Mark Vandegrift 
Welcome to the FranSimple Podcast, where the world of franchising is the topic and the concepts are made simple. Today, we're going to introduce FranSimple, the podcast, and with me is Steve Vandegrift, and he is an expert on franchising. So as we begin this podcast series, our goal is to talk franchising updates, news, you name it, and every episode is designed to make the concept simple. So Steve, welcome to the FranSimple Podcast.

Steve Vandegrift
Well, thank you, Mark. It's great to be here today.

Mark Vandegrift 
Yeah, tell us a little bit about yourself.

Steve Vandegrift
Well, first of all, I find it very interesting that you and I coincidentally have the same last name. 

Mark Vandegrift 
What? 

Steve Vandegrift
Is that crazy?

Mark Vandegrift 
Crazy. Especially Vandegrift. I mean, who doesn't have the last name Vandegrift? Yeah.

Steve Vandegrift
Well, who has that name? Right, right. I didn't know we were doing comedy. So a little bit about myself. I've been actually involved in franchising for over 30 years. I'm married with two adult children, five grandchildren. Love to golf, love to vacation, love to do podcasts.

Mark Vandegrift  
Oh awesome.

Steve Vandegrift
I love to help honestly, businesses expand through franchising. It is exciting through pandemics, through recessions, franchising was still alive and well, and it was great to see our industry is that strong. So not that certain businesses didn't have challenge. We certainly recognize that, respect it. But we still had businesses even during those periods that said, if we're going to do it, let's do it now. Now's the time. So franchising is a fun business to be in. I like to say there's never a dull moment. Each day is going to present and its own day, it's going to be a little different.

Mark Vandegrift
Cool. Well, you have a background in franchising, you said. So have you ever been a franchisor?

Steve Vandegrift
I have. I actually started my career out of Miami University. I had a friend that was in a, back then it was a mattress, furniture, and a waterbed store. Your younger listeners probably have no idea what a waterbed is. Yes, we don't see them anymore.

Mark Vandegrift 
a water bed is. I hear they're making a comeback.

Steve Vandegrift
Yeah, well, you would think so. They were therapeutic for you. So I had a friend that actually opened a store within a franchise system. It was a local chain and my senior year I was home on a break and he asked me if I'd be interested in driving down south of us here in Canton down in Dover, New Philly. He was looking to open a second store. We happened to find a great location and on the way back he said when you're done with school I'd love to have you as a partner. We would love, I'd love to do this business with you. I think you'd be great. He had actually introduced me to the idea of sales my sophomore year of school when I was home, he was working for a local similar concept, but a local mattress, waterbed, etc. And he and the owner were in process of moving out to Fort Wayne to open a second and a third location. He asked me if I was willing to take on the sales slash manager role for that few months I'd be home over summer. The rest is history. I went back to Miami. I changed my major from accounting finance, which was turned out was not my bent. And I switched to business. And here we are all these years later.

Mark Vandegrift 
So you are a franchisee, right? 

Steve Vandegrift
yes

Mark Vandegrift 
Okay. So you've been on one side of it, but I think you are also a franchisor.

Steve Vandegrift
That's correct. We flash forward a few years and I had been down in Myrtle Beach playing golf on vacation with my wife, kids, grandparents. And ultimately I had played a golf course that had this small little yardage book. It was black and white. They drew a bunch of half moons from various points and you were supposed to figure out by looking around where you were at. But the interesting thing to me, Mark, was that at the bottom there was this little three quarter inch, half inch ad about that wide, that tall. And there were a number of restaurants that had advertised and I could not get that out of my mind. And I thought on the way back, I thought, man, if this was done right, if this was in color, if you had the local Cadillac dealership, the BMW dealership, the restaurants. And so I set about to develop that concept. It just so happened that one of my brothers, turns out to have the same last name as you as well, was a software expert. And I said to him, do you know anyone that would know what kind of software we should use? And this is way back when. And he introduced me to his friend who actually operated back then. It was a desktop publishing company up in Kent and he suggested a particular program. I started to build out the concept, how we were going to design holes, et cetera. And then I met with a local golf pro at one of our public courses. He later told me the hair on his back of his neck stood up when I told him what I wanted to do. And that was simply replace your scorecard with a full color yardage book that up until then was only offered mostly at private clubs and resorts. I wanted to take it to the masses. I wanted to be able to deal with, the resorts, et cetera, but I wanted to be able to offer it to public, semi-private courses, et cetera. And so ultimately, I developed a program that basically cost them the same out of pocket that their scorecard cost them back then it was five six seven cents per book per card so we said in exchange for that five six seven cents we're going to give you a full color yardage book it's going to have the scorecard in the middle and opposite each page it's going to have an advertisement full color for a local business and I ended up launching it that spring and within the year we had had so many courses reach out we couldn't take them all we grew the next year to about 10. I started to get phone calls in year two like many of our clients today will call and say you know I've been getting these inquiries about franchising for years and so ultimately I made the decision to franchise the business I engaged with a company in Pittsburgh they were one of the few that actually did franchise development. And then I started to get these documents, my franchise disclosure document, which back then was called the uniform franchise offering circular, large work. I got my FDD.

Mark Vandegrift 
UFOC, I remember it.

Steve Vandegrift
Yeah, you can't remember. We called it a U-FOC. Everyone got a really kick out of that. Yes, and I'm not using profanity here. So ultimately, they also sent me an operations manual. And as we receive probably a half dozen inquiries of these types a year, I basically said what these prospective clients, when they call us, said. And that is, Steve, I don't recognize my business in these documents. And so ultimately, I had to self-teach myself how to write manuals. I employed a local, I engaged with a local franchise attorney to rewrite our franchise disclosure document. That ultimately led me to consulting with a few of his clients as I was running and owning my yardage book business. And ultimately we ended up granting about 30 franchises around the country. We ended up producing books for the Arizona Biltmore some of these large resorts. It was a great business. In fact, the funny thing is way back when about my seventh franchise, who was my age now, said to me, where do you think this is going? And believe it or not, I had a Palm pilot. I was an early adopter. And I said I envision one of these days we're going to hold something like this in our hand and we're actually going to be able to not even use a yardage book. We're going to see it. And little did I know if I really thought that was true, I probably should have invested in a GPS way back when. So at our peak we were producing about four million yardage books a year across the country and that was my introduction to being a franchisor and realizing the types of support, training, etc. that you needed to provide to your franchisees.

Mark Vandegrift 
Very good. So you have been a franchisee, you've been a franchisor, you've kind of fallen in love with that system. But let's back up now because we've been talking franchising already and the assumption is, that people that come to this podcast are going to understand that. But let's assume I'm a fifth grader. I know you think I act that way sometimes, so it's all good. Not too much pretending that needs to happen. So I'm a fifth grader, give me a very basic definition of the concept of franchising.

Steve Vandegrift
Well to simply address that there's three things that makes a franchise a franchise ultimately you're going to let someone use your trade name like Fransource or Innis Maggiore. The other one is whether you're going to charge them a fee to open one of your businesses. The third one ultimately is if you want to provide them training, if you want to have certain controls over their business, that's basically the simple definition of franchising so there's just those three components.

Mark Vandegrift 
So what you're saying is it's a way to expand my business if I want to have more locations by doing the three things that you said, by allowing other people to get involved. Is that correct? 

Steve Vandegrift
That's right. That's exactly right. And that allows you to do so.  

Mark Vandegrift 
So there's probably other ways to do that, right? What would be just list a couple, like I don't know, corporate expansion.

Steve Vandegrift
Well, that's certainly one of them. Licensing is another. Joint Ventures could be a third.

Mark Vandegrift 
Okay, and then we have some clients that are also dealers and distributors. Are those methods of growing too?

Steve Vandegrift
That's correct. They certainly are, and each have their place. There's no question. Sometimes it's one, sometimes it's the other.

Mark Vandegrift 
Well, let's help our listeners understand it from a very fundamental level. Let's compare and contrast with a couple of these. corporate expansion. If I want to expand my business, what is corporate expansion mean?

Steve Vandegrift
Well, corporate expansion is what you see with many national chains that are not franchises. They made the decision early that they were going to grow. They had three, four, five locations. And ultimately, they may have looked at franchising, but they decided that they could go corporately. They had the level of capital necessary. They were willing to create that hierarchy, that infrastructure, to be able to support without having individual owners out there.

Mark Vandegrift 
So if I want to expand the business, I have to take my resources and pour it into another location, right?

Steve Vandegrift
That's correct. We would say that's one of the downsides of corporate expansion is the capital it requires.

Mark Vandegrift 
Okay. And then you're talking even human resources because now I have to hire a manager for that store. I have to hire all my personnel. HR still falls under me. Accounting still falls under me, et cetera.

Steve Vandegrift
That's right, leases that you lease property for, you're going to sign every lease. Exactly right. So we call them contingent liabilities that you have under corporate expansion.

Mark Vandegrift 
Okay, let's compare it to something maybe a little different than that, a dealership.

Steve Vandegrift
Dealerships work very well we like to say when you have a product, in other words Toro would be a great example. Toro works with dealers and distributors and they are licensed the right to in essence sell and service that Toro mower to keep it simple. Ultimately they can the dealership the dealer itself or the dealership business itself can assist things with things like how to they can train them how to treat that mower, how to service that mower, how to maintain that mower, how to sell that mower, but they ultimately cannot control the individual dealers and distributors that are actually providing that product and that service. So it limits them in terms of their controls.

Mark Vandegrift 
Okay, so having a widget, for example, that I can sell to others that then they can sell to the consumer would be a good application with dealership.

Steve Vandegrift
It is because they're the ones buying it a wholesale price and then they're going to sell it retail.

Mark Vandegrift
Okay, so as a nuance then, distributorships are kind of close to that, are they not?

Steve Vandegrift
Distributorships, yes. Dealerships and distributorships are very similar. The structure of the agreement might be different, but at the end of the day, the end result is the same.

Mark Vandegrift 
Okay.

Mark Vandegrift 
Okay. And then I think you mentioned joint ventures and licensing. How do those work as far as business expansion?

Steve Vandegrift
Well, let's say that someone has a really cool trade name, trademark. They can actually license another business to use that under a trademark license agreement. And then they typically would get a royalty so to speak people associate that with franchising. But we use that in other expansion methods as well. They might get 2 %. I knew somebody, a friend, that actually designed office furniture and his goal was not to create a manufacturing plant, a sales force. His goal was and he was very good at what he did. So he reached out to all the major chair, office chair manufacturers and he would do a license deal He would license them the right to manufacture in exchange he would get a percentage of the revenue.

Mark Vandegrift
Well, that makes sense. So as I'm thinking about franchising, there's kind of some criteria that you might list that would make franchising the best business expansion option I could choose. What would be kind of the top level criteria that you might think of?

Steve Vandegrift
Well, first of all, we like to say that franchising allows businesses to expand using other people's money. And that's franchise fees, royalty fees, et cetera. And so that's certainly a tremendous business aspect of franchising for especially businesses that might have one, two, three locations. They really feel they have something special. They want to continue to expand. But they love the idea, and I'll segue into another benefit. They love the idea of putting an owner at that location rather than a manager. If they're six states away and that manager decides to quit corporate they have to send in somebody. With the franchise you have a highly motivated manager even if they hire a manager to work for them they're still ultimately responsible for that business from both the capital outlay from signing the lease. A franchise company never signs, co-signs leases and so the contingent liabilities are greatly reduced when it comes to franchising over corporate expansion. Okay, yeah another ability for most of our clients it allows them to more rapidly expand. We have a lot of clients that come to us and say they say I'm going to continue probably adding a location or two every couple years, but with franchising with our training and support we could probably open 10 or 12 franchises our first year. So that allows them to expand more rapidly, capture additional market share, and at the same time increase their brand recognition and awareness.

Mark Vandegrift 
Okay. So if I choose to franchise, have a business right now. How do I know if my business is eligible to franchise?

Steve Vandegrift
Well, and what we love to say is that's part of our job. We always tell prospective clients when we first talk to them is there are certain things that we're looking for. And sometimes we've had to tell clients or prospective clients that you need to really hone in on this because at the end of the day, franchises want a system of operation that's plug and play. They don't have to figure anything out. They can simply follow. We'd like to say, excuse me, we like to say that the franchise company is providing the vehicle, they're providing the roadmap. At the end of the day, the franchisee is responsible for putting the gas in the tank. That's their passion, their commitment, their capital. So together, that allows both parties to just tremendously benefit.

Mark Vandegrift 
What about the psychological aspect? What would you tell someone that's considering franchising their business, what would you say, hey, you need to get ready for this because it's going to change your world?

Steve Vandegrift
That's an important one because again, we're educating our prospective clients. We tell them initially it's going to be like a associate's degree. We want them to understand what it really takes. And so I'll use an example of the restaurant industry. Oftentimes the one of the owners of a particular concept is a restaurateur loves to spend time in the kitchen. And we explained to them that coming out the other side, they have to reposition themselves. Typically they'll need to really get involved initially in the franchise operation. So from that point, we've actually had these restaurateurs say, you mean I can't be in the kitchen 10 hours a day. And we explained that sure you can't if you have other key people that can handle the training, the support. But if you only have a couple locations, you probably are going to need to be involved. And that's actually made them decide to wait until they developed additional locations, develop some of those key employees that can actually take on a role in that operation. That's one of the biggest things. And the fact that Franchisees are going to want ongoing support. They're going to want to be able to contact you. And if you have one owner that's the one that knows everything, they may feel a little bit overwhelmed with that requirement that they need to support the people that they granted a franchise to.

Mark Vandegrift 
You have on your website a 15 question quiz. It's on fransource.com. What are the elements in that in terms of helping people maybe work through whether or not they're ready to go? What are those 15 questions about and how did you come up with those?

Steve Vandegrift
Well, first of all, it's recognizing a need. We would get the first year or two in business, I would get a lot of the same, what does it take to be a successful franchisor? When do I know my system's ready? And we didn't want to give them a hundred page questionnaire. We wanted to get the key ones out of the way first. Okay. Do they have a system that they can teach and train others to operate according to the prototype locations within a reasonable time period and at a reasonable cost? In other words, is it going to take someone two years of training to learn this to become a successful franchisee. They're probably not going to have a ton of interest in that because most people come as a existing job and many of them are hoping to make that transition into a full-time business owner and so that is certainly one of them do they have that trainable aspect of it where they can in fact train the multitudes to do it another one is certainly having their system dialed in that is critical as I mentioned previously I believe it's so important that a franchisor has figured everything out. That's the day-to-day operation, who the suppliers are, what are the items or products or menu items we're going to offer, who's going to source our supplies for us, what's my trade dress going to look like? And many people get overwhelmed with the idea of even what do I name my company? How do I set up a website? Those are things so if you have all that dialed in a prospective franchisee who's looking for a system where they don't have to figure things out is going to gravitate towards that. That's another important one. Another question on there relates to do you have key people that can assist you in training and supporting franchisees and providing that high levels that they need, another critical one. Another example would be do they have more than one location? Now we have successfully developed franchises for single location businesses but we always like to do really a much deeper dive under the hood and understand what makes them different. If you're a pizza shop and you have one location what is going to allow us to help you compete in franchise in the franchise space if you have just one location and something those businesses that we work with that have a single location they either had a special special operating system. They just had unique menu items that no one else is currently carrying. They had huge demand from customers to franchise their business. Those are all the things that we're really looking for ultimately in that franchise or prospective franchise.

Mark Vandegrift 
So if anybody were wanting to get to that questionnaire, it's available on your website, they fill it out. How do they get an assessment back? What happens?

Steve Vandegrift
Great question. And going back to the original point, we wanted to be able to give just people that were business owners that were thinking about franchising a way to see. And so we have that 15 key questions quiz that each question is weighted based on its importance to the decision to franchise a business. And so what we do then is if they'd like, they can actually set at the bottom, they can just include their email address, name of the company, their name, and we're going to provide them within 24 hours, their quiz results, their quiz score, and an invitation to contact us to schedule a time. And we'll talk further in detail about their responses to the quiz, as well as a little deeper dive under the hood, as I mentioned. In other words, asking some qualifying discovery questions that help us start in helping them decide is now the time am I the right business am I the right type of owner that should in fact franchise their business.

Mark Vandegrift 
So have you ever turned down someone or recommended against them doing franchising?

Steve Vandegrift
We feel that's one of the probably most important thing we can do. Just to use a client without by name, they had contacted us. They were one of the first food truck concepts out there. So you can tell this is going back a number of years. And we went through our due diligence process. And ultimately, we identified that they had some really unique menu items, which all needed to be locally sourced. Well, franchising is about a consistent method of operation. That includes products, so that was one of our concerns. There were a few, but one of them was that for sure. They literally were using a POS system that was the old cash drawer where you punch the buttons. They probably got it at an antique store. So we talked to them about point of sale systems and the importance to that for reporting, tracking inventory, all that was so important. And so at the end of the call, they said, well, what do you think? And I said, I think you probably know. We suggest that you develop these few things. The greatest thing, Mark, is when they, companies like that, two years later, I get a call. Identified who they were, said, I don't know if you remember us. Well, it was kind of unique. I remembered them and I shared some of the things I remembered to the extent that he thought I was reading off the notes. So I thought that was great. He says, well, you're going to be thrilled to hear we worked out our social supply. We finally have a today POS system and we just won a governor's award for small business. We're ready to franchise. And so that's how we look at it. The importance of doing so of really having to say no. And we know that'll come back to us. We just recently had one that we just felt they said we can either focus on our business or continue working in our business. We talked to revenues, we talked about the profitability. And ultimately I said, I didn't even have to tell them. They said, well, you kind of shared a few things along the way. It sounds like we should take our resources, spend the next year or two building up our business, getting to where we should be at and then come back to you. And I said exactly right. And they were just so appreciative that we were willing to tell them, let's say the bad news but we're not going to encourage any business to franchise that we're not 100 % sure that they can be successful. Then once again we have a system to ensure their success they have to follow it just like a franchisee and they appreciate that.

Mark Vandegrift 
Very good. Well, Steve, let's wrap up our first episode of the FranSimple Podcast. Thanks for joining us. And thank you to all the listeners that come aboard here as we produce and publish our first episode. So if you're out there listening, we'd really love for you to like, share, and subscribe to the FranSimple Podcast, the podcast designed to make the concept of franchising simple. Until next episode. May your business expand through the power of franchising.