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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) how you can create assets through franchising on Thrive15.com, one of the most affordable business schools in Michigan! 

Clay:    Terry Powell, how are you?

Terry:    Hey Clay. I'm great. How are you doing buddy?

Clay:    I'm doing well. I've had a, just North Carolina is beautiful. I've never been to Charlotte before and I'm just amazed by all the trees downtown here. It is gorgeous. It's absolutely great.

Terry:    It's a nice area.

Clay:    Today, we are talking about creating an asset through franchising and this idea is a little bit interesting for I think for a lot of people because when you think about creating an asset, very few people stop and take a timeout and think about their current job and where they are creating an asset at this current job, where they are creating something that has value later. But before we deep dive into that, I want to give people just a little bit of a context as to how many years you've spent in this industry and a little bit of about what you do today. Can you tell us, how many years you've been involved in franchising and what exactly you do today?

Terry:    Yeah, I've been in franchising for over 30 years and the primary concept that we work in that 30 years is a company called The Entrepreneur Source, which is a network of franchise coaches that work with people seeking to discover whether franchise ownership might be a viable solution to building an asset based for themselves.

Clay:    Now you've seen a lot of people go from like rags to riches or somebody who started a very, with a very, they put everything they had into starting a franchise or buying a franchise and you've seen a lot of people become millionaires. I mean you've seen it first hand. As far as this concept, what kind of potential does somebody have to create a million dollar asset for themselves by buying a franchise?

Terry:    It's very likely that you can create an asset that would be a million dollar asset considering that 52% of all franchise units are owned by multi unit operators. The potential for going extremely beyond that million dollar asset is quite high.

Clay:    What kind of revenue does somebody have to do in their annual base to generate a million dollar value business? What do they have to do?

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Terry:    Depends on the industry they are in and how those industries are valued from a resell standpoint. But anytime you have a predictable volume that's of history and you've got a business that's got clientele that someone can come into and start at that point rather than starting at the beginning, it creates a very high asset value or what we call a resell value and that's not unusual when franchise. Now you are going to have other assets associated with that franchise such as the equipment and such as some of the fixtures and furnishings and the leases that will be transferred. All those things have an asset value.

Clay:    Give an example for Thrivers watching this, there is a gentleman that I've met kind of from the peripheral, a very, very close friend of mine, kind of an acquaintance, nice guy though and what the he has done is he has this habit of buying franchises from a franchisee whose maybe a little disgruntled, not following the system. He buys them and he fixes them up, implements the system and sells them for a million bucks and he has done this a couple of times and I thought what an interesting business model this guy had and but he was able to do it because he says, "Hey, the brand has value as long as there is customers and revenue.", but if you work in a typical corporate job, you can't just work at your job for a few years and say, "I want to sell this job to Larry."

Terry:    That's right.

Clay:    Then Larry again just buy that job from you.

Terry:    It's a big differentiator. 

Clay:    It's huge. Now, Terry, if I'm somebody whose unaware of what the word asset means, I'm going to go ahead and kind of just, I guess break it down for anybody who watch this who doesn't maybe know this term means exactly. Asset is defined as a resource with economic value that an individual, corporation or a country owns or controls with the expectation that it will provide benefit. Terry, what are some of the things that you see franchise owners do that can absolutely kill like destroy the value of their franchise? Say they bought a great franchise, it's well known, it's known for being successful but they bought it, what are somethings that we want to be careful and make sure we don't do that can just kill the value of a franchise asset?

Terry:    That's a great question. The key to developing a high value asset is to maximize all the elements of the franchise model to be working for you because franchise models create lots of synergies and multipliers and multipliers are like compound interest. The system does the heavy lifting for you, but it also works for your business to continue to drive multipliers. The more you are in sync with having the system work for you, the higher the asset value. Now we talk a lot about income, lifestyle, wealth and equity. The equity that you develop in business ownership is that asset. That's what you can either pass it on to your children as an inheritance or it can be part of your estate or you can sell that asset. 

Clay:    Why is it important if I'm working at a job right now that I take a timeout just a second to ask myself, am I building an asset. What happens if I don't and why is it important for me to really think about that?

Terry:    I'm a firm believer that the reason 75% of the adult population has an on going consistent strong, very strong desire to be self sufficient is because we really never design or wired to be working in the kind of environment you are for an appointment. At least 75% of us weren't. Most of us are functioning in that role for the wrong reasons and when you add to the factor that there is no asset appreciation, it make sense that you have to ask yourself why am I doing this.

 

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