#104: King of Franchises Reveals All

Speaker 1 I always thought I was going to work on Wall Street for dad's company. So I did it throughout high school, college, after college, and realized I was bored to tears.

Speaker 1 So I had a pseudo-uncle, it's really my uncle's best friend, Stephen, that called me and said, I heard you're bored. Well, good news.
We're going to build a billion-dollar restaurant company.

Speaker 1 I helped him build TGI Friday's franchise from nothing to 200 million over the course of five years. And then I said, I have to do my own thing.

Speaker 1 Got roped into a Krispy Kreme donut franchise as a partner. So had a nice equity stake, built that up to $25 million a year.
And we had Nevada and Utah.

Speaker 2 How many locations is that?

Speaker 1 It was about 10 at the time.

Speaker 2 Two and a half million per location in donuts.

Speaker 1 I tell people often that when you join a franchise, there are people that panic when they go, why would I give somebody $50,000 for a franchise fee to join this business?

Speaker 1 Well, why do people give Tony Robbins $50,000 or this one? or that one or Richard Branson and join a mastermind. Franchising is joining a mastermind.
I like that.

Speaker 1 Where there's collaboration and people that are supporting the heck out of you to be successful. And you will learn that.

Speaker 2 Excited to bring you another episode of the Founder Podcast. Today I'm with Lance Growlick here in his home in Las Vegas.
He's the founder and CEO of Ion Franchising.

Speaker 2 Representing over 800 brands, Lance has been deemed the king of franchising. How can you literally get paid to get educated? Should I franchise a business just because I like it?

Speaker 2 Expect to learn what franchises are trendy and what will sustain.

Speaker 2 We'll be diving into best practices on trying to franchise a brand while talking about the risks and benefits of getting involved in franchising. All in this episode of the Founder Podcast.

Speaker 1 Let's go.

Speaker 2 So Lance, you've worked with hundreds, if not thousands of entrepreneurs in the franchise space. Super excited to have you on the show.

Speaker 2 You know, franchising is always something that's really intrigued me.

Speaker 2 I've never been in the franchise world, but when you build a proper business and scale, you do it much in the franchise type model, right?

Speaker 1 Something that's replicable, has good solid processes and whatnot.

Speaker 2 So

Speaker 2 tell us a little bit about like how you fell into or found your way in the franchise world.

Speaker 1 Yeah. So I always thought I was going to work on Wall Street for dad's company.
And I was geared up for that almost my entire life.

Speaker 1 Dad was an accountant that fell into Wall Street because of his older brother. retail and wholesale business.
They were the largest over-the-counter trading house on Wall Street.

Speaker 1 So I did it throughout high school, college, after college, and realized I was bored to tears.

Speaker 2 What bored you about it?

Speaker 1 I needed people interaction. I needed people.
And just sitting at desks and a desk and making trades, it wasn't what excited me. Wasn't excited.
Yeah, the concrete jungle of Manhattan.

Speaker 1 I needed to be outside. I needed to be with people.
I needed to do something different. So I had a pseudo-uncle.

Speaker 1 It's really my uncle's best friend, Stephen, that called me and said, I heard you're bored. Well, good news.
We're going to build a billion-dollar restaurant company.

Speaker 1 And I had restaurant experience in college. And so I went and joined him in Arizona.

Speaker 1 I went out for a trip first with my uncle, scouted it out, loved the idea of it, Greener Pastures, Scottsdale, Paradise Valley, Arizona.

Speaker 1 And we ended up, I helped him build TGI Friday's franchise from nothing to 200 million over the course of five years. Wow.
So in the 80s.

Speaker 2 As a franchisee, he was able to build that. Was it eventually sold off?

Speaker 1 Eventually, yes.

Speaker 1 He got bored and went back to Asia to go build another company probably seven years later or so.

Speaker 2 Interesting.

Speaker 1 But, you know, it was a great experience. There were some new territory we developed.
There were existing franchisees we bought out, a lot of acquisitions.

Speaker 1 But I think that's where my MBA in franchising and restaurants came from.

Speaker 2 Yeah. So what,

Speaker 1 like, what was your role in going and doing that? I was the gopher. What he told me initially was come and join me

Speaker 1 and I'm going to teach you everything and you're going to learn so much just from my tutelage and all this. Well, let me tell you, I start off as a host.

Speaker 1 Talk about starting at the bottom. I'm working the door, seating guests, which was totally fine, making, you know, $9 an hour, I think is how I started.

Speaker 1 And then he put me in this this management and development program and manager and development program.

Speaker 2 So was there initial promises of like, hey, I'm going to make you a partner in this or is just like, come and learn it. Come and learn it.

Speaker 1 And I was totally fine. I was young, didn't have any bills.
Just out of college, worked on Wall Street for all those years throughout high school and college.

Speaker 2 You had to have been making pretty good money on Wall Street compared to working as a

Speaker 1 I was still working my way up. No doubt I left a lot.
I left a lot and I left a huge opportunity in New York for sure. But the reality is this was fun.
This is what got me excited.

Speaker 1 This is what energized me because I grew up in a very

Speaker 1 entrepreneurial family and realized that I can make money doing anything. Nobody in my family had a real job.

Speaker 1 So I said, I could do what they're doing and maybe my course changes.

Speaker 2 So what backing up before all that, you said you could make money doing anything. Were there like some different side hustles or anything that you did growing up that got the ball rolling?

Speaker 1 How are entrepreneurs born? Are they born or are they made in a lab? Is there an environmental accident? Right. You know, I grew up with entrepreneurs, so I was always entrepreneurial.

Speaker 1 I was always excited about kind of striking out on my own.

Speaker 1 My favorite thing was when I was probably 14, I had other relatives that would sell Russell Athletic sweatsuits at the flea market in Long Island where I grew up.

Speaker 1 And it was funny because they dropped me off with a cooler and go, go sell, and we'll give you a percentage of whatever you sell. Nice.
They left me alone.

Speaker 1 And I was making money and I enjoyed the heck out of it.

Speaker 1 Just doing my own thing, not having a boss per se.

Speaker 1 I was 14, though. I mean, it's like, it's not, I don't know if I could do that for the rest of my life.

Speaker 2 Was that your first experience with it?

Speaker 1 Yeah. I mean, then I started valet parking cars.
I was a lot watcher when I was like 15 and eventually started valet parking cars and loved that

Speaker 1 but you know for me and I was a manager of that as well

Speaker 1 leadership was definitely my thing I love to work harder than most people and I realized that at a young age like hey there's some lazy people out here there's some people that just want to cash a check and I'm a lot of them a lot of them and I'm all about working hard getting results making people happy loved customer service at a young age i realized people people are where it's at i want to make people happy i love it i love it.

Speaker 2 So you go and you start working with your uncle and you start building this empire and you work your way up. At what point, like, how many years were you there?

Speaker 1 I was there only five years. Okay.
It's probably the longest I've ever done anything.

Speaker 1 I was always a builder, not so much a maintainer. So while there was action, I enjoyed it.
My wife to this day says I have major ADD.

Speaker 1 Probably should be on medication, but no, I enjoy, I enjoy the process of building.

Speaker 2 So if you're a builder and you were there five years and previously you'd been distracted and whatnot, there was obviously an end point that you were working towards.

Speaker 2 Did you have a goal in mind while you were doing all these things?

Speaker 1 My goal was just to learn continuous improvement, continuous education. I am a lifelong learner.
As long as I can learn, I'm going to be there.

Speaker 1 But like I said earlier, Uncle Stephen got a little distracted himself, went back to Asia to go build other businesses, Korea specifically. I remember calling him around the five-year mark.

Speaker 1 He goes, I told your father you'd get bored at some point and leave me. That's okay.
You learned. But I made it up to the area manager ranks.

Speaker 1 And I had a lot of special projects where I was with him on a regular basis, hearing him negotiate leases. And he was tough.
He was tough.

Speaker 2 And so from there, where did you shift into? So that kind of taught you the ropes, the basics, the ground level stuff. And then was it like, all right, I'm going to go and do this on my own?

Speaker 2 What did you decide there?

Speaker 1 So So I had a hell of an education. I'll never forget at TGI Friday's corporate management training.
I'll never forget they said to you, they said to all of us, so you know more than 98%

Speaker 1 of restaurant owners anywhere in the world now with this education. And I believed it.
I really believed it. It's a hell of an education and a process with Fridays.

Speaker 1 They made some seriously wrong moves chasing. chilies and apple bees, and that's another story.

Speaker 1 Quality of the food went down and all that, but it was a hell of an education. For me, it was: all right, well, I go back to Vegas, start consulting.

Speaker 1 What do people do after they've done something fun and they feel like they have a lot of knowledge to share? You either write a book or you start consulting, right?

Speaker 1 So at that point, I thought I was too young to write a book. Let's go consult.

Speaker 1 And I enjoyed that, but eventually I got in the hotel business, became an opening food and beverage director at the Stratosphere Hotel in Vegas, did about 50 million in food and beverage, had about 700 employees.

Speaker 1 It was a blast.

Speaker 2 My old man.

Speaker 2 That was your company.

Speaker 1 Well,

Speaker 1 it was the stratosphere. It wasn't my company.

Speaker 1 I was the food and beverage director, and a buddy of mine was the VP that hired me for that. He was the old Friday's guy that my uncle had hired.
So Small World got dragged into that.

Speaker 1 And then I said, I have to do my own thing.

Speaker 1 How do I do my own thing? And I was looking at things like Wing Stop and got roped into a Krispy Kreme Donut franchise as a partner. So

Speaker 2 I think it's key for for the listeners and the viewers to know, like,

Speaker 2 you know, in 2024, it's very easy to get caught up that, like, by age 21, 22, I should be a millionaire, should have it all figured out, should be out on my own running my own thing.

Speaker 2 But you took a different route, right? Like, you went and you learned from your uncle. You were willing to take the pay cut, you were willing to do it for the experience.

Speaker 2 And then, on top of that, you went and got even a better education going and working for the stratosphere. I mean, building out a food and beverage and running 700 employees, right?

Speaker 2 Like that is an incredible experience on somebody else's dime. Absolutely.
Getting paid for it and somebody else's risk

Speaker 2 portfolio.

Speaker 1 Absolutely. And they're willing to pay me for this.
Right. Right.

Speaker 2 I think that's probably one of the most underrated things in entrepreneurship right now is going and being an intrapreneur for somebody else, operating under somebody else's risk

Speaker 2 diagram, the fact that you're not making the risk, right? You got open access to the hiring, the credit card, everything else, really running a business within a business.

Speaker 2 Yeah, sure, you don't get the upside, but the experience and being able to do it on somebody else's risk is like...

Speaker 2 so underrated in 2024.

Speaker 1 100%. And a lot of people are impatient.
And a lot of people, by the time they become an entrepreneur, are missing too much.

Speaker 1 And they don't know what they don't know at at this point.

Speaker 1 And that is the challenge. I felt ready when I got into it.
I knew I was ready. I wasn't perfect.
I still made mistakes, but I, you know, I felt like I paid my dues and I was ready to go.

Speaker 2 Yeah. Yeah.
Yeah.

Speaker 2 So at that point, you start getting into, you said, Krispy Kreme franchises and those type of things.

Speaker 1 Krispy Kreme donuts. I was invited, again, through a relationship.
You keep your eyes open. Right.
And,

Speaker 1 you know, opportunities will come when you put the word out. And I had a family friend that was the first franchisee for Krispy Kreme in New York City.

Speaker 1 And they knew the guy that became the second franchisee for Krispy Kreme. Brilliant guy.
Unfortunately, he

Speaker 1 never ran restaurants or food service in his life. Smart investment banker, MBA type.

Speaker 1 And he and I became fast friends. And I consulted for free, gave him advice.
He opened the first store. It was an an outrageous success in Vegas.
But he still had

Speaker 1 operational issues. And eventually I joined him.
Nice. Had a nice equity stake and built that up to $25 million a year.
And we had Nevada and Utah.

Speaker 2 How many locations is that?

Speaker 1 It was about 10 at the time.

Speaker 1 And

Speaker 1 it was a lot of fun. And, you know,

Speaker 2 $2.5 million per location in donuts.

Speaker 1 There was also a lot of wholesale business. But yeah,

Speaker 1 we had a store in Utah that opened doing $250,000 opening week. Issaquah, Washington, I helped support that opening.
You're a Washington state guy. Issaquah did $450,000 opening week.

Speaker 2 That's a lot of sugar and bread.

Speaker 1 It's a lot of sugar and bread.

Speaker 1 A lot of air going into that product. Eight cents

Speaker 1 a glazed donut is what it was in the old days. Is that what the COGS were? That's what it was in the old days.
Wow. I don't know what it is these days, but commodities are not the same anymore.

Speaker 2 Everything's got a 8 cents a dozen was costing you 96. Yeah.
So a buck for a dozen. And at that point, they were selling it, what, for $3.79?

Speaker 1 In the old days, I remember $3.79 a dozen glazed. And these days, my son just told me it's like $10 in LA for that same dozen glazed or something.

Speaker 2 That's crazy because you would think $3.79, man, that's cheap, but you're really only, you know, 25% to COGS on that. That's crazy.

Speaker 1 It's, you know what? We still made plenty of money because people would come and buy individual donuts and, you know, dollar and change for a donut that costs not much. Right.

Speaker 1 Yeah, that's, that's phenomenal.

Speaker 2 That's, that's a lot of volume, too, doing 450,000 of, you know, 379 a pop.

Speaker 1 It was a model that definitely worked, although they were a little bit greedy in those days. They made people build too many stores.

Speaker 1 And, you know, look, in business, you have to decide: are you going to be a destination or a convenience, especially in a brick-and-mortar type business?

Speaker 1 How many donut shops, how many Krispy Kremes can you have within, you know, 10 miles?

Speaker 2 So being the king of franchising, right? Like

Speaker 2 you help consult people that are getting into or considering either building out a franchise themselves or going and buying into and scaling different franchises.

Speaker 2 I'll tell you what, like, especially in the food industry, I'm assuming what percentage of the franchises that you work with are food?

Speaker 1 Yeah, it's funny. Food is a huge component of franchising.
Everybody knows it because of the brick and mortar nature, you know, all the quick serve restaurants.

Speaker 1 So while it's incredibly popular, I don't do a lot of food deals these days because there's so many other better

Speaker 1 categories, if you will, or industries, home service brands, as you know very well.

Speaker 1 Biggest, my favorite today, great return on investment. You're not spending $500,000 to a million dollars building a restaurant.

Speaker 1 You can spend $300,000, get multiple territories of something, and still come at it. I know a guy with a roofing franchise in his first year, he did $8 million.
Wow.

Speaker 1 $8 million with a roofing franchise. That's awesome.

Speaker 2 I'll tell you, the thing that's always scared me of

Speaker 2 franchising, right? Like to be a franchisee, especially in the food industry, is like food is very trendy. Right.
And, you know, lots of ups, lots of downs. I mean, let's

Speaker 2 krispy cream. Yeah.
You know, I look at what it used to be 20 years ago, man. It was like you pull up to a Krispy Kreme, you got a line wrapped around the building and out the parking lot.

Speaker 2 You know, now it's like, man, they're serving them at gas stations and

Speaker 2 little fundraisers. So like, what would you say to someone that's maybe like a cynic or, you know, or like,

Speaker 2 because

Speaker 2 I'm a little overcritical towards, you know, the food industry. It's like, how, why would it be worth it to me as a franchisee to take all the risk,

Speaker 2 because I get it for the franchisor, man. They're making anywhere from 6% to 10%

Speaker 2 of the revenue and really not footing all the risk. So what would you say to somebody that has a feeling like that?

Speaker 1 Yeah, first of all, any franchisor

Speaker 1 that wants to do really well needs to support the heck out of their franchisees and make sure they're successful.

Speaker 1 Otherwise, they don't have an exit.

Speaker 1 So the reality is, you have to find the right leadership team with the right business model.

Speaker 1 Food can be trendy. Look at, remember frozen yogurt?

Speaker 1 Everybody wanted a frozen yogurt business.

Speaker 1 That was easy to predict. It was like banking all over again.

Speaker 1 Every bank, there's always a consolidation at some point. Well, in the yogurt business, I'm like, oh, gosh, here we go.
Another yogurt brand.

Speaker 1 Easy barrier for entry. Everybody's jumping into it.
Everybody likes it. Well, you don't go in with things that you like.
That's why I tell people, forget about your passion.

Speaker 1 Do you want to make money

Speaker 1 or not? Use your skills. But leadership.
Look at the leadership of the business you're getting into. Look at the history.

Speaker 1 One of the best parts of the franchise process is actually talking to the existing franchisees. And any great franchise.

Speaker 1 has a formal validation process where they say, Chris, here's a list of 100 franchisees. Call five of them, call 10 of them, talk about their experience.
Ask questions like, Are you growing? Right.

Speaker 1 You know, grow or die is the typical mentality for a lot of entrepreneurs. Are we growing? If you're not growing, there's a problem.
And it's easy to figure it out.

Speaker 1 What I help people with is I help people stay away with those franchises that are trendy. Wellness today.

Speaker 1 How many more infrared sauna massage type concepts do we need? When I venture to guess, a lot of the equipment is the same, and I'm not dogging on that.

Speaker 2 So you would say that would be over-trendy in 2020.

Speaker 1 Well, it can be. There's a lot.
Everybody, I mean, look, we know jumping out of the pandemic that we are an obese, out-of-shape country that needs a lot of help.

Speaker 1 We need more things to make us feel good. Sadly, food and sugar and things like that do it.

Speaker 1 I'm, you know, with Wingstop, I did that too. A whole bunch of fattening food.
So the reality is you just have to go in with your eyes wide open.

Speaker 1 When you use a franchise consultant like me, I'm going to steer people away from things that I think are not going to work in the long run. This is why I love home service brands.

Speaker 1 I love senior home care, companion care brands. Every day another 15,000 Americans turn 65.
These are things that we need in this country.

Speaker 1 And you almost can't go wrong with a lot of those brands in those industries.

Speaker 2 You know, I appreciate

Speaker 2 the guidelines of like, hey, go,

Speaker 2 if you're going to jump in, go and interview 100 franchisees and whatnot.

Speaker 2 But wouldn't you say that like during the heyday of let's keep using Krispy Kreme, wouldn't every franchisee be like, yeah, we're doing phenomenal.

Speaker 2 The support is awesome. We're growing, everything like that.

Speaker 1 No,

Speaker 1 when I was with Wingstop, I was the president of the franchise advisory council. I was one of the top franchisees,

Speaker 1 And I spoke to prospective franchisees, did validation calls on a regular basis.

Speaker 1 I discouraged as many people as I encouraged, depending on what their plan was. And people that were smart would ask direct questions like, based on my plan, do you think I'd be successful?

Speaker 1 I said, hell no.

Speaker 1 Because you just told me you have no restaurant experience. You're going to hire somebody off the street and hope and pray.

Speaker 1 Hoping and praying isn't exactly

Speaker 1 a system or a part of a business plan, right?

Speaker 1 You know, I don't think you're going to be successful. The restaurant business is the hardest business to get into.

Speaker 1 There's perishable goods, in some cases, the worst employees that can go anywhere to get a job down the street.

Speaker 1 This isn't like a professional that might have a plumbing license, you know, that's that's more focused, or someone that cuts hair for a living, even, for instance.

Speaker 1 So the answer is, I think the validation stage or process is gold when you ask the right questions. I actually give people questions.

Speaker 1 I've had people so excited, they're in lust with a brand and ready to get married because that's what it is. It's like it's a relationship.

Speaker 1 People are getting married to a business for typically 10 years in a franchise agreement. So I tell people, well, how many? How many people did you actually speak to in the validation?

Speaker 1 Oh, I talked to three. They were all happy.
And

Speaker 1 call some more.

Speaker 1 What questions did you ask? I reconfirm. There's also a franchise disclosure document.
There's 23 items in that, including the item 19, which is sales figures.

Speaker 1 So there's a lot of ways to test whether or not this brand is going to work. Now, but you brought up the biggest piece of all of it.
How do I know it's going to work in the long run?

Speaker 1 Even if it is working right now, how do I know? Krispy Kreme, it was easy to spot. The leadership team was not that good.

Speaker 1 They ended up getting greedy. Who would put 20-something hot shops, big Krispy Kreme shops in Southern California? Why not start with five?

Speaker 1 And that's what happened in Southern California. If I remember exactly.

Speaker 1 I think it was store number seven opened in Southern California and all the previous six locations opened doing well over $200,000 a week. And it was store number seven that barely did $20,000.

Speaker 1 Might as well have shut the lights off at that point and realized, holy shit, we just screwed up.

Speaker 1 We oversaturated this area.

Speaker 2 So, what are your thoughts right now? On there's the last two to four years has been a pretty big cookie craze.

Speaker 1 Yeah.

Speaker 2 A lot of cookie shops opening up.

Speaker 1 A lot of crumbling.

Speaker 2 Yeah, a lot of crumbling. You know, not to call out any names in particular.

Speaker 1 Yeah. Right.

Speaker 2 But yeah, you got different shops like Crumble, like Dirty Dough or whatnot.

Speaker 1 I had the Dirty Dough CEO on the other day. Okay.

Speaker 2 So, yeah,

Speaker 2 I want your honest thoughts. Is it trend?

Speaker 1 Yeah, it's too trendy. Too trendy.
Just like the cupcake craze before, it's just not realistic. I'll tell you,

Speaker 1 I'm one of the biggest donut experts in the U.S. I've been called that on a regular basis.
I've been involved in a lot of donut concepts.

Speaker 1 And I will tell you, donuts are not as trendy. Anybody can make a cookie at home.
Anybody can bake a cupcake,

Speaker 1 but nobody can just walk into their kitchen and fry donuts successfully.

Speaker 1 And same thing with fried chicken, for example. Items that are more proprietary and harder for people to do are the ones that will be more successful in the long run.

Speaker 1 So when I saw the cupcake craze and the cookie craze, I was like, oh, gosh, this is not going to last. It can't.
It's just not possible. It's just too expensive.

Speaker 1 It's just not going to be worth it in the long run for the customers. Nobody can repeat or make that glazed donut from Krispy Kreme in their house.

Speaker 1 So when people have a hankering and they have a craving, they're going to go through that drive-through at some point.

Speaker 1 The fact that there were too many Krispy Kreme shops, Walt Disney didn't put in 30 Disney Worlds for a reason. Right.

Speaker 1 So you have to find a brand with great leadership that is going to grow in a controlled fashion the right way the right way that's going to benefit you the franchisee in the long run yep you're going to have your protected territory and look like subway when the founder of subway deluca passed guess what

Speaker 1 friends i knew that had subways knew there was going to be a problem and sold and they took their money took their chips off the table and went elsewhere to build another business. Interesting.

Speaker 1 They did well while it lasted. They were not confident in the new leadership.
Those are things to look out for.

Speaker 2 So 2024, I'm a successful entrepreneur.

Speaker 2 I have plenty of money to go invest, and I'm, you know, I'm invested in the stock market, real estate, or whatnot, and I'm considering the idea of getting in the franchise world, but at the same time, really don't want to get my hands dirty, right?

Speaker 2 What advice are you giving to somebody like that?

Speaker 2 direction,

Speaker 2 what franchise are you going to point them towards? Or are you going to say stay out of it altogether because you need to get your hands dirty?

Speaker 2 What kind of advice you're giving them?

Speaker 1 Well, first of all, I always tell everybody prescription before diagnosis is malpractice. A lot of people hit me up with, what's the hottest franchise today? I said, well, it all depends on you.

Speaker 1 And franchising, not everybody's Christly. Not everybody can create and found their own brand in solar or anything else for that matter, in home services.

Speaker 1 So franchising is great for those that don't want to do the heavy lifting to figure out a model that's actually going to work.

Speaker 1 So when I'm talking to people that don't want to work that hard, if you have appropriate skills, I call it your what? What is your investment level? You're going to get an SBA loan.

Speaker 1 How much cash do you actually have that you want to invest, number one?

Speaker 1 What are your skills? A good communicator. A guy like you can literally do anything in franchising.
Been there, done that, no problem. You're the perfect candidate.

Speaker 1 But there are people that maybe are an engineer. Maybe they haven't managed people before.
So I have to be careful. They've never managed people.
It might be a problem.

Speaker 1 Because really, what is franchising all about if you're going to be what we call a semi-absentee owner?

Speaker 1 Semi-absentee ownership is a goofy franchise term that simply means you're going to keep your day job or your other investor type activities and you're going to work on the business, not necessarily in the business, 10 to 20 hours a week.

Speaker 1 But somebody else will be in the business as a GM type that's going to run your business for you, go through the corporate training, et cetera. There are plenty of brands that are set up for that.

Speaker 2 Is there anything out there in the franchise world, whether it's home services, food, whatever else, that does not require my time, would only require my money?

Speaker 1 There are, I have a broker, Rhino 7,

Speaker 1 and Doug and his son Joe, great team over there. They represent quite a few brands that are real passive opportunities.
Spray Foam Genie is one of them under their umbrella. And Spray Foam Genie,

Speaker 1 Spray Foam insulation is hot.

Speaker 1 And everybody wants to go green, at least that's what the government tells you. And Spray Foam is a great way to insulate your house.
It lasts.

Speaker 1 It doesn't fall down like the pink stuff or some of the blow-in stuff. So Spray Foam Genie has an absentee model.
I have a gentleman in New Jersey, bought four,

Speaker 1 I think it was four territories in Oklahoma. It was the closest, best territory that he liked.

Speaker 1 And he's not even in the same state.

Speaker 1 So they go under a management contract where someone else is managing his business for him. So it was a little bit to set up things, bank accounts and admin, yeah, but you're not doing the day-to-day.

Speaker 2 So what kind of return can a franchisee expect in a model like this?

Speaker 1 Yeah, and again, the expectation, depending on

Speaker 1 it just depends on the market. But as you know, if Wall Street, if the SP 500 can return 10.5%

Speaker 1 since the 50s, people have a certain expectation. Well, in real estate, I got this, and I want to get more if I'm going to invest in a business.
You also have the write-offs, depreciable assets.

Speaker 1 So depending on your accountant and how you structure things, your goals might be adjusted as well. So it just depends.
Can you get your money back in two years?

Speaker 1 Maybe. You know, in the restaurant business, it's typically the longest because you have, you know, a larger investment.
Right.

Speaker 1 So it might take you five years to get your money back off of restaurants. It might be three years.
But the beautiful part is the exit. Yeah.

Speaker 1 Because in franchising, as a franchisee, you're going to sell for three to five times cash flow, typically.

Speaker 1 And, you know, you mentioned cookies. I had a Crumble franchisee looking to sell for about 15 million, just a few locations a couple of years ago, five locations.

Speaker 1 Hopefully he's still doing well. Some aren't.
You know, there is some crumbling going on, as we alluded to.

Speaker 2 The cookie is crumbling.

Speaker 1 Yeah, the cookie is crumbling a little bit. But, you know,

Speaker 1 it all doesn't last forever unless you're in some really solid niches like home service brands.

Speaker 1 And I mentioned earlier, senior home care. But there are some pretty incredible returns for franchisees.
I have plenty of brands, a garage door brand.

Speaker 1 I know a franchisee that just exited for $100 million. A franchisee.
Crazy. He didn't build his own.
I mean, he built his own company, but he didn't.

Speaker 2 He didn't. What franchise was that?

Speaker 1 That was Precision Garage Door.

Speaker 1 One-hour heating and air conditioning. My wife's niece and her husband just got involved in that.
They're not even 30 years old. Good for them.
Not in that industry.

Speaker 1 They've had people exit for 60 million. I think 108 million is their record today.

Speaker 2 So what do you think about, I don't know if this is what you call it, maybe like more of the reverse franchise model, which is like the Chick-fil-As of the world,

Speaker 2 where it's owner-operator,

Speaker 2 you're very little down, but very little equity. I don't know, was it a 15% equity stake in your location?

Speaker 1 You're sharing in the profits and you have the potential to make, I mean, a lot of Chick-fil-A operators, as you were alluding to, they're not really franchisees. They're operators.

Speaker 1 That's what they call them.

Speaker 1 They might make a half a million a year. It's an incredible opportunity for a lot of people.

Speaker 1 But over time,

Speaker 1 the true entrepreneur,

Speaker 1 most people are not going to last in that system. They're going to feel trapped.

Speaker 2 Sounds terrible to me. Like, you're telling me I got to show up to a restaurant and run this thing and like that I'm maxed out at two locations total.
Yeah.

Speaker 2 Is there anybody else like Chick-fil-A doing a similar model?

Speaker 1 You know, in the old days, Outback

Speaker 1 did that type of model that I considered pretty similar, the proprietor model. Yeah.

Speaker 1 In those days, your buy-in, Chick-fil-A is $10,000, Outback, I think, was $25,000, and you got 10% of the cash flow, plus you got a modest salary.

Speaker 1 And there were people doing incredibly well back in the day with

Speaker 1 Outback. But you have to consider there are some people, when you use the intrapreneurial

Speaker 1 word before, there are people that aren't necessarily ready for a full commitment. And that's a good way to, you know, it's like before you get married, you date for a while.

Speaker 1 You might get engaged for a while, so everybody's kind of at a different level of commitment. So, sure, it's just another option, you know.

Speaker 2 It's interesting. So,

Speaker 2 and then you have the guys out there that have done it without franchising, like Panda Express.

Speaker 1 Are you in an outberger?

Speaker 2 Are you familiar with Panda Express's like the financial position?

Speaker 1 Uh, I know they do incredibly well.

Speaker 2 Yeah, I think they're like over 2,600 locations, all solely owned.

Speaker 1 Yeah, which is

Speaker 2 that is like a stun, stun. Like, yeah, like that, that's just crazy to me.
So,

Speaker 2 why would somebody

Speaker 2 go and be a franchisee versus going and building their own thing that they could potentially scale to 2,600 locations?

Speaker 1 Well, because most people don't either want to put in the work or don't know how to put in that kind of work to develop something all on their own.

Speaker 1 The Steve Jobs of the world and the, you know, the Michael Dells of the world, there aren't that many.

Speaker 1 And there are people that just, it's easier to look at a model, like in a franchise model, that is proven. And just,

Speaker 1 I'm just going to follow that blueprint.

Speaker 2 So, what would you say, like, for a really good franchise is the most, like, the things that are brought to the table by a franchise or more than others, right? Like,

Speaker 2 I would imagine it's like systems and processes and software and brand and co-marketing.

Speaker 2 What are some of the other things that you should look for from a solid brand to bring to the table?

Speaker 1 A good example, Rolling Suds, a power washing brand. Most people, when I mention that to them, they look at me, their eyes want to glaze over and go, power washing?

Speaker 1 I could walk into Home Depot or Lowe's and get a power washer.

Speaker 1 Not this power washer. This is like the Robert Downey Jr.
Avengers style power washer.

Speaker 1 They can clean a building from the ground floor, you know, four stories up with soap and sanitizer and soft wash and et cetera. So here's a brand with something very proprietary.

Speaker 1 There's no major competition.

Speaker 1 HOAs and property management companies that are hiring them didn't even know a service like that existed.

Speaker 1 They see a little old man with a little power washer that's going to take three years to clean everything effectively. So amazing leadership team.
My friend Aaron is the CEO of that.

Speaker 1 33-year-old brand based in Pennsylvania.

Speaker 1 And I mentioned very proprietary. Their culture, as you speak to their franchisees, you'll realize immediately that their culture is incredible.
They help each other. The amount of collaboration.

Speaker 1 I tell people often that when you join a franchise, there are people that panic when they go, why would I give somebody $50,000 for a franchise fee to join this business?

Speaker 1 Well, why do people give Tony Robbins $50,000 or this one or that one or Richard Branson and join a mastermind?

Speaker 1 Franchising is joining a mastermind, where there's collaboration and people that are supporting the heck out of you to be successful. And you will learn that.
Rolling Suds has an incredible culture.

Speaker 1 We got to spend some time with their corporate. They just had a grand opening for their new training center in Nashville.
We were just there. Had a great time.

Speaker 1 And more importantly, met a lot of franchisees and heard about their experience and the support and the collaboration and this mastermind mentality of what they go through. So are the processes there?

Speaker 1 Yes. But guess what? Processes and systems will develop.
McDonald's franchisees,

Speaker 1 they were the ones that invented the filet of fish and the Big Mac and submitted that to corporate. Say, hey, we need a fish sandwich on Fridays.
People are asking for this. And they kept it.

Speaker 1 So the best brands are going to have that open forum, if you will, and collaboration. And that's what Rolling Suds has.
And that's why it's become one of the hottest brands that I have.

Speaker 2 Is it still profitable to be a McDonald's franchisee?

Speaker 1 You know, I don't have the current numbers. I was going to actually, it's FDD season.
Everybody's updating their disclosure documents, and I was curious if McDonald's updated theirs.

Speaker 1 The answer is, of course, it can be profitable.

Speaker 1 But years ago, years ago, it was all about the real estate, getting into the real estate and putting the building on there and having a cash-flowing business.

Speaker 1 on the real estate in which you were the landlord. So today it can be profitable,

Speaker 1 of course. However, it's a big investment.

Speaker 2 What is it, a million bucks?

Speaker 1 Well, if you're just talking land and building, depending on,

Speaker 1 I'm sorry, not even the land, just equipment and the leasehold improvements and what have you. Yeah, you're going to be at a million easy for one lot.

Speaker 1 A lot more than that these days.

Speaker 2 Yeah, absolutely. And what can you expect to make

Speaker 2 in a McDonald's like that?

Speaker 1 See, that's the thing. A Chipotle, you're talking about corporate stores earlier, like Chipotle,

Speaker 1 you're doing $2.5 million a location without a drive-through.

Speaker 1 McDonald's is these days probably about the same, if they're lucky

Speaker 1 and with a drive-through.

Speaker 1 A lot more commitment in the facilities and bigger locations. Interesting, interesting.

Speaker 2 So back to, I know I kind of asked this question earlier, but let's go back to my particular situation. Say you're me.

Speaker 2 And I'm not necessarily looking at franchisee, but this is how you're like, I like playing through this.

Speaker 1 You have plenty of time.

Speaker 2 Yeah, say, say I want to go and be a franchisee. Say I got $10 million cash.
I don't need to go. Maybe I can go and get some SBA loans, leverage things or whatnot.

Speaker 2 But say I got $10 million cash that I want to go and I have experience in the home service space and I'm willing to go and commit 60, 70 hours a week. What are you doing?

Speaker 1 That setup,

Speaker 1 I would keep you right in the home service space.

Speaker 1 And there are

Speaker 1 roofing.

Speaker 1 It could be roofing it could be air conditioning it could be uh rail and fencing the the the world of superior and top rail fence and stand strong fencing there's some great fence and rail companies

Speaker 1 but in the home service space all of the trades plumbing zoom drain is a hot one one-hour heating and air conditioning why would you say these are pretty hot right now well these are proven brands with big numbers right great franchisees, great systems, great processes in place for years.

Speaker 1 These aren't brand new brands by any stretch.

Speaker 1 So it's just literally plug and play. And

Speaker 1 you will find proof of concept throughout the United States for all of these brands. Best choice roofing, mighty dog roofing.

Speaker 1 And they're all a little bit different. So you'll fit in nicely, Chris.

Speaker 1 We'll find you a good home.

Speaker 2 Well, there's a good chance that's not the route that I'm going to be taking, but I do appreciate the mental exercise.

Speaker 1 It's fun to do. You got it.

Speaker 2 It's fun to do.

Speaker 2 So, Lance, if somebody is interested in getting into franchising, are you a resource that they can go to? Of course.

Speaker 2 To help us understand a little bit more about what you do. Yeah.

Speaker 1 So I get paid like a recruiter. Okay.
So I'm a free resource for people. They don't ever pay me.
It's not like I'm a real estate agent where they're paying my commission at closing, so to speak.

Speaker 1 I'm a referral source. I get paid like a recruiter, and I'm going to show people.
I'm going to listen to people and understand what they're looking for.

Speaker 1 Most people don't necessarily know what they're looking for, but we talk as to what your goals are, as I mentioned earlier. What is your investment? What are your skills?

Speaker 1 I have a great assessment on my website, and it's the part of my franchise finding formula.

Speaker 1 That free assessment helps me and you understand based on your mindset, skill set, life experiences, what brands and industries might be best for you.

Speaker 2 That's awesome.

Speaker 2 And what's your website? Where can people find you?

Speaker 1 My name is LanceGrallik.com. And also, my podcast is IonFranchising.
So E-Y-E onfranchising.com. They can find both of those websites.
The assessments everywhere on those.

Speaker 1 And social media, you can DM me, you know, founder. Nice.
For you.

Speaker 2 Are you a big guy on Instagram? You control your own, or you have a team that runs that?

Speaker 1 I have some teammates that do help me with it, but I'm typically the one answering.

Speaker 2 Responding to the DMs and whatnot.

Speaker 2 And your handle on Instagram, which one is that?

Speaker 1 It's Lance Graalick. It's Lance.graalik, technically.

Speaker 1 It's got some followers, so you'll find me. Nice, nice.

Speaker 2 Well, Lance, I appreciate just the

Speaker 2 deep dive into the franchise world. You know, it's fascinating.
It's a whole new way of doing business. I personally have never been in the franchise world.
I've flirted with the ideas, right?

Speaker 2 I have friends that have been very successful. One of of my good friends sits on the board of franchisees for Papa John's.

Speaker 2 I think he's got something like 80 locations now. Nice.

Speaker 2 And, you know, of course, Papa John's is famous for recently having Shaq come in and buying a bunch or whatnot.

Speaker 2 Have you...

Speaker 2 With some of the brands and whatnot, have you ever dealt with any of those more celebrity type franchise owners?

Speaker 1 Yeah, you know, Jeff, who's the CEO and founder of Everbull, he's got, Drew Brees has 150 or so Everbulls.

Speaker 2 For sure, for sure. Are you

Speaker 2 good friends with Jeff?

Speaker 1 I was on Jeff's podcast.

Speaker 1 He's going to join me on mine soon, and hopefully we can drag

Speaker 2 Drew with us. Jeff's a great dude.
If you guys haven't watched the episode that I did with Jeff,

Speaker 2 we swap podcasts.

Speaker 1 He's got a great podcast. Jeff Fenster show.
It's great.

Speaker 2 Lance, appreciate your time.

Speaker 2 Last piece of advice.

Speaker 2 So somebody is really, really struggling to take that leap to go and start their business, to do the next big thing, or just, you know, really struggling to get outside of their comfort zone.

Speaker 2 What piece of advice would you give to them?

Speaker 1 Start. Most people remain stuck.
Please start. And the start, just call me.
Reach out. I give free advice all day.

Speaker 1 Sometimes I'm talking to people and I have a feeling based on their own admission that it's going to take them years to get out of their rut or whatever scenario they're in. It doesn't matter.

Speaker 1 Start, reach out for some help. I'm happy to help anybody.

Speaker 2 I love it. Appreciate your time, Lance.
Until next time.