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Starting a Franchise with Jon Ostenson

George Grombacher February 2, 2023

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Starting a Franchise with Jon Ostenson

LifeBlood: We talked about starting a franchise, non-food franchising, what makes one franchisee a better fit, the challenges of Amazon-related businesses, and the value of having and following a system, with Jon Ostenson, CEO of FranBridge Consulting!

Listen to learn the characteristics of successful franchisees!

You can learn more about Jon at FranBridgeConsulting.com and LinkedIn.

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Our Guests

George Grombacher

Jon Ostenson

Episode Transcript

george grombacher 0:15
Why plus Georgie and the time is right, welcome today’s guest strong and powerful. John Austin said, John, are you ready to do this? George, let’s do a great to be back with you, and excited to have you back on. John is the CEO of Fran bridge consulting. He’s a Forbes contributor on the subject of franchising, and he’s the author of non food franchising. John, tell us about your personal life more about your work, why you do what you do? Absolutely no, appreciate you having me back on George, based here in Atlanta, Georgia, and I’ve got a wife and three young kids, and we stay pretty active here in the community. But you know, I’m blessed to get to do what I do. And that’s helping people step into business ownership, either for the first time, or maybe they’re building out a portfolio and they’re stepping into a new opportunity, both both entrepreneurs and investors all around the country. And they, it’s a lot of fun for me to open up their eyes to this world of what I call non food franchising. And what I found is when people hear the term franchise, they think fast food. And yet, there’s so many more opportunities out there in different industries, which I know we’ll touch on in just a minute. And so really educating and helping them understand where those tangible steps to take to match up with the right opportunity there in their area, that’s gonna be the best fit for what they’re looking to do on a day to day basis. Thanks, I appreciate that. So is there just a best franchise that if I get into this one, it’s going to work? Or is it really dependent on fit? Depends on it. I mean, we’ve got a lot of great ones, we work with over 600 Different brands out there. What you know, again, it’s a wide array of industries, you know, from health and wellness to Property Services has been a huge one for us a lot of niches within that. But to oil changes to businesses to support kids, pets, the older population, you know, what I’m seeing out there is people want understandable businesses that are non trendy, that are cash flowing, that aren’t going to go anywhere. They’re somewhat recession resistant, Amazon resistant, COVID resistant, in some cases. It’s kind of those non sexy niches. And so it’s things like dumpsters and insulation and gutters. And yet things that people are always going to need, you know, are things like senior care, oil changes, you know, I’d call these non sexy, but they’re understandable, they’re needed. And we just see all different types of backgrounds all around the country stepping into them. So yeah, certainly, there’s some that we like more than others, I’d say, of the 600 we work with, there’s probably a top 50, you know, that we’re really focused in on that we just think are the best of the best have the right franchise or leadership team, they have the best financial models, they’ve got the true competitive advantages in their given industry. And those are the ones we kind of steer our clients towards.

That makes a ton of sense.

You mentioned, you mentioned not Amazon, and it just got me thinking, the percentage of of the younger generations that are like, Oh, I’m going to start my own business, I’m just going to do drop shipping, or I’m going to do Fulfillment by Amazon or whatever it might be.

Jon Ostenson 3:19
Yeah, how do you think about that? Or what do you think about that? You know, certainly, it is interesting. I mean, we we’ve been doing this long enough, we see a lot of different case studies, and we’ve had clients say, Hey, we’ve gotten embedded with the Amazon, we’ve gotten really deep. It’s been a good living for us. But now, there’s a whole lot of Amazon’s got that upper hand, and they’re very nervous about any changes could be coming down the pipeline. We had a client last year that was he’s in his mid 40s, up in Rochester, New York, John Bradley came to us and he had built up he was a pharmacist by trade. And he had built a FedEx routing business on the side and delivering largely Amazon goods. And he had 27 trucks had built up nice little Empire. They said, Hey, I’m ready, diversify my portfolio want to get into something different. I wanted to get into home services, and we ultimately mash them up with a great, great opportunity thereafter, and we introduced them adopt 1012 different opportunities. He goes through the process and find stuff best fit for him. So no, you know, we I see a lot of people that are looking to get an online business going because on paper, they think that’s easier, and it looks good. And there’s certainly some viable, viable options out there. But also see a lot of people looking for resales. They say, Hey, that sounds better than starting something fresh. You know, in our book, nonfood franchising, there’s a chapter dedicated to resales and how we think about those and the pros and cons of buying an existing business versus starting one new but under the franchise umbrella. We kind of delve into that as well. Yeah, I think that makes a lot of sense.

george grombacher 4:47
When and anytime you hear horror stories about people that have big internet businesses, and then the algorithm changes or whatever it might be and their revenue drops by a large percentage

Jon Ostenson 5:00
Very, very meaningful, talk about how a lot of these big companies, you’re using their rails, essentially, and they do have the upper hand, how is that different with some of the franchises that you’re working with?

Unknown Speaker 5:13
Yeah, you know, with a good franchisor. I mean, there’s trade offs to everything. However, I, it’s our humble belief that franchising does represent a better path to business ownership for most people. And I mean, you just look at the pure success rates out here, it’s not even close between franchises and non franchises. Yeah, but some of the reasons behind that, again, I say good franchise, they’re not all created equal, just like any industry. But when you’ve got a strong franchisor, that’s a business partner for you, you’re in business for yourself, not by yourself that franchisor, if you’re running more of an executive model, where you’re managing the manager, they’re kind of tag teaming with you to manage that manager and serve as the technical resource. You’ve got other franchisees that are somewhat peer group where you’re exchanging best practices, you’ve got a playbook, you know, that profit path to profitability from day one, you start marching towards, it’s all about executing. And then you also get to trade at a higher multiple, typically, on the exit than a non franchised business, there’s been some really interesting studies to support that. So again, maybe your hands are tied a little bit more. So as far as you know, you can’t put your thumb prints all over the business. However, any good franchisor is still going to let you test different marketing vehicles or trying different ideas. So there’s some good flexibility, but that’s one of the things that we help our clients discover, as they go through the process and understand what is that best fit for them?

george grombacher 6:31
What popped into my head was that discipline equals freedom. So you have people that are entrepreneurial, that that want to have their fingerprints on things. But knowing that this is there’s there’s a playbook that’s proven that if I execute on these steps, that I’m going to, obviously there’s no guarantees have success, going to get the cash flow, I’ve got this peer group. So I’m, I’m able with with within this framework to personalize things and scratch that entrepreneurial itch without having to do everything. Yeah,

Unknown Speaker 7:03
you just think about if you were starting business, you’d have to go there and start running marketing, you know, some kind of customer acquisition will, you’ve got no data from which to start with and instead, the franchisors launched a lot of similar looking businesses all around the country in similar markets. And they know, from a large data set, you know how to optimize that advertising day, once a year, there’s just a lot of little intangible benefits, as you think about getting that business off the ground.

george grombacher 7:26
In terms of the peer group, or just just support fraud, if it’s, I have a question or I need some accountability. How does that vary from? I imagine it varies from brand to brand?

Unknown Speaker 7:38
It does, it doesn’t, you know, I’ve been a franchisor myself headed up the shelf Janie franchise system in the past. And, you know, we we were there, I mean, the better our franchisees did, the better we did. And so, you know, we built out a support team that was not only running their marketing, and providing kind of all the systems, the technical resources and the training, but also, we had consistent check ins, especially early on, and we were very involved with our franchise owners, we provide them with coaches and field managers, you know, to kind of go out there for the sole purpose of supporting them and helping them thrive in their business. So, you know, definitely see the pros outweigh any cons associated with it. And what’s interesting, George is we have a lot of existing business owners that get into franchising, maybe they’ve started a business, they’ve been successful. But you know, the second time around, or third time around, they say, Hey, been there, done that, you know, we’d rather start on third base than first base and have a lot of the track already laid for me to use your analogy. So we do see a lot of that, and that what’s right for that next season. So you kind of build out a portfolio and, you know, we have some clients that like to buy, get into complementary type opportunities, like the real estate broker plan in mind that just bought a property management franchise. I mean, that’s a very complementary business. But then we have others that are diversifying completely we have a guy that was has done very well and security alarm systems built that company from scratch. Well, he just bought a roll off dumpster business, things that have know that a lot of dentists buying oil changes, we get some dentists buying a big fence company recently. Yeah, things that are totally uncorrelated to their day

george grombacher 9:08
to day. It’s interesting. And it’s fascinating how, you know, you just listed off a number of things like oh, wow, there’s there’s actually franchises and there’s there’s companies that that that are doing all these things, and of course, why wouldn’t there be so is it common? You mentioned at the at a franchise that you were working with that, the better the franchises did franchisors did the better, the that everybody did. I’d like to hear a little bit more about that. And is it common for the the the master franchise to provide coaching to their franchisees?

Unknown Speaker 9:45
It is very common. Yeah, I’d say again, part of its vetting process, there’s over 4000 brands out there in America, and we kind of cut out the food and the hospitality. The lodging I just my humble belief is there are easier ways to make money. We certainly need the food guys. But there are multiple reasons why I think there are better opportunities for my clients. So you take out roughly half the market, and then we whittle it down even further. And we’re looking at those franchisors that have a track record of providing the best support, and to have produced the most successful franchisees. And then at the end of the day, that’s what matters. And so, you know, we build those relationships, and we’re always adding to that portfolio, but over 600 brands work with all the different, you know, top development groups across the country, and, you know, but a big focus is on those that you know, have a heart and care about and, you know, build a culture to support the franchise owners. That’s what it comes down to. It’s not about them making money, and there’s a newer franchisor. I mean, that’s, you know, not all franchisors reach 100 units under locations, only the good ones do. And, yes, there’s a lot of entail that we kind of pull into. And then of course, we have the relationships on the back end as well.

george grombacher 10:53
100 sounds like a lot. Is that is that a lot? Or is that the gold standard? Is that what?

Unknown Speaker 11:00
Yeah, you know, I had a client, actually, we’ve had seven clients that have gone into a great gutter franchise system, you know, just incredible numbers behind it, you know, $6 billion industry. That’s a system that went from 20 locations to over 250 locations in the past two years. So you can see it’s kind of growth, you know, when you’re doing things the right way, and you’ve got all the pieces in place. Yeah, but quite a few franchisors, you know, we’ll never get to that 100 location 100 Mark, and maybe they just aren’t strong enough competitive advantages are the internal systems and I love what you said discipline equals freedom. I absolutely agree with that. And I think you you rise to the, you know, rise to level your goals, you fall to the level your systems to kind of go along with that thinking, and franchising is all about systems and processes. And the end of the day, that’s what it comes down to.

george grombacher 11:48
Yeah. So are there characters, I’m sure that there are characteristics of people that are successful doing this. You mentioned dentists, these are people that appreciate the technical knowledge, and then showing up every day and cleaning the teeth and doing all the things but what are some of those through lines? You say? Yep, you’re a person who probably going to be good at this? Yeah,

Unknown Speaker 12:11
you know, so I’m a member of the entrepreneurs, organization, EO. And we’ve placed a lot of EEO clients, you know, these people have built their own businesses, we’ve placed a lot of them in franchises. However, there’s some of those some EO members have to explain your to entrepreneurial franchising would not be a good that you’ve got to put your thumb prints all over, it would not fit in well here. How the majority, I’d say do like franchising for all the reasons I listed, but there’s some that just wouldn’t work out. Well, what’s interesting, George is I’d say, probably 1/3 of our clients are looking to leave a corporate job and run the day to day operations, probably two thirds are really looking to keep their day job. And maybe it’s corporate, maybe it’s, you know, we work with a lot of doctors, law bloggers, maybe they want to keep the day job, they’ve got a few extra hours a week that they can dedicate to kind of a side hustle and put a manager in place. And I say, that’s probably two thirds of our clients. So that’s really been an increasing part of the business. And we call it semi passive or an executive model. And nothing’s entirely passive. However, there again, with that franchisor support, you put a good manager in place, it is very doable. To go about it that way. And so what to kind of get back to your original question, that is one of the most common things is just the willingness to follow a system. And that sounds cliche, but when I was a franchisor, and I saw all these franchise owners across North America, all operating very similar businesses, our top franchisees are always those that follow the system the most closely. And again, that sounds like some of your franchisor would say, but it was absolutely true. Those that didn’t try to get too creative and market to the wrong segments or higher. pay their people way too much. I mean, you have baselines for all of this, and we kind of help explain, here’s the best way to do it. Either follow us or don’t follow us. But those who are willing to follow military veterans, others that are very disciplined, you know, willing to kind of adhere to it are the best ones.

george grombacher 14:02
Yeah. And that’s one right there where I bet people say, oh, yeah, sure, John, I can totally follow along. I can totally do that. But you need to be really honest with yourself. Because if you’re not actually that person, if you do want to put your fingerprints all over something, or if you’re not going to be willing to for whatever reason, just wake up and do the same thing every day, it’s probably not going to be a fit. Yeah,

Unknown Speaker 14:28
which is totally fine. And that’s how some people are wired. But I look at a client of mine, Nathan Bulcock, over in South Carolina, 40 years old, largest franchise, the two minutes in the truck moving service, but he operates in 12 markets now. And every year he and I do a deal together. And in each case, he puts a young 27 or so year old guy in charge somebody new from church or the community and says hey, go make us proud and give us a little bit of equity. And every deal that we’ve done together, he’s come back and bought additional locations within the first year. I mean, she’s been highly successful and I You know, for him, it’s Hey, I love the franchise world, and countless stepped in and plug and play. And I don’t have to put my fingerprints all over.

george grombacher 15:08
How common is that of bringing somebody in and giving a little bit of equity? And what is a little bit of equity commonly?

Unknown Speaker 15:16
Yeah. So, you know, it runs the gamut, you know, franchises that I’ve owned, you know, we’ve let people buy into the equity, you know, typically up to 20%. And yeah, there’s some caveats, if they were to leave that and, you know, does invest, I mean, we have all the stipulations in there. But everyone has a different approach, you know, some recognize that equity isn’t everything, let’s incentivize them based on profitability and make it act like equity, but not true equity, or keep the cap table clean than others. In case of Nathan, I’m he’ll, he’ll go very generously from the get go. And he’s done a very well. So different trains of thought around it, there’s not one that’s right or wrong, I think it’s very individualized and kind of you bring your long term perspective, and as far as the role you want to play, and how long you see this person staying,

george grombacher 15:58
is that coaching that a franchise will provide to their franchisees commonly,

Unknown Speaker 16:06
you know, they will help them find that manager, oftentimes, to some degree, they’ll explain here’s the best path to go round, here’s the background. So we’ve found to be successful, they will train that manager for you, you can send I mean, we’ve done that with our franchise, Wilson, the manager off to training, let franchisors spend a week with them and train them up, which is a huge benefit. As far as how you incentivize them don’t give some recommendations, but it’s really up to you, um, they don’t meddle too much in that. You know, that is something that actually Nathan is the client I just mentioned, is now doing some consulting for us, in His time is extremely valuable, but we actually fund his coaching several hours for each of our clients, once they make it through the process, just kind of help help them get off to a great start.

george grombacher 16:50
Yeah, that that makes a ton of sense. So. So when somebody picks up the copy of non food franchising, what what are they getting themselves into?

Unknown Speaker 17:00
Yeah, and, you know, we try to make it very readable and understandable, this world of franchise, you know, how do you find the right franchise? What are the was the investment look like? What does that include? What are the expected returns? How do we understand the Franchise Disclosure Document and the FTD, as it’s known? You know, what are some of the things that we found to be most successful? And then we also compare a franchising versus just a startup? You know, what are the trade offs? Both ways franchising versus acquisition? If you were to acquire a business, we’re also talking about those with an existing an existing business, you know, does it make sense to franchise it? You know, what are the pros and cons around that? And so, yeah, we cover a whole lot of different topics, talked about the ownership styles, we talked about the types of industries, which you mentioned this earlier. But it is fascinating when you understand the types of businesses you never think about, and wait a minute, that’s a franchise, and I realized that. So we talked about the different types of industries which resonate with different backgrounds. And yeah, really excited about the book just got it out there two months ago, kind of incredible feedback so far. In George would love to provide a free digital copy to all of your listeners as well. So we want comes out to our website, framebridge consulting.com, share your name, email address, we’ll get you both in on audio as well as a digital download for free of the book. So I’m more than happy to jump on in on the call as well and kind of talk through what it would look like to engage. It’s entirely free for our clients to work with us. There’s no cost at all. We’re funded by the brands, it’s a great model, but more than happy to help in any way we can.

george grombacher 18:35
What is that engagement typically look like somebody goes on and picks up a copy of the book, they say, This is great. Click, contact us, you set up a call, walk me through sort of the how that process looks?

Unknown Speaker 18:46
Yeah, we’ll jump on a 20 minute call. We’ll talk through a little bit about your background. You know what your thoughts are on franchising, we’ll try to help fill in some gaps in the knowledge and if it makes sense to engage from there. And now’s the time, good timing for you to explore opportunities, then. From there, we will all have you fill out a brief questionnaire, I’ll share some additional resources with you, we’ll actually send a physical copy of the book over to you as well. But then from there, next thing we’re doing is we’re teeing up opportunities, we’re sending you a video in which we pulled together the top 10 or 12 opportunities in your market fit what you’re describing, as well as what we see resonating with others who have similar backgrounds that have already met all of our criteria, and have that availability in your market. So from there, you would say hey, here are the three or four that seem most intriguing, we make the introduction to the franchise brand. And then the brand. You know, you’ll go through a series of calls with, you know, in which you’ll dig through the financials, you’ll talk to other owners hear about their experience, you get all your questions answered. Just a whole number of different topics. And, you know, at any point you can hit pause and say, Hey, John, that’s not going to be the right one for me totally fine. And you know, it can be an iterative process where we go back and look at additional opportunities we didn’t start with, but we’re going to start what happens George has two or three calls any start with In this framework in your mind, here’s what I’m looking for. Here’s what makes sense. Here’s what doesn’t make sense. And I mean, we’ve just had a huge success rated, it’d be more place clients with great opportunities, and then we see them coming back and finding additional locations. That’s where we get our validation. But we hold our clients hand through the process and have a series of touch base calls and help them understand the funding piece. If they need to get a franchise attorney to review the agreements, we have all those resources for them.

george grombacher 20:25
Excellent. Well, John, thank you so much for coming back on where can people learn more about you give us the website again.

Unknown Speaker 20:32
Come back to Fran bridge consulting.com. That’s fra N bridge. consulting.com Sign up for our free monthly newsletter, we put out some great content, I will also then send you a digital copy of our book as I shared and you know, now’s the time to take the next step and dedicate a few hours to exploring opportunities we’d be happy to engage.

george grombacher 20:51
Excellent. If you enjoyed as much as I did so John your appreciation and share today show with a friend who also appreciates good ideas go to Fran bridge consulting.com F F r a n bridge consulting.com. Get your free copy of the ebook, nonfood franchising, sign up for the newsletter and schedule that initial call and begin the process of figuring out if this is the right fit for you. Thanks again, John. Enjoy, George. Thanks. And until next time, remember, do your part by doing your best

Transcribed by https://otter.ai

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