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What Franchising Can Teach You About Scaling

Are you trying to decide if franchising is a good option for your business? Check out Tom’s seminar, How to Franchise Your Business. Learn about the process and become equipped to make well-informed decisions regarding the future of your company today!

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About This Episode

“Should I franchise?”

 

It’s a question all successful business owners think about at some point. But a lot needs to happen before you take that first step: What type of factors should be in place before deciding to franchise, and how can you know if franchising is the right move for you?

 

Today we’ll talk with Tom DuFore, the CEO of Big Sky Franchise Team, where he supports and consults with Big Sky Franchise Team’s clients on their expansion and franchise efforts. So if you’ve ever wondered about how to and when to start scaling your business, Tom has the answers.  

1. For a lot of business owners, franchising is a scary concept, but it doesn’t need to be.

It’s just a conceptual idea that’s almost formulaic, as Tom demonstrates, and it shouldn’t be overwhelming. The idea isn’t to take over the world with your business. It can be on a much smaller scale – home services like painting, roofing or lawn care, or businesses like veterinarians. Keep it simple when you start considering franchising.

2. Inspect what you expect.

For business owners, that means making sure you have documentation about everything! That might not be a strength for some business owners, but there are a lot of great apps and other companies that can help you document. Tom Dufore’s company, The Big Sky Franchise Team, is a great example of a business that will help you document and organize so you can pass on your processes to others and grow as a business.

3. Franchising starts with small steps.

This doesn’t need to be overwhelming. It’s very easy to see if franchising makes sense for your business right now. It could be the time to make the move, or you may still be a few years off. Whatever the case, take the time to ease into the process and talk with trusted professionals to make sure franchising is right for your business. 

Have you franchised or considered franchising your business? What should be in place before you make that move?
Do you feel like your business would be a good idea for a franchise? Why or why not?
What are some of the better franchise models in the market today in your opinion? Why are they such good models?
What are some ways you can grow and expand your business beyond franchising?

Franchising helps you multiply what you do really well.

Tom Dufore

At its core, franchising is a method of distribution.

Tom Dufore

Franchising is oftentimes full of average businesses. They've just figured out how to do one thing really well.

Tom Dufore

Multiply your success.

Tom Dufore

(02:31) If Tom could have his own late night talk show, who would be his first guest?

(04:09) What exactly does Tom Dufore do when it comes to helping businesses franchise?

(05:14) What are some of the guiding principles for businesses who choose to franchise?

(08:33) What is the difference between scaling and franchising?

(10:01) Sometimes small business owners think franchising is their only expansion option, but that’s not true.

(11:50) What are some businesses that we don’t realize are actually franchises? 

(12:54) Franchises are composed of these three primary items

(15:23) As small business owners, it’s important to not limit your ideas when it comes to franchising. 

(16:56) Tom talks about documenting and operations as it relates to preparing to franchise. 

(19:14) If someone feels like they’re ready to franchise, how can they be sure they’re ready from a profit standpoint?

(22:06) What is one practical next step someone can do to head in the franchising direction?

(24:03) Franchising doesn’t have to be scary and shouldn’t be overwhelming. It can be on a much smaller scale than most people realize. 

(25:36) So much of the value of a business is in documentation. Inspect what you expect. 

(26:49) This week’s one next step: Go watch Tom’s video seminar on How to Franchise Your Business. Business owners can use it to learn about the process and make well-informed decisions about the future of their company.

Speaker 1:

The most popular category the last year, since the pandemic started is home services, painting franchises, window washing franchises, landscaping, power washing, all different kinds of businesses that you would never even imagine have been franchised. In general, if the business has just one operating unit and is doing well, that’s where most of our clients start.

Speaker 1:

Welcome to One Next Step, the most practical business podcast in the world, helping you get more done, grow your business and lead your team with confidence with tips and tools you didn’t get in business school. Here are your hosts, Tricia Sciortino and Lisa Zeeveld.

Tricia Sciortino:

Welcome to One Next Step, the practical business podcast that helps you run your business so it stops running you. I’m Tricia.

Lisa Zeeveld:

And I’m LZ. In today’s episode, we are focusing on something all successful business owners eventually think about, franchising.

Tricia Sciortino:

That’s right. So we brought in someone who knows all about this topic. Tom Defore is the CEO of Big Sky Franchise Team, where he supports and consults with Big Sky Franchise Team’s clients, on their expansion and franchise efforts. His depth and breadth of experience is expansive. Having personally consulted with and advised hundreds of businesses ranging from startups to some of the largest companies in the world.

Lisa Zeeveld:

Yeah, we’ll be talking with Tom about the mentality that successful franchise owners have. What type of factors should be in place before deciding to franchise and how you as a business owner can know if franchising is the right move for you. This is such a great relevant discussion because most of us wonder about how to, and when to start thinking about scaling our businesses, and guess what, as you’ll see, Tom has all the answers. So with that, let’s get the discussion with Tom. Welcome, Tom. We are super excited to have you join us on the One Next Step podcast.

Tom Dufore:

Thank you so much. So happy to be here. Thank you for the opportunity.

Lisa Zeeveld:

Yeah. Well, we’ve got some fun questions for you today, but we always like to start off by asking kind of an icebreaker. You know, you have your own podcast, but I’m sure you’ve got some fans out there who want to know just a little bit more about you. So are you ready?

Tom Dufore:

Yes.

Tricia Sciortino:

Ooh, teed that up good.

Lisa Zeeveld:

Maybe nervous?

Tricia Sciortino:

Now you made him nervous.

Lisa Zeeveld:

I know. Okay. So if you could have your own late night talk show, who would be your first guest?

Tom Dufore:

Oh, well for me, that one is, that’s pretty easy for me. My first guest would be Paul McCartney. I love the Beatles. And Paul McCartney is my favorite Beatle and have just followed him and just think he’s wonderful so, love the music he produces and maybe a little atypical given my age, I guess, but you know, I love, love the Beatles always have, so that’d be my first interview. My first guest.

Tricia Sciortino:

I’m impressed. How quickly you knew the answer to that question, I’d have to ponder on that a little bit myself. Yeah, that’s good. That’s good.

Tom Dufore:

Well, I always think, you know, it’s one of those questions where you get asked, well, do you think sometimes you get asked those questions and they’re like, well, could it be a living or do they have to be dead? I was like, well, if it’s a real one, it has to be alive, you know? So I was like, okay.

Tricia Sciortino:

Not the ghost of George Washington.

Lisa Zeeveld:

Right, no you can’t do those, you can’t do those. Yeah. I definitely dabbled in a little bit of Beatles, but it wasn’t until their one album came out, which of course is like the, you know, pared down greatest hits that I really fell in love with them. So a good choice. Good. I would definitely watch your late night talk show to see Paul McCartney, so…

Tricia Sciortino:

Yes, yes, yes.

Tom Dufore:

Thank you.

Tricia Sciortino:

Wow. Okay. So let’s talk about Big Sky and franchising. First, why don’t you just tell us a little bit about the guiding principles of your business and what it is you do and the model that you’re kind of teaching and walking through with franchising?

Tom Dufore:

Sure. Well thank you for the opportunity. Our company runs on our core values that are, are predicated by certainly our driving vision or purpose, which is to inspire and foster greatness. And so that’s everything we do orients around that. And we have three core values. We live by number one is win-win relationships. Number two is professional excellence. And number three is continuous improvement. And really those are in rank order. So I tell our team if at any point anyone is in conflict with the other, the superseding wins out if they’re ever in conflict.

Lisa Zeeveld:

I like that.

Tom Dufore:

So yeah, so I always try to give clear direction on that. And at Big Sky we help companies franchise their business. So primarily small to mid-sized business owners, expand and use franchising as a vehicle to grow their business, whether that might be regionally, nationally or internationally.

Tricia Sciortino:

Fascinating. So what are some of your guiding principles for business that do franchise? Is there like a checklist of things that are criteria that makes them ideal?

Tom Dufore:

Sure. So in terms of maybe what makes the business franchisable as a starting point to say, how would my business qualify to be a franchise? If I’m listening in, I’m thinking of growing I’m at that phase, what do I do next? How do I even know franchising is a good fit for me? And we use a few key drivers to help in that assessment process. Number one, we like to see that there is a profitable prototype. Do you have a business that’s operating? And we can break that down a little further by saying, well, you need to have a business model, that makes sense, certainly it doesn’t have to be the world’s greatest. A lot of times when companies think about franchising, they think that they have to have the world’s greatest fill in the blank, whatever it is, or the best fill in the blank.

Tom Dufore:

And franchising is oftentimes full of average businesses. They’ve just figured out how to do one thing really well or figured out the marketing secret to their business model. And maybe the balance of it’s fairly average, that’s okay. But it’s, we like to look at that profitable prototype. Number two, we want to make sure that there’s a customer base for that end customer for a franchisee, if they buy. And we like to see that there’s preferably a national customer base, because if you’re going to franchise, you want to have that ability to expand at minimum. It needs to be a regional customer base, sometimes our products or services. And you think about maybe even favorite foods that may be kind of regionally based. Well, if at least there’s a multi-state area, there’s enough room to grow and ideally it’d be great to be international.

Tom Dufore:

And then the third component is that you would be able to train someone how to run your business in a reasonable time period. And well, then the question is what’s reasonable and so reasonable in franchising and we typically like to see as short as one day, which is very short and not the normal. And then as long as two months, we typically see most franchise training programs range between one to two weeks is where we typically see a normal range. And for example, we have a client that is in the veterinarian business. So a franchisee in most cases is going to have to be a veterinarian. Well, in this client’s case, they will not be teaching their franchisees how to be a veterinarian, right? They’re not going to be a doctor, there are schools and things for that. However, they are teaching them the business practices. How do you actually run and operate a business? Because doctors, medical schools and such are great at teaching how to be doctors and veterinarians and so on, but they’re not business schools. So it’s teaching those business foundations and principles there.

Lisa Zeeveld:

Yeah, that makes sense. So I’m thinking through, we’ve got a listener right now. Who’s maybe thinking, okay, well I definitely want to grow my business. I want to scale my business. Is scaling, I mean, can scaling be franchising or is franchising different than scaling? Explain that to us.

Tom Dufore:

Absolutely. Franchising is a way it’s, it’s a method of distribution at its core. Franchising is a method of distribution for the product or service that you’re offering. And the original, I can’t say original, but an early form of franchising really stemmed from manufacturers when they were, had sales territories to increase distribution of products. And a good example might be dealers think of auto dealers or tractor dealers and different things like that. Manufacturers have these dealer outlets that are selling just their products. And then that came, moved into business format franchising, which was popularized by companies like Holiday Inn and McDonald’s and Dairy Queen. And these companies that came out in the early 1900’s. And so you’ll see that this kind of trend for growth through franchising and scale franchise and scale to me now I’m in the franchise and business kind of go hand in hand together.

Tom Dufore:

We, you know, we have a catchphrase here, which is multiply your success, which is what we kind of took that name from for the podcast that we run. But it’s the idea of multiplying what you do well, and franchising helps solve that problem when you’re looking to grow faster, reach more places more quickly. And it’s sometimes a small business owner thinks that just because they franchise that franchising is their only expansion option and that’s wrong. Franchising is one option that can be part of many. You can continue to open company owned locations or partners or bringing other people in. It’s just one of many options. So I’m not a one size fits all. It’s how can this fit in for your ultimate vision or where you would like to take the business.

Tricia Sciortino:

Yeah, I love that

Tricia Sciortino:

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Lisa Zeeveld:

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Lisa Zeeveld:

You know, you mentioned like Holiday Inn and I think it took me a long time to realize there were certain businesses that were actually franchised. I don’t know, are there any businesses that you think you probably don’t realize that’s a franchise? Anything that like sticks out? I’m just kind of curious.

Tom Dufore:

Sure. That’s a great question. The popular franchises, most people are familiar with are going to be certainly hotels, motels, food service. Those are really, really popular venues for it. There are other businesses that would not seem as likely, as you start getting into especially service oriented businesses. There are professional services, engineering firms, even specialty businesses, where to the consumer will not refer to their business as a franchise. So it may be referred to as an affiliate as a network member or something in that regard. But underneath of it all is a franchise agreement tying them together. And you know, there are a lot of misconceptions with what, what is a franchise? And you know, sometimes people say, well, should I franchise or license or create a business opportunity or a dealer or this or that. And franchising’s comprised of three primary items when a business owner and this case for a small business would franchise their business, they would sell the rights to someone to use their business name and then their business system for the payment of a fee. So name, system, fee, when those three pieces are in place, you are a franchise and you can call it anything else you’d like, you could refer to it as a license, an affiliate, a this, that or the other.

Tom Dufore:

But at the end of the day, you will be most likely a franchise.

Tricia Sciortino:

I did not know hotels were franchised. I just thought Marriott owned all the Marriott’s. I don’t know. So fascinating. Thank you.

Tom Dufore:

For example, in a Marriott’s case, those are going to be company owned territories. So it’s not every hotel, it’s not every motel chain, but a lot of them are. And if you haven’t ever noticed when you go into a hotel lobby, depending on where you’re located, if you’re allowed in a hotel lobby or not given the state of the pandemic and coming back to normality a little bit, but there’s always a little plaque up at the front and same in most franchised businesses you go into, there’s a little plaque by a front register, that’ll say owned and operated by some business name or a licensee or a franchise location of fill in the blank is a little plaque. You know, that’s maybe a six by six plaque that will say that on there, it’ll say managed by or owned by, something to that regard. So that, that’s a pretty, when you’re not looking for it, it’s easy to miss, but once you start seeing it, you’ll start paying attention.

Tricia Sciortino:

You’re going to see him everywhere.

Lisa Zeeveld:

The only reason I know is because I have this weird hobby I get on those real estate websites. And I always look for houses, properties. And then Tom, I shared this with you. When you, when I was on your podcast. I also look at businesses for sale because I love to learn about businesses. And so I kind of comb businesses for sale. And I would see that the Holiday Inn, or I think Hampton, I think they might be one of them too. And that’s how I learned T, that that was a franchise. It like blew my mind. Like I feel like on some of those websites, you can really learn a lot about different businesses and it’s become sort of this weird hobby for me, but I’m always surprised at what I see. And I think that goes, is really important is that as a small business owner, to not think you’re too small, I know that you said there’s a revenue, but to not limit your idea, you don’t have to be a quick serve restaurant, which I think a lot of us kind of get into business or, you know, adulthood thinking.

Tom Dufore:

That’s a great point. Yes, it’s a very common misconception as consumers, we see and purchase products from franchise businesses in many cases every day or every week, or at least every month, we’re going to a fast food restaurant. We’re going to a hotel. It’s these industries we’re very familiar with seeing, but there are so many out there, especially the most popular category the last year, since the pandemic started and continues on is home services. So home services franchises, painting franchises, window washing franchises, landscaping, power washing, deck washing, grill cleaning, I mean all different kinds of businesses that you would never even imagine have been franchised. Roof washing companies. I mean, just all different kinds of things that you might not think of that in general, if the business has just one operating territory or one operating unit and is doing well, it’s working, that’s where most of our clients start. That’s where they begin.

Tricia Sciortino:

That’s fascinating. So that tees into my next question perfectly. So the operating core of all of this is so important to the franchise model. So talk a little bit about documenting, processes, operations as it plays into maybe preparing to, or being able to franchise.

Tom Dufore:

Sure. That’s a great question. One of the questions we like to ask our customers or prospective clients or anyone who’s thinking about franchising we’ll say, well, is your business in a position right now that if you could give someone the keys, train them, hire a new manager, train them for a couple of weeks, give them the keys to the business. And then you go to Europe and not answer your phone for six months, could the business run and operate. And that’s kind of, that’s a little extreme, but that’s kind of like what it means to go through the franchising process.

Tom Dufore:

Now that’s on an extreme side, the idea being that if you could train someone to run your business in that let’s say two or three weeks a month or so on how to run the business and with some relatively infrequent support, because you’re generally not in the unit or at the business every day, there might be a connection point. It might be a phone call once a day, or it might be a video call once a week, but it’s not every moment of every day kind of micromanaging it and tying it back with BELAY here. I’ve always viewed, it hit me, someone brought to my attention that franchising is really kind of a form of a virtual business.

Tom Dufore:

It’s kind of this whole idea where, you know, you are not running that business anymore, someone else is, and they’re not right next to you. They’re, halfway on the other side of the country. And so you don’t know exactly what’s going on day to day and you’re trusting them with your business and processes. So documentation is important. Most small businesses, it’s an avenue that it’s for entrepreneurs that they tend to struggle with. It’s not a, strength of theirs and that’s why companies like mine exists to help them document those processes. Very often those processes do exist. They just haven’t been documented yet. So it’s going through that, that whole documentation process.

Lisa Zeeveld:

So what would you say, I know at the beginning here, we talked about there kind of three critical mass areas that you look at, but is it like a revenue size? I mean, how does somebody really know if they feel like they’ve got the documentation, they feel like, you know, they could train somebody in two weeks and run away to Europe if, when Europe welcomes us back, you know, and it is something that there’s a market for outside of their area. I mean, could somebody have a pretty small business? I mean, where does that profitability? I’m the CFO I need to know. Where is the profitability, where it’s in the numbers?

Tom Dufore:

Question. So I’ll give just kind of a high level, simple answer, and then I’ll do a deep dive into some real number crunching. So from a high level, if you’re selling your franchise to an owner operator, if an owner operator is going to come in and run that business, they need to be able to make a living running that business. So wherever they’re located, so a living now and in most franchise and for most franchisees operating the income to the owner operator, generally ranges no different than most management type positions. They’re going to range maybe from $50,000 salary to maybe $150,000. And looking at that as kind of just a barometer. Now we take a look at a return on cash investment for the franchisee when they come in. So we tell, we like to look at, so we’ll do a deeper dive here. We like to show in most, there are some exceptions, but in most cases, a 20% return on the cash investment for a franchisee that’s owning and operating that business.

Tom Dufore:

Plus the ability to earn a manager salary. And we look for them to be able to achieve that in their third year of operating. We assume the first two years, in most cases, they’re building the business they’re growing. And for most thriving franchisees, they’ll hit that in their first year or 18 months in. But we look for that. We assume it takes about two years for a solid break even. Things are going well. And we look for that return on cash investment number because the franchisee, when they come in, if they take a loan out, then the business should be able to service that debt that they took out to open and run that business. So we like to see that 20% return on cash. So if they took out, let’s just say it’s a $300,000 investment. And they took a loan out for $200,000 and they had to put a hundred thousand dollars in cash. We’d like to see a 20% on that cash investment in year three. And then it would be an annual return plus that manager salary.

Tricia Sciortino:

Perfect. Well, you have it down to a science. That’s really, really helpful. So if there’s anybody out there listening who is considering this, if you could give somebody one practical, like next step, this is intriguing for them. They find it fascinating. They want to consider it. What would you tell them? This is the one next thing they can do to hit in that direction.

Tom Dufore:

Sure. Well, the typical next step that we advise anyone who’s thinking about it is to, we offer a free consultation to anyone who’s thinking about franchising. So I would say, give us a call, reach out, send an email, ping us through our website. Happy to give anyone who’s listening in a free consultation. There are no, there are no fees for anything until you say let’s do business together. So we have a wealth of resources and information, including free seminars and webinars and content for people to take a look at.

Lisa Zeeveld:

That’s awesome. Well, this has been extremely helpful for us. I know just talking to you when we met at a networking event, I learned a ton about franchising, and I think it’s one of those things that people often shy away from. Not because it’s not the right fit, but because they don’t know enough about it. And so I think that just bringing it up more often and letting you know, small business owners know that this is a way to grow and scale their business could be super helpful because, you know, again, I like to make money. I like to help businesses grow and make money. And I think franchising is an awesome way to do that for them. So thank you, Tom, for joining us.

Tom Dufore:

Thank you. I really appreciate the opportunity.

Tricia Sciortino:

Yes, it was great to meet you, Tom. Thank you.

Tom Dufore:

Yes, you too. Thank you so much.

Lisa Zeeveld:

Well, Tom was an amazing guest and I know that the information that he shared today is going to be such a helpful plethora of knowledge for those small businesses who are considering scaling, but just don’t know how to do it. So what did you think, T do you got any good takeaways?

Tricia Sciortino:

Yeah. You know, this was a very fascinating call to me. We were kind of talking about this a little bit, but the idea of franchising is a very scary concept. You just think of the big players, you know, I think of McDonald’s right and franchising, but what I loved about, first of all, not only is he just, wow, what a book of knowledge on all things franchising, you can tell, we barely scratched the surface about what he knows about franchise. He had it down to like the nickel and the dime and the percent. And I love that. It’s fascinating, but he really took the fear or the overwhelm away from it being just a conceptual idea, kind of how he talked about home service businesses or the veterinarian story. Right. And like, Oh gosh, I would have never even thought about it. You can do it on a scale that’s appropriate for you.

Tricia Sciortino:

It could be a smaller scale. You don’t have to go to plan to take over the world, but you can plan to do it regionally or inside your state or so I just love that he took away kind of that overwhelm and fear factor for me in his kind of discussion about all things franchising.

Lisa Zeeveld:

Yeah. It makes it more attainable. Right. I mean, it’s like, Oh, what could I franchise, I mean, that’s kind of low I’ll franchise this and I’ll franchise…

Tricia Sciortino:

Yes, totally. As an operator, of course, I love the fact that he talked about, you know, documentation and operations and processes, because that’s like my love language right there.

Lisa Zeeveld:

Well, that’s exactly what I was going to say is it’s a good reminder and I’m going to take it just even outside franchising. You and I know this, like so much of the value of a business is in the documentation. Like you literally have to inspect what you expect. And I think that, you know, he mentioned it a lot of small business owners aren’t very good at that. And so they skip right over it and they think, I know they have the tribal knowledge. I know how to run this business. And they, they just never think to write it down. There’s a lot of great applications out there that make it easy to do, you know, to create a SOP’s, you know, or process documentation. So it doesn’t have to feel daunting, but it’s one of those things, even if you don’t think you’ll franchise, it’s just thinking of having a long view of your business and realizing maybe at some point you do want to take a sabbatical or just a long vacation, or you might need to think of succession planning who would perhaps own the business or run the business.

Lisa Zeeveld:

If you want to treat it more as an investment and not be such an active participant, that that documentation is really what makes the difference in any business. But Especially if you want to go into franchising.

Tricia Sciortino:

Absolutely.

Lisa Zeeveld:

Well, as always, we have a download for you so you can take your One Next Step. This week’s download is Tom’s video seminar on how to franchise your business. Business owners can use it to learn about the process and make well-informed decisions about the future of their company.

Tricia Sciortino:

Yeah. So text the phrase One Next Step to 31996, or visit One Next Step podcast.com and you’ll get access to today’s resources to help you keep moving forward. Thank you for joining us today. We will see you next week for another episode of the One Next Step.

Lisa Zeeveld:

Start by making today count.

Speaker 1:

Thanks for listening to One Next Step. Be sure to subscribe on Apple podcasts or follow us on Spotify. Then join us next time for more practical business tips and tools to help you get more done, grow your business, and lead your team with confidence for more episodes, show notes, and helpful resources. Visit One Next Step podcast.com.

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