In this post, I’m going to teach you how franchising works.
To be sure, there is no question that dozens of articles have been written explaining franchising. Some of them are excellent. But here’s the thing.
None of them include Jerry’s way of explaining how franchising works.
The best part?
A few paragraphs from now, you’re going to have an “aha” moment. Just like I did when I first heard
Jerry’s my dad’s explanation of what some have called “The best business model ever invented.”
In January of 2011, my late father, Jerry Libava, finally convinced me to join his franchise brokerage firm.
I had been
downsized fired from my management job at an automotive franchise and was looking* for a new job.
* I was “kind of looking,” if you know what I mean.
Did I mention how nervous and miserable I was?
Between not having any luck getting a job, my dad hammering on me to join his firm (several times a week), and my wife giving me “that look” on an almost daily basis, I felt like I had to do something. But what?
To be completely honest with you, I didn’t want a “job.” The idea of working for yet another band of idiots wasn’t very appealing.
That is why I finally succumbed to my dad’s badgering.
I did so after I got a better feel for what my role would look like as a franchise broker. So I decided to join him, and by doing so, I officially become my own boss.
Next, it was time to learn more about franchising. And this is the part you’ve been waiting for.
How Franchising Works: Just Add Water. What?
A month or so after I joined my dad, I flew to Carlsbad, California for training.
The training I received was terrific. I learned a lot about franchising and even more about becoming a franchise broker. And when I got back home my dad taught me even more about the franchise business model.
Speaking of training, part of my dad’s training involved attending local franchise ownership seminars he put on. He showed me how to set them up, how to get local people to attend them, and more.
In addition to the public seminars, he was the “go-to” guy for all of the local Outplacement firms in our area. He would speak to groups of downsized managers and executives about franchising.
The first one I attended changed everything for me.
Because of the way my dad explained franchising, and how it works.
Basically, by the time he was done, I was able to “see” what franchising really was. And you will to.
Baking A Cake, Part 1
Here’s how my dad explained franchising to a group of people who had recently been downsized from their corporate jobs.
This is the best way I know to explain franchising.
Let’s say you want to bake a delicious chocolate cake. (The recipe below is courtesy of David Lebovitz, a top pastry chef)
The first thing you need to do is gather your ingredients. They include:
10 ounces of bittersweet or semisweet chocolate coarsely chopped
6 ounces of unsalted butter-cut into squares
5 large eggs, at room temperature
cup of sugar
Now that you have everything ready, do the following:
1. Melt the chocolate and butter in a double boiler stirring occasionally, until smooth. Remove from heat.
2. In a large bowl, whisk together the eggs and sugar, then whisk in the melted chocolate mixture until smooth.
3. Pour the batter into the pan and cover the top of the cake pan snugly with a sheet of foil.
4. Bake the cake for 1 hour and 15 minutes at 300 degrees. It should feel just set in the center, like quivering chocolate pudding. If you gently touch the center, your finger should come away almost clean.
5. Lift the cake and remove the foil. Let cake cool for 30 minutes.
Ta da! (My words)
Now, between gathering the ingredients, prepping, and mixing everything up to get ready for baking, you’re probably talking a half hour of work. Not too bad. Wait; don’t forget cleanup. Add another 10-15 minutes for that.
So let’s say it takes 40 minutes from start to finish to prepare a simple chocolate cake (from scratch) for baking. Not bad. Now stay with me…
Baking A Cake, Part 2
I have a question for you.
What if there was an easier, faster way to bake a delicious chocolate cake?
If, like most people, you’re busy and starved for time, you’d probably be interested in something like that, right?
Well here it is.
Instead of buying the ingredients listed above for your chocolate cake, taking the time to prep everything, and cleaning your kitchen afterward, all you have to do is go to the grocery store, walk down the cake aisle and choose a box of chocolate cake mix that says “Just add water.”
So now when you want to bake a chocolate cake, all you need to do is:
- Open the box of cake mix and empty its contents into a mixing bowl
- Add water
Your cake will be ready in 30 minutes and you’ll only have two things to wash.
“But will the cake taste as good as one made from scratch”
Taste it and see for yourself.
“So what does this have to do with franchising?”
I’m glad you asked.
In a nutshell, if you’re interested in becoming your own boss, there are two ways to do it.
The first way is when you have an idea for a product or service and you decide to start your own business to get it to market. This is what’s known as a “startup” business.
If you decide to go this route, you’ll need to figure out everything your businesses needs, along with specific ways to market and distribute your product or service.
In particular, these are some of things you’ll need to do.
- Apply for a startup loan
- Find a location for your business
- Register your business
- Determine product/service pricing
- Apply for trademarks
- Design your logo
- Choose and purchase the right technology
- Setup a website
- Find vendors and suppliers
- Find and hire employees
- Put together a marketing plan
- Set up your online marketing channels
There’s more, and you’re not even open yet!
Or you can just add water.
In other words, you can buy a franchise.
In this case, everything you need to start your business is included. Like:
- Proven business systems
- An operating manual
- A marketing plan
- Support from headquarters
- A network of fellow franchisees to talk to and learn from
- Occasional new products/services to sell
And a lot more.
Now, are there lots of rules when you own a franchise? Absolutely.
Do you have to pay royalties and an upfront Franchise Fee? Yep.
The bottom line is this:
If you want to be your boss, do you want to do start a business from scratch, where you have to come up with all the ingredients to make your business profitable?
Or do you want to “Just add water,” which entails using someone else’s proven business idea (and system) to help you operate your own profitable (hopefully) business?
That’s How He Did It
Hearing my dad tell attendees how franchising works changed everything for me.
I loved the “Just Add Water” way of describing what franchising is-and what you get as a franchisee. It really helped me understand the core of what franchising is. And I hope it helped you.