In this post, I’ll share key lessons about how to start a franchise. These lessons are based on what the founding partners of 4 Pillars and I learned while building our business from zero to 80 locations across Canada.
“So what’s the key to building a franchise? How do you actually get the business up and running?” It’s a question we hear at networking events and from friends dreaming of leaving their nine-to-five jobs behind.
It’s a frequent question because it’s a common dream in Canada.
In Canada, one in every 14 working Canadians are employed by a franchise. We have the second largest franchise industry in the world (the U.S. beats us), with 100 billion dollars in annual sales.
With so much growth and opportunity, most people have either thought of creating their own franchise or investing into existing models like Subway and Tim Hortons.
Why ask us about building a franchise? We—that’s Reg, Troy, and me, Paul—run a financial services franchise called 4 Pillars. Our company helps Canadian families and businesses restructure their debt and build financially stable futures.
Over the past 14 years, we’ve grown to 80 locations across Canada and have helped 10’s of thousands Canadians restructure over $1 billion dollars in consumer and commercial debt.
In these last 14 years of running this business, we learned a lot of lessons that can help you decide whether buying or starting a franchise is right for you.
From marketing challenges to wading through legal documents, there many things you’ll need to master (or learn to delegate) if you want to grow or buy into a franchise.
We have 80 locations now. But back then, there wasn’t an intention to build a franchise. It all started with a much smaller dream.
Looking back on those early years, there’s a pattern of principles that I believe make a franchise successful.
Let’s go back to the first and most important lesson about franchises, one that was learned sitting around a kitchen table, many years ago.
* * * * *
It was January 2002 when it all began.
Reg had just left his role of COO for a public company. Our friend Troy was winding down his IT role with a corporation. Paul was still working in the banking industry and didn’t join the team until 2007
Our backgrounds work well together. Reg had years of experience in consulting, management and financial services, working for large corporations. Paul had a background in banking and finance. And Troy had worked for a number of corporations in IT and management positions.
Back then, it was basically operating as a small and unorganized consultancy firm. There is one skill that connects the three of us: we all had experience in financial services. So by chance it started by helping and advising a lot of struggling companies.
These companies were in serious trouble. We are talking about companies on their last financial fumes, well beyond help from traditional sources like the banks or investors. Most of them were just about to close down. Go bankrupt. It was the end for them.
This exposed the owners to large personal debts to the business creditors they had been required to personally guarantee and CRA through directors liabilities.
(As a side note, if you know a business in serious financial trouble our other company—the Corporate Turnaround Group—helps businesses navigate and stabilize financial challenges such as CRA debt, operational challenges, and the threat of bankruptcy.)
We have watched a number of business owners try and navigate the debt industry on their own, many going through bankruptcy as it was the only option presented.
Reg and Troy knew this industry. And so they began helping these distressed business owners—people that nobody else wanted to help—restructure their personal debt and avoid bankruptcy.
Back then, it was the intent to build a national franchise and they weren’t even sure other people would want to do this work.
Figuring out why a business becomes successful in retrospect is like asking a musician how they wrote a hit song. It’s easy to describe the moment you discovered something great. But hard to replicate. You are just in the right place with the right set of skills.
And then something happens. It takes off right away. You know that you’ve unlocked something special. You’ve discovered an underserved market, a crowd hungry for help and overlooked by other companies.
That’s the biggest secret of building a franchise we can share. You need initial organic growth. The main reason why a lot of franchises fail in Canada is because the owners are using franchises as a desperate tactic for raising money to grow. The business is struggling. So, the owners turn to franchising as a marketing strategy.
Marketing is amplification. If there is no early growth, nothing special or unique about your product or service, then you will build 50 unsuccessful businesses. Your current problem will multiply. But instead of answering to your partners or investors, you’ll now have 50 very unhappy franchise locations.
A franchise is simply one of many different ways to scale your business. It’s not a cause of success. It’s a growth lever to get your amazing product or service into the hands of more customers.
Your first location (that’s you running a small business from your kitchen table or selling waffles from a food truck) needs to be successful. You need to be busy.
You need to feel the demand for your product or service. If you aren’t attracting customers right out of the gate, adding more locations will not solve that problem.
You need to feel the demand for your product or service. If you aren’t attracting customers right out of the gate, adding more locations will not solve that problem.
How to sell your first franchise location
If you want to sell your first franchise, you need two things: a product or service that is different and a brand. We found both of those things by using a tried-and-tested business formula: serve a market nobody else cares about.
4 Pillars started as a small consultancy operation. All of us (Reg, Troy, and Paul) come from careers in corporate turnaround or financial services. So, we are known for our knowledge about how corporate debt works, restructuring, and the debt and financial services industry.
So, we are known for our knowledge about how corporate debt works, restructuring, and the debt and financial services industry.
We are simply doing what we know: help people deal with debt.
But as we were no longer working for big companies, our market had changed. We are now working for the companies and people most large banks didn’t care about.
These are struggling businesses and individuals. And they were all way over their head.
It began by working for friends and struggling businesses, There was a deep personal connection with these people and wanted to make sure they found a solution that worked for them personally.
Losing their business was a devastating process. Now they stood to lose everything personally and what they saw as the ultimate failure, personal bankruptcy.
This really shaped 4 Pillars.
There is so much debt in Canada. But so little transparency and education for people struggling.
We are still surprised at how little the average Canadian business owner knows about debt. They can borrow. They can sign leases. They can rent equipment.
But what if the business fails or begins to struggle? They aren’t prepared for that.
Here are the three key things that allowed the sale of our first franchise.
By the way, we still help businesses eliminate large portions of debt including CRA debt.
If you know a business in serious financial trouble our other company—the Corporate Turnaround Group—might be able to help them.
#1 Find an underserved market
Banks were selling debt. But there was a clear gap in education for businesses or individuals who got into financial trouble.
Where is the education?
Where are the options for families, especially as debt is so easy to fall into?
In this industry, we always become their ‘go-to’ people for advice on anything financial as a huge amount if trust is developed when you help someone during one of their darkest times.
In the beginning, these failed business owners were always only offered one solution. It became clear there must be a better option for them than just bankruptcy.
It was common knowledge to us because we worked in the industry. But for the average business owner, this advice and guidance meant they could keep their home and not go down with the sinking ship of their failed business.
But for the average business owner, this advice and guidance meant they could keep their home and not go down with the sinking ship of their failed business.
The lesson: if you have specialized knowledge about an industry, this can be the start of a service franchise, especially if you apply that knowledge to an underserved customer segment. What customers are the big companies in your industry overlooking?
#2 You don’t have to spend huge amounts of money
In 2002, with an investment of $500 by each founding partner, 4 Pillars was created. The goal was to better help Canadians navigate the debt industry and ensure they received the representation they desperately needed.
The business was run from home.
The founding partners didn’t look for investors or hire a marketing agency to find potential franchisees.
It was done by hard work and got results. The businesses and individuals we help always tell their friends and family and word spreads fast.
Soon, there was more business than could be handled.
The lesson: don’t be blinded by expensive branding consultancies, marketing agencies, and the lure of business debt. Start small. Make sure there is a healthy demand for your product or services.
#3 Franchising was the best growth model
There are many ways to grow a business and often franchising is the wrong route.
But for 4 Pillars, franchising was the best fit because it needed three things in order to scale our services.
Local support. With 4 Pillars, we need to meet with our clients face-to-face. We need to hear their stories and work with them. So, it wasn’t feasible to suddenly borrow millions of dollars to rent offices and hire employees across the Canada.
A training model that we could teach and replicate. 4 Pillars sells expertise. Because the techniques and skill can be taught to other smart and compassionate people franchising became a logical choice here as it involves building processes, systems, and training. We can train other people to do what we do. Some expertise is harder to scale—for example, teaching people how to sew beautiful custom suits.
Local and national strength. We knew that if we combined a strong national brand with individual offices across Canada, this would be the best for our clients. We have more negotiating power, can offer better financial products, as well as keep that human touch and personal guidance that started the business.
Once you find a product or service that is different and you develop the basics of your brand and mission, then the next choice is to decide whether franchising is the right growth lever for your business.
Our business gained initial traction because it offered a personal connection.
A struggling business owner or consumer with overwhelming personal debt doesn’t want to deal with a faceless organization.
They need a local mentor, someone that talks with them and explains all their options and someone who cares.
When success was achieved locally, it proved the business was viable and with right people would be very successful on a national scale.
The business model was strong. So the first franchise location wasn’t hard to find.
The lesson: franchising needs to fit the DNA of your business model. For 4 Pillars, there needed to be a way to scale expertise as the personal connection for businesses and families in trouble helped us compete with larger companies. Make sure that franchising fits your competitive advantages.
In the next section, I’ll offer some advice for people on the other side of the franchise equation: people thinking about buying, rather than starting their own franchise from scratch.
Should you buy a franchise? Advice from three real owners.
Do a search for franchises to buy in Canada. You’ll find that the people doing the selling make it look pretty fool-proof.
You’ll be buying into an established business, get support and buy a piece of a growing empire. It’s a sure bet.
Yet, as many franchise owners realize, investing in a franchise isn’t a straight path to success. You will have challenges and it’s not easy to start a business, even when buying into an established franchise model.
This article will share stories from three real franchise owners.
We interviewed three of our 4 Pillars locations and asked them this question: what do you know now that you wish you knew in your first year as a franchise owner?
Looking back to their first years as franchise owners, our owners offered some fantastic advice for people thinking about buying a franchise in Canada.
It’s a lot of work. But most seem happy with the decision.
“One thing about franchises is that your success is NOT guaranteed,” says Zach Brull who owns and runs a 4 Pillars franchise office in Markham, ON.
Zach’s advice for people considering buying a franchise in Canada is to be prepared for the work ahead.
A franchise is less work than starting your own business from scratch as you have corporate and marketing systems in place but you shouldn’t count on the franchise as an automatic pipeline of instant revenue.
“Does the franchisor pitch an ‘easy life’? if so, RUN! [Brand name removed] did this and it scared the living crap out of me. Owning a business is HARD . . . anyone who says different is either lying or a genius . . . and there aren’t that many geniuses around.”
So would he buy a franchise again?
“When things are humming I get the best of both worlds…I have my own business, get to do things the way I want to do them the way I like to do them BUT at the same time I have boundaries to work within and I’m not all alone.”
“A one man shop can be a lonely existence. It’s made even more lonely when there’s no one there to speak to, to help you.”
Trevor Glasser, who owns and runs a 4 Pillars franchise office in Oshawa Ontario had similar advice.
When thinking back to what helped him in his first year as a franchise owner, he credits creating a routine to stay focused on building the business.
“One of the key questions I still ask myself every day is, what I am doing right now going to help me make money or benefitting my business?”
While his franchise location initially took longer than expected to build a positive cash flow, he’s also happy that he took the plunge and bought a franchise.
“The financial rewards have been very good for me owning a 4 Pillars franchise, which is very satisfying. It has taken years but I have learned to book time off for myself and take advantage of my free time. I have a great deal of control over my schedule.”
Keeping the cash flowing
One of the big challenges for new franchise owners was cash flow.
As Zach and Trevor pointed out, a franchise is still a business and like any other business, it requires you to invest time and money into building your initial customer base.
“I had no idea about how important cash flow was,” says Trevor Glaser.
“Fortunately, I had the money in the bank to float on but knowing it takes some time to generate consistent cash flow is important. Having a good accountant helps too.”
When building this initial business, Zach recommends that new franchise owners take advantage of the tools and systems created by your head office.
He says that “corporate deals and arrangements, as well as branding, are meant as support mechanisms that you, in turn, must maximize.”
Educate and train yourself quickly
Jane Williams, who has since retired and sold her franchise internally to an existing owner ran a 4 Pillars franchise in London, ON and takes a similar stance.
Many franchise systems are designed to help you build your business. Take advantage of training and education provided to you.
“It’s always a leap of faith when you buy a franchise that the purchase price includes adequate training to give you the best chance of success in your new business. The support of head office is crucial to speed up your learning curve of the product or service you’re are selling and your business operations.”
Even Zach, who now runs a successful 4 Pillars franchise, admits that he hasn’t taken full advantage of all the tools available to him.
“It took a bit of time to learn how to utilize all the available tools. To be honest, I still don’t know everything there is to know in regards to what’s available to me.”
It’s important to use the marketing and training resources provided by the head office as it gives you early confidence in selling and marketing the business.
As Jane Williams says, “I wish that during my first year that I could have portrayed more confidence in selling my services because head office was always readily available to work on files with me.”
Choosing the right franchise to buy
Of course, we’re very happy that these three talented individuals choose to invest in a 4 Pillars franchise. But they did have other options.
So what’s their advice for choosing the right franchise to buy?
First, make sure you actually want to buy a franchise. Zach Brull advises people to really consider their intent in buying a franchise.
If your intent is to avoid all risk and work, then being a business owner and entrepreneur likely isn’t the best path for you.
He also advises that you make sure that the franchisor has a track record of success with their own corporate model.
“If you’re buying a restaurant franchise, did this restaurant become successful on its own first or has the owner’s genius son decided franchising is a good way to make a buck even though the restaurant is kinda ho-hum?”
Jane Williams suggests that you do your research, calling “franchisees not on the list provided by head office.” You can gain insight into the business by talking to disgruntled franchisees.
Zach also offered other bits of advice about metrics and compliance.
He says that the head office should be able to provide metrics and benchmarks for expected success, as part of the value of working within a group is you have comparables.
Zach advises that you look at this data carefully. “If your closing rate is 30% but the guy on the other side of town is closing 40%, why is that? Is it geography? Sales skills? Lead source? Accident? All of the above?”
Compliance is another issue, especially as franchises often involve you buying rights to a sales territory.
Zach worries about compliance as your head office needs to protect the rights of each location.
“The only thing worse than a rigid and uncompromising franchisor is one who doesn’t enforce the rules. I saw this at [Franchise brand redacted] . . . flagrant violations that harmed everyone but for years, no one had the guts to do anything about it.”
So what’s their final advice?
We asked our three owners to offer some final advice to people thinking about buying a franchise in Canada.
Jane Williams’s biggest lesson was related to taking advantage of education and training.
She stresses that you need to “use the experience of your fellow franchisees to grow your business and maximize the support you get from your head office.”
Zach Brull was very candid about choosing the right franchise.
He urges people to evaluate the value proposition and support offered by the head office and to think carefully about why you are choosing to buy a franchise.
“Every dimwit who’s had a modicum of success thinks he or she can now franchise. What value do they truly bring to the table?”
And to finish things off, some very sensible advice from Trevor. Don’t forget the tax man!
“Track your CRA expenses carefully as creating huge CRA debt can take down any business.”
About Paul
I’m one of three Managing Partners at 4 Pillars. Reg and Troy founded 4 Pillars in 2002 and I joined them in 2007.
You can also find me at the Corporate Turnaround Group, a consultancy that helps businesses navigate and stabilize financial challenges such as CRA debt, operational challenges, and eliminating large portions of business debt with restructuring.
Thanks to Zach, Trevor, and Jane.
We’re so grateful for their knowledge and time. They received no compensation for their advice and we’re very thankful for the thoughtful responses.
Zach Brull runs a 4 Pillars franchise office in Markham, ON.
Jane Williams is a retired 4 Pillars debt restructuring specialist from London, ON.
Trevor Glasser owns and runs a 4 Pillars franchise office in Oshawa, Ontario. You can also find him at www.goodbyedebt.ca.
