectors. But I would say right now. So if you're just asking me right now, I'd say the service industry, there's a lot of services out there. You know, think man in a van, that it's not necessarily. I mean, from pet grooming to home services, you know, anything in your backyard to. I mean, and it's not just consumer based. There's other B2B plays with that too. But the service industry is really intriguing, and I think it opens a lot of doors and easier to crawl before you run, so to speak, because you can start small with one employee, one van, low overhead, easier barrier to entry. And then as you get more business, you add another one, you add another one, you scale to a different territory. So it's easier than just saying, oh, my gosh, I'm biting off so much more than I can chew. I have this huge team, I have this fleet, I have this. So the service industry right now is really interesting to me personally.
- [40:44]
Host
It's funny that you say that, because I was on a walk with a friend the other day and she asked me that question. If I had to for some reason, some reason, start another business today or tomorrow, what would I choose? And hands down, I said service industry. Something that would have next to no overhead because you could run it out of a truck.
- [41:02]
Lauren Vermette
Yeah.
- [41:03]
Ann McGinty
And it's interesting.
- [41:04]
Lauren Vermette
I mean, there are some models that I work with. It's a very simple business model, but if it's executed well, it stands out. You know, there's a lot of, like, industries that are differentiated and specialized, but they don't necessarily have the process down. So kind of getting into one of those, a simple model, just execute it better than the next and there's an open, open door.
- [41:24]
Host
Yes, yes. No. I love service industry businesses. So just as a final question here, for anyone who is in their early 20s today or even late teens, maybe they are graduating from high school or graduating from college or didn't go.
- [41:40]
Lauren Vermette
Sure.
- [41:41]
Host
What life wisdom would you give to them?
- [41:44]
Lauren Vermette
Ooh, that's a big one. I would say looking back now, in my late 40s, I look back and Think there's more than the traditional path. So you know, coming out of, out of school, I had to get a career. I went to liberal arts. So your career wasn't as defined as, you know, specializing in something. So you get some internships, perhaps get experience in the things, and then you get into a corporate job and you climb the ladder and you, you may pivot to a different company, et cetera, but there's more opportunities in the unconventional path. And I think it's worth exploring with the right investigation. And I would say it's not just risk, but it's calculated risk and it's exciting to see. I think it's, it could change the trajectory of your, of your life.
- [42:31]
Host
I think that's very inspiring, especially for this generation that is entering the world at a time when jobs can be scarce and the cost of living can be high. And so, yeah, make your own path.
- [42:43]
Lauren Vermette
Exactly.
- [42:44]
Host
Well, Lauren, it's been so great chatting with you. I have learned so much from this interview and I'm very grateful for your time. So thank you.
- [42:52]
Lauren Vermette
Thank you so much. Thanks for having me. And really, if anyone listening is interested, reach out. I'd be happy to chat and help see if there's something that we can align with you.
- [43:04]
Ann McGinty
Today's Key Takeaways if you're less of an ideas person but understand operations, franchising might be the perfect fit. Can you lead a team? Can you execute on a playbook? Franchises come in three main owner, operator, semi absentee and investor model. But every model still takes work. Even with a semi absentee setup, you'll need to stay involved, especially at the start. Brick and mortar franchises can take six to 18 months to build before opening. You'll want to be hands on during that phase. Once open, a good manager can handle the day to day if you have the right person in place with the right incentives. But don't rush to hire managers before the business is ready. Timing matters and franchisors often help train staff. Franchises offer tested models with proven processes, reducing the guesswork compared to starting from scratch. There's a model for nearly every skill set. You don't need a business degree. Many franchises work well for people with leadership, sales or community building experience. Don't pick a franchise just because you love the product. Passion is great, but make sure it fits your goals, time and lifestyle. Always know your why. Aligning business decisions with your personal values and long term goals. Always ask about closures. Some are hidden as franchisor buybacks. Dig into the franchise disclosure Document the FDD to Understand the full picture. Franchisors earn royalties from your revenue, so they're motivated to help you succeed. Startup costs vary from around 100,000 for service based franchises to several million for bigger locations. Financing is available. SBA loans, robs using retirement funds and home equity can make it accessible. Profitability timelines vary too. Some franchises ramp up in 60 to 90 days, others take longer. Franchising can be a bridge from corporate life to entrepreneurship, giving you more freedom and flexibility. Accept calculated risks. It's part of the process. But always weigh the best and worst case scenarios and make sure the risk is worth it. Franchise consultants like Lauren can help match your goals and skills to the right business, usually at no cost to you. The other advantage of franchises is that they come with a built in network of owners for support. You can talk to them, learn about the challenges and what success looks like for them. You're buying into a system that's been tested and refined, giving you a head start. Remember, fit matters more than flash. A franchise with less cool factor might be a better fit than a trendy brand. Do your homework. Talk to owners, review financials and ask tough questions. Franchising can open doors, but success depends on finding the right fit for you. And finally, there's more than the traditional path. Be open to unconventional opportunities, take calculated risks and explore what's possible beyond the corporate ladder. It might change the trajectory of your life. That's it for today. I release episodes once a week, so come back and check it out. Have a great day.