Are You Ready to Invest in Your Dreams? What does it take to transform a vision into a sustainable business and eventually into a lucrative investment opportunity? This week's episode of The Angel Next Door Podcast with Marcia Dawood discusses the often-overlooked world of franchising and angel investing, revealing the essential elements driving entrepreneurial success. Alongside guest Domineca Neal, an experienced entrepreneur and angel investor, listeners are taken on an educational journey through the nuances of starting and scaling a business, whether independently or through franchising. Domineca Neal brings a wealth of knowledge to this episode. With a diverse background ranging from being a CPA at a big six accounting firm to becoming a seasoned franchise owner and eventually stepping into the world of angel investing, she embodies the quintessential entrepreneurial spirit. Neal has not only thrived in multiple business environments but has also dedicated herself to mentoring others, especially women and BIPOC communities, on their own journeys toward financial and operational success. They explore the practicalities of owning a franchise, from the initial due diligence to overcoming common challenges like labor and expansion. Moreover, Domineca shares invaluable advice for entrepreneurs considering franchising their own business models. The episode comes full circle with an inspiring discussion about angel investing, where Neal reveals how her portfolio seeks financial returns and aims to generate positive social and environmental impact. This multifaceted conversation is a must-listen for anyone looking to gain practical insights and inspiration on creating successful business ventures while giving back to the community.
Are You Ready to Invest in Your Dreams?
What does it take to transform a vision into a sustainable business and eventually into a lucrative investment opportunity? This week's episode of The Angel Next Door Podcast with Marcia Dawood discusses the often-overlooked world of franchising and angel investing, revealing the essential elements driving entrepreneurial success. Alongside guest Domineca Neal, an experienced entrepreneur and angel investor, listeners are taken on an educational journey through the nuances of starting and scaling a business, whether independently or through franchising.
Domineca Neal brings a wealth of knowledge to this episode. With a diverse background ranging from being a CPA at a big six accounting firm to becoming a seasoned franchise owner and eventually stepping into the world of angel investing, she embodies the quintessential entrepreneurial spirit. Neal has not only thrived in multiple business environments but has also dedicated herself to mentoring others, especially women and BIPOC communities, on their own journeys toward financial and operational success.
They explore the practicalities of owning a franchise, from the initial due diligence to overcoming common challenges like labor and expansion. Moreover, Domineca shares invaluable advice for entrepreneurs considering franchising their own business models. The episode comes full circle with an inspiring discussion about angel investing, where Neal reveals how her portfolio seeks financial returns and aims to generate positive social and environmental impact. This multifaceted conversation is a must-listen for anyone looking to gain practical insights and inspiration on creating successful business ventures while giving back to the community.
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Marcia Dawood
Well, hi, Domineca. Welcome to the show.
Domineca Neal
Hi, Marcia. Thank you. Thank you for the invitation. I appreciate it.
Marcia Dawood
Well, I'm excited to talk to you today about your angel investing journey. You also know an awful lot about franchising. Now, you and I met through Venture. Well, and we were mentors together at the Aspire program, which I absolutely love. It's so fun and we get to help so many entrepreneurs and we get to see so many cool innovations. Right?
Domineca Neal
Yeah.
Marcia Dawood
So why don't you start out, tell us a little bit about your background and how you learned about angel investing.
Domineca Neal
Oh, yes. So, yes, I agree. Venture well, Aspire is fantastic. Love, love their programs, love the organization. So my start, my background, I have sort of like a hodgepodge. I'm almost like a generalist. That's my specialty. But I do have some specific expertise and knowledge, particularly around franchising and a few other areas.
Domineca Neal
So I started my professional career actually practicing as a CPA with a big six accounting firm. So I'm dating myself already. And then in that experience, in addition to doing audit work, little bit of tax and M and A, I met small business owners and started to learn a little bit that built upon my experiences that I already had, which in particular, I would say the impetus was a gentleman that I met who was an owner of several locations of a major fast food franchise. And I met him when I was 14. And I was amazed because here's this young girl who lived on the east side of Detroit, and I meet the owner who happens to be an African American male. And I just was like, whoa, this guy owns this big brand, these locations. And it was just exciting. And I literally built a relationship with him and gained knowledge and support, which I'm sure we'll talk about a little bit later.
Domineca Neal
But anyway, professionally, I started out as a CPA practicing and then went back to grad school, and I shifted to brand management and I started sort of managing a business within a business, which is what brand management is you're doing from ideation through to commercialization. You're managing P and Ls and you're also managing teams. And so at some point I'm like, why don't I try this on my own? And interestingly for me, was a natural to pick franchising as my first business, which was an acquisition in the restaurant space, which with a major brand. From there, I went on to have another business which was similar to, like a startup, but it was in a franchise concept, which we can talk about why I believe it was like A startup. And then I went on as an equity partner with a spin out from a major Fortune 500 company. And it was an investment advisory firm, so worked as the COO and an equity member for that business. And that's where I was introduced to angel investing. As part of that experience was working with the primary principal to do research to understand how to go about laying the groundwork for our venture capital line of business.
Domineca Neal
And one of the other partners, along with some other individuals, were starting up an angel investment group, Commune Angels. And I knew two of the founders. I had went to undergrad with them, two women. They were the two women of the five founders of this fund or angel group. And of course it piqued my interest and I admired both of them. We, I believe one of them for sure.
Marcia Dawood
Oh yes. And she's been on the podcast before.
Domineca Neal
Fantastic. Yes. Awesome. Awesome. And so it was a natural to say I want to learn more. So in addition to learning about venture capital, I had won a scholarship to UC Berkeley, Berkeley's online venture class. I took that and Commune also, along with Detroit Tech Town, offered lots of sessions and then the ACA as well. So I was like taking all types of classes, building, expanding my network.
Domineca Neal
And I proceeded to begin to invest. And so that's how I got into angel invest investment. And it was natural, it was about learning the craft initially. But I understood entrepreneurship because of my own experiences, so it was a no brainer for me.
Marcia Dawood
Wow. Oh my gosh, what a cool evolution of your story. So franchising to me is just so fascinating and I've seen so many people get into the franchising business or they buy a single unit franchise and then of a big brand, no matter what it is. And I've seen them be very successful with it and go on to buy multiple units. And then from the other side, we can talk about how if entrepreneurs ever wanted to use a franchise model to try to build out their business. But let's just start out. Talk to me a little bit about what it means to own a franchise and how it all. What are some of the inner workings of all that?
Domineca Neal
Yes. So it is to me one of the spaces that is probably very underrated. While people understand like when you say franchising, they know what you're talking about. But to be a franchise owner, that's where the gap happens. And franchising essentially are businesses that someone has created an idea, a business, they typically has operated it or tested it out and they develop a profile for how can I replicate this? And so then they become the franchisor and typically give that opportunity to others to also pretty much buy into it. The great thing is that it's your business, right? It's not, it's a form of licensing, I guess you could think of it. But you own those businesses when you're a franchisee. But there are different rules and processes and things that you follow which are also what makes makes.
Domineca Neal
It helps you to mitigate some of the risk of doing a new business. Okay. Because as we know it's risky to start businesses. So franchising mitigates some of that because theoretically the franchisor has figured out how to do this and replicate it time and time again. And all you need to do is kind of follow their operations guidance and replicate the success. And that's one of the things that I love about it, particularly for first time business owners. And typically the startup cost are a little bit lower. But even when they're higher, if it's a proven concept, you can actually tap into traditional financing sources.
Domineca Neal
It expands the right, the resources, your resources available to fund it because it's not so much a unknown entity. So that's a pretty cool point of.
Marcia Dawood
Difference as well because you're kind of using the name or the reputation. And I think it's so interesting too because as a new business owner, if I were to become a franchisee, I don't have to worry that people are going to wonder what the business is that I've just created. People kind of know when I walk into XYZ franchise, I know I'm going to get a certain level of service, a product or whatever it is and they come to expect it. So I think following those operational guidelines can be really be helpful and then there's not a surprise on either side or the owner or the customer.
Domineca Neal
Right, exactly. And that's what drives the success, is your ability to really become expert at implementing and executing their processes and then you can focus on the customers or the outcomes of the product or service that you're selling.
Marcia Dawood
And where have you seen where franchisees sometimes get a little over their skis or they kind of are in a bad place and need to kind of right size everything.
Domineca Neal
Yeah, I love that question because theoretically franchising has sort of proved it out for you and so it should work. However, there are differences between the different franchise offerings. And so one is really doing your due diligence to understand what concept are you interested in investing in. For example, if you are interested in a particular sector and you identify some brands or A brand that you're interested in understanding how much awareness there is about that particular brand. Because think of it this way, if a brand maybe say, has 100 units and they're concentrated in a particular geography and then you decide to go into a new geography, the awareness may not be what in that other geography, which means your cost to implement and execute that concept in another geography where the awareness is low may cost more because now you have to do more marketing, more building the brand. And so that's something very important to take into consideration because that can change the economics, right? The feasibility. Will you be able to successfully build the awareness to get the trial, to get the customer base to come into your business? And so that can be a risk factor that some people do not factor in because they really like the product or service. But it may feel like a truer startup than a franchise if you go into an area where it's just not known and doesn't have a following.
Marcia Dawood
Right, yes, I can totally see where that would be challenging.
Domineca Neal
The other thing I will point out is there can be risk from franchisees who once they decide on a particular concept, they believe that they have some ways to improve or do it better. And understanding that you're buying something that's proven. And so you're probably better off if your due diligence indicates that this is going to be a viable business for you to execute as it was designed, as opposed to trying to remake the strategy, the model, et cetera. Because that introduced risk into your investment.
Marcia Dawood
Which totally makes sense. You don't want to reinvent the wheel. What about labor? Because I've heard franchisees tell me in the past, anyway, that's one of the things that they really struggle with. They aren't sure how much, how many people to hire, how they would balance all of that.
Domineca Neal
Yeah, that's a great question. Particularly given the challenges that over the last, I would say 20 years, it's become more challenging for small business owners to identify great talent, what to pay them. And so I would suggest a couple of things. One, again, look to your franchisor to see if there's some best practices. So sometimes say, for example, one of the franchises that I personally owned was in the restaurant, restaurant sector and it was a very well known brand and there were rules of thumb in terms of what your volume was, how many employees you should have operationally working so that you can capture that customer coming through your drive thru or coming inside of the restaurant. And so it was literally down to that level where they would say hey, you need 13 people on the floor or you need four people to prepare to get the restaurant ready to open. And so it was very. And those are the systems where it can be a little bit higher to get in, but they've been proven out over thousands of units.
Domineca Neal
And. But when you don't have that much history, then it becomes also looking at other businesses, similar type businesses joining chambers of commerce, having people that mentor you in those businesses. What I one of the most interesting things I found the first franchise I purchased, which was an acquisition. I reached out to a couple of franchisees in the market and two gentlemen reached back out to me, invited me to their locations. They were both multi unit owners and literally showed me financials, took me through line. They did not see me as a competitor. And can you imagine starting up a business and having some walk you through line by line, their financials telling you what the ranges you need to target, the profitability. The cash flow question is about labor.
Domineca Neal
So one of the benefits, again to franchising is your fellow franchisees often do not see you as the competition. And so they're willing to share information. If you build those relationships or are willing to reach out to people, they're willing to share information that literally sets you up for success.
Marcia Dawood
That's so great. My gosh. It's kind of like that story of if you have one coffee shop in an area, that coffee shop might do okay, but you put another coffee shop across the street. Now both coffee shops are doing great. Right. It just, it's not really what you would think would happen. But it does happen. Right?
Domineca Neal
There's it, it is, it draws people in, you're expanding the potential for your customer base. And everybody eats.
Marcia Dawood
That's right. I love that. So I've had a couple of entrepreneurs come to me and say, hey, we're thinking about taking our business model of what we're working on and franchising it. And that, to me anyway, seems quite daunting. But that's because I don't really have a lot of background in franchising, obviously. So tell us a little bit about what your thoughts are around an entrepreneur doing that.
Domineca Neal
Oh yeah, and I love that. So a couple of thoughts. One is get you a good franchise attorney.
Marcia Dawood
Yes.
Domineca Neal
Because so franchising, whenever you, a potential franchisee is exploring a concept, there's something called a franchise disclosure document or fdd. So each state typically oversees franchising in their state. And so your FDD is filed by the franchisor with any state in which they operate and there can be times where the AG says, hey, you know what? You can't, you can no longer operate if you violate certain rules or there are certain complaints. They kind of monitor the franchising on a state level. And there's also some monitoring that happens at the FTC level, but primarily at the state level. And so you want to get this document and typically you're required to. The franchisor is required to give you this document. However, there's timing of when they give you the document, the wait time when you sign it.
Domineca Neal
And because of that, I always encourage people, and I did this myself when I invested in a couple of franchise concepts, is you can get the FDD on your own. Some states you just have to request it, some has a de minimis fee, pretty much the cost of copying it, and you can read through all the different sections that have the cost of startup, etc. So if you want to be the franchisor, the reason I said the first thing is to get a good franchise attorney is because they understand all those regulations. Because what you put in that FDD is almost like marketing. But the AG expects you to have the information to substantiate what you're putting in there, trying to sell it to franchisees. And if someone makes claims in their FDD about a certain amount of revenue or profit you will make, that's you can be held accountable for that. And so understanding what type of information you're required to have in there and what type of information is optional, and if you want to be that aggressive, making sure that you have the information to substantiate it so that there aren't ramifications on the other side. The other thing is making sure that you've done enough operating or selling of the services to validate your proposition, because you're the expert, you've opened them, you've run them, and in some cases you may have even closed them or relocated them.
Domineca Neal
And so you need to understand what it takes to successfully execute this strategy of the product or service that you're presenting outside of that, if you do that part, those two components, then it sort of sells itself. Right? Because you have the results to show that can be very appealing to someone and you have the proper regulatory and legal guidance to make sure that you're staying and playing within the guardrails.
Marcia Dawood
Interesting. So if somebody is going to do this and they. But it's new, right? So they're going to have to find maybe one or two people who are kind of willing to take the leap with them. Right. In order to kind of figure it all out and figure out what are the best practices, what are the operating guidelines that we want to give people. How does somebody navigate all that at the beginning?
Domineca Neal
One of the best ways to do it. So say you have this idea, you open it up, let's call it a coffee shop and you see you got something there and you may open up two or three more. One of the best ways to then say, okay, I need to start expanding is look at some of your employees.
Marcia Dawood
Ah yeah.
Domineca Neal
Who've been with you from day one. There is a major coffee franchisor, I'll just say, based in Michigan, kind of focused in the Midwest, but they're in multiple states. And if you look at the history, there are two co founders, but actually the original co founder and the other co founder. One of them actually was one of the first employees.
Marcia Dawood
Wow.
Domineca Neal
And helped grow the concept and so became the other co founder and very successful franchise concept. So looking to those employees and in fact even the very large franchisors, you will find look to identify people, people who work in different locations if they're corporate owned stores or even franchisees. Sometimes when we talk about labor, Some ways to identify people and retain them so that you can be competitive is to identify people to help you grow your business and do creative things like allow them to earn some equity so that one day they can also become a franchisee. I've seen that many times over. And that person then goes and build their own multi unit business. And that is a great story to like the American dream.
Marcia Dawood
Oh, I love that. That's great. And I love taking people who have been loyal to you were there from the beginning and it's their blood, sweat and tears also. That's in the company, right?
Domineca Neal
Absolutely. Because you can't grow that business on your own. And so you have this person who typically depending on the franchise is not a high income person, but they're willing to work hard, they do good work, they're willing to save and with a little bit of equity or depending on the particular franchise system, they can go get financing. Many franchisors and in addition to like lenders like a bank, your neighborhood bank, community bank, who may offer because they're familiar with the concept in their area, there are also franchisors who have approved lenders. So with my first franchise acquisition, I actually went with one of the franchisors approved lenders which really streamlined the process because once I identified the locations I had P and L history and so Then they just had to do a little bit of background information on me, but really the business was generating cash flow, but it was a turnaround and they knew I was approved to be a franchisee. So I had all the training and certifications that I needed. So it was really turnkey.
Marcia Dawood
Wow, that's amazing. So now you're a member of Community Angels and you've been doing angel investing. Tell me what's going on now and what are you seeing out there in the world?
Domineca Neal
Yeah, so I've been doing angel investing for I think now a little over three years, maybe four. And my portfolio now is in like I would say close to the 20s portfolio.
Marcia Dawood
Amazing. Yeah. Diversification, we love it.
Domineca Neal
Yes, absolutely. Critical, right?
Marcia Dawood
Critical, yes.
Domineca Neal
And for me, when I think about angel investing and other sources of funding, it was important for me that I provide a resource for women and people, BIPOC people. And so that's been a big part. And so out of all of my portfolio investments, all but one either have women founders or co founders or bipoc people and some a couple that do not. They either focus their primary beneficiaries of their product or service are those same communities. So my philosophy is that I can invest in those women and BIPOC people who do not have the same access to funding that you know, historically and currently. But also if you're developing a product or service that benefits those communities, I'm for that as well. And so that's been my approach. And I mean I'm in from pharma to med tech to I mean just a variety, clean tech, climate tech.
Domineca Neal
And in fact, interesting tidbit, we have land in our family that's been in our family for over 100 years through my paternal, excuse me, my maternal grandmother, my dad's mom. And this was out of a time when typically African Americans were not permitted to own land and even transferring the land, typically resulting you losing the land. So we have managed to keep it in the family. And I had this epiphany as I started getting into angel investing and started really looking at estate planning and things like that and realize how do I keep this here and create this legacy so that the land is never sold? And through the program of venture. Well, one of the fellow, one of our fellow investors and colleagues, Erica introduced me to a young lady who had a startup focused on solar energy and her focus was on small and medium sized landowners helping them to evaluate it for solar.
Marcia Dawood
And I remember that company.
Domineca Neal
And so just talking about how much I love angel investing. So here's this woman who's built this team is actually her second business, her second startup. And I was able to help her by participating in some of her early work as she figuring out her concept. And now we're at the point where we're looking at a pilot as her next milestone. And for me, the benefit of potentially creating this legacy where we're generating income, helping the environment, helping the local communities, residential and business is beyond what you can do in any other kind of investing. Right. It's just.
Marcia Dawood
That is such a great story. Oh, my gosh. And you'll get to keep it with the land of your family.
Domineca Neal
Exactly. Is that like a great. I mean, so that's what angel investing is to me, is this network you build, which you talk about in your book, and people are aware you share what you're working on, even personal things. I just have. She happened to know about my family because I was like, yeah, I'm trying. I'm looking at six different business ideas I've come up with, and solar was one of them. And just so happened she met this young lady, and then the young lady ended up being a part of the venture. Well, program.
Domineca Neal
So it was just all around a big win for everybody. And so I'm just ecstatic to be a part of it.
Marcia Dawood
Ugh. I just. That is. That's like, we talk about sometimes we can have triple wins where we're getting a financial return, we're able to help the environment, and then we're able to help, like, an underrepresented founder or something like that. But this is. There's five or six layers of wins here. It's, like, incredible.
Domineca Neal
And so it's about the possibilities that come with angel investing, because you take people starting at the earliest stages where they have a dream and a vision, and to be a part of helping them bring that to life is something that really you can't buy. You can't buy.
Marcia Dawood
You can't buy that. No. Well, Domineca, you have been a dream to have on the show. I. You have so much wisdom and knowledge to share with everyone, and you do it so much with being a mentor to so many incredible founders. So thank you for all that you do and thank you for coming on the show.
Domineca Neal
Thank you, Marcia. It's been a delight to be a part of this. You've been awesome getting to know you over the last couple of years, and just congratulations on your new book. And I just think that it's so needed in this community, and I look forward to continuing to support you.
Marcia Dawood
Oh, thank you.