Steve Gordon: Welcome to the Franchise Freedom Podcast. My name is Steve Gordon, I am not your host of the podcast. I’m here actually to turn the tables on your host, Giuseppe Grammatico. And today he is going to really walk us through from a high level, the entire process of deciding whether or not a franchise is a right thing for you to meet your goals. So, I’m really excited about this. I’ve got a lot of curiosity about franchises. So I am here acting kind of on your behalf, you know as the listeners and hopefully I will ask just a few the questions that are on your mind and I think it’s going to be a lot of fun. So just happy. I’m excited. Welcome. Let’s dive into this. Giuseppe: Thanks to you very, very excited to be here and looking forward to it. Steve: Yeah, I mean, I think it’s worth noting. It’s not like this is your first rodeo with franchising, I mean, you came out of the corporate world, you bought a franchise and, and use that kind of as, as your way to creating some freedom and you become a master franchisee and a master franchise or so you really kind of been on all sides of this. And so, and you’ve I know, you’ve advised, I think, over 1000 people through the process. So you’ve done this a lot, and you know, kind of where people tend to go in the wrong direction. And so I think this will be really valuable for folks who are listening. Giuseppe: Absolutely. And I’ve probably made every mistake along the road as well. Steve: Well, you know, the experience is actually one of the best teachers, isn’t it? So, we’re going to give everybody a shortcut so they can learn from your experience and So, to kind of start us off, when somebody is thinking about a franchise as a potential business, how should they begin to approach the idea of buying a franchise?
How To Approach Buying A Franchise
Giuseppe: Well, there are many approaches you know, then I’ll answer it this way the one thing I did, and this is definitely the wrong way and I see a lot of people following this, this process is they’ll look at something they like for example, they’ll they like coffee. So they’ll say you know what, I go to this establishment and I want to buy this coffee franchise or I like this type of food, this sandwich from this franchise and I want to take a look at that. And when I speak with candidates on a daily basis, I tell them that that is great. You know, you definitely want to have some interest in the actual product or service but let’s actually take a step back from there and figure out okay, what is you know, what, what is my goal? Why am I Actually owning a business? So that’s kind of that that would be step number one is figuring out why you’re owning the business in the first place. Steve: Yeah, I could see really beginning at that place where they get clear on the goal of it because, you know, owning and running a business and, you know, it’s not a trivial thing. I mean, it takes some commitment and, and, and some effort. So what are some of the reasons that as you’re working with people that they articulate to you that, you know, they, when they explain Well, this is really why I want to do it? Giuseppe: Right. So we always talk about their goals, exactly where do you want to be, you know, why are you owning the business? So for example, I’ll get answers such as I to want more time with my family. I’d like to travel more, make more money, flexibility, wealth bill building and as well as tax benefits. So and those are all really important. And I always have candidates prioritize and say, Okay, what is most important to you? And the one key takeaway is that there is no right or wrong answer. It’s not about well, will this answer generate the best franchises? Or will I make the most money here? There is no right or wrong, you decide, you know, you got you’re going down this route. Now, let’s figure out you know, what are the most important things to you? What’s your Why? What are your goals? You know, why? Why are we doing this? Because, at the end of the day, franchising, business ownership is just one of the many vehicles that will take you to the place that you want to be. So those are the most common reasons I get. And then I always follow that up with when we talk about entrepreneurship as well as business ownership. Do you want to own a franchise? Do you want to own a standalone business? franchising? Another question I get, you know, what’s the state of the franchise industry, franchising is not an industry, franchising is simply a proven business model. So with that being said, in any business, you need to figure out what do you want to do? Do you want to create the systems that are in place the product or service from scratch? Or do you want to take advantage of a proven system where the franchise company commonly is known as the franchise or has actually spent the time and the money to figure out the optimal way to do business and put together a proven system that works? So you know, those are two big questions franchise model or non-franchise and once again, one is not better than the other. I get that question as well. If, if I were to do it all over what I would I have chosen a franchise? Absolutely 100% but that was because I wanted a proven business model that I could run with but some other people like the flexible And they really enjoy being able to create the entire process and system. And I’ll tell them, you know, franchise ownership may not be the right fit. So I can put you in touch with someone that may have an inventory of companies you may want to take a look at or someone that can help you set the business up, you know, from the very beginning stages. Steve: Yeah. And I think it’s, I think you bring up a really good point, it’s important for people to understand those distinctions. one’s not necessarily better than the other on the whole, but one model might be better for an individual versus another. And, and it’s, I really do think it’s useful for people to examine that and that’s one of the things you take them through, right you as you’re working with somebody who considers themself kind of a candidate for, you know, for owning a franchise. You’re asking them a lot of questions as you have conversations with them are true. Giuseppe: Yes, there. There are a lot of questions and I don’t I jokingly say let you off the hook. So if I do ask you a question, what type of business models attract you? And you tell me food, I’m going to ask you, why not just simply write down food and we’re going to take a look look at a list of food or restaurant franchises. So, you know, well, we’ll take a look at why food, what interests you about food? So we’ll ask a lot of questions. Some of them are going to require a little bit of thought, and we’re not looking to get every question answer on the first call will obviously follow up with a second but I do like to just get a good grasp of what your interests are. I even go through an exercise where I say let’s, let’s envision the perfect day. So you wake up in the morning. Are you getting change getting dressed, putting a suit on and going to the office? Or do you envision yourself staying in your pajamas and working from home from your home office and having more of a home-based business? So we’ll do a little bit of a, you know, a few exercises, figuring out what the business looks like feels like on a daily basis, what does your ideal business look like not? What’s the business I want to be in and then do my interests actually match that. Let’s put all the attributes, all the characteristics, everything I want the business to look like, we’ll list those all out. And then only after gathering all that information, including your goals and everything else we went over, then we will look into finding what you know, what’s the exact or a few exact franchise matches. So I think that’s very valuable and that we kind of reverse engineer the process and work backward. This is what I want. We’ll take note of that. We’ll take a look at some franchises that will get you to where you want to be. So those are, those are some questions and then and then we also follow up, you know, as far as examples of other questions, You’re not just interested, but what are your strengths? What are your weaknesses? What do you enjoy doing? Are any opportunities? We were working with a few candidates last week and they talked about being in the insurance industry, and they were looking at a food franchise but after digging a little deeper, we found out they had tons of opportunities with their current employer and potentially working together where they kept their job and had a franchise as a side business and were able to leverage the opportunities, the relationships that they had with their current employer. So we kind of we was going the food direction, and then we turned it around and now we’re looking at an insurance-based franchise. So the value that I bring is just asking the right questions. And at the end of the day, if you decide to invest in a franchise, I guarantee you one thing you’ll definitely learn something new about yourself. Steve: Yeah, I can imagine that you’ll learn a lot of new and different things. One of the things you said Giuseppe is, and this just really, you know, struck me as it must be very typical of people who are kind of exploring this is they, they have this kind of notion of the kind of franchise that they want. And it’s easy to kind of come in with that, you know, with maybe that preference. But you’ve told me before, you know, before we started recording, you told me there are over 4000 franchise companies that, you know, it would be almost impossible for an individual who’s not in the industry to really understand the breadth of all of those different companies and the opportunities that are available. Do you find people are surprised when you know, you tell them how many there are?
Giuseppe: Yes, absolutely. So they’ll come to me and a lot of times, they’ll just see whatever, whatever they see on their way to work or driving home and that’s typically retail, a lot of stores, a lot of restaurants. Many people that I speak with do not realize that franchises cover essentially every industry out there. So their areas you mentioned, over 4000 franchise companies out there and there are a constant new franchise, franchise companies coming out every year and it just gets overwhelming. There is just so much information out there. I’ve had I had someone come to me that was looking at a particular franchise and after all his due diligence and you know, on his own before coming to me finding out that you really were in love with this franchise, did all the due diligence, spoke with franchise owners in his area found out the territory as it was already sold. So, you know, we in the research or due diligence process, we assist in that area, you know, well we’ll definitely take a look and make sure your area is available that you’re taking a look at and many other options, which we’re going to dive into soon here. Steve: Yeah, well, and I can see how critical that is. I mean, you can come in with a picture in your mind of something that you want, but all these questions that, that you’re taking people through really helping them get clear on what they want, you know, what do you want that ownership experience to be like, you know, and then matching that up with the franchise’s that’ll fit that, to me, that’s a really powerful way to approach it. A very, very thoughtful, systematic way to approach it. So then as you’re doing that you take you’ve taken somebody through that analysis, and, and you’ve kind of identified what they’re looking for what’s the next step? Where do you Where do you go with the next to help them along this journey?
How We Can Help
Giuseppe: The next we get into financials, but I’m even going to take a step back from there and just so you know, with with the due diligence, when looking At a franchise obviously, you can do it, go on your own and do the due diligence or obviously you can use a service of what I do for a living as a franchise consultant. The process is very similar. The differences obviously as a consultant, we do have a background in franchising. We’ve done our due diligence, I’ve owned multiple franchises in the past but you know, what we typically do is we like to start out with a right fit call, just to make sure that we are a good fit, it can be personality fit, it could just be if we feel like you’re a good fit for franchising in general if we just feel like you really want to recreate the wheel and we just feel like you’re definitely business owner material, but you may want to look to start something on your own. We’ll be more than glad to let you know as well as put you in touch with an individual data or a broker or another country. A consultant that will be able to help you start your own business. Once you get past that first call, we decide to work together, we send you out that questionnaire. So it summarizes a lot of what we spoke about, but gives you a little bit of extra time to give it some thought, answer the questions, bring your involve your spouse, as many cases that the spouse will be involved and fill out that questionnaire. Typically it’s 10 to 15 minutes. And then we follow up with a consultation, which is where we dig in a little bit deeper, deeper, as far as goals as far as you know, what you’re looking for in the franchise and things like that. Once we have that consultation, step three would be let’s figure out okay, this is a this is what your ideal franchise looks like. Not a name, not an industry or service. This is what it looks like. based on the questions we’ve asked you and the answers you’ve given us. And once we have a grand set that model is what you are looking for. We’ll email it out, you know, mail your hard copy as well and you’ll use that’ll be the basis for any franchise selection from here on out. And the last step Step four, which is a step that just goes on for I jokingly say forever is that, you know, based off that model will have you take a look at two or three franchise concepts that might match that model will make the introductions for you. The franchise companies will contact you directly and you will continue your due diligence process by asking questions gathering information, we will be working with you throughout the process to make sure you are aren’t on track are asking the right questions are getting the feedback and your all your questions answered. And this is to the point where if you do decide to buy a franchise we will still be in touch on a monthly basis. Working with you to make sure you know see how things are going at the franchise. And if you are ever looking to expand, you know, maybe look at additional territory additional stores. In some cases, the two or three franchises may not be the right match and we look at sometimes a fourth or fifth option, sometimes we need to tweak the model slightly or make a small modification and then find, you know, a couple more franchises that you know that that will meet the model on the back end will do a lot of due diligence for you. So we’ll do territory checks will make sure that the areas are available but will also more important than anything else will get to speak directly with the VP sometimes the CEO of various franchise concepts and just have a candid conversation to find out if this particular candidate may be a good fit. So a typical question that would come with It usually comes up is the candidate is looking to be a semi-absentee owner maybe work 510 15 hours a week, is that doable with this type of franchise, some concepts will require the franchise owner to be the full time the first year. And in that first year hire a general manager to take over. So in that case, you may not be the best fit. So it’s good too, to get those questions out of the way in the very beginning because there’s nothing worse than having to spend a lot of time researching a franchise and finding out it’s just not the right match given how you are looking to run the business. So, so there are these are, you know, kind of the four-step overview. You can essentially contact the franchise ORS directly, or you can utilize a franchise consultant like myself, our service is completely free. So so the question I always get is what’s the catch and then And I basically said there is no catch. We work almost like an executive recruiter, we are compensated directly from the franchise company should you decide to invest, but there is no pressure, there’s never a fee for our service and there’s no difference in investment. So if you use this utilize a service of a franchise consultant, or go out on your own and buy directly from the franchise company, there is no difference. As far as an investment. Steve: Yeah, it’s really, really an amazing arrangement that people can take advantage of, you know, where they don’t mean to hire you to do all the things that you’ve listed I’m sure would be very expensive if the person was paying out of pocket, but the fact that that, you know, you’re paid when they purchase a franchise, it allows you I think to give them a lot of TLC along the way and even afterward after the fact, without them having to come out of pocket, which is pretty powerful. So just that the I know that there is probably a question that is lingering in people’s minds there, you know, I’m, I can tell you as a business owner myself, first thing that comes to my mind when I look at a franchise if I’ll drive, you know, I have this habit where I’ll drive down the road and look at, you know, a particular brand of franchise and go, I wonder what the economics of that are. And then the next question my mind is, I wonder what it takes to get into that franchise? What does it take to buy it? And I’m sure that folks who are listening, have that question floating around in their head. So, I mean, to make this work, do you need to be walking around with you know, a million dollars and change in your pocket? Giuseppe: That’s a great question. That’s a whole topic in and of itself, and I’m glad you brought that up. Believe it or not, a lot of the myths or when people contact me asking me And they’re looking at something large retail and McDonald’s or Wendy’s where, after the build-out and franchise fees and inventories, you can look at over a million dollars. And the truth of the matter is you do not need a million dollars to invest in a franchise we have, or there are multiple franchise concepts where the investment is under 100,000, you know, between just say 75 and 100,000 on the low end So, so yes, if you’re I should say no, you do not need millions of dollars to invest in a franchise. And I guess the next part is if you do have the money, you know, where do I get funding, which is the next common question that I usually get with funding. There are many options I always in just to prepare anyone that contacts me. I’ll give them a little bit of homework and I’ll assist where Where possible, but figure out what your financials were. So, in the beginning, we were talking about figuring out your goals and your why and why you’re doing this, figuring out financials and taking a look at just kind of an inventory of what you have. So typically I have people look at liquidity and net worth. And I’ll get the question well, how do you content How do you calculate liquidity or net worth? And the net worth is essentially assets minus liabilities. So in the net worth equation, the biggest one is if you own a home, what’s the value of your home that’s the asset the market value, what is in your retirement accounts invest just regular investment accounts in the bank, cash money market, checking, adding all those together, getting that number and then subtracting the mortgage? What you still owe on the house. If you have an auto loan, subtract that any debts debt and anything that you owe, and that will give you your net worth number. Now, why that number is important is that many franchise companies will have a minimum net worth requirement. They’re looking for people that have the proper funding in order to run the business. They will also look at liquidity because in order to invest in a franchise, the first fee you’ll pay as the franchise fee. So they’ll say what’s your liquidity what can you afford? and liquidity is what you have on hand. So that’s cash, money market CDs, checking accounts and even the investment accounts since they can be easily liquidated in order to fund your franchise so when when when people say how much is the franchise some people confuse the total investment with the actual franchise fee the franchise fees typically, on the lower end the total investment is going to also include the franchise fee, it’s going to include the build-out if any, it’s gonna if it’s a retail location, inventory marketing, maybe three to six months salary because obviously it’s going to take you a little while to get your business up and running. Steve: This has got to be the most stressful thing for people to try and figure out. And particularly if you’re coming from a situation where you haven’t run a business before, and you haven’t had to necessarily deal with a lot of, you know, the financing end of things when it comes to a business. And, and, absolutely, it’s got to be one of the most stressful things for people to kind of think about, as you’re walking people through this process. You know, it seems pretty daunting. Is it as challenging as it seems upfront or is there are there some straightforward solutions? Giuseppe: It’s actually it’s pretty straightforward. And we’re fortunate enough we work with a few funding companies across the country and the beauty of their services, instead of us trying to figure it out, this is definitely not my background. Lending is definitely out there. So let I give each person a little bit of homework to do, you know, as we mentioned, will show them how to calculate the net worth. But well, you know, we’ll always recommend speaking with one or two funding companies where you can layout that information and they will simply ask you a few questions ask you what franchise you’re maybe looking at if we’re at that stage, if it’s the beginning stage, we just may want to look at just what are they all the opportunities available to me, and there are quite a few. So the reason when we calculated net worth and we include retirement accounts, that is actually one of the funding options. So when it comes to funding, a lot of people don’t realize this, but you can fund a business with retirement assets, which is completely penalty-free. There’s a specific process We won’t go into detail on that process but that is an actually lately it’s been one of our number one options as far as funding because you are funding your business with your own money. It’s not alone. You’re funding it with the retirement assets of moving it over from previous employers 401k liquid liquidating the equity holdings of mutual funds and investing directly in your business and that and that could be used to fund the franchise, even pay yourself a little bit of a salary to get yourself going. But as far as other options go, as far as funding, you know, once the funding company will take a look at your full kind of the full picture. They’ll give you some options, but some of the options will be just a standard bank loan. We’re actually you don’t need a funding company you can go directly to the bank, but the funding company will also be able to take a look at an SBA loan a small business loan where the They’ll take a look and say, okay, the government will be responsible for also for payback of this loan. It’s typically a 10-year loan with a fixed interest rate. There are many options there. We mentioned retirement savings if you have savings, obviously, that’s liquid you can fund your franchise with all the money in savings checking and money markets line of credits. So utilizing directly the equity or home equity line of credits, utilizing the equity of your home to fund the business is a very common way. Myself, I did not contact the funding company 15 years ago, when I started my process and I wish I did. I contacted a bank and at the very last minute the bank pulled out because they did not realize I was leaving my job to start this business which was one of the questions on the application. So In my case, I went to friends and family and I was fortunate to have my grandparents fund my business which, you know, we pay them back as soon as possible. But if it wasn’t for them, it definitely would have made the funding equation much more difficult partnerships. They come upon occasion where a partner would come in. Sometimes it’s a 50-50 partnership. Sometimes we see silent partners, someone just coming in as more of an angel investor, they’ll put up the money, they’ll be more of a silent partner or just kind of meeting with the owner once a month or once a quarter just to oversee the business and give any feedback. And we also have private equity groups, where you’ll have a group of individuals pull their money together. As I’ve been seeing more and more often. Each person in the group brings something to the table. Not just money, but maybe someone will have a background in operations, some will have a background in HR and other people in sales and they’ll pull their money as well as their talents, their previous experiences to help run a private equity fund, or just maybe a pool of 10 1520 different franchise companies, and just using, you know, pulling their resources together to run that. So that’s a kind of a general overview. And another quick note on the funding company options. Each funding company will do all the research at no cost to you, which is another major advantage. They’ll bundle what you’re looking for to get you the best rates so they’ll go to bat for you to get you the best rates options. Only if you decide to move forward with an SBA loan or utilizing and rolling over your retirement assets. Only at that point, you would realize any type of face there is no pressure, no fees just to gather the information. Steve: Well, that’s fantastic. So, you know, if somebody is looking at this process, and they’re interested in pursuing a franchise, at what stage should they reach out and be in contact with franchise consultants consultant, like you? Giuseppe: That’s a good question. It could be. I recommend sometimes it just in the very beginning just to get some general information, obviously, they can listen to any recordings or podcasts that we put out there for some general guidelines and information but sometimes I do realize because I went down that path, the amount of information is just extremely overwhelming. All that information online, you know, what do I do with that information? So, I know I was a little bit overwhelmed. I had reached out to the franchise consultant that they broke it down into the exact four-step process. So 15 years ago, I utilize a franchise consultant. And now I am a franchise consultant because I love the process. I truly love what I do I truly help love to help people invest in businesses. And I also, you know, on the flip side, I truly love to tell people, hey, and be honest with people and just tell them, hey, this may not be the right fit for you. And this could essentially save you hundreds of thousands of dollars and your and all your savings because business ownership, in general, isn’t the right fit for everyone. So I really enjoy being honest with people helping them I kind of jokingly say I like to level the playing field. There’s You know, one thing I like to talk about our myths about funding your franchise that that’s a common myth. When we just talked about the different options, and I like to give everyone the information, not everyone has equal amount of money and I understand that but we all have access to the same information, for the most part, you know, we have, we have the same amount of time in the day. So if, if someone is looking, I strongly recommend they reach out to a consultant like myself. And in that 15 minutes, typically is what we spent on our first phone call, you’ll learn a lot about yourself, you’ll get a good feeling if business ownership and or franchise ownership is a good fit. And that 15 minutes could potentially save you, you know, 10s of hundreds of hours down the road. So definitely give us a call there’s there’s never a free and you know, we send everyone a link to our calendar book a 15-minute phone call and we’d love to chat. Steve: That’s great Giuseppe. So where can folks go to find out more so if they’re listening to this and they want to just, you know, find a time to talk with you and see if maybe you can help them where can they go. Giuseppe: So I highly recommend to take a look at our website. So it’s ggthefranchiseguide.com. That is our website. I have calendar links on there. You can schedule that that initial conversation, we have blogs, just general information will be uploading our, our podcasts, franchise freedom. So you’ll have all the episodes of the various podcasts we have recorded. So you’ll have just an abundance of information we were essentially creating a library for anyone that wants to get some information. And, you know, by listening to the podcast, someone may have just learned how to how to calculate net worth. So there’s always a key takeaway in any of the podcasts. If you’re eager to speak with me right away, you can just give me a call or send me a text at 908 873 6134. That is my office line and it does also receive text messages. So website to the calendar, contact me directly. And we typically return every call the same day or within 24 hours. So give us a call we’d love would love to speak with you and help you out. Steve: Very good. Well, Giuseppe, thanks for sharing your wisdom with us today. And hope that folks who are pursuing a franchise will take you up on the offer and jump on a call with you and see if you might be able to help them. Again, the website is GG, the franchise guide.com. And stay tuned. I know just happy you’re working on a book and you really are going to go in detail not just through what we cover here, but actually through a whole lot more and really outlining the process and the decision making that goes into to choosing a franchise so we’ll look forward to that as well. Giuseppe: Very excited. Yeah, that that’s the first mention of the book, very excited to launch that and I appreciate it I had a great time here and I’m available to take any questions. Steve: Excellent. Thanks, everyone.