[SHOWNOTES]

TITLE: New Franchise Broker Laws - With Sarah Davies

DESCRIPTION:

Sarah Davies, General Counsel of the International Franchise Association (IFA), discusses the proposed Model Franchise Broker Registration Act by the North American Securities Administrators Association (NASAA) and the California Senate Bill 919. Both pieces of legislation cover the same territory, focusing on registration and disclosure requirements for third-party franchise sellers. The IFA worked with the California legislator to introduce Senate Bill 919 in January, proposing registration and disclosure requirements for third-party franchise sellers. Meanwhile, NASAA has been working on its Model Broker Registration Act for several years.

Davies explains that the term "third-party franchise sellers" encompasses franchise brokers, franchise sales organizations, and franchise consultants. Currently, there are no educational or registration requirements for franchise brokers. The IFA supports education for franchisors and has resources and tools available for this purpose.

The IFA is supportive of increased transparency in the franchise sales process as part of its overall initiative around responsible franchising. Senate Bill 919, which requires franchise brokers to provide disclosure information, has passed the Senate and is currently before the California Assembly. If passed, it will require the governor's signature to become law, with a proposed effective date of January 1, 2026. The disclosure required for franchise brokers is straightforward and basic, including contact information, professional experience for the last five years, litigation history, services performed for clients, a general description of the compensation structure, and franchises sold in the last year.

NASAA, while not a rulemaking body, has issued statements of policy or commentary to clarify disclosure obligations under the franchise rule. These guidelines are then adopted by states, either formally or informally. Franchisors, for the sake of having a single Franchise Disclosure Document (FDD), generally comply with NASAA's commentary. - With Sarah Davies.

TIMESTAMPS:

00:00 Introduction: "Sarah Davies is the General Counsel of the International Franchise Association..."

01:05 Discussion on Senate Bill 919 and NASAA Model Franchise Broker Registration Act.

03:08 Overview of Senate Bill 919 and NASAA's initiatives.

05:18 Definition and role clarification of franchise brokers.

07:10 Requirements to become a franchise broker.

09:00 Lack of current regulations for franchise brokers.

10:20 Support for increased transparency in franchise sales.

12:15 Status of Senate Bill 919 in California.

14:30 Effective date and preparation time for Senate Bill 919.

15:55 Extensiveness of disclosure requirements for franchise brokers.

17:40 Submission process and potential fees for registration.

19:05 Responsibilities of franchisors under Senate Bill 919.

20:20 Role and function of NASAA in franchise regulation.

22:00 Relationship between NASAA and the FTC.

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast

Where to find Sarah Davies:

DESCRIPTION:

Alicia Miller, founder and managing director of Emergent Growth Advisors, discusses her book, Big Money in Franchising, and the role of private equity in the franchising industry. She highlights the success story of Tropical Smoothie, which grew from 315 to 1400 units through private equity partnerships. She also discusses the Dwyer Group, a home services giant, which transitioned from being publicly traded to partnering with private equity.

Miller points out that 700 franchise brands have partnered with private equity companies, with at least 2 trillion dollars available for investment in franchising. She explains that private equity in franchising began in the 1990s, with significant growth after the 2009 financial crisis. She emphasizes that successful private equity partnerships in franchising focus on franchisee satisfaction and investment.

There are 5,000 registered private equity firms in the United States, with 1,400 having invested in franchising. These firms often specialize in certain sectors or stages of brand development. Miller advises emerging brands to be prepared before engaging with private equity firms and to consider the implications of losing decision-making authority. She reassures franchisees that initial private equity transactions usually align with their growth goals.

-With Alicia Miller

TIMESTAMPS:

00:00 - Introduction of Alicia Miller and her background in franchising and private equity.

01:15 - Example of Tropical Smoothie's success with private equity, including recent transactions.

02:00 - Discussion on the Dwyer Group and its transition due to private equity involvement.

03:00 - Acceleration of private equity interest in franchising post-financial crisis starting around 2009.

04:30 - Challenges faced by publicly owned franchise companies with shareholder interests.

06:00 - Overview of the number of private equity firms and family offices in the United States.

08:00 - Potential conflicts between franchise operations and private equity decisions.

09:15 - Specialization of private equity firms in franchising and specific investment criteria.

10:30 - Exploration of how private equity firms actively seek out emerging franchise brands.

12:00 - Dynamics between franchisors and private equity firms in brand acquisition and growth strategies.

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast

DESCRIPTION:

John Hayes, host of the Franchise Hot Seat, interviews James Butler, a serial entrepreneur, author, and franchise sales coach. Butler shares his experience of owning three bridal shop franchises and five different businesses, and his decision against franchising his concept after consulting with a franchise attorney. He discusses his consulting work for franchise owners and his belief that not all businesses are suitable for franchising, emphasizing the need for differentiation in a saturated market. He also mentions the trend of consolidation in the industry, with companies like Authority Brands and Five Star Franchising acquiring different brands under a parent brand.

Butler and Hayes discuss the challenges of franchising a small gym, with Butler suggesting that success in this area requires effective marketing and community building. He warns against franchising businesses that cannot provide adequate support to franchisees or have not developed a solid business model. He cites statistics from the International Franchise Association showing that two-thirds of franchise brands in America never reach 100 outlets, questioning the financial viability of franchising for these businesses.

Butler and Hayes discuss the reasons why people are drawn to franchising, despite the challenges. Butler suggests that many franchisors do not fully understand the industry or their business, and make mistakes as a result. They also discuss the importance of marketing in franchising, and the difficulties faced by small start-ups in competing with larger, more established brands.

Butler's book, Franchise Growth Strategies, is mentioned, specifically his concept of an "idea day" for making big breakthroughs in business. He explains that this involves scheduling time to reflect on the business and its trajectory, and to develop a list of activities to work on going forward. He emphasizes the importance of regular reflection and strategic planning for growing franchisors.

Butler warns against the "activity versus accomplishment trap", stressing the importance of focusing on activities that contribute to long-term goals. He suggests having three to six priorities per day, and maintaining a master list of tasks from the last "idea day". He also discusses strategies for avoiding distractions and staying focused on priorities.

- With James Butler

TIMESTAMPS (Use ChatGPT on Transcript):

00:00 - Introduction by John Hayes

00:11 - James Butler's introduction

00:39 - Discussion about owning bridal shop franchises.

01:06 - Decision against franchising their own concept.

01:27 - James Butler discusses his experience with multiple businesses and consulting.

02:08 - Question about the saturation of franchising.

03:06 - Discussion on industry consolidation.

03:42 - Mention of meeting a former franchisee over lunch.

04:09 - Conversation about small gym franchises.

05:11 - Further discussion on small fitness franchises and marketing challenges.

06:03 - Reflection on the struggles of emerging franchise brands.

06:44 - Question about the appeal of franchising.

07:23 - John Hayes reflects on the caution needed in franchising decisions.

08:01 - Discussion on "idea days" and strategies for business breakthroughs.

08:57 - Importance of planning and reflection in business.

09:29 - Reflection on daily routines and accomplishing goals.

10:06 - Conversation on prioritization and avoiding the activity vs. accomplishment trap.

10:52 - Managing distractions to stay focused.

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTub

DESCRIPTION:

Edith Wiseman, the president of FRANdata, discusses the changes in the franchising industry, particularly in relation to SBA loans. She explains that the SBA has changed its standard operating procedure, eliminating the need for lenders to worry about affiliation between the franchisor and franchisee. However, this has led to the SBA no longer determining whether a franchise is eligible for an SBA loan, a task that now falls to the lender. This can be problematic for certain business models, such as passive businesses, which may not be eligible for SBA loans.

Some lenders still consider affiliation a credit issue, despite the SBA's stance, and may refuse to lend to new franchises. To address this, FRANdata has developed a certification of franchise eligibility for SBA lending, which has been signed by nearly 250 franchisors. This certification allows franchisors to self-certify that they abide by all eligibility rules, simplifying the lending process.

Wiseman also discusses the number of active franchise systems, estimating that there are between 3750 to 4000 active franchise brands. She confirms that a new franchise brand appears on the scene every day, but notes that the demand for SBA loans is greatest from brands that are slightly past the emerging stage.

For emerging companies that may face resistance from lenders, Wiseman recommends joining the Franchise Registry and using FRANdata's certification to demonstrate their eligibility for SBA loans. She also advises understanding the landscape of SBA lenders and finding a financing partner that is best suited for their franchise system.

Wiseman concludes by discussing some of the eligibility criteria for SBA loans, such as the franchisor not controlling the money flow of the franchisee. She notes that while this is a credit concern for some lenders, there are ways around this issue, such as the franchisor signing an addendum that allows the lender to take a security interest in the accounts receivables.

- With Edith Wiseman

TIMESTAMPS:

● 00:00: Interview Introduction

● 00:56: Discussion on SBA Regulation Changes

● 04:08: Affiliation Concerns for Lenders

● 07:30: Introduction of Franchise Registry's Certification

● 10:30: Impact on Emerging Franchise Brands

● 12:35: Assistance for Emerging Franchise Companies

● 15:17: Clarification on Affiliation and Credit Issues

● 17:45: Other Eligibility Criteria

● 19:25: Challenges for Franchisors

● 21:00: Example of a Unique Business Financed

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast

DESCRIPTION:

John Hewitt, an industry veteran with 5,200 franchisees under his belt, discusses his career in franchising. Hewitt founded several companies, including Jackson Hewitt, one of the world's top retail chain franchises with over 10,000 tax offices. He has also founded other franchise companies and currently runs Loyalty Brands, a platform brand with multiple sub-brands. Hewitt has sold companies twice to public entities for seven figures.

Hewitt shares that he always knew he would become a millionaire, but discovered that the journey is more fulfilling than the destination. He enjoys changing lives and plans to continue in the industry indefinitely.

Hewitt's most recent venture, Loyalty Brands, was born out of a conversation with a former employee who suggested he help other franchises grow. Despite being under a non-compete clause from his previous company, Liberty Tax, Hewitt decided to embark on a course to have multiple franchise brands.

Unlike other franchisors who focus on a single industry, Hewitt looks for franchises with integrity, replicability, and stickiness. He believes that many franchisors fail because they prioritize their own success over that of their franchisees. Hewitt's philosophy is that happy, successful franchisees lead to unstoppable growth.

Hewitt's key to franchising is building the best system in the industry and having franchisees who follow that system. Despite having brought in 5,200 franchisees, he shares that not all of them have followed the system.

- With John Hewitt.

TIMESTAMPS:

● 0:00 My guest today is industry legend, John Hewitt.

● 0:47 We've been in franchising about the same number of years, but John is an icon with 5,200 plus and counting franchisees in your career.

● 1:20 John founded several companies, including Jackson Hewitt.

● 1:51 Why such a story?

● 2:23 The journey is the joy.

● 3:15 Loyalty brands, a platform brand.

● 4:10 You have sold twice to public companies for seven figures.

● 5:00 Why not just a tax? Why multiple brands?

● 5:50 The beginning of loyalty brands.

● 7:08 The search for integrity, replicability, and stickiness in franchises.

● 8:00 The challenges of franchising and reaching 100 locations.

● 9:00 The secret to franchising: happy, successful franchisees.

● 10:10 The failure of many franchisors.

● 11:15 The importance of building the best system in the industry.

● 12:20 Personality profiling in franchisees.

● 13:30 Attitude and culture as keys to success.

● 14:20 Identifying bad franchisees.

● 15:30 Blaming others versus taking responsibility.

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast

DESCRIPTION:

The Franchise Hot Seat episode features Nick Gartner, a franchisee and franchise development professional for Hudson Valley Swim. Gartner shares that he was involved with Hudson Valley Swim before it became a franchise, focusing on operations at corporate locations. He transitioned into franchise development when the company decided to franchise. Gartner and his brother opened their own Hudson Valley Swim location in Stamford, Connecticut after about a year of being franchisees.

Hudson Valley Swim is a swim school that caters to all ages and abilities, teaching survival skills, basic swimming, and competitive swimming. Gartner was attracted to the franchise because its mission and core values aligned with his own. He emphasizes the importance of core values in a franchise, citing exceptional customer service as one of Hudson Valley Swim's key values.

Before becoming a franchisee, Gartner worked in franchise development right out of college. He also had experience working at Hudson Valley Swim's corporate locations during summers in college and high school. He did not play a part in the decision to franchise the business, but he has contributed to its growth through franchise development.

Gartner discusses the challenges of becoming a franchisee, highlighting the support provided by the franchisor as a major advantage. He also notes that he always wanted to own a business and chose franchising because it offered a blueprint and ongoing support.

As a member of Generation Z, Gartner shares that 80% of his peers want to own businesses and make a positive impact on their communities. He believes that owning a business allows one to control their schedule and success. Gartner also emphasizes the importance of giving back to the community, stating that his work with Hudson Valley Swim saves lives by teaching an essential skill.

Gartner explains that there are many options for Gen Z individuals to afford a business right out of college, including Small Business Administration (SBA) loans. He was able to secure funding for his business without much difficulty. Gartner concludes by reiterating the importance of community involvement and the benefits it offers.

- With Nick Gartner

TIMESTAMPS (Use ChatGPT on Transcript):

● 00:00: Introduction to the Franchise Hot Seat podcast.

● 00:21: Introduction of Nick Gartner as the guest.

● 00:55: Nick's background and involvement with Hudson Valley Swim.

● 02:45: Nick's decision to open his own franchise location.

● 04:11: Overview of Hudson Valley Swim and Nick's attraction to the franchise.

● 05:47: Importance of core values in franchising.

● 07:40: Nick's understanding of Hudson Valley Swim's core values.

● 09:21: Nick's role before becoming a franchisee.

● 10:37: Decision-making process behind franchising the business.

● 12:41: Challenges faced in becoming a franchisee.

● 14:56: Gen Z's perspective on business ownership and community impact.

● 17:30: Importance of giving back to the community.

● 19:23: Funding options for young entrepreneurs.

● 21:07: Importance of community involvement for Gen Z.

● 23:05: Discussion on stereotypes about Gen Z.

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Tw

DESCRIPTION:

Ron Holt, founder of Two Maids & a Mop, shares his experiences with Fred DeLuca, the billionaire franchisee of Subway. DeLuca, known for his curiosity and larger-than-life personality, built the world's largest franchise company from scratch. Holt first met DeLuca at an IFA conference in Las Vegas. At the time, Holt's company was a small cleaning business in Florida with 12 locations. Despite having all the necessary systems and processes in place, they hit a wall and didn't know how to proceed. It was suggested that they should consider franchising, despite Holt's lack of knowledge in the area and the negative things he had heard about it from other franchise owners.

During a break at the conference, DeLuca sat across from Holt and began asking him questions about his business. Holt, initially annoyed, began to engage in the conversation, boasting about his 12 stores. When Holt asked DeLuca about his own business, he was humbled to learn that DeLuca owned Subway with 42,000 global locations. The two continued their conversation for hours, with DeLuca offering invaluable advice about franchising.

After the conference, they continued their discussions via Skype. DeLuca offered to buy Two Maids & a Mop multiple times over the next year, but Holt declined as the offers were not financially appealing. Despite this, Holt appreciated DeLuca's mentorship and the lessons he learned from him. One piece of advice that DeLuca gave Holt was not to always listen to franchise owners, as their suggestions may make their lives easier but could come at a cost to the business. Holt shared this advice at a Two Maids conference, which was met with backlash from the franchisees. Despite the controversy, Holt acknowledges the value of DeLuca's advice and the impact it had on his business.

-With Ron Holt.

TIMESTAMPS:

00:00 - Introduction and background on meeting Fred DeLuca

01:05 - Initial impressions of Fred DeLuca and his interest in the speaker's business 02:15 - Transition into discussing the speaker's background and entry into franchising 03:10 - Decision to explore franchising and attending an IFA conference

04:20 - Meeting Fred DeLuca at the conference and initial interactions

05:30 - Fred DeLuca's involvement and mentorship over the following weeks

06:45 - Offer to buy the business and considerations

07:40 - Fred DeLuca's mentoring style and lessons shared

09:00 - Fred DeLuca's resistance to technological changes and lessons learned

10:20 - Advice from Fred DeLuca regarding franchisee feedback and profitability

11:30 - Reaction to sharing Fred DeLuca's advice with franchisees

13:00 - Conclusion and reflection on Fred DeLuca's teachings

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast

DESCRIPTION:

Alex Gingold, the guest on the Franchise Hot Seat, discusses his business DonutNV. The rebranding from Cinnamony Donuts to Donut Envy was intentional, aiming to engage customers and prompt them to ask questions about the brand.

The business started in 2014 as a small outdoor mall kiosk at the Philadelphia premium outlets, serving hot mini donuts in two flavors and fresh squeezed lemonade. Gingold and his wife, Amanda, chose the donut business for its flexibility and their love for quick service food. They also wanted to avoid the time commitment of brick and mortar businesses.

The decision to start the business was catalyzed when Amanda lost her job. Gingold kept his job in the insurance industry for another year and a half after launching the business.

The couple launched their first mobile trailer a year after starting the kiosk due to customer requests for their presence at events.

Gingold also shares his experience working at Subway as a teenager and his aspiration to become a Subway franchisee. However, a business professor advised him to build his own system instead, leading him to franchising.

He expresses regret that his small business and entrepreneurship degree program at Penn State did not include franchising education.

- With Alex Gingold

TIMESTAMPS:

00:00 - Introduction to Donut Envy and intentional branding

01:12 - Origins of Cinnamony Donuts and rebranding to Donut Envy

02:30 - Starting as a kiosk at Philadelphia premium outlets

03:50 - Initial menu offerings and concept development

05:10 - Transition from corporate roles to entrepreneurship

06:45 - Finding used donut equipment on Craigslist

08:15 - Decision-making process and overcoming hurdles

10:00 - Official launch of Donut Envy in 2014

11:20 - Balancing entrepreneurship with maintaining a job

12:40 - Expansion into mobile trailer setup

14:00 - Transitioning from job security to entrepreneurship

15:30 - Learning experiences from early Subway employment

17:00 - Considering franchise ownership at a young age

18:20 - Participation in Subway's global student competition

LINKS:

WEBSITE: http://franchisehotseats.com/

LinkedIn: https://www.linkedin.com/in/drjohnhayes/

Twitter: https://twitter.com/drjohnhayes

YouTube: https://www.youtube.com/c/Howtobuyafranchise

Instagram: https://www.instagram.com/hayesjph/

TikTok: https://www.tiktok.com/@johnphayesfranchise

Pinterest: https://www.pinterest.com/DrJohnHayes/

Facebook: https://www.facebook.com/franchisehotseatpodcast