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This business coaching session explains more about the most common franchise fees.

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Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Lesson Nugget: A key aspect of getting business is how relentlessly you pursue your customers. If you are just waiting around for business to come to you then it never will.
  • Lesson Nugget: Understanding your role in a franchise is one of the keys to successfully running a franchise business.
  • Lesson Nugget: The franchisee and franchisor relationship is interdependent. Both make money from the others' success.

run your own business like uber, how to start a business

-I want to give an example here. Years ago, I worked with a business that was in the medical field. And the guy opened its doors, and he looked at the phone. And he would wait for it to ring. I mean I'm not really sure exactly what his theory was. But I went in to meet him in his office, and he was there. And it was quiet. No customers were coming in. And so he kept waiting.

And eventually, I explained to him-- I said I know you're looking to hire me as a consultant to learn how to start a business, and I don't mean at all to be-- I don't want to come across like I'm talking down to you, but let's just look at the law of cause and effect. What cause are we doing to create some kind of effect? What are we doing to create customers? And he says, well, I don't believe in advertising. And I wanted to slap him, but professionally speaking, you can't do that kind of thing.

So I couldn't slap myself either, so I just-- so you believe that if you just are out there long enough that you'll get business. And he says, well, I'm a word-of-mouth guy. And I said, OK. And it was just sort of that mindset where you're not going to advertise, but you're going to wait for the phone to ring, and you believe in word-of-mouth.

I think a lot of people who buy a franchise, or any kind of business, we, unfortunately, begin to think that my phone should ring just because I'm in business. I really like this-- as a business consultant, I like this minimum advertisement amount because it forces your phone to ring, and you have to advertise, in some capacity. Can you walk me through how important you think this kind of agreement is for a lot of businesses?

-It's really very important because most franchisees, left up to their own mindset, would follow somewhat of the example you just described. And we've seen others where we provide a press release-- regional, local press releases on a monthly basis for our franchisees. We've actually had franchisees who said, I'm not going let you do any press releases for me because I'm just getting started. I'll wait until I'm successful, and then we'll do press releases. And that sounds like a reasonable approach.

Or, they'll hold back and say, well, I'm not going to spend more money on marketing until I see what the results are. And that's obviously not a strategy.

-And I want to go back to the very core, as we wrap up these four, to make sure we're 100% clear on this. The franchisor is making most of their money-- almost all their money off of their royalties, a percentage of your business. And if you have no business a small percentage or a large percentage of is still 0. And so they're trying to push you to grow in a successful way, right? I mean that's-- at the end of the day, that's why these fees exist?

-I wouldn't necessarily describe it as pushing. They're really looking to make sure that you have your eyes wide open, you understand what your commitment needs to be that interdependent relationship. They're going to do their part to invest it properly. You're going to do your part to commit that you'll do that. Because they understand that if they bring you a long on that type of a route right from the very beginning, they're going to be less issues about not having results.

-And just to clarify here, you're saying it's definitely not pushing. It's more like a coaching and a mentoring. It's not pushing. It's just saying we're encouraging you strongly to grow quickly.

-Franchisor doesn't work for the franchisee, nor does the franchisee work for the franchisor. They have this interdependent relationship that they agree that they're going to both do their part and share from that. Now, the royalty piece and ongoing fees like advertising and so forth, many people will say, well, that is not going to allow me to be as profitable as I might be if I just did this on my own. There's all types of data and examples to show that that's just the opposite.

Those franchise outlets, even with those royalties and brand building investments and so forth, are far more successful financially than those that don't have that format.

-In closing, I want to bring this up. If you buy a franchise, your rate of success is tremendously higher than if you're going out there as an independent business owner. And you can look up whatever statistics you want, but the data is out there, and it shows that you have a tremendously higher likelihood of success as a franchisee as you do as an independent business owner. And that's really why I get excited about this whole business model.

And Terry, I appreciate you being here and clarifying about these fees and all these costs, what they mean, and what they're going towards. So thank you so much.

-Thanks, Clay.



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