Monday, 11 July 2016 10:53

Ringer Radio Episode 15

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Monika
Good afternoon, Atlanta. This is Monika Meacham and Gabriel Meacham here with you , with Ringer Radio. I hope that you are having a great Friday afternoon. As you all know, we love to bring in guests and we love to find out about different businesses and the way they start and what they go through and to help our listeners if you’re out there either with a business or struggling with a business or even contemplating having a business.

Gabe
If you have a successful business and it’s running and it’s going, at some point, pretty much every business flirts and fantasizes with idea of [“what if we can get really big] and what if we became franchised and what if everybody knew our brand?” and there’s a big leap there that happens knowing how to do stuff for yourself and be profitable just by yourself, then at some point the big hurdle of…I think it’s something that most people never have sat and talked with anybody that understands franchises and all the legalities behind it. All that being said, we have super special guest…

Monika
Tom Rather, here with us from Franchise ASAP. He has created well over 60-70 franchises, correct?

Tom
88.

Monika
Eighty-eight franchises across the U.S, including Canada.

Gabe
That’s a lot of personalities to have to deal with. We’re going to have a good time talking to him about some of the stuff he saw and maybe some tips for our listeners. By the end of it I would hope to know, if we’re honest with ourselves, what are the qualifications to say “yes, I would be successful as a franchise.” Because it’s not for every personality. It’s not for every business. Some businesses just need to know to just do what you’re doing, you’re doing awesome.

Monika
So how long have you been doing franchises now?

Tom
Since ’88. I got into the franchise industry selling ERA Real Estate Franchises and I didn’t really know anything about franchises or how they worked and after I found out what was involved it made sense because I was consulting for privately owned companies already…going in doing the Dr. Phil bit, slapping them around a little bit and telling them what to do. It occurred to me that on the sales cycle…either people know if they want a franchise or they don’t. If you ask somebody that owns a business “have you ever thought about franchising?” they know immediately what the answer is. If they have then we talk about it.

Monika
I would imagine that you’ve got to be all in or nothing with doing a franchise so it’s got to be quick response whether or not you would actually do it.

Tom
Exactly. I think that some people have a growth gene anyway. They get to certain point and they say “let’s go big time!” They’ve seen it happen to others. I had one franchise that we did out of Canada and he sold 35 the first year and 35 the second year and I called him and said “what are you doing? How are you selling so many franchises?” He said “well this is not the first time I’ve done this. I know how to do it. I hire the people and we’re doing the deals.”

Gabe
So in reflection what are some of the fastest growing franchises that you saw?

Tom
That one particularly is very interesting because it’s a screw jack and a screw jack is what you put into the ground to support a building. It could be under this building, for instance. I didn’t even know what a screw jack was…I’d never heard of it. You know what a foundation is but…he bought a screw jack company and started selling and franchising it and they’re going like gangbusters.

Gabe
I guess franchises aren’t always what you think. When I think franchise I think restaurant but I guess there’s all kinds of little business models.

Monika
He’s even got a Web Design one in his list here.

Tom
We need another one, actually.

Gabe
I always had this idea that it could be a kiosk in a mall…you train people the right way and once somebody’s website is enrolled in they system then anybody with proper training can manage that site.

Monika
I think he thinks there’s more people out there that want websites than there really is.

Tom
One very interesting one was a fellow came to me and he wanted to take orthopedic parts…knees, hips, shoulders…straight to the hospital from the manufacturers. Normally that goes through a rep and he asked me if I saw a problem. I said “yes, I see a problem. The reps are going to put a contract on you because you’re putting them out of business.” I had another lady in boulder that wanted to do a high end consignment shop…didn’t have a location, but she wanted to franchise. She said “do you see a problem?” I said “well, it depends on how good of a salesman you are.”

Monika
So she started doing a franchise before she actually had something to franchise?

Tom
Well she actually had a location by the time we go got finished with her but when she came she didn’t even have a location.

Gabe
I heard Mo’s was like that. They sold their first franchise without even having the first store up.

Tom
They tried to do Willy’s which is a local taco place here in town and they wouldn’t go for it so they…

Gabe
Is that what the back story is on that?

Tom
Yeah. About 75% of what we do is service related businesses…home health care, doctors, weight loss, medical marijuana, whatever…and 25% is food related. We’ve done 5 pizzas, 5 frozen yogurts…occasionally a fast, casual restaurant.

Monika
So I want to take this back a little bit…1988 you said you started this business. During the 90’s I’m sure you saw a lot of push in terms of, the economy was pretty good and there’s probably a lot of franchises going. How was it starting and ramping up as business owner getting your name out there? Was there much competition? Was there a lot of people in this industry? Was it really just finding those right people that had it in their mind that they wanted to franchise?

Tom
Well I came from a corporate background and back in those days I’d flown to LA for an hour meeting so I assumed that you had to do face-to-face with everybody. What happened by the time I got into franchising was people were more accustomed to the Internet, they were more accustomed to phone conversations so you could establish rapport with people over the phone and over the Internet. So when I found out that I didn’t have to go to California to franchise somebody in California I said “voila! I can do it from the mountains” like we’ve done for the last 6 or 7 years. That was a big surprise to me. Out of the 88 or so I’ve done, I’ve only met 5 or 6 of them. The rest of them are out there in the big, wide whatever.

Monika
So what do you provide a franchiser? Say we come to you and we want to do a franchise as a business. What is it that you provide in terms of the service?

Tom
Basically we talk about whether they are franchisable or not in the first place. [Will somebody buy them?] Are the economics of what they’re doing sufficient to support a franchise? Because the franchisee has to pay them a royalty and then he’s got to have enough left over to make a living basically.

Monika
So they’ve got to have a whole business plan ready for what a franchisee would look like?

Gabe
Like an action plan?

Tom
You would hope but in the real world that’s not really how it happens. Most of the time they think it’s too expensive for them to do it so when they find out it’s not it’s like “OK let’s do it.” They really haven’t put together a plan so that’s what we work on with them.

Gabe
That makes sense. So by the end of it you’ve got a full package that the potential operator or investor would look at and go “Oh, OK, I completely understand.”

Tom
Exactly.

Monika
Well at this point I believe we have to take a quick break so before we get into the next topic, why don’t we take a quick break and then we’ll be right back. Ringer Radio.

Monika
Welcome back, Atlanta. Again, this is Ringer Radio with Monika and Gabriel Meacham.

Gabe
If you have a second, please check out our website. It’s www.hirearinger.com. We’re going to be putting all kinds of new episodes and stuff like that on.

Monika
We’re pretty far behind in getting our episodes up but we’re working on it.

Monika
We’ve got Tom Rather with Franchise ASAP and a quick, fun, little tip about Tom…you might recognize his last name because he has a cousin named Dan Rather so he’s got some famous blood in his…

Gabe
Did you beat up Dan Rather when you were little?

Tom
No. he grew up in the Texas area and I grew up in Tennessee and Kentucky so there was no danger in us getting in a fight.

Monika
So Tom here has done over 88 franchise businesses and he’s here to help us all out to understand maybe if we’re thinking about doing a franchise or if you’re thinking about doing a franchise, he’s here to help us out and guide us and tell us what to do or where to go or how he will help you.

Gabe
Tom, let me ask you a question…I’ve always said you can pretty much smell success. Is that true of a franchise? Have you kind of adopted a palate to, upon talking to people, you can tell if they’re going to be really, really good at it or not? Is there that sense with you and if so what’s it smell like?

Tom
You would hope that would be true but it’s really not true because what you can’t tell at the point when you talk to them, when the run an operation, is you can’t tell if they’re going to be able to make the transition to managing other people doing what they’re doing. Usually a business owner is a dictator. He runs his own show. He doesn’t account to anybody except his wife, maybe. When he has franchisees he has to be able to manage them in a different kind of way…

Gabe
He has to become a server…

Tom
That’s right. You can’t really tell if he’s going to be able to make that transition. You hope that he can. You hope that he understands that he’s going to have to. I wish I could say that I’m able to pick them out but I really can’t. The most successful one that we talked about with the screw jacks, his real vocation is a drummer and here, he’s running a successful franchise.

Tom
In the last segment we were talking about profitability and whether they have enough profit for the franchisee to pay him a royalty and have enough left over to make a living…that’s the basic criteria. So once you get past that hurdle…

Monika
…so that’s federally mandated right? In order to be…[No] Is there anything that you have to pass in order to become a franchise?

Tom
Here’s what a franchise is…a franchise has a trademark that’s a license for somebody to use. They have a system that they train people to use and they require that they use that methodology. The third thing is they charge a royalty for the use of the trademark and the system. If it does those 3 things, it is a franchise, whether you call it a franchise or not. After that, what kind of royalty they charge, what kind of franchise fee they charge is pretty much up to the individual that franchises their company. Of course, we guide them along and we tell them what’s normal and what’s expected.

Monika
What’s about the average that you generally see in terms of how much a franchisor can charge its franchisees?

Tom
A franchise fee runs $25,000 - $30,000 and what that’s for is to pay for defining the franchisees and to pay for training the franchisees.

Monika
Is that one time? Yearly?

Tom
One time and then renewed 10 years later…they pay it again or a fraction of it again. Then they have to pay a royalty on a weekly or monthly basis based on their gross sales. That generally runs 5% - 6% of total sales. So a franchising company needs to be earning about 20% - 25% true net profit because 5% is really 20%. Once we talk about that we get down to what you have to do to be a franchise, which is a disclosure document, about 70 – 75 pages long [very big document]. My wife does those, thank goodness.

Monika
So is your wife with you in this business? Is she in another business that’s streamlined with you?

Tom
She’s in the same business with me and fortunately it works. She has an office upstairs and I have an office downstairs, plus a couple of her Executive Secretaries that are retired work for us also. They were all buddies in the corporate world and they’re just super qualified people. You couldn’t hire those kind of people off the street.

Tom
The key to our business…when somebody contacts us they don’t have any idea whether we know what we’re doing or not but what they find out very quickly is how accessible we are. Sunday night I get a call about 6:30. This guy in Vegas calls me and wants to franchise his business. We talk a few minutes and the next day I send him a proposal. For me that’s not an intrusion. So from that point of view you’ll develop a friendship even though you’ll never meet these people.

Monika
Do you know how many people in the US have a business like yours? Are there many of you?

Tom
There are not a bunch of them. There are 2 big ones in the Chicago area…FranCore and I Franchise.

Gabe
From my experience it’s rare to find somebody with a franchise, and that’s all they do, vs. somebody like a Graphic Designer who says “Oh, we do franchising as well.” You want guy that that’s what they do.

Monika
That knows all the legality behind it. I remember you said you have lawyers…

Tom
We’ve got a great franchise attorney that works with us on our documents and reviews them.

Gabe
We’re about to go to break but why don’t we open up the microphone for if somebody wants to get ahold of you. What’s the best way?

Tom
The best way is either an email: tom@franchiseasap.com or my cell phone: 770-595-1055.

Gabe
With that we’re going to go to break.

Monika
Welcome back, Atlanta. Again, we’re here with Ringer Radio with Gabriel and Monika Meacham. We have Dan Rather here with us from Franchise ASAP. So we’ve been talking to him about franchises and when you know what you’re doing and whether or not to go into a franchise. I guess we need to go into more about whether you’re ready to go into a franchise.

Gabe
There’s a difference…there’s those that are ready, meaning they really want to and they feel it’s the next step, but technically they’re not ready. There’s things they don’t even know they should have thought about. How do you know when you’re ready?

Tom
I think the thing that stops most people is they think it’s too expensive. They’ve talked to some of the big guys and found out it could cost you close to $100,000 to franchise and they say “we clearly don’t have that laying around.” So when they find out it’s affordable then they begin to think seriously about it.

Monika
So what’s affordable? Can we tell our folks how much they should be thinking about?

Tom
Affordable is below $20,000, including their trademark, which is manageable for a lot more people than $100,000 is.

Monika
From what you were saying earlier, average franchiser gets $25,000 per franchisee so they basically can pay it off in the first one that they get.

Tom
Exactly. The economics of franchising from a franchisor point of view is you pay for the cost of franchising with the sale of 1 franchise. You double your present bottom line with the sale of 4 franchises. The leverage is there. I don’t know of any kind of investment that pays that kind of return and once they understand that it makes a lot more sense and then they begin to get prepared. You learn on the job basically. You learn by doing so once we go through the documentation process with the prospective franchisor…the Disclosure Document (about 75 pages), the Franchise Agreement {what the 2 of them sign and it mirrors what’s in the disclosure document) and the Operations Manual. We also do an Operations Manual for them. About ½ of that is about How do you run a franchise and what’s involved in being a franchisee. The other half is How do you run the burger place or the cleaning or the home healthcare.

Monika
Now I know a lot of business, in order to be successful as a franchise and in order for their franchisees to be successful, there’s got to be good marketing and branding behind the business. Do you get involved there? Do you give assistance? If you see something that’s not good branding do you say something? Is there a requirement of some sort?

Tom
There’s no requirement but it makes perfect sense that if you’re going to impress people to buy your franchise then you ought to be able to be presentable. You don’t have to have the latest state of the art, but that’s when I introduce them to people like yourselves who know how to do those things.

Gabe
Make it look pretty. It also builds value. At the end of the day, if you’re going to go out and try to sell a franchise, you’re going to go out and try to sell a franchise for as much as you can so it’s all part of that whole mix.

Monika
Do you have any good stories or tips for our folks out there in case they’re on that teetering point or maybe they’re about to do it and they want to pick up the phone but they’re not sure if they have everything they need? What do they need to have in hand or ready to go before picking up that phone and calling you? Is there anything?

Tom
Well, they need to download our e-book, which is pretty explanatory on what all is involved in franchising.

Monika
You have a free e-book out there?

Tom
Yes. Just go to our website [www.franchiseasap.com] and you’ll be able to download it right there. Call us. It doesn’t take 10-15 minutes to figure out if you’re close or not.

Monika
Apparently you don’t even need a location to start the franchise process.

Tom
You just have to have the desire to start one and a good ‘why’ you’re doing it in the first place. I was just reading an article this morning on Tom’s shoes…the guy that sells a pair, gives away a pair…it’s not as easy as it sounds. They do about $400,000,000/year and he was having some growing pains so he had to bring in an investor. It’s in Inc. Magazine this month.

Gabe
That’s definitely a trend with the Gen Y…they put the social aspect to the business, which justifies the business itself.

Tom
I think that people haven’t really thought through enough on what would be involved on actually doing it because their financials are not quite where they want them to be or they don’t think their profitability is sufficient so they need to talk to somebody like ourselves that can tell them “Look, what are you waiting on?”

Monika
That actually brings up an interesting question: how do you go about getting sales, in general, for your business? You’re a B-to-B type of business and there’s tons of businesses out there but you can’t pick up the phone on all of them. Do you get word of mouth? Is it referral? What’s driving your sales?

Tom
Ouija board comes in handy. You have to be committed to doing it. When I drive all over Atlanta, everything I see is franchisable in one way or another. There’s about 20,000,000 businesses in this country and there’s about 4,000 different types of franchises, so if you divide that out it will tell you that 1 out of every 4,000 or 5,000 businesses could franchise. Does that mean you have to call 4,000 businesses before you find one? No. Not necessarily. You have to have a website. You have to do a little pay-per-click. You have to write a blog. You have to tell everybody that you run into what you do. You have to get on a radio show like this. You just have to be committed to doing it.

Gabe
Become a beacon and let them find you.

Tom
I was driving around one day and I saw this kids’ Say & Play van. It had a big number on the side so I called it and I said “hey, you ever thought about franchising?” She said “I sure have. We need to talk.” But that happens very rarely but it can happen. It just so happened that that was the cell phone of the girl that owned the company.

Monika
I guess a big key is if somebody’s spending money on advertising then there’s possibility they want to grow and be bigger than what they already are. They understand the value of the advertising in the first place.

Tom
Where do those people hang out? They hang out on Groupon. They hang out on [Angie’s List]. And you notice that Berkshire Hathaway and Amazon are also in that same market now. They’re doing home improvement businesses. Everybody that’s advertising that way is a potential franchisor.

Monika
I hope to do that someday. I’ve always dreamed of having several businesses…not just the one we have with Ringer, but actually growing and starting other ones because Ringer’s a great catalyst for other businesses in my opinion. Eventually, maybe someday, we would look at doing a franchise. We’re going to go ahead and take a quick break since we’re at that time. We will be back.

Gabe
Hello and welcome back to the show. This is Gabriel Meacham and Monika Meacham with Ringer Radio. Future Gabe, you’re awesome. Stay awesome and I love ya.

Monika
You can tell Future Monika, your wife, the same thing. That would be cool.

Gabe
Future Monika, you’re awesome and I love ya.

Monika
We have Tom here with us today. We’ve been talking to Tom from Franchise ASAP. He’s been helping us out to understand about franchising and if you’re looking to franchise he’s a great resource to use. It’s much cheaper than you would think. It could cost as low as $20,000 as I understand and you make it back after you get your first sale. I’m not saying you don’t have to put in your own hard work but…

Gabe
Really, what you’re doing is you’re giving them all the technicalities and everything they actually need [the documentation] to comply with the law…

Tom
We make them legal…

Gabe
But you still got to have that drive.

Monika
You still have to sell it at the end of the day. You’re going to have to sell the franchise and make sure it’s marketed well.

Gabe
Are there companies out there that post-franchise, help people sell franchises?

Tom
They do. They’re called portals. They have websites and they’ll have 200 franchises that they have on their website. Their hit rate is about 1 out of 100 so from my point of view that’s not something I want to do.

Gabe
It’s another mechanism to eat margin really.

Tom
Part of the reality that I’ve talked to people about that think about franchising is to tell them that ‘nobody wants to sell your first franchise, so you’re going to have to sell your first few franchises…period, no matter what route you take after that.’ Once they understand that and they’re still on board…

Gabe
I guess after you get a good 5 franchises under your belt it’s pretty easy to find a salesperson because you’ve already proven that this is a sellable concept and any salesperson is going to jump on that.

Monika
You gave us this cool little list of all the different types of industries you’ve done a franchise in and one of them sticks out to me because it’s very different…Nerf Battlefield.

Tom
It’s interesting. It’s in Boise, ID and I came across it because one of our kids and grandkids lives in Boise and we came across it. They are nerf guns that shoot nerf bullets. It’s like paintball but it doesn’t hurt.

Monika
So did you ask them if they were interested in franchising since you saw it?

Tom
Yeah. That’s one of the ways you find clients. You go do things.

Monika
So for those of us that might be interested in franchising, again, can you give everybody your website and your phone number for them to reach you at?

Tom
Sure. It’s franchiseasap.com and my cell phone is 770-595-1055.

Monika
Wow, this is how dedicated he is. He gives you his cell phone number. That’s awesome. So do you have any questions for us at this point? Do you have any good stories you want to tell us or tips?

Tom
Five years ago we got a call from Oakland, CA about medical marijuana. That was before it really came on the scene so much.

Monika
It was legal already right?

Tom
Medical marijuana was legal in California but only medical marijuana. So I have a very conservative franchise attorney that reviews everything we get. I called Joe and I said “Joe are we going to do this one?” He said “if it’s legal we’ll do it.” So we did it.

Monika
So this is just a supply store or was it actually medical marijuana itself.

Tom
It was actually a combo. They actually issue medical marijuana cards for people that have prescriptions for it and they actually provide grow equipment for people that want to grow their own. It’s like a hardware store for marijuana growth equipment.

Monika
So I’m sure if somebody came along at this point and they actually sold in Colorado or up in Portland or maybe even Washington and they called you up and said “I want to start a franchise.” You’d be all for it, it sounds like.

Tom
Absolutely. If it’s legal.

Monika
So do you have any other questions for us or any other topics?

Tom
Have you ever thought about franchising?

Monika
Ringer? He’s thought about Ringer.

Gabe
We have. It’s one of those things that especially the technology industry uses, changes so rapidly. I almost think that if it was wrapped as some kind of education thing it would be easier to franchise rather than just the service of Design. I’m sure we can bubble it down to what a lot of businesses do and bubble it down to McDonald’s menus and say “if you want a website with this, this, this and plus fries” I can teach a bunch of people how to do that but that business model is much lower than we want to be. I would love to think about it and figure out how it could work but for high end stuff, to where there is no menu and all you have to do is sit and listen and figure out what this guy needs and figure out how to deliver that in a world where there is no set way of doing it, but 100 different ways you can skin that cat, you just have to do it the way it works best for the client. I’d love to but if anything I think it would be a bubbled down version…

Monika
Like you’re a la carte kiosk thing.

Tom
I’ve always thought that the model that would work for a company like yours is you execute corporately and you fade…

Monika
That’s what he said…maybe open up sales offices or franchising it that way and then in-house, doing all the work.

Monika
We’ve had a pretty good show today. We’ve had Tom with us. Tom, thank you so much for being with us. If anybody has any franchise needs, please reach out to Tom. I’m sure he’d be glad to give you a free consultation and walk you through whether or not you’re ready and walk you through to become a franchise. Again, if you’re looking for the branding for that franchise or your website, give Ringer Consulting Group a call. You can reach us at www.hirearinger.com or at 404-369-0009. Have a wonderful Friday.

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