When I ran my franchising business, I made it a point to work with my franchisees, offering them advice from my own experience to help them be as successful as possible. Of course I like to think of myself as a unselfish person, motivated by genuine concern for my fellow man but, of course, it was in my interest to help the franchisees. In so far as they were successful, so too would be the company. I had everything to gain from helping them become as wealthy as possible.
Though I am no longer in the franchising business, old habits die hard.
The other day, I was headed to a business meeting and hailed a cab to take me there.
Now it is somewhat of a joke in North America to remark on the large number of immigrants who occupy the drivers seats of taxis in Canada and the United States. Many natives find it alienating to climb into a cab echoing with the sounds of Arabic pop tunes or in which a picture of the god Ganesh greets passengers from the dashboard, but I always welcome these little reminders of my own experience as an immigrant to this country. I know what it is to struggle at difficult jobs for very little money in a new and strange land.
So it was that I struck up a conversation with this particular cabbie. I told him that I was a Canadian citizen from Iran and I asked him where he was from.
“I am from Bulgaria!”, he said. He was obviously very happy to talk of his old home with someone who understood the experience of having to leave it behind.
“Oh. Bulgaria”, I replied. “I have been there. Beautiful country. My family actually originated in Azerbaijan.”
So we got to talking and eventually he asked me what I was doing in my life and I told him a little of my story. When I got to the history of 3 for 1 Pizza & Wings he became very excited.
“Oh! You have been in the franchising business?”, he asked. Then quickly added, “I want to buy a Tim Horton – but the damn thing is so expensive. I heard they cost a million dollars.”
I sat back and listened to him talk about this a little more. He proceeded to describe his ambition in glowing terms as the car continued on its way. It was his dream, he said repeatedly, “to buy a Tim Horton’s.”
When he finished, I looked up at him through the rear-view mirror and said, “Listen. My advice to you is this: Don’t buy a franchise.”
I saw his eyes as I said it. He was crestfallen. I was denigrating his dream. But there was also a look of puzzlement in his face.
“Why?”, he asked.
I said, “Tell me, how much do you know about the food industry?”
His answer:
“Zero”.
“You never had a restaurant?”
“No.”
“Did you run a food-related business?”
“No.”
“OK.”, I continued. “Now tell me, how long have you been driving a cab?”
“17 years.”
Now perhaps you as a reader can already predict where this conversation is going but it is amazing how so often we cannot see in our own lives the mistakes we so easily see others making.
So I told him, “You have been a taxi driver for 17 years and now you want to go out and buy a Tim Horton: Do you know that the majority of people who, like you, get involved in something they have never done, never make it?”
He said nothing. I asked, “How much money do you have?”
“I worked 17 years. I saved 25 thousand.”
I said, “25 thousand! 25 thousand only?”
“Yes.”
“That’s certainly not enough to get a franchise.”
The truth is, getting a franchise is a kind of Hollywood dream for many immigrants. Everybody wants to get into franchising. Advertising (about which I know a little something) can make a franchise appear a certain path to success and security. And so it can be. But too often, ambitious people become distracted by unreachable goals and miss the big opportunities that are right at hand.
I told him, “I got my start in franchising myself. Before I became the president of a franchising company, I ran a small pizza store and was very successful. But I’ve never had reason to advise anyone else to do it. It’s just not something you should leap into without having some idea of what you are committing too.”
At that point, I paused. Considering what I should say next. How best to get my message across.
“Listen.”, I told him. “You and I both immigrated to this country. We know what it is like. We know that we immigrants are often very much committed to our work. But there is another side.
“We swing from tree to tree like monkeys.”
Now I had his attention. “Swing from tree to tree – like monkeys?”
“Yes. I said. When we have one job, we dream of another! We want to get ahead – of course — but always it is something else we need to be doing that will make all the difference.”
I went on: “Here’s what I always told the people I dealt with: Even if you are washing toilets, stick in that business and become good at it!”
“Toilets?”, he asked, incredulous.
“Yes.’ I said. “Even toilets
“Because in business — in this country — doing business is like driving in a mountain – not like driving on a prairie. It is always uphill and downhill. Look at GM and Crysler. Uphill and downhill. This is true of every business. Don’t think things are going to be so smooth you are going to make two million dollars a year for life and for the next 500 generations. That is B.S. You are going to have challenges.
“But the key is experience — knowledge. Knowledge is power. Knowledge is success.
“You can survive in the valleys if you know the business. If you don’t know the business, in the troubled times: That’s when you lose. If you are in a business you know ‘like the back of your hand’, bad days: You know how to survive; good days: You know how to jump — to go faster!
“Stick in the business you know and you will always be successful. Don’t jump for one tree to another. Stick with the tree you are in.”
By this time, the car was pulling up to my stop but I had a few minutes still before my meeting. I could tell he was thinking about what I said. As I reached for my wallet, I asked him, “So how much do you know about Tim Hortons?”
“Nothing”.
“Nothing? You know nothing but you are willing to go spend a million dollars on a business? And you know nothing?”
He was silent.
Fact was, it was all very good advice I was giving but my taxi-driver friend had unresolved ambition and I’d only taken away his hopes. I had given him no way to achieve greater success.
“Listen”, I said. “I know only a little bit about the taxi business. I don’t know a lot but I know a little.”
About all I knew was that taxi licenses are limited: An enormous waiting list exists for these licenses and most of those who get them, do not use them; they rent their licenses out to others. But I also knew that these licenses can be purchased from their owners on the open market – for the right price.
So I asked him, “Do you own your own taxi and your own plate?”
“I wish!” he exclaimed. “If I owned my own plate, I would be a happy guy.”
“How much does a plate cost?”
“About $100,000”.
“Ok. 100 thousand. If you owned your own plate, how much more profit could you earn each month?”
“About $2500 more every month.”
“You know this business very well?”
“Yes. Like ‘the back of my hand’. I’ve been doing it for 17 years.”
“If you own your own plate, you will be happy?”
“Yes. Of course. Not only will I be happy but, I told you, I will be making 30 thousand extra a year.”
“What if one day – just close your eyes and imagine – you own ten of these plates.”
He started laughing, “Are you joking? That’s my dream! I would not need to drive. I know a guy, he has 17 plates. He’s not working. He’s just renting to other people. He collects 800 dollars-a-week from everybody. ”
“Do you have good credit?”
He said, “Yes.”
“Ok.” I said. “Have you ever heard of something called an S.B.L.?”
“SBL?”. He asked. “What is that?”
“It’s something called a ‘Small Business Loan’.”
(In point of fact, the program name was changed in 1999 and is now referred to as the CSBF program, or “Canadian Small Business Financing” program — but I didn’t realize that at the time.)
“Every Canadian is entitled to apply for, and get, a small business loan once in their life. Of course it requires a business plan that has to be approved by the bank. The government of Canada – if I am not mistaken – will back the loan, up to 75% or 80%. That makes it very low-risk for you.
“Get somebody – an accountant – to make a business plan for you. Go to your bank and say, ‘I’m starting this business’ – because taxi business is a business – say, ‘I want to buy my own plate and this is how much I’m going to be making extra and this is how I am going to be able to make my payments to you’, and show them your plan.
“Now make sure you make your payments on time because a good relationship with your bank is how you get good credit. Later on…you know what…you don’t even need an SBL. You can go to the bank and they will finance you for second, third, and fourth, fifth, sixth plate! They will back you. After all, you’ve proven to them you know what you are doing. You’ve proven you know the business like the back of your hand!”
He was amazed.
“You know what? I didn’t know that! You are the first one to tell me this information. No one gave me such advice – and from just a guy in my cab!” He laughed.
“My friend it is not so unusual for me”, I said. “Once I gave this kind of advice all the time to the people who worked for me. If you know how to help someone become successful, it costs nothing and makes everyone richer to pass on a little information.”
“But you are telling me I can go to my bank and I could get money to buy my plate?”
“Yes. Of course you could. Up to 250 thousand. Maybe you can even buy two plates – if you can put a good business plan together. One you drive and one you rent and have another drive for you.
“Now.” I said, “Would that make you happy?”
“Oh that’s my dream! I would love it!”
“Well”, I said. “Can I ask you. If you have been in this business for years, why would you ever have wanted to go into a business that you don’t even know?”
“Well. I just heard that it was a good business. Look at how busy Tim Horton’s are. How could it not make me wealthy?”
That was his answer.
And that is the problem with many people: They become deluded by a Hollywood fantasy. They think, “”Hey. I want to own my own restaurant”; “I want to own my own franchise”; “I want to own my own pizzeria.” They imagine these properties as investments that will earn money for their owners with little supervision. They do not realize how much “water” it takes to make it go – how much sacrifice is needed to be successful.
To run a restaurant business is not easy. It is a tough business; it is a good business; it is a profitable business, but you have to work very hard.
When I was president of 3 for 1 Pizza & Wings, I encountered several franchise owners who found themselves unpleasantly surprised by the level of commitment their outlets required. One couple in particular – a husband and wife – both had previously been employed by revenue Canada. Their combined incomes from salary had summed to around $150,000/year. That’s good money. Very good money. The kind of money they would have been very lucky to make from a $120,000 investment in a pizzeria. Returns of 100% or 200% are extremely rare in any business.
It just doesn’t work that way.
The majority of the people who own franchises – franchises as ubiquitous as even Tim Horton’s, which can cost a million or even two million dollars to buy – their return on investment is between 8% and 11%. In fact, the profit margin for most restaurants is no more than 2%.
But back inside the taxi cab – and with my meeting time rapidly approaching – I had only a few moments in which to underscore my advice to this cabbie.
I said to him, “The main thing you need to realize about franchises in the food industry…you are only buying yourself a job.
“If you do a good job, you earn more. Of course. But do not think that you can buy a business, hire a manager to run it for you and expect to make money. Your best bet is to stick with the business you know and take advantage of opportunities available to you.
“Put that business plan together and go to your bank to get that small business loan.”
“Now one more thing,” I said, as I was exiting the car. The cab driver was so excited now, he got out of the vehicle as well to walk over to my door. “Get an accountant to help you with that business plan but don’t pay him the whole fee up front. It costs about $1200 to get a business plan together. Just pay him $200 up front – and don’t buy their bulls–t! – you can pay them the rest when the loan comes through and make sure that’s a condition of your contract with him.”
The cab driver looked at me – as he closed the passenger door behind me. “You are telling me that one day I can own someday maybe 10 plates?”
“Yes. I am. I’m telling you one day you can own more than 10 plates – if you know what you are doing”
“I am an idiot!”, he said. “I was just thinking about going into different business: Restaurant business, donut business — whatever; meantime, I didn’t realize I know this business like the back of my hand.”
I told him, “A lot of people…they make the same mistake as you. There is so much fish in their own damn pond but they want to go and fish in another pond.
“Stick with what you know. And become not good — become professional at it.”
After that, he looked at me like I was his guardian angel. “You changed my life today,” he said, as he shook my hand. “That is what I am going to do. There is no way I am going to think about any other business.”
Tags: 3 for 1 Pizza & Wings, Anthony Solhi, Canadian Small Business Financing, CSBF, Franchising Advice, SBL, Small Business Loan
