Start With A Win - The Culture in Your Business is EVERYTHING | Adam Contos

Starting point is 00:00:00 So you need to be willing to step up and demonstrate how you want the culture of that organization to be. I mean, first of all, you have to be willing to put in the work. You've got to exhibit the leadership that you want your employees to be operating under. Welcome to Start With A Win, where we unpack franchising, leadership, and business growth. Let's go. And coming to you from Start With A Win headquarters at Area 15 Ventures, it's Adam Contos. This is part two of two with me on the Culture Matters podcast with Jay Doran. Let's jump right in.

Starting point is 00:00:31 Curious about the investments. What was the inspiration behind investing in organizations? And for those that are listening that may be looking for capital partners, advisory in that way, let's go in that direction after. So what was the inspiration behind going into that next level? Ventures 15.

Starting point is 00:00:51 Area 15 Ventures? Yeah. What did I say? Ventures 15. Yeah, whatever. I don't know. Area 15 Ventures. There you go.

Starting point is 00:01:00 Right. Yeah. So I left Remax because I wanted to invest in some businesses with the co-founder of Remax. He and I became very good friends. Dave Linegar, he's my mentor and best friend. And because I was the CEO of a public company that he was a large shareholder in, we could not buy companies together.

Starting point is 00:01:19 It was a conflict of interest. And there's this public company rule book of about 40,000 pages called Sarbanes-Oxley. And they said, no, you work for this guy. He's a shareholder of yours. So you can't go buy businesses with him. I'm like, that's fine. I'll retire from Remax and he and I will go buy businesses. Wow. So ultimately, you want to start in an industry where you're relatively well-versed. So for instance, I know franchising. Real estate is secondary to franchising for REMAX. REMAX itself, while you know it is a real estate company, it's actually a franchise

Starting point is 00:01:56 company that franchises real estate companies. So we had 9,000 franchise locations around the world. And I knew franchising very well. It's a regulated industry by the Federal Trade Commission. And as a result, I was very well versed in it. I thought, Dave, let's go buy some franchise companies or maybe start some up. And he goes, absolutely. Love it. Franchising is fantastic. So franchising is helping build entrepreneurs, is ultimately what you're doing.

Starting point is 00:02:25 So you have this network of small business owners and your goal is to help them make more money because when they make more money, you make more money. And when you make more money, you can grow the brand and it reciprocates and helps them because it creates brand name awareness, purchasing power, things like that for them to help do their business better. Everybody wins. That's a key thing that we have to focus on here. One of our key tenants in this organization is everybody wins. We want everyone to benefit. We don't want you to buy a franchise just because we want you to buy a franchise. We want you to buy a franchise because we want you to create wealth. So that's how the whole thing works. So, um, we got into

Starting point is 00:03:06 franchising. We, we have a couple of different sandwich companies. We have daddy's chicken shack, which is a fried chicken sandwich concept. And then we also have Porta subs, which is a sub sandwich concept. And then we have a whole bunch of other smaller companies that were invested in here and there. Um, we're actually a franchisee of Harley Davidson dealerships. So we've got a couple of dealerships there. And then, uh, we're, we're getting into some tech startups that all. Can you see Buffett? Oh yeah.

Starting point is 00:03:34 Yeah. There he is. I went to my first year, all the meeting 23 was. Oh, wow. Got to see Charlie before he graduated. Yep. Yeah. Yeah.

Starting point is 00:03:44 They've, they've done some great work. I'm curious about the everybody wins idea. Is part of that the focus on whatever the franchise's value prop is to the customer as opposed to the franchisor profiting from selling the franchisees. Right. That's connected. Because I've often watched the franchisor grow in revenue to the detriment of whomever's allocating capital into it as a franchisee. Right. It's become almost like a greater fools theory or something.

Starting point is 00:04:25 Right. I mean, you've got this, this in a lot of times the franchisee becomes kind of dependent on the franchise or for the rules and regulations, because there is a, you know, there's a contract there in place for them to, to license and operate that franchise. But ultimately the franchise,, if they look at this as, I want to make as much money as I can, then they lose sight of the fact that their goal is to help the franchisee grow. But if they come into this with, I mean, really, franchising, you should focus on two things, okay. The first one is increasing franchisee

Starting point is 00:05:05 revenue. The franchisor should be 100% interested in increasing franchisee revenue and helping control those expenses that that revenue has to, to, uh, to reduce. So ultimately, you know, you take the revenue, you take out the expenses. That's where your profit is. The franchise or gets a percentage of the revenue. So if I help you increase your revenue, yeah, I win also, but you win at a larger scale than I win. And that's how it should be because I'm winning over the whole bunch of people. You're winning for yourself. Is the underlying philosophy that the franchisee that is, they're the client. Yes.

Starting point is 00:05:43 Not me. Right. Right. The customer. philosophy that the franchisee that is they're the client yes not me right right the customer the franchisor if so even if it's like below awareness right if i think i'm the client like i'm just gonna make more as many sales as possible yeah the the idea is the franchisee is the customer of the franchisor. If that deviates, what happens? What are some of the ways that the franchisor can fail the franchisee? That would be my question. Well, first of all, not caring about them. Caring more about revenue than their success.

Starting point is 00:06:19 And once you start becoming the police force of the franchise organization, that's when it turns into a parent-child relationship where you're not partnered with the child. You're enforcing the rules of life on the child. And nobody wants to be in that situation. It creates a difficult conversation every time you pick up the phone. Because you don't want to pick up the phone as the franchisee and get chewed out every time going, why aren't you making more money? Why aren't you getting better grades? Why aren't you picking up your room? Things like that. Trying to see the IRS.

Starting point is 00:06:52 Yeah, exactly. Yeah. I mean, it just turns into a really difficult relationship. But if the franchisee looks forward to the calls of the franchisor because the franchisor is interested in their success, then it's a welcomed call. It's a trusted call. And the conversation is productive. So it's a, hey, we figured out this way that you can make more money. Let's try it together. So everybody has skin in the game in this. Act like it. So it's like if your trainer lost weight when you lost weight, do you think they'd be more interested in you losing weight? Absolutely, they would. Well, I mean, as a franchisor, we make more money when you make more money. So we are absolutely interested in you making more money. Is there a connection with short-term view, long-term view? Curious on your thoughts on. I think it has to do with, I mean, there's, yes, you look at short-term and long-term, but in the short-term, you look at how do we create the habits that create the long-term returns? Because we're looking for, you know, as a franchisor, we want our franchisees to create generational wealth.

Starting point is 00:08:08 That's really what it's about. But you create generational wealth one day at a time by increasing same-store sales. So if I can take you from having $3,000 days to $4,000 days, okay, wow. Let's multiply that by a year or five years. So that's what we're shooting for. And that's the first key piece is increase same-store sales. How do we increase same-store sales? Whether or not it's a brick and mortar store or a service organization or a real estate agent or whatever it is, how do we increase your ability to make more money today? And then the second piece of franchising is how do we increase the brand together? There's balloons all over. I'm not sure what happened. That was good. That was cool. All right. What's the second piece?

Starting point is 00:09:01 So the second piece is increasing the brand. So growing the brand itself, which means increasing the number of franchises out there. So when you're selling franchises, you grow in three different ways. Okay. One is somebody who's an existing franchise buys another franchise. That's how you increase your footprint. The second one is they refer you to one of their friends who they're like, hey, I love this franchise company. My friend should buy one also. So you get a referral, get them to. And then the third one is you go out and organically find somebody who's not part of your franchise network to buy a franchise. But you'll notice one thing, the franchisee affects two-thirds of your growth. Your existing customer affects two-thirds of your growth.

Starting point is 00:09:48 Now, think about that in any business that you're in. If you looked at your existing clients and said, how can I grow my business? If you thought, wow, these people affect two-thirds of my growth, they're either going to buy more from me, they're going to refer somebody, or the third leg of that machine is I'm out organically finding new customers. Two-thirds of your success comes from your existing customers.

Starting point is 00:10:11 The brand piece, that's the parasocial element. Yep. But the sustainability of it would be rooted in same-store sales, which is connected to that mentor-mentee relationship. Correct. Franchise or mentor. Mentee is the franchisee. Like, who's walking in the door? What's that Chinese proverb?

Starting point is 00:10:32 A man who can't smile, don't open shop. Something like that. I love that. Yeah. So that interaction. This is the masterclass on franchise. For those that are listening that have interest in getting involved in that arena, what are some red flags they should look out for when they're interviewing companies to invest their

Starting point is 00:10:56 hard-earned? Because I'm thinking of everyday people. Maybe they were an exec or an employee, or they've tried entrepreneurship on their own, like totally on an island. And now they're like, let me get behind this franchise. So what are some things to look for to say, oh, that's not the right institution, right? That's not the right franchise for me. Right. Well, I mean, first of all, you have to, you have to understand the culture of the organization. I mean, culture matters. And ultimately it comes back to, can you see yourself in that culture? Because the culture is not going to change to, to, you know, around you, you're going to have to fit in that culture,

Starting point is 00:11:37 that organization. So I would do some research on that organization, particularly on the leadership of that organization. Is there a single video out there of their CEO talking about the culture of their organization? Because if there's not, you have to wonder, okay, what's going on behind the scenes? What's behind the curtain of this organization? If you go and sign up for this company and figure out that the culture is not for you, you can't get out of that. You're in an agreement, typically a five, seven, or 10-year franchise agreement. So I would learn about the culture of that organization before you do anything else. The second one is, can you see yourself operating the system that that business operates within? So that system might be, let's say it's a service

Starting point is 00:12:23 organization where maybe it's a coaching franchise. Can you see yourself following that coaching or that mastermind concept and buying into it and loving it? If it's a sandwich shop, can you see yourself loving that brand and that product and what it's all about? Because if you're not in love with it, you're not going to give it everything that you've got. I don't like sandwiches, but I want money. So let me do sandwiches.

Starting point is 00:12:50 Yeah, you can do sandwiches. I mean, well, here's the reality though. You have to love the concept and how it operates. Oh, you don't have to get high in your own supply, but you have to enjoy the supply chain. Correct. You got to love this. But here's the reality is if you love chocolate, I don't want you owning a chocolate company necessarily because all you're going to do is eat your product.

Starting point is 00:13:17 Interesting. So, I mean, you'll get sick of it. You have something that you, you know, sure you like it. Like, like our sub sandwiches or high quality meats and cheeses. People are like, I love this. I'm like, okay, can you eat it every day? No, I, I are fried chicken. I can't eat fried chicken every day. Yeah. Maybe the founder of the founder of the franchise might've been like all hopped up, but maybe those that are operating that, that former, I would say, I would say you like the product, but you don't have to live on the product. So pick the culture. Do you do diligence? See yourself operating the system. Is there another that you'd advise? capital to get going. Don't go into something going, ah, I'm going to try and cheap this.

Starting point is 00:14:06 There's a pro forma for each of these different franchise companies. There's something called a franchise disclosure document, which is a federally regulated document. There are 23 sections to that. They're called items. So there's 23 items in there. And items five, six, and seven discuss the financials around opening a franchise organization. If you can see yourself handling those financials, then great. And then item 19 is kind of a balance sheet for the whole thing. So you take a look at, can I see myself doing this? Because if you can't, then you just bought yourself another paycheck. And you're going to be angry at yourself as your boss because you're the boss.

Starting point is 00:14:51 So you'll be angry at yourself. What you're doing when you buy a franchise, you're not necessarily going and working as an employee in a company. You're buying the rights to a system to run your own company within that system and brand. You're the boss. So can you see yourself running that business based on those financials and those requirements in order to create those rough profits? And then if you want to scale it, you open another one.

Starting point is 00:15:18 You open another one. You open another one. You become a holding company. And that's where you really create wealth is multi-unit franchising. I was just listening to a book by Guy Hans as an investor. And he would mention at the end of the book that he was, his family for general generational wealth purposes was interviewing for a long time to acquire all of the Scandinavian, I think it was Scandinavian, McDonald's and how that was going to create this generational. And it was these hundreds and hundreds. It was like this nine figure, multi nine figure. And it was pretty amazing to listen to that story. And then

Starting point is 00:15:53 here we are talking about it. So it is something that people do to set themselves up, their families up. So my follow up on that is for the listeners that could be interested in that as a franchisor, investor, advisor, coach, what are some things you're looking for to say, this person may think they're fit for that, but that doesn't suit them. So we could disqualify some of the people that are listening. Right. I mean, first of all, you have to be willing to put in the work. A franchise is not an ATM machine. You don't walk up to it and it hands money to you. You have to put in the work. It is a job. And you start off as an owner operator nine times out of 10. Even if you wanted a McDonald's, you have to be back behind the register. You got to be making fries, things like that.

Starting point is 00:16:38 Every franchise company wants you to start as an owner operator, unless you're going in and just buying multiple franchises, then you better have some really good management team that is experienced in that franchise brand. But the reality is you need to be willing to get your, your hands dirty a little bit and go in and learn the business. And it's fantastic because I mean, it doesn't take long. Most franchise companies have fantastic training programs. You'd be like, wow, I just, it doesn't take long. Most franchise companies have fantastic training programs. You'd be like, wow, I just learned a whole bunch about this. Like when we bought the Sub Sandwich Company, I went to sandwich university.

Starting point is 00:17:12 I learned how to make sandwiches. And I'm like, whoa, I'm 52 years old. I had no idea that's how you make a good tasting sandwich. But that's fantastic. So, I mean, the reality is you need to be willing to stand behind the register and talk to the customers. If you're not willing to do that, I don't necessarily know that you're cut out to be an entrepreneur because entrepreneurs, you need to be willing to talk to customers. And they're like, well, no, I want to be a business

Starting point is 00:17:39 owner. The reality is you've got to exhibit the leadership that you want your employees to be operating under. And if they see you do it, they will do it. That's how you build a great culture in your small organization that is a franchise someplace. How the boss operates, how the boss talks, how the boss reacts. And I say reacts because let's say you have a customer who's having a bad day and they come in with a chip on their shoulder. I mean, if you pound on the table and cuss them out, guess how your employees are going to be treating the next customer? Pounding on the table and cussing them out. If you're in a team meeting and you're pounding on the table and cussing out your employees, guess how your managers are going to treat those employees? The same way. So you need

Starting point is 00:18:24 to be willing to step up and demonstrate how you want the culture of that organization to be. And it does take a fair amount for people to do that because they might leave the corporate environment and go, I want to buy a franchise, which is typically where franchisees come from. A lot of times they come from the corporate environment. They're like, I've retired. I've got a little bit of money. I'm going to invest it in my future and my family's future. And I don't want to work for anybody but myself. So we always say you're in business for yourself, not by yourself and in franchising. So, um, I mean, that's the idea behind it. You, you run businesses, you start scaling those businesses. Next thing you know, you have three of them, five of them, um, you know, take a single unit franchising. Let's thing you know, you have three of them, five of them. Take a single unit

Starting point is 00:19:05 franchising. Let's say you're making $100,000 a year just for round number. Next thing you know, you own five of them. You've got synergies. So you're not now bringing in 100,000 per store. You're bringing in 125 per store. Things start magnifying. Real estate, a lot of uncertainty. I had a tremendous amount of guests on in the last year and a half. You're behind the scenes now in that industry. There's some disruption going on. Where's the opportunity? What advice do you have for the listeners that are in and around real estate? Well, first of all, if you're a real estate agent, I think you need to take a hard look at how you justify your value proposition

Starting point is 00:19:46 to your customer. Because given all the class action lawsuits going on in the space, they are questioning, okay, what are you doing for me for that commission? So you need to have a hard conversation with yourself and say, am I just making a commission or I'm actually delivering value that deserves that commission? And I think that's really one of the key points in real estate right now. If you're a consumer, I would say, make sure you're getting the value from your real estate agent

Starting point is 00:20:15 in order for them to earn that commission. Because what is a commission? It is an exchange of money for value delivered, okay? So let's justify our value in this marketplace. Now, where are the opportunities here? Well, ultimately there's, there's a lot of opportunity showing up in, um, in the explanation of that value. Um, the national association of realtors suffered a big loss in a class action lawsuit recently. They're probably going to appeal it and things like that, as have several other players. There are like 18 lawsuits going on, class action lawsuits going on in the real estate space right now. It's really, really overwhelming.

Starting point is 00:20:55 But ultimately, it's calling into question how people operate. And is that ecosystem closed out where people are required to operate that way? Or is there antitrust going on? We as people in the real estate space, I don't sell houses. I run real estate companies. Right now, I'm involved in some startups that are looking at what are the opportunities available in the real estate space. But ultimately, what it comes down to is how is the consumer being treated and is the value being justified to the consumer by the agent for that commission? And some of the control of the information in the

Starting point is 00:21:34 process, I think there's going to be some decoupling going on, meaning people have to be a member of National Association of Realtors and their state association realtors and their local board of realtors in order to be part of the MLS, in order to be able to sell and display listings from that MLS. But ultimately, I think some of that is going to create some opportunities for disruptors to come in, some new tech plays to come into the space. So keep an eye on the real estate space. I think it's going to be exciting over the next couple of years. Let that alignment break, be misaligned. So new opportunities are coming to serve the people that want to be in those roles

Starting point is 00:22:13 as they change or something. Yeah. Every time there's change happening, every time there's some sort of a rule change or law change or anything like that that happens in an industry, it opens the doors for new entrants into the business space. So what's going on right now is absolutely going to change the real estate space. Will we see new entrants? Yes, we will. We will see different companies pop up. We will see different tech providers pop up. We will see different opportunities for consulting pop up. But realistically, it's going to come down to value delivery like any other businesses. There must be value for money in any business. And where is that value gap going to occur in the real estate space? If you listen to this podcast, I challenge you to share this episode, leave a comment,

Starting point is 00:23:06 leave a review on the Culture Matters podcast. Final word, how do we start with a win, Adam Contos, CEO in 2024? Awesome. Thanks, Jay. I appreciate you having me on here. And thanks to everybody for listening. Here's what I would say. Don't settle, okay?

Starting point is 00:23:23 Always go out and be the best that you can and don't settle. When you've done something, go, am I settling for what I've got right now or can I do more? That's where you find that magic space is above settlement. We only show up with 25% to 40% of our capability. Where's the rest of it? Look in that bucket that you brought to work and go, oh, I can do two more deals. I can make five more calls. I can make three more people smile today by picking up the phone and contacting my customers.

Starting point is 00:24:02 And as a result, I'm not going to settle for where I'm at right now. I'm going to be better in 2024. Adam, where can people follow you most quickly to get that parasocial phenomenon? You can go to Adam Contos, CEO and all the socials, or you can just find me at adamcontos.com. If you're listening, please share this out. We'll see you next time on the Culture Matters podcast.

Start With A Win - The Culture in Your Business is EVERYTHING | Adam Contos

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