NON-Food

Franchising
The Better Path to
Business Ownership

JON OSTENSON, CFC

 Aragon House Publishing

Non-Food Franchising: The Better Path to Business Ownership

Copyright © 2022 by Jon Ostenson
All rights reserved. No part of this book may be used or reproduced in any
manner whatsoever without written permission except in the case of brief
quotations in the context of critical articles or reviews.
ISBN (paperback) 979-8-9867430-0-4
ISBN (ebook) 979-8-9867430-1-1
ISBN (audiobook) 979-8-9867430-2-8

Cover design by Aaxel Author Services & Deividas Jablonskis

Interior design by Aaxel Author Services
www.aaxelauthorservices.com

Printed in the United States of America

This book is dedicated to my incredible clients whose consistent
successes have inspired me to impact the lives of many more!

100% of profits from this book will be donated to Hope International, a Christian
non-profit that supports entrepreneurs in underserved communities around the
world through avenues such as microfinance loans and savings groups. Their ‘hand-
up vs. hand-out’ approach empowers sustainable commerce that has an exponential
impact on the entrepreneurs’ families and communities for years to come.
 Contents

Business Ownership: The American Dream 1

Franchising vs. Startups 7

Franchising vs. ‘Entrepreneurship Through Acquisition’ 13

The Franchise Landscape and Ownership Roles 19

Industry Opportunities 27

Financials: Funding and Returns 37

Franchise Disclosure Document and Legal 45

Selecting a Franchise 53

Long-Term Strategies 61

Understanding the Franchisor’s Perspective 69

Conclusion 77

FranBridge Client Testimonials 81

About the Author 87

Business Ownership:
The American Dream
“If you don’t build your own dream, someone will hire you to help build theirs.”
- Tony Gaskins

I
believe that there is an entrepreneurial spirit inside each of us. Some
act on it, some contemplate it, and some ignore it. But it still exists.
Every day, I talk with those interested in exploring business
ownership across the United States and Canada. As I do so, I pick up
on commonalities, themes and trends.
To launch a business, you can start from scratch with a few dollars
and an idea. You can build anything from an application for mobile
phones to an automobile, invent anything from a service that others
never thought of to constructing a better mousetrap. You can also
purchase a business. There are several ways to do this. For instance,
some entrepreneurs purchase struggling businesses with the aim of
turning them around. But not everyone is interested in taking on the
stress of righting a potentially sinking ship. Some entrepreneurs want
a proven concept with proven systems. While there is no guarantee for
success, there are plenty of ways to mitigate risks.
One of America’s greatest entrepreneurial ideas throughout recent
decades is the concept of a franchise. While it isn’t quite accurate to
say that Americans invented franchising, there is no question that

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 Non-Food Franchising

American companies were the first to perfect the framework. In fast

food, some of the earliest chains date to the 1920s, including Howard
Johnson (now better known now as a hotel) and White Castle. Of
course, McDonald’s is the world’s largest franchisor, with over 36,000
outlets worldwide.
However, the focus of this book is on ‘non-food’ franchises. It
may surprise you to learn that non-food franchising actually predates
the fast-food chain concept. The Singer Company actually began
franchising in 1851, offering others the opportunity to sell sewing
machines. Imagine a time before most of our clothing was stitched
overseas; in fact, even before the stitching and hemming of clothes was
done in factories at all. In the 1800s, nearly every household had to
sew their own clothes. Singer is often cited as the first real franchisor
in American history - 70 years before any fast-food chains popped up.
In 1902, Rexall, a chain of pharmacies, came on the scene and
created a pattern and framework that others then followed. And now,
fast forward, times have certainly changed. Today, there are several
thousand non-food franchise opportunities from which to choose.
And, as you can imagine, the possibilities are staggering!
While many people are excited by the wealth of opportunities that
exist, few know where to start. You may have asked yourself these types
of questions in the past:
“Do I have what it takes?”
“What are the risks?”
“What are the potential rewards? Do they outweigh the potential
concerns that may linger?”
Most people know someone, a friend or family member who has
been highly successful in building a business of their own; many of
us also know of someone for whom the entrepreneurial game ‘didn’t
work out’. They went for the dream, like gold miners headed west in a
Conestoga with the sign “California or Bust” and ended up … busted.
Everyone’s own experience comes into play in how they view
the world, and in turn, how they think about their jobs, careers, and
investments. If you’ve seen people who went bust, perhaps you’ve
gotten cold feet, even though you have the desire and drive. It’s also

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 Business Ownership: The American Dream

common for cautious relatives to tell you to ‘get a job’ or ‘find steady
work’.
But people with a positive, can-do mindset enjoy the process of
thinking ‘what if ’? They will sprint, then jog, then walk, then tiptoe
their way up to the edge of the diving board. Some will take the plunge.
And after some time, the majority of those will ask themselves... ‘why
didn’t I jump sooner’?
Paraphrasing Tony Gaskins, you can either support someone else’s
dreams or you can apply the same energy toward accomplishing your
own. You can either get compensated for helping someone else build
their empire, or you can build your own. Perhaps getting hired to build
someone else’s empire is the right thing for you or the right thing for
this season in your life. There is certainly nothing wrong with being
an employee. However, if something about that feels a little off to you,
you’re in the right place. You have the liberty to follow your own dream
and chart your own path. After all, you only live once!
Often, people see business ownership as risky. However, consider
an airplane pilot. The pilot has more control over outcomes when they
are the ones flying the plane as opposed to when they are sitting in
coach or even business class... I have seen so many people who have
been asked to step off the airplane, often unexpectedly, sometimes just
a few years before they’re ready to retire, when there are few options
for getting re-hired. Unless their contractual position provides a golden
parachute, they will find their livelihood in free-fall.
They may realize too late that they have no control over decisions
being made by ‘the boss’ or ‘the ivory tower’... Serving at someone else’s
prerogative can be far riskier, no matter how loyal an employee you
may be. To be non-expendable, you have to be the owner.
At this time in history, I believe that Americans should feel
encouraged at our long-term prospects, regardless of the 24/7 news
cycle’s often discouraging headlines. What I see in my daily discussions
with clients is a level of interest in business ownership that I personally
believe to be unprecedented, and this should bode well for the future
of our nation. People inherently WANT to own businesses. Whether it
is the freedom that can be afforded by this path, the ability to control

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 Non-Food Franchising

one’s own destiny, or just a piece of the greater American dream, more
and more are waking up to this inner desire.
Even prior to the global Covid pandemic, Americans were showing
increased levels of interest in ownership for a number of reasons. Two
of these are well articulated by Adam Grant:
‘Burnout is being overwhelmed by work. Boreout is being
underwhelmed by work.’ Another way to say this is that having too
much to do is exhausting, but having too little to do is demoralizing.
What did the global COVID pandemic do? Did it make people
more cautious about opening a franchise? Not in the least. Since 2020,
the interest level has accelerated - big time. People had the opportunity
during the pandemic to slow down and question the path they were
on. Maybe you’re one of those who is wondering if it’s too late to make
a shift in what is now known as the Great Resignation, or as I refer to
it, the ‘Great Reassessment’? The answer is NO! It is not too late.
Now is the time to scratch that entrepreneurial itch!
Not only are people looking toward their future, imagining how
they can live the life they have dreamed, they are also taking a keen
interest in investing. In total as a country, we have record levels of
cash sitting on the sideline. The stock market is as unpredictable as
ever; crypto is even more volatile than usual, and many precious metals
are flat. Interest rates will likely continue to be at lower historical
levels in the coming years, despite rising from the levels seen in the
age of COVID. We all recognize that, with institutional buying and
the lower interest rates, there are also only so many good real estate
deals to be had. So, where do you put your money to work? Have
you ever considered that franchise ownership could be an investment
opportunity instead of a ‘job’?
Where is this interest coming from? The demographics range
across all working age groups from people in their early twenties to
late sixties. That being said, the most interest in non-food franchises
has come from those in their thirties to fifties. However, we have done
a solid handful of deals in the recent past for entrepreneurs in their
twenties - and they are all killing it now! I love to imagine what their
businesses will look like in the years ahead. You’re never too old… nor

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 Business Ownership: The American Dream

too young to own a franchise.

Now, you might wonder if it is necessary to quit your job if you
want to launch a franchise. The answer is ‘No’. If you like the security
of employment and want to test the waters before jumping in 100%,
there are many options.
Roughly half of those we work with are stepping in full time as
owner-operators, leaving their current jobs. The other half are looking
to go ‘semi-absentee’ or ‘semi-passive’ with what we often refer to as an
‘executive model’. This is a structure in which they keep their full-time
job and hire a General Manager to run the day to day operations of
their franchise investment. We will discuss this approach further in the
pages that follow. For now, I hope it is encouraging to know that you
can be successful either way.
We have shared that interest in business ownership is high—
perhaps higher than ever before. So, what type of business should you
get into, and under what general framework does it fall? What is best
for you? To purchase an existing business, to build a startup from the
ground, or purchase the rights to a proven model that comes with a
playbook, ongoing support, and quite a few other benefits? We will
cover these topics in detail in the chapters to follow.

‘Franchising as an asset class’

Were you aware that you can use a franchise investment as part of your
retirement portfolio? Many investors are seeing the potential returns
and recognizing that the phrase I have coined - ‘Franchising as an asset
class’ - can serve to diversify their wealth, making business ownership
a piece of their total pie. We will discuss further throughout this book,
as well.

The Trifecta
If you’re considering joining the Great Reassessment, it’s important
to understand that there are benefits to business ownership beyond
simply replacing employment income with business cash flow. You
need to remember that you are also building an asset with exit value.

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 Non-Food Franchising

On top of that, you are able to write off expenses as a business owner
that you cannot as a W-2 employee.
I like to call the three-pronged benefits of cash flow, asset
appreciation, and expense tax write-offs the ‘trifecta of business
ownership’. Beyond the financial benefits that make up this trifecta,
there also lies the potential for freedom, independence, and satisfaction
in building something that others cannot take away from you. It goes
without saying that, while the ‘trifecta’ provides tangible ownership
benefits, there also exist other intangible ownership benefits.
More and more investors are waking up to the idea that franchising
can truly be the better path to business ownership. Not interested in
owning a place that focuses on flipping burgers or deep-frying chicken?
Don’t worry. There are countless opportunities outside of food when it
comes to franchising.

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Franchising vs. Startups
“I believe it is true that the difference between great people and everyone else is
that great people create their lives actively, while everyone else is created by their
lives, passively waiting to see where life takes them next.”
- Michael Gerber

F
ranchising isn’t right for everybody. But for the vast majority
of would-be business owners and investors, I firmly believe it is
simply a better path.
In this chapter, we will explore the pros and cons of franchising.
First, let’s start with some basic considerations.
1. One of the top considerations for determining whether or
not franchising is right for you is your personality profile. I
have noticed that if someone is ‘too entrepreneurial’, thrives
on constantly changing things up, and can’t live within a
framework or follow a playbook, franchising may not be right
for them.
How can you be “too” entrepreneurial? Ask yourself: Do I insist
on always reinventing the wheel? Some people are bored by running
a system, while the genius of franchising is in the development of a
system that works.
An entrepreneur that is focused on execution rather than tinkering
too much will do very well in a franchise system. In my experience

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 Non-Food Franchising

on the franchisor side of the house, I consistently observed that our

top performers in the system were almost always those adhering most
closely to the playbook.
Think of it like owning a car. Some car owners trick out their
ride with all kinds of features. They love to go to the auto parts store,
exploring all types of after-market add-ons and they typically do the
work themselves. Other gear-heads go further, swapping out the entire
engine, chopping the chassis to change the length of the car from
bumper to bumper, molding different parts for the body to shape a
one-of-a-kind hot-rod. Meanwhile, most car owners are happy to turn
the key and drive their car down the road, trusting the design work to
the manufacturer, and using the vehicle as a tool to get from point A
to point B.
Franchising is set up to be a turnkey solution. If you’re going to
be tempted to “chop the chassis” in your business and turn it into
something unique, franchising may not be the best option for you.
It’s just not a personality fit. But if you’re into accelerating your career
trajectory and getting from point A to B, franchising could be the
ticket. After all, you are still a driver rather than a corporate ‘passenger’.
2. As a franchise owner, you typically send 5-7% of your top-line
revenue back to the franchisor in the form of a royalty. For
the first 2 or 3 days a month (assuming your business grosses
about the same amount daily), every penny that comes in goes
to the franchisor. However, considering all of the systems you
are getting, along with the marketing and operations support,
this can actually be a great deal. If you were building from
scratch, learning lessons the hard way vs. executing on best
practices derived from prior lessons learned, the expenses
tallied up may total a full week of revenue every month. It is
all about perspective.
That being said, it is very important to ensure that you are getting
a level of support from your franchisor that justifies the ongoing
royalty. It needs to equate to an investment in the business, rather than
a required expense. Not every franchisor’s offering is as strong, nor is

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 Franchising vs. Startups

every system as tight as the next.

The percentage isn’t the issue here. The goal is finding the right
franchisor that delivers truly excellent value in return for your ongoing
royalty investment.
3. Success rates of startups: According to The Small Business
Administration (SBA), which defines a “small” business as
one with 500 employees or less, in 2019, the failure rate of
startups was around 90% over time. Research concludes that
roughly 22% of startups fail in the first year, while 30% fail
by the end of the second year, 50% by the fifth year, and 70%
have disappeared before the end of their 10th year.
According to the U.S. Bureau of Labor Statistics in a recent
entrepreneurship report, “It’s generally accepted, because of their
established, proven business practices, that franchises have higher
success rates than independent businesses.” This doesn’t mean that
buying a franchise is a guaranteed success, but it does suggest that
franchise ownership is one way to significantly improve the viability
of a long-term successful business. The same report states that “About
20 percent of all businesses in the U.S. close after the first two years of
operation and a little over 38 percent after four years.”
Note that the SBA and the Bureau of Labor Statistics may be
using different research, but their findings are eerily similar. Want to
run a startup? The odds are about 50/50 that your business will still be
around in five years.
On the other hand, according to a five-year study performed
by the franchise consulting firm FranNet, 92 percent of franchises
launched were still in business after two years and 85 percent after five
years. So why do franchises not only stay in business longer but often
produce better profitability, oftentimes, earlier to launch? Based on my
experience as a franchisor, a multi-brand franchisee, and a franchise
consultant, here are my top 10 reasons.

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 Non-Food Franchising

Top Ten Reasons to Purchase a Franchise

1. Franchise owners ‘start on 3rd base instead of on 1st base’.
What baseball manager wouldn’t prefer a triple to a single
with their leadoff hitter? The odds of scoring a run during that
inning are increased substantially. On day one as a franchise
owner, you know the roadmap to profitability and can begin
executing on it... With a startup, you’ll have to determine if
the business can even become profitable. You can do market
research, but it may be difficult to know for sure without a
great deal of trial and error. In many cases, it only takes one or
two major errors to sink a startup!

2. Franchise owners know that their ‘product market fit’ has

already been established. There is a known market willing to
pay for the service or product you are providing... and you can
build the business from early on in a way to achieve strong
long-term profits based on this knowledge.

3. Proven playbooks are provided by the franchisor in areas such

as marketing and operations. Running a business requires a
broad variety of skills. If you’re not already an expert in certain
areas, this can present an issue for traditional startups. Imagine
starting a business without a keen understanding of marketing
- especially marketing in your selected industry. As a franchise
owner, you are handed a proven, turnkey marketing system.

4. In addition to a marketing system inclusive of digital, print,

media, etc, most franchisors have experienced team members
and preferred vendors that have learned their business and
accumulated large data sets from which to fine tune and
optimize your marketing campaigns. Don’t underestimate the
value of getting more bang out of your marketing buck.

5. Franchise owners can step into a technology stack from the

franchisor that has been previously selected and customized

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 Franchising vs. Startups

for their needs. The heavy lifting has been done and you have
one less thing to think about. Often, this technology may
include internal development and systems as well as best in
class 3rd party software customized to the particular franchise
system.

6. With franchising, you have a mentor or ‘coach’ on the sidelines

in the franchisor - you’re not in this alone! To be cliche, you
are in business for yourself, but not by yourself. The franchisor
has a full support team of ‘assistant coaches’ whose purpose is
helping you drive your business.

7. An often-overlooked benefit of franchising is that you will

have the opportunity to exchange best practices and learnings
with other owners across the country that are living parallel
day to day lives as you. The areas for information exchange
can include items such as the testing of different marketing
vehicles, which pools are best to fish in to find great employees,
and how to find and network with potential referral partner
types in your local market. You are in alignment with these
other franchisees, whose businesses increase in value as yours
increases.

8. Ever since Rexall pharmacies began in 1902, franchise owners

have benefitted from the collective buying power of a franchise
system - whether it be for products, equipment, or services.
This can be a massive value-add depending on the nature of
the business - and it can often justify much of the royalty
investment.

9. While it does not completely de-risk the franchise opportunity,

having the opportunity to speak with other franchise
owners through the ‘validation process’ (see Chapter 8 on
the ‘process’) when exploring the franchise, plus having the
benefit of being able to review the Item 19 of the franchisor’s
Franchise Disclosure Document (FDD) (see chapter 7 on

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 Non-Food Franchising

‘legal’) provides a franchise candidate with incredible insight

into the financial potential of the business prior to making
their purchase decision. By contrast, with a startup you are
often drawing pro formas on the back of napkins and spit
balling assumptions on revenues, expenses, ramp-up timeline,
and so forth.

10. Finally, it is important to note that franchise businesses enjoy

a 50% higher exit value, on average, compared to their non-
franchise counterparts in like-kind industries. The Rinker
School of Business recently conducted a study looking at
over 2000 business sales over a ten-year period and across a
wide variety of industries and found that franchise businesses
traded, on average, at a 1.5X multiple of their non-franchise
counterparts in the same industry. This is eye opening for
many!

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Franchising vs. ‘Entrepreneurship
Through Acquisition’
“For the investor, a too-high purchase price for the stock of an excellent company
can undo the effects of a subsequent decade of favorable business developments”
- Warren Buffett

I
n this chapter, we will examine the pros and cons of franchising vs.
purchasing an existing business.
Many of my clients are considering the purchase of an existing
business and find themselves weighing the tradeoffs of that path
against the pros and cons of the franchise route. There is a popular
idea in entrepreneur/investor circles these days that the best way to get
into business ownership is through buying into an existing operating
business, whether it be a franchise or non-franchise resale. This approach
of purchasing a business is often referred to as entrepreneurship through
acquisition, or ‘ETA’. More often than not, I have clients reach out after
exploring a number of resale options, and after we consult together, the
majority of these clients end up going with the franchise model instead.
There are several attractive aspects of ETA on the surface: the
new business owner often has positive cash flow on day one. They
acquire existing customers. They have market awareness due to the
company’s prior marketing efforts. Employees are likely already in
place, equipment is (hopefully) working, and things are generally set

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up. The business is a known entity, at least to some extent, and there is
a track record.
Caveat emptor: But let the buyer beware! What worked for previous
owners in the past might not work as well in the future for a variety
of reasons. There can be drawbacks to the ETA model. Usually, you
will pay two to five times the existing annual earnings to acquire the
business (and sometimes higher depending on the industry and other
factors). In most cases, this means you won’t recapture the purchase
price for several years. To do so faster will require some combination
of an increase in gross revenue, and/or a decrease in spending that does
not negatively impact revenue, resulting in overall improvement of the
bottom line.
This leads us to a second concern. Can you trust the bottom-
line figures provided by the seller in the first place? I have found that
the seller’s financial books and records from which the projections are
made most often require numerous caveats and add-backs, to the point
that you are trusting the seller’s iffy explanations and rosy expectations
more often than hard, repeatable data.
Third, what about your human resources? If there’s one thing most
people don’t like, it is change. Inheriting an existing team of employees,
no matter how good they are individually and as a team, means there
is a culture and a way of doing things that will be shaken up. Even
in the best-case scenario, when all the employees are top notch, it is
not always easy to get buy-in and retain the top talent. The seller may
have no idea that half his team is already contemplating a move; they
aren’t likely to tell the owner that they’re considering changing jobs, let
alone thinking about switching careers, or even considering purchasing
a franchise themselves!
In the worst-case scenario, you purchase a business and find
that there are some dead-weight employees who need to be replaced
immediately, only to discover that some of those people don’t go quietly
into the sunset. They can walk out with trade secrets, details, important
documents or customer relationships. Even if they have a non-compete
agreement, if they decide to break it, you may be in for a long legal
battle that wasn’t in your financial plan. In many states, non-competes

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 Franchising vs. ‘Entrepreneurship Through Acquisition’

are not even highly enforceable - or at least not worth pursuing legally.
The exiting employees can also generate collateral damage through
adding additional layers of change and anxiety amongst their former
colleagues that plan to stick around (or at least for the time being). In
short, inheriting people has as many unique possible pitfalls as there
are advantages. Even the best, most reliable, irreplaceable employee is
likely to feel some degree of inner anxiousness when a business changes
hands. I don’t mean to paint an overly cloudy picture, but I want to be
realistic. Change is usually tough.
Next, what about brand awareness in the marketplace? That’s a
pro, right? Not necessarily. Brand awareness in the market may not
always be a good thing - you are inheriting all the past experiences of
customers, both positive and negative. You may have to rebrand to
convince people that your business can be trusted. If you’ve ever seen
that sign in a window that says “now under new management” you
know that someone out there is trying to tell the customers that their
experience is about to improve. But a sign in a window isn’t worth
much if people have stopped parking in the lot in the first place. An
advertising campaign may be warranted.
Also, what seller is able (and willing) to tell you all about the
customers that will likely quit coming? How many of the customers were
loyal to the seller and may drop off? Rarely do they even get feedback on
why people don’t come back; the customer just ghosts. This means that
the previous business owner has a blind spot; it isn’t that they’re being
dishonest, it’s just that they might not even know themselves. Maybe
their customer base is dwindling because they’re aging out, dying,
going out of business themselves, irritated at something small, found a
better deal elsewhere, didn’t like the sales rep… the list goes on. Think
about the businesses you have personally stopped patronizing. An auto
mechanic, a grocery store, the local gym… Why? How many of them
noticed when you left? How many of them ever got a true reason? The
business you’re considering buying likely has been equally clueless.
The worst thing that can happen is you find that neither employees
nor customers have as deep a sense of loyalty to the business and the
brand as you thought or hoped, and the next thing you know you’re

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not only in business for yourself, but also by yourself.

Our business is really simple. When you look at a deal and its structure looks like
an octopus or spider, just don’t do it.
— Timothy Sloan, CFO of Wells Fargo

While each of these factors listed above may or may not be a

concern, finding a deal on a great business for acquisition that fits you
well is difficult. First, such deals are not easy to find. Second, there are
a lot of people looking. If it is a good deal, you will rarely be the only
one negotiating for the business. If you are alone and nobody else is
looking to buy it, ask yourself why.
Below is a chart of key considerations when purchasing an existing
business. Yes, it can be done. Yes, it can be challenging to find the
needle in the haystack.
• Highly fragmented
• Stable / low cyclicaility
Industry • Growing at > 2x GDP
• Low external risk factors (i.e. regulation, technology obsolescence, etc.)

• High percentage of recurring / repeatable revenue

• Track record of consistent profitability
Company • Diverse customer base
• Strong middle management

• Revenue between $5 - 50 million

• Stable cash flows of at least $1 million
Financial • EBITDA margins > 10%
• Low capex and working capital requirements

• Owner seeking liquidity and wanting to retire / transition out of daily operations
• No succession plan in place
Context • Company in need of additional management, capital and board expertise to
capture groth opportunities

Now let’s talk about franchising, which can often serve as a better
option for entrepreneurs and investors.
Because we have already discussed the pros and cons of franchising
in the previous chapter, we won’t go into the same level of detail. The
things you want as a result of buying an existing business (proven
model, roadmap, learnings, many items already in place, etc) can also
be derived from purchasing a franchise… but the cost of entry is lower
on average as you are not paying a multiple of past earnings. In addition,
you have the support of the franchisor and other franchisees as well as

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 Franchising vs. ‘Entrepreneurship Through Acquisition’

leverage in buying power, large data sets for marketing, partners in

innovation, the potential of a more profitable future exit and more.
Before we go too much further, let’s talk about a paradigm shift
in your thinking. When you purchase the rights to a franchise, rather
than being a buyer of a business, from day one you are setting yourself
up to one day be a seller of the business. This is the seat you want to be
in! Nobody owns a business forever. Life is terminal, and therefore so
is business ownership. There are two ways to go out: close the business,
which terminates all revenue, or sell the business, which can result in
revenue for your retirement and for your legacy. Start with the mindset
of a legacy planner and buy a business with the full awareness that
someday you will want to sell it. Build it into a business that a future
buyer would love to acquire!
It is worth stating again that a franchise owner who sells their
business tends to average a 50% higher exit price than that of other
businesses in their industry. A franchise, in other words, is a better store
of value.
When it comes to entrepreneurship through acquisition, many
of my clients see the trade off of getting started at a lower price with
a more proven entity even if it requires putting in a little bit of effort
out of the gate as a better alternative to paying out the profit of the
past several years of an operating business that lacks support beyond its
current team and all of the inherent risks we mentioned above.
Three chapters in, you may be shaken a bit; that’s good, it means
you’re learning. If this book is causing you to rethink your approach
to entrepreneurship, that’s alright. At the very least, you are getting a
chance to reexamine what you thought you knew. But whatever you
do, don’t give up on dreaming. Hang in there. I trust you’ll love where
this is heading.
Twenty years from now, you will be more disappointed by the things that you
didn’t do than by the ones you did do, so throw off the bowlines, sail away from
safe harbor, catch the trade winds in your sails.
— Mark Twain

17
The Franchise Landscape and
Ownership Roles
“Everybody trades time for money. Even the entrepreneur. The only difference is,
people in successful businesses trade their time for more money.”
- Danny Iny in Inc. Magazine

T
here are several different ways to approach the role of ownership
within a franchise business. Roughly half of my clients are
looking to get into business as the ‘owner/operator’, meaning
that they will be engaged in the business on a day-to-day level. The
other half come to us looking for an opportunity where they can
leverage valuable skills, relationships, and capital outside of managing
a business’ operations day-to-day. This latter role has various names
but is commonly referred to as an ‘executive’, ‘semi-passive’, or ‘semi-
absentee’ model.
Before we look at the two basic approaches and what would serve
you best as an owner, it pays to know what the franchisors think. Do
franchisors prefer to have the owners engaged in the business on a day-
to-day basis? How do they like the executive model?
Most brands would love to have the owner serve as the operator
because they know that nobody has buy-in like the owner does, nobody
else has the same skin in the game. However, they also want the very
best people to join their system and they know that these motivated

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 Non-Food Franchising

and passionate all-stars often have their hands in other initiatives.

Some franchises do require the owner to serve as operator and they will
be clear about this upfront. From a high level, I would estimate that
roughly 10% to 15% of non-food franchises we have selected to work
with have this requirement. This leaves a vast majority that allow you
to own a business but not serve in the role of day-to-day manager.
Let’s examine the owner/operator role first.
What is an owner-operator? In this role, the owner has typically
chosen to leave their current 9-to-5 day job and focus the majority of
their personal work time and energy on building a team and overseeing
their day-to-day activities as the General Manager or President of the
business. To be more specific, depending on what is applicable to the
particular functioning of the business, their day-to-day activities may
include: 1) hiring and managing the team; 2) overseeing marketing
efforts with the franchisor’s home office team and potentially an outside
marketing vendor; 3) meeting with clients and running appointments;
4) ordering inventory; 5) representing the brand by networking at
groups like BNI (Business Networking International) and by getting
involved in the Chamber of Commerce or other relevant groups; and
6) managing the books or working with a vendor to do so. In short,
they will do anything and everything that goes into running a business.
While it’s perfectly fine to take on a franchise as an owner-operator,
especially if you have a feeling that you are going to love what you do,
not everyone comes to franchising looking to run the business. We’ll
leave the owner-operator for now, as it is fairly straightforward, and
look at the other side of the coin.
I often talk about the concept of ‘Franchising as an asset class’.
Franchising can serve as an alternative investment vehicle for those
looking to diversify their asset portfolio. This is attractive especially for
those that want to have some level of involvement with their portfolio,
although not necessarily the day-to-day, hands-on kind of involvement.
Therefore, the other half of my clients fall into a second category of
engagement that is not day-to-day, referred to earlier as the executive
model.
Both of these roles involve more interaction with the investment

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 The Franchise Landscape and Ownership Roles

than taking your money to a financial planner and investing it in a

401(k) for your retirement, but they don’t always require as much
involvement as many people think.
This flies in the face of the idea that purchasing a franchise equates
to buying yourself a job. When you purchase a franchise, it is good
to remember that you are building an asset and that you also receive
the side benefit of expense deductions along the way. This is what we
previously discussed as the trifecta.
Many executive model owners utilize their background, interests,
and networks to lean into their High Payoff Activities, often referred to
as “HPAs”. This is a term my former business coach, Jack Daly, taught
me. Essentially, you play to your strengths, where you get the most
return for the time you are able to invest and then delegate everything
else.
For example, if you have a background in accounting and have
been breeding dogs as a hobby for forty years, a mobile dog grooming
business could quickly tap an existing network of veterinarians, kennel
clubs and dog owners who have purchased your puppies, etc., and
while someone else can do the work of dog grooming in the truck,
you’re tapping your network for new client accounts and using your
background in accounting to pay close attention to the bottom line. As
you continue to read, begin to think about your networks, even in your
hobbies and personal life.
I have personally adopted the referral network/HPA thinking
with the businesses in which I have invested. For instance, I know a
lot of builders, property managers, and other potential referral partners
for our Driveway Company franchise in Atlanta. My reaching out and
making these connections increases our lead flow and is a value-add
to business. This is one of the key ways I can play to my HPAs in the
limited time I give to the business each week. This networking supports
our team in more significant ways than my overseeing worksites or
interviewing new crews of labor. (In fact, I have never been on one of
our job sites)!
Many people who are exploring the purchase of a franchise are
already business owners. Some of them own existing businesses which

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 Non-Food Franchising

are franchises and some own businesses which are not. They come to us
looking to expand their portfolio of business investments through either
adding in a complementary business or a diversifying business. This
doesn’t mean that you have to have previous experience as a business
owner, and it doesn’t mean you have to own multiple businesses. There
may be a little more to learn - primarily around mindset, but it can be
done. You might be surprised at how many of your neighbors also own
a business. It isn’t a foreign concept!
Here’s an example of a complementary business purchase: a recent
client of ours, Justin L. in the Atlanta area, had built up a sizable real
estate brokerage practice and chose to buy into a property management
franchise that would serve as a turnkey adjacent service, leveraging
his relationships, lead flow, and team members within the real estate
industry. He can sell a ten-unit apartment complex to an investor
and turn around and manage it for them at signing. In this way, the
apartment building investor or owner can also become a semi-absentee
owner. Our client considered starting a property management business
from scratch, but as soon as he was exposed to training, systems, and
the reputation of the franchise, it quickly became a no-brainer for him.
He set up one of his key employees to run the initiative and when
we checked in with them recently, he couldn’t be happier about his
decision.
An example of a diversifying business purchase includes this one:
we recently helped our client, John B. in Rochester, NY, purchase a
one-stop shop garage renovation business earlier this year. Our client
was a lifelong pharmacist that had started to get a side hustle going a
few years back as he purchased FedEx routes. After building it to 26
trucks, he decided it was time to set the pharmaceutical practice to
the side. Rather than looking at opportunities that could complement
the FedEx business, he came to us with a desire to explore home
services opportunities. We walked through roughly a dozen different
niches he felt he could see himself addressing in his local market, and
he narrowed it down to garage renovations. We then looked at three
opportunities within this space to determine the best fit. Similar to our
broker/property manager client, he is thrilled with his new purchase

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 The Franchise Landscape and Ownership Roles

and plans to expand his portfolio of business investments further once

he stands up this second investment.
Please do not be discouraged if you feel that you don’t have a
strong local network, have an existing business to leverage, or have
experience of running a business already. While these items can be
helpful, they are by no means a necessity!
With the excess cash on the sidelines and lack of great investment
options elsewhere, more and more people are turning to investing in
businesses for the very first time in their lives. The idea of taking on
an executive role and jumping on a touch base call with the team each
week is appealing and allows executives to leverage their backgrounds
to coach or mentor their managers. In this role, executives can derive a
personal sense of fulfillment as they draw on their past experiences and
groom the next generation for success.
In my experience, the executive owner will be heavily involved in
1) profit-and-loss management; 2) strategy; 3) managing the manager;
4) scaling the business through rolling out new territories or locations;
and as their success grows, 5) adding additional businesses to their
portfolio. These are all things that an owner-operator would do for his
or her business as well, on top of the other responsibilities previously
mentioned.
Roughly half of our clients that opt for this model look to bring
on a strong General Manager to run the day-to-day operations while
they focus on leading the GM and leaning into areas in which they
can best serve the business. Our clients love that, with the executive
model, they are not alone in overseeing the business. They also have
the franchisor and the franchisor’s team watching the business and
supporting the GM along the way. This is another huge advantage that
franchising offers to these semi-absentee owners.
While the executive model certainly looks great on paper,
finding a good general manager can be daunting. If you don’t have
prior experience with a particular a candidate, you may have to cycle
through more than one to find the right one. Think about your own
personality: do you have the guts to fire someone if they’re not running
the business to your liking and are unable to course-correct in a short

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 Non-Food Franchising

amount of time? If you don’t want to cycle through GMs until you find
a good one, this may require a slower, more thorough process of hiring;
taking your time may be worth it in many cases.
We’ll discuss the idea of a hybrid model more in depth later
on, but for now, we’ll just mention that a great way to find a great
GM could include working as the owner-operator at first and seeing
which one of your employees has good chemistry with you, shows the
initiative, responsibility, and other characteristics you would want in a
GM before promoting them and stepping into the Executive role. Of
course, many, if not most, do not have the bandwidth to be active in
this capacity - even at the onset.
Again, working in the business early on is not a necessity. We
have many case studies of client successes in finding general managers
and aligning interests with them through compensation packages that
include items such as profit sharing and/or equity. We have taken
the learnings and best practices from all of our clients and have now
incorporated these principles into the value-add advice that we provide
to our clients. We also recently launched a partnership with a national
recruitment firm that will assist our clients in identifying and vetting
key talent. This will serve as a game-changer for many!
If you have identified and hired a good general manager, you can
really set them up to be the franchisee for all intents and purposes.
For instance, with the Driveway Company franchise in Atlanta that I
co-own, we have a manager, Andrew, who not only runs the day-to-
day operation, but also serves as the liaison with the franchisor. Before
joining our company, our manager was a C.P.A. for the previous five
years. At age 27, he was antsy, felt stuck in a cubicle, and wanted to get
out and work with people and build something.
Andrew is loving life now! He went to training with the franchisor
when we first started, and we are letting him handle the day-to-day
decision making. We get on the phone once a week to touch base,
and we have several email and text exchanges throughout the week.
He knows I’m here and ready to support him whenever he needs it,
but I also give him the reins and autonomy to exercise his judgment
in decision making. We also pull the team together once a month for

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 The Franchise Landscape and Ownership Roles

a fun luncheon event and this is something we really look forward

to, certainly not a chore. Business ownership can be fun. In fact, we
recently sponsored a Nascar race in Atlanta, wrapping one of the cars
with our branding. My family had the opportunity to spend time with
the driver in our home the night before the big race and then joined
him in the pit the day of the event!
With a GM in place, will everything be done exactly how you
would do it? No; but if you have a good one, they will often surprise
you with items for improvement that you never would have thought
about, even if you were on the ground with the business every day. A
good GM brings their own creativity and thoughtfulness to the work.
Ultimately, if a GM can run the business in 80-85% alignment with
the way you would, you should take it! Our GM at the Driveway
Company, Andrew, is well above that mark. It made me think, “Let’s
go build some more!” (And that is exactly what we did, recently buying
out two other franchisees’ locations and expanding our footprint!)
It is important to note that Semi-Absentee or Executive leadership
is not for the micro-manager! If you want to have your hands in
everything, circle back to the idea of being the owner-operator. A lot
of the decision making around choosing your best opportunity comes
back to understanding yourself first.

Hybrid Approaches
There is a season for everything. Many new franchise owners have a
desire to see their role evolve as they move forward. Here are a couple
of ways that you may grow into the role you really want.
1. Beginning as an owner operator with the plan to bring on
a GM later on. This allows the owner to really understand
the business and its needs, as well as its path to scale. Their
intent and desire is often to pull back their involvement in the
business over time as they gradually adopt a role that includes
more strategic vs. operational activities in support of the
business. These owners desire to eventually work exclusively on
the business, rather than in the business. They want to focus

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 Non-Food Franchising

on expansion, whether it be through rolling out additional

locations or territories, or through acquiring another business,
either complementary or diversifying, from the current one.
It’s not impossible to be strategic, to work on the business, or
to seek out additional growth opportunities while serving as
a true owner-operator, however, it wouldn’t be accurate to say
that you can give these things your full focus when you are
running the day-to-day operations.

2. Others want to keep their current day job - at least for the
time being. They may feel more secure relying on this primary
source of family income until the franchise is really rolling,
even though it is their dream to eventually run the business
soup to nuts. In their approach, they begin by building and
scaling the business on the side. Then, once the business is
cash-flowing to the level they have targeted, they say goodbye
to their boss and jump into the owner-operator role full time. I
have seen this work very well, but I believe that it is contingent
on them being willing to invest in a general manager who will
serve as a business driver and get the wheels in motion prior
to the owner jumping in full time.
One of the questions we frequently get asked is: ‘How much time
one should expect to invest in their business as an executive or semi-
absentee owner’? In principle, the owner may eventually be able to put
in as little as 5 hours a week. However, I encourage my clients to plan
conservatively. If they anticipate working only 5 to 10 hours/week in
the early going, they should probably round up and call it 10 to 15…
or even 15 to 20. Realistically, nothing worth doing is easy... but in the
end it is very doable and the rewards can be great.
Franchising provides a variety of industry opportunities, and
by nature, some industries and their respective businesses are more
conducive to the executive semi-absentee model than others. We will
dig into this in our next chapter.

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Industry Opportunities
“There is only one success - to be able to spend your life in your own way.”
- Christopher Morley

W
hy not food? Everybody eats, right? At a certain point in
my career, I chose to niche my focus down to non-food
franchises. I did it for several reasons:
1. Food franchises tend to require higher capital investments.
In my view, this means that they carry a little more risk,
especially if you are not in a highly recognizable national
brand. Branding matters more in food than in many other
categories. Regional brands, for instance, may have strong
local followings, but plunking one down three states away
from where the first ten stores are located is not very different
from starting a mom-and-pop restaurant in terms of brand-
name recognition. On the flip-side, the large national chains
tend to already be saturated, meaning that your market likely
already has one or two locations of a given concept with more
in development… and the earlier players will have grabbed
the premium locations.

2. Yes, everybody eats every day. However, food trends change

over time and it is hard to predict the future. Think about

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 Non-Food Franchising

the success of food chains that did a good job of representing

their products as healthy, farm-fresh, organic, and how some
chains that never deviated from the greasy food that they sold
began to struggle. Will the franchisor keep up with trends and
will they be able to adapt in a large-scale way without going
off-brand? You don’t often see a franchise restaurant on a busy
street corner closing, but when you do, it could have less to
do with management and organization, and it could mean
that the food they serve has gradually become less irrelevant
to consumers without course corrections at the corporate
kitchen.

3. In my humble opinion, there are simply easier ways to make

money, many of which require less investment, often fewer
employees, less weekends and evenings, and are void of supply
chain/inventory & spoilage issues. If you could minimize risk
and maximize your upside at the same time, why wouldn’t
you? This isn’t about it being easier in terms of hard work, but
easier really means smarter or more of a sure thing.

4. I don’t personally have a background in food and if I were

to include food within my focus areas, I would not be able
to go in as deep and become an expert in other industries as
each sector carries its own nuanced models and frameworks.
For me, as a consultant, it benefits my clients if I focus on a
strong, profitable, and highly desirable set of sectors. I would
rather go deep vs. wide! Now, there are those who have a
background in food or find that’s where their heart is. They
are willing to work through the challenges and they often
experience good financial upside - especially as they build out
a very large portfolio. I am very thankful for these individuals,
as we certainly need them in the game!

5. Interestingly, I have found that 95% of my clients desire to

be in industries outside of food. They feel similarly to me
that while they could run food establishments, there are other

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 Industry Opportunities

strong options that are often more compelling.

So what are people actually gravitating toward in the market for
franchise opportunities? There are a few common threads that have
emerged from my work with clients across North America in recent
years. These include:
1. An interest in opportunities that may be deemed ‘less sexy’
and represent solid, understandable businesses. The core value
that people seek here is simplicity. They want an area that
operates in what is widely projected to be an ongoing market
need and the franchisor knows how to fill it. Typically, the
work isn’t overly complicated with many moving parts - and it
is certainly not trendy.

2. We have seen a desire for built-in resistance to disruption.

Though nothing is ever completely predictable in life, for
obvious reasons, we see a lot of interest in opportunities that
are less likely to be disrupted by recessions, pandemics, or
technology. Anything that can be seen as an essential service
by the government and is more needs-based rather than tied
to discretionary spending for the consumer is an attractive
franchise these days.
One other thing that people want their businesses to resist is the
invasiveness of mega-corporations. They want products and services
that aren’t likely to be threatened by a company such as Amazon
who is capable of rolling out a brand-new service that instantly grabs
huge chunks of market share across the country. Even though many
franchisors do use technology - often as a differentiator, people are
looking for something that is far less likely to be disrupted by the
‘Amazons of the world’.
Again, it is nearly impossible to completely predict the future.
For instance, which taxicab company saw Uber coming? How will
blockchain and crypto currencies impact the next wave of how we do
business? While the future is difficult to predict or foresee, the macro
forces that are at work, based on recent global events, are transparent

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 Non-Food Franchising

enough.
3. Another shift is the desire for a franchise that requires as
few employees as possible while still delivering a high return
on investment. Of course, this varies by owner as some
individuals love leading large teams and even lean into their
experience and skills in hiring, incentivizing, and retaining
as a competitive advantage of theirs. That being said, I will
point out that the desire for fewer employees has always been
present to a degree, but I have certainly seen it rise in clients’
ranking of importance in recent years. The fact is we have
been working through the ‘Great Resignation’ (i.e. ‘Great
Reassessment’) and more people have enjoyed working from
home and being self-employed than ever before. At the same
time, a variety of economic and political factors can make
the job market tight; finding great employees when a great
employee is in higher demand naturally means giving up more
of your profit to your payroll to keep them happy and ensure
their loyalty. The shift in how people want to be employed is
mirrored by those who want to own a franchise.
Now, let’s have some fun and talk specifics. What are some of
the more popular industries today, along with examples of businesses
contained within each?

1. Property services.
This category includes Business to Consumer (B2C) home services as
well as
Business to Business (B2B) property services and also businesses
that can serve both segments. I would say that hands down no other
category broken out below has been hotter than property services in
recent years for several reasons.
With property services, oftentimes, you can work remotely. If you
do have to have a physical location, it isn’t retail-based or customer-
facing, rather more of a back end, small industrial space for equipment
storage, team meetings, etc.

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 Industry Opportunities

Not having a pricey lease has been attractive to many of our

clients. Examples of property service businesses include recurring
services such as property management or pool cleaning; but they can
also offer one-time, bigger ticket items such as insulation, gutters,
and driveway paving. People are loving the ‘ServPro type models’ of
the world, where payment for the end customer is as transactional as
an insurance claim. They also love niches such as roll-off dumpsters
for construction sites, parking lot maintenance and line striping, etc.
There are so many unique segments in highly fragmented industries in
which you can bring a white-collar approach to managing traditionally
blue collar businesses.

2. Health and Wellness.

There has never been so much interest in improving health and boosting
immunity as there is currently. Fitness certainly took a breather during
the Covid pandemic but has come back really strong ever since. All
sorts of models and setups exist within the wide world of fitness, from
big box gyms to boutique concepts and specialized services such as
stretching and personal training.
An example of a differentiated model in the fitness space includes
a placement we recently completed for a client: we helped our client, a
PhD professor at a large university, get into a well-established concept
that offers incredible technology that guides fitness programs for the
market segment of customers over the age of 50. As you may have
noticed, many in this demographic do not like the big box environment
and, as a result, are largely uncatered to in the market.
Another non-fitness example in health and wellness includes this
one: We had a client purchase ten locations of an IV drip business
that was started in Rhode Island by two doctors. It has been on fire!
The business is able to boost immunity at the cellular level, fight free
radicals, and lower the occurrence of heavy metals in the body. This
business model requires some educating of the public; however, this
is cutting edge technology and our client has invested in the future of
health care.

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 Non-Food Franchising

3. Automotive.
Auto has always contained a good slice of the non-food franchise pie,
from Meineke, Maaco, car washes, and more. There are new models
popping up every day, including an International waterless car wash
that some of our clients have engaged in.
Electric cars are getting a lot of headlines these days but even
fifteen years from now, studies show that fewer than 10-15% of cars
on the road will be electric with the current average age of functional
cars being twelve years. What this means for oil change businesses
is that there is still a long runway ahead. We recently had a pair of
clients purchase ten locations of an oil change franchise that specializes
in constructing prefabricated buildings in unused parking spaces of
a retailer’s shopping center as a prime location for their kiosks. This
franchisor has demonstrated strong financial financial results deriving
from their model of great street visibility, convenience, and customer
service.

4. Pets.
I have always said that people care about their kids, their pets, their
homes and their health. They will continue to spend in all of these four
areas, no matter what economic conditions. But pets? Pets are really
special. The pet industry has never been more popular for franchisees
to get into. Think about the sheer number of households with a pet
in America: 90 million. That’s 70% of all households, which creates
an ongoing, insatiable need for caring services. And there are tons of
options. From boarding and grooming to dog-walking and big box
retail to veterinary care, there are franchise options at every price range
and with a broad variety of setups.
We mentioned mobile dog grooming earlier when talking about
how you might think through your personal contacts that would make
getting a business rolling easier… again, if you love your pets, you
might love running a business that helps other people take care of their
pets, too.
The pet industry has niches as well. For instance, we recently

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 Industry Opportunities

helped a client begin franchising his service dog training business. He

has carved out a great corner of the market and has built an amazing
track record of success. He is seen as the best in the US at his craft and
is now bringing other owners in on it as well.

5. Kids
Kids are almost as popular as pets. That sounds like a joke, but seriously,
you raise a kid for eighteen years, or two or three kids for twenty to
twenty-five years. One thing is for sure, people never stop making
babies, again regardless of economic conditions, recessions, pandemics
or anything else that’s happening in the world. There will always be a
pipeline of kids at all ages and that translates to a massive market for
supporting services across the board. Some of the examples of franchises
that serve this category include computer coding and development
programming training, specialized day care, tutoring, youth sports,
swim lessons, and more. One of the more popular franchise options
in recent years is a martial arts concept with incredibly strong semi-
absentee financials. The majority of owners in this one never thought
they would be invested in a martial arts business, but they put their
owner hat on and loved the characteristics of this franchise, such as 1)
Strong monthly recurring revenue, 2) Few employees, no inventory,
not open weekends, and 3) The feel-good community component of
providing a service that both helps the anti-bullying cause and supports
physical activity for kids who may not be as interested in team sports
and therefore naturally gravitate to alternative sports options.

6. Older Population
In a social phenomenon that has been termed the “Silver Tsunami,”
there are more than ten thousand people turning sixty-five years old
every day. No previous generation has ever had a stronger desire to age
in place - i.e. in their own homes. The current wave of folks in this age
group are often avoiding going to assisted living as long as they can,
which opens up many more options to help them stay in the homes
they love. Franchise offerings include plenty of options to support the

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 Non-Food Franchising

Silver Tsunami demographic. One example is in-home care, including

those with specializations and areas of focus, like dementia.
This might sound like a subcategory of the Health and Fitness
segment listed above, and in cases like in-home care, it is. However, it
can also be a subcategory of Property Services. We work with franchise
opportunities that provide offerings such as wheelchair ramps, stair
lifts, bathroom retrofits, and more. These franchises specialize in
allowing people to retain their mobility and accessibility throughout
their home. We also partner with a great custom orthotics / insole
company that uses 3D printing for a variety of foot issues and a nice
benefit of this one is that Medicare recipients represent a large chunk
of the customer base. Why not let the government pay your invoices?
It’s an easy sale.

7. Business to Business (B2B) services

B2B services can be a broad category. How about an example? We
recently had a client, David S., in Indianapolis, purchase a business
coaching franchise. He is now armed with all of the curriculum,
assessments, marketing, training, and support and credibility to launch
his practice vs. having to recreate the wheel on his own.
Here are a few other examples of franchises that offer services to
support other businesses: there are franchises that provide bookkeeping
and marketing; we love one business that promotes themselves as the
“cost analyst expert”. They analyze invoices and vendor agreements
for small and medium size company owners and then leverage their
collective buying power, forming agreements across a variety of vendors,
and benchmarking providing clients with strong recommendations
for cost-saving changes. Their business model includes a contract that
allows them to participate in a percentage of the cost savings their
customer gains for the next three years, but this revenue can sometimes
be recurring as well. Often, by the time the three years’ contract is
up, the customer has grown their own business, purchased additional
services, and is ready to begin another audit.

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 Industry Opportunities

8. Other
From moveable storage (think PODS) to laundromats, mattress
manufacturing to drug testing to salons, the options outside of food
and lodging are extensive - and we keep adding to our list of possibilities
as companies choose to franchise their businesses as a means to scale.
We are always working with the top development groups across the
country to identify and vet the best options coming down the pipeline
for our clients. For every franchise you can name, from Jiffy Lube to
ServPro, there are dozens of franchises you’ve never heard about which
have great financials and will fit your lifestyle and your existing skills
and network. There really is a wide world outside of food!
Also, most opportunities never hit our clients’ radar until they
hear about them from us. This is why we love what we do: introducing
clients to opportunities they never would have thought of on their
own. We find that close to ninety percent of our clients actually end
up selecting an opportunity that they never knew existed in an industry
they had never considered!

35
Financials:
Funding and Returns
“If you want to be happy, set a goal that commands your thoughts, liberates your
energy, and inspires your hopes.”
- Andrew Carnegie

P
erhaps by this point you’re thinking, this all sounds wonderful,
but how much can I really make? Why not invest further in
completely passive areas such as the stock market or buy a lake
house to enjoy and rent out?
I have found it to be eye opening for clients when they understand
the returns that can be generated by many franchise systems in the
market. Return potential very often surpasses what they could expect
from other asset classes such as equities and most real estate investments.
As a reminder, there are three tangible financial benefits of business
ownership:
1. You have an ongoing cash flow.

2. You are able to write off expenses that a W2 employee cannot.

3. You are building an asset that should have exit value when you
go to sell.

The exit value potential often gets overlooked when people think
about franchise ownership, but rather than overlook it, we ought to

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 Non-Food Franchising

consider this as a very important aspect. Just like any other business,
the goal is to build up the revenue streams and the intrinsic qualities
of the business so that a future buyer will be interested in paying you
a premium to purchase it. Unless you plan to give the franchise to a
family member, eventually you will want to sell the business.
It is worth mentioning, franchise businesses, on average, earn
a higher resale price when compared with non-franchise businesses.
This was proven out and reported on by a trio of researchers at the
Marshall E. Rinker Sr. School of Business. “Our research supports the
value of a franchise branded business,” explained Dr. John P. Hayes,
director of PBA’s Titus Center for Franchising. “If two people operate
the same type of business over a period of years and enjoy similar sales,
the franchise business is more likely to sell at a higher price point.
Business owners ought to be aware of that information in advance of
launching a business.” After examining 2,159 business resales over a
10-year period, the researchers found that franchise businesses sold at a
1.5X higher price than non-franchise businesses. Buyers of resales also
clearly value the attractive proposition of franchises, and an existing
franchise, proven and operating well in a certain geographical location,
can be very enticing1.

The ‘Item 19’

Most franchise systems have an ‘Item 19’ breakout shown as one of
the 23 items contained within their Franchise Disclosure Document,
or FDD, which we will discuss in more depth in the next chapter. The
Item 19 is a financial representation made by the brand, providing
candidates with a view into the financial potential if they choose to
invest. Every year the FDD and item 19 are updated with the latest
information, including the prior year’s financial performance across the
system.
Some franchise systems will provide high level revenue figures for
1 John P. Hayes, CFE; David Smith; and Mary Kay Copeland, all members of the Rinker
School of Business faculty, prepared a peer-reviewed study “Determinants Impacting Resale
Premium Disparity when Selling a Small Business: A Predictive Non-Linear Approach.” Fall
2021 issue of The Journal of Business and Economic Studies

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 Financials: Funding and Returns

a portion of their owners while others will go into great detail, showing
all aspects of their owners’ P&Ls - broken down either by performance
quartiles, averages, medians or other breakouts. One franchise system
we work with actually shows the P&Ls for all locations along with
business-related metrics such as conversion rate and average sale. While
they go above and beyond the norm (their Item 19 is twenty-four pages
long!) I am beginning to see a greater level of detail in the majority of
Item 19s I review.
Having spent a good portion of my career in the corporate world,
I tend to think of the Item 19 as representing public information
similar to the earnings releases for publicly traded companies (back
in the day I was once responsible for writing these for our company!)
Corporate entities’ leadership teams have to be careful not to make
representations of financial performance in private conversations that
are not shared in publicly released materials. Any discrepancy could
result in exposure to a lawsuit.
In the same way, franchisors and their teams have to be careful to
not share results, estimates, or pro forma assumptions with candidates
that are not included in their Item 19. It should be a red flag if someone
from the franchise’s corporate office said to you, “I know that Item 19
says [XYZ], but you can probably do even better.”
While the franchisor is limited to sharing financial assumptions
and direction based strictly on Item 19 representations, existing
franchise owners within the given system are free to open their books
to candidates and share any thoughts they have around financial
performance during the validation process that a candidate goes
through during the exploratory process (we will discuss this further in
Chapter 8).
It is important to recognize that there are any number of minor
variables in your market; and of course, you’ll have to run your business
well to achieve your targeted results. However, between the Item 19
and the validation feedback from other owners which we’ll discuss later
in the chapter on the franchise selection process, candidates should
have a good grasp of potential financial performance—both top line
and bottom line—before making the decision to move forward with a

39
 Non-Food Franchising

franchise purchase. This information is also invaluable when comparing

multiple franchise opportunities from which to choose. Now, let’s
provide you with a better understanding on the actual numbers.
Profitability-wise, it is very common for franchises to deliver
margins of 15-25% on the bottom line; that is, net margins, after all
expenses have been paid. However, many of our recent client deals are
with franchise systems that provide for net margin potential of close
to 30%. In fact, four clients of ours that recently purchased the same
property services franchise system in different markets around the US
will hit an exact 30% bottom line margin if they perform average to
the balance of the franchise system. However, based on the caliber of
clients we work with, my guess is they will far surpass the average!
Now, while 30% may be the average bottom line for this system,
the actual return on investment, or ROI, is actually much higher. This
is because the average investment is roughly $200k and the average
revenue is $1.8M. If you do the math, this shakes out to $540k (30%
of $1.8M) / $200k = 270% return. Of course, the business will be
ongoing so the return will actually be much greater than the one year
snapshot. And, they will have a business that they can sell down the
road. I certainly encourage my clients to plan conservatively, but when
you look at models such as this, even a cautious financial projection
can more than pay the bills.
We have had five clients recently buy into another fast growing,
emerging brand that comes in at the 15% margin mark but with some
very fast revenue ramp ups. Their first-year average revenue across their
30+ locations shows current owners are averaging $1.7M, with their
second year at $2.7M, while the third year averages $3.9M! The initial
investment on this one is also in the $200k range and we will leave
the math to you for the total return on this one. So, what is the secret
sauce to the fast ramp in this example? Very strong national account
agreements provided to franchise owners by the franchisor.
Not all franchise systems reflect those kinds of revenues or that
speed for ramping up, but we share this example to demonstrate that
opportunities can deliver larger returns than many would expect. The
total net earnings your franchise can make is not the only consideration,

40
 Financials: Funding and Returns

of course; a slower build or lower revenue percentage might be better for

an individual based on their network or other factors we’ve discussed
before.
Again, even with the Item 19 visibility and the feedback received
during owner validation, we always encourage our clients to take a very
conservative approach in their assumptions when they think through
their pro forma planning. We like to steer toward opportunities
that have enough meat on the bone that even if our clients were to
underperform the average, again, an eventuality which is not likely
given the types of individuals we work with, they would still be pleased
with the overall return. This may mean decreasing your expectations
vs. the Item 19 by five to seven percent, to be on the safe side. If you
would still be satisfied with your results, the business may be a good fit
all else considered.
Making half a million a year may sound great, but now you’re
wondering if it could be possible to get into a franchise at all. Perhaps
you have more drive than cash. We’ll discuss funding in a moment, but
first let’s talk about what the reality of the opportunity cost is. How
much does it cost to invest in a franchise? It certainly varies. Roughly
75% of our client placements fall between $125,000 and $300,000,
all in. Of the other 25%, about half are above this range and half are
below.
The ‘Item 7’
Every franchise system has an Item 7 within their FDD. This is
represented as a range, inclusive of items such as the franchise fee, any
equipment and/or vehicles needed, the build out of a retail space if
the business is brick-and-mortar based, the startup costs, technology
investments, and typical working capital estimates such as marketing
expenses and personnel expenses for the first couple of months of
operations. The range in the Item 7 can vary widely. For instance, in a
non-retail, service-based business, the range may be shown as $90,000-
$150,000. The largest variable in this type of business may be whether
an owner chooses to purchase the initial vehicle (for example, a truck
or delivery van) with cash, finance it, or lease it.

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 Non-Food Franchising

The one-time, up front franchise fee for one location or territory

(defined oftentimes by population or number of addressable businesses
or addressable houses with an income of at least $X depending on the
type of business) is typically $49,000, give or take $5,000. There are
some variations in franchise fees. However, I would estimate that 75%
of the businesses you would look at fall into this range, from $44,000
to $54,000. Don’t be surprised if this number is increased by ten to
fifteen percent within even a few years after publication of this book
due to inflation. Even so, the point stands that three quarters of the
opportunities will be in a similar price range; after all, the franchisors
are competing with one another for new owners.
Discounts of $10,000 to $20,000 are typically provided for
additional or subsequent location purchases, so it is very common for
owners to purchase three or more locations out of the gate, locking up
the geography for an entire region for future development.
So what are the variables that impact the investment level of a
franchise? The most common ‘big hitters’ would be 1) whether the
business is brick-and-mortar (retail) based, requiring a build out
and property lease; 2) whether the business is capital-heavy (think
large, industrial equipment); and 3) how much paid marketing and
advertising is required to drive the business out of the gate to ramp at
the desired speed.
We have done deals for clients that have been as low as $65,000
all-in, however, the $125k-300k range is a good rule of thumb for the
vast number of opportunities we consider to be the most attractive in
the market right now.
Funding the franchise
How can a franchise be purchased and funded? There are some
solid funding vehicles for franchises. In our experience, about one
third of our clients self-fund their purchase, another third use Small
Business Administration (SBA) loans, and the final third use a variety
or combination of self-directed retirement accounts, portfolio loans,
friends/family/equity partners or Home Equity Lines of Credit
(HELOCs).

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 Financials: Funding and Returns

For those using SBA loans, most are using versions that require
cash infusion of 20-30%. There are a few hurdles to jump through,
but we have a great partner that helps our clients navigate the process,
teeing them up with franchise friendly lending institutions at the end.
Given the current, lower rate borrowing environment (from a
historical lending standpoint), many of our clients have tapped into
the equity of their homes, using HELOCs for their initial funding.
As interest rates go up and down, the methods used for funding
may change. If a candidate has strong holdings in non-retirement
brokerage accounts, they can borrow against these in a fashion not too
dissimilar from a line of credit and this is referred to as a “portfolio
loan”. These can carry the lowest interest rate of any borrowing vehicle
and can be used to leverage up to 70% of your brokerage portfolio. I
personally use this as it is a no-brainer way of ‘leveraging’ and setting
up an opportunity for true arbitrage.
Within franchising, the Roll-Over as Business Startup (‘ROBS’)
program is also very popular. This allows someone to use their retirement
account to purchase the franchise. There are some stipulations in the
inner workings, such as establishing the business as a C-corporation
and requiring certain upkeep practices on the account. However,
given the lack of great opportunities for retirement funds in the public
markets, this can be a great avenue for many - especially for those later
in their careers.
Did you serve in the military? Veterans, because of the service they
have put forward on behalf of our country, are highly valued within
the franchise world. A small token of appreciation is shown to them
through franchise fee discounts that can range from $5,000 to $10,000
and sometimes even more. As a side note, veterans often make great
owners with their backgrounds of discipline, hard work, and executing
against a ‘playbook’!
There are many ways to fund a franchise purchase. Knowing the
financial potential that many of the systems can deliver makes the initial
investment much easier. As we said in the introduction, the returns
delivered by a franchise business purchase can truly be eye opening
when compared to the initial capital outlay!

43
Franchise Disclosure
Document and Legal
“Opening a franchise can be a great way to start a business. It can also be
overwhelming when you initially receive the Franchise Disclosure Document.”
- Houston Barnes

O
ne of the great things about franchising is that it possesses
multiple avenues of providing potential buyers with a full
picture of the purchase prior to signing a franchise agreement.
In this chapter, we will dig deeper into the most important set of data
points - those contained within the Franchise Disclosure Document
(FDD).
The FDD can be overwhelming, but by the time you finish
reading this chapter, you should have an increased comfort level when
reviewing your next FDD. After all, thousands and possibly millions of
other people, like you, have read through FDDs and found that they
have helped them gain a strong understanding of every aspect of the
respective business before purchasing. You can too!
First off, the FDD is not optional; if you are exploring a franchise
opportunity, you will absolutely get a copy and have a chance to
review it in detail. Franchise systems are regulated by the Federal Trade
Commission (FTC) and are required to have an FDD. The FDD is a
legal disclosure document that franchisors must share with individuals

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 Non-Food Franchising

interested in buying a franchise as part of the pre-sale due diligence

process.
The document contains information essential to potential
franchisees that are on the verge of making a significant investment.
In the past, you may have heard of a UFOC and if so, you’re likely
wondering why we’re talking about the FDD rather than the UFOC.
This is because the FDD was previously known as the Uniform
Franchise Offering Circular (UFOC) before it was revised by the FTC,
the country’s consumer protection agency, in July 2007. According
to the FTC, franchisors have an obligation to provide the franchisee
candidate with the FDD at least 14 days before it needs to be signed
or before any initial money is exchanged. The franchisee candidate has
a right to a copy of the FDD after the franchisor has received their
application and agreed to consider it.
The FDD outlines comprehensive information about the roles
of both parties involved in the franchise—the franchisor and the
franchisee—and is designed to enable the potential franchisee to make
an informed decision about their investment into the business. The
document lays out how the investment will work in practice for the
potential franchisee, which is critical because a franchise is a unique
type of investment and business. I believe it is important for my clients
to know that the FDD is written by the franchisor’s attorneys to be a
relatively one-sided document. While it provides candidates with good
visibility, it also serves the important role of protecting the franchisor
down the road against the risk of possible lawsuits. It also serves to
protect franchisees in that it gives the franchisor the ability to take
action, if needed, with other franchisees that may have chosen to go
well out of bounds, and as a result, are risking harm to the brand. As a
franchise owner, you want to know that you are protected in this way!
The FDD is divided into 23 sections referred to as ‘Items’, and the
potential franchisee must review each of them before signing.
What exactly is a franchise from a legal point of view? A franchise
is a license that a party (the franchisee) acquires to allow them to
have access to a business’ (the franchisor’s) proprietary knowledge,
processes, and trademarks. This gives the franchisee the ability to sell

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 Franchise Disclosure Document and Legal

a product or provide a service under the business’ name. In exchange

for gaining the rights to the franchise, the franchisee usually pays the
franchisor an initial start-up fee and then ongoing fees, often expressed
as a percentage of revenue, or ‘royalties’. It is worth noting, though,
that buying a franchise will almost always entitle you to also benefit
from the franchisor’s training, support, and expanding brand power. It
is like any other investment, though, in that there is no guarantee of
success. Anyone who may entertain the idea of opening up a franchise
should carefully weigh the pros and cons before doing so. The FDD is
a critical source of information for that evaluation process—but it is
not the only way to evaluate a franchisor.
I always encourage clients to have a franchise attorney review the
FDD ahead of their purchase and I would say that roughly half of
my clients choose to do so. The objective of the review is twofold.
First, the attorney checks to ensure there are no one-off clauses that
are atypical to most franchise systems they have reviewed in the past. If
there are, they may not be a deal-breaker, but they can often necessitate
some discussion and/or clarification. The second reason is to review
the document with the candidate to ensure the candidate has a good
understanding of the contents.
The candidate does not have to accept everything the franchisor
says to be able to proceed. As part of the review, about a third of my
clients will have an amendment to the FDD drawn up by the attorney
that they ask the franchisor to agree to. It may pertain to their specific
setup, market, or it could simply serve the purpose of providing
clarification to language within the FDD that the franchisee and their
attorney consider ambiguous. Assuming the requests are reasonable,
most franchisors will agree to aspects of the amendment. However,
having been a franchisor myself, I can assure you that the last thing a
franchisor wants to do is show partiality to one owner that they are not
showing to others for material items. Therefore, potential franchisees
should consider exactly what it is they are requesting and whether the
franchisor may see that as preferential treatment and, thus, not approve.

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 Non-Food Franchising

Now, let’s get more specific about what is contained in the FDD.
Below is a summary list of the 23 ‘Items’:
1. The franchisor and any parent companies, predecessors,
and affiliates: This section also establishes how long the
franchisor has been operating.

2. Business experience: Item 2 outlines the experience of the

executive team currently running the franchise system.

3. Litigation: Here, the FDD covers any pending legal actions,

material actions, and prior actions against the franchise.

4. Bankruptcy: Any and all bankruptcies involving the franchise,

its predecessors, and its affiliates must be disclosed in this
section.

5. Initial fees: A franchisor must disclose any up-front fees to

franchisees, as well as ongoing royalties.

6. Other fees: Undisclosed fees can be a source of dispute later

on down the road, so a franchisor must be careful to reveal all
charges to be fully transparent.

7. Estimated initial investment: The franchisee must be aware

of what the low and high range of the initial investment can
be, including an estimate of what amount is expected to be
needed on hand for their working capital when the franchise
opens.

8. Restrictions on sources of products and services: This

section covers any required purchases of goods and services, in
addition to disclosing any ownership or financial relationship
between the franchise and required suppliers.

9. Franchisee obligations: In this section, the FDD lays out the

franchisee’s obligations - often in a reference table.

10. Financing: Outlines the conditions of any financing

48
 Franchise Disclosure Document and Legal

arrangements between the franchisor and franchisee, as some

franchise systems will offer financing to their owners.

11. Franchisor’s assistance: advertising, computer systems,

and training: Item 11 explains the pre-opening and ongoing
assistance in a variety of business areas that the franchisee can
expect from the franchisor.

12. Territory: The FTC makes no legal obligation or requirement

upon the franchisor to give a franchisee any range or territory
to do business, but this is the space where any geographical
restrictions a franchisor is putting on the franchisee will be
indicated.

13. Trademarks: Item 13 discloses the trademarks registered to

the franchise.

14. Patents, copyrights, and proprietary information: This

section discloses any and all of a franchise system’s additional
patents, copyrights, and other protected information not
covered under the trademarks section.

15. Obligation to participate in the actual operation of the

franchise business: Here, the FDD makes it explicit whether
the franchise can be held as an arms-length investment (semi-
absentee) or whether direct participation is required (owner-
operator).

16. Restrictions on what the franchisee may sell: This covers

whether only franchise approved goods and services can be
sold, or, conversely, whether the owner may elect to add
something for an additional revenue stream. For example,
a fitness gym might restrict what types of merchandise and
refreshments can be sold at the counter, or the owner may
have the right to sell whatever they want.

17. Renewal, termination, transfer, and dispute resolution:

Outlines the prescribed processes for all four of these issues

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 Non-Food Franchising

related to continuing, closing, or selling the business.

18. Public figures: Covers any person whose name or physical

appearance is associated with the franchise. For example,
this could be a particular celebrity who appears in franchise
commercials. Obviously, this section, along with others, will
be updated over time.

19. Financial performance representations: An optional space

for a franchisor to estimate a franchise’s potential performance,
based on reasonable assumptions. The majority of franchises
that we work with include an Item 19 and it is typically
referenced more often than other Items during the exploration
process with the exception of Item 7.

20. Outlets and franchisee information: In this section, the

franchise statistics are disclosed regarding the number of
company-owned outlets as well as the number of franchised
outlets in operation for the prior three years.

21. Financial statements: A franchisor must provide three years

of financial statements to the franchisee as part of the FDD.
This includes balance sheets, statements of operations, owner’s
equity, and cash flows.

22. Contracts: Ready to sign? This is where the franchisor

outlines the franchise agreement. It may also include financing
agreements, product supply agreements, personal guarantees,
software licensing agreements, and any other contracts specific
to the franchise’s situation.

23. Receipts: This is the final section of the FDD. Here, the
franchisor will review the disclosure and business decisions
outlined between the two parties and provide the franchisee
with any additional information that hasn’t been covered in
the previous 22 sections.

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 Franchise Disclosure Document and Legal

That may seem like a lot, but much of it is straightforward. When

discussing opportunities with clients, once we get to the point of
examining FDDs together, much of our conversation tends to center
around Item 7, the investment range; and Item 19, the financial
performance representations as mentioned above. In other words, we
try to get a really clear picture about what it’s going to cost and how
much you’re likely to make, the two key features of any investment.
These two sections are great data points for comparisons, as we touched
on in the prior chapter. As we mentioned above, the balance of the
FDD is certainly worth having an attorney go over with you as well.

National and State Filings

Occasionally, when beginning your franchise exploration process, you
may have to wait for a brief period of time to engage with a particular
franchise system to learn more.
No matter where a franchisor is headquartered and operates from,
Franchise Disclosure Documents are required to be audited annually
with new each year filings to remain up to date with the federal
government as well as the state government in some cases. These filings
typically take place in the first few months of a new fiscal year and may
cause a franchise system to ‘go dark’ for a brief period of time, during
which new locations cannot be sold while the filings are processed.
This ‘dark’ period has zero impact on existing owners. It simply
impacts the timing of the brands to sell NEW locations in the state in
the upcoming year.
In addition, there are 14 ‘Registration States’ that, in addition to
the Federal Franchise Laws, have state laws on the books that require
franchisors to register their FDD with a local state regulator before
offering or selling a franchise within the state. At the time of publication
of this book, these states included California, Hawaii, Illinois, Indiana,
Maryland, Michigan, Minnesota, New York, North Dakota, Rhode
Island, South Dakota, Virginia, Washington, and Wisconsin.
As a result, franchise brands may delay offering ownership
opportunities in these states, and if they choose to move forward,

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 Non-Food Franchising

there will likely be a lag before candidates are able to engage in their
respective discovery process. In general, you can expect that purchasing
a franchise with an emerging brand may take a bit more time in these
areas.
One closing thought - while the FDD can be intimidating and
seem restrictive upon first review, it is important to understand the
‘spirit’ of the law and how it differs from the ‘letter’ of the law. Typically,
a conversation with the respective franchisor behind the FDD will yield
a better understanding as to the ‘why’ behind certain provisions as well
as the likelihood of the provisions actually ever needing to be enforced.
In the next chapter, we will discuss how the exploration and
discovery process works.

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Selecting a Franchise
“I have found that when you begin evaluating ‘Option A’ vs. ‘Option B,’ and
you start to take steps in the direction of one of the two, ‘Option C’ very often
comes along out of left field. Activity breeds activity.”
- Jon Ostenson

L
anding the right opportunity amongst the roughly 4,000 franchise
brands in North America requires a methodical, focused process.
It can be easy to get overwhelmed by the volume of opportunities
and end up getting stuck in the weeds. But there’s hope at the end of
that tunnel, and having a guide to help you through the maze can pay
off in a number of ways.
At FranBridge, we have designed a streamlined process that has
proven to be both highly efficient and effective. Components of our
process are not 100% unique to others in the industry, but our overall
approach and support is superior. This is largely due to our reach,
industry relationships, deal volume, and vetting capability driven by
our past experience working both sides of the table. I have personal
experience as a franchisor and as a multi-brand franchisee and this
has served my clients tremendously as we review different aspects of
opportunities in relation to each other.
It is worth noting that working with FranBridge carries zero cost
to our clients. We are compensated by franchisors on the back-end, and
for the franchisors it is a sales and marketing expense, meaning that not

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 Non-Food Franchising

a nickel is passed along to our clients in any fashion. If you were to seek
out a franchise directly vs. working with us you would be paying the
same franchise fee. Also, because our fees are fairly standardized across
all of our franchisors, we are able to work with our clients without bias
and without a conflict of interest.
Now that we have gotten that out of the way, how does the
exploratory process work?

Get to Know You Phase

First, we spend some time getting to know our clients through a phone
discussion. We ask some key questions to 1) Help our clients begin
to think through the types of options and 2) Provide us with the
information to narrow down the field of potential opportunities to
those that will be the best match for our client’s consideration.
Second, we have our clients complete a brief questionnaire that
provides us with supplementary information to ensure we are focusing
on the right industries, investment levels, and role/participation level
of the candidate in the business. Imagine, for example, that a client
tells us that they are sure they are not interested in an owner-operator
model. We can then eliminate that 15% of franchisors who require the
owner to be engaged full time in the business.

Selecting and Narrowing Options Phase

1. Next, using the information provided from our clients, along
with the broad experience we’ve gained by observing what
is currently resonating with similar candidates across the
country, we spend about a week reviewing the availability of
opportunities in the client’s desired geographical location or
market to build a portfolio of opportunities, typically between
6 and 10 in number, to review with the client.
During this time, we also provide clients with additional
resources, which can serve to not only educate them on
franchising but also tee up additional ideas and preferences

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 Selecting a Franchise

as they begin to get a feel for the landscape and the types of
opportunities most popular with others who are walking in
their shoes with similar backgrounds. For instance, what are
other candidates with families doing?, What are others who
want to get into health and wellness drawn to in the market?,
What has proven to be a great fit for others with a B2B sales
background?, etc.
2. One of our favorite steps is reviewing the specific opportunities
with our clients as this is often when we see the light bulb turn
on and the magic begins to happen! We typically use an online
webinar format to walk through the characteristics of each of
the six to ten opportunities - the business model, leadership,
investment and return levels, stories from some of our other
clients who have bought into the business, competitive
advantages, market niche, pros and cons, and why we see
it is a good match for the client’s personal lifestyle, current
financial situation, and future goals.

3. Narrowing down further: After our review meeting, our clients

choose between two and four opportunities with which to
take a ‘next step’.

Next Step Phase

The next step involves us introducing the client to the respective
franchisors and then our clients can schedule introduction calls with
the franchisors at their convenience. The following steps in each
franchisor’s process usually include:
1. An introductory call in which the business and brand overview
is provided.

2. A ‘Unit Economics’ call in which the business’ financials are

discussed in depth.

3. An FDD (Franchise Disclosure Document) review + a territory

mapping review.

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4. Franchisee Validation Calls and Franchisor Leadership Calls.

5. ‘Discovery Day’ or ‘Confirmation Day’.

6. Awarding of a franchise (i.e. an offer to join the franchise

system).
The process is designed to ensure that candidates have as much
information as possible and can make an informed decision with eyes
wide open.
To expand on the Validation Calls, these serve as an opportunity
for candidates to speak with existing owners of the given franchise
system, learning about their ramp up and the support they received
from the franchisor, hearing how their financials have shaken out, etc.
Were their projections too aggressive? Or were their results better than
expected? Existing owners, unlike franchisors, are not limited in the
financial representations they can make. They can be an open book -
and a great source of information, on all sorts of topics.
Moving forward to the Discovery Day, what does this typically
look like? The Discovery Day, also referred to as ‘Confirmation Day’
or ‘Meet the Team Day’ typically consists of a full day or a day and
a half onsite visit at the franchisor’s headquarters. The event usually
kicks off with a dinner followed by an all-day session the following day.
Presentations will be provided by the franchisor’s team in areas such as
training, marketing, and operations. Candidates really get to know the
team that would be supporting them day in and day out. The franchisor
will also get to know the candidates better to ensure there is a fit both
ways. After the Discovery Day, if candidates are extended an offer to
join the franchise system (referred to as the ‘awarding of a franchise’),
they will typically have a week or two to make a final decision.
When are candidates locked in and committed? Not until the
end. They are able to drop out of the process with any of the franchise
brands at any given time. It is very typical for a candidate to start out
looking at three brands, drop one after an initial call or two, and then
potentially bring back another opportunity for consideration as each
call provides them with new thoughts and their thinking evolves. It can

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be an iterative approach. It’s almost as if you’re watching a scale with

a basket on either side as it leans first one way and then to the other.
Even attending Discovery Day can be an eye-opening experience,
after which prospective franchisees have second thoughts. There is no
obligation to purchase a franchise, even at such a late phase in the
game.That being said, I encourage clients not to attend Discovery
Day unless they are at least 80% sure they will move forward with the
opportunity should everything check out. The franchisor would agree
with this approach.

Throughout the process

We check in with our clients every 7-10 days throughout the process,
holding their hand and serving as a sounding board. We answer
questions, help them compare opportunities, share perspectives, and
assist them in introducing new opportunities to the mix if needed.
Our clients’ thinking always evolves as they go through the franchisor
discussions, so sometimes we even bring in an additional couple of
opportunities for consideration a few steps in. We also help our clients
through introducing them to the best funding sources, recruitment
resources, and a franchise attorney if desired. During the process, we
also have conversations on our own with the franchisors, ensuring that
our clients are getting everything they need and covering all bases.
Additionally, it is not uncommon that we go to bat in negotiating
for our clients - either on components of the franchise agreement such
as territory size expansions or positioning our clients against other
candidates that are looking at the same brand in the same market. This
is extremely common - taking place at least 40-50% of the time. It can
be competitive out there and we always fight for our clients… (and we
usually win)!
From start to finish, the exploratory process typically lasts 30-75
days from the initial introductory call with the franchisor, with the
vast majority happening in the 45-60 days. It is important to note that
after this process you are not expected to launch the business the very
next day. Oftentimes I will have clients wait several months - even up

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to 9 months as they like to get their ducks in a row, make some initial
hires, and attend the franchisor’s training sessions at a time that fits
within their overall schedule. As a side note, your day to day life never
slows down when you attempt to carve out time to evaluate business
opportunities!

Working with Franchise Sales Organizations

One thing worth mentioning is that many brands, especially ‘emerging
brands’ or those early in their growth, will often use Franchise Sales
Organizations (or ‘FSO’s).
These franchise development groups play an important role for
growing brands in that they serve as the sales arm of the franchisor’s
organization and lead candidates through the discovery process. For all
intents and purposes, these groups know the brands they represent as
well, if not better, than an in-house resource would, because they are
specialists. Note that the franchisor will still get involved in the process
and will be the ultimate decision maker on each candidate. However,
by using an FSO, they typically do not get involved until midway or
later in the process.
I frequently encourage emerging franchisors to consider using one
of the FSO groups as it allows the franchisor’s headquarters staff to focus
their time and efforts on supporting the newly onboarded franchisees,
rather than spending most of their time trying to sell new locations.
Many of the ‘hottest’ brands in recent years have been represented by a
top notch FSO. We are fortunate to have strong relationships with all
of the preeminent FSO groups in the United States. This allows us first
crack at new opportunities coming down the pipeline before they hit
everyone’s radar and allows our clients to get in the door before their
market is snatched up.
An important note - I often see clients either love or dislike their
franchise brand or FSO sales rep (or ‘developer’ in franchise-speak). It
can be hard to look beyond a personality clash with a developer and
focus on the positives, or to see the negatives when the rep is such a
lovely person, but I always remind my clients that their connection (or

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lack thereof ) with the sales rep is a temporary relationship and that the
most important relationship by far is with the actual franchisor and
their leadership team. The franchisor and their staff will be the day-
to-day support partner once the candidate enters the franchise system.
As mentioned above, even when an FSO organization is involved,
candidates will still get ample time to connect with the franchisor. This
takes place during the leadership calls, a one-on-one meeting prior to
discovery day, and finally, at discovery day itself.
The discovery process is a new experience for most of our clients.
Many people find it to be a really enjoyable experience. Of course, it
is also easy to get a little overwhelmed, as I said before, life does not
slow down to allow you to evaluate business opportunities. In fact, I
have found that the world seems to conspire against people to increase
their level of overall busyness and distractions during this time! I have
had countless clients of ours receive job promotions, get hired for new
jobs, or at a minimum, be given increased workloads as they walked
through the process. Perhaps this is because the people who are most
attracted to considering franchise ownership are open to growth;
people who have this sort of growth mindset find advancement and
increase waiting for them under every rock and behind every business
opportunity meeting.
The exploratory process, overall, has proven to be tried and true,
as evidenced by our results. By going through the process, you will
look at businesses differently. You will develop a filter, or lens, through
which you compare and contrast different types of opportunities; even
gaining a more critical eye for the opportunities offered by advancing
in your current job.
We believe that walking through the discovery with a consultant is
a no-brainer. While you could go directly to brands’ websites, you will
quickly find that your eyes will glaze over. In addition, you will find
that the brands always put their best foot forward with their marketing
messaging. It is important to have a guide who knows the leadership
teams behind the brands, what kind of momentum they have on the
back end, and what trajectory of growth they are on. In addition, who

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is buying and why are they buying?

Having a guide who has walked in your shoes, that is, someone
who has purchased franchises themselves and has even led franchise
systems as a member of the C-suite team, is a highly valuable resource.
Purchasing a franchise is a big decision, typically larger and more
significant than buying a car, and you want to ensure you have the
best expertise available at your fingertips when evaluating various
opportunities and all facets contained within each.

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Long-Term Strategies
“My biggest motivation? Just to keep challenging myself. I see life like one long
University education that I never had - everyday I’m learning something new.”
- Richard Branson

I
n Stephen Covey’s 7 Habits of Highly Successful People, he encourages
readers to “begin with the end in mind.” This certainly applies to
the strategies employed as you evaluate a franchise purchase. While
life rarely works out in perfect unison with the plans you have drawn
up, having a general direction that aligns with your long-term goals
will shed insight for you on the best path forward.
Many of my clients tend to over-analyze their purchase decision
because, frankly, they have more than enough data, which tempts them
into getting caught up in the weeds. This is the double-edged sword of
the readily available information provided in the franchise exploration
process information such as the FDD, other franchisor-provided data
points, and current franchisees’ validation anecdotes - all of which we
discussed in prior chapters. One of the most important things is to
determine what the end goals are and then create strategies that are in
harmony with that direction.
That being said, let’s touch on several common strategies that I
have seen my clients adopt. There are three basic approaches we will
look at: Single-Brand Focus, Complementary Portfolio, and Diversified
Portfolio.

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Single Brand Focus

As the name suggests, the candidates who choose this strategy are
looking to go deep with one brand, scaling through an expanded
geographical area. For instance, I have had clients purchase the rights to
as many as ten locations both in territories for service-based businesses
as well as in traditional brick-and-mortar locations. Their desire is to
really learn the brand inside and out, eat/sleep/breathe the business and
milk it for all it is worth, across an entire portion of a state or within
multiple metros.
While I have had clients, oftentimes as multi-investor partnerships,
go for ten locations, it is much more common for those I work with to
opt for three or four locations or territories out of the gate. Typically,
they will begin operating in one or two of the locations they’ve
purchased and focus their marketing efforts there. While they do have
the right to serve all locations out of the gate, they want to keep their
efforts focused and concentrated, expanding their marketing over time
into the other territories they have purchased once they are comfortable
working the system.
The speed or rate of expansion is usually discussed with the
franchisor prior to making the purchase and we call this the ‘development
schedule’. The franchisor wants their brand in every location, but they
understand the sensibility behind doing it one step at a time, too. They
want the owners to be set up for success by not moving too quickly to
expand.
Note that, while the geographical footprint in a multi-unit
approach is most often contiguous, this is not always the case. I have
had a handful of clients who have operated in multiple states - as many
as six states at a time. While this can create some challenges, it can
also maximize the opportunity. For instance, if the business lends
itself to a certain type of market, such as a city neighborhood with a
certain population density or within a region of particular economic
or cultural demographics, it may require expanding to non-contiguous
areas, assuming the operational capabilities can be put in place in a
remote location.

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Complementary Portfolio
As you would guess, this strategy involves the development of a
collection, or portfolio, of businesses. Whether this is done via franchise
businesses alone or through a mix of franchise and non-franchise
opportunities, the goal is for all of the businesses to provide synergies
to each other. Many of my clients have purchased brands, often multi-
location, with the primary intention to scale and expand through the
acquisition of additional, nearby businesses over time. I encourage
them to only launch one franchise at a time with this strategy, as I
have personally been involved in a two-brand launch myself and found
that it spread our focus and efforts a little thinner than I would have
liked. In hindsight, we should have given ourselves at least a six-month
staggered start between launches. No matter how ambitious and
energetic you may feel when you start, there is a point at which your
extra work may produce diminishing returns. Pace yourself.
I have enjoyed seeing clients of mine come back and purchase
additional businesses after successfully launching their first one. They
have been able to bring their objectives embedded in this approach to
fruition. They find opportunities for synergy, such as:
A. Reduced customer acquisition cost. For instance, if you
already have a trusted and established customer relationship,
being able to offer them an additional service that ties in or
complements the first is a no-brainer and will not alienate the
consumer. Reducing acquisition costs can really impact the
bottom line in many businesses.

B. Economies of scale through shared resources. This can be in

areas such as shared office space for administrative and finance
work, a single employee answering the phone for multiple
businesses, or on the front end with sales and marketing (as
point A above suggests). As your small business grows, you
will typically require fractional employees in administration,
for example, your need may begin with a half-time position,
then expand to three-quarters, and then eventually one-and-a-

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quarter, and so on. Having the ability to have someone work

on multiple businesses helps the owner level and adjust the
workload and balance out an employee’s involvement.

C. Opportunities for advancement. I have had clients who have

become highly skilled at acquiring talent as a result of the career
paths that they were able to offer candidates. If a new hire can
see a path forward in which they have potential assignments
and promotional opportunities across multiple businesses, this
can be very attractive to them - and a competitive advantage
to the owner of the businesses.
One client of mine has found that hiring employees in their mid-
twenties in his organization, then watching them prove themselves
and earn his trust, has provided a fertile recruitment pool for future
general managers of businesses which are not yet on his radar. As these
employees become ready for this type of role, he comes to us to guide
him into the next opportunity that he can onboard, promoting and
thus retaining these excellent workers. He recognizes that providing
additional responsibility to them is something that will continue to
challenge them and allow them to earn more for their often growing
families over time.
Let’s touch on another client example of a complementary
approach. Our client, Lucas B., in Columbia, South Carolina, had
built up several non-franchise businesses across multiple industries.
He noticed that he had very strong connections and relationships
with companies in the construction arena, in particular, where one
of his businesses was involved. Together, we looked at a number of
opportunities that could leverage these relationships.
Lucas realized that his ability to get out of the gate quickly on the
front end, plus the infrastructure of a franchise system on the back-
end, would set him up for strong success. And that is exactly what
happened. Lucas purchased a multi-territory roll-off dumpster business
and has since come back to purchase the rights to several additional
locations. He is thriving - and having fun doing it!

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 Long-Term Strategies

Diversified Portfolio
Whether someone is looking to diversify intentionally, or simply has
the ability to be opportunistic and flexible when an attractive option
comes along, the diversified approach can provide great benefits.
While there may still be economies of scale and potential
opportunities for advancement as we just discussed, the ‘Diversified’
approach likely has less front-end customer marketing crossovers as a
benefit. However, one of the objectives of this approach often lies more
in the potential of non-beta correlations (to use technical speak). For
instance, if a particular industry was hit due to a worldwide pandemic,
having ownership of businesses that fall outside of the industry, as
well, can lead to possible offsets. An impact in one sector in which you
own a business does not mean you have to struggle overall - if you are
diversified.
That being said, I would say the greater desire toward diversification
within franchising lies not in the risk mitigation side but rather in the
expansion of exposure as well as personal interest. As a business owner,
having variety on a day-to-day basis can be a great outlet for those who
have other interests. As a business owner, you become aware of the
things you like and don’t like within your current business, and this
leads you toward what to look for and avoid in the next opportunity as
you continue to diversify.
Having multiple types of businesses can simply be more fun
and interesting. Sometimes you don’t know what you will be most
passionate about until you get in the game and get exposed to life inside
a business. Many clients that I work with have had successes in growing
traditional, non-franchised, businesses in the past and they love the
idea of now being able to start up new businesses via franchising rather
quickly in comparison with their past experiences for all of the reasons
we have covered in this book.
For another example of a diversification play, let’s discuss our
client Nathan B. Nathan is the largest franchisee of Two Men and
a Truck Moving Service, operating in close to a dozen markets and
generating north of $30M in annual revenue. Through his expansion

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efforts, Nathan has built up a solid organization underneath him.

Nathan came to us several years ago with an interest in diversifying
his ownership interests into other categories. We have since helped
him get into multiple multi-territory purchases in the home services
arena, as well as in the waste management space. In each case, Nathan
inserted one of his young staff members that had earned his trust into
the General Manager position and told them to go build a business
from which they would both benefit.
Nathan’s strategy has paid off well as his young GMs have quickly
built and grown their respective businesses with Nathan’s coaching
from the sidelines and the support of the franchisor’s operations teams.
In each deal we have done together, Nathan has returned to purchase
additional locations. Repeat purchases for expansion are one of our
favorite forms of validation!

Owner-Operator
Don’t forget that it is okay to have more modest ambitions. Not everyone
is interested in owning multiple locations within one franchise, or
complementary or diverse portfolios. Some prefer to build a business
they can enjoy working in too, being involved in the day-to-day action
for the sense of purpose they can derive from meeting customers’ needs
and investing in teams.
Others may prefer operating the business vs. working for a boss in
the corporate world for the schedule flexibility, the financial rewards,
and the sense of accomplishment of building something of their own.
Serving as an owner-operator does not mean that your lifestyle
will necessarily dictate that you eat and breathe the business all the
time. Having a single location or a few locations can be the long-term
strategy that you leverage for the other things you want to do in life.
An example of an owner operator could be seen with our client,
Sam L. in Los Angeles, CA. Sam was a former Silicon Valley executive
that had moved from the Bay Area to LA to be closer to family. Sam
came to us, interested in building a sizeable business, but he didn’t
know what that looked like and he didn’t have a particular industry in

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 Long-Term Strategies

mind. Through our process, we introduced him to a well-established

commercial property services business that he quickly resonated with.
While he was ok with the work itself, he saw the proven financial
model and really appreciated the support and reputation of the
franchisor. When Sam realized that he could leverage some of his
past sales executives in the business, he felt that the opportunity was
a no-brainer and jumped right in. While his background differs from
his new business from an industry perspective, the management and
leadership skills needed to be successful had been honed in his past.
These were the most important keys to his future success within the
support system of a strong franchisor.
While it is great to have a general sense for the strategic direction
you want to grow, I encourage clients not to put too much pressure on
themselves early on.
Your thinking, and to a degree, your strategy, will most certainly
evolve as you go ahead with your plans, and you don’t have to have it
all figured out on day one. In fact, the majority of those we work with
do not know what their long-term plans look like in any level of finite
detail. They generally have a sense of what they would like to see when
they look in the crystal ball, but they aren’t certain which of these paths
will be the best fit. I encourage people to stay open-minded, learn as
they go, and to continue taking one step at a time. I have been at this
long enough to know that there is this approach. I have seen the results
over time.

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Understanding the
Franchisor’s Perspective
“Business empires and dynasties are not built on day one, but they will never be
built if you don’t start on day one.”
- Hrushee M. Sangani

B
usiness owners reach out to me on a regular basis seeking
guidance as to whether they should consider getting into
franchising on the franchisor side. As they begin to learn that
franchising includes many types of business outside the food-and-
hospitality arena, the obvious question is to wonder whether their
current business is ‘franchise-able.’ I love having these conversations
and sharing my perspectives on the current franchise landscape, as well
as helping them weigh the pros and cons of going down the franchise
path.
As an involved member of the Entrepreneur’s Organization, I
have a steady stream of founders who are more often than not in an
expansion mode of thinking and who are weighing options for the
optimal path to growth. While I don’t personally take companies
through the franchising process, I have several great partners who do.
They provide a soup-to-nuts approach that provides these would-be
franchisors with a turnkey setup.
Drawing on my experience as a franchisor, as well as my time

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spent leading a firm that served as a franchise vendor, and of course

as a franchisee myself, here are a few of my thoughts on the benefits
of franchising your business, along with some other items for
consideration.
From my perspective, franchising can be a great vehicle for scaling
a business to new markets. To build a successful franchise brand, it is
important to have a business with processes and systems that can be
duplicated and replicated, and one that someone would want to invest
in and run themselves. It goes without saying, but at its most basic
roots, the business must have good revenue and profitable margins, as
well as many of the other benefits we have discussed previously.
One of the best questions to ask yourself before you offer
your business as a franchise opportunity is this: What makes your
opportunity desirable? Obviously, it has to have a proven track record.
The financials need to be attractive, relative to the resources and effort
it would take someone to build and run it. However, it requires more
than just solid financials. It needs to have a competitive advantage or
niche in the market. This does not necessarily mean you have to have a
patent or a highly proprietary element, though that is nice. It should,
however, have at least some unique reason for existing. This could be
a wealth of past marketing data that has steered your company toward
a specialized approach to customer acquisition, which a new owner
would benefit from. It could be a supply chain they could tap into,
national accounts or strategic relationships they could draft off of, or
a support team at the corporate office that they could leverage to scale
much faster than on their own. Ideally, it needs to be an industry that
is ripe for new entrants across a wide variety of markets, preferably in a
growing segment of the economy.
No matter which of these things your company does best, you
will need to have the systems and processes nailed down in-house so
that when a consultant sends a candidate to you for discovery, they
are impressed at how thorough your system is. When you compete
for franchisees’ attention, you’re not necessarily competing against
only companies in your own industry, rather you need to accept the
paradigm shift of competing in the Industry of Systems and Processes.

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 Understanding the Franchisor’s Perspective

Once you see that, you understand that when you begin to sell
franchises, this is where you compete with everyone else, no matter
what product or service they provide their end customers. You will
want to be a very attractive opportunity for candidates that may be
looking at opportunities across multiple industries.
If neither you (as the founder or CEO) nor your executive team
has prior franchise experience, I always encourage founders to onboard
some key resources with franchise experience on their resume, as
franchising can be a unique animal. Primarily, franchising is dynamic
in regards to the support needed for your newly minted franchisees. It is
wise to have others on your team that truly understand the franchisor-
franchisee dynamic.
So, what are some of the benefits of franchising your business as a
way to scale it? Here are several:
1. You are using other people’s money to expand rather than
having to borrow or raise capital.

2. You get owners who know their local markets and have
more skin in the game. As a business owner, you have always
wanted your team to act as though they were owners. Through
franchising you can actually accomplish this - literally!

3. You can get leverage over vendors through added volume.

This can be in the traditional supply chain sense or it can be
with service providers, such as outside marketing agencies.
Almost anything your business has to buy can be acquired less
expensively as you increase the volume.

4. You are building toward a nice exit. The bottom line is private
equity LOVES franchising because of the model behind it. I
receive calls daily from PE firms wanting my take on upstart
franchises that they could potentially acquire. If you search
Google for ‘franchise acquisitions’, you will see firsthand the
massive, ongoing level of purchases taking place by those with
deep pockets.

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5. There is a true altruistic element to franchising your business.

You are helping others successfully achieve the dream of
business ownership, and you are indirectly creating a lot of
jobs along the way!
But not everything is rosy, of course. So, what are the tradeoffs of
franchising?
Some would argue that you may lose control of the brand.
Theoretically, this is true, however, I believe this is often overblown. As
long as you are careful to define the guardrails within your FDD and
bring on good owners, you are not likely to not run into this possible
issue in a serious way.
A more common challenge is that founders and CEOs don’t go
in eyes wide open on the franchisor side. As a franchisor, you need to
understand that having owners personally purchase the opportunity to
build a business under your umbrella will require you to provide them
with strong, ongoing support. You will wake up one day and realize
you have kids across North America who have placed high expectations
on you. It is important that you keep them happy and playing well
together!
Here are a few considerations from my experience:
1. Select your early owners even more carefully. I encourage
new franchisors to not jump at the first candidates showing
interest in their franchise opportunity. It is easy to get excited
to find that someone is interested. Remember when your
first girlfriend or boyfriend expressed an interest in you? It is
easy to miss how that person might not be the right fit. But
breaking up with any of your first five or ten franchisees can
be much more of an issue than telling your seventeen-year-old
crush that you are moving on.
On the other hand, selecting the right owners—especially
out of the gate paves the way for great long-term growth for
the franchise system overall. The early owners will set the tone
for the culture and will make a huge impact on the type of
owners who will be attracted to the opportunity in the future.

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 Understanding the Franchisor’s Perspective

Their financial performance will determine the data that gets

built into Item 19 of the FDD and they will be the ones on the
other end of franchisee validation calls during the exploratory
process. These early pioneers will either be some of your best—
or worst—salespeople. It is, therefore, wise to be highly selective
and really vet the initial owners. It will take longer, but you will
be glad you were patient!
2. Sales function: it is easy for new franchisors to get wrapped
up in the time-consuming process of selling new locations.
I believe it is wise for them to consider using an ‘FSO’ or
Franchise Sales Organization, as previously discussed. There are
a number of groups that do an outstanding job of representing
you as if they were a member of your team. They know
franchise recruitment and the best practices process-wise for
the exploratory process. Let the FSOs do the time-consuming
work of taking candidates through the first few steps of the
development process, knowing that the vast majority of these
will not eventually move forward with a purchase.
You will still get involved in the development process and
will make the ultimate call on a candidate, but using an FSO
allows you to stay out of the process until it gets serious further
down the line. This approach is better than a penny-wise/pound
foolish attempt at mastering all things, which isn’t doable. Your
primary objective should be onboarding and supporting your
newest owners and leading your support team in setting these
new franchisees up for success.
3. Making money: Many would-be franchisors zero in on the
franchisee fee and the potential royalty stream, in addition to
the exit multiple they will one day enjoy. However, they need
to understand how ‘franchise economics’ works in reality.
From what I have seen, the initial franchise fee is quickly
reduced and only a portion of it actually hits the bottom line of
the franchisor. The fee gets consumed by marketing expenses
as well as sales expenses, either through using consultants/

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brokers or internal resources. Franchisors should view the

franchise fee as a sales and marketing expense rather than as a
large piece of their earnings potential.
The royalty can certainly become substantial over time as
franchisors collect 5 to 8% of owners’ gross revenues. Early on,
however, the royalty stream will not add up to an enormous
sum until the system is developed and growing steadily. In the
early days, new franchisors use the majority of the royalties to
pay for their home office support teams as they begin to work
with the franchisees day in and day out. Think of the early
royalty as a cover for administrative expenses.
So, where does an attractive franchisor bottom line
spring from? I always encourage franchisors to think through
opportunities to vertically integrate themselves. For instance,
when I was at ShelfGenie, we had a manufacturing plant
that developed the wooden boxes which became part of our
customers’ ‘solution’ for their pull-out cabinet shelving. We
were able to take a healthy markup on the production of these
custom boxes. This contributed to a very strong bottom-line
for the company and an eventual exit.
Not every business will have an obvious area for vertical
integration. But be creative. You can always find ways to tap into
this strategy. These integration arrangements will naturally need
to be disclosed to franchisees in the FDD. An example could
be marking up advertising services. If advertising expenses for a
franchisee with your preferred digital provider would normally
cost $5,000/month, but you have been able to bulk buy based
on all of the locations the provider is supporting, you may get
a reduced rate to $3,500/month. Because you are overseeing
the provider and working with them closely, so that each of
your franchisees does not have to, you can justify adding in a
management fee of $750/month per franchise location. In this
scenario, everybody wins. The franchisee pays less than they
would as a stand-alone business, plus they have less work in

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 Understanding the Franchisor’s Perspective

managing the provider. They also get the best insights of the
provider, leading to optimization of ad spend as a result of the
provider having visibility into large data sets across locations.
As the franchisor, you win because you’re creating a recurring
income stream that drops to the bottom line and augments your
royalties and other revenue sources. Also, you have successful
franchisees with optimized marketing campaigns based on the
support, data, etc.

Franchising isn’t the right path to scale for every company. However,
as more and more owners are waking up to both the variety of industry
types getting involved as well as the benefits that are available through
franchising, I am seeing more and more owners at least consider the
option of becoming a franchisor as one of their potential strategies to
scale.
We have been working with a number of businesses, in
conjunction with our partners, that are going through the franchising
process right now - from commercial cleaning to alternative medicine
to flooring to yoga studios with even a few restaurants thrown in. We
also recently helped a chiropractic clinic begin their franchisor journey
and look forward to seeing the growth. The possibilities are endless,
and at a minimum, I would strongly encourage you to consider
whether franchising is the right choice for your business. In addition
to the considerations shared above, we would be happy to engage in a
discussion to help you consider the options.
For many companies out there, franchising just makes sense!

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Conclusion

T
hroughout this book, we have discussed the fast-growing
world of franchising in areas outside of food. We shed light
on the different approaches to funding, the role of the owner
within the business, and the longer-term strategies. We reviewed why
franchising can be a better path to business ownership when compared
to traditional startups and to purchases of existing businesses.
Certainly, there isn’t a one size fits all model and everyone is wired
differently. However, more and more would-be entrepreneurs and
existing business owners are taking steps to uncover this vast universe
of diverse opportunities, with many of them jumping in with two feet.
These new owners are recognizing the benefits that franchising
can afford them, such as support systems, community, buying power,
and a proven playbook. They are attracted to the ability of starting on
3rd base with a new venture vs. 1st base. They aren’t looking to recreate
the wheel or test product-market-fit on their own. Instead, they can
step into a fully built vehicle, take the keys, and drive.
These entrepreneurs and investors recognize that one element of
risk mitigation is that of being in business for themselves, but not by
themselves. For instance, the vast majority of newly minted owners are
now operating in a field in which they do not have experience on day 1.

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However, they are able to bring their skill sets to the table and tag team
with the franchisor, leveraging the franchisor’s industry experience,
systems, processes, and competitive advantages.
Many that are purchasing franchises today are doing it through
the executive or semi-absentee model, continuing to spend the bulk
of their time on their corporate job or the other businesses they were
previously running. They are attracted to the dynamic of the franchisor’s
partnership in supporting their day-to-day General Manager that is
running the business on their behalf. This is yet another benefit of
franchising that startups and acquisitions of (non-franchised) businesses
do not provide.
In this book, we hit on the legal aspects of franchising as well as
the multiple approaches to funding. We provided a glimpse into the
financial potential, which we continue to find eye opening for many of
our clients. We covered the process of selecting the right franchise and
how FranBridge supports its clients in doing so. A number of client
examples were shared throughout the book. It was hard to pick and
choose which ones to include as there are so many more that we would
have liked to use as illustrations!
In summary, entrepreneurship is alive and well in North America.
Recent events, such as the worldwide pandemic, have only increased
the level of interest that we see in the market every day. Many are
questioning the path they have been on and feel that it is time to make
a change. They are coming to the conclusion that in a world of constant
change both in the workplace and in their investment portfolios, they
would like to have something in which they can have an additional
degree of control - i.e., their own business.
As I shared in the opener, I firmly believe that there resides an
entrepreneurial itch inside almost every one of us. Some ignore it and
some kick the can down the road, looking for every possible excuse
to stay on the sidelines. However, in my experience, for those that
are willing to step out of their comfort zone and step into business
ownership, the primary question they ask themselves in hindsight is
‘why didn’t I do that sooner’? In addition to my clients, this was my
own experience as well.

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 Conclusion

I am so thankful that I personally have had the opportunity of

running my own businesses. Since stepping away from the corporate
world, I have never looked back. Not once. The freedom, autonomy,
and financial rewards I have been blessed to achieve would never have
reached the current level if I had continued to serve as a W-2 employee.
After leaving Corporate America, I had the opportunity to
lead a great franchise system on the franchisor side and then step
into ownership as a multi-brand franchisee. These experiences and
the thousands of clients I have been so fortunate to work with have
dramatically shaped my views on business ownership and investments.
There is nothing that I love more now than opening the eyes of others
to see the wide array of opportunities and approaches that exist.
Every day, more and more entrepreneurs and investors are
discovering that non-food franchising is truly a better path to business
ownership.

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FranBridge Client Testimonials
“Simply put, Jon is an asset to every aspiring entrepreneur looking to
take the leap and every business owner looking to scale. I’d say he is
a natural, but the amount of effort and energy he puts into honing
his craft is remarkable. He has a unique ability to sift through the
noise, identify your primary objectives, and connect you with sound
opportunities. His advice and counsel have put me on a trajectory to
create generational wealth.”
—Joe DeCantis (Jacksonville, FL)

“I was completely overwhelmed by the franchise process while I was

searching on my own. When I found Franbridge on a podcast, I knew
they were exactly the people I needed on my team. They helped me
find a concept that was an absolutely perfect match for my skill set and
experience. Since then, our company’s growth has been explosive. I
couldn’t have done it without Franbridge!”
—Will Allen (Charlotte, NC)

“If you’re seeking a trustworthy expert to help you navigate the world of
franchising, look no further than Jon Ostenson. I don’t know how Jon
does it, but whenever any challenge would arise in my journey to find
the right franchise fit, Jon would find the time to guide me through it,

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 Non-Food Franchising

without exception. Buying a franchise can be a rollercoaster. Luckily

for me, Jon was there for all the ups and downs, every twist and turn.
I couldn’t be happier with my decision to become a franchisee, and I
can say without reservation that I couldn’t have done it alone. Thank
you, Jon!”
—Dave Sagalyn (Boston, MA)

“Working with Jon has been one of the best decisions made as we
explored opportunities. The wealth of knowledge and experience
coupled with the efforts made to not only get an understanding of our
verticals of interest, but also placing intriguing brands/opportunities in
front of our team for consideration, was invaluable. Our relationship
with FranBridge is a highly revered partnership that we see as a long-
term relationship to nurture.”
—Darron Cooper (Baltimore, MD)

“Jon brought us such amazing options. We are thrilled to launch a side

hustle in the health and wellness space. It will serve the community and
generate a wonderful semi-passive cash flow for us. We appreciate all of
your guidance in helping us land the perfect opportunity!”
—Kimberly Grant (Fayetteville, AR)

“I came to Jon looking for a franchise opportunity that complimented

our existing real estate business. His very first suggestion ended up
being a perfect fit. While we evaluated the opportunity, Jon’s wisdom
shined through his advice on whether a franchise was the way to go.
I appreciated how he helped us clearly lay out the pros and cons, and
make the best decision for our businesses. We ultimately made the
decision to move forward with a property management franchise, and
it was a great decision.”
—Justin Landis (Atlanta, GA)

“I choose to work with Jon to introduce me to opportunities where

he knew the teams and leadership well. He spent the time getting to
know my strengths and goals and matched those with some really
outstanding franchises. We worked together to evaluate my final two

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 FranBridge Client Testimonials

choices and now I am happy to say that I am a proud new owner of an

awesome home services franchise. I would not be here without Jon to
help guide me.”
—John Bradley (Rochester, NY)

“FranBridge introduced me to a great roll-off dumpster business. I

added this to my portfolio of companies and have since come back and
bought additional locations. The business is on fire!”
—Lucas Bunch (Charleston, SC)

“FranBridge helped me every step of the way. There is nobody that

could have supported us the way that they did with their deep industry
knowledge and insights. We will be referring many more folks to Jon!
Thank you!!!”
—Mary Beth Johnson (San Francisco, CA)

“I knew nothing about franchising before I met Jon. I have now

acquired the franchise rights for 10 territories for an oil change business,
3 territories for a driveway repair company, and I’m franchising out my
own flooring business. It goes without saying but Jon is well connected
and he helps entrepreneurs take action!”
—Matt Wood (Atlanta, GA)

“When we got into a competitive situation with a rapidly expanding

brand, Jon’s experience and relationships made a HUGE difference
and was a significant factor in us winning the territories we wanted.
Because the franchisor respected Jon and the previous candidates that
Jon brought to the table, the franchisor trusted Jon and his opinion of
us. Not only that, but Jon was in a unique position (having worked
with the brand previously) to help coach us (as first-time franchisees)
up so we presented ourselves in the most positive way possible in a
very competitive situation. Ultimately, the franchisor selected us and I
know that Jon helped influence that decision in our favor. Because of
our experience with Jon, I continue to stay in touch and look forward
to hearing about new opportunities on the horizon.”
—Albie Whitaker (Mobile, AL)

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 Non-Food Franchising

“Jon was great at understanding my background and presented a mix

of franchise opportunities ranging from simple or complex B2B or
B2C businesses to choose from. If anyone is looking into franchise
opportunities and needs help in finding and evaluating opportunities,
I’d highly recommend Jon and his team!”
—Sam Lee (Los Angeles, CA)

“Getting off on the right foot - Jon was incredibly supportive,

knowledgeable, connected and transparent throughout the process.
FranBridge and Jon work hard to vet opportunities that are a fit for
each client’s expertise and lifestyle, which are also among the top
performing franchise businesses nationally, aligned with modern-day
business values, along with the methods and digitally-centric processes
for running companies in the decades ahead.”
—Anthony Migliazzo (Westfield, NJ)

“Getting to know Jon both personally and professionally over the

last year has been a fantastic experience. While he has become a great
friend, he has also done wonders for me professionally. I have come
to learn that Jon is one of the most connected people in the world of
franchising. Since meeting Jon, he has helped me purchase into two
successful franchise concepts (one where he also invested with me,
putting his money where his mouth is) as well as help me begin the
process of franchising one of my other businesses. If you are fortunate
to get to know Jon, you will only be better for it!”
—Mike O’Connor (Seaside, FL)

“Deal is closed! 5 territories to start. Our goal is to purchase the

remaining territories within several months. Thank you for all of the
help!”
—Ken Winters and Sacha Jackson (Orange County, CA)

“Working with Jon with FranBridge was an exceptional experience.

After having an initial conversation where any question can be asked,
Jon came back to me with opportunities that are available, within

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 FranBridge Client Testimonials

my area, in my target investment range, and most importantly

opportunities were all based on our initial conversation. Jon was well-
educated on all of the opportunities. I did move forward, however,
there was no pressure from FranBridge. Jon and I have kept in touch
since I opened my business, and Jon has continued to provide insight
about running a small business based on his experience. I plan to work
with FranBridge again!”
—Greg Frist (Dallas, TX)

“I enjoyed working with The Franbridge Team. They helped me identify

several successful franchises companies that fit our backgrounds, guided
us through the process, supported our search, and finally helped us
secure a successful franchise business. Thank you Franbridge!”
—Bryce Boyd (Atlanta, GA)

“I really appreciate all Jon has done. If he hadn’t gone on White Coat
Investor I wouldn’t have ever known these opportunities existed!”
—Everett Brandon (Sunnyside, WA)

“Our experience with Jon was fantastic. Jon helped us identify

opportunities that fit our needs and walked us through every step of
the process. One of my favorite things about working with Jon is that
he is always available for a quick call when I need to pick his brain. We
look forward to working with Jon in the future on our next venture.”
—Ad Boyle (Columbia, SC)

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About the Author
Jon Ostenson is in the top 1% of franchise consultants in the U.S.
and is a frequent contributor on the topic of ‘non-food franchising’
for outlets such as Inc., Forbes, The Franchise Journal and Franchise
Connect. Jon is a multi-brand franchisee and is grateful to have strong
operators leading his ventures. As a result, he is able to commit over
90% of his time to serving as CEO of FranBridge Consulting where
he helps others achieve their own dreams of freedom and wealth
generation through business ownership.

Prior to FranBridge, Jon served as the President of ShelfGenie, a national

franchise system with 200 locations. Before moving to ShelfGenie, Jon
invested fifteen years in the corporate world, including a long tenure
as Vice President of Sales for Carter’s Inc., responsible for over $350M
in annual sales. Jon began his career as a consultant with Accenture,
often working internationally on behalf of clients. Jon is on the Board
of Directors for the Entrepreneurs Organization (EO) and has BBA
and MBA degrees from the University of Georgia. Jon lives in Atlanta
where he and his wife, Jenny, have three children and are very active in
the community.

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