The 5-Step Test That Can Save You From Buying the Wrong Business | Entrepreneurship | How We Profit | E3 | Part 2

Too many aspiring entrepreneurs spend years saving for business ownership, only to invest in an opportunity that was never the right fit. Alex Smereczniak has seen buyers focus on passion, hype, or income potential before asking whether a business matches their skills, lifestyle, and financial reality. In Part 2 of this How We Profit episode, Alex shares his five-step framework for evaluating franchise opportunities and breaks down real business models that can help entrepreneurs build wealth through franchising. In this episode, Hala and Alex will discuss: (00:00) Introduction (01:15) Franzy’s Business Model (12:27) The Five-Step Process for Franchise Buying (29:29) Red Flags Every Buyer Should Watch Out For (32:20) Why Artificial Turf Franchises Are Booming (38:25) The Business of Pediatric Therapy Centers (43:53) Beauty and Wellness Studio Margins (46:00) Pilates Studios as Cash Machines (48:17) The Economics of Coffee Shop Franchises (53:11) Profitable Franchise Categories for Entrepreneurs Alex Smereczniak is the co-founder and CEO of Franzy, an AI-driven franchise discovery platform that helps aspiring business owners find and evaluate franchise opportunities. Before Franzy, he co-founded 2ULaundry and LaundroLab, a tech-enabled laundry delivery and laundromat franchise business. He has experience building marketplace businesses, raising venture capital, and scaling franchise systems. Join the thousands that use Franzy to research, match with, and buy a franchise at franzy.com Sponsored By: Indeed - Get a $75 sponsored job credit to boost your job's visibility at Indeed.com/profiting Shopify - Start your $1/month trial at Shopify.com/profiting. Quo - Run your business communications the smart way. Try Quo for free, plus get 20% off your first 6 months when you go to quo.com/profiting Prolon - Reset your body with Prolon’s five-day plant-based program. Go to ProlonLife.com/PROFITING for 15% off sitewide plus a $40 bonus gift when you subscribe to their 5-Day Program. Northwest Registered Agent - Get a complete business identity with Northwest. Visit northwestregisteredagent.com/YAPFree and start using free resources to build something amazing. Resources Mentioned: Alex’s Platform, Franzy: https://franzy.com/ Alex’s Instagram: instagram.com/alexfromfranzy/ Alex’s Twitter: x.com/AlexfromFranzy Alex’s LinkedIn: linkedin.com/in/alex-smereczniak-40310329 HWP with Alex Part 1: youngandprofiting.co/AS-HWPE3PT1 Active Deals - youngandprofiting.com/deals Key YAP Links Reviews - ratethispodcast.com/yap YouTube - youtube.com/c/YoungandProfiting Newsletter - youngandprofiting.co/newsletter LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ Social + Podcast Services: yapmedia.com Transcripts - youngandprofiting.com/episodes-new Disclaimer: This episode is a paid partnership with Franzy. Sponsored content helps support our podcast and continue bringing valuable insights to our audience. Entrepreneurship, Entrepreneurship Podcast, Business, Business Podcast, Self Improvement, Self-Improvement, Personal Development, Starting a Business, Strategy, Investing, Sales, Selling, Psychology, Productivity, Entrepreneurs, AI, Artificial Intelligence, Technology, Marketing, Negotiation, Money, Finance, Side Hustle, Startup, Mental Health, Career, Leadership, Mindset, Health, Growth Mindset, Passive Income, Online Business, Solopreneur, Networking

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Hala Taha?

  Today's episode is sponsored in part by Northwest Registered Agent, Whatnot, Mod, and AG1. Northwest Registered Agent gives you the tools and guidance to build a complete business identity. Start using free resources at northwestregisteredagent.com/ yapfree. Whatnot helps sellers grow through live shopping, community, and real-time connections with buyers. Search Whatnot, W-H-A-T-N-O-T, in the App Store, download, and you can start selling right away. Mod connects qualifying patients with licensed medical providers for modafinil to support sustained energy, focus, and alertness throughout the day. Visit mod.com for a free consultation and get 10% off your first order plus free shipping with promo code PROFITING.

• 0:45Hala Taha?

  See their website for important safety information. AG1 Next Gen supports your nutritional foundation with vitamins, minerals, pre- and probiotics, and superfoods. Go to drinkag1.com/profitting and get a free immune support bundle with your first subscription order. As always, you can find all of our incredible deals in the show notes or at youngandprofiting.com/deals.

• 1:08Speaker 01

  Franchise businesses trade at a like 1 to 3X higher multiple than an independent business.

• 1:14Hala Taha?

  Oh, wow.

• 1:14Speaker 01

  You've got five businesses with 600K in revenue. You're a $3 million business now with 20% margins, 600K a year in cash flow, pretty good life.

• 1:24Hala Taha?

  If you've ever thought, I want to own a business, but I don't want to start from scratch, this episode is especially for you. You're listening to part two of my conversation with Alex Smirsnack, co-founder and CEO of Franzie.

• 1:36Speaker 01

  I used to hate it. I love franchising now. I think it's such a clear, de-risked path to wealth creation. I think it's the most overlooked path to wealth in America that doesn't get talked about.

• 1:46Hala Taha?

  Let's talk about how profitable a marketplace business like this is.

• 1:51Speaker 01

  When we first started, we did just under half a million in revenue in our first 11 months. Now, this is our second year. We will 7X the revenue we did last year. And so our gross margin is about 80 to 83%. So it's like a software business.

• 2:03Hala Taha?

  That's really good. Out of all these categories, which are the most interesting and profitable for people to really look at?

• 2:09Speaker 01

  And you weren't afraid of risk. Food does so well. They print money. For like the more risk averse person, I love.

• 2:18Hala Taha?

  Okay, so I want to keep talking to you about Franzie. I want to understand who your customer is and how you're marketing to them.

• 2:26Speaker 01

  Yeah, so our customer, there's like three ICPs for ideal customer personas. It's the corporate escapee, the person who is definitely has all the skills you need to be successful in entrepreneurship, but doesn't know where to start. They've gotten comfortable, they have a good income, but finally something happened. It was kids are older, they just can't stand their boss anymore, they don't see a path forward the way they used to, and they're ready to go do their own thing. Like, that group loves Franzie, they love the data, they love the support that we provide. The second group is what I'd call like hackers or like serial entrepreneurs. They're the ones we just talked about. They own short-term rentals, maybe they were doing drop shipping when that was, you know, hot. They're, they've got their hands in a couple of different things. You know, maybe their core, their own core business and they want to add other things

• 3:11Speaker 01

  to it. So they'll come to us as like, hey, I want to add some of these concepts and this concept, and this is what I already do, is there any that are complementary to what I already do? I have these rentals, or is there like a home services repair, you know, franchise I could lay around that would also benefit my core business? So we get, we get that. And then the third bucket is your like professional franchisees. They're the ones that this is all they do, they have 30 units already, 40 units, 50 units, and they might be what are called mumbo's, multi-unit, multi-brand operators. So they own 20 Dave's Hot Chickens, they own 10 Jersey Mikes.

• 3:44Hala Taha?

  They're so interesting.

• 3:45Speaker 01

  And they crush it, and they're just looking for the next concept. Like, hey Franzie, do you guys have any, you know, I don't have a taco concept, are there any like up and coming ones that I can get into quickly before other people grab the territory? So some of this is like a land grab and you got to get the right brand early enough. Others, it's being good at identifying maybe diamonds in the, you know, the rough where it was a bad operator who's selling, or their kids don't want it, and you're looking, you know, you're looking for the right thing. It's more hunting.

• 4:14Speaker 01

  But there's two, there's both in Franzi, Hubs, all three of those buckets.

• 4:17Hala Taha?

  This is so much more exciting than this concept, you know, that Cody Sanchez and I love her. But like just buying a boring business from somebody who's retiring, like buying a franchise to me just seems so much more exciting and fun because it's more branded and like there's just so many different opportunities and less of like turning something around and just kind of like taking something over and picking a good location.

• 4:43Speaker 01

  The thing that I think gets discounted is the upside is insane because if you, again, let's use the three Jersey mics example again. Now that we're in the system, like we're part of the club, other franchisees of other brands respect us, we have credibility, oh, you've done it before. And so our ability to go start acquiring, oh, Terry over here has 10, he's trying to sell three of them, let's bolt those onto our three Jersey mics. Now we've got six, oh, this guy's selling all five of his, we can go buy his now. And we're now getting that deal flow that outsiders don't get. Plus the, again, the credibility of people wanting to sell to us because we've proven ourselves as operators, the brand loves it. And the final, you know, ultimate upside is when we go to exit, franchise businesses

• 5:27Speaker 01

  trade at a like one to three X higher multiple than an independent business.

• 5:32Hala Taha?

  Oh, wow.

• 5:32Speaker 01

  Because you're part of the system that's de-risked. Banks like to lend you more than, you know, yours and I's sandwich shop, you know, they don't want to loan to the one-off, they want to loan to the group that has 200 stores worth of data and have proven that they have, you know, longstanding credit and are safe and more durable. And so easier access to lending, better exit multiples when you sell. I used to, again, be a hater, the more I've gotten into, I'm obviously a total fanboy and unbiased.

• 6:00Hala Taha?

  Not a hater anymore.

• 6:01Speaker 01

  But franchising is a great, great, great path to build a huge business if you want to.

• 6:07Hala Taha?

  Let's talk about how profitable a marketplace business like this is. Like how much are you spending a month in expenses? Like what are your biggest costs to run this business? How much are you profiting every month?

• 6:19Speaker 01

  When we first started, we did just under half a million in revenue in our first 11 months, which for a startup. You know, it was in the top like three-ish percent like I was, you know, we're happy with it. But I told you the college thing of like 120K a week. So I'm always like more, more, more.

• 6:33Hala Taha?

  You're like, I beat this in college.

• 6:36Speaker 01

  And VC, you kind of said it earlier. VCs have this expectation, if you're going to get on that treadmill of the top 1% usually triples, triples, doubles, doubles. So if you start at like 300 to 500K, they want you to do one and a half million the next year, and then four and a half million, and then nine million, and then 20 million, basically. So like in four years, that's quick. You're a 15 to 20 million dollar business in four years. Like they want you to go fast. And then from there, they dump a bunch of money on you and you go.

• 7:04Hala Taha?

  And they don't care about you being profitable. They just want you to grow.

• 7:07Speaker 01

  Use the money to grab market share, build product. And so at first, when we were going to be bootstrapped, we were like, we need to be profitable right away. And I think we can, because we'll be doing the most, most of the selling ourselves and, you know, coaching and advising. And then when we decided to take venture, it was like, all right, we're building for a different outcome here. We're building for a national, maybe even global Canada, Europe. It's sort of like there's franchises everywhere. There's a much larger outcome we can go after now. And so second year, you know, now this is our second year, we will 7X, I think it's six or 7X the revenue we did last year. We're already, we already, we already beat our projection for this year last month. We just started hockey sticking earlier this year, mostly because we have capital and we can do things faster.

• 7:48Hala Taha?

  Yeah.

• 7:48Speaker 01

  And the gross margin on a marketplace, you know, we're paying out, you know, commissions or success fees to our coaches and advisors who work with individuals. So they get compensated, you know, a part of that flat fee that we charge a brand. And so our gross margin is about 80 to 83%. So it's like a software business.

• 8:05Hala Taha?

  That's really good.

• 8:06Speaker 01

  Yeah, it's a software business essentially. And then our net margin is a bit of a loaded question because we're plowing everything back into marketing, into new product development. We have engineers that were at Palantir previously, that were at Fullstory, these unicorn businesses, who were making half a million dollars a year as a software engineer. We're not paying them that much, but they have equity and still a pretty healthy salary. So to invest in a team like that, you end up burning money. There's this idea of a burn rate with startups. How much cash are you basically losing each month? So we're still burning cash. April was profitable because it was such a big month for us. We did more revenue in April than all of last year in Q1 combined.

• 8:47Hala Taha?

  Wow.

• 8:48Speaker 01

  So it's in like May is looking like the same June is gonna maybe

• 8:51Hala Taha?

  Amazing. So word is, word is out. People are buying.

• 8:54Speaker 01

  People wanna be free. They wanna own businesses.

• 8:56Hala Taha?

  Yeah. It's more than ever. People wanna be entrepreneurs. What are the marketing channels that are really working for you?

• 9:03Speaker 01

  Yep. So there's three main ones. It's organic. So our, our own podcast content coming on and, you know, sharing our story and franchising on, on shows like this. That's been probably the primary focus of ours, just cause Hermosy's an investor of ours.

• 9:20Hala Taha?

  Oh, amazing.

• 9:20Speaker 01

  And he, you know, over and over is like, organic is the best lead channel of anyone, you know, paid and referrals is probably the next, like paid search, cause someone's coming with intent or referral, because they're also coming with intent and trust. And then they're like, and then you know, maybe paid like meta ads. And then he was like flyers of, I don't know, he had like a whole list, but he always has organic at the top. And so we very early on made a concerted effort to say, we gotta get good at this, even though it's not my natural like skill set or disposition. I'm trying to figure it out. But so organic, second is paid. So paid search and paid social. So Facebook ads, Instagram ads actually do, do pretty well. And then the last bucket is like referral and affiliate partnerships falls into that bucket.

• 10:04Speaker 01

  So we'll do digital partnerships with other online creators, influencers, content, you know, creators in business. And then offline relationships as well. So partnerships with, there's a group called the IFA. It's the largest nonprofit organization for franchising. So like, can we partner with them? Can we partner with other folks that have access to some sort of distribution?

• 10:26Hala Taha?

  In terms of your team, how many people are on your team? And what is like day to day of Francy look like? What are the problems you guys are solving?

• 10:35Speaker 01

  Yeah. So we're still somewhat lean. I would say we're under 20, under 20 people. Which again, with what we're doing, we're building two products effectively now.

• 10:44Hala Taha?

  That's not a lot of people.

• 10:45Speaker 01

  It's

• 10:46Hala Taha?

  So customer service, are you outsourcing yet or?

• 10:49Speaker 01

  So we are coaching. We have full-time coaches on our team. They're able to handle way more volume than a traditional broker because of all these tools we've built. So a traditional broker, a lot of their Time was spent on follow ups and drafting emails and putting one pages together. Like we've AI the hell out of that to the point and it's perfect. Like it's actually better than what was happening historically. It's done instantly. And so our team can truly spend time doing what humans do best. And that's conversing with other human beings and helping them and coaching them and building relationships with them versus time behind a computer doing admin type work. And so if you cut out half of what they were doing previously, which was 40 to 50% admin work, they now can talk to twice as many people and still have a high level of quality and support

• 11:33Speaker 01

  for that individual's goals and mission, et cetera. So we're able to do it a lot more efficiently as a result of that. So 19 people. It's the best team I've ever worked with.

• 11:43Hala Taha?

  Yay.

• 11:44Speaker 01

  Very, very smart people, hardworking, and I just try to stay out of their way.

• 11:50Hala Taha?

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• 12:33Hala Taha?

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• 12:59Hala Taha?

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• 13:43Hala Taha?

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• 14:09Hala Taha?

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• 14:54Hala Taha?

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• 15:06Hala Taha?

  Yeah fam, one thing I've learned building a remote team is that talent is everywhere. Your next amazing contractor, editor, designer, or team member might not be in the same city or down the street. They might be across the world. But hiring globally is one thing and paying globally is a whole different headache. Different currencies, fees are not always clear, and the last thing I want is somebody on my team wondering when their money is coming. That's why I'm excited to partner with Remitly. The app helps you send payments in over 100 currencies globally with transparent pricing and no hidden fees. Setup takes minutes, so paying international contractors, freelancers, or vendors doesn't have to become another messy task on your list.

• 15:50Hala Taha?

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• 16:34Hala Taha?

  And for anybody who's interested in a franchise, they can really, you know, just study this episode and get a lot more clarity on what is a good fit for them. So step one is define your why before anything else. Why is getting clear so important?

• 16:49Speaker 01

  So this was something I learned along the way and it was because people will come, "How do I make the most money? How do I get rich?" And I'm like, "Oh, let's just take a step back." Not everyone is in it purely for that. Yes, of course, we want to make money and profit and it's important. But some people come and they're like, I don't see my kids. Like I, my hours are this and like, if I could even just replace my income, or even a little less, but I had more freedom and flexibility, I would do that. And so we ask, we spend a lot of time with people on what's motivating you to do this? Is it more quality of life and you know, balance and control? Is it legacy for your kids? Some people come like, I want to open up this business with my son or with my daughter.

• 17:28Hala Taha?

  Like a family business.

• 17:29Speaker 01

  Cause they've made a ton of money already. He's like, I just want to do something that'll teach my kids entrepreneurship and franchising feels like a good, safe again way to do that. So some it's legacy, some it's freedom and control. Some it is purely money and they're like, I just want to make this many dollars. Some it's a hobby and it's just for fun. Like there's some like retirees that will come to us and they're like, I'm getting bored. I want to just like go open up something. We're like, okay. So we really spend a lot of time on why is this important? And that dictates the rest. And sometimes we tell people, depending on their why, franchising is not for you. So if someone comes to us and like, I want to start something from scratch. I want to have a say in everything that I do and not be told what to do anymore. We're like, well, franchising, there's going to be a playbook and you kind of have to follow it. And like, yes, you can still be entrepreneurial for sure.

• 18:12Speaker 01

  You're still the owner of the business, but you can't go like buy McDonald's and start selling like lobster rolls. Or like, you know, like it's just like, you gotta stay in a certain lane. And some people aren't the right fit for that. And we're also very transparent and honest because it's a waste of everyone's time. The brands won't like us. You'll end up being unhappy in two years. We might've made a quick buck, but it's not, that's not worth it in the long run.

• 18:34Hala Taha?

  No. What are some of the common like misalignment points with people? Like they come in and maybe like have their eyes set on something and, and there's misalignment. What are the common ones?

• 18:44Speaker 01

  Yeah. So one is this idea of like, it's mailbox money. They're like, yeah, I'll just come in, I want to put 200K and it's going to spit out 400K in the first year. And then every year after that'll be great. I was like, if that were true, I would be doing that repeatedly over and over and over again. There is a lot of work, no matter what you do, like fast money is, is not good in my opinion. You're going to have to work hard no matter what you do, whether it's franchising or not. And you know, that we have to kind of condition people on a little bit. It's like, this isn't just a like set it and forget it thing, especially in the first year or two. So there's misalignment on the time commitment sometimes. The next big one is people will come because they. They like a product or they saw this thing happen and they're dead set on it.

• 19:27Speaker 01

  They don't want to budge. And we talked to them and we're like, huh, this is like not aligned with your skillset at all. Or your risk tolerance that you just shared with us, or what you have. Yeah, but I love golf. I want a golf simulator.

• 19:39Hala Taha?

  Hmm. Again, the passion thing, like it's not about what you're passionate about.

• 19:43Speaker 01

  If that aligns, it's a great bonus for sure. Like if it happens to be like you can, the risk makes sense and the skillset and the golf sim works out. And you can take your buddies there and send friends, friends and family or whatever. They're like, great. It's a bonus, but it shouldn't be the core driver of why you're making the decision.

• 19:59Hala Taha?

  Okay. Step two, know your operator profile. So what are the common profiles of different operators out there? And then what kind of businesses are conducive to those personalities?

• 20:09Speaker 01

  Yep. So a big one is honestly a lot of veterans, which is another reason I love franchising. A lot of brands give veteran discounts. Almost every brand gives some sort of like 10 to 15% discount on the franchise fees. And pretty meaningful. And veterans make phenomenal franchisees. Because if you think about being in the military and in some of the situations that they're in, it's very regimented and structured. But in the moment, if you know, combat starts to happen, like it's all chaos and reacting and adaptive. And a little, not entrepreneurial, but a lot of the same kind of skills of being able to react quickly, think quickly, make decisions quickly. And some ex-military and veterans do so well in franchising because there's some structure and there's regiment, there's a playbook.

• 20:51Speaker 01

  But the reality is in the day to day of running any of these businesses, you're going to have to react and adapt. And you can't be like, oh, on page 52, the customer got mad. What do I do? It's like you're reacting, my employee got some issue that happened and I have to work with them to solve it. And so there's that persona of like the ex-military operator. And whether you're ex-military or not, it's that persona of someone who's really good at managing teams, managing people, good with structure and regiment. There's just a sub persona within that group that's ex-military. The other one is you're like, you're ShamWow guy, the seller, the marketer, the promoter. They're very good at like high ticket sales. Maybe not as good at, I mean, they could probably inspire and rally a team, but they might not be great at like.

• 21:36Hala Taha?

  Executing?

• 21:37Speaker 01

  Executing the like day to day like logistical chaos that they have to put together. But they can probably go sell a bunch of fifteen thousand dollar pool installation jobs or five to ten thousand dollar fencing jobs. And so maybe home services, big ticket home services is good for them. Because it's a smaller team, you know, one or two people, you know, instead of a team of some restaurants. People don't realize this. I didn't realize it until I got into it. A McDonald's has forty to sixty employees.

• 22:02Hala Taha?

  Oh, wow.

• 22:03Speaker 01

  Because there's, there's three shifts, twenty-four hours, seven days a week. And even if it's not twenty-four seven, most restaurants still have like thirty to fifty employees. So it's a lot. I mean, it's a lot of people, a lot of turnover. Like, that's a different skill set than the smaller or specialized team. So those are the two big ones for sure. So are you more sales, marketing oriented? Less, you know, good on the complex people operations or are you more of like a structured? Maybe you don't want to go knock on doors and so you need a brand that has a lot of heavy marketing support from the parent and like a really recognizable, reputable brand.

• 22:36Hala Taha?

  How do you know if you're better suited for like B to B versus B to C?

• 22:41Speaker 01

  So well, some of the questions we asked to get into that a little bit, some people come in with a pretty strong opinion of like, I know what I'm good at. I don't want to talk to other like, you know, ones and twosy kind of B to C type conversations. I want to go deal with other professionals making a, you know, professional business decision. Part of it's their personality. Some people come in, they're very friendly, they're charismatic, they're bubbly, which could work for both. But it's in a way where it's like the friend across the street that you trust for, again, a recommendation for your home or for a smaller ticket decision. And there's others who are way more sophisticated, they come off more polished, sophisticated. Maybe their background is in doing enterprise level sales. So those we put into more of a B to B bucket and say, hey, you would, you can just tell.

• 23:22Hala Taha?

  Cause they can do high ticket sales.

• 23:23Speaker 01

  Yes. And just the way they carry themselves is more polished versus the other person is probably just as intelligent. It's not an intelligence thing, it's just the way they communicate is maybe more informal. It's fun, it's likeable, bubbly. They are selling, I'd say like different things or usually have better success selling different things.

• 23:43Hala Taha?

  Yeah. And I would imagine that the B to C person might not be the person selling the thing, right? They're just kind of operating.

• 23:52Speaker 01

  More marketing too. It's like they're creative, they're kind of with fun, crazy ideas and like they want the freedom to go do that. And the brand does allow you at a local level to do a lot of that. You can't go rogue and you know, change the logos and certain things like that. But if you want to go run local events at the PTA meetings or at kids sporting events or do collabs with other local small businesses, like there's a persona that's really good at that. And then there's this other persona who's like, I want to deal with business professionals all day and like line up my meetings a week in advance. And two very different personalities and skillsets.

• 24:25Hala Taha?

  Step three, match on financials and markets. So what kind of numbers and economics are you typically looking at to judge whether it's a good franchise opportunity or not?

• 24:37Speaker 01

  The first part of that too, and I'll come back to the question is, we need people to have 50K, 30K at the lowest end of cash available to them and 150K or so net worth. So anything below that, it does get really hard. There's some franchises that are 10K, 15K to get into, but you're essentially buying yourself a job, which is okay. It can work and you can do well at it. It's just there's.

• 25:01Hala Taha?

  What's an example of that?

• 25:03Speaker 01

  So like, there's like bucket in a mop type franchise where you're basically buying the rights to a territory of commercial cleaning. So like, but you're the one probably going there with family members or some employees to actually clean the office building. It might be even this, you know, podcast building that we're in, might be a customer, they'll pay 200 bucks a month and now they're on a route and every day we're going to go clean office buildings, bathrooms, empty trash, vacuum, etc.

• 25:23Hala Taha?

  So it's like, it's no location, it's just like a van and?

• 25:26Speaker 01

  A bucket in a mop. And I say it jokingly, but like, that's kind of it.

• 25:30Hala Taha?

  And the brand.

• 25:31Speaker 01

  And the brand that you get. And so what you're buying there is they help you find customers and like they're doing that from corporate and they maybe have national partnerships with Regis, the office management business. And so maybe they're feeding you leads and deals and that's the value that you get, but it's only eight grand to get into it and you can make 30 grand and not do that great or you might be really good at this and grind it out. And I've heard of some of these people with huge territories and they're doing, you know, half a million plus in cash flows. Like it's possible and it gives a person who. Maxes out a credit card to get in.

• 26:04Hala Taha?

  The opportunity, yeah.

• 26:05Speaker 01

  The opportunity, but more often than not, there's a term in franchising, they call them sharecroppers, who do this because they are kind of just like, all right, let's sell 200 of these a month, knowing that 100 of them are gonna in two months give up and fail. And I don't love that personally, but it's still a path where 100 of them are making it and succeeding and are probably very happy. It's just, you get into that volume like that, it starts to feel a little bit like, oh, you're just like, selling as much as you can.

• 26:32Hala Taha?

  Yeah, it feels like a scam or something.

• 26:35Speaker 01

  I don't like it as much. And then there's like, a fun one though, that I think is real, this is more of a side hustle. It's called Card My Yard. And it's, you've probably seen it before. You drive around a neighborhood and you see these like, happy birthday Alex, or congratulations, whatever. And that's a franchise. You know, they sell you the kit of all the letters and stuff, and they again, help you with local marketing and advertising. And then a family will pay you 60 bucks to go card their yard.

• 26:58Hala Taha?

  Oh, cool.

• 26:59Speaker 01

  Put that up. Again, we don't try to play God and say, hey, these are the, these are the best 10. You know, we have our own opinions, but I think is great, my co-founder might actually disagree with on some things and say, well, I like these, because it does go back to your individual personality, your risk tolerance, et cetera. Instead of like trying to vet a brand based on, is this 10K to get into like Card My Yard? Because there really is an audience for that and the right fit for that as well, even though it's 10K to get into it. All the way up to there's one called Big Blue Swim School, and then Slick City. It's like indoor slides, but it's like this massive like kid's birthday party, 4 million to build that out though, because this is huge complex. And so it's not so much like, what does this cost to get into? Or even the economics of the business, because some people, again, it's not about the money, they're just like,

• 27:43Speaker 01

  it's a real estate play for me. I just want this thing to break even, even because I'm, the real estate's gonna appreciate in value over the next five years.

• 27:49Hala Taha?

  Taxpayer.

• 27:50Speaker 01

  And that's why I'm doing it. Yeah, or it's an opportunity zone thing. So there's all these reasons people might do it that aren't always purely bottom line profit for that specific operating business. A lot of the times it is. So the thing that we really vet for on Francy is, is there any like mail intent or potentially, potential fraud? Does the founding team's background check out? Do they have experience doing this? Is there red flags around all these stores that have opened and are now closing? So there's things that we look for that we are starting to surface as, you know, potential flags. So we'll, if you look at a brand profile, it might flag that, hey, this brand has had. Thirty percent more closures in the last year than they did four years ago. Something's up. Like, why are they closing?

• 28:34Speaker 01

  Or is it consolidation that looks like closures? Like, at least ask the brand this when you talk to them, if you are interested in this brand still.

• 28:40Hala Taha?

  Yeah.

• 28:40Speaker 01

  So we're surfacing insights like that to derisk it for people.

• 28:43Hala Taha?

  Do most people get a loan to actually get their franchise? So most people are just putting down like the 20% of their loan to buy the franchise?

• 28:52Speaker 01

  Yeah. So that's why we said that 30 to 50K. You can get into concepts for less than that, but if you have 30 to 50 grand in cash, it opens up so many brands you can get into with an SBA loan. If you have 30 grand and that's, you know, 20%, you can buy a business, you know, for 150-ish K and maybe bring another partner in. So 150K options, there's actually a lot of them. So that's why we say at a minimum have 30 to 50K, because that gets you into 150 to 250K businesses.

• 29:22Hala Taha?

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• 31:31Hala Taha?

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• 32:15Hala Taha?

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• 33:00Hala Taha?

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• 34:27Speaker 01

  So the way to diligence, I mean, one, use a tool like Francy. There's all this data that's very digestible. Typically, I would have said, go to the FDD, that franchise disclosure document. One, they're hard to find because there's only 11 states that like publicly register them and they're buried in government websites. So they're hard to find. If you do find them, they're 200 pages of legal documents, which aren't super exciting to read. It's hard to know what you're looking at. And so Francy, and there's other platforms, so use those as well, that show you revenue cost to get into it. What's the royalty? What's the franchise fee? Everything you need, just, you know, quick at your fingertips. So that's a good way. The best way though is talk to other franchisees of that brand at random. As you go through the process, They're gonna, it's almost like an interview process.

• 35:12Speaker 01

  If you've ever interviewed someone and you ask for references, they give you the three best. They're not gonna give you the boss that like they know didn't like them or that they got fired by or whatever. It's like, sure, those are great, but you know what they're gonna say. Same thing when you're buying a franchise. The brand serves up, here's the three you should talk to, and they're like the most successful, money-making, highest-achieving franchisees, which is great, you wanna hear what they did and how they did it. But you should go then secret shop and find your own. Maybe that, you know, and that's listed in the FDD and on our site. You can go look at all the old franchisees. Go look them up on LinkedIn and cold outreach to them. And you might have to email or message five of them, but one or two will say yes, and you might learn, yeah, the brand said they were gonna do X and they really did Y. And then you need to, as an individual, decide, is this believable?

• 35:57Speaker 01

  Am I hearing this enough times? Or is this, they were a bad operator and they're bitter about it? It's like, there is some of that that you have to sift through and filter through. But that is the single best way to understand, is the concept legitimate and viable? Is by talking to the many people who have done it before you.

• 36:15Hala Taha?

  Yeah, I wonder if there's a world in which you can be the platform where franchisees can provide their reviews and things like that.

• 36:23Speaker 01

  More to come. We're, we're, we're starting to work on some stuff now that will certainly spotlight and highlight that better.

• 36:30Hala Taha?

  What's a red flag with a franchise?

• 36:33Speaker 01

  A lot of closures. Like if they've started closing a bunch of, a bunch of locations, something's not working. There's a reason, either there's competition coming that's just beating them and they're not profitable and they're, they're better off closing than losing money each month.

• 36:48Speaker 01

  They've cannibalized themselves, so Subway did this on purpose and it's biting them in the butt now, but.

• 36:53Hala Taha?

  Subway also had like yoga mats in their bread, so.

• 36:58Speaker 01

  They found out it like wasn't technically bread because there was so much sugar in it. It was like a donut, actually, it was like the technical definition for their bread. They did a lot of things wrong at the end, especially, they just got greedy. And some brands will do that, they'll, you and I have protected territory again, and then all of a sudden, three years from now, they're like, we need to open more locations, because that's how we as the franchisor make money. Let's cut, you know, our territory in half and sell three more. And we're like, what? So we just lost half of our customer base and have all these fixed costs. And so brands can do that, it's not.

• 37:29Speaker 01

  You know, there's, there's a lot of protection in the legal documents for the brand and the franchisee, but just you gotta be mindful of stuff like that and make sure you are picking a brand with high integrity people and that the franchisees all love and get along with.

• 37:41Hala Taha?

  Older franchises might not be good at like updating their marketing tactics or their support systems. Am I wrong in that assumption?

• 37:51Speaker 01

  You're totally right. I mean, you see it in some of you and just like the, the lipstick on the building, right? It's like a lot of the restaurants that are refreshing the outside and modernizing the drive through and that's a good sign. You as a franchisee have to pay for that and some franchisees hate it, but in order to stand out and be, you know, up with the competition, you need to have menu innovation and you need to have better technology and a better experience. So yeah, brands that are investing in that pretty aggressively is a good thing, even though you as a franchisee will probably be paying for it in some form or fashion, you should be constantly innovating and growing and wanting a brand that is doing that.

• 38:26Hala Taha?

  Okay. Step five, using transparent data instead of commissioned broker.

• 38:31Speaker 01

  Yeah. So that's at our core. Again, how we get paid, that's Franzy. We get paid flat. It's the same across all brands. So we, I don't want to say we don't care which business you get into, but from a financial perspective, we don't care which business you get into. What we care about is are you going to be successful in this business? Cause if you are, you're probably going to buy more locations eventually and hopefully they're through us and you're eventually going to add another brand at some point and hopefully it's through us. And as we grow as a tech company, we're going to have other products and services and hopefully we've built this amazing relationship with you that you want to come to us for, hey, I need help with this. Do you have a software solution for that? Do you have a services solution for that? And so everything at our core has to be done through the mission of how do we create the next million entrepreneurs and how do we, you know, in order to do that, they need to be successful. It's not the next million failed entrepreneurs. It's the next million successful entrepreneurs.

• 39:16Hala Taha?

  Okay. So we talked all about in part one, in case you guys missed it, we talked all about Franzy and his platform. Right now we're going to go through different case studies and opportunities of franchise opportunities and we're going to have Alex kind of vet them for us and help us understand why it's good, why it's bad. So we've got this artificial turf installation, which we were talking about earlier. It's a project-based home services business. There's no storefront, right? There's no lease, which means that the startup costs are, are pretty low. And the initial investment your team, Brett on your team, actually gave me is 121,000 to 163,000.

• 39:58Hala Taha?

  The average territory revenue is a little under 600,000 and the net margin is 21,000. So talk to us about why this kind of business is really hot right now.

• 40:11Speaker 01

  It is one of the most popular businesses on our platform. And again, there's 4,000 brands you can go look at. And I think part of it is it's new. There's home services for everything. There's gutter cleaning. There's window washing. There's roofing. There's HVAC. How many turf businesses have you ever heard of? And I hadn't really heard of many at all before. And so I think it's becoming a trend, which is good to be a part of it, not a trend that's just going to go away. I think people like the idea of convenience. And when I, I live in a condo now, but I had a house previously and I hated cutting the grass. I'm so busy with all those startup stuff.

• 40:44Hala Taha?

  Yeah, nobody wants to do that.

• 40:45Speaker 01

  I come home, I want it to look nice, but I don't want to do it. And then I'm paying someone to do it. And I'm like, I find myself really caring about this thing constantly and how it's done. It was just, it was just like distraction more than it was a thing that I enjoyed.

• 40:59Hala Taha?

  Yeah.

• 40:59Speaker 01

  If I had a bunch of turf that looked perfect all the time and green and good for dogs and kids, like sign me up. And I think another part of it is some cities are starting to regulate and outlaw the ability for you to grow natural gas, or sorry, natural grass. So Las Vegas recently said, no, you can't grow natural grass in the city limits anymore. There's a lot of cities in Florida starting to think about, hey, you can't use water for things like this. And so turf is really the only option if you want greenery. Otherwise, it's like rocks or I don't know, something else.

• 41:30Hala Taha?

  It's the water restrictions driving up demand.

• 41:32Speaker 01

  So the South and the Southeast, you know, California are really good for these concepts. It works in other you know, colder markets, but really works where there's a lot of heat and you're constantly watering and grass is dying and this just solves it permanently.

• 41:47Hala Taha?

  Like for a franchise, is 21% margin good?

• 41:50Speaker 01

  So the thing that's interesting about franchising, it covers everything hospitality, food, health and wellness. And so it's really almost industry dependent, just like you would weigh maybe a fitness concept versus a, you know, other health and wellness concept. It doesn't matter if it's franchised or not, the margin is going to be probably pretty similar across both. And so I think businesses that are over 20% margin regardless of the industry is usually pretty good unless it's super low revenue volume, anything over 20%, like you have wiggle room, there's a lot of buffer there. And what I like about this brand or this concept is while the revenue is somewhat low per territory, less than 600,000, most people are buying up two, three, four, five territories at once because the incremental

• 42:33Speaker 01

  cost to do this is another 30 grand, 20 grand. You're not having to spend 120 to 180 each time.

• 42:39Hala Taha?

  I was thinking that, that you'd have to spend 120, but now, now it's, you just get an SBA loan.

• 42:44Speaker 01

  Well, and it's just the right to the territory. So that 120 to 180 K is really like get the truck, get the initial materials, three months of working capital, you know, and some installation equipment, et cetera. Once you have that, the territory is really what's valuable in a business like this because it's all services based. So you're now buying, if it's 60K for one territory, 50K for the second, 40K for the third.

• 43:08Hala Taha?

  But you don't necessarily have to buy the trucks, more trucks.

• 43:11Speaker 01

  No. I mean, if you sort of do a company where you have jobs, but that's a good champagne problems and you got growth happening. And so we've had a number of people buy three, four, five, six territories and you do the math, you got five businesses with 600K in revenue, you're a $3 million business now with 20% margins, 600K a year in cash flow, pretty good life. I mean, how many people do you know making 600 grand a year? It's not a lot.

• 43:35Hala Taha?

  Not a lot of people. So one of my former clients was Brian Scudamore. He was my, he was my client for years. I ran all his social and podcasts and stuff. He's 1-800-GOT-JUNK and he also has like a paint company. So are home services franchise businesses, are they generally like desirable?

• 43:56Speaker 01

  I think so. They're easier to get into and the overhead is not as high. So to me, the risk is lower from a fixed cost perspective. What scares me sometimes, and I'm doing some physical retail businesses myself, is like, once you build. You're not moving it, it's there. And so if you pick the wrong location, you're dead. You know, and like that freaks me out. What I like about home services is you got a huge territory with a bunch of houses. And if one neighborhood's not working, another one might. And the cost usually is some equipment that even if it doesn't work out, you can sell back. I can't sell them all the improvements I did at this retail location, all the drywall and plumbing and electrical work we did.

• 44:33Hala Taha?

  That's true.

• 44:34Speaker 01

  That's there. But if it's my truck that I bought and my, you know, power washer or window cleaning equipment, I can probably sell it back, not for, you know, one to one dollars, but probably half or some amount. So worst case scenario, I'm not out as much. So I like it for the lower risk, lower cost. And some of these home services businesses, there's garage.

• 44:56Hala Taha?

  Garage clean out?

• 44:57Speaker 01

  It's like garage clean out and like I call like pimp my garage, like the pimp my ride, you know, version for your garage. And they'll do over a million dollars in revenue as a services business, putting epoxy, you know, epoxying people's floors and putting custom shelving in a garage. And it's not a super complicated business.

• 45:13Hala Taha?

  It's just such a cool way to just make money. Um, all right. Next one. This one's really interesting. Pediatric speech and ABA therapy. These are therapy services reimbursed largely through insurance. The customer's families with children who need speech or ABA therapy, which is, is that autism therapy?

• 45:34Speaker 01

  Effectively helping those with autism or speech deficits to find exercises and therapies that they can do to form the habits that help, you know, improve, improve those deficits and, um, you know, navigate life and develop those skills in a, in an easier way.

• 45:53Hala Taha?

  Interesting. So the initial investment is anywhere from 300,000 to 800,000 dollars. But the location revenue can be over a million dollars, 1.3 million dollars for mature locations. Top locations doing a million and a half per year. So they're, they're very lucrative. So what's, uh, what's the opportunity in this? Are these becoming more popular?

• 46:16Speaker 01

  Yeah. So I think, yeah, and I don't know that it's necessarily that people are being, you know, there's more and more people with autism. I think there's just a lot more attention and care to, uh, you know, mental health, special needs, way more than there was historically. I think people in the past were kind of like. Rub some dirt on it, basically, and you just, people wouldn't pay attention. And now there's way more science and then research behind it. And so I think it's one in thirty-four have some level of autism. And so it's centers that help, you know, people develop skills to better cope and navigate life that might, that may have autism or other, um, you know, disabilities or learning, um, you know, issues. And so these facilities are becoming more popular. The cost for the, the location being three to, you know, eight hundred Ks, depending

• 46:59Speaker 01

  on the size, the market that you're in, but then your point, one point four million in revenue. The margins, I imagine, it's not listed in their FDD, but it's probably similar to a fitness concept where you have trainers or some sort of professional there. And usually those businesses have mid twenties to mid thirty percent margins. I imagine it's like twenty-three to thirty-three percent ish margin on one point four million. Again, a great business. The mission behind it's phenomenal. So some people come to us, again, it's not about the money. They're like, I want to help because my child has X, Y, Z. And so this is one of those businesses where there's a, you know, fantastic mission at its core. Plus you can make money. Plus you can provide care in a way that's, you know, above what's been done traditionally.

• 47:42Hala Taha?

  It's also recession proof.

• 47:44Speaker 01

  Yeah, you, you're gonna need this regardless. I mean, what parent isn't going to pay, especially if insurance is covering it? Makes it a no-brainer. Insurance pays more than, you know, a lot of retail businesses would. It's, you know, almost guaranteed and it's somewhat of a recurring revenue model because you're going to have clients for a series of months. You know, it's not like it's one-off, come in, okay, I learned some, you know, skills and I'm out. It's like any kind of therapy or physical therapy, mental, you know, going to a psychologist or therapist is, you know, for mental health, you're going to go multiple times for a series of time. And so you have this kind of recurring, I'd say, client base built in that's never going away. You know, once they matriculate, the next group is already coming and it just doesn't stop.

• 48:28Hala Taha?

  Okay, I want to go back to the turf one for a second. What are the elements of success? Like, what do you think that person needs to do to actually like have a well-running territory?

• 48:39Speaker 01

  Yep, so turf is one of those like medium to larger ticket sales. It's not like it's tens of thousands, but it's not. Five hundred bucks either.

• 48:48Hala Taha?

  Hmm.

• 48:49Speaker 01

  And so this is where I would look and the, the team is small. You don't need a huge team. So this is where I'd go back to the ShamWow.

• 48:54Hala Taha?

  Yeah, that's like the marketing guy, yeah.

• 48:56Speaker 01

  You want the person who's like gonna go do content in their local market and be like, your backyard could look like this and sending. Yeah, I could see someone sending DMs or AI images of like, hey, I got you this picture of your house from Zillow and I made it look like it has turf. Like, doesn't this look way better? Here's a before and after that I just created of your actual house. Some people might get creeped out by that, but I can see a bunch of people being like, wow, that looks really good. And so you're gonna want someone who's creative like that and is coming up with out of the box ideas and getting in front of each single house in their territory. And cause that's each, each one's an opportunity. And the team to install the turf is one or two people. So you don't need to have this huge, complex operation. And so I think for someone to be successful there, you want a founder or an operator that is marketing slash sales led.

• 49:41Hala Taha?

  And then on the therapy side, what are the key things to make sure that your business is profitable on that side? Like, what do they need to worry about or lean into?

• 49:50Speaker 01

  Yeah, I think the quality of the therapist is really important. It's such an emotional thing. It's such an important thing that the level of training and the caliber of the individual you have first and foremost in the location. Cause that's what will keep people coming back. There's support groups and Facebook groups, et cetera, for families with children with autism. And so they're gonna be all talking to each other about, hey, we found XYZ facility. It's amazing. We work with Tiffany or John there and they're like, that's gonna happen. And so it starts with the quality of the service you provide. I think first and foremost and word of mouth will be big for this business. The second thing is likely partnerships with, you know, what are other adjacent services? Is it hospitals? Is it, you know?

• 50:34Hala Taha?

  How to plug your distribution, like, yeah.

• 50:36Speaker 01

  Yeah, finding those like one to many distribution outlets. Cause this isn't gonna be like a Facebook mark or like a local marketing thing. This is gonna be much more relational, emotional, referral based, community based. Like what community partners can you find that share similar clientele?

• 50:50Hala Taha?

  Okay, number three, a sunless spray tanning and skill wellness studio. So beauty and wellness, small format studio. Investment is three hundred thousand to six hundred thousand.

• 51:05Hala Taha?

  Average net revenue is 650,000. Well, I guess operating margin is 25% because there's retail products as well.

• 51:13Speaker 01

  Yep.

• 51:13Hala Taha?

  So how do you feel about these spray tanning type studios? Are they good?

• 51:20Speaker 01

  So this is one where it would probably be someone who's more into this because it's a lifestyle or a passion decision. It's a traditional tanning is bad for you, but I still want to look good and have good skin health and beauty there. And so this could be someone who's really passionate about that, maybe doesn't need this to be the sole source of income. And so they're doing this as a little bit of a, not a side hustle, but a side source of income and they like it and they like interacting with the clientele. They like being that person that owns it because there's other things that you could do that you'd make more money than this one.

• 51:55Hala Taha?

  Yeah, and way less initial investment.

• 51:57Speaker 01

  Right. This to me is one of those ones where people are gonna, again, it's a passion thing. They want a physical location and it's not about building this empire, this massive wealth producing thing. Because this one as well, what I was gonna say was even though it's three to 600K or so depending on the size, the margin's really good, but the operation's not that complicated. You've got people that come in, they book times, they go in, it's usually equipment that's supplying a lot of the spray tan. And so you don't need a ton of people either. So it's simple, which makes the lower revenue, lower return profile relative to your fixed

• 52:40Speaker 01

  costs a little bit more attractive because you can kind of, this is one of those more potentially semi-absentee businesses.

• 52:47Hala Taha?

  Interesting. And so you could open up multiple locations. Like if you got a lot of cash, it could be a good one for you if you're passionate about it. All right, next one. Reformer Pilates Studio, my dream, my dream.

• 53:01Speaker 01

  These are fantastic.

• 53:02Hala Taha?

  If I quit Yap today, I'd be owning Pilates businesses. So basically you're investing anywhere from 500,000 to 700,000 dollars, which to me sounds high because there's such little. Whenever I think about Pilates, I know the machines, but like it doesn't seem like there's that much involved. Average studio revenue is over a million dollars a year. EBITDA margin is 30% nearly.

• 53:31Hala Taha?

  And there's memberships, packages, ClassPass. So not, not so bad.

• 53:38Speaker 01

  I love this one personally. So it's, it has recurring revenue, membership based. It's like a SaaS, you know, software as a service type of business. And I've talked to Ellen Latham a few times. She's the founder of Orange Theory. And her story is phenomenal. Orange Theory really revolutionized like this kind of concept where it was, we're going to go beat, you know, the big gyms and do this very bespoke, kind of curated, specific, you know, training programs, et cetera. And people will pay for it. They love it. They're part of a community. It's kind of cult-like a little bit in a good way. And she was telling me that at their height, they were trading at like 20 to 25x multiples.

• 54:19Hala Taha?

  Wow.

• 54:19Speaker 01

  Which is insane. And so I think the multiple is good again because there's recurring revenue built in and there's such a loyal, you know, following. So for that brand with the high margin, the recurring revenue, yes, the build out's more expensive, but the revenue justifies it. I mean, the average location, I think it's like 350K in EBITDA or 360K.

• 54:37Hala Taha?

  349.

• 54:38Speaker 01

  I don't know. You get a couple of these open and again, you have a pretty good lifestyle and a cash machine.

• 54:43Hala Taha?

  This validates my dream.

• 54:45Speaker 01

  And this one, when you're talking about getting into a franchise, you need like a trainer or someone to run the gym anyway, unless you were planning on it being you. And maybe like, I don't really want to do that.

• 54:57Speaker 01

  It's a great one to find like an operating partner model.

• 55:01Speaker 01

  Cause you're not going to be running 17 classes at once. So now you need 17 people. So you really need a small handful of really good, reliable trainers, some equipment and a location and you're good.

• 55:12Hala Taha?

  I love it. Okay. Let's move on to the fifth one, gourmet coffee shop. So we've got a coffee shop. It takes anywhere from 260 to 900,000 dollars, depending on the format. Averaged unit gross sales per year is 600,000. Top 50% make 840,000 a year.

• 55:33Speaker 01

  So the margin, I think I pulled it last night. It's 15%. And this one is interesting because there's this like Lego, you know, set of being able to to set up the layout. So do you want to have drive through, no drive through? Do you want a retail, you kind of sit down area, walk in area? And so that's why the range is so big on the cost from 300K to I think it's 800K or so. And so that gives you flexibility. And that's where earlier we talked about how entrepreneurial are you? This is where you get to be entrepreneurial. Do I want to go for this? Or do I want to scale it back? Do I want to add that later? Is that even possible? Can I do my build out in a way where I can add it later? And coffee is especially these like more bespoke coffee shops are crushing

• 56:16Speaker 01

  around Seven Brew. If you're familiar, they've Blackstone has invested in them. They are opening, I want to say it's like multiple locations a day right now.

• 56:25Hala Taha?

  Oh, wow.

• 56:26Speaker 01

  And it's just drive through. It's like a little, it's like that Washington or Seattle style coffee shop where it's just a core and then like three drive through lanes and they're just, it's speed versus Starbucks has become, you kind of go in, 17 customizations for every person's drink. You sit there and you hang out. And that was really good at the time. Howard Schultz was like, I want this to be the third place. You know, I want this to be a place that people can come in to sit and do work or meet people or dates or whatever it is. And I think the world is just increasingly becoming busier and busier and busier. And there's a huge subset that doesn't want to wait. And Seven Brew and this concept as well is built for speed. And so, you know, this drive through element, that's why the top

• 57:09Speaker 01

  50% of the drive through group of this concept are doing 800,000 instead of 600,000. The issue I have is the margins just lower and it's because it's food and bev. Most food and bev is going to be worst case, high single digits, best case, low 20%.

• 57:26Hala Taha?

  This seems like another business where somebody's going to go into it because they just love coffee.

• 57:30Speaker 01

  Yeah.

• 57:30Hala Taha?

  And like not realize that it's. Not the best choice compared to other options that are out there.

• 57:36Speaker 01

  Well, and this one in particular has like very good, high-quality gourmet style coffee. Some of the other concepts that I mentioned, Seven Brew, Dutch Bros is like this. It's way more targeted at a younger demographic. It's almost like they're selling custom energy drinks in some cases, or these like dirty sodas as well. And those do way more volume, way more volume, higher margin because it's just way simpler. This is, I think it's lower margin because it's this like very, you know, high-quality beans and their roasting process is protected and they're doing all these other fancier things and selling a premium product.

• 58:14Hala Taha?

  Is a coffee franchise more of a real estate business than than an actual product business?

• 58:20Speaker 01

  Yes. So Dunkin', very much like McDonald's, way more value in the real estate that they own than the actual operating business. Most people think of Dunkin', it's like, oh, it's donuts, it's coffee and, you know, America runs on Dunkin' and it's the whole business. But the franchisees behind Dunkin' are all primarily in it for the the real estate ownership.

• 58:39Hala Taha?

  It could be if you want to get into like commercial real estate, you open up franchises knowing that the real value, like it's maybe you get a little bit of money every year from the franchise, but the real value is owning the commercial real estate.

• 58:51Speaker 01

  Yeah, some of the like OG franchise guys that I know that are, you know, 60s, 70s now, they started out with a small handful of Burger Kings or Pizza Huts when Pizza Hut was really blowing up 20 years ago, 30 years ago. And they then started buying the real estate underneath as they became more successful individually from the operating business. And then eventually they hit a point where like, I'm sick of doing this and dealing with employees and turnover and customers and all this stuff. Like, I own all this real estate now, but what can go into a Pizza Hut with that like very unique roof? And they're like, well, why don't I just sell my Pizza Huts, I'll make some money. But now I got tenants in all my locations that I own that are gonna at least run this for five to 10 years

• 59:33Speaker 01

  because the franchise agreement is typically a five to 10-year agreement. And so I think it's a brilliant play. Like you can start out, operate, work your way up. Again, hard work up front is always gonna be there. Then you find yourself as a commercial real estate owner and a path to easily selling to a perfect tenant. Cause it's already built out. It's already there and it's the staple, this name brand of, because it's a franchise. Versus Hollis and Alex's taco stand that no one knows and we go to sell.

• 59:59Hala Taha?

  So you could resell just the franchise rights and not

• 1:00:03Speaker 01

  Just the operating business.

• 1:00:04Hala Taha?

  The property.

• 1:00:05Speaker 01

  Yes.

• 1:00:06Hala Taha?

  And you can do that on Franzy.

• 1:00:07Speaker 01

  Yes.

• 1:00:08Hala Taha?

  Okay. So out of all these categories and all the categories that are available on Franzy, what are the most interesting and profitable for people to really look at?

• 1:00:17Speaker 01

  Yeah. I hate giving the it depends answer, but it so much does on the individual and the person. So let me break up like two personas. You know, so for like the more risk averse person who is scared about real estate, like I love home services. Because it's stuff that's not going to go away, even during COVID. Everyone's doing all these home projects and home services just skyrocketed. Maybe some people cut back on the convenience oriented things, like someone coming to cut their grass. But your HVAC goes out, you're not going to live in 90 degree, you know, weather in your house or you know, heat in your house. And so some of these staples, I think if you're willing to out compete the local options, which many of them are mom and pop. So it's still you who's also mom and pop, but with the power of a brand behind you and the power of a network of other franchisees to learn from.

• 1:01:03Speaker 01

  So I love home services for that more risk averse group, both the operational minded and the jam wild sales minded operator. If it was, you had endless money and you weren't afraid of risk. Food does so well. It's risky. It's lower margin. But if you get in the right concept, like Dave's hot chicken, or now there's one called Mike's red tacos. It's out of California. It's like Berea style tacos.

• 1:01:25Hala Taha?

  I'm so surprised you said that.

• 1:01:27Speaker 01

  Have you heard of Mike's?

• 1:01:28Hala Taha?

  No, but I'm, no, I haven't, but I'm surprised you say you said food. Cause I always thought like restaurant business was so difficult and so.

• 1:01:35Speaker 01

  Well, I think I mentioned it in the, you know, the first part, but. That Economist article saying that McDonald's has minted more millionaires than any other company in the history of mankind.

• 1:01:44Hala Taha?

  Everybody needs to eat.

• 1:01:45Speaker 01

  What they say about restaurants is true. I think it's like, again, me starting my own barbecue shop on my own. Even if I was really good at it, it's so hard. You have supply chain stuff and menu stuff. You're doing all these things on your own. I couldn't tell you how to do all the menu for McDonald's, but if McDonald's gave me the whole playbook and I just need to now operate this four-wall location, I can do that. But all the other stuff that they figured out before me with tens of millions, hundreds of millions of dollars and the technology and the food innovation and the supply chain, they got farmers in Argentina that they're getting all the burger meat for 10 cents a pound versus me paying a dollar 50 or whatever.

• 1:02:26Speaker 01

  That's what makes it so accessible and the chance of success of a restaurant drastically higher than an independent restaurant. If it was independent, I would agree with you. If it's franchise, I'd say if you get the right brand, especially at the right time, they print money. Average McDonald's prints 600 to 700K in cash flow.

• 1:02:43Hala Taha?

  Wow.

• 1:02:44Speaker 01

  A year.

• 1:02:45Hala Taha?

  That's so surprising.

• 1:02:46Speaker 01

  Chick-fil-A, 9 to 10 million dollars average unit volume for one Chick-fil-A.

• 1:02:51Hala Taha?

  I figured that with Chick-fil-A is so hot. These brands also get so trendy, right? Like Chick-fil-A for so long was so trendy. And I think some of the other ones you were just mentioning, like they kind of just like blow up and everybody wants to go try the new one in their town.

• 1:03:06Speaker 01

  There was a guy that I met probably five years ago now. He was a McDonald's franchisee. His dad started out before him and I think had two or three of them. He then took it from two or three to 30.

• 1:03:18Hala Taha?

  Wow.

• 1:03:18Speaker 01

  And we asked him, like, what's the average McDonald's do? How much does your portfolio do? He's like, well, the average does, and at the time it was like four and a half million in revenue. It's now up to like five and a half or close to six. So four and a half, he's like, that's for the average. He's like, I have top locations. He like wasn't just bragging, he was being serious. He's like, mine's in the top quartile. So I'm doing like five and a half per. So all right, 30 locations, five and a half. So you're doing like 150, 160 million dollars a year in revenue off of something that you started, you know, 15 years ago, 20 years ago with your dad at three. So what's the margin? He's like, I'm probably making like 600K per location. So we did the math again and we're like, oh my God.

• 1:03:57Hala Taha?

  You're loaded.

• 1:03:58Speaker 01

  You're paid like an NFL quarterback, you know? And then we caught up with him about a year ago. He's now up to close to 90 locations. And so just like, once you get going and you have that level of cash flow, it's like, you're the monopoly man. You're just like, I'm gonna buy 10 more, I'm gonna buy five more. Cause you already have the team in place, you already understand the system. And it's just like, you're so big now.

• 1:04:20Hala Taha?

  It's a repeatable process that you can just do over and over again.

• 1:04:22Speaker 01

  The momentum can't stop. There's another anecdote I want to share. And this guy was an investment banker, so he knows deals. His background, we talk about skill, you know, brand fit. He's like, I'm an investment banker. I like just looking at deals. I don't need to be passionate about food or fitness or whatever. And he was at an orange theory and he asked the owner, he's like, I'm just curious. Like, how much do you make? And he showed him the numbers. He's like, you make that off of two locations? He's like, I make that off of one location. So this individual went and bought two or three orange theories. I think he started with one, quickly got to two or three, and then he started using SBA financing. He was good at raising money as an investment banker. So he started putting deals together and saying, hey, here's what I'll pay you if you invest in this. So he might not own 100% of the equity of what he was doing. But he in seven years got to 120 locations.

• 1:05:07Hala Taha?

  Oh my God.

• 1:05:08Speaker 01

  Mostly food, Dave's Hot Chicken, Restore Hyper Wellness, Papa Bagels, Marco's Pizza. And all of those have average unit volumes of two to three and a half million dollars. So on 120 locations, we're talking like a three to 500 million dollar a year business, a half a billion dollar a year business in seven years.

• 1:05:30Hala Taha?

  And you never invented anything.

• 1:05:30Speaker 01

  In seven years. So like, that's fat. If you think about seven years from now, I'm 34 years old. If I started doing what he did by 41, I'm done. I don't have to work again. I can sell this portfolio for.

• 1:05:42Speaker 01

  Depending on the multiple on the EBITDA, the EBITDA on that business is probably

• 1:05:47Speaker 01

  seventy-five to one hundred and twenty-five million for seven times that I could sell. And even if I only own thirty percent of it, I'm selling for multiple tens of millions of dollars and I can decide I'm done. And so this is what I like about franchising is there's these playbooks and if you're willing to do the work and-

• 1:06:03Hala Taha?

  You could really build like a whole empire. What did you call them, like mumbo or like-

• 1:06:07Speaker 01

  Mumbos.

• 1:06:08Hala Taha?

  Mumbos.

• 1:06:09Speaker 01

  Multi-unit, multi-brand operators. That's exactly what this individual did. He started out with Orange Theory and then he just added another, added another, oh, this is a hot brand, it's not developed in Florida yet, I'm gonna go buy the rights to five and build those over the five years. It truly is, I know I'm, you know, fanboying again, but I used to hate it. I love franchising now, I think it's such a clear de-risked path to wealth creation. I think it's the most overlooked path to wealth in America that doesn't get talked about.

• 1:06:37Hala Taha?

  I mean, I've talked about franchising on this show before. Like I mentioned, Brian Schoonamore was my client, he used to come talk about it once in a while. And it always felt like a little bit obscure, like, yeah, sure, I guess people can start franchises, but like, it just seemed so not easy to figure it out and not easy to find opportunities. So it's really cool that you're solving this problem with Francy and now people can go on there and vet opportunities and learn more and hopefully you create your goal of a million entrepreneurs.

• 1:07:09Speaker 01

  Run her way.

• 1:07:09Hala Taha?

  Yeah. So Alex, this was an awesome interview. Thank you so much for breaking down everything about Francy in part one, going through these case studies in part two, so people can really think about what kind of franchise is great for them. I end my show with two questions that I ask all of my guests. So the first one is, what is one actionable thing our young improfitters can do today to become more profitable?

• 1:07:35Speaker 01

  So if it's, if it's an existing business, it's the easiest and most effective answer is raise your price. Most people are scared to do it, they're terrified, they think they're gonna churn a bunch of customers. Think about Amazon with Prime or Netflix when they charge us $3 more, we get upset for like a week.

• 1:07:52Hala Taha?

  Yeah, you forget about it.

• 1:07:53Speaker 01

  But they just created like hundreds of millions of dollars in profit, not revenue profit, because they have so much volume now. And Alex Formosi talks about this a lot, too. He's like, yeah, I used to have 200 members at my gym and they'd pay a hundred bucks a month. So I raised the price to 300 and I provide a little more value to justify the price. I churned half my customers and I have 100 people paying 300 instead of 200 paying 100. Not only am I generating more revenue, my costs stayed the same because I had the gym, I had the equipment, everything else already. So not only did I generate more revenue, I'm vastly more profitable than I was. The answer more often than not is raise your price, but people are terrified to do it. You need to do it thoughtfully and you do it in a way where your value is matching it.

• 1:08:32Speaker 01

  But raise your price, you will make more money like that and your business will also become simpler as well doing it. If the answer is in general, go to franzy.com and check out Buy a Business and join the movement.

• 1:08:46Hala Taha?

  Love it. I love that advice. Okay. And then what is your secret to profiting in life? And this can go beyond business, beyond finance, however you want to answer it.

• 1:08:57Speaker 01

  Yeah, I've decided a while ago, it's like, I know we have one life here and I want to live it fully. And that's with having good times with my friends, that's working very hard to build a business and have an impact. It's loving my family as fully as I can. And so my secret has been, I don't want to be 80, 90, looking back. I wish I would have done that with more intention or more effort or harder. And so my advice is just like every day, whether it's a hard day or not, like get up, do it fully, because it is short. I mean, it's, you know, I probably have over 40, 50 years or whatever it is, and I want to go at it as aggressive and as fully as I can.

• 1:09:38Hala Taha?

  I love that. Well, Alex, thank you so much for joining us on Young and Profiting Podcast.

• 1:09:42Speaker 01

  Thanks for having me.

• 1:09:44Hala Taha?

  And that's how Alex and Francy profit. This two-part conversation showed us that franchising is not just McDonald's, Subway's, or the big brands we already know. It can be home services, fitness, therapy, beauty, food, and so many other business models. What resonated most with me is that entrepreneurship does not always have to start with a blank page. For the right person, franchising can be a way to start with a proven playbook, real data, brand support, and a business model that's already been tested. But as Alex made clear, franchising is not passive. You still need to run your business, drive marketing and sales. You still need to know your why, understand your operator profile, run the numbers, do the due diligence, and pick a business that actually fits your skills, lifestyle, capital, and risk tolerance.

• 1:10:29Hala Taha?

  So if you're thinking about business ownership and you've got some money, keep your mind open and consider franchises. Don't just chase the sexiest franchise idea. Look for the model you can operate well, scale wisely, and profit from over time. Thanks for listening to How We Profit Wednesdays, the young and profiting format where real entrepreneurs share real numbers, real margins, and the real story of how their businesses actually work. I'm Hala Taha, and I'll see you next time.