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The Amazing Authorities Podcast
The Truth About Franchising: Costs, Risks & Opportunities with Franchise Expert Liz Leonard
00:30:48
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- [00:02]
A
Welcome to the Amazing Authorities podcast where game changers, visionaries and category leaders share how they built their brands, platforms and global influence. Your host is Mitch Carson, international speaker, media strategist and creator of the Instant Authority system. If you're ready to learn from those who've done it and want to become the go to expert in your space, you're in the right place. Liz Leonard is in the house today. Now she's going to wow you. Why is she going to wow you? Because this lady is in the know. She's in one of the few states I've never visited. It's in a blue zone. So I learned this about her. Liz, welcome to the Amazing Authorities podcast. And I know you're going to share gems, nuggets, ways for people to make money based on their God given skills.
- [00:56]
B
Thank you for having me, Mitch. Can't wait.
- [00:59]
A
Yes. And you are in the beautiful state of Maine.
- [01:04]
B
I am in Maine called Vacation Land. And a lot of people come here and say, liz, where should I go? There's so many places on the coast to tour. So if anybody's looking for advice, let me know. I will definitely connect you.
- [01:16]
A
Yeah. And I found out you have been all, you've got a wealth of business experience and one thing that is most noteworthy about you, you've been married a whopping 29 years. You know, I made it 11. That was my claim to fame. You've made it 29 years. Now, I'm sure it was all great. There are no bumps along the road at all. Nothing like business, nothing like marriage. But nonetheless, you've made it 29 years. You've got two grown daughters. And that in itself, that is an indicator of stick to it. Iveness, you're a lady with some grit. And you're this franchise queen is I'm going to label you a little bit because, you know all facets of franchising. When we got to know each other a little bit, why should someone consider a franchise versus going out and starting their own business?
- [02:12]
B
Great question to start with and I appreciate the queen thing. I think I'm a seasoned queen. How's that?
- [02:17]
A
Okay. Well, one with a crown that's been shined, shined and buffed.
- [02:21]
B
Thank you. So, you know, I think the experience that I bring to the table, the grit that you mentioned really helps people understand. Kind of the school of hard knocks, right? Like living it, breathing it, experiencing it, the roadblocks, the potholes, there's a lot. And if people are considering franchising, it's a great opportunity for people to get a playbook or business in a box, which, which is really the most simple way. It's all systematized. Obviously it costs money, you're partnering with the franchisor, but it does give you all of the pieces. Now I have done both. I have done my own startup. We did a $1.2 million child care center. We bought the real estate. It was a 10,000 square foot building. When people think of child care, they're like, oh, it's just changing diapers, no big deal. Liz, guess what? It was a big deal. 140 kids, 2:22 full time degreed teachers. Oh wow, big building. But I share this with you because when we started that business I thought, I don't know what I'm doing, I'm uneasy, I want, I can't make a mistake. I just left my health care job making 180 so there's no room for error. So very scary. And your house was on the line.
- [03:36]
A
So for, oh, oh wow.
- [03:38]
B
This is in the millions, right? So these get a little bit more, you know, a little bit more red tape and a little bit more commitment to the bank. But I share this with you because I was introduced the powerful world of networking and this is in my book, which I know we're going to mention my book, but I was introduced to a couple in California, in Silicon Valley who had employer sponsored childcare centers. They had 14 of them with Google and Yahoo and Stanford University. And I was in awe of this couple. Like, wow, they have exactly what I want to do. Can I fly out and meet them? Will they like me? Will they work with me? Could they teach me? I'm teachable, right? So long story short, I did fly out, I did meet them. She said, you remind me of me. You've got grit, you've got energy, you're going to do this. She said, I'm going to work with you, but here's the plan. I'm going to give you my playbook, I'm going to give you my spreadsheets, I'm going to give you my vendor discounts, we're going to do your website, we're going to help you with the software system for billing, we're going to, we're going to give you everything to set up your school and we will consult with you for one year. And I thought, oh my God, that's awesome. And then I thought, this is kind of like franchising. This is cool. Like this is way back when in 2006. And so I paid them $65,000. They were with me for a year. They gave me confidence, they gave me courage, they endorsed my product and service. And if I hadn't had them in my world, I don't know if I'd be where I am today. So I want to share that story because I've done both. We've owned a franchise as well. They're both great models, but I think having being on my own island, which is what you are when you start your own business and many people think it's easy, I'm just going to go start my own thing. I talked to a gentleman yesterday, senior care home health. He wants to just go start his own. I'm thinking, okay, that's great, you go do that. You call me back in six months, let me know how that's going to. But at the same time, when you're in business for yourself and you don't have any systems and support, you're responsible for the technology, platform, hiring, recruiting, HR laws, the list just goes on and on. So you better have access to resources to make sure that you don't have a lot of mistakes. And you know, the, the goal for me was to get the playbook, replicate it, duplicate it and knock it out of the park. And we did that. So franchising, which is kind of the opposite, gave me a system, it gave me friends to call. Right. In franchising, you have people that you can call that are just like you, that can answer any questions before you write the check. For, you know, a lot of money, you're able to validate with owners and try it before you buy it. But you're still able to talk to owners when you're in the system. But the training that you get, the tools, the technology, there's some pretty big differentiators there when you go start your own. So. And we could go on and on about this, about independent versus franchise, which I'm happy to do. You just let me know.
- [06:33]
A
Well, I'm curious what happened to this major undertaking with these 22 full time faculty members and personnel. When I had a big staff, my biggest headache and stressor was the personnel. It wasn't sales and some of the other component SOPs, but managing people.
- [06:55]
B
And that is the one reason why I sold my business. Because I love the children. I always miss Liz. To them they were just like, they were, they were like a, a bright light in my heart. They were just the energy, their little personalities and they needed me and I brought something to the community where they made friends. And I will add that that school we opened in 2007 when the recession hit and our business thrived because moms had to go back to work. They were grateful for us. And those kids are graduating from college now. So I really feel old. You know, how long I've been married. The audience is listening. You probably can guess.
- [07:33]
A
Okay.
- [07:33]
B
Kids are graduating from college and I'm so proud that they and some of them are still friends. But the staffing model, especially in this industry, in each industry, you can look through it from a different lens, which we did, we studied this turnover. These were all full time employees, full time benefits. Each teacher had their own brand new classroom. I mean, you think about a brand new childcare center, 10,000 building, 10,000 square foot building, and what you would want to offer kids. Well, we gave them everything. So it wasn't enough, Mitch, if they could make $1.50 more or even maybe a buck more, they would leave. And so I found that the older generation of teachers were very loyal and they stayed the younger generation, out the door. Spinning door, actually. So that is one of the reasons why we decided to sell was the turnover in that industry, which I highly recommend people study industries for Turnover rates was 28%.
- [08:33]
A
Oh my gosh. And there are reasons, because higher pay, was that the number one lure?
- [08:40]
B
And hard work, I mean, I don't know how many audience members have children, but we all know that it's a lot of hard work. Every day is different. You've got to be a problem solver. You've got to talk about being a Sherpa. I mean, you are teaching, you are, you are their confidant. And so it's hard work. And I think many people didn't want to do the work. They felt like they were not compensated. And I think that's kind of an industry trend. I mean, we can also compare it to like CNAs and senior healthcare, which is my corporate background. So that particular profile of employee always feels like they're not paid enough, which I always use the phrase entitlement.
- [09:16]
A
Okay.
- [09:17]
B
You know, it's, it's a very difficult thing to solve. But that industry, but there are those people that are passionate about kids and those are the people I needed to find. So the solution that I put into place, and I don't know what you did, Mitch, with your business. I started using a tool called predictive index. I took my top 10 teachers and I gave them this basically this skills assessment, identified what they had for value system, skill system, all the pieces. Right. Anybody that I interviewed after this turnover thing, Started snowballing. I had them take this predictive index tool and it helped me do my hiring. So there are solutions that you can put into place that might cost you money, but in the long run, you know, the retention rate will be much better. And so that was a win win for me. So it got better.
- [10:08]
A
Oh, you did improve with this. Okay. Your retention. Oh, it's the number one expense of most businesses is payroll, and that's payroll. And if you have turnover, you got to train new people and interview time. It. It killed me. And I eventually just said, I'm done. I'm going another route. I've been there, done that. I lost my hair and had to buy new hair. And it was, it's. And there's a truth to that. It was enough. It was enough. So I get it. So then you're able to figure out where the landmines are. As a franchise consultant, as a former business owner, that wasn't a franchise. And this is where you wear your direction hat today with the big flashlight on the, on the, on the cap. Okay.
- [10:58]
B
Yeah. I mean, we really, our process is very buttoned up. So the first thing I do is I give people a skills assessment. I want to know what they leverage, what they have for leverageable skills and transferable skills. So what they bring to the table. And do we need a manager run model, or are we looking for an owner operator model? And so we need to identify the skills we need to talk about, can we transfer them, what their role in the business is going to be. But the stars have to line up for this to be successful. And the more work we put into the front of trying to define what it is, how it, how is it going to benefit you or your family? What is the end game? What is the end goal? You know, can your family get by, you know, six months without having the big fat salary coming in from one of the spouses? So we have some really big heart to heart talks. And it's really vision mapping about the business being a vehicle. So where is this vehicle going to take you and your family? How hard are you willing to work? How many hours can you put into it? Will your spouse be involved? Do you have an adult son or daughter that might want to be involved? So we work with a variety of people, from veterans to investors to family legacy builders. People that are actually, you know, laid off. That's probably the most common person that I'm working with. And then the new, the newest is people that are looking for an off ramp. They need a secondary Income and they know that their job is not safe. And so I just had three calls yesterday with brand new candidates and they're like, Liz, I need an off ramp. I need a plan because I cannot stay doing what I'm doing. I'm doing what I'm doing because I'm tied to golden handcuffs and I gotta figure a way out.
- [12:40]
A
Yeah, gotta, gotta feed myself now.
- [12:43]
B
Franchising is not right for everybody, Mitch. And if I run into somebody that thinks they know more than I do, they, they know how to go start their own business. They really don't want to take the time to research franchising because this does take time. It's a research based project. I just tell them, I, I don't think this is going to be a good fit. You go do your thing and I'm always available. I'll send you a copy of my book. But sometimes, you know, we have to part ways if it's not ideal.
- [13:14]
A
Would the antithesis of a good candidate be somebody like Elon Musk who knows everything?
- [13:22]
B
Probably not. That's a good human.
- [13:26]
A
Well, I, I thought we needed a little funny sideline there, you know, or, or a Steve Jobs type. These are the people that think they know it all and they're gonna, they have to have their way and this is not gonna work. Who is the, who's a good candidate for a franchise to thrive?
- [13:51]
B
I would phrase that answer with this. People that have pain in their life, they're trying to solve the problem. And it could be I lost my job. It could be I am 59, turning 60 and my resume is not getting picked up. I feel old, but I have all these great collective skills to contribute. But I'm feeling terrible about myself. And it also could be defined with one spouse has an amazing job, an amazing salary, and that gives the other spouse freedom to do something and to build that secondary or third income stream. So it also could be somebody that is, you know, an investor that has a portfolio businesses and looking to divest cash and add another one. We have a case study in our book where that happened. So there's, you know, there's a few answers to that. So I'll give you a few examples. But it's usually somebody that I need help, Liz. I need to solve this. It isn't, I'm just shopping, window shopping for businesses that never works.
- [15:00]
A
What kind of money do they need to have typically on hand for a, the down payment or the franchise fee? And then how much cash flow do they need to have set aside?
- [15:11]
B
Yep, great. Question. So there's really, in simplest terms for today's podcast, two lanes that we go down to research for people. There is a retail location which everybody's minds automatically goes to food. I'm sure yours did too. So.
- [15:25]
A
Right, McDonald's.
- [15:26]
B
Yes, McDonald's. And then hair care and fitness. You know, we drive by these big beautiful buildings and we see the franchise sign. So that is. Those are examples of a very significant retail location model. They're usually manager run, right. So those can be anywhere starting from 350North up to a million. I mean they are, they are big footprints and they will have a lease payment. So that is not for everyone. The other one, which is almost like the best kept secret in franchising are the non brick and mortar opportunities. And I don't know where everybody is, but if you're on the highway, you notice these vehicles driving down. They're usually vans, they're usually box trucks. They might have a big logo on them, but they might be boring businesses like plumbing, electrical, roofing, landscaping, security, anything to do with a building that could be maintained, installed, repaired. There's a franchise out there and they don't require this significant retail space that we gave. The example of the hair care, the food, the fitness. They might actually lease space at a little warehouse.
- [16:40]
A
Very like a ServPro.
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B
Is that one of those like a Serv Pro? Restoration is a great category. We also have coaching and training, we have E Commerce. We have so many different types of models.
- [16:51]
A
Sandler sales system.
- [16:53]
B
Yeah, Yep, We've got all kinds of those. And those are perfect examples of a very low investment. Those could be under 150. So. And we help people with funding. So a lot of times they fill out a questionnaire for me and it will actually help them tally up net worth. Not everybody knows their net worth, you know, off the top of their head. So we help them with the tools and if they need assistance with funding, we send them to an SBA funding partner to get pre qualified. It's a phone call, it's exploratory, it's free. You just give them information over the phone and they'll go, okay, I think we could do this given your family situation and then the other one. Another best kept secret in franchising is called the rollover for business startups. So if we have somebody in career transition that is leaving the corporate job and has a robust retirement account, they can actually do a tax free rollover and they can give themselves a loan and it goes into C Corp and they can use it Specifically for the business. So we actually usually refer out to both of those funding partners so they can be have exploratory calls because we want them to be informed.
- [18:05]
A
And you, I know that I've known people that have had these storage units. That's another seems, that seems to be a cash cow. Or is it not, you know, in the mailboxes. That's another one. I've seen the UPS stores. Are those, do they make money typically?
- [18:24]
B
We actually owned a self storage business. Okay, I got to that part on our intro. We had 134 units. It was an acquisition, it was not a franchise. So that is a space that I'm very familiar with. We actually just sold it to an investor in Maine and now I think he owns like 12 of them. So he's kind of buying up the whole state. So it was a great opportunity for us. But the self storage is a great industry, A lot of investors. Look at that one. I have one actually speaking to a company today at 4pm so it is a great industry, but that would be for the high level investor.
- [18:57]
A
Okay. And that usually you have a resident manager that lives there. I think because I've used storage units myself and there was a guy living somebody else.
- [19:05]
B
Oh, it depends. Now with technology, cameras, remote gates open, you know, the doors, if you don't pay your bill, you can't get in. I mean the technology behind these now is amazing. So a lot of times that would be as close to semi absentee as you could get. Which. Semi absentee is kind of a gray word. But you know, semi absentee means you don't need to be there 40, 60 hours a week as the donor, you are there keeping an eye on things. Maybe 10 or 15 hours a week. Okay.
- [19:35]
A
Interesting model. And you've written a book. Let's see your book.
- [19:39]
B
Yes, I have written my book. It's called you'd franchise Fast Pass. We tried to have a lot of fun with the COVID and it doesn't have my face on the COVID which was suggested by a lot of different experts. But I wanted to be creative.
- [19:53]
A
But.
- [19:53]
B
But it is a step by step guide defining your ideal business. We've got eight case studies, so eight franchisees that I placed years ago gave me their time. And we all know time is something that is like precious. So I am forever grateful for them, you know, for giving me their time and interviewing with my ghostwriter. And there's eight different brands, eight different stories, eight different strategies. And that's what I wanted the book to be, an education Based product. So. So we have a funding chapter, we have an exit strategy. We definitely have a little bit about my story, just going from corporate America to entrepreneur and then franchise owner with my husband. So it's really a tool. And then we have an educational portal that we built that goes along with it. So once they start working alongside of me as their franchise advisor, they have eight modules that they're able to log into, which are full of tools and resources and everything you could think of to understand the franchise industry. But more importantly, the portal was built to hold people accountable in the process. Turn over every rock, ask every question, and really understand how to vet these businesses out.
- [21:03]
A
And it's an international bestseller. Did I see that at the top of the book? See that again, Internet. What countries was it a bestseller? The US and what other country?
- [21:12]
B
You know, I don't know that answer, Mitch, and I should. So, okay, I can research that and get back.
- [21:19]
A
I was curious. I'm just curious myself because. Well, all right, I. I think the reason I asked that question is how much applies because you're US Based, you have an American accent. Does this spill over into Canada? Which would of course be another. That is a different Amazon bestselling algorithm. So do they have similar rules to what we have?
- [21:43]
B
Canada is different than the US in terms of franchise Federal Trade Commission law. So it is a highly regulated industry, which I let everybody know. They will be getting, like a disclosure document. Most of them are average 300 pages. So definitely, again, the regulations are there, but Canada has its own set of rules. So I actually had a couple that I was working with, and many of the franchise brands are not registered in Canada because they have to jump through more hoops to be able to. To sell franchises there. So it's a whole different set of rules. But.
- [22:15]
A
Okay, so how about in Mexico?
- [22:19]
B
I don't do any business in Mexico.
- [22:21]
A
All right. So international is a whole different game.
- [22:24]
B
It is. I mean, I. I have definitely helped people from. I'll give you an example. Brazil, it's not a healthy place to live. We had a family that was referred to me wanting to move to the US for safety reasons and family. And it goes on and on. I was able to help them with the E2 visa program. They worked with an immigration attorney. It took us over a year to get this done. But they. Because of that business and the E2 visa, they were able to move into.
- [22:53]
A
The US and so, no, I'm familiar with that process.
- [22:57]
B
Freedom is what they called it.
- [22:58]
A
Exactly. They're buying citizenship.
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B
Yeah.
- [23:02]
A
With that program, it's great. Brings in dollars into the US And I think it's a great incentive and to bring people here legitimately.
- [23:11]
B
Yes.
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A
Legally.
- [23:13]
B
Yeah. I might get one of those people a year. It's not a huge, you know, kind of candidate base for me to help, but.
- [23:19]
A
All right, now I'm going to ask a different question, one that we didn't talk about. Let's say I had a great idea, because I might. I'll say that on camera. Off. I build this business. It's a unique model, at least I believe it is. What revenue should a potential company that then wants to become a franchisor reach? What is the bar that needs to be set? I know you have to have standardized SOPs. I get that. Really important, because then you hand the cookie cutter off. What are the revenue numbers that are expected before you could be taken seriously?
- [24:00]
B
Yeah, before I. Before I answer that. We also work with companies and we use the word franchise development or packaging up an independent business to become a franchise model. Which is what.
- [24:12]
A
You're correct. That's what I'm referring to. You described it in better, more eloquent terms, Liz.
- [24:17]
B
That's okay. But we've got three, four. I don't know. I probably can think of five off the top of my head, that if I have somebody, which I have this year, call me and say, where do I go? What do I do? I have this great thing that I've got four. Four corporate locations that I'm running, and I think I have a franchise model list. So I refer them out. I refer them to. I tell them to shop around. So I give them three or four people. I'm a big believer in comparing and contrasting, which I teach my candidates. Same thing. If you're looking for a company to package you up to be maybe a potential franchise model, you want to make sure you find the right partner. They all come in different shapes and sizes and price tags, depending on the. So they do want three years of financials. I will kind of answer your revenue question.
- [25:04]
A
Okay.
- [25:05]
B
They will analyze those. But if anybody listening to the call has a business that they've built that they're like, you know what? This is something that I could replicate. Easy. Call me. I'll refer you out to these companies and see if you have a business that you could franchise.
- [25:21]
A
All right, what's. Now, here's something else, and it might be riding the line thinly. There are people that will sell territories with a biz op versus a franchise. I'm sure you've heard about this, I come from the direct marketing world and there are people that would say in this exclusive area you can run this business opportunity. And then they might get in trouble with, I guess the FTC is that who would, who would govern that or look into that and say you, you're running a franchise, where's your paperwork?
- [25:57]
B
They do need paperwork. And there is a fine line. You are correct, there are business opportunities. We can give some examples. Vending. So and just for to clarify what business opportunities are, it's a one time fee that is paid to be a licensee of a product and service. There's training that comes with it, there's a whole list of things that comes with it and there is some red tape and there is some follow up that will be required of the person that owns this biz op to do. And some states require heavy paperwork. I'll just leave it at that. And if you avoid the heavy paperwork, you could pay a hefty penalty. So you know, it is important to make sure that you screen carefully, you vet out these business opportunities. You know, we have probably three or four in my inventory and I am becoming a little bit more cautious about them, Mitch, and just making sure that they've dotted the I's and crossed the t's and you know, before I would ever have anybody introduced to them.
- [27:05]
A
Okay. Yeah. Because I know there, there could be a thin line I've heard in order to enter to get your business franchise. Like there was a financial guy that I was doing some marketing work for a number of years ago. He had a model and he wanted a franchise and he gone to the franchise attorneys and I think the number was 2, 300,000 in legal fees. Is that about right? Is that a little heavy?
- [27:30]
B
That's a little heavy. That one's a little heavy. I mean again, some of these guys understand that it could be an emerging brand, the budget might not be robust. You're, you're building your technology systems, your software systems. You're, you know, you're getting ready to kind of, you know, obviously replicate duplicate scale so they understand that you need to spend money very wisely and some of them have different payment plans that you can be on. So you know, again, there are some out there that have worked with some very large brands that would be on the upper echelon of what you're talking about. But there are some that are a little more reasonable. You know, I have the woman that I knew has a soccer business. It's a soccer clinic for kids.
- [28:15]
A
Okay.
- [28:16]
B
Now there's three or four competitors out there. She did her market research. I introduced her to three different kind of packaging companies because she didn't know what to do and where to go. And you know, so she is going to franchise her business. But you know, I sent her to the experts first to get the, you know, she needed more information before we make a decision.
- [28:37]
A
Okay, well, great. And where can they get in touch with you?
- [28:42]
B
My website is probably the best place. So I have a free copy of my book that I'd like to offer to anybody who is considering franchising and you can get it on your franchise fastpass book.com and then the big robust website is just yourfranchisefastpass.com you can find me. And I have a LinkedIn newsletter so I should be pretty easy to access on the Internet. Just send me a message and me or my assistant will get back to you. We'd love to send you a free copy of the book.
- [29:13]
A
Great. Well, Liz, you've been a great guest. How illuminating. And like I said, I have a, a potential franchisee for you that I'm going to refer to you. And I think he'll really like your message because he's been looking for an opportunity and I think in the sales arena he'll be great. I don't know if there's something that competes with Sandler or some of the others out there, but let me refer him over to you because I do believe you. You have the queen cap.
- [29:42]
B
I would greatly appreciate it, Mitch. Thank you. Referrals like gold in our business, of.
- [29:47]
A
Course, but I had to trust you first. Now I'm, I feel like you certainly know and impress me and I'm sure the listeners are impressed. Your franchise fastpass.com Liz Leonard. She is our main lady because she's from Maine and she's also the queen of franchising. Yes, I am punful and we will see you again in the near future. I'm sure you'll be a guest again. Liz, thank you so much for your time today.
- [30:17]
B
Thank you.
- [30:19]
A
Thanks for tuning in to the Amazing Authorities podcast. If today's episode inspired you, take a moment to subscribe rate and leave a review. It helps more experts like you rise to the top for behind the scenes access and free resources to boost your authority. Head to MitchCarson.com until next time, stay amazing.