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Cut the tie to anything holding you back from success. Welcome to the Cut the Tie podcast. Hi. I'm your host, Thomas Helfrich. And in each episode, we bring you real entrepreneurs that really overcame challenges on their journey to become successful. We look at the impact, the moment, how it affected everything in their lives. Follow us on Apple, Spotify, and YouTube. Now let's meet our guest on Cut the Tie podcast.
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Both of you have Never Been Promoted to if you're listening, you won't understand, but we just ran into a show of the YouTube live stream. I thought it was pretty cool looking. It's kinda fun. So, looking for our guest, mister James Hilovsky, who's a franchise expert matching, you know, you and your the the right, you know, business for you. We'll talk about that here shortly. He got he gotta be he's the first kind of new intros. I think I think we should all just take a drink right now and celebrate that moment. Alright. Let's get kinda serious. Not really. We are all about helping entrepreneurs cut ties to stuff holding them back, helping them become entrepreneurs, help them become the best first in themselves, in in life, but also in entrepreneurship. And our guest today is is James Lofsky. He is, Rhe FranDream.com. He's tons of experience matching individuals with their dreams of of business ownership. And, one of the paths you can take in in becoming an entrepreneur is buying a franchise. You know, someone like myself was crazy and did the zero to hero, let's make up all our own things and processes, spend way too much money and figure it out, or you could buy a playbook and a support system and just go do that on a proven business model. I'm gonna tell you, it would have been a lot easier to do the franchise route. Just just lay it out there. So, James, we'll be on here just shortly. In the meantime, listen, I I've said in the intro one one call to action. You know, take a moment, follow on Spotify, Apple. And if you like the YouTube, just hit the subscribe button. We do tons of live shows, lots of great content, and it, helps the channel and the community, get, you know, their voices heard. So let's bring James on here shortly.
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There is James. Oh, here we go. I figured out technology.
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I was having it's not a we thing. I was having technical challenges to start off this day. I've gotten through it. We've powered through it. Together, we did it. Thank you. Yes. Thank you.
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Thank you so much for having me. Of course. No.
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You know, you're you're you're you're in the franchise game, and you, you know, you have a a moment you realized you wanted to do that. But maybe just take a moment here and just kinda just do a brief introduction who you are, and kind of what your company the FranDream. Right? What what do you guys do?
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Yeah. So, what the FranDream does, we we match people. We show people what are out there, business, business professionals and athletes that are there. We show you what's out in the franchise world, what options you have because there's over about 7,000 franchises you could you could look at. I kinda help narrow that down for you, listen to, you know, what your goals are, if you're owner operator, passive model. Find the best model that might fit for you. Show you maybe five to 10 different options, then introduce you to the franchisor, and then stay with you during the whole time to help you make that decision, during that process.
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Is your guide a coach, consultant, advisor? Broker's probably a little bit, I don't like the term because it, you make money, but you make it from the franchise. It doesn't cost a person working with you anything to work with you. They only get knowledge and process in a someone's corner to say, what does this mean? You know, how how do I take that, you know, and to facilitate. That's fair way to describe it.
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%. I couldn't say it better myself.
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You know what? So when it's over, I was gonna take the rest of it. Right. Exactly. Yeah. It's interesting. I talked about this in the intro. Becoming an entrepreneur, you'll own your own business is the American dream. I think the American dream is dead as it was presented to us. So let's work for a company. Let's save for retirement. Let's have these very years. The more men I'm almost 50 now that I I see, you know, the fifteen years ahead of me who retired, they a lot of times they don't make it, past couple years, because it is their mind shuts down. I just I wouldn't be work optional. I I think one of the ideas of of building, with a franchise is it could be a second career. You're building wealth as opposed to trading your time for money. And it's a hell of a lot easier than doing it the way that I did, which is, like, let's create our own brands and and figure out our own sales funnel. Do do you wanna just give you the you know, for anybody who's not you who do maybe it's like, what what's a franchise? What do, you know, what do they mean by that? Do you wanna do the definition of kind of what a franchise is and what isn't and and maybe the high levels of benefits from it? And you just set it up for us a little bit so those who don't know.
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Absolutely. When you think of franchise, I think a lot of people think, well, you know, it's just all restaurants. It's McDonald's. I saw the movie. So it's all restaurants. Well, the franchise is is a is a model, a business model where they've made the mistakes already. They have they have processes in place. They have systems in place. They have a nice playbook. They hand that playbook off to you to where you can take that playbook, follow it, and be successful. So when we talk about different franchising, like I was saying earlier, a lot of people just think, oh, it's just restaurants. Now if you're driving across the down the street and you see a a truck that's a plumber, maybe a HVAC truck that that's out there, that's probably a franchise. Franchising is in every industry and and any any field or trade. It can be a franchise. There's franchises that if you're not a, like a certified plumber or don't have a general contractor's license, you can get into a franchise to be a an HVAC company because you're gonna be running the company, and they'll help you fire hire the technicians that that could that can run the business for you. So a franchise is is really that helping hand, but, also when you think of franchises, you do think the company is gonna help me. But also you have to understand that all the franchisees in the franchise system, they're now gonna be become your teammates because they want you to succeed. So you can go to them for help as well, not only the franchisor. So right in in the franchise world, there's tons of advantages to going with the franchise.
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Well, you make a good point. Right? The other owners who have their own defined territories, who are not gonna infringe on your world, want you to succeed because the ra raising of all tides of the brand helps them. And they also will learn from what's working from you. They'll also share them what doesn't work or does for them. That that support community by itself is something you don't get when you go do it by yourself. You you're you're guessing a lot. What you're describing isn't a guess. It's an educated decision based on data of others where you can, you know and, honestly, with AI, you you could create models and ask to to say, why does that work in this city and not this one? And it can come up with ideas and hypothesis. So there's probably a lot of ways to to look at the data behind a franchise why but, anyway, getting in the weeds a bit, but the support is there. When you work so I think you understand how the franchise consultant, or adviser works. You you are part of a group. There are there are a few out there. Which group are you do you are you part of?
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The FBA Franchise Brokers Association.
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So so the reason that's important for listening is because they have a portfolio of companies they've vetted. Ones that they are legit, they follow the regulations, there's a bunch of steps you need to go through when you become a friend you know, to buy a franchise. There's a bunch of steps that the franchise consultant needs to take you through and sign offs, and the people selling them have to follow. So if you're if you're trying to buy a franchise and they don't have a very defined system, I think it's a red flag. Fair enough? Fair enough. Yep. Absolutely. I've seen a few. They're trying, but they're like, where's your FPD? And, you know what I mean? So, the point is can you walk us through high level though the system? Because being part when you have a franchise consultant as part of a bigger group, you have to be accepted into that group. And and then you have access to a portfolio of of stuff. So walk through maybe someone who's looking for a franchise, what the system or the steps should be you should be following. And if you're not, you should ask a red flag. So will you take that one so people are aware of what you should be doing?
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Yeah. Absolutely. Yeah. I mean, definitely, when you're when you're in the group, you have access. So those franchises, anything in my system has been vetted. We can go out that system, but I will have to do some research and vet that franchise as well. But the the whole, process should be when when we I show you different options that are out there. The process would be, hey, James. Hey. I really love this particular franchise. Then it's like, okay. Let me introduce you to the franchise or they're going to reach out to you. So then what the franchisor should do, they'll give you an introduction call, give you a a deeper dive. We're just doing the airplane flyover. They're gonna give you a deeper dive of, hey. Here's our system. Here's our marketing. Here's how we're gonna support you. Then they should send you an FDD, which is a franchise disclosure document. In that document, it it tells you what the costs are gonna be, what the fees are gonna be, how they're gonna support you. So having that document is very important to review, and you need to sign for that because you need to have fourteen days to review that document before you can sign anything. So it's not like you can go in and put into the paper. You have to have fourteen days to review that. Then what you should be doing is having other meetings, meeting different people, maybe the head of marketing, just taking more of a deeper dive. And the main thing that I can tell you is that you should go in the when you get that FDD, you'll have franchisees that you can connect with that are in the system, and that's the most important thing. Because you wanna call them and ask, hey. Would you do this again? When did you get your your money back on this? What kind of support do you get? What is the support? To me, the most important thing on a franchise is the support because they could tell you all you want about how much you can make, but it's the support you're getting from your business partner because, you know, business is business. The franchisor is not gonna run your business. They're gonna give you the playbook. The to be successful in the business, it's more about your your what you're putting into it, the people you're putting into place, and you're running the business.
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So that the making the money and that, that's still up to you. Yeah. But you wanna have the franchisor that's gonna give you the best support to do that. And I I know you have just a few more steps to come after this, but I wanted to maybe we'll continue this here after you've you've done your discovery period, during the first two weeks to get stuff signed. You're learning. You know, do you recommend meeting with, like, a super successful one on one that's struggling?
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Yeah. I would say super successful, one that's struggling. And then also, I would do one that's fairly close to you, and and or something that's like a demographic, but you'll never tell them you're looking at buying right by them because they might go, oh, maybe I should buy that territory. So
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so it's not They're under their feet. I've been thinking about doing it, so let me do it now. So yeah. That's that's a good point. If there's someone who's already bought a franchise and they're near you, and you say, hey. I'm like eight miles from you and I'm thinking about buying one. They they they will approve the other person first. A %. Yes. If they're already vetted and they already own one and they have a small and communal, franchise fee to go grab that territory. So be strategic people. But but you have to ask also the question, why hasn't that person bought that territory, anyway? So there's there's things there. And I have the example, by the way, just to point this out. We were looking at a a franchise, and I I started with the the least successful person who's been doing it for eighteen months. And the guy was had a similar profile in a different market completely, but he was busy. His he was like, this is something that, you know, you can't say you're gonna be absentee. That's not allowed. Right? You you could be semi absentee or semi passive. And I will keep putting time into the little franchise, but I do need it to be kind of running itself because I have other things. He's like, that was my idea. He's like, what I found was unless you're really out there selling, marketing, day to day, trying to get these old boys clubs, trying to get all the stuff you need to do, you're gonna best break even. He's like, because I can't I cannot commit enough time to it because ads don't do enough. Right? The com you need to be commercial. You have and you don't like, in this case, it was like, we had the wrong size things for the commercial. The point being is it was a reality check of what I thought I couldn't do versus you like, yeah, but when you get into it, your custom position is too high. You know, it's not repeat, so it's hard to predict it. It was like it was it's like we backed out because I'm like, alright. I won't have time to commit to it. So where I'm going with that is I found that discovery. I think we about dodged someone with a bullet on that. And I and we slow the roll, but what I found was for one of us, my wife and I do this, we have someone's gotta be a % in. Is your take? At least one person has to be a % in on us. Would you agree with that statement?
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I would say, typically, yes. You one person's gotta be a start list to get it going where it's a like, to get it off the ground and established in a in the black kind of business. Yeah. I would say to to roll it to roll it up, one person probably has to be able to be in it 100% of the time. Absolutely. And then you could kind of back off. Or if you have a really great team already in place and you really trust that manager, that manager could get it off the off the ground for you. But that that is really probably someone that you know and you vetted already before, not someone that you're taking a chance on and hiring. I I probably wouldn't put that much pressure on them.
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Right. Well and and I think the point of that is when you go down this path and you're doing discovery, I think it's one of the questions you need to ask also is not, you know, how much time do you really put into this? And and what you discover is, are they working smarter and following a playbook? Are they working everything? You think, man, they're really they're following it. They're putting eighty hours a week in and it's still not working. I to me, it might be a red flag. I can only put twenty in. We're not doing that great with it. Okay. Maybe you know, so you you can start assessing qualitative data. Let's say it that way. And with the quantitative piece, so that's subjective versus hard fact and be like, alright. Well, I did this. I think I can make it work. So I think that's an important piece. Alright. You've done discovery day. You've signed the FDD. What happens next?
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Done discovery. So then, actually, you you've you've had your introduction call. You've done the FDD. You're you're dig taking a deeper dive into the, different departments that the franchise has. You've called your franchisee. You've done validations, what's called validation. You're very excited with validation. Then you go to a discovery day, which could be done virtually, could be done in person. I I would always recommend going to see a site or a a a territory that that's out there. I would I would say go go visit a location, that that that's going. And then in that, in that discovery day process would be you're meeting everybody. Okay. We approve you. You approve me. Because at the end of the day, the franchise has to award you a franchise. They can say no. And I've had it happen to a couple clients where they go, you know what? It's just not a fit. So we're we're not gonna offer them a franchise. So always make sure that you are, treating looking at buying a franchise much like a job interview of, hey. I wanna impress them because they're looking to become partners with you. And the worst thing for a franchisor to do is have a bad franchisee. So it it is, you know, it's it's it's a it's a double in street that we're looking for the best possible fit on both sides.
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Oh, right. You did. You don't want a local franchisee to get sued, make national news, which hurts everybody. Like, that that would be bad. Okay. So you take through that and then there's discovery and they they they the franchise or and there's a finance component too. That's done after is it done in parallel?
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It's kind of done in parallel, like, during signing because once once you've done that discovery day and you both say, okay. Let's come up to agreement. Then I like to say, then it is time to maybe negotiate something on your behalf of, hey. Let's do no franchise fees for six months, the royalties.
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How about That's a good stuff. I thought that stuff was set in stone. Every franchisee I'm sorry. Every franchise has to do exactly the same. Is that is that not true? That's not true. You could you can you can negotiate, some of the things that that are out there. You can do, it could be paid over time so we get better cash flow. Is this
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It it could could be. Yes. Yeah. It could be paid over time, get better cash flow. I I would always say, hey. Can I have no royalties for the first six months?
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And and Six months of revenue. Revenue shift.
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So you're like, that I mean, the and and I just tell my candidates, the worst they can say is no.
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Yeah. But that's interesting. I I thought for sure you couldn't I'd be like, I look. I'm learning something here. So everyone listen to it out here. You have things you I know you can negotiate territory size. That's one thing. Yeah. Because so it's either by square miles or people or some version of that. Is that correct? Since so it's like or the whole city. You can negotiate multiple territories with delayed franchise payments. I've told them you can't do that. And but I I guess you can or it's just not. I can tell you about that a bit because you buy multiple territories. That's really resource scaling. Yeah. So so the franchise fee typically is a a one time fee paid to the franchise or at time assigning.
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That's typically right now on average about 50,000. So that is paid to secure your territory when you sign. Now if you say, hey. I wanna have two or three territories, then you're gonna negotiate that franchise fee. The one franchise fee, that's 50,000. You you typically cannot move off that at all. But if you go, hey. If I buy two territories, can I get in all in for a franchise fee of 80,000? And they might do no prepay. Yeah. If you if you free yeah. Because you gotta prepay that. Then they'll go well, it's gotta be at least 90.
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So you can negotiate once you get into multi That's their they want that revenue in, which guarantees you know, the cost of sales for the next territory is done. Correct. Correct. Yeah. And when and from the consultancy, are you paid on how many territories they buy or just that they buy anything?
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Just that they buy any it it it kinda varies. Some say, hey. If you do a multiple deal, you could you you get a little bit more. And so it it it kinda varies on the franchise on that regard. I I would say if you're into a franchise system and you're and you're buying one territory and you have the means to buy the second one and think at some point you would expand, I would probably really recommend looking at doing that because you get that discounted franchise fee, typically. And then you also have protected, you know, a surrounding area. And then you also could negotiate, like, if it's a brick and mortar business, like, maybe it's dog grooming, then you you could go, okay. That second territory that I have, that second unit, I wanna have about eighteen months to build that out. So in eighteen months, I'll have that one open. So negotiate timeline on when that second territory or unit will be open.
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I love it. I didn't know that. And you'd like to the worst thing they can say is no. What what's your kind of tape? Okay. So let me get to that. So we're gonna come back to the types of franchise here. So you go through that and secure financing. The the the financing world is tricky. You can do it with cash. You can do an SBA loan and pay for your nose and testicles and and or overused to do that. Sorry. Interest rates are high. So it's like you look at it like, oh, credit card. Or there's a thing called, ROBS. So this is where you can use a four zero one k to potentially fund your your, franchise. Can you maybe do a one, two, three on what those are and end with your explanation of how, like, the because I think a lot of people don't realize they can use a full and get a fund, it it through a phase. So could you once again, take that one since you're the expert?
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Yeah. So well, one is so a lot of, typically, you could do it just pay it for cash on hand. Some people do liquidate stocks or sell some, real estate investment just to just to pay pay it all off in in in full. The other thing that you can do is, like you said, a $4.00 1 k loan. You need about 20% down. If it's a $2,200,000, dollar invest 200 k investment, you're looking at about, 40 k that they wanna see down in in a business account. And then the $4.00 1 rollover four zero one k rollover is a really good one where you can use your four zero one k funds that you could take out a loan on and and roll that into. So that is a very popular one as well. And what I typically do on that, I typically send the send my, candidates to a lender that that walks them and takes them a deeper dive on on how to do that. The other thing that we haven't spoken about that you can do as well is sometimes you can do a HELOC on on your home where you just take equity out of your home to do it as well.
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That's fantastic. So, the HELOC, you know, is another example of, if you're working somewhere and you have w two income to establish the HELOC while you still have income to do it, because once you leave, you won't be able to get a HELOC, just to be clear. Get your finances and things like that in order ahead of time. Using your four zero one k requires you to set up an LLC and you do this I think it would be probably a tax attorney. What who's the right person to contact to work through how to do that correctly?
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It would just be any any, SBA lender helps you can help you, facilitate that. Because they Oh, wow. That yeah. With the robs, they help you with the LLC. They they help you form all of that and and get that flowing. That when you're talking on your four zero one k rollover to get access to those funds, probably, typically, thirty days or less. It's pretty quick process. SBA loan, yeah, two to three months.
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So Well, that that was the question I was gonna have for you too. So let's say you, you know, the reason you would use your four zero one k, it makes whatever seven to 10% of the market. Your idea behind it is you come in with cash, and you then you have ability to turn a company into a cash flow machine faster by not having an SBA loan that potentially be several tens of thousands even to pay back to the size of your loan. But it does mean you can't do both. Doesn't mean you couldn't take cash from one thing, do a small s smaller SBA loan to give you additional operating cash because that's the one thing that will kill a franchise fast any business faster than anything else is zero cash.
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Exactly. Yes.
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So, actually, on that note, does the franchise that you're trying to buy typically say, listen, you really need a minimum of this cash reserves recommended this?
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Yes. And that that that is that is in the deep dive of, hey. In that FDD, you will get what's called the item seven of, here's the money you're gonna need. And and some of it some of it is a big gap, like, it's 200,000 to 280,000. But in the f d FDD, the item seven, it breaks down all the items of kinda where where that would go, where you might need extra money. Because it's gonna cost more to build out in California than, you know, maybe Missouri. So you're you're gonna have some fluctuation there. But yeah. Yeah. Definitely is, that's a talking point. Because like you said, the last thing the franchisor wants is, undercapitalized, franchisee. So they wanna make sure that you have the funds and you're gonna be able to sustain yourself. Typically, in that FDD, on that item seven, a lot of times included is six months runway of cash.
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Yeah. And what I was thinking, like, too, like, do the franchise ors ever, you know, you're getting through it, you're set up, you're five minutes, and you're like, this sounds like three months short. Will the franchise or, yeah, to the right terms here, will they sometimes say, hey. Listen. We'll do the loan on you and but we'll collect revenue back until we get paid off.
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Typically not. No. They typically won't do that. They they typically wanna make sure that you're, able to be able to fund this and and, be that on your own. The the only time really some franchisors, they will go they will run a a a special where they'll say, hey. Our typical franchise fee is $50,000. What we're gonna do for this limited time, we're going to not 40% off our franchise fee. So so and then what we're gonna do to make it a little bit easier to get into this is we're going to defer that cost of, let's say, now it's let's just say 30 20 thousand, make it simple math, $20,000. So we're gonna give we're gonna give you two years to pay off that franchise fee, and we're gonna do it at interest fee. So it's basically, you know, a thousand dollars a a a month that you're paying for the franchise fee. So you don't have that big $50,000 yet. So sometimes they will do that.
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Operating capital. That's great. Alright. So you can do that financing. It's all secure then then you're I've seen you you usually have just like a in person day or something
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with the owners and you're signing at that point. Right? Like, we're doing this. Yes. Absolutely. We're signing. We're gonna do this. They've approved us. We've approved him. We we've negotiated everything. We're signing, and then it's, okay. Who's going to training?
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Yeah. We'll train it. So training comes next. Usually, you know, as part of your business model, you're gonna have to pay for that. You do it. You get all your hardware. You get, you know, cyclo whatever it is. You just, you know, trucks, it depends what you're buying. You're now in the training and now you're you're running your business. So, let's talk a little bit about types of different. There's there's services, there's brick and mortar. Go through the options. This is like high level, and I'd like to get your take on a couple things.
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Yeah. Definitely. There's there's brick and mortar, which is, you know, when you have the a lease and and and you have a office space, so it could be a brick and mortar where it's could be a retail brick and mortar. It could be brick and mortar of a office space to where you're have the staff has to meet up, like maybe you are in a house cleaning business. You need a small office where everyone can meet, grab supplies, and go out. So there's brick and mortar. There's options to where it could be from home where you maybe, where where most of the business is conducted from from your home office, that that could be done to where maybe it's a window washing company and you have you have a couple trucks that, your employees have, but you that could be a home based business that's that's ran and and have your territory. And then there also are some franchises where you can be home based and you that that's where you're running everything. That you're you're basically maybe just making calls and and and doing things for your business, like, an example that would be a business business judgment business to where a court's awarded a a a a claim and that someone a judgment of $10,000 and someone has to grab that. So your business would be to go get that $10,000, get a percentage of that for your clients. And that could be done from right from home, and that's that's all you need is just a computer and and and yourself.
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Is that a, like, a collection business, basically?
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Basically, it is a quote, unquote collection business, but it is it's court court is awarded a judgment, and then you're there behind the scenes helping that client collect that. But you're you're not the one that's, you know, repoing
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assets or not be
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repoing, unfortunately. You're not being repo, man. You're doing it all from from, you you know, you're making directions on on what assets to seize all from your home. It's pretty interesting franchise, really. And and that could be done for clients throughout The US.
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I feel like that one, could end in you getting murdered. I'm pretty sure what happened. Oh, because, like, oh, we're gonna come take little Johnny's toys. You guys very much so familiarized with the Fair Debt Collection Act before you take that one off. See, you yourself don't get sued for, you know. You know, what's your take on Chick fil A? Chick fil A is, you know, I mean, my background was in the restaurant business. So Actually, I should probably say, you have a big the reason I'm asking is I I know a little bit about Chick fil A at the bottle, and I know you're a restaurant guy. I should've I should've set that up. But he has lots of experience in the restaurant business. So you can if you'd like to share what your background was, please, before you can expect that to be able to context.
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Sure. Sure. So I I I have a lot of experience in the restaurant business. I was in corporate America in the restaurant side for twenty twenty plus years, and then I went from, that to a company that was just starting out, and I built that from one to a hundred of supporting their franchise side. Then the largest franchisee said, hey. Partner up with me. And that's so I was a franchisee with them, and we had our we had our restaurants, then we did a an ice cream franchise, then we did our own, cookie dough franchise in our own coffee shop. So lot of experience in the restaurant world. And one thing when I get a client that doesn't have any restaurant experience, they'll go, how about the restaurants? And I'd say, well, it's the highest failure rate, and it's the most expensive you can possibly get to know, most restaurants are gonna be at least 700 k to a million dollars, and it's gonna be probably a long game that you're gonna get your money back. So it's it's it's gonna be a little bit longer game, and I've been in this all my life, and I had sites because it's gonna come down to site selection. I had sites that I thought was gonna be $2,000,000 plus site, and it didn't do that. And I've had sites that I said, hey. The rent's great. We're gonna make a little bit of money off that. It was one of our busiest restaurants. So it it is a very tough business and labor costs keep going up and margins keep shrinking, but that's for another day and all that. But,
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you know But when you get Chick fil A, it's it's, I'm not gonna give my opinion on it, but, like, what is your take on that as a friend? Like, just as a franchise? Well, I wouldn't re I really wouldn't call it franchise. I would call it If you can call it that. I'm leading the witness. We didn't by the way, they were listening. We did not have this conversation ahead of time. It's gonna be very obvious why I said it's not really a franchise. But please go ahead. Absolutely. Yeah.
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It it is a program that is very tough to get into. So you have to prove yourself as as a as a manager, entrepreneur, and then you are, you know, invited to be a, oh, okay. Like, they probably call it a owner. Right? Owner operator to where, you now share on the profit. So if you could get into it, it's a it's a very good model, but just know that you're going to be it's your job and you're gonna be married to that, that business. And, you know, you don't have anything to sell. You don't have an asset. When you're done, you're done with it. So, it's very tough to get into. Could be lucrative, but you're gonna be, you know, slinging chicken for you know, you're you're you're gonna be in the trenches every day.
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So that's that's the point I wanna point out. So there are businesses out there that are jobs. You're buying a job. In particular, that one, it is incredibly hard to get to. It looks like you make a fortune. The truth is I think the top guys make maybe $2.50, half a million a year. You bought a job that you need to be at on-site, I believe, at least five days, maybe not six days a week. And you basically have to get permission to take vacation from your own business. So if you want a job that you're in the community, and I I would say that. I don't know if, Ace Hardware's are kind of the same way, but I think there's a lot of businesses out there that you buy that look great, but you're you're in it. You're you're not on it. You're not working on that business ever. You are in it executing, and you don't even own it. So you can be replaced and you will be when you die. And go see heaven and Jesus because that's what Chipotle is all about. So I don't buy a Chick fil A. If you like, if you wanna buy Chick fil A.
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Right. Exactly. There you go. Exactly. % agree with you. Tell totally.
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So what do you like? I I know okay. Listen. So franchise consultants can't give you their opinions on revenue, what it could do, what it should do. You do you do you do you do you read, you know, say section seven FDD, check it out. Can't you can't provide a for a pro form a, which is an Excel sheet that does a predictive model. You certainly can ask franchise owners for them. I would do that. But what can you do to help steer somebody from, let's say, services versus brick and mortar? What are what are the factors of of of those type of companies and maybe who gets into it? Maybe through investment, through investment, the capital available personality. Can can you take that of where you direct people through to get them lined up so they can be successful?
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Yeah. Absolutely. Well, I I can tell you basically what an average unit does if the franchisor has published that. And or if it's on marketing materials, I will tell you this and and I will give you, you know, my opinion on that for sure. So but, yeah, definitely, when you're when you're looking at franchise and you go, you know, your questions, brick and mortar versus non brick and mortar and all that. Well, you know, it all really depends before you can really even answer that question is, what are you looking for in the business? Are you looking to keep your job and have a a semi absentee, which I would tell you, you know, you're gonna be at least twenty hours into this, and you're gonna have to have a really good manager. But at first, I would recommend doing it full time. Or are you looking to be owner operator where you're gonna be working, you know, on and in your business? So that that's kind of a a big factor too. And then what are your goals? I I have a NFL football player that's a client. He's, you know, getting towards the end of his career, and he's like, you know, I I wanna make, I'd like to make about $500,000, you know, in in the profit in in my franchise. So the goal really for him was we found a a model that he loves. It's a gym, which which is great. And we're like, okay. To make this, I think we're looking that we're gonna have to do multi unit, that we're we're we're gonna have to do that to get you to where you wanna be. So we're looking at probably doing three gyms. Okay. Perfect. That's what what the road that we're thinking. Another client was he was in corporate America. He was looking at dog grooming that and and he was like, you know, I want to have generational wealth. I want to have, you know, maybe three, five, and and build up from there, but I wanna start with three. And I'm gonna have my my wife and daughter gonna run the first one. And then I would say, once I get the second one open, I'm gonna transition from my job into into the business. So it's different ways and and and strategy that you come up with of what are you looking to get out of the business. So that that is really the main thing of coming up.
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Well, that and if you only have you only have a balance sheet or your couples will say sharing about doing 250,000 or 300, whatever it is, and you do have a balance sheet that could do a million, you're not gonna be eligible for some things, nor should you try to go push that probably. You're adding a lot of risk. You can do it, but I'd be like it's your job to say that's really pushing the balance sheet, guys. Like, this one's good or and it doesn't mean, by the way, if you buy something that's 200,000, it means it's gonna be any more profitable money than the $2,000,000 1 like theirs. For example, you could buy, essential services plumbing as you described. That shit's always needed. I think that. Exactly. We always need plumbing. Like, if unless you're looking a little handy guy like me, but there's parts of plumbing in my eye. I'm not sure why that vacuum has just happened in my drawer. I have no idea how to fix that. Guess who's coming out? Plumber. He's gonna figure it out because he knows how to do that. He does he knows how to use a clean up correctly to figure out shit. He sure does. Anyway, the point is your investment amount matters. Also, your personality. Right? So if you can't on your Facebook say, I own a Johnny on the Spot franchise. I pick up shit from Apple, Lily. You can custom go ahead and tell them that again. You're you're probably not gonna fit that. It's not gonna work as well of I love my Pilates studio. I'm so proud that I have this beautiful thing. Can you talk about that kind of maybe psychological it it related to success of the franchise or if it's important. Well, maybe maybe I'll just roll, you know, off on that, but it doesn't matter.
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And is it gonna be a factor? I I definitely think it does matter because you you wanna do something that you enjoy, but fits your personality too. Like you're saying, you gotta be able to promote to if it's a if especially if it's a business, you gotta promote it. You've gotta be able to talk about it and promote it. So you have to have a certain type of personality for that. But I will caution and say, I always kinda tell a candidate that this, you know, we're gonna look at options that you are very interested in, and that's what I wanna provide for you. And I will find something in that area that I think not only fits your personality, fits your interest, but I also want you to be open minded and maybe look at this thing, over here that maybe you've never thought about opening up dog grooming, but, you know, the margins are 30 to 40% on this. Let's think about that. So I definitely wanna give options, but I also say, you know, the last thing I want you to do, I I know you you have a particular interest in this area the last thing I want you to do is have a hobby. You know you're in to get a business, I want you to have a business that's going to have really strong margins. So I would say there's about 400, maybe 500 franchises in my inventory. There's some that I don't even ever consider showing because I don't feel they have a strong enough margin for their investment level to even show a candidate. I I don't care what their interest is. At at the end of the day, if they still say, yes, that's what I want, okay, I'll go down that rabbit hole with you. But I I don't want you in a hobby, I want you in a business, something that's going to achieve your goals that you've set out to set out to do.
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I like that. And I, I mean, my wife are interested in how how do you get, how do you handle this scenario? And I mean, I'm asking for a friend, where one person is the crazy entrepreneur that talks about entrepreneurship and loves the business model and has been very thankful his wife's had a steady w two jump to pay for things while he built it. Not saying who the friend is, but he's a cool guy with a nice tie. Then you have a wife who's sick of possibly reporting to people and working for people, but is really having a tough time risking money. And the security that a w two does and the risk involved with it. When you see this kind of dilemma that one wants to or it just can't get over the risk comp, do you influence that at all or do you just or do you how do you how do you how do you help that couple?
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Well, I would say through my experience, when you ask any entrepreneur who has left a corporate job, when you ask them, would you do it again or what would there be a regret? I would say the majority of them would say, I wish I would have done this sooner. And You become a franchise owner. So yeah. To to become I wish I would have done this sooner and left corporate America because, you know, I left right at the time where, you know, they they were cutting staff and and I just knew I was gonna be the next one. You know, like like you said at the top of the top of your top of the show, you know, the the job is, you know, that is the no longer do you work for a company, you have a pension, you had a great forty year career. That's just not out there. I I think the reality of it and what I will tell people in that position, if you've been in your job twenty years, you know, if you're getting up there in age, I would say there's no loyalty in business anymore. That business will turn their back on you in a in a New York minute and replace you with someone. Once they once you've hit that threshold of salary, they're gonna wanna cut some costs. I guarantee you they'll figure out a way to eliminate your position or, you know, find a way that, you know, that you're going to be, you know, let go. And I would also say the other thing is, you know, you've bet and made other a company a lot of money. You know, it's time to bet on yourself. Do I have a guarantee that you're gonna make it? I don't have a guarantee of that. No. But I do know if you're hardworking, you're gonna put effort into it, you have a great franchise, we find you a fit, and we find you a franchise that gives you super strong support, you have a lot going for you. Probably more than, you know, yes, it's gonna take a while to get used to not having that, you know, paycheck every two weeks, but, at some point in in your job, I will also ask you this, you're capped. You're capped at what you can make. In business, it's it's unlimited. You know, it's it's unlimited. If if you're looking at, you know, buying a new car, in business you could go, okay, if if this is a good month, that's a good month. Then, you know, we'll pay cash for that car. If you're in running paycheck to paycheck and having a having a paycheck, you know, you're going, yeah, we're gonna take a loan out and get that car and I'm gonna scrimp to get the the down payment for the car.
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Yeah. And I I think part of what you do when you fund your own company though too, you build in how to pay yourself during that time. That's part of the. Yeah. So, yes, you're borrowing money from yourself to pay yourself. Are you gonna like triple tax that once you do that? I don't even know. Probably not. Actually, using a four zero one k that was deferred, you probably are just paying regular income tax on it at this point. Anyway, you can you can ease it, but no one's getting into it to just, you know, be broken, be even. Right? You're you're into it to go like, I I I explained that a lot. Like, you know, if you're making a hundred and $20,000 a year, most of the franchises you're gonna try to buy will should net you at least 10 k a month when it's up and going at least. But one location, the difference is now you can go to a second location and another location potentially or to a different franchise altogether. So I I think the point is the the risk piece that I think a lot of people have a tough time getting around it for the first eighteen months. Yeah. It's getting it up and going. It's the work because it's an unknown. It's a it's a dark room that you've never entered. You're asked being asked to walk across it and go find the door. The difference is you have someone with a light and a guide that says, look out for that couch. You're gonna trip your foot here. We're gonna turn the lights on for you. And I think I think that's an important piece for the risk to get past it. There are people though who fail and there are ones that don't. Is it the person who's bought it and their work ethic? Is it a franchise? What what usually is the reason do you see people don't do well or really it doesn't work at all and it becomes a giant loss? Or is it just food industry?
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Typically, the franchisees that I've seen that that that do fail, the majority are not following the system, just, you know, want to complain about the way the franchise is running things, and one that they, are completely hands off when they needed to be hands on. They're not paying any attention to the business and or they are nickel and diming the business when they should be, you know, putting money in to support it, but they just don't have that. They just have the short sight of I I I can't do this. I can't market like this. I can't afford to market. And, you know, that that's all shortsightedness of, you know, you you really need to put money into you know, make some money. So you need to invest in your business and keep investing in your business. And other times too that I've seen where people fail is that they fail and they are just going down on the on the ship, and they're not asking from help. It could be either the franchisees or the franchisor. So it it is a combination of factors, of of why you fail. And then sometimes it's just the business was just not gonna work in this area. But it's typically more of there's many things you can do to, you know, get yourself out of that rep. And
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and let me pivot gears a little bit. So I I I had this conversation with my wife today, and and and the business I'm picking is not for any other reason just than than I just it's a relative example. So here here it is. Pilates studio. My wife had gone to it for a long time two two and a half some years, paid her money, used it. And I look at it, I go, why do I need a franchise for that? And that's why because, like, I can look at any of the one, two, three, four studios. They have x amount of reformers and so much square footage. That's an easy calculation. They have some kind of vibe look, certainly peaceful, intense, whatever. Some have software, some don't. So, but you need a scheduler, you need a way to collect payments, and probably a way to market to the bare minimum. So you go high level, probably get solve all three of those to be fair as well. So, you know, they have little side things, cooler, socks, nice bathrooms. So they have a build out, they have a space. Doesn't actually have to be super located, just needs to be generally an area that feels safe with no parking. Some of the areas actually have terrible parking to be fair. Why do I need to franchise that?
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Well, that that's kind of sometimes a common question and I would say, okay. It does look easy. What you're gonna see some hiccups there, and you're gonna go down some rabbit holes that you probably didn't even think of, where in a franchise, you're going to have that support. So So remember, franchise is not only giving you that beginning support of that training. They're gonna give you ongoing support. In the moment anything happens, you're gonna raise your hand, and they're going to be able to come out and help fix that. Also, you have that network of franchisees. We talked about teamwork of gonna go, yeah. Do this. Do that. Oh, cut your cost this way. Oh, I use this. Or if you're in a franchise system, you're getting better pricing and cut rates for vendors because they buy in bulk, especially in HVAC. Your HVAC costs are a lot less being in a franchise than out on your own. So there there's a lot of different things as well as when you talk about marketing, if your marketing department's already done, they they already have designed the marketing. They have several marketing programs that you have to at your leisure of depending on what what marketing plan do they wanna run. They'll come up with that for you. They'll come up with a business plan if with your business coach of of, hey. The the I wanna, you know, do this in this quarter, and they help you achieve those goals. So, you know, I I would say some people might have that entrepreneur spirit that say, I could do it myself. I don't need those royalties, and, you know, more power to it. I did it both ways. And we did our own coffee shop, like I told you. We did our own, cookie dough franchise. Should should we have done a franchise? I would say in in in them, I wish we would have done a franchise instead of done it on our own. It would just would have been much, much more successful because in in the it's harder to break into something when you're not a franchise and you're mom and pop. You're looked on now as, oh, that's a mom and pop. You know? And and not saying a mom and pop can't become big, but it is very hard to crack that nut of of I'm just a mom and pop. Right. Also, your kids are gonna benefit when they're like, why don't we franchise this? Right. Exactly. And so which is fine. I mean,
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you know, there's just a lot of factors. And I think that the point is, as somebody who's built their own brand and taken it, I could look at the marketing, like, I could run ads. I think I could figure out that. There's a lot that you don't know that you run into. And, yes, you may you're gonna overprice pay for something, but you might save on others. I think I could get build out done cheaper, but the truth is the corporate place does it anyway. They have their firms. You build it to release and anyway. But you have a lot of unknown costs of, like, well, do you have your architectural plans? Do you have this? How do you do permitting? Like, you you like, there's a lot of stuff in the setup that that franchise fee will get you to revenue faster and also help you support later, with here's some new updated marketing techniques, keywords that seem to be like, I think the marketing plan of a franchise is probably one of those valuable playbooks you can get. And they and I think one of the things I think people need to look for, and I know that I have this marketing kind of background, but it is it needs to be someone needs to be attended to it at the franchise corporate level. Yep. Because the the same one that worked five years ago won't work now.
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%.
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It won't. Like, you just you'd like, hey. You need content. You need these kind of pictures. There's a there's a whole different play than just straight ads. And by the way, oh, yeah. This. Anyway, so I I think that's a big piece too as people look into this. Just conscious of time too. I know we're over just a little bit here. Who should get a hold of you? By the way, thank you so much. This I think anybody who's listening to this should have a really good perspective of franchising also that you should be a guy that they may wanna reach out to to do this. How do they do that? Who should do that?
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Yeah. And I'd say anybody who's interested in looking at the business world and starting a business, let's just have a have a talk. And and it's, just like we've we've had this conversation, it's not a used car talk of, hey. Yeah. Franchising for you. Do this. Do that. We just kinda have a chat. And if it makes sense to go forward and look at franchises and and and then explore that possibility with franchisors, absolutely. Let's, let's let's do that. So, yeah, just the Rhe FranDream.com, that's my website, or you can email me at james at the FranDream, and, I would love to have a conversation with you and talk with you.
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Awesome. Hey. Well, thank you so much, Dave. I'm gonna put you in the, in the I think it used to be pairing. It's kind of like a magenta color room now. We're gonna put you in the magenta color room now. Perfect. Thank you so much for for spending a few moments with me today. Thank you so much. I really had a great time. Thank you for having me. Appreciate it. Let listen. Get a hold, Jamie. The FranJerinkum The FranDream.com. That's  the frandreamdot com. And and if you're interested, you know, can reach out and see what you know, it doesn't cost anything to talk to him, and he can, line you up or shoot you straight or or get you on your way to to building wealth for yourself. I really appreciate his time and everybody else who's listened and, watched. I have one one small action. Right? Just hit the follow button on your, podcast player, Apple, Spotify. And if you listen to YouTube or watch, I should say, hit subscribe. Thank you so much. Get out there. Go unleash your entrepreneur. Stop making excuses, cut ties, things holding you back, and and just move
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forward. Thank you for joining us on this episode of Cut the Tie. Let's stay connected. Please hit that follow button on Apple, Spotify, or YouTube. And if you're ready to advance your entrepreneurial journey even further, join our free community at facebook.com/groups/cutthetie. Cut the tie to everything holding you back from success.