Coaching Through Financial Stress: Kyle McEuen on how top brands build trust to boost unit economics

Hey everybody, welcome to today's webinar. Super special guest. Today, I'm joined by Kyle McEuen, who's the SVP of Franchise Services at ProfitKeeper, which is a PrimePay company. Kyle's been in the industry for almost twenty years. He's a CFE, also a franchisee of Primrose Schools, which is so exciting, awesome brand.

And today I asked him to come on to bring in a little bit of that experience of both the finance of franchising, but also that franchisee experience to talk about something that a lot of folks don't talk about a lot, which is how do you coach through financial struggle, right? Operational is one piece, but when a franchisee's actually in financial stress, how do you approach that?

What are the ways to navigate a franchisee through that to make them a rock star performer again? Kyle, thanks so much for being on today.

Yeah. Thanks so much for having me, Gary.

Cool. So, I mean, before we get started, would love if you could give a little bit of a self-intro. I know I-- hopefully I did you at least partially justice there.

Yeah. Yeah. No, it's a pleasure to be here, like I said. Far as background goes, worked for ProfitKeeper for almost twenty years, believe it or not. Came out of public accounting, went right into, and have been with the company for quite a while. So it's been a fun ride here at ProfitKeeper.

We've done a lot of really cool things

Oh.

My wife and I opened our first Primrose school, and, and then we have, opened up since two more, or

That's

And so that has been a journey in and of itself, but we're really proud of that.

We love Primrose as a partner. I always have to give them, kudos whenever I'm talking about Primrose. They're a great partner. We now like, we're proud that we've run, the businesses and such that we are ranked one, two, and three with our campuses in the state of Arizona. And so we've done a lot of hard work, or it's been a lot of hard work to get it there.

But, yeah, we love wearing that hat too. So I think that it helps me on my ProfitKeeper role quite a bit, being able to experience what franchisees experience as well. So that's a little

Awesome. That's so cool. And yeah, agreed. Primrose is such an awesome brand. Yes, maybe like-- and I-- this isn't you, but, you know, franchisees that might be struggling, right? And the realities of there's many reasons, that that might happen. You guys, obviously, ProfitKeeper, get a special lens into understanding that, but maybe putting your franchisee hat on, what is a little bit misunderstood by brands with franchisees that might be struggling?

As I think about, that, so many conversations with individual franchisees at ProfitKeeper, but then just my own personal experiences, and I think a certain extent, m- there is... I, don't want to call it an empathy gap, but, sometimes there tends to be an empathy gap where, brands say, "This is the model. You run it just the way that you're supposed to run it." And then when franchisees are, working hard, I'll use the quotation terms, working hard, they might be filling that process out, not having a lot of success. Like is mounting, and they feel like they're working hard, but they're not seeing the success.

And so there's this gap of understanding like the franchisor is why aren't you running the model the way it's supposed to be run?" Franchisee's "I'm trying." And so reconciling where that breakdown is operationally is tough sometimes. And then also, I think I'm speaking the obvious here, but a lot of franchisors have to have the infrastructure to be able to adequately help those franchisees in a timely way. Like the communication i- is built up. Like I remember talking with one franchisee who's "I haven't talked with my franchisor for four or five months." And sometimes it's the franchisee saying, "I don't want their help. I'm gonna do my own thing." And that, in my opinion, doesn't lead to always the best results. And then sometimes e, just the franchisor simply for whatever reason, doesn't have the structure to be able to touch the franchisee that much. So it's this balance that is played between, and the franchisee. And I will say, the, lone ranger approach for franchisees who feel like they can do on their own, I think they're missing a big opportunity to understand that their franchise is a partner with them has experienced a lot of different things and that can help them. But vice versa, there's a lot of things that the franchisee is experiencing that the franchisor can maybe better help them with specifically instead of just generally telling them certain things. So yeah, I, would say it's just a balance. It, doesn't go all the way one way or the other sometimes, but mainly just that communication gap of I'm struggling and I need some help, to be able to overcome this certain issue.

Yeah. It's, it's interesting, you know, as you're talking, I don't know if you know this, I'm the youngest of four, and as the younger sibling, it's always like, "No, you know, I can do it myself. Like, leave me alone. Like, y- I know you've done it," but, there's something about that pride, and I, I wonder how that manifests in the franchisee relationship because as a franchisor, you know, presumably you know when people are struggling, whether they raise their hand or you see it in the data.

So when you approach them, I as a franchisee could imagine being defensive, right? So how do you- Think about that balance of holding somebody accountable but still not making them defensive. I mean, it just feels like such an intricate dance and such a delicate situation.

Yeah, and I think acknowledging that in the very beginning, I think helps.

Right.

You understand that, it's a little bit like, I, read a book a long, time ago, it's called Critical Conversations, and it really talks about

Yeah.

Right?

And we don't want that. That's not helpful to be able to, bridge these gaps and help the franchisees out. So the way that I would say it, and a lot of this is my own experience, wearing my franchisee hat again and talking to a lot of franchisees at ProfitKeeper as well, is that when a franchisor approaches, an operational conversation, and it's like, "Hey, we're not seeing the results that we want to see," I think immediately sometimes that's tied to very specific operational things, which is helpful. But what I would also say is, it's ungrounded with data, and it's ungrounded with financial information as well. Where I think that's the problem is that sometimes that can feel very critical. "You're not doing this, you're not doing this, you're not doing this, you're not doing this." f- for consideration, if someone came into one of, our schools, and they said, "This isn't set up the right way.

This isn't set up the right way," or the furniture, whatever is, wrong here, and it's just instead, narratives are very powerful. The franchisor could come in and say, "What we've seen is that when franchisees really pay attention to these details, when you're taking, a family on a tour, that this shows really well, and this helps convert people better if you have it set up this way."

Or, "If you structure your room this way, it will give you the flexibility to add a new, child into your classroom that could equate to this much per month, that could equate to this much per year." "If your kitchen is set up this way, it could save you money as..." those are the types of things that all of a sudden you really have the franchisee's attention. Instead of it being critical, you're tying it to the outcomes that they really want, which is greater profitability. They, are under a tremendous amount of stress a lot of times, but they did it to make money. They did it to take care of their families. And so instead of just focusing on just that, that o- operational, only, you

Interesting.

That can help you financially." And then I think that's a lot better, or, more, yeah. The franchisees will run with that a lot more than they will just, "Oh, great. My franchisor came in and just was critical of everything I was doing."

It's, it's so interesting, you know, you're, you're talking about this, and I'm thinking the difference between, you know, an instructor that's just telling you the way it is versus a business partner. And I, I think about this, you know, I've-- I'm a co-founder. My business partner is my best friend, right?

And we grew up together. And I love that, and it's awesome, but there's this idea of we can't both be doing the same thing, right? We need to be tackling different parts of the business. And what it sounds like you're saying is the franchisee's there for the operations, and the brand is kind of like the eyes up part of that business partner, right?

They're the ones that are looking across hundreds of similar businesses and trying to figure out what's working and then bringing that in as like a, "Hey, here's what I found," not, "Here's what you should do." Which I think is actually a really big and very interesting, at least paradigm shift for me in my brain.

Yeah. A- absolutely. I think, the more we realize that we can't be everything, a- experts in everything, and we realize that we need help, and that's what the best part of franchising is. We've always heard it i- in business, for yourself and not by yourself. You've

Right.

To convention after convention, clients, other types of events, and it still seems like there inevitably is a little bit of mistrust where, franchisees just feel like, the franchisor maybe, takes them for granted, maybe doesn't care about their financial outcomes per se, think that's true.

So I think that's a breakdown in, a communication and conversations and narratives where the franchisor is like, "Listen, the more successful you

Are, the more successful we are. So let's work together and, let's put in the work together, but we can help you. If you listen to us, we can help you." So that's just

So critical wherever you find... You put that coaching hat on as far as franchisors, and then equally just reiterate that to the franchisees. "We're coming to visit you, and yes, there are certain standards that must be met that we can't compromise on per se, but we're looking at this as an opportunity to really help." If the f- if the franchisee feels like when that franchise business coach left, that they're like, "That wasn't really helpful," like they just s- were unhappy with everything that I'm doing, and I'm working long hours, I'm doing everything I can I would submit to you that's a real breakdown in communication.

There was something there that, was a missed opportunity for the franchisor or the franchisee to collaborate together on what would really help the franchisee.

That's cool. I'm, I'm also thinking now, what's the extent of that, right? And I'm-- again, I'm putting my business owner hat on, but there's an element of if somebody's telling me or advising me to try something different, I'm happy to try it. But if someone's asking me to spend money on something, that's, that's a next step.

And I'm thinking about, you know, on the sl- small end, it's like, you know, spend on a marketing channel or, you know, spend more on marketing. That's a clear one. But when some people are asking for a remodel, right? You're talking, you know, a six-figure bill. Yeah, how do you, you know, h-how, how do you extend the trust to that level and root it back in franchisee success?

And I'm especially curious in, you know, ProfitKeeper, you guys look at the P&L data, the ultimate data, right? How do you think about the marriage between something that's very almost nebulous to a franchisee to a financial outcome?

Yeah, that's a really great question. I will say the trust the

Yeah.

The franchisee, the easier that is. If a franchisor has successfully implemented some of these programs to really nice and good outcomes, franchisees inherently trust them a little bit more to, "Hey, they're doing this for a reason." But once again, I go back to more the fundamental level. I'm a big believer if you don't speak it, it doesn't exist to someone. Like you have to speak it, and then furthermore add in you gotta ground it with data. So if a franchisor comes to me and they're like, "We're gonna require $150,000 investment in whatever that is, a remodel it is," and they just leave it at really difficult for a franchisee to say, "Ooh, that's a lot of money for what?" And I

Yeah.

Where the gap in the narrative like is. And so once you fill it in with, "Here's why we're doing this. We found, and we've done research, we've already done, we tested this with 20 franchisees that did that same investment. Here's the average return over the last year because the, the location is refreshed, it feels good. Traffic is increased. Here's the KPIs, here's the financial data." I think it's just so much easier to be able to accept that type of a request, from your franchisor. And I'll go back to, again, I'm putting on my ProfitKeeper hat now, and so I'll be a little bit of an advocate for the, the power of financial data in these types of situations. I think that the big missed opportunity for a lot of franchise business coaches and brands with their, strategies on how they help the franchisees is they go in and they focus just on the operations and those types of conversations, and they do not ground it or with financial information. And so I think that's the big misc, And as I've spoken to a lot of franchise business coaches and franchisors, I think, in... If they're being really honest, one of the breakdowns is that they don't always feel comfortable having those conversations. Themselves aren't always familiar with all of the mechanics of a P&L or what levers to pull that could produce this or produce that.

And so I just think one area that the franchisors would need to focus on is, helping those franchise business coaches feel comfortable, when they go into those coaching situations, being able to talk about a P&L, talk about why the operations make a difference to the P&L. And as long as that's happening, I think the franchisees see that as way more help, along the path of, their partnership with the franchisor.

Interesting. It's-- You know, it sounds like it starts with that single P&L informing the decision, then you figure out the narrative, and then it comes back to, I like what you said around saying it first and then backing up the data, right? Not starting with data overload, but saying very succinctly, "This is what's happening," naming it, and then moving back to the data.

Have you-- Which brands, and maybe I'm gonna strike off Primrose 'cause you've already done enough advocating of them, but, you know, which brands do you see that do this really well? Or what, kind of similarities do you see across brands that do this really well, where they have a process that both informs and is smart, but then also is able to adjust and nuance for the reality that it's, you know, and in five hundred individual franchisees at the end of it, right?

How, how does that work?

Keeper has some amazing clients.

Yeah.

I smile as I talk about it. We just have so many amazing clients that, that I've just been in awe of. As I take a step back, and I'm, have relationships with these franchisors, I'm like, "That is good what you're doing," right? I just get to take a lot of this in.

So I'll omit names. But what I will tell you is some of the best franchisors that I work with play that fine line of, for example, financials, right? A lot of franchisees, it's just the culture, "I don't want to share my financial information because maybe I'm embarrassed because I'm not doing well. Maybe I have a little mistrust with the franchisor of how they're gonna use that data," etc. But the best, practices that I've seen with our clients are when they're requiring financials, but then the franchisees can see that they're using those financials. So for example, one brand, and they're a large brand. They've been around forever. So they have figured out some really great things. They probably hit a lot of walls along the way- But they finally figured out that constant, meetings or, coaching sessions with the franchisees, and I'm talking on a regular basis, where the franchisee sits down with the franchisor they're reviewing financials and offering help and guidance. That works brilliantly because then when a franchisee comes for requests or whatever, they know that the franchisor is not there just to collect royalties, right? They care about their bottom line because they're talking about the bottom line. And, that- that's like kind of a really important point. You can say you care about a franchisee's bottom line, you're never really talking about profitability or reviewing the financials or trying to help them with that, then really how much do you care? I say it that way. So this franchisor, they have regular... I... And I know it was monthly, but they might move to quarterly after monthly after a while. But they are meeting with the franchisees, meeting with those, quarterly, meetings, and they are talking about financials and operations together. And they are very successful, and they have a lot of franchisees. And so I just look at that as they're doing that, and that's their outcomes, I think that's what really everybody should work towards, regardless of the politics.

And I know there's a lot. Like some franchisors like, "Hey, I haven't collected financials before. It's not my, it's not my, culture." and, I just often reflect on that and I'm like, "Yeah, but if you require that information, you're telling them inherently that it's valuable to you." And as long as you're using it, because if you don't use it, then their franchisees just feel like it's a check the box, then they can... You can work to those really like amazing outcomes together, or at least get ahead of it way before it's a problem. One more thing, a point I'll make on your question was, franchisor came to me a long time ago, and they just hadn't been collecting financials and, there's different kind of vendors in our space of what ProfitKeeper does. And they said, just regardless of who you choose, what you're using as a tool, mentioned, "Listen, what I love about a software like this is it tells me that there's an issue long before the franchisee calls me and says, 'Hey, listen, I don't think I can continue this. We've got to run a process of shutting down or whatever.'" Because you're looking at the data and you see that way before it's coming. Like literally the radar system. You see that come in, you're like, "Danger zone. There's some problems here." And they can jump in and coach and try to help. So with the lack of collecting financials and the lack of having a tool a ProfitKeeper or whoever you're gonna use- I think at a d- a huge disadvantage.

Such a believer in the financial transparency and performance coaching at a cadence. I think that's so right on. And-- But y- interesting, you know, you're talking about problems, identifying them sooner. Maybe this will be my last question to you. The How does that look for a top performer, right? If somebody says you're highly profitable, Kyle, you know, you're one, two, and three in Arizona, and now you show up and someone's telling you about your P&L or your operations, and you're looking at them saying, "I'm one, two, and three," you know?

Like, "What are you telling me?" I'm curious what that conversation looks like on the flip side and what financial transparency and frequent coaching looks like when you're doing well, not when you're doing poorly.

I, love that question. Yeah. Why I like that question is because I do feel like a number of franchisees, maybe some that are listening or... But they're out there, where they feel like inherently there's no value for them to compare themselves against, the majority of the franchisees in the system because they're doing that well. What I'll tell you is, bringing it back to our schools, is there is f- over 500 schools in the US, and I absolutely believe that, because I have a certain situation in Arizona, that if I compare myself against schools that do about the same revenue as me, is a tremendous amount that I can learn from them. And so I think, how I would answer that question, and how I've seen it, at least for me, is that you start to expand that, and you start to compare yourself against others in your peer group, that you can say, "Hey, listen, they're doing just as good to me, a- as me, even better, I want to compare myself against a peer like that because I want that lift.

I want to see, how are they managing their labor? What are their expenses like? What is their revenue like?" And then, franchising is one of the most wonderful networks that there is. A big believer in it. As far as then, okay, with that information, now I can reach out to franchisees and say, "Talk apples to apples."

"Hey, how are you... Labor cost is, three to five percent over yours. I see we're doing about the same amount of revenue. Is it as simple as, you've got a different wage rate than me in a different state, or are there some things that you're doing, tactics, some practices that you're in, I could emulate?" And when you're open to that, I call it being open to a new space of possibilities, there's some amazing things that can happen. As opposed to you're closed and you're like, I'm doing as good as I can. There's no way I could do better. No one can tell me that I can do better. I can't learn-" anything from anyone.

And I look at that as that's sad. To me, that's weak and that's ineffective. To me, you can always learn from others, especially who have the outcomes that you're looking to produce maybe someday. And again, to answer that question, what I would say is, in that case, if you feel like there's not value and you're doing really well, like for, Kyle and Cade with R3 Schools, what I would start to do is expand that comparison group, and I would start to say, "Hey, w- who else in our system what I do or is in that same area?"

And ProfitKeeper can help you do this too with the way that we do benchmarking, but I'm gonna start to benchmark myself against them.

Love that. This idea, even if you're number one, you have something to learn from the other top ten, right? If that's how you're joining the challenge, then you're saying that it extends to hundreds. Kyle, this was awesome. Always our last question, if people have follow-ups or people wanna get in touch with you, what's the best way to do that?

Oh, geez. I'm gonna... Look, if someone wanted to contact me directly, I'd say email me at kyle@profitkeeper.com, or just go to profitkeeper.com. We want everyone to be successful in franchising, so whatever the tool you're using, if you feel like we could be helpful, we'd love to help. I know I'll speak to Gary and Harmonyze, like they're amazing, and so yeah, we're just really appreciative to be here. We love, everybody that's in the franchise business model and want to see you succeed. Yeah, if we can be of help, let us know.

I love that, Kyle. Thanks so much for the time

Right, thank you.