Episode Transcript
[00:00:00] Speaker A: Hello everybody and welcome to All Things Considered Franchising podcast. I am your host, Scott Scotty Milos and I've been around the franchising space. Well, seems like a lifetime. So welcome to the show.
[00:00:13] Speaker B: Just a little FYI.
[00:00:14] Speaker A: I help people explore franchise ownership, see if it's the right path for them, and more importantly, provide an educational journey to see how a brand that fit can fit your goals and lifestyle. I also educate my clients on how to validate and make a logical business decision as well as an informed decision.
[00:00:34] Speaker B: On this show, you'll hear directly from
[00:00:36] Speaker A: franchise owners as well as franchisors, leading exciting brands and people within and in the industry of franchising. You can always connect with me at scottyeperfectfranchise.com that is my email address.
Visit the websites at the perfect franchise.com or Scott Milo's franchisecoach.com. you can also text and call me at 413-935-5111. Now let's get into today exciting episode.
[00:01:05] Speaker B: Hey everybody and welcome to another episode of All Things Considered Franchising. I am your host, Scott Scotty Milos. I am the founder of All Things Considered Franchising. You can find all of our recordings over 300 now. I think we're close to 350 on all of your favorite podcast channels. Of course, all things considered franchising.com website as well.
We also have recordings of rapid fire Q and A as well. I'm also the founder of ScottMyllosFranchiseCoach.com, which is an organization that helps people research and explore business. Ownership is powered by the Perfect Franchise, which is the educational back arm of my organization.
I am really honored to have the next guest on because let me put it to you this way. If you are a baseball player and you wanted to put in front of you three of the top hitters in the in, in, in, in in the world, whether alive, retired or whatever, you probably pick George Brett, Rod Carew and Tony Gwynn.
If you were a basketball player, you probably pick John Havlcheck, Walt Frazier and Willis Reed or some others. But he's no stranger to franchising. If you want to talk franchising and kind of shoot the breeze, this is the guy. Michael Mudd, who is partner and chief executive officer at Brand One, just an encyclopedia when it comes to franchising, has spoken on franchising, sat on committees, ifa.
Michael, welcome to the show.
[00:02:42] Speaker C: Thank you, Scott. And I appreciate you having me. What an amazing introduction.
[00:02:49] Speaker B: No. And all of it's true. You know, you, you're a who's who in the industry.
If I was sitting at a, if I wanted to sit at the bar and have a couple of beers and talk franchising, you're the guy I want
[00:03:01] Speaker A: to do it with.
[00:03:02] Speaker B: Well respected. But I guess my first question is this, Michael.
Just to get our listening audience kind of programmed a little bit, researching and exploring business ownership is something someone's got to take seriously.
Let's not worry about when is the right time, when is the wrong time, what are the circumstances, you know, within the economy.
But in your opinion and your, and based on the depth of your experience, how should someone begin looking at franchising or consider business ownership through investing in a franchise? Because it's not for everyone, let's face it.
[00:03:45] Speaker C: Yeah, it's absolutely not so.
Well, one, thank you, Scott, for the introduction and bringing me into the call. So I talk to a lot of people who are trying to explore ownership and what it. What can they do outside of traditional employment. And what you find is it's like finding a needle in a haystack there. If you're looking for an existing business, you're ultimately probably buying somebody else's problem.
If you do get lucky, it's like how do you negotiate that and how do you do the due diligence on that? So a lot of times people don't want to buy the value somebody else has created. They want to start up something and create the value of their own. And if they're going to exit, then they can take the windfall of the value they've created. So franchising, I guess let me start off. There's, you know, a couple of ways that you can go about this. You can go independently start up a business. Right. But a lot of people aren't visionaries, Scotty. So, so how is somebody going to start a business if they don't have the vision for where this business is going to go? Like they visionary. You know, leaders are hard. They're not a lot of people out there that have the vision to go build something. So what a franchise does is it creates a playbook. It creates something that's been time tested, it's been proven. There's SOPs or standard operating processes and systems that are going to create some predictability around the business that this, this person is getting into.
So if you were going to what First I would answer the question of why franchising. So a lot of people got to start there. They want to get, they want to do something they want to do something big. They want to, they want to have control. They want to protect their future.
But how are they going to do it? Should they do it independently? They should do it with a franchise. So once somebody decides that franchising is worth a look, and then at that point, there's a couple ways to go about it, they can engage with somebody like you, Scotty, which I think is a huge advantage, which would be a franchise advisor or a franchise consultant or a franchise coach. You're going to hear these terms interchangeably throughout different, different systems. But what I think the value, and I would just say to anyone in your podcast, is you're able to give options and, and things that a candidate wouldn't have thought to consider or explore.
So doing this for 22 years now, a lot of times candidates come into a process with me and we start to look and do the due diligence on a franchise concept. And they say, you know, it's interesting because I would have never considered this business model, but it's the best absolute fit for me. And now that I understand that model, I'm glad that Scotty introduced it to me. So I think what a consultant does is they, they have so many, they have a lot of options, and, you know, they're a gamut of different industries and verticals and timing matters. And there's so much going on within the space that sometimes you just need somebody that is an expert, an advisor to kind of put out the landscape, understand a candidate's, their skill sets, their experience, their capital position, and then put together options that, that build the future that they're trying to design rather than doing it this way. And I'll tell you, I've known people who loved a sandwich and they said, you know what? This sandwich is so good, I'm going to go buy the franchise to be the guy who makes the sandwiches. But they, they didn't realize that the, that person, that business is not giving the lifestyle that they want with the business model. So I would definitely not buy a business because you like the product. I would buy the business because it, it develops or produces the, the lifestyle, the income, the, the future that you're trying to design for you and your family. That's, that's why I think consultants sometimes are a better way to go than trying to go at it at your own as you start to explore franchise opportunities.
[00:07:37] Speaker B: Right, Right. It's interesting you say that. I kind of chuckle when you, when, when, when you mentioned the sandwich. Kind of reminds me in an old saying. I Think it's a Sandler or may even be a Ross Perot.
[00:07:49] Speaker A: That
[00:07:51] Speaker B: Ross Perot or Sandler was interviewing somebody and they said, well, why. Why are you interested in sales? It was actually, I think, and the person said, well, I like people.
And Sandler said to the guy, well, do you have a dog? He said, yeah. He says, does your dog like people? He says, yeah. I said, did you bring your dog? Sandler says, did you bring your dog on the interview? Because I want to interview him. So there's a lot of. There's. There's a lot more to franchising than just the sandwich or the product or the service.
I always like to coach people that the beauty of franchising or the advantage of franchising is that you don't have to be an expert in every opportunity within that business as an independent. As you mentioned, you're managing all of that as the owner. So now you're going to rely on other people, not kind of quote, like a partner.
And thank you for the kind words. On the consulting side, that's great.
When somebody is really kind of leaning into their skill sets. And as you just said, that fit.
I like sandwiches, so to speak. What are some of the ways that someone should really validate or find out if it is the right fit in your side? And then, you know, from there, I'd like to get into more about Brand one and your organization and how you match up and create that fit for individuals.
[00:09:22] Speaker C: Okay.
[00:09:24] Speaker B: All right.
[00:09:24] Speaker C: Well, there are a couple things in here I'm gonna kind of. I might go tangential a little bit, Scotty, so bear.
[00:09:30] Speaker B: Okay, okay.
Any way you can, Mike.
[00:09:35] Speaker C: Yeah. So within our brands, and I would. I would encourage anyone on the franchisor side of this equation to identify an ideal candidate profile. So this are the characteristics.
It could be culture. A lot of our brands are recruiting for culture fit. A lot of our brands are recruiting for a particular skill set. A lot of our brands are recruiting for a specific capital position.
So there's a lot that goes into, like, what is ideal? Like, we have to define what are the characteristics, the skill set that we're looking for. So a lot of times brands can clearly communicate that to a candidate, and sometimes they can't. Okay, so the challenge is not every brand is created equal. So I would encourage any candidate that's going through the process to ask that question directly.
What are you looking for in your ideal franchisee? What characteristics? And hopefully the developer you're working with can clearly communicate that. But more importantly, Scotty, anyone Looking at franchising needs to do proper due diligence.
And I can't stress that enough. There are two fundamental pieces that you can use for due diligence in a franchise. One is to look at the franchise disclosure document. And a lot of times people put over reliance on the fdd. So this is the. Probably the one question.
Let me save it because I'm going to get tangential already. So you have the fdd. And then another way is to go talk with the operating franchisees that are already in the business, performing in the business that can provide validation on how it's going for them. That is the most important thing. It's more important than an FTD review, Scotty. The FTD is important because it reviews really your obligations to the franchisor and the franchisor's obligations back to you. In a legal context, it's important to know that. It's important to know your fees, it's important to know your investment and what they state in the financial performance representation.
But you need to go out and talk to the franchisees and make sure you understand their. If you talk to somebody who is. Is crushing it and knocking the. The COVID off the ball. Just asking the question, how much money you make? Is the wrong question. I think that's absolutely the most.
This is the mo. The worst question I hear in franchising is how much money am I going to make? Michael, that's. I get that all the time. How much money can I make in this business? Well, it's. The business is not going to make the money for you. Okay? That's the difference between a franchise investment and a passive investment. If I was to go and put the money in the stock market, I might be able to look at, you know, future. Like, I can look at a lot of things to analyze it, and even then I don't know. But I. What's interesting about a business, it's an active investment. And what I love about active investing, Scotty, is I can perform with my capabilities, my skill set, my experience, my energy level and my passion and my. I can move the needle. So it's not. A franchise is never going to make somebody money. A franchise is going to provide a playbook and an operating system that I, knowing I'm amazing, can crush the needle with this particular operating system.
So it's not about how much money the brand's going to make, it's how much money.
Like, do you feel, based on the validation you're doing with franchise owners, that their skill set, their experience, that you can replicate what they're producing with the operating playbook. So I think it's validation, it's due diligence, it's talking with a good sample of the franchise owners to get confidence that you too could be successful within this business model that the, that the franchisor is making available their support, their systems, their training, their playbooks. Can you execute that model? That's really what the due diligence is about.
[00:13:21] Speaker B: So when we look at franchisees, and just to take that one step further, there is a variation from top to bottom, performance wise in franchising. I mean, every franchise has its A list all the way down to the C list. And then, you know, unfortunately, sometimes you have the D and the F list. Far and few between, but it's there.
So the discrepancy between the top and the bottom, is it as simple as the person in category A is working harder, following all the systems and doing what they're supposed to do, and person C is just maybe not, you know, concentrating on the systems and doing what they're supposed to be doing as much as they should be.
[00:14:12] Speaker C: Okay, so there are a couple things in there. So yes, every franchise system has a bell curve. And it's predictable that that bell curve in every system.
One time somebody said to me, you know, so we're going to run a marathon and we're going to run it through New York City. The course is exactly the same. You look at it, the marathon course, everyone runs the same distance with the same elevation changes. But notice how like what the difference is between people in America. Some people are way out in the front and some are way in the back. So that, but the majority, the 80% of the system is going to fit in the middle of this bell curve. So what then constitutes the performance within that marathon or in this case, within a franchise system? It could be a lot of things, Scotty. So it's not necessarily work sometimes, sometimes not. So grit, I think is important. So yes, can you be gritty?
But also if you make the right decisions, in other words, who you hire matter is probably more important than how hard you work. So as an owner in a business, the beauty and I hope everyone on this meeting, the reason we all want to be business owners is because we want people to work for us. I want people to build my dream world. I don't want to be, I don't want to go build somebody else's vision for the future. I want to build my vision for the future. And ideally, I want a lot of people working for me, that are providing value for the organization.
So it's. The hiring decisions sometimes are the most important. And a lot of times you see people that make bad hiring decisions or they are creating bad leadership styles. You'll find leadership is really setting clear expectations of people and then trust but verify. Watch your KPIs and hold people accountable.
But a lot of times people want to be friends with all their employees, so they don't hold that accountability standard. It starts to slide. There are. Sometimes they're, you know, they, they. There's a lot of this talk about they want to. They want to do nothing. So they're not creating any culture in their team. They're not leading their team. It's basically putting people in an organization and then they're passively, you know, operating, and that's the recipe for disaster. So there's a lot that goes on that creates the.
The bell curve. But the beauty. The beauty of this, Scott, is everything is in the control of the franchise owner. So sometimes I think the biggest barrier you're gonna see for people that actually become franchisees is fear. Okay, that's right.
[00:16:43] Speaker B: That's the biggest reason people say no, and they don't realize it.
Yeah, but.
[00:16:50] Speaker C: But I guess if you can, if you can understand that, why. Why are we fearful when we control everything? That's the. Like, if I was to control the decisions I make, and I control who I hire and I control how I pay, and I control how I work and when hours I work, all those things are under my control. If it doesn't work, it's because of my capabilities in the system. And I love that. I don't know why somebody would want for me. I would be a lot more fearful being under the control of somebody else than being in the control of myself. But also, I've been an entrepreneur for a long time, Scotty, so I don't.
It's hard for me to go back thinking about the W2, but.
But that's like.
[00:17:29] Speaker B: Yeah, it is hard.
It is hard.
[00:17:35] Speaker C: Once you're a pickle, it's hard to go back to a cucumber. It just go back. I couldn't imagine.
[00:17:40] Speaker B: Right.
[00:17:40] Speaker C: Not being in control of. Of what happens day to day. But anyway, I think I got off.
[00:17:45] Speaker B: No, no, that, that. That's interesting.
We're talking to Michael Mudd, who's partnering chief executive officer over at Brand One, and I kind of want to sh.
There are development companies, franchise sales organizations. Everybody defines organizations like Brand One differently.
But you Brand One and your partners, Dave Schaefers you know, go down the list, are exceptional at what you do. There's a strong track record for the brands. You have a diversified portfolio, whether it's senior care, seniors, helping seniors serve, live to be healthy. I mean, you can go down the list.
But what, what, what's unique about Brand One and I could probably think of maybe two or three other similar companies is your concentration on bringing on the right candidates, meaning awarding the right candidates to the right brands, but also making sure and working with those individuals, not doing the work for them, as you said, but providing the guidance and the systems to be successful. So what, what is the, the model of Brand One? What, what is your mission statement?
If I have a client right now Talking to Brand1, one of your developers and they want to invest in one of your business, how, how are you walking that person through a process to eventually and hopefully become successful?
[00:19:24] Speaker C: Okay, it's almost a two part question there, Scotty, so I'll take both parts. So first on Brand One, thank you for the comments. So Brand One is the nation's premier franchise recruitment company.
And I'm one of four. There's five business partners at Brand One, so I've got 22 years of experience. Franchising is all I've ever done professionally. I went to school to be a pilot and just didn't pursue aviation.
Once you get franchising, it's hard to get it out of your blood. It's, it is contagious on all levels. But at Brand One, we don't just work on the franchisor side.
Like my partners are involved and we're involved in all kinds of things. We are franchisee operators of many systems. Dave Schaefers is a franchisee with 100 striper, which is one of our clients. He's a franchisee of Clean Eats, which is one of our former clients.
If you look in like. Alexandra Warren is our VP of operations. She's a franchisee with Restopros, which is our current client. So we're involved in it from an, from an investment standpoint. We are investors in franchisors. We are operators at the franchisee level.
We are also highly connected to every one of our brand partners.
We are 20, we have 23 brands in our portfolio and they range from investments on maybe a hundred thousand on the low end to, you know, a four or five million dollars investment on the high end for some of the brands we work with. So it's a lot with the, of diversity in our portfolio.
We love senior care. We have a depth of Senior care.
[00:20:59] Speaker B: Yep.
[00:21:00] Speaker C: We work with mature brands, Scotty. So there are brands that have full scaled national footprints with 300 franchisees. We have a lot of those.
We also work with, you know, smaller emerging brands that have huge potential but there are some characteristics. So one, they need to be properly capitalized for their growth. They also need to have proper bench strength to support the growth. And then we also want to make sure that the brands are differentiated with something that's clear and unique and that there's a reason for it to be in the community they serve.
We also look for brands that create a positive impact in the community.
[00:21:36] Speaker B: Right.
[00:21:36] Speaker C: We've been approached by a lot of things that like why do we need another hookah lounge? Right. Like I get it, it might be, it might make a lot of money but I, I want it to be provide genuine value to communities. So we really look for those types of brands now within the process. So this is one of the most, I'm more of a process guys. Got it. And that's probably one of the things that are a little unique is understanding how a candidate is going to go through the buying process. And in so many other scenarios people design their process around how they want to sell a franchise and we don't sell franchises. We, we work it through a recruiting process that we, we look for the right fit. We support our candidates with proper due diligence and knowledge and information and training modules so they can understand everything that they're, that involves in this franchise. Like how is the franchisor going to support them and what are the systems that they have for marketing? What are the systems that they have for real estate design and construction? If there's real estate involved, what are the systems? How are they going to get trained? So we, we educate the candidate. We also put a clear system together for, for a transparent due diligence within all of our systems. We want to make sure that they can talk to any franchisee in the system that's important. So franchisees contact details are listed in an ftd. We make sure they're aware of that they can do all the proper due diligence. So we typically take candidates through.
It's usually a two to maybe a three month journey, Scotty, where what we're doing is making sure they can follow a defined system because if they're going to be effective franchise owners, the playbook should probably be followed at least initially so they can really get going before they start to do anything outside of the playbook. So we look for people that follow systems. We look for people that follow the, the profile of the, of the ideal candidate. And then from there we're going to help them through their due diligence so they can learn and ultimately make an informed decision.
We are, I would say, that we vet the candidates and we make sure they're a good fit for that, that ideal brand.
The brand itself also does its own vetting and they also do their own research and they host them typically at their headquarters and really get to know each one of the candidates. But if they can go through the full process and they get awarded the location, this is what I find, Scotty, is that what makes franchising so amazing are the people in franchising. So if we get exceptional people, that's my role is to get, we go recruit exceptional human talent. We're like a, we're like a, an HR agency. If you look at recruiting agencies for traditional employment, we do that for franchising. So we get human talent and then we can match that with, with amazing operational systems. So our brands have great tech stacks, great systems, great SOPs.
So that proven playbook with great human talent creates exceptional performance.
So it's not one plus one equals two. With brands we work with, it's one plus one equals three. That's what we're looking for, is three in that formula. So we're looking for the talent match with great systems. And then when you put a community of franchisees together, this is oftentimes overlooked as well as a benefit to franchising. People think, well, what's the franchisor going to give me in this, in this business? Right? But the reality, probably the best value you're going to get is what the community of franchisees are providing because they're. When you have like, you can bounce ideas off of another fellow franchise owner or if you like, there's a lot of slack channels and stuff that happen within franchise communities.
So it's oftentimes like your facs and the community of the franchise provides tons of value. That's even outside of what you might be thinking you're getting into with the franchise or support.
So franchisees support each other and that's a phenomenal benefit as well.
[00:25:33] Speaker B: Well, it's like co op marketing. Yeah, it's like co op marketing. I mean, you're sharing and so let me ask you this because I'm just kind of visioning how our listening audience and how people are taking in the information.
Is there an advantage to someone who is investing in a franchise that is supported by a, an fso like Brand One, who has the marketing, the operations, the training, the technical support.
Obviously, AI is becoming, very, becoming a very big question now on how has it helped me versus how is it going to hurt me? And having someone like Brand One to be able to answer those questions. So is there a. I don't know if advantage is the right word because I don't want to throw anybody who's not using an FSO under the bus.
But are there strengths to working with organizations, working to an organization like Brand One, who has all that under one umbrella, or is that just a matter of opinion?
[00:26:42] Speaker C: I think it's, it depends on each one of the organizations, Scotty. So I wouldn't necessarily say that I put everyone into one bucket and I wouldn't say put all franchisors in one bucket. And I would also say not to put all of like there's platform companies and there's multi branded franchise or is. And there's, there is what they call these franchise sales organizations or third party franchise sellers would be another way to say that.
But for us, I'll just speak on behalf of Brand One. I do think there's tremendous value in working with Brand One because we vet them out before a candidate would ever vet them out. And if you think about it, we're, we're vetting out for exactly what candidates are looking for. We want solid, strong brands that have founders that are doing it for the genuinely the right reasons. There are a lot of brands. If you ask them, why do you want a franchise? They'll say, because I want to make a lot of money. That is not the reason to franchise. So we go look for the right things and then we, we talk to about 300 brands a year, Scotty. That's like, wow. And we bring on board maybe four to five. Okay, so it's, it's like we've had a lot, we have to kiss a lot of frogs before we get the brands that we bring into our, our company.
But we also build strong and enduring brands. I think when we, when you look at the track record that we have, we've been operating now for 10 years. We have a decade behind the company.
I think our, our reputation, and I hate to say it this way, but our, I think our reputation kind of speaks for itself.
[00:28:13] Speaker B: Yes, it does.
[00:28:14] Speaker C: We don't like to hype Brand One all that much. It's more about results. I mean that the results speak.
But the brands we build are strong, they're enduring because we do a lot of the due diligence before they ever come into our process.
And then we do, I believe, a good job in finding and recruiting the right people. So we bring in the right operators, we're going to build much stronger brands as a result of our work. We're kind of the gatekeeper to each one of these systems.
[00:28:40] Speaker B: Do you find that some of the brands that you've brought in that maybe haven't worked out is because that particular brand isn't really resonating well with your systems? In other words, there, you know, it's kind of like, hey, the guy looked great playing baseball in spring training, but now he. You know, I always think of trouble with the curve with Clinton Eastwood. You know, the guy could hit a fastball, but when he pitched a curve, you know, no major league teams can ever bring somebody on, so who can hit a curve. So are you looking at brands? And then you get them into the portfolio, so to speak, and then realize, hey, you know what? This isn't working out for you. We don't want to hold you back. But that's not how we do it.
[00:29:26] Speaker C: Yeah. And for us specifically, Scotty, it doesn't have to do with, like, its growth rate.
[00:29:31] Speaker B: Right.
[00:29:32] Speaker C: So we all take on brands that, like, they're able to support five franchisees this year, and that's fine because if we put sol. If we put amazing franchisees in the first five, that builds the foundation that then builds. The next year we'll do 10, and then the next year we'll do 20.
And then after that, now we can really. They have the infrastructure and the support to really start pacing out some serious growth. So we're okay to do that. But what happens is, I've learned this the hard way, Scotty, is that my team, and I'll tell you, I believe brand one has the most exceptional people on the planet. We collectively, within our organization, we have 450 years of experience in franchising. It is insane how much experience sit under the roof. But my company has to. Has to work within the culture of other people's companies.
So, like, we're deep with our brands. Like, we're. We know intimate level details. We do full. We build a lot of operational systems on our end. Like, we do a franchise development manual. We bring in, like, training hubs and we. We have resources where we really understand everything about our brand partner so we can build processes and systems to help educate people on the merits of that brand. So if. If they're. If they have toxic cultures which sometimes get realized after we start developing, it's it. My team has to be living in those toxic environments. And it's not good for my.
[00:30:57] Speaker B: It's not good.
[00:30:58] Speaker C: Yeah. So that's like the biggest thing we've seen is just misalignment in culture. And then we have to make hard decisions, and it's tough to make those decisions. But it's also important because I. The. I think the culture of Brand One is really good, and I don't want to have any toxicity within the walls of Brand One. So they're hard decisions to make. But the end of the day, I think if you make the right decisions, it's not necessarily about the money. It's more about aligning with great brands that are going to create better reputation. Because all we really have is reputation, Scotty. So Brand One is built upon the collective reputation of all of our wins and our successes and our people.
So it's mostly culture misalignment. And when that happens, we do make the hard decisions, and our agreement allows for either party to move out. That's what's nice, is we don't, like, lock a brand into a contract, and nor do we expect that as well. We can move and they can move. So if there's ever a misalignment, it's really easy for the two parties to separate, which makes our relationship built on what we always call Scott. Even what we build this on is trust, like and respect.
So as long as those trust, like and respect stay connected with our brand partners, we have very long relationships. The average brand in our company has been with us for five years. It's like long, deep relationships that we have with these. These organizations.
[00:32:21] Speaker B: So to close out, we're talking to Michael Mudd, who is partner and chief executive officer over at Brand One, to close out. Michael, you are very up to speed, very involved in regulations within the franchising industry.
It's no secret that the Federal Trade Commission has tight guidelines, and then the guidelines within states, the registration states, the 13 registration states, is that a plus for potential franchisees, investors, that there are tight regulations, whether you agree with some or, you know, you're never going to agree with all of them.
So that's part A to that question and part B.
A lot of potential people who are looking at franchises look at franchising as a way for the franchise or to get rich and not the person who's investing in the business. And I think you and I, in all the years that we've been in this business, know that that's a fallacy. Although there are brands that don't operate Ethically, we won't name them. I mean, anybody could really kind of look that up. So the regulations, the question, the regulations, are they good for franchising? And two, when somebody addresses. And I'm sure you've gotten the question, well, franchisors make all the money. I'm not going to make any money. How would you address that?
[00:33:46] Speaker C: Yeah. Okay, so let me, let me start. Regulations, I do believe, yes, work to the advantage of the franchise buyer or the franchisee in this case. And the reason is that branches have to provide disclosures that are going to help you identify red flags or concerns or things that you, you need to be aware of before you make an investment in that operational system.
So things that I would, I say that get identified were things like previous litigation or pending litigation or bankruptcies or leadership. Like, you can see the whole leadership team of the organization.
And if you're seeing like, is there sustainability? Is everyone in this company just got hired last week. It also has audited financial statements. Scotty, this is important. So a lot of candidates come and they think only about themselves and that's okay. Like, how much money am I going to make? You're taking advantage of me because you make all the money. This is kind of your next point. They don't even think to look at the audited financial statements in these FDDs.
So I would say one of the most important things that a candidate should probably understand is, is the franchisor properly capitalized? Are they able to be an ongoing concern? Do they have the capital to support the growth that you're seeing? Item 20 shows you, like, all of the growth. How, how many franchisees have been awarded? How many are projected to open? So you have to understand, like, is there infrastructure to support this growth and is there capital to support that growth?
All of that can be seen right in these disclosures. So I would say yes.
The regulations that are imposed by, it's called the franchise rule. Is the, is the national guidelines. Then there's state specific, there's 13 states that go above and beyond what they do at the federal level. But the FTD is a very important part of due diligence. But the problem, as much as we want this to be plain English and understandable, the average person probably still has confusion around it. So this is why I think sometimes it's good to get advice from, from a franchise advisors and consultants like you. Also, if you work with a really good recruiter, they will take the time to walk you through that. We have, we have a video that gets sent out to a candidate to help them understand even what an FTD is like. It's not about the brand. We're working with fdd. We have tools and resources to help candidates understand the tool, to do their due diligence and then we walk them through a full review of an fdd. So it's. I'd say yes, the regulations help a ton. Now secondarily on the money side.
So franchisor is what they call royalty sufficiency, where they have to get open enough locations to actually support their operations with royalty. That break even period is, is tremendous, Scotty.
[00:36:38] Speaker B: Yes, it is. You're right.
[00:36:39] Speaker C: And then people think these franchise franchise fees if done right. So if you look at the franchise business model, the franchise business model is about royalty, it's not about franchise fees. So if done right, the franchisor should be using its franchise fees to support the cost of getting franchisees open and open.
[00:36:58] Speaker B: Yep.
[00:36:59] Speaker C: And then they're, they're trying to get very successful locations where they're supporting and getting them open, operating and successful. Successful where the benefit becomes when both parties are making tons of money.
So we've heard a lot of stories out there, but when done right, the franchisor should get to a point where they're making money. Because if not, that's a huge risk to the franchisees. Just understand if you, if the franchisor is not making money, you are. That's there's risk there. So you want the franchisor to make money, but you also want the franchisee to make a ton of money. So franchisors should understand the EBITDA of the operating franchisees. Because what if done right, the franchisor's primary focus should be how much money are my franchisees making. Because if they're making a lot of money, that means they're going to grow, they're going to open more locations, they're going to tell other people about it. So it's really when you look at your operational team, like franchisors, ops teams, they should be driving KPIs, they should be doing infield support to make sure that that metrics are being driven in the P L to drive the adequate way to ebitda. Because if the EBITDA is strong, that's going to fuel everything. It's going to make the system, you know, it's going to set it on fire. That's where you get very big thriving systems are when franchisees make a ton of money, but the franchise or two has to make money. You got to think your, your partnership is the wrong word. But you're working within an agreement where both parties should get better benefit from each other's involvement. A franchisee should be better off with the franchisor and a franchisor should be better off.
[00:38:37] Speaker A: Yeah, yeah.
[00:38:37] Speaker B: I always like to, you know, and again, you pretty much said it, that the franchise, the franchisor's income and how they make money is royalties.
You know, that's their goal. They want to be able to get to royalties to pay their bills and pay their people versus capital investments and things like that. Or even private equity at some point. You know, private equity tends to be an exit strategy. Michael, thank you for being a guest here. Any closing thoughts? Anything that maybe I didn't ask that you would want to share with the audience at this point?
[00:39:11] Speaker C: I guess, I mean, the only thing I would say is one, thank you for having us. Scotty, we appreciate everything that you do for Brand One. It is tremendous and I have a tremendous amount of respect back to you. I know you opened up the meeting with, with, with respect to our company, but there are a lot of consultants out there. I would say you're. What I would say is at the top of the pack in terms of experience and what you do for your, your candidates. So thank you for everything and allowing me to come into the podcast. I'm available at any time for, for support to you and, and to your candidates. So thank you for having us on.
[00:39:45] Speaker B: I appreciate that. We've been talking to Michael Mudd, as I said, partner and chief Executive officer at Grant.
You can find Michael on LinkedIn. You can probably reach out, connect with him. He's a busy guy, but I'm sure if you sent him a message, he will find sometime, maybe two, three o' clock in the morning, which I've gotten emails from you at that time, but I certainly will get back. I'm your host, Scott. Scotty Milos, the founder of All Things Considered Franchising and of course scottmylasfranchisecoach.com which is powered by the perfect franchise. You can reach me on LinkedIn as well. If anyone has any interest in the Brand One Opportunities brands, you can go to their website. You can reach out to me, but it's been great having Michael and I hope to catch up with you again another six months from now and kind of get an update. There's so much to talk to you about. It's just hard to start where that's really what it boils down to. It's you're a wealth of information. Michael, go have a great holiday season with your family, and we will catch up next time.
[00:40:45] Speaker C: Likewise, Scotty. Thank you.
[00:40:46] Speaker B: Thank you, Sam.
