Mar 18, 2020
I’m joined on today’s episode of Franchise Secrets by my good friend Kevin Wilson. As someone who originally started in private equity, moved into franchising and now runs Buzz Franchise Brands, Kevin brings a unique perspective with different insights from most of our guests. What I find really sets him apart is his ability to understand both the franchisee and the franchisor, as well as the best approach to creating a high functioning business with the intent to build equity.
Today we cover a wide range of topics from planning an exit strategy, to making decisions for the long term, to one important trait that most successful people have in common, and so much more. I love Kevin’s take on how to start the franchisor-franchisee relationship off on the right foot as well as what you can expect a potential investor to be looking for when you ultimately plan to sell a franchise business.
This episode is perfect for anyone just starting out in franchising that wants to learn how to plan for the long term, or people with a few franchises under their belts but looking to level up their game and eventually plan a graceful exit. Tune in for an hour’s worth of gems from Kevin!
5:27-10:26 - Not paying for marketing and other common mistakes young franchisees make
12:43-16:03 - Leading and caring for your franchisees
16:25-21:11 - How to vet a potential franchisor
21:11-26:16 - Laying the foundations for a good franchisor-franchisee relationship
31:08-35:56 - Positioning your business to be valuable to an investor
41:17-53:57 - Kevin’s brands and the lessons he’s learned along the way
The Foundations of a Good Working Relationship
90% of the battle in having a good relationship is starting off on the right foot. If you begin your relationship with honesty and reasonable expectations, the path forward will be that much more smooth.
Everyone is going to have hiccups along the way, but that is part of the journey. Before you invest your money in a business you should always feel confident that your business partner is going to be right there in the trenches with you, picking you up when you falter.
A good franchisor should be honest with you about the fact that it won’t always be smooth sailing. Address this before hand and make sure you know what will happen when someone does make a mistake, whether it’s you or them, and how those mistakes will be rectified. Make sure they know that you are there for the long haul, ready to roll with the punches, and make sure that you feel confident they will be there for you. If you establish this precedent early on, your working relationship will begin with a respect that is easier to maintain.
Planning Your Exit
Almost every franchisor and franchisee that I know ultimately plans to exit their business. But not all of them really understand what they need to do in order to build a business that is not only well run, but also attractive to investors.
What would you be looking for if you were buying into a business? You would probably want to see that the business was running well but that there was also significant room to grow. Not many people want a stagnant business plan, and you want to make sure you’re putting yourself in a position for your business to be as attractive as possible.
Have you planned out a timeline for when you want to exit your business? Do you have good relationships with your franchisees? (the ones who potential investors will definitely be speaking with!) Have you built a strategy that can continue to grow well into the future? These are all questions you need to keep in mind right from the beginning, all the way until you actually make a sale.
The Doom Loop vs The Success Loop
There’s a reason that most businesses fail in the first 5 years. Actually there are many reasons. One of the common mistakes that young business owners make is not understanding the need to constantly market. They think that once they’ve built it, the customers will come, especially in a brick and mortar store, but that is simply not the case.
Franchisees who fall into this mindset often cut marketing costs at the first sign of any type of slowdown in their business. When the revenue starts to drop they begin looking for places to save money, but this is a grave mistake that can curse your business. When they stop investing in marketing, the business drops off even faster, giving them less and less revenue and ultimately trapping them in a downward spiral.
That’s why having a top notch franchisor is so important. Not only can they help you avoid pitfalls like this, they can actually provide capital when times get tough, avoiding the doom loop altogether and replacing it with a success loop! Who wouldn’t like a nice little success loop in their life?