Start With A Win - How Technology is Driving the Future of Franchising with Dave Liniger

Episode Date: June 29, 2022

There are more than 750,000 franchises in the United States, meaning that more than 10% of American businesses are part of the franchise model.Adam welcomes back Dave Liniger to talk all about franchising and how technology is likely to be one of the biggest drivers of the industry moving forward.Dave Liniger started RE/MAX in 1973, and it has become the largest real estate company in the world with a record year in 2021. He also runs a private equity company, Area15 Ventures, focused on emerging franchisors and high-growth businesses and franchise concepts.Dave tells story of beginning of RE/MAX and selling his very first franchise in Kansas City. Over the course of the next two years, Dave sold more than 100 franchises across North America.Dave explains the concept of a franchise as a system of methods, training, advertising and more that can be imparted on franchisee. The franchisee pays a fee to buy into the concept and pays the cost of opening a business, making the franchise model a great way to rapidly expand a business concept without it being cost-prohibitive. Dave shares the four key elements of franchising:Unique product or serviceBrand, advertising and market sharePurchasingTraining Technology and SystemsDave shares the story of the success of the McDonald’s franchise and how it transformed the fast food franchise industry.One of the biggest benefits of owning a franchise is the access you receive to a network of peers. You get to learn from each other and share ideas and insights to grow businesses. Dave also shares that every significant, good idea for RE/MAX came from his franchisees. He tells the story of how breakfast, the filet o’ fish and the Big Mac started at McDonald’s thanks to the ideas of franchisees. Adam and Dave talk about a new franchise concept they have acquired through Area15 Ventures called Daddy’s Chicken Shack. This business is a great example of how technology is driving the future of franchising. As a walk-up concept, the restaurant blew up during COVID, generating over $1 million in revenue. The owners designed a prototype with curbside pickup and limited seating, and featured technology that enables guests to order food via their phone, on the app and through food delivery services. The technology tracks the order and geo-targets the customer, and when they are 8-minutes away from the restaurant, they begin preparing the food. The drive-thru is also only for pick-up orders. This technology is eliminating the need for waiting in lines for pickup. The restaurant also features in-person ordering via artificial intelligence.Episode Links:DaddysFranchising.com Area15Ventures.comGet Adam's “3 Key Leadership Secrets” Guide!Connect with Adam:https://www.startwithawin.com/https://www.facebook.com/AdamContosCEOhttps://twitter.com/AdamContosCEOhttps://www.instagram.com/adamcontosceo/

Welcome to Start With A Win, where we give you the tools and lessons you need to create business and personal success. Are you ready? Let's do this. And it's Adam Kantos here. Start With A Win. We are at Area 15 Ventures, second home of Start With A Win with Brand Viva Studios. Producer Mark, how you doing, buddy? Hey, I'm doing so good. Awesome. Hey, you and I have talked a lot about franchising in the past because franchising is just a huge part of US societyS. society. I mean, it's a great big part of the GDP as well. I think it's like upwards of five or six percent impact on the GDP in the United States with, I mean, millions of employees involved in franchises.

We have with us one of the preeminent experts in franchising. You're ready to go? Oh, so ready. Let's go. Awesome. All right. So with us today as our special guest, a longtime guest of ours, we have the co-founder of Remax, Dave Linegar. How are you doing, my friend? I'm awesome. Awesome. All right. So I want to talk about franchising. We've talked about leadership. We've talked about personal development, things like that in the past. But I want to talk about the mechanics of franchising. You are in the International Franchise Association Hall of Fame, both you

and your amazing wife, also the other co-founder of Remax, Gail Linegar. You're the chairman of the board at Remax Holdings, and Gail is the vice chair. So you've been in franchising for a long, long time, and you're really kind of one of the founders of franchising. You know, you hear people like Ray Kroc and some of the other, you know, key people, Colonel Sanders, things like that, who really built franchising. You're one of those key icons in it. Dave, when did you get into franchising? Tell us the story of how you got into franchising, because this is really interesting for a lot of our listeners because they are, so many are with Remax. So tell us about that. It's sort of an accident. We started REMAX in January of 73, and eventually Gail and I opened eight offices. About 1975, a young man from Kansas City called, and somebody had written an article

about one of my friends was going to imitate the Remax system in Kansas City. Well, he wasn't a friend. He'd come in to interview for a job and then he just tried to steal the idea. And then in his newspaper, it was, well, my buddy Dave is teaching me how to do all this. And no, I had no conversation. And he said, would you? And I told him that. And he said, would you? And I told him that. And he said, his name was Dennis Curtin, by the way, my first franchisee. And Dennis said, would you consider selling me a franchise then? And I said, well, yeah, yeah, I would.

And he and a couple of buddies flew out. And they bought the first franchise. It was for North Kansas City in 75. Sold two in 76, one in Washington, D.C., one in Calgary. And in the end of Christmas of 76, my eight managers came to us for our manager's luncheon. And they said, look, you're starting to sell franchises. Why don't you let us buy our offices? And I said, well, I put a lot of money in those offices. And they said, oh, we'll pay for more than the franchise fee.

We just need time. And we'll give you payments. And that way you'll have the financing and 77 to franchise. Wow. And so we sold them the eight franchises that gave us our capital. And in 77, we sold 100 regions and franchises. Wow. Okay. So I guess my next question is, what is a franchise? But before I ask that, you know, just so our listeners know, there are more than 750,000 franchises in the United States. I mean, it's

incredible. And I think there's what, Dave, as you've got franchises, which are franchisees, and you have the franchisor, which is like the parent company, like Remax or McDonald's or something like that. And then the franchisees are the locations. And I think there's what, like 4,000 franchisors or something like that? In the United States. In the United States. Okay. And also one of the stats that I found interesting was 10.5% of all businesses with paid employees in 295 industries are franchises in the United States. I mean, 10.5% of all businesses in the U.S. are franchises. I mean, that's truly amazing. So tell me, in your words, what is a franchise? A franchise is a system of methods,

systems, training, advertising, etc. that can be imparted on a franchisee. The franchisee pays a fee for that, and the franchisee pays the cost of opening his own business. So franchising is a way to rapidly expand a business concept without being capital intensive for the franchisor. So the franchisee is basically subscribing to a proven business model? That's what it's about. Now, bear in mind, 4,000 franchisors in the United States, about 400 new every year. They don't all make it. If you look at it, the top 12, 13 of us account for 80% of the business and outlets there are. And then you've got hundreds of franchisors that have 5, 10, 20 units.

So there's a big disparity. And the problem is the small have to figure out how to scale up, which means money, manpower, etc. So if you look at the best franchisors in the world, they try to get to four really important elements of franchising. The first, obviously, is a unique product or service. And so like McDonald's, it's a 15-cent hamburger, the 10-cent French fries, etc. With REMAX, it was the REMAX commission concept, if you will. The second thing that you have to have is brand and market share. The third, you're going to end up with brand and market share and advertising, I should say. The third is group purchasing.

And finally, the fourth is training technology and systems. Let's use McDonald's as an example. And it evolved over a period of many, many years. I think Ray Kroc was 57 when he got the concept from the McDonald brothers. And his original concept was you walk up to the window, you get your order, it's fast, and then you go to your car and eat in your car or drive away. And so his concept was he didn't want a telephone because that meant it was a hangout spot for teenagers. He wanted people gone. He didn't want newspaper machines.

He didn't want bus benches or picnic tables because then people would clog up the area. And so that started the evolution of the revolution. And then, interestingly enough, they got bigger. They're the biggest purchaser of potatoes in the world. And they buy potato farm contracts from farmers five years in advance. And so the group purchasing started to kick in. And when you start looking at it, the benefits of the franchise far outweigh the 5% or 6% franchise fee. So you're, I mean, basically a franchisee is buying time and effort

that's been put into this by the franchisor and by the other, their peers in the franchise system. Because franchising is a network. And a lot of that is the value of that network of your peers. Tell us a little bit about that because you always talk about the value of all of that knowledge you gain from those other people in the field. Well, the thing that's fascinating is sometimes the ivory tower group think they're smart. And they think that maybe everybody else is not quite as smart. But the truth of the matter is, every significant good idea for REMAX came from the field. It did not come from the ivory tower. For instance, it was the request from the field to start the REMAX

satellite television network. And at the time, we knew that other people like Walmart and a lot of the automobile dealerships all had the same system. Why not do it with the real estate business? The hot air balloon. We foofooed the idea, but it became pretty obvious that the agents loved the idea. And that changed our entire logo. If you look at McDonald's, their schedule was open at 11 o'clock, no breakfast. And then one of their franchisees had road construction in front of their place and it was all screwed up. And so, you know, the staff got there at eight o'clock in the morning and all of a sudden on their coffee break, these guys were coming from the construction crews and stating, we're hungry.

We need something to eat. And they said, well, we can't open until 11. And then all of a sudden, the guy thought, well, better to beg for forgiveness and then ask for permission. And so he came up with the Egg McMuffin. Wow. And then they started the breakfast service. When Ray Kroc found out about it, he was not angry. He was just amazed at the volume of business they were doing.

And it opened up for three meals a day. Same thing, Filet-O-Fish. That was a franchisee in Philadelphia. And at the time, the Catholics were, you couldn't eat meat on Friday. And so he was desperately trying, how can I keep the Catholics here? And so he came up with a fish and then it was adopted by everybody. Another one came up with the Big Mac because he was competing with some of the bigger restaurants that had the big, I can't remember what the name of it was. Anyway, but he wanted a bigger hamburger. And so they came up with these things.

So the field is brilliant. They're on the firing line every day. They're the ones that are testing ideas. And so even if you look at our training programs, our training programs, for the most part, came from our top producers. Okay. That's fascinating, Dave. And I know you've been in franchising for decades. Obviously, Remax, Motto Mortgage,

which is five years old now. It's one of the fastest growing emerging franchisors. It's a mortgage franchise across the US, over 200 units now, I think 300 sold, something like that. You've gotten into other franchise concepts and you're kind of looking at the future of franchising as well. So talk to us about how technology is driving some franchising. And particularly, I mean, you are now, and for full disclosure, I'm part of this whole process. We've got a concept called Daddy's Chicken Shack, which is a chicken sandwich concept that's in infantile stages. But there's a location open in California. But it's not a sandwich store with some technology. It's more like a technology store with chicken sandwiches. Can you tell us about how technology and the evolution of franchising is changing how people do simple things? Well, the founders, two really great people,

middle-aged, 38, 43, something like that. Very good at what they do. She had a celebrity catering business. So she's a celebrity chef. But on a whim, everybody loved her chicken sliders and in the catering business. So she called her dad and said, hey, come out here to California and we're going to start a chicken sandwich concept. And I want you to help run it. So they had an off the track 700 square feet, no indoor seating, no outdoor seating, no parking because there's a fire department right next to them. And so the people have to walk up and get their stuff. COVID hit. Her catering business caved overnight and everything was canceled. And that little sandwich shop did $1.3 million that first year.

Wow. And it was all takeout or Grubhub or something like that. And so they decided this is success. We had to franchise it. Got a hold of the two of us through a contact. We went out, did the taste, and we were sold on them as individuals. But it was fascinating about how the individual, Chris, said that technology would change quick food outlets. And so they were finding out that the restaurants that did have seating, it was still going 60, 70% was pickup because limited seating and COVID of being able to use the space.

So they designed a prototype that's about 2,000 square feet. Ideally, drive up windows, but if not, a curbside pickup. Very limited seating, maybe 42 on the inside, a little bit on the patio. And they created their own technology. And the technology is such that you can order your food by telephone, by an app on your cell phone, by your computer, or Grubhub, or any of this you want to. And then they track the order and they geo-target around the market. And when you're eight minutes out

from picking up your food, that's when they prepare it. They don't prepare it a half an hour in advance. And unlike other lines, you can't order at a little microphone and get through the drive-through. The drive-through is for pickup only of pre-orders. And the technology exists that even like the Grubhub people and whatever,

they know their assigned minute that it's going to be ready and they hit it. They've already paid with a credit card and all they do is ID, pick up the food and drive off. And so there's no 10-minute line waiting for them to give you your big mac so you have this massive interaction in franchising now between experience and convenience going on and it's technology enabled and then my understanding and what i've seen in in the technology there is that when you come back the next time they already know who you are and what you're ordering yeah if you order inside um they have artificial intelligence and it looks like a giant ipad you walk up to it it recognizes you from your previous visit whenever it was and it was like

yeah hi mr linegar do you want the same thing you ordered here last time and it pops up this is what you ordered last time and you either just just hit OK, or you say, no, and I want to reorder. And it's, I mean, what it all boils down to is, and this is the same for really all types of franchise concepts that, and you were mentioning this to me earlier, it comes down to how involved but efficient and experiential can you come up with for the consumer so that there's – I mean it's like you're not just eating a delicious piece of food, which by the way, their chicken sandwiches are the best I've ever had. But you have this feeling that you just accomplished something because it's so simple to order. I mean it's not like there's a problem here. Is that the level of experience that consumers are demanding now and into the future?

Yeah, especially the younger generations. Google has run everything for everybody. So Google makes it so easy. You want to know anything in the world, just hit the mic and tell, and they'll give you the answer instantly. And so we've got an entire generation of people that have never had to go to an encyclopedia or do a paper by looking things up. They just have to Google it, and it's simple. The simple is very important to the younger generations, but COVID accelerated this because even ex-gens and maybe some baby boomers that really weren't into ordering their grocery online all of a sudden had to. And they decided this is easy.

Awesome. Awesome. I mean, it's so cool. I encourage everybody to check this out. Daddiesfranchising.com is where they can find out more about Daddy's Chicken Shack. And Dave, I know you're always looking for more concepts in franchising. I'm sure you'll have some more for us here when we talk in the future. Thank you for being on Start With A Win,

and thanks for sharing your franchising knowledge. You're welcome. Nice to be here. Are you wondering how to grow your business? It might be something you're missing, and's not sales and it's not marketing. I'll tell you that right now. It's something most people don't even think about. And that's leadership. Okay.

Whether you're leading yourself or a team, leadership is the key for next level growth. And you're in luck because Adam has put together three of the techniques and ideas he used as the CEO of Remax to develop himself and his leaders to produce amazing growth and results. If you want to download these three keys, head over to adamcontos.com slash leadership and get those. So until next time, remember, start with a win. Bye.