Christo Demetriades, Managing Partner at Conscious Capital Growth

“As a franchisor, you’re entrusting your franchisees to continue the growth of your brand, and putting the essence of the brand in their hands.”

A proven entrepreneur, visionary and leader, Christo Demetriades has spent 3 decades as a CEO, CFO, and COO for franchising, restaurant, entertainment, and self-care brands. His superpower: Building and nurturing strong, loyal management teams that drive both culture and goal achievement. He’s also no slouch as a dealmaker — among his exits was selling a fitness venture to Sir Richard Branson’ Virgin Active. Today he (along with Episode 20 guest Heather Elrod) invests in and counsels ‘zors, helping them accelerate the growth of their brands while avoiding the landmines. 

Listen as Christo discusses with Ab and Vini the ways that ‘zees and ‘zors can seize opportunity — if they’re in sync with the pace of change in their market. How to anticipate the “curveballs” that can disrupt (and sometimes derail) a business. The combined threat and opportunity of technology for food businesses. His four bits of advice to young potential ‘zees. And the only two things better than starting and growing your own business!

Listen to the archive episode with star Heather Elrod.

Transcript

 Hi everyone, welcome and thanks for joining us for Stars of Franchising. Get ready for a roller coaster ride through the world of franchising as we bring you the best stories of inspiration and entrepreneurial grit and turning dreams into franchise realities. That's right Vinnie. From emerging to global brands, we'll chat with the genius minds behind the magic. All brought to you by the Tariq Farid Franchise Institute at Babson College. I'm Ab. And I'm Vinnie. Now buckle up for some serious inspiration.



 So excited to have Christo Dimitriates here to share some experiences. Welcome Christo.



 Thank you, thank you. Pleasure to be with you guys. Well we usually start, you know Vinnie and I do for our audience to really ask guests like you with so much great, wonderful experience. Not only franchising but entrepreneurship, life and leadership to really start with your why and what caused you to do what you do Christo. Well I've been in the franchise business for over 30 plus years. Been in business since I was 18 years old. Was started my first business when I was still in college. And so I have been in business throughout the world represented in 18 different countries around the world. And I've been in the brand building business pretty much my entire business career. I just love to see businesses come out of the ground. You know entrepreneurs start a concept and see that concept to fruition and essentially achieve their goals in life which is ultimately to build a successful brand and create wealth for themselves and their families and build a foundation for great brands.



 And so we had the opportunity both my partner Heather Elrod and myself we came together a couple of years ago after wanting to put together conscious capital growth for many many years essentially to help franchise companies specifically franchiseurs in their effort to scale their business and achieve success throughout their business. And a lot of franchiseurs establish a great brand. They create an incredible culture and they get to a point where there is a new requirement for management skill for financial need.



 And that takes a whole another level of skill set. And so we hope to partner with those franchiseurs. We do take investment in those franchiseurs and we look to help them avoid the land mines we've been there. We know how tough it is to make a payroll on a Friday and go through the aches and pains of growing your business and we hope to avoid the land mines and guide them in the right way but ultimately help accelerate their growth.



 Wow. Well Christo this is great because as you can imagine this is interesting to me because in the area of marketing and sales and what you folks do when you talk about building brands in different countries and my first question maybe we could just start from there my first question would be when you look at the franchise world when it comes to building brands across different countries what are the major challenges and how do you navigate those?



 Well you know the first thing that a franchise company requires is obviously you need a great brand and a great brand also means you need great unit economics. For a franchisee to be successful the unit economics need to work and obviously bringing the right franchisee into your business that is a partnership. You're in partnership with that franchisee for 10 plus years. You are emboldening them, you're entrusting them to continue the growth of your brand and you're putting the brand and the essence of the brand in their hands. So I would say the first and foremost is make sure that you have your hands on the culture of the brand. The culture of that brand is the essence of the brand, it's the soul of the brand. You need to make sure that you have that brand and you're able to export that culture and the soul of that brand. In franchising the most difficult or the most challenging but also the most opportunistic



 factor of franchising is the ability to export your brand. Export your brand to other cities, other towns, other regions, other cultures and so making sure you have the essence of the culture in place is certainly one of the bigger challenges. Not only in the franchise space but any business that is looking to expand their brand. Thank you.



 That's great stuff. So given that you had an early start in entrepreneurship and then your career in franchising, I'm not sure the timing of it, franchising was first, but let's just take a look at this idea that some people feel that franchising is an entrepreneurship, right? How can it be entrepreneurial if you're taking a playbook or you're replicating someone else's idea? What do you think of that? Can you talk a little bit about this intersection or that perception?



 I think it's probably one of the biggest misconceptions because honestly, they are so intertwined. Whether you're on the franchisor side or you're on the franchisee side, a great franchisee is entrepreneurial.



 The ability to start your own business and then grow your business, whether you're then starting and growing into the franchisee as a franchisor and bringing franchisees on,



 you need an entrepreneurial spirit to be able to do that. It goes both ways because from a franchisee perspective, yes, the argument is, "Well, why don't you just start your own business?" Well, great franchisees also recognize that the ability to join an existing brand, a brand that they have passion for, a brand that they can see has all the buildings of success, that you can join a system where you can bank on and enjoy the fruits of further marketing



 and training and all the brand recognition that comes with being a franchisee, it's a huge benefit. It's why we're seeing franchising for the last 30, 40 years, 50 years, franchising has always led the growth specifically in the United States, but we're going to see that more so now than ever before. Well, Christos, let's move on to maybe if you can explain to us what, in your opinion,



 the best franchisees do well and also what do you think the best franchisors do well?



 Well, I think that from a franchisor perspective, as I mentioned earlier, unit economics and



 culture are what drive your brand. You need to make sure that before you go into the franchise space, you have unit economics that your franchisee can benefit from. The franchisee success is a franchisor success.



 I think you need to make sure you develop and maintain the brand. That's the primary responsibility of the franchisor is to maintain the brand and the brand essence.



 Franchisors work to establish and build the identity of the business. They do that through advertising, through marketing, through training and support.



 Then one of the responsibilities of the franchisor is to continuously expand and grow and make sure that you are establishing brand presence throughout your region, throughout your - make sure that you're creating brand presence for your franchisees, throughout the system.



 From a franchisee perspective, I think one of the biggest misconceptions from a franchisee's perspective is that going into the franchise business, you don't need to work your business. You're buying into a successful system. I put my money in and I put a manager in place and I'd never have to worry about it. That's just not the case.



 Franchisee certainly - no matter what industry you're in, no matter what sector you're in, the most successful franchisees understand that we are making an investment. We need an ROI on that investment. We need to manage our people. We need to manage our business. We need to work our business. Those franchisees are always the most successful.



 Good stuff. Christo, given some of the brands you've worked on and this idea of scaling, I'd love to explore maybe a little background on a brand or two, most recently before your role now, that some lessons learned and advice, let's just say, for early stage franchisees or brands that are looking to scale, but maybe share a story or two.



 Well, you know, and you and I have spoken about this many times today more so than ever. The challenge and the opportunity for franchisees and pretty much any business is the speed in which a sector and a business is changing. Technology has changed the world.



 COVID, I would say, has accelerated that emphasis, that need. But I think today more than ever, and something we focus on very, very dearly here at Conscious Capital with our brand leaders, is to make sure that we are always in tune with the next steps and make sure that we understand where the consumer's going. Because consumer needs, consumer habits are changing so rapidly that you always need to be one step ahead of where that is. And, you know, today understanding what can actually be the curve ball in your business. It's not always a competitor. And a perfect example of that is, pick a camera brand, Canon, Minolta, Kodak. These guys were in the, you know, setting cameras and were always looking at their competitor as to how they create their innovation and how they stay one step ahead. And all of a sudden, you know, next minute, the iPhone literally took them out of business. And so it was another industry, another sector altogether that essentially came in and swept the industry aside.



 And most of them were not looking for that. They had their eye on their own competitors rather than understanding where the curve ball was going to come. And so I think that that is the biggest challenge today. And I don't care what sector you're in. I don't care what industry you're in. I don't care what business you're in. It's understanding where the next wave is going to come.



 And you know, just to answer your question, we recently acquired a juice business called Main Squeeze Juice Company out of Louisiana.



 Really exciting brand. And we are growing that brand both organically and via a quizzet of growth.



 And the food business is one where I think we are going to have a revolution in terms of technological improvement.



 And that is back of house and front of house. There's going to be technology improvements that are going to change the way the consumer orders, experiences, and achieves that overall product because technology is changing so quickly. And that can be a threat, but it is also an opportunity. And a lot of companies are looking at that threat in that it's going to eliminate a lot of labor.



 Yes, but it is. But it also creates a new labor force. It also creates new opportunity in the labor market. But it is going to create more efficiency. It is going to bring and help cost of goods and all of those factors that in the food business you're dealing with every single day.



 Christo, when you look back all these years working in the franchise world and now as a capital provider to players in the industry, what would you consider your biggest failure?



 And what did you learn from it?



 That's a great question, Vinny.



 I think a failure that we've all made in the past, specifically as a franchisor, is not having the ear and not having your foot or your hand close to the franchisee because the franchisee is the one running the business. The franchisee is the one that touches the customer every single day. And I think that one of the big mistakes that we've all made in the past is not allowing the franchisee to have a voice and have a sufficient enough voice to help in change, in technology, in marketing, in the training aspect. And those businesses that really always are ahead of the game and always have a very good handle on their customer always bring the franchisee into play and allow them to participate in some of the changes and the decisions that are needed to maximize your business and the efficiency of your business. So I'd say that that's been an area that over time through experience we've had to learn. Well, and that points to, I think, Christo, something you said earlier on that importance and how vital it is to have a partnership and have empathy for your franchisees. I'll piggyback on that a little bit and follow your thoughts and words and talk innovation.



 And given all the change that's coming at us and as you state, the franchisees that are close to their customers in the market, can you talk a little bit about how the franchise model itself can promote that innovation? And have you seen some of the best ideas in a brand come from franchisees?



 Oh, absolutely.



 And just sticking with the QSR or the food industry, we're seeing tremendous innovative change happening both in the back of the house and by back of the house, I mean, in the kitchen and everything around the kitchen and what that ultimately means, I think, for today's market and again, doesn't matter what industry you're in, the two biggest challenges that we have in today's world is labor and cost of goods. And those two things affect not only the P&L dramatically but also the balance sheet. For a franchisee, making sure that you have maximized the ability for them to have as low a capital outlay as possible improves their ROI as they grow. But then also making sure that the P&L is maximized and what you're seeing in the food space right now is tremendous innovation in mechanizing the ability for a robot with artificial intelligence to have the ability to not only slice the tomatoes, slice the onions, prep the vegetables, put a patty on the grill, understand the temperature of that patty and then deliver a final product, which is going to, you know, for an owner, that's a huge innovative change that reduces labor cost, that reduces error dramatically, that reduces the time of production and delivers a consistent product to the guest.



 From the front of house, you've seen already McDonald's and many, many others have rolled out artificial intelligence in their point of sale where you're able to now, you know, walk into a restaurant and the point of sale recognizes you instantaneously through via facial recognition and is able to remember the last order you placed.



 It will automatically bring it up.



 Hey, Ab, welcome back. You know, your last order, you ordered a double cheeseburger and a strawberry shake. Would you like to repeat the order? Right. And, you know, a simple yes sends the message straight through to the kitchen. It's already got your credit card details on file and away you go. You haven't yet even seen anybody up front or spoken to anybody. So imagine the speed of ability to move through the line in that instance and then have the robotics in the back preparing the food. Now, that's not going to eliminate the need for human capital and human resource, but it's certainly going to enhance the experience.



 And, Chris, you spoke about what things a franchisor should keep in mind before venturing into this business. Can you share with us on the side of the franchisees, if you have in front of you a group of students or interested people who would like to become franchisors, what advice would you give them?



 Vinny, you know, that's a really great question. And it's something that we have our eye on in every one of our brands right now, because the youth market, what we've seen certainly through COVID is, as everybody knows, we lost a huge percentage of the labor force. And a large reason for that is that people realize they want to be in their own businesses. And this is starting at the college level now. It's why you're seeing SBA and other financial programs start opening up the ability to provide finance models to younger people that haven't yet been in business, because that's where



 the future is. That is where we are going to grow and where we're going to continue the evolution of industry in this country. And so, you know, starting out, there's a few things that I would say to any young franchisee, no matter where they are or what their circumstances. The first one is make sure you have the right team. Make sure you build a team around you that can provide the service and the efficiencies and the growth that you're planning for your business.



 The second thing is, I'd say, make sure you get the right advice. You know, people rush into the franchise business, whether on the franchisee or on the franchisee or side, but certainly as a franchisee, make sure you understand the FDD. Make sure you understand what you're buying into, what you're getting.



 Make sure you have passion for what you are about to embark on, because if you're not passionate about it, you're not going to be successful in it. I'd say that's the single biggest criteria in making a decision as to what franchise you want to be in, is make sure you can be passionate about what you are going to be embarking on each and every day. From the minute you get up in the morning till the time you go to bed at night, your business is going to be the dominant player in your life, more so than your wife or your husband or your kids. You're going to be involved in your business, and so making sure you have a passion for what you're doing is really important. And the last aspect, I'd say, is make sure you're well capitalized, because that ultimately can be ... We've seen so many businesses fail as a result of just not being capitalized sufficiently enough.



 People have great ideas. People have great businesses. People have all the recipe for success. But if they are not able to weather some of the challenges that get thrown at you from your everyday life, and it happens, the curve ball comes, you can have a weather event that shuts you down. Look what happened with us with COVID recently. You just don't know where you're going to need resource and reserves, so make sure you're well capitalized. And that's going to set you up not only for your entry into your business, but also for your growth going forward.



 Great advice, Kristo, and it links back to some of the other things you said that I think would be helpful for people. And you mentioned the FDD, which for our audience, the Franchise Disclosure Document, and I love your words about making sure you get the right advice and you're capitalized.



 Franchisees in that, right? They're going to have a range the franchisor gives them for what it's going to cost to a unit, but it also sounds like you should find out what that is for your local market and plan for some working capital to get to profitability. Is that what you're alluding to a little bit?



 Absolutely. Okay. Absolutely. Good stuff. And then how about talking to other franchisees? Do you think most potential franchisees realize the importance of doing that?



 Yeah, some do, some don't. I think one has to have the ability to decipher the good, the bad, and the ugly from other franchisees. Good point. Some franchisees, the ability for a potential franchisee to analyze what, if they're speaking to a system and they speak to 20 franchisees, they're going to probably get 20 different opinions. You're right. So the ability is, and I don't care what franchise system it is, you always have that top tier, middle tier, and bottom tier. You're going to get different opinions from each one of those tiers, have the ability to decipher and siphon through the noise that can come from that, but absolutely very important to be able to communicate with the franchisees and ensure that everything the franchisee has told you, has sold you on, is coming through the franchise system from their mouths. Right. Well, that's great advice because you're right. The bottom quartile that you mentioned, they could be just not have done their own homework or not an entrepreneur or expected it. Exactly. So I think that's really, really great advice to have the ability to digest all of it. So Vinny, I'll turn it over to you to one of your favorite questions. Christo, what is it that keeps you awake at night when you look at the brands that you currently manage or that you currently own, the franchise brands you currently own, and why so?



 Vinny, I'd say there's so much, I think from an operational perspective, there's a lot that can keep you up at night, but I think the thing that keeps me up at night is making sure that I have a handle on where the market is going and what are the external factors that can affect my business, whether it is interest rate hikes or inflation or any of the external areas that can have an adverse effect on my business and something that I have little control over. So make sure that I understand where the market is going and where the trends are, and then you can pivot. I think one of the biggest mistakes that entrepreneurs make today is the inability to pivot when those kind of challenges arise. And those that ultimately win the trophy at the end of the day have that ability to be able to find where the challenges are and find where the least path of resistance is in order to get to the other side of the road once those challenges do arise.



 Krista, one last one for me on a topic that we've had some really interesting discussions on. It's the forefront of a lot of things that are going on in our society and the world, which is DEI and diversity, equity, inclusion, and this intersection with franchising, given the local impact that a franchise owner has. And also the role of the brand. Can you talk a little bit about this intersection and how important it is for a brand to have a mindset around those issues, not only for its customers, the world, but also employees?



 You're talking about social impacts? Yes.



 Hugely, hugely important in today's world. I think, you know, whether it's in the franchising industry or business in general,



 businesses have become very aware of recognizing the importance of implementing social impact and sustainability initiatives in their business, not only to do their part in creating a better world, but also to appeal to their customer who have priority. Customers are demanding this these days in most countries around the world, for that matter. And I'd say, you know, some franchise companies have started implementing DEI initiatives, creating diversity and inclusion committees within their own businesses, monitoring other



 organizations, and others have committed to sustainability goals, you know, including reducing carbon footprint or sourcing from sustainable suppliers and making sure that the culture that they are trying to message to their customer is coming all the way through their brand.



 And I'd say, you know, in terms of social impact, many franchises explore ways to give back to the community. That's one of the bigger areas today where you can make a difference is within your own communities where your businesses are, whether it's charitable donations or volunteering or, you know, supporting local initiatives. But I think overall, franchise companies that do prioritize DEI social impact and sustainability are likely to benefit within their employee base, with their franchisees, and mostly with their customers. So I think it is a very important part of business today. Well, I love it because, you know, what you said is so true and maybe not a lot of potential franchisees and entrepreneurs realize that they can leverage the power of those big brands that are making a commitment to do that and maybe write a little bit forward and use it in their due diligence and evaluation of the brand. That's great stuff. Any anything else from your end? No, that's cool because the one thing, of course, Crystal, we surely look forward to hearing from our guests. It has to do with if they look back, is there something they will do differently and why? I mean, is there something that they learned that the franchise world taught them that they wish everybody at some point in their life should just keep in mind?



 Bernie, we don't have enough time for you to go back. Give us one. Talk about everything. We do definitely not have enough time. But I would say, you know, if I am in the spirit of Babson and, you know, your market and who you're trying to appeal to, I would say the most important thing to and the message I try and relay every single day of my life is, you know, business is not easy. Business is tough.



 There is nothing that's going to give you more satisfaction in your life, maybe, you know, a successful marriage and great kids are the only two things that can give you more satisfaction than starting, growing, building your own business. I would say that, you know, it is not an easy task like anything in life. Neither is marriage. Neither is bringing up kids.



 So the message I give to everyone that I'm involved with on every single day of my life is never give up. Just never give up. You know, it's a cliche, but it is one of the truest sayings that any successful entrepreneur can hold on to because business requires persistence. It requires perseverance. It requires the willingness to learn, adapt, pivot, listen to where the change is coming and be true to your culture beliefs. But at the same time, we have the ability to see where the curve ball is coming and make the changes that are necessary. And any time you feel like you're down, just know that there's always tomorrow. And at some point in time, if you just hold on and don't give up, things change and things happen for the better. This is awesome. That's incredible. What great words and, you know, some entrepreneurs and you're alluded to have mentioned that their businesses are kind of like their babies and in the partnerships you talked about. So you're right. There's a lot of similarities. Well, you know, Christo, just we're really, really grateful for your time today and for our collaboration and for all the lessons. And you epitomize a lot of what we talk about here at Babson and the spirit of entrepreneurship and authentic leadership and pivoting, right, and taking action. So we look forward to learning more and seeing from a little bit of far and somewhat close, hopefully some of these brands and how they grow and you're able to scale because we love scaling here. And so much thanks to you and best wishes.



 Yeah. Thank you so much, Ab. And we look forward to working with with you and with Babson and whatever we can do to help and help you achieve what you guys want to do. Just let us know. But it was an absolute pleasure. It was an absolute pleasure meeting with you. And thank you. I hope to see you guys soon. That'd be great. Thank you. Thank you so much. I quit. Thanks, Christo. You got it. Thank you. But, Christo, so what's up with what's up with the young is that the two people? I don't know, man. I don't know.



 Listen, you know, I have a love-hate relationship with him. He beat our sons two years ago, but at the same time he's Greek and I love everything about him.



 I sometimes have this, I don't know who to support. But the sons say, who are the sons meeting next? They play game two tonight with Denver Nuggets. They lost game one. So we watch them come back here tonight, hopefully. We had a great call last week and I've had to bite my tongue. I don't know if I've told Vinny, but we had a great call last week with Omar Simmons. And he mentioned, oh yeah, we did a recent investment. So I was biting my tongue that we had that connection. So anyway, he was great.



 Fantastic, fantastic. And congrats on that. And I'll talk to you soon. All right, my friend. All right, guys. Thank you, Christos. Thank you.



 Thanks for joining us on this episode of Stars of Franchising.



 Stars of Franchising was produced at Babson College, engineered by Travis Gray. Karen Soway is our guest coordinator and music by Ralph Taylor. If you like Stars of Franchising, be sure to review us wherever you get your podcasts.



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