Young and Profiting with Hala Taha - The 5-Step Test That Can Save You From Buying the Wrong Business | Entrepreneurship | How We Profit | E3 | Part 2

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Starting point is 00:01:33 in the show notes or at young and profiting.com slash deals. Franchise businesses trade at a, like, one to three X higher multiple than an independent business. Oh, wow. You got five businesses with 600K in revenue. You're a $3 million business now with 20% margins, 600K a year in cash flow. Pretty good life. If you've ever thought, I want to own a business, but I don't want to start from scratch, This episode is especially for you. You're listening to Part 2 of My Conversation with Alex Smearsnack, co-founder and CEO of Franzy. I used to hate it. I love franchising.

Starting point is 00:02:07 I think it's such a clear de-risk path to wealth creation. I think it's the most overlooked path to wealth in America that doesn't get talked about. Let's talk about how profitable a marketplace business like this is. When we first started, we did just under half a million in revenue in our first 11 months. Now, this is our second year. We will 7X the revenue. did last year. And so our gross margin is about 80 to 83%. So it's like a software business. That's really good. Out of all these categories, which are the most interesting and profitable for

Starting point is 00:02:37 people to really look at. And you weren't afraid of risk, food does so well. They print money. Or like the more risk-averse person, I love. Okay, so I want to keep talking to you about Franzy. I want to understand who your customer is and how you're marketing to them. Yeah. So our customer, there's like three ICPs for ideal customer personas. It's the corporate escapee, the person who definitely has all the skills you need to be successful in entrepreneurship, but doesn't know where to start. They've gotten comfortable. They have a good income, but finally something happened. It was kids are older. They just can't stand their boss anymore. They don't see a path forward the way they used to and they're ready to go do their own thing. Like that group loves frenzy. They love the data.

Starting point is 00:03:23 They love the support that we provide. The second group is what I'd call, kind of like hackers or like serial entrepreneurs. They're the ones we just talked about. They own short-term rentals. Maybe they were doing drop shipping when that was, you know, hot. They've got their hands in a couple different things. And, you know, maybe their own core business and they want to add other things to it.

Starting point is 00:03:40 So they'll come to us as like, hey, I want to add some of these concepts and this concept. This is what I already do. Is there any that are complementary to what I already do? I have these rentals or is there like a home services repair, you know, franchise like a layer on that would also benefit my core business. So we get that. And then the third bucket is your professional franchises. They're the ones that this is all they do.

Starting point is 00:04:02 They have 30 units already, 40 units, 50 units. And they might be what are called mumbos, multi-unit, multi-brand operators. So they own 20 Dave's hot chickens. They own 10 Jersey mics. So interesting. And they crush it. And they're just looking for the next concept. Like, hey, Franzy, do you guys have any, you know, I don't have a taco concept.

Starting point is 00:04:21 Are there any like up-and-coming ones that I can get into quickly before other people grab the territory? So some of this is like a land grab and you've got to get the right brand early enough. Others, it's being good at identifying maybe diamonds in the rough where it was a bad operator who's selling or their kids don't want it and you're looking, you know, you're looking for the right thing. It's more hunting. But there's two. There's both and Franzy helps all three of those buckets. This is so much more exciting than this concept, you know, that Cody Sanchez and I love her.

Starting point is 00:04:51 But like just buying a boring business from somebody who's really. retiring, like buying a franchise to me just seems so much more exciting and fun because it's more branded and like there's just so many different opportunities and less of like turning something around and just kind of like taking something over and picking a good location. The thing that I think gets discounted is the upside is insane because if you, again, let's use the three Jersey mics example again. Now that we're in the system, like we're part of the club, other franchisees of other brands respect us. We have credibility. Oh, you've done it before. And so our ability to go start acquiring, oh, well, Terry over here has 10. He's trying to sell

Starting point is 00:05:34 three of them. Let's bolt those onto our three Jersey mics. Now we've got six. Oh, this guy's selling all five of his. We can go buy his now. And we're now getting that deal flow that outsiders don't get. Plus, again, the credibility of people wanting to sell to us because we've proven ourselves as operators. The brand loves it. And the final, you know, ultimate upside. is when we go to exit, franchise businesses trade at a like one to three X higher multiple than an independent business. Oh, wow. Because you're part of this system that's de-risked, banks like to lend you more than, you know,

Starting point is 00:06:06 yours and I's sandwich shop. You know, they don't want to loan to the one-off. They want to loan to the group that has 200 stores worth of data and have proven that they have, you know, long-standing credit and are safe and more durable. And so easier access to lending, better exit multiples when you sell. I used to, again, be a hater. The more I've gotten into, I'm obviously a total fanboy and I'm biased. But franchising is a great, great, great, great path to build a huge business if you want to.

Starting point is 00:06:35 Let's talk about how profitable a marketplace business like this is. Like, how much are you spending a month in expenses? Like, what are your biggest costs to run this business? How much are you profiting every month? When we first started, we did just under half a million in revenue in our first 11 months, which for a startup, you know, is in the top, like, three-ish percent. Like, I was, you know, we're happy with it, but I told you the college thing of like 120K a week.

Starting point is 00:07:00 So I'm always like, more, more, more. You're like, I beat this in college. And you kind of said it earlier. VCs have this expectation if you're going to get on that treadmill of the top 1% usually triples, triples, doubles, doubles. So if you start at like 3 to 500K, they want you to do up 1.5 million the next year. and then four and a half million, and then $20 million, basically. So in four years, that's quick.

Starting point is 00:07:26 You're a $15 to $20 million business in four years. Like they want you to go fast, and then from there, they dump a bunch of money on you and you go. And they don't care about you being profitable. They just want you to grow. Use the money to grab market share or build product. And so at first when we were going to be bootstrapped, we're like, we need to be profitable right away.

Starting point is 00:07:42 I think we can because we'll be doing most of the selling ourselves and coaching and advising. And then when we decided to take venture, it was like, all right, we're building for a different outcome here. We're building for a national, maybe even global Canada, Europe, instead of like there's franchises everywhere. There's much larger outcome we can go after now.

Starting point is 00:07:59 And so second year, you know, now this is our second year, we will 7x, I think it's 6 or 7X the revenue we did last year. We already beat our projection for this year last month. We just started hockey sticking earlier this year, mostly because we have capital and we can do things faster.

Starting point is 00:08:17 Yeah. And the gross margin on a marketplace, you know, we're paying out, you know, commissions or success fees to our coaches and advisors who work with individuals. So they get compensated, you know, a part of that flat fee that we charge a brand. And so our gross margin is about 80 to 83%. So it's like a software business. Yeah. It's a software business essentially. And then our net margin is a bit of a loaded question because we're plowing everything back into marketing, into new product. development. We have engineers that were at Palantir previously that were at full story, these unicorn businesses who were making half a million dollars years as a software engineer. We're not paying them

Starting point is 00:08:58 that much, but they have equity and still a pretty healthy salary. So to invest in a team like that, you end up burning money. There's this idea of a burn rate with startups. How much cash are you basically losing each month? So we're still burning cash. April was profitable because it was such a big month for us. We did more revenue in April than all of last year in Q1 combined. Wow. So it's in like May is. looking like the same June is going to maybe one and a half. So word is out. People are buying.

Starting point is 00:09:23 People want to be free. They want our own businesses. Yeah. It's more than ever. People want to be entrepreneurs. What are the marketing channels that are really working for you? Yep. So there's three main ones.

Starting point is 00:09:33 It's organic. So our own podcast, content, coming on and, you know, sharing our story and franchising on shows like this. That's been probably the primary focus of ours just because Hermosy is an investor of Oh, amazing. And he, you know, over and over is like, organic is the best lead channel of anyone. You know, paid in referral is probably the next, like paid search because someone's coming with intent or referral because they're also coming with intent and trust.

Starting point is 00:10:02 And then they're like, and then, you know, maybe paid like meta ads. And then he was like flyers event. I don't know. He had like a whole list, but he always has organic at the top. And so we very early on made a concerted effort to say, we got to get good at this, even though it's not my natural, like, skill set or disposition. I'm trying to figure it out. Yeah.

Starting point is 00:10:19 But so organic. Second is paid. So paid search and paid social. So Facebook ads, Instagram ads, actually do pretty well. And then the last bucket is like referral and affiliate partnerships falls into that bucket. So we'll do digital partnerships with other online creators, influencers, content, you know, creators and business. And then offline relationships as well. So partnerships with there's a group called the IFA.

Starting point is 00:10:46 It's the largest nonprofit organization for. franchising. So can we partner with them? Can we partner with other folks that have access to some sort of distribution? In terms of your team, how many people are on your team? And what does like day-to-day of Franzy look like? What are the problems you guys are solving? Yeah, so we're still somewhat lean, I would say we're under 20, under 20 people, which again, with what we're doing, we're building two products effectively now. That's not a lot of people. It's... So customer service, Are you outsourcing it? So we are coaching.

Starting point is 00:11:20 We have full-time coaches on our team. They're able to handle way more volume than a traditional broker because of all these tools we've built. So a traditional broker, a lot of their time was spent on follow-ups and drafting emails and putting one-pagers together. Like, we've AIed the hell out of that to the point. And it's perfect. Like, it's actually better than what was happening historically, but it's done instantly.

Starting point is 00:11:40 And so our team can truly spend time doing what humans do best, and that's conversing with other human beings and helping them and coaching them and building relationships with them versus time behind a computer doing admin type work. And so if you cut out half of what they were doing previously, which was 40 to 50% admin work, they now can talk to twice as many people and still have a high level of quality and support for that individual's goals and mission, et cetera. So we're able to do it a lot more efficiently as a result of that. So 19 people, it's the best team I've ever worked with. Yay.

Starting point is 00:12:13 Very, very smart people, hardworking. And I just try to stay out of their way. Yeah, fam, I built an app in 15 minutes. And before you ask, I didn't suddenly become a software engineer. In fact, I've never written a line of code in my life. But now I'm turning out apps like it's my day job. And that's because I learned how to do it through Mindstone. It's an AI transformation company that helps close a gap between having access to AI

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Starting point is 00:17:15 To claim your 15% off discount and your bonus gift, prolonlife.com slash profiting. Franzy is awesome. Like, I feel like you're building such an awesome business. So congratulations. I know that you have a five-step framework. So I am going to go over each step with you. And for anybody who's interested in a franchise, they can really, you know, just study this episode

Starting point is 00:17:41 and get a lot more clarity on what is a good fit for them. So step one is define your why before anything else. Why is getting clear so important. So this was something I learned along the way, and it was because people will come, how do I make the most money? How do I get rich? And I'm like, oh, let's just take a step back. Not everyone is in it purely for that.

Starting point is 00:18:02 Yes, of course, we want to make money and profit and it's important. But some people come and they're like, I don't see my kids. Like my hours are this. And like if I could even just replace my income or even a little less, but I had more freedom and flexibility, I would do that. And so we asked, we spent a lot of time with people on what's motivating you to do this? Is it more quality of life and balance and control? Is it legacy for your kids?

Starting point is 00:18:27 Some people come to like, I want to open up this business with my son or with my daughter. Like a family business. Because they've made a ton of money already. He's like, I just want to do something that I'll teach my kids, entrepreneurship and franchise. It feels like a good safe, again, way to do that. So some, it's legacy, some is freedom and control. Some it is purely money, and they're like, I just want to make this many dollars.

Starting point is 00:18:47 Some, it's a hobby and it's just for fun. There's some, like, retirees that will come to us and they're like, I'm getting bored. I want to just, like, go open up something. We're like, okay. So we really spend a lot of time on why is this important, and that dictates the rest. And sometimes we tell people, depending on their why, franchising is not for you. So if someone comes to us and like, I want to start something from scratch, I want to have a stay in everything that I do and not be told what to do anymore. We're like, well, franchising,

Starting point is 00:19:10 there's going to be a playbook and you kind of have to follow it. And like, yes, you can still be entrepreneurial for sure. You're still the owner of the business. But you can't go like buy McDonald's and start selling like lobster rolls. It's just like you got to stay in a certain lane. And some people aren't the right fit for that. And we're also very transparent and honest because it's a waste of everyone's time. The brands won't like us. You'll end up being unhappy in two years. We might have made a quick buck, but it's not worth it. It's not worth it in the long run, no. What are some of the common, like, misalignment points with people? Like, they come in and maybe, like, have their eyes set on something and there's misalignment. What are the common ones?

Starting point is 00:19:47 Yeah, so one is this idea of, like, it's mailbox money. They're like, yeah, I'll just come in. I want to put 200K and it's going to spit out 400K in the first year. And then every year after that, it'll be great. I was like, if that were true, I would be doing that repeatedly over and over and over again. There is a lot of work. No matter what you do, like fast money is not good, in my opinion. you're going to have to work hard no matter what you do, whether it's franchising or not. And, you know,

Starting point is 00:20:11 that we have to kind of condition people on a little bit. It's like, this isn't just a like set it and forget it thing, especially in the first year or two. So there's misalignment on the time commitment sometimes.

Starting point is 00:20:20 The next big one is people will come because they, they like a product or they, you know, they saw this thing happen and they're dead set on it. They don't want to budge.

Starting point is 00:20:30 And we talked to them and we're like, halla, this is like not aligned with your skill set at all. or your risk tolerance that you just shared with us, or what you have, like, yeah, but I love golf.

Starting point is 00:20:40 I want a golf simulator. Again, the passion thing, like it's not about what you're passionate about. If that alliance, it's a great bonus for sure. Like, if it happens to be like you can, the risk makes sense and the skill set and the golf sim works out, and you can take your buddies there

Starting point is 00:20:53 and send friends and family or whatever, they're like, great. It's a bonus, but it shouldn't be the core driver of why you're making the decision. Okay, step two, know your operator profile. So what are the common profile? So what are the common profiles of different operators out there?

Starting point is 00:21:08 And then what kind of businesses are conducive to those personalities? Yep. So a big one is honestly a lot of veterans, which is another reason I love franchising. A lot of brands give veteran discounts. Almost every brand gives some sort of like 10 to 15 percent discount on the franchise fees. And pretty meaningful. And veterans make phenomenal franchisees because if you think about being in the military

Starting point is 00:21:29 and in some of the situations that they're in, it's very regimented and structured. but in the moment if, you know, combat starts to happen, like it's all chaos and reacting and adaptive and a little, not entrepreneurial, but a lot of the same kind of skills of be able to react quickly, think, quickly, make decisions quickly. And so ex-military and veterans do so well in franchising because there's some structure and there's regimen, there's a playbook. But the reality is in the day-to-day of running any of these businesses, you're going to

Starting point is 00:21:56 have to react and adapt and you can't be like, oh, on page 52, the customer got mad, what do I do? It's like, you're reacting. my employee got some issue that happened and I have to work with them to solve it. And so there's that persona of like the ex-military operator. And whether you're ex-military or not, it's that persona of someone who's really good at managing teams, managing people, good with structure and regimen. There's just a sub-persona within that group that's ex-military.

Starting point is 00:22:25 The other one is you're like, your sham wow guy, the seller, the marketer, the promoter. they're very good at like high ticket sales maybe not as good at I mean they can probably inspire and rally a team but they might not be great at like executing the day-to-day logistical chaos that they have to put together but they can probably go sell a bunch of

Starting point is 00:22:46 $15,000 pool installation jobs or $5 to $10,000 fencing jobs and so maybe home services big ticket home services is good for them because it's a smaller team one or two people instead of a team of some restaurants people don't realize this I didn't realize it until I got into it.

Starting point is 00:23:02 A McDonald's has 40 to 60 employees. Oh, wow. Because there's three shifts, 24 hours, seven days a week. And even if it's not 24-7, most restaurants still have like 30 to 50 employees. So it's a lot. I mean, it's a lot of people, a lot of turnover. And like that's a different skill set than the smaller or specialized team. So those are the two big ones for sure.

Starting point is 00:23:23 So are you more sales marketing oriented, less good on the complex people operations? or are you more of like a structured, maybe you don't want to go knock on doors. And so you need a brand that has a lot of heavy marketing support from the parent and like a really recognizable, reputable brand. How do you know if you're better suited for like B2B versus B2C? So well, some of the questions we ask to get into that a little bit. Some people come in with a pretty strong opinion of like, I know what I'm good at. I don't want to talk to other like, you know, ones and Tuesday kind of B2C type conversations. I want to go deal with other professionals making a professional business decision.

Starting point is 00:23:56 Part of it's their personality. Some people come in, they're very friendly, they're charismatic, they're bubbly, which could work for both. But it's in a way where it's like the friend across the street that you trust for, again, a recommendation for your home or for a smaller ticket decision. And there's others who are way more sophisticated. They come off more polished, sophisticated. Maybe their background is in doing enterprise level sales. So those we put into more of a B2B bucket and say, hey, you can just tell. Because they can do high ticket sales.

Starting point is 00:24:26 Yes. And just the way they carry themselves is more polished versus the other person who's probably just as intelligent. It's not an intelligence thing. It's just the way they communicates maybe more informal. It's fun. It's likable, bubbly. They are selling, I'd say, like, different things or usually have better success selling different things. Yeah. And I would imagine that the B to C person might not be the person selling the thing, right? They're just kind of operating. It's more marketing too They're creative They're coming with fun crazy ideas And they want the freedom to go do that And the brand does allow you at a local level To do a lot of that

Starting point is 00:25:03 You can't go rogue and change the logos And certain things like that But if you want to go run local events At the PTA meetings Or at kids sporting events Or do collabs with other local small businesses Like there's a persona that's really good at that And then there's this other persona who's like

Starting point is 00:25:19 I want to deal with business professionals all day and line up my meetings a week in advance and two very different personalities and skill sets. Step three, match on financials and markets. So what kind of numbers and economics are you typically looking at to judge whether it's a good franchise opportunity or not?

Starting point is 00:25:40 The first part of that, and I'll come back to the question is, we need people to have 50K, 30K at the lowest end of cash available to them, and 150K or something. so net worth. So anything below that it does get really hard. There's some franchises that are 10K, 15K to get into, but you're essentially buying yourself a job, which is okay. It can work and you can do well at it. It's just... What's an example of that? So like, there's like bucket in a mop type

Starting point is 00:26:07 franchise where you're basically buying the rights to a territory of commercial cleaning. So like, but you're the one probably going there with family members or some employees to actually clean the office building. It might be even this, you know, podcast building that we're in, might be a customer. They'll pay 200 bucks a month. And now they're on a route. And now they're on a route. Every day we're going to go clean office buildings, bathrooms, empty trash, vacuum, et cetera. So it's like it's no location. It's just like a van and a bucket in a mop. I say it jokingly, but like that's kind of it. And the brand. And the brand that you get. And so what you're buying there is they help you find customers. And like they're doing that from corporate. And they maybe

Starting point is 00:26:38 have national partnerships with Regis, the office management business. And so maybe they're feeding you leads and deals. And that's the value that you get. But it's only eight grand to get into it. and you could make 30 grand and not do that great, or you might be really good at this and grind it out. And I've heard of some of these people with huge territories, and they're doing half a million plus in cash flow. It's possible, and it gives a person who maxes out a credit card to get in. The opportunity, yeah.

Starting point is 00:27:08 The opportunity, but more often than not, there's a term in franchising. They call them sharecroppers who do this because they are kind of just like, all right, let's sell 200 of these a month, knowing that 100 of them are going to in two months give up and fail. And I don't love that personally, but it's still a path where 100 of them are making it and succeeding and are probably very happy.

Starting point is 00:27:29 It's just you get into that volume like that. It starts to feel a little bit like, oh, you're just like selling as much as you can. Yeah, it feels like a scam or something. I don't like it as much. And then there's like a fun one, though, that I think is real. This is more of a side hustle. It's called Card My Yard. And it's, you've probably seen it before.

Starting point is 00:27:44 You drive around a neighborhood and you see these like, happy birthday, Alex. or congratulations, whatever. That's a franchise. They sell you the kit of all the letters and stuff, and they again help you with local marketing and advertising, and then a family will pay you $60 to go card their yard. Oh, cool. Put that out.

Starting point is 00:28:02 Again, we don't try to play God and say, hey, these are the best 10. We have our own opinions. What I think is great, my co-founder might actually disagree with on some things and say, well, I like these, because it does go back to your individual personality, your risk tolerance, et cetera.

Starting point is 00:28:16 instead of like trying to vet a brand based on is this 10k to get into like card my yard because there really is an audience for that and the right fit for that as well even though it's 10k to get into it all the way up to there's one called big blue swim school and then uh slick city it's like indoor slides but it's like this massive like kids birthday part like four million to build that out though because it's this is huge complex and so it's not so much like what does this cost to get into or even the economics of the business because some people again it's not about the money they're just like it's a real estate plate for me. I just want this thing to break even even because I'm the real estate's going to appreciate in value over the next five years and that's why I'm doing it. Yeah, or it's an opportunity zone thing. So there's all these reasons people might do it that aren't always purely bottom line profit for that specific operating business. A lot of the times it is. So the thing that we really vet for on Franzy is, is there any like mail intent or potentially potential fraud? Does the founding team's background check out? Do they have experience doing this? is there red flags around all these stores that have opened and are now closing?

Starting point is 00:29:20 So there's things that we look for that we are starting to surface as potential flags. So we'll, if you look at a brand profile, it might flag that, hey, this brand has had 30% more closures in the last year than they did four years ago. Something's up. Like, why are they closing? Or is it consolidation that looks like closures, like at least ask the brand this when you talk to them if you are interested in this brand still. Yeah.

Starting point is 00:29:42 So we're surfacing insights like that to de-risk it for people. Do most people get a loan to actually get their franchise? So most people are just putting down like the 20% of their loan to buy the franchise. Yeah. So that's why we said that 30 to 50K. You can get into concepts for less than that. But if you have 30 to 50 grand in cash, it opens up so many brands you can get into with an SBA loan. If you have 30 grand and that's, you know, 20%, you can buy a business, you know, for 150-ishk and maybe bring another partner in.

Starting point is 00:30:12 So 150K options, there's actually a lot of them. So that's why we say at a minimum have 30 to 50K because that gets you into 150 to 250K businesses. What's up, young improfiters? When you start a business, nobody warns you that you're about to become the creator, the marketer, the finance team, the customer support team, and the person who's chat GBTing why checkout is not working. That's exactly why I always say start with Shopify. Shopify has been a real business partner for me as I've grown Yap Academy and launched products like my LinkedIn Secrets, Master. It powers millions of businesses worldwide and 10% of all e-commerce in the U.S. Whether you're a household name or just getting started, Shopify has got you covered.

Starting point is 00:30:57 Because let's be real, your business should not require 17 tabs, five logins, and a minor emotional breakdown just to sell a product. Shopify lets you build your store, market your products, manage payments, track analytics, and handle shipping returns and inventory all in one place. Shopify does this all so you don't have to do it alone. Start your business today with the industry's best business partner Shopify and start hearing. Sign up for your $1 per month trial today at Shopify.com slash profiting. Go to Shopify.com slash profiting. That's Shopify.com slash profiting. Yeah, fam, as my business keeps growing, I feel like I'm always hiring. I recently added two

Starting point is 00:31:40 new video editors and a producer to my team. And I can tell you from experience, the right hire can give you leverage. The wrong hire gives you a second job. that's the last thing you need. So when I need the right person, I go to Indeed sponsored jobs. Indeed sponsored jobs boost your job post and search results so you can reach candidates who meet your specific criteria like skills, certifications, location, and more. Because the goal is not more resumes. The goal is better matches. Spend less time searching and more time actually interviewing candidates who check all of your boxes. Less stress, less time, more results. When you need the right person to cut through the chaos, this is a job for Indeed sponsor jobs.

Starting point is 00:32:19 And listeners of this show will get a $75-sponsored job credit to help get your job the premium status it deserves at Indeed.com.com slash podcast. Just go to Indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire? This is a job for Indeed, sponsor jobs. Okay, step four. Do the real due diligence on the franchisers. So what are some of the ways that people can do due diligence? And then also is like a really well-known brand, like Dunkin' Donuts or McDonald's? Are those always the best choices? So the weighted diligence, I mean, one, use a tool like Franzy. There's all this data that's very digestible.

Starting point is 00:33:03 Typically, I would have said go to the FDD that franchise disclosure document. One, they're hard to find because there's only 11 states that like publicly register them and they're buried in government websites. So they're hard to find. If you do find them, they're 200 pages of legal documents, which aren't super exciting to read. It's hard to know what you're looking at. And so Franzy, and there's other platforms, so use those as well, that show you revenue cost to get into it. What's the royalty?

Starting point is 00:33:27 What's the franchise fee? Everything you need, just quick at your fingertips. So that's a good way. The best way, though, is talk to other franchisees of that brand at random. As you go through the process, it's almost like an interview process. If you've ever interviewed someone and you ask for references, they give you the three best, they're not going to give you the boss that they know they didn't like them. or that they got fired by or whatever. It's like, sure, those are great, but you know what they're going to say.

Starting point is 00:33:54 Same thing when you're buying a franchise. The brand serves up, here's the three you should talk to, and they're like the most successful money-making, highest achieving franchisees, which is great. You want to hear what they did and how they did it, but you should go then secret shop and find your own. Maybe that, you know, and that's listed in the FDD and on our site, you can go look at all the old franchisees.

Starting point is 00:34:14 Go look them up on LinkedIn and cold outreach to them, and you might have to email or message five of them, but one or two will say yes, and you might learn, yeah, the brand said they were going to do X and they really did Y. And then you need to as an individual decide, is this believable? Am I hearing this enough times? Or is this they were a bad operator and they're bitter about it? And it's like there is some of that that you have to sift through and filter through. But that is the single best way to understand is the concepts legitimate and viable is by talking to the many people who have done it before you. Yeah, I wonder if there's a world in which you can be the platform where franchisees

Starting point is 00:34:49 can provide their reviews and things like that. More to come. We're starting to work on some stuff now that will certainly spotlight and highlight that better. What's a red flag with a franchise? A lot of closures. Like, if they start closing a bunch of locations, something's not working. There's a reason either there's competition coming that's just beating them and they're not profitable and they're better off closing than losing money each month. They've cannibalized themselves. So Subway did this on purpose and it's biting them in the butt now. Subway also had like yoga mats in their bread.

Starting point is 00:35:27 They found out it like wasn't technically bread because there's so much sugar in it. It was like a donut actually. It was like the technical definition for their bread. They did a lot of things wrong at the end, especially they just got greedy. And some brands will do that. You and I have protected territory again. And then all of a sudden three years from now they're like, We need to open more locations because that's how we as the franchise or make money.

Starting point is 00:35:47 Let's cut our territory in half and sell three more. And we're like, what? So we just lost half of our customer base and have all these fixed costs. So brands can do that. It's not, you know, there's a lot of protection in the legal documents for the brand and the franchisee. But just you got to be mindful of stuff like that and make sure you are picking a brand with high integrity people that the franchisees all love and get along with. older franchises might not be good at like updating their marketing tactics or their support systems. Am I wrong in that assumption?

Starting point is 00:36:20 You're totally right. I mean, you see it in some of you and just like the lipstick on the building, right? It's like a lot of the restaurants that are refreshing the outside and modernizing the drive-through. And that's a good sign. You as a franchisee have to pay for that and some franchisees hate it. But in order to stand out and be up with the competition, you need to have menu innovation. and you need to have better technology and a better experience. So yeah, brands that are investing in that pretty aggressively is a good thing.

Starting point is 00:36:47 Even though you as a franchisee will probably be paying for it in some form or fashion, you should be constantly innovating and growing and wanting a brand that is doing that. Okay, step five, using transparent data instead of commissioned broker. Yeah, so that's at our core, again, how we get paid. That's francy. We get paid flat. It's the same across all brands. So we, I don't want to say we don't care which business you get into,

Starting point is 00:37:09 but from a financial perspective, we don't care which business you get into. What we care about is, are you going to be successful in this business? Because if you are, you're probably going to buy more locations eventually. And hopefully they're through us. And you're eventually going to add another brand at some point. And hopefully it's through us. And as we grow as a tech company, we're going to have other products and services. And hopefully we've built this amazing relationship with you that you want to come to us for,

Starting point is 00:37:30 hey, I need help with this. Do you have a software solution for that? You have a services solution for that. And so everything our core has to be done through the mission of how do we create the next million entrepreneurs and how do we, you know, in order to do that, they need to be successful. It's not the next million failed entrepreneurs. It's the next million successful entrepreneurs. Okay, so we talked all about in part one, in case you guys missed it, we talked all about Franzy and his platform. Right now we're going to go through different case

Starting point is 00:37:54 studies and opportunities of franchise opportunities. And we're going to have Alex kind of vet them for us and help us understand why it's good, why it's bad. So we've got this artificial turf installation, which we were talking about earlier. It's a project-based home services business. There's no storefront, right? There's no lease, which means that the startup costs are pretty low. And the initial investment, your team, Brett on your team actually gave me, is 121,000 to 163,000.

Starting point is 00:38:27 The average territory revenue is a little under 600,000, and the net margin is 21,000. So talk to us about why. this kind of business is really hot right now? It is one of the most popular businesses on our platform. And again, there's 4,000 brands you can go look at. I think part of it is new. There's home services for everything. There's gutter cleaning.

Starting point is 00:38:51 There's window washing. There's roofing. There's HVAC. How many turf businesses have you ever heard of? And I hadn't really heard of many at all before. And so I think it's becoming a trend, which is good to be a part of it. And not a trend that's just going to go away. I think people like the idea of convenience.

Starting point is 00:39:07 and when I live in a condo now, but I had a house previously, and I hated cutting the grass. I'm so busy with all those startup stuff. I'm like, I come home. I want it to look nice, but I don't want to do it. And then I'm paying someone to do it. And I'm like, I find myself really caring about this thing constantly and how it's done. It was just like distraction more than it was a thing that I enjoyed. Yeah.

Starting point is 00:39:29 If I had a bunch of turf that looked perfect all the time and green and good for dogs and kids, like sign me up. And I think another part of it is some cities are starting to regulate. and outlaw the ability for you to grow natural gas, or sorry, natural grass. So Las Vegas recently said, no, you know, you can't grow natural grass in the city limits anymore. There's a lot of cities in Florida starting to think about, hey, you can't use water for things like this. And so turf is really the only option if you want green or otherwise. It's like rocks or, I don't know, something else. So it's the water restrictions driving up demand.

Starting point is 00:40:02 So the south and the southeast, California are really good for these concepts. works in other, you know, colder markets, but really works where there's a lot of heat and constantly watering and grasses dying and this just solves it permanently. Like for a franchise is 21% margin good? So the thing that's interesting about franchising, it covers everything, hospitality, food, health and wellness. And so it's really almost industry dependent, just like you would weigh maybe a fitness concept versus a, you know, other health and wellness concept.

Starting point is 00:40:33 It doesn't matter if it's franchise or not. the margin is going to be probably pretty similar across both. And so I think businesses that are over 20% margin, regardless of the industry, is usually pretty good unless it's super low revenue volume, anything over 20%, like you have wiggle room. There's a lot of buffer there. And what I like about this brand or this concept is while the revenue is somewhat low per territory, less than 600,000, most people are buying up two, three, four, or five territories at once because the incremental cost to do this is not a 30 grand, 20 grand. You're having to spend 120 to 180 each time.

Starting point is 00:41:09 I was thinking that that you'd have to spend 120, but now it's, you just get an SBA loan. Well, and it's just the right to the territory. So that 120 to 180K is really like get the truck, get the initial materials, three months of working capital, you know, and some installation equipment, et cetera. Once you have that, the territory is really what's valuable in a business like this because it's all services-based. So you're now buying, if it's 60K for one territory, 50K for the second, 40K for the third. But you don't necessarily have to buy the trucks, more trucks. No.

Starting point is 00:41:41 I mean, if you start to get your point where you have jobs every day, but that's a good problem. It's champagne problems and you got growth happening. And so we've had a number of people buy three, four, five, six territories and you do the math. You got five businesses with 600K in revenue. you're a $3 million business now with 20% margins, $600K a year in cash flow, pretty good life. I mean, how many people do you know making $600 grand a year? It's not a lot. Not a lot of people.

Starting point is 00:42:07 So one of my former clients was Brian Scudamore. He was my client for years. I ran all his social and podcasts and stuff. He's $1,800 got junk, and he also has like a pink company. So our home services, franchise businesses, are they generally like, does it? I think so they're easier to get into and the overhead is not as high. So to me, the risk is lower from a fixed cost perspective. What scares me sometimes, and I'm doing some physical retail businesses myself, is like once you build, you're not moving it, it's there. And so if you pick the wrong location, you're dead. And like that freaks me out. What I like about home services is, you know, huge territory with a bunch of houses. And if one neighborhood's not working, another one might. And the cost, usually is some that even if it doesn't work out, you can sell back. I can't sell them all the improvements I did at this retail location, all the drywall and plumbing and electrical work we did that's

Starting point is 00:43:04 there. But if it's my truck that I bought and my power washer or window cleaning equipment, I can probably sell it back, not for one to one dollars, but probably half for some amounts. The worst case scenario, I'm not out as much. So I like it for the lower risk, lower cost. And some of these home services business, there's garage. Garage cleanout. It's like garage clean out. And like I call like Pimp My Garage, like the Pimp My Ride, you know, version for your garage. And they'll do over a million dollars in revenue as a services business, putting epoxy, you know, epoxying people's floors and putting custom shelving in a garage.

Starting point is 00:43:40 And it's not a super complicated business. It's just such a cool way to just make money. All right. Next one. This one's really interesting. Pediatric Speech and ABA Therapy. These are therapy services reimbursed largely through insurance. The customer's families with children who need speech or ABA therapy, which is, is that autism therapy?

Starting point is 00:44:03 It's effectively helping those with autism or speech deficits to find exercises and therapies that they can do to form the habits that help, you know, improve those deficits and, you know, navigate life and develop those skills in an easier way. Interesting. So the initial investment is anywhere from $300,000 to $800,000, but the location revenue can be over a million dollars, $1.3 million for mature locations, top locations doing a million and a half per year. So they're very lucrative. So what's the opportunity in this? Are these becoming more popular? Yeah. So I think, yeah, and I don't know that it's necessarily that people are being, you know, there's more and more people with autism. I think there's just a lot. more attention and care to, you know, mental health, special needs, way more than there was historically. I think people in the past were kind of like rub some dirt on it, basically, and people wouldn't pay attention, and now there's way more science and research behind it. So I think it was one in 34, have some level of autism. And so it's centers that help, you know, people develop skills to better cope and navigate life that might, that may have autism or

Starting point is 00:45:17 other, you know, disabilities or learning, you know, issues. And so these facilities are becoming more popular. The cost for the location being three to, you know, 800Ks, depending on the size, the market that you're in, but then your point, 1.4 million in revenue, the margins, I imagine, it's not listed in their FD, but it's probably similar to a fitness concept where you have trainers or some sort of professional there. And usually those businesses have mid-20s to mid-30% margin. So I imagine it's like 23 to 33%ish margin on 1.4 million. Again, a great business. The mission behind it's phenomenal. So some people come to us again. It's not about the money. They're like, I want to help because my child has X, Y, Z. And so this is one of those businesses where there's a, you know,

Starting point is 00:46:04 a fantastic mission at its core. Plus, you can make money. Plus you can provide care in a way that's, you know, above what's been done traditionally. It's also recession proof. Yeah, you're going to need this regardless. I mean, what parent isn't going to pay, especially if insurance is covering it, makes it a no-brainer. Insurance pays more than a lot of retail businesses would. It's almost guaranteed, and it's somewhat of a recurring revenue model because you're going to have clients for a series of months. It's not like it's one-off come in. Okay, I learned some skills in them out. It's like any kind of therapy or physical therapy, mental, you know, going to a psychologist or therapist is, you know, for mental health, you're going to go multiple times for a series of time.

Starting point is 00:46:48 And so you have this kind of recurring, I say, client-based built-in that's never going away. You know, once they matriculate, the next group is already coming and it just doesn't stop. Okay. I want to go back to the turf one for a second. Yeah. What are the elements of success? Like, what do you think that person needs to do to actually, like, have a well-running territory? Yep.

Starting point is 00:47:09 So turf is one of those, like, medium to-lawful. larger ticket sales. It's not like it's tens of thousands, but it's not 500 bucks either. And so this is where I would look and the team is small. You don't need a huge team. So this is where I'd go back to the sham wow. Yeah, that's like the personality. You want the person who's like going to go do content in their local market and be like your backyard could look like this and sending, you know, I could see someone sending DMs or AI images of like, hey, I got this picture of your house from Zillow and I made it look like it has turf. Like doesn't this look way better? Here's a before and after that. I just created it.

Starting point is 00:47:42 your actual house. Some people might get creeped out by that, but I can see a bunch of people being like, wow, that looks really good. And so you're going to want someone who's creative like that and is coming up with out-of-the-box ideas and getting in front of each single house in their territory, because each one's an opportunity. And the team to install the turf is one or two people. So you don't need to have this huge complex operation. And so I think for someone to be successful there, you want a founder or an operator that is marketing slash sales led. And then on the therapy side, what are the key things to make sure that your business is profitable on that side? Like, what do they need to worry about or lean into?

Starting point is 00:48:20 Yeah, I think the quality of the therapist is really important. It's such an emotional thing. It's such an important thing that the level of training and the caliber of the individual you have, first and foremost, in the location. Because that's what we'll keep people coming back. There's support groups and Facebook groups, et cetera, for families with children, with autism. And so they're going to be all talking to each other about, hey, we found XYZ facility. It's amazing. We work with Tiffany or John there.

Starting point is 00:48:45 And that's going to happen. And so it starts with the quality of the service you provide. I think first and foremost and word of mouth will be big for this business. The second thing is likely partnerships with, you know, what are other adjacent services? Is it hospitals? Is it, you know. How to plug your distribution line? Yeah.

Starting point is 00:49:05 Finding those like one to many distribution outlets. because this isn't going to be like a Facebook mark or like a local marketing thing. This is going to be much more relational, emotional, referral based, community based. Like what community partners can you find that share similar clientele? Okay, number three, a sunless spray tanning and skill wellness studio. So beauty and wellness, small format studio, investment is 300,000 to 600,000, average net revenue is 650,000. Well, I guess operating margin is 25% because there's retail products as well. Yep.

Starting point is 00:49:43 So how do you feel about these spray tanning type studios? Are they good? So this is one where it would probably be someone who's more into this because it's a lifestyle or passion decision. It's a traditional tanning is bad for you, but I still want to look good and have good, you know, skin health and, you know, beauty there. And so this could be someone who's really passionate about that. maybe doesn't need this to be the sole source of income. And so they're doing this as a little bit of a, not a side hustle, but a side source of income.

Starting point is 00:50:15 And they like it. And they like interacting with the clientele. They like being that person that owns it because there's other things that you could do that you'd make more money than this one. Yeah, and way less initial investment. Right. This, to me, is one of those ones

Starting point is 00:50:29 where people are going to, again, it's a passion thing. They want a physical location, and it's not about, building this empire, this massive wealth-producing thing. Because this one as well, what I was going to say was, even though it's three to 600K or so, depending on the size, the margin's really good, but the operation's not that complicated. You know, you've got people that come in, they book times, they go in. It's usually equipment that's applying a lot of the spray tan. And so you don't need a ton of people either. So it's simple, which makes the lower revenue,

Starting point is 00:51:07 lower, you know, I think return profile relative to your fixed costs, a little bit more attractive because you can kind of, this is one of those more potentially semi-absentee businesses. Interesting. And so you could open up multiple locations. Like if you got a lot of cash, it could be a good one for you if you're passionate about it. All right.

Starting point is 00:51:26 Next one. Reformer Pilates studio, my dream. My dream. These are fantastic. If I quit you up today, I'd be owning Pilates businesses. So basically you're investing anywhere from $500,000 to $700,000, which to me sounds high because there's such little. Whenever I think about Pilates, I know the machines, but like it doesn't seem like there's that much involved. Average studio revenue is over a million dollars a year.

Starting point is 00:51:55 EBITA margin is 30% nearly. And there's memberships, packages, class pass. So not so bad. I love this one personally. So it has recurring revenue, membership-based. It's like a SaaS, software-as-a-service type of business. And I've talked to Ellen Latham a few times. She's a founder of Orange Theory.

Starting point is 00:52:21 And her story is phenomenal. Orange Theory really revolutionized like this kind of concept where it was, we're going to go beat the big gyms and do this very bespoke kind of curated, specific training, programs, etc. And people will pay for it. They love it. They're part of a community.

Starting point is 00:52:38 It's kind of cult-like a little bit in a good way. And she was telling me that at their height, they were trading at like 20 to 25x multiples. Wow. Which is insane. And so I think the multiple is good again because there's recurring revenue built in and there's such a loyal following. So for that brand with the high margin, the recurring revenue, yes, the buildout's more expensive, but the revenue justifies it. I mean, the average location, I think it's like 350K in Ibitah or 360K. 349.

Starting point is 00:53:08 I don't know. You get a couple of these open. And again, you have a pretty good lifestyle and a cash machine. Yeah, I love this. This validates my dream. And this one, when you're talking about getting into a franchise, you need like a trainer or someone to run the gym anyway, unless you were planning on it being you. And maybe you're like, I don't really want to do that. It's a great one to find like an operating partner model because it's not like going to be running 17.

Starting point is 00:53:32 classes at once. Now you need 17 people. So you really need a small handful of really good, reliable trainers, some equipment or location, and you're good. I love it. Okay, let's move on to the fifth one, gourmet coffee shop. So we've got a coffee shop. It takes anywhere from $260,000 to $900,000, depending on the format. Average unit gross sales per year is $600,000. Top 50% make $840,000 a So the margin, I think I pulled it last night. It's 15%. And this one is interesting because there's this like Lego set of being able to set up the layout. So do you want to have drive-through, no drive-through? Do you want a retail, you kind of sit-down area, walk-in area? And so that's why the range is so big on the cost from 300K to I think it's 800K or so.

Starting point is 00:54:26 And so that gives you flexibility. And that's where earlier we talked about how entrepreneurial are you. this is where you get to be entrepreneurial. Do I want to go for this or do I want to scale it back? Do I want to add that later? Is that even possible? Can I do my build out in a way where I can add it later? And coffee is, especially these more bespoke coffee shops are crushing around a seven brew. If you're familiar, Blackstone is invested in them.

Starting point is 00:54:50 They are opening, I want to say, it's like multiple locations a day right now. Oh, wow. And it's just drive-through. It's like a little, it's like that Washington or Seattle-style coffee shop. where it's just a core and then like three drive-through lanes. And they're just, it's speed versus Starbucks has become, you kind of go in, 17 customizations for every person's drink.

Starting point is 00:55:12 You sit there and you hang out. And that was really good at the time. Howard Schultz was like, I want this to be the third place. You know, I want this to be a place that people can come and just sit and do work or meet people or dates or whatever it is. And I think the world is just increasingly becoming

Starting point is 00:55:26 busier and busier and busier. And there's a huge subset that doesn't want to wait. And 7 brew and this concept as well is built for speed. And so, you know, this drive-through element, that's why the top 50% of the drive-through group of this concept are doing 800,000 instead of 600,000. The issue I have is the margins just lower and it's because it's food and be. Most food and bebv is going to be worst-case high single digits, best case, low 20%. This seems like another business where somebody's going to go into it because they just love coffee. Yeah.

Starting point is 00:56:00 And not realize that it's not the best choice compared to other options that are out there. Well, in this one in particular, it has a very good, high-quality gourmet-style coffee. Some of the other concepts that I mentioned, Seven Brew, Dutch Bros is like this. It's way more targeted at a younger demographic. It's almost like they're selling custom energy drinks in some cases or these like dirty sodas as well. And those do way more volume. way more volume, higher margin because it's just way simpler.

Starting point is 00:56:32 This is, I think it's lower margin because it's like very, you know, high quality beans and their roasting processes protected and they're doing all these other, you know, fancier things and selling a premium product. Is a coffee franchise more of a real estate business than an actual product business? Yes.

Starting point is 00:56:50 So Duncan, very much like McDonald's, way more value in the real estate that they own than the actual operating business. Most people think of Duncan. it's like, oh, it's donuts, it's coffee, and, you know, America runs on Duncan, and it's the whole business, but the franchisees behind Duncan are all primarily in it for the real estate ownership. It could be if you want to get into like commercial real estate, you open up franchises knowing that the real value, like it's not, maybe you get a little bit of money every year from the franchise, but the real value is owning the commercial real estate.

Starting point is 00:57:21 Yeah, some of the like OG franchise guys that I know that are, you know, the 60s, 70s now, they started out with, a small handful of Burger Kings or Pizza Hutts when Pizza Hut was really blowing up 20 years ago, 30 years ago. And they then started buying the real estate underneath as they became more successful individually from the operating business. And then eventually they hit a point where like, I'm sick of doing this and dealing with employees and turnover and customers and all this stuff. Like buying all this real estate now. But what can go into a pizza hut with that like very unique roof? Yeah. And it's like, well, why don't I just sell my pizza huts? I'll make some money. but now I got tenants in all my locations that I own

Starting point is 00:58:00 that are going to at least run this for five to ten years because the franchise agreement is typically a five to ten year agreement. And so I think it's a brilliant play. You can start out, operate, work your way up. Again, hard work up front is always going to be there. Then you find yourself as a commercial real estate owner and a path to easily selling to a perfect tenant because it's already built out and it's already there

Starting point is 00:58:20 and it's this staple, this name brand because it's a franchise versus Hollas and Alex's, You know, taco stand, and no one knows, and we go to sell. So you could resell just a franchise rights and not the operating business. And not the property. Yes. And you can do that on Franzy. Yes.

Starting point is 00:58:37 Okay. So out of all these categories and all the categories that are available on Franzy, what are the most interesting and profitable for people to really look at? Yeah. I hate giving the It Depends answer, but it so much does on the individual and the person. So let me break up like two personas. Okay. So for like the more risk-averse person who is scared about real estate, like I love home services because it's stuff that's not going to go away.

Starting point is 00:59:03 Even during COVID, everyone's doing all these home projects and home services just skyrocketed. Maybe some people cut back on the convenience-oriented things like someone coming to cut their grass. But your HVAC goes out, you're not going to live in 90-degree weather in your house or heat in your house. And so some of these staples, I think if you're willing to out-compete the local options, which many of them are mom and pop. So it's still you who's also mom and pop, but with the power of a brand behind you and the power of a network of other franchisees to learn from. So I love home services for that more risk-averse group, both the operational-minded and the JamWow sales-minded operator. If it was you had endless money and you weren't afraid of risk, food does so well. It's risky.

Starting point is 00:59:47 It's lower margin. But if you get in the right concept like Dave's Hot Chicken or another one called Mike's Red Tacos, it's out of California. It's like Berea-style tacos. I'm so surprised you said that. Have you heard of mics? No, but I'm, no, I haven't. But I'm surprised you said you said food because I always thought like restaurant business was so difficult. And so.

Starting point is 01:00:05 I think I mentioned it in the first part, but that economist article saying that McDonald's has minted more millionaires than any other company in the history of mankind. What they say about restaurants is true. I think it's like, again, me starting my own barbecue shop on my own. Even if I was really good at it is so hard. You have supply chain stuff and menu stuff. You're doing all these things on your own. I couldn't tell you how to do all the menu for McDonald's, but if McDonald's gave me the whole playbook,

Starting point is 01:00:34 and I just need to now operate this four-wall location, I can do that. But all the other stuff that they figured out before me with tens of millions of hundreds of millions of dollars and the technology and the food innovation and the supply chain, they got farmers in Argentina that they're getting all the burger meat for 10 cents a pound versus me paying $1.50 or whatever.

Starting point is 01:00:54 that's what makes it so accessible and the chance of success of a restaurant drastically higher than an independent restaurant. If it was independent, I would agree with you. If it's franchise, I'd say if you get the right brand, especially at the right time, they print money. Average McDonald's prints 6 to 700K in cash flow a year. That's so surprising. Chick-fil-A, $9 to $10 million average unit volume for one Chick-fil-A.

Starting point is 01:01:21 I figured that with Chick-fil-A is so hot. These brands also get so, like, trendy, right? Like, Chick-fil-A for so long was, like, so trendy. And I think some of the other ones you were just mentioning, like, they kind of just, like, blow up where, and everybody wants to go try the new one in their town. There was a guy that I met probably five years ago now. He was a McDonald's franchisee. His dad started out before him, and I think had two or three of them. He then took it from two or three to 30.

Starting point is 01:01:47 Wow. And we asked them, like, what's the average McDonald's do? how much does your portfolio do? He's like, well, the average does, and at the time, I think it was like four and a half million in revenue. It's now up to like five and a half or close to six. So four and a half, he's like, that's for the average. He's like, I have top locations.

Starting point is 01:02:03 He like wasn't just bragging. He was being serious. He's like, mine's in the top quartile. So I'm doing like five and a half per. So I'm like, all right, 30 locations, five and a half. So you're doing like 150, 160 million dollars a year in revenue off of something that you started, you know, 15 years ago, or 20 years ago with your dad at three,

Starting point is 01:02:20 He's like, what's the margin? He's like, I'm probably making like 600K pro locations. We did the math again and we're like, oh, my God. You're paid like an NFL quarterback, you know. And then we caught up with him about a year ago. He's now up to close to 90 locations. And so just like once you get going and you have that level of cash flow, it's like, you're the monopoly man.

Starting point is 01:02:42 You're just like, I'm going to buy 10 more. I'm going to buy five more because you already have the team in place. You already understand the system. And it's just like you're so big now. It's a repeatable process that you can just. do over and over again. The momentum can't stop. There's another anecdote I want to share, and this guy was an investment banker, so he knows deals. His back when we talk about skill, you know, brand fit, he's like, I'm investment bankers. I like just looking at deals. I don't need to be passionate about

Starting point is 01:03:04 food or fitness or whatever. And he was at an orange theory, and he asked the owner, he's like, I'm just curious, like, how much do you make? And he showed him the numbers. He's like, you make that off at two locations? He's like, I make that off of one location. So this individual went and bought two or three orange theories. I think he started with one, quickly got to to two or three. And he started using SBA financing. He was good at raising money as an investment banker. So he started putting deals together and saying, hey, here's what I'll pay you if you invest in this. So he might not own 100% of the equity of what he was doing. But he in seven years got to 120 locations. Oh, my God. Mostly food. Dave's Hot Chicken. Restore hyper-wellness,

Starting point is 01:03:43 pop-up bagels, Marco's Pizza. And all of those have average unit volumes of two to three and a half million dollars so on 120 locations we're talking like a three to five hundred million dollar a year business a half a billion dollar your business in seven years and you never invented anything in seven years so like that's fat if you think about seven years from now i'm 34 years old if i started doing what he did by 41 i'm done i don't have to work again i can sell this portfolio for depending on the multiple on the ibit the i bet on that business is probably 75 to 125 million for seven times that I could sell. And even if I only own 30% of it, I'm selling for multiple tens of millions of dollars and I can decide I'm done. And so this is why I like about franchising is

Starting point is 01:04:30 there's these playbooks and if you're willing to do the work and you could really build like a whole empire. What did you call them like mumbo or like mumbos? Mumbos. Multi unit, multi brand operators. That's exactly what this individual did. He started out with Orange Theory and they just added another, added another. Oh, this is a hot brand. It's not developed in Florida yet. I'm going to go buy the rights to five and build those over the five years. It truly is, I know I'm, you know, fan-boying again, but I used to hate it. I love franchising now.

Starting point is 01:04:58 I think it's such a clear de-risk path to wealth creation. I think it's the most overlooked path to wealth in America that doesn't get talked about. I mean, I've talked about franchising on this show before. Like I mentioned, Brian Scunamore was my client. He used to come talk about it once in a while. And it always felt like a little bit obscure. Like, yeah, sure, I guess people can start franchises, but like it just seemed so not easy to figure it out and not easy to find opportunities. So it's really cool that you're solving this problem with frenzy.

Starting point is 01:05:30 And now people can go on there and vet opportunities and learn more. And hopefully you create your goal of a million entrepreneurs. We're on our way. Yeah. So, Alex, this was an awesome interview. Thank you so much for breaking down everything about franzi in part one, going through these case studies in part two. so people can really think about what kind of franchise is great for them. I end my show with two questions that I ask all of my guests.

Starting point is 01:05:56 So the first one is what is one actionable thing our young improfitors can do today to become more profitable? So if it's an existing business, it's the easiest and most effective answer is to raise your price. Most people are scared to do it. They're terrified. They think they're going to turn a bunch of customers. Think about Amazon with Prime or Netflix. Netflix. When they charge us $3 more, we get upset for like a week. Yeah, you forget about it.

Starting point is 01:06:22 But they just created like hundreds of millions of dollars in profit, not revenue profit, because they have so much volume now. And Alex Formosie talks about this a lot too. He's like, yeah, I used to have 200 members at my gym and they'd pay, you know, 100 bucks a month. So I raised the price to 300 and I provide a little more value to justify that price. I turned half my customers and I have 100 people paying 300 instead of 200 paying 100. Not only am I generating more revenue, my cost stayed the same because I had the gym, I had the equipment, everything else already. So not only did I generate more revenue, I'm vastly more profitable than I was. The answer more often than not is raise your price, but people are terrified to do it. You need to do it thoughtfully and you do it in a way

Starting point is 01:06:59 where your value is matching it, but raise your price. You will make more money like that and your business will honestly become simpler as well doing it. If the answer is in general, I'd go to franzi.com and check my buying a business and join the movement. Love it. I love that advice. Okay. And then what is your secret to profiting in life? And this can go beyond business, beyond finance, however you want to answer it. Yeah, I've decided a while ago is like, I know we have one life here and I want to live it fully. And that's with having good times with my friends, that's working very hard to build a business and have an impact.

Starting point is 01:07:41 It's loving my family as fully as I can. And so my secret has been, I don't want to be 80, 90, looking back. I wish I would have done that with more intention or more effort or harder. And so my advice is just like every day, whether it's a hard day or not, like, get up, do it fully because it is short. I mean, it's, you know, I probably have 40, 50 years or whatever it is, and I want to go at it as aggressive and as fully as I can. I love that. Well, Alex, thank you so much for joining us on Young and Profiting Podcast. Thanks for having me.

Starting point is 01:08:13 And that's how Alex and Franzy profit. This two-part conversation showed us that franchising is not just McDonald's, Subways, or the big brands we already know. It can be home services, fitness, therapy, beauty, food, and so many other business models. What resonated most with me is that entrepreneurship does not always have to start with a blank page. For the right person, franchising can be a way to start with a proven playbook,

Starting point is 01:08:36 real data, brand support, and a business model that's already been tested. But as Alex made clear, franchising is not. passive. You still need to run your business drive marketing and sales. You still need to know your why, understand your operator profile, run the numbers, do the due diligence, and pick a business that actually fits your skills, lifestyle, capital, and risk tolerance. So if you're thinking about business ownership and you've got some money, keep your mind open and consider franchises. Don't just chase the sexiest franchise idea. Look for the model you can operate well, scale wisely, and profit from over time.

Starting point is 01:09:13 Thanks for listening to How We Profit Wednesdays, the young and profiting format where real entrepreneurs share real numbers, real margins, and the real story of how their businesses actually work. I'm Halitaha, and I'll see you next time. Hey, y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder, what if?

Starting point is 01:09:29 Like, what if it doesn't hold up? That sofa was four days old. You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.cair.cair, every style, every home.

Young and Profiting with Hala Taha - The 5-Step Test That Can Save You From Buying the Wrong Business | Entrepreneurship | How We Profit | E3 | Part 2

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