Start With A Win - What is a Franchise with Dr. Ben Litalien. Part 2 of 2

Episode Date: June 14, 2023

Guest Intro/Bio Dr. Ben Litalien is the Founder & Principal of Franchise Well, a consulting practice dedicated to the improvement and enhancement of franchising.  He is also on staff at Georgetown University in Washington, DC where he created and teaches the Franchise Management Certificate program for franchise professionals from across the country and around the world.  He is also an Adjunct Associate Professor at University of Maryland Global Campus where he teaches Entrepreneurship, Small Business Management and Venture Planning in their online undergraduate program.  Ben’s three-decade career in franchising includes building multiple franchise concepts to scale and running ExxonMobil’s U.S. franchising program, where he developed a pipeline of 1,000 locations in less than five years.  He is involved in the development of social franchising across the globe including JIBU, a network of retail water store franchises in eight East Africa countries where he serves as a founding board member.  Ben’s consulting clients include IKEA, RE/MAX, Snap-on Tools, Brain Balance and eXp Realities new co-work concept SUCCESS Space.Ben is a recognized speaker on "Franchise Development" and "Franchising for Good" and is a Contributor for Forbes.com on franchising.  Ben completed his doctoral program at the University of Maryland Global Campus and received his CFE (“Certified Franchise Executive”) designation from the International Franchise Association in 2003. Ben and his wife Raeann have been married for 37 years and they live in Fredericksburg, Virginia.  They have three grown children and four grandsons.  He is an avid golfer and fly fisherman.Main Topics – Part 2 01:10 What are you buying - the Franchise systems and processes07:02 You save on two things if you are systemitazed09:13 What builds brand value?10:44 Community connectedness to the franchisee13:59 Best way to launch your business16:43 What is the #1 small business challenge?19:18 Last bit of great advice before owning a franchise Connect with Adam: http://www.startwithawin.comhttps://www.facebook.com/AdamContosCEO https://www.linkedin.com/in/adamcontos/ https://www.instagram.com/adamcontosceo/ https://www.youtube.com/@LeadershipFactoryhttp://twitter.com/AdamContosCEO  Listen, rate, and subscribe! Apple PodcastsSpotifyGoogle Podcasts 

Welcome to Start With A Win, where we talk franchising, leadership, and business growth. Let's go. And welcome back to Start With A Win. Adam Contos here at Start With A Win headquarters in Denver, Colorado at Area 15 Ventures. We have some franchises. We own two franchise companies, two franchisors. We are franchisors. As well as we are franchisees. We own company stores as well as we are franchisees of other brands also here. So a lot of experience behind the scenes here. I have on Dr. Ben Letalian. He's the founder and principal of Franchise Well, a consulting practice dedicated to the improvement and enhancement of franchising. He's a doctor for a reason. This guy's really smart. He has a lot of experience in franchising, thousands of units, some major brands, and he and I have done

franchising business together. So I could personally vouch for him. And he is one of the best fly fishermen on the planet. Thank you. So anyhow, Ben, welcome back to part two of the show. Thank you. Thank you. Glad to be here. Yeah. So we started, we talked a little bit about the foundations of franchising, but I want to get into the systems of franchising. Really, what are people buying? They're buying time and systems and processes. You think, I want to start a business, but I don't know what to do. I know there's a ton of legwork before you can just open doors and start selling stuff and finding customers or having a website, a brand, social media, whatever it is. And franchises take care of pretty much all that stuff. So except for a lot of times, customer acquisition is localized. So that's on the

franchisee or the local unit. And we'll get into that here. But talk to us about what does a franchise system look like? You've been a big guy on systems thinking. And I know The Fifth Discipline is a book that when I first met you, you're like, you need to read The Fifth Discipline. It's a fantastic book. It's about systems thinking. Talk to us about systems in business. Great. Well, thank you. Yes. Systems thinking really helps you understand the franchise model. The franchise model is a very foreign business model to the average person who grows up in a work-a-day environment, right? You have a boss, the boss tells you what to do and you do it or you get fired, right? So franchising

is completely different. You own the business, but you operate under a brand and you follow a system. So that system that you're following is the most critical aspect of picking the right franchise. You might fall in love with a brand. You might have a lot of passion around a concept, but without that underpinning system, it's going to be on you to figure out how to operate effectively. And that's not a good reason to buy a franchise. So you want to look at those underlying systems. In a franchise, it is simply a system of systems that are interconnected and interdependent. What I mean by that is there's a system of selling franchises,

right? So if you're a franchisor, you've got to have a system to find candidates, attract them, present your value proposition, and sign them up for your franchise, sell them the franchise. That system has to work in conjunction with the training system. Your system of training somebody who's never been in your business before, right, to become proficient at your business. I like to say you can't open a subway and somebody walks in and says, hey, I want the bacon chicken ranch. You say, well, we're new. We haven't been trained on that yet. That's unacceptable, right? When you open, you got to be 100% delivering the value proposition. That puts

a lot of pressure on a franchisor to fully train a franchisee before they let them loose. So that training system has to be working with the sales system, the operating system. Once you get trained and you get up and running, that operating system is how you operate the business day in and day out. That system has to be working in conjunction with the training system. Otherwise, you have weak links in your system. We talked about on the previous cast, technology. My gosh, the technology system is so powerful and so advanced today in franchising. And it's one, quite frankly, that a lot of people struggle with. That's why I'm seeing a lot of millennials getting attracted to franchising now where they hadn't been in years past because we've become so technologically advanced in our franchise operations. have to work in conjunction with your marketing system, right? You talked about customer acquisition. If you're in brick and mortar, it's very different than if you're in a service industry. And so what is that acquisition system, customer acquisition system that you're going to be using in order to

build your business? So franchising is a very complex model that is oftentimes taken so lightly because it looks from the outside to be so simple. Well, it's fascinating when you start listening to the systems of systems here. I mean, this is like literally a machine. And a lot of people, you know, they want to start a business. You know, the American dream is to be an entrepreneur. And that's really what franchising facilitates is somebody's ability to go out and start a business without having to figure out all of the ins and outs of the systems necessary around that. So ultimately, you would almost say that you are, you know, you're first of all, you're renting this system from the franchise or so that you can create cash flow.

And that cash flow either allows you to, you know, you've built a operating business as a consistent customer base or something like that. Let's say, you know, you mentioned the sub sandwich shop we shall not name. Oh, sorry. We'll talk about Port of Subs. Yes, exactly. It's a great example, yes.

Yeah, yeah. I mean, if we're talking two ends of the spectrum, PortaSubs is the way to go. And we look at their system of how they do everything. And it's even full disclosure here, I'm the CEO of PortaSubs. And Ben helped us with the acquisition of that business. So we're both very familiar with their systems. Their systems are down to the point where they tell you how many holes to drill in the bottle cap of the little container that you pour oil on the sub sandwich with. I mean, it's, and the size of the drill bit for crying out loud.

It's, we show them how to do that. The systems are so concise. How do you slice a tomato? How do you slice an onion? How do you lay the tomato pieces out in the little metal thing that you pull them out of to put on the sandwich? So, I mean, this is all very precise. Everybody, if you think of what you do at work, if you work for a corporate entity or maybe you're an entrepreneur or something like that and you're kind of winging it with your systems, if you were systematized, it saves you two things. It saves you time in operating your system, but it also gives you the ability to spend more time gaining customers. Therefore, you're leveraging the top line by doing this and probably saving expenses in the process. So systems are there for a reason, but sometimes people want to avoid those systems, Ben, when they buy a franchise and they're like, okay, you plug it

in and it spits out dollar bills, which isn't the case. That does not happen, folks. Don't fool yourself on this. Franchise is a model that you work within, but people want to change that model sometimes, Ben. It seems like everybody comes up with their own variation or idea around it. I want to stress this. And Ben, can you give me some flyover on it? The franchisor usually has figured out ways to screw it up before they figured out ways to make it work. Don't try and screw it up.

It ain't broke. Go work it. Ben, thoughts on these systems and sticking to them? Yeah. Again, I think if you're going to use the franchise model to build wealth for your family, and in many cases, generational wealth, I mean, the resale value of a successful franchise, it outpaces three to one an independently owned business. This is research research this isn't just winging it This is actual research been done On businesses that are independent

The exact parallel In franchising three times The value so Should you pursue franchising as a way To build wealth and Generational wealth yes it's a great Thing but look at the systems Underpinning the model.

As you mentioned with Florida Subs, only 140 locations, but the systems they have in place are accurate, precise, proven, well-founded. And as a franchisee, if you just follow it, you'll get a predictable outcome. That's the reason we have models. If you try to reinvent the wheel, how do we know what the outcome is going to be? It might be great for you and your one location. Is it good for the system? In franchising, consistency of customer experience is what builds brand value. That means that sandwich is the same whether I'm in Las Vegas or in Reno or in Phoenix and I go get the number one, it should taste exactly the same. If it doesn't, we're not going to build brand value. Don't buy it with the listeners here. We've seen in the same franchise model, same franchise brand.

So, you know, it could be Port of Subs. It could be Remax. It could be Daddy's Chicken Shack. It could be, you know, Great Clips. It could be anything. The people that follow the system religiously seem to be the most successful in that brand. I mean, it's practically a given that if you start deviating, what you're doing is distracting yourself from truly operating the business. And that's one of the biggest challenges that people

have is we inherently are distracted beings. You see this, especially in this day and age, there's so many distractions out there. It's incredible. But when you button down and you follow the system, it's the same with a diet and exercise and the discipline of whatever business it is. You want to get smarter, be disciplined in learning. Just do it over and over again. So the key word here is consistency in your systems. I want to talk to you about the community of franchising because every franchise is a local community location. If you see something as just like nationwide umbrella under doing something broad and general, it's probably just a corporate entity. It's not a franchise most likely, But franchises generally are community-based.

The owner's community-based. The employees, obviously, live in the community. And the customers are community-based. How important is franchising to our communities, Ben? Yeah, it's fascinating. 28 million small businesses in the United States, according to the SBA, means 500 employees or less, right? Less than 1 million are franchise businesses. Yet, that 1 million create 3% of the U.S. GDP, non-farm, non-government. That is mind-blowing, right? I mean,

it is a powerful, powerful model that a million business owners out there take advantage of. It is something that I encourage people to look into because it's just there's nothing that replaces. There's nothing out there. You can start anything on your own and learn everything on your own and potentially build it into something very powerful. But as you said, time is our most important commodity, right? We've got to maximize our time. Franchising lets you jump that learning curve and start with a win, right? A brand, a full operating system. And guess what? If you focus on the two areas, you have competitive advantage, the A team, building your team, building your culture, and your local sphere

of influence, it's a formula that works 100% of the time. And so anyway, I think it's an important thing to consider for sure. All right. And let's share a few of our little secrets here. Okay. We just launched a new Daddy's Chicken Shack in Scottsdale this past week. You were a big part of that. I was at the grand opening also. But ultimately, turning on the lights, the grand opening of a new business is not something that just happens that day. You don't just go, all right, let's go hang up a sign and start making some chicken. It literally takes months, if not years, a lot of times to turn on the lights in a new business location. But all that time leading up to it is important for connecting with the community. Yes.

It was the manager of that store, Mark, was visiting. I mean, he visited, I think, every single one of the businesses practically within a mile or two of the location and shared his excitement, the food, the hours of the store, the culture, things like that with all these different people. And what that did was create such a groundswell in the community that the grand opening was fantastic. And the follow-on momentum after that grand opening was fantastic. And the follow on momentum after that grand opening was incredibly powerful. We utilized a couple of resources that Ben has also participated in, such as we had QR codes, we put up signage early, built our email list, and we started marketing to those people. Ben, you've seen some good business launches and some not so good business launches

in your time. Is that one of the key variables there? Tell me about what you see that works and what doesn't work. I mean, some people just sit there and open the door and expect customers to come rolling in, but we know that's not. It's important when you think about franchising to think of the stages. You look at a franchise company, there's an early stage where they're getting launched and putting their systems in place. And then it starts to gain momentum and it gets into this growth mode, right? And at some point it'll actually hit maturity, you know, with the growth. And so it's important to know what stage you're in. Same as a franchisee. When you're launching a new business as a franchise or even as

a non-franchise, that early stage, like we did in Scottsdale, right? It's grassroots. It's pounding the ground. This is what franchisees can do that companies can't do very well. Like you said, going out and meeting people, networking within the community, being involved with your B&I network, being involved with the local chamber, making those local connections, right? Because you're going to be, they may not know about the brand outside of the community that you're in. Your job is to make sure they know about it where you are. Now, organizations that, like if you think about Five Guys, for example, over time, you know, those early stage franchisees, every single one of those had to connect with their community and become well known.

And then they started to ripple out and add more and more units. Today, opening up with five guys, you just put the sign out. Right. And because you already know everything you need to know about five guys. And so whether it's been open five years or five minutes, you as a consumer are still likely to pull in there if that's what you want. So I think at early stage, franchisees play such a powerful role at establishing the connection with the local community. The second thing I would say is franchising is a social institution. It's not a corporate institution. Franchising is made up of individuals in a local community representing the brand, all doing it consistently to give that customer the right experience. That is a very different thing than Starbucks owning all the locations and telling all the managers what to do and how to do it.

This fabric of owners is the most powerful machine on the planet, in my opinion. And that's what makes franchising so exciting as a business model. I mean, let's flip the paradigm here on franchising. Franchisees do have challenges, though. This is not just all butterflies and unicorns and everything's grand and special. There are challenges in running a small business. Every day you turn on the lights and you need a customer to walk in the door and you need to make sure they have a great experience, things like that. What is the number one small business

challenge you have seen in your time consulting in decades of consulting the businesses and how has that been overcome? Yeah. And part of it is, again, from my experience, part of it is from research, which the small business administration has researched business failures relative to SBA loans, right? Because they guarantee the loan. And so when it fails, they want to understand what happened. And according to SBA, the number one reason for small business failure in the United States is failure to effectively market the business in order to generate enough customers to sustain it financially. So that's from the research side. I would say from my personal experience, a couple of things.

One, the franchisee who comes in who doesn't follow the system. We talked about it earlier. It's like, well, I think we should make it this way. Oh, I know that's what the franchisor says, but I want to do it that way. And they deviate from the proven model and get inconsistent results. The second is funding. Going into a franchise or starting any business, you've got to think with the end in mind. You've got to make sure you have enough capital to get it through. And that puts everybody in a bad situation, right? You can't pay the rent, the landlord's on you. You can't pay the royalty, the franchisor. It's hard to support you if you're not paying. It's just a devastating environment when a small business owner or franchisee runs out of capital. So I think just to kind of turn that around, if you're looking

at being a franchisee, look at the marketing side of the system the franchisor is offering. Are you going to have to do everything? You can control your local sphere of influence, but what are the marketing assets that are going to bring you customers that the franchisors provide. Awesome. Ben, this has been some incredible insight, incredible information on franchising. Any last bits of knowledge or advice for our listeners about the franchise space and growing a small business? Yeah, I truly think it is the best opportunity for the average family person to build and grow to a significant level of business without the risk of doing it from scratch and on your own. That being said, take advantage of all the opportunities before you become a franchisee to make a good choice. For example, get the FDD and read it carefully.

Don't just skim it. Don't let the salesperson talk you through it. Print it out. Get a magic marker, a highlighter, and go through it and ask those questions. Understand it. Secondly, talk to franchisees. They've already done it. They already made the decision. Ask them very those questions. Understand it. Secondly, talk to franchisees. They've already done it. They already made the decision. Ask them very pointed questions. Did it cost more than you thought it would? Did it take longer to become profitable? Are you able to live off the profit

margin now? What were the challenges? How does the franchisor support you? That kind of validation with a few franchisees is invaluable. My hope for the listeners that are out there thinking about how can they build generational wealth for their family, franchising is a super powerful way to do it. But go in with your eyes wide open, do your research and make a good choice. Awesome. Thank you, Ben. Dr. Ben Litalian from Franchise Well, great friend and amazing mind in franchising and business growth. Ben, I have a question I ask all of our awesome guests on the show. I'm sure you have a fantastic answer to this. And that is, how do you start your day with a win? Thank you. Well, I do have an important routine that helps me start with a win. And that is I get up early. I like to get up. My wife likes to sleep in,

you know, get up a little later. So I like to get up early and I like to take Shadow, which is my buddy here. He is so eager to see me. You probably have this experience, right? He can't wait to see me. And we get up, we make coffee, and then we go for our walk. And he chases the ball and does his business and all of that. And I come back and in the quiet in the morning, I like to have a little time of reflection. And I oftentimes will read some scripture. I'll spend time reflecting on things going on in my life, people that I care about and and, you know, important things that I need to care for and be aware of. But it just gives me that opportunity to go into the day fully focused and effective. And so that's how I start my day with a win.

Awesome. Dr. Ben Litalian, thank you for being on Start With A Win. We appreciate all you do for the industry. And thanks for starting with a win. Awesome. Dr. Ben Litalian, thank you for being on Start With A Win. We appreciate all you do for the industry. And thanks for starting with a win. My pleasure. Thank you. 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, Adam Canto, CEO, as well as on all the social

media platforms. And don't forget, start with a win.