170 - The Importance of Listening in Franchisee Selection and Development with PostNet's Bill McPherson

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

Welcome to Listening with Leaders. You are the Vice President of Retail Network Development for 2 companies, all owned basically the same company, but 2 different, 2 different franchise operations. One is alphagraphics.com, which has been around for a long time, and also postnet.com. And you are the guy that kind of goes out and finds people and works with the franchisees of those very successful organizations. Welcome to the show.

I appreciate it, Doug. Yeah, so AlphaGraphics been around 51 years and PostNet about 31 years.

I know, as we were talking before we started recording, uh, there's— I've seen the AlphaGraphics trucks around in, in in my region here in Central California. So, um, you've got a background in franchise development that goes back a long ways. Tell us a little bit about your back— your backstory.

Yeah, um, let me back up even a little bit before that because I think it weaves into maybe a little bit for kind of listening and kind of thought leadership. So, um, born in Southern California— you and I were chatting before a little bit— um, just north of Los Angeles. And, uh, was very involved in athletics, and in fact basketball. Um, was blessed and fortunate to, uh, this is way back in the day, but blessed and fortunate to be, uh, All-City Los Angeles and All-Valley. So, um, was good enough to get some looks at some Division I and Division II schools back in the day. Um, went to a, uh, Division I on a partial scholarship, and then Got injured for the third or fourth time, had to have surgery and then rehab, transferred to a junior college. My career was all but ended and so switched to a finance degree and got recruited out of college with a Fortune 100 company in finance and accounting. Moved to Chicago, Illinois with Baxter Healthcare at the time, a Fortune 100 company. And was in charge of finance and accounting for about 3 years, climbing the proverbial corporate ladder, as they say. And just by mistake, by happenstance, fell into the franchise industry about 27 years ago. Got recruited to go back to Northern California with a small staffing company. They didn't have any franchise. They were all corporate owned. And after 2 years there of successful growing their corporate units, they asked me to lead and start a franchise. I didn't know anything about franchising, probably didn't even know what the word meant. But it was awesome because I had to— I was thrown in and had to do everything from recruit potential entrepreneurs to supporting them to marketing, technology, legal, all of that. So been in franchising, as you said, yeah, about 27 years now in B2B concepts, consumer concepts, retail, etc.

Yeah, tell us a little bit about what, uh, AlphaGraphics and PostNet do.

So AlphaGraphics and PostNet, uh, print marketing solutions, signage, um, on the AlphaGraphics side, that's kind of their core, more of a business-to-business model, solution selling, etc. PostNet, um, started and for the most part still very entrenched in pack and ship, uh, solutions, but has evolved to mailboxes, virtual mailboxes, notaries, and then some of the PostNet owners have certainly gravitated to more print, print options and capabilities as well. So both of them kind of in the same space, which is in similar space. So print marketing solutions, providing solutions to small, medium, large companies to get the word out about their brand.

And how many franchisees do you have in the operation?

Alphagraphics, about 250, primarily most of them in the US. PostNet, about 700, about the same in the US as Alphagraphics, and then about 400+ internationally, primarily in South Africa.

And in terms of your role working with both operations, what exactly do you do?

So my, my team's responsible for 3 things. One, bringing in new franchise owners, entrepreneurs. So somebody raises their hand, Doug raises their hand and says, tell me about AlphaGraphics. We take Doug through the whole due diligence process, getting all the questions answered, see if it's the right business, the right franchise. Um, second thing we do is real estate. So I've got a director of real estate. So we do site selection, lease negotiation, demographics, uh, helping them with construction, building their store. And then third thing is funding. So we work with preferred lenders. Obviously, most people that go into a small business need some sort of funding. So we assist in that as well.

That's a, that's a big portfolio. And, and so, and so your job is really just to grow, grow the franchise operation.

Absolutely. So building the brand, putting dots on the map, as we say. And, and that's interesting. So, yes, that's the primary goal and objective, but I've been very fortunate. These two brands throughout my whole career are probably— well, they are the most selective franchisors that I've ever led, which means a lot of franchise companies, you know, if Doug has the financial resources and there's a territory available in Central California and he has no felonies or misdemeanors, then he pretty much gets a franchise, right? That's how a lot of franchises operate. We go through all the background checks and financial qualifications as well. However, what's most important to us is bringing in the right integrity franchisees, the right cultural fit, because we've been doing this long enough to know that it needs to be a marriage. If we get that marriage right, that culture right, and then the franchisee works hard and follows a proven system, then it doesn't fail.

Right. And so your franchisees are generally very successful.

Yeah.

Yeah.

In fact, coming out of the pandemic, both of our brands and 2021 and 2022 had record years in their histories as far as average gross sales per franchise location coming out of the pandemic. So pretty exciting.

So how much, how much in your part of the business, how much post-franchise leadership development do you do?

So good question. So my team will do everything we talked about to lead them to make the right decision for them and their family. And if they say yes, we want to join the franchise brand, then there's kind of a handoff to learning and development, training, operational support, etc. And we've got a phenomenal team, you know, all my colleagues in those respective areas that take it from there and then help the franchisee be successful.

So you've been, you've been in the franchise business generally for almost 30 years and you've been with Alphagraphic PostNet for quite a while. What exactly is it that gets you excited and out of bed in the morning?

Yeah, well, at my age, I'm just happy to get out of bed with no injuries.

You know, I kind of, I kind of get that.

After about 40, if I get up with no injuries, I'm happy. So that's number one. I think number two is— well, let me back up. So my parents in Southern California, they own their own small business, a staffing company, for 18 years. And I always tell them that they did it the hard way. It was not a franchise. But nonetheless, they, they had the entrepreneurial spirit. I grew up with the small business owners, uh, my parents. And, um, I've just always enjoyed and thought I'd be involved with it somehow. And then when I fell into franchising, um, just became very passionate about it because the franchise model helps eliminate so much of the risk, um, and provides success and the ability to scale and built something for their children, you know, franchisees, a lot of them will pass on to their son or daughter. So, I think getting up each day and being able to represent two very high-integrity brands, that's number one, because I can't sleep at night if my team or myself are trying to put somebody in business that I don't feel good that they're going to be successful. Does that make sense?

Absolutely.

So, you know, having two great brands, great leadership teams, and then helping people, you know, go into business. Most people do this. If they do it, they do it once, maybe in their life, uh, and to see them be successful, to take them down that path. And then, like I say, both of our brands, we have a lot of them that, uh, do what's called legacy transfers. So where they pass it on to their son or daughter or other family member, and that's exciting.

Wow.

Um, what are the characteristics of the success franchisee?

Yeah, so interesting. So, um, AlphaGraphics, a little bit more business-to-business. Post that a little bit more business to consumer. But even with that said, some of the common traits I think for success in our systems would be great customer service, being involved in the community. So our most successful owners are very much involved in the community, giving back. We were chatting a little bit before the podcast about some of our owners and giving back in their local communities. That's huge. As much as we provide great services, marketing solutions, technology solutions, it still comes down to people and relationships. So the franchise owner and their teams that they build have to differentiate by providing great customer service relationships. A lot of our business is repeat and referral business. So how do you—

when you're— when a person applies to become a franchisee, how do you, how do you evaluate whether or not this person is a good fit?

Yeah, we take them through a very extensive process, my team. So from initial inquiry, hey, tell me more about the franchise. There's a very pragmatic and structured process where we get all their questions answered about sales, marketing, technology, support, training, all the things that we bring to the table as a franchisor. But then we also, um, we do some one-on-one phone interviews. We, we require all of them to come to what's called a Discovery Day in Denver, which is where we're based, Denver, Colorado. We pay for their trip out here. They go through, spend— we have dinner the night before so we can get to know them personally with the executive team. Then we spend a whole day going through proprietary information and as well as getting to know them better. We also use third-party assessments, personality assessments that I'm sure we've all taken throughout our careers. So it's a variety of things to make sure that we're trying to bring in the highest propensity successful owner as possible because You all— both of our brands throughout our whole history, we don't have a single corporate location. So we're 100% franchised. So if Doug becomes a franchisee, Doug and all of his colleagues, franchisees, that's the brand.

Yeah, you can't have some— yeah, you can't have somebody screwing up.

No, our franchisees are the brands. So we, we're very selective, right?

Um, and then, so what kind of people are attracted to to your type of franchise?

I think, you know, obviously in any franchise they want to more control their destiny. But then specifically with our brands, I think being involved in the community, giving back. We hear stories all the time where our franchisees will be hosting one of us if we're in town or taking a client or a new hire that they have and driving them through the community and say, hey, I did all that signage or I did that billboard or I did the menu board. And they take great pride in providing solutions and helping local businesses grow their brands.

Wow, sounds pretty cool. So this, so this show is called Listening with Leaders. Uh, tell me about the importance of listening in your career and also in developing franchisees.

Yeah, I was thinking about that as I prepared for this because, um, obviously it's extremely important, especially in what we do in franchising, right? We're We're trying to have people lead them to make a decision if this is the right business for them. And then if they do, that's a big decision, right? Major life decision to leave corporate America, leave their benefits, start a business. And so, the tendency with my team is to talk, talk, talk, sell, sell, sell, try to get out the value proposition, right? But Unlike trying to sell them, you know, a new iPhone or something, this is a business. It's like purchasing a home, okay? And even a greater lifestyle change when they're leaving corporate America. So, we really have to coach and be cognizant of listening, identifying their fears, their pain points, their concerns. And it's hard, especially in sales management, because you're kind of geared towards, I need to sell this product or service or find, is this the solution for somebody? So, the natural tendency, I think, is to talk. Rather than extremely important to listen. Because if you really listen, especially in somebody looking at a franchise, they're going to be fearful, they're going to have concerns, they're going to be scared. Absolutely everyone will. And so having them articulate that, listening, responding. And what I coach my team a lot on is, um, try to have the franchise candidate or the franchise owner articulate Even if my team knows what their concern is or what they're about to say, I think it's so much powerful if the client, if the candidate speaks it coming out of his or her mouth. And so if you listen properly and then ask the right questions and then shut up and then see if, you know, how they communicate back.

Well, this is interesting because when I work with sales groups, I tell the people that I'm training for the first 5 minutes, Don't say a word. All you're going to do is you're going to ignore their words. You're going to listen to their emotions.

Yeah.

And you're going to reflect back their emotional experience.

Yeah.

Because you need to validate what their emotional experience is before they'll ever give you the time of day.

That's right.

And to your point, too many salespeople jump into problem solving and selling without ever, without ever considering emotional experience of the prospect they're talking to.

Yeah. And for this sort of decision, we will never get a yes, meaning yes, I want to join AlphaGraphics or PostNet, unless we are very good at listening, identifying solutions to their pain points, and building trust.

That's right.

How are you going to build trust if you don't listen?

That's right. And there's something even deeper than that, which you've alluded to, which is creating emotional safety.

Yeah.

You're right. People will come in, they're coming out of corporate America where they're pretty well set and probably making a pretty good salary.

Yeah.

And they have an entrepreneurial itch. But boy, leaving, to your point, leaving the retirement and the health and the financial security behind, that is a scary proposition.

Yeah. Yeah.

And, and listening to the fear and the anxiety and the concerns and the worry is, I would think, would be critical.

And you just said it also acknowledging that. So we're going to hear it. And we've been doing this long enough to know that every candidate feels it. Now, whether they articulate it or not, they absolutely feel it. If they say they're not scared, they're lying.

Right.

So then when they articulate it, validate it.

That's right.

Doug, I hear you. That's normal. Every candidate goes through this. This is why you're looking at potentially doing a franchise to eliminate that risk and have the support, etc., but validating that.

Right. And so I teach validation by saying simply a you statement. So, Bill, man, you're looking at this and it's scary. And, and you're, this is raising a lot of anxiety and concern about you because what happens if you fail?

Yeah.

You worry about your financial security and your, and so this is a big step and it, at times it seems like it's a little bit of, it's overwhelming the decision you have to make.

Yeah. Yeah.

And what's interesting is brain scanning studies show neuroscience shows that when you do that, they've got this high level of anxiety and fear on the emotional side of their brain. The emotions are inhibited and at the same time, the thinking part of the brain, the right ventral lateral prefrontal cortex is activated. And literally within 2 minutes, they calm down, they feel safe, they can think again.

Yeah.

And then they can evaluate. But more importantly, they say, man, that guy Bill McPherson, he really gets me. I feel really safe with him.

Well, and I think, I think, I think that's— yeah. And that's so critical, I think, especially if you don't have the relationship yet in those first 2 to 3 minutes.

That's right.

Because if you don't know somebody, you're going to hop on a Zoom call or meet them at the corporate office or what have you. You know, they already kind of have some pushback to say, okay, this guy or his team's in charge of selling me a business that's going to cost me $300,000. Okay, get ready for the hard sell, right?

Right, exactly.

And so they already kind of have this barrier up, and you— and it's not about that. It's about truly understanding the client, if it's the right cultural fit for both sides, understanding their fears or apprehensions. The, the business side of it, the franchise agreement, the numbers, all that will take care of itself if We build the trust, the relationship, we listen, then we can get into the business model. Is this the right fit? The numbers make sense, etc.

Right. And the other part of that is how well does this prospect listen to you guys?

Yeah.

Are they— do they know how to listen?

Yeah.

Because if they don't know how to listen, that's a red flag.

That's a huge red flag, especially in a franchise model, because our most successful franchisees follow the model that's been proven for 51 years. If you're not listening to the coaching, of the operations team, the marketing team, etc., then why are you joining a franchise?

Yeah.

And it's really interesting you say that because what comes to mind is so if somebody joins a franchise or we take them to the last step, which is called Discovery Day in Denver, and we talk about following a proven model, well, some people may say, well, Bill, of course, that's why we're going to join a franchise. Who wouldn't follow the model? Well, guess what gets in the way sometimes where they don't follow the model? Ego.

Right, exactly.

They don't, they don't listen. Their ego gets in the way. They've been very successful in corporate America and that's, that's not good.

They think, well, they think that their success in corporate America is transferable.

Yeah.

Entrepreneurship.

Yeah.

And it, and it's not. Yeah. I, I have, I have mediated dozens and dozens of disputes where the conflict arose because somebody thought the skills in one domain was transferable to domain, right? Absolutely not. Yeah. So how do you go about coaching and training your people to, to do this kind of listing that they're probably not used to in the beginning?

Yeah. In fact, in the last 6 months, I brought on 2 new team members, one for each brand. And so it's been a lot of coaching and kind of onboarding and a lot of role playing.

Yep.

I do.

We do a lot of role playing where, you know, we'll take such— I'll, I'll tea up a situation. I'll be the client, and we'll reverse it. They're the client. You know, we switch roles. And it takes time because you got to throw out different scenarios and then debrief after and say, okay, did you hear what that candidate said or the use of words? Did you really listen? What did you take from that? Versus, I know you have a talk track. I know how you've been trained to sell AlphaGraphics and PostNet, but get off your script And let's— did you really hear what they were saying? Did you identify their pain points? One of the things that's very near and dear to me is when we listen and we identify a concern, a pain point, or a wound, as I call it, then I don't care what our value proposition process is. We stop. We don't go to the next step. You stop and address that, or you're never going to continue to build trust and continue the process.

That's, that's exactly right. You've got to validate people. I call it listening other people into existence.

Yeah.

And when you listen people into existence, that's when you can move forward. But if you're, if your agenda is on you, I need to make this sale because maybe I get a big commission out of this or whatever, or my performance review. If it's all about me, not going to go anywhere. You've got to be totally focused on the other person.

Speaker, again, especially I think it depends on, you know, what, what you're marketing, right? If, if, if we were selling the new iPhone. Maybe, maybe not, depending on how much is on you. You want to make a sale. You're talking about a business, you're talking about a six-figure investment, you're talking about loan. There's no way. It's got to be about them.

Yeah, absolutely. I mean, it's— so, um, in your career, you've, you've run across people who are poor listeners. What do you think causes poor listening?

Or listening? Um, I think maybe, um, maybe some of their life experiences, uh, whether it be teachers, whether it be their parents, whether it be colleagues, um, maybe insecurity, maybe just not being taught, um, maybe previous job roles that they've had depending on what product they were trying to sell. You know, maybe they worked at a used car used car dealership that had very serious quotas, and that, that was the whole mean— they didn't get a salary and it had to be about sales, right? So, um, but it's hard, as we mentioned before, even if they don't come with that, it's just hard because if you're in a sales management role or a value proposition role, I think the tendency, even if, even if you're trying to hone your listening skills, um, the people that tend to be in these positions tend to be A-type personalities, high performers. They want to succeed. And oh, by the way, they get commission as part of the compensation, so they want to make commission. So they're always kind of in the, in the sell mode. That's okay as long as it's an integrity with a good listening process on how you go about it, right?

I mean, I like the— I mean, the people that are fairly competitive and self-driven, that's a great because it gets them out of bed and moving. But they've got to recognize that, especially I think in your business, that I'm here to serve my prospect. I'm not here to sell anything.

Yeah, we try to train, you know, my team to lead candidates to the right decision for them and their family.

That's right. Whatever that decision is.

That's right. And I tell people when they come to The Last Step in Denver, where we pay for them to come Discovery Day, I open up the day and say, look, You're at the tail end of the due diligence. We're here to answer all your questions. My goal is when you leave here, you can go back and talk to your advisors, your family, make the right decision for you and your family. I hope it's to join AlphaGraphics and PostNet, but if it's not, I'm okay. I'll sleep good at night knowing you made the right decision.

That's— and that's the way it should be. Yeah.

And how do you—

how do you— are you able to pass that integrity down to your people?

I hope so. And I think so. We've got— I've got a phenomenal team and colleagues, and I think we're all dialed in to this has to be high integrity, both before they're a franchisee, after they're franchisee, helping them succeed when they go to exit strategy and sell the business. And unfortunately, there's a lot of franchisors that don't operate that way, right? It's about signing the contract, getting a fee, giving them a week of training and say, good luck. And we're about as opposite of that as you can get. So I'm very proud to work in that environment.

Well, the fact that you've got almost 700 total franchisees speaks a lot because, you know, the magic number I think I've heard is like 70 or 80 or 120. And when you exceed that, you've demonstrated that you've got a successful operation. Right.

Right.

But, and you guys have, you know, I mean, you're multiples over that. So obviously over 50 years, the company has figured out the formula to build wealth for a lot of people.

Yeah, I think one of the things, Doug, we also, we got purchased by a parent company, MBE Worldwide, based out of Milan, Italy, about 7 years ago. And so right before I joined AlphaGraphics, and it's just been a night and day difference in a positive way with their ownership, their leadership. The original founding family were franchisees in Europe under Mailboxes Etc. And now they've built a 10-brand, 3,100 franchises worldwide, $1.3 billion in gross sales last year.

And you're just part of that organization.

Yeah. So it's been awesome.

Wow. That's interesting that a European company would come in and buy and from your perspective, it's been a really powerful impetus for the company.

Yeah. And quite, quite, quite opposite to where AlphaGraphics was prior to that, which was true private equity. So you're probably familiar with private equity.

Oh yeah, absolutely.

Yeah, I've been through two of them myself and it's brutal. They were a little painful. But, you know, rather than the proverbial 3 to 5 year, you know, buy a company, strip the cost down and flip it. MBE has been doing this for 25 years and helping thousands of franchisees be successful. So it's a long game to them. Yeah, it's not the short game, which is awesome. But they collaborate with our senior management team. We've got a phenomenal CEO and president in Denver, Ryan Ferris, who I report to. And that, that relationship between Denver and our brands and over the pond in Milan is wonderful. So we learn a lot from them with what they're doing with other brands. They learn a lot from us. If we want to invest in a new technology or look to purchase a company, then we go to them and if it makes sense, they do it. So it's been very healthy.

That's really good. Yeah, I can imagine getting out from under some of the private equity people is probably a huge relief.

It was nice.

Yes.

Well, a little bit of change in culture when you do that.

Yeah. Well, that you've got, you've got owners that are you know, have a really long-term view of this and look at franchise, a franchise operation as sort of a long-term income play rather than a short-term end play makes a lot of sense.

And that's the way it should be, right? Because we've been talking about finding the right franchisees with our brands and this marriage, this long-term relationship. There's a disconnect if your parent company doesn't have a long-term play as well, which they do.

So it's nice because, I mean, as a franchisor, it is an income play. It's not a, it's not a capital asset play. Yeah. And I mean, the value in the company is probably the income stream. But, but if you don't build the income stream, then you have nothing. That's right. And the income stream is all based on how good your franchise operations are.

Yeah. Number of locations and how well they do because we get a royalty.

Absolutely. So, yeah, that's probably why the marriage with the private equity people wasn't so good. It's short.

It was a short, short term and then a divorce.

Here you go. Oh, I can just imagine the Advil that people were taking.

Thankfully, I came on right after that. But my boss Ryan went through it. He was the president, CEO. And, you know, the cultural shift has just been night and day since we got out of that and MBE's partnered with us.

And you've probably done a lot better. The company's done a lot better, probably.

Oh, yeah, absolutely.

Yeah. Because you can, you can do what you need to do, not do what you need to do to for quarterly profits.

And exactly, yep, you're aligned with your strategic vision, kind of the endgame, understanding that we're a franchise model and it's about the long-term growth of the franchisees and the revenue versus the opposite.

Yeah, I, I, I've interviewed a number of CEOs on this show who have gone or were sold out to private equity or have private equity, and I haven't heard a story yet from any of my guests that were happy about the process.

Neither have I. I mean, there's pros and cons, right?

I mean, of course there is. I mean, if you're a business owner and you want to get out, right, private equity is not a bad way to do that. But it has its limitations and its shortcomings, shortfalls. And You know, the private equity people are not aligned with the values of the acquiring companies. And if they bring in, if they acquire different companies with different values, yeah, high integrity company versus a low integrity company and trying to merge those cultures, it's brutal.

It's brutal. So the culture, you got a problem with the culture. And then in a franchise model specifically, you know, private equity comes in trying to cut costs, make EBITDA look better. Well, then you're, you're, you're reducing your support. Number of people that are supporting the owners. Well, guess who gets— guess who suffers from that? It's the franchise owners, right? Right. So that's not good either.

Yeah, absolutely. Well, good. I'm glad that all turned out well for you.

Yes.

One more question before I let you go. What's one thing about yourself that we would never know unless you revealed it to us?

About me?

Yeah, about you personally.

I'll go back to, uh, my basketball days because I think that, you know, going through high school and Park College basketball, I learned so many things that apply to business, as you can imagine.

Right.

But in Los Angeles, many years ago in high school, I was the only— I was the first freshman in my high school's history that got brought up to the varsity team during the playoffs. And I went to the same high school that Gail Goodridge went to that used to play for the Lakers.

Right.

And I was the first freshman to ever get brought up. And during that year, we went to UCLA Pauley Pavilion and played in the championship.

Wow. Good for you.

We lost, but I got to play at Pauley Pavilion as a freshman, which was just amazing.

And was that in the Wooden years?

Yes.

Yeah.

And walking out, I'm telling you, walking out of the locker room in the Pauley Pavilion, I mean, it was just, you know, 16-year-old kid, freshman, 15-year-old. It was unbelievable.

What a rush. Good for you. Well, this has been a great conversation, Bill. Thank you so much for your time.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, would you please share this episode on social media? Just do a quick screenshot with your phone and text it to a friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithLeaders. I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up ratings and reviews go go a long way to help promote the show and mean a lot to me and my team. Want to know more? Go to my website, DougNoll.com, or follow me on LinkedIn, Facebook, and Instagram. That's @DouglasEnoll. Thanks for listening, and we'll see you on the next show.