2096 – The Three-Tier Franchise Model as the Future of the Cleaning Industry with Adam Povlitz

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1:05With us right now, Adam Pavlitz. Adam, you are the CEO and President of Antigo Cleaning Systems based in South Florida. Your website, AntigoCleaning.com. Adam, thank you for joining us. Thanks for having me, Josh. Pleasure to be here. Yeah. Well, give us a quick overview of what you do with Antigo. Sure. So Antigo is a commercial cleaning franchise, but what's unique about it is that while most franchises that people are familiar with, like a McDonald's or something, is you have the corporate office and then the people who own the restaurant. So it's a two-tier franchise. We are a three-tier franchise, which is not very common.

1:44And so let me walk you through that because it's a little confusing. We have a master franchise. So we have the corporate office. I manage the corporate office. We have a master franchise and then a unit franchise. So the easiest way to think of it is actually in the opposite order. When I say commercial cleaning, most of your listeners are probably thinking, you know, everyone gets the mental image of the guy with a mop and a bucket or a vacuum or something like that. And that is actually what we would call our unit franchise. So these folks are in the cleaning business. They hire the crews. They learn the chemicals, equipment.

2:19But the question is, where did they get those clients from? And so what our franchise model does is answer that by saying, wait a minute. There's actually in cleaning, there's actually like a nighttime aspect of the cleaning business, which is the cleaning, the chemicals, and so on. But then there's also a daytime aspect of the business, sales, marketing, invoicing, collecting the money you've invoiced. And so what we did is we actually split the daytime and nighttime into two separate businesses. So what you'll have is also a master franchise. And a master franchise is more of the white collar in the blue collar industry.

2:54So these are people who become master franchises are usually like mid-career executives, former directors, VPs, CEOs, presidents, whatever it may be at their previous career. And they don't do the wildest part is they're managing a sales team. They're managing an accounting team. They have zero people at a master franchise who do any cleaning whatsoever. So they're in the cleaning business, but they're the white collar sales, marketing, and accounting side of the cleaning business. And then they support those unit franchises in their territory. Got it. Got it. Well, this is really interesting.

3:31I think there's a couple of stories here. Number one, obviously, we could talk a little bit about how that model has been good for you. And, you know, as well, you know, there are a lot of folks that listen to this. They're very good at what they do. And maybe, you know, some sort of license or franchise model might be in the cards. And obviously, you did a lot of research on this before you expanded out. Because didn't Antigo just simply start as a solo location? Or like, how did you start all of this? Yeah, so actually, Antigo started in 1989 as like a traditional cleaning company for a short period.

4:07Then in 1991, there was one office and they were essentially the master franchise. They were selling the unit franchises for people looking to get into the cleaning business and then also selling the cleaning contracts. And that was it for eight more years. And it wasn't until 1999 that they realized, they go, wait a minute, we could probably duplicate this in different parts of the country. And it was actually Tampa, Florida was the first master franchise officially opened. And now we're sitting at 48 master franchises across US and Canada, supporting 1800 unit franchises. So it's really mushroomed out.

4:52Yeah. Well, so with the two tier as well, I think what's advantageous about that, and again, so full transparency, we're actually working with attorneys and all kinds of other things for a bit of a license model. But what I like about what you're talking about is it kind of opens up who you're able to work with. because I think that there may be several people or, you know, the kind of the persona that would look at, look, I do not want to be involved in, you know, on the ground operational, you know, you know, in some cases might feel like adult daycare, you know, or you're just having to take care of all that, that sort of work.

5:32Like, I'll be honest, like that doesn't appeal to me. However, I know how to work, you know, networking and sales and that sort of thing. Like that's my spring. And so that's where I'd prefer to stay. And so can you tell me a little bit more about like when you were in the early stages of designing this, what led to that two-tiered system? So admittedly, we're not the first to design that structure. And it's surprisingly common in the industry to do that because what you said is exactly right. I mean, nobody is a little kid growing up saying, when I grow up, I want to be a janitor. I'm sorry. You know what I mean?

6:14It's not on the list. Maybe fireman, maybe dinosaur, right? But janitor is not on the list. But then when you realize that there's so many aspects of the business, right? So what's cool about franchising is, I mean, literally, I mean, as you probably know, you can franchise just about anything at this point, but it's will it work, obviously, is the million dollar question. And if you think about all the other franchise models out there, if you decided to buy a restaurant, well, now you're a restaurateur and you work nights and you work weekends. And that is the restaurant life. If you if you decided to franchise most models, right, you're in the business where our franchise deliberately is designed around setting it.

6:58So you're working on the business from day one. So instead of being the guy that has to, you know, you're 50 something years old and you go, wait a minute, I got to go empty trashes and clean bathrooms. No, that's not at all the model. All you're doing is repurposing and saying, wait a minute, I know how to manage a sales team. I know how to, you know, run a staff and, you know, get the accountants in there doing the bookkeeping and collecting some funds. Like this isn't rocket science. It's customer service. It's sales. but if you've been if you've ever managed something like that before you go wait a minute i can do this and there's zero cleaning involved so it it sort of took on you know took on a life of its own once once you kind of have the light bulb moment yeah yeah okay well um so adam let's uh i want to share or kind of talk about um in in your case um who might be a good fit right so um a lot of folks that listen to this show, they're already like, they're locked and loaded.

7:57Like they've, they've got a great company. They love what they're doing. And they might be at that stage where they are interested in multiple streams. Right. And so maybe not. And so to our friend, you'll self-select based on my question here. But, you know, do you, I would imagine, I'm sure you've worked with people that like, they already have investments going. They already have, maybe they have a business going. They have some experience and they have a network. So maybe you can share just a little bit about someone that might have those resources or assets in their life, how that might work with a model like yours, not necessarily just Antigo, but again, kind of what you're proposing.

8:42So, I mean, from a general functional standpoint, I mean, our typical buyer persona is someone who is either really crushing it, frankly, at what they do, or on the flip side, a victim of an unfortunate layoff or something like that. It's wild that it's on opposite ends of the spectrum, because if you've been laid off ever before, and you're 45 years old, and you go, wait a minute, any job I'm looking at from here, they're not going to pay me what I'm used to getting paid, and or I have to start at some, you know, some junior position and rework my way back up. And you go, wait a minute, I know what the heck I'm doing here.

9:23Why would I ever do this, you know, from, you know, and start and take a step backward when I can invest in myself. And then on the flip side, if you have someone, you know, if you're someone and you're just absolutely a monster at managing a sales team, and you're crushing your goals, my I guess my question is, why are you making money for someone else? You know, I mean, at the end of the day, it's you're making somebody else rich because it's their company. And yeah, you might be making a good salary. But at the end of the day, it's their business. And you're just a cog in the wheel. Why not be the wheel?

9:54That's what's unique about what gives us, you know, a different opportunity, I think, than other brands. Yeah. Okay. And then, like, what is the typical? I mean, what is the model? You know, and just, again, you don't have to be super specific on numbers, but just generally, you know, stepping into either level, like what have you guys decided on what that relationship looks like? Is it, are you sharing revenues? Are you just outright, hey, you pay us a license fee? Or do you mind sharing just a little bit about the structure? Sure. So the unit franchisee pays to, so let me start at the bottom.

10:34The unit franchisee operates, you said i think you were in out of orlando so we have a master franchise in orlando a unit cannot open in a territory where there is not a master franchise right so uh we have a master franchise in orlando they sell a unit franchise a unit franchisee is going to pay somewhere in the neighborhood of a 10 royalty uh they're going to pay for you know uh administration all the collections efforts all that they're going to pay for a marketing fee um there's an optional insurance program and like a guaranteed payment program. There's about a bunch of different options.

11:10That 10 % that the unit pays to the master franchisee, they're going to split that with me. But the beauty of this is that most franchisees, again, if you own a McDonald's, you're making money off of the hamburgers and the fries, but you're not making any money off the franchising aspect itself. Whereas our model, that's what's another unique piece to it is, look, I mean, the reality is there's so many franchise brands out there, not necessarily because there's that many concepts that are franchisable, but let's be honest, there's a lot of money in the franchise aspect itself. And so our model allows the master franchise to also participate in that aspect where they're selling the unit franchises in their territory, collecting those upfront fees, collecting a royalty from their franchisees, and then they pay a license fee essentially to Antigo Corporate for the training and support and everything that we do to get them set up.

12:13Yeah. Okay. So one last thing I would be remiss if I didn't ask about this is where are we right now with the cleaning industry as a whole? obviously there was a huge spike uh during covid where are we today we're looking now getting into 2025 uh we hope and pray that there's not going to be a pandemic anytime soon because those suck uh but that said where are we with cleaning uh cleaning uh the industry so cleaning i mean cleaning is doing phenomenally i mean during during covid that was a you know that was probably one of our worst years in our history and we grew 8%. So, you know, it's one of those, you know, it's nothing to write home about.

12:56But at the same time, when you have businesses cutting 50%, 80%, and we grow eight, you know, I'm a happy camper. This is a it's a double digit growth industry. You know, I think that the million dollar question during COVID was what are you going to do about everyone going remote? And now the push is the return to office. I mean, everyone's saying no, We need to get back to the office. And even if it's in a hybrid structure, the office is still open. It still needs to be cleaned, right? All the trashes still need to be emptied and the bathrooms still need to be cleaned. So it's something where we're expecting to continue in this double-digit growth pattern for the foreseeable future.

13:34What we're seeing that's interesting right now is consolidation. So there's always that downward pressure from the customer. We want to pay less. We want to pay less. You know, it's not we're not we're not selling them diamonds. We're selling them cleaning. So it's you know, it's a budgetary constraint every once in a while. And so that that is something that always happens. But what's really unique is that two things. One, there's an upward labor pressure, right? So so people want to be paid more. And so it's actually to our benefit when you look around the country and minimum wage is rising, because then when you go to to a customer and say, here's our price and they go, you You know, I mean, man, that's that's higher than I expected.

14:16And you go, you know, minimum wage is fifteen dollars, sixteen dollars, whatever it is an hour. We have to make sure we're paying a fair wage. So it increases the revenue for the master and unit franchise. And simultaneously, they're looking for customers are looking for consolidation. They're wanting to put more services under one roof and be able to communicate quickly. Right. That's probably the biggest gripe of anybody second to they did a bad job cleaning. The second probably biggest gripe is and I couldn't talk to them. I couldn't get in touch with them. I had an issue and I couldn't get it resolved.

14:52And so that's something we've done. We actually have a proprietary software called CleanCom. And it allows for communication directly between the client and the franchisee that's servicing their account. It's all private. So you're not exchanging cell phone numbers. it's got built-in Google Translate so if your native language and their native language is not the same you can still speak uh type in like whatever your issues are in your language and they'll they'll read it in theirs um you have you had pictures it has a two-hour built-in response guarantee so if you don't get a response within two you will get a response within two hours no matter who it's from um and then on top of that it's got built-in analytics so if if you We see a franchisee has, say, three issues in restrooms.

15:39The master franchise knows to bring them in and say, hey, let's do a retraining on restroom cleaning before it becomes a bigger issue. So it's changing the game on how we're using technology to really adapt to where the industry is heading. Yeah. Your website, anagocleaning.com. When somebody goes there, what do they click on? What do they do? If you're looking into a franchise, there's actually a button in the top right corner talking about franchising. And if you're looking for a master franchise, there's a whole subset of pages with more information about that as well. Yeah. All right. Adam Pavlitz, again, founder, president, CEO of Antigo Cleaning, website, AntigoCleaning.com.

16:26Thank you so much, Adam. Thank you.

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