A podcast-style interview with Mike Andes discussing scaling a service business. He explains franchising is suited when starting new locations requires substantial capital (trucks, equipment, new space) because franchising leverages other people’s capital, but franchisors often capture only a small share of location profits and scaling to ~100 franchisees is difficult. His biggest scaling mistake was understaffing the command center during rapid growth, which caused missed calls (~20–30%), slower response times (a day vs. under an hour), employee burnout, and a painful multi-week recovery involving hiring and training.
Questions this video answers
Approximately 20–30%.
Response time slipped from under an hour to about a day.
But in the context of scaling, why did you choose a franchise model? Do you think it's the. Is the best way to scale sort of any business or is it specific to lawn care? I'd love your thoughts on that.
Yeah, so great question. Franchising is good, a good model when it requires a lot of capital to start a new location. So what I mean by that is for us to start a new location, we got by trucks, equipment, we got a new space, geographical space. Right. If I was trying to scale a business that was very, very low cost to start, for example, a cleaning business where literally all I need was a rag and a mop and I could literally get started, that might be where you want to own the business and be more of a chain because you then can do 100 locations for relatively low cost. Franchising is a great model to be able to scale quickly because you're using other people's capital and as the initial startup costs. What's the downside of franchising is you get a very small percentage of the profits generated from all of those locations. So I would say that if someone's deciding between franchising versus just starting more and more of their own locations, the big question comes down to can you, can, can you start one of one more of your locations without much capital? Because if you can, you should probably own it. If you can't and it's geographically bound like ours is, then it might be a good idea for franchising, but should not be over understated. Just how difficult is to get past 100 franchisees? Because that's actually when a business will typically become profitable as a franchisor. It's extremely difficult. A very small percentage of franchisors ever cross 1050, let alone 100 franchisees.
What's the biggest scaling mistake you've made so far and what did you learn from it and how did you recover from it?
Yeah, the one that comes to mind immediately is the fact that we didn't staff up enough at our command center. So for our. What we failed to realize is that when we started franchising a couple years ago, we got X amount of locations. That's great. But we failed to realize if we double the amount of locations that we have, it's not going to just double the amount of incoming calls, emails and office admin work that we take for them at command center. What we fail to realize that the existing locations are also going to double or triple in size. So instead of having a linear where it doubles, it's actually going to 4x, it's going to quadruple. And it's much more of an exponential growth pattern in terms of incoming calls, inbound, amount of leads coming in. And we dramatically underestimated this past spring and it was horrible. We were missing 20, 30% of the calls and they were going to voicemail. Our response time was a day instead of now, like under an hour in terms of sending out estimates. So. So we really figured that out. But that was a very painful part of the business. We were working six, seven days a week for ungodly amount of hours. People were breaking down to some extent emotionally just because amount of work that was being put on everyone and it was hard to find people. And it's not like you can just onboard people immediately. It takes weeks for them to get trained up to where they can actually be useful. So it was a very difficult time in the business and something I will look back at one day and hopefully laugh about.
One last question for you here. We've all seen businesses doing great in one location struggle. When they start to expand, what's the main cause and how do they prevent it?
Yeah, because most of the time most businesses are personality dependent, which means they depend on a personality, a strong personality usually found in the founder or the entrepreneur that's running and juggling everything in the business. So building a business that's personality dependent will always mean that if you remove that personality, the business will collapse. Whereas when you create a systems centric business, the systems run the business, not the person you can replace the person you can put a different manager in and everything will just work fine because everything's built on the systems instead of the personality. And for most entrepreneurs, it's easy to build a business around your personality because you are awesome, because you are great. Like let's all bow down to the entrepreneur and say how great you are because you probably are, you're probably better than most people at their jobs. But the problem with that is if you become the strongest point that everything is centered on, you also become the weakest link of the chain. And if you break, everything will fall apart. And when you create a second, third, fourth location, you cannot be at each location. And that's typically why people will fall apart and businesses will fall apart because they're not system centric when they go to a multi location system.
