Start With A Win - The top trends in business and franchising in 2023 with IFA CEO Matt Haller

Starting point is 00:00:00 What does one of the leading CEOs in one of the largest leading business associations in the world have to say about small business? Today, we talk to the CEO of the International Franchise Association, Matt Holler, and find out. Welcome to Start With A Win, where we talk franchising, leadership, and business growth. Let's go. And coming to you from Start With A Win headquarters here at Area 15 Ventures, it's Adam Kantos with Start With A Win. Today, we have a good friend, amazing guest, somebody I've known for quite a few years. Matt Holler is the president and CEO of the International Franchise Association, otherwise known as the IFA, the world's largest trade association representing franchising worldwide. The IFA represents thousands of franchisors, franchisees, and suppliers. Works in Washington, D.C., across the country, and around the world to protect, enhance,

Starting point is 00:00:57 and promote franchising. Matt's been with the IFA for 12 years. In 2021, Matt moved to the role of president and CEO. He's doing a great job. I'm on the board of the IFA from his previous position as head of government relations and public affairs. Under Matt's leadership, the IFA continues to grow really well, expanding educational event and promotional offerings across all of franchising while leading the charge to protect the business model in new and innovative ways. Folks, this is about small business all over the world. It has a huge impact on it. Listen to this podcast and you'll find out why. Matt, welcome to Start With A Win. What's up, Adam? Great to be here. It's great to see you. So we have a lot to talk about today, but I mentioned to everybody, I'm on the board of the IFA. So you and I get to talk about franchising quite a bit. And we probably converse at least a

Starting point is 00:01:50 couple of times a month. But if you can share with our guests, as the CEO of the IFA, what are some insights to the current state of the franchise industry in 2023? Yeah, I mean, franchising, it always tends to perform a little bit better than the overall economy. And I think that like, if there's one word maybe to put around franchising and how it's doing right now, I would say resilient. It's incredibly resilient business. Is franchising perfect? Is it growing as fast as you know as every franchisor would like it to grow? Is every franchisee's bottom line as strong as they want it to be right now? No. I mean, we're dealing with major, major changes in the economy that are impacting the franchise model at every single level, whether it's inflation or supply chain or labor or just geopolitical

Starting point is 00:02:43 or US domestic political kind of uncertainty, right? Like that impacts franchising in every single way, just like the rest of the economy. But our members, franchisors, franchisees and suppliers, like the model is resilient. It's growing. And, you know, there are certain sectors that are growing stronger than than others. There are certain areas of the country that are growing more aggressively than others. We can get into that depending on how in the weeds you want to go. We look at this with Fran Data, our economic research partners at the beginning of the year. And we, you know, we have great insights and great research at the IFA as part of the value of the organization is publishing information

Starting point is 00:03:25 for the public and for our members to kind of benchmark how they're doing against the trends that we see. Awesome. And this is not a pitch to join the IFA, but if anybody on here would love to join, we'd love to have you. Like you said, there's a lot. Franchise.org, by the way. And you can get all this and anything there, including membership information or research. Research is free for anybody in the general public.

Starting point is 00:03:48 There you go. And frankly, I mean, if you're with a local community or something like that, or your business is local, then I would encourage you to go to Franchise.org and take a look at that because it will kind of tell you what's, you know, what you can expect in business. What, you know, franchising has been around since, I think the, it started becoming regulated in the 1960s and 1970s through the Federal Trade Commission. It is a regulated industry. Everybody has to file a franchise disclosure document. And we're getting caught up on that right now, I guess. And I know the IFA is pivotal. I'm on the committee to help with educating the government. Do you see a disconnect going on as a trend in the space? You mentioned government changes, things like that. Where are we at with that? And what do we need to do in order to make sure that franchising is safe and secure for our local franchisees in our communities to continue to grow their

Starting point is 00:04:43 small business? Yeah, I think disconnect is a really good way to think about it. So free enterprise and franchising as a component of the free enterprise system, like it advances more quickly than government regulations keep up with it. And I think that's generally OK. I think what we have right now, though, in franchising is the franchise disclosure document and the franchise rule that the Federal Trade Commission has in place. You know, it really has not kept up with the pace of franchise development and the rapid use of the franchise model. And the idea, if you put on a regulator hat here, is we are concerned about protecting the consumer. And the consumer, in our case, is the prospective franchisee. And the thing about the IFA and franchisors is they want to protect the consumer too. I mean, the last thing that anybody that's in business or should be in franchising really should want is to have misaligned information or understanding of the relationship and the obligations that are on each side of that you're involved with, which the IFA is leading, is looking at it from a free market perspective with all of the stakeholders. We call it the IFA kitchen table, bringing together franchisors, franchisees, and suppliers, those that are in the third-party lead generation business, which is critical. What are our ideas for evolving disclosure laws at the federal level

Starting point is 00:06:28 to bring them up to speed with the way that prospective franchisees consume information today while maintaining protections for those prospective franchisees and ensuring that franchising can still continue to thrive and kind of raise the bar for the franchising ecosystem in a way that works for the private sector. But that also continues to ensure that government, you know, can protect the business model and protect the consumers, which is their role. And this is a function of the government working with the private sector in order to provide consumer protection, not only for those in the private sector getting into the business, but also the overall end consumer. So it's fascinating how all of this plays together. And this covers, for all of our listeners here, we have a lot of people in small business, entrepreneurs, real estate, real estate franchising, things like that. Real estate is essentially a substantial part of the

Starting point is 00:07:31 GDP itself, the real estate transactions that happen across the US. And I'm talking about the gross domestic product of the US. But franchising also is like 3% to 4% of the gross domestic product. So we're talking about a substantial amount of economic impact that small business and franchising has on our local communities. Matt, you mentioned some of the trends. Can you give us some of the areas where you're seeing franchising really start to explode and a lot of growth going on? And maybe some places where it's slowing down.

Starting point is 00:08:02 Yeah. So in terms of geography, states in the southeast and the southwest are experiencing the fastest franchise business growth in 2023. So places like Texas, Florida, Georgia, Tennessee, North and South Carolina, your home state of Colorado, Arizona are some of the top states for franchise growth. The southeast being the highest, uh, in terms of sectors, uh, service related businesses, uh, and quick service restaurants are going to see the highest rate of growth, uh, in 2023 and service is a broad category. So it's business to business services, uh, you know, sign making franchises and things like that, uh, quick service restaurants, the category that, uh, people tend to think of the most when they think about, you know, sign making franchises and things like that. Quick service restaurants, the category that

Starting point is 00:08:45 people tend to think of the most when they think about the franchise community. But I think that's that continues to be a really strong category within within restaurants. And I mean, you know, this in your sector, the shrinking of the real estate footprint coming out of COVID and the trend towards drive-thrus and third-party delivery and the ability to really leverage and monetize a business without as much of a physical real estate footprint is something that we're seeing a lot of innovation on. And I know one of the other questions you want to talk about is technology. Maybe we can fast forward to that here because we're seeing it across all different aspects of the franchise economy. Sure. All right. Let's jump into that. Let's jump into tech here real quick.

Starting point is 00:09:35 We're going to bounce around a little bit in the franchise space and also in the small business space. So keep listening to this. A lot of great small business tips come up here. Matt mentioned me being in the food space. Yes, we have two food concepts. But also, obviously, I still have my a little bit of one of my toes in one in the real estate space for some of the service providers and such there. Matt, what are you guys seeing on your end when it comes to technological innovation? And let me ask you this. This is, you know, the elephant in the room. How is AI playing into this also?

Starting point is 00:10:07 Yeah, well, I was telling you before we got on the live camera here about a conference I was at actually in Colorado Springs earlier this week. And for associations, it was a group of association leaders, everybody talking about how are we using artificial intelligence and technology to deliver better value to our members? And I think you mentioned education as an area we've been growing, and technology plays a really big role in that. I think increasingly as we move into the next couple of years here, how consumers look for and find information about franchising using, you know, a almost like a chat GPT for, you know, educating themselves about information, but within, you know, the

Starting point is 00:10:53 franchise.org, you know, ecosystem, right? That could be a really powerful way for us to deliver information to a prospective franchisee. And back to the earlier point, you know, what's the role that the association, you know, can and should be playing in getting better information to a, you know, a tire kicker that might be looking at a franchise opportunity. I think for our members, you know, artificial intelligence and technology, I mean, it's impacting every aspect of the business. I think the FranDev area is the is the area that is most interesting to me right now and kind of that impacts everybody across the franchising ecosystem. They're at every conference that I've been to in the last six months, including the IFA convention and our recently just completed franchiseanchise Customer Experience Conference and a few others, there's at least one session specifically on artificial intelligence and its role in the franchise model. But to me, franchise development and lead sourcing

Starting point is 00:11:58 with using artificial intelligence to help get better information into the hands of people more quickly and more accurately, I think is really, really compelling. And by franchise development, can you explain what you mean by that? Yeah, what I mean by that for those that are maybe outside the franchise community, it's franchise sales. So how is a franchisor reaching a potential franchise lead through their own websites, through third-party relationships, be they brokers or franchise development companies that they might outsource with through portals online, whether it's media companies that are out there like Entrepreneur or some that are specific within the franchise channel, and then just online advertising and things like that.

Starting point is 00:12:48 Gotcha. And obviously, AI is transformational in a lot of these spaces. One of the things we don't talk about is how the technology impacts one of the biggest challenges that we have in franchising, and that's personnel. Obviously, how many employees are in franchises in the U.S.? About 8 million. 8 million. Okay. So, folks, if you can think about how much of a lift it is in the, call it, 800,000 franchise locations, you've got 8 million employees.

Starting point is 00:13:23 Matt, how does technology play into these employees and maybe recruitment retention or longevity things or even replacement? I mean, how does that play in? Are you seeing? Yeah, I look at it. I try to come at it from like, what are the positives when we think about technology, right? And so I think about how much more quickly can you develop a piece of content, whether it's content for a consumer, whether it's content for a piece on franchise development? I think, how do we work smarter, not harder? And how do we accelerate some of the things that we do that bog us down. I mean, I was listening to the speaker at the conference I was just talking about, who, you know, is literally, you know, one of the foremost AI experts. And I think he said he's done 300 talks with, you know, he was invited to go speak to the Pope about

Starting point is 00:14:15 artificial intelligence. And so he's heading out to Venice next week to do that. And, you know, he was saying he's using AI within his email, right, to just draft email responses. I mean, we all have this, you know, at least for me, I have all these flagged emails, you know, things people I need to get back to. And it's not that I don't want to get back to them. It's that I want to, I need to think about how I want to frame that response. And, you know, there's, there's a website that, that he talked about, you know, canaidoethat, I think, dot com is the website. And so there's all these, you know, there's hundreds of companies that have started just in the last six months that are developing artificial intelligence to make us all more effective and efficient in every way of our lives. And the more effective and efficient we are, we're all dealing with burnout, right? So, you know, if we can create more time in our day to

Starting point is 00:15:08 spend, you know, ziplining, like I was, you know, two days ago in Colorado, or just time with our family, or just time for like mental health or exercise, like that's, that's a win. So I think we need to think about it more from like, what does it create for us, which is time, like, that's the only thing that is, is, is limited in each and every one of our days. And I don't know a lot of people that want to spend more time, you know, physically doing tasks that could that could be, you know, optimized through the use of artificial intelligence. So I think there is a fear. But I think let's look at it from from the positive. And that's a great point because ultimately,

Starting point is 00:15:48 why do people buy a franchise? They buy a franchise for two reasons, for time and money. I mean, ultimately, that's it. And if you take in combined time and money together, what does that give you? Theoretically, it gives you freedom. So that's really what franchising is about, is creating freedom. And it, you know, it's a, it's a license to operate that way based upon a proven track record and system. So, you know, this is, this is a fascinating direction we've taken this. What do you, what do you see as the future of franchising? I mean, it's, you know, we're going through a time right now where we have some, you know, I'm not trying to get political, but we have some heavy regulation coming down on franchising and small business in a lot of places with like joint employer um you know type of liability uh you know we're we've got uh

Starting point is 00:16:36 efforts to maximize or really start to increase these minimum wage positions out of minimum wage positions uh which creates an onus situation for the consumer because ultimately prices have to go up or stuff like that, or the business can't continue to operate. I mean, there's all these different pressures going on. If you looked at your crystal ball and said, three to five years from now, franchising, granted, we wouldn't have been able to predict the pandemic or any of that stuff going on. And you and I both went through that in franchising. Yes. But I mean, what direction do you see going, you know, going with this? And what are you optimistic about? Yeah, I mean, I'll go back to my resilient point. I think the model itself is incredibly resilient.

Starting point is 00:17:20 You mentioned the political and sort of government pressures that are, you know, coming at us. Look, that's the reason that's our niche, right? When we think about, you know, what does IFA do uniquely, you know, that nobody else does and uniquely well, we protect the business model. So we will be engaged in every one of those government relations, you know, advocacy issues, whether it's Congress or the Federal Trade Commission or the Labor Department or, you know, the state of California, wherever else something might come at us. And, you know, we will ensure that the model will continue to thrive, and we will have a seat at that table with government, and we need our members, we need the franchise community, you know, with us, it's not just people that are paid to do these things, you know, we need people that are experts that are living and breathing it, we call them, you know, our grassroots. And I mentioned 8 million workers, 800,000 businesses, 3,000 brands, and 600 supplier companies. Every single one of those people has a role to play in helping us educate about why franchising works, where it can be improved,

Starting point is 00:18:16 and why we don't want the overreach of the government in different issues or ways that are being proposed. Awesome. What are you seeing? So on a, you know, I mentioned personnel. Franchising is a people business. What are you seeing as far as the opportunities with that people business? You know, we've got unemployment fluctuating, what call it, three and a half to five and a half percent, something like that, depending on where you're at, maybe more in some places. But what, what do you see as a good opportunity for franchises to grow in these businesses to grow? And, you know, or maybe somebody wants to open more, but they're like, I can't get people. Any, any thoughts on that?

Starting point is 00:18:59 Yeah, I'll take it. I'll take it two ways. So at the franchisor side, I think we continue to see franchising, you know, kind of as a category or as a, I know we're not an industry, but, you know, as a career path, right? And that's something that the IFA and, you know, organizations like you all with University of Denver and programs like the Certified Franchise Executive Program and our different partnerships, you know. We're investing in the need for talent at the franchisor level in particular, and in the supplier category where people that do development, operations, law, technology, but with a specific understanding of franchising. So the sector, the number of franchisors, I think that will just continue to grow. So the number of people that need to understand franchising is going to continue to grow. And we need to continue to invest in education about people in colleges and universities and early stage in their career, that franchising is a place that you can go and spend 30 years in a career and be really damn successful. I think on the franchisee side, where we really have,

Starting point is 00:20:05 you know, a significant, you know, lower wage and less skilled work, we just don't have enough people in this country, right? I mean, the answer there is immigration reform, right? And so that is the key to unlocking so much economic growth, not just in franchising, but across, you know, a whole host of industries. I'll go back to this conference I was at this week and representatives from groups like the beer wholesalers to the banking industry to the corn refiners, all these different associations and people who are at different areas of the economy, everybody's saying the same thing. We don't have enough labor availability in this country. And immigration has become so political, like so much of these

Starting point is 00:20:49 policy issues that are real challenges. We need to make immigration more of an economic argument and less of a political argument. It's not a Republican or a Democratic issue. You know, it's an economic issue. And it's something that's going to make this country continue to stand up against, you know, global superpowers like China and others, you know, that are, that are, you know, coming for us. And so I think that is, is the case for giving somebody that might be concerned about, you know, labor availability and shortage, and hesitating on, you know, adding another restaurant, or, you know, even entering the franchise sector because they hear about the challenge of labor. To me, the answer there is immigration.

Starting point is 00:21:30 That's a great point, Matt. And it's fascinating when you look at that, because when you take a look at intrinsically what people want to do, they want to get better and they want to contribute. I mean, that's really what we're created for. So, you know, as a franchise organization, franchise or franchisee, that should be part of your values is to help people get, like franchisors and franchisees are in this together, you know, in a good franchise system and ferreting out, you know, what is your franchisor going to do to continue to support, you know, your labor challenges? You're not going to, the franchisor is not going to set the wages, the benefits, the pay, they're not going to hire directly, but there are things that brands and franchisees through associations, franchisee associations are doing to help address, you know, labor availability, labor shortage, you know, work on, you know, co-ops and things like that

Starting point is 00:22:31 for pooling resources around that benefit programs, tuition reimbursement, transportation. So there are things and economies of scale in franchising that you're not going to get in other forms of business ownership that are unique to the model and, you model and are ultimately what drives that resiliency and that success of franchising. Awesome. Some great information here. Matt Holler is CEO of the International Franchise Association. Make sure you check them out at franchise.org. And they're also on all the social media channels. They've got a great deal of current news and data out there. I go to their website quite frequently to catch up on not just franchising, but the economy and the direction and personnel and things like that, because it is important to small business and all business,

Starting point is 00:23:17 for that matter. Matt, I have a question I ask all of our great guests on the show, and that's how do you start your day with a win? Yeah. So you mentioned our mission statement is protect, enhance, promote franchising, and that is PEP for short. So what I do, it's a double shot of espresso and Americano. Just like that's the first thing I do to start my day with a win and just rock it from there. Right on. Well, Matt, it's great to see you again. Look forward to seeing you in person, you know, hopefully this month. I think you're coming back out to Colorado. I'll be out there. Yeah. The 19th of July. So I'll see you then. Right on. Awesome. And everybody take a look at franchising. It is an incredible

Starting point is 00:23:59 way of, you know, not just building a business, replacing a paycheck, whatever. It's about building an asset and creating something greater for your community that pays you back. So take a look at franchising. If you have any questions, reach out to me here at Start With A Win or to the International Franchise Association. They're happy to answer any of your questions and help you think through some things. Until then, thank you for being on Start With A Win, everybody. Until then, thank you for being on Start With

Starting point is 00:24:25 a Win, everybody. And Matt, thank you for being on Start With a Win with us. Awesome. Thanks, Adam. Thanks for joining us on Start With a Win. Be sure to like and subscribe to this episode and share it with your friends. Also, be sure to check out Adam on YouTube at Adam Canto CEO, as well as on all the social media platforms. And don't forget, Start With a Win.

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Start With A Win - The top trends in business and franchising in 2023 with IFA CEO Matt Haller

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