The #1 Franchising Mistake to Avoid for FINANCIAL FREEDOM

Guest:

Cliff Nonnenmacher
Franchise Consultant | CEO of Elite Franchise Advisors
LinkedIn

Host:

Melissa Aarskaug

Executive Connect | Website
YouTube: @ExecutiveConnect

Episode Overview:

In this powerhouse episode of the Executive Connect Podcast, Melissa Aarskaug sits down with Cliff Nonnenmacher, former Wall Street insider turned franchise empire builder. Cliff shares the truth about franchising—the good, the bad, and the financially ugly. Whether you're a high-income earner looking to escape the corporate grind or simply exploring new paths to build wealth, this episode is packed with real talk. Cliff dives into what actually works in franchising, the #1 mistake to avoid, and why “passive income” might be the biggest myth of all. From a cartridge business that scaled to closets that bring in $9M/year, this conversation delivers both insight and fire. We spoke about:

• What franchise trends are booming—and which are dying
• The five winning franchise categories you should keep your eye on
• What makes franchises actually fail (hint: it’s not the economy)
• How to approach franchising with realistic expectations and strategic planning
• ROBS funding, hiring hacks, and the ultimate exit strategy

Timestamps:

00:00 – The Harsh Truth About Franchising
01:18 – Meet Cliff: From Wall Street to Franchises
04:43 – First Franchise Win: Printer Cartridge Empire
07:21 – What Wall Street Taught Him About Scale
10:01 – Franchising Trends You Need to Know
14:25 – 5 Winning Franchise Categories (Tools, Pets, Aging, Biohacking, Education)
21:03 – Why Franchises Really Fail
25:11 – The 41 Principle of Hiring and Leadership
28:29 – Should You Quit Your Job to Franchise?
32:36 – Passive Income Myths and Airbnb Reality Check
34:04 – Franchise vs. Building From Scratch: Who Wins?
40:14 – Exit Strategy: Multiples & Liquidity Explained
45:11 – Eye-Opening Franchise Funding Strategy (ROBS)
49:34 – Final Thoughts + Where to Find Cliff

Connect With Us:

Podcast Website: https://www.executiveconnectpodcast.com
YouTube: https://www.youtube.com/@ExecutiveConnect

Social:

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Podcast LinkedIn: https://www.linkedin.com/company/my-executive-connect/
TikTok: https://www.tiktok.com/@melissa_aarskaug
X (Twitter): https://x.com/melissaaarskaug

Episode Transcript

(00:00):
There is an inherent risk and there's a failure rate to franchising.

(00:03):
A lot of this falls on the prospective franchisee or business owner
and a lot of it falls on the franchisee or who's doing the vetting.
You cannot buy a franchise in this country.
Let's start with that saying, you cannot buy one.
It has to be awarded to you.
So if you're awarding franchises to the wrong people, well, that's on the brand.
Like you did that to yourself, right?
So if you awarded a franchise to someone who is marginally capitalized

(00:26):
or doesn't have the personality or the intestinal fortitude to be self-employed,
well, you failed.
If you awarded a franchise to someone and you didn't really dig in deep
on site selection, demographic, psychographics, discretionary spending,
a one three five mile radius of household income, you failed.
And I see this a lot.
I see a lot of brands that don't have a tight discipline when it comes to site selection.

(00:49):
I see a lot of brands and a lot of lawyers and a lot of commercial brokers
who don't protect the franchisee in terms of lease negotiation.
Ever dream of ditching your nine to five and owning your own business?
But not sure where to start.
Today on the Executive Connect podcast,

(01:09):
we're joined by Cliff Namanmachir, a former Wall Street pro
turned franchise powerhouse.
Cliff's built and scaled everything from fitness brands
to Babatium Pires.
And now he's here to answer the big questions.
Why does some franchises crush it and others flop?

(01:31):
Do you need to quit your full time job and go all in?
And you can really buy an urgent care franchise without being a doctor?
Buckle up.
Cliff's about to demystify the world of franchising and show you how to build
your own wealth on your own terms.
Welcome, Cliff.
Well, thank you very much.

(01:52):
Appreciate it.
Happy to be here.
Excited to talk to you.
Now your career started in investment baking at Morgan Stanley
before you made the bold move into franchising.
What inspired you to pivot?
That's a great question.
I was an entrepreneur in my whole life,

(02:12):
and I'm going to say my whole life going back to age eight,
breaking golf balls and doing random things at entrepreneurial things.
So I knew I always wanted to be an entrepreneur.
I started to make a little bit of money.
I bought a satellite system and started trading, day trading.
My handle was blue chip.
I was very early in the day trading days.
So I'm going back in the '90s.

(02:33):
And then I took my portfolio to Wall Street,
because now I'm like, I got to become an investment banker.
This is great.
And I did love it.
And I also viewed it as very entrepreneurial.
I didn't view becoming a financial planner or broker
as really a job.
I didn't view it that way, because I wasn't getting paid
as an salary.
It's like, look, you hunt and kill and drag back something

(02:53):
to the cave.
You're basically creating your own income stream.
So I ended up taking a job with, at the time,
it was Solomon Smith-Barney, who, as you know,
was no longer around.
It was acquired by Morgan Stanley.
And I was with a team there, a coal comprehensive wealth management.
We managed around 250 million.
And I had my strange boss moment, where I asked,

(03:16):
this is a very simple story that everyone listening can relate to,
whether-- I mean, leadership is just gone, in my opinion,
in corporate America.
It's just, I don't know what happened to it, but it's gone.
And I ended up working for a guy, and I asked him for a printer.
Now, remember, we're a million dollar producers.
And there was about 60 brokers in the office.
And I said, could we get a printer on our side of the building?

(03:38):
And he said, if you want a printer, you buy it.
So I did.
Not knowing that the printer cartridge was $250 every time
we bought the cartridge.
Now, I know why they didn't want to do it.
They wanted one printer for 60 brokers in Naples, Florida.
That's where I was at the time.
I lived in Marco Island, and I was a investment banker
at Naples on Fifth Avenue.

(03:59):
So I bought the printer.
I figured out, with a soldering iron,
and a little copper pipe that I cut,
I melted a perfect circle into the toner hopper,
and I filled it up with aftermarket toner,
put a electrical tape on it, put it back in the printer,
and yes, it printed 3, 4,000 more pages.
So I'm like, what the hell?

(04:20):
So I went to Barnes and Noble, and found a franchise in Australia
that reverse engineered printer consumables,
including the secret handshake, which is the chip
on the tip of the cartridge that recognizes
the two as OEM original equipment manufacturer.
I bought the rights of the company from Australia
and expanded the brand in the entire state of New York

(04:42):
in Connecticut.
And that was my introduction to franchising.
I literally left my investor banking job,
bought the franchise.
It was a master.
So there's layers of franchising.
There was the franchise ore, which is the highest level.
And then there was the master, which is the second highest.
I bought a master which meant I had the right to open up
as many locations in the state of New York in Connecticut

(05:04):
as I wanted, but uniquely, I also had the opportunity
to sell the business to you, or to anyone, and generate
a royalty, and to keep part of the initial franchise fee.
So it's a little different model.
And then I would support you, not the corporate office,
not the franchise ore, I would.
So there's different layers of franchising master.
And then below that would be an area developer,

(05:25):
below that would be a multi-unit owner,
and then a multi-unit franchisee,
and then just a single-unit franchisee.
So that's kind of the hierarchy of franchising.
That's how I started.
Ready to lead smarter and invest wiser?
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we unpack executive strategies for wealth and influence.

(05:47):
Hit the subscribe button now.
Don't just watch apps.
I love it.
And I remember buying some of those cartridges
at not HP cartridges back in the day.
I'd turn my HP cartridges in and get the generic refill
cartridges.
I totally remember that.
They were crazy times.

(06:08):
If you extrapolated in the '90s and early 2000s,
if you extrapolated the ink in the cartridge,
you were paying around 3 to 5,000 a gallon.
I mean, everyone was complaining about the cost of milk
and the cost of gasoline.
And it's always amazing how we focus our attention
on all the wrong areas.

(06:29):
Meanwhile, you're buying a black or a tricolor inkjet cartridge
from Canon Lexmark HP.
And if you extrapolate the milliliters of ink,
you're paying thousands of dollars a gallon.
And it's primarily water and it's anti-cregulation agents,
anti-corrosive agents.
I mean, come on.
It's more expensive than Chanel number five.

(06:50):
No, right.
Right.
It's nuts.
I love it.
I love the pieces.
I love the pieces.
I love the pieces.
So tell me a little bit of that.
Let's talk a little bit about how that time on Wall Street
really shaped your approach to building a franchise.
What did you learn at Wall Street that really helped you
succeed in the world of franchise?
That's a good question.

(07:11):
Do I attribute a lot of the teachings from Wall Street
versus-- because I've owned businesses prior.
And let's just say I made a living, right?
I thought I was successful, of course.
I was doing well.
But I didn't start creating wealth until I got involved
in franchising.
And I think I would give franchising the industry

(07:32):
and the brands, most of the credit for how
to scale a small business, how not to operate in it,
but on it, very big difference, right?
I don't want to be standing behind the counter,
refilling intjet cartridges.
I want to be working on the business.
Great book written on that topic is Michael Gerber's
The E-Mith.

(07:52):
Great book.
Because it's a huge issue in our industry.
People go, I'm a business owner.
I bought a business.
And I have to tell them, no, you're not.
All you do is buy yourself a job.
Because I went to your store and you actually make sandwiches.
The fact that you call yourself an entrepreneur
and you're making sandwiches tells me
that you bought a job, not a business, right?
Because anything that requires your day-to-day involvement

(08:14):
is defined as a job, versus buying a business
and hiring people and delegating.
And the reason that the E-Mith is so important,
the reason why working on the business, not in it,
is so important because almost everyone
is raised by someone that said this.
If you want something done right,
you have to do it yourself.
And that one line literally destroyed the thinking

(08:37):
of tens of thousands of entrepreneurs
who felt like they needed to drive their van.
They needed to make the sandwich.
They needed to advertise.
They needed to wear all these hats.
And it all really does is suppress you and keep you poor
and keep you in one location.
That's what it all does.
It just really suppresses the entrepreneur in you

(08:57):
and keeps you down and keeps you bogged down in the weeds,
doing a tend-down on our job.
So franchising gets you out of that.
It is a huge mine shift that takes quite a while
to get away from really the corporate indoctrination
of thinking grid square, staying your cubicle,
staying your lane.

(09:17):
Don't do this.
Be a team player.
Let me distract-- like corporate America
has their own talking points.
And then there's entrepreneurship.
And it's a huge mental exercise to transition
from a cubicle or a corner office to a small business owner.
They don't realize that until they do it.
Yeah.
Not you said that.
I've heard that comment so many times in my career.

(09:40):
If you want to do it yourself.
So that's so spot on.
I love that you said that.
Now, I don't know what it is.
It seems like franchising is hot right now.
I know there's not a day that goes by in my social media
on LinkedIn if someone's not hitting me up to buy or franchise.
So I know franchising is constantly evolving.

(10:01):
So what's hot in the franchise world right now?
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- It's a great question.
Everyone wants to know what's hot, right?
So they want to know what's selling, what's moving.
We help people.
So at Frenacity, which is the consulting firm

(10:42):
that I co-founded with my partner Justin,
we help people navigate the process.
What you just asked is the number one question.
And then we have to kind of ground them a little bit
and say, right, what's hot for this,
what's hot for an ex-farmor rep?
Is very different from what's hot from an ex-engineer
from Amazon, right?
They're very different business models.

(11:02):
And a lot of people just want to chase what's hot
instead of really saying, well, what do I want?
What are my investment objectives?
What's my risk tolerance?
What am I willing to invest?
What do I need to earn?
What I need to earn is very different
from what the other person needs to earn, right?
What phase of life am I in?
That guy has little kids chirping in the nest

(11:23):
and I'm an empty nester, right?
So these are very different phases of life.
And what we try and do with the investor is to say timeout,
let's not talk about brands, let's talk about you,
your spouse, your phase of life, your income needs,
your retirement assets, and really just get big picture.
And we wrap that up into what are your investment objectives?

(11:43):
Let's commit it to writing.
And now we have a strict adherence to say, OK,
you want to be a dance recitals and soccer games,
but yet you're looking at a fast food franchise.
Those two stories can't be true.
You're not going to be at any dance recitals
and soccer games if you want to get in the food industry.
Things like that, or a white tablecloth food concept.
It's not happening.
These are seven day a week, 10 AM, 11 PM type businesses

(12:08):
that do not bode well for lifestyle.
Versus a five day a week business,
kicking off six figures of net income
that could give that parent or that spouse the freedom
and flexibility that they wanted when they got here?
Because right now everyone wants their life back.
And COVID was a reset button.
And everybody realized how they adapted in a miserable situation

(12:30):
like flying every week or commuting every week
and doing all these crazy things for work.
And then when COVID hit, they were like, wow, I never realized.
And we're human.
It's the human condition.
We acclimate to terrible situations.
People acclimate to being physically abused
and really like they acclimate to it.
It's nuts.
Because that's a self-preservation mechanism

(12:50):
that makes us say I have to provide for my family
therefore standing on a train platform
in the snow at four in the morning is good.
No, it's not.
It's a horrible life.
It's the shittiest life ever.
I mean, I don't know why anyone would do that, but they do.
And I grew up along on it.
I used to see these guys standing on the train platform
at four in the morning.
I'm like, you're better than I am.
I'm not doing that.
Like that's never gonna happen.

(13:11):
You'll never see me catching a train
to then catch a bus, to then catch a subway.
I've always said if you wanted to destroy instantly
the quality of your life commute, period, just commute.
You'll absolutely destroy the quality of your life.
And I deal with these people every day.
Two hour, two hour, not round trip.
Two hour each way commutes to work in a car.

(13:32):
Like these people are miserable.
They're absolutely miserable
and they're only doing it obviously to provide.
But to your point, because people want answers,
they don't want that answer.
They don't want the investment, right?
It's like how to lose weight.
They just want to pill.
They want ozemic and wagovie.
They don't want to hear you got to go to the gym.
They don't want to hear you have to,
they don't want to hear the long haul to get what they want.

(13:53):
They want instant, because we live in a time
with instant gratification.
No one wants delayed gratification than no one.
So in my world, what we're seeing is trends.
And some of those trends are buying businesses
that require the use of tools, a tool being a squeegee
or a pressure washing wand or a drill or roofing,

(14:14):
and exciting plumbing, glass, window replacement,
flooring, wallpaper removal, anything requiring a tool
you're going to win.
Because we have destroyed a man's ability in this country
to use a tool.
We feminize them.
And we've been feminizing men over the last 20 years, right?
It's just the reality.
We have feminized them to the point

(14:34):
that their testosterone levels have plummeted.
Their sperm counts have plummeted,
and they can't even reproduce anymore.
And now you have two presidents talking about IVF at the same time.
Think about that.
Name one time in your history, I'm 53.
Name one time one presidential election
that you had two sides of the aisle talking about IVF
at the same time.
That's how bad it has become.

(14:57):
A male sperm count has dropped 50% in the last decade
in this country.
Think about that.
So what's happening?
I don't know.
I just know what is occurring and how to hedge it.
And how to hedge it is to invest in anything
requiring the use of tools you're going to win.
A lot of people don't know this.
I asked them this all the time.
I go, I represent a closet organization franchise.

(15:20):
That's on its face.
Sounds cute and fun.
I go, what do you think the average revenues are?
Every client answers the same investment range.
750,000 to 1 million.
That's the answer.
The answer is 9 million.
9 million is the average revenue
of a closet organization franchise.
So people don't realize that these non-sexy businesses

(15:44):
are the ones that make the money.
So there are five trends I'm going to go through with you.
One, anything involving the use of tools,
we refer to it as the feminization of men in America.
Second category, since we can't repopulate,
and a lot of them don't want to repopulate,
we humanize pets and animals.
So anything involving the humanization
of pets and animals you're going to win,

(16:04):
whether it's boarding, grooming, daycare, training,
retail, it doesn't matter to me, it's a $150 billion
market cap pet care, right?
Third category, this country is aging,
and it's aging rapidly, and we're not repopulating.
You're starting to see a theme here.
And these themes are destructive, which is why Elon

(16:25):
stands on the highest hill telling everyone,
have babies, we don't need to depopulate,
we need to repopulate, because we're an aging population.
And if you want to know, if anyone wants to know,
well, what's the problem if we don't have babies
and what's the problem if a country ages, look at Japan.
Because they have now lost two decades of productivity,
two decades of creating wealth, their real estate market

(16:47):
has been annihilated, just look, if you want to look
at an ancient civilization at one way older than America,
and you want to know what happens when you don't repopulate,
look at Japan and really study Japan for the last 20 years.
It's not a pretty picture.
The government is paying people to get married.
They're paying people to have babies.
They have to repopulate.
Because you need youth to care for the elderly.

(17:08):
It's obvious.
You can't have seniors caring for seniors.
It's like one's breaking a hip, trying to save the other one
from break, like it doesn't make any sense.
So anything evolving, the humanization of pets and animals,
next is the silver tsunami, the aging of America.
They claim that there will be more diapers, adult diapers
sold in America than baby diapers in the next decade.

(17:30):
Think about that.
That's frightening.
That's just the crap out of everybody.
So anything evolving is sister living.
Is sister living?
It doesn't mean a hotel.
It means a residential property.
You could get involved in residential assisted living
for the price of a single-fail-me-home
that you convert into assisted living.
A plenty of brands that do that.
Or home care, non-brick and mortar home care, right?

(17:52):
Or mobility, or non-emergency medical transportation.
There is, or daycare, adult daycare, there's so many ways
in franchising that is backfilling all these trends
that I'm sharing with you.
Next would be, because we're aging, once again,
you're seeing this theme, you now have anti-aging.
You have biohacking.
And you and I are doing a podcast right now.
And we live in a time with Hubertman, the Asprey,

(18:15):
Atea, you have all these anti-aging experts
running podcasts, teaching people how to biohack
and how to live longer, and how to reduce their metabolic age.
There's a program right now on Netflix, which is called Don't Die,
by Brian Johnson, who spends $2 million a year,
basically biohacking and anti-aging,
and reducing his metabolic age by, I don't know,

(18:38):
between 10 and 20 years, he's,
someone met with him and said he has the skin of a 10-year-old.
The skin of a 10-year-old.
I mean, you have to see this guy.
And he posts this whole, if you've not seen it,
he posts everything he does on his website,
the Brian Johnson Don't Die website.
So anti-aging biohacking, beauty vanity,
I don't care if it's hair, nails, eyelash lounges,

(19:00):
Botox injections, hair extensions,
I don't care anything in, I wanna feel good,
I wanna feel proud, I wanna feel sexy,
I wanna feel, it's better about myself,
that whole category, I wanna feel young, I'm in.
And then lastly, and again, this is my opinion,
I think that public schools have failed miserably,
a lot of the feminization of men
has a lot to do with public schools.

(19:21):
They have killed home economics, they have killed art,
they have killed sciences, they've killed sports,
they killed welding, they killed woodshop,
they killed everything to make you a productive human being
and to make a man-manly.
And with all that being said, franchises are now backfilling,
all this stuff.
So any, you want science, technology, engineering,
math, art, architecture, robotics,

(19:44):
what do you wanna do today with your child?
Franchising is now backfilling all of it,
including music, including cooking, everything.
So those are the trends we focus on, why?
Why are we focus on those five?
They are anti-AI, which is the biggest risk
to everyone employed and self-employed is AI.
AI is a massive risk to everyone,

(20:05):
and Amazon, of course, any online commerce.
The businesses I gave you have really nothing to do
with AI risk for at least the next 10 years, I would say,
and Amazon.
And that's one of the reasons why we advise our clients
prudently on focusing on those five areas.
I know it's very long-winded answer.
- No, that's great, I love it.
A lot of it I agree with.

(20:28):
So let's talk a little bit, so that's kind of an area
is to focus on what people should be paying attention to,
but I know in our area, I see a lot of franchises start up
in less than a year, once their least space is done,
they close, so let's talk a little bit about,
I know you talked a little bit on why it's a golden ticket,

(20:49):
but I think what's the biggest reason
that franchises fail and how can aspiring owners
avoid these pitfalls?
- It's a great question, and I'm glad I don't want to go
on shows and it's all like perfect world blue sky, right?
There is an inherent risk and there's a failure rate
to franchising and a lot of this falls

(21:11):
on the prospective franchisee or business owner
and a lot of it falls on the franchisee or who's doing
the vetting, you cannot buy a franchise in this country.
Let's start with that, say, you cannot buy one.
It has to be awarded to you.
So if you're awarding franchises to the wrong people,
well that's on the brand, like you did that to yourself, right?

(21:32):
So if you awarded a franchise to someone
who is marginally capitalized or doesn't have the personality
or the intestinal fortitude to be self-employed,
well you failed.
If you awarded a franchise to someone
and you didn't really dig in deep
on site selection, demographic, psychographics,
discretionary spending, a one, three, five mile radius
of household income, you failed.

(21:54):
And I see this a lot.
I see a lot of brands that don't have a tight discipline
when it comes to site selection.
I see a lot of brands and a lot of lawyers
and a lot of commercial brokers and a lot of who don't
protect the franchisee in terms of lease negotiation.
So there's a lot to unpack in this one question, okay?

(22:15):
There's a lot here.
We could start with runway.
Why did this person fail?
It's a great brand, why did they fail?
Great brand, great location.
They ran out of runway.
They were under capitalized.
They should never have done that deal of that size
without gathering assets, gathering funding
from either third parties, the SBA, someone.

(22:35):
Like you just didn't have enough runway.
And I see it a lot in this business
where great brand, great person, excellent location,
why did they fail?
They ran out of capital.
They could not get through the long break even cycle.
They couldn't get through whatever cycle.
Some people start businesses during recession.
Some people started during COVID.
Like you have to be able to weather that cycle.

(22:56):
And a lot of people aren't prepared for it.
They also don't understand their global debt service
of their personal life.
I'm buying a business.
How many kids do you have too?
They're both entering college.
Time out.
Like that is a huge financial burden.
You're gonna pay for two kids or in college
and you starting a new business all at the same time.
Like do you have the capital for that?
Let's talk about it.
So number one reason why a lot of people do fail,

(23:18):
they just run out of gas.
They run out of runway.
They run out of capital.
And the sad part is the finish line is right there
in front of their face.
That's the saddest part that I see.
They're so close to break even,
but they can't handle it anymore.
Least negotiation, the ability to bounce from a bad space,
they just don't have those options.

(23:39):
A lot of these brokers will jam people
and straight 10 leases with personal guarantees.
You're going nowhere.
And it's sad because a lot of times people recognize
this location is no good.
They recognize that the anchor tenant is moving.
A whole food's an LA fitness, a big box retailer is leaving
which is driving in all the foot traffic.
The small business owner can't pivot.

(24:00):
They signed a crappy lease.
When you work with us,
we have a 22 point mandate for negotiating commercial leases
to mitigate and manage those risks,
including personal guarantee risk.
Another thing is, and I love this by the way,
attitude is everything.
When you talk about failure,
people for self-preserving reasons

(24:21):
like to blame everyone else for why they failed.
Like the woman or the person at McDonald's
that burnt themselves that wanted to sue McDonald's
because the coffee was too hot.
Like you hear these stories saying,
you go, is anyone accountable anymore?
And the answer is no.
Is everyone to blame for everyone else's failures?
Yes.
Like that's all we do today is blame.
Let's start with this and it's one of my favorites

(24:42):
and it's from Jack Welch.
Jack Welch wrote a book called Winning
and he stated in the book that the number one question
from the audience is how do you hire people?
And he came up with a formula
that I have been using my entire career
and I wanna share it with you.
He calls it the 4E1P principle.
This has a lot to do with a successful human being,

(25:02):
a successful business owner or employee.
The 4E1P, the first E is energy.
Do you have energy?
Yes, great.
You check that box.
But you have energy.
Can you energize others?
Can you energize the team that's supposed to be following you?
You're either the leader or the business owner,
you're running your own culture.
Can you energize others?

(25:22):
Yes.
Okay, thirdly, can you execute?
Franchising is all about flawless execution
of a proven business model.
It's a road map.
It's a blueprint.
All you have to do is execute.
You don't have to create the logo.
You don't have to federally register the trademark.
You don't have to do anything.
You don't have to create a website.
You literally don't have to do anything,
but execute flawlessly off the model.

(25:44):
The third E is execution.
Next E, which I find most leaders are weak in this category.
Do you have edge?
Can you have difficult conversations with people?
Most people are cowards.
They don't want to have difficult conversations.
You know what's sad?
Most small business owners will let someone crap on them,
and I'll ask them, go, why do you let them come in late every day?

(26:04):
Why do you let them leave early?
Why do you let them sit on their phone
when customers are walking by?
You want to know the answer is,
I don't want to have a conversation with them.
What if they quit?
My attitude is, what if they stay?
Right?
So there's such a different logic here.
You have to have a little bit of edge to say, come here.
You're demoralizing the staff.
You're coming late.
You leave early.
You're on your phone.
I'm not going to tolerate it.

(26:25):
You're going to either get in line to our culture.
You're going to get out.
But most people can't do it.
And the last one is P for passion.
You have to believe in something.
Everyone wants to straddle the fence.
They want to be neutral.
They don't want to say half the things I just said,
because they don't want to offend anybody.
And they want to silence the intelligence.
So we don't offend the stupid.
You can't live like that.

(26:46):
You can't run a business.
You can't run a department.
You can't run a company like that.
So that has a lot to do with why did that local restaurant fail?
There's a lot to unpack there.
I don't know the answer to it.
But I do know why people fail.
And what I just said is a lot of the reasons why people
don't make it, whether it's energy, whether it's being

(27:07):
a leader, whether it's creating the right culture,
whether it's having difficult discussions, whether it's
being passionate about what you're doing and what you're
executing at the local level.
You need buy-in from people to execute your business.
And a lot of people just don't know how to do it.
They're weak.
Just telling you.
It's so true.
You're going to be thinking about one of my first bosses.
He was 100% italian.

(27:27):
He told me, "Arskog, you need to do this."
And he was so direct.
I loved it because I still to this day,
what, 20 something years later, he's my first boss I ever had.
I still do things the way he said.
And one of the things is I would show up exactly on time.
And he's like, "Arskog, if you're on time, you're late,
you've got to put your stuff away, fill up your walk,

(27:50):
do all these things before you start your day."
And that simple person talking to me,
20, what was it, 25 years plus ago, now I show up everywhere early.
And I'm always ready at the exact time.
But had he not had that conversation with me
and had he not taught me to do more than what I'm paid to do by him?

(28:15):
Because he was a franchisee owner.
He was the owner of where I was working.
I would not be, I'd have a lot of the same characteristics he taught me today.
But quite a switching gears.
I know a lot.
I see in Austin, we have some people
that are doing full-time, ownership, part-time, absentee ownership.

(28:40):
Tell us the story of, do I quit my full-time job and go buy a franchise?
What does that look like for people that are maybe high-income W2 employees
that are interested?
And they do have that cash in the bank.
And they are ready to make that jump.
Talk to me a little bit about the three differences.
Yeah, so I think the right way to answer it is if you're going to buy a business,

(29:04):
depending on what you invest.
Let's just say you're investing several hundred thousand dollars, three, four, five.
I think you should quit and you should fully immerse yourself in your investment
and get that business successful.
So I think that's the right answer.
Is it realistic?
Is it realistic is now the next thing?

(29:24):
And reality, no.
A lot of people know it's like I'm head of household or I have the healthcare benefits
or we need the cash flow.
Right, just their risk appetite is different.
So a lot of people do want to be what we refer to as being heft-pregnant, right?
They want to keep their career and they want to own a business on the side.

(29:46):
It is very normal.
It's common and we allow it with the right person.
So I'll work with someone like that if they have the right amount of capital.
Of course, they have the right amount of cash flow coming in.
There's no sense in keeping your day job if you're making 60 and you have to hire a manager
that you're paying 80.
That doesn't even make mathematical sense.
So sometimes these are just simple math problems.

(30:09):
Sometimes they're risk appetite problems.
Sometimes they're phase of life problems.
It's all sorts of things that we have to navigate.
So you have, I'm going all in, quitting my job, fully immersing myself.
Then you have, I'm going to, I have 20 hours a week of bandwidth.
I'm going to hire a manager and I'm going to be semi absentee.
Thirdly would be fully passive and I don't believe in it and I talk everyone out of it.

(30:32):
I don't have commission breath.
I'm not here to hurt anyone.
I'm not here to put people in business to destroy their life.
If someone believes truly that business ownership is fully passive, I mean that they're just
naive to what business really is and they don't understand the inner workings of actually
running a small business in their community.
So I don't let people go fully, fully passive, which is keeping my career just making investment.

(30:58):
I'm going to hire someone to let them run it.
It's never going to work.
Chances are I would say 90% of the time probably going to fail.
So I don't even think running an Airbnb today is fully passive.
Think about that.
So if I'm building my argument for running a small business that's not fully passive,
someone would build an argument go, you know what he's right.
I should just go buy a piece of real estate.

(31:19):
That's fully passive.
Good luck with that.
Good luck with that.
If you're going to do high frequency turnover, Airbnb, a lot of those people got a lesson
in the definition of passive.
Now they're all done.
You're in Texas?
Yeah, you're in Texas.
Yes, Austin.
There's a ton of people dumping their Airbnb's.
The amount of properties for sale right now for these Airbnb investors is at an all-time

(31:43):
high.
They're getting crushed for that reason.
I thought this was passive.
It's not passive.
So anyway, that's a real good example because I know a lot of people during the pandemic that
had a place that moved out in the suburbs because they didn't want to be where they were
at and they rented out their place and now they've Airbnb and meeting exactly what you

(32:05):
just said is happening.
It's like every day they're trying to flip a house, clean a house, change the sheets, you
know, tenants are breaking stuff, they're taking stuff, keeping track of everything, replacing
the forks.
So that's happening a ton of else in your spot on right now.
Now compare that to, I bought an ETF, compare that to, I bought the S&P 500, compare that to,

(32:29):
I bought a piece of art or I bought crypto or I bought a mutual fund or a bond.
That you want passive, that's passive.
Just invest, set it, forget it, hire a broker, let them deal with it.
So that passive word is, we're writing a book right now called Beyond the Brand for
this exact reason.
Everything you and I are talking about today is Beyond the Brand.

(32:50):
Like you don't hear me riffing brands, your audience needs to buy this, they need to buy
this brand, that brand brand A, B and C, no brands.
Prognosis before diagnosis is malpractice.
There's no reason to talk about brands, brands are like prescriptions.
I don't even know what you need yet, I don't know what's wrong yet, I don't know where
your pain is yet, let's not talk about brands.

(33:11):
Let's talk about you, what you want, your investment objectives and that, that to me is the
best part of what we do and that's why we wrote the book is to really get people thinking
differently and expand their mind into semi absentee, right?
All in, passive, all that stuff.
It's a good conversation.
Yeah, and it made me think about some people I know that kind of what you were talking about

(33:35):
got, you know, realized that they're paying dumb tax and they lost a lot of their savings
on, you know, starting a business or buying a business and they really jumped in head
first without a plan.
So I want to talk to you a little bit about the value of talking to a franchise consultant
and before making that purchase.

(33:55):
Can you share a little bit about the benefits of that?
Definitely, yeah.
We're not all equal like every profession, right?
No, no, accountants equal, no doctors are equal.
We're not all equal.
I think a prospective investor wants to align themself with someone that has been there,
as that wisdom has that business experience, their heart needs to be in the right place.

(34:16):
Too many people today are just so comfortable lying to your face and not advising you properly.
And I think that we bring all that to the table.
We bring a lot of integrity to the table.
We bring our battles scars to the table.
We bring a lot of brands that we've, I'm on my 12th, you know, company in my 50s now and
I'll continue to invest in brands and sell brands and scale brands.

(34:38):
I love it.
I'm obsessed with it.
I think we bring a lot of that to the table.
I'm huge on managing risk.
It's a huge thing that yes, I'm entrepreneurial and people who view me as a risk taker.
I spend a lot of time identifying and managing risks.
I spend a lot of time on the unintended consequences to try and manage some what if scenarios.

(35:00):
Not all of it.
You're not going to manage all of it.
You're never going to be 100%.
But I do spend a lot of time on managing risk and I share that with our clients.
Like I said about the least negotiation, I've learned a lot over the years about brick and
mortar, least negotiation, especially starting my career in New York with some of the most
difficult landlords on the planet are in New York.
I mean, they're very challenging to deal with.

(35:21):
I learned an awful lot and then reshape that and created my 22 point mandate for a least
negotiation.
So the, you know, what you're asking, who do you hire?
Number one, they should work for you for free.
Let's start there.
No one should be charging for their services in my world.
So my world of franchise consulting is a free service.

(35:44):
No different from a realtor.
Okay, realtor is are paid by sellers.
So are franchise consultants.
Franchise consultants are compensated by the seller, not the buyer.
So let's get that out of the way.
It's a free service.
You don't sign anything.
You don't, you're not, I tell every client you're not buying anything.
I want to get that out of their vernacular and I think it's powerful to tell everyone
even listening.

(36:05):
If you work with us, you're not buying a franchise.
You are not.
Number one, you can't buy a franchise.
The brand has to like you and award it to you.
So let's get by out of your vernacular.
All we're doing is determining over the next three, four, five months is franchising an investment
vehicle for you.
Is this the right fit?
Do you want to follow a model?
Do you want to stay inside the curbs?

(36:26):
Are you too entrepreneurial?
Many of the people listening are so entrepreneurial that I would tell them, do not do this.
You're going to be miserable.
Elon Musk does not belong in franchising.
He's played too entrepreneurial.
People, these successful business people that we know do not belong in franchising.
They're too entrepreneurial.
They want to reinvent everything.
They want to play with the widgets.
They want to invent things.
They want, like, a franchisee that joins a franchise doesn't want to do those things.

(36:49):
They would just want to execute.
They want to clap time, create wealth, replace their income, create generational wealth,
have a legacy for the kids, secure a spouse's future, intervene in a life of a child.
They want to invest for those reasons.
They don't want to reinvent things and create patents and all that stuff.
Working with a consultant will keep you out of trouble.

(37:10):
They'll have you focusing on brands that align with your investment objectives.
They'll help you manage risk.
They'll hold your hand through the whole process.
They'll tell you that you need to get that evaluated by an attorney.
They'll guide you in the right way.
They're right attorney.
Not a divorce attorney, not a real estate attorney, a franchisee law attorney.
Very big difference.
Very big difference.

(37:31):
A traditional attorney will tell you to run if they read a franchisee agreement.
A franchisee attorney will say, "This is ordinary and customary."
How could those two stories be true?
Run for the high heels?
And this is normal.
That's why you want to make sure you align yourself with the right professional advisors
so you don't have all that unnecessary fear.
And what's very interesting, if you work with the right consultant, they have experience

(37:52):
in dealing with fear.
Fear is the reason most people don't move forward with literally everything in their life,
whether it's approaching a woman, or whether it's approaching a guy, or whether it's approaching
your boss for partnership or a raise, or whether it's buying a business, or whether it's
having a baby.
It's all fear.

(38:12):
It's all fear.
And you need to learn how to observe it, not let it control you and overcome those fears.
And a good franchisee consultant will say, "You're entering the stage where it gets real."
And now you're feeling the fear.
And a lot of people will manifest fear in different ways.
They're number one ways to blame their spouse.
Just letting you know, it really is.

(38:34):
Number one out to doing anything is the spouse.
They won't let me do it.
They think it's a horrible idea.
Whoever he or she, it doesn't matter, the spouse always brings a hand grenade to the closing
table.
Then it's blaming the accountant or a lawyer.
Then it's blaming their brother-in-law, who's a plumber, who's very successful.
We hear all these stories.
And it goes in this order.
It's interesting how fear manifests itself.

(38:56):
And what they don't realize is, we already know what you're going to say.
Because we know all these things that people do to get out of changing their life.
And they want to live in the past.
Fear is a big deal.
We don't spend enough time on it.
We really don't.
Because it really just stops people from living the best life that they could possibly live,
retiring uncompromised and living the best life.

(39:18):
And creating a legacy for their children and grandchildren.
These investment fears hold them back.
I'll tell you, as you hear us talking about.
My husband just was fearless.
He just assumed he was my husband.
I'm like, wait, so it is spot on.
And he, that's how he does business.
Fearless, go, go, go.
And it really is a muscle.
And it's amazing to see what happens when one can live out of place of being fearless and

(39:43):
really sit in that.
So now you've got to help me answer.
I need some for our dinner parties.
We have this debate at our dinner parties.
We have friends that own franchises and friends that have built businesses from the ground
up.
And we get into this debate on who's smarter and who's making more money.

(40:04):
And so maybe you could give me some insights on the advantages of franchise ownership versus
building a business from the ground up.
Yeah, that's a good question.
So I commend all of them.
Anyone who's entrepreneur, I have the utmost respect for, right?
So I'll just, as a blanket statement, I commend both of them who's better or who's winning.

(40:27):
Really largely comes down to the person that's executing the model.
I know people that own one subway.
I know people that own 100.
I know people that own one tax accounting service.
I know people that own 250 Liberty tax franchises.
So a lot of it has to do with the person.
I believe, I believe that franchising is the probably the best.

(40:49):
Methodology for creating wealth ever that has ever been created.
If you think about wealth creation, second to that would probably be life insurance, right?
But you have to die to receive the benefits of it.
So if you look at like a methodology of creating wealth, I think franchising is on parallel
to anything, you know, out there.
Why?

(41:09):
Clapses time.
Time is not your friend.
It's the only commodity you can't recycle.
And it will take your friends at the dinner table.
It will go on and pontificate about how they spent 30 years building their business.
The franchisee comes in going, I only own this for five years and I'm making as much or
more than you are.
And you spent 20 years doing it.
So do that math.
It's like, yeah, but we're more proud.

(41:30):
We created everything.
Well, I'm proud that I've collapsed time.
Leverage, leverage collective intelligence to scale my business and create wealth.
So who's right or who's wrong?
I don't know that there's a right or a wrong.
What I could tell you is this.
The friends at the table that created their own brand, that is a unique breed.
It's a unique breed of entrepreneur.
They created something.

(41:52):
The person that bought the franchise, they're also unique in their own way, but they bought
someone else's bright idea and just scaled it.
And I think that franchising provides a pathway to wealth creation without having to invent
anything.
Think about that.
To me, that is, that's when one plus one equals four.

(42:14):
I'm sorry.
It is a force multiplying effect when you can say, I've been a corporate American my whole
life.
Okay?
I'm not entrepreneurial.
Okay?
I always wanted to do something on my own.
Great.
Why don't you buy a franchise and then they do.
And then they have the ability to call someone in Arizona.
Hi, my name is Cliff.

(42:35):
I bought the same franchise you have owned for 20 years.
I heard you're doing eight million, four million, two million, I'm at zero.
Do you mind if I fly out there?
Can I take you to lunch or dinner?
Can I pick your brain?
Can I leverage your intelligence to find this path to what?
That's the beauty of franchise.
You could have two, three hundred people.
Now your friends at the dinner table that created their own brand, who were you calling?

(42:57):
Well, we were lying on each other.
So it's just you two.
Here's the other thing you need to know.
Exit strategy, which most people do not put enough emphasis on.
There's a lot of things to talk about today.
No one wants to talk about, right?
Rest tolerance, right?
Appetites.
Joe, who's this?
Exit strategy is everything.
Build the plan with the end in mind is critical, right?

(43:19):
We all heard that book.
Build the plan with the end in mind.
This is proven, by the way, this is not for the cocktail party discussion.
You will get a greater premium on EBITDA and a franchise than you will in an independently
own business.
It has been proven by biz by cell aggregating data over decades.

(43:41):
Franchise, netting a hundred is getting, I'm just going to use an example, a three time
multiple.
Same business that's not in a franchise netting a hundred, they're getting a two, two and
a half time multiple.
It's been proven.
Franchise, we've got to hire a multiple because when the person buys it, they know that
if the seller bails on them, they have the ability to call the franchise or in a hundred, fifty,

(44:05):
two, three hundred other franchisees to get the answers to the test.
How do I do this?
How do I compensate my manager?
How do I retain my talent?
How do I, how do I, how do I, everything is there for the asking where that independent
business, what is the first thing we do is a buyer of an independent business.
We put in writing, you were going to stay on as a consultant five days a week for the

(44:27):
next, how many months?
Right?
That's the first thing you put in that deal.
100%
Reps, warranties and you will be here for a smooth, seamless transition of the business over
the next 90 days.
That's in writing in the contract.
Some people even hold back money in escrow so that the seller fulfills that 60, 90 day obligation

(44:47):
because that is the pain point of the buyer.
What if you leave?
You don't have that worry in franchising.
That's why we get a greater multiple, multiple and that's why we also have more liquidity.
We have more, forget the multiple, even if the multiple was the same, you will sell way
more franchises as compared to way more independence because of the liquidity factor.

(45:08):
This is like insanely important when you're an investor, exit, liquidity, risk, all of it,
net, margin, yeah.
100%
Yeah.
100%.
So let's talk, let's talk funding strategies.
Are there any kind of unique funding strategies that you want to share or financing options
that people could explore when they're looking at franchises?

(45:32):
No one has ever asked me that question.
Interestingly enough, so I was an investment banker as you know and I used to come back to
my branch manager and say, I met with the doctor's office and they own their building in their
form.
He said, "It's impossible.
It's impossible."
Then I would go back out in the street because I was a retirement plan executive with

(45:52):
Salmas McBarnay and I would go back out in the street and I meet a lawyer in the lawyer
and say, "Yeah, we own our building, we own real estate, we own all this stuff in our retirement
plan."
I'd go back to my branch manager, can't do it.
It's impossible.
You can only buy stock funds and mutual funds, blah, blah, blah.
So here's Wall Street's talking points.
If you have money, you need to give it to us.
That's simple.
That's Wall Street.

(46:12):
If you have money, you need to give it to us.
Stocks, bonds, mutual funds, proprietary products and all their horse crap, right?
So all that stuff, that's what they say.
But they don't tell you is that since a RISOLO was enacted in 1974, the employee
Retirement Income Security's Act, you and I have the right and your listeners to self-direct
your retirement assets, right?

(46:33):
You could do a self-directed IRA or you could do something that no one probably has ever heard
of on this call called an R-O-B-S.
It's called a roll over for business startup.
And what it allows is it allows you and I forget our age, forget our age because I know
you're not 59 and a half another in my.
So that being said, you're laughing, but that being said, you know you're not subject

(46:55):
to a, excuse me, you know your subject to a penalty because you're too young and I'm
too young.
Yes.
Yes.
There is no early withdrawal penalty.
It is a dollar-for-dollar distribution.
It is not alone.
There are no federal income taxes.
You can take dollar-for-dollar out of your IRA, 457, 4.3B, IRA roll over, set simple, any qualified

(47:18):
retirement plan that is not connected to your current employer, right?
So you can't be employed and do this.
You have to have your IRA on the side of your job or an IRA roll over something like that.
You could take it dollar-for-dollar invested in a franchise or in a business.
Zero or I want to repeat, zero penalty, zero federal, zero state, zero or which are all penalty

(47:42):
and still maintain tax deferred status.
Now why do I love this?
So people are going, oh that's cool.
Why do I love this?
Here's what I asked people and I'm going to just give you to you simply.
I'll ask people, what do you have in your checking account?
A hundred grand.
Is that what you're going to use to buy the franchise?
Yes.
Okay, a hundred grand in your checking account.
What's in your IRA?

(48:02):
A hundred grand?
Yeah, but what do you have in your IRA and they go a hundred grand?
I go, no you don't.
If you have a hundred grand right now in your IRA and you live in a tax state, you have less
than $70,000 in that account.
This is the big misunderstanding with IRAs.
So I go, why would you use a hundred grand and after tax dollars in your checking account

(48:24):
to buy a franchise when you can let the state of California and the federal government invest
in your franchise?
Because your IRA, a little bit of it belongs to the state of California and state income tax
when you take the money out and 30 cents in the dollar guaranteed belongs to the Fed.
So why wouldn't you use their money to buy the franchise?
At that moment, once your mind is expanded by new ideas, it never goes back to its original

(48:49):
shape and that is the moment where people go holy crap.
If I lost, so then I tell them, if you lost that full hundred grand in your IRA, you only
lost 70 or less in a state tax state, you lost less than 70 grand because 30, 35 or 40
of it never belonged to you to begin with.
It's not your money.

(49:10):
I got at least people.
I got a million dollars in my IRA.
No, you don't.
You have less than 700 grand.
This is like a wake up call.
A lot of people don't realize when they start taking distributions from these retirement
accounts, that money is not there.
It belongs to the state and the Fed.
Anyway, that's my eye opening funding strategy is to use the Fed and the state to fund your
franchise using an R O B S strategy.

(49:34):
This is amazing.
It's been an awesome deep dive into franchise.
Now tell our listeners where they can find you and how they can connect with you.
Frenacity.com, so my name is Cliff Nautamauke.
You can find me at Frenacity.com.
That's F-R-A-N-O-C-I-T-Y.
And for any listeners that have an interest specifically in franchising, my podcast, Pursuit

(49:58):
of Profit, only discusses franchises.
That's it.
Does not compete with Melissa, you know, nothing like that.
So it's a clean, clean show.
We love it.
I appreciate that.
Thank you.
But all alone Cliff, thank you so much for being here.
It's my pleasure.
I know you're going to motivate our listeners to look into franchising strategies.

(50:21):
We appreciate your knowledge and your time and that's the Executive Connect podcast.
Thank you for having me.