Franchising: The Understated Path to Entrepreneurship with Alex Smereczniak

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we'll be breaking down franchising, the understated path to entrepreneurship. To drop these vibe bombs, I brought Alex Smurznack into EO Fire Studios. Alex is a serial entrepreneur and CEO of Franzi, making franchise ownership more accessible. He built 2U Laundry and Laundro Lab, selling over 100 franchises. He's passionate about helping others take big swings in business and life. And Fire Nation, we'll talk about the advantages and disadvantages of buying a franchise.

0:39We'll talk about financing. We'll also talk about some of the most unexpected types of franchises that are out there and oh, so much more. And a big thank you for sponsoring today's episode goes to Alex and our sponsors. Is now the time to grow a successful business? Attend the world's highest rated business growth workshop taught personally by Clay Clark and now featuring football star Tim Tebow and President Trump's son, Eric Trump at thrivetimeshow.com slash EO Fire. Again, request life-changing tickets today at thrivetimeshow.com slash EO Fire. Do you have the right mentor in your life right now?

1:16For the first time in seven years, I'm opening up a few mentorship slots for individuals who know they need the guidance and accountability to take their business and life to the next level. Email me at john at EOFire.com with the subject line mentor, and we'll schedule a 15-minute chat to go over the program and see if it's the right fit for you. Alex, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. You don't need to be passionate about what you do to become successful. I think you just need to be obsessively committed to being great at whatever that is.

1:58I think back to, you know, high school or early days and people are like, oh, you know, chase your passion and chase your dreams. And I think for some people that, you know, can absolutely work, but the more I've, I've, I guess, lived life and have seen success stories and have seen people really, you know, make it to that other level. It usually has been things that they might not have necessarily been passionate about out of the gate, they just became either really good at it or obsessive over it or their personality, you know, lended itself to never giving up. And it became their passion later, or in some instances became their passion later, but it might not have necessarily been that at the beginning.

2:38So that's, that's my hot take is that you don't actually need to be passionate about what it is that you do to become successful. That is a hot take. And that's actually on theme for today's episode, which is the understated path to entrepreneurship, franchising. And Alex, I like to be honest on my show, genuine, transparent, and there are both advantages and disadvantages to buying a franchise versus just starting an independent business. Let's talk about those now. Out of the gate, the immediate number one advantage to franchising versus an independent business to me is the higher success rate, especially when you look at it over a five-year period.

3:18So over the two-year period for a franchise business, success looks like 92%. Businesses are still around. They're still figuring things out. They're growing compared to 86 % for an independent business. If you and I started a car wash on our own together. But what gets really interesting is the five-year mark. At five years, a franchise business has an 85 % success rate compared to about 50 % of independent businesses. So boom, And there goes half of our peers that, you know, when added on their own. And what I like about franchising is it gives you that unfair advantage or that leg up. You've got that system of peers around you.

3:55You've got a proven system built out, you know, or at least one concept at a minimum already open and running and, you know, with a track record. And then in the long run, you get that group buying power and, you know, the ability to negotiate with suppliers and vendors and, you know, basically every part of the business that would benefit from group buying. that opportunity is there. So a lot of, you know, big advantages out of the gate. The disadvantages though, I think are, you know, it depends on the person, the individual and their personality. And what I mean by that is for some really mature brands or even very successful, unique franchise models like Chick-fil-A, you're, you're basically buying yourself a job.

4:35I mean, Chick-fil-A, the average unit, they just came out with their new numbers. Their average unit volume, is over$9 million per store. Incredible business. $9 million per Chick-fil-A location. But the franchisees of that system, while making good money, and that might be what's motivating a number of them, they are very much buying themselves a job. They have to be at their location 40, 50 hours a week. Chick-fil-A doesn't allow you to hire a GM until way down the road. And so for some individuals, the idea of getting into a more mature brand might actually be a turnoff because they're essentially an employee of a larger business, even though it is their business.

5:16They're still an entrepreneur. They're still running that business. They have just so little flexibility and they have to follow things so rigidly that, you know, you're essentially an employee again. And I know for some people, that was why they decided to franchise to begin with was to have that freedom and the flexibility and the ability to chase that dream to be an entrepreneur. And for some mature brands, that just isn't the case. The other disadvantage I'd say, too, and one thing I challenge every individual I talk to about franchising is franchising is really also only valuable if you're getting value throughout the relationship, you know, the course of that franchise agreement, which is typically 10 years.

5:56Most people I don't think realize that you're signing a 10-year commitment. I joke, it's the second most important decision you're going to make in your life behind which partner or spouse you're going to choose. And so for franchises, the question I use to filter it is, ask yourself, what has the franchisor done for me lately? You know, and if in the first year you're asking yourself that, it's probably, oh, they helped me find my site. They got me open. They helped me train. Like all these amazing things, right? Where it's an easy yes. yes, this was the best decision I ever made. But what about in year six?

6:29And you're sitting there, you've got this thing down, you maybe have multiple locations open, you've got a GM, you've got teams in place. And you ask yourself, what is the franchisor done for me lately? And if you're like, well, you know, not much of anything or nothing really, then you actually might have been better off starting your own business independently from the beginning. But if in five years, you're sitting there like, well, I get burger meat for 10 cents a pound versus is everyone else paying a dollar, then that's a huge cost savings. And that group buying power is still massively beneficial.

7:00The menu innovation, the technology that they're building, the national client relationships or partnerships they're forming on every franchisee's behalf. If those types of things are happening in year five, then it's still very much worth it. But if the answer is no or nothing, that's a big disadvantage to being a franchisee at that point. Now, I can tell you that a lot of listeners are listening to those numbers and saying, man, that sounds really appealing for all the obvious reasons. So what really is the best way for us to determine if franchising is the right path for us? Like, what are those key considerations?

7:35This is maybe a little bit meta or too holistic of thinking, but I really challenge people to take a huge step back and figure out what their why is. But on a deeper level, like five or six layers under, It's almost like that kid that's like, well, why? Well, why is that? Why is that? It's like, do that exercise to yourself five times over. Because at the surface, it might be, oh, I want independence, or I want to be my own boss, or I want a side hustle or a thing that generates additional income. Well, why do you want that income? Well, I want to give my kids more opportunities. Well, why? You know, you really got to do that, peel that layer back, because you might find that there's six other ways to accomplish what you're trying, what you're really trying to do.

8:22And if it's, you know, financial freedom, maybe short-term rentals and doing, you know, real estate is a better path for you than franchising, or maybe it's investing in the stock market, or maybe it's, you know, doing drop shipping. There's a million ways to generate, you know, additional side income and franchising might not be that path. And so I really challenge people to make sure they ask those whys. And for franchising specifically, I think it's a good path if you're looking to learn a set of new skills, really flex and work on that entrepreneurial muscle. Franchising is a great way to do that in a de-risked way.

8:57And so I think about risk tolerance as well. I think about your personality. I think about your financial readiness. I think about the time commitment that you can make. And for franchising, you've got to be able to say, I want to be challenged mentally and I want to learn something new. but I also might not have this immediately original idea to do on my own. And so I like the idea of franchising because it's a proven or somewhat proven system plus a group of peers that I get to work with and be surrounded by. So maybe your risk tolerance is a little bit lower, but you still want to be entrepreneurial and you have the time to commit to learning these new things and building a business still from scratch in a lot of ways, even though the playbook is there, you still have to take it from zero to something.

9:40And so all those lessons are still there and all those challenges are still there. And then I think a bonus is, you know, is it the right industry or fit for me? As I mentioned, you know, my previous answer about the unconventional thoughts on success and it not needing to be a passion. I do think people should consider, is this something I could see myself doing for 10 years? And if I kid you not, there's a franchise for this. It's called BioOne. It is hazardous waste removal. And it's a crime scene cleanup and removal. And you can imagine what goes into that. If you're sitting there and thinking, I don't want to be around blood or other things that will gross me out, then you probably shouldn't buy into a BioOne franchise.

10:21But if you're someone who is just indifferent on what it is, and you want to generate good returns, then BioOne might be a great fit for you. And so I really challenge people to think about imagining themselves in that scenario of running that business, whatever it may be. And is it something that you can do or that you could hire a GM to do, or that you just, you know, you know, you'll be so far removed from it that it doesn't matter because you're going to build 10 of these locations and have a team, you know, run the day to day over time. So those are the big categories I think you have to really think in on most importantly, the why and why you're doing it and what's motivating you.

10:57I love that thinking about the why and about some of those unexpected franchises that people might not think about. We're actually going to be diving into that a little deeper, as well as financing options when we get back from thanking our sponsors. Is this your year to grow a successful business? Are you looking to learn the proven processes and success systems that have been used to create thousands of millionaire success stories? See thousands of success stories and testimonials from real people just like you, who Clay Clark has mentored and coached into prosperity at thrivetimeshow.com slash EO fire.

11:30Clay's proven business coaching program is month to month and it costs less money than hiring a minimum wage employee. Yes, it's month to month and it costs less money than hiring a minimum wage employee. Schedule your free personal 13 point assessment with Clay Clark himself today at thrivetimeshow.com slash EO fire because Clay only takes on 160 clients and only allows 300 attendees to each business conference, you will interact with Clay directly. See thousands of real success stories and learn about attending the Thrive Time Show two-day in-person workshop featuring football star Tim Tebow and President Trump's son, Eric Trump, today at thrivetimeshow.com slash EO Fire.

12:06Become the next success story. Schedule a free consultation and request tickets to join football star Tim Tebow and President Trump's son, Eric Trump, at Clay Clark's next business conference today at thrivetimeshow.com slash EO Fire. Question for you, Fire Nation. Do you have the right mentor in your life right now? For me, mentorship was everything. From when I was just getting started in podcasting, webinars, course creation, book writing, you name it, I hired a mentor to guide me every step of the way. For the first time in seven years, I'm opening up a few mentorship slots for individuals who know they need the guidance and accountability to take their business and life to the next level.

12:48It's a three-month program, and together we will achieve massive results. If you're interested in learning more, email me at john at eofire.com with the subject line, mentor, and we'll schedule a 15-minute chat to go over the program to see if it's the right fit for you. That's john, J-O-H-N, at eofire.com, but only if you're prepared to ignite. Alex, we're back, and financing. I mean, a lot of people might be listening and saying, hey, I'm interested, but I don't exactly have a ton of money to get started. And I heard that franchising can be pretty pricey at the upfront. So what if we are in need of financing?

13:29What financing options exist for aspiring franchise owners? Well, the good news is, is there is a lot. The bad news is there's a lot. So there's everything from conventional loans with your bank to SBA 7A loans or SBA 504. And those have various requirements from a credit score perspective, providing personal guarantee and collateral as well, all the way down to some people use credit cards and they max that out for the franchise fee or the initial fees to get started. some more practical financing options though and examples are you know the sba loans are it's a great program depending on rates as well but you there's there's a number of you know banking options and institutions you can work with to to explore a program that a lot of people don't realize about and i think this is you know incredibly interesting is it's called a robs rollover program.

14:30And the acronym for ROBS is rollovers as business startups. So it's a method where you can actually borrow against your retirement funds penalty and tax free. And again, people don't think that you can do that. You think, oh, if this has been set aside, I can't touch it until I retire. How do I gain access to these funds? And the answer is you can. The government's thought is that if you can invest your retirement money tax-free into corporations, why can't you invest in yourself and your own business? And so franchising does qualify for the Rob's rollover program, which is the ability to borrow against your retirement assets, and it'll be free.

15:12And a strategy that I've actually seen a couple of people use recently that I really like is they'll actually use an SBA loan for, let's say, 70 to 80 % of the purchase price or the build-up price of the business. So let's just, for math's sake, let's say the business costs a million dollars. Someone will use an SBA loan to finance, let's say 700 ,000 of it. Decent rate, pretty favorable terms, especially as a first-time entrepreneur or business owner. But then they have that other 300K that they have to come out of pocket with. And that still is scary to a number of individuals. And so they're wondering, how am I going to do this?

15:53It's the right concept for me. It's slightly more expensive, though. How am I going to finance this other 300K? You can actually combine the SBA program with a Rob's rollover and finance that additional 300K with retirement assets that you might already have squirreled away, only investing, again, in yourself directly as the operator versus the S &P or the stock market, which as we've all seen recently is, you know, it's not immune to risk or being degraded or negatively impacted. And so that's an interesting combination that I see some people exercise is that SBA loan plus the ROBS rollover. The last couple options I'll mention is some people will raise capital from friends and family.

16:39They'll go find an investor. I actually We met a 23 year old the other day who owns multiple franchise locations, which is crazy to me. 23 right out of college. I asked him how he how he did it. And he went and found a capital partner. And he said, look, I'm going to earn the sweat equity. I'm paying myself a very modest salary these first few years. But now I own I think in his example, he owned 25 or 30 percent of the business, which is more than most people can ever say of any business that they own. and he has the option to increase that ownership over time with different milestones and success.

17:11And so I know a lot of smart money and capital that wants exposure to franchising, but they don't want to run the day-to-day. And so for any operators out there listening, I think it's very possible to find that capital partner that will help back you and get your first few locations off the ground that you can then parlay into you owning 100 % of another concept down the road once you've gotten a few wins under your belt. So as you can see, Fire Nation, there's quite a few options when it comes to financing that's right there, just ready to be taken. And again, we mentioned with Bio One, kind of an unexpected type of franchise.

17:45Maybe give us another example or two that people might be like, huh, I never would have thunk it. Yeah. So one that I really like recently that, you know, and you're right, everyone thinks McDonald's and Subway and fast food. But what people don't realize is that franchising touches 6 % of the American GDP. It is a massive part of our economy. It touches everything from hotels to food to fitness to childhood education to home services. I mean, most of the home services brands we've probably all used at some point, whether it's a plumbing service or a gutter cleaning or a window cleaning business.

18:21It's actually not this independent, locally originated business. It's locally owned and operated. All franchise businesses are. But it likely was and is a franchise concept. It is. I mean, it's pervasive. A new franchise business opens every eight minutes in the United States. And so I say all that to harp on the fact that there's probably more non-food franchises than there are food franchises. And so some examples and ones that I really like right now are there's this big wave of golf simulators. One that I like out of Cincinnati, especially called Another Nine, is kind of like the anytime fitness concept where there's no employees, there's no food in Bev.

19:03So it's very simple to operate and very simple to get up and running. and you access it like an Anytime Fitness with, you know, instead of a key fob, it's your phone, but you book a private bay, you and some friends, or, you know, maybe it's a business meeting, or you and your family want to go, can rent out a golf simulator bay, like, you know, top of the line, you know, some of the most expensive simulators you can get, and go play Pebble Beach for an hour, you know, after work or on the weekends. And that's a franchise business that gets you up and running. They're building a bunch of software to help with marketing and access.

19:34and so that's a really exciting one you know right now another one is a brand called Kid Strong where it's a fitness concept for for your children and I don't want to say it's similar to Orange Theory because it's not like it's this boot camp but it's really about empowering children because there's all this data right now that with all the screen time that kids have these days they're losing a lot of that self-esteem and confidence in themselves way earlier than any generation before them. And so this is a program dedicated to go get active, be around other kids your age, positive affirmation.

20:09Part of their kind of mantra is, I'm going to butcher their saying, but the kids basically all kind of flex their arms and say, I am capable, I am strong, I can win. It's something like that. And there's videos of it that I encourage people to go check out. It's incredibly inspiring, but also makes you realize, hey, kids are in front of screens, and this is a pretty cool mission. So there's Kids Strong, there's another nine. And the last one I'll say that I like a lot right now is called Daisy, which is a smart home installation franchise. So think of all of the internet of things, smart home devices we have, the speakers, the lights, the HVAC even, the appliances, all of those things that can talk to each other, but are a little bit disjointed across different hardware providers.

21:02Daisy actually helps with the installation, regardless of product it is, a brand that it is that you might be purchasing or wanting to use. And they integrate it all seamlessly across one another. And you put it on a tablet for you so you can control your whole home all from one device or limited number of devices. So that's another one. I mean, again, really lots of variability, lots of different franchises out there. There really is something for everyone, even from a price perspective. Sorry, the last one I'll add is this other one called, I'm sorry, you got me excited about this now. The last one is called Card My Yard.

21:44So again, I think people think franchising, they think McDonald's, That's$4 million to build. I could never do that. Guard My Yard is a$10 ,000 to get into franchise. And it's a side hustle through and through. It's not a full-time business, I would say, unless you really built it out. But it's those little happy birthday or welcome home Noah if it's for a new baby. Or maybe it's someone graduated. Those yard signs that you see in people's yards from time to time. I think we've all driven through a neighborhood and seen it. That's a franchise. It's called Card My Yard. And they provide you with all the letters and the marketing materials and also a booking platform and software so that customers can find you nationwide or in your local city to book with you.

22:33And so I'll share that last one because it really does range across multiple industries and multiple price points. Well, I can see why you're so excited. There's a lot of cool things going on in this world. I mean, Fire Nation, if you get excited about a topic or an industry or a vertical or a niche, like there's probably a franchise there that you can go find. And it's a little plug and play. It's a kind of a turnkey operation for a lot of these situations. You can just jump in and make things happen. I mean, the technology is disrupting traditional franchises right now. There's so many cool things that are going on.

23:06So, Alex, bring us home. If you could just share one key takeaway from everything we talked about here today, what would that key takeaway be? Key takeaway is to really do your research. And again, make sure you understand your why. Once you've understood your why and you're set on franchising because of all the reasons we mentioned, it's accessible. There's an option for everyone, truly. Once you've decided that, I'd say make sure you're doing, again, your homework on the brand that you work with, the individuals even that you work with. So I, you know, part of the reason, you know, in my background, why I'm so excited about franchising is, you know, I built this platform called Franzi, which is, is think of it as Zillow for franchising.

23:51And the reason we did that, and the reason I'm bringing it up is it is a free platform for you to go use to go do this research that I'm talking about, you need to make sure it's the right fit. That's the most important thing I would say is fit. And as I joked about, it's the second most important decision you're going to make in life, but you know, behind your, your partner and finding the right spouse. And so why not do the same level, you know, of diligence you would, you know, dating someone, buying a house and, you know, going and seeing them and looking on Zillow and talking to mortgage lenders.

24:23You should be doing the same thing when you buy a franchise is go see what all brands are out there. Use some of the AI tools that we've built to help hone in on what the right fit is for you based on your risk tolerance, your goals, your objectives, and your operational experience and fit. And then make sure you have the right lending options lined up and the right financing lined up. And then as you start to talk to that brand, you know, really make sure that it's something you could see yourself doing and a group of people that you could see yourself working with for the next 10 years. It's all about fit.

24:54And that's what I would say is the most important thing is, is understand your why and then understand if it's the right fit or not. So franzi.com, that's F-R-A-N-Z-Y.com. Beyond checking out the website, any other specific call to action for our listeners? Yeah, I'd say check out the website, the Franzy Fit Score. It takes less than 10 minutes to do and it's actually kind of fun. It's, you know, it recommends, you know, here's John's top three brands and it's kind of this gamified and fun, see what my flavor is, you know, process and product. So I'd definitely check out the Franzy Fit Score And then I'm also always happy to talk to people interested in franchising.

25:35I'm happy for people to reach out to me directly. My email is alexatfranzy.com. Same as the website, F-R-A-N-Z-Y.com. Happy to field any questions, set up time to jump on the phone and walk you through your franchise journey. Yeah, definitely go check that out. Fire Nation, franzy.com. I mean, I'm on the website right now. I'm seeing the cocky rooster. That's really kind of appealing to me. I'm going to go ahead and scope out a little bit more about that for sure. And as Fire Nation knows, they're the average of the five people they spend the most time with. And Fire Nation, you've been hanging out with AS and JLD today.