As an entrepreneur and franchise consultant, one of the books that has resonated most for me is Robert Kiyosaki’s Rich Dad, Poor Dad.
This book teaches us to view money not just as a medium of exchange but as a tool for growth, freedom, and opportunity.
My passion for franchising stems from similar beliefs. I like to think that with the right guidance and knowledge, anyone can harness the power of established systems to create personal wealth and autonomy.
Today I’d like to share with you the lessons I think are important from Rich Dad, Poor Dad. If you’re interested in franchising, I hope it will help you realize the immense potential in franchise systems and stay committed to the goal of being a “Rich Dad” (or Mom!).
Contrasting Philosophies from Two Dads
At its core, Rich Dad, Poor Dad is about nurturing an entrepreneurial mindset.
The easiest way to understand this mindset is with Kiyosaki's tale of two fathers—his biological “Poor Dad” and the father of his childhood friend, “Rich Dad”. These stories show two distinct viewpoints on money and success.
Poor Dad
This perspective epitomizes the traditional mindset many of us are familiar with. Go to school, get good grades, secure a stable job, and save for retirement. It's a tried and true path, but often restricts individuals to the fixed confines of a salaried role.
For some, this is a comfortable and preferred route. But if you're eyeing the potential growth and autonomy of owning an independent business or franchise, it might feel limiting.
Rich Dad
This perspective is the entrepreneurial approach. Rich Dad encourages understanding how money works, leveraging investments, and not being afraid to take calculated risks. Rich Dad believes in creating and controlling sources of income, rather than just earning it.
This mindset is central in the franchising world, where the goal is to leverage a proven system to maximize returns.
The Importance of Financial Education
Not surprisingly, Robert Kiyosaki believes strongly in the value of financial literacy. He observes that the business landscape is littered with pitfalls for the uninformed.
Know the Difference Between an Asset and a Liability
Kiyosaki urges people to “Know the difference between an asset and a liability, and buy assets.”
In simple terms, an asset puts money in your pocket, and a liability takes money out.
Today, the Internet is rife with start-ups and “sure-shot” investment opportunities. Yet, only investments that perpetually enhance value and generate consistent income are assets.
Recognizing franchise opportunities that will genuinely act as assets means discerning between ventures that will augment your financial portfolio and those that might look promising at first but will slowly erode your capital over time.
As you evaluate franchises, it's crucial to ask yourself: Beyond the initial allure, will this franchise sustainably bolster my income? Or, beneath the surface, does it carry hidden costs and challenges that might offset its benefits?
Pay Attention to Due Diligence
Kiyosaki emphasizes the value of informed, meticulous research.
Due diligence and a proper assessment of relevant franchise opportunities are essential so that you buy an asset that works for you rather than a liability that drains your resources.
First, make sure a franchise fits with your lifestyle and personal goals. Next, review market trends and the franchise’s positioning. Gauge the vitality of the brand and estimate its growth trajectory.
When you get the opportunity, read the Franchise Disclosure Document. It contains vital details about the franchisor’s financial health, legal issues, and the experiences of current and past franchisees. By analyzing this document, you gain insights that can guide your decision-making process.
Round out your research by consulting with existing franchisees, assessing the leadership’s track record, and crafting a profit and loss projection. Altogether, it should take around 30 hours to properly review a franchise.
Learn and Adapt
Kiyosaki advocates for continuous learning. He advises, “Your future is created by what you do today, not tomorrow.”
For franchisees, this means perpetually upgrading your knowledge and skills. Whether it's mastering the latest digital marketing techniques, understanding emerging consumer behaviors, or attending franchise-specific training programs, there's always room to grow.
Work to Learn, Not to Earn
One of Kiyosaki's most enlightening teachings is the idea of "working to learn."
At a glance, this might seem counterintuitive. Isn't the goal always to earn?
Let's dig deeper.
Choose Experiences That Enrich Your Skillset
Every job, role, or business endeavor imparts unique lessons. For instance, a stint in customer service teaches patience and effective communication. A role in procurement might emphasize negotiation skills.
For you, as an aspiring franchisee, this means choosing experiences that add to your skill repertoire, even if they don't always come with a hefty paycheck.
Investing in a franchise involves a similar step. At first, you’re literally paying to learn. Over time, though, that investment often pays off, and it pays much higher than if you had simply taken the job that pays you the highest salary on Day 1.
Have a Beginner’s Mindset
In my experience, the most successful franchise candidates are those who show up with a beginner’s mindset.
Even though they may know a lot about an industry, they come ready to learn every aspect of the franchisor’s system. They resist the temptation to try something new or do something the way they’ve done it in the past. Instead, they embrace the opportunity to learn and implement a proven money generating system.
Work to learn, not to earn… and in the end you’ll earn a lot more.
Make Money Work for You
A salient lesson from Rich Dad, Poor Dad is the art of making your money work for you, rather than the other way around. This begins with choosing a dynamic investment instead of a static investment.
Static Investments
Static investments are the predictable, less volatile avenues for parking your money. A static investment has a relatively fixed return over a given period.
These investments are characterized by their lack of active management. They often yield returns at set intervals or upon maturity.
Common examples of static investments include fixed deposits in banks, government bonds with set interest rates, and certain real estate investments where the primary gain is from rental income.
While static investments offer stability, their growth potential is often limited. They’re typically passive, requiring little to no active involvement from the investor.
Dynamic Investments
Dynamic investments stand out for their potential to grow and evolve based on active management and continuous involvement. These investments aren't just about parking your money and waiting; they're about rolling up your sleeves, strategizing, and directly influencing the outcome.
In short, they’re a bit more exciting… more fun to run, and more profitable.
The very nature of dynamic investments allows for adaptability to market conditions, responsiveness to opportunities, and the chance for investors to shape their investment's trajectory.
A prime example of a dynamic investment is franchising. The investor (franchisee) doesn't just invest capital. Instead, they immerse themselves in the operational aspects of the business. From choosing the location and hiring staff to marketing and day-to-day management, every decision plays a role in determining success.
In franchising, the potential rewards are often proportional to the effort and innovation applied. This makes it a quintessential dynamic investment.
Success is not just about the initial buy-in. It’s about the ongoing commitment and the drive to evolve, expand, and excel. With a franchise, you can scale operations, open multiple locations, and even branch into various franchise brands.
Succeeding as a Semi-Passive Owner or Owner Operator
If you choose to make a dynamic investment, then your next choice is how to manage your investment. In franchising, you can choose between being a semi-passive owner or owner operator.
If you choose to be a semi-passive owner, then you need to focus on hiring a good general manager to operate your franchise for you. At this point, your job is to manage the manager. You simply check in with them regularly to see how things are progressing, make sure the business KPI (Key Performance Metrics), and inspect your franchise location to ensure everything is operating smoothly. This will require between 10-20 hours per week of your time, in some cases even less. This allows you to keep a full or part time job, open other businesses or locations, or just pursue the passions in your life.
If you prefer to be an owner-operator, then you’ll be responsible for hiring a team and ensuring your location aligns with each of the franchise’s prescribed processes. You will directly manage your business and it will require your full time attention. Once your location is earning a steady profit, you can tap into your monthly profit if you wish to hire a general manager who can take over day-to-day management duties- and transition into a semi-passive owner. This will free you up to pursue other ventures or enjoy the lifestyle that your investment provides.
The Power of Networking
Rich Dad emphasized that it's not just what you know, but also who you know. In franchising, this mantra holds significant weight.
Building Relationships
The franchise industry thrives on connections. Whether it's fellow franchisees, suppliers, or industry experts, each relationship offers unique insights, opportunities, and sometimes handy shortcuts. Participating in franchise conferences, workshops, or local business events can lead to invaluable relationships.
Collaborative Growth
In a franchise system, you're not alone. Other franchisees, often facing similar challenges or successes, can be a treasure trove of strategies, advice, and support.
Instead of viewing them purely as competition, see them as allies.
By sharing knowledge and resources, you can collectively boost brand recognition, negotiate better deals with suppliers, or even lobby for beneficial changes within the franchise system.
As Kiyosaki says, “The richest people in the world look for and build networks, everyone else looks for work.”
Networking isn’t just about exchanging business cards. It's about actively listening, collaborating, and leveraging relationships for mutual growth.
Reduce Risk through Knowledge
As Kiyosaki says, “Often, in the real world, it's not the smart that get ahead but the bold.”
Rich Dad, Poor Dad isn’t about avoiding risks. Instead, it teaches you to understand and mitigate them.
Every business venture comes with inherent risks, and franchising is no exception. One thing that can help you to mitigate these risks is to work with a franchise consultant.
Bridge the Knowledge Gap
Knowledge is your shield against unforeseen challenges.
A franchise consultant possesses a vast reservoir of industry knowledge. They understand market trends, franchise systems' nuances, and the intricate details of franchise agreements.
Collaborating with a consultant ensures you’re not walking the franchising path blindfolded, but with a guiding hand leading the way.
Get Tailored Franchise Matches
Every aspiring franchisee has unique strengths, passions, and financial capabilities. A franchise consultant takes these individual factors into account, matching you with opportunities that align with your profile.
It's not just about finding a great franchise. It's about finding a great franchise that’s right for you.
Conclusion
By adopting the principles in Rich Dad, Poor Dad, you’ll set yourself up for a journey of informed decisions, calculated risks, and successes.
I’m a huge advocate for franchising, and I help people interested in becoming franchisees to find the right franchise for their interest and lifestyle. I’m one of a few independent consultants who do this (not part of an agency), and I like the independence that this provides.
My services as a franchise “matchmaker” are free for franchise candidates. (Like a real estate agent, I’m paid a referral fee by the franchise for finding and referring quality candidates.)
If you’re interested in meeting with me to discuss your franchise goals and see if we might be a fit to work together, I’ll be happy to meet with you. Just schedule a free consultation on my website.
I really look forward to helping you find the perfect franchise for you.