Your Franchise on Steroids

By Greg Barton

$2.26 per hour! I tripled checked the numbers and a horrifying wave of shock hit me like a ton of bricks. How do I explain to my wife that we just worked the last six-months of our lives for less than minimum wage? I push back the overwhelming feelings of dread that I may have made the worst decision in my life! Gone was the excitement and pride of owning my own business. I'm left with nothing but the realization that after all this hard work, investment and risk, we were drowning in the proverbial franchise pool.

This book is designed for franchise owners or those considering a franchise in their near future. So, if you are reading this page while sipping on a low-fat latte and considering a book purchase, it means you already own or are considering to take the franchise plunge! The objective of this book is to toss you a life-line and to teach you concrete strategies and the immediate actions that anyone can follow to succeed. The book takes you from drowning in the deep-end and shows you in easy to follow steps how to not just swim but become a top performer. There is no need to spend weeks, months or years struggling to optimize your franchise, like I did. This book is the shortcut to put your franchise on steroids and become one of the many newly minted millionaires that franchising consistently produces each and every year!

• Language: English
• Publisher: Tellwell Talent
• Release date: Aug 5, 2020
• ISBN: 9780228834328

Greg Barton

Greg Barton is an award-winning twenty-year franchise veteran, with extensive experience in multiple markets with one of Canada's most well-known franchises, Tim Hortons. He has created an online learning program to help new franchisees accelerate their franchise to the next level at www.franchiseonsteriods.com.Greg was successful with taking an underperforming franchise that was declining in sales to the highest net sales in the entire chain, growing sales by over five-hundred percent. This was achieved in a remote community with a population of only eighteen-thousand people. His franchises have won multiple franchisor awards and awards from the Government of Canada for community service, and he was presented with the highest civilian honour from the Minister of Defence and the Canadian Armed Forces. He graduated from the Haskayne School of Business (Calgary) with an MBA and is a Certified Professional Accountant (CPA).Greg was born in Minto, New Brunswick, and has lived in Osaka, Japan; Toronto, Ontario; Yellowknife, NWT; and even Cambridge Bay, Nunavut. He currently resides in Calgary Alberta.

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Your

Franchise

on Steroids

Greg Barton

Your Franchise on Steroids

Copyright © 2020 by Greg Barton

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the author, except in the case of brief quotations embodied in critical reviews and certain other non-commercial uses permitted by copyright law.

Tellwell Talent

www.tellwell.ca

ISBN

978-0-2288-3431-1 (Paperback)

978-0-2288-3432-8 (eBook)

This book is dedicated to my wife and son, who have always unconditionally supported me.

Table of Contents

Chapter 1  Keeping Your Head Above Water

Chapter 2  Choosing The Right Franchise

Chapter 3  How Much Should My Franchise Make?

Chapter 4  Learning How To Swim

Chapter 5  Managing As A Lifeguard

Chapter 6  Operations Manager

Chapter 7  Document Everything!

Chapter 8  Time And Motion—Steps To A More Efficient Operation

Chapter 9  Cutting Costs Strategically

Chapter 10  Putting Your Drive-Thru On Steroids—Blood From A Stone!

Chapter 11  The Root Beer Rule™

Chapter 12  Losing Money From Absenteeism Is Making Me Sick!

Chapter 13  Optimizing Your Staff Profit-Sharing Program

Chapter 14  On Your Mark, Get Set, Grow!

Chapter 15  When Is The Right Time To Sell?

Chapter 16  What Does The Future Of Franchising Look Like?

CHAPTER ONE

Keeping Your Head Above Water

The title Your Franchise on Steroids may appear perplexing to some. Steroids portray an image of high-performance athletes who take short cuts to get an edge on their competition. There have even been a few high-profile cases portraying decorated champions as nothing more than drug-enhanced frauds. This book doesn’t purport that athletes or everyday people should engage in steroid use. In fact, it has nothing to do with the actual drug itself. It is simply a contrast that suggests if you could find a performance-enhancing strategy for your business, wouldn’t you take it?

I have spent years optimizing my skills in accounting as a CPA and improving business strategies through an MBA and applying these skills to franchise operations. My trials and errors eventually led to my franchise becoming the number-one-ranked Tim Hortons franchise (in terms of pure sales) worldwide. I have leveraged my franchising success into commercial real estate acquisitions. This has provided me with a clear understanding of the importance of site selection and what drives traffic to a new franchise site.

I have taken my experience, expertise and know-how and packaged it into the key drivers of franchise success. It has taken me twenty-years to learn these skills … there is no reason why you, a franchise owner, should have to do the same. There is a short-cut to franchise success and this book is it.

The customers are beginning to line-up outside and a surge of energy fills you with pride as you open the doors for the first time under your ownership. This is the day you become master of your own destiny, handler of your own road map and the moment you finally get to be your own boss. Last week, during franchisee training, you felt like you could conquer the world; now your feelings of pride are quickly turning to apprehension as you scramble to finish last-minute prep before opening. You are short-staffed, the milk distributor shorted your order, the air conditioning is not working because it’s not fully installed yet and the third person in line is the health inspector. Two big thoughts are racing through your head. … I thought this was a turnkey operation? and Did I just make the biggest mistake of my life?

Welcome to the wonderful world of the franchisee.

I have designed this book for franchise owners and anyone considering a franchise in their near future. So, if you are reading this page, it means you own or may want to own a franchise. You are either one of over 800,000 franchise owners in existence or one of the thousands who will join their ranks in North America in the next few years.¹ You may be one of the franchisees who go to your business each day and ask yourself why it is you are just keeping your head above water. Each day you put in the hours but as the months pass you get more and more tired while your financial picture remains relatively the same.

You finally ask yourself: Did I just buy myself a job or do I have a business that can make a meaningful improvement to my family’s life?

In this book, I will demonstrate concrete strategies that will help franchisees succeed while avoiding some of the most common pitfalls. You’ll go from treading water in the deep-end to learning how to swim in the proverbial franchise pool. I will give you concrete strategies you can implement today. Not only will you learn to swim, but I’ll teach you how to get out of the pool and into the lifeguard’s chair and eventually into the upstairs office as the operations manager.

The success rate of independently opened businesses is grim. According to the U.S. Bureau of Labor Statistics, 70% of independent business start-ups survive the first two years, 50% survive the first five and only 30% exist after ten years.² Compare this to franchises where 92% of franchisees were still in business after two years and 85% survived a full five years.³ Put another way, with a franchise you increase your odds of success by almost 100%. It is one of the key reasons people flock to proven franchise models every year. In fact, the majority of new businesses that will open this year will be from some type of franchised m odel.

Great, you made the right decision but what about the 15% failure rate? I thought these concepts were guaranteed to work? Not only do 15% of them fail but another 10% of franchises are re-sold within the first two years. The number one reason franchisees sell existing franchises is poor financial performance. It’s not that this 10 % of franchises are not profitable but making a $30,000 profit in your first year for working ninety-hour work weeks will start to take a toll on any highly motivated franchisee. It seems the lustre of being your own boss quickly fades when you haven’t slept or seen your family for several months.

The really smart franchisees start figuring out what they could have been making with a similar skill set in the open market (a concept known as opportunity cost and one we explore in detail in chapter two) for a forty-hour workweek. They calculate what they are making now and quickly figure out that they just went into business to make less than minimum wage for the past year: a rate of compensation that is totally legal by the way, since you are not an employee of the franchisor. You, my friend, have an independently run business that is expressly licensed to use the trademarks and systems of the franchisor. In other words, yes, you legally can work for below the minimum wage in the U.S. and Canada under a franchisor model. Not only that but you probably just invested most of your family’s savings and have put yourself heavily in debt to do so.

Before you get too depressed, remember that the franchise model has also produced more millionaires than virtually any other system in the world. In fact, the top franchisees across almost every industry and sector make much, much more than a good living. In this book, I will provide you with some expertise, direction and strategies to be one of the top franchisees in your field, and I will also provide you with some sound advice for when and how to move on. We’ll examine some of the big questions, such as:

1)How much should your franchise be earning?

2)How can you get out of the deep-end and start managing this thing?

3)What operational strategies can you implement to become a top earner?

4)How can you optimize your staff contributions and keep them motivated?

5)What if your operational strategies don’t comply with the franchisor?

6)Should you buy a second, third franchise? If so, when?

7)When is it time to get out?

Many franchisees continue to struggle and expect the franchisor to have all the answers. The unfortunate truth is that the franchisor can, in some cases, offer advice but don’t look to them to save or turn around your franchise. The franchisor’s top people are focused on franchise sales and hopefully new products and the marketing of existing products to drive sales. They simply don’t have the resources to make your franchise successful. Many disputes, including some nasty legal ones, have been born of this fact but the simple truth is that they have very limited resources to examine your business in detail. They send inspectors around (usually called regional managers) to ensure you are meeting licensee standards and policies. Frequently, these inspectors are young college grads who have never owned or run a business in their short lives and have limited management experience. The franchisor’s person in the field is focused on maintaining the minimal acceptable standards, not performance-driving strategies.

In his book Outliers, Malcolm Gladwell describes the upper and lower outliers of the normative curve (bell curve).⁴ The franchisor spends their focus on the lower outliers: people losing money, franchisees poorly representing the brand or those not paying royalties on time … in other words the franchisees in serious trouble. If your franchise is somewhere in the middle, or an average performer, then it’s considered within the bell curve. This means you are on your own to make it to the upper outlier range, the mystical place where the franchisees are making the big b ucks.

In his book The E-Myth Revisited, Michael Gerber states that franchising creates an ideal system of processes that can be replicated time after time.⁵ It is true that franchised systems reduce failure rates by creating systemized processes for franchisees to follow but processes are only as good as the franchised system. If franchisors are not sharing best practices and constantly integrating those practices into improved systems, then simply following processes day in and day out means you will be stuck somewhere in the middle of the bell curve forever. There is nothing wrong with being average but if you want to make serious money, you need to get in the top 10% or upper outliers’ group as fast as poss ible.

This is where I have put some well-tested strategies to get you out of simply treading water in the franchise pool to getting you managing your franchise. I teach you to implement key strategies to put your franchise operation on steroids. However, before I take you there it is critical to know what success looks like. What is the minimum bar and when do you know you have made it or when can you tell that your business has improved?

For existing franchisees and those of you still considering your franchise options, there is one very quick and dirty way to figure out if you have your head above water: I developed the 10/20 Rule™.

My 10/20 Rule™ is simply a quick calculation or test to see if your franchise or prospective franchise meets two important financial tests. If your franchise or prospective franchise passes both these tests, then one of two things is occurring:

A)As an existing franchisee, you have your financial head above water; or

B)As a prospective franchisee, you should keep moving forward with the franchisor.

The 10/20 Rule™ test is this:

1)Is your franchise making 10% EBIT or greater (earnings before interest and taxes)?

2)Do your rent, royalty, and advertising expenses add to 20% or less of revenue (sales)?

TEST ONE: The 10% rule simply says that you should have at least 10% of your earnings left over to pay interest, taxes and then yourself. Interest and taxes are not included in the initial calculation because interest rates on loans vary greatly based on the lender, such as a bank, credit union, government program, family member, friend, credit card, loan shark (you get the picture), and taxes vary greatly by country, state or province. Also, franchisees invest differing amounts of equity in the initial start-up. Using earnings before interest and before taxes neutralizes these personal and specific variables.

Is your franchise earning below 10% EBIT or has your prospective franchisor provided you with some Performa that has an average EBIT below 10%? If so, then you may want to take a second look. For those not familiar with the term Performa, it is defined in accounting as a set of financial figures that are hypothetically based on previous business operations for estimate purposes.⁶ If you consider an earnings rate below 10%, you will first need to pay your interest expense, then your