Franchising Isn’t Easy—And That’s Why It Works | Franchise Fridays with Jeff Dudan #213

Hey, everybody. Welcome back to Franchise Fridays on the Unemployable podcast with Jeff Duden. And today, a very special treat. John Harrelson, the chief legal officer of Homefront Brands, joins us to share his view of franchising. Welcome, John.

Thanks, Jeff. I appreciate you having me out.

Yeah, very exciting. Very exciting. So let's start with a quick introduction. Share your background with us.

Sure. So I've been in franchising for maybe 25 plus years. I started out a long time ago at Taco Bell, and actually, it's a funny story. It's where I decided to be a franchise lawyer.

In the drive through?

No, no, no. I was just sitting in my cube one day. I'd been there maybe for about a year, and I was working on doing some stuff on the Taco Bell Express brand, and I just kind of sat there and said, you know, kind of like this, you know, I'm working with franchisees, I'm working with the business, and, you know, I think this is what I want to do for the rest of my life. And I just. It's one of those iconic things in. In your life. And it's like I remember that exact moment where I just sat there and said, I'm going to be a franchise lawyer. And, you know, from there, I went to Valvoline. I worked for Servicemaster, been at Servpro Power Brands, been with a lot of franchisors. But, you know, actually, Homefront Brands is one of the favorite places I've been, and I think that's because we got to be here from the start. Yeah.

So share a little bit about what you do here at Homefront Brands and how you work with the franchise owners.

Sure. So probably the most important thing I do is put together the franchise disclosure document, which is what we use to sell franchises. And in terms of working with franchisees, mostly what I do is help them work through problems. Right. So sometimes we'll get a call and say, hey, you know, I need. Need to hire some subcontractors. And we're like, yeah, we have this form contract that you can use. You probably need to check with your local laws. But, I mean, we have those kinds of things. Sometimes people will just call up and say, hey, I've got this going on in the field. How do I handle this situation? And we'll give them some general advice on. It's like, hey, in the past, I've done this. So it's a lot of working with them, helping them to make sure that they're doing the right thing. Sometimes it'll just be customer issues, little things like that. Sometimes it's contract questions. But, you know, I mean, it's one of the things I make. I most enjoy about it is you get to go along on this journey with the franchisees, right? You know, from where they start to them building a successful business. And you're kind of a part of that. And, you know, that's probably the thing I most enjoy about it is, you know, just getting to see them, you know, be successful, see them, you know, go through the challenges and kind of help them through.

Lawyers get involved when you have a challenge or an issue, and lawyers also get involved when things are going great and you're expanding and you're growing. So what is one of the absolute most favorite things that you like working with franchise owners on?

You know, I think more than anything else, it's really just being there, you know, day to day, and helping them work through issues. You know, it's one of those things where you kind of. You. You build a friendship almost, and it's not really, you know, I think it isn't like, it just happens, like, you know, like somebody calls up and, you know, and you just have this transactional relationship. I mean, you talk to people, you get to know their families, you know, their kids. You know, it's. It's one of the things I love most about franchising, right, is like, there's a real community within, you know, between the franchisor and the franchisee. It's, you know, we're both focused on the same thing. And, you know, you know, it's people just like, well, hey, you know, they feel free to, you know, call and talk when they. We've got issues. And, you know, they know that you're there to help them, right? And it's. It's helping them out, I think, that I enjoy the most. And, you know, and it.

It just.

It transcends where I'm at today. I mean, just two weeks ago, I had a franchisee at a. At a different company that called me up and said, hey, you know, can you have a few minutes? And I'm like, yeah, what's going on? And, you know, and he's like, I have this really weird situation and like, how do I deal with it? And so it spent maybe 15 minutes on the phone walk through it. And. And at the end, he's like, I'll do that and I'll let you know what happens. And, you know, the end, it worked out. So, I mean, but that's the kind of relationships that, you know, I think, you know, we have with franchisees. I mean, that may not be the case with everyone at every company, but it's those relationships. I just, you know, love talking to them, love helping them out through things. You know, it could be that, it could be like even something more simple, right? Like, you know, how do I set up this company and you know, how do we, you know, navigate through funding or other things? You, there's a lot of stuff that we get involved in. So. But you know, like I said, helping them out, it's the thing I enjoy most.

You said we're both working on the same things or we're both working to accomplish the same things. What do you mean by that?

So I think when you look at franchisors that are the most successful in the industry, the one thing they have in common is they are focused on the success of their franchisees. Right? So when we're working on the same thing, what I mean by that is if our franchisees aren't successful as a franchisor, we'll never be successful.

Right.

So we have to have that focus of what we do every day has to be for the benefit of the franchisee and for the benefit of the system as a whole. And you know, that I think sets franchising apart from, you know, just company run operations because, you know, I mean there it's all about dollars and all this other stuff. And like I said with franchising it's more about the community and everybody is invested in the success of each other. Right. You know, the neighboring franchisees, you know, they work together on projects, you know, and it's that huge community of knowledge. I mean, where else are you going to get, you know, 50 other people that are doing the same thing you're doing that are willing to actually share their, your best practices and I mean, the mistakes that you can avoid by being in a franchise, right. I mean, that's one of the most powerful things about the whole model, right? Is, you know, you really just, you get this group of people and you know, you can just call them up and they're like, oh yeah, I dealt with that, here's what we did. Or yeah, don't do this because, you know, I made that mistake and this is why it turned out bad. And yeah, that is the genius of franchising is you just have this huge network and, and you don't have to build it, it's there.

Yeah, business is competitive and every little edge that you can get helps.

Yeah, absolutely. I mean, that's really what it's about. I think that's what makes franchising easier than doing the business on your own.

So you've talked about the community. What other reasons might somebody want to get into franchising today?

I think the biggest reason, obviously, is that community of people. I do think, though, that franchising as an industry is. It's got this, this evolution that's going on. Right. So you see it in, in some brands, you don't see it in others. But one of the, the biggest trends that I see is you're having private equity investment come in on the franchisee side. Okay. Right. So it used to be, you know, you would see private equity buying franchisors, and that's still going on. But I think the, the future and I think, why? If you're an entrepreneur who wants to build a big business, but you know, there's usually a point in time where you hit a wall, right? Where you're like, okay, just maybe you don't have the skill set to really scale beyond a certain point, or maybe you don't know how to do the financial controls and the engineering, or maybe you just don't have access to capital. Right. But those are the things that, when I see where franchising is going, if you can build a business to, you know, 5 million, you know, to sort of that, that it's a big business, but it's not huge. Private equity is moving in with those franchisees that are successful. Right. And they are giving them, you know, professional management on how to grow an organization and scale it. They're giving them, you know, the financial, you know, sort of how to run finance, I think, a lot more tightly and efficiently. And, and they're giving them access to capital to really grow to that next level. And, you know, the smart franchisors are embracing that. And so I think if you want to get into franchising, you want to build a big business, but then you want to have the opportunity to really grow. I mean, this is like to just explode that growth. Franchising is probably a much better path to that than trying to build it on your own.

Right? Right. Over the years, you've engaged with thousands and thousands of franchise owners in your various roles, doing renewals and I mean, probably 10,000 franchise owners, I don't know. But you've done a lot. You've been with large companies. What would you share about who an ideal candidate might be for a franchise in your experience?

So probably the three most important things are you have to Be intuitive, okay. You have to be really smart, and you have to have grit. Of that grit is the most important. Right. You have to be willing to grind it out. I mean, look, you're gonna have days where you crush it, right? I mean, you're out there and you're just like, ah, this is awesome. And you're gonna have. The next day could be exactly the opposite.

Right, right.

You know, you've got to kind of build your network to kind of support you through those bad days. But, you know, when I look at, you know, who's going to be the. A good franchisee, it's that I just can't fail attitude, you know, and sometimes, you know, you'll see somebody walk in. And this is my favorite franchisee. I was doing a training with one of the companies I worked with, and I saw this franchisee walked in and, you know, he's rough, right. And he's tattoos. He's got some, you know, earrings and, you know, he's got this scraggly beard. I mean, and, you know, you're like, I don't know, you kind of wonder. Right. And in. Anyway, so his name was. What he went by was Rooster. Right. So colorful guy, colorful nickname. Right. And Rooster. Yeah. But I mean, he was smart and, you know, he paid attention, asked questions, you know, and, you know, somebody paying attention in a legal presentation, you know, a step up, you know, just to start with.

Absolutely.

But about six months into his business.

I'll play this interview just to go to sleep at night.

Yeah, it's awesome. No, but about six months in, you know, he went to. He was. We had a. This. The wife of our CEO of our parent company said, hey, I need somebody to come, you know, do the. Do a home inspection. And, you know, because they were buying a place for their daughter to go to college.

Right.

And it was his territory. So we sent him out and we're like, well, hopefully, you know, the look doesn't scare off. Right. And, you know, after the inspection, we got note back from, you know, the owner's wife, and he's like, man, Rooster was awesome. I absolutely loved working with him. You know, I mean, this is rave review. Right. And, you know, we kind of went into it and I don't know, but I mean, that's the thing is, like, anybody can be a good franchisee.

Yeah.

If they. They just have that desire to just grind it out and, you know, they're personable. Right. I mean, you know, sure. It is a business. Everything's kind of sales. Right. You got to Be good at that. But it's building confidence in people, and it doesn't really matter what you look like. Right.

The conversation that I've had a hundred times is, how do you pick the right franchise owners? My experience is sometimes the more experienced on paper that might look more qualified end up being the least successful franchise owners, and then somebody that comes in that you're concerned about giving it to become your rookie of the year and your franchisee of the year and all of that, and it's very difficult to measure somebody's heart and their desire and their willingness. I have not been able to find in this assessment tool that will actually give you a true picture of how people are going to participate in. In the franchise brand. So to your point, it's that. That is an incredible story. And I think one, if somebody's out there thinking about joining a franchise and they're not sure if they're right, I mean, I think. I think the. The first thing you need to do is look in the mirror.

Yeah.

And say, you know, how. How bad do I want it? Am I willing to show up every day? Am I committed to it? Do I have that grit that you're talking about? And, you know, that's. That's a great point for anybody out there that's at that inflection point in their life thinking about what's next for them. John, what are some common misconceptions people have about franchising?

Yeah, I think probably the biggest misconception they have is that franchising is easy. Right. Then you can just buy franchise. You can sit back, money just rolls in. Right. I mean, look really good. Franchisees make it look easy.

Sure.

Yeah. You know, I mean, they're like, you know, they're, you know, they've been working it for a lot of years and they've, you know, they're doing well. Right. And a lot of people skip ahead to that point and think that when I buy a franchise, that's where I'll be. And they ignore all the work, all the, you know, the grinding it out, all the bad days, you know, all the tough times, you know, can I make payroll? Can I do, you know, all of that stuff that they had to go through to get to that success. I think franchisees, sometimes they get this vision in their head that is just going to be like, boom, I'm there. But it's really that hard work. You got to go through that to be successful. I mean, it's true of any business. Right. But I think with franchising, People kind of get this confidence that, well, I've got the system and it's fine. And that's the advantage. Right. I mean, you're much more likely to be successful because you have that support behind you, but you can't forget that it's still a lot of work.

And is that the main mindset shift that people need to make to be successful in a franchise?

Yeah, I mean, I think it's that. But also realizing that you have this group of people behind you that you can phone them and get advice, you can figure out how it is they became successful, you have this mentor group. Right. And realizing that you can't just do it on your own and that you need to leverage that network if you're going to be a successful franchisee. That is the mind shift. I think that matters most is, you know, being humble enough to say, I can't do this on my own. Right. And then going to your neighbor, going to your business coach, whatever. Right. And just getting that advice and then having the, you know, the humility to actually follow it. Right?

Yeah. So intellectual arrogance. I've had this big career, I know how to do everything. And not only am I going to do it myself, I'm going to tell everybody else how to do it when I don't know how to do it myself. Versus intellectual humility, intellectual curiosity, like how, how is this best done? What do I. Who do I need to be and how do I need to operate to achieve the greatest success that I can and how can I maybe help others inside of that? I think that collaboration pie is so important. There is a direct correlation between a franchise owner's success and their level of engagement in the systems, in the meetings and with their peers. It is a one to one relationship. People that are struggling or near the bottom, they aren't engaged with anybody or anything. People that are near the top are engaged with everybody and everything. And it's just an incredible proxy to how people are going to operate. And you can see it early. Unfortunately, we can't see it before they get awarded, but you can definitely see it. And we can intervene in those situations and hopefully get those people to get engaged and get involved and make a difference. You've had the benefit of working for some of the largest brands in the United States and maybe even in the world. What differentiates a great franchisor from a less great franchisor?

So I think the most important thing is that the franchisor is invested in and truly cares about the success of the franchisee. Right. So they are oriented towards what are we doing to help the franchisee. Whether it's investment in technology, whether it's helping do education and training, whether it's putting together systems to help them scale and hit next levels, whatever helps that franchisee be successful at sort of that unit level economics, the franchisees focused on that will be successful because they're so invested in the success of their franchisee. The natural byproduct of that is a successful franchisor. Right. And you will also find that when you invest in the franchisees and you actually care about them, right? I mean, you will build that trust that allows them to trust you and the system. And, you know, people that trust the system, people that trust their franchisor, you know, they just go forward, they do stuff and their businesses are successful.

Right.

You know, I mean, and it looks different at different companies. Right. So when I was at Taco Bell, they had what we call the how we work together principles.

Okay.

And, you know, that was David Novak, and I mean, he's just a giant in the industry. And, you know, it got everybody on the same page, you know, at Service Master, very different. It was servant leadership and honor God and all we do. And, you know, that. That built a community of common belief and, you know, you know, and commonality amongst all the people. And that allowed people just to work together because they all had sort of the same core value set, and people were living those values. And, you know, so like I said, every place can be a little different on how they approach it. But if you don't have that core values, if you don't live those core values, you know, you're not focused on the success of the franchisee, you will not be successful.

You will not be a great franchisor. That's for sure.

Yeah.

What are some things that people overlook when they're joining and choosing a franchise brand?

So I think a lot of people focus on the numbers. How much cash do I invest? How much can I make? They kind of look at the transactional side of things. I think what's more important are the intangibles. Who are the people that you're getting into business with? What have they done? Have they been successful in franchising? Do they have integrity? What is their core values? You know, I mean, ask questions like, well, how do you guys deal with adversity when you guys have a problem? Right. You know, we do. And, you know, do they have examples of how they live out the values that they talk about? Right. I think those kinds of things are really important. Because what matters most is what is the franchisor going to do when you reach adversity? Right. Because it'll happen. Right. You know, like during COVID you know, everybody was, you know, freaking out. The best franchisor said, how can I help my franchisees through it?

Yeah.

You know, it's maybe it's fee relief. It's like all sorts of things that they could do, you know, but find a way for them to do the business they can do, you know, work through, you know, getting maybe exemptions from the stay at home orders. Whatever. Whatever it was. Right. I mean, that's the kind of stuff where, you know, you've got to, as a franchisee that's looking at a company, ask yourself, have has that company proven to me that if things go south, they're going to be behind me.

Fair enough. Is there one glaring mistake that you see new franchise owners make that maybe are less successful?

They don't trust the system. Got it. And I think that genius attacks.

Yes, we call them genius attacks at home front brands.

Yeah. I mean, and what it is is they sort of like, well, I think I can do it better. And then they end up so focused on, you know, fighting the system and trying to figure out a better way to do things, they don't focus on operating their business.

Right.

You know, and it's just a lack of focus. Right. And they're focused on the wrong things. And like I said, I mean, the ones that are successful, right. They trust the system, they follow it, you know, And I mean, look, you make tweaks, right? I mean, I get that, but you can't re engineer the whole thing. You know, you can't think that you know better.

Right.

You know, you don't, you know, when you color outside the lines, generally you're going to get problems. And invariably, you know, people who, you know, do have issues, that's what, that's the main cause.

Yeah. Again, you've been at Service, Servicemaster, Servpro, Taco Bell, Valvoline. What's one thing about homefront brands that most people don't know, but maybe they should?

So I think the sort of, the, the origin of a lot of what we do here comes from football.

Okay?

Right. And I say that, I mean, look, there's a lot of coaching that goes on. Right. I mean, you know, that's one of the things we focus on here is coaching our franchisees. And I think a lot of that comes from being the leadership's history in working in sports and how that translates into business. And I think sort of understanding that. That sometimes you need a halftime.

Just make some adjustments, right?

Yeah.

Got to make some adjustments.

And I think that sort of culture of sort of how you build a true team and how you train them and how you get them to work together to be successful, I think that is a little bit the magic of how we do things here. And I think if you understand it, it's a lot easier because sometimes you're kind of like, well, why are they doing this? And, you know, why are they talking about it in this way? And I think if you understand that, you know, you might have a better understanding of, you know, sort of the origin of sort of where all that comes from.

That's fascinating to me, John. I haven't got that feedback from you before, but look, business athletes, right? Drafting the best athlete on the field and finding a way to utilize their talents, making sure that everybody understands the game, that there's only one football, and that everybody has to do their job. Yeah, I like it. I think I'm going to adopt a little more of that. Yeah, we'll go deeper into the football thing. Whistles for everybody. That's right. All right, fair enough. That's great. Franchising in general, what trends do you see next three to five years?

Yeah, I mean, I think you're going to see a little bit of a consolidation. Okay. And I think that's going to happen at two levels. I think you'll see it at the franchisor level, where people will build platforms. I mean, it's a little bit of what we're doing, but I think you're going to see, you know, continue to see that.

Sure.

In a lot of spaces. I think you're going to see that on the franchisee side, where, you know, particularly in, you know, some of the retail brands, you're going to have people rolling up on the franchisee side. The 1. At least the businesses that are successful. Yes. You know, and as I mentioned before, I think you're going to see franchisees that are successful in their brand bring in private equity to get them to the next level. And I do see that as more of an emerging trend because a lot of franchisors are very hesitant to bring in private equity on the franchisee side. Right. Because you've got issues that maybe aren't fully aligned. Right. So franchising generally has been. Well, we want the individual, we want that community. And I think if you bring in private equity in the right way, you maintain that personal touch that you have with franchising at the local level. But you bring in this sort of professional management, the way to truly work the financials of a business, and then you have this access to capital to help them grow. And I think, you know, the franchisers that do it right, you know, they're going to do so much for those franchisees. They will. They will hit a business size they never could have imagined.

There's example after example of that in the industry, not only with just pouring resources into the right areas, but strategy. Like where to point.

Yeah.

Where to aim, what markets can we exploit? How can we help franchise owners win more quickly in these areas? I agree with that. It has to be done right. And I do believe that the cultural aspect of it, making sure that the company has identity who they are, and that that identity remains the same to the extent that it's positive and that anything that might be toxic, you know, is. Is overcome. So, you know, there's businesses, I like to say businesses, people and math. Right, and people. The people piece is probably the art and the math is probably the science, but they have to work together.

Yeah, absolutely.

Awesome. All right, we're heading towards the barn. We're tugging on the range. John, we're turning this. This pony towards the barn here. Last question for you. If someone out there is listening and they're on the fence about franchising, what's the one question they should ask themselves?

Do you trust who you're going into business with?

Wow. Okay, fair enough. We'll leave it right there. John Harrelson, thank you so much. This was an incredible interview. Great.

Thank you.

Great. Hey, everybody, thanks for listening. Franchise Fridays on the unemployable podcast with Jeff Duden. We've been here with John Harrelson, chief legal officer of Homefront Brands. Thanks for listening. Go down to the show notes if you want to learn more to homefrontbrands.com and click on the link for my book, the Business Athletes Regimen for Great Life through better decisions to help you through this inflection point in your life. We'll see you next time.