Thomas Scott, the brilliant mind behind Home Run Franchises, shares the story of their company, from its humble beginnings to its incredible growth in the home services industry. We also delved into the pivotal role of marketing in the franchise system’s triumph.
Thomas emphasized the importance of strategic marketing initiatives, emphasizing that a well-executed plan can elevate a business while a lackluster approach may hinder its progress. He also touched upon the struggles faced on the franchise journey, emphasizing the necessity of resilience and staying true to one’s vision.
Thomas enlightened the show with the significance of finding the right fit, stressing the alignment of values and mission to build a strong foundation. Furthermore, he shared invaluable insights on how to maximize the value of a franchise, including innovative strategies and cultivating customer loyalty.
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I am very excited for our guest as he goes without exception. He is the Founder and CEO of Home Run Franchises. Thomas Scott, welcome to the show.
Thanks. It’s good to join you. I’m excited about this.
I’m excited to share all of your collective wisdom and years of experience. I think that our audience and the world will benefit from all of what you’ve learned in building franchise systems, specifically in the home services world. How did you start Home Run Franchises? It’s such an amazing group of franchise brands, but I want to know right from you why and how did you start it?
I’ve been in franchising for a little over 25 years at this point. For a lot of people my age, I didn’t set out to be a franchisor or franchisee for that matter, and fell into the industry. I started out as a franchisee for a company called Charlotte Home Staging in the very early 2000s, in 2001 and 2002. It was the country’s largest Home Staging franchise. I had three units. I had come out of a career as a paper journalist and photographer. It’s a totally different industry. That’s how my marketing and I came to it from storytelling.
I liked that business. It was a lot of fun, and I realized that I enjoyed being a business owner. That was liberating for me. It changed the lives of the people around me. I was able to employ people and grow and help people. The franchisor at the time had a heart attack in 2002. He said, “You’re my top franchisee. Would you be willing to buy this or take it over from me?” I said, “I don’t know. I have $37 in my business account. I don’t think that’s the way that works.”
He goes, “No, you get some partners and you’d be surprised. I will sell it to you. I wouldn’t sell it to anybody else because you know the business and you have an aptitude for it.” Sure enough, I got some partners. We bought it. We grew it to 100 units. That company is still around, thriving and doing well. I ran it for seven years. I did development, operations, marketing, managing the team, and all the training. I did every job in a franchise system.
It was the hardest gig I’ve ever had. I went from being the top-performing franchisee to the bad guy overnight because I thought, “Everybody will like me. I’m a franchisee. This will be easy.” I had to learn the hard lessons of franchising the hard way, like brutal right up front. That led me to a career in franchising. I’ve run a supplier business that does franchise development marketing called Brand Journalist. I have franchised eight other brands along the way. I’m a serial enthusiast of franchising. I’ve got four brands under the Home Run brand umbrella. Two of them are growing. We did good clips this year of closets and dryer vent superheroes. We do the lighting squad and lifestyle window films. It is super fun.
I thought that there was a need for service. I believe service space is hot and there aren’t enough viable, substantial, and well-run franchise systems to satisfy the demand. They are franchising. I think we recruit between 18,000 and 20,000 new people a year in our industry out of the 5,000 or 6,000 brands there are in the US today. There are 25 million people looking to start a business at any point.
There are sheer numbers of who want to be business owners and with what we have, I think service is the logical entry point for most people. Most people don’t have $500,000 to buy a restaurant or some huge business, but they can scrape up $80,000, $100,000, or $150,000, in the case of mine, and buy something affordable. The industry needs to start people because, like you, I’m committed to coaching people and teaching them how to grow a prosperous business. I know you’re super data-oriented and have a great culture in your brands, but it was out of a goal of not so much building brands to sell, building brands to incubate and grow multi-unit owners out of because there’s not enough of that in our industry. Do you agree with that?
Absolutely. You mentioned something early on, talking about growth and many different pieces, but I want to take it to some lessons learned there. You’d mentioned in a nugget, “I went from the good guy to the bad guy and learned some hard industry lessons.” What did you mean by that?
When you’re a top performer in a system and you have a seat at the table or you’re pioneering the decisions to help companies grow and you’re set records, you’re growing at a rapid pace. Whenever in a system you have a top performer come along, they can sometimes change the way people perceive the possibilities of the business. That was happening in my space when I was a multi-unit franchisee. I had three units.
I had very close deep relationships with the other franchisor or franchisees. We did a franchise advisory council. I was involved knee-deep in the business because I’m an all-in kind of guy. When I became the franchisor, and it came time to collect royalties or get people structured and help improve the business, what I thought was improving the business wasn’t. I had this top-down idea of how you run a franchise system, never having run one.
I realized quickly that people wanted a boss. They would’ve gotten a job. Franchising is a people business. I would say franchising is a two-metric business. It is about having happy franchisees first. For me, that’s the primary thing. You have to enjoy the business you’re in. If you have enough money to buy a franchise, chances are you can do about anything in our society. It needs to be fun and enjoyable.
It needs to be financially rewarding equally part. You have to be happy and profitable franchisees. Any business is hard. Franchises are generally easier to operate, scale, and grow. They’re worth more. They perform at a higher level, but it doesn’t mean they’re easy. You still have to work at it a little bit. Have you found that to be the case in yours?
Absolutely. The business isn’t going to run itself. It’s important to set that expectation. It’s about lifestyle fit and expectations. In our business, at least, especially in being a service-based company and having a brick-and-mortar, we’re going out into the field and we’re growing the brand. It’s boots on the ground and growing the portfolio from scratch. Doing that in the community takes work and effort. As an owner, you’re an owner-operator. You’re doing that. If you’re building a team, just because you have a team in place doesn’t mean that they know what to do, they know when to do it, and they know what matters. That all takes effort and intentionality. What we’re talking about takes work.
The key lessons I learned in going from being a multi-unit owner who was very successful as a franchisee to a franchisor make me a better franchisor. I think about things. When I say I’ve intentionally created a franchisee-centric culture much like you have, I put the franchisee first. There’s a big range of FTC open comments right now. If you look at all the changes to the franchise rule that are underway as we speak, a lot of it is around brands that don’t understand what being franchisee-centric is.
Franchisees are my customers. They’re my partners. They’re the people that pay royalty so I stay in business. I believe that they use the business model I develop to better themselves and make a positive impact in their community. I believe franchising is the one way that somebody can participate in the economy at their full market value. In a lot of ways, it’s a more diverse income business segment. It’s the most diverse segment we have in American business.
It’s a democratization of capitalism. Anybody can participate in franchising. Anybody who raises their hand and says, “I’ve got the drive. I want to be a Gary Vee or Mark Cuban. I want to do that,” the steps are there. It’s one step at a time. You can take that journey. Anybody from any background, ethnicity, or skin color, we’re like the Army. We don’t care. If you have the drive, passion, enthusiasm, and resources, and you’re willing to put the work in like you’re talking about, why wouldn’t we give somebody that opportunity?
It’s a beautiful thing to see that happen. The lessons that I’ve learned are that franchising is a people business. It’s full of deeply complex relationships. You’re not just in the closet business, the dryer vent cleaning business, or the painting business. We’re both in the recruiting, training, supporting, coaching, and developing people business. What we do is help people run a better version of a business than they’d ever be able to run left on their own devices.
When you say the FTC rule, for those that aren’t familiar, can you shed a little light there?
This is the second time in my whole career that this has come up. It is asking for public feedback on the nature of franchise relationships, franchise documentation, the disclosure process, and franchise agreements. They’re asking people for comments. Most of the comments that have come in have been negative. There have only been 200 or 300 comments. Most of them are from disgruntled people who’ve had bad experiences in mostly big food chains. The things like the Unleashed brand’s premier martial arts have taken half of the comments from that debacle.
What they’re asking is whether you should be able to negotiate your franchise agreement. Should the franchisor be able to change the operations of the business after you sign? Should you have to follow them? Are you able to buy raw materials like food in the case of a restaurant at a more affordable price point? If you can get it locally, then do you have to buy it from the franchisor? Are you able to exit the agreement and have non-competes or all those kinds of things?
They are leading questions. They bring up people who’ve had bad experiences, but what they don’t talk about is it’s been open for 90 days. There have been 200 comments. There are one million franchise locations in the United States. The overwhelming majority of people have prosperous fun businesses. I don’t have disgruntled people in my systems. I don’t think you do either.
We have people who get up every day and go, “This business rocks. I’m going to buy more units.” We have people reinvesting in the model and going. I do think that it’s a good point to make about relationships that because franchising is such a relationship-driven business that you have to start out, everything you do in your business has to be focused on building a positive relationship, building a relationship that’s built on trust, empathy, respect, and giving franchisees a seat at the table so the decisions don’t happen to them.
It’s what I was doing when I was a franchisor in the beginning. I was saying, “I’m going to do this. I’m going to change our ad program.” We were doing digital marketing back in 2002. We’re going to have websites. People didn’t want to spend money on a website. They didn’t even know what a website was. We didn’t have broadband internet. It was back in the dark age. My kids say it was black when everything was black and white. They asked me, “What was it like to grow up when everything was black and white?”
You have to say, “How can we make this business better?” You have to influence people in positive ways. How would you take your painting business and add a whole other sales silo? How would you be able to increase your tickets and happier customers and get into a more specialized version of your industry, whatever it is? What if you did A, B, and C? Would that work for you? Would you be willing to try that out with us and be our Guinea pig and experiment on it?
I find that when you involve franchisees in the business development itself and give them a seat at the decisions, they’ll often make the same decisions you would as a franchisor. If you force it on them, people’s automatic response is, “No but hell no. I don’t want any part of that. Leave me alone. Why are you bothering me?” It’s a counterintuitive business for a franchisor to learn. Have you had that experience in yours? What’s it been like for you?
A thousand percent. To the point you’re making, you have every good intent to improve the system, but without infrastructure for collaboration, it creates a bottleneck. Clearly, franchise owners are in business or themselves. They want to be in business with other business owners. That’s the whole benefit of franchising. If you don’t have that open ear and it’s top-down, then it does create an issue within the franchise system.
Early on, we went through that as well. It was a growing pain for me and I had all the intent. I designed the model to be collaborative. I thought I was stewarding the brand with good intent in rolling out new initiatives, but I was doing it independently from the system. Good thing I appreciate feedback and can be coachable because I quickly learned that wasn’t going to be a successful way to run the franchise as a franchisor.
It’s not a hard lesson to teach in some way, but we surround ourselves with corporate staff. One of the real shortcomings of our business model is that a large percentage of the people I see that work in emerging brands as corporate support people start out as an employee of a franchise or a founder’s business. They work in the core business and then they get moved up to corporate support person because they know the mode. That doesn’t make them a good franchisor.
They don’t have the intellectual capital to understand that this person is counting on you to help them grow the business, and they leverage their house, car, and life savings to take this opportunity. They don’t want you to tell them what to do. They want you to help them materialize the promise that the brand made to them in the beginning.
It’s a whole different level of intellectual thinking that goes into how you support someone. I tell my people, “Start every conversation with, ‘What do you want to take away from this call? How can we help you?’” Let’s get that out of the way first. What are the things that are bothering you in your business or the things that you need the most help with? Let’s make sure we take care of those before we start talking about our agenda and what we want.
“We got some ideas on how to get you to the next level. We want to invite you to experiment with some things with us. Would you like to be part of a pilot group for a new type of ad that we’re going to do and we’ll maybe subsidize part of it because it’s not proven?” As a marketing person, this holds merit, “Here’s why I think it’d be good for you. Here’s what’s in it for you. What do you think?” I find that when you have dialogue like that in small groups or individually, it opens up a whole other level of performance. Do you find that to be the case in your business?
Absolutely. That’s coming from a one-on-one perspective, coaching one-on-one and putting it in front of the franchise owner like, “What would you like to accomplish?” What a question.
Make it theirs by involving them in that dialogue. We have Facebook support groups. We do lots of back and forth on Facebook. We use our Facebook closed support group as an important tool for training and ongoing support. We do Zoom Calls every other week. We have lots of small performance groups. I try to get them to ask. If somebody has a win, we try to celebrate wins and then say, “Is there something there that we should all be doing?” I’ll get that person to talk about what they did and then come back with, “Here are some ways we could systemize that. We could use this vendor for this. Here’s a sample ad you could try and a suggested budget if you want to experiment on your local stuff,” or whatever it is.
It is constantly innovating. The role of a founder and a CEO is less to be driving the operations day to day, and more to be evolving the business model and improving the relationship with franchisees. That’s all I do. I’m not recruiting franchisees. It is trying to make people feel heard, loved, and cared about like, “We are proud of you as an owner. You’re killing it. Whatever your goal is bring up a couple of other points because you’re a huge culture fan. I love the culture you’ve built in your brands.” I find there are two types of cultures and franchise systems. One is positive. One is less so. There are either compliance culture franchises where everything is strict and orderly. You have to stay within a narrow box. People are always telling you what you can’t do or what you’re doing wrong.
Restaurant brands are famous for this type of culture, and then there’s a performance culture. When we get into service brands like we’re operating, the performance culture is like, “Where do you want to be in three years? Let’s come up with systems to help you get there.” It’s more like “Let’s go out and conquer the universe” culture and less of, “You’re not doing it right.”
“Let’s focus on what you’re doing right. Let’s build on that.” Every person is different even though it’s a franchise system. You would run a painting business differently than I would run a painting business or my wife would run a painting business or the next guy down the road. Have you had any experience with those two types of cultures? Do you buy into that idea?
It’s an interesting juxtaposition there because performance is generally the result of compliance. That is the beautiful component of a successful franchise executing the model. That’s what’s been proven and worked out and is the winning formula that a franchisee gets into business within a franchise setting. They are choosing not to create and bootstrap getting into the marketplace and failing to succeed in innovating a winning formula within the market. One that consumers say, “Sign me up. That gives me value.”
Their systems are built around delivering that value. That is a consistent juxtaposition there where you want performance and you want compliance as a franchisor because compliance leads to maintaining the integrity of the brand. The brand is only as good as it is consistent, granted you want the flexibility and the collaboration to give feedback to improve the business model because not everything is perfect and the market is always changing. Because of that, there needs to be processes and infrastructure, that culture that welcomes innovation from the ground level.
It creates an interesting juxtaposition in that no franchise owner is going to enjoy a culture of compliance. Everybody loves to win and be a high performer and get results. I think there has to be the core of that trust. Trust that the compliance is going to be for my benefit. I trust that I have a voice and that if I have feedback, it will be innovated into the model which is essentially a by, which leads to compliance.
Compliance is a bad word for somebody coming from Corporate America, firing their boss, and jumping into a franchise. There’s a natural pent-up frustration toward corporate. We’ve done everything we can to disassociate ourselves from that corporate perspective. We call ourselves the Home Office. For us, if you refer to us as corporate, it’s a bad and naughty word. It’s much like compliance. We try not to use the word compliance and corporate. Fundamentally, compliance or following the model. You can trigger fewer franchise owners by following the model as opposed to being in compliance. That’s a fine line to walk there.
The two aren’t independent of each other. If you’re compliant, it doesn’t mean you don’t have performance. If you’re a high-performance culture, it doesn’t mean you lack compliance. In my systems, the lesson that I’ve learned over the time I’ve been in is that you have to start out building that trust with a roadmap. If you’re dealing with especially an emerging or incubated system, that starts our systems from scratch. We’re dealing with a lot of brand-new people. The person that joins a new system with less than 10 or 15 units is a very different type of operator that might join somebody with 80 or 100 units. They’re different parts of the market segment.
I find that I’ve got to sit people down because I go after a lot of young entrepreneurs. I’m very big on Gen Z buyers. I like diversity recruitment. I like giving people opportunities that can’t afford $150,000. I have business models and ways to get people into business at a much lower rate. I sit down and say, “If you were a franchise, where do you want to be in three years? It’s great you’re doing this, but why are you doing it? What do you want?”
I would tell you that in this remote work area that we’re in, there’s a profound lack of professional development happening with younger people. They’re not around in an office surrounded by older more experienced people. They don’t have the advantage of coffee cooler talks and solving problems and learning how to deal with issues. They’re in their mom’s basement working on a laptop on a Slack channel. While that’s great for freedom, it has a negative professional development component to it. You’re missing out on some stuff.
One of the things franchising can deliver is a more intentional professional development of the franchise owner because our goals are that. If I don’t develop that person into an executive and a high-acumen business owner, they’re not going to grow into 3, 4, or 5 units. I start with that. I say, “Good, that’s the goal.” I want you to understand that your time is worth $400 an hour as an owner. That’s what you’re worth. If you’re willing to take the jump off the cliff and start a business, that’s what you bought. It’s this ability to produce an engine that will deliver that for you and your family. If you buy into that, the best way to get there is obviously through compliance.
I don’t call it compliance. I say, “Here’s the fastest way to fall the system. If you have a better way to get at the system, I’m all ears because if there’s an improvement, we should all stop and pay attention to that.” I have a kid that’s a hockey player. He graduated high school and was going off to study franchising at Palm Beach Atlantic and getting excited. He was an aggressive hockey player and had a really hard time with his emotions. He is an ADHD kid. He would lose his cool on the ice. Hockey is an emotional and aggressive game to start with. He was very good at it.
His coach sat him down one time after he had a frustrating game. He was mad at himself because he missed a shot and they lost the game. He got mad on the bench and threw or broke a stick or something stupid. The coach said, “If you’re going to go out on the ice and you’re going to score five goals, you can come back to the bench and act like a donkey all you want. I’ll be happy to have you. If you’re going to go out and screw up and be mad at yourself and berate your teammates and act like a donkey, I don’t need that on the team. That’s a bad thing. You don’t have that control.”
That’s what it’s like to coach new franchisors. Get them to understand that we’re all in this together. Understand that the $400-an-hour mark is theirs. It’s a path that we can lay out, then why having to follow all these systems makes more sense. Franchise systems run into trouble. I’ve been a multi-unit owner myself in 5 or 6 different systems in my career. I have coffee shop franchises and I love coffee. I grew up in New Orleans. I’m a big coffee person. Running boutique specialty coffee shops was on my bucket list. We did that for a bunch.
What happened in mine is the culture in the franchise system. That franchise brand was amazing. The products were great. The operational support culture was not that great in that system. That was frustrating for my wife and me. We would develop stuff because we were pioneers and got involved early on. We had a menu that we worked on that was performing at a high level.
The operations guy comes in and says he wants to re-engineer the menu and you have to use the new menu. The new menu had a 20% lower ticket. It cost everybody and we lose money on it. Instead of saying, “Maybe we got it wrong,” or testing it out and saying, “We tested it out. Here’s the data. It looks like it’s better than the one you have.” Forcing something in the name of compliance that causes you to underperform as a franchisee kills a relationship when that happens.
That’s what I mean by compliance culture. People not thinking about what’s in it for their franchisee in the forefront and thinking about their own ideas first, and then whatever happens happens. They bought a franchise because they wanted to follow a system. I don’t know a single owner that would tell you that that’s why they bought a franchise.
They bought it to be in business for themselves and to create all of the benefits that come with entrepreneurship, and the American Dream of owning a company. That creates this interesting dynamic that isn’t always logical.
It’s an emotional thing. What I find with younger buyers, and I think we should probably spend some time talking about Gen Z buyers and younger buyers. Now their whole value proposition of why a franchise is smart to buy is changing. I find that they’re interested in the professional development part of a franchise. They’re interested in what the franchise can deliver to them more than the actual financial performance. Most importantly, I hear people talk about running a business because they’re surrounded by influencers on. You go on Instagram, TikTok, or any of the real stuff. It’s one more smart business person after another doing Gary Vee-style marketing and sharing a lot of valuable content. I do it myself. I think it’s helpful.
What they hear is that running a business is hard and lonely. Running a franchise is the opposite of that. It’s a social network version of a business. You’re in a community of people doing exactly the same thing. There’s something to be said for a team sport version of business where you and your teammates go out and conquer the universe as a team, do high fives, have parties, goof off, and get swag. It’s fun. There’s a fun component of running a franchise. In the startup, you don’t have that business saying that the pioneers in a segment get slaughtered and the settlers prosper. Franchisees are the settlers they come into an established space and don’t have to bootstrap it or figure all the hard stuff out. It can just run at a rapid clip. It’s a beautiful thing to watch.
Gen Zs are the future of franchising. It’s a segment of franchise owners that are underserved and overlooked.
In the last three years, they’ve made up about 30% of the people I recruit, but they’re 60% of my top performers. They outperform middle-aged guys like me, 3 to 1. This is going to sound silly, but when you’re my age, you don’t remember what you did in your twenties. It’s a hazy ten years of bad mistakes, relationships, bad ideas, bad hair, bad clothes, and bad everything. It doesn’t matter. You can screw up massively in your twenties, and there are no real serious long-term consequences of that. If you don’t, you’re not afraid to fail. Not that failure is an awesome thing to endure but this generation has a different idea of failure. If you’re not failing, you’re not trying. You should learn from every failure and that’s how you swing the bat.
It’s the Babe Ruth rule. He got the most home runs, but he also had the record the same year for the most strikeouts. We don’t talk about the strikeouts. If you’re unafraid to fail, you probably won’t fail with franchising because it’s much of a higher success rate overall. I think they look at franchising as this social community part of the business. It’s a fast track to entrepreneurship for a lot of people. That’s new in franchising. That’s not the way people have ever thought of franchising. They think of it as some weird multi-level marketing spinoff or some hidden society where there’s a huge agreement, and everybody is living. They don’t understand what it is. You get into it and you go, “This is pretty cool.”
I love what you said relating to Gen Z franchising. It’s the social networking of business. I’ve never thought of it that way. That’s a neat way to think about it.
The reason that businesses fail. If you’ve run a business, it’s lonely. When we first met, you were telling me about starting your business in your mom’s basement or something. I thought you were joking, but you were serious. You literally started in your mom’s basement, which is an awesome story in itself. It’s lonely. You have to have balls of steel to do that. It’s not an easy thing to go against all the negative feedback you get as a founder or an entrepreneur and to go into franchising and not have any experience in franchising.
That’s a tough learning curve. It’s not a quick thing. The reason franchise systems go out of business has more to do with the founders can’t get through the learning curve. They can’t even understand the stuff we’re talking about in this conversation. One of the things I’m really committed to professionally is trying to help people avoid that dip because it is possible for people to learn the stuff we’re talking about.
As a founder, you have to let go and go on mute. Everybody in the organization’s favorite moment is when you go on mute.
I haven’t listened to it as much as I should, but I hear it. Gen Z has this idea. I don’t think they want to work in a traditional job. I think the idea of working 40 hours in an office, they equate that to having a phone call with somebody. I have 6 six kids and 4 of them are Gen Zs. They don’t talk on their phone like a phone isn’t for talking on. They’ll talk to their parents if they have to, but they use the phone to text and communicate visually with videos, Snapchat, and all that stuff. If you ask them to talk on the phone, that’s a painful experience.
They don’t understand. It’s like writing an email, “Why do I have to write an email? Why can’t I just text you?” Their form of communication is different. I think they don’t want to work in an office for the same reasons. The idea that you’d give up 40 hours your entire week to sit in somebody else’s office and do what they want you to do seems like not worth the pay on the flip side. Whereas running a business or multiple businesses, which is what I see a lot of them do, and having several side hustles seems like the preferred path. They can get to $100,000 of income much quicker that way than working their way up through the ranks and paying their dues because they don’t see the reason to do that anymore.
Anybody who’s got any skills can go out and make $70,000 or $80,000 in the market. There are many options for people. Where franchising shines is we have this ability to attract people. I call them jobs are for the losers generation. Every other generation was taught that you have to have a job. You have to go to college. You have to do this and that. They’re like, “That’s a bunch of crap. I would much rather go work with Nick and learn how to run a painting crew, learn how to market and manage people and learn how to build a leveled-up business. That would be much better. Who wouldn’t want to do that?
Chatting with you makes a lot clearer why founders and franchise organizations struggle to get through the learning curve of being a franchise system. It is hitting me that we talk much about being in business for ourselves but not by ourselves. That’s many times put in the context of a franchise owner. It’s very rarely put in the context of a franchisor, founder, or leadership group of a franchise system. What we’re talking about is growing that muscle. I joked and said that when the leadership team goes on mute, it eliminates that top-down. The foot forward of the franchisor is creating that community of we’re in business for ourselves but not by ourselves.
That social network, all too many times the leadership group behind a franchise system doesn’t participate or minimizes the ability to participate in being in business with other business owners. That clearly creates a lot of frustration. Frankly, initiatives are developed without the franchise owners in mind. In your example with the coffee franchise, you had done all these work boots on the ground and their best beta was what you had done with the menu. They independently built a menu that probably was not baited over a period of time, data captured, and ran amongst a few locations before standardizing across the system. Rather, they worked it out amongst themselves and then came to you and other owners and presented this new way of doing business.
The whole time, your hands are up like, “I’ve been working on the same thing directly in my market with the clients and there’s real data here that’s leading to growth,” but yet there’s not an ear or an infrastructure to allow for that collaboration, that feedback loop. Much of McDonald’s menu was created by franchise owners. The breakfast sandwich was created by McDonald’s franchise owner. You look at breakfasts in fast food in general, McDonald’s was a huge influence on that. Behind that was a franchise owner.
It’s the secret sauce of a franchise organization, but it’s creating the infrastructure to do that, innovate the beta, isolate innovation, get that properly documented, and beta tested out and let the numbers and the data speak for themselves to have the owners be aware of that process that’s being led by the franchise owners but facilitated by the Home Office.
You have that collaboration there where you have the Home Office keying up and organizing the hands and feet behind the work, but it’s out in the field. The franchise owners are that collective genius, but they don’t have the extra time beyond running their business to create the infrastructure and beta and facilitate. That’s where the Home Office brings a tremendous amount of value. It takes some time for a franchise system to develop all that and get in stride culturally system-wise, department-wise, and people-wise. There’s a lot to it. It doesn’t happen overnight.
If there was one takeaway from this conversation for new franchisors, what you articulated is perfect. As a franchisor, you have to lead with initiatives and make a clear transparent business case for everything you want to do. You have to get buy-in from franchisees before you throw in the lever. That means you have to have a beta, not just the marketing guy’s idea or the operating guy’s idea, not just an idea in a corporate store that is not run by a franchisee. You have to test things in a franchise environment somewhere.
I’ll always get at least three volunteers and say, “We’re going to experiment with a menu and we’re going to try three versions of the menu. We’re going to get people to tell us what does and doesn’t work. We’ll subsidize the cost. We’re going to look at the data after 120 days and see which one is the winner and we’re going to talk about it. That’s what we’re going to use to define the next version of our engineered menu.”
Everybody likes that. No franchise owner is going to get their feelings hurt or feel alienated or pissed off about that because you’re being inclusive. You’re being transparent and nobody has got an agenda other than we’re here to help you reach that goal that you want of higher revenue, higher margin, more popular menu, or whatever it is. That could be any system in any franchise system.
That set of steps, people rarely follow and it’s easy to follow. It’s not hard to ask. They want a seat at the table. They’re in the business all day every day. They want to help you pilot things and experiment with stuff. I’ve never had a franchisee turn me down. On the back end of that, I get a brand champion for the initiative that says, “I did this. It kicked ass.” I’m like, “Everybody should be doing this. Here’s my data. Here’s what I did. Here’s the step-by-step.”
I don’t even have to push it. It happens organically because it’s like a viral Facebook post. It’s the social media part of the business. What a great lesson to teach if we could teach people that as a franchisor. I think that one misunderstanding of the corporate people leading initiatives is what does tons of relationship damage. I see it at franchise conferences as a supplier. I’ve been to hundreds of franchise conferences. My advice for people is that if you’re going to have a two-day or two-and-a-half-day conference, limit the corporate staff to three hours or less of presentations.
Maybe the first morning have a State of the Union and the marketing stuff, “Here’s what we’re going to do,” and have a guest speaker, and then shut the hell up. Let them run the show and facilitate dialogue. The feedback you’ll get is, “We had to listen for a couple of hours to you guys, but that presentation on how to sell painting is amazing. I love what John Doe did about his and his market.” You know they get on the edge of their seat. You’ve seen that in your system too. People get excited about sharing what their wins are. You got to create a platform for that. It’s a people-first corporate-second kind of idea. It’s the opposite of American business.
We’re clearly talking about what creates high-performing franchise owners and franchisors, and franchise systems in general. This is all communication and relationships in businesses about people. This is the franchise business model, the relationships and cadence that create a successful relationship that leads to a performance culture. Another part of this that leads to success and is important to long-term sustainability is marketing. I wanted to know from you because this is something that you do well with your brand journalist background. What would you share to give the audience some context about the marketing support that you do for your franchise owners?
That’s such an important point, and it gets left by the wayside. I believe that if you’re going to charge somebody royalties, you need to justify the royalties you charge in terms of the positive marketing momentum you’ve delivered for the franchisee. I found early on in my career twenty years ago with the franchise award that if I could go to franchise X and say, “You spent on your royalties $2,000 this month, but look through the marketing systems and the ad fund, and what you did and what we’ve done for you with the local website. You got 77 leads this month, which equated to $30,000 worth of sales in that particular business. Isn’t that awesome?”
When you present data that way, nobody minds paying royalties because it’s a clear ROI on it, but if you won’t take the time to lay out the pieces, in the case of all human nature, in the absence of information, we make up the worst case scenario. Every franchise system will get to a point where the franchisees are solid. It’s all about them. They’re doing it by themselves. Maybe they’re not at all doing it by themselves. They have no clue what they’re doing, but in their mind, they’re not supported.
I think marketing and operations today have melded together. In a service brand, we are marketing businesses. Marketing is very essential. It always perplexes me when I see franchise service brands and franchising that have no internal marketing staff and no systems and no structure. They just dump a lot of stuff on outside vendors or tell people to go figure it out themselves. You bought a franchise to have some standardization and better marketing. It is the thing that perplexes business owners. It’s the reason most independent businesses fail. They can’t get a handle on it. Why would you think of somebody in a franchise system?
I talk to people all the time. I’m amazed at the poor quality of internal marketing systems, but you have to have average marketing systems that will get an average franchise owner to have average unit performance. That’s the minimum. That’s the price for admission as a franchisor. I can say that with confidence. If you don’t have a viable model, you’re going to have churn and then you’re going to stop growing. What do you think about that?
Leads are the oxygen behind a business. No matter what your conversion rate is, whether it’s 1% or 90% or probably more realistically 30% to 60%, whatever your closing rate is, you’re going to close jobs at whatever your conversion is. As a result, you need more leads because it’s going to create more revenue which is going to create more bottom line.
We could have a whole other podcast on marketing tactics and strategies. That would take a whole hour, but we’re going to run out of time, but it’s been a good conversation. I hope people listen to this conversation because this is valuable information for a new franchisor for sure.
If you were to give a single tip on marketing, what would that be?
Go where people are. That’s the thing. In our industry, we are not as nimble as we should be. If I think about what I’m doing on marketing with my systems, we’re doing lots of explanatory short-form video advertising. I have people go out and document a job every week, at least one job. I prefer you do it every day, but at least once a week, go out and document a dryer vent job with your camera. Have your tech do it. “Here we are in front of the house. Ms. Jane called and her dryer stopped up and says it was not working.” We look behind the dryer. “Here’s what it looks like.” We show the camera inside the line. We show it’s full of lint. “Here’s what we took out. Now, it’s running great and clean.” We do a whole little 60-second narrative of a typical visit. We do a voiceover on it. We put that on our channel. It gets viral and got organic traction as it is.
You can turn that into an ad and the ad is real legs with it. If I was doing painting, I would be doing that about tips to look for a new good painter in Franklin, Tennesse, where I am. What should you be looking for? Here’s what we did and look out for this quality of paint.” It was in a 60-second video. It can show a lot of pointers. People love to watch the journey of a job from start to finish. If I look at the closet business, we do that with our closets. We do before and afters and explain the problem. We show what the closet looks like and then put back together the polished product that looks beautiful. We get thousands of views on those and turn them into ads.
My competitors in that space are still doing Valpak, paid searches, and home shows. I don’t ever even come across those guys in the market. There are fifteen under-closet companies in Nashville. My wife runs a local one. We’re in a sea of people that are talking about us. It’s awesome. That’s because you have to stay where people are and they’re looking on social media. Your phone listens to you because you probably have a microphone enabled for a bunch of apps. It knows what you’re talking about. The ads that you create, suddenly, you can get intentional in who you’re targeting. We had good creepy is what I like to say. It’s beneficial for the business and it’s helpful to the person that’s looking for it anyway.
Good and creepy, but transformations and how-tos on social media, the takeaway is you have to capture and document. Get into that rhythm. Ideally, do it daily, but at least do it weekly. Create a cadence for yourself where you’re using your cell phone to capture transformations and how-tos, and getting in front of where people are, which is on their phones on social media.
There are these tiny microphones that go on your cell phone that you can carry with you all the time. We do it for franchise recruitment. I do short-form videos for franchise recruitment, and they’re very effective. The streams of relative information where people can get to understand what you do is like testimonials on steroids.
If I see ten houses in and around my community from a vendor who clearly knows what they’re doing and has beautiful vans, and the people are professional, and the customers are happy, and the houses look correct, and I can go drive by the house and see it myself, I’ll get that business because nobody else is doing that. I think that’s the future. That’s a dramatic shift in how we develop marketing systems. It’s good for us that we’re a little more nimble. Thankfully, my competitors aren’t as nimble. We’re on a mastermind group with JTs. He’s one of my competitors in this space. I always keep my mouth shut on that call when it comes to that. Don’t tell.
Keep that one low there.
Everybody will learn how to do that at some point, and then it’ll be onto something else. I think you have to go where people are and you have to look for the underutilized marketing strategies. That’s something the franchisors should be doing all the time. That’s a huge value-add for us. You should be looking ahead always and be aware of what the changes are. You can affect change on a global scale much faster than a traditional startup company can.
The tension is constantly shifting wherever that medium is. As a franchisor trying to evaluate, “Where’s our best ROI for the most amount of attention,” that is social media and short-form video, but you have to get into the cadence of creating that organic content. It’s simple. You can get on a phone and do it. Thomas, this has been an incredible conversation. We’ll have to do this again. We could spend an entire episode on social media alone. You’ve done such a great job of building your brand and sharing much information for free online. If people would like to reach out to you and learn more, how can they do that?
HomeRunFranchises.com is our website. You can see me on LinkedIn @ThomasScott, TScott@HomeRunFranchises.com. I’m on Instagram and TikTok. You can find me in all those places. I post videos every day with this content. It’s personal branding. It’s been a lot of fun. I encourage people to do more of that. Thanks for having me. It’s been an awesome conversation.
It’s been a pleasure. I most certainly have leveled up. I hope you as well. Until next time, take care.
Thomas is a career student of franchising. He’s operated at many levels of franchising including franchising nine franchise brands – Showhomes Home Services, Founder of The Lighting Squad, Up Closets Custom Closets, Dryer Vent Superheroes, Lifestyle Window Films, Dryer Vent Squad, Clozetivity, Frost Shades Window Films and Magnetainment.
He has been a multi unit owner in 5 franchise systems and his units were the top performing in each. He started and still operates Brand Journalists, the leading Franchise Development marketing supplier to the franchise industry. Through his brands and his marketing companies, he’s grown over 380 franchise systems and helped recruit over 12,000 franchisees.
Thomas focuses on creating opportunities in the niche home service franchising segment. He is a huge proponent of DEI and helping younger entrepreneurs find affordable paths to franchise ownership. Thomas is on the advisory board of the Titus Center for Franchising at Palm Beach Atlantic University, where he has served since the program’s founding.
Thomas was a journalist before franchising and is a master storyteller. Skilled at franchise sales and development, franchise operations and support and franchise marketing.