In this transcript, Clay Clark (US SBA Entrepreneur of the Year) discusses with Terry Powell ("the father of franchising" and founder of Entrepreneur's Source) franchising 101 on Thrive15.com, one of the best business schools in Michigan!
Clay: Terry Powell, how are you my friend?
Terry: Clay, glad to be here. I'm doing great.
Clay: Hey, we are talking about franchising 101 and who better to talk to about this than Terry "Boom Boom" Powell. He's never been called that until today. I'm glad ... in all seriousness though, you are kind of like the Godfather of Franchising in a lot of word. People call you that and I know you a dealing in the state of Connecticut but people who might not know who you are, can you explain to people just briefly what your relationship has been with the world of franchising and how long you've been in this industry?
Terry: I've been in the industry over 30 years and primarily the fame so to speak and what I'm known for is a company called The Entrepreneur Source that was launched in 1984. That really revolutionized the way people discover franchise opportunities and how they use them to growing come lifestyle wealth and equity.
Clay: Today we are going to be talking about franchising 101 and specifically we are going to be talking about these four different areas, okay. One, what is franchising? Two, what is the difference between a franchise and other types of self-employment? Three, where did franchising actually come from? And at four, what do you actually buy when you buy a franchise system? We are going to start of with what is franchising? Terry, the definition of franchising according to our good friends at Investopedia.com, it says, "A type of license that a party (franchisee) acquires to allow them to have access to a business's, in this case the franchisor, proprietary knowledge, the process is in trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees." Terry, from your perspective, if you had to explain what a franchising was to a 3rd grader like me, an adult 3rd grader, what does that truly mean?
Terry: The definition there is very accurate but from a 3rd grader standpoint, it's important to talk about what it isn't. A lot of people talk about franchising as a industry and it really isn't. Franchising is a methodology, a way of doing business. In fact, it's, there is corporations, there is private entities, there is self-employment, there is entrepreneurship, but franchising is nothing more than a methodology for growing and expanding a business. Franchise originally make the decision to franchise in order to bring in some of the entrepreneurial aspects of having individual franchisee's bring their passion to apply to their business model.
Clay: You are saying it's a business model, not an industry ...
Terry: Franchising is not an industry.
Clay: Why is the distinction matter?
Terry: Well, because it's ... franchising is not an industry because inside of franchising, there are 70 to 80 different industries that apply franchising as a business model to grow. They have a choice, they can either open company units which many large corporations do or they could take their model and grow it by franchising it.
Clay: A lot of people when I say franchising, when you said the word franchising may think immediately of the golden arches and McDonald's or restaurants of some kind, but you are saying, hey, restaurants are just 1 of those 70 industries or 1 of those 80 industries, there is a lot more to franchising that just restaurants.
Terry: Yeah. It's the way the business decided to grow and franchising is just one of many ways you can do that.
Clay: What is the main difference ... as we talk about principle number 2, is the main difference between a franchise and other types of self-employment. Terry, in your mind what is the main benefit and difference it separates owning a franchise system from owning other types of business's?
Terry: The biggest one comes to mind is the idea of being in business for yourself but not by yourself. You have a different type of relationship there where there is an interdependent relationship between the franchisor whose licensing either an intellectual property in their systems and proprietary processes to use within guidelines for you to be able to use that model to grow your income lifestyle, wealth, and equity. Interdependent. They don't work for you, you don't work for them, but they form an interdependent win win type of relationship.
Clay: You are in business for yourself, not by yourself. I love that. I love that. You have a support staff and if people who are watching this don't know, when you buy a franchise, a lot of times you can pickup the phone and call corporate and they can help you with things. If you are having a struggle, they have training for you, they have materials, supportive documentation. It's really a neat, neat relationship there.