[00:00:06] Speaker A: Hello, everybody, and welcome to another episode of All Things considered. Franchising powered by Scott Milesfranchisecoach.com dot. I am your host, Scott. Scotty Miles. All things considered franchising is a podcast dedicated to the entrepreneur. We provide content relating to business ownership, entrepreneurship, both on the franchising side and the independent side. Scottmylasfranchisecoach.com is a consulting organization founded many, many years ago to help people research and explore business ownership. The services, guidance, education that we provide our clients is absolutely at no cost to them. We are re enumerated, compensated by the franchisors brands that we represent in our portfolio.
We're going to take a little bit of a sidetrack in our conversations that we had over the last few weeks because for those of you who know me, data and analytics are very important to me. I use a lot of data and analytics and lead generation on my consulting side. And I'm really pleased to announce a guy who's been around the franchising industry for a long time, understands research, understands data surveys. And that's the founder and CEO of Franchise Research Institute and France survey. Survey, Jeff Johnson. Jeff, welcome to the show.
[00:01:26] Speaker B: Hey, thanks, Scotty. Good to be with you.
[00:01:28] Speaker A: You know, you and I were chitchatting before we hit the, hit the button here to start this, but analytics and surveying goes away back in the franchising industry. This isn't just because the Internet and technology advanced that all of a sudden that we have analytics, but analytics and surveys have played an integral part in the franchising industry, both on the franchisor side, the franchisee side. People who are interested in researching and exploring opportunities, obviously, and also for organizations that provide oversight to the industry. Walk us through some of the things that your organization does, and what you're seeing is kind of those bullet points that really help drive the industry or keep the industry on a straight, narrow, I guess I should say.
[00:02:19] Speaker B: Well, it's a huge industry. As you know, Scotty, there's somewhat, what, 4000 franchise opportunities available. So it's huge. And franchising, it's hard for me to believe that I've been in franchising four decades now. Scotty, you and I go back, you know, we've been around a long time. And I got into franchising back in 1984. I bought a Schlotzky's franchise. And for folks that are looking for a business opportunity, I chose franchising. And I still think it makes sense. It's a great avenue to accumulate personal wealth. I was tired of trading time for money, and I wanted to be compensated for. I don't know how smart I was or how hard I worked or what I could accomplish. And so I opened three locations in four years.
I had a food truck where I was grilling hot sandwiches outside the football stadium and the state fair. And so I was one of those guys doing all of that stuff. Tchlock skis grew tremendously. It went from 200 locations when I started to 750.
The company went public in December of 1995, and then they went bankrupt in August of 2004.
And I was an area developer for Schlocky's at that time, and I had four states. So I was traveling and opening up locations and helping new franchisees. And so I was really deep in the wood in the woods. But after 17 years, Slotsky's goes bankrupt. I'm out of business.
[00:03:47] Speaker A: So sorry to hear that.
[00:03:49] Speaker B: Yeah, that's, what did I learn about that. And that's kind of this story because I've been doing franchisee surveys for two decades. Started doing that in 2002. And I'm really looking at the data, and I think most candidates need the data. And we can talk about that when we get, you know, to that part of the story. But I hired a PhD, wrote the methodology. I was not looking for another Yelp survey on how happy we all are. I really wanted some data, so I wanted to, I had a PhD, I wanted to reach out, and we got a great client base right now. But I'm not here to pitch all of that. I kind of, I want to talk a little bit about excellence as franchise organization and what, you know, what is a franchise? What makes one excellent? What's the difference between a good one and a really good franchise, and what does the data look like?
[00:04:42] Speaker A: That's interesting you bring that up, you know, because when we talk about data, we don't necessarily always talk about a quantitative side. There's a qualitative side. But as a kid growing up, when I started to get into this entrepreneur and wanted to open businesses, my father used to share a line with me that numbers don't lie. You know, one in one is always going to be two and two plus two is going to be four. And no matter how you look at it, it isn't about what you have in your checkbook that you can spend. It's about, you know, the expenditures and the profile, the financial profile you have of your company. So when you look at your surveys and your data, to go back to what you just said, 4000 franchises, not a lot of not all of them are good ones. Matter of fact, there are probably a lot of bad ones and things that kind of have those alarm clocks as associated with it. So if one was going to start investigating franchise wars, where. Where is the criteria that you're suggesting that someone look at besides that? And I guess the focus has always been on item 19. But where is. Where, if you look outside of the item 19, where is the other focus? What are people looking at?
[00:05:59] Speaker B: Yeah, it's a great question. I think they're really two pillars, and you need to make, when you make that decision, take the emotions out of it. We all talk about that, right, Scotty? Because we fall in love with the hamburger, whatever it is, and we decide we want to do that, whether it may be good or not. But the two pillars for me when I'm talking to new candidates, one is the franchise performance. Can you make money at the deal? Right.
[00:06:25] Speaker A: Right.
[00:06:26] Speaker B: The second crucial element, and I knew that when I was searching for a franchise, was, what do the franchisees say in private? And so when I founded this company, what I wanted to do is have that, you know, that clipboard, and I wanted a big sign, you know, executives stay out, and I wanted to go in that room and start talking to franchisees. Is this the real deal? You know, do they care about your success? What's the training and opening support look like? What are they doing on social media? Does it help you grow your business and profit? So that's the other piece. What I did is I started driving around talking to franchisees because I was living in Dallas at the time. Schlocky was out of Austin. There were a ton of them. And so I would go out. I was a sales manager, so I would go out with my sales guy, and when the day was done, I'd go find a Schlossky's franchise. So I would just. I would go talk to him and say, you know, is this? And I really. I wanted to know if there was some magic that the franchisees had that I didn't have so that I could. I just couldn't get there. But I also wanted to know, is this the real deal? And I don't want to hear the spin. You know, I want the real validation. So I wanted to do that in a more sophisticated way. So. But that's the key to me, is franchise performance. You know, can you make money? And secondly, what are franchisees saying in the locker room right now? Do you think I should be recruited? Do they care about you? Are they interested in your or is it all about the company? So when Schlocky's went bankrupt, they kind of lost their way. When they got public, there were a whole bunch of folks that got stock bonus, you know, stock stuff. So then the goal was to increase the value of the stock. So it came out at about ten. Target was, we want to get it to 20. So anything that can make the franchisor more money is something we want to do regardless of what happens with the franchisees. Franchisees, they lost profitability for lots of reasons. Stores started to close and, you know, it was a house of cards, so. But the secret sauce is really enfranchisees, and it's not just satisfaction, it's profitability. You know, this is long term. When I did the Schwatsky's deal, there was no plan B. Scotty. I mean, I.
[00:08:37] Speaker A: Right, no, I mean, and you're right, because it's, you know, when we were talking to our clients over
[email protected]. You know, we, we take into consideration that regardless of whether it's a million dollar investment or $100,000 investment, it's still an investment, and it's a lot of money regardless of who you are and where you are in your financial profile. So you have to really kind of understand. But let me ask you this, Jeff. You know those hidden secrets in the validation? I always preach to my clients and direct my clients that it's the validation. Validation. Step outside of the validation calls. Talk to franchisees. Try to get outside of the box and not talk to franchisees in your general area, because human nature is, they're going to look at you as a threat anyway, coming into their territory. So step outside the box, get into different states. But what are some of the alarm, the alarm clock sounds that you hear? That would be, you know, our listeners may want to hear that. Maybe I should think twice about this.
[00:09:45] Speaker B: Yeah. And what I. When we take all of the data and we're back to the data and we put it all on a spreadsheet, we find that the majority. So if it's low performing bad ideas to the extraordinary, it really forms a bell curve. So most franchise opportunities are somewhere in the middle. Yeah, they're doing, you know, we don't even care about the bottom guys. But what I focused in is those are really top franchise, you know, that top 10%. And what is unique about those folks and what we found is that there is a real desire for them to partner, not in a legal sense, but to partner with franchisees. To be successful, and you need two pieces of that, they have to be customer focused. I mean, if customers are not satisfied, you got a problem. Most of us can kind of figure out if, you know, is that a good value? You know, our customers, the other part of it is they're also in franchising. Well, that's a whole different business model. So it's the customer satisfaction return customers, etcetera. But then is the franchisor really understand franchising? And as their franchising focused, are they interested in partner and your success?
[00:11:00] Speaker A: That's interesting.
[00:11:01] Speaker B: That's kind of the secret. We do work with Arby's and all the inspire brands and, you know, h and r block and a lot of emerging brands, but folks that are really interested in the data, you know, the franchise executives that want to know how well we perform as a franchise organization, then I believe, you know, there's an argument in franchising, are the franchisees customers of the product? I really believe they are.
[00:11:27] Speaker A: Right.
[00:11:28] Speaker B: If you wouldn't buy a microwave without looking at the reviews, don't you have to talk to franchise? I mean, if you're going to invest your life savings, you want to know the reviews from existing franchisees. And we're, our model is to become, we want to reach out to every franchisee, brand new long timers, multi unit, and then we want to quantify the data on how would you rate the overall quality of the franchisor, knowing what you know now, would you do it again? And if not, why?
Would you recommend the franchise? If not, why? And so all of those key, that's where we can really dive in. And franchise executives, for the most part, if they really care about those metrics, they become clients of ours because they need to know year over year when we, are we making progress in training, are we making progress in support? How does our field support work right now? What do franchisees really feel about that? And oftentimes franchisees are not going to go, yeah, my field guy's really no good. You just, the retribution that can happen is just enormous.
[00:12:34] Speaker A: Right? What? You know, it's kind of interesting the way you put that, you know, and I'm sure that in your, in all the years that you've been putting the data together, the surveys and reviewing it, analyzing it and going it over with franchisors, there have to be some, what I would call surprises that have developed over the years.
But some of this has to be common sense as well, because the underperforming franchisees are typically going to be the less happy they're the ones that are really going to kind of push back on it's the franchise or fault when you look at the franchise or they're going to push back on the franchisees saying that you're not following the process. So when you look at that kind of that wall that starts dividing the franchisee and the franchisor because that's really when all the trouble starts, that's when all the fighting starts. How do you see the resolution to all that on the franchisor side? I mean, is there a secret sauce? Not that you want to give it away, but is the franchisor really just kind of just need to go out there and kind of hold the hand and work with these underperforming franchisees? Or is it you need to get.
[00:13:52] Speaker B: Out so you've got the tug and pull between sales and operations?
If we over promise, then expectations are not going to be realistic on the franchisee side. And so if reality doesn't meet, expect, I mean, that's the big challenge for franchising right now is because 4000 franchises are going to try to find that person that will do the right thing. So our fallback is franchise executives. Without our data, franchise executives have the chronic complainers, the folks that are going to be unhappy all the time.
[00:14:25] Speaker A: No matter what. Yeah, no matter what.
[00:14:27] Speaker B: And that's true franchising, but it's also true on a football team or a military organization.
[00:14:33] Speaker A: That's human nature.
[00:14:34] Speaker B: And the other side is you have false praise. So there are folks that come up after the meeting or the whatever and they tell you what they think you want. They want to be the teacher's pet. Right?
So our data, we want to take out the chronic complainers and the teacher's pets and then we want look at that 80% or whatever the number is, that 80%, what do those folks think? So if the goal of the franchisor is to make a franchisee successful, if they're unhappy, we have something to sell. So I don't think the focus for the franchisor is how do we babysit all of these guys? I don't think that's true. If there are folks that just are never going to be happy, then you got to find an exit plan that doesn't involve 49 lawyers because that's where it always ends and nobody wins that deal.
[00:15:22] Speaker A: Right. That's interesting. Yeah, that's interesting.
[00:15:25] Speaker B: So I want those, that middle 80%, the silent majority, and what do they have to say? And how can we move the needle? How can we help that organization be in that extraordinary, you know, that top percent of the bell curve. So study those folks. What do they do that's unique that the rest of them aren't? Can the franchise organization live on royalty income or do they need to keep selling, selling, selling? So you can look at the financial data and kind of equate that. And if they can make a living and be profitable for the franchisor, have a model that makes customers crazy happy with the product, and the franchisee can make money.
[00:16:07] Speaker A: Right?
[00:16:07] Speaker B: You got the sweet spot right there, Scotty. And that's. That's what we're trying to help candidates find. And we're trying to help franchise organizations take the data and be in that top performing extraordinary category.
[00:16:21] Speaker A: One of the things that, and I think you'll agree to this, and it's funny, I recently just got done having John Hewitt on my podcast, and of course, John is the founder of Liberty Tax. 55 years, over 10,000 franchises awarded. Of course, now he has loyalty brands. But, you know, we were talking about that, these emerging brands now, and there seems to be an influx over the last five years, six years of emerging brands, people who have businesses that want to try to franchise their business. And I just got back last weekend from the national events franchise Expo with Michael Hyman, Dennis and his group. And I would say that one out of the three people that stopped by my booth were people that are interested in franchising their business. And what alarms me most about what I'm hearing is the lack of knowledge that these people have, especially when they've been speaking to an FSO, what it takes to become a successful franchise or brand. And you do work, and you do a lot of work with emerging brands. So talk to us, talk to the audience about, you know, if they're thinking about franchising their business, what are some of the key components and things that they should be thinking about?
[00:17:41] Speaker B: That's.
I've always made this comment that franchising is like sex because it is unique in all. So it's not another distribution method. I mean, it is so unique that you really have to start off, what the heck is franchising? You know, and how does it work?
There's a lot of folks that have businesses that are looking at franchising because, as you know, Scotty, private equity is, yes, crazy about franchising. And, you know, unfortunately, in large part, is because franchisees can't go across the street. So if you make them unhappy, they're still in the loop, and they're still paying royalties. And that is so attractive, so right for companies that are. Look, honestly, Scotty, they need somebody like you. They mean they need a consultant that understands the unique. The uniqueness about franchising. So if you've got a really successful business, should I franchise it? Which I think is what you ask is a complicated answer. Can you, as the company, make money and could a franchisee still paying all the royalties use your unique business systems and make it profitable? And that's a delicate combination.
[00:18:58] Speaker A: It is. It's a very delicate combination. You're absolutely right, because I, you know, typically my response to people is basically what you just said, are your systems and best practices your quote menu?
[00:19:09] Speaker B: Yes.
[00:19:10] Speaker A: Can somebody duplicate that and delegate that to be successful? And number two, I think the other part that people don't understand is that the actual documents to franchise is the easy part now. But once you're handed the documents and say, congratulations, you're registered with the Federal Trade Commission, the hard work really starts because you got to spend another 510, 15, $20,000 a month to start generating lead development, lead generation, the service, taking care of your franchisees, building your infrastructure.
Is there any interesting data that you have that shows about the emerging brand category, about people who tend to want to invest in a merging brand? Because that tends to be the higher risk category versus a taco bell or something else, but. Or Kentucky fried chicken? So can you speak to the tolerance of risk when people are looking at emerging brands or kind of the structure they should be looking at?
[00:20:14] Speaker B: Yeah, really, it gets back to the leader, you know, the top folks. And do they understand? Because now, if you go into franchising, you're right about the documents. I mean, we can get the contracts put together, but it is. You're now inviting folks to invest in your business, and they are not employees. They are going to view themselves as owners, minority owners, but they're fully invested. And are you ready to invite all of those folks into the conference room and they're not going to sit quietly and they may not share, but are you ready to turn over if you have that autocratic management style? Franchising won't work for you, Scotty, because this is a collaborative effort and you want to have more folks, more investors, you know, involved in the whole process. That's where it fails. It's not. If you can get the money right, then do you have, you know, a servant mentality when it comes to the franchisee? And if not, don't do it. I mean. Absolutely.
[00:21:14] Speaker A: Right.
[00:21:15] Speaker B: Right. Because franchisees, and then in the early days, if you get a couple of folks that were just bad fits, not necessarily bad people, but just bad fits. You have complicated life, and I know you know this, Scotty, but you have complicated life to a point where you just, you wish you hadn't done it, right?
[00:21:35] Speaker A: Right. Just flipping this script. We're running out of little time here, but we've been speaking to Jeff Johnson, founder and CEO of Franchise research Institute and France survey. Kind of a person who's been around the block or two, lots of tenure and understanding the analytics and the data within the franchising industry. Let's flip it back to the person who's listening to us speak right now, who is contemplating whether to start researching, investigating franchise opportunities.
If you are going to give them a piece of advice or guidance on the validation process, what are the one or two things that you think those particular folks, people who are doing their due diligence, what are the one or two must due diligence processes for validation that someone should follow?
[00:22:26] Speaker B: You know, franchise? You know, oftentimes you and I will get a question like who's the best one? I want to know which the best deal. And it's really when you're looking for, I mean, it's like buying shoes, right? You know, there's women's shoes, there's running shoes, there's men's shoes at all. So what is a good fit for you and your background? So first of all, what's going to work well for you? What can you invest in? How much cash do you have? What are the opportunities out there? And what is a best fit for what you're looking for? We're all trying to create wealth, not just make money, but really create wealth. And then what you're trying to do is find is the franchise organization, customer focused and franchise focused, because now you're the consumer. And the only way we, our clients oftentimes will share the survey results because it's something we can stamp, you know, this is data that you can rely on, not a handful of validations because so the franchisor is always going to try to steer you. You know, these folks, you're in a college town, these guys are in a college town, but they're never going to recommend, you know, the truly bad apples to you. So how do you get a feel for the franchisor is really looking to partner, not just to sell a deal. They want to partner with somebody for the long haul. These are largely ten year contracts. And when you read the contract, I mean, you can't just walk away. So how do you find the franchise organization whose leadership top folks really are looking to partner? And if you're, I'm not interested in the sales spin. So if you want to get past that, then you have to get ahold of franchise. If you don't have data like a report from Oz, then you have to get by, you know, and there are others that are, do kind of a Yelp survey and they're trying to identify the top validators and share that with the franchisor. And it's just another sales spin cycle. Right, Scotty?
[00:24:21] Speaker A: Right.
[00:24:22] Speaker B: Get. How do you identify folks that really care?
[00:24:27] Speaker A: Yeah, I think, you know, you're absolutely right because I think in our consulting organization, my consulting organization, you know, I try to tell people, yes, the numbers are important, but you also have to feel comfortable and be confident that the people that you're partnering with, because it is a partnership in a way that you have to be comfortable with these people that are going to provide you with the systems, the best practices to be successful. And that if you do run into a roadblock, that you can pick up the phone and you're comfortable to be able to get you through your roadblock because that's what you need them for. The numbers space in themselves. I mean, if they weren't successful, if they didn't have successful numbers somewhere down in their history, they wouldn't be a franchise right now anyway. A franchisor. I mean, that makes sense, right? I mean, nobody's going to invest in something you're not going to make money at.
So I agree with you there.
[00:25:20] Speaker B: And Scotty, the only caveat I would have is all of the data you're looking at in an FDD is really looking in the rearview mirror. That's what happened last year, in the year before. And what this will offer is what's going on in the locker room today. What are franchisees saying today?
[00:25:37] Speaker A: Right.
[00:25:38] Speaker B: That's really, it's not an easy thing to do, but you have to hear that voice. And I want to spend just a second, if you have it, Scotty, on consultants like yourself who can be extraordinarily helpful in identifying.
If the consultant really dials into the, the prospective franchisee and says what works for you, what's going to be a really good fit, and if they've got a, you know, a portfolio of brands that they know really well and they're, you know, their concern is, I really want to make a match here. I want people to be married. I want to, I want to be in business forever. And so I can look back at folks that I helped get into business and talk to them, and they're going, Scotty, you, the recommendation and the help you gave me was invaluable. And on top of that, I'm not paying your salary.
The other folks are, the franchisors are falling. So if you can identify a great consultant broker that works with you, I think it's extraordinarily helpful.
[00:26:34] Speaker A: Yeah. You know, it's funny doing, doing these trade shows, and I've a lot of experience at trade shows, and I love the trade shows. The expos, somebody said to me, came up to my booth on Sunday and said, hey, look, you know, I noticed there are two or three other consultants here that do the same thing you do. How do I know which one to pick? I said, look, pretty simple. It's like a relationship. You have to feel somebody you're going to trust, feel comfortable, somebody who's going to listen to you and not tell you what to do. So if it's me, great. If it's the other person you're more comfortable with. But that's how you really kind of put this into perspective. And it's also on the franchisor side, the brand that you're going to pick, pick the people that you're going to trust and feel confident with, that's going to lead you and guide you or help you get to the. To building that wealth and legacy that you're looking for.
[00:27:22] Speaker B: Absolutely.
[00:27:24] Speaker A: I said, you know, I spoke at one of these conferences over the weekend, and I said, look, I said, no's okay.
[00:27:30] Speaker B: Oh, yeah.
[00:27:31] Speaker A: You know, the brands would rather you say no, and the brand would rather tell you no than have to fight you after you've already given them a check for 100 grand. And, you know, you don't know what to do.
[00:27:43] Speaker B: Yeah. And franchisees, we have to recognize that. I know franchiseors are trying to sell franchises. I guess they need to, but franchisees are starving to be successful. I remember when I quit my corporate job and went into selling sandwiches, my mother in law couldn't believe it. But then that's my goal, is to. I want to prove it to my mother in law. I want to prove it to my wife and my friends that I made a good decision. I invested in a great brand. I'm a part of something bigger than myself. And you know this. You know, when I see you at the next cocktail party, I'm going to tell you about my new deal I just did in franchising in a second location. So it is a relationship business, and you need to find a consultant, like you said, that works with you, and you need to be in a brand that cares about you.
[00:28:33] Speaker A: Right? Right. Well, Jeff, we appreciate your time. We've been talking to Jeff Johnson, who is founder and CEO of Franchise Research institute, Fri, and France survey. If you'd like to connect with Jeff on LinkedIn, just feel look him up. If you have any questions or Jeff, message him. And of course, again, like I said, you can reach out to him on LinkedIn. Is that the best way for someone to connect with you on LinkedIn?
[00:29:00] Speaker B: LinkedIn's fine. Or it's jeffransurvey.com.
[00:29:04] Speaker A: There you go. I am your host, Scott Scotty Miles of all things considered franchising to review all of our podcasts. We are creeping up on 100 episodes now. Visit allthingsconsideredfranchising.com or go to all the podcast channels. Spotify, Apple, whatever it is that you listen to for assistance in researching and exploring franchise opportunities, business ownership, feel free to visit scottmilasfranchisecoach.com. Lots of wealth of information there. And fill out the inquiry form, and we'll reach out to you to schedule an intro call. This is Scott, Scotty Milos saying thanks again for joining us. Jeff, great having you, and we hope to get you back soon. And until next time, thanks much. Thank you.
