De-Risking the AI Economy with Franchising with Cliff Nonnenmacher

0:01Who's ready to rock today, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, are the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we'll be breaking down de-risking the AI economy with franchising. To drop these vibe bombs, I am brought to Cliff Nottemacher and the EO Fire Studios, franchise expert and serial entrepreneur. Cliff built businesses from Wall Street to Main Street, now helping others find financial freedom through practical, proven franchise guidance. In Fire Nation, we'll talk about the types of franchise models that are best suited to thrive in an AI-driven economy.

0:35We'll talk about de-skilled labor, red flags, and leverage, and oh, so much more. And a big thank you for sponsoring today's episode goes to Cliff and our sponsors. Franocity has helped hundreds of people leave unfulfilling jobs, invest in recession-resilient businesses, and create legacy income for their families through franchising. Visit Franocity.com, that's F-R-A-N-O-C-I-T-Y.com to book a free consultation and start your franchising journey with expert guidance. Cliff, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:13What's up, Fire Nation? I'm so happy to be here. Thank you, John. Listen, I've lived by this my entire life. I have probably 16 answers to this question. One of them is I think that most people overestimate the need for degrees and credentials. Everything's got to be perfect. I believe you could teach yourself almost anything and outlearn anyone if you absolutely lock in. And I do believe wholeheartedly, and I've lived my life by this, success is a byproduct of obsession and independent thinking. Not pedigree, not a degree. And while I was growing up watching all these guys graduate with debt up to their eyeballs, with a college degree that they can't monetize, I feel like I was getting a better education with$1.50 in late fees at the local library.

2:00And I love that line out of Goodwill Hunting. I do. I love that line. Do you like apples? How do you like these apples, right? Well, Fire Nation, you can tell that we are locked in for today's episode because Cliff is on fire. He's going to be bringing the Goodwill Hunting quotes. I'm going to be bringing the heat. We're going to be talking about de-risking the AI economy with what? With franchising. And we have to face the facts, Cliff. AI is simply displacing jobs at an unprecedented rate. How does the franchising community serve as a safety net or even a second act for those who are at risk?

2:38Right on. Yeah. I mean, look, let's level set. Goldman predicts 300 million jobs will be lost globally to AI. McKinsey estimates they adjusted their estimate. 400 to 800 million jobs will be lost by 2030. 30 audience franchise models thrive where AI struggles. AI is brilliant. I love AI. I use it every day. John, you know this. I use AI for nearly everything, but AI excels at automating, predictable digital and repetitive tasks today. That's, but it struggles with that physical service, IE home repair, senior services, physical therapy, human empathy, even though millennials are using AI, you know, as a life coach, It does lack, let's say, that personal connection, and it lacks feet on the street right now.

3:28It doesn't have that localized execution, let's say, office cleaning, like corporate office cleaning or tree trimming, things like that. So I think that franchising operating in these domains that are not that repetitious are resilient to automation. And it's a defensible play long term for people. So I am long franchising as the single greatest hedge against AI, robotics and humanoids. Because what we're about to experience goes way further than just chat GPT or Genesis and logging into a computer and giving it a query. This is big, man. We're talking about humanoids, talking about people standing behind the counter at the Marriott, checking you in, and then a humanoid taking your bags to your room and orienting you with the property.

4:14That's where we're headed. I mean, it is happening. Elon Musk is getting us there faster than anybody else can possibly believe. And listen, we're talking to the right guy right now. Cliff is the founder of Franocity, and it's just a fantastic company that we actually at Entrepreneurs on Fire, have just entered into a fantastic year-long partnership. He's going to be sponsoring the show. He's going to be a repeat guest. So this is your go-to individual, Fire Nation, when it comes to all things franchising. And that's why, Cliff, I want to talk about the types of franchise models that you think are best suited to thrive in this AI-driven economy that both you and I know we're moving towards quickly.

4:53Absolutely. I appreciate that. There are five categories that we focus on at Frenosity. And it does require a bit of an explanation. So just bear with me. The first category we refer to as the feminization of men, and it's not to be sarcastic. It's not to be political. What it means is that we have literally feminized men in America for the last, let's say, two decades. We told them, do not go into the trades. We literally shit all over the trades, told them to go get a degree in gender studies or political sciences. we told them they don't need to know how to use tools, right? So if you look at men right now, sperm count plummeting, it's actually 50 % decrease in the last decade.

5:35Testosterone levels are plummeting. Why am I saying this? Because there are franchises that can backfill all these voids in our society. Just look around, look at your landscape, look what's going on in this country. You can find a brand to fill those voids and solve problems. Number one is feminization in men. It includes ED. It includes testosterone therapy. It also includes any and all businesses that require the use of tools because unfortunately most men can no longer use tools and they have to call someone else to do the job. Second is the silver tsunami. This country is aging, aging rapidly.

6:12You mentioned Elon a minute ago, and I'll quote him. He said that in the next decade in the United States, there will be more adult diapers sold than baby diapers, and that should scare literally everyone. That is a huge statistic. So largest generation ever born were baby boomers, 1946 to 64. They're aging out, and they need help. They need mobility. They need non-emergency medical transportation. They need assisted living. They need nursing homes. They need ramps. I have a guy just doing ramps, doing a million to three million a year, just doing custom modular ramp systems to get people in and out of their home.

6:48Number three, since we're not repopulating, since we're aging, we have humanized pets and animals in America, literally humanized them. They have birthday parties. They have spa treatments. They have their own bakeries, Wolfgang Pucks, right? They have all these. They have clothing now. They have all sorts of things. So since we humanize them, this is$150 billion, with a B, billion-dollar industry. Whether you're training the animal, whether you're grooming the animal, whether you're boarding, daycare, whether you're providing some type of retail services, there is an ungodly amount of money to be made in the humanization of pets and animals.

7:25Number four out of our list of five is the pursuit of youth. Again, because we're aging. Everybody wants to feel youthful. They want to feel beautiful. They want to feel sexy. They want NACs. They want peptides. They want to be able to get their joint movement backs, right? They want to get manis and petties and facials. They want anti-aging. They want biohacking. They want cold plunging and contrast therapy. They want red light therapy. We're not talking about Orange Theory Fitness here. We're going way beyond that. We're talking Atiyah, anti-aging, Huberman. We're talking about the next wave.

8:02And everything I'm saying is not to illustrate trends in this country. There are franchises in every single category that I'm discussing right now. And number five, which I'm very passionate about, is youth enrichment, right? The public schools have failed miserably. They have failed our children. These kids are ranked on the bottom. They can't do basic math. They can't spell. They can't read. We've ruined them. But one of the things that schools have done is they've destroyed music, right? because it uses both sides of your brain, right? They've destroyed, let's say, art. They have destroyed sports.

8:38They have ruined home economics. The average kid goes to college, doesn't know how to crack an egg. So you have youth enrichment, even in the sports category. So you have youth sports. We have STEM, science, technology, engineering, math. We have art, we have music, everything that I just described. So those five categories are AI resilient, they're recession resilient, parents love them, people love them. I bet you have a 10, 20-year runway with this category of five. We really dig deep into this in our book and on our pod and all that stuff. And that's fantastic stuff, Fire Nation. You're going to have to get your hands on this.

9:17Now, there's a term out there, de-skilled labor. Can you explain, Cliff, what that means and specifically how it ties into the AI disruption and, of course, franchise opportunities? I have been using this term for about a decade and people would correct me and say, you mean unskilled, right? I'm like, no, I'm talking about de-skilled labor, right? Where employees will be replaced by future technologies and automation. So just think about a national call center. Let's just take something everyone listening can relate to. A national call center placed anywhere in the world, right? The call center receives a finite number of questions daily.

9:54According to IBM Watson, big data aggregating everything, 60 to 80 % of these questions are repetitive and could be replaced by AI. This is why Goldman and all these guys keep saying, you're going to lose hundreds of millions of jobs. Because think about every national call center. Hi, my modem doesn't work. Done. Answer. Hi, what are your hours? Right? It's just simple. It's all the same stuff coming at them. That's why they've been aggregating this data for so long. And now AI is ready, right? So de-skilled labor is going to give our franchisees an opportunity to eliminate a human employee, right?

10:31Think about that. So just this year alone, 61 ,000 tech workers have already lost their job. John, I'm talking year to date. It's only May, right? So we've lost 61 ,000 tech jobs due to AI. Microsoft was 6 ,000 of those jobs alone. So when you're investing in brands with disco labor, it's going to allow the investor to implement AI, robotics, humanoids, and operational efficiencies, cost reduction, and the beauty margin expansion, which has been annihilated by inflation. Inflation has destroyed margin because a lot of small business owners are afraid to raise their prices and further lose more customers.

11:10But I just want to go further and I'll close the loop on this. I envision 1-800-GOT-JUNK is another brand that everyone probably can nod their head and say, I know what that is. I envision 1-800-GOT-JUNK with one human driver accompanied by a heavy lifting humanoid. I envision a home inspection franchise pulling up in a self-driving cyber truck, two, three optimist humanoids approach the home. They launch a drone, do a home inspection. Their eyes are clear infrared looking for water damage or moisture behind the walls. They run a diagnostic on the HVA system and all electronics. They've notified the homeowner prior to arrival.

11:51The homeowner received a full report with highly rated Google review vendors to fix all their deficiencies in the report. You cannot compete with this. The beauty is the home inspection employee was fired, but the people listening that buy these businesses, we're in the long game. So it's not like we're getting replaced by it. We're the ones that need to go and double down on these businesses that are going to just be mind-blowing, mind-blowing. And the consumer experience is going to be second to none. Cliff, I mean, when you talk about this stuff, I get so fired up because Fire Nation, it is the absolute future.

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15:30ziprecruiter.com slash fire. Again, that's ziprecruiter.com slash fire. Zip Recruiter, the smartest way to hire. Cliff, we're back and I want to talk about red flags. What red flag do you look for when you're evaluating whether somebody, an individual, an entrepreneur is truly a fit for franchising, especially when it comes to this changing economic landscape? Love this. I'll tell you why I love this because I've listened to a lot of episodes. I've listened to a lot of, I have, it's a fantastic show. I, and I hear a lot of people and I listen to other competitors that are in this space that speak about it.

16:05Here's, here's the answer you will hear 99 % of the time, the prospective franchisee must be able to follow a proven system that that would be the answer. I, as much as I agree that that is an answer, I respectfully disagree. That is the answer because there are flags, there are tells to everyone. I can almost tell you, it's almost a gift and a curse to me that I could tell you very quickly whether someone is just good or bad, right? I call it a gift and a curse at the same time because it may prevent me from having longer term relationships with some people because I could see something. I could see and feel something very, very quickly.

16:44I subscribe to this, John, and I think it was brilliant and I've been using it my whole career. Jack Welch came up with a 4E1P principle, and it applies to franchising. Number one is the person needs to have energy, right? Energy. I pride myself on a high degree of energy. Why do I think energy is important? Because it is absolutely unequivocally contagious. People follow passionate people. They follow people that have deep conviction in something, right? Energy sets the tone of an organization. It sets the corporate culture. It accelerates growth because we're high performing, high energy people.

17:23It also attracts top talent. No top talent wants to work for a schlub, a low energy, I hide in a cubicle. Nobody, right? High intensity, high energy comes with laser focus too. That's number one is energy. Number two is energize. Just because you're high energy doesn't mean you can energize your team and you can get them to follow you through a wall, right? Get that team to want to take a bullet for you. You have to be able to energize your staff. We talked about how high energy people attract top talent. People want to follow leaders who are dynamic. They're driven. They're genuinely excited, right?

18:03I mean, people, you cannot fake real energy. I listen to episodes all the time. I could just tell you right now, there's a lot of people out there that are just fake. They're influencers. They're reading scripts. It's not what they feel. They don't believe in what they're saying. So here's an example. You mentioned it a minute ago, Elon. Everyone loves Elon. Here's a perfect example of energizing your staff. This man stood in front of his team and said, hey, I would like to catch a 20-story rocket with chopsticks. Did the people laugh? No. They ran back to their office and made it a reality. That's energizing your staff.

18:37Number three is edge. Leadership isn't what it used to be. There are no more Lee Iacoccas. There's no more Jack Welch's, right? These guys are gone, right? There's too many leaders. They're soft. They avoid conflict. They delay difficult decisions. They don't have that edge. You need edge. If you're going to be in business, you have to be able to walk up to an employee and have a coaching moment and not dance around them and fear that they might quit and let them, let them demoralize your entire staff because you don't want to call them out for being late every day and leaving early while the remaining staff follows the corporate code.

19:13You got to have edge. Number four is execute, which is the first answer. You must be able to follow a proven system. I say it differently. You must be able to execute the proven system flawlessly in your market, right? Execution is everything. This country is idea rich and execution poor. Everyone has an uncle and family member sitting around the table that said, I came up with that idea in 1985. I could have thought of that. Everyone is idea rich, execution poor. So I feel that that's equally important. And lastly, John is P for passion. You've got to be passionate. You have to show intense enthusiasm for the things that you have an undying devotion for.

19:56I personally have an undying devotion to my clients, their success, them achieving their investment objectives and the franchising industry in general. I do. I have an undying devotion to it. But you know what we didn't talk about today, John? We didn't talk about direct industry experience. We didn't talk about degrees. Who mentioned degrees? Who mentioned, well, you know, if you want to own an urgent care center or painting franchise, you need to be a professional painter. Absolutely not. You need to have the 4E, 1P principle. If you have that, you will interview with any brand in America. They will want you on their team.

20:29It's that simple. Well, Cliff, I love your energy. I love your personality. I was an officer in the U.S. Army for eight years. And I'm going to give you one of the higher compliments I can give is you can be my platoon sergeant any day, brother. Any day. This is audio only by I'm saluting this man. I see the salute. I love it. Now, I want to talk about creating cash flow, freedom, long-term security, because as entrepreneurs, we love leverage. So how can someone leverage franchising as a way to create that, that cash flow, that freedom, that long-term security? Without going all in at first or quitting their job right away, Cliff.

21:07One thing I'll say to the audience, I don't believe in passive. And my definition of passive would be you and I buying the S &P 500 and then walking away. That to me is passive. Crypto, passive. I don't believe franchising is passive. What I do believe for the corporate exec that wants to keep their career, I do believe in semi-absentee. All right, Chris, you have your full-time career, but you want to get something going on the side. When I'm working with semi-absentee people, I have a list that I would go through. One of them is determining their bandwidth because a lot of people are time starved, right?

21:47They're miserable. They're working for a large tech company putting in 60 hours a week. So if I could find out their risk tolerance, if I could find out their investment objectives, if I could find out their investment level, what are you comfortable investing of your own capital? Do you have an appetite for debt? How much bandwidth do you really have? Are you working from home or are you stuck in an office where you've got eyes on you all day? No, I work from home. I've got 20 hours a week of bandwidth. Fantastic. Where are you? Geography. What does that market look like? Are we in like the deep Louisiana population 500 or are we in a major market like Houston and so on?

22:22So when folks are keeping their job, I look for and my business partner look for asymmetrical investments. because we want to manage that risk. I want them to keep their full-time job. I want them to put up as little amount of money as possible. That's asymmetrical. Low buy-in. Go small. Go low. No debt, preferably. Non-brick and mortar. Everyone wants to jam someone in brick and mortar. Stay away from the brick and mortar if you're going to keep your career because it's going to eliminate personal guarantee risk. It'll lower your investment by probably$150 ,000 to$200 ,000 minimum. that's the reduction just by saying non-brick and mortar right so there's so many things you have no construction no 10-year lease no personal guarantee risk that's huge they're typically higher margin i like a short ramp to break even i like as few employees as possible and i love de-skilled labor where in the next probably 48 to 60 months you will start to replace people with productivity items like AI and so on.

23:25I do like limited to no inventory. I do not like my money sitting on a shelf. I don't like that. I like cash paid on demand of service. I like highly scalable businesses. The guy has a job. I need something easy to execute, realistically easy to execute. Every franchise development director in America is going to tell you their brand is easy to execute. No, it's not. No, it's not. And we're going to trust but verify that type of stuff. And this is very important. I look for recession resilience, AI resilience, but more importantly, John, I look for businesses for this particular client that you've outlined.

24:01I look for businesses that have a history of weathering economic cycles. And I'm talking about housing crisis. Did you come out the other side clean? Check. Recessions came out the other side clean. COVID came out the other side clean. That's the business I'm showing the corporate exec. I want to straddle the fence, between being an employee and being self-employed. And I'll tell you, I have a great track record working with those folks in that list that I just provided to you. And this is what I refer to as investment objectives. So if I'm ever working with one of your listeners, this is what we want to formulate.

24:37What are your investment objectives? What do you want? How much do you need to earn? How much bandwidth do you have? What is your risk proclivity? Where do you live? So much to unpack, and I know we don't have the time on one episode. Yeah, but we have multiple episodes to come, my friend, and Fire Nation is fired up, I can tell you that. So let's talk about taking the first step. What is your call to action for our listeners today? Call to action is, I would reach out to me, so you could reach out to me a couple of ways. One, frenocity.com, F-R-A-N-O-C-I-T-Y.com, and or they just email me cliff n at frenocity.com and schedule a free consult john i know we didn't mention this but our services are free to your listeners so the services are free we're paid we're just not paid by your listeners we're paid by the seller of the brand at the seller's expense very similar to a realtor or a headhunter your listeners are not paying a dime for our services they're not committing to anything fire nation as i mentioned towards the beginning of the episode Cliff and I have entered into a year-long partnership here, and I vet my partners very carefully.

25:49I love Cliff. I love what he stands for. I love the free service. That's, again, free service that he is offering to you, Fire Nation, to my listeners right here on Entrepreneurs on Fire. So take him up on it. Go to Franocity.com, cliffn at Franocity.com. Send him an email. That's a way you can get a hold of him and have a conversation. Have a consult. It's free and you can tell this guy is not going to waste your time. So one final call to action, Cliff, and then we'll say goodbye. There are tens of thousands of people that know that they're on the chopping block. They know they write code. They know they do things that could be replaced.