Paul's Posts

Paul's Posts

Deb Evans Joins Franchise Foundry as President to Grow Emerging Brands from ‘Inside-Out’

HOUSTON (November 12, 2013) — Franchise Foundry, a multi-brand franchisor and business incubator focused on emerging franchise brands, has named Deb Evans as President. Evans, a Certified Franchise Executive and well-known name in franchising with specialized expertise in franchisee/franchisor relationships and progressive digital marketing for franchise brands, will help the company’s portfolio brands benefit from best practices in operations and marketing.

Starting her career in franchising in 1996 as a teacher at a COMPUTER EXPLORERS location, Evans made the leap to entrepreneurship a year later when she invested in the franchise. That same year, she purchased a second territory and became one of the first multi-territory owners in the COMPUTER EXPLORERS franchise system. In 2004, she joined the corporate team as President and CEO, holding these roles for eight years. In 2012, she launched Deb Evans Consulting to help franchise systems create and strengthen internal teams that develop peak performing franchisees.

“Our company and the brands in our portfolio will benefit tremendously from Deb’s 17 years of experience as a franchisee, franchisor and franchise industry consultant,” said Paul Segreto, Franchise Foundry CEO. “She understands the delicate relationship between franchisors and franchisees and brings an outstanding level of expertise to the social marketing space. Her fresh perspective will help our emerging brands effectively build their internal operations and social platforms.”

As the original founder of FranCamp, now called FranTech, Evans’ sought to provide more hands-on education to franchisors on how to effectively market their brands within a social digital space. She will be bringing this expertise to her new role at Franchise Foundry by working closely with the management teams of each brand to strengthen their social technology programs.

“One of my main goals is to help our emerging brands make better use of their digital space for franchise development and operations, as well as for franchisee and community relations,” Evans said. “I’ve known Paul Segreto for years and have worked with him and the Franchise Foundry brands in the past as a consultant. Now, I’m excited to officially join the team as President to help build upon strategies that Paul put in place.”

In addition, Franchise Foundry will be opening new corporate offices in the Houston area within the next year and expanding its team. Evans will also be involved in acquiring new brands within the Franchise Foundry family. Meanwhile, Segreto will remain involved with the company, but focusing most of his day-to-day efforts in his new role as CEO of Franchise Source Brands International, a key strategic partner of Franchise Foundry.

About Franchise Foundry
Franchise Foundry is a multi-brand franchisor and business incubator focused on emerging franchise brands. Boasting more than 30 years of experience building businesses, Franchise Foundry understands the unique challenges that emerging franchisors face. Its team provides franchise consulting, franchise management, franchise marketing, franchise technology and other franchise development services. The company currently works with the following franchise brands: The Curtain Exchange, Monkey Bizness, and Above Grade Level, among others.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Franchise Foundry Moves to Texas

We are excited to announce a significant shift at Franchise Foundry. Effective October 1, 2013, Franchise Foundry will be operating its food brands under a new banner, Wrist Rocket Ventures. Franchise Foundry will continue to operate and service its non-food brands as Franchise Foundry.

Paul Segreto will continue as the CEO of Franchise Foundry and will relocate its offices to The Woodlands, Texas. The Curtain Exchange, a wholly owned Franchise Foundry brand, is also based in Texas. In addition to The Curtain Exchange, Franchise Foundry will continue to service Scooter’s Jungle, Monkey Bizness, Above Grade Level, and Hassle Free Home from its Texas offices.

Christian Faulconer, founder of Franchise Foundry, will lead Wrist Rocket Ventures. Wrist Rocket will occupy the former Franchise Foundry offices in Provo, Utah where it will continue to support its various food brand clients, including Sweeto Burrito, Macarollin’, Spoon Me, and Sub Zero Ice Cream.

This division will allow each group to continue to strengthen its offering within its respective segment of the market.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Borrowing for Your Franchise

In my previous post, I listed four financial skills that I think every franchisee — frankly, every business owner — should have. In this post, I will talk about the impact of borrowing to finance your franchise. It is imperative that franchisees understand the impact borrowing can have on cash flows.

If you have to borrow a substantial amount to get your business up and running, you will also have to service the debt. One of the most common financial complaints I hear from franchisees who are struggling is that they aren’t making any money even though the profit and loss statement shows healthy income. This is usually because they borrowed so heavily to start the business that most of the cash flow is going to service debt payments. This is not necessarily a bad thing if you understand what you are doing and you have planned accordingly. If the business cash flow can service the debt, you are potentially getting a great return on your investment. Let’s look at a simple example:

Becky Borrower needs $400,000 to open a Bob’s Burger Barn (BBB) franchise. She borrows $300,000 for 5 years at 10% interest. Her monthly debt payment is just over $6,300. If her BBB franchise generates $500,000 in sales and profits of $100,000 (20%), she will only net about $23,000 after debt and before taxes. It doesn’t sound good.

On the other hand, Becky Borrower only invested $100,000 and generated a return on that investment of roughly 23%! And if we assume that the business is worth more or less what Becky paid for it, then she is in pretty good shape as long as she planned for the debt payments and doesn’t need the cash flow for living expenses.

Let’s compare Becky Borrower to Calvin Cashpayer. As his name would suggest, Calvin paid all cash for his franchise. He generates the same results ($500,000 in sales, $100,000 in profits). Since Calvin Cashpayer has no debt service, other than taxes and depreciation, his income is going to be a lot closer to his cash flow. Interestingly, his return on investment is actually slightly lower than Becky’s. He invested $500,000 and generated $100,000 for a 20% return. If Becky had negotiated a lower interest rate (say a 6% SBA loan), she would have seen a pre-tax return of almost 30% on cash invested and still she wouldn’t have a lot of cash in the bank.

I mention this because in my experience, Calvin Cashpayer would be thrilled with the business and Becky Borrower would be ticked. Becky is actually getting a better ROI but franchisees in highly leveraged situations usually didn’t plan to service the debt they needed to invest in the franchise.

There isn’t a right way or a wrong way to do this. Borrowing can be the right decision, but only if you plan to service the debt and understand that it will have a significant impact on your cash flow.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Franchise Finance Basics

In my role at Franchise Foundry, I often have the opportunity to speak to franchisees about their financial statements. Financial management is a skill that is critical to successfully managing a franchise, but it is common for franchisees to have limited financial backgrounds. Their franchise may be the first time that they needed to be able to read a profit and loss statement. While I can’t cover everything you need to know to manage the finances of your business, here are three tips that most people I talk to would benefit from:

1. You can only manage what you measure.
When times get tough, it’s human nature to put your head in the sand. When you start managing your finances by what is in your checking account, you will find that there is less and less in the account. Even if times are tough (maybe especially if times are tough) pay close attention to your financial statements.

It is also important for your financial statements to be accurate. If you have a lot of expenses labeled as “Miscellaneous” or “Credit Card Charges” you won’t be able to get a handle on where your money is going. Knowing where your revenue is coming from is important too. If you have a few categories of revenue (food and clothing, for example) make sure that you break that out as well.

2. Know the difference between fixed and variable expenses.
Fixed expenses stay the same every month and variable expenses change depending on how much you sell, how much labor is required, etc. You typically have one shot at negotiating your fixed expenses (when you negotiate your lease, for example), but you can often work on reducing your variable costs over time. When you are starting a business, do what you can to keep fixed costs as low as possible. Low fixed costs means you have a lower break-even point — the point at which your revenues cover all of your expenses, but you make not profit.

3. Don’t mistake profit for cash flow.
I can’t tell you how often I have heard people say, “The profit and loss statement says I should have $XXXX, but there is no money in my checking account!” Make sure you are asking your accountant for a complete set of financial statements. This should include a profit and loss statement, a balance sheet, and a statement of cash flows. There are online tutorials that will teach you the basics of each of these documents, but for the purposes of this blog, I will tell you that the statement of cash flows will tell you if you generated cash this month or not. The profit and loss statement is intended to give you a basic overview of the health of your business. The idea behind modern double entry accounting is that we want to match expenses with the revenues they helped to generate.

Let’s take a simple example. Let’s say you need a computer for your business and that computer will probably help you operate your business for 2 years. If you were to pay $2,400 for the computer equipment, your bank account would show you paying $2,000 but your profit and loss statement would probably show an expense of $200 per month for each month of the 2 year lifespan of the computer. You would also see an asset on your balance sheet that would decline in value as you recognize the $200 per month on your profit and loss statement.

4. Track expenses as a percentage of sales.
I like to look at my monthly expenses as a percentage of sales and then compare those to industry averages. Most franchisors will share information with you and let you know how you stack up compared to others. If your labor cost is 30% while everyone else’s labor is averaging 25%, you know where to focus your efforts. Look at these expense lines as a percentage of sales by month and year to date. It’s also useful to look at how you did last month compared to the same month last year.

Finally, it’s important to understand the impact borrowing can have on your cash flow. That topic is complicated enough to warrant its own post. I will write about that next.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Awarding Franchises

In the franchise business, there is a lot of hype about awarding / selling franchises. It’s hard to determine what it means to award a franchise when some franchisees make commitments for one or many franchise units, but in some cases they are not obligated to open those locations for a long period of time. This is complicated by the fact that in some cases the franchisee is purchasing large areas with substantial commitments for both developing the franchise and supporting new franchisees.

If you are unfamiliar with the world of franchise sales, you will likely find it confusing when a company talks about awarding hundreds of franchises, but they only have two open locations. The franchise disclosure document is a good place to go to understand the number of units that are opened, the number that are committed to be opened, and the number that have closed. If you are evaluating a franchise, you can gather a lot of good information from those details.

All of that aside, awarding franchises is a rewarding job. We love to help brands find people that will help their businesses grow in new territories.

This year, at Franchise Foundry, we have awarded commitments for over 400 franchise units across our portfolio. Some of those locations are under construction or have already been opened and others are committed over the coming years. In every case, we have worked hard to ensure that the franchise candidates are qualified and committed to the success of the business. We are proud of every franchise brand we work with and we love watching them grow.

We are thrilled with what we have been able to accomplish during the first half of the year and excited about what the rest of 2013 has in store.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Waterfall Software Joins Forces with Franchise Foundry to Support Emerging Franchise Growth

Washington, DC – April 29, 2013 – Leading franchise management system, Waterfall Software, has teamed up with full-service franchise development company, Franchise Foundry, to help emerging franchises reach their full potential. Franchise Foundry’s strategic development expertise combined with Waterfall Software’s command of the digital aspects of franchising make them well suited to provide a comprehensive solution for franchise success.

“We’re proud to partner with such an esteemed organization and excited for our complementary offerings to positively impact the franchising community,” says Waterfall President, Brad D’Ancona. “We feel that by leveraging Waterfall FMS Franchise Foundry will gain a strategic advantage in the marketplace as they help franchises worldwide achieve large-scale, meaningful growth.”

About Waterfall Software
Waterfall FMS offers franchisers a holistic and simplistic approach to franchise oversight. The robust system improves a franchise’s web design and web presence strategy, effectively promoting your franchise on the social web, and tracking progress with an all in one dashboard. Developed by acclaimed interactive agency, Blue Water Media, Waterfall delivers a team with over 20 years of experience in web design, web development, and marketing & selling franchises. For more information, please visit: http://www.waterfallfms.com

About Franchise Foundry
Franchise Foundry is a full-service franchise development company focused on emerging franchise brands. The Franchise Foundry team provides franchise consulting, franchise marketing, franchise technology and other franchise development services to emerging franchisors. Whether you are a new franchisor or a successful entrepreneur looking to franchise your business, the team at Franchise Foundry is ready to help. For more information, please visit: http://www.franchisefoundry.com

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Franchise Today Kicks Off Fourth Annual Legal Series

Houston, Texas – April 9, 2013 – “Franchise Today” radio show begins its fourth annual “Franchise Legal” series this Thursday, April 11 and culminates with the IFA Symposium (May 5-7) recap on May 30. The eight-week series – double the content since its debut in 2010 – will deliver compelling insight from the perspective of leading legal minds within the franchising world.

“Each year we continue to expand the ‘Legal’ series based on growing listenership and the enthusiastic response from the franchising community,” said “Franchise Today” host Paul Segreto. “We are thrilled to have the opportunity to share the expertise of incredibly talented and well-respected leaders in the profession. The value they bring to our audience is immeasurable.”

Segreto and his guests will delve into the day-to-day legal issues facing franchisors as well as timely hot topics – private equity in franchising, social media legal considerations, franchise sales best practices (from a legal perspective), franchisor litigation issues, and international franchising challenges. “Listeners will walk away with a deeper understanding of legal matters and tangible advice and recommendations to help franchisors succeed in a competitive and litigious business environment,” said Segreto.

In line with presenting the franchise community with best practices and advice, the “Franchise Legal” series features an impressive lineup: Michael Laidhold of Plave Koch PLC, Lee Plave of Plave Koch PLC, Amy Cheng of Cheng Cohen LLC, Barry Heller of DLA Piper LLP, Mark Kirsch of Gray Plant Mooty LLP, Lane Fisher of Fisher Zucker LLC and Jonathan Redgrave of Redgrave LLP. Rounding out the two-month series with an IFA Legal Symposium Recap will be IFA’s Dean Heyl, director state government relations and public policy and tax counsel. Though several IFA staff members have contributed to “Franchise Today,” Heyl’s appearance marks the first time an IFA staff attorney will participate as part of the ‘Legal’ series.

Hosted by Paul Segreto, president and CEO of Franchise Foundry, the show’s newly expanded format is a series of multiple episodes with industry leaders, experts and key players sharing their unique perspectives on the chosen topic. This year’s series also included “Voices in Franchising” featuring IFA President and CEO Steve Caldeira and “Franchise Finance & Multi-Unit Franchising” in March. New to the “Franchise Today” lineup is a summer-long Franchisor Spotlight Series where some of the leading franchisors share best practices they’ve implemented for improved unit-economics and franchise growth. Additionally, Segreto is planning six to eight special event broadcasts throughout the year for a total of approximately 60 live shows in 2013.

For more information or to listen to live and archived shows, please visit http://www.blogtalkradio.com/franchisetodayshow.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

It’s the Unit Economics, Stupid!

I had a good conversation with David Leoncavallo of Sopra Capital today. Sopra and Foundry operate in a similar space so it is always interesting to spend some time talking about trends we see in franchising. One of the things we have both run into recently is that too often for emerging brands, unit economics takes a back seat to everything else when it should be the focus.

When we talk about unit economics in franchising, we are referring to the individual franchisee’s ability to make money by following the franchise system. If you are evaluating a system, you can generally find information about how well existing franchisees are doing by taking a look at Item 19 of the Franchise Disclosure Document. Many emerging franchisors leave Item 19 blank, which means you need to talk to existing franchisees about how well they are performing. Remember that franchisors can only talk about financial performance that is disclosed in Item 19.

If you are a franchisor struggling with unit economics, here are three tips to consider:

1. Focus on expense reduction strategies. 

The best place to start when it comes to improving unit economics is expense reduction. This is because every dollar saved is a dollar in your franchisee’s pocket, while revenue always comes with additional expenses (the cost of delivering the service or product). Look at ways that you can use the scale of your franchise system to negotiate volume price discounts for everyone in the system. This could be through the use of centralized printing solutions, like Divvy, or through negotiating better food distribution contracts with your network.

2. Don’t forget the revenue. 

Even though expenses are the place to start, a strong system also includes strong revenues. Once you have franchisee expenses under control, the increased revenues will be more profitable to the franchisees. Marketing has changed dramatically in recent years and that means that there are a number of cost effective ways to drive your business. Develop and execute a digital marketing campaign to support your franchisees, but also remember that the best marketing is free and it comes from your customers. Solutions like Listen360 help you and your franchisees understand the quality of the customer experience at individual franchisee locations. You want your customers to become your brand’s best promoters.

3. Track and measure your efforts. 

Most franchisors only collect revenue information from their franchisees. It’s difficult to have a complete understanding of your system’s financial performance if you don’t also have a firm grasp on the expense side. We recommend ProfitKeeper‘s tools to help franchisees and franchisors track profit and loss at the unit level. Identify a baseline of performance prior to implementing any expense reduction or revenue generation strategies so you can see the impact of your efforts. It is easier to get franchisee compliance with new programs if you can demonstrate measurable success.

If your unit economics are strong, it makes marketing and selling the franchise system much easier. Good unit economics leads to happier franchisees. Happy franchisees will provide strong validation of the system to candidates interested in your system. On the other hand, weak unit economics can make awarding franchises extremely difficult and no amount of marketing or PR will completely solve your problem.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Steve Caldeira to Discuss Economic Outlook, Policy on “Franchise Today”

Just days ahead of the 53rd International Franchising Association (IFA) Convention, “Franchise Today” host Paul Segreto welcomes IFA President and CEO Steve Caldeira as part of the show’s “Voices of Franchising” series. In addition to previewing the convention, Caldeira will touch on some of the industry’s hottest topics, including the association’s policy agenda and its 2013 economic outlook.

“We are thrilled to have Steve Caldeira on the show and with only two days before the IFA Convention, we’ll be able to touch on key issues facing the franchise world,” said “Franchise Today” host Paul Segreto. “As one of the most respected leaders in the industry, Steve’s insight into the economic future as it pertains to franchising and explanation of important policy issues is invaluable.”

In line with presenting the franchise community with best practices and advice on various aspects of management and development, the “Voices in Franchising” series includes other industry minds including Nancy Weingartner from Franchise Times and Therese Thilgen from Franchise Update. Caldeira will discuss the IFA Convention’s schedule and highlights (taking place Feb. 17-20 in Las Vegas), share the IFA’s approach to improving small business policies in Washington and explain the IFA’s 2013 economic outlook. This will mark Caldeira’s third interview on “Franchise Today;” his first was in January of 2011, only nine months after being at the helm of the IFA and his second was post-convention in February of 2012. Hosted by Paul Segreto, president and CEO of Franchise Foundry, the show’s newly expanded format features a series of multiple episodes with industry leaders, experts and key players sharing their unique perspectives on the chosen topic. Remaining Q1 series include “Franchise Finance & Multi-Unit Franchising” in March; and the fourth annual “Franchise Legal Series” made up of eight parts culminating with the IFA Symposium recap for April and May. New to the Franchise Today lineup is a summer-long Franchisor Spotlight Series where some of the leading franchisors share best practices they’ve implemented for improved unit-economics and franchise growth. Additionally, Segreto is planning six to eight special event broadcasts throughout the year for a total of approximately 60 live shows in 2013.

For more information or to listen to live and archived shows, please visit http://www.blogtalkradio.com/franchisetodayshow.

About “Franchise Today”: Hosted by industry veteran Paul Segreto, “Franchise Today” is a production of Franchise Foundry, a full-service franchise management and development company. The radio show has grown to thousands of listeners, including international, and focuses on sharing advice and best practices from the leaders of the franchise community. Segreto and his team’s goal is to educate franchise professionals and help franchisors succeed at all levels. The new format promises multi-part series throughout the year as well as several special event broadcasts. Franchise Foundry also co-produces FranSummit, a social media and digital marketing workshop. To listen to “Franchise Today” live or hear archived shows, visit http://www.blogtalkradio.com/franchisetodayshow

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry

Analytics and the Franchise Awards Process

People often ask me how I ended up in franchising, and the truth is that I’m not exactly sure — I feel like I just landed here and stayed because I love it. Prior to Franchise Foundry, I co-founded two technology companies, both with an analytics emphasis. The first was Sharp Analytics. At Sharp, we did some really cool work for companies like Procter & Gamble, Princess Cruise Lines, Sprint, and other well known brands. These companies came to us because they wanted to understand their customers better in an effort to attract more “best customers.” For example, we did a customer segmentation and analysis for a very high end skin care line. We overlaid purchase behavior with demographic information to identify what the best and worst customers looked like. We used that information to create a marketing campaign aimed at finding new customers that looked like the very best existing customers. And of course, we measured the results.  It was rewarding work because it produced results.

So when I ended up in franchising, it was natural to look at the awarding franchises through the same lens. What do the best franchisees look like? Is there just one profile, or are there several franchisee profiles we should be looking at? What messages will those candidates respond to? Where are they? How do I find them? And how can we systematize and measure the process of discovering new candidates and awarding new franchises?

When we kick off development for a new brand at Franchise Foundry, we bring this type of thinking to the table. We start with what the ideal franchisee looks like, and identify demographics that will help us find people like them. We develop messaging specific to each targeted segment and roll out measurable marketing based on our plan. We rarely get it exactly right the first time, which is why we measure everything we do. We want to know what works and what doesn’t so we can fine tune the process.

The result is that year over year, we have awarded more franchises per generated lead than the national average by a wide margin. And we plan to continue to fine tune the process, improving our conversion rates this year by tracking our efforts closely and throwing out the stuff that isn’t working and spending more time on the stuff that does.

Join our communities:
Twitter -> @fran_foundry
Facebook -> FranchiseFoundry
Google Plus – > +FranchiseFoundry
LinkedIn -> FranchiseFoundry
YouTube -> FranchiseFoundry