← The Koerner Office - Business Ideas and Deep Dives with Chris Koerner
The Koerner Office - Business Ideas and Deep Dives with Chris Koerner
The Most Overlooked Way to Get Rich (Proven Blueprint)⏐Ep. #279
00:41:13
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- [00:00]
A
I think franchising is the most overlooked path to wealth creation in America. Makes entrepreneurship and ownership a lot more accessible to the everyday person. $600 million a year. This guy started from zero. This can be what you want it to be. It can be empire building, or it can be a ones and twosie type thing that kicks off a couple hundred grand a year for you, but still puts you into a better position in life financially and more importantly, doing something that's fulfilling, rewarding, and yours, not someone else's.
- [00:29]
B
It's a blueprint for success.
- [00:30]
A
That's proven with this business's case that I mention mentioning. Their average revenue is $2.6 million per person.
- [00:36]
B
Holy cow.
- [00:37]
A
Off of a business that might have cost them five grand to get started.
- [00:40]
B
I want to hear from you your three favorite franchise concepts today that the average Joe could afford to buy into, but still profit hundreds of thousands of dollars a year, if not more.
- [00:51]
A
Yeah, let's do it.
- [00:55]
B
A lot of people out there don't feel like they're ready for full fledged entrepreneurship, or at least they don't feel like they can take the risk to be an entrepreneur and work for themselves. And a lot of people out there also don't want a boss. They don't want to clock in and out every day. They're looking for something in between. And in my opinion, franchising is one of the best ways you can do that. You still have accountability. You have someone holding your hand, pointing the way, giving you a proven blueprint and framework to follow, which reduces your risk while still retaining a bunch of upside. But you're a business owner. You own equity, you own your time. It's kind of the best of both worlds in a lot of cases. And the vast majority of franchises can be funded with an SBA loan, which carries up to 90% financing. So if the startup cost for a franchise is $100,000, you can get 90,000 of that financed. And if you don't have $10,000, you can get friends or family to finance that. So today I had my friend Alex on. All he does is look at franchise opportunities for a living. And I said, alex, bring me your three best franchises that are very approachable, affordable, but still can scale to millions of dollars a year in revenue or profit. And he did not disappoint. I was shocked by how much these random franchises make. So let's dive right in. Okay, Alex, Smack. Welcome to the Kerner office. Why don't you tell us who you are and what you do?
- [02:14]
A
Yeah. Chris, appreciate you having Me today, I'm Alex Smack, originally from Minnesota, based here in Charlotte now, but I am a serial entrepreneur. I started back in college, went to Wake Forest, did a laundry and dry cleaning business in college that I ran, grew and sold for mid six figures. Went and did the corporate thing for a year and a half at Ernst and Young and hated it. I was like, this is not fast enough. It's not mine, it's not fulfilling. I need to do something entrepreneurial again. So I started another laundry company in 2016, when you were seeing all the Uber for X businesses like Instacart, Shipwag, Rover, scaled it to about 18 million a year in revenue and started franchising part of that business. So we built physical laundromats to support all the delivery business and realized we got to open hundreds of these and laundromats aren't cheap. So we started franchising part of it in 2021. Sold 118 locations in about 14 months. Got a crash course on franchising, ended up hiring a CEO so that I could go work on what I'm working on now. And that is a platform like Zillow that helps people identify due diligence, find lenders for the right franchise businesses to get into. Whether that's a 20 grand of business to get into or a $2 million, you know, business to get into. Our goal is to help create the next generation of entrepreneurs through the franchise business model.
- [03:35]
B
Okay, and that's exactly why I wanted to have you on, because I've talked to a lot of franchisors, right? A lot of people think of franchise as a franchisee. You buy into a system, but franchisors are the ones that are the system. So I've talked to a lot of franchisors that are tunnel vision, focus on their business, and they love it and it's the best thing ever. And I get it because that's how business owners are. But you are more agnostic about individual franchise concepts, but you're very passionate about franchising in general as a path to build wealth. So I wanted to have you on because you just have a lot of surface area, you have a lot of experience with franchising and building wealth with franchising. And I want an unbiased take from you. Sound good?
- [04:15]
A
100%. I think franchising is the most, most overlooked path to wealth creation in America. And the reason I feel that way. I used to be a skeptic, to be honest. I think people hear franchising and they think oh, it's McDonald's, it's Subway, it's going to cost me millions of dollars to get into. Or it's these like snake oil salesmen of, you know, people that only have one or two units open and it's not proven and it's not going to work. The reality is those are the goalposts. Those are the end ends of the spectrum. And there is a thousand thousands of other concepts in between that are very viable, do produce good revenues, cash flow can replace your income, can lead you on a path to empire building. It's really about identifying the right opportunity. Just like you would a side hustle or an independent independent business. Franchising is just a business model that is layered on dozens and dozens of other industries, from home services to health and wellness to food, fitness and, you know, everything in between.
- [05:07]
B
Yeah, I feel like there are three buckets of franchise concepts. There's like the well established mature ones like McDonald's. You're going to have to pay multiple seven figures to get involved. And then there are so many brand new concepts where one guy started a business and it went well, so he spent way too much money to franchise it. And statistically speaking, you'll probably agree most of those will fail. Right? They just will fail. And then there's the third bucket, which let's call the future crumbles. Right. And that's probably a very small percentage. I'm not trying to misrepresent. Like there's a very small percentage of franchise concepts that are the next crumble, the next batteries, plus Planet Fitness, et cetera. I assume that those are the ones that you're interested in and trying to kind of turn people onto. And no one knows for sure. We can't see the future, but certainly there are indicators like, you know, multiple six figures of profit per territory or per location. What are the other like metrics that you look for in an early franchise concept that's like late enough to have a proven track record, but not so late to where there's not any money left to be made.
- [06:07]
A
Yeah, so I almost start with the individual and something that took me a little bit to realize is, you know, yours and I's risk tolerance might be very different. Yours and I's operational background and skillset might be very different. Our financial goals are very different. Are, you know, so all those things factor in because some people come to me and they say, just show me the brands that make the most money and like they're very financially motivated and that's, that's fine. A lot of people come and say, hey, this is a legacy for my kids. It's I hate my job. I'm not trying to become a multi millionaire. I just want to replace my W2 income, which is 150 to 250 grand a year. Like, show me the options, do that, do that. And there are hundreds, if not thousands that will do that. They might not be the McDonald's that can produce $700,000 in profit per box and have this empire building like upside down, but they're the steady, you know, relatively affordable to get into. You've got a playbook, you got a peer group that can replace that 150 to 250k income. So I start with the individual, like, what do you want? What's your risk tolerance? What are you good at? And then we start to look at, all right, they're very risk averse. They need a more mature brand. So let's find one that has over 80 units, 100 units already open. Because that is a really good indicator of system strength. If they have staying power, they've been around for 5, 10 plus years, they've got near 100 or over 100 franchise locations open. It is usually a good sign that they have the systems, the playbook, the market figured out, and there's product, market fit and ability to create value for the franchisee. Now if you're less risk averse and you want all the upside, you want to empire build and carve out territory in your market, whether that's Cincinnati or Dallas or wherever it may be, you want to get in earlier, but you're going to take more risk to do that. But you've carved out protected territory. So it really is this, you know, it's not one size fits all. And you really have to understand the individual and then fit them and match them to the right brand. And that's, you know, a big driver of what we're trying to do at Franzi is use AI to make that more accurate and straightforward.
- [07:59]
B
Yeah, I feel like a lot of people would be surprised to learn how much some franchises make and how little others make. I remember learning that an average subway nets like 30 grand a year and you really, you really like can't make money unless you own 10 subways. What a miserable business. Like 10 subways with like 100 employees. Like, no, thank you. And then I Learned that a batteries plus makes like 300 grand a year or a. My like missed opportunity franchise story was 2010. I was living in Huntsville, Alabama, which is right near Tennessee and Planet Fitness started coming on my radar and I had a guy that would fund like me buying into Planet Fitness. I didn't have any money, I was broken. But they had zero locations in the state of Tennessee at the time, like Nashville, Memphis. And I'm like, dude, I could be the guy to open Planet Fitness in Tennessee. And I wasn't, obviously. But I think the Planet Fitness is net like 5 to 600 a year each, easily.
- [08:55]
A
And the multiple, that's the other thing people don't think about, is when you go to exit that business, let's say it was Planet Fitness because there's such a now mature brand, they've got stability, predictable cash flow, private equity. And these larger multi unit operators look at them in banks as well, look at them as significantly de risked. And so they put a premium on the multiple they would pay if it was Chris and Alex's gym. You know, that might trade at 3 to 4x EBITDA or multiple of cash flow. But if it's a Planet Fitness, it might be like five to six, five to seven and you get two to three whole turns on your exit that you wouldn't get in an independent business. And people, I think discount that when they look at the model as well.
- [09:34]
B
Yeah, people think that those high multiples are only for the franchisor. And they're there for the franchisor for sure. Right. Crumble is a billion dollar business. But groups like a franchisee with multiple territories. A mumbo.
- [09:46]
A
Call it a mumbo. It's a multi unit, multi brand operator.
- [09:50]
B
Okay, all right, so they can chase high multiples too.
- [09:53]
A
Yep. You're saying, honestly, even the individual brand. Yeah. If you and I own two Planet Fitnesses, we might get a slight premium on the exit. If you and I own five plus though, you're now in that same range as the guy that owns 15. I mean, orange Theory at its peak. Orange Theory at its peak was trading at like 19x EBITDA as a fitness studio. You know what I mean? Like that's like a SaaS or a software multiple on.
- [10:17]
B
Yeah.
- [10:18]
A
On a gym. But it's because they look at it like, all right, you've got diversification across this larger number of units. You have this brand that's cult like, you know, it's cult like following and loved across the country. And there's proven playbooks and systems and technology they're building. And you know, because of all that, it's de risked and we will pay a premium for this predictable stream of cash.
- [10:38]
B
Okay, so I want to hear from you your three favorite franchise concepts today, Starting with three, ending it with your all time favorite that are approachable, affordable, that the average Joe could afford to buy into, but still hope to profit hundreds of thousands of dollars a year, if not more, per territory or location.
- [11:00]
A
Yeah, can we do that? Yeah, let's do it. So I like that you said accessible too, because that was a theme. I think that I and many others stereotype and think like, I have to be incredibly wealthy to do this. And what I like about franchising is it makes entrepreneurship and ownership a lot more accessible to the everyday person. You don't need to be Elon Musk, you don't need to be Zuckerberg to go build significant wealth in business and in franchising as a way to do that.
- [11:26]
B
When we talk about each concept, I'm going to ask you, like, how viable is this business opportunity for someone, if they wanted to just do it outside of a franchise concept with no support, just do it on their own? I want to ask you at the end of each one, how viable would this be for someone to do on their own? Because some people might just hear the concept and think, that's genius. I don't think I need the help. And they may, they may actually need the help. They may not. They may have a lot of experience in that space and they might want to save a little money. So I'd like to hear how viable any of them would be for someone to go solo on.
- [11:56]
A
Yeah, let's do it. I love that. Yeah. So the first one that I think comes to mind for me is private insurance adjusting business, which a lot of people don't think about as a franchise model. You might think of, again, food or fitness or something else. This is what I love about franchising. What always surprises people is it touches everything. And so in this one, it's insurance adjusting. Only 1% of current insurance claims use a private adjuster. And what a private adjuster does is they go to the insurance companies and they kind of bully them or beat them up a little bit. Right. Like they want to help you get more money for the damage that happened to whatever asset it is. It is whether it's fire or water or hail damage. And in most cases, they can increase that claim by 747% or so, let's say two, two grand. They'll go get you 17 grand and on your behalf will go and negotiate with these different insurance companies. And their revenue monetization, or their model is they take a flat percentage of the total claim so they're incentivized.
- [13:00]
B
I love that model.
- [13:01]
A
Go get as much as they possibly can. And it's simple, right?
- [13:04]
B
Let me make sure I understand this correctly. If I get in a car crash, I use Liberty Mutual. I call my guy, he's like, yeah, we'll give you five grand for this fender bender. I go to the franchise, my local franchisee for this company, and say, hey, Liberty Mutual wants to give me five grand. And he says, I'm on it. Let me be your adjuster. He comes back, gets me 12, and he gets paid a percentage of that of the entire 12 or of the delta between the 5k and the 12k.
- [13:31]
A
So it's of the entire 12, but they set minimum. So I think because you don't want to hire this person, you're already going to get five, and then they get you six, and you're like, okay, what was the point? I didn't make anything incremental. But in your example, if they go get you, even if it's eight, they'll take 10%. So they'll make 800 bucks.
- [13:47]
B
You cap it.
- [13:48]
A
Yeah. You netted 7,200. You still made $2,200 more than you would have by not hiring this person. And a lot of people, I think, don't realize that this is even a service, which is why I think it's such a big opportunity in a big market. Again, 1% of claims are actually using a business like this. And so I think there's a lot of white space for a brand to come in and make it more well known, make it more education around it. But it's easy to get into, as an individual, know, into the system. You don't need a bunch of overhead, you don't need a ton of money to get started. Their franchise cost for this is 43,000. So if you borrow money to do this, you might only need five grand to get started.
- [14:27]
B
Wow. Like, and you could borrow money from a bank or from friends and family, like, 90% in this case.
- [14:32]
A
Yeah. So the SBA is. Is meant for exactly this reason. You know, one of the things that the US Government does really well is they want to support entrepreneurs. It's the backbone, you know, of our. Of our economy, of our society. And so SBA loans, especially under 200 grand, are very accessible. You need to show that you have some sort of collateral, whether that's a home or another asset or, you know, some sort of W2 income or income from the business that you can prove that you'll be able to Pay the loan down as you're scaling the business. But more often than not, they're very willing to help people get started for businesses exactly like this.
- [15:06]
B
So SBA loans are not just for, like funding a current business or for buying someone else's business. You can use it to buy into a brand new franchise concept.
- [15:15]
A
Yeah, brand new. Like they love franchising because of the reasons we mentioned. Hey, it's de risk. There's all these other units we can look at and see how they're doing. And so, you know, with this business's case that I'm mentioning, the adjuster business, they've got a bunch of existing operators and their average revenue is $2.6 million per person off of a business that might cost five to ten grand to get started.
- [15:37]
B
Holy crap. Okay, so 2.6 million in revenue to the average franchisee and you can get started for five to ten grand, assuming you get an SBA loan to fund 90% of the down payment. What is the profit on that? 2.6 million.
- [15:52]
A
Yeah. So typical gross margin, because it's such a low overhead business is 70 to upwards of 90%. And then depending if you have a sales team or if you start hiring other folks to help with, you know, reaching out to other customers and working with the insurance companies, you can net 25 to 45% of that revenue.
- [16:11]
B
Holy crap. I mean, let's say, Yeah, I think 700 grand profit. 800 grand.
- [16:16]
A
Yes. For the better operators.
- [16:17]
B
Yeah, I'm sure you have to work into that. Right. Like you gotta ramp up to that average number, few years.
- [16:24]
A
Yeah, that means a few years to ramp for sure. And the thing about franchising is, again, is it accelerates that ramp. If it was, you know, me doing this on my own, I need to go figure out insurance law and build relationships with the claim companies to build a brand I have to establish myself. And what these franchise brands can do is they give you the branding, the playbook, the systems, the relationships they already have regionally, nationally with these different companies. So it's more plug and play. It doesn't mean that you're rich immediately and your year one is $2 million, but your year one is substantially higher than it would have been had you done it.
- [17:01]
B
Yeah.
- [17:01]
A
On your own.
- [17:02]
B
And in this case, is the franchisor feeding you leads? Is it support? What all are they providing you?
- [17:08]
A
Yep. So they'll provide you with leads, they'll give you a lot of like, AI and data driven tools that they've built in house because they're Pulling the resources, all the franchise fees that they collect in the royalties, for the most part get plowed right back into the business. To build technology, to invest in brand new marketing and lead gen, do individuals
- [17:27]
B
need like insurance experience or background for this particular franchise?
- [17:32]
A
Not entirely. It's like the franchise brands are great again about doing training, getting you license if there's licensure requirements.
- [17:39]
B
Okay, now on a scale of 1 to 10, 1 being impossible, 10 being easy, how viable would this same business idea be for someone to do on their own, not in a franchise concept?
- [17:53]
A
Yeah, so because of how regulated insurance is and I think how credibility based it can become, I mean you're dealing with people at a, you know, pretty tumultuous time in life if their house just got severely damaged or another asset, you know, they really want to make sure that it's someone that has a background in it or has a track record or has a brand behind them. So for that reason alone and the regulation, I would give it a, you know, a three or maybe a four to do on your own. You don't have the carrier reputation, you don't have the weather driven data system, you don't have the proprietary lead engine built out. So you're starting from scratch in all those spots versus with, with the brand. You know, you've got the technology that they've built in that backing, the national positioning, built in systems, you know, et cetera, to get started on square three instead of square one.
- [18:36]
B
It's interesting because like the less viable a franchise is for someone to do independently, I think that's like the more of a moat that that franchise has. Because if we were looking at like a poop scooping franchise, which there's a half dozen of those or so it might be an 8 out of 10. Right. Like anyone can go start picking up dog poop and find a customer for that, but that means their moat is like a 2 out of 10. That's the trade off that you make, right?
- [19:01]
A
100%. Yeah. I like when there's some sort of skilled labor or a brand advantage or a supply chain advantage or some curriculum advantage that's hard to replicate. So if you look at like Planet Fitness or some of these other large brands, they have one of those moats built in and it's harder to do on your own. And that's why franchising in that case should exist and should be successful in that case. If it's to your point, no moat, no barrier to entry, you know, you really have to question, am I better off Just doing this on my own. Or not.
- [19:31]
B
Yeah. All right, so that's your third favorite. What's your second favorite? Right now that's approachable to all.
- [19:38]
A
Yep. So second favorite is one that is, let's call it a home services platform. They help you as a home buyer, or, sorry, as a home seller, prep your house for selling it. And they have all this data that suggests if you do like slight improvements, maybe it's like a small bathroom remodel or you know, some new paint on the exterior, new garage door even, they've priced in all of these things that will generate a higher sale price. And so you might pay them 5 to 15k to make some of these improvements and clean, clean everything, get it prepped and staged. But also some light renovations. You know, you'll pay them five to fifteen grand to do this, but you'll likely get two to three X that back in the form of what you sell your, your home for. So I like that as a business because it's again, smart, low to get into less than 150k and the low end, it's 110k. So if you borrow money, again, you're into it for 10 to 15 grand. And the average revenue of this business is $2.7 million a year. So you're again, holy cow, you're in a market where people are always buying and selling homes even when things are a little tighter. They might not be buying as high of a frequency or as high of a price point, but people are still selling homes.
- [20:47]
B
What I love about businesses like this is that it's high ticket. So you say 2.7 million, and that's a lot of money. Objectively. You divide it by 15,000, which could be their average ticket price, and that's 180 customers, which is like one closing every two days. That's like, I could wrap my mind around that.
- [21:05]
A
Yeah. If you get relationships with all the brokers and the real estate agents, it's like you're the guy, you're the business that they go to to help improve this and increase the chance of selling the home.
- [21:15]
B
Yeah, I mean, I'm trying to crunch the rough numbers. And in the city I live in, there's like, there's probably like 40,000 homes because there's a hundred thousand people, two and a half people per home, 40,000 homes. Let's say they live in five years on average. So divide that by five. 8,000 homes are sold every year here in like a modestly sized suburb city. 8,000 homes are sold A year. So in order to make 2.7 million with this franchise in this one city, not like all of North Dallas Fort Worth, but this one suburb, you'd have to sell like 2%. 2% of those homes. You'd have to like, be touching 2% of those homes sold per year to make 2.7 million. That sounds very feasible.
- [21:54]
A
Yeah. And it's, again, it's a need. It's. It's something that people have to do and they want to increase their, their sale likelihood and sale value. You know, some people are probably spending 30k, 40k with, with this business to, to make improvements to generate 70k and 80k in additional home value.
- [22:09]
B
Yeah, well, this is a lot like the one you just talked about, the insurance adjuster one, because all of the incentives are aligned and it's, it's almost like a service that quote, unquote, no one's paying for, you know, because the homeowner is about to make a lot of money on their home. Statistically speaking, the majority of homeowners in the United States today have decent equity in their home. That's a fact. Right. So on the whole, the person's about to make five or six figures on their home and the bet is the gamble, which no one can really prove if it's fully true or not, because you don't know what that home would have sold for if the garage door weren't painted. So that's also in the benefit of the franchisee because you can't really prove definitively that that $2,000 new garage door will return $4,000. It's just like, based on studies and estimates or whatever. So, like, no one's really paying for it. The buyer isn't, the seller isn't, but the franchisee is, is still making money because it's, it's an investment. And it's an investment you make at a time when you're about to make money. And if I were to bet, they probably have like, you know, pay later options where you can pay it close. Is that true?
- [23:12]
A
Yeah, some of the businesses will allow you to do things like that. They'll get clever on pricing and incentives like that. It just depends on the brand.
- [23:21]
B
Yeah. Because a lot of people, like, even if they're about to make 50 grand on selling their home and these improvements are going to cost 15 grand, they might not have that in their checking account. Right. They might need to bank on paying at the closing table.
- [23:34]
A
Yep. And the other value of it too is if you think about this, imagine you're selling your house and you have to do some of this and you have an electrician involved and someone to do driving drywall and someone to do maybe there's some plumbing work. And now you or your, your real estate agent are trying to coordinate all these subcontractors and you know, different people versus this is just one person. It's like the whole like one throat to choke kind of thing. It's like, hey, we hired this company. They then, you know, as the franchisee of this business, you're the one responsible for subbing this out. You're not actually doing the work yourself. So some people hear about these businesses and they're like, wait, I don't know how to do these renovations or electrical work.
- [24:11]
B
No, you're just a general contractor.
- [24:13]
A
You, yeah, you're the GC and you're project manage, managing it. And you after, as you build the business, you've got a bench of people. It's like, oh, I got this electrical guy, I've got this plumber, I've got this patchwork guy. And it's like you've got a team that you can call on and you know, for certain jobs, you know who you'd pull in and who you want and you become effectively, like you said, a GC or a project manager.
- [24:32]
B
Yeah. This is a beautiful business because it's just, I mean it's just like a handyman business framed as like a increase the value of your home business at a time when you're about to make a lot of money from selling your home. It's just perfect. Like it's just, it's a handyman business dressed up like a increase the value of your home business. What are, what are the margins on this business on average?
- [24:52]
A
Yeah. So the gross margin for this business is anywhere from 40 to 50%. Net margin is 12 to 22% depending on again how you're able to negotiate materials and the work from the subcontractors as well as the pricing structure with the seller, you know, because I think again, some of these folks will do a percentage of the incremental value that they can generate. They'll, you know, they'll get clever on, on some of that pricing structure as well.
- [25:17]
B
Yep. So this is probably the perfect business for someone that's in the real estate space. That's a broker that was a broker that knows brokers or agents. Commercial residential, someone with construction experience, general contracting experience. On a scale of 1 to 10, one impossible. 10, extremely viable. How viable could this be business idea be for someone to Start on their own and not within a franchise concept.
- [25:41]
A
Yeah, so this one I think is a little easier to do on your own. Don't get me wrong, the operations a little bit more complicated than the insurance adjuster business we talked about. I also think like ex military people would be great at this. Or people that have managed teams before because of all the project managers essentially in corporate America who have had to manage a lot of moving parts and different deliverables and timelines and you know, a lot of communication being involved and direction and so for people with those backgrounds, I think, you know, much easier, maybe a seven or even an eight. But for the average person, I'd say, you know, six or so. The thing that the franchise has in this case is they've got referral playbooks and relationships with regional and national, you know, agents and you know, real estate agent systems and some of those, those larger referrals. Yeah, Keller Williams and Sotheby's and Alan Tate, et cetera, et cetera. Same with sourcing the subcontractors. They've got some relationships built in there, pricing frameworks, brand positioning, you know, with the brokers, et cetera. It's like those again, are those like cheat codes or shortcuts that you get? But not impossible to do this on your own. I think you probably in most of these cases save yourself a year, maybe two of headache by joining a franchise system and having that, that franchise or in your corner as well as the peers that are in different territories sharing best practices and lessons learned.
- [26:57]
B
Man, I really like this because I wasn't even really thinking of the realtor angle. I used to have a house cleaning business that only went through realtors and our thesis was realtors have a lot of surface area, they have a lot of touch points for multiple homes and they're incentivized for that home to be clean when it's shown and when it's sold. And they don't have to pay for it, they just refer it to the homeowner and the. So it's actually a very similar business, just much, much smaller ticket size. And I love that too because the realtor is like the referral source. They're like, dude, you got to pay for this because it's going to increase the value of your home and it's going to make my commission go up a little bit too. So like everyone's incentives are aligned and the realtor acts like a salesperson for you. And if you get a high volume Realtor on your team, like that could be dozens of closings a year, that
- [27:41]
A
becomes your sales engine. The more of those relationships you have, they're just constantly drumming up the business for you.
- [27:47]
B
Yes, okay, that's. That's a banger. But that's not number one. What's your number one? And then let's talk. Let's have a little bonus round after that.
- [27:54]
A
Let's do it. So my number one is a, let's call it a specialty home improvement business. They do, of all things, window boxes, custom window boxes, you know, outside of your garage or your, you know, your windows on your house. They design them. They make it look good aesthetic to your home.
- [28:10]
B
Like planters.
- [28:10]
A
Planters like the flower window boxes. And they decorate them, they replace, you know, flowers in them. So, like, they'll do things like for Valentine's Day, they might put red flowers in with like, you know, some garlic. You know, not garlic, but like other, you know, Valentine's Day themed designs. At Christmas, at Easter, they'll do that. So every month there's this recurring subscription revenue. And as you can imagine, again, you don't have a storefront. There's not a lot of overhead. You might have, you know, kind of an operations, let's call it center, where you've got some of your materials and supplies and, you know, plants, et cetera, that you might be, you know, holding before you go do these installations with your customers. The investment cost is under 140 grand. So if you're borrowing money, you know, 14 to 15k to get in, but the average revenue is four and a half million dollars a territory. What, doing window boxes for window boxes? Window boxes and planting flowers.
- [29:03]
B
Okay, so let me make sure I understand. This company goes in and they probably charge thousands to install these planters and window boxes. They probably charge like, per window. And then they've got a subscription model where, you know, they load in the dirt. On day one, they load in some flowers, and then every quarter, every month, they're swapping out flowers or they're fertilizing the flowers, watering them. Is that accurate?
- [29:25]
A
You're very close. So there's. There's two revenue streams. One is the installation like you said, it is in the thousands of dollars on average per ticket, the charge per window. And then there's this recurring subscription, and they have, as you can imagine, all sorts of add ons. Do you want new flowers every month? Do you want them, you know, less frequently? You know, flowers that will have, you know, longer life? Or do you want this variety based on the season and the month? And then they Will do these decorations, as I mentioned. They'll have like kind of fun little like trinkets and like character like designs in addition to the flowers based on, you know, if it's Easter month or Christmas or Thanksgiving, they'll, they'll have it themed to, you know, that month or that time of the year. Their average revenue per customer per year is around $1,300. And it ranges from 1300 to, you know, $2,200 a year per customer. And it's just this route based thing where they, you know, are going around each home and replacing flowers on a fairly regular basis.
- [30:20]
B
Dude, I can't let my wife listen to this episode. She will buy this like yesterday or she'll buy a franchise if it doesn't exist already here. She already has like a every two weeks flower subscription. It's like, that's a lot of money. But I love her anyway. Is this going to be the first to go in a recession or. I'm just shocked that this is so big of a business per territory.
- [30:43]
A
So my last business, the laundry business, we used to get asked that question a lot. I was like, you know, is this recession resistant? And we got a taste of a little bit of that with COVID and a few other years that we were operating and we found that it was more affluent households that I think pay for things like laundry. And I think honestly this service falls into that category. And while those houses aren't fully isolated from recessions, they're definitely more recession resistant. And they will keep spending money on things like this because it brings them joy, happiness, it gives their house character. And you know, in some cases they kind of set it and forget it and you know, they're not necessarily thinking about it. So I imagine, I mean, laundry is more of a need than this is. But if it operates somewhat similarly and it's the same customer demographic, I could see some, yeah, you know, some staying power.
- [31:32]
B
Well, I mean, it's depressing, but the data shows that the middle class is shrinking. And so to your point, if, if it's the upper middle class that's paying for this, they're probably going to be mostly okay during a recession. Okay, so what are the, what are the margins on this 4.4.6 top line. And I will say to those listening, like these revenue and profit numbers are not like BS pulled out of our butts. Like this is federally like regulated. Like these companies have to publicly report their franchisor like their corporate owned location revenues and their franchisee revenues. So these are real numbers.
- [32:07]
A
Yeah, so the numbers that I'm pulling are from what's called an fdd, a Franchise Disclosure Document. Each franchise is regulated by the ftc, the Federal Trade Commission, and they are required to every year update their FTD with the number of units they've sold that have shut down. Why did they shut down? Are there any ongoing lawsuits or litigation? Is there any bankruptcy that was claimed in the system? So you can see the health of the individual franchisees in the system as a result. They also have what's called an item 19. The item 19 is where they have audited financials, where they show revenue numbers, they show margin, they show, you know, financials similar to a public company's filings, you know, quarterly filings. You do need to look for footnotes where they have some sort of like adjusted EBITDA or adjusted, you know, revenue numbers. And so for those listening, I would just be cautious as you look at item 19s and FTDS to be aware of, look at the footnotes and make sure you're, you're getting the whole, whole set of information. But the data that we're sharing today are directly from, from those ftds.
- [33:05]
B
Yeah, I mean, if I were seriously considering a franchise, I would take the whole FTD and those are like hundreds of pages, upload it to Claude or ChatGPT and be like, all right, cut through the noise. Like, what are the red flags, yellow flags, green flags here, that's got to be so valuable.
- [33:19]
A
100%.
- [33:20]
B
Okay, so three great options. Do you have any, like, any wild cards for me that are worthy of mentioning?
- [33:27]
A
Yeah, so I've got one or two, one that I'm just, I personally am fascinated by. It's these artificial turf businesses that are starting to pop up. You see them a lot at, you know, gyms will put artificial turf in. You'll see them at hotels or multi unit condo or apartment buildings. And now you're seeing a ton of single family homes. Just say, hey, I'm sick of, you know, maintaining the grass and I want somewhere for my kids to play their sports and the dogs to run around. And it's just, you know, it's not something to think about. And so they're doing away with natural grass and putting in, you know, this artificial turf into their backyards and in some cases front yards. And then you've got cities like Vegas where they're starting to essentially outlaw the growing of natural grass because of the water consumption that it has. So in Las Vegas proper, you're not legally allowed to grow actual grass anymore. You Know, starting, it was actually this year, starting in 2026. And I think you'll see a couple other cities where water is, you know, less abundant and you know, maybe Florida, you know, California. And so some of these local laws requiring that, I mean, what are people going to do? Do they put rocks or do they put turf or what do you do to have some sort of green and you know, something that makes you feel like nature and feel good about it. And so these turf businesses have started to do, you know, really well. And same thing, there are less than 150k to get into and in many cases will produce over $2 million a year in revenue and you know, three to four hundred grand in profit.
- [34:52]
B
Wow. Now I forgot to ask you, what are the margins on the window boxes business?
- [34:56]
A
Yeah, so the gross margin on the window business, because it's a lot of dirt and plants and as you can imagine, they're marking that up a decent amount. The gross margin is very high. It's 60 to 65% the net margin because of the labor you will hire to go install the boxes, to swap out the plants. It's a lot of manual labor will eat into some of the rest of that margin. You're left with a 20 to 25% net margin, which is still great for a services business.
- [35:26]
B
Yeah, I mean over a million bucks a year per location in profit. That's crazy. On flowers. Geez Louise. Okay, last wild card. What do you got?
- [35:36]
A
Yeah. So then another one that I think is more accessible that you know, many people can get into are some of the like office cleaning or commercial cleaning businesses. Those are very, you know, accessible financially. They're 50k, 60k to get into. And they'll set you up with all sorts of tech to drive leads from Airbnb accounts to businesses to single family homes. And you're effectively running a, you know, residential short term rental cleaning business. Average revenues for this are 1.26 million. 6k to get started. Mostly margin because it's, you know, in a lot of cases it's an owner operated business. The person buying into the franchise is also one of the cleaners at first, until they scale out their team. And then I've met a few of these franchisees who now they live in Europe or Africa and they've got a team here that's just running it. They're doing the nomadic life and they've run the whole cleaning business while they're, you know, living remotely. This isn't a business that's going to make you a multimillionaire but this is one of those ones that could replace your, you know, middle management, corporate America job where you're making 150 to 300 grand a year. You know, I think this could replace that income and you could go do it remotely and live somewhere else and, you know, live abroad or live a more flexible lifestyle while having this team of cleaners turning Airbnbs and, you know, commercial offices.
- [36:57]
B
Amazing. I know a guy in northwest Arkansas that does that, and he does. He does very well. Only cleaning. Airbnbs.
- [37:03]
A
Airbnbs is. It's such a good niche to go after because you can go get the owner's list if you're clever. And that's where I think some of these franchisees are helpful. Again, they can. Franchise options are helpful because they can go get those lists and they have those tools to go scrape all the Airbnb owners and operators and, you know, drive you business.
- [37:19]
B
Yeah. And I've been an Airbnb owner, and it seems like once every three months I'm looking for a new cleaner. Like, it's just hard to keep a good one. So if you do cold outreach to me at the right time, I'm probably saying yes.
- [37:31]
A
Yeah. There is a lot. Me and my brothers have one in northern Wisconsin, and it's like, you know, oh, nice. We're remote, as you can imagine. And so finding a good cleaner is so. Is so critical. And once they're good.
- [37:42]
B
Oh, especially there. Yeah.
- [37:43]
A
You don't want to lose them.
- [37:45]
B
Alex, this has been amazing. I think franchising is awesome. It's like a box I've never checked. I think I would make a terrible franchisee, probably a terrible franchisor, too. But I think that a lot of people out there, it's perfect for, like, they. They've tasted white collar, but they want to do something for themselves. Like, they don't want full autonomy. They want some hand holding, but they still want to, like, own their time, own some equity. I think it's a great option for a lot of people out there.
- [38:13]
A
Yeah, I completely agree. I. Even though I've been more of this, like, kind of tech entrepreneur, I own franchises myself. You mentioned actually the brand that I'm a franchise of earlier in the conversation.
- [38:23]
B
Oh, okay.
- [38:24]
A
And another brand, a golf simulator brand called Another Nine. It was the crumble, like, you know, viral brand that you mentioned that that's coming up right now in a different category.
- [38:35]
B
Oh, you're a franchisee there?
- [38:37]
A
Yeah, Me and, me and my business partner are developing locations in the Midwest, and I'M here, I'm here in North Carolina. So that's the other thing is you get to a certain stage, you can start, you know, I, I know guys that started franchising seven years ago, started with zero locations. They're up to 120 locations now across Dave's Hot Chicken, Pop up Bagels, Marco's Pizza, European Wax. So it's not even just all food. They get the system now. So he's like, I don't have to deal with menu innovation or supply chain or branding or mark, I don't do any of that. The brand does all that. I just need to operate a team, go find sites and get them open and like that's what I'm good. I go raise capital or I borrow capital and I repeat that 120 unit franchise system probably does $600 million a year in revenue. So like just do the, do the math. And this guy started from 07 years ago. And so this is why I'm, you know, trying to spread the word as much as I can on this can be what you want it to be. It can be empire building or it can be a ones and twosie type thing that kicks off a couple hundred grand a year for you but still puts you into a better position in life financially and more importantly doing something that's fulfilling, rewarding and yours, not someone else's.
- [39:44]
B
It's a blueprint. It's a blueprint for success.
- [39:46]
A
It's proven 100%.
- [39:47]
B
Just don't screw it up. Yeah, Alex, this has been great. I appreciate your time. Where can we find you if we want to learn more?
- [39:54]
A
Yeah, so if you want to check out 4000 different franchise concepts and check out the AI that helps you match, you know, with the right brand, check out Franzi.com we do provide you with free hands on one on one coaching. Sometimes it's actually me, sometimes it's other folks on our team that are franchisees themselves. So they've been through it, they know what to look for, they know the right lenders to talk to, etc. And so we help you from idea to, you know, you opening that location, whether it's a service or retail based business. So Franzi.com and then we have a podcast called How I Franchise this where we interview franchisees of all stages and sizes. Some are just getting started, some have the 100 plus unit portfolios and everything in between on how they did it, how they financed it, how they chose the brands, what they would do differently now and then. Alex, from Franzi on all channels. Instagram x TikTok, LinkedIn is just my name. Tons of franchise content. If you want to check it out and learn.
- [40:48]
B
Amazing. And then we have a link to a form where people can learn more about any of these franchise concepts that we've learned about as well that we'll put in the show notes.
- [40:55]
A
Yeah, check it out. We will prioritize reaching out to you because our franchise advisors are all full to the brim right now with all sorts of people looking at buying businesses. So if you check out the link below, but we'll make sure to prioritize reaching out to you.
- [41:08]
B
Okay, thank you, Alex.
- [41:09]
A
Thanks Chris.
- [41:10]
B
Thanks for hanging out on the Kerner office. Please share this with a friend if you liked it.