Why Franchises Are the Smart Investor’s Play 🏬 EP135

0:05Ladies and gentlemen, welcome to a special edition of the Money Monday's podcast. Normally, we're inside of an RV motorhome. But instead, today, we are inside this$100 million mansion in Beverly Hills that Tai Lopez is hosting his events at as we speak. Some of his guests happen to be the people I was going to interview. So, bada bing, bada boom, we decided to take over his library to make this podcast episode. So, as you guys know, we cover three core topics. How to make money, how to invest money, how to give it away to charity. We're talking about all those topics. And keep in mind, when you're listening to this podcast, it's not always just for you.

0:37It might be for someone from your past, present, future. Meaning, I might interview someone about real estate, owning nightclubs, a rapper, an athlete, a celebrity. And the topic that they're talking about may not pertain to you, but it might be for someone in your life from your past, present, future. So listen to these episodes. We keep them to under 40 minutes because the average workout is 45 minutes. The average commute to work is 45 minutes. So this episode will be under 40 minutes for your listening pleasure. So without further ado, I'm going to have two guests at the same time give you the quick two-minute bio each so we can get straight to the money.

1:09Awesome. Hey, Chris Wright, co-founder of the company, Franzi. My background is in software and product, and we're building a product called Franzi. Think the Zillow for franchising, so we help people get paired with franchise brands that are a good fit for them and help them become entrepreneurs. Very cool. And I'm Alex Merznak, originally from Minnesota, based in Charlotte, North Carolina now. the other co-founder of Fransi and a serial entrepreneur. This is my third company, the last one we raised 35 million in venture capital for. It was a laundry and dry cleaning pickup and delivery business.

1:44Eventually started franchising part of that business which is how I got into the world of franchising and saw you know just how broken and misaligned the franchise buying processes. So with Fransi we're hoping to disrupt the traditional broker model and democratize access to buying small businesses and franchise businesses. So the company that you raised at 35 million for, did you stop, did you get bored, did you sell it? A mixture of all the above actually. So I was nine years into it. Yeah, long, long, long journey. And we started at the advent of all the like Uber for X businesses. So you saw like Shipt and Instacart and Wag and Rover.

2:19I was like, someone's going to do this for laundry and dry cleaning. I'm going to be pissed if it's not me and someone else does it. So we started up in 2016 and the reason I think I eventually started to move on from it last year was we had pivoted into a business that had trucks and washers and dryers and eventually vertically integrated the business. And I was like, I don't know if I'm the guy that takes us from 30 laundromats open now to 300 or 3000. So I hired a CEO last year to go work on Franzi with Chris full time. Very cool. What about you? What about me? Yeah. Last company, what did you say?

2:56What happened there? Yeah. So before Franzy, I was with a company called HR Logix. We helped provide tax credit software and HR compliance software to businesses. We grew that business from, I think, seven people when I joined and a couple million in revenue to close to 90 million revenue by the time I left. I had just had my first kid and we had been growing this business for about three years and it had gotten pretty intense and I really enjoyed the people I was working with and the business I was building but I wanted to take a step back and spend a little time my family really be present for the first six months my son's life around that time as I was kind of getting decompressed Alex called me about this idea of Franzi sent the bat signal yes I know we've been wanting to work together for a long time and I was ready to jump in and start building Franzi alongside did you guys happen to live in the same city or convert so he was he was in Charlotte originally when we met but then he'd moved to Birmingham for the HR Logix business.

3:50I was like, all right, come on. Come on back home. Very cool. All right. So let's talk about the make money side. When you're first getting into an entrepreneurial career, someone out there listening, they dive right into entrepreneurship. So they go take a job, you know, work at a company first. Like talk to us about your thoughts about the beginning of an entrepreneur's journey when they're like 21, 22, 23 years old. Yeah. So for me, like I grew up, my dad was a financial advisor. And I think I got to see a little bit of that, like eat what you kill mentality and he'd always told me like there's three types of careers or you know paths you can take you can either work for someone else uh you can have the ability to work for yourself which is what he was doing or you're gonna have people working for you and like that that just always resonated and stuck with me and i knew i needed to be in bucket two or three and he's like you'll live a probably more fulfilled you're happier life doing that um and so i took that advice wholeheartedly and started a business in college, loved entrepreneurship, was addicted to it.

4:49And through that kind of course, like seeing my peers, I think, you know, realized we're pushed frequently, you know, to get good grades in high school, to then get into the good college, to get good grades again, to then go work at the Fortune, you know, 100 company. And I just didn't want to do that. I knew that wasn't for me. And so my advice is, especially to people at that age or that juncture in life is to take the risk then you know that's probably one of the best times in your life to do because you don't have a ton of responsibility probably don't have kids at that point a ton of you know debt or bills or anything um and so i always say buck the norm and you know try that try that business and take that risk at that age what do you think yeah i had uh i had two role models in my life early on we were talking about kind of business and what i should do with my life and kind of how to get started.

5:39And I don't think that a lot of people really know who they want to be when they grow up, but I'm still kind of learning who that is for me. But that's right. My father-in-law is a serial entrepreneur and he encouraged me to kind of just explore entrepreneurship. And so I started my first business in college was an Amazon FBA business. I know a lot of people explore those at one point and we had gotten pretty big at the time and then took my dad's advice and went down the kind of corporate route and went to go work for Deloitte and consulting and really enjoyed that as well, but determined that I really kind of wanted to be the owner of my own destiny a little bit.

6:13And so much to my wife's chagrin left and started a cleaning company was on demand, Uber for cleaning, similar to laundry. I got out sooner than he did. But I think that you really have to figure out what you want to build and how you want to build it. But more than anything, it's a really great time, like Alex said, to take risks when you have less responsibilities. I know that it was easier for me taking this risk having a kid already because I had done it in the past. But if I was just starting from scratch at 31 years old and deciding to be an entrepreneur, I don't know that it would be nearly as easy as it was back then.

6:46So quick question on the laundromat side. Every article study I see, because I talk to Cody Sanchez a lot, showcases that laundromats are actually the lowest failure rate of any business to acquire. You guys know anything about that? Yeah, so I mean, we had 30 plus, we still have 30 plus of them open and going. I think it's because it's such an essential need. People have to have clean clothes. And so if you're in a lower income community or an area where there isn't access to a washer and dryer, you have guaranteed customers. And they're fairly simple businesses to run. There's no employees if you don't want to.

7:20It can be an unattended laundromat. And so I think that's why there's a lot of success in the model. Now the size of that success varies, right? could have a business that only kicks off 30 grand in cash flow a year if it's a bad area or bad equipment right i've seen laundromats do six seven hundred eight hundred k in cash flow with very very few employees very cool so the 30 laundromats you guys are running those owning those how does that work so some of them are corporately owned and some are franchised so we started franchising the laundromats in uh 2021 under a brand called laundry lab we sold 118 locations in 14 months.

7:59And that's the beauty of the franchise model is it can scale and just blow up. You have other partners with you that have the capital that are building and developing a series of locations with you. And so we could grow the business pretty rapidly. The first six years we started, we had two corporate stores. In the following two years, we started franchising at 30. Whoa, that's a huge job. It speeds everything up when you bring those partners in. So I invested in Everbol in 2018. There was 13 locations. blinked our eyes 2019 there was 21 locations i raised five million dollars for the company to help scale it seven seconds later it was covid so we had to furlough the staff we had at that point 25 locations open right around march when the closing day was march 2020 and then jeff venster went on the full attack signed like over 300 leases sold franchises all over the country, Drew Brees invested, Jason Tatum, all these things like Kamar Usman, everybody started jumping in.

8:59And now two years later, there's 103 locations, one new one every six days. We're building for everybody else. We're building for Shaq, Mark Wahlberg, EOS, we're building other people's locations. And just, I think about that shutdown period of like, most of them shut down. That's why it was called the shutdown, especially franchises that were freaking out. They weren't, that no one was willing to go sell franchises. And so that leads me to tell me about Fransi. Like what do you, what is this? Why is this? Like, why did you decide to go down the franchise model? Yeah, so when we started franchising the laundromats, we knew nothing about franchising.

9:33It was this crash course like entrepreneurs do. Like, if it's a problem, let's just go figure it out. And so we started franchising, we realized, all right, how do we sell a franchise? We have to, you know, do sales and run ads and go on podcasts. And we worked with what's called an FSO, a franchise sales organization that essentially acts as your internal sales team. And so that was effective. They helped a lot. They set up our sales process with us. So we were so focused on operating the stores and getting our new franchisees open. But we eventually crossed paths with business brokers, franchise brokers.

10:07And what a lot of people don't realize is those franchise brokers take a 60 % commission. 60? Six zero. What? On the franchise fee. Wait, what? People don't know this. And you'll get reached out on LinkedIn by these individuals. You're like, oh, this is a free service for me. They tell you they make money from the brand, which they do, but they leave out how much it is that's leaving the system. That franchise fee should be reinvested in training and site selection and marketing. 60%. And so I would go to these conferences with these franchise brokers, and I saw just how much money they were all making and how fat and happy they all were.

10:44and all the brands were like, I hate having to do this, but I don't know what else to do. I'm so focused on scaling the business that this is just, this is the way it is. And as an entrepreneur, you hear that a bunch of upset people, one side that's very fat and happy. There's a problem here that could be solved with technology using AI, better sales process. And so our goal is to democratize the process around franchise discovery, franchise buying and selling. So what stage are the company in now? So Chris and I started working full-time on it last summer. In the better half of last year, I was compiling the largest, most robust data set in franchising.

11:21We have over 25 ,000 FDDs, franchise disclosure documents, across 3 ,600 brands. We've trained the LLM, we've trained the model to be very, very accurate at recommending the best brands for you as you come through. We soft launched in November, hard launched January of this year. We've raised about$3.3 million in venture capital. We've started closing deals like crazy and helping people find the best fit franchise for them. So how do you make money? So similar to a broker that we get paid based on success. Only 59 %? No, it's a much lower reduced flat fee. So we tell our clients up front, we make money from the brand, here's how much.

12:05And it's a flat dollar amount so that we have no incentive to push one brand over another in front of you it can be objective yes so whether i want to get a gym or an everable it doesn't matter to you yeah versus a broker they might only show you the analogy i use is brokers today will only have an inventory of like 30 to 50 brands but you again as their client don't realize that you think oh this person's going to bat for me they're going to look at the thousands of brands they're only showing the brands that have paid the play in the background not 30 to 40k just to get into the group. And so it's like a real estate agent showing you houses that they're also the listing agent.

12:40They're bucket listings, huh? Yeah. It's crazy. You would never buy a house like that. So why would you buy a business that way? Okay. So I go to the website. Where's an app? It's a website. I go to the website. I say, I'm Dan. This is how much... Am I telling you my budget or telling you my area? What am I telling you? Yeah, you're answering around 10 questions, giving us interests, what industries you're interested in, your budget, at kind of where you want to put the franchise. And so those few simple pieces of information that feeds into our AI, which looks at everything we know about every single brand, which the model is trained on, and then pulls back with nine or so recommendations.

13:16Then you're going to see a screen that'll have kind of Tinder style, thumbs up, thumbs down. As you like different brands that then feeds in the algorithm again. On the end of that journey, you kind of get connected with one of our team members, one of our coaches who's going to help narrow that list down. And we spent a lot of time with prospects on the front end to make sure that they're as educated as possible, but also to make sure that they're getting matched with the right brands. We're not just rushing them towards a decision or rushing them to talk to brands. We wanna make sure they understand franchising and understand what they're getting themselves into before they actually get to that stage.

13:48And so are there experienced brands that are gonna come there or experienced investors? Or do you think it's gonna be someone that's just starting with one to three locations that wants to come in? We have three main ICPs, ideal customer profiles. it's the corporate you know grinder they've been working nine to five they want to do something entrepreneurial but they don't know where to start yeah so there's that group then there's like the side hustler you're kind of hacker type that does short-term rentals and they've got crypto exactly yeah and then the third group is your sophisticated you know opera they own five units 10 units 20 units of a concept and they're looking to add to that portfolio and find the next dave's hot chicken or the hot concept that they're discovering on Frenzy.

14:30So I go there, I discover it, and you guys recommend Fit Body Bootcamp. Okay, now what? Yep, so we, you have a coach that you can use as much or as little as you want. So, you know, franchise advisor, they can help you with finding the right lending or capital structure. They help you with finding a franchise CPA, a franchise attorney, the right commercial real estate agent to help you find the site if it's a retail business. And then if there is ability to negotiate with the brand, They'll help you be in your corner through that process as well. So they walk you through the whole franchise buying process to the day that you sign.

15:03And then we're not done at that point either. We help you with all the things that the brand isn't already doing. The brand's going to do training and marketing and some of the site selection. We're all the business in a box type of stuff. Get your entity formed. We'll help you set that up. We'll help you with all those other things that every business has to do, regardless of whether it's a franchise or not. And then what about the building? Have you talked to Jeff Enster about WeBuild? to actually go build the locations? Yeah, so I was on Jeff's show probably a month or two ago and met Justin Sloan, who's your big operator in Texas.

15:35Yeah, we'll eventually pull WeBuild in for... Offering to do that. Yeah. Interesting. Okay, so I go there. You tell me if you buy the bootcamp. I talk to my coach. I've got 350K saved up, ready to go. Do I talk to you again? Do I need you anymore? Yeah, the idea is that every step of the buying process, even if you hit a hiccup along the way in a brand conversation. We're having conversations with you, your coaches, every single time you have one of those. There's debrief calls if you want to have them, right? Depends on how much the prospect wants to engage, but has debrief calls at the end of each of your meetings with the brand, helps you understand what came out of that meeting, helps you have new questions to ask at that meeting, and then walks with you all the way to discovery day, which is that kind of final step before you sign or don't sign, and then helps you make that decision at the end of the day.

16:24So they're there as much or as little as you want, but really throughout the whole process and then thereafter. How do people find you guys? Where's your clients coming from? Yeah, so it's three main channels right now. It's programmatic SEO that we're using. So we have all these very data-rich articles on top 10 ice cream franchises of 2025 that have investment costs and revenue and Google My Business reviews. So SEO we're dominating in, paid ads, podcasts, and we're starting to put a ton of our own content out. We launched a show recently called How I Franchise This, which is a play on the NPR podcast.

17:01We're telling the story of the normal dude, right? It's not Colonel Sanders or Ray Kroc. It's like we're going to talk to Susan and Tim who left their jobs at Bank of America. Now they run three fitness concepts and they love it. and they've been more fulfilled doing that than anything else they've done. We want to tell the story of that average person, that average operator that went and did it. So someone saved up this money. They're working their core job. Maybe they sold some real estate. On the invest-in side of this podcast, I like to ask, how do people make decisions like that? Because they can invest in the stock market, cryptocurrency, more real estate.

17:38There's so many different things. The S &P 500, why franchises? Yeah, so I think franchising is one of the most underestimated wealth plays of all time. I mean, it's 10 % of our country's GDP and no one's talking about it. It's always like, oh, it's McDonald's and Subway and that's what it is. They don't realize it's hospitality and home services and fitness and health and wellness. So it really spans all these different categories. And then the success rate, which I think is important for people that are being entrepreneurs for the first time or the 20th time, is the five-year success rate on a franchise business is 85 % compared to half of independent businesses failing after five years.

18:20And so that's the reason we're preaching about it is entrepreneurship has changed both of our lives in a very positive, incredible way. But not everyone wants to go be a tech entrepreneur or a real estate entrepreneur. And this is a really good but diverse set of options to become an entrepreneur in a more de-risked way. Interesting. What about for you guys personally, as you guys are making capital, what do you like to invest into? I mean, we're both looking at more ways to invest in franchising as much as possible. Alex has invested in a couple of franchises and me personally, I'm trying to build out a franchise portfolio as well.

18:53We haven't, we're just kind of getting it off the ground, but I think that we want to put our money where our mouth is and invest in franchises because we do believe it is a very de-risk way to build out your own personal wealth, wealth through your family and generational wealth. It scales, it's got a playbook that's built in and it gives you the opportunity to build on a system and platform that's got support built in that you wouldn't necessarily otherwise have if you're building something from scratch or buying an existing business. Yeah, I'm doing five indoor golf simulators in Minnesota.

19:21It's called Another Nine. And I like it because there's no employees, there's no food in bed. It's like anytime fitness, you fob in or use the app to get in. It's private based. It'll be like a room like this where you can go with your family or buddies at three in the afternoon or three in the morning. There's no employees there it's fob access um and i really like this one bagel concept called pop-up bagels oh yeah i followed that guy it's blowing up the the average unit volumes are crazy it's like two million dollars in revenue off of bagels really and that's like one of the it's the simplest thing one of the genius things they did is they forced you to buy three you can't buy one can't buy one you can only get three like groups of three that's so interesting that's the thing and the cost to in is like 450 to 650k they've sold all of maine to florida all texas all california blowing up it's like the next i'd say crumble cookies but for bagels bagels interesting yeah i was wondering why i followed that guy there was something about it that made me compelled by it they're doing new you know flavors every week and cream cheese you know crazy and you know spiced flavors and cookies and cream and that's what i think people are getting hyped up about It's the crumble playbook, but for bagels.

20:33Yeah. I mean, crumble's got multi-billion dollar valuation now. It's just staggering to watch what they're doing. Okay. So also on the investing side, how can people invest into learning? Like how do they learn about franchises? They can figure out, do I want a pop-up bagel? Do I want an Everbull? Do I want a Fit Body Bootcamp? Do I want a laundromat? Like where do they study? How do they invest in themselves? So there's a lot of good podcasters out there. There's Brian Beers, there's Fran Dogs, and the Wolf of Franchising, our newsletter resources. We have our podcast where we tell stories of people getting into it, how they got into it, how they financed it, how they identified the brand.

21:12What's your podcast called? How I Franchise This. And then on Fransy as well, we have all sorts of franchising 101 guides. So what is an FDD in the first place, and what section should I look for? And then a lot of our software, our process is to help with that education, to get over that first step of fear, because that's where most people get hung up is, I don't even know where to start, so I'm not going to. We want to make it as easy as looking for a house on Zillow. Make it fun, honestly, where you can go look and see, like, I could see myself doing this. It fits me. It's a 97 % match, et cetera.

21:43So we have tons of educational content on the site as well. And then our coaches as well, right? There's no obligation if you start talking to one of our team members. There's no obligation to move forward, even if it's just to understand if franchising is a good fit for you. we sometimes tell people franchising might not be a good fit, which is part of what we believe in is transparency and objectivity. Right. We don't want to recommend one brand or the other because one brand pays us more. And we also want to make sure that we're transparent with people on how the whole process works and can educate them whether they become a client or not.

22:16So as you're considering investing to the business, raise 3.3 million and growing, why does a company go raise$3 million? Why is that part of the process? Yeah, so we bootstrapped initially and we were like, oh, let's take some of the money from previous businesses. And then we just, you know, we see this wave happening right now of AI starting to displace more and more white collar jobs. It's people that would go, you know, buy and run a franchise. And we want to capitalize on the wave that's happening. There's also the silver tsunami happening with the boomers transferring 15 trillion over the next decade.

22:51And so our thought was we either bootstrap and go a little slow or we can raise money accelerate product development, accelerate go-to-market, and be more aggressive on marketing and driving awareness for what we're doing. Because there's a lot of things out there that you could do. You can go to BizBuySell. You can go consume Cody Sanchez's content. There's all these other ways to buy a business. And we want to grab our piece of that mindshare of, hey, franchising is a very viable way to get into ownership. And raising capital helps do that better and faster. To Alex's point earlier about franchising making up 10 % of the US GDP, but no one seems to really talk about it.

23:27You can either buy a business, you can start a business from scratch, and then you maybe have a friend or a cousin or somebody who does franchising or is in franchising somehow. We want to make franchising as mainstream as possible. And one of the best, quickest ways to get there is to invest more capital and making that story told at a more product scale. Let's talk about investing in people. Let's say I am the doctor or accountant, lawyer that did save up half a million. I can put in 350K into this thing, one of these franchises. I don't want to run it, or I don't know how to run it. How do I invest in people?

23:58How do I go find someone to run this thing or partner on this thing? So not yet, but at some point, Franzy's going to pay our capital with the operators as well. So part of that survey... I was not teeing that up. We're not there yet, but that's one of the product iterations we want to make is, because I ran into it all the time. You get these really, really good operators that ran five McDonald's for a wealthy family or individual who just doesn't have enough money saved to go buy their own restaurants. They would be a great candidate to go pair with Dan, who's maybe saying, hey, I've got capital.

24:28I don't want to run six Dave's Hot Chickens. So let's find the operator and give them some sweat. I don't want to run them. Yeah, exactly. I want to eat at them and own them, but not run them. I want to post about it. Definitely don't want to run it. So my life is designed where I will not do a project without a quarterback. I don't care how much money you tell me. I don't care who, this, that. I don't care about any of that stuff. If I don't have a quarterback, which is a CEO, to run that company, I will not do the project. Even if someone offers a boatload of capital. There's a war chest. Here's$12 million, Dan.

25:02Do this tequila brand with me. No. I'm not going to run it. You're not going to run it. Who's going to run it? I don't want to find out later. I don't want to go just hire someone off of LinkedIn or monster.com or hot jobs and go try to run it. I need to know who the quarterback is or I am not in ever under any circumstance. It comes up every week. I'm pitched. Well, every day I'm pitched. But every week I'm pitched like something that's fully capitalized. Just be my partner. Just be the advisor. And I just say no. I leave a lot of free money on the table. But I know the long-term effect of it is and the short term.