Matt Haller | On the Homefront with Jeff Dudan #41

You don't need to go to college to become a successful franchise owner. When you find the right person that understands what being a franchise owner actually entails in terms of hard work and following the system, there's great human potential in that. Franchising gives people this incredible opportunity to become small business owners. Government regulation is not always a bad thing if it's done with those that are looking to enhance franchising. The problem is there's no clarity, there's no guidance. A lot of times government issues regulation that you just don't like. You've made a choice with the stroke of a pen. Government has made that choice more difficult, more expensive and unclear. And you don't know how to comply with this rule. You're kind of damned if you do and you're damned if you don't. You know, that is something that we need to turn up the volume on to Congress to understand and ultimately overturn.

Hello everyone and welcome to on the Homefront. I'm Jeff Duden. Today we are talking to President and CEO of the International Franchise Association, Matt Holler. If you are curious about business ownership or starting your franchising journey, you will not want to miss this episode. Matt and I take a dive into the science of the franchise model, the current state of our economy, and how that forecasts the future of American entrepreneurship. If you like what you hear today, leave a like comment or subscribe to see all the content that we have coming your way or if you have any questions regarding business franchising or just about the show, use the link in the description below and we'll get right back to you. Thanks for listening. Welcome everybody. You are on the home front with Jeff Duden. And today we are with Matt Haller, who is the President and CEO of the International Franchise Association. Welcome and thank you for being on. Matt.

Thanks for having me. Jeff, good morning. How are you doing today?

I'm doing amazing and I'm so excited to get to spend this time with you today. And I really want to dig into all of the things that are going on with franchising. It's vital to our economy, small businesses, upwards of 60% of our GDP. Franchising is a material piece of that. I've heard you say it's the greatest wealth creation business model ever invented and there is a lot of precedent for that. And we're, we're very interested in expanding the reach and relevance of the franchise sector. And I'm interested today to hear all of the things that you and the organization are doing to, to make that. So to get started, we would love to learn a little bit about you, Matt. Would you care to share a little bit about how you grew up?

Happy to. So I am actually one of very few people that grew up in the D.C. area. I was born in Georgetown and grew up in Northern Virginia. So you always have to choose a side of the river for the most part. And I'm a Virginia kid out of state. It's Commonwealth, of course. Grew up in Burke, Virginia, Went to public school in Lake Braddock. So as in Northern Virginia, everything has some elements named after the Civil War. General Braddock was one of the key generals in the Southern Army. Went to college in North Carolina, so went just a little further south. I always probably offend a small percentage of your audience, but I always was too dumb to go to uva but smart enough not to go to Virginia Tech. Oh. So ended up, you know, we have.

The edit button going on that.

I love it. I wanted to go, I wanted to go to a state capitol because I had. I picked up a little political bug, you know, late in my high school career and thought being in a state capital like Raleigh would enable me to learn from, you know, working in government a little bit in the state capitol in Raleigh. And ended up working as an intern for a large software company that was building a public affairs and government relations practice called SAS Institute, now the world's largest privately held software company. And learned how to basically be in the influence business and influence public policy, build relationships with elected leaders and just the importance of kind of getting a message out. So I studied political science and had that great firsthand experience watching government relations professionals do their job and the importance of just building relationships. Came back to Washington right after college and got a great start in Washington with a small business based in Atlanta, Georgia, called United Parcel Service that is pretty relevant right now. We're doing this four days before Christmas or so. And so learned how that large enterprise really engages in government relations and public affairs and really mobilizes their workforce to engage in government relations and public affairs to best influence public policy to help that business enterprise grow. And that was actually my first contact, at least that I ever thought of the franchise model. Because it was right around the time that UPS had purchased mailboxes, et cetera, and was in the process of rebranding MBE here in the US into what is now known as the UPS store. And I've had a couple of other positions since my time at ups, including with the US Chamber of Commerce and with another trade association in the pharmaceutical industry and then some outside public affairs agencies that I've been involved in before coming to the IFA almost 13 years ago. And I've had a number of different positions here at the ifa and we can talk more about what the IFA does as we get into the conversation. But I'm in D.C. firmly a creature of the swamp, as I say. My wife and I live in the city and, yeah, just love it here in Washington. Gets a bad rap out there in the real world, as I say, but DC actually is a great place to live. While there are some challenges right now in the city, it's a city. You always are going to have challenges when you put this many human beings in a small footprint.

Well, there's a lot to do in D.C. and of course, it's the seed of our democracy. So there's a lot of. Always a lot of activity and focus going on there. And we appreciate the fact that you found the IFA and the IFA has found you. What is in broad strokes, the role of the IFA in franchising?

Yeah, our mission, Jeff, is to protect, enhance and promote franchising. And, you know, I can talk in great detail about what we do in each of those three buckets within the mission, but just, you know, very high level, you know, protecting franchising means government relations and advocacy at the federal level in states, cities, you know, internationally. In some cases. Enhancing franchising is the work that we do through our events, through. Through our professional developments, through networking, really the investment that the association makes in its programs to enhance the business model as a way of doing business and improve business practices within franchising. And then promoting franchising is. We'll definitely talk about this. Most people didn't set out on a career path to become franchisors or franchisees. Franchising is not really taught in business schools in a major way. It's certainly not taught at an undergraduate or high school level as a career path. And so most people find their way to franchising as kind of a second component of their career. And promoting franchising as a career path, as a way of thinking about being an entrepreneur in a different way is there's a lot of opportunity to do more there. And it's probably the biggest challenge that our member companies, particularly franchisors, tell us they face is just finding qualified leads to become business owners. But at the same time, 70% of the country says they'd be interested in owning a small business, and two thirds of that population has no idea where to start. And franchising is part of that solution. So we have to raise the volume about people that just see it as something to even consider. And the IFA does a lot in that regard. We want to do more and we want to encourage others to do more to help us be a force multiplier.

Let's start with the enhanced piece of it. There are only a handful of universities in this country that have a program around franchising. I know that Titus is affiliated with FAU or yeah, Florida Atlantic, and I think there's something at Purdue. There was a master's program up at Quinnipiac that had started. I'm not familiar with more than maybe half a dozen programs around franchising. Yet the numbers of franchising are staggering in terms of the number of people that are employed either by or with a franchise organization or the over, I guess 800,000 establishments in this country now that are franchised. 3,000 to 4,000 actively growing brands, depending on where the number is. Why don't more universities, in your opinion, put together a program with franchising as its curriculum?

Well, I think there's a lot of ways to maybe answer that question. One might be the industry. And I use that sort of just as a catch all phrase. Franchising is not an industry, of course, it's a collection of industries. But the industry's done really well without needing colleges and universities to be invested in that. I'm not saying that we wouldn't benefit greatly from more intentional academia focus on the franchise model, because I think where we actually need more of a intentional academic focus on franchising is less so at the entrepreneurial level, but at the brand level, at the franchisor level and kind of in the supplier category, where we need people that understand that we are three and a half percent of private sector gdp. And there's an incredible opportunity to move around through career development and actually develop a really healthy way of living as a marketer or a technology person or an operations person or a sales development person in a franchise business. And a lot of franchisors are struggling to find individuals to work that have franchise experience to come and support their franchisees. And some of the bigger supplier companies that focus exclusively in the franchise channel similarly are looking for people with an understanding of the business model. So we would benefit greatly from that. I think the other part of it, Jeff, is you don't need to go to college to become a successful franchise owner. And so, in fact, a lot of franchisors don't want people that went to college. Right. They like to target people that have maybe a stronger work ethic and are self made and just have the grit, might have a little less of the financial capacity to do it. And when you find the right person that understands what being a franchise owner actually entails in terms of hard work and following the system, that person can. There's great human potential in that. University of Louisville is now, through a big endowment that Yum Brands made. They probably have the most robust franchise program. They call it a Global center for Franchising Excellence at the University of Louisville. And the IFA has developed a long partnership with UOFL to deliver what we call our CFE program, our Certified Franchise Executive Program. And we've brought in other academic institutions as partners in that vein as well. There's also programs at places like Babson College up in New England and at the University of Denver through a big endowment from Dave Lineager, who is the founder of ReMax you mentioned down in Florida with the Titus School. That's another long standing program. Ohio State now has a program that's being run by a guy named Michael side, who for those in the franchise industry, of course is fairly prominent. Michael wrote the book Franchising for Dummies with Dave Thomas, the founder of Wendy's. And so we're starting to see more of this and we're certainly encouraging it. And for anybody out there that's in academia and in franchising, reach out to the IFA and we'd love to help you get on your pathway to setting up the franchise program.

You mentioned Dave Thomas. From an origin perspective, if you go back through the history of the ifa, so many notable founders have been past presidents, past chair of the ifa. What was the original intent of the IFA as you understand it, and then how has it evolved to be the massive trade organization that it is today?

Yeah. So Bill Rosenberg, who was the founder of Dunkin Donuts, really drove the formation of the IFA with 15 or 20 other founders and leaders of early franchising companies back in the 60s. And what was driving it was in some cases not totally different than what we're facing today in terms of governments looking at business practices in the franchise model as it was in its infancy and becoming concerned about individuals being taken advantage of who at kind of more unscrupulous business brands that were using the franchise model as it was in its infancy, were taking fees from franchisees and not providing them with any support. I don't want to use the term Ponzi scheme. But there were elements of this that were misleading investors. The Federal Trade Commission now has its franchise rule, which is the primary governing requirement for franchise disclosure and information. IFA worked to develop that. And that group of early founders basically saw that if you're not at the table, then you're on the menu. And government regulation is not always a bad thing if it's done in concert with those that are looking to enhance franchising. And that group of individuals looked around and said, we have interest on restaurant issues and we have interest on hotel issues, but there's not an organization that represents franchising, and we ought to create one because this model that we're developing is in its infancy. They saw something as far as opportunity for the franchise model to expand into other industries. And clearly it has, as you talked about, the 3,000 concepts that are out there in the U.S. actively selling opportunities. But they also saw risk. And like any sophisticated CEO or founder, you know, you've got to look at your, you know, your SWOT analysis. And I think they appropriately saw that this was a shared, you know, threat across the industry, but also shared opportunity. So that is really how the IFA came to be in back in the 60s, and we've been around 67, 67 years now.

Today we use the franchise disclosure document, the fdd. Prior to that, it was something called the ufoc, the Unified Franchise Offering Circular. Do you. Back when franchising first started getting legs, was there no governing document, no standardization of disclosure that needed to happen so people could just call anything they wanted to a franchise and, and really invite people into it with a variety of standards that just had really no boundaries or no definition.

Yeah, effectively you have the Wild west, and that's what needed to be reined in in some reasonable way. We still have a little bit of the Wild west with a patchwork of states that have additional requirements. Some states require registration to sell a franchise, others do not. You know, but we also have this, this federalist system that was created, you know, by the founding fathers of the US Governments. And, you know, most Republicans generally like to, you know, cede power to the states and let states decide what works best for them. And, you know, enfranchising. That is something that we, you know, have butted up against and certainly helps our friends in the franchise legal community be incredibly relevant to our brands. But if we were to literally start franchising again, I think I would posit that the model would benefit from one uniform registration and disclosure system, not a patchwork approach like we have today, but certainly better, in my view, that there is something that creates some standardization across for the prospective investor and for franchisors to be able to enforce what's called a brand standard and ensure that their franchisees are following the rules of the playbook and have appropriate legal recourse to address that if they're not. Again, you need to have, you know, the Dunkin Donuts, as I'm here with my Dunkin. Right. It needs to look and feel the same to the consumer, you know, here in Washington or where you are down in Charlotte. Jeff. And, you know, if the franchisee is not following that playbook. Right. It impacts every other franchisee value of their business. They built in that system. It obviously negatively impacts the consumer experience. And the brand has to hold that individual franchisee accountable. And the franchise agreement and those brand standards allow the franchisor to take the recourse necessary to do that. Yeah.

And that's right at the crossroads of where the IFA steps in to really advocate for the franchise industry when regulation appears that could be constricting to our ability as franchisors to maintain brand standards and also respecting the individual individuality and the. The sovereignty of the business ownership of the franchisee as small business owners. And I know we would love to. We'll unpack that and we will get into your exceptional appearance on Congress last week, which we appreciate you going up there and representing all of us. And it was really powerful opening statement, and I know a great conversation and we were well represented. What I'd like to do right now is I'd like to. For people who are maybe new to the ifa, I'd like to give a landscape of the organization and how it works. There's a leadership pipeline. There's committees, there's forums, there's all kinds of ways to participate. It's a large organization. There's a lot of work to do inside of that. It's a volunteer, really, you know, a lot of volunteers from the franchise industry that. That help to make the organization go. Can you give an overview of the structure of the organization? So if I was a new franchise or coming in, you know, and I said, okay, for the next 10 years, I want to. I want to give back to the industry. I want to volunteer my time, maybe sponsor or contribute to the organization. What are the steps? What's the path for me to really be a good member and to invest in this industry and the association into the business model that has given me and my franchise owners so much?

Sure. So we, in terms of membership, so we are a membership organization. We have about 1300 franchise brands who are members of the IFA. And it's everybody from, you know, McDonald's and Dunkin, you know, down to, you know, this sort of hypothetical new franchisor that you mentioned who's just getting started and you know, wants to, wants to learn, wants to be mentored, wants to understand what vendors maybe to partner with as they help help them grow what, you know, wants access to prospective franchisees. So if you're a new franchisor, you know, coming to IFA and joining as a, as an entry level member, you know, we're going to give you, you know, an incredible pathway to, you know, help you grow your professional network within the franchising community. I think that that is, you know, number one, the most valuable thing about becoming involved and showing up at IFA events, volunteering as you learn over your journey, becoming a speaker at IFA events, maybe not at our convention, but perhaps at a smaller event like the event Jeff, you and I were at recently in New Orleans, the Emerging Franchisor Conference, which is a much more intimate and sort of high touch kind of event, about three to 400 people and both learning and becoming a speaker as you scale there. I think I mentioned the CFE program earlier in the program, I would say if you're new to franchising or hiring new people to your company, going through that fairly intensive professional development process which can be done in about six months to get your CFE, you'll be part of a cohort of 20 or so people who are going to be your buddies over the next 10 to 20 years in franchising. And that's just a pretty cool thing. While you also get a soup to nuts education in becoming a world class franchisor. And then as you start becoming assimilated into the ifa, giving back in different ways. I always say every dollar that comes into the association, right, you know, we're putting it back out in support of that mission that I talked about earlier. And in particular we're putting it out in service of protecting the business model the way that you've decided to grow your business and support your franchisees, businesses. And a lot of that work, and a lot of that money is spent on government relations and advocacy work to protect franchising from unnecessary or overburdensome education regulation. Excuse me. And just to also then go back into promoting franchising. So again, back to what I said earlier, that 70% of the country that might be interested in Opening a small business, but doesn't know where to start, helping educate the public through research and through different communications campaigns about the franchise opportunity and associating your brand with the ifa, you have a certain halo effect. There are standards that we have in membership, so not anybody can become an IFA member. You have to meet certain criteria, and we evaluate that criteria over time as well. So all these things, I think, are benefits. And we have a team of 40 people here at the IFA that work for the association and can help you be your concierge, navigate different questions that are inevitably going to come up and be a connector to other people that have faced these common challenges that all franchise systems inevitably face.

From an economic perspective, as a franchisor, we can participate in fran pack, which is our industry pack, and it's specifically for the advocacy work that's done in the governmental space. I think you can give individually up to $5,000 for that. But the ask is generally a dollar a day, $365, so that we can all be represented globally, you know, by the IFA and the, you know, paying attention, kind of watchdogging what regulations are coming down the pipe. There's been some real pivotal interceptions and oppositions to some legislation that really just kind of strikes right to the heart of small business. And we've been very successful as an organization in doing so, obviously putting our dollars in membership and then showing up at these events. And, and admittedly, I've only operated in three or four different industries in my career. I've never been part of a more collaborative, more collegial, more open business group as the ifa. I, you know, Charlie Chase was the past chair. Was he current chair or past chair? He was past chair.

Immediate past chair.

Yep, he was past chair. And, you know, he, he stood up and he's the CEO of First Service Corporation, which is a very large, small number of brands, but just a very large system publicly traded out of, out of Canada. And, you know, and I've heard him say this before, he said, you know, if, if somebody comes up to me and they have a painting concept, if somebody comes up to me and says, I want to do a painting concept, you know, you know, and they think that he's going to be upset or competitively annoyed by that. He says, no, man. He says, whatever, but if you it, just do it. Well, because the responsibility as franchisors to take care of our franchisees, to, to do all of the things that we can do to make them successful and to run our businesses in a responsible way. When we get conflict between franchisors and franchisees around the space, it's not good for any of us. And I have observed that the leaders of the industry, the Charlie Chase's, the Katherine Monson, all of the Shelly Sons, the David Bars, all of these people that have been at the head of some of the more successful brands over the years, they share without reservation about how to build great franchise companies. Because I think everybody understands that, you know, to the extent that we self regulate and we self educate and we do a good job of ourselves, then the government might find it less necessary to jump in and, you know, put regulation upon us that we might not want. So I would encourage people, if somebody has a family business, one or two locations and they're looking to, to get into the franchise space, the first thing they need to do is they need to go to the IFA national event, which is, where are we this year?

We are in Phoenix in February.

Phoenix. We're in Phoenix in February this year. So we're, we're coming to you. I'm sure we'll, I'm not sure when this episode, this episode will get out before then. So people will have time to sign up to register and just show up and really get a sense of the massive number of tracks and courses around operations and sales and finance and all those small nuances of legal. All the small nuances, and then also participate in roundtables and, and get, you know, start your franchise network today. I'm constantly amazed, although there will be what, three or 4,000 people at this.

Event, maybe 5,000, more than 4,000 people.

More than 4,000 people. And, but at the end of the day, it's actually a very. But that, that's going to include some franchisees. This can include a lot of suppliers and vendors and a lot of franchisors. It's actually a very small industry. I mean, in terms of actually number of people that are making things happen. And if you go to that event, you can get access to people that have built some of the brands that you've known and loved for your entire life and you've been a customer of. So it's really neat. I've always been fascinated by the accessibility of leadership inside of the franchise space. And that's one of the biggest benefits that I've gotten through my career through the ifa.

Yeah, no doubt you touched on this in your opening, Jeff, but I've been at three associations and by far right, the willingness to collaborate and share even amongst competitors, just Lessons learned and best practices. Yeah, it's, it's really remarkable. So for anybody starting out, that is, that is certainly a benefit of the franchise model.

Yeah, there's always room for people to, who are want to do it well inside of it. Well, let's move a little bit towards the protect piece of it. Last week, on Wednesday you appeared in front of Congress, I guess on Capitol Hill. You did a great five minute opening. What are some of the issues today that we are most concerned about from a regulation or legislative perspective?

Yeah, well one, before I get into that, I'm just glad that I didn't do what the university presidents did in their very publicized, I don't know, they got a Brazilian fire at me being up there.

I don't know. And maybe there's no such thing as bad publicity, Matt. We could have got a billion views if you would have taken some unpopular positions.

But indeed, so I testified, was the.

Seat you were sitting in just still smoking hot from those.

It was the same committee. It was the same committee. I don't think I was in the chair of the woman who at University of Penn. I think she was one chair over from the one that I was in. But it was a great opportunity to highlight franchising, why it's important and also highlight the top threat to the franchising industry right now is this rule that was finalized by the National Labor Relations Board concerning an issue called joint employment. This rule goes into effect at the end of February. And essentially what the rule does is it makes franchisors effectively responsible for employees at businesses that they don't directly control their franchisees businesses and the employees of those businesses. Franchisors absolutely have influence and a requirement under other laws, we've talked about that earlier, to enforce brand standards and ensure their franchisees are delivering on that brand promise. And that takes involvement in the business and it takes what some refer to as soft power. But they're not directly controlling wages or benefits or schedules. They're not directing day to day employment activities at their franchisees businesses. If they were, then franchisors and that franchisee under current law should be considered joint employers. And what that would mean is they could be sued if there's a violation of labor and employment matters. You didn't pay somebody overtime or in this situation, this is a big labor union priority. They're trying to organize workers in franchise businesses. The franchisor, if they were a drone employer, they would be required to sit at a bargaining table along with all of the franchisees, employees, representatives and so you have this multi employer kind of collective bargaining table that is going to be completely unworkable for the franchise business model. And in fact it's not really workable from a collective bargaining standpoint either. Like there isn't a room big enough to hold all the lawyers that would need to represent all these different businesses that would need to be at the table to organize entire franchise systems employees. But the problem with joint employment and franchising is you just, you can't have both. Right? So I made this point in my, in my testimony. You can have collective bargaining and franchising coexist, right? This is not a. Franchising is not an anti union strategy. Franchising is a business growth strategy. It's a way for brands to reach new markets more quickly with other people's capital and local market intelligence. On the franchisee side, no franchisor ever started their company to say, I don't want responsibility for employment matters, I want to just grow. And I can grow with other people's capital and reaching new markets more quickly. But this issue of joint employment is a big priority of organized labor. They would like to organize sort of top down. They can be very lazy. It would be costly and expensive to go organize restaurant by restaurant by restaurant and individual business units in any franchise system or service concept or hotel or whatever it may be. So this is an effective way to change the law through an independent agency, which they've done, and try to force, you know, business to react. And what's going to happen here, because we've seen this issue play out before, is it's going to be very costly and expensive to franchisors and to franchisees. And that's not going to be good for anybody because franchisors are going to do one of two things. They're either going to, now that they have this liability for the way the joint employment standard has been changed, they're going to take a lot more control over those businesses because they have the shared liability and responsibility now. Alternatively, they're going to back way off because they're going to be fearful of lawsuits for any interaction and communication and other engagement with their franchisees. And that is not going to make franchisees happy because they've paid for a lot of the support that is inherent in the franchise relationship through franchise fees and royalties, other fees. And that also is going to have a negative impact on the consumer because it's going to make things a lot more expensive. If litigation increases and that cost of doing business is going to increase that Ultimately all gets passed along. So none of this is a positive. And like I said, we've seen this before and we don't need to see this again. So we're hopeful Congress will step in and overturn this rule. There's some means to do that, through what's known as the Congressional Review act, allows Congress, through a simple majority, to overturn a major regulation and instruct this agency to go back to the drawing board and either, you know, issue something more narrowly tailored or just back off entirely. The IFA has also sued the National Labor Relations Board in federal court in the Eastern District of Texas, challenging the rule in three areas. So, you know, we're also playing this out on the litigation front.

And then what is the Save Local Business act brought forth by James Comer?

Yeah, so the Save Local Business act is standalone legislation that would amend the National Labor Relations act and the Fair Labor Standards act to create a permanent definition in statute that a business can only be named a joint employer if it exercises direct and immediate control over another, over the essential terms and conditions of another business's employees. So when I talked earlier about a franchise or a prime business being involved in setting of wages, setting of schedules, prescribing benefits, those are direct control elements, right? If you and I are in business together, Jeff, and your subcontracting work to me, and you tell me exactly what I need to pay my employees, you're a joint employer of my employees. You should be responsible. But if you're telling me, here are the general guidelines, if I'm a construction company, our business is open at this time and we need you to be here and perform this work over the next six weeks. We're going to pay you $20,000 to do this work. Right? It's up to me to determine the right workforce that I need, right? When those people need to be there, what type of work they need to perform, that's a typical business to business contractor, subcontractor relationship. And all of those kind of general, widely accepted business practices are now under this expanded definition of joint employer put forward by this nlrb, this, this agency, they are now in dish of joint employment. So any one of those interactions that you and I have with one another can be, you can be brought to the bargaining table and you can be sued as the prime business. And similarly, nearly anything in a franchisor franchisee relationship can be cited as indirect or unexercised control over a franchisee in the franchising relationship. So this rule is not something that just impacts franchising there are 71 business organizations from the national association of Manufacturers to the American Trucking Associations to the Associated Builders and contractors that are concerned about this and have asked Congress to overrule it. So it's a broad coalition that the IFA is leading, and we're very concerned about it. And I would say to any of your listeners out there, go to SaveLocalBusiness.com if you want to learn more about that issue. And there's opportunities to get involved with grassroots and telling your members of Congress that you own a small business or you own a franchise and you don't want to be named as a joint employer, and they need to reverse this.

As an example, let's say a franchisor had a learning management system that was available to anybody to. For a salesperson or an estimator or a general manager for some particular location. And in the operations manual, you recommended that, you know, people go through the learning management system and they should score 80% or better and complete all the modules. Is that exerting direct control from the franchisor, just making those systems available and making that as a recommendation as to how they run their business? Because it's very subtle, but significant.

Yeah, I wouldn't call it direct control, but I certainly wouldn't, Wouldn't. Would not say that it couldn't be cited as indirect control, which is an element of this new rule. There's language in the new rule that says anything having to do with working conditions at another business, you know, what is, what does that mean? So this rule is fairly boundless in terms of, you know, what, what an ambitious, you know, plaintiff's attorney could. Could bring forward to, you know, get another business, you know, to the table.

Yeah, man. It's. If you want to have great brand standards and you want the customers to have a great experience. Experience, then you've got to provide high guardrails and great systems and incredible clarity about how the products and services are delivered. And to the extent that the franchise owners and their employees adhere to that, I mean, that's. That's on them. You can't force them. You can't fire them. You really, I mean, you know, that's the rule. Like, we can't fire. We can't fire franchisees, and we. And we definitely can't fire their employees for lack of compliance. So how much control do we really have?

It's.

We're, we're. We're providing best practices, tools, education, all of the things that they can get from us. Or, I mean, in a Lot of ways they could get from other industry associations or things like that just packaged up tailored for the brand that, that we're offering. So it's really difficult for, for me to understand, you know, how to redraw that line in terms of what we do and what we don't do. Matt, are there any industries that are more susceptible to or, or, or any particular franchise areas that you're more concerned about? For example, restaurants that have a very high employee count, lots of restaurants, lots of employees, or some of these three tier models where you have a franchisor, a master franchise, master franchisee, I guess, and then franchisees delivering the work below that are those areas that are more likely to trigger joint employer challenges.

Look, I think that no area of the franchise sector is really immune from this because so much of what is inherent just in any franchise system is, you know, it's required to, you know, really make a franchise a franchise. Right. Like some element of control. I think it's more a function of where the unions are putting more of their time and energy and certainly in the quick service restaurant industry that is a major focus of the primary proponent of this, this new rule, which is the seiu, the Service Employees International Union. So I think certainly the restaurant industry, I would also say in the, not necessarily three tier, so much on joint employment as just those with anybody in kind of vulnerable workforce, like lower wage, entry level, high numbers of maybe non English as a primary language. There's a lot of attention there by the unions as well. That does tend to play itself out in the janitorial and commercial cleaning areas, but also in, you know, you touched on some of the commercial and residential services areas as well. And then lastly, I mean the hospitality sector, you know, less so SEIU and more of a UNITE here focus in terms of organized labor. So but look, I think everybody is evaluating how to make changes to the way that they do business right now. And that sounds very benign, but when you change the way you do business, that is costly and the franchise relationship can become frayed if there is not clear understanding of why things are changing and franchisors are not communicating with their franchisees about why this is happening. And I think that also creates an opportunity for, you know, what can I do about it? Right, well, and back to the advocacy, it's like we're not doing this because we want to. Right? We're not taking things away or exercising more control because we now have liability because we want to. We're doing it because this government entity has moved the goalposts in the middle of our franchisor franchisee relationship. And if you're pissed off about that, as you should be, then you should pick up the phone and call your member of Congress and say you've got something to do here. This is why you've been, at least in theory, why you've chosen to serve your country in elected office. And Congress has an appropriate oversight role to play over government overreach by these agencies. And making it clear, as I did in the congressional hearing, Congress will be making a choice, right? Do they want to stand up for this, this new role, or do they want to stand up for the franchise business model? And, you know, let's be clear about what choice that they're choosing to make.

We certainly appreciate the work you're doing there. It's, you know, at my level here at the franchisor, with a couple of decades of experience and then leaning on the shoulders of the people that have come before for us, like, we, we're very prescriptive about the way we support franchisees. I mean, like, really, really prescriptive in, in how we build that relationship equity. The, you know, how we, we consider engagement with our franchisees in every decision that we make. We do, we consider radical transparency in every decision that we make. We understand that the, the health of the relationship with the franchise network, and that doesn't mean that you're rolling over on a whim of every question. And, you know, I mean, we are a servant leader organization, but servant leadership is giving people what they truly need, not necessarily what they say they want. If they're under stress or in the moment or if they're uncomfortable doing something, there's some hard lessons and candor that's delivered. And, and because business is full contact and, and it's hard now, we have to be able to get in the pocket. That's a boxing term. With our franchisees. We have to be close enough to them so that we understand that when they're struggling that we're working on the right problem. This can't be, we can't be, you know, franchising like at a prison through a glass wall. It doesn't work. I mean, we, we've got to be out there with them. We've got to be paying attention to real issues. We need to be working with them on the, on the, the real challenges that they're facing. And, and it's, and it's, you know, even though the business model is, I mean, the business model is well defined in the way that we execute It. But the variation comes in the franchisee and their background, their experience, the challenges that they're facing, all of those types of things. So for us, you know, we kind of know how to do it. We've learned how to do it one way, and it's high engagement, it's radically transparent, and it's, you know, and it's relatively integrated. Now. I know that we don't break any of the laws, joint employer laws. We don't. We know what not to do. And we don't want the responsibility of managing or being responsible for a franchisor's employees. That being said, it's a little. It's. It's. It's difficult for us to understand where we would be able to peel that back and have it not impact the ultimate success of the franchisees.

Yeah. The problem is, and I said this also at the hearing, there's no clarity. Right?

Right.

There's no guidance. Right. You know, a lot of times government issues regulations that you just don't like. Right. But at least there's clarity in many cases about how to comply. This is so unclear and so boundless in terms of, you know, what activities that you are required to engage in to be a successful franchisor that are you now not able to do in order to not become a joint employer. Because if you do become a joint employer, there's no incentive to franchise. And that is unfortunate on a number of levels. It's unfortunate because franchising gives people this incredible opportunity to become small business owners, but they didn't become small business owners to have the overlord of the franchisor controlling or responsible for every aspect of their business otherwise. That's why when we say joint employment really turns franchisees effectively into middle managers, and you didn't buy yourself, you don't want to buy yourself a job in the franchise model. You want to buy a business that you can grow and monetize and sell or give to your kids or whatever you want to do with it. And then from a franchisor perspective, franchising is a choice. You've made a choice to go in that direction versus, you know, owning these assets, as some businesses decide to do, pursuing a corporate model. And that's okay, too. But you've made a choice, and with the stroke of a pen, government has made that choice more difficult, more expensive and unclear, and you don't know how to comply. And that's why I feel like franchising is sort of in this vice grip right now with this rule. You're kind of damned if you do and you're damned if you don't. And that is something that we need to turn up the volume on to Congress to understand and ultimately overturn.

Yes. Let's get, let's. Let's make a goal of some clarity in 2024. Matt, can we touch on a few trends? I'd love to get your perspective on these. Are you good on time right now?

I am.

Okay, good. Thank you for that.

So.

Are you seeing from where I'm sitting, and I think it's probably because I've become more broad in franchising of late, but I see an awful lot of new brands popping up. Are you. Would the numbers tell you that there are more new brands entering and maybe some brands leaving the network? Is the churn greater now than it has been, or is this the way it's always been?

Churn is definitely higher by churn. There are going to be brands that start ultimately three years from now. They will not exist. They will not have sold a franchise, or they would have been bought and maybe consolidated into a competitor brand. It is, and I think that is a good thing in on one hand, because people are seeing the franchise model as a model that can help generate wealth, grow a concept, but there's a lot of risk there, too. And you mentioned something earlier, Jeff. You're radically transparent with your franchisees and you're very close to them. You know, new franchisors need to understand that they're not in the business of selling, you know, whatever product or service they were selling before, they're in the business of servicing their franchisees. And that is an incredibly different business than they were in before. And you have to understand what being a franchisor really means. And we've been talking a lot lately about responsible franchising at the ifa. And that's why I think it's particularly important that people who are choosing to pursue franchising as a growth strategy for their business, they get involved in the industry and they build relationships with people like yourself and others who have done this before and done it in a responsible way. Because you can't be a successful franchisor if your franchisees aren't successful, too. And it's as simple as that. And that only can happen if you're franchising responsibly through an appropriate amount of new franchise development. We call it royalty self sufficiency. If you're a franchisor that is only making money because you're selling new locations and generating revenue off initial franchise fees. You're not a successful franchisor, you're not going to last. Your franchisees need to be profitable and that is going to be the greatest sales tool that you can ever have. Having third party validation to prospective new franchisees from your existing franchisees is absolutely the right approach. I think if we're seeing new franchisors that are growing that way, you're also then seeing new franchisees that are growing that way. And that is really the sweet spot for franchising long term.

There's definitely a trend over the last decade of accelerated franchise development and I think that's okay if you have the intellectual capital and the capital capital and the human capital to support the franchisees. And I get asked, I talk with a lot of emerging concepts and they say, well, how much, how much money do I need to get this brand? And I've got a number that I tell people it's about five times or ten times more than other people seem to tell them. But it just, I don't see any way around it. You need a, you need a, you need a certain amount of capital over the first 24 months if you're going to have normal franchise development to invest ahead of revenue in the support and the technology and the platforms and, and everything to do it responsibly. And the challenge becomes, if somebody engages in accelerated franchise development, but there's nothing on the back end of it and once people become under supported and the systems start to break and you've got all these franchisees out there that are, that are needing, you know, that creates I think some of the challenges that maybe some self inflicted damages that we, that we do to ourselves in the industry. Along those lines, are you, are you seeing more or less conflict right now in, in between franchisors and franchisees as a trend? Or is it about, you know, table stakes, business as usual?

I think that we have democratized the ability to get a message out through social media in such a way. So everyone's an activist. I think we see more, but I don't see anything in the data that demonstrates that there is more.

I would agree with that.

So I think you have to look at everything. Data don't lie. And we don't see it in franchisee satisfaction surveys from, you know, independent observers like Franchise Business Review. We don't see it in litigation. Are there bad franchisors out there? Absolutely. Are there ways for franchisees to deal with franchisors that are misleading them? Absolutely. Do we need state regulators and our federal regulators to do more to enforce existing law. Absolutely right. But I don't see anything in the data that shows franchisees or franchisors are facing more conflict or litigation. I just think we've democratized the ability to get information out and conflict sells. So I think we also see a lot more media coverage of conflict that manifests itself in different ways. But this goes back to what we were talking about, about the infancy of the ifa. And you know, where we do need better information is we do need to improve disclosure. We do need to improve what information a prospective franchisee can get before they make a choice to decide to partner with a brand as a franchisee. And a brand ultimately decides that they want to, you know, make, you know, invest in that, in that, that franchisee becoming part of their system. And let's be clear, both sides are making a choice, right? There is nobody compelling either person in a franchise relationship to enter into that relationship. Can we do better? Can government, the Federal Trade Commission, do better to improve disclosure and the requirements that they place on brands to help convey what it is that they're offering to prospective franchisees? Absolutely. Do brands actually want to provide information in a different way? Absolutely. So why isn't government working with industry to help us go back to the roots and modernize the franchise disclosure document and make it something that's available electronically, make it something that's a little bit more user friendly, turn it into sections that are answering, you know, pretty straightforward questions like, you know, how much does it cost? Like, what are my obligations? How can a franchisor change the system to improve, you know, what, what delivers on the consumer promise because of changing market conditions? So those are all things that the IFA is working to develop a better framework to educate potential investors and allow franchisors to better present their offering to prospective franchisees in a really competitive Marketplace where there's 3,4000 brands out there talking to the same pool of prospective franchisees who are in a lot of ways turned off just by the way information is presented. Because it's confusing as hell.

Yeah. And I think to your point, because of the standardized disclosure process and also the ability for people to be effective marketers and salespeople, you can have an emerging brand with 10 locations and they sound the same as a 50 year old brand with $3 billion of sales. And if you're on the other end of the phone or the other end of the zoom, it's almost indiscernible between the two. And it's, and, and I think that's that's got to be a challenge. So for pros, for prospective franchisees, where they're seeking any sort of endorsement, any sort of a referral recommendation that they can to figure out like what's the best way to go and, and which brand do I need to do I need to join. I think I know that some of the states have revamped their requirements around the item 19 going into next year. So it seems like every year the way that you present the numbers is change. You know, you can't do this, you know, top third, top half, these types of things. So it seems like they're always tweaking it to try to give the prospects the best value view of the financials. There is some art and some science around the way that you, those item 19s are put together across the various brands. So, but at the end of the day, franchise prospects, they need to invest the time, they need to call franchisees, they need to meet leadership, they need to, you know, they, I think if they run through the process, hopefully they, they make the decision that's right for them and a lot of good options out there in franchising.

Yeah, due diligence is absolutely critical for prospective franchisees. And look, we don't want everybody to come in to the system. Right. People that aren't willing to put in the time to do the due diligence, frankly, they're probably not going to make very good franchisees at the end of the day either. And so this is not a get rich quick, you know, scheme that. Right. This is a, you know, you're entering a 10, maybe longer your relationship with, with a franchisor. And, but, but also you should, you should be able to understand for those that are willing to make the time and investment, you know, it should be a little bit more straightforward for them in terms of the obligations that franchisors could provide.

Yeah. From a funding perspective, we're going into an election year and I'm interested to know what typically happens in franchising in an election year, if you have any visibility into what to expect or what some trends might be there. And also homeownership has always been a really important part of hard assets collateral that people use to fund their franchise, to collateralize against their franchise. Homeownership is in decline, especially in the younger groups here due to poor affordability. And you know, is, is, is there a real concern at the IFA about the, the changing asset base that's available to this next generation of people coming up and their ability to build Enough assets to follow their dream of entrepreneurship with a franchise.

Well, we've never seen higher rates of people interested in owning a small business, but that is definitely butting up against just consumer savings and as you mentioned, homeownership as well with just kind of the geopolitical uncertainty related to we've got two wars that are out there right now with Russia and Ukraine and with Hamas and Israel. And then you layer on the uncertainty or just lethargic view of the American electorate as we stare down potential rematch of the 2020 election with former President Trump and President Biden and the possibility of a contested election and what that could mean for decision making. I think all of this sort of you put it into a basket and it's not a recipe for people who franchisors need to make decisions and franchisees take longer to make decisions. So I think the trend that we see is it takes longer from initial lead to closing. And I don't think that's going to get any shorter in the next year just given everything that is out there on people's minds. And as I also mentioned, the media environment, the media plays up a lot of this stuff and people need to understand what's going on. I'm a big believer in free speech and freedom of the press, but I think we still see a lot of lazy media coverage of different trends and things that are out there that weigh on people's minds. And people consume media not through the traditional forms. They tend to associate with people that are just reinforcing their existing values or beliefs or conspiracies that they have. And there's not a feedback loop that is like it was in the before times. I don't even know when that was anymore. But I think a lot of this is just a way of saying it's taken longer. That's one of the trends for people to make a decision about. Yeah, I'm going to pursue this 10 year franchise relationship and that's, that's, that's a problem.

Matt, on, on trends, maybe a fun one. Do you see more celebrities coming into franchising? I think the sports figures, it seems like all of the, all of the levers that make franchising such a great business model at the franchisor level certainly extend down to the franchisee level. And I see celebrities and professional athletes and people that want to make investments in businesses more and more frequently leaning into the franchise model. Is that what you're seeing from where you're sitting?

Yeah, I think a lot of them see a lot of Brands see celebrity partnerships as a way to sort of leverage an additional tool in their marketing toolbox in terms of other development. They also see that celebrities see franchising as a place to deploy capital that's got a high return on investment and with the right management and operating team below them. We have seen it. So as an example, at the IFA convention two years ago, we had Shaquille o', Neal, who was a keynote speaker and did an amazing job. Last year we had Drew Brees not breaking any news here today, but we have another one lined up that is a highly influential person in sports media business that will be our keynote speaker in Phoenix at the IFA Convention this year. We'll get to get ready to announce here really soon. So excited about that?

You can tell us, Matt. Both of our listeners promise to keep it quiet.

Not going to break any contractual relationships that haven't been finalized yet.

Well, we'll have to wait, but we're excited for it. I'm sure it'll be another great, great partnership. Well, Matt, I appreciate you being on today. This has been very informative. Obviously, the more energy that we invest in education around the sector and, and that we put behind protecting, enhancing and promoting the industry is good for all of us. This has been an industry or business model for me that I would have never been able to have the experience experiences of my life without. And it, it only really happened for me when I started to join the IFA and I started to rub shoulders with all of the people that were so willing to give their time to some guy who just had a couple of restoration locations and was trying to figure it all out. So I just want to encourage people, man, half a life is showing up and if you show up and you show up with humility and you know, don't act like whatever people will help you and, and you know, ask questions, be helpful, participate if somebody asks you to, to be part of a committee or to show up somewhere if there's, if they can't figure out a reason to say no, then the answer should always be yes. And the IFA is a host of people that will give back to you as much or more than you're willing to put into it. So I appreciate your leadership, Matt. I know I was very excited when you got this role a couple three years ago and you've done an excellent job on behalf of all of us. So thank you so much for that last question. If you had one sentence to make an impact in someone's life, your go to sentence what would that be?

It's don't ask, don't get.

Ah, don't ask, don't get. Got it. Keep it simple. All right, Matt, how can people reach out to you? What is the best way to contact you if they had a burning desire to get in touch with you?

Yeah, well, if you want to check out the IFA, come to franchise.org franchise.org you can check out all the programs and things that we do there. I'm pretty active on LinkedIn, so feel free to connect with me on LinkedIn or on X, formerly known as Twitter, matthewhauler. And happy to engage with anybody there. So I really appreciate the opportunity to be with you, Jeff. You're such a great leader in the franchise sector, big supporter of the IFA and really proud of what you've been building in this next generation of Jeff Duden, and look forward to seeing all the great stuff that's to come from you and your team.

Appreciate you, Matt, and thank you for being with us today on the home front. Everybody out there, thank you for listening.