In an interview with 1851 Franchise, the President of FranchiseBlast answers 5 questions about how he got his start and his thoughts on the industry
1. What was it that drew you into franchising?
I started my first company when I was 16. I was performing web development for local businesses to help fund my studies in software engineering. We happened to start working with an emerging retail franchisor who had two locations at the time. During my studies, we built a number of software applications for them, ranging from in-store interactive kiosks and integrated point of sale to a higher-level ERP helping them manage their supply chain from China to Europe, Mexico or domestically.
By the time I graduated from my Master's in 2007, my first franchise client had grown to 40 units. We saw an opportunity within the emerging segment of franchising and launched FranchiseBlast to address it. Although we now work with franchisors of all sizes, we've always looked at things from an operational perspective, helping improve unit-level economics.
As a software engineer, I could have focused the company on any vertical. What I found interesting (and still do) about franchising is the potential to learn about many different industries which all utilize the franchise model to expand their business. Each industry focuses on different key performance indicators and learning to dive deeper into the operational efficiencies for these industries has kept me learning and improved my versatility.
2. What do you see as the biggest change that is going to impact the franchise industry going forward?
One could talk about the deep changes that are happening with the increasing labor costs and push for technology adoption, but I think the broader trend we're seeing is that franchising is getting its act together.
We're seeing shrinking margins in all verticals for various reasons. This is causing a greater number of franchisees to fail. Some are simply poor operators but other failures reveal symptoms of weaker business models.
Good salesmanship was once the primary driver of franchise growth, but prospective franchisees now have access to more information to be able to benchmark opportunities and make wiser choices. Item 19 unit-level economics are now commonly used as a key selling point. Franchising is seeing a shift towards multi-unit operators who are both financially savvy and proven operators.
All of these elements combined shift some power back to the franchisees. Overall, this will impact the financial viability of some franchise systems who aren't able to sustain themselves on their royalty stream alone. The franchisors who will win will have acknowledged this shift in power, focused on improving unit-level economics and used the franchisee's momentum to fuel their growth as a team.
3. What advice would you give to other young up-and-comers?
In franchising, it's all about relationships. Attend as many events as you can to meet like-minded folks from whom you can learn. Not only that but your friends will change jobs and you never know what opportunities that may open up for yourself at a future date.
4. What’s an innovative company (that’s not in franchise space) that you like and you think franchising can learn from?
Instead of singling out a particular company, I believe franchisors should pay attention to some patterns in Software-as-a-Service, especially enterprise software. Yes, they are completely different verticals but both rely on recurring revenue streams to ensure sustainability.
More importantly, it is very easy to find benchmarks in the software space which define how fast you should be growing, what your team size should be and what the breakdown should look like, enterprise valuation multiples and various KPIs at each stage in the company's lifecycle.
As a simplified example, a rule of thumb in franchising is to have one franchise business coach for every 30 franchisees. Digging deeper, the franchisee-to-coach ratio is more a function of average unit volumes (AUV). SaaS has similar rules of thumbs for how many customer success representatives to employ, based on the company's monthly recurring revenue (MRR) and average deal size. FBCs and CS reps both work increasing revenues and reducing churn.
The are many other comparison points, but in general, it would be nice if the community more formally documented/communicated these benchmarks to assist emerging franchisors make critical decisions pertaining to the growth of their organization and founding team on their path to sustainability (aka product-market fit in software).
5. What are some things you like to do in your spare time?
This may surprise a few people but I enjoy listening to industrial metal.