September 11, 2025 • 32 mins
What separates successful franchise concepts from the overhyped flashes in the pan? In this revealing roundtable discussion, franchise prodigy Dan Claps – who sold his company to private equity before turning 30 – joins forces with seasoned franchise consultants to cut through the noise of franchise marketing and deliver unfiltered truth about what really drives success in this industry.
The conversation quickly challenges conventional wisdom about market saturation. Rather than fearing competition, the experts reveal why established markets often present the safest bets for new franchisees. "How many pizza restaurants are in your neighborhood? Every corner, right?" Dan points out. "Pizza is a $25 billion space. You need a lot of pizza." This counter-intuitive approach to evaluating franchise opportunities shifts the focus from avoiding competition to identifying robust demand.
Perhaps the most powerful insight comes when Dan shares his formula for franchise success: "90% of being an entrepreneur is picking the right industry." The panel explores how technology integration, recession resistance, and market validation should guide your franchise selection process far more than trendy concepts or flashy marketing.
For current franchise owners, the discussion tackles the evolution of the franchisee-franchisor relationship. Dan reveals innovative approaches to keeping veteran franchisees engaged beyond the two-year mark when many begin questioning the value of their royalty payments. His insights on establishing Franchise Advisory Councils and creating financial incentives for system-wide growth represent cutting-edge thinking in franchise leadership.
Whether you're contemplating franchise ownership or already operating within a system, this episode delivers practical wisdom from those who've built and sold successful franchise businesses. Their candid assessment of market opportunities, technological disruption, and relationship management provides a roadmap for navigating the complex franchise landscape in today's economy.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Hi everyone, welcome back to the we Bought a
Franchise podcast.
I'm Jack Johnson, I'm JillJohnson and we are back with
another roundtable format.
And today we're throwingsomething even more interesting
into the mix.
We have one of today's hottestfranchises.
The CEO and, dan, I guess wouldit be fair to say you're the
founder of the franchise.
(00:21):
Is that fair?
Speaker 2 (00:23):
You know I always like to joke.
I did find the business, so Iwould count myself as a founder.
But the founder of Voda is apartner in the business, and so
I consider myself the founder ofthe franchise company, but the
business started in 2009.
Speaker 1 (00:37):
Okay, so Dan Klaps, who's the CEO of Voda
Restoration.
You guys, Dan, is like one ofthe biggest prodigies in
franchising.
Were you even 30 when you soldyour company to private equity?
Speaker 2 (00:51):
I was a month away from 30.
Speaker 1 (00:53):
29.
Wow Excellent.
Speaker 2 (00:55):
It was like June May 7th was the transaction and my
birthday was June 7th.
Speaker 1 (01:01):
There's a lot and, for those of you who listen to
our podcast, we've had Dan onbefore, but we're excited to
have him on this format with thewhole team.
We also have our team ofamazing franchise consultants.
We have Catherine Allen, whoowns a Soccer Stars franchise.
She was MVP in her first year.
We have Morgan Knoller, whoalso owns a Soccer Stars and she
is known as one of the biggestbig deal closers in her system.
(01:24):
She's also one of the top fivefranchise owners.
We have Brian Gross, who's alsohad a successful exit with his
franchise Art of Drawers, butbefore he exited, he was one of
their top.
I think you were their topfranchise in your first year,
correct, correct?
Yes, so we've got quite apowerhouse today, we sure do.
So all right, Dan, let's getright into this.
(01:46):
I want to start with you.
The format of this podcast forall of you listening is to be
more of like a fireside chatwhere you're going to get to
hear real franchise people justkind of talking about what we're
seeing in the industry and inthe world.
So, dan, for you, let's justget right into it.
What category in franchising doyou think is most overhyped and
(02:09):
why?
Speaker 2 (02:11):
Oh, wow, overhyped, and why?
Well, I guess for me, thebiggest thing I see in
franchising and you mentionedthis is all about being candid,
so I plan to be For yourlisteners.
I'm from New Jersey, so respectmy directness.
I'm a big proponent of, I thinkobviously, when a franchise
(02:34):
concept comes out and it's neverbeen done before, that's very
exciting and obviously startingsomething that has never been
done before is a great businessprinciple.
But I think that when a newtype of brand comes out in a
completely different industrythat has not been franchised
before, I think that you can seesome challenges when they grow,
because you know to put inperspective.
If, like you're in the roofingbusiness or you know boutique
(02:57):
fitness, this has been done,it's been tried and true.
There's no changes in crazylicensing or build outs end up
being three times the amount,and so I think the things that
get overhyped are sometimes aconcept which would end up being
a huge concept around thecountry, but maybe not
franchising as many units rightaway.
You know.
(03:18):
To give you an example, likeyou know, I think the golf
concepts are really, reallyinteresting and exciting, but
some of them haven't been provenout yet, which is fine.
Bigger risk, bigger reward.
There's nothing wrong with that.
And then you franchise thatbusiness and then in certain
states there's regulations orrequirements that were
unforeseen, and so I think thethings that get overhyped are
(03:38):
it's exciting to go into a newindustry never done before, but
I think franchisors doing thatshould probably prove that out
in a few markets first, butbefore then going into hyper
growth.
Speaker 1 (03:49):
I think that's a good point and I don't want to open
that up to the group here.
But before we do that I have aquick question for you, just to
follow that up.
One of the things that's mademe nervous there are some newer
franchises that when you look intheir FDD, if the franchisor is
just losing money, hand overfist, that really freaks me out.
(04:11):
And I know some of them mayhave equity partners and things
like that.
I don't know, am I beingshort-sighted with this?
Speaker 2 (04:18):
I don't know.
That's an interesting point.
I think that when someone'sexploring a franchisor, they
should obviously explore item 20and item 21.
The only thing that I would sayyou should definitely look at
that the leadership team or thefounder has substantial capital.
The only thing to play devil'sadvocate to that is when you
look at, often, a franchisorthat's in high growth phase.
(04:39):
If you think about theaccounting principles that are
applied to a franchisor, theycould look different than the
actual reality.
So to give you an example, it'svery granular.
But if a franchisor has awarded, you know, 50 territories in a
year and they were able tocollect those franchise fees,
they obviously have substantialexpenses in those costs.
(05:00):
Those all get recognized forthe year, but the franchise fee
gets amortized over 10 years andso all of a sudden that number
can look upside down, becauseall the expenses were recognized
for the year but all therevenue was deferred over 10
years.
And so I think that's one thingto keep in mind.
There's other ways to obviouslyvalidate that they have
financially sound.
(05:20):
Obviously, if they haveroyalties that sustain or, you
know, subsist in my sales, theIRS recognizes those revenues.
So it gets a little confusing.
Speaker 4 (05:28):
So I thought Dan brought up an excellent point
with creating a new market.
Right, and I think it comesback to we hear all the time is
there's too much competition,the space is too saturated.
So something new, almost stillsafer, right.
I just had a candidate who wasgoing through the process with
an electrical services companymajor metro area and weeks in
(05:49):
the process came to a stopbecause I guess they had just
Googled for the first timeelectricians in their area.
They said they found over 20.
And it gets back to afranchising trying to mitigate
risk, right, and would yourather be in a market where
there's huge demand that's kindof recession resistant and just
get a slice of it to have asubstantial business, or go and
(06:12):
try to create a whole new market?
One of those is simpler, right,you know so.
So I really like dan's take onon just the risk of going in
something that's brand new andunproven.
Speaker 5 (06:25):
I like your comment on the high risk, high reward
with the emerging brand, right.
So like a part of what we do atFranchise Insiders is the
Zorical assessment which willshow us who falls more into that
entrepreneurial bucket versusthe proven system, right?
So I think that's, you know,that's where we come in, so when
(06:45):
we are talking with a candidateand we can see, okay, this
person like me, I'm veryentrepreneurial, that was my,
those are my results.
Soccer stars had been around awhile but they had just started
franchising.
So essentially, in my opinion,it was kind of an emerging brand
because they had never reallyfranchised before.
And so more again, you know, I'msure you would agree with this,
they were kind of an emergingbrand because they had never
really franchised before.
And so, morgan, you know, I'msure you would agree with this,
(07:06):
like they were kind of buildingthe plane while it was flying,
like, oh, we need, you know, andbecause I came from franchising
, uh, and I'd done that for 13years and was building them like
new, new, that world, I and italigned with my passions and
interests and all the things,like I was able to scale really
quickly.
But I think for someone whomaybe came in, or could come
into a brand who is not thatentrepreneurial, you know,
(07:30):
person, they may struggle more,and so that's where that
matching process andunderstanding your candidate for
us is really crucial, so thatwe're setting them up for
success and, in turn, on yourend, dan, you know we're
bringing you quality candidatesthat are gonna, you know, thrive
in your system.
Speaker 2 (07:46):
Just to piggyback on Dan, you know we're bringing you
quality candidates that aregoing to, you know, thrive in
your system.
Just to piggyback on that, youknow, like that's a great
example.
Obviously, there's exceptionsto what I was saying, like in
your case, in that conceptbacked by a large you know
financial partner Right, andthey're very savvy in the youth
enrichment space.
I think that's it.
That's a different situationversus, like you know, I started
doing something completely new.
I've never been a franchise orI don't have a ton of you know
(08:10):
this hypothetical.
I don't have a ton of you knowcapital like that.
I think it's different than inyour case.
That brand is super well backedfinancially and has a lot of
intellectual capital behind it.
And then just one more thing onBrian's point.
You know what's interesting tome, like how many pizza
restaurants or pizza places arein your neighborhood, every
corner right?
Well, pizza is a $25 billionspace.
You need a lot of pizza.
You know, in our spacerestoration it's a massive
(08:33):
industry too.
You need a lot of competitors,but what I've found is a lot of
people will like, let's say, Iwas looking at you know a waxing
concept and I go and I look atall the waxing concepts in my
area and I say, okay, there'sfive and there's 10.
What people don't alwaysremember is that you don't know
about the other brands, thatmaybe someone bought in a
(08:54):
neighboring territory, that theyhave a development schedule,
that they will be opening threeor four more of those from.
Maybe there's a developmentschedule in four different
concepts in the same space, andso like it's difficult to really
assess like how many are inyour market versus you
succeeding or not.
I think it's more important tolook at like what's the industry
growth and revenue size, andthen it's okay for there to be
(09:14):
competition.
Because just last thing toBrian's point me personally, I'd
rather not have to educate amarket on something.
I'd rather come into a marketwhere there's a general
understanding of that and thengo into it.
Now don't get me wrong.
When Orange Theory first cameout, you were the first Orange
Theory franchise owner, kind ofvery early into boutique fitness
.
There probably was some marketexplanation.
(09:36):
But what people forget is thatOrange Theory wasn't this giant
concept at first.
Their ADVs have gone up overtime as the market has caught up
to that space.
Speaker 1 (09:49):
Dan, do you remember when you and I were having
dinner at the Boca Resort andthe founders of Orange Theory
and Anytime Fitness were at thetable right next to us?
Speaker 2 (09:56):
I thought it was funny because I had met Dave
Mortensen a few weeks prior andI saw him sitting there we were
having dinner and obviously Iwas intimidated to go up.
It was like literally like thefounder of Orange Theory and
spouses and the founders ofAnytime Fitness.
And then he actually saw me andcame up and I was like, oh,
this looks cool in front of Jack, Like I know these guys, but it
(10:18):
was just actually because I wasafraid to say hello to them.
Speaker 1 (10:22):
You know one point on competition.
You know, jill and I I rememberwe started Franchise Insiders I
purposely like the big namefranchise consultants at the
time not because I didn't likethem, but I didn't want to see
their stuff.
Right, I just wanted to havetunnel vision.
I knew they were there but Ilike blocked them because I
(10:42):
didn't want to see.
I just wanted to go.
I knew that we could win and Iknew we had a good brand, but I
didn't want to see them.
And it was the same with pinks.
Like with pinks, we never evenbothered to see who our
competition was.
We just open and um.
And we created the top pinksfranchise last year.
And our opinion has always beenthe same as what you said,
which is we know the demandsthere, we know the competitors
(11:03):
are there and we know inherentlywe're going to be better.
Speaker 3 (11:06):
I think that's you know.
Again, when people look atthings, it's like, oh, but
there's already this in thisarea and it, you know if it's.
If you want to open a crumbleand there's already a crumble in
your neighborhood, you're yeah,you're not going to open it,
it's already there, they've donethe research that that's a good
market.
So you know, for us too, with,like the window with pinks
(11:28):
windows, it was like we knew.
I mean, we had window washersand pressure cleaning in our
neighborhood.
We saw it every day and insteadof that pushing us away, it
made us excited, because we'resaying people already doing this
.
So then let's find our edge,like, how can we be the best out
of all this?
The need is there.
So I don't think you need toshy away from competition, um,
(11:49):
but I think again.
I mean, I'm sure you guys allsee this we get people that say,
oh, they just opened up.
You know this, uh, ice creamplace.
I want to open one, like, butit's there already.
But a good brand one, but wecould find something similar,
since the need is there and themarket is there.
So let's look at somethingsimilar.
Speaker 1 (12:08):
But to Dan's point, I mean, it's like so here locally
, we have a, and you're right,there's a million pizzas in Boca
Raton and most of them aremediocre.
Speaker 3 (12:14):
Yeah, we still don't have one that we like.
Speaker 1 (12:21):
So there's this guy who comes in, opens up a place
called Death by Pizza and it'sDetroit pizza and it's awesome
pizza and it's Detroit pizza andit's awesome and it's got a
cool brand and you can't get in.
So again, I still think a brand.
Just like what you did, Dan,with Voda.
There's tons of restoration outthere.
Voda looks good, right, Vodalooks modern.
It's got a young leadershipteam.
It has things that make itdifferent.
Um, what's a hidden opportunitythat franchisors see that most
(12:44):
consultants and buyers overlook?
Speaker 2 (12:46):
The first thing is like, 90% of being an
entrepreneur is picking theright industry.
If you pick the right industry,you can even afford to make
some mistakes because you're inthe right industry.
There's high margins, highgrowth, there's high opportunity
.
People want to be in it, theywant to work in it, they want to
use the service or product andso I think picking the right
industry is key and from thelens of a franchisor, I know
(13:09):
that for us we didn't start inrestoration, we were franchise
executives that got intorestoration, but I'd say 90% of
our success was picking theright industry.
It was high growth, it was infavor of institutional investors
, there's high margin, there'sconsolidation happening in the
space and, as you know, there'swater's not going anywhere.
There's gonna always be waterand floods and issues and with
(13:29):
climate challenges and just theaverage age of a home getting
older 38 year old average, whichis just gonna get older there's
a lot of opportunity.
So I think, taking the rightindustry and then I think the
biggest opportunity to yourpoint, whether it's restoration
or roofing or some type of nextgym concept, usually businesses
can succeed with just bettercommunication, a better customer
(13:51):
service experience and, mostimportantly, going into an
industry where the technology isantiquated and just simply
investing in better technologyto make the service better, make
the business offering better.
Better technology to make theservice better, make the
business offering better thosethings alone you can go into an
industry that's kind ofdinosaur-esque and go in with
better technology, betterbranding and a better, just
(14:12):
really way of communicating andyou can win.
You don't have to recreate thewheel.
Speaker 1 (14:19):
Yeah, we had a franchisee from Sharkyy's cuts
for kids on last week and I'lltell you.
You know, when Jill and I firstbecame franchise consultants,
we looked at that brand andwe're like man, who would ever
buy this?
And now I look at it and I'mlike this is an awesome
franchise.
It's been around a long time.
It doesn't have litigation.
(14:40):
Um's got a lot of franchisees.
Ai is not going to take it over.
It's a simple staffing model.
We've got section 179.
That is where I think franchiseconsultants really can help
people who are coming in andsaying I really want the UPS
store, and help them sort of seethe forest through the trees.
Speaker 6 (15:04):
Yes, I think we need to pay a lot of attention to
technology and AI and what can'tbe replaced, like sharkies, I
mean I'm going to get my kidshaircut, not using AI, I'm going
to go into a store, so thatone's pretty recession proof.
I like those.
Home services are always needed, but the technology has to be
there right.
We're increasing, so I thinkthat's our job to make sure that
(15:25):
whatever franchise we'reshowing our clients is something
that can grow and scale.
Yeah, I think there's a lot ofthings.
I also think part of our job ismaking sure that these new
franchisees coming in understandthat they're running a business
and even if the AI is there andthey do have the franchisor
(15:45):
backing them, they still have towork hard and run the business.
And I'm hearing more and morethat they're sort of feeling
like it's a playbook and theycan come in and that the
franchisor is going to give themall the clients that are going
to do all the marketing for themand it's just the business is
going to run itself.
So we're seeing a lot of thaton my end.
Speaker 1 (16:11):
I'm a lot less afraid of my burrito getting made by a
robot in a couple of years atChipotle.
I wouldn't trust it to cutTrey's hair, that's for sure.
But that's why validation iskey, and someone said it the
other day.
We were on a call, dan, withCMIT, which is an IT consulting
franchise, and she said wemandate that each prospective
franchisee validate with atleast five to seven franchisees,
which is the guidance that Ithink 90% of franchise
(16:33):
consultants give too.
Talk to those owners to reallyhear what they're doing and how
they're running the business andhow.
Yes, you can have a great brandlike Voda, you can have a
recession-resistant service likeVoda, but the franchisee is
still the one that makes themagic happen.
Speaker 6 (16:50):
And I think what's unique about Voda is it's really
two franchises in one.
So, voda and Dan, you've done alot of work, but you've made
sure that, even if it's notrestoration, that you're still
doing the carpet cleaning,you're still getting those jobs
and your employees stay employed.
And I think that's reallyimportant to note, because a lot
of the home services is justvery narrowly focused and they
(17:11):
could be doing a lot more withjust one brand.
I think Voda does a really goodjob.
Speaker 5 (17:16):
And I would say with my biggest learning, I think,
with Soccer Stars, was the cashflow and figuring out that,
because I had to pay my coachesup front and there was a lot of
payment on the back in like fouror five months later.
And with Voda Dan, you talkedabout that at the Franser
Conference.
That's where the cleaning andthe restoration are really good,
(17:37):
right Hand in hand, kind ofkeeping that consistent cash
flow going while these biggerjobs are coming in.
Speaker 2 (17:47):
Yeah, and not to shamelessly plug Voda, but to
give you an example in thatregard, I think about a few
years ago when we launched thebusiness, we saw a lot of
opportunity where we would go toa home to do, let's say, a mold
extraction, get mold out ofsomeone's home.
And they would say, oh mygoodness, I didn't know this was
going to be you know $3,000,and maybe insurance isn't
(18:07):
covering it for whatever reason.
And I remember thinking like,well, how many of these jobs are
we losing to people that maybejust can't stroke a check for
three grand or don't want tostroke you know swipe, their
credit card?
And we pulled in a partnerwhere we could do consumer
financing right.
So all of a sudden we can walkinto a home and if someone can't
spend the $3,000, we can offerthem a 0% APR over 24 months.
(18:30):
And then we took that productand we embedded it into our CRM
system where we can literallyjust right there on the spot say
, hey look, jack, we can financethis.
Here's the payment terms, it'sright there, just click a button
and it goes to the invoice.
That's an example of technology.
Or one other example two yearsago I was at the Restoration
Industry Association Conferencethat I go to every year, and
(18:50):
everyone was like no AI, that'scrazy, no one's going to want
things done that way.
Well, our technology providerthat we utilize for project
management leaned into that, andhere we are now today where,
when we do estimates, that's abig part of our business, right,
it's more of an art than ascience when you do a water
mitigation estimate forinsurance through Xaptimate.
And for a long time we had apartner we still do but that
(19:15):
would work with our franchiseowners if they needed some help
getting those estimates up andthey charged a fee, but the fee
was always worth paying becausethey could take the average
ticket up enough where thatpercentage didn't matter, right?
Well, here we are two yearslater.
Our technology provider wasable to do that now through AI.
So they introduced AI estimatesto make doing estimating more
(19:35):
accurate, more seamless throughAI, through all the knowledge
that it has, and so you knowperfect example if you're not
leaning into that technology,not when everyone's starting to
do it, but beforehand, you canvery quickly in any business
start to lose market share.
Speaker 1 (19:50):
Isn't Klarna going public today?
Can they see that, speaking ofyou know, being able to finance
over time, I mean, look, peoplekeep sort of talking about
feeling like the economy'swobbly but yet spending is still
great.
People are still out therespending at the same levels they
were spending.
Restaurants are still full.
Actually, debt, if you look atdebt ratios, there's still.
(20:12):
People are not.
It's no different than it was.
But it's the jobs, right,they're saying.
But even the unemploymentnumbers aren't terrible.
But people keep saying, well,why aren't the jobs growing?
Because AI, because ai can takethe place of so many of these
jobs, which is why we're seeingsuch a strong influx of new, you
know, business owners andfranchise owners, because, let's
(20:34):
face it, so many of those jobsthat were needed, like, look at,
we can do so much coding nowwith claude.
Um, claude can take the placeof, like a coder, two coders and
so, yeah, that's why we'reseeing it.
The economy is still very strongin terms of what people are
spending.
The stock market's at anotherall-time high today.
(20:54):
But the reason why the jobs aresoft is because AI is able to
take the place of so many ofthose jobs, which is why we're
seeing the influx.
Which, dan, leads me to my nextquestion for you, and I have to
read it here Um, when, as yougrew Voda, and I remember being
there with you in your firstcouple of months what's the
hardest part about growing ayoung franchise system?
(21:15):
What, what you know?
Take us through that a littlebit.
Speaker 2 (21:20):
Yeah, I mean, I think probably the hardest part about
growing a franchise system likeVoter or any other is it's a
lot like building a technologycompany.
Or an extreme example if youread the book Shoe Dog by Philip
Knight, it's about his journeyof building Nike and I can sum
up the book for you.
He goes through basically hellfor 20 years and now he's Philip
(21:41):
Knight.
They had inventory issues forthe entire journey of Nike, like
he was always, even though thecompany was in China and Japan
and wherever all over the world.
He was like struggling to like,keep like his business afloat
or his personal life because hewasn't able to take a ton of
money out of the business.
I think that building a solidfranchise or you have to be
(22:02):
disciplined and you have tocontinually just reinvest your
profits that you make when youfinally do make profits into the
business, into the leadershipteam, into support staff, into
technology, and so if you're afranchisor, you're building an
asset that is eventually goingto be worth a ton of money and
make you great EBITDA, butyou're going to have to have a
(22:23):
really long time horizon becauseeven when everyone's going to
celebrate you everywhere you go,they'll say great job and your
franchisees are happy.
But if you're doing it right,you're reinvesting into that
business for the long term.
And then I think the secondthing is and this is something a
reality I came to recently If Igo right now downstairs and I
press a button on my phone foran Uber, I expect it to show up,
(22:45):
I expect it to be on time andall these things.
I don't know how many ridesUber runs a day around the world
, but the expectation is itshows up.
If you really think about it,you're pressing a button and the
car's showing up.
It's amazing when I fly in anairplane and I was 10 cans
through the air, which is anamazing, you know feat for
mankind, right, you know, Iexpect it to be on time and if
it's even a little bit delayed,I'm upset.
(23:05):
I see people get upset evenwhen it doesn't take off because
of weather, like it's not.
They can't control that, butthe bar is so high, no matter
what, right.
And so I feel the same way withbuilding a franchise system.
You hit this next bar whereyou're like man, we're doing 10
times more than we ever werebefore.
But that next franchisee, orthat franchisee that's been
(23:27):
around for a bit, that'sstarting to mature and wants to
continue to get value out oftheir royalty, is going to
continue to raise the bar, andso I think, like the, it's not
really a challenge.
But you have to just understandyour customer, which is your
franchise owner.
As Jeff Bezos says, thecustomer is divinely
dissatisfied, like they willnever be satisfied, and that's
not a negative, that's a goodthing, that's what pushes you to
(23:47):
get better.
But I think it's just you haveto be in this business knowing
that you know you're North Stars, you're making an impact,
you're changing lives, you'rehelping people become a business
owner.
They're not always going tothank you for it and they're not
always going to recognize that,recognize that, but that's okay
, that's that's.
You know, like what you've done.
You know?
One more example on that theaverage home service business,
if you look it up on online,like, does 100, 200,000 their
(24:09):
first year.
You know.
And Voda, the average ownerknows a half million their first
year.
But if you've never owned abusiness or maybe you do, in our
top 25, median 25, it's 800,000.
If you've never owned abusiness and now you do, all of
a sudden you do 800,000, well,you have nothing to compare it
to.
So you're just like, wow, that'snot very good, I still got to
pay these royalties.
I had to pay a franchise fee.
You're stopping me from doing X, y, z and sometimes it gets
(24:31):
kind of lost, that like how muchyou leapfrogged years of trial
and error.
But I think, to sum it up, it'sunderstanding that it's not
always going to be pats on theback from your franchise owners.
That's okay, because over timewhat I've found is when
franchise owners meet kind ofthat two-year mark, usually they
start to see wait a minute, I'mstarting to see that the
(24:53):
franchisor is playing a hugerole in the organization of my
business.
So I think it's justunderstanding that you didn't
get in this business for feelgood, everything's amazing.
You got in the business to makean impact and build something
substantial, and good thingstake time.
Speaker 1 (25:12):
Well said Team.
Any thoughts on that?
Speaker 6 (25:18):
Yeah, I think that's absolutely true that two-year
mark is.
I think we've all felt that inthe two-year mark.
One thing I think I've seenwith franchisors and maybe you
can speak to this, dan is how dofranchisors support those new
franchisees as well as theveteran franchisees?
Because I think it's reallyeasy to support the brand new
franchisees coming in.
(25:40):
They're so excited to learn,it's like first day of school.
They're just soaking upknowledge, they're willing to do
whatever, but then you get tolike a certain point at that
two-year mark probably, as formost people and then how does
that franchisor support thoseveteran franchisees to get to
that next level of growth?
And I think that's where I'veseen some franchises struggle a
little bit.
Speaker 2 (26:00):
Yeah, that's a great question.
You know it's interesting and Icome from a lens.
I started as part of afranchise system in Murphy
Business and Financial franchisein 2014.
And so I know what it's like tobe a year and a half in.
You're trained, you've learnedeverything and it's like wait,
what is this royalty getting menow?
And so I think the franchisethe worst challenge is to
continue to wake up every daysaying how do we make it where
(26:21):
no one's ever going to want it.
I'll never forget a franchiseowner calling me and saying I
don't want to pay this royaltyand I just said back I wouldn't
either.
No one ever wants to pay.
I don't want to pay any of mybills, right, like it's just
part of the.
I'm never happily paying, youknow, a bill.
But how do you make it wherethe value proposition is so
strong?
I can only speak to ourbusiness and again I'll just
speak from a lesson learned.
(26:43):
One of our top franchise owners,who was early into the system
and he bought directly throughme about a year in, said I don't
feel like you.
You know I've helped navigatethis business from the beginning
.
I don't feel like you'relistening to me as much as you
know, you should be anymore.
Like I have a strong voice, andso I think step one is to
(27:05):
establish an FAC.
So for us, we established aFranchise Advisory Council and
now those relationshipsinherently you have legacy
owners end up in there becausethey're early in, they're
further along, they have a biginfluence with other franchise
owners, so they get elected.
Now we have this FAC where thelegacy owners and top producers
have a tremendous voice, likethey're really helping us
(27:25):
navigate the next steps of thebusiness.
And then the second thing thatwe did was we established a top
producer call where once a month, our top producers, the
leadership team and our founderget together.
To get from zero to 500 is adifferent mindset.
500 to a million, a million totwo, and then two to five, five
to 10, 10 to 20.
That's kind of like the lineageof a business.
(27:47):
Each one of those requires acompletely different mindset and
mentality and coaching, and soI think it's understanding.
First of all, by the way, if youhave a million dollar producer
I'm speaking for thefranchisor's lens why would you
forget about the person that's,as a customer, paying you
thousands, if not tens ofthousands, of dollars a month in
royalties, like they're,they're the most important, and
(28:08):
so I have a little bit of aunique lens in this that I'll
happily talk to someone that'snot producing if they, you know,
I I I ask that they go throughthe channels first, but I'm I'm
happy to get on a call.
But I found, if I can influencetop producers the people that
are most engaged, that areproducing the most, and
incentivize them to help themiddle and then the middle help
the bottom, that's where we getthe best results.
(28:29):
So it's actually the oppositeFor me.
I try to focus my time on thepeople that are succeeding and
just ask for them to like carrythat forward or pass that back
to the rest of the system.
But then one more point on this, and I haven't figured this out
yet of the system.
But then one more point on this,and I haven't figured this out
yet.
But I think, from a franchisorperspective, if you're a top
producer, morgan, and I'm like,please help me with everyone
(28:51):
else, well, I'm sure you're agreat person that wants to help,
but what's in it for you?
Right, like we all should getsome incentive.
And so we're working on, like,why does helping the middle and
bottom performers actuallybenefit your business, whether
it's national accounts, justbrand awareness, or maybe
there's some type of financialincentive.
I just think that it'simportant that we don't just ask
(29:13):
just to do us a favor, but likehow can we make it where it's
worth your time to actuallyinvest into it?
And I haven't figured that oneout yet, but that's something
I'm always thinking about.
Speaker 6 (29:23):
Well, it's interesting you say that because
that kind of led us toconsulting, because we felt like
that's what we were doing.
Catherine and I are part of afact channel.
We were elected by the peers.
We are happy to give back.
That award that I won last yearwas community impact, so it's
important to me.
But I did start to wonder.
There's no financial gain.
I'm still going to do it, butit started to dawn on me.
Speaker 1 (29:47):
I'm kind of consulting and there's so much
that people can learn from youguys.
Sorry, Catherine, go ahead.
Speaker 5 (29:58):
Yeah, we're on the FAQ and we're on the top
producer call, so we do that too.
Dan, I love that you do that.
I think it's great.
Can I just get a littleroyalty-like break, maybe it
would be nice.
Speaker 2 (30:10):
We had this vision of like and if a franchise is
listening to this, please go doit and maybe you can go swim in
the waters and see if there'salligators first and then,
before I jump in I'm kidding,but like an idea that I had was
like if you think about likeWarren Buffett's favorite
companies that he's everinvested in, he says direct
sales organizations are hisfavorite.
Now I'll use a structure likeMLMs not frowned upon, like
(30:31):
obviously there's negatives tothem.
But when you think about likeMary Kay model, there's a what's
that called A downstreamcommission that goes all the way
down.
If you think about like themilitary, like extreme ownership
, like there's pods, right,there's teams of four that have
teams of four, that have teamsof four, and so like how can you
create a financial structurewhere, look like, if you're
(30:52):
going to invest your time, thereis some type of rebate at the
end of the year If you help getyour pod, you know their goal
was to do X revenue.
If we can get them to, you knowY revenue average you get a
financial benefit as afranchisor.
It's kind of like blending anarea developer model with not.
But again, I haven't figuredthis out, but I think a
(31:12):
franchisor that does.
Hopefully it's us first, butthat would really create a great
community where you arefinancially incentivized to help
everyone else.
And the last thing I'll say thegood thing is I think, like you
, you learn.
Like the best CEOs are greatfollowers as well.
Great leaders are greatfollowers.
I think when you teach, youactually end up learning Like if
(31:33):
you could teach something youreally know it.
Speaker 1 (31:35):
Yeah, makes perfect sense, dan.
I know you're up against it and, by the way, anyone who's
interested in working with us,go to the franchiseinsiderscom.
Look at our team page.
That's how you can get in touchwith Catherine Morgan, brian
David.
Anyone would be happy to helpyou with, uh um, finding the
right franchise.
Thank you, dan.
Speaker 5 (31:53):
Thank you team.
Hi everyone, welcome back to the we Bought a
Franchise podcast.
I'm Jack Johnson, I'm JillJohnson and we are back with
another roundtable format.
And today we're throwingsomething even more interesting
into the mix.
We have one of today's hottestfranchises.
The CEO and, dan, I guess wouldit be fair to say you're the
founder of the franchise.
(00:21):
Is that fair?
Speaker 2 (00:23):
You know I always like to joke.
I did find the business, so Iwould count myself as a founder.
But the founder of Voda is apartner in the business, and so
I consider myself the founder ofthe franchise company, but the
business started in 2009.
Speaker 1 (00:37):
Okay, so Dan Klaps, who's the CEO of Voda
Restoration.
You guys, Dan, is like one ofthe biggest prodigies in
franchising.
Were you even 30 when you soldyour company to private equity?
Speaker 2 (00:51):
I was a month away from 30.
Speaker 1 (00:53):
29.
Wow Excellent.
Speaker 2 (00:55):
It was like June May 7th was the transaction and my
birthday was June 7th.
Speaker 1 (01:01):
There's a lot and, for those of you who listen to
our podcast, we've had Dan onbefore, but we're excited to
have him on this format with thewhole team.
We also have our team ofamazing franchise consultants.
We have Catherine Allen, whoowns a Soccer Stars franchise.
She was MVP in her first year.
We have Morgan Knoller, whoalso owns a Soccer Stars and she
is known as one of the biggestbig deal closers in her system.
(01:24):
She's also one of the top fivefranchise owners.
We have Brian Gross, who's alsohad a successful exit with his
franchise Art of Drawers, butbefore he exited, he was one of
their top.
I think you were their topfranchise in your first year,
correct, correct?
Yes, so we've got quite apowerhouse today, we sure do.
So all right, Dan, let's getright into this.
(01:46):
I want to start with you.
The format of this podcast forall of you listening is to be
more of like a fireside chatwhere you're going to get to
hear real franchise people justkind of talking about what we're
seeing in the industry and inthe world.
So, dan, for you, let's justget right into it.
What category in franchising doyou think is most overhyped and
(02:09):
why?
Speaker 2 (02:11):
Oh, wow, overhyped, and why?
Well, I guess for me, thebiggest thing I see in
franchising and you mentionedthis is all about being candid,
so I plan to be For yourlisteners.
I'm from New Jersey, so respectmy directness.
I'm a big proponent of, I thinkobviously, when a franchise
(02:34):
concept comes out and it's neverbeen done before, that's very
exciting and obviously startingsomething that has never been
done before is a great businessprinciple.
But I think that when a newtype of brand comes out in a
completely different industrythat has not been franchised
before, I think that you can seesome challenges when they grow,
because you know to put inperspective.
If, like you're in the roofingbusiness or you know boutique
(02:57):
fitness, this has been done,it's been tried and true.
There's no changes in crazylicensing or build outs end up
being three times the amount,and so I think the things that
get overhyped are sometimes aconcept which would end up being
a huge concept around thecountry, but maybe not
franchising as many units rightaway.
You know.
(03:18):
To give you an example, likeyou know, I think the golf
concepts are really, reallyinteresting and exciting, but
some of them haven't been provenout yet, which is fine.
Bigger risk, bigger reward.
There's nothing wrong with that.
And then you franchise thatbusiness and then in certain
states there's regulations orrequirements that were
unforeseen, and so I think thethings that get overhyped are
(03:38):
it's exciting to go into a newindustry never done before, but
I think franchisors doing thatshould probably prove that out
in a few markets first, butbefore then going into hyper
growth.
Speaker 1 (03:49):
I think that's a good point and I don't want to open
that up to the group here.
But before we do that I have aquick question for you, just to
follow that up.
One of the things that's mademe nervous there are some newer
franchises that when you look intheir FDD, if the franchisor is
just losing money, hand overfist, that really freaks me out.
(04:11):
And I know some of them mayhave equity partners and things
like that.
I don't know, am I beingshort-sighted with this?
Speaker 2 (04:18):
I don't know.
That's an interesting point.
I think that when someone'sexploring a franchisor, they
should obviously explore item 20and item 21.
The only thing that I would sayyou should definitely look at
that the leadership team or thefounder has substantial capital.
The only thing to play devil'sadvocate to that is when you
look at, often, a franchisorthat's in high growth phase.
(04:39):
If you think about theaccounting principles that are
applied to a franchisor, theycould look different than the
actual reality.
So to give you an example, it'svery granular.
But if a franchisor has awarded, you know, 50 territories in a
year and they were able tocollect those franchise fees,
they obviously have substantialexpenses in those costs.
(05:00):
Those all get recognized forthe year, but the franchise fee
gets amortized over 10 years andso all of a sudden that number
can look upside down, becauseall the expenses were recognized
for the year but all therevenue was deferred over 10
years.
And so I think that's one thingto keep in mind.
There's other ways to obviouslyvalidate that they have
financially sound.
(05:20):
Obviously, if they haveroyalties that sustain or, you
know, subsist in my sales, theIRS recognizes those revenues.
So it gets a little confusing.
Speaker 4 (05:28):
So I thought Dan brought up an excellent point
with creating a new market.
Right, and I think it comesback to we hear all the time is
there's too much competition,the space is too saturated.
So something new, almost stillsafer, right.
I just had a candidate who wasgoing through the process with
an electrical services companymajor metro area and weeks in
(05:49):
the process came to a stopbecause I guess they had just
Googled for the first timeelectricians in their area.
They said they found over 20.
And it gets back to afranchising trying to mitigate
risk, right, and would yourather be in a market where
there's huge demand that's kindof recession resistant and just
get a slice of it to have asubstantial business, or go and
(06:12):
try to create a whole new market?
One of those is simpler, right,you know so.
So I really like dan's take onon just the risk of going in
something that's brand new andunproven.
Speaker 5 (06:25):
I like your comment on the high risk, high reward
with the emerging brand, right.
So like a part of what we do atFranchise Insiders is the
Zorical assessment which willshow us who falls more into that
entrepreneurial bucket versusthe proven system, right?
So I think that's, you know,that's where we come in, so when
(06:45):
we are talking with a candidateand we can see, okay, this
person like me, I'm veryentrepreneurial, that was my,
those are my results.
Soccer stars had been around awhile but they had just started
franchising.
So essentially, in my opinion,it was kind of an emerging brand
because they had never reallyfranchised before.
And so more again, you know, I'msure you would agree with this,
they were kind of an emergingbrand because they had never
really franchised before.
And so, morgan, you know, I'msure you would agree with this,
(07:06):
like they were kind of buildingthe plane while it was flying,
like, oh, we need, you know, andbecause I came from franchising
, uh, and I'd done that for 13years and was building them like
new, new, that world, I and italigned with my passions and
interests and all the things,like I was able to scale really
quickly.
But I think for someone whomaybe came in, or could come
into a brand who is not thatentrepreneurial, you know,
(07:30):
person, they may struggle more,and so that's where that
matching process andunderstanding your candidate for
us is really crucial, so thatwe're setting them up for
success and, in turn, on yourend, dan, you know we're
bringing you quality candidatesthat are gonna, you know, thrive
in your system.
Speaker 2 (07:46):
Just to piggyback on Dan, you know we're bringing you
quality candidates that aregoing to, you know, thrive in
your system.
Just to piggyback on that, youknow, like that's a great
example.
Obviously, there's exceptionsto what I was saying, like in
your case, in that conceptbacked by a large you know
financial partner Right, andthey're very savvy in the youth
enrichment space.
I think that's it.
That's a different situationversus, like you know, I started
doing something completely new.
I've never been a franchise orI don't have a ton of you know
(08:10):
this hypothetical.
I don't have a ton of you knowcapital like that.
I think it's different than inyour case.
That brand is super well backedfinancially and has a lot of
intellectual capital behind it.
And then just one more thing onBrian's point.
You know what's interesting tome, like how many pizza
restaurants or pizza places arein your neighborhood, every
corner right?
Well, pizza is a $25 billionspace.
You need a lot of pizza.
You know, in our spacerestoration it's a massive
(08:33):
industry too.
You need a lot of competitors,but what I've found is a lot of
people will like, let's say, Iwas looking at you know a waxing
concept and I go and I look atall the waxing concepts in my
area and I say, okay, there'sfive and there's 10.
What people don't alwaysremember is that you don't know
about the other brands, thatmaybe someone bought in a
(08:54):
neighboring territory, that theyhave a development schedule,
that they will be opening threeor four more of those from.
Maybe there's a developmentschedule in four different
concepts in the same space, andso like it's difficult to really
assess like how many are inyour market versus you
succeeding or not.
I think it's more important tolook at like what's the industry
growth and revenue size, andthen it's okay for there to be
(09:14):
competition.
Because just last thing toBrian's point me personally, I'd
rather not have to educate amarket on something.
I'd rather come into a marketwhere there's a general
understanding of that and thengo into it.
Now don't get me wrong.
When Orange Theory first cameout, you were the first Orange
Theory franchise owner, kind ofvery early into boutique fitness
.
There probably was some marketexplanation.
(09:36):
But what people forget is thatOrange Theory wasn't this giant
concept at first.
Their ADVs have gone up overtime as the market has caught up
to that space.
Speaker 1 (09:49):
Dan, do you remember when you and I were having
dinner at the Boca Resort andthe founders of Orange Theory
and Anytime Fitness were at thetable right next to us?
Speaker 2 (09:56):
I thought it was funny because I had met Dave
Mortensen a few weeks prior andI saw him sitting there we were
having dinner and obviously Iwas intimidated to go up.
It was like literally like thefounder of Orange Theory and
spouses and the founders ofAnytime Fitness.
And then he actually saw me andcame up and I was like, oh,
this looks cool in front of Jack, Like I know these guys, but it
(10:18):
was just actually because I wasafraid to say hello to them.
Speaker 1 (10:22):
You know one point on competition.
You know, jill and I I rememberwe started Franchise Insiders I
purposely like the big namefranchise consultants at the
time not because I didn't likethem, but I didn't want to see
their stuff.
Right, I just wanted to havetunnel vision.
I knew they were there but Ilike blocked them because I
(10:42):
didn't want to see.
I just wanted to go.
I knew that we could win and Iknew we had a good brand, but I
didn't want to see them.
And it was the same with pinks.
Like with pinks, we never evenbothered to see who our
competition was.
We just open and um.
And we created the top pinksfranchise last year.
And our opinion has always beenthe same as what you said,
which is we know the demandsthere, we know the competitors
(11:03):
are there and we know inherentlywe're going to be better.
Speaker 3 (11:06):
I think that's you know.
Again, when people look atthings, it's like, oh, but
there's already this in thisarea and it, you know if it's.
If you want to open a crumbleand there's already a crumble in
your neighborhood, you're yeah,you're not going to open it,
it's already there, they've donethe research that that's a good
market.
So you know, for us too, with,like the window with pinks
(11:28):
windows, it was like we knew.
I mean, we had window washersand pressure cleaning in our
neighborhood.
We saw it every day and insteadof that pushing us away, it
made us excited, because we'resaying people already doing this
.
So then let's find our edge,like, how can we be the best out
of all this?
The need is there.
So I don't think you need toshy away from competition, um,
(11:49):
but I think again.
I mean, I'm sure you guys allsee this we get people that say,
oh, they just opened up.
You know this, uh, ice creamplace.
I want to open one, like, butit's there already.
But a good brand one, but wecould find something similar,
since the need is there and themarket is there.
So let's look at somethingsimilar.
Speaker 1 (12:08):
But to Dan's point, I mean, it's like so here locally
, we have a, and you're right,there's a million pizzas in Boca
Raton and most of them aremediocre.
Speaker 3 (12:14):
Yeah, we still don't have one that we like.
Speaker 1 (12:21):
So there's this guy who comes in, opens up a place
called Death by Pizza and it'sDetroit pizza and it's awesome
pizza and it's Detroit pizza andit's awesome and it's got a
cool brand and you can't get in.
So again, I still think a brand.
Just like what you did, Dan,with Voda.
There's tons of restoration outthere.
Voda looks good, right, Vodalooks modern.
It's got a young leadershipteam.
It has things that make itdifferent.
Um, what's a hidden opportunitythat franchisors see that most
(12:44):
consultants and buyers overlook?
Speaker 2 (12:46):
The first thing is like, 90% of being an
entrepreneur is picking theright industry.
If you pick the right industry,you can even afford to make
some mistakes because you're inthe right industry.
There's high margins, highgrowth, there's high opportunity
.
People want to be in it, theywant to work in it, they want to
use the service or product andso I think picking the right
industry is key and from thelens of a franchisor, I know
(13:09):
that for us we didn't start inrestoration, we were franchise
executives that got intorestoration, but I'd say 90% of
our success was picking theright industry.
It was high growth, it was infavor of institutional investors
, there's high margin, there'sconsolidation happening in the
space and, as you know, there'swater's not going anywhere.
There's gonna always be waterand floods and issues and with
(13:29):
climate challenges and just theaverage age of a home getting
older 38 year old average, whichis just gonna get older there's
a lot of opportunity.
So I think, taking the rightindustry and then I think the
biggest opportunity to yourpoint, whether it's restoration
or roofing or some type of nextgym concept, usually businesses
can succeed with just bettercommunication, a better customer
(13:51):
service experience and, mostimportantly, going into an
industry where the technology isantiquated and just simply
investing in better technologyto make the service better, make
the business offering better.
Better technology to make theservice better, make the
business offering better thosethings alone you can go into an
industry that's kind ofdinosaur-esque and go in with
better technology, betterbranding and a better, just
(14:12):
really way of communicating andyou can win.
You don't have to recreate thewheel.
Speaker 1 (14:19):
Yeah, we had a franchisee from Sharkyy's cuts
for kids on last week and I'lltell you.
You know, when Jill and I firstbecame franchise consultants,
we looked at that brand andwe're like man, who would ever
buy this?
And now I look at it and I'mlike this is an awesome
franchise.
It's been around a long time.
It doesn't have litigation.
(14:40):
Um's got a lot of franchisees.
Ai is not going to take it over.
It's a simple staffing model.
We've got section 179.
That is where I think franchiseconsultants really can help
people who are coming in andsaying I really want the UPS
store, and help them sort of seethe forest through the trees.
Speaker 6 (15:04):
Yes, I think we need to pay a lot of attention to
technology and AI and what can'tbe replaced, like sharkies, I
mean I'm going to get my kidshaircut, not using AI, I'm going
to go into a store, so thatone's pretty recession proof.
I like those.
Home services are always needed, but the technology has to be
there right.
We're increasing, so I thinkthat's our job to make sure that
(15:25):
whatever franchise we'reshowing our clients is something
that can grow and scale.
Yeah, I think there's a lot ofthings.
I also think part of our job ismaking sure that these new
franchisees coming in understandthat they're running a business
and even if the AI is there andthey do have the franchisor
(15:45):
backing them, they still have towork hard and run the business.
And I'm hearing more and morethat they're sort of feeling
like it's a playbook and theycan come in and that the
franchisor is going to give themall the clients that are going
to do all the marketing for themand it's just the business is
going to run itself.
So we're seeing a lot of thaton my end.
Speaker 1 (16:11):
I'm a lot less afraid of my burrito getting made by a
robot in a couple of years atChipotle.
I wouldn't trust it to cutTrey's hair, that's for sure.
But that's why validation iskey, and someone said it the
other day.
We were on a call, dan, withCMIT, which is an IT consulting
franchise, and she said wemandate that each prospective
franchisee validate with atleast five to seven franchisees,
which is the guidance that Ithink 90% of franchise
(16:33):
consultants give too.
Talk to those owners to reallyhear what they're doing and how
they're running the business andhow.
Yes, you can have a great brandlike Voda, you can have a
recession-resistant service likeVoda, but the franchisee is
still the one that makes themagic happen.
Speaker 6 (16:50):
And I think what's unique about Voda is it's really
two franchises in one.
So, voda and Dan, you've done alot of work, but you've made
sure that, even if it's notrestoration, that you're still
doing the carpet cleaning,you're still getting those jobs
and your employees stay employed.
And I think that's reallyimportant to note, because a lot
of the home services is justvery narrowly focused and they
(17:11):
could be doing a lot more withjust one brand.
I think Voda does a really goodjob.
Speaker 5 (17:16):
And I would say with my biggest learning, I think,
with Soccer Stars, was the cashflow and figuring out that,
because I had to pay my coachesup front and there was a lot of
payment on the back in like fouror five months later.
And with Voda Dan, you talkedabout that at the Franser
Conference.
That's where the cleaning andthe restoration are really good,
(17:37):
right Hand in hand, kind ofkeeping that consistent cash
flow going while these biggerjobs are coming in.
Speaker 2 (17:47):
Yeah, and not to shamelessly plug Voda, but to
give you an example in thatregard, I think about a few
years ago when we launched thebusiness, we saw a lot of
opportunity where we would go toa home to do, let's say, a mold
extraction, get mold out ofsomeone's home.
And they would say, oh mygoodness, I didn't know this was
going to be you know $3,000,and maybe insurance isn't
(18:07):
covering it for whatever reason.
And I remember thinking like,well, how many of these jobs are
we losing to people that maybejust can't stroke a check for
three grand or don't want tostroke you know swipe, their
credit card?
And we pulled in a partnerwhere we could do consumer
financing right.
So all of a sudden we can walkinto a home and if someone can't
spend the $3,000, we can offerthem a 0% APR over 24 months.
(18:30):
And then we took that productand we embedded it into our CRM
system where we can literallyjust right there on the spot say
, hey look, jack, we can financethis.
Here's the payment terms, it'sright there, just click a button
and it goes to the invoice.
That's an example of technology.
Or one other example two yearsago I was at the Restoration
Industry Association Conferencethat I go to every year, and
(18:50):
everyone was like no AI, that'scrazy, no one's going to want
things done that way.
Well, our technology providerthat we utilize for project
management leaned into that, andhere we are now today where,
when we do estimates, that's abig part of our business, right,
it's more of an art than ascience when you do a water
mitigation estimate forinsurance through Xaptimate.
And for a long time we had apartner we still do but that
(19:15):
would work with our franchiseowners if they needed some help
getting those estimates up andthey charged a fee, but the fee
was always worth paying becausethey could take the average
ticket up enough where thatpercentage didn't matter, right?
Well, here we are two yearslater.
Our technology provider wasable to do that now through AI.
So they introduced AI estimatesto make doing estimating more
(19:35):
accurate, more seamless throughAI, through all the knowledge
that it has, and so you knowperfect example if you're not
leaning into that technology,not when everyone's starting to
do it, but beforehand, you canvery quickly in any business
start to lose market share.
Speaker 1 (19:50):
Isn't Klarna going public today?
Can they see that, speaking ofyou know, being able to finance
over time, I mean, look, peoplekeep sort of talking about
feeling like the economy'swobbly but yet spending is still
great.
People are still out therespending at the same levels they
were spending.
Restaurants are still full.
Actually, debt, if you look atdebt ratios, there's still.
(20:12):
People are not.
It's no different than it was.
But it's the jobs, right,they're saying.
But even the unemploymentnumbers aren't terrible.
But people keep saying, well,why aren't the jobs growing?
Because AI, because ai can takethe place of so many of these
jobs, which is why we're seeingsuch a strong influx of new, you
know, business owners andfranchise owners, because, let's
(20:34):
face it, so many of those jobsthat were needed, like, look at,
we can do so much coding nowwith claude.
Um, claude can take the placeof, like a coder, two coders and
so, yeah, that's why we'reseeing it.
The economy is still very strongin terms of what people are
spending.
The stock market's at anotherall-time high today.
(20:54):
But the reason why the jobs aresoft is because AI is able to
take the place of so many ofthose jobs, which is why we're
seeing the influx.
Which, dan, leads me to my nextquestion for you, and I have to
read it here Um, when, as yougrew Voda, and I remember being
there with you in your firstcouple of months what's the
hardest part about growing ayoung franchise system?
(21:15):
What, what you know?
Take us through that a littlebit.
Speaker 2 (21:20):
Yeah, I mean, I think probably the hardest part about
growing a franchise system likeVoter or any other is it's a
lot like building a technologycompany.
Or an extreme example if youread the book Shoe Dog by Philip
Knight, it's about his journeyof building Nike and I can sum
up the book for you.
He goes through basically hellfor 20 years and now he's Philip
(21:41):
Knight.
They had inventory issues forthe entire journey of Nike, like
he was always, even though thecompany was in China and Japan
and wherever all over the world.
He was like struggling to like,keep like his business afloat
or his personal life because hewasn't able to take a ton of
money out of the business.
I think that building a solidfranchise or you have to be
(22:02):
disciplined and you have tocontinually just reinvest your
profits that you make when youfinally do make profits into the
business, into the leadershipteam, into support staff, into
technology, and so if you're afranchisor, you're building an
asset that is eventually goingto be worth a ton of money and
make you great EBITDA, butyou're going to have to have a
(22:23):
really long time horizon becauseeven when everyone's going to
celebrate you everywhere you go,they'll say great job and your
franchisees are happy.
But if you're doing it right,you're reinvesting into that
business for the long term.
And then I think the secondthing is and this is something a
reality I came to recently If Igo right now downstairs and I
press a button on my phone foran Uber, I expect it to show up,
(22:45):
I expect it to be on time andall these things.
I don't know how many ridesUber runs a day around the world
, but the expectation is itshows up.
If you really think about it,you're pressing a button and the
car's showing up.
It's amazing when I fly in anairplane and I was 10 cans
through the air, which is anamazing, you know feat for
mankind, right, you know, Iexpect it to be on time and if
it's even a little bit delayed,I'm upset.
(23:05):
I see people get upset evenwhen it doesn't take off because
of weather, like it's not.
They can't control that, butthe bar is so high, no matter
what, right.
And so I feel the same way withbuilding a franchise system.
You hit this next bar whereyou're like man, we're doing 10
times more than we ever werebefore.
But that next franchisee, orthat franchisee that's been
(23:27):
around for a bit, that'sstarting to mature and wants to
continue to get value out oftheir royalty, is going to
continue to raise the bar, andso I think, like the, it's not
really a challenge.
But you have to just understandyour customer, which is your
franchise owner.
As Jeff Bezos says, thecustomer is divinely
dissatisfied, like they willnever be satisfied, and that's
not a negative, that's a goodthing, that's what pushes you to
(23:47):
get better.
But I think it's just you haveto be in this business knowing
that you know you're North Stars, you're making an impact,
you're changing lives, you'rehelping people become a business
owner.
They're not always going tothank you for it and they're not
always going to recognize that,recognize that, but that's okay
, that's that's.
You know, like what you've done.
You know?
One more example on that theaverage home service business,
if you look it up on online,like, does 100, 200,000 their
(24:09):
first year.
You know.
And Voda, the average ownerknows a half million their first
year.
But if you've never owned abusiness or maybe you do, in our
top 25, median 25, it's 800,000.
If you've never owned abusiness and now you do, all of
a sudden you do 800,000, well,you have nothing to compare it
to.
So you're just like, wow, that'snot very good, I still got to
pay these royalties.
I had to pay a franchise fee.
You're stopping me from doing X, y, z and sometimes it gets
(24:31):
kind of lost, that like how muchyou leapfrogged years of trial
and error.
But I think, to sum it up, it'sunderstanding that it's not
always going to be pats on theback from your franchise owners.
That's okay, because over timewhat I've found is when
franchise owners meet kind ofthat two-year mark, usually they
start to see wait a minute, I'mstarting to see that the
(24:53):
franchisor is playing a hugerole in the organization of my
business.
So I think it's justunderstanding that you didn't
get in this business for feelgood, everything's amazing.
You got in the business to makean impact and build something
substantial, and good thingstake time.
Speaker 1 (25:12):
Well said Team.
Any thoughts on that?
Speaker 6 (25:18):
Yeah, I think that's absolutely true that two-year
mark is.
I think we've all felt that inthe two-year mark.
One thing I think I've seenwith franchisors and maybe you
can speak to this, dan is how dofranchisors support those new
franchisees as well as theveteran franchisees?
Because I think it's reallyeasy to support the brand new
franchisees coming in.
(25:40):
They're so excited to learn,it's like first day of school.
They're just soaking upknowledge, they're willing to do
whatever, but then you get tolike a certain point at that
two-year mark probably, as formost people and then how does
that franchisor support thoseveteran franchisees to get to
that next level of growth?
And I think that's where I'veseen some franchises struggle a
little bit.
Speaker 2 (26:00):
Yeah, that's a great question.
You know it's interesting and Icome from a lens.
I started as part of afranchise system in Murphy
Business and Financial franchisein 2014.
And so I know what it's like tobe a year and a half in.
You're trained, you've learnedeverything and it's like wait,
what is this royalty getting menow?
And so I think the franchisethe worst challenge is to
continue to wake up every daysaying how do we make it where
(26:21):
no one's ever going to want it.
I'll never forget a franchiseowner calling me and saying I
don't want to pay this royaltyand I just said back I wouldn't
either.
No one ever wants to pay.
I don't want to pay any of mybills, right, like it's just
part of the.
I'm never happily paying, youknow, a bill.
But how do you make it wherethe value proposition is so
strong?
I can only speak to ourbusiness and again I'll just
speak from a lesson learned.
(26:43):
One of our top franchise owners,who was early into the system
and he bought directly throughme about a year in, said I don't
feel like you.
You know I've helped navigatethis business from the beginning
.
I don't feel like you'relistening to me as much as you
know, you should be anymore.
Like I have a strong voice, andso I think step one is to
(27:05):
establish an FAC.
So for us, we established aFranchise Advisory Council and
now those relationshipsinherently you have legacy
owners end up in there becausethey're early in, they're
further along, they have a biginfluence with other franchise
owners, so they get elected.
Now we have this FAC where thelegacy owners and top producers
have a tremendous voice, likethey're really helping us
(27:25):
navigate the next steps of thebusiness.
And then the second thing thatwe did was we established a top
producer call where once a month, our top producers, the
leadership team and our founderget together.
To get from zero to 500 is adifferent mindset.
500 to a million, a million totwo, and then two to five, five
to 10, 10 to 20.
That's kind of like the lineageof a business.
(27:47):
Each one of those requires acompletely different mindset and
mentality and coaching, and soI think it's understanding.
First of all, by the way, if youhave a million dollar producer
I'm speaking for thefranchisor's lens why would you
forget about the person that's,as a customer, paying you
thousands, if not tens ofthousands, of dollars a month in
royalties, like they're,they're the most important, and
(28:08):
so I have a little bit of aunique lens in this that I'll
happily talk to someone that'snot producing if they, you know,
I I I ask that they go throughthe channels first, but I'm I'm
happy to get on a call.
But I found, if I can influencetop producers the people that
are most engaged, that areproducing the most, and
incentivize them to help themiddle and then the middle help
the bottom, that's where we getthe best results.
(28:29):
So it's actually the oppositeFor me.
I try to focus my time on thepeople that are succeeding and
just ask for them to like carrythat forward or pass that back
to the rest of the system.
But then one more point on this, and I haven't figured this out
yet of the system.
But then one more point on this,and I haven't figured this out
yet.
But I think, from a franchisorperspective, if you're a top
producer, morgan, and I'm like,please help me with everyone
(28:51):
else, well, I'm sure you're agreat person that wants to help,
but what's in it for you?
Right, like we all should getsome incentive.
And so we're working on, like,why does helping the middle and
bottom performers actuallybenefit your business, whether
it's national accounts, justbrand awareness, or maybe
there's some type of financialincentive.
I just think that it'simportant that we don't just ask
(29:13):
just to do us a favor, but likehow can we make it where it's
worth your time to actuallyinvest into it?
And I haven't figured that oneout yet, but that's something
I'm always thinking about.
Speaker 6 (29:23):
Well, it's interesting you say that because
that kind of led us toconsulting, because we felt like
that's what we were doing.
Catherine and I are part of afact channel.
We were elected by the peers.
We are happy to give back.
That award that I won last yearwas community impact, so it's
important to me.
But I did start to wonder.
There's no financial gain.
I'm still going to do it, butit started to dawn on me.
Speaker 1 (29:47):
I'm kind of consulting and there's so much
that people can learn from youguys.
Sorry, Catherine, go ahead.
Speaker 5 (29:58):
Yeah, we're on the FAQ and we're on the top
producer call, so we do that too.
Dan, I love that you do that.
I think it's great.
Can I just get a littleroyalty-like break, maybe it
would be nice.
Speaker 2 (30:10):
We had this vision of like and if a franchise is
listening to this, please go doit and maybe you can go swim in
the waters and see if there'salligators first and then,
before I jump in I'm kidding,but like an idea that I had was
like if you think about likeWarren Buffett's favorite
companies that he's everinvested in, he says direct
sales organizations are hisfavorite.
Now I'll use a structure likeMLMs not frowned upon, like
(30:31):
obviously there's negatives tothem.
But when you think about likeMary Kay model, there's a what's
that called A downstreamcommission that goes all the way
down.
If you think about like themilitary, like extreme ownership
, like there's pods, right,there's teams of four that have
teams of four, that have teamsof four, and so like how can you
create a financial structurewhere, look like, if you're
(30:52):
going to invest your time, thereis some type of rebate at the
end of the year If you help getyour pod, you know their goal
was to do X revenue.
If we can get them to, you knowY revenue average you get a
financial benefit as afranchisor.
It's kind of like blending anarea developer model with not.
But again, I haven't figuredthis out, but I think a
(31:12):
franchisor that does.
Hopefully it's us first, butthat would really create a great
community where you arefinancially incentivized to help
everyone else.
And the last thing I'll say thegood thing is I think, like you
, you learn.
Like the best CEOs are greatfollowers as well.
Great leaders are greatfollowers.
I think when you teach, youactually end up learning Like if
(31:33):
you could teach something youreally know it.
Speaker 1 (31:35):
Yeah, makes perfect sense, dan.
I know you're up against it and, by the way, anyone who's
interested in working with us,go to the franchiseinsiderscom.
Look at our team page.
That's how you can get in touchwith Catherine Morgan, brian
David.
Anyone would be happy to helpyou with, uh um, finding the
right franchise.
Thank you, dan.
Speaker 5 (31:53):
Thank you team.
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