Garret (00:03.016)

Gary, welcome to the podcast.

Gary Prenevost (00:04.904)

It's my pleasure, Garrett. Thank you for having me.

Garret (00:08.2)

Yes, no, I'm glad that we were able to connect. Audience, this is Gary Previnost. He is a franchise expert here to talk to us about the pros and cons of that. Super interested in this topic, just because I'm in the property management business and there's a lot of franchises trying to take some market share. So Gary, why don't you start off by giving the audience a little bit of your background.

Gary Prenevost (00:31.112)

Sure. I've been an entrepreneur, Garrett, for 35 years. Before that, I was a banker in Winnipeg and Manitoba. So I got my foundation business in the bank. Very, very solid business, but ultra conservative. You know, it takes forever to make a decision. You had to follow a strict set of rules. And I realized very early in my career, I was that contortionist in the invisible box in corporate.

So I left and became an entrepreneur started out as a family business in Toronto. We were live in artificial tropical plants, selling plants in the offices. And it was very interesting business. We grew that into being Toronto's third largest interior scaper. But I found being a family business too many cooks, not enough servers, as it were. So I went, one of my clients was a franchise or pseudo franchise and

progressively got to know them better and eventually got lured away by them. So go from one family business into another family business. And that was sales management leadership training. So I started by selling the franchise. Within a year, I bought my own, became a business coach. And I did that with my partner at the time. We did that for 10 years, around a year, I think it was around a year.

We took over the entire franchise system. So I went from franchisee to franchisor. And interesting enough, one of my referral sources for new prospective franchisees was FranNet. And the guy, Lloyd Shearer is his name, kept on saying, you'd be really good at this. You should come over to FranNet. And I said, go away. This stuff got a great life. I don't need another business. And eventually he kept on just the constant tapping.

In 2002, I bought my Frandette franchise and I've been with Frandette since then. So along the way, bought a couple of master franchises. We'll get into one of the experiences today maybe. I bought a master franchise out of France and over four years ran that and proceeded to lose over a million dollars and that taught me a whole lot about myself and what not to do. But continued to, once I came out of that, I became a...

Gary Prenevost (02:48.296)

focused on top performance because I had to make up all that loss and totally changed my trajectory. And hence, 10 years later, the book came out on how to achieve top performance, not just my own experience, but also on interviewing other top performers and CEOs of franchise systems. So that's how the unstoppable franchisee came about. What do the top people do that the rest don't do?

Garret (03:11.528)

Wow. Okay, that is a great segue. Why don't we why don't we just back up a second. Super interested about maybe just what is a franchise? Why don't you define that for the audience?

Gary Prenevost (03:14.44)

But yeah.

Gary Prenevost (03:24.264)

Well, so a lot of people misunderstand franchising. They think franchising first is food and retail. And that's the visible face of franchising. But there's over a thousand franchises in Canada, over 3 ,000, close to 4 ,000 in the US. So there's a lot more than just food or retail. A franchise is a business relationship between the franchisor and the franchisee. The franchisor owns the trademarks, the systems, the processes. They've done a lot of investing in

Garret (03:32.2)

Of course. Yeah.

Gary Prenevost (03:53.288)

researching how that business model works. The franchisee buys the license to that, but is an independent business. And the franchisee helps them accelerate their time to launch. I call franchising a time compression strategy for the first two years because they've got systems and processes. They're focused on the right things instead of, gee, what should I do? Thinking about a startup, they have a whole lot of things to figure out, right?

Garret (04:18.856)

Sure.

Gary Prenevost (04:19.272)

franchise system, the franchise or will say do this, do this, do this, avoid those things, focus on these things. And that helps them get a much faster launch with a lot of coaching, support and training. Once they get that foundation, I call that the progress to competency. This is really important as we understand the progressive stages of people grow in their businesses. You get to competency, that's the stage where the owner

I know enough about the business to run the business reasonably. I call that average performance. Then once you get a couple of years at competency, you move to proficiency, now you're getting good at the business. And it usually takes people around three years, sometimes four years to really understand what the business is, how to make it work, building the team, all those different things. And that now they're proficient. And this is where a lot of people, they...

they start going into that comfort zone, I can take my foot off the gas and they start relaxing and then they hit a plateau. Whether it's a franchise or a non -franchise business, most business owners get stuck at the plateau stage. And what I found with top performers is the extra level of focus, once they hit a plateau, they use that comfort zone as a, I'm gonna learn this, what can I reflect on? What do I need to grow? What do I need to...

build, hire, whatever, invest in the business, and they set a new learning curve, and they move from proficiency to mastery. And that's an entirely different step.

Garret (05:59.752)

Okay, proficiency to master. I love what you just said there because as a small business owner myself, and, I know that we're kind of in a little microcosm here, but what the rest of the audience might be knowing, depending on when that, when this is released is I've really committed myself to a lot of extra business training in the past six months, like tens of thousands of dollars, just because I have a science background and

School of Hard Knocks has kind of been my way. I mean, there's a stat out there that I think 97 % of businesses fail within the first 10 years. I don't know if franchises are included in that, but what you said there about a startup, it certainly resonates with me because as any entrepreneur, you are just trying to make payroll, you're trying to make things work, you don't know what your processes are, you don't know what a process is. So speak to me about how a franchise model,

just even on those first two years can even help at a very basic level.

Gary Prenevost (07:02.28)

So a couple of different things. First, I'll address that failure rate. The failure rate in franchising is under 20%. So there's a much different level of risk. It's a risk mitigation strategy because you've lived it yourself. As an entrepreneur, start from scratch. You've got nobody to guide you, to coach you, to figure out. You can, as you've just done after all these years, you've now started spending serious money or investing serious money in learning.

Garret (07:10.952)

Okay?

Gary Prenevost (07:31.24)

But when somebody's starting up, they're bootstrapping and every bit of cash that they have has got to go to figure out where's the right next customer coming from? How am I going to find the product or whatever it is? In a franchise system, that's all in a good franchise system. Not all franchises are created equal, but in a good franchise system, that's all figured out. So it's here is the support tools. Here is where you focus your marketing. Here is how you hire staff.

Here's how you get, once you get the initial contact, usually they're scripting, here's how to move that candidate from a prospect to a customer. Here's how to do fulfillment or product, whatever it is. And then here's how to remarket to them to keep the business coming in. And that's all happening real time. So, because you've got the support of the franchisor,

to guide you, especially in the launch good franchise or self support people just focused on helping new franchisees get out of the gates. Once you're up and running and you're at that proficiency stage, now you're interacting with all the other franchisees that are also at that level. So you're sharing experiences, you're bubbling up best practices, you're sharing the mistakes. Hey, don't do this, we tried this and it didn't work or we tried that, try it this way. And that's how systems refine.

is continually evolved.

Garret (08:53.448)

Okay, yeah, I think what you said about retail and food, that's what we think about, you know, the Subways and McDonald's and I mean, name your fast food franchise because you think I'm buying a business that's ready to go. What are the parallels to any other businesses cleaning other retails? I mean, there's so many out there.

Gary Prenevost (09:11.624)

boy. There's 80, at least 80 different industries. If it's a service, it's probably been franchised somewhere. So, you know, there's, we have, let's break it down into traditional versus non -traditional. Traditional, what's called bricks and mortar. That's what, you know, food, retail, those are inbound where the customer comes in. So the marketing drives the customer in, the location brings the customer in.

The role of the owner in that type of business is managing people, managing the customer experience, managing facility. There's a lot of management involved. And this is going to go, we'll come back to this later. I'm going to plant a seed now, but a lot of people buy the business because they like the product or service or they like the brand, but they don't have management skills. And then they struggle in that business because they've bought something that they didn't do enough research on.

If we, if we, so what I care about when I'm helping people figure out what business to buy, the first thing we look at, what are their skills? What are their criteria and their goals? So I'll come back to that later. Let's come back to the other businesses. Non -traditional franchises is this is where it would be, the business, you as the owner of the franchise, you are helping your staff bring this product or service to the customer. So.

cleaning, business to business or business to consumer. You've got commercial cleaning, you've got residential cleaning, two entirely different businesses. You have anything in senior care. Think about where the caregiver is going to the homeowner. If it's a home service, if you have worked on around your house, around your yard, there's a franchise for it. So gutters, lighting, fencing, roofing, bathrooms, like any...

any home service. So those are those. There's a lot of different areas. We have franchises in pools, swimming pools. This is kids, the safety, teaching kids how to swim. There's a dog, anything with pets, right? So there's a lot of different things. It always comes down to, instead of saying, I like that franchise or I like that category,

Garret (11:25.544)

Yeah. Yeah.

Gary Prenevost (11:37.256)

I say it this way, the franchisee has to believe in the value proposition. They have to have conviction for around the product or service what they're offering. And that's the same whether it's a franchise or other business.

Garret (11:48.968)

That's fair, yeah.

Gary Prenevost (11:50.472)

But successful people, just the second part of that, successful people have the skills to put that product service in the customer's hands. So when somebody is looking at what the right franchise is, what are my core skills? What have I developed on my career? And these are the things I like to do and good at, find a business where those things transfer into that new industry.

Garret (12:11.528)

So let's say that I'm an electrician and worked for a company for a lot of years and now I'm on my own making decent money, but I'm just being driven absolutely bananas by the accounts receivable I have to do at home. And then I'm on the tools during the day and I'm spending every evening trying to drum up new work. And I'm just thinking of just going back and working for somebody. What would you say to that electrician?

about looking into a franchise.

Gary Prenevost (12:43.368)

Well, there's a couple of different ways to look at that. The first is, does he still want to be an electrician? Okay, because sometimes people have said, I've done enough of that. What else do I want to do? If he wants to stay as an electrician, then a couple of options. One is to go to franchises like there's Mr. Electric, which is part of the neighborly family, which is one of the big multi -brand companies. They're called platform franchising.

where systems and process could alleviate a lot of that. That would be one option. Another option is to say, I am going to hire and admin, he probably has got to look at what is he doing, how much is he doing himself. Cameron Harrold, the former COO of 1 -800 -GOT -JUNK was responsible for bringing 1 -800 -GOT -JUNK to a notoriety it has. One of his things that he says is, if you do not have an EA, you are what? Executive assistant.

So, you know, it's another importance of support. So that would be one option is looking at a franchise. Second is hiring people and staying as an electrician by himself without it. Maybe even get a business coach to help him with that. The third would be, hey, I'm done with the electrician, but I've got a lot of transferable skills. I know project management, I know site management. I know the staff or the...

contractor management, I've done those different things, what other business might be out there that I could use those skills but not work so crazy hours.

Garret (14:22.888)

Okay, let's talk about cost because I'm sure the audience is like, okay, that's great, but I can't afford X. I just need to get going. Can you maybe do an anecdotal cost comparison between, you know, a solopreneur that's starting a business versus investing into a franchise right out of the gate.

Gary Prenevost (14:42.792)

Well, it's hard to do that cost comparison, Gerrit, because a solopreneur, it's a lot less expensive when you open the business day one, but three to four to five years, 80 % or higher failure rate, the trial and error cost, what are the mistakes and how expensive are those? And people look at those and those are the easy ones to spot. But what is the opportunity lost cost? I didn't see that, so I missed that.

And there's a lot of that trial and error. So I'll say it this way, a tutoring fee is gonna get paid. The franchisee is gonna pay the tutoring fee to the franchisor. Somebody who buys an existing business is gonna pay the previous owner a tutoring fee in terms of the value of that business and the transfer as they take it over. They start from scratch, entrepreneur is gonna pay a tutoring fee.

in the school of hard knocks and that's going to take two to three years or longer to figure that out.

Garret (15:43.944)

Yeah, present.

Gary Prenevost (15:44.2)

So the cost comparison, I look at franchising to do it right, I advise people they need at least $75 ,000 liquid. Even if you're gonna find franchise, there's franchise fees from 20, 25 ,000 at the very low end to millions of dollars. If you're planning on having something full time, 75 to 100 ,000 liquid.

is a good amount. You can usually in the US it's 25 % and 75 % funding in Canada. It's about one third of your own money to two thirds of the bank funding. So it really depends on the bank. It depends on the category, but those are general. It's good to have buffer. You don't want to use all your money to get the business open and then hoping that you get all the customers the right way right off the bat.

Somebody's gonna go into business, they should plan for nine to 12 months of no income. I call year one a sacrifice year. You wanna plan for that as your, if you're the principal breadwinner of the family, let's say your monthly expense, not after tax, is $5 ,000. Well, if the business costs $100 ,000 to buy, you need at least $60 ,000, 5 ,000 times 12, you need to have $5 ,000 per month in reserve so you can fund your family while you're building the business.

Garret (16:45.352)

Yeah.

Gary Prenevost (17:09.96)

And then there's the working capital of the business as well. So it's not just, you know, there's a lot of complexity to what it takes to open a business, which is why in the friend of business people come to us because we have to figure all that out.

Garret (17:23.336)

Okay. So I mean, again, I've been in business for, I think 26, 27 years now, incomes risen like gross revenues, but not crazy. And sometimes I look back and wonder, shouldn't I be further ahead than I really am? And now with the business training I'm taking operations, finance, marketing, sales, conversion rates, landing pages. I mean, I'm being, I'm drinking from a fire hose right now. And I wonder,

You said it, opportunity costs lost. If I had made this investment and I mean, it's, it's upwards of what you said, 75 to a hundred. If I had done that 20 years ago and found a way to do that, where would I be right now? I mean, that's, that's what keeps me up at night. Sometimes I know you can't, you can't look backwards, but so I think you make a really, really good point.

Gary Prenevost (18:14.536)

It's interesting, we all do that. It's like, geez, if I would have only. Sometimes we're not ready for the lesson. When I do my keynote speaking at conferences, one of the things I talk about is one of my early mentors said to me, learn to love the plateau because that's where we spend most of our lives. The plateau is, the universe gives us short, steep learning curves of opportunity. We climb up that.

We get to them and we go along the plateau learning our lessons along the way. And that plateau can be two, three, five years. And the university will keep on dropping lessons in front of us, Garrett. Some of those lessons are gonna be opportunity. Wow, this is a catalyst. I could take advantage of this. Some of them are mistakes. Some of them are staff challenges or whatever. But people will go along a certain point of that. Okay, I'm at the point where I wanted to be and then they pause and that's where we come back to the comfort zone.

And then they get stuck on that plateau and never proceed further. So if they're not looking at the learning or kind of similar to what you just described, they haven't figured out that they should be learning more and investing in learning. Then they're not going to get that next plateau. But once they get on that next plateau, now this is where big multi -unit owners, they scale their businesses. They started a single unit, they learn, they get a couple more, and then they learn how to do that. And now they're getting into scale.

Garret (19:24.904)

Yeah.

Gary Prenevost (19:37.96)

So you can't, I'll say it this way, you can't get to large scale success by jumping from this plateau, three or four plateaus up. You have to progress or you have to hire people who have those skills and you oversee them.

Garret (19:53.576)

Right. Okay. Let's dig into, and I have a very servicey definition of this in my mind, so I'm sure the audience would appreciate an answer. Corporate owned versus franchise. What are we talking about here?

Gary Prenevost (20:10.088)

Give me a little bit more context, please.

Garret (20:13.064)

a corporate owned business where there might be a business that chooses to have multiple locations versus franchising.

Gary Prenevost (20:23.624)

Okay, so there's a couple of ways I'll answer that. The first is why do people franchise instead of expand corporately? One of them is speed to market. When you're growing corporately, there's a lot of capital involved, there's a lot of staffing involved, there's a lot of organizational operational complexity, and that usually means a lot slower growth, progressively. So if somebody, if a new,

business out there or in rapidly growing businesses saying what's the best way to really blow the doors off this and get national or international, using their own money is gonna be a long slow growth and they risk having the knockoff factor, competition is gonna come in and do something quickly and they're gonna lose market share. So people who decide to grow by franchising will say we're gonna build the system, we're going to license that and we're gonna have other people.

local communities where we want to grow, they're going to buy into it and they're going to be driving the business locally. And there's been several interesting studies where franchisees outperform corporate store. These are like one, I can't remember the name of the actual company. It was an eyeglass company in the US, I think it was New York. They had over 600 managers, 430 something.

manager bought in and did a corporate buyout and those managers, the same staff, the same location, the same people were now franchisees. They have between a 27 and 36 % year over year increase and the other 100 plus that didn't work part of it were flat. So franchisees, that owner mentality, they show up different. So that's one of those, that,

Garret (22:16.328)

Okay.

Gary Prenevost (22:18.184)

people find very appealing. So the franchisors are getting a royalty, which is a small part of the profit and the upfront franchise fee, whereas corporate is going to keep all the revenue and then manage the expenses that way. So those are the elements of usually a speed to market and that local penetration, having a business owner run the business as opposed to a manager run the business. And almost unanimously, people will tell you that,

franchise -run businesses or owner -run businesses, people are going to show up far better than if they're just a manager.

Garret (22:55.56)

Absolutely. I mean, that entrepreneurial mindset, I mean, we all know that you can do probably two to three times the work of your first employee just because of the knowledge that you have. What about autonomy and control? If I'm a bigger company and I'm thinking of expanding out, how do you balance that?

Gary Prenevost (23:17.64)

Boy, that's an interesting, the autonomy and control, people think franchising is highly structured. And I have very little operating autonomy. There are brands where that is a requirement. You think about some of the biggest food brands, you're dealing with safety, you're dealing with process, you're dealing with a number of different compliance elements that they have to have a very strict model. So the more structure there is that's required,

the less that the franchisee is going to have operational attitude. The mindset of somebody who is going into one of those businesses is, I have to adapt to this system and follow the system. A lot of franchises though, Garrett, are not as structured. We have on our entrepreneur profile, which we get all of our prospective clients to take, it's we have a compliance ratio. How well do you follow structure? I score a six out of 20, which is very low.

And I've been in franchising for 30 plus years. So it's a matter of understanding what that compliance zone is. See, I have compliance around branding. I have compliance around some marketing elements. I have a lot of operational latitude in my franchise, because Frandant is a franchise. I have a lot of operational latitude around how I execute. But as long as I stay within the bands where the band of secret sauce is for my franchise, that's part of the

Garret (24:16.36)

Hahaha.

Gary Prenevost (24:45.352)

research we help people as they're understanding the businesses, what is the band of secret sauce that they have to stay within and where do they have operational latitude?

Garret (24:55.464)

Yeah, I think where I was also coming from, from the origin of that question was from the corporation's point of view, the core business in terms of, okay, I can expand to this location, this location, maybe a few provinces. Let's take my property management company, which, like you said, the energy and the, I mean, I think about it sometimes. I can't even imagine how much it's going to cost me. Nevermind me going back and forth. And then that energy component with your first employee. But then what I'm saying is.

From the corporation's point of view, head office, now you've got this franchisee who is maybe going off on their own, they take the structure and now the business looks completely different. That's what I also meant about autonomy control from not the franchisee, but the franchisor. What would you say about that?

Gary Prenevost (25:42.344)

I'm not sure I understand the question. The question is when somebody leaves a franchise, do they...

Garret (25:47.368)

No, no, no, no. Let's just say that I create a franchise. I'm just talking corporate versus a franchise model. And then I might worry because I'm a bit of a control freak what the franchisee is doing to my name in that region, going off, saying different things, you know, making, I don't know what it is. I know you said it's within that band of whatever you're trying to design, but how would you, how would you break that down for the franchisor?

Gary Prenevost (25:50.084)

Yeah. Yeah.

Gary Prenevost (26:12.968)

So.

When I was with iFranchise Group, for five years I helped companies become franchisors. And one of the first things I said is, when you go from corporate, when you go to franchisor, you lose control and you gain influence. In corporate, you have all the control. You can make all the rules and set all the structure. In a franchise, that control is shifted down to the franchise agreement and the operations manual. As an independent business owner, I as the franchisee, I...

have the option, be very careful on how your readers hear this, any business owner has the option of following rules or not. If they don't follow the rules of the franchise system, there's serious consequences, remedial, all the way to risking losing the franchise. But the franchise or can't go in and say, thou shalt do this. The franchise or says, here's all the reasons why you should and here's what, and they influence behavior through coaching support.

and guidance. And part of that coaching and support when somebody is starting to go off the rails a little bit, they're going outside of the boundaries of that. The good franchisers will have systems in process to identify kind of like early warning systems, hey, they're not following this or this is happening. And the key performance indicators system, whatever the metrics are, a good franchise or has that and strong franchisees are managing to those metrics as well. So they know when something is happening, when something's being disrupted.

Garret (27:48.552)

Okay. You've mentioned FranNet a bunch of times. I find it super interesting that, you have a franchise that teaches people how to choose franchises. Why don't you give me a background on what FranNet does.

Gary Prenevost (28:01.544)

Well, thank you. We are think of it as the e -harmony of business ownership. What we do, people come to us saying, I want to be in business. I don't know what my options are. I don't know where to look. Sometimes I don't know how to look. Some people are saying, I've got great corporate trajectory. I've got good earning. I don't want to give up my corporate. I want to have something where I can manage in the background. We call it semi absentee or manager run businesses.

So some people are looking for that other people saying I'm done with corporate. I want to have a full -time business So we before we ever start saying here's the right brands to look at we get them to do personality assessments What are their their financial picture because we want to guide them around timing risk and opportunity Garrett What are their transferable skills? I think this one of the most important elements of the work that we do is understanding what people skills are and just as importantly what the skill gaps are

because then you go into the goals, what do they want to achieve short term, midterm, long term, financially and lifestyle wise, they can't achieve that in business if they don't have the skills to execute the business model. So coming back to what I said before, the core skills, what somebody's core passions and abilities are around types of work, the more that that lines up with what the work is, it takes to drive the product or service into the customer's hands.

the more successful they're gonna be. If they have a skill gap, they have to look at the franchise or to help them build that skill gap, invest in training on their own. Those are the two options or hire people to do that. And that's where the franchise or we'll come back to. If they don't like the work and this happens so often is they don't know that they don't like the work until after they bought the brand.

Like this is they get seduced by the brand and they 80 % of all franchises are sold direct from the franchise or to the candidate where we deal with that intermediaries, myself and other competitors. We deal with that other 20 % are saying, I'm going to be a little bit more careful. I'm going to be a little bit more purposeful and figure this out so that they're not going to get seduced by the brand or by the opportunity. If they go through and we take 12 to 15 weeks sometimes of coaching to.

Garret (29:54.888)

Hmm.

Gary Prenevost (30:23.56)

understand what the options are. And so we coach them through every stage of research. We give them multiple options to look at and then go through it on a stage by stage basis. What's really neat is it's kind of like executive recruiting applied to franchise. We get paid by the franchisor on successful matches. So the franchisees aren't paying for our services. It's part of the franchise or marketing budget. Most people like that part.

Garret (30:44.68)

okay. That's super interesting. You know, I, just because I love business, there's, I think an annual, I guess it's a trade show for franchises. And I just remember what you just said now, you know, I'm walking through and everybody's handing you pamphlets. There's all these different franchises, lots of shiny bells and whistles, lots of sales going on. And yeah, you could literally.

I don't want to say talked into because I mean, I think in the spirit of competition, everybody's passionate about their, their processes and their, their franchise. But you know, you, you are literally making snap decisions. All of a sudden you're sitting behind a curtain signing up for a franchise that you really thought you might've wanted. And then what do you do with the buyer's remorse after like you are, you're not buying a car here. You're buying a lifestyle.

Gary Prenevost (31:33.8)

Well, I want to address that because there's a perception around the franchise shows. There's franchise and business opportunity shows. Franchising, in most jurisdictions, there's a built -in cooling off period. They're not trying to rush somebody into a decision. Manitoba, for example, has a 14 -day cooling off period. That's usually 10 business days or two calendar weeks is what it is. So...

That gives people time to research and best in class franchisers, it's not a sales process, it's an awarding process. They don't want people to come in who aren't suited. Now the business opportunities, vending machines or whatever else, it's like that's that behind the curtain, get the credit cards out and let's get as many machines as you want. They want to sell within two to three weeks at the most of you being at the show.

Buying a business should be, you've waited this long, I tell people you've waited this long, as much as your career, take three months. Put 15 hours a weekend to learning about yourself, learning about the business options, learning about your customer base, all those things for three months. It's a learning journey with the intent of finding something, it's not a buying journey. You only buy once all the right criteria boxes have been satisfied.

So that's the work we help people figure out whether or not they buy. And only one third of my clients have bought. I work with over 2 ,000 people over the course of my career with Framnet.

Garret (33:04.616)

Okay, let's back up to that part about who pays for your services. Let's repeat that because can you explain that again, the pricing model?

Gary Prenevost (33:15.016)

So franchise or will pay us our fees once somebody has signed. And it's usually pretty close from one franchise or to another. It's all being a franchise. It's paid to my head office. So it's a relationship between the franchise or and my franchise or and I get my share. Think of it this way is it comes out of the marketing budget for the franchise or if they're going to spend.

X amount of thousands of dollars on internet marketing and buying leads and all those things. We bring highly qualified candidates to the franchise or the franchise. Go ahead.

Garret (33:56.488)

Okay, and then if I'm, sorry, if I'm one of those people who listen to the show and I want, you know, I contact you after, do I pay to get into one of your programs during this initial, wow, okay.

Gary Prenevost (34:07.972)

No, there's never there's never there's never any fees. Part of the work I do is educational. The we I've created a video series that they just sign up for. There's no cost. It's on demand. 12 different videos. Here's the things you need to be aware of to as you're considering starting a business in scratch, buying an existing business or buying a franchise pros and cons. What are that that that exercise is an exercise at the end of video to call my career strategy. What are the things that you bring to the table?

There's intellectual capital, there's time capital, and there's money capital. Those are the three primary resources every business needs. So you've got to figure out what the right balance is. Then you get into the criteria and all that. Most people have never bought a business before, so they don't know how many criteria to look at.

Garret (34:58.664)

Yeah, that's, you know, I'm, I'm, I'm chuckling here because, my wife is, a nurse 30 something years ready to retire next year and not really sure what to do after she sees me with the multiple businesses I have. And some are good, some are bad, but then of course she sees the, the stress and the grind. I mean, that would be a perfect candidate for you. Somebody who has just finished one career and doesn't want, you know, in their early fifties and wants to maybe.

do something but not quite sure what it is.

Gary Prenevost (35:29.544)

And we've worked with a lot of nurses over the years. I was a paramedic for five years in Northern Manitoba. So I relate to the healthcare industry. That was while I was with the bank. The people skills, the patients, there's just so many different things that the skill set that she built up doesn't mean she wants to do those things. So this is, yes, they can make great entrepreneurs, but where is their operational passion?

Garret (35:35.848)

wow. Yeah.

Garret (36:00.84)

Exactly. She's burnt out thinking she loves gardening, right? So maybe there's something there.

Gary Prenevost (36:04.008)

Yeah. Maybe she needs to go through decompression before she, to me, you lead one career, you don't, it's not always healthy to immediately jump into something else. You know, we work with a lot of people who have been downsized, layoffs, transitions, mergers and acquisitions, technology disruptions. Somebody else makes a decision that affects our client's career. They put their button, press pause on that person's career.

We want them to be four to six to eight weeks in transition, just reflecting before they really engage in the franchise search. Now I've had people who get laid off on Friday come to us on Monday, but we still, through the course of the process, it takes that three months, they are able to decompress.

Garret (36:38.6)

Absolutely.

Garret (36:51.176)

Wow, okay. No, I'm liking what I'm hearing. Let's talk about mindset. What mindset do you find, have you found in your career that makes it for it to be a successful franchise owner?

Gary Prenevost (36:57.48)

Hmm.

Gary Prenevost (37:05.64)

It's actually the first driver of my book, The Unstoppable Franchisee, is growing next level mindset. And I described that next level mindset. If somebody is going to be a business owner, they better commit to lifelong learning for as long as they have the business. And it goes back to that growth. We are going to deal with, as entrepreneurs, we're going to deal with opportunity, we're going to deal with challenge, we're going to deal with adversity. Think about COVID for a moment.

COVID was a huge disruptor to most industries in North America and around the world. Well, it's not the first disruption we've had as entrepreneurs, and it's not gonna be the last. AI is the most current disruption. There's positive disruptors, there's negative disruptors, and what's positive for one is a challenge for somebody else. So it's how do we embrace change or disruption?

Why is this happening? What do I need to do about it? How do I innovate around it? Those are all signs of the growth mindset is the world is my oyster. Self accountability, self responsibility. This happened, whether it's good or bad, this happened. What am I going to do with it? What am I going to do about it? And how am I going to use this as a catalyst to move forward?

Garret (38:22.311)

Yeah, no, I like that a lot. Kind of goes along to my next question, which is long -term success. Now you mentioned, I was taking notes here as the audience can see, competency, proficiency, comfort zones, and then proficiency to mastery. Not all franchises are going to give you that support and making it through those breakpoints and stages. What...

I mean, do you guys offer any support or, you know, suggestions past somebody who's now into the second, third, fifth year of their owning their franchise?

Gary Prenevost (38:59.944)

Yeah, there's a way where do I go? How do I respond to this? The first thing I'll say is if all it took to be successful in franchising was to follow the system, everybody would be rock stars.

Successful franchisee. I based my book research on the top 4 % of franchisees. What the super performers, what do they do that the rest don't do? What are their traits and characteristics? Top performers embrace the businesses differently. They do more with the systems and processes. Somebody who gets that comfort zone and just co -serve. So we have some clients, Garrett, who come to us and say, Gary, I want to get back to this. I want to protect this lifestyle. If I'm doing that, that's fine. That's all I want.

then that's going to be a certain type of business. If we get somebody who's saying, I'm the type of individual who I set a goal, I achieve it, I look for the next one, and I set that and achieve it, and I look for the next one, those are going to be different types of businesses. Not all businesses can scale. But along the way, they have to have the ability to learn and adapt and accumulate the skills to take it to those scales. So the franchisors usually are really good at that first level.

to the mid -level. Top performers use the other franchisees who are also top performers. And this is where that next level support comes. And that's one of the greatest strengths of a franchise system is all of the support of the other people doing the same business day in, day out, who are willing to share best practices.

Garret (40:36.104)

A community, yeah, okay. Yeah. Okay, and that, I mean, you just answered my next question, which was going to be long -term success of a franchise versus independent business owners. That seven, eight, 10, 15 year, now you're scaling me as a separate business owner. I have no idea how I'm gonna scale.

Gary Prenevost (40:37.192)

It is a, it's a family.

Garret (40:59.624)

It's very rare that you're going to get somebody in any industry that's going to be able to go to their 5, 10, 15 competitors and say, hey, why don't we collaborate and figure out how to do our business better? Right?

Gary Prenevost (41:07.656)

Yeah. Competitors saying, you know, I'm having this problem. The competitors say, keep on going. Yeah, you can keep on doing that.

Garret (41:15.176)

Right, yeah, yeah, you know, give you some disinformation. So yeah, I really like that. I would almost challenge anybody to say that upfront cost is almost like peanuts compared to all these lost opportunities and getting into trouble and then not being able to scale later.

Gary Prenevost (41:34.216)

Well, that's the voice of experience and you and I both know that because I've had start from scratch businesses as well. People who have never been in business before, they have trouble grasping that. I want to bring in another level though of return. Because I think a lot of people when they go and they buy a business, they don't think about exit strategy. I maintain you should never go into business without knowing what your exit strategy options are.

The dream is I'm going to buy it, build it, sell it for a whack of cash at the back end. Well, the more the business is reliant upon the owner, the less valuable it is. So as we, as we look at a franchise system, good franchise systems where you're building teams, people, processes, multiple locations, if you scale that way, it's going to be more, more valuable at the back end. The, so when people, I'll use this example, if a franchise is making a hundred thousand dollars profit.

Garret (42:00.424)

Mm -hmm.

Gary Prenevost (42:30.12)

On average, franchises sell for two and a half to three and a half times their annual profitability, whereas non -franchised businesses, the exact same business sells for one to two times. So if that business sells for three times $300 ,000 and they've had it over 10 years, in Canada, we've got the lifetime capital gains tax. So that's $30 ,000 a year after tax savings.

up to 1 .25 million, which was just announced by the government earlier this year, that if you're making $100 ,000 a year and you've got this back end value, a lot of people don't figure the back end value when they're looking at return on time and how much money am I going to make. Now, not all businesses can sell for value and not all businesses that can sell for value do sell for value if they haven't been built or operated sufficiently well.

Garret (43:01.224)

Mm -hmm.

Gary Prenevost (43:23.496)

But it's important to factor the back end in to what the right business is.

Garret (43:24.52)

So let, yeah.

Mm hmm. Okay, so what you're what you're speaking about here is somebody I mean, let's just call it like it is somebody owns a sandwich shop and I'm not gonna promote any sandwich shop franchises out there but let's say that you've been operating in your small town for five, 10, 15 years and you're ready to pack it all in and you call your commercial realtor and say I'm ready to sell my business compared to hey, I have a successful

whatever insert name in there and successful as you know, sandwich franchise. I mean, I think it's common sense that it's easier to sell the franchise or maybe, I mean, speak to me about what the franchise or is going to do to help you sell and exit.

Gary Prenevost (44:10.472)

Because it's an independent business, it's up to the, in most cases, up to the franchisee how they're going to sell. In some businesses, and all franchises, almost all franchises have the, the franchisor has the right to not approve a purchaser if they don't have the skills or other, other core criteria. But that's, that's rare. Often though, what I see in a good brand with a good, a good location,

Other franchisees, when one person's ready to exit and not somebody else is willing to grow, it never hits the market because somebody internal buys it if it's priced right, if it's priced at fair market value. So, but yes, the short answer is they should sell far faster, far more value than if it's a non -franchised independent business of the exact same category.

Garret (45:00.552)

Well, I mean the sandwich shop we're talking about. You might sell the assets, the Panini Press, the name. It really depends because everybody's watching and looking to see who the next operator is going to be and if they're gonna change the recipes. Meanwhile, half the time you don't even know that ownership has changed hands when you're selling a franchise. Yeah, okay. All right, so let's talk about marketing and brand power.

Gary Prenevost (45:21.32)

Mm -hmm. Correct.

Garret (45:30.28)

Because I mean that was what was in my mind when you're buying again fast food retail and those types of things in any of these businesses How do you how does that factor in?

Gary Prenevost (45:42.472)

I'm going to raise some eyebrows. Garrett, for somebody looking at a franchise to buy, I say brand is irrelevant. They go, what the heck are you smoking? Brand is everything. That's why I'm buying a franchise. No. What is a brand? A brand from the consumer point of view is a customer promise, an experience promise. If the consumer cannot experience that at the location that that franchisee buys,

then they will come two or three times. But if that franchisee or business owner, if they're not a franchise, if they're not delivering, executing, training their staff, managing everything at or above experience expectation level, the customer is not going to come back. And nowadays, they're going to drop poison pills electronically on the way out in terms of negative reviews. So it can actually, you're an underperforming, not following the rules. You're actually doing brand damage.

Garret (46:33.96)

Mm -hmm.

Gary Prenevost (46:40.776)

So it comes back to the ability to deliver the brand promise, operational management, leadership. What are all those different components? How does the person who wants to be the franchisee develop those skills or have the skills and how do they learn how to transfer them into that industry?

Garret (46:42.152)

Correct.

Gary Prenevost (47:00.36)

So bread is important.

Garret (47:01.)

But just putting that sign up there must have something to be able to attract more customers, assuming that you can deliver on the customer promise.

Gary Prenevost (47:07.824)

Well, yes, and here's another part. It is never the franchisor's responsibility to bring the customers in. Again, people going, what do you mean? That's why I'm buying a franchise. No, it's the franchisor's responsibility to bring you a strategy, systems and process, part of which is customer generation, marketing, sales, whatever those conversions are. It's your job as the franchisee to execute. Say, this is what part of the work that I do at Franchise is helping people understand.

Garret (47:33.672)

Okay.

Gary Prenevost (47:36.136)

It's not just, hey, put in the sign up and people will come. What does it take to get people to come? In my book, The Fourth Driver, Grow Your People, Grow Your Leadership Skills, it's about servant leadership. Great franchisees, great business owners treat their staff as their most important repeat customer.

So how do you develop and lead the people to make sure customers coming in, whether walk by or brand driven, are having the experience that they want and are going to come back?

Garret (47:58.088)

correct.

Garret (48:11.624)

And that gets down to your processes, your people processes that is passed down from the franchisor. But of course you have to follow those. You have to be again, a good engaging boss, treat everybody fairly, all those touch points.

Gary Prenevost (48:22.152)

But look, yes and. See, what people want is really important to realize, and you've lived this yourself, is when they buy a franchise or they launch a business, they're going from being really good at whatever they've been doing all their life to all of a sudden, they have to start over and I have to learn how to get good at something. So that's where that value of sacrifice, they invest time, money and dollars to go up and learn and grow.

They don't immediately walk in and I'm brilliant over here, I'm gonna be brilliant over here. They have to go through that learning journey. Whether, and this is coming back to the difference between franchise and independent, is you've got a community around you to help you do that as a franchisee. So it accelerates that growth as we talked about earlier on the show. Whereas an independent, they have to figure it all on their own and it's slow, hard knocks.

Garret (49:18.088)

Yeah, wow. Okay. Marketing campaigns though. I mean, I'm just thinking, again, this is probably coming from my naivety initially of what a franchise is. Again, talk about these national fast food chains, international fast food chains. You see a TV commercial out there. That's gonna help your neighborhood fast food retail chain. I mean, that's kind of what I was also talking about marketing and brand power.

Obviously, I mean, we're paying for that as a franchisee in some way, shape or form, right?

Gary Prenevost (49:53.736)

Most franchise structures have a marketing fund or a like this is a brand fund. A small percentage of royalties goes to a small percentage goes to the brand fund or marketing fund. And then a larger percentage goes to the royalty. So two separate funds. In most jurisdictions.

The franchisor, those funds don't go into general coffers. The franchisor is the custodian of those marketing fees. In a good franchise system, the franchise advisory council will have influence over how and where that's spent. So yes, there's local benefit sometimes, but it's somebody who's buying a franchise shouldn't expect that that I'm paying this, it needs to happen in my market and in my immediate area.

It's a brand fund, so it's overall developed.

Garret (50:51.176)

Okay, so if I'm again, neighborhood sandwich shop and I run wanna have some two for ones or free when you know, buy one get one free Wednesdays, probably we're now we're getting right into the like the weeds of what you're allowed to do and what you're not allowed to do as per that franchise or agreement.

Gary Prenevost (51:08.904)

Yeah, this is where the franchise or here's the marketing structure. Here's the current campaign. Here's what we're doing. Here's what you need to execute in your marketing. The branding is an important part. The marketing is an important part. Community engagement, Garrett, a lot of people as business owners underestimate and undervalue community engagement. When I think about community engagement, you know, I've...

Garret (51:19.624)

Okay.

Gary Prenevost (51:38.824)

heard many franchisers tell their franchisees, you need to become the informal mayor of your town. Be out there connected. People think community as the geographic community around where they live. Well, there's a geographic community around the centre or franchise. There is a faith community. There is an ethnic community. There is a business community. Who are your customers? What other businesses have the same customers?

And there's several different communities. Each one of those communities is a mining opportunity. The more savvy franchisees will get out and engage the community, each of those communities on different fronts. And it supplements the more visible you are, you're serving the community. That's just part of the marketing strategy.

Garret (52:24.776)

Okay. All right. Let's, let's talk about the future. Where do you see the future of franchising going?

Gary Prenevost (52:36.072)

I am heavily biased towards franchising for a lot of reasons. I've seen the good and the challenge of starting from scratch or buying an existing business. I've also had wins and failures in both franchising and not franchising. The more what we're seeing, the shifts, we're getting far more technologically, I'll say it differently, technology is accelerating far faster.

than we've ever seen before. One of the strengths of franchising is the ability to respond to that and innovate faster. They have whole teams at head office and the franchisees working together with their suppliers compared to an individual who I've got to figure out on my own. There's just not the processing power to do that. And instead of, gee, I got to learn AI. Well, okay, the franchise we're working on AI, here's how we're integrating it. Here's how it's going to optimize the customer experience. Here's how it's going to optimize your internal processes.

They've got entire teams working on that, whereas a business owner, independent, you don't have that. So technological speed. Another big change is platform franchising. You've got more private equity coming into franchising and most private equity is investing where it's not buy it, build it, and then sell it in a few years to make a lot of money. It's buy it, build it, and hold it. We're going to really help this thing scale.

And downstream, we're going to sell it to a bigger private equity company who is going to take it to the next level. So that does strength for the brand, strength for the franchisees, financial operational strength, leadership talent of the franchisor. So, and then you've got the strength of multi -brand platform. I use Neighborly as an example, where Neighborly's philosophy is on the home. They've got a whole bunch of different services that are franchised for different sectors of the consumer around the home.

So you're seeing this one franchises customer base can be utilized to accelerate the speed of launch with a new franchisee in another area. So I think franchising is only going to get stronger. It's going to get more refined. It's going to be more sophisticated at the operational level. It's going to out distance independent businesses. We're going to see it stronger than independent businesses.

Garret (54:41.992)

Okay.

Garret (54:56.616)

I think it's going to permeate more and more different industries.

Gary Prenevost (55:00.68)

I don't know about that because we're already quite broad based. Franchisers do not invent industries. Franchisers wait till there's enough momentum. So the bleeding edge and then the early leading edge, they prove, the inventors prove the demand. Franchisers come in and outperform, out market, out operate the non -franchise less complex operators. And they capture market share once the demand is proven.

Garret (55:29.992)

Yeah, I mean, to your point, I was again at that multifamily conference in Toronto last week. And, you know, there was, first time I've ever seen this, a property management franchise, booth. Now I knew this franchise, not going to mention names, of course, on the podcast, but I knew them from the U S and they're trying to penetrate into Canada. so it was really interesting. I had a, you know, they had a few operators there.

And we had some discussions and I mean, they admitted that it really was for somebody who wanted to get into the field of property management and maybe scale to about 200, 300 units as a solopreneur. But then they're providing the, the, you know, the, the training, the licensing, the, all those types of things in whatever market, they didn't have anybody in Manitoba, but I was very interested because I'm having trouble scaling up to a thousand units and they were freely admitted.

we don't have any operators of that size, right? So there wasn't a good fit there, which was a little bit disappointing to me because I was, you know, sometimes I think what could it be? Maybe I should just franchise my own model, but then that magic, that magic sauce to get from 600 to a thousand is super difficult in my industry.

Gary Prenevost (56:41.48)

And there are very, very few who have done it.

Garret (56:48.68)

Yeah, yeah, no, that's always a challenge. Well, this has been really, really insightful. I can't wait for this episode to get out there. I'm going to be, of course, putting all of your contact information about FranNet and how people can get in touch with you. We'll talk about that post show. I'd like to finish the podcast by asking every guest this question, and I'm really interested to see what you have to say. So this is the Investing to Win podcast.

How do you define success and what does winning look like for you?

Gary Prenevost (57:22.568)

I got my start in franchising in the business development sales management leadership training. So I go back to the traditional definition of success, the progressive realization towards worthwhile predetermined goals, smart goals. I have a, every year I have a journal and I have a goals list and I have a dreams list. The dreams list is I've been building for years, anything that I say I wish I want.

It goes on. I want to learn to play the piano. I want to fly a helicopter. Like those like I used to say I wanted to skydive now until a bullet breaks. But so but every year, Garrett, I picked two to three things off my dreams list and I move it to a goals list. And so that's how I focus on that. I create a plan of how do I execute and how am I going to get there? A goal without a plan and a plan without a tracking is a waste of time. It's a dream. So to me, it's it's.

putting that in together. The book was an example of one of my dreams was to write a book. I finished that last year and the USA Today Pick was one of the top 10 business books for 2024. So it was pretty exciting about that. But so success is living, living the life that you want to live under the terms you define. I have one of the coolest businesses in the world. I can help people change their lives.

Garret (58:29.864)

Wow.

Gary Prenevost (58:43.624)

So I love what I do. I get to show up every day. There's parts of business that I don't like. Every business has stuff. yuck, I got to do that too. But 85 % of the things I do in my business are like candy to me. It's like play. And then I have a great personal work -life balance. So those are parts of it.

Garret (58:50.664)

Mm -hmm.

Garret (59:03.016)

Yeah, I think what we're speaking about here and I'm the same is if you base your goals and your success on a bigger purpose, it just everything seems to gel a little bit better. So I really love what you just said there.

Gary Prenevost (59:16.744)

And purpose is so important. There was an article in the Walrus magazine in November called the end of retirement. And they talk about purpose, actually when being connected to purpose extends life. Like 50 % of people who are tied, like the response surveys they had, they had a substantially longer life when it was tied to purpose. And part of being a business owner, when you do it right, be a franchisor otherwise,

When you tie your purpose to the work, not the product, to the work, and the outcome to the work, it's an exciting place.

Garret (59:55.176)

100%. All right. Well, I think that's a great place to cap it. Thank you so much for reaching out, hanging out with me for an hour. And yeah, I can't thank you enough for showing up here.

Gary Prenevost (01:00:06.696)

My pleasure. I love the conversation. Thank you, Gar.

Garret (01:00:10.76)

All right, take care.