A (3:16)

Yeah, I think that's important note because you think of at least, you know, for me, I think of McDonald's, I think of Subway and it's like it doesn't always have to be fast food. There's like the breadth is really, really wide of what is available here.

C (3:28)

It's kind of amazing. Any industry that you can think of, there's probably a franchise in there and there's a franchise that's going to want you to run it full time and a franchise that says, yeah, we've got a semi passive model in there. So don't think of the fact that you have to which a lot of my people do, they think McDonald's, they think million dollar investment and they think brick and mortar.

A (3:47)

Yeah, we'll get into some of the investment amounts in a little bit. The example that comes to mind is Shaq, like, doesn't the guy own like 105 guys restaurants or something? He owns. He's like the franchisee, I guess you would say, for like a ton of different stuff. And he's like, well, you can't be at all these places at once. He's not running this stuff. He's like the. The passive or semi passive investor here.

C (4:08)

That's correct. And I had a doctor that did exactly that. We had a little while ago that the Regis Corporation, the ones that own Supercuts, the hair salons, they were selling their Corporate locations off. And I had a gentleman, a doctor who wanted to help underprivileged people who couldn't afford doctor services. So his goal was to get into 100 of them. So what he did to do and he full time doctor. So he's not going to be, you know, he's not going to be in there cutting hair or, you know, greeting customers. So what we did for him is that he bought so many at a time. He bought like the first group was 20 on that. And so for every seven salons, he then hire a regional manager to run those on that. And then every group of seven, then he'd hire another regional manager to do that. And then we built him up to 100 different Supercuts doing that model. So that is how you do that. Probably what Shaq is doing, something similar to that where you start developing a team of people that are actually going to go in there and manage the people and do that for you. You just oversee operations, check on things, key indices.

A (5:04)

Okay, so if I'm starting out my niche research process and I'm sitting in that chair, maybe I'm a mid career person looking for a way to get out of that career or just to build up like another income stream, like diversify my sources here. Where do we begin the research process? Because like we said, the breadth can be. There's franchises in every industry imaginable.

C (5:29)

Unlike the real estate world, when you can see all the real estate listings, there's no real place to go to find a list of all the 4,000 franchises that are out there in the US today. You could probably start at the International Franchise Association. They've got some in there, but there isn't really. Yeah, it really helps to come to people like me who do have a list. Now. I don't work with all 4,000 of them. I work with my 750 or so. But starting out with a consultant, I found when I did it myself, I had like 20 different people calling me up and saying their franchise was the greatest thing since sliced bread. And it's like, wow, that's a lot of people. I got a hold of a franchise consultant who really helped me take a step back and say, okay, let's take a look at, you know, like, where have you been? Where are you at now? Where do you want to be? And let's start narrowing down that circle.

A (6:14)

Yeah, yeah, yeah. And you take your fee as a, like almost as a referral partner where it's like, hey, look, we're trying to play matchmaker here. And find something that's the best fit for you, where you're going to find success and that meets your goals and your budget and all this stuff. And the franchise is paying your fee or is the franchisee the person hiring you saying like, okay, I'll pay you hourly or how does that work?

C (6:36)

Franchisors pay me a referral fee if you decide to invest in that franchise. So for my clients, I'm free.

A (6:43)

Got it. So starting out, get some guidance here from somebody who's been there, done that and helped other people get started in that space. I think that makes a lot of sense. And then maybe there's like a narrow down the check boxes of what is realistic to do on a, on a part time basis if that's the route that you want to go. You mentioned some home services seem to be on the rise. Like any specific ones that, that come top of mind that look like a good opportunity right now.

C (7:08)

Generally you're going to want to look at the ones that people need every single day. So everybody needs heating and air conditioning every single day. The most amount of clients you're going to have. Because everybody needs that sort of thing. Plumbing services, electrical services, senior care. Also another one that. And that's mostly all private pay. So the people already have the money on those. So those are great ones for making a good deal of money. Tutoring is another good one. People always like to. Parents always like to take care of their kids, make sure they get the best education possible. Anything in the health and wellness as well. All great, great franchises. Again, we all need it every single day.

A (7:42)

Maybe the commonality that I'm hearing amongst these is that I would be hard pressed to name, you know, more than three or four, like electrical companies near me or plumbing companies or even senior care facilities. It seems very fragmented. Is that what I'm hearing? Like, okay, because it is so fragmented because it's dominated by a lot of mom and pop or smaller type of businesses. There's a growing interest in the franchise company like becoming the go to player in that space and trying to build up a more regional presence or a more national presence.

C (8:16)

That's correct, Nick. They don't have a market share. Nobody has a real market share in any of those businesses right now. So what you'd be looking for is what kind of services that they offer to you. As a new franchisee. One of the main things that you want is when you're looking at some of the service industries is do they have a call center or are you the one fielding the phone calls on a regular basis. Even though you're doing it semi passive, you don't necessarily want your manager to be fielding the phone calls. You want to make certain that they have a call center will take the calls and schedule the calls for you. If you want to reduce your risk even more, then look at the franchises that have 100 or more franchisees already. Out of the 4,000 franchises that are out there in the US today, only about 5 or 10% of them actually get to 100 franchisees or more. So you already know you're in the top 5 to 10% if you get one that's got a lot of franchisees. And then look for groups. So Authority Brands is a big group on there. They have many different franchises like Mr. Sparky, One Hour Heating and Air Conditioning, Benjamin Franklin Plumbing, Monster Tree Service. So they've got a few of them underneath there. And the Neighborly brands, they've got, you know, the Molly Mates, the ground guys.

A (9:18)

Oh, yeah, I've seen them on. I've seen their stickers on trucks in the neighborhood.

C (9:21)

Yep. So the Neighborly is the largest home services group, franchise group in the US and then you go for the Belfor Group, which does a lot of the cleanup for, like, restoration services. Like, they did have the cleanup for Katrina. So Belfor is the largest restoration company in the whole world. And under their umbrella, then they've got the 1-800-water damage, they've got the hoods that does hood cleaning inside of restaurants, ducks cleaning as well. So then, you know, you're part of a larger organization, so more power behind them.

A (9:50)

And that's typically better run, better managed in your experience.

C (9:54)

Correct. They have had their systems and processes in place, and they've got a proven partner that'll actually bring business to you as well as the business that you're doing in your particular area. But they've got the organization, the systems and the processes well documented in place.

A (10:12)

Yeah. I remember talking with Brian Scudamore from 1-800-got junk. And he had branched out and he had, like, acquired a painting. Like, wow. One day painting. And he had a couple of. Maybe had like a carpet business. So he's kind of like applying the Same model, the 1-800-got-JUNK model, to these other little niches inside home Services. And so it kind of sounds like doing a similar thing.

C (10:34)

Brian's a great guy. I know him. And yes, he has got. He's another one that's got a lot of great franchises underneath him. All great, proven systems that have been just working out and growing on a regular basis.

A (10:45)

Now, if I don't know the first thing about water damage, restoration or plumbing or cutting people's hair at super cuts, I don't know if people are going to be super excited about a brick and mortar type of location. But so maybe like, okay, look at the ones that are more like operate out of a van or operate out of the client's home, maybe that may be more attractive. But even then, do I need to know how to do the thing? It's like I'm going full agency model right out of the beginning and I got to find other people to do the work and hope that there's enough margin left to over.

C (11:17)

We're not going to hope on anything. So that's one thing we're going to make certain as we go through the process. Whether you're working that franchise full time or whether you're doing it semi passive. And here at the side hustle show, we're looking at everything semi passive and manager run. But either way, the franchisor doesn't want you working necessarily in the business itself. They want you working more on the business and growing the business. If you're working in the business, it takes away from your time of growing that business. So I've gone to, speaking of 1-800-water damage, I've gone to their offices and I've seen what they do with their franchisees when they first come on get the onboarding done, they will flood a room and they will show the franchisees exactly how it gets done. That will probably be the one and only time that you're going to go in there and actually do that work. So, no, you will hire people to do all that work for you. I wouldn't go so far as to say never because, you know, you might want to, you know, step in now and then just to see how things are going and work with your crew. But no, the franchisor, once you building that business up, whether you're doing it semi passive, whether doing it full time, you want to work on that business to build that business up, you don't want to be in there doing the work. Now, if you happen to like doing that, then, yeah, I've got a couple franchises I can introduce you to where you can be the person in the truck that goes around doing everything all day. I don't get a whole lot of interest in those. But, you know, every now and then there are. But most of them, no, you're not doing the business, building it.

A (12:37)

Yeah, it's kind of a different mindset. Like, oh, I'm going to buy myself a job. Kind of a mindset.

C (12:40)

Yeah, exactly Nick, exactly.

A (12:42)

To help give you a sense of what kind of franchise opportunities are out there, I put together a list of 50 of them on the lower startup cost side of things to help kickstart your research process. You can grab that resource for free at the Show Notes for this episode side hustlenation.com franchise or just follow the link in the episode description and it'll get you right over there.

B (13:03)

I've got more with Greg in just.

A (13:04)

A moment, including why people pay the franchise fee instead of just building competing business themselves.

B (13:10)

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A (15:04)

Just go.

B (15:04)

To indeed.comsidehustleshow right now and support our show by saying you heard about Indeed on this podcast. Indeed.com Sidehustleshow terms and conditions apply. Hiring Indeed is all you need.

A (15:18)

You mentioned like tutoring or some of the ones that I see on the list are, you know, commercial or residential cleaning. It's like, if I'm going to have to go out and get clients for these businesses anyways because they're not a ton of brand recognition around whatever the company or franchise is, why pay the franchise fee? Like, why not just go do it myself if I'm gonna have to go out and be the one building up the local presence anyways?

C (15:42)

Perfect question. So what you're looking at there is that if you go out and start doing it, you'll probably make a few mistakes along the way and you'll have to figure out, this works. This doesn't work. Name brand, no name brand, it doesn't matter because you don't have that yet. So you're gonna be trying to figure that out on your own. Now, what you want from that franchise is that they've already gone through that process. They've already made the mistakes. They've proven before they became a franchise that they can build it and they can replicate it. You want them to get you there to where you want to be two to three years quicker than if you were to do it yourself. That makes sense.

A (16:16)

Okay, so it's kind of. This becomes a little bit of a calculus of, well, could I realistically figure this out on my own or versus like, you know, paying this company thousands of dollars for the privilege to, you know, wear their T shirt.

C (16:32)

That's correct. So what I encourage people to do is do a comparison, go out there and check it out yourself. For every franchise, almost every franchise, you're going to be paying a franchise fee. Yeah. And that's going to be right around $50,000, give or take. So now what you have to look at is what do I get for that $50,000? Now, above and beyond that amount, that's the amount that it takes to build that business up to get it going. So the out of pocket expense is going to be different from you first starting out in doing it yourself versus getting into a franchise. That difference is going to be 50,000 pretty much, give or take. So you got to figure out, okay, is that $50,000, what are they giving me for that? Are they giving me, you know, where Do I find my employees? What do I look for in an employee? Where do I find them at? What's the structure? What's the questions that I ask them to make certain I get the right employees? What's the marketing plan that they have for me? How has that been proven out before? How is that working with the franchisees that they have now, again, talking with the other franchisees, you get a good feel for that, especially when you talk to the ones that are first starting out. Talk to those. How did that work out for you? Did everything go as planned? Talk to the franchisees. If you get into a franchise that has been around for a number of years, talk to the ones that have been around longest. Okay. Now that you've gotten into the business.

A (17:53)

Yeah. And probably. And the people who've, like, gone back to the. To the table to buy a second and a third, they're like, hey, this works.

C (18:00)

And what is the franchise still doing for you today? Why are you still in it? What are they doing to help you improve?

A (18:07)

So it appeals to me from the standpoint of, look, this is a business in a box. You know, somebody else created the recipe. We just got to go find more bakers. Right. So we could. We're going to scale that way by kind of distributing the people, you know, running the system. Right. It's like, we made this thing, it works. But we can only be in so many places at once, so we need more people. And this is a way to get access to those people or allow people to buy into that system.

C (18:33)

Correct. So what you're looking as a business, you got one or two ways that you're going to expand your business. You're going to either do it yourself, you're going to go out and build other territories, use your money for it. You get all the money because it's yours. But now you've got more responsibility. The other way to do it is have other people use their money to come in. You collect those royalties off of that. And generally speaking, from a franchisee point of view, you're going to be paying 5 to 10% royalties. In addition to that, what that business gets when they do a franchise is they get somebody that's local to that area. So now you've got a local business owner, and that's what they really enjoy is having a local presence there. People that know the area and people in that area know them. One of the advantages of being a.

A (19:13)

Franchise, the closest experience I have to this, was when I was painting houses in college. And there's a Handful of outfits that do this, you know, with college kids. The one that I joined did not have an upfront franchise fee because they're like, well, these college kids, they can't afford an upfront franchise fee. But what they did, they charged a lot more than 5 to 10% royalties on every job. And so that was kind of how they made their money. And that was the name of the game. It's like, can we recruit nationwide a couple thousand college kids, go paint, you know, thousands and thousands of houses and take a percentage of that. And that was their, that was their model. And it was at the same time like a really formative entrepreneurship experience for me.

C (19:51)

That's awesome. Yeah, that's a great way to do that. You get more people into it that way. If you don't charge as much of a franchise fee, but you just take more off the top, then this pay for performance. Did they help you get the jobs? Did they look for the jobs for you?

A (20:02)

You were on your own to book the jobs, but they gave you their estimating system and teach you how to go bid the jobs, how to find some painters. And you know, it's like a bunch of 19 year olds with paint sprayers, like, everything that can go wrong does go wrong type of deal, but you got to learn to work through it. And like I said, it was really, it was super stressful, like, never worked harder in my life. But it was also really rewarding experience to transform a bunch of houses over the course of the summer and work through some of those challenges. So that was. That's probably the closest experience I have to operating a franchise.

C (20:38)

Pretty darn close.

A (20:39)

So you mentioned, okay, typical franchise fee investment, maybe in the ballpark of $50,000. Are your people coming to the table with cash? Is there financing options available? What do you see there?

C (20:51)

Most of them like to do the financing option itself, especially my semi absentee owners. They like to use other people's money as long as the investment services the debt. So SBA loans are very popular on that. It doesn't take too long to get an SBA loan for one of those. It does take a lot of paperwork. So you got to go through that.

A (21:11)

Paperwork a couple months. Usually that's usually a 10% down.

C (21:14)

It depends on what we're looking at there, Nick.

A (21:16)

If we.

C (21:17)

Let's take a look at the service industry. For instance, you probably get going to get an express loan for about 150,000, $200,000 or so. They're going to want 20,000 for that. So you put $20,000 down. Then they pop the other 150, 200,000 into your business account. If you're looking at something that is more of a brick and mortar that requires a build out, you're probably looking at a 7A loan. Generally speaking, that might be up to 20%, 10% to 20% on something like that. So you're right around 10%, but maybe up to 20% on the SBA loan, depending on the investment that you're looking at there.

B (21:49)

Okay.

A (21:50)

And because are they more likely to land on these systems because they're semi proven out in other, in other geographic areas?

C (21:58)

They are the people that I work with fund franchises all the time. Because that franchise has that proven record of success. That part's good. So now all this comes down to is what is your credit score? As long as you've got a good credit score, franchise has got the success rate, you put it all together, you're good to go. The other thing that you could do is you could just do a 401k rollover and use your own money for that. If you have a 401k and IRA from a previous employer, you can use that as well.

A (22:25)

And not going to debt, going into debt to yourself. Right. Because you got to pay that back or there's penalties or something.

C (22:30)

No, zero penalties. Nope. It's not like when you take a loan out from your 401 from an employer that you have where you pay yourself back, but you pay yourself back more. This is what I did to start my business. I did the 401k rollover. Basically you create a C Corporation and then you put your 401k money into a self directed 401k plan. What the self directed plan means is that you can buy stock in any corporation that sells stock. So your C Corporation, Nick's C Corporation, you have stock in that when you create that C Corporation. So your self direct 401k plan then can buy shares of Nick's C Corporation stock. So you just take that money and put it into Nick's C Corporation checking account. You write yourself out a stock certificate. I actually had little stock certificates I had to write the stuff out on and that's how you fund it there. No penalties whatsoever. It's pretty simple process. At some point in time you probably want to change that over like I did from a C Corporation to an llc. Now there's many different ways and I'm not an expert in taxes and things like that. So your CPA would be a better person to talk to about that and when to do it. So my CPA told me at one point in time, he said, okay, you've run the gamut of, you know, your C corporations. Now time to switch over to an LLC tax. And since I'm doing it myself, taxes and S corporation. So again, CPAs, I'm not giving advice. No tax advice here.

A (23:51)

Sure. Like C Corp is taxed at the corporate level and then all the earnings that you take out are also taxed at a personal level. So it's like the argument against it for solo operators has always been, well, avoid the double taxation and get. And just go with the llc. S Corp, something like that.

C (24:06)

That's correct, Nick. That's what I was doing.

A (24:08)

But this is a creative way to finance the startup costs.

C (24:11)

Correct. I didn't need a whole lot, so it wasn't too bad for me. But what ended up happening is that now your stock went up in price, so now you just buy your stocks back. So then when you buy your stocks back and go out of that, you don't get taxed on that because you're just buying the stocks back. So that's not a taxable event. So now I had a whole lot more in my 401k than what I started with.

A (24:35)

Okay, let's walk through an example here and maybe we can use the 50,000 startup costs like in terms of raw numbers and maybe, you know, we borrowed 40,000 of that. I don't know, that's probably going to mess up our, our math. But let's kind of pick one or pick a recent example from a client of yours and let's talk through some of the numbers and like the break even points and the debt servicing and all this stuff that people are going to be curious about.

C (25:01)

Okay, so let's say you just start off with an SBA type loan and let's say you start off with about $200,000. So you put $20,000 down, you get an SBA loan of 200,000 and that's the total buy in.

A (25:12)

But do you think, is it necessary? Like, are the startup costs really that high?

C (25:16)

It depends on which one you want to take a look at. Now if we're looking at something like the one that I got started in, which was a Scully Mitchell telecommunications consulting franchise, 50,000 franchise fee. And then after that it was just marketing and advertising. So no, there's not a lot on that. And the margins were great because it's just labor. Yeah, just labor. Yeah, basically it's just labor on that. So I would be sharing the cost savings I did with my people on there, So I got 50% of that. So if I was saving them, you know, $1,000 a month, I got $500 a month. So now that's $500 a month. And all I had to do was mostly just labor and then probably spent, you know, 25, $30,000 on advertising and marketing. Okay, that's. So the rest was mine. So that one's pretty easy. If you go into something like the plumbing or electrical, then you've got a few other things that you need to purchase. But if we want to take a look at something that's mostly you work from home and you go out and do it, you go out and meet with your clients and customers. Like a cost savings type franchise where there's no overhead, then.

A (26:18)

Yep, yeah. Or even like a tutoring type of thing where it's like, I don't even need a specialized van or any. I don't have any equipment. It's just like, you know, I'm going to go hire tutors who know what they're doing and I'll be the administrator.

C (26:31)

Correct. So now all you, the only expense there is your tutor. And the only time you need a tutor is when you have clients and customers. So you get the customer first, you find the tutors, you match them up. So you got, you probably, you know, interviewed a few tutors just to see who's going to be the best one. The franchise tells you how to do it, where to find them. So now you've got a client, they give you $1,000 a month, you pay the tutor $500 a month, and now you got $500 back per month from that. And with that, you are don't necessarily need an office because you're sending the tutors over to the students, whether they meet them at school, library, however you want to work that out. We look at just the service industry. Then no, there's not a whole lot of overhead on that. And the only time you need people that you have to spend extra money on, like I said, when you get that tutor is when you already have the client and they already start paying you.

A (27:19)

Would that be common labor margin to look for is like, I'm going to double my labor cost is what I'm charging the customer to have the margin to pay the franchise, royalty to pay for my marketing and overhead to pay for my debt service. Is that kind of typical?

C (27:35)

It is there about just depending on which franchise that you're getting into on those. But if I run an Example, let's say senior care, for instance, where you're running it out of a small office. We can use some good numbers on that one. So that one's a good one to get into if we look at senior care. So you got a small office, couple of employees, and then you have seniors and you have, let's see, you build that up after a couple years to about 50 seniors. Once you get up to about 50 seniors, you're going to be bringing in a million dollars, top end, and you're going to be dropping about $200,000 to the bottom line after everything's all said and done. So I want to know, because I put many people into the senior care business and that's pretty typical.

A (28:14)

This is like a. Like a facility, like a elder home facility. Nope.

C (28:18)

You send caregivers out. Sorry, I didn't make that clear. So you have a small office and you're going to keep mom and dad at home a little while longer so they don't have to go to an assisted living facility.

A (28:28)

Oh, okay, okay.

C (28:29)

So you send caregivers into their home. So that's a good one. For 20% margins on that. If you have a manager, you probably pay them maybe 50,000 a year if you want to do that, which is a good price, a good salary. And then you're dropping still 150 to the bottom line on the senior care business with 50 seniors, they're doing that. So that's a good one, a good semi absentee one to get into and a good service industry. And your total investment on that's probably going to be right around 150, maybe 200,000. And you're getting the office together, training the people, a couple people, because you're going to have somebody helping you out with staffing and doing interviews for caregivers. So that's going to be what your total cost that you're looking at for that one is.

A (29:11)

Yeah, I mean, I could see this being a completely remote operation too, without having an office space.

C (29:17)

You could actually do that. The only time, the only reason that you really need the office space is because you have those caregivers and you might want to meet with them on a regular basis, but otherwise there are some that you can. Your manager, if again, we're on the side hustle show, so we're just talking side hustles now full time. So your manager is doing it. So your manager can do it from home, can do it remotely. Every once in a while you're going to want to meet with people. So Maybe you get a regis office and rent it out once a month so everybody can get together and meet. But yes, you can do that remotely. Semi absentee.

A (29:49)

Okay, so I see. Even if you're going the full office route here, like you said, 150, 200k startup cost and once you have this thing up and running, you're netting 150,000 a year. Have a manager that's doing it and like kind of just managing the manager. And yeah, you see 150 grand flowing back to the bott line and it's a mobile service where you had me scared. Like I got to have this senior home with 50 people and like, oh my gosh, the medical overhead and regulations around this, like, oh, this is going to be a really complicated build out. But here's an alternative path to that.

C (30:23)

That would be a lot. We do have senior homes. There are a lot more and they're a lot more involved.

A (30:28)

Well, it reminds me of care.com, which is kind of a matchmaking type of service or platform for caregivers, for babysitters, for pet sitters and like I think they probably even have tutoring too. But it's just kind of, you know, upload your stuff to the site and it's kind of like a matchmaker service where they got to play the demand side and the supply side, which in this case you kind of do two just on a smaller scale and try and build up the local, you know, brand recognition for your own little slice of the franchise.

C (30:57)

That's true. And what you're doing there and why you're local is that you're building up your name. So even with the senior care industry, there's so many different senior cares out there. But the people that are putting mom and dad in your care, I don't know that they're as much concerned about the senior care name brand itself. They're more concerned about how they feel about Nick, not about the brand.

A (31:19)

Yeah, who's the person who's actually coming to go see grandma?

C (31:21)

So they want to believe in Nick. Not necessarily the senior helping franchise.

A (31:27)

Yeah, there's actually some just down like half a block away. I always see him out helping walk this lady, getting her exercise. It's like, oh, I wonder if he's through one of these franchises.

C (31:38)

Could very well be. That's true. She should have had a shirt on. If you have, if you have to guess at that, something to remind them is that you need to advertise. So wear the, wear the shirt so that when you're out walking more with.

B (31:49)

Greg in just a moment, including what.

A (31:51)

Separates the people who successfully operate a franchise versus those who don't, and how.

B (31:55)

He can build both near term cash flow and long term equity using this model or somebody else came up with.

A (32:01)

The idea you just had to execute on it. That's coming up right after this.

B (32:06)

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A (33:26)

There's gotta be a better way.

B (33:28)

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A (34:34)

So this is, it's a different way to look like everything I've done has been like self funded and I've never taken on debt. But we talked, we did a vending machine episode last year and we kind of joked. I was like, oh, you know, 0 to 100 grand in vending machine revenue. It's like you could also call it zero to $500,000 in machine debt or something. It was kind of like, yeah, it's a lot of equipment financing in that case. But similar here was like, well, I'm going to the revenue from the machines that the snacks and drinks, the stuff that they're generating pays for all of that debt service and then some. And so it sounds similar here where that's the name of the game is to build it to the point where the revenue that the business is generating pays down the loan and then after a couple years you're in the clear.

C (35:23)

Correct. And that's not something you want, we want you to guess at. That's something we want you to calculate before you get into that franchise. We want that calculated out by going through the process of due diligence with the franchisors and then following up with the franchisees. So you've got a good feel for this is how much I'm going to spend now on everything the franchise has the cost broken down on item number seven of the franchise disclosure documents under total investment. So we want that pro forma on there and then we want to know from the franchisors, okay, what is the standard build up? How many clients am I going to get this month, next month, this year, next year? And then when do I. And then here's my debt service, here's all my expenses. When am I breaking even? The franchisor is going to go over a lot of that with you. You're going to follow up with the franchisees at least 10, if not more until you start hearing that same thing over and over again on there and you get a good feel and you can fill out that pro forma. So now you're not wondering, you're not guessing. Okay, it should be it's not should, it's, you know, been done before. This is how they did it. This is where I'm going to hit break even. This is where I'm going to hit profit. You want to know that before you sign anything or make any investments.

A (36:26)

Do you find from your clients that those estimates tend to be fairly accurate?

C (36:31)

Yes, they do. Quite accurate. And some of my franchises, my clients who got into franchises actually got and beat that. I had one lady that went into. Yeah, she went into a. What did she go? Oh, Mr. Sparky. She went into a mistress parker, which is authorities brand electrical services franchise. She made rookie of the year. So she knocked it out of the park. And she was a real estate investor with her husband on that. And she actually beat that, beat that estimate. That was a little bit more of an investment because there's a little bit more work there. And moreover. So it was probably a little over 200,000.

A (36:59)

But can I pause on that and say, well, from the people who are having outsized success relative to the averages, what are they doing differently?

C (37:08)

They are hiring the right people, so you have to look for the right manager right away. So with the electrical services one, that one's going to be a challenge. So you have to work closely with the franchisor because you need a master electrician for that one. So what they're doing is they're staying on top of their master electricians. So now you're running at semi absentee because your master electrician is basically the one that's doing all the work. You can't do anything like electrical in there in any house at all.

A (37:31)

Yeah. And do you find that this is a person who. He's kind of a solo journeyman person and they suck at the marketing side and they just, look, if you find me business, I will fulfill that business. But they don't want to be like the business owner. It's a weird, maybe a different mindset.

C (37:52)

It is. What's. That's exactly what you're looking for and what they help you find, whether it's electricians, whether it's a handyman service, those people that do that work, they're great at doing that work. One thing they're not great at is going out and building up that business. Yeah. So the reason they would go with you is that because you know that business and you know how to build a business and you know how to work with people on that, they're going to let you do that. You just, just like you said, Nick, do you send me the business I'll get it done. I don't want to deal with that part of it. You do it. I'm good. I'm your master electrician, I'm your master handy person, I'm your master plumber.

A (38:26)

And I still see this franchise game as entrepreneurship, but maybe entrepreneurship with, with training wheels, with some guidance here. Because it's like you follow somebody else's playbook, follow somebody else's recipe. So again, not having to start completely from scratch. And yes, it comes at a cost, but we're doing your due diligence up front, kind of mapping out that projected pro forma, like, here's what we expect to happen. You mentioned not hiring the right manager was kind of a way to level up and perform better.

C (38:56)

Not everybody thinks like an entrepreneur. I mean, if you're an entrepreneur and you want to get out there and be an entrepreneur and do it, you're 1 in 100. So there's 99 other people out there who says, who are going to say, no, I'm going to work for you because that's what I enjoy doing. That's what makes me feel good. That's what I'm comfortable with. Perfect. If you're an entrepreneur, there are not too many of you out there. One in a hundred people, definitely you're in the top 1% club.

A (39:21)

But any other mistakes that you see people like, failure rates, well documented, much lower than like just a regular independent startup, but still not zero. So like, what do you see where these things go south?

C (39:36)

So this is transparency in franchising. The great thing about franchising is you have a lot of transparency in there in the franchise disclosure documents. So you can go look in there under item number 20, which shows a number of franchisees who started the business and are still running it, and a number of the franchisees who started it and are no longer running it. We want to see 85 or 90% success rate or better. Pretty easy math to get that done. There's people that are going to leave the system, but that says a couple different things. If there's a lot of turnover there, a lot of it. What it says is that the franchisor is not picking out the right franchisees. So he doesn't have, he or she doesn't have a good selection process. But you're asking specifically about some of the bad things that happen with, with people that get into franchising. If you, when you're doing your due diligence, don't look at things that are maybe in style, in fashion right now. We had a big run on yogurt shops a few years back. Every.

A (40:26)

Yeah, that was the exact example I was gonna say.

C (40:29)

There you go. So everybody thought their yogurt shop was the greatest thing in the world. So they're putting out yogurt shops and people were buying them left and right. Not a lot of them made it. Not there's. They have that one up and that went down pretty darn quick on there. So that was in fashion. So what you gotta look at is what that business model is all about. What has it done in the past, where's it at now, and where do you see that going in the future? So you have to make certain that's the sort of thing that people are going to be doing for quite some time. So don't get clouded by what's in fashion at the time. If you're first time into franchising, your first time in entrepreneurship, maybe you probably want to look at those franchises that I mentioned earlier that have 100 or more franchisees where they've done it and they've proven it out. Because the ones that you're going to have a challenge with is the emerging ones that maybe haven't gotten their systems quite down yet. Now, if you got into Orange Theory when it was emerging, you're golden.

A (41:17)

Yeah. It's hard to know is it going to be a trend spike and a dip, or is it like, you know, we're going to ride this hockey stick all the way to the moon?

C (41:24)

That's a challenge when you first starting out. A lot of those emerging franchises are good, so I don't want to disparage those. A lot of people like getting into something that's emerging because then they can be part of the brand as it's building up and they can have some more say in how the brand goes, where it goes from there. If that's what you like doing, then that's something you want to take a look at. But there's going to be a little bit more risk in something like that. Like you said, it's not going to, you know, shoot to the moon and. But you really need to take a look at that business model and where they're going to get their money from today, tomorrow and into the future.

A (41:55)

One thing that we haven't touched on is the idea. Sure, we're building near term cash flow. I think that's a great goal for any business. But we're also building equity. We're building asset value in a business because it's typically going to sell for you know, three times annual earnings or whatever it is, depending on the industry. So it's kind of yes. If the goal is to replace the day job, that's a really great short term goal. But like long term, like now that it becomes this potentially, you know, generational wealth building type of asset, you're seeing clients go that route too and exiting or flipping into something bigger or, you know, taking that and putting it towards their nest egg and retiring.

C (42:35)

A couple different routes. They take on that, Nick. There's quite a few of them that, you know, they say, you know, their kids are getting a little bit older, high school, college, and they say, you know, we're looking at this together as a family. So that I want to build it up. And then once kids get out, then they have the opportunity to say, yes, I want to be part of that franchise and maybe grow out some more territories, diversify into other franchises. I have people do that. I've also had people that have built up their franchises after three years and come back to me and said, okay, I've done this one, let's get this one sold and let's get me into another one. I'm ready for my next adventure. Latest one that I had was a gentleman who got into a senior care franchise. Love senior care. And after two years, three years, two years, he said, I'm bored. This thing runs like clockwork. I need something else to do. Let's go find me something else. And that's what that's all about is you've got something at the end of the day to sell if you want to. Now people come to me and say, I, I want to resale franchise. Find me one that's already in business and I want to buy it. Real challenge for me on that one because when you go to sell your franchise, first thing you do is you tell your franchisor, I want to sell this. Good, you're doing great. Three times net plus in equipment. First thing the franchisor is going to do is going to go to the other franchisees in the area that are close by and say, hey, Nick is selling this franchise, one of you folks want to pick it up. Because they want somebody that's already proven in their system to have first choice to pick it up. Most of the time that's what happens is that one of the other franchisees pick it up. So I don't get a whole lot of good resales unless there's no other franchisee in the area. But occasionally I'll get some, but not too often because Other franchisees will pick up. So it's a good resale of value on, on franchises and I got a lot of people that are looking for them.

A (44:13)

That's interesting. So you get a proven business and so now the neighboring, the guy in the town over has the opportunity to come in and buy it, but not at the initial franchise fee cost. Now you're going to pay it as if it was just a full blown business resale.

C (44:26)

That's correct. So now you're picking up for three times net plus any equipment. So it's. You got the cash flow, got a proven business, but you're going to pay for it.

A (44:34)

Yeah, I can imagine. You know, it could be hard to part with if you're down to that 10 hours a week of management time and it's spinning off good cash flow. It's kind of the passive income dream in a lot of ways. So it sounds like it's feasible given, given the right team members and the.

C (44:50)

Right business, it's a valuable asset to have when you've got it all built up. It's like an annuity. Now you've got all the time in the world to go do whatever you want to do so you can do what you want when you want and you've got the money to do it.

A (45:03)

You're speaking our language, Greg. The book is real. Why franchises are worth considering and how they can be used for building wealth. The website is franchisemaven.com you can check Greg out over there. What's next for you? What's got you excited this year?

C (45:19)

This year? You know, I thought I'd try something a little bit different this year is that sometimes people come to me and they say, you know, I've got a franchise that I'm looking at that I don't work with. But they want my help evaluating it. So I'm not too sure if there's a market out there for it, if people will actually pay for it. But I have put together a little mastermind program where if people want to do that, they don't necessarily want me to help them find a franchise, but they want to get with other people and just talk through franchises. And you don't want me to teach them how to investigate a franchise. We'll have to see what comes to that. Most people just want me to help them find a franchise. That's where I do most of my stuff. And if you have a business out there and you want to turn it into a franchise, I've turned a few businesses into franchises as well. So that's good, but that's where I'm at. Just helping people, turning people into entrepreneurs through franchising.

A (46:06)

All right, coming soon, the side Hustle show franchise. Spin it off in whatever niche. I don't know, kind of a. Kind of a national market already. We'll see. But again, franchisemaven.com Greg, really appreciate you jumping on and kind of sharing the ins and outs of how this stuff works as a potential side Hustle angle for you. It's one that we haven't really covered a whole lot of, so appreciate you joining me for that. Let's wrap this thing up with your number one tip for side Hustle Nation.

C (46:33)

There's probably a franchise out there for everybody, but everybody is not for franchising. I'll introduce four people to a franchise. Three of them will say no. We'll agree on it together. So I'm not here to pressure you into it. Just a good option to look into.

A (46:47)

Very good. We will link up all the resources mentioned in the show notes for this episode and as a listener bonus, I also put together a list of 50 franchises along with some estimated startup costs and income potential as a place to get your creative juices flowing a little bit. See what kind of options are out there and try to target those on the more inexpensive side of the spectrum. But again, just see what's out there beyond what we covered in today's call. You can download that for free at the show notes for this episode Sidehustlenation.com Franchise or just hit the link in the episode description and it'll get you right over there. If you're already a subscriber, just check your inbox. Should be in this week's newsletter. Big thanks to Greg for sharing his insight. Big thanks to our sponsors for helping make this content free for everyone. Sidehustlenation.com deals is where to go to find all the latest offers from those sponsors in one place. Thank you for supporting the advertisers that support the show. That is it for me. Thank you so much for tuning in. If you're finding value in the show, the greatest compliment is to share with a friend. Fire off that text message. Let them know, hey, I think you should check this out. Until next time, let's go out there and make something happen and I'll catch you in the next edition of the side Hustle Show. Hustle on the.