Secrets to Franchising Success

Check out the latest episode below. Mr.Biz Radio provides business owners with the knowledge and insights needed to drive their companies forward.

Mr. Biz Radio: Secrets to Franchising Success


Unedited transcription of the show is included below:

(00:03):

Welcome to Mr. Biz radio, Biz Talk for biz owners during the next half hour, Mr. Biz, Ken Wentworth, a leading business advisor, and two time best selling author will cover topics. That'll help business owners run their companies more profitably and more efficiently. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz, Ken Wentworth.

(00:28):

All right. Welcome to another episode of Mr. Biz Radio with me, Mr. Biz, Ken Wentworth. And we have, we're gonna cover a topic this week that we have cover a couple times in the five. Now five, I could say five plus now, five plus you years. We've been doing the show. It's been five, five years in like a week or two, but nonetheless that's five plus, right? That qualifies. <Laugh> so we're gonna talk this week with someone who is an expert in the franchising world. So our guest this week is Mr. Tom dfor. He is the founder and CEO of big sky franchise team. He's an author serial entrepreneur, franchisee, and host of his own show. Multiply your success. Big, big franchise team. Easy for me to say big sky franchise team is an award winning consulting firm, specializing, helping growth-minded entrepreneurs, franchise, their business, big guidance consultants have advised more than 600 clients, including Jamba juice, two men in a truck, Matt co tools, and many others.

(01:25):

Sure. You guys have heard of all those brands, Tom values, building others up, whether it's an owner looking to franchise their business or members of his team, his leadership focused on treating people with respect, encouraging them to be their best and always learning. He seeks to live out his company's purpose to inspire and foster greatness through its three core values. Win-Win relationships, professional excellence, and continuous improvement. Tom has an undergraduate bus undergraduate in business management and an MBA, and he is happily married. The guy who threw happily in there. That's good. Just in, just in case Mrs. Du four, watches this right. Happily married with three wonderful Joe. So Tom, welcome to the show.

(02:05):

Well, thank you so much for having me I'm I'm I'm grateful to be here.

(02:09):

Yeah. So full disclosure. So first of all, I have to say for those watching on either Mr. Biz network or on the YouTube channel or, or on social media I'm feeling a little bad because you know, I'm looking at that Tom's perfectly coed hair and I've got the the, the shaved look going on right now. We had, I got someone close to me that's going through chemo. So me and a couple other people, we shaved our heads it's actually coming back in, but it's kind of like peach fuzzy right now, Tom. So I'm, I'm, I'm feeling, I'm feeling jealous of your luscious locks.

(02:43):

Well, I, it sounds like you did it for a great cause, so I I'd love to do that as well. I love it. It's great.

(02:49):

Good stuff. Good stuff. Well, you know, let's get into it. What's what talk, still's start with your, your entrepreneurial journey. So what got you to where you're at now as a, as an entrepreneur? Sure.

(02:59):

Well probably like a lot of entrepreneurs out there. I, I, I always knew when I was a kid, I just had kind of this thing in me that said entrepreneurship. I had a I remember having a high school teacher. He was, he taught economics and the big cool thing for him was that he was this local business guy. He had a, I grew up in a small town. And so like, it was kind of the, the chatter among the other students. I thought, wow, that's pretty cool. He's a teacher. But he also runs a, a business that everybody knows him about. I thought that's pretty cool. And was fortunate that my, to see my dad kind of fulfill an entrepreneurial journey. He, he had been in the car business. His whole career started working there when he was 16 and eventually opened up just a little used car, lot that he opened and worked there nights and weekends and summers washing cars and, you know, doing mostly Porter stuff there.

(03:57):

I thought, well, that's really neat. I, I, I want to pursue that at, and so that kind of just always stuck with me and I set a goal. I remember in, in college that I, I wanted to be, have my own business by the time I was 30. That was just kind of, I, I have no reason. I, I don't know where that idea came from, but that was just kind of on my goal list that I was setting when I was, I don't know, 19 or two, one years old. And so I said, by the time I'm 30, I wanna be a business owner and kind of going that direction. I, I wanna get some experience under my belt of working and figuring some things out. And as it, it turns out funny when you put things down on paper, literally it was, it, it was almost to the day, three months after I turned 30, had signed into signed on when joined and partnered in with an old colleague of mine and worked with together with him for a few years. And then just had a difference in kind of vision and long term perspective for where we were taking the company and decided to separate on amicable terms. And that's when big sky here almost six years ago now. And so that, that's kind of the, the manifestation of coming to this whole idea of, of starting and starting a, a, a, a business and becoming an entrepreneur.

(05:15):

So, Tom, at what point in that journey, I'm kinda curious because you know, even from relating to my own journey, so lot of what you just mentioned resonates with me as well. At what point did you decide to write a book? At what point did you start your podcast during that own journey?

(05:29):

Yeah. Great question. So the podcast, the the book, almost all of that happened right after the pandemic came out like a lot of folks, but it it's, it, when the pandemic hit, we lost about half of our clients stopped. They, they called us or messaged us and said, we have to put our project on hold, or we have to permanently terminate our relationship just because of what's been going on. And it, it happened in three weeks. I mean, there's literally three week windows, like one call email after another, we have to stop and it wasn't due to anything. We did. It just, you know, you, you have these lockdowns and shutdowns. They're not generating any revenue. And I always tongue in cheek tell our clients, look when things are, are not in a great position. The easiest line item to cut is your friendly franchise consultant.

(06:22):

So <laugh>, and so, so that's basically what happened. And, and I met with our team, our leadership team, and I said, we have to do something. Even though we have lost a lot of clients. I said, we are still, they are still in need support. And we're working with growth-minded successful entrepreneurs. They have a, a, a wide range of advisors that they work with, but I know for maybe 20% of them, we are their primary advisor. And I said, for, for 20%, or even if it's 5% who whomever is out there listening, we need to do something to help them. And so within two weeks of that happening, we launched a, a webinar series. And this is how, you know, how kind of, how old it is, which is funny to think old, we called it navigating the coronavirus economy series, and it's like, that's we still called it the coronavirus back then.

(07:10):

And so we started it and we still are running that today. Now we, we, and we bring in experts to talk about all different kind kinds of things. Back then. It was, we had the, we brought in one of the few at the time P P P kind of experts who had kind of figured and been following what was going on in ID loans and all of the things that were happening. We were bringing people in to talk about this and help keep people in the loop of what was happening. And so that was really the, the focus of it. And then the podcast followed shortly thereafter and the podcast had been in our marketing plan for the year. It, so it, it timing wise that kind of worked out, but this webinar came in. And when we looked back at all of that, we realized that our, our overall purpose, which you read in the intro there is to inspire and foster great, and this, and when we think about inspiration, the inspiration is, is it's great, but it's temporary. And so we want to inspire, and that's really the purpose behind the podcast is to provide that weekly dose of inspiration. And then the webinar series is really fostering and it's helping maintain that education, new ideas and, and keep that engine burning. So unknowingly, we didn't, you know, it was a little unintentional. We were kind of living out what, what we tried to do as an organization. So it, you know, and that, that's kind of where we came from there.

(08:32):

Well, it's good stuff. So it tells me a few things we're oriented break here, but you know, I'm impressed because you didn't, you used that time, you know, you had down time, you're losing some clients and you used it for things that helped your clients and the existing client base and future clients. Again, this week, we're talking Mr. Tom dfor. He is the CEO and founder of big sky franchise team. You can follow them on Facebook, Instagram, LinkedIn, YouTube, big sky franchise. Come back after the break for Mr. Biz tip of the week,

(09:00):

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(09:30):

Thank you for listening to Mr. Biz radio. Did you know our show airs seven days a week for more than 30 hours. Now, if you are in the B2B space and would like to reach thousands of business owners every week, including our more than 250,000 social media followers, our thousands of daily internet radio listeners, our email list fans and Mr. BIz solutions members email us at This email address is being protected from spambots. You need JavaScript enabled to view it. to become a sponsor tapped into Mr. Biz nation to help grow your business.

(10:01):

Check out both of Mr. Biz's national bestselling books, pathway to profits, and how to be a cash flow pro on Amazon. Now, once again, here's Mr. Biz.

(10:12):

All right. Welcome back to the show. And as always, it is time for Mr. Biz tip of the week, and week's tip. I'm sure that Tom is gonna, this is gonna light you up, Tom. You're gonna like this one. So the tip is what is your net margin? If you don't know what that is find out because improving it as a business owner will change your life. It is super, super important. And I mentioned net margin because is everyone quotes the gross margin all the time? What's your gross margin. And for me, while that is important, especially in manufacturing and things like that, for me, at the end of the day net margins, where it's at, that's what ends up in your pocket at the end of the day for those unfamiliar net margin without getting too deep into the weeds, but it's essentially your net income divided by your sales.

(10:55):

So that's telling you how much of the sales that come in the front door end up at your pocket at the end of the day, and a super, super important measure there. And if you can look at ways to improve that again, literally can change your life and, and make you you know, better balance all that kind of stuff, make more money, all that kind of good stuff. So I'm sure Tom works with that a lot as well. Again, that's week this week, we're talking with Tom before, and I should mention, I didn't mention their website, bigskyfranchiseteam.com. That's bigskyfranchiseteam.com.

And in the third segment, as we always do, when we pick the brain of our guest Tom's gonna give us, so stay tuned for this, the secrets to franchising success. So think about those different things that you may have some questions for your big business of, geez, I'm thinking about doing it. I'm not sure exactly. Even where to start. Tom has been doing this for quite some time has worked with all these different businesses. Like I mentioned, some of these brands that you've all heard of before, so clearly knows what he is talking about. That's why we brought him on the show. So Tom let's get started here. You know, how do you determine, so I'm a business owner and I'm thinking about it. And I say, you know, should I franchise, how, what, how's that decision matrix

(12:03):

Work? Yeah, great question. And we take our, there, there are three broad categories or kind of check boxes that we, we wanna look at from, at, at minimum kind of some minimum benchmarks. The first one is, do you have a profitable prototype? Just kind of clean simple. If we just said, do you have an operating prototype? And is it profitable? And Mr. Biz, as you just mentioned, net margin is one of those things. That's really important that we take a look at. And all often times our clients or prospective clients will say, well, in my tax return says, I didn't make any money last year. Well, but that doesn't mean you didn't make any money in your business. Right? As a business owner, owner compensation comes in many different forms in many different ways, how folks like to take it out of it. So we look at at is kind of an, when we think of profitability, we're also looking at that total owner's compensation or owner benefit program that you have set up for yourself.

(13:02):

So that's number one that we want to take a look at. Number two is we wanna make sure that there's an audience preferably on a national basis, meaning that there are customers who will buy your product or service nationally at minimum regionally. So that there's enough room for you to open up or sell enough franchises. And ideally internationally, you never know where this is gonna go. And then the third piece that we like to take a look at is can you train someone how to do this in a reasonable time period and by training in a reasonable time period, what we mean by that is most franchise systems are, have a training program that's anywhere from one week to maybe four weeks and typically a one to two week training period. Some go as long as two months, some as short as one or two days.

(13:49):

And in today's world, the the pandemic has accelerated online, learning an integration for online learning, which I think is wonderful because there are so many great things you can do with it, where there's a combination of it. So those are at a high level. What we like to take a look at. And the one thing on the training that I like to talk about is sometimes you clients will have a very specific niche business. So just a for in instance, is we have a client that's in the, that's a veterinarian practice. And in many states you must be a veterinarian. You have to be a doctor to own that business model and own and operate it or own 51%, or there are different requirements based on state rules and laws. And so in those instance says, obviously you are selling to a doctor that is, or a veterinarian that is qualified to do that.

(14:42):

We're not, this is not taking people through a medical school, <laugh> on order to learn how to do this. Or I have had a client that's an engineering business or an engineer professional engineering company. And in many states you, you must be a professional engineer or a professional engineer must own that business or own a percentage of it. And so you just have to adjust accordingly. So we're not teaching doctors how to doctor we're teaching these experts, how to run and operate this kind of a model or, or it's a business operating system, marketing processes, procedures, and so on.

(15:17):

Well, it's interesting. And it, as you were talking, it made me think, I just literally over the weekend watched, I don't know if you've seen it yet, Tom, but I would suggest you check it out cause I'm sure you'd get a kick out. I, I, I was like geeking out on this thing. It was a, a show called the I think it's called the, the foods that built America. I don't know if you're familiar, it's on gosh, what network's on. I can't even remember, but it's literally talking about the McDonald's the taco bells, the et cetera and Colonel Sanders KFC, and the process of how they built their businesses and, and then eventually franchise and how the so different right. KFC and how Colonel Sanders went about things was so different than the way McDonald's did and how Ray crock came in and, you know, kind of hose the way the, the brothers, the McDonald brothers a little bit.

(16:02):

But anyways, it, to me, it was very interesting because it showed, and again, those are long ago and it showed that there's more than one way to skin, a cat, as they say a lot of different ways to do this. So I think that's, you know, what you had mentioned is super, super important because, you know, I talk about this too, when even if you're not franchising, you're just open a second location. You gotta make sure that first location is operating efficiently and profitably. You don't wanna make a copy of something that's crappy. You make, you know, in the old days, old days when we would copy things, right, you make a copy of a copy. It's always as good as the original, right? So you wanna make sure that you're those things that you mention are critically important to making sure as you make those copies, you're not messing everything up.

(16:40):

Yeah. That that's exactly right. And you, you make a, you make a great point. And that's why one of the first exercises we take all of our clients through it's we call it the franchise blueprint. It's we take our clients through a three step process when they F and in the franchise blueprint. Part of what we're really assessing is we take an average franchisee. We try to play out even for a brand, a client that maybe has 1, 2, 3 of something. We try to figure out what does an average franchisee look like? Very often the owner or founder is a high performer. So we would assume that, and usually most original operators or founders, they would be a top 10% franchisee in their system. So we try to tone down revenue and some of these other things to assess and try to get a more realistic snapshot.

(17:27):

And, and then we, we look at that and say, okay, can of an average franchisee. And we look at this as an and try to see what would their return on investment look like. And we try to look at a return on cash investment, assuming that the, the cash flow in the business will service any debt load, or maybe partners that they take on to open the business. And, and can it work for the franchisee and then build the rest of the model from there. If it doesn't work for the franchisee, it, it doesn't make any sense. Then why are we doing this? It, it has to start there.

(18:00):

Yeah. And it goes back to, to, you know, one of your, the principles of your company, you know, the Win-win relationships, you know, people who go about this to complete wrong way, and they frame franchise and just start taking on anybody. If you've got a check to right, I'll take it and I'm gonna, you sure you get a franchise. And that is, I'm sure you would agree. Absolutely. The wrong way to go about it. Because if that franchise fails, it's got your name on it, essentially. Right. As, as the franchise, or it's got your name on it. And if people see those things closing, it's not good for you.

How often do you see a McDonald's close? Right? I mean, it never happens. Right? They got it down. They've been doing this for a long, long time. They got the system down. So cool stuff. Well, we're gonna come back. We're gonna hit a breaker. Come back. Tom is going to give us the secrets who franchising success. You can tell. He knows what he is talking about. We've been talking about a lot of these things. Find out more bigskyfranchiseteam.com. That's bigskyfranchiseteam.com. Follow them on Facebook, Instagram, LinkedIn, and YouTube.

(19:00):

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(19:30):

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(20:01):

To submit questions to the show, email them to This email address is being protected from spambots. You need JavaScript enabled to view it.. Now, once again, here's Mr. Biz.

(20:09):

All right. Welcome back to the show. And it can mentioned you hear that during the break, if, if you have questions. So we, I, I will periodically do, as we get questions in and I start to see a common theme amongst them. I'll do a, we call 'em ask Mr. Biz, right?

So we compile all the questions that we get submitted from listeners via email or, or DMS, or, you know, whatever on social media. And we'll do the ask Mr. Biz questions. And I'll give you a shout out on this show and all that kind of stuff, Tom from Georgia called in, you know, sent us a question about X, Y, and Z and will answer your questions you know, on the show and all that kinda stuff. So if you do have questions, please submit them. We'd love to hear from you guys.

(20:45):

We love, I love doing those shows. It's a lot of fun because you know, the, my VA who handles all that stuff, like I'll tell her, like, don't even tell me the questions. Like, do you think they're pertinent questions? And so I just kind of on the fly answer the questions, it's probably not the way it should be done, but I like it. I like the improv nature of it and just, you know, kind of going with it. So so Tom, the moment that we've all all been waiting for, give us some of these secrets to franchising success. Some of the things that you've seen, you've worked with some of these huge brands that have built massive franchise prop platforms. What are some of the things that you see that are the secrets to franchising success?

(21:22):

Yeah. Great question. And I appreciate the opportunity to talk about it. And we, we actually have a a, a, a downloadable document called the nine pitfalls to avoid when franchising your business. And we'll send a link out if anybody's interested in downloading it, but I'll talk through some highlights from this one here that, that really this, the, these nine came from what we've seen, especially emerging franchise brands, as well as just large brands, you know, large and small fall victim to this. And, and it's easy for it to happen. So one of these points is the idea of get rich, quick thinking. And so it's, it's something you just mentioned, Mr. Biz, before the break about not having that win-win mentality. If, if your coming in as a, an entrepreneur looking to franchise, and you've got this mindset of, well, if you're looking at your franchisees as dollar signs and just a money grab, franchising's the wrong business, don't do it.

(22:20):

It's not worth it. It's go pursue and expand and grow in other ways, put your money in the stock market, do something other than franchising, okay? Cuz that's, that's the wrong mindset to come into. And, and that can get you into a lot of trouble down the line. This is not, you know, Selmon forget 'em in, in the old days of franchising, we're talking maybe 30, 40, 50 years ago, you might have been able to get away with that today's world. That doesn't work that way. So that's number number two second point out of that is inconsistent or absent marketing. So this is one of those things where I've, I've worked with so many emerging and startup franchisors over the years that all every owner I've ever worked with has always told me Tom, I, I can't wait to start marketing and generating franchise sales.

(23:10):

And all of a sudden their, their documents are put together the strategies ready and they're ready to go to market. And all of a sudden they press pause. They freeze, they get scared or nervous of spending money on marketing. And that's the, one of the biggest issues I see with franchisees is, and either they don't spend marketing or it's inconsistent, it's erratic and forgetting that the franchise sales process, this is a long sales cycle. This is not like selling a hamburger or selling a maid cleaning service, or even selling a veterinarian care where it's, it. It's very easy to understand someone maybe spends $20, a hundred dollars. It it's not gonna impact their life, whereas buying a franchise does. And so sometimes clients see how long it takes and they'll either stop or start and stop and start. And the sales cycle takes a long time.

(24:06):

You know, let me jump, go ahead ahead. Go ahead. So I literally, I think it was, I think it was last week's show. The Mr. Biz tip of the week was how much to spend on marketing. And one of the things, one aspect of that is I tell people never go below 2% of your revenue. So I recommend usually typically between two and 8% of your revenue is what you should spend on marketing. Sometimes up to 15% for short term things, opening, location, product, things like that. But really to your point, I say, even when things are tough, you know, that's another one of those things you go, I'm gonna cut all my marketing spend. Like things are tough for revenues down. Then you cut off your pipeline. Yeah. Cause again, spend, especially with, you know, selling franchises, as you mentioned, that's a long haul, you know, that's not, that's not a, an immediate return, like you said, you're not selling an immediate consumable product. So you have to keep that going. So, you know, I, I tell people all the time, no matter your business, but especially with what you're talking about, you gotta at least date that 2% because you start to build some momentum and then you, you cut it off for 60 or 90 days and people go to dig out a business or they not franchise it anymore. And it again, dries up your own time, our pipeline.

(25:07):

Yeah. That that's exactly right. And you know, what's interesting about your comment in most franchise agreements between that, that are set up. We recommend our clients have a minimum local marketing spend that every franchisee has to spend. And normally it's somewhere between two to 5% just as kind of like that minimum minimum base. And what's interesting is the franchisees push back on that? They say, well, why do I have to spend this money on marketing? We said, well, if you were to start your own independent business, would you market your business? And they all say, oh yes, I would. Well, how much would you spend for that? Well, I'd probably spend this well, do you think that's more or less than that? Two or 3% that's in the, oh, well, it's probably more, well, this is what we're right. Trying to do. We're trying to make sure to help ensure that success for you by keeping that marketing alive.

(25:56):

So I totally agree with you there. The next point that we like to talk about is providing ongoing support. So we see mistakes happen when ongoing support is not provided. So in a franchise system, you have three jobs. You need to sell franchises, train them and support them. And ongoing support is something where we see franchise or sometimes fall short of that. And it's ongoing support doesn't mean you're doing the work for them. It's maybe coming up with a new marketing idea or updating your website or coming up with new products or service offerings, different things. In that regard, it could also just be more of a coaching relationship that develops over time with your mature franchisees, where they don't need you to hold their hand anymore. They just wanna have a financial review of their numbers or help keep them on track as they're expanding and, and growing their business.

(26:49):

So the, the next point that we like to talk about is tied back to marketing, which is once those leads are coming in, do you have a franchise sales process that you take the prospects through? Again, we talked about this being a long sales cycle, but in franchising, there are these little stages that a franchise buyer needs to go through. There's a legal component to franchise sales with the franchise disclosure document. There there's a discovery, there's a, an application there's this whole kind of getting to know you think of this, like dating to get to a future spouse. And, and it's really how long it goes. Most the typical franchise sales cycle is three to six months, as long as 12 to 18 months that I, I see candidates go through. But on a, even on a short, on a fast side is, can be three or four months and that's fast and franchise sales mm-hmm <affirmative>.

(27:42):

And then the, a fifth piece here that we like to talk about. It is a little self-serving, but it's not hiring the right professionals to support you through this venture. And it it's the same reason why, why a franchisee buys a franchise because there's a proven system model methodology to do it. And that's the same thing that we provide to our clients and really any bull consultant or reputable hiring the right franchise attorney as part of the journey, which is why we re refer out great franchise attorneys as part of the process. So having those professionals to help and the overwhelming majority of franchisors, especially new franchisors have no experience in franchising. And not saying you shouldn't franchise because of that, not, not at all, rather having a team of experts or people to support you is important. And, and I'm, I'm a, a rising tide lifts, all boats, kind of a person. So whether that's hiring big sky franchise team or some other consult, reputable quality franchise consultant that can support you, I'm all in favor of it because it's gonna help give you, you help you give, get the best shot going into franchising.

(28:50):

Yeah, I think that's huge, huge, great tips, great tips. I love all five of them and I couldn't agree with you more. You got, I might have everyone check out that link as well. So there's four other ones to talk through. So again, we've been talking this week with Tom before he is a founder and CEO of bigskyfranchiseteam.combigskyfranchiseteam.com.

Tom, thanks so much for coming on and show you shared a lot of gold nuggets. I really appreciate

(29:12):

You coming on. Thanks for having me so glad to be here.

(29:15):

Yeah, absolutely. Follow them. Facebook, Instagram, LinkedIn, YouTube as always guys. Thanks for watching. Thanks for listening. Have a great week. And don't forget as always cash flow is king.

(29:31):

This has been Mr. Biz radio to learn how to become part of Mr. Biz nation. Visit MrBizSolutions.com for access to free weekly content. Subscribe to the Mr. Biz YouTube channel and follow him on Facebook, LinkedIn, Instagram, and Twitter, to listen to archive shows. You can find them on the Mr. Biz Solutions website.