A (0:00)

One big mistake in franchising can cost you everything. Your life savings, your retirement, your kid's college fund. It's not a risk free investment that some salespeople make it out to be. Now I've been in franchising for over a decade. I run an eight figure franchise business. I've helped dozens of other people get started and scale. So I've seen and experience it all. Franchising can be an amazing vehicle to build life changing cash flow and wealth if you do it right. So forget everything you think you know and let me show you how to actually do this without getting screwed. So now the first step sounds obvious, but almost everybody skips it, which is you have to get really clear on your goals. Like why do you want to own a franchise? Why do you want to own a business? There's some people that just want to make money. They're saying, listen, I don't care what I do, as long as I'm making money. That's my goal. There's other people that really want freedom, right? They want to build a business with their kids, maybe who are graduating college. Maybe they want more time to spend with their kid, your young kids, so they're at home, maybe they travel too much, right? The key insight here is you got to start with you like what do you want? Because when you own a business and specifically a franchise, your life will now evolve around that for a period of time you will eat, sleep and breathe the business. You won't stop thinking about it, right? Everywhere you go you're going to be thinking, how can I grow my business? What is the advantage? Who is the relationship? At least that's me, right? I'm somebody that like I get consumed with it and it's all I think about. And the best performers I know are the same exact way. You need to start with yourself and really get clear on what it is that you're trying to achieve here. Because you don't want to optimize for the wrong thing, right? If you optimize for time, right? The time with your family or whatever it is. But then you get into a business that's like 247 operation and you turns out that like you are missing dinner every single night because you signed up for a business that is an emergency on call deal. Like yeah, versus getting into a business that's Monday through Friday, nine to five. You have a very predictable schedule that leaves this time on the nights and weekends to enjoy your life, right? These are really important decisions that a lot of people don't Think about. But it starts with that. Really give some reflection on that. Then we get into exploring the opportunities. Now there are 3,000 or more different franchises out there. It's overwhelming the number, but the truth is I would say it's something like 80% of them are crap. They are founders who have a great business by themselves and someone sells them on this idea that hey, you should franchise this. And so now they pay a lawyer $50,000 or whatever it is and they get an FDD, they get all this stuff, they get a website, maybe they go to some trade shows and they start franchising the business, they start selling it. But they don't have like a support team. They really don't have great systems. Their ops manual was put together with ChatGPT based off of like a bunch of loose documents. And it's a bunch of slop, right? There's things that like on the surface the brochures may look good, but the reality is they don't really have the systems and they're not dedicated on it. Because franchising, to be really successful, the franchisor needs two components. They need industry experts. So that's like somebody who knows the business inside and out. The restaurant or the painter, the like turf guy, the auto repair guy, the senior care, like whatever. The thing is, you need people who are world class experts in that. But then a great franchisor, there's this whole other component which is systems and training and community and support. Right now every franchise or needs to have that and you can't have one without the other. And so what I'm really looking for when I look at brands and I talk to people about brands is they need both. Who are the people on your team that have industry knowledge and are experts in this field? And then who do we have that are franchising experts that know, like, how do we attract great candidates, how do we vet people? Because franchising is like a partnership. If you're a franchisee buying into a brand, you're now like a partner in the brand. They're a partner in their business. And so if they don't pick the right partner, it's not good for anybody. So they need to have that solid system. And then it's like the support, the community, how franchisees communicate, how do we share ideas, how do we run great meetings and conventions where we bring everybody together, right? These, all these things that are part of what makes a good brand, that it's not just on the surface, like you gotta go deep and it's really Hard, honestly to go out there. There's a number of companies that are trying to do this from a technology basis, building these databases and AI matching tools and all this stuff. But like a lot of it is still like they're using the surface level things to try to determine that. Then you've got like These rankings, Entrepreneur100 and you've got, you know, franchise times and these, these different sites. The truth is those brands pay money to be on those. They're not bipartisan by any means. They're a marketing effort. And so you really can't go by that. The other option is you work with brokers. So a franchise broker is somebody who you'll work with and they present you options. Now there are really great brokers and they're really bad ones. Let's start with the really bad one. So there's people out there who will just literally take the five brands that you know, they know the most. And they just like every single person that comes through gets the same five brands, like, whatever's hot. And then there's other brokers. And I put myself in this camp. We, we are franchise brokers. I run a team and like our team works with you one on one to go through all these things, like what are your goals, what are your skills, you know, where do you live, what's your budget, what type of business do you want to run? X, Y and Z. And then we take a curated list and present them to you. If you want my help, you can work with our team or, you know, happy to help direct you to someone else if, if you weren't a good fit for us. And with a broker, you don't pay them anything. There's no cost to you. The franchisors pay us a fee for helping somebody get into the brand. But it's, it's overwhelming. It's completely overwhelming to. And so this is really what you need to kind of figure out is what type of business do you want to run? I really break down to four business models. Retail, contractor, team and truck. I have a whole other videos. We kind of dive into that to figure out what is the best one that is good for you. And just because the business is good for me doesn't mean it's good for you. We go back to this. Personal goals, right? This is the big thing you really have to think about is what do I want? What type of business do I want to run? What is the best business for me right now too? Sometimes a franchise might be a good step. Stepping stone, right? It might be the one that, like, helps you quit your job and gets you on the path of where you want to go. But that same business might not be the one that you can scale to eight figures. It might be one that, like, I can replace my income, I can get my freedom, I can become a business owner. It's great for, like level one, but it doesn't get you level ten. And that's okay. But once you're in the game, once you start to build these skills, you build those muscles, it's way easier to make that jump to the bigger business than to go totally cold as an employee to this larger business. Once you start to find brands that you like, whether it's through a portal, whether it's through a broker, or it's like you're just googling or whatever, you start to have these initial conversations. So you're going to get on a call with a franchise development rep. Now, most of them are very friendly, but they're also salespeople. Right? Their job is to really kind of communicate the brand, to really sell you on the brand. And you really want to make sure that it feels good for you too, and that you're not just like getting pulled along in this process, but that, like, they are asking questions about you. They're trying to understand, like, what are your goals? Like, where do you see yourself? The best brands have a sales process that turns people away, that they realize, like, we don't want everybody, we want this specific person because we value franchisee profitability. Like, we want a company that has stacked with very profitable franchisees. And if you are not going to be a good franchisee, like, if they think that I would be a terrible operator and I wouldn't make money in their system, they should turn me down. Because if they don't, like, I could be a cancer for the rest of the system. The best brands have a very strong filter and they eliminate people through their process. Like, they have a very tight driven process. But anyway, you get on these calls, you start to learn about the business model, the backstory, the future goals, and you really want to ask some pointing questions here and really drill into them. I have a whole list of franchise due diligence questions that, you know, everybody that we work with gets. And I'll link with the link below. You can have it free. And basically it helps you walk through kind of all the questions that I would ask when I'm going through it. Up to this point, you're like, all right, this thing's looking good. I want to Keep going down the path. You're going to get into what's called an FDD review. That stands for a franchise disclosure document, which is a hundred ish page document that lays out all the rules of the franchise in a very easy read format. Because every brand has to follow the same format. There's 23 chapters, it lays them all out. The big ones that I'm going to look at immediately are number six, which is the ongoing fees. So this is going to have the royalty, you know, brand fund, all the required fees that you're going to have to pay. It's all in there. Number seven, Item seven is the startup cost. So this is going to be the franchise fee and then all the other fees that are related to starting it. It's always going to be a range, so like a high to lower, which you know is based off of, you know, recent franchisees and their startup costs. They'll also give into like development costs. So if you plan on doing multi unit, it will show you those costs then item 19. So item 19 is like the big popular one that shows financial performance. Brands have a lot of different things they can show you. They can show you nothing. They can show you everything. Like P Ls of every single franchisee by month, they're the best. Not many have that. They can show you like gross sales margins, whatever information they want to show you. As long as they follow some like rules around like not eliminating too many people. They can be really deceiving too. Like sometimes brands show you things to make it really look good. But it's like the corporate location, it's been around forever and it doesn't really tell you the condition of the franchisees, which is really what you're after here at this point. It's just a brief overview. It's super easy to get them. You can download a lot of them for free through Wisconsin has a state website. You just go to Wisconsin FTD search, you can get them there. You also have to get them as part of your process of exploring the brands. And then you keep going. Right now at any point you can drop out if you said, hey, like I don't like this fdd. There's things in here that I think are complete garbage you can drop at any point here. But let's say you want to keep going, then you start to get into validation. Now in the validation, this is where you get to speak to other franchisees and you get to hear the truth. And there's a couple different ways you can do this. Number one is you can just go to the back of the FDD and you can find in one of their exhibits the list of every single franchisee. And many times it's their email and their phone number and then you just call them and just say, hey, I'm looking at buying to this brand and I would like to talk about your experience. There's other brands that run group calls. So for very fast growing brands, they don't want to bombard their franchisees with all these like one on one calls. So they once a week they host a group call. Many of them record it and you'll get access to the recordings. And so it's really good to kind of listen to those and you want to hear about like day in the life, like talk to me about your day to day, like what's it like? What are the biggest challenges that you are facing? Because whatever challenges challenges they're facing, you're probably going to face the same. You want to get into the support and the marketing and the financials and the regrets like hey, would you do this all over again, right? Would you recommend this to a friend or family? Do you plan to expand? There's lots and lots of questions here. As part of that due diligence checklist, I have a whole list of 20 plus questions to ask existing franchisees as part of the validation. So if you download my free checklist, you can get it there. You'll hear good stuff, you'll hear bad stuff, you're here at all. You really have to kind of vet to think like is this person going to operate the business like I would? Because if I'm going to be a full time operator and I talk to somebody who's like a part time treating this thing just like this side project, like we are probably going to have different results, at least I hope I would do a little bit better. So like I want to talk to some of their top performers and yeah, I want to talk to some of the bottom performers and I want to get a good sense of like is the support there is the training there are the mistakes and pain that the like lower performers have. Is that an issue with the system or is that a personal issue? Right. That I may or not experience? Validation seems good from here you are at this point starting to get your funding together. So a lot of people use SBA loans to fund franchises. Most of the time they can get 80% of the total startup costs. And so at this point, if you're serious, you really should start this process of getting approved for funding. We have a number of different people that we put people in contact with, but loan brokers like Benetrends, Fran Fund, Tenant Financial are really good. You can also, you know, look at Oaktree and a number of other, like, very popular SBA lenders out there who do the same thing. But you definitely want to line up your financing as early as possible because it can draw out and this will help ensure you know what you can afford and you don't waste any time on things that you can't. And at this point, if things are looking good, they will invite you to meet the team Day, Discovery Day, Confirmation Day. They all have, like, different names and stuff. It's all the same, though. Basically, you're going to fly to the headquarters, you're going to meet everybody in person. You're going to meet the leaders of the different departments. And what you really want to look for is like, is this everything? I thought it was? Like, I am meeting these people. Like, I'm going to now be part of this world. If I move forward and culturally, do I vibe with them? Are these the type of people that I want to surround myself with that I want to build a business upon? Who are the other people that also got this invite? And like, could I see these people as fellow franchisees, fellow friends and business owners, or do I feel like, man, these are all really sharp people and like, we're all like, super excited about this thing and it seems legit. I've been in those rooms. I've also been in rooms. Rooms were like, oh, my God, how did these other people get here? There's like a guy in the corner and he's got like a stained shirt and you know, they're asking the dumbest questions and it's like, are they willing to sell this thing to anyone or am I just the sucker here? And so you really want to feel that, like, it is a strong process. They've got their shit together and that you would be proud to be part of it. And at this point, after Discovery Day, they are going to vet you. They're going to do the same thing to you to say, is this a guy or gal who. We want our team who's going to represent us well? Who's going to help us build the vision that we have in becoming the biggest blank in this industry? And there's been many times that brands will not move forward with a candidate after they meet them. Right? Sometimes it's, you know, they take catch you dinner and stuff. And sometimes, like, there's. There's stories of people getting absolutely hammered at the bar, like, starting to hit on some of the employees and, like, all this crazy stuff, and they're like, wait a minute, this guy, like, not somebody that we want on our team here, right? Or somebody who's honestly just like, very annoying and asks a lot of dumb questions and, like, totally forgets all these things that we talked about, right? And then there's other people, they're super excited, and they're like, hey, we want you on our team. They will then offer you the right to apply. Like, they will say, hey, if you're willing to move forward, we will award your territory. At that point, they usually give you, like, 1ish weeks to basically lock down your territory. And you have to kind of that decision to move forward or not. And if you say, hey, I'm moving forward, at that point, you should be working on getting your SBA finalized. You'll start to set up your LLC and your business entities, and then you have to sign the franchise agreement. Now, as part of the process of signing the agreement, you should get it reviewed by a franchise attorney. Franchise attorney normally charges about 2 to $3,000 to go through the entire document and really, like, just point out a lot of things to bring them to your attention. In some cases, they can help you negotiate or change certain things. Other times, there's nothing that they can help you negotiate, but you do it more to make sure that you fully understand what you are signing. Okay, that's the big takeaway here, is a franchise attorney will help you make it abundantly clear in terms of what you are agreeing to. You may not like it, you may think this sucks, but at the end of the day, the franchise or needs to protect the entire brand. Like, I own 35 Midas shops. Like, I am a top performer. If I have a neighboring franchisee who is not up to brand standards, who's ripping customers off, whose shop is a total mess, who is using, like, dangerous equipment, right? A car could fall off the lift any day and, like, crush somebody, and it's a complete shithole. That hurts my business, right? If a car falls off a lift and kills somebody, and that's a news story, that someone gets killed at a Midas shop, do you think that helps my brand and gets me more customers? No, it's going to kill it. And so I want the franchisor to have the ability to force people, when appropriate, to get up to the standards that we all agreed to, right? That I agreed to, that they agreed to, that everybody agreed to. And if they're not playing at that level and they said they were going to do it. The franchisor needs to use their power and the only way to get that power is the franchise agreement. Now some brands abuse that. Some brands, it's overreaching in terms of what they ask for and the like conditions that you have to do. And so this is why the franchise attorney comes in and says, hey, listen, this is pretty standard or hey, this is like totally crazy here. Like we need to get this fixed. Sometimes they pull out lawsuits that haven't been disclosed of them suing franchisees and franchise or like tons of stuff. So sometimes they can uncover some really bad stuff that was like hidden all along. And so you definitely want to do this process. It sucks to spend the money on the due diligence, but like, honestly, there are horror stories out there. And working A, with a good team like mine, but then B, working with franchise attorneys and other professionals like you stack the odds in your favor in ensuring that you are getting in the best opportunity that you can. You decide, hey, I'm moving forward. You sign the contract, you wire the money. If you're using financing, your financing will come a couple weeks later, but that's okay. And then you get started with training. They start you with onboarding. You're going to have probably a 90 day, just like Gauntlet that's going to get thrown down where it's going to be chaos. Probably where you're going to have 40, 50, 60 hours of online training. You're going to have to get all your business stuff set up. You have to line up insurance and get payroll and like you're going to start connecting with other franchisees and there's like a ton of stuff that you're going to do, but you're often in the races and depending on the business model, you might even be launched and making money in 90 days. If you're in a retail concept, you know, it could be six months because you got to find and like renovate a retail spot, but that's pretty much it. And then you're rolling. And so owning a franchise can change your life. Like it's changed mine. It's changed so many people that I know, but there's just so many options out there. 3,000 franchises and everyone has a slightly different process. What I went over today is like what a lot of brands follow if you do it right. Right. There's other brands that try to rush this process and they don't give you all this information and it's really, really like could get people in a really bad situation because they end up getting a brand that has lofty promises, that don't have the support, and then they're locked into this terrible contract and they feel absolutely stuck. Unfortunately, I talk to these people, they want advice on how do they get out. And, like, I do my best to direct them. But if you are looking to buy a franchise, the best thing you could do is not get into that situation by ensuring you follow the right process. So there's anything I can do to help reach out. And if not, please subscribe. I'll see you in the next video. Cheers.