Acquisitions Anonymous - #1 for business buying, selling and operating - This Franchise Cleans Fryer Oil… But Is It Profitable?

Episode Date: April 21, 2026

In this episode the hosts debate a commercial kitchen oil filtration franchise that most liked for its recurring revenue potential, while one host strongly opposed it due to small market size, customer churn risk, and dependence on struggling restaurants.Welcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.Looking to build a professional website in minutes? Try Wix: https://wix.pxf.io/c/6898629/3115214/25616?trafcat=templateHubSpot is the backbone for how businesses scale without chaos. Try them out here: https://go.try-hubspot.com/OeG9Vr💰 Sponsored by:Capital Pad is a marketplace connecting acquisition entrepreneurs with investors ready to fund deals. They standardize governance, distributions, and investment terms—making it dramatically easier to raise capital or invest in small business acquisitions. If you need funding or want to back operators, Capital Pad streamlines the process. Discover exclusive opportunities at https://capitalpad.comFRANZY - Thinking about buying a franchise instead of an independent business? FRANZY is a free platform built for acquisition-minded entrepreneurs who want to explore franchise ownership without broker bias. FRANZY matches you with franchise opportunities based on your capital, goals, and lifestyle—and includes free coaching from experienced franchise operators. If you're exploring ETA but want a structured, system-driven alternative, check out https://franzy.com/This episode examines a franchise opportunity in the commercial kitchen services industry: a business that filters and recycles cooking oil for restaurants using proprietary mobile filtration equipment. The concept is simple but operationally intensive—technicians visit restaurants regularly to extend the life of fryer oil, reducing costs for customers while creating recurring service revenue. Entry costs to start a territory are roughly $130K–$150K, and average single-territory operators generate around $300K–$430K in annual revenue across roughly two to three service vans.Key Highlights:- Startup investment roughly $130K–$150K per territory- Average single territory revenue $300K–$430K with 2–3 vans- Estimated 20–25% net margins after normalization- Key risk: reliance on restaurants with high failure and churn rates- Split verdict: most hosts thumbs-up, one strong thumbs-downSubscribe to  weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking hereDo you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.Do you enjoy our content? Rate our show!Follow us on Twitter @acquanon Learnings about small business acquisitions and operations.For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous, the internet's number one podcast about small business buying, selling, and operating. Today, we dug into a deal that was super interesting. Alex, our friend from Franzy brought it, and it is a business that the other three hosts all liked, and I hated it. So stick around for the whole thing, and you can figure out how we felt about it and why I didn't like it. All right, here's the deal. Hope you have fun. We'll set acquisitions anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore. And thumbs downing on just the plus inventory line.

One of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems. Unclear demand or a single owner who holds all the knowledge. Franchising approaches that problem differently. You are buying into an established brand with documented systems, unit level data, and repeatable operating playbooks. The heart part is knowing which franchises are actually worth evaluating. That's why Alex Moresniak, former CEO of 2U laundry, built Franzy. Franzy is a free platform that helps acquisition-minded entrepreneurs explore franchise ownership without broker bias. You answer a few questions and Franzy shows you franchise opportunities that align with your capital, lifestyle, and long-term goals.

You also get free coaching from people who have actually built and scaled franchise businesses. If you are exploring ETA and want to understand whether franchising fits your acquisition strategy, visit franzi.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. All right. Well, we were just starting to talk about the bloodbath that is the drive-thes. through coffee, Dutch brothers, Seven Brew Market. So continue on.

It's not just a land grab, but it's also just like a brand grab. Like we need to get our name on as many corners as possible and in as many places. Yeah. What's your perspective on the space, Alex? Yeah, I was just telling the group, we, you know, we work with a lot of the large franchisor brands. And one of the ones that you mentioned, you know, well-known national chain, told us that they are only selling 70 units plus at a time to incoming

franchisees at this point. So they need big, whole territory, whole regions or whole states to be bought out now at this point because just of how big they are and how fast they're trying to get these open and grow. So why is it 70 and not 50 or 100? Like how do you end up with 70? It's like it's a very oddly precise number that it's like, well, what? That's a good question. I don't know if it's how they've market mapped and they've found that the average metro can support. I don't know. many. Could you fit Charlotte in the surrounding two-hour drive-time, 70? My guess is it has to do a drive time because they typically want multi-unit operators like that to have local GMs and district managers that can get to their locations within less than an hour or two. So my guess is

it has something to do with the ability to get GMs and district managers into each store on a recurring regular basis without driving more than 90 minutes. Does that create like a really active like secondary and resale market? I mean, if you were an early entrant and you just bought like one or two or three, and then you've got these big consolidators, I feel like that's the path I've seen before, is that they're like, great, we're going to gobble you up and, you know, just get out of our way. That's exactly what happens in franchising. So, you know, you've heard some, like Hermozzi said this before,

and others have said, you know, why would you franchise? And a lot of the reasons people franchises, you know, if the four of us start a coffee shop or a gym or whatever it is, and we have this cult-like following and have this amazing brand to scale it nationally, because there's physical infrastructure, we either need 20 years or hundreds of millions of dollars in capital to actually go pull that off. Look at Chick-fil-A.

I mean, they're just now. Everyone knows them now. It's famous. It's widely popular. But Chick-Fleys been doing this since like 1940-something. I mean, it's been forever until they got to this point. And so people start franchising to accelerate that. You bring other people's capital in.

You can start scaling much more rapidly national. And so if you think about the evolution of a franchise business as a franchisor, you have initial success independently. You start franchising to accelerate growth. You eventually grow and tap out the whole country. And so how do you grow from there? You start buying them all back from your franchisees or you see consolidation happening with private equity family offices and you try to buy them back or the P.E. the family office tries to buy the franchise or at that point. So consolidation is always going to happen in most successful franchise. systems and chains.

I think there's an open question as to whether it's possible to do what Chick-fil-A, Panda Express, and all those guys did in today's age, because they all came of age when capital was relatively scarce. So you weren't dealing with, like, you weren't dealing with people blitzscaling into all these markets like Seven Brew and Dutch Brothers are. I mean, Dust Brothers is just like, they raise so much money via SPAC. Seven Brew has all this private equity money. they're deploying throwing capital around like crazy.

I think there's an argument to be made. You either have to go big or you can. And the two ways to go bigger are either raise a ton of money from private equity and spread it out like Seven Brew has and Dutch Brothers have, or you go hard in franchising like Scooters has and use other people's money. But I don't, I mean, I don't think it's possible to do what Panda Express and Chick-fil-A did in today's age. Like, there's too much capital fighting you.

Yeah, even look at Raising Cains. I mean, they started out franchising, and even then, Todd Graves was very meticulous about how he's scaled and maintaining and protecting quality, kind of like an in-and-out. And then recently, in the last five years, bought all those franchises back early in the maturation cycle of a franchise, and it's mostly corporate-owned. And he's now at his size and has access to capital to your point where he can do the whole thing on his own, for the most part. I mean, he's got capital partners, but a lot of it's still him. What's interesting to me is how the SBA program is so important to the financing, financing the growth of these brands. SBA does a lot of those individual franchisee development deals and even some of the, you know, retrades where they, where they sell to somebody else. But it's a huge cornerstone of, you know, that financing vehicle and it all kind of comes back to financing.

Like you said, you know, you franchise so you can finance it. the growth faster. The SBA and banks love franchising. I didn't appreciate this as much before I got into the franchise world and ecosystem. But banks, one of their core jobs is risk mitigation and they look at a franchise system as, hey, there's playbooks, hey, there's multiple data points that we can look at to see how well are these working across the country versus Mills and Alex's coffee shop. which is sometimes it's counterintuitive that you know makes sense there's all this data but each location is its own small business and just because there's a system and your playbooks doesn't mean it's guaranteed for success but i think banks look at it like it's de-risked at least

and we're more willing to lend to these these types of operators it's de-risk that way and it's de-risk if they can get an sba guarantee so with those two suddenly a startup financing is not so scary you come in without those two things well definitely without the be a guarantee you're not going to get startup bank financing. And, you know, it's actually even hard outside of a franchise system to get startup bank financing. So it's really those two, you know, ways of mitigating the bank's risk that make it all work. That's interesting. I think about that as a catalyst for like the maturation of a franchisor. And then they can go, hey, we'll like disperse it, use subsidize money and then consolidate it, you know, once it's been de-risk. I am friends with

the family office that runs Golden Corral, and they kind of went the other way. They did predominantly corporate, I think, early on, like multiple decades ago, and then realize we would rather be in the franchise or space and kind of rolled them out. But it was a different kind of maturity decision for them where they were like, we just don't want to operate this as much anymore. We would rather, you know, kind of sit in a perch and just oversee. They don't want 5,000 employees. You know, They'd rather collect 6 to 8% of revenue across the system and not deal with the headache. Something else you just said too reminded me of some franchisors are getting, I don't know if you'd call this aggressive or not, but they will pre-negotiate in the franchise agreement their first right of refusal to buy your store back,

which might be 10 years from now. And in some cases, they'll even set the multiple at which they're going to buy it at or directly an effective price, which I think is kind of crazy. You don't know what the market's going to be like in five to ten years. And the fact that you're setting a multiple is wild. But they're doing that proactively because they know 10 years from now for the only way we're going to grow is to start buying everyone back. And guess who does not pay attention to that is a first time unadvised franchisee buyer. And that doesn't matter.

Yeah, I've seen, we've seen deals where it's under LOI. They even got a broker. They listed it. Got under LOI. That person's trying to get an SBA loan. to buy it and finds out, oh, the franchisor is not going to let this one go. They have right of a first refusal and they're taking it. So something for buyers to be aware of. If a franchise is listed in existing going concern franchise, you should probably ask about right of first

refusal and whether they've already cleared that with the franchisor, as we've seen it. Even a sophisticated buyer might not catch that. I mean, because it's just, it's not something that was common previously, but I'm starting to see it more and more. It's almost one of those things where you just, you wouldn't think that that would be allowed or that that would be expected. And so sometimes it gets overlooked and you got to read your documents. Even the owner of the franchise has forgotten it in the cases that we've seen because they haven't gone to, you know, to clear it first. So I am now going to suddenly give you guys a hint that we should talk about the deal that Alex brought up by putting it off on the screen. So yay me. Would you like a passive

aggressive host for your podcast? Yeah. I know a guy. You just put it up on the screen and go, excuse me, guys. That's very interesting, but we're here to talk about this deal. You need a DJ like, boer, boi, boi, bo, pooh,

like you need one of those things. Cool. All right, well, let me, I've never seen this before, but I think it would be fun, Alex. I will read it,

and then you add color as you see fit. So I think last time we tried, you brought a whole FDD, and after, they're 210 pages, Totally interesting if you're into that. But you brought, thankfully, a summary of this time. So let me give you this one.

So this is Filta Environmental Kitchen Solutions. And the industry is actually commercial kitchen services. So the basic TAM information, and there's a million restaurants in the U.S. Every single one has a deep fryer that could be a potential filter customer. Restaurants spend a $3,000 to $5,000 per year on cooking oil per friar, and most just dump and replace it. Filta extends oil life through on-site micro filtration saving customers 50% or more on oil costs. Most restaurants still manage to fire oil themselves and there's a developing market with massive room to educate and convert.

So let's just pause there. So I've seen where there's like cooking oil, recycling, like boxes at some of these big restaurants, especially like, you know, the big kind of fast food chains. So how does this kind of fit into that world, Alex? or does anybody know? Yeah, so I guess a lot of these restaurants, even some of the larger chains, there's not mandates yet around

how long restaurant operators are keeping the same oil. So some of them will, yeah, it's pretty, I mean, I don't know, unsanitary and not, you know, knowing some of these dirty kind of behind the scenes, you know, facts or information. So filter came in and said,

hey, we can, you know, recycle and refilter for you. We have this proprietary piece of hardware that we have outfit into a van. So they pull up, they connect to your oil, and they refilter it at fried temperature, which I think is fascinating. My guess is it has to do with the ability to clean it

while it's, I guess, hot, and the particles and things are loose and separated from each other, et cetera. So they've developed this proprietary technology, this MFU, this mobile filtration unit, is something that filter has patents on and it was part of the reason you didn't even consider refranchised. Did you say MFU?

Yeah, MFU, mobile filtration unit. It sounded bad for a second. So they're proprietary machines that are transported in outfit vans that filter cooking oil on site at the frying temperature. From that core service, they stack up to five additional recurring service lines on the same customer. So I guess they just like drive up, run a hose into the friar, and like suck out the oil, filter it, and put it back in. And they've been franchising for 22 years in the U.S. market.

They're originally from the U.K. Where they started the name as Filter Fry. So the franchise data sheet here has a franchise fee is about $40,000. It costs about $75,000 for the MFU, parts, filters, van prep, and uniforms. So it costs you about $130,000 to $150,000 to open one up. You pay 6.5% of base revenue royalty, and that decreases as you break $10 million. there's a marketing fund one percent of revenue minimum royalty $650 a month and then you pay seven and a half percent of ongoing fees and in the first three months there's no royalty

so Alex how do I do I sum these together like am I paying 15 percent of revenue and fees and stuff or is it it's six and a half plus one yeah six and a half plus one is is the base royalty and it sounds like that will decrease on a sliding scale as you get closer to and you we can look in the FDD at some point if we want. But as you get to $2 million, it might go down to 6%, or 5.5%. And then as you get to 4 or 5 million, it will go down to

4.5%. And as you get past 10, 4%. So that royalty decreases as you find more and more success. And what I noticed when I was looking at this FD, filter prioritizes growth and incentivizes it pretty strategically in a way that I haven't seen a lot of other brands do. The sliding

royalty scale, I don't see a lot of brands do that. So they're encouraging you to say, hey, I want to go buy another truck. I want to go buy another territory. And my guess is a goal to consolidate an incentivize consolidation because we talked about it earlier with Golden Corral. Even if you are the franchisor, you don't want to deal with thousands of individual franchisees. You'd rather have 400 that own multiple locations. It's just easier to manage and less complexity is the franchisor. So it looks like there's six service lines per you sell six products into this. So there's filter fry. That's a micro filtration.

Filter bio, that's vegetable oil collection that they resell. Filter gold that's cooking. They will sell you cooking oil if you want. proprietary walk-in filters. So they'll do filter changes in your walk-in cooler. That filter drain, they clean drainage pipes and treat them. and then a filter clean, which is a deep cleaning steam for individual customers. So once you have the hood cleanings.

That's what? I would think too. Those are like, you know, hood cleanings, which are regulated and mandated. You can't just let your hood get, it's a fire hazard. So that's fun. Yeah. And then here. So they sell in on the oil as the base, your core recurring product.

And then you're there, you know, every few weeks and you can sell, you know, upsell all these other things is the is the thought um so financially in 2024 they had 78 multi-territori operators and then they have 39 single territory franchisees so is this one truck one franchise one territory is that kind of how it breaks down no you can have so the average vans operated in a single territory is it's 2.6 on the high end seven on the the low end one um so territory is typically defined by the number of households um that's more I guess for a retail one. For Filta, I'd have to look in the FD,

but it's either miles, you know, a radius based or zip code based. Sometimes brands will draw polygons and do it, do it that way, but they'll typically do it based on, you know, households. Even if it's a commercial-based business, my guess is they do it based on population and households. Look at the dispersion between average gross revenue

for multi-operators and single operators. It's like a multiple of three. Well, is that because the average multi-territor operator has 5.6 vans and the average single-territor operator has 2.6? I assume that's an aggregate. I think there's an outlier here, though, because the average vans operated, the biggest multi-territor operator has 34. You see that high, low median? So, like, this may be skewing the average a good bit. Yeah, look, the median, I think, is more.

you're representative but even then the median is a multiple of three to your point while the trucks are only two times you know delta so like if we look at this atomically as a single territory operator there's 39 franchisees they're doing 429 000 average gross revenue the median is 300,000 and they're doing that across two and a half trucks on average yeah that means the average revenue per truck is my math right, it's like $150,000. They have a note down there below. Average revenue per van, 232 for multi-territori operators.

So yeah, probably for the single territory, it is, it is in the 150th range. Yep. It's a wild thing about franchises. They talk about revenue a lot. They don't talk about profit that often. Well, and part of it, I think, too, is it's because these FDs, so the item 19 is where the financials are. audited financials. And a lot of the times you have all this goofy stuff happening where an owner

might have a ton of seller discretionary earnings and they're paying themselves a bunch. And so the profit just gets, I don't want to say useless, but it's harder for them to pin down and give accurate representation. And brands are so worried about, you know, earnings claims and, you know, misrepresenting where an individual is and how much you could profit. So a lot of the times, I tell people, go talk to franchisees in the system and just ask them, how much are you paying yourself? How much are you making? Because it's the best way to get the real data without the brand worrying about future lawsuits and making earnings claims. And that is a downside. I'd say to franchising is it's almost overregulated in certain areas

and then not enough in others. And it scares brands from like, I don't know, I want to talk to you like a partner and give you the answers. But if I say the wrong thing and I get sued five years from now, it's just not worth it. So go talk to Mills or go talk to the other franchisee and let them tell you what they're making. Hey, everyone, it's Bill, and I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad, and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So Capital Pad is a marketplace for acquisition entrepreneurs that is people who want to buy a business

and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side, is that CapitalPad takes care of all of the details

that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in Black White. Basically, CapitalPad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad.com and tell them that Acquisitions Anonymous sent you.

would we want to take a stab at what we think the net margins are or they should be in the business like this? I have some info from a few operators I've talked to. They're doing about 40% gross margin. Again, full disclaimer, this is not in the FDD. This is purely from conversations with other franchisees. You know, roughly ballpark, let's say 40% gross margin and then a 15% net margin. But that's inclusive of the owner paying themselves a salary and other personal expenses that they're they're treating as seller discretionary earnings. So if they took a normalized salary, this might be a 20, 25% margin business. Yeah, I think that's fair to say.

Guessing, you know, yeah. Yeah, I think that's fair. S-D-E. Is what you're talking about? Yeah. S-D-E. Yeah. Right. S-T-E margin.

What's their dispersion across kind of mom-and-pop versus like large chain? Do you have any sense of that? I didn't see any information on that other than this feels like, even though they've been franchising for 20 years, there's still a ton of education happening where restaurant owners, and more regulation is coming to require owners to be more cleanly

about making sure that the oil is being filtered or replaced on a more frequent basis. And also just the education around how much this can save them on costs by having it filtered versus fully replaced. This kind of feels like, yeah, I was going to go to Mills, I think this kind of feels like smash my trash to me.

I think we've done that one a couple times on the pod. And as I think about the model of like vitamins versus medicine, right, this feels very much like a vitamin thing that you're selling. I just wonder how hard, I wonder how easy the cell is from this, right? It's just like, hey, your cooking oil is slightly too dirty, Mr. barely hanging on restaurant, you know, customer. And then you're trying to sell them a bunch of other stuff.

It's nice to haves, right? Whereas, you know, with these restaurateurs, I just feel like, I just worry this can be hard, hard to sell this. I don't, I don't know. I think there's more revenue, I think there's more viable revenue lines here than there is in Smash My Trash. Like, smash, okay, they're kind of pivoting and saying maybe we'll own cans also, but that's a different truck that has to move them and haul them and take them to the dump

and bring them back and all those kind of things. To me, I think that, if your foot in the door is something that there's relatively low or no competition on, people aren't recycling oil. They're just saying, hey, get rid of my old oil and bring me new. Then it seems like a relatively good way to get your foot in the door. And then you're trying to upsell over time and saying, hey, while we're here, it looks like you're running low on oil, you know, and I don't know.

Maybe you have to compete on price to maybe that's a highly competitive thing. But I would think I would think I like these other additional revenue lines better. It may be though that to me the national accounts thing would be the biggest play here. And you would have it hopefully an accumulating advantage as the brand gets bigger because then as the franchisor goes to pitch Burger King or something like that, you know, you're saying, well, we can cover, you know, 30% of your stores that doesn't really help us. If you can cover a much higher percentage of our installed base, then it just helps you as you grow. It reminds me a little bit of pool services. You know, you've got a van.

You've got a technician. Chemicals. Yeah. Yeah. Yeah. And once you're there working on somebody's pool, you notice all the other stuff that they may need to do or need to buy. It feel like it's very similar, but you know,

you're selling to the restaurant industry and it's mostly about their friar. But similar. brings up a good... I don't know if that's... I don't know if that's a good parallel to making this attractive. Like, we have a pool guy. Sometimes his truck doesn't work

when he tries to drive to our house, right? Like, and, you know, I think we've seen in this podcast that pool construction is a great business to be in. Pool cleaning and pool service is a terrible business to be in. So is this the pool service of restaurants?

I guess that's what I'm asking. It feels like it. I like it better. It's got better margins. probably and it's B-to-B, which is always, I don't know, always better. I think high-ticket. Yeah.

I would be worried about the phenomenon, though, where a large brand dictates certain things. It could help you. It could severely hurt you. But like, you can't go sell foam cups to your local Chick-fil-A. They control the supply chain and they own the company that makes the foam cups. So if you could use this as an advantage, I think it's a huge advantage. but if you are boxed out by the large brands,

then you're SOL and you'll never break your way into it. Yeah, I think that's a good point that you bring up two mills on the national account piece. Like one of the few reasons that you would franchise versus doing something independently is, you know, if you and I run one of these locally in Charlotte, but nowhere else, you know, we're never going to go get the Burger Kings and the large systems of the world, at that national or franchisor level. But if Filta has locations all over the country and they can negotiate a huge, account with hospitals and casinos and restaurant chains. We benefit as that individual franchisee

because the broader parent company has that access. They also need to be helping us drive OPEX down over time to the tune of it being greater than the royalty that we're paying. Most people are in franchise because the OPEC savings outweighs what I'm paying in royalties. Take McDonald's or any restaurant as an example. If you and I have to go buy burger meat for $2 a pound, but McDonald's is getting it for 40 cents, but we have to pay them a 6% royalty. It's still very likely worth it for us to go and do that with all the other benefits we get of menu innovation and technology

and brand marketing, et cetera. And I think a commercial services business like this isn't any different. Can you save enough on the vans, the filtration system, the oil, but also gain advantage through those national accounts? But, Nils, are you kind of saying if someone comes up with a better MFU. I like that word. Sorry, I have to use it in.

I'm like your shortening mother. And you're sort of stuck. I don't know. I mean, so I hear what Michael's saying. Like this feels like it could be either competed away or kind of like smash. You're basically asking somebody just pay for something that is going to reduce an alternative cost. But it's not in their budget right now anyway.

So you're having to say, hey, you pay X amount of dollars for new oil, but we can reduce that, you know, interval by you paying us, you know, in the meantime, very similar to smash. If this had an installed base, it would be a much more durable, I think, and scalable business long term, like on-site propane tanks. We have an on-site propane tank that I honestly don't even, I don't even know the last time we priced it. We have not gone to competitors and said, hey, will you come give us a price for a new propane tank and what is our, you know, cost per gallon of propane. It just is out of sight, out of mind. It never runs out. They come refill it all the time. Like it, it's a very, very small cost in the grand scheme of things for us. This does not have that.

You know, it's not like the blue rhino at the gas station where like there's a, there's a cabinet. There's something physical on premise or a tank at my shop. But I think it's, I think it's at least in between. That's better than the pool service guy who, you know, nothing is proprietary or beholden to him. I think the other kind of thing we should talk about this is I think a lot of people are going to take out SBA loans to get something like this started or, you know, it's not a huge amount of money coming out to get it started, but it's also kind of, I don't mean to be insulting, but it's kind of small ball, right?

Like, this is not a lot of revenue for the type of life risk that people are going to be taking. And, you know, they have $118 million. in revenue, like, there are chick-fil-A, like, owners that do better than that, right? And that's an extreme. But I think you get what I'm saying, like, do I want to be in this business, or would I rather figure out how to get into something like, you know, McDonald's? And I know that's an extreme. And you or I are not walking into McDonald's, but like, this is just a pretty small business in the grand scheme of things, and especially one for being around for two decades. It just, you know, kind of, I think about just the inherent opportunity cost with something

that just kind of has this small of a tam and it's this small of a size. So I'm happy to be arguing against here, but I'm like, man, this feels like hard work for not a big market. My response, I used to think similarly, I used to think franchising is just McDonald's and Subway, and it's these multi-four, five, six million dollar plus year per unit businesses. What I've grown to appreciate is that there's all these different archetypes of people out in the world.

Some people just want supplementary income and that's it. Some people want to replace their income. And we have to remember, like I, you know, you and I might think, I need to get to 400K, 500K,000k, 600k a year. Others are like, I would be life changed and thrilled if I could make 150, 200 grand a year and run my own thing and do my own thing. And so I've grown to appreciate there's different backgrounds, walks of life where it's supplementary income, replace my 100 to 200k a year salary and I don't have to work for the man anymore. and then there's empire builders that are, I, you know, my time is worth $2,000 an hour. Yeah, and I need to go build 30 of these.

Gurdly. Let's go. I get what you're saying, but I think there's so many flavors out there that, you know, for some other people, they'll look at this and be like, this would be the best thing that ever happened to me if I could do this and figure it out.

I totally agree. I think owning a small business, especially because of SBA financing being available, has become aspirational similar to owning your own home. You know, for some people, it's not about being huge. It's about being independent and having that control. And so, yeah, I think there's a lot of people for whom this is appealing. And there's also a lot of people who, their first time dipping their toe into entrepreneurship,

they want something small. Whether that's the right decision or not, you know, it doesn't matter. That just feels safer to a lot of people to go with a franchise system, where they've got support and somebody's kind of figured it out for them. And also, you know, it's not a huge capital outlay. It's something they feel like they can accomplish. And maybe they go larger from there. But I do think there's a lot of people for whom this kind of thing is very appealing. Alex, how did you find this? So we, on the platform that we've built, we've got 4,000 plus brands, you know, franchise brands worth of data. Their FDDs, third-party data,

consumer reviews of these brands. And so typically I'll go scour and see what's out there, what's got the most units sold. If I'm looking for something less risky, I look for 10 years, essentially, how long have they been doing this, how many brands have they have opened, what does the average success look like?

If I'm looking for that moonshot, roll the dice, it's risky, but it could be a very successful. Like a Dave's Hot Chicken, imagine getting in early to that, or another very popular one right now that's going to, I think, do really well. It's called Mike's,

red tacos. It started in California. Some of the Dave's guys are involved. And I think they're going to knock it out of the park. It's a phenomenal product. But you have to find those and get in early. So we use our data set and our platform to identify these things. That's cool. Are most platforms at this, most franchise systems at this level of scale with, I think, I can't remember how many units it said. It's over 100. Are they using a like a franchise development, we're to do kind of external, like, franchisee discovery and, like, in essence, a distribution model for the franchisee sale. A system this large will typically do development in-house.

They might work with a group like ours, like Franzy or, you know, another network to generate leads, high-quality vetted leads that, you know, we're handholding and supporting with financing, entity creation, all this other stuff that reduces friction. But we're also making sure we find them good operators. They're letting us know, here's what our top operators. operators look like. They have this personality, this kind of background, this level of risk tolerance. And then we got to look for that. And that's where, you know, we're a matchmaker essentially. But these larger brands do most of it in-house. Emerging brands will outsource their,

franchise sales and development to these third parties called FSOs, franchise sales organizations who take a cut of the franchise fee, zero money down or upfront and go out and run that process as though they are the brand themselves. Yeah. Michael, I will say I went on their franchise page, and they have $118 million in system revenue. I know that is too small for you, but it's not too small.

But here's the deal. There's 121 franchises, right? Franchiseese. So the average one is doing $900,000. Yeah, I'm just kind of pushing back on the, hey, like, I appreciate people wanting to be in a niche, want to replace their job. there's a danger in being in a small tam, right?

And a lot of times small businesses and small, you know, small franchise systems are small for a reason, right? They're chasing a small market. And one that here in this case, like kind of feels like a nice to have rather than a central thing. And you're selling into customers that potentially are barely hanging on, small mom and pop restaurants. Hopefully there's some national contracts.

But if there were, why aren't they doing more revenue than $900,000 in $118 million? There's a million restaurants and they are only at 118 million. To me, that's kind of like, you know, I should think through this carefully. And the biggest choice any entrepreneur makes is what business you're going to be in. And it kind of gives me pause. This is kind of like, do I want to be in the home health care space? Like, just freaking hard. Like, just feels hard.

Yeah. Versus, you know, versus where, you know, when the stuff hits the fan, are these small restaurateurs going to be cutting this pretty quickly? Yeah, I think you're one of the first things to get cut. because this is a nice to have franchise. That's what scares me. I think that's a good point too. Lacking any regulatory change or brand requirements,

some of the exposure you have or the diversification you have within your customer base is definitely up for question. I think some of those national accounts can offset it like large hotel chains, casinos, businesses that are maybe more isolated or insulated from some of those impacts. but I agree with you if it's a local restaurant operator who is having a hard time at it, they don't need to be paying for a service like this necessarily. Yeah, the customer's turnover is probably pretty high, to Michael's point. You probably have to continually market to,

because there's so many restaurants go out of business. Just the industry that you serve is so volatile. There's almost nothing you can do to kind of overcome that. You probably just have a lot of turnover. Yeah, your customers may not churn because you did a bad job. they may just churn because they are turning. That's right. One thing I will say is I talk to one of their larger operators

and very hardworking, fairly sophisticated individual. And this is true for not just filter. I think a lot of franchise concepts as well as independent businesses. Some of the operators out there don't want to work. Some of them aren't thinking about how they can apply AI into their business. How do I do this better? how to do this faster, cheaper. They're kind of just mailing it in a little bit,

and they're not overly sophisticated, and they're still making money that they're happy with and good with. And what I noticed about the top operator or the better operator in Filto was that he was willing to put in the effort, and he was willing to be thoughtful about his business, and he's over $5 million a year in revenue with, I wouldn't say that much more work to get there. He was willing to treat this like a 40 to 60 hour a week

thing and really treat it like a zone and go implement new processes and new approaches to onboarding customers. And I don't want to say it's easy, but if you're willing to roll up your sleeves and aren't afraid of some of the dirty work and the dirty jobs, I think you can really go make a pretty big business for yourself, whether it's this or any other business opportunity. I like it. I'm thumbs up. Yeah, me too.

For the right people. I am too. Me. We should say the caveat. Michael has done something similar size, similar competitive, like environment before in drive-through coffee. So we started the conversation on that note.

And I feel like this has similar negative characteristics as the ones that you keep bringing up about this. So I get it. It's like once, bit and twice shy. Me. Alex, how do you feel? So I like stuff like this because I like selling

and I like that there's national account play here. I would be thumbs up on it too because it feels like one of those dirty kind of niche things that a lot of people wouldn't go and do or if they did decide to do it, wouldn't do it well. And I'm a competitor. I like competing and I feel like I could build a sales motion that would just dominate the market that I was in.

I think I could, I don't mean to sound too arrogant. I think I could be one of those top 20, 30% operators in this type of system. And I like things like that where I know I can go into the arena and compete and have an outsized chance because the other competition doesn't feel as crowded or fierce or willing to do that extra 10 hours a week that I'd be willing to do. Yeah, I'm sure to be said for being the most talented person in a sea of not very talented people. I'm talking for, I'm speaking specifically for Heather. This is about the podcast.

So, but, but yeah, I get your point. I'm still a big me. It's like, oh, there's better, this better dates to play in this one. I've said this on the pike nuts before, Alex, but I had a friend in the restaurant space who they were consolidating and they were like buying individual units from dentists who were like, how hard could it be to run a restaurant, you know? And then they're like, oh, my God, this is not easy. They were, they were buying them from the dentist at a discount and rolling them and

arbitrage play into their highly valued system. So I think there is room for that. Yeah, I'm glad that's the one thing AI hasn't fully destroyed for us yet is there's an arbitrage out there. And there's things that you can go find and make better still. I don't know how long we're going to have that for. But anytime there's an opportunity to do it, I try to jump on it. It's a great deal, man. Thanks for bringing a good one.

Yeah, thanks for having it. Alex, you want to talk a little bit about what you guys do and then we'll wrap up? Yeah, I'll be quick. I mean, we effectively are Zillow for franchising. So just like you'd go look for a vacation home or if you're moving and you're just looking at houses for fun, we've got all sorts of fun data to go play with. A lot of what we looked at today

we have for 4,000 plus brands, revenue costs, how many locations are open of shutdown, etc. And then we help you if you want it. We give you free coaching on what's the right fit for you. That's a lot of, I think, what determined success is what's right for you? We heard it today.

What's different from Mike Lee is different than Mills, Heather and me. And we help you kind of think through what the right fit would be for you and then finance it all and you know get it up and running you know soup to nuts that's what franzi helps you do yeah awesome mills you can be found on a roof i was on one earlier today and i will be on another before the end of the day and heather you saw somebody at baseball field yesterday and i was like it's a good day when i get on the roof bad days are when i can't get out and heather you can be found at vizzo dot net if you knew

vizocap dot net vizzo capp dot net come to my tuesdayap dot net come to my tuesdays day, Zoom, if you're going to buy a business and use an SBA loan. And they're every Tuesday. You can find me at Chili's. All right. Thanks for being here. We'll catch you next week.