🍟 11/28/2022 – Reevaluating “Small Business” Ownership
Reevaluating “Small Business” Ownership
This past Saturday was Small Business Saturday. It happens every Saturday after Thanksgiving, and is purposely positioned between Black Friday and Cyber Monday, both of which are dominated by large retailers offering steep discounts in-stores and online.
It’s a great opportunity for small business owners to drive revenue, as it encourages local shoppers to support businesses in their community, instead of Amazon, Wal-Mart, and other corporate juggernauts .
Small Business Saturday is a wonderful initiative that I fully support. Small business owners are generally hard-working, community-driven, and passionate entrepreneurs who deserve to be rewarded.
However, upon perusing twitter on Saturday, I noticed two themes that often come up regarding “small business ownership”. Those 2 themes are:
- Franchise owners are NOT small business owners
- Multi-location owners don’t deserve to be supported
I’ve seen this debate play out many times at this point, be it twitter, LinkedIn, you name it. I’ve kept quiet on the subject, but it’s time I share my thoughts.
Franchise Owners ARE Small Business Owners
Franchise owners are small business owners who simply chose a different path in their entrepreneurial journey. I’ve spoken with thousands of prospective first time franchise buyers – many of them at a certain point considered building their own business from scratch.
But for anyone who’s gone down that path, you know how intimidating and overwhelming it can be. Hence, many decide to work with a franchise to decrease their risk of failure, and have a built-in support system when they launch.
After all – over 20% of businesses fail during the first 2 years of being open, and over 65% are wiped out after a decade.
Those aren’t encouraging statistics, so it’s no surprise people opt for franchise brands with a demonstrated proof of concept. Considering that point, why would we punish those entrepreneurs who chose a franchise by saying they aren’t “true” small business owners?
If anything, there’s an argument to be made that more people should consider franchises before venturing on their own.
I’d be remiss to not mention that the key difference between buying from your local cookie shop versus a Crumbl Cookies shop, is that generally ~6% of a franchise owner’s revenue gets passed up to the corporate entity that is licensing the brand.
Technically, this means that 6% of what you spend at a franchise isn’t going to the business in your community. Instead, it’s going to a company that is helping create more business ownership opportunities for individuals.
If you ask me, it’s a tiny price to pay, and more importantly, is an equally worthwhile initiative to be supported.
Beyond the “franchise vs independent small business” debate, is the notion that multi-location owners don’t need, nor should they receive support.
The common critiques of multi-unit owners are:
- They’re not small business owners
- They’re not in the store everyday greeting their customers
- They’re solely profit driven and not in it for “the love of the game”
- They own locations outside of their market and aren’t part of the local community
While some of this may be true, i.e. someone who has franchises across an entire state obviously doesn’t live in every town for which they own a business in.
But, let’s think about it from the lens of the franchise owner – why would you *NOT* strive for expansion? Why would you not want to make more of an impact, and grow your own business by building more locations?
As a society, we romanticize the mom & pop business owners who greet their customers as they walk in, and work in their business day in and day out.
And I get why – it’s incredibly admirable and inspiring to see this level of commitment and enthusiasm from an individual.
It’s a beautiful thing…or is it?
Should the stereotypical mom & pop business owner lifestyle be what brick & mortar entrepreneurs strive for?
For context, I’ve met business owners who work in their store 7 days a week. While they do enjoy their work, and put a smile on their face for customers, they’d also love to have a break every now and then.
They’d love to take more vacations. To spend more time with their family. To not have to be the first one in and the last one to leave…every single day.
Don’t get me wrong, I’m not oblivious to the fact that every dollar that goes to the owner of a single location is more meaningful than for the entrepreneur with a portfolio of locations across a town, state, region, or potentially the entire country.
So let me be clear: if an individual store owner was struggling, I’d opt to provide them with my business rather than an established multi-unit owner who is already financially well off (c’mon guys, I’m a wolf, not a monster!).
With that said, the irony of being a “small business owner”, is that if you do find a way to scale your business, build more locations, and hire yourself out of daily operations – then you become the villain!
What is this, Batman?
Now, if working in your business is what you’re truly passionate about, and you’re content with that lifestyle, then who am I (or anyone) to say “you should want more”.
But outside of those select individuals, we should be celebrating and supporting multi-unit franchise owners because of their success, not using it as an excuse to not support them.
I’m talking about folks like David Schuck, who started out with a Liberty Tax franchise, and over the years expanded to 12 locations. Eventually, he could afford brands that required a heftier investment, and was one of the first franchises in the Club Pilates system.
Today, he still owns those 12 Liberty Tax locations, and also owns 39 Club Pilates and counting!
Then there’s Lucas Mitchell, who was a manager of 8 Five Guys restaurants, before realizing he had the chops to do it on his own.
Through incredible persistence in networking, he was able to raise capital to acquire 5 locations, and today owns 15+ locations. The best part is, he’s just getting started!
The Multi-Unit Trickle Down Effect
Yes, multi-unit ownership creates more wealth for the franchisee. More cash flow results in more annual profits, and also commands a hire exit multiple should you sell your portfolio of franchises some day.
But the aspect that isn’t talked about enough is that it’s also better for the employees that work inside the locations of a multi-unit owner.
What do I mean?
Culture refers to management’s leadership style, the people you work with, the hours you have to work, and the values of the organization as a whole.
If you’re working for a multi-unit owner versus a single store, you’re apart of a larger organization with a growing team.
There’s a mission that you can align with. It’s not just a job to help keep the lights on at a single store.
Value refers to what you can receive as an employee i.e. recognition, compensation, benefits, etc.
Who do you think can afford to provide a higher salary and top tier benefits – the single Club Pilates owner? Or David Schuck, who owns 39 locations?
Not only that, but the smartest multi-unit owners know that providing employees with the opportunity to earn into some level of ownership, whether it’s equity or profit sharing, results in fantastic employee performance, and successfully performing stores.
This means that employees get more financial upside, and locations provide top notch service at scale.
Growth is the last piece of the puzzle that is often overlooked. Even if an employee is happy with their salary and benefits, if they’re not growing (personally and/or professionally), they will get bored, and potentially leave.
Continuing to use David Schuck as an example – David can provide upward mobility for his top performing employees. Upward mobility means leadership opportunities that can drive professional and personal growth.
Beyond upward mobility, I’ve met multi-brand franchisees that allow employees to jump from management positions of brands in completely different industries.
Bored of overseeing 5 fitness franchises?? No problem – here’s an opportunity to help grow our pet franchise division! (That’s a real life example that I’ve generalized for the sake of confidentiality).
As you can imagine, the optionality keeps things fresh for employees, disrupts monotony, and ultimately provides growth opportunities for individuals.
Small business owners, whether they are with a franchise or a brand started from scratch, is an equally admirable path, both of which are worthy of support from their local community.
And while a small percentage of a franchise owner’s revenue is collected by the parent entity, it should be viewed as fair compensation in exchange for creating small business ownership opportunities across the country.
Certain business owners may have the drive to work in their business daily, but I suspect many would welcome the ability to choose their working hours.
Scaling to multiple locations is the pathway to freedom for these owners. That freedom benefits the owners greatly, but also enables far more opportunity and upside for their employees, something that a single shop owner cannot do.
So franchise owner or not, multi-unit owner or not – all forms of small business entrepreneurs deserve support!
The Evolution of Fast Food Franchises
Fast food franchises have evolved over the last few decades to keep up wtih technology and consumer preferences. Dining rooms are out, and drive-thru’s + quick ordering is in.
But seeing the change in the physical locations themselves is crazy to see – and makes you wonder if the lack of experience being provided is diminishing what made these brands special.
Dominos Legend takes the helm at Restaurant Brands International
Patrick Doyle led Domino’s as CEO from 2010-2018. In 2010, Domino’s stock price was $10/share. When he left in 2018, it was a whopping $270 per share. It’s one of the greatest turnaround jobs ever to be executed.
He’s now joined Restaurant Brands International, the owners of Burger King, Tim Hortons, Popeye’s, and Firehouse Subs as the executive chair. You can expect Doyle to strengthen their franchisee base, and improve the digital sales across RBI’s portfolio of brands.
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