Franchising: It Starts With One | Franchise Law Blog

Franchising: It Starts With One

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The numbers you’re seeing on the screen are off the chart. Literally. You actually had to look away from your monitor for a moment – and look back again, just to make sure you weren’t hallucinating. Turns out you weren’t. Wow!

Are you surprised? Not really. You’ve been dreaming of this moment ever since you had your epiphany.

Has it been easy? Heck no.

Worth it? You bet.

Again… those numbers.

Wow!

Your Franchising Story

You (Terry Evans) opened The Sustainable Hardware Store* way back in 2011.

By then, 25 years of corporate life had taken its toll on you.

You semi-participated in a job search (after being let go from your last position), but your heart wasn’t in it. Neither was your head.

So you decided to pursue something totally different. A business. A business you could call your own. Maybe one that was right up your alley.

Tinkering

You had been tinkering with stuff ever since you remember.

For example, at 10 years old (maybe younger), you were taking lawnmowers apart and putting them back together, just to prove to yourself you could do it. And by the age of 16, you were doing the same thing to motorcycles – and eventually cars.

By the time you graduated high school, you had taken apart or worked on things that weren’t only garage-based. I’m talking televisions, stereos, and several other items found in most homes at the time. Clearly you enjoyed tinkering with stuff. What’s more, you were good at it.

Reality Sets In

At your house, without exception, attending college was not an option.

Your siblings had either graduated or were about to graduate from college, and you were next in line.
And even though you would have preferred to find a job or at least some type of apprenticeship that would have allowed you to build and/or repair stuff (and get paid to do it), the smarter thing to do long-term (according to mom and dad) was to get formally educated on something. So you did.

An Accountant Is Born!

In addition to being good at taking things apart and repairing them, you had first-rate math skills. And you liked working with numbers.

One of the classes you signed up for in your first semester of college was “An Introduction to Accounting Principles.”

Admittedly, you only took the class because it involved math. But something happened in that class. You became energized. You actually had some pep in your step. And after a while, you were able to see yourself doing accounting for a living. So that’s what you pursued.

25 Years!

You were quickly hired by a medium-size accounting firm right out of college, and you stayed with that firm for 15 years. A few years after you were hired, you got married and eventually became the father of two children. Perfect.

Then, as you began your 15th year with the firm (you liked your job a lot), a headhunter contacted you. His client, a large accounting firm, was interested in hiring an experienced CPA. And they were willing to pay well. Very well. So you ended up taking that job. The money was good, and it was an excellent company to work for.
Until, (after 10 years of working there) you heard the words that corporate employees all over the country dread hearing: “Terry, we’re eliminating your position.”

Your Next Adventure

Getting let go definitely caught you off guard. The reason: a “restructuring.” And it was an unpleasant, demeaning experience. One you never wanted to go through again.

That said, you participated in what I’d call a low-energy job search-for about a month… until you didn’t. But that was only because you could.

That’s because you lived below your means. That (and the fairly generous severance package you received) enabled you to breathe for a bit. In addition, you (nor your wife) were big fans of fancy cars, custom home theater set-ups, and $20,000 vacations. Plus, your kids were off to college and your moderately-sized home was paid for. All in all, you were in good shape. Good enough to consider starting your own business, as you really weren’t interested in getting another “job.”

Your Leap into Entrepreneurship

Your love of tinkering with stuff didn’t end when your career as a CPA began.

Without exception, you put your nose to the grindstone Monday through Friday. But weekends were yours.
In between family activities and the like, you tinkered. But that’s not all.

A New Obsession

A great deal of your work as a CPA involved startups, and a lot of them were in the green space. The things these young companies were doing interested you.

As a result, you started dividing your important “tinkering” time learning all you can about green energy, sustainable products and more.

Now, some might argue that you weren’t always this way. And they’d be right, as you never considered yourself to be an environmentalist or a “save the whales” kind of guy.

But you were starting to think about what type of world your children – and (hopefully one day) your grandchildren – would be living in 20-30 years from now.

Would it be a cleaner, healthier world?

Or would fresh air and clean water become harder to come by as the years went on?

The Sustainable Hardware Store

Fifteen months after you were let go from your accounting firm, you opened the doors to your hardware store.

You used some of the money you had invested over the years to build out the commercial space you leased, purchase starting inventory (including the technology to help manage it), signage, along with a hundred other things one needs to launch a new business.

Your idea for opening The Sustainable Hardware Store came about because of your love for tinkering with things along with your newly found affinity for green energy and sustainability. Moreover, you were going to be able to help people successfully finish their projects while at the same time provide products that were far better for the environment than the current ones being sold locally. But you had bigger plans.

A Vision

Your store did almost $1 million in sales the first year it was open. Turns out there was a lot of interest in the sustainable products you were offering. In addition, the solar power products you started carrying were beginning to move. All in all, you were a very happy small business owner.

One day, as you stood outside looking at your sharp and extremely busy new hardware store, you had an epiphany.

What if you were able to duplicate what you did, nationwide?

Specifically, what if there were HUNDREDS of locations of The Sustainable Hardware Store up and running?

Franchising The Sustainable Hardware Store

After getting an enthusiastic response of your vision from a few trusted friends and local business leaders, you decided to do some research. You wanted to figure out the best way to accomplish your vision.

A few weeks later, after reading dozens of business blog posts and a couple of books, you felt that turning your business into a franchise business was probably the best way to go.

The first thing you did was contact a franchise attorney. That’s because you knew that there were lots of legalities involved in franchising. And you wanted to do this right.

Here are some of the other things you did:

And while these things were going on, your franchise attorney was busy drafting your franchise agreement and creating your Franchise Disclosure Document.* You must have a Franchise Disclosure Document (FDD) in place to be able to legally offer your franchise opportunity for sale.

The Launch

Several months after getting everything done, you officially became a franchisor (July 6th, to be exact).

  1. You had a legal team in place.
  2. Your franchise sales department was up and running.
  3. Your technology was upgraded, and you hired an IT person to keep everything running smoothly.
  4. Consumer marketing initiatives were started.
  5. New franchisee marketing was started.
  6. A real estate person was hired to assist with site selection.
  7. Your PR campaign was launched – which started the ball rolling.

And roll it did.

3. 11. 22. 32. 40. 48. 42. 52.

The numbers above represent the number of franchise units sold each year, from 2012 until now. They’re certainly impressive numbers. But it wasn’t easy. But what is nowadays?

For example, as a franchisor, you learned that you have to sell franchises, support the franchisees you’ve brought in, consistently market and advertise so your franchisees can make money. Plus you need to make sure you’re keeping everything above board in the legal sense.

Now to the numbers above. If you add them up, they total 250. That’s right; The Sustainable Hardware Company has 250 stores. Wow! But it gets better. Especially for you.

If you remember, I started this post off with a description of Terry Evans looking at his computer screen in utter amazement, as he couldn’t believe the numbers. You won’t either, because here’s what he saw:

$10,000,000.

That’s the amount of money his company brought in the last 12 months… from royalties. Let me explain.

All franchisees of The Sustainable Hardware Company must pay headquarters 5% of their monthly revenue in the form of royalties.

On average, each location did $800,000 in annual sales.

Multiplying that out at 5%, each franchisee sent $40,000 a year to Terry’s company.

And $40,000 x 250 locations = $10 million a year in royalties.

Now, Terry has lots of annual expenses, but after things are all said and done, he has one heck of a payday.

And to think he started with one. If you’re interested in having a conversation about turning your independent business into a franchise business, go here.

(This post was written by The Franchise King®, Joel Libava. He’s the author of two books on owning a franchise. In addition, he’s a franchise ownership advisor who provides his clients with straightforward information on buying a franchise.)

 

Category: Franchise Your Business

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