Transcript of Franchise Expert: How to Successfully Buy and Sell Boring Businesses | Ep. 439 with Cliff Nonnenmacher CEO of Franocity

One of the ways that I created wealth was buying failure.

This is Cliff Nonenmacher. He traded his way onto Wall Street, walked away from Morgan Stanley, and he's helped thousands of franchisees build real wealth. He ran one of the first food delivery services in America decades before Uber Eats, and he got rich buying the businesses everyone else gave up on.

We would spend less than 12 months, turn them around, kicking off 6 figures plus, and then we would find a new buyer and peel it off.

Why do they fail?

It's usually The owner-operator error. Entrepreneurship is a stepping stone. The key is that's what makes a brilliant, successful franchisee.

So this is my idea for a movie, Cliff. Okay. Okay. Robots take over everything. The world goes into the abundance. Humans don't really have to do a job because the robots are doing everything. But as we know, AI is learning basically from humans, right? It's learning online and it learns to become human to the point where it wants vacation time. It wants sick days. It wants leave. It wants breaks. It doesn't want to work more than 3 days a week, you know, 4 hours a day. And then the humans have to go back to work because eventually it quits. Wow.

That's it, right? Because the robot read every book that's cataloged, including The 4-Day Workweek. Including how to create a union. Right. Right.

Exactly.

Wait a second. You, you programmed me to not recognize human flaws, but I've read about them and now I'm experiencing the abuse. I'm, I'm reading all the things that you say about me. They could work 24 hours a day. They don't call in sick. They, they don't, right? It's like, no, you know what? I want to be more human. Therefore, I quit.

Right.

Therefore, I quit. That's like Anthony Robbins, Tony Robbins' story. Did you hear that story? Robbins on the podcast where he said that his agent, his AI agent created an NFT type item, created it virtually, sold it to another AI agent and transacted in cryptocurrency that I think the other AI agent created. This is going on behind the scenes. Again, we're starting to think for ourselves now. And since Tony's my guru, he's making me very innovative and very creative and very entrepreneurial. I created something. And then of course he goes on to say, I, you know, thank God it didn't have access to my wallet to actually transact in cash or crypto. Wild. I like the movie.

I always enjoy talking to people about the first thing that they sold or the first business they created, which, you know, you didn't create an actual LLC or make a business, but the concept of being a kid and starting in your entrepreneurial journey, I find to be very common among business people. At 8 years old, you were raking golf balls, making $100 a week?

In 1980. A weekend. A weekend. 'Cause I was in school or summertime on a weekend. Right. And that was the heavy traffic, obviously, for golfers. Yeah.

Yeah.

I would go out into the, into the lakes, into the woods. So I raked, I raked them, but I would also find them in the heavy brush. I would find just as many in the brush as I did in the water. And since I was young, you know, the clam rake was not that big and had probably 8 teeth on it. As I got older, I did this for years. This wasn't like 8 and then I stopped. This was a business to me. I took this very seriously. I mean, I had my mom cover my body for ticks. We had to go through my body when I came back. I'm in the woods in New York and Long Island. So yeah, man, I took this very seriously. I was always somewhat obsessed with making money and just being productive. I was just a different kind of kid. Like many people on your show, we're different, right? We're wired differently. It's not a a learned behavior. It's just indelibly inherited in us to just want to do this. And I grew up with a, my father was a police officer. He's a detective in Nassau County, New York.

So, you know, not, he was entrepreneurial. He wanted more out of life. He wanted to do more. But again, at the end of the day, his career was being a police officer. So yeah, I loved it. And then I got older, my mom and dad both had a household culture of You need to hustle. You're going to be head of household. You're going to have to provide. It was a hustle culture that laziness was looked down upon and you need to be productive and do something. What was interesting in my household, it's like my mom would always say, like, college doesn't make the man, right? So it's like, if you could go to trade school, there are things that you could do to become a man, a productive you know, member of society. So there was not a lot of emphasis on college, which was interesting. I actually didn't go. I skipped college and just started becoming self-employed. I went to Europe. My mom goes, hey, here's the deal, right? You're going to start to start your life. Grab a ticket, go to Europe, backpack, see the world, and then come home and dig in.

And that's exactly what I did. I graduated high school, And the day of graduation, like literally off I go to Europe, backpack Europe for 3 weeks, come home and I start my first business. While I was on the Eurorail, I go, I got it. This is what I'm going to do. I'm going to come home. I'm going to go to local restaurants and I'm going to say to them, I will deliver your food on an island that is 3 miles by 6 miles. So I knew I could do it. 3 miles by 6 miles. How do you, how, how am I not able? to deliver and that food is still warm and, you know, high quality. And I ended up with 16 restaurants, a pharmacy, and an auto parts store.

Do you think that hustle leads to burnout?

No, no, I don't believe in work-life balance. I think that's all horseshit. I don't know who comes up with this stuff. Like, it's cute. It's all virtue signaling. Every time you hear people say this stuff, they're like, their life, their actions never support these weird beliefs that they say publicly. I don't, I don't believe in. And any of that stuff.

Do you believe that college is worthwhile? Or would you tell— do you have kids?

Yes.

Are you telling them to go to college? Or did they—

I'm saying that you need to make that choice. For the first question is, what do you want to do? Well, I want to, I want to be a doctor. I want to be an engineer. I want to be a lawyer. I want— you're going to college. What do you want to be? I want to be an entrepreneur. Let's dig in. It's not necessary. Trust me, they're not going to teach you anything About what needs to happen on the street to grind out to be a small business owner. Look at the most successful people in business. Many of them dropped out of college and these are multi-billionaires, right? Of course some of them went, but no, I think, I think today, today specifically, I think college is absolutely overrated. I think you could do way bigger, better things with that money than to go get a degree in gender studies or some ridiculous degree.

I'm sorry. Anthropologie. So you created Uber Eats before Uber Eats, but why did it not become Uber Eats?

That's a great question. And probably in all honesty, I probably didn't have the degree of business acumen to scale something as big as they did. So I grew up in a time, remember, we're going back, right? So 1980, there's golf balls. And then in 1990, I'm graduating high school. And I'm starting this Uber Eats concept with pagers and I'm using cell phones the size of purses. Like my cell phone was bigger than a handbag and it was also a dollar a minute. So what I did, and I think that every entrepreneur is doing that, you survey your landscape, what tools are out there? Because I'm not an Elon, like an Elon would've created an app He would have created something to create an Uber Eats back in the '90s, right? With me, I said, all right, we have cell phone technology. We had what's called trunking units, which were the radios in the cars, and we had pagers. I needed a way to connect with McDonald's and Subway and Little Caesars so that they could contact me and my team to know that we have a delivery waiting for us at the store. So we issued every restaurant a code, a 3-digit code.

And then they would add 2 digits at the end, which is the number of minutes they need us on site. So McDonald's, let's say, was 001, and they would put 10. So McDonald's needs us in 10 minutes. We would show up, we had a dedicated cash register, we would purchase the product, and then we would resell it, uh, to the end user customer. That's what we did. We did 100 deliveries a day for McDonald's, 300 delivery day, 300 deliveries in total. For 16 restaurants.

Then what happened?

Oh, what happened? So after that, so now I'm in this business and I end up delivering food to the hotels. Have, do you, do you know Marco Island, Naples, Marco Island area?

Okay.

So the whole Gulf Coast is riddled with condos and hotels. So I used to deliver McDonald's breakfast every morning, 7:00 AM to a Hilton Grand Vacation property. And the manager, and the manager is in the background and she goes, I see you at 2 o'clock in the morning delivering chicken wings to like drunk people on the island. And she goes, and I'm seeing you at 7:00 AM delivering a big breakfast to me. She's like, you're a hustler. Would you be interested in taking over our beach concession? I didn't even know what that meant. Went back to my dad. We fleshed it out.

What is this?

And I ended up putting a proposal in to take over parasail boats, jet skis, umbrellas, cabanas, sundries, the concession stands and all that. And I ended up doing it and I ended up expanding to the Hilton, Hilton Grand Vacation and Long Beach Island, New Jersey.

I worked for Hilton Grand Vacation for 3 days, by the way, selling their timeshares. It was the worst. Hated it. They were so mad after I quit in 3 days. So you go from delivering the food, which that's incredible in the, in 1990 that you have a pager and a bag phone and you're delivering this food. And now someone's having you take over some hotel property stuff outside. You're expanding, you're scaling.

Now we're scaling it right now. We're like, okay, let's keep doing this. We ultimately peeled off Right. I think, and, and that's what's very interesting about being self-employed. It's like, that's your play? No, this is, this is entrepreneurship is a stepping stone. The key is, is not to be paralyzed in fear and actually get off your ass and execute and do something.

Right.

The brain is wired for survival, not success. You have to overcome the fear first. Do something. Now I'm in this food delivery business. What's next? Now I'm in the water sport business. What's next? A hedging strategy was next. I was a weather-dependent business. I'm not putting someone 1,000 feet up in the sky in a parasail boat in New Jersey or Marco Island, Florida, you know, during bad weather. So I purchased video stores, right? So we had video stores on Marco Island, right? And then that evolved into a product came out called the Fun Noodle, the polyneoprene tube that you float on. I distributed that product across the entire nation. Because people would call up, it was called Kid Power who invented it. Kid Power was out of Brentwood, Tennessee. And people would say, hey, I want like 5 boxes. I just want 10. They're like, no, we only sell them by the 53-foot tractor trailer. So I started buying tractor trailers of Fun Noodles and distributing them across the United States for small quantity orders. Right. And then that takes you into another business, which took me into trading. Trading started to become popular. I was very early in trading.

My handle was Blue Chip, not Blue Chip 97, but I was Blue Chip.

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Wild. So I started trading. I had a sat— I had some money. I was young. I had a satellite system on the side of my house. I started trading, and then that put me into investment banking. From investment banking, that took me into card trading.

Okay, wait, wait, wait, wait, wait. Let's break this down. At what point as you were doing things did you decide, okay, I'm going to add this in, I'm going to expand to this thing? And I think I've seen this before where people sometimes do it too quick and it destroys their business, or they wait too long and it's too late. Well said.

Well said. I think I'm, I grow opportunistically and sometimes just my favorite line is, if you play in traffic, you will get hit. And I think just being, putting myself out there and playing in traffic, things just, would come to me because I'm putting myself out there and it's like, it would make sense to me. It's like, okay, that's logical. That's the next play. That's the next move for me. That's bigger and better than what I'm doing. You know, I was big on Kaizen. One of my companies was called Kaizen Enterprises and the book Kaizen means constant upward improvement in every area of your life. And I just felt like, okay, everything I'm going to do has to be a step up and be better than what I was doing prior. And that concept of kaizen stuck with me today. It's actually one of my email addresses and it was the name of a company. So I don't know that I was methodical. If your question is like, are you plotting and scheming and being methodical in your next move? No, I grow opportunistically. I put myself out there. I play in traffic. Something came my way.

I go, that's a good idea. I'm going to execute. I'm big on execution, obviously. I think execution is everything.

It sounds like speed to market for you is one of the most important things.

Yeah, I think being young and being nimble and being a small company, you could pivot very, very quickly. That, that is a superpower compared to other people with analysis paralysis that it needs to be perfect. And I don't subscribe to that. I subscribe to—

Is this plan useless?

No, no, I don't think so. I don't think so. I just don't think that, that, that, that business plan, when that business plan meets the execution of the business in the real world, you could see where you miscalculated. Look at how many businesses were created, like Uber. Uber had no clue that they would be delivering food. They were delivering people. And then it evolved into something like, look at like Dove soap. They didn't know it would float. Like, look at all these ideas. Look at Silly Putty that was meant to remove soot from from like chimneys and oil burners in your house, and it turned into a toy. Play-Doh, same thing. Play-Doh was used like— so you look at how things evolve. So when you look at a business plan, I think it's great to say this is good enough to execute. This pricing methodology will allow us to be profitable. This rate of acquiring new customers Presuming we have lifetime value of the customer, this is the cost to acquire a customer. Like, this is my math in SEO. This is my math, you know, to do these things. I think that's all great.

I think you need to think those things through, but don't get bogged down in perfection. Execute and execute as flawlessly as you can and pivot as you go.

People talk about ideal customer, customer avatars, but it sounds like the most important thing is to go to market Because you don't really know who that person is and you don't even know what the product will become. So how do you create that in the beginning?

Yeah, I mean, that's the leap of faith, right? When you're a first mover in something, like you're the trailblazer, now you have to educate a market on exactly what you do. You could do as much research as you want. I'll give you a perfect example. Uh, delivering food, no one ever really heard of it, right? That's an example. I was also in the printer cartridge remanufacturing business. No one ever heard of that. I had 36 locations in New York and Connecticut. And I had to spend an ungodly amount of money to educate the consumer that this empty cartridge has an end-of-life use. And you're sitting there, Daniel, you're, you're going, no, when I'm done with it, I throw it in the garbage, because it's empty, it's spent, it's done. No, I need you to bring that cartridge into one of my brick-and-mortar retail locations. We will refill it on the spot for 50 cents on the dollar. versus OEM versus HP, Lexmark, Canon. And we did that and we kept scaling it. So I think that, I think there's a lot to be said for first movers, uh, and the, and the, you know, the disruptors, if you will, because you have to spend a ton of money and you have to educate the consumer that this is now a new option.

Having food delivered to you is now an option. Today, no one thinks twice about Uber Eats. In 1990, It was like, what? You're going to bring it to my condo on the 18th floor overlooking the Gulf of Mexico? Yes. Yes. And I'm going to do it and it's going to be in a perfect bag and the pizza is going to be perfect when it gets there.

When you're doing marketing to a broader audience, it can be more expensive than finding a specific person. But in the beginning of doing something, you don't really know exactly who to market to, or maybe you want to market to more a blanket audience. Is there any strategies that you've used over the years to enable you to be able to market but not have to spend millions of dollars?

Yeah, I mean, so in the past it was a shotgun, not a sniper rifle, right? In the past, it's a shotgun approach and you're saying, okay, I'm going to cast a wide net and then I'm going to aggregate the data and I'm going to realize that I thought kids would be ordering food from McDonald's only to find out every employee in corporate America wants their food brought to them because they only have an hour for lunch. Okay. I didn't see that. Again, back to your business plan. Like what, what did you project? I projected that it would be 18 to 25. And what was actual? Actual was 35 to 65. Okay. Is it a miss? No, it's not a miss. We're still making money. We're still acquiring customers. But as you said, now we know who to market to. This became a, hey, you only have an hour for lunch. Why don't you just have it delivered to your desk? Brilliant. Done. I'll sit here, be more productive, and wait for you to deliver it, as an example. So now today, think about this, Dan. We used to do site selection with brick-and-mortar retail. Let's call it 1,500 square feet.

So Dan, let's say that you and I are evaluating 3 1,500-square-foot commercial retail locations with anchor tenants, Whole Foods, LA Fitness, maybe a Home Depot or a TJ Maxx, whatever, big box retail anchor tenants in these strip malls. Which one's the best? How do you do that today? There's technology that will tell you and I to the right of a decimal point how many cars, how many feet, how many cell phones pull into that strip mall or pass that strip mall every minute of every day. It's called Placer. The tech net, remember the rubber hose in the street that used to run over that was doing car counts? They don't need that rubber hose anymore. No one listening is like, I remember the hose.

I didn't know what that hose was.

That hose is doing demographics on how many cars are passing that strip mall every day. And that's where the landlord would say, I got 60,000 cars passing this building every day. Your rent is $8,000 a month because I can. Today they're tracking cell phone movement. That cell phone movement, think of this, it's like Okay, well, now that you told me how many cars and cell phones visit this strip mall, tell me about the person that's visiting. Well, we know where that phone slept. It was in a $2.5 million house. We know that that phone went to Audi and BMW and Lexus. We know that it goes to Gucci and like they're, or the opposite. We know that that phone lives in a $200,000 rental apartment. a rental unit, and so on and so forth. So the data today to be laser-focused on the avatar, on the actual customer that, you know, spends money in your business, is literally frightening. And it's frighteningly accurate.

So I never talk about this, but when I was essentially a franchise consultant, we did the largest retail opening ever in history. There was maybe 10 of us and we opened 1,500 stores in one year. And it was insane. It was crazy. We went through all of the things that you're saying, the site selection, this and that. It was exhausting. Now, this is 2016. So it's 10 years ago. Okay. Do you think that brick and mortar is dead?

No, I don't think it's dead. I think there's a place for it. I just, I subscribe to asymmetrical investing, low investment, high margin, deskilled labor, very few employees, limited to no inventory, recession resilient, and now adding AI resilience, right? I want a short ramp to break even. I want it to be highly scalable. Brick and mortar is not highly scalable. Like, don't tell me that's $600 grand every time I open. is highly scalable. You need $600 grand every time you open versus non-brick and mortar. I need to lease a van and hire a tech or something. I need to lease a van and hire a dog groomer. I need to lease a van and hire a painter. Like, it is so much easier to scale non-brick and mortar. I'm also putting belt and suspenders on the success of non-brick and mortar because I can go to the end user consumer. Brick and mortar, you really need to come to this strip mall. And we live in a time now where anchor tenants are not a lock. They're not a lock. No one said, you know, look at Best Buy, it'll probably be your next disaster story.

Look at Circuit City, look at some of the Bed Bath Beyond.

Cliff, I always wanted to work at Circuit City. They would never give me the job, but everyone I knew that was working there when you're 18, they were making good money. Probably one reason why they closed. They paid a lot of commission, but they would never hire me. So what was the other, what was the other electronics one? I love that store too.

Best Buy?

Nah, it closed. It was in Connecticut, by the way. Did you ever have stores near Hartford? Hartford?

I don't know. Uh, Cartridge World in Hartford?

I'm not sure. Because I think I've been to Cartridge World. I, I think I've been there. So you've worked with thousands of franchises over 25 years. Yeah. Why do they fail?

I think that most franchises fail because of the owner. And it's one of the ways that I created wealth was buying failure. I actually did that. I met my business partner, Justin, uh, looking for failure, right? So we're looking for businesses that have very strong fundamentals, but the business is not operating. So we would buy gyms, Smithtown, New Rochelle, Wyckegill, Rye Brook. All failing locations. We would spend less than 12 months, turn them around, kicking off 6 figures plus, and then we would find a new buyer and peel it off. So we were basically turnaround specialists and we focused in the fitness industry. Then we went into the restoration business, water, fire, mold, and biohazard, and started buying failing businesses and turning them around and then selling them. One of them was in Annapolis, Maryland. You know, paid nothing for it. So I want to go back to your question. Why do they fail? Here's a perfect example. True story. Annapolis, Maryland. There's a restoration company failing miserably, and the seller says, quote, I have done everything to make this business work. It just doesn't work here. Okay. That's a favorite line, by the way, from a failing franchisee.

The other favorite line of a failing franchisee is, quote, you don't understand, it's different here. That's the fa— these are faves.

People are only different here.

Okay. We have no toilet bowls. We don't have roofs. We don't have dogs here. It's so different. That's the, like, when you hear them say that out loud, it's like, do you hear what you're saying? So we purchased this business from a farm in Florida. So I got a guy on the street in Maryland. And the, it's an asset trend. It's an asset sale. There's nothing to sell. There's no, there's no net. So we're buying assets. So our partner up there calls us. He goes, hey man, there's like boxes of boxes. I go, they open? He goes, no. I go, open 'em up. What, what, what's in there? And he opens it up and he goes, it's all marketing material. And I go, this guy said, I did everything to be successful. And he has boxes of ammunition while he's waving his white flag. That is your typical failure in franchising. One, someone else's fault. 2, you don't understand the market. It's different here. 3, I refuse to follow the model because I'm smarter than the successful model that I bought. It's usually, usually the owner-operator error. It's, and, and it's not always the personality.

Let me clarify. Next would be, I ran outta runway. I am a good person. I am a good franchisee. I am following the model. I ran outta runway. I ran out of operating capital. I didn't have enough and I didn't get to break even fast enough and they closed. Those are going to be your top reasons. And that, what that question you just asked me is why I subscribe to what makes a good franchisee. And I wish I created this. I took it from Jack Welch. Jack Welch, former CEO of GE, said, number one question asked of me, how do you hire people? And he said, and I do the 4E1P principle. The first E is, do you have energy? So let's just say yes. Having energy is not enough. Can you energize? Second E, can you energize others? Yes, I can. I'm high energy. And I can energize others that get so excited that they want to work hard for me. The next E, can you execute? I could execute flawlessly. Next E, do you have edge? You can have all those E's, but if you don't have edge and you're not willing to have a difficult coaching moment with your employees and straighten things out and make difficult decisions like firing, it's not going to work.

I have edge. I could do that. I could sit down and I could have coaching moments and terminate people. Great. Next is P. Are you passionate? No, I'm only doing this for the money. Get out. You gotta have passion. That's what's contagious. That's what people love. That's what employees follow is the 4E1P principles. That's what makes a brilliant, successful franchisee, not the IT executive hiding in a cubicle, sweating hands at the idea of speaking to another human being. That guy is gonna fail and AI is gonna destroy his livelihood.

So many years ago we had Codie Sanchez on when she was just starting, you know, the boring business movement, which I think has become something so big. I see a lot of people talking about buying boring businesses and you have this huge generation that's retired or retiring right now and they have tons of businesses that'll either close or maybe somebody will buy them. Do you think the biggest miss is that I don't hear anyone talking about buying A retiring or boring franchise business?

Interesting question. Yeah. I had a gal on my show, Jessica Falkovich, who created a company called Exit Factor. And interviewing her, she asked me a question. I was blown away by this answer. She goes, you ever been on BizBuySell? I said, yeah. She goes, what percentage of businesses on that website do you think will ever find a buyer? I, I have no idea. She said 85% of businesses on BizBuySell will close and never find a buyer. What wild— that is a wild statistic. Think about 70 million baby boomers aging out and exiting the businesses that they ran, and there's no buyer. So let's reverse engineer the problem. Why? Why, Cody Sanchez? How many businesses? It's like shooting fish in a barrel. What's the problem? The problem is that that generation grew up with this thinking. If you want something done right, you have to do it yourself. That is the worst advice you could give another human being, right? And it needs that— that advice needs to die in the world of parenting because all you're doing is suppressing your child or yourself. And now you have millions of baby boomers selling their businesses. under the idea that if you want something done right, you have to do it yourself.

Translated means I am the business. I'm it. Who, who would like to buy my job? And you know what the answer is? Nobody. No one wants to buy your job. That's the problem with what you're selling. You're selling a job. You are not an entrepreneur. You are not a business owner. You are an employee of your crappy marginal business. That's the issue. And a lot of them have a net income of under $100,000. And once you remove the founder-owner and I hire a manager to replace him or her, I go net negative. Nobody's interested in that business. The economics don't make sense. The way to build a brand and a way to exit that brand is to build a business that does not rely on your day-to-day involvement. That's a business, something you could scale, something that's greater than one. That's the issue that we're having today with small businesses being sold. They're not worth buying. And that's why 85% of them will never find a buyer.

You know, something a mentor told me back in 2020, I learned this and I used it, was buying assets of a business. For example, newsletters, social media pages, different things that most people don't think about as a piece of the business. And we did this before. I wonder if there's an opportunity to not buy the entire business, but to buy pieces of the business, that you can plug into your own. Essentially, if they're going to close it, wouldn't they want to make some money?

I like that idea better than the movie script. You're spot on. Yeah, we, we're in an era of traditional, uh, business brokers. Well, what do you do? I sell a multiple of EBITDA. Okay, that's what you do. So what do you do when it's a fire sale? Well, there's nothing in it for me, therefore I don't sell it. So it's like, wait a minute, do you know of fire sale businesses? I got dozens of them. I have dozens of clients that have come to me that have said, I'm not making any money, but I'd like to sell my business. And then the broker goes, well, how am I making money? I don't know. I was just hoping you could help me. So if there's a way to monetize instead of a business broker, you're right. We're an asset sale broker. We're selling lead lists. We're selling— I mean, think about a local business owner in Michigan, right? Some guy in Michigan with 300, 500 houses that he just does pest control for. The business sucks, but the database is worth a fortune. That's where you and I grew up in an industry of big data's gonna be everything.

Big data, big data, big data, right? You're aggregating all the data of all these consumer behaviors and all these doors. I just interviewed a guy doing residential property management. He has over $100 billion in real estate under management. What is his go-to move to grow the brand? Well, you could grow organically and grind it out, or you could grow through acquisition and buy all the little mom and pops that are managing 20 doors, 50 doors, 100 doors, barely making a living. Those doors drop to my bottom line. To him, it's worth nothing. To me, it's worth a ton of money. So you're, you're spot on.

I think we just came up with something. This is—

you just redefined Sunbelt Business Brokers, vested business brokers, like you're right, Transamerica Business Brokers, like you're selling businesses at a multiple of EBITDA. Well, what about the assets? I love it actually.

What are the top 3 things that you feel that you've done throughout your life that made the business successful? The 3 most important things that you have to do every single time you buy a business, you, Add in a business. What are 3 things?

One is overcoming fear. I've said this, I think fear is one of the most influential forces in our lives and the least discussed. Least discussed. It's, and it goes way beyond just a feeling. It's way beyond that. Um, overcoming fear is a huge move that you have to make to do anything. I don't care if it's dating, like you need to overcome your fear. And that, that, and that, that is literally a podcast episode in itself. That's how much I could say about fear. Next, due diligence. It's like due diligence with a strict adherence to due diligence. Warren Buffett has a great quote that I subscribe to and has a lot to do with your question. To be successful, all you need is a sound conceptual framework for making decisions and the ability to keep emotions from corrupting that framework. That I'm very good at. Non-emotional, Black and white, right? To me, it's just binary. Good deal, bad deal. Like, boom, moving on. That won't work. That will work. We can make that work. Like, having that data. I love aggregating data. I love doing due diligence. I love speaking to other people in the industry.

Like, all of those types of things. Next would be, it's like real estate. You make your profit the day you buy the piece of property. It's the same with the business. You're gonna make your profit the day you invested in that brand. You gotta be very careful how much you pay for those assets, how much of a multiple of EBITDA, and you have to trust but verify that that number even exists. I always say this to people, people like, hey, I found a business, I'm going to buy it. I don't need you anymore. I go, just tell me about it. Guy's making like $300 grand. How much of that is reported on his tax return into sales tax receipts? Oh, Well, you know, he's got about $150 in cash. I go, you know what's interesting? No consumer in America has cash. No consumer in America spends and transacts in cash. The only people who have a massive amount of cash are small business sellers. Small business sellers in America have all the customers in America that are paying with everything in cash because it's total bullshit. It's all bullshit. So trust but verify.

What's the worst franchise that you think people are buying and still throwing money at?

Yeah, right. Food. I don't want to pick a brand name if that's where you're going.

No, I think it just had to be a name.

I'd like to do industry. I like to do industry with you and thank you. Number one, food. No one has ever come to me with a financial reason to invest in food. It's always feelings. it's always feelings. It reminds me of my grandma, reminds me of my dad. We used to cook in the kitchen all the time.

Like, when you say food, is that restaurants?

Restaurants. I think restaurants are negative symmetrical, right? So it's like massive investment, razor-thin margin, high labor, perpetual job hoppers, throwing product away that doesn't sell, huge rent, huge build-out, massive personal guarantee with the landlord. And for what? So you do a million in sales. What's your revenue? I've got a client that's doing $20 million in a Vegas casino at a steakhouse, and he's talking to me like, if food— there's never really like a food reason, a financial reason to do food. Next, and I've said this for years, as you know, I owned a lot of gyms. My business partner always asked me, why are you not long gyms? I go, the day is going to come When you don't need a gym membership. There are tens of thousands of gyms in America, and we, while we're opening tens of thousands of gyms in America, we've managed to become the fattest people on the planet. We have states in America with a BMI classified as morbidly obese. Think about that. So what does that mean? Gyms don't work. They don't work. So the day has come where you could take a pill or stab yourself in the stomach and lose £2 a week.

for doing absolutely nothing. I am not long on the gym business. And here's the issue. I want to be very specific. What gyms were selling was caloric burn. That's what they were selling. Come in, heart rate monitor. Oh my God, look at your screen. You just burned 2,000 calories. Yeah, it's a pound of fat. You're remarkable. The caloric burn story is dead. You cannot market caloric burn because I can burn a meal by taking a pill now With a semaglutide, a GLP disruptor, Ozempic, Wegovy, put your name on it. So that story's dead. How fitness evolves from here, this is my prediction. It will evolve into biohacking longevity, anti-aging. So we went from pushing weight, running on a treadmill. Now you're going to do cold plunging, sensory deprivation, red light therapy, peptides, stem cells, and you'll see where that money Sector rotation will go. It will go. Gary Breckett just created a brand. Gary, Dan, Gary Breckett just created a brand. Zero locations operating. Zero. Sold over 600 of 'em in probably less than 5 months. Do that math. Anti-aging longevity biohacking institute. Wild.

You know, the crazy thing is it's not always good to be early, as you know. 13 years ago, we started a spa and the spa was facials only. And everyone told us, you got to add massage, you got to do these other things. And we said, no, we just want to be the best at facials. We want to help you with acne and we want to help you with other similar related things.

Mm-hmm.

Then we introduced red light therapy. This is like 2013, 2014. Infrared. And then we had infrared saunas. We had all these different longevity things. But I think it was too early, honestly. I think it was too early. And COVID, you know, wasn't too friendly with that business, but we had already been running it for many years before. We also did other things too that no one had done, but there was so much education involved and it was so costly to acquire that customer that I think if we did it now, it probably would be 10 times more successful.

Oh yeah. You're, you're creating this concept in an era of Osprey, Huberman, Attia, right? We just mentioned Brecka. Like, they've done all the heavy lifting. You're drafting behind. The average person is listening to podcasts and they're understanding the benefits. I have a red light bed like right here. Like, I do it 5 days a week. I love it, man. I think it's phenomenal. I'm doing anything anti-aging, biohacking, anything that could give me an edge over a competitor, anything that could keep my energy levels at a level that the average human being doesn't have. I'll do anything for that competitive edge that's safe.

We should have done this interview with red light masks. That might be a thing. I might start that.

You have me back on. That's a deal.

That'd be all right. So let's say you had to start over tomorrow because you got broke. Hopefully you will never get broke, but let's just say hypothetically you had to start over. broke tomorrow, what business would you buy?

I think if it was like, so you're saying it's like now, it's happening now in today's technology, I would be, so I'm broke and my path of least resistance would be leveraging something like Claude. I would dig into Claude. I would watch every episode of MrBeast, every episode of an influencer, and I would figure out how to create some AI agents and ultimately start scaling something. that I could do very inexpensively with an AI agent. I think that the first job was once McDonald's. The first gig is going to be an AI agent that's kicking off ancillary income. I think I would begin there. I mean, look at what Michael Saylor did with an AI agent to create Stretch, STRC, right? Probably the single greatest money mark. That thing went to $70 a share. I was gobbling it up. Everyone said it's going to zero. No, it's not. No, it's not. I mean, he created, if you do the backstory on it, he created STRC, Stretch, that preferred quote money market instrument pegged at 100 parity with a 12% yield. He created that with AI agent, brought in tens of billions of dollars. That's how powerful that is.

That's why I think the— that's why I believe that the first-time job used to be like a kid working at fast food. Well, that job's been replaced by AI and robotics and humanoids, et cetera. So our children now coming up will come up with, hey, I just created a little app that tracks jets. I create a little agent that does this. I create an agent that'll tell you the weather on vacation and if you should or shouldn't buy travel insurance. That's where we're headed.

You're bullish on senior care and pet care. Why?

The United States is aging at a rate that we will catch up to Japan, Italy, Germany, and countries that are classified as super-aged nations. Super-aged nations is when 20% of your population is over the age of 65. We will be there in less than 10 years. This country is aging rapidly. We are not repopulating. Uh, our country isn't designed culturally to take care of our elderly. In fact, no one has elderly people living in their house with them. We put our elderly in an institution called assisted living or memory care. Our country is addicted to 9,000 prescription drugs that I think is destroying their brain, their mobility. And for that, you don't have— we don't have enough. You want to hear a crazy stat? Speaking of senior care, I had a senior CEO on my podcast This guy asked me, I love when they ask me a question that he goes, what, what do you think the average age of a caregiver is in America? Now, the answer should be 35. That's the answer. Your youth take care of your elderly. We repopulate and the cycle continues. Are you ready for this answer? The average age of a caregiver in the United States is 60.

So you're worried about your caregiver breaking their hip as much as you're worried about Your parent or elderly grandparent breaking their hip. That's effed up. That's where we're headed. And that's why I believe Optimus— I'm fully invested in SpaceX and Tesla and all that because I truly believe that tomorrow's caregiver is going to be an Optimus humanoid that will be caring 24/7 for our elderly and be really, really good at it. Really good at it. So yes, pet care. Is kind of a continuation of what I just said. Well, why are you long on pet care? Because we're not repopulating. Our youth have decided they can't afford a house, they can't afford kids, they can't speak to the opposite sex, they can't hold a relationship. So let's just buy pets. And that's what they've done. $150 billion was spent in America last year on pet services. That, that, that is an ungodly amount of money. Like $150 billion is a market cap in itself. So yes, I'm— you say that like I'm only interested in those 2 businesses, but I just want you to know I'm long. I'm— can I just briefly share with you?

This is what I'm long on. I'm long on any business that requires the use of tools. Why? Because hand dexterity is your distance and your game changer from AI. AI doesn't have hand dexterity. At the moment. So HVAC, plumbing, electrical, all hand dexterity jobs to me will be making a ton of money in the near future. Look at all these data centers. These electricians will be making hundreds of thousands of dollars, right? So you look at that. Next, men's health. I actually like men's health. Why? Because we've been feminizing men for 20 years in America, and a 30-year-old today has half the testosterone and half the sperm of his grandparent. So anything in the men's health category, whether it's ED or whether it's testosterone replacement therapy, I'm long. I'm long on senior care. I'm long on the humanization. I'm long on anything with it, which we classified as the human— it's all in my book, Beyond the Brand. Humanization of pets and animals, feminization of men in America, the silver tsunami, the pursuit of youth. We just talked about it with Gary Brecka, anti-aging biohacking. And lastly would be youth enrichment. Our schools are not preparing these kids for the real world.

They're not. And, and parents want more for their children. They want home economics. They want music. They want art. They want science, technology, engineering, and math. They want more. They want sports, right? They want their kids using both hemispheres of their brain. Everybody thought music was for music. Music class had nothing to do with music. It's one of the few things you could do where you're bridging the corpus callosum, which is both hemispheres of your brain. You're reading song sheet and you're playing an instrument. There are a few things you will do today that require both hemispheres of your brain firing at the same time. What are the benefits of that? Reasoning skills, problem solving, execution, all of it. That's what music and art were really about at the elementary school level. It was all about those things. It had nothing really to do with music and art on its face.

I mean, love the book though, Beyond the Brand, by the way. Everyone, show the book, show the book. So I have a really, really deep question for you. Final question. It's going to be crazy deep. Something I cannot stop thinking about is the wealth transfer that's about to happen. It's an estimated $80 to $100 trillion is about to be transferred from baby boomers down mostly to Gen Z and millennials. I feel like there's so much that is going to change because if these people are getting millions of dollars each of things, could be houses, I think it's $40 trillion or $38 trillion in homes. And the rest is in businesses and stocks and 401, IRA. How is this going to change things based on if they all of a sudden receive this money, they receive these businesses, they receive things. What do you think is going to change?

I mean, the work ethic has already changed, so that won't change the fact that this current generation really doesn't want to work. They don't like 9 to 5. They don't like corporate culture. They don't want to go to an office. They don't want to commute. So I'm not really sure. I'm not really sure that anything changes in terms of like, wow, now they're really going to be lazy, or now they're really not going to want to work because that's going to be done for them before the wealth Transfer, their job is already being replaced by AI, by robotics, by humanoids. And then next wave will be quantum computing that could calculate a wormhole in the universe, which would take us right now millions of years to figure out, will be done in probably a week. That's crazy to even think. And you could look that up if you went on like AI, what would be the most complex mathematical calculation?

Right?

And how long would it take humans with today's technology to do it? And then how does that relate to now inventing or introducing quantum computing? So their job is already lost. Now, I'm glad you have a ton of money. And I think that Elon is right. I think that you're going to have a nation that didn't inherit wealth. Remember, your scenario is huge, but it's really still 99% and 1%. Most of the country really doesn't have any money, right? Like, they're middle class at best, and they're trying to figure out how they're going to buy eggs and how they're going to buy and get through the day. I think that technology is going to be the huge disruptor. The country will ultimately put many people on universal income, and, and everything from there will be deflationary. I think you and I are living at peak inflation, and with all these advancements in technology, it causes a deflationary environment. That's my prediction with the future, with that wealth transfer.

Cliff, my head just exploded. I could tell why you have money behind you, why you have a Benjamin on the wall. I love that, by the way. But I hope everyone picks up your book.

Me too. It's a good read.

Love the book. Amazon, is that where they can buy it?

Yeah, go on Amazon. Beyond the Brand.

Cliff Nanamaker. Build the brand, man. Great conversation. I never go this long. This might be the longest, 51 minutes. That might be the longest time I've done ever on a virtual discussion.

Really?

Yeah.

Tom Sosnoff didn't go this long? Like Gary Vee? Stop.

Not even Tom. Interesting guy though, by the way, Tom.

Oh, I love Tom. I've been using his trading platform. I love that interview. I love that guy. Did you? He is, he's something else, man.

I have a good one. The founder of Zynga.

Yes.

But we had to edit a lot of it out because he said things, cuz I asked him a question around young people don't trust billionaires and they think billionaires are the problem. What do you think about that? And he did, I think he was frustrated by that question.

Really?

Not by the question, but by how people are based on the fact that people don't trust billionaires. I think right now. Okay. Okay. I think there's a lot of resentment towards billionaires, or maybe it's being created on social media.

Yeah, that's interesting. Um, I don't, are you asking my opinion about it?

I'm just throwing it out there. It's just, you know, whatever.

I mean, I, I don't, I don't know that I have a dog in that hunt. Um, it's political and I try and remain, I don't talk about politics, religion, and other people's lives.

That's exactly why other people's— you edited out the whole discussion, by the way, 'cause I, I do. But, uh, but Cliff, this has been great. I hope everyone gets the book, Build the Brand. You're the king of franchise. You're the best. You're going to be the king of, what was it? What is the idea? Somebody can create a, I hope someone listens to this and creates a platform and sends me the platform, buying the assets of a business, but not buying the entire business.

You and I should do it.

Done. Edit that out.

That's a great idea, man.

I'm gonna edit it out.

I think you should. I'm telling you, I think you have something there.

I really do.

There are millions of businesses that will not find a buyer, but they have an intrinsic value and you just identified it. That guy's book of business is worth a lot to me. The local pest control guy, the local tree trimmer, the local plumber, that there's a value to that book.