Rich Potter: How Franchising Gives Trapped Entrepreneurs a Proven Path to Freedom

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Good morning, good afternoon, good evening wherever you are in

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the world. Today we've got Rich Potter who is going

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to tell us all about franchising. Welcome to the podcast,

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Rich. Thanks for having me. I'm excited to have this

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conversation with you. Franchising, that's a big subject, right? First

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of all, take me back. You told me nine years

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ago you started on your own, working for yourself. Tell

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me that story. Yeah, it actually took about three years

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to get there. So about 12 years ago I was

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a sales executive working for an electronic component distributor. My

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largest account at the time. The company got bought out

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by a company in India and I was worried that

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about 60, 70% of my commission was going to disappear.

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They were going to move all production to India where

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it was cheaper and I was going to lose that

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account. I relied heavily on my commission and that being

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my large account scared me. So I went home from

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work, I told my wife about it and we decided

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that we should start a side gig, a side business.

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So we started looking around on Biz by Sell and

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Craigslist and just everywhere we could just get some ideas

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because we've wanted to start something, we just didn't know

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what. We found a photo booth company for sale in

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Phoenix, Arizona, which is where we live, and we started

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looking into that. We ended up not buying that business,

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but we liked the idea so much that we started

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a photo booth business. I reached out to my dad,

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I got a $10,000 loan from my dad, bought a

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photo booth, created a website and went to it. That

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quickly turned into a second photo booth after about three

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months and then a separate division in that event business.

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We started doing bubble soccer rentals and within a year

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we launched an E commerce business. We were doing those

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two kind of together, building that up over the course

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of about three years until it finally overcame what I

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making up my job. So decided to leave and went

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all in full time. And that was about nine years

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ago. I've been completely self employed for nine years. We

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still have that E commerce business, still great business for

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us. I have an office manager that pretty much oversees

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probably 95% or more of the day to day. We

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sold the event business about two and a half years

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ago. We had a six figure exit. It didn't really

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fit our lifestyle anymore. All the weekend events. We were

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doing a lot of weddings and birthday parties and different

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things. It didn't really fit with my kids getting bigger,

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wanting be there with them on the weekends, in the

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evenings. So we sold that and I started what I'm

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doing now full time with franchise consulting. Been doing that

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for two and a half, almost three years. I've owned

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a couple franchises myself in the past. Actually just sold

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my franchise this past weekend. Closed on that. So, yeah,

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I love it. I love the support of a franchise,

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the systems. When you go into franchising, your odds of

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success are a lot higher than trying to do it

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on your own because of all the support and the

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training. I'm a big fan of that. I've done both.

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I've done a couple of startups, I've done a couple

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of franchises. And you can definitely see a difference in

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franchising with the support and stuff that comes with that.

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I love entrepreneurs. I think entrepreneurs are the greatest people

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in the world because we see a problem in the

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world. Right. How many other people see these problems? How

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many people have you come to you, they got a

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great idea for you. Right. But they don't do it

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themselves. Right. No one takes that step. Yeah. I saw

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some stats the other day. Something like 2% of people

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in. In the world will start a business in their

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life. Wow. Yeah. Yeah, that's crazy. I didn't realize it

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was that low. Yeah. 10 to people will start a

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business in a year and all that. 1% of people

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that sold a business, most of them will fail in

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the first year. Yeah. Yeah. So that makes successful entrepreneurs

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a very small minority. And yeah, you're doing this with

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your wife and you've been married for a long time.

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21 years, did you say? Almost. Yeah, it'd be 21

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in July. Yeah. Well done. And yeah, one of the

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things that I've really found over the years with entrepreneurship

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is that it's actually quite lonely. It can be. No,

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you're absolutely right. It can be. I have to make

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an effort to stay connected with my friends, my buddies.

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Wife's always pushing me. I need to go out with

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the guys. But it can be lonely. Yep, for sure.

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And it can be lonely for a couple of different

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reasons. You can keep your friend circle. You can do.

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If you have the capacity to do that. And that's

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a big problem is capacity. Yeah, you can do that.

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But even with your friends and your family and your.

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Obviously with your wife, it's different, but you can't have

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the same conversations. Right. You don't get the depth of

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the experience that you're dealing with. Oh, I've had this

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client do this or I don't know how to deal

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that with that problem. And yeah, that's one of the

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things that I'm spending a lot of time on now

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is how do I build the communities around entrepreneurs that

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can have real conversations about stuff. Right. Because it's so

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difficult to find that you got a networking events and

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you think you're connecting with people. You are, but you're

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not connecting with entrepreneurs. Yeah, it's a pretty good point.

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Most of my buddies are not business owners. We can't

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have the conversations you can have with other owners, other

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entrepreneurs for sure. And I guess that's something from another

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franchise point of view that you tap into a bit,

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right? Absolutely. The best franchises out there are going to

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have Facebook groups or discord groups or they'll have a

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way to connect, stay connected, swap ideas, swap best practices

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and stay in touch people who doing the same thing

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as you, the same business, the same brand in their

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market. So yeah, there's a lot of good networking within

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franchises. Awesome. So where

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does it go now? Right, where does the world go

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now? Yeah, we're now at a different place. And I

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like what you're doing. I like the idea of slot

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machines and photo booth because that's quite a physical hands

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on product. Right. What about AI? Where do you see

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AI taking over as world of entrepreneurship of us? It's

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such an unknown. I don't think we've ever seen anything

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like this. And we're entering a world where mass layoffs

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are becoming very common. That desk job I think is

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quickly disappearing. But I think what's not disappearing is the

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trades. I think the people that survive this have specific

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skills that can't be replaced by AI. And I think

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business ownership is one of those things that I think

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is going to be protected in a lot of ways.

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But certain types of businesses will last better, weather the

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storm better than others. I think home services will last

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and continue to be one of the best industries to

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get into. I think it's a very long time before

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that Tesla robot shows up at your door to fix

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your plumbing issues or to work on your H Vac

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and jump in your attic. Right. That's going to be

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a human person that does that for a long time.

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The owner of that business is protected, but the workers

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as well. So I see AI now creeping into franchise

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space. You've got those AI agents that can be created

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that can help that business owner respond to phone calls.

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Those agents can do right. They'll replace a ton of

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employees and make it so your business is leaner, more

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profitable. Business owners should definitely lean into it, not be

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afraid of it. It can really help out in the

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franchise space. I think we're missing a trick. If you've

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got 10 people in your company and 10 people in

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your company are doing 70% of the work they don't

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like doing and 30% of the work that they do

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like work doing. Quite often that work that they're doing

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is this ability to connect as humans. It's ability to

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have these deeper connections, it's ability to spend more time

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with the customers. It's ability to really go out and

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have the meetings and do the things that life has

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got so busy that we don't do it anymore. And

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this should be the opportunity that business owners lean into.

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I've got three IT companies. If I can have somebody

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working for five hours a day and doing 10 times

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the work and enjoying their life, wouldn't that be a

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better thing to do? Oh, absolutely, yeah. That's the world

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we can go into. Yeah. I hope that's the direction

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that this takes us. Right. There's no reason that we

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need to be working as hard as we are now.

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We can become more efficient and if we can change

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the culture to where six hour work days or four

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hour work weeks or whatever is more common because we

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can get the same amount of work done in that

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time with the help of AI. Right? So hopefully it's

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not that now we're doing five times as more work,

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working just as hard or harder. Hopefully we can step

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back and have a better work life balance with the

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technology that we're seeing. And I think one of the

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stats that really I'm all statistics today. One of the

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stats that I saw the other day was 62% of

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business owners are now struggling with AI burnout. And I've

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worked out why it is. Right? Because the way our

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minds work is I see a problem and I'm like,

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okay, I can fix it. Then I see another problem

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I cannot fix that. We walk around looking at these

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problems in the world we can fix and we've had

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this list in our mind of all these problems we

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want to fix for so long. Now AI has come

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along and it's like giving us solutions to all these

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problems, right? But it's not giving us the ability to

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deliver them because ChatGPT has got 5000 threads on it.

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Your quotes got 5000 threads on it. And that's going

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to change over time. But we see all this opportunity,

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right? And the biggest trick in my wheelhouse at the

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moment is what's the problem I'm trying to fix? Yeah.

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What's the actual problem I need to fix for my

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Business right now. Not the shiny and by the shiny

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shit. As soon as we chase it. Oh, I've got

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this great idea. I'm going to go and do that.

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Yeah. How do you think we manage with this? The

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overwhelmed piece? Have you seen it much yourself? Yeah, I

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deal with it myself a lot. I think that's something

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that entrepreneurs deal with constantly. Not only is it a

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lonely world, sometimes it's tough. Right. Running businesses is not

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easy. And that burnout's real for me. Having a

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routine in the mornings with my intentional meditation practice and

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my walk. I do that stuff to set my day.

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Give me some me time. I'm not, I don't. I'm

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not that guy that spends two hours on the morning

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and does the sauna, the cold plunge and all of

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that stuff. And then like, I don't begrudge that. That's

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great. I need 30 minutes, I need 45 minutes. A

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little meditation, a little walk, my coffee and then I'm

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off. But there's definitely things that we can do to

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help with the burnout. I don't know the solution to

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it. It's real. I think it just takes a little

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bit purposeful action to work through it. For me was

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understanding that I have to look after myself because I

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can't do nearly as well. But once you can tie

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your own wellness to your profit, then you tend to

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put more effort into your own as well. Yeah. I

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think another thing is making sure that you're aligned properly

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with the type of business you're building. And that's something

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that I am very intentional about when I help my

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clients to look at franchises is before we ever look

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at any brands or any industry, I really want to

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get a good feel for the type of lifestyle that

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they're trying to build around a business. Do they want

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to work weekends, late evenings? Do they want something that's

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more semi passive that they can hire a manager to

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do A lot of? There's a lot of making sure.

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Are you the type of person that is more of

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a hunter or are you a gatherer type of person?

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Right. A lot of those IT professionals that I work

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with are more of that gatherer mentality. They're not super

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out going. Right. And they wouldn't fit very well with

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a sales heavy franchise. Those are things I just need

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to know up front. So I'm not showing them that

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franchise that's you're now B2B sales super heavy, which won't

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fit for that person. Right. So I think when you're

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not properly aligned Mentally, with the business that you're

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in, whether it's a job or whether it's business ownership,

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that will definitely lead to burnout pretty fast as well.

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Yeah. 100. I think that's what happens in a lot

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of cases is that people have an idea, they make

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a bit of money on it, and they're doing it

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for the money. They're not doing it for the passion

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or the vision. I do what I do now. I'm

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actually more doing business, coaching the IT business. I'm busy

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exiting at the moment. I love getting in front of

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somebody and I love seeing the light in their eyes.

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Okay, yes, I can fix that and I can fix

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that and I can do this. They go from half

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a million to a million, loving their life again. Business

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owners deserve to live the life they love. We get

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into this for freedom, we end up in a prison

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of our own making. I want to pick your brains

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about franchising because it's such an interesting subject. I've got

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a few clients that are probably on the other side

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of what you're doing now, but you will have done

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this in the past. So creating your own franchise. Talk

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to me about that. Yeah, What I do is I

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systemize. Systemize a business operating system. I don't know if

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you come across EOs or business operating systems. Yeah, yeah.

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I was previously in the airways coach and now I'm

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a BOS coach, which is an offshoot of that for

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smaller businesses. More cost effective, more manageable with AI, less

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structured. So you're a business owner, you've got a really

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good operating system laid out. You know what you're doing,

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you don't need to be there. That's a time to

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think about franchising. Yeah, absolutely. And that is something that

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I help people out with as well. I help the

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guy who wants to start a business get into franchising,

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but that person who's also developed a very successful startup

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business that can be franchised. So you need to get

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it to a point where it's profitable. You need systems,

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because the only way you're going to be able to

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sell other franchise territories and help those owners and operators

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become successful is if everything that's up here that made

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your business successful needs to be written down, needs to

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be in a playbook, you need to be able to

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deliver that. Right. Every franchise out there was launched by

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some operator who created a very successful business in their

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own market. They saw an opportunity, and rather than trying

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to expand through corporate locations, it made more sense to

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them to expand through Franchising. So they created the franchise,

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sold the territories, but now it's a totally different business.

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You need to have those systems and those trainings and

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that support. A lot goes into it, but it's a

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fantastic way to grow your brand nationwide. I like it

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better than trying to expand corporately because you can hire

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managers in different regions, different states. But those managers, they're

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going to quit, they're going to leave, they're not going

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to care as much as an owner. And if you're

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selling territories to people who own that territory and own

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that market, they're going to care about it a lot

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more. They're putting their own time, their own money into

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it. And you can create a pretty dominant nationwide brand

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by doing that. You're starting from nothing. You're starting from.

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You've got a business now, now it's running quite well,

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you've systemized it, you're making half a million a year

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or a year. At what point do you actually now

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need to think about franchising? Yeah, I would think at

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that point where you're starting to think about expansion, you're

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dominating your market. You've got all the systems in place

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and you're thinking about, hey, should I open up in

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that metro, the neighboring state or my brother in law

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came to me and said, hey, you should open up

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here. You get people starting to approach you to talk

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about opening up in other markets. I think it's a

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great time to think about franchising. I think it's very

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important that you're at that profitability state. You're not in

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that growth state still where you're trying to take over

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your mark. You're still trying to hit that roi, still

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trying to make profit. Don't do it then because you

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need to have everything in place at your location to

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show that it's repeatable in someone else's market as well.

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It's a totally different business. You're jumping out from operator

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to mentor now. You're trying to help people replicate it.

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And you need to hire because you're going to need

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to hire a lot of people with the support systems

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to the business coaches and franchise development reps and people

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to provide all of that support that you as a

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founder, you'll never be able to continue to run your

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corporate location and provide all the coaching and mentoring of

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your new franchisees. If you try to do it alone,

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you've got your operation operating. You take a millionaire, by

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my definition of running a business correctly is you can

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take three months off and the carriers are running. You're

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still growing. I like to call it bus proofing my

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business. Right. If I get hit by a bus tomorrow

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and I end up in the hospital for three months,

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will my business still be around when I get out?

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Exit ready? That's all. What are those kind of costs?

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Like give me a, you know, obviously it's going to

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be different for everything. Firstly to set it up and

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to get all those resources in place and then so

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that's on that side but on the other side is

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what's the payout? Yeah. So we partner with a firm

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that does a lot of it with us. So we

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have a lawyer that will create the franchise disclosure document.

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That is a 200 plus page document that explains the

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franchise offering. It has to be registered with every state

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that you want to offer your franchise in. There's the

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manuals, different playbooks that need to be written. We also

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get you into 12 different franchise shows across the U.S.

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the whole setup process takes anywhere from three to six

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months to get you up and operational be able to

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offer franchises. So it costs $65,000 to do that side

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of it. But then if you want to join the

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broker associations, I'm part of the franchise broker association. There's

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about 500 franchises that belong to it that I can

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represent to my clients. So if you want to get

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in front of brokers that are now helping you push

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your franchise, that costs money to be part of those

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associations to get in front of those brokers who are

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your lead gen arm. And then there's hiring. You do

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need at least an operations manager, a business coach, someone

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like that. So you have a probably a six figure

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salary that you need to bring on to coach and

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help. I would say you got that $65,000, you got

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at least that one six figure salary. It's probably 150,

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$200,000 launch project to open up a franchise. Right. But

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then you're charging anywhere from 40 to 60 thousand dollars

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:: 18:19

per territory depending on what you let's average right now.

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:: 18:23

So the franchise fees that you're charging should cover

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:: 18:28

your operational support. You saw a couple of those and

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:: 18:31

you've got your, is that a one off fee. So

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:: 18:35

the franchise fee itself is just a one time upfront

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:: 18:38

and typically the way a lot of franchises will do

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:: 18:40

it is they'll charge 60,000 for that first territory and

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:: 18:44

then 45 if you want a second, like a 30

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:: 18:47

if you want a third. So it does get discounted

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:: 18:49

if you buy more locations. But if that's the one

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:: 18:52

time and then there is that royalty, usually somewhere between

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:: 18:58

5 and 8% royalty and that's off of your top

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:: 19:02

line revenue. So you will have that royalty coming in

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:: 19:05

to help support operations as well. So you're looking at

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:: 19:09

selling five of those and then you're sliding to. Then

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:: 19:12

you're starting to make money. Yeah, those first few, you're

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:: 19:15

not going to make any money on that. That's just

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:: 19:16

going to cover all the expenses, hopefully get you to

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:: 19:19

a break even point. But once you're like 5, 10

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:: 19:22

plus, you should be generating enough money to start hiring

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:: 19:25

a great support team and really build out a good

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:: 19:28

operation. Some of the best franchises I've seen pre hired

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:: 19:31

all that stuff. They took a risk. They hired three

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:: 19:34

or four people before they ever sold that first franchise

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:: 19:37

location because they knew they wanted that proper support in

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:: 19:40

place before they started selling. And now Vota cleaning and

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:: 19:44

restoration is one that comes to mind. They've sold over

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:: 19:46

100 territories in two years. They put operational support in

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:: 19:50

place before they ever sold a franchise location and it's

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:: 19:53

really paid huge dividends for them. And then I guess

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:: 19:58

you have that internal struggle of if I go and

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:: 20:00

do it myself, how much can I actually do? Yeah.

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:: 20:03

You mean not buying a franchise, just opening up the

387

:: 20:06

locations. Definitely save on the franchise fee itself. But then

388

:: 20:09

you're, you're trying to figure it out yourself. Right. You're

389

:: 20:11

trying to figure out the marketing, you're trying to figure

390

:: 20:14

out what works, what doesn't. I think in a lot

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:: 20:17

of cases you're going to get to profitability faster through

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:: 20:21

a franchise because you're going to be able to skip

393

:: 20:24

mistakes. You'll learn from someone who's already made those mistakes.

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:: 20:28

Do you have both elements happening where the main brand

395

:: 20:31

will go and open their own other offices in their

396

:: 20:34

prime locations and then sell franchises in others? Yeah. There

397

:: 20:39

are plenty of franchise organizations that are still expanding through

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:: 20:41

corporate locations too, as selling franchise locations. Yeah, that seems

399

:: 20:46

like a sensible way to have both sides of the

400

:: 20:49

pie. Yeah. You'll see franchises that have 10 plus corporate

401

:: 20:52

locations and then franchise locations. Some of the real successful

402

:: 20:56

ones, they had 20 corporate locations before they ever sold

403

:: 20:59

franchises. Everyone has a different approach. Then you have those

404

:: 21:02

at one location. Then they operate some, sell that corporate

405

:: 21:05

location to a franchisee, have no corporate locations and just

406

:: 21:09

manage the franchise. They feel like they're better at helping

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:: 21:13

people launch and grow than they are at running their

408

:: 21:16

own corporate location. There's several different approaches to it. Yeah.

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:: 21:20

Cool. I think I should become a franchise coach. I

410

:: 21:23

think you should. Yes. The basic assignment, not the selling

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:: 21:27

side of it. Cool. And what's next for you? Where

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:: 21:31

are you taking it? What's the next big project? Like

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:: 21:34

I said, I just sold my franchise. I'm in Phoenix,

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:: 21:37

and I owned a franchise up in the salt lake

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:: 21:39

territory with my brother. We only owned it for about

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:: 21:42

a year. Launched it. It became really difficult for me

417

:: 21:45

to travel up to Utah as much as I thought.

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:: 21:47

And my brother's job took a lot of time, and

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:: 21:51

we figured we weren't going to be able to grow

420

:: 21:53

it as big and as fast as we wanted. So

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:: 21:56

we decided to exit. We made a good exit. We're

422

:: 21:59

happy with what we got for it. Now I spend

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:: 22:01

most of my time helping people get into business through

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:: 22:03

franchising. But I think my next project, I want to

425

:: 22:06

build some legacy businesses for my kids, especially my 16.

426

:: 22:10

She's finishing up her sophomore year. She wants to go

427

:: 22:13

get a job, but she sees that I don't have

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:: 22:15

a job. We're actually going to start a local vending

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:: 22:18

machine business and create small routes and micro businesses for

430

:: 22:23

my kids so that they can learn how to operate

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:: 22:26

a business and learn how to get new clients, how

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:: 22:29

to fill these machines, how to track inventory, and that

433

:: 22:33

way they don't have to go flip burgers. They can

434

:: 22:34

make more money than their friends just to fill in

435

:: 22:36

these vending machines. And the thing is, what a blessing

436

:: 22:38

that is for you. You're able to go now with

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:: 22:42

this entrepreneurial journey of yours and really make time for

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:: 22:45

your family in a way that you would never have

439

:: 22:47

been able to do before. Yeah, that's what it's all

440

:: 22:50

about, man. I love the freedom that being an entrepreneur

441

:: 22:52

has provided for me good income. But more than anything,

442

:: 22:55

you, ability to be here for my family. I work

443

:: 22:58

from home a couple days a week. I'll go into

444

:: 23:01

the office. I run an e commerce business. We still

445

:: 23:03

have a big warehouse. So I'll go in there and

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:: 23:05

operate for three days a week. A lot of freedom.

447

:: 23:08

I never miss anything important for my kids. I'm always

448

:: 23:10

there for it, which is the most important part. Just

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:: 23:13

to close off, you're thinking about franchising your business. What's

450

:: 23:17

the one thing you should think about? Other than speaking

451

:: 23:19

to you, obviously. Yeah, yeah. Reach out to me for

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:: 23:22

sure now. Just make sure that you've got the system's

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:: 23:26

in place to manage it. Right. Any knowledge that you

454

:: 23:29

have up here, it needs to be down on paper

455

:: 23:32

somewhere. It needs to be in some sort of operation

456

:: 23:34

manual. That's the biggest thing like being able to transfer

457

:: 23:40

your knowledge of how to build up a successful business

458

:: 23:43

needs to be transferable. That's the biggest thing. It needs

459

:: 23:45

to be replicatable in another market. If that's the case,

460

:: 23:50

then I think you're ready for it financially. You've got

461

:: 23:52

the money there to support that. Then it's a great

462

:: 23:56

way to expand your business and I think you should

463

:: 23:59

definitely consider working. When people start a franchise, they try

464

:: 24:02

to find their franchisees themselves and they'll struggle for a

465

:: 24:06

few years. Maybe you don't need to join the broker

466

:: 24:09

networks, but get in with a couple of brokers to

467

:: 24:13

help grow your system. You're going to have to pay

468

:: 24:15

someone like me a commission to do that, but it's

469

:: 24:18

going to help bring people into your system a lot

470

:: 24:20

faster than you trying to do it yourself. You're probably

471

:: 24:22

not that marketer. You probably don't know how to go

472

:: 24:25

find those franchise leads to buy a franchise. You know

473

:: 24:29

how to operate a successful roofing business, right? Stick with

474

:: 24:32

that and let the brokers like me help bring potential

475

:: 24:35

franchisees to you. That would probably be one of my

476

:: 24:38

biggest recommendations to the franchise owners. Thanks very much for

477

:: 24:41

joining us George. Wish your daughter very much luck in

478

:: 24:44

their vending machine operation. Thank you. I appreciate it. I

479

:: 24:48

provide a free service. Anybody who wants to look into

480

:: 24:50

franchising, whether you want to buy a franchise or whether

481

:: 24:53

you want to turn your business into a franchise. My

482

:: 24:56

service is 100 free to my clients. That consulting and

483

:: 24:59

coaching throughout the process. To identify that right business for

484

:: 25:03

you, just reach out to me franchiseheroes.com I'll put that

485

:: 25:08

on all the details as well. Awesome. Thanks Roy. That's

486

:: 25:11

good chat with you.