Mistakes and Advice for Franchise Success

Lance Hood (FranPro) 0:00

So , Brian , from your experience , what are some of the biggest mistakes or false beliefs that you've seen struggling franchises make ?

Brian Peart (Commercial Capital) 0:13

Okay . So for starters , the thought that the lender is kind of the enemy , the lender is on your side , actually Like they're going to make sure that everything makes sense . The cash flow projections look right , you can qualify to do it , you have enough working capital to do it . We always add extra working capital in because businesses don't go out of business if they're , if they've got too much cash right , it's only when there's no cash left . So I think that's one of the things .

Brian Peart (Commercial Capital) 0:48

Also , you know not wanting to do business plans or projections or whatever , and feeling like that's intrusive . The truth of the matter is , if my son came to me and said , dad , I want to start a business , I'd make him do a business plan because it forces you to look at your competitors , do a SWOT analysis strengths , weaknesses , opportunities , threats run your numbers and make sure if it even makes sense to do it's possible that you could start a business that never has any chance of making money based on where you're at or whatever , and so you know , maybe a competitor down the street . So do that , that business plan .

Brian Peart (Commercial Capital) 1:28

It's just a great way of making sure that what you're doing is smart and the lender is also going to make sure . If the lender is approving you , the chances are that you have a . You're probably going to succeed , you know , because that's a lot of smart people looking at the deal and saying , hey , you can do this , you know .

Lance Hood (FranPro) 1:46

So yeah , I've told clients . I said , listen , you know , probably the most unfun part is going through and doing that whole business plan and everything . But I said it's necessary because you know the bank , they want to know that you understand this business and you have a plan to succeed , because they want their money back . You know that's right and if they don't think you're going to succeed , you're too risky . So , even if it doesn't seem like something that you want to do , I said it's good to do it . Just like going through the FDD you should read it several times , you need to know what's in there and you need to have your business plan and having someone else write it for you . You know some people I'm sure they do that but then you really , if that's what you do , you really have to read it . But you need to write it and you need to own it and understand it , because that's also your plan to not just to execute on , but your plan to how are you going to make this work .

Lance Hood (FranPro) 2:39

So I think that the lender is in it . And I tell people , when you look at franchise you have , if you're working with a consultant or broker , they're evaluating you , you know , to see if it makes sense . Then the franchise is evaluating you and then your lender is evaluating you . So , you're having all these people evaluate to make sure that it looks like this is a good fit , that you're going to be successful . No one can guarantee anything , but at least people are putting in their time and effort to do that . That's right .

Brian Peart (Commercial Capital) 3:10

That's right .

Lance Hood (FranPro) 3:12

Thank you . What do you ? Because you've tell me great stories and you've tell me horror stories . What do you see top performing brands doing differently than struggling brands ?

Brian Peart (Commercial Capital) 3:28

So I think two things to look for . If you're , you know , trying to figure out a franchise , is you know one ? How do they screen out , you know , applicants ? If it's a brand that just everybody who fogs a mirror they try to get them to sign the upfront fee , then that's trouble , you know , down the road . But if they take the time to get to know you , they pre-screen you , they maybe check your credit etc .

Brian Peart (Commercial Capital) 3:57

They're really trying to determine if you're someone who can be successful with that brand . Like you were saying , they're analyzing you to make sure you're going to work , because the good brands don't want a bunch of people failing . They want everybody to be successful , you know . And then look for a strong support team . You're going to be looking at different properties and all these things and you want them to have a good back of the house where they've got their people in place .

Brian Peart (Commercial Capital) 4:24

And it doesn't have to be a giant brand . It can be a small brand just started by people who know what they're doing and they've got the support system in place so that they're there to help you . Because you know there are some locations in a town that are better for a particular brand than other locations and they should know from their experience which ones those are , and they should be able to help you with that . So there's lots of things all down the line that , if they've got a good support staff behind them , I think that's going to really improve your chance of success as well , because a good franchise takes a lot of the risk out of a business startup away , really because they've got proven systems . You just want to make sure that they can help you and they're not too overburdened with whatever they're doing , so that they can make sure you're successful too .

Lance Hood (FranPro) 5:14

Right , yeah , because you told me about people that were growing so fast but the franchisees were struggling but they were still loading people in . Yeah , and you know there's got to be some red flags . What would you say to the franchisee oars , as some you know , hey , I'm a franchisee oar , I'm getting started . You've seen big brands . You've seen small brands struggling , high performing . What advice would you give to the franchise companies ?

Brian Peart (Commercial Capital) 5:39

Well , if it's brand new , they've got to get on the franchise registry right with the SBA . So they've got to go to the SBA and you can go in there . But I would say that make sure that you are clear on the type of person you want to bring in to your company . We mentioned on a different video me and you that I helped Firehouse Subs grow across the way . They had an interesting thing They'd have a day of discovery and they'd fly the potential franchisees down and they spend a day at corporate and they meet the owners etc .

Brian Peart (Commercial Capital) 6:15

And the one thing they wanted in the back of their minds they were looking would we want to fish with this guy , believe it or not ? They just wanted people that were kind of like them , kind of friendly , kind of whatever . They were clear on the type of person they wanted to recruit and they did very well . They're at 1,000 locations now or whatever . They've done really well and I think Burger King just bought them or something . So make clear on who you want to recruit and then just make sure you support them , you make sure they're successful .

Lance Hood (FranPro) 6:51

So what are a few challenges that commercial capital ran into when it was growing , and how did you solve those ?

Brian Peart (Commercial Capital) 6:59

The worst challenge we had was the 08 market crash . Whereas much of the world went into a recession , the commercial mortgage backed securities markets shut down completely , so we lost 95% of our business in three days . You couldn't even get an SBA loan because the pricing was so bad that the banks couldn't sell the paper . So once you had that crash I mean we had 700 branches across the country in 2007 , 785 . We were monstrous , and then we lost 95% of our business and I foolishly thought that it was just going to quickly turn around . It was just a blip , and a year later , after paying everybody's salaries , I had drained all my resources . I had to just completely reorganize my business and I made it loan officer-centric so that it's basically me . When you call in a commercial capital , you're going to get me , and so it's not a legacy thing . My son does work with me and I can bring in other family members , but it's not something where it's a legacy thing , but it's something where I know , that I'm marketing .

Brian Peart (Commercial Capital) 8:11

I know that I'm doing the business and I know what I'm doing . And so if the market cracks again , I will gain market share , because I am doing it better than everybody else , and that's kind of happened . Commercial volume has slowed down some , but I'm having my best quarter ever , and so I'm gaining market share as we speak .

Lance Hood (FranPro) 8:35

Yeah , I remember when I was talking with you , you were like busy Things are busy , like it was hard to get time in for this call . So , plus , yeah , well , it seems like by keeping your sales , your costs down , admin down , sales up , you really have a business that's always focusing on keeping fed and not costing too much . I think other businesses can take that concept and use that too , because that's the way you don't get bogged down in all these expenses that are dragging you down , right , yeah ? So One other thing what's some of the most valuable business advice you've heard or discovered or ever shared ?

Brian Peart (Commercial Capital) 9:19

So you know , I think one of the best things I ever heard was your inflow must exceed your outgo , even if it's by a dollar . If you bring in more money , then you pay out in expenses . You've turned a profit right . Where it gets deceptive is people . If you're growing your debts , then you're not turning a profit . So you might start the month with $10,000 in your bank and pay all your bills and everything and then still have $10,000 at the end of the month , but if your credit card balance is grew by $5,000 , you actually lost $5,000 that month . You didn't turn a profit .

Brian Peart (Commercial Capital) 9:52

You might feel wealthy because you still have $10,000 in your account , but you actually lost money , and if you do that for too long , then you will be in a crisis situation , and so you can't allow that to happen more than a month or two In occasional odd time , when you've got a lot of expenses one particular month . That's one thing . If , every month , your debt is growing , that's a huge , huge warning sign that you're losing money . And I think the second one would be try to grow your sales constantly , but also keep your costs . Look at your costs constantly .

Brian Peart (Commercial Capital) 10:31

So you want to be doing both and adding revenue streams and new markets to grow your sales . But be looking at the costs that you have and try to renegotiate different contracts if you have them and cut costs where you can . I just reduced my costs in my processing division and increased my productivity , so I mean my profitability is going to go through the roof because I was growing sales and cutting costs . It's doing both at the same time . If you can , don't just get all about sales and forget about your costs , and don't get all about cost cutting and forget about your sales . You got to do both .

Lance Hood (FranPro) 11:13

And I could see how having that increase of debt could actually make you believe that , not even realize that you're actually going . You're getting pulled down because you're not seeing it . It's just a debt balance . I feel like it looks good .

Brian Peart (Commercial Capital) 11:28

I know from experience . That's what happened to me in 08 . I was a millionaire on paper , but I also had a million dollars worth of debt . I had three million dollars worth of assets , but I had a million dollars worth of debt and when the market crashed , that three million of assets went down to 500,000 . All of a sudden I'm upside down and it took me years to pay all that off . I didn't file back and say it took me years to pay it off and I thought I was flowing because I had millions running through .

Brian Peart (Commercial Capital) 12:02

But actually today I'm way more profitable than I was back then and I'm still only a third of the volume I was doing at my high in 07 as a company . But I'm three times more profitable than I was back then with no debt . Really .

Lance Hood (FranPro) 12:17

And just from talking with you and listening to you , I can see how that would be beneficial . Because when I talk with some people , you get a rep that works for a company and they're getting a salary and so they're just like , if I close it , if I don't , they don't have this drive to make it happen . They're not hungry .

Lance Hood (FranPro) 12:34

And so they're just sitting there content and they're just like eh , you know , and you're focusing on making sure that deals close , and that , I think , is one of the big things that stands out about you .

Brian Peart (Commercial Capital) 12:49

Insurance companies get residual right . I don't . If I don't close the loans , I don't make any money . I don't feed my family , you know , and my six kids . So I have to work and so I am very , very focused . I'm only going to take in loans that I feel I can close . But if I do take it in , I do intend to close it , and because otherwise I'm wasting my time and that's not fair to anyone that counts on my support , you know . So yeah , you got to be on it , man .

Lance Hood (FranPro) 13:24

Last question , Brian are there any trends or new technologies that you think people should keep their eyes on ?

Brian Peart (Commercial Capital) 13:34

So I'm not a tech guy , but you need to be aware of what's happening in the marketplace and pay attention to potential disruptions . We're speaking here on what Tuesday ? Last Friday , a big bank went under , so there was a lot of hubbub on everything about banks . Are they in trouble ? And most banks are very healthy , so that's not a problem .

Opportunities in Times of Disruption

Brian Peart (Commercial Capital) 14:05

But whenever there's disruptions , there's always opportunities , and so be aware of the opportunities that may be present . Don't be afraid of things to come .

Brian Peart (Commercial Capital) 14:14

There are a lot of warning signs in the economy and other things to make one doubt , but there's always opportunities to make money . There is always going to be people eating out . There's always going to be people using things . So the Roman Empire fell right , but I can still go to Rome , italy , today , thousands of years later . George is not going to disappear off the map if the Federal Reserve keeps raising rates , so there's always going to be business around . You just have to look for the opportunity and see where they are . I'm always looking . The Fed started raising rates last year , so now this year it's very beneficial to refinance 7A loans into 504 loans , so now I'm doing a lot of refinances . Last year I didn't know refinances . Now I'm doing more refinances because I'm saving these people 3% and 4% . So I'm just looking at the opportunities constantly and trying to take advantage of them with product that I have .

Lance Hood (FranPro) 15:14

And business is really about solving problems , and so what you're saying is , when these big problems come up , it's not that you should worry , it's that you should go . Whoa , if I have the solution for this or a solution for what the problems that are coming because of this current situation , I can really grow . There's some companies that really grow back . When we had COVID , I mean , there was companies that just went off the charts because they were in a situation and they ran with it Zoom was one of them .

Brian Peart (Commercial Capital) 15:39

We're on a Zoom call right now . Right , zoom just took off because of COVID lockdown , so there's always an opportunity . They made billions , I don't know , lots of money during that time , so absolutely .

Lance Hood (FranPro) 15:53

Well , thanks , brian , I appreciate it . If you would like to work with Brian you can go here and reach out to him https://Franpro . vip/GoCommercialCap .

Brian Peart (Commercial Capital) 15:55

Thank you buddy .