ET14- Picking a Franchise w/ The Franchise King

Joel Libava Knows Franchises- Before You Buy One, See Him!

ScreenShot011Actually, I’ll take that a step further and say not all franchises are good, period. People new to the business of business sometimes have the idea that a franchise is an automatic success and you can’t lose money investing in one.

That is absolutely not the case. While there are plenty of proven concepts that do a good job selecting owners who can be successful and supporting them until they are there are many more with less than stellar records whose franchisees end up largely on their own.

Figuring out how to get into a good franchise that will match your personality, experience and aptitude is the job of Joel Libava, known in the trade as the Franchise King.

Joel doesn’t get paid to put you into a particular franchise, he gets paid to help you find the one that is best for you. That is a critical difference and one you should really appreciate!

I had a good time talking to Joel about the ups and downs of franchising as a business model and how they can be great businesses to imitate, even if you don’t end up buying one.

Check out the podcast and if you are even remotely thinking about buying a franchise be sure to sign up for Joel’s Franchise Business University course. It’s the best money you will spend of all your franchise investments.

Show Links:

Twitter: @FranchiseKing


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Matt:              Alright! I’m excited today for this episode to introduce Joel Libava from and Franchise Business University. He is, without a doubt, the reigning franchise expert on the internet with a ton of experience in franchises and franchise decision making for perspective entrepreneurs. With that, let me just jump in to Joel. Give us some of your background and where you got to today, where you started from and where you got to.

Joel:                Sure! I’ll be happy to. Thanks for having me, Matt! The first question people usually ask is “Where did you get that crown?” and “Why do you think you’re the Franchise King?” Well, I bought the crown in the store and the 2nd thing is that I didn’t come up with the name, The Franchise King, myself. It was kind of conceived for me by a business consultant in my Ohio area who yelled from the across the room at a big business convention one day, “Hey! It’s the Franchise King!” I said, “Huh? Who?” and a friend of mine, Jim Cooper in Cleveland, who is a pretty big internet marketer and author said “Dude! You got to copyright that thing. Hurry up!” So, I got an attorney and I got a copyrighter and it stop. It’s work. I try not to be too hokey with it. I don’t really wear the crown because I look like an idiot with the crow but I use it on my advantage and I try to share straightforward information like [inaudible 0:07:25.3]. I didn’t wake up one day saying to myself “I want to be a franchise adviser or a business owner.” I do wake up one day after being fired from my last real job back in 2001 saying to myself “I just don’t want to work for a bunch of idiots anymore but I don’t know what I’m gonna do.” And then, my late father, Jerry Libava, who is one of the first franchise brokers in the country hammered on me for about 3 months to join his firm, which I did. It was a good for me for a while. I was a broker. I was helping people get franchise businesses at the runway. I was a matchmaker making pretty good money. But something changed. Some people that I were helping, all of the sudden they weren’t too successful. They were actually going out on a business. Guilt set in even though I know it wasn’t my fault. It wasn’t feeling right. I was making a pretty big permission check to put someone to business and I was happy for them and I wanted to put them to the business but they were failing and it’s just was happening too many times. So I said, “There’s got to be a way for me to help people look into franchising carefully without my wallet being affected, if they buy it or not.” People pay me for my expertise but I don’t get paid by the franchise or as a broker. So, I’ve taken a big income hit. It’s getting better now. I’d like to help as many people as I can. I love what I’m doing and the money will come and it’s starting to. I’m okay with the decision to leave franchise broker but I really focus on making sure people are careful and that they do incredible research. That’s what I specialized, teaching folks how to do great research in the franchise they choose.

Matt:              Just for people who may not be aware, a franchise broker generally works with a subset of a total franchise world. They only work with franchisers that pay them a commission for putting people into the franchise. Whereas now, what you are doing is you’re completely independent of that revenue source and so you can point people in the direction of any franchise under the sun vs. just the limited amount of franchises available to a franchise broker.

Joel:                Exactly. I’m not a matchmaker but once I get to know someone if they’re working for me on an hourly basis, I’ll say “You know what, I happen to know this franchise. I think the concept might be a good fit for you.” You need to talk to them. So I have no problem in doing that. But in general, I’m showing people – kind of pointing them the right direction based on what they’re telling me. What directions should they look? What sectors in franchise that you’re kinda help them figure that out?

Matt:              So, what are the things – I’ve always sort of wondered about or try to evaluate potential franchises as a road to entrepreneurship. What you’re paying for or should be paying for hopefully is 2 things, right? You’re paying for the brand and the awareness that you get by being part of a system as oppose to an independent operator and then you’re also paying for hopefully the system, the operating plan that lets you be successful once you open the door. But there are so many different franchises out there. How do you evaluate whether or not you’re getting your money’s worth on those 2 accounts from all those different options

Joel:                Well, as making things a lot of easier but at the same a little more challenging. It used to be that one would go to the local public library in our neighborhood and gets some magazines and look at franchises that way and then trying to find books written by educators and business people on franchising and they kinda figured out. Now, everything’s really out there but everything out there isn’t true. Every franchise website you go to isn’t what you may think it is. Some of the franchise websites out there are run by franchise brokers but they don’t really tell you that. It’s a little funky. The way that it works for is to what are the right ones and the branding and a good operating system. I mean, you want to look at the internet. You want to build a Google search or a yahoo search on the franchise name and [inaudible 0:11:56.8] but the best way is to talk to the franchise or your franchise sales rep for some basic information and then, one the time is appropriate to talk to people that are actually living it, who have written a check, who are franchisees, existing franchises, it’s really about the approach. You have to approach them the right way. You could become a friend and that’s how you gonna get all the answers to what you need. [Inaudible 0:12:30.2], there would be a franchise dog who owns his own Twitter account. He is hanging with me on the office today. Actually every day in the castle. If you hear a little Jingaling, that’s his call.

Matt:              Nice. I guess, in retrospect, I’ll jump to go a little bit one of the questions obviously is “Which franchise is gonna be a good investment for you vs. some of the other options?” but really the first the question you should be asking, “Is franchise right for you at all? If so, what type of franchises kinda best fit you for what you want to achieve?” is that something that you can help people?

Joel:                Absolutely! I’ve created a free quiz and it’s easily found on where people take a very unscientific quiz and I question some rules. Other words, “Would you make a good franchise candidate?” a good franchise candidate is someone who is willing to follow all the rules and who is not gonna really bunk the system. Someone who is okay with putting their ego aside in order to reach their goals because the important thing to remember is, when you buy a franchise, if you buy a food franchise for instance like Subway, it was someone else’s concept. Someone else came up with the business system. Someone else came up with all the different prices, information, recipes, if you would. It’s their baby. It’s not yours. If you put your ego aside and say “I don’t care what it takes. Maybe I’m sick of working for corporate. Whatever my reason is why to be a franchise owner, I’m going to be really okay using someone else’s system as long as it can get anywhere I want to go.” So, the franchise quiz really gets the people thinking whether or not they are either franchise material and if they have the tolerance to become a franchise owner. There’s no guarantee, Matt. Franchising is risky because it’s your mind you’re investing. Really, until you’re in it, you don’t know everything.

Matt:              That’s what makes it sort of a tricky set-up because on the one hand, you have to not be the kind of entrepreneur or personality that wants to control everything. Like “I want the logo different. I want the menu different. I want to operate differently.” All that, but at the same time, you’re putting the money in. then, it’s on you. They’re not gonna make the money for you. You’re not an employee who is just showing up to punch in and punch out. You have to hustle and make it work.

Joel:                Yeah. With you accounting background, Matt, you know who’s a business person and who is not. A cool thing about franchising is a lot of assistance is provided like payroll to figuring on your expenses. I mean, there’s a lot of really cool software program that some of the top franchise owners use which makes it easier. You don’t come [inaudible 0:15:49.7] a ton of business experience but still you’re willing to work hard and you have to be really willing to listen and follow the rules.

Matt:              Right. I think a lot of people are somehow under the impression that it’s an investment like buying a dividend stock and you put your money in and then it just pays you off for a certain amount every year, but it’s definitely isn’t. It is an independent business. You may have a brand behind you and a system but it’s just as much a business as everything else and you got to put the work in to make it successful and it definitely can go under. I’ve got some clients who are franchisees. Some are doing very well and some that are border line. It’s not for lack of trying maybe in your particular cases but the franchise business is not a guaranteed income by any means.

Joel:                That’s right. If we sum all those people you’ll be able to help. And what I try to prevent with all the stuff that I write and with my new Franchise Business University, I’m trying to prevent pain, financial pain. I don’t want to see people lose everything. A friend of mine, Shawn Kelly, once own a website called “” It’s interesting because you really can get a good feel of the emotions behind franchisees that are going on a business who just aspires their franchise. I don’t want anybody that I ever work with to end up on in the comment section. That’s what I’m trying to prevent. Shawn is a great guy. He has a cool site but I don’t people going there commenting, because if they do that means that they are either about to fail or they had. So I really try to prevent that.

Matt:              I think the best defense against that is a good education. You have to understand what you’re getting into, the requirements, what you’re gonna have to put into it way beyond just the investments but what you’re gonna have to put into it and then understand what you’re actually getting into, the business you’re getting into. Even if you’re a newbie, even if it’s an industry that you are not familiar with, you really should do your homework and understand who the customers are and understand the market above and beyond maybe what the franchise is going to tell you. Really dig in and understand how the whole thing works to give yourself a best fighting chance of being successful.

Joel:                In addition, and I totally agree, Matt. In addition, I want to see people learn about franchising itself. I want people to understand what the business model is really all about. A lot of people think that, “Oh! Wow! All I have to do is write a check to the franchise” or “It’s pretty much a business in a box. I just have to turn the key, open the door and magic will happen.”

Matt:              Not likely!

Joel:                No. if it’s easy, it’s probably not gonna be real.

Matt:              Yeah. Well, back to the sort of the earlier point that brought up and I’m looking at it as you said sort of from an accounting perspective and looking at the numbers in black and white. What you’re giving up in being a part of a franchise is you’re giving up a good chunk of what would otherwise be money in your pocket. Those are royalties. If you weren’t paying those royalties, there would be money in your pocket. So you really have to look at “Okay, this is how much I’m gonna pay.” Whether it’s a percentage of sales, or flat fee or whatever it is “This is how much I’m giving up to be part of the system. So, am I sure that that’s a good return on that investment vs. either being in a different franchise system or being an independent business where I don’t have those royalties but then I have other challenges.” Understand what you’re giving up in becoming part of their franchise and make sure that you’re getting something in return, hopefully equal to if not more than what you’re investing into it.

Joel:                I agree. Some people may not really think about that they are looking in getting into a franchise as oppose to an independent business or starting your own thing is speed to market. Franchise is really authors. You can get in business pretty fast when you a franchise because everything is kind of in place already. It’s great. If it’s a food business or a retail business, once you find a location you could be up and running really fast as oppose on doing it on your own, trying to figure it all up, before you even get the location you’re talking months. Speeder market is huge. It’s a huge advantage in franchising especially the way business moves today which is fast.

Matt:              Definitely. I think one of the big things when they are considering a franchise is there is a fairly significant upfront investment in most cases as well as needing to have operating capital in reserved to get you over the hump on the breakeven point vs. a lot of startup business, you could start, especially on service business being a web designer or something like that, its only hundreds of dollars. How do most people work out financing their franchises and mostly personal savings? Are there loan options? What are most people do or what are the options?

Joel:                Well, in the good old days, folks used to just kinda [inaudible 0:21:14.6] and borrow against their house directly without going to an SPA Lender or something like that. Now, it’s a lot harder to get. It’s still considered as startup financing. It’s a lot of harder to get. The banks are kinda weird. They’ve been weird since 2008. It’s better than it was but you need to have really big credit now and you have to show that you have enough money to still ask. A lot of people forget about operating capital. More people than that forget about living capital. You still need your living business. Not like you’re buying a franchise, a startup franchise and make $60,000 on your first year. You might not have anything. You need to have money stash away.

Matt:              When you help people figure out what they are doing, I’m assuming you’re looking at the whole picture right? Their personality? What’s gonna be a good fit? Their experience as well as their finances? What they can comfortably manage?

Joel:                Yes.

Matt:              Yes. That narrows the choices.

Joel:                Gosh, almost like an accountant. I want people to be really conservative [inaudible 0:22:31.7]. A lot of people think “Oh! Franchise! That’s gonna cost me $300,000” Well, maybe. Maybe not. What if it’s a service based franchise where it’s a residential house cleaning business. Those are $100,000 or $150,000. Become a business coach, that’s generally under a hundred thousand dollars. It’s not always big money to get into a franchise. It depends on the type of franchise you’re gonna get.

Matt:              Okay, this is sort of a subjective question obviously. In your opinion, what are the some franchises to get into? Obviously, we’re throwing out who’s the best fit for what. But just some of the best, the most consistent success stories you’ve seen. Are there some that kinda stand out as being good choices for many people?

Joel:                I could name a couple of food franchises. Probably at least one. For instance, five guys [inaudible 0:23:39.9]. Now, of course, everyone is like “Oh, great Joel! The franchise king said that Five Guys Burgers and Fries is a great franchise.” I think it is. From a coaster point of view and from what I could tell from a franchisee point of view, however, there’s [inaudible 0:23:57.1] in the United States that happened for a couple years now. So, it doesn’t help much but if you go into a Five Guys, you’ll see it’s a pretty tight operation. High investment, over half a million dollars to own one and there’s a lot of payroll, there’s a lot of money involved in running it. But you know, a father and his kids started this thing and really have done a nice a job. That’s one even though it’s not available. There’s a lot of ones in the food industry. There’s things in retail. There’s healthcare, senior healthcare. There’s a lot of stuff in senior care. I’ve worked with Bright Star Healthcare in the past. I’m working with a younger senior home care company right now. It’s a really nice place called Happier Home in New York. I think she has a pretty good thing going. She does placements. It’s pretty cool. [Inaudible 0:25:00.6].

Matt:              I knew it was a difficult question that I asked.

Joel:                The best franchise for you is definitely could be the best franchises, could be a little different from what I see because of their personality, because of the money we may have to invest. It’s kind of a loaded question but the best way to find out what the good franchises are is you try to match yourself, match your skills and your strengths to opportunities that will allow you to use them and talk to the franchisee and set an appropriate time. Find out if they’re making money. You could even ask them what they know of you, you think you can make a good franchise owner. There’s a lot of really cool ways to do it but there’s nothing magical. It takes hard work to find the franchise you could money with and be successful in and hopefully I help people do that.

Matt:              Well, I knew it was a loaded question. It was sort of those things where I think a lot of – in the old days anyways you said, people go to magazines. There’s a really prominent business magazines that does a list of franchises but from what I heard, I don’t know if it’s true or not, but those are actually the ranking that are at least partially influenced by paid placements. Asides from anything else, the list of what’s the best is pretty subjective and maybe influenced by other things as well. Just because something ranked number 1 or number 5, it doesn’t mean it’s a good fit for you at all. That’s really not a place to kind of start your research effort.

Joel:                To be fair, for disclosure, I [inaudible 0:26:46.6] magazine. I could tell you that rankings are definitely interesting. There are a lot of facts in them at least. Though if you see the rankings, at least you could find out how many franchises the franchisor has, what the investment is. It’s a good way to at least break that down. I don’t know. Some of these franchise review sites, they don’t really disclose how they are making money. For instance, you know a lot about business. You know some about franchise. I know a lot of franchising and I know some things about business. What’s you and I come up with a and we’ll start reviewing franchises, etc. and let’s just see what happens. Well, it’s gonna cost us money to set up a site. We have to host it. We have to do advertising. My point is, some of these franchise websites out there that do reviews, and how are they getting paid for those reviews? Who’s paying for it? For disclosure, it’s really important nowadays. I have more problems with some of the franchise review sites that I do with some of the big name sites that do rankings. It’s just too hard to tell how the reviews are coming about because they ain’t free. I got news for you. Nothings free.

Matt:              Yeah, it’s unlikely somebody’s putting hundreds of hours of work into these sites out of the goodness of their heart. It’s hard to believe.

Joel:                I caution people that are looking at franchisers to be careful about rankings but be more careful some of the franchise review sites unless you understand what their business funnel is. Are they getting paid by the franchise owners? Are they requiring you to pay as a visitor? Are there ads? Something’s going on. The only true review you can get is from a franchisee that’s in business that’s willing to open up to you. That’s the best information you’re gonna get.

Matt:              What’s your opinion on how reliable – maybe that’s not the right word – but how much faith I guess critics give the franchise sales representatives because obviously they want to get – you’re going to them for information about the system and they want to give you good information and find good fits to put in to their franchises but at the same time, to your earlier point, they are getting compensated by bringing people into this system not by kicking them out. Is there trust but verify I guess with franchise sales representatives?

Joel:                Yeah. Part of what I teach at the University Website is how do even talk with sales reps begin with. I want you to get to know them too. How long have they been working with this franchise company? How long have you been to franchising? Do you turn people down or pretty loose with it? [Inaudible 0:29:55.4]. They’re not gonna take this to anyone but because they know of that because the franchise or the CEO is gonna have to approve this person. They want to look good too so it’s up for them. But a few thousand dollars sometimes set writing on whether or not the someone that they work with is gonna become a franchisee. Franchise workers have more than that writing. Whenever there’s money involved at the end, you have to be careful. Is this person you selling you a franchise? Is this person a matchmaker? Or is it about them? It’s tough to tell. Once you start looking at franchises and you found one that is like “Oh man! This is perfect for me. The emotion starts takings over and in effect may start to not be as settled in your mind.” You have to be really careful. I love to tell people that [inaudible 0:30:56.3] machine. It’s close to emotional like “Oh no! I got to do this. I don’t want to talk to any franchisees that are losing their shares.” You really have to get all the facts and take the objective view.

Matt:              Well, I used to see the same thing in doing business sales. If people are skeptical up to a point and then they hit this tipping point where now everything is – they sort of come to bed and dreamed about being the owner and how everything is positive and you can’t tell them anything negative. They just won’t hear it. You want to push that point off as far as you can and be as objective as you can for as long as you can before you commit to something because it is your money at the end of the day. If it doesn’t work out, you’re gonna be the one left hold in the bag so you really don’t want to jump into it with anything other than facts if you can possibly avoid it.

Joel:                Right. That’s the cool thing about what I do. There’s no big fat paycheck waiting for me at the end of the consultation I have with someone. I don’t care if they buy the franchise or what. But if they do, I’m gonna make sure they know everything that is [inaudible 0:32:09.5]. They’re gonna be safe when they work with me. I don’t have any expectations. I don’t have to sell them anything. Once they agree to purchase my services, my expertise, the sales part of what I do is over. “Here’s what you’re looking at and let’s figure this out together.” That’s kinda how I do it.

Matt:              Well, I think that’s great and I think that’s the best investment that anybody is looking at a business, franchise or not, can make is educating yourself on what the options are, what the risks are, what the opportunities are, what you’re getting into and you don’t want to be paralyzed by urinalysis but at the same time, just jumping into something is a pretty sure recipe for disaster. You may still end up being successful but it’s gonna be a lot more expensive and take a lot longer than it probably needed to. Somebody like yourself offering this kind of education in my mind, that’s the best money. Whether it’s a couple hundred or couple of thousand dollars, to spend that money upfront to find the best fit and really not guarantee your success but go a long way towards being as successful, as long way towards hopefully mitigating any risks and insuring success as much as possible. That is money well spent. Even if at the whole end of the process you don’t end buying a franchise, then look at it is maybe half a million dollar you saved from a big mistake.

Joel:                That’s right. Here’s another secret thing those people don’t know. Sometimes a spouse is not very enthusiastic about this whole franchise idea and by taking the course or working with someone, that is subjective, the spouse may, by ends, may feel better than if the spouse was left totally out of the game. It’s really important to get the whole family involved. Folks, if you’re looking at a franchise and your spouse is not that enthusiastic, we need to talk. I’m not gonna convince but I’m gonna share some statistics and talk about the safety in working with someone like myself or working out with other professions, people that can help your business plans, people that can help with financing. Smart people that can really try to lower the risks.

Matt:              In that way, the spouse knows “Hey! It’s not just this crazy idea that you got. Other 3rd party, independent people, who know what they are talking about have looked at it also and said if you did this right, it could be a really good thing.” That’s gonna make anybody feel more comfortable.

Joel:                For sure.

Matt:              Well, I appreciate your time, Joel. How can people who are interested in finding out more, getting in touch with you? What is the best place to find you?

Joel:                My main website is kinda the hub of everything – My newest website, is where my courses are. I have a free course and more advanced paying course that can be found on that site.

Matt:              Awesome! Well, I’ll put those links on the show notes. I really appreciate you taking the time to chat with me today. I think its super important, the information your providing. The first place I would recommend anybody to start if they got an inkling of an interest in franchising is to check out what Joel’s got and go through the process to make sure it’s a good fit for you. Then, if it’s a good fit, figure out which system in particular to use. I think that’s just the smartest way to go. Thank you for sharing your knowledge with this Joel. I really appreciate it.

Joel:                Thank you and thanks for all you do in small business to in helping people grind the numbers down.

Matt:              It’s my joy.

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