Lance Hood (FranPro): 0:00

Today we have Sam Phelps, the Director of Development for Tenant Financial. Sam, welcome to the call.

Sam Phelps (Tenet): 0:07

Happy to be here, lance, thanks for having me.

Lance Hood (FranPro): 0:10

Can you share a little bit about your background and how you became the Director of Development with Tenant?

Sam Phelps (Tenet): 0:16

Sure, I think we talked about the recovering banker who was in banking for about 12 years, started my career right out of college there and did a little bit of everything, as far as the underwriting administrative side to the sales side and finally running an SBA department, before I departed and made the transition over to the consulting side, which is. It's fun for me to get to talk to people, franchise orders, franchisees and our clients and say, hey, this is what the bank's thinking and this is what we need to adjust to.

Sam Phelps (Tenet): 0:54

So I've been working with small businesses all my life and just thoroughly enjoyed it. I feel like I've learned more in my career than anything from the individuals I've worked with and getting to hear their stories and just be a resource for them. So it was kind of a natural transition to come over to Tenant last year, and so I've really enjoyed the opportunity here.

Lance Hood (FranPro): 1:21

Well, for everybody who doesn't know what Tenant is, can you give us an idea of what you do, the different kinds of programs and how what you do is different from other companies?

Sam Phelps (Tenet): 1:30

Sure Tenant Financial Group, first and foremost, is a financial consulting company. We were built around being an advocate for our clients, being a resource in this wide world of funding needs for the franchise portal, and we have a couple of different ways we can help in that. So we are a third party administrator for 401k plans, specifically in the ROBS program and for those that don't know about that, that is the Rollover Business Startup, which allows you to access your retirement funds by investing into your own company much like you would a stock on the stock market or a mutual fund.

Sam Phelps (Tenet): 2:12

You can buy shares of your own company and be off to the races. We do all things in that space as well as we are a funding resource.

Sam Phelps (Tenet): 2:20

We have a network of blenders that offer a wide variety of different debt options, as far as SBA, which is a lot of what we do, as well as unsecured signature loans, and then, finally, equipment funding, whether that is an equipment loan or a lease. You try to just make sure that we take care of our client first. We know that each person that walks in our door is different, with different backgrounds, different risk tolerance, different things they want to accomplish, and our goal is to make sure that we listen to you and then offer you the different options and or transparent, so that you can make the best decision for yourself. So I would say that is how we are a little different. We do a lot of listening, we make sure that we take into account your situation, and then we want to make sure that you understand and turn over as many stones as you have to in making your decision, and then we move forward with whatever works best for you.

Lance Hood (FranPro): 3:20

And can you share a couple of, I would say, disasters or really bad situations that you had to help the client turn around?

Sam Phelps (Tenet): 3:30

Well, I think sometimes and we talked about this earlier, lance it's when either the guts started on their own or have gone down a path that you may think you have been doing, going the right direction. We have to do a little bit of cleanup. I think our staff is really good about that. We're understanding that sometimes people go, and one of the things with the ROBS program is it has to be a taxable corporation and LLC is different in how it's taxed. It's not taxed on the corporate level.

Sam Phelps (Tenet): 4:07

We see that a lot where folks maybe already have their business set up. We're prepared we help you make that change. And then of course not to get too far off in the weeds, but it is my background. I always have to say with SBA there's very specific rules. What we try to do is just get in front of those, and sometimes we come to clients and they have scenarios where it could be. Unless they adjust something or make a change, it could be a non-starter out of the gate with SBA.

Sam Phelps (Tenet): 4:38

Our goal again is to try to get as many of these questions answered up front, so the process down the road is a lot more smooth.

Lance Hood (FranPro): 4:48

So you mean, if somebody sits there and goes, oh, I've already set up my LLC, and you're like, and I want to use it, and you're like, well, you may not be able to use that for this loan, you run into those situations.

Sam Phelps (Tenet): 4:59

Yeah, it happens occasionally, but for all those listening out there. It's not the end of everything. We can make changes and so, again, it just starts with the conversation and more than likely we've seen this scenario before. We can help you make changes that need to be.

Sam Phelps (Tenet): 5:20

But don't be afraid to come to us and they'll feel like you have to do any homework ahead of time, where we'll stay on the call as long as you need to, and we very, very often, with our group, do follow-ups and follow-ups to our follow-ups to make sure we've got everything taken care of.

Lance Hood (FranPro): 5:36

Yeah, I've had an experience where people try to do it themselves and they have a half baked pie and then they want me to finish it and I'm like I can't help you very well at this point. That's a good analogy.

Sam Phelps (Tenet): 5:49

It's kind of like if. I were to go into the kitchen of my wife. She's Italian, so she's running the show. I'm there to help put the pieces in the pie and if I listen to her guidance, boy, do we have a much better pie if I try to bake it myself.

Lance Hood (FranPro): 6:07

Yep, or somebody pulling it out of the oven said here, fix it. I'm like that's harder.

Sam Phelps (Tenet): 6:13

Absolutely.

Lance Hood (FranPro): 6:14

So what are some of the biggest mistakes, or maybe even false beliefs that you see that tend to hold either people buying a franchise back or franchise companies, because sometimes they are making mistakes and having false beliefs.

Sam Phelps (Tenet): 6:30

I think the I'm gonna kind of flip it to the other side on this for mistakes. I think a lot of folks are scared that they can't get funding, that they are not worthy, and so what we try to do is really have that conversation to you know what's the total project cost? Are you wanting to do one unit, two units, three units? And really there's usually a path there. There's usually an option for most people. So my advice would be is to have that conversation early.

Sam Phelps (Tenet): 7:05

Don't be afraid to pick up the phone, don't be afraid to schedule a meeting or ask us to reach out to you, and we encourage our franchise, of course, to do that. We much rather you come to us when it's something in the gray area and we see if we can work the solution, because sometimes there's something you haven't thought about. There's a way we can move things around, to get creative on the deal, and so my advice would be always to get us involved sooner rather than later, and then we can go through what the options are, the highs and the lows of it and how it makes sense for you, but you know I hear that a lot from our franchise orders that people are nervous about the funding side of it because it's their first commercial transaction.

Sam Phelps (Tenet): 7:49

It's their first business transaction and they don't know if it's something that they can accomplish. And that's what we're here to do is we're here to help ease that pain as much as we can.

Lance Hood (FranPro): 8:05

And how do you see top brands doing things differently than struggling brands? What are those kind of indicators or signs or things that you just stand out about the top brands?

Sam Phelps (Tenet): 8:15

I'd say the top brands are probably the ones that engage us the most but at the same time, they are absolutely relentless in their communication, relentless in making sure that they have got their franchisee in a good position to keep moving forward. I think once you see a franchise that has a process down, they are very happy to provide information, to answer questions, to make sure that everybody goes into what their eyes open. I think that comes from experience I mean, we've all been there where we can always remember the really good ones and then the things that weren't really bad, and so learning from those situations to make sure you encompass all the heartaches and all the things that can help that person make a very educated decision.

Sam Phelps (Tenet): 9:12

So give those to our franchisee or so we work with, because most of them do that.

Lance Hood (FranPro): 9:18

Yeah, I've seen that you have the people who are new and excited but figuring it out and the communication isn't really as consistent and helpful, so that you're not a team. It's almost like to treat it like a handoff. But then there's the people who are very process oriented, maybe too much process oriented, and in that instance too, they may or may not communicate with you, but it's that back and forth, like we're all on the team. Sometimes, as a broker, you see that you're pulling the client, the franchisee and the lender all together and making sure that everybody is on, knows everything.

Sam Phelps (Tenet): 9:57

I think you nailed it Just making sure that flow of information is as smooth as possible based on the current situation.

Lance Hood (FranPro): 10:05

Well, what are some of the most valuable business advice or realizations that you would share with franchise companies?

Sam Phelps (Tenet): 10:13

I would say that the transparency you know the ones we work with that are very do very well. Fdds are sharp. They're very reflective of what's going on in the company. And then also, you know revisiting that every year, what if we're going to throw the major thing out for both franchise owners and franchisees? It's make sure you're well capitalized.

Sam Phelps (Tenet): 10:37

If you think you're going to hit break even by day 45, you know what we might plan for 90 days to hit that break even. So you have a little bit extra cash and a bank account. You know our goal is to working with the franchise orders and where we try to have a value add to is we want that person that when they're done working with us and working with the franchise or you know, through that closing process, all they're worried about is getting that business operational and pumping along there through that ramp up period. So capitalization is key. You know making sure the bank accounts are full and that they can cover you so you can be successful. And you know the good ones do a great job of that.

Lance Hood (FranPro): 11:23

What's one of the most important factors with the lenders when it comes to getting a loan closed for a franchise? I mean Item 19 play a part, like, what are the big things that play a part with getting a loan?

Sam Phelps (Tenet): 11:37

You know I'm going to switch it to some of the qualitative here. I mean absolutely the FDD and breaking down. How do all the pieces come together? And what Lance is talking about is you know, can you pull all the pieces out? Because that lender is going to say, hey, where's all these funds going to? It comes out in what they call a source of the use. Who's sourcing it, Whether that's your equity contribution, your cash, maybe it's Rob's dollars that we're helping you with, and also that, that loan piece, and so that has to be very specific. But I would say that the biggest thing, let's tell your story. You know you decide to do franchising. You've got a unique background. Let's let's really sell your successes. Let's talk about how you are successful and those you know 20 years of being in this industry help to make you the perfect candidate for this, and so you know, just making sure that you're not.

Sam Phelps (Tenet): 12:35

You're not just another person, and that's where we try to help folks and you know, differentiate themselves the franchises are going to work with you to make sure you understand all the details in their FDD and we'll help you check, check, check to make sure that's off the list for the banker. But we're really going to push you to sell your story because then this is the opportunity to put yourself on display and then highlight how you're a perfect fit for this industry, this franchise, and more worthy of the loan.

Lance Hood (FranPro): 13:09

And those are perfect things for someone who's looking to buy a franchise to think about, you know, for qualifying through the bank and for being awarded through the franchise, and that any other tips that you want to give the franchise companies as far as being, how do you say, presenting themselves not just to the franchisees but to the banks so that they are more likely to get a loan? I mean is, are there any factors that the banks are looking at when they're looking to fund one of these companies?

Sam Phelps (Tenet): 13:44

Sure, a lot of it comes down to the performance of the franchise and being able to highlight and back up. You know what we're trying to accomplish in these individual projects by objective and empirical data, and so a lot of that's where you're going to get the questions and underwriting. If this specific situation is different than you know, what's in the median, what's in the average for performance? That's reflected on the FDD.

Sam Phelps (Tenet): 14:13

And so really data is what's going to help solidify the request, to make it an objective decision More than subjective, I think a lot of the subjectivity comes down to the individual, like we discussed, and it's awesome. Tell your story and we are going to help you.

Sam Phelps (Tenet): 14:32

You know promote yourself the best you can, but when it comes down to the nuts and bolts and you're working with an underwriter, what we try to do is make sure it's a very objective process, that you know these financial projections, this business plan that has these numbers and performance information is backed by good hard data in a proven method.

Lance Hood (FranPro): 14:58

And what are some trends or technologies that are new, that are out there, that you think that people should be aware of?

Sam Phelps (Tenet): 15:07

Oh, we're going to go down the rabbit hole. It's the big discussion, even in our world, and as far as utilizing AI at the moment. Even as a company, we're starting to see where we can automate some of our processes or get help with some of the putting together things that normally used to be a manual process. My advice when you look at these business things is look at the resources. I had a mentor that hired me that was the president of the CEO of the bank.

Sam Phelps (Tenet): 15:42

He said I learned real early that my time is very valuable and if we can find things to alleviate some of that stress and so we're actually spending time helping the business grow, whether that's utilizing the bookkeeping resources that we maybe can refer you to, or the franchise or has set up or inventory those types of things to where you're not necessarily having to spend hours or hours after the closing bell and to make your life so where you can concentrate on things will help the business grow and be successful.

Lance Hood (FranPro): 16:23

Absolutely, because then what you don't want to do is be so busy. You don't have a lifestyle Utilizing these tools and technologies to do that Things like AI. The one thing people don't realize is it's useful, but what it does is it reports on what's been written. It's not, as I would say, fully creative. It's looking at what's out there and it's rewriting what's out there. It's more of a reporting function than I found, and all the programs are very different in how they prompt it and talk to it. It's very interesting and very useful as a handy tool, but it's like a fast car that needs a good driver.

Sam Phelps (Tenet): 17:11

Just because you have it. What I was going to say is you can utilize it to its abilities. I think that's a great analogy. The comment we make is you've got a great top notch symphony here, but you're the conductor and it's only going to be as good as the conductor inputting it. It's not a replacement for some things, but if you have something that's repetitive, that maybe is time consuming, you can take that off your plate. It's a great resource.

Lance Hood (FranPro): 17:42

Next question is why do you think it's important to have a think tank like this, where we share information, come together, collaborate.

Sam Phelps (Tenet): 17:52

I think it's always good to continue a conversation that's important, and the reason why I think this conversation is important is a lot of folks have a lot of misinformation out there.

Sam Phelps (Tenet): 18:06

We talked about getting to us quickly. Getting to us quickly helps us understand what you're trying to do but, more importantly, put something together that they're going to be very, very happy with and understand all the different options. And the important reason why we get together on this lens is things change and the economy is always changing. The lending environment, just the overall how things work.

Lance Hood (FranPro): 18:37

It occasionally needs to be tweaked and so making sure that it's not quite as scary as a lot of people think.

Sam Phelps (Tenet): 18:44

There's a lot of resources out there and it starts with a conversation like this. We're having a conversation here as part of the webinar podcast, but this is how we do business.

Sam Phelps (Tenet): 18:58

This is how we talk to individuals and come on over, we're ready to talk about it and hopefully everyone's gotten a couple of different nuggets they can take with them and investigate. But at the same time, I think it's just important to keep uncovering these stones for people and see if they can be as successful as they can with doing their own research or getting to a funding partner to help get these things off the ground and make the dreams come true. That's the goal.

Lance Hood (FranPro): 19:30

Right. I've seen so many people that where they're nervous to talk to people but we don't realize is the experts on your team. It's your team and it's a shorter, easier, simpler, less mistakes and corrections to start with your team than to try to do a bunch of self-research and go off in a different direction, because who knows when that stuff was written and who knows how accurate it was? Times are changing and so, just like you, give people that maybe start with the wrong business entity just be easier if they just started with their team on day one and work with them. Well, Sam, I appreciate you. I want to thank you for joining us today and sharing your insights and anyone who's interested in Tenant. You can click the link here https://Franpro. vip/GoTenet. Well, thank you, Sam.

Sam Phelps (Tenet): 20:23

Thank you, Lance. It was a pleasure. Thank you.