Buying a CEO Networking Club Franchise – $1M Business Breakdown

0:00Hey, Michael here. Welcome to Acquisitions Anonymous, the internet's number one podcast about small business buying, owning, and investing. Today, we broke down a deal that Travis and I found fascinating. And we may have done this deal before on the podcast, but we're almost 500 episodes in. And when Travis started talking about his take on it, I was like, oh, who cares? Let's do it again, because Travis is going to be that good. So I hope you will get as much out of it as I did. And stick around to the end. You can see what we each thought about the deal and whether you should go after it. Here's the episode.

0:30We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. Thumbs down on just the plus inventory line. One of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems, unclear demand, or a single owner who holds all the knowledge. Franchising approaches that problem differently. You are buying into an established brand with documented systems, unit-level data, and repeatable operating playbooks. The hard part is knowing which franchises are actually worth evaluating. That's why Alex Merezniak, former CEO of 2U Laundry, built Fransy.

1:03Fransy is a free platform that helps acquisition-minded entrepreneurs explore franchise ownership without broker bias. You answer a few questions, and Fransy shows you franchise opportunities that align with your capital, lifestyle, and long-term goals. You also get free coaching from people who have actually built and scaled franchise businesses. If you are exploring ETA and want to understand whether franchising fits your acquisition strategy, visit fransy.com. That's F-R-A-N-Z-Y dot com. And thanks to them for sponsoring today's episode. Travis, good morning to you. Happy Friday. Good morning to you.

1:33Great to be here, Gerds. Yeah, so what's new? You and I were together earlier this week, and then I was like, come on back so we can do a second one. You miss me. I get it. I'm charming.

1:49Oh, was there anything new? No, no. If you're not watching, I grimaced after I said that. Radio's like, ah, this guy's a dick. It's totally fine. It's totally fine. Well, it's just going to be you and me today unless Mill stumbles in. He had something going on on a roof somewhere. Heather is at an ETA conference, and Bill is at some sort of conference as well today. So you and I are the two with nothing better to do. Ah, fair, fair. It's totally fine. Actually, as soon as I get off this call, I have so many hours worth of rush work to do. I'm behind today. But I came to you anyway. I missed you.

2:32Perfect. Well, thanks for being here. Let's do this deal I brought. This may be a deal we've done before, but when I kind of mentioned it to you in the pre-show, you were so funny when you started to talk about it that I was like, oh, who cares? Let's do it again. So it's on Biz by Sell, and it is, I have it up on the screen for you guys watching. It is a deal called CEO Life, and it's an exclusive club for leaders, in Los Angeles. And the photo appears to be a bunch of people, first of all, in some rich person's house. And if I could just go on a rant here, Travis, after coming back from Japan, it drives me crazy that all these people are wearing their outside shoes in this house, this person's house.

3:18My wife and I are the type of people that when we host a party, we make everybody take off their shoes. Because shoes are filthy. Supposedly I was just informed that this is a white person thing in the U.S. and people make fun of us worldwide for it, including non-white people in the U.S. They're like, guys, this is what I've been told, what I was told recently. For wearing shoes in your house. Yes. Yes. Yeah. We stayed like in Japan for spring break. So I took the kids to Japan for spring break and, you know, it's a once-in-a-lifetime thing. So, such a good thing to do with the kids. And we stayed in an Airbnb, not in a very nice neighborhood, just totally decent, but they had the whole slipper thing like the Japanese do.

3:59Don't wear your shoes in the house. And the floors were spotless. Just like a total, total pleasure. Like you walk around your bare feet and it doesn't feel like you're walking around an American house where there's like crap everywhere on the floor. It was just delightful. And it just reminded me of how important the shoe thing is. So I miss, I lived in Asia for 10 years and I miss it dearly. And that part is wonderful. What I do now, I actually like wearing shoes in the house. So I I just have house shoes. Like, they're sneakers. I just wear them at the moment I get in the house and walk around with that.

4:30That's great. Yeah, that's like, yeah, it's perfect. So, anyway, now I have to do this deal. Business. So, these people are wearing shoes in the house. And it looks like kind of 30, 40, 50-year-old kind of professionals having drinks inside of a house with bad lighting. and like it's the type of house that like a person who wants to show off that they're wealthy buys with like 20-foot ceilings you know uh by the way i have 20 foot ceilings i was like i realized i just uh i realized i just uh basically like side tangent this is this is worthy of this talk here for a long time i've wondered why like rh restoration hardware is that their original name was like why they've crushed it so much and they obviously have and their furniture is very pretty and whatnot but i realized once i got this house that we're in now which has gigantic ceilings like 95 98 of furniture manufacturers make things that don't look proper in high ceiling homes right rh is one of the only ones that does and that's why you can't go to you know most you can't go to like crate and barrel and like buy a couch or buy a cabinet and bring it in the home because it just looks silly with the tall ceilings.

5:45So anyway, that's how they carved out their niche, which of course, you know, the tall ceilings are kind of a class thing. I have tall ceilings because this is the house my wife wanted. Though apparently we, I have learned we are starting to not want this house anymore. That's what I've been informed, mostly because I'm getting random listings sent to me of other houses in the area that are, we're in the downsize phase of life, where we're just tired of taking care of a pool. So I'll keep you posted. All right, so back to this deal. So it's an exclusive club for leaders of Los Angeles. A million dollar asking price is what they want.

6:18They do not say what cash flow is, but they claim that EBITDA is$576 ,000 and it does$1.4 million in revenue. It was established in 2023. So it is selling at a little over two times EBITDA. I don't understand why they're saying EBITDA for a business like this. It's super low capex. So anyway, I guess we'll figure that out. So same thing? I guess so. I don't know. Sometimes I wonder. Okay, so this is a high margin recurring revenue global scalability. It's a high-end business networking club with an established chapter for sale. This year, opportunity to step into ownership of an established chapter of CEO Life, a premier business networking, education, social, and philanthropic club designed exclusively for CEOs, entrepreneurs, business owners, and C-suite executives.

7:10This chapter is part of a nationwide model with thriving locations across the U.S. and additional markets continue to open. Each chapter follows a streamlined high-margin system requiring only about five employees slash contractors and just a few hours of the owner's time each week. with a recurring revenue model and national brand backing. This is not just another business. It is a lifestyle business with global scalability. CEO life is structured to help each chapter partner grow towards$10 million in revenue with only$1.5 million in costs projected over 5 to 10 years. Supported by corporate marketing and executive leadership team, the heavy lifting of branding, global trips, and virtual events is handled centrally, allowing you to focus locally.

7:51The event and member experience includes one extraordinary in-person event per month hosted in your chapter city, two corporate hosted virtual events monthly, two international global trips annually with all the chapters. CEO life stands behind his chapters. If you decide this isn't the right fit, we'll buy the chapter back at full purchase price. By acquiring this chapter, you're not only buying into a proven business, you're joining a national movement, uniting top leaders, creating lifelong relationships and making a difference in communities worldwide. And then they have some videos.

8:24So, yeah. So do you have an idea of, Travis, how would you describe what this business does or what this thing is? There's a lot of interesting stuff here. It's just a club, right? It's a decentralized club. Instead of having a clubhouse, you just kind of go from place to place. Is that basically it? You're buying community, buying people to hang out with who are supposed to be similar to you, which is a thing. It's hard. To me, I think this is like a YPO version of those things. There's dozens of these type things that it's like a CEO peer group is what I think. But some of them expand beyond just business and they also do a lot of social and they get together and do philanthropy together.

9:10I'm in Vistage and we're just all about business. They're very little social. Um, but other ones are different. EO is another one that people, I think this is just, is, is it, it smells like just a knockoff of that? Basically, which I think the right ones provide an immense amount of value to people. Um, it was very interesting. It was a franchise. That was the thing that I didn't expect. I thought this was like, you're, you're buying the actual group, but it's a franchise. And that last, what was it? if you decide this isn't right they will buy it back for you at full purchase price like what is this how does this work yeah this is the only one of these that i've seen that requires you to put up cash to buy the territory um vistage and those guys most people enter it by starting up groups from scratch um and then there's a few of them i think like hampton is fully centralized.

10:10They run all of their groups. There's no partnership with the people facilitating the groups. They're self-facilitated. They're totally centralized. But this is the only one I know where they're like, hey, buy into this scheme. And I use the scheme, word scheme, liberally. This is an interesting one because in theory, it can be a great business. I feel like you're having to possibly lean on the franchisor. Is that how you say it? But yeah, a little much here. Where with something like Hampton or your group, it's kind of more based on the founder themselves, I would imagine. Well, for Vistage, the way they do it is their individual local chairs, they call them, who run their own little mini business under license from Vistage.

10:59So they do a revenue share as 1099s with Vistage and they have a non-compete and all this kind of stuff. But they are basically mini entrepreneurs running their own little book of business. And that's for the category of kind of chair-driven or like, you know, facilitated groups. I think YPO is that way. Tab is that way. And YPO may or may not have facilitators. I'm not sure. But then there's other groups like EO and Hampton that I think are totally the members are expected to facilitate them. I've been in those before. I've found them very disappointing where you're self-facilitating. But, you know, I think this appears to be kind of more the model where they expect the person running this local chapter to be in there like recruiting CEOs and coaching them and organizing parties and being best buds with everybody.

11:52That's the read I have. That makes sense. It seems like it'd probably be a really good fit for the right type of person. I am certainly not that type of person. but someone who is either you know post exit and looking for meaning and wants to hang out with like-minded people fine or people wanting to break into that kind of realm themselves you know you're not quite there but you want to be around those people interesting way to do it so I started a club I don't know snowball kind of a community a while back and I was amazed at how difficult it is to really get those things going because you have like the chicken or the egg problem and it's always like you're having enough interesting content there but you don't want to like just force the content from just the founder you want other people to do it too and this is a really difficult thing to like get everybody together at the same time um in theory it's like easy but in practice i felt this was like quite hard to do writing communities is like a whole like what you're talking about is like a whole special set of skills somebody has to love doing i learned it felt like the immense amount of work to me.

13:00Whereas making YouTube videos or making podcasts and doing what we're doing feels like a joy to me. I'm doing this because it's fun. It's super fun. Throwing a cocktail party and calling up a bunch of people and trying to get them there and all the pressure of the event. There are some people who derive so much energy from that. I found it was an enormous suck trying to run a community and think, how am I going to please all these people today? There are people who find joy in that. I do not. I do not. So to your point, I think you got to be the right person to get into this type of business. It's also difficult to know if people are happy because the vast majority of people will be lurkers of some sort.

13:39And some people are just very happy being lurkers, but you wouldn't know it. Like, are they miserable? Do they regret buying it? Like, what's the deal here? We just don't know. And I didn't like that pressure. So we actually, I don't know, a few months ago, we didn't even tell the members yet. I guess we should. We just made it free. We just turned off billing i was like i the the opportunity cost of making this bigger versus my other ventures just isn't there but i just want a place to hang out with friends so let's just make it free and like make it not a thing but we haven't told anybody so maybe we should here we're telling people now it's a questionable sign that nobody's calling you but like hey you haven't billed me yet which is a very an a very american thing to do i guess so so this does say competition is white po vistage and other similar membership clubs.

14:23So they see themselves, I guess, competing directly with that as I scroll down here on the listing. So I guess the big question to me is, what am I buying here? Like, am I buying a book of business already? Like, do they already have a bunch of members and I'm stepping into that? Is that kind of it? Oh, 100%, right? I mean, it's worth nothing otherwise. Yeah. Other than the piece of paper that says this is your territory. That can't be that much. And I'm for sure buying myself a job. Like, there's no way I'm not turning this into my gig. I mean, the description said a couple hours a week and you've got five employees doing it for you.

14:59That's always completely accurate, right? Give me a break. Oh, you don't think so? It's very interesting. The people, you know, so they have these videos here, which are kind of fascinating. They're very well produced. Every picture seems to have alcohol in it. That's the first thing I've noticed about this. This is the first lady, she's on the screen right now, who she definitely has hit the tanning bed and is, every picture has alcohol in it. It's very interesting. So one thing I looked at joining a peer group like this earlier in my career, like 20 years ago, and I went and interviewed with a group.

15:43And you're supposed to get interviewed by the group and they see if they like you, want to bring you in and stuff like that. and um they were like we're gonna meet at a bar and it's like okay like we'll interview you there i was like what time they're like tuesday one o 'clock i was like okay so we met on tuesday at one o 'clock at this bar out in the suburbs and i showed up and the whole group had already been there for like two hours they were all hammered retired ceo life now they're and they were just there and and i was like so is this normal they're like yeah sometimes we'll get together on a tuesday afternoon and hang out and i'm like okay and then i started to talk to them about like what's the group about and what's important to them they're like oh the camaraderie is amazing we spend such amazing time together and then they proceeded to tell me about how at their retreats were the best part and i was like oh cool what's cool about their piece they started showing me photos and they were like basically they had found like this place in rural Texas that just basically look like, like, uh, like Hugh Hefner's grotto at the Playboy mansion.

16:49And I was like, okay. And they're like, here's us partying. And there's like chicks in bikinis. What? And I'm like, what? What is going on here guys? And, uh, they're like, yeah, like, well, a couple of us have gotten divorced, but man, we know how to have a good time. And it was basically like a CEO frat that these guys are great. I know not every peer group is the same, but I was like, look, the last thing I want to be is around a bunch of alcohol with chicks and bikinis when I'm like a married man who loves my wife dearly. And, uh, yeah, so I passed on that one. Even just the optics. You could be the best guy ever.

17:24It doesn't matter. Like one photo, you're done. There's no, there's no, well, it's kind of like, you know, I'll hang out with like young colleagues and stuff on business trips and they're single guys that are like, okay, we're going out to the bars. I'm like, yep, not me. Like, they're like, wow, I was like, okay, there is no upside to any of this. Like, I'm going to be tired tomorrow. I'll be hungover. And best case is, like, somebody gets my phone or gets a phone and takes a picture of me, like, with my arms around, like, a 24-year-old girl. Like, not, you know, it's not because I'm doing anything wrong, but because, like, people hug and stuff.

17:59Like, that's just the way it works. So anyway, like, that's why I just go back to my hotel room. I'm not doing this. So this is the same way I felt about this group that interviewed me. Anyway, business. This is so big to the business. Uh, but yeah, I think that just ties into this whole thing in terms of, um, these can be great businesses. Like, you know, just from a fundamental standpoint, you can actually help people. And you said you're in a peer group or no? No, I found the, well, I have a community, but it's just really like a forum of like close individuals. But, uh, the, the mastermind type thing just didn't really connect with me.

18:35I've been in several of them. I tried out Hampton, like a lot of people love it. It just wasn't for me. so it doesn't fit with my personality yeah I was in Hampton for a couple months nice people great yeah you know and I think I think there's you know one of my one of my board co-CEOs is in there and he loves it you know I think that ties back to kind of the point with all this like it comes down actually who are the people you're spending time with and what are they doing and that's why I brought up this alcohol thing and all these pictures like this CEO life thing looks like a party group that happens to talk about business and yeah there's to me, that's a huge turnoff because I'm not a party guy.

19:13Yeah, I'm with you. But let's look at the more of the macro view of some of these groups and communities. I don't know Hampton's finances, but surely that thing is printing, right? I mean, if you have the distribution of somebody like Sam or somebody like yourself, then these companies could be absolutely amazing. I have no idea how much Sam is in the weeds of this stuff, but he would not have to be. And so, I don't know. I don't know if CEO life is quite going to be the same thing as Hampton. I very much doubt that, but it can still be amazing businesses at the same time. I mean, at the end of the day, like I would just, about the actual listing we're looking at here, what's the stickiness, right?

19:55You're going to have churn rates. The churn rate will determine everything. And how are you getting new customers? What's your customer acquisition strategy? is it dependent on you know the the main corporate company coming in and delivering people to you are you having this ground cheese up yourself there's a lot of questions that i think really determine is this a good deal or is it not yeah hi heather here when i'm not breaking down deals with these guys i'm helping people get the right sba loans for their business acquisitions because when you're buying a business the best financing isn't one size fits all there's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things.

20:35That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q &A session on SBA loans at visocap.net, then click Zoom Sign Up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom Sign Up. So for Vistage, I'm pretty familiar with that model because I've seen people go through their program. They put you through like a two-week virtual training and they basically arm you with, hey, go network and build your first group, right? And for Vistage, the numbers are actually really not very good.

21:13I think it's like 15 % of people that start their program and become a Vistage kind of licensee, which it costs you nothing to start, just time. And you basically, it's like 15 % are running a group at the end of year one. so like it's not it's not good in terms of that kind of stuff and i think it used to be 10 and they're pretty excited about making it 15 the um the the basically what they tell them to do is like just go start networking like hell to try to get your first group together and then ideally you get to kind of the 12 to 15 person critical mass to get the group going and then once the groups get going, they tend to grow via referrals.

21:55Like you'll get three to five referrals kind of a month from friends who run into folks and are interested in referring people to the group. And like my group that I've been in for over 10 years, like that's how it grows. Like we'll lose one or two members, you know, every quarter, maybe one a quarter, let's say, to a quarter. But there's one or, you know, the chair is getting referrals and ideally building up the base of kind of folks who churn out for various reasons. Everything from their business selves to they retire to like they just get busy and life gets in the way. But that tends to be how the growth is happening.

22:29But for Vistage, it's that chair who's hustling. There's very little that comes from the central organization. So what was interesting is I just Googled CEO life pricing. How much does this community cost? You might do the same. You don't see anything about that. All you see are details about the franchise. And what that is telling me is that the franchise is really being pushed here, not the actual underlying membership, right? Like Google will serve up the results that people want to see. You know, you can game it a little bit, but over time, Google will learn and show you that. And so most of the people searching this are probably searching for the franchise opportunities instead of how to be in the actual group.

23:17I don't even see that. It's all businesses for sale or franchise stuff. It may not be this one, but it may have been the other one we did. I think we also Googled some of the reviews, and they were horrible for this thing. It's like, oh, this organization behind it is not kind of what you're looking for and the type of people you want to do business with. I think they have some pretty accusatory, predatory-style reviews from people who had signed up for the franchises. and look based on everything I know it is pretty much impossible for you to build a group like this doing only a few hours of owner's time each week like there's just no way why don't you believe the listing I don't get it it never lies I think if it was something where it's like look this needs to be your full time job but you can make a half million dollars a year like okay cool like I'm with you like that sounds good But this, hey, you can just phone it in and show up to a happy hour once a month and just print checks.

24:21If that was true, why does the national organization need the local franchisee? It doesn't make any sense. They could hire somebody for 20 % the cost to do that job very easily. So that doesn't smell right to me. Yeah, I'm with you. If you look at the economics, though, let's say you get members paying$2 ,000 a month to be part of this, which is not crazy for some of these groups. And by the way, there are some like, I know of one in Austin that is$60 ,000 per year for people to be part of. And it's like an investor club. I think they're called a lifestyle club or whatever. Because there's a whole different other flavor of these for people who are post-economic.

25:03Have you seen any of these? I know that I think the other one you're talking about, that one, I don't know about the others. There's a long angle as well. You know, high net worth. Post-economic, I like that term though. Yeah, this means you don't give a shit about money. Yeah. You got too much to care. Tiger 21 is the most common kind of EO for post-economic people. So it's designed for, you know, you're sitting on$20 million in cash. Like, what are you going to do with it? Yeah, yeah. 60 years old. You sold your business. us. But the economics back to this one, like if you get people paying$2 ,000 a month, right, that's 24 grand a year.

25:44Once you start to have 15 people in a group, like the economics start to add up really nicely because your costs don't grow that much, right? You have some staff and you're not paying for big capex, you're not buying any real estate, you're hosting stuff in people's houses or offices, like it gets really nice really quickly, but you got to kind of reach a tipping point to get there. That palm tree painting, just I can't quit looking at it. Why in this house do they have that? Anyway, but, alright, back to the thing. So, the business itself. There is so much wrong with that palm tree painting. The first is it's way too big for where they put it.

26:19Is this a tanning salon? Like, I would put this in a tanning salon if I owned one. Anyway, but so, if you look at, like, locations for this, I have to imagine Los Angeles to be primo franchise real estate for this. You know, tons of people, tons of money, right? Like you said, the 2 ,000 bucks or 1 ,000 bucks or whatever is way less economically in Los Angeles. But also, from my understanding, as a guy who's never lived there, there are so many people wanting to be in the club in Los Angeles. And here you can buy your way into a club, a club. It's maybe not the club you want to be in, but it's a club and it's got other successful people in it.

27:10Also the perks, it is a filter, right? In a place where everyone wants something to be around other people, you know, kind of like yourself, who there's a much higher likely chance that they are in similar life situations as you. This stuff kind of plays. Yeah. I mean, look, I'm totally sold on the idea of these being good businesses. I think it's very easy for them to veer into the corner of sketchiness or trashiness or predatoriness. Which, the fact you pull up the website for this thing and it's like, okay, who cares about those members? We care about signing more franchisees. That's not a great side to me.

27:50But I'm 100 % behind the utility of things like YPO, Hampton, EO. The online community we started called ScalePout that we sold. Like, these are all things that there's a huge amount of value in peer relationships here. The problem is some of this just doesn't smell right in this particular, this particular listing. Yeah, 100%. I think going above and beyond to be above board with things and play the long game is really what cements these is, especially like the leader, it will flow out from them, right? And if the leader is this franchisor who is really just focused on pushing out memberships, then that kind of deteriorates from the start.