Paul Segreto, CEO of the Franchise Foundry, joins us to talk about franchising and the process of taking a company with a proven concept and making them franchise-ready.
Please excuse any typos in this hasty transcript.
Jay Curry: Hello Texas! Welcome to Texas Business Radio. We have a terrific program today. We’re going to be talking about franchising and we’ve got four people coming in who are specialists.
And I think in this segment, we’ve got what I call, Mr.Franchise himself. This is going to be very informative. I’m Jay Curry your host. I have George Walden in for Matt. George thank you for joining us.
George Walden: Oh, my pleasure. I’m a huge fan of franchising. As most of you know, I’m an investment banker and help companies to buy companies. I believe the franchise model is a great model for developing business.
Jay Curry: Yes. Today we’re going to be talking about not necessarily buying it but how to build it. And this is going to be an interesting twist. But before we get started, let me remind everybody that you can call. We have a 24 hour call 844-814-8144, you can call that 24 hours. Give us your questions. We’ll get the experts. We’ll get them on. We’ll get you the answer. That’s 844-814-8144. Don’t try to remember that. You can go to Texas Business Radio and it’s there for you. We also monitor #TBR on Twitter. TBR as in Texas Business Radio. And of course, as I’ve already mentioned, Texasbusinessradio.com is where everything is. High definition, color videos of all of our guest, information about our sponsors, our host, everything. So at Texasbusinessradio.com. All right. We’re going to get started with Mr.Franchises is what I call him. Somebody is probably registered somewhere Paul. But Paul Segreto…
Paul Segreto: That’s good.
Jay Curry: Who is the CEO of Franchise Foundry. Paul thank you for joining us.
Paul Segreto: Thank you for having me. I appreciate it.
Jay Curry: So, what the heck is Franchise Foundry? What are you doing?
Paul Segreto: So, Franchise Foundry works with emerging brands coming into franchising. So basically, individual business owners that have a proven model for a period of time that decides to explore franchising as the next phase of their expansion or growth as opposed to opening up corporate locations. So, Franchise Foundry works with those individuals, putting them through a feasibility stage in order to determine if they are right for franchising. Not only the business model but also the, the founders vision and his, his mental makeup in being able to work with franchisees as opposed to employees, so to speak. As well, we also work with brands that have entered franchising and maybe have been just floundering around for a couple of years and not really meeting stakeholders expectations. And we helped get them on the right foot. And then in both cases, we also helped them with actual franchise sales and development.
Jay Curry: So to be clear about it, we’re talking about the franchiser. If you have a model and it’s profitable and doing well and you think it might be franchise-able. You’re the guy to call to help them figure that out. Right?
Paul Segreto: That’s correct. And in many, many cases there are individuals that even though they have a proven business model, might not be right for franchising. But taking them through some of the early stages, it actually helps improve their business. And allow them the opportunity or afford them the opportunity to be able to expand for additional corporate locations, now that they have systems and processes in place.
Jay Curry: Tell us a little bit, this franchising is big in America. It’s big all over the world. What have you seen? What are the trends in that area?
Paul Segreto: You know, it’s an interesting question. A lot of people don’t really understand franchising and its tenants. But it is the cornerstone of the, of the U.S. economy. And franchises are every bit mom and pop locations like independent locations except they’re part of a brand that has some established brand awareness and documented systems and procedures. Investment levels can go everywhere from, you know, $50,000 for a home based business all the way up to, you know, multiples of millions of dollars for hospitality and hotel, hospitality and hotel industry.
Jay Curry: Okay. What’s changed in the last five years? You were talking earlier with George and I about some of the things that have been going on. It’s been some pretty remarkable changes in franchising.
Paul Segreto: There’s been a lot of remarkable changes in franchising in that, over the last two and a half years Aziz Hashim, who was the outgoing chair person of the IFA and now runs the NRD Capitol. One of the, one of the strongest private equity groups in franchising that’s funded by franchisees of different models. He was quoted as saying on my podcast, Franchise Today, “That we’ve been seeing one franchise brand a day coming into the franchise space for the last two and a half years. And the trend is, is, you know, going to continue for probably the next two to three years”. So this all rides the, the fact that I had or a point that I had heard about franchising and entrepreneurship, that 40 percent of the population by the year 2020 will self-sustain with their own, with being able to generate their own income. Now, franchising is a part of it. Of course, there’s independent businesses, there’s multi-level marketing, sole practitioners, solo entrepreneurs, etc. But that’s a big number, so you have more and more people looking at franchising as the, you know, a potential opportunity.
George Walden: When we were talking earlier you referenced a couple of terms; sustainable franchising and sensible franchising. Could you go a little into that?
Paul Segreto: Sure. It’s something we’re very passionate about. My, my co-host on Franchise Today, Stan Friedman and I talk about this a lot. Too many people get involved in franchising as a get rich quick scheme. They look at it and say “Wow! I could, you know, sell a bunch of franchises. If the franchise fees $40,000, my God, I could be making all kinds of money”. But really the sensible part about it is being able to be sustained by your royalty stream. Meaning that as the franchisee is trained and supported and they start to grow, your income as the franchiser continues to grow. And then you have to make an ample investment back into your system in order to be able to educate and train and support those individuals. The, the wrong way to do it is to just jump in and sell franchises all over the place and then start to have them fail. You know, franchising is governed, its regulated by the federal government through the franchise, Federal Trade Commission. And in doing so there are certain criteria that we have to follow. So, if we have failed franchisees in the system, we have to disclose those in our franchise disclosure document.
Jay Curry: That’s not good news.
Paul Segreto: It’s kind of hard to get somebody to invest when they’ve seen a bunch of failures.
Jay Curry: So you do more, you’re going to help them figure out whether this is fit for their particular business. But you do more than that. Once they get into it, you kind of keep them on the straight and narrow. Right? What kind of services?
Paul Segreto: We a, we, we, we provide a variety of services at that point. Once they’re already into franchising, where we’re training their staff, we’re coaching the franchiser to be the right type of franchiser based upon the interdependency of the franchise relationship. And that’s very, very important that it is not a employer, employee type a relationship it’s inner dependent. Their success depends on yours and vice versa. What we also do is help them put together, you know, support programs, marketing programs. We’re very passionate about social media and communications. So we also help them through their first wave of franchise growth. Making sure they do that a sensible way. In a, in a hub and spoke type model as opposed to, let’s say developing here in Houston and Dallas and then all of a sudden you know running across the country. They’re never going to be able to support that franchisee. So we kind of hold the reins back on them.
Jay Curry: So, I don’t want to get past this segment without talking about your blog a little bit. You have a fantastic blog. Tell us a little bit about the Franchise Today blog.
Paul Segreto: Yeah. So Franchise Today is a podcast that’s on Blog Talk Radio. You can listen to it at blogtalkradio.com/franchisetoday. We’ve been doing it for, I founded it eight years ago, it will be nine years in January. We have 300,000 on demand, on demand listens a year. We’re very passionate about it. My co-host Stan Friedman helped me take it to a new level a couple of years ago and we have some of the biggest names in franchising. We’ve had GiGi Butler the founder of Gigi’s cupcakes, Dina Dwyer-Owens from the Dwyer group, Jimmy John Liautaud from Jimmy Johns sandwiches and the list goes on and on. And we talk all about sensible and sustainable franchising.
Jay Curry: So, that’s one hour. It’s all about blog, it’s all about franchising, it’s a blog.
Paul Segreto: It’s all about…
Jay Curry: You, you, you can go listen to it any time. It’s on BlogTalkRadio.com/franchisetoday.
Paul Segreto: That’s correct and it’s also on iTunes at Franchise Today.
Jay Curry: Fantastic. So, Paul Segreto…
Paul Segreto: That’s correct.
Jay Curry: The CEO of Franchise Foundries, who we’ve been talking to. Now Paul, if somebody has got the bug now, how do they get a hold of you?
Paul Segreto: Sure. The first thing they can do is look at our Web site at www.franchisefoundry.com. As well as, I’ll get my personal phone number 832-797-9851. Whether you’re looking to take your business into franchising or even if you’re looking to explore franchise ownership yourself, I’m happy to speak with you.
Jay Curry: All right folks, we’ve said about everything we can with Paul but we’ve got three more franchise specialists coming in. But before we go there, we’re going to have to take a break. Pay a few of our own bill. Don’t go anywhere. We’re going to be right back. We’re talking franchising.
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Jay W. Curry
Along with hosting “Texas Business Radio”, Jay is a Professional Certified Coach and Master Chair facilitating four Houston-based Vistage peer groups. In addition to being a best selling non-fiction author, the 2015 release of his award winning novel, Nixon and Dovey: the Legend Returns, adds novelist to his title. Jay holds a BS in Mathematics from Oklahoma State and an MS in Computer Science from Kansas State. You can learn more about Jay HERE.