November 8, 2023 • 26 mins
Welcome to FranPro Insights Podcast. If you would like to access our most recent content and to receive updates, you can register here: https://franpro.com/
Contact us here Anything@FranPro.com if you:
- Want help finding a franchise
- Would like to be featured on our program
- Would like help producing or want a podcast produced for you
- Are a franchise company and want access to our free ROI Tracker dashboard
In this episode, Lance Hood of FranPro interviews Chief Executive Officer Doug Schadle at Rhino7. Doug Schadle is an incredible resource for any franchise organization. If you would like to work with Doug you can reach him here: https://Franpro.vip/GoRhino7
In this call: "How to avoid declining sales and irrelevance by using an effective sales process."
Also covered:
- Are you taking unnecessary risks with your business?
- Are you fooling yourself, is your brand unique or memorable?
- What does an effective sales process look like?
- Utilize your FDD to get your brand the traction it needs
- And more
Transform your understanding of franchise branding with our latest guest, Doug Schadle, CEO of Rhino7. We delve straight into the heart of franchise sales, exploring the nitty-gritty of developing an effective process, especially for emerging brands. Doug gives us a masterclass on reverse engineering from P&Ls, backing this up with the crucial element of a robust support system for franchisees. He also provides a reality check on the financial investments you need to reach self-sufficiency in royalties.
Moving on, Doug takes us on a journey through franchise investigation and brand selection, providing us with a roadmap to delivering successful investigations. He shares invaluable insights on leveraging homework and conversations to educate prospects, and how to effectively navigate objections and fears. With a unique angle, Doug also delves into how an individual's skill set can influence their franchise choice, illustrating this with compelling examples.
Wrapping up, we dive into the world of branding and the Franchise Disclosure Document (FDD) with Doug. He unravels the magic of striking branding and effective franchising, contrasting unique businesses with established ones. Doug also brings to light common pitfalls and how to evade them, emphasizing the importance of the FDD as a growth tool. And for those eager to learn more from Doug, he generously shares how you can connect with him and tap into his wealth of knowledge in the franchise industry. This episode is packed with golden nuggets for anyone looking to venture into or expand in the franchise business.
Contact us at Anything@FranPro.com if you:
- Want help finding the right franchise for you
- Would like to be featured on our program
- Would like help to produce or want a podcast produced for you
- Are a franchise company and want Free access to our ROI Tracker dashboard
*Some of the companies we interview compensate us a commission if you purchase something.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Lance Hood (FranPro) (00:00):
Hi everyone.
Today we have Doug Schadle, theCEO of Rhino 7.
I want to introduce you to himbecause he is one of the top
thought leaders in our industryand I just want to grab his
insights.
Doug Schadle (Rhino7) (00:14):
Good morning.
Lance Hood (FranPro) (00:14):
Lance, how are you today?
Doug Schadle (Rhino7) (00:16):
Good.
Lance Hood (FranPro) (00:17):
Well, Doug , can you take just one second
and just tell everybody aboutRhino 7?
Doug Schadle (Rhino7) (00:27):
Well, rhino 7 goes back quite a ways.
We started in 1999 and when wefirst started we were primarily
a franchise sales organizationwith larger companies like a
grapeclips, things along thatlines that wanted us to help
them grow.
(00:47):
As we grew over the years wedid a lot more pieces of the pie
for franchise oars.
So in some cases we are thefranchise or in other cases we
team up with them strategicallyto help give them what they need
.
And we have multiple divisionsat Rhino 7.
(01:08):
We have our developmentdivision, which is franchise
sales.
We also have a pretty good sizeconstruction management
department where we helpfranchisees find their sites and
open their units, whetherthey're retail or medical.
And then we obviously dooperational support too with
some of the different brandsthat we have supporting
(01:31):
franchisees.
So we're headquartered inRaleigh, north Carolina have
been here really since 1999.
I've been here since I was achild.
Really, my parents moved here,so love Raleigh.
So if any of you are thinkingabout moving, you should
definitely check out NorthCarolina.
It's a good place to live.
Lance Hood (FranPro) (01:52):
Nice, I've been there.
It is beautiful.
So if I'm a young brand, I knowyou work with established
brands and young brands both.
But the biggest thing is it'shard to learn how to do the
sales process.
I know that people canbasically they're successful
running their business, butdeveloping it into a franchise
(02:12):
and actually selling it thoseare all new skills and sometimes
outsourcing that works.
Can you talk about how a lot ofnew brands they don't have a
sales process and they justthink that they're going to talk
to people and then people aregoing to buy it.
Can you really talk about whatan effective sales process looks
like?
Doug Schadle (Rhino7) (02:33):
That's a good question, lance.
We do a lot of work with what'scalled an emerging brand.
These are newer brands thathave a good model or they are an
independent business that isnot a franchise yet that we can
learn from the inside out, wrapa good franchise system around
(02:55):
it and then grow them and helpthem grow effectively.
We do a lot of that.
But an emerging brand probablydoesn't realize, especially in
their early years, thatfranchise sales and development
growth for a franchise or is astrategy.
People want to know a handfulof things when they're looking
(03:18):
at a franchise what the businessis and does, what the owner's
role needs to be or, if there'svarieties of those roles, what
are they, what the totalinvestment is going to be at the
high end for the franchise,which is the item seven.
And then they want to knowapproximately what's being made
already in the business so thatthey can potentially relate that
(03:39):
to themselves.
That's the item 19.
If a brand is an emergingconcept, especially with no
franchisees or young, earlyfranchisees, their item seven
and their item 19 are verycritical for them.
To help people understand whatthey are, they need to build a
(04:00):
detailed item 19.
This sounds a little strange,but the best franchise systems
are really reverse, engineeredoff the P&Ls of the business
that the founder created or, ineven better businesses, multiple
units.
So they've tested it over andover.
There's a lot to becoming anemerging franchise and a
(04:23):
franchise or and a lot of thefocus really needs to be on the
support system.
So many times emerging brandsbelieve that after they get some
franchisees they can layer inpeople to help them grow and
support franchisees.
Really, all that needs to starthappening before you bring in
(04:44):
franchisees, so that you have asystem for everything that
you're doing, so that you canbring in franchisees and help
them the best you can.
That can be a challenge forfranchisee or especially
emerging, because if they growslow then they have a tendency
(05:06):
not to where we want to layer inthe staff.
If they grow quickly, they'rechasing their growth.
So it's a catch-22 on bothsides.
We try to prepare franchisee oras best we can for what's going
to happen with those types ofthings Emerging concepts.
You got to put some money intobeing a franchisor, so a lot of
(05:29):
times an emerging franchisecompany will think that it's
going to be cheaper than itactually would be to open a unit
.
Then it would become afranchisor, and that's just not
the case.
Lance Hood (FranPro) (05:43):
Now, I know that we've talked about
this in the past, but whatshould a franchise expect to
spend on average an emergingbrand to go from starting to
where your royalties are payingfor everything?
Doug Schadle (Rhino7) (05:58):
Well, that royalty self-sufficiency is
obviously where everybody'strying to grow, because once you
get there then you canexponentially grow up larger
from there.
But typically a brand needs toprobably have a half a million
dollars that they are going toneed to be able to utilize over
the time that they start untilthey reach that.
(06:18):
If they have franchisees thatdo lower gross sales and higher
margin, then it could be amillion dollars.
So every franchisee is going tobe different depending on what
their franchisees are reallygoing to produce for them.
So trying to give you a feelfor that, if a franchisee has
(06:41):
high gross revenues, thenthey're going to make more
royalty.
When a franchisee develops andgrows, if the business is
smaller, maybe less expensive toget into and has low gross
sales but high margins for thefranchisee, then that causes the
(07:01):
franchisee typically to have toinvest more money to grow the
business because they're goingto need more people to support
lots more franchisees that dolower gross that are paying in
lower royalty.
So those are some of the thingsthat we help franchiseeers
figure out when they're lookingto develop.
Lance Hood (FranPro) (07:22):
Right, because they're going to make
less money, because it's lowergross sales and they're going to
have to have more peoplebecause they're serving more
franchisees Makes total sense.
Doug Schadle (Rhino7) (07:33):
Yeah, and that's something that most
emerging concepts don't reallyunderstand.
They'll grow into that, but youhave to plan accordingly, and
that's a big factor in it all.
Lance Hood (FranPro) (07:49):
Right, because I actually see that when
I work with an emerging brandversus a well-established brand,
the well-established brandsthey'll have webinars, They'll
have a five-step sales processwhere they go through financials
and the support and everythingelse and then they go through a
discovery day and awarding,whereas some of the young brands
(08:11):
, especially, they try to do iton their own.
They're just happy to get onthe phone, they give their
elevator pitch and they're likedo you have any more questions?
Let me send you the FDD andlet's talk in two weeks, which
just isn't an effective salesprocess.
Why is not having the structureand just talking about it not
(08:32):
lead to franchisee interest?
Doug Schadle (Rhino7) (08:36):
I think probably the biggest focus with
that, Lance, is you're notcompleting the investigation of
the categories that are withinthe business that they need to
learn.
If the franchisor is just havingconversations, a conversation
sends them the FDD, goes overthe FDD and then tries to bring
them in for a discovery day, thepotential franchisee is really
(09:02):
coming in with very littleknowledge.
It's better to reverse that andbreak the business down into
categories.
So let's just say staffing.
What you want to do is you wantto help them understand every
aspect of staffing who they'regoing to need, what
approximately they're going tohave to pay them, how they're
(09:25):
going to recruit them, all thedifferent aspects of those
things.
And then, when you're finishedwith that, you can basically ask
them do you think you've got apretty good handle on staffing
and, with our systems that wehave, do you think you can
implement this?
And they're either going to sayyes or no.
If they say no, then there'smore to cover right to get them
(09:47):
comfortable.
If they say yes, then you canhave a checklist and check that
off and then move on to realestate or whatever other
categories that the brand reallyneeds to have to be able to go
through those things.
Then, once they've gone throughevery category, they have a
good understanding of thebusiness.
Even it's time for a virtualdiscovery day or a discovery day
(10:11):
, whatever the brand reallyneeds to do to implement their
system, to finalize it.
Lance Hood (FranPro) (10:17):
Right, right, and you already kanske
want to repeat it a little bit.
Some of the things that I'veseen you do have been very
interesting to me.
I watched how you had this onelogo that I loved and then you
guys changed it and I didn'tlove it as much, but you told me
that you had to remove a bunchof the details and colors from
(10:40):
it because it made it drasticimprovement in the cost of
producing that logo for thatbusiness throughout everywhere
it touches, which was veryinteresting to me.
I wouldn't think of littlethings like that, but I mean you
guys have it all dialed in.
Doug Schadle (Rhino7) (10:53):
Well, there's a lot of pieces to the
pie, so what we're really tryingto do is look for the most
effective way for the brand tosucceed.
So if you, let's say, you'vegot a, an emerging concept that
has three or four differentunits and they're all in
different sized space, right,let's say, it's retail.
(11:16):
What we really want to do, then, is we want to look at what is
the most, the very mosteffective space size and square
footage, and then hone in onthat size and do just that, not
try to have a wide variable toopen it up to.
(11:36):
And so what that does is itreally helps franchisees get the
best, get the best of bothworlds.
In other words, the franchiseeor tested right, and now we know
which one is most effective,and then we focus on that side,
and that could be done withstaffing, real estate, marketing
(11:59):
, all the different things thatneed to happen.
Lance Hood (FranPro) (12:02):
Doug, what are some of the things that you
guys do that really keep thethe sales process moving for
people?
Doug Schadle (Rhino7) (12:10):
Well, there's, there's a lot of
different things that areinvolved in an investigation of
a franchise, right?
And so what you're reallytrying to do is deliver that
information not not in a week,right, not in a two week period.
Really, you want to give it tothem, spread out a little bit so
(12:30):
that you can make sure thatthey're absorbing everything
that you're giving them.
So, on the average, you know,some brands are going to need
around a month.
Others may need six weeks totake them through the categories
of what you need to take themthrough.
So what we think works best isto talk with them and discuss
(12:51):
certain things and then havethem go learn.
In other words, do homework inbetween calls, not feed them
every time you're you're talkingto them all the information, so
that when you're talking withthem they're learning, but when
you're not talking with them,they're just sitting and waiting
right For the next time theytalk with you.
(13:13):
So by utilizing these types ofsystems, it helps the
perspective franchisee reallyfigure out what we all want to
know, them and us.
Are we a good fit for eachother?
Because if we are fantasticright, they'll come into the
system much more educated,better prepared, all the
(13:36):
different aspects of what it isright.
If they are not a good match,we'll know it relatively quickly
and then they can focus onwhat's going to be a better fit
for them, right?
So a lot of times in scenarios,lance, when people are looking
to get into a franchiseebusiness, they have a tendency
(13:58):
to focus in on things they like,right?
So I like to use the example Ilike to eat sandwiches, so I
should own a subway, right?
So that's really not how itshould happen.
What you're really trying tofigure out is what's the
business model and what of myskill sets fit this business
(14:23):
model best, right?
And if I like to eat sandwichesbut I'm not really good at
recruiting and managing people,then that's not for me, right?
Not even close.
But if I am good at thosethings, then that brand can work
for me, right?
(14:43):
So you're really trying to seeand give that franchisee what
they need for whatever type ofmodel they're looking at, so
that they can make a goodeducated I don't want to call it
guess, but a good educateddecision on whether they think
they can fit in that franchiseor not.
Lance Hood (FranPro) (15:05):
Right, and you know one of these things
when you're breaking this upinto these categories, doug, it
seems like what you're doing isyou're doing a couple things.
One thing is you're handlingobjections, because they're
going into this thing that wouldbe like site selection type
stuff, and they're like well, Idon't know if I can find a site.
Well, as you go through thatmodule, they're learning how to
(15:25):
do it.
So you're one handling theobjection and two, you're
teaching them how to think abouthow to make this work.
Right, they're envisioning well, here's how I make it work.
So they're playing this activerole.
Like that homework is having toplay this active role in
figuring out the problems andvisualizing themselves figuring
this out, which makes it not asscary.
Doug Schadle (Rhino7) (15:48):
That's very accurate, right?
So in the best systems, rightfor franchise development and
growth, you already know wherethey're going to have concerns,
and so you build a system thatalready answers those potential
concerns before they ever evenget there.
(16:08):
Right, so that when they dohave concerns it's not a laundry
list, right, it's somethingsmall that you can focus on and
help them find the answers onwhether that answer is good for
them or bad for them.
And they realized this is goodfor me as a brand or this is not
good for me as a brand.
(16:28):
So by strategizing how you'regoing to build the franchise
investigation process, you'rereally using those categories so
you can focus.
So, typically, what we like todo is we want to focus on the
stuff that would seem most scaryfor somebody, right?
So let's say it's a retailbusiness, right, and most people
(16:54):
that would look at it had neverdeveloped out a retail
storefront before, let alone go,found a lease negotiated and
all those types of things.
So in that brand we would start, right after an introduction
call, with real estate.
That way we can help themunderstand how we're going to
(17:14):
help them and the system they'regoing to get, but also what
their responsibilities are, sothat they know they can handle
that.
Then most likely, in that typeof scenario, you're moving into
staffing, next then marketing,then technologies, whatever it
is that you really need to coveras a brand.
Lance Hood (FranPro) (17:36):
Right and putting the biggest rocks or
hurdles at the beginning and itseems like by you getting in
front of it they'll spend lesstime dwelling on it and that
puts less of that fear intotheir bones, because we're just
handling it right away and thefurther you go you're really
handling smaller and smallerobjections along the way.
Doug Schadle (Rhino7) (17:59):
Yeah, you're sliding down into the
things that are managed a lotfor them, or at least assisted
heavily for them, so that theycan realize the heavy lifting
that they would have to do earlyin the investigation, rather
than putting it at the end andsurprising them with it.
They really want to help themunderstand it early so that they
(18:23):
can know they could have, theycould do it Right.
They have to know they can doit in their own mind and then
once they realize they can dothat, then you move on to the
next category.
Lance Hood (FranPro) (18:36):
I know that you don't work with just
anybody.
You definitely weed throughpeople and find the brands that
you're willing to commit to, andso I think it's good for people
to understand if I'm a brand orI want to become a franchise.
These are some things that Ibetter have dialed in, because
you know, if a franchiseorganization like yourself would
(18:57):
pass on that, they should knowthat they're not in an optimal
state yet.
What are?
What do you look for in a brand?
Doug Schadle (Rhino7) (19:06):
First, it would probably be the unit
economics of the brand.
So if they've opened multipleunits and financially they just
do okay, then that's going to besomething that probably we
wouldn't be able to help,because once you factor in
royalty, brand funds anddifferent things along that
(19:28):
lines, it would make it so thatit was a lower revenue producing
business.
So a lot of times we get peoplethat come to us with a brand
that has a lot of promise butit's not all the way there yet.
In other words, they may needanother year or two of growth to
show where they can really gofinancially.
(19:51):
So a lot of times a newfranchise concept comes from
customers and I want to explainthat.
So let's say that you go to arestaurant and you're sitting in
there and you love the food inthe atmosphere, and so, as a
customer, the owner happened tocome by and ask how you're doing
(20:14):
.
You tell them you love it andyou say you should franchise
this.
People would love it.
That is a trigger for an ownerthat gets them thinking about
that.
But what it really does is itmakes a false impression of what
people really would need to doit, because the customer's just
(20:39):
giving you the customer point ofview.
They don't know what it coststo do it, they don't know how
much time commitment the ownerhas.
They don't even know if they'remaking money, they just like
the product or service.
So that's a catalyst for anowner to then really look at
what they are financially andthen that can tell them whether
(21:00):
they can franchise, becausefranchisees have different costs
than independent businesses do.
They have royalty, brand fun.
They got a franchise fee to getinto the brand.
So the unit economics needs tobe pretty good to be able to do
that.
And then, once you can seewhere your unit economics are,
(21:23):
you pull the PNLs.
Then that will tell you whatyou can backdoor into.
And then you can relate that tothe item seven on the high end
of the item seven and then youknow what it is.
Here's what the business is anddoes.
Here's what it's going to costsomebody to get into and here's
what the business has producedin the past in income.
(21:46):
That paints the picture.
Lance Hood (FranPro) (21:50):
Right, and sometimes I see these companies
that become a franchise and,instead of having something that
is unique and has a good brandthat has a good feel, they're
just normal, and that makes itharder for them to stand out.
There are things that makesomething like a cohesive brand.
(22:12):
You just love it there.
It has a theme, it's unique,and things where they're just.
I mean, it's just the samething you see everywhere.
What are the components thatreally make that stuff stand out
?
Doug Schadle (Rhino7) (22:25):
Well, you've really got two types of
businesses out there.
You've got the unique businessthat there's not a lot of or
hardly any of that people wouldgravitate towards because
there's less competition.
And then you've got the old,tried and true businesses that
have been around forever but thedemand is gigantic and you're
going in and carving out yours.
So in both those cases youstill need the same thing.
(22:49):
You need heavy marketing, right, because if people if it's
unique people don't know itexists, right.
So your marketing efforts aremore on awareness, to get people
educated with it.
I like that style.
And if you're in somethingthat's very prevalent, then
you're really not educating themon what the business is.
(23:10):
You're educating on them, tothem, that you're out here,
right, and that you have goodstaff, good systems, bonded,
licensed, sure, all those typesof things.
So there's a variety ofdifferent ways to attack it.
I don't, you know, if it'sunique, then there's some
(23:32):
attributes that you can have,and if it's not unique but very,
very established, there'sattributes to that too.
So both can work.
Lance Hood (FranPro) (23:43):
And what are some of the biggest mistakes
that you probably see brandsdoing as their, I would say,
first, emerging brands andsecond, like major brands that
just aren't getting the tractionthey want.
Doug Schadle (Rhino7) (23:57):
I think for an emerging brand right out
of the gate, that one of themistakes that they made is
they're not diving into theirfranchise disclosure document.
Well, right, they're going outfinding an attorney, the
attorney's developed it, givesit to them and now they think
they are ready to go.
Right, that's really not theway it works.
(24:19):
You want to help craft your FDDinto something that works for
both the franchisee and thefranchisor.
It builds the strategy intowhat you're doing, whether it's
a territory-driven system or amarket penetration strategy, or
a true area developer or amaster.
(24:41):
Those are different things thatyou can use, lance, to make
yourself unique in the model,right.
So you're trying to use thesedifferent things.
So I would say the FDD not beingused as a tool, just being
implemented as a hurdle theyneed to get through is a tough
part For a more establishedbrand that becomes even more
(25:02):
critical.
Right, because you're craftingyour FDD as you grow every year,
because you're probably movingthings around.
You're moving your item 19,.
Right, because you have morebusinesses in that you can put
in, and you're moving your item7 as you learn more as a brand
(25:22):
Right.
So franchisors are constantlyworking on those things every
year and I think that's probablyone of the things that doesn't
get enough focus with the brand.
It just is a headache that theywant to try to get out of the
way and they really don'trealize.
That's your tool, that's yourstrategy, and your strategy
needs to be implemented throughyour FDD and then you can go
(25:46):
implement that in your salesprocess.
Lance Hood (FranPro) (25:49):
Right, Well, Doug, I appreciate you.
I want to thank you for joiningus and I just wanted to say, if
you want to connect with DougI've known him for many years.
You can tell he's one of theextremely smart guy, knows what
he's doing, been on thefranchise sore side, franchisee
side, development side If youwant to work with him, there's a
(26:10):
button right next to this.
You can click herehttps://Franpro.
vip/GoRhino7 and get connectedwith Doug.
Thanks, Doug.
Doug Schadle (Rhino7) (26:17):
We appreciate the time today.
Hi everyone.
Today we have Doug Schadle, theCEO of Rhino 7.
I want to introduce you to himbecause he is one of the top
thought leaders in our industryand I just want to grab his
insights.
Doug Schadle (Rhino7) (00:14):
Good morning.
Lance Hood (FranPro) (00:14):
Lance, how are you today?
Doug Schadle (Rhino7) (00:16):
Good.
Lance Hood (FranPro) (00:17):
Well, Doug , can you take just one second
and just tell everybody aboutRhino 7?
Doug Schadle (Rhino7) (00:27):
Well, rhino 7 goes back quite a ways.
We started in 1999 and when wefirst started we were primarily
a franchise sales organizationwith larger companies like a
grapeclips, things along thatlines that wanted us to help
them grow.
(00:47):
As we grew over the years wedid a lot more pieces of the pie
for franchise oars.
So in some cases we are thefranchise or in other cases we
team up with them strategicallyto help give them what they need
.
And we have multiple divisionsat Rhino 7.
(01:08):
We have our developmentdivision, which is franchise
sales.
We also have a pretty good sizeconstruction management
department where we helpfranchisees find their sites and
open their units, whetherthey're retail or medical.
And then we obviously dooperational support too with
some of the different brandsthat we have supporting
(01:31):
franchisees.
So we're headquartered inRaleigh, north Carolina have
been here really since 1999.
I've been here since I was achild.
Really, my parents moved here,so love Raleigh.
So if any of you are thinkingabout moving, you should
definitely check out NorthCarolina.
It's a good place to live.
Lance Hood (FranPro) (01:52):
Nice, I've been there.
It is beautiful.
So if I'm a young brand, I knowyou work with established
brands and young brands both.
But the biggest thing is it'shard to learn how to do the
sales process.
I know that people canbasically they're successful
running their business, butdeveloping it into a franchise
(02:12):
and actually selling it thoseare all new skills and sometimes
outsourcing that works.
Can you talk about how a lot ofnew brands they don't have a
sales process and they justthink that they're going to talk
to people and then people aregoing to buy it.
Can you really talk about whatan effective sales process looks
like?
Doug Schadle (Rhino7) (02:33):
That's a good question, lance.
We do a lot of work with what'scalled an emerging brand.
These are newer brands thathave a good model or they are an
independent business that isnot a franchise yet that we can
learn from the inside out, wrapa good franchise system around
(02:55):
it and then grow them and helpthem grow effectively.
We do a lot of that.
But an emerging brand probablydoesn't realize, especially in
their early years, thatfranchise sales and development
growth for a franchise or is astrategy.
People want to know a handfulof things when they're looking
(03:18):
at a franchise what the businessis and does, what the owner's
role needs to be or, if there'svarieties of those roles, what
are they, what the totalinvestment is going to be at the
high end for the franchise,which is the item seven.
And then they want to knowapproximately what's being made
already in the business so thatthey can potentially relate that
(03:39):
to themselves.
That's the item 19.
If a brand is an emergingconcept, especially with no
franchisees or young, earlyfranchisees, their item seven
and their item 19 are verycritical for them.
To help people understand whatthey are, they need to build a
(04:00):
detailed item 19.
This sounds a little strange,but the best franchise systems
are really reverse, engineeredoff the P&Ls of the business
that the founder created or, ineven better businesses, multiple
units.
So they've tested it over andover.
There's a lot to becoming anemerging franchise and a
(04:23):
franchise or and a lot of thefocus really needs to be on the
support system.
So many times emerging brandsbelieve that after they get some
franchisees they can layer inpeople to help them grow and
support franchisees.
Really, all that needs to starthappening before you bring in
(04:44):
franchisees, so that you have asystem for everything that
you're doing, so that you canbring in franchisees and help
them the best you can.
That can be a challenge forfranchisee or especially
emerging, because if they growslow then they have a tendency
(05:06):
not to where we want to layer inthe staff.
If they grow quickly, they'rechasing their growth.
So it's a catch-22 on bothsides.
We try to prepare franchisee oras best we can for what's going
to happen with those types ofthings Emerging concepts.
You got to put some money intobeing a franchisor, so a lot of
(05:29):
times an emerging franchisecompany will think that it's
going to be cheaper than itactually would be to open a unit
.
Then it would become afranchisor, and that's just not
the case.
Lance Hood (FranPro) (05:43):
Now, I know that we've talked about
this in the past, but whatshould a franchise expect to
spend on average an emergingbrand to go from starting to
where your royalties are payingfor everything?
Doug Schadle (Rhino7) (05:58):
Well, that royalty self-sufficiency is
obviously where everybody'strying to grow, because once you
get there then you canexponentially grow up larger
from there.
But typically a brand needs toprobably have a half a million
dollars that they are going toneed to be able to utilize over
the time that they start untilthey reach that.
(06:18):
If they have franchisees thatdo lower gross sales and higher
margin, then it could be amillion dollars.
So every franchisee is going tobe different depending on what
their franchisees are reallygoing to produce for them.
So trying to give you a feelfor that, if a franchisee has
(06:41):
high gross revenues, thenthey're going to make more
royalty.
When a franchisee develops andgrows, if the business is
smaller, maybe less expensive toget into and has low gross
sales but high margins for thefranchisee, then that causes the
(07:01):
franchisee typically to have toinvest more money to grow the
business because they're goingto need more people to support
lots more franchisees that dolower gross that are paying in
lower royalty.
So those are some of the thingsthat we help franchiseeers
figure out when they're lookingto develop.
Lance Hood (FranPro) (07:22):
Right, because they're going to make
less money, because it's lowergross sales and they're going to
have to have more peoplebecause they're serving more
franchisees Makes total sense.
Doug Schadle (Rhino7) (07:33):
Yeah, and that's something that most
emerging concepts don't reallyunderstand.
They'll grow into that, but youhave to plan accordingly, and
that's a big factor in it all.
Lance Hood (FranPro) (07:49):
Right, because I actually see that when
I work with an emerging brandversus a well-established brand,
the well-established brandsthey'll have webinars, They'll
have a five-step sales processwhere they go through financials
and the support and everythingelse and then they go through a
discovery day and awarding,whereas some of the young brands
(08:11):
, especially, they try to do iton their own.
They're just happy to get onthe phone, they give their
elevator pitch and they're likedo you have any more questions?
Let me send you the FDD andlet's talk in two weeks, which
just isn't an effective salesprocess.
Why is not having the structureand just talking about it not
(08:32):
lead to franchisee interest?
Doug Schadle (Rhino7) (08:36):
I think probably the biggest focus with
that, Lance, is you're notcompleting the investigation of
the categories that are withinthe business that they need to
learn.
If the franchisor is just havingconversations, a conversation
sends them the FDD, goes overthe FDD and then tries to bring
them in for a discovery day, thepotential franchisee is really
(09:02):
coming in with very littleknowledge.
It's better to reverse that andbreak the business down into
categories.
So let's just say staffing.
What you want to do is you wantto help them understand every
aspect of staffing who they'regoing to need, what
approximately they're going tohave to pay them, how they're
(09:25):
going to recruit them, all thedifferent aspects of those
things.
And then, when you're finishedwith that, you can basically ask
them do you think you've got apretty good handle on staffing
and, with our systems that wehave, do you think you can
implement this?
And they're either going to sayyes or no.
If they say no, then there'smore to cover right to get them
(09:47):
comfortable.
If they say yes, then you canhave a checklist and check that
off and then move on to realestate or whatever other
categories that the brand reallyneeds to have to be able to go
through those things.
Then, once they've gone throughevery category, they have a
good understanding of thebusiness.
Even it's time for a virtualdiscovery day or a discovery day
(10:11):
, whatever the brand reallyneeds to do to implement their
system, to finalize it.
Lance Hood (FranPro) (10:17):
Right, right, and you already kanske
want to repeat it a little bit.
Some of the things that I'veseen you do have been very
interesting to me.
I watched how you had this onelogo that I loved and then you
guys changed it and I didn'tlove it as much, but you told me
that you had to remove a bunchof the details and colors from
(10:40):
it because it made it drasticimprovement in the cost of
producing that logo for thatbusiness throughout everywhere
it touches, which was veryinteresting to me.
I wouldn't think of littlethings like that, but I mean you
guys have it all dialed in.
Doug Schadle (Rhino7) (10:53):
Well, there's a lot of pieces to the
pie, so what we're really tryingto do is look for the most
effective way for the brand tosucceed.
So if you, let's say, you'vegot a, an emerging concept that
has three or four differentunits and they're all in
different sized space, right,let's say, it's retail.
(11:16):
What we really want to do, then, is we want to look at what is
the most, the very mosteffective space size and square
footage, and then hone in onthat size and do just that, not
try to have a wide variable toopen it up to.
(11:36):
And so what that does is itreally helps franchisees get the
best, get the best of bothworlds.
In other words, the franchiseeor tested right, and now we know
which one is most effective,and then we focus on that side,
and that could be done withstaffing, real estate, marketing
(11:59):
, all the different things thatneed to happen.
Lance Hood (FranPro) (12:02):
Doug, what are some of the things that you
guys do that really keep thethe sales process moving for
people?
Doug Schadle (Rhino7) (12:10):
Well, there's, there's a lot of
different things that areinvolved in an investigation of
a franchise, right?
And so what you're reallytrying to do is deliver that
information not not in a week,right, not in a two week period.
Really, you want to give it tothem, spread out a little bit so
(12:30):
that you can make sure thatthey're absorbing everything
that you're giving them.
So, on the average, you know,some brands are going to need
around a month.
Others may need six weeks totake them through the categories
of what you need to take themthrough.
So what we think works best isto talk with them and discuss
(12:51):
certain things and then havethem go learn.
In other words, do homework inbetween calls, not feed them
every time you're you're talkingto them all the information, so
that when you're talking withthem they're learning, but when
you're not talking with them,they're just sitting and waiting
right For the next time theytalk with you.
(13:13):
So by utilizing these types ofsystems, it helps the
perspective franchisee reallyfigure out what we all want to
know, them and us.
Are we a good fit for eachother?
Because if we are fantasticright, they'll come into the
system much more educated,better prepared, all the
(13:36):
different aspects of what it isright.
If they are not a good match,we'll know it relatively quickly
and then they can focus onwhat's going to be a better fit
for them, right?
So a lot of times in scenarios,lance, when people are looking
to get into a franchiseebusiness, they have a tendency
(13:58):
to focus in on things they like,right?
So I like to use the example Ilike to eat sandwiches, so I
should own a subway, right?
So that's really not how itshould happen.
What you're really trying tofigure out is what's the
business model and what of myskill sets fit this business
(14:23):
model best, right?
And if I like to eat sandwichesbut I'm not really good at
recruiting and managing people,then that's not for me, right?
Not even close.
But if I am good at thosethings, then that brand can work
for me, right?
(14:43):
So you're really trying to seeand give that franchisee what
they need for whatever type ofmodel they're looking at, so
that they can make a goodeducated I don't want to call it
guess, but a good educateddecision on whether they think
they can fit in that franchiseor not.
Lance Hood (FranPro) (15:05):
Right, and you know one of these things
when you're breaking this upinto these categories, doug, it
seems like what you're doing isyou're doing a couple things.
One thing is you're handlingobjections, because they're
going into this thing that wouldbe like site selection type
stuff, and they're like well, Idon't know if I can find a site.
Well, as you go through thatmodule, they're learning how to
(15:25):
do it.
So you're one handling theobjection and two, you're
teaching them how to think abouthow to make this work.
Right, they're envisioning well, here's how I make it work.
So they're playing this activerole.
Like that homework is having toplay this active role in
figuring out the problems andvisualizing themselves figuring
this out, which makes it not asscary.
Doug Schadle (Rhino7) (15:48):
That's very accurate, right?
So in the best systems, rightfor franchise development and
growth, you already know wherethey're going to have concerns,
and so you build a system thatalready answers those potential
concerns before they ever evenget there.
(16:08):
Right, so that when they dohave concerns it's not a laundry
list, right, it's somethingsmall that you can focus on and
help them find the answers onwhether that answer is good for
them or bad for them.
And they realized this is goodfor me as a brand or this is not
good for me as a brand.
(16:28):
So by strategizing how you'regoing to build the franchise
investigation process, you'rereally using those categories so
you can focus.
So, typically, what we like todo is we want to focus on the
stuff that would seem most scaryfor somebody, right?
So let's say it's a retailbusiness, right, and most people
(16:54):
that would look at it had neverdeveloped out a retail
storefront before, let alone go,found a lease negotiated and
all those types of things.
So in that brand we would start, right after an introduction
call, with real estate.
That way we can help themunderstand how we're going to
(17:14):
help them and the system they'regoing to get, but also what
their responsibilities are, sothat they know they can handle
that.
Then most likely, in that typeof scenario, you're moving into
staffing, next then marketing,then technologies, whatever it
is that you really need to coveras a brand.
Lance Hood (FranPro) (17:36):
Right and putting the biggest rocks or
hurdles at the beginning and itseems like by you getting in
front of it they'll spend lesstime dwelling on it and that
puts less of that fear intotheir bones, because we're just
handling it right away and thefurther you go you're really
handling smaller and smallerobjections along the way.
Doug Schadle (Rhino7) (17:59):
Yeah, you're sliding down into the
things that are managed a lotfor them, or at least assisted
heavily for them, so that theycan realize the heavy lifting
that they would have to do earlyin the investigation, rather
than putting it at the end andsurprising them with it.
They really want to help themunderstand it early so that they
(18:23):
can know they could have, theycould do it Right.
They have to know they can doit in their own mind and then
once they realize they can dothat, then you move on to the
next category.
Lance Hood (FranPro) (18:36):
I know that you don't work with just
anybody.
You definitely weed throughpeople and find the brands that
you're willing to commit to, andso I think it's good for people
to understand if I'm a brand orI want to become a franchise.
These are some things that Ibetter have dialed in, because
you know, if a franchiseorganization like yourself would
(18:57):
pass on that, they should knowthat they're not in an optimal
state yet.
What are?
What do you look for in a brand?
Doug Schadle (Rhino7) (19:06):
First, it would probably be the unit
economics of the brand.
So if they've opened multipleunits and financially they just
do okay, then that's going to besomething that probably we
wouldn't be able to help,because once you factor in
royalty, brand funds anddifferent things along that
(19:28):
lines, it would make it so thatit was a lower revenue producing
business.
So a lot of times we get peoplethat come to us with a brand
that has a lot of promise butit's not all the way there yet.
In other words, they may needanother year or two of growth to
show where they can really gofinancially.
(19:51):
So a lot of times a newfranchise concept comes from
customers and I want to explainthat.
So let's say that you go to arestaurant and you're sitting in
there and you love the food inthe atmosphere, and so, as a
customer, the owner happened tocome by and ask how you're doing
(20:14):
.
You tell them you love it andyou say you should franchise
this.
People would love it.
That is a trigger for an ownerthat gets them thinking about
that.
But what it really does is itmakes a false impression of what
people really would need to doit, because the customer's just
(20:39):
giving you the customer point ofview.
They don't know what it coststo do it, they don't know how
much time commitment the ownerhas.
They don't even know if they'remaking money, they just like
the product or service.
So that's a catalyst for anowner to then really look at
what they are financially andthen that can tell them whether
(21:00):
they can franchise, becausefranchisees have different costs
than independent businesses do.
They have royalty, brand fun.
They got a franchise fee to getinto the brand.
So the unit economics needs tobe pretty good to be able to do
that.
And then, once you can seewhere your unit economics are,
(21:23):
you pull the PNLs.
Then that will tell you whatyou can backdoor into.
And then you can relate that tothe item seven on the high end
of the item seven and then youknow what it is.
Here's what the business is anddoes.
Here's what it's going to costsomebody to get into and here's
what the business has producedin the past in income.
(21:46):
That paints the picture.
Lance Hood (FranPro) (21:50):
Right, and sometimes I see these companies
that become a franchise and,instead of having something that
is unique and has a good brandthat has a good feel, they're
just normal, and that makes itharder for them to stand out.
There are things that makesomething like a cohesive brand.
(22:12):
You just love it there.
It has a theme, it's unique,and things where they're just.
I mean, it's just the samething you see everywhere.
What are the components thatreally make that stuff stand out
?
Doug Schadle (Rhino7) (22:25):
Well, you've really got two types of
businesses out there.
You've got the unique businessthat there's not a lot of or
hardly any of that people wouldgravitate towards because
there's less competition.
And then you've got the old,tried and true businesses that
have been around forever but thedemand is gigantic and you're
going in and carving out yours.
So in both those cases youstill need the same thing.
(22:49):
You need heavy marketing, right, because if people if it's
unique people don't know itexists, right.
So your marketing efforts aremore on awareness, to get people
educated with it.
I like that style.
And if you're in somethingthat's very prevalent, then
you're really not educating themon what the business is.
(23:10):
You're educating on them, tothem, that you're out here,
right, and that you have goodstaff, good systems, bonded,
licensed, sure, all those typesof things.
So there's a variety ofdifferent ways to attack it.
I don't, you know, if it'sunique, then there's some
(23:32):
attributes that you can have,and if it's not unique but very,
very established, there'sattributes to that too.
So both can work.
Lance Hood (FranPro) (23:43):
And what are some of the biggest mistakes
that you probably see brandsdoing as their, I would say,
first, emerging brands andsecond, like major brands that
just aren't getting the tractionthey want.
Doug Schadle (Rhino7) (23:57):
I think for an emerging brand right out
of the gate, that one of themistakes that they made is
they're not diving into theirfranchise disclosure document.
Well, right, they're going outfinding an attorney, the
attorney's developed it, givesit to them and now they think
they are ready to go.
Right, that's really not theway it works.
(24:19):
You want to help craft your FDDinto something that works for
both the franchisee and thefranchisor.
It builds the strategy intowhat you're doing, whether it's
a territory-driven system or amarket penetration strategy, or
a true area developer or amaster.
(24:41):
Those are different things thatyou can use, lance, to make
yourself unique in the model,right.
So you're trying to use thesedifferent things.
So I would say the FDD not beingused as a tool, just being
implemented as a hurdle theyneed to get through is a tough
part For a more establishedbrand that becomes even more
(25:02):
critical.
Right, because you're craftingyour FDD as you grow every year,
because you're probably movingthings around.
You're moving your item 19,.
Right, because you have morebusinesses in that you can put
in, and you're moving your item7 as you learn more as a brand
(25:22):
Right.
So franchisors are constantlyworking on those things every
year and I think that's probablyone of the things that doesn't
get enough focus with the brand.
It just is a headache that theywant to try to get out of the
way and they really don'trealize.
That's your tool, that's yourstrategy, and your strategy
needs to be implemented throughyour FDD and then you can go
(25:46):
implement that in your salesprocess.
Lance Hood (FranPro) (25:49):
Right, Well, Doug, I appreciate you.
I want to thank you for joiningus and I just wanted to say, if
you want to connect with DougI've known him for many years.
You can tell he's one of theextremely smart guy, knows what
he's doing, been on thefranchise sore side, franchisee
side, development side If youwant to work with him, there's a
(26:10):
button right next to this.
You can click herehttps://Franpro.
vip/GoRhino7 and get connectedwith Doug.
Thanks, Doug.
Doug Schadle (Rhino7) (26:17):
We appreciate the time today.
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