How to Finding the Right Franchise – Tom Scarda Interview

From the tracks of New York’s subway system to the boardrooms of franchise consulting, Tom Scarda’s career journey has been anything but conventional. Once a train conductor, Tom is a self-made small business owner and certified franchise expert (CFE). He founded The Franchise Academy and wrote three books — Franchise Savvy, The Road to Franchise Freedom, and The Magic of Choosing Uncertainty.

Tom has owned and operated five different businesses — both franchised and non-franchised. His experiences include being recognized as the #1 franchisee in one of his ventures and experiencing a complete failure in another. This has shaped Tom’s expertise, making him uniquely qualified to guide others in the franchise world. Over his career, he has helped more than 1,500 people decide if franchising aligns with their goals.

In this interview, we explore Tom’s journey, his practical advice for franchise newcomers, and the essential insights he shares for building a thriving franchise business.

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From Train Conductor to Franchise Expert

SBS – Can you describe your journey from being a train conductor to becoming a franchise expert? How did it all start? 

Tom – When I was growing up, my parents rarely said I should go to school and get an education. They said I should get a good government job with a pension. They would literally sign me up for the civil service tests. Once in a while, I would take them. Other times, I would not show up. But I did take the one for subway conductor because that sounded interesting to me, and lo and behold, I got the job about a year later.

I was a brand new subway conductor working on the trains, opening and closing doors, and making the announcements on the New York City subways. At the time, I was 22 or 23 years old, and an old-timer told me, “This is a great job. You’ll always have a shirt on your back. You’ll never have a silk shirt, but at least you’ll have a shirt.” To me, that sounded like mediocrity, and I wanted a silk shirt. How would I get that? I looked around and realized my bosses did not have silk shirts. They are nice people, and I’m still in touch with many of them from years ago, but they were not living the lifestyle I wanted. I realized what business owners were and thought, “How do I become a business owner?” I know nothing about business at all. I’m not a sales guy. 

After reading many books and attending seminars, I realized that a franchise is a business with training wheels. It’s not true entrepreneurship, but you’re a business owner fully, and you have the coaching and the guidance of the larger company to help you with everything that you need, from setting up a business structure all the way to how to sell the business at the end if you wanted to do that. That’s how I got into it. 

First Steps to Success

SBS – What key factors contributed to the success of your first venture? 

Tom – I was lucky it started and ended well with my first franchise. However, the second franchise that I bought into actually failed. Going through failure and understanding why that happened made me a franchise expert. 

But to answer your question, at the beginning, I was just reading many books — self-help, motivational, inspirational, and biographies of famous entrepreneurs. That inspired me, and what I took away from it was that everyone starts from zero. No one, at least self-made people, is not born into it. They have to figure it out and learn it — and you learn it from following others who have done it. 

That also gave me the energy and the focus to change my life. It helped me realize that I’m not stuck in a situation and could change it, but the only way it’s going to change is if I change myself. That’s the thing — whatever you want to change into, you have to become that in your mind first and then act like that person to get where you want to be. It’s not just in business; it could be in anything. If I wanna be a happily married person, what do happily married people do? You learn, and you become that person.

The third thing is — if others tell you to go the extra mile, I say, “Go the extra 10 miles.”

Evaluating Opportunities

SBS – What are the top three criteria you recommend for prospective franchises when evaluating if something is a good opportunity for them?

Tom – That’s a great question, and it’s individual. What I mean by that is we come under what I’m going to say is the wrong advice, where people say, “If you work at a job that you love, you never work a day in your life.” Yes, that’s true if you’re working a job, but that has nothing to do with owning a business. You have to understand the business. In franchising, you’re typically not going to get into something that’s your industry. Franchising is usually a second career, not something you went to school for. 

I always advise people not to become infatuated with a business concept. If you are a great baker, you might think you should get into something like a bakery, but I can almost guarantee that you’ll hate baking in about a year if you’re trying to pay your bills with that. You don’t want to mix your passion with making money. You want to find something that’s a great vehicle with great margins and is needed in your community — and let that money pay for you to do the things you enjoy. Then you could bake because you love to bake, not because you have to pay the bills.

Franchise Myths

SBS – What are some misconceptions that people have about owning a franchise? 

Tom – The number one franchising misconception is that once you buy it, everything’s great, and you just make money. It’s absolutely not true. You’ll have to work it, build it, and build a customer base, just like any other business. The only real difference is that you’re buying into someone else’s idea. They have already blazed a trail, and you’re following it. This guidance gives you a much quicker time to break even or make a profit because you’re avoiding all potential mistakes. They’ll also tell you how much money you need for marketing, rent, etc. — they have it all lined out. 

People often look at a franchise and think it’s pretty expensive. Yes, you’ll pay a little bit more to get started, but in the long run, you’ll make more because you’ll stay in business. If you start from scratch, statistically, 50% of startups fail within the first 12 months. In franchising, it’s the opposite. People succeed more often than fail if they’re in the right business and boarded for the right reasons.

Financial Readiness

SBS – What financial preparations should someone do before investing in a franchise? What do they need to have for the first year?

Tom – The number one reason for failure in business, franchise or not, is not having enough money. There are more than 4,000 franchise concepts that span 90 different industries, so you could get into a concept that costs about $50,000 to start, or you could get into a McDonald’s, which is in the millions. So, you have to figure out your budget. 

I teach my clients to have three buckets of money filled. Once you figure out how much it will cost to start a franchise, you need to have the initial capital to open the doors and be ready for your customers. Then, you need working capital or post-closing capital. It will take weeks or sometimes even months to start bringing in some real money, so you need to have that second bucket to pay for rent, staff, marketing, etc. The third bucket is something almost everyone forgets about. I call it the “home capital.” This is the money you need to pay your bills at home and put food on the table while working towards making a profit in your business. 

On top of that, here is a tip — whatever you think it will cost, add 20% or 30% more because everything always costs more.

Building Strong Partnerships

SBS – How important is the relationship between a franchisee and a franchisor?

Tom – You are hitting on a very insightful question. I tell my clients that they need to fit in the culture of that business — and the culture is set from the top, from the founders or the presidents of the company.

In a franchise, you can figure out the culture by doing what I call “validation calls.” You’re permitted and encouraged to call as many franchise owners in that concept that you’re looking to buy. I have 39 questions that I set up my clients with so they can make these calls really effective. You want to ask questions to see if they are answering the phone when you have a problem and if they are really helping with setting up the POS system and other software. 

Ultimately, before you spend any money on the franchise, you will also visit the franchise corporate headquarters, sit down with the leaders of the organization, and ask very pointed questions to see how they react. Are those people with whom you could hang out, have dinner, and have fun? Would you go on vacation with these people? Because if the answer is no, don’t buy the franchise. You’ll be involved with them for years, so you have to like them and fit into the culture.

The Role of Market Research

SBS – How critical is market research for the success of a franchise, and what key things should franchisees start with to be successful? 

Tom – Even though you’re buying a franchise, you should start with an abbreviated business plan. The franchise company knows who the competition is. If you think about it, you’re the captain of the ship of that franchise, but the franchise company is at the helm, looking at the horizon to make sure that nothing wrong’s happening. They will also see if you should start selling other products or change something in marketing.

So, you need to start with the basics. Are people in your area using that product or service? People make the mistake of saying, “I love this XYZ franchise, and there’s none in my area. I’ll be the first one.” That’s bad. There might be an excellent reason why there’s none in your area, so you must understand the usage and the competition. 

If you want to open a high-end hair salon, you want to see another one in the area. That means people are using it. The thing that’s different about franchising is that franchises know exactly who their perfect customer is (at least the good ones do). They survey their current customers to build the perfect customer avatar and feed that to a marketing company. Then, they use Google Maps to figure out where they want to be. In a good franchise, everything is run on data. If they’re going to sink thousands of dollars into a new location, they need to know that it’ll work and you’ll have the best chance at success. With the franchise, you have a leg up because they have the data. That data is not cheap. It will cost around $150,000 to get those Google heat maps.

Resources for Aspiring Franchisees

SBS – What services and resources does your Franchise Academy offer aspiring future franchise owners? 

Tom – The Franchise Academy is now 19 years old. It took a long time to get over the hump. We educate people about franchising, inspire people, and get them to see if franchising is for them. Ultimately, I match people with franchise opportunities based on their skills, personality, and goals. I like to call it the “eHarmony of business.” If you don’t know it, that’s a dating app, and we use the same technique. I coach people to help them understand the pros and cons of franchise and business ownership. As I said, the second franchise I purchased failed, and I wrote a book about it called Franchise Savvy. I want people to know and learn from my mistakes so they don’t make the same ones.

All of that’s available at The Franchise Academy. My service is 100% free of charge. I get paid like a recruiter. Great franchise companies want somebody to screen the person to make sure they’re a good match, and then it’s an easy kind of due diligence process.

Words of Wisdom

SBS – What advice would you give someone considering investing in a franchise?

Tom – First, you have to figure out your skill set. What are you good at? What have you enjoyed doing in all the jobs you had going all the way back to when you were a kid? What is a common theme? Then, you need to figure out what franchise company is looking for owners with that skill set. That’s what I do for people. For example, if you love donuts, you think you should open a donut franchise. Yeah, but the guy that owns that franchise does not have the skill set that you have, or vice versa. You have to match yourself with a business requiring your acumen.