Why Smart Money Is Moving Into Non-Food Franchises in 2025 with Jon Ostenson

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 why smart money is moving into non-food franchises in 2025. To drop these value bombs, I are brought to John Austinson and to EO Fire Studios. John is a top 1 % franchise broker, consultant, investor, and author of the book, Non-Food Franchising. He is the CEO of Fran Bridge Consulting, an Inc. 5000 company, and draws on his experience as a former Inc. franchise president and multi-brand franchisee and serving his clients.

0:36Today, we'll be chatting about who is getting involved in franchising and why. We'll also talk about the cost to launch a franchise and the funding options available. Some examples of great franchises that are crushing it right now and oh, so much more. And a big thank you for sponsoring today's episode goes to John and our sponsors. Take control of your data and keep your private life private by signing up for Delete Me. Now at a special discount for our listeners. Today, get 20 % off your Delete Me plan when you go to joindeleteme.com slash EOfire and use promo code EOfire at checkout. John, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:23Fire Nation, we are old friends and it is so good to be back with you today. And something about becoming successful, I was talking with a client just yesterday and he said, John, I wish I'd started a business a year ago, two years ago. And, you know, it reminded me, oftentimes people forget that you have to make some hard decisions along the way, especially in the beginning. And, you know, starting a business, that's hard, right? You know, it takes work, it takes effort, it takes a mental commitment to it, you know, but you have to work backwards. And it reminded me of a quote, easy decisions, hard life, hard decisions, easy life.

1:57So the question is, what decisions do you need to make today in light of where you want to be down the line. Wow. Love the start to this episode. And Fire Nation, John and I were kind of looking back on his now 10 episodes on Entrepreneurs on Fire over the years and just the amount of people within Fire Nation that he's helped in the franchise space. And that's why today we're going to be talking about why smart money is moving into non-food franchises here in 2025. So John, I want to start by talking about who exactly is getting involved in franchising today and why are they doing it? You know, entrepreneurship is alive and well.

2:33I've personally never seen so much interest, I think for a variety of reasons. And, you know, if you look at Google search results, building a business, that search is at an all-time high. You know, everyone is interested. And I think, you know, a few years after COVID here, people are, you know, kind of been kicking the can down the road. They're saying, if not now, then when am I going to, you know, build my own empire instead of someone else's? You also see a lot of real estate investors. You know, a lot of our clients invest in real estate too. I personally do. I think it's an all the above strategy.

2:58But, you know, frankly, there just haven't been many good real estate deals out there and interest rates are high. And so a lot of them are saying, hey, what's another tax advantaged alternative investment that I can, you know, move into? And a lot of them are coming over to franchising. So, yeah, you know, we also see a lot of cash on the sidelines looking for a good place to find yield. And so for a variety of reasons, seeing a lot of interest from every walk of life, you know, medical doctors to attorneys to mid-level managers to those earlier in their career, you know, quite a few folks right around my stage.

3:29I'm 45 years old and, you know, they're kind of poking their heads up saying, hey, if not now, then when, you know, let's get after it. And maybe franchising is our best, best foot forward and best path to business ownership. So, you know, theme wise, we continue to see a lot of interest in somewhat recession resilient industries, you know, things like, you know, I always joke about non-sexy is the new sexy when it comes to business ownership, but you know, that meaning behind that, just non-trendy, understandable cash flowing businesses, things that AI won't disrupt tomorrow, but AI can actually benefit as an example.

4:00And, you know, the way I think about it, you know, what are people going to continue to spend on regardless of the economy? And it's the things they care about, their kids, their pets, their aging parents, their homes, their health. And so those are the categories that we see a lot of interest from a variety of backgrounds getting involved in. Anybody that keeps their finger on the pulse of the economy, they know that global liquidity is skyrocketing right now. They know that the Fed is about to go into major printing mode when it comes to money. There's$7 trillion in money market accounts right now.

4:31And there's frankly just been a lot of content out there about buying an existing business because, you know, that money in a money market account, I mean, it's there, but it's not earning a ton of interest. We all know inflation is real and people looking for better ways to utilize that money. So how do you feel franchising compares to this approach of buying an actual existing business? Let's kind of talk about the pros and cons there. Yeah, you know, buying an existing business can be a great proposition. However, from where I sit, again, these are the conversations I have multiple times every day.

5:05So many of those that I speak with have been looking for an existing business for three years, four years, five years. I mean, this is time that they could have spent building a business or building a franchise. And so, you know, a lot of effort goes into it. Some of them even hire a full-time analyst to go out and search for them. So, again, it can be a good proposition. But what I continue to hear is, hey, I've been under LOI three times, four times, five times. Due diligence didn't shake out. The buyer reneged. Someone else moved in, you know, and outbid me. And so right now, we also see listings down.

5:36You know, I think with interest rates higher, you know, multiples are coming down and therefore people are sitting on the businesses not selling as much. And so it's a supply demand thing. And so many of these individuals are now coming over and saying maybe franchising is a better path, at least for this next season. It's not that they'll never buy a business, but maybe franchising is the right way to go, at least right now. And, you know, one thing that I expose them to is, you know, what I call internal M &A. Within a franchise system, most franchises that go up for sale never hit the open market.

6:05Instead, they're sold to other franchisees in the system. I've personally been on both sides of that transaction myself, and that's usually what happens. And so there's not a lot of great franchise resales out there because someone's already buying it in the franchise system. So again, getting your foot in the door with a strong franchise and then having that potential to expand over time by buying other franchisees is a path that a lot of them are waking up to. And Fire Nation, it's really interesting to think about the different opportunities that you do have out there. I mean, of course, buying an existing business, I mean, that's an opportunity, but you have to think, why is this person selling their business?

6:40There's probably a reason. You know, not everybody's riding off into the sunset. They're like, okay, it's time for me to unsaddle. There's usually underlying reasons. So doing a lot of deep digging and finding out what the best opportunity is for you is why we're having this conversation today. Because I want to know, John, how much it actually costs to launch a franchise. And let's just talk about the funding options that are available. And you brought up a good point, John, that I'll finish that last thought on. Sure. Oftentimes with existing businesses, you know, everything looks great on paper and, you know, you're typically paying a premium because there's market awareness.

7:13You've got a team in place. All of that. Maybe it's cash flowing already, but there's inherent risk to that. Whenever you inherit someone else's team of employees and someone else's culture and someone else's customer base, there's huge risk of that changing on day two after the acquisition, right? So, again, a lot of people like the idea of franchising, a proven model, being able to put your thumbprints on it from day one, and you're not paying a premium for the business in the same way you would with an existing business. So, oftentimes, again, people get their minds around that later in the game.

7:46But to your question on the investment level, so certainly it ranges across the board. I mean, I just had clients that bought a bunch of trampoline parks the other day, and those are$3.5 million each. Most people are not going quite that big, though, that we work with. usually when you look at the franchise fee and the startup cost and several months of working capital all grouped together you know oftentimes you're in the 150 ,000 to 400 ,000 range somewhere in that ballparking that might even be for multiple territories in a service-based business you know to get involved some people are using cash most like the idea of leveraging and so what that would look like is you know putting in 50 or 60 ,000 of cash and then using an SBA loan for the balance.

8:26And obviously, banks prefer lending to franchises over startups, right, for obvious reasons. And so we really don't have that much of a challenge getting our clients approved for SBA loans. So that's a very, very common approach. You can always pay this back early. Obviously, the interest is tax deductible. One other way that a lot of people like to go about it is using their old 401k from a previous employer, purchasing the business with a retirement plan, then they pay themselves a salary. And some will actually do that in conjunction with an SBA loan, But we call that retirement plan program, the ROBS program, R-O-B-S.

9:00But yeah, happy to speak with people more about that. Very cool stuff. And I love that you brought up the trampoline park. I mean, I have an 18-month-old son, and I can tell you in the community that I live in, there's a trampoline park about 25 minutes away. And every birthday party, like every event, it's at the trampoline park. The kids just love it. They go there. They're just bouncing off walls, literally. They're dunking basketballs. I mean, they're just having the time of their life. And I'm like, I'm going to be spending so much time at this trampoline park in the next like 10 years. It's going to be pretty crazy.

9:32So something to think about for sure, Fire Nation. Like, what are you excited about? What are you fired up about? There's probably an amazing franchise around that. And we're actually going to be talking about some specific examples when we get back from thanking our sponsors. Online safety and security is more important than ever. And as business owners who market and promote online, we need to be hyper aware. Unfortunately, our personal information is being compiled by data brokers and sold online every single day. That's why I personally recommend Delete Me, a subscription service that removes your personal information from hundreds of data brokers.

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10:41That's Join delete me.com slash EO fire code EO fire. John, we're back. And as I kind of mentioned before the break, my audience has loved hearing specific examples of the franchise opportunities that are just out there. So can you highlight a sampling of a few of the new ones that have you really fired up for various reasons? Absolutely. No, we'll kind of go across the board here and touch on different industries. So, you know, out of the gate, two that come to mind are ones that check a lot of boxes for our clients. You know, I oftentimes get asked, what are the highest return opportunities with the fewest number of employees?

11:17And that's a general line of thinking. And so there's two right now that we're really liking that require zero to one employees. And so this really is, and they're very scalable businesses. One is in the logistics consulting space. It's a business that was proven out in the UK over 20 years, you know, with roughly 50 franchisees. They just entered the U.S. recently. And, you know, the proposition they provide, they work with small, medium-sized companies that do a lot of shipping. And they serve as an intermediary between them and the carriers and become that subject matter expert. It's got all the technology.

11:53And the proposition that you're able to provide to these businesses that, you know, don't want to spend their time on the shipping is really three things. One is leverage buying power because you're able to leverage the power of a franchise system and all the buying negotiations that happen there. customer service. Now they actually have a point person to go to instead of a technology interface. And then a third would be a subject matter expert where you're able to be consultative and be more prescriptive in how they're shipping and how it can be improved upon. So that's one that we've got a lot of clients engaged with.

12:24The other one in that zero to one employee space is one where you become a subject matter expert on really senior care facilities. Most of the time when Families are looking to place their aging parent. They've never been through the process before. They don't know where to start. They don't know which are the good ones, which are the bad ones, what would be the best fit based on finances and everything else. And so you're able to really get to know that local market. Again, they train you on all of this. And then you're really able to help these families in placing, making recommendations for placement into different senior care facilities.

12:59And so, you know, and you get a referral fee on the back end from those companies. So your clients are never having to pay you. It's very consultative, non-salesy. So, again, when you think about the aging population, and certainly we do a lot of placements in in-home senior care. That's a big space. But this is one that we like. It's a little on the periphery of that, kind of in a niche. And we always love the niches. So those are two quick examples. You know, next I'll touch on home and property services. That is the behemoth where we just see so much smart money flowing in. And so much private equity is getting involved there.

13:29And there's a great flooring company that we're working with that can refinish hardwood floors in only one day without having to sand them. I mean, they've got proprietary products and procedures that are different than the competition. So it's all about differentiation, right? And a true value to the customer. So we like that one. You know, the roofing space. Roofing oftentimes gets paid by insurance companies. You have some deep pockets on the other side of the equation. Those are big ticket items. We're working with a company right now that in addition to roof replacement and repair, they also provide a coating system that can, again, it's proprietary, but this coating system extends the life of the roof by literally decades.

14:09And so, again, very differentiated in a very large industry. One other that I'll briefly touch on in the property services arena, restoration. I've had clients do so well in the restoration space. That's water mitigation, mold remediation. We all think of ServPro, right? They're the 800-pound gorilla out there. but there's so much market share to be had by these other companies and again it's a b2c and b2b model and i just have had clients you know had a lot of success we continue to place clients you know with these different companies offering that service and then finally just kind of a miscellaneous i'll do rapid fire here on a couple more you know we just placed a client in kansas city last week in the mobile dog grooming space people will always spin on their pets right youth sports we've had clients do exceedingly well in youth soccer you know i had notes from several clients in the past month about how well they've done in the youth soccer industry.

14:59I mean, we're always, and you know this with your 18 month old, we're always going to spend on keeping our kids active. Right now I'd say, we don't do food often, right? But we always keep an eye on it. And there are two or three concepts right now that we really like right now. One is kind of a healthier version of Panera. Another one is pizza, which one of the best pizzas in the country, but they also start with a food truck. And so it's kind of a different model. You know, in the beauty space, we're like in the sunless tanning concept that we just play some clients with, a nice recurring revenue model.

15:32And then finally, an area that's near and dear to your heart, as well as mine, is health and wellness. Oh, yeah. And just all the different modalities around that. So, you know, McKinsey just came out with a study recently that showed that, you know, all these treatments and, you know, longevity boosting and health boosting techniques are now becoming mainstream. and that's not going to change. Their projections on the health and wellness growth over the coming years is just through the roof. And I had a client recently purchase a business, five locations of a franchise that provides multiple modalities under one roof.

16:07So it's infrared sauna, cold plunge, red light, cryo, all of those types of services under one roof, recurring revenue, membership model. And it's a great compliment to all the gyms out there. So again, this is just a quick sampling of those that we work with that we're liking out there just to give some examples of the variety that we see. Man, what a ton of gems. I mean, I feel like every time you open your mouth and talk about a new company, John, I'm like, I feel like I could see myself doing that. Like, it's just like, it kept going, like, as you were talking. And then at the very end, I'm like, yes, cryo, red light therapy, cope lines, like, let's go.

16:39And I mean, of course, having a dog and a kid, I mean, yes to both. I mean, I spent way too much money on my dog. And then with a kid, I mean, like you talk about the youth sports to me that really resonates because man even at 18 months old like unfortunately you know all my kid really wants to do i mean he wants to do a lot of stuff but i mean he wants to do too much screen time you know he's always grabbing for the phone or wanting to like point at the computer or the television and i mean it just starts at such a young age now no matter like how hard you try like we get him outside all the time but it's like we need real activities that he's excited about that he gets fired that he wants to go do not that we're making him do.

17:15So I love all these different opportunities. So something's going to resonate with you, Fire Nation, if you're thinking about this. So just keep on thinking. Now, if Fire Nation is listening and they're like, man, I like what I'm hearing, but I want to learn more. What's the best way for somebody to find the right opportunity for their situation and their market? Because we all have different situations. We're all in different markets. What do you have to say? You know, you can certainly Google around, but you're going to find over 3 ,000 companies out there putting their best foot forward and you know giving you their marketing spiel and uh you know it's so important to understand what's going on behind the scenes even if you come across a list of a top 50 franchises top 100 franchises in different publications put those out into the day most of the time those companies are paying to be on the list and so it's very deceptive in that way right um it's just a pr move for them so that's where we encourage people hey partner with with folks like us and we we do a whole lot of placements and you know we're always at conferences and have the relationships with the different franchisors.

18:12We get to know the teams and see what's going on behind the scenes. And we work with over 600 different franchises, part of the largest franchise network in the country, really working with those companies that are looking to expand, that still have good markets to expand into. And it's entirely free to partner with us. We simply get a referral fee from the brand on the back end when a placement happens. For them, it's a sales and marketing expense, so nothing gets passed on to our clients in any way. It's a nice, clean model. And, yeah, like I said, we're working with it. the growth companies out there and kind of keeping an eye on what's coming down the pipeline, you know, like this one from the UK that I just mentioned as an example.

18:46So yeah, you know, I have a very streamlined process that I've taken so many EO Fire listeners through, where we get real opportunities in front of you. If I were in your shoes, John, what are the opportunities I would want to be looking at that are open there in your market? And we give them some great variety and help them kind of narrow those down and then hold their hand through the process where it usually takes about two months from start to finish landing on the right opportunity. But we introduce them to funding partners if they want to have a franchise attorney review the agreement. So it's kind of a one-stop shop.

19:18We've got all these partners that we can pull in to support them too. So in a nutshell, that's how we help. And that would certainly be my recommendation of how someone starts. And even as a baby step in that direction, happy to share a free downloadable copy of our book, Non-Food Franchising. It's about 90 pages. is I put a ton of content in there. We've gotten great feedback. And oftentimes people read it by the time we get on our first call. So I'm certainly happy to jump on a call, happy to share a copy of the book or all of the above. Fire Nation, a lot of exciting things out there. I mean, those one employee businesses, I mean, those are pretty exciting.

19:51And especially when you bring AI into the equation, I mean, I mean, you can really take some of those multiple employee businesses and say, well, wait, can we really have one employee now working with the aid, the assistance of AI and really keep this, you know, very, very streamlined. So John, give us that call to action. You talked about the book, just give Fire Nation the direct call to action for them to take the next step. Yeah, we make it easy. Just come out to our website, franbridgeconsulting.com, F-R-A-N bridgeconsulting.com. And, uh, you know, share your email address. We'll immediately send you a copy of the book in multiple formats.

20:25You can download an audio or, or, you know, just a PDF or what have you, ebook capable as well. So share your email address. We'll reach out to you. We'll also send a link to the calendar if you want to take that next step and jump on a call. I'm more than happy to chat with any EO Fire listeners. I've worked with so many over the years and would love to get to know you and share some thoughts, answer some questions and we'll go from there. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with J-O and J-L-D today. So keep up that heat. And for links to everything we talked about, visit eofire.com.

20:58Type John J-O-N in the search bar and the show notes page will pop right up. And John, thank you for sharing your truth, your knowledge, your value with Fire Nation. For that, we salute you and we'll catch you on the flip side. Hey, Fire Nation, a huge thank you to our sponsors and John for sponsoring today's episode. And Fire Nation, are you an entrepreneur on fire who's looking to share your amazing message with the world? If yes, we are now accepting applications for entrepreneurs on fire. To learn more about becoming a guest, visit eofire.com slash guest. And I'll catch you there or on the flip side.

21:30Take control of your data and keep your private life private by signing up for Delete Me. Now at a special discount for our listeners. Today, get 20 % off your Delete Me plan when you go to joindeleteme.com slash eofire and use promo code eofire at checkout. Thank you.