Anthony Taylor is joined by Lance Graulich, who shares about the amazing franchising success of TGI Fridays. In this episode, learn about Lance’s creative hiring process and why it is important to listen to your employees to create a highly productive team. He explains why it is helpful to have checklists for everything and how to properly implement brand standards in a non-limiting manner. Lance also discusses why prioritizing customer experience above everything else is a sure path toward success, especially within the franchising scene.
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In this episode, I am joined by the king of franchising, Lance Graulich, who is the CEO of ION Franchising. He's helped over 1,000 people move into franchise ownership. He hosts a podcast. He's been a franchisee and CEO himself. He's had some pretty amazing successes in the world of franchising with franchise brands that you would know and recognize. I’m excited to hear about your story, Lance. Thanks for joining us on the show.
Anthony, thank you so much for being here. When I got invited to your show, I was so excited because I'm on different podcasts. When I heard niches like strategy and leadership, those are my favorite topics. I'm glad I'm here.
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I've had a lot of jobs in my career but I was a sales associate for the French-Canadian market for a company called Be The Boss. I was calling franchisees who can do some advertising there. I learned a lot about the world of franchising. It's an exceptional model. You can do very well with the right franchise partner. It's a different type of business ownership than your typical startup growth but it has its challenges. It has its pros and cons. It's a cool world. I want to hear about your experience. Why don't you tell our audience a little bit about your background above and beyond what I might've shared and we'll get into some questions?
There are three major pillars of investing. I call it Wall Street, stocks, real estate, and business ownership. Franchising seems to be that big black hole that many people don't understand. There are lots of misconceptions. Everybody thinks you have to be a millionaire to own a franchise. For McDonald's, you do. I represent almost 1,000 brands and lots of opportunities.
I thought I was going to work on Wall Street. I had a grandfather who was a real estate attorney and investor. Another grandfather was a Polish immigrant. Nobody could ever understand that he created a supermarket empire from a little corner bodega he created in New York. I followed Dad on Wall Street but I got bored pretty quickly. I got my Economics degree and said, “There’s got to be something else.”
I followed another relative who called me and said, “I'm building this billion-dollar franchise empire. Come join me in Arizona.” I helped him get that empire from nothing to $225 million by 1992. That was with a brand called TGI Fridays in the old days. I said to myself, “This is a pretty cool gig. I don't have to sweat every component that I normally would in establishing a business. I'm following a roadmap and a blueprint. I get to elaborate and mastermind with other people who have done it before in this exact brand.”
I followed my path and eventually became a Wingstop franchisee and a multi-state franchisee with a partner with Krispy Kreme Donuts. I had the confidence to start launching my brands and was very successful with that. I've also been the Chief Strategist through title for many brands as a consultant. As you and your audience know, your vision for what a company needs to be is incredibly important. Someone has to have a vision.
I typically have X-ray vision on a lot of different businesses, especially where I got my start in the restaurant business, which is one of the hardest industries there is. I like to say after what I've accomplished in restaurants, “If you can do it in restaurants, everything else is easy after that.” Those are a couple of highlights. I love building businesses. I'm not exactly a maintainer. I love the hard stuff.
Not only did you build this franchise system from scratch but you're doing it yourself. I have a lot of questions. Part of me wants to know about your journey growing such a well-known brand as TGI Fridays. What did you learn? I'm also curious because we have business owners who tune in to this show. Many of them want to grow and scale their business. They think about it growing and scaling as one but I believe the principles are the same.
The idea is that you duplicate not yourself but you put a bunch of processes and systems in place such that the work can be duplicated, which is the essence of a franchise’s core. Versus scaling on top of itself, you're scaling to a degree and expanding wide. Maybe I can scratch my itch for both questions as we think of the case study for TGI Fridays. How did it grow from concept to scalable idea, recognizing that the world of restaurants is the hardest business that you could do? What were some lessons there that you learned?
In TGI Fridays, we were a franchisee so we had territory. It all started with four locations we acquired in the Phoenix, Arizona market. There were a lot of additional acquisitions and new store developments. In a franchise system, you have the luxury to follow somebody else's blueprint or game plan. You have checklists for everything like how to receive goods, train people, and everything. It's gotten a little bit easier because of technology. We have things like learning management systems and videos that are easily used to train people.
All franchise brands are looking to get people up to speed and trained quicker than ever before. That was always a goal but with technology, that's easy. In a nutshell, Fridays was my jumping-off period. It wasn't my company. I didn't have equity. It was my uncle’s. It was an incredible experience since 1992 from nothing to $225 million. We go, “Look what is possible.” I traveled the country. I went to Dallas in the corporate office and listened to the seasonal menu changes and all these things.
The bottom line is every company has got to stay fresh and relevant, and Friday's didn't. Their leadership changed. Chili's, Applebee's, and Fridays were competing for the dwindling casual dining market. Also, Panera Bread, Five Guys, and all these other fast casuals, as they're called. People realized that if they were going to sit down, it better be something great. Otherwise, it's not worth it. The experience started to wane and lack. I didn't stick around for any of that. I saw that coming and I was gone moving on to other things.
When it comes to how to do these things, it's all about people. Nobody builds an empire on their own. Although I saw something interesting. Some claim that someone will become the first billionaire working all by themselves because of AI and its capabilities. I don't know if that's true or not or ever going to happen but the reality is everybody reading more than likely has people doing the work and AI can be helpful. In the world of franchising, there are a ton of service-based businesses. We will never be out of business because of Amazon or AI. AI will enhance the experience. It's not going to hurt it.
Artificial intelligence can be helpful in the world of franchising. For instance, it will always enhance service-based businesses.
As we think of “traditional” versus franchisee businesses, they are more similar than they are different. The question is, how do you be a successful franchisee? Follow the system, but especially for a food brand and all franchises, it's people in there. What would you say in your experience defines a good leader? I could say there’s a caveat within a franchise system but I'm sure that there are parallels between franchises and non-franchises. What makes a good leader within a franchisee-type system?
Let me take it back one step. At the end of the day, whether you're starting your business or following a franchise system, it's all the same fundamentals. The reality is most people don't have an original idea or concept that needs to be launched. We've watched enough Shark Tank and heard Mr. Wonderful say, “That's a hobby, not a business. Does the world need your solution?” Franchising is following that proven method.
Whether you are starting your own business or following a franchise system, it is all the same fundamentals. Most people don’t really have an original idea or concept that needs to be launched.
As far as leadership goes, it's pretty simple from my standpoint. If you are a great leader, you are willing to do the hard stuff and set the example, pace, and standards but it all truly starts when you hire your first employee. Building that core team is the most critical thing in the world. We're all going to have turnover always. However, it's that core team, the people closest to you and who are most important to you.
The first question I ask CEOs of any size company is, “If you were going to close down tomorrow temporarily just because, you were going to restaff the entire company, and you only had the current people that work for you to choose from, I want you to rank them as to who you would call back first and why?” It's pretty amazing that a lot of business owners struggle with truly who their best people are or maybe they have 1 or 2 who are great and then the rest are not.
I was like, “There's your problem.” You should be fighting to determine that there are, 50 people who are your best, second best, third best, or whatever it might be. Being a leader is all about listening to your employees from the hiring stage. Where a lot of people make big and critical mistakes is they hire the wrong people in the first place and then they have all these false beliefs and expectations of what these people can do. They waste a lot of time.
We've all probably heard my favorite expression on hiring, “You hire slowly and fire fast.” I could tell you stories on how I've hired and have been very successful. It’s a very unique way to hire people. At one of my restaurants, I had a key person who would be in management sitting at our counter while we were in the middle of a busy lunch rush. I had them specifically come through one of these stores during the middle lunch rush. I pretended to be so busy that I couldn't talk to them because we were so busy. This was all a setup. They sat at the counter.
One of my key staff interviewed the person and the person didn't know they were being interviewed for the job by that individual. They were thinking it was me. That person failed the culture test. It didn't work. I'm very creative like that. At the end of the day, we all know, and a lot of people reading know this, that the people that you're interviewing are on guard. They have prepared answers and canned responses. Our job is to figure out what's true in what they're saying or who taught them to respond that way. That's why I love to hire people that are employed. If you want another tip or trick of mine, I'll give it to you.
I have a slightly different question if you don't mind. This is what I find interesting or what I was thinking about. Listening to your employees is critical. In a franchise system, one might take the case that there are many things that cannot be changed and I'm sure that there are some things that can be changed. In some big organizations that might be very large enterprises, certain things cannot be changed. There are systems, processes, infrastructure. The question is, how do you balance having employees feel heard and supported in a system and structure that is relatively static or fixed? “Here's what we can change and can't change.” It might speak to the culture or something else.
This has a lot to do with going back to the hiring process. I'll give you an example based on that question. At Krispy Kreme Donuts, they had some pretty poor systems. They were a long-established company that had a very bad operations manual in the early days and we helped change that. Listening to employees or observing, I saw a lot of new bakers make bad donuts and then I realized it was the procedures and the training that were the problem.
It wasn't so much listening. It was observing and realizing I had to jump in and help the staff to determine why are new bakers screwing this process up so much. Where are we missing it? We readjusted the training materials and the training guides to ensure that they wouldn't make those same mistakes. Let me add something. When it comes to a franchise or an independent business, standards are standards established by the owner of the brand.
Let’s say McDonald's says that a burger has to be cooked in an exact way to an exact temperature and served within a certain period. Otherwise, it's thrown out so somebody doesn't get an ice-cold burger or whatever it might be. The bun has to be toasted to this color and all these things. Standards are standards in any company. What I did as a franchisee to be a top performer, when it came to customer service, not everything is scripted in every single franchise.
There might be guidelines that could be scripted, like the air-conditioning tech in my favorite air-conditioning franchise, which is called One Hour Heating & Air Conditioning. They might have certain upselling procedures and things to enhance the sales process and address the speed of certain things but at the end of the day, giving amazing customer service and follow-up can never be replaced. Where most people fall short is poor customer service, poor follow-up, rude behavior from staff, and things like that. People leave companies not because of the company. They leave people. They don't like their environment.
We had a guy in our show, Chris Ronzio, who runs Trainual. He's big on training procedures and processes. What I find interesting is how you shared it in the example of McDonald's. We talked about brand standards. Most people think of brand standards that say, “Here are our colors and logo,” versus, “Here's our expectation or minimum. When we deliver our product or service, here's the level that we want it to be.” Above the level is great or at the level below is not. There are guidelines like, “Here are the guardrails you play within that. Here are the processes.”
A lot of times, people think of processes, systems, and standards as constraining things but in this case, in principle, it should allow you to do your best work consistently and for the brand owner. Let's say you are the owner-CEO of a business. You own the business. What you're putting in place are the standards for your business versus training protocols or checklists. It's focusing on the standard at the top of it. Does that land with you, Lance?
Absolutely, including speed of service and all of that, whether it's QSR or Quick Serve Restaurants like McDonald's or One Hour Heating & Air Conditioning. Let me throw in a very quick story. I was a big student of organizational development and design. I studied with some PhDs years ago on this subject. It fits perfectly with what you're talking about.
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They did a study of schoolyard kids. It’s a classic schoolyard when you go out and play in the schoolyard. There's a lot of room to play but there's a fence. Where do kids typically play in any schoolyard in America in that setup? It’s all over the yard. There are kids hanging on the fence. There are kids in the middle. There are kids all over the place. They did a study and they removed the fence. Where did the kids hang out? Was there a change? There was a change. There were no kids hanging out where that fence was because there was no barrier, guideline, or security. Nobody was that far. Everybody huddled closer to the building.
That is exactly what it's like in an organization where there's appropriate training and standards for employees. I was comparing to kids but it’s the same idea. Kids grow up to be adults. These adults in every great organization with great standards, expectations, and training will innovate, go out, and push themselves. Without that and the poor culture, they're going to huddle close to that building and the results will not be the same.
Even the flip side of that is I was a soccer kid so I played on the corner against the two fences but the fences should keep you safe. If you play outside of the fence, that's where the alleyway and cars are. As a brand owner, the fence is to protect people and have everybody be successful. Putting those things in place to help your employees be supported, they can see it in 1 or 2 ways. They could see it as a constraint or a way to keep them successful.
As a leader, it's on you to be able to explain not just the what but the why of that. Let's talk about you as a CEO, Lance. What are 2 or 3 things that you're working on in terms of your development? You're doing a bunch of stuff but what are you working on personally to help you improve to become a better CEO and leader?
I'm a lifelong learner. I'm always reading 1 new book or 2. At the end of the day, it's helping my team be successful. I have several full-time employees and some part-time employees. Even back in the old days when I had big organizations and 700 employees, and we were doing millions of dollars in business across multiple states, for me, it's all about how I support my staff to be better. I always encouraged my staff to spend 10% of the time innovating, and I don't care if it's a franchise or not.
Let me give you an example of what we came up with at a Krispy Kreme Donut shop a million years ago as it feels like. We put a camera in the speaker post in a drive-thru. Why? It’s because the staff can relate to the individual they're speaking to. They can see their body language, their face, and if they're paying attention. In Utah, where there are a lot of kids and families, a lot of moms have to reach into the backseat while they're ordering and talking to the kids. It’s whatever we can do to innovate and support the staff to make their job easier.
Our job as a leader is to how you make somebody's job easier. With technology, there are so many ways. Every organization that's smart is talking about how AI can help or hurt. “What do our customers want,” and things like that. For me, it's forever innovating. I've always spent a percentage of my time driving my wife nuts who works for me because she's a lot more conservative than me. She’s like, “Focus on that on your list.” “I am but I need to focus on new stuff. Otherwise, I'm going to have nothing on my list after that.” I need to always have something in process or progress.
Whatever you can do as a business leader to innovate and support your staff to make their job easier, do it. And with the technology today, that is much easier to do.
What I hear out of that is even for we'll call it established, proven, and tested organizations, whether that's a franchise or not, stick to what you know, do that well, and make sure that you meet the standard but also look, “Where can we improve?” We're never too confident to say we're perfect.
Never settle.
How can you, as a leader, look at innovating while also putting those structures in place to support your people? Ultimately, it delivers the highest level of customer experience.
Anthony, it's grow or die. That's it.
Lance, time flies when we're having fun. We're close to the end of our interview here. If people want to learn more about how to be a great leader and enter the world of franchising or if they want to connect with you, where do they go? Where can they learn more about what you're doing?
I'm everywhere. On Instagram and Twitter, it’s @LanceGraulich. You can DM me Anthony as the keyword. There are two final thoughts for me. I have a great free assessment. If you're interested in being your own boss, I do have a great assessment. It helps me and you understand your life experiences, mindset, and skillset. It’s an amazing assessment. It only takes about fifteen minutes. It's on my website at LanceGraulich.com and IONFranchising.com. A lot of independent business owners are out there.
I set up franchise systems. I have a big team that does that. Franchising your business, the exits are insane. It used to be for years, a franchisor can sell their business for 10 times EBITDA or 10 times cashflow. As of this conversation, we're seeing exits as high as 30 times cashflow. If you have an independent business that you're proud of and that is a great business, I’m happy to talk to you about setting it up for franchising. It's not that expensive. It's a great investment and an easy way to grow and scale across the country compared to you doing it all yourself.
Price is only an issue in the absence of value so if you can deliver something great for your people and you can support society and customers at the same point, that's excellent. Lance, thank you for being on the show. I appreciate you sharing. I look forward to hearing more about what you get up to in the community.
Thank you so much for having me, Anthony.
It's my pleasure.
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Lance Graulich, LanceGraulich.com, is supporting franchisees and franchisors all over North America. One of the things I'm taking away from this is the idea of the fence in the schoolyard. Without the fence, people will gravitate to the middle. It doesn't support your customers and support them in being successful. It limits your total capacity to have an impact on your customers. The other is, what are you doing to innovate? Spend a bit of your time continuously innovating so that you can keep pushing forward and maintain your relevance. I'm like potentially some other brands that didn't do that. I appreciate you reading, being here, and spending time with both of us. See you next time.