Your First Year of Franchising - Avoid These Common Issues!

Jarrad Goulding, let's talk about some common roadblocks in that first year. So what are some common roadblocks franchise partners run into in their first year of business?

First one that probably after they get started is, okay, cool, I've gone through the training, I've gone out and had my time with the franchise partners actually doing the technical side of it. Now I'm out in my first week. What do I do? And it's all on me now. Especially if they've had a boss their entire life being told, go off and do this, go off and do that. And they're like, Oh my God, it's just me now. Like, that can be a scary thing. Luckily, our franchise support people do come in and they're giving them tasks and they're getting things for them to set up. They've laid out a detailed plan for them for the local area marketing. So that does help a lot. So, you know, that's probably one of the first things is just mentally being prepared for the fact that I'm in charge of my own destiny now and I've got to be my own boss. And say, right, my full-time job now is that I go out and I do this and I've got to go out and do something. So it's 9 AM on a Monday. I've got to go out there and local area marketing becomes my full-time job because right now the business is brand new. It's as quiet as it's ever going to be, which is great because it's an opportunity in the fact that now we can dedicate our full time to local area marketing. Now that time is going to get shorter and shorter, obviously, because hopefully that gets filled up with more and more jobs. But you see it as an opportunity is that I can just lean into heaps of local area marketing, but then all of a sudden, oh, now on Tuesday I've got a job, so I can't do any on that day. So you swap out the local area marketing time with the job time. Yep. So going forth like that. So that's, that's one. And that's just a mindset thing that you and a habit thing that you have to get yourself into of being able to do that.

It could be a trap, you know. You've got all this free time.

Yeah.

You don't want to sit on your ass.

Well, that's the thing, right? Like a lot of people, I don't have my phone on me, but a lot of people will sit at home and just look at their phone and just go ring, ring. And like, that's, you know, there's offense and there's defense and you want to be spending a lot of time on offense at that stage of me going out there and pushing for things and trying to drum up the local area marketing. And then just like the way that we like to look at it is think of any of the leads that come through as a bonus, right? So I'm going to build this engine. I said it from day one that we started The Local Guys, we're a marketing company that happens to do franchising, okay? It happens to do test and tag or happen to do pest control or cleaning, but we're a marketing company first. So if franchise partners think of themselves in that same mindset is I'm a marketing company first that happens to do whatever division I'm in. And if they do that, then all of a sudden it changes the mindset up here. And they're actually out there doing it. Now, do we provide a lot of these? Yeah, we do. But like, if that covers itself, then let's worry about worst case scenario.

Yeah.

Because best case scenario will take care of itself. Yeah. Yeah. Yeah. So there's that one, you know, like there's cash flow things that you need to be thinking about now as well. Before, if you're an employee, every Friday's payday, I know I'll go out and blow it all. And then I've got some another pay coming through on the next Friday. When it comes to a business owner, you've got a lot of things that you've got to think about as far as taxes, as far as I do the job and then I might not get paid for 14 days. You know, lots of different things like that. So it's not as simple a process as it is when you're an employee. So you've got to think about that. You've got to make sure that you've got some cash reserves for that as well. That you're putting money away for taxes, that you're putting away money for things like royalties and lead fees and stuff like that.

It's the old grandma with the envelope method.

Well, that's it, right? So we talk about Profit First a lot. So we talk about the different buckets. So every dollar that comes in, we've got, you know, 30 cents going into this account, 30 cents going into this account, 30 cents going into this account. So I know actually maybe only 30 cents of it is for me to go out and spend, you you know, for my own spending and stuff like that. And the other ones have got allocations that they need to go through. And we're just updating our systems on that at the moment, where we're creating all new videos for our franchise partners to talk about the Profit First system and giving them percentages and stuff like that to help them as a guideline to begin with. So if they're brand new to this whole thing, they would give them some default percentages they can work on. Now everybody's different because obviously you might drive a $100,000 car and I might drive that you've got on loan. And I might drive a $20,000 car that I own. So obviously you're going to need more expenses for vehicle, more money for vehicle expenses than I will, but it's a guideline. So yeah. Yeah. So, so that's another one that—

Have a budget, basically.

Have a budget. Yeah. Know what your expenses are in that budget. And no one's ever done it. We'd never been taught it in school or whatever, but it's a really important thing to do. So that's something we do in our onboarding and our training with our new franchisees.

It's just too easy to get hit with a bill and then another bill and then you're out on the street.

It's the one-two punch. You know, I talk about it all the time is whenever you have an incident that happens, it's never one thing that goes wrong. It's normally two or three or four things that all happen at once. And that puts you into a scenario. So having a buffer, having a budget, and having a plan to work towards, and we lay all that out for our franchise partners so that they don't have to reinvent the wheel. They can just follow what we've, what they lay out for them is a really good way to do it. But there are a couple, yeah.

What about pricing for your services?

Yep, sure. So pricing is a massive one as well. So not a really, really good point. That's one where people can get into all sorts of problems with because they'll go out and they'll see competitors are charging X price or whatever. Or, you know, they've got, um, they've never been in the industry before and they're coming up with their own pricing, but they've literally on day one of starting this business in this industry. And the hard part about that is, is you don't know where the market is. You don't know what is going to get you a good conversion rate or a bad conversion rate. Like we've got pricing for all of our divisions. We've got some guidelines around the pricing, which helps set them up. But if they want to be eligible for the turnover guarantee, they stick to our pricing or lower for the first 12 months. And then after that, they can go to whatever pricing they want. But, or they can, they can change the pricing whenever they want. It's just, They're not eligible for the turnover guarantee for that year. But that helps set a lot of people up. I've had franchise partners that have gone rogue with pricing before. And, you know, it would be like they were winning all the small jobs because they were leaving the price of that. But when it came to the really big jobs, they were keeping the pricing the same as little jobs and weren't doing like a sliding scale. And the problem, and so we're seeing their ATV, their average transaction value, and it's like, why is it so low? Like, why is the conversion rate not there? And this is why we've got scorecards and we can, we can pull this stuff apart and go, what's going on here? And that was the problem, right? They were keeping their pricing the same across the board. So clients, obviously, if you've got a $10,000 job, they're going to go to more competitors. We have to get 3 quotes at least. And obviously all the competitors want to win that job because you've got volumes. So they're going at a lower, lower price. And this particular franchise partner was going at the same rate as a smaller job and not winning any of those ones. So, and the worst thing is they understood why we had that pricing scale. After the fact, but it took them 4 or 5 months to work that out. Now you've had 4 or 5 months of paying royalties, paying lead fees, but not getting the conversion of those bigger jobs. And the only ones that are winning are the little ones, which aren't, you know, it's the big ones that you really want that make the big difference. So, you know, that's a hard one.

What should they do? Stick to the pricing guide.

My suggestion is for the first 12 months, you're brand new, stick to the pricing guide, right? You don't know if there's a, you might say, oh, well, there's a competitor in my area, or I've checked a couple of websites and they're charging X, Y, and Z. And they get really excited because they go, oh, I could charge that. And they spend the money, or in their minds have spent the money before they've even won the job. And I've seen that a few times as well. And you don't know if that competitor has been in the industry for 10 years and their book is completely full and they're just trying to fill the last few spots in their book with higher paying customers or getting rid of some of their lower paying customers and fill them up with higher paying customers. So you don't know all these things that are happening. So my strongest advice is, what do you do? Stick to the pricing for the first 12 months. Learn the industry, understand it. By the time you're in for 12 months, you know a bit more what you're talking about now. You know, you know the area, you can have done some competitor research, you understand, you've got a good feel of where it's at. You can afford to play with the pricing a little bit while still having a good conversion rate. So that would be my advice in that scenario. Yeah. Yeah.

Okay. What about customer service? A lot of people that come through, they buy a franchise, maybe it's the first time they're in a customer-facing role. How is customer service a roadblock in the first year and how do they overcome it?

Yeah, it's a massive one because it will affect your repeat jobs considerably. We're in a relationship business, so everything's about relationships. Anyone can come and offer a new cleaning service, new pest control service and undercut you. Same thing with test and tag. It's the relationships that are going to keep you in the job where they will say, sorry, we're happy with that guy. We've been using him for 5 years, 10 years, whatever. And that's all going to come through customer service. So it is those 1%ers that you put in for, you know, just spending a couple of minutes with them before you leave, making sure you keep your promises. Making sure that you're friendly, smiling, and happy as you're going into there. I remember my old Boost Juice days, we used to have a franchise partner that had come from the banks. And when he was first getting started, he had written on his hand, smile, just as a reminder, because he was not a people person naturally. So that was something that he wanted to work on. So every time he'd go through and, you know, put his thing through the register or whatever, he'd get the reminder to smile and just connect with everyone.