Franchise Warnings & Smart Investing: A Conversation with David C. Barnett

Episode Transcript
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David C Barnett (00:00):
Someone who's looking at a business for the

(00:01):
first time ever, like if they'relooking at a laundromat or a dry
cleaning business, or arestaurant or, or any kind of
business really it may be thefirst time that they look at
that kind of business, but we'velooked at dozens or hundreds,
and so we can move through theprocess very quickly.
People only pay for what can bedemonstrated, and so.
Our advice to that guy was, ifyou can wait two years to sell,

(00:22):
make these changes, improve theprofitability, you'll ultimately
end up with a higher sellingprice and bonus.
You get to enjoy the addedearnings over the course of that
period of time.
at the end of the day, the biglitmus test that I always say
people should be asking is, whatare the different fees I'm gonna
pay?
And what should I be getting forthat money?
What will I get for that money?

(00:45):
Welcome to the Franchise FreedomPodcast, where you can escape
the corporate trap throughfranchise ownership.
Here's your host, Giuseppe gr,the franchise guide.

Giuseppe Grammatico (00:58):
Welcome to the Franchise Freedom Podcast.
I'm your host, your zepiGrammatical, your franchise
guide, the show where we helpcorporate executives experience
time and financial freedom.
Very exciting show for youtoday.
You had asked for more guests,for more content and, and
different directions, and we, welistened.
We got your messages.
I have my good good, goodfriend.

(01:18):
We've known each other since Ibelieve, 2020 where we exchanged
some podcasts.
David C.
Barnett.
David, welcome to the show.

Hey Giuseppe, it's good to have be here again.
Thanks so much for having meback.
I'm happy to talk with youtoday.

Yep.
I actually, I I screwed up and Iwill admit that in the very
beginning here, and I think lasttime we spoke it was Q3 Q4 of
last year, were a, a four timer.
This I believe is your fifthtime, and I forgot the SNL robe.
So that was the the promise Imade to you.
So we, we owe you a robe.
So, I am gonna be traveling, soI may, may have to steal one

(01:52):
from the from the hotel whenwhen we're out there.
But no, I, I really appreciateit.
I'm, I'm really looking forwardto the show, and you reached out
to me and said you, you know,had had a new book going live.
I, I was super excited to haveyou on, so, thanks again.
I, I really appreciate youcoming on.

Yeah, no problem.

So for those that maybe I, you know, I
was told once before that whensomeone sometimes listens to the
show, they may only go back afew episodes.
we've done some great shows onein particular around exit
strategy planning, which wasprobably our, you know, top five
show.
On, on that topic number oneshow.
And we've definitely sent thatout.
If you could give the audiencemaybe a little bit of background

(02:28):
of, of who David is and and whoyou serve and, and who you help,

Sure.

helpful.

Yeah, so, so I'm a a former business broker,
so I had a, I've had severalcareers in sales and
advertising.
I've been working with smallbusinesses since the 1990s
basically.
And I spent a few years as abusiness broker and, business
brokerage is a really toughbusiness because basically you
get paid when you sell abusiness for someone, you get a

(02:55):
commission and you can go formonths and months between deals.
And so there was a lot of upsand downs, sort of a cashflow
rollercoaster.
I eventually decided it, itwasn't suitable for me because I
had two young children at homeand I went back into the
workforce and, and, and took ajob with a bank.
A few years later, the bankreorganized and I ended up
starting the business that Ihave today which now we're

(03:16):
talking still over 10 years ago.
Basically working with businessowners and people that wanna buy
businesses, doing many of thethings that business brokers do,
but with a very different kindof business model.
So today I work with buyers andsellers as a consultant, and we
basically have broken down theprocess of buying or selling a
business into steps and peoplecan work with us for whichever

(03:37):
steps that they want.
So, for example, with sellers,what we do is we do an
evaluation on their business andshow them what they likely are
gonna be able to sell theirbusiness for.
For some people, they stop rightthere because maybe they've
already identified a buyer andthey just needed something to
help guide the conversation withthat person.
For people that want to talkwith new people, we'll then
create what we, we'll do what wecall the packaging.

(03:59):
So we'll create a businessprofile, or some people call it
a sim, which is a buyer facingdocument.
That talks about the business,shows different, you know,
financial performance exhibits,that type of thing.
And then some people end rightthere.
Others want us to help them findthe buyer.
So we will run an advertisingcampaign online, much the same
way the business brokers do, andwe use the same websites like

(04:20):
Biz Buy Sell, for example.
And we filter the inquiries thatpeople send in looking for
information on the business.
We get the, the buyer, theprospective buyer to fill out
the NDA, et cetera.
We, we help the seller managethe process, but we don't act as
a broker in any of this.
We just charge for each stepalong the way.
And when the business ownerfinally does sell the business

(04:41):
you know, they sell it on theirown with our help.
There's no commission oranything like that.
So it's a, it's a very differentkind of business model.
And we do the same sort of thingwith buyers where we help them
look at businesses and help themanalyze deals, et cetera.
And and it works very well.

That's awesome.
So, so done with you type ofsystem.
Right.
We're gonna, we're gonna, it's ateam approach as opposed to.
Here's the listing to thebroker.
You find the buyers and when youdo, you know, we'll we'll sit
down and talk with them.
And I,

Yeah, absolutely.

have you seen, and you don't have to give
specifics, but is it, is it, isit a package you know, you're
doing?
Is this hourly?
Is this just you charge a flatfee for the step?
And have you seen a significantsavings, you know, for someone
looking to sell?
I think a traditional brokermaybe charges about 10%.

Yeah, so, so the way that our pricing works
is we charge fixed fees for eachof these different steps.
And we have slightly differentfee structure, depending on the
size of the business.
So people know that when they,for example, if they want us to
do the evaluation, if they're abusiness owner and they wanna
sell one day we tell'em upfront,this is what the cost is.
And so then we go through theproject and we meet with them.
We give them the report, wereview it with them, they know

(05:48):
what they're paying.
You know, for, for people whohave never engaged with a
consultant before, when theyhear an hourly rate, they get a
little bit fearful that youknow, is this gonna take 10
hours or 30 hours?
Like, how many hours am I gonnabe billed for?
And so, we've, we've tried toadopt the fixed price model so
that people know exactly whatthey're getting into.
The buyers especially like itbecause buyers.

(06:11):
You know, really often don'thave any experience working with
consultants so we can show them,you know, here's what, what,
what we charge to do an analysison the, on this project.
Most of our analysis projectsfor buyers, for example are up
to just a couple thousanddollars, and some of them are
even under.
And, and so it's, it's not a lotof money.
And the reason why we're able todo these projects so

(06:33):
inexpensively is that we'vejust, we've done hundreds of
them.

Right.

Someone who's looking at a business for the
first time ever, like if they'relooking at a laundromat or a dry
cleaning business, or arestaurant or, or any kind of
business really it may be thefirst time that they look at
that kind of business, but we'velooked at dozens or hundreds,
and so we can move through theprocess very quickly.
That's what makes us efficient,that's what makes it economical
for people to use our service.

I love that.
And you're, and you're my go-to.
So I've we've sent the show out.
We've have referred you over theyears because I, I really like
that approach.
It's a lot cleaner.
People know what they're gettinginto.
If, if, if listeners arelistening in and whether you're
watching or listening just tothe audio, you'll notice David
has a slight accent and David isout of Canada.
So question that comes up is,can you work with anyone?

(07:20):
You know, a lot of the audienceis, is calling, is listening
from the United States.
So my understanding is youreally can help anyone, right?
Canada,

About three, about three quarters of our
clientele is in the States.
Yeah.
So we work with people all overthe place.
And my, my training andbackground is from is, is, was
learned from Americaninstructors.
So, you know, I got my initialtraining through a, a big
franchise in the businessbrokerage world.
And I got what.
Went through a certificationprogram from the IBBA, which is

(07:47):
based in the us

Hmm.

And so that's where my, that's where my
training is from.
And yeah, I live in Canada, butwe work with American clients
all the time and people in othercountries as well.
So it, it, it really, you know,the, we're not giving people.
Advice on a clause in acontract.
You know, people who are goingto do one of these transactions,
they're going to need the helpof a CPA and an attorney to, to

(08:11):
get these deals done.
And one of the advantages thatwe bring is that we've just,
we've been through this so manytimes with different people.
The conversations that I willhave with someone is not.
What needs to be changed in acontract, it will be, here are
the things you need to talkabout with your attorney to make
sure are, are talked about, andthey're considered in the final

(08:32):
paperwork that your attorneyputs together for you.
So I, I kind of give people aheads up of what to expect, what
kinds of conversations they needto have, what sorts of things
they need to look out for, andthe final details of that.
And, you know, creating a, adocument or getting advice on,
you know.
To how to plan your new entityfor the acquisition, for
example.
I mean, that's gonna come fromyour cpa, so it doesn't, it

(08:53):
doesn't remove the necessity forthose other players on, but I
would argue, I, I help peopleget through those conversations
more quickly.

I love that.
And one, and one experience.
I had referred someone to youbecame a good friend over the
years wanting to sell.
You know, you, you go to atraditional broker, great.
What's it, what's it worth?
Let's sell it.
You asked a question, why do youwanna sell it?
I think in that one particularcase.
That gentleman was, was workingtoo many hours, and you said,
well, why, why are you workingthose hours?

(09:22):
Why are you doing these tasks?
And you were able to, give themsome, some feedback into maybe.
Keeping the business, maybethere wasn't a need to, to
really, you know, sell thebusiness, but it was because
you, you were making money, theyenjoyed the business, just the
hours were outta hand and justreworking the team.
I think you had changed someroles, how to make an additional
hire.
So that's the other value youmay think you wanna sell, but

(09:45):
maybe you just need that, thatcoach, that, that, I should say,
to really kind of, you know,walk you through that process.
And that was super helpful.
So,

you, you raised an interesting an interesting
point.
Like a lot of the times when wework with business sellers one
of the questions we ask is abouttheir timeline

Right.

because when we do the evaluation, we often are
able to identify sort of lowhanging fruit or problems with
the business that could beaddressed that would really
enhance the value.

Hmm.

So it's, it is pretty normal for us to have a
meeting with someone.
This happened just the otherday.
We were reviewing an analysis ofwhat we call an MPSP, most
probable selling price analysiswith a, with a client.
And we showed them that theindustry average gross margin
for their business was a acertain amount, like 43%, and

(10:31):
theirs was only 37.
And we said, this means eitheryour inputs are too expensive,
you're paying too much for yourstuff that goes into each
project, or your pricing is off.
One of the two.
And, and then he kind of, youknow, developed a little smirk
on his face, and I said, if yourpricing was in line with
industry, or your costs were inline with industry and you were

(10:52):
getting the proper gross margin,this extra six points would be
on the bottom line.

Wow.

That would mean that your profit would be this
amount and this would have thisimpact on your, on your business
profitability.
He knew he was underpricing.
He knew that he wasn't asaggressive as he should have
been.
He knew that other people werecharging more, and I don't think
he really understood what it wascosting him

Hmm

because when it comes to selling a business,
it's, it's.
What results can you demonstrateto someone?
You, you can't sell a businessto someone saying, Hey, if you
own this business, you can makemore money because I don't
charge enough.
Everyone's gonna be like, yeah,sure, buddy.
You know, if, if you could havebeen making more money, you
would've been making more money.
People only pay for what can bedemonstrated, and so.

(11:36):
Our advice to that guy was, ifyou can wait two years to sell,
make these changes, improve theprofitability, you'll ultimately
end up with a higher sellingprice and bonus.
You get to enjoy the addedearnings over the course of that
period of time.

Right.

So, you know, to be able to give someone some
real input into exactly what theproblem may be with what the way
they're running their businessis something that we really look
forward to when we can do it.
It requires a time horizonthough.
We, we have to have people reachout to us and start working with
us well before they get to thepoint where they need to sell
tomorrow.
You know, because when, whenyou're at that point.

(12:13):
Then, you know, your options arefar more limited.

Yeah.
The, the the story I alwaystell, the very short story I
always tell is when I sign myfirst franchise cut the check,
shook the hand of thefranchisor, and he asked me
point blank, what questions doyou have?
And I said, how do I sell thisthing?
So that was my exit strategy,right?
It was within one minute ofsigning the agreement.
You're always thinking of thatbecause is it the, is it the

(12:37):
scale and.
Sell in five years, you'rebuilding a legacy, maybe passing
it down to the kids.
Things change, right?
The kids may not want thebusiness, they may not want to
be involved, or as you mentionedbefore, you wanna sell.
You, you need to startpreparing.
And now is the time, not, youknow, when you're ready to sell.
So that's a very, very goodpoint.
last, last piece, and I, Iwanted to switch gears here a

(13:00):
little bit and, and talk aboutthe new book.
Where, where does someone start?
So they're, they're not sure.
Kind of, I wanna sell, maybethey're listening to the show.
Maybe I don't wanna sell, I, Ineed some coaching and
consulting, and they don't knowwhat, what service.
So where, where is the, thewebsite they should go to.
And what do you recommend askind of a first step?

So, in fact one of the, you know, we're gonna
talk today about the book that Iwrote 10 years ago that I've
recently updated.
There's a, there's another oneactually, how to Sell My Own
business.com, which has alsobeen recently updated.
You can find that on Kindle orPaper Book.
Paperback from Amazon, but ifyou go to the website, how to
Sell My Own business.com, you'llbe able to download a free copy

(13:40):
of that as a PDF.
And it's been completely updatedfor 2025.
And it explains the wholeprocess of what is going to
happen, what the different stepsare, and then there's an
another, sort of book withinthat new edition, which also
gives you a bunch ofconsiderations to apply to your
own business, to prepare you toactually do a transaction.

(14:01):
So kind of a to-do list to makesure that you're, you're in fact
ready to sell.
So I would recommend people getthat.
You know, there's also myYouTube channel now.
I've got hundreds of videos outthere about deal making.
So if somebody just has a, aninterest in this idea of buying
or selling businesses and theywanna learn more about it, just
look up David Barnett.
YouTube or any of the podcastingplatforms, you'll find me right

(14:22):
away.
David Barnett's Small Businessmaybe would be your search.
And you can start to absorb someof that content.
But if someone wants to learnabout selling a business, go to
How to Sell My own business.com.
Download the book or, or if youprefer paperback and get it on
Amazon, also available in thesecond edition.
That's just been updated.

Awesome.
And we'll

Awesome.

in the in the show notes.
That's a great first startingplace.
And and I get that question allthe time.
Where, where do I start?
Or what, what should I thinkabout?
And that's what I, what I telleveryone, why do you wanna sell
the business?
Where are the issues?
And then obviously go down that,go down that the, review the
book and go down the checklist.
So cool.
So, wanted to switch gears alittle bit.
So we met, you know, going backprobably about five years or so

(15:04):
and when I had launched mypodcast, and I'll remember right
before I'm, I'm looking at, youknow, the, the book and
franchise warnings and I'm like,wait a second.
What, what, what are we talkingabout today?
This, this crazy guy DavidBarnett.

I think you reached out for an interview
with me and then, and then Itold you, Hey, but do you know I
have this book out franchisewarnings, right?
With the yellow cover?

It was our, our agency at the time.
That's right.
The, the agency reached out.
I remember them great agency.
They helped me launch the, theshow back in Fe.
It was February of 2020.
We officially launched rightbefore COVID.
So it was kind of actually theperfect time because it was a
great way to, to network withthe, with the show.
And I'm like, what am I, what amI getting myself into?
So, you know, we laugh about itever, ever since, but.

(15:43):
Great book.
It was recently updated.
You had, you had reached out.

Yep.

Tell us about what, what the book is
about and, and what updates haveyou included in the new version.

Sure.
Well, I, I first wrote the bookin 2015 and I, I think it's a,
it's probably I think the thirdof the, of the different books
that I've written and, you know,I was struck by.
Just the fact that there are alot of books Giuseppe about how
to pick the right franchise.
And I had over the course of mycareer as a business broker and

(16:15):
just in life in general, youknow, meeting other people,
doing business i'd, I'd run intopeople who've had difficulties
before in the world offranchising.
And I asked myself, you know,where is the book talking about
the other side of the coinbecause we've got all of these
books.
How to pick a franchise or whyyou want to have a franchise and
all these types of things, butwho's telling people about what

(16:37):
can go wrong and what kinds ofconversations need to be had
with franchisors and with otherfranchisees when you're
exploring these opportunities?
And so I thought.
Maybe I can make some kind ofquick download ebook kind of
thing.
Well, it quickly, quickly grewas I thought about the
different, situations I'd helpedpeople through.
I, you know, all the times Ihelped people try to resell a

(16:58):
franchise and had franchisors dothings that weren't really in
the interest of the franchisee.
And, and the stories juststarted to pile up.
I, you know, started writing andeventually ended up with a book.
And so just like the, the titlesays Franchise warnings.
I take people through what cango wrong with the franchise

(17:18):
business model and what kinds ofthings need to be looked out
for, what sort of conversationsyou need to have.
Because people that are in thepromotional space for
franchisees you know, obviouslytend to talk about what's great
about a franchise and they'renot talking so much about what.
May go wrong for someone.
So that's the whole purpose ofthe book.

(17:39):
You, you read through it.
I mean, of the different thingsthat I talk about in the book
how many of them have, have yourun into that have actually been
things that that you've seenpeople have difficulty with?

Yeah, it, it, well, it's, it's amazing
how, how, what.
What I feel is common sense.
Yes.
I'm a, I'm a franchise coach andconsultant, and I, and I'm like,
well, this should be kind ofstandard.
But I've talked to people andover the years and like, yeah, I
bought a franchise.
I don't know, it's, if it's forme, I, I lost money at, you
know, blah, blah, blah.
And they kind of gave me thereasons.
So I, I asked them, did you findit on your own?

(18:10):
Yes.
How many Fran, you know, so forthe example validation, how many
franchisees did you speak with?
I didn't speak with any.
I'm like, you didn't, you know,the franchisor is putting,
obviously they're, they're gonnaput their best foot forward, but
also understanding this is afive to 20 year, typically 10
year, five to 20 yearrelationship.
This is a marriage.
But they didn't introduce you toany franchisees?

(18:32):
You didn't ask to speak?
No, I just, I just decided,yeah, I'm gonna make that
decision and move forward thatthose franchisees are gonna give
you the good, the bad, andeverything in between.
You need to dive deeper.
You know, you need to ask themif it was bad, did it get fixed?
If it didn't get fixed?
It's continue.
It's a continuing issue.
You should bring that up to thefranchisor, but you nailed it.
The book, the book is 100%accurate.

(18:55):
The book really is not about, isfranchising good or bad?
Every franchise is completelydifferent in how they run their
business.
Some, some their sales cycle ismuch faster.
Others will really have these.
in place to, to help you do yourdue diligence.
But yeah, it's very, veryaccurate.
It's, it's dead on.
And know, when you're doing yourdue diligence, don't rush the
process.

(19:15):
And that's where, where I helpalso people is walking them
through, Hey, we know, we know,we told you to do your
validation call.
Did you do them?
And how many did you do?
Why did one?
Well, you may wanna line upanother four or five.
You want to get, talk to the newguys, you want to talk to the
guys that were in business forfive or 10 years and everyone
else in between.

I, I think that that point you just made is
really important because people,you know, if, if you talk to
someone who's just been in thesystem for a year, they might be
in a little bit of a honeymoonphase.

Right,

But if you talk to somebody who's been in the
system for five years, forexample, then you're gonna get a
different.
Perspective because maybe thatperson has had an opportunity to
come up with some problems ordifficulties that they've had to
work through with the systemand, and so what they're gonna
share about their experience isgonna be a little bit different.
I also think there's real valuein face-to-face conversations
versus sort of electronic ortelephone conversations.

(20:06):
I think that when we arestanding in front of each other,
we are more.
Apt to be open up and, andtransparent and share things
that we may not necessarilywanna share, you know, in an
email, for example.
Right.
And, you know, especially if thefranchisee you're talking to is
worried that something thatthey, you know, disclose might
end up being shared withsomebody else, that, that could

(20:27):
make them look bad.

A hundred percent.

yeah.
The, the, you know, in therecent updates to the book, I
added some new sections.
One of the sections was onethical franchising, which is a
conversation that you came andhad over on my YouTube channel.
And but one of the other thingsthat that I wanted to point out
is, is in the book I also talkabout, you know, the, the, the

(20:53):
different ways that you cancompare a franchise opportunity
with other kinds of business.
So there's an example in there,for example, of a pizzeria as a
franchise resale versus anindependent Fran pizzeria.
And how you know, the twodifferent businesses are gonna
have very different values, howthe sort of franchise fees and
everything plays into thevaluation.

(21:15):
Formula And, and these arethings that I think are just
important for people tounderstand because you are
making an investment when youget into one of these things.
And at the end of the day, thebig litmus test that I always
say people should be asking is,what are the different fees I'm
gonna pay?
And what should I be getting forthat money?
What will I get for that money?
And in some franchise systems,there is tremendous value in

(21:39):
that exchange.

Agreed.

I'll give you an example, and this is again
from an update that we've doneto the book, my own franchise
experience because when I was abusiness broker, I was part of a
franchise system.
And the way that the franchisewas set up is it had a a flat
monthly licensing fee.
And with that membership in theorganization, I got access to a
whole bunch of.

(22:01):
Services, like basically tothese online websites.
One of them I mentioned earlier,you know, biz Buy sell, but
there were a few others as welland we got access to those
websites and we also got accessto a really fantastic CRM

Hmm.

if I was an independent business broker and
I was paying for all thosethings individually.
They would've added up to morethan the licensing fee.
So, so I actually saved money bybeing a franchisee versus being
an independent business.
And, and so the point of thebook is not to say, like you
said, that all franchises arebad.

(22:36):
It's to get people to thinkabout.
In a critical way, how do Ianalyze this?
How do I figure out if this is agood deal for me?
You know, I, I like to point tosort of the large franchisors
that are in markets wherethere's a continuous need for
innovation and promotion andthings like that.

Hmm.

And when you get into those franchise
networks.
Basically you've got thosepeople at head office who are
creating all that stuff.
They're thinking, you know,months down the road of what the
promotions are gonna be.
They're creating the advertisingand marketing collateral.
They're probably preparing theonline campaigns.
They're, you know, taking careof maybe of the Google AdWords
for you locally.
They're doing a whole bunch ofstuff that independent business

(23:19):
owners have to try to curve timeout to handle.
And when people are busy.
People don't, and this is, and,and this is, you know, where a
lot of people fall down inindependent businesses is they,
they're always busy in theirbusiness and they don't have
time to quote unquote work onthe business doing these sorts

(23:40):
of things.
But in a lot of these franchisenetworks, yeah, there were
people that had office doingthat sort of thing.

And that's, and that's a, and that's part
of, you know, asking, I alwayscall it a speak with the captain
steering the ship.
I call it a.
third stage in due diligence,the, the discovery day.
Confirmation day, talk to thecaptain.
Where the hell is this shipgoing?
If they don't give you a clearunderstanding of where this ship
is going, what they're workingon, you know, it could be simply

(24:05):
nothing.
We have everything nailed downand we are focusing on national
accounts.
Great.
Spoke with another brand theother day.
You know, we're embracing ai,we're not renting it, we're
owning it.
So we've invested a milliondollars in ai.
Speaking of which.
The transcript from this episodeis gonna get dumped into our
system, which is gonna createnot just marketing content, but
it's gonna create content forour technicians when they're out

(24:26):
in the field.
It's gonna be content to, torespond to customers.
So I think you have to beinnovative people that are
constantly fighting it.
Now, I'm gonna be old school.
I'm not gonna embrace ai.
That's fine, but there's gonnabe a big, I think, a massive
shift.
I'm, I'm not saying, you know,there may be some jobs going
away, but what are the brandslike, especially these, home
service brands where you reallycan't outsource cleaning or

(24:50):
mosquito spraying or roofing.
But what, what can they dodifferently?
And if AI can help withautomating things and, you know,
hopefully cutting back your exyour expenses, then, then you,
you really embrace it.
But yeah, you want, you wannaknow what's, what's going on and
if they can't give you thatanswer.
And that's really, you know, alot of brands I'm, I'm finding
are, are the founders are, aremore involved as opposed to

(25:11):
waiting until the end.
Because this is all about thematch.
So in my opinion, if thefounder's on, we have founders
that, that sometimes do all thecalls, sometimes, you know, they
get in, in the middle.
But if the match isn't there,why drag this on until the end,
the this confirmation, discoveryday to find out maybe the match
isn't there.
Let, let's find out sooner thanlater.
Or if there is a concern like,Hey, you really need to be a,

(25:33):
you know, an extrovert in sales,but you know, maybe that's
someone you, you hire.
Are you open to that?
Great.
Then we can, you know, we canmove forward.
So.
Yeah, it's very, very important.
There's a difference in tellingpeople what to do.
You know, they've, you know,read the book.
I, I send videos.
I feel like in my years of doingthis, there's this enforcement.
So, did you talk to franchisees?

(25:55):
Yes, I talked to one, talk toanother.
I feel like there's thisconstant, like, you have the
guide, but let's, let's, let'sstay on top of it.
Did you talk to enough people?
So I think there's acombination.
Play there, get the book, andthen you need that person to
con, constantly remind you, but.
know, ask the questions.
Don't, don't feel bad.
Don't hold back.
If a concern comes up, speakingwith the franchisee, bring it

(26:16):
up.
If you don't like the answer youdon't like the direction, no
one's tying your hands.
No one's telling you you have tosign a franchise agreement.
You can say, I respectfully walkaway.
Maybe this isn't the right matchfor me.
And that's okay.
It's you, you, you made thatdecision, you did that due
diligence.
You realize the fit wasn't therefor that brand.
But maybe you wanna look at.

(26:37):
different brand in that sameindustry.
So, that choice at the end ofthe day is always yours to make.
No one is gonna ever force youto sign that agreement, but just
get educated, get comfortablebefore, before signing.
So that's my rent

Well,

and.

I, I've got a question for you, Giuseppe.
The, the whole AI and technologyadoption and everything like
that, I mean, you mentioned justa moment ago, roofing.
Right.
And I know that there areroofing franchises out there.
I someone on Twitter the otherday posted a picture of a, like,
clearly an AI generated photo oflike a mechanical man installing
shingles.

Oh,

And he, the, the, the, the co the comment
was.
You know, this gonna be a longtime before we see this.
I think the roofing industry issafe from ai.
And then some other peoplestarted to respond with images
of these like shingle installingrobots that looked like little
crawling, sort of, like littleJohn Deere crawling tractor
things, but miniature that arerolling along a roof, nailing

(27:34):
down shingles.

Hmm.

And I thought, you know what?
It's.
It's gonna happen sooner than wethink.
I would imagine that if there'sa roofing franchise system, you
know, they, people at headoffice are going to be better
able to coach and guide theirfranchisees about whether or not
a certain machine is a goodinvestment or not.
You know, I, I had in with, youknow, and be a little bit ahead

(27:58):
of the curve than than justindividual roofers.
Maybe being.
Maybe calling upon manufacturersor trying things out on their
own.

That's a good

Do you know anyone who's experimenting with.

I know we have, power washing company.
So, so on the roofing side,that, that, that's actually new
to me.
So I, I do not what I've, whatI've seen is, and this is still
new power washing, you know,using drone operators to power
wash and then automate wherethey're cleaning water towers,
they're cleaning the roof of astadium, you know, all the
different sports stadiums andgetting ready for the World Cup

(28:31):
and the FIFA cup that we'regoing, you know, we're having
right now.
So we've seen them usetechnology utilizing drone tech,
so.
We have there, there are roofingcompanies that will scan if they
know a hail store storm iscoming a, a tornado, well,
tornado's hard to figure, but onthe east coast we have our
hurricanes they know that acertain zip code will be
affected or zip codes beingaffected, they have drones that

(28:54):
will scan all the roofs beforeand after, which is nice.
Saves you the time of

Oh.

up on a roof.
So it'll do imagery, it'll show,and it's simple.
Right.
This is the before.
This is the after obviously.
This was due to storm damage.
Easy to submit pictures.
They can even do there'sinfrared cameras on there.
So they, they, maybe the rooflooks good, but they can show
heat escaping from the roof in,in certain spots.
So, yeah, we've seen thattechnology and we've seen it

(29:21):
with power washing.
I've seen that, that tech there.
So it is it, it's, it's prettyamazing where we've seen a lot
of it is.
know, we can have a call centerwhere AI is the first line of
defense and AI can answer 1000calls for example, or make a
thousand calls all at the sametime.
I've heard, you know, crazynumbers like that cutting down
on, on those payrolls, right?

(29:42):
Because it, it's expensive,right?
It's not, it's not a, it's notcheap.
Manpower is hard to find.
So, you know, and, and, and goodquality staff.
So, AI is it's consolidateunfortunately, I guess
unfortunately, unfortunately,depending on how you look at it.
is is definitely a taking awaysome jobs.
It's making the franchise owner,the business owner more
efficient.

(30:02):
I mean, I utilize AI in mybusiness and full transparency,
we've cut our costs in half.
We've automated just the introprocess of getting an intro call
and after that I kill off thethe ai.
I want, I want completecommunication between myself
and, and that person.
But that's interesting.
With the roof, I've seen it withcleaning, cleaning robots,
self-cleaning.

(30:23):
Restrooms that was prettyinteresting.
What I will say is thetechnology is expensive.
I guess it's gonna be heresooner than we think, but where
I, this is still new, but whereI anticipate the value a
franchisor will bring is thatthey will, number one, know
about the technology beforeanyone else because they have a
team that's just deal dealingwith those areas of the business

(30:45):
and the economies of scale.
if you're a roofer buying one ofthese machines, it may cost you
a hundred K, but if you'resaying, well, I have 500
franchisees nationally, we'reall gonna buy one.
What can you do

Yeah.

Not only can we cut the expense, but
we're gonna give you some, somegreat fin funding and financing
options.
So that's what I envision.
But again, I, I could be wrong,but that's what I envision with
with that technology.
Interesting stuff though.
See I'm learn learning, learningevery day.
And that's actually while we'reon that topic, that that's part
of our, our trip to Cincinnation, on July 14th.

(31:18):
We have a hundred twenty, ahundred twenty five companies
coming out and not just tellingus why we're great, but going
into how AI is affecting theindustry and not just the
business, but the industry ofwater and smoke mitigation and
things like that.
So, you know, technology isgood.
One of your fellow neighbor aCanadian franchise franchisors
you know, they utilize ai andwhat they've done is they

(31:40):
actually came up with a liquidroof, so maybe not a machine
installing it, but they're able,assuming your roof is

Oh, and they give a coating to the old
shingles.

they go in with a they can, a spray on coat
to match the color and textureof the roof, depending if you
have a, you know, a a, dependingon the type of shingle, and then
a clear coat finish and givingyou.
A really nice discount comparedto ripping off the roof.
And again, it has to be in astate that it could be repaired.
Sometimes a few shingles need tobe replaced, and that's it.
But as, as long as it's indecent standing, you can extend

(32:12):
the life.
And we've seen technology comeinto play where, you know, you
may, you, you may be able to dothree or four liquid roofs for
the price of one completelybrand new installation.
So there's a lot of cool stuffout there.
Really popular with propertymanagers.
So I thought that wasinteresting.

Yeah, makes sense.

So what el what else?
In, in the, in, in the book anyother things kind of stand outs
that you would recommend?
Someone thinking about buyingthe book, maybe they never read
the the, the first version.

Yeah, just some updates to case studies.
There is new content in there.
Like I said you know, thingsabout my own experience as a
franchisee.
The, we do have the new sectionon ethical franchising as well
as, you know, some, some contentrelates to FTC inquiries and
cases that have happened.
You know, basically highlightingwhere the problems creep in.

(33:00):
You know, what are the thingsthat that happen that cause
franchisees to wanna complain?
And again, you know, not allfranchises are bad.
Not all franchises are good.
I think it's important forsomeone who's gonna make an
investment decision where theycould potentially be taking
their retirement funds or theirhome equity or something and
putting it into a business.
They are informed as to whatsorts of things they need to be

(33:24):
watching out for or haveconversations about.

Right.

And I think that the FTC data was really
informative because it kind ofshows these are the, you know,
the topics that people arecomplaining about.
And so I was sure to includesome of that stuff with the
update as well.

Awesome.
Yeah, I, I will say, you know,responsible, ethical franchising
has been coming up quite a bitand I, and, and I like to, when
I, when I work with families,I'll, I'll tell them, listen,
you know, the franchisor can'ttell you this is.
The mindset has to be a littlebit different.
This isn't an ROI, you'relooking at investing in
Microsoft and it's gonna yieldme so much, or the s and p 500.

(33:58):
This is a business, you know,they're gonna give you data on
the investment range, but couldthat invest, could that number
be less or could it be more?
Absolutely.
You know, there were, duringCOVID we saw some certain costs
skyrocket.
So you're using that previousyear's data, you know,
understanding where the dataends and, and where it's
renewed.
So every year.
agreements are being updated.

(34:19):
So franchisor can't tell you,Hey, you're gonna invest in this
business.
You're gonna make a hundred K.
They're gonna give you auditedfinancials.
They're gonna give you some, insome cases, averages.
In some cases.
I've seen a, a franchisor, whichis really cool list every profit
and loss for every singlefranchisee.
I mean, the FDD was literallytwice the, the thickness or
length of any other FDV I'veseen.

(34:39):
But that data is all great.
It doesn't guarantee you thatyou're gonna obviously make that
so.
When you're starting anybusiness, I always say, you
know, you know, side of caution,you wanna make sure you have
that buffer, that business maytake a little bit longer.
Life gets in, in, in the way,maybe a, a life event delays the
process.
But if you're gonna buy afranchise, I think the intention

(35:01):
there is, you know, go in with,with an open mind that you're
gonna follow that system.
if you're gonna util utilize themarketing, it takes a little bit
of time.
There's, there's gonna be a rampup phase, but stay close to the
franchisor assuming you moveforward.
You know, ask for advice, askfor help.
Some people don't ask for helpright away.
You know, you're paying aroyalty.
That's, that's the supportyou're getting.

(35:22):
And I'm not saying call and geta, get an instant answer, but,
you know, stay on top of yourmain point of contact.
They're in it together.
You know, they're not, they'remaking money when you're making
money.
Yes, typically it's a royalty ongross revenue, but they want you
to succeed.
The worst thing any franchisorwants is a closure or

Yeah.

Does it happen?
Absolutely.
Some franchisors don't followthrough and other franchisees
sometimes don't, you know, giveit a hundred percent of their
efforts.
So, you know, definitely do yourdue diligence, but also give it
all you got.
You know, you're, I I always saydon't go in if this is gonna
work.
Go and saying, this is gonnawork and I'm gonna do everything
I, you know, it takes, whetherit's a franchise or a

(36:03):
non-franchise business.
What, what would you like toadd?
Because I, I, I'd be curious,you know, I keep saying the same

I, I'd like to, I, well, I, I'd like to
reiterate the point you justmade about the last thing that a
franchisor wants is for alocation to close.
I'm, I'm actually my ARC firm'sname has given out to people in
Fran in three specific franchisesystems.
I've worked with themextensively over the years.
When people call head office andthey say, you know, I think I'm

(36:29):
gonna get out.
I want to sell, or I wanna closeor something, they, they give
our name out and it's becausethey want.
To get that person help to beable to sell or understand, you
know, what their location mayreally be worth if it hasn't
been performing well.
They want someone who's gonnashow the person, you know,
here's exactly what can beexpected if you do try to sell,

(36:51):
because to your point.
They do not want the number oflocations to go down.
This is one of the key thingsthat's in the FDD is they get to
show how many locations theyhave active.
And obviously a franchisenetwork that is constantly
growing

Right.

is going to be you know, a better story for
them to be able to share withpeople than one that is seeing
an attrition in the number oflocations.
And so.
It's absolutely true that thefranchisor wants people to be
successful.
They want them to be operatingfor the long haul.
That's what is most lucrativefor the franchisor, and it's
what makes it easier for thefranchisor to then expand and

(37:26):
recruit new people.
So I, I don't think anyfranchisor out there signs
people up with an intention ofhaving them fail the, when you
are starting a new location,though, you, you are starting a
new business.
Like you've gotta get customerswho presumably are operating or
buying something from otherpeople.
And so, buying a franchisecertainly does make it easier

(37:47):
because you're, you're given allthe tools, the systems, the
processes, the branding, allthat kind of thing upfront.
But it's not without its risks.
You still have to get thecustomers, you still have to
reach that break even point.
I think that looking at theexperience of other franchisees
is very instructive.
It, it is helpful.
I, I kinda like the idea of the,the franchisor that included

(38:07):
everyone's p and l because Ithink the one big takeaway
people would get from goingthrough that if they, if they
looked at it carefully, is justthe very ability that's possible

Right.

that, you know, you can end up with a really
spectacular location or one thatis struggling.
We just don't know.
And that.
To me that that's reallyresponsible because it's
highlighting the fact that smallbusiness is a risky endeavor.
It is not, definitely not arisk-free thing to get into.

Absolutely.
Yeah.
I, I didn't, I did not realizethat with the franchise
companies that, that isinteresting.
And I, and I think that's great.
You know, you know, they want,they want you to succeed.
And I think it starts with thatin it, it starts with, before
even making that decision goingback to responsible and ethical
franchising that conversation'sbetween you and the franchisor.
And to your point, you know,they, they wanna set everyone up

(38:55):
for success.
So on the franchisor side, ifthey don't feel the, you know,
the fit's there or they feelit's, it's there, but they're
like, man, you really gotta beselling and you never sold a
thing in your life.
This is gonna be a struggle.
These are our thoughts.
We can make it work, but you'regonna need some assistance with
maybe a seasoned sales person.
Are you okay with that?
Can the franchisor approve youand then you decide not to hire

(39:17):
that sales person?
Absolutely.
Will you struggle more thanlikely?
But ultimately it's a business.
You're not an employee.
They can't force your hand,obviously, in, in hiring that
individual.
In some cases they may say,well, in order to come to
training, you know, you need tobring a, a gen, the general
manager running the businesswith you.
So, that will be somerequirements.
These are not surprises.

(39:37):
These are things that will bediscussed well ahead of time,
ultimately it's up to you toexecute on, on that blueprint.
I did, I do get some verydisturbing questions.
you know, I, I had a, a call theother day that said I heard I
heard on, on a show orsomewhere, maybe it was on
YouTube, that you can't losemoney with a franchise.
And I go, really, I mean, whatis, what is a franchise?

(40:00):
It's a business.
And I go, honestly, if that werethe case.
We wouldn't be talking.
Right.
Right now I would buy every damnfranchise out there.
And I said that jokingly.
It was a younger guy,

Listen, Giuseppe, if that were the case,
the the banks would open all thefranchises.

Right,

because they already have the money, and if
you, and if they were convincedit was risk free, that's what
they would do with their money.
Yeah, there, there certainly isrisk in, in the new edition of
the book, there's actually achapter there.
I don't know if you took a lookat it.
It's my advice to franchisorswhere, where I give some
feedback and advice to peoplethat run franchise systems and I
say like, here are some of thethings that you should be
looking at in, You know, in, in,in functioning better or being

(40:39):
better able to, to show peoplethat you are one of the people
that is, that is actually takingthese concerns into a
consideration and you're, andyou're trying to do the best you
can at, at i, I don't know ifit's, it's really, it's doing
the best at.
Creating a good opportunity forpeople, but, but doing the best

(40:59):
at finding the right people forthe opportunity.
As you know, the fit between theindividual and the business is
really important.
And if, if you know, the, thedifference between success and
failure is a sales effort andthe sales.
Skills of a, of a, an owner.
And in all likelihood, at thebeginning, when you're starting
off, the owner will be the onlysalesperson.

(41:21):
And for example, that skillset,those traits have got to be at
the top of the list of who'sgonna get into that opportunity.
I, so to me the, the fit isgotta be the number one thing
and then the other stuff, youknow, you just have to make sure
it makes sense, right?
Like, you know, are there otherpeople already in that.
You know, segment in thatcommunity, how many other people

(41:42):
are in that community doing thesame kind of business.
It's the same sort of analysisyou do when you're thinking
about starting any kind ofbusiness.

Yeah.
You, you have to, you know, youshould contact your competitors
one, one a term if you want touse this, if you're researching
on your own.
outta cur, if you're justcalling cold, right?
You're just calling contacting abrand who is your franchise
avatar.
They know nothing about you.
Maybe you're just calling, yougot an intro.
Who's your franchise?
Who?
Who's the ideal fit for thistype of business?

(42:09):
You may fit check off every box,but they'll come back and say,
and also you need a hundredliquid in 250 net worth.
Well, that may be a stretch.
Well, that alone could reallysuffocate your business.
You know?
Could you fudge the numbersTechnically, yes.
But where,

Yes.

that gonna end up?
When you know you're up andrunning in the business and you
run out of funds?
Was it the FraNChiS or did yourun out of funding?
So they're gonna have certainrequirements.
We, we get those requirements,we're crystal clear.
But if you're calling cold andyou're just say, Hey, I, I want
more information.
Who's your, who's your idealfranchisee or avatar?
They're gonna list financialrequirements and role
requirements.

(42:46):
That alone, is that a goodstarting point?
If you should have that, thatsecond conversation or not?
Or maybe revisit later on whenmaybe you have sufficient funds.
So, as we're, this is, this isa, a, a great conversation and I
encourage everyone to pick upthe book.
And if you're a franchisor, youknow, hit up David, you have the
website.
We're gonna put all that theweb, in the in the show notes.

(43:08):
So

If you buy it on Amazon, make sure it's the
2025 release because there,there are some copies of the,
you know, 20 15 1 that peopleare trying to resell.
So it's still up there.
Just make sure it's the new,it's got, the new one has a big
crest on it.
This as second edition.
And yeah, it's available now inpaperback and Kindle.

Awesome.
Any as we're, as we'refinalizing the show any last
piece of advice to.
You know, we've got a lot ofcorporate executives, a lot of
individuals looking to invest intheir first business, whatever.
It's a, a resale, a startup or afranchise.
Any last parting piece of advicethat maybe we didn't discuss?

Yeah, you can consume all kinds of content
about small business and you canconvince yourself with enough.
Content that one thing is betterthan the other.
What I would say is that in anybusiness, any small business the
owner is at the center ofeverything.
And so what is really importantis to do an analysis of your own

(44:04):
skills, knowledge, andexpertise, and figure out what
you are good at and what thingsyou can do to improve a
business.
And I think whether you start abusiness, buy a business, or
engage in a franchise, there'sgotta be a fit between what that
business is and the, the waythat it helps.
Clients and cu you know,customers and the skillset and
knowledge that you have becauseyou can, you can either get into

(44:27):
something you know nothing aboutand then you are gonna be a
student and you're gonna belearning and you're always, you
know, gonna be sort of a littlebit behind the curve.
Or you can get involved withsomething where you already know
that you can bring potentially acompetitive advantage to your
business because of yourbackground and expertise.

Hm.

Experience and what you've been doing and what
you know, and try to figure outa way to leverage your own
personal experience intowhatever business, you know,
endeavor that you try to getinto.

Perfect.
That's exactly it.
Do, do, do the self-audit.
If I were to add one thing,which I see is a consistent
issue, get your finances inorder.
Just, we're not saying, I'm notsaying you know, double your
savings, but just get them inorder.
the value of your home?
What's the mortgage?
Where are your investments?
Are they in I retirement or not?
I see so many people have noidea, you know, what, what their

(45:16):
finances look like.
So get that in order along withwhat are your monthly expenses?
If I were to leave my job who'spaying my mortgage and my
student loans and everythingelse, does my spouse or partner,
you know, are, are they working?
Are they bringing in income?
your expenses, get your net, youknow, what you're bringing,
bringing home, what are yourinvestments, house and other

(45:37):
real estate properties looklike.
That alone is a, is a greatexercise, which I update on a
monthly basis.
Personally, I have an Excelspreadsheet, so, I encourage
everyone to, to start there and,and maybe you don't know if the
timing isn't right, you can, youknow, work with someone like
David, work with someone likemyself.
We can put you in front, frontof a funding company.
They'll do a, a free analysisfor you.

(45:57):
Just giving you high levelwhat's.
What's available.
They may come back and say, youknow, we may agree franchising
is great.
Owning a a resale or, or, or anon franchise business is
perfect, but gotta get thatcredit score up a little bit and
maybe a little bit more insavings.
Why don't we, why don't we talkin six to 12 months?
Get those numbers back up.
That's okay.
That's, that's progress.
Sometimes you're mentally there,but financially not.

(46:20):
Or maybe it's a startup and ithas much lower investment.
Keeping in mind, maybe it'lltake a little bit more time to
ramp up and you're okay with it.
you have something to compare itto.
So de definitely do thatself-audit, get the financials.
We can definitely spend a wholea whole show on that.
But that's, I think that that'sthe basics.
Don't look for the, the sexybusinesses on biz Buy, sell or

(46:40):
the franchises.
Just do an internal audit andlet the family know and make
sure everyone's on the samepage.
A lot less family drama.
That's the most important stuff,family.
Let the family know.
Don't buy a business and letyour spouse know after the fact.
You know, that's that that'llsave that'll save a few
marriages right there alone.
So, but David, it was apleasure.
I we could definitely be talkingfor hours looking forward.

(47:02):
I, I think you know, this is I,I believe number five.
So we'll do an annual show.
You have quite a few books outthere and topics that we can
discuss.
So I think, we'll, we'll keepthis we'll keep this to an
annual thing, if that's cool.
I really really enjoy.
conversations, I learn a lot.
And we'll even link some of theprevious episodes, especially
the exit strategy planning thatwe talked about.
You know, it was only, I thinkthat was about, I think two or

(47:25):
three years ago if I'm, if I'mnot mistaken.
But we'll link that to the showand anything you need, da
David's your guy.
Highly, highly recommend'em, andapparently other franchise
companies do as well.
I appreciate you coming on andwe'll we'll definitely talk
soon.

Awesome.
And don't forget, if you own abusiness how to sell my own
business.com, you can downloadthis one for free give you an
idea of what you're, what you'regonna be involved with if if you
decide to sell one day.

I wish I had that book when I sold last,
but hey, next one.
Thanks again.

Thank you.
Thanks for tuning in if you wantto learn how to make the
transition from corporate toowning your franchise.
Join Giuseppe on the nextepisode.
You can also follow on allsocial media platforms and
achieve financial and timefreedom today.

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