Jon Ostenson_Diversify Your Portfolio with Franchise Opportunities

Diversify Your Portfolio with Franchise Opportunities with Jon Ostenson, FranBridge Consulting

August 30, 2023

If you want to diversify your revenue streams and get into business ownership without starting a new company from scratch, investing in a franchise might be a good option for you. But how do you find the right franchise opportunities? In today’s episode, Jon Ostenson and A.J. explore franchise opportunities to help you grow your entrepreneurial journey. They also dive into the smartest tactics for matching your long-term goals to your franchise investment, how to prepare to break into franchising, and why investing in a franchise is a wise choice.

About Jon Ostenson:

Jon Ostenson is a Certified Franchise Consultant and a top 1% consultant/broker nationally specializing in non-food franchising. As the Founder and CEO of FranBridge Consulting, he has helped thousands of entrepreneurs and investors understand all aspects of non-food franchising and explore different business ownership opportunities. You’ll find his insightful contributions in well-known publications like Forbes, Inc., The Franchise Journal, and Franchise Connect, where he writes about franchising and franchise investments.

Drawing on his experience as a multi-brand franchisee and his background as an Inc. 500 franchisor, Jon authored the book called “Non-Food Franchising: The Better Path to Business Ownership.” Addressing key topics such as strategic opportunity selection, semi-passive business models, and financial potential, this book is an essential resource for aspiring entrepreneurs, underscoring why non-food franchising is the optimal route to successful business ownership.

For a comprehensive book review, check out this page.

How to find the right franchise opportunities

When considering breaking into franchising, it’s important to first understand that franchises are not just restaurant businesses. When people think of franchisees, they immediately think of big fast-food chains like McDonalds and Burger King. But the truth is that there are more great franchise opportunities beyond fast food chains. Even though they might not sound fancy or desirable at first glance, they’re just as essential as food businesses. Sometimes even more indispensable.

For example, businesses like dumpsters, gutters, or insulation are not the ideas that first come to mind when considering smart investment opportunities. However, these businesses are crucial for everyday life and have strong franchise potential. So, when evaluating possible franchise ideas for your portfolio, it’s best to consider what customers need and not just what they want.

Episode highlights:

  • Fast food businesses are not the only franchise opportunities you can explore. Non-food franchising could be a much better path to business ownership as they’re often necessities that people can’t go without, like dumpsters, children’s apparel, or pet stores, which makes them more lucrative and sustainable. (03:43)
  • Franchising is a great way to create multiple income streams and diversify your investment portfolio, helping you build long-term wealth and secure revenue. It’s ultimately about not putting all your eggs in one basket but allocating your money across different investments. (05:49)
  • Having a good manager for your franchise is a game changer. It takes the burden off you without sacrificing the quality of business operations. (07:59)
  • Every entrepreneur is different. So, it’s important to identify your own business WHY to understand which direction you want to take next in your entrepreneurial path and then unlock a franchise opportunity that will fit those goals. (14:07)
  • When you’re preparing to invest in a franchise business, it’s critical to first research and identify market gaps where the customers’ needs are not being met. Then, start thinking about how you could solve their pain points with the right business. Only once you’ve uncovered the right opportunity can you start working on the funding piece and the actual paperwork for owning your franchise. (18:13)
  • Even though some businesses don’t seem that intriguing at first glance, what matters is that they’re necessities on the market. They have real franchise potential and are more likely to stand the test of time. (22:43)

Jon’s best advice for entrepreneurs:

“Where we see most of the attention being given today, again, it’s these what I would call boring businesses, things like gutters and insulation and floor coatings and dumpsters. We have clients killing it with dumpsters. It’s things that, like I mentioned, the senior care, we’re still doing a lot of oil changes in most states, but it’s pets, it’s kids, it’s businesses like that, that you don’t think of oftentimes until they’re in front of me and say, wow, there really is a market need.” (22:54) 

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[00:01:40] Jon, thank you so much for coming on the show.

[00:01:42] Jon Ostenson: A.J., excited to be here, looking forward to our conversation.

[00:01:45] A.J. Lawrence: Really quickly before we dive too much into the process, I really like your path. Because I was going through your background, you’ve been in Accenture, you’ve had this bunch of senior sales roles, and then you kind of went and got a franchise yourself and went down this path before building FranBridge. What was the reason for you getting a franchise? Why did you decide to get a franchise and how did that lead to then eventually starting FranBridge?

[00:02:13] Jon Ostenson: Yeah. Like a lot of members of your audience, I didn’t have franchising on the radar in the past and I spent many years in the corporate world and had a great run and had that entrepreneurial itch. And it was really just about seven years ago that I stepped away from the public company world and stepped in actually on the franchisor side.

[00:02:28] So I had the opportunity to serve as president of ShelfGenie Franchise System, which is an Inc. 500 company, and we experienced some really rapid growth there for a few years. And fast forward, that was kind of my moment of enlightenment if you will, when the light bulb went off, but ended up partnering with the founder of ShelfGenie. We spun off, we’ve invested in franchises ourselves as you said, and really have just fallen in love with the franchise model.

[00:02:51] So I’ve now sat on both sides of the table and continue to invest in franchises myself. I just pulled the trigger on another one a couple of weeks ago down in South Florida, but love the model for all the reasons that we’ll probably hit on here in a few minutes. Good thing is I got good people running the businesses for me and allows me to spend most of my time helping others do the same.

[00:03:09] And so I feel very blessed to get to work with over 600 different franchise companies today, and then great candidates all across the country and really helping to educate them and hold their hand and walk them through the process of finding the right match for them.

[00:03:20] A.J. Lawrence: I know you were mentioning a bit earlier when we were chatting before starting this. You wrote a book for people to use to evaluate sort of looking at franchises. Let’s kind of just start with that general like if you are interested, generally, just learning more, where do you begin? Obviously with your book, but then how else?

[00:03:41] Jon Ostenson: Yeah, well, our book, Non-Food Franchising. Oftentimes when people think franchising, they think fast food and yet there’s so many other industries out there. And we appreciate the guys to get into food, we certainly need them. But in my humble belief, there are easier ways to make money.

[00:03:54] And so it can be overwhelming to your question on how do you start? And when you look at the marketplace out there, there’s about 4, 000 franchise brands in the US. If you cut out food, if you cut out hotels, which are also just a different animal, that probably cuts the market in roughly half, maybe a little over half.

[00:04:09] But then when you stand back and you look at the different key characteristics of franchises, you know let’s look at the financial model, let’s look at competitive advantages within a given industry of different businesses, let’s look at the franchise leadership team, that is so important. That’s essentially your business partner.

[00:04:24] And for us, I want to see not only good industry experience, but robust franchise experience on that leadership team – that they know how to support successful franchisees. So when you start applying these filters, it usually narrows it down a good bit. So, like I said, we picked around 600 companies that we represent, and these are across a wide array of industries, things like home and property services and health and wellness.

[00:04:47] We do some automotive, we do some fitness, but it’s things like kids and pets and the senior population. All these segments that people will always spend on, they’re somewhat resilient. These are the areas that our clients are resonating with and that we resonate with. And once you start applying these builders and then going down that path, it narrows the grouping to a more manageable number.

[00:05:07] A.J. Lawrence: Very cool. So when someone’s looking at FranBridge to have a conversation with you, who’s your customer?

[00:05:13] Jon Ostenson: Yeah, we’ve certainly done deals year to date with clients from their 20s to their 60s, but I’d say who is kind of that avatar that we see coming to us more than any other segment, I’d say folks in their mid 30s to maybe mid 50s. And we have a lot of placements with doctors and lawyers and corporate executives that maybe are looking to keep the day job, but they want to get something going on the side. We have others that are looking to jump in full time.

[00:05:35] And then we have a lot of existing business owners. That is a very large segment of our client base. And within that, in some cases, they’re looking for a bolt on business. The other day we did a deal, a large real estate broker. He wanted to get a property management business and said, hey, let’s go the franchising route.

[00:05:49] So, that’s kind of a natural extension. In some cases, they’re looking to diversify. I always look at so many different case studies of business owners of ours and our client base that have that portfolio mindset. And many of them are also investing in real estate and other alternative assets, but they love the idea of multiple streams of income. And once you start to build an organization around these companies, then you can promote within and attract better talent. And you kind of get that snowball movement.

[00:06:16] Perfect example, we were talking before the show about Columbia, you being from University of South Carolina. Well, one of my favorite clients, Nathan, went to the University of South Carolina based in Columbia. He’s the largest franchisee of Two Men and a Truck moving service. Operates in about 12 markets, does about 30 million a year in that business.

[00:06:32] Well, every year he and I do a deal together and he comes to me and says, hey Jon, I’m ready for the next thing. You know, he’s just built out this franchise empire. He’s gotten into things like home services and property services and waste removal space, these non sexy type of industries, but they’ve been great for him.

[00:06:49] And what he’s found is he’ll attract young guys from his church or community to come work for him. They prove themselves in his core business. And then he gives them a lot of responsibility to go out and run these additional businesses. So he’s creating business owners, he’s creating jobs, he’s creating just a huge impact in the community, meanwhile creating a lot of profit on the bottom line.

[00:07:08] A.J. Lawrence: Well, that brings up a good question, kind of even diving into that avatar. I know some people who are very interested, but they kind of say, I don’t want to be working in a franchise. You know, that typical do you work in or do you work outside the business? Do you work on the business?

[00:07:22] With the structure you get, what’s the general expectation? And I know this depends completely on the franchise you’re working on, but as someone looking to kind of get in it, like our typical audience member. They already have a decent bootstrap business, give or take, load is mid 7-figures, and they’re looking to, as you said, diversify the revenue or maybe even get a little bit deeper, add something that talks to someone they’re already selling to. What’s the expectation of the work they have to do in the business, the franchise that they go with?

[00:07:59] Jon Ostenson: It absolutely comes down to the person that they put in charge of running the day-to-day. Having a good manager, and it should be no surprise to anyone out there, takes away a lot of headaches.

[00:08:08] And so if you don’t have a good manager, if you have to replace the manager, you’re going to have to lean in and probably have a few more headaches and you have to get involved. However, if you have a good manager, franchising really does create that framework for you where the burden for that day-to-day does not rest on your shoulders in such a big way because you’ve got the franchisor, assuming it’s a good one, that your manager can go to for all their technical questions and really lean onto their operations team from a support standpoint.

[00:08:32] Let them drive the marketing. Let them use those large data sets to help optimize the marketing. They’re maybe procuring a lot of things on the supply chain side. They can train your key employees. So again, you kind of get to choose your own adventure of what role you want to take in the business and how involved you want to be. But if you have a good manager, you have a good franchise or it’s very doable.

[00:08:53] And so I’d say probably a third of our clients start out working in the business full time. Probably two thirds are looking to go semi-passive or semi-absentee as we call it. And then we actually have a few opportunities out there where they’re truly passive, where the franchisor will run the business for you. They’ll actually recruit and manage the manager.

[00:09:09] Those are very rare, but we do have a couple of those. One of which I’m personally invested in. But no, I’d say even if they are looking to jump in and run the day-to-day, day one, their plan is hey, as soon as that business stood up, I’m going to pull myself out and replace myself.

[00:09:22] Many that are looking to get it going on the side, some of them, like I said, are keeping their corporate job. But they say, hey, once the business is producing positive returns and is in a good place, I’m going to jump in and run the business. So a lot of different paths to your involvement.

[00:09:36] A.J. Lawrence: I’m trying not to ask too general because I know it all depends on the choose your own adventure and every franchise is its own type of environment and stuff. I joined this thing called Hotworx and it was really interesting because I liked the saunas and I like all that stuff. And I loved it when I was kind of like, wow, they only have one or two people there for a few hours a day. It is all remote access, it is all remote booking. You book over the app.

[00:10:07] And when I met the owner, since I live in Northern Virginia, and like a lot of people, he works for the government in a role, and this is something he does after hours. He can remotely log in, check everything, and I was like, wow, so you have your outside job, but this model was pretty much built for that type of person, someone who has a job and then can run this around their schedule. There are need to have some people. Are you seeing more companies being built or more franchises being built like that?

[00:10:39] Jon Ostenson: 100%. And as a franchisor, I’d love if all of my owners were all owner operator. I mean, that’d be great. But if I want to track the best people out there, chances are they’ve got other things going on. And to get your best people, oftentimes you have to allow for that semi-absentee ownership style.

[00:10:53] So I’d say the vast majority of those that we work with, probably 85-90% do allow for the semi-absentee. And again, they’re willing to train the manager. The better you do, the better the franchisor does so they’re very aligned in interest with you. And again, they’re not all created equal. That’s why we help our clients find the right ones. But no, I’d say more and more that semi-absentee approach is very common.

[00:11:14] A.J. Lawrence: All right. I was going through your site and looking at this because, like I said, this has started entering into my consideration set. You talk about building a framework, what does that mean for your client when you’re building a framework? What are you trying to bring into consideration and help them understand?

[00:11:31] Jon Ostenson: Yeah, there’s just a lot of different variables that come into it. And I was working with a couple of clients today and we’re trying to thread the needle and they had very stiff requirements. So I think at some points you may have to give a little bit, but ultimately that framework looks like this. It’s what kind of ownership style do you want? The industries you want to be involved in? Are they more discretionary or more needs based?

[00:11:49] We’d look at the financial model that plays in. Is it another income stream or is this going to be your main income? What’s your investment level? We look at, is it a more established franchise system or a more of an emerging brand? And there are trade offs both ways.

[00:12:03] We look at certainly whether it’s going to be a remote business. A lot of the industries that we’ve been working with of late, I think about home and property services or senior care, for instance. Those are more remote where you don’t have a brick and mortar customer facing retail presence, but some people prefer that retail presence.

[00:12:19] So we look at that, we look at the geography and kind of their market and what’s taking place there and what the demographics look like. And so all of these pieces come in to help build this framework. And so oftentimes this is what’s fun about our business is once a client gets involved and maybe they’re talking to four franchisors we’ve introduced them to, usually we’d show them 10 or 12 opportunities in their market that we think are the best of the best, but they narrow it down to four. So oftentimes that one that was number four in their mind pops up to number one after a call or two.

[00:12:45] And so, most of our clients go in with an open mind and over 90% end up purchasing something that was never on their radar. And oftentimes that’s because their framework starts to change. As they start having real conversations with real opportunities, they start to realize, hey, this one mentioned this. I should ask the same question of these other ones. And they start to, in their mind, create here are the characteristics I like and the ones I don’t like, and that ultimately leads them to the right opportunity.

[00:13:11] A.J. Lawrence: I like that because I’ve always agreed part of the reason I even do this podcast is because sometimes I realized in the past that when I was confused about something for my own businesses, it was listening to another entrepreneur not talk specific- like I didn’t want to know how they handled it so I copy it. But just hearing the way they would phrase something that they were dealing with that I may have a problem, it’s like, oh, you included this into your consideration.

[00:13:38] It was just that emphasis and the way someone describes it changes the way you think about something. You may be looking at something and going, okay, it has to be this, or I’ve read 5,000 things, I’d say you do this, this and this. And then you talk to someone and it’s like, oh, you did that. And yeah, you kind of did that the way people think you’re doing it. But the emphasis is always that the interesting thing that kind of pushes you a little bit more clear to make that decision.

[00:14:05] Jon Ostenson: 100%. And so many of our clients will say, hey, I’m passionate about health and wellness that’s why I went into medicine. And I really want to stay in an arena that resembles that. Others say, hey, I’m open-minded and end of the day, I want to make as much money as I can with as little time as possible with as few employees as possible.

[00:14:23] So yeah, everyone values things differently. I’d say especially so many of your listeners are existing business owners and said they likely have a different framework than someone that’s worked as a W2 their entire life. And you know, some of their experiences help inform how they think about opportunities and what the right fit may be.

[00:14:39] So I love what I do because I get to see all these different business models, but I also get to see the kind of the psychology that goes into the decision-making as well.

[00:14:47] A.J. Lawrence: All right, maybe a little bit of inside baseball. How did you go about deciding which franchises you will even be evaluating for your clients?

[00:14:56] Jon Ostenson: A couple of things. I’d say, again, going back to the financial model, the competitive advantages, the leadership teams is probably where I put the most weight. I personally tend to like more needs based businesses versus highly discretionary businesses. And what I found is my clients like those too.

[00:15:10] So we’re looking for boring businesses. Things that are non-sexy, non-trendy, aren’t going out of style, but they’re understandable. They’re cash flowing, they’re Amazon resistant. And so those are the lenses through which I’m evaluating most opportunities out there.

[00:15:24] And then we’ve been very, very blessed. Last couple of years, I’ve done more placements than anybody else in the country and it allows me to see firsthand what is resonating with different backgrounds and why is it resonating. And so all those perspectives help inform the brands that I’m going to put in front of my clients. And ultimately what I’m striving to do is give them the 10 to 12 opportunities in their market that are available, that check their boxes, that are the ones that if I’m in their shoes that I’m personally wanting to purchase.

[00:15:51] A.J. Lawrence: Okay, let’s step back then because that was a lot of really cool things. What are some things, that if they are not intelligent enough to go reach out to you to talk about this, if they’re looking on their own, what should they be looking for there?

[00:16:05] Jon Ostenson: Well, it can be challenging because you don’t always find all that information online. Obviously, you’re going to be seeing the marketing messages from all these brands. Oftentimes, they’ll have a top 50 list or a top 100 list. Well, if you look behind the covers, companies pay to be on this list and so those can be very deceiving. And some of the best players out there don’t feel like they need that PR so they don’t spend on it.

[00:16:25] So I always caution people because in some cases it may turn down an opportunity on likes. They only have five locations. You say there’s two new. Well, the fact is they just sold 70 locations. They’re going to be opening up in the coming months and they’ve got a great thing going and you need to know about it. But the leadership teams, I mean, franchising is a small world and I get to go to these conferences and I get to go to these events and really have these relationships with these franchisors.

[00:16:46] Many of whom my clients have bought into over the last couple of years so I’ve gotten to see their experiences and I’ve gotten to know these franchisors personally. Just like any industry, you’ve got great players, you’ve got good players, and you’ve got some that I’d probably not purchased myself.

[00:16:59] And so first off, it’s entirely free to work with us. We’re funded by the companies. When deals get done, it’s just like real estate or an executive search type model and our clients never pay us in nickels. So it’s kind of a no brainer to work with someone when you get to understand what’s going on behind the scenes, in addition to kind of what you’ve done your own research on.

[00:17:16] So all that to say to your question, sometimes it can be difficult to get to the information you need. It’s not always disclosed unless you really dig into that FDD franchise disclosure document. And even within that, you have to wade pretty deep into it to really understand it.

[00:17:30] A.J. Lawrence: Yeah, that has been one of the things I have noticed. Someone pointing me towards, I think it’s called franchisegator or something. I can’t remember the name. I’ll find it and throw it on the show notes everyone. Sorry about that.

[00:17:41] Jon Ostenson: All of those are portals. You’ve got consultants out there that buy leads from those so watch out. You’ll start getting attacked by people you probably don’t want calls from. So that’s not how we go about our business. Ours is entirely referral. And we work with clients that reach out to us.

[00:17:54] A.J. Lawrence: All right, looking at the quality of things, how best could someone who is thinking, okay, maybe this is the route to go. What should they be preparing on their side as they start talking to you? Not so much the process of working with you, but even preparing to be able to work with you. How should they be thinking about that?

[00:18:12] Jon Ostenson: Yeah, start thinking about things that are of interest. What are some of those businesses in the area? Where do you see crowds showing up? Where does there seem to be demand?

[00:18:20] Do you have young families moving in? Do you have more of an older demographic around you? Where have you noticed that your spouse says, hey, I can’t find a good X, Y, Z. I’d say in most cases, our clients don’t have a lot of that information when they first come to us. But if you can start taking notice of some of those, then it’s helpful.

[00:18:35] I’d say, start working on the funding piece. Even though we do some 7-figure placements out there, I’d say most of the deals that our clients are doing right now all in investment, you’re somewhere in the one 150 to 350 range. That’s where most of them are falling. So if you’re not going to pay for that in cash, then what is going to be your best method?

[00:18:52] And a lot of our clients are using SBA loans to fund. Some are using an old retirement plan or rolling it over through what we call ROBS program. Some will use the HELOC, some will use a portfolio loan. So start thinking about that piece of it and start talking to others in the community.

[00:19:05] And also start thinking about what it looks like for you going forward. I mean, what is that next season for you? Is it keeping the day job and getting this going? Is it jumping full time, assuming that you find the right opportunity? But also think a few steps ahead. What is that end goal? Start with the end in mind. Is it to have a portfolio of opportunities or do you ideally want to go really deep with one and maybe free up as much of your time as possible? What are those things that are most important?

[00:19:30] A.J. Lawrence: And looking at that, what is the sort of the time frame that someone is looking at? Beginning the search, having the conversation with you, to being a franchisee?

[00:19:41] Jon Ostenson: Franchisee, exactly. From the conversation with us, usually we’re presenting opportunities about a week later, once we’ve checked all the territory availability and such. From there, once you let us know which ones you want to engage with and we make those introductions, you have that call with the franchisor and certainly you can hit pause at any given time in that process and we could bring others in for consideration.

[00:19:59] But I’d say from the first call with the franchisor until you walk through their process and your signing, I’d say on average, it’s probably around 60 days. Some do it faster, some do it a little bit slower, but on average, 60 days.

[00:20:10] From there, it’s not that you’re launching the business the next day. It’s you working with the franchisor on when you want to schedule that training. Usually you would spend a week of training at their home office. Maybe there’s some virtual training you do as well.

[00:20:21] If it’s a retail business, there’s going to be a few steps around site selection and build out, you know, so it’ll be a little bit longer runway. But if it’s a service business that doesn’t require the retail side of it, it could be that you’re up and running two months later. However, if you said, hey, I’d rather wait till X, Y, Z on the personal side happens and we want to wait six months, usually franchisors are pretty open to that.

[00:20:42] A.J. Lawrence: Okay. Well just a few days ago, I was looking at the guy who did Bulletproof Coffee and I’m forgetting his name right now.

[00:20:48] Jon Ostenson: Dave Asprey.

[00:20:49] A.J. Lawrence: Yes. And he has one. And I realized though, that there’s one that does almost, it seemed almost the same exact one. They have Tim Tebow and a much larger one that has like hundreds of hundreds, I can’t remember. What are some of the more interesting ones you have? And then what do you think about sort of the ones that have that like, for lack of a better term, a more sexy branding approach versus that more background necessary provider?

[00:21:23] Jon Ostenson: No, there are definitely a few. You mentioned Dave Asprey. I mean, Upgrade Labs is his. You’ve got Gary Brecka’s, you’ve got a few kind of in that health space that I think are interesting.

[00:21:32] I think it’s early for some of those. There’s one that we recently started working with that I’m really excited about getting in front of our clients, and it kind of follows that same genre. And it’s in the men’s health type space and around testosterone treatments and such incredible financials around this one. So no definitely like kind of niches within the healthcare space where we see a lot of attention being given.

[00:21:52] I’d say on the more sexy ones, it would be things, I mean we’ve done IV drips. I’d consider those for looking, those have done very well. We’re doing ones a lot in the pet space. Things like dog training, which you may not say is sexy, but I think it’s kind of fun. We’ve done a lot of youth-

[00:22:08] A.J. Lawrence: I had a few dogs that yes, I’ve spent tons of money on training so I know.

[00:22:14] Jon Ostenson: They always say this, regardless of the economy, people are going to spend on what they care about. And they’re always going to spend on their pets, on their kids, on their aging parents. Hopefully they’ll spend on their health and they’ll spend on their homes in large part.

[00:22:25] So I think businesses like that, they cater to those types of sectors, stand to do well. I’d say even as far as sexy concepts, again, most of what we focus on is non-sexy, but health and wellness definitely has more. We’ve got some neat concepts in the senior space and that’s just a demographic that continues to grow.

[00:22:41] And we did do one in the food space recently. We don’t do food often, but it’s this great food truck and it kind of flies in the face of all the characteristics that we usually don’t like about food.

[00:22:50] We’ve done some random ones, things like business coaching or cost analysis, but where we see most of the attention being given today, again, it’s this what I would call boring businesses. Things like gutters and insulation and floor coatings and dumpsters. We have clients killing it with dumpsters. It’s things that, like I mentioned, the senior care, we’re still doing a lot of oil changes in most states, but it’s pets, it’s kids, it’s businesses like that that you don’t think of oftentimes until they’re in front of me and say, wow, there really is a market need.

[00:23:19] There’s not someone else that’s doing a good job of that in my area. So yeah, it’s a combination of the two. And what’s sexy to someone may not be as sexy to the other one, so ultimately the numbers are the sexiest thing I think to most people.

[00:23:30] A.J. Lawrence: Yeah. And I think maybe that’s an interesting question because just using Dave Asprey’s, there were 2, 3 locations listed, yet I did find references on some social media about people opening more like you said, oh, you may only see a few but there’s maybe hundreds coming behind. How do you kind of approach, and obviously it all depends on the individual model, of individual franchise, etc, etc. But early stage franchise versus more established, who do you tend to maybe push certain type of people to are more established versus a new? What’s that kind of evaluation prism that you use?

[00:24:10] Jon Ostenson: It’s a blend of the two. I’d say we probably err a little more on the emerging businesses side and frankly, that’s because the territory is taken. If it’s a brand you’ve heard of, it’s probably taken. Your territory is sold. So you don’t really have a chance at it.

[00:24:23] So oftentimes it’s more emerging, but it’s so important to me, going back to my earlier point, that you have that franchise leadership in that group. I was sharing with a client today, there’s a business that a few of our clients have already bought where they do these walls that go around construction sites.

[00:24:37] So you always have renovations going on, whether it be in retail or whether it be in hospitals, airports and such. And you have these walls that go around those. Well, this is a great business. It’s almost like the equipment rental business where you have a team go out there and quickly set them up, but then you’re collecting lease payments on those walls every month and they pay for themselves in 70 days.

[00:24:54] Well, this is one, they had great industry experience. They recently had an equity infusion from a group that has great franchise experience, and they’re going to be supporting these owners going forward. And so that’s what I look for. So it’s an emerging brand, but you’ve got the franchise experience.

[00:25:09] They brought up successful franchisees and other systems in their background. That’s really, I’d say the number one thing I look for. Obviously, the financials. If you don’t have 100 locations to look at to get your comparables, and maybe you’re looking at 10 locations, I want to see that there’s enough meat on the bone that even if we take a small sample size like that, and we take a conservative approach to pro formas, there’s still a really attractive return even if you go conservative. So I’d say those are two of the big things and obviously the competitive advantages are huge.

[00:25:39] A.J. Lawrence: I like that. When looking at a franchise that doesn’t have that per se existing revenue, but they may have the existing opportunity, how do you approach that guidance of like, okay, I am looking for something maybe a little bit more of a sure thing or a larger thing or a larger opportunity versus the value of something that may be smaller and more self rate. I’m not sure if I’m framing that question right, but just how to look at size in a franchise and what does that mean generally?

[00:26:12] Jon Ostenson: Yeah, as far as how big to go out of the gate. And again, ironically, I was talking about this with a client earlier today and what I shared with him was, hey, this is your first foray into business ownership. I’d say, let’s go a little bit smaller. End of the day, you may have the chance to come back and buy additional locations. Flip side is, they may sell because you didn’t buy them.

[00:26:31] However, even if they do sell, now you’ve got an adjacent franchisee, there’s increased brand awareness, and maybe you can buy him out down the road, or maybe he can buy you out. Plus, like you said, there’s so many opportunities out there. So maybe we go smaller with this first one, and then that’s going to help inform how we think about that next one.

[00:26:48] And so, again, taking the portfolio long term approach, so many of our clients do go really deep by buying multiple brands over time. Once they stand up the business, it’s in a good place to come back for the next one. So certainly the risk profile, certainly the financial situation, there are a lot of things that play into it. But I’d say you typically go a little bit smaller if it’s your first foray.

[00:27:08] I think about a client of mine in the fall, though. He bought six locations out of the gate. He was a C-level guy, kind of a young C-level has that day job, but he came to us and he was ready to go and bought six locations of the property services franchise. Came back to me literally two months ago and said, hey, Jon, I’ve got a great manager in place. I’m ready to go with the next thing.

[00:27:28] So I’d say that’s kind of a faster turnaround time than most, but he’s ready to go and he just pulled the trigger on six more locations of another business. And he said, hey, I’ll probably be back next year, ready to go again. So I’d say that’s less common. It usually takes people about a year before they come back for more, but love seeing his approach.

[00:27:45] A.J. Lawrence: That does bring up a good thing. We did talk about there’s the financing you bring to the table from your own investments, your own net worth, but then looking at SBA, when someone is looking at that larger picture, is it financing from the franchise? Is it traditional mezzanine debt? What are you looking at when you are looking at sort of that more larger scale opportunity?

[00:28:11] Jon Ostenson: You know, SBA loans are still the most common financing vehicle that people use in franchising. So those are still very common. Certainly you can use a portfolio loan or other approach there. Now, private equity loves franchising.

[00:28:24] Typically they’re not coming in at a single franchisee level. Sometimes they will come in like in the case of pods and kind of scoop up a whole bunch of them, Orangetheory for instance. Typically, private equitiy is investing in the franchisor level and usually it’s a really good thing for the franchisees in that system. Not always, but usually it is because they’re infusing strategic capital in there.

[00:28:42] And oftentimes these PE firms own multiple franchises. And so there’s some portfolio kind of rising tide raises all ships. There’s some synergies between the different companies. So I’d say lots of private equity money floating around franchising, usually it’s more of the franchisor side. Usually the franchisee level is more of the SBA loans that we see.

[00:29:01] A.J. Lawrence: Very interesting. Well, we keep asking individual questions, but I actually think the best thing is look, if you’re listening to the show and you’re interested in franchise, reach out to Jon and start a conversation. So Jon, what’s the best way for someone to reach out to you and begin learning more?

[00:29:20] Jon Ostenson: Yeah, come out to our website, franbridgeconsulting.com. That’s F-R-A-Nbridge consulting.com. We put out a free monthly newsletter with some great content, but also when you sign up for that, we’ll send you a copy of our book as well. Got a book called Non-Food Franchising that came out last fall. We’ve gotten great feedback on it, but we’d love to share a free digital copy with you.

[00:29:39] And if there’s interested in the next step, when my assistant reaches out to you, just let her know and we can set up a time to get on the calendar and talk. So again, entirely free to work with us. Love what I do, getting to help entrepreneurs all across the country and would be more than happy to engage.

[00:29:54] A.J. Lawrence: All right, great. I’ll make sure all that’s on the show notes, in the email when this episode comes out, and also in our socials for this. Jon, thank you so much for coming on the show today. I really appreciate that. This has been really interesting and I’m like, thank God, today the cameras weren’t working. Because I’ve been taking notes and usually I feel so bad. I don’t want to seem distracted, but there’s some really interesting things I want to explore from this. So thank you so much for coming on the show.

[00:30:19] Jon Ostenson: Absolutely, A.J. Thanks for having me.

[00:30:21] A.J. Lawrence: Everyone, thank you again for listening. Like I said, it’s been fascinating. The more I get to do the show to kind of explore different models of entrepreneurship, franchises is one thing I don’t think gets talked about enough in the concept of general entrepreneurship conversations.

[00:30:39] People, it’s obviously there. Everyone knows about franchises but not in the same sort of discussion of looking at the pluses and minus of what you’re looking to do and comparison. So hopefully what Jon shared with us today and kind of just exploring things like FranBridge helps you deepen your understanding of what is possible when you take your own entrepreneurial journey cause this is really fascinating stuff. Anyway, at the end of the day, it’s where you want to take it, not what other people tell you. So go check out FranBridge.

[00:31:09] All right, everyone, we’ll be back soon with another episode. So thank you again for listening and I’ll talk to you soon. Bye-bye.

[00:31:22] This episode of Beyond 8 Figures is over, but your journey as an entrepreneur continues. So if we can help you with anything, please just let us know. And if you liked this episode, please share it with someone who might learn from it. Until next time, keep growing and find the joy in your journey. This is A.J., and I’ll be talking to you soon. Bye-bye.

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