The Brian Beers Show

Episode 278: Alex Hormozi Said Franchising Is a Scam. Here's Why He's Wrong

Release Date: September 8, 2025
Host: Brian Beers

Overview

In this episode, Brian Beers challenges Alex Hormozi’s critical view of franchising—specifically Hormozi's claim that "franchising is a scam." Drawing on his own experience building an 8-figure franchise portfolio, Beers breaks down Hormozi’s main arguments, addresses common misconceptions about the franchise model, and provides actionable advice for both franchisees and those considering entering the industry.

Key Discussion Points & Insights

1. Alex Hormozi’s Critique Recap

[00:00-00:19]

• Hormozi asserts franchises start for two reasons: "An impatient entrepreneur or the business never worked."
• He argues if a business model works well, the creator should own all the locations themselves ("Why would you franchise? Just own them all.").

2. Understanding the Franchisor & Franchisee Roles

[00:19-01:18]

• Brian clarifies that Hormozi refers to franchisors (the parent company), whereas he speaks from the franchisee perspective (the operator/buyer of the franchise).
• On impatience:
  "I don't want to wait multiple decades to be some old Panda Express dude. I want to start making money now, today. The earlier you can start compounding money, knowledge and experience, the better." (B, 00:32)
• Franchising lets a business grow rapidly by leveraging other people's resources (money, time, expertise).
• Franchisees benefit from established concepts and support, skipping the process of reinventing the wheel.

3. “Just Own Them All” – Why It's Unrealistic

[01:19-01:55]

• Most entrepreneurs lack the capital or desire for debt/equity dilution required to own every location.
• Example: Some franchisors, like Papa John’s, operate corporate locations alongside franchised ones for cash flow, piloting ideas, and flexibility.
• "Papa John's in 2023 operated over 500 corporate locations that outperformed franchisees by almost 20% in revenue per store." (B, ~01:40)
• Corporate-owned stores give the company flexibility but are not feasible for most individuals.

4. Profitability Myths & Franchise Economics

[01:56-03:00]

• Hormozi implies franchises exist because the original business isn't profitable. Beers contends it's the reverse: the best franchises are highly profitable, which attracts buyers.
• Franchisees often reinvest in more locations to compound returns.
• Notable Moment: "I got an 800% return on a single deal where we put $50,000 down to buy an existing franchise that made us $400,000 the next year. Like, I can't get those returns anywhere else." (B, ~02:25)
• Franchisors are valued higher due to recurring royalties—a stable, contractual revenue stream.

5. Risks, Red Flags & Due Diligence

[03:01-03:55]

• Franchising can attract "sleaze balls"—people pushing poor business models to get rich quick.
• "This is why due diligence is critical. There's over 3,000 franchises. How do you figure out what are the diamonds and what's all the crap?" (B, ~03:17)
• Vetting includes:
  • Deeply questioning franchisors
  • Talking to both new and established franchisees
  • Checking if business goals and values are aligned

6. Why Franchising Works When Done Right

[03:56-05:30]

• Franchisors handle marketing, branding, software, real estate, and more, freeing the franchisee to focus on local execution.
• Memorable Analogy:
  "There's this famous saying about Michelangelo carving the David... It's the same thing from a franchisee: I want the franchisor to carve away everything that I don't need to worry about and I can just focus on making something beautiful." (B, ~04:20)
• Franchisees can grow by acquiring more locations, cross-selling with other franchise brands, and leveraging strong franchisee networks.

7. Franchisee Community & Local Impact

[05:31-06:40]

• Franchisees forge a community, making expansion and acquisition smoother:
  "You just pick up the phone and you talk to your friends and you say hey, are you interested in selling or is anybody in your market interested in selling? This is how I grew from 2 to 33 in eight years." (B, ~05:55)
• Local ownership boosts performance and community reputation:
  "A local franchise owner is going to care way more about the reputation in the community than any corporate employee, because it's that person's money on the line." (B, 06:20)
• Execution tends to be better when owners are embedded in the community.

8. The Bottom Line

[06:41-end]

• Franchising isn’t a magic bullet—there are no guarantees or perfect brands.
• It’s simply a vehicle to achieve personal and financial goals.
• Closing Thought:
  "Franchising has changed my life. It has changed many of my friends' lives and maybe it could change yours too." (B, ~06:46)

Notable Quotes

• On impatience and compounding:
  "I don't want to wait multiple decades to be some old Panda Express dude. I want to start making money now, today. The earlier you can start compounding money, knowledge and experience, the better." (B, 00:32)

• On Papa John’s model:
  "Papa John's in 2023 operated over 500 corporate locations that outperformed franchisees by almost 20% in revenue per store." (B, ~01:40)

• On franchisee returns:
  "I got an 800% return on a single deal where we put $50,000 down to buy an existing franchise that made us $400,000 the next year." (B, ~02:25)

• On due diligence:
  "This is why due diligence is critical. There's over 3,000 franchises. How do you figure out what are the diamonds and what's all the crap?" (B, ~03:17)

• On Michelangelo and franchising:
  "I want the franchisor to carve away everything that I don't need to worry about and I can just focus on making something beautiful." (B, ~04:20)

• On local owners:
  "A local franchise owner is going to care way more about the reputation in the community than any corporate employee..." (B, 06:20)

Conclusion

Brian Beers rebuts Alex Hormozi’s critique by grounding his counterpoints in real-world franchise ownership experience. He acknowledges the murky aspects of franchising, the importance of due diligence, and the limitations of the model. However, he emphasizes that when approached wisely, franchising offers a uniquely powerful way to build wealth and foster enduring business relationships. For Beers, the secret is in careful evaluation, community engagement, and leveraging the strengths of a proven system.