June 7, 2025 • 24 mins
Worried about picking the wrong franchise, making money, or losing your investment? 🤔 In this power-packed solo episode of the Franchise Freedom Podcast, Giuseppe Grammatico tackles the Top 15 Concerns potential franchisees face! From understanding financial realities and franchisor support to navigating long-term agreements, marketing, and exit strategies, get expert answers to your most pressing questions. If you're considering franchise ownership, this episode is your essential guide to overcoming fear and making an informed decision. Don't let concerns hold you back from achieving franchise freedom!
- Key Topics Covered:
- Picking the Right Franchise (01:30)
- Will I Make Money? (03:05)
- Risk of Losing Investment (04:05)
- Franchise Workload & Hours (05:40)
- Can First-Timers Succeed? (07:00)
- Assessing Franchisor Support (08:20)
- Franchise Financial Health (FDD) (09:25)
- Long-Term Agreements (10:50)
- Work-Life Balance (11:35)
- Managing People (13:00)
- Startup Capital Needed (13:40)
- Changes After Signing (15:20)
- Territory Limitations & Growth (16:05)
- Marketing Responsibilities (17:25)
- Franchise Exit Strategies (18:30)
DISCLAIMER: The information on this podcast is for general information purposes only. Franchising involves risk and careful consideration should be given before making any decisions.
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The Franchise Freedom: Discover Your New Path to Freedom Through Franchise Ownership, Book by Giuseppe Grammatico https://ggthefranchiseguide.com/book or purchase directly on Amazon.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
giuseppe_1_06-04-2025_141036 (00:00):
A franchise is a business, we call
(00:02):
it, a business on trainingwheels.
There's no guarantee inanything.
There's no guarantee in thestock market.
There's no guaranteed in abusiness, It's a lot of hours to
launch a business.
Some people have a full-time joband are running this on the
side.
It's still gonna be a lot ofwork, at least initially, to get
the business up and running.
will I be stuck in a territorythat limits my growth?
(00:22):
So, you know, when you're buyinga territory, each franchise will
have different criteria.
Some will be just strictlypopulation.
Others will have, an age group,senior care, maybe, the age
group of 70, 75 years of age andolder.
If it's private pay, they'regonna look at average household
income.
There's gonna be opportunity forgrowth in the territory.
So in some cases, you're gonnatry to figure out what the
(00:46):
average franchisee does inrevenue as well as,
profitability, so it may be oneof those where you're, looking
at a second territory anddoubling the population that you
can go after.
I wouldn't say it limits yourgrowth, but you're definitely
locked in, so that you don'thave other franchisees competing
with you.
You will, potentially look atadditional franchises for
growth, or, you know, eitherwith territory or staying in
(01:09):
your territory and know what wecall vertical expansion or brand
stacking where you're addingthese complimentary brands, to
compliment, you know, if you gotthe painting business and have
relationships with a thousandcustomers you may add on a
roofing business, a cleaningbusiness, anything, involved
with the home.
(01:40):
Welcome to the Franchise FreedomPodcast.
I'm your host, GiuseppeGrammatical, your franchise
guide, the show where we helpcorporate executives experience
time and financial freedom.
You got me today.
We just had a last minutecancellation, reschedule for a
guest, and, I said, what, whatcan we talk about?
This week and, was watching avideo by Alex Hormo, which is
(02:01):
actually perfect timing, andsaid, ideas for creating content
sometimes are right in front ofus.
It could just be reviewing thelast couple weeks of
conversations and, questionsthat came up, concerns, topics,
agendas, things like that.
And actually using theconversations you're having,
with your clients and.
(02:22):
Customers so that's what we didtoday.
For today's show, I thought itwould be really helpful because,
you know, part of franchising,right?
It's, you know, really excited.
It's a new chapter in life, butsome fears come up and concerns.
So wanted to, I.
Review.
I think we have here, I have, Ihave a long list of notes here.
15.
We'll see if we can get it inone show.
Worst case, we'll split this up,but we're gonna go through the
(02:44):
top 15, concerns that, potentialfranchisees have when,
considering franchise ownership.
Glad you could join us today.
If you are ready for, change andare interested in exploring
franchising, give us a shout.
Go to the website, gigi thefranchise guide.com.
Check out our book FranchiseFreedom, same name as our
podcast, and you can book a calldirectly with us.
(03:07):
There's a quiz there, which willhelp you figure out, three
questions.
If franchising may be a goodfit, take advantage of that.
Worst case, you get a copy ofthe book, so you have nothing to
lose.
In diving into the, topic today,we're gonna go through 15,
concerns.
So, number one, what if I pickthe wrong franchise?
Now I think this is more forsomeone that's doing the
(03:27):
research on their own, we're notguessing here.
We're putting in a lot of time.
A lot of effort, and I think thesecret here is really.
Working in reverse, figuring outwhat the ideal franchise looks
like as opposed to just, goingto a list of top 100 franchises,
top 500 franchises.
And I'm not saying anythingwrong with those lists, but,
(03:49):
there's not much substance,what's the criteria?
How are they added to the list,you know, what if I pick the
wrong franchise?
We're figuring out what theideal franchise looks like.
If you've gotta keep your joband run it part-time, you want a
franchise that allows forsemi-absentee or part-time
ownership, that franchisor willlet you know.
Especially on that first call,if they allow that type of
ownership, it's gonna talk aboutthe investment, right?
(04:11):
The investment has to bealigned.
The territory, the location hasto be available.
Employees.
If you don't like a lot ofemployees, you're gonna put that
in your franchise model what theideal business looks like, and
look for brands, that fit thatmodel.
And you're having.
Multiple calls with thefranchise, multiple calls with
the franchisees, as well asmeeting with the C-suite
founders, president, as well asother potential franchise
(04:33):
owners.
So we're not guessing here,we're making an informed
decision.
That should not be, a concern,as long as you're spending
enough time on the due diligenceupfront.
Number two.
Interesting one, will I actuallymake money?
And at the end of the day, whatis a franchise?
A franchise is a business, wecall it, a business on training
(04:56):
wheels.
There's no guarantee inanything.
There's no guarantee in thestock market.
There's no guaranteed in abusiness, a mom and pop.
Startup or a franchise.
The franchise has a provenmodel, proven system.
They're giving you the tools,the keys to everything.
But, you need to follow thatsystem.
Sometimes you will follow thatsystem and struggle a little
bit, and being disciplinedenough to go back and work with
(05:19):
the franchisor, contact thecoach.
Can you make money with thefranchise?
Absolutely.
Can you lose money?
Absolutely.
It is a business.
It is a risk, but, if you followthe system, you wanna put as
much, you know, find the rightfranchise, right system, check
out the financials, right?
You're gonna create a pro forma.
Look at item seven and 19 inthe, franchise disclosure
(05:39):
document.
Ultimately no one's gonna beable to, give you that info.
You can talk to fellowfranchisees and, check on their
progress, how they've done inthe past, and really putting all
that information together inorder to move forward with your
franchise.
Number three, what if I lose myinvestment?
Well, we wanna avoid, we wanna,avoid losing an investment.
(06:01):
And usually with losing aninvestment, that means like
going outta business.
And that goes back to, you know,the other concern of, you know,
will I actually make money oreven picking, will I pick, you
know, what if I picked the wrongfranchise?
Again, risk in a Fran in, in afranchise, in, in any business.
But with that being said.
You know, if you are assumingthat, you know, you spent the
(06:23):
time on the due diligence andthe, and the fits there, it,
it's, it's a lot of work thefirst year.
So it's setting the expectationthat you may not make any money
or even if you'd made any money.
I usually recommend if you canafford it, reinvesting as much
as you can, putting all theprofits back in the business the
first year so that you can.
Truly, build it up.
Make sure you have sufficientstaff marketing and anything
(06:44):
else needed for the business sothat maybe starting in year two,
you can, work more on thebusiness versus in the business.
So, you know, there is,depending how you fund it, you
know that that's money that, youhave to, invest in the business.
We don't want you to lose thatfranchise fee.
Franchisor doesn't want you togo outta business either, so ask
for help.
(07:04):
Talk to your fellow franchisees,follow the system.
Just, you know, consistentlyfollow.
And if you're struggling with akey area, follow up.
If it's not a neighboringfranchisee, the franchisor can
work with you and speaking withother fellow franchisees across
the country.
Number four, I don't wanna work80 hours a week.
(07:24):
When owning a business, it's alot of work.
It's a lot of hours to launch abusiness.
Some people have a full-time joband are running this on the
side.
It's still gonna be a lot ofwork, at least initially, to get
the business up and running.
You gotta find that rightgeneral manager, running the day
to day and staff a franchise inthe water and smoke mitigation
space.
So it's gonna be something new.
(07:44):
So there's a learning curvethere.
I don't know about exact hours,but I worked a lot of hours when
I first started, I ran mybusiness full-time.
But if you're running itpart-time, factoring a lot of
hours, I.
And kind of what, you know, howlong it'll take to really get
trained in the businesslaunched.
Sometimes the first hire doesn'twork out and there needs to be a
replacement.
That's okay.
That's part of businessownership.
(08:05):
Once the business is up andrunning, I'll do whatever it
takes to get up and running.
I don't wanna work 80 hoursafter the first year.
Okay.
Or the first, six months.
Okay.
Who do we have to put in place?
Who's handling the marketing,the franchise or great.
Still need someone to review theKPIs.
That would be me, the owner.
Salesperson's going out.
Maybe it's a weekly check-in togo over quotes and training
(08:26):
maybe that's with the generalmanager.
Maybe that's with you.
It's really figuring out, andconstantly tweaking if you're
noticing that.
One area's taking a lot longer.
Maybe that goes to the generalmanager.
Maybe that gets split up, overthe week.
So, expect to work a lot ofhours, but, with the whole point
to, take advantage of thosesystems to take a step back.
I've never owned a businessbefore.
(08:46):
Can I really do this?
Great question.
A franchise is a business.
A lot of people will go thefranchise route because the
system is in place.
It's been proven, the CRMs, themarketing, the website, all
that's really been handled foryou.
In many cases.
You may even have nationalaccounts you can tap into.
The franchisor does not requireexperience, nor do they require
(09:07):
business ownership experience.
Specifically in that industry,they're looking for that right
match for the person requiredfinancials, liquid and net worth
financials as a means to fundthis thing.
Has the right skillset andattitude.
Not saying, well, how quickly,can I make a million bucks my
first month?
You have to have the rightattitude.
Following the system.
(09:27):
Team player, there's gonna beannual conferences you may get
asked to speak with, potentialfranchise candidates, down the
road.
Absolutely.
Can you really do it well?
You're gonna follow the systemand do whatever it takes, define
your role in the business, whichmay change sometimes.
The role.
Day one is gonna be differentthan day 365.
And kind of putting togetherexpectations of what it is now
(09:49):
and what that will be after thefirst year.
These are all really good andactual questions I get, and have
received.
I jot them down and review them.
Will the franchisor reallysupport me now?
This is a good question because,with 4,000 franchise companies
out there, not all franchisesare created the same.
The franchisor will talk abouttheir training on your first
(10:12):
couple calls, the support andeverything else involved.
They may even give you access totheir training portals.
Both virtually in person what,what all that looks like.
What happens if there'sturnover?
You have to hire a new generalmanager, that kind of deal.
What you're gonna hear is, stagetwo of due diligence the
validation calls with yourfellow franchisees.
(10:33):
Are you getting the support youwere promised, not just
initially to launch thebusiness, but.
Throughout the process, when youhad issues, were they there,
were they open to suggestions?
So those validation calls willbe crucial and, you know, give
you a, a, a, an idea of whatsupport will look like.
That is a key area a lot ofpeople skip or don't realize.
They maybe talk to onefranchisee and, feel that's,
(10:56):
sufficient.
I recommend speaking with ahandful of franchisees.
Maybe, some, veterans, somenewer franchisees, some
franchisees that are running itpart-time versus full-time
initially.
That way you kind of get a nicemix, of feedback, from people
that ran it maybe a little bitdifferently.
All right, number seven.
How do I know if a franchise isfinancially healthy?
(11:20):
Great question.
The franchisor legally, everysingle year has to update their
FDD, the Franchise DisclosureDocument.
In that franchise disclosuredocument towards the end, are
gonna be audited, financials,they're audited, there's an
extra cost, you know, franchisesare regulated by the FTC, and
making sure those numbers areaccurate.
So not only are they closing thebooks for the year, but in that.
(11:44):
They're gonna captureeverything, financially ha have
an order to go in, make sure thenumbers are accurate.
Check on things, make phonecalls, send letters to vendors
and that kind of stuff.
So, so you're gonna do a mixtureof that.
In the FDD we will list any typeof lawsuits, if that's a concern
of yours.
And that's, first couple items.
I forget the exact item there,two or three if I'm not
(12:04):
mistaken.
You'll have everything in there.
You can also, you know, at somepoint have a franchise franchise
attorney review.
Not that they're gonna beexperts in the financials, but,
have they heard of the brand?
Are there any red flags theysee?
Plus any research you do onlineor, speaking with, your
validation calls with thefranchisees.
Great questions here.
(12:26):
Number eight, I'm worried aboutbeing locked into a long-term
agreement.
There is an agreement betweenyou and the franchisor.
Typically they average about 10years.
I've seen some brands do five.
I've seen some oth, some othersdo 20 years.
But really, you know, you'rebuilding long-term equity here
that you know that there's,there's gonna take time to
build, the business up.
Figure out an exit strategy, howyou're gonna sell.
(12:49):
And all that.
That long-term agreement locksinto terms.
It protects you as thefranchisee.
Everything has to be laid outexactly how the agreement reads,
so that there's no changes.
So you know that there's notgonna be any, you know, crazy
changes over the, over those 10years.
And, so that is a, a typicalagreement is gonna be, 10 years.
But at any point in time, if youwanted to sell the agreement,
(13:11):
you would essentially do atransfer.
Someone will pay, there may be anominal transfer fee, and then
the franchisor will have to meetthe buyer because that
relationship will continue withthe buyer.
So, another good question.
Number nine, can I still have alife and spend time with family?
Absolutely.
And that goes back to pickingthe right model.
(13:32):
Spending time with family, wecall that time freedom time
freedom.
Is definitely the number one,followed by financial.
If you're running at semiabsentee.
They're gonna have a train totrainer program.
You know, how are you gonnasupport me if I keep my job?
And then figuring out, what isthe right franchise, but also
equally important, which is noton the franchise, it's on you.
Is finding the right generalmanager to run the day-to-day.
(13:53):
That general manager needs to bereally clear on, their job
function, the requirements, whohandles what.
Because you want there to bebalanced.
You need to be involved on everysingle call, every single issue
or decision.
That manager needs to beempowered to make, certain
decisions.
The more empower they are, themore freedom you'll have.
And, you know, you're not beinginvolved or having to be in the
(14:15):
office just maybe checking invirtually doing an hour zoom
call with the office.
So, those are things to thinkabout.
And then again, going back tospeaking with franchisees.
Asking about their work lifebalance, and asking them for any
recommendations on setups, rolesfor the manager, maybe they can
share a job description.
(14:35):
Those would all be greatstarting points.
Number 10.
What if I don't like managingpeople?
Another great question, but itgoes back to the basics.
What is the right fit?
You may have managing experiencebut don't like managing people
and that's okay.
Some brands will have higherstaff and I.
Maybe require you to befull-time, there's gonna be a
big management function andmaybe that's not a good fit.
(14:57):
But if you know you don't likemanaging people, you're more big
picture, maybe managing a smalloffice of, two or three W2
employees.
And then having, your, yourtechnicians, your labor that are
W nine contractors, you can haveyour GM handle that.
Or you just hire someone to dealwith the hr.
While you're overseeingmarketing and big picture stuff.
(15:17):
It goes back to finding theright franchise where you as the
owner don't have to be themanager managing the entire
staff, or a portion of the staffand maybe not the technicians
and the contractors.
All right, how much money do Ineed to get started?
Ranges on franchises are allover the map.
Franchise fees I've seenanywhere from, 10,000 to over a
(15:39):
hundred thousand, plus all theother costs.
We've seen a lot of, non brickand mortar franchises fall in
that one to$200,000 range.
Can be investment be less.
Absolutely.
Can it be more?
Absolutely.
But keep in mind, this is arange that usually will cover
the franchise fee.
Training and startup and yourfirst 90 days of operation.
(16:00):
So you have some payroll,working capital and things like
that.
You know, brick and mortar, canget into that 3, 3 50 k, plus
range.
But you know what you're lookingat as far as how much money,
each franchise will have a networth and liquidity requirement.
But as far as cash out ofpocket, if you're using a
retirement rollover, it could bethe entire investment.
(16:20):
Since you're using yourretirement assets, people that
are using an SBA government backloan, you're looking at about 20
to 30% of the project costs.
So what I recommend, if, so on a200 K investment, it may be 40
to 60,000, but also having thatbuffer, right, if the business
takes a little bit longer to getup and running, a territory,
that, you wanna pick up a secondterritory or maybe there's a
(16:41):
resale in the market that youwanna take advantage of and
bundle it together with yourterritory or location.
Always having access to funds,so liquid capital or bare
minimum, a line of credit.
But 20 to 30% of the project ifyou're doing our, and that's
with the loan.
If you're doing a retirement,it's your own retirement assets
and you can just fund the, theentire thing.
Some people use a combinationand we refer everyone on these
(17:03):
questions to Benetrends.
We have a great relationship andsend everyone over for a free
consultation to review allthose, all, all those different
options.
So great question.
All right, we're on 12 of 15.
What if the franchisor changesthings after I sign?
The franchise agreement spellsout your rights, and you know,
there's gonna be fulltransparency of exactly what's
(17:26):
in the agreement.
So if there is a chance of anyagreement, any changes, they
will let you know.
Or if there's a certain lock inclause read that franchise
agreement, get clear oneverything, and bring it up to
the franchisor.
But typically that's why, youknow, you sign that five, 10
plus year agreement as they lockeverything in.
But if there is any, type ofchanges, number one, it needs to
(17:46):
be listed in the franchiseagreement.
Number two, the franchisor needsto communicate and be
transparent about any change orany issues but that's why we
have these agreements to haveeverything spelled out.
13, will I be stuck in aterritory that limits my growth?
So, you know, when you're buyinga territory, each franchise will
have different criteria.
Some will be just strictlypopulation.
(18:08):
Others will have, an age group,senior care, maybe, the age
group of 70, 75 years of age andolder.
If it's private pay, they'regonna look at average household
income.
There's gonna be opportunity forgrowth in the territory.
So in some cases, you're gonnatry to figure out what the
average franchisee does inrevenue as well as,
profitability, so it may be oneof those where you're, looking
(18:31):
at a second territory anddoubling the population that you
can go after.
I wouldn't say it limits yourgrowth, but you're definitely
locked in, so that you don'thave other franchisees competing
with you.
You will, potentially look atadditional franchises for
growth, or, you know, eitherwith territory or staying in
your territory and know what wecall vertical expansion or brand
(18:52):
stacking where you're addingthese complimentary brands, to
compliment, you know, if you gotthe painting business and have
relationships with a thousandcustomers you may add on a
roofing business, a cleaningbusiness, anything, involved
with the home.
Great question.
14.
Do I have to do all themarketing?
No, it really depends on thefranchise you buy.
(19:12):
A lot of B2B type of franchises,may not have marketing in-house,
but they'll have you go out andnetwork at the Chamber of
Commerce.
If you're providing a service,reducing expenses for small
businesses gonna be a lot ofchamber.
Meetings, maybe some events,one-on-ones, and things like
that.
Some, which is very common inhome services.
(19:32):
B2C franchisor may handle allthe, you know, the, the virtual
digital, marketing for you.
You're still overseeing it.
Reviewing the KPIs, making surethe lead flows there, the close
rate's there to figure out ifthe, quality of lead is a sales
person getting a good quality,quality lead, but not closing
it.
So once you have thesebenchmarks and you know what the
average close ratio is, ifyou're not meeting those
(19:54):
numbers, you have to revisit andsay, okay, what changes do we
have to make in the messaging?
Maybe the market's gonna beslightly different.
Marketing is gonna vary,starting from scratch.
If there are no, marketing,being created for you.
They'll train you on that.
Some cases they'll provide youthe assets, the eBooks, to post
on your own, but that reallycomes down to what that
franchisor is offering to you.
(20:17):
Excuse me, what happens if Iwant out?
This is the exit, strategy.
You sign a 10 year franchiseagreement, two years go by, you
wanna sell it for a profit.
Maybe the fit wasn't there,whatever the reason may be.
I usually recommend you stillhave that 10 year agreement, so
you don't walk away from theagreement, you wanna, get as
much as you can and sell thebusiness.
(20:39):
So what I recommend is, numberone, speaking to the franchisor.
And, seeing what your optionsare.
The, the, the best way sellingto a, a fellow franchisee, as I
mentioned in a previous, you paya transfer fee.
The buyer or seller, as long asit's getting paid.
Sometimes there's no transferfee.
In many cases it's just anominal small transfer fee.
(21:00):
If there's no neighboringfranchisees or maybe the
neighboring franchisees aren'tinterested, you can look at a
broker or working directly withthe franchisor where they can.
Send a listing out.
A broker may want exclusivity,so you wanna definitely read the
agreements and speak with thefranchisor first.
They may know of someone rightoff the bat like, Hey, you know
what, the whole state of NewJersey is sold out.
(21:21):
We've been getting a lot ofcalls.
So yeah, we may actually have acandidate, for this specific
area.
Always want to try to sell thebusiness.
That's the biggest thing youwanna get.
Some type of multiple on themoney you're taking outta the
business.
I understand that's not alwaysthe case, but you always wanna
try to sell the business and,work with that franchisor.
So, 15 great, concerns, that weget.
(21:41):
A lot of it goes back to.
The fit.
If you just dive in, theseconcerns and questions mostly
come off, you're just going inand looking at a, a blind list
of brands.
If you create the model and justsay, there's 4,000 franchise
companies.
I wanna be, part-time in thebusiness to start.
While many brands won't allowthat, it needs to be under a 200
(22:02):
k investment.
Well, that's gonna rule outpretty much all brick and
mortar.
To have, under five employees,it needs to give back to the
community.
As you're adding all thesecharacteristics, it's becoming
closer to something you'relooking for.
Will I have to work 80 hours aweek?
There are brands like mosquitospraying.
In certain, states in the USwhere you're only spraying maybe
(22:23):
six, seven months a year, somepeople have second homes and who
knows in Europe, and they'reable to vacation because there's
no work in the, in the winterseason, others will take
advantage and, provide adifferent service, maybe even do
holiday lighting.
So the match, I think, helpswith all of this.
Again, there's always gonna be arisk, you're gonna do all the
due diligence you can to makesure the fits there.
(22:44):
You understand the role.
You know exactly where thefranchisor is going.
You understand the support.
You have trust in thefranchisor.
You believe in the franchisor.
You're doing that all upfront.
And that's where, I come intoplay.
I have my finger on the pulse offranchising.
I get to talk with a lot of thefounders and CEOs and
presidents, and people involvedwith the brands.
(23:06):
I don't know every brand.
I don't know every aspect offranchising, but.
On a daily basis, we are talkingwith another professional
learning about the changes, theeffects of ai.
How will tariffs affect thebusiness if there's any effect
at all?
So, we're here to help.
There's no cost for what we do.
We, get paid directly from thefranchise companies.
They pay our fees, so you don'thave to, which is really nice.
(23:27):
Check out the website, gigi thefranchise guide.com.
More than glad to review these.
Questions on an intro call.
There's a three question surveyhelping you figure out if a
franchise may be a good fit,leading you to the calendar.
As I mentioned, worst casescenario, you get a copy of the
book, franchise Freedom.
It's my exact blueprint offinding my first franchise.
I would love to help you out.
Thanks again for all thesequestions.
(23:48):
I keep everything confidential,so if a question comes up and
we're having a call, I never usenames.
Even in success stories we keepeverything confidential.
Unless we get the okay from youto share.
Thanks again for joining.
We really appreciate it.
And we got, some excitingepisodes.
We have a couple franchisecompanies coming, back on the
show.
Really excited to share those.
Until we talk again, take care.
See you guys.
A franchise is a business, we call
(00:02):
it, a business on trainingwheels.
There's no guarantee inanything.
There's no guarantee in thestock market.
There's no guaranteed in abusiness, It's a lot of hours to
launch a business.
Some people have a full-time joband are running this on the
side.
It's still gonna be a lot ofwork, at least initially, to get
the business up and running.
will I be stuck in a territorythat limits my growth?
(00:22):
So, you know, when you're buyinga territory, each franchise will
have different criteria.
Some will be just strictlypopulation.
Others will have, an age group,senior care, maybe, the age
group of 70, 75 years of age andolder.
If it's private pay, they'regonna look at average household
income.
There's gonna be opportunity forgrowth in the territory.
So in some cases, you're gonnatry to figure out what the
(00:46):
average franchisee does inrevenue as well as,
profitability, so it may be oneof those where you're, looking
at a second territory anddoubling the population that you
can go after.
I wouldn't say it limits yourgrowth, but you're definitely
locked in, so that you don'thave other franchisees competing
with you.
You will, potentially look atadditional franchises for
growth, or, you know, eitherwith territory or staying in
(01:09):
your territory and know what wecall vertical expansion or brand
stacking where you're addingthese complimentary brands, to
compliment, you know, if you gotthe painting business and have
relationships with a thousandcustomers you may add on a
roofing business, a cleaningbusiness, anything, involved
with the home.
(01:40):
Welcome to the Franchise FreedomPodcast.
I'm your host, GiuseppeGrammatical, your franchise
guide, the show where we helpcorporate executives experience
time and financial freedom.
You got me today.
We just had a last minutecancellation, reschedule for a
guest, and, I said, what, whatcan we talk about?
This week and, was watching avideo by Alex Hormo, which is
(02:01):
actually perfect timing, andsaid, ideas for creating content
sometimes are right in front ofus.
It could just be reviewing thelast couple weeks of
conversations and, questionsthat came up, concerns, topics,
agendas, things like that.
And actually using theconversations you're having,
with your clients and.
(02:22):
Customers so that's what we didtoday.
For today's show, I thought itwould be really helpful because,
you know, part of franchising,right?
It's, you know, really excited.
It's a new chapter in life, butsome fears come up and concerns.
So wanted to, I.
Review.
I think we have here, I have, Ihave a long list of notes here.
15.
We'll see if we can get it inone show.
Worst case, we'll split this up,but we're gonna go through the
(02:44):
top 15, concerns that, potentialfranchisees have when,
considering franchise ownership.
Glad you could join us today.
If you are ready for, change andare interested in exploring
franchising, give us a shout.
Go to the website, gigi thefranchise guide.com.
Check out our book FranchiseFreedom, same name as our
podcast, and you can book a calldirectly with us.
(03:07):
There's a quiz there, which willhelp you figure out, three
questions.
If franchising may be a goodfit, take advantage of that.
Worst case, you get a copy ofthe book, so you have nothing to
lose.
In diving into the, topic today,we're gonna go through 15,
concerns.
So, number one, what if I pickthe wrong franchise?
Now I think this is more forsomeone that's doing the
(03:27):
research on their own, we're notguessing here.
We're putting in a lot of time.
A lot of effort, and I think thesecret here is really.
Working in reverse, figuring outwhat the ideal franchise looks
like as opposed to just, goingto a list of top 100 franchises,
top 500 franchises.
And I'm not saying anythingwrong with those lists, but,
(03:49):
there's not much substance,what's the criteria?
How are they added to the list,you know, what if I pick the
wrong franchise?
We're figuring out what theideal franchise looks like.
If you've gotta keep your joband run it part-time, you want a
franchise that allows forsemi-absentee or part-time
ownership, that franchisor willlet you know.
Especially on that first call,if they allow that type of
ownership, it's gonna talk aboutthe investment, right?
(04:11):
The investment has to bealigned.
The territory, the location hasto be available.
Employees.
If you don't like a lot ofemployees, you're gonna put that
in your franchise model what theideal business looks like, and
look for brands, that fit thatmodel.
And you're having.
Multiple calls with thefranchise, multiple calls with
the franchisees, as well asmeeting with the C-suite
founders, president, as well asother potential franchise
(04:33):
owners.
So we're not guessing here,we're making an informed
decision.
That should not be, a concern,as long as you're spending
enough time on the due diligenceupfront.
Number two.
Interesting one, will I actuallymake money?
And at the end of the day, whatis a franchise?
A franchise is a business, wecall it, a business on training
(04:56):
wheels.
There's no guarantee inanything.
There's no guarantee in thestock market.
There's no guaranteed in abusiness, a mom and pop.
Startup or a franchise.
The franchise has a provenmodel, proven system.
They're giving you the tools,the keys to everything.
But, you need to follow thatsystem.
Sometimes you will follow thatsystem and struggle a little
bit, and being disciplinedenough to go back and work with
(05:19):
the franchisor, contact thecoach.
Can you make money with thefranchise?
Absolutely.
Can you lose money?
Absolutely.
It is a business.
It is a risk, but, if you followthe system, you wanna put as
much, you know, find the rightfranchise, right system, check
out the financials, right?
You're gonna create a pro forma.
Look at item seven and 19 inthe, franchise disclosure
(05:39):
document.
Ultimately no one's gonna beable to, give you that info.
You can talk to fellowfranchisees and, check on their
progress, how they've done inthe past, and really putting all
that information together inorder to move forward with your
franchise.
Number three, what if I lose myinvestment?
Well, we wanna avoid, we wanna,avoid losing an investment.
(06:01):
And usually with losing aninvestment, that means like
going outta business.
And that goes back to, you know,the other concern of, you know,
will I actually make money oreven picking, will I pick, you
know, what if I picked the wrongfranchise?
Again, risk in a Fran in, in afranchise, in, in any business.
But with that being said.
You know, if you are assumingthat, you know, you spent the
(06:23):
time on the due diligence andthe, and the fits there, it,
it's, it's a lot of work thefirst year.
So it's setting the expectationthat you may not make any money
or even if you'd made any money.
I usually recommend if you canafford it, reinvesting as much
as you can, putting all theprofits back in the business the
first year so that you can.
Truly, build it up.
Make sure you have sufficientstaff marketing and anything
(06:44):
else needed for the business sothat maybe starting in year two,
you can, work more on thebusiness versus in the business.
So, you know, there is,depending how you fund it, you
know that that's money that, youhave to, invest in the business.
We don't want you to lose thatfranchise fee.
Franchisor doesn't want you togo outta business either, so ask
for help.
(07:04):
Talk to your fellow franchisees,follow the system.
Just, you know, consistentlyfollow.
And if you're struggling with akey area, follow up.
If it's not a neighboringfranchisee, the franchisor can
work with you and speaking withother fellow franchisees across
the country.
Number four, I don't wanna work80 hours a week.
(07:24):
When owning a business, it's alot of work.
It's a lot of hours to launch abusiness.
Some people have a full-time joband are running this on the
side.
It's still gonna be a lot ofwork, at least initially, to get
the business up and running.
You gotta find that rightgeneral manager, running the day
to day and staff a franchise inthe water and smoke mitigation
space.
So it's gonna be something new.
(07:44):
So there's a learning curvethere.
I don't know about exact hours,but I worked a lot of hours when
I first started, I ran mybusiness full-time.
But if you're running itpart-time, factoring a lot of
hours, I.
And kind of what, you know, howlong it'll take to really get
trained in the businesslaunched.
Sometimes the first hire doesn'twork out and there needs to be a
replacement.
That's okay.
That's part of businessownership.
(08:05):
Once the business is up andrunning, I'll do whatever it
takes to get up and running.
I don't wanna work 80 hoursafter the first year.
Okay.
Or the first, six months.
Okay.
Who do we have to put in place?
Who's handling the marketing,the franchise or great.
Still need someone to review theKPIs.
That would be me, the owner.
Salesperson's going out.
Maybe it's a weekly check-in togo over quotes and training
(08:26):
maybe that's with the generalmanager.
Maybe that's with you.
It's really figuring out, andconstantly tweaking if you're
noticing that.
One area's taking a lot longer.
Maybe that goes to the generalmanager.
Maybe that gets split up, overthe week.
So, expect to work a lot ofhours, but, with the whole point
to, take advantage of thosesystems to take a step back.
I've never owned a businessbefore.
(08:46):
Can I really do this?
Great question.
A franchise is a business.
A lot of people will go thefranchise route because the
system is in place.
It's been proven, the CRMs, themarketing, the website, all
that's really been handled foryou.
In many cases.
You may even have nationalaccounts you can tap into.
The franchisor does not requireexperience, nor do they require
(09:07):
business ownership experience.
Specifically in that industry,they're looking for that right
match for the person requiredfinancials, liquid and net worth
financials as a means to fundthis thing.
Has the right skillset andattitude.
Not saying, well, how quickly,can I make a million bucks my
first month?
You have to have the rightattitude.
Following the system.
(09:27):
Team player, there's gonna beannual conferences you may get
asked to speak with, potentialfranchise candidates, down the
road.
Absolutely.
Can you really do it well?
You're gonna follow the systemand do whatever it takes, define
your role in the business, whichmay change sometimes.
The role.
Day one is gonna be differentthan day 365.
And kind of putting togetherexpectations of what it is now
(09:49):
and what that will be after thefirst year.
These are all really good andactual questions I get, and have
received.
I jot them down and review them.
Will the franchisor reallysupport me now?
This is a good question because,with 4,000 franchise companies
out there, not all franchisesare created the same.
The franchisor will talk abouttheir training on your first
(10:12):
couple calls, the support andeverything else involved.
They may even give you access totheir training portals.
Both virtually in person what,what all that looks like.
What happens if there'sturnover?
You have to hire a new generalmanager, that kind of deal.
What you're gonna hear is, stagetwo of due diligence the
validation calls with yourfellow franchisees.
(10:33):
Are you getting the support youwere promised, not just
initially to launch thebusiness, but.
Throughout the process, when youhad issues, were they there,
were they open to suggestions?
So those validation calls willbe crucial and, you know, give
you a, a, a, an idea of whatsupport will look like.
That is a key area a lot ofpeople skip or don't realize.
They maybe talk to onefranchisee and, feel that's,
(10:56):
sufficient.
I recommend speaking with ahandful of franchisees.
Maybe, some, veterans, somenewer franchisees, some
franchisees that are running itpart-time versus full-time
initially.
That way you kind of get a nicemix, of feedback, from people
that ran it maybe a little bitdifferently.
All right, number seven.
How do I know if a franchise isfinancially healthy?
(11:20):
Great question.
The franchisor legally, everysingle year has to update their
FDD, the Franchise DisclosureDocument.
In that franchise disclosuredocument towards the end, are
gonna be audited, financials,they're audited, there's an
extra cost, you know, franchisesare regulated by the FTC, and
making sure those numbers areaccurate.
So not only are they closing thebooks for the year, but in that.
(11:44):
They're gonna captureeverything, financially ha have
an order to go in, make sure thenumbers are accurate.
Check on things, make phonecalls, send letters to vendors
and that kind of stuff.
So, so you're gonna do a mixtureof that.
In the FDD we will list any typeof lawsuits, if that's a concern
of yours.
And that's, first couple items.
I forget the exact item there,two or three if I'm not
(12:04):
mistaken.
You'll have everything in there.
You can also, you know, at somepoint have a franchise franchise
attorney review.
Not that they're gonna beexperts in the financials, but,
have they heard of the brand?
Are there any red flags theysee?
Plus any research you do onlineor, speaking with, your
validation calls with thefranchisees.
Great questions here.
(12:26):
Number eight, I'm worried aboutbeing locked into a long-term
agreement.
There is an agreement betweenyou and the franchisor.
Typically they average about 10years.
I've seen some brands do five.
I've seen some oth, some othersdo 20 years.
But really, you know, you'rebuilding long-term equity here
that you know that there's,there's gonna take time to
build, the business up.
Figure out an exit strategy, howyou're gonna sell.
(12:49):
And all that.
That long-term agreement locksinto terms.
It protects you as thefranchisee.
Everything has to be laid outexactly how the agreement reads,
so that there's no changes.
So you know that there's notgonna be any, you know, crazy
changes over the, over those 10years.
And, so that is a, a typicalagreement is gonna be, 10 years.
But at any point in time, if youwanted to sell the agreement,
(13:11):
you would essentially do atransfer.
Someone will pay, there may be anominal transfer fee, and then
the franchisor will have to meetthe buyer because that
relationship will continue withthe buyer.
So, another good question.
Number nine, can I still have alife and spend time with family?
Absolutely.
And that goes back to pickingthe right model.
(13:32):
Spending time with family, wecall that time freedom time
freedom.
Is definitely the number one,followed by financial.
If you're running at semiabsentee.
They're gonna have a train totrainer program.
You know, how are you gonnasupport me if I keep my job?
And then figuring out, what isthe right franchise, but also
equally important, which is noton the franchise, it's on you.
Is finding the right generalmanager to run the day-to-day.
(13:53):
That general manager needs to bereally clear on, their job
function, the requirements, whohandles what.
Because you want there to bebalanced.
You need to be involved on everysingle call, every single issue
or decision.
That manager needs to beempowered to make, certain
decisions.
The more empower they are, themore freedom you'll have.
And, you know, you're not beinginvolved or having to be in the
(14:15):
office just maybe checking invirtually doing an hour zoom
call with the office.
So, those are things to thinkabout.
And then again, going back tospeaking with franchisees.
Asking about their work lifebalance, and asking them for any
recommendations on setups, rolesfor the manager, maybe they can
share a job description.
(14:35):
Those would all be greatstarting points.
Number 10.
What if I don't like managingpeople?
Another great question, but itgoes back to the basics.
What is the right fit?
You may have managing experiencebut don't like managing people
and that's okay.
Some brands will have higherstaff and I.
Maybe require you to befull-time, there's gonna be a
big management function andmaybe that's not a good fit.
(14:57):
But if you know you don't likemanaging people, you're more big
picture, maybe managing a smalloffice of, two or three W2
employees.
And then having, your, yourtechnicians, your labor that are
W nine contractors, you can haveyour GM handle that.
Or you just hire someone to dealwith the hr.
While you're overseeingmarketing and big picture stuff.
(15:17):
It goes back to finding theright franchise where you as the
owner don't have to be themanager managing the entire
staff, or a portion of the staffand maybe not the technicians
and the contractors.
All right, how much money do Ineed to get started?
Ranges on franchises are allover the map.
Franchise fees I've seenanywhere from, 10,000 to over a
(15:39):
hundred thousand, plus all theother costs.
We've seen a lot of, non brickand mortar franchises fall in
that one to$200,000 range.
Can be investment be less.
Absolutely.
Can it be more?
Absolutely.
But keep in mind, this is arange that usually will cover
the franchise fee.
Training and startup and yourfirst 90 days of operation.
(16:00):
So you have some payroll,working capital and things like
that.
You know, brick and mortar, canget into that 3, 3 50 k, plus
range.
But you know what you're lookingat as far as how much money,
each franchise will have a networth and liquidity requirement.
But as far as cash out ofpocket, if you're using a
retirement rollover, it could bethe entire investment.
(16:20):
Since you're using yourretirement assets, people that
are using an SBA government backloan, you're looking at about 20
to 30% of the project costs.
So what I recommend, if, so on a200 K investment, it may be 40
to 60,000, but also having thatbuffer, right, if the business
takes a little bit longer to getup and running, a territory,
that, you wanna pick up a secondterritory or maybe there's a
(16:41):
resale in the market that youwanna take advantage of and
bundle it together with yourterritory or location.
Always having access to funds,so liquid capital or bare
minimum, a line of credit.
But 20 to 30% of the project ifyou're doing our, and that's
with the loan.
If you're doing a retirement,it's your own retirement assets
and you can just fund the, theentire thing.
Some people use a combinationand we refer everyone on these
(17:03):
questions to Benetrends.
We have a great relationship andsend everyone over for a free
consultation to review allthose, all, all those different
options.
So great question.
All right, we're on 12 of 15.
What if the franchisor changesthings after I sign?
The franchise agreement spellsout your rights, and you know,
there's gonna be fulltransparency of exactly what's
(17:26):
in the agreement.
So if there is a chance of anyagreement, any changes, they
will let you know.
Or if there's a certain lock inclause read that franchise
agreement, get clear oneverything, and bring it up to
the franchisor.
But typically that's why, youknow, you sign that five, 10
plus year agreement as they lockeverything in.
But if there is any, type ofchanges, number one, it needs to
(17:46):
be listed in the franchiseagreement.
Number two, the franchisor needsto communicate and be
transparent about any change orany issues but that's why we
have these agreements to haveeverything spelled out.
13, will I be stuck in aterritory that limits my growth?
So, you know, when you're buyinga territory, each franchise will
have different criteria.
Some will be just strictlypopulation.
(18:08):
Others will have, an age group,senior care, maybe, the age
group of 70, 75 years of age andolder.
If it's private pay, they'regonna look at average household
income.
There's gonna be opportunity forgrowth in the territory.
So in some cases, you're gonnatry to figure out what the
average franchisee does inrevenue as well as,
profitability, so it may be oneof those where you're, looking
(18:31):
at a second territory anddoubling the population that you
can go after.
I wouldn't say it limits yourgrowth, but you're definitely
locked in, so that you don'thave other franchisees competing
with you.
You will, potentially look atadditional franchises for
growth, or, you know, eitherwith territory or staying in
your territory and know what wecall vertical expansion or brand
(18:52):
stacking where you're addingthese complimentary brands, to
compliment, you know, if you gotthe painting business and have
relationships with a thousandcustomers you may add on a
roofing business, a cleaningbusiness, anything, involved
with the home.
Great question.
14.
Do I have to do all themarketing?
No, it really depends on thefranchise you buy.
(19:12):
A lot of B2B type of franchises,may not have marketing in-house,
but they'll have you go out andnetwork at the Chamber of
Commerce.
If you're providing a service,reducing expenses for small
businesses gonna be a lot ofchamber.
Meetings, maybe some events,one-on-ones, and things like
that.
Some, which is very common inhome services.
(19:32):
B2C franchisor may handle allthe, you know, the, the virtual
digital, marketing for you.
You're still overseeing it.
Reviewing the KPIs, making surethe lead flows there, the close
rate's there to figure out ifthe, quality of lead is a sales
person getting a good quality,quality lead, but not closing
it.
So once you have thesebenchmarks and you know what the
average close ratio is, ifyou're not meeting those
(19:54):
numbers, you have to revisit andsay, okay, what changes do we
have to make in the messaging?
Maybe the market's gonna beslightly different.
Marketing is gonna vary,starting from scratch.
If there are no, marketing,being created for you.
They'll train you on that.
Some cases they'll provide youthe assets, the eBooks, to post
on your own, but that reallycomes down to what that
franchisor is offering to you.
(20:17):
Excuse me, what happens if Iwant out?
This is the exit, strategy.
You sign a 10 year franchiseagreement, two years go by, you
wanna sell it for a profit.
Maybe the fit wasn't there,whatever the reason may be.
I usually recommend you stillhave that 10 year agreement, so
you don't walk away from theagreement, you wanna, get as
much as you can and sell thebusiness.
(20:39):
So what I recommend is, numberone, speaking to the franchisor.
And, seeing what your optionsare.
The, the, the best way sellingto a, a fellow franchisee, as I
mentioned in a previous, you paya transfer fee.
The buyer or seller, as long asit's getting paid.
Sometimes there's no transferfee.
In many cases it's just anominal small transfer fee.
(21:00):
If there's no neighboringfranchisees or maybe the
neighboring franchisees aren'tinterested, you can look at a
broker or working directly withthe franchisor where they can.
Send a listing out.
A broker may want exclusivity,so you wanna definitely read the
agreements and speak with thefranchisor first.
They may know of someone rightoff the bat like, Hey, you know
what, the whole state of NewJersey is sold out.
(21:21):
We've been getting a lot ofcalls.
So yeah, we may actually have acandidate, for this specific
area.
Always want to try to sell thebusiness.
That's the biggest thing youwanna get.
Some type of multiple on themoney you're taking outta the
business.
I understand that's not alwaysthe case, but you always wanna
try to sell the business and,work with that franchisor.
So, 15 great, concerns, that weget.
(21:41):
A lot of it goes back to.
The fit.
If you just dive in, theseconcerns and questions mostly
come off, you're just going inand looking at a, a blind list
of brands.
If you create the model and justsay, there's 4,000 franchise
companies.
I wanna be, part-time in thebusiness to start.
While many brands won't allowthat, it needs to be under a 200
(22:02):
k investment.
Well, that's gonna rule outpretty much all brick and
mortar.
To have, under five employees,it needs to give back to the
community.
As you're adding all thesecharacteristics, it's becoming
closer to something you'relooking for.
Will I have to work 80 hours aweek?
There are brands like mosquitospraying.
In certain, states in the USwhere you're only spraying maybe
(22:23):
six, seven months a year, somepeople have second homes and who
knows in Europe, and they'reable to vacation because there's
no work in the, in the winterseason, others will take
advantage and, provide adifferent service, maybe even do
holiday lighting.
So the match, I think, helpswith all of this.
Again, there's always gonna be arisk, you're gonna do all the
due diligence you can to makesure the fits there.
(22:44):
You understand the role.
You know exactly where thefranchisor is going.
You understand the support.
You have trust in thefranchisor.
You believe in the franchisor.
You're doing that all upfront.
And that's where, I come intoplay.
I have my finger on the pulse offranchising.
I get to talk with a lot of thefounders and CEOs and
presidents, and people involvedwith the brands.
(23:06):
I don't know every brand.
I don't know every aspect offranchising, but.
On a daily basis, we are talkingwith another professional
learning about the changes, theeffects of ai.
How will tariffs affect thebusiness if there's any effect
at all?
So, we're here to help.
There's no cost for what we do.
We, get paid directly from thefranchise companies.
They pay our fees, so you don'thave to, which is really nice.
(23:27):
Check out the website, gigi thefranchise guide.com.
More than glad to review these.
Questions on an intro call.
There's a three question surveyhelping you figure out if a
franchise may be a good fit,leading you to the calendar.
As I mentioned, worst casescenario, you get a copy of the
book, franchise Freedom.
It's my exact blueprint offinding my first franchise.
I would love to help you out.
Thanks again for all thesequestions.
(23:48):
I keep everything confidential,so if a question comes up and
we're having a call, I never usenames.
Even in success stories we keepeverything confidential.
Unless we get the okay from youto share.
Thanks again for joining.
We really appreciate it.
And we got, some excitingepisodes.
We have a couple franchisecompanies coming, back on the
show.
Really excited to share those.
Until we talk again, take care.
See you guys.
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