Schooley Mitchell

Here's a Thing that's well outside my usual tech beat. Schooley Mitchell is a cost reduction consulting franchise, which is kind of a mouthful but the idea is pretty simple: they go into small businesses, knock down their costs, and take a cut of the savings. A couple more details from a podcast with their founder:

• They started in telecom, i.e. negotiating down businesses' phone and internet bills. Apparently this is a more common thing than I thought.
• The consultant charges nothing up front and make their money on a 50% residual over 36 months. i.e. if they knock $500/mo off a bill, then they take $250/mo for 36 months.
• While not strictly re(oc)curring after the residual period, theoretically the client is incentivized to keep sending their bills and expenses for continual analysis, which opens the way for additional savings (+ corresponding revenue).
• Standard franchise fee is $68k to start. There are other nominal startup costs, but nothing huge since no physical presence or equipment required. Ongoing royalty is 8%.

There's a lot to like about the core business model. It's simple, because who doesn't understand saving money? It's pay-for-performance and 100% incentive aligned, i.e. nobody wakes up wondering why they are paying a retainer. And in keeping with the times, it's recession-resistant, because... well, who doesn't like saving money?

My biggest questions are around the franchising bits. What's the trade between head office and a franchisee? The podcast episode implied that head office does the heavy lifting for implementation, so how much of that is process / knowledge and how much of it is a cornered resource, e.g. a special contract between head office and vendors? If it is mostly learned replicable processes, what incentivizes the franchisee from just taking off after the term of the agreement? Vice versa – with a relatively low fixed startup cost, why does Schooley franchise out vs hiring or opening up corporate-owned offices?

Still, this was interesting on a meta level. Previously I thought franchising was either 1) an incremental game for the wealthy (e.g. McDonald's typically requires $500k liquid and $1MM+ total invested), or 2) being a risk mule for a new brand (e.g. froyo or cupcake joint back in the day, or I guess it's cookies now?) So at the very least, I discovered the franchising world is way broader than I thought.