By Stephanie Schomer, Entrepreneur
Making the switch from franchisee to franchisor comes with a brand-new learning curve -- and no matter how wise or successful a franchisee once was, life has a franchisor is never an easy transition. Four entrepreneurs who've made the switch share their most valuable lessons.
“Know Where You Need Help”
When Nader Masadeh’s family moved to Cincinnati from Jordan when he was a child, most of his relatives worked in restaurants. “When you come to the United States as an immigrant, skills don’t always transfer,” he says. “Restaurants provide accessible work.”
Masadeh was no exception: He put in time at Taco Bell and Burger King. But after graduating high school, he took a different path. He studied engineering and business, worked for auto parts manufacturers and then Procter & Gamble. In 2004, he purchased a Buffalo Wings & Rings franchise. He’d planned at first for his father to operate the franchise, but he soon fell for the business more broadly.
“I loved the brand, the niche it’s in, the food it serves,” he says. “I didn’t understand why it hadn’t taken off.” He was certain that with some additional systemization and professionalism, he’d have a hit. In 2005, he made an offer to buy the brand from the current owner, and she accepted.
After the purchase, Masadeh brought on two partners, and identified their first big problem. “The other store owners had licensing agreements, so they weren’t paying royalties, and they weren’t getting any corporate support,” he says. That meant he had no money coming in and would have to get creative about fixing the company. The solution would take almost five years and a lot of changes -- rethinking the company’s relationship with franchisees, where they’d open new locations, and even what the restaurants looked like.
Now Masadeh has some tough advice for franchisees looking to become franchisors: “A great franchisee isn’t always a great franchisor, and vice versa,” he says. “Know your skills, know where you need help, and hire people to help you make the transition.”
What He Learned
1: Take inventory
Masadeh and his partners took stock of what they had: some old uniforms and equipment in a warehouse, and a very out-of-date Franchise Disclosure Document. Then they spent the next 18 months cleaning up the operation -- creating a new manual, a marketing plan, brochures for prospective franchisees, and a unified menu. “There hadn’t been any corporate support before,” he says. “We had to build that in.”
2: Start fresh
The brand had a bad reputation in Cincinnati, thanks to the poorly run restaurants of the past. That made it hard to find new franchisees locally. But when Masadeh ran some ads online, he received inquiries from California, Texas, and Florida. So he decided to go where the opportunity was and rebuild the brand where it could be introduced fresh. “Those development agreements were a big win,” he says. (Today, there are 12 stores -- nine are franchises -- open in Cincinnati.)
3: Expand the audience
The original Buffalo Wings & Rings model felt like most sports bars: dark, masculine, and loud. “We realized that if we made it more family- and female-friendly, we’d have a bigger opportunity,” Masadeh says. They added a dining room that was brighter and not so loud. They made the restrooms more accessible from the dining room with no need to walk through the bar. And they updated furniture to make the space more inviting.
4: Listen to your markets
Both Masadeh and one of his partners are originally from Jordan, and they believed they could bring the brand back home. But they failed on their first three attempts. “We tried to adapt our model to the local culture but quickly realized that’s not what they wanted,” he says. “They wanted the Americanized experience -- the wings, the menu in English, the sports, the bar.” They opened stores with their U.S. model, and sales skyrocketed.
“Know Where You Need Help” When Nader Masadeh’s family moved to Cincinnati from Jordan when he was a child, most of his relatives worked in restaurants. “When you come to the United States as an immigrant, skills don’t always transfer,” he says. “Restaurants provide accessible work.”
“I’d Rather Be in Control of My Own Destiny”
Alexis Courtney had spent eight years as a high school teacher when she became pregnant with her second child and quickly realized that life as an educator would no longer cut it. “My income was pretty much a wash once my husband and I factored in daycare for two kids,” she says. “We decided that if I was going to be working, we wanted it to benefit our family.”
Her husband, Neal Courtney, had been a longtime exec with Famous Brands International, the parent company of TCBY and Mrs. Fields Cookies, and the couple wondered if they should launch their own business. But neither had the bandwidth or a foolproof idea. Then Alexis took their daughter for a haircut at Cookie Cutters Haircuts for Kids, one of the only kids’ salons in Utah, and was charmed by the experience. She knew she had her solution: They’d become Cookie Cutters franchisees. “We bought an existing store that employed six stylists, and our first Saturday, we did 135 haircuts,” Alexis says. Demand remained high. They soon operated five locations in Utah.
Alexis’s new franchisee career worked…for a while. Then Neal’s company relocated the family to Colorado and promoted him to CEO, forcing Alexis to schlep back and forth between the two states to maintain their Cookie Cutters locations. The situation worked, but it wasn’t ideal.
Then in 2014, Cookie Cutters’ founders offered to sell the brand to the Courtneys. They bought the company, installing Neal as CEO and Alexis as COO. It was a big leap -- emotionally and financially -- but one that’s paid off. Now the brand is closing in on 100 locations open across the country.
What She Learned
1: Move slowly
The Courtneys didn’t have the cash on hand to buy Cookie Cutters, so they spent four months discussing the opportunity and plotting out the financing. That gave them the time to determine a plan they were comfortable with -- and identify the risks they were willing to take. “We had to roll our 401(k)s into this business, which is scary,” Alexis says. “But if we didn’t buy it, someone else would. I’d rather be in control of my own destiny.”
2: Experiment with sales channels
Cookie Cutters’ previous owner hadn’t focused on selling new locations, but the Courtneys wanted to. They updated their FDD and started marketing. They poured $30,000 into internet advertising that resulted in not a single new franchisee, so they switched paths and started working with FranNet, a consultancy and brokerage that connects franchisors with prospective franchisees. “We’ve sold pretty much every franchise through FranNet,” she says.
3: Build your toolkit
To manage a growing roster of franchisees, Alexis had to learn to work smarter. She adopted Asana, a project management application. “I have boards for all my franchisees,” she says. “If someone is new to Cookie Cutters, I have a 12-week plan to share with them, starting with a weekly phone call and about four or five tasks they need to accomplish. It helps us get things done without overwhelming new partners.”
4: Shift your communication
When the Courtneys were running a franchise, they had a fairly simple operation: Alexis had her tasks, Neal had his, and that was that. But now that they’re running a larger corporation, they’ve had to change their style. “Everything we’re working on has to be run past the other person in order for our operation to be synergistic,” Alexis says.
“There’s No Better Way to Put Capital to Work”
When David Graham built his current business, Code Ninjas, he didn’t want to build just a coding school for kids. He wanted to build the coding school for kids. “It’s a timely, niche business, and we knew someone would end up being the 800-pound gorilla in the space,” he says. “We wanted it to be us.”
Code Ninjas was also a return to form for Graham, a longtime lover of coding who’d taken an unexpected detour into a very different line of work. He began his career as a software developer, and owned and operated a consulting firm, a video game business, and a coding program for adults, then became fixated on…the world of fitness? “I liked the recurring revenue model,” he says plainly. “But I had no idea how to open a gym.” So in 2010, he became a franchisee with Anytime Fitness. He was impressed with the operation and came away with a big lesson: “I saw the capacity of franchising in an expansion model, and I thought, if I ever have an idea that I need to take national -- and quick -- there’s no better way to put capital to work.”
In 2016, when he came up with the idea for Code Ninjas, a programming school for kids with a strong focus on fun, he did just that. He developed a strong infrastructure and started selling franchise locations. There were bumps along the way, but iteration and a focus on serving his partners turned Code Ninjas into a hot commodity that’s sold 380 locations in just 20 months.
What He Learned
1: Define your niche
Graham saw his coding competitors as all academically oriented. “But we wanted kids to actually want to come to Code Ninjas,” he says. So he focused on fun, and he tested multiple curricula before starting to franchise. “We tried lectures, we tried bug-fix programs, and we realized finally that kids want to build their own games on our platforms.”
2: Adjust for growth
At first, Graham says, he overestimated how much people would be willing to pay to enter the system. “We had sold 12 units in six months -- not the pace we wanted,” he says. So he cut the franchise fee in half and trimmed additional costs to make the opportunity increasingly appealing to prospects. “It caught on fire,” he says. “We sold 240 franchises in our first year.”
3: Cater to your franchisees
“We identified early on that some of our franchisees were kind of nerdy guys like me. They’re introverts,” he says. So his team created a system that would work best for their partners. “As an example, we do a weekly executive call where we go over everything happening in the company, and they can ask questions if they have them.”
4: Create clear goals
Because of the brand’s rapid growth, Graham has created KPIs to track success at every level of the company, making sure quality doesn’t falter. “Every employee has KPIs, and they roll up to their team manager, and they roll up to the executives,” he says. “It helps us take the pulse of the organization. Those KPIs are our heartbeat, so if we don’t track it, we won’t know if things are erratic.”
“There’s No Better Way to Put Capital to Work” When David Graham built his current business, Code Ninjas, he didn’t want to build just a coding school for kids. He wanted to build the coding school for kids. “It’s a timely, niche business, and we knew someone would end up being the 800-pound gorilla in the space,” he says. “We wanted it to be us.”
Code Ninjas was also a return to form for Graham, a longtime lover of coding who’d taken an unexpected detour into a very different line of work. He began his career as a software developer, and owned and operated a consulting firm, a video game business, and a coding program for adults, then became fixated on…the world of fitness? “I liked the recurring revenue model,” he says plainly. “But I had no idea how to open a gym.” So in 2010, he became a franchisee with Anytime Fitness. He was impressed with the operation and came away with a big lesson: “I saw the capacity of franchising in an expansion model, and I thought, if I ever have an idea that I need to take national -- and quick -- there’s no better way to put capital to work.”
In 2016, when he came up with the idea for Code Ninjas, a programming school for kids with a strong focus on fun, he did just that. He developed a strong infrastructure and started selling franchise locations. There were bumps along the way, but iteration and a focus on serving his partners turned Code Ninjas into a hot commodity that’s sold 380 locations in just 20 months.
“If Franchisees Don’t Do Well, We Don’t Do Well”
Sammy Aldeeb is well aware that pizza is an oversaturated market. But it’s still full of opportunity. “Pizza will never go away,” he says. “You can be a millionaire and eat pizza, or you can be a college kid on a student budget and eat pizza. That’s why it’s a $45 billion industry.”
That’s also why, after 10 years as a successful franchisee for brands including Marble Slab, Subway, and Great American Cookies, Aldeeb sold his portfolio of nearly 30 locations and started developing his concept for Urban Bricks, a made-your-way pizza franchise, built in the style of Chipotle.
“Fifteen years ago, I would only eat burritos from my favorite ma-and-pa Mexican restaurant in San Antonio,” he says. “But now, I love designing my own burritos at Chipotle. America is shifting to customized everything, so why not do that with pizza? No one orders a supreme anymore.”
Even with a decade of experience as a franchisee, transitioning to franchisor of an upstart brand was a culture shock. “Before, if a store didn’t do well or if operations weren’t intact, I had no one to blame but myself,” he says. “But when you’re a ’sor, it’s a different game. If franchisees don’t do well, we don’t do well.”
What He Learned
1: Ask for help
The red tape that comes with launching a franchise boggled Aldeeb’s mind. “I was amazed at the amount of paperwork and dollars it took to legally establish the business,” he says. Rather than try to do it alone, he prioritized finding strategic partners and resources to talk him through the process. “I give the International Franchise Association a lot of credit. They’ve been a great resource, probably one of the best investments we’ve made.”
2: Price for the right franchisee
Aldeeb wanted passionate franchisees rather than those with a ton of business experience, so he was determined to keep buy-in costs relatively low. Today, he’s proud that his franchise fee stands at $35,000. “I’ve been in their shoes, so I think with their pocket,” he says. “We have been cautious on costs, not only on build-outs but on the menu items. The restaurant business is tough -- we want this to be monkey-proof and sustainable.”
3: Set clear expectations
Aldeeb was confident that he’d created a system and a set of guidelines that would help his franchisees succeed. But he didn’t plan on doing any hand-holding, and he told them that up front. “I always tell our partners, ‘We are going to teach you how to fish, but we will not fish for you,’” he says. “If you don’t learn to do the work yourself, you don’t need to be in this business -- or any business, for that matter.”
4: Fix what’s broken
Aldeeb has learned that not every franchisee will be an instant success, and he’s proactive when a store is underperforming. “If they fail, we fail,” he says. “We put on our aprons, retrain that team, and try to reestablish what attracted the franchisee in the first place. We owe that to them as an emerging brand they took a chance on.”
“If Franchisees Don’t Do Well, We Don’t Do Well” Sammy Aldeeb is well aware that pizza is an oversaturated market. But it’s still full of opportunity. “Pizza will never go away,” he says. “You can be a millionaire and eat pizza, or you can be a college kid on a student budget and eat pizza. That’s why it’s a $45 billion industry.”
