Latest / The Inspired Stories Podcast / Faith-Driven Franchise Investments: Todd Recknagel's Three20 Group Playbook

Transcript

Faith-Driven Franchise Investments: Todd Recknagel's Three20 Group Playbook · The Inspired Stories Podcast

0:04
Welcome to another edition of the Inspired Stories podcast,
0:08
where leaders share their experiences so we can learn from
0:11
their successes and be inspired by how they've overcome
0:14
adversity. My name is Anthony Kotaspodi and
0:16
today's guest is Todd Recknangle, Managing Partner at
0:19
3:20 Capital. Group.
0:22
They are a. Private investment firm focused
0:24
on franchise distribution and multi unit businesses.
0:28
They partner with middle market companies to help them grow
0:31
through both capital investment and operational support.
0:36
Under Todd's leadership, the firm has been recognized for its
0:39
hands on approach in supporting companies that strive to combine
0:42
strong performance with faith driven values.
0:46
He also invests in multi unit expansions across the country,
0:50
ensuring that each brand remains aligned with its strategic
0:54
goals. Todd himself has served on the
0:56
board of the International Franchise Association and has
1:00
been featured in multiple industry publications.
1:03
Prior to joining 3/20, he was CEO and Partner at Mr. Handyman
1:08
International and AM Conservation Group where he
1:12
guided significant expansion. With an MBA in Finance from
1:15
Michigan State University, Todd brings decades of experience in
1:19
building high growth franchises and coaching leadership teams to
1:23
success. Before we get into all that good
1:26
stuff, today our episode is brought to you by my company,
1:30
Add Back Benefits Agency, where we offer very specific and
1:33
unique employee benefits that are both great for your team and
1:36
fiscally optimized for your bottom line.
1:39
Imagine being able to give your employees free access to
1:42
doctors, therapists, and prescription medications.
1:45
It can even work for your part timers.
1:47
And here's the fun part, the program actually puts more money
1:51
into your employees pockets and the companies too.
1:54
One recent client was able to increase net profits by $900 per
1:59
employee per year. Results vary for each company
2:02
and some organizations may not be eligible.
2:05
To find out if your company qualifies, contact us today at
2:07
AD back benefits.com. All right, back to our guest
2:11
today, Managing Partner of 320 Group, Todd Recknangle.
2:14
Thanks for making the time to Share your story today.
2:16
Hey, thanks, Anthony. I appreciate that and appreciate
2:21
your time and, and being on and just want to say hi to
2:24
everybody. So Todd, you've been managing
2:28
partner 320 Group long time, 26 years and county, but before
2:32
that you were involved in a number of franchise operations.
2:36
How did you first find your way into the whole world of
2:39
franchising? Yeah.
2:41
Well, a great question kind of going back to my early
2:44
beginnings. The I was a banker investment
2:49
banker had formed was a Co founder of a of a small
2:53
mezzanine fund actually in 1989. So it goes back a ways.
2:57
I got my MBA in 87. So it just all to say it just
3:02
makes me old, I guess, Anthony, But and I found myself working
3:09
on other people's deals and, and just really desiring my own
3:17
deal, my own company. I, you know, I just had that
3:20
entrepreneurial Dr. I mean, if I go back to my grandmother, who
3:25
was born in 19 O2, she had her own, her own store that she
3:30
supported herself after my grandpa died.
3:34
My grandfather on the other side was one of the early A&W
3:37
franchisees, way back in the 60s, I think late 50s, early
3:42
60s, which is crazy to think. My dad owned a chain of
3:46
pharmacies and so entrepreneur was in the blood.
3:51
And so as we were growing the investment fund and as I was a
3:56
banker, I was desiring my own business.
4:01
And so I did the smartest thing I thought I knew how to do and I
4:06
bought a Territory for Blimpy Subs and salads.
4:11
And I don't know if you remember the old Blimpy brand, they were
4:15
at one time nationwide and had gotten up to 2100 units actually
4:19
across the country. And I had a territory in West
4:23
Michigan where I helped open a number of stores as an area
4:28
developer and then also operated and owned my own group of stores
4:33
and became the largest individual franchise in Blimpy
4:37
in the 90s. And so even though I think when
4:42
I was leaving the investment banking and leaving a six figure
4:45
income and jumping into the entrepreneurial thing, I think
4:48
my dad originally thought, boy, I don't know if we've done so
4:51
well with the kids, but. Even the the comfort of a you
4:56
know, a nice steady corporate job and the benefits that go
4:59
with it to go out on your. Own where is high everyday
5:01
looking like an executive and my dad thought I took a step
5:05
backwards getting into franchising but but that that
5:08
was the beginning Anthony. OK.
5:10
And obviously there's something about the franchising space that
5:13
you have fallen in love with because here we are today.
5:16
You continue to do it. Can you lots of times, like a
5:20
specific anecdote or story can help to explain to people why
5:27
something is so important, why you're so passionate about it?
5:29
Can you think of a a a story like that?
5:31
Yeah, absolutely. The early on, those first 3
5:36
units I thought were going to kill us.
5:40
We were losing. I went from making over 100,000
5:42
to losing 100,000 first year because we opened three stores
5:47
within about seven months. And I thought, what in the world
5:51
have I done? And somebody approached me, It
5:56
was like a parent of one of the kids that worked for us and
5:58
said, oh hey, we would like to maybe buy this one store from
6:02
you. And I really thought about it
6:04
and I thought, you know, yeah, that's kind of my worst
6:08
performing store. Maybe if I just got rid of that
6:10
one. And.
6:11
And I was talking to a mentor and it dawned on me that I need
6:17
to fix this, own it, fix it and improve the earnings.
6:21
Whether I want to sell it or keep it, it doesn't matter.
6:24
I need to fix it. And I think that day that I
6:28
became the franchise and the owner of it, not the day I went
6:32
and signed the agreements early and was all excited.
6:34
That was the day I owned it and I knew I needed to drive it.
6:38
We ended up driving those 3 units, hired an operations
6:43
person to help us in the process because we weren't, you know,
6:48
and necessarily the best. We hired in some good managers,
6:50
hired in some OPS people. We learned a lot, grew to six
6:54
stores, then grew to 10, then grew to 12 and ended up actually
6:59
selling out before Blimpy declined.
7:02
And so sadly, Blimpy ended up, I think there's probably less than
7:06
250 units. But as a banker and as a former
7:12
investment banker, it made a lot of sense to me to be in a
7:16
formula and to have a formula that worked, but you still had
7:20
to work that formula. And so that was an early lesson
7:25
hands on driving those to success and then selling out of
7:29
those. And that was also where I said,
7:32
hey, I love franchising. And so we started to look around
7:36
to acquire other franchise companies and even franchisors.
7:41
We looked at a number of different things.
7:44
That's that's actually when I first formed 320 Group as a
7:48
company. The reason it's 26 years old as
7:51
it was formed in in 2000. I think it's about 25 years old,
7:55
might have been 1999 though that I think about it.
7:59
We formed that entity, but that entity actually laid dormant for
8:05
a number of years. And I'll get to that later.
8:10
But then when I was looking around, I ended up buying into
8:12
Service Brands, which is a new platform company that was formed
8:18
in 2000 that they had run Molly made for many years in the US.
8:24
And then they decided to become one of the original Gangster
8:28
platform companies and franchising and they they formed
8:32
800 Dry Clean and then Mr. Handyman.
8:36
And then I bought in as a partner and became CEO of Mr.
8:41
Handyman, which is where what I did for many years from about I
8:46
came in in 2003, few years after Service Brands had been formed
8:51
and then was there until late 2011.
8:55
So let's go back a bit because you said something that really
8:58
caught my attention the day that you decided, hey, I need to fix
9:04
the problem in Blimpy, right? Three stores.
9:07
You lost $100,000 open three stores in seven months.
9:10
Things aren't going well. Somebody offers to buy one of
9:12
them. Somebody talked to you and they
9:15
sat you down and like, hey, whether you sell it or keep it,
9:17
you need to fix it. And that was the day that you
9:20
really became the franchise, not the day that you signed the
9:23
papers. Yeah.
9:25
Say more about that. You mean just because you owned
9:28
what the problems were and up until that point maybe you
9:30
weren't taking as much ownership well?
9:32
I, I had, I had investors in the deal.
9:37
I think I had a personal guarantee on the deal.
9:40
And so there would have been, you know, my house would have
9:42
been on the line and I had 70% of the company and I had
9:48
investors that were 30%. And so my head being in the
9:53
investment game was like, oh, I can't let my wife down.
9:57
I can't let my house or my guarantee down.
10:01
And we're losing money, but it'll turn.
10:03
And now I can hire these people. And, and I, I was just kind of
10:07
had all this jumbled in my head and it was almost a day that I
10:12
was like, wait a second, this thing's losing money and this
10:16
guy's wants to buy it for a song.
10:18
He's not going to pay me a premium because it's a brand
10:21
new, you know, gorgeous store. It's losing money right now.
10:24
He wants a deal. And for me to get it up to a
10:28
value of being able to really even sell it, to keep it or sell
10:33
it, I had to get in there and I had to be the guy.
10:37
That's why I said I was a franchise.
10:40
So I actually first took a leave of absence from the investment
10:44
firm because I had, I had invested in these units in the
10:47
side, like I was still kind of putting a deal together.
10:50
And then I realized we had to move closer to the units.
10:54
We sold our home in Grand Rapids, moved out to Holland to
10:58
be closer to our first few units, Holland, MI and and
11:04
actually was hands on. I mean, fact, I had a story one
11:08
day, one day I literally had a guy, we were working on a
11:12
$1,000,000 investment into his company with the investment firm
11:17
that I was part of. And I was in my own store
11:22
working the slicer, standing there at the lunch line, working
11:25
the slicer and kind of wiping down tables and helping over the
11:28
lunch hour. And the guy came in to order and
11:31
I knew his name. And I said, oh hey, you know,
11:34
Joe, how are you? You know, And I, I said, and he
11:36
looked at me and he's like, is slicer guy talking to me right
11:40
now? I mean, like you like look right
11:42
past me and looked at the menu and didn't even recognize me.
11:45
And we were cutting the check over in the investment firm.
11:49
So that, that was probably where I first learned I was wasn't
11:52
going to get a whole lot of respect in, in working in a, in
11:56
my own restaurant business. But but I knew if I could make
12:00
it, I certainly would have the earnings and the growth and, and
12:05
what I wanted out of life. And so, so that, that was just a
12:09
funny story from from early on in that first year, but I took a
12:13
leave of an absence from the investment firm and then I and
12:18
then I went ahead, just left the investment firm.
12:20
We got the units up to earning good money, had turned them
12:25
around nicely, got them growing. In fact, by the time we got to
12:29
store number six, we were 50% ahead of the system average on
12:34
unit volume for, for the Blimpy units.
12:37
And that, that was part of what helped us grow and, and continue
12:41
to give us success. And then we grew out of cash
12:43
flow, bought our, I bought out our minority investors and, and
12:47
so that turned out to be a, a nice deal.
12:50
And then I I sold the territory and sold the units from O1 to O2
12:57
I had sold out of sold out of Blimpie at at the point where.
13:01
And why did you sell out? What was the next vision?
13:03
Well, there were some changes going on in Blimpie.
13:08
We didn't like how the the food costs were changing and the
13:13
franchise or was just to be the money on the back end.
13:19
And so and it was starting to affect the franchisees.
13:24
And so you know, going from 2100 stores to 250 or 300 today mean
13:31
that kind of probably tell told more of a story from 2000 to
13:36
2025 then I could even tell frankly, but I I wasn't crazy
13:43
about it and we had maximized what we had and I didn't want to
13:48
grow in the system anymore. So we sold.
13:52
So today 320 Group. Why is it spelled the way that
13:58
it is good. It's three spelled out THR EE
14:03
and then it's the you know the numerals. 20 Sure, sure.
14:09
That was the only website I could get.
14:11
No, I'm just kidding the that. Happens it.
14:14
It actually stands for Ephesians 320.
14:20
And in that verse Paul writes as he's going through Ephesians,
14:27
he's talking a little bit about what's available to us in in
14:34
Christ and, and, and this full life that that we can lead.
14:40
And he gets to that point in Ephesians 320 and 321.
14:45
That goes now to him who is able, Him being God, who is able
14:50
to do exceedingly and abundantly beyond what we could ever ask or
14:54
imagine. To Him be the glory.
14:57
It's not for us. He gave us the gifts, He gave us
15:01
the blessings. It's all for Him.
15:03
Now. He can do exceedingly and
15:05
abundantly beyond what we could ever ask or imagine, but to Him
15:10
be the glory. And so all the glory goes to
15:12
God. And so I had realized at that
15:16
time when we formed the company that you know what it needs to
15:21
be. I was, you know, somewhat
15:23
humbled in some of the experiences I gave you at at
15:27
Blimpie struggling through that and you know, the slicer guy
15:30
story. But I realized it needed to be
15:34
all about God and and not as much about me.
15:39
Not, not to say that I didn't continue to have struggles.
15:41
I'll be happy to share them with you.
15:44
But but where we are blessed and grow and even grow through the
15:49
struggles to to God be the glory.
15:51
So that that's the story, the meaning and the reason behind
15:55
320. So I want to get into what
15:58
you're doing at 3:20 and the investment thesis and all that.
16:01
But I, I think, you know, it's clear based on the story you
16:05
just gave, where the name came from, you know, after a Bible
16:08
verse that means a lot to you, that faith is a big part.
16:12
Of your life. Clearly, franchising has been
16:15
and continues to be a big part of your life.
16:18
Talk to us about what you're doing to sort of bring those two
16:22
worlds together. Sure.
16:25
Well, one of the things now one of our my passion projects
16:29
today, God, God has just been knocking on my heart for
16:33
probably the last five years that we have such a wonderful
16:40
group of folks and franchising and franchising is a great way
16:45
to build a business and support your lifestyle.
16:47
And I do very, very much love franchising.
16:50
I've been in at 32 years now and, and we get together at many
16:56
of these events and some of the folks will talk about their cars
17:01
or their house or their latest vacation or all of those things.
17:04
And those things are all very nice.
17:05
We're, we are blessed. I just was talking about 320
17:08
group and God has given us more than we could ask or imagine.
17:11
We're blessed. But my heart is really for
17:16
guiding more and more folks into the Kingdom of heaven and
17:21
looking out at eternity and spending time with the one who
17:26
has created us and has given it all.
17:29
So I started an organization called Fran Faith, which is more
17:34
of a community and a movement of where faith comes together with
17:40
franchising. And what what we're doing is
17:45
working on five different areas, faith, family, franchising,
17:51
finances and fitness. So we think God wants you to be
17:57
healthy. And so we're putting on content
17:59
on fitness and health. God wants to bless your
18:03
business. And so we're doing stuff on
18:06
franchising, but also finances. And so we had a, we had a
18:11
franchise broker that on one of our podcasts that's selling over
18:17
a billion dollars of franchises. And so he was a great guest.
18:23
And so and and so we want to help people with their faith,
18:26
their franchise, their family. And again, I stand here as a
18:30
person who was married 25 years, had an affair with business and
18:36
franchising, building all these companies and and got divorced.
18:43
And so I, Christy and I, my wife today, who's a Co founder and
18:49
Fran faith and a Co founder and in our company, 320 Capital
18:53
Group, Christy and I are very, very happily married.
18:56
We have 6 kids between us, both full of faith, but we both
19:01
stand, you know, with, with broken marriages from our first
19:04
marriages. And so, so we've, we've learned
19:09
a lot through that. You can kind of wind up being
19:12
bitter and looking back or blame the other, or you can take the
19:15
blame on yourself, understand that you're forgiven and go on
19:19
and, and be the best person you can be in faith.
19:22
And and, and so so we've we've done that.
19:27
So how can people find out more information about this group?
19:32
Number of ways you can go to franfaith.com, which is our
19:39
website for our organization and our movement.
19:43
Our podcasts are also on YouTube.
19:45
The easiest way is probably either on our website sign up.
19:50
We also have a community within the Circles app and so you can
19:55
find Fran Faith in the Circles app and that's nice because you
20:00
can contact other members within the community, which you can't
20:04
do on YouTube necessarily, or seeing our LinkedIn posts.
20:08
So you could probably search for it on YouTube, LinkedIn.
20:12
This is a place for people to kind of congregate and, you
20:15
know, people who are sort of these two parts of your life
20:20
that are so important to your faith and franchising also share
20:23
this and support each other and share stories.
20:26
Am I kind of getting the idea? And we're putting out, we're
20:30
putting out a newsletter, we're putting out curated content
20:34
weekly, a podcast weekly, just information to try to reach
20:40
people, to encourage them, inspire them.
20:43
We don't want to over spam or over text anybody, but we do
20:49
take your e-mail and your text and we'll send you a message of
20:53
encouragement weekly and that kind of thing.
20:56
So that's, and right now, right now we're funding everything.
21:00
I mean, it's just, it's free to join, easy to join.
21:03
So it's just a community movement that we're building.
21:09
Very nice. OK, so back to 320 group.
21:12
What's this about? What's the investment thesis
21:15
here? What are you involved with?
21:17
What? Why do this?
21:19
Sure, sure, sure. So partnered in service brands,
21:25
helped build, I think it was 8 different brands all told.
21:29
There was a group of brands beyond the three that we had
21:32
started with that were certified restoration, dry clean and
21:36
ducks, which we helped and and then ultimately some of those
21:40
brands were sold back to their founder or sold to Belfour
21:44
Franchise Group. Puroclean was one of the brands
21:48
that we were partnered with and so help grow all those brands.
21:52
I think all told the brands were over 4 or 500 million in system
21:58
sales and over 1000 franchisees. And so it was ended up being
22:02
very successful for most of that time period.
22:05
I was CEO of Mr. Handyman drove that brand to almost 100 million
22:11
in system sales and 300 locations.
22:17
And then ultimately service brands are the main, the main 2
22:21
brands, Molly Maid and Mr. Handyman were ultimately sold to
22:27
Neighborly to the name of the company's Neighborly today.
22:31
It was Dwyer Group at that time in Texas and they have a big
22:35
family of brands and are a multi billion dollar company.
22:38
So and so, which is interesting too because Neighborly and Dwyer
22:44
was originally kind of a faith-based company as well.
22:47
So that was kind of a, a neat story sometime the Dwyer story
22:51
is, is quite a story. But I had kept my stock and
22:56
stayed on the board and and was part of the investment
22:59
committee, but left as CEO in 2011.
23:04
And I partnered with a private equity firm to purchase a
23:07
company in Charleston, SC, which was AM Conservation Group.
23:13
And we ended up growing that company through 2 private equity
23:17
sponsors, grew it from 27 million to about 260 million in
23:24
revenue and the EBITDA was like 4 million to 40 million.
23:29
And it was just crazy successful.
23:32
Bought out some of our large competitors and just a very,
23:37
very nice deal. Concurrent with that, my partner
23:41
Tri Vest which was the PE backer in in, in, in becoming, you know
23:48
owner and see me being CEO of that company.
23:53
The we also had partnered in Take 5 oil change, which was a
23:58
portfolio company and we helped take 5 grow from about 20 units
24:02
to 90 units and formulate the model.
24:06
And there was a just a wonderful team.
24:08
I was just a Co investor and board member in in that
24:12
particular deal, but all of those deals sold out within
24:18
about 18 months of each other. And and so my new wife Christy
24:26
and I formed a family office that that is essentially 320
24:32
group. So I had revived the old company
24:35
that I had and formed a investment firm.
24:39
We're now we were much more active and much more active in
24:43
investing in deals and growing companies.
24:46
We had this track record of these 10 or 12 companies that we
24:50
had built behind us probably all told had three or 400 million in
24:56
investor gains in those companies.
24:58
Not, not our money, but for the private equity firms had had
25:03
very successful track record and soon.
25:05
So now we started investing a little bit more for our own
25:08
capital account and our first deal was Massage Envy.
25:15
I'll, I'll just stop there. That gives you a little bit of
25:17
the history of why. Yeah, that's really helpful.
25:20
But yeah, before we we kind of go into, you know, what's in the
25:23
portfolio today, I want to better understand what it is
25:28
that you've been doing over and over and over again that has
25:32
allowed for so much success with each of these different
25:35
companies that gotten involved with.
25:36
Is it just that you've been able to infuse cash at the right time
25:40
and companies that are already very strong operationally?
25:43
Do you just know how to market, you know better to find more
25:46
customers? What?
25:47
What's the playbook look like? Yeah.
25:49
So it's not, it's not always cash.
25:52
Sometimes cash maybe needs to secure the deal to underwrite
25:56
the deal, to shore up the balance sheet or to invest in
25:59
the deal. So certainly cash, but it isn't
26:04
necessarily throwing cash at these deals.
26:07
In fact, it's many times the opposite.
26:11
It tends to be all of the operational blocking and
26:15
tackling that we learned early on.
26:18
It's putting in CRM systems and tracking the leads and
26:23
understanding every stage and what are the key metrics of
26:27
success and, and aligning the interests of the people so that
26:32
they're rewarded, The company's rewarded, the customers
26:36
rewarded. And we're watching all of those
26:38
key metrics and hands on getting in there, tweaking and making it
26:44
better and better. And we've been very blessed
26:47
through this whole period of technology being able to support
26:51
our cause so that we've always been able to track things or
26:56
have CRMS or have systems that were also getting better at the
27:01
time and that are continuing to get better now and going
27:04
forward. I mean, I see huge opportunities
27:06
every single day that, that we can continue to grow and, and
27:12
improve. But, but it it's, it's at, it's
27:17
all of the, the blocking and tackling hands on stuff at the
27:21
core unit level. That's, that's what we see.
27:26
And that's, that's been our playbook.
27:27
Did that Did that answer your question?
27:29
I think so. I mean, the big things I, I
27:31
think I heard you hit on Todd were, hey, we put ACRM in place,
27:35
we get better at tracking the leads and we get better at
27:38
aligning goals, right, So that the employees are incentivized
27:44
to help improve the performance as as the performance of the
27:48
company improves, their compensation improves.
27:51
Right, right. And so just this last two weeks,
27:57
we've probably talked to three different founders of their
28:00
companies and their original units there.
28:05
These are founders of franchise companies that have two or three
28:08
units, 4 units, that kind of thing that they own, company
28:10
owned units and they're just getting into franchising.
28:14
And in almost every deal, in the last two or three deals that
28:17
we've looked at, the unit volume and the performance was starting
28:23
to sag. And if it was improving so much,
28:28
the cash would be throwing off from those company units.
28:32
They probably would decide to just open their own and not go
28:35
to franchising. But the performance was sagging
28:38
and so they were looking to and and some of it is maybe just
28:42
taking their eye off the ball operationally and shifting and
28:45
trying to become a franchisor. That happens.
28:47
It's natural and I don't blame any of these folks.
28:51
But it was interesting when an outside set of eyes came in and
28:54
looked at it and said, wait a minute, you're footprint is too
29:00
large, your build out is too expensive.
29:04
Yes, it's drifted up a little bit with inflation, but there's
29:08
some things you could do about it.
29:09
You could value engineer it. You could bring that footprint
29:12
down, probably still do the same volume.
29:15
So it's even tweaking the model a little bit to right size the
29:20
investment and then get it right sized with the return so that
29:25
it's almost so grand that you want to just build them
29:28
yourself. When a franchisor gets to the
29:31
point where they want to build their own units because they're
29:36
so successful and they almost want to keep them from the
29:39
franchise, that's when that's an incredible model and franchisees
29:44
are fighting to get in that. You know, the Take 5 model that
29:48
I mentioned that ended up growing to 1000 units now for
29:54
Take 5 and they're still using the similar low footprint model
30:03
that we had developed in the high margin.
30:06
And the the method and the quick service that we had developed in
30:10
that formula that able enabled them to have a very, very quick
30:15
payback 18 months or two years often times, which was a really
30:21
nice return. And that's probably why they
30:23
grew to 1000 units. And so I think every franchisor
30:27
needs to follow that formula. We only learned that formula
30:32
just from doing the blocking and tackling of of trying to improve
30:36
the unit economics at that level.
30:39
How hard is it for you to take your expertise from 1 industry
30:43
into another, right? You learn Blimpy, you learn food
30:46
costs and you know, customer service and that kind of
30:49
environment. You know how transferable are
30:52
those skills into some of the other industries that you've
30:56
involved with? So this is a shout out to all
31:00
the restaurant operators in the in the country.
31:04
When you're on top of a lease which is rising and then you've
31:09
got labor costs which are rising, have been rising and
31:13
food costs that are rising, you're on top of three variables
31:18
that you have to be really good retail is detail and you have to
31:23
be really good operationally to to to run that successfully.
31:29
And so, and that's why restaurant operators are one,
31:32
hard working, but two, great at what they do.
31:35
And so we think those skills often times are transferable
31:40
into almost anything. And because you, you know,
31:45
you've managed all three, you know, on some levels now as a
31:49
franchisor, we, we learn certain things like CRMS and tracking
31:57
the key metrics and, and being a franchisor with over 15
32:02
different systems and then a franchisee multi unit franchisee
32:06
now with six or seven different systems, you learn it from both
32:10
ends. And so you learn, you learn some
32:14
of those key metrics and we find it's very, very transferable.
32:19
Now that being said, it is transferable, but we do like
32:24
certain spaces. We obviously like the service
32:27
space where we can improve customer service.
32:33
You know, we, we, we clearly like certain spaces because
32:36
that's, you know, where we are and where we're investing in.
32:39
But but we find we find the skills are very transferable.
32:43
So what is it that you guys are doing now?
32:45
Are you going into concepts that you like and buying out lots of
32:50
franchise licenses? Are you going and investing in
32:54
the core franchise or is it a combination of the two?
32:59
We're in both, but give you an example.
33:03
So when we first did 320 group, we purchased 7 massage envies
33:11
from area developers. We purchased from three
33:13
different area developers. Some of them were around our
33:17
home in Ann Arbor and Southeast Michigan and some were in our
33:23
near our Florida home. And so we kind of like that
33:26
portfolio to dip our toe and to take a look at it.
33:29
We've always kind of like that model.
33:32
We started with that Group of seven, we doubled the earnings
33:36
of that group of seven, doing the operating, blocking and
33:38
tackling, creating a good culture, taking care of our
33:41
customers, all the things that we preach and say we did
33:45
ourselves with our seven. Then we had an opportunity to
33:50
pull together a merger with 21 additional units and we knew we
33:55
needed to build kind of a private equity C-Suite with
33:59
that. We weren't going to you know,
34:01
kind of hands on run it. We had management and leadership
34:04
in our units, but we didn't have a full CEOCFOII was serving as
34:10
the, you know, the head of the company.
34:14
And, and so that was when we partnered with Trivest and then
34:20
we did build out some new stores, but we cut a deal with
34:24
corporate to be able to expand. And I say corporate, the
34:29
franchisor and we got to went from 28 units to 68 just before
34:37
the pandemic, continued to grow through the pandemic, got to 95
34:42
units. Then a couple years ago, three
34:45
years ago now, I guess we added another 35 when we bought out
34:49
Texas, we bought a big operator in Texas.
34:51
So we're at 130 units in the Massage Envy group, 3000
34:56
employees and at 1800 therapists.
35:00
And Estes were actually the largest employer of therapists
35:03
in the country Now in portfolio companies.
35:07
How were. You guys able to continue to
35:08
grow through COVID? It would seem like you got a
35:12
space even more like this is one of those things that has to go
35:15
dormant for a while, no? Yeah, we, we went through the
35:20
customary shutdown. We followed, you know, the rules
35:26
to the T Fortunately, we weren't in California or any other, you
35:30
know, areas like that. We were in we're we're in mostly
35:35
Arizona. We're in all the Midwest states.
35:39
We go. So you were.
35:40
Able to open back up to some degree.
35:42
We were able to hear backup places, most areas.
35:44
So we were closed for the six week.
35:47
That was the six week period. We were blessed with PPP money,
35:55
but what needs to be clear on that is that six week period we
36:02
had about a $10 million payroll that we fully met.
36:07
We fully took care of our people and paid them through that whole
36:11
period. Before the PPP money was
36:13
available. Before the PP, money was you.
36:15
Guys are just like. We made it.
36:17
We're. Going to do this, we're going to
36:18
take care of them. We're taking it out of our own
36:20
pockets. Our people and our resources
36:23
were too valuable. Our therapists are SDS, the
36:27
people that work for us are our production.
36:30
And so we allowed members to opt out of their payment and it was
36:36
amazing. Our members are incredible. 90%
36:40
of them stayed in and so so they stayed in.
36:43
The loyalty was unbelievable, off the charts and we fully
36:46
understand even the 10% that opted out.
36:50
And then we made a decision we were going to cover 100% of the
36:53
payroll and so we did 100% of the payroll.
36:56
Now we got a portion of that reimbursed.
37:00
But you didn't know it at the time you made that.
37:01
We didn't know it at the time and then again, it just we were
37:04
blessed. It's not any praise to us or
37:08
whatever we were. We were blessed.
37:11
But the government did reimburse that portion through PPP, but it
37:16
really kind of brought us back to probably still being a little
37:20
bit behind the game. We didn't have like extra money
37:23
or oodles of money, but others had kind of struggled through,
37:28
made different decisions or wrong decisions.
37:31
And, and so we paid them fairly for their businesses, but we
37:37
were able to pick up some businesses from just some weaker
37:40
players, unfortunately, or people that were just sick of
37:44
it. They were sick of struggling out
37:46
of COVID. So, so we invested pretty
37:50
heavily before the pandemic. We invested heavily in our
37:54
people and then we were blessed with what we kind of picked up
37:57
post pandemic and then to be able to get to the units today.
38:03
Today we're you know, paying debt down quickly and growing in
38:08
our EBITDA and and, and again we're we're blessed and doing
38:11
well. Any thoughts to continue to
38:14
expand your footprint with Massage Envy?
38:19
We have such an amazing, we have ACEO that ran a billion dollar
38:25
company and we have ACFO that came from a public company and,
38:29
and we, we, and, and that, that I sadly I'm leaving out the rest
38:36
of the, the C-Suite that are all unbelievable individuals.
38:39
But my point to that is we have such a powerhouse management
38:44
team in that company that we could actually be a platform for
38:48
other to purchase other things. And so we may strategically grow
38:52
and look at, look at other brands.
38:55
We're, we're 13 or 14% of the system and Massage Envy.
38:59
And so we're we're comfortable at that at that point without,
39:05
you know, necessarily being, you know, any larger.
39:09
Maybe not put too many eggs into the same basket, so to speak.
39:13
And so looking at the other companies that you've got in
39:16
your portfolio, explain to us what you're looking for.
39:20
You said that you really like the service.
39:22
Space say more about that. Well, so another company is
39:27
office Pride that we partnered with again we brought in Trivest
39:34
capital as our partners on that and we serve as operating
39:38
partners and board members, call investors there, have a
39:42
wonderful CEO there that we helped recruit, bring in and
39:47
build the team. Again, another faith-based
39:50
company, we are strengthening that model, doing a lot of the
39:55
blocking and tackling office pride is a commercial cleaning
39:59
organization. So they not only do offices, but
40:03
it's actually offices are only 15 or 20% of what they do.
40:06
They do schools, they do hospitals, they do all kinds of
40:09
commercial establishments. So very successful company and
40:16
and now we're just. As we're reformulating the
40:19
model, we're just ramping up franchise sales and so improving
40:23
that as well. And again, that's all the
40:26
blocking and tackling. We did that deal a little over
40:29
three years ago. And so we've got a good model
40:34
there. 3 1/2 years ago, we invested in a group of sola
40:40
salons company called Salon Freedom that had about 30 solar
40:47
salons. And we like the solar model
40:51
because it's actually creating entrepreneurs in the solar pros
40:57
that come in and lease the suites from you.
41:00
And we have systems in place that actually help them run and
41:04
operate their own business. So they might already have a
41:06
book of business at a salon somewhere, high end salon, they
41:10
might be giving 40 or 50% of their income to the salon owner,
41:15
but they already have their own book of business.
41:17
They come in, they pay 7 to 8% of their revenue in rent to us
41:23
in a salon suite. And and then we have the tools
41:27
to help build their business. And so it's actually creating
41:29
entrepreneurs. We have, we have 2000 solar pros
41:32
because we've grown that now from 30 units to 60 units.
41:38
And so these entrepreneurs are are doing what they're they do
41:42
hair, they do nails. They, they do hair, they do
41:45
nails, they do massage, they do permanent makeup like tattoo
41:52
permanent makeup. They, we have chiropractors in
41:55
there. We have, we had some of the guys
42:00
we're, we're also getting chains which will come and they might
42:05
be doing lashes or they might be doing the dental repair or
42:10
chiropractors. They're, they're coming and
42:13
putting in offices inside our suites.
42:16
And so we're seeing all kinds of different new opportunities with
42:20
that. But originally the concept was
42:23
mostly polar pros were hair technicians or aestheticians.
42:29
But now we're seeing a full variety of folks so.
42:33
And then tell us about specialty tile products.
42:37
Specialty tile is a really nice high end.
42:41
It's one of the largest distributors of tile products in
42:47
the Southeast United States. And they, I forget what the
42:51
percentage is, but a lot of their stuff comes out of Italy.
42:55
Really beautiful Specialty tile as it as in the name and, and we
43:02
are doing more and more stuff domestically, which is kind of
43:05
neat to see that grow in that particular company.
43:09
But it's a company that does probably 2/3 commercial tile.
43:13
So like we did the Orlando airport, you know, Holiday Inn
43:18
Express is a big customer and Olive Garden's a big customer
43:23
and you know, so we have a, a lot of customers there.
43:26
But then we also a third is residential.
43:29
So we do a lot of nice homes and, and we're specked by
43:32
designers all around the country now.
43:35
So we've grown the sales team, we've grown the blocking and
43:38
tackling on, on delivery and distribution and the way we
43:43
operate, we put in platform CRMS, all of the things that we
43:47
brought it into a little more of a a high technology company.
43:53
And and so yeah, company is doing very well.
43:57
So that's a little that's probably a little bit out of our
44:00
norm though it's obviously out outside of franchising.
44:02
We just, we just like the deal so.
44:06
Well, and it's a, it's a physical product more than a
44:08
service, right, right, right. So a little bit different in
44:11
that respect too. How would you characterize today
44:15
the role that you and separately your wife have in all of this?
44:20
You've got great leadership teams at, you know, these
44:23
different companies that you've invested in.
44:26
Are you guys still working to set the vision?
44:28
Are you helping to make decisions on, hey, we're going
44:32
to go this direction with our next investment, kind of lay it
44:35
out for us. What's a day look like for you?
44:37
Yeah. So we're generally completely
44:40
behind the scenes. So when we Co invest and go into
44:44
a deal, generally we're minority partner in the private equity
44:49
firm is the majority partner, but we're lockstep together.
44:53
So often times we can do stuff that's much larger than
44:58
ourselves and you know, we could do very, very large deals if we
45:02
need to. We do like the smaller middle
45:05
market deals frankly. But and so we are usually
45:10
working on strategy. We're usually always coaching
45:14
the CEO. We're often times coaching the
45:17
entire C-Suite. So we're on individual calls
45:21
with them, we're on group calls with them.
45:23
We help recruit the C-Suite. We're in usually all the monthly
45:30
operating calls. We're usually in all the board,
45:34
board calls or board meetings that are often times in person.
45:39
We a lot of times help on budgeting and strategy, but then
45:44
also help on the acquisitions for the growth.
45:48
So I handle much more of the financial and strategic areas
45:52
like that. Christie is much more
45:57
operationally driven and handles a lot of the operational areas
46:02
and websites, CRM blocking and tackling, you know that are
46:06
hands on with the OPS folks. Case in point, when we purchased
46:11
AM Conservation Group, we were at a point where we were
46:19
acquiring our largest competitor and doubling the size of the
46:22
company and, and it was going to be a big undertaking.
46:26
And I was worried about the integration.
46:29
And I remember going to our private Equity Partners and
46:31
saying, hey, I have somebody who's close to me.
46:35
We're dated and dating and engaged, but she's literally the
46:39
best person that you could bring on to do the operational
46:46
integration of this company. And, and so they all met with
46:50
her, they loved her, they brought her on.
46:53
And that was actually kind of the first time that we had
46:55
partnered together on private equity.
46:58
We had worked together earlier and, and, and worked together as
47:02
a couple, but and she, she became a shareholder and, and
47:08
did an amazing job in the integration, had an amazing
47:11
return as part of that deal as well.
47:14
And and so we had a kind of a marriage merger and corporate
47:20
merger all at the same time, so. Todd, let's shift gears for a
47:25
moment, and I'd like to explore a big, serious challenge that
47:29
you've had to overcome in your life.
47:31
How'd you get through that and what did you learn?
47:34
Yeah, well, I, you know, I could probably point to some of the
47:42
things I've brought up. Getting through a divorce and
47:46
trying to do the right thing and keep your family together and
47:50
still keep a good relationship with the other partner.
47:55
That was hard. I mean, it was, it was
47:58
heartbreaking. It was a struggle.
48:02
It was not easy. And at at one point I had to
48:06
keep two homes and two cities and go back and forth and work
48:11
remote back in, you know, 2010, 15 years ago now, before remote
48:19
work was even really popular. I mean, everybody does it today,
48:23
it seems like. But, but at that time, I was
48:27
working back and forth just to be close to the kids because I
48:31
happened to have my role in another city and couldn't really
48:34
move the kids out of their school.
48:36
And so that was that was really a struggle.
48:42
And then I had to overcome kind of my own pride.
48:48
I had to be open and honest and talking about it.
48:50
And I had to take on 100% of the blame.
48:55
He can make a decision to do 100% of the blame, but I need to
48:59
make a decision to take 100% of the blame.
49:02
And whether she does or not, I have to just be the one to
49:06
forgive and love and take, take the blame, if you will.
49:09
And so getting through all of that, figuring that out was
49:14
probably my biggest challenge, frankly, in life.
49:20
I mean, making sure your kids are OK and, and all at the same
49:26
time, a lot of these roles when I had some roles early on and
49:33
sold the company or was part of U.S. company sale or what not.
49:39
I mean, I've had my position because of a sale or because of
49:43
a, I, I, I've had my position eliminated probably 10 times in
49:48
my life. And those aren't always easy
49:52
transitions to get through. But I realized that God took me
49:56
through some of those journeys. This is part of what is going to
49:59
go into my book. One of the chapters is going to
50:02
be titled fired. And I, I, I realized God took me
50:07
through those journeys for a many different reasons, but one
50:11
of them being there's a lot of people that buy a franchise that
50:17
got let go somewhere. They're corporate refugees and
50:21
having that understanding, or there's a lot of people that are
50:25
coming off of a divorce or there's a lot of people that
50:28
have been struggling with those life transitions.
50:30
Or we buy a company from a founder and then the founder has
50:35
to go through that transition and understanding that we're all
50:39
a bit prideful. We all have our baby, which is
50:43
the company. We're probably all having an
50:46
affair with business, which is what, you know, I had had, I was
50:50
much more focused on travel and, and, you know, making money and
50:55
building the company that I, that I should have been on, you
51:00
know, children, for example. And so getting through a lot of
51:07
those lessons personally has allowed me to help and minister
51:11
to others has has helped me walk them through the the shift of
51:17
giving up maybe their pride, helping them get through the
51:22
transition, help them and so. Who helped to lead you through
51:27
that transition? Who was there to coach?
51:30
Or mentor support you well, I'll get into some personal mentors
51:36
at at some point here, but they're our Lord Jesus.
51:43
There is just no better mentor. I can I can remember just
51:47
feeling crushed and just, you know saying God, why are you
51:51
silent and I remember one time hearing hearing his voice not
51:55
not audible, but the lot the the impression inside my head that
52:01
you are going to have to go through this.
52:03
I remember praying Lord take this divorce away.
52:06
I mean, what, why are we struggling?
52:08
And I heard you need to go through this.
52:12
And I thought, what does that mean?
52:14
And I'm like, go through this divorce, go through this
52:16
journey, go through, you know, and why did I hear that?
52:19
And I realized the Holy Spirit was speaking to me and that I
52:24
needed to get through this and I needed to learn and I needed to
52:28
grow. And through, through reading
52:35
different books and seeking the Lord and going through some of
52:40
these journeys, I, I did learn to grow.
52:42
I think I'm a much better husband today than I ever was.
52:45
I think I'm actually a better ex-husband that I, that I ever
52:50
was. I get along great with my
52:52
ex-wife now. Our family gets along great.
52:56
Christy gets along great with her ex husbands.
52:59
In fact, they're actually coming down staying with us and our
53:02
place at Christmas time. It's so just it's that that
53:06
important for the families to be together.
53:08
And and and so a lot of that came from laying down my own
53:15
life, my own pride, learning through it and then growing in
53:20
faith. Now on on mentors.
53:23
I had an incredible mentor named Lloyd Reeb, who who is the Co
53:29
founder of halftime and he was my coach for several years, for
53:35
two or three years. I mean he still I would call him
53:38
coach and he still is my coach and we talked quarterly now, but
53:43
but Greg Serrat, pastor of Seacoast Church, has been a
53:47
great pastor and mentor of mine and is my coach today.
53:52
I've had other mostly, you know, pastors that have been great
53:56
leaders. My best friend in college became
53:58
a pastor and, and he would, he would call me twice a week
54:01
during the whole divorce process.
54:03
And, and my older brother serves, he's an orthopedic
54:07
surgeon, but he's a wonderful man of faith and does mission
54:11
trips today and is very involved with starting a church and, and,
54:15
and, and he would call me regularly.
54:17
And so I had a lot of a lot of folks that were around me loving
54:23
me up in faith and and helping me get through.
54:27
You mentioned a book. Does it have a title and when
54:30
can we expect it? It does have a title.
54:36
It's the title is God wants in your business.
54:42
And and it's a lot of people are seeking what they're seeking in
54:49
business and success and wealth and and they maybe see God as
54:57
separate. Maybe they struggled and had a
54:59
poor relationship with their earthly father and so they're
55:03
struggling with their heavenly Father or maybe they were
55:05
brought up. I was brought up Lutheran's A
55:07
lot of people say, oh, they've come to me since we've done Fran
55:11
faith and they say, oh, I was brought up Catholic, but yeah,
55:13
I've kind of fallen away. And, and so they have this view
55:19
that God is this thing that's part of the church or something.
55:24
When God, God wants our heart, God understands our journeys.
55:29
God, God wants us to have a relationship with him.
55:34
God wants in your business, God, God wants in your daily thought
55:40
process. God wants the little things that
55:43
are bugging you. God understands your heart and
55:46
understands your fears and he wants to take those away.
55:49
He wants to wipe your tears away.
55:51
And all the things I'm talking about are things that I've
55:54
discovered through reading in the words, through journeying
55:57
through this it, it's all truth. And so it's writing down some of
56:03
those stories through my journey, writing some of those
56:07
truths and helping other, you know, my heart, my compassion is
56:12
for other business leaders to to find that truth.
56:16
That's beautiful. When can we expect the book?
56:20
Well, it's it's. You're asking yourself that
56:23
question. Boy, oh boy, Anthony, you nailed
56:26
that right on the head. I I have been writing chapters
56:34
and stories and information down for a number of years.
56:39
And and so now as we, I think it's more important to do the
56:43
Fran faith and do the outreach in the podcast.
56:46
And so I've had so many ghost writers come to me because it's
56:51
hard to write a book. And, and they've said, Oh my
56:54
gosh, just off the lot of the information and a lot of the
56:57
stuff that you have, we could easily take these in and
57:00
probably get that stuff. And I probably will need that
57:03
sort of organizational help at some point, but I know I'm
57:09
called to write the book and I need to get as much of it down
57:13
as I can. And when that would be, I mean,
57:15
it could be this year, but it could be 5 years from now.
57:18
I don't know. But but well and for.
57:20
People who want to know Todd's given us permission to give out
57:24
his personal e-mail address here so you can keep in touch with
57:27
him and he can he can keep you up to date on that.
57:30
It's Todd with 2DS, Todd at 3:20, group.com.
57:35
And as we were talking about earlier in the interview, 3 is
57:38
spelled out THR EE and then it's the number 2 and the #0 and then
57:43
group.com, SO320, group.com and two other things I want to do
57:47
before I ask my last question for you today, Todd, as a
57:50
reminder to everybody, if you want to get your employees
57:53
access to benefits that won't hurt them financially and
57:56
carries a financial upside for the company, reach out to add
57:59
back benefits.com. And finally, if you'll take just
58:02
a moment to leave us a comment or review on your favorite
58:05
podcast app, you'll hold a special place in our heart
58:07
forever. So last question for you, Todd,
58:10
you and I reconnect one year from today and you are
58:13
celebrating something big. You're very excited about this.
58:15
What's that big thing you hope to be celebrating one year from
58:18
now? Well, I, I think it would
58:23
probably be the, the further growth of, of Franface as a
58:31
community and starting to see that, you know, I think about
58:37
the recent Charlie Kirk and, and just so sad to see him lose his
58:47
life. But the, the movement that he's
58:50
left, he was always pointing toward Jesus and the movement
58:55
and the growth of the movement and he laid down his life for
58:58
that has only grown. And so that's pretty
59:04
inspirational. I mean, we've sold a lot of
59:07
companies. I could say, Oh gosh, if one of
59:11
our companies sold and we had some big blessing, Oh, that'd be
59:13
great. Well, that's only a temporary
59:18
blessing and it would be great. It'd be nice love to be sharing
59:22
that with you a year from now. But frankly, the thing that
59:26
really is my my passion would be see this group grow and see more
59:33
and more people come to the Lord and in their faith be
59:37
strengthened. Or even folks that just want to
59:40
strengthen their franchise business.
59:42
Let's say they're not Christian and they come to Fran faith dot
59:46
dot com they're Jewish or Muslim or a non believer and they just
59:51
you're going to get you're going to get truths on how to grow
59:54
your business and and even if you're not a believer and and
59:59
and so. So our hope for the community is
1:00:02
that we'd be very, very inclusive, that it would
1:00:04
continue to grow, that it would change lives.
1:00:06
And so that would probably be my biggest hope for the next year.
1:00:11
And that we're excited about and we're putting time and effort
1:00:14
and, you know, working, working on.
1:00:18
In fact, I thought, I thought it was interesting that our pastor,
1:00:22
who I love dearly in the north, we go to a church in the north
1:00:25
and the South because we do go back and forth, live in Sarasota
1:00:27
and Michigan still. And our pastor in the north
1:00:33
said, he said, hey, we're going to have the whole church start
1:00:37
praying for revival. And our church has had 500
1:00:44
baptisms year to date. They're out there.
1:00:48
They're they're tracking. I mean, it was like revivals
1:00:52
here, but the pastor's now calling on folks to pray for
1:00:56
revival, which is revival among our community and among our
1:00:59
world. I think if we keep pushing the
1:01:05
edge of the envelope and continue to grow, I think we're
1:01:08
we're seeing a, a great faith movement, a great harvest.
1:01:12
And I think God will continue to bless it.
1:01:14
And so that's, that's, that's where I'm at, Anthony.
1:01:19
Todd Recknagle from 3:20 Group. I want to be the first to thank
1:01:22
you for sharing both your time and your story with us today.
1:01:25
I really appreciate it. Yeah.
1:01:27
Thanks, Anthony. Thank you for having me Hope.
1:01:30
That's a wrap on another episode of the Inspired Stories podcast.
1:01:33
Thanks for learning with us today.