Latest / Reframe First / Rogue Schott, Head of Franchise Expansion at Block Renovation | Why Franchises Fail Before They Open
Transcript
- Oleksij Rak: Hey guys, welcome to another episode of Reframe First. I'm Alexey and let me welcome our today's Rog Schott, head of franchise expansion at Block Renovation. So hi Rog, it's great having you here. Rogue Schott: Absolutely. I appreciate you inviting me today. Oleksij Rak: Yeah, thanks a lot for joining. So block renovation and franchise expansion. So what do you do? Is block renovation a franchise by itself? And what do you do there? Could you tell us a bit? Rogue Schott: great question. So block renovation is not a franchise ourselves. So we are actually a massive marketplace for contractors and clientele. so what I do personally, I am head of franchise expansion at block. we partner with franchises throughout the entire country that are emerging and opening up new locations. only brick and mortar is what we focus on. So that'd be QSR, retail. a lot of health and fitness brands, things like that. And we provide pre-construction services. So Oleksij Rak: Mm-hmm. Rogue Schott: we provide an introduction from the franchise oars after they sign a franchise agreement. And we can introduce them to architects if they don't have somebody internally that they utilize. but majority of our value is provided around the contractors that we provide and what goes on thereafter. Oleksij Rak: Yeah, I see. So what is the typical phase when the franchisees come to you and at which phase do they come to you and what is the most common questions they come with? Rogue Schott: the it it depends on if they have any experience or not, to be honest. I believe it's upwards of 85% of franchisees are first-time business owners. So Oleksij Rak: Yep. Rogue Schott: they're totally new to absolutely everything across the board. so we fill in gaps on there are questions around how much a project generally costs, how long it generally takes for the project to be completed, what next steps are essentially from the point of handoff up until they open up the doors on the location. those are different for each and every project. So there's not a simple blanket statement. But as we, you know, engage with more and more brands, we're able to provide more clarity to everyone Oleksij Rak: Yeah, yeah, I see. And how long does it usually take to complete the project? And like, is the sizes of the project? It could be something small, something big. Yeah. Rogue Schott: Okay. so let's let's say a QSR project comes in, a juice bar, juice bar of smoothie. from Oleksij Rak: Mm-hmm. Rogue Schott: the time they get introduced to me, if they have plans in hand, we source contractors for them, we introduce the contractors. the turnaround time on a proposal is generally about two weeks after we review the proposal, negotiate on their behalf. It generally rolls into about three to four. So I would say within a month we could get a contractor selected. Oleksij Rak: Mm-hmm. Rogue Schott: in a perfect scenario, if the permits are ready, the construction duration is generally around eight to twelve weeks, give or take. Oleksij Rak: Yeah, it's frost. Rogue Schott: Yeah, yeah, it it is. And that that's why it's so important to have some assistance on the front end. firm bid deadlines, quick turnaround times, on revisions, things like that, because it's very easy for it to unravel and go from twelve to sixteen weeks in totality to five to six months. And then at that point you're paying on empty space, which nobody Oleksij Rak: Yeah. Rogue Schott: wants to do. Oleksij Rak: Yeah. Yeah. Are you usually contacted by French resource or to do French as this kind of come directly to you? Rogue Schott: A majority of our business is through franchise or introductions. so we work with a partnership model, very loosely iterated, just stating that we're here to provide contractors and our pre-construction services to franchisees as they sign on. as they join the network for the franchise themselves, we get a warm introduction from them. We do get the occasional franchisee that reaches out to us directly. but not nearly as frequently as we we get the warm handoffs from the franchises. Oleksij Rak: So basically when franchisee signs a franchise agreement with franchisees or franchisees or advisors, okay, go get to go to these guys and they will help you like open the location. Rogue Schott: absolutely. So yeah, we we get an email introduction. At that point, I schedule a discovery call with them just to first off introduce myself, my role with not only them, but also with the brand that they had signed on with, what we're looking at over the duration of my time that will be with them, which is up until they sign the contract with the contractor, and outline some expectations in terms of what they should be looking out for in the coming weeks. Oleksij Rak: What are the most typical problems that you have with working with franchises, especially with a lot of new franchises? First time business owners, they come with quite a... Weird, but probably what mostly they are typical questions. What are the questions that they come with? And what are their common struggles? Rogue Schott: Yeah, absolutely. a lot of it is tied around how much a project will cost. Oleksij Rak: Yeah. Rogue Schott: they always want to ask me how much a project will cost. I can tell them a range that I've seen, just even over the past three months, but it varies so wildly on a few different pieces of criteria. One would be the location of the project. If we're building in LA, it will cost substantially more than if we were doing a project in Cleveland. just simply due to the location. it also is determined by what the space was utilized for previously. If it was a retail shop that didn't have all the plumbing fixtures in alignment for a restaurant, then that will impact the cost of the project as well. If it just so happened to be a similar concept that was there previously, then we can reutilize a lot of the mechanical electrical plumbing that was installed initially to save them some money. So that would be one of them. another question is the the timeline is always at the top of mind. so they're all they intertwine big time, it because they want to ensure that the money that they're putting up front will translate into revenue as soon as possible because they don't want to pay on an empty space. That way they're missing out on revenue, they're having to pay out of pocket. for the lease itself. the franchise also doesn't like that either because that's not producing more revenue for the business as well and provide some obstacles in terms of expanding also. So we we try to provide some clarity there and make sure they understand everything. The the main goal with all of this at the end of the day is to make sure they fully understand everything from the initial point of contact through the contract because We're we're talking about an average of about three hundred and fifty thousand dollars per project on these. And you don't want to sign that blind. You wanna make sure you understand what you're getting into and everybody's on the same page from the giveaway. Oleksij Rak: Yeah, that was also my question. You mentioned like $350 per project. Is it something average? What are the usual costs of breaking mortar project? Rogue Schott: yeah, so if if we're doing a full scale build out of it, Oleksij Rak: Yeah. Rogue Schott: I would say anywhere in the range of like two hundred and fifty to four hundred. I see a lot land between three hundred and three hundred and fifty thousand dollars. And it it can fluctuate and based off the criteria I said earlier. some concepts operate with a much larger space as well, but most counterserve restaurants are within the realm of about eleven hundred square feet to fifteen hundred, somewhere in there. So about two to three hundred dollars per square foot is generally what it rounds out to. Oleksij Rak: And what are the typical business segments that come to you? Is it only restaurants or is it some fitness? Rogue Schott: Yeah, so we do a lot of restaurant concepts right now. healthy eating is super popular. So we have a lot of juice bars, smoothies, things like that. A lot of people are beginning to incorporate protein as well. so we we work with a lot of those guys. that going along with the the healthy foods is the fitness brands. they're expanding very quickly right now. And they they have a very it is much easier to anticipate what the cost of their projects will be because there's not as much plumbing work and things like that involved within it. But we do a lot of those. I also have some partners that are in the education sector for children, for coding, even some daycare facilities that we've partnered with as well in the past. but I would say probably sixty to seventy percent of all of my clients of right now are are restaurant affiliated in some magnitude. Oleksij Rak: How do these kinds of projects differ? Quite likely, daycare and restaurant differ in complexity and in the list of providers that needs to come into play. How do they differ? Rogue Schott: yeah, so the there's a lot diff substantially different requirements in terms of the ventilation system required Oleksij Rak: yeah. Rogue Schott: for a restaurant, especially when we're including a full kitchen. so we're talking about a full on grease trap that has to be installed, a ventilation hood to make sure that the you know the the smoke, the steam and all that is escaping the property, Oleksij Rak: Yeah. Rogue Schott: and not flowing out into the dining area as well. something that comes up across the board for all these that's a little bit different depending on what sector they're in is the bathrooms and Oleksij Rak: Mm-hmm. Rogue Schott: the ADA compliance as well. there's a maximum amount of people that can be included within a daycare at any given time, and things like that. it's also location dependent. California's a little bit stricter in terms of their fire codes and things like that than they are in the Midwest just because they're so apt to unfortunately that the fires and things like that that occur Oleksij Rak: Yeah, Rogue Schott: out. Oleksij Rak: Yeah. Okay. You mentioned that you are a marketplace of service providers. How does it work? Rogue Schott: Great question. So we have the largest network of commercial contractors in the entire country. we do a very thorough onboarding process of them prior to providing any introductions whatsoever. So they have to pass a few pieces of criteria checkpoints, such as a valid license in the state that they were operating the business in. They have a minimum of two million dollars worth of insurance coverage across the board. they are able to pass a background check. We provide that on the company, but also take it a step further also on the contractor themselves on a personal level, just to make sure we can not introduce anybody that has pending lawsuits, essentially Oleksij Rak: Yeah. Rogue Schott: avoid any issues before they get too deep into the conversation. And along with that, we want to make sure that they can provide references. we've been running a franchise division between block renovation and formerly. Build Zoom, which was acquired by Block Renovation in Q4 of last year, for about six years now. So it's really given us the opportunity to identify who works best and at the same time continue adding on more contractors that specialize in this space to make sure that we're providing the best experience for our franchisees. Oleksij Rak: Is it some kind of curated list or is it like marketplaces as a marketplace? Can the franchisee Rogue Schott: It Oleksij Rak: come over and choose? Rogue Schott: yeah, that's a good question. So it it's a it's a marketplace with a point person. So as a franchisee is introduced to us, we have a specific list of contractors that are affiliated within that specific market. we have access to that list and we don't just blindly add people. we do our own vetting process based off of the piece of information that we get from the franchisee, such as their timeline, their budget, what they find most important. in terms of qualifying a contractor from their own standpoint. And at that point, we start off with a list of about 15 to 20 different contractors that work in that area and narrow it down to a top three to five generally and provide a personal introduction to the franchise system. Oleksij Rak: And then continue work. And then they get in touch with the contractors. Do you control the whole process of getting the location open? Or do you just give them a list of contractors? Here's design, here's architectural plan. Rogue Schott: Good good question. Good good question. So yeah, I I we do a thorough vetting call with the contractors in advance. it's a very personal introduction to the franchisees. so we have a central point of contact there for communication. I have follow-up calls with all stakeholders. That will be franchisors, franchisees, contractors, excuse me, and anybody else involved in the decision-making process. so we meet with the franchisees, especially during the bidding process, at least once or twice a week. And just to reiterate on the fact that they understand absolutely everything, identify any outstanding questions, and make sure everybody's aligned as the project progresses. Oleksij Rak: Yeah, yeah, and then they just start working together. Do you control all the process until it's done? Rogue Schott: we we do not interject ourselves during the actual construction phase unless we are asked to. So we don't really provide too much value at that point. We had done so much effort on the front end to hopefully avoid needing to be involved during the construction process. So that's making sure that the contract is fair for all parties involved, that the timeline is set in stone, that they're held liable if they do go over the timeline, to where You know, there there's some liquidated damages that could take place. cover lost time, revenue opportunities, things like that for the franchisees. So that way everybody's covered at the end. Oleksij Rak: Yeah, OK, I see. What's probably the most labor-intensive part of your job? Like, what takes the most Rogue Schott: Of of my job? Oleksij Rak: time? Rogue Schott: labor intensive, I would say reviewing the bids by far. the Oleksij Rak: Yeah, the bit. Rogue Schott: the pro yeah. So the the bids come in. Unfortunately, there's no standard format in the construction industry to to provide a proposal. Oleksij Rak: Yeah. Rogue Schott: sometimes we get a very, very blunt number with with no breakdown of where the money is being allocated throughout the entire project. And Oleksij Rak: Mm-hmm. Rogue Schott: then sometimes we get it broken down to where you know how many screws they intend to use. as they complete the entire thing. Yeah. So you you understand as they come in, it is so incredibly difficult to do a comparison between the two. so that's that's where we you know provide a lot of value, do the follow-up conversations with the contractors. I also give them a template that they I I request them to utilize anyways to in you know input the numbers into. Sometimes they don't always play by the rules. but if their numbers look appealing off the cuff. We have to make sure that it's fully inclusive of everything because otherwise it leads to change orders and the project cost is substantially more than what we'd anticipated when we signed the contract in the first place. And that's the last thing we'll. Oleksij Rak: Yeah, for sure. Why don't you automate this kind of work? Yeah. Rogue Schott: Why don't I automate it? so I I do. I I automate Oleksij Rak: Thank Rogue Schott: some. Oleksij Rak: some. Rogue Schott: so A AI is fantastic. we have a tool that we've been sharpening over the past four years now Oleksij Rak: Yeah. Rogue Schott: that we run internally as the proposals come in. We feed it in there, it provides us feedback, give us some clarity on some of the questions we should look for. Unfortunately, it does come back with some feedback that doesn't quite make sense. Or there's some things that are lost in translation between the conversations that we've had with the parties that's not exactly included within the proposals and things like that. So we we give that a thorough review up front because we we don't want them to adjust something that's been decided outside of what's within the written proposal itself. but we we do lean on that quite a bit internally as well. Oleksij Rak: Yeah, so we do it, right? So that's great. Could you tell us a bit more about what you do with AI tools? You mentioned you have some interesting software and what do you do at all at your company with AI tools nowadays? Rogue Schott: Great question. So we provide a specific folder for each brand as they come in. this brand will provide us an FDD which outlines all the details that they provide to the franchisees as they sign on. we get an understanding of what their expectations are on the cost of the projects, preliminary numbers for FF and E. if they are including that within their package that they're providing. essentially like a responsibility matrix. along with that, we input their lease information, a landlord work letter, the plans, the proposals that they come in, absolutely everything. kind of feeds off each other to make sure that there's no overlap there, that everybody's bidding on the exact same project. because some of these documents are substantial and the contractors are extremely busy on their end as well. And it's very easy to overlook some fine-tuned details that may not look like a big deal, but if we're talking about a twenty to thirty thousand dollar price difference just off of something being mislabeled, we we need to identify that off the bat. so we we provide essentially every stitch of information that we possibly can for the franchise and utilize that specific portion for for the new locations as you go. Oleksij Rak: Have you already automated reading the FDDs? Because all of them are quite different. Do you do it like manually and extract all that information from FDDs? Because FDDs usually is like a long document. Rogue Schott: yeah, yeah, they're they're very long, you know, two hundred plus pages. Oleksij Rak: Yeah. Rogue Schott: so so yeah, we we we we upload all that in there and it just deciphers a a few of the different portions of it that are that are most valuable. Oleksij Rak: Yeah, you need only some certain parts of the video. Awesome. What else do you do with your AI? Rogue Schott: so we AI helps us source potential franchises. so we are members of the IFA, International Franchise Association, and we are with all their newsletters, a lot of different newsletters that aren't directly IFA f affiliated but franchise affiliated, that make postings about franchises that are rapidly expanding, may assign a new deal. are really hot, popular, providing a lot of revenue, gives the opportunity to understand who our target audience should be that that we haven't been approaching already. So we we take that opportunity, it gives us a talking point when we do reach out to them. you know, say hypothetically, hey Bob's chicken, I saw recently that you guys had signed on 18 new franchisees in the state of Texas. I'm currently working on seven of them myself. I'd love to have the opportunity to discuss with you and see see if we could, you know, be a good fit to work with each other. So it it provides a warm introduction there and along with that also some follow-up cadence to to make sure that we stay in alignment. Oleksij Rak: Yeah, yeah. So you can get in touch with franchisees after you worked with some of their franchisees already. Rogue Schott: Correct. Well that and and some competitors as well. so the the concepts are all slightly different, but they are very similar. ten different chicken restaurants have different branding, different mill work, different signage, different colors, but the main parts of the project are essentially identical across the board. So if you get really good at doing it for two to three brands, then you can definitely do it for another five to ten. Oleksij Rak: Yeah, for sure. Is competition in your space big or not? Or are you somewhat unique in the space? Rogue Schott: There there isn't direct competition what we provide due to our Oleksij Rak: Yeah. Rogue Schott: our business model. so there are other companies that provide pre-construction services. they pay a retainer to them. they generally operate off of a flat fee or a percentage of the total project value at the end of the day, is where they take their cut. the revenue model at block is based off of the contractors. So the contractors pay us directly. We do never invoice. the client whatsoever and avoids any mismanaging there. So they don't have to come out of pocket for anything throughout the entire process. they don't have to include anything special within their SBA loans. they just, you know, utilize our services and the contractors pay us for for being h able to have the opportunity to engage with them in the first place. Oleksij Rak: That feels like a quite common model within the franchise space. The franchisee is not paying for anything other than the location. So, the franchisee is not paying the consultant services. services user. Rogue Schott: Right. Oleksij Rak: yeah, it sees the franchise or sub-ang or construct or constructor vendor some construction vendors are paying. And Rogue Schott: Right. Oleksij Rak: it's awesome. Awesome. I think we've covered pretty a lot of everything. It was a quick one, but is there anything else you would like to add on top of what we discussed? Because I'm kind of out of questions. I had a lot of them, but we already discussed them. Rogue Schott: Yeah, yeah, absolutely. so one thing that I've recognized is Oleksij Rak: Yeah. Rogue Schott: that where we provide the most value is where franchises begin to expand at an exponentially quicker rate than what they were initially. Oleksij Rak: Yeah. Rogue Schott: it is very feasible for the C suite within a franchise to keep tabs on two to three, maybe even four ongoing projects at any given time. But sometimes they sign on with a franchise broker and they just totally take off. All of a sudden, we're selling 15 to 20 a month. That means Oleksij Rak: How do you handle it? Rogue Schott: yeah, yeah, it's a great problem to have. but your workload is just, I mean, exponential at that point. and if you take a step back and just look at the numbers of it, let's say that's there's four contractors on each of those locations for 20 projects. That's 80 different people. That also means there's 20 different franchisees that are asking a ton of questions. So that's a hundred people that you have to juggle at any given time to fill in all the gaps across the board while you're trying to still expand. So you have a finite amount of time, and you you have to either make the decision: do I hire on somebody internally within a W-2? come out of our budget essentially to cover this, which which some some teams do, or Do you outsource it? it it you know prov provide some fractional support to somebody such as Block Renovation or or you know somebody else that does this in the space. because suddenly what you were really good at and what got you to this point is no longer your job. Your your job totally translates from being great at selling franchises, great on identifying new markets and expanding, to dealing with phone calls and reading bids and reading plans and answering all these questions. that you didn't exactly sign up for initially. And it starts falling off on everything you were good at initially. So Oleksij Rak: Yeah. Rogue Schott: yeah, that that's probably the the largest thing that I've identified over the years is you know, the the teams that recognize that early on, they continue expanding for years later on. the ones that let it unravel and get away from them, you you end up playing catch up. So it's something very important to identify as early as possible. Oleksij Rak: That's a great problem to have, but it's still a problem that you have. Rogue Schott: And absolutely. Oleksij Rak: Are these bursts common in this space? How often do they happen? Is it somewhat seasonal or just a great mixture of good franchise and good broker who just burst it? How does it work? Rogue Schott: Good good question. yeah, so it it's a little bit of both. Oleksij Rak: Yeah. Rogue Schott: a lot of it depends on what's popular. in the in the past twelve to eighteen months, health and wellness-based products have been extremely popular. So fruit and you know, juice bar smoothies concepts have blown up. Oleksij Rak: Yeah. Rogue Schott: it's very easy to expand on those. Everybody is also operating out of smaller areas. you know, very few projects are moving forward with a dynam concept Oleksij Rak: Mm-hmm. Rogue Schott: anymore. they are, you know, doing a counter serve. There there may be five to six tables inside, but it's a take it and go. It's it's just kind of rolling with the times. Everybody wants things right now. They want it on the go. that that's why, you know, pe people enjoy social media so much. Is because they get to, you know, flick through, get on to the next one. So but that's what's popular for right now. In five years, it could be totally different. it was chicken restaurants, two to three years ago. There was a ton of chicken restaurants. Now they're starting to, you know, die down substantially. Dave's is doing fantastic, but Oleksij Rak: Okay. Rogue Schott: it it it just became extremely saturated. So it's first to the market, helps out tremendously, and you know, identifying what what what the the market wants. Oleksij Rak: Do franchisees ever make profits? Because they need to buy the franchise, they need to open the location. And they need to operate, they need this ramp period. So it's a lot of money that they need to put into the franchise. And the question is, if you know it's based on trends and if it changes in a few years, does it even... make this profit so that it turns the cash around. Rogue Schott: Correct. Oleksij Rak: Like, put X amount of money in like in the first year and then like over next, I don't know, five years take 20 % of that out and then, you know, the franchise is dead basically because like it has changed. as you mentioned, people do not want to sit in the restaurant. They want to take it, take and go. So it's a different concept. Rogue Schott: Yeah, it it it is. It's very different. so all of this is covered in the discovery phase with the franchises and Oleksij Rak: Yeah. Rogue Schott: in the franchisees. The conversation goes along with it. so they cover their recent revenue, what they've been, you know, bringing in, what their median is, what their mean is, and essentially what their path to profitability looks like. generally over like a five to seven year period. because nobody wants to They they they want to open up a business, not a job. you you don't want to just tread water and get just enough money out of it to get by. You you want to sign up with the right team, make sure you have the right support internally to make sure that you are a priority to create revenue, not only for the brand, but for you and your family as well. sometimes I I've seen numbers shared that that are unrealistic. Oleksij Rak: Mm-hmm. Rogue Schott: sometimes they they even sell themselves short a little bit, you know. but a lot of that comes down into the due diligence that the franchisee themselves does. reaching out to not only the best performing franchise location, but to the most recent, I think is what's most important. what is the experience you had when you opened up six months ago? If you were to do it again right now, what would you take into consideration? Because anybody can introduce you to the the top five to ten locations and they look very you know, promising. But if that's not the same con concept and mindset across the board, then it's not really the full story. Oleksij Rak: How often do you have to repurpose existing locations? Where I live, it's quite often, we have this season all of restaurants and cafes, so they open for one season and next season they come over and it's a completely different location already. So there's a completely different franchise over there. How often do you have to do it in your business? Rogue Schott: yeah, so in terms of just like d changing out a location for a totally new business. Oleksij Rak: Yeah, just repurposing. Rogue Schott: Yeah. Yeah, yeah. I I mean on all the time. That that's what majority of these Oleksij Rak: with them. Rogue Schott: projects are is repurposing a previous owner. so a lot of that the reason why they close, that the that to take a step back, the number one way for your business to fail is for it to get ruined before it opens. Right. So that Oleksij Rak: Mm-hmm. Rogue Schott: that's the entire value proposition that we're providing here at Block is to make sure that doesn't happen. If Oleksij Rak: Yeah. Rogue Schott: you anticipate it will take $300,000 to open up your store. Oleksij Rak: Yeah. Rogue Schott: And it opens three months past the time that you had expected. And it ends up costing all in $475,000. Oleksij Rak: Yeah. Rogue Schott: Now you have multiple months worth of missed revenue that you have totally missed out on. You have paid on the on the lease of the location that's providing no income. And also you had to come up somehow with $175,000, whether it's back through the SBA within a loan or out of your personal finances. But regardless, somebody has to pay that back. And Oleksij Rak: Yeah. Rogue Schott: whatever they've given you for that five to seven year projection no longer exists. Now, if you want to still hit those same numbers, you have to put up 180% with the revenue on top of what you're expecting, which is extremely overwhelming. And The last thing you want to do when you open up a location is be scared. And feel like, you know, you're you've been put in a compromise position. And that that that's what we look to avoid there. because we unfortunately we do see it very often across the board. It's not just franchises, but it's also mom and pop shops that have a very preconceived notion of what it costs to open up and operate a business. a lot of times I see people, wanting to compare construction costs now back to a project they did in 2005. And we all wish that was still the case, but Oleksij Rak: haha Rogue Schott: unfortunately it's not, you know, your your home isn't worth the same it was 20 years ago. Nothing is. Gas isn't, you know. And everything increases, sometimes substantially more than what you would like for it to. but that's just the name of the game. That that that's why it's good to, you know, make sure that you have this full understanding b before you get in in the first place. Oleksij Rak: How many of your clients do have an understanding of how much they need to put in? Because it's disclosed in FDD, but still, what you mentioned, if you're delaying on the construction project, it means you're paying the lease. The costs are always higher than what you expect. It's always true. But how many of your clients do really understand the cost before getting into the business? section. Rogue Schott: so the the FTD will provide a high and a low cost in there. So it Oleksij Rak: Yeah. Rogue Schott: will say it it can cost between 250 to $450,000. They always want it to be the $250. Oleksij Rak: Yeah. Rogue Schott: in the perfect scenario, it very, very rarely is. And that's that's with everything going according to plan. there's you know, that it's just the nature of the beast, unfortunately. So that the the 250 Like I said, totally perfect scenario. Absolutely everything falls into place and is still generally a little bit higher than that. oftentimes they get the loan for 250 because they think that's what it's going to cost. they they've googled themselves into a hole. that's that's the the probab I should have mentioned this earlier. One of the most common traps I run into is they do their own personal research. And AI and Google. And other sources that they find online tell them how much their project will cost. And the those metrics didn't actually view the space itself. They didn't understand what voltage the electricity is lined up for. They don't understand where the plumbing is sourced at. Do we have to drill into the floor? do Oleksij Rak: Mm-hmm. Rogue Schott: we have to only work on nights and weekends because we don't want to disturb other tenants? which will increase the the cost of the project by 15 to 20 percent. These are all things that aren't generally taken into consideration and that that definitely, you know, end up at the bottom line for Oleksij Rak: Yeah. Rogue Schott: for the the budget on a project. so that that's that's why we like to get literally every single piece of information that we possibly can on the location to where we can identify that stuff in advance and then try to give them a preliminary understanding of what they're getting into. so that way they don't get sticker shock. because no nobody likes to fully expect a number that's 50% lower than where five bids have come in at. at the same time, that's why it's also extremely important to get three, four, maybe five different bids on a project, because generally the average of those bids is what your your project will cost. The super low ones generally never good because they are missing large scope items. Those are generally the ones that come in with no breakdown of where the money's being allocated. it's just claiming that they'll do your project for substantially cheaper. Oleksij Rak: Mm-hmm. Rogue Schott: but it never does. It always unravels, develops into a essentially money trap. And, you know, leading back to what we we discussed a moment ago, unfortunately, businesses End up closing eventually. Oleksij Rak: Yeah. So that's interesting considerations of like the average bid is what it could actually cost. Because they Rogue Schott: G correct. Oleksij Rak: choose something below average, but it will end up costing the average. Rogue Schott: It it it generally does and stuff magnitude. Now, the the the middle bid, I mean that's not always the best one by any stretch. at the same time, my goal is also to not just take that bid, but negotiate on behalf of the client. you know, can can we shave off a percentage point or two of what your profit margins in are? can we value engineer perhaps some different material that is very similar but comes in at a twenty percent less cost? you know, can we get another subcontractor to bid on the electrical portion because all of your numbers look good, but your electrical is a bit higher than everybody else's. Can can we get another look at that? to to incrementally chip away at it and and make sure that, you know, like like I said, they're they're put in the best position when they open up the business in the first place. Oleksij Rak: Awesome. You got really great observations about franchises changing every couple of years, because trends are changing. This is something I have not heard from consultants who are interviewed because they have different perspectives and they are eager to sell the franchise. What other observations do you have in the industry? What other trends do see? Because this is really great one. I didn't consider it. And it's actually the reality because trends do change and people want to Rogue Schott: Yeah. Oleksij Rak: experience different business cases, business scenarios. What else do you see? Rogue Schott: so there's the the age of AI going on right now. And how how they Oleksij Rak: Yeah. How does it change? Rogue Schott: yeah, and you know, and how how they implement that into their day-to-day differs widely. you know, their internal CRM in terms of you know what they utilize as they're selling the franchises that differ from across the board, their outreach cadence, if they have somewhere internal, essentially like a Kanban board that shows where each of the opening locations are at concurrently, to Oleksij Rak: Yeah. Rogue Schott: where they can identify on the roadmap over the next, you know, six months, give or take. so they can anticipate revenue, things like that. everything is just an API webhook away from being fully integrated to each other. but it's substantially easier to do that now than it was even five to ten years ago. utilizing the inf the technology we have at hand. so if we can, you know, begin plugging into each other essentially, you know, what we have internally, the the numbers that go along with it, to where that way you can see exactly what's going on on the inside as you're running your own margins at any given time. Sorry, what's that? Oleksij Rak: Is it already happening? Is it already happening? Like franchisers, franchisors integrating with you via APIs to know the cost. Rogue Schott: we're we good good question. so not as of yet. but that that's that's something that we we would like to get implemented here at some point. the there there is a a a lack of communication outside of what's going on internally with between brand to brand, company to company. And especially when you're working together as a client, there there's definitely an opportunity to bridge that gap there. And that's what I think is most important as of right now, to make sure everybody is on the same page concurrently, a central source source of truth. Instead of never ending email threads back and forth, we just have the same charts. We look at them together at any given time, you know, and have the access to the information for all parties involved. That means that you don't have anything hidden behind closed doors and you know, everybody can look at everything in real time. Across the board. Oleksij Rak: How advanced in technology, how technical are usually the franchisers? Franchisers or franchisees? Because they are about running business, I guess, not about technology and integrating QA APIs into HFA. Rogue Schott: Yeah, so yeah, that that definitely wouldn't be something that a franchisee would incorporate. We would have to start off with a franchise or the C suite of the the company, to see if we could get something integrated. at the same time, you don't want to be the guinea pig on it, you know, you don't want to be the first person to try it out. So it it will take some iterations to get to that point in the conversation. but that's you know, something that we've discussed and tinkered with quite a bit internally here at Block is to, you know, find an avenue for everybody to log in together. you know, see the same things, slightly different dashboard for the franchise or than the franchisee. so that way they could get an overarching look of everything that they have going on concurrently. essentially from the same view that I would look at if I were looking inside of their profile. to where you know, like I said, just you know there's actually more information there, but we don't have to have as many direct points of contact. It's just, you know, at at your win at any point that you You like to to see it. Oleksij Rak: Yeah, I see. Look, since I'm running a software company, I'm always interested in what can be built for franchisees or for different players, for franchisees, for franchisees, for them to benefit from. Is there any piece of software that you think would help the market, help these players on the market? Maybe Rogue Schott: I Oleksij Rak: we can build it, I don't know. Rogue Schott: Yeah, no, I I I definitely think there are some to be built. I in the franchise space, what we've been discussing throughout this entire podcast, it it isn't brought up often enough in general. I've been to numerous conferences, I've been to many seminars, I've spoken to many franchise teams. They Oleksij Rak: Yeah. Rogue Schott: focus on scaling, they focus on sales, they focus on you know, revenue, they focus on all those things. But the The three to four months between signing and open and and you know beginning construction or even opening up the location, it isn't talked about. majority of these teams are requesting that the franchisee find their own contractors. They sometimes they have to find their own architect, or even find their own space without you know having somebody identify one that would be most profitable for the business. And there there's tools out there that that can provide that for you without them even realizing it. So I I I think that's just an entirely untapped market right now with in terms of what we're providing right now to literally just help you out, you know, take take some some load off your shoulders and n helps help set up your franchises for for success. If you have somebody internally for it, fantastic. it if not, it it's good to lean on somebody else. The the number one thing I've learned in project management is how to become a professional delegator, essentially. Oleksij Rak: Yeah. Rogue Schott: because that that's what it all boils down to. You know, you want to put the best person in charge of each and every portion of your business, of your project, of what whatever it is that you're working on at any given time. it it's better to be a master of one of or then than a jack of all tripes, because then you essentially just spread yourself too thin and you actually never get anything accomplished the way it should be. Oleksij Rak: Yeah, yeah. Awesome, awesome. That was a great discussion. And thanks a lot. Thanks a lot for that. Is there anything you would like to add on top of that before we wrap it up? Rogue Schott: outside of everything we've discussed, I Oleksij Rak: Yeah. Rogue Schott: would just like to have the opportunity to to share with the audience. always open for more conversations. even if we wouldn't be a great you know great direct partner for you. can the franchise space is known for connections at the end of the day. It's a very, very niche market. And it's very much as much of who you know than what you know. Oleksij Rak: Mm-hmm. Rogue Schott: so sharing contacts with anybody is always extremely helpful because oftentimes you end up providing an introduction offhand that you don't even recognize could be filling a void for somebody without you recognizing. So it's always good to connect, contact. I'm always available via phone, text, email, attend a lot of conventions, things like that. And you know, I'm I'm not a sales guy. I just like to be up front with you know, who I'm helping out. try to be as transparent as possible and make sure everybody ends up winning at the end of the Oleksij Rak: Awesome, for sure. Thanks a lot, Torque, for this discussion and good luck. Rogue Schott: I appreciate it. Well thanks Alexei and look forward to connecting with you again here soon. Oleksij Rak: Sure.