A pastor’s wife, strapped for cash, holds a gently-used clothing sale in her living room. Fast forward 20 years, and the concept- now known as Just Between Friends- is an international franchise recognized by Forbes and almost every major media outlet. But the path to this point was filled with unknowns for cofounder and CEO Shannon Wilburn. She didn’t have a business background and knew nothing about royalty fees, disclosure documents or raising capital. Listen as Shannon discusses facing her insecurities and building something bigger than she ever imagined.
Shannon: Because I didn't have the business background I didn't know you could go raise capital or get investors.
Lauren: This week on The F Word
Shannon: I left that meeting, drove straight to Barnes & Noble, and bought the book Franchising for Dummies.
Lauren: Shannon Wilburn, the co-founder of the international franchise, Just Between Friends.
Shannon: Sometimes you are going through the valley, but you're going to see the sun soon.
Lauren: If you're a mom or a dad, chances are you've heard of this. Just Between Friends is a pop-up consignment shop with kids' clothing, toys, furnishing, maternity clothes and more. Today we're joined by Shannon Wilburn, the co-founder and CEO. Under Shannon's leadership, the company has grown to 150 franchises in 30 states. It's been featured on Good Morning America, The Today Show, CNN, and has been on Forbes' list of Top 10 Franchises to Buy for three straight years. Shannon, we're so excited to have you.
Shannon: Thank you for having me. I'm excited.
Lauren: I love that you have a classic start-up story. You began this whole thing in your living room. Tell us about that very first sale, why you did it, and how it went.
Shannon: Yeah sure. So I had a one-year-old and a two-year-old. My elementary education degree had served me well for a couple of years, but I wanted to be able to stay home with my kids. And so I had told my mom, who lived in the Dallas-Fort Worth area, if you ever hear of anything, let me know of something I can do to make a little bit of money. This was in the late 90s. So she called and said, "Shannon there's this event that they're doing in Fort Worth. I think you need to start it in Tulsa." She didn't have a lot of information. If those of you who are old enough can think back to before the internet and before email and really small business ... You had to make those connections over the phone. She didn't have any information for that business and she didn't even go to it. It was through friends that she even found out about it. She called and said, "Hey, Shannon, there's this business. It's a pop-up consignment event." I don't even think she used the word pop-up because that wasn't a thing back then. But she said families bring their gently used clothes, they make a portion of the proceeds and then the business makes the rest to be able to operate. And so she told me about it and it sounded like a lot of work. But I called a friend of mine from church and said, "What do you think about this idea?" She said, "That sounds great. I want to do it with you." So that's really how our partnership formed. Daven Tackett is my co-founder, and she's also a local Tulsan. We started there in my living room and we convinced 17 people to bring us their gently used children's and maternity clothes. And we sold about $2,000 worth of merchandise in two days. It was the hardest $150 I think I've ever made, because we prepared 17 families' items. Daven and I did all of the clipping loose threads, laundering, hanging up, tagging -
Lauren: That's a lot of work.
Shannon: There was no online bar-coding system. It was all handwritten tags. We used a ten key to check people out and used the kitchen drawers as cash drawers and someone tried to buy my couch. But it was inside. We didn't want it to be a garage sale. We went from my living room to three-car garage, then to a church gymnasium, then to the Tulsa fairgrounds. Paul and Daven actually ... Paul is Daven's husband. They actually run the Tulsa business now, still at the Tulsa fairgrounds. It's one of our top five events in the nation. We started franchising in 2003. I run the franchise system now.
Lauren: Okay, very cool. Before we talk more about the growth of Just Between Friends, your journey with consignment actually started at a really young age. There was a big change in your family.
Lauren: Will you talk about that a little bit?
Shannon: Yes, absolutely. I have an identical twin sister. When my sister and I were 12 years old, 1982, my dad who was 33 at the time, was diagnosed with multiple sclerosis. He had the form of MS where he went from a cane to a walker to a wheelchair in a matter of six weeks. He went from a six-figure income, being CFO of an oil and gas company, to going on disability. So our life changed drastically. We moved out of our custom home that we had just built, got rid of our brand new cars that we had just bought, and moved into a rent house and life changed. I can't say that it was hard, really. I remember thinking, well this isn't fair. Probably my dad thought that it wasn't fair too. I really felt like the Lord was leading us through those times. Maybe even in preparation for what I was going to be doing in my future. Anyway, I started shopping consignments. We didn't have a lot of cash and so we had to stretch our dollar. My sister and I, instead of shopping retail, we started shopping consignment because our dollars went further. I remember my mom saying, "Only buy it if you love it." Because she knew that we had to do that, and I know lots of families live like that. It was just natural growing up, shopping consignment. When I got married to a pastor, when we had kids, things were still tight. I knew that we needed to continue to stretch our dollar, so I shopped consignment for my kids. That was what led up to the birth of Just Between Friends, if you will.
Lauren: So this background, this passion fuels you today?
Shannon: It does. I love being able to see families stretch their dollar. I don't work at the events any longer since I'm running the franchise system. But one of the last times that I ran a cash register at the Tulsa sale, I remember a young mom coming in by herself. She was pregnant. She looked to be probably 18 or 19 years old. Didn't have anyone with her. She came up to the register with four items. It was like burp cloths, a bag of miscellaneous bottles, three onesies that were in a bag, and then something else. I can't remember what it was. But the total was $10.80. I remember her standing there, looking embarrassed, and she said, "Oh, I didn't realize you charged tax." And so she was looking at the four items, which are essentials, trying to figure out what she was going to put back. And I was devastated for her. Because I was like, "Take it." You know? Then I went in the office and cried. But that's real life for a lot of people. And really the passion that drives me and the passion that drives our franchisees across the country is just being able to have a community of people that really help each other because that's what this is about. If we didn't have families bringing items to sell, and we didn't have people purchasing items, then the concept wouldn't work. But thankfully we do have people that value saving money and people value making money so it works.
Lauren: Your first sale was in '97?
Lauren: And the idea caught on like wildfire like you were saying. Just grew and grew and grew. You decided to franchise in 2003. That's a huge step. What -
Shannon: I didn't know what I was getting myself into quite frankly.
Lauren: What was going on in your head and in your heart in that time of deciding to franchise? I think a lot of businesses reach a point of, is this something to do? I think it's a question that comes up across a lot of -
Shannon: Right. I meet ... It seems like every month I'll get a call from someone that says, "Hey, Shannon. I have a friend who wants to franchise your business or I want to franchise my business. What advice would you give?" I actually did that this past weekend. I did that with someone based in Oklahoma City. When we were growing the Tulsa business, we kept thinking that we were going to max out our revenue potential. We kept thinking it can't get any bigger than this because Tulsa really embraced it. I credit Tulsa and Tulsans for really putting us on the map because we wouldn't be here without just that initial interest and growth that we had here in Tulsa. But friends and family found out about the growth of the Tulsa business and they started asking us "can we start this here" and "can we start this there." Because I didn't have a business background, my elementary education degree did not teach me that you shouldn't let people use the name Just Between Friends. So, if we're talking about failure ... You know again, I feel like the Lord's hand was in this because we made lemons out of it. I mean, we made lemonade out of lemons. We went ahead and helped people get started in their own state and in their own city. I think we helped 10 people get started and let them use the name Just Between Friends because again we didn't know that we weren't supposed to do that. When the opportunity presented itself to franchise, meaning I was overwhelmed with helping those other business owners do what we did and do it well ... But they were really helping us prove the concept. I didn't know that term back then, proof of concept. But we went and told them that we're going to franchise and we want you to be our first franchisees. Many of them hung around and became our first franchisees and are actually still franchisees today. That was why we did it. I didn't know at the time that I should be nervous about it. We prayed about it. When someone made the suggestion that we should start looking into franchising, I didn't even know what franchising was. I mean I knew McDonald's was a franchise but I didn't know ...
Lauren: What that looked like ...
Shannon: What that looked like or you know. And so I left that meeting, drove straight to Barnes & Noble and bought the book, Franchising for Dummies. Read that from cover to cover. Talked to my business partner, Daven, about it. We were like, this might work. So we reached out to people who had been there, done that. We didn't know a lot of people that had franchised their business. But Daven and I had a friend of a friend in the Dallas area that had started Cici's Pizza. So we drove to Dallas and met with him for three hours. It was just golden gold information. We came back and we hired an attorney, and started selling franchises. The goal was to sell 10 franchises a year. Anyway, that's how the franchise system grew. In the meantime, the Tulsa business was also growing. It hadn't leveled out at that point. We had two businesses that were doing well. So, that was fun.
Lauren: Yeah, that's a lot. And you've met your goal of 10 a year. You're at a 150 franchisees now in 30 states and Canada. You're international. Congratulations. That's amazing.
Shannon: I love being able to say we're international. The international headquarters of Just Between Friends is in Tulsa, Oklahoma. Thank you very much.
Lauren: Obviously, there's a lot to celebrate. But I'm sure these past 15 years, and you've touched on it a little bit, there've been some rough spots. Can you think of ... What's one big mistake you made or a scary time that when you look back maybe you still shudder a little bit like, "Oh my goodness, how did we get through that?"
Shannon: Wow, okay. So lots of scary points in the business. I'm trying to think of which one to share. I think franchising is hard. It is ... I love being a business owner and I love helping other businessmen and women realize their dreams of ownership. I love being able to mentor and help them. But you can't do the work for them. Probably early on ... We bootstrapped our business. So we borrowed from the profitable Tulsa business to support the franchise system because it was still so new. And our royalties are really low so we don't charge our franchisees a large percentage of their revenue like lots of franchise systems do. Mostly because they don't own the product. So it's not like you're taking a full retail product. There's not a lot of margin. Our royalties in the beginning were not really enough to sustain us and support us how we needed to be supported. And again because I didn't have the business background, I didn't know you could go raise capital or get investors, or even ask friends and family for money. That wasn't something that I even knew about. There was no 36 Degrees North back then. Anyway, the downturn in the economy at end of 2008, 2009 ... because lots of people were leaving corporate America and looking to really take their future into their own hands, we sold 30 franchises in 2009. So, while the rest of the country was in a downturn and people were losing their jobs and revenue was just really down, we were growing like crazy.
Lauren: It changed your business.
Shannon: It did. We sold 30 franchises that year. Everything was focused on selling franchises. Then because when you sell a franchise you're taking in initial capital for a franchise fee, but then the next year you have to support those franchisees, and they're not doing a lot of revenue at that point. And we're charging a small royalty, so it's not like we had hundreds of thousands of dollars coming in the next year to support these 30 extra franchisees. What happened was, everything was focusing on getting them up and running, that we were not focusing on supporting the franchisees that we currently had. So in 2010 we closed 10 franchises. I felt like that was a huge personal failure for me. Just that I didn't see that coming and that we weren't there as a franchise system to support these people who had put their money and their time into a business that they thought could be there for them.
Lauren: How'd you come back from that and keep yourself from getting too stretched thin in the future?
Shannon: We realized really quickly that we needed to put some capital towards hiring more support. That became the next year... 2011 became really the year where we focused on supporting the franchisees in the way that they needed to be supported. That's something I'm really proud of now, is I feel like we have a great support system. There's still stuff to complain about. Like franchisees, they have expectations just like you and I have expectations. And sometimes we're not going to meet those expectations. But we try really hard. We have high franchise satisfaction. We're not perfect. We still have terminations. We still have closures. But we try really hard to be there for our franchisees when they're in a hard spot.
Lauren: How do you maintain the quality of your brand? It seems like you really have to trust your franchisees to not slack off or not go rogue. What do you do to protect that?
Shannon: And this is in any franchise system, really. I don't know if you've seen the movie The Founder, the McDonald story. But if you haven't seen that, that's really a good ...
Lauren: I need to go watch that now.
Shannon: Yeah. You watch it on Netflix. It's really good.
Lauren: Add that to my list.
Shannon: But it's really about the quality of people that you are asking to ... recruiting into your system. I don't like to call it franchise sales, although I do sometimes. You're selling franchises. Really what we're doing is recruiting franchisees. So we're recruiting like-minded ... We're like-minded in culture. We all love a bargain. Honest people. There's a huge vetting process when we're asking franchisees to join our brand. If I have an inkling that you're going to be dishonest and you're not going to really live up to the standard that we have set, then you won't be getting a franchise. I think that's a lot of brands because they don't want to ask for future problems just by saying yes to someone who isn't a good fit. Now you do have brands that... They will take anyone with cash. We are not one of those.
Lauren: So you do enough vetting at the beginning that it's not as much of a problem later down the road?
Shannon: Yes. That's the goal. Because people can be dishonest. They can slack off and not do what they're supposed to do. That's going to happen. But you can kind of get rid of some of that by looking at the people that you're bringing in to represent your brand. We do have people that will maybe slack off on the inspection process or whatever. We hear about it most of the time from other franchisees who ... I always tell our franchisees, "We are only as good as our lowest performing franchise." Because when you're a part of a brand, you get blamed and you get ... I don't know, you all remember what happened with Chipotle last year, a year before. And just how that's hard for all of the franchisees. That's hard for the entire brand, when something goes bad at one location.
Lauren: I know. The stigma hits everyone.
Shannon: Yes. Franchisees want to protect their investment. If a fellow franchisee is not really upholding or following the brand standards, we usually hear about it. Then we'll step in and you know, is it a mistake or were you doing this on purpose? We try and bring them back into compliance. One of our employees is called our Franchise Care Coordinator. That's a nice way to say compliance. She works with franchisees who may need a little bit of handholding. But we have no reason to kick people out of the franchise system, unless they're doing something really illegal or not trying, or something like that. Again, back to whoever you ask to be a part of your brand.
Lauren: I asked you earlier on the phone, what your haters say about you. You said they say you're too optimistic. You're out of touch with reality. I'm sure you're just one of many entrepreneurs who have that same feeling. What do you do to combat that and find a healthy balance between realism and optimism?
Shannon: Yeah, thank you. I cry a lot. No. Irrational optimism, that's kind of what...
Lauren: I think that plagues entrepreneurs.
Shannon: Yeah, I know. Well, I will tell you one thing that I did this year. First of, I have several weaknesses. Not just being irrationally optimistic. Every entrepreneur, every business owner has weaknesses and you have to combat that by other resources. That may be money, that may be people. I surround myself with smart people. That's one of the things that... I believe that's really the main reason why Just Between Friends is still here today. I have a great executive team. We just hired a CFO. We've never had a CFO. We're 15 years old so I'm really excited about that change. Another thing is, this year we added an advisory board. I have four gentlemen who have been in the franchising space for years. I don't know what their combined years in franchising add up to, but I know it's a lot. Man, just being able to sit at their feet when I'm having to make hard decisions... It's really good to have a different perspective. Because I am irrationally optimistic they help bring a little bit more realism.
Lauren: Bring you back down to earth.
Shannon: Yes. But then they're also there to help me figure out. When I brought the advisory board on, one of the questions that they asked me was, "What keeps you up at night?"
Lauren: What's your answer to that question?
Shannon: Oh, gosh. About 50 things.
Lauren: You don't have to go down that rabbit trail.
Shannon: Actually, what I told them was, "Well, nothing keeps me up at night. I sleep really well, but I probably shouldn't." I heard a speaker. I went to a franchising conference in August in Minneapolis. The speaker was awesome. The keynote. He said, "We all have 43 things that we need to be working on." I mean every business owner, every entrepreneur, we all have those things out there. Your list continues to grow. And he said, "But we really can't tackle 43 things. We can tackle three or four. So really look at the three or four that are coming to the top of the pile and put some initiatives and some strategy and some capital around those, the bigger problems. The other things will still be there when you wake up in the morning, but at least know you're working on whittling that down." That kind of gives me a little bit of relief, of looking at that long list every day and knowing that there are so many things that we have to be doing as a company in order to stay competitive in a changing marketplace. But it's really good to have advisors to help me out.
Lauren: Let's talk a little bit about that. I'm sure there have been many copycats of this pop-up children's consignment idea. How do you stay ahead of your competition and how do you stay competitive and innovative?
Shannon: I think really making sure that we're doing competitive analysis and watching what our competitors are doing. Not like a hawk. Sometimes I think if you focus too heavily on your competitors you're not focusing on where you're going. You're focusing on them. I think it's good to, every month, look and see are they doing anything new? Have your employees that ... If they're on their mailing list or whatever, to be watching and seeing any innovative ideas that they're doing that maybe we can implement. I guarantee they're watching us. We have people copying our stuff all the time, which I guess is flattering, but it's also frustrating. We listen a lot to our franchisees. They have a great pulse on the business because they are doing it every day. We do a what's called a franchise business review survey every year. We ask them questions about our technology, leadership, core values, training and support; what we're missing, what are the threats to our industry. So, listening to them and acting on some of that stuff. Also, something else we did this year because our marketplace is changing significantly, really over the last year especially with Facebook Marketplace... What we did is in November, we invited about 30 of our franchisees to fly to Dallas. We met at a Best Western. I told them this is not a conference, this is a work weekend. We're not going to eat conference food, have plated lunches. We're going to order Zoe's and McDonald's.
Lauren: Dig in.
Shannon: Yeah. They were happy to come. We spent two full days looking at really the threats to our industry, and coming up with innovative ideas to combat that.
Lauren: Can you share some of those?
Shannon: Yeah. Well, I think we probably came up with 300 different things that need fixing. But the three... We had them talk about it and over the course of two days we narrowed it down to three top-level initiatives. That was... We have a software portal called... And interestingly enough it's all around technology. So I should stop saying that we're a franchising company and I should say we're a technology company because I think most brands, everything is done over technology these days. For efficiency, you know. So we are... Well, not to get too deep into the weeds here, but our CRM is really dated. So, adding things like email campaigns and stuff like that... We don't have that in our core system and so franchisees are having to go outside of our core system, which we don't want them to because that's added revenue they're having to spend, which means it's less money that's going in their pocket. And we want them to be profitable. So, that's one thing that we're looking at. We've actually hired a technology strategist. He's going to be helping us. We're in the assessment phase. He's having conversations with my staff, with franchisees, with all of our vendors that are in the technology space. We spend a lot of money on technology. That was probably the top-level, is looking at our franchise management software, our CRM. It's an antiquated system. We're ready to have something new. So, we've got someone that's working on that. The second thing was our point-of-sales, so more technology. Also, looking to see what other options are out there. Our point-of-sale works great, but it is something that I think the franchisees would like more business intelligence, because that's the newest thing. They want to be able to follow a customer. Right now everything is segmented and fragmented at the franchise level. They know what their people are doing, but they don't know if the same customer is shopping in Tulsa, in Broken Arrow and Owasso, and how much they're buying and what they're buying. So that's something that we're looking into.
Lauren: Being more data-driven?
Shannon: Being more data-driven and being able to have access to that business intelligence so that you can, number three initiative is marketing. What are we doing as far as digital marketing and where we're going with that. Those are the top-level initiatives that we are working on right now. We actually have our annual conference in San Diego in January, and so we're going to be giving some information and asking for some more task forces at that time. So, it's fun.
Lauren: Sounds like fun. Sounds like a lot of exciting growth on the horizon.
Shannon: Well, I hope so. You know, you hope you're going through all this blood, sweat, and tears because you're going to grow. And there's always that fear that... I'm not driven by fear, really. But I do a lot of praying because there are fears that can creep up. You just have to know... I just have to know I'm not in control. I surround myself with smart people and I love that you guys are doing this podcast because every franchise owner has things that they go through that probably make them question if what they're doing is really what they should continue doing. So, just some encouragement out there, you're not alone.
Lauren: That actually leads into our last question really well. We always end with, what would you say specifically to encourage an entrepreneur who is in the weeds of it right now, who's working to make this dream a reality ... What would you say to give them that push to say, you can do it, keep going?
Shannon: Again, back to the surround yourself with smart people. Couple of years ago, I felt like the Lord was leading me to do something in the franchising space when it came to women and franchising. You just have so few women in C-level positions within the franchising space, so really most industry. What I did in November... Actually, before the Thought Leadership Summit that I just told you about... It was actually after. But I invited... There were nine of us that got to come together. Women franchisors. So, women that have started different brands. And Two Men and a Truck franchisor was started by a woman.
Lauren: Yeah, she's awesome. I've heard about her.
Shannon: Yeah. So, Melanie Bergeron. She was there. There was a woman there who has four automotive brands, which is very random. Usually that's a man's industry. We had someone who started a concept called Lash Lounge. Someone who started Massage Heights. We had some really powerhouse women. One of the things that we talked about... It wasn't like sit around and talk about negative stuff, but one of the evenings it got to a point where we were talking about challenges. Challenges that we had experienced, really so that we could help one another. Because I tell people there's no new problems in franchising. If you are experiencing a problem... and this goes for business as well... If you are experiencing a problem with your business, someone else has already been there and has figured out a way around it. If you ask enough people, ask enough questions, you don't have to reinvent the wheel and figure out how to handle something. Just ask. So that's what that was about. Like, "Oh my gosh I've got this person is suing me or this franchisee is doing this crazy thing or this vendor's doing this crazy thing." We talked about all of that. One of the franchisors that was sitting there in that circle, she is probably the most junior of us. She has 10 franchises and has not been in franchising very long. She said, "I'm listening to all of this. Would you guys do this again? Would you start another franchise? Would you do this again?" And I was afraid of what they were going to say. They went, without fail, around the room. Everyone said, "Absolutely I'd do it again." Because there's that rewarding side for entrepreneurs. Yes, sometimes you are going through the valley. But you're going to see the sun soon. And you're going to come up on the mountaintop here pretty soon. But I think a lot of that is about surrounding yourself with people that can help you. You do not have to be doing this by yourself.
Lauren: And you shouldn't be really.
Shannon: Right. Exactly. So, I'm thankful for this podcast. I know it's going to help a lot of people.
Lauren: Well, thank you so much for coming in. Thanks for chatting with us. I love hearing your story. It's so good.
Shannon: Well, thank you Lauren. Thank you.
Lauren: Next week on The F Word.
Chip: My expectation was to fail, and that I was going to fail on a small enough scale that I could get back up.
Lauren: The founder of Topeca Coffee, Chip Gaberino, shares his highs and lows of building his international seed to cup coffee company.
Dustin: The F Word is brought to you by 36 Degrees North, Tulsa's base camp for entrepreneurs. To learn more about our workspace, community, and resources visit 36n.co. The F Word season one is recorded at KOSU Studio, hosted by Lauren King and produced by Julie Combs.