Thriving, Absolutely Thriving

It is great to be part of something that is successful. Success often breeds success.

This can be the case with franchising.

The business model is thriving right now and gets better every year.

Hear Pete and Nat discuss why franchising is so awesome on this podcast episode.

Transcript

Pete: [00:00:00] Good morning, Nat. 

Nat: Good morning, Pete. 

Pete: Whoo. I'm pumped up.

Nat: I'm pumped up, too. Yeah. Yeah. 

Pete: What are you pumped up about? Oh, you caught me off guard there. I could tell you why I'm pumped up. Why is that? I just got back from a franchise conference in New Orleans. Great food. Good, good to see everybody. But I got to tell you that at the conference, because we've got franchisers, their franchise consultants.

 All all those people came together at the franchise conference and they're great conferences. But I got to tell you, there was a ton of energy in the room and why there was so much energy is that franchising is booming. It's absolutely, there are more and more franchise concepts out there, and there are more and more people investing in franchises.

I mean, it's just, it's absolutely amazing. I'm not going to avoid it because it's pretty cool, right? Yeah, 

Nat: I definitely feel like franchising is the bright spot in the economy, for sure. 

Pete: Oh yeah, we'll talk about that in another podcast of how [00:01:00] franchises add to the economy, right? So today what I thought we would talk about is the The 10 factors contributing to a franchise business model thriving.

So why are franchises thriving? Right? Why are more people investing in a franchise? All right, so let's go. What do you think the first one is? 

Nat: Well, I always feel like a lot of people over the years I've talked to want to be. In business or they like the idea, but it's kind of elusive. So the thing about franchising is it's a proven there's proven pattern or proven product or service and proven sales and marketing.

So basically you're managing your debt downside risk with a proven franchise. That's what I, I think is kind of the sweet spot of franchising. 

Pete: Yeah, somebody's kind of proven out the business model, right? They've done it, they've made the mistakes, they've refined it and all that kind of stuff. And as somebody invests in a franchise, they can kind of leverage that business model, the systems, the process, procedures.

So it's, [00:02:00] it's, it's kind of a better path to become an entrepreneur. It's still a lot of, you know, it's a lot of work to start a business, but it's an easier path to becoming an entrepreneur by leveraging the proven success of a business model or a franchise. Yeah, it's like 

Nat: I always think of it like kind of like a bicycle with training wheels on it, you know, you have some some stability to While you're getting started.

Pete: Yeah, right. So absolutely. All right. What would be another Another reason why brand 

Nat: recognition I think is always big too Like, you know all things being equal why not own a business that people already know like and trust 

Pete: Well, I think the deal is is that many franchises are early adopter franchises, right?

They're just starting to build their brand right? And so you kind of look at it as you're going to grow into that brand Right. So when you invest in that franchise, it may not be the brand name that it's going to be right. It's it's starting point because they got to build that brand by having franchisees in the markets.

And think about like McDonald's, [00:03:00] the first McDonald's franchisees. They didn't have a brand, but it grew into a brand, right? And that's true for, for many. And as we look at franchises, most of them are kind of early adopters, right? You're, you're coming in, you're starting a new territory, opening up a new location in a community, and it starts building.

And then, then you look like a hero, right? When it all of a sudden, it's a Jimmy John's, and you own four locations, and it's got a very strong brand. But you're an overnight, 

Nat: overnight success. Yeah. Right. Right. 

Pete: Yeah, it just took 10 years. Yeah, absolutely. Alright, what would be a third one? 

Nat: Well, I think, you know, the best brands, of course, are going to have the best training and support, so that's something that people would want to be looking at.

You know, how does the franchise train and support their franchisees, not just at the very beginning, but all through, over the years. 

Pete: Yeah, we talked about that franchises is an is an easier way for somebody to invest in a business, right? And the idea is is that they have all the training support. Like many people say to me, Pete, I want to buy an existing business.

I said, that's [00:04:00] great, right? When you buy an existing business, if it's not a franchise, you have that transition with that owner for a couple months, right? At best. Or two weeks. Yeah, two weeks, right? And then all then you're on your own. If you invest in a franchise, you have all that training, all that support.

You got somebody right there by your side helping you, right? And they got a set process to do that. And then if you got problems, you can lean on them from a step point. So that's a big one from a franchise is the training and support. And not only you, the entrepreneur, but also some of your employees, right?

Because you think about you've been to training before you could bring your manager, your lead manager to the training and stuff like that, or the franchisor sent somebody out to do in market training for you. But that's a big one why franchises are booming is because the great training and support makes it just easier for people to invest in a franchise when they know that they have the training and support.

Nat: Yeah, it's really a partnership and you don't have to do [00:05:00] everything as the business owner in that case. 

Pete: Yeah. Okay, what would be another reason why franchises are thriving? 

Nat: Like I always really like that they, a lot of things are, you know process oriented or standardized. So a lot of franchises will standardize the operations.

So the nice thing about that is after you, you, after you figure it out or you learn it, you don't really have to relearn it. So you become a master expert and then you can start to scale 

Pete: up. Yeah, well, I think about Starbucks, I think about McDonald's, and I'm always using examples of food, but they're simple ones, right?

McDonald's, it is all about standardized operations, right? This is exactly how you make a burger. Or if it's Starbucks, this is exactly how you make a iced tea. Right? I mean, shaken, all that kind of stuff. The idea behind is they have that set process, those operations that are standardized, that just makes it easier for you as the owner to have employees.

Because I suspect with your business, you have a lot of stuff that's [00:06:00] standardized, right? If you're going to a customer, these are the seven things that you do. And this is what we always do. And I suspect you have a report that tracks all that stuff. Yeah, you want 

Nat: to try to take the thinking out of it as much as possible.

Pete: Absolutely. And just make it simple. All right, what would be another one? 

Nat: It kind of needs to scale. So with franchising, you know, like I was kind of talking about before, once you master your first location you know, basically opening up a second and third location, it's just repeat and rinse, rinse and repeat.

 That's what I always think is smart to open up multiple locations or multiple franchise units. 

Pete: Yeah, you know, when we talk about that, you can scale horizontally. So open up multiple locations or develop multiple territories. You can scale vertically right where you can have multiple businesses that are doing different things in the same geographic area.

And why I like people scaling. Horizontally is because you can leverage the marketing, right? If I'm building a brand for one location or [00:07:00] or building awareness, it's easy than to do it for two or three. Or if I'm training people to train them, I could move them between different facilities, right? Or if I'm buying a commodity, I could buy it across for three opposed to just one.

So certainly there's great economies of scale as you look to build a franchise. What would be another one? What would be another reason why franchises are thriving? I think the just access to financing is always pretty key because the lenders, they're familiar with franchises and they like to reduce the, lenders like to reduce their risk obviously.

Nat: So when you're working, when you're looking at investing in a franchise, that's going to many times seem less risky to the lenders. 

Pete: Yeah, absolutely. And I think we talk about now there's a lot of capital in the market, right? When we had the downturn in 2008, the capital markets froze, froze up, right? Today, there's a lot of money out there.

SBA loans, people are using [00:08:00] retirement dollars. They're using through what is called the ROPS. They're using equity in their home, which is supercharged right now. So there's lots of capital out there. And certainly financing is one of them. Now rates are higher than they were. But they're still not what they were back in the late eighties.

Right? Right. Yeah. Right. So the idea is, is you, you have plenty of capital out there that makes it easier to invest in a franchise. No question about it. What would be another one? Like I talked about you know, being a little less risk. So mitigating your risk you know, that's what the lenders like, but that's also like a reason why businesses, franchises thrive.

Nat: You look at failure rates, typically for franchising, it's going to be a little bit less or less than a start from scratch type of 

Pete: business. Yeah, no question about it. When we talk about franchising, we do mitigate that risk, right? The idea is, is that a franchise has all the systems, the process, procedures, the brand.

And we've been talking about that today, right? And the idea is, is that if you [00:09:00] follow that system, you make less mistakes. And if you make less mistakes in business that saves you capital capitals, like a lot of business, right? It also saves you time, right? So, you know, if you're trying to figure out stuff.

 It just takes time with the franchise. They've already figured that out. So you get going faster again improves your chances of success. So bottom line is that you can never eliminate risk with business, but you can mitigate it with the franchise or reduce it. 

Nat: Yeah, and talking about getting started faster, that's another thing.

Actually, franchises are really good with, you know, sales and marketing and advertising support. So, you know, we've all seen the orange bicycle sitting outside a strip mall and we're like, what is that? And we come to find out, you know, the orange theory is coming there soon and they're doing the pre sales and all that.

 So I think that's another strength of franchising is the marketing advertising support. 

Pete: Yeah, absolutely. They've kind of figured out they've got the template to do it. I need to just follow the system, [00:10:00] especially as we talk about kind of launching the business. If it's a facility business, a lot of times they'll do pre sales 90 days out.

Like my wife invested or excuse me, became a member of a yoga six. I wanted her to invest in it, I wanted her to run it, but she had no desire to do that. But she actually became a member of a yoga six here in our community, 90 days before they ever opened up. She got a great membership rate. So we like that a lot in our household, but, but the idea is, is that that marketing they use that the that local yoga six use the marketing and advertising model from yoga six to build awareness and sign up members.

Nat: Yeah, it's nice to be able to open your doors and you know, be maybe close to breakeven or break even, you know It helps it makes you a lot a lot happier. 

Pete: Yeah, it sure does right, but it takes a lot of hard work and For that simple, okay. We'll [00:11:00] be another one 

Nat: I always think of franchising as being hyperlocal.

So, you know, just local entrepreneurship, just being, you know, right here in your community. A lot of executives have, you know, spent the last 20 years traveling all over. It's just nice to kind of roll out of bed and, and we'll either walk or ride your bike to the office and invest. Hire people, be able to hire local people. 

That's one thing that I think is actually pretty, pretty 

Pete: rewarding. Yeah, when I was a corporate executive, I was always gone. Right? And you know, so it's hard to be involved in the community. And so the opportunity when I started my business to be in my community to make a difference to be joined the chamber and and create jobs and all that kind of stuff.

That's real. And that it makes me feel good because I'm making an impact in the community. And you're the same way right with your business. You're you're hyper local and you're making a difference in your community. Totally. Yeah. Okay. What would be the last one? 

Nat: I think [00:12:00] the, you know, even though franchising is, you know, systems and processes and all that, I think that they do a really good job adapting to your local market.

 You know, sometimes you'll see some franchises, they'll have even like pictures of the town or the city that they're located in and things like that. So, you know, there's a good amount of flexibility and you kind of get that local flavor or flair from a franchise too. Yeah, 

Pete: I think they allow, they allow you to kind of customize it a little bit.

I think about a pizza franchise that I play somebody in and they, they were, they would tie into the local community sports team. Right. It was a college, you know, University of Minnesota or whatever it may be. And I think that's real. Or they also you talk about like pricing, right? So tier one market in terms of pricing tier two.

So they adapted based on the community or the market. Yeah, 

Nat: sure. Yeah, there's a lot of there's a lot of flexibility, but there's also a lot [00:13:00] of systems and processes and structures. So it's kind of the best of both 

Pete: worlds. Yeah. All right. Well, I tell you, I've pumped up about where franchising going because more and more people again are investing in franchises.

And that's what we do. We help people do that. And and now is the time to take advantage of all the opportunity around franchise 2024. All right, let's 

Nat: do it. All right. Bye.