Scott Juetten has participated in several entrepreneurial ventures, including owning and operating a successful franchise business with two locations that earned more than $2 million in annual revenue. His locations have been in the top 1 percent in revenue among 500 FASTSIGNS franchise locations internationally.
Juetten was a founding member of the Pacesetters, a select group of franchise owners who consistently achieve annual revenues of more than $1.3 million. He has been a member of the Franchise Advisory Council, and he was elected Franchisee of the Year by his peers in 2004 for his ability to develop a successful business while in an owner absentee role.
In 1994, Juetten joined Alliance Equity as a director. During the past 13 years, Alliance Equity has successfully completed more than 75 transactions in the middle market (business values of $2 million to $25 million), including the sale of his two FASTSIGNS locations. Juetten’s primary role during this period has been to facilitate successful exit strategies for sellers. Juetten can be contacted at email@example.com.
NuWire: Can you give us a little background on yourself and your experience with franchises?
Juetten: I’ve always had sort of an entrepreneurial way about me. I actually owned an imprint company in college…and after college, went out and did the interview program and ended up working for a Fortune 500 company in a sales and marketing position. And after about a year and a half [or] two years of that, it became clear to me I really wanted to…take my own direction and build my own business.
An ex-partner of mine in the college [company] and I talked about going out and buying a company. And we put together sort of a checklist of options and scenarios and what would make most sense and quickly came to a conclusion that we wanted to be in a business-to-business environment, not be in…a business-to-consumer environment. And at our age, which at that time was 23, we also felt that franchising would be a more secure route for us to go. So through that process [we] came across FASTSIGNS, and…ultimately decided that FASTSIGNS was the best fit for us, and we opened our first location in 1990, and then…we broke off our partnership in about 1993 [or] ’94, and then I opened a second location…[I] now have been owner/operator for the past 17 years.
NuWire: Why did you decide to purchase into FASTSIGNS as a franchise?
Juetten: Well, the leadership of FASTSIGNS and their general support for the franchisee was clearly above…anything we had came across…and the chemistry was really strong. We flew out, we met with the president of the franchise, and got to know him, and obviously we did our due diligence with current franchisees.
We liked the product, it had a high margin, it was a good price point, and really felt like we could…take our corporate sales background and it would dovetail well into the FASTSIGNS sales process….After we had done our due diligence, it became clear that we liked the business model, we liked the leadership and we liked the product.
NuWire: When you purchased your first store, how involved were you in the actual day-to-day business, and what type of responsibilities and duties did you guys take on and split within your part ownership, and then…how did that change when you decided to branch off on your own?
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Juetten: Well, initially my partner at the time and I decided that it would…make more financial sense if one of us maintained our career path in the short term while the other built out the business. So I took the path of being the owner/operator, and that required an exorbitant amount of time…it’s no different than probably any other startup. Yes, you have the framework, but you have to go out and build the business from ground zero.
I put in…60, 70 hour weeks in the first…couple years of that business. And moving forward, when my partner and I decided to break off our partnership, and I ended up ultimately buying him out, when I opened up the second store, I actually put management from my other store into that store. So my time really didn’t increase a whole lot. I just became more of a business owner, rather than a business operator, which was always my intent.
I think it’s really important that everyone treat their business like an asset and grow it…with the expectation ultimately you’re going to sell it. I’m a big proponent of the E-Myth…by Michael Gerber. His big point is that you’ve got to figure out how to create systems and procedures. And that’s the other beauty of a franchise is you’re able to leverage a lot of the core procedures that have been…already proven….And then, in terms of multiplying out and expanding, I think it allows you to do that in a much…quicker fashion.
NuWire: Once you had multiple stores, how did your involvement with the actual store itself change?
Juetten: I turned into more of a general manager, working more on the business, working on more of the outbound marketing, the financial planning, the expansion, equipment purchases, hiring….Rather than being at ground level, maybe at more of a 10,000 foot level approach to the business, and really trying to focus on making sure the business could operate ultimately without my involvement, knowing that someday I would sell that business and that would be a valuable feature to the business, if I wasn’t the business.
NuWire: What were the key factors that allowed you to have a successful business without having to be constantly involved in the operation?
Juetten: My management style is one of empowerment. I’ve always believed in empowering people to assume responsibilities and give them an opportunity to fail. I think the tendency for many business owners, especially… smaller business [owners], is to overly manage many, many of the details of the business and become very micro. And while you may eke out a little bit more profit, maybe early on, than the average business owner or operator, I think what it doesn’t allow you to do is expand and make the business more about the infrastructure rather than about the owner. So I really think my biggest advice to anybody looking to own and operate a company of this size is to make sure that you empower the people around you and try to really build out your management team…[and] staff. And keep in mind, in many of these businesses, you’re hiring…hourly wage-earners, and so you’ve got to get pretty creative in terms of how you provide incentives, commissions…to get them to stay…long term.
NuWire: If you were able to go back in time, would you have done anything different in regards to buying or operating your franchises? And if so, what would you have done differently?
Juetten: I think I would have used the asset earlier on to leverage other opportunities. Once the cash flow got over a certain point, I think I would have taken a few more risks to either add another location, make an acquisition and possibly just continue to diversify in other areas.
NuWire: If you could give a new franchise owner any one piece of advice, what would you tell them?
Juetten: I would follow the [operations] manual of a franchise…it’s proven, that’s why you’ve invested in it, that’s why you’re buying into it, and then the other big piece of advice would be to hire good people and be willing to pay good people.
NuWire: Do you think most investors could be successful with franchises…or do you think they need to have certain traits, experiences, facets of their personality?
Juetten: I think it’s…critical in franchises to be very much a people person, be willing to get to know your customers, be willing to sell, market, and then I think the other big piece is be willing to take advice. I think at times business owners tend to…put a net around themselves and say, ‘I know it all,’ and I think it’s important…to put quality advisors around you.
The biggest piece of advice I could probably provide them is to continue to look to expand upon what they already know, whether that’s from professionals, it’s books, other franchisees. I would look strongly to your peers inside the franchise, find the most successful franchisees and get to know what they’re doing because…there appears to me to be a…90/10 rule in the franchise systems. Typically there’s 10 percent that way over-deliver or…have significantly higher revenues. And typically they’re doing something different, unique or possess some unique trait.
NuWire: I’m interested…in hearing a bit more about the process of actually selling the franchises.
Juetten: I think a business owner should know the value of their business every year. It’s usually the largest piece of their net worth and they should understand if the value of it’s going up or going down and why on both fronts.
[Selling] needs to be a planned event. You need to make sure you have a strong advisor or advisors around you to help prepare for that process, your profit and loss statements, your tax returns, all of those things need to be very clean.
I think there’s a tendency to run a lot of expenses through a business that…may be considered discretionary and…those need to be accounted for when you go to ultimately sell your business. So…it should be a planned process, you should plan out that exit strategy. And because of my background I was able to…replace myself…many years ago, so that’s made me less a part of the business so it takes out the whole debate whether the business goes away if I’m not there. The business already performs without me.
And then I think the other piece of critical decision-making is…you should understand the value of your business because if it doesn’t match up with when you want to sell it, then you need to figure out how to get there. And it may be that the risk of doing that or executing on some plan whether it be an acquisition, whether it be cutting overhead, etc., those risks or…that uphill road may be too steep and it may behoove you to sell it anyway.
I think there tends to be a misperception when these smaller…business opportunities are sold…they hear rules of thumb, they hear from their buddy who sold their business and they got…five times this or six times that….Well, you really should get somebody who has a professional background, who can really make sure they navigate you through what is your business probably going to go for, or what type of value range should they anticipate when they take it out to market.
It was really very simple for me to take it out to market [and] find the buyers. The climate, especially right now in 2007, is very hot for business owners to sell their business. There’s a lot of liquidity out in the marketplace and there’s a lot of…individuals looking to buy businesses. So it literally took me, start to finish, when I’m all done here, it’ll take me less than six months to sell off all my locations.
NuWire: Is there anything else that we haven’t touched on related to franchises that you think investors in general should be aware of?
Juetten: I would make sure they really understand that…that franchisor is going to be your partner, and to some degree, big brother. They’re in the business to drive top line revenue. So you need to understand that most of their decision-making is going to be predicated upon growing revenue, not driving profitability or bottom line profits. So…they need to have their eyes wide open when they walk into this that…it may take longer than they think to get to a state of profitability. And they should plan that….But once they get over the hump, I think there’s considerable upside and…there’s a ton of positives.