Income Guarantees Explained | What They Really Mean in Franchising | The Real Franchise – Ep 51

Rhiannon Welcome back to another episode of The Real Franchise, a podcast that goes where others simply won’t. An unfiltered view of franchising business mindset, and everything we stand for when it comes to supporting a community of small business owners. Join me, Rhiannon, the CEO for James HomeServices Australia, and Justin, one of our owners, as we unpack it all with no topic off limits.

Today we are talking about income guarantees. Justin. It’s a hot topic. We’ve just been chatting for a couple of minutes offline, and you’ve said even in the last week this has come up several times. Today we’re going to dive into Income Guarantee, but we’re going to put a different spin on it because we’ve talked about income guarantee before on this podcast series.

Right. But what we did in that episode was we really focused on our income guarantee. Today we are comparing ours and others operating in the same sector as us. So we’re comparing the competitors to us, and we’re going to talk about the key elements of income guarantees and where they stack up, where they don’t, what they mean, what the underlying motivations of them are.

And this episode is really designed to give our listeners a a very unfiltered, deep dive on what an income guarantee actually is. So, Justin, where shall we start? I think there are four key elements to an income guarantee. One is value, one is time, one is conditions. And then for us the focus really is the bigger picture. Should we start with the basics.

Things like value and time frame.

Justin Yep. So I guess a competitor or what you’re looking at I guess with value a time frame is how much am I going to get? Usually it’s expressed per week, you know, what’s the minimum guarantee of income per week that a company prepared to guarantee? And for how long? And it can sound right. You know this in the industry.

And it’s because of this I’ve been actually doing a bit of looking on, you know, a range of different websites of our competitors. And there’s a broad range and, you know, we can put marketing companies can put a great spin on all sorts of amounts and per week, and oh, we’re going to give a special at the moment six months or, you know.

But I want to encourage people that are listening to that really dig deep to ask questions, you know. So what does that mean? What does. Okay, James, you’re giving 1500 a week for three months. What does that mean? And dig deeper into it. Because there’s a whole range. Interestingly, some of the main things I found this week, which I wasn’t aware of, some of our key competitors no longer offer an income guarantee that they’ll offer, a lead guarantee, you know, and it sends all stars and whistles on the websites.

But what does that mean? You know, we can understand you. So let’s let’s, let’s.

Rhiannon Let’s take a little second at a high level. What is an income guarantee? So that even somebody listening for the first time who’s, who’s just new, just thinking about it, looking into a franchise and come across this language income guarantee. What is it in a nutshell.

Justin In a nutshell. I think the fear for everyone is I’m going to quit my job, start a business. But what if I don’t earn money? What if it takes a while? So the purpose of an income guarantee, but I think for most organizations is it gives a safety net for people that that, you know, that so long as you do the right stuff, you’re going to have at least X amount of dollars per week coming in, and that guarantee will go for a set period of time.

I think in a nutshell, that’s what the income guarantees.

Rhiannon Yeah. That’s right. It gives you a level of certainty that, that there will be an income there in your business, whether it is from real jobs or whether it is from the franchisor topping up to a particular level, more or less. And so you mentioned a lead guarantee before. That’s not our focus today. But what is a lead guarantee?

Justin Exactly. And then it simply just says you’ll get leads. Well, is that one lead? What sort of leads? You know, one of the, one of the organizations guarantees, five leads a week, you know, which is that. Oh, yes. Yes, I and and as we we’re going to talk, I know one of the key point that we want to focus on is you’ve got to be looking long term.

You know, what does that really mean. And, and and I will get to that in a moment. But yeah, my biggest encouragement for this for people that are listening, you know, just putting it in at the front. Ask questions, dig deeper. Because an income guarantee can be a good marketing spin. You really want to have a look at what that means, what it is.

Rhiannon So across the board, is it fair to say that most franchise networks that offer an income guarantee are sitting around the $1,500 a week mark at the moment, and most networks, sitting around the, like 12 week mark. And there are some exceptions that can go as long as, say, six months. Is that the kind of ballpark we’re talking about?

Justin Yeah, yeah, yeah, thousand to 2000 a week. And what’s interesting is in some of the major franchises, they have like middlemen. We used to be the same in Germany. We used to have regional franchises. So it’s up to the regional franchises or in those businesses to offer. So it varies very much region to region around the country for, for the major franchises in our nation.

Rhiannon So that means that if somebody who’s listening is, diligently doing their research across a number of different networks, and if they have inquired with, you know, some of the bigger franchise networks in the cleaning lawn mowing space, really what that means is that depending on where you are geographically located in the country and depending on who it is that you end up speaking to, your income guarantee might look different.

Is that what. Yes. Yes.

Justin Absolutely. Yeah. Yep, yep. And James used to be the same. What I started as a regional franchise or 15 years ago. And I’ve always given an income guarantee for everyone that joined us because I’ve put my money where a mouth is. But other regionals in the organization back then would it? And it’s one of the first things you and I changed is we just made everyone gets an income guarantee when they start with James.

Doesn’t matter where you are.

Rhiannon Yeah, absolutely. Exactly. All right. So let’s start diving into a little bit more of the detail. Right. So we kind of know that we’re looking at like a 12 week time frame. There are exceptions. And we could talk about that. We’re looking at around $1,500 now by the way, for anybody listening, we are a 12 week income guarantee and it is $1,500.

So we are right. Bang smack on par with what industry are offering. However, I want to get into the real differences. Let’s talk about conditions. What are some of the conditions? Actually let’s start. Let’s start more plainly. What is our belief about what the conditions on the income guarantee should be? Should they be conditions that are different to your franchise agreement?

Bigger than that. They change the scope of the works? Or should they be simply the, representation of the franchise agreement?

Justin The letter to me, what I love about particularly our income guarantee, I think an income guarantee should be all about look, when I, when I’m taking someone through the information process, I’m telling them our system works. If you follow our system, you’re going to build a good business. The income guarantee should simply be an encouragement to follow our system.

It shouldn’t be any more. It shouldn’t be any less. If you’re following the system, then we’ve said you should be able to build a successful business. And if it’s a bit slower in the start, but you’re following our system, then we’re putting our money where our mouth isn’t going to support you over those first three months. And we’ll get to obviously, like you said, why it’s 12 weeks because we’ve learned a lot about the 12 weeks period.

Rhiannon Have we had. Yeah. All right. So then, our conditions are that you simply comply with the franchise agreement that you’ve just entered into, which is which is what you should be doing anyway. As a new business owner, in any network, you know, in any network, it doesn’t matter whether it’s us or someone else that you choose, you are obligated to be compliant with your franchise agreement.

And so the conditions on our income guarantee are just simply that you do that. And we actually do then go into the level of, a slightly deeper level of detail about the actual tasks and activities that that means, so that you’re not diving into your franchise agreement every second day to try and figure out whether you’re compliant or not.

Our conditions just simply are a summary of the things that you need to do to be compliant with your franchise agreement. Yeah. So if we talk about, our competitors and others in the same industry as we are for cleaning and for lawn mowing franchises, what sort of conditions have you seen in on your, out there?

Justin I guess some of the differences, like for us, like we’ve just set our conditions, and I’ve explained this this way to people that whether we had an income guarantee or not, you need to be doing these things. You know, the income guarantees is that bonus in our network to support you. If it’s a slower start. Some of the conditions that I see elsewhere, honestly, some of them are very similar.

Most of them are very similar to ours. However, it’s when it comes to paying that it’s very different, you know, like, Many of the main companies now will offer. Yeah. Let’s say, for example, they’ve guaranteed 1500 a week. You’ve only done $900 of jobs, so they made 600. Well, they’ll send you to do $600 worth of free work for people, right?

They’ll book jobs and quotes and you’re off. They’re doing those jobs and and then they pay you for those, or you’ll do half price jobs or quarter price jobs for customers, but you’ve actually got to do stuff to get that money, right. That’s you’re not just paid money. And that sounds great. You know, a lot of people go, oh, great, yeah, at least I’m going to have money coming in.

But I’m not sure if you want me to jump in.

Rhiannon now Yeah. Let’s go. Let’s let’s just go straight there. What are some of the downsides of that?

Justin The downside is it’s short term thinking for people because you the income guarantee is not forever. Doesn’t matter who you with. So the real point of the exercise, if you’ve started a business to build a successful business to build a successful income. So you need to be doing the things to build a business right and doing free jobs like a free job or a quarter price job.

If you want to cut my my lawn, I love to my, but if someone’s going to do it for free, knock yourself out. Right. And so you’ll you’ll you’ll do lots of jobs, but you’re not going to build your business. And what happens under those models are people get busy doing that instead of being busy doing the things that are actually going to build that business.

Rhiannon Yeah. So let’s, let’s pause and break this down. We keep saying doing the things that will build the business. What are the things for anybody who is just new and not not used to our lingo yet? What are the things what really are we talking about here?

Justin Yeah. Well, building a business is you need customers. That’s what brings you income. So you need to be doing activities that are going to bring your customers. So the break it down. Always explain to people, in our training, day one, we take people through a course. And I think we might have done an episode early on about our 51 Ways to Generate Leads for Your Business.

So we teach people 51 things that don’t cost money, right? We do the paid advertising for them. We have big campaigns and all that stuff. So we’ve got all that going. And obviously that’s going to generate some leads that will get people busy. But the real thing that builds momentum is you doing the business owner doing the 51 different things in that area.

So the most important thing is to get really practical for me are online. So, you know, putting into practice what we teach you with your Google business profile, you know, really being active on that, being active on social media, going and visiting your local real estate agents and registering with them, going to your local care agencies, getting in your neighborhood.

We provide 10,000 brochures with your name and phone number, you know, going and dropping brochures and talking to people in your neighborhood. All those sorts of things are part of the 51 ways. And the more you do that, the more customers you’re going to generate. If you’re running around flat out doing three jobs so the company pays you some money.

Well, that’s great for a few weeks. But when the income guarantee runs out, Oh, where’s my cut? I haven’t got customers right. So the important thing, and we’ve learned in the first 12 weeks, you’ve got to build that customer base.

Rhiannon Yeah. One of our business coaches, has more recently started referring to the marketing that we teach our business owners to do locally as, becoming locally famous because you. Right, we do all the paid stuff, the tricky stuff, the stuff that requires you to actually have legitimate marketing expertise. We’ve got it. We’ve got a team that handle that.

We’ve got experts to handle that. And and, our results are strong. We get very good results for our new business owners. And our ongoing business owners are lacking that space. But one of the things we’ve learned is that our campaigns get more results for a business owner. When that business owner is active locally and and somebody listening is going to go, well, hang on a minute.

That’s a pretty long, long bar to drill. Like, how are you getting there? And I’ll break it down really simply. The more you are seen and heard from locally, the more people are then likely to pick up their phone and go to Google and type clean in the email. And of course, the minute somebody types into Google cleaning them, will our advertising starts popping up and then right, targeting that person because clearly they are interested in your services.

Oh, As soon as you type clean in the email lawn mowing person near May into Google meta, which is Facebook and Instagram also knows exactly what you’re doing online, and they will also start targeting you with the advertising that we’re running on their platforms. So we find that the more that our business owners become, locally famous and the more search traffic they’re generating online, the more our campaigns can, can, can perform to them as well.

So when we’ve been talking about doing the things we, in a simplistic form, we are talking about marketing locally to support the marketing that we do for you at a head office level. We’re talking about marketing locally to generate your own inquiries, and then we are talking about converting those inquiries into paying regular jobs, because in our network, 80 to 90% of the revenue generated in our network is regular jobs.

And so when we’re talking about the conditions of our competitors and it’s that, okay, well, if you need to be topped up $1,600 this week, you’ve got to go out and do that job for free or at a discounted rate. You’re taking time away from marketing and from prospecting and from introducing yourself to real estate agents and other business owners.

You’re taking time away from being able to grow your own regular customer base that is more likely to deliver you a sustainable income longer term than if you just keep doing three jobs for 12 weeks, because eventually the 12 weeks comes to a stop. And then what happens?

Justin Yep, yep. Exactly.

Rhiannon Exactly what else? What are some other conditions that you’ve come across or heard from? Because sometimes we even we don’t even need to research this a lot actually. So so much of what we know about our competitors is not because we spend time researching them, but actually because people inquiring with us. Yeah. I’ve also inquired with them and they tell us, tell us, what else have you heard?

What what else do the little things that people should be aware?

Justin Some of the other conditions are that they must accept all jobs. Right. And that can be an issue because you don’t want to work for everybody. It’s not like you’re trying to build a successful business and, you know, yes, they should be the reasonable ones. And there you don’t want to pick, you know, you’re building a business, so you don’t want to be too picky, but, you know, the same token, you don’t want to put yourself in an unsafe position.

You don’t want to do, you know, in other organizations, you’ve got to accept it like they could send you, you know, halfway across the capital city to do some jobs, and they’ll pay you for those jobs to make top up the income guarantee, but they don’t pay you for travel and things like that. And these are the sorts of feedback we get.

All those things of what we were just talking about. It’s distracting you from doing what you need to do in your beginning of your business, beginning of the business. You got to be focused on those good habits. And I what I love about our guarantee, because we’ve crafted it over a long time. Right. Because, I’ll be honest, the income guarantee James used to offer 15 years ago was that sort of stuff.

You know, we would pay half the jobs that people did. Right. And and one of and this is something that we’ve changed since we’ve owned the business is that no the income guarantees like a carrot to help people build good habits, to do the right stuff. And if they do those things, they know they have at least 1500 a week and income.

And literally you sign off on it, you know, like the franchisee invoices you, you saw an offer and it gets paid every Tuesday. You know, if they’ve if there’s people that are going to be paid.

Rhiannon Yeah. I don’t remember the last time I paid one because so many of our new business owners. Yeah, I’m earning that $1,500 so quickly. Or, you know, they’re not they’re not doing all the things that would make them compliant with the franchise agreements. So they don’t meet the conditions in that way. But honestly, that most of it most of the time, it’s they’re just building the business so quickly that they can’t they don’t want to apply for the income guarantee because they’re so motivated to show that they can do it.

I actually had somebody recently who was like, I’m specifically not going to apply the income guarantee. I’m not. I think you might know who I’m talking about down here in Victoria. And he was like, I’m going to do everything by the book. I’m going to follow the system. You’ve taught us to the letter, because I want to demonstrate that to you, that it works.

But I also want to stand on my own two feet as quickly as possible. And I love that attitude. Like you didn’t get into business to, you know, be have it presented to you on a silver platter. You got into business because you wanted true independence. So let’s actually I just want to talk about late face for a moment because I feel like they really play part of this conversation.

The last thing you said was that some networks require you to accept all leads. Also, those same networks, some of them charge laid phase. Can you just walk us through what are late fees and what are the financial implications of a business having to accept all of the leads and also having to pay late fees on that?

Justin Yeah. So most of the networks in the cleaning industry and lawn and garden, may I charge late fees. And that late fee ranges in price from about 1750 lead up to some organizations are up to $40 a late. Wow. Okay, so let’s say you they send you 15 leads that you had to accept.

Rhiannon So this is just customer inquiries right?

Justin Yes. Correct. Yeah. So they’ve generated however a customer inquiry they’ve sent it to you. You’ve got to go contact the customer again like I don’t quite try and get the job. Yeah. But in the background you’re also going to get an invoice for that late of 17, 50 to $40, depending on the organization.

Rhiannon What if you don’t to come.

Justin You still pay you you still get the invoice. Yeah. Yep. And and that’s the thing about late fees. Like often people it’s not a genuine it can be a competitor just wanting to see what you what getting a price of you or you know that sort of stuff happens. Yeah. But you got to pay an ego 15 leads that 20 bucks a label is what, another $300 in fees for the week on top of the set franchise fee that those organizations pay.

So you can end up with very quickly a massive franchise fee for the week because you want lots of leads, because you don’t have much work at the beginning, but you’re copying a massive bill at the same time when you can probably least afford it.

Rhiannon Yeah.

Justin And and that’s the challenge. And this isn’t about late fees. This, this this episode. But to me, that’s the challenge of late fees. Is that it’s it’s hitting people at a time when they can least afford it. Yeah. We don’t charge late fees. So, yeah, just late fees. The other thing I just want to say about late fees quickly, for me personally, they make me really annoyed because as you know, you can tell when a business owner is active in their area because you can see, yeah, the inquiry that’s generated in the system by them.

Rhiannon Yeah. Yeah. I see we got.

Justin The lead fee then bills them because they did the right thing. It’s almost like having a kid do the right thing and you’re smacking for. Yeah I think it’s it sends the wrong message to me.

Rhiannon Which is exactly why they’re not a thing in our network. That will never be a thing in our network. It’s not something that sits with us. It doesn’t align morals and ethics with which we laid this network. We firmly believe that if somebody is doing the work, then they should receive the outcome and the reward for that work.

And we also firmly believe that when you’re starting a business, and you can least afford those expenses, that’s the last thing that we want to be slapping you with. And at the end of the day, we are motivated by your success and slapping you with, you know, 2 to $400 worth of late fees every week. That’s not that’s not helping you very successful in your business.

That’s not helpful at all. All right. Let’s talk about the bigger picture here. What does all of this mean?

Justin What it all means is do you have homework? Do you research because, often income guarantee is just a great marketing book for one of the better work. You know, it’s really look at what do you need? And is that guarantee sending you in the right direction, you know, to building a successful business. Because if it’s just about making you feel good to sign up, that’s a very short term focus.

Yeah. You know, you didn’t build the you didn’t get into whatever business it is to be successful for three months or six months or whatever the income you went into it to be successful in the long term. Yeah. So you want a guarantee that’s going to support you to get there long term.

Rhiannon Yeah. And, and and that is the underlying motivation for our income guarantee. And the fundamental design of it is that by simply, by simply ensuring that the franchise agreement is being complied with, we are encouraging you to get out there and do your marketing. We are encouraging you to follow our, contact procedure. With new inquiries so fast and really timely follow up.

And we’ve got some very specific kind of guidance that we put around timings and follow ups and content of those follow ups and how you lead them to try and get the best outcome. And so our income guarantees set up to encourage you to stick to that system. The income guarantee is set up in such a way that it encourages you to maintain, really close contact with your business coach on a very regular basis throughout its period, because your business coach is your lifeline.

They are the person that can help take this, you know, this manual and this system from words to a business. They are that linking point. You know, we we always talk about our system is set up for people who follow it to say success and the your business coach is the person who’s demystifying that system for you and helping you to implement it into practice.

What we’ve learned over the last few years is that the minute the minute we have a new business owner in our network or an existing one following our system, they are building a business, they are actively building a business, and they’re building sustainable business because our system is designed to help people build a reoccurring job database. So regular customers and that makes our businesses sustainable.

So our income guarantee is set up. It is a safety net, right? It still is a safety net. It’s $1,500 a week guaranteed. So long as you’re following the system that we train you in. It’s $1,500 a week guaranteed for the first three months of your business. It is a safety net, there’s no doubt about it. If you’re having to make the jump from employment into business ownership, the hardest thing to do is to come to terms with the fact that what was automatically going into your bank account every week just for showing up, is now your responsibility to generate that.

Scary. So the income guarantee is a safety net. But in our network it’s also designed to make sure that in that 12 weeks you’re building a business, you’re not working for us, you’re not working to market our brand and build the brand awareness and the brand reputation. You’re not dealing with, an overflow of leads that we can’t otherwise service at a head office level.

You are actually building your business. And I love it, because that creates independence. And the model of some of our competitors creates, frankly, hyper dependance on the market. Yes, the marketing of that franchisor. And then, you know, what happens in some of those models. The next new business owner comes in. So all of the leads go to the next new business owner so that they have the opportunity to do the work in.

And you know, the income guarantee applies to them. And then guess what? You spent 12 weeks basically working as an employee. You didn’t get a chance to build your own customer database in that time. And then the 12 week mark comes, their strategy changes. Their focus goes to the next new business owner in their network. And you literally overnight, you go from sitting comfortably at knowing this $1,500 guaranteed to who knows?

Justin Who knows? That would be a good nother episode to talk about that the philosophy upon the businesses and teaching people to fish.

Rhiannon Yeah, yeah yeah yeah. There you go. Well, that sounds like a natural place to wrap this episode. Was there any other closing thoughts? Remarks about income guarantees, any message for anybody listening who’s who’s maybe now feeling more confused? I started listening to this episode because that’s possible.

Justin You wrap that up so good. But I just had a something happened last week. That’s just the conversation burning in my mind that I just I’m not sure if I touched on it. There’s specials. There’s things that get right. So as as we’ve been talking about is 12 weeks, you know, there’s another organization at the moment advertising six months.

Yeah. Right. So 26 weeks. And I had an individual say to me last week, Jason, really want to go with you guys. But how about you match the 26 weeks? And so I had this conversation with him that now I think in our last episode ran and you shared some actual numbers, you had the screen up going to the numbers.

What we have seen, if someone doesn’t have their business humming by the 12th week, it ain’t going to happen. No, you’ve got to have your business going. But so it would be irrelevant whether we gave a 12 week guarantee or a 52 week guarantee. Yeah, we need to have your business humming by the 12th week. And this is what I said to the guy, like, ask the questions, talk to our people.

Like, if you’re not earning, why over the 1500 a week by week 12, then there’s problems, right? And I know you our coaches are going to be working with you long before then on that. And so I don’t, I guess, message to summarize all that down. And what I said to this guy is diet. Just hooked by “oh yay, I’ve got a six month income guarantee”.

Dig deeper. What are the conditions? Is it helping you grow a business? And if you’re having to rely on that guarantee after week 12, I would say even after week six, there’s real problems with your business, and you need to have a really hard look at how you’re operating your business and what you’re actually doing in your business.

Rhiannon Yeah, exactly. And I think that the final thing to add is that, you know, a couple of times throughout this discussion, we’ve referred to the those, those income guarantees as you’re essentially just working as an employee for that company, more or less, you’re not super in control. You are dependent on them. And I will say there are certainly people for whom that model is more suited.

Yes. We, we are focused on creating true independence in our business owners. And I want to use this as a as a segue, actually, to the next episode that we’re going to record, which is, we actually are fit for you because so much of our process, our information process is about trying to define whether we fit what the inquiring potential business owner is genuinely looking for.

And there are times where we don’t. And so, you know, whilst you may have listened to all of this and thought, oh, he’s, he’s two people just kind of, you know, singing up their own income guarantee. I’m also more than happy to say if our model doesn’t suit everybody. And if you’ve listened to this and actually this episode has helped you go, you know what?

Well, I understand what they’re saying, but that’s not what I’m looking for. Perfect. Great. If it’s helped you reached clarity. That was the goal of this discussion. Not to convince you of us over anybody else. It was to help you reach clarity. And also, I’m going to go right back to your opening line. Justin is ask more questions, just really dive deep with whoever you’re speaking to.

Put them through their paces, ask all the curly questions, and make sure they give you answers that you feel that you can trust, because that is the most important part of any information process with any franchise network is ensuring you feel like you are fully informed before you make your decision.

Justin Excellent.

Rhiannon Perfect. Let’s leave this episode right here, and we hope that you might join us for the next episode of The Real franchise very soon.