The Entrepreneur DNA - Semi-Passive, Fully Profitable: Inside the World of Non-Food Franchising | Jon Ostensen

Starting point is 00:00:00 What is up? The entrepreneur DNA family. I have an incredible guest here with me today. Now, this is someone who two times has hit the Inc. 5,000 with his business and is helping entrepreneurs understanding how to build, grow, and buy into non-food franchising. John Austensen is here. How are you, brother? Hey, Justin, excited to be here. Yeah. So, listen, I think the M&A world merger and acquisitions is how I look at it. I think you have a term E-T-E-A. I think we're saying the same thing here.

Starting point is 00:00:34 I think this is a big topic, right? And I think it's something that people want to understand how did they get started into entrepreneurship? Should they go out and buy companies? What type of companies are the right kind of company? Should they be starting their own company? And then if they do, should they be franchising? You have a very good friend, two very good friends,

Starting point is 00:00:52 who have done the franchise model with their own company they started. So they started a company and then went out and turned it into a franchise. right and so I want to get into all this in this this episode and into dive in so let everyone know kind of your background best-selling author two-time ink 5,000 you know let's go a little bit more about who you are as a moment time absolutely so based here in Atlanta Georgia work with clients all across the country and you know for the longest time I thought when I heard the F word franchise it meant fast food right I mean that's kind of what conjures up in your mind but you know like so many out there I spent many years in the corporate world, had a great run, always had that desire to build my own empire instead of

Starting point is 00:01:32 someone else's, didn't know what it looked like, and really is about a decade ago that I stumbled into franchising and have the opportunity to step in as president of Shelf Jeannie franchise system and support all of our franchise owners across North America. And really, through that experience and seeing all these diverse backgrounds that we allowed and supported and becoming business owners, I really fell in love with the model. So since then, I've invested in franchises myself on the franchisee side and started my consulting practice alongside that about seven years ago and I've been able to help you know just hundreds of people step into business ownership through franchising so passionate about what we do it's entirely

Starting point is 00:02:05 free to work with us very much like a real estate model we simply get a referral fee none of that's passed on to our clients and yeah love engaging and helping others understand what are the top available opportunities in their markets they probably wouldn't have thought of on their own yeah but things that we're liking out there that can be a good fit for them I think you know it's funny I've interviewed an individual before about franchising, and he runs a unique model in terms of he's more of a conduit, like a hub. Man, did it intrigue me. I mean, it really, you know, my entire adult life, I've been an entrepreneur. I graduated UCLA, went directly into entrepreneurship.

Starting point is 00:02:42 I've never used my diploma, never used a W or never had a W-2. And man, I'll tell you, the lift it takes to be a true entrepreneur, to not necessarily. necessarily have any bumper rails, right? To not necessarily have a playbook that is just given to you. Like, hey, if you do these things, here's how you create success. Like, yes, nowadays, there's YouTube and podcasts, which is why I want people to listen to this podcast because people like yourself. But listen, you know, it intrigues the daylights out of me moving forward.

Starting point is 00:03:13 I'm in a season in my life. I have options. I have the opportunity to look at things in a manner that, like, I'll be shooting you straight. Like, I'm looking at certain non-food franchises that, it doesn't take a big team. It's not big, heavily people built, right? And God, does that intrigue me.

Starting point is 00:03:30 Yeah, absolutely. No, and it's interesting. If business ownership was easy, everyone would be a business owner, right? And that pertains to franchising, too. It takes work. There's a reason why you can make an outsized return. It's because of the effort that you need to put into it. Now, not every franchise system is created equal, right?

Starting point is 00:03:46 I'd love to say, hey, all of franchising is great, but just like any industry where you've got thousands of players, you're going to have some that aren't that great. and then you've got some that are really strong that provide great supports. That's where we come in to try to help navigate because there's a lot of noise out there. Even if you come across the top 500 franchise list, you know, companies are paying to be on that list. It's a PR mess. There's just, there's a lot of noise and that's where we come in to help.

Starting point is 00:04:09 But no, you're exactly right. It's really interesting, Justin, a lot of existing business owners, you know, come to franchising and say, hey, I remember all the hard work that went into my first go round and, you know, what it took. And I love the idea of maybe next time I step into a franchise. franchise and, you know, build out that portfolio of diverse opportunities. And in some cases, they're not a good fit for franchising. You know, some people are too entrepreneurial and they want to put their thumbprints all over it. But for many of them, again, they say, hey, I appreciate everything that I'm going to be given day one and how I can start on third base

Starting point is 00:04:40 and have a proven marketing system that I don't have to learn from and waste money on. I've got a technology stack that's customized me day one. You know, I've got a community of other franchisees. It's kind of a built-in mastermind. I'm learning from their experience and trading best practices and kind of short-cutting that path to success. And obviously, a good franchisor on the sideline, they can support them. And oftentimes, what they'll do is they'll put a manager in place to run the business day-to-day. It's what's called an executive model.

Starting point is 00:05:08 Some call it semi-passive, semi-absentee. I like to call it semi-involved. You're still going to be involved. And the degree to which you're involved comes down to having a good operator. But if you've got a good operator that's incentivized and you've got a good franchisor, they can really carry a lot of that daily support water for you. Yeah. What would be the one thing that you probably get most, ask them most?

Starting point is 00:05:28 Now, maybe I don't want to get there yet, but like maybe something people aren't thinking about when considering looking into this, right? Like you would say, man, I wish if everyone could know this little thing about it, right? Like, what would be either a misconception, a falsity, a lie, outright lie, or just something that's unknown about franchising that you could be a voice to help people understand it? Yeah, I think, you know, kind of to my point, I think a lot of times franchising gets painted with a broad brush for better or for worse. And again, there's just, you've got a lot of different industries representing, a lot of different companies, a lot of different leadership teams behind these companies. So there's a lot of variables to go into a little bit of art, a little bit of science.

Starting point is 00:06:07 And so again, we call franchising an industry, but it's composed of so many little industries. And so I'd say just understanding, you know, who the good players are out there, who the bad players are, how franchising stacks up versus buying an existing. business or starting your own business and, you know, knowing the right questions to ask guys, to kind of boil it down, what are the right questions I should be asking as I evaluate these different franchise models? What would be the one question they should be asking you? What would be an important question? Listen, everyone should be going and following John now, reach out to. Is there anywhere of specific you would like them to reach out to? Yeah, come out to our website, Franbridge Consulting.com, F-R-A-N-Bridge Consulting.com.

Starting point is 00:06:47 I've got a lot of content out there. We'd love to share a free copy of our book, which, you Sure, your email address will send you a copy of the book, but also on LinkedIn. John Austin said it at LinkedIn. I put stuff out there most days. So what would be a question that you probably get most commonly asked? How can I find an opportunity with the fewest amount of employees and the highest return on investment? How can I just go make a million dollars when I sleep all the time and not really have to do anything? Is that kind of the angle?

Starting point is 00:07:14 Yeah, it's a franchise. It isn't it supposed to run itself? I'm not going to have to do anything. Obviously, Instagram says so. that's right that's right again there's so much noise out there you just have to yeah yeah and I go back to if it was easy everyone would be doing it but you just look at the success stories and there's again you can make an outsized return you can get the tax benefits of business ownership you can build an asset that you're able to sell you know one

Starting point is 00:07:38 other question we get a lot of times is hey can I just buy an existing franchise you know a resale I had a client this week that bought a pool cleaning business out in Denver that was already up and running that does happen it's probably five or ten percent or we do, not for lack of demand, but lack of supply. Because what typically happens is within a franchise system, if someone goes to sell, you know, the other franchisees get first line of site and essentially first dibs on that. So you'll see, I've got so many case studies that clients of mine that over time have acquired new markets by acquiring other franchisees in the system, gave them a path to exit, gave them a path to expansion. And so oftentimes the good resells never even

Starting point is 00:08:14 hit the open market. So that is something I have to explain to people that, hey, that can be a great proposition, but oftentimes the supply of good opportunities isn't there. What do you think about making a choice on what franchise, right? So I think most people want to use this argument, like, I want to follow my passion. I would do, I'll make this up. I love golf. I want to do something as golfing franchise. And I know there's a handful of them out there.

Starting point is 00:08:40 You love to golf, but do you love running a business, right? So that's where I, because I've never done a franchise yet, I will say. I'm not a big believer in, you know, follow your passion. I just recently made a post about this. I think, you know, the golf as an example, I love to play golf. Do I really want to run a business potentially like eight, 10, 14 hours a day if I don't have a manager yet and like I got to be in the trench? Do I like, is that going to be passion fulfilling me?

Starting point is 00:09:11 Probably not. Right. And so when people are looking at it, because there's a lot of choices, right? what would you advise them to be looked like is it numbers based right just go look at the results is it some level of passion based is it some level of or all of these things right maybe it's a component of all like how much time do you have how much money do you have what's your interest level in the subject matter uh you know do you need an office do you not need an office like what would be things they should be kind of looking at when making these decisions because there's a lot of

Starting point is 00:09:43 options there's a ton yeah and there's not a right answer or wrong answer for each one it really is specific on what you value the most. You know, I was coaching a client this morning who he's down, he's talked to a lot of opportunities. He's down to a teen driving school and he's down to to real estate wholesaling franchise opportunity. Totally different businesses and he's like, how should I weigh the pros and cons and how should I think about it? In the day, some people will prioritize more of the financials. They say, hey, if I can be the million dollar porty king and be known as that at the cocktail parties, I'm totally fine with that, right? Other say, hey, I've got to have something that I can really just, you know, I'm passionate about the

Starting point is 00:10:21 community. I'm passionate about seniors. You know, I want to help the older population age in place in their homes and serve them because I went through something with my mom. So everyone's got their own story and their background. I've got health care professionals and doctors that say, hey, get me out of health care. I've got others to say, I'm passionate about health care. I've got to stay in it. So, you know, everyone is a little bit different. What I found is Justin, we could sit on the sideline and hypothesize around characteristics of businesses and build our buy box, if you will, what is most helpful as getting in the game? It's having real conversations.

Starting point is 00:10:52 That's why the approach we take is, hey, Justin, if we are in your shoes based on what you shared with us, based on what we're seeing in the market, here are the 12 opportunities that we would want to consider across different industries that we think would be really interesting for you. You would then say, hey, John, here are three or four that seem most intriguing. Let's talk to these. It can be an iterative process. But once we get in the game, you start having real conversations about real businesses,

Starting point is 00:11:13 you start to compare and contrast the different characteristics that you prioritize. in your mind. And it's amazing when you have that light bulb moment and maybe you look at your spouse or you just have that intuition. It's like, that's the right one for me. And so I always say that's when the magic happens. When you get off the couch, you get in the game, you start having conversations. Probably 90% of those that we work with end up in an industry that was never even on their

Starting point is 00:11:35 radar. So when that light bulb goes off and you say, gosh, this is a combination. I never would have thought about this, but this makes a lot of sense. It's just so many case studies around that. So one of the things I love. love about it. And again, the more and more I talk about it, even with you right now, I'm like, God, I just love it. But I love business. This is why the entrepreneur podcast started. It's why the entrepreneur DNA community started, which you'll also be able to be a part of. But like,

Starting point is 00:12:02 the other thing is flexibility. I think some people, they want to own their own business. Franchising is an opportunity. But they want to own their own business because they want this backpack lifestyle, right? They, that's what, they don't want a boss. And while, While you could go both ways, let's talk a little bit about the, like, how are franchises successful? Because in my opinion, not being a franchisee, is probably in most part the same way that a true, genuine startup entrepreneur is, is they work their face off, right? They're in the trenches, as you just say. Like, they are doing the work. They're executing at a high level.

Starting point is 00:12:38 They're building infrastructure following the game plan. There's a playbook. That is a benefit, in my opinion, to the franchise model. you are literally given a playbook. But they've got to work. Am I, is it not quite as, am I off here? Because I just, I come from a place of educating people like, if you're going to be an entrepreneur,

Starting point is 00:12:57 you got to work the same amount of hours, like the 80 hours a week that you work for your boss and you're killing yourself over to make $100,000 a year. You've got to be willing to do that if you want any level of success. Because otherwise you're willing to do it for him, but you're not willing to do it for yourself. And that's where I get confused. You know, I used to joke that I'm the hardest boss I've ever had.

Starting point is 00:13:13 Now, you're working hard, but you're also building an asset, right? You're building something you're proud of that you've got equity in. And so, yes, you're absolutely working hard, and I will never sugarcoat that. But you're working on the right things as you work hard because a lot of things have already been taken care of for you. You're not having to go figure out all these other things. There's already product market fit that's been proven out. You know that if you work hard, it's going to lead to something. So, again, it gets you focused working on the right things and you're getting that coaching.

Starting point is 00:13:39 You're staying on task. You're not getting off in the weeds. it's as easily, right? It just like anything, it's what you put into it. So if you put a lot of effort into a proven system, your chances of success are a whole lot higher than if you were just running all these little tests on the side. So I'd say you work hard,

Starting point is 00:13:57 but you're working hard of the right things. That's how I'd frame it up. That, you know, I bring that to, so I've done consulting for the better part of 13 years, right? I've consulted a lot of real estate investors specifically and then business owners. you do that for the most part it's because you want to get ahead of the curve,

Starting point is 00:14:15 around the curve, you want to move further, faster and avoid the pitfalls. That's why you hire someone who's been here, done that, where's the scars to show it? I feel like franchising just expedites that whole process as well, right?

Starting point is 00:14:27 Like, I find most people end up working on busy work that is totally unnecessary, that a franchise can a lot of times remove completely because it's literally already set up. There's nothing to work on. It's already built in, right? talk to us a little bit about like the speed if someone listens to this and says i got to talk to john i want a franchise i'm out of my job i'm leaving monday this my last day what about the speed

Starting point is 00:14:52 of all this like it's not quite as fast i think what people think and maybe i don't know everything i've looked into a couple and it definitely was not like a i'm up and running and by march yeah well a couple of variables there so let's jump on a call next week we have that conversation i come back to a couple days later say, hey, I reach out the franchisors. Here are the ones looking to expand in your area. Let's go through these. You pick several to talk to. From that first call you have for the franchisor until you're at the point of signing the franchise agreement, on average is about 60 days, give or take. Some of my clients move faster. Some move a little bit slower, but around 60 days. It's not that you're launching the business the very next day, right? Now, if it's a brick and

Starting point is 00:15:31 mortar retail style business, there's going to be site selection, there's going to be build out. It's going to take a couple months, you know, maybe six months even. If it's not, If it's more of a remote business, which a lot of them are, a lot of property services and in-home senior care, and there's just different businesses that don't require a physical location. You can get those up and running pretty quickly. And so you would work with a franchise or on that timeline. Hey, do you want to launch two months from now? What are the things that you're doing to set things up?

Starting point is 00:15:58 Where are things you're doing on your end to get it set up, you know, staffing, marketing, all that jazz. And so you can turn it around pretty fast in what I would call service-based business. So it depends on the style you're going into. I don't know if you're able to say some of your favorites are the most popular, but like name some of the industries that these are in. Because there's a lot of different. I found out because I'm just interested now, like there's a home painting, you know, window blinds, you know, window cleaning.

Starting point is 00:16:33 Like the span of what is actually available. is pretty massive. Can you throw a couple out there so people at least understand whether they're your favorite or the most sought after, irrelevant to me? I just want people to understand how vast this really is. Yeah, we're seeing a lot of interest. To your point in things like home services and property services, you know, maybe more blue collar, non-sexy type industries, everything from insulation to flooring, the pool cleaning, to cabinets to, you know, just all these different niches. A lot of private equity flowing in there, smart money saying, hey, these are things that AI will only enhance over time. It's not going to replace, at least in our lifetimes, right?

Starting point is 00:17:08 a lot of interest in health and wellness. A big one just launched this past week with Tony Robbins and Gary Brecker. In the first two weeks, they had 200 qualified leads, raised their hand. There's only 600 available territories. That one's going to go fast. It's all about longevity. And we've had clients get involved in different recovery modalities within health and wellness. That's a big one.

Starting point is 00:17:28 Anything related to seniors. That could be in-home senior care. That could be more of a subject matter expert that works with all the nursing homes. It helps from a placement standpoint guide families into the right location. It's almost like a real estate broker. We just had a client in Florida that signed up for a senior fitness franchise. Certainly anything related to kids or to pets. I go back to what are people going to spend on regardless of the economy? It's the things they care about their kids, their pets, their aging parents, their health, their homes.

Starting point is 00:17:57 Franchising tends to be a little more B to C oriented just from a volume of opportunity standpoint. However, at any given time, there's a good handful of B2B services that we like, too. We've had clients recently jump into insurance adjusting freight brokerage and consulting. I just had a client assigned with a cost reduction consulting practice. Business coaching is actually a franchise. So these are opportunities where you don't have to have a large team necessarily. But there's so many sectors out there that, again, you would never think about B2B, about industrial hoses and piping.

Starting point is 00:18:33 There are a lot of industries that require that. So riches in the niches is definitely true when it comes to franchising. You know, it's funny because you talk about like business coaching. I mean, I think everyone wants to go out there and be a coach. Whether they have the actual expertise or resume to back it up or not, it's wild. Just because now I'm curious about that. Someone comes in, says, John, I really want to look at the business coaching franchise. But they're new to business.

Starting point is 00:19:01 Is that like a you can't or there's still an opportunity for them? to own a franchise? I'd say, can they add value? So a lot of people will have experience and say, hey, we'd love to leverage this experience. And I would say, well, you can go out there and totally recreate the wheel, or you can sign on with this franchise system

Starting point is 00:19:19 that is worldwide. It gives you great credibility because you're, you know, you've been trained. You know, you understand how it works. You know, but you also get all these assessments and curriculum and things that you have your beck and call to support your clients. You're not having to recreate everything.

Starting point is 00:19:33 So, you know, and again, this office. sometimes gets overlooked, Justin, but we all know business ownership can be lonely, right? It's lonely at the top, you know, but if you have mastermind groups, you know, and I'm a big believer in mastermind, well, franchising is a mastermind. Like I've been a part of the entrepreneurs organization for years. I've been a part of several other masterminds. That's been hugely instrumental in my own entrepreneurial growth. And here with the franchise system, not only do you have other business owners, but they're living the same thing day in, day out, and you guys are learning from each other. So oftentimes I think that gets overlooked, but that community aspect is big. Yeah. There's no doubt.

Starting point is 00:20:09 You know, and so the reason why I ask that very pointing question is because I'm in that space, you're in that space. Yeah. And the challenge I saw for COVID is people became coaches or consultants without having any actual historic dealings of what they're coaching, right? And so that can be frustrating. But what I will tell you is because this is why franchising to me has so much benefit. Like, I've never been in the golf space. I enjoy golf, but I am looking at golf simulator franchises because I just think it's a great model and golf is so popular right now.

Starting point is 00:20:43 It's ridiculous. It's everywhere. It's all over TV, indoor golf competition. Like, it just has legs, right? But I also think the PE and the VC and all this private equity coming into home services, geez, like you got to consider those. They may not be sexy, but I have a friend who went into the roof

Starting point is 00:21:02 space. I do not believe he's a franchise, by the way. I just think, I'm just talking about home. He's already looking at offers from PE. And, you know, he is on Instagram. He talks and he shows his like sales huddles and he's on a roof and he's shown. It doesn't have to look sexy to gain attention, right? And it's an ROI play. And that's the biggest thing. I joke that non-sexy is the new sexy. People want non-trinity. Yeah. No, I would agree. I mean, you know, they all, they all look or view these trendy, but the things that actually can make dollars and cents and actually have exits and all these other things that people want to be an entrepreneur and sell it one day and be, you know, well, you may not be, you know, in the golf simulator that sounds sexy. You might be in

Starting point is 00:21:47 the window cleaning or you might be in the, you know, window blinds or whatever, you know, these home services that like, what was that one you told me, like pipe and something? Oh, industrial piping, but yeah, you know, people like, you know, when there's a competitive advantage of the business. In the case of that one, they've got a supply chain, right? They're a national player. They're able to get things instantaneously. We shot a client in a Delaware that signed on with a great franchise that does hardwood refinishing, you're flooring, but they can do it without having to sand the floors.

Starting point is 00:22:15 And so they're able to get in and out much more efficient, much cleaner process because they have proprietary product, proprietary elements. So whenever you have intellectual property, that gives you a leg up as well within the franchise world. The thing I saw from my perspective when looking into this, it turned into it. a little bit of a marketing game. Like I just believe the person who could understand the marketing the best and understanding how to gain attention, just like anything, by the way, so we're clear.

Starting point is 00:22:42 You're going to do really well. Because here's the way I look at it. You have the franchisor who gives you the playbook. You run the playbook. But now you just need eyeballs. Now you just need to gain attention, right? And if you could do that, you're going to be great. Because to your point, all these franchises are franchises because it's a need, it's a want,

Starting point is 00:23:01 people want to be in the space and want to have this industry. Or at times it's a need, right? Like, people do need to get their house painted. People do need, you know, all these other services that you're talking about. Like, it's a need. So you just need to be the person that is at the top of the mountain screaming loudest. Talk to us a little bit about the marketing and what you encourage or what you see, at least from successful franchise.

Starting point is 00:23:23 What are they doing? What are they leaning into to become as successful as they are? Yeah. Well, oftentimes you're operating in less sophisticated. industries, right? Maybe it's a highly fragmented mom and pop's type space and you're able to come in and yeah, it's not necessarily all about the brand, right? I mean, when it comes to food and hotels, it's all about the brand.

Starting point is 00:23:42 But in some of these, it's just about having a white collar approach to a blue collar industry, right? It's being more professional than the competition. Yeah, there are industries. You mentioned paint. I'm personally not a big fan of paint. I'm not a big fan of like mosquitoes, not a big fan of, you know, home cleaning. To me, they're already big brands in that space.

Starting point is 00:24:01 and there's very little differentiation. So you're really competing on price. And that's not where I like to play. Like some of the industries I'm involved in, you don't have big players. Like I've got an asphalt paving and line striping franchise, parking lots, that I'm invested. I've got no idea of a competitor of yours.

Starting point is 00:24:15 None. I've got another one that provides temporary walls around renovation projects and construction sites. Again, highly fragmented. No one can ever name a company in that space, right? But if we go about our marketing better and we get in front of them and could I start this business on my own? Maybe, but do I get much more of a running start by going with a proven franchise system?

Starting point is 00:24:35 Absolutely. And I get the benefit of day one, they know what it takes to launch one of these businesses and how to optimize that marketing. So I'm not wasting marketing spend, right? And so that's part of the value add to me is, A, I'm not having to do all the marketing myself. Yeah, they're doing a good bit of it. But it's also optimizing the spend, you know, so I'm not wasting marketing dollars. So, you know, I'll always encourage people as you go through the process and you're talking to these franchise companies, really in the back of your mind and even ask these questions,

Starting point is 00:25:04 what value am I getting for that royalty stream? Typically you're paying six or seven or even eight percent of revenue back to the franchise order, but you want to be able to tangibly look at things and say, hey, I'm getting this value from them. And oftentimes there are things that you'd be paying for anyway, right out if you were to just launch a business. So, yeah, we always want to make sure they're, you know, learning what they would get in value,

Starting point is 00:25:26 that they're getting to know that leadership team, not just the salesperson for the franchise, we call them developers. But really, that team is who's going to be your business partner going forward. And, you know, if it's a newer company, I want to see that there's not only industry experience, but also a good franchise experience, you know, people that have been there, done that, supported successful franchisees in their previous lives with other companies. To me, that's the best indicator of future success.

Starting point is 00:25:47 Now, there's not 100% success rate in franchising. What do you see those that don't make it? What are the mistakes that you're seeing from the ones that don't become successful? Every now and then, it will be on the first. franchisors side, you know, and I absolutely hate that. You know, fortunately, we've got a really good track record, but, you know, you work with enough folks. I mean, that that is going to happen and it breaks my heart. But, you know, there are times where it's on the franchisor side. Maybe they don't provide the support that they led you to believe they would up front. Most oftentimes,

Starting point is 00:26:17 though, I would say it's on the franchisee side. In some cases, someone's just not cut out to be a business owner, right? They're not able to, you know, make the tough calls when needed or spend the marketing in those pressure moments or say, do I put another dollar? in, you know, not everyone's cut out for it. But most oftentimes, it's the lack of willingness to follow the system. And that sounds so cliche, Justin, but I've seen it firsthand. When I was at Shelf Jeannie and I had all these franchisees across North America, our top performers were the ones that followed the system the closest. I had a client recently that is no longer in business. It kills me up in New Jersey. And this is the franchise system might have placed 10 clients with. I've had

Starting point is 00:26:57 clients do very, very well with these guys. I know the CEOs very well as two brothers. And I reached off them. I said, what happened with my client in New Jersey? I thought he was a great guy. They said, John, he wouldn't follow the system. We tried to coach him up. We flew into his territory. We did everything we can to support him. But he thought he was the smartest guy in the room, didn't have the humility to actually follow the system. And as cliche as that sounds, that can be the downfall. If you don't have that degree of humility where you're able to say, hey, there's a reason why I pot in. Now, a good franchise resort is going to let you try new things and innovate. That's where the best ideas come from. But by and large, you want to follow the system and that's your best

Starting point is 00:27:34 path to success. I feel like that answer for sure would be universal, right? I think we all, even myself, like sometimes I think I'm too smart, right? And the worst part is when you start to buy into your own bullshit, right? And then you're like, that's a tricky spot, right? Because now you just are bought into this. Oh, I'm better. And then, you know, whether it's God or, you know, your hand gets slapped. And like, well, baller, you're not. not that good, right? There's an actual system in their process here. So I think that is a very common foul in most in all entrepreneurship, right, where you just think you're better then. For that case, if just for all the good and the bad of all this, right, like you're not making it work,

Starting point is 00:28:16 what are your options here? You sell it. Do you just let it wind down? Do you know, do you get penalized somehow because you couldn't figure out how to make it work? What is the like exit if like it doesn't work out for you. Yeah, most common path of, you know, low-hanging fruit would be to sell it to another franchisee and maybe you take a haircut on it, right? Or maybe you sell the equipment to other franchisees or the vehicles just depending on the type of business. So I'd say that'd be your easiest path.

Starting point is 00:28:40 The next one would be put it on bizbysell.com or, you know, there's some websites out there that get a lot of eyeballs from a resale standpoint. Certainly you could always use a local broker. I'd also talk to the franchisor and say, hey, who has shown interest in my territory during the time that I've owned it? that I can now reach out to, maybe a natural lead list. So, no, you definitely have a few levers to pull. And oftentimes I'll play that out with clients ahead of time because they'll be like,

Starting point is 00:29:02 gosh, I really want to do this, but I've never done, made a big decision like this in my life. And it's like, hey, you know, you've been looking for three years and you've come pretty close. Like this may be the time to actually take a step forward and you bet on yourself. You know, look at all these other people that made it work. But also play out what is the worst case scenario. If you get six months in, if you get 12 months in and realize it's not for you or, you know, your revenue ramp hasn't been what you. you thought it was and you don't see the light at the end of the tunnel.

Starting point is 00:29:28 You know, what are those options you have? And then once we kind of talk to it, in most cases, they're like, oh, that's actually not that bad, you know. Right, right. Maybe you take a haircut. Maybe you lose a little money like you can on any investment that you ever make in your life. Ever.

Starting point is 00:29:39 Anything worth doing, anything worth doing is going to have some degree of risk. But again, if you do your due diligence up front and, you know, if you're a halfway decent person, you know, business person, I mean, it's very doable. Yeah. You know, let's talk about the sexy stuff. how do we make it work? Like how do we go big in this world, right? Like, I'm at a place.

Starting point is 00:30:01 Like, I probably wouldn't go into it to go have one or two. Like, I'm like, I'm going for an exit. I would go in. I would want to go as far and as big as I possible. Like, what is possible? I don't think people even know what's possible, right? Like, yeah, you can have a location or you can have one franchise. But you also can have a hundred with the right franchise or, right?

Starting point is 00:30:22 Like, let's talk about what's possible. Let's talk about the fun stuff. Yeah, a friend of mine owns a couple hundred locations of a couple brands. Now, he's got some funding behind him, obviously. But no, I'd say at least half of our clients will buy multiple locations out of the gate. You know, if that's a service-based business, there might be $250,000 in population as one territory, and they might buy three or four or five territories. That's very common to give yourself a path to scale.

Starting point is 00:30:45 Also, once you're in the franchise system, again, you get first line of sight into anyone else that's selling in that franchise system. So you can m&A it internally within that process. brand to kind of go vertical integration, if you will, they're going deep. A lot of our clients will come back a year or two later and say, hey, John, we've got a good team in place. You know, we're ready for our next rodeo and I'll introduce them to a business that, you know, compliments their current one. Like I had some clients that did in-home senior care. They came back to me six months later and said, we're ready for the next thing. What complements this? I said, how about this business that does wheelchair ramps and stair lifts and retrofitting

Starting point is 00:31:16 solutions for mobility in your homes? Great compliment to it. Others say, hey, we want to diversify, you know, totally different industries. So there's not a wrong answer. wrong right answer. Of course you can always acquire existing businesses. You can always start businesses. So I encourage people think about what's right for the next season. What's that foundation that you want to put in place? You know, in one client that I like to point to in South Carolina just because he's done it really well. My client, Nathan, he's the largest franchisee of two men in a truck moving service. We'll start out with one location over time, acquired other franchisees. He's up to 12 locations now, doing 45 million a year in revenue,

Starting point is 00:31:49 has built a large organization underneath him of great people. He's been able to attract talent because what he does is every year or two he comes to me and says hey john what franchises do you like out there he'll then pick one put that young guy or young gal over it give them a chunk of equity and say hey go make us proud and time and time again he's had success and you know again and then they start acquiring other franchisees and those businesses it's been really cool to see this model that he's built and you know not all of our clients are that far along but a lot of them are on that path and see that north star of where they want ahead um you know and And that's when it gets really fun, right?

Starting point is 00:32:25 Yeah, I mean, that's what I'm talking about. This is the fun, this is the sexy. Let's just talk. Now, we'll put aside your client that's obviously kind of in the league of zone as a moment in time. But like, is there a pretty easy direct path to making a quarter million dollars? Like, what does that look like, right? Because in my opinion, I think the stress and headache of even franchising or being an entrepreneur in general, you can probably find a lot of jobs if you're halfway qualified to make a quarter million dollars a year.

Starting point is 00:32:50 Now, if you are a grinder and never really went to school and you're just like, I know I could do something, then this for sure could be the fastest and easiest path. There's no doubt about it. Right. But, you know, what does it take? Like, what, like a reframe of what I'm asking you. When the franchise shows you the numbers, what are you looking for bottom line net to the owner of the franchisee, right? Like 20% of revenue, 30, like, where do you want to try to look for? because then it just becomes math.

Starting point is 00:33:23 Like how big is the area? What could gross REV be? And I'm 20% of that number. And that's what I could figure would be the income. Yeah, I'd say 20% is a good kind of median, 15 to 20%. We have some that are north of 30%. But yeah, so then it's a million dollar business right at 25% that gets you to that number. Oftentimes you're not going to hit that in year one.

Starting point is 00:33:42 I do have clients that have hit a million dollars in year one in revenue, not bottom line, but revenue. But I would say oftentimes between months 12 and 24, you probably hit the run rate where you can be netting $250 to the bottom line. In some cases, it may take two territories or three territories. It just depends on the business. But I would say you kind of hit that run rate where now you're every month kind of running at that pace. You know, part of it depends on it if your owner-operator, you know, if you're paying a

Starting point is 00:34:07 GM, you've got to cover their salaries. That's going to be a little bit up a longer road. But, no, it's surprising to people oftentimes at what the potential is. Because, again, you're putting in effort, right? And when you extrapolate the fact that you invested $200,000 at the beginning, and you're now making 200,000 bottom line annually, that's 100% return, right? And it becomes almost infinite at some point, right? If you own it for 10 years, like, sure, you can calculate it, but it's thousands and thousands of percent's returns.

Starting point is 00:34:35 And that's just the cash flow. I call it the trifectar. You've got the cash flow, you've got the asset that you'll be able to sell one day and then you get the tax benefits. So if you have a spouse that's a W-2, it's a great play to have some exposure to business ownership because it just opens up the tax playbook. The government and so. We haven't even talked about that fund, sex. And that's sexy. Like being an entrepreneur has so many benefits, including the tax side.

Starting point is 00:34:54 In fact, our call tonight, as we're recording this, we have a call tonight in the entrepreneur DNA community about that, right? And about how entrepreneurship and taxes and the laws that Trump has changed. I mean, there's, if you're listening to this, I need you to reach out to John. Because even if you haven't thought about this, I will tell you someone who's been an entrepreneur for 23 straight years on my own without franchising, I am heavily engaged in looking at this. And John is a great resource for you. So again, what was the website?

Starting point is 00:35:24 Yeah, Franbridge Consulting.com, F.R.A.N. Franbridge. Frambridge.com. Yeah. Now, the other part will be the exit. This is kind of the bigger, sexy part for me. So it's a little selfish that I'll go here. But, you know, how often does PE come into this world versus, I guess, how often does it, you

Starting point is 00:35:49 sell off to just another one of the franchisees. Like, is there, does PE play in this world pretty good? Or is it typically you sell off to the other franchisees? Great question. Now, I was speaking at a PE conference in Cincinnati this past summer, and the comment was made by one of the firms, it's sexy for them to have franchising in their portfolio now for a PE farm. They love the model.

Starting point is 00:36:08 Typically, they're investing at the franchise or level. They're bringing in strategic capital, building out a platform where they get some synergies, but they're investing, you know, heavily in those brands. I've seen it mainly be a good thing, at least in the non-foods. space. Occasionally you will see them do a roll-up of franchisees. You know, a friend of mine runs a big PE firm and he's added me, introduced them to several clients of mine that have built up large portfolios. I'd say that can't happen. Most likely you'll sell to other franchisees in the system or on the open market in most cases, but there are times you'll see them come in and do a

Starting point is 00:36:42 large roll-up of franchisees. That's so fun. I mean, you know, listen, you're in the business to start, grow, scale. and then hopefully you can exit. I mean, I think that's what a lot of people, you don't want to own a business that literally is lifelong, right? I don't think anyone volunteers for that. That may have been our grandparents, like, oh, we're going to start our store,

Starting point is 00:37:01 and that store will be the community. Great. I think if you're listening to me and you have been and you're loyal, then you know you want to have your end in mind. You want to know what you're trying to do. And I think, again, Franbridge.com and John, in all the franchises, give you an opportunity. please inspect them.

Starting point is 00:37:20 Do yourself a favor. I get nothing out of this, by the way. It's because I genuinely believe you need to know your options. You know, in the real estate space, as you're well aware, John, there's a handful in the investor side that I know all of them as founders and friends of mine because that's where I come from. I never thought about it that way because I was already running a business. But you want me to go have other opportunities because I have a little more time freedom.

Starting point is 00:37:46 I'm in. I'm really looking at it. right? It just makes sense. What do you see the, what do you see on the horizon? I always like to kind of end with like, what do you see out there? Are there new industries coming to the plate? Are there new opportunities? Is something changing? Is there new tax bills? Is there anything that is worth note you see on the horizon right now? Yeah, gosh. I mean, we've never seen so much interest. I think, you know, the drum beat around AI coming for jobs is getting louder and louder. I see it playing out firsthand on the, you know, on the ground here. In markets across the U.S., I've got folks

Starting point is 00:38:18 to have a background in technology or consulting, and they're saying, hey, we see the riding on the wall. Maybe now it's the best time to jump in. And I mean, I have these calls every single day. So built up demand, I would say from a supply standpoint, it's exciting. Just so many niches. Again, they're coming online with, you know,

Starting point is 00:38:35 I did a post recently on LinkedIn where I said, hey, here are seven opportunities you can get into for all, you know, under 150,000 where you don't have to have any one employer, no employees. and I've got a lot of interest from people who are saying, I didn't know those existed. Again, because they hear the F-word franchise and they think fast food, but there's so many different little areas that I love exposing people to.

Starting point is 00:39:00 And it's fun. Everyone, that is John Austenson. This is the entrepreneur DNA. I'm Justin Colby. I would encourage you, Franf-R-A-N-Bridge.com, reach out to John, talk to him. inquire. It doesn't cost you anything. It doesn't hurt you. You're more informed on making decision how you yourself can grow your entrepreneurship journey or start it off. So, John, I appreciate

Starting point is 00:39:26 you being on. Yeah, thanks for having me. All right. See you guys on the next one. If you think there's some people in your world that need to talk to John, need to look at franchising and adoption. Please share this with least two your friends. Appreciate you. Talk soon. Bye.

The Entrepreneur DNA - Semi-Passive, Fully Profitable: Inside the World of Non-Food Franchising | Jon Ostensen

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