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He Makes $50M/Year Buying Failing Businesses — Transcript

by David Heacock · 13,699 words · 1,880 segments · language en · Watch on YouTube

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0:00We do over $50 million a year. I've got
0:01a whole seuite of team that now run the
0:03business that I've effectively replaced
0:05myself. We're in the people business
0:06[music] that just happens to fix cars.
0:08Like last week, our top mechanic made
0:09$5,000.
0:10>> People that get into franchise work
0:12basically buy themselves a job.
0:15>> People who who make like ridiculous
0:17money fly private jets that nobody hears
0:18about. A great franchise you should be
0:20able to copy and paste. I don't want to
0:21be the hero anymore.
0:22>> Brian is running a multi-million dollar
0:24opportunity [music] that's hidden in
0:26plain sight. Brian isn't a genius. He
0:28just knows a few critical things. I flew
0:30him to New York City to understand this
0:32opportunity, catalog everything he's
0:34doing right, and ask him the biggest
0:36mistakes he sees when people try to copy
0:39him. I've built a business that auto
0:41repair that we do over $50 million a
0:43year. I've got a whole seuite of team
0:45that now run the business that I've
0:47effectively replaced myself. And so I
0:49spend a lot of time kind of on the next
0:50level which is uh on content on media to
0:54to really build uh a holding company
0:56that will attract investments,
0:58partnerships and and other deals that go
1:00beyond you know what we can physically
1:02do in our shops. So
1:04>> So how did you get into your business in
1:07the first place?
1:08>> Uh so it was a family business. My my
1:10dad uh became a franchisee in Midas.
1:13That's that's the brand that we're in in
1:14the 70s when he was in his 20s and did
1:17it pretty much his his whole life uh
1:19after college and I graduated in 2010. I
1:21I joined the business and you know I
1:24never knew anything about cars. I never
1:25worked on cars, not a mechanic, but I
1:28have always had a love for business and
1:29so I I joined and and just just learned
1:32it working in the business six days,
1:34seven days a week.
1:36>> So it's auto repair and auto parts is
1:37that the
1:38>> uh just service? Yeah, auto repair.
1:39Yeah, we don't like sell parts. It's not
1:40like AutoZone, but like um
1:42>> And so did you did you grow up going to
1:44work at all with your with your dad or
1:46how did that happen?
1:47>> A little bit. I think I worked two
1:48summers. One in the shop and I was like
1:50a like a teenager and one in the office
1:52doing like paperwork and other other
1:54than that I had jobs working in other
1:56places and so uh so yeah after college I
1:57joined the business started working in
1:59it and then um
2:00>> So when you came back from college what
2:02was your first job? What did you do on
2:04day one?
2:05>> Yeah, first day was uh you could call it
2:07a service writer. So, it's just like
2:08somebody who's like in the shop uh
2:10taking tickets from the the mechanics
2:12who say like this is what's wrong with
2:13the car and just like, you know, writing
2:15up the estimate and then talking to the
2:17customer and telling them, you know,
2:18this is, you know, you came in for this
2:20issue, this is what you need, this is
2:21what's going to cost. Uh, and, you know,
2:23trying to get them to say yes.
2:25>> So, what was the revenue of the business
2:26in 2010 when you started?
2:28>> Uh, so they were doing probably about $5
2:30million between they like five or six
2:33stores at the time.
2:34>> And so, when you say five or six stores,
2:36all Midas stores.
2:37>> Yeah. They're all Yeah. all the same
2:38franchise. And you know how the
2:40franchise works is like, you know,
2:42people may know Midas. There's a
2:43thousand locations, you know,
2:44nationwide, but then every franchisee,
2:46you know, independently, you know, owns
2:47and runs the store, uh, kind of along,
2:50you know, within the guard rails of the
2:51franchise, but it's still, uh, you know,
2:53it's still driven by the owners.
2:54>> So, does an average Midas store do about
2:56a million dollars in revenue or
2:58>> back then? It did. Now, it's now it's
3:00higher.
3:00>> So, what would you say an average Midas
3:01store does today?
3:02>> Uh, today probably 1.3 1.4 four like
3:06nationwide. Ours are a little bit higher
3:08than that. We do about 1.5.
3:09>> So all five of the locations were Midas
3:11locations. And are all of your locations
3:13today Midas locations?
3:14>> Uh yep. And that's
3:15>> So So you you so you've basically stuck
3:17with the same with the same same
3:19franchise?
3:20>> Yep. Yeah. And and a lot of our growth
3:22has been through through acquisitions
3:24through there's you know other groups
3:25that want to get out and often it's it's
3:27easier to sell to an existing franchisee
3:29who's already in the business and and
3:30knows it and they trust you and uh than
3:32selling it to an outsider. So walk me
3:34through how a franchise how a midish
3:37franchise works like you know what are
3:39the economics how do you get signed up
3:40for it?
3:41>> Yeah so um so startup cost so it can it
3:45can vary significantly depending on if
3:47you're going to be taking over an
3:48existing store that's like already a
3:51maybe an independent shop or or
3:52competitor that we can convert. So,
3:54like, you know, we just did one uh we've
3:57done two recently last year that we took
3:59it was a competitor that closed uh like
4:01a like a Monroe muffler or a Pep Boys or
4:03like a like a Goodyear, something like
4:05that. And so, so we go in there, but
4:06it's a great layout. It's a great it's a
4:08great um location. And you know, we we
4:11got to paint, we had to put new signage
4:13up, we got to maybe upgrade some of the
4:14equipment, but like all in, we might be
4:16into it for $150, $200,000
4:19to to get that going. Now, if it like
4:21wasn't a shop and we had to like install
4:23lifts and punch out bay doors and like
4:25convert a non shop into a shop, I mean,
4:27we'd be it could be $500,000 or more.
4:30>> But like from a franchise perspective,
4:32like what are the mightest rules that
4:34say like if you just find a good
4:36location, can you just call them up and
4:37say, "Hey, I want to I want to open
4:39here."
4:40>> Yeah. I mean, they have every every
4:42brand's a little bit different, but
4:43yeah, they'll have like guidelines that
4:44they're going to look for in specific
4:46stores. And in franchising, there's
4:47definitely a spectrum of control, you
4:50could say, of like for what they allow.
4:52I would say Midas is is more on the like
4:54easier side to to deal with where
4:56there's some more flexibility versus
4:57some brands are going to be like
4:58extremely strict on it. Uh so yeah, we
5:00we we'll send them a site, they'll come
5:02back to us with a projection of of
5:04revenue and like traffic counts and
5:05demographics and but at the end of the
5:07day, it's it's really our decision to to
5:09say, "Hey, like we're going to move
5:10forward whether you guys think this is a
5:12good location or not."
5:13And so like what is the economic
5:15relationship with Midas? Like how does
5:16how does that work?
5:17>> Yeah. So you pay a franchise fee
5:19upfront. Uh that's not that bad. I want
5:21to say we pay I don't know $15,000 a a
5:24store, something like that as like an
5:25upfront fee. Part of it's because we're
5:28an existing franchisee and they have
5:29like every brand has like different
5:30rules, but but ours is relatively
5:32inexpensive. And then uh so we pay a 10%
5:34of our revenue to to Midas. Half of that
5:37money goes into a national ad campaign.
5:39So that gets split nationally by DMAs by
5:42regional. So like you know we'll be on
5:44like you know sports like during the
5:46playoffs right there'll be there'll be
5:47national TV ads that comes out of that
5:49ad fund and then the other half goes to
5:51you know the corporate that's like their
5:53their main profit center uh for the name
5:55for like the community for all the
5:57things that you get for being part of
5:58it. though. So roughly like the real
6:00cost is about 5% of of sales on an
6:02ongoing basis.
6:03>> And then like do you get a exclusivity
6:06for you don't get any?
6:08>> Yeah, there's no exclusivity
6:09technically. Now they do look at like
6:11potential cannibalization between stores
6:13and so when we submit a site if they
6:15think it's it will hurt another
6:16franchisee by more than like 10 15% of
6:20of their revenue then they could decline
6:22it. Now if it's our own store that we
6:23cannibalize they don't care because it
6:25you know it's up to us.
6:27>> Yeah. So um you know what what else do
6:30they give you for that 10%.
6:33>> There's a number of things. One, one of
6:35the reasons people join is is a brand,
6:36right? So like Midas is a national
6:38brand. It's it's one of the most
6:40recognizable ones. So like, you know, we
6:42can open up a store like like we just
6:44opened up a store last July that was
6:46that was a brand new store from zero as
6:47a competitor failed there. You know, we
6:49have we have customers on day one. We're
6:51cash flow positive by the end of 30 days
6:54and like that store will make probably a
6:56hundred grand this year for us like net
6:58cash flow and our startup cost was about
7:00100 grand to get it going. So, like year
7:02one, we got all of our money back and
7:04because we have a a recognizable brand
7:05that people know. Like if it was Brian's
7:07Tire and Auto and we open up in that
7:09same spot, I don't you know, we don't
7:10really have a reputation.
7:12>> And you think that's because people
7:13drive by and they see Midas and they
7:15recognize it or is it they do a Google
7:17search and
7:17>> it helps?
7:18>> It's like a combination of everything,
7:20right? Of of of trust and familiarity.
7:22And then yeah, retail spots and like we
7:24you know, we paint the buildings, we
7:25clean them up, they look really good. uh
7:27you know we're in a high trustbased
7:28business and so the more that like we
7:30can have a better image that the more
7:31people are going to trust us.
7:33>> You started in 2010 you know basically
7:35writing order tickets. Yep.
7:37>> Um and how long did it take you to go
7:39from that to deciding you were going to
7:41grow through acquis acquisition and and
7:43expanding?
7:44>> Yeah. So I I start I started to learn
7:46the business you know nothing about cars
7:48like I' you know I'd ask the mechanic
7:49all right tell me what's wrong like
7:50they'd teach me what it is so I could
7:51like tell it to the to the customer. And
7:53then um over time I took more and more
7:55responsibilities in terms of like hiring
7:57people, training people. Uh and then in
8:002016, so it was like six years later, I
8:02had you know I wanted to make more
8:03money. I was, you know, I was just an
8:04employee, you know, in my my dad's
8:06company. And so my my brother had
8:08recently joined and then together we
8:10went out and bought um two stores from a
8:12guy that was looking to retire in the
8:13same.
8:14>> How did you swing that? Did you have a
8:16lot of money that you were looking to
8:18>> bank? It was a bank loan. I mean, we I
8:19think we each put in $67,000 from
8:22savings, so it was $130,000 down and
8:25then we got a bank loan for the rest,
8:26which was like four or something uh to
8:28buy these two stores for 550 something
8:32in that range. And uh you know, they
8:34were
8:34>> what gave you the confidence to do it?
8:35Like what was the cash flow of the bit
8:37of that business?
8:38>> Yeah, so they were doing we think they
8:39were doing back then probably about 200
8:43they're probably making about $200,000
8:45between the two stores. about 100k each
8:46of like you know cash flow after paying
8:49like you know having managers and
8:50everybody in the store and so our debt
8:52payment I think was 60 so like we're
8:54like all right well we'll put in 130,000
8:57we should be able to you know we have
8:58200k of cash flow minus our 60k down
9:00payments so we got about 150k after
9:03after that
9:03>> so you basically bought at like two and
9:05a half times cash flow y um
9:07>> business that we already kind of knew
9:08and was in the market and like confident
9:10that like hey worst case scenario like
9:12we can just like maintain because those
9:14stores were doing less volume on average
9:17than you know the stores that I was I
9:19was running.
9:19>> So, how did you find that opportunity?
9:21>> Relationships. I think that that's the
9:22biggest thing in in in a in a franchise
9:24business or or any any of these ones
9:26like in the trades where a lot of guys
9:28know you start to know each other and
9:29you know I put the seeds out that hey
9:31I'm looking to grow and when you want to
9:32retire or you want to sell like I'd love
9:33to be the first call and so uh so those
9:36two stores then you know kind of set the
9:38the snowball for for the rest of it.
9:40>> And how many stores do you have today?
9:42>> Uh 36.
9:43>> 36. And you did all of that through
9:45acquisition?
9:46>> 32 of them.
9:48>> And so like the the other four were just
9:50green fields.
9:51>> Yeah. These new stores, competitors that
9:52failed, dark stores that we've uh so we
9:54like never built like built a building
9:56from scratch. Uh but yeah, they're
9:58conversions.
9:59>> And um are you continuing to grow that
10:02business in the same way through
10:03acquisition?
10:04uh we're reaching somewhat of a a like a
10:07stalemate now because we've acquired
10:08almost all the ones that we can like in
10:10our footprint who who want to be
10:12acquired and you know
10:13>> so you say within your footprint what
10:15what what is keeping you from expanding
10:17that footprint
10:18>> uh so it's a couple things one is people
10:21like we're we're we're in the people
10:22business that just happens to fix cars
10:24so like we got have great people in the
10:25stores that you know customers trust
10:28that you know that we trust and uh so
10:31that would be that's like the biggest
10:32concern to say hey we're going to go to
10:33like Baltimore. So, right now we're
10:35like, for context, we're in
10:36Philadelphia, New Jersey, and northern
10:38Philadelphia. It's called Allentown. Uh,
10:40so the 36 stores are kind of in these
10:42three three markets. And so, we've
10:44looked at like, all right, can we go to
10:45Harrisburg, like central PA? We've we've
10:47looked at Baltimore, DC. We've we've
10:49looked at plane ride markets, too, like,
10:51you know, in Florida and Missouri, and a
10:54bunch of others. And it's always been a
10:55concern of like, uh, well, who who I
10:58don't know who who's going to run them?
10:59Like, do we do we send somebody from our
11:01team who has to relocate out there? Do
11:02we find some random people and like try
11:05to get them up on on kind of the culture
11:06and the way we do things? I don't know.
11:08It's it's like I I think we'll get there
11:10eventually, but then you compare that to
11:12like if we can grow our same store
11:14revenue like by by a certain amount,
11:17like it's it's way more profitable once
11:18we hit a certain number. If we can get
11:20our stores from, you know,5 1.5 million
11:22to to two and a half million, you know,
11:24our our additional profit on on those
11:26incremental sales is significantly more
11:28than than adding a new market. So, you
11:31mentioned at the start of the
11:32conversation that you have a great
11:33management team um that you've got that
11:36you've put in place and that you're now
11:37spending your time doing content
11:39marketing and ultimately building a
11:41holding company. So, why don't you walk
11:43me through Brian's goal is 10 years from
11:45now, like what where is this going?
11:47>> Yeah. So, I think I I look at it at uh I
11:50guess two different paths. One path is
11:51like the auto repair business uh you
11:53know, we want to we're going to keep
11:54growing that. We want to keep growing
11:56locations and and really focus on
11:57growing revenue and and cash flow cuz at
11:59the end of the day these are these are
12:00like cash flow businesses. Not as much
12:03of like hey there's going to be this big
12:04like equity payday down the round. Like
12:06maybe there will but like I'm not going
12:07to bank.
12:08>> Well, it sounds to me like you're
12:09looking to basically um make that
12:12business more efficient and grow
12:14organically rather than you know trying
12:16to use it as an acquisition channel to
12:19create
12:20>> like I don't want to take on like we
12:21don't have that much debt. we probably
12:22have six million in debt, something in
12:25that range. So, we've thought like, all
12:26right, do we take on a ton of debt and,
12:28you know, try and double or triple and
12:30pay these big multiples, but then it's
12:32like, I don't know, is that is that
12:34worth it?
12:35>> So, have you seen the multiples expand
12:37in in this?
12:38>> They're growing. Yeah. Yeah. And there's
12:40like private equity back guys that are
12:41that are getting into it or or extreme
12:44extremely wealthy, you know, families
12:45and uh for I mean, for good reason. But
12:48so so that business it's like you know
12:50focused on on cash flow and and just a
12:52continuous strength unit economics. We
12:54have a great team and then on the other
12:56side I mean I I love uh I love the the
13:00challenge of of building something new
13:03right uh and I think I love the the
13:06partnerships like working with other
13:07people and helping them grow. And so
13:09yeah 10 10 years from now I mean it's a
13:11good question. I guess that's part of my
13:13uh what I'm working to get more clarity
13:14on. I I really enjoy helping people and
13:16and seeing others succeed. And so we're
13:18doing that now through through
13:19partnerships and investments and and
13:21one's kind of all in the franchise space
13:23uh where I, you know, have have a lot of
13:25knowledge and connections and and and
13:27friends to to help these guys grow.
13:28>> So what does that actually look like?
13:30>> Yeah. So there's a couple ones. So like
13:32one, for example, I'm a I'm an investor
13:34and a partner and a franchisee in a
13:36artificial turf company. So they
13:38install, you know, artificial grass in
13:40uh in primarily residential but but in
13:43commercial now. So like I have a
13:44partnership in in Texas. So we own
13:46Houston and I got I got a guy down there
13:48and we're we're crushing it. And so
13:49that's one that I'm like a franchisee
13:51and I'm also like an investor in the
13:52brand. And so the
13:53>> So how did how did that opportunity
13:55>> some of it's content, some of it's like
13:57the people that know me and you know
13:58they're looking to start this thing from
14:00scratch and you know want want my want
14:02my insight.
14:02>> So it's like so it's not an existing
14:04franchise. It's something that you're
14:05starting from scratch.
14:06>> Uh yeah, they started it from scratch.
14:07Now they've got I don't know 50 plus
14:09franchises around the country and it's
14:11you know it's like just I don't know two
14:12years old. Uh so it's grown really fast.
14:14>> So you're working you're like the
14:15equivalent of Midas in your original
14:17business in this turf business is like
14:19you're the franchise.
14:20>> Yeah. I'm invested into the franchiseor
14:22and adviser to them and then we're also
14:24I'm also a franchisee well with a
14:26partner right so like I'm not I'm not
14:28running a dayto-day. He's he's the one
14:29busting his butt every day. And um but
14:32but it's like deals. I'm doing more
14:33deals like that where I can I can help
14:35through the kind of the knowledge and
14:36the strategy that we've got in terms of
14:38of how we scale the business and and
14:39what we look for in talent and uh help
14:42these both franchises do it but then
14:44also the brands and there's you know
14:46there's the economics on both sides are
14:48good.
14:49>> Yeah. So what would you say your focus
14:51is today?
14:52>> Uh I'd say most of it is I mean there's
14:54there's three a lot of it content right
14:56creating creating a lot more content but
14:58really with three outcomes. one is is
15:00people. So through through content,
15:02YouTube videos and and all the stuff
15:04we're doing, uh we we get a lot of
15:06inbound requests that people that want
15:07to come and work for us. Uh primarily in
15:09the auto repair business. So we've got
15:11multiple guys that are looking at
15:12relocating like across the country to to
15:15come and work
15:16>> like mechan like mechanics.
15:17>> Yeah. Mechanics, managers, district
15:18managers, uh you know, like higher level
15:21higher level guys.
15:22>> Like why do you think they watch your
15:23YouTube video and they say, "Hey, I want
15:24to come."
15:24>> It's like we make fun content. But but
15:27like we we talk about like we're in the
15:29people business and like people in
15:31specifically automotive at least like
15:32there's a lot of there's a lot of like
15:34companies that aren't good. There's a
15:35lot of ones that like they go to work
15:36and they feel like unappreciative or the
15:39the money is not good but they know they
15:40have the raw talent and the skills. You
15:42know we we have performance-based
15:43compensation plans. I mean our best like
15:45last week our top mechanic made $5,000
15:47last week and the number two made 4,000.
15:50The number three made 3,000. The other
15:51guy made yeah 3200. So we have multiple
15:54guys that are making really good numbers
15:56because they're I mean they literally
15:57can do the work of two or three people.
15:59>> So how does that differ from how a
16:01normal Midas franchise is run?
16:03>> I I mean so there are a number of shops
16:05that that do very well better better
16:07than me on average. Uh I mean I'm more
16:08public about it but like they also run
16:11really good organizations. So like I'm
16:13not I don't I'm not like special in that
16:15way but this the top tier guys. Yeah.
16:17They all believe in what I believe which
16:19is like creating this culture where we
16:21can attract really good people and then
16:23we we create we create systems that want
16:25people to stay. Like we close close at
16:27five o'clock so that people can have
16:29dinner their families instead of we have
16:30competitors that are open to like 7 8:00
16:32at night and we we're closed on Sundays
16:34and they aren't like and so there's all
16:36these things that that we do to run our
16:38company in a way that uh attracts and
16:40retains talented people. So then we
16:41share that stuff online and then there's
16:44other people that were like, "Wow, I
16:45would I would love to be be part of that
16:46because I'm here stuck, you know,
16:48grinding it out on on a Sunday afternoon
16:50and like my boss doesn't care and
16:52nobody, you know, it's a corporate
16:53structure, but in a franchise, you know,
16:55we're like, you know, my brother and I
16:57are the owners and like, you know, this
16:59we have Collins, our our CEO, he he
17:01runs, you know, everything." Like
17:02there's like the three of us like
17:03there's no corporate structure. like we
17:04have like labels and stuff, but at the
17:07end of the day, uh we're very accessible
17:09and like we're just trying to run a a
17:11good organization. And so sharing those
17:13stories is what um what what attracts
17:16people to organization.
17:17>> So what differentiates a good fr
17:20franchise from a bad franchise?
17:21>> The franchises can reliably make money.
17:24Uh I think is the the number one thing.
17:26There's tons of franchises out there. I
17:28also one of the one of the other things
17:30through online content is I have a I
17:32have another team that helps people buy
17:33franchises and so that's a lot of the
17:34way that we so we kind of like broker
17:36them in a way so people would come to us
17:38and say hey you know help me find one
17:39we'd have a team that will help them
17:40like play matchmaker and
17:42>> and so like walk me through like you're
17:44you're kind of making my head spin a
17:46little bit you've got a lot of you got a
17:47lot of different business models it
17:48sounds to me um so that's why I'm just
17:50trying to kind of get a little clarity
17:52on like when you say they come to you
17:54they're coming to like a a specific
17:56website that funnels them through all of
17:58this
17:58>> content. Like so it's all content,
18:00right? So that's why most of my most of
18:01my focus is is creating content around
18:03how do we make money in franchising,
18:04right? So it's how I make money through
18:06our business and here's how other people
18:08make money. Uh and then depending on
18:09what what the insight is, you know, it's
18:12it's I have the funnel, right? So the
18:13one funnel is to like the team of uh
18:15people who can help them find it. And
18:17then you know, if it's like, hey, I want
18:18to work for you guys, then it goes to my
18:20team uh internally in the daughter. So,
18:22so I come to you and I say, "Okay, I'm a
18:24young entrepreneur and I want to do what
18:28you've done and make money in
18:29franchising. How do you help me?"
18:31>> Yeah. So, we'd walk through uh to try to
18:34understand a number of things and I a
18:36what are your uh what what are your
18:38goals like? So, what are you looking to
18:38do?
18:39>> I want to make a lot of money.
18:39>> I want to make a lot of money.
18:40>> What are your like
18:41>> Yeah. So, I want you I want So, so I
18:43want to make a lot of money. What do I
18:44do?
18:44>> Uh can you sell?
18:45>> I think I can I can sell. Sure.
18:47>> Yeah. So, I'd recommend we you get you
18:49look at some some brands that are
18:51they're high ticket and sales driven.
18:52So, for example,
18:53>> like what? So, so like so like what?
18:54>> Turf business.
18:55>> Turf business.
18:55>> Turf business. The average ticket is
18:57$10,000. I mean, we have quotes out
18:59there for 100,000 150,000.
19:01>> Okay. I live I I I I live in in Florida
19:04in um West Palm Beach. I want to go in
19:07the turf business. What's my next step?
19:08>> That's a that's a perfect market. Yeah.
19:10So, if you're interested So, so then
19:11what what our team does is just connects
19:14you to the the brand, right? So the the
19:15brands then walk you through their sales
19:17process to talk about um you know
19:19background and stories and goals and all
19:21stuff. Then they kind of get into the
19:22economics. I mean really then you want
19:24to vet them, right? And so what what we
19:26do is give you questions to ask, right?
19:28To to understand um is this the right
19:31business for you? A lot of it's going to
19:33be you know the emerging brands. So like
19:34brand new stuff like this one, they're
19:35two years old. Like they're a startup in
19:38a lot of ways too and you're kind of
19:39like a startup. And so that culture is
19:41going to be like dynamic, right? things
19:44are going to be changing, technolog is
19:45going to be changing. Like if if you
19:47want everything to be completely set and
19:49like rigid, like probably not a good
19:50fit. You get into like like Midas or a
19:52brand that's I don't know, Surfp Pro or
19:54something that's been around for
19:55forever, they're going to be like like
19:57elephants where it's going to be like
19:59slowm moving. Everything's going to be
20:00slow moving, right? In terms of their
20:03adoption of technology, the like uh just
20:06just the way they do things.
20:08>> So, how much money do I need to get
20:09started on my turf business?
20:11>> $150 $200,000. So that's that's a lot of
20:13money. How how am I like if I don't have
20:16that money, what am I supposed to do?
20:17>> Uh so SBA funds up to 80%. And uh
20:19>> even for a new franchise.
20:21>> Yeah, they love franchises. So you got
20:2230,000.
20:23>> I could probably I I could I could I
20:25could maybe maybe make it happen.
20:26>> But you got the money franchise.
20:27>> So let's let's say I don't have any
20:29money. What are my options?
20:30>> You have no money.
20:31>> I got no money.
20:32>> I shouldn't do a franchise. Okay. I have
20:34$10,000.
20:35>> Nah, not enough.
20:36>> Not enough. How much minimum do I need?
20:38>> 50.
20:39>> 50 for for basically any franchise, you
20:41think? Not any, but like that can get
20:43you started.
20:44>> Yeah. So, I actually have a one of my
20:45brothers actually invested in a
20:48franchise disaster cleanup. So, so like
20:52like let's say you have a hoarder house
20:54or um somebody
20:56>> passes away. Um what do you think about
20:59that that kind of business?
21:00>> I think it's okay. I I don't know if it
21:02would be one I would I would do.
21:04>> Why not?
21:04>> I like the ability to go out and get
21:06customers. So, this is a preference
21:07thing. So, you ask like what kind of
21:08business model do you want? I like I
21:09like a business where we can go out and
21:11like we can put effort in to generate
21:13activity to to create business, right?
21:14So, for example, like if in the auto
21:16repair business, if we want to generate
21:17customer, we could just like pick up the
21:18phone and dial customers who haven't
21:19been in a while, right? And we could
21:20like do more direct mail. We could do a
21:22bunch of things to generate activity to
21:24get us leads in.
21:25>> So, you you have a you have the
21:27opportunity for repeat business.
21:29>> Yeah. And like the ability to just like
21:31we could go and generate business on our
21:32own. There are some that are more like
21:35not I don't say p they're not passive
21:36but like if you're in a disaster
21:38recovery business you're just kind of
21:39waiting until there's a disaster of some
21:41sort right uh or if you're waiting to
21:44find a hoarder or like yeah you could do
21:45ads so like you know are you a hoarder
21:48come and like give us a call right
21:49>> or probably like a landlord that needs
21:51>> yeah landlord something usually it's
21:52like somebody dies and they go to their
21:54like parents house and it's a mess and
21:56then they're like you know cleaning it
21:57up you know so then their insurance it's
21:59it's generally insurance driven business
22:00insurance driven is going to be like
22:02highly competitive
22:03because of like, you know, guaranteed
22:05money. And so it's just going to be it's
22:07going to be hyper competitive in that
22:09space. You got to be really good with
22:10like your margins and your cost control
22:11because generally you can adjust like
22:13the prices kind of are what they are set
22:14by the insurance companies for any of
22:16that like disaster recovery
22:19even like roofing roofing to a degree if
22:21it's like stormchasers. And so all that
22:23just like it creates it creates like
22:25this hyperco competitive side that that
22:28then become relationships. So a lot of
22:30the guys that succeed in those
22:31businesses have relationships with the
22:33like uh insurance agents or insurance
22:36guy because like they call the insurance
22:37agent the insurance agent hey say call
22:39these guys first uh or the insurance
22:41companies these adjusters. So there's
22:43just this like whole world that like
22:44already exists where like all these guys
22:46are are you know printing money or doing
22:48really well and then like you're the
22:49newcomer and you're trying to break in
22:51through these relationships and it can
22:52be really hard but then you can't really
22:54do marketing or it's just harder to do
22:56marketing as well as it is in you know I
22:58don't know uh another type of business.
23:01>> Yeah makes it
23:04>> um very very poorly. I think they
23:06actually they actually shut it down.
23:07That's what I but but but it was
23:09actually you know what what you said and
23:11I it was my first thought when I first
23:13heard about it but like um how do you
23:16actually sell this business? How do you
23:17I mean meaning how do you advertise it?
23:19How do you find customers? Um it's not
23:21like you really can run Google ads and
23:23get a you know sustainable um you know
23:27lead flow in my opinion.
23:28>> There's a lot of bad franchises. There's
23:30like
23:31>> Yeah. And that's kind of why but but my
23:33point was is like how do you how does
23:35someone differentiate between a good
23:38franchise and a bad franchise.
23:40>> Yeah. Uh so I mean tons of due diligence
23:44in talking to other franchises. So you
23:45should your goal should be to talk to as
23:47many of them as you can to understand
23:49like you know what's their experience
23:52like compared to their experience.
23:53>> So how do you let's talk about how
23:54somebody actually does that though. So
23:56like my guess is if I call up a
23:57franchise and say, "Hey, I want to talk
23:59to your franchises." They're going to
24:01set me up with people that you know
24:03basically. So like like how do I how do
24:06I actually approach this?
24:08>> Yeah. So you would I mean all their name
24:10and contact information are in the back
24:12of the franchise agreements that you're
24:13going to get. So you would you would
24:15have all the information. So you you can
24:17reach out blankly and just say, "Hey,
24:19I'm looking, you know, I'm looking into
24:21buying. I have a few questions. You have
24:22a few minutes." And like the brands do I
24:26mean if you ask the brands yeah they'll
24:27they'll direct you to to people that
24:28they want you to talk to. Uh and so it's
24:31kind of both ends though like when
24:32you're going into it you do want to talk
24:34to the best people because you're going
24:35to say like hey I I want to like this is
24:37the level that I plan to operate. So you
24:39would want to talk to like other high
24:40performers to understand the way they
24:42see it. But then yeah you're going to
24:43want to talk to the guys in the middle
24:44like the average people. And then yeah,
24:46you probably want to talk to some at the
24:47bottom and try to understand why do they
24:49think they're not doing well and to get
24:51perspective on is it like is it them to
24:54say hey I'm not putting the right effort
24:55in or I have another job and this is
24:57like a side thing for me or is it you
24:59know the the marketing is not effective
25:00these systems don't work like blah blah
25:02blah like if you hear the same stories
25:04throughout all the levels then you know
25:05it's it's probably there's probably
25:07truth to that.
25:08>> Yeah. You know use my sales skills to
25:10come up with 200 grand to go into the
25:13turf business in West Palm Beach. um how
25:16much money can I expect to make this
25:17year?
25:18>> So in in all the in all the agreements
25:20there's uh what's it's called an item
25:2219. So it's like every brand discloses
25:24some sort of financial information based
25:25off of current franchises on corporate
25:27on all these different factors uh for
25:29for them. And part of this is cuz like
25:32cuz like I'm I'm an investor like I
25:34can't tell you you're going to make some
25:35but but like
25:36>> we can pick it we it didn't have to be
25:37the turf business. I was just using that
25:38because you gave me that. That would be
25:39one that would be one way you'd look is
25:41like in the fi you would go to their
25:42FDDDs. They have financial performance.
25:44Some of the brands do a really good job
25:46in disclosing tons and tons of financial
25:47information. They'll say, you know, like
25:50the best ones will will give you um
25:52yearbyear like ramp up periods of
25:54franchises. So like to say in in month
25:57like by month, say in month one this
25:59franchisee did x amount, month two,
26:00month three, month four. So this whole
26:02grid th those are like the best where
26:04they give you tons and tons of data that
26:05that you can go on. Uh some of them just
26:08give you one thing say hey this brand's
26:09been around for 30 years or the founding
26:11location
26:12>> like in a good franch like let's say not
26:14in the turf business because you can't
26:16you can't talk about that but let's say
26:18in a well-run franchise um you know in
26:22you know whatever whatever industry you
26:24want to talk about burger joint um you
26:26know let's say I put a $200,000
26:28investment like what kind of return can
26:30I actually expect um if it goes well
26:33>> there's no set rules right so this is
26:35like it's like you're buying a business,
26:36right? And I think this is like the this
26:37is this is the hardest part is like how
26:39much money can it make? I mean, I've
26:40put, you know, I've put $50,000 down to
26:43buy a store that's made, you know,
26:45millions of dollars up to this point,
26:46right? I've put $200,000 down in a store
26:49that, you know, barely makes money. So,
26:51like it's like you're it's like you're
26:52running a business. And so, it's it's
26:55there there's not the the hard and fast
26:56rules. what what people really care
26:59about is we're not I don't know if the
27:01is is how quickly can I can I make my
27:03money back and then what do I expect
27:04like over time this thing to be able to
27:05to produce for for most people yeah if
27:09they're going to put $200,000 into it I
27:10think most people are going to expect to
27:12be able to make like 200 grand a year on
27:13it like 100% roughly of of whatever
27:16their like capital outlay is
27:19>> um so I want to come back to this but
27:21like one example that I've seen when I
27:23like in the YouTube world of franchises
27:26like I believe there's a whole group of
27:28people that own Subway franchises and
27:30will disclose the amount of money that
27:32they can make which which um which is
27:35not not not very much yet people somehow
27:37do it. Why don't you walk me through
27:39that? Why is the Subway
27:41>> get such a bad rap from their
27:43franchises?
27:44>> Uh the fees are really high. I want to
27:46say they're like 15ish% of of their
27:49revenue that they're they're paying up
27:50to corporate and food's already like a
27:53low margin business. And so they've got
27:54they've got low revenue and then they've
27:56got high fees and then they've got you
27:58know on the in the food businesses
28:00usually the the franchiseor is
28:02controlling the supply chain. So they
28:03have to buy from their vendors and
28:04normally the supply chain also becomes
28:06like a profit center for them. And so
28:08then they have inflated supply costs,
28:10low sales, high, you know, high and and
28:12then their their rent's still the same,
28:13the insurance is still the same, their
28:14payroll costs are the same.
28:15>> Have you come across anybody who's super
28:17successful as a Subway franchise?
28:19>> I have one friend, but he's he's selling
28:21them all. He had like 20 or 30 and he's
28:23uh he's selling them all. You know what?
28:24Actually, I got another guy I know who
28:25who's got a number. He's probably got 50
28:27or so.
28:27>> So, what do they do well that these
28:31people I see on YouTube don't?
28:33>> I would say they have extremely tight
28:34cost control. like they they are
28:36extremely tight on all these like
28:38payroll is going to be the it's payroll
28:39and cost of goods, right? It's like any
28:40business, but especially in food. So
28:42extremely tight and and then maybe their
28:45goal isn't to make a ton of money per
28:47location. Like if some of these guys if
28:48they can make, you know, five to eight
28:51grand a month, some something in that
28:52range, like sing single digits, they're
28:54happy, but but because it's like very
28:56predictable. And then if they can have,
28:57you know, 20 of them making 5K a month,
29:00they got 100 grand a month and they've
29:01got like a team and a system and they're
29:02not like in the weeds every day. But the
29:05challenge becomes like if you could take
29:06that same like it takes a lot of skill
29:08sets to be able to to run the retail and
29:10sign leases and hire people like you
29:12have all these like raw skills then like
29:13if you applied that to a business that
29:15instead of making 5,000 a month could
29:16make you know 15 or 20,000 a month like
29:19it's the same amount of like input but
29:21your your leverage would be much greater
29:22in output. So I think that's what a lot
29:24of the guys end up like getting out of
29:25the business is because they realize
29:26they like it's really good for like
29:28learning all these skills like they
29:29learned it in a really hard business but
29:31then now let's go apply it to like a a
29:33better business. If I were going to
29:34critique the average franchise model, I
29:36know I'm I'm certainly no expert in in
29:38in franchise franchising at all, but um
29:42you know, I think that most people that
29:44get into um franchise work basically um
29:48buy themselves a job.
29:49>> Correct. Um, and you seem to have
29:51successfully um figured out how to build
29:54a system that allowed you to step away,
29:57but but that came with in order to do
30:00that, it requires um lots of locations.
30:03Like it's it's pro it's I would guess
30:06would be pretty difficult to do that if
30:08you only had one Midas location for
30:10instance. Walk me through how somebody
30:13um makes that transition.
30:14>> Yeah. So ultimately it it all comes down
30:17to like you you need you need extremely
30:20high level people to be able to to run
30:22the or the organization, right? So that
30:23starts as the owner. So you know I have
30:25this thing that's called the the hero
30:26versus the architect. And so when you
30:28start a business like you're going to be
30:30the hero like you're going to show up
30:31every day. You're going to like solve
30:33any problem that comes a after you you
30:35wear the cape. You go home, you know,
30:37like a like a job well done, right? And
30:39then that works, right? And and then you
30:41you start to make more money. You then
30:43use that money to buy a second location,
30:44maybe a third, maybe a fourth, but
30:45you're you're continued to be the hero.
30:47You solve everybody's problems and now
30:49your whole team is used to that. If you
30:50got a problem, just just go to David.
30:52He'll he'll take care of it. And then
30:54they get in this trap where it's really
30:55hard because then they feel like they're
30:57surrounded, I don't say by a bunch of
30:58idiots, but a bunch of people who have
31:00like low accountability and won't get
31:01things done. But then there's this like
31:03shift that happens that that to to
31:05really grow and that at least I figured
31:06out is like I don't want to be the hero
31:08anymore. And that that was me for a
31:09while. But but then you realize like the
31:11only way that I could get out of it is I
31:13need somebody else who could I could
31:14like you know hand the cape to and they
31:16could be the hero. But to hire that
31:18person, you know, it's like at least
31:19$100,000 or or if not, you know, more.
31:23And so that that's the first step,
31:24right? Is you you have to be able to
31:25hire somebody, hand them the cape, be
31:27okay that like things aren't going to be
31:29as good as if you were going to do it.
31:30And that immediately you have a you have
31:32more than $100,000 drop in your income.
31:34And that that step right there is really
31:37hard. It's like in my turf business, I
31:39put in 200 grand, you know, I'm
31:40probably, let's say, let's say I'm
31:42targeting to make 200 grand next year,
31:44100% return. Well, then now I got to
31:46hire a manager. Then my my profitability
31:49just got cut in half.
31:51>> So, it's this like stairstep approach.
31:52And this is this is what I So, we hire
31:54the next guy to takes off a bunch of
31:56stuff off my plate. So, now instead of
31:57me spending all my time like putting out
31:59fires and hiring people and like dealing
32:01all this stuff, this guy now does it.
32:03Um, and then I have like, you know, 30
32:05hours or whatever of free time cuz he's
32:07taken over my job. And so I have to
32:09invest that time in going and and
32:10finding more locations to say, "All
32:12right, can I get another, you know, four
32:14or five locations that could then make
32:15me another whatever $500,000, right?"
32:18And so it's like this stairstep
32:19approach. And so then you reach that
32:22next level and it's the same thing all
32:23over again of like, "All right, now I
32:24get another 100k guy to take over and
32:26run this this other group of five
32:28stores." And now my main job is I've got
32:30this like I've got these two guys that
32:32report to me and then we got to build an
32:33office because of like you know things
32:35fall through the cracks. And so it's
32:37been this it's kind of this constant
32:38this game of like this stairstep
32:40approach and at each level working to
32:42get more things like operationally
32:45things off my plate or you know the the
32:47owner's plate to be able to continue to
32:49focus on like the growth and the bigger
32:50picture.
32:50>> Yeah. Would it be fair if I said that in
32:53order the most successful franchises are
32:56ones that you can create a good enough
32:59system that you're able to expand by um
33:03growing locations of that franchise.
33:05>> Yeah. You have to be able to reliably
33:07grow and multiply and just like like a
33:10great franchise you should be able to
33:11copy and paste. you know, just like
33:12there's franchises all over the country,
33:13you as like the owner of of it should be
33:16able to to copy and paste.
33:17>> Given all of that, which makes perfect
33:20sense to me, why do you think it's not
33:22the highest and best use of your time to
33:24continue to do that versus going out and
33:28building this holding company as you
33:30describe it?
33:30>> Yeah. Um, I guess part of it is is the I
33:35I enjoy it, right? I I enjoy working
33:38with people. I enjoy the content. And I
33:39enjoy coaching, you know, other owners,
33:41right, to solve the same problem.
33:43>> Does that mean you do not enjoy the
33:44day-to-day of of running?
33:46>> Yeah. Over time, I felt like I don't
33:48know. To me, it's kind of like a kind of
33:49like a game. And at a certain point, not
33:50to say I won the game, but a certain
33:52point, it's like, yeah, I could keep
33:53doing this the same thing, but uh I got
33:56like less joy out of that than uh
33:58because I'm like the visionary. I'm not
34:00the integrator. I'm not the guy like who
34:01can who
34:02>> You're using a lot of traction terms. Is
34:04tra is tra is traction a a formative um
34:08um book for you?
34:10>> We've read it. We've tried some of it.
34:11Uh a lot of people get it. So like the
34:13language we use, but
34:14>> yeah.
34:15>> Yeah. So I'm uh I'm not the one to be
34:17like grinding it away day after day like
34:19working to solve the the problems. Uh
34:21versus I'm like the you know I I have
34:23more enjoyment from the other side of it
34:25which is which is like what's the new
34:26challenge? What's the new thing I can
34:28learn? and then you know finding people
34:30who are really really good at the
34:31operations to let them do the stuff that
34:33you know like I don't really like but
34:34they're like rock stars in it. Why? Like
34:36why would you make the decision? I'm
34:38just I'm just you know playing a little
34:40devil's advocate with you or kind of
34:42going through this. I'm it's interesting
34:43to me the thought process but you know
34:46why would you not like you mentioned
34:48multiples are going up for for Midas. A
34:50lot of people are for you know for
34:51well-run franchises. Um and there are a
34:54lot of people that you know are looking
34:55to buy them. You know if you want to
34:57make the change why would you not just
34:59sell your business and go all in on on
35:03something else?
35:04>> Yeah. So great great question. Uh, I
35:06mean, one, I mean, I've I've I'm I'm
35:08completely out of the the day-to-day.
35:09So, like my phone doesn't doesn't ring
35:11at all except unless we're like talking
35:13about deal. Like, I mainly focus on on
35:14new stores. Um, but even that, like even
35:16last year, our CEO totally found,
35:19negotiated, closed two acquisitions. So,
35:21like I have I have no involvement in the
35:23day-to-day running. And so, it is it is
35:26somewhat like, you know, passive for for
35:28me up to this point. Uh, and so I would
35:31I would so I think through like all
35:33right, if I were to sell it and I've,
35:34you know, thought about it, it's like I'
35:36I'd pay pay a bunch of taxes and then,
35:39you know, I have like a bunch of money,
35:40but but then what would I do? I'd want
35:42to go out like I do the content, but
35:44part of the part of the like the goal is
35:46to show people like what are we doing,
35:48right? Um, and so it's it's nice to be
35:50able to show and tell and so I like that
35:53component, but then it's like what would
35:54I do? I probably eventually still get
35:55the itch of like wanting to do something
35:57again. And so then I'm like that's like
35:59and I've got an amazing team and I
36:00wouldn't want to like I wouldn't want to
36:02lose them. So
36:04>> yeah. So so let's go back to your
36:0610-year vision. U you say you're you're
36:08still kind of figuring that out. Is that
36:10is that true? Yeah.
36:11>> Walk me through what figuring it out
36:12means like like what is it that you are
36:15looking to kind of achieve at this point
36:18in your life that you haven't gotten
36:20yet?
36:21A lot of it's impact, right? Helping,
36:23like you said, there's a lot of people
36:25who even in the franchise world, they
36:27they buy it and they buy themselves a
36:28job. And uh I've
36:30>> I think that's probably most fr most
36:32franch I would I would I agree. And like
36:35I have
36:35>> and that's if they're lucky like
36:37probably a lot of them fail. So I mean I
36:38think it's it's not a I don't know the
36:40stats, but I would imagine it's a pretty
36:42low um success rate on
36:44>> Yeah. In comparison across the whole c
36:46across the whole category.
36:47>> Yeah. Yeah. There's like this clear
36:48divide. There's like people who who make
36:50like ridiculous money and fly private
36:52jets that nobody hears about cuz a lot
36:53of them aren't public about it at all.
36:55And so so that's like the world that
36:56nobody nobody sees. And then there's
36:58this then there's like the lower half
37:00which are generally not as great brands
37:02that that people get into following like
37:04marketing and whatever not really not
37:06doing the right not following maybe the
37:08right the best path. I want to push back
37:10on that a little bit just because I'm
37:11curious like how many of those people
37:13that have really done well in franchises
37:16um have started in the last 15 years do
37:18you think?
37:19>> I don't I mean I've been in it for 10
37:22but I mean I have a number of friends
37:23across
37:24>> but but but you you you really I mean
37:26your like you've you've your family's
37:28been in it for a long time. So um I mean
37:30the reason I push back is I know I know
37:32a few people that have been really
37:33successful in franchise um franchising.
37:36Um the biggest actually being um Wendy's
37:39franchisers. Um and but I know that the
37:42way that they are able to do that is
37:43because of like legacy. Like the best
37:46franchises that I know about are very
37:48protective in who they allow to actually
37:51Yep.
37:52>> to actually um be a part of that. And so
37:54everybody that I know that's been super
37:56successful has done it because of kind
37:58of legacy relationships versus like
38:01going in and building it today. So
38:02that's what that's what I want to be
38:03honest with people.
38:04>> Yeah. No, 100%. And I I Yeah. And yeah,
38:06that is true. And then there's also ones
38:08I mean, I've got I've got a buddy who's
38:10three years in. I mean, he made a half a
38:11million bucks last year. He'll probably
38:13make 750 this year. And like
38:14>> he's not flying on a private jet.
38:16>> He might he might.
38:17>> That's why I said if you throw out
38:18private jet money like I want to show
38:19that's like what is the what is the
38:21pathway to that? Like that's what I'm
38:22genuinely curious about. Like like if
38:24somebody wants it has that kind of
38:25aspiration, how do you
38:26>> usually it's like a trade-ups scenario,
38:28right? where they they might get into
38:29something that is like a lowerc cost
38:31thing that then allows them to to be
38:34able to yeah maybe trade up into a brand
38:36like a like a like a Wendy's or a Taco
38:38Bell or a fitness concept or something
38:40that that can be big. But there's other
38:42ones I know that are like I think one of
38:44them is a staffing agency. I know a guy
38:46that does extremely private private jet
38:48money well. So like there there are a
38:50number out there. But yeah, it is it is
38:52not the norm. It is it is more but but
38:54it's a pathway, right? I think that the
38:56big thing like in franchising, it's a
38:58vehicle to make money. It's like it's
38:59like real estate. It's like, can you
39:00make money in real estate? Well, you can
39:02lose a lot of money or yeah, you can
39:03make a lot of money. And there's like a
39:04million different paths you can do it of
39:06experience. It's it's
39:07>> So, let's say I'm a young entrepreneur.
39:09Um, you know, I get out of college. I
39:13want to start I want to I want to do
39:15something entrepreneurial, you know, and
39:17I'm looking at my my set of options. Do
39:19I go franchise or not franchise? And
39:22why?
39:22>> Somebody young that doesn't have a lot
39:24of money? Pro probably not I don't like
39:26>> why so why so why not let people
39:29under capitalize is a huge thing where
39:31they they they start the business they
39:32have
39:33>> that's true in any business right so
39:34like I'm starting a business it's either
39:36a business or a franchise like which
39:38route do I pick which has the highest
39:40probability of success for me
39:42>> it would all depend on what it is right
39:43I think I think there is no hard and
39:44fast on on the franchise side I think it
39:46really depends on what franchise there's
39:483,000 of them and I I I think it would
39:51be I think someone could two different
39:53people could go in the same brand with
39:54the same capitalization side like they
39:55both have 50,000 or whatever invest and
39:57and those two people are going to have
39:59extremely different outcomes based on
40:00their individual efforts and skills and
40:02all these other things just like any
40:03other business and I think that's that
40:05is the problem that is the problem from
40:07like a sales perspective when when
40:08people look at investing in franchise
40:10they they look at the McDonald's and
40:11they think oh it it's like this it's
40:13like an it's like a it's like an asset
40:14that I buy that I'm going to get this
40:16like some sort of like pro-forma
40:17guaranteed return and it is ex it is
40:20extremely driven based off of that
40:21individual person's ability to go and
40:23execute And so like even our store like
40:25we've bought multiple stores that when
40:26we buy them they are losing money. So
40:28like it's Midas it's literally the same
40:30exact building and and sometimes even
40:32staff and then we go in there and like
40:34Brian's flavor of operating it doing the
40:36things that we do. We can turn that
40:38store from making maybe maybe no money
40:40into 100k 200k 3 4 500k a year. We're
40:43literally the exact same building in
40:45business and you know but we do though
40:47like we have our way of doing it and so
40:49that's like the big challenge and why I
40:51don't get cy with like answers and stuff
40:52but it's not like it's not like oh I put
40:54money in and I'm like you know I have
40:56this like guaranteed to get money out of
40:58it and and that's like a lot of the lies
41:01that's like are sold.
41:02>> Yeah. I mean, I think that if I were
41:04answering the the question, and I think
41:06you would agree with this, that, you
41:08know, ultimately going and getting
41:10experience in a business and really
41:12understanding that business, preferably,
41:15you know, working in it perhaps for
41:17somebody else first, is probably a
41:19better way to get to get started,
41:21whether you're going into a franchise or
41:23not. Yeah, like if you were like wanted
41:25to open Brian's HVAC service company,
41:28you'd probably be better off working in
41:29an HVAC service company for a while,
41:31watching how it's run, like
41:33understanding how you can and improve
41:35it. And you know, doing that before you
41:38commit to something is probably
41:40>> buy like you're signing a franchise
41:42agreement that could be 10 years, it
41:43could be 15 or 20 years. Many of them
41:45have clauses that say like if you, you
41:47know, quit like you just try and close
41:48it up prior to the franchise agreement,
41:50they can sue you for liquidated damages.
41:52to like whatever times left times the
41:54multiple like how many how much
41:56royalties you've been paying. So like
41:57there's downside too on on some of these
42:00as well.
42:00>> That's interesting that that's that's a
42:02common practice.
42:03>> It is in a lot of agreements. Can it be
42:04enforced? Uh do they want the publicity
42:06and the lawsuits disclosed and like a
42:08lot of times it's not enforced but there
42:10are some that it is. Uh so so yeah. So
42:12like when you say like should some a
42:14young person with no experience get into
42:15it? They're not just like paying the
42:16money for the franchise fee, they're
42:17also signing like a 10-year commitment
42:19essentially. Now you can sell it if it's
42:21but if it's not making any money or
42:23losing money it's really hard to get out
42:24of and so that that all becomes like
42:26it's more so it is more complicated
42:28right there's all these different
42:29factors and so that's why for people
42:31that like me who are in it and we get it
42:33like we we have kind of this like unfair
42:34advantage of doing these acquisitions
42:36and and creating a lot of value because
42:38there are other people in the same brand
42:39losing money or not executing the model
42:41or whatever we can see that we can go in
42:44immediately literally the next day and
42:46fix a bunch of things that
42:48>> so even if you're in a franchise that
42:49has a, you know, existing business
42:51model. Um, you still have to know how to
42:54operate a business.
42:54>> You're still a business owner. You just
42:56like you have guard rails that you have
42:57to play by, right? In terms of like with
43:00with Midas, like there's certain
43:01services like we're not going to do like
43:03paint and like stereo systems and all
43:05this stuff, right? We're like do brakes
43:08and tires and exhaust and steering
43:10suspension and like whatever. We do
43:12nothing inside the car. It's all like
43:13under it. But like that's the guard. We
43:15can't advertise. Like our marketing has
43:17to be within brand standards. Like we
43:19can't do purple and green like
43:21alligators on a Midas thing. Like it's
43:23got to be, you know, gold and gold and
43:24red. So like we have guardrails, but at
43:26the end of the day, like we're
43:27independent business owners that just
43:28happen to be in the Midas Midas name.
43:31But the way we hire, the way we create
43:33culture, the you know, the way we we
43:34price things, sell things, treat
43:36customers, like like totally up to us,
43:38right? And and that's why you have these
43:40variants of success. That's like I talk
43:42about there's like a spectrum. If you're
43:43like I mean the the extreme is like a
43:45Chick-fil-A where technically you're a
43:46franchisee but really you're like a
43:48managing partner where you know you
43:50can't even sell the business. So when
43:51you want to get out it just gets
43:52transferred to somebody else. Like
43:53there's no you have zero equity value
43:56and you know it's like a profit sharing
43:58agreement. It's not even royalties.
44:00>> You're limited to one location
44:01>> pretty much. Most have one, some have
44:02two or three. Like the most have three.
44:04But you're essentially a managing
44:05partner wrapped in a franchise
44:06agreement. But for those people, it's
44:08$10,000 to get in and they can make, you
44:10know, four $400,000 a year managing a
44:12restaurant. So like if you already a
44:14restaurant manager working for a
44:16competitor, yeah, great great
44:18opportunity, right? And then maybe you
44:19could take those skills that you learn
44:21to then go and open up whatever a
44:23chicken salad chick or some sort of like
44:24other restaurant. And so they have
44:26extremely strict ones. If you're a
44:28McDonald's or any any of the food is
44:29going to have extremely extremely strict
44:31like rules and and you you're definitely
44:33more, you know, operating the model. But
44:35even in those there's there's value
44:36creation in the experience that you have
44:39at a at a wing stop, right? That is
44:42going to make you either do really well
44:43or you do really bad.
44:44>> So make the case for why someone should
44:48choose to go into a franchise.
44:50>> I I guess there's a couple reasons I
44:52enjoy like why am I in it? Right?
44:53Because I could I could sell it and I
44:54have a bunch of skills. I could go and
44:55like get out of it and do something
44:56else.
44:57>> You could go and run a regular business.
44:58>> I could Yeah. I could do whatever,
44:59right? And so it's like a you like you
45:02want to focus primarily on execution in
45:05and operations. So like I don't really
45:06think about marketing in that business.
45:07I don't think about the website. I don't
45:09think about like I mean we've built our
45:11own tech but for the most part like as
45:12it is my job is to like hire great
45:16people and then make sure like they have
45:17a good experience in the store. So I I
45:19have a more narrowed focus and the more
45:20narrow the focus the you know I can put
45:23100% of my energy into that and not have
45:24the distractions of these other things.
45:26Yep.
45:26>> Right. So that's like first. A second
45:27one that we haven't talked about is like
45:28the community. So franchises in in in
45:31great brands become like family. And so
45:35I could call up any of my buddies right
45:37now and ask them, you know, how much
45:39money did you make last month? What was
45:40your payroll percentage? What was your
45:41cost of goods? What are you doing
45:42differently now? And like you you're
45:44immediately part of this like network of
45:46other owners who are going to share
45:47ideas and best practices and challenges.
45:48And
45:49>> so that's how you can benchmark yourself
45:51to so you know if you're doing well.
45:52benchmarks and like we can see like
45:55there's a guy up in up in the Northeast
45:57who's just as many sources as me and
46:00he's he's like crushing our numbers.
46:01He's to a degree we're catching up with
46:03him. So we're at we're talking to him be
46:05like, "Man, what are you doing?" Because
46:06there's not many guys like at scale who
46:08are doing really well. And so he's he's
46:10laying out his exact plan which is you
46:13know we call it stacking talent but but
46:15basically stack
46:15>> because you doing better if anything
46:17just helps his helps the the brand so it
46:20helps everybody. It's not going to
46:21detract from you're not going to take
46:22his business.
46:23>> Yeah. Cuz we're in different markets and
46:24like so you've got this like you have
46:26this like network effect of of in good
46:28brands some brands don't want this
46:30happening. So like good brands uh you
46:32have this network of effect of a bunch
46:33of franchises who want to help each
46:35other grow outside of corporate. So then
46:38there's some brands have this like us
46:40versus you mentality and might used to
46:42be like this years ago but like it's
46:44good now where like you know it was kind
46:46of like hey you guys are going to be
46:47gone in a few years because it's like
46:48corporate turnover but we're going to be
46:49here and so then you've you've got this
46:51like you know bond and and relationships
46:53that that alone creates enough value to
46:56more than pay for the royalty the the 5%
46:58that we pay because of the the like
47:00brain trust. And so for for me it's like
47:03people who like that idea of like they
47:04want to be part of a community. They
47:06want to focus on operations. They don't
47:07want to have to like reinvent the wheel
47:08or like come up with all this stuff from
47:10scratch. But you're right like the the
47:11challenge is how do you as an outsider
47:14how do you figure that out? And that
47:15that is really hard.
47:17>> So let's say that I'm a entrepreneur and
47:20I come up with a very good local
47:23concept. How should I think about
47:26whether or not to grow that concept by
47:29creating a franchise versus going out
47:31and just expanding on my own?
47:33>> Yeah. So, there's a number of of
47:35>> And so, just to be clear, we're talking
47:37if you're going to be a franchise or
47:38>> Yeah. So, um yeah, I guess one of them
47:41is capital. So, like it is, you know,
47:42when you become a a franchiseor, you
47:44shift the capital requirements to the
47:46franchises. The franchises are paying
47:47for it. So, some guys, they just they
47:49just don't have the capital or they
47:50can't raise it or they don't want to
47:51take on a bunch of debt. That's one of
47:53the reasons. The the big shift though is
47:55like when they become a franchiseor,
47:56they shift from being in whatever
47:58business you're in. So say you're in the
47:59like you have a coffee concept or
48:01whatever. You're not in the coffee
48:02business anymore. You're in like the
48:03sales marketing and training business.
48:05So you have to like market to
48:06franchises. You have to train
48:07franchises. You have to like create the
48:09community and like they're the ones that
48:10have to do the thing. Where some of them
48:12fail is they they have a good concept.
48:15They they franchise it, but then they
48:16don't build any of that arm, right, of
48:18like how to support the franchises and
48:20give them all the things that they need.
48:22And so you have to like go into it
48:24knowing that like I'm not in this
48:26business anymore. I'm in this this new
48:27business if if that's really what what
48:29you want, right? And so that's a big
48:31one. Then it's like, yeah, is it going
48:33to work in in other markets? Is it is it
48:35is it a New York City based thing or is
48:37this something that like, yeah, this
48:39would work in Florida, this would work
48:40here, this would work there. I think
48:41there's got to I mean, there's got to be
48:42demand. The economics need to work with
48:44a franchisee paying a 5% royalty. So if
48:47you if you have a 10% net margin without
48:49royalties, like it's not a good
48:50franchise because they're going to be at
48:52five, right? If you're at 20% and they
48:53can the franchisee can make 15. Yeah.
48:56Like that that could possibly work. C
48:57can you reliably market to get customers
48:59at least in a retail facing business is
49:01is a big one. So if it's all based on
49:02like B2B relationships that you have to
49:04like whatever get whatever the thing is
49:06and the marketing like let's say the
49:08whose responsibility is the marketing at
49:10that point?
49:11>> Yeah. I mean it it switches it it
49:13changes by brand. It really depends if
49:14it's national or not. like how a lot of
49:16the earlier stage brands even like the
49:18turf business is franchise they'll pick
49:21uh agencies like like digital agencies
49:23to do that franchises they could be like
49:25hey pick from any one of these guys the
49:27challenge is some of these agencies like
49:29a lot of them suck or they'll do good in
49:31like one or two markets like maybe they
49:32do good in Dallas and Houston or or or
49:35Houston and Atlanta but then they like
49:37for whatever reason they can't make it
49:38work in Philadelphia they can't work it
49:39here and so then the franchises are
49:41sometimes up to like having to go find
49:43other agencies to be able to because
49:45it's just like it's not working. And so
49:47like when you say like if you're saying
49:49okay um you use this agency to um grow
49:52here like who's actually paying for that
49:54agency like is it is it the
49:56>> it's the franchisee direct usually it's
49:58usually the franchisee where the new
50:00model like in the older models like the
50:02legacy brands you pay into a national
50:03fund the fun then out of that fund gets
50:06split all the agency fees you know
50:07creative fee management
50:08>> like in the Midas example do you pay for
50:10any advertising at the at the store
50:12level or is it all at the
50:14>> we pay for incremental so like we do
50:15we're big into direct mail. I spend like
50:17800 grand a year on direct mail that I
50:19directly control and target and like
50:22have like a a great return on. And so so
50:24I do that, but then everything else like
50:26all the digital and Google and paper
50:28click and LSA and all that crap, they
50:30handle it all. And like we we'll vote on
50:32campaigns to say like what are the the
50:34coupons we're going to honor
50:35essentially.
50:36>> So that's all from the 5%. Yeah. Um
50:39basically feed. even that like we don't
50:40know of that like 5% how much of that
50:43that is getting spent in Philadelphia
50:45versus like Richmond versus like Florida
50:47like it's just one big slush fund and
50:49they they choose how they're going to
50:50spend all that money. So get bigger
50:52markets, get a like bigger prat a share
50:54because media is more expensive. In some
50:55ways it's not as good because you don't
50:57have as much direct control versus you
50:59know in like the turf example like my
51:00guy like he works with an agency and
51:02like he spend he just decides how much
51:04he's going to spend to say hey we're
51:06going to we're going to spend 2200 on
51:08PBC. We're going to spend like two grand
51:09on meta and this and that. We just have
51:11like a minimum we have to hit. Uh the
51:13brand requires like a minimum because
51:15people have to advertise you know.
51:16>> Yeah. So basic basically as part of
51:18their franchise agreement they're like
51:19okay you have to spend x% of your
51:21revenue on advertising
51:22>> if it's a yeah if it's a retailbased so
51:24it's like all the things that that that
51:26people have to like consider if they're
51:27going to get into this it's like you get
51:28into a brand like that like yeah you are
51:29going to have to make more decisions you
51:30have like agency partners that help you
51:32but like some people like that idea say
51:33yeah I want to have I'm like a little
51:35bit more of a control freak and want to
51:36like be able to do this and other people
51:37are like no just take my money and like
51:39I don't I don't want any involvement. So
51:40what kind of net margin do you think
51:42somebody should be looking to target if
51:44they want to go into a franchise
51:46>> in a retail concept like our target's 15
51:49like after after interest and
51:50depreciation stuff we're not we're at
51:51like 13 our goal is 15 all in and in
51:55mobile concepts so that they don't have
51:57retail they should 20%. And yeah, so
51:59like and this is where I think the
52:01problem of like job versus scale comes
52:03in because like if you have a million
52:05dollar a year revenue, which is would be
52:06big for some of these franchises if
52:08you're at 150
52:10grand that you probably are not don't
52:12have the money for a manager. But if you
52:14have 10 of those, then you can pay a
52:16manager 200 grand a year and it's it's a
52:18much lower percentage of your
52:20profitability. So I think when people
52:21talk about scale, like that's what
52:23that's what people really have to
52:24understand about franchise. They start
52:26with one, but then they got Yeah, they
52:27got the 150, but then they got to hire
52:28the guy. Maybe like they're running the
52:30day-to-day, right? And so then it's
52:31like, all right, I don't I'm going to
52:32have somebody else do this. I got to pay
52:33him like a 100. So now I'm making 50,
52:35but I got to then go launch a second
52:36location. I got to get that one up to
52:38150 and then it's the third. So it's,
52:40you know, it's back to that like that
52:41stairstep approach. But at every level,
52:43you're usually giving up income to hire
52:45somebody to then bet on yourself to go
52:47and do another one. And so if you can do
52:48an acquisition where it's like it's just
52:50easier because you're buying the cash
52:51flow and you have like confident that
52:54hey I I see they're not doing a bunch of
52:55these things. My number's better like
52:57boom I got this I'm going to make it
52:58better or the startup like I have
52:59buddies that do that but they're but
53:01they're spinning up these locations you
53:03know from zero but but they've done it a
53:04bunch of times so to them it's like it's
53:06not a big deal.
53:07>> Yeah. So you look at everything that
53:08you're doing you obviously have your
53:10your your your f you're doing a lot of
53:12different things. What are you most
53:14excited about at the moment?
53:15>> Yeah. So like it it's really so it's
53:18it's working with other franchises to
53:22help them do everything we just talked
53:23about, right? Which is like there's a
53:25lot of people who buy themselves a job.
53:27You know, I've I've not or I've I've
53:29figured out how to replace myself from
53:31it, right? And a lot of it is through
53:33through how do we build a a great team
53:34that can run without us? How do we
53:36strengthen the unit economics so we can
53:38have strong monthly cash flow? And then
53:40how can we grow locations without
53:41growing stress? like those are like the
53:43three three pain points that that people
53:45have. And so it's like I don't know I
53:47think I've got a bunch of really good
53:48systems that that I've used. And so I am
53:51working with uh you know franchises who
53:54who want to be able to to to do the same
53:56thing. And so I'm uh I'm pouring a lot
53:58of my time and effort in you know into
54:00systematizing these things and then and
54:02then helping others do it.
54:05>> Has AI changed how you think about
54:06systems at all? use it a lot to figure
54:09out what can I do to create and shorten
54:11up and just hopefully find like a
54:13different way to look at it. We don't
54:14use it necessarily to like do things,
54:16you know, it's more of like a I would
54:18say a thought partner slash like
54:20organizational tool.
54:22>> What type of software do you use to run
54:24your business?
54:24>> So, we've built so I guess this is maybe
54:26the AI thing. So, so we've got like the
54:28core point of sale which is like an
54:29automotive thing that people would know.
54:31Uh and then you we have Slack is like
54:34our communication channel and then so my
54:36brother who's my my my partner has using
54:39AI cla code built like this this
54:42business intelligence app that is
54:44ridiculous where you know like I pull it
54:46up. We got we have real-time sales on
54:48every store. We've got real-time pay. So
54:50our mechanics are paid based on
54:51performance. I was telling you about
54:52that. Every mechanic can log in and see
54:54like how much money they've made. Uh
54:56we've got real-time Google reviews.
54:58every single call that comes into our
55:00shops gets recorded and AI transcribed
55:03and graded to tell you like was it a
55:04good call or not. And so we have like
55:06all these like business insights that
55:08we've used but then we still need to
55:10like you know the insights are great but
55:11like are you going to do something with
55:12them is what really matters. And so, uh,
55:14>> it's interesting to me though because I
55:16I very much I have this thesis that the
55:18place that AI is making the biggest
55:21difference is actually on, um, business
55:23intelligence and just like um, analyzing
55:27data. Um, and I think I mean that's
55:29certainly how we use it the most. It's
55:30basically, and I want to be very clear
55:32on this, it's not using AI to analyze
55:34the data. It's using AI to create code
55:37that allows you to to to analyze the
55:40data. Um, which is a it's a nuance of a
55:42difference, but it's something that I
55:43think a lot of people misunderstand
55:44because like just feeding your data to
55:46AI, you're going to get junk a lot of
55:48times. It's going to hallucinate. It's
55:49going to tell you things that are not
55:50true. Um, but using it um to organize
55:54your data to to create code that gives
55:56you access to organize your data and
55:58visibility into that data shortens the
56:00time from when you can get an insight
56:02and take action against that insight to
56:04make your business more efficient.
56:05>> Yep. Yeah. So, that's a we've done that
56:07internally and it's been it's been
56:08awesome.
56:09>> Yeah. But um and that that that's the
56:11biggest change that we've seen and most
56:13entrepreneurs that I talk to um that's
56:15how people are actually using it in a
56:16practical way. So I just find that I
56:18find that interesting. Anything else you
56:20want to talk about or you want to to um
56:22get off your chest?
56:23>> Um no, I'm good.
56:24>> Well, Brian, thank you for joining me on
56:26Boring Money. I really appreciate it.
56:28>> Yeah, thanks for having me. Yeah.

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