← Unemployable with Jeff Dudan
Unemployable with Jeff Dudan
Before You Go Multi-Brand, Watch This! (Franchise Empire Rules) with Mary Kennedy Thompson #237
00:14:39
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- [00:00]
A
So I'd like to talk about franchisees and one of the things that's happening now in the space and Neighborly was a leader inside of this, that you've got sophisticated business owners, high net worth business owners, many, maybe not so when they came in, but building large transactional, transactionable businesses inside the franchise space, in the trades, in multi unit franchising, food.
- [00:26]
B
Concepts, food business, you can see it across, across everything.
- [00:31]
A
So if a franchisee or prospective franchisee came to you and they said, I want to build a multi unit, multi brand franchise empire, what advice or experience would you share with them? What counsel would you give with them on how to approach and solve for that outcome?
- [00:48]
B
Yes, well, first I, you know, I'll start by telling you I was a multi unit franchisee myself. I had three locations in Cookies by Design, which is different than multi brand. And you have to look at both because they're different. You know, multi unit. You know, you're a subject matter expert in that business and all what you're doing there is learning how to be operationally excellent and put the right leadership team in place that can run the business when you're not there. When I had my first shop, it ran beautifully. When I had my second shop, I went to my second shop and my first shop started falling apart because I didn't have the right team in place because I was the person that was fixing everything. So you, you have to learn how to do that and build out this team that operates better even when you're not there, that operates better because you're not there multi brand. And we had a lot of conversations at Neighborly about this and when I left, it wasn't even 1% of the franchise owners were multi branded. But there's a place to do it and a time to do it. And what I would always start with is a couple questions. Whether you're going to do multi unit or multi brand is first is do you own the space you already have? Do you have the deepest market penetration that you know, Are you better than at least the top, you know, are you at least in the 25th percentile of or 75th percentile? You know, are you in your market penetration? Because if you're not, you're spending money to open another location or do another business that you're not even making the most of what you have? So start with is your profitability where it needs to be, Is your market penetration where it should be? Which means you're in the top 25% of your system in market penetration? And then do you have a solid plan for succession planning and leadership? So that's the first. And then when, if you're looking at doing multi branded, it's to me it's like again a family where everyone has the same last name and there are qualities of. But each child, each brand has different qualities. And I remember, you know, the type of person that is a plumber versus the type of person that's an electrician are very, very different human beings. And you're leading two different types of people and you think I, I just have to lead the same. But it's not. And so it's making sure that when you're doing multi brand is one, do you have somebody in each brand that knows and loves that brand, that brand. You're going to have people above that that need to look at the organization as a whole. You know, if you're doing, if you're a franchise owner doing shared services like shared marketing and shared accounting, which makes sense, you have to have somebody in that brand that knows and loves that brand that can teach and show the marketer and teach and show the accountant. Like this is how this ties back. And that's the biggest mistake that I see is someone will say, well, I'm really good at running this brand, therefore I should be good at running all the other brands. It's making sure you understand and you have ownership people who really are in that brand and live it every day that know everything from the point of sale to who the customer is to the type of person you need to recruit to do the best job. And oftentimes you're better off doing multi unit. You'll make more money doing multi unit than multi brand. Now we're places I've seen multi brand be really work really well is when you have an area where you're geographically constrained. I remember there was an area up in, in Canada where we had a franchise owner and he had the best market penetration of the brand. I mean literally he was number one. He was constrained by the ocean on one side and a river on the other side. And it was a constrained market tide. And for, and he was, he could go wider within those brands because he had gone deep and it made perfect sense. And, and there is, there are synergies that come from. If I'm doing this for advertising, I can do this plus this, plus this, plus this. If I'm counting these beans over here, I can add these beans over here and it makes sense. I'd also, I also would, you know, I would ask you Know, what is your plan? Who are the people that are helping you make this plan come together? Who is the champion for each brand or each, each location? And then, you know, what is your end game? Do you want? You know, I was just talking to a great franchise owner who is an ifa, Gary Robbins. He's amazing and you know, he's very clear about his plan. He and his family, they meet regularly, they talk about succession planning, they bring in an outside person to help them. And I think he's got like 65 locations of what he has and other brands as well. But he's very clear about what his end game is with his family. And what is that? Is it that you want to sell it someday? Is it that maybe a small private equity company may come by it? Is it that you want to break it up and sell it to different people? Because it makes sense to understand what that brand is.
- [05:52]
A
When people are looking at particular brands in terms of selecting the brands or the scalability of it, what are some of the things that you would look at? We come from the home and property service space. So a lot of the neighborly businesses didn't have storefronts, correct?
- [06:09]
B
Most did. No, most of them did. They, they had, I wouldn't say it wasn't a consumer facing storefront. No, professional, you know, like they all showed up and would dispatch a shop.
- [06:19]
A
Yeah, yeah, yeah, they, they had a shop. But you know, if you're, if you're looking at businesses that are constrained by location, say a fitness concept or a cookies concept. Sorry to hear that your first one crumbled when you went to the second one. But you know, I had to hold on to that for like five minutes.
- [06:38]
B
Yeah, that's really good.
- [06:40]
A
Well, there you go. We won't cut that. So, but, but when you. Okay, so if I wanted to build something that was retail based, location based, fitness, wellness, things like that. Yeah, there's a, there's another huge investment inside of that. So now you've got to say, well, how do, how do people. If I'm, if I'm building one and I'm going to be in the top 25% of the network, how do I fund the additional one? Am I able to fund that out of the operating of the first one or am I going to have to go get more outside debt? You know, how deep do I need to go to get incremental profit into my business? And then where do the efficiencies come from inside of that? Because you hear people, I know somebody had 110 Planet Fitnesses, you know, 35 of this, 65 of that. And it seems like the retail based locations lend themselves to being multi unit. I think it's because each one is a standalone and it's a. You're stamping out another little factory, little profit factory, and you're doing it exactly the same. And then there's probably some efficiencies from the management of that managing staff and buying insurance and all those types of things. But you know, what kind of characteristics, if you were to advise somebody, and I'm not in anything right now, what are some of the characteristics that you might advise me to at least consider if I really wanted to build a material generational business inside of franchising?
- [08:06]
B
Well, you know, the thing that struck me is when I went from one location to two locations, I had 100% increase in my overhead, but I did not necessarily have 100% increase in my revenue to begin with. And I certainly did not have 100% increase in my EBITDA. And so I still, I know I sound like a broken record, but I'll start with make sure you have strong market penetration where you already are and that you really are operationally excellent. Like you said that you can stamp that throughout. And so then it's, what is your end goal? So like I might say I'd like, you know, I, I want this small restaurant concept. I want the Austin market. The data says that I can have 30 in this location. That's my end game. And so if that's my end game, how do I need to build my organization to be able to do it? And what are things that are repeatable? Where is it that the magic happens on site and where is it that things are repeatable that don't have to happen on site? Like counting beans? That doesn't have to happen on site. That can be somebody who's really good at that and can work with each store manager. But you know, I remember one time I had a customer that came in and she said, I love coming to this store because this store is much better than the other store. And she didn't know I owned other stores. And I said, really? And what happens is they become connected to the people there. And so if you're looking to operationally stamp it, make sure that you don't forget the values that your people that are working with the customers are going to live, eat and breathe to make your place come alive. And that has to be very specific to where you are. And then, you know, the, I think, you know, marketing Accounting. Those types of of disciplines can be done at a not on site. They're ones that, they're the same no matter what site there is. Make sure you have the right leaders. Leadership matters. Every location needs a leader. And that doesn't mean a $200,000 a year leader. A leader is somebody who cares about what happens there, that has a growth mindset that is going to be able to recruit good people and keep them there so that the organization can grow. And you know, it was this way in the cookie business, it's this way in the food business, it's this way in the home services. There are some people that are gonna be with you cause they're on their way to something else. Cause you have some turnover. And then there are gonna be some that they decide, this is for me and this is what I wanna do. And you've gotta make sure you have enough of those. This is for me, this is what I wanna do at each of those locations. Then lastly, when you keep an end in mind, if I'm thinking that I want to open 30, you know, go back to your question. How do I fund that? What does that look like? That end game. I know that it gets easier to get the money as you have more success. So work hard to have your first couple of locations be very successful. So that when you go to the bank and maybe you, you know, I, I think, I think it's important to build relationships with bankers. And you know, the small regional banks are not. There aren't near as many of them as there used to be. It used to be a lot easier. You got to know your banker and you'd go to your banker. I still encourage people to have a relationship with a banker at as regional a bank as you can find so that you, so that when you go and say, see these first two? And here's the P and Ls and here's all the information, I'm ready to open my third. And here's the plan and that you have it. You're not just. The plan isn't just here. The plan is actually here's where I want to be tomorrow, a year from now, three years from now, five years from now. And then what is your end game? Do you want to hold it and your children are going to step in? Or is this something sometime in the future you may sell? Because that does change some things. Or even an employee. Stock owned, purchased, right?
- [12:02]
A
Well, not only in franchising, but also in life. I believe that you have to succeed in the opportunity that you're currently in to get the next opportunity to win the next opportunity. And I think people forget that. I mean, it's like you've got to get what you're doing down and it's, it's gotta be, it's gotta be excellent. And then, and then once you have demonstrated to a bank or to partners or anybody else that you have the ability to operate and to win, then all of a sudden opportunities start to come at you. And now you've got to be very careful in what you select.
- [12:38]
B
We have strategic pillars here at bni and we have four cornerstones underneath them. And the way Roman's built building, the leftmost cornerstone was the most important one because it's where you started your building. And that one for us as members first, you could just translate that to customers first. And then the next one is we attract top talent. And what are you doing to attract top talent? And then the next one is simplifying processes. You alluded to that, Jeff, earlier is how do we simplify processes so we can repeat them, repeat them, repeat them. And then, and then the last one is we execute brilliantly. And so if we can keep those four cornerstones, I can start growing. You know, I can. If I can do those four things and be hyper focused on those four cornerstones and each of those locations that I do, it gets faster and easier. Faster and easier.
- [13:26]
A
I'm writing that down. You said it was members first, so customer first.
- [13:30]
B
We say members first because that is our customer, customers first. And then we want to make sure that we attract top talent. Because if I'm not attracting top talent, then my company is not going to be able to grow as fast as I need it to grow. I need smart, strong people who are attracted to the opportunity, to the values, to how we do, then I need to make sure I always simplify processes. What happens, What I found was by the time I got to three locations, I, I had so many complicated processes and it was because each, I allowed each store to do some things differently. I shouldn't have, I should have had the discipline of. And we got there, but it took me a couple of years to get there. I did it the hard way. And then lastly, when I have, you know, when I, when I put my customers first, when I attract top talent, when I simplify processes, then I can execute brilliantly. And to me, executing brilliantly means that what is the experience my customer has? That's why I'm a member in a chapter, so I can actually experience. I told somebody if I ran a hamburger company, I'd eat a hamburger every day. I'm so glad I don't because it wouldn't do well for my waistline. But what are the things Executing brilliantly Goes right back to putting your customer first.