← Business with Beers
Loading summary
Transcript1 lines
- [00:01]
A
Hey there. My name is Brian Beers. I do this podcast to help ordinary people make life changing money by owning franchises. I own a portfolio of franchises. I help people buy their first franchise. I partner with people to scale their franchise. It's literally my life. So if you want to learn more about making money by owning franchises, go to brianbeers.com I have a weekly newsletter where I share very tactical advice on everything that I talk about here on the podcast. So let's go. If you're thinking about buying a franchise, stop what you're doing right now. I've been in franchising for almost 15 years and have evaluated hundreds of franchises. And there is a simple framework that separates the winners from the losers, helping you choose the best one. So let's go first, let's start with misconceptions. There's a lot of misconceptions in the franchising industry. And the biggest one that I find is that people think franchising is only fast food or fitness. They think of McDonald's, they think of Burger King, Chick Fil, A, Taco Bell, Wingstop, Pizza Hut, Domino's. All the biggest fast food companies out there are franchises. That is true. They also of Fitness, Orange theory, Planet Fitness, F45, all those are franchises. That is true. But there's this whole industry of home services and B2B and senior care and pet care and automotive and spas and tons and tons more that you can get into almost any industry. In franchising, the second big thing that people think of is that there's some magic bullet, that there is a franchise that you could buy and you're guaranteed to be successful. But that's not true. There is no magic bullet because running a franchise means running a business that happens to play by some rules and that means it's personal. And so just because something works for me doesn't mean it's going to work for you. And so it's a big mistake when people just think that there's this magical list out there. They look at this top 100 list and think that, oh, I'm just gonna buy the number one ranked entrepreneur.com best franchise. And the truth is those brands often pay to be on those lists. It's more PR than it is like an actual ranking of performance or anything else. And the final misconception is that there's some predetermined rate of return that you will get when you buy a franchise. They think buying a franchise is like buying an investment property where there's going to be certain rir or return on this or cash on cash or you know, these fancy like investment terms. But that's not the case because a franchise is a business and I'm going to run it different than you are going to run it and I'm going to have different results than you. So when it comes to choosing a franchise, do not follow what I call a top down approach where people say, well just send me the great brands. Just like take all these brands and just like send them to me and I will filter to see if any of them make sense. For me, the framework that I'm about to go over is what I call a bottom up. So we're going to start with you and the things that you want to achieve owning a business. And then we are going to work our way up to find a great brand that matches the things that you want to do. So There are over 3,000 franchises to choose from. How do you go about finding the right one? What I would recommend is to start with a blank canvas. You are about to embark on a whole new journey in your life and you have a blank canvas to paint from. Right? You can paint any picture you want. This is what I find to be the most exciting part about getting into a franchise, is that you don't have to get into something where you have industry knowledge. I know nothing about without cars yet I own over 30 automotive repair franchises. I have friends that get into restoration or painting or senior care or spas or like almost anything and they don't have knowledge or experience in that industry before. But it doesn't matter because the franchisor has trainings and systems and support and they compress a decade of a knowledge and experience into days of training for you. You have this blank canvas to choose from. How are you going to paint it? So how do we go about painting this blank canvas? Well, we're to start with your goals, like why do you want to own a business? So most people are looking for the same thing, which is freedom. Freedom means your ability to choose to work, choose to travel, choose to buy something, to say no to something. And generally the more money you have, the more freedom that you will have. How much more money are you looking to make? Are you looking for just a side hustle to make a couple bucks on the side? Are you looking for something to replace your current income? Do you want to have something to build with your kids or do you want to build an empire? I mean, I have chosen the empire route. My multi unit franchise business will do $45 million in revenue this year. While I have friends who buy a business to build it with kids on the weekends and just like teach them about entrepreneurship, they're happy and I'm happy. We're both succeeding in what we set out to do. And you need to get clear on like what you want to do and why you want to do it. One of the things is a schedule. You could choose a family friendly business that has a schedule where you work Monday through Friday, 9 to 5. Like the phones, the business, everything shuts off when you get home for dinner. There's no weekends, there's no nights, there's no travel. All that is great. There's other businesses that run seven days a week, which is totally fine, right? And if you're fine on Saturdays and Sundays and you don't care about a specific day off, totally fine. There's other businesses, businesses that have crews consistently working overnight shifts in emergency calls with 24, 7 potentially. There are pros and cons to all of it. And if you don't care about that, then whatever, it's, it's fine. But if it's something that matters and you have would have a choice between one of the two, pick the one that fits best for you and your family and your goals and why you're doing all this. The next thing is your involvement. Like how much time can you commit to this business? Or can you commit to doing whatever it takes to achieve your big goals? Or is it part time? Are you going to be restricted based on your current job or just like your goals to travel, novel or whatever it is. And the truth is that part time efforts will deliver part time results and that you really need to think through. Are you willing to do the work that's necessary? Grab a notebook and really think through the things I talked about in terms of your goals, your schedule, your involvement, your money. Like what does success look like in a couple years? A lot of people skip this step and it's a huge, huge mistake because this will help determine the types of franchises and the types of businesses that make sense. Because owning a business is hard work. Nobody gets into it because it's not easy, but you do it because the long term rewards are worth the short term pain that you will go through. And this matters because a franchise that's great to build a side hustle in or spending time with your kids, whatever, probably isn't the right fit if you want to build an empire and vice versa. And by the way, if you're new here, my name is Brian Beers, I own a Multimillion dollar franchise portfolio. I help people find, operate and scale profitable franchises. Subscribe if you want to learn more about franchising. So the second thing I would think about on this canvas that you're going to paint is what are your skills? Like where are you naturally gifted at? What gives you energy, what drains your energy? Like what do you hate doing, what do you love doing? There are three buckets to consider here. Sales, operations, management. Every business has these three. But think about where you would shine the most and like what would be your priorities? A is sales. So do you truly love sales? Like overcoming objections, hiring, training salespeople. No problem with like getting people on 100% commission based plans. You're willing to be the number one sales rep for months if that's it. Like you maybe excel in some sort of like B2B franchise. There's a number of out there that are in staffing, they're in facility services that are in like commercial cleaning. There's other ones that are in high ticket home services. Roofing, painting, fencing, flooring, cabinets. Like anything in a home that has to get replaced. We're talking five $10,000 tickets here. You may excel in a sales driven business like that if you're really good in operations where something that's like logistics, heavy, lots of moving parts, optimizing equipment, optimizing labor, spreadsheets, all this stuff. Then something that is like a truck based business where you make money on a per truck basis and it's like how do we route these trucks, how do we optimize? So it's power washing. It could be like some sort of like mobile pet grooming, restoration, window cleaning. As a fryer oil management business that I'm part of. Anything that just has like a lot of moving parts and logistics could be something that you would excel. And then number three is management. So do you love to lead people like or do you think you would do well with a huge staff of let's say like low skilled, high turnover industries, Senior care, residential cleaning, staffing. All those ones may be really good given your desire to manage and lead people. And the final note here is looking at a business to business versus a residential model. If you have a ton of experience in B2B sales then that could be a great option. Like there are many ones that are low cost, have huge potential but they are like you're swimming with the sharks. If you don't have a ton of B2B experiences, experience, I would not choose a franchise that is heavy, heavy B2B, a mix is fine, right? Some of these things are like 50, 50 totally fine. But if it's like heavy, 100% B2B, don't do it unless you know you're known. The third thing I look at is location. What type of business do you want to run in terms of where it's going to operate? You really have three options. Retail, mobile or home based. So a retail business is something that has, you know, bricks and sticks, bricks and mortar, where you know someone is going to go to you. These are high cost, 300,000 to over a million dollars to build one out. And it's going to take a long time to find it, construct it, get it open all that. I mean you could at 9 to 12 months a location for, for new ones to get into. And so if you have a goal of opening five locations to hit your target, like it could take you four to five years if you had to open every one of those from scratch sequentially. The next one is a mobile business. So these are super popular in franchises, territory based mobile, like you go to the customer, these can be in tons and tons of different trade based industries. You know the appeal with these is there's low overhead. You know, you have trucks, you might have a warehouse, you might not. And as you grow, you just add more trucks. As you build the business, you hire more salespeople, spin up more marketing. Relatively easy to scale, but challenges are, you know, you've fragment management like your people all over the place, right? And so it's a little bit harder to keep an eye than physically going to a retail facility. And then home based. Like do you want something that is very low cost, very low to run, like you can literally run it from your kitchen table. And the lowest cost, the quickest to launch, but eventually some sort of limit on how much you can make there. You got to make sure that one aligns with your longer term goals, which for many people it's a great, great fit. Just make sure it does. The other thing is like your budget will drive this. Retail is going to be the most expensive, mobile is going to be in between. Home services are going to be the cheapest. And so have knowing what your money you're going to spend is going to be a big driver. And then what makes sense where you live in terms of the demographics, the income. Do you want to get into a business that has high seasonality, like power washing for example in the northeast, you know you have a limited season versus power washing in Texas or if you want to get into the mosquito business Everywhere in the country it's only nine or so months and so you're going to have like three to four months, possibly of no work. And are you the kind of person who would say, man this is awesome, I get a built in vacation, I can go to Florida, I can relax, or are you going to go stir crazy like me? Like I would go absolutely stir crazy if I had $0 coming in for a number of months. And so for me it's not a great fit, but I have a number of friends who are in this business, they absolutely love it, it fits perfectly in their schedule. These are the types of things you really want to consider. And then also it's territory, expansion. Like is there room if you get into this thing to expand the business? You know, whether it's greenfield, whether it's acquisition, if you were getting to a legacy brand and like everything else is sold around you by one unit, you could be landlocked. There's a lot of like other things to get into. I don't want to get into all in this video, but territory, location, just like what makes sense where you live is a huge, huge part of what you need to start to think about. Final is budget. 50% of franchises cost less than $350,000. Most people don't know that. And the SBA will end up to 80% of your startup costs. With a hundred thousand dollars of cash, you have a total budget of $500,000 which could get you five units, territories of a $100,000 concept, two of a 250 or one of a $500,000 concept. Personally I would choose more of a lower cost than one higher cost one, but that's my preference. Something that you are going to want to give some thought to to what makes sense. Next is funding. There's a lot of different ways you can go about funding. One of the ones that many people don't know about is a 401k rollover or it's called a robs where basically you have a bunch of money from your corporate job sitting in a 401k. You were able to use that money to fund the startup of your franchise without any penalties or fees. There's a whole bunch of rules around this. Just know that it's possible and you really want to work with an expert who knows how to set these things up. There are some franchise or that actually offer in house financing on the franchise fee and other startup costs. It's something you can talk to them through. Some people use a heloc, a home Equity line of credit, which is like the lowest cost in terms of interest rate and like flexibility because you have equity out of your home. You could also look into getting personal unsecured loans. You could combine multiple lending sources. And at the end of the day, my advice is to be conservative. It takes a lot of work to get the plane off the ground. You don't know how long it's going to take for you to get cash flow positive. And it's better to have more cash and not need it than to have be stretched really thin with tons of debt. And then now the business isn't going as well and you're really starting to get stressed out and needing more cash than what you have. And so an easy way is like you're going to estimate how much money you want to make. Take your first year sales, cut them in half, take your first year's expenses, double them, and start with double the amount of money of cash than you think you need. Better to play it safe than sorry. The next question people come across is, how many territories should I buy? As part of your budget consideration, you are going to be posed with a question of how many units should you buy. Brands often offer a discount if you buy more units up front. So don't buy more than what you're comfortable with. And every person that's different, it could be 1, 2, 3, 4, 5, whatever, depending on your situation, you're going to have to balance the budget that you have with your growth plans and availability. There's a lot of considerations in here, but the big thing, and this is why I go back to the beginning of having these goals, is like, where do you see this business in a number of years, you know, and what's the path to get you there? And everyone starts somewhere. You start with one, you start with two, whatever it is, and then you continue to build. Just don't get trapped by buying too much, being extended too far, not having the ability to invest and grow, that's a big problem. On the other hand, like if you buy one and then someone else comes along and buys everything else and now you're pigeonholed, that's a problem too. There's no right answer. It's just a matter of knowing like where you want to go in the best path to get there. And finally with budget, you got to build out a financial model, spend time through Excel, building out a simple financial model. You want to figure out, like, what's your break even point? How much sales do you have to do to be cash flow positive. And then what's it look like on a best case scenario? What's average, what's worst case like? I want to run different scenarios at different levels to have an idea of how much money I think I'm going to make. I'm also going to look at the first 12 months of cash flow. What do I think I'm going to do in sales every month? What are my expenses going to be? I might lose money for a number of months. That's going to burn money in the bank account, making sure that doesn't fall below a certain number. I did a whole video on this topic of how to build out a financial model. We're going to link that in the description below. So if you're interested in that topic, check out that tons and tons of details there. So we got the framework, we got this canvas. Now it's due diligence. Like we're starting to talk to brands. What are the things that you need to do to make sure we're choosing the right brand? This is critical. 3000 brands, many of them are crap, to be totally honest with you. And there's only probably 10% that are pretty good who have founders that care, that really want to see everybody succeed. I would look at that, the leadership team, number one, the founders or the CEOs, whoever's in charge now. I want to know what is their background, what's their personality like, what are their goals like, where do they see this thing in a couple of years? I really want to understand the people that we are going to partner with to grow this franchise. And I want to make sure I'm aligned with them. I've met some of these founders and CEOs of these brands who are complete jerks. And it's like I would have no interest in being associated with you. And I met others who become friends because honestly they're good people and they care. Well, I've met other people who truly care about their franchisees and they're putting franchisee profitability over their own because they know that will lead to long term success. Those are the types of guys that I want to be partners with in a brand. Then I'm going to do market research. This is a huge, huge one of what's going to work in your market. So figure out is this thing to work, who are the competitors? Has anybody else been here and failed? Why do they fail? What's the macro, industry trends? Is this industry growing or shrinking? Or is there already people buying this thing in the market that we can come in and take over? Is it highly fragmented? Is there one big 800 pound gorilla? Like there's a lot of these different factors and we can't go over it all today. But just like market research, industry research, super important. And then you got to talk to current franchisees, validation, you got to ask tough questions. You want to ask, how's the support, how's the training, the marketing? What are sales like now? What was it like when you started? What are your gross margins, what are your net margins? How much did it cost you? Did it cost you more or above your budget? You want ask them, would you do this all over again if you had a choice? Because they're going to tell you the truth. Franchisees that you talk to have no incentive to tell you anything different. And some of them are going to be through group calls. Some of them you can get on one on one. At the end of the day they went through the same process that you're going through and just be nice, build a relationship, be honest with them about what your concerns are, what you're excited about, see what resonates Ultimately, some of these people you talk to may end up becoming your friends if you end up joining the franchise. If you're interested, I have a whole due diligence checklist. There's over 40 questions to ask. We're also going to drop that in the description below. Below you can grab it for free because this is one of the most important steps and the more brands you start to check out, the more franchisees you start to talk to, the better yet you will get at identifying like what is exciting, what's a good thing and then what's a red flag, what's something you got to run away from next as part is your due diligence. You're going to go over the franchise disclosure document in the FDD. There's 27 items or 21 items or something in this thing. But there are really just a couple big ones that I look at all the time. Item three, legal issues. Does the franchisor have they sued franchisees? Have franchisees sued them? They've gone through bankruptcy. And just like other things are all going to be in like item three, item four, I'm to look at item six, that's going to have all your ongoing fees, your royalty advertising, any technology fees, startup fees, all these different things are going to be in there that are on an ongoing basis. Item seven is going to have your initial investment cost, so the franchise fee, how much they think you're going to need and all These other setup costs and it's going to have a range in there from a medium to low. And really like I'm looking in there to see like is there anything that seems like kind of ridiculous or does it all kind of seem like it makes sense? I'm going to look at item 12, which is territory protection. There's all these different things around territories. I don't want to get it here. But like you want to understand, do you have exclusive rights, protected rights? Can you market outside your territory? Can you work outside your territory? Can other people do that within yours and really understand what protection you have. Item 19 has the financials that they're willing to disclose on corporate locations or other franchises. A lot of people put a lot of hype into item 19, but you got to take it with a grain of salt. And then item 20 is unit growth. That shows you, is this brand growing? Is it shrinking? What's the trend? And I would highly recommend you hire a franchise attorney to review the franchise agreement before you sign it. This is just a disclosure document. This is an agreement that's later on. But this disclosure document is what sets up the agreement. Once you get further down the line, you can hire attorney. Right now it's probably two to three grand. They review the whole thing, they tell you what's normal. So how do we go about finding a franchise? So we got this big list. We have all these ideas swimming around our head now of what we want. We've painted this beautiful picture of what it's going to look like. But now we know how to vet the brands. But how do we go about actually finding the brands? Right, so you have two options really. Number one, you can go directly to the brands. You know, you can use search tools, rankings forums, Twitter, Reddit, whatever it is to identify potential brands. Honestly, super time consuming process since you have to set up all these calls. Everything looks great on the inside. You're going to be working with a bunch of salespeople. Some of them are ethical, to be honest. Some of them are totally not ethical and kind of slimy. And you have nobody on your side. You have nobody to kind of tell you, hey, what they're telling you is like normal, not normal. And you are going to spend a ton, a ton of work and end up may just spinning your wheels. Option B is you work with a franchise consultant. What they're going to do is bring you brands to look at. They're going to save you time. It's someone who's on your side or should be on your side and it's 100% free to you. They were kind of like a buy side real estate agent where you know, they work with you to go, go help find a house to buy and you don't pay them anything. They get paid a commission when that house is sold. Similarly, franchise consultants get paid a referral fee by the franchisor. You know, they are successful in helping play matchmaker. And unfortunately not all franchise consultants are equal. Some of them have zero experience running franchises, being part of franchises. They went from being a corporate employee to selling franchises. And they only approach they know is the top down approach where they say, here's a bunch of popular brands, here's five of them, do you want them or not? And it doesn't really work. And this is where my team comes in, this is where I excel. Like we have a franchise consulting company that I run and we work with you to understand those goals. We follow this bottom up approach. If any of that sounds good and you want to work with my team, there's a link below, you can click it, you can book a call, we can go from there. And that gets into the question of what's the timeline look like? Like how long does all this take to find it, to choose it, to do due diligence, all this stuff. Most people take about three months from booking the initial call to finding a franchise that they love. They sign, they pay, they officially start, and then usually it takes another three months to launch if it's like a mobile territory and another three to six months if it's real estate. Pretty much six to 12 months depending if you're going with to a mobile or a retail model. Like your life could look completely different in six months from now. And the next timeline question is, okay, well I get this thing launched, I get it going, how long until I'm making money? And the truth is nobody knows. No one can tell you when you're going to be profitable. Some might be profitable on day one through pre sales, some it could take three months, six months, it could take 12 or more months to be profitable. Like you could be losing money for 12 months. That is a very real possibility. And it's super important to discuss this with other franchisees. Validation, all those talks, you really want to find out how long until you were profitable and ask that question over and over again. And once again, no one has a crystal ball. But it's a good sign if a number of people are within a certain timeframe, that makes sense. With your expectations, the process of choosing a franchise can be absolutely overwhelming. But by following this bottom up approach you gain clarity because you now know what you want. Then it's just a matter of finding something that meets your goals and owning the right franchise could change your life. It has changed my life, it has changed many of my friends life. If you want to learn more about franchising, watch some more videos. Click this one here. I hope you enjoy this and if I can be a help, find any of my links below and if not, I'll see you in the next video. Cheers.