Navigating Self-Employment and Franchising

Every year, many thousands of men and women leave their corporate work life behind and take a leap of faith to a totally new future. They want to be in control of their own destinies, to do something they love, to experience success by their own hand and to leave a legacy for their family. Now, if you're one of these people considering this transition to working for yourself, well, then you have a huge decision to make. Here's the question. Will you go it alone? into your own business or will you invest in a franchise? Now we're going to try to help you with that because we have lined up really some incredible legends of the franchise industry and some experts as well. So sit back, relax, and enjoy their wisdom, their experience, and their sage advice. There's rarely a day that you don't buy a product or service from a franchise business. They serve us food, maintain and fix our vehicles, ship and receive our packages, rent us movies. The list goes on and on. Look at any service or finished goods industry, and franchising is likely to be there. So what is the franchise business model? And what makes it so popular and successful? successful. Franchise is just a unique way of doing business that enables people to be in business for themselves, but not by themselves, and to be able to compete in the marketplace in ways that benefit from synergies, economies of scale, buying power, brand recognition, and yet you still have control of your destiny and you have control of your own enterprise. You know, franchising, as I suspect you've heard from others, generates about $1.6 trillion in the market. marketplace in America today. It is just an amazing economic driver. But that is almost the result of what I think is at the heart of business format franchising and that's relationships. It is perhaps the most synergistic business in the world, speaking specifically to the relationship between franchisor and franchisee. I love franchising because it gives opportunity to people who otherwise may not have such opportunity. Franchising is supposed to be an opportunity for ordinary people just like you and me to have the opportunity to take a system and get extraordinary results. It's extremely interdependent and there is a great opportunity to leverage the shared wisdom and knowledge and passion of a large group of people that are all aligned, looking for the same purpose and same end result. Well, franchising takes the... power of a distributed network and puts it to work. You can't buy the dedication that's required to run a business, in my opinion, from a management position. You can't manage down. You've got to find the internal power and let it flow up. And that's what a group of franchisees bring. They bring the artwork. work however many hours it takes. I'll do whatever I see needs to be done in my market to stay consistent with the brand promise to make it successful in this market. My wife and I actually started franchising as franchisees in 1977. So for 13 years, we were franchisees of ServiceMaster. So we had a chance to see that opportunity to take a national brand, a system, a process, and a procedure that continued to improve over time. build that equity in our own community, and then have the opportunity to sell it and to see that. So that's the thing that I think is great about franchising. I think one of the reasons that franchising has been so successful is that it's really a collection of the best practices across a broad spectrum of people. So if you look at the success of an individual business, if someone goes out on their own in a business, that business is only going to get as good as them. It's only going to get as good as their innovation, their ideas. But as you... As you start to add people to that network of franchises, it starts to take on the power of that collective group. What appeals to me is it's not just a one-man show. You've got an owner who will be the franchisee, and he's looking to you as the franchisor for all the support, training, and coaching that you can provide. know that you're not just talking to somebody who's in there to manage the operation. He will actually own it. So it's an exciting partnership to that respect. Franchising is also about community. It's about the fact that none of us are as smart as all of us put together. And a really good franchisor who really works on those relationships has the benefits of getting input and value from the franchise partners, the home office team, or the employees that work with the franchise. and even vendors and suppliers so that you're consistently perfecting the system and everyone wins that way. People with dreams, people with hopes, people with desires that want to do something meaningful for their life have embraced this economic engine that's created all of these businesses and these hopes and dreams that have come true. Clearly, as we've just heard, one... One central theme of franchising and an important aspect of the business model is that you're not alone. Another important fact is that there's a proven system to follow. But that's not all. It's just the beginning. If we drill down, we'll find that there are a number of advantages that are provided by the franchise business model and franchisors to prospective franchisees. Any benefits from being part of a franchise? First of all, you have the support of the franchisor and their entire support team, which includes everything, in our case, from site selection to lease negotiation. helping them through their equipment selection, store build out, getting the store open, training their staffs, hiring their staffs, and getting to the point that the business is running. and then ongoing support beyond that, as well as marketing tools that you can utilize to help build the business. I mean, in franchising, you're leveraging the brand of the franchisor, which is built over time through the collective efforts of all the franchisees, whether that's through cooperative advertising funds, whether that's just through local brand recognition. So you've got the brand. You've got the buying power of the network to reduce costs for the franchise. Guys. franchisee, there's many factors, but I think one of the most powerful factors of franchising is the collective brainpower of the franchise network. I mean, if you're in business for yourself and you come up with one idea, you know, that's one idea maybe better than your competition. But in franchising, if you're part of a network, let's say, that has 100 franchisees, I mean, for every one idea I'm coming up with, there's 100 ideas that together as a network we're coming up with. I mean, you look at McDonald's as an an example, I mean, Ray Kroc's vision of collecting the intellectual capital of that entire network, I mean, the Big Mac, the Filet-O-Fish, the Happy Meal, I mean, Ronald McDonald himself, these weren't the franchisor's ideas. These were the franchisee's ideas. And by collecting that knowledge and innovation, every franchisee in the network benefits from it. Well, hopefully the biggest thing that a franchisee can gain is just years and years of knowledge as well as years and years of experience. I think that you pay just as much for advice on what not to do as for you paying for the experience and the proven system on what to do. So, for example, I really do believe that many individuals are extremely bright, but if you can shorten that learning curve and shorten the results, that many... many franchisors have taken years and years and years to learn, and that is in your benefit, then more than likely the investment in the initial franchise fee as well as the ongoing royalty stream are very, very minor compared to the upside value of what you're getting. As for the value of the business model, how else can an independent business person open up a business on his own and get the money? get the benefits of being able to compete in the marketplace as effectively as by being attached to a brand that's got traction and is known nationally or globally, to have the buying power that you can benefit from all of the other people that share that brand with you. You could open up any type of a food business, for example, and open your own ice cream shop or open up your own sandwich shop. But where's the synergy? Where's the buying power? Where are you going to get all that point of purchase marketing material, all the four-color separations? All of those things come together. as part of having a shared brand or a shared opportunity through the franchise. When one considers the resources that a franchise system offers, it might seem that with good employees, a franchise business might almost run itself. That a franchisee might have their time freed up so they could spend a good deal of time elsewhere. So all of this begs the question, how involved should franchisees be on a day-to-day basis in their franchise business? I use the analogy, because I'm a woman, I can do this, that a franchise is much like having a franchise. a baby. And initially, you go through the pregnant stage, and it's not wonderful. And then you go through the pain of having the child, which is getting the store open. When that child is born, that needs to be taken care of. just so much nurturing so that initial first few years in order to get the business volume to where it it's it's solid and and where it's comfortable for the franchisee they're going to need to have more involvement so I absentee ownership will not work I don't At least in our business, I can't speak to franchising as a whole because there may be other models, but in ours, those folks that are in the store every single day are the ones that are successful. I'll tell you a great story. I had several stores that were really successful that we owned up in the Boston market and decided we were going to sell them, and one of my best friends was a banker in California. And he said, you know, I think I'll just buy those. And I said, you want to move back to? And he said, no, I'm going to just do it as an investor from here. I said, oh, Keith, you don't want to do that. You've really got to be around. He said, you know, that reminds me of, he said, I had a fellow in today. He was a banker in the middle part of California and had a farmer came in. And he said, you know, Mr. Jones, always his crops were better. He got more yield per acre. He was always the best farmer. And I asked him, why is it? that your crops, your land makes more than anybody else. And he said, Sonny, the reason my fields produce more is because, he said, what is it that you put on them? He said, what I put on them is my shadow. I said, Keith, that's too good. I'm stealing that story. I think that's the story of franchising. You need somebody that can put your shadow on that store every day. That's the ingredient that makes it successful. Most prospective franchisees ask themselves the question, is franchising right for me? Well, it's important to note that not everybody is suited to being involved in franchising, to being a franchisee. So here's a few different questions you may also want to ask yourself. Am I right for franchising? Do I have the right stuff? Do I have what it takes? to be a franchisee? And finally, what are the qualities of a successful franchisee? I think passion is the most important thing because without that, that and tenacity... You never lose until you quit. And sometimes I've found in some cases where franchisees just give up before they, I mean, they're on the precipice of making their business work, and they just give up, and to me, it's such a shame. Definitely integrity. I don't think anyone wants to do business with anyone who doesn't have that. Certainly accountability, that they realize. that is good of a system that they may buy into. The real success depends on that franchisee or that franchise partner, as I like to say, implementing that and being accountable for their leadership and their actions and their follow-through. I also believe that leadership is extremely important. Without leadership, you don't have anything. So I would say integrity, accountability, and leadership. You'd start with the qualities you'd look for in a friend. You'd start for, look for the qualities that you'd look for in a person that you'd want to surround yourself with in your life. So you look for people with integrity and values and commitment. You know, people that are committed to their family, whether they have children or not, is not relevant, but what's relevant is the type of people that they are. And because anything that's not built on a foundation of quality isn't strong. And then once you've identified those characteristics. depending on the business model, then you look for certain skills and traits. In our business, we look for people that are very comfortable with themselves and very comfortable in the community and very comfortable promoting themselves and their business. In terms of identifying the ideal candidate, the franchisee that would be the most successful, there's been an awful lot of work done to look at profiling, to look at psychological profiles, to look at intelligence, to look at all kinds of things. And you know, what I really think it boils down to is almost the emotional IQ of a franchisee. And really for all of us, that's the way it is. Because it's really the ability of a franchisee to have a vision and drive against that vision, to have that inner... Peace of mind, if you will, that inner drive, the desire to succeed. So the quality that we look for is really it's a matter of the heart. And if a person has that intent and that desire, they'll be successful. While there are many qualities that make an individual well-suited to becoming a franchisee, there are also some that don't. In particular, one quality that many people would think would be a great asset to a prospective franchisee, in fact, isn't. Let's talk about entrepreneurs and franchisees. Well, people get the idea that franchisees need to be entrepreneurial, and they do need to be entrepreneurial in the passion and the persistence that they bring. to the business system that they've bought into. But most importantly, they need to be system followers. They need to do what it is that the franchisor has worked out works. There is absolutely no... point at all in buying into a business system and then not using it. That is just crazy. So you need to be as a franchisee a system follower. Now that's not quite the same thing as what we would ordinarily think of as an entrepreneur. So there's something there in the middle between the outright entrepreneur who always wants to do their own thing, the person who is best off as an entrepreneur. an employee and the kind of person who's best off as a franchisee, who wants to be their own boss, but wants to be their own boss within a system where they're doing somebody else's thing, not their own thing. And that's a niche in the middle of the market which not everybody suits. We've had people from all walks of life join our franchise system, young, old, men, women, and from all backgrounds. And you might think as an Internet franchise that those with the most technical experience would be most successful. But it's really a willingness to follow a proven system. I mean, franchising is not about reinventing the wheel. Sometimes people will say that franchising is not for entrepreneurs. It's not for people who want to just create it themselves. It's for people who are comfortable following a proven system. And then people that bring to the job or the role a burning desire. to succeed? The perfect franchisee is going to be somebody who understands that there's a difference between being a true entrepreneur or having an entrepreneurial spirit. For me, I look for somebody who's willing to take the step and take the leap because you're putting money at risk. You're taking a chance. But if you follow a franchised system, you're mitigating against those things that could put a business out of business if they were trying to figure it all out for themselves. So the kind of person who makes the best franchisee is somebody who has the courage to step over the line and get in business for himself. But if he were a true entrepreneur, instead of being truly spirited as an entrepreneur, he'd want to reinvent everything himself. He'd want to write the book. He'd be the person who says, I think it goes like this, and every day like this changes. That true entrepreneur needs to do it on his own. But the person who can live within the boundaries of an operating system and understand that's literally what they're paying for is the most qualified person. to get into business and become a franchisee. Each brand's got different and unique things that they're looking for in people. They're looking for different traits that might be unique to the offering. In my business, while we're an ice cream business, we need people who like to make people happy. We need people who like to be pillars of their community, be involved in fundraising programs, helping build programs for schools and for athletic associations. If you're a shy person, you're not right for my business. It doesn't mean you're not right for my business. right for a franchise. You're just not right for mine. So it's, again, it's matching up the skill sets with the concepts and having passion as a person for that particular type of business. You don't want to have to put a key in a door every day to a place that you're feeling like is work. You really have to bring passion, and that's a very important component. You know, I guess the best way to do that is if I think about the most successful franchisees I've got, we've... We've got folks that were policemen. We've got folks that were firemen. We've got folks that came from financial backgrounds. We've got guys that ran managing partners for Accenture. The thing that I think that all of them have in common is dedication to discipline, following a system, and being dedicated to it, and candidly, hard work. Anybody believe me? believes that you can come by a franchise and it'll make you successful is making a mistake. Franchising and Mannequin and all of the driven brands family can't make you successful. What we can do and have done for 30 years is allow you to use a system and the tools that if you use them, which is a big if, if you use them will allow you to make yourself successful. Franchising can't make you successful. Meineke can't make you successful. Econolube can't make you successful. But the tools that we've got in place, if we find folks that will use the tools, can allow you to make yourself successful. So I guess the key is that you want someone that doesn't believe they know it all already. We want smart people, but we want people... that understand that we've already made all the mistakes for you. You know, I've got burns all over me because I've made the mistakes. You don't have to make them again. Give us a chance to show you how not to make those. A good franchisee would, I'll use the example that, for a major league basketball team, everybody that's on that team, a winning team plays together, they use the same playbook, they wear the same uniform, and they train together and they grow together. A losing team usually has a superstar and he's... Sometimes isn't strong enough to make the team a winner. It's more individualistic. And a franchisee, to be successful, has to want to be part of a team. As a matter of fact, if they don't want to be part of a team, they shouldn't even consider becoming a franchisee. They have to have a passion for the business. They have to realize that there's a tremendous amount of work that they're going to have to do once the business is open. A true entrepreneur... ...is one who will take all the risk and then do it entirely his or her way. That one isn't going to work very well in a franchise. That doesn't say that many of the franchises have quite a bit of leeway in terms of what you do. They call it the freedoms or the liberties to do various things your way. But there is still a common theme. But if you're just a... a raving entrepreneur, no. Don't come to franchising because nobody's going to tell you what to do ever. Now we turn to the topic of franchise financing. Let's face it, unless you're independently wealthy already, you're going to have to borrow money from somewhere to make your dream of owning a franchise complete. So we turn to our expert in this area who starts off with a look at the various types of personal equity you may be able to leverage in financing. a franchise. I think first of all the most important thing is for a franchisee to understand what their own credit rating is and how they will appear to any kind of a third-party lender. So I think step one should be a prospective franchisee, even before what they're deciding what franchise to become involved with, should check their own credit. and they should use one of those free credit checks online because when they do that, it doesn't hurt their credit report score, but if a third party checks it, it actually hurts your score. So that's the first advice that we give to a prospective franchisee. The second thing is to take... take stock of all your options. For example, you may have some home equity and be realistic about that. If your home is worth $500,000 and you have a $250,000 mortgage left, a lender is not going to lend you another $250,000. They lend you up to typically 80% of the value. So 80% of $500,000 is $400,000. So you know you can raise. a hundred and fifty liquid based on your home. You're still employed but you're thinking of going into business on your own. Maybe now is the time to set up that, we call them HELOCs, Home Equity Line of Credit. You're still employed, you have that income, it's easier to get, you'll get the best rate. It's the cheapest money that you can borrow, your home equity line of credit, because it's based on real estate. There's usually no cost in arranging the loan and you're only going to pay interest. interest on the money when you take it.

Here's the question. Will you go it alone? into your own business or will you invest in a franchise? Now we're going to try to help you with that because we have lined up really some incredible legends of the franchise industry and some experts as well.

So sit back, relax, and enjoy their wisdom, their experience, and their sage advice. There's rarely a day that you don't buy a product or service from a franchise business. They serve us food, maintain and fix our vehicles, ship and receive our packages, rent us movies. The list goes on and on. Look at any service or finished goods industry, and franchising is likely to be there.

So what is the franchise business model? And what makes it so popular and successful? successful.

Franchise is just a unique way of doing business that enables people to be in business for themselves, but not by themselves, and to be able to compete in the marketplace in ways that benefit from synergies, economies of scale, buying power, brand recognition, and yet you still have control of your destiny and you have control of your own enterprise. You know, franchising, as I suspect you've heard from others, generates about $1.6 trillion in the market. marketplace in America today. It is just an amazing economic driver.

But that is almost the result of what I think is at the heart of business format franchising and that's relationships. It is perhaps the most synergistic business in the world, speaking specifically to the relationship between franchisor and franchisee. I love franchising because it gives opportunity to people who otherwise may not have such opportunity. Franchising is supposed to be an opportunity for ordinary people just like you and me to have the opportunity to take a system and get extraordinary results.

It's extremely interdependent and there is a great opportunity to leverage the shared wisdom and knowledge and passion of a large group of people that are all aligned, looking for the same purpose and same end result. Well, franchising takes the... power of a distributed network and puts it to work.

You can't buy the dedication that's required to run a business, in my opinion, from a management position. You can't manage down. You've got to find the internal power and let it flow up.

And that's what a group of franchisees bring. They bring the artwork. work however many hours it takes. I'll do whatever I see needs to be done in my market to stay consistent with the brand promise to make it successful in this market. My wife and I actually started franchising as franchisees in 1977. So for 13 years, we were franchisees of ServiceMaster.

So we had a chance to see that opportunity to take a national brand, a system, a process, and a procedure that continued to improve over time. build that equity in our own community, and then have the opportunity to sell it and to see that. So that's the thing that I think is great about franchising.

I think one of the reasons that franchising has been so successful is that it's really a collection of the best practices across a broad spectrum of people. So if you look at the success of an individual business, if someone goes out on their own in a business, that business is only going to get as good as them. It's only going to get as good as their innovation, their ideas.

But as you... As you start to add people to that network of franchises, it starts to take on the power of that collective group. What appeals to me is it's not just a one-man show.

You've got an owner who will be the franchisee, and he's looking to you as the franchisor for all the support, training, and coaching that you can provide. know that you're not just talking to somebody who's in there to manage the operation. He will actually own it. So it's an exciting partnership to that respect.

Franchising is also about community. It's about the fact that none of us are as smart as all of us put together. And a really good franchisor who really works on those relationships has the benefits of getting input and value from the franchise partners, the home office team, or the employees that work with the franchise.

and even vendors and suppliers so that you're consistently perfecting the system and everyone wins that way. People with dreams, people with hopes, people with desires that want to do something meaningful for their life have embraced this economic engine that's created all of these businesses and these hopes and dreams that have come true. Clearly, as we've just heard, one... One central theme of franchising and an important aspect of the business model is that you're not alone. Another important fact is that there's a proven system to follow.

But that's not all. It's just the beginning. If we drill down, we'll find that there are a number of advantages that are provided by the franchise business model and franchisors to prospective franchisees. Any benefits from being part of a franchise? First of all, you have the support of the franchisor and their entire support team, which includes everything, in our case, from site selection to lease negotiation.

helping them through their equipment selection, store build out, getting the store open, training their staffs, hiring their staffs, and getting to the point that the business is running. and then ongoing support beyond that, as well as marketing tools that you can utilize to help build the business. I mean, in franchising, you're leveraging the brand of the franchisor, which is built over time through the collective efforts of all the franchisees, whether that's through cooperative advertising funds, whether that's just through local brand recognition.

So you've got the brand. You've got the buying power of the network to reduce costs for the franchise. Guys. franchisee, there's many factors, but I think one of the most powerful factors of franchising is the collective brainpower of the franchise network.

I mean, if you're in business for yourself and you come up with one idea, you know, that's one idea maybe better than your competition. But in franchising, if you're part of a network, let's say, that has 100 franchisees, I mean, for every one idea I'm coming up with, there's 100 ideas that together as a network we're coming up with. I mean, you look at McDonald's as an an example, I mean, Ray Kroc's vision of collecting the intellectual capital of that entire network, I mean, the Big Mac, the Filet-O-Fish, the Happy Meal, I mean, Ronald McDonald himself, these weren't the franchisor's ideas. These were the franchisee's ideas.

And by collecting that knowledge and innovation, every franchisee in the network benefits from it. Well, hopefully the biggest thing that a franchisee can gain is just years and years of knowledge as well as years and years of experience. I think that you pay just as much for advice on what not to do as for you paying for the experience and the proven system on what to do. So, for example, I really do believe that many individuals are extremely bright, but if you can shorten that learning curve and shorten the results, that many... many franchisors have taken years and years and years to learn, and that is in your benefit, then more than likely the investment in the initial franchise fee as well as the ongoing royalty stream are very, very minor compared to the upside value of what you're getting.

As for the value of the business model, how else can an independent business person open up a business on his own and get the money? get the benefits of being able to compete in the marketplace as effectively as by being attached to a brand that's got traction and is known nationally or globally, to have the buying power that you can benefit from all of the other people that share that brand with you. You could open up any type of a food business, for example, and open your own ice cream shop or open up your own sandwich shop. But where's the synergy?

Where's the buying power? Where are you going to get all that point of purchase marketing material, all the four-color separations? All of those things come together.

as part of having a shared brand or a shared opportunity through the franchise. When one considers the resources that a franchise system offers, it might seem that with good employees, a franchise business might almost run itself. That a franchisee might have their time freed up so they could spend a good deal of time elsewhere.

So all of this begs the question, how involved should franchisees be on a day-to-day basis in their franchise business? I use the analogy, because I'm a woman, I can do this, that a franchise is much like having a franchise. a baby.

And initially, you go through the pregnant stage, and it's not wonderful. And then you go through the pain of having the child, which is getting the store open. When that child is born, that needs to be taken care of.

just so much nurturing so that initial first few years in order to get the business volume to where it it's it's solid and and where it's comfortable for the franchisee they're going to need to have more involvement so I absentee ownership will not work I don't At least in our business, I can't speak to franchising as a whole because there may be other models, but in ours, those folks that are in the store every single day are the ones that are successful. I'll tell you a great story. I had several stores that were really successful that we owned up in the Boston market and decided we were going to sell them, and one of my best friends was a banker in California. And he said, you know, I think I'll just buy those. And I said, you want to move back to?

And he said, no, I'm going to just do it as an investor from here. I said, oh, Keith, you don't want to do that. You've really got to be around.

He said, you know, that reminds me of, he said, I had a fellow in today. He was a banker in the middle part of California and had a farmer came in. And he said, you know, Mr. Jones, always his crops were better. He got more yield per acre.

He was always the best farmer. And I asked him, why is it? that your crops, your land makes more than anybody else.

And he said, Sonny, the reason my fields produce more is because, he said, what is it that you put on them? He said, what I put on them is my shadow. I said, Keith, that's too good. I'm stealing that story.

I think that's the story of franchising. You need somebody that can put your shadow on that store every day. That's the ingredient that makes it successful. Most prospective franchisees ask themselves the question, is franchising right for me?

Well, it's important to note that not everybody is suited to being involved in franchising, to being a franchisee. So here's a few different questions you may also want to ask yourself. Am I right for franchising? Do I have the right stuff?

Do I have what it takes? to be a franchisee? And finally, what are the qualities of a successful franchisee?

I think passion is the most important thing because without that, that and tenacity... You never lose until you quit. And sometimes I've found in some cases where franchisees just give up before they, I mean, they're on the precipice of making their business work, and they just give up, and to me, it's such a shame.

Definitely integrity. I don't think anyone wants to do business with anyone who doesn't have that. Certainly accountability, that they realize.

that is good of a system that they may buy into. The real success depends on that franchisee or that franchise partner, as I like to say, implementing that and being accountable for their leadership and their actions and their follow-through. I also believe that leadership is extremely important. Without leadership, you don't have anything. So I would say integrity, accountability, and leadership.

You'd start with the qualities you'd look for in a friend. You'd start for, look for the qualities that you'd look for in a person that you'd want to surround yourself with in your life. So you look for people with integrity and values and commitment.

You know, people that are committed to their family, whether they have children or not, is not relevant, but what's relevant is the type of people that they are. And because anything that's not built on a foundation of quality isn't strong. And then once you've identified those characteristics. depending on the business model, then you look for certain skills and traits. In our business, we look for people that are very comfortable with themselves and very comfortable in the community and very comfortable promoting themselves and their business.

In terms of identifying the ideal candidate, the franchisee that would be the most successful, there's been an awful lot of work done to look at profiling, to look at psychological profiles, to look at intelligence, to look at all kinds of things. And you know, what I really think it boils down to is almost the emotional IQ of a franchisee. And really for all of us, that's the way it is.

Because it's really the ability of a franchisee to have a vision and drive against that vision, to have that inner... Peace of mind, if you will, that inner drive, the desire to succeed. So the quality that we look for is really it's a matter of the heart.

And if a person has that intent and that desire, they'll be successful. While there are many qualities that make an individual well-suited to becoming a franchisee, there are also some that don't. In particular, one quality that many people would think would be a great asset to a prospective franchisee, in fact, isn't.

Let's talk about entrepreneurs and franchisees. Well, people get the idea that franchisees need to be entrepreneurial, and they do need to be entrepreneurial in the passion and the persistence that they bring. to the business system that they've bought into. But most importantly, they need to be system followers.

They need to do what it is that the franchisor has worked out works. There is absolutely no... point at all in buying into a business system and then not using it. That is just crazy.

So you need to be as a franchisee a system follower. Now that's not quite the same thing as what we would ordinarily think of as an entrepreneur. So there's something there in the middle between the outright entrepreneur who always wants to do their own thing, the person who is best off as an entrepreneur.

an employee and the kind of person who's best off as a franchisee, who wants to be their own boss, but wants to be their own boss within a system where they're doing somebody else's thing, not their own thing. And that's a niche in the middle of the market which not everybody suits. We've had people from all walks of life join our franchise system, young, old, men, women, and from all backgrounds.

And you might think as an Internet franchise that those with the most technical experience would be most successful. But it's really a willingness to follow a proven system. I mean, franchising is not about reinventing the wheel.

Sometimes people will say that franchising is not for entrepreneurs. It's not for people who want to just create it themselves. It's for people who are comfortable following a proven system. And then people that bring to the job or the role a burning desire. to succeed?

The perfect franchisee is going to be somebody who understands that there's a difference between being a true entrepreneur or having an entrepreneurial spirit. For me, I look for somebody who's willing to take the step and take the leap because you're putting money at risk. You're taking a chance. But if you follow a franchised system, you're mitigating against those things that could put a business out of business if they were trying to figure it all out for themselves. So the kind of person who makes the best franchisee is somebody who has the courage to step over the line and get in business for himself.

But if he were a true entrepreneur, instead of being truly spirited as an entrepreneur, he'd want to reinvent everything himself. He'd want to write the book. He'd be the person who says, I think it goes like this, and every day like this changes. That true entrepreneur needs to do it on his own. But the person who can live within the boundaries of an operating system and understand that's literally what they're paying for is the most qualified person.

to get into business and become a franchisee. Each brand's got different and unique things that they're looking for in people. They're looking for different traits that might be unique to the offering. In my business, while we're an ice cream business, we need people who like to make people happy. We need people who like to be pillars of their community, be involved in fundraising programs, helping build programs for schools and for athletic associations.

If you're a shy person, you're not right for my business. It doesn't mean you're not right for my business. right for a franchise. You're just not right for mine.

So it's, again, it's matching up the skill sets with the concepts and having passion as a person for that particular type of business. You don't want to have to put a key in a door every day to a place that you're feeling like is work. You really have to bring passion, and that's a very important component.

You know, I guess the best way to do that is if I think about the most successful franchisees I've got, we've... We've got folks that were policemen. We've got folks that were firemen.

We've got folks that came from financial backgrounds. We've got guys that ran managing partners for Accenture. The thing that I think that all of them have in common is dedication to discipline, following a system, and being dedicated to it, and candidly, hard work.

Anybody believe me? believes that you can come by a franchise and it'll make you successful is making a mistake. Franchising and Mannequin and all of the driven brands family can't make you successful. What we can do and have done for 30 years is allow you to use a system and the tools that if you use them, which is a big if, if you use them will allow you to make yourself successful.

Franchising can't make you successful. Meineke can't make you successful. Econolube can't make you successful.

But the tools that we've got in place, if we find folks that will use the tools, can allow you to make yourself successful. So I guess the key is that you want someone that doesn't believe they know it all already. We want smart people, but we want people...

that understand that we've already made all the mistakes for you. You know, I've got burns all over me because I've made the mistakes. You don't have to make them again. Give us a chance to show you how not to make those.

A good franchisee would, I'll use the example that, for a major league basketball team, everybody that's on that team, a winning team plays together, they use the same playbook, they wear the same uniform, and they train together and they grow together. A losing team usually has a superstar and he's... Sometimes isn't strong enough to make the team a winner. It's more individualistic. And a franchisee, to be successful, has to want to be part of a team.

As a matter of fact, if they don't want to be part of a team, they shouldn't even consider becoming a franchisee. They have to have a passion for the business. They have to realize that there's a tremendous amount of work that they're going to have to do once the business is open.

A true entrepreneur... ...is one who will take all the risk and then do it entirely his or her way. That one isn't going to work very well in a franchise.

That doesn't say that many of the franchises have quite a bit of leeway in terms of what you do. They call it the freedoms or the liberties to do various things your way. But there is still a common theme. But if you're just a... a raving entrepreneur, no.

Don't come to franchising because nobody's going to tell you what to do ever. Now we turn to the topic of franchise financing. Let's face it, unless you're independently wealthy already, you're going to have to borrow money from somewhere to make your dream of owning a franchise complete. So we turn to our expert in this area who starts off with a look at the various types of personal equity you may be able to leverage in financing.

a franchise. I think first of all the most important thing is for a franchisee to understand what their own credit rating is and how they will appear to any kind of a third-party lender. So I think step one should be a prospective franchisee, even before what they're deciding what franchise to become involved with, should check their own credit. and they should use one of those free credit checks online because when they do that, it doesn't hurt their credit report score, but if a third party checks it, it actually hurts your score. So that's the first advice that we give to a prospective franchisee.

The second thing is to take... take stock of all your options. For example, you may have some home equity and be realistic about that.

If your home is worth $500,000 and you have a $250,000 mortgage left, a lender is not going to lend you another $250,000. They lend you up to typically 80% of the value. So 80% of $500,000 is $400,000.

So you know you can raise. a hundred and fifty liquid based on your home. You're still employed but you're thinking of going into business on your own. Maybe now is the time to set up that, we call them HELOCs, Home Equity Line of Credit. You're still employed, you have that income, it's easier to get, you'll get the best rate.

It's the cheapest money that you can borrow, your home equity line of credit, because it's based on real estate. There's usually no cost in arranging the loan and you're only going to pay interest. interest on the money when you take it.

Transcript for:Navigating Self-Employment and Franchising

Transcript for:
Navigating Self-Employment and Franchising