May 16, 2025 • 42 mins
Have you ever dreamed of owning a business without starting from scratch? The world of franchising offers exactly that opportunity, but there's much more to it than most people realize.
Franchise consultant Rudy Farico pulls back the curtain on this powerful business model, revealing that franchising extends far beyond the fast-food restaurants most associate with the industry. With 34 years of experience and over 900 businesses launched, Rudy explains how franchising spans numerous sectors including healthcare, senior services, automotive repair, and countless other industries.
The statistical advantage of franchising is compelling. While 80% of independent startups fail within two years, franchises enjoy a remarkable 95% success rate. This dramatic difference stems from following proven systems rather than reinventing the wheel. As Rudy colorfully puts it, "Don't put shrimp on your Big Mac" – a metaphor for the importance of following the established franchise formula.
Many potential owners hesitate due to financial concerns, unaware of the various funding options available. Through retirement accounts, home equity, and other assets, franchise ownership becomes accessible without requiring massive liquid capital. The Franchise Disclosure Document provides transparent information about startup costs, ongoing fees, and performance metrics, allowing for informed decisions when paired with proper professional guidance.
The most successful franchise owners share one critical trait: coachability. They trust the system, follow the established processes, and leverage the support provided by the franchisor. For those considering this path to business ownership, proper research and guidance from experienced consultants like Rudy can make all the difference between struggling and thriving.
Ready to explore if franchising might be your path to business ownership? Connect with Rudy at FranchiseWithRudy.com or text "RUDY" to 26786 for a free consultation tailored to your background, goals, and budget.
If you need assistance in obtaining funding, book a free discovery call at www.tdjequityllc.net. Let us know the scope of funding needed and the amount. A broker will contact you to discuss your funding needs. And remember, at TDJ Equity Funding, we do not force your funding needs into a lender's box but find a lender's box that fits you!
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Episode Transcript
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Speaker 1 (00:13):
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Speaker 2 (00:44):
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Owned Webinar Series is aplatform to educate business
owners on the resources that mayadd value to your business
Owners Education Journey.
Welcome everyone.
The secret world of franchisingEver wonder how it works?
Have you ever thought aboutowning a franchise but stopped
(01:04):
short because you didn't knowwhere to start?
Do you wonder how much money doyou need to buy a franchise?
What research should you dobefore signing a dotted line?
If these questions have evercrossed your mind, you're not
alone.
Many people dream of owning abusiness without the guesswork
of building from scratch, butthey don't know where to find
(01:26):
the answers.
Today's show is the secretworld of franchising with our
guest, Rudy Farico.
Rudy is a franchise consultantin a DFW area of Texas, but he
works nationwide.
He has agreed to meet with ourlisteners to discuss the ins and
outs of the world offranchising.
(01:46):
But first let's welcome Rudy toour show.
Speaker 3 (01:52):
Good afternoon.
Thanks for having me.
Speaker 2 (01:54):
Glad that you are here, rudy, so let's start off
with you letting us know alittle bit about you before we
actually go dive into thisinformation.
Speaker 3 (02:02):
Well, I'd be happy to .
I'm not born in Texas but I'vebeen here almost 30 years, so I
got here as fast as I could.
I've been in the franchisespace 34 years.
I've helped over 900 businessesget off the ground in my career
so far and that's kind of aballpark kind of lost count, but
(02:22):
I spent my entire career in thefranchise space and so what
I've uh, what I've allowedmyself to do is partly my
experience today to help folksunderstand what a franchise is,
how it works, what theobligations are, what you have
to do, what they have to do, andum, and how it all works to the
(02:44):
benefit of everybody.
So I appreciate the time tochat with you and your listeners
and answer questions andbasically just educate folks on
what a franchise is.
I'm just a resource, just likeif you want to paint your house,
you get someone who knows howto put paint on the wall.
If you're interested inbusiness ownership and a
(03:06):
franchise model, that's my areaof expertise and I'm here to
help.
Speaker 2 (03:10):
Okay, wonderful, so we're actually looking for a
great show and a lot ofinformation from you, rudy.
So you and I have talked beforeabout the franchise business,
so the question I have issomething we already talked
about, which is what are thebiggest myth about owning a
franchise?
That most people believe, butit's not true.
Speaker 3 (03:31):
The first, probably biggest.
The biggest misconception, Ithink, is most people think
franchising is fast food andwhile there are some fast food
opportunities in franchising,it's not just fast food.
In franchising it's not justfast food.
(04:06):
There's lots of differentverticals, from automotive
services to medical services,senior care and senior placement
, various retail establishments,all kinds of different things.
Role is helping folksunderstand just what is
available and how it might be agood fit for their background,
whether they've got an ITbackground or just a customer
service background or a salesbackground.
Lots of great opportunities.
Other misconceptions are oh, Idon't have enough money to do it
.
And most people don't realizethat it's not as expensive as
you might think and there's waysof leveraging retirement funds,
(04:27):
insurance plans, home equitysavings, investment accounts,
things like that, all withoutpenalties or taxation.
If you know the right person totalk to, they can explain how
it works, give you your choicesand see what's in your budget.
And then the last thing is itcan be an overwhelming process.
(04:48):
If you were to Googlefranchises.
there's 4,000 choices out theretoday and where do you start and
so getting help from somebodywho knows what they're doing,
somebody like myself.
There's 180 guys and girls inmy company that do what I do
around the country and aroundthe world, and there are other
(05:08):
companies who have people likemyself who do this.
So get yourself a trustedresource to help you navigate
the waters and figure out iffranchising is a good fit for
you.
If so, what type of franchise,how to pay for it, how to get
legal help.
All of those kinds of thingsare all things that I help
people figure out and navigatethat journey.
Speaker 2 (05:28):
So they basically don't have to go in this thing
by themselves.
That's what you're saying.
You're available with help outthere to help them with the
franchise.
Speaker 3 (05:37):
That's exactly right, and the whole concept of a
franchise is to be in businessfor yourself, but not by
yourself.
That's been a catchphrase infranchising for decades.
We're taking it a step further.
How do you get into the rightfranchise?
And so my role is to help youfigure out, because all the
franchises out there will.
They'll accept your money,they'll sign you to a licensing
(05:58):
agreement and they'll teach youhow to do their business.
That's their role.
And you follow the program.
You'll do that and pay someroyalties, and that's your role.
Well, that's all great, but youalso have to make sure you're
in the right one, because youdon't want to get bored with
what you're doing.
You don't want to check out onwhat you're doing.
You don't want to have it notwork out, and so making sure you
(06:19):
find the right fit is where Icome in and make sure that you
don't overextend, that you findsomething that you can actually
execute and follow the programon and that you know might be a
good fit for you and your familyon a long-term basis.
Speaker 2 (06:33):
Okay, great.
So when you talk about that,the potential of franchises what
should research be done beforecommitting to a franchise?
What type of research should wedo before we commit?
Speaker 3 (06:51):
So the biggest thing that you need to be aware of is,
every franchise company haswhat's called a franchise
disclosure document.
We call it the FDD.
It's an overwhelming document.
It's anywhere from 150 to 300pages, and I don't want to say
it's legalese, because theFederal Trade Commission
requires that it's written inplain English, but it's an
overwhelming amount ofinformation and so but you have
(07:11):
to review it, you have to reviewit in detail, you have to
understand it.
You have to understand theobligation that you're getting
yourself into before you signthe documents and before you
write the check and so gettinghelp whether that's a franchise
attorney not just a businessattorney, but a seasoned,
knowledgeable franchise attorneyto review documents and explain
(07:33):
to you.
You may not be able to changemuch, but you need to understand
what you're signing before youdo it.
There's also information in thedisclosure about how the
business runs.
Validation is an important part.
Talking to other franchiseowners for the company or
competing companies tounderstand really what you're
getting yourself into.
What does a day in the lifelook like?
And if you don't understandthat clearly, make sure you do
(07:56):
before you make that decision.
Speaker 2 (07:58):
Exactly.
Okay, that makes a lot of sense.
So people are now looking atand you know, as a loan broker,
we have people coming in andpurchasing business or they're
acquiring partners or whateverthe case.
So those are now looking at andyou know, as a loan broker, we
have people coming in andpurchasing business or they're
acquiring partners or whateverthe case.
So those are consideredindependent businesses.
So when we look at franchise,how can someone determine if a
franchise is the right path forthem compared to starting an
(08:19):
independent business?
Speaker 3 (08:22):
Generally, I answer that question by starting with
some basic statistics.
According to the Bureau ofLabor Statistics, 80% of all new
businesses mom and pop startupswill be closed in 24 months.
It's just hard.
It's just hard to start yourown business from scratch.
(08:42):
It doesn't matter how good theidea is, if you make great
cupcakes, that's fabulous, butif you don't know anything about
accounting and marketing andfiling the DBA and registering
trademarks and all these otherthings where things can go wrong
, then you may stumble on somethings or make a mistake that
(09:02):
gets you in trouble.
There's just a lot of thingsthat can go wrong.
The flip side is a franchisehas a 95% success rate.
That's.
That's different, right.
So if I'm, if I'm, if someonehas already proven the system,
they've already shown me how tomake the cupcakes, but they also
show me how to do theaccounting.
They show me how to find mycustomers and what my marketing
(09:24):
plan is.
They also show me how to do theaccounting.
They show me how to find mycustomers and what my marketing
plan is.
They've got a brand around it,so you know some cool name or
something that you know peoplecan identify with, and so
there's advantages to being inbusiness for yourself owning
your own piece of the pie, butdoing it in conjunction with a
system that you can follow.
And as long as you follow theprogram, your chances of success
(09:46):
are significantly,significantly higher, and that's
what franchising brings to thetable.
Speaker 2 (09:53):
Bring to the table, compared to you doing your own
business.
Great answer, great answer.
So what are some of the mostcommon mistakes new franchise
owners make and how can theyavoid them?
Speaker 3 (10:04):
new franchise- owners make and how can they avoid
them?
The first is thinking that theyknow what they want before they
talk through the process.
I get a lot of people who cometo me and they specifically want
that famous chicken drive-thruplace that everybody talks about
and they think that that's whatthey want to do but they don't
(10:25):
have all the information right.
You and I had that conversation.
Speaker 2 (10:28):
Right.
Speaker 3 (10:29):
You knew somebody who was interested in that and I
said, well, did you know, this,and did you know this?
And did you know this?
Oh no, I didn't know that.
So now, based on facts, you canmake a better, more informed
decision.
Okay, so research is importantbut, research doesn't mean
(10:50):
Google, okay.
Research means talking to peoplein the business.
Research means finding anexpert, whether that's an
attorney, to understand whatkind of business entity you
should create to protectyourself.
An accountant to make sure thatyou set up the right entity for
your personal tax situation andLLC.
Everybody knows what that is,but a sub chapter S or C court
(11:10):
might be a better fit for you,but you don't know that until
you talk to someone who knowswhat they're talking about.
Okay, another big mistake ispeople will go to legal zoom or
some online service and formtheir own business entity Huge
mistake right.
Too many loopholes in there.
Your personal assets are stillat risk.
(11:32):
I would never, never, never,let one of my clients go form
their own LLC.
Getting overextended isprobably the next biggest thing
that you know they try to do toomuch.
Speaker 2 (11:46):
Okay.
Speaker 3 (11:46):
And so, uh, you know, temper the enthusiasm just a
little bit.
Make sure you set yourself upfor success.
Um, you can always grow more.
You can always do other things.
Um, you know synergisticbusinesses, um, but I think, at
the end of the day, it's alsobeing coachable.
Um, franchise systems have aprocess.
They figured it out, but Ithink, at the end of the day,
it's also being coachable.
Franchise systems have aprocess.
(12:06):
They figured it out.
They don't need you to fix it.
There's a certain way to make aBig Mac and that's what the
customer expects.
So don't be putting shrimp onyour Big Mac and upsetting the
customers.
That's not how you do it.
And even though you love shrimpand it might be delicious,
that's not what the customersare looking for.
So, follow the program, becoachable, buy into the system.
(12:47):
You know, drink than people whothink they can outsmart the
system and and and find ashortcut or or find something
else that they can do.
That, will you know, make themmore money faster, or whatever.
Those, those people, are notgoing to be successful long term
and those are the ones that endup, you know, uh, leaving the
system early, for whateverreason exactly, and I know, uh,
what you're saying on thefranchise.
Speaker 2 (13:07):
Like, for instance, people want to change some
recipes.
I don't think they realize that.
We know you've changed therecipe, but you are a certain
restaurant you know what I'msaying that you bought.
So I see that can happen and itwill add to the bottom line,
which is the money you won't getwhat you should get if you're
not doing it based on whatthey're giving you.
So that's some greatinformation.
(13:27):
So what other hidden costsshould potential franchise
owners be aware of when they arebuying into a franchise?
Speaker 3 (13:36):
So in that franchise disclosure document that I
mentioned earlier, there are twocritical actually three
critical sections.
Every franchise disclosure has23 sections.
It doesn't matter what thefranchise is, they're all the
same.
That's mandated by the FederalTrade Commission.
So now it's helpful to findthis information.
Section six talks about ongoingcosts.
(13:59):
What is the franchise going tocharge you on an ongoing basis
for various services, royalties,marketing fees, technology fees
, late fees?
Anything that they can chargeyou for has to be listed in that
document, or they're notallowed to charge that to you.
So if you want to know what's itgoing to cost to operate the
(14:19):
business.
It's right there in item six.
Item seven is the startup costs.
You got to look at those verycarefully the franchise fee,
construction, signing a lease,buying equipment, inventory,
travel for training, setting upyour corporation, setting up
(14:39):
your books, marketing, spend,Everything that you need to be
open to the public is itemizedin section 7.
And.
And then there's besides thatchart where it's all itemized.
Then there are paragraphsafterward with explanations.
Read those explanations,understand those numbers and and
(15:00):
and validate those numbers whenyou, when you're talking to
owners, did it actually cost you$35 a foot to build your space,
or $150 a foot to build yourspace, or was the equipment
really this much, or were youable to get a deal?
Challenge may not be the rightword.
Inquire as to where thesenumbers are coming from, what do
(15:23):
they mean, what's behind themand what are the opportunities.
Generally, a franchise is goingto give you the low and the
high number as to what it'sgoing to cost to open their
business.
Keep in mind that that numberhas to be good in all 50 states.
So if I'm looking at afranchise disclosure for a
candidate in Texas, I know thatthat disclosure also is good in
(15:45):
California and New York, whichis probably more expensive to
start a business, so it's notgoing to cost me quite as much.
But Dallas is not cheap Dallasand Collin County and our area
is starting to get up there interms of cost.
But if I'm in Birmingham,alabama, where cost of living is
significantly less, I know thatit's not going to cost me as
(16:05):
much to open the business inthat market than it would be in
Dallas or Los Angeles.
So we'll look at all thosenumbers and inquire and see what
the real numbers are.
Or section 19 of the FDD iswhere companies will share.
They'll share financialperformance of their business,
(16:31):
whether it's their company ownedunits or their franchise units
that have been open, that aremature, that have been open for
you know, at least a year or so,so that you can have some
understanding as to the incomethat's generated by running this
business.
And usually they'll put upaverages, maybe averages by
quartiles or in thirds top third, bottom third.
You know those kinds of things.
You really really, really wantto dive into those numbers and
(16:53):
understand where the money'scoming from, how revenue is
generated, what costs are thenassociated with it?
and build your own financialmodel right.
Don't just say how much moneycan I make?
I don't know financial model.
Don't just say how much moneycan I make, I don't know.
I don't know what you're goingto do, whether you're going to
follow the system or if you'regoing to go and push shrimp on
(17:13):
your big net.
I don't know the answer to that, so I can't tell you how much
money you're going to makeunless you go, execute the plan
and have all the dominoes fallinto place and the best you can
do is a projection in your andthen trust your gut.
Speaker 2 (17:30):
Okay, so that sounds pretty good.
Speaker 3 (17:33):
Go ahead and get help Review those numbers with your
accountant, review them withyour consultant, review them
with your potential franchisor,review them with other
franchisees.
Make sure that they make sense.
Speaker 2 (17:45):
That makes a lot of sense.
Now I guess we got people on Ifyou guys go into the chat and
you can ask questions, and soRudy is prepared to answer any
questions you have.
So just utilize the chat forthat and then I'll actually ask
him.
So the next question we have ishow important is location when
choosing a franchise, and whatis the criteria should be
considered?
Speaker 3 (18:07):
So every good franchise organization has a
process for finding a location.
Now let's back up.
Not every franchise requires alocation.
Some are home-based businesses,some are home-based or a little
warehouse where I have atrailer and on my trailer I've
got a ladder and some bucketsand I paint houses, and that's a
(18:28):
franchise, so you don'tnecessarily need a storefront to
run that franchise.
Those are franchises that youcan be operational in 30 to 90
days after you sign a franchiseagreement.
If a franchise does requireretail space, you're going to
extend that time because it'sgoing to take you six months
just to identify the location,negotiate the lease and and
(18:54):
secure the keys.
Then you can build it right andso you might be a year before
you're open, and that may bepart of your consultation with
someone like me how soon do youwant to be in business?
I want to be in business in sixmonths.
I don't have a job right now,okay.
Well then, maybe retail is notsomething we're going to look at
.
I'm going to coach you throughthat process, right?
Maybe we're going to look at ahome-based business or warehouse
(19:16):
based business or a trailermobile business, anything like
that.
You can be up and running in 90days and you can be dog grooming
, right, and that's pretty cool,right, and they'll teach you
how to do all those kinds ofthings.
Now, if your business doesrequire real estate, then
they're going to have criteria.
They're going to look at theirtop performing stores.
(19:38):
Their top performing storeshave populations within a radius
that support the business,certain income levels, household
income levels, ethnicities, jobtypes, whatever right and so
they know what they're lookingfor.
Now they're going to go to thecommercial realtor in your area
(20:01):
or, if you don't have one, Ihave some and we're going to go
to that commercial realtor andsays my franchisor, Meineke Car
Care Centers, says I need 10,000square feet with four garage
bays or a piece of land that Ican build that on right and I
can either rent that land or buythat land.
But in a 10-mile radius I need5,000 households of average
(20:25):
income of $65,000 or more,whatever, whatever, whatever the
companies have the criteria,this is what's been successful
for them before.
Again, follow the formula youdon't have to go reinvent,
reinvent.
Oh, this, this looks like it'dbe a great area.
And if they say no and theyhave the right to say no- right
they say no, you're missing themark here.
Follow their advice.
(20:45):
They've done this beforeexactly I've had franchise
owners in my past pick their ownlocation.
I then go to the market totrain them or whatever, and I'm
disappointed that the location Ilook at it goes.
I know, when I walk in the door, whether they're going to be
successful or not.
Speaker 2 (21:03):
Exactly.
Speaker 3 (21:04):
I didn't know that was even provided location.
Speaker 2 (21:06):
They help you find a location with some of them, some
of the franchise will.
Speaker 3 (21:11):
Yeah, most, most of them will and most of them have
criteria because they want youto be successful.
Here's here's.
Here's something you need toknow.
If a franchise company has afranchisee who is unsuccessful
and that business fails and theyhave to close their doors, they
are required to put that in thedisclosure.
So the next new candidate isgoing to see that.
Speaker 2 (21:34):
They go what?
Speaker 3 (21:35):
happened to Jackie?
Why did she close her store?
Well whatever, whatever,whatever, right.
And if there's a whole longlist of people who have closed
their business, it's going to beharder for them to sell the
next new franchise.
So they're going to doeverything in their power to
make sure that your store nevercloses.
(21:56):
They are motivated to make sureyou are successful.
Now, if you're not followingthe program and you just need to
go away and sometimes that'sthe case if you just refuse to
stop putting shrimp on your BigMac then they're going to say,
all right, maybe you shouldn'tbe a franchisor, and we're going
to find a way to have yougracefully exit the system and
go about your business.
We're going to find someoneelse to buy your location and
(22:17):
we're going to move you out ofthe system.
And that's okay too, because ifyou're not going to follow the
system, you're not going to besuccessful anyway.
So, again, that's that's thebest thing they can do, for you
For you Okay.
Speaker 2 (22:27):
So we have a question did come in from Patel and he's
asking how much help does thefranchisor help with connecting
financing and operation supportlike vendors?
Speaker 3 (22:45):
How much do they do in helping with that?
That varies from company tocompany, but generally that's
the single biggest thing thatthey do.
So whatever it is that you'rebuilding let's say, a restaurant
, restaurant needs kitchenequipment, needs tables, needs
chairs, needs decorations on thewall, etc.
Etc.
Etc.
Generally they're going to handyou a vendor book.
These are all the people you canbuy your stuff from.
(23:07):
Now one of the things you haveto know is does the franchisor
get money from that vendor as akickback or a rebate?
And if they do, they arerequired to disclose that in
their franchise disclosure.
They are required to tell you.
So it's not a bad thing thatthey do that, but they can't do
(23:28):
it behind your back.
Okay, so that possibility isthere to provide, provide you
vendors, contractors, creditcard companies.
Software for your accounting uh, where to buy your.
Buy your tables.
Where to buy your walk-incooler.
Where to buy your, your cuttingboards.
Where to buy your table saw.
Where to buy your step ladderall of that stuff is in the
(23:49):
vendor list and it's itemized inthe disclosure right.
So where does that number comefrom?
To build my business, stuff isin the vendor list and it's
itemized in the disclosure Right.
So where does that number comefrom?
To build my business?
It's in the disclosure.
What makes up that number?
Here's a list of the vendors.
Here's all the equipment youneed to buy.
You add that up there.
It is in the disclosure.
Speaker 2 (24:06):
OK, great, that was a great question to Patel.
Ok, anybody else have anyquestions?
Put them in a chat and wedefinitely going to give them to
Rudy, all right, so the nextquestion what are some of the
under the radar or emergingfranchise opportunities that are
gaining momentum in 2025?
Speaker 3 (24:31):
QC Kinetics very popular brand, game Day, men's
Health both big, huge franchisecompanies.
Very difficult to get one oftheir locations or territories
at this point.
In fact, I think Game Day issold out across the country now
and they're just lookinginternational.
But it's medical healthservices, senior placement,
(24:53):
anything in the senior spacehuge up-and-coming sector.
The baby boomers, the last ofthe baby boomers, are aging into
that sector.
The millennials behind them arean even bigger group of people.
So finding a place for grandmaor grandpa or mom and dad as
they get older they can't beleft at home.
Those are great businesseswhere you're helping them find
(25:16):
suitable accommodations orin-home health care, where a
nurse or just a companion comesto the house, helps, helps clean
up, have some chores, maybetakes them to the doctor uh,
husband and wife might beworking so they can't deal with
all the stuff all the time.
So they have in-home healthcare.
Come take care of mom and dadand take care of some of those
(25:39):
things so that they're notleaving the gas on or burning
the house down or doing whatever.
Speaker 2 (25:43):
Those franchises are something to look at.
You said it's kind of takingoff in 2025.
Speaker 3 (25:49):
They have been for the last couple of years and I
think and I think that trend isgoing to continue.
There's lots of great brands toprovide in-home health care as
well as health funding placementin senior care facilities okay,
it makes sense.
Speaker 2 (26:02):
It makes sense what everything going on it does so
and very, very simple businessmodels to operate okay, great.
We have another question fromtj.
How do we prevent overpayingfor a franchise?
Speaker 3 (26:18):
That shouldn't happen , since all the costs are
itemized in the disclosure.
But I think it's important tosay all right, if I'm going to
build this restaurant and theysay it's going to cost me half a
million dollars, me half amillion dollars, okay, I'm gonna
take, I'm gonna take thatdisclosure and I'm gonna go talk
to a local contractor and say,all right, this franchise says I
need a 2 000 square feet infrisco and that I should be able
(26:41):
to build it for 250 000.
Is that a legitimate number,right?
And so don't know, don't, don'tfind that out after you bought
the franchise.
It's going to cost you 300 000.
Right, ask somebody before youmake that decision.
Can I build this in frisco forthis amount of money?
Exactly, and know the answer tothat?
(27:03):
So the best way to uh, the bestway to not overpay for stuff is
to just ask questions.
And again, you know are thereways of getting some of this
equipment.
Can I get a used ladder to opena painting company?
Yeah, a ladder is a ladder, aslong as it's not broken, whether
you buy a new one at the bigbox or you buy a used one at a
garage sale, it's a ladder,right.
(27:24):
But you need a ladder to painta house, so you can save a few
dollars by doing that.
But you can't really keep yourway through that process either.
Some stuff you just got to buyand that's just.
It is what it is it is what itis.
Speaker 2 (27:41):
that makes a lot of sense as well.
Now we have another question,um, from patel how much do you
sit on exploratory calls tochoose franchises within the
same industry?
So what are we saying here?
Patel, I can turn you on if youwant, so you can kind of say
(28:02):
your question a little bit moreso you can expand.
Are you OK with that?
What are some industries toinvest in over the next couple
of years?
So he said what are someindustries to invest in over the
next couple of years?
Just raise your hand, patel, ifyou want to speak, ok, and then
I'll turn it on.
Speaker 3 (28:18):
So the question is what are the up and coming
industries that I'm going to sayare medical services senior
placement, home services.
There's always going to bedemand for electricians,
plumbers, hvac, those kinds ofthings, and there's lots of
companies in franchising thatprovide required services.
(28:43):
Right, because you know when,the, when, the, when, the AC
goes out.
You've got to get a fix Rightso that doesn't go away.
No matter what the what theeconomy is doing, People still
need to get that done.
Speaker 1 (28:55):
Then there's.
Speaker 3 (28:57):
Then there's that remodels and renovations and
things like that Lots of greatconstruction companies.
All of those do well when theeconomy is good.
Do okay when the economy isokay, but do slow down a little
bit when money gets tight.
I'll put off doing the bathroomagain another year, right,
(29:18):
because money's tight this year.
So when there's a choiceinvolved those, um.
But you know, remediation whenthe hot water heater breaks,
your house floods.
There's no getting around that.
You need to take care of thattoday and insurance generally
takes care of that.
Hopefully, you know goodinsurance will cover those
things.
But those services are alsovery lucrative businesses right
(29:40):
um and they businesses andthey're not going away.
They're not going away anytimesoon.
A lot of people are talkingabout electric vehicles, vehicle
charging, things like that.
That's a real hot topic.
I have some concerns about that.
I think the technology in thatspace is changing so quickly
(30:01):
that if you were to buy afranchise in that space today
and open it in six months itcould be different, and a year
from now it may be so different.
I just don't know and I don'thave a crystal ball, but I'm
skeptical of those kinds ofthings and unless you have other
inside knowledge or otherbackground in that or just an
(30:23):
appetite, that's somethingyou've got to have.
I have businesses that do that.
I'm a little nervous about them, to be honest with you because,
the technology is changing sofast that you could literally
buy the franchise today, and itcould be obsolete in a year.
Speaker 2 (30:40):
And I can see that, especially when you're looking
at the process it takes to getthe franchise going and, like
you said, six months, it mightbe a year.
So I hadn't even thought aboutit until you said it.
You're right, you have to lookin the future of what it's going
to be by the time you open.
And you're right, there's a lotof change in that and I know
someone in the chat mentioneddon don't say ai, but ai is not
(31:00):
a franchise or anything youthink we would look in.
Speaker 3 (31:03):
You know how they're working with that because
there's a lot of changes in itthe ai is changing how we do
business right, so let's, let'ssay it that way okay the ability
, the ability to make peoplemore efficient, more productive.
Right, ai, can you know?
If I want to post on socialmedia, I can get AI to do that
for me and it creates all theseneat things and videos and blah,
(31:25):
blah, blah.
It allows me to be a bettermarketer.
It allows me to be a better youknow, maybe provide a script to
create an app to run mybusiness a little bit better.
Tremendous advances intechnology.
If you think the last fiveyears have been crazy, the next
five you won't even recognize.
I mean, it's going toabsolutely blow your mind and it
(31:46):
will change some of the things.
It will change some of thesteps in how we do business.
But, if you think about business, as to what's still an
essential requirement, AI cannotprepare your air conditioning.
Ai cannot change your oil.
There's just certain thingsthat AI can't do, but all the
big companies are investing inthe tools leveraging AI to make
(32:08):
their businesses more efficientand smarter.
Now let me ask you this Do theyhave an AI franchise?
Do you know of?
Yeah, not specifically, thatjust does ai um there are tech,
there are tech companies, thereare uh companies that will do
network services.
(32:28):
If you're a small business andyou just you're not big enough
to have a tech team and you wantto outsource that to nerds to
go or team logic it, or uh, Iguess that's the or Global Cyber
or Cyber Global.
Those guys do network protection, cyberware, cyber protection,
(32:50):
hacking, all that other kind ofstuff.
They help businesses protectother businesses or protect
against that.
Ai has some of the tools thatthey use to protect your
business from hackers and soforth.
Speaker 2 (33:04):
Right.
So it's basically you're sayingthat AI would be probably along
with the technology industry.
Somewhere in there might be apart of it.
Speaker 3 (33:12):
If you're talking to franchise companies, about a
business, one of the questionswould be how is your company
leveraging artificialintelligence to make yourself
more efficient?
Speaker 2 (33:20):
and keep up with your competition.
Ok, that's a great question.
Thank you so much.
You're right on that.
So let me ask you this whatfinancing strategies or
resources do you recommend forthose who want to purchase a
franchise?
Speaker 3 (33:36):
So we talked about the franchise disclosure, having
the startup costs, Section 7,the low and the high.
Take that high-end number.
So let's say you're talking toa coffee shop and that coffee
shop is going to cost a half amillion dollars.
You're going to need somewherebetween, depending on your
(33:56):
credit score somewhere between10% and 30% cash infusion into
the business.
So if it's half a milliondollars, I'm going to need
between $50,000 and $150,000cash.
I can then go borrow $350,000to $450,000 from an SBA lender
to get my half a million dollars.
(34:18):
And now there's my budget,keeping in mind that half a
million dollars does.
And now there's my budget,keeping in mind that half a
million dollars does include sixmonths worth of operating
expense to make payroll and payrent, things like that.
Cash reserves are factored intothat number, right, so it's not
just money out of pocket, andyou should then be able to be
cash flow positive and be ableto service your debt within that
(34:39):
six months time or within thatreserve period right, so that
you're off and running otherbusinesses that get off to a
faster start.
Don't need cash reserves.
If all I have is a trailer andmy trailers $200,000, and it has
equipment on it, I just paidcash for it or I got some
financing for it, equipmentleases, whatever.
(35:02):
That's fine, but I can bepainting houses really quick.
The coffee shop I still need tofind it, build it, et cetera
and.
I got to be paying my bills.
So am I still working and can Istill pay my bills?
Or am I tapping into my cashreserves because I'm not
currently working and I'm livingon that?
money, all of those becomefactors into the cash flow, the
business and and things that Ihelp my clients understand
(35:26):
before they make any decisions,before they borrow money
whatever.
But at the end of the dayyou're looking at anywhere from
ten to thirty percent cashinfusion depending on your
credit score.
If you're 800 or better, youcan probably get something in
the 10 range.
There are some some banksthat'll do that the bigger the
project you know, if you get amillion and a half dollar
(35:48):
restaurant, you're probablylooking at 20 25 cash infusion
and in some of those biggerprojects versus just minimal
dollars down okay, great, thankyou so much.
Speaker 2 (35:58):
So I'm gonna ask you my last question, but at the
same time, I want you to givesomething you definitely want
our listeners to know.
So the question I have is whatqualities or habits have you
noticed in the most successfulfranchisees you've worked with,
and then you definitely want totell us a little bit about it.
A little bit about it.
Speaker 3 (36:18):
So, I'll give you a great example.
One of the first people I putinto a franchise after I became
an independent consultant, soabout four, yeah, four years ago
, a gentleman here at Frisco, aguy that I used to work with
several years before, connectedwith me on LinkedIn and saw that
I was doing something differentand asked me for some help.
(36:39):
So I connected him with a windowcleaning business and he had
never cleaned windows before.
He was a corporate training guy.
He built programs to teachpeople how to do uh, you know
their job in the field forthousands of stores and all that
kind of stuff.
Now he's got a window cleaningbusiness and he calls me up the
first month after he signed andhe's getting going and he goes.
(37:00):
Rudy, I'm hopping mad, I'mhopping mad.
I don't like this.
What's the matter?
He goes.
They want me to spend $2,000and do the ad pages, that direct
mail couponing thing right thateverybody gets in the mail
called the ad pages.
He goes.
Speaker 1 (37:16):
I don't want to do it .
Speaker 3 (37:17):
I think that's crazy.
I said all right, john, let meask you something.
Who were they targeting?
Who were you targeting in yourbusiness?
Speaker 2 (37:30):
to clean windows.
Who makes?
Speaker 3 (37:31):
that decision?
Right, Typically the wife orthe lady of the house, right?
So just because you don't readthe ad pages, John, they come in
the mail you throw them out.
Does your wife read them?
Well, sometimes?
Okay, Well, your company knowsthat ad pages works because the
lady who picks up the mail looksfor the coupons and is going to
(37:52):
find your ad when she wants herwindows done.
She's going to call you.
And so what you need to do istrust the process.
These guys have been doing thisfor a long time.
Be coachable.
Put the first order out there.
Let's see what happens, okay.
All right, I'll trust you, I'lldo it.
He's reluctant but he's goingto do it.
(38:13):
He calls me back a month laterthe ad dropped.
First day it was out in themail he got a 65 000 job to
clean windows.
This house had 95 windows in it,three-story house.
He cleaned all the windowsinside and out, charged the lady
65 000 to have her windowscleaned and he said I'll never
(38:37):
not do ad pages ever again.
Thank you, thank you forcoaching me into being coachable
.
Speaker 2 (38:44):
Exactly, and that was a great one.
Let's tell everybody how did Iget in touch with you, Rudy.
That's what I want them to hear.
Speaker 3 (38:51):
So right here on my shirt, franchise with Rudy
FranchisewithRudycom is mywebsite.
So if you want to find out moreabout me, my contact
information, etc.
Etc.
Just go to that website and youcan find me there.
You can also text my name, rudyR UDY, to 26786.
That will automatically get youregistered into my database and
(39:16):
then we can connect and followup and so forth.
So you'll get an automatedresponse.
Provide me your contactinformation and so 26786, text
the word Rudy to that and we canget connected.
Speaker 2 (39:29):
Okay, I just put it in the chat.
Speaker 3 (39:31):
I saw that.
Or if you Google me, rudyFrederico, I am the only one on
the planet.
The paragraph that shows up hasmy phone number in it.
So just Google, rudy Frederico,find me on LinkedIn, find me on
Facebook, pick up the phone,call me.
Let me know how I can help.
I also I don't charge peoplefor consultation.
(39:55):
I am compensated by the brandsthat I represent.
They all pay me about the same.
So whether I'm helping you finda painting company, a
restaurant or an oil changebusiness, it doesn't matter to
me.
I just want you to besuccessful.
So let's have that conversation, and if it's you or somebody
you know, or you and somepartners, or you and some
(40:15):
friends, or whatever you want todo, we just have to have the
conversation, learn more aboutit, get educated and then make
decisions, and then you writechecks, and so nothing costs
anything until you learn whatyou're doing Exactly.
Speaker 2 (40:27):
So you all definitely can reach out to Rudy.
I have on occasion for otherclients and when I say he has a
wealth of knowledge, oh my Godhe does.
So you definitely want to reachout to him.
Well, I want to thank you somuch, rudy, for taking time out
to speak to us today.
We definitely enjoyed you anddefinitely hopefully we can have
you back on maybe our podcastor some other stuff that we have
(40:48):
as well.
Speaker 3 (40:48):
Okay, We'd love to Thank you very much Appreciate
the time.
Speaker 2 (40:52):
Thank you.
So that's the end of our showfor today and I want to thank
our guests, like I said, rudy,and encourage you all to contact
him.
Like all previous guests.
He's listed on our websitereferral page at
wwwtdjequityllcnet.
Please visit our YouTubechannel at TDJ Equity Funding
(41:12):
Insiders for previous recordingand this recording and if you
would please subscribe to boostthe algorithm to alert others
about us as well.
Again, thank you all forlistening.
Happy growing your business,until.
Again thank you all forlistening.
Speaker 1 (41:28):
Happy growing your business.
Until next time.
Thank you and take care.
Bye-bye.
We hope you enjoyed thisepisode of TDJ Equity Funding
Insiders Podcast.
If you'd like to be a guest orget in touch with us, please
visit our website attdjequityllcnet, forward slash
podcast or email us at podcastat tdjequityfundinginsidersnet.
(41:50):
Until next time, take care.
Ready to get the inside scoop on equity funding?
Tune in to TDJ Equity FundingInsiders Podcast for an in-depth
look at what it takes to accessfinancial capital and maximize
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Hear from experiencedprofessionals, including bankers
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(00:36):
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Speaker 2 (00:44):
Giving Power to the Business.
Owned Webinar Series is aplatform to educate business
owners on the resources that mayadd value to your business
Owners Education Journey.
Welcome everyone.
The secret world of franchisingEver wonder how it works?
Have you ever thought aboutowning a franchise but stopped
(01:04):
short because you didn't knowwhere to start?
Do you wonder how much money doyou need to buy a franchise?
What research should you dobefore signing a dotted line?
If these questions have evercrossed your mind, you're not
alone.
Many people dream of owning abusiness without the guesswork
of building from scratch, butthey don't know where to find
(01:26):
the answers.
Today's show is the secretworld of franchising with our
guest, Rudy Farico.
Rudy is a franchise consultantin a DFW area of Texas, but he
works nationwide.
He has agreed to meet with ourlisteners to discuss the ins and
outs of the world offranchising.
(01:46):
But first let's welcome Rudy toour show.
Speaker 3 (01:52):
Good afternoon.
Thanks for having me.
Speaker 2 (01:54):
Glad that you are here, rudy, so let's start off
with you letting us know alittle bit about you before we
actually go dive into thisinformation.
Speaker 3 (02:02):
Well, I'd be happy to .
I'm not born in Texas but I'vebeen here almost 30 years, so I
got here as fast as I could.
I've been in the franchisespace 34 years.
I've helped over 900 businessesget off the ground in my career
so far and that's kind of aballpark kind of lost count, but
(02:22):
I spent my entire career in thefranchise space and so what
I've uh, what I've allowedmyself to do is partly my
experience today to help folksunderstand what a franchise is,
how it works, what theobligations are, what you have
to do, what they have to do, andum, and how it all works to the
(02:44):
benefit of everybody.
So I appreciate the time tochat with you and your listeners
and answer questions andbasically just educate folks on
what a franchise is.
I'm just a resource, just likeif you want to paint your house,
you get someone who knows howto put paint on the wall.
If you're interested inbusiness ownership and a
(03:06):
franchise model, that's my areaof expertise and I'm here to
help.
Speaker 2 (03:10):
Okay, wonderful, so we're actually looking for a
great show and a lot ofinformation from you, rudy.
So you and I have talked beforeabout the franchise business,
so the question I have issomething we already talked
about, which is what are thebiggest myth about owning a
franchise?
That most people believe, butit's not true.
Speaker 3 (03:31):
The first, probably biggest.
The biggest misconception, Ithink, is most people think
franchising is fast food andwhile there are some fast food
opportunities in franchising,it's not just fast food.
In franchising it's not justfast food.
(04:06):
There's lots of differentverticals, from automotive
services to medical services,senior care and senior placement
, various retail establishments,all kinds of different things.
Role is helping folksunderstand just what is
available and how it might be agood fit for their background,
whether they've got an ITbackground or just a customer
service background or a salesbackground.
Lots of great opportunities.
Other misconceptions are oh, Idon't have enough money to do it
.
And most people don't realizethat it's not as expensive as
you might think and there's waysof leveraging retirement funds,
(04:27):
insurance plans, home equitysavings, investment accounts,
things like that, all withoutpenalties or taxation.
If you know the right person totalk to, they can explain how
it works, give you your choicesand see what's in your budget.
And then the last thing is itcan be an overwhelming process.
(04:48):
If you were to Googlefranchises.
there's 4,000 choices out theretoday and where do you start and
so getting help from somebodywho knows what they're doing,
somebody like myself.
There's 180 guys and girls inmy company that do what I do
around the country and aroundthe world, and there are other
(05:08):
companies who have people likemyself who do this.
So get yourself a trustedresource to help you navigate
the waters and figure out iffranchising is a good fit for
you.
If so, what type of franchise,how to pay for it, how to get
legal help.
All of those kinds of thingsare all things that I help
people figure out and navigatethat journey.
Speaker 2 (05:28):
So they basically don't have to go in this thing
by themselves.
That's what you're saying.
You're available with help outthere to help them with the
franchise.
Speaker 3 (05:37):
That's exactly right, and the whole concept of a
franchise is to be in businessfor yourself, but not by
yourself.
That's been a catchphrase infranchising for decades.
We're taking it a step further.
How do you get into the rightfranchise?
And so my role is to help youfigure out, because all the
franchises out there will.
They'll accept your money,they'll sign you to a licensing
(05:58):
agreement and they'll teach youhow to do their business.
That's their role.
And you follow the program.
You'll do that and pay someroyalties, and that's your role.
Well, that's all great, but youalso have to make sure you're
in the right one, because youdon't want to get bored with
what you're doing.
You don't want to check out onwhat you're doing.
You don't want to have it notwork out, and so making sure you
(06:19):
find the right fit is where Icome in and make sure that you
don't overextend, that you findsomething that you can actually
execute and follow the programon and that you know might be a
good fit for you and your familyon a long-term basis.
Speaker 2 (06:33):
Okay, great.
So when you talk about that,the potential of franchises what
should research be done beforecommitting to a franchise?
What type of research should wedo before we commit?
Speaker 3 (06:51):
So the biggest thing that you need to be aware of is,
every franchise company haswhat's called a franchise
disclosure document.
We call it the FDD.
It's an overwhelming document.
It's anywhere from 150 to 300pages, and I don't want to say
it's legalese, because theFederal Trade Commission
requires that it's written inplain English, but it's an
overwhelming amount ofinformation and so but you have
(07:11):
to review it, you have to reviewit in detail, you have to
understand it.
You have to understand theobligation that you're getting
yourself into before you signthe documents and before you
write the check and so gettinghelp whether that's a franchise
attorney not just a businessattorney, but a seasoned,
knowledgeable franchise attorneyto review documents and explain
(07:33):
to you.
You may not be able to changemuch, but you need to understand
what you're signing before youdo it.
There's also information in thedisclosure about how the
business runs.
Validation is an important part.
Talking to other franchiseowners for the company or
competing companies tounderstand really what you're
getting yourself into.
What does a day in the lifelook like?
And if you don't understandthat clearly, make sure you do
(07:56):
before you make that decision.
Speaker 2 (07:58):
Exactly.
Okay, that makes a lot of sense.
So people are now looking atand you know, as a loan broker,
we have people coming in andpurchasing business or they're
acquiring partners or whateverthe case.
So those are now looking at andyou know, as a loan broker, we
have people coming in andpurchasing business or they're
acquiring partners or whateverthe case.
So those are consideredindependent businesses.
So when we look at franchise,how can someone determine if a
franchise is the right path forthem compared to starting an
(08:19):
independent business?
Speaker 3 (08:22):
Generally, I answer that question by starting with
some basic statistics.
According to the Bureau ofLabor Statistics, 80% of all new
businesses mom and pop startupswill be closed in 24 months.
It's just hard.
It's just hard to start yourown business from scratch.
(08:42):
It doesn't matter how good theidea is, if you make great
cupcakes, that's fabulous, butif you don't know anything about
accounting and marketing andfiling the DBA and registering
trademarks and all these otherthings where things can go wrong
, then you may stumble on somethings or make a mistake that
(09:02):
gets you in trouble.
There's just a lot of thingsthat can go wrong.
The flip side is a franchisehas a 95% success rate.
That's.
That's different, right.
So if I'm, if I'm, if someonehas already proven the system,
they've already shown me how tomake the cupcakes, but they also
show me how to do theaccounting.
They show me how to find mycustomers and what my marketing
(09:24):
plan is.
They also show me how to do theaccounting.
They show me how to find mycustomers and what my marketing
plan is.
They've got a brand around it,so you know some cool name or
something that you know peoplecan identify with, and so
there's advantages to being inbusiness for yourself owning
your own piece of the pie, butdoing it in conjunction with a
system that you can follow.
And as long as you follow theprogram, your chances of success
(09:46):
are significantly,significantly higher, and that's
what franchising brings to thetable.
Speaker 2 (09:53):
Bring to the table, compared to you doing your own
business.
Great answer, great answer.
So what are some of the mostcommon mistakes new franchise
owners make and how can theyavoid them?
Speaker 3 (10:04):
new franchise- owners make and how can they avoid
them?
The first is thinking that theyknow what they want before they
talk through the process.
I get a lot of people who cometo me and they specifically want
that famous chicken drive-thruplace that everybody talks about
and they think that that's whatthey want to do but they don't
(10:25):
have all the information right.
You and I had that conversation.
Speaker 2 (10:28):
Right.
Speaker 3 (10:29):
You knew somebody who was interested in that and I
said, well, did you know, this,and did you know this?
And did you know this?
Oh no, I didn't know that.
So now, based on facts, you canmake a better, more informed
decision.
Okay, so research is importantbut, research doesn't mean
(10:50):
Google, okay.
Research means talking to peoplein the business.
Research means finding anexpert, whether that's an
attorney, to understand whatkind of business entity you
should create to protectyourself.
An accountant to make sure thatyou set up the right entity for
your personal tax situation andLLC.
Everybody knows what that is,but a sub chapter S or C court
(11:10):
might be a better fit for you,but you don't know that until
you talk to someone who knowswhat they're talking about.
Okay, another big mistake ispeople will go to legal zoom or
some online service and formtheir own business entity Huge
mistake right.
Too many loopholes in there.
Your personal assets are stillat risk.
(11:32):
I would never, never, never,let one of my clients go form
their own LLC.
Getting overextended isprobably the next biggest thing
that you know they try to do toomuch.
Speaker 2 (11:46):
Okay.
Speaker 3 (11:46):
And so, uh, you know, temper the enthusiasm just a
little bit.
Make sure you set yourself upfor success.
Um, you can always grow more.
You can always do other things.
Um, you know synergisticbusinesses, um, but I think, at
the end of the day, it's alsobeing coachable.
Um, franchise systems have aprocess.
They figured it out, but Ithink, at the end of the day,
it's also being coachable.
Franchise systems have aprocess.
(12:06):
They figured it out.
They don't need you to fix it.
There's a certain way to make aBig Mac and that's what the
customer expects.
So don't be putting shrimp onyour Big Mac and upsetting the
customers.
That's not how you do it.
And even though you love shrimpand it might be delicious,
that's not what the customersare looking for.
So, follow the program, becoachable, buy into the system.
(12:47):
You know, drink than people whothink they can outsmart the
system and and and find ashortcut or or find something
else that they can do.
That, will you know, make themmore money faster, or whatever.
Those, those people, are notgoing to be successful long term
and those are the ones that endup, you know, uh, leaving the
system early, for whateverreason exactly, and I know, uh,
what you're saying on thefranchise.
Speaker 2 (13:07):
Like, for instance, people want to change some
recipes.
I don't think they realize that.
We know you've changed therecipe, but you are a certain
restaurant you know what I'msaying that you bought.
So I see that can happen and itwill add to the bottom line,
which is the money you won't getwhat you should get if you're
not doing it based on whatthey're giving you.
So that's some greatinformation.
(13:27):
So what other hidden costsshould potential franchise
owners be aware of when they arebuying into a franchise?
Speaker 3 (13:36):
So in that franchise disclosure document that I
mentioned earlier, there are twocritical actually three
critical sections.
Every franchise disclosure has23 sections.
It doesn't matter what thefranchise is, they're all the
same.
That's mandated by the FederalTrade Commission.
So now it's helpful to findthis information.
Section six talks about ongoingcosts.
(13:59):
What is the franchise going tocharge you on an ongoing basis
for various services, royalties,marketing fees, technology fees
, late fees?
Anything that they can chargeyou for has to be listed in that
document, or they're notallowed to charge that to you.
So if you want to know what's itgoing to cost to operate the
(14:19):
business.
It's right there in item six.
Item seven is the startup costs.
You got to look at those verycarefully the franchise fee,
construction, signing a lease,buying equipment, inventory,
travel for training, setting upyour corporation, setting up
(14:39):
your books, marketing, spend,Everything that you need to be
open to the public is itemizedin section 7.
And.
And then there's besides thatchart where it's all itemized.
Then there are paragraphsafterward with explanations.
Read those explanations,understand those numbers and and
(15:00):
and validate those numbers whenyou, when you're talking to
owners, did it actually cost you$35 a foot to build your space,
or $150 a foot to build yourspace, or was the equipment
really this much, or were youable to get a deal?
Challenge may not be the rightword.
Inquire as to where thesenumbers are coming from, what do
(15:23):
they mean, what's behind themand what are the opportunities.
Generally, a franchise is goingto give you the low and the
high number as to what it'sgoing to cost to open their
business.
Keep in mind that that numberhas to be good in all 50 states.
So if I'm looking at afranchise disclosure for a
candidate in Texas, I know thatthat disclosure also is good in
(15:45):
California and New York, whichis probably more expensive to
start a business, so it's notgoing to cost me quite as much.
But Dallas is not cheap Dallasand Collin County and our area
is starting to get up there interms of cost.
But if I'm in Birmingham,alabama, where cost of living is
significantly less, I know thatit's not going to cost me as
(16:05):
much to open the business inthat market than it would be in
Dallas or Los Angeles.
So we'll look at all thosenumbers and inquire and see what
the real numbers are.
Or section 19 of the FDD iswhere companies will share.
They'll share financialperformance of their business,
(16:31):
whether it's their company ownedunits or their franchise units
that have been open, that aremature, that have been open for
you know, at least a year or so,so that you can have some
understanding as to the incomethat's generated by running this
business.
And usually they'll put upaverages, maybe averages by
quartiles or in thirds top third, bottom third.
You know those kinds of things.
You really really, really wantto dive into those numbers and
(16:53):
understand where the money'scoming from, how revenue is
generated, what costs are thenassociated with it?
and build your own financialmodel right.
Don't just say how much moneycan I make?
I don't know financial model.
Don't just say how much moneycan I make, I don't know.
I don't know what you're goingto do, whether you're going to
follow the system or if you'regoing to go and push shrimp on
(17:13):
your big net.
I don't know the answer to that, so I can't tell you how much
money you're going to makeunless you go, execute the plan
and have all the dominoes fallinto place and the best you can
do is a projection in your andthen trust your gut.
Speaker 2 (17:30):
Okay, so that sounds pretty good.
Speaker 3 (17:33):
Go ahead and get help Review those numbers with your
accountant, review them withyour consultant, review them
with your potential franchisor,review them with other
franchisees.
Make sure that they make sense.
Speaker 2 (17:45):
That makes a lot of sense.
Now I guess we got people on Ifyou guys go into the chat and
you can ask questions, and soRudy is prepared to answer any
questions you have.
So just utilize the chat forthat and then I'll actually ask
him.
So the next question we have ishow important is location when
choosing a franchise, and whatis the criteria should be
considered?
Speaker 3 (18:07):
So every good franchise organization has a
process for finding a location.
Now let's back up.
Not every franchise requires alocation.
Some are home-based businesses,some are home-based or a little
warehouse where I have atrailer and on my trailer I've
got a ladder and some bucketsand I paint houses, and that's a
(18:28):
franchise, so you don'tnecessarily need a storefront to
run that franchise.
Those are franchises that youcan be operational in 30 to 90
days after you sign a franchiseagreement.
If a franchise does requireretail space, you're going to
extend that time because it'sgoing to take you six months
just to identify the location,negotiate the lease and and
(18:54):
secure the keys.
Then you can build it right andso you might be a year before
you're open, and that may bepart of your consultation with
someone like me how soon do youwant to be in business?
I want to be in business in sixmonths.
I don't have a job right now,okay.
Well then, maybe retail is notsomething we're going to look at
.
I'm going to coach you throughthat process, right?
Maybe we're going to look at ahome-based business or warehouse
(19:16):
based business or a trailermobile business, anything like
that.
You can be up and running in 90days and you can be dog grooming
, right, and that's pretty cool,right, and they'll teach you
how to do all those kinds ofthings.
Now, if your business doesrequire real estate, then
they're going to have criteria.
They're going to look at theirtop performing stores.
(19:38):
Their top performing storeshave populations within a radius
that support the business,certain income levels, household
income levels, ethnicities, jobtypes, whatever right and so
they know what they're lookingfor.
Now they're going to go to thecommercial realtor in your area
(20:01):
or, if you don't have one, Ihave some and we're going to go
to that commercial realtor andsays my franchisor, Meineke Car
Care Centers, says I need 10,000square feet with four garage
bays or a piece of land that Ican build that on right and I
can either rent that land or buythat land.
But in a 10-mile radius I need5,000 households of average
(20:25):
income of $65,000 or more,whatever, whatever, whatever the
companies have the criteria,this is what's been successful
for them before.
Again, follow the formula youdon't have to go reinvent,
reinvent.
Oh, this, this looks like it'dbe a great area.
And if they say no and theyhave the right to say no- right
they say no, you're missing themark here.
Follow their advice.
(20:45):
They've done this beforeexactly I've had franchise
owners in my past pick their ownlocation.
I then go to the market totrain them or whatever, and I'm
disappointed that the location Ilook at it goes.
I know, when I walk in the door, whether they're going to be
successful or not.
Speaker 2 (21:03):
Exactly.
Speaker 3 (21:04):
I didn't know that was even provided location.
Speaker 2 (21:06):
They help you find a location with some of them, some
of the franchise will.
Speaker 3 (21:11):
Yeah, most, most of them will and most of them have
criteria because they want youto be successful.
Here's here's.
Here's something you need toknow.
If a franchise company has afranchisee who is unsuccessful
and that business fails and theyhave to close their doors, they
are required to put that in thedisclosure.
So the next new candidate isgoing to see that.
Speaker 2 (21:34):
They go what?
Speaker 3 (21:35):
happened to Jackie?
Why did she close her store?
Well whatever, whatever,whatever, right.
And if there's a whole longlist of people who have closed
their business, it's going to beharder for them to sell the
next new franchise.
So they're going to doeverything in their power to
make sure that your store nevercloses.
(21:56):
They are motivated to make sureyou are successful.
Now, if you're not followingthe program and you just need to
go away and sometimes that'sthe case if you just refuse to
stop putting shrimp on your BigMac then they're going to say,
all right, maybe you shouldn'tbe a franchisor, and we're going
to find a way to have yougracefully exit the system and
go about your business.
We're going to find someoneelse to buy your location and
(22:17):
we're going to move you out ofthe system.
And that's okay too, because ifyou're not going to follow the
system, you're not going to besuccessful anyway.
So, again, that's that's thebest thing they can do, for you
For you Okay.
Speaker 2 (22:27):
So we have a question did come in from Patel and he's
asking how much help does thefranchisor help with connecting
financing and operation supportlike vendors?
Speaker 3 (22:45):
How much do they do in helping with that?
That varies from company tocompany, but generally that's
the single biggest thing thatthey do.
So whatever it is that you'rebuilding let's say, a restaurant
, restaurant needs kitchenequipment, needs tables, needs
chairs, needs decorations on thewall, etc.
Etc.
Etc.
Generally they're going to handyou a vendor book.
These are all the people you canbuy your stuff from.
(23:07):
Now one of the things you haveto know is does the franchisor
get money from that vendor as akickback or a rebate?
And if they do, they arerequired to disclose that in
their franchise disclosure.
They are required to tell you.
So it's not a bad thing thatthey do that, but they can't do
(23:28):
it behind your back.
Okay, so that possibility isthere to provide, provide you
vendors, contractors, creditcard companies.
Software for your accounting uh, where to buy your.
Buy your tables.
Where to buy your walk-incooler.
Where to buy your, your cuttingboards.
Where to buy your table saw.
Where to buy your step ladderall of that stuff is in the
(23:49):
vendor list and it's itemized inthe disclosure right.
So where does that number comefrom?
To build my business, stuff isin the vendor list and it's
itemized in the disclosure Right.
So where does that number comefrom?
To build my business?
It's in the disclosure.
What makes up that number?
Here's a list of the vendors.
Here's all the equipment youneed to buy.
You add that up there.
It is in the disclosure.
Speaker 2 (24:06):
OK, great, that was a great question to Patel.
Ok, anybody else have anyquestions?
Put them in a chat and wedefinitely going to give them to
Rudy, all right, so the nextquestion what are some of the
under the radar or emergingfranchise opportunities that are
gaining momentum in 2025?
Speaker 3 (24:31):
QC Kinetics very popular brand, game Day, men's
Health both big, huge franchisecompanies.
Very difficult to get one oftheir locations or territories
at this point.
In fact, I think Game Day issold out across the country now
and they're just lookinginternational.
But it's medical healthservices, senior placement,
(24:53):
anything in the senior spacehuge up-and-coming sector.
The baby boomers, the last ofthe baby boomers, are aging into
that sector.
The millennials behind them arean even bigger group of people.
So finding a place for grandmaor grandpa or mom and dad as
they get older they can't beleft at home.
Those are great businesseswhere you're helping them find
(25:16):
suitable accommodations orin-home health care, where a
nurse or just a companion comesto the house, helps, helps clean
up, have some chores, maybetakes them to the doctor uh,
husband and wife might beworking so they can't deal with
all the stuff all the time.
So they have in-home healthcare.
Come take care of mom and dadand take care of some of those
(25:39):
things so that they're notleaving the gas on or burning
the house down or doing whatever.
Speaker 2 (25:43):
Those franchises are something to look at.
You said it's kind of takingoff in 2025.
Speaker 3 (25:49):
They have been for the last couple of years and I
think and I think that trend isgoing to continue.
There's lots of great brands toprovide in-home health care as
well as health funding placementin senior care facilities okay,
it makes sense.
Speaker 2 (26:02):
It makes sense what everything going on it does so
and very, very simple businessmodels to operate okay, great.
We have another question fromtj.
How do we prevent overpayingfor a franchise?
Speaker 3 (26:18):
That shouldn't happen , since all the costs are
itemized in the disclosure.
But I think it's important tosay all right, if I'm going to
build this restaurant and theysay it's going to cost me half a
million dollars, me half amillion dollars, okay, I'm gonna
take, I'm gonna take thatdisclosure and I'm gonna go talk
to a local contractor and say,all right, this franchise says I
need a 2 000 square feet infrisco and that I should be able
(26:41):
to build it for 250 000.
Is that a legitimate number,right?
And so don't know, don't, don'tfind that out after you bought
the franchise.
It's going to cost you 300 000.
Right, ask somebody before youmake that decision.
Can I build this in frisco forthis amount of money?
Exactly, and know the answer tothat?
(27:03):
So the best way to uh, the bestway to not overpay for stuff is
to just ask questions.
And again, you know are thereways of getting some of this
equipment.
Can I get a used ladder to opena painting company?
Yeah, a ladder is a ladder, aslong as it's not broken, whether
you buy a new one at the bigbox or you buy a used one at a
garage sale, it's a ladder,right.
(27:24):
But you need a ladder to painta house, so you can save a few
dollars by doing that.
But you can't really keep yourway through that process either.
Some stuff you just got to buyand that's just.
It is what it is it is what itis.
Speaker 2 (27:41):
that makes a lot of sense as well.
Now we have another question,um, from patel how much do you
sit on exploratory calls tochoose franchises within the
same industry?
So what are we saying here?
Patel, I can turn you on if youwant, so you can kind of say
(28:02):
your question a little bit moreso you can expand.
Are you OK with that?
What are some industries toinvest in over the next couple
of years?
So he said what are someindustries to invest in over the
next couple of years?
Just raise your hand, patel, ifyou want to speak, ok, and then
I'll turn it on.
Speaker 3 (28:18):
So the question is what are the up and coming
industries that I'm going to sayare medical services senior
placement, home services.
There's always going to bedemand for electricians,
plumbers, hvac, those kinds ofthings, and there's lots of
companies in franchising thatprovide required services.
(28:43):
Right, because you know when,the, when, the, when, the AC
goes out.
You've got to get a fix Rightso that doesn't go away.
No matter what the what theeconomy is doing, People still
need to get that done.
Speaker 1 (28:55):
Then there's.
Speaker 3 (28:57):
Then there's that remodels and renovations and
things like that Lots of greatconstruction companies.
All of those do well when theeconomy is good.
Do okay when the economy isokay, but do slow down a little
bit when money gets tight.
I'll put off doing the bathroomagain another year, right,
(29:18):
because money's tight this year.
So when there's a choiceinvolved those, um.
But you know, remediation whenthe hot water heater breaks,
your house floods.
There's no getting around that.
You need to take care of thattoday and insurance generally
takes care of that.
Hopefully, you know goodinsurance will cover those
things.
But those services are alsovery lucrative businesses right
(29:40):
um and they businesses andthey're not going away.
They're not going away anytimesoon.
A lot of people are talkingabout electric vehicles, vehicle
charging, things like that.
That's a real hot topic.
I have some concerns about that.
I think the technology in thatspace is changing so quickly
(30:01):
that if you were to buy afranchise in that space today
and open it in six months itcould be different, and a year
from now it may be so different.
I just don't know and I don'thave a crystal ball, but I'm
skeptical of those kinds ofthings and unless you have other
inside knowledge or otherbackground in that or just an
(30:23):
appetite, that's somethingyou've got to have.
I have businesses that do that.
I'm a little nervous about them, to be honest with you because,
the technology is changing sofast that you could literally
buy the franchise today, and itcould be obsolete in a year.
Speaker 2 (30:40):
And I can see that, especially when you're looking
at the process it takes to getthe franchise going and, like
you said, six months, it mightbe a year.
So I hadn't even thought aboutit until you said it.
You're right, you have to lookin the future of what it's going
to be by the time you open.
And you're right, there's a lotof change in that and I know
someone in the chat mentioneddon don't say ai, but ai is not
(31:00):
a franchise or anything youthink we would look in.
Speaker 3 (31:03):
You know how they're working with that because
there's a lot of changes in itthe ai is changing how we do
business right, so let's, let'ssay it that way okay the ability
, the ability to make peoplemore efficient, more productive.
Right, ai, can you know?
If I want to post on socialmedia, I can get AI to do that
for me and it creates all theseneat things and videos and blah,
(31:25):
blah, blah.
It allows me to be a bettermarketer.
It allows me to be a better youknow, maybe provide a script to
create an app to run mybusiness a little bit better.
Tremendous advances intechnology.
If you think the last fiveyears have been crazy, the next
five you won't even recognize.
I mean, it's going toabsolutely blow your mind and it
(31:46):
will change some of the things.
It will change some of thesteps in how we do business.
But, if you think about business, as to what's still an
essential requirement, AI cannotprepare your air conditioning.
Ai cannot change your oil.
There's just certain thingsthat AI can't do, but all the
big companies are investing inthe tools leveraging AI to make
(32:08):
their businesses more efficientand smarter.
Now let me ask you this Do theyhave an AI franchise?
Do you know of?
Yeah, not specifically, thatjust does ai um there are tech,
there are tech companies, thereare uh companies that will do
network services.
(32:28):
If you're a small business andyou just you're not big enough
to have a tech team and you wantto outsource that to nerds to
go or team logic it, or uh, Iguess that's the or Global Cyber
or Cyber Global.
Those guys do network protection, cyberware, cyber protection,
(32:50):
hacking, all that other kind ofstuff.
They help businesses protectother businesses or protect
against that.
Ai has some of the tools thatthey use to protect your
business from hackers and soforth.
Speaker 2 (33:04):
Right.
So it's basically you're sayingthat AI would be probably along
with the technology industry.
Somewhere in there might be apart of it.
Speaker 3 (33:12):
If you're talking to franchise companies, about a
business, one of the questionswould be how is your company
leveraging artificialintelligence to make yourself
more efficient?
Speaker 2 (33:20):
and keep up with your competition.
Ok, that's a great question.
Thank you so much.
You're right on that.
So let me ask you this whatfinancing strategies or
resources do you recommend forthose who want to purchase a
franchise?
Speaker 3 (33:36):
So we talked about the franchise disclosure, having
the startup costs, Section 7,the low and the high.
Take that high-end number.
So let's say you're talking toa coffee shop and that coffee
shop is going to cost a half amillion dollars.
You're going to need somewherebetween, depending on your
(33:56):
credit score somewhere between10% and 30% cash infusion into
the business.
So if it's half a milliondollars, I'm going to need
between $50,000 and $150,000cash.
I can then go borrow $350,000to $450,000 from an SBA lender
to get my half a million dollars.
(34:18):
And now there's my budget,keeping in mind that half a
million dollars does.
And now there's my budget,keeping in mind that half a
million dollars does include sixmonths worth of operating
expense to make payroll and payrent, things like that.
Cash reserves are factored intothat number, right, so it's not
just money out of pocket, andyou should then be able to be
cash flow positive and be ableto service your debt within that
(34:39):
six months time or within thatreserve period right, so that
you're off and running otherbusinesses that get off to a
faster start.
Don't need cash reserves.
If all I have is a trailer andmy trailers $200,000, and it has
equipment on it, I just paidcash for it or I got some
financing for it, equipmentleases, whatever.
(35:02):
That's fine, but I can bepainting houses really quick.
The coffee shop I still need tofind it, build it, et cetera
and.
I got to be paying my bills.
So am I still working and can Istill pay my bills?
Or am I tapping into my cashreserves because I'm not
currently working and I'm livingon that?
money, all of those becomefactors into the cash flow, the
business and and things that Ihelp my clients understand
(35:26):
before they make any decisions,before they borrow money
whatever.
But at the end of the dayyou're looking at anywhere from
ten to thirty percent cashinfusion depending on your
credit score.
If you're 800 or better, youcan probably get something in
the 10 range.
There are some some banksthat'll do that the bigger the
project you know, if you get amillion and a half dollar
(35:48):
restaurant, you're probablylooking at 20 25 cash infusion
and in some of those biggerprojects versus just minimal
dollars down okay, great, thankyou so much.
Speaker 2 (35:58):
So I'm gonna ask you my last question, but at the
same time, I want you to givesomething you definitely want
our listeners to know.
So the question I have is whatqualities or habits have you
noticed in the most successfulfranchisees you've worked with,
and then you definitely want totell us a little bit about it.
A little bit about it.
Speaker 3 (36:18):
So, I'll give you a great example.
One of the first people I putinto a franchise after I became
an independent consultant, soabout four, yeah, four years ago
, a gentleman here at Frisco, aguy that I used to work with
several years before, connectedwith me on LinkedIn and saw that
I was doing something differentand asked me for some help.
(36:39):
So I connected him with a windowcleaning business and he had
never cleaned windows before.
He was a corporate training guy.
He built programs to teachpeople how to do uh, you know
their job in the field forthousands of stores and all that
kind of stuff.
Now he's got a window cleaningbusiness and he calls me up the
first month after he signed andhe's getting going and he goes.
(37:00):
Rudy, I'm hopping mad, I'mhopping mad.
I don't like this.
What's the matter?
He goes.
They want me to spend $2,000and do the ad pages, that direct
mail couponing thing right thateverybody gets in the mail
called the ad pages.
He goes.
Speaker 1 (37:16):
I don't want to do it .
Speaker 3 (37:17):
I think that's crazy.
I said all right, john, let meask you something.
Who were they targeting?
Who were you targeting in yourbusiness?
Speaker 2 (37:30):
to clean windows.
Who makes?
Speaker 3 (37:31):
that decision?
Right, Typically the wife orthe lady of the house, right?
So just because you don't readthe ad pages, John, they come in
the mail you throw them out.
Does your wife read them?
Well, sometimes?
Okay, Well, your company knowsthat ad pages works because the
lady who picks up the mail looksfor the coupons and is going to
(37:52):
find your ad when she wants herwindows done.
She's going to call you.
And so what you need to do istrust the process.
These guys have been doing thisfor a long time.
Be coachable.
Put the first order out there.
Let's see what happens, okay.
All right, I'll trust you, I'lldo it.
He's reluctant but he's goingto do it.
(38:13):
He calls me back a month laterthe ad dropped.
First day it was out in themail he got a 65 000 job to
clean windows.
This house had 95 windows in it,three-story house.
He cleaned all the windowsinside and out, charged the lady
65 000 to have her windowscleaned and he said I'll never
(38:37):
not do ad pages ever again.
Thank you, thank you forcoaching me into being coachable
.
Speaker 2 (38:44):
Exactly, and that was a great one.
Let's tell everybody how did Iget in touch with you, Rudy.
That's what I want them to hear.
Speaker 3 (38:51):
So right here on my shirt, franchise with Rudy
FranchisewithRudycom is mywebsite.
So if you want to find out moreabout me, my contact
information, etc.
Etc.
Just go to that website and youcan find me there.
You can also text my name, rudyR UDY, to 26786.
That will automatically get youregistered into my database and
(39:16):
then we can connect and followup and so forth.
So you'll get an automatedresponse.
Provide me your contactinformation and so 26786, text
the word Rudy to that and we canget connected.
Speaker 2 (39:29):
Okay, I just put it in the chat.
Speaker 3 (39:31):
I saw that.
Or if you Google me, rudyFrederico, I am the only one on
the planet.
The paragraph that shows up hasmy phone number in it.
So just Google, rudy Frederico,find me on LinkedIn, find me on
Facebook, pick up the phone,call me.
Let me know how I can help.
I also I don't charge peoplefor consultation.
(39:55):
I am compensated by the brandsthat I represent.
They all pay me about the same.
So whether I'm helping you finda painting company, a
restaurant or an oil changebusiness, it doesn't matter to
me.
I just want you to besuccessful.
So let's have that conversation, and if it's you or somebody
you know, or you and somepartners, or you and some
(40:15):
friends, or whatever you want todo, we just have to have the
conversation, learn more aboutit, get educated and then make
decisions, and then you writechecks, and so nothing costs
anything until you learn whatyou're doing Exactly.
Speaker 2 (40:27):
So you all definitely can reach out to Rudy.
I have on occasion for otherclients and when I say he has a
wealth of knowledge, oh my Godhe does.
So you definitely want to reachout to him.
Well, I want to thank you somuch, rudy, for taking time out
to speak to us today.
We definitely enjoyed you anddefinitely hopefully we can have
you back on maybe our podcastor some other stuff that we have
(40:48):
as well.
Speaker 3 (40:48):
Okay, We'd love to Thank you very much Appreciate
the time.
Speaker 2 (40:52):
Thank you.
So that's the end of our showfor today and I want to thank
our guests, like I said, rudy,and encourage you all to contact
him.
Like all previous guests.
He's listed on our websitereferral page at
wwwtdjequityllcnet.
Please visit our YouTubechannel at TDJ Equity Funding
(41:12):
Insiders for previous recordingand this recording and if you
would please subscribe to boostthe algorithm to alert others
about us as well.
Again, thank you all forlistening.
Happy growing your business,until.
Again thank you all forlistening.
Speaker 1 (41:28):
Happy growing your business.
Until next time.
Thank you and take care.
Bye-bye.
We hope you enjoyed thisepisode of TDJ Equity Funding
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