The Most Hidden Path to Financial Freedom in America

0:00 Franchising is one of the most overlooked paths to wealth in America. That's a very bold statement. There are more millionaires generated from franchising than all combined players ever in the NFL. And there's a number of private equity family offices starting to get further and further into franchising. And they're buying both large franchisees or they're doing roll-ups. You made this bold claim and I want to fight you about it now. I'm totally on your team. Traditionally franchising gets looked at as like Alright, it's either McDonald's and Subway and you gotta have three million dollars to do it, so only the wealthy can actually do it. But there's 4,000 franchise brands. And if you're willing to do the research, willing to do the work, there are a lot of hidden gems of brands and industries that are really taking off. So explain the path. What's the game plan? This is such a good hidden gem, I don't wanna talk about how I did this. I feel like I can rule the world, I know I can be what I want to Alright, what's up? Welcome Alex. Alex is

0:59 The franchise guy that we have invited on the pod. So I don't know if that's what you normally get called but that's what we're calling you. So This podcast called My First Million. One of the reasons we originally called it that was because there was all these different ways people made a million dollars. And in my first ten episodes, I think I had a guy who did it in real estate. A guy who did it with Amazon FBA, a guy who did it playing poker. And I was very fascinated just to hear All the different ways you can win in business for two reasons. One, I wanted a menu of options I could go choose from. How can you know which one sounds most appealing to me? Which one sounds like it fits me. And the second is

1:31 I like just hearing that you could be do it in all these different ways because it makes the impossible feel extremely possible. I remember when I was sort of pre-success. It felt like winning was like Just this needle in a haystack. I couldn't find it. And then as I've been doing this podcast, I realized It's a haystack full of needles. You there's so many to choose from. There's so many different ways to win. You're gonna talk about

1:50 Kind of retail and franchising. Did I do did I do you justice there setting that up? Yeah, absolutely. I honestly, up until four or five years ago, was a bit of a I think franchise hater and thought, Oh, yeah, that's Is that really entrepreneurship or is that Yeah, are there viable paths there? And the more I've gotten into it, the more I've realized it's probably the most overlooked path to wealth creation in in America and I've become a big fan. That's a very bold statement. All right. Yeah. Well let's let's start with who who you are. So you're uh you're a guy who made your initial wealth

2:26 In laundry, in the laundry business. So can you give us the fast forwarded Quick version of your story. Yeah, I'll try to be try to be short. So I'm originally from small town, Minnesota, town of fifteen thousand people Uh, ended up in North Carolina for college, went to uh to Wake Forest, studied finance, was about to have a pretty kind of boring plain life, and then bought a laundry business my freshman year of college. Um, did seller financing, had to learn what that was at at eighteen, uh, learn what a discounted cash flow analysis was at eighteen, just talking to

2:57 Yeah, business school professors before I got into the bus school and I ended up buying that business and learned more doing that than any class I took at Wake. You know, we ran it, we grew it, we sold it for A little over ten times what we bought it for and and had an exit. uh our senior year for I think about ten times what we bought it for. And that

3:15 Set the path to Complete addiction. W why did you buy a laundry business as a college freshman? Who does that? So I was I was working for them. I was working for them as a way to make a little extra beer money and and was hooked. I was like, This could work at Duke and Chapel Hill and Vanderbilt and you guys are graduating. I wanna buy it. And they asked for thirty grand and my jaw hit the floor. I was like, That's the most money I've ever heard of. Uh and I had maybe two grand saved up, so had to get creative and figure out how are we gonna buy this and structure it and Well that's sort of like one of the one of the three businesses college kids starts. It's usually like some type of like app or something where like college kids could sell stuff to other kids.

3:53 Uh or a roommate matching app. Which I did. Or like a like a laundry map. Uh uh a laundry business. I know Blake Myowski, I think that's his name, the guy started Tom Shoes. That was his first business was the laundry business. Well what were you doing? You just go pick up the laundry from students' dorm rooms, you said like hey You you know, I remember when I went to college, I didn't know how to do laundry. I'd like, you know, grown up and my parents did my laundry and so by the time I got to school I was a little confused. My roommate had to teach me like What is a dryer sheet? And like why do you use this? What are all these different components? How long do you leave this in?

4:25 Yeah, so Tuesday was pickup day. You'd leave your stuff outside your dorm room door. We'd have runners, you know, mostly football players that could hold like two hundred pounds of laundry at a time and they're just you know run up and down the hallways, grab your bag. We'd partner with vendors off campus. They would clean it. We'd return it Thursday. But the big unlock for us was Kids aren't paying for this. You know, it's a bunch of broke college kids. It's their you know of affluent parents or your parents that are worried about them, you know, being at college not knowing how to do laundry. And so the big thing that changed it for us that allowed us to go from you know call it thirtieth thousand in revenue when we first bought it to just under three hundred grand a s a school year in revenue.

5:02 was get a booth at orientation week. And for whatever reason Wake gave us a booth next to where you got your meal plan, where you got your parking pass, where you got your keys to your door, like all the like marquee things you need to do. And we went full sham wow guy. Like I was like, Step right up, we're the premier laundry service that wake. You got your kids gotta have it. You don't want them to go Yeah, clothless. You got to sign up for this. Yeah, and they loved it. They thought it was like the cutest thing and they're like, Yeah, that's true. My kids, you know, screwed going here and not knowing how to do laundry and I want them studying or you know And so

5:38 We went from yeah, thirty K a year and school year to like two hundred eighty thousand our first year. Is this still a business that any college kid could do today? Like has this been a solved problem, or does every campus just have kind of like a version of you who's who hustles and makes the the campus, the freshman laundry service? Yeah, I think Sam's right. Like the number of people I've met that have gone on to be serial entrepreneurs that were like, Oh, I did that in college too. Like I thought I was so cool and special and unique, that I meet like thirty other college kids that had a laundry business at their school. So I don't think it's been like systemically or like at a scale, you know, solved. Um it's just yeah, the the Business that we had was called Wake Wash, and it's been owned by nine other groups of college kids. It's changed hands that many times, and it's been such a cool

6:24 launchpad for all these other entrepreneurs because it's this like safe Hm. fairly simple business model, but you do learn so much how to hire people, manage them, fire people, work with universities on your contracts and agreements, market to customers, sell the people. Again, it changed my life entirely. I wouldn't, I don't think, be an entrepreneur at the the level that I am and have the level of obsession I have over it if it wasn't for that college laundry experience that I had. How old do you know?

6:51 Uh just turned thirty four. You m and so you sold that for what? Uh Six or seven hundred thousand dollars. You said mid six figures? Yeah, it was like four f little over four hundred thousand. Oh, that's badass. So in college you sold a business for four hundred thousand dollars. I thought I could retire.

7:08 Well that no as a twenty one year old you're like oh my god I don't have any college debt and I didn't pay attention to finance class, so good thing you didn't go down the finance finance career path. Well the funniest thing is Like any good laundry man. He ran another cycle. He goes and he starts another laundry business right afterwards, right? Well, I I sold I sold out for a little bit. I went and worked for Ernst Young. I thought as far as corporate jobs go, consulting's gotta be entrepreneurial. You're jumping from project to project, you're working with different teams. And again, love the people I worked with, did learn a lot, but I it was like soul crushing work. I I hated the type of work I was doing.

7:46 And in twenty fourteen, twenty fifteen is when all the Uber for X businesses were taking off. So Instacart and Shipped and Wag and Rover and Drizzly and DoorDash and Yeah, all of these and I thought someone's gonna do this for laundry and dry cleaning and if it's not me, I'm gonna hate myself and I need to go At least throw my hat in the ring. So quit my job at EY. started a company called two U Laundry in January of twenty sixteen. Um and we had a

8:13 Yeah, pretty wild roller coaster of a ride from there and the story is still being written to a degree there. Hey, real quick. If you like this episode and you want more ideas on overlooked businesses I have something you might like. A while back, Chris Corner came on MFM

8:30 And we called him the side hustle king because he built so many businesses. Well, he ended up giving us a list of two hundred ideas and the blueprints to build them. It's a great resource and totally free. If you want it, just click the link in the description to get it now. All right. Now let's get back to the episode.

8:48 You made this bold claim. You said that franchises are What did you could you phrase it exactly? Because I'm gonna I'm gonna try and prove you wrong, but I wanna we're gonna have a f we're gonna have a fun debate. But with uh tell me your the exact phrase. Yeah. So I think franchising is one of the most overlooked paths to wealth in America. Um, and I think it deserves more attention and people Giving it a shot.

9:10 Great. I want you to be right. But uh we're gonna we're gonna like have a co conversation about that. And the reason you know this is you have a software company where you it's like a marketplace for franchises. So you have mm perhaps one of the best, uh like bird eyes view of like the the industry. What are the numbers that would make you make that claim?

9:27 Yeah, so franchising as it's it's a business model, first of all. I think a lot of people think franchising's an industry. It's a business model that spans food to hospitality, health and wellness, early childhood development. Most of us probably don't even realize we're using franchises on a daily, you know, for sure a weekly basis. Hotels, Marriott Hilton franchise businesses. Yeah, there's all the food that we all know, McDonald, Subway. Yeah, Chick-fil-A, et cetera. But then gyms that we all go to, Orange Theory, F forty five, Barry's, they're some form or fashion of a franchise.

9:59 And then you talk about your home, gutter cleaning, painting, uh you know Pest control, et cetera, all franchise. It is eight percent of our country's GDP. Is produced from franchise business models. And I think traditionally franchising it's looked at as like all right, it's either McDonalds in Subway and you gotta have three million dollars to do it so only the wealthy can actually

10:19 Do it well. Or it's these like kind of slimy ones that are just popping up and they don't have systems and they're telling you they're gonna sell you a dream. But there's four thousand franchise brands. Um, and if you're willing to do the research, willing to do the work, and willing to look. There are a lot of hidden gems of brands and industries that are are really taking off and have valuable systems and a valuable peer group that

10:41 The everyday average. Yeah, entrepreneur could benefit from if it's the person that doesn't have the original tech idea or Wants to go raise venture capital, but wants to build a business and build wealth. Franchising, I think, again, is one of the most Yeah, underrated, overlooked path to doing that.

10:58 So explain the path. All right. So I'm a person. And um you know, explain a blueprint or a model that you could see. So, you know, you take X dollars that you have saved up or you raise from somebody. You buy what type of franchise and then what type of returns do you get? What's the game plan? So I always use analogies and I think a good one for for franchising is akin to real estate. You could buy a trailer, you know, one lob trailer and rent that out, or you could buy a hundred door multi unit deal and there's everything in between and franchising's no different.

11:27 Of those four thousand brands, there's some as affordable as ten thousand dollars to get into. Chick fil A actually is only a fifteen thousand dollar franchise fee because they want to pick from the best crop of operators, but they're a lot more restrictive on how many units you can actually open. How you operate, how involved you need to be in the business, et cetera. Isn't well you can only have one? Yeah, you can only have one. There'll there's unicorns they allow to do two, three more, and then brands like Armark or these you know food service providers that do stadiums and campuses, they've got dozens, if not hundreds, because They have those you know agreements on those those those venues.

12:02 But some of these franchises will be ten K all the way up to there's four million plus dollar swim schools where you've got six pools you're building and Yeah, it's a much higher stakes, but higher reward uh opportunity. So let's say you you said Chick fil A t fifteen K, but then you have to build the restaurant, right? So the franchise fee every brand will have, and that can range from ten K to you know seventy K in some instances, and that's basically your ticket in line. It's your I now own the rights to this territory or this, you know, ten mile drive radius, et cetera. And then there's the build out cost. Just like if you were to do it on your own, how much is this gonna cost to Upfit the location, buy equipment, you know.

12:39 uh boilers or Yeah, stoves and all the stuff that you need for a restaurant. There's bad investment costs as well. Chick fil A is a little bit of a pseudo franchise. It's fifteen K for the franchise fee, but then Chick fil A actually build you buys the site, they pay for all the build out.

12:55 But they're taking a fifteen percent royalty instead of six percent, which is standard. So six percent on your revenue is standard. Chick fil A's taking fifteen, but then they take fifty percent of your profits as well, which no other franchise or does. They take zero percent of your profits. So you're effectively with Chick-fil-A buying yourself a a high paying job. Did you guys read about this? I this article went viral. Or not viral, but maybe in the business world it was popular. I think it was in the Wall Street Journal. It was March first, child twenty five. It was about the friends, these two buddies I think they're only thirty five to be honest. And they they had started a business called uh Garnett Station Partners. Did you read about this? No.

13:31 Okay, so uh you correct me in the story, but two guys I think they looked like thirty five to thirty seven Two buddies. Who raised a fund and bought a bunch of franchises and now have a multi billion dollar fund, and I think they've taken out you know, hundreds of millions of dollars out of the business. Yeah. So they um and there's a number of private equity family offices starting to get further and further into franchising, and they're one good example of it. And they're buying both large franchisees, or they're doing roll ups essentially of all right, Sam, Sean, and Alex own five Jersey Mics and they find Six of us and they go buy all thirty of'em. You know, and they're doing these kind of one off deals, but now they own

14:06 A thirty unit portfolio that's doing Yeah, an average of two and a half million per location and Yeah, now have close to a hundred million dollar a year revenue business. The acquisition and it was five acquisitions or six ac acquisitions. So there's a lot of that happening. And so they the Wall Street Journal phrased it so differently because when I think of franchise, I think of um

14:26 A little bit blue collary or an ex NBA basketball player. That's who I think about. Uh, they they've so far have raised three point five billion dollars. They're only thirty eight years old, and they bought everything from gyms, funeral homes, car washes, and they bought hundreds of these and they've just operated it really well. And I think their big win was betting on Little Caesars. I think they bought a bunch of Little Caesars if I like uh maybe eight years ago and now it's been really popular. But the way that they've rebranded this was actually Amazing. What do you mean rebranded it? What's the rebrand?

15:03 The rebrand is like it's just like they made it a lot more white collar. So when I think of franchise, I think like a mom and pop business who just wants to get into it and they got they put forty thousand dollars together and they work for fifteen years and slowly acquire one or two at a time and hopefully they have their it's almost in the same category as like a dentist. Right. You know, like the middle America wealthy people who have done it, you know, year after year and been very consistent. These guys were thirty-eight year old Manhattanites who raised a billion dollars and they've just crushed it. And it kinda reminded me, I think there's been a a handful of things like this, Sean, where it's like things that um serious operators operators don't take serious. And that is how I kind of read it about these franchises, where it was like Yeah, mom and pop's have done well owning three or four of them. What would happen if you own three thousand of them? And that's what there's there's a lot more smart money coming in and using that real estate example again. It's there's all these folks that might own five doors or a duplex or a quadplex. And private equity and family offices or ex investment bankers are saying, What if I go roll up a hundred of these, two hundred of these and that's that's exactly what Cal did, the story that I you know shared with you guys. Tell that story. Who's Cal?

16:06 Yeah. So Cal Gulapali, he's a a franchisee based in Florida. Uh former investment banker, I think he worked up in New York or in the North East and You know, decided he wanted to do something for himself. He's like, I know how to put deals together, how to structure and you know, analyze a business. And so he bought a few butcher shops at first. So independent businesses, more like ETA or a search fund of seven years ago, eight years ago.

16:29 And that went okay. Like he learned a lot how to be an operator and Yeah, learn some retail. But then he was out his orange theory, his gym that he goes to, and he's a curious guy. He asks, you know, the manager, you know, is the owner around or can I get in touch with him? Gets in touch with the owner. ask the owner, how much money are you making? The owner was forthright, shared his financials, and I think he was making four or five hundred grand for that you know profit from that one location.

16:52 Cal's like you make that from one gym? And he's like, Yeah, I own three of them. He's like, So you're making over a million dollars a year off of three locations And so he goes and buys two orange theory's like immediately. That was in twenty eighteen. Dude an ex b an ex banker doing this is sort of like a young gay couple gentrifying a neighborhood. You're like you're like an outsiders are like Something's up. Like it's starting. Yeah. This is like that story. Or a retired New York banker in Florida who's on his second uh his second thing.

17:25 Well, so he he starts doing this in twenty eighteen. Seven years later, at the peak, he's had a hundred and twenty locations open in seven years. Of orange theory or of other things? Eight different brands. Marco's, uh Pizza, Restore Hyper Wellness, European Wax Center, uh Papa Bagels. Did he raise money? So th what he's done and I so I have a podcast as well called How I Franchise This and he talks through exactly how he finances it, how he structures the deals. And a lot of the times he owns thirty to sixty percent of the equity in these kind of like sub deals that he's doing. So he's using private equity, family office, you know, independent investors.

18:02 Um, but he's the operator, uh and or owning thirty to sixty percent of a system that Likely does over half a billion a year in revenue across all of his Yeah, his his units. In seven years. Who the hell can operate? A hundred different

18:17 Franchises. That's so difficult. How is he doing this? What is the model that lets this happen? So he as he was scaling and usually it's going from six to ten is the really challenging part'cause you start having district managers, you know, managing a unit. But he's so far removed from the day to day now that he's got this

18:39 Yeah, the system and line of defense where each brand has uh basically a COO over it. Within that organization, there's multiple district managers, and then underneath them they manage you know four to five stores each and GMs and assistant GMs. Once that system is in place, there's so much redundancy that Yeah, you've got people calling out and all the headaches you'd worry about with a business like this. He's got a couple of thousand new hourly employees across the system. And that sounds like a massive headache, but because of the system and you know, the the things that come with franchising, it is much easier for him to have these playbooks for training and Uh how do you handle employee turnover and How much profit would it make a year or cash flow and how would it be do you value it is the value in the equity value that you build up or is it just the uh profitability?

19:22 So b so both franchising, and this is you know something that o w uh opened my eyes a bit is A real estate investor would be jumping up and down about twelve to sixteen percent IRR. A franchisee is upset if they're not north of twenty five percent IRR. So the cash on cash return is You know, double in many cases of the expectation of the floor. Yes, there's more risk. Yes, there's more, or in some cases there's more risk and there's more. Well, you're running the business. Right. Yeah. But as you get these systems in place, it becomes similar to owning a portfolio of hundred, you know, doors in a in a commercial real estate.

19:54 Um And and so the the cash on cash return from the cash flow of the business is twenty north of twenty five percent. That's not factoring in the enterprise value when you go to sell. And franchises trade at one to two X. more uh a Viva Ta than a an independent business because it's de-risked across the thousands of units or hundreds of units in the brand

20:15 Banks de risk it that way, investors de risk it that way. Um and you have this peer group again in this franchise or to to to rely on twenty five percent cash on cash. What was the cash? I don't even know what it would cost to have a hundred and twenty-free Well just do it, do it in a simple do it one, right? Yeah. One location. Let's walk through the economics of a single location. of pick your favorite franchise if you were advising your your little brother or your cousin.

20:39 To go do one of these, where would you guide them? And then let's walk through a one location economics. Yeah, so it and I know people hate the answer it depends, but there really is a franchise for everyone's whole pick. You know, let's just pick Dave's hot chicken, a brand that a lot of people know has had this kind of viral growth the last few years. The average Dave's hot chicken, you know, is anywhere from six hundred and fifty K to to one point eight million to build and that depends on size, the market you're in. I know it's a a big range.

21:07 But the average revenue of a Dave's hot chicken is is over three million with Yeah, twenty ish percent. you know, cash flow mar margin. So we're talking about Six hundred K in in in profit. Okay, but we've we gotta slow down. So Dave you you you tell'em, hey, Dave's hot chicken, great great brand. Yep.

21:24 You're Little brother says, Okay Uh, what am I gonna need to go build this day to start a Dave's hot chicken? So I gotta apply And then I have to pay a fee and then I have to come up with a million or mil one point five million dollars to build this thing. How am I gonna do that? Yep. Yeah. So in Dave's hot chicken case, they now require you to do at least five

21:42 And so in this case, this is one of those examples where You do need two and a half million liquid, five million dollar net worth. Or to have raised that money from investors. If his little brother and he didn't have that cash, I'd say, Hey, we gotta go find some investors, you're gonna be the operating partner, just like what Cal does, you know, today across his system. So little brother, can we prove that you're a good operator, that you have experience in managing a Chipotle or whatever it may be to go raise this capital. Um if he wasn't capitalized.

22:07 Five million bucks. Yeah, s yeah. So to get started he would need Two and a half million liquid in this case to build the first, you know, one or two. SPA is a great option as well. So Cal, even someone at his scale, is still using S P A because it's designed and meant for Buying small business like this.

22:24 For getting us all to eat hotter chicken. That's what the SBA Do you also have to be good at spotting a trend because, for example, if Dave's hot chicken You know, was a thing twenty years ago. I lived in Nashville when how our hot chicken got started and it was like Not that popular. And then something happened on TikTok where hot chicken got cool. But then I don't know, is it a phase? Like do you have to be do you have to get good at picking what a winner is?

22:50 Yeah, absolutely. So one of the things that I think about a lot is what makes some of these wildly successful franchisees versus the ones that aren't. And I think like picking an independent business, whether it's trash or Yeah, these other unsexy businesses, you need to find something that Yeah, I think carries long term value, unless you know it's a trend and you're like as long as I get in early, I can build a substantial business and ride the wave and and ride the trend. I think it's very similar to buying an independent business as well, but Cal is an example, spotted Dave's early, he spotted pop up.

23:20 You know baggles early and they're taken off right now. Okay. So let's redo this. So because you you gave us Dave's hot chicken and now your little brother needs five million dollars. And I think we we've hit our wall. So let's do something that's not gonna require that. Let's take a more realistic I don't have Friends and family that will give me you know Two to two and a half to five million dollars liquid and I don't have the operating experience of running a Chipotle for three years yet. So what what what else would I do? European Wax Center, what are we thinking? So let's do let's do another nine. That's one that I'm in full disclosure, I'm developing five and other nines in Minnesota right now. It is uh indoor. What's another another nine. Another nine.

23:55 Is that the name of a franchise? It is a fully unattended, so no employees, no food and bev indoor golf simulator franchise. Um Golf is very, you know, trendy and popular right now. It's making a comeback. You got the Netflix effect with full swing. This past year actually more Americans played off course golf, so like top golf simulators, etcetera, than actual Green grass golf.

24:18 Uh for the first time. Substantial. Okay, so you you basically say hey, there's this trend and this movement. indoor golf simulators. You said yourself you're building five five of these out. Okay, so let's walk through again the one unit example. Do I does little brother need

24:34 Some special sauce to do this, or what does he need? What's the steps? Yep. So in this case you are gonna need Yeah, an SPA loan. That's what you know we're using to finance some of these. The build out's substantially lower than a Dave's and they don't require you to build five of them. So you can get into one or two of these. When you go to get that SPA loan Do they need you to have proven anything yourself, or can you just say, look, this is a franchise

24:56 I'm gonna operate it. I've had this corporate job and I'm ready to go do this. Do you need Some something to qualify for that S Bay loan. Yeah, so typically depending on the brand you're getting into, you need fifty K, I'd say liquid and over a hundred and fifty K net worth. So again, I think attainable for Yeah, a lot of people wanting to go escape corporate or

25:15 add onto their real estate portfolio, uh et cetera. SPA will borrow you up to five million dollars across multiple loans, you know, over time. And they will make you sign personal guarantees. So you are, if you own a house, that's collateral. You know, they're looking for, does the individual have enough collateral and does the brand have enough data and proof points that this is a concept we want to back and be involved in. And Most banks, like I think a lot of opportunities, some love food and that's what they do. They're the food lenders. There's others that love fitness and they're the the fitness lenders.

25:45 And so you gotta find the right lender that is comfortable with the concept you're looking at. So how much does it cost to build one of these? Yeah, so one of these is anywhere from, you know, three hundred and twenty ish K to eight hundred thousand, depending on the number of private bays you want. So another nine is different than these social experiences you see where it's food and bev and Staff. This is Like any time fitness. You fob in with your phone, you can go at three in the morning if you want, they're twenty four seven, and you go play Yeah, sim golf on some of the nicest equipment out there. Yeah, the guys that started us out of Cincinnati.

26:17 They said they got surgeons that go three times a week at three in the morning when they're off shift and they go play Pebble Beach for an hour before they go home and you know call it a day,'cause that's their routine and that's when they can get away and do it. But they don't have five hours to go play. An actual round. So I'm on an another nine.com. It looks really fun. I I don't even golf, but this looks like a it would be really fun. But it looks very uh new. Like it I think their headline says just Just two dads they're gonna play more golf. That's who founded it. And then it's a it's got a pretty funny language that actually says like, Did we mention that we're B Y O B.

26:49 Like it seems it seems cool, but it seems um like why would I need them? Why wouldn't why would you pay them money versus going doing it on your own? Yep. So one thing I always tell people if they're thinking franchising, and again, here's another analogy. It's like a lot of brokers or people will say, like, I know Sam and Sean. They just assume they want ice cream. So it's like which flavor do you want? And I said we gotta take a step back. Maybe they don't even want ice cream, maybe they want cookies or cake and Yeah, the dessert type being franchise versus real estate versus buy your own business.

27:19 And so I usually tell people if you're gonna do franchising, you need to think about this over a ten year period,'cause most franchise agreements are ten years. You need to say in five years. What value is this brand gonna be providing me that justifies this ongoing six percent royalty? And so in food it makes a lot of sense. McDonalds is gonna give you ten cent per pound burger meat versus a dollar that you get on your own. You're getting more value in the bulk purchasing power of the brand, the menu innovation, the marketing, et cetera.

27:45 Then you are keeping that six percent. And so a brand like another nine, because a lot of the value is frontloaded, they're getting breaks on equipment and and build out and helping you with Site selection and design. Yeah, how do they create value over time? And for me it was I'm doing you know Franzi full time. They are gonna provide resources on an ongoing basis, training

28:06 Um they're building software that I don't want to spend time building or investing that Alows better scheduling and easier marketing and lessons to go partner with existing golf courses to drive volume from from that channel. They're building this really cool league, you know, software where Sam could be in New York and Alex is in Charlotte and we could be doing a fantasy football type league where all of your high school or college buddies could play against each other. Yeah, in your respective markets, um and have this like fun ongoing competition. So they're investing in technology that I think create stickiness within the the consumer base. They make the operations a little bit easier, maintenance contracts.

28:40 Right. Um, that's probably probably one of the least value add five years from now, kind of examples versus a restaurant. But even then, it's worth it to me to not have to think about all that. Okay, so finish up the economics for me. So you said You're gonna go, you're gonna build this thing out for let's just round it to five hundred grand. And you're going to franchise this for these guys, they have a six percent royalty. What are you look and you got the you got that five hundred grand from the SBA? Ten percent down. Yeah. Ten percent down. So you put fifty K down.

29:07 And you're gonna you're gonna uh Get the rest as a loan. So what are you looking for? And how do you w why you know, I guess you're trying to do five locations, maybe it takes five for this to really like be meaningful. Is that is that right? So I always tell Bill if you're gonna try to replace your income or how uh Yeah, kinda like a side hustle or some side income. You can do that with one or two units. If you're really looking to fully replace if you have if you're a high earner, two hundred and fifty, you know, K plus and out in in in salary.

29:33 You're gonna need three plus locations to replace your income and eventually beyond that. So for me and my partner, it was let's do five. They're very passive. There's no employees. There's no food and bev. We can run five as essentially a side hustle without having to be super involved in the day to day. One unit on average is doing Just under three hundred K a year in revenue, which might not sound like a lot, but they have fifty five percent margins because there's no labor, there's no food and bev, it's just the build out cost and rent, essentially. You don't need high occupancy to to to get

30:02 to meanful amount of of of profit. So We're expecting each one to do 150 K in profit after all expenses. Uh you get to five of those, you know. generate seven hundred fifty K and relatively passive income. You know, it's a lot of work for us up front to find sites and build, but Meaningful cash flow.

30:20 In the long term. And Sam had a good point a second ago where he was like, Do you have to almost think like an investor and spot things a little earlier than the curve and figure out what's gonna have staying power. And you had this interesting thing. You texted us, you said uh turf businesses. And I think in this one you were saying.

30:37 There's almost like a regulation That you will benefit from. You said like Vegas, for example, is prohibiting h new homeowners from growing grass. So they have to go turf. Uh can you talk a little bit about that like that idea and how you would Capitalize on it.

30:52 Yeah, so Waterloo Turf is the brand. He's a former private equity guy. And this is a big thing that I look forward to, just like Sam said, find trends. You're betting on people as well, because this is a partnership. I think another thing people might discount in franchising is I'm not just buying Sean's old business. We shake hands and Sean and Alex don't really interact beyond that. No, I'm looking at Sean as a tenure partner. We're gonna work together, you guys are gonna make investments in the brand, help me with marketing and the problems that I have and you know build a system of other franchisees that hopefully can all benefit from and and learn from one another. Um, and I think people maybe take that part for for granted. So I just wanna stress that. The founder of Waterloo Turf is phenomenal.

31:29 Former Calli guy. Yeah. very deal driven investment bank are very analytical and He's looking for this trend and seeing the turf industry in the United States as four billion dollars today. gonna grow by another of half a billion next year. And there's no clear winner. There's no national brand.

31:47 No one's dominated this. Why don't I go build a franchise brand around it and do that and build capabilities and bulk purchasing power on an ongoing basis for the materials. There's ongoing maintenance to kinda returf and make sure the grass is still enjoyable for young kids and Yeah, it's not you know wearing out quickly. Um And it's another

32:05 pretty affordable business to get into. It's only a hundred and five to one hundred and fifty thousand to get into because you don't have the overhead of a retail store. There's no physical location. You don't need a lot of equipment. And so You can own a business that on average is generating one point three million dollars in annual revenue with profits around two hundred and seventy thousand dollars a year. So again, one location for in this example could replace a lot of high earner incomes, but now you're your own boss, you're an entrepreneur with a playbook and a team behind you.

32:34 versus having to have this completely original Idea. Yeah, to convince you or make make that push for you to leave your corporate job. Why are you um Selling software to this. Why don't you just go buy a bunch of these? That sounds great.

32:47 So I'm trying to do both. That which maybe sounds like a not great I idea, but I've partners on the franchise side that are in my version of Cal. I'm being more capital a capital partner. I have operating partners in the franchises because I can't physically build a software company. And operate fr a franchise portfolio, but the goal is to get to fifty to a hundred unit portfolio just like Cal's doing and

33:10 And yeah, okay, let's just say Hypothetically, let's say you get to fifty to a hundred, what are you telling yourself you're like oh that I'll make five million a year off of that? Yeah, at least and then the the enterprise value. So like Cal with Papa Baggles or Dave's hot chicken, I mean the exit multiple for him will be six to ten X on on Ebata compared to Three to five X if you just owned Cal's chicken shop. Orange theory at its height was trading for twenty one X Ebita. It was

33:36 In insane. I mean it was like a software business multiple on a gym. But because it was a s part of a system, um they had some recurring revenue, they you know, investors and private equity groups rolling them up. treated it like a software business. Sean, have you heard of Papa Bagels? No. They s they were started in this little town that I used to live in, Westport, Connecticut.

33:55 And they have this crazy model where you can only buy twelve bagels at a time. I think you have to pre buy or the some sometimes they're like changing their the rules, but it was like you had to pre buy twelve bagels in advance. And now I live in Manhattan. And Two things. One, they're better than like the normal mom and pop bagels. They are phenomenal. And two Every time you see one, there's a line.

34:17 I the the pop up bagel phenomenon is incredible. I've never seen anything like this. And it I think it's just like a m husband and wife started making bagels like in during Covid times and it kinda turned into this like It could be a m a billion dollar plus uh brand at this point. What's but what's your um Alex, what's like the calculus here both in terms of like emotion, work, and money on starting pop up bagel or starting orange theory? Versus

34:45 Owning a bunch of them as a franchisee. So you're saying starting as you know, like the franchise or like what The husband and wife do with pop up. Sam's saying should I shoot to own forty five of someone else's chain? Or should I shoot to create The franchise and then franchise it to

35:02 A thousand people, right, Sam? Is that is that kind of what you're asking about? Exactly. Yeah, exactly. For example, we had Brian Scudemore on MFM a while ago. Brian started this thing called one eight hunter got junk. It was a horrible bit of business for like I think fourteen years. I think it took him fourteen years to have to a million revenue. And then he was like year five after we decided to franchise It took off and now he's uh one of the uh he he's a he's a multi he's a multi billionaire. And I'm like, that sounds cool. Uh but you're advocating towards the other stuff of uh owning someone else's uh franchises. Yeah, I think it goes back to like the entrepreneur archetype. Like if you're like that builder

35:37 Yeah, creator type or like Yeah, you are the less than probably one or two percent of the population that thinks and has those types of aspirations and doesn't want to have a boss. Like you're likely the kind of tech software entrepreneur or yeah, creator type. But I think ninety nine percent of the population is not like that, but they wanna do something entrepreneurial. They just don't know what, they don't know how. That's why I'm such an advocate is, you know, had I not had that small college entrepreneurial experience, I might not have learned things to go be A successful entrepreneur later on.

36:08 And the more people we can get getting some of these reps in of like, all right, go build a team, go have to find a location, go have to solve these problems real time and have some of the shitty stuff that happens to you as an entrepreneur happen to you. So you learn how to take Yeah, those punches and Yeah, become Uh Yeah, an operator and an entrepreneur. That's why I'm an advocate for it. As me as an individual

36:28 I like the creator like higher risk, higher reward. Let's go try to build this system to a thousand locations and I you know, I started that. The reality is I don't think that's the majority of America or the majority of people. What do you think is the thing to look out for? Who's lying to me? So In any legitimate way of making money. There's always going to be if there is a legitimate way of making money, there's gonna be a bunch of people who come in and dis say and say, You know what?

36:52 Let me ride the back of that legitimate way of making money and I will overpromise, I will under deliver, I will try to, you know, sell a lemon to somebody. And this happens in real estate. This I could tell you, hey, you know, uh Tech investing, startup investing, that sounds great, right? You can invest in the future of entrepreneurs. Well I can tell you the people who are gonna Basically

37:11 I it's not a scam, but it's like Dude, you're gonna lose your money if you do it that way. And I could tell you the people who who do it in a certain way where have a good shot of making money. And there's a clear difference when you're on the inside, you know. You know who's who. Right. And so uh in every industry I think this exists.

37:29 In the franchise world, what are the red flags? Who's lying to me? Who's who out who's out there trying to take advantage of you and what should you look out for that would uh be those sort of signs to run away? Yeah, there are the reason I was kinda smirking is there are so many and it is one of the main drivers behind Franzi is that regulation and I'm not a big proponent or you know over you know fan of of overregulation, but it is the wild west in business brokering and especially in franchising. So there's no licensure to become a franchise broker. You know, like real estate, you have to go get license and you're registered in the state, you have to take coursework, you have to disclose your commissions and fees and how you make money.

38:07 In franchising, it is absolutely insane about what's allowed. So the three of us, boom, we're all franchise brokers in this moment. You're you're done. That's it. Like you don't have to go get registered in a state. You don't have to take a a course or an exam. And then you can go charge a sixty percent commission on the franchise fee. Six zero. And for anyone that's ever done sales, I mean, outside of insurance, does anyone else know a sales commission that's that high and that incentivized? No. I can't think of anything else that's

38:33 that that high of a a commission and so What does that attract? A lot of people who are gonna say what they need to say to get a huge payday. If they close a couple of deals a year, it's two, three, four hundred grand. Some of these brokers are making a million dollars a year. Not having to run anything other than the convincing someone to buy the right business. So was the broker. Yeah. So like I I hope some regulation happens and and pushes it. At least tell people how you make money and how much so that you know because

39:01 half the time they're not telling you and you think as the person receiving their services, this person's smart, they're gonna help me, this is great, it's free for me. And you know, you know they're making some money on the back end, but you don't realize just how much. The bigger issue on top of it is they might only be showing you the fifteen to twenty brands that they have an agreement with. And so there's four thousand brands and you're being shown this universe of fifteen to twenty. having no idea what's happening out in the background. It'd be like buying a house. From a real estate agent that's also the listing agent on the house and then them only showing you the listings that they're also the the listing agent. Are they

39:33 Wh where do they where do they sit in this ecosystem? So are they cold calling people? Where are they running like webinars? Like what What are they doing to even get in the middle of the transactions? How are they generating the transactions? You you guys probably both get a lot of LinkedIn messages and I'm sure you've got a bunch of franchise brokers in your inbox saying, Hey, Sean, have you ever thought about owning a car wash franchise or this? You'd be a great odd entrepreneur or great operator in this business and A lot of LinkedIn outreach, yeah, webinars. Some of them make YouTube channels. Right. Telling you how easy it is. Wait, is it and is this Franzi's uh business model? You get sixty percent?

40:08 No, so I wanted to build friends. I'm trying to disrupt the broker model and democratize it. So hey, instead of the twenty brands that a broker might show you, here's four thousand, here's all of them. Cause we scraped what are called FTDs franchise disclosure documents. It's like what Zilla did with the MLS. So now every brand is out here, the good, the bad, the ugly, which ones have failed, shut down locations, have declining AUVs and revenues. Um and then we charge a flat dollar amount to the brand. So instead of sixty percent, it's about half of that. Um, it's flat across all brands and we disclose that up front to our clients. So think of us as more of a franchise fiduciary. So we're

40:50 Here's how much we make. Here's how it works. We have AI that's matchmaking you with the right brands based on all these unique things about you. And then we just help you. Yeah, find the right fit, get financing, get your entity formed, get the right franchise CPAs, franchise attorneys involved, et cetera. What brands would I have bought fifteen or twenty years ago that just crushed it today? Like what can we look back on and be and and and

41:13 Put together some dots for the or you know, put on map. Yeah. Yeah. Yeah, N nothing Bunt Cakes is still one of the best. unit economic businesses there was. I mean in Rourke Rourke Capital is this also kind of hidden behemoth that owns the majority of brands that most people don't realize. They own Driven brands, which is Minaky, Makeup, Take Five.

41:33 They oire brands, which is Auntie's, Cinnabon. So War Capital, according to Wikipedia, has one point four million employees And thirty seven billion dollars under management. So it's just a huge company that owns tons of franchises. So when I'm on their site and I see Dunkin' like Dunkin' Donuts, what does that mean? They own some locations or they own part of Dunkin'? They are the franchise or so Rourke's playbook is Let's Go Buy Up The Franchisors and now they have that six percent royalty stream into perpetuity across all of these brands. So they have Splash Swim School, they got Jimmy Johns, Dunkin' Donut, Sean. Are you gonna let are you gonna let these guys come after the Battle mob?

42:12 Everything you worked for. They're coming out No, everybody needs exit liquidity and this is ours. You guys love Indians. Okay, so uh uh what what which other uh businesses were cool ten or fifteen year ago? Nothing but cakes. I've never heard of that. That was hilarious. Yeah, needs to be. You gotta try it. It is really good. And again, the the economics are low food costs, very good AUVs. I think it's three three million or so. The box is small and simple. There's one near me. Yes. Selling these cakes?

42:53 Selling cakes. I'm telling you, it's very disgusting. What the hell is that? Yeah, I don't even know what a butt cake is. This looks horrible. It looks disgusting. Don't knock until you try it, I'm telling you. Did they just change the name from Bunt Cake to something else? I would be so in. Today's episode is brought to you by HubSpot. Did you know that most businesses only use 20% of their data? That's like reading a book, but then tearing out four fifths of the pages. Point is you miss a lot. And unless you're using HubSpot, the customer platform that gives you access to the data you need to grow your business. The insights that are trapped in emails, call logs, transcripts, all that unstructured data makes all the difference because when you know more, you grow more. And so if you want to read the whole book instead of just reading part of it, visit hubspot.com.

43:37 Okay, but nothing. Bun cakes. That one was a winner. What else was a winner? A lot of home services like Benjamin Franklin Plumbing, Mr. Smart uh Mr. Sparky, your electrician. You could just use Benjamin Franklin's name? Apparently. You guys talked about one eight hundred, uh

44:03 Yeah, junk as well and then um Omar Solomon from uh College Hunks Moving Junk, they did really well. Same thing as one very similar to one hundred junk. Obviously hotels, Marriott, Hilton have done incredibly well. We had um this guy named John Morgan, he's a billionaire. He um is um a Morgan and Morgan law firm. He kinda like

44:24 you know, he's a billionaire and so he owns just crazy amounts of stuff and he's got all these stories and like Two or three times he said, I don't know if you remember this, Sean, he was like, Yeah, we own some Marriott hotels Like he just like made these comments that were s fairly offhanded, but y it was probably like an eight or nine figure like thing. It was like probably a pretty big deal. I'm shocked at how many Like ballers are are in on this. It's pretty amazing.

44:47 They I've found like with the podcast, the ones that have more than fifty units open They don't wanna come share what they've done because they're like this is such a good Good hidden gem. I don't want to talk about how I did this or that it's out there because Again, it is substantial wealth creation. I know a guy that owns When I first met him, he was at Forty Seven McDonald's.

45:06 And he was producing I wanna say it was like thirty five or so million a year in cash flow. He's paid like an NFL quarterback. He told me he's like, I don't remember the last time I stepped foot inside of McDonald's unless it was it was one I was looking at buying, but I haven't eaten here. I haven't worked here. I've got one COO who runs the whole thing for me. I've got two private planes. 'Cause one's not enough, I guess.

45:29 And he just does whatever he wants and has this thing, you know, cash flowing. I talked to him recently, he's up to ninety McDonald's now. And I don't yeah, the math on that's probably close to seventy million or so in cash flow. Yeah, you're you're doing a good job of proving your thesis to be true. What um what's the nothing bunt cake but today? Oh, but it's like the one that's just taking off.

45:51 We mentioned it earlier, but just the you know, the pop up bagel has those cult like following a phenomenal brand. Great revenues, simple business model. Uh is food the best? Most all the best ones you've mentioned is food, but food seems a little bit more fatty. Yeah, exactly. It seems like I would want to own the plumber. type of business or like you know, home services. Or turf or whatever. Th those scene I naturally I would try to go to the unsexy

46:16 Maybe recurring, maybe higher ticket, maybe kinda local monopoly. It's not a fashion choice. It's not a trend. I don't Need to people to keep coming to the gym and stay motivated. I don't need people to to change their their h diet habits, you know. Am I wrong in that? Is that the is that the wrong lens for this stu sort of thing? No, I think you know home services does phenomenally well. Food is tough too. Like if you don't get the right brand and hit the right trend at the right time, like it's very expensive. It's harder to get in and out of.

46:41 But if you find the right one, they're highly profitable. There's A lot more systemization and uh you know tools that the franchisors are providing that peer network. But if you're looking as like, hey, I'm the average everyday kind of average person that wants to get into franchising and still have Yeah, pretty significant upside.

46:58 You're right, home services,'cause you're not building a retail location. You're not constrained by what if I pick the wrong location and now I'm stuck here with this huge investment and I can't move this box. It's million dollar, two million dollar investment. But if I own Benjamin Franklin Plumbing or there's one called Garage Kings that Yeah, I think Damon John from Shark Tank was hyping up at one point, but they go epoxy your garage and like kinda pimp out your garage, the custom shelving and epoxied floors and racking and all this stuff. They'll do one point three, one point four million a year in revenue and very high margin because

47:30 Again, not a lot of variable costs or or fixed costs either. And Here's going around. Pimping out garages and cash flowing half a million dollars a year. Dude, Sean, we have this guy named Tommy Mello coming on. Have you ever Googled Tommy Mello?

47:43 Tommy Mello. Sounds like a gangster. He is gangster. Wait till you talk to him. He's cool. Uh I think he's coming on a couple of weeks. A one garage. I think all they do is garage doors. And he sold uh a half the business, give or take.

47:59 Uh For sure. I it was in the billion dollar plus valuation. And his the garage doors, I think they do something he shares everything. I think it was like two hundred fifty or three hundred million dollars a year in garage door Replacement.

48:13 That that was the thing with garage kings too is like you the average unit volume is one point three million and they're like we're not even doing garage doors or other fixtures yet and that's gonna add another half a million, you know, per territory annually. So it's just these like un unsexy overlooked things that But I do think that a lot of people make a mistake there. So I have a friend named Chris who took over his father's H C uh uh HVAC company and he scaled it from ten million to two hundred million in revenue. And he was he was yeah, it's it's called Hoffman Bros, and it's in St. Louis now, Nashville, and he was telling me he was like You know, all the he was like c making fun of me. He was like, All you tech bros think that it's so cool to get in this business. Like you don't know the half of it what I have to deal with with when you're working with the blue collar H Vat guy. But what he said was he was like, My competitors They're a lot smarter now because it's a lot of the young guys have taken over. But he was like, We give our guys iPads and we teach them like we sh literally have a checklist for them. So when you go to the door, pet the dog

49:06 Uh we ask permission, say, May I come inside here? I got these uh things I'll put on my feet. When you leave, you say something like, Hey, I'll get a fifty dollar bonus if you leave me a Google review here. Like just this checklist of things that a lot of mom and pop businesses they just don't do. And So on one hand I do think that like People like us are like, Yeah, it's just an overlooked thing. Like you're so smart, you went to a good college, just go start a garage tour business when in reality it's way more challenging than that.

49:33 But also at the same time, I do think that there are a lot of like people who don't sweat the details like maybe a m a little bit more of a uh militant operator would. Yeah. No, that's completely fair. But I think Whether it's

49:45 A corporate job, a tech startup, or one of these unsexy blue collar, you kind of base things. There is no shortcut. It is all gonna be hard work. And to you know, for me it's that person that's willing to work hard. They're smart, they're capable. And they have capital, they have access to capital. Like you can go do this. Most people can go figure this out. It's not gonna be this cakewalk and it's you know completely downhill.

50:09 But if you got the work ethic and You're willing to do it. Franchising is a great way that's de risk then what is this? This is this is the this should be the only thing in the MFM merch shop. This giant flag you put up on your wall says We do this not because it is easy, but because we thought it would be easy. The story of uh of my life. All entrepreneurial ventures for me start this way.

50:32 We we get dozens of people that come through they're like What's like a good business I could invest in where I don't really have to do anything, I'm like, not this, so go I don't know, go Maybe buy Bitcoin. I don't know. I'm unique in that I want a lot of money with the least amount of work, but I really don't want to take a lot of risk either. So what do you got for me? Uh Sean, I was thinking of a another I was thinking of another one when we were talking. You're like, what other kind of trends? And I think one that we haven't talked about is you know, seniors, aging population, baby boomers. There is a ton of demand, pent up demand right now for senior care that

51:08 You'd think would be oh, everyone else has this idea, they're gonna go build other facilities and in home care. But we'll like every once in a while for market kind of validation, we'll call places up and say, my my grandmother, my mom, et cetera. And like oh we you know, we're we're booked out or we have a list that's eight months long, twelve months long. And this is in most markets. So there is not enough supply for the amount of demand there is. And so there's another one that's been around for a while. It's called Homewatch Caregivers.

51:32 Total investment, hundred and twenty K to one hundred and seventy seven K. Um Two and a half million average yearly revenue. Doing senior care. What about uh funeral homes? Um

51:43 Well, I was asking for a bunch of reasons. One baby boomers, sorry, at that age, but also um Sean has this thing called one chart businesses and a few years ago he showed us the charts of cremation. And it was just like astronomical how many people preferred being cremated now versus twenty years ago. Of the market. Wow.

52:15 And and you said that everything or you said that a large percentage of the stuff that we work with that we know about is a franchise are funeral homes. I haven't actually seen I'm sure there is one, but I haven't seen a funeral home franchise. But if you're trying to do your vertical uh play here, there is crime scene cleanup franchises, so you could start there and uh it's called Bio One is one of them. There's a few but I think we talked about that. Yeah, they're uh they're going and cleaning up crime scenes and everything that comes with that.

52:44 Wow, that's incredible. Yeah, there there definitely are um franchises for this in f both funerals and uh cremation. There's also the the pet. It isn't the pet. Uh creation one like a big one now.

52:56 It's everywhere. There's no there's I don't think there's any space where you're like, is there a franchise? Like the answer is pretty much always yes. It's just a question of like this up. How good. Go to aftermath dot com, Alex. Aftermath. Oh God. Do you know this business is doing really well if they bought aftermath dot com. Oh, this is the crime scene.

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54:32 By the way, you said you scrape the data, so they have these disclosures. And the disclosures basically have to say The good and the bad, right? So it's like basically th there's a required set of financial reporting. that these franchises have to do similar to like how public companies have to report their numbers.

54:48 But almost more structured, right? Because you specifically like I I've seen this with MLMs. MLMs also have to Published all of their uh data about how their, you know, whatever their associates are doing. And it's basically you know, you look at this table and it's like well, so ninety eight percent generate less than a thousand dollars.

55:05 And then after that, you know, the rest of the these people do well. And so all the number all the data is very structured because they're legally you know, they're legally required to do that. Is it the same thing with franchises? Like can I go get Very clear pictures. I tried I looked into this one activity place and I was like, Oh, this is great. This is gonna crush. And so I was thinking about buying a franchise for my sister, for my trainer, like you know, a business and a box that they could run. And they were so evasive.

55:30 Uh I shouldn't say evasive, but like It was not easy to just get clear answers to like three questions. You know, what is the range of revenue to expect? What is the range of of of profit to expect? And how many uh how many l of the locations are you know profitable or unprofitable. Like you know, or is the average you know, is it two percent of the locations are unprofitable or or you know Fifty.

55:51 And um you know just general questions like that. It was like well You know, it it'll all be in the packet. And I was like, It's not in the packet, you know, because they're not required to report in certain ways. So I guess what have you found in scraping all this data? Yeah, so every brand is regulated by the FTC, the Federal Trade Commission. They're required to have this two hundred page legal document called an FTD. It's a franchise disclosure document. And it's very structured to your point. But kinda like a public company's

56:18 filings there's little tricks and adjusted EBITDA and you gotta read 30 footnotes to figure out what the hell's going on. Brands are doing the same thing. And so we help people navigate those. We the reason we build Franzy again was Just like Zill, you can go here and see what's this gonna cost. Is there bankruptcy, is there litigation, how many have shut down? I tell people to go look at the item twenty. It's where they show how many units they've sold, how many are open, and how many stores have shut down'cause it's the best way to go see

56:44 Is the system relatively healthy? Are a bunch of people selling? Are they actually opening the units that they've sold or is there a huge delta? Uh it's in a good indicator of do they have their you know, systems and their shit together basically to go sustain this and do this well. Um, and then the best validation is just go talk to other franchisees, people who are actually doing it, who are in it. And what you described is a red flag. If a brand is not willing to share certain things that they're allowed to share, it's a red flag. What's the best practice for contacting? Is it just you cold call and you say, Hey, I'm looking into franchising in a totally different territory? Yeah, I look at it like hiring someone like

57:18 You, you know, you ask them for their references and they're gonna give you like their mom and you know, their best boss they've ever had and like they're gonna say all these great things. But then you should go talk to their bosses or employers that they didn't give you, but they mentioned in the interview. And that's really how you get validation. Same thing here. The brand is gonna serve up their top two performing franchisees, they're gonna say all these great things. And you're gonna feel like I have conviction now. You should go on LinkedIn and find two or three others that they didn't list and just go yeah, call the outreach. People will If you reach out thoughtfully, they will spend twenty to thirty minutes with you telling them Yeah, you're the good, the bad, and the ugly. But let's say you got a twenty minute phone call with them and you got to ask three questions. What are the three questions you would ask one of those other franchisees?

57:57 Yeah, immediately, you know, would you do this again knowing everything you know now? And that should be pretty telling'cause they're either like knee deep in it at that point, like this sucks, I'm spending way more time, I've lost money, this is brutal. Or they're like in the hard part still, they're in the J curve and they're coming out and they're like, I see light, I'm super bullish on this and yeah, I would do this again. Or they're killing it and you know, they love it. So like that question usually you get a lot out of. I then would ask about support and what it's like working with the brand'cause a lot of the reason you're franchising versus going on your own is Is the team actually providing value? Is it six percent worth it? Or would you have been better off doing this on your own?

58:33 And so that's a good indicator of should I franchise this or not, or you'll be a franchisee of this or not. Lastly Yeah, I'd I'd ask how much money you're making. Yeah, how how profitable is this? Yeah, is it what you expected? Is the juice worth the squeeze?'Cause they might be making some money, but it was a lot of investment, it was a lot of time for something that could have produced in the stock market or in real estate or something else. I'm just looking for the pain in their voice, regardless of what they're saying. I'm just trying to detect the the underlying pain that I that I I can sense. Well the the the good thing about doing this val these validation calls is

59:07 Yes, while they have an interest in the brand. you aren't gonna compete directly with them, you aren't gonna add necessarily value to their location and so they have no incentive to protect the brand and lie and be like, Sean, I would do this in a heartbeat all over again because it doesn't actually directly benefit them. So you are gonna get real raw responses most of the time'cause they don't want someone else to go make if it was a mistake, the mistake that they made. They've you know they want to help you out. They're Hopefully not.

59:35 Vindictive people, uh, for the most part. And if they're doing well, they're gonna be happy to share that too. This kinda the the franchise industry seems kind of cool to us as content people because We have these guys that are kind of these cowboys. They're like these Midwestern or Southern guys who are really wealthy and you know, it's like that meme of like when you get on an airplane, if you see a guy with like baggy blue jeans and loafers and like a fat Rolex that he's like reading like You know, like uh Prospects reports just like via on paper. You know what I'm saying?

1:00:06 Uh do you meet a a lot of people like that?'Cause that seems like it seems like there's like a lot of really cool stories here. There are so many. And that's part of what we're doing with our show is like how do we highlight these? And I gotta try to just get them comfortable to even tell because it's such a they've got such a good thing going. They don't wanna mess it up and Yeah, attract more private equity than is already flooding the franchise model, you know, today and is only growing. But yeah, there is a lot of Stories like Cal's where five years ago they weren't doing this and now they've got a business doing a couple hundred million a year in revenue. Um and that's where my I flipped. I used to be again franchise model hater and I should just go do this myself and everyone should just go do it themselves. You can extract six percent. And yeah, then you you realize how many corners, not that you're cutting, but just how much value is created in that system and bulk purchasing power, branding, et cetera.

1:00:57 Um I've become a you know a believer for the right person and the right brand. I mean, there's a lot of ifs still and things you need to check off and make sure it's the right fit, but Um Yeah, there's a lot of these cowboys uh out here that Are kind of unassuming and running massive businesses.

1:01:14 One of my favorite franchisers was the dad in the movie The Blind Side. Do you remember that, Sean? The joke in the movie was Tim McGraw's character and it was based on a real character and he ended up selling this for nine figures, but he was like, you know The kid with dat brag, he goes, My dad owns fifty taco bells. I was gonna say it was like Jack in the Box or Taco Bell. I think it was Taco Bell and Domino's Pizza or Pizza Hut. Are they the same, like Yum Brands? Yeah, Yum Brands, KFC. Oh, it was Pizza H Pizza Hud, Taco Bell and the KFC. Yeah, like bragged about it and I thought that like in my head that has been what the franchiser is basically a um Uh a franchisee is um an X. high school quarterback.

1:01:55 Who married the high school sweetheart and is a good guy with kids and he owns about, you know, ten KFCs and three taco bells. And he brings it to school, uh, for his kids to make up the class like him. You should you guys should get if you if you can get him on is uh I think his name's Greg Flynn, but it's the Flynn group. They own thousands of franchise locations and their system their bit and this is like a family run business. They're

1:02:21 And don't hold me exactly to these numbers, but they a report came out uh uh in the last couple of months. The Flynn group did I think it was six point three billion in revenue last year. Owning franchise, like they're franchisees. And so that was more revenue than KFC dominoes uh

1:02:41 Popeyes, like huge brands, this group of franchisees is doing more revenue than the whole parent, the whole franchise or of you know very well known, very large, large brands. Their home page. When you go to the West. The ho the hero banner is just onion rings falling from the sky. Who doesn't want that? Who doesn't want onion rings falling from the sky? Now that I think about it, there are so many more ballers than I thought. Sean, do you remember Lorenzo Fatita, the guy who is the founder and CEO of um The UFC. Well, he came from a wealthy family, so they've been ballers for forever.

1:03:15 But before he was the CEO or um founder of the UFC He was the CEO of Gordon Birsch, if you remember those guys. It's a Brewery it's a franchise, I believe. But it's a brewery and bar is all it is. I thought they were like

1:03:29 Hotels in Vegas. They were. They the the mom and dad the the family was rooted in that. And then also for some reason he he uh In nineteen ninety five he bought controlling interest in the Gordon Beers brewing company and I think they had franchises. H here's an interesting one I saw the other day. It was there are more millionaires generated from franchising than All combined players ever In the NFL.

1:03:53 Dude, you uh you made this bold claim and I wanted to fight you about it. Now I'm on I'm totally on your team. My first mentor in college, we when I was in college, we entered a business plan competition and we were trying to win and they they assigned you a mentor. So the first team They got matched with this guy who was like a biotech entrepreneur sold his company for like four billion dollars.

1:04:14 Uh the second team that got up, they got matched with uh the guy from Mint.com, Aaron Pet whatever his name is. And and you know, so he's a tech entrepreneur. You know, hundreds of millions of dollars. And they were like, You guys are gonna be with Michael. And we were like, Who's Michael? And they're like Michael owns. The number one and I'm like, What is it gonna be? He's like

1:04:35 Largest chain of Applebees in North Carolina. And I was like, um Womp Womp. And so I was expecting I was like, Michael pulled up at a Rolls Royce. We pulled Exactly. We go outside. Michael's got the best car. Michael's the got the freest schedule. He's like, Oh, meet whenever you guys want to meet. This guy owned, I think, like thirteen or thirty Applebee's or something like that. And I know exactly who you're talking about. I'm in Charlotte. That's Michael. I didn't even know his last name. Yeah, yeah, that's right. Yeah. He was such a good guy, and he had like such a um His story was so cool and it was kind of inspiring because Up till then my frame of like, Well, if you want to make it as a entrepreneur, like you need genius invention. And Here was this guy who was clearly living this wonderful life, who was super successful.

1:05:19 And what was his genius invention? Nothing like he basically was just like I will take Like what to me was the most boring food franchise you could literally Applebee's would have been like if I was coming up with the joke, that's what I would have said. And I just noticed on this Flim group there it's a on their timeline. It says nineteen ninety-nine, our journey begins with eight Applebees, and now they have five thousand plus units or whatever, they have like you know thousands of units. Um, and they're like expanding into New Zealand as territories'cause they're just like, you know, dominating the whole globe.

1:05:47 And I just remember th like kind of that guy broke my frame because he really had like built this wonderful life without doing what felt like, you know, pulling a rabbit out of a hat. Or catching lightning at a bottle and coming up with the new invention, the new product that just say, you know, like Sets the world ablaze. And you know, there's'cause there's so many different ways to win. It just kinda depends what you're what you're suited for. You know, he was a great executor, he was a great manager, and he was

1:06:09 Great at building up and developing people so that they could run the locations. And that's what he needed to be great at. So it's not like it was so easy, he didn't do anything, but he was great at those things rather than coming up with, you know, the game changing concept. Sam, you asked me earlier, like why why don't you just go open a hundred of these and why are you building a tech company? And what Sean just said. Yeah, is is the tempting part of it. It's like all these tech entrepreneurs I meet, I think they they sound smarter, they sound more sophisticated than the multi net franchisee people I meet. They're working

1:06:39 Way harder. But maybe maybe we got it all wrong because ninety percent of them go to fail. And they're wasting all this like hard work and talent and brain time on this thing that has such a small chance of outsize success. And then I'm meeting the Wild Bus Cowboys on the plane and they're like Yeah, I just followed the playbook. Not again, not to make it sound like it was all a cakewalk, but like, yeah, I just followed the playbook. I am good at finding real estate and making deals with the landlords and

1:07:02 Started with one and now I got fifty and I'm make twenty million a year and I don't really know. Yeah, but look, the the the grass is always greener on the other side. Like as someone who worked in fast food and worked one of these jobs. You don't want to you didn't want to hang out with me. Like you know what I mean? Like you you would not have wanted to like manage to me when I was a kid. And so like there's The grass is always greener. It sounds dope. My brother in law owns a moving company and I hear the numbers and I'm like, that's awesome. He's like, dude, I had to fire a guy the other day because he was doing heroin. Yeah. Like on the job. Like so like, you know, it's cons. But I tell you what, there seems like a lot of pros right now. Where do you uh where do you live?

1:07:41 I'm Charlotte, North Carolina. Are you building the company there or remote? Yeah, building it in Charlotte. We have no we have you know team members uh in South America, Philly, but the majority of us are here in in Charlotte. How much did you raise? We raised three and a half million uh in our seed round to go and we launched January of this year. We're up to thirty five thousand unique visitors a month coming to the site and

1:08:04 Starting to build out a a second product with it. Our goal is to basically Salesforce, but for the franchise models. We help you buy a business, we help you operate your suite of franchises or your portfolio franchises. And then we help you sell those back on our What's your revenue range now? Have you crossed any figures? Uh, not yet. No, we're we're less than eleven months in. Um

1:08:25 So we'll do seven figures this this first year, which for a startup in the first year were We're happy with. Sorry, I thought you s said you'd start a while back. I didn't mean to be like Uh this is pretty cool. I um I didn't know what we were getting into when we got into this. I thought A you were just gonna like pitch your company and in which case

1:08:49 That was it gonna be great and you didn't do any of that? And B, I was like franchises, I don't wanna hear about this. And it turns out It was actually one of my favorite episodes. Like This is uh the type of people you get to hang out with and the stories you get to hear and um frankly you, the type of personality you have. That's the these are some of the stories that Sean and I like uncovering. Um maybe people that aren't in the SF New York scene, which Sean and I both are in. And so it's really fun to like hear your perspective on stuff. It's it's pretty cool. Thank you. No, that that goes a a long way. I know you guys see a ton of business models and people and Um, I felt the same way and sometimes I still even feel a little crazy about what we're doing. It's like is this something that can really help people? And you know, I want them to have the same entrepreneurial experience I had. They just might not

1:09:33 want to do a tech company from scratch. Like how do I show people and educate people that this is a path if you want to walk down it? Again, I I know I use I'll probably overuse analogies, but when you think of like the financial housing crisis, like people are who's to blame? Is it the banks? Is it the administration? And I think Using that as an example, banks start originating a ton of mortgages because Fannie Mae and Freddy Mac said, Well, take the risk off your balance sheet. And so w of course the bank's gonna go originate a ton of mortgages and was it unethical? Yes, but their incentive got taken away. And I look at franchise brokers the same way. It's like It's not real is it their fault? I don't know. Like no one's regulating them. They're Yeah, everyone else is doing it and so there's no cap on it. So they're gonna go sell businesses and make sixty percent. But

1:10:12 My thoughts let capitalism do what it's good at and level the playing field and democratize things and and hopefully Yeah, that's what we're able to do here at at Franzi. Well sick, dude. Great stories. Um you're a great guy, you got a great goatee. Great podcast. This is it. That's the pod.

1:10:34 be what I want to I put my all in it like a day song on the road, less travel, never looking back. All right, everyone, if you're listening to MFM, you probably want to make more money. Well, I want to tell you about a podcast you might want to check out. It's called The Sales Evangelist, and it's hosted by Donald Kelly. Each week, Donald interviews the world's best sales experts who share their strategies to succeed in sales. They share actionable insights and stories that will encourage, challenge, and motivate you to hustle your way to the top. If you're someone looking to raise your income level, check out the sales evangelist. You can find it wherever you get your podcasts.

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