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The big push in real estate is expansion by way of franchising an entire business system. How do you build something people would want to plug into? What are the pros and cons of buying into something? How do franchisees protect themselves, and franchisors provide value? On this episode, we talk to David C. Barnett who shares on business broker transactions, and the risks and opportunities involved in franchising.
The stuff that’s really awful happens when the franchisee puts themselves in the position where the franchisor has incredible leverage over them. -David C. Barnett
Takeaways + Tactics
Residential real estate is going towards a flat-fee menu of services, and more of a business consulting model.
If you shut down a franchise, a franchisor can actually sue you for the balance of royalties that would remain under the life of the agreement.
The most important thing to be clear on when it comes to franchising is how easy your exit would be.
If the first 4 or 5 franchisees are out-of-the-park successes, everyone after that will look at them as the model.
At the start of the show, David shared how he got started in his career and what he learned about business. “Real world, main street, small family businesses don’t operate the way big corporations do.” Next he shared how he uses YouTube to put out valuable content, “the most important thing is putting out something that is quality – algorithms track behavior.” We also discussed the franchising push that is happening in the real estate industry. We shared on how the franchising model works in the hairdressing industry and towards the end of the show, we discussed how to create something people would want to plug into.
David also gave insight on;
- When franchising works and when it doesn’t
- How franchisees can get the most of the relationship with franchisors
- How franchisors can create value so they don’t end up creating their competition
- Why the initial franchisers need to be successful
- Advantages of the flat-fee franchise model
Part of marketing is you’re trying to put something in a box that people understand. -Matt Johnson
It’s easier for a buyer to buy a business, than it is to buy a business and build it at the same time. -David C. Barnett
When you buy into a franchise, you might not be getting a business, but leasing one. If you want to use someone else’s well-tested rulebook, franchises can be a great model. You just have to look at what exactly you’re paying for, the risks involved and how the rules can change down the road. Protect yourself by getting into something that has a reasonable exit for you, and maintain good franchisor-franchisee relationships. Remember once you’ve invested, you’re committed.
David started a finance consulting practice in 2006 began brokering the sale of companies in 2008 and bought a Sunbelt business brokers office in 2009. He arranges financing for hundreds of start-ups, acquisitions or expansions. He is also the author of three best-selling business books; ‘Invest Local: a guide to superior investment returns in your own community,’ ‘Franchise Warnings: What you really need to know before you buy’ and ‘How To Sell My Own Business: A guide to selling your own business without paying a broker’s commission. Go to davidcbarnett.com for more information.
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