My Lessons on Fear, Financials, and Scaling the Right Way
Nicaragua was the scariest country I visited as a Training Specialist. Being from Guatemala, I’ve heard many things about communism and the guerilla happening there, so I feared going to this country the most during the Nomad Franchise Executive phase of my career. But, boy! Was I wrong…
In these last few blog posts, I’ve shared stories, experiences, and lessons from my 35+ years in franchising. I’ve covered my first years as a Nomad Training Specialist for Domino's Pizza, helping Master Franchisees design, implement, and train their people on the processes, procedures, and policies they needed to manage their franchise organization the right way.
We also visited the Dominican Republic, where we had a record-breaking opening and faced many supply chain obstacles. Plus, you learned about a heartbreaking brand news I received at the end of 1993 that would change the Domino’s Pizza culture forever.
In this blog post, we’ll travel to Nicaragua, a country that really scared and intimidated me—especially because I was traveling alone. I have to admit that I was quite nervous about this assignment, but thankfully, everything went smoothly, and it was a very enriching experience.
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The Wrong Impression
My assignment in this country was to improve general operations for the Franchisee, who had two units at the time. The owners were a very prominent family in the country, and they weren't the real operators of this particular brand, so they really needed help with operations, improving quality, training their people, and doing a better overall job.
So there I was, the representative of the American brand in a country that felt intimidating to me. But soon I realized that I had the wrong impression. People there were just wonderful! They wanted to learn more, do more, and be successful and thrive. They were just like everyone else in other countries and wanted the best for their business!
I had such a fantastic experience there. During the day, I spent my time with the people in the stores, training them on how to make the pizzas, organize the units the right way, and make sure the supply chain was optimized. It wasn't strange to see me in full Domino's Pizza gear with flour all over the place, teaching people how to do a great job. And, as I said, the people were just amazing, humble, and very eager to learn.
Then, in the evenings, I was all dressed up and going to many social events and cocktail parties, invited by the Master Franchisee, Cesar Augusto Lacayo Lacayo, because, as I explained, he came from a very prominent family. In fact, his cousin was the president of the country at the time. Also, while I was there, Cesar Augusto and his family launched the country's first cell phone company, and he invited me to the celebration.
That was the kind of contrast I experienced as a Training Specialist for Domino's Pizza. As I said, I could be covered in flour and pizza in the morning, and then have dinner with the country's president that evening. I enjoyed both experiences equally. And, in the middle of it all, I learned a lot about people, cultures, and human motivation.
Nicaragua started as the scariest country, but I would say it became one of the most special experiences of that phase of my life. Don't get me wrong, all of them were amazing, but there was something special about Nicaragua.
All the fears and ideas I had about the country were wrong. Everybody was great. I even participated in a horse parade! I knew how to ride horses because my father put us in lessons when I was a kid, and they had a horse parade and invited me to come. It was just both wild and amazing!
In case you missed it: [Video] The Phone Call That Started It All. AFA's Origin Story
Cayman Islands and the Missing P&Ls
All good things must come to an end, and once the assignment in Nicaragua was completed, I moved on to the next one: Cayman Islands.
While it was an amazing location, and I can even say that Seven Mile Beach in the Cayman Islands is probably my favorite beach, I have to confess I don't like the beach, or the sand, or the salt, or the sun. So, I really did go to the beach.
I focused on my job, which was, again, to set up a structured training process for the organization so they could implement it across the three units they had at the time.
- I had seen it before and ever since: an operations manual alone isn't enough to run a franchise business.
All of the Franchisees I supported needed to know how to implement this manual in their day-to-day operations. They also needed to understand how to manage the business side of the franchise: the people, the training, the cost control, the inventories, the schedules, the financials- all of the systems that had nothing to do with how to make a pizza.
By the way, these are all the things that we teach at the American Franchise Academy.
Learn more: Brand Systems vs. Business Systems: The Franchisee Gap
While I was working with John, the Franchisee, I noticed other issues: they were very inconsistent in product portioning; they had a lot of people on their schedule and a lot of waste.
When I asked John for his financial statements to see what was going on, I was shocked that he didn't have any. The reason: they don't have taxes in the Cayman Islands.
As you know, in the United States, most people create financial statements so that they can pay the government their fair share of taxes. In the Cayman Islands, you don't pay income or business taxes, so they didn't have to prepare financial statements.
Remember: I had a business that failed, and one of the first things I learned from joining an organization like Domino's Pizza was that understanding the profit and loss statement helps you spot opportunities and make better decisions.
So, I decided to do the P&L on my own using data from inventories, schedules, and everything I had access to. My goal was to analyze where they were and where they should be on average, compared to other Domino's Pizza locations elsewhere with similar volumes.
No one had asked me to do that. But whenever I went to a country, I always looked for something else to do beyond my assignment. So, if I was there because of supply chain, I might get involved in training. If I was doing training, I might look at marketing. If I were handling marketing, I would look at training…
To me, there was always something else to do. And in the Cayman Islands, I wanted to give John feedback on how they could improve profitability.
While they were doing quite well with their very high-volume store, growing their money in the bank, he was shocked when I showed him the results of my analysis. Not only because he realized he could be making much more money, but because he didn't know these P&Ls could help him manage the business.
Funny enough, the very next day John showed up with an accountant and asked me to share all the information with him as well, because he had decided that, from now on, they were going to have P&Ls. I was very happy that this was such an eye-opening business tool for him and that it helped him set up their financial statements for good.
John wasn’t the only one so open to learning. The manager there was also always asking and always wanting to learn more. So it was a pleasure to share all this information because they wanted to learn more.
That's another thing I really got out of my International phase as a Franchise Executive. Everybody's hungry to learn, and people are grateful and open to receiving that knowledge.
Argentina and The Glass Castle
Eventually, the assignment ended, and the next country I went to was Argentina, all the way down in South America. That particular assignment was very interesting.
Again, I was there to support their training process for three stores they had at the time. This was a semi-new Master Franchisee, and I remember being amazed when I walked into his office for the first time.
Not only because the headquarters were in a building called “The Glass Castle”, since all the front of the building was made of glass. But also because it was a very large organization… too large, if you ask me.
The training team I was going to work with had two people. They also had an accounting department and a marketing department. Plus, they had a front desk person and an executive assistant. They weren't doing so well financially, so I couldn’t tell how they paid for this enormous infrastructure with only three stores. This was a lot of people for such a small operation, with no urgency or plans to open more units soon.
Guess what happened? Less than a couple of years later, the whole country shut down. And yes, there were a couple of other reasons why this happened, but still I’m sure the enormous administrative expenses were too much for only a few stores.
Eventually, my time there ended, and I headed to Brazil for the longest assignment I'd had as a Training Specialist. But that’s a story for the next blog.
Three Revelations I Learned
There are a couple of things I learned from these particular countries I went to during my Nomad international career.
1. The importance of Financial Statements
The Cayman Islands, as I said, does not pay income tax or business tax. The country gets its income through import taxes because it imports everything, so duty is how the government survives.
Accounting goes back to the time of kings and queens, when you were supposed to pay duty, or taxes, to the government. Accounting came about as a way to keep track of how much you needed to pay whoever owned the land you were working on.
Now, you might think that if you don't pay taxes, you don't need accounting, but accounting isn't just for paying taxes.
Financial statements give you a score, a record, and metrics for where your business is, and they also help you understand trends, where you're going, and where the opportunities are. All in all, they help you make better decisions and take more focused action to change and improve your business.
I love financials and numbers, and this experience in the Cayman Islands really brought that home for me. That’s why these are some of the key topics we teach in all of our programs: metrics, dashboards, financial statements, break-even analysis, financial planning—all of these tools and knowledge are essential to becoming a successful business owner.
2. The importance of being present
Something else that I learned in this process is that you really need to be present in your business. You cannot be an absentee owner. No matter what anybody tells you, no absentee-owner business thrives.
- Yes, you can have a business and be away from it most of the time, but you won’t be as successful as you could be because you're not looking at your business all the time.
No employee will care about your business as much as you will.
Staying actively involved will help you achieve greater success. When you regularly pay attention to how your business is doing, you’re better able to spot opportunities, address challenges, and maximize the business results.
3. The importance of overhead expenses
Remember “The Glass Castle”? Franchisees must understand how much money they should and should not spend on overhead, meaning the general and administrative expenses. Otherwise, they can break their business.
Your revenue comes from your open, operating units. So you need enough of them, and they must be big enough, to cover GNA expenses and still have money left over.
Does that mean you’ll sometimes have to work really hard and put in extra time to cover those responsibilities because you can't afford to have an executive assistant in the office? Yes. But eventually, once you have enough units, you will have more time and financial freedom.
The question is, can you hang in there through “The Hell Zone”, which is that stage between two and six units where only the problems seem to multiply and you don't even have time to sleep, eat, or take a break? You need to get through that to reach the point where you can afford to hire a District Manager and eventually grow to 7, 8, 9, 10, or 15 units and build a big infrastructure for your corporation.
I promise you that as you grow, things get easier. I know it doesn't feel like that at the beginning because you have to deal with a lot. But once you have enough cash flow to build your first District Manager area, everything changes. But you must have your systems, processes, and procedures well documented and defined, and have trained your employees on them to truly escape that Hell Zone.
The best part is you don’t have to figure all of this out on your own. That’s where we come in! Explore our educational programs and learn how we can help you develop and implement the systems that let you scale and delegate operations the right way.
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