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

Today's episode is sponsored in part by Shopify, Qo Indeed, AT&T Business, Prolon, Cash App, and Northwest Registered Agent. Shopify is the global commerce platform that helps you grow your business. Start your $1 per month trial at shopify.com/profiting. Qo is an AI-powered phone system that brings your calls, texts, and contacts together in one place. Try Qo for free, plus get 20% off your first 6 months when you go to quo.com/profiting. Indeed helps you attract, interview, and hire all in one place. Get a $75 sponsored job credit to boost your job's visibility at indeed.com/podcast. AT&T Business delivers reliable business-grade connectivity that gives your team a competitive advantage. Switch to AT&T Business at business.att.com. Prolon helps you reset your body and reverse your age with a 5-day plant-based program that mimics fasting while still nourishing you. Go to prolonlife.com/profiting for 15% off sitewide plus a $40 bonus gift when you subscribe. If you've been curious about Bitcoin but haven't made the jump yet, Cash App makes it easy. For a limited time, new customers can get $10 added to their balance. Just use code CashApp10 when you sign up. Northwest Registered Agent gives you the tools and guidance you need to build a complete business identity.

Visit northwestregisteredagent.com/yapfree and start using free resources to build something amazing. As always, you can find all of our incredible deals in the show notes or at youngandprofiting.com/deals.

Meditieren, Yoga, Joggen, nichts entspannt mich. Echt?

Mich entspannt meine Steuer total.

Steuer? Wie Finanzamt? Die Steuererklärung?

Ja, ich habe ganz locker über 1.000 € zurückbekommen.

Hast du geheime Connections?

Nö, nur die WISO Steuer App. Wow.

Und das ist einfach?

Klar, die macht fast alles automatisch. Plötzlich fühle ich mich so So entspannt!

Hol dir dein Geld zurück, tiefenentspannt mit WISO Steuer.

Franchise-Businesses trade at a like 1 to 3x higher multiple than an independent business.

Oh wow!

You got 5 businesses with $600K in revenue, you're a $3 million business now with 20% margins, $600K a year in cash flow. Pretty good life.

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 2 of my conversation with Alex Smirnak, co-founder and CEO of Franzi.

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.

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

When we first started, we did just under half a million in revenue in our first 11 months. You know, 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—

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

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

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

Yeah. So our customer, there's like 3 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 Franzi. They love the data, they love the support that we provide. The second group is what I'd call like kind of like hackers or like serial entrepreneurs. They're the ones we just talked about. They own short-term rentals. Maybe they were doing dropshipping when that was 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 to it. So they'll come to us as like, hey, I want to add some of these concepts and this concept. This is what I already do. Is there any that are complementary to what I already do? I have these, these rentals.

Or is there like a home services repair, you know, franchise I could layer on 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 MUMBOS, multi-unit, multi-brand operators. So they own 20 Dave's Hot Chickens, they own 10 Jersey Mike's.

They own— So interesting.

And they crush it. And they're just looking for the next concept. Like, hey, Franzi, 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 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. But there's two, there's, there's both. And Franzi helps all three of those buckets.

This is so much more exciting than this concept, you know, that Cody Sanchez and, 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 'cause 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.

Well, the thing that I think gets discounted is the upside is insane because if you, again, let's use the 3 Jersey Mike's, mm-hmm, you know, 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, well Terry over here has 10, he is trying to sell 3 of them. Let's bolt those onto our 3 Jersey Mike's. Now we've got 6. Oh, this guy's selling all 5 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 trade at a like 1 to 3x higher multiple than an independent business.

Oh wow.

Because you're part of this 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 total fanboy and unbiased, but franchising is a great, great, great path to build a huge business if you want to.

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?

When we first started, we did just under half a million in revenue in our first 11 months, which for a startup, you know, is in the top like 3-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. You're like, I beat this in college. And these— 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 $300,000 to $500,000, they want you to do $1.5 million the next year and then $4.5 million and then $9 million and then $20 million, basically. So like in 4 years, that's quick. You're a $15 to $20 million business in 4 years. Like they want you to go fast. And then from there they dump a bunch of money on you and you go.

And they don't care about you being profitable.

They just want you to grow, 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 coaching and advising. And then when we decided to take venture, I was like, all right, we're building for a different outcome here. We're building for a national, maybe even global Canada, Europe, et cetera. 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 6 or 7x the revenue we did last year. 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.

Yeah.

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.

That's really good.

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 'cause it was such a big month for us. We did more revenue in April than all of last year in Q1 combined. Wow. So it's, and like May is looking like the same. June's gonna maybe be more than that.

Amazing. So word is out. People are buying.

People want to be free. They want to own businesses.

Yeah, it's more than ever people want to be entrepreneurs. What are the marketing channels that are really working for you?

Yep, so there's 3 main ones. It's organic, so our own podcast content, coming on and, you know, sharing our story and franchising on shows like this. That's been probably the primary focus of ours just 'cause Hormozi's an investor of ours.

Oh, amazing.

And he, you know, over and over is like, organic is the best lead channel of anyone, you know, paid and referrals 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. Then he was like flyers event. 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 skillset or disposition. I'm trying to figure it out.

Yeah.

But so organic, second is paid. So paid search and paid social. So Facebook ads, Instagram ads actually do pretty well. And then the last bucket is like referral and affiliate partnerships falls into that bucket. 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?

In terms of your team, how many people are on your team and what does like day-to-day of Franzi look like? What are the problems you guys are solving?

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.

That's not a lot of people.

It's—

So customer service, Are you outsourcing it or—

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-pagers together. Like we've AI'd the hell out of that to the point where it's perfect. Like it's actually better than what was happening historically, but 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, you know, 40 to 50% admin work, they now can talk to twice as many people and still have a high level of quality and support for that individual's goals and mission, etc. 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. Yay! Very, very smart people, hardworking. And then I just try to stay out of their way.

Yap Gang, do you want to look and feel your best this summer? And I don't just mean looking good on the outside. I mean feeling amazing from the inside, all the way down to your cells. Yep, your cells. If you do, I'm going to put you onto a reset that I've been absolutely obsessed obsessed with. It's Prolon's 5-day fasting mimicking diet. Prolon is a plant-based nutrition program with soups, snacks, and beverages that keep your body in a fasting state while still nourishing you. It is the only nutrition program clinically proven to trigger autophagy, your body's natural cellular cleanup mechanism. And autophagy can support longevity, and it can even reverse your biological age. For the last couple of years I've known about it, but I was always scared to actually do a fast because I work out a lot. I didn't wanna lose muscle, and honestly, not eating for days sounds way too hard. But then with my birthday coming up, I wanted a reset. I wanted to lose like £5. I wanted more energy and to look my best. And that's how I came across ProLon. And everything comes prepackaged, labeled day by day.

There's no prep, no planning, no guessing. And I loved it so much that now I'm planning to do it 3 times a year. With ProLon, I'll be young and profiting forever because with 3 resets, you can actually reverse your age by 2.5 years, which is just insane. That means every year I'll basically be getting younger. If you're ready for your own reset, for a limited time, ProLon is offering Young and Profiting listeners 15% off sitewide plus a $40 bonus gift when you subscribe to their 5-day program. Just visit prolonlife.com/profiting. That's P-R-O-L-O-N-L-I-F.com/profiting. Prolonlife.com/profiting to claim your 15% off discount and your bonus gift. Prolonlife.com/profiting. What's up, young improfitters? When you start a business, nobody warns you that you're about to become the creator, the marketer, and the finance team, the customer support team, and the person who's ChatGPTing why checkout is not working. That's exactly why I always say start with Shopify. Shopify has been a real business partner for me as I've grown YAP Academy academy and launched products like my LinkedIn Secrets Masterclass. It powers millions of businesses worldwide and 10% of all e-commerce in the US. Whether you're a household name or just getting started, Shopify has got you covered.

Because let's be real, your business should not require 17 tabs, 5 logins, and a minor emotional breakdown just to sell a product. Shopify lets you build your store, market your products, manage payments, track analytics, and handle shipping, returns, and inventory all in one place. Shopify does this all so you don't have to do it alone. Start your business today with the industry's best business partner, Shopify, and start hearing. Sign up for your $1 per month trial today at shopify.com/profiting. Go to shopify.com/profiting. That's shopify.com/profiting. Yeah, fam, I built an app in 15 minutes, and before you ask, I didn't suddenly become a software engineer. In fact, I've never. Written a line of code in my life, but now I'm trying out apps like it's my day job, and that's because I learned how to do it through Mindstone. It's an AI transformation company that helps close the gap between having access to AI and actually getting value from it. So this all started when I attended their Breakthrough AI Weekend. I learned how to build apps, and I also learned about their platform Rebel, which basically acts as a second brain, and it actually helps you use AI in a way that completely transforms the way that you do your work.

It changed my life. I left that weekend thinking that I have to roll out Mindstone to my entire team, and we did. So we started with the 4-week AI competency program. It's online. You don't need code. It's made for non-technical professionals and it's really affordable. And so I sent 60 people on my team to take this training. And with that training, you get access to this platform called Rebel where you can ingest your email, your Slack messages, your Fireflies, all your Drive resources, and then you can basically use it as a coach, as a tool, as a thought partner every day before I hop on a meeting. I ask Rebel, hey, what do I need to know for this meeting? What do I need to bring up? And it will scan Slack and even send me things that I didn't realize what was going on in my company. You can create skills, which create a process that might've taken 2 or 3 people and going into different apps, and it can do that on your behalf. It is amazing what you can do with this platform. It has drastically improved our efficiency at YAP Media so much so that were pausing hiring on a lot of roles.

I recommend you start with their 4-week AI competency program. You can get access and get 10% off at experience.mindstone.com/yap. That's experience.mindstone, M-I-N-D-S-T-O-N-E.com/yap for 10% off their 4-week AI competency program. Franzi's awesome. Like, I feel like you're building such an awesome business. Uh, so congratulations. I know that you have a 5-step framework, so I am going to go over each step with you. 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 1 is define your why before anything else. Why is getting clear so important?

So this was something I learned along the way, and it was because people 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. Like, 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.

Like a family business.

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. And 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 came to us, comes to us and they're 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. And 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. 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 got to 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 2 years. We might have made a quick buck, but it's not— it's not worth it in the long run.

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?

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 in, it's going to spit out $400K in the first year and then every year after that, it'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 like set it and forget it thing, especially in the first year or two. So there's misalignment on the time commitment. Commitment sometimes. Um, the next big one is people will come because they, they like a product, or they, you know, they saw this thing happen and they're dead set on it. They don't want to budge. And we talk to them and we're like, holla, this is like not aligned with your skill set at all, or your risk tolerance that you just shared with us, or what you have.

Like, yeah, but I love golf, I want a golf simulator.

And we're like, again, the passion thing. Like, it's not about what you're passionate about.

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 then you can take your buddies there and send 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.

Okay. Step 2, 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?

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, ex-military and veterans do so well in franchising because there's some structure and there's regimen, there's a playbook. 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, you're reacting. Or 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 regimen.

There's just a sub-persona within that group that's ex-military. The other one is you're like your 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 can probably inspire and rally a team, but they might not be great at like executing, executing the like day-to-day, like logistical chaos that they have to put together. But they can probably go sell a bunch of $15,000 pool installation jobs or $5,000 to $10,000 fencing jobs. And so maybe home services, big ticket home services is good for them because it's a smaller team, you know, 1 or 2 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 40 to 60 employees.

Oh, wow.

Because there's, there's 3 shifts, 24 hours, 7 days a week. And even if it's not 24/7, most restaurants still have like 30 to 50 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, more specialized team. So those are the 2 big ones for sure. 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.

How do you know if you're better suited for like B2B versus B2C?

So some of the questions we ask 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 twos, kind of B2C type conversations. I want to go deal with other professionals making a 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 B2B bucket and say, hey, you would—

you can just tell because they can do high-ticket sales.

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

And I would imagine that the B2C person might not be the person selling the thing, right? They're just kind of operating where it's more marketing too.

Yeah, it's like they're creative, they're coming up with fun, crazy ideas, and like they want the freedom to go do that. And brand does allow you at a local level to do a lot of that. You can't go rogue and 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 skill sets.

Step 3, 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?

The first part of that too, and I'll come back to the, the question is, yeah, 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, you know, it can work and you can do well at it. It's just there's—

what's an example of that?

So like there's like Bucket and 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 a month and now they're on our route and every day we're gonna go clean office buildings, bathrooms, empty trash, vacuum, et cetera. So it's like, it's no location, it's just like a van and a bucket and a mop. I say that jokingly, but like, that's kind of it.

And the brand.

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 Regus, 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 $8,000 to get into it and you can make $30,000 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 flow. It's like, it's possible. And it gives a person who maxes out a credit card to get in the opportunity. Yeah, 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 2 months give up and fail. And I, 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.

Yeah, it feels like a scam or something.

Yeah, I don't like it as much. And then there's like a fun one 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. 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 to go card their yard. Oh, cool. Put that out. 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. What I think is great, my co-founder might actually disagree with on some things and say, oh, I like these because it does go back to your individual personality, your risk tolerance, etc. 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 kids birthday party, $4 million to build that out there because it's this 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, It's a real estate play for me. I just want this thing to break even, even because I'm— the real estate's going to appreciate in value over the next 5 years. 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 Franzi is, is there any like malintent 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 30% more closures in the last year than they did 4 years ago.

Something's up. Like, why are they closing? 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. Yeah, so we're surfacing insights like that to de-risk it for people.

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.

Yeah. So that's why we said that $30K to $50K, you can get into concepts for less than that. But if you have $30K to $50K in cash, it opens up so many brands you can get into with an SBA loan. If you have $30K and that's, you know, 20%, you can buy a business, you know, for $150K-ish 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 $30K to $50K because that gets you into $150K to $250K businesses.

Yeah, fam, I'll admit it. The first time I heard somebody explain Bitcoin, I felt like I had accidentally walked into a finance bro TED Talk. Charts everywhere, acronyms flying around, one guy saying decentralized like it was a personality trait. I nodded along and understood absolutely nothing. And then I just didn't touch it. I didn't invest. Invest in Bitcoin for years. But here's what I've learned in business. Sometimes things are not actually complicated. They're just explained in the most complicated way possible. If you've been curious about Bitcoin but haven't made the jump yet, Cash App makes it easy. You can set up automatic purchases with zero fees or buy larger amounts also with zero fees. Start small or go bigger. It's designed to be simple either way. For a limited time, new customers can get $10 added to their Just use code CashApp10 when you sign up. And don't forget this part: send at least $5 to a friend in the first 2 weeks. Terms apply. Cash App is a financial services platform, not a bank. Banking services provided by Cash App's bank partner. Bitcoin services provided by Block, Inc. brand. For additional information, see the Bitcoin disclosures at cash.app/legal/podcast.

Iconic vibes zum besten Preis. Wow geht mit Euphoria in die dritte Staffel. Ein paar Jahre nach der High School. Wusste ich nicht, ob das Leben so war, wie ich es wollte. Stream ab dem 13. April parallel zum US-Start. Wöchentlich eine neue Folge. Das Problem ist, wenn du einen Pakt mit dem Teufel schließt, gibt es kein Zurück mehr. Freu dich außerdem auf weitere Highlights wie House of the Dragon und Wicked. Alles ab nur 2,98 € im Monat. Streaming war noch nie so wow. Du willst eine richtig sweete Karriere? Klar! Schon mal an Ferrero gedacht? Nutella kennst du. Das ist eine von über 35 Ferrero-Marken, die Menschen weltweit verbinden. Inmitten dieser Marken beginnt dein Weg. Ein internationales Umfeld, in dem du schnell wächst und deine Ideen was bewegen. Für jeden Karriereschritt, denn bei Ferrero gibt es mehr Möglichkeiten, als du denkst. Bring dein Talent ein. Mehr unter ferrerocareers.com.

Okay, step 4. Do the real due diligence on the franchisor. So what are some of the ways that people can do due diligence? And then also, is like a really well-known brand like Dunkin' Donuts or McDonald's, are those always the best choices?

So the way to diligence, I mean, one, use a tool like Franzi. There's all this data that's very digestible. Typically I would've said go to the FDD, that franchise disclosure document. One, they're hard to find 'cause 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 Franzi, and there's other platforms, so use those as well that show you revenue, cost to get into it. What, 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 going to— it's almost like an interview process. If you've ever interviewed someone and you ask for references, they give you the 3 best. They're not going to give you the boss that like, yeah, 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 going to say.

Same thing when you're buying a franchise. The brand serves up, here's the 3 you should talk to. And they're like the most successful, money-making, highest-achieving franchisees, which is great. You want to 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 'em up on LinkedIn and cold outreach to them. And you might have to email or message 5 of them, but 1 or 2 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? Am I hearing this enough times? Or is this, they were a bad operator and they're bitter about it. And it's like there is some of that that you have to sift through and filter through. Yeah, 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.

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.

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

What's a red flag?

With a franchise, like a lot of closures, like if they start closing 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 better off closing than losing money each month. They've cannibalized themselves. So Subway did this on purpose and it's biting them in the butt now.

But Subway also had like yoga mats in their bread.

So they found out it like wasn't technically bread because there's so much sugar in it. It was like a donut, actually, 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, though. You and I have protected territory again, and then all of a sudden, 3 years from now, they're like, we need to open more locations because that's how we as a franchisor make money. Let's cut, you know, our territory in half and sell 3 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, you know, there's, there's a lot of protection in the legal documents for the brand and the franchisee, but just you got to be mindful of stuff like that and make sure you are picking a brand with high-integrity people that the franchisees all love and get along with.

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

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-thru. 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.

Okay. Step 5, using transparent data instead of commissioned broker.

Yeah. So that's at our core again, how we get paid. That's Franzi. 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? Because 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? 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.

Okay. So we talked all about in part one, in case you guys missed it, we talked all about Franzi and his platform. So 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. 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.

It is one of the most popular businesses on our platform. And again, there's 4,000 brands you can go look at. 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, you know, really heard of many at all before. And so I think it's becoming a, a trend, which is good to be a part of, and not a trend that's just gonna 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.

Yeah, nobody wants to do that.

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

Yeah.

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 know, 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.

So it's the water restrictions driving up demand.

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.

Like for a franchise, is 21% margin good?

So it, the thing that's interesting about franchising is 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 gonna 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 2, 3, 4, 5 territories at once because the incremental cost to do this is another $30 grand, $20 grand. You're not having to spend $120 to $180 each time.

I was thinking that, that you'd have to spend $120, but now, but now it's— you just get into the deal. It's just the right to the territory.

Yeah.

Why? It's just the right to the territory. So that $120 to $180K is really like get the truck, get the initial materials, 3 months of working capital, you know, and some installation equipment, etc. 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.

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

No. I mean, if you start to get to a point where you have jobs, but that's a good problem. Champagne problems. And you got growth happening. And so we've had a number of people buy 3, 4, 5, 6 territories. And you do the math, you got 5 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.

Not a lot of people. So one of my former clients was Brian Scudamore. 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?

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, 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 all the improvements I did at this retail location, all the drywall and plumbing and electrical work we did. That's there. But if it's my truck that I bought and my, you know, power washer or, you know, window cleaning equipment, I can probably sell it back. Not for, you know, one-to-$1, 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— garage, uh, garage cleanout, it's like garage cleanout.

And like, I call it like Pimp My Garage, like the Pimp My Ride, you know, version for your garage. And they'll do over $1 million 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.

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. Uh, the customers, families with children who need speech or ABA therapy, which is, is that autism therapy?

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

Interesting. So the initial investment is anywhere from $300,000 to $800,000, but the location revenue can be over $1 million, $1.3 million for mature locations, top locations doing $1.5 million per year. So they're very lucrative. So what's the opportunity in this? Are these becoming more popular?

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, 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 research behind it. And so I think it was 1 in 34, 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 $300,000 to, you know, $800,000 depending on the size, the market that you're in. But to then your point, $1.4 million in revenue, the margins, I imagine it's not listed in their FTD, 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-20s to mid-30% margins.

So I imagine it's like 23 to 33-ish margin on $1.4 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 XYZ. 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.

It's also recession-proof.

Yeah, you're going to 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 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 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 gonna go multiple times for a series of time. And so you have this kind of recurring, I 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.

Okay, I wanna go back to the turf one for a second.

Yeah.

What are the elements of, success? Like, what do you think that person needs to do to actually, like, have a well-running territory?

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 $500 either. And so this is where I would look. And the team is small. You don't need a huge team. So this is where I'd go back to the ShamWow, you know.

Yeah, that's like the marketing guy.

Yeah. 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 You know, I could see someone sending DMs or AI images of like, hey, I got 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 could see a bunch of people being like, wow, that looks really good. And so you're going to 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 because that's each, each one's an opportunity., and the team to install the turf is 1 or 2 people. So you don't need to have this huge complex operation. Um, and so I think for someone to be successful there, you want a founder or an operator that is marketing slash sales led.

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?

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, because that's what will keep people coming back. There's support groups and Facebook groups, etc., for families with children with autism. And so they're going to 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 going to 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, how to plug your distribution?

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

Okay, number 3, a sunless spray tanning and skill wellness studio. So beauty and wellness, small format studio. Investment is $300,000 to $600,000. Average net revenue is $650,000. Well, I guess operating margin is 25% because there's retail products as well.

Yep.

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

So this is one where it would probably be someone who's more into this because it's a lifestyle or passion decision. It's, hey, you know, traditional tanning is bad for you, but I still want to look good and have good, you know, skin health and, you know, 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, you know, that owns it because there's other things that you could do that you'd make more money than this one.

Yeah. And way less initial investment, right?

This to me is one of those ones where people are going to— 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 going to say was even though it's, you know, $300,000 to $600,000 or so depending on the size, the margin is really good, but the operation is not that complicated. You know, you've got people that come in, they book times, they go in. It's usually equipment that's applying 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, you know, I think return profile relative to your fixed costs, a little bit more attractive because you can kind of— this is one of those more potentially semi-absentee businesses.

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.

Mm-hmm.

All right, next one. Reformer Pilates studio. My dream. My dream.

These are fantastic.

Business. If I quit YAP today, I'd be owning Pilates businesses. So. Basically you're investing anywhere from $500,000 to $700,000, which to me sounds high cuz there's such little involv— 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 $1 million a year. Uh, EBITDA margin is 30% nearly. There's memberships, packages, class pass. So not, not so bad.

I love this one personally. So 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 Orangetheory, and her story is phenomenal. Orangetheory really revolutionized like this kind of concept where it was, we're going to go beat beat, you know, the big gyms and do this very bespoke kind of curated specific, you know, training programs, etc. 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.

Wow.

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 buildout's more expensive, but the revenue justifies it. I mean, the average location I think is like $350K in EBITDA or $360K.

$349K.

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

Yeah, I love this. This validates my dream.

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

Yeah.

Um, it's a great one to find like an operating partner model, um, because it's not gonna be running 17 classes at once, so now you need 17 people. So you really need a small handful of really good reliable trainers, equipment, or location, and you're good.

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 $260,000 to $900,000. Depending on the format. Average unit gross sales per year is $600,000. Top 50% make $840,000 a year.

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 set up the layout. So do you want to have drive-thru, no drive-thru? Do you want a retail, you know, 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 around Seven Brew, if you're familiar. Blackstone is invested in them. They are opening, I want to say it's like multiple locations a day right now.

Oh, wow.

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 3 drive-through lanes and they're just— it's speed versus Starbucks has become, you kind of hang in there, 17 customizations for every person's drink.

Yeah.

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 and just 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-thru element, that's why the top 50% of the drive-thru group of this concept. Are doing $800,000 instead of $600,000. The issue I have is the margin's just lower. And that's because food and bev— most food and bev is going to be worst case high single digits, best case low 20%.

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

Yeah.

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

Well, 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 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.

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

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 real estate ownership.

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 not— maybe you get a little bit of money every year from the franchise, but the real value is owning the commercial real estate.

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, buy 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 5 to 10 years because the franchise agreement is typically a 5 to 10 year agreement. And so I think it's a brilliant play. You can start out, operate, work your way up again. Hard work up front is always going to be there. Then you find yourself as a commercial real estate owner and a path to easily selling to a perfect tenant because it's already built out, it's already there, and it's this staple, this name brand, because it's a franchise versus Hala's and Alex's, you know, taco stand that no one knows.

And we go to sell So you could resell just the franchise rights and not just the operating business, the property. Yes.

And you can do that on Franzi.

Yes.

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

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 outcompete 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. So I love home services for that more risk-averse group, both the operational-minded and the chamwao 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 another one called Mike's Red Tacos, it's out of California. It's like birria-style tacos.

I'm so surprised you said that. No, but I'm— no, I haven't. But I'm surprised you say— you said food because I always thought like restaurant business was so difficult.

And so I think I mentioned it in the first part, but that Economist article saying that McDonald's has minted more millionaires than any other company in the history of mankind. What they say about restaurants is true. I think it's like, again, me starting my own barbecue shop on my own. Let's— even if I was really good at it, It's so hard. You have supply chain stuff and menu stuff. Like you're doing all these things on your own. I couldn't tell you how to, you know, 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, if not 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, you know, burger meat for $0.10 a pound versus me paying $1.50 or whatever. 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 franchised, I'd say if you get the right brand, especially at the right time, they print money. The average McDonald's prints $600,000 to $700,000 in cash flow.

Wow.

A year.

I'm so— that's so surprising.

It's like $9 to $10 million average unit volume for one Chick-fil-A.

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

And there's a guy that I met probably 5 years ago now. He was a McDonald's franchisee. His dad started out before him and I think had 2 or 3 of them. He then took it from 2 or 3 to 30.

Wow.

And we asked him, we're like, what, 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 $4.5 million in revenue. It's now it's like $5.5 or close to $6. So $4.5. 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 $5.5 per. So we're like, all right, 30 locations, $5.5. So you're doing like $150, $160 million a year in revenue. Off of something that you started, you know, 15 years ago, 20 years ago with your dad at 3. 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, you're 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 it's just a monopoly, man. You're just like, I'm going to buy 10 more.

I'm going to buy 5 more because you already have the team in place. You already understand the system.

And it's just like you're so repeatable process that you can just do over and over again.

The momentum can't stop. There's another anecdote I want to share. And this guy was an investment banker, so he knows deals. This is back when 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 Orangetheory 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 2 locations? He's like, I make that off of 1 location.. So this individual went and bought 2 or 3 Orange Theories. I think he started with 1, quickly got to 2 or 3, 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 7 years got to 120 locations.

Oh my God.

Mostly food. Dave's Hot Chicken, um, Restore Hyper Wellness. Pop-Up Bagels, Marco's Pizza, and all of those have average unit volumes of $2 to $3.5 million. So on 120 locations, we're talking like a $300 to $500 million a year business, a half a billion dollar a year business in 7 years. And you never invented anything in 7 years. So like, that's fat. If you think about 7 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 depending on the multiple on the EBITDA, the EBITDA on that business is probably $75 to $125 million. For 7 times that, I could sell. And even if I only own 30% 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—

You could really build like a whole empire. What did you call them? Like MUMBO or like—

MUMBOs.

MUMBOs.

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 going to go buy the rights to 5 and build those over the 5 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.

I mean, I've talked about franchising on this show before. Like I mentioned, Brian Schoonemore 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 Franzi and now people can go on there and vet opportunities and learn more and, uh, hopefully you create your goal of a million entrepreneurs.

We're on our way.

Yeah. So Alex, this was an awesome interview. Thank you so much for breaking down everything about Franzi 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 and profits can do today to become more profitable?

So if it's, if it's an existing business, I, 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 going to 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.

Yeah, you forget about it.

They just created like hundreds of millions of dollars in profit, not revenue, profit, because they have so much volume now. And Alex Hormozi talks about this a lot too. He's like, yeah, I used to have 200 members at my gym and they'd pay, you know, $100 a month. So I raised the price to $300 and I provided a little more value to justify the price. I churned half my customers. I have 100 people paying $300 instead of 200 paying $100. Not only am I generating more revenue, my cost 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. 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, I'd go to franzi.com and check on buying a business and join the, join the movement.

Love it. I love that advice. Um, 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.

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 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 like, 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, it's You know, I probably have another 40, 50 years or whatever it is, and I want to go at it as aggressive and as, as fully as I can.

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

Thanks for having me.

And that's how Alex and Franzi profit. This two-part conversation showed us that franchising is not just McDonald's, Subway, 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. 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.