Franchise Expert: How to Successfully Buy and Sell Boring Businesses | Ep. 439 with Cliff Nonnenmacher CEO of Franocity

27:55I am a good person. I am a good franchisee. I am following the model. I ran out of runway. I ran out of operating capital. I didn't have enough and I didn't get to break even fast enough and they close. Those are going to be your top reasons. And that question you just asked me is why I subscribe to what makes a good franchisee. And I wish I created this. I took it from Jack Welch. Jack Welch, former CEO of GE, said, number one question asked of me, how do you hire people? And he said, and I do the 4E1P principle. The first E is, do you have energy? Just to say yes. Having energy is not enough.

28:38Can you energize, second E, can you energize others? Yes, I can. I'm high energy and I can energize others that get so excited that they wanna work hard for me. The next E, can you execute? I could execute flawlessly. Next E, do you have edge? You can have all those E's, but if you don't have edge and you're not willing to have a difficult coaching moment with your employees and straighten things out and make difficult decisions like firing, it's not gonna work. I have edge. I could do that. I could sit down and I could have coaching moments and terminate people. Great. Next is P. Are you passionate?

29:12No, I'm only doing this for the money. Get out. You gotta have passion. That's what's contagious. That's what people love. That's what employees follow is the 4E1P principle. That's what makes a brilliant, successful franchisee. Not the IT executive hiding in a cubicle, sweating hands at the idea of speaking to another human being. That guy is going to fail and AI is going to destroy his livelihood. So many years ago, we had Cody Sanchez on when she was just starting, you know, the boring business movement, which I think has become something so big. I see a lot of people talking about buying boring businesses and you have this huge generation that's retired or retiring right now, and they have tons of businesses that will either clothes or maybe somebody will buy them.

30:00Do you think the biggest miss is that I don't hear anyone talking about buying a retiring or boring franchise business? Interesting question. Yeah. I had a gal on my show, Jessica Falkovich, who created a company called Exit Factor. And interviewing her, she asked me a question. I was blown away by this answer. She goes, you ever been on Biz Buy Sell? I said, yeah. She goes, what percentage of businesses on that website do you think will ever find a buyer? I have no idea. She said, 85 % of businesses on Biz Buy Sell will close and never find a buyer. Wild. That is a wild statistic. Think about 70 million baby boomers aging out and exiting the businesses that they ran and there's no buyer.

30:50So let's reverse engineer the problem. Why? Why? Cody Sanchez, how many businesses? It's like shooting fish in a barrel. What's the problem? The problem is that that generation grew up with this thinking. If you want something done right, you have to do it yourself. That is the worst advice you could give another human being. And that advice needs to die in the world of parenting because all you're doing is suppressing your child or yourself. And now you have millions of baby boomers selling their businesses under the idea that if you want something done right, you have to do it yourself. Translated means I am the business.

31:32I'm it. Who would like to buy my job? And you know what the answer is? Nobody. No one wants to buy your job. That's the problem with what you're selling. You're selling a job. You are not an entrepreneur. You are not a business owner. You are an employee of your crappy marginal business. That's the issue. And a lot of them have a net income of under 100. And once you remove the founder owner and I hire a manager to replace him or her, I go net negative. Nobody's interested in that business. The economics don't make sense. The way to build a brand and a way to exit that brand is to build a business that does not rely on your day-to-day involvement.

32:09That's a business. something you could scale, something that's greater than one. That's the issue that we're having today with small businesses being sold. They're not worth buying. And that's why 85 % of them will never find a buyer. Something a mentor told me back in 2020, I learned this and I used it, was buying assets of a business. For example, newsletters, social media pages, different things that most people don't think about as a piece of the business. And we did this before. I wonder if there's an opportunity to not buy the entire business, but to buy pieces of the business that you can plug into your own.

32:47Essentially, if they're going to close it, wouldn't they want to make some money? I like that idea better than the movie script. You're spot on. We're in an era of traditional business brokers. Well, what do you do? I sell a multiple of EBITDA. Okay, that's what you do. So what do you do when it's a fire sale? Well, there's nothing in it for me. Therefore, I don't sell it. So it's like, wait a minute. Do you know of fire sale businesses? I got dozens of them. I have dozens of clients that have come to me that have said, I'm not making any money, but I'd like to sell my business. And then the broker goes, well, how am I making money?

33:23I don't know. I was hoping you could help me. So if there's a way to monetize instead of a business broker, you're right. We're an asset sale broker. We're selling lead lists. We're selling. I mean, think about a local business owner in Michigan, right? Some guy in Michigan with 300, 500 houses that he just does pest control for. The business sucks, but the database is worth a fortune. That's where you and I grew up in an industry of big data is going to be everything. Big data, big data, big data. Right. You're aggregating all the data of all these consumer behaviors and all these doors. I just interviewed a guy doing residential property management.

34:02He has over$100 billion in real estate under management. What is his go-to move to grow the brand? Well, you could grow organically and grind it out, or you could grow through acquisition and buy all the little mom and pops that are managing 20 doors, 50 doors, 100 doors, barely making a living. Those doors drop to my bottom line. To him, it's worth nothing. To me, it's worth a ton of money. so you're you're spot on i think you just came up with something this is you just redefine i'm all about longevity in business and in life that's why i take coco via a daily plant-based supplement powered by coco flavanols bioactive compounds found in a coco bean clinically proven to support heart and brain health only coco via uses coco pro the most concentrated and consistent cocoa flavanol extract on the market.

35:01Here's the science. Cocoa flavanols increase your body's natural production of nitric oxide, a super molecule that signals your arteries to relax and widen. This optimizes healthy blood flow, delivering vital oxygen and nutrients throughout your body. In fact, this physical support starts working within 30 minutes, improves circulation in two hours, and promotes long-term cardiovascular health. When taken daily, cocoflavanols can improve blood flow and vascular functions and help retain healthy blood pressure and cholesterol levels. The 500 milligram capsules are clinically proven to help preserve cognitive function and protect memory as you age.

35:41And if you're looking for an extra brain-boosting edge, Cocoa Via also offers their 750-milligram Ultra line, which is clinically proven to improve three distinct types of memory, word recall, spatial memory, and long-term memory. I take 500 milligram capsules every morning with breakfast. Go to cocovia.com, that's C-O-C-O-A-V-I-A.com, and use my promo code FOUNDERS at checkout for an extra 20 % off or check out your local sprouts. Let me tell you about a time that Upwork saved me. I had two hours to get a submission to a major media outlet, and I thought there was no way I'd make it. I jumped on Upwork, messaged someone, and within 10 minutes, they replied, 90 minutes later, the work was done in my inbox, submitted on time.

36:33And here's the best part. Two years later, that same person still works with me today. Upwork is where businesses find highly skilled freelance professionals for specialized work from software development and AI implementation to marketing design business operations. With Business Plus, you can access the top 1 % of talent on Upwork. AI shortlisting matches you to top freelancers in under six hours. And with over 170 ,000 five-star freelancers, you can hire with confidence. Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow.

37:17That's U-P-W-O-R-K.com Upwork.com Sunbelt business brokers Vested business brokers Transamerica business brokers You're selling businesses At a multiple of EBITDA What about the assets? I love it actually What are the top three things That you feel That you've done throughout your life That made the business successful The three most important things that you have to do every single time you buy a business, you add in a business? What are three things? One is overcoming fear. I've said this. I think fear is one of the most influential forces in our lives and the least discussed. Least discussed.

38:00And it goes way beyond just a feeling. It's way beyond that. Overcoming fear is a huge move that you have to make to do anything. I don't care if it's dating. You need to overcome your fear. and that is literally a podcast episode in itself. That's how much I could say about fear. Next, due diligence. Like due diligence with a strict adherence to due diligence. Warren Buffett has a great quote that I subscribe to and has a lot to do with your question. To be successful, all you need is a sound conceptual framework for making decisions and the ability to keep emotions from corrupting that framework.

38:41That I'm very good at. non-emotional, black and white, right? To me, it's just binary. Good deal, bad deal. Like, boom, moving on. That won't work. That will work. We can make that work. Like having that data. I love aggregating data. I love doing due diligence. I love speaking to other people in the industry, like all of those types of things. Next would be, it's like real estate. You make your profit the day you buy the piece of property. It's the same with the business. You're going to make your profit the day you invested in that brand. You got to be very careful how much you pay for those assets, how much of a multiple of EBITDA, and you have to trust but verify that that number even exists.

39:21I always say this to people. People are like, hey, I found a business. I'm going to buy it. I don't need you anymore. I go, just tell me about it. Guys make it like 300 grand. How much of that is reported on his tax return and to sales tax receipts? Oh, well, he's got about 150 in cash. I go, you know what's interesting? No consumer in America has cash. No consumer in America spends and transact in cash. The only people who have a massive amount of cash are small business sellers. Small business sellers in America have all the customers in America that are paying with everything in cash because it's total bullshit.

39:59It's all bullshit. So trust but verify. What's the worst franchise that you think people are buying and still throwing money at? Yeah, right. Food. I don't want to pick a brand name if that's where you're going. No, I'd like to do industry. I like to do industry with you. And thank you. Number one, food. No one has ever come to me with a financial reason to invest in food. It's always feelings. It's always feelings. Reminds me of my grandma. Reminds me of my dad. We used to cook in the kitchen all the time. When you say food, is that restaurants? Restaurants. I think restaurants are negative symmetrical, right?

40:37So it's like massive investment, raise within margin, high labor, perpetual job hoppers, throwing product away that doesn't sell, huge rent, huge build out, massive personal guarantee with the landlord. And for what? So you do a million in sales. What's your revenue? I've got a client that's doing$20 million in a Vegas casino at a steakhouse. And he's talking to me. like if the food there's never really like a food reason a financial reason to do food next and i've said this for years as you know i owned a lot of gyms my business poet always asked me why are you not long gyms i go the day is going to come when you don't need a gym membership there are tens of thousands of gyms in america and we while we're opening tens of thousands of gyms in America, we've managed to become the fattest people on the planet.

41:34We have states in America with a BMI classified as morbidly obese. Think about that. So what does that mean? Gyms don't work. They don't work. So the day has come where you could take a pill or stab yourself in the stomach and lose two pounds a week for doing absolutely nothing. I am not long on the gym business. And here's the issue. I want to be very specific. What gyms were selling was caloric burn. That's what they were selling. Come in, heart rate monitor. Oh my God, look at your screen. You just burned 2000 calories. Yeah, it's a pound of fat. You're remarkable. The caloric burn story is dead.

42:09You cannot market caloric burn because I can burn a meal by taking a pill now with a semi-glutide, a GLP disruptor, Ozempic, Wagovi, put your name on it. So that story's dead. How fitness evolves from here, this is my prediction. it will evolve into biohacking, longevity, anti-aging. So we went from pushing weight, running on a treadmill. Now you're going to do cold plunging, sensory deprivation, red light therapy, peptides, stem cells. And you'll see where that money sector rotation will go. It will go. Gary Breckett just created a brand. Gary, Dan, Gary Breckett just created a brand. Zero locations operating.

42:52Zero. sold over 600 of them in probably less than five months. Do that math. Anti-aging Longevity Biohacking Institute. Wild. You know, the crazy thing is, it's not always good to be early, as you know. 13 years ago, we started a spa, and the spa was facials only. And everyone told us, you got to add massage, you got to do these other things. And we said, no, we just want to be the best at facials. We want to help people with acne, and we want to help you with other similar related things. Then we introduced red light therapy. This is like 2013, 2014. And then we had infrared saunas. We had all these different longevity things.

43:34But I think it was too early. Honestly, I think it was too early. And COVID, you know, wasn't too friendly with that business. But we had already been running it for many years before. We also did other things too that no one had done. But there was so much education involved And it was so costly to acquire that customer that I think if we did it now, it probably would be 10 times more successful. Oh, yeah. You're creating this concept in an era of Osprey, Huberman, Tia, right? We just mentioned Brecca. Like they've done all the heavy lifting. You're drafting behind the average person is listening to podcasts and they're understanding the benefits.

44:15I have a red light bed right here. I do it five days a week. Um, I love it, man. I think it's phenomenal. I'm doing anything, anti-aging biohacking, anything that could give me an edge over a competitor, anything that could keep my energy levels at a level that the average human being doesn't have. I'll do anything for that competitive edge. That's safe. We should have done this interview with red light masks. That might be a thing. I might start that. You have me back on. That's a deal. All right. So let's say you had to start over tomorrow because you got broke. Hopefully you will never get broke.

44:51But let's just say hypothetically, you had to start over broke tomorrow. What business would you buy? I think if it was like, so you're saying it's like now it's happening now. And in today's technology, I would be so I'm broke and my path of least resistance would be leveraging something like Claude. I would dig into Claude. I would watch every episode of Mr. Beast, every episode of an influencer. And I would figure out how to create some AI agents and ultimately start scaling something that I could do very inexpensively with an AI agent. I think that the first job was once McDonald's. The first gig is going to be an AI agent that's kicking off ancillary income.

45:33I think I would begin there. I mean, look at what Michael Saylor did with an AI agent to create a stretch, STRC, right? Probably the single greatest money mark. That thing went to$70 a share. I was gobbling it up. Everyone said it's going to zero. No, it's not. No, it's not. I mean, he created, if you do the backstory on it, he created STRC, Stretch, that preferred, quote, money market instrument pegged at 100 parity with a 12 % yield. He created that with AI agent, brought in tens of billions of dollars. That's how powerful that is. That's why I think that's why I believe that the first time job used to be like a kid working at fast food.

46:18Well, that job's been replaced by AI and robotics and humanoids, etc. So our children now coming up will come up with, hey, I just created a little app that tracks jets. I create a little agent that does this. I create an agent that'll tell you the weather on vacation and if you should or shouldn't buy travel insurance. That's where we're headed. You're bullish on senior care and pet care. Why? I'm all about longevity in business and in life. That's why I take Cocovia, a daily plant-based supplement powered by cocoflavanols, bioactive compounds found in a cocoa bean, clinically proven to support heart and brain health.

46:56Only Cocovia uses Coco Pro, the most concentrated and consistent cocoflavanol extract on the market. Here's the science. Cocoflavanols increase your body's natural production of nitric oxide, a super molecule that signals your arteries to relax and widen. This optimizes healthy blood flow, delivering vital oxygen and nutrients throughout your body. In fact, this physical support starts working within 30 minutes, improves circulation in two hours, and promotes long-term cardiovascular health. When taken daily, cocoflavanols can improve blood flow and vascular their functions and help retain healthy blood pressure and cholesterol levels.

47:39The 500 milligram capsules are clinically proven to help preserve cognitive function and protect memory as you age. And if you're looking for an extra brain boosting edge, Coco Via also offers their 750 milligram ultra line, which is clinically proven to improve three distinct types of memory, word recall, spatial memory, and long-term memory. I take 500 milligram capsules every morning with breakfast, go to cocovia.com. That's C-O-C-O-A-V-I-A.com and use my promo code founders at checkout for an extra 20 % off or check out your local sprouts. Let me tell you about a time that Upwork saved me.

48:21I had two hours to get a submission to a major media outlet and I thought there was no way I'd make it. I jumped on Upwork, messaged someone, and within 10 minutes they replied. 90 minutes later, the work was done in my inbox, submitted on time. And here's the best part. Two years later, that same person still works with me today. Upwork is where businesses find highly skilled freelance professionals for specialized work from software development and AI implementation to marketing design business operations. With Business Plus, you can access the top 1 % of talent on Upwork. AI shortlisting matches you to top freelancers in under six hours and with over 170 ,000 five-star freelancers, you can hire with confidence.

49:11Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's upwork.com. The United States is aging at a rate that we will catch up to Japan, Italy, Germany, and countries that are classified as super-aged nations. Super-aged nations is when 20 % of your population is over the age of 65. We will be there in less than 10 years. This country is aging rapidly. We are not repopulating. Our country isn't designed culturally to take care of our elderly. In fact, no one has elderly people living in their house with them.

49:59We put our elderly in an institution called assisted living or memory care. Our country is addicted to 9 ,000 prescription drugs that I think is destroying their brain, their mobility. And for that, we don't have enough. You want to hear a crazy stat? Speaking of senior care, I had a senior CEO on my podcast. This guy asked me, I love what he asked me a question. He goes, what do you think the average age of a caregiver is in America? Now the answer should be 35. That's the answer. Your youth take care of your elderly. We repopulate and the cycle continues. Are you ready for this answer? The average age of a caregiver in the United States is 60.

50:44So you're worried about your caregiver breaking their hip as much as you're worried about your parent or elderly grandparent breaking their hip. That's effed up. That's where we're headed. And that's why I believe Optimus, I'm fully invested in SpaceX and Tesla and all that, because I truly believe that tomorrow's caregiver is going to be an Optimus humanoid that we'll be caring 24-7 for our elderly and be really, really good at it. Really good at it. So yes, pet care is kind of a continuation of what I just said. Well, why are you long on pet care? Because we're not repopulating. Our youth have decided they can't afford a house, they can't afford kids, they can't speak to the opposite sex, they can't hold a relationship, so let's just buy pets.

51:28And that's what they've done. $150 billion was spent in America last year on pet services. That is an ungodly amount of money. $150 billion is a market cap in itself. So yes, you say that like I'm only interested in those two businesses, but I just want you to know I'm long. Can I just briefly share with you? This is what I'm long on. I'm long on any business that requires the use of tools. Why? Because a hand dexterity is your distance and your game changer from AI. AI doesn't have hand dexterity at the moment. So HVAC, plumbing, electrical, all hand dexterity jobs to me will be making a ton of money in the near future.

52:14Look at all these data centers. These electricians will be making hundreds of thousands of dollars, right? So you look at that next men's health. I actually like men's health. Why? Because we've been feminizing men for 20 years in America and a 30 year old today has half the testosterone and half the sperm of his grandparent. So anything in the men's health category, whether it's ED or whether it's testosterone replacement therapy, I'm long. I'm long on senior care. I'm long on the humanization. I'm long on anything with it, which we classified as the human. It's all in my book, Beyond the Brand.

52:48Humanization of Pets and Animals, Feminization of Men in America, The Silver Tsunami, The Pursuit of Youth. We just talked about it with Gary Brecka, Anti-Aging Biohacking. And lastly would be youth enrichment. Our schools are not preparing these kids for the real world. They're not. And parents want more for their children. They want home economics. They want music. They want art. They want science, technology, engineering, and math. They want more. They want sports, right? They want their kids using both hemispheres of their brain. Everybody thought music was for music. Music class had nothing to do with music.

53:24It's one of the few things you could do where you're bridging the corpus callosum, which is both hemispheres of your brain. You're reading song sheet and you're playing an instrument. There are a few things you will do today that require both hemispheres of your brain firing at the same time. What are the benefits of that? Reasoning skills, problem solving, execution, all of it. That's what music and art were really about at the elementary school level. It was all about those things. It had nothing really to do with music and art on its face. I mean, love the book, though. Beyond the brand, by the way, everyone show the book, show the book.

53:58So I have a really, really deep question for you. Final question is going to be crazy deep. Something I cannot stop thinking about is the wealth transfer that's about to happen. It's an estimated 80 to 100 trillion dollars is about to be transferred from baby boomers down mostly to Gen Z and millennials. I feel like there's so much that is going to change because if these people are getting millions of dollars, each of things could be houses. I think it's$40 trillion,$38 trillion in homes, and the rest is in businesses and stocks and 401k, IRA. How is this going to change things based on if they all of a sudden receive this money, they receive these businesses, they receive things.

54:41What do you think is going to change? I mean, the work ethic has already changed. So that won't change the fact that this current generation really doesn't want to work. They don't like nine to five. They don't like corporate culture. They don't want to go to an office. They don't want to commute. So I'm not really sure. I'm not really sure that anything changes in terms of like, wow, now they're really going to be lazy or now they're really not going to want to work because that's going to be done for them before the wealth transfer, their job is already being replaced by AI, by robotics, by humanoids.

55:17And then next wave will be quantum computing that could calculate a wormhole in the universe, which would take us right now millions of years to figure out, will be done in probably a week. That's crazy to even think. And you could look that up if you went on like AI, what would be the most complex mathematical calculation, right? And how long would it take humans with today's technology to do it? And then how does that relate to now inventing or introducing quantum computing? So their job is already lost. I'm glad you have a ton of money. And I think that Elon is right. I think that you're going to have a nation that didn't inherit wealth.

55:58Remember, your scenario is huge, but it's really still 99 percent and one percent. Most of the country really doesn't have any money, right? Like they're middle class at best, and they're trying to figure out how they're going to buy eggs and how they're going to buy and get through the day. I think that technology is going to be the huge disruptor. The country will ultimately put many people on universal income and everything from there will be deflationary. I think you and I are living at peak inflation. And with all these advancements of technology, it causes a deflationary environment. That's my prediction with the future with that wealth transfer.

56:35Cliff, my head just exploded. I could tell why you have money behind you, why you have a Benjamin on the wall. I love that, by the way. But I hope everyone picks up your book. Me too. It's a good read. Love the book. Amazon, is that where they can buy it? Yeah, go on Amazon, beyond the brand. Cliff Nahnemacher, build the brand, man. great conversation i never go this long this might be the longest 51 minutes that might be the longest time i've done ever on a virtual really option yeah tom sosnoff didn't go this long like no gary v stop not even tom interesting guy though by the way oh i love to i've been using his trading platform i love that interview i love that guy did he is he's something else man I have a good one.

57:26The founder of Zynga. Yes. We had to edit a lot of it out because he said things because I asked him a question around young people don't trust billionaires and they think billionaires are the problem. What do you think about that? And he did. I think he was frustrated by that question. Really? Not by the question, but by how people are based on the fact that people don't trust billionaires. I think. OK. I think there's a lot of resentment towards billionaires or maybe it's being created on social media yeah that's interesting um i don't are you asking my opinion about it i'm just throwing it out there it's just you know i mean i don't i don't know that i have a dog in that hunt um it's political and i try and remain i don't talk about politics religion and other people's lives that's exactly other people's children out the whole discussion by the way because i i do but uh but clip this has been great i hope everyone gets the book build the brand you're the king of franchise you're the king of you're gonna be the king of what is it what is the idea somebody can create a hope someone listens to this and creates a platform and sends me the platform buying the assets of a business but not buying the entire business you and i should do it done edit that out that's a great idea man i'm gonna edit it out I think you should.

58:51I'm telling you, I think you have something there. I really do. There are millions of businesses that will not find a buyer, but they have an intrinsic value and you just identified it. That guy's book of business is worth a lot to me, the local pest control guy, the local tree trimmer, the local plumber. There's a value to that book.