The Most Hidden Path to Financial Freedom in America

23:28So let's do something that's not going to require that. Let's take it more realistic. I don't have friends and family that will give me, you know, two and a half to five million dollars liquid. And I don't have the operating experience of running a Chipotle for three years yet. So what else would I do? European Wax Center, what are we thinking? So let's do another nine. That's one that I'm in full disclosure. I'm developing five and other nines in Minnesota right now. It is an indoor. What's an other nine? Another nine. Another nine. Is that the name of a franchise? It is a fully unattended, so no employees, no food and bev, indoor golf simulator franchise.

24:03golf is very trendy and popular right now it's making a comeback you got the netflix effect with full swing this past year actually more americans played off-course golf so like top golf simulators etc than actual green grass golf for the first time that sounds substantial okay so you you basically say hey there's this trend and this movement indoor golf simulators you said yourself if you're building five of these out. Okay, so let's walk through, again, the one-unit example. Does little brother need some special sauce to do this, or what does he need? What's the steps? Yeah, so in this case, you are going to need an SBA loan.

24:39That's what we're using to finance some of these. The build-up's substantially lower than a Dave's, and they don't require you to build five of them. So you can get into one or two of these. When you go to get that SBA loan, do they need you to have proven anything yourself, or can you just say, look, this is a franchise. I'm going to operate it. I've had this corporate job and I'm ready to go do this. Do you need something to qualify for that SBA loan? Yeah, so typically, depending on the brand you're getting into, you need 50K, I'd say, liquid and over 150K net worth. So again, I think attainable for a lot of people wanting to go escape corporate or add on to their real estate portfolio, etc.

25:18SBA will borrow you up to$5 million across multiple loans over time, and they will make you sign personal guarantees. So you are, if you own a house, that's collateral. You know, they're looking for, does the individual have enough collateral and does the brand have enough data and proof points that this is a concept we want to back and be involved in? And most banks, like I think a lot of opportunities, some love food and that's what they do. They're the food lenders. There's others that love fitness and they're the fitness lenders. And so you got to find the right lender that is comfortable with the concept you're looking at.

25:49So how much does it cost to build one of these? Yeah, so one of these is anywhere from, 320-ish K to 800 ,000, depending on the number of private bays you want. So another nine is different than these social experiences you see where it's food and Bev and staff. This is like anytime fitness. You fob in with your phone, you can go at three in the morning if you want, they're 24-7, and you go play sim golf on some of the nicest equipment out there. The guys that started this out of Cincinnati, they said they got surgeons that go three times a week at three in the morning when they're off shift, and they go play Pebble Beach for an hour before they go home and call it a day because that's their routine and that's when they can get away and do it, but they don't have five hours to go play an actual round.

26:31So I'm on Another9.com. It looks really fun. I don't even golf, but this looks like it would be really fun, but it looks very new. I think their headline says, just two dads are going to play more golf. That's who founded it. It's got pretty funny language that actually says, did we mention that we're BYOB? like it seems it seems cool but it seems um like why would i need them why wouldn't why would you pay them money versus going doing it on your own yep so one thing i always tell people if they're thinking franchising and again here's another analogy it's like a lot of brokers or people will say like i know sam and sean they just assume they want ice cream so it's like which flavor do you want and i say we gotta take a step back maybe they don't even want ice cream maybe they want cookies or cake and you know the dessert type being franchised versus real estate versus buy your own business.

27:18And so I usually tell people, if you're going to do franchising, you need to think about this over a 10-year period because most franchise agreements are 10 years. You need to say in five years, what value is this brand going to be providing me that justifies this ongoing 6 % royalty? And so in food, it makes a lot of sense. McDonald's is going to give you 10 cent per pound burger meat versus a dollar that you get on your own. You're getting more value in the bulk purchasing power of the brand, the menu innovation, the marketing, etc. then you are keeping that 6%. And so a brand like Another9, because a lot of the value is front-loaded, they're getting breaks on equipment and build-out and helping you with site selection and design, how do they create value over time?

27:59And for me, it was, I'm doing Franzy full-time. They are going to provide resources on an ongoing basis, training, they're building software that I don't want to spend time building or investing that allows better scheduling and easier marketing and lessons to go partner with existing golf courses to drive volume from that channel. They're building this really cool league software where Sam could be in New York and Alex is in Charlotte, and we could be doing a fantasy football type league where all of your high school or college buddies could play against each other in your respective markets and have this fun ongoing competition.

28:32So they're investing in technology that I think creates stickiness within the consumer base. They make the operations a little bit easier, maintenance contracts. And that's probably one of the least value add five years from now, kind of examples versus a restaurant. But even then, it's worth it to me to not have to think about all that. Okay, so finish up the economics for me. So you said, you're going to go, you're going to build this thing out for, let's just round it to 500 grand. And you're going to franchise this from these guys. They have a 6 % royalty. What are you, and you got that 500 grand from the SBA.

29:0410 % down. Yeah, 10 % down. So you put 50K down and you're going to get the rest as a loan. So what are you looking for? And how do you, why, you know, I guess you're trying to do five locations. Maybe it takes five for this to really like be meaningful. Is that right? So I always tell Bill, if you're going to try to replace your income or have, you know, kind of like a side hustle or some side income, you can do that with one or two units. If you're really looking to fully replace, if you're a higher earner, 250K plus in salary, you're going to need three plus locations to replace your income and eventually build wealth beyond that.

29:37So for me and my partner, it was let's do five. They're very passive. There's no employees. There's no food and bev. We can run five as essentially a side hustle without having to be super involved in the day-to-day. One unit on average is doing just under 300K a year in revenue, which might not sound like a lot, but they have 55 % margins because there's no labor, there's no food and bev. It's just the build-out costs and rent. Essentially, you don't need high occupancy to get to a meaningful amount of profit. So we're expecting each one to do 150K in profit after all expenses. You get to five of those, generate 750K in relatively passive income.

30:15A lot of work for us up front to find sites and build, but meaningful cash flow in the long term. And Sam had a good point a second ago where he was like, do you have to almost think like an investor and spot things a little earlier than the curve and figure out what's going to have staying power and you had this interesting thing you texted us. You said turf businesses. And I think in this one, you were saying there's almost like a regulation that you will benefit from. You said like Vegas, for example, is prohibiting new homeowners from growing grass. So they have to go turf. Can you talk a little bit about that idea and how you would capitalize on it?

30:52Yeah, so Waterloo Turf is the brand. He's a former private equity guy. And this is a big thing that I look forward to. Just like Sam said, find trends. You're betting on people as well because this is a partnership. I think another thing people might discount in franchising is I'm not just buying Sean's old business. We shake hands and Sean and Alex don't really interact beyond that. No, I'm looking at Sean as a 10-year partner. We're going to work together. You guys are going to make investments in the brand, help me with marketing and problems that I have and build a system of other franchisees that hopefully can all benefit from and learn from one another.

31:23And I think people maybe take that part for granted. So I just wanted to stress that the founder of Waterloo Turf is phenomenal, former Cal-like guy, very deal-driven investment banker, very analytical. And he's looking for this trend and seeing the turf industry in the United States as$4 billion today. It's going to grow by another half a billion next year. And there's no clear winner. There's no national brand. No one's dominated this. Why don't I go build a franchise brand around it and do that and build capabilities in bulk purchasing power on an ongoing basis for the materials? There's ongoing maintenance to kind of re-turf and make sure the grass is still enjoyable for young kids and it's not wearing out quickly.

32:03And it's another pretty affordable business to get into. It's only$105 ,000 to$150 ,000 to get into because you don't have the overhead of a retail store. There's no physical location. You don't need a lot of equipment. And so for$100 ,000 to$150 ,000 grand, you can own a business that on average is generating$1.3 million in annual revenue with profits around$270 ,000 a year. So again, one location in this example could replace a lot of higher-earner incomes, but now you're your own boss. You're an entrepreneur with a playbook and a team behind you versus having to have this completely original idea to convince you or make that push for you to leave your corporate job.

32:42Why are you selling software to this? Why don't you just go buy a bunch of these? That sounds great. So I'm trying to do both, which maybe sounds like a not great idea, but I have partners on the franchise side that are my version of Cal. I'm being more capital, a capital partner. I have operating partners in the franchises because I can't physically build a software company and operate a franchise portfolio. But the goal is to get to 50 to 100 unit portfolio just like Cal's doing. And let's just say, hypothetically, let's say you get to 50 to 100. What are you telling yourself? You're like, oh, I'll make 5 million a year off of that?

33:18Yeah, at least. And then the enterprise value. So like Cal with Papa Bagels or Dave's Hot Chicken, I mean, the exit multiple for him will be 6 to 10x on EBITDA compared to 3 to 5x if he just owned Cal's Chicken Shop. Orange Theory at its height was trading for 21x EBITDA. It was insane. I mean, it was like a software business multiple on a gym. But because it was a part of a system, they had some recurring revenue. Investors and private equity groups rolling them up treated it like a software business. Sean, have you heard of Papa Bagels? No. They were started in this little town that I used to live in, Westport, Connecticut.

33:55And they have this crazy model where you can only buy 12 bagels at a time. I think you have to pre-buy, or sometimes they're like changing their rules, but it was like you had to pre-buy 12 bagels in advance. And now I live in Manhattan. And two things. One, they're better than like the normal mom and pop bagels. They are phenomenal. And two, every time you see one, there's a line. the pop-up bagel phenomenon is incredible I've never seen anything like this and I think it's just like a husband and wife started making bagels like in during COVID times and it kind of turned into this like they could be a billion dollar plus brand at this point but what's your Alex what's like the calculus here both in terms of like emotion work and money on starting pop-up bagel or starting Orange Theory versus owning a bunch of them as a franchise franchisee.

34:48So you're saying starting as, you know, like the franchisor, like what the husband and wife did with Pop-Up. Yeah. Sam's saying, should I shoot to own 45 of someone else's chain or should I shoot to create the franchise and then franchise it to a thousand people, right, Sam? Is that kind of what you're asking about? Exactly. What's the difference? Yeah, exactly. For example, we had Brian Scudamore on MFM a while ago. Brian started this thing called 1-800-GOT-JUNK. It was a horrible bit of business for like, I think, 14 years. I think I think it took him 14 years to head to a million in revenue.

35:17And then he was like year five after we decided to franchise. It took off and now he's a multi-billionaire. And I'm like, that sounds cool. But you're advocating towards the other stuff of owning someone else's franchises. Yeah, I think it goes back to the entrepreneur archetype. If you're that builder, creator type, where you are the less than probably 1 % or 2 % of the population that thinks that way and has those types of aspirations, and doesn't want to have a boss, like you're likely the kind of tech software entrepreneur or, yeah, creator type. But I think 99 % of the population is not like that, but they want to do something entrepreneurial.

35:56They just don't know what, they don't know how. That's why I'm such an advocate is, you know, had I not had that small college entrepreneurial experience, I might not have learned things to go be a successful entrepreneur later on. And the more people we can get getting some of these reps in of like, all right, go build a team, go have to find a location, go up to solve these problems real time and have some of the shitty stuff that happens to you as an entrepreneur happen to you so you learn how to take those punches and become an operator and an entrepreneur. That's why I'm an advocate for it.

36:26As me as an individual, I like the creator, like higher risk, higher reward. Let's go try to build this system to a thousand locations. And I started that. The reality is I don't think that's the majority of America or the majority of people. What do you think is the thing to look out for? Who's lying to me? So in any legitimate way of making money, there's always going to be, if there is a legitimate way of making money, there's going to be a bunch of people who come in and say, you know what? Let me ride the back of that legitimate way of making money and I will over promise. I will under deliver.

36:57I will try to sell a lemon to somebody. And this happens in real estate. I could tell you, hey, tech investing, startup investing, that sounds great, right? You can invest in the future of entrepreneurs. Well, I can tell you the people who are going to basically, it's not a scam, but it's like, dude, you're going to lose your money if you do it that way. And I can tell you the people who do it in a certain way where you have a good shot of making money. And there's a clear difference when you're on the inside, you know. You know who's who, right? And so in every industry, I think this exists. In the franchise world, what are the red flags?

37:31Who's lying to me? Who's out there trying to take advantage of you? and what should you look out for that would be the sort of signs to run away? Yeah, the reason I was kind of smirking is there are so many and it is one of the main drivers behind Franzi is that regulation, and I'm not a big proponent or fan of overregulation, but it is the wild west in business brokering and especially in franchising. So there's no licensure to become a franchise broker. You know, like real estate, you have to go get licensed and you're registered in the state, you have to take coursework, You have to disclose your commissions and fees and how you make money.

38:07In franchising, it is absolutely insane about what's allowed. So the three of us, boom, we're all franchise brokers in this moment. You're done. That's it. You don't have to go get registered in the state. You don't have to take a course or an exam. And then you can go charge a 60 % commission on the franchise fee. Six, zero. And for anyone that's ever done sales, I mean, outside of insurance, does anyone else know a sales commission that's that high and that incentivized? No. I can't think of anything else that's that high of a commission. And so what does that attract? A lot of people who are going to say what they need to say to get a huge payday.

38:40If they close a couple deals a year, it's two, three, four hundred grand. Some of these brokers are making a million dollars a year, not having to run anything other than convincing someone to buy the right business. It's always the brokers. Yeah. It's like a timeshare presentation. So I hope some regulation happens and pushes it. At least tell people how you make money and how much so that you know, because half the time they're not telling you and you think as the person receiving their services, this person's smart, they're going to help me, this is great, it's free for me. And you know they're making some money on the back end, but you don't realize just how much.

39:11The bigger issue on top of it is they might only be showing you the 15 to 20 brands that they have an agreement with. And so there's 4 ,000 brands and you're being shown this universe of 15 to 20, having no idea what's happening out in the background. It'd be like buying a house from a real estate agent that's also the listing agent on the house and them only showing you the listings that they're also the listing agent. How do the brokers work? So are they, where do they sit in this ecosystem? So are they cold calling people? Are they running like webinars? Like what are they doing to even get in the middle of the transactions?

39:43How are they generating the transactions? You guys probably both get a lot of LinkedIn messages and I'm sure you've got a bunch of franchise brokers in your inbox saying, hey, Sean, have you ever thought about owning a car wash franchise or this? You'd be a great entrepreneur, a great operator in this business. and a lot of LinkedIn outreach, yeah, webinars. Some of them make YouTube channels. Right. Telling you how easy it is. Wait, and is this Franzi's business model? You get 60 %? No. So I wanted to build Franzi. You're stuck and I'm the best. Yeah. These fucking brokers accept me. They suck.

40:16You're trying to disrupt that broker model. I'm trying to disrupt the broker model and democratize it. So hey, instead of the 20 brands that a broker might show you, here's 4 ,000. Here's all of them because we scraped what are called FDDs, Franchise Disclosure Documents. It's like what Zillow did with the MLS. So now every brand is out here, the good, the bad, the ugly, which ones have failed, shut down locations, have declining AUVs and revenues. And then we charge a flat dollar amount to the brand. So instead of 60%, it's about half of that. It's flat across all brands, and we disclose that up front to our clients.

40:46So think of us as more of a franchise fiduciary. So here's how much we make, here's how it works. We have AI that's matchmaking you with the right brands based on all these unique things about you. And then we just help you find the right fit, get financing, get your entity formed, get the right franchise CPAs, franchise attorneys involved, et cetera. What brands would I have bought 15 or 20 years ago that just crushed it today? Like, what can we look back on and put together some dots? Yeah, 10, 15 years. Yeah, nothing but cakes is still one of the best unit economic businesses there was. I mean, Rourke Capital is also this kind of hidden behemoth that owns the majority of brands that most people don't realize.

41:29They own Driven Brands, which is Meineke, Mako, Take 5. They own Inspire Brands, which is Auntie Anne, Cinnabon. So Rourke Capital, according to Wikipedia, has 1.4 million employees and$37 billion under management. So it's just a huge company that owns tons of franchises. So when I'm on their site and I see Dunkin', like Dunkin' Donuts, what does that mean? they own some locations or they own part of Dunkin'. They are the franchisor. So Rourke's playbook is let's go buy up the franchisors and now they have that 6 % royalty stream into perpetuity across all of these brands. So they have Splash Swim School, they got Jimmy John's, Dunkin' Donuts.

42:08Sean, are you going to let these guys come after the Patel mob? Everything you worked for. They're coming at it. No, everybody needs exit liquidity and this is ours. These guys love Indians. Okay, so which other businesses were cool 10 or 15 years ago? Nothing but cakes. I've never heard of that. That was hilarious. What? You got to try it. It is really good. And again, the economics are low food costs, very good AUVs. I think it's$3 million or so. The box is small and simple. There's one near me. This location could, on average, would do$3 million in revenue. Yes. selling these cakes? Selling cakes.

42:54I'm telling you, it's something disgusting. I've never even had a Bundt cake. What the hell is a Bundt cake? Yeah, I don't even know what a Bundt cake is. It looks horrible. It looks disgusting. Don't knock until you try it. I'm telling you. Did they just change the name from Bundt cake to something else? I would be so in. Today's episode is brought to you by HubSpot. Did you know that most businesses only use 20 % of their data? That's like reading a book, but then tearing out four-fifths of the pages. Point is, you miss a lot. And unless you're using HubSpot, the customer platform that gives you access to the data you need to grow your business, the insights that are trapped in emails, call logs, transcripts, all that unstructured data makes all the difference.

43:29Because when you know more, you grow more. And so if you want to read the whole book instead of just reading part of it, visit HubSpot.com. Okay, but nothing bundt cakes. That one was a winner. What else was a winner? A lot of home services like Benjamin Franklin Plumbing, Mr. Sparky, your electrician. Wait, you could just use Benjamin Franklin's name? Apparently. What? Yeah, the home services businesses. George Washington's gutter suckers. You guys talked about 1-800-Junk as well. And then Omar Solomon from College Hunks Moving Junk, they did really well. Same thing, very similar to 1-800-Junk.

44:13Obviously, hotels, Marriott, Hilton have done incredibly well. We had this guy named John Morgan. He's a billionaire. He is a Morgan & Morgan law firm. He kind of like, you know, he's a billionaire. So he owns just crazy amounts of stuff. And he's got all these stories. And like two or three times he said, I don't know if you remember this, Sean. He was like, yeah, we own some Marriott hotels. Like he just like made these comments that were fairly offhanded, but it was probably like an eight or nine figure like thing. It was like probably a pretty big deal. I'm shocked at how many like ballers are in on this.

44:46It's pretty amazing. I've found, like with the podcast, the ones that have more than 50 units open, they don't want to come share what they've done because they're like, this is such a good hidden gem. I don't want to talk about how I did this or that it's out there because, again, it is substantial wealth creation. I know a guy that owns, when I first met him, he was at 47 McDonald's and he was producing, I want to say it was like 35 or so million a year in cash flow. He's paid like an NFL quarterback. And he told me, he's like, I don't remember the last time I stepped foot inside of McDonald's unless it was one I was looking at buying.

45:19But I haven't eaten here. I haven't worked here. I've got one COO who runs the whole thing for me. I've got two private planes because one's not enough, I guess. And he just does whatever he wants and has this thing, you know, cash flowing. I talked to him recently. He's up to 90 McDonald's now. And, you know, the math on that's probably close to 70 million or so in cash flow a year. You're doing a good job of proving your thesis to be true. What's the nothing bundt cake but today? Oh, but today. So like the one that's just taking off. I mean, we mentioned it earlier, but just the pop-up bagel has this cult-like following, a phenomenal brand, great revenues, simple business model.

46:00Is food the best? Most all the best ones you've mentioned is food, but food seems a little bit more fatty. Yeah, exactly. It seems like I would want to own the plumber type of business or like, you know, home services. or turf or whatever. Naturally, I would try to go to the unsexy, maybe recurring, maybe higher ticket, maybe kind of local monopoly. It's not a fashion choice. It's not a trend. I don't need people to keep coming to the gym and stay motivated. I don't need people to change their diet habits. Am I wrong in that? Is that the wrong lens for this sort of thing? No, I think home services does phenomenally well.

46:34Food is tough too. If you don't get the right brand and hit the right trend at the right time, it's very expensive. It's harder to get in and out of. But if you find the right one, they're highly profitable. There's a lot more systemization and tools that the franchisors are providing that peer network. But if you're looking as like, hey, I'm the everyday kind of average person that wants to get into franchising and still have pretty significant upside. You're right, home services, because you're not building a retail location. You're not constrained by what if I pick the wrong location and now I'm stuck here with this huge investment and I can't move this box.

47:07It's a million dollar, two million dollar investment. But if I own Benjamin Franklin Plumbing, or there's one called Garage Kings that, you know, I think Damon John from Shark Tank was hyping up at one point, but they go epoxy your garage and like kind of pimp out your garage, custom shelving and epoxied floors and racking and all this stuff. They'll do 1.3, 1.4 million a year in revenue and very high margin because, again, not a lot of variable costs or fixed costs either. And you're just going around pimping out garages and cash flowing half a million dollars a year. Dude, Sean, we have this guy named Tommy Mello coming on.

47:41Have you ever Googled Tommy Mello? Tommy Mello. Sounds like a gangster. Yeah, he is gangster. Wait till you talk to him. He's cool. I think he's coming on in a couple weeks. A1 Garage. A1 Garage. I think all they do is garage doors. And he sold half the business, give or take. I think it was in the billion-dollar-plus valuation. And his garage doors, I think they do something. he shares everything. I think it was like$250 or$300 million a year in garage door replacement. That was the thing with Garage Kings too. The average unit volume was$1.3 million. And they're like, we're not even doing garage doors or other fixtures yet.

48:21And that's going to add another half a million per territory annually. So it's just these like unsexy overlooked things that if I... But I do think that a lot of people make a mistake there. So I have a friend named Chris who took over his father's HVAC company and he scaled it from 10 million to 200 million in revenue. And he was, yeah, it's called Hoffman Bros. And it's in St. Louis, now Nashville. And he was telling me, he was like, you know, he was like making fun of me. He was like, all you tech bros think that it's so cool to get in this business. He's like, you don't know the half of it, what I have to deal with when you're working with a blue collar HVAC guy.

48:53But what he said, he was like, my competitors, they're a lot smarter now because a lot of the young guys have taken over. But he was like, we give our guys iPads and we teach them, like we literally have a checklist for them. So when you go to the door, pet the dog. Ask permission. Say, may I come inside here? I've got these things I'll put on my feet. When you leave, you say something like, hey, I'll get a$50 bonus if you leave me a Google review here. Like just this checklist of things that a lot of mom and pop businesses, they just don't do. And so on one hand, I do think that like people like us are like, yeah, it's just an overlooked thing.

49:26Like you're so smart. You went to a good college. Just go start a garage door business when in reality, it's way more challenging than that. But also, at the same time, I do think that there are a lot of people who don't sweat the details like maybe a little bit more of a militant operator would. Yeah. No, that's completely fair. But I think whether it's a corporate job, a tech startup, or one of these unsexy blue-collar kind of base things, there is no shortcut. It is all going to be hard work. And for me, it's that person that's willing to work hard. They're smart. They're capable. And they have capital.

49:59They have access to capital. you can go do this. Most people can go figure this out. It's not going to be this cakewalk and it's completely downhill. But if you've got the work ethic and you're willing to do it franchising is a great way that's de-risked and what is this? This is the only thing in the MFM merch shop. This giant flag you put up on your wall that says we do this not because it is easy but because we thought it would be easy. This is the story of my life. All entrepreneurial ventures for me start this way. We get dozens of people that come through and they're like, what's a good business I could invest in where I don't really have to do anything?

50:38I'm like, not this. So go, I don't know, go maybe buy Bitcoin. I don't know. I'm unique in that I want a lot of money with the least amount of work, but I really don't want to take a lot of risk either. So what do you got for me? I'm like, nothing. Sean, I was thinking of another one when we were talking. You're like, what other kind of trends? And I think one that we haven't talked about is, you know, seniors, aging population, baby boomers. There is a ton of demand, pent-up demand right now for senior care that you'd think would be, oh, everyone else has this idea. They're going to go build other facilities and in-home care.

51:13But we'll, like, every once in a while for market kind of validation, we'll call places up and say, hey, my grandmother, my mom, et cetera. And, like, oh, we, you know, we're booked out. We have a list that's eight months long, 12 months long. And this is in most markets. So there is not enough supply for the amount of demand there is. And so there's another one that's been around for a while. It's called HomeWatch Caregivers. Total investment,$120K to$177K. $2.5 million average yearly revenue doing senior care. What about funeral homes? Are funeral homes franchises? It sounds like, well, we're just going to roll up the sleeves here and get in the mud.

51:50Get in the mud. Cremation is so hot right now. Well, I was asking for a bunch of reasons. One, baby boomers are at that age, but also Sean has this thing called One Chart Businesses. And a few years ago, he showed us the charts of cremation. And it was just like astronomical. How many people prefer being cremated now versus 20 years ago? It went from like 10 % to 50 % of the market. Wow. And you said that everything, or you said that a large percentage of the stuff that we work with, everyone we know about is a franchise, are funeral homes? I haven't actually seen, I'm sure there is one, but I haven't seen a funeral home franchise.

52:26But if you're trying to do your vertical play here, there is crime scene cleanup franchises. So you can start there. It's called Bio One is one of them. There's a few. I think we talked about that. Yeah, they're going and cleaning up crime scenes and everything that comes with that. Wow, that's incredible. Yeah, there definitely are franchises for this in both funerals and cremation. There's also the pet. isn't the pet cremation one like a big one now it's everywhere I don't think there's any space where you're like is there a franchise the answer is pretty much always yes it's just a question check this out go to aftermath.com Alex aftermath oh god you know this business is doing really well if they bought aftermath.com this is the crime scene crime scene cleanup yeah oh wow this is for the folks out there who have a business that does at least 3 million dollars a year in revenue Because around this point, that's when you're able to look up after being heads down for years building your company.

53:27And you realize two things. One, you've done something great, but you're still a long way from your final destination. And two, you look around and you realize, I am all alone. I've outrun my peers. Which means you're now making$10 million decisions alone, by yourself. And that is when mediocrity can creep in. My company Hampton, we solved this problem by giving a room of vetted peers, of other entrepreneurs who are going to hold you accountable, call you out on your nonsense and help show you the way. Because the fact is, is that there's only a tiny number of people in your town who know what you're going through and who have been there.

54:01And they're hard to find. The biggest risk is not failing. You have a company and it's working. You're going to be fine. But the biggest risk is waking up 10 years from now and saying, shit, I barely grew in business and in life. And for people like you who are ambitious, wasted potential and regret is what we want to help you to avoid. We have made so many of these groups and we have a thousand plus members. And I know this stuff actually works. It can change your life. It changed mine and I know it will change yours. So check it out, joinhampton.com. By the way, you said you scraped the data.

54:35So they have these disclosures and the disclosures basically have to say the good and the bad, right? So it's like basically there's a required set of financial reporting that these franchises have to do, similar to how public companies have to report their numbers, but almost more structured. I've seen this with MLMs. MLMs also have to publish all of their data about how their associates are doing. And it's basically, you look at this table and it's like, well, so 98 % generate less than$1 ,000. And then after that, the rest of these people do well. All the data is very structured because they're legally required to do that.

55:13Is it the same thing with franchises? Like, can I go get very clear pictures? Because I tried, I looked into this one activity place and I was like, oh, this is great. This is going to crush. And so I was thinking about buying a franchise for my sister, for my trainer, like, you know, a business in a box that they could run. And they were so evasive. I shouldn't say evasive, but like, it was not easy to just get clear answers to like three questions. You know, what is the range of revenue to expect? What is the range of profit to expect? And how many, of the locations are profitable or unprofitable?

55:45Is it 2 % of the locations are unprofitable or 50 %? And just general questions like that, it was like, well, it'll all be in the packet. And I was like, it's not in the packet because they're not required to report in certain ways. So I guess, what have you found in scraping all this data? Every brand is regulated by the FTC, the Federal Trade Commission. They're required to have this 200-page legal document called an FDD. It's a franchise disclosure document. And it's very structured, to your point. But kind of like a public company's filings, there's little tricks and adjusted EBITDA. You got to read 30-foot notes to figure out what the hell's going on.

56:25Brands are doing the same thing. And so we help people navigate those. The reason we built Franzy again was, just like Zillow, you can go here and see what's this going to cost. Is there bankruptcy? Is there litigation? How many have shut down? I tell people to go look at the item 20. It's where they show how many units they've sold, how many are open, and how many stores have shut down. Because it's the best way to go see, is the system relatively healthier? Are a bunch of people selling? Are they actually opening the units that they've sold? Or is there a huge delta? It's a good indicator of do they have their systems and their shit together basically to go sustain this and do this well.

56:58And then the best validation is just go talk to other franchisees, people who are actually doing it, who are in it. And what you described is a red flag. If a brand is not willing to share certain things that they're allowed to share, it's a red flag. What's the best practice for contacting? Is it just you cold call and you say, hey, I'm looking into franchising in a totally different territory? Yeah, I look at it like hiring someone. You ask them for their references and they're going to give you their mom and their best boss they've ever had. And they're going to say all these great things. But then you should go talk to their bosses or employers that they didn't give you, but they mentioned in the interview.

57:29And that's really how you get validation. Same thing here. The brand is going to serve up their top two performing franchisees. They're going to say all these great things, and you're going to feel like, I have conviction now. You should go on LinkedIn and find two or three others that they didn't list and just go cold outreach. People, if you reach out thoughtfully, they will spend 20 to 30 minutes with you telling them, you know, you're the good, the bad, and the ugly. Let's say you got a 20-minute phone call with them and you got to ask three questions. What are the three questions you would ask one of those other franchisees?

57:57Yeah, immediately, you know, would you do this again knowing everything you know now? and that should be pretty telling because they're either like knee deep in it at that point like this sucks i'm spending way more time i've lost money this is brutal or they're like in the hard part still they're in the j curve and they're coming out they're like i see light i'm super bullish on this and yeah i would do this again or they're killing it and you know they love it's like that question usually you get a lot out of i then would ask about support and what it's like working with the brand because a lot of the reason you're franchising versus going on your own is, is the team actually providing values at 6 % worth it?

58:30Or would you have been better off doing this on your own? And so that's a good indicator of, should I franchise this or not? Or be a franchisee of this or not? Lastly, I'd ask how much money you're making. How profitable is this? Is it what you expected? Is the juice worth the squeeze? Because they might be making some money, but it was a lot of investment. It was a lot of time for something they could have produced in the stock market or in real estate or something else. I'm just looking for the pain in their voice, regardless of what they're saying. I was just trying to detect the underlying pain that I can sense.

59:02Well, the good thing about doing these validation calls is, yes, while they have an interest in the brand, you aren't going to compete directly with them. You aren't going to add necessarily value to their location. And so they have no incentive to protect the brand in line. Like, Sean, I would do this in a heartbeat all over again because it doesn't actually directly benefit them. So you are going to get real, raw responses most of the time because they don't want someone else to go make, if it was a mistake, the mistake that they made. They want to help you out. They're hopefully not vindictive people for the most part.

59:37And if they're doing well, they're going to be happy to share that too. The franchise industry seems kind of cool to us as content people because we have these guys that are kind of these cowboys. They're like these Midwestern or Southern guys who are really wealthy. And it's like that meme of when you get on an airplane, if you see a guy with like baggy blue jeans and loafers and like a fat Rolex and he's like reading like you know like uh prospects reports just like via on paper you know what I'm saying like uh do you meet a lot of people like that because that seems like it seems like there's like a lot of really cool stories here there are so many and that's part of what we're doing with our show is like how do we highlight these and again it's trying to just get them comfortable to even tell because they've got such a good thing going, they don't want to mess it up and attract more private equity than is already flooding the franchise model today and is only growing.

1:00:31But yeah, there is a lot of stories like Cal's where five years ago they weren't doing this and now they've got a business doing a couple hundred million a year in revenue. And that's where I flipped. I used to be, again, franchise model hater and I should just go do this myself and everyone should just go do it themselves. You can extract 6%. and then you realize how many corners, not that you're cutting, but just how much value is created in that system and bulk purchasing power, branding, et cetera. I've become a believer for the right person and the right brand. I mean, there's a lot of ifs still and things you need to check off and make sure it's the right fit.

1:01:05But yeah, there's a lot of these cowboys out here that are kind of unassuming and running massive businesses. One of my favorite franchisers was the dad in the movie, The Blind Side. Do you remember that, Sean? What was your franchise? The joke in the movie was Tim McGraw's character. It was based on a real character. He ended up selling this for nine figures. But he was like, you know, the kid would brag. He goes, my dad owns 50 Taco Bells. I was going to say, it was like Jack in the Box or Taco Bell. I think it was Taco Bell and Domino's Pizza or Pizza Hut. Are they the same, like Yum Brands?

1:01:38Yeah, Yum Brands, KFC. No, it was Pizza Hut, Pizza Hut, Taco Bell, and KFC. Yeah, he bragged about it. And I thought that, like, in my head, that has been what the franchisor is. Basically, a franchisee is an ex-high school quarterback who married the high school sweetheart and is a good guy with kids. And he owns about, you know, 10 KFCs and three Taco Bells. And he brings it to school for his kids to make the class like him. You guys should get, if you can get him on, I think his name is Greg Flynn, but it's the Flynn Group. they own thousands of franchise locations and their system they're bitten this is like a family run business they're and don't hold me exactly to these numbers but they a report came out uh in the last couple months the flynn group did i think it was 6.3 billion in revenue last year owning franchise like their franchisees and so that was more revenue than kfc dominoes Popeyes, like huge brands, this group of franchisees is doing more revenue than the whole parent, the whole franchisor of very well-known, very large brands.

1:02:51Their homepage, when you go to the website, the hero banner is just onion rings falling from the sky. It's just the first thing you see. Who doesn't want that? Who doesn't want onion rings falling from the sky? Now that I think about it, there are so many more ballers than I thought. Sean, do you remember Lorenzo Fetida, the guy who was the founder and CEO of the UFC? Well, he came from a wealthy family, so they've been ballers for forever. But before he was the CEO or founder of the UFC, he was the CEO of Gordon Biersch. If you remember those guys, it's a brewery. It's a franchise, I believe.

1:03:25But it's a brewery and bar is all it is. I didn't know that. I thought they were like hotels in Vegas. They were. The mom and dad, the family was rooted in that. And then also, for some reason, in 1995, he bought Controlling Interest in the Gordon Beers Brewing Company. And I think they had franchises. Here's an interesting one I saw the other day. It was, there are more millionaires generated from franchising than all combined players ever in the NFL. Dude, you made this bold claim and I wanted to fight you about it. Now I'm totally on your team. My first mentor in college, when I was in college, we entered a business plan competition.

1:04:03and we were trying to win and they assigned you a mentor. And so the first team, they got matched with this guy who was like a biotech entrepreneur, sold his company for like$4 billion. The second team that got up, they got matched with the guy from Mint.com, Aaron, whatever his name is. And so he's a tech entrepreneur, hundreds of millions of dollars. And they were like, you guys are going to be with Michael. And we were like, who's Michael? And they're like, Michael owns. The number one, and I'm like, what is it going to be? He's like, largest chain of Applebee's in North Carolina. I was like, oh, womp, womp.

1:04:41And so I was expecting, I was like. And Michael pulled up at a Rolls Royce. Exactly. We go outside. Michael's got the best car. Michael's got the freest schedule. He's like, I'll meet whenever you guys want to meet. This guy owned, I think, like 13 or 30 Applebee's or something like that. And I remember. I know exactly who you're talking about. I'm in Charlotte. It's Michael. I don't even know the last name. This is his last name. Yeah, that's right. He was such a good guy. And he had like such a, his story was so cool. And it was kind of inspiring because up till then, my frame of like, well, if you want to make it as a entrepreneur, like you need genius invention.

1:05:13And here was this guy who was clearly living this wonderful life, who was super successful. And what was his genius invention? Like he basically was just like, I will take like what to me was the most boring food franchise you could like, literally Applebee's would have been like, if I was coming up with the joke, that's what I would have said. And I just noticed on this Flynn group, on their timeline, it says, 1999, our journey begins with eight Applebee's. And now they have 5 ,000 plus units or whatever, they have like thousands of units. And they're like expanding into New Zealand as territories because they're just like, you know, dominating the whole globe.

1:05:47And I just remember like kind of that guy broke my frame because he really had like built this wonderful life without doing what felt like, you know, pulling a rabbit out of a hat or catching lightning at a bottle and coming up with a new invention, the new product that just say, you know, sets the world ablaze. Because there's so many different ways to win. It just kind of depends what you're suited for. He was a great executor, he was a great manager, and he was great at building up and developing people so that they could run the locations. And that's what he needed to be great at. So it's not like it was so easy he didn't do anything, but he was great at those things rather than coming up with the game-changing concept.

1:06:22Sam, you asked me earlier, why don't you just go open 100 of these and why are you building a tech company? And what Sean just said is the tempting part of it. It's like all these tech entrepreneurs I meet, I think they sound smarter, they sound more sophisticated than the multi-unit franchisee people I meet. They're working way harder. But maybe we got it all wrong because 90 % of them go to fail and they're wasting all this hard work and talent and brain time on this thing that has such a small chance of outside success. And then I'm meeting the Wild West Cowboys on the plane and they're like, yeah, I just followed the playbook.

1:06:55Again, not to make it sound like it was all a cakewalk, but they're like, yeah, I just followed the playbook. I am good at finding real estate and making deals with the landlords. And I started with one and now I got 50 and I make 20 million a year and I don't really do that. Yeah, but look, the grass is always greener on the other side. As someone who worked in fast food and worked one of these jobs, you didn't want to hang out with me. You know what I mean? You would not have wanted to manage me when I was a kid. And so the grass is always greener. It sounds dope. My brother-in-law owns a moving company and I hear the numbers and I'm like, that's awesome.

1:07:27He's like, dude, I had to fire a guy the other day because he was doing heroin on the job. So, like, you know, pros and cons. Pros and cons. But I tell you what, there seems like a lot of pros right now. Where do you live? I'm Charlotte, North Carolina. Are you building the company there or remote? Yeah, building it in Charlotte. We have team members in South America, Philly, but the majority of us are here in Charlotte. How much did you raise? We raised$3.5 million in our seed round to get going. We launched January of this year. We're up to 35 ,000 unique visitors a month coming to the site and starting to build out a second product with it.

1:08:07Our goal is to basically sales for us, but for the franchise model. So we help you buy a business. We help you operate your suite of franchises or your portfolio of franchises. And then we help you sell those back on our marketplace. What's your revenue range now? Have you crossed eight figures? Not yet, no. We're less than 11 months in. And so we'll do seven figures this first year, which for a startup in the first year we're happy with. Sorry, I thought you said you'd start a while back. I didn't mean to be like, you just haven't said you don't have 10 million. I was like, wait, where are you finding these companies?

1:08:39Because I want to invest in them. This is pretty cool. I didn't know what we were getting into when we got into this. I thought, A, you were just going to pitch your company, in which case that wasn't going to be great. And you didn't do any of that. And B, I was like, franchises, I don't want to hear about this. and it turns out it was actually one of my favorite episodes. This is the type of people you get to hang out with and the stories you get to hear. Frankly, you, the type of personality you have. These are some of the stories that Sean and I like uncovering. Maybe people that aren't in the SF New York scene, which Sean and I both are in.

1:09:15And so it's really fun to hear your perspective on stuff. It's pretty cool. Thank you. That goes a long way. I know you guys see a ton of business models and people And I felt the same way. And sometimes I still even feel a little crazy about what we're doing. It's like, is this something that can really help people? And I want them to have the same entrepreneurial experience I had. They just might not want to do a tech company from scratch. So how do I show people and educate people that this is a path if you want to walk down it? Again, I know I'll probably overuse analogies, but when you think about the financial housing crisis, people are like, who's to blame?

1:09:44Is it the banks? Is it the administration? And I think using that as an example, banks started originating a ton of mortgages because Fannie Mae and Freddie Mac said, we'll take the risk off your balance sheet. And so of course the bank's going to go originate a ton of mortgages. And was it unethical? Yes, but their incentive got taken away. And I look at franchise brokers the same way. It's like, is it their fault? I don't know. No one's regulating them. Everyone else is doing it. And so there's no cap on it. So they're going to go sell businesses and make 60%. But my thought is let capitalism do what it's good at and level the playing field and democratize things.

1:10:17and hopefully that's what we're able to do here at Franzi. Well, sick, dude. Great stories. You're a great guy. You got a great goatee. Great podcast. This is it. That's the pod.

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