TDJ Equity Funding Insiders Podcast

#29 Franchising Decoded: The Truth Behind Business Ownership with Rudy Frederico

• A "How to Get Funding" Podcast • Season 3 • Episode 29

Share episode

Have you ever dreamed of owning a business without starting from scratch? The world of franchising offers exactly that opportunity, but there's much more to it than most people realize. 

Franchise consultant Rudy Farico pulls back the curtain on this powerful business model, revealing that franchising extends far beyond the fast-food restaurants most associate with the industry. With 34 years of experience and over 900 businesses launched, Rudy explains how franchising spans numerous sectors including healthcare, senior services, automotive repair, and countless other industries.

The statistical advantage of franchising is compelling. While 80% of independent startups fail within two years, franchises enjoy a remarkable 95% success rate. This dramatic difference stems from following proven systems rather than reinventing the wheel. As Rudy colorfully puts it, "Don't put shrimp on your Big Mac" – a metaphor for the importance of following the established franchise formula.

Many potential owners hesitate due to financial concerns, unaware of the various funding options available. Through retirement accounts, home equity, and other assets, franchise ownership becomes accessible without requiring massive liquid capital. The Franchise Disclosure Document provides transparent information about startup costs, ongoing fees, and performance metrics, allowing for informed decisions when paired with proper professional guidance.

The most successful franchise owners share one critical trait: coachability. They trust the system, follow the established processes, and leverage the support provided by the franchisor. For those considering this path to business ownership, proper research and guidance from experienced consultants like Rudy can make all the difference between struggling and thriving.

Ready to explore if franchising might be your path to business ownership? Connect with Rudy at FranchiseWithRudy.com or text "RUDY" to 26786 for a free consultation tailored to your background, goals, and budget.

Support the show

If you need assistance in obtaining funding, email us at podcast@tdjequityfundinginsiders.net. Tell what the scope of funding is needed and the amount. A broker will contact you to discuss your funding needs. And remember, at TDJ Equity Funding, we do not force your funding needs into a lender's box but find a lender's box that fits you!

Speaker 1:

Ready to get the inside scoop on equity funding? Tune in to TDJ Equity Funding Insiders Podcast for an in-depth look at what it takes to access financial capital and maximize your investments. Hear from experienced professionals, including bankers, underwriters, loan officers and industry experts, as they share their unfiltered stories and valuable lessons on securing funds.

Speaker 2:

Giving Power to the Business. Owned Webinar Series is a platform to educate business owners on the resources that may add value to your business Owners Education Journey. Welcome everyone. The secret world of franchising Ever wonder how it works? Have you ever thought about owning a franchise but stopped short because you didn't know where to start? Do you wonder how much money do you need to buy a franchise? What research should you do before signing a dotted line? If these questions have ever crossed your mind, you're not alone. Many people dream of owning a business without the guesswork of building from scratch, but they don't know where to find the answers. Today's show is the secret world of franchising with our guest, Rudy Farico. Rudy is a franchise consultant in a DFW area of Texas, but he works nationwide. He has agreed to meet with our listeners to discuss the ins and outs of the world of franchising. But first let's welcome Rudy to our show.

Speaker 3:

Good afternoon. Thanks for having me.

Speaker 2:

Glad that you are here, rudy, so let's start off with you letting us know a little bit about you before we actually go dive into this information.

Speaker 3:

Well, I'd be happy to. I'm not born in Texas but I've been here almost 30 years, so I got here as fast as I could. I've been in the franchise space 34 years. I've helped over 900 businesses get off the ground in my career so far and that's kind of a ballpark kind of lost count, but I spent my entire career in the franchise space and so what I've uh, what I've allowed myself to do is partly my experience today to help folks understand what a franchise is, how it works, what the obligations are, what you have to do, what they have to do, and um, and how it all works to the benefit of everybody. So I appreciate the time to chat with you and your listeners and answer questions and basically just educate folks on what a franchise is. I'm just a resource, just like if you want to paint your house, you get someone who knows how to put paint on the wall. If you're interested in business ownership and a franchise model, that's my area of expertise and I'm here to help.

Speaker 2:

Okay, wonderful, so we're actually looking for a great show and a lot of information from you, rudy. So you and I have talked before about the franchise business, so the question I have is something we already talked about, which is what are the biggest myth about owning a franchise? That most people believe, but it's not true.

Speaker 3:

The first, probably biggest. The biggest misconception, I think, is most people think franchising is fast food and while there are some fast food opportunities in franchising, it's not just fast food. In franchising it's not just fast food. There's lots of different verticals, from automotive services to medical services, senior care and senior placement, various retail establishments, all kinds of different things. Role is helping folks understand just what is available and how it might be a good fit for their background, whether they've got an IT background or just a customer service background or a sales background. Lots of great opportunities. Other misconceptions are oh, I don't have enough money to do it.

Speaker 3:

And most people don't realize that it's not as expensive as you might think and there's ways of leveraging retirement funds, insurance plans, home equity savings, investment accounts, things like that, all without penalties or taxation. If you know the right person to talk to, they can explain how it works, give you your choices and see what's in your budget. And then the last thing is it can be an overwhelming process. If you were to Google franchises.

Speaker 3:

there's 4,000 choices out there today and where do you start and so getting help from somebody who knows what they're doing, somebody like myself. There's 180 guys and girls in my company that do what I do around the country and around the world, and there are other companies who have people like myself who do this. So get yourself a trusted resource to help you navigate the waters and figure out if franchising is a good fit for you. If so, what type of franchise, how to pay for it, how to get legal help. All of those kinds of things are all things that I help people figure out and navigate that journey.

Speaker 2:

So they basically don't have to go in this thing by themselves. That's what you're saying. You're available with help out there to help them with the franchise.

Speaker 3:

That's exactly right, and the whole concept of a franchise is to be in business for yourself, but not by yourself. That's been a catchphrase in franchising for decades. We're taking it a step further. How do you get into the right franchise? And so my role is to help you figure out, because all the franchises out there will. They'll accept your money, they'll sign you to a licensing agreement and they'll teach you how to do their business. That's their role. And you follow the program. You'll do that and pay some royalties, and that's your role. Well, that's all great, but you also have to make sure you're in the right one, because you don't want to get bored with what you're doing. You don't want to check out on what you're doing.

Speaker 3:

You don't want to have it not work out, and so making sure you find the right fit is where I come in and make sure that you don't overextend, that you find something that you can actually execute and follow the program on and that you know might be a good fit for you and your family on a long-term basis.

Speaker 2:

Okay, great. So when you talk about that, the potential of franchises what should research be done before committing to a franchise? What type of research should we do before we commit?

Speaker 3:

So the biggest thing that you need to be aware of is, every franchise company has what's called a franchise disclosure document. We call it the FDD. It's an overwhelming document. It's anywhere from 150 to 300 pages, and I don't want to say it's legalese, because the Federal Trade Commission requires that it's written in plain English, but it's an overwhelming amount of information and so but you have to review it, you have to review it in detail, you have to understand it. You have to understand the obligation that you're getting yourself into before you sign the documents and before you write the check and so getting help whether that's a franchise attorney not just a business attorney, but a seasoned, knowledgeable franchise attorney to review documents and explain to you.

Speaker 3:

You may not be able to change much, but you need to understand what you're signing before you do it. There's also information in the disclosure about how the business runs. Validation is an important part. Talking to other franchise owners for the company or competing companies to understand really what you're getting yourself into. What does a day in the life look like? And if you don't understand that clearly, make sure you do before you make that decision.

Speaker 2:

Exactly. Okay, that makes a lot of sense. So people are now looking at and you know, as a loan broker, we have people coming in and purchasing business or they're acquiring partners or whatever the case. So those are now looking at and you know, as a loan broker, we have people coming in and purchasing business or they're acquiring partners or whatever the case. So those are considered independent businesses. So when we look at franchise, how can someone determine if a franchise is the right path for them compared to starting an independent business?

Speaker 3:

Generally, I answer that question by starting with some basic statistics. According to the Bureau of Labor Statistics, 80% of all new businesses mom and pop startups will be closed in 24 months. It's just hard. It's just hard to start your own business from scratch.

Speaker 3:

It doesn't matter how good the idea is, if you make great cupcakes, that's fabulous, but if you don't know anything about accounting and marketing and filing the DBA and registering trademarks and all these other things where things can go wrong, then you may stumble on some things or make a mistake that gets you in trouble. There's just a lot of things that can go wrong. The flip side is a franchise has a 95% success rate. That's. That's different, right.

Speaker 3:

So if I'm, if I'm, if someone has already proven the system, they've already shown me how to make the cupcakes, but they also show me how to do the accounting. They show me how to find my customers and what my marketing plan is. They also show me how to do the accounting. They show me how to find my customers and what my marketing plan is. They've got a brand around it, so you know some cool name or something that you know people can identify with, and so there's advantages to being in business for yourself owning your own piece of the pie, but doing it in conjunction with a system that you can follow.

Speaker 3:

And as long as you follow the program, your chances of success are significantly, significantly higher, and that's what franchising brings to the table.

Speaker 2:

Bring to the table, compared to you doing your own business. Great answer, great answer. So what are some of the most common mistakes new franchise owners make and how can they avoid them?

Speaker 3:

new franchise- owners make and how can they avoid them? The first is thinking that they know what they want before they talk through the process. I get a lot of people who come to me and they specifically want that famous chicken drive-thru place that everybody talks about and they think that that's what they want to do but they don't have all the information right. You and I had that conversation.

Speaker 2:

Right.

Speaker 3:

You knew somebody who was interested in that and I said, well, did you know, this, and did you know this? And did you know this? Oh no, I didn't know that. So now, based on facts, you can make a better, more informed decision. Okay, so research is important but, research doesn't mean Google, okay.

Speaker 3:

Research means talking to people in the business. Research means finding an expert, whether that's an attorney, to understand what kind of business entity you should create to protect yourself. An accountant to make sure that you set up the right entity for your personal tax situation and LLC. Everybody knows what that is, but a sub chapter S or C court might be a better fit for you, but you don't know that until you talk to someone who knows what they're talking about. Okay, another big mistake is people will go to legal zoom or some online service and form their own business entity Huge mistake right.

Speaker 3:

Too many loopholes in there. Your personal assets are still at risk. I would never, never, never, let one of my clients go form their own LLC. Getting overextended is probably the next biggest thing that you know they try to do too much.

Speaker 2:

Okay.

Speaker 3:

And so, uh, you know, temper the enthusiasm just a little bit. Make sure you set yourself up for success. Um, you can always grow more. You can always do other things. Um, you know synergistic businesses, um, but I think, at the end of the day, it's also being coachable. Um, franchise systems have a process. They figured it out, but I think, at the end of the day, it's also being coachable. Franchise systems have a process. They figured it out. They don't need you to fix it.

Speaker 3:

There's a certain way to make a Big Mac and that's what the customer expects. So don't be putting shrimp on your Big Mac and upsetting the customers. That's not how you do it. And even though you love shrimp and it might be delicious, that's not what the customers are looking for. So, follow the program, be coachable, buy into the system. You know, drink than people who think they can outsmart the system and and and find a shortcut or or find something else that they can do. That, will you know, make them more money faster, or whatever. Those, those people, are not going to be successful long term and those are the ones that end up, you know, uh, leaving the system early, for whatever reason exactly, and I know, uh, what you're saying on the franchise.

Speaker 2:

Like, for instance, people want to change some recipes. I don't think they realize that. We know you've changed the recipe, but you are a certain restaurant you know what I'm saying that you bought. So I see that can happen and it will add to the bottom line, which is the money you won't get what you should get if you're not doing it based on what they're giving you. So that's some great information. So what other hidden costs should potential franchise owners be aware of when they are buying into a franchise?

Speaker 3:

So in that franchise disclosure document that I mentioned earlier, there are two critical actually three critical sections. Every franchise disclosure has 23 sections. It doesn't matter what the franchise is, they're all the same. That's mandated by the Federal Trade Commission. So now it's helpful to find this information. Section six talks about ongoing costs. What is the franchise going to charge you on an ongoing basis for various services, royalties, marketing fees, technology fees, late fees? Anything that they can charge you for has to be listed in that document, or they're not allowed to charge that to you.

Speaker 3:

So if you want to know what's it going to cost to operate the business. It's right there in item six. Item seven is the startup costs. You got to look at those very carefully the franchise fee, construction, signing a lease, buying equipment, inventory, travel for training, setting up your corporation, setting up your books, marketing, spend, Everything that you need to be open to the public is itemized in section 7. And. And then there's besides that chart where it's all itemized. Then there are paragraphs afterward with explanations.

Speaker 3:

Read those explanations, understand those numbers and and and validate those numbers when you, when you're talking to owners, did it actually cost you $35 a foot to build your space, or $150 a foot to build your space, or was the equipment really this much, or were you able to get a deal?

Speaker 3:

Challenge may not be the right word.

Speaker 3:

Inquire as to where these numbers are coming from, what do they mean, what's behind them and what are the opportunities. Generally, a franchise is going to give you the low and the high number as to what it's going to cost to open their business. Keep in mind that that number has to be good in all 50 states. So if I'm looking at a franchise disclosure for a candidate in Texas, I know that that disclosure also is good in California and New York, which is probably more expensive to start a business, so it's not going to cost me quite as much. But Dallas is not cheap Dallas and Collin County and our area is starting to get up there in terms of cost. But if I'm in Birmingham, alabama, where cost of living is significantly less, I know that it's not going to cost me as much to open the business in that market than it would be in Dallas or Los Angeles. So we'll look at all those numbers and inquire and see what the real numbers are. Or section 19 of the FDD is where companies will share.

Speaker 3:

They'll share financial performance of their business, whether it's their company owned units or their franchise units that have been open, that are mature, that have been open for you know, at least a year or so, so that you can have some understanding as to the income that's generated by running this business. And usually they'll put up averages, maybe averages by quartiles or in thirds top third, bottom third. You know those kinds of things.

Speaker 3:

You really really, really want to dive into those numbers and understand where the money's coming from, how revenue is generated, what costs are then associated with it?

Speaker 3:

and build your own financial model right. Don't just say how much money can I make? I don't know financial model. Don't just say how much money can I make, I don't know. I don't know what you're going to do, whether you're going to follow the system or if you're going to go and push shrimp on your big net. I don't know the answer to that, so I can't tell you how much money you're going to make unless you go, execute the plan and have all the dominoes fall into place and the best you can do is a projection in your and then trust your gut.

Speaker 2:

Okay, so that sounds pretty good.

Speaker 3:

Go ahead and get help Review those numbers with your accountant, review them with your consultant, review them with your potential franchisor, review them with other franchisees. Make sure that they make sense.

Speaker 2:

That makes a lot of sense. Now I guess we got people on If you guys go into the chat and you can ask questions, and so Rudy is prepared to answer any questions you have. So just utilize the chat for that and then I'll actually ask him. So the next question we have is how important is location when choosing a franchise, and what is the criteria should be considered?

Speaker 3:

So every good franchise organization has a process for finding a location. Now let's back up. Not every franchise requires a location. Some are home-based businesses, some are home-based or a little warehouse where I have a trailer and on my trailer I've got a ladder and some buckets and I paint houses, and that's a franchise, so you don't necessarily need a storefront to run that franchise.

Speaker 3:

Those are franchises that you can be operational in 30 to 90 days after you sign a franchise agreement. If a franchise does require retail space, you're going to extend that time because it's going to take you six months just to identify the location, negotiate the lease and and secure the keys. Then you can build it right and so you might be a year before you're open, and that may be part of your consultation with someone like me how soon do you want to be in business? I want to be in business in six months. I don't have a job right now, okay. Well then, maybe retail is not something we're going to look at. I'm going to coach you through that process, right? Maybe we're going to look at a home-based business or warehouse based business or a trailer mobile business, anything like that.

Speaker 3:

You can be up and running in 90 days and you can be dog grooming, right, and that's pretty cool, right, and they'll teach you how to do all those kinds of things. Now, if your business does require real estate, then they're going to have criteria. They're going to look at their top performing stores. Their top performing stores have populations within a radius that support the business, certain income levels, household income levels, ethnicities, job types, whatever right and so they know what they're looking for.

Speaker 3:

Now they're going to go to the commercial realtor in your area or, if you don't have one, I have some and we're going to go to that commercial realtor and says my franchisor, Meineke Car Care Centers, says I need 10,000 square feet with four garage bays or a piece of land that I can build that on right and I can either rent that land or buy that land. But in a 10-mile radius I need 5,000 households of average income of $65,000 or more, whatever, whatever, whatever the companies have the criteria, this is what's been successful for them before. Again, follow the formula you don't have to go reinvent, reinvent. Oh, this, this looks like it'd be a great area. And if they say no and they have the right to say no- right they say no, you're missing the mark here.

Speaker 3:

Follow their advice. They've done this before exactly I've had franchise owners in my past pick their own location. I then go to the market to train them or whatever, and I'm disappointed that the location I look at it goes. I know, when I walk in the door, whether they're going to be successful or not.

Speaker 2:

Exactly.

Speaker 3:

I didn't know that was even provided location.

Speaker 2:

They help you find a location with some of them, some of the franchise will.

Speaker 3:

Yeah, most, most of them will and most of them have criteria because they want you to be successful. Here's here's. Here's something you need to know. If a franchise company has a franchisee who is unsuccessful and that business fails and they have to close their doors, they are required to put that in the disclosure. So the next new candidate is going to see that.

Speaker 2:

They go what?

Speaker 3:

happened to Jackie? Why did she close her store?

Speaker 3:

Well whatever, whatever, whatever, right. And if there's a whole long list of people who have closed their business, it's going to be harder for them to sell the next new franchise. So they're going to do everything in their power to make sure that your store never closes. They are motivated to make sure you are successful. Now, if you're not following the program and you just need to go away and sometimes that's the case if you just refuse to stop putting shrimp on your Big Mac then they're going to say, all right, maybe you shouldn't be a franchisor, and we're going to find a way to have you gracefully exit the system and go about your business. We're going to find someone else to buy your location and we're going to move you out of the system. And that's okay too, because if you're not going to follow the system, you're not going to be successful anyway. So, again, that's that's the best thing they can do, for you For you Okay.

Speaker 2:

So we have a question did come in from Patel and he's asking how much help does the franchisor help with connecting financing and operation support like vendors?

Speaker 3:

How much do they do in helping with that? That varies from company to company, but generally that's the single biggest thing that they do. So whatever it is that you're building let's say, a restaurant, restaurant needs kitchen equipment, needs tables, needs chairs, needs decorations on the wall, etc. Etc. Etc. Generally they're going to hand you a vendor book.

Speaker 3:

These are all the people you can buy your stuff from. Now one of the things you have to know is does the franchisor get money from that vendor as a kickback or a rebate? And if they do, they are required to disclose that in their franchise disclosure. They are required to tell you. So it's not a bad thing that they do that, but they can't do it behind your back.

Speaker 3:

Okay, so that possibility is there to provide, provide you vendors, contractors, credit card companies. Software for your accounting uh, where to buy your. Buy your tables. Where to buy your walk-in cooler. Where to buy your, your cutting boards. Where to buy your table saw.

Speaker 3:

Where to buy your step ladder all of that stuff is in the vendor list and it's itemized in the disclosure right. So where does that number come from? To build my business, stuff is in the vendor list and it's itemized in the disclosure Right. So where does that number come from? To build my business? It's in the disclosure. What makes up that number? Here's a list of the vendors. Here's all the equipment you need to buy. You add that up there. It is in the disclosure.

Speaker 2:

OK, great, that was a great question to Patel. Ok, anybody else have any questions? Put them in a chat and we definitely going to give them to Rudy, all right, so the next question what are some of the under the radar or emerging franchise opportunities that are gaining momentum in 2025?

Speaker 3:

QC Kinetics very popular brand, game Day, men's Health both big, huge franchise companies. Very difficult to get one of their locations or territories at this point. In fact, I think Game Day is sold out across the country now and they're just looking international. But it's medical health services, senior placement, anything in the senior space huge up-and-coming sector. The baby boomers, the last of the baby boomers, are aging into that sector. The millennials behind them are an even bigger group of people.

Speaker 3:

So finding a place for grandma or grandpa or mom and dad as they get older they can't be left at home. Those are great businesses where you're helping them find suitable accommodations or in-home health care, where a nurse or just a companion comes to the house, helps, helps clean up, have some chores, maybe takes them to the doctor uh, husband and wife might be working so they can't deal with all the stuff all the time. So they have in-home health care. Come take care of mom and dad and take care of some of those things so that they're not leaving the gas on or burning the house down or doing whatever.

Speaker 2:

Those franchises are something to look at. You said it's kind of taking off in 2025.

Speaker 3:

They have been for the last couple of years and I think and I think that trend is going to continue. There's lots of great brands to provide in-home health care as well as health funding placement in senior care facilities okay, it makes sense.

Speaker 2:

It makes sense what everything going on it does so and very, very simple business models to operate okay, great. We have another question from tj. How do we prevent overpaying for a franchise?

Speaker 3:

That shouldn't happen, since all the costs are itemized in the disclosure. But I think it's important to say all right, if I'm going to build this restaurant and they say it's going to cost me half a million dollars, me half a million dollars, okay, I'm gonna take, I'm gonna take that disclosure and I'm gonna go talk to a local contractor and say, all right, this franchise says I need a 2 000 square feet in frisco and that I should be able to build it for 250 000. Is that a legitimate number, right? And so don't know, don't, don't find that out after you bought the franchise. It's going to cost you 300 000. Right, ask somebody before you make that decision. Can I build this in frisco for this amount of money? Exactly, and know the answer to that? So the best way to uh, the best way to not overpay for stuff is to just ask questions.

Speaker 3:

And again, you know are there ways of getting some of this equipment. Can I get a used ladder to open a painting company?

Speaker 3:

Yeah, a ladder is a ladder, as long as it's not broken, whether you buy a new one at the big box or you buy a used one at a garage sale, it's a ladder, right. But you need a ladder to paint a house, so you can save a few dollars by doing that. But you can't really keep your way through that process either. Some stuff you just got to buy and that's just. It is what it is it is what it is.

Speaker 2:

that makes a lot of sense as well. Now we have another question, um, from patel how much do you sit on exploratory calls to choose franchises within the same industry? So what are we saying here? Patel, I can turn you on if you want, so you can kind of say your question a little bit more so you can expand. Are you OK with that? What are some industries to invest in over the next couple of years? So he said what are some industries to invest in over the next couple of years? Just raise your hand, patel, if you want to speak, ok, and then I'll turn it on.

Speaker 3:

So the question is what are the up and coming industries that I'm going to say are medical services senior placement, home services. There's always going to be demand for electricians, plumbers, hvac, those kinds of things, and there's lots of companies in franchising that provide required services. Right, because you know when, the, when, the, when, the AC goes out. You've got to get a fix Right so that doesn't go away. No matter what the what the economy is doing, People still need to get that done.

Speaker 1:

Then there's.

Speaker 3:

Then there's that remodels and renovations and things like that Lots of great construction companies. All of those do well when the economy is good. Do okay when the economy is okay, but do slow down a little bit when money gets tight. I'll put off doing the bathroom again another year, right, because money's tight this year. So when there's a choice involved those, um. But you know, remediation when the hot water heater breaks, your house floods. There's no getting around that. You need to take care of that today and insurance generally takes care of that. Hopefully, you know good insurance will cover those things. But those services are also very lucrative businesses right um and they businesses and they're not going away.

Speaker 3:

They're not going away anytime soon. A lot of people are talking about electric vehicles, vehicle charging, things like that. That's a real hot topic. I have some concerns about that. I think the technology in that space is changing so quickly that if you were to buy a franchise in that space today and open it in six months it could be different, and a year from now it may be so different.

Speaker 3:

I just don't know and I don't have a crystal ball, but I'm skeptical of those kinds of things and unless you have other inside knowledge or other background in that or just an appetite, that's something you've got to have. I have businesses that do that. I'm a little nervous about them, to be honest with you because, the technology is changing so fast that you could literally buy the franchise today, and it could be obsolete in a year.

Speaker 2:

And I can see that, especially when you're looking at the process it takes to get the franchise going and, like you said, six months, it might be a year. So I hadn't even thought about it until you said it. You're right, you have to look in the future of what it's going to be by the time you open. And you're right, there's a lot of change in that and I know someone in the chat mentioned don don't say ai, but ai is not a franchise or anything you think we would look in.

Speaker 3:

You know how they're working with that because there's a lot of changes in it the ai is changing how we do business right, so let's, let's say it that way okay the ability, the ability to make people more efficient, more productive.

Speaker 3:

Right, ai, can you know? If I want to post on social media, I can get AI to do that for me and it creates all these neat things and videos and blah, blah, blah. It allows me to be a better marketer. It allows me to be a better you know, maybe provide a script to create an app to run my business a little bit better. Tremendous advances in technology. If you think the last five years have been crazy, the next five you won't even recognize. I mean, it's going to absolutely blow your mind and it will change some of the things. It will change some of the steps in how we do business.

Speaker 3:

But, if you think about business, as to what's still an essential requirement, AI cannot prepare your air conditioning. Ai cannot change your oil. There's just certain things that AI can't do, but all the big companies are investing in the tools leveraging AI to make their businesses more efficient and smarter. Now let me ask you this Do they have an AI franchise? Do you know of?

Speaker 3:

Yeah, not specifically, that just does ai um there are tech, there are tech companies, there are uh companies that will do network services. If you're a small business and you just you're not big enough to have a tech team and you want to outsource that to nerds to go or team logic it, or uh, I guess that's the or Global Cyber or Cyber Global.

Speaker 3:

Those guys do network protection, cyberware, cyber protection, hacking, all that other kind of stuff. They help businesses protect other businesses or protect against that. Ai has some of the tools that they use to protect your business from hackers and so forth.

Speaker 2:

Right. So it's basically you're saying that AI would be probably along with the technology industry. Somewhere in there might be a part of it.

Speaker 3:

If you're talking to franchise companies, about a business, one of the questions would be how is your company leveraging artificial intelligence to make yourself more efficient?

Speaker 2:

and keep up with your competition. Ok, that's a great question. Thank you so much. You're right on that. So let me ask you this what financing strategies or resources do you recommend for those who want to purchase a franchise?

Speaker 3:

So we talked about the franchise disclosure, having the startup costs, Section 7, the low and the high. Take that high-end number. So let's say you're talking to a coffee shop and that coffee shop is going to cost a half a million dollars. You're going to need somewhere between, depending on your credit score somewhere between 10% and 30% cash infusion into the business. So if it's half a million dollars, I'm going to need between $50,000 and $150,000 cash. I can then go borrow $350,000 to $450,000 from an SBA lender to get my half a million dollars.

Speaker 3:

And now there's my budget, keeping in mind that half a million dollars does. And now there's my budget, keeping in mind that half a million dollars does include six months worth of operating expense to make payroll and pay rent, things like that. Cash reserves are factored into that number, right, so it's not just money out of pocket, and you should then be able to be cash flow positive and be able to service your debt within that six months time or within that reserve period right, so that you're off and running other businesses that get off to a faster start. Don't need cash reserves. If all I have is a trailer and my trailers $200,000, and it has equipment on it, I just paid cash for it or I got some financing for it, equipment leases, whatever.

Speaker 3:

That's fine, but I can be painting houses really quick. The coffee shop I still need to find it, build it, et cetera and. I got to be paying my bills. So am I still working and can I still pay my bills? Or am I tapping into my cash reserves because I'm not currently working and I'm living on that?

Speaker 3:

money, all of those become factors into the cash flow, the business and and things that I help my clients understand before they make any decisions, before they borrow money whatever. But at the end of the day you're looking at anywhere from ten to thirty percent cash infusion depending on your credit score. If you're 800 or better, you can probably get something in the 10 range. There are some some banks that'll do that the bigger the project you know, if you get a million and a half dollar restaurant, you're probably looking at 20 25 cash infusion and in some of those bigger projects versus just minimal dollars down okay, great, thank you so much.

Speaker 2:

So I'm gonna ask you my last question, but at the same time, I want you to give something you definitely want our listeners to know. So the question I have is what qualities or habits have you noticed in the most successful franchisees you've worked with, and then you definitely want to tell us a little bit about it. A little bit about it.

Speaker 3:

So, I'll give you a great example. One of the first people I put into a franchise after I became an independent consultant, so about four, yeah, four years ago, a gentleman here at Frisco, a guy that I used to work with several years before, connected with me on LinkedIn and saw that I was doing something different and asked me for some help.

Speaker 3:

So I connected him with a window cleaning business and he had never cleaned windows before. He was a corporate training guy. He built programs to teach people how to do uh, you know their job in the field for thousands of stores and all that kind of stuff.

Speaker 3:

Now he's got a window cleaning business and he calls me up the first month after he signed and he's getting going and he goes. Rudy, I'm hopping mad, I'm hopping mad. I don't like this. What's the matter? He goes. They want me to spend $2,000 and do the ad pages, that direct mail couponing thing right that everybody gets in the mail called the ad pages. He goes.

Speaker 1:

I don't want to do it.

Speaker 3:

I think that's crazy. I said all right, john, let me ask you something. Who were they targeting? Who were you targeting in your business?

Speaker 2:

to clean windows. Who makes?

Speaker 3:

that decision? Right, Typically the wife or the lady of the house, right? So just because you don't read the ad pages, John, they come in the mail you throw them out. Does your wife read them? Well, sometimes? Okay, Well, your company knows that ad pages works because the lady who picks up the mail looks for the coupons and is going to find your ad when she wants her windows done. She's going to call you.

Speaker 3:

And so what you need to do is trust the process. These guys have been doing this for a long time. Be coachable. Put the first order out there. Let's see what happens, okay. All right, I'll trust you, I'll do it. He's reluctant but he's going to do it. He calls me back a month later the ad dropped. First day it was out in the mail he got a 65 000 job to clean windows.

Speaker 3:

This house had 95 windows in it, three-story house. He cleaned all the windows inside and out, charged the lady 65 000 to have her windows cleaned and he said I'll never not do ad pages ever again. Thank you, thank you for coaching me into being coachable.

Speaker 2:

Exactly, and that was a great one. Let's tell everybody how did I get in touch with you, Rudy. That's what I want them to hear.

Speaker 3:

So right here on my shirt, franchise with Rudy FranchisewithRudycom is my website. So if you want to find out more about me, my contact information, etc. Etc. Just go to that website and you can find me there. You can also text my name, rudy R UDY, to 26786. That will automatically get you registered into my database and then we can connect and follow up and so forth. So you'll get an automated response. Provide me your contact information and so 26786, text the word Rudy to that and we can get connected.

Speaker 2:

Okay, I just put it in the chat.

Speaker 3:

I saw that. Or if you Google me, rudy Frederico, I am the only one on the planet. The paragraph that shows up has my phone number in it. So just Google, rudy Frederico, find me on LinkedIn, find me on Facebook, pick up the phone, call me. Let me know how I can help. I also I don't charge people for consultation. I am compensated by the brands that I represent. They all pay me about the same. So whether I'm helping you find a painting company, a restaurant or an oil change business, it doesn't matter to me. I just want you to be successful. So let's have that conversation, and if it's you or somebody you know, or you and some partners, or you and some friends, or whatever you want to do, we just have to have the conversation, learn more about it, get educated and then make decisions, and then you write checks, and so nothing costs anything until you learn what you're doing Exactly.

Speaker 2:

So you all definitely can reach out to Rudy. I have on occasion for other clients and when I say he has a wealth of knowledge, oh my God he does. So you definitely want to reach out to him. Well, I want to thank you so much, rudy, for taking time out to speak to us today. We definitely enjoyed you and definitely hopefully we can have you back on maybe our podcast or some other stuff that we have as well.

Speaker 3:

Okay, We'd love to Thank you very much Appreciate the time.

Speaker 2:

Thank you. So that's the end of our show for today and I want to thank our guests, like I said, rudy, and encourage you all to contact him. Like all previous guests. He's listed on our website referral page at wwwtdjequityllcnet. Please visit our YouTube channel at TDJ Equity Funding Insiders for previous recording and this recording and if you would please subscribe to boost the algorithm to alert others about us as well. Again, thank you all for listening. Happy growing your business, until. Again thank you all for listening.

Speaker 1:

Happy growing your business. Until next time. Thank you and take care. Bye-bye. We hope you enjoyed this episode of TDJ Equity Funding Insiders Podcast. If you'd like to be a guest or get in touch with us, please visit our website at tdjequityllcnet, forward slash podcast or email us at podcast at tdjequityfundinginsidersnet. Until next time, take care.

People on this episode

Contributor

Jacquelyn Jackson

Host