551: Entrepreneurship Built for A Students?

You are listening to the Wealth Formula Podcast with Bup Joffrey.

Get ready to change your life.

Welcome, everybody.

This is Bup Joffrey coming to you from Anaceto, California.

And before I begin today, I want to remind you, once again, as I always do, that there is

a website associated with this program.

It's at WealthFormula.com.

And that's where you go if you're interested in participating in this ecosystem beyond simply

listening and watching or whatever you do.

Lots of resources there on the website.

In addition to that, I draw your attention to the Accredited Investor Club.

A group of accredited investors.

It's basically a way to get access to private deal flow.

If you're an accredited investor, which you don't have to go to school for, you just have to make enough money.

$300,000 per year for filing jointly are a million dollars of net worth outside of your personal home.

And you are an accredited investor.

Go ahead and sign up for the Wealth Formula Investor Club because who doesn't want to join a club?

The price is right.

Because, well, it's free.

All you have to do is get onboarded.

And the rest is just sit back and look at the deal flow.

And if nothing else, you'll learn something.

Let's talk today a little bit about how you can make some more money to invest.

Because, you know, most people assume that a high income leads to wealth.

Sometimes it does, but I get to tell you more often than not it leads to a comfortable current lifestyle that depends on getting paid dollars for hours.

And listen, there's nothing wrong with that.

There really isn't.

And I don't criticize that.

I don't encourage people to do things that are out of their comfort zone.

For most people, the best path is really to keep on doing what you do well and invest your income in the real estate and other assets.

And use that as your growth mechanism for wealth.

And that alone, it can create a significant wealth over time.

But if you look at people with outsize wealth, there's usually another element involved.

And that is that they own businesses and they own something that can scale.

And the key difference isn't how hard they work.

It's what they own as leverage.

And what do I mean by that?

In this case, the leverage comes from systems, right?

If a business runs because you're there every day and you get paid for that amount of time that you were there, it can be profitable.

But it's got an upward limit, right?

It's still tied to your time.

But when you get some systems in place, the business can grow beyond you.

And you might be ending up, you know, working the same amount of time or even less.

But profitability goes up.

And that's when it really becomes a true asset.

Something that actually has enterprise value that you can actually sell to somebody.

Now for high income professionals, you know, that creates a little bit of a problem.

Like how in the world are you going to do that?

If you're working a full time job as a physician, for example,

it's not like you have a ton of extra time.

And you're already doing well and walking away from that to pursue something uncertain doesn't make a lot of sense.

And frankly, for almost anybody, I don't recommend it, although I did that myself.

Now a more practical approach is probably to build something alongside what you're already doing.

Yeah, it'll be a little extra work, but it'll be worth it.

Something that has the potential to become scalable over time.

Now, there are a few approaches to owning a business that you can start scaling.

And the first one is what I have done multiple times, but just starting a business from scratch.

And that can work.

As I said, I've done it multiple times.

Sometimes it turned out very well.

Others didn't turn out very well at all.

But you know what, candidly, being a startup entrepreneur, it requires a certain kind of personality.

One that's comfortable with a lot of risk.

You have to have the coronary arteries for it.

And if you don't, it's probably better to recognize that early and stay away.

Not only for your own good, but for the good of your family and everyone around you.

Now buying a business is another option.

And I think, you know, you think about something that's been there.

It's already proven its way.

It makes money.

It's just less risky, right?

But most businesses in the price range that can be afforded by someone with a, you know, high income, a high income professional.

That is they aren't that big.

The businesses themselves.

And the problem with smaller acquisitions often come with hidden risk.

Like there's key personality, you don't know about our operational quirks issues as the seller understands way better than you do.

And may in fact be part of the reason they're selling.

Now, that's not always the case.

It certainly isn't.

But those are some of the things that do come up when you're buying a business that is not that big from somebody else, right?

Now, the next option is franchises.

We've talked about this on the show a few times.

And I keep coming back to it because what makes franchises interesting in my opinion to people like us is they provide a structured roadmap.

And when I say people like us, a lot of you were a students, right?

You doctors and lawyers and professionals, whatever.

And what you were good at in school was following a curriculum and executing, right?

That's what you were really good at.

You had a model.

You can follow and do it really, really well.

Franchise ownership is about learning a system that's worked in the past that's worked for others and applying it consistently.

Now, you don't have to invent the model.

For me, as a startup guy, I had to kind of invent the model.

And that's very risky.

I was younger and stupider and it was paid off.

But in your 50s and you're already established, it may not be.

So when a franchise, you don't have to invent the model.

Again, all you're doing is you're executing one that has already been proven.

Now, of course, there are also trade-offs in franchises as well.

I've been down this road before and you're going to hear a little bit about my story there.

I never actually bought a franchise, but I thought about it.

First of all, I noticed that franchise fees.

Well, they can be pretty significant.

I started wondering, well, hey, how am I going to get any bottom line with this stuff up from capital requirements?

They can be pretty high, right?

And again, even though it's not a startup in the sense that it's a new business concept,

you still have this upfront capital requirements, sometimes build-outs and stuff like that.

And then finally, the thing that I would say has been an experience is that the advisory landscape isn't always objective.

And it's difficult to find out.

And it's not just about objectivity.

It's about getting the type of information you want in your initial search.

So the real challenge in this space is figuring out how to evaluate opportunities,

getting an unbiased perspective, really digging down.

And that's what we're going to cover in this week's World Formula Podcast.

Yes, it is another franchise podcast, but this one is different, is with the founder and CEO of Franzee,

which is kind of like the Zillow for franchises.

I think it's a really interesting concept.

We talk a lot about the challenges of franchising why it might make sense still for many people,

kind of going to what they're doing over at Franzee, which again, I think is pretty interesting you may want to check out.

I'll have that interview for you right after these messages.

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Again, go to WellFarmualBanking.com and don't wait because in this case, time is money.

Welcome back to the show, everyone.

Today, my guest on WellFarmualA podcast is Alex Smersnik.

He's a co-founder and CEO of Franzi, a platform that helps people discover,

and evaluate franchise opportunities using data and technology.

He previously co-founded To You Laundry and Laundra Lab,

skilling the concept into a national franchise network through with more than 100 license sold.

And today he's focusing in helping aspiring entrepreneurs understand a landscape of franchising

and really to identify opportunities across wide range of industries.

So we're going to explore what that franchise world really looks like in 2026.

Alex, welcome to the show.

Buck, thanks for having me excited to talk about what I think is the most overlooked path to wealth creation in America,

and that's the franchise business model.

So thanks for having me on.

Let's start with this.

How did you, you know, how did you get into the franchise business yourself for you?

Did you buy a franchise or what did you do?

Yeah, so I've, I've been a serial entrepreneur ever since college.

I did a Laundry and dry cleaning delivery business.

My freshman year at Wake Forest down here in North Carolina.

I learned more doing that than any class I took at Wake Forest.

I was hooked on problem solving and doing the marketing and the contracts and operations.

And it was through that business that I got into franchising because we eventually started franchising part of that business.

We started franchising the physical laundromats that we were building to handle all the delivery volume.

And I knew nothing about franchising before that.

So we got a crash course on what is an FDD?

A franchise disclosure document.

How do you structure it?

What should the royalties be?

What should the territory rights be?

How old people finances?

What's the average buildout?

You know, all the things that went into it.

And then in 2021 started franchising.

We sold 118 locations in our first year.

Saw the good, the bad and the ugly of how people buy and discover franchises and thought,

Hey, this is a really good model.

But the way that people access the data, do do diligence, finance these things, find the right fit, etc.

Is pretty opaque and not super transparent.

And so that's what's led us to, you know, focus on frenzy or building now,

which is essentially the zillow for the franchise marketplace.

Let's start.

It gets like, let's talk a little bit about franchises in general.

It's not just fast food.

Much broader world.

How would you sort of put out the main categories of franchising out there today?

Yes.

That was one of the surprises for me was that I think like a lot of people,

I thought, oh, it's McDonald's.

It's subway and it's all food.

And you need to have millions of dollars to get into it.

Otherwise, you can't do it.

Or it's these like emerging concepts that are very risky and not proven out.

And, you know, I don't know if I want to do that.

The reality is there's a very dense middle as well.

And there's everything in between.

There's home services franchises.

There's health and wellness.

There's hospitality.

There's early childhood development.

If you really pay attention the next time you're driving around in a car or using a home services business,

I'd say eight or nine times out of ten.

It's a franchise system.

Franchising represents eight percent of our country's GDP.

It's a huge part of our economy.

Yeah.

And there are options for everyone on that spectrum,

either you're the more affluent, you know,

you want to be a restaurant operator to,

hey, I've got 20 grand and cash saved up.

And I want to get started.

There's franchises under 150, 100k to get into.

That can do seven figures and revenue.

You know, once you get into them.

There really is something for everyone.

If you want to become an entrepreneur and if you want to become a business owner,

but you don't know where to start.

Yeah.

So of the categories in general,

like which sector is do you think are sort of growing the fastest right now?

Why?

Yeah.

So food's declining a little bit because I think it's saturated.

There's a ton of concepts.

There's a lot of new concepts replacing some of the old home services.

It's seeing a really big boom right now.

I think it's, you know, there's a departure from people,

you know, worried about losing their jobs to AI.

A lot of people wanting to invest in themselves.

And home services is something that AI is not going to touch or be,

you know, replacing anytime soon, maybe in the future.

But those tools when they do come out will benefit the owners of those businesses.

So home services is really big.

When you say home services.

Is that like cleaning services and stuff?

Or what?

It could be gutter cleaning, roofing.

There's one that is a,

it's a window boxes actually.

You can install these custom window boxes on your home.

And then there's a subscription where they come and they fill new flowers,

you know, once a month.

And they even do themes like around Easter.

They'll do like Easter decorated window boxes around Christmas.

They'll do Christmas themed window boxes.

And, you know, the average revenue of those franchisees is,

is over $1.2 million and it's window boxes.

And so you,

you have a lot of,

of businesses and business models that I think you wouldn't typically think of or would overlook that.

Or quietly very boring, but cash flowing and cash printing concepts.

And you've been,

I guess mostly on the selling side of the franchise,

not so much buying,

or what's your experience on the buying side?

Yep.

So I'm a franchisee as well.

One in a,

a golf simulator concept.

You know,

so it's no employees,

no inventory,

the private bays.

So I have five of those locations in Minnesota.

And then starting to develop a food and beverage concept now,

that's more of a snack kind of categories.

It's a bagels,

you know, lower investment to build out the location,

less employees,

but still high, high AUVs,

average unit volumes,

and high revenue still.

So I've seen both sides.

When you're looking at something as a buyer,

because obviously, you know,

this audience you're talking to right now,

they're not going to be selling them,

is you're buying them.

Like, what are the key metrics that you're looking at

to determine whether a model works?

Yeah.

So I almost start with the individual

and their preferences first.

So some people say,

well, I just want the one that's going to make me the most money,

and that might seem obvious,

but a lot of people get into this for a number of reasons.

It's they hate their job,

and they just want to replace their income.

Some people want to empire build.

They're going for 10, 20, 30 plus units over a 10 to 15 year period,

and they really want to build this massive wealth generating

and creating, you know, creating machine.

Others don't have that aspiration.

And so I always, when we work with individuals,

I look for four things from them first,

before we even go look at businesses,

and that's Buck.

Are you, you know, you're risk-seeking,

or risk-neutral, or risk-averse,

or understanding people's risk profile?

Because there is something on every part of that spectrum,

a Chick-fil-A,

or essentially buying yourself a job.

It's almost guaranteed.

You can only do one of them, though.

All the way up to, you know, white space,

brand new concept with promising,

you know, economics and a promising team.

You can buy the whole market and develop 15 of them in your, you know, home city.

Much more risk-seeking, though.

So risk is the first thing we get to handle on.

The second is Buck's, you know, financial readiness.

You know, is this a huge bet for you?

Is this part of your portfolio?

You already have real estate?

And, you know, equity investments and other, you know, things there,

and this is just an add-on to the portfolio?

Or is this you betting the bank and you're, you know, again,

you're, you're, you're stretching a little bit.

So financial readiness.

Third is operational ability.

What's your past experience?

Are you really good at sales?

Are you, have you managed teams of people before?

What is your personality like there, operationally as well?

And then the last one is ultimately, what are your goals and interests?

So you're doing this for legacy for your kids,

and you want to build a business with your family?

Are you doing this to replace the W2 income?

Are you doing this to, you know, to generate somewhat passive, you know,

cash flow as part of your other portfolio?

Or are you empire building?

And this is going to be a 10 to 15 year, you know, time horizon.

And you're going to go build out 50 to 60 plus locations

or acquire 50 to 60 plus locations over time.

So we start there and get a sense of the whole person.

And then we use this AI algorithm that we've built to go

scan the 4,000 brands that are out there.

So we have every brand that you can possibly imagine on our platform.

And we have things like AUVs, average unit volumes or revenues,

the cost to get into them.

How many units do they have opened or closed to determine,

again, risk?

What's available in the markets you're after?

We have all the lenders that you need to get this going operationally.

What do you need to be good at for this business to be successful?

Is this a, you know, an operator model, an executive model,

a semi absentee model?

We factor all of these hundreds of different factors into our calculus

to then come back to you buck with your top 10.

And then it's iterative from there.

What do you like?

What do you not like?

What resonates with you?

What fits your goals?

And then you just get smarter and smarter as we do that exercise with you

to ultimately find you the best fit.

So long answer, but the goal is fit.

You mentioned lenders.

How likely, as it depend on the franchise,

is the SBA loan an option for brand new franchise owners?

Yeah, I almost, I'd say that, you know, the SBA is built for this.

The SBA loves franchising for a number of reasons.

One, you have a proven new system or somewhat proven.

Even if it's only five units open and it's a, you know, a nascent or an earlier brand.

A bank would still rather that than buck and Alex going off to go build a coffee shop

for the first time, at least for part of a system that has playbooks and vendor relationships

and a brand and a website and, you know, some of the things already figured out.

And so the SBA, you know, is the primary financing source for franchising.

And a lot of the times you can get 80 to 90% loan to value.

And so for a number of these start or, you know, these franchises,

you can get into for five to $25,000 if, you know, if you're looking on the lower end of the investments spectrum.

All the way up to you can borrow a couple million dollars in the SBA, you know,

financing for a restaurant or other more expensive cup formats or concepts.

You mentioned like your own, some of the stuff you own and you own them in Minnesota.

Do you live in Minnesota?

I don't. So that's the thing is I have an operating partner in Minnesota.

I'm more of a capital partner.

I'll help with real estate site selection, you know, managing our books, strategy.

But my partner in Minnesota, he's on the ground and he's more of, you know, managing the team,

looking at sites in person, going to see the stores in person.

And that's what I like about franchising as well as you can get to a certain size

where you can hire operators and have a full-blown team in multiple lines of defense between you

and the day-to-day operation of the business.

But at first you start out, you know, in the business.

Then it's, you know, a thing I'll say is you have to work.

It's I do it, you know, at first in the early days when you have less than five locations,

then it's we do it when you start to have managers and GMs.

And then it's they do it once you have, you know, 10, 15 plus locations.

And you have a whole management team in place, GMs, district managers.

And they're effectively running the business for you.

And that goes back into fit, you know, what is your ultimate goal?

And what are you trying to accomplish with the franchise model?

And how far are you trying to take it?

Yeah, yeah.

Now I was going to, you know, that ends up being a little bit of a challenge for some of, you know, my audience.

Because we typically are, so in some ways the franchise model sounds great, right?

Because, you know, I'm a physician, make good money.

I'm invested in real estate.

And I like the idea of doing something else, but, you know, I don't have, you know,

20 hours, 30 hours a week to devote to this realistically.

How big of a hurdle is that for people like me?

Yep. So that's where there's these, and that's part of our, you know,

our brand's these processes.

We'll go ask you, you know, is this a 10 hour a week thing?

Zero, 20, 40, full time, et cetera.

And there are concepts and brands that fit each of those, those answers.

And more, there's at least solutions.

Many people, if they want a brand that has more hands-on requirements,

they'll bring a spouse on board.

They'll have them get involved.

They'll bring a business partner or an operating partner on board with them.

Maybe it's a family member.

Maybe it's a son or a daughter.

Maybe it's a neighbor.

Maybe it's someone from, you know, there's their network that they bring in.

It's like me, as for an example, the golf simulators are very passive.

You can do that and keep your full-time job because it's zero employees.

It's zero inventory.

It's all self-service.

It's 24-7, kind of like a 24-7 on a tentative gym.

And that kicks off, you know, 100 to 150 grand in cash flow per location.

And it's like a nice, you know, cash flowing investment that is an asset

that's also appreciating.

And you can exit, you know, multiple years down the road if you want to as well.

But it doesn't require, you know, me to leave what I'm doing full-time to go focus on.

All the way up to you've got the restaurant where there's 30 employees and it's a lot more hands-on.

You need an operating partner at that point if you're not going to be involved in the day-to-day.

And there's tons of great operators that you can find out there to give five to 15% equity to

that will treat it like their own, but you're the capital behind it.

And, you know, you're maybe involved in site selection and some of the more strategic decisions.

But outside of that, you're operating partner will run, you know, they'll run the business for you.

And so the answer is yes, it's possible just depending on do you want a partner or not

or do you want something truly passive and their solutions for both.

So I want to tell you a little bit about my experience so far because, you know, I mentioned to you before,

Alex, I've had a couple people on the show guarding franchises.

First, with regard to the franchises themselves, the one thing that I was having a real hard time with

is a lot of the times that the commissions were, you know, the franchise commission or whatever you call that.

They were pretty high. I mean, they'd be like eight or 10% and that's up revenue.

And, you know, I've started three businesses in my life and I think about like what that would mean for the bottom line

and it was really hard for me to figure out, you know, the risk profile on that is really tricky, right?

Because you're giving 10% or 8% and, you know, you've got to, so you've got a million dollar revenue, that's fine.

But, you know, if you're starting out, how do you navigate that?

I mean, because that's a big part, especially in startups where, you know, 10% of your revenue could take you from being profitable, you know, to being underwater entirely.

So, what are your thoughts on that?

Yep, so you, for franchising, you know, one of the first questions I'd tell people to ask themselves is,

what will the brand do for you in five years that justify, you know, six to eight, sometimes 10 is the high.

I mean, that's the highest and you'll see what's six to eight percent in your royalty.

What will the brand do for you five years from now?

Because a lot of the value up front is definitely there. They're training you.

They're helping you find the right site. They're giving you all these playbooks, materials, marketing tactics,

and support, technology, and all this stuff that is valuable the first few years.

But five years from now, and you now understand the business, you become someone of an expert.

What justifies you paying multiple thousands of dollars, you know, a month or a year to be a part of their brand?

And there needs to be an answer there.

And so that's things like, well, they have some sort of access to national accounts that I would have a hard time getting on my own because of the scale.

We're getting these national partnerships that's generating my location revenue.

And that is worth giving up, you know, six to eight percent for.

Or in your food, for example, buck on his own can go buy burger meat for a dollar a pound.

But I'm getting it for 20 cents from McDonald's.

And like that alone makes up for the six to eight percent, you know, tenfold, you know, to do.

And so like there's clear obvious answers.

Some franchises don't have a great answer.

And that's when you need to really ask yourself, am I better off doing this on my own or investing somewhere else?

And so I start there is what are they going to do for me five years from now?

And the math should always equate.

It should always make sense that the six percent you're putting in.

You're getting at least that if not some multiple of it back in the form of learnings, revenue, supply chain efficiency, technology efficiency.

Like you and I as a, you know, as an independent gym might not go invest half a million or a million dollars into technology and wearables.

But Orange Theory has done that.

They have whole wearables that they sell to their members.

They generate additional revenue off at the all this additional data.

You and I as independent operators just wouldn't, you know, just wouldn't do that.

And so we make up for the royalty and investments like that.

So you have to ask that question first.

The second thing I look at too is franchising is it's another asset class.

It's, it's business ownership, which could be independent or franchise based.

But I look at it as a, you know, return on investment decision and franchising, you know, listeners can go look this up.

Historically has a, you know, 15 to 35% cash on cash return.

Where else are you going to produce that type of outcome?

Yes, there's more work and there's more.

In some cases risk involved.

But you are generating a substantially higher return on capital than you would in an equity, you know, where they average is 8 to 11% granted way more passive.

But you also, you also don't have this ownership piece and a business that's, that's cash flowing underneath it.

And then with real estate, you know, real estate investors, I think would jump up and down at a, you know, 13, 14% IRR 15 to 16% IRR.

We're talking double that in franchising or in business ownership in general, whether it's a franchise or not.

And that's, that's inclusive of that royalty.

So from a pure return perspective, I think franchising still presents one of the best performing assets.

There are, you just need to pick the right one and make sure it fits your, again, risk tolerance, lifestyle, what you're good at operationally and what your goals are.

Yeah, I think that's an important thing to point out because the profit margin typically on any operating business.

I mean, it should be, hopefully 20%, you should be able to get a 20% IRR.

People look at that and they're like, well, why am I doing real estate? Well, the reality is it's a little different, right?

Because if you're in real estate, it's not as much of an operating business.

I say that with one caveat is when, you know, for example, we buy 200 unit buildings, that's a business, right?

But, but there is a stability because people have to lose somewhere.

It is a big piece of, you know, concrete and all that stuff.

So, you are getting a higher return, presumably if it works, however, you do have to understand that it's actually work.

It's more work, right? You're going to have to pay more attention.

You're going to have more, probably more fluctuations and stuff like that.

That's not to deter from it. I think it's something that, you know, I as a, you know, guys started businesses like you.

I mean, we know the value of that business when it starts cranking and, you know, in my strategy is always been take that income and invest in the more stable asset in real estate.

Let me ask you something else, Alex, this is actually kind of interesting to me because again, I've had an opportunity to go through this process before and obviously haven't pulled the trigger.

And the other thing I found frustrating for me is a little bit on the broker relationship.

And this is not to put down any brokers, but you know, I think like when you're talking about busy professionals, right, you kind of need somebody to really kind of really guide you.

And what I had a few experience where you would spend 30 minutes or so going through a lot of the questions that you just, you know, you talked about with me.

Then you get just sort of as, you know, 10, a list of literally 10 companies to look at.

And what do you think of these? Well, I don't know. I don't know. Tell me.

Tell me about it. I mean, you want me to go and, you know, you can just read about them and say, yeah, that sounds interesting.

But I have no idea because what I'm looking at are metrics like how, how likely is this to be successful?

You know, where? Why? Why is this a good idea? You know, those kinds of things where you really dig into it when people are thinking about this from, for me, it's a lot about, you know, risk mitigation.

I wanted to do something that was, it doesn't have to hit it out of the park. It doesn't have to be a 40, 50% cash on cash.

But I wanted it to be something that I felt like there's higher risk of success.

And okay, if I'm getting, you know, 15 to 18% cash on cash, I'm cool with that instead of the 30.

So I guess my big question is, how do you, I don't know how, what your process is and if it's any different, but I find that it's, there's also a motivational element that I can't say for sure that is true.

But I get the sense that there's certain ones that kind of get pushed at you and you're not really sure why, but you kind of feel like there's probably some economic incentive behind it, you know, because it doesn't really make sense whether pushing one so hard.

So tell me about that conversation and again, I have no experience with your business folks know that I'm just talking to Alex for the first time.

How are you different if you're different?

Yeah, I'm glad you're bringing this up to and I'll, you know, I'll let everyone a little secret on how the brokerage world works.

And this is, you know, my main motivation and drive or why I started frenzy in the platform that we've built is as a franchise or I saw it firsthand.

A lot of franchisees take their 401ks, you know, use half of it because you can do what's called a Rob's Rollover, which is essentially accessing early retirement assets without penalty to invest in a business.

The IRS, IRS allows you to do that a lot of people don't realize you can do that.

I saw people's tax free thing is it is it tax free tax free.

Okay, so you can help me.

Well, okay.

So many people don't realize I think the government figures, hey, if we're allowing you to use retirement assets to invest in publicly traded companies, why wouldn't we let you invest in yourself if you wanted to start a business or you're buying to a franchise.

So it's called a Rob's Rollover.

It's like I figured it stands once roll over of.

I forget what it stands for.

I always roll over.

No, it's right.

Yep, yep.

But so I saw this happen and I saw brokers pushing these concepts and as I learned more and more about how this works.

I realized these brokers take a 60% commission on the franchise.

He's 6, 0.

My dad was in sales for 35 years.

My brother's been in sales for 20 years.

I have never heard of a commission that high in anything else.

And so the incentive is very much there for these brokers to make sure that you buy a business.

business even if it's not the best decision for you and so I saw that and

thought one this needs to be regulated I'm not usually a big proponent of

regulation but this is like the wild west there's no licensure requirements

there's no disclosure requirements for brokers so boom buck you and I can both be

brokers in this very moment on this call there's no coursework like there's a

real estate you know agent there's no disclosures like a real estate agent has

etc and so high commissions little to no regulation on disclosure or licensure

and so you got to reach by all these people that you think are in your corner

and when you brought up they they seem like they're pushing the same

concepts over and over you're exactly right because those brands have

maybe cut unique deals to say hey we'll pay you 70% instead of 60 or 80%

and so they're going to try to push that concept so at francey what we're

doing is the same thing zilla did to the real estate discovery and research

processes were democratizing access to all of the data we have every brand you

can imagine all the cost data all the revenue data how many are you know

being litigated right now how much bankruptcy has been claimed how many

locations have shut down so you're seeing very transparently what is happening

with this brand in the system and we're leveraging AI to curate that list for

you so there's actually reason and logic behind it versus Alex saying buck

here's your top five that I just made up because they pay me the most money in

the background so that's the first thing we do differently and the second is

our fee structure is we get a flat dollar amount from every brand that we

help someone you know identify and match with and it's the same across each

brand so we have no incentive to promote one concept over another it's truly

what is the best fit for buck and then we monetize other other areas lending

referrals we get paid you know basis points on loans we originate but I

get very objectively I think no one expects you know people I don't

brokers or people who are facilitating things not to get paid I mean that's

they're you know that's what they do that's their job but I think just alignment

is really important and I didn't sense that there was always alignment because

it seemed like there's some that I'm like why are you so into this one it you

know what I mean like it it was turned off by that whole thing because I just

felt like we're not really I don't feel like I'm really know what's going on

here and I'm not it's I'm just going to turn it off so that's that's what

happened to me I've had the same experience I've talked to a number you

hundreds of others I've had the same experience and something that I think is

also unique about buying into a franchise is if you think about a traditional

broker whether it's real estate a car you know an existing independent

business there's there's a seller and there's a buyer and you're going to have

some sort of negotiation your shake hands and you likely move on in your life

and never interact again if you're developing a franchise business or a

you know series of territories maybe you have five that you're developing over

four years with this brand you're gonna it's a marriage you're going to be

working with that brand for the next 10 years at least and so I look at the

franchise brokers it they shouldn't be brokers they're more matchmakers it's

more welcome here to guide you educate you on what questions to ask what to

look out for how to identify the right fit how to find the right lenders how to

get your entity formed it's these types of tactical things but also matchmaking

because it's not a buyer verse seller relationship it's a buyer and a brand

who are going to now be in a marriage for the next 10 years and it's our job to

make sure it's a good marriage and a good fit and so even the idea of it being a

broker I disagree with and you know the relationship and what the purpose of

what we do and what a broker does in franchising should be looked at and

done very differently you describe it as sort of a zillow process where you're

basically kind of doing a search and your things are coming up

on that and it's sort of a do-it-yourself kind of situation right we have a

a little bit of each like for for the very like data analytics self-driven

self-motivated people you can go all the way on our platform without

talking to someone you can get you can find a lender you can find the right

brand you can do it all on your on your own do you know DIY but then we do

have access to expert coaches they have been or are franchisees themselves

for decades they play that coach that matchmaker they're there to be on the

phone with you whenever you want it's all free for you because again when we

place someone into the right fit brand or the right lender we generate

revenue and that's what covers the ability to have those you

expert resources at your disposal for free some people come to us and they're

like look I'm a real estate investor I'm been curious about this I'm gonna

take two or three calls if you just educate myself and I'm likely not to do it

great we you know we're there for that if you're coming and saying hey I hate

my job or on the same real estate investor and I just want to add you know

operating business of some of my commercial sites great we can you know we

can help you find the exact right fit based on that market the demographics the

complimentary businesses etc. and all of that is free to

the prospective buyer Alex do some franchises not want to participate in

franley for any for any reason we launched about a year and a half ago and we've

had one brand say no to us they all look at it as hey this is like us

showing up on google we need to be out there we need to be shown and the value of

a really good franchisee is worth so much to them because it's a new location

it's new revenue it's new royalties over a 10-year period and so the cost

that we charge is so low and so minimal yeah it's almost cheaper than a brand

acquiring a new franchisee on their own through traditional marketing

you know methods and so brands are very aligned buyers are very aligned are

really just creating that you know what it was typically asymmetric

information we're making it symmetrical and fair and open and honest and

the process and the you know end result is just a lot more aligned and

better what's the secondary market on franchises like

so obviously people maybe they accumulate or maybe they only have one franchise

but they want to eventually sell it whatever what does that market look like

and to me it sounds like it's a very difficult market to penetrate

yeah so that's what I mentioned the 20 to 35 percent cash on cash return earlier

that did not include the terminal value or the exit potential by owning one of

these businesses many people don't realize if you and I own

you know a Dunkin Donuts versus Buck and Al's coffee shop we're going to get a

multiple that's one the two turns higher than you and I would have gotten

as an independent shop because investors banks etc look at it as

de-risked you're part of a system you have a national brand and so they put a

premium on that so your exit values a lot higher now the liquidity that you

asked about your resales and what about people that you know own 10 units and

they want to sell to what typically happens is it's hard for you and I as an

outsider to get into these deals because as a 10 10 you know Dunkin owner I'm

might sell to the other Dunkin guy down the road of the town over the other

town over or the other town over yeah and that's great but part of what we're

doing at francey is again creating more access to that as well me is that

seller while the brand might like me to sell to another Dunkin operator because

it's you know no training for them they already know what they're doing they're

already in the system it's great for the Dunkin the brand me is the seller if

my potential pool of buyers is just other Dunkin operators how competitive is

that process and am I really getting the best price and so francey's creating

liquidity as well in the resale markets we do have resale opportunities on

our platform so that me is the Dunkin owner I can go shop into the Dunkin

the existing Dunkin franchisees but I can also shop it to the Davis hot chicken

franchisees the private equity group that's starting to get interested the wealthy

family office that wants to get into you know franchising and now I've got

competition and I'm getting an additional half an X to one and a half X turns on my

EBITDA and you know that can be meaningful especially if I'm selling two three four

five units in a in a portfolio this could be the difference of millions of

dollars by having more respective buyers yeah interesting

lots of good stuff here Alex so would I have I not asked

that you think it's probably a good idea for you know an audience like mine

yeah something that I like I'm on the path for right now is like you know

francey is a tech company it's a much more risky thing than a lot of other

things I could be doing but I also own you know cash flowing

physical brick and mortar businesses which is my hedge against AI like I see

how fast technology is moving I see how many people are being displaced from

their work and I think that owning an asset whether it's real estate or a

cash flowing business is paramount right now it's like to me it's this hedge

that I need to have and I you know implore others to take it seriously again

whether it's a franchise or not this isn't me you know promoting

francey it's just go go own something so that you can have that hedge

and again I think there is a wider range out there than people realize whether

that's the one independent or franchise location or

you know a brand that has three four hundred plus open there really is something

for everyone and I do think there's this mentality of

you know you can go as small as you want and one unit can replace your income

or you can go after multiple units and it can change your life I

I have a a guest that came on our podcast he started seven years ago in

20 it was 2018 it's like it's eight years ago now

he had zero locations he started out with a butcher shop that wasn't franchise

did okay with that then he bought one orange theory fitness franchise

did really well with the one bought a second bought a third

he's now to a hundred and twenty franchise locations across davsat chicken

marcos pizza and a few other brands that business

does around six hundred million dollars in revenue a year

and seven years ago he had none of them he was a former finance guy

worked in banking and my point with that is there really is the ability to chase

the American dream in this like guard railed way there's playbooks there's

a team there's peers you don't need to go start uber or

Facebook or some tech company to have these types of outcomes and you don't

need to go you have some crazy original idea it's if you're a good operator

and you know how to put deals together and structure capital franchising to

me is the most viable and again overlooked path to significant wealth creation

in our country how do we learn more about france so the francey dot com or

yep so the website is above my head here this is outspel fr a and zy dot com

and then we put out a ton of educational content we have a podcast called

how i franchise this where we tell stories of every day people and their

backgrounds and what they did to get to one unit all the way up to a hundred

hundred plus units and then i'm on linked in instagram tiktok twitter acts

etc as Alex from francey and tastic thanks so much for being on the show today

Alex yep thanks for having me buck wealth formula banking is an ingenious

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dot com welcome back to show everyone hope you enjoyed it and again franchises are a great idea

to consider and again it's one of these things that i've been thinking about for a while

i'm going to myself check out this francey site i'll let you know how it goes and and you should

let me know how it goes as well if you're doing some franchises i'd love to know about your

experiences what you've done you know what kinds of franchises you've actually been a part of

and what what your successes and failures were all about to shoot me an email at buck at wealth

formula dot com this is buck jaffrey signing on thank you for listening to the wealth formula

podcast visit us on the web at wealth formula dot com the information contained in this podcast

are opinions not fact as always consult your own financial team before making any investment

see you next time