Robert Justis is the director of the Stephenson Entrepreneurship Institute at LSU’s E.J. Ourso College of Business and a professor in the Rucks Department of Management. He teaches courses in franchising, entrepreneurship, small-business management and international business management. Justis has been quoted in USA Today, The Wall Street Journal, and Inc. magazine, and he has discussed franchising issues in a BusinessWeek podcast. The Denver native has worked for LSU since 1987.
1. In an economy like this, what’s the climate like for entrepreneurship?
A lot of times, there is an influx of business ideas and business developments during recessions. One of the major reasons is that individuals are almost forced to look at their situation and think about different business opportunities. Many of them are laid off, and many of them look at what’s coming in the future and leave large organizations to start their own business because they realize things aren’t looking good.
2. What about financing?
It is very difficult to find money for starting up a business. A lot of startup money today comes from the same sources it always has. First of all is family, second is extended family, third is friends, and the fourth one you finally get to is angel investors. Venture capitalists are generally interested in “taking it to the next level” financing [not startups].
3. Is it hard to find angel investors here?
There are tremendous opportunities in Texas. They have a mentality and a history of growth and development. We do have angel investor groups throughout Louisiana, but there’s not that many of them that are really formulated. But we have angel investor groups in Texas that actually call us. [Locally], the availability is a little bit secretive. We have investors that come and talk to us; quite often they mention a specific industry or some area of development they would like to get into. We do not have the size of angel investors that other locales would.
4. What are some of the biggest mistakes entrepreneurs and small businesses make?
They fail to plan. Another problem in entrepreneurship is that you’ve got to realize there are many things you do not know. The really good ones not only see their vision, but also know they’re going to be limited by their own capacity. We got a call a few years back from the CFO of the McDonald’s corporation wanting help with a new training program. I thought that was the funniest thing I’d ever heard of; McDonald’s already has one of the greatest training programs around. He said, “We’re very good at training operations; we have all these videos and tests and all these benchmarks. But we’re having some problems with same-store growth, and we’ve come to realize our managers and franchisees do not know enough about overall business principles and practices.”
5. So the franchisees knew how to do what they do internally, but they didn’t know how to grow the business?
Right.
6. Is there a tension between the qualities needed to start a business and the qualities needed to run a business?
That person starting up a business is going to have a desire to be innovative and creative, and they may have one of the greatest ideas since sliced bread. But how do you put [the business plan] together, and how does it make sense? After you get the business started, you’re going to have to bring somebody in to help with administration. We hate that word. But administration is going to allow you to set up the rules that are going to allow you to get organized and develop stability to help you succeed.
7. What are some of the advantages and disadvantages of buying a franchise as opposed to starting your own business from scratch?
In franchising, you’re working in a “proven” system. They will teach you all the operations and how to manage those operations. Your success is important to the franchisor because they get more money if the franchisee succeeds. The disadvantage is you’re going to lose some control. You’re going to have to follow the operations and regulations established by the franchisor and pay them a royalty. You lose some entrepreneurial spirit.
8. What are some of the most important things to remember in selecting a franchise?
You need to review the franchise disclosure document. You need to talk to several different franchisees. You need to find out their relationship with the franchisor, if [the franchisor has] been honest, trustworthy, helpful, and if they’ve been providing continuous value. A lot of that value is done on the advertising side. McDonald’s [for example] is never going to win a hamburger-tasting contest, but as far as advertising, promotion and development, they’re probably the best there is.
9. Tell me a little about the Entrepreneurship Fellows Program.
We’ve been working on it for over a year, and it’s now being kicked off. We’re looking for juniors from engineering, biosciences, business, whatever. We take those students and train them in some of the intricacies of business. We bring in a lot of outside speakers. Stephen Moret has been in from [Louisiana Economic Development’, and probably about 12 business people have come in and talked to them. In the summer, we place those students in internships throughout the United States. In the fall they come back and report on what they experienced. They discuss this with their other classmates and faculty, then you bring in more business people, and they discuss it with them as well. It’s an opportunity to discuss their entrepreneurial desires and experiences. Of the students we currently have, I think half of them are operating their own business right now.
10. So with all the state budget cuts, what are some of the things you’re doing to be more entrepreneurial?
The chancellor has asked us to help develop a profitable online learning program for the university. We think that is going to come about in the very near future. He also has a desire to develop a microbrewery on our campus, so he’s asked us to develop some business plans and other ideas for it. Also, there’s a mixed-use development he wants to develop near where the old Alex Box Stadium was. There’s married student housing in there, and he’s thinking about maybe tearing some of that down. You can go back and put in new housing, but you can also include a retail section, maybe even a hotel. So that could be fun.
