The Home Service Expert Podcast - Creating a High-Performing and Happy Workplace

Episode Date: January 10, 2019

Kevin Wilson is the CEO and President at Buzz Franchise Brands, the multi-brand franchising company that’s home to well-recognized home service brands, such as Mosquito Joe, Pool Scouts, and Home Clean Heroes. Buzz Franchise Brands was named as one of Inc. Magazine’s Best Workplaces for 2017, while Mosquito Joe has received several awards, including the prestigious FBR50 Franchisee Satisfaction Award from Franchise Business Review. In this episode, we talked about marketing, hiring, franchising... Note: Since this interview was conducted, Buzz Franchise Brands sold the Mosquito Joe business. They continue to operate Pool Scouts and Home Clean Heroes, which are both franchising, and intend to continue launching new brands in the years ahead.

This is the Home Service Expert podcast with Tommy Mello. Let's talk about bringing in some more money for your home service business. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs and experts in various fields, like marketing, sales, hiring, and leadership, to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Hey there, folks. Welcome back to the Home Service Expert, where we're going to talk

about things to grow your business. Today, I have Kevin Wilson on the line. And Kevin comes from quite the background. He's done a lot of different investments. He's taken companies public. He started several franchises. Kevin, do you want to talk a little bit about what you've done in the past and why our listeners should be listening right now? Sure, Tommy. It's nice to join you here. My background, in a nutshell, I started my career after college working for a management consulting firm called Bain & Company. For those of you that don't know Bain, it's considered one of the large strategic consulting firms. And most of our clients were very large Fortune 500 companies.

I did that for several years in the Toronto office and then down in the Dallas office where I spent most of my time. I always wanted to get back and start my own business. I was very entrepreneurial throughout high school and university. And so I left Bain to start a retail bagel store called Benny's Bagels and did it with a couple of partners. We grew that business to 30 locations over a few years. And then we ended up selling it. All the stores were in Texas. Some are still there. We ended up selling it. And then I got recruited to be part of a turnaround team in the airline industry, which is where my background was at Bain. The airline in this case was down in South Africa. So I went with my wife

to South Africa. We were down there for three years, had a successful experience with the airline. We had our first child was born there. And then when we came back to the US, we landed at Virginia Beach, which is where she's from. And I've been here ever since. And that was early 2000. Immediately at that point, I got into private equity in Mexico of all places. So I was commuting a little bit between Virginia Beach and Mexico City. One of the things I'm most proud of in that experience for several years was the creation of an airline. So I leveraged my experience at Bain and then at South African Airways and wrote a business plan for the creation of Volaris, which to this day is sometimes number one, sometimes the second largest

airline in Mexico. It's got about 70, 75 aircraft and flies all over Mexico, Central America, and the US. That commute started to become difficult. So I landed in Virginia Beach and with two other partners. We had three funds of capital that we invested in early stage, sometimes pre-revenue, pre-profit companies. A number of those businesses were in the franchising space. So I had my previous experience with franchising. I leveraged that again in this space and we made several investments. And then after about 8 years, I really had a desire to get back into an operating role and something that I like to do and lead teams.

And an opportunity came along locally. Some guys had started a business called Mosquito Joe. And they had a couple trucks and I I liked what I saw, and decided to buy the company. We put some money into the company, $3.5 million, and then hired a team of five people to begin to start to turn this two-truck operation into a franchise operation. Those five people are with me today. So about six years later now, we've grown Mosquito Joe to 285 locations that are open right now this season. Along the way, we pivoted a little bit and decided to become a multi-brand franchising company.

So our second brand was Pool Scouts. That's our take on the residential pool cleaning business. And for those of you that know that business, you'll know that it is incredibly fragmented and also very unprofessional too. So it was an opportunity to use a lot of the tools and skills that we learned in Mosquito Joe servicing homeowners and bring those skills to the pool cleaning industry. And then our third brand, which we're going to begin franchising next month, is called Home Clean Heroes. We've been incubating it now for about a year. And that's our fresh take on the residential cleaning segment. So we're really excited about that brand. So that's where we are today, Tommy. I hope that's enough to know.

That's absolutely incredible. I think I've had a lot of people on here and a lot of successful $250 million companies, but you're blowing me away with this stuff. I'm really glad you got to get on here today because I got some great questions that I want to know and I know the listeners out there want to know. Bain, you were responsible for fixing problems. You went in and you really, you just went in and found the problems.

Tell me a little bit about some of the biggest problems that you experienced. And I know it might not have been all home service industry, but there's got to be some commonalities between the simple problems that you would face at Bain and some of the things you've ran across during the last 10 years. Yeah. I mean, so, you know, at Bain, you know, normally we would be brought in by the CEO or the board of directors. And they usually, the great thing about being a young kid at that age is you're working on the most important problems that that company would face. And you can just imagine what they are. They could be anything.

So in the case of the airline we worked with, it was Continental Airlines at the time. They were losing money. They had no pricing strategy in place. They didn't know which routes were profitable, which ones weren't profitable. So analysis was done on that. Their maintenance operation, they were a high-cost provider of maintenance operations. So we helped them quantify things that they should be able to focus on versus things they should let somebody else do. And lots of different things that I worked on. But what I really

learned when I worked at Bang was, one, be very data-driven. Be very metrics-driven in everything you do. Know the data and the data will set you free and really give you a lot of good insight into what's going on with your business. And so that's been a common thing that I've used across my career in all businesses, is just be very metrics driven and understand that. So that would be an example of what I learned working in a big organization like Bain and working for big companies like Fortune 500 companies. That's absolutely great advice. And I think that some of the home service experts out there don't use the data enough. I always talk about dialing in your CRM

to know the numbers and really knowing your accounting and your QuickBooks or some people use some different advanced accounting systems. But I think simple is better in that regards. I got a great question because I met some of the guys that started some of the biggest, there's a company called Direct Energy

that actually bought out some Jim Abram and some of the other guys that started it, Terry Nichols. And basically what they did is they went out in the 70s when they started selling AC units. And this was back in the day where air conditioning units weren't as common. And I believe it was in La Crosse, Wisconsin. So it was an add-on unit to the furnace. And then basically, the way that I've heard the story is Jim Abrams kind of got shafted because they got together with GE and people cut in front of him in line to be the CEO of the company called Train, which is a big air conditioning unit producer. So they got big into residential. Jim went on his

own. He started doing financing, started doing all these service agreements, really built the business. One Hour Air was born. And then they did the same thing with the electric business, Mr. Sparky. And then they did it with plumbing, Benjamin Franklin, Punctual Plumber. Sure. So what they did was, and I want to hear your story on this, because this is the biggest company in home service by far. I mean, their revenues and what they've done is they started franchising it as well, but it basically built the best practices. They went into a city like St. Louis and then they went into every city and they got all these air conditioning companies

that come in and they said, look, here's what you get if you come on our best practice schooling or whatever you want to call it. We're going to give you get access. You get a discount on all everything you buy because we worked out manufacturer discounts. You get access to our CRM, which is still used today, which is an amazing CRM. So we'll be able to tell you exactly what KPIs to focus in on. You're going to get consulting. You're going to get the best practices, you're going to get our handbooks, you're going to get everything. Basically ran it almost like a franchise, but then they were able to kind of sneak behind the curtain and see what companies were kicking butt. And then what they did is they promised everybody when they do an IPO, they're going to make everybody millionaires, which they did. They made hundreds of millionaires.

But they didn't necessarily start in the franchise model. Can you talk to me about that kind of licensing deal and being part of a better practices versus going into the franchise? Because franchise really, in my opinion, is starting from scratch. You're not going to get a ton of people that built a really successful business doing millions of dollars and say, I'm going to dump my brand name and switch it to this. So we get this question quite a bit when it comes to the biggest companies in the space. Yeah, it's interesting. You know, I think my experience with licensing per se is somewhat limited. My experience with franchising is much greater. And what you see, especially in home services, the Dwyer Group is an example in our industry, also a very large home services

franchisor. A lot of the franchises, they get what are called conversions. So these are groups of mom and pops scattered across the country that want the power of a brand name, that want the power of a system, the consulting, the CRM, and then they convert. And usually, everybody has different mechanics for how the conversion is done. But a lot of the time, the existing revenue is grandfathered in so they don't pay royalties on their existing business. And then it's only on new businesses generated or for a period of time is grandfather did. So it's a really attractive way, I think, to become part of a larger system and leverage the brand. And I think that's my experience in home services is it's probably the area where conversions, where you have a huge benefit is the development of a single brand and understanding some of the marketing. It's certainly an area where we emphasize a lot. And it's an area where most people don't have a lot of experience, especially the mom and pops.

So you got $3.5 million and you've got a company called Mosquito Joe's and you've got a couple trucks and you just like the concept. And I'm very familiar. There's a company called Moxie. I meet with the owners probably once a month and their whole plan was to go door to door and they get a lot of customers at a time. He said it's a nightmare, but now we have thousands of heavy customers in Phoenix and it's hard to manage that. But how do you start? You get three and a half million dollars and you got a couple of trucks. Tell me A to Z, your game plan on how to build a franchise from that moment. Yep, absolutely.

So, you know, it started with the creation of the plan. And so, you know, even backing up before I got the three and a half million, I created a plan. And the plan was based on what those two trucks were doing, what I thought they could do in a territory size that we developed. And you first have to prove out the unit economics for the franchisee. I got convinced the unit economics were there. I put a plan around those single unit economics and how fast I thought we could grow the business. And that plan I took to the investors. And then the investors put their money in. I then went out and I identified some people to hire. So I hired a finance guy, a marketing person, an ops person, and a development

person, and myself. And we got together. And the first thing we did is a number of different work streams. First thing we did though, is we rebranded the company. So Mosquito Joe was like every other brand in the mosquito space at the time. And the thing we liked about it was the name. We didn't like anything else really about it. It was the name and they had some customers and they proved out the unit economics. So we went through a full rebranding process with a large agency that cost about $100,000. We got our operations manuals completed. One of our guys did that. We put together the structure, the plan, the development plan. So all of the documents came together, the franchise disclosure document, the operations manuals, and then the brand guide and the support that we were

going to provide. And then we began offering franchises. And we went to all the states, including the registration states. We put about $400,000 the first year into advertising to recruit franchisees. And I think it started in October. So we closed on the money in June. We started in October and November. And then we sold our first franchise in January. We specifically went to market with a very low franchise fee,

where our competitors were at $25,000, $30,000, our franchise fee. And we told ourselves, we can increase it whenever we want. But for the first group that come in, we want them to know that we're in this together. We don't want to make money on the franchise fee. We'll make money on our royalty downstream with them. And so it was $7,500 for the first franchise fee. And probably the first 10 to 15 franchisees that bought territories, that's what they paid. Our franchise fee today is about $30,000. And then we just began growing. And then as we grew, we put our systems in place. We figured out when we needed to hire people in advance. And then we had a very detailed plan each year and each month as

to what we wanted to try to achieve. And looking back on it now after five years, we've been at six years. When I look back on that original plan, we were very, very close. In some cases, we did better than the plan. In other cases, it was slightly, slightly behind, but generally right on plan. And it was just a series of just thinking through what's possible and then getting input from the team. So one of the coolest things that I think you said that I'm really interested in is you went out, you found your marketing guy, your ops guy, your finance guy. And those guys are all still with you. Then you found the development guy and yourself. Tell me a little bit about what you look for to build a team like that and make sure they all mesh together and kind of just how you built

a team. Because I think that alone in itself was probably the biggest thing that built the company. Obviously, you've done a lot of right things along the way, but putting that team together, it was huge. How did that come about? Yeah, so I think bringing on anybody, obviously, the trust is a big thing. My development person, Walter Ewell, I'd known him for a long time. I had actually invested in a business where he was the president of, and his true expertise is on development. And he's recruited more franchisees than most people in the industry. But his skill set was much larger than that. So he was great to have on board right from the beginning to create the development document, talk to the initial franchisees.

The woman I hired for my marketing, Angela Zerta at the time, she had no background in franchising, but had worked at a large agency in Austin. So really a breadth of marketing. And so on and so forth. And so what I looked for was, I looked first at the competency that each of them had in the roles that I needed to have them in. That's really important. And then the second thing was, are these people that I could work with day to day? Over time, we've refined our hiring model. I'll talk a little bit about that later. But for me, it was, I want to get a great team that I can work with who are going to push and challenging me. But I really need people that are good in their areas and people that would be a good fit, if you will, for the company. And so that's where it started out.

They're all with me today. They've all got stock in the company. I've got an incentive unit plan that I've created for everybody. So not only are they paid market wages, which was one of the reasons why I raised that much money, I wanted to get good quality people. I didn't want to bootstrap it. And then I wanted to make sure that they're in Senate. So they've all invested money in the business and they've all got incentive unit options as well. So how does that look? So they've invested money. So you basically gave them the ability. Is it phantom shares or how does that work? No, they're real units.

They're real units. They're junior to the units that had money invested. But my background allows me to run this type of process because I used to do this a lot. So I share with them what the financials of the company look like, told them what the investors bought in at, give them the opportunity to buy in.

So sometimes we have investors. I have about 50 unique investors that put up the $3.5 million. So from time to time, I'll have an investor call and say, you know, Kevin, I've got something that happened in my life and I'd like to sell some of my shares. I give the first right to my senior leadership team if they

would like to buy them. I tell them how I think about the pricing of the shares or the units, if you will, and then they buy them. And then in terms of the incentive units, the incentive units are just, they're a certain strike price based on whatever the last price was that was sold at. So they get the upside above that price and then they're vested over four years. If for some reason they leave, then I have the ability to buy those units back at fair market value. Got it. It's very incredible. I will say that at the least, the way that you've structured it and your background obviously allows for that. And I think that a lot of people

can learn a lot about really taking care of the top people in your company and making sure that they're all have an opportunity to buy in because when it's theirs, they tend to make better decisions to help the growth of the company. Am I right? Yeah, I totally agree. I mean, I've always, you know, you know, I never wanted to be that guy that gets to the end, whatever the end is, and have a lot of success. And that success hasn't been shared with the team that helped bring you there. I think, you know, the people in Silicon Valley, California, they understand that from the very beginning in terms of getting the best and the brightest and making sure they're incentive. You know, it's the same type of thing. You can

do that across all your companies. But you know we're all we're competing for talent and in our space we are too we happen to be in a labor market right now that's really really tight you know i like to think that we've created a great environment here and that my senior team is incented so they're not looking for other opportunities to move around that's what i'm hoping we're creating yeah absolutely Culture and leadership are such a huge attribute in a company your size. Tell me a little bit, I've read about six books

and I've really challenged myself on this question. What are the advantages of owning a company? And like I said, whether you're doing licensing deals or just owning it outright, and I know a lot of them because your brand doesn't get damaged as easily, but versus the franchise fees. And talk to me a little bit about the franchise fees, just between what it's going to cost between your attorneys to get it going. So both of those, just the good and bad of each, like a SWOT analysis and just the startup fees with the lawyers to get it going. Sure. So you're talking specifically, so an entrepreneur that's got a location that's doing really well and he's trying to decide whether he wants to franchise it or whether he wants to grow corporate stores? Correct. Yeah. So the way I think about it is I look at a couple of things. One, I look at the unit economics. So is this a business where high volume business where you can hire quality management and pay them well so they treat it like their own and then you can continue to grow that way and you've got the capital available to

grow corporate stores? Or is it something where you might have high employee turnover, it's low volumes, in our case, it's seasonal, maybe having local content, local connections is important. So when I looked at this, I said, yep, this is a perfect franchise opportunity because of this. So we immediately said, that's the way we're going to grow. In fact, all of our services, we've said, we're going to be the franchising company. We're not going to own a corporate location. We've got one or two locally that we own. So in terms of starting out, I think one, to pull together the franchise disclosure document with the lawyer and get everything ready. You're looking at maybe $40,000 to $50,000 to get all the branding done to really launch it. And you're looking at maybe $100,000 to get all the CRM set up. So you get your phone systems, all the software you need.

We use all cloud-based software, so we don't build our own software. But there's a lot of upfront setup fees, maybe another $50,000. And then you're going to fund your losses in the first couple of years. I think you should probably... To start a franchise business, if you're going to do it well, hire people, put the development budget in place, you're looking at $3-4 million. And I've done this now. We're about to launch our third franchise in the last few years. And as we put our plans together, it's all coming in at around the same price. For us, it's a little bit better, but still $2.5 to

$3 million to launch something. So I think if somebody wants to get into it, and they really want to do it in a meaningful way where they can scale quickly and not bootstrap it and make long-term decisions versus short-term decisions decisions because they're constrained by capital, then I think you're looking at $3 to $4 million. Got it. That's very interesting to hear the numbers to really build a company that you're... Did you say 280 now, franchisees? Yeah, we got 285 locations open for Mosquito Joe that's been done by about 150 franchisees. So we have most people do development agreements and take more than one territory.

Yep. Yeah. I love that. That's a great opportunity. If somebody is kicking butt, the franchisees, the franchisors should give them the opportunity to own plenty of them. Right. Right. So you guys take it just a percentage. Is it like, you know, how does that work? If I'm a,

if I want to be a franchisee of your business, tell me a little bit about, I put up the 30 grand and what do I get and how does that kind of, how am I paying the royalties? So the total investment for Mosquito Joe or Pool Skirts are all around the same price. It's around 80 to $90,000. And that includes the franchise fee. So with that, it includes working capital, you've got to get a truck, all the things that are outlined in our item seven of our franchise disclosure document. And then in terms of how we make our money is we largely make our money off of the royalty that we charge, which is 10% on net revenue. And that's how we make our money. It's paid to us on a weekly basis. And it's fairly straightforward.

We have other requirements in our agreement that make us a little bit different than other franchisors. So one of the things that we require, and this gets a little bit, Tom, into what I was talking about earlier I said you know our experience has been is that most people don't understand marketing and so if I get take somebody off the street I give them five thousand bucks I tell them to put together a marketing plan for a local business they wouldn't really know how to do it and most of our many of our franchisees are that way too so we said if that's their biggest pain point so we need to be the best of that we need to be the best at that.

And we need to have the best programs so that we can support our franchisees. So on my team, I've got in-house graphic design people. I've got dedicated SEO people. I've got direct mail expertise. So we handle the bulk of the marketing budget on behalf of every franchisee. So we have a $30,000 direct mail requirement,

three different mailings that hit every targeted household in their territory. We have an SEO requirement so that we feel that anytime somebody is doing a search, we want to rise to the very top. And that includes a pay-per-click requirement. We want that to rise to the very top because so much of the way people are finding people now is through their iPhone, through the net. So we handle all that for them. And so the support... And then we have dedicated franchise business coaches as well. So the support we provide, I think, is pretty significant, much more so than what I've seen from other franchisors but a lot of it really is emphasized on the on the marketing support so all the marketing so if I'm a

franchisee I know for a fact I don't have to work on money mailer or Val pack I'm not trying to figure out who to hire for SEO and build links I'm not trying to do a PPC campaign all that is handled for me. That's exactly right. We do all of that in totals of $30,000, $35,000. The franchisees requirements are hire great technicians, take care of your customers, and then do some other local outreach that we can't do remotely. So go talk at civic leagues, get banners hung at pools or ball stadiums or soccer fields, do the grassroots guerrilla marketing. What we provide is the same level of service with the same marketing budget for all territories. What we found is the ones that really, really take off are the ones that

do that extra, extra little bit. They really embed themselves within the community. So, but for the most part, it's been very successful getting the phone to ring for our franchisees. We do other things as well. We survey every single customer a few times a year, and we get what we call the net promoter score. If they get high scores, it means they've got a lot of promoters. So we use that information and we create lists for them of people that they customers that they specifically can call who are most likely to refer them to other customers so we've then we have a referral program in place so there's a lot of this is going to get a little bit

to the metrics and stuff and the data and how we use it but there's a lot of stuff that we do to really support the franchisees so the net promoter score is a fancy way of saying, would you use us again and refer us to friends, family, and neighbors, correct? Yeah, that's exactly right. They rate you on a scale of one to 10. If they give you a nine or a 10, they're considered a promoter. If they give you a seven or eight, they're passive. They're sort of indifferent. And then if they give you a 6 or lower, they're a detractor. And so you get the total possible score you can get is anywhere from a negative 100 to a positive 100. I think Mosquito Joe right now, system-wide, when I checked yesterday,

I think we were at 70%. And to give you an idea, 70% would put us at a very, very high end of net promoter scores I mean that that's like that's like up there with Apple and other iconic brands so yes that's a metric that I look at very closely that's enough that's on average and we got some franchisees that are much lower than that those are the ones that we can then focus on to understand exactly what's going on but it's a it's an important thing to do and we send out thousands of these surveys every year. So the Net Promoter Score is basically what a lot of venture capitalists look at before they'll buy

a company. And they'll take your data, your customer data, and they'll send that out to develop that before they really want to do that. Is that correct? Because I've read a lot of books on the Net Promoter Score. Yeah. Yeah. In fact, it was started, the Net Promoter Score was actually developed by a partner at the old firm that I used to work at, Bain & Company. It was in their customer loyalty practice. And it really is. It's a great measure because it's a single question that's asked to everybody. So everybody's getting the same question they asked. And so you can compare scores on an apples to apples basis. So we really like it. So they look at somebody looking at buying a company, they're definitely going to look at

net promoter score if you have it. If you don't have it, you should have it. They're going to look at your retention rate of your customers. And they're going to look at the referral rate of your customers. You're going to look at a lot of things. But those are three real important things to understand how good you are at attracting and keeping and engaging your customers. So one of the biggest problems that I have seen with most home service companies is their call center and their follow-up process. I think those two are like huge, huge. And follow-up, follow-up, follow-up and call center. Who do you have answering the calls? Is it corporate or the franchisor or is it the franchisee? Yeah, it's the... So the way we've handled that, and I would just underscore exactly what you just said, Tom, it probably is the biggest challenge is that.

So we have a VoIP system in place. And so we're able to track all call metrics. But we let the franchisee get the first crack at it. And if it after a number of rings, I think it's three or four rings, if they haven't picked it up, then it rolls to a call center. The call center that we use is more of an answering service. We just want the customer to speak to a live person. If they speak to somebody live and they've given their message, the chance of them going somewhere else is less than if they had to leave a voicemail. It's not ideal. So our call center that we use is not a sales function. It's more of a message taker.

Ideally, we want the franchisees to sell it. They're local. They know their business. They know their area really well. That's ideal. What we do though is we track the calls and the call metrics. And so if we see calls coming in and a number of them, too many of them are getting diverted to the call center, or if we see the calls coming in and they're not being converted to customers,

those are all things that we track and give us opportunities to better help the franchisees. And so we'll reach out to them and say, look, it looks like you're having a hard time converting customers who are calling in. Let's take a look and figure out why that is. Are you pricing too high? Are you not asking for the sale? I mean, this is a very easy sale to make. So what's going on? And it just allows us to do that. And it also points out, in some cases, if we have absentee owners, they love being able to see this because they've hired somebody to answer the phone for them. And if they're not doing it, or if you're not doing it well, they want to know that as well. So it's just another way that we can help.

So tell me, I love this and I got so many other questions, but you said a lot of people buy franchises for a turnkey business. They could hire somebody very good, pay them a reasonably amount of money and just make a pretty passive income. Tell me a little bit about how that works out and can that still be successful? Because there's a lot of people out there that might say, you know what, I might sell my business and get involved in a done for you type franchise business. Yeah. I mean, I think that's a great question. I mean, so we have what we would call semi-absentee owners, and then we have the owner-operators, or we have spouses that work together in the

business. I'm not a believer or a fan of a real absentee owner business. I mean, if you're going to invest money in an operating business, you're going to need to spend time on it. You might not be able to work on it nine to five during work hours if you've got a job, but when you come home, you should be spending time on it. On the weekends, you should be spending time on it. And if you're not, you really have to question your commitment level and whether or not you're really cut out to be a business owner, because I just don't think that's a workable. So then, you know, semi-absentee, like if you hire the right person and you give them the right skills and the tutor and you're looking at it as a bridge

to allow you to get your business scaled so that you can leave and do it full-time, we've got a lot of people that have done that and made that work and be successful. You gotta get good people though. And so you gotta demonstrate that you know how to hire people and you know how to retain people.

And that's really important. So I think where we've had our greatest success is where people just jump in with both feet right from the very beginning and say, look, I've made a decision. I'm leaving my job. Or sometimes that decision has been made for them. I don't have a job and I want to go full on in this. People are always surprised at how well they can do. They begin to believe in themselves. They're scared at first, but when you get in there and they know that they got the support that we're going to provide them, we're not going to let them fail. We're going to work like heck. If they're willing to work like

heck, we're going to work like heck. We're going to help them be successful. And it's incredibly rewarding to see these people get into their own business, be successful, and in some cases, really question whether or not they could do it. But once you get in there and get it going, you realize that good work ethic becomes critical and a lot of people can be very successful. I love it. You said 10% of net income. Explain to me for us. 10% of revenue. Sorry. 10% of revenue, net revenue. Oh, net revenue. Okay. So net revenue is determined. Yeah. We just take off, we just take off discounts. And so, you know, sometimes in order to attract customers, we will, you know, there'll be offers

that go out to give them first time discounts. So what we do is we just, we don't charge the franchisee on the gross if they're not taking that in. So really what we try to do is just charge them 10% on the revenue, the actual revenue that they're earning. We call it net revenue. And then how does that, I'm just curious because you obviously do all the marketing, how does that get paid for? Does that get paid for? Yeah, marketing is completely separate. So there's two types of marketing support that we provide. One is the, there's a 2% brand fee that's paid by the franchisee that goes into a fund. And that's used broadly for building the brand. It can be used for dedicated pay-per-click in certain markets. But it's really up to our discretion on how we use that. And we're

accountable to the franchisees. And the bulk of it gets put back into the markets where it came from. But by pooling the money, it allows us to buy things like XM Radio, as an example. We do some of that as well. The direct mail, the SEO, those are all... It's like a way to think about it. We almost have an in-house separate vendor and we've negotiated what the rates are. That's what the franchisee pays. So market-based rates, but there's an agreement that you've got to do. You got to send out 90,000 pieces of direct mail. Here's what your cost per piece is. Go ahead and pay that. And then here's the SEO, how much you're going to pay per month. And that's just charged on a monthly basis. I love that. So typically the rule of thumb that everybody says is 10%. I'm a big fan of going above 10% in marketing when you're trying to penetrate a market.

Typically, as far as total revenue, what percentage do you guys think you spend and what do you recommend? On marketing? That's a good question. That's a great question. So, you know, early days, you don't have any, you don't have much revenue. So it's going to be much higher. Steady state though, what we've put into our agreements is that franchisees must spend a minimum of X, a minimum of the greater of this, which is the fixed dollar amount I told you that $30,000 or $35,000 or 8% of previous year's revenue. Okay. So let's give you an example. So if a business gets to, say last year, we did a million dollars in a territory, the fixed dollar requirement was $35,000 they had to spend, but 8% of a million is $80,000. The requirement is they need to spend $80,000 on marketing in that next year.

Does that make sense? 100%. It's either 35,000. So basically, 35,000 would be somewhere around 400. If they make more than $400,000, they're going to spend 8% of that. If they make less than that, they're going to spend the 35,000. That's it. That's exactly right. That's the break point. And that's critical because this is where we should be aligned. The franchisor or the franchisee should be aligned. But historically, I've seen that not always be the case. And some people are comfortable. They get to a million bucks. They're making a couple hundred thousand dollars of cash flow over an eight-month period. And that's good enough for them. And so instead of making $200,000, they said, well, I can make $250,000. I just don't have to spend money on marketing. I've got all these customers. We're in a young, emerging,

fast-growing segment of pest control. My experience is you don't take your foot off the accelerator. You press it down harder and you keep penetrating and you get the density. And so that's what we've done. And that's what the purpose of that approach for marketing is. We want people to always be growing their business and not get comfortable with where they are. I love that concept. I really like what you've done with this whole business. You mentioned that hiring is a big deal. And I, I gotta tell you, everybody listening out there and myself included, hiring's definitely been a challenge. I offer people a lot of good things to come on board and it's, we've got a great training program for my garage door company, but as far as really

recruiting and getting great A players and really giving them the coaching and leadership they need. Tell me a little bit about how you're finding the people of where you're going and how you're recruiting. So yeah, so I guess a couple. So for my corporate team, we do a lot of different things. So we'll use LinkedIn, we'll use Monster, we'll use Indeed, we'll use search firms. So I'm happy to pay, you to pay a healthy commission to a search firm if they find the right person. But we do a broad search. So if I think about the team I've got in place here, we've hired people from... I'm in Virginia Beach. We've hired people from Texas, Arizona, Illinois, Georgia, Florida. I mean, we've hired them from

all over the place. And so we didn't want to limit ourselves just to the area where we're at. Happy to fly people in for interviews. We might do some interviews over the phone first, but happy to just make sure we get the right people. That's the most important thing. And so what we usually do is we like to try to remove... The resume will come in. We try to remove any bias that we may have when we see somebody. So we just do telephone interviews initially. And if we feel there's a good competency on the other end, that's what we try to assess first is how competent would these people be in the position that we're hiring? What's their background? What's their skill set? Have

they done this before? What's been their experience? And then if we feel there's a good competency experience, then we will bring them in for an in-person interview. And that's usually for a day. And then they go through... The whole senior leadership team will interview them. And then depending on the departments they're in, they will be interviewed by them too. So anybody that gets a job here at our company, Buzz Franchise Brands, I've absolutely met every single person, as has my senior leadership team. And that's a requirement I put in place. And so then when they get here, then I don't know a lot about SEO pay-per-click. I know enough to know what it does, but I don't know a lot of the technical part of it. I'm counting on my team to make that assessment on the individual.

What I'm going to assess is the fit. Is this person going to follow the values of our company? We've got five core values. I talk to them about our core values and get their views on those core values. Are they somebody that I like to spend some time with? Do I feel like they'd be a good fit with the rest of the company? What do they like to do outside the office for fun? Those are things we try to gauge. And if we feel they've got a good competency and they're going to be a good fit with the company, and then we make an offer. But I feel like we're in the franchising business. You probably feel this way too, Tommy, but you're also in the hiring business.

I mean, I just feel like I'm hiring all the time. I feel like I'm interviewing all the time. And so you just got to get used to that and get your mind around that because it's a very important part of the business. Oh, it's huge. And I think, so what are your franchisees doing and looking for actually the physical, driving the truck, spraying the homes? What do they look for and how does that process work? How do you support them? Just post on Indeed,, and all over the place? Yeah, the technician. Yeah. So, you know, this is one of the areas in franchising over the last few years where it has been, you know, that the National Labor Relations Board has been, you know, the rulings that they've taken has caused a lot of franchisors to step back a little bit to figure out how much support they actually provide with the hiring, the recruiting, the training

of technicians, in this case, the employees of the franchisee. It might be swinging back shortly, so we'll have to see. But we had to step back a little bit for that. So we tell them where to go, how to look. Our job is an outdoor... Two of the three brands are outdoor brands. And what we find is we can recruit people like firemen, police officers, leaders in the community, people that already have jobs, but they've got a lot of flexibility in their jobs. In some cases, college kids, and then others that are looking for part-time jobs. Because it is seasonal it has its own unique challenges but you know our franchisees have just done a wonderful job

and finding great people to execute the plan that we've we've helped put in place with them but I'm not gonna say it's not it's I think it's probably the single biggest issue for the company I mean finding customers we're great at recruiting customers and we're great at keeping them. Just continuing to find good people to work is always the challenge. So you've got all the analytics. Like for my system, I use a company called Service Titan. It actually tracks every single call. I track it down to the search term that the people put into Google. Like I've got even ValPak per 10,000 zone. I've got a separate phone number. I have 700 zones now, I think on a national level. So we've got it down to like the T I know what marketing kills it. I know what doesn't. I mean, my wrap trucks are my number one source of phone

calls because I've got well over a hundred of them on the road that are getting for the cost. It's by far the best. What do you think your best marketing source has been over the years now at Mosquito Joe's? Yeah, sure. So consistently, every year, the number one source for new customers is our direct mail program. We recruit 30% to 40% of all new customers through the direct mail program and directly. And I should step back a little bit, Tommy. Our direct mail program is both a direct response vehicle, but it's also a brand building vehicle. We're a relatively new company in a new segment. And so we still think it's the best way to get the word out to our targeted customers is they get this big, bright yellow postcard

in their mailbox. So historically, 30% to 40% comes from that. The next largest source was yard signs. We put yard signs when we do the services. That's worked really well for us. That's probably another 15%. That has changed over the years. Digital now, more broadly speaking, digital

is now the second largest and fastest growing segment. That's probably now 20%. And then that digital could be pay-per-click. It could be just coming in through the web. Could be Facebook ads that are put out. And then the vehicle would be probably at this point referrals would probably be third and that's roughly around 15 to 20 percent and then the vans are are after that and then there's a smattering but it's about four sources it's yard signs it's vans it's digital and it's the it's the direct mail so i'm trying to figure out the company, but it might be like Orkin or Truly Nolan. But one of them was worth like an outrageous amount of money. I don't remember exactly.

It's Rollins. Rollins. Okay. So was that something you took into consideration when you got into this industry? They were that bit. Yeah, they were the thousand pound gorilla and they could come in and crush us. Not really crush you guys,

but I mean, did you take into consideration just of how much money they make? I mean, it's like, it's outrageous. Yeah, I mean, yeah, my view was somewhat simplistic. So I think I get asked the question a lot by prospects when they come through, you know, are you concerned about the big guys getting into this business? You know, the Rawlins of the world, the truly Nolans. And I was like, they've been in this business. You

know, they were in this business before I was in this business. The issue is, is how they branded themselves. And so Rawlins through Oregon has branded themselves as this in-house pest control company that takes care of roaches and other stuff inside the home. We've branded ourselves as the mosquito experts outside the home. And so, you know, if done well, a brand is a very powerful thing. I mean, it's got a promise associated with it, and it's a very powerful thing. It's hard to switch. Like, you know, Starbucks doesn't get upset when McDonald's starts offering lattes, right? It'll be a nice little add-on maybe for McDonald's,

but it's not going to put a dent in the Starbucks plan. Our view has always been the same, which is we compete against everybody. If the lawn doctor wants to offer mosquito services, which they've done, that's great. They're going to get a few customers, but it's not going to be their dominant business. And people aren't going to call them first because they're known as the lawn doctor. They're not known as the mosquito or tick guy. If I got into lawn services to compete against lawn doctor, I don't think he'd be too concerned about that. So that's where I think... So getting back to your original question, was I concerned about the big guys? I wasn't I mean I think you know I I believe in the power of the franchisee the local content I thought we could put

a system in place that could really support them and I knew how they had branded themselves and we were gonna brand ourselves very differently you know more as a lifestyle brand something new and fresh in the industry that's brilliant I love it. So you said direct mail. A lot of people think direct mail is dead. You accumulate, you got 40% of your customer base through direct mail. Tell me a little bit about, is it a mail piece? Is it a jumbo postcard? Is it something they take out of a letterhead? What does that direct mail be like? And how do you guys find your perfect avatar to mail to

yeah so we procure the list and we have our own proprietary criteria that we use of who those people are that we want to target who would be our buyers and we then go out to the data houses and there's about three big ones in the in the country and And we buy the list based on what we think are the right parameters. We then take that list and then we create a creative. It's a six and a half by 10 inch thick stock, a separate card with the person's name gets put right on it. It's got a call to call to action, usually an offer on there. There's an area where they can scan and go to a landing site if they want to do that. But it's an incredibly bright piece that stands out. And the thing we do, Tommy, which is most companies don't do, and they don't do it because it's very difficult to do. I happen to

be fortunate. I got a great team of creative people here. But we use a lot of humor in our marketing. So this bright yellow card will show up and it will say, should you decide not to call us, save this card for swatting. Or are you tired of donating blood on the way to the mailbox? And it's got our logo and it just causes people to smile. And our view is if done well, humor will trigger that memory again when they've got that point of pain, which in our cases, they're getting bit by mosquitoes. And so we just feel that our piece really stands out. I don't buy into the fact that direct mail is dead. And candidly, I'm not sure it's ever going to be dead because it is, as the inbox gets filled up, the mailbox has a lot more room in it. And we're finding that our card just

continues to stand out above everybody else. And it's a great source for us. And maybe it's because of how we do it, but it definitely works for us. Yeah, I love the concept. I want to ask you some questions. I'll wrap it up here in a few minutes. But what happens if you guys take your 10% typically in the home service is 18 to 22% profit margin. Some people are going upwards of 30 to 40 because there's not a lot of cost of goods sold and the labors are not ridiculous. Have you ever had a franchisee kind of not actually be profitable? I mean, what do you do in that type of situation? I'm just curious for the listeners out there that think about going.

Yeah. I mean, we're really clear with everybody when they come in and we tell them, I tell them, everybody, you're not going to make money in your first year, your first season. It's a seasonal business. You got to build up your business. If you do it well, by the second year, you'll start breaking even, you'll start seeing some positive cash. But take a long-term vision on this business. And if you do that, you're going to build up your customer base and you're going to have a loyal base that comes back every year. You're going to wake up in a few years and you're going to be happy you did this. If you start getting impatient right out of the gate, this business isn't for you. So we do. But just like any other system, we have territories

that aren't successful, franchisees that aren't successful. It's almost never because there's no mosquitoes. There's mosquitoes everywhere. If they came to. It's almost never because there's no mosquitoes, right? There's mosquitoes everywhere. If they came to us in the first place, there's mosquitoes everywhere, right? So it's never because there's no mosquitoes. It's never... I mean, we compete against everybody. It's never about the competition. So the only thing that's left is the operator. And we do our best to try to make sure that we assess the person when they come in that they're going to be the right type of operator. But you never truly know until they've actually gotten in the business and done it.

And some people just aren't cut out for business ownership for one reason or another. There's a handful of reasons, but they might not be cut out for it. So what we try to do is we say, look, it doesn't look like this business is for you. Do you agree with that? And we try to work out a graceful way for them to exit the business. We try to assist them in selling what they have if they've got something to sell. If they don't have something to sell, we just tell them, I don't feel like you got much to sell here, but we'll try to get the territory off your hands. We're not going to make you pay these extra fees that you're obligated to

pay. There's no reason to sort of compound the problem. I mean, our goal here is to, you know, usually if we think that's a mistake, they probably think that there is a situation that's not right for them too. So the ideal way is just try to work on a graceful exit for both parties. Yeah, that makes a lot of sense. And sometimes it's not easy. Your job is to make it as easy as possible, but also to assess the right franchisee for the position. But it doesn't always work that way. I mean, I, unfortunately, even my managers that we call market managers sometimes are just not the right people. And there's nothing wrong with that, but you can't win every time. And, uh, I understand that surely everybody out there understands that. I mean, you guys, you guys won Inc. Magazine's Best Places to Work For in 2017. You won, let's see here,

Entrepreneur's Franchise 500 list, the top 200 franchises in 2017. Then you just won the FBR50 for 2018 Franchise Award. I mean, what do you think you're doing differently? You got a great team, first of all, and that's first and foremost, but what is it that's causing you to win all these awards and make it such a great place to work for? You know, I think it comes down to initially, I mean, I really view my primary role is to take care of my team and take care of my employees. Because if I think if I do a good job of that, they're then going to take care of our franchisees and the support that we provide. But the way we do that, we do that in a number of different ways. We got to set a five core

values that we live by here. And we recognize those, honor those. We set up what we call a sanity control committee. It's called our SCC. And what they do is it's a group of five people from different parts of the company that I've selected. And I get together with them on a regular basis and we plan out a calendar. And the calendar is a fun event on a monthly basis. It is also a quarterly lunch and learn that we do. So I might take everybody to Topgolf for a Friday afternoon. I might bring somebody in and do a wine tasting one afternoon, one night, whatever it may be. And a lot of the ideas just come right from the team. So tell me what you think is fun. What would you like to do? We put a calendar together for a whole

year, similar with the Lunch and Learns. We may bring somebody in that can talk about wealth management, can talk about fitness, whatever people find interesting. I want them to feel like when they come to work, they're coming not to work, they're coming to a place where they've got a lot of people that they enjoy being around and that they're here to support our franchisees. And so we talk a lot about that. We talk about the importance of supporting our franchisees, but we try to create an environment where people are challenged, where they enjoy coming to the office and feel really good about it. And we listen and we communicate well.

So those are all the things we try to do. And as a result, getting things like outside magazines, best workplaces or Inc. magazine, best workplaces, what that allows me to do is it builds on itself, allows me to recruit more great people because great people want to work at great companies. And so it's really a very effective recruiting tool for us as well. And it's nice to get the accolades. I mean, I think people feel good about seeing those awards and being part of a company that takes that stuff seriously. So we work hard at it.

It's a lot of hard work, but it's definitely worth it. All right. I'm going to close out here with a few more, and I promise I'll let you go. So one of the things I do at the end is try to tell everybody where they can find you, but I don't want to go there just yet. I want to talk about your mission, vision, and the five core values. I'd love to hear them. And I'd love to let the listeners kind of understand the way you came up with those and why it's so important for, for who you became and what the company is today. And just go over

what those are and how you came up with those with your team. Sure. Yeah, I appreciate that, Tommy. I mean, I think our vision is to be a leading multi-brand franchising company providing services to the home. So we developed that vision. We think it's very clear with what we do and what you'll see from us over the next several years is just incremental brands that are incubated and then growing. The thing that gets me up every day and coming into work that I really like is our mission, which is enable people to realize their dreams. And, you know, as much as I love, you know, killing mosquitoes and cleaning pools and cleaning homes, what I really love is helping people get into their own business and supporting them to be successful. So whatever their dreams are,

we want to understand that whether it's two lifelong buddies that want to own a business together or it's a spouse, a couple that want to get into business together. We've got a woman that was a hospice nurse for 15 years and said, I can't do that anymore, but I still want to give back to the community. She's one of our better franchisees. And she didn't know anything about business. And we were able to teach her that. So enable people to realize their dreams is our mission, something we really, really live by. And then our five core values are lead with integrity, be curious and innovate, have fun, empower and serve, and then act with purpose. And I won't go into the details,

but under each of those are things that we live by. So we have little mouse pads with our values on them. We have them hanging here. We recognize them. We recognize employees that are living those values. It's just really important to us. And it's only five. So it's a number that I can remember as well, which is important. Yeah. Yeah, absolutely. That's one of the biggest things we're working on is really grown so much. We really got to realign with what our, our main mission is. And when we were 10 people versus 200 now, you know, I think it's important and where you are, where you're evolving and changing. I mean, Google, Google at one point was to do no evil. And then they grew beyond that. But, you know, I think this has been amazing.

And the last questions I ask are two is if someone's interested in getting a franchise, you've talked about three main franchises you're working on. You've got the Mosquito, you've got the pool cleaning business, and then you've got the residential home cleaning. How would they get a hold of you and find out more about these franchises? Yeah, I mean, the easiest way you can go just to our corporate site,

which is buzzfranchisebrands.com. B-U-Z-Z, franchisebrands.com. That's the easiest way. And then there's a menu there. It can take you to each of the brands that we own, take you right to the franchise development sites. Or if you want to go, it's MosquitoJoeFranchise.com, PoolScoutsFranchise.com, or HomeCleanHeroes.com.

We don't have the franchise site up yet with HomeCleanHeroes. But I think the easiest way would be to go to BuzzFranchise Brands. Perfect. And as far as you, if somebody's got a question and they want to reach out to you, do you have a good LinkedIn or maybe an email address that if they had a specific question? Yeah, sure. They can reach me at kwilson at buzzfranchisebrands.com or they can find me at Kevin Wilson, Buzz Franchise Brands on LinkedIn too. And happy to reply that way. But love to connect with people. Perfect. And is there any books that you recommend

or anything that really took you to the next level as far as whether it's recruiting, managing, marketing, or just setting up a franchise or something that really stands out that really moved you in a positive way? You know, I read a lot too. And I forget a lot of the books I read. I just remember some of the lessons I learned from those books. There is one book I remember reading a long

time ago, and it was written a long time ago. But it's called The Effective Executive. And it's a very thin little book written by Drucker. And it just talks about the importance of being efficient and effective in what you do. And he talks about just how people think about their time, how people think about prioritizing things. It's a very simple, easy to read book with a lot of really good ideas in there. And even though it was written years ago before the internet came up, it's all still relevant to today. Very good. And last but not least, is there any last things that you'd like to share with our listeners that maybe I didn't touch upon

or a final thought? Yeah, no, not really, Tommy. I thought it was a great, yeah, great questions. Great interview. You know, we're very passionate about what we do here at BuzzFranchise Brands. Franchising is our business. We love supporting franchisees and we want people to realize their dreams and we think we play a part in doing that. So if anybody out there is interested in partnering with a great group of people, just give us a call. We'd love to help you out. Great. Well, listen, Kevin, I really appreciate you jumping on today. I learned a ton and I think everybody out there did. So maybe once you get your other franchises up, we can talk about how they've grown up maybe in six months.

But this has been great. Once again, I thank you for jumping on today. Thanks, Tommy. All the best. Bye-bye. Hey, guys, I really appreciate you tuning into the podcast. I wanted to let you know that my book is available right now on Amazon. It's called The Home Service Millionaire. That's homeservicemillionaire.com.

Just go to the website. It'll show you exactly where and how to buy the book. I poured two years of knowledge into this book and I had 12 contributors. Everybody from the COO at Home Advisor to the CEO of Valpak and of course, Ara, the CEO of ServiceTitan. It tells you how to have the right mindset and become a millionaire and think like a millionaire. It goes into exactly how to turn on lead generation. Have those phones ringing off the hook for the customers that you want to be calling where you can make money and get great reviews. It also goes into simple things like how to attract A players. Listen, if you want a great apple pie, you need to buy good apples,

and you need to know where to buy those apples. And it also talks about simple things like knowing how to keep the score. You should have your financial check every week. You should know exactly what's coming in and out of your account. You should know when to cut advertising that's not working. And more than anything, you should know how to cut employees that aren't making it for you. Listen, you might have a big heart, but this book is going to show you how to make decisions built on numbers. I hope you pick up the book, and I really appreciate everything.

I hope you're having a great day. Tune in next week. Thank you.