🔮 The Future of Franchising | The Real Franchise – Ep 67

Rhiannon Hello and 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 that we stand for when it comes to supporting a community of small business owners. Join me, Rhiannon, the CEO for James Home Services Australia and Justin, one of our owners, as we unpack it all with no topics off limits.

Justin, today we’re talking about the future of franchising. And I’m going to throw immediately over to you for a little bit of context as to why we’re talking about this today.

Justin About a week ago, I attended an industry leadership event, franchising industry, and it was great. Many leaders, commentators across the industry were there sharing they had like a panel up front. But then also a lot of the delegates had just returned from, the worldwide franchising conference that’s held was held in Las Vegas. So that’s sort of giving updates on franchising worldwide.

And I found some of the comments really interesting. And I’d love to to dive into some of them today. So that’s the context is, is this forum and they’re talking about what the industry sees as the future and that we’re giving their feedback. And I know this is a topic that’s for a long time and close to your heart.

So from your perspective, I’d love to throw it back to you.

With what? You. Because you’re keeping your finger on the pulse here. What changes do you see inevitable? Do you see coming to the industry and maybe why some of those things have to happen, need to happen?

Rhiannon Yeah. Yeah. That that franchising is headed for massive change in the next 5 to 10 years. Anybody who thinks that they can continue the model they’re delivering today and just maintain and still be successful in 5 to 10 years time is a dreamer Some of the big changes that we’re seeing already impacting the industry, a lot of those are around, risk and cost, particularly upfront.

The introduction, you know, worldwide of some subscription models and pay as you go models and just that whole concept of reducing the need to put money on the table up front to get something that is changing our space, that is changing consumers expectations. You know, it used to be it’s still is entirely common that franchise networks.

You pay for your business up front and in our network that, you know, in, in our industry that’s anywhere from 25 to $60,000 on the table up front. We are seeing that being highly, highly challenged. We’ve already moved, of course, we introduced our subscription model almost four years ago. Very much ahead of the game. But we are now seeing others respond to this pressure through other, interpretations of taking away that risk.

People want more flexibility. They’re not wanting to sign up to a ten year agreement anymore. You know, there’s really good reason for that. And certainly what’s influencing that is things like the gig economy and also just our younger generation being more empowered with more options and more choice about what they want to do with their lives.

That’s influencing that heavily. I think that the other thing that is really, really going to change is how, you know, I will impact the franchising space significantly, but maybe not in the way most people think. Right? Everybody thinks AI, oh it’s going to take jobs. AI is going to challenge our industry because people use franchised networks as a way to start a business.

When they haven’t done it before, and they’re looking for help and guidance. Well, ChatGPT can now give you that help and guidance, right? You can go to chat or, any other LLM large large language model of your choice and you can type in in fact, I did it this morning. I was trying to come up with a content idea for Tik Tok, actually, and I thought in the shower last night, I thought of this idea.

What if I went to ChatGPT and typed in tell me the steps to start a business. Now, I’ve got almost 15 years experience now of starting businesses. I know how this works, right? And I thought, I’m going to catch this thing out, right. No way ChatGPT can tell me how to start a business in a way that’s actually going to be good quality information.

And I thought, I’ve got the perfect content idea. You know, I asked ChatGPT to tell me how to start a business, and it got it wrong. Let me tell you how to actually do it right. I typed it into chat this morning. It didn’t get it wrong. It gave really good advice, right? It didn’t give you the whole story, but it gave really good initial advice.

And so the challenge in franchising is that we are seen as the pathway into business ownership. For those that need advice. Yes. And ChatGPT is going to challenge our position. So off the top of my head, those are three big shifts that we’re going to see that we are already seeing. And the sort of influences

Justin Yeah. Yep. Well, then I guess we’d like to dive in, maybe dive into those three and go, well, okay, that’s where we’re going. What are we doing about those things at James? Yeah. Would that be.

Rhiannon Yeah.

Justin a good place to go.

Rhiannon Yeah. It is. It is a good place to go because for the last five years, I’ve been watching all of these outside influences on our industry. And every year I’m watching how they’re changing and how the pace at which they influence is accelerating. Four years ago, we introduced a subscription model because we recognized back then that people were not wanting to put money on the table.

You know, three years ago we moved from, you know, just offering sort of we’re at the other end of the phone support to a full on business coaching support and, you know, highly, highly tailored profit coaching solutions for all our business owners. And we did that because, you know, AI is changing how you can get advice on how to start a business and how to be profitable.

And also because what consumers want out of a franchise is bespoke and tailored guidance to them specifically. So we are already doing that. You know, we’re offering way more flexible options for the term of our franchise agreement than most in our industry. You know, we’re tailoring and we’re actually building skills. The other thing that I really think, you know, there’s there’s one way to sum up where our industry is going, and it is business start up as a service.

Right. And so we think about what we offer, not just as a here’s a brand. He’s a reputation. He is the system. Go and do it right. That’s traditional franchising. Forget it out the window. It’s so yesterday there are franchisors out there doing you know he’s our brand. He’s our reputation. He’s our system. Give us a call if you need. Nah

They’re they’re about to they’re about to fall off a cliff. And frankly, they don’t even realize it. What we do already is we’ve created a business growth ecosystem where business start up is the service we provide, business guidance, bespoke tailored solutions, identifying weaknesses, identifying business roadblocks, and going in specifically to help, individual business owners with exactly what they need to break through their own business roadblocks and get to the goals that they’re setting for themselves.

That is the ecosystem that we’re frankly, we’ve already got here in our network.

Justin And what we so I just want to contrast that for for people listening right in in this meeting that I was in. One of the, the commentators who’s an absolute, I think, genius leader in our industry, and I totally agree with what he said. He was saying to the audience that in the future, you as franchise owners are going to have to be profit, be seen as profit coaches for your franchisees.

And he went on to say, you know, at the moment many of you catch up with your franchisees once or twice a year. You sit down and go to you might you might sit down and go through your figures. And he said, however, he’d been in the industry for decades. He said, I know for most franchisors it was it’s just a tick and flick thing getting the franchisees figures.

And I was up and I shared with you in a debrief after I was amazed because this is normal business. At James, we employ people who have all been business owners in our company, have walked the walk and talk the talk, and you particularly have been upskilling them to work with their franchisees to help them generate profit. And and, you know, we were just refining that, process yesterday in a, you know, updating.

And and for me, as an owner in the company, it’s been fantastic to see the swing in success where business owners like it is extremely rare for someone in their network not to make it. You know, I encourage anyone looking at a franchise, check out industry statistics if you can get them on success rates and things like that.

We’re happy to share with people that are looking because we are our coaches are profit coaches. Yeah, that really help people. And ChatGPT can’t help them. Right. It it’s it’s an awesome tool. And you know, I know these other franchises are threatened by that was one of the topics It’s it’s like it’s and it’s also sorry I’m jumping ahead.

But you know, there’s a lot of legislation coming in and in franchising that the government’s focused on at the moment. And you and I talked about this for us. It’s not threatening because if you’re doing the right thing, if you’re looking after people, does it matter? You know, if you drive everywhere at 100km an hour, there’s a speed limit really worrying, you know, like it’s only those that want to drive 140, 150

They get really upset. Yeah. So that’s my little rant, but it was just, it’s normal business for us.

Rhiannon Yeah. And it was such a realization for me. You know, we had like an hour and a half debrief after you attended this session. Right. And I just spent an hour and a half being practically dumbfounded by the feedback that you were giving. You know, because they’re talking about the future of franchising and none of it’s wrong. You know, they identified I as an influence.

They talked about the need to be profit coaches. They talked about the need for more flexibility and more tailored solutions. Right. They’re not wrong, but they’re talking about that in the future. Yeah. This is what we’re doing now. And I you know what we’ve spent you and I two we’ve spent the last 16 years working at Husky’s off to get this business in this network to where it is, you know, and we we were coming from behind.

It’s no secret. We’ve talked about it before, many a time on this podcast that when you and your business partner bought in six years ago, we had a, we had a turnaround situation on our hands, and that’s what we focused on. And in leading that turnaround, I thought what we were doing was just getting up to speed with the rest of the industry.

Right. I thought that having business coaches do what our business coaches do. I thought that was normal. I thought having a software system that had complete and full visibility over our business owners and their profitability and their, you know, all of the data that we need to be able to identify the specific roadblocks in their business. I thought that was normal.

I thought helping our business owners with growth strategies, personal and professional, was normal. I thought helping franchisees to employ staff to plan for employing staff, to budget for employing staff. I thought that was normal. Turns out that’s the future and we’re living in it. We’re doing it. Yeah, that’s already what it is that we do.

Justin Yes, yes. Yeah. So that was the first thing. What was the second thing we wanted to dive into?

Rhiannon We wanted to well, I think it’s sort of segways really neatly to actually challenge some of the.

People think of franchising in a certain way. Yes. I think of franchising in the traditional sense. Brand reputation system. Go and do it. Rules regulation, pay your franchise phase franchise or works with you a couple of times a year. And it’s pretty much a compliance issue. Rather than coaching and what we’ve been developing in our network uses those foundations, but is building on it.

And over the last few years, I have realized that.

There are a few ways to describe what we do that doesn’t use the word franchise. So, for example, something that I talk about often is that where a business accelerator.

You come into our network and you’re in a program, a fast paced, structured, detailed program that can take someone has taken tens and tens and tens of businesses now, from zero experience to high performing business owners in can be as little as 12 weeks.

And so while other franchise networks are just out there handing out brands and reputations and systems, we are giving you a literal blueprint to go from zero to whatever number you want. And you can you can pick any number, and whether you get there or not is only resultant of the effort that you put into implementing the blueprint that we give you.

Right? So I love to look at this as a business accelerator. There’s another way that we look at us that you explain way better than I ever do. And I’m about to put you on the spot. You know, we use we use the analogy often of, you know, athletes at the peak of their profession or, you know, sporting teams who are world champions, or even leaders who, admired globally for leading their companies or being thought leaders on leadership or these people have a team of experts.

I’m going to hand body because you explain this way better than I. Why does this matter to us?

Justin Yeah. So to just summarize what you’re saying, one of the things I’ve observed is every high performer in sport, like you was saying, one of the characteristics I say of high performance, they have coaches, you know, you might call a mentor or whatever, whatever your language is. But they’re coaches, people that work with them, that help them drive them forward.

So if you’re listening to this and you go, oh, you know, I know business. I’ve been self-employed for a decade or so, right? You need a business coach, you know, and and that’s where our support is focused. You know, you might never have been self-employed as well. Well, you definitely need a business coach, right? ChatGPT can’t help you with the nuances of the every day two day in a business.

And if you’re sitting there thinking, I don’t need help, I can do this myself. Well, the Australian Open was just on why do the number one players in the world, every single those players, every single one of them, has a support team head coach? Yeah, they’re the best in the world. Right. And and I think it’s just pride that makes us think we know it all or think we can access it all.

And and any shrewd person in business, in life will have mentors in. And I guess I’m not sure if I’m answering what you wanted me to answer, but that’s I see where our real sweet spot has become as a network is is the way we’ve restructured things, even the way we employ our coaches. When we, you know, we identified we needed to provide coaching and gradually we’ve just wanted to get going.

You know what? Wherever possible, we want to make sure these coaches are people who have actually been business owners. Right. All five of our coaches at the moment have all had businesses with us. And and one of them still has a business with us. But it just adds that credibility and, and knowledge and it’s all about the focus of our business.

Is then all of that helping that person succeed? Yeah. And the spotlight that’s on franchising. If you’re sitting there wondering, you know, well, why does franchising have a sour taste for some people, some, you know, in in circles, I think largely because the power, the focus has been more on the franchise or historically and network fee structure, everything only works if we see a business and a successful.

Yeah. And so everything that you and I have worked on over the last six years has been focused on helping our business owners be more successful. I mean, look, I was looking at our average hourly rate across the network this morning on that computer system. You know, honestly, most franchises couldn’t tell you what the average hourly rate is for their people in their networks.

We can tell you to the cent over the last 12 weeks, on average, what our average hourly rate is. I was looking at that thinking, well, when we bought this business a few years ago, it was half that.

Rhiannon Yeah.

Justin Yeah. So on average people in our network now are earning double and doing the same task. Essentially.

Rhiannon Yeah.

Justin And that’s because of that focus. So that’s because of that coaching. That’s because you know the tennis players, they get the percentage rate of serves in Up because they’ve got a coach working with them on technique over, you know how to serve. Great. But it’s it’s getting that I had a business coach once that taught told me that big business is all about fractions and fractions of fractions.

It’s all about getting the little things in line and getting it right. And when you look at it back to the topic. Frankly was a where we really help our people. Is the fractions of the fractions really getting the business to focus on you getting that right?

Rhiannon Yeah, because.

Justin I think we’re doing a fantastic job of that.

Rhiannon I do too, just quietly, it’s about being we we offer a curated team of experts to help someone be the best they can be at being a business, because it’s a hard slog, right? Being a business owner is challenging. It’s complex. It’s good. You’re going to have up days. You’re going to have down days, you’re going to have days where you want to give up.

You’re going to have days where you’re on an absolute high and you know everybody who is performing at their peak, whether it’s sport, whether it’s leadership, whether it’s anything else in life, they are they are performing at their peak because they have a curated team of experts behind them working on the one percenters. And so that’s what we do.

We put together a team of curated experts. The, the other thing I want to touch on really quickly, as you know, just kind of a different way to think about franchising is, you know, you could go and you could do a diploma of business at TAFE or you can go and do a business degree at uni.

I did a business degree at uni. Did it teach me how to run a business? Absolutely not. It taught me theory, right? It gave me theory I, I honestly remember completing my business degree and then like the next day being like, I have no idea how to run a business. Now. I do, I did a major in marketing and also in law, and I got out and I thought, I don’t know how to be a lawyer, and I don’t know how to be a marketing officer either.

Like, what was this all for? And so it builds a foundation of knowledge, but it’s not teaching you how to do the thing. And I often like to explain and it work to people as we give you the Knowledge Foundation while you’re building a real business, while you’re earning an income, while you’re creating freedom and flexibility for yourself.

We are also teaching you everything you need to know, but none of the stuff you don’t need to know. And so I love to say and explain to people that franchising is, you know, starting a business with a franchise is like a diploma of business and a degree all wrapped into one, with the added massive bonus of getting to build your own business in real time with real practical help at every step of the way.

Justin Yeah, yeah. So but I just it’s ironic. You just said that I had a meeting, actually, one of the best meetings I’ve had with someone in a year. Last night with a great fellow who was looking at actually, I even said on joining another network, and he was outlining to me last night why he was going to join the network.

And we just talked for joining us, keenness to join us. But but he he was signing up to do a, a landscaping course. You know, he’s going to start lawn garden business. They want to go and get really skilled up. And I said, oh that’s a great thing.

And I’m sure you’ll learn. But why spend that now? Why not get in. Because all the findings provide and stuff. And then if you feel you need to upskill further, if you feel that that will assist you, go do it like. But but don’t go spend the money now you know. And that’s this is the support. This is just my boss.

You’re doing the same. You know. And he had all these big tools and equipment and he’d already this is what I’m going to go buy now I’m going to buy this I’m going to buy that. And it’s like that’s all great because so many toys. But when you start a business, you know, and this is of me boasting sort of coaching that we provide, right when you start a business, but the getting your business just cash flow is king.

Yeah. Keep whatever cash you can until the cash is flowing. And and so he was like, oh that makes sense. So I said, yeah. Because you know, if you don’t get jobs for those particular tools you spend thousands. And I said you should have taken up space if you need them, you can go buy them. It’s not drama.

So it’s it’s a good franchise. It’s just going to help you guide you. Look, I love the term that you just use the ones. Yes. There’s some major things that we help people, but often it’s the one percenters that make the big difference. We have a thing in James. It’s the little things in business that like the big difference.

Rhiannon Yeah, yeah, yeah, absolutely. Before we wrap this, episode of the podcast, I just want to talk about, I want to talk about the future of franchising in terms of making sure that the incentive is in the right place right now. What I mean by that, and I’m going to throw it back over to you for this.

But what I mean is that we’ve commented a couple of times already that franchising traditionally has a little bit of a sour taste, because it’s been all about the franchise or making the money. And what we’re talking about today is that we are seeing an enormous shift. We have already shifted, but now we’re seeing the industry saying we as an industry, need to shift to a model where actually the franchisee is at the center of everything we do quite genuinely, and their profitability is now important to us in order to drive our profitability.

Now, we already operate this way, but can you explain what I mean by this? Because we’re really just talking about the difference between upfront fee versus pay as you go models and also when it comes to franchise fees flat fee versus percentage fee. So what do we do and why is that important moving forward?

Justin Yeah, one of the comments from this, one of the presenters was saying to this group of franchisor leaders, if your franchise relies on the profit from the upfront style of the business to survive, your days are over already. That was his comment. And and the sour taste. Now I’m going to grossly over generalize, right? Just so people understand, franchise owners in the past have developed a great system.

They have a great brand. If you want to join us, you have to pay. It’s a privilege to be with us, right? We are in the position of power. Oh, you little peasant, come join us. Sort of. Right. That’s sort of grossly exaggerating the mentality. And and sadly, it’s still the mentality. I believe in a lot of organizations and what the government legislation, what industry leaders are trying to get this change is because franchising is an incredible tool.

It’s probably one of the most powerful small business startup tools on the planet. There’s some reason why franchises are so successful. There’s a reason why the success rate in our franchise is incredibly high right? There’s a reason that you want a franchise, but you got to do the right one. And so that, by and large, has been how franchise is franchise owners have operated historically, the change in the future.

And as you just said, that what we already do is the focus in a good franchise is all about the individual. You know, it’s all about ensuring they’re successful. And if the franchisees, if the business owners are successful, well, then the franchise is going to be successful. Yeah, it’s almost like that old saying do unto others as you would have them do unto you.

Rhiannon And what?

Justin And and so I want to encourage anyone who’s listening to this that’s looking at which franchise. If the business you’re looking at what’s all the money up front, why.

Rhiannon Yeah.

Justin Right. Because if they’re gonna deliver value to you, well, value should be shared. And yeah, they can make value down the track out of that relationship if they have to get all the money upfront. Most of the money that should ring alarm bells for anybody. If the fee structure to me in anything. Right. When you bought a piece of software, you might remember this year, but I can remember when going by Microsoft and you had to pay, like, 500 bucks, or, you know, you could get the student version and get it cheap.

right? MYOB when we first got MYOB it was $550.

Like that’s unheard of now going and buying software for a big upfront cost. No no, no, I just sign up with us at 100 bucks a month, right? That’s how all of our software operates. And there’s a reason for that. And there’s a reason that us as consumers have swung to supporting that sort of operation. We’re already there, right?

Our fee structure is a percentage. So if you’re not doing well, we don’t do well. Yeah. So everything is focused on seeing the individual be successful. Yeah. And I would encourage people listening. Make sure whatever business you’re getting involved with that their success is tied to your success 100%.

Rhiannon Yeah. You want to make sure you franchise or has skin in the game. Yes. And you know our subscription model flipped the tables completely on the industry. You know, because nobody had ever done it before. And we said basically the subscription model was us saying we we believe that we can get you started in business. We don’t need your 20, 30,000, $40,000 upfront.

Justin Yes, we.

Rhiannon We know we can get you to success. And if we get you to success, then our structure allows you to pay that to us over time. We don’t need it upfront. We are going to invest in you and we are going to put our money where our mouth is. We’re going to invest in you. We’re going to teach you the skills.

We’re going to help you build that business. And then when you’ve got that business, you can pay it to us as you can afford to do. So. It totally flipped the tables on the industry. And I think, I think we were simply ahead of our time. I think that we’re going to say, you know, still to this day, there’s nobody else offering a subscription model.

I have seen in recent months variations of pay as you go models packaged differently, which is really interesting. I think that the pressure is beginning to build, and I think that’s a good thing. I think pressure keeps businesses honest and it keeps franchisors making sure that their focus is on the franchisee. And I love our model because no matter whether you look at it from the the buy in the subscription side or from our franchise fee side our model is designed so that we are incentive incentivized based on our business owners performance.

We only get paid when our business owners are performing, and I think that that is where the future of franchising is headed. And indeed, we are already there.

Justin That’s yeah, that’s probably a good place to wrap up.

Rhiannon I agree. Let’s do just that. Thank you so much for listening. I hope that you found some value and I hope that you might join us for another episode of the Real Franchise very soon.