Inside a Senior Care Franchise Doing $21M in Revenue

0:00Acquisitions Anonymous Hosts:Acquisitions Anonymous, Internet's number one podcast about buying and selling of small businesses. Today, we had a special guest who I will let introduce themselves in a moment. But they brought a pretty cool deal, which was something we've never done before. And I think you'll be fascinated by where Heather and myself and our guest Alex ended up when we dug into it. Yeah, it's totally new and surprisingly positive. Yeah, yay me. All right, here's the episode. We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. I'm thumbs downing on just the plus inventory alone.

0:38Acquisitions Anonymous Hosts: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. Fransy 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.

1:10Acquisitions Anonymous Hosts: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. All right. Good morning, everybody. Heather, I have a special surprise for you today. Uh-oh. I'm scared. Well, we have a guest. Oh, okay. Now I'm not scared. Yeah, Alex is here from Franzi. So Alex, maybe get started. Like, introduce yourself. And then you're the best guest ever because you also brought a deal.

1:46Acquisitions Anonymous Hosts:But let's start with you telling us about yourself. Yeah, let's do it. Well, thank you both for having me on. My name is Alex. I'm a serial entrepreneur, originally from Minnesota, but based here in Charlotte, North Carolina now. Background's been in tech companies ranging from laundry delivery. So the Uber for X category when that was popular, scaled that up to about$100 million valuation, $18 million in annual revenue, raised$33 million in venture and eventually hired a CEO and started my next thing, which is Franzi, which is a Zillow-like platform to help people buy and sell franchise businesses.

2:22So as we started franchising our laundromats in the previous one, I saw business brokers taking 60 % commissions and not a ton of access to good data on franchise opportunities and thought we should change that and democratize access and allow people a fair shake at becoming an entrepreneur. So we've got 4 ,000 brands on the platform and have had an awesome experience helping people become business owners and entrepreneurs the last couple of years.

2:50Acquisitions Anonymous Hosts:Yeah, right on. so how much you know zillow went into e-buying at one point like they were actually all the way into the transactions so where do you guys kind of sit in that spectrum of oh we're a listing site like biz buy sell or all the way deep to like we're actually going to be an intermediary or actually take ownership of stuff like where do you guys kind of draw the line so today we take individuals all the way through to a closed deal so we help with lending you know we we generate 100 to 200 basis points on loan originations. We help with entity creation. We help with diligence. So you get a dedicated franchise advisor.

3:27We are paid a success fee similar to a broker, but it's a flat dollar amount. That's about half of what a broker takes. So more money into the brand's pocket means more money invested into their system, sales, training, marketing, et cetera. Plus the flat fee allows us to remain entirely objective. Our goal is what's the right fit for Heather or for Michael? and that's where the line stops. We might eventually start funding and backing individuals eventually and owning locations ourselves. But for today, it's go at your own pace. Some people come, they see all the data and they actually go all the way through and do the deal on their own without any human in the loop support from us.

4:04Others, they want to talk every other day and they need a lot more handholding and support. Yeah, superb.

4:11Acquisitions Anonymous Hosts:Well, so you brought a deal. So maybe what's the story of how this deal came to you? Yeah, so I mean, from the point of view that we have, and I own a couple franchises myself, some in the food space, some in golf simulators. And there's other categories I'm also very interested in from the vantage point that we get. We look at 4 ,000 plus franchise brands, we have the whole universe of them. And so I'm constantly looking at different macro trends. And one thing that I really like right now is senior care. There's constantly demand for it, but not enough supply. We'll do secret shopping in different markets and call as though we're looking for care for a loved one.

4:47And the same story happens every time. We've got a six-month wait list where we're full or we don't have the ability to do in-home care for your loved one. And so I brought a senior care deal here that's in-home senior care. It's a brand called Comfort Keepers. It's non-medical, so you don't need skilled staff. The startup cost, because there's no retail overhead, is pretty low. it's$100 ,000 to about$160 ,000 to get started. That's mostly working capital. But the revenue upsides well over a million into the seven figures with the highest revenue generating store doing$21 million in sales a year.

5:27Wow.

5:28Acquisitions Anonymous Hosts:Okay. So it is... Have you run across anything, business like this, Heather? Oh, yes. In fact, even this exact franchise brand, absolutely. We see a lot of buyers in the ETA space interested in home health care. This is a hot one for sure. Yeah, so the core of how the business works, and Heather, correct me if I'm wrong here, is you have a local territory, right? And you recruit home health care folks. So it's kind of like a staffing agency for home health care. You're selling to consumers and people with aging parents and stuff like that. Is that the core business? That is exactly right. It's very much a staffing type of business.

6:13But of course, you have to have marketing and you have to get the clients in the door as well. But yeah, I think the staffing side is always what we see is always the more challenging part of it for the business owner as well. Being able to get enough staff to grow and just keeping the staff that they've got on there. 100%.

6:34Acquisitions Anonymous Hosts:So this is a franchise disclosure document from Michigan. Is that right, Spike? Correct. Yep. So for people who don't know, maybe start with what a franchise disclosure document is because this doesn't look like a normal listing. This looks like a legal document. Yep, yeah. So in franchising, every franchise is regulated by the FTC, the Federal Trade Commission. And if you're going to franchise a business, you need to produce what's called an FTD, a franchise disclosure document. and it is this 200 plus page document that's somewhat intimidating and has a lot of legal jargon and that's part of the reason why again we built Franzio is to let's strip out the parts that actually matter initial investment, what are the fees and ongoing royalties what's the potential revenue in AUVs how has performance been as far as stores or territories opening, shuttering is the brand growing and then is there any ongoing litigation, bankruptcy, etc.

7:28So all of that information is in an FDD to cut through some of that 200 page noise. I really encourage people to look at three different, they're called items, is how they break the sections out. And so I encourage people to look at the item seven, that's where it's your total investment cost, how much working capital even do you need for the first three months is the minimum requirement you have to disclose. Some will show five, six, seven months plus, but it shows your working capital requirement, what it's going to cost to do the build out if it's a retail business, what point of sale and technology costs you're and have all of the all-in soup to nuts, what is this going to cost you to get into?

8:05And then the item 20 is the number of territories or locations that have opened, shut down over a time period. So you can see is the system growing, which is usually a good indicator of the health of the system if they've had a lot of units shut down or stay stagnant or transfer. It's kind of a hidden thing I look for. If there's a lot of transfers, that might be the brand trying to hide, essentially that they didn't have locations shut down, so they don't have to mark it down as a closure because they had a franchisee sell it to someone else and it's not counted as a closure at that point. And then the last item I encourage people to look at is the item 19.

8:40That's where there's audited financials. But again, there's some flags to look out for here. Similar to a company's public filings, they get clever with the metrics and they have footnotes and they have adjusted EBITDA and there's a little bit of finessing that some companies will do to try to make their performance look better than it is. But the item 19 is where there are audited financials and numbers that you can look at to get a sense for the unit economics of the business and the individual territories or units.

9:12Acquisitions Anonymous Hosts:So these guys have been around for a while. So I pulled up table 19 or section 19, which you talked about the revenue per location and stuff like that. So they have locations that have been around for 85 months or more. That's seven years. There's 532. So the vast majority of franchisees are seven years old or older because they only have 600 total as of 2024. And somebody's doing 21 million in home staffing. Wow, that's crazy. On the other end of that spectrum, like some are doing, you can see 8 ,000 or 25 ,000 aren't doing as well. But what I've noticed in talking to franchisees is a lot of it comes down to who the operator is, how much are they putting into it, and did they get a good territory, and have they bolted on second, third, fourth, fifth territories and are really empire building versus income replacing.

10:08Acquisitions Anonymous Hosts:so it looks like as the franchises age the ones that are relatively new, less than two years old they have two of them and their average revenue is $200 ,000, the ones that are closer to three years in age is$500 ,000 then they have this cohort that's actually lower in average, there's five of those that are between three and four years old, they're $364 ,000 but it mostly looks like people are growing and some of the higher end ones end up at$2 or$3 million in revenue A question for Alex on this table. Would the franchise, if a franchisee sold their going concern franchise to somebody new, would they start the age all over again?

10:49Would they say that's a new one or would they count it from whenever that territory started? So there's no hard and fast rule. And this is where I think, you know, as you're doing diligence on a brand, asking the franchise or that type of question, because the document doesn't require, you know, for them to have a hard and fast rule on how to treat that. I'm actually not entirely sure in Comfort Keeper's case, but let me see if I can't find in the FTD if they mention it. The reason I ask is in the SBA, the agency itself, they will, at the time of a business sale, they count the business as new in their data set at the time of a transfer of ownership, which is small nuance, but it would be interesting to know.

11:37It matters for sure. Let me see if I can't find it in the item 19. okay so typically the unit does not reset to year one in the item 19 it continues on from the age it was um at the year it was purchased interesting so how can i tell how many failed it didn't work out um yep so that would be the item item 20 item 20 and that's one of the other ones you mentioned right that people should look at all right let's go down to item 20 by the way i'm

12:14Acquisitions Anonymous Hosts:using if you're on this thing on audio the reason it takes me a while to pull this up is this document's like 250 pages long it's crazy and that's the issue again with with franchising that i have is it's like who you know who's gonna actively look through dozens and dozens of these and know what to look for and and what to search and that was the issue i had i think franchising is a great vehicle to wealth creation, but the way it's structured today, the access to data support is just not as clear or as aligned as it should be. Maybe let's walk through this. So this is item 20, outlets and franchisee information.

12:49Acquisitions Anonymous Hosts:So what do we have here, Alex? It's the outlet type and company-owned and changes of those? Correct, yeah. If there's any transfers, if there's any closures, any sell-offs, and this is the 2025 FDD so they've got a net new 41 units year over year last year 86 % have been operating 7 plus years so you mean this signals it's a very mature system closures exist you can see here that they owned under an affiliate, which is an associated company, about 20 % of the units, maybe 15 % of the units. They owned 100 of them in 2023. And it looks like they've been selling off their company-owned franchises to franchisees and going just pure play franchise.

13:42Acquisitions Anonymous Hosts:What would cause that to happen? It could be ownership wants. I've heard there's an individual in Charlotte, his name's Jeff Dudin. He started AdvantaClean, which was like a home restoration, a restoration franchise that did really well. He was on Undercover Boss and had a nine-figure exit, etc. But he, at one point, decided to go all franchising because he started having a young family. And he was like, I was on the road all the time and to manage these locations corporately, it was just more than I wanted to do. And so he decided to franchise some of those units out. One, to prove in the franchise model, but two, change his lifestyle.

14:14So sometimes that's a signal that the owners and the original group decided, we want this to be more scalable and we want to collect royalties at the parent. but from an operating perspective, we want to de-risk it a little bit and put some of that labor risk onto the franchisees and the franchise system in exchange for them recouping the majority of the owner profit, EBITDA, etc. For other systems, though, there's another side of that coin. The rule of thumb in franchising is corporate should develop anywhere from 10 % to 25 % of the units as they scale. The reason being, if you think about a franchise system, a lot of the time is If you do it all on your own and you do it over time and self-funded, it would take 40, 50 plus years to really get to a national scale with all those brick and mortar locations.

15:02And, you know, it's just the speed is not there. It's much harder to get there. But they maintain 10 to 20-ish, 25 % ownership because inevitably you sell out the whole country. And so where do you grow from there? If this is an empire building, your private equity backed or your more ambitious group, they then start buying the system back because the economics at the unit are much better than just the pure royalty payments you can collect. Look at the Flynn Group, for example. They're the largest franchisee in the country. Their business does more revenue than some of the largest franchisor systems, more than Popeyes, more than Domino's.

15:41They're doing billions and billions of dollars in revenue as a franchisee. And so the franchisor, if they want to grow more at that point, they need to start buying stores back. And in some cases in these FTDs, we'll negotiate what that multiple that they buy you back for is on day one, even though that event might not happen for five to 10 years. But they'll negotiate some multiple or some predetermined right of first refusal. I have run into that right of first refusal to buy back before with buyers who someone wanted to sell their franchise, they got a broker, they listed it, buyer came along, got a signed LOI, and then found out during diligence that the franchisor had this right of first refusal and wanted to exercise it.

16:25And the deal was off. Yeah, you have to, I mean, these are the types of questions I think people might not think of initially. And these are the types of questions you have to ask is, you know, we even had this happen with a client with a brand recently. They wanted to buy four or five territories in a market. They went through diligence. They're doing validation, which is another thing that's critical in this process. Talk to other franchisees, other business owners. that's one of the benefits of franchising is you can talk to people who've done exactly what you're about to do versus Heather and Alex's one-off coffee shop.

16:55There's only one of those. You can talk to other coffee operators, but not others that have been in that exact same kind of predicament or situation. And so they were deep in diligence doing validation and they loved the brand. They decided they wanted to do it. And then the brand came back and said, hey, we gave a right of first refusal to another owner and operator in this area and they've decided they want to do it. And the issue there is the brand should have been more forthright about that as to not waste people's time. And those are some of the kind of frustrating things that can kill a deal that there should be more visibility and communication around.

17:32Acquisitions Anonymous Hosts:So, I mean, looking at these charts, it's green flags that, at least so far, we're not seeing a lot of transfers. We're not seeing a lot of outlets close down or get reacquired by the franchise or ceased operations. In general, it looks like the franchisees are pretty healthy and continuing based on just kind of the macro numbers on a state-by-state basis. And then we either like or maybe don't like that the franchisor is selling off their units to franchisees because they had, again, close to 20 % of the units were run by the company. But so far, it looks like people have been pretty successful with this one just based on the numbers over the past 25 years.

18:14yeah I like it because it has and this is what I like about franchising in general it's 6-8 % of our country's GDP quietly a lot of people don't realize that or even think that franchising represents all these different industries it's not just McDonald's and Subway it's hospitality it's health and wellness, it's home services it's childhood education it's senior care and what I like about comfort keepers or senior care in general is from a macro perspective there's 10 ,000 individuals hitting 65 every day right now. The population of folks that want to age in home is like 94 % of that group, but there's not enough demand again.

18:54And so there's this upside potential of you see the 21 million, you're outlier, but there's also this ability to just replace your income if that's what you want. You're sick of working at the bank. You're sick of working at the hospital as a nurse or whatever it may be. And you want something for yourself. There's the ability to do everything in between. I'm going to go replace my 120, 150K salary and do this for myself. Or I'm going to go buy two, three, four territories and start making 500K, 700K, a million dollars a year in profit. If I want to go put in that effort and build a mini empire in my market.

19:29Acquisitions Anonymous Hosts:Yeah. Man, I'm just looking at all these fees as an entrepreneurial bent kind of guy. I'm like, 800 a month for all this stuff. Zip code fees. like uh you know just like oh man like i guess that's the core of it like if i'm entrepreneurial like why do i need to be part of this franchise system um like i understand like you know 1-800 got junk or even popeyes like there's a national brand that people know about like what when you have an off brand or kind of niche brand like this like what am i actually buying when I buy into a system like this? Yeah, so part of it with Comfort Keepers, they do have a national brand.

20:11People are somewhat familiar with SEO, ad presence, etc. is part of it for sure. And to your point, more so in restaurants or brick and mortar, you get that benefit especially the supply chain, menu innovation stuff that happens with retail. For a business like this, I think it's a lot of the technology they've built for scheduling, training, coordinating care with a group of individuals that maybe aren't very tech forward. So they've figured out the nuances of how do you handle that? How do you bring in children or other family members into the process and be able to communicate and expose that both ways?

20:43Your average individual, and it's becoming increasingly easy with AI and vibe coding, but the average individual isn't going to go build their own website and brand and know how to do SEO and figure out scheduling. And so it's that kind of cheat code for the average individual who wants to be entrepreneurial but might not think how Michael does or how Alex does and can operate a business and can manage people and can look at a P &L, but they might not be able to put the whole thing together. And so franchising to me is you're giving up economics 5 % to 9 % of revenue in exchange for a peer group, training, technology, a brand, support throughout that journey.

21:25I run into this issue that I haven't seen before. or there's 600 other franchisees I can call on to say, how do I handle this? And you have all that built in. And I think the data supports that as the chance of success in a franchise over five-year periods, 80%, while an independent business is 50%. So you're de-risking it, but you're giving up economics to do that. Hey everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad. And it is the thing that I wish existed when I started my journey of operating and investing in small businesses.

22:00So CapitalPad is a marketplace for acquisition entrepreneurs, that is people who want to buy a business and need capital, to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is the place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing too from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white.

22:44Basically, CapitalPad professionalizes investing in small businesses and the returns can be really, really good. I'm so stoked they exist. It's founded by my friend, Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out CapitalPad.com and tell them that Acquisitions Anonymous sent you. I think lenders look on it like training wheels entrepreneurship with training wheels and so when you look at a buyer that maybe doesn't have the perfect resume fit for whatever it is they're trying to get into if it's a franchise system the lender will be a little more accepting of that because they've got all that support that you just mentioned Alex whereas if they're trying to buy a business that doesn't have that franchise framework the lender's going to scrutinize it a little bit more so we always kind of look at it like training wheels.

23:41There's a lot of people that want to become entrepreneurs that do need all that support. Yeah, I would say that's the vast majority of the United States. How many friends or family members do you have that you're at Thanksgiving or getting a dinner and a drink and like, I hate my job, but I don't know what to do. Franchising to me is one of those vehicles. Short-term rentals is another one of those vehicles where it's entrepreneurial, but it's not building Uber from scratch or the steel manufacturing company that I'm like, I don't know how to put a deal like that together and raise capital for it, etc.

24:12So it makes, to me, entrepreneurship and small business vastly more accessible than a lot of the other options out there. And to Heather's point, banks underwrite them a little bit differently, a little bit more favorably in some cases. And on the enterprise value, when you go to exit, the multiples are typically one to three turns higher in a franchise system versus an independent business for that exact reason. It's de-risked a little bit. There's the opportunity to scale. Private equity loves it. So as a finance guy, I love the EBITDA multiple expansion as a value for franchise as well. And there's data.