Welcome to Franchise Talk, the engaging go-to information resource for franchise owners including those interested in buying or selling a franchise. Franchise Talk is brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Visit morganandwestfield.com. And now, here's the host of Franchise Talk, Emery Orosz.Emery:
Hey, Dennis, good morning. Emery Orosz from Morgan & Westfield, how's it going?Dennis:
It's going great Emery, how about you?
Emery: I'm doing good, I'm well, a beautiful day over here in Santa Fe. For those in the audience we're talking with Dennis Jenkins this morning and he's the VP of Franchise Licensing for Money Mailer. Dennis, I understand that Money Mailer is one of Entrepreneur Magazine's top ranked advertising services for 2015. Congratulations on that.
Dennis: Thank you very much. It was nice to get to number 1 ranking again.
Emery: Yeah. And you've been with Money Mailer for 15 years now?
Dennis: I'm going into my 16th year, can you believe it?
Emery: Congratulations. How time flies, right?
Dennis: Yeah, that's for sure.
Emery: Dennis, again, I appreciate you being on the show and I wanted to talk about Money Mailer. But first, I wanted to just tap in to your experience. You've been in the business a long time. If you wouldn't mind I'd just like to start out with some basic questions on franchising, is that okay?
Dennis: Sure, absolutely.
Emery: What would you say Dennis are the advantages of buying a franchise as opposed to an independent business?
Dennis: I think the advantages are if you're looking at a good, established, proven franchise, you're going to have a brand that's recognized in the market. And then you're also going to have the training, ongoing support, and improvement systems in place for marketing your business, kind of managing those day-to-day operations. And probably most important a business plan that you know that if you follow that plan you're going to achieve your financial goals. You look at so many independent, non-franchised businesses that fail because the owner is spending all of his time running around, trying to just keep up with the day-to-day operations, and reinventing the wheel on a day-to-day basis versus franchising where you have proven systems in place.
And probably most important a business plan that you know that if you follow that plan you're going to achieve your financial goals.
Emery: You've mentioned several factors. I think I counted at least four or five. But those factors that you just mentioned, what do you think is the most important one that the franchisor should offer their franchisees?
Dennis: I really think that training and support are really mission critical. In most cases, you've got a new franchisee that's coming in to a brand new industry. They've probably never owned a business and they really need to hit the ground running quickly. So without a very strong on-boarding system, it could take a really long-time before that new franchisee starts making money. At Money Mailer, of course we're not just the franchisor that sold the franchise we're also the supplier. So we don't make any money selling franchises and royalties. We're not a profit center for us like other franchise systems so as the supplier, we're only going to make money after the ads are sold. So we need to make sure that franchisee is successful as quickly as possible. Not just because it's the right thing to do, but it's the only way that Money Mailer will ever get a return on the investment that we make in new franchisees. Again, we've made big investments in technology, training, support, and systems. We try to leave absolutely nothing to chance.
Emery: I totally agree with you when it comes to training and support. That's critical. If the franchisee cannot get support from the franchisor he's not going to last long. What do you think Dennis is important for a guy or gal looking at a franchise business? What do you think is really important for them to consider before buying a franchise?
Dennis: I think you've got to choose something that you can really be passionate about. You can show up to a job, you can give it 50%, and you can probably survive. But when you're a business owner, you need to communicate passion to the people you're doing business with. When I hear our franchisees talk about all the local businesses they have helped succeed and how they're giving back to their communities. And I talk to a lot of their customers who said, "You know what, if it wasn't for my Money Mailer franchisee my business wouldn't be where it is today." I can tell these franchisees have a real passion to help businesses succeed. And then along with passion I really think a candidate needs to take a close look at the strength of the franchise system, and make sure they're looking at a proven franchise concept. It seems like there's a new franchise concept introduced every week. But if you're looking at a startup you're really not leveraging the benefits that a franchise is supposed to provide. So you don't have the proven systems and the recognized brand, and the strong training and support. I've seen some of these new concepts. They say we've got all these company stores that are successful. But you got to remember company stores are run by company employees, not independent franchisees, that's a big difference. An employee you've got control over what they do, in a franchise system you provide systems and guidelines but you lose that element of control. But again, with a new concept you can also make the argument that it could be the next McDonald's or the next Subway. But whether you want to bet your life savings on picking that kind of a winner, it just seems a little bit risky to me.
But you got to remember company stores are run by company employees, not independent franchisees, that's a big difference.
Emery: Yeah, I agree with that assessment, and just from my own experience when I'm looking at franchises I like to see at least 100 successful units, maybe 100 to 200…strength in numbers. If you have 100 to 200 units spread across the country and they're all successful then it's a pretty good bet that you've picked a winner. And that's just my opinion. I'm just one guy.
Dennis: No, I think you're absolutely right. I think you're supposedly buying into a system. And if that system doesn't exist, you're taking a bigger risk than you have to.
Emery: Yeah. Anything else that you can add Dennis, that's important to someone to take into consideration before buying a franchise? Anything else you can think of?
Dennis: Yeah, I think you'd agree with me on this. I think you also need to be honest with yourself and really do some soul searching, and determine how hard you're willing to work to be successful because starting any business, whether it's an independent business or a franchise, it's always going to be harder than you think. And that work ethic may actually be the most important factor in determining whether or not you should even buy a franchise, because let's face it, when you're a business owner you're taking 100% ownership of your success or your failure. I think work ethic is critical. And then, we also both know how important working capital is. What you don't want to do is start off putting yourself under a lot of undue financial pressure where you have to start making money right away and making a mortgage payment. I think those good franchisors that you work with will give candidates some working capital guidelines. And then on a personal level you want to have about 6 months of living expenses so to set aside as a cushion. I know every franchise is different but I think the working capital is important.
Emery: Yeah, and that's where we come in at Morgan & Westfield. We've been working with a company called Benetrends and they've helped over 10,000 entrepreneurs fulfill those dreams of owning a business or franchise over the past 30 years. They've helped 10,000 people and they have a great plan, a rainmaker plan. That working capital is important, and turning over those 401K's. I don't understand all the details, that's why we work with the professionals. Dennis I have to ask you, I wonder how you still have a job. I don't mean that in a demeaning way but how do you still have a job? Everyone knows that direct mail is dead, it's a dinosaur, so how come you're not extinct after going on 16 years with Money Mailer? Can you explain that to me?
Dennis: That's a great question. And as you know Emery, 15 years with one company in the franchise industry probably does make me a dinosaur. But seriously, one of the most common misconceptions we hear from candidates is that direct mail is dead. The first thing we try to show them is our actual, national media AdSpend numbers. In 2014, Direct Mail was actually 44.5 billion... That's billion with a B, it's growing. It's actually the second largest media spend in the United States. It's second only to TV. But it's surprising to a lot of people because all the hype today is about increases on digital AdSpend, on Google, and other search vehicles. But people don't realize that a lot of that digital increase comes from declines in spending on the old search engines - yellow pages, and newspapers. Ten years ago, if you wanted a good deal on a pizza, you went to the newspaper, maybe you went to the yellow pages. Today, you go right to the internet using your tablet or your smartphone. There are new search tools out there. But what you don't want to see on your tablet or your smartphone are all those random ads and offers from companies that are advertising to you on your digital service. You want to go to a YouTube video for example, you probably don't want to click on that banner ad that pops up. You're kind of tired of that 24/7 daily digital dump.
But seriously, one of the most common misconceptions we hear from candidates is that direct mail is dead.
Emery: Let's say a person in San Francisco, if they have the Money Mailer app, all they have to do is click on that app and they can walk in to the pizza shop, show them the coupon on the phone and get the deal. That's basically the way it works.
Dennis: Absolutely. That's a good point that you brought up. Our core customer is that local neighborhood business owner and that shared mail envelope gives the business owner a very measurable, cost effective way to reach out to these folks that live within a reasonable drive time of the location. And then to your point, we'll surround those offers with an integrated menu of online, mobile, social media. We're getting that business the best way to target their prospects at home, but also on the go, with or without a physical coupon for redemption, just exactly what you just said.
Emery: Yeah, so they don't need that piece of paper. This is part of the reason I think why Money Mailer is doing so well, because they have progressed with the technology, with the times. They haven’t stayed in the past and just said we're going to stick with coupons. We're going to live and die with just a paper coupon.
Dennis: Absolutely. We just finished up the best year in our 35-year history. And I think our success is coming from exactly from exactly what you just said. We really helped re-invent marketing for these local neighborhood businesses. And they need that expertise to compete and build market share.
Emery: Absolutely. Dennis, I just want to shift gears for just a moment here. Most of the folks in the audience know what an FDD is, a franchise disclosure document. Dennis, do you guys have an Item 19? Before you answer yes or no explain what an Item 19 is for those that may not be familiar with that.
Dennis: Yeah, an Item 19 is an earnings representation and it tells the candidate what the average earnings are for their franchisees over the past year. You have to update that every year with audited financial statements. And we have a very strong, six-figure Item 19, our franchisees are finishing up their best year ever. Again, I've been here 15 years and I don't think that the company has ever been better positioned for even stronger growth ahead.
Emery: You've brought out the point just a minute ago about Money Mailer having their best year in, what was it, 34 years last year?
Dennis: Yeah, it's the best year in our 35-year history. It's been a great ride.
Emery: Good, congratulations. I know you guys don't charge royalties. How does that work? The vast majority of franchisors charge a royalty for their franchisees. How does it work if you don't charge a royalty?
Dennis: We don't charge a royalty in the beginning but we do charge a royalty, but the royalty is a very low, flat fee per mailing. I mentioned that unlike most franchisors, royalties are a not a profit standard for us. The flat fee royalty will vary by the size of the territory. But being a flat fee, it means that a franchisee could increase sales by $100,000; and there would be zero royalty on a $100,000 increase. So a franchisee could come in and double and triple sales with zero increase in royalties. Again, we're the supplier. We make our money fulfilling orders. Again, the franchise sale and the royalty and not a profit center for us like other franchise systems.
We don't charge a royalty in the beginning but we do charge a royalty, but the royalty is a very low, flat fee per mailing.
Emery: Yeah, a little bit earlier in our conversation we talked about training and support. What exactly does Money Mailer do for new franchisees when it comes to that training and support which is so critical to their success?
Dennis: Yeah, I really thing we've taken the training and support to the next level because we need to. We need to make the franchisee successful very quickly. So they're going to start with one week of very intensive classroom curriculum at Money Mailer University. And this is where they learn how to use the technology, the targeting tools, and the very consultative, question-based sales process that we've developed to make franchisees local marketing experts. And most important they learn how to identify what a qualified prospect looks like, and that's important because every territory is going to have hundreds of businesses of what we call our “top 80” businesses categories. And then after Money Mailer University, they go to what we call boot camp. Boot camp is actually at a company operation. And that's where the new franchisee can apply everything they learned at Money Mailer University in a real-world, actual sales territory. So all those mistakes where the new franchisee is going to inevitably make, they're going to make it in our territory, not theirs. And then after they master this consultative sales process at boot camp, they're going to go over their territory and work with their own, dedicated, field-based franchise performance coach to make sure they hit the ground running. And new franchisees will have a field-based franchise performance coach who's personally accountable for their performance for the entire term of the franchise agreement. And then from day-to-day operations, they've got an internal customer care concierge. So every franchisee has a dedicated customer care expert to make sure that mailing cycle will run smoothly. And then also a dedicated art center coordinator that works with a team of graphic designers to create all their ads. So it's pretty robust.
Emery: I want to make sure I heard you right. Did you say that the coach is available for the entire term of the entire term of the franchise agreement? Did I hear you right?
Dennis: You heard me, absolutely. I'll tell you Emery, a big part of their annual performance appraisals is based on how well their new franchisees do in that first year. So the coach is a person that's got a total vested interest in making that new franchisee successful quickly.
I really thing we've taken the training and support to the next level because we need to. We need to make the franchisee successful very quickly.
Emery: Wow, that's a great program. Dennis, I have a lot of interest in Money Mailer. I've been working with you for a long time. One of the objections that a lot of people say to me is, "Emery, don't you have to be a real sales animal to do this job, to own this franchise? How would you respond to that comment that you have you to be a sales animal, per se?
Dennis: Well, Emery, I think you definitely have to have sales potential. You definitely got to be totally customer-focused. But over a third of our franchisees had no prior sales experience. But let's face it, financial success is going to come from providing clients’ value, signing annual agreements and of course generating monthly repeat business. So you obviously need to be a good people person. You need to be out there working with small business owners, you need to have that passion to help businesses in your community succeed. But this isn't one of those high-pressure, one-call close transactions. So it's very consultative, it's relationship driven. But if you're a person that wants a business where you sit in an office and wait for the phone to ring, this is probably the worst possible franchise you could ever take a look at. But you got to have sales potential and work ethic. And if you have that, you're going to be successful in this business because we've got the systems in place to make you successful.
Emery: So that sales background is not critical but it sure does help, right? Is that the way you'd sum it up?
Dennis: It really does help. I would say this would be a tough business if you're not prepared to be out there working with people.
Emery: Yeah, so a people person for sure. What about the competition? I know ValPak is out there and sometimes people say, "Oh, Money Mailer, ValPak, it's all the same." Is that your viewpoint Dennis? Is Money Mailer different from ValPak?
Dennis: Yeah, ValPak is a great company. They're a great competitor. We compete with them in every single market that we're in. But our strategies are really pretty different. Valpak's core customer is more regional and national chains. Our core customer is hyper local. We're going to go after that local community-based business. If you're a chain and you're working with ValPak, you're going to want to hit every apartment, every mobile home, every zip code in every market. But if you're a local dental practice going into the Money Mailer envelope, we're going to hit single family homes, higher media and household incomes. We're much more targeted. Our envelope is also very, very different looking than anything else that's out there. ValPak uses a standard business-sized envelope, standard industry-size ad, third of the page. We use a big, jumbo, oversized, red, white, and blue, patriotic-looking envelope. And we have an ad page ad format, so we're actually giving the client 34% more ad space, front and back, to drive home kind of a more compelling value added message. And our philosophy is, if you're a consumer and you get a big, bold, red, white, and blue envelope every month that's filled with local neighborhood offers that you know you can take advantage of, you can open that envelope and that's going to build loyalty, trust, and more repeat business for our franchisees obviously, and also their clients.
Emery: I can definitely see the distinction between you guys and ValPak. I think you guys definitely have the edge there. Dennis, I know you guys have protected territories. So that brings up the thought that with a protected territory doesn't it get maxed out fairly quickly? How is it possible, if that is true, that you can grow the business? That part I just don't get.
Dennis: Yeah, the franchise territories are protected, but the territory never really gets maxed out because of the huge number of local neighborhood businesses in every territory. It's really an unlimited prospect base. So an average territory has at least 1,500 businesses in what we call our “top 80” business categories, and all the protected territories too. Franchisees are going to be working with maybe 100 to 120 of these businesses that will be in their active prospect base, and they'll have a core repeat client base of solid repeat customers, probably in the 40 to 50 range. They will also have in their territories though, local chain accounts that might want to advertise in multiple Money Mailer territories and they can work with these clients through our national profit sharing plan, called Cross Sales. So a franchisee is never going to run out of prospects no matter how long they've been in the territory. I think the beauty of this franchise is, unlike the kind of a brick and mortar franchise where they make a lot more money, they need to open more locations, you got to buy more territory, this is a business that really can be scaled by just adding customers without any additional franchise fees, and you can double or triple your sales with no increase in royalties, which is kind of a great way to build your business.
So a franchisee is never going to run out of prospects no matter how long they've been in the territory. I think the beauty of this franchise is, unlike the kind of a brick and mortar franchise where they make a lot more money, they need to open more locations, you got to buy more territory, this is a business that really can be scaled by just adding customers without any additional franchise fees, and you can double or triple your sales with no increase in royalties, which is kind of a great way to build your business.
Emery: Sure, so the scalability is definitely there. The potential for growth is there. Like I said earlier I've been working with you for quite a while, now it's a great franchise. Money Mailer is a great franchise opportunity but it's not for everyone.
Dennis: Yeah, and I think that's absolutely right. I think one of the reasons why we like to work with professionals like you and your team is that you do a great job interviewing the candidate to see if Money Mailer is a good fit. I know when I talk to somebody that you refer to me, I know the candidate is at least open to Money Mailer. I'm going to do an individual business model review webinar where I'll go over the strategy, the competition, the earnings potential. And then if the candidate and I determine that Money Mailer is not the right fit, I always tell them that you can help them find something else that will be a better fit for them. We love working with you guys.
Emery: Thank you Dennis, I appreciate that. We love working with you as well. I wanted to thank you for being on the show today. Dennis, I know there are opportunities to delve in to some other aspects of Money Mailer. So would you be open to doing this again? I haven't hurt your feelings when I asked you about being a dinosaur, have I?
Dennis: No, that's okay. You're not the first person to call me that.
Emery: Okay, good. We look forward to speaking with you again Dennis on another subject. Again, I appreciate you being on the show today.
Dennis: Thanks for your time Emery and always great working with you my friend.
Emery: Thank you Dennis, you take care.
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