5-3: Exploring the Alluring Universe of Franchising: The Ups, Downs, and the Laundry Mat Detour

Are you ready to unlock the doors of the franchise universe? Promise you, this episode is a goldmine for aspiring franchise owners. We pull back the curtain on the enthralling upsides of franchising, such as tapping into brand recognition, leveraging a proven system, and enjoying streamlined processes. But we don't stop there; we dive into the deep end, exploring the unchartered territory of the obligations and hefty initial investments. 

Have you ever thought about the laundry mat industry?  Come down the rabbit hole as we take a detour into the world of laundry mat franchising, known for its success and longevity. 

Plus, we highlight franchising as a potential launchpad into a new industry, and how you can do this without leaving your current job. Join us, as we embark on this thrilling exploration into the franchise universe and discover a world brimming with potential and promise.

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Jennifer Faith Dempsey has been in the beauty industry for over 10 years. For the last 5m years, she has owned J. Faith Hair Studio. She brings her experience on how she balances entrepreneurship and motherhood. Check out Jen’s blog.

Staci Joy Dempsey is an insurance agent, a mom, and a busy non-profit volunteer. She truly understands what it means to be an entrepreneur. Staci serves as the podcast's host.

Jack Dempsey is the dad who heads up this busy family. He is a founding partner in Dempsey, Weiss & Associates, an Elmer, NJ-based insurance and investment firm that began more than 30 years ago.

Transcript

Staci J. Dempsey: 0:00

Hi everyone and welcome back to the business of business podcast. Two daughters and their dad. I'm your host, dcj Dempsey, and, like always, per usual, thankfully I have the other daughter and the one and only dad, jennifer and dad Not the J word, not the J name Good morning. So we welcome you guys back to this episode and we want to hit on a topic that we really haven't really talked much about and that is the pros and cons of franchising.

Staci J. Dempsey: 0:36

You know we I know I definitely do business and go places that are franchise and there are some really interesting you know ways to go about when you start to look into, you know, becoming a franchise or joining a franchise chain, and then there also can be some, maybe some things you guys haven't thought about, maybe some cons that you haven't really thought about, because the franchise it really is very appealing, I think, to those who like a particular niche. For example, you know the gym that I belong to. They are a franchise which I really didn't know that up until most recently, but the owners of that franchise they have they work another nine to five job and so I think there's some really great things about some. You know when you want to join a franchise. So let's let's jump right into this. So, dad, this was this was your idea this year, this was your topic. So why don't you just start sharing with our listeners a little bit about kind of what was on your thought process at 530 this morning in the gym, dreaming about franchise?

Jack Dempsey: 1:57

And when I jump into that, I just in case people pick up on it and her tone of voice. Jennifer's a little upset with me because I spoiled her daughter this past weekend and had a whole bunch of fun doing it.

Jennifer Dempsey: 2:10

So and he didn't answer my phone call when I called him.

Jack Dempsey: 2:14

I knew you were going to yell at me.

Jennifer Dempsey: 2:16

And then I had a text to him like how dare you? Christmas is very soon, so well, I took her shop for I said let's go shopping for mommy.

Jack Dempsey: 2:26

And then of course it was like pop, pop, do you think I would look pretty in this dress? What am I supposed to do?

Staci J. Dempsey: 2:33

So yeah, probably yes, let's buy it, so you can. So anyway, which leads me to my next question when are you picking my kids up? You have a thousand grandkids that can get expensive quickly, so I'll let you check your.

Jack Dempsey: 2:51

If you want to shut down the spoiling, you know that would be the way to do it. It's toss them all happy at one time.

Staci J. Dempsey: 2:57

Yeah right.

Jack Dempsey: 2:58

But on our topic, franchising, I, yeah, you know, because first of all, I just would encourage our listeners. I mean, one of the magazines I've been getting for years and is entrepreneur magazine. And there you know, and it's a, it's a magazine that does have articles in there for entrepreneurs. You know that are good articles, quick type articles. But the other thing that is really the driver of the magazine is around franchising. They do give a lot of, again, categorically, you know, different franchises based on category food, self care, you know medical, all these different categories and then kind of list, you know, you know what, what are some of the most popular franchises. So again, it's a very, it's a very good publication to get, even if you're not doing franchising, because it usually has good articles in it that will help your business. But it's just interesting. So I've always been tracking and found franchising to be a very interesting business concept. Now, as most people know, if you're, you know, when you look around and you see franchises, what you're, what you're buying into as a system, is the way I would describe it. When you, when you buy into a franchise, you're buying into a system that's already built out. So obviously the investment upfront is going to be probably more than if you took that, that business, whatever that output is of your business, and did that independently, because you could probably scale small or starting out and then hope, you know, you could scale up, as you know, as revenue went up. So it's going to be a, you know it's going to be a more investment up front. So you need to make sure you would be financially positioned to do that Um.

Jack Dempsey: 5:09

But again, having so the so the pros of it would be, you know it's an already established system. You would have brand recognition, you know. So people are going to be familiar with the brand Um, you know. For example, you know, look at your, you know. Look at your um franchise pizza places. You know. You have dominoes, you have Papa John's. These are all franchises with a very strong brand recognition. But if you drive by pretty much every strip center, there's a pizza place in it. It's either a franchise or it's something maybe more independent Um, you know, with one location, but you know so. But again, you're buying into that, into that system. Your distribution, I mean your, the products, all the things that you need are already well established Um and um. You know the systems, whether it be um. You know your, your technology, your um. You know how you handle your accounts receivables. All that has already been systematized, you know so. So, again, a huge benefit, uh, to buying into a franchise. Now, what's the big downside, Jennifer? What do you think the big downside is?

Jennifer Dempsey: 6:30

That you also have to follow their systems probably right, so you don't have like a hundred percent freedom to to maybe run the business how you would run it. Right. There's, I'm sure there's probably things in place that you have to do things a certain way which I in in my mind, can be obviously a good thing and and maybe at times not be such a great thing either.

Jack Dempsey: 6:55

Well, that's exactly right Because, again, you have your initial costs to buying into the franchise and then most franchises are going to have you know what they would, uh, what they would call, you know, like a royalty right. You know, based on some, you know some formula of royalties and that you would pay based off of. You know, off of sales, or you know if it's food distribution, a lot of times you're buying the product you know from them. You know so, um, so or both. I mean, let's look at a very popular franchise like a Chick-fil-A. You know, obviously they're not. You know they're not allowing, you know, each independent owner of those Chick-fil-As to go out and work their own deals with them, deals on where they get their chicken and where they get their, their food products to sell. You know they're.

Jack Dempsey: 7:51

You know the owners of those operations are buying it through Chick-fil-A and again and I'm assuming, I don't know for sure, but there's probably even other royalties you know that need to be paid in addition to that. So so you're paying on an ongoing basis, um, for, you know, for the benefit of, you know, operating that franchise and having those systems and branding. You know, um, you know, at your fingertips. You know, so, um, and not having to reinvent that. So I mean again, my thought around franchising is you know what's your business, you know what do you, what are you looking to? You know, start a business in, so we'll take like your business. Jennifer, you know you're in the beauty business, the hair business, so you are not a franchise, you're an independent operator. So, but what's? But? What could you have done when you came and said I want to open my own salon? What would have been your other choice?

Jennifer Dempsey: 9:00

Yeah, I mean, in our industry we obviously have franchises. I think a popular one is great clips right, we've all kind of heard of that and so the business model around that kind of franchise is quantity over quality. So I mean, you know, I think if you align with that, if you come from that world, then that might make sense to you. I think when it comes to franchising it's more about, like I have this desire to be an entrepreneur, but maybe I don't have this like idea or this vision to start from scratch. So you can kind of get plugged in. And because my salon is in a strip mall, I've kind of seen it over the years of different kind of franchises coming in and moving out. One that comes to mind is we have what's that pretzel place called pretzel pretzel factory in the strip. Now I've been here almost eight years in the strip mall in my location and I want to say it's turned hands probably three or four times right. Different owners, and what number one I think we talked about this before dad like how do you make money off of pretzels? Is the first question I have. But the second thing I've realized as I kind of witnessed that, is that you know you come to my strip mall around lunchtime, pretzel factory is booming, so it doesn't necessarily matter. No one even knows. The consumers don't really know that maybe it's changed owners because it's still the same, the same product as being produced each and every day. So it doesn't necessarily matter who's running the behind the scenes. You know you're still going to come to a product factory, get the get the same pretzel and whatever they have. But from someone that's kind of you know I'm here every single day and know what's going on behind the scenes I'm like wow, it's changed, it's changed hands quite a few times and from an outsider looking in, the volume is still there. So I think I think that's huge for franchises. If you're thinking about that is that when you're independent and you're creating a business from nothing, like I've done, brand recognition is huge and so when you to have to build, that just takes years. Consistency, you know. You know I can tell you, even after almost eight years, like we got people coming into the salon saying I didn't even know there was a salon here and it like kills me inside because you're like what, all this marketing, everything that you know, all that, everything we're putting into letting people know that there's a salon here, and then you still have people saying I didn't know there was a salon here. So brand recognition probably would be like.

Jennifer Dempsey: 11:40

The major pro for me on this topic is you know, you can just have that conversation like does you hear that they're putting the hand and stone in down the street? And there's no, what's hand and stone? Right. But when I put my, my sign up, people are like what is J Faith Hair Studio? Right, what is that? So you kind of the the, you kind of the the consumers already know what to expect when they walk into a franchise, right. But when you're independent, you're starting out from nothing. There's that what is this? What's it going to look like, what's it going to feel like? So for me, on the franchise topic, I think that would be the biggest pro. That comes along with that, and then again, the con for me would be just being able to make those business decisions.

Jennifer Dempsey: 12:23

I've been in that place before where you're boxed in. I can remember a lot around charity. You know, I'm really passionate about giving back. And when you're working for someone else, or maybe you're boxed into a franchise, there's just some things you're never going to be able to do and that creative side of you, you know you can. You can get a lot of pushback from going outside of the box.

Jennifer Dempsey: 12:43

Speaking of pretzel factory again, just because it's in my strip, the last owners made their own kind of pretzel. So they made you know, I forget what it was, but it was good. It was like, you know, a hot dog pretzel, something that was not the franchise you know they don't do. He created his own pretzel and he got in a lot of trouble about that and had to stop doing it. So I remember that was the complaint. But I guess you could probably sell franchises pretty easily too, because I've seen it happen quite a few times. So I don't know what that would look like from an independent person. But there's a lot to go. There's a lot of pros and cons, I think, when it comes to franchises.

Jack Dempsey: 13:24

Well, one of the things that you just mentioned before.

Staci J. Dempsey: 13:27

You know, right in the beginning, you know, the, the gym that I belong to is a franchise and when I, when I was talking with the owner Deb, you know she, she's worked in a, in a casino for the last, you know, 25 years and always had a passion for fitness and for helping people through fitness and she, they had opened their gym in January of 2020. So we know what happened March of 2020, right, but she said, you know, through the franchise opportunity was her way of being able to really, you know, kind of already be plugged into a business concept, which she said she's always wanted to own her own business. But she knew that she still wanted to keep, you know, her, her career in the casino. But this was her opportunity to, you know, be in business and to kind of fulfill that, that dream that she had, but also just to kind of elevate her passion for fitness and helping others with their health. And she said, she said, if it wasn't for the franchise way, I would have never been able to do this because of exactly what you guys have already shared, that you know the, you know what supplements that you need to have, you know sell in the gym, down to the systems, down to the app that we use, to you know reserve what class we we want to take. You know all of that is already laid out.

Staci J. Dempsey: 15:01

Now she did mention that you know the fees that she still has to pay for those things. That is a frustrating area because if they increase the price, they increase the price and you have to sell those products. You have to use that app. You have to, you know use, you know the, you know where people you know to pay for their reoccurring classes and things like that. So on that side of things go up. You know she has also.

Staci J. Dempsey: 15:31

Now she has no way of also kind of filtering that down in any way in some aspects to the consumer because she gets a price increase. She has no way. So that that can be a frustrating aspect of it. But for someone that still kind of wants to stay in the career they're doing and just kind of have a lot of the figuring things out and researching took all of that out of the equation for her. And obviously, going into March of 2020, you know she still had. She still has hiring issues. She still has. You know, march of 2020, the workouts were outside and you know, but she still was able to. I mean, obviously they're still doing very well now, but my point in saying some of that was that the universal problems, whether franchise or not, are still there, like trying to find people to hire and, you know, getting people to your location and things like that.

Jack Dempsey: 16:35

But that's my great alternative.

Jack Dempsey: 16:37

Yes, one of the things that you both hit on that, I think, is a benefit to franchising, you know, especially if you, especially if location is a critical thing for your business. You know, because I've seen a lot of businesses non-franchised well, even franchised, but more non-franchised who you know went into a particular location that just didn't work. You know, for whatever reason it just you know, the business model seemed fine but the location didn't work. Maybe it was just, you know, the ability to get in and out in a convenient way. You know that type of thing. But with franchises they're going to be in most cases much more skilled at helping you determine the right location for that franchise, because they've got the data, they've got the understanding of demographics and traffic patterns and things like that. That sometimes you, just when you're doing it on your own, you're kind of, you're basing it more off of. You know, yes, location, but also price to rent a space and that type of thing. So you know, so that's located. You know, helping you with the location to put your franchise or your business is one of the big assets. Now, with that being said, you might have your own idea around a location and the franchise says, nope, we're not going to allow. That could be territorial. You know where you're infringing on, maybe another franchise's, you know, area that type of thing. So again, that would come, you know, with some limitations.

Jack Dempsey: 18:30

The other thing that you brought up, stacey, that I think is important, and it is, you know, you can see it in Jen's business. There's no way that me, for example, that I could not be in the hair business, that I could open up a J-faith hair studio. There's just no way, you know, because I just I don't, I don't understand the business. I don't do hair. I don't do. You know, I just don't. I wouldn't be able to do it. However, if I have the resources, I can open a sports clips or a great clips or whatever they call the clips. You know I could do that because now it's franchised, right. So it's all. That's already all that's already done.

Jack Dempsey: 19:15

As a matter of fact, I think it's my understanding that a lot of those hair cuttery franchises are actually owned by people that don't do hair. You know they're just. You know they've got the money, they open them and the system's in place. So, like you said, stacy, if you have a person who's looking to say I want to do a franchise, but I don't want to quit my job, I don't want, you know, like those are the kind of franchises you can look at and do, but you know, so that's another option, you know, is, you know, does the franchise allow me to get into that business without giving up something else where J-Faith I'm all in? You know, I mean I can't, I'm not going to work a, you know, a full-time job and be able to successfully operate a J-Faith. You know, the owner operator of that, like Jen, has to be involved in a very significant way. So, again, I think, another pro to franchising, you know, from that perspective, thoughts on that Jen.

Jennifer Dempsey: 20:26

Yeah, that's exactly what I was going to say. I feel like when you even just going into franchises, you you know, comparing them to independent businesses all the independent businesses that I support on a continuing basis you always see the owner in there, and so franchises number one you don't know who the owner is and let alone if you see them. So I think kind of the key to even you know franchising is yes, maybe you know the startup is still working your job and starting a franchise, but you get a couple great clips under your belt and you get the right people in there to run the business on the day to day. It seems really great.

Jennifer Dempsey: 21:10

I guess the downside to that, if you had any passion for the hair industry, you probably wouldn't want to go into that, into that business, but into that franchise. So again, I think, just where you're at which, really what you want to be doing good for some people, maybe not so good for other people, but now you're doing it. Some people, maybe not so good for other people, but now you got me thinking should I get into the franchise business? I still keep this business, oh sure.

Jack Dempsey: 21:45

No doubt no.

Jennifer Dempsey: 21:47

I'm going to Google that later.

Jack Dempsey: 21:48

Yeah, well, and the other thing that again, going back to the publication, you know, entrepreneur publication it does. I look at a lot of these franchises and usually it'll give you in there what the range of startup costs are. And so I mean, I was looking at one recently because you're seeing these new car washes popping up. You know that you drive in them and then they got the free vacuums and they're kind of this. They're really nice. There's kind of state of the art. You can buy membership. It's like I bought a membership, one's like $21 a month for this membership and sometimes, if I'm right there, I'll just I'll go through five times in a row, just because I can, you know, and no, that's an exaggeration maybe two times in a row. But the point being is, you know, I look at these, but I look at those franchises for those car washes and like the one I was looking at, you know, like the average startup cost is like $6 million. I'm thinking $6 million. It's like man, how many $21 car washes do you need every month to pull all that off? But the numbers must work out because you're seeing them right. You're seeing these car washes, you know, pop up and you know.

Jack Dempsey: 23:19

So my point being is, when you look at those numbers, you know they can be headscratchers for sure. But again, if it's something that you feel that you know you would be passionate about and have, and really have an interest in, it's probably worth looking into in more detail. So, but again, $6 million, you got to have some. You better have some money behind you to get into that. You're not going to, you're not going to do that with you know, a few thousand bucks in the bank. So so that could be a topic for another day on how do you, you know, how do you finance, you know some of these things. But but again, I think franchising really does for an entrepreneur. It really does make sense if you really you know, look at it carefully.

Staci J. Dempsey: 24:16

Absolutely. I can see the wheels turning in Jennifer's head. Hmm, what's a franchise that I can look into that would partner well with Jason.

Jennifer Dempsey: 24:28

Well, you know what's so funny and dad will probably laugh for the longest I've been like dad, I really want to open a laundry mat and he's like you're so weird. What's wrong with you? But I think it's the desire because of the business that I'm in. I'm always intrigued by businesses. That number one if you don't need employees, or you don't need that many employees, or you don't need employees with a certain talent Remember who I am and where I come from, right.

Jennifer Dempsey: 24:52

So I've always wanted to like open a laundry mat and I have a lot of great, you know, memories when I was coming up as a hairdresser, spending a lot of time in a laundry mat and I remember calling dad and complaining like I hate this, I hate this laundry mat. I just went to an apartment with a washer and dryer and he would always like have words of encouragement like this is a great time, this is so good for you, you can plug in, you can read a book, you can, you know, in dad fashion. So there's like a little little why. So I'm always kind of like should we open a laundry mat? That's it.

Staci J. Dempsey: 25:29

It is not cheap to wash your clothes at a laundry mat. No, it's not out for like two weeks.

Jennifer Dempsey: 25:35

Right.

Staci J. Dempsey: 25:36

Listen, I was like how bad do these kids need clean clothes? Because how dirty is this shirt Really? Because?

Jennifer Dempsey: 25:45

you can wear it one more day.

Staci J. Dempsey: 25:47

The amount of nice laundry mat.

Jennifer Dempsey: 25:49

you know we would do it, we would do it right. So yeah, I that's always kind of been like how can we do that? That would be cool.

Jack Dempsey: 25:57

Well, it's interesting, I know it, please Come on. Yeah, well, right, I know it's interesting because when I go back to my hometown, to, you know, get up to my dad's house, you know I drive by the Blueville Laundry Mat and that laundry mat has been there because I used to well, probably at 11 years old, we would all stand in front of that laundry mat to catch the bus to go to school. So so take my young age and subtract at least 10 years, and that's been there that long, so it definitely has had staying power for quite a few years and it's, it's a nice place, you know. So, all right, it's growing on me, it's growing.

Jennifer Dempsey: 26:38

That's the one We'll buy, that one.

Jack Dempsey: 26:41

Right, the idea is growing on me, let me put it that way. So good stuff.

Staci J. Dempsey: 26:47

Good stuff, great stuff, good conversation, and hopefully this has maybe triggered something in one of our listeners minds to even just take the plunge and start researching and looking up and doing your own education on the benefits and the kind of franchising. So we want to wish you guys all a very merry Christmas, a very happy holidays. We hope that you guys have a wonderful time doing whatever it is that you do during this time of year and we will see you guys in our next episode. Bye.