The Truth About Franchising: Is It Really the Fast Track to Success? with Guy Coffey

You've seen the ads. Be your own boss. Escape the rat race. Own a franchise and live the dream. Sounds great, doesn't it? But here's the thing. Too many people jump into franchising like it's a game of Monopoly. They're not really realizing that the bank could be rigged, the rules confusing, and if you're not careful, you'll be mortgaging your future before you even pass Go. When it comes to franchising, you need to know what you're really signing up for. And that's what we're talking about today on Experience Leadership.

Welcome to Experience Leadership, a podcast that challenges small business owners and entrepreneurs just like you to dare to be the exception. Join our host, Customer Experience Expert Marc Haine, as he uncovers relevant and timely content to help you script and direct your business and teams to create jaw-dropping experiences your customers and staff deserve. Here is the host of Experience Leadership, author of Lights! Camera! Action!, customer experience expert Marc Haine.

Welcome to this episode! I am your host, Customer and Employee Experience Strategist Marc Haine. And thank you for joining me today on Experience Leadership. My guest is franchise veteran Guy Kofi. And today, we're going to be pulling back the curtain on the realities of franchising. What works, what fails, and the costly mistakes too many business owners make before they even open their doors. If you've ever wondered whether franchising is the right move for you, this is the conversation you can't afford to miss. My one ask is that if you know somebody who could use this information, please go ahead and share a link to this episode. Do them the favor because I know this is a big, big topic. Owning a business sounds like the ultimate freedom, doesn't it? I mean, you call the shots, set your own hours, and build something you can be proud of. That ultimately is the dream. But here's the reality. Every year, countless people dive into franchising without a plan, believing that buying into a brand is a guaranteed shortcut to success. They assume the system will do the heavy lifting. That all they need to do is find a good location and put a sign over the door. And then, reality hits hard. And that brings us to our Question of the Day. So, have you been to the franchise shows, checked out a few brands and thought, oh, This is the road to easy street. Or you already have a business and you're thinking, wow, if I could license my systems, I could make a mint. I'd love for you to be part of this conversation. Go ahead, share this link to this episode on your favorite social media platform. Hashtag it #ExperienceLeadership and let me know what your thoughts are when it comes around to your thoughts about franchising. You know, when it comes to franchising, some people learn the hard way by Jumping in blind and hoping for the best. Guy Cofie is not one of those people. He spent nearly 2 decades mastering both sides of the franchise world. First, as a multi-unit franchisee with Anytime Fitness back when the brand had fewer than 100 locations. Now, it's the largest fitness chain in the world. And then, as the co-founder of Frenchie's Modern Nail Care, which he built and scaled before successfully selling it to private equity this past year. Today, Yi is an advisor to emerging franchisors and franchisee entrepreneurs, helping business owners avoid costly mistakes, build systems that actually work, and create businesses that don't just survive but thrive. He is also the host of Conversations with Kofi, where he shares his candid insights on what it really takes to succeed in franchising. So, if you're thinking about buying a franchise, starting one, or just figuring out how to make yours work better, You'll want to lean into this episode because Guy is here. He's done it. He's been there. He's bought the t-shirt and he's got the hard-won wisdom to prove it. Guy, welcome to the show. It's great to have you.

It's great to be here. I really appreciate the opportunity to meet with you and to share some of what I've learned in my, in my path and my journey and hopefully get some people to consider it with eyes wide open.

I love that. And that's, you know, the purpose of this podcast, right, is to get people to expose things and have the right questions to ask. Franchising is often sold almost like a business in a box, but in reality, how many people actually know what they're getting into when they actually sign franchise agreements?

Well, at the surface, if you just listen to the ads or, you know, watch the ads or read the ads or talk to, you know, some franchise development folks, it is sold as a business in a box. If the brand name is really well known, that's going to carry you a long way. If it's not, their systems will carry you a long way, things like that. And it's really one of those things where it's caveat emptor, like buyer beware, not in a negative way. I just want to say that is, it's just a reasonable amount of due diligence is necessary for any investment. And you don't just take the person that's trying to sell you the investment at their word. I don't want to cast dispersions on anybody in the industry because there's a lot of great people that are selling franchises. But you have to make sure that you're going in with wide open and you know the advantages, the disadvantages, and have a realistic expectation of what this business is gonna take from you in the beginning. And then is there an opportunity for you to kind of not ease out of the business, but ease out of day-to-day operations at some point?

Mm-hmm.

And I think the biggest thing that people go into and that are surprised about is most franchises, single unit owners, things are small. They're small businesses. And any small business that's starting out, even if it's a fantastic model, it's going to take time and effort and energy. A leader is going to set the tone and the pace. There's a necessity for a leader to be in there for a while and to learn everything and to be able to lead those systems and those operations going forward. So that is the biggest thing that I see in franchising is people aren't, even in my, in our own case, like Here's the keyword to listen for: absentee ownership or semi-absentee ownership, or is it a full-time owner-operator necessity required from the franchisee? So obviously if you tell someone that it's going to be absentee owned, that's really appealing to people because like, oh, okay, I've got enough money for the territory fee and a couple months of operating capital. I can still have my full-time job or I can still run this other business. And that's often not the case.

Yeah.

So Then you get to semi-absentee, which is where a lot of franchises are advertised basically is like, it's semi, like you get to work on the business, not in the business. And I think that's where there's a gray area that often in the sales process can, the amount of time, effort, energy, passion that you're putting in can get minimized in the sales process aspect, but in reality it still is necessary. And then if someone's saying that you have to be an owner-operator, well, a lot of franchises aren't going to lead with that because that limits their buyer pool to so many.

Right.

Because you can only work one business then. You know, an example of that is like CrossFit gyms, although it's technically not a franchise, they only allow their owners to have one, as they call them, boxes, you know, and that's because they want that owner in there and operating it.

And heavily dedicated to the brand, right?

Yeah. The owner's going to be in there on the daily all the time. So, you know, for instance, with Anytime Fitness, you know, when we got into that, they, as you mentioned, there was less than 100 and their operations manual and their design manuals were— our design manual back then was find 5,000 square feet and buy a bunch of purple paint. You know, it's vastly different now. They've gotten better and better and better. And as we've gotten better at operating them, You know, it truly is like my operating unit is truly absentee owned. I go there 4 or 5 times a year and I'm on the phone with them about 1.5 to 3 hours a week. That's it. That is after 15 years of that one being in operation.

This is the same thing for any small business. Any small business starts off and your investment of time at the very upfront is where it's necessary. And then successful businesses find, make sure that their business can operate without them, with systems in place to be able. And so franchising really doesn't make that any different.

That's true, with a caveat, is if it's a good franchise system. What I, what I always say, I'm a huge proponent of it. I'm, I'm very— even though I've benefited greatly from the model, I've also had negative experiences.

Sure.

Most recently with a different system, um, very negative experience. But the model is still great because what I always think is I want more people to be entrepreneurs because I have lived it. And I think the people around me that I see, they live a better lifestyle. And I'm not just talking about more money. I'm talking about more flexibility, more presence, more engagement. Their kids see them working. Their kids are learning about the realities of business and life by watching mom and dad around the kitchen table or being in the car with them or things like that. So I love entrepreneurship. I think it's a great way to go for a lot of people, but there are a lot more people that could run a really good model than there are people who can create all the systems and the model and the tech stack and everything like that. And so that's my main reason for really pushing on franchises because like my wife and I, Stephanie is my co-founder and my wife of 31 years. We're pretty good at executing, following directions and leading people and managing. We're not super creative. Like we couldn't do things from absolute scratch. Even when Frenchy's came along, like we stole from the best in, not in a legal way, but we used all the systems that we learned in Anytime Fitness and Waxing the City and other organizations that we've been involved with and we put 'em in, we replicated them and that's it. So that's why I think There's so much crossover between franchising and small business, which is fantastic. And, but there are advantages in franchising and you'll hear people that are proponents of franchising, you know, they'll talk about the lower risk rate of less franchise businesses fail.

Because of proven systems, right? Yeah.

Yeah. You have the recipe and if it's working in multiple places, you can probably also use that same recipe where you live.

Yeah.

Right.

Out of curiosity, like, what are the biggest misconceptions that new franchisees have when they step into a franchise? What are some of the kind of things that take them off track that they go, oh my God, if I'd known this?

Yeah, it's—

that's a little question, by the way. That's just a little— Oh, okay.

Yeah, well, I would say, you know, the— it comes down to human beings. It's people, you know. It's, you know, for businesses People solving, helping other people solve problems, right? And that's the biggest thing is, especially if someone's coming from a corporate background and then all of a sudden they're working in fitness or beauty or home services, they kind of expect people to have the same career aspirations, motivations, drives, standards, things like that. And then they get into this small business world where, you know, if someone doesn't show up for work, they're not putting their family at risk. They're not putting all their health benefits at risk, you know, because you're usually not offering that when you're starting out as a single-unit franchisee. And you have people that don't show up for interviews or say they get hired and then they never show up for the first day of work. And they're like, I did not sign up for this. I don't know how to handle this. So the people aspect is the number one thing. And then The sheer amount of time, if the franchisor hasn't really prepared them in the beginning for, like, we used to tell people like first 6 to 12 months, you should be in the business. You should know that business backwards, forwards, come across all the exceptions to the rule that you're going to have. And then you're in a position to set the tone and set the pace. And then you've also dealt with a lot of the weird stuff that comes up. So then you can actually step out and help other people. Guide that. So I think that's the other thing is we've had people that tried to keep their full-time job while they're starting a new franchise system. And my advice to people is you have to cut the cord. And if you're going to invest $50,000 in a territory fee and whatever for build-out, or if it's a home services, you know, for the vehicles and the systems, like Give that business everything it needs, at least for the first 6 to 12 months. And then you can figure out how to hire, replace yourself in some aspects of the business, first with the admin and then maybe with the marketing and then maybe with operations. But the last thing would be to replace yourself with is the sales for sure.

Yeah.

So that's the biggest thing is the amount of time that's involved, but it's It's highly leveraged time. Like when we opened our Steamboat location, we thought it was a great idea. And then Chuck Runyon, who is the founder of Anytime Fitness, we were talking to him and he is like, yeah, I'm not so sure about Steamboat. And then my business mentor actually lived in Steamboat, which is a, it's a town about 3.5 hours away from our house and it's near nothing. And you have to go over 2 mountain ranges to get there. And they were like, yeah, I don't know. There's so much competition there. It's a very active community and they have this great center there that people get lifetime memberships to. So we got so scared that we moved there. We leased out, we leased a house for a year and moved there just so that we knew if it didn't go well, it wasn't because—

Because you weren't there.

The manager.

Yeah.

Yeah. So I mean, that's what it took and that was in 2010 and now it's, I think the number 11 Anytime Fitness in the US. So it's paid off, but it's the early stuff that people gotta get. It's like you don't go into it to buy a job. I totally get that. You do it for the freedom and the time flexibility and things like that. But in the beginning, it's nose to the grindstone for a while, and then you can step back and then hit every hockey game or baseball game or play or whatever your kids are doing.

It's interesting because again, this is the same model that even small businesses have to do, right? You start your business, you're grinding it out until you get to a point where you got systems and methods in place, you have a hiring process, That's working really well. You start hiring marketing people and HR people, and then you start hiring for your replacement. And what I find in small businesses, a lot of people don't do that last step. They stay on as the operator. And then, when they want to pull out of the business, they're completely shocked that their business really isn't worth a lot because it relies on them being there.

Yeah.

And so, even in the franchise space, the message I'm getting from you right now is Even in the franchise space, you want to make yourself obsolete as you move yourself forward so that you can pursue other things. To your point, as a multi-unit franchisee, you can't be in every store 6 hours, 12 hours a day, all at the same time. You need to have systems in place to be able to let the store run on its own. Absolutely. Yeah.

And there's, there's a process for that. One of the great things about being a franchise system is, is the openness and the sharing of best practices, because somebody that's running an Anytime Fitness in Edmonton isn't really worried about me having the great practice that he has for, or she has for marketing or hiring or recruiting or anything like that. So you have that benefit of being in the system where you can call one of the strongest operators and say, that seems to have this great lifestyle and be like, how exactly are you doing that?

Yep.

I'm sitting here and that to me is really kind of the The magic behind franchises is that when you step into it, you're stepping into a community of people who are like-minded, people who are driven by the same things you are. And there's shared knowledge wealth that people are willing to share because you're not actually competitors. Yeah.

I mean, it's— I was amazed when I first got into it, that the openness of it all. Then, you know, that was in 2006. And it's grown year in and year out of the amount of information that people will share with you if you're willing to have conversations. And one of the things that I, if you see any of my content or anything like that, I'm kind of always hammering on keeping loose ties open with people. Shoot them a text, happy birthday, something on LinkedIn, because you don't want it to be like the next time, you know, you're going to want to ask them for a favor or a tip or like ask them like, how the heck are you doing that? Like, I see how you're living. And how are you doing that? You know, they're going to be more amenable to picking up the phone or getting on a Zoom call and sharing that information with you.

Right.

And it's huge. And I've even seen it like in the beauty industry, but you know, that we were competitors in with other people that we would even share best practices in there because we know it's not about having the right playbook. It's all about execution.

Yeah.

You know, and there's that philosophy that The tide will raise all boats, right? And so, you know, things like franchise, the franchise shows, or the franchise, or the franchisee kind of retreats and management trainings and all these sorts of things help bring that community together. So, from a business entrepreneur standpoint, yes, you're an entrepreneur. But at the same token, being part of this community, you're not by yourself.

Yeah, you know, the tried and true saying in franchising is you're in business for yourself, but you're not in business by yourself. You have someone else running the same model. But that I would say is, that's another thing. If someone's considering getting in franchising or if they're considering starting a franchise themselves, it's all about engagement. You know, we, I was a preferred vendor for Anytime Fitness as well. I used to do their resales. So if somebody was trying to sell an Anytime Fitness and wanted to go through the corporate route rather than do it themselves, I was, my company would do that. And I've sold Anytime Fitnesses for $80,000 and I've sold 'em for $800,000. Same model, same types of markets. And then the $80,000 guy or gal will be like, yeah, it's a model. It doesn't work in this town. It doesn't work in my market. All these kind of things. And I'm like, yeah, well, like I have 2 that are in markets smaller than yours and they're doing okay. And I'm not trying to brag on myself. It's just like a lot of people have this uniqueness. They think their town is so unique or something like that, that the model doesn't work there. And it's more likely there's the model does work there. And the challenge Which was my point. Sometimes I get off point here, but I'm coming back, is that they'll disengage from the system. If they don't think that the model is working, they'll disengage from the whole system. Even their franchise business coach will be trying to reach out to them. And they're like, they don't— all they're telling me is how to run this model and it doesn't work for me. So they just cut off all communication. And that's the last thing you ever want to do. It's like, if you're having troubles, you got to have more conversations, not less.

Yeah. And it's amazing what support is out there. I know. We have a Boston Pizza franchise that when it first started up in our community, the first 3 years, they really, really struggled to get it off the floor. And it was, it was for the, the fact that they had the support of head office and the other Boston Pizza franchisees around them that they were able to get over the hump of those first 3 years and really make it a success.

Yeah, the answers are out there. They're probably not in your own head. Yeah, I know that for myself. I've done it over and over again. To be honest, I watch people's lifestyles and I'm like, How are you doing that? So there was a guy actually up in Canada, Ontario, and he had a few Anytime Fitnesses and he was always off doing stuff. And I'm like, how are you doing that? And he is like, well, I have really good managers and they can work in any one of my clubs very easily. And I was like, well, everyone's a little bit different. And he is like, no, they're not. I was like, well, different markets, even stuff in the offices different? And he goes, no, it's not. Like the paperclips are in the same drawer, in the same file in my Mississauga club as they are in the Toronto club. Like he had everything identical so that his managers, it didn't matter if someone was on vacation, someone else would go in there. I was like, I've never thought of that. So I tried to imitate that because that gives you time freedom.

Yeah.

If you have someone that can run that club just as well as you can. You know, so it's, there's just tons of knowledge, but it's stuck in other people's heads. And in franchising, you'll find like the worst question that you can ask a top performer is, what are you doing different? Like you're, you're doing $900 grand a year and I'm doing $600 grand a year. What are you doing different? It's the worst question because the top performers don't know what they're doing different from you.

Yeah.

You know, they're just running it how they run it.

Yep.

And so, and so part of the Right thing could be, could I maybe shadow you for a couple of weeks?

Oh yeah! Yeah, or have a manager.

When we come back, I'd like to turn the coin over and talk about the franchisor side and what mistakes they make when they decide they want to franchise. And we'll get to that right after this.

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Welcome back. We are having a great discussion about franchising. And franchisees, and now I'd like to get on to franchisors. But before I do that, Guy, you have a book coming up. Now I know it's not published yet, but at some point we're going to have to put the book when it is published into the show notes. You want to tell us a little bit about what your book's about?

Yeah, it is the journey of my wife and I working together for 17 years in the franchising space, both as franchisees of an emerging brand that, you know, had very few when we started, and now it's a juggernaut in 35 countries, actually has operations on all 7 continents, including Antarctica, because it has a gym on a ship that circles Antarctica. That, and it's the stories of small business, the challenges, the joys, the opportunities, the pitfalls, and stories that came out of that and that kind of highlight franchising, small business ownership, also working with your your spouse because whether they're actively involved in the business, like Stephanie and I are both actively involved, or their wagon is just hitched to the business that you're running because it affects the family or just the spouse. And there's a fair bit of humor in it because we sometimes, if you're not laughing, you're crying. And so we are, we're like, okay, how do we handle COVID? How do we handle, we're just supposed to open this this club in a small town and you hired your great manager and then you find out that you can't open for 3 months because the city council doesn't meet again for 2 months and they have to do a zoning variance because you're classified in the same classification as traveling circuses somehow because you own a fitness center. Like things that you just cannot predict. And you gotta figure out ways around it. And so those always make for, you know, funny stories. Really good stories. Yeah. So, you know, what we tell our, our sons and ourselves sometimes is, you know, when, when something goes wrong, that's where the, the interesting part of the story starts sometimes.

Yeah. So on the franchisor side, are you seeing mistakes that entrepreneurs make when they decide that they wanna turn their business into a franchise? I know that that becomes, especially, you know, my background being in food service, that, that's like the, The holy grail is like, if I could turn this into a franchise, oh my goodness, life would be great.

Right, right. The biggest mistakes that people make— so I'm going to take this from a couple different ways. So you have a great operating unit, and I'm working with someone like this right now. They have a great operating unit, the numbers are there, they've talked to some people, the margins are there that it could afford to have Other people join and pay royalties and all the fees that are associated with the franchises and still have a really good growing business. The danger, the mistake people make is jumping in too soon and not understanding the full franchise business because all of a sudden you're not in the gym business or the pizza business or the home repair business. You have a new business called a franchise. You're a franchisor. And that is a complete and total different business than what you're in. That being said, there's tons of support out there for these kind of things, and there's tons of resources available too. And what I like to see when someone's talking to me about possibly franchising their business is that they've done a bit of homework and there's some free resources out there or close to free that you can go up that learning curve really, really quickly with just some time and effort. Number one being in the US, the International Franchise Association is a trade association. They lobby for franchising in the US. I know the Canada Franchise Association, the CFA, is also really strong.

Yep.

There is a ton of resources on those sites that you can get up the learning curve quickly. It's not just, hey, this business is working in my town because it could be based on you're an amazing operator. You know, it's, but if you're going to be, you know, doing a proof of concept or something like that, you want to make sure that it's not just based on your expertise or your personality or your connections and things like that. And talk to some professionals, but also hit those free resources or very, very close to free resources. There's some excellent books out there as well. That can get you up that path really soon. And then when, once you are start starting to sell, say you've got your franchise disclosure document done, you know, you've got your franchise agreement, you've got all these things going, then the challenge is it's like this, you know, like you want to make sure number one is when we were growing ours, we wanted to make sure that we always had enough support for our franchisees.

Mm-hmm.

Because we know, especially in a brick and mortar where you're building, you know, you're building out a, a retail space or a building or something like that, usually, unless you're dealing with a big multi-unit operator that's got other things going, if you're dealing with somebody that's on their first unit, they're just leaving corporate America. It's their financial health on the line.

Yes.

Because they've signed a, usually a 10-year agreement for the franchise agreement, which there are teeth in that agreement that you're expected to build out and operate that business for 10 years. And you've usually signed a 10-year lease and then you've spent X amount of dollars on building out. So we always looked at it as like the health of this person's, their financial health is based on the health of this unit operating really well. So it's a big deal. And then what happens with a lot of emerging franchisors is you get into this cycle of you just, you're selling more and more territories and there's tons of opportunities to invest in people that will help you do that. It's a big chunk of money when that comes in and you're usually paying that out if you're using people to help you sell those things and you have to have enough money in order to support the franchisees. And I always heard that and I got it theoretically, but I was like, well, what's it going to take to support them? And the number one thing is really, really good people.

Yeah.

To help guide them and keep them engaged and in a learning environment, in a growing environment. And in any small business, there's going to be challenges that come up in the first 3 months, 6 months, and you have to be able to get those, walk those people off the ledge sometimes, keep them engaged, keeping them having faith in the process. And you have to have really quality people that know your model, know small business, and actually can communicate really well. And I'm super excited that just recently, There's more and more resources to get those franchise business coaches or franchise consultants or whatever the term is for each system. You know, one of your Canadian compatriots, Angela Cote, has AC Inc., and it has a whole certification process to coach, to certify coaches, which is, I think that's the linchpin of people having success or not having success early days. Because there's no model out there that I know that you put that name up on the door and you just, you build it and people are going to come and things are going to run smooth.

Well, McDonald's, but again, the, the proviso though is it runs smooth is the disclaimer. Like, people will come in the doors because it's a McDonald's, or it's because it's, uh, you know, in Canada, Tim Hortons, because people know the brand. But then very quickly that brand gets polluted if it's not run properly. So, is it fair to say that, you know, I have a theory about entrepreneurship and about even when we promote people that people tend to be incidental leaders in that they didn't train to become leaders. They didn't train on and get trained on management styles and leadership concepts and, you know, HR skills and that sort of thing. So, would it be fair to say that a franchisee has some semblance of ownership in getting their franchisees up to speed and becoming really good leaders?

Absolutely. And that's, that's another area of— I see it as being increasingly improved in franchising with more— there's 2 trends that I see that are going on right now that I absolutely love. Number one is more structure and training for the franchise business coaches, as I just mentioned. And the other one is Training people how to be frontline managers, how to manage the frontline people, because those are the people that your clients are getting their whole impression from. And there's a couple great resources out there right now for that as well. Monica Rothgery has a great book called Lessons from the Drive-Thru, and it's a fantastic book. She started out as the manager of a Taco Bell in a suburb of Chicago. 30 years later, she was the COO of Yum Brands, which I think owns Kentucky Fried— like they own so many things.

So many.

Taco Bell and Kentucky Fried Chicken and all that. And she has this great book where she's talking about the frontline leadership and how you have to manage and lead frontline folks differently. It's, you know, you can read a Harvard Business Review case on how to, you know, manage C-suite executives or mid-level managers, it's totally different than the 17-year-old who wants to go to prom on Friday instead of showing up for their job. You know, like what's gonna keep them communicating with you so that you can run your operation smoothly? And those are 2 trends that I see, the improvement in franchise business coaching.

Yes.

From the corporate, from the franchisor to the franchisee, as well as some training on how to manage the frontline Um, how a manager, a frontline manager approaches leading and managing their team that's providing the customer experience.

Yes.

You're speaking my language.

Yes, exactly. And then, you know, you like people, you know, you're providing people, you know, and then, you know, like when we started out with the first thing that we did for Frenchy's was have a client experience cycle. And we hired, I didn't know about you then, Marc, but, um, we hired a guy named John DeJulius who has a customer experience.

Yeah. Very good. Yeah.

Yeah. Fantastic guy. Right. And that's what we managed to all the time. We had a 6-stage client experience cycle.

Yeah.

And we had, this is a defect, this is a standard, this is above and beyond. So like when we were talking to somebody that was an 18-year-old nail technician, we, we weren't attacking her. It didn't, of course we wouldn't attack anybody, but sometimes if someone's younger, they can take constructive, criticism as an attack. And so it wasn't be like, hey, you did this wrong. Like, you know, you're dumb or something like that. It was like, hey, this was a defect. Like, where did it go wrong in this, in this part of the cycle, do you think? And they would get it, you know? And then they would help train the other people on the, on the same client experience cycle. And we hammered that home. We have daily standups, a huddle every morning for 5, 10 minutes.

God, you're speaking my language, Guy. Stop it. It's like you're just sucking things out of my brain.

Those, those kind of simple everyday practices, consistent.

Amazing what they do, right?

Absolutely work. Yeah.

Yeah.

Yeah.

Yeah. We saw in, even in our own system, the people that would like, sometimes literally that huddle is 5 minutes. And if you're not doing it every day, you totally don't get it. And if you are doing it every day until you don't do it, you don't, you don't understand the importance of it. But we had people in our system that would almost refused to do the huddle. They were at the bottom of the performance because they're like, it doesn't matter. And then we would say like, well, these people are doing it and look at their numbers because we would rank and stack everybody. We shared numbers.

Yeah.

Like that's the other benefit of being in a system is if you think the model doesn't work, but you see someone doing 4 times as much as you, like maybe it does, right? But we would say like the top 5 people in the system, Their team meets every day. And then if they were in a disengaged state, they would be like, yeah, but they're in California or they're in a fancy area of Dallas. Like I'm in Ohio. It's like, they're all people. They're all people.

Yeah. Yeah.

So yeah, so those daily practices and when Stephanie and I were looking at nails, you know, we got into it because Stephanie was the president of Waxing the City for a while. And we just saw this industry, these industry numbers of waxing and nails is always lumped together. And nails is actually way bigger in terms of dollar amounts than waxing. And there was no number one brand in the US or anywhere really. And we're like, hey, if we can just put in, like, make it a good place for people to work and provide a good client experience, we're going to do well, even if we're not lowest priced or anything like that. And, you know, it, the model proved itself and it, and it keeps on going on and, and we're looking forward, even though we're not directly involved anymore, we're just, we still wanna see Frenchies growing coast to coast because it's great for the people that work in the industry. Mm-hmm. And it's great for the clients. So, you know, we, we just believe in it. So I love it. Makes it easy to, to root for it.

I'd like, I'd like to talk about when it goes horribly, horribly wrong. Franchising and franchisees. And you mentioned some of it, and we'll— when we come back, I'd like to dig a little bit deeper into some of the things that go horribly wrong.

Absolutely. Eyes wide open.

Attention meeting and event planners! Is your company or association planning a live or virtual conference, seminar, staff retreat? Are you looking for a fresh, energetic perspective on what it takes to put on a jaw-dropping experience For your customers or staff? Book customer experience expert Marc Haine for your next group event. Past participants have said, Marc kept us in stitches while teaching us how important and powerful actually designing our customer experience can be. Read more testimonials and find out how Marc can serve you and your group at marchaine.com. That's marchaine.com.

Welcome back! As you can tell, Guy and I are passionate about helping entrepreneurs and business managers just like you. So, if you belong to an industry association or an organization that is planning a conference, a leadership retreat, or if you feel that we could be of service, feel free to drop us a line or do a connection request. Our details are in the show notes. Please don't be afraid to reach out. That's what we're here for. Guy, if someone is considering buying into a franchise, what would you say are the top 3 things that they should be doing before signing anything?

Number one is looking really carefully at their franchise disclosure document. If you contact any franchise system, they are going to send you that because there's a notice provision. So they have to send you that. They want to send you that as quickly as possible. And then knowing the items to really dig deep on is really important. You know, I can point people to a resource on my website for that. Just tips on how to go through an FDD. That's number one. Number 2 is talk to other people that are in the system. It's called validation. Visit if they have some units in your area, definitely visit as a client and then try to reach out to the owner. All the phone numbers for current and past franchisees are in the FDD. So that's the second thing. And then depending on the size of the system, early days, if you're going to be a pioneer in an emerging brand, get to know the founders as much as you can and make sure that you like them, to be honest. I mean, some of this is gut stuff. It's not picking their brain out of every piece of information or anything like that. It's like, do you like them? You're going to be spending at least 10 years working with them or working with the decisions that they're making and implementing in the system. So, and I really encourage people, this would be number one is if you're interested in one, go down the path with 3. Like you never want to just be looking at things one-on-one. You want to have comparison points and you can do it fairly time efficiently. And this is a long-term agreement. It's going to affect the future, your financial future. I always say it's going to affect your kids. So never look at one solely. If you're interested in a bunch of different things, look at a bunch of them.

Yeah.

Like look at resale sites. You can look at resale sites and get a lot of information. Resale sites like bizbuysell.com or in our case, franchiseflippers.com. It's a great site. You can get a lot of information from someone that's trying to sell their business or their broker. Now, obviously I'm not recommending wasting people's time, but this is part of your discovery process and you may be interested in that one down the line. But when anybody's thinking about doing this, I'm like, start early. We have a trainer that wants to own his own gym someday. And I said, well, have you looked at any gyms? He's like, no, I'm, I don't have any money yet. Like sometimes it doesn't matter. There's deals that come up, like situational deals that you might, you know, if you're aware of things, you might be able to take advantage of. But even in the worst case scenarios, like if you're looking at something in 5 years, when you do have the money, you're going to be like, yeah, I've already looked at 20 of these deals. This one is great. Or this one is terrible based on what I've learned. You know?

So the industry seems to be, especially when I go like to a franchise show, it seems to be like heavy-handed in sales and really trying to push people to make that decision and so on.

Yeah.

And they get people really super enamored. Like I had a friend of mine who was looking at a pizza franchise. And so, he actually went down to Florida to talk and they wined and dined him and it was a great experience. And they visited stores which were beautiful. And then, he came back and when I started working with him, I started going through some of the numbers with him. And the reality is, and In hospitality, your margins are pretty darn tight. And so, but it wasn't something that they themselves tipped their hand on aside from kind of wooing the next franchisee. So, is there a mythology that we can shake out of the excitement of trying something new and all the kind of ego, the fanning of the ego to really get down and dirty and being able to get out of the emotional decision component? And really being able to analyze what you're being given properly.

Yeah, there is. So, you know, your client went down to a discovery day as they call them, you know, as we call them too. It depends on where it is in the process. As part of our process, discovery day was the last part of the sales process. So he had already financially qualified, experience qualified, and then it's really a time for them to come experience a service in our case. And then go out to a dinner so that we can get to know them a little bit better and they can get to know us and our team a little bit better. And then the next day is on a move forward or not, you know, is because it's a big decision. There's been a lot of lead up to that, a lot of information sharing. So we would have like 4 or 5 structured calls before that, like our marketing call, our unit economics call, things like that. And it's a big sale. And especially if there's brokers involved, franchise brokers or a franchise sales organization, they are professional sellers. And what's the saying? Time kills all deals. Like, if someone's interested, you want to close them as quickly as possible if you think they're the right person for it.

Right.

So no shade on that profession or anything like that. But again, I go back to, it's like, it could be the right one for you. You know, but if that's the only one that you've looked at so far, you should probably look at another one. Yeah. And, and, and it gets a little bit— because it's, it's expensive.

It's 10 years. There's even if it's a dollar a year that you're making, it's, it's your time, it's your focus, it's your— right, the sacrifices you need to make. It's expensive.

Yeah. So if someone was looking at a system, what I would say is Look at first, it's easy to get the FDD. All you have to do is request it.

Yeah.

And do that. That's number one. Like pick one that you're interested in and then look at the resales that are available. Go to one of those 2 sites that I mentioned earlier, and you're going to hear the ups and downs of that franchise system from whoever's reselling.

Mm-hmm.

And resales aren't always like when I used to sell Anytime Fitnesses and other gyms. It is not an indication that there's something wrong with the business. It's an indication of that owner's time in their chapter for that business is done, whether it's financially, like they want to cash out mentally or whatever. Yeah. Yeah. Yeah.

Yeah.

So like, don't think resales means like, oh, there's something wrong. Like people have got to retire. They might not have anybody to give it to or whatever. There's always an exit in a business and it's not necessarily bad.

Right.

But yeah, get the FDD, look at resales, have a bunch of conversations. I know that sounds really basic, but that's the part that I think people miss is like, people will pick up the phone, you know, like if you've called 10 franchisees, you're probably going to be able to talk to 3 or 4 of them.

Yeah.

And you will get so much information and just beware, you know, because sometimes that person didn't operate the system really well and maybe that's their negative, you know, so that's having multiple conversations.

Well, it's like evaluating anything. Drop the high, drop the low, what's Right, the median. So, I mean, obviously, there are people out there with all sorts of nightmare stories. For you, the good, the bad. We've talked about all sorts of cautionaries. Nightmare stories. You mentioned that you tried to do something with somebody and you lost a ton of money in the process. Can we talk a little bit about kind of what these cautionaries are that we should really like from a franchisor perspective? But I'm sure franchisors have got the wrong kind of franchisees in. Right. But at the same token, sometimes the franchisees have hooked up to the wrong kind of franchisor. Yeah.

So let's just like take this from a, like a bad franchisor.

Sure.

Because there are some, they don't last very long. I will say that. Or they can turn into a bad franchisor. Like, you know, we had Quiznos here in Denver at a certain point. It was, it was, you know, a super hot selling brand. It's going really well. And then they started getting greedy and controlling all their supply chain and overcharging their franchisees for things that they should have been charging less for, like napkins with Quiznos on it, things like that, that they were exorbitantly priced and they had to buy 'em. So that's one thing. It's not going to happen too often. My own recent horror story was something that had nothing to do with franchising. It could have been if I bought a business from anybody else. It was just someone that completely embezzled. And so we spent I don't know, $250,000 on territory fees and they basically stole the money and shut everything down. Now that is an anomaly and there's no way around that and it had nothing to do with franchising. But what you should look out for is franchisors that are especially emerging franchisors. Obviously I love emerging franchisors. We were one, you know, I want more people to get into franchising because it is a great model. Both on the franchisor and franchisee side. The thing that I would look out for is if they're, if it's super hot and they're selling a ton of territories and there's a lot still in development, meaning they've sold more territories than they've opened, which is normal. That's going to happen. That's called SNOs, sold not opens, SNO. But when that number gets so big, there's a system right now that I went down the path with them. I really liked them. They've got They've got great people on their franchise team, every, like rock stars. But I didn't go with it just because they've sold so many territories and they don't know what they don't know until they get to this point. And if there is any problem, it's going to be a massive problem at the same time.

Right.

So I'm a little leery about systems that are growing too fast in terms of territory sales because, you know, the development of the actual units, people opening, whether it's brick and mortar or people, you know, opening another territory with vehicles for home services, it's a little lumpy, you know, and you always want to have that franchisor being ahead of the curve on what kind of support that they're going to have to provide to their franchisees. Now that could be, you know, certified, well-coached franchise business coaches, but in some businesses, if it's really contingent upon a certain technology or a certain type of vehicle or something like that, it's also supply chain Right. Every little part that goes into that thing, that's part of the revenue-producing vehicle or piece of machinery or something like that. So, you know, and that could be in any business, but when they're growing super fast, there's, we're herd animals. So like if something's growing super fast, number one is they're going to be touting it, which is fine. It's part of the sales thing. Like, hey, get this, like, you know, You better buy this territory in Littleton soon because they're going out, like, look how much we're selling right now. And it can rush people into doing this.

Yeah.

And that's a, you know, it's not, if anybody's doing that, like, watch out for them. They're a salesperson. That's their job. Right. I worry about systems that are growing too fast. I really like, you know, slow, gradual growth, organic growth that they're able to build up. It's a little bit more predictable. And then look for, I'm working with a group right now, another Canadian group, and they're young, they're small right now, but like when I talk to 'em about different things, they're like, oh yeah, we've already talked to them and this is what we're doing. Like they're ahead of, they're acting like a big group.

Right.

And they're like, they have their own EOS implementer already. Like some people would say that's like putting the cart before the horse. I'm kind of like, that shows a lot of foresight.

And preparation. Yeah, because scaling is tough. People think scaling is like, oh, we'll just double what we do. It's not that simple. Sometimes to double what you do, you need to do 5 times of something in order to make it happen, right?

Absolutely.

Yeah.

So yeah, I like that. And yeah, I would say that's the biggest thing is if someone's selling too much too soon. Yeah. Um, and they get super hot and we've seen that, you know, with certain industries before. Remember frozen yogurt, like how big that was?

I mean, out here we had up in Canada, we had Felix and Norton, which was like these gourmet cookie things, kind of like Cookies by George but just a little different. But then they started just— oh, they saturated the market with one item, which was cookies, right? And after a while, it's like, okay, well, we'll try to sell coffee. And it never took. And so, the franchise after 5, 6 years of just really hitting really amazing highs just started coming crashing down because people got sick of the product.

Right. So, and when they're— when they're— and then when they were selling a ton guaranteed, they're like, well, you better— yeah, you better get Edmonton because it's going to be gone pretty soon.

Yeah.

And it's—

and it's true.

Yep. Well, we just got our Krispy— first Krispy Kreme up here.

Oh, congratulations.

And so— and so now— but now it's like, here's one, and watch, in, in a matter of months, I'm sure we're gonna have announcements for 5 more. Same thing with Chick-fil-A, just opened up Edmonton. And so we had one open right now. There's another one slated to be open, and I know it's going to go crazy.

Oh yeah.

So it's, it's a crazy business for sure.

Yep, absolutely. One of our clients, um, at Frenchy's, our local one here, is she, she owns 2 Chick-fil-A's. And, you know, it's a great example. It's a fantastic system.

Yep.

You know, obviously it works. Um, you know, I don't know how much my kids spend there every week, but it's a lot. I do know that. And even that system where it's kind of unconventional and things like that, but it's like last year, she's like, oh yeah, I gotta figure out what to do because Chick-fil-A owns the real estate. And when they say like, we're gonna reinvent, they shut it down for 6 weeks and you gotta figure out where to put those folks and all that kind of stuff. And there is a whole cycle just for everybody that's listening that's gonna be a franchisor or franchisee. You know, there's a cycle where franchisees in the beginning think the franchisor knows everything. The trust level's super high.

Yeah.

And then they start running into some challenges that weren't in the FDD, like the kid that wanted to go to prom instead of showing up, like things that are totally out of the franchisor's control.

Right.

But then they're like, oh, the, the franchisor doesn't know anything. Yeah. So there's this trough of, of the thing. And then, you know, the, the people that get through that later on, they're like, Yeah. Like I'm glad I have this system. You know, like when we had our little debacle with our, the franchise that we bought and then, you know, the person did something illegal. The first thing that Stephanie and I did is we looked for another franchise system that we could do the same business in. And the reason was because we know who we are.

Yes.

We know that we didn't want to create the tech stack again. We didn't want to create the operations manual and all the processes. And we would happily pay 6 to 8% for someone to handle all that stuff.

Right.

That's why, like the detractors of franchising will say like, oh, it's 6% royalty. It's just making, you know, they just make so much money on that. It's like, first of all, a lot of that money goes towards supporting and creating new things.

Yeah.

And the other thing is there is an advantage in numbers and we can do it for a lot less as a system than people can do it mom and pop individually.

Yep.

And we found that over and over again during COVID We created our own product line for our franchisees that actually lowered their product cost and got our Frenchie's name and, you know, by kitchen sinks with our liquid soap and in the bathrooms with our body butters and things like that. And that was a thing where like, yes, people had to carry that, but it was like a 25 to 30% savings for them.

Sure.

You know, on their expense line.

Yeah.

That's the kind of The first person I ever heard say this, I'm sure it wasn't his original thought, but like Chuck Runyon, who's the founder of Anytime Fitness, and he always used to say like, I wear 3 hats. Like when I wake up every morning, I have a franchisor hat on, like what's good for the franchisor. I have my franchisee hat on, like what's good for the franchisee. And then I have my client, like what's good for our members? What's good for the Anytime Fitness member? And that's That's how we looked at everything with Frenchy's. Like, is this a win-win-win? Because if it's not, we can't go ahead and revisit it.

Oh, but I mean, you revisit it and then you figure out how to make it the win-win-win, right? So it becomes part of your strategic planning.

So yeah, and you learn— like, one of the things that we learned, yeah, like, we learned a lot growing up, kind of growing up in the, in the Anytime Fitness system. At one point, Chuck and Dave were the founders, and, um, they decided that they were gonna mandate that we all had to buy these Anytime Fitness power bars and health food and things like that. And it was a debacle. We had a closet full of bars that tasted bad and their supply chain wasn't worked out. And you know what, Chuck and Dave, the next conference, they had 2,000 people there. They might've been worried about duck and eggs and tomatoes on stage, but they're like, hey, Guess what? We're growing. We want to stay relevant. If we're going to stay relevant, we can't keep on doing what we've been doing. We tried Anytime Health and it didn't work. Sorry. Like we're going to try things out that like just kill it, that we're going to make up that money. And we're going to try some things as we're growing that don't work because we're going down a brand new path. But the one thing you'll see—

That would be a really big cautionary is if you had a system, if you had a A franchising system that never changed anything. That to me would be a red flag.

Curves. At one point in time, Curves, the, the women's workout facility, was the biggest franchise on planet Earth. They had like 10,000, 12,000 units, which was the biggest at that point in time. They never changed one thing. There's still fitness models out there that focus almost exclusively on women, like the Bar Method, you know, things like that. But they didn't change a piece of equipment, the curriculum, the onboarding, the membership, and it became obsolete because people just got sick of it. Like, that would be another thing. That's a really good point, Mark. If you're looking at a system that is established, like, what have they done differently, you know, recently?

In the last 10 years.

Yeah.

Or just in the last 10 years, how have they evolved? Yeah. Yeah.

Yeah. That's a really good point. I didn't think of that earlier.

Yeah. Yeah. This has been such an amazing conversation, Guy. As I mentioned before we even went live, I've been trying to do a franchise show for ages, and this one has delivered above and beyond. And I know that we could probably turn this into a whole master class about franchising, but we only have this limited time. Maybe we'll have you back, but maybe we'll have you back when you launch your book. How's, how's that sound?

I would love that. Thank you so much. Yes.

As we wrap up, do you have any last thoughts about what we've been talking about today?

Well, yeah, if you've been thinking about— if you're in corporate America or corporate Canada or wherever you're listening and you've dreamt about trying your own thing You owe it to yourself and to your family to at least go down the path. It's just time and effort. It's not going to cost you much. There's so much available information. Please just invest in yourself and spend 5 hours, 10 hours going down the path to learn more. I truly believe that small business ownership, I know this sounds grandiose, but I truly believe it makes the world a better place. It brings people awareness of the codependency. I always give the example, there's a spice shop right down the road. Like, I'm not a cook or anything like that, but I visit the spice shop and I buy rubs there because I want the spice shop people to be there for other people and for my neighborhood.

Plus the rub is pretty darn tasty.

It sure is. But yeah, I would say like if it's crossed your mind, like scratch that itch and just spend some time.

Yeah, investigate it. I love this. Yeah, Guy, could you tell everybody how they can get a hold of you if they want to reach out?

Sure. The easiest way is on LinkedIn. It's @guycoffee, so G-U-Y-C-O-F-F-E-Y. LinkedIn is the best place. Also on Instagram, same handle, same thing for Facebook, everywhere. That's the easiest way to reach me. And if you reach out, I, you know, I'll, we can set up a call. I'm happy to talk to anybody that's really looking into this and see if there's some way that I can help.

Lovely. Thank you, Guy. Thank you so much for doing this with me today. It's been brilliant.

Been an awesome experience. Thank you, Marc.

Thank you very much. Hey, why don't you let me know if this was of value to you? As always, my offer stands. If you would like 30 minutes of my time to brainstorm your business with you and your team, feel free to book yourself on my online calendar. The link is in the show notes. It's the one that's marked meetwith.marchaine.com. It would be my absolute honor for me to be of service. And if you're looking for some help with your franchise idea, or you're thinking about picking up a franchisee and you just need to talk to somebody to help you tweak your mindset and figure out some of the, some of the i's to dot and some of the t's to cross, please reach out to Guy because he's here to be of service to you as well. And while you're at it, why don't you go ahead and leave a comment or review about this episode? I'd love to get your feedback. Was this of value for you? Did you get any real nuggets of wisdom from Guy today? Let me know. I'd love to know. Thank you so much for joining me today. My name is Marc Haine. I hope you stay safe, stay healthy, and I hope, I hope, I hope you dare to be the exception.

Thank you for joining us this week on Experience Leadership. Make sure you visit marchaine.com for full directory of available episodes. While you're at it, if you found today's content invaluable, please share it and tell your friends about the show. As Marc says, knowledge is power, but only if you share it. Be sure to tune in each week for the newest episode. Please stay safe, stay healthy, and dare To be the exception.