Loading summary
Transcript1 lines
- [00:01]
A
Most people chase rental properties to build wealth, and I did too, until I realized that franchises were much faster, more scalable, and way more profitable. Today, my franchise portfolio does $50 million a year revenue and growing. And I'm going to show you exactly why I sold almost every property I owned, what the numbers looked like, and how franchising has helped me unlock real freedom. For years, I followed this safe, wealth building approach. Buy a property, fix it up, rent it, repeat. You know, it worked like, kind of like I. I had cash flow and the properties did increase in value and it didn't require a ton of my time. But man, was it slow. And there are these massive hidden costs that nobody talks about, which I'll get to. And at the same time, I was operating a few franchises. I bought my first two in 2016, another in 2017, another one 2018. And at some point, I looked at the scoreboard and said, why am I still holding on to these rentals? So I did what most investors would never do, and I sold almost every single door. So let's talk the numbers. I had six rental properties. Most of them were single family homes. Each cash flowed about $500 per month. So it was $3,000 per month for this little portfolio that I own. And back then, I was buying homes like this one for $80,000 after repairs. But if I wanted to double my income, go from 3,000 to 6,000, I would need to double the properties that I own, double the amount of cash. I would have to put down the work, everything with it. And there's so many things I just couldn't control. What we could charge in rent, the interest rates on the debt, the insurance costs that would rise every year, property taxes. There's so many things that I couldn't control. And then you'd get hit with these massive repair bills. There's this one house I had that we got hit with a $10,000 repair to fix the main sewer line that went out of the house into the street. That ripped away like two years of cash flow on a single property. At the same time I was buying these existing auto repair franchises. I'd had this one deal, $110,000. I bought this existing business that was making about a hundred thousand dollars a year, like one times profit. I was able to buy this thing. The owner had a hard deadline to move, to get out for personal reasons. And in a franchise system, you can't just walk away. So a lot of times franchisees want to sell to other franchisees because they're already in the system, and they know each other, they trust each other, and so I was the easiest person to sell it to. I bought that thing, and we got it making even more money pretty quickly. In 2018, I bought another existing franchise for $52,000 down, right? So I got debt, but. But that was our down payment, and I had to totally restart the stores. We painted it, we put all this new equipment in. Like, we really fixed it up. And in the next 12 months, that store made over $300,000 after paying my debt, paying all that equipment, paying everything. So 52,000 into 300,000. With franchises, I control my destiny. I could improve operations. I could optimize marketing. I could build better teams. I could train people. I could expand strategically. I could open up new locations. I could acquire ones. I could scale faster. Like, there's so many different levels that I could pull that I was in control. And at the same time, I have these real. These properties, you know, making $3,000 a month, barely making money. And my phone is ringing with the property manager telling me about these problems and what do you want to do about this? We got this person to be evicted. I had a lady die in one of my homes. And so then, you know, we had to deal with that. Super sad, but, like, it is what it is. And then deal with the family and the move out and all this stuff. At the end of the day, it was like, these properties, while technically it's passive income, it was such a waste of time and energy and effort versus I could buy a franchise and make so much more money without really changing my time. Like, it became passive, in a sense, and that I would make more money while working the same amount of hours. Now, a lot of people have myths about franchising. Number one, they think it's just like burgers and fries, right? But that's dead wrong. Everyone knows McDonald's, you know, chick Fil, a Planet Fitness, like, but that's just like, 1%. There's successful franchises in almost every industry. I'm in auto repair. I'm also an artificial turf. I'm in painting. I'm a partner in a senior care franchise. I'm a partner in a window cleaning franchise. You can get into a spa, retail, plumbing, H vac, roofing, restoration, pet care, B2B services. There's so many things that a lot of people don't even know. This. Myth number two is that franchises are, like, just a job that you buy, right? And in the beginning, yes, it is true, you are highly involved. Like, you just invested a ton of money and time and, and, and effort into this thing. You better bet your ass that you were going to invest the hours to make it happen. But that's like true of any high potential business and that you have to put the work in if you want the return. A franchise is just a business system that you leverage. It's not like you're trading hours for dollars in a traditional job sense. It's that you're trading hours in order to build a machine that generates cash flow whether you're there or not. Eventually you'll be able to sell that machine for a lot of money or just hire yourself out to, to have that freedom. Like my life today, I have a ton of freedom because I've built a business big enough to support an infrastructure below me and they're able to handle a lot of the day to day stuff. Well, I get to focus on more of the higher value stuff, like the bigger bets. I make fewer bets, but I make bigger bets. But that doesn't require me physically being there, which gives me freedom, which allows me to take those calls and do those deals from almost anywhere. Because I'm not tied to the success of, of a physical location, even though we run a physical business. The next myth is that real estate is passive income. It's true. You don't trade your time for money in the traditional sense, and as I mentioned, neither do I. But like, are you trying just to have a little bit of juice on the side, or are you trying to build a system that actually earns you that freedom? Or you want to build a business that actually sets your kids up in a legacy and allows you to create the life that you really want to live. Like a franchise in a business will get you way, way quicker than real estate is. I like to think of real estate as what you do once you have money, but not necessarily how you make money. So how much money can a franchise make? Well, it's like asking how much can a business make? Are we talking about a lemonade stand or apple? But with a franchise, I like to think about it in terms of average unit. Now a unit could be a building like my Midas auto repair shops. Is a physical building or a territory, as in Waterloo turf. We have territories that we, we operate out of. You figure out what the average unit sales and margin is. So for example, let's say we had a business where the average unit territory or, you know, box can do a million dollars of revenue and has a 15% net margin. So you make $150,000 of profit out of that unit. So the next question is, what does it cost to start? Franchises range from a hundred thousand dollars all the way up to millions of dollars or more to get started. So let's say in this hypothetical business, it was $500,000 to build out this facility that I can make up $150,000 on. That's a 30% return on the all in money. Not bad. The SBA loves lending to franchises, often up to 80% of the startup costs. So on that $500,000 business, you may be able to get a loan of 400,000, meaning you only need to bring a hundred thousand to the table. You are going to have lower cash flow because you're going to have debt payments. But let's say you go from 150,000 to making $100,000 of cash flow on that franchise, you're still at 100% return on your investment. You put a hundred thousand dollars in, and you're making $100,000 out on it. The next question is, well, how many can you operate if you could only operate one? Like, you're right, that's like kind of a job, and it's not that exciting. But what if you could take that a hundred thousand dollars of cash flow that you, you make on that, and you use that as the down payment for location number two, and then you use location number two's cash flow, which becomes location three, and so on. Plus you add in a few acquisitions, and all of a sudden we've got five locations in a market and we're making $500,000 a year, all while you are working the same number of hours, because you're building a team, because you have systems in place, right? Like, this is how it's supposed to work. A franchising is supposed to be copy and paste, copy and paste. And then while it sounds simple, it's not easy. And that's where the skill comes in. And that's why people who are successful at it, like me, can make a lot of money, but it's not for everyone. And so how long does it take, right? So if I have that one location, how long till I get my second or third, fourth, fifth, or 34 like I have in that one business? Usually it takes locations a few years to hit an average volume. Some come out of the gate pretty strong, while others never even hit it? And this is a critical part when you're looking into franchises is you want to talk to other franchisees, you want to ask them about their experience, how long until they Hit certain metrics, how long until they were profitable? Are they taking a, any money out of the business or they reinvesting because they constantly want to grow? You know, I, I help people buy franchises. If you ended up working with us, we would provide you with a ton of these questions that to ask other franchisees and a bunch of worksheets and due diligence and a ton of stuff. It's all totally free. There's a link below if you want to learn more. Um, but anyway, so you, you talk to them and you learn this thing and then all of a sudden you now have a business. Five locations, $500,000 that might be worth two and a half million dollars if you wanted to go and sell it and then go off and do the next thing. But the challenge is not all franchises are equal. Many of them are terrible. They don't have good systems. Their support is like non existent and almost anybody can pay $50,000 and to get on the legal documents to become a franchise or pay, pay a fee to go to a convention and you go see them in a booth and then you give them a bunch of money and then it's all downhill from there. I mean, I have people all the time who reach out to me on LinkedIn saying, saying, Hey, I want to franchise my business. Like, what do you think? I asked him a few questions. It turns out they're only doing like $150,000 in revenue and they want to build a franchise. I guess one person asked me, should I like, he didn't even have the business. He had an idea for a business and he said, is it possible to start franchising this before I actually like develop the concept? And I was like, no, that's a terrible idea. All these people are going to invest in it, assuming that there's a system and there's a process and there's all this stuff and I'll get off my soapbox here in a second. But like, it's very frustrating how many bad apples are there in the franchise world, which gives it a bad name, which is why many people don't want to go down this path, is because there's a lot of people who are looking to get rich quick by selling franchises and just selling their brand to somebody else. And so you really want to know what good looks like. And a lot of that is part of this process, to take it seriously, to do a ton of due diligence. And there's no magic bullet in this. But at the end of the day, I have a lot of friends who make a lot of money by starting small. They're all in on this thing like it is their job and they absolutely love it. And they just keep reinvesting the profits to grow bigger and bigger. And then eventually you can get into multiple brands, right? I mean, I'm in three different brands. As an operator, we have partnerships and like there's no limit to what we can do because it's like a muscle that you build. Just like you build maybe owning real estate where you develop all these systems. It's the same thing in franchising where you build this muscle, you build a team, you build a back office, and then you keep rinsing and repeat. And that's the best part about this. And then really, if at the end of the day you really want to get into real estate, you can go out and then later when you have money, buy commercial triple net, like zero headache properties, right? That's totally fine. But at that point you're doing it to maintain wealth, you're not doing it to grow wealth. And I think that's the, the big thing that people get wrong is they get into this thing, they think this is my path to freedom. But at the end of the day, it could take you 10 years to get there versus, you know, a hundred thousand dollars into a business that you're all in and you, you just like drive it home every day. You might be able to get there in like two years, right? Like, you can accelerate the timeline so much quicker, but it takes a lot of work. It's not for everybody. Not everyone is meant to be an entrepreneur. So it's really for the, the people that want to put the work in and see the results. And if you're serious and want to learn more, I have a number of videos that could help you. Check out this one about Waterloo Turf, which is the brand that I'm a partner in and a franchisee and we're getting it launched off the ground. Cheers.