Latest / Exit Algorithms / Buy an Asset, Not a Job: Franchise Exit Rules Every Business Owner Should Steal | Greg Mohr (#114)
Transcript
- Pete Vera, Exit Algorithms: Welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high value exit. I'm your host, Pete Vera, and today I'm joined by Greg Moore. Over the last 12 years, Greg has guided more than 300 entrepreneurs through franchise evaluation and helped open over 500 successful territories. He's also a two time Wall Street Journal bestselling author. Who has also co-authored a book with Kevin Harrington, the original Shark from Shark Tank. Now, Greg is the founder and operator of Franchise Maven and a leading advisor for entrepreneurs building wealth through franchising. Greg, great to have you here. Welcome to the podcast. Greg Mohr Franchise Maven: Pete, it it's it's an honor to be on your show today. I appreciate it. Pete Vera, Exit Algorithms: Yeah, excited to dive into this. Greg, do you mind starting off? Can you share with listeners a bit about your background business journey and how did you get into the franchising world? Greg Mohr Franchise Maven: Absolutely, Pete. I'll keep it kind of short and quick here. We could go into it real deep, but we'll keep it short. a long time ago in a land far, far away, when I was sixteen, we all had to get jobs somewhere. So I ended up at Taco Bell and I ended up moving up on the Taco Bell world and managing restaurants there. And found out that the owner of the Taco Bells I was working with, she owned 50 Taco Bells throughout the Sacramento, California area. So she was a a master franchiser for Taco Bell. So that was my first foray into franchising, the first time I've ever heard the word franchising before. But I helped her build up her restaurants all over the place there. Went on to do restaurant management for 15 years, got bored with that, got went to college, got a degree in electrical engineering and physics, became a microelectronic circuit engineer, did that for 15 years. While I was doing that, I owned some real estate, had a couple of rental properties, and another another engineer and myself. We bought dry cleaners, privately owned dry cleaners, and we bought some storage units. So we ran those while we were being engineers at the same time. We both got out of the corporate world at the same time. that while that dry cleaning was interesting, it was a privately owned business. And it's very it's a big challenge when you don't know anything about dry cleaning and and you run a privately owned business because you got nobody to ask about stuff. You had to figure it out yourself. storage units are pretty easy. That that part was simple, but the dry cleaning was rough. So my friend loved doing the dry cleaning stuff. So I'm like, I'm selling my half to you. You take that. I love that franchising thing that I did. back at Taco Bell. I want to do that again because I don't have the latest, greatest idea of what to do next and and start my own business. So went out and found a great franchise with the help of franchise consultant and I invested in that, ran that. but what I found was a franchise consultant. He was he had a very interesting role is that he got to work from home all the time. He didn't have to go out and do any traveling. Wh whereas when I was doing the telecommunications consulting, I talked to business owners like car dealerships, hospitals that had huge telecommunications needs and helped them save money on those. But I had to travel, had to drive out and talk with them one on one all the time. Where he got to do everything from home. So I said, I wanna do that. to the franchise consultant, teach me what you do. I wanna do that. And so been doing that ever since and have a look back. Pete Vera, Exit Algorithms: Yeah, that's awesome. I love that story. yeah, l let's start off. Do you mind sharing a bit more detail about that that initial exit you had? was there any you know, any preparation going leading up to that point? or any anything you would have done differently now, you know, looking back on that. Greg Mohr Franchise Maven: probably would have gathered a few more clients before I exited that. So what I did was with the franchise system, it's you can still exit. You just have have to get approval for from the franchise or who are you going to exit to. So rather than do that, I just sold it back to the franchise or himself. And he had another franchise he had another franchisee that was near my area that wanted to buy it. So it was interesting is that I still had some predictable income, which is you something that you really kind of need and recurring income that you that's really helpful when you do an exit. So he was able to my franchise or was able to find somebody that to pick that up and to take that over for me. But I I spent probably about a year and a half there, maybe two years. I looking back, I I probably would have spent a little bit more time building it up a little bit more. So I had a little bit more or maybe a lot more recurring income and predictable income on that. That would have really helped build up that multiple more on that. It's pr I had it as pretty one just pretty much just a one person show. So when you're doing businesses that are a one person show, you know, everything centers around you. but our clients what we do is we'd save them money on their telecommunications bills and we'd we'd do about a two year or three year contract with that. So I did have some people on under contract with me that I was able to sell off those assets to the franchise or in into the existing franchisee on there. But I should have built up should have waited a little while longer and built up a little bit more to get a little bit more of a multiple on that. Pete Vera, Exit Algorithms: Yeah. that makes sense. I I ask most of my guests that question and timing, it seems to be a a you know common common area where you know they could have they could have done it a little better. You know, hindsight's 2020, right? but yeah, let the lesson always you know, takeaway is they're it plan as far ahead as you can. It's right, major event in your life and it requires years of of preparation and and planning. I'm I'm curious on the franchise. side of things, are there what are the typical restrictions or or maybe just rules around the the exit part when when a when a business owner is considering retiring or moving on doing something else, what are the rules around that? Greg Mohr Franchise Maven: They have to be approved by the franchise or simple as that. When you get into a franchise, you'll go through a process where if you're interviewing that franchise and that franchise is interviewing you at the same time. You both want to make certain that it's a good fit on that. So when you're gonna sell it to somebody else, the franchise or has to go has to take the your prospective buyer through the same process that you went through in order to evaluate the franchise because they wanna make certain it's a good fit. They want to make certain basically that this person will make a success successful franchisee in their system. Pete Vera, Exit Algorithms: Yeah, that makes sense. Are there Greg Mohr Franchise Maven: Which is good good for the buyer as well. I mean, if you just walk into like we did to the dry cleaning business, walk in, I probably wasn't I probably wouldn't have made it through the franchise, you know, investigation process, which is good because without my buddy there that that knew some things about the dry cleaning business and liked it, he was able to make it work. But if I did it, I might have not worked, you know, might have failed. So not necessarily a bad thing when you're a buyer going into that. And making certain that it's a good fit for the b you're a good fit for that business you're looking at. Sorry, I interrupted you, Pete. Pete Vera, Exit Algorithms: No, that that's helpful you know, clarification. It's more so that it seems like they just want to make sure that the business will continue to thrive once you sell it. Not they're not necessarily against the sale selling or the exiting. but yeah, and that that's what you would want anyways if you were selling your regular business that wasn't a franchise, also, right? You'd want to, you know, make sure they have a safe, safe pair of hands to take the business on. do you have People that you consult with that have kind of the the build buying with the intent to grow and and eventual exit in mind. Is that or is that not necessarily a typical mindset that franchisors have or franchisees? Greg Mohr Franchise Maven: You know, Pete, it's interesting. They don't necessarily have that to begin with, but on our very first phone call when I talk to them, I tell everybody that because quite often people will thinking, you know, I'm getting a franchise, I'm buying a job. So I tell them right off, first phone call, if you treat this like a job, it is going to be a job. We are going to treat this like an asset, growing an asset. That means that business is not going to revolve around you. So we yeah, that's one of the first things I go over with people is it's an asset to build it up, have a manager run it, you don't deal with it. Or you're whenever you're ready to sell or go on vacation for thirty days, nothing's gonna break. It just runs without you. Pete Vera, Exit Algorithms: Yeah. that's a great and that's a great goal for any business owner to have. Do you consult through that that whole process, the whole arc of transitioning the business to to kind of run by itself? Greg Mohr Franchise Maven: No, actually I do not. I go through the process of getting somebody from start to finish as far as which franchises will be a good fit for them, and then getting them into going through the due diligence process of looking into that franchise. So one thing that we walk through and that I tell them is that since we are going to be treating this like an asset and not a job, what we want to do is we wanna talk to the franchisees out there who are not running this full time, who are not owner operators on there, who are more of a semi absentee type person is what we're looking at there. So we want to talk to as many of those as we can. Because you've already got the systems and processes set up in place because it is a franchise to where you know what each employee is going to be doing on a regular basis. So you've got like, you know, in a restaurant, you know, you've got a a cook that comes in. So from nine to eleven he's going to be doing prep work. Then he's going to take a break. Then from twelve to two he's going to be out on the floor running that. So you've got that whole thing all lined up in a chart. That's all franchises do. Everything's lined up in a chart. So what you want to make certain is that you're not on any of those line items. Your name is not in one of those charts. You don't want to be one of the in that process of making that business run on a regular basis. So you want to make certain that you've got everything turned over to a manager to do that. So you're not the you the business is not revolving around you and you don't really need to be there. Pete Vera, Exit Algorithms: Yeah, definitely. What what have you seen work well to to develop those, you know, those SOPs and just to make your a business seem sellable, right, or to desirable for a buyer, make it obvious that it has those SOPs and systems in place that'll that can make the business an asset. Greg Mohr Franchise Maven: So what we want to look at is this is a couple of different things that when we're looking at a franchise business. We want to look at and what actually as you're selling it, what buyers are going to look for is the strength of the franchise system as well. Now, just because it's a franchise doesn't necessarily gonna just increase that multiple at all. It's really the quality of the business itself on that. So we want to begin with by looking at the franchise itself and the quality of the franchise system. We wanna look at its its growth rate. How long has it been in operation? How well is it growing year after year? One of the good things about franchises is we have the transparency there to see all that, because they have what they call their franchise disclosure documents. So you can and you can take a look in there under item number twenty, the number of franchisees who are buying into the or investing into the system each year and they'll show you show you the growth rate on that. So we want to really look at that because that's a good then it's a good quality franchise, a good quality system. And then when people are looking to to sell and the buyers are looking to buy, then the buyers are looking at predictable income, recurring income, not necessarily on potential, but something that they can actually track over time. So they see that steady growth rate of the franchise and now they're looking at your individual business and they're looking at your your growth rate as well. And that's what they're gonna be buying on. That's what they're gonna be paying the multiples on is the growth rate that you have and back into that by the growth rate of the franchise. Pete Vera, Exit Algorithms: that you said some really good really good information there. So yeah, do you have a a system or yeah, a process to determine like what what what sets the price for a a franchise and you know, why is one franchise able to charge a premium over another? Greg Mohr Franchise Maven: Basically the quality of the business and whether or not it revolves around you. what and what I've seen when and I've sold a lot done a lot of resales with with franchises as well, and what they're really looking at is a clean profit and loss statement on there. With and it you get that with the franchise system because you're paying royalties. you know, one of the other things with a franchise, you pay royalties. So you have to get you have to have good books and the franchise is going to check your books every once in a while. So you have to have a nice clean set of books. on there. And that's really one of the other things that people look at is that so they can look at that profit and loss statement. And they know exactly as they look at it, they can see exactly where everything's going out. And there's nothing questionable, so to speak, in that. So they're not they have to be really the line items have to be really set and clear because the franchise is really going to be checking that every once in a while because they're taking the royalties, so they want to make sure you do, which is good. It's good for everybody. Keeps you in line. And having those clean clean numbers really says a lot and really helps that so that you're not questioning that. I've had I probably though I've probably had a maybe one or two of where the people where the resales I sold where the people weren't were putting some line items that were a little bit questionable in there. And and I found that when buyers are looking at that and they're wondering what that is, that that really kind of turns them off. So having that really clean p P and L sheet really makes it helps with those multiples quite a bit 'cause then they're never they're not wondering about the business or wondering what's going on in the business. It's clear and concise. Know exactly what's going on. Pete Vera, Exit Algorithms: Yeah. Yep. Sound sound practices, yeah, franchise or not. We see that a lot in just small business MA, right? They're trying to reduce their tax burden by putting a lot of expense personal expenses on their business. But when you go to sell, I mean, you better have a really good explanation for that. But no matter no matter how good it is, or even the receipts and everything to back it up, it's still a little bit of like You know, not not desirable if when you go when you go to sell, right? Greg Mohr Franchise Maven: True. Very true, Pete. Pete Vera, Exit Algorithms: Yeah, I'm you know, an another theme of the show is AI. I'd love to hear out from your perspective in the franchising world. How has that f affected your journey as a you know as a franchise consultant? Greg Mohr Franchise Maven: It's fascinating the AI the AI stuff that's going out there. I would say I'm not an AI expert. I would say it's more of a force multiplier, than it necessarily is it taking anything over. I think the only thing that AI could really take over and it's probably doing it already is with Amazon, when you're buying products on that, you're buying commodities. those all we need to do is just go out there and Amazon reminds us, you know, you haven't bought this in a while a while. You know, do you need to restock on this? yeah, yeah. That's where AI really really comes into play with the business world, you can only go so far with the AI with AI. People want to talk to people eventually. I mean I've had some other franchise consultants have tried, well, let's just do AI for the whole franchise consulting thing. It gets up to a point and then it just falls flat. Because everybody at some point in time wants to talk to a real person. So while it can help you with many different things and do some like for me, if I need to generate some more marketing material. It's a great way to go out there and and have it help me come up with ideas, generate some marketing material, but I just can't let it go go nuts because it comes it comes up with some real wild stuff every once in a while. So I have to check everything that it does. It's I heard somebody refer to it's like training a dog. You know, you you gotta keep on going, repetitive, repetitive repetitive, and then you get it to where it's pretty, pretty close. A lot of the franchise systems are using AI to make things a lot simpler, especially for some administrative costs on that. And having those franchises that do that is a real plus because they're going to get ahead in the world. Because there's some things that if you do like like I do on a repetitive thing, is producing different ideas, producing different content to go out there and do the marketing. It's great for that because I can just give it kind of a a general theme and it'll go for it, but I still need to check it to make sure it's good. And the people If you know, when you're getting into like home services, people want to talk to you. People want to talk to a real person. Senior care services. They're not going to turn it over to some, you know, kids aren't going to turn mom and dad over to some AI system. They're gonna want to they're gonna turn it over to Pete. They wanna know that Pete's gonna be the one that's gonna take care of mom and dad and keep them at home a while longer. And same with the home services when you get into those sort of things, is that they want you to come out. They want to sit down and talk about what problems they're having, how you're going to solve their problems. So while it's a great force multiplier for for the some of the things that you do on a repetitive basis that don't need human interaction. Each one of our businesses, the franchise businesses, they need that personal interaction every once in a while. People just want to talk to people. Simple as that. Pete Vera, Exit Algorithms: Yeah. Yeah. I I like your perspective a lot. I I think that's that's still gonna be the case for a long the foreseeable future, right? People want that that human and human connection. yeah, I'd I'd love to hear your process though, and and you know, how do you maintain maintain that human to human connection while still you know leveraging AI as much as you can. Greg Mohr Franchise Maven: So I've got a little thing called I think called marvelism and I've got like five different people in there. So social media, an executive assistant. So I'll go out and I'll say, you know, find me some podcasts to get on. Because I like going on other people's networks and getting on podcasts. I say, this is what we're looking for as far as podcasts go. These are the different areas. So go out and help me find those ones. So they'll come back and sometimes they'll come back with ideas that are quite right. and then sometimes they come back with ideas that are perfect. So That's one thing that I use it for. And then for content, when in doing social media marketing. this so you give it some background on yourself. You give it some things that you've done. Like I've, you know, I've written my book. It's a Wall Street Journal bestseller. I've done co-author for others. So I put that in there, Franchise Consultant of the Year a couple of times, I've done that. And I put all that information into the AI system and I said, okay, now utilize this and put together a nice opening statement for potential podcast hosts. And then bring it back to me and let me take a look at it. And then so what they'll do is so I don't have to do all that research. That saves me all that time. So I save hours and hours rather than having to go through and search on all the different podcasts that I want to go on. I let them do that for me. But then when I reach out to podcast hosts, I I've tried to have AI do it, but when I looked at them, it's just a little too generic sometimes. It's not real personal. So you really kind of got to get in there and add your personal text. all that research beforehand was great, saved a lot of time on that. Perfect. But when it comes down to now I want to get in front of that podcast folks like yourself, I've got to have something a little bit more personal in there involved with that. I've got to really go in there. And that's something that AI up to a point it can't really do that final personal touch that you put into it. So I use that quite a bit. And franchises use that quite a bit too. There's a lot of things that they can do like on the phone, scheduling appointments, making everything run on system and processes. But again and the same with the franchise consulting business. You can only go so far when somebody wants to actually talk to somebody about it. But saves me a lot of time when I doing that for that other stuff, research stuff. Pete Vera, Exit Algorithms: Yeah. that's great. Yeah. Great insight there. Yeah, I'd love to talk a little more about your your book, Greg. or one of your books. Let's see. W which one did you write latest? The one with was that the one with Kevin Harrington? Greg Mohr Franchise Maven: The latest one was with Kevin Kevin Harrington that I wrote. That was my latest one. I did one with Kevin. I did a couple with my book publisher, Rob Kosberg from Best Seller Publishing. On that, that was one of my other Wall Street Journal best-selling books in USA Today best-selling books in my book. The only Wall Street Journal best-selling book only about franchising out there. Real freedom. So that gives you a I it'll walk you through step-by-step process of how to investigate a franchise, what to look for, red flags. Real world examples are the people I work with. So you know exactly what my process looks like. for those of you out there, there's a book inside of everybody. Go out there and write a book. You need to. It's a bit better than a business card on on that. But this book, we're really walking through it. I mean, if you want to learn how to investigate a franchise by the time you're through with that book, you will know how to investigate a franchise. The only thing with fr in the franchising world that we don't have as compared to like real estate is we don't have a listing. of every single franchise. You know, like in real estate, you can go to your area and you can get a listing of of all that. But Pete Vera, Exit Algorithms: Mm-hmm. Greg Mohr Franchise Maven: in a franchising world doesn't work that way. you have to do what's called territory checks, see who's available. And there's like 5,000 franchises out there. So there's a lot to go through. So this will show you how to investigate it. If you know exactly which one you want to investigate, it's good. But if you don't know which one to get into, that's where the challenge comes in and that's where people come to see me when they don't know exactly what they want. And Usually nobody that comes to me knows what ig the what exactly they want. They know what they don't want. That's an easy question on that, but they don't always know what they do want. And that's where I come in. And as far as AI goes, I've not been able to use it effectively after a conversation with my clients to say, okay, this is a conversation I have with my clients. Go find franchises that are a good fit for them. We have a system that does that. But it hasn't been very good at at at predicting the right one. So that's again where the personalization comes in, really getting to know your people so that and that's a challenging part of of our business is finding that perfect franchise for people. and like yourself, you know, you do the the MA thing, you like to grab, you know, different businesses, build a portfolio on that. There's quite there's quite a few people that I work with that want to do that sort of thing. So in order to build a portfolio, you've got to know what kind of fits for you personally. on that, what's a good fit for you and what you're trying to accomplish in the next five years. So with your MA group, it's something that you folks do is probably talk to the people and find out, okay, w what are your goals? What are you trying to accomplish? Where do you want to be five to ten years from now? Let's find businesses then that will meet those goals and let's find multiple businesses that will will they'll help you get to where you want to be, whether it be private or or franchises, whereas I just do the the pri the franchise thing, no private businesses. Pete Vera, Exit Algorithms: Yeah. that's great. yeah, and I I I agree. I think writing a book is probably one the best things you can do for just personal brand and yeah, getting your name out there. I how how did you come up go about you know, co authoring with with Kevin Kevin Harrington? Was that the book or is it a a different what was what's that book called, the the latest one that you wrote? Greg Mohr Franchise Maven: latest one I wrote with with Kevin, I'm gonna have to check. I I'll give you the answer to that in just a second. We'll go through the the other question that you had was how do I get involved with Kevin? So I got involved with Kevin through Rob Kosberg, bestseller publishing, who published my book for me and helped me get it to the Wall Street Journal best selling list. I was down there visiting with with Rob and then what happened was that he had Kevin show up for one of our one of our meetings that we had down there and I got introduced to Kevin that way. and then he he said, you know, I'm you know, I'm writing a book. Let's let's, you know, let's collaborate on it. And there was a couple other people in there with us at the same time that we we collaborated together on that one. so it wasn't just it wasn't just me, but a few others from Rob Cosberg. So it was great because now what I did was got involved with, you know, writing my own book. Or sorry, writing yeah, writing my own book. It involves Rob. Rob got me introduced to Kevin, and then Kevin and I wrote a book, and a couple other folks, we wrote a book together as well. So that's how I got with Kevin. Then I ended up actually working with Kevin's team. And he they helped me also do some marketing and advertising as as well. Kevin actually did an an infomercial for me on that. And we got it was really cool. So I did an interview with with Kevin. He did infomercials. with me. And then we took that infomercial and we put it out on the CNBC, Fox News and a couple other Bloomberg. so that was really cool that he you know Pete Vera, Exit Algorithms: Nice. Greg Mohr Franchise Maven: I I actually g you know got up in the morning watched it on TV and your little commercial pops up there, you know, in the middle of of the of the broadcast there it was it was pretty Pretty cool, pretty fascinating. So from idea Pete Vera, Exit Algorithms: Yeah. Greg Mohr Franchise Maven: to empire is what I did with with Kevin. From idea to empire. Pete Vera, Exit Algorithms: Yeah, what what is the the through lines through line of that book? Maybe some major takeaways for business owners listening. Greg Mohr Franchise Maven: Is how to turn your ideas into a to an empire. So in order to do that, you can have your own idea and you can do your own thing and create your own systems and process and create your own business. Or if you just want to create an empire, from my standpoint, is how to create an empire through the franchising model and how and how to look at things like horizontal growth or vertical growth. So you can create an empire with franchising by doing one franchise and just building out building out kind of a euphemism, but taking over more territories. So, you know, you take over your city, you take over your your county, you take over your state with one franchise and grow grow the system. Now I say build out but there's service industry isn't a brick and mortar industry. Service industries you don't have a build out brick and mortar you do on that. But so for how to create your empire through franchising either from the horizontal growth or just take one territory. And build an empire that way and do it with a vertical growth. So home services are great to do that one with. Now, home services like you know, lawn care, pest control, you know, window washing, cleaning the house, even though it's home services, quite a few of the franchises do both residential and commercial on that. So you basically own the home or you own the business. So you have that territory, and you may start with the lawn service, and then you might add pest control and then general maintenance, gutters, window cleaning, holiday lighting, and you can do commercial or residential. So now you own the business or you own the home. And now you've got four, five, six, seven franchises in in a vertical system that are all the same clients that you're working on. So you're in that one one general area and you just can whatever that business or home needs, you've got the service for that. Pete Vera, Exit Algorithms: Yeah. Wow. And then you cr you can cross sell to the customers, right? To each other. Greg Mohr Franchise Maven: Exactly. You're out there doing the lawn, you say, Hey, I could send my team over to clean your house for and you know, let me know what you think. I'll just give you a free cleaning and then if you want to continue doing that, let's sign up or vice versa. Very easy way to build an empire, doing that. Pete Vera, Exit Algorithms: Yeah. Wow, that's awesome. I I'm I'm glad we got introduced, Greg. It's been a a really fun conversation here. I got one one final question for you. And you touched on this pretty well already. But if you had to summarize, leave listeners with just one practical tip for a an business owner preparing for a high value exit, what would that be? Greg Mohr Franchise Maven: Build a business as if you are going to exit it tomorrow, even if you don't plan to sell it for ten years. Pete Vera, Exit Algorithms: Yeah, that that is great advice. awesome, Greg. Thank thank you so much for hopping on today. We love this conversation. Where where can listeners find you and learn more if they enjoyed it like I have? Greg Mohr Franchise Maven: You can go to Fran my website, franchismaven.com. That's franchise A V as in Victor E N dot com. Email me at Greg at franchisemaven.com. Or you can do it the old-fashioned way since I am kind of old fashioned. And just pick up the phone and give me a call. 361-772-272.