The Franchise Gold Rush: How to Build Wealth, Cash Flow, and Real Estate Through Franzy | Alex Smereczniak

What is up, the Science of Flipping family? Welcome back to another incredible episode. This guest is phenomenal. He's 33 years old. He's already exited two businesses on his third, what I think, swan song outro. And if you are in business, this is gonna be an episode that you want to listen to because Franzi.com is taking over. Alex Smurznak is here. All right, dude, well, excited to have you here. You know, you're 33, as I was just giving you a little bit of a hard time. You've already built this incredible resume with two exits. You're working on a third. Franzi.com is phenomenal. But let's jump into Franzi to start. What is Franzi? What's your mission? What are you thinking about moving forward in the next three to five years with it? Yeah, so our mission with Franzi is to help enable the next one million entrepreneurs starting in the U.S. And the way that we're going to do that is through democratizing access to ownership in businesses, starting with franchising. So think of Franzi as the Zillow for buying and selling small businesses. So you have all this data, 4,000 brands, investment costs, average revenue. Who's the executive team behind it? What territories are available? Does this match my risk tolerance? All the stuff that you would need to do, just like Zillow has square footage, bedroom, school district. Franzi has that for small business. All at your fingertips. Don't have to talk to a broker unless you want to. Don't have to commit to anything unless you want to. It's all just the data and the information that you need and the support that you need to get lending and finding the right brand. No kidding. So when you think like mergers and acquisitions is such a big topic right now. I've had more than a handful of people here as guests with that. Does this play into that realm of merger and acquisitions? Is this just the franchise model? How are we looking at Franzi.com? Yep. So for now, it's just de novo units or territory. So new net new development of, you know, a Jimmy John's or a gutter brothers franchise, a service business where you don't need retail. You would buy the territory for Fort Lauderdale or for Miami and then go develop that out and start it from scratch. Yeah. We are starting to work towards a resale marketplace where Justin could come on and also buy the existing Jimmy John's franchisee in Miami or the existing gutter brothers territory. Yeah. Depending on, you know, where you want to jump in. Some people like an existing business. other people want to have their stamp on it and build it up from from scratch with the franchisor so we are talking to any and all entrepreneurs here because at the end of the day i today justin colby can go to franzi.com and i can say you know what i want to get into the restaurant business yes you have a list of restaurants let's just use jimmy john's but you'd likely would have more maybe you can name them but like 4 000 brands on the pop 4 000 brands it's almost every franchise concept that exists in the united states are is on franzi.com yep right now go check out frenzy.com uh i mean i was so excited about this because i just think as i'm a serial entrepreneur like i gotta be careful with our conversation right now because next you know i'm gonna be on frames you're like what's the next industry i'm going in sorry right and a few times people we've met have bought a business with us yes as us having a conversation like this and three months later they're like well now i own this operating company right hey now i gotta go do this thing uh i'm reading a great book big shout out to the road less stupid if you've ever uh heard or read that one it just is kind of the fundamentals of business where people just react and make emotional decisions like i get all fired up here and i go buy a franchise like is that really the best thing i should be doing right now um so this is exciting because i think um well let's jump into what i believe is a great um industry sector home services i'm a real estate guy we all know that right we're we're listening to me because that platform but how many of those i mean do you have a number of how many you know home services type companies roofing like you just mentioned uh gutters uh windows flooring hvac like i just i think that's a major play for a lot of individuals it has been increasingly popular because there's average unit volumes of revenue of these service businesses, you know, well over a million dollars, but the startup costs are 150K, 200K, 250K versus a retail restaurant or a health and wellness franchise could run you half a million, a million, two million in some restaurants cases or more for not too dissimilar of revenues. I mean, restaurants, Chick-fil-A, McDonald's will have, you know, kind of gold standard revenues, but these home services brands, again, seven-figure revenue for a low six-figures investment And so there's a lot of money in people moving into home services because one, it's cheaper. Revenue upside is still there. Plus, AI is likely not to disrupt people washing windows or painting sidewalks or painting houses for a while. I mean, it's probably going to happen at some point. At some point. But these are safer for a little bit longer. Okay. So do you ever get excited about a business or an industry that you get on Fransy? All the time. I mean, I'll see things and like, if I had endless money in time, I would buy one of those, buy one of those. And so I have a podcast too called How I Franchise This, where I'm interviewing people that have gone from everyday corporate America or they were at Tesla or they were, they were born into it, whatever their story was before franchising and then how they got into it, how they specifically found the right brand, how they financed it. So it's tactical, you know, uh, storytelling, but I've interviewed a few people that started, you know, seven years ago with zero franchise locations and now have a hundred plus across six or seven brands. They've got orange theory, they've got restore hyper wellness. They've got Dave's hot chicken, pop up bagels. And I see that and I hear their stories and exactly how they did it. Yeah. And it, to me, it's like, if you're willing to work hard, if you're willing to go raise some capital and bring on, you know, private equity or private debt partners, anyone can literally go do this it's the american dream if you're willing to go and do it and franchising just provides this platform that i think is unlike anything else the playbooks are there the brand is there the recipes are there the training the marketing it's all there you just need to be willing to go do the work and operate and i've seen this story over and over and over again the same consistent theme across all of them is they were willing to do the hard work they found the right capital partner and then they went all into the franchise model and six seven years in like a diamond you know they put the pressure in and so what i think is the key is most franchises and i don't know a lot about franchises right but you hear the stories of mcdonald's right just the concept of like there's a book they give you the book you run the play they're in some repeat every day it works right and that is in large part i'm the real estate guy right and so i are there real estate people or is there a real estate sector to francy so a lot of these big multi-unit franchisees will also go in and buy the underlying asset that they're developing on. Unless the franchisor, you know, McDonald's kind of does a lot of that corporately. They're one of the largest, you know, real estate businesses in the world. People don't think about it that way. They're disguised as a burger shop. Right. But some franchise concepts, a lot of them actually aren't thinking about that because they're not at that scale yet. In fact, most franchise brands are considered emerging. 75% of them have less than a hundred locations open. Over a hundred is more mature and that's their 25%. But if you get in with an emerging brand that you like, that has the upside, Dave's hot chicken early, pop up bagels early, you can go develop the real estate yourself and have this owner operator play where you've got cash flowing operation on top of an asset that you own. I've heard of some franchisees purposely paying themselves higher than market rent because then they can go borrow against that cashflow on the real estate side to go over in their second and third one and so there is a whole you know strategy for those interested in you know commercial real estate and a real estate play on top of the operating business that's a really smart angle as a real estate guy i'm really that way you just hit like you buy the the whether it is a current location or maybe even develop one right you buy that corner that's just this rundown thing tear it down build your new uh dave's hot chicken right whatever the franchise uh you pay yourself higher market rent the income shows strong finances banks love it banks love it they go give you more money to do it again yep it's almost like that like burr method for residential looking different i love that you know there's a you're not a real estate guy and you're throwing out real estate terms this is good yeah no it is i mean this is where I go as a real estate play we could even be the McDonald's right we don't I don't have an allegiance to name me three you said um Papa Bagels uh Dave's Hot Chicken and Orange Theory besides working out which I do love but I wouldn't have an allegiance to any of those brands as a brand but what I do know and what I do love is that the business model of buying the the real estate understanding the economics of that getting higher than market rent understanding bankability and now I have real businesses that have real operations. There's a formula. Running a real estate play. The bigger play is the McDonald's real estate play. And again, when you get to 100 units, I mean, this is real, real scale. Wow, that's... When you get to five, that's significant for people. I mean, there's everywhere in between, there's an opportunity to run both of those plays if you have the capital and the desire to go structure it that way. The issue I think a lot of people run into is they're not capitalized well enough to be thinking about, they have to develop five net new locations, plus they're going to buy the real estate, which could be six figures, high seven or mid seven figures. And so they're trying to navigate, how do I finance all this? Franchises are five times more likely to succeed in the first five years than traditional startups. But finding a franchise ownership opportunity can be overwhelming with over 4,000 brands to choose from and brokers with misaligned incentives. That's why my friend, Alex Smearsnik, co-founder and former CEO of 2U Laundry, built Fransy. Whether you're interested in fitness, home services, automotive, or food, Fransy make it simple to find your perfect match. When you visit fransy.com and answer a few simple questions about your goals, lifestyle, and budget, and get access to hundreds of personalized opportunities, plus free top-of-the-line coaching that will never cost you a dime. Franzy is completely free to use from start to finish. You'll never have to pay them. If you're ready to take the next step towards franchise ownership, visit franzy.com. That is F-R-A-N-Z-Y dot com to get started today. so the the real estate individuals listening to this right now um they they come up with the same challenge right they say okay i want a single family burr right i want to fix and flip i want an apartment i want a fourplex whatever those things are the secret of raising capital that i found and i've raised tens and tens and tens of millions of dollars the secret's always this give the opportunity out there someone's going to like that opportunity right what i believe for most real estate investors and business owners, if you are in need of capital and you don't actually let anyone know there's an opportunity, it's very hard. Like everyone goes to the bank to let the bank know I'm in need of capital. There's no difference in running a business, being a real estate investor, needing capital and not going outwardly, like posting on Facebook or Instagram, not, Hey, can I get a loan? Everybody it's, Hey, there's an opportunity I have. Would you like to be a capital partner? There's a lot of money out there. I literally had one yesterday and he i think he owns a dave because he talked about this chicken i swear to god he was like i had a buddy who had this operation he needed some capital it's a chicken spot i threw 150 grand at it and the revenue is incredible it could be one of those which is funny but the point being is that individual i came across because i have apartments and he's thinking about lending on the apartments but he also lends in partners on this operation and so i would tell anyone out there listening to this like this is very real like in my world the upside i have no genuine want to own a like a dave's chicken or like but the employees right but if i could just put it together let the the booklet run itself right but have the upside of the real estate there's a very exciting play for those individuals especially if you do more than one location you start to get these local economies of scale where you can have one general manager one gm run the business for you essentially like you still have to be involved as far as like site selection yeah you build out costs and modeling it out but if you're willing to do that work find the right capital partner you can operate to some extent you can hire gms and there's a story i tell a lot of a guy that i know met him five six years ago i don want to name his name because he likes to be under the But when I met him owned 43 or so McDonald McDonald on average do to million in revenue Like an individual McDonald Individual location. And then do $600 to $800K in cash flow. So you do the math on his 43 location. Makes a couple bucks. He's paid almost like an NFL quarterback. And since I last, I talked to him about a year ago or recently, and he's up from 43 to like 90 or so McDonald's now, because he's got this cash machine. He's just going and buying up three over here, Justin's six in Greensboro, 10 here. And you can just, the momentum doesn't stop. And I asked him, I was like, how do you manage all this? He's like, I have one COO that I think he pays 350 grand a year. So not insignificant, but also not a crazy amount for that large of a business. Yeah. And that individual runs the whole thing. He's like, I haven't been in a McDonald's from an operating perspective in a long time. and select to go buy i mean that's on a huge scale like imagine now you have three of some new concept you can take the same lessons hire a gm pay them well yeah they'll run that business give them some profit sharing yeah and you're you're now you know the one operating two three steps ahead you're looking for location four five and six or a group of five that you can bundle up and and buy together becomes an acquisition game as long as you have that operating team that's properly incentivized and how much you may not know this answer but how much would a what's an average income for the owner operator of a of a franchise i'm sure they vary but like if people are thinking like i'm tired of my nine to five i don't want to do this thing i'm looking for something else like what could you consider if you go buy a franchise and again i'm sure it varies and i'm not going to hold you to it and neither should they don't hold them to it um what what What are you talking about? Whether it's McDonald's, maybe that's the most known, or Dave's Chicken, or Orange Theory, what would you consider? So I'll give a couple answers, because I think the common misconception is, like, you think McDonald's, you think Subway, when you think of franchising, and immediately one or two things happen. You think, that's too expensive, I could never own that, this franchising isn't for me. But they're wrong, because they don't realize there's a franchise that costs $10K to get into, it's not going to replace your income, but it can kick off $20,000 to $30,000 a year in cash flow. And that's a great return on investment. Great return. Just depends on how much you have to work for that investment, but great return. So all the way on that end of the spectrum. And Chick-fil-A even is only $10,000 to get into because it's not really like a full franchise. They make you work 40, 50 hours a week. You're more buying a job and they get 50% of the profits, which is not normal for franchises. So even Chick-fil-A you can get into if you're the right operator willing to do the work. And then it goes all the way up to some of these swim school franchises where you're building seven pools and you're teaching kids how to swim, it's an expensive investment. The average unit volumes are very high. That's more like three, four million to get into. And there's everything in between. I always, you know, people think I'm joking when I say it, but there really is a franchise for everybody. If you want to go do this, and depending on what your goals are, I think you have to have, I'd say to do this right, 30K minimum in cash and then go borrow. You know, an SBA loan is meant for businesses like this if you're just getting started. so it really is accessible to you know you're kind of a middle class working person can go do this if they're wanting to be entrepreneurial and to go take some of that ownership back all the way up to the more sophisticated maybe they've got entrepreneurial experience they got a little bit more capital saved up there's the opportunity to take bigger swings and do the the real estate play or do a multi-unit deal and so there truly is a you know an answer for everyone and their goals and there's a certain group that you know they may be just getting started and they don't have more than five grand saved up. Like I, you know, my advice to them is work and save like you would to pay off debt and then go buy the business when you've got a little bit of a nest egg to go invest in a services business that you can start. It's interesting because I'm just such a serial entrepreneur. Like the, the, the other side of this is being make, making sure you are in a financial place. I think that was a great point. Like maybe don't push all your chips in if you're going to go quit your job and like every last dollar you have, you're going to go start X franchise, like maybe give yourself some level of a bridge, right? And I am just more curious for my own interest. What is the more expensive level of franchise? Like what's a McDonald's franchise? Um, what else would be considered expensive? So some of the QSRs or quick service restaurant franchises, because there's so much build out, there's all this equipment, massive refrigerators and freezers that are sure you're already 50 grand a pop. yeah um those can be two three in some cases four million dollar developments depending on where it is and then you leave that percent to get into it i would guess yeah and so the franchise fee typically is it's not crazy 30 grand to 50 grand to get the rights to a territory or location uh it's really just the build-out cost i mean minding the site developing it getting the right gas line in electrical what do you see is the newest hottest franchise that on the market right now i mean you have 4 000 of them yep so there's a few categories one is golf right now i was just taking off i think it's with you know the netflix effect of them having yeah showing and swing yeah tiger woods and rory doing the stadium golf stuff right live even you're creating that kind of more like i don't know entertainment approach or version of golf it's yeah it's kind of like what netflix did to f1 there's just a lot more interest now and so these indoor golf simulator franchises are taking off there it's almost like anytime fitness do you remember that i do you can bob in yeah it was a great franchise model worked in these really small markets across the united states has no employees ever happened they're crushing it there's a bit yeah they're doing the low ticket thing is huge you in terms of the clientele so you service the clientele that doesn't need to spend a lot of money for you i would assume that's got to be huge and so this there's no employees there's no inventory private golf simulator bays you know room a fourth of the size of this this is why i at six as well. And the investment cost isn't high. It is a good real estate play because you put them in these smaller, you know, out parcels, et cetera. They're 200 to 400K to fully develop. And then they cashflow 100 to 150K a year. No way. With no employees. And it's BYOB. So people can bring a six pack and play Pebble Beach in an hour when the kids go down. So I'm going to bring this back to real estate. So storage facilities versus apartments. People will always make the argument. and by the way, I own both. I tend to support this argument. No tenants, no headaches versus apartments, which is always something, tenants, et cetera, right? This is the equivalent in the franchise world, right? And I'm sure there's a couple of them, but like, that's exciting. You go put a hundred, what did you say to start it? It's like 200 to 400K, again, depending on size, how many things you put in. That's the buildout, that's also the franchise fee, like you're somewhere in there. and you'll spit out 150 grand gross or net. Stop it. That return is insane. Yeah. A lot of these franchises you want to look for should have the ability to generate revenues at least one times the cost to put in and then you want a payback period of ideally as little as possible with two to three years. You're made whole now. Yeah, three can work, five can work but you start to get into this longer time frame and there's a little bit more risk there and things have to be executed better. But if you can get to three years or so, that's usually a good. Something like that could you, I mean, what's the locale? Like what is the typical location for like a golf indoor, golf simulator type of? So it's kind of like middle class, upper middle class, households, dual income families with kids. They're busy families. They can't go golf for six hours. I mean, because realistic, let's be honest, that's how long it takes. I didn't pack. Look, I love to go go high, play, unpack, home. Right, no. You can go play Pebble Beach in an hour at 10 p.m. when the kids go down. You can do it whenever you want. One of the brands that we work with, they have an example of they've got these surgeons that play every day at 3 a.m. They get off their shift and they go to the location and go play around and then go home. Well, where are these locations? What kind of facility would it look like? Is it a more rural area? Is it big? What is that? Well, like in suburban areas, like by, you know, near a target in a, in a, um, strip center, you know, their center development could work. Um, you're in like class B property. I'd say you're not in like the Barry's bootcamp or the like Primo real estate, which is great. Um, you can be in class B, maybe even class C in some instances, as long as you're backed up to a neighborhood that has a few thousand households that fit that demographic of busy family, you know enough income to like golf and enjoy it but don't have the time to go for all my entrepreneurs are aspiring like you gotta look at this right even if you're the real estate guy like me this is something that like i'm genuinely now you have 4 000 opportunities like this one now is intriguing to me because i actually was thinking this weekend i want to play more golf by more i mean any at this point because i just have two kids in life right um this is a big real estate play like that one would probably be hard to own the asset right you'd probably have to do a lease i'm guessing yeah because if you're in a strip center unless you take down the whole center and put two or three different concepts they could put two or three and i see people which you mean absolutely they'll buy a strip center and they put three your complimentary franchise businesses next to each other and we have a few um hospitality groups that are developing hotels and yeah different mixed-use development i asked me like hey we got six open, you know, spots or bays, what, what concepts, what franchises can we put in? They're going to own and then operate the franchise. That's phenomenal. Like I hadn't heard of. I almost feel like this is only a real estate play at this point. I just, maybe cause like, I just, you go buy a strip mall, which is right now, like on the cheap relative lending is not perfect, but that's why it's on the cheap. You now have the businesses you can put into the strip mall. Everyone's concerned about strip malls because of COVID obviously changed the game for a lot of different things. But like lending's not great. But if you actually occupy the units with your own businesses, you are your own tenant. You increase your rent to pay down the loan and you rents and repeat. Like I just feel like now here's the key. Operations systems. Like I'm on a big push. processes, principles, people, um, procedures, right. And then you can profit. Yep. But if you don't have these processes, principles, uh, people and procedures like dialed, your profit is going to either suck or go the other way and you won't profit, right. You're going to lose. Are most of these franchises extremely dialed in? So someone like myself that doesn't have a lot of time or maybe someone that doesn't have the business acumen and is going to learn this are they pretty dialed in with these books and game plans and processes like can you literally people think about it this way so i want you to kind of tell me are is this like a plug and play and you just follow the recipe and it'll come out as a beautiful cake this the honest answer is it does depend on the stage of the brand this is where franzi comes in to help we do give free coaching from folks at our franchisees themselves so if you came through and you said this is kind of my background this is my operational experience my risk tolerance my capital situation and here are my goals we go match of the 4 000 specific brands partially using ai so we've indexed 26 000 what are called ftds franchise disclosure documents and we pair it up against justin's unique set of criteria interest goals etc because while there's some different similar flavors to what people are looking for you have very different hobbies passions like that is an important part You don't want to buy a business that in a year you're like, I don't really align with that or have time for it or agree with it. And so it is important that it's something that you can get excited about five years from now, 10 years from now. And you're not going to be like, I own the, you know, gutter cleaning thing and people are complaining all the time. I'm just not passionate about it. So we help you do that. And to answer your question about, you know, the how plug and play is it? It does depend. some brands over 50 units especially have full-blown teams training marketing playbooks technology that they've built out for procurement and their crm their point of sale is all just dialed in but these emerging brands are are not as dialed in it's more entrepreneurial so when we get clients that come through they're like i want to do this because i want to be entrepreneurial i want to have a say what gets built we actually tell them to not join like a chick-fil-a or mature brand because you're basically buying cash flow or and or a job yeah at that stage like they're like, Justin, here's what you do. Don't sneeze this. This is how you sneeze. They'll probably do exactly what you need to do. Totally. And you have to do it. And for some, that's great. Some people love that. A lot of people are like, I don't want that. I'm doing this. Their purpose, their why is I want to be an owner. I want to be entrepreneurial. I want to let my creativity run And we tell those individuals you should take an earlier brand because you not going to get to let that not going to scratch your itch fully You might be your own boss You might have cash flow coming in but you not you going to be miserable just like you might be now in this nine to five. And so go take the additional risk of joining a brand early. And with that comes other upside. You get an influence on the franchisor. You might get to negotiate franchise fees, royalties, because they're earlier. You get the ability to white space territory, out of fourth unit, a fifth unit, it's sixth territory, et cetera, as you go versus Dave's Hotchick and McDonald's. They're mostly sold out. So now it becomes an acquisition game for that. Yeah, yeah, yeah. They've got to buy up the others. Resellers and all that. And you guys are getting into that space at some point here. Yeah, so we've started building a prototype of the resale marketplace. The reason we didn't start there is with DeNovo or new territories, we have structured financials. That FDD, that franchise disclosure document I mentioned is a standard document that the Federal Trade Commission regulates across all franchises. It's easily indexable, scrapable, and so we can give you accurate, clean data. As soon as we get into resales, Justin's books look different than Alex's books, even though both owned a Jimmy John's. And your definition of seller discretionary is different than mine. And Florida's different than North Carolina. And there's all these things that come into play. And so AI allows us to get, you know, kind of more apples to apples faster and not needing as much human underwriting and modeling. but that's the interesting problem we're trying to solve with technologies. How do we build a resale marketplace that has clean, accurate data and is still mindful of people's sensitivity around their financials? And when do we show Justin's book to a seller? How much do we verify the seller? What much friction do we... And all this goes through frenzy. Yep. So let's talk a little bit more in frenzy because I just geeked out on this opportunity. Describe frenzy for everyone and the understanding of what it is and then what the trajectory is. Yeah. And so I know I use this almost maybe too much, but the way I describe it just to get it clear quickly as possible is honestly what Zillow did for real estate buying for a franchise. It's a platform that has and houses every brand you can imagine with all this data and information on them, the revenue, the cost to get in, what the royalties you're going to pay are, who the executive team is. Has there been any bankruptcy or litigation so that you can see those red flags? And we're starting to pull in more third-party data. What are consumers of this brand, the customer going to go buy the Dave's Hot Chicken sandwich, what do they think about it in each region in the country? What are commercial rents and leases? So we start pulling in just more and more so that you have the information you need to make a smart, thoughtful, diligence decision. So that's all the data piece. There's also this very emotional part of this. some people aren't doing it purely as an investment so i i had one guy come through he's like just show me the business that makes the most money like that some people that's what they want they don't care what it is there's a franchise called bio one it's a bio bio one they clean up crime scenes and like dead bodies and like oh that could make the most money and the guy all right guy that this one's for you but other people are like i want to build a business with my kids and it's a legacy thing we're probably not going to send you to buy our one we're going to send you do a milkshake or a dessert concert. It's still cashflow, but it's something your kids could work at in high school and could be a part of, you know, as you build. And some people come, they've made more money than they need. And they're doing this because it's intellectually stimulating. They want to show their kids entrepreneurship. There really is all these different reasons people do it. And think of Franzie as the, again, database and diligence information with that kind of softer coaching where we talk you through what is Justin's why? What can you afford? how do we think about all these different brands does it actually solve your goals your financial picture and what you're operationally good at yeah um and that's that like nuanced piece that i think a human does need to stay involved in because people buy from people and that's right and give you all the data in the world but after a while you're like now what do i do i like these three i think but i'm not really sure what to do next right and the answer is that question too with human interaction we'll meet you in person we'll jump on zoom calls as much as you want to use it it's free for you we get paid by the brands a flat dollar success fee so that we have no incentive to promote one brand over another and we're going to keep it that way from here on out because this is such a critical life decision it would be i think morally and ethically wrong to allow brands i'll pay you triple the amount and now we're showing justin brands that might not actually be the best fit and that's what's happening today in the the kind of franchise brokerage world is they're making a 60 commission on the franchise fee six zero so if one brand's franchise fee is 60 grand and others is 30 it's you just have the wrong incentives it'd be hard for a lot of individuals to say i'm going to show you the 30k one even even though this one very double if if you buy that right right um so we're just trying to flip that on its head make it fully transparent about how this whole world has worked and why how long has he been around for So we started last summer, took about six months to really get all the data. Last summer. Last summer. And you were able to onboard and basically sell all these franchises to be able to use you as a platform to go come on and talk. That is how big of a pain point this is for the brands because there's so much of the franchise fee, they're hemorrhaging out to all these different middlemen and commissions and fees. So they're desperate for another solution to get high quality potential franchisees. for a much lower cost and that's our goal of franzies how do we can democratize this whole process empower the brand if we do that they're going to reinvest into the franchisee use the franchisee have a higher chance of success because you're getting more and more capabilities resources support being invested in versus 60 going out to a broker do this later so that's the one of the end goals here is how do we enable and support again the next million entrepreneurs so i'm gonna have two questions one how did you come up with this concept like just no one wakes up one day is man i need to solve for this problem about franchising that doesn't happen right um but then two like how did i want to get the origin story of like how did you push into it because that's what a lot of entrepreneurs struggle with right they found the pain point they found the solution they realize they have some gold and they go now what right and then and i guess let's even take one step before that and then we'll get to the other two you've already done two businesses you've exited two business let's talk about those what what vertical were they in um why did you exit and then why are we here now with franzi yeah so i'll give you the the origin story because the first one for me started uh my freshman year of college so i went to wake forest and from Minnesota originally. And I grew up with a dad that was, you know, a hundred percent sales, a hundred percent commission, eat what you kill. So entrepreneurial, you know, in a big way, I remember, you know, in the summer he'd golf all summer long and then fall, winter, spring, especially in Minnesota was busting his ass. And I was like, how are you able to do this? All my friends' parents are constantly working nine to five. And you have, it seems all this kind of flexibility and freedom to work when you want. And his advice that has always stuck with me is there's three kinds of career, you know, careers you can have, Alex, you can work for someone else. You can work for yourself. We're going to have people working for you. He's like, I'm in the second bucket. I work for myself. I can, you know, I, some months I make zero commission, other months that's half of someone, someone's annual salary. And he's like, but it gives me, it affords me that, that time and that flexibility. And so that's just always stuck with me as I know I need to go do something that are sales working for myself or, you know, some sort of, um, like subject matter expert or working or having people you know working for me and so when i got to college i was looking for entrepreneurial things to do and i worked for this laundry and dry cleaning pickup and delivery oh man business in college yeah this is fascinating this could work at duke and chapel hill and vanderbilt i want to i want to i want to buy this thing and so they were selling it for 30 grand my jaw hit the floor i'm 18 this is the most money in the world yeah and i'm thinking how cheap oh my god how can we get 20 of those now well so i had 18 i thought this right i have quite a two grand maybe saved yeah maybe and so i found two other partners we got to like 11 grand still not enough so then i'm going to the the business school before i'm in the business school at wake asking finance professor professors i want to buy this business how do i structure it so they're teaching me about seller finance or out really and like you're like 18 year old is like trying to sure i'll help them so like professors you know from wake thank you like they didn't have to do any of that they started breakfast hours before i was even in the business school helping me figure out this deal so we figured out the deal we did seller financing and paid them a percent of revenue over the course of a few years you mean the owners or the that we bought it from okay no not the professors not the professor not the professor oh my god i was like good for you professor so we bought the business we immediately went to the university and said this needs to be a checkbox option for your incoming freshmen parents etc we took the business from like it was like 26 000 in revenue it was doing but high margin 80 margin or so and we 10x the revenue our first year it was like 250k because they gave us a booth at orientation week so all the parents are coming through like get your meal plan get your food uh parking yeah oh yeah get the laundry service too brilliant bro um and so we sold that business when we graduated and sold it for about 10 times what we bought it for good for you I was like, we can retire after. Yeah, right. Yeah, right. Oh, very many. But then I went and worked for Ernst & Young doing consulting for a year and a half. And I really wanted to keep growing to other colleges. But my partners at the time wanted to go do investment banking, marketing for Pepsi. I didn't want to be the laundry guy, even though that was probably the best time in our life to go do it. I still give it a crap. So we could be here. Right now, I'm like, bro, you should have leaned in. I kind of did. I kind of came back. I went to EY for a year and a half. Okay. And I hated it. I was like, this is not as entrepreneurial as I thought. I love the people. I mean, very smart people. I learned a lot, but it just wasn't, it was not fulfilling. Like going into Wells Fargo and how do we squeak out a tenth of a percent of efficiency? And it was just, things move slower. And I just was hooked from that college laundry thing. I would obsess over it. It was this game almost. And I saw all these Uber for X businesses pop up. This was 2014, 2015. So you're seeing Instacart, Shipt, Wag, Rover, Postmates, DoorDash, Uber for anything. And I thought someone's going to do this for laundry and dry cleaning. It's not just college kids. Like there's busy families. No one likes doing laundry. It's time consuming. People outsource lawn maintenance all the time. Why wouldn't they pay us to do their laundry? Let's take what we learned in college and do this on a larger scale. So we started in Charlotte. and over the course of eight years we ended up raising 33 million in venture capital scaled to a dozen markets or so and then realized unlike doordash and you know ride sharing which is point a to point b you need you go to the airport you need it now oh justin's we're going now we're going a to b to yeah split it up into dry cleaning and laundry then bat you run the process and it's way more logistically complex sure um and so we did route based instead of on demand. So we'd go into your neighborhood and pick up 30 orders. We started vertically integrating and building physical laundromats to support all the volume. And it was through that process that, you know, eventually we got to the franchise piece was these stores aren't cheap. They're a million dollars with all the equipment. They're very profitable because we have a delivery business coming in as well as a walk-in customer base now using the same asset base. And we needed to scale more locations. And so we thought, well, why don't we franchise the brick and mortar layer, the technology platform on the delivery piece on top. And that's how we got into franchising in 2021, started franchising a subsidiary called Laundrelab. And we sold 118 locations in 14, 16 months. Franzied it. And maybe it wasn't. It wasn't Franzi. I thought it was. I thought it was. As the franchisor, like we were the, we were the Dave's hot chicken. We were the company selling franchise licenses. and part of that was we worked with franchise brokers and we worked with what's called an fso a franchise sales organization and that's where this idea for franzi was born we were the brand paying out 60 commission that's 80 percent russians they're like we need this money to invest in site selection support and construction support and marketing or just like hemorrhaging out you know cash and we'd also raised venture so we had this unique advantage that most brands never have if you and i franchise this podcast studio or we franchise you know a run club or whatever the concept is we don't have venture capital behind us typically and so even more so these brands need that franchise fee to invest in themselves and their capabilities and support of their franchisees and that's when the light bulb went off i was like if we're having a hard time you know scaling the team appropriately with the amount of stores we have to open. How does anyone else ever do this? And the answer is they end up giving up way more equity to like friends and family or like maybe more not predatory you know VC or private equity but groups that could really get good valuations or they take 30 years and they go very very slow or they just they don scale they don they yeah you and i stock capped at three or four corporate stores and like honestly i want to go down this path right so i think there's a lot of really good brands that should be national and don't because they you know there's not the right resources and tools out there and i think there's some brands conversely that get propped up by the broker networks that have no business being as big as as they were because the underlying financials aren't sound or proven out but you know the networks are just pushing these concepts down everyone's you know throat essentially and so long answer short franzi was you know born from this idea of how do we put the control and the cash back into the brand's you know pocket so that they can reinvest in the franchisee ultimately creating this more kind of positive self-fulfilling loop versus today which i think is kind of the wild west unregulated so you have what was that original dry cleaning laundry brand uh so it's called to you laundry was the delivery piece and then laundry lab is the physical brick and you own them and then you franchised them yep right so you went through the whole process of franchising then you were the company paying all these brokers 40 60 commissions 80 commissions at times yep found the pain of like this sucks yep we're not capitalizing the way to grow that we need because we pay it all out yep and then he said i could help other brands technology can do a lot of what the brokers are doing it's top of funnel lead gen it's light matchmaking and it's light qualifying you buy you buy a house this way you know through bank rate and rash companies you buy a car carvana we're not saying society's ready to go buy a half a million dollar business just online sure right um but if you think about franchising it's not as pure of a brokerage play is you buying a car wash or a house. There's a buyer and a seller. You kind of need someone in the middle to help negotiate and play nice. And then you transact and you're probably done interacting with each other. Yeah. In franchising, if you think about it, you're like, hey, maybe a golf thing, maybe a restaurant. You need some advising and coaching. And then the relationship you're building with that brand is going to be a five to 10 year relationship. So it's not this transactional. I found the one. Right. Fine, I'm done. Right. It's dating. It's matchmaking more than anything. And so traditional business brokering doesn't make as much sense because the relationship and the situation is very different we're more of a matchmaker yeah franzi should be a matchmaker not a broker yeah like a true so like you're not a dating site that's very transactional where you're swiping left and hit it and quit it you're more like one of those matchmakers come sit down yep 100 people in a room get to know each other spend some time with like that's the difference because you're on a credit really transactional one else for a five to 10 year commitment with that brand. So you better like the team you're working with. You better like the brand. You better like what their mission and their core values are because it's going to be a part of your life, whether you're the hands-on operator or just the investor type. It's still a big part of your life and you need to believe in the team behind it and who you're going to be working with. So you have a team that can hold someone's hand and help them understand all this. I mean, that's the brilliance. So that's what led to Franzy. Yep. Right. So you actually exited your first franchise? So I'm still on the board of that business. I sold some of my equity. Yeah. rolled the rest and had a decent liquidity. Now you have a startup and he's going in. Yeah, I'm back to square one again. I love that stage, zero to one, zero to 10 million. Yeah. And I love the scalability of this, but also the mission behind it is entrepreneurship has drastically changed my life. It's the most fulfilling thing I've ever done. I work most weekends because I want to. I have a four and a half month old at home, so I'm trying to balance family time. But this is my hobby. like people what do you do outside of work work because i this it's fun to me i genuinely love doing it and i think a lot of people go throughout life not having found that kind of purpose or that thing that you know lights them up fills them up every morning and so if we help even a hundred people 10 people find that through franzi like that's the that's the goals like show someone who's been this has been tugging at them their whole life it's been eating at them they've been successful in their own right but it's been for someone else it hasn't been for them how do we champion that person, de-risk it for them, find the right fit, find the right financing program and structure, and like really give them the tools they need to go take that risk that they're more than capable of doing operationally and, and, you know, intelligence wise. So your avatar to come see franzi.com, you would like them to have some level of financial means. They don't need to be affluent. 50K in cash is ideal because then you can borrow, you can basically get into most franchise concepts 250k 50k in cash yeah 150k net worth 150k net worth some level like above 700 credit or is credit not credit yeah i think above above 700 is good above 650 can still can still work but and you are do you have a way for can people from this episode or wherever they're seeing this can they get a hold of you in the sense of like book a call or find out more what's the path to do that yeah if you if you email me at alex at franzi.com it's my direct email we can set up time either with me or other franchisees you know other franchise experts on our team otherwise we're all over social media so alex from franzi on twitter x instagram tiktok linkedin there's all sorts of ways for us to engage we have a newsletter a podcast we're pushing a ton of educational information out there because again i think most people are capable of doing this if they want to the issue is most people just don't know where to start that's it they don't have someone to help them they don't have resources and so our goal again is let's give you that so you can take that push to jump and start building and there's so many people knowing what i so i have the science flipping podcast i have the entrepreneur dna podcast i have these podcasts that i know there's a lot of people hungry to be entrepreneurs right some like the real estate play like to me this is a real estate play this is a business play this is a lifestyle play, right? Like you were going to solve for a lot of it. I obviously lean into this real estate play because then you have multiple exits. Not only you have your income on the way in and through, you have an exit on the franchise if you want, and you can resell it through franzi.com if you want. You have an exit on the actual property, or maybe that's the legacy play that you gift to your kids and you exit the business ownership and you just allow someone else to lease that property. I mean, I just genuinely should not be doing this podcast because now I'm Now I'm going to be eyeballing my next. You're going to be iron-ackel unlocked. That's right. The other thing to make it even more exciting, someone like you especially is going to love this. It's one of the reasons I like franchising now is if you get into the right system, the right brand, and you do scale three, four, five locations, I mentioned these bigger fish are constantly looking to buy up. Oh, yeah. Those three to five pack people. There's exits along. The multiples are higher in franchising because it's almost like a triple-A rated bond. It's like you've got, it's not just Justin and Alex's coffee shop, it's Starbucks or it's Ziggy's coffee or it's this thing that has a brand behind it, a franchisor behind it, the stopgap. So the risk is less. So we can actually sell for instead of a two to three X multiple, four to six, sometimes seven, eight, nine, 10 X multiples on you. But so you're talking two to three X on your exit than you would have had if it was independent. And so it's like the exit opportunities are bigger. So all these, there's all these. It goes back to the principles. tailwinds processes principles practices these are the p's i talk about like that's a business principle go into a business that you can have an exit with like no one wants to work forever so what is your exit go into it thinking what your exit is yep this is phenomenal um so franzi.com is where they want to go i'm gonna and by the way if you follow me i'm gonna be tagging him all over everywhere right so you're gonna be seeing that everywhere uh what would be one of the bigger misconceptions regarding franchises either outright lies like people just don't know that that is an outright incorrect fact like it's not a fact or a misconception of a franchise yeah i think the number one is that you know franchising is just these big brands mcdonald's subway there is truly a franchise for just about any concept you can imagine yeah gutter cleaning window cleaning health and wellness most people don't realize hotels most of them are franchises hilton marriott a lot of them are owned by individual groups or individuals yeah um it's not just food so there are franchises truly could be franchises podcast there i think there is a franchise podcast studio that's starting to expand and look at this like there there is i mean the crime scene cleanup again there is franchising for everything and within that there's also franchising i think for just about everyone again it's not for those that are you know just starting to get started in their career just starting to squirrel money away like you do take a risk but very very calculated but for most people that have 30k even saved up you can get into a franchise business i think that's the other misconception is you think oh the rich is going to get richer it's going to be wealthy people buying another you know mcdonald's like there definitely is some of that but there's also the guy who i talked about on our podcast he had zero seven years ago and he's up to 120 and he just went one at a time and then those started cash flowing and he built onto those. Then he got connected with family offices and some private lenders and brought partners on and went to $30, went to $50. It's the American dream. You can do it and go after it if you're willing to take that risk, surround yourself with the right people and be thoughtful about the brands you get into. That'd be my answer is franchising is way bigger, more encompassing than way broader. Less restrictive than people realize is not just Starbucks or McDonald's. It's not these big brands there's also and maybe you want a franchise maybe you reach out and say hey i have an idea that i want a franchise yes how did you like 4 000 franchise like is that just call by call was it once the word got out they started coming to you how did you build that out that is really impressive so very similar we took the playbook from zillow zillow immediately had all the inventory because they pulled it from the mls i don't even know what mls stands for but it was essentially multiple listing service okay multiple listing services i don't even know how MLS allowed them to do this or if they did allow them to do it but Zillow day one had every house all this price data and so they wrote a New York uh there's a Wall Street Journal article about new site Zillow you can they'll tell you what your house is worth and so all of us are curious right like it's probably the biggest investment a lot of people are making of course and so of course they want to see well what is this thing worth and so all this traffic was coming in claiming their houses we took a similar tact where we have all the data just like the MLS in these So we scraped and it took us six months to build this whole data set and platform up. So we get all this information. We now have all the brands on the platform. And similar tactic, we went to the brands and said, hey, we have your brands on here. All this traffic is coming to look at it. They're wanting to buy it. But we're only sending the leads to people that have become verified. So we have all these people looking at you. So you're verifying them, not the franchise. Yeah, we as the platform are verifying Dunkin' Donuts. Make sure it's someone that actually works at the company. They get on board. they sign a legal agreement with us to basically take ownership of that page just like you and i can claim our house on zillow yeah or are you verifying the potential uh franchisee both but to get all the brands verified on the platform we propped it up on the you know went live with all those brands all this traffic started coming in looking at sites and then we go back to the brand say hey we have all these people that have favorited your page i want to connect with you yeah we want to pass them on but we can't connect you with them until you've claimed and verified your profile and so they then all started signing the agreements and wow take it on 4 000 of them yep wait is it 4 000 different franchises or are you just talking about locations different brands wow yeah so within those brands some of them have thousands of locations you know getting talking about etc then there's the newer brands that might just have five and so again i keep saying it and i don't you know mean to be cliche but there really is something for everyone if you want more mature we've got if you want emerging and you know more entrepreneurial we've got it if If you want $4 million investment, we've got it. If you want 20K investment, we've got it. Wow. Service versus retail versus 15 employees versus two employees. And you can really filter on every bit of criteria you want. This is incredible. Franzi.com. Who would have thought? I should not have found this episode. This is going to drive. I'm going to go into a wormhole because of you and call you all night. Bro, what about this one? Should we do this one? Who should I be talking to? This is going to be great. Guys, this is Alex. I am Justin. This has been the Entrepreneur DNA. Make sure you look up franzi.com. Make sure you look up Alex. Is Alex Franzy or is it? Alex from Franzy. Alex from Franzy. All over all platforms. This has been incredible, dude. This is a real estate play. It's an entrepreneur play. It's a young person, old person, a legacy play. I mean, this is, I'm genuinely excited about this because I just think this way, right? This is why people become entrepreneurs. Appreciate you being here. Yeah, thanks for having me again. All right, guys, this is Justin. That is Alex. This is The Science of Flipping. And if you enjoyed that, please share it with two of your friends.