Mastering the Art of Franchising: Harnessing Multiple Streams for a 7-Figure Lifestyle:Jon Ostenson

you're not just buying cash flow you are building a business that's going to have that potential to exit down the road franchises usually traded at a higher multiple than non-franchised in the same industry and I've got a study I can cite to show that but there's a third piece of it too I like to call this the trifecta third piece would be as a business owner you're able to write off expenses that you couldn't otherwise for instance I pay my kids I've got a new book out they ship the book and they package it I pay them each I get the tax write off but then my kids are able to put earned income into the Roth IRAs so it's a way of creating this generational wealth without just the cash flow component but also on the tax strategy side thank you [Music] welcome to Super entrepreneurs podcast today we have with us John austinson John is a top one percent franchise consultant nationally and he leads Fran bridge Consulting as a CEO John draws on his experience as a former Inc 500 franchise president and a multi-brand franchisee and serving his clients John is also a best-selling author thank you so much John for coming on our show should they appreciate you having me looking forward to our conversation it was wonderful what you've been doing how did you take the leap into starting your own firm like so many of your listeners spent many years in the corporate world and had a good run but had that desire to do something a little more entrepreneurial and didn't know what it looked like first step was stepping away from a public company into a private company and serving as president of shelf Cheney franchise system we've experienced some very rapid growth but really that was a pivotal moment for me where I got to support all these owners these franchise owners across North America and really see how franchising can be a better path to business ownership for many of them and long story short ended up partnering with the founder we split off and we've invested in franchises ourselves on the franchise east side of the table and then we've had other partners as well where we've invest in our franchises that's a piece of what I do but fortunately we've got good people running the businesses for us and allows me to spend close to 95 percent of my time helping others do the same which franchises are your go-to that you have under your umbrella as a franchisee yeah so there are a handful primarily a Property Services space I've got one in the custom orthotics space as well so a little bit of diversity in there but I'll just touch on Industries real fast here yeah I think it's fascinating too yeah I work in what I call non-food franchising I'm coined that term because when people hear franchise they think fast food and yet I work with over 600 different franchise companies that are in Industries outside of food and my humble believes they're just easier ways to make money and we have clients across the North America that have backgrounds they may be doctors or attorneys or current business owners or corporate Executives they're looking to get into entrepreneurship but don't know what that looks like and what's the right opportunity for them once we expose them to the opportunities that are out there and play matchmaker which I'm happy to talk more about they're resonating with what I would call boring businesses things that are cash flowing understandable non-trendy aren't going anywhere in some cases they're Amazon resistant or coveted resistant or recession resistant it's businesses like gutters and insulation and dumpsters and oil changes those types of understandable businesses we're still doing a lot of like health and wellness I think Fitness is a little bit crowded but we like health and wellness we like businesses that regardless of the economy they stand to do well people are always going to spend on their kids on their pets on their aging parents on their health so businesses that come alongside and support those are where we really encourage our clients to look and where we see a lot of attraction these days it makes sense we also had a very successful Medical Clinic in Toronto and we were in the process of franchising in the States and Canada through a company like yours and they also said the same thing this type of medical service or products for Baby Boomers is the next wave a lot of people are finding them attractive yeah absolutely and the fun thing for us is probably 85 or 90 of our clients end up purchasing something that was never on their radar typically in an industry they never thought about and oftentimes you don't know what you're looking for until you see it right there in front of you but yeah exactly what you were saying I think people will always spend on their health they'll always spend on the older population which continues to get it become a larger Mass out there ten thousand people turning 65 every day largely they've got dispensable income relative to other groups we've never seen so much activities what we're seeing right now I think some people were saying hey it's time to make that jump and do something more entrepreneurial but maybe we don't go all the way in and so we go the franchising route where you get some benefits you get that franchisor on the sideline that's like a coach you get other franchisees that are living the same thing you are you're sharing best practices You've Got A playbook you're essentially starting on third base instead of first base and a lot of things have been figured out for you even the marketing you're operating from a large data set versus having to go figure things out on your own I'd say franchising isn't right for everybody some people are too entrepreneurial and want to put their thumb prints all over it it's really interesting we have so many business owners that have been there done that they say hey for our next Rodeo we want to get into franchising we would appreciate everything that's being done for us and even in some cases some people are looking to make that jump and run the business full-time as an owner operator but then others are looking to go what we call semi-passive or semi-absentee where they can tag team with the franchise or to put a manager in place and then manage the manager and so it takes some of that day-to-day burden off of them and it's that's a very common thing to keep your day job but get a side hustle going as well yeah that's an attractive opportunity for someone in a franchise world and even a franchisor if they look at branching out by opening locations is the fastest way to grow because you're partnering with other people's money to launch locations for example 100 no it's using other people's money but they also have skin in the game but you always want your course to act as owners not employees and here you actually have an owners who know their local market they're highly incentivized and as you are well aware private Equity loves franchising and I get calls every week from private Equity firms saying hey John what are you seeing out there what franchises should we be looking at you're seeing a lot of deal activity where they're typically coming into the franchisor level but making those Investments infusing capital and then in some cases they'll even roll up a lot of franchisees and provide an exit that way have you come across any type of franchisor that is in the coaching industry or the personal development industry Yeah we actually placed a client recently in Indianapolis in a business coaching franchise and that's one of the nice things about that so you don't have to have a large team but at the same time you're trading time for money however you can get a high value ascribed to that time and some of the benefits let's just use that as an example not only do you get trained but you also get this arsenal of curriculum and assessments and other tools that from day one you can go out there and provide value to your clients with and so it helps you not have to recreate the wheel and start from scratch also they would help you with your marketing and that client acquisition piece lead generation client acquisition that's a big piece of what franchises provide from a value standpoint so how do you identify and evaluate potential franchise opportunities for clients yeah great question so there are roughly 4 000 franchise brands in the us alone and when you take out food and you take out lodging hotels are another animal we stay away from yeah yeah that cuts in roughly half and I'd say from there we Whittle it down to roughly 600 or so at any given time that we feel are the stronger ones out there that are in growth mode honestly from there I'd say 10 of those from my experience I feel are the best of the best and those are the ones that I engage my clients with where yeah they've got the franchise or leadership teams with the track records they've been there done that brought up successful franchisees you've got to Roi return model financially that's very attractive in a lot of cases very compelling you've got competitive advantages within your industry and then we've been very blessed the last couple years we actually do more deals than anybody else in North America and so I get to see firsthand what is resonating with different backgrounds all around North America and why is it resonating and so bringing that intelligence and combined with what our clients share with us about their situation what they're looking to do and what the goals of the business are and then we take it a step further down to the the amount the availability within their area sometimes that that can be a limiting factors and once we do all that and put through those filters you're usually looking at roughly 10 opportunities that we would recommend as being those that you should take into consideration and then we take our clients through a process where we expose them to those opportunities eventually they narrow it down to a short list of somewhere between two and four well we make introductions to the brands and I'll mention this the nice thing about our process it's very much like an executive search type model and our clients never pay us a nickel it's entirely free if they were to go directly to a franchise brand or go through us they're paying the same franchise fee so it's a very clean model refunded by the brands very good that's excellent that's a really good point that you shared right there John for being a one percent of all Consultants do you have some sort of mindset questionnaire that you go through with your clients to identify to really drill down to see if that model is going to match their personality at the current time yeah great question we we do have an online Forum that we have them fill out but it's very short and what I found the level of candidates that we work with oftentimes they are more executive level or mid-career and that being said we have clients we've done deals with as young as 24. but I'd say The Sweet Spot of the time is 30s 40s 50s they want a streamlined process they want to get to it they want and a lot of times you don't know what you don't know what you're looking for until it's right there in front of you you have a very streamlined process that gets opportunities in front of them that's really I think as you walk through the process exploring there's a number of steps that the franchisor will take you through over the series of a number of weeks and we come alongside and we've got we'll get on calls with our clients and help them process what they're hearing and think about questions to be asking or we'll bring up funding Partners or a franchise attorney or a recruiter we've got all this in our ecosystem to support them really the magic happens and I think the realization and kind of the wake-up call of hey this is someone that can work or can't work really comes more through having real Commerce conversations with real opportunities getting to ask questions and you learn a lot about yourself and you build this framework in your mind of what it is you're looking for and to your point it's a mindset if you will and some people will realize this isn't for me but quite a few do move forward exactly and where I get my validation is when they come back and they buy their second opportunity or they come back and buy additional locations within that first year that's very common that's what gets us excited that type of alignment I feel is important if someone goes into a franchise seeing the numbers to get excited but they lose that excitement because there was no mindset alignment there was no passion I'm just thinking on those lines when you question them do you see they're getting into long-term or they're just getting into it for the numbers yeah it's the same because you see different mindsets in different backgrounds and there's not necessarily one size but it's all some people want to be passionate about the industry this they step into hey we're passionate pet people we want to be in the pet industry quite a few say hey we're going to default to what's providing the highest return that allows us to keep our day job or a fewest number of employees but another common one I hear but oftentimes it's what's right for that next season and I try to take zero pressure off of people and say hey you're on a journey you'll likely have multiple ventures in the future a lot of our clients have built up a portfolio of multiple businesses what's right for that next season and even if down the road you want to try some your hand of some traditional startups having gone through the franchise process you're going to learn a lot about how to Best in Class build a business okay and so a lot of times they do take that mindset and they start looking at it from different angles but again it's not right for everyone it's not right forever now there's never a perfect time to buy a business I tell people yeah just life doesn't slow down when you're looking at businesses as Abraham Lincoln said the best time to plant a tree is to yesterday second best time is today so you'll be glad that you did in most cases yeah so how is the now perfect you being in the position that you're in John you must come across some phenomenal opportunities and then you have a roster of clients that are looking for opportunities what do you do in that kind of situation it must get tempting for you to take on that opportunity for your own bucket do you still promote it to your client base or do you add it to your portfolio yeah most of the opportunities would be available in a number of different markets and so even if I were to jump on it I'd be essentially taking one market but there are plenty of markets left so I think about a great example here I'll give you two examples very different type of Industries you know two businesses I'm invested in one is a concrete Paving business they do the line striping for parking lots it's a b or B it's a recurring Revenue they fix cracks and potholes and it's out of Canada uh container the business start in Canada enter the US of a great model you know this is a space highly fragmented a lot of Mom and Pops type players if you can come in with a wide glove approach to a blue color industry just makes sense in strong very strong financials around this business but I'm invested up in Minneapolis is where our location is I'm running it somewhat passively I've got other partners that are more active than it but we've had three clients buy into that we had one in South Carolina one in Des Moines Iowa One in Atlanta where I'm based there's another one that I'm sure in the custom orthotics that's one I met with the CEO Friday afternoon we created an investor model where the franchisor will actually run the business on behalf of franchisees so it's a true absentee model that's extremely rare and franchising for their three or four that we work with today and so I've helped them kind of craft that on what it looks like yeah but that's one that that I'm personally buying a few locations down in Florida that they're going to run for me I actually had a client buy the rights to all of Canada in that one as well as some other locations investor license yeah yeah awesome wonderful would be the funding piece of things because they oftentimes they get asked how much is it to get into one of these and certainly if we do laundromat you're talking a million dollars but I'd say most of the placements we're doing when you look at startup costs franchise being a working capital you're somewhere in that 150 to 250 range is where most of them are falling and some clients are using cash some are using an SBA language and so that's essentially including several months of marketing and Personnel cost insurance payments other things but with that and those would be more service based type businesses some people are using a bank loan like an SBA loan somebody using camera using an old retirement plan where you can roll that over once your IRA and purchase the business without the tax implications some will use the HELOC or other means of funding we're seeing a lot of different paths to getting into business but okay I want people to know it is more reasonable investment wise than a lot of people think thank you for sharing that it's an important part if someone comes in and they have 150 000 dollars they can either pick up the real estate investment for passive income or they come to you and say find me a cash cow in your experience what would you advise a person like that yeah and I would say probably the 80 of our clients also own investment real estate so getting back to the mindset do they think the same way and so oftentimes they have a few single family homes or maybe multi-family they come to us and say hey there aren't too many good real estate deals you have these days we're not seeing much and we like the idea of diversifying our portfolio and so in some cases they want businesses they complement their current portfolio where they say hey we're already paying someone else to do these services that could you is there an opportunity to do that and then we do it for our owns and then also do it for others investments in some cases it's more of a again we want someone something that's pretty passive where and I'll just give an example here I've got a client in South Carolina that Nathan I like to use as an example he's built up a portfolio over time of franchise businesses he's 40 years old largest franchise you have two men in a truck operates in probably a dozen markets built up a 30 million dollar business you know he's created an organization to support that and so now every year Nathan comes to me and says hey John what are you seeing out there that will introduce them some opportunities he picks one he puts a young guy or gal from his organization in charge of the business gives them some equity and says hey go make a sprown and he's had tremendous success at these I mean different locations on every deal that we've done within the first 12 months is when you have that long-term thinking there are a lot of options one thing that people oftentimes forget about you're not just buying cash flow and you scale it up and there's work to be done but you're not just buying cash flow you are building a business that's going to have that potential to exit down the road franchises usually trade at a higher multiple than non-franchised in the same industry and I've got a study I can cite to show that but there's a third piece of it too I like to call this a trifecta the third piece would be as a business owner you're able to write off expenses that you couldn't otherwise for instance I pay my kids I've got a new book out they ship the book and they package it I pay the Mage I get the tax write off but then my kids are able to put earned income into the Roth IRAs so it's a way of creating this generational wealth without just the cash flow component but also on the tax strategy side backside what do you feel your innermost superpower is that got you to this point in your life I think ability to change and adapt I'm trying to learn good things every day and when I was a young boy playing baseball I was not I think I'd be enfranchising here someday but when you look at my career it's taking me to India where I've brought up vendors over there on behalf of multinational it's taking me to servings BP of sales for largest clothing company for children in the world Carters and stumbled in a franchising but absolutely love it feel like I'm in my sweet spot and able to help a lot of people now so I think being able to change and learn new things every day is my superpower love it John thank you so much for taking the time to come on our show today shared some wonderful information and if there's anything else happening in your business and that you need our help in just don't hesitate to contact us I appreciate you and audience thank you once again for joining us for another episode with John as information will be in the show notes below if you're looking to increase income or wealth the best way to do is by adding multiple sources of income and that's what John is talking about here there's tremendous opportunity to increase step by step and create that seven figure plus lifestyle that you want as an entrepreneur and the best way is to add multiple sources of income again thank you so much for joining us appreciate you guys appreciate you guys helping us grow without you we wouldn't be growing so appreciate you and John thank you so much foreign [Music]