PURE GREEN PODCAST - EPISODE 1: ERIK VAN HORN
The world of franchising can be difficult to navigate for those who are new to industry. Interested franchisees want to make sure they chose the right franchise to build their financial future and franchisors want to make sure they chose the right franchisees to grow their brand.
In this episode, Ross Franklin sits down with Erik Van Horn, Founder & CEO of Franchise Secrets. Erik is heavily entrenched within the franchise world as an investor and advisor to franchisors, a former franchisee who made the transition to franchisor, founder of the Franchise Secrets FaceBook group as well as franchise consultant and speaker within the industry.
2:28 How to know if franchising is right for you
6:44 What potential franchisees should look for in a franchise
9:26 What questions should franchisees ask franchisors
10:54 When should a franchisee consider opening up their second location
13:51 Why only 1% of franchise leads actually buy a franchise
17:27 Lead generation for franchisors
20:51 System and processes for franchisors
Ross Franklin 0:16
Welcome to the pure green Podcast. Today on the show. We have Eric Van Horn, the founder and CEO of franchise secrets. Eric specializes in both sides of the industry on the franchisee side and the franchisor side. Eric, it is such a pleasure to have you on the show. Thanks so much for being here.
Erik Van Horn 0:34
Ross is a good man. I’m excited to be here. Good to see you. Yeah, so
Ross Franklin 0:38
just to kick things off today. Tell us about franchise secrets.
Erik Van Horn 0:42
Alright, so it was about 20 years ago, I bought my first franchise that turned into seven different brands over the next 20 years, both on the franchisee, and the franchisor side and COVID hit. I had this Facebook group called for franchisees and I had a podcast called franchise secrets. So I just doubled down on everything helping people through COVID and I grew this Facebook group and the franchise secrets podcast has started to grow. And out of that I just started to do more and more things from masterminds to helping franchisees and franchisors so that’s kind of the origin of it. It was born out of COVID
Ross Franklin 1:17
I love it. And you know, I’m a member of the franchise secrets Facebook group, and I’ve just found it’s such an amazing community, people asking questions, people are getting answers. It’s really amazing for the franchise industry. And so with the Facebook group, so it’s open to both sides of the business, right? franchisees can join it franchisors can join it and everyone just kind of joins in, right?
Erik Van Horn 1:38
Yeah, you got franchisees, you got franchisors and you’ve got buyers, people that are thinking about franchising is right for them. And I’m really protective of those buyers, because there’s a lot of people in there that want to sell them something and so I’m really protective of the buyers, I want them to come in and to really get an inside look at franchising from franchisees and franchisors without being sold a bunch of stuff. So that’s why I love having people like you and they’re just giving value and helping out.
Ross Franklin 2:04
That’s awesome. So I’d love to just pick your brain on both sides of the business. So let’s start off with the franchisee side. So first off with someone looking at getting involved in franchising, someone wants to become a franchisee what are some things that they need to think about to know if it’s right for them?
Erik Van Horn 2:24
HOW TO KNOW IF FRANCHISING IS RIGHT FOR YOU
I think you there’s some misconceptions out there with semi absentee, some people I love to my absentee businesses to my absentee franchises, but you really need to take an inventory of the time that you have. And just because of brand, any brand brands I’ve been a part of brands I’ve owned, just because they say you need to work X amount of hours in the business, validate that with franchisees or really talk to the founders and say this is how much time I have to devote will this work. And the more that you kind of get to know the founders or other franchisees to really understand the time commitment. Because some people get into it, they think it’s going to be just like an investment, which a lot of times, it’s a lot more than investment. But that’s the beauty of it too. Like you can get into a brand and put your time into it and get a return on your time because nobody’s going to do it better than you as a franchisee. So one, I would just want to take inventory, if I have a full time job, you know, I’d want to know that I still have enough flexibility, or the ability to hire somebody really good to manage the thing for me. And then number two is his capital having enough capital. I see some franchisors out there that are kind of too light on that. But like you in the space that you’re in, you want those well capitalized franchisees, whatever that is, and so I appreciate founders like you that want to bring that accurate expectation to what it actually takes to own a franchise. So those are like kind of the two main things, especially when I used to work as a consultant helping people look at different brands out there. And then timing, I wouldn’t, I don’t really want to start, or people don’t want to start looking at buying a franchise brand unless they’re ready to make a decision. Because once you start doing your due diligence and diving into it, it has an end process. So it has a beginning and an end to it. And you know that as you help people look at your brand, people will eventually come to discover day or whatever the thing is that you have at the end of the process. And it’s time to make a decision, both from your side and their side. And they just people just need to know that it’s time to get serious once they start diving into good brands. Because if somebody gets into it, they’re like other time is this not right? Well, they just wasted your time and their own time. So I’m a big fan of this knowing those three things. How much capital is it take Do you have enough net worth and liquid capital? Do you have the time to put into the business and are you ready to buy within three months of starting to look those are kind of generically the things that I would say to buyers out there so I don’t know what do you think?
Ross Franklin 4:47
I love it. So let’s say that you have someone’s think about franchising. You know they’ve identified if whether they want to be an absentee franchisee they want to hire a restaurant veteran to go in and operate for him or they decide They want to be an owner operator, let’s say they have the funds or they already got approved with SBA financing. So they’re ready to go. And they’re interviewing different franchisors, what are some of the things that they should look for in a franchise? And what are some of the questions that they should ask the franchisor.
Erik Van Horn 5:17
So how many franchisees, do you have Ross right now,
Ross Franklin 5:20
right now, we’ll have 20 units open this month, we have a pipeline where franchisees, we’re going to finish with 35 to 40. At the end of this year, we’re on pace to have 100 By the end of 2023.
Erik Van Horn 5:32
And how many are open today? So you can have on PCF 20, open by the end of this month? You said,
Ross Franklin 5:37
Yeah, we have 15 open now, fiver and construction sets open this month. Okay, so
Erik Van Horn 5:41
that’s perfect. I mean, you’ve got kind of the best of both worlds there. So the question, if I remember correctly, after I started peppering you with some questions is like, what kind of advice? Would you give someone looking at a brand to kind of at this stage? Is that kind of the question? Yeah, so we have a franchise, emerging brands, a super emerging brands don’t have anything open except for their corporate locations, if they do have a corporate location. And so they’re, it’s an that’s a much bigger risk, but when to be a 15 locations open, and some are corporate, some are franchise locations, you’ve got a lot of validation to do there, it might not, they might not be open for one, two or three or five years, but you can validate training, you can validate how their grand opening was, you can validate so many different things.
WHAT POTENTIAL FRANCHISEES SHOULD LOOK FOR IN A FRANCHISE
So my advice is, is people that are looking at, you know, brands like this is to look at validation from a number of different standpoints. One, you know, you want to you always want to kind of make sure your financial expectations are what the franchise what you are was what being is being experienced out there in the field owners are actually doing so when you have 15, open, you’ve got five more opening up this month, and then you’re just continuing at that same pace, that gives prospective franchisees a lot of room to be able to ask a lot of different questions to franchisees at various stages. So you can see whatever ones are opened up the longest, how they’re doing, you can validate that you can validate to the ones that just opened up this month. Let’s say you’re listening to this, and you just had five open up if I’m a prospective franchisee looking at this, I think that’s amazing. Because now I can go visit them, I can, you know, talk to them on the phone, find out we’re costs within line of what you were expecting, because that’s the big thing right now with costs, costs are just going up everywhere. So I like to know, you know, I like a brand that could tell me real time if costs are to be expected. And whether they are they’re not, you can hear it for franchisees and I, you know, there’s a I love talking to franchisees from that standpoint, ask them how grand opening was, you know, there’s so much to validate with, like with what you’re doing in the stage that you’re in, and then even just the, you know, location, what did they liked about that location was it to the expectations of what they thought from a, you know, first month in business, so you can just validate so many things. So I’m a huge fan, huge fan of having the update where you are at the stage, because the other thing is, there’s so many open locations for people to get into, like, you know, some of the best locations out there are available. So you’re kind of in that sweet spot, you got locations open, and then you’ve got so much whitespace so many opportunities for people to buy, and they can kind of pick and choose where they want to go. So if I’m a prospective franchisee looking at any brands, this is what I would be, I’d look at this and be like they’re in a real sweet spot. Now, if you have 100 locations open, because that’ll happen before long, you’re not going to be in this kind of sweet spot. There’s it only gets better from a validation standpoint, but good top territories are taken. And here’s one kind of point I want to make on that a lot of times prospective franchisees think or franchise buyers, they think all the good areas are gone, because that’s where because everyone just takes a good areas up front. Well, that may be true, but it may not be true. I’ve seen a lot of franchise buyers buy based on where they live geographically, not where the actually the best locations are for the particular brand. So, you know, that’s something else to keep in mind as, as brands grow.
Ross Franklin 9:11
Those are some awesome points, you know, as on the phone with a prospective franchisee yesterday, went through a ton of questions. And then they asked me what other questions should I be asking you? So in your opinion, what questions should prospective franchisees ask the franchisor?
Erik Van Horn 9:25
Well, I think if you are a good franchisor taking them through a really good process, and I know that you’ve watched some of my stuff and whatnot. So I believe you have a really good solid process and it just gets better as you grow. But if you have a good process, you should be basically answering all of their questions as they go along where they should be. So really, at the end of the day, a lot of the questions are internal questions that they should be asking themselves like, Am I really ready to be a business owner? Am I really ready to make some of these decisions so good franchisors provide the info Meishan that prospective franchisees need at the appropriate time. Some people want to ask more questions, they want to bet on the first call, they want to dive into the unit economics of it, or they want to dive into the Franchise Disclosure Document or things that are, you know, maybe on the second or third or fourth call, or they want to talk about territories when that’s really reserved for the third or fourth caller before discovery day. So some people try to hop ahead, but good franchisors know that just like there’s a system that they have for their franchisees, there’s a system and process they have for prospective franchisees or franchise buyers to kind of follow along. So if you get that question, and you were thinking, Boy, I don’t know what else they should be asking probably because you’re doing a really good job of giving them the information that you’ve already given them.
Ross Franklin 10:45
That’s super helpful. So let’s say prospective franchisee makes the decision they get their first store open. When do they when should they consider opening up their second location?
Erik Van Horn 10:56
WHEN SHOULD A FRANCHISEE CONSIDER OPENING UP THEIR SECOND LOCATION?
Well, this is a tough one, because I’ve done I’ve done I’ve opened up multiple locations back to back like signing leases back to back. And the quick story on that and this was after I was a veteran franchisee I’ve done I’ve spent millions of dollars opening up different franchises over the years and, and I opened up one, it was average, it was an average location I heard already had my lease signed on my second one was started construction on that. And then I was assigned a lease on my third one. So within the course of the year, I had opened up my first one opened up my second one, which was a dog, it was an absolute dog, everyone thought it was gonna be the best one. And then I opened up the third one because I had to because I’d already signed the lease already started building it out. And it was the most expensive one from rent to build out everything. And that thing opened up printing money day number one. So it’s average location, dog. And then I had this thing that I couldn’t help but make a bunch of money off of. So with that said, if I can, especially like in in, you know, a franchise like yours, I would try to lock up a few territories so I could expand. And then I would open up that first one, see what I learned from it, and then open up location number two, based off what I learned with customers and whatnot. But sometimes in brands, you have to open up more sooner than you want to as a franchisee because that’s the way this is the way it is. So I don’t know exactly what yours is. But let’s say you had to open up one in the next six months, I wouldn’t be afraid of doing that, I wouldn’t have been able to have an eight figure exit on that brand that I was just talking about. If I wasn’t forced to open up three right away, I would have quit after number two. So I’m so grateful I didn’t quit after number two. And number two was the worst one by far out of all of them that we opened. So we had one dog at a 12 locations. And it was our second one. Thank God, it wasn’t our first one. And thank God, I was able to get number three opened up and then they were just great after that. So the point of that is just because your first one isn’t doesn’t do as well as you think it is, there’s going to be factors that are outside of your control, even the franchisor thought number two was going to be so great. And it ended up just being you know, a difficult one all the way around. So net net, I would like to open up three back to back within 18 months if I could, but that’s a very generic answer. Very helpful.
Ross Franklin 13:15
And let’s shift the conversation over to the franchisor side. You know, the craziest thing is, before we got into franchising, I heard this statistic that all the other franchisors were telling me, and I know you’ve heard it before as well, which is they say that in the franchise world, out of all the leads that you get, you know, only 1% of them end up buying, you know, that’s such a it’s such a crazy statistic, you know, I’ve been in, in sales and so many other industries, just that percentage is so low. So my question for you is, why do you think that 1%? Do you think that that is true? What’s your thoughts on that? Why? If there’s any truth to it, why is it so low?
WHY ONLY 1% OF FRANCHISE LEADS ACTUALLY BUY A FRANCHISE
Erik Van Horn 13:54
So I think there’s truth to that, because I had a guy on who represents a some of the lead portals, he spoke to my franchise or mastermind the other day, and he said, between one to 300 leads, you should get a deal out of that, which equates to about 10 to $12,000 of pure lead cost. But I mean if it’s 300 leads to get a deal $1,200 That’s the cheap part. It’s like grinding through 300 Different leads to get that deal. So think there’s just so many such a variety of ways franchisors find leads for their brand. You know if it’s from a podcast, like people that listen to my franchise secrets podcast, they get into a brand. I just heard one of my portfolio brands. He said, Eric, we were on your podcast. We had no equity in this company. But he said we had 30 really good quality leads come through because of your podcast. And these are people that have been listened to my podcast for years. And they found out you know, they liked his particular brand and they liked because I was involved with it, but they liked a lot of other things about it. So there’s 30 leads that came in right away and those are high quality leads probably get five to 10 franchisees out of that. Now, if you were to try to get five to 10 franchisees out a portal leads paying 160 bucks a lead and get in one out of 300, then you know, you’re going to be somewhere, but that one, one lead out of every 100 makes it a podcast with Porter leads. So it just depends where you’re getting your leads. And like for you, you should be better than the well, it just depends how many leads you’re getting in from your website, right, and how quickly you can bet them out. But I would say a qualified lead somebody that is financially qualified, they have the expectation to buy in the next three months, if they like your brand, and they have the time to be able to devote to it. If they’re qualified like that, and they’re interested, you should be way above that for your particular brand. And I think you should have a high inflow of leads coming in just because your customers can become franchisees, people that go into your locations, they have the you know, a lot of big and have the net worth, and they’re going to come from a place where they should be owning a brand like yours. So that’s what I like particular brands like like pure grain, like, I mean, they should be it should be out there on Instagram. And because of that, and podcasts and just blast it out there, you should get a good amount of leads that you don’t have to stick to that 1%. So it’s true, but it’s kind of misleading at the same time.
Ross Franklin 16:17
You know, I think I read somewhere that out of all your clients that you close 25% of them, 25% of them end up buying a franchise, is that true?
Erik Van Horn 16:25
When I was a consultant, it was I think it was probably one I probably it was I think it was around one out of four, but they were vetted. They were a lot of times they’d heard me, that’s why I love how, why you have a podcast because they get to hear you they get to see see you they get to understand how you think and your personality. And you know, and and as long as we’re authentic and who we are on social, then people really get to know like and trust you or not, you know, there are people that don’t probably don’t like me, because you know, I live on a live on a ranch in the middle of nowhere in South Dakota, they might not like that. But I’m in people’s ears all the time, they get to understand how I think and and they like I want Eric to help me find a franchise. And so I would get with them, then I would qualify them on those three things that I just talked about. So if they were qualified, and they filled out this long form, then they weren’t, that’s what I consider to lead. I would close one out of four of those. And I didn’t spend a whole lot of time with them either.
Ross Franklin 17:22
That’s awesome. Can you talk a little bit about lead generation for franchisors best practices and what your thoughts are there.
LEAD GENERATION FOR FRANCHISORS
Erik Van Horn 17:29
One of the first things I would do, if I’m like coaching you, I would say have a call scheduler, like even if you have the capacity to pick up the phone or send the email, have somebody call a pre qualifying schedule them on your calendar. And then I would send out a video to them on what to expect on that first call or some things about your brand. That way you’re using that first call just to get to know them. So I would from a lead. That’s that’s more like once you have the lead, but that’s what I would do once you have that leads. So to get leads, I think I would really just go after that ideal ideal avatar, whoever your current franchisee is, I would start showcasing them, I would have them on your podcast, I would have them do other podcasts and as much as they can, because a lot of people think and I get it, I get a lot of requests for for franchisors to be on my podcast, and I don’t let franchisors get on my podcast anymore, because the end up with 30 leads and I don’t know the brand very, very well. So I don’t let this any brand get on my podcast anymore. But I if you know, I would advise you to have your franchisees get on different kinds of podcasts, whether it’s a podcast on family, it’s a podcast on how you know I was in the military. Now I’m a business owner, or I, you know, always wanted to own a business. And now I get to own a business or this was my background as a pharmaceutical sales rep or medical device sales rep before and now I can do now I have a business. So the more that they’re out there talking about it, I would incentivize my franchisees to go out there and be on podcast, and then I would at the corporate office, just blast that out to your list. So that way it serves and it helps people get to know your franchisees as well. So it’s not just you out there as Ross talking about everything. Now, you’ve got 15 other franchisees, and pretty soon you’ll have 50 franchisees out there kind of doing the same thing. So I think that’s one really underutilized, a way to do it. And maybe if it’s even a podcast where you’re able to be on it with them, or they can do it in a group or something that’s in their comfort zone. So like there’s no better there’s no better PR than having your franchisees just talking about their life and who they are and why they did what they did.
Ross Franklin 19:41
That is such a great idea. If you think about it, there’s no better ambassador to the brand than a successful franchisee just going out there and talking about their experiences. I love that that’s definitely something I want to embrace. So thank you for that. That’s amazing.
Erik Van Horn 19:56
And then what you can do from your end is put your social media machine behind it. And if a brand doesn’t have a social media machine, this is a good reason to get one to hire somebody that is focused on social. So they can take that content from that particular website, chop it up and create little micro pieces of content, give it to the franchisee, because franchisees will want to share that, and then they can go share that different places. So, you know, I just think that’s a very underutilized strategy. I don’t see many. I don’t I’ve never had a request from a PR agency asking to get a franchisee on. And when I was a part of another brand, I requested that from our PR agency, I said, I would like this franchisee to go beyond podcasts and said, No, Eric, we want you on podcast, like, no, I’ll be on podcast but you want a franchisee that a lot of people can relate to because it just it hits that avatar versus me talking about it.
Ross Franklin 20:49
Love that. Talk to me a little bit about systems and processes for franchisors what’s what are some, some franchises that come to mind with just amazing or game changing systems and processes who’s like, in your opinion, the best in the industry as it relates to systems and processes.
Erik Van Horn 21:08
I’ll just be super honest, I don’t know any young franchisors that are good at that. Like they, I think the best ones at it are the ones that know that they’re out, they always need to improve. And they tell their franchisees like we’re in the process of of improving, and we’re always going to be improving. So even like, think back to your first training, I remember being a part of a brand, we had our first train as a franchisor. And it was good, but it was still rough. And this was not a new. We weren’t part of a new team is like there we were experienced franchise people doing this and yet first training, we still had kinks to work out. And so we didn’t look for feedback from our franchisees that just completed training and how great we were we were looking like what did we Moyer, do we need to improve. And that went so far with them. Because we did improve, we looked at their stuff and they’re like, oh, we need to do this, we need more of that we need less of this. And we immediately changed it. And now the franchisees had a voice in that new franchisee. So wow, they are changing things. So I think the best ones are those that are that are always improving and tweaking that and learning from their franchisees. So I think I feel like I weaseled out of that question a little bit. But as as I that’s the first thing that came to mind when I heard you say that, otherwise, there’s just big brands, I mean, think about Budget Blinds, I have one of their one of their biggest franchisees part of my franchisee mastermind, and and I know different people that are part of that brand. And they they’re they’ve say very good things about that brand, but they’ve continued to invest back into their franchisees. So that would probably be one that has really good solid robust systems
Ross Franklin 22:46
and love what you were saying about continuous improvement. That’s actually one of our core values. So that’s that definitely resonated with me. But Eric, thank you so much for time before we wrap up, I would love for you to just tell our listeners, you know where they can find you. How can they get access to join the Facebook group franchise secrets? If you can talk about that before we wrap up? That’d be great.
Erik Van Horn 23:07
For sure. So there’s a free Facebook group. We got about 3000 people in it. There are people that are buyers, their franchisees and franchisors just go to franchise secrets group.com franchise secrets group.com and get in there and ask some questions and learn. It’s a great community. There’s a lot of really, really smart people in there much smarter than me. And that’s what I love about it. And there’s people that are very new to think about buying a franchise or new to franchising. It’s a great place to learn. So if you want access to accurate, really good raw information, that’s the place to
Ross Franklin 23:41
go. Awesome. Eric, thank you so much for being on the show. Ross I
Erik Van Horn 23:45
love what you’re doing. I love the brand. I think it’s amazing. You’re at such an amazing time to be able to have a brand like this at the stage that you’re at in the space so I can’t wait to see where you go. Thanks for having me on.