Latest / Financial Survival Network / Smart Investments in Changing Markets - Cliff Nonnenmacher #6226

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Smart Investments in Changing Markets - Cliff Nonnenmacher #6226 · Financial Survival Network

• 0:00
  Speaker 1: And this is a huge issue in franchises that people go.
• 0:03
  Speaker 1: They sell like great businesses and they're making great money,
• 0:06
  Speaker 1: like like the I have a custom closet. Franchise does
• 0:10
  Speaker 1: nine million a year. Wow, No, no one knows this.
• 0:14
  Speaker 1: They all think the money's in food or fitness. No,
• 0:17
  Speaker 1: nine million doing custom closets.
• 0:20
  Speaker 2: You are listening to Carrie Lutz's Financial Survival Network, where
• 0:24
  Speaker 2: you get valuable information you just can't find anywhere else
• 0:28
  Speaker 2: to thrive in today's trying times. You need the Financial
• 0:31
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  Speaker 2: dot com and get your free newsletter and gift. Financial
• 0:40
  Speaker 2: Survival Network now more than ever.
• 0:47
  Speaker 3: And welcome you are listening to and watching the Financial
• 0:50
  Speaker 3: Survival Network. I'm your host, Carrie Letz. Well, if you're
• 0:54
  Speaker 3: thinking of a franchise, think, think hard. Things are changing.
• 0:59
  Speaker 3: You need to be up on the trends. But one thing,
• 1:02
  Speaker 3: maybe there's a hope make America healthy again. How's that
• 1:06
  Speaker 3: going to work on the franchise food sector. And well,
• 1:12
  Speaker 3: we have with us today returning guests and a literal
• 1:18
  Speaker 3: franchise guru. He's doing what he loves and we're thrilled
• 1:24
  Speaker 3: to have him it's.
• 1:26
  Speaker 4: Cliff, not a mocker. And but we got your name right,
• 1:30
  Speaker 4: Cliff always, Yes, you did.
• 1:32
  Speaker 1: Many free, Thank you, good to see you, too, good
• 1:35
  Speaker 1: to be back.
• 1:36
  Speaker 5: So make America healthy again? Maha. So do I sell.
• 1:41
  Speaker 4: McDonald short and buy Chipotle? What do I do here?
• 1:46
  Speaker 1: That's a that's a great statement, you know, you know,
• 1:48
  Speaker 1: it's funny about these things. When you talk about food
• 1:51
  Speaker 1: and you talk about Maha and you talk about virtue signaling,
• 1:55
  Speaker 1: what we're seeing is a bunch of people saying, I
• 1:58
  Speaker 1: want to eat clean, I want to do this, I
• 2:01
  Speaker 1: want non genetically modify food. And then where do they
• 2:04
  Speaker 1: go to? The drive through at McDonald's or a quick
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  Speaker 1: service restaurant. I mean, we all have opinions, right, but
• 2:11
  Speaker 1: you can look at the earnings of McDonald's and it'll
• 2:13
  Speaker 1: it'll prove that that business is not necessarily slowing down.
• 2:18
  Speaker 1: While we all say I'm going to eat clean, I'm
• 2:21
  Speaker 1: not going to eat that shit anymore. I'm going to
• 2:23
  Speaker 1: do this, I'm going to do that, the reality is,
• 2:26
  Speaker 1: you know, Carrie, when I'm inside of a asa ebowl
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  Speaker 1: brand or a juicing smoothie, cold pressed, clean, non GMO,
• 2:35
  Speaker 1: no artificial or anything. So yeah, but I'm usually alone.
• 2:40
  Speaker 1: I'm usually into one or two other people. Unfortunately, every
• 2:43
  Speaker 1: time I travel and every time I go into a
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  Speaker 1: healthy eatery, I look around and say to myself, the
• 2:48
  Speaker 1: world keeps telling me that they want these food categories,
• 2:52
  Speaker 1: but I'm just not seeing it in terms of, you know,
• 2:56
  Speaker 1: the revenue, the volume, and the acceptance of that. I
• 3:00
  Speaker 1: see people going to the cheap quick service restaurant space
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  Speaker 1: and eating that genetically modified garbage is what it really is.
• 3:08
  Speaker 1: It's fake food.
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  Speaker 3: Yeah, it's not so cheap anymore, and it's but definitely convenient.
• 3:15
  Speaker 3: I remember I traveled from New York to Florida, drove
• 3:20
  Speaker 3: along I ninety five, and I couldn't find any healthy alternatives.
• 3:25
  Speaker 3: I had to go like fifteen miles off at one
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  Speaker 3: point to find like an organic barbecue place that was delicious.
• 3:33
  Speaker 3: But you know, when you're driving down the highway trying
• 3:36
  Speaker 3: to get somewhere, you don't necessarily want to get off
• 3:39
  Speaker 3: the beaten path. And hey, our president, for all of
• 3:44
  Speaker 3: his pluses and minuses when it comes to dietary habits,
• 3:50
  Speaker 3: he's not really the.
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  Speaker 5: One you want to be emulating, is he.
• 3:54
  Speaker 1: I know, did you see like RFK you know, he's
• 3:57
  Speaker 1: going through his whole inquiry whatever is going on there, right,
• 4:01
  Speaker 1: And that's right, That's that's right. And it's like, hey,
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  Speaker 1: my boss likes that kind of food. He likes a
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  Speaker 1: fast food cheeseburger with a diet coke, you know. So
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  Speaker 1: he actually brought that up today during all the questioning
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  Speaker 1: from senators and whatnot. So yeah, I mean, look, there's
• 4:21
  Speaker 1: a there's a place for everyone, and everyone wants to
• 4:24
  Speaker 1: eat clean. The reality is is an economic structure to
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  Speaker 1: eat and clean. Everyone knows this. There's a camp of
• 4:30
  Speaker 1: people who go to Whole Foods, and there's a camp
• 4:32
  Speaker 1: of people who can't afford it at all. Organic eating
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  Speaker 1: clean is a lifestyle and you really can't put a
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  Speaker 1: price tag on it because it is. It's actually an
• 4:42
  Speaker 1: expensive lifestyle and you just have to say, look, I'm
• 4:45
  Speaker 1: disciplined and this is what I'm going to eat. There
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  Speaker 1: are brands for everyone. What we're seeing though in the
• 4:51
  Speaker 1: food space post COVID is that inflation has really taken
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  Speaker 1: a huge bite out of restaurants tour profitability. And I
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  Speaker 1: don't care if your white tablecloth or quick service, it
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  Speaker 1: doesn't matter to me. You're feeling the pain post COVID
• 5:08
  Speaker 1: of increased labor expenses, increased cost of goods, supply chain disruption.
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  Speaker 1: There are restaurants who actually ran promotions and ran out
• 5:18
  Speaker 1: of the product, Like you don't want to run out
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  Speaker 1: of a product when you're doing a promo. I mean,
• 5:22
  Speaker 1: that's it's not a bragging right exactly. I mean you
• 5:26
  Speaker 1: could say it was so popular, ran out right, but
• 5:28
  Speaker 1: you're losing money. So there's been a lot of issues
• 5:31
  Speaker 1: post COVID in the food space. And I also believe
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  Speaker 1: that food is a very expensive endeavor with a very
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  Speaker 1: low return. And I'm talking about what I believe is
• 5:42
  Speaker 1: single digit net and I have really no interest in
• 5:45
  Speaker 1: businesses of the single digit net. Yeah, I mean they
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  Speaker 1: killed it.
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  Speaker 5: They killed it, uh.
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  Speaker 1: I mean inflation has absolutely killed it. I think if
• 5:55
  Speaker 1: you look at inflation, if you look at supply chain,
• 5:57
  Speaker 1: if you look at cost of goods, if you look
• 5:59
  Speaker 1: at increased their rent, if you look at their increase
• 6:02
  Speaker 1: in their insurance, everything in that world has gone up exponentially.
• 6:08
  Speaker 1: And yeah, well that's the issue, and that's why AI.
• 6:11
  Speaker 1: The only the talk now in our industry is the
• 6:14
  Speaker 1: future of a QSR will have no seating. There is
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  Speaker 1: no value proposition to seating, there will be no seating.
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  Speaker 1: It will be an inline space or drive through, and
• 6:25
  Speaker 1: it's grab and go. That's it. Grab and go, order
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  Speaker 1: on the app, come in, grab your food and leave
• 6:31
  Speaker 1: and eat it elsewhere. And it's going to be all
• 6:34
  Speaker 1: AI driven. So either app where you ordered it. If
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  Speaker 1: you do walk into the brick and mortar location, you'll
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  Speaker 1: probably end up facing a kiosk and place your own
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  Speaker 1: order and someone will either yell your name or just
• 6:45
  Speaker 1: your bag will just appear in a window. I'm seeing
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  Speaker 1: it now. Already in Florida and Western Popeyes, inline space
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  Speaker 1: didn't speak to a soul. There were flat screen tea monitors.
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  Speaker 1: You place your own order and leave.
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  Speaker 4: No, it's around the app, or you order on the app.
• 7:00
  Speaker 1: That's right, that's where we're headed.
• 7:02
  Speaker 3: You order on the app and they say hello, and
• 7:04
  Speaker 3: you're like, somebody talking to me. But you know, Starbucks
• 7:09
  Speaker 3: trying to pull this, or they tried to pull it,
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  Speaker 3: but they misread their place in the community, you know,
• 7:15
  Speaker 3: because you go into a Starbucks now they're brightly lit, nos,
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  Speaker 3: the's no warmth. They're trying to discourage people from hanging
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  Speaker 3: out there socializing, and I think it's been to their detriment,
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  Speaker 3: not to mention the fact they got this rewards program,
• 7:32
  Speaker 3: which I call it the customer disloyalty program, because they
• 7:35
  Speaker 3: keep cutting it back and cutting it back. And I
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  Speaker 3: call it the inflation Cafe because their prices have increased
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  Speaker 3: way beyond the stated rate of inflation and they're failing
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  Speaker 3: at it right.
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  Speaker 5: Business is going down.
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  Speaker 3: It's not just inflation, it's lack of warmth and their locations.
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  Speaker 1: I hear you, and I get all that with not
• 7:59
  Speaker 1: a fan of the brand. Quite frankly, I don't even
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  Speaker 1: think they really have that great of a product and
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  Speaker 1: they charge a premium for it. They have lipped the
• 8:07
  Speaker 1: script on what made them successful. And I think a
• 8:10
  Speaker 1: lot of brands forget where they came from, and they
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  Speaker 1: forget how they became so successful. You know, this is
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  Speaker 1: a brand that I felt like they were America's you know, restroom.
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  Speaker 1: Now they want to charge you know all these things. Well, yeah, yeah,
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  Speaker 1: you had locations on every street corner and people would
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  Speaker 1: come in, pop in, use the restroom, buy a cup
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  Speaker 1: of coffee, tea, or a little snack, and leave. So
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  Speaker 1: I agree with you. The experiential part of business. Brick
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  Speaker 1: and mortar is in question. It really is. And then
• 8:38
  Speaker 1: look at Dutch Brothers, look at Ziggy's, look at all
• 8:40
  Speaker 1: these other brands in the coffee space. They're just sitting
• 8:43
  Speaker 1: in the middle of a parking lot and it's drived
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  Speaker 1: through only zero experience. It's all about rice, right, and
• 8:49
  Speaker 1: it's all about a good product. And there's nothing with
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  Speaker 1: leather back chairs, there's no Wi Fi like they reversed
• 8:58
  Speaker 1: all that. So if you look at Scooters, if you
• 9:01
  Speaker 1: look at Dutch Bros. If you look at Ziggy's, you know,
• 9:04
  Speaker 1: these brands scattered across the country, totally different business model,
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  Speaker 1: and their unit economics are enviable and the price is right,
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  Speaker 1: and that's what people want right now. People have price
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  Speaker 1: increase fatigue, they really do. They're done with the price increases.
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  Speaker 1: They're just they're voting, as they say, with their feet
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  Speaker 1: and they're voting with their wallet and they're saying absolutely not,
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  Speaker 1: I'm moving on. So the restaurant space is somewhat in trouble,
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  Speaker 1: if you will, white tablecloth, definitely fast casual. Different story.
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  Speaker 3: So yeah, and then it's this thing called the third place,
• 9:41
  Speaker 3: which refers to a physical location outside of your home,
• 9:45
  Speaker 3: which is first place office and still go to one
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  Speaker 3: which is second and it's like a place where people
• 9:52
  Speaker 3: go to socialize and connect with others. And you know,
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  Speaker 3: after COVID you would think, Wow, everybody wants to do that,
• 10:01
  Speaker 3: but diminishing. So getting away from food, we talked about
• 10:06
  Speaker 3: top trends last time you were on.
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  Speaker 5: What has changed, if anything? They are We talked about.
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  Speaker 3: Healthcare, pet care, handyman, home services. We're still looking there
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  Speaker 3: is there more entrance into that area.
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  Speaker 1: We yeah, are top. Just as a quick recap on
• 10:26
  Speaker 1: the categories that we tend to focus on, You and
• 10:29
  Speaker 1: I spent some time on AI and Amazon and Amazon
• 10:33
  Speaker 1: and AI proofing your business. We talked about anything evolving tools.
• 10:37
  Speaker 1: We refer to it as a category. The feminization of
• 10:40
  Speaker 1: men in America right where sperm count has dropped, testosterone
• 10:44
  Speaker 1: levels have dropped, that a lot of these people, young
• 10:47
  Speaker 1: people can't have babies, many have ed because of these issues.
• 10:51
  Speaker 1: It's a war on men. And we talk about why food.
• 10:55
  Speaker 1: I think food has a lot to do with why
• 10:57
  Speaker 1: there's a war on men and elly boys. Yeah, and
• 11:01
  Speaker 1: that's actually what you said. Yeah, and it's like, okay,
• 11:04
  Speaker 1: how did we get here? Franchises are now backfilling and saying, hey,
• 11:08
  Speaker 1: we have solutions to some of these societal problems. We
• 11:12
  Speaker 1: have testosteronotherapy. Most men can't use tools any longer. The
• 11:16
  Speaker 1: tool category or the service industry is a massive market
• 11:21
  Speaker 1: to be in. I argue that if anyone got involved
• 11:24
  Speaker 1: in HVAC, plumbing, electrical, anything evolving the home structure, you're
• 11:30
  Speaker 1: going to win. That's just my attitude. We have shit
• 11:33
  Speaker 1: on the trades far too long, and there's now a
• 11:37
  Speaker 1: huge gap missing with people who can. Actually there's no
• 11:42
  Speaker 1: craftsmen anymore. I mean, please that those days are over
• 11:45
  Speaker 1: and we need to get back to that where we
• 11:46
  Speaker 1: start to embrace the trades, encourage our kids that don't
• 11:50
  Speaker 1: want to go to college, go to a trade, go
• 11:51
  Speaker 1: to a vocational school, become a welder, be you know,
• 11:54
  Speaker 1: fix the infrastructure, all these things that think are huge.
• 11:57
  Speaker 1: Next is, as I said, pats and animals, huge category,
• 12:00
  Speaker 1: one hundred plus billion dollar market cap, whether you're training dogs,
• 12:03
  Speaker 1: grooming dogs, boarding them, daycare, retail, ton of money to
• 12:08
  Speaker 1: be made in that. We talked about the graying aging
• 12:12
  Speaker 1: of America and people could capitalize off of this massive
• 12:16
  Speaker 1: baby boomer population that is turning seventy to eighty every
• 12:19
  Speaker 1: single day in the thousands in this country, whether it
• 12:23
  Speaker 1: be mobility, or whether it be just transportation, or whether
• 12:28
  Speaker 1: it be assistant living through residential real estate. We didn't
• 12:32
  Speaker 1: speak much about another huge trend, which is child enrichment.
• 12:36
  Speaker 1: Anything involving services removed from public schools. The public schools
• 12:41
  Speaker 1: have failed miserably, and I think that art is missing,
• 12:45
  Speaker 1: and the stems are the science technology engineering at math,
• 12:49
  Speaker 1: and I think music is missing. And again, franchises are
• 12:53
  Speaker 1: backfilling and providing these services inside the public school. It's
• 12:58
  Speaker 1: not like you're creating a brand, you're down the street.
• 13:00
  Speaker 1: These services operate inside the public school system. The reason
• 13:04
  Speaker 1: that the schools are killing it but yet embracing it
• 13:07
  Speaker 1: from a third party is there's no tenure, there's no pension,
• 13:10
  Speaker 1: there's no medical benefits, there's no HR none of that.
• 13:13
  Speaker 1: So they're like, Okay, you want to operate a franchise
• 13:16
  Speaker 1: in the school for music and art, no problem, but
• 13:18
  Speaker 1: we are not going to provide it through you know,
• 13:22
  Speaker 1: through the city or through the local municipality. So I
• 13:25
  Speaker 1: also see a huge move. You know, I've been in
• 13:29
  Speaker 1: the gym business for years. Of my business partner, Justin
• 13:31
  Speaker 1: and we've all often said what the client really wants
• 13:34
  Speaker 1: is just a pill. Nobody really wants to be there.
• 13:36
  Speaker 1: They just want to pill. They want to lose weight,
• 13:38
  Speaker 1: be done with it. Well, that that time has come,
• 13:41
  Speaker 1: with semi glue tides, we're starting to see money moving
• 13:46
  Speaker 1: away from traditional When I say traditional gyms, I'm talking
• 13:49
  Speaker 1: about treadmills, strength training equipment, just what we call me
• 13:54
  Speaker 1: too products. Every gym has that. It's like me too,
• 13:57
  Speaker 1: Hey does your gym have treadmills? Me too, Like we
• 13:59
  Speaker 1: all have millsen strength training equipment. Those gyms, in my opinion,
• 14:03
  Speaker 1: are are going to grossly underperform in an era of
• 14:06
  Speaker 1: all these scientific achievements with weight loss like ozepic, wagovi right,
• 14:15
  Speaker 1: the semiglue tides that GLP disruptors, people are losing weight
• 14:18
  Speaker 1: for doing nothing, like literally doing nothing. So we also
• 14:23
  Speaker 1: live in a time where we have a tea and
• 14:26
  Speaker 1: osprey and you have Huberman teaching people how anti aging, biohacking, right,
• 14:33
  Speaker 1: your sicania rhythm, just all these different things that people
• 14:38
  Speaker 1: can do to get centered, to get balanced, to increase
• 14:42
  Speaker 1: their tests that we just talked about testosterone to increase it,
• 14:45
  Speaker 1: you know, natural lights so there's so much going on
• 14:47
  Speaker 1: in the biohacking space, and I think it would become
• 14:50
  Speaker 1: even more popular in this administration if RFK gets you know,
• 14:56
  Speaker 1: gets the top job.
• 14:58
  Speaker 3: You know, my prediction is if he doesn' get it,
• 15:00
  Speaker 3: someone else will get it, who they hate worse, who
• 15:03
  Speaker 3: will actually have more impact because they'll be a scientist.
• 15:06
  Speaker 3: But hey, what about if we come up with a
• 15:09
  Speaker 3: franchise here, Cliff, where we call it a remasculization, where
• 15:14
  Speaker 3: we teach guys how to change tires, how to change
• 15:18
  Speaker 3: the oil on their car, how to do you know,
• 15:22
  Speaker 3: minor household repairs like changing a lamp or putting in
• 15:28
  Speaker 3: a switch, or you know, changing light bulbs.
• 15:32
  Speaker 1: Isn't it scary like we've gone so backwards with these topics.
• 15:38
  Speaker 1: When you and I were growing up and went through school,
• 15:41
  Speaker 1: I was in welding wood shop, I was in home economics.
• 15:46
  Speaker 1: I made breakfast, I learned how to break an egg,
• 15:48
  Speaker 1: I learned how to sew, I made pillows. I mean,
• 15:52
  Speaker 1: we did all this stuff that just killed all of it,
• 15:55
  Speaker 1: anything that made a student a productive human being and
• 15:59
  Speaker 1: a good member of society. They eliminated all those things.
• 16:04
  Speaker 1: It's really frightening. So what you're talking about is like
• 16:08
  Speaker 1: getting back to the basics. Listen, we just needed an
• 16:11
  Speaker 1: executive order to restate that there are only two genders.
• 16:15
  Speaker 1: So when you're talking this kind of nonsense, we're going back.
• 16:18
  Speaker 3: Wait wait, there's only two. I thought that Biden said
• 16:22
  Speaker 3: they were at least two.
• 16:24
  Speaker 1: Yeah. Yeah, I mean, come on, we're going We're going
• 16:28
  Speaker 1: in the wrong direction. We've got to get back to again.
• 16:30
  Speaker 1: Common sense isn't so common. You've got to get back
• 16:32
  Speaker 1: to the basics. And again, we have these cooking classes,
• 16:36
  Speaker 1: the cooking academies for the kids to give them life skills.
• 16:40
  Speaker 1: So I agree with everything you just said. There needs
• 16:42
  Speaker 1: to be first of all, we have to acknowledge the
• 16:45
  Speaker 1: fact that our kids are not prepared for life. All right.
• 16:47
  Speaker 1: So once we get there, then the parents can start
• 16:50
  Speaker 1: to say, all right, I need I need to help
• 16:52
  Speaker 1: this child. I need to give them the skill sets
• 16:54
  Speaker 1: to be able to go to college, I live on
• 16:56
  Speaker 1: their own and do laundry. I'm amazed at the stories
• 16:59
  Speaker 1: and my goals, my friends, my family of how ill
• 17:02
  Speaker 1: prepared the generation is to deal with life.
• 17:07
  Speaker 5: Yeah, well that's a whole nother story.
• 17:10
  Speaker 3: And I was guilty not showing my kids, my son
• 17:13
  Speaker 3: in particular, how to do this stuff. I mean, you
• 17:17
  Speaker 3: come into my house and I've got like, you know,
• 17:20
  Speaker 3: closets that's like loaded with tools, and you know, there
• 17:25
  Speaker 3: are things that I can't do or that I won't do,
• 17:29
  Speaker 3: like I'm not going to do plumbing, although I did
• 17:31
  Speaker 3: change a flapper on my toilet and that was a disaster,
• 17:38
  Speaker 3: but eventually I got it. Now, I say, when I
• 17:42
  Speaker 3: can actually change a toilet, then I'll know that my
• 17:46
  Speaker 3: handyman skills are there.
• 17:50
  Speaker 1: Right, I feel blessed. I happen to be extremely handy woodworking.
• 17:55
  Speaker 1: I've done some electrical, I've done a little bit of everything.
• 17:59
  Speaker 1: I actually enjoy and I find it therapeutic and rewarding
• 18:04
  Speaker 1: to not have to call anyone, you know, to do
• 18:06
  Speaker 1: the work. So I think it's great. And again, franchising
• 18:10
  Speaker 1: provides a place for everyone. There is an asset class
• 18:15
  Speaker 1: for everyone, and you know, listeners should say, hey, whether
• 18:18
  Speaker 1: you put in your child or grandchild or yourself in business,
• 18:22
  Speaker 1: we provide all these different services.
• 18:23
  Speaker 5: So let's put on your hat.
• 18:26
  Speaker 3: If you were looking to buy a franchise now and
• 18:30
  Speaker 3: you can get as specific as you want.
• 18:32
  Speaker 5: What area would it be in?
• 18:34
  Speaker 4: Is there a particular company and how much would you
• 18:37
  Speaker 4: put into it?
• 18:38
  Speaker 1: Interesting? Great question?
• 18:40
  Speaker 5: All right, So.
• 18:42
  Speaker 1: I view myself as a very disciplined investor, and what
• 18:45
  Speaker 1: I look for are asymmetrical investments, meaning I look for
• 18:51
  Speaker 1: a really low investment. Really low. To me, enfranchising is
• 18:54
  Speaker 1: sub two hundred thousand. So if I could find a
• 18:58
  Speaker 1: business that is under two hundred thousand, again, we're back
• 19:01
  Speaker 1: to that asymmetrical comment. I want a very short ramp
• 19:05
  Speaker 1: to break even. Short ramp for me is three to
• 19:08
  Speaker 1: six months maximum maximum three to six months to break even.
• 19:12
  Speaker 1: And when I say break even, I don't mean getting
• 19:14
  Speaker 1: my two hundred grand back. I mean stop the bleeding
• 19:17
  Speaker 1: of my current burn rate to own the business.
• 19:20
  Speaker 5: Right.
• 19:20
  Speaker 1: Everyone always views break even as ROI versus breaking even
• 19:25
  Speaker 1: on your burn rate nextll, So you're that's right, that's right.
• 19:30
  Speaker 1: The business needs to cash flow enough money to cover
• 19:32
  Speaker 1: my current burn rate of the business. If I'm spending
• 19:35
  Speaker 1: five thousand dollars a month to keep this business operating,
• 19:38
  Speaker 1: it needs to be making five thousand of me to
• 19:39
  Speaker 1: break even. My ROI is my two hundred grand. I'll
• 19:43
  Speaker 1: deal with that under a separate KPI, a different, whole,
• 19:47
  Speaker 1: different metric. Next, I want as few employees as possible.
• 19:52
  Speaker 1: Love people, but employees are a problem, and they're one
• 19:55
  Speaker 1: of the thousinesses their liability. We have a lazy workforce,
• 20:00
  Speaker 1: have a culture now that just doesn't really want to hustle,
• 20:03
  Speaker 1: and we have the kind of a I would say,
• 20:07
  Speaker 1: the worst labor market in the history of the country
• 20:10
  Speaker 1: at the current moment. So I like businesses that don't
• 20:13
  Speaker 1: require a lot of employees, and if they do that,
• 20:14
  Speaker 1: it needs to be unskilled labor that I could quickly replace
• 20:18
  Speaker 1: and train and put into the field and do their thing.
• 20:21
  Speaker 1: Next is I do not like inventory. I don't like
• 20:23
  Speaker 1: my money sitting on shelves. I do not like account receivables.
• 20:26
  Speaker 1: I want cash paid to demand on service. I do
• 20:29
  Speaker 1: like either contractual recurrence or built in recurrence. Meeting a
• 20:36
  Speaker 1: gym is a contractual recurring fee. Hey sign here, La Fitness,
• 20:40
  Speaker 1: pay me thirty dollars a month for as long as
• 20:42
  Speaker 1: you're here. Great, it's a contract. I pay you monthly.
• 20:45
  Speaker 1: Hair nails, makeup, write other things. It's a built in
• 20:49
  Speaker 1: recurring revenue stream. Right, hair grows, it gets cut, grows again,
• 20:52
  Speaker 1: it gets cut. There's things like lawn tree. The things
• 20:55
  Speaker 1: like that are built in recurring revenue models. So I
• 20:58
  Speaker 1: do like recurring revenue, whether it's contractual or if it's
• 21:02
  Speaker 1: just built in inherently to the business model. I like
• 21:06
  Speaker 1: highly scalable, and everyone loves to say highly scalable, like
• 21:10
  Speaker 1: six hundred thousand dollars. Franchises are not highly scalable. You
• 21:14
  Speaker 1: need six hundred grand every time you scale the business.
• 21:18
  Speaker 1: That isn't highly scalable, especially if it needs thirty employees
• 21:22
  Speaker 1: as well. That's not highly scalable.
• 21:23
  Speaker 5: We got to go into debt every time you that's.
• 21:26
  Speaker 1: Right, expensive debt. So I like highly scalable business, and
• 21:30
  Speaker 1: I put emphasis on highly scalable, meaning I could just
• 21:34
  Speaker 1: maybe buy another van. I could buy a vehicle. I
• 21:37
  Speaker 1: could hire a tech I could hire maybe two employees
• 21:39
  Speaker 1: in a vehicle. That's my definition of scaling the business.
• 21:43
  Speaker 1: Keep the marketing machine on, hire two employees, get another vehicle,
• 21:47
  Speaker 1: and send them out to perform a sell a product,
• 21:51
  Speaker 1: or provide a service. So I do and I have
• 21:54
  Speaker 1: no interest. This is important. I have no interest in
• 21:57
  Speaker 1: businesses with single digit razor. Then march none. If I
• 22:01
  Speaker 1: can't net fifteen to twenty plus percent to the bottom line,
• 22:05
  Speaker 1: I'm out. So when I talk about waiting, if you said, okay,
• 22:08
  Speaker 1: that was a lot, I need you to wait them,
• 22:12
  Speaker 1: the margin is going to be heavily weighted above everything.
• 22:15
  Speaker 1: If you said, if you checked every box right now
• 22:17
  Speaker 1: and said, oh I've got everything you just said with
• 22:20
  Speaker 1: an eight percent net, I'm probably out. I just don't
• 22:22
  Speaker 1: see myself doing it. I mean, it's it's just there
• 22:25
  Speaker 1: is no room for error in eight percent. And that's
• 22:28
  Speaker 1: and that circling back, and that is where the food
• 22:31
  Speaker 1: industry finds themselves. They find themselves spending a million dollars
• 22:34
  Speaker 1: to get a food concept open with a five to
• 22:37
  Speaker 1: eight percent net. It's just not worth it to me.
• 22:40
  Speaker 5: Yeah, and you want to avoid rent right.
• 22:44
  Speaker 1: In this example, yeah, under two If that's thank you
• 22:48
  Speaker 1: for saying that, Carrie, Because when you're sub two hundred grand,
• 22:52
  Speaker 1: you're absolutely not brick and mortar franchising. You're not paying rent,
• 22:56
  Speaker 1: You're not in class a space next to whole food
• 23:00
  Speaker 1: or next to a large grocery chain. You're not in
• 23:02
  Speaker 1: a strip mall. You're operating out of a office, which
• 23:05
  Speaker 1: is cheap because nobody works in a storage unit, bengo
• 23:09
  Speaker 1: or mixed multi use industrial park exactly, a flex space exactly.
• 23:14
  Speaker 3: Yeah, yeah, cheapest rent. You don't want location the centric business.
• 23:19
  Speaker 3: So what does that leave us with here?
• 23:21
  Speaker 1: It leaves us with a ton of business is the
• 23:22
  Speaker 1: problem with most of the audience. They go, Oh, I
• 23:25
  Speaker 1: was always told it takes money to make money. That's
• 23:28
  Speaker 1: just not necessarily true. Non brick and mortar brand sub
• 23:31
  Speaker 1: two hundred grand can change your life, and you can
• 23:35
  Speaker 1: scale them into the millions, so you don't have to
• 23:39
  Speaker 1: spend a half a million dollars to make a living.
• 23:41
  Speaker 1: You could spend under two hundred thousand and make an
• 23:44
  Speaker 1: enviable living and one that you've never had before, you know.
• 23:47
  Speaker 3: So one I always thought about and I haven't really
• 23:51
  Speaker 3: thought of doing it. But you know, you got all
• 23:54
  Speaker 3: these airbnbs here, and you know, generally the owner, especially
• 24:00
  Speaker 3: if they're remote, cannot manage it effectively. The biggest, the
• 24:05
  Speaker 3: biggest problem, and I know a bunch of Airbnb people,
• 24:09
  Speaker 3: the biggest problem that they encounter is actually cleaning, getting
• 24:17
  Speaker 3: high equality cleaning service like you would get at a
• 24:21
  Speaker 3: top notch hotel, and.
• 24:23
  Speaker 5: One little specadert will ruin your rating as an Airbnb host.
• 24:28
  Speaker 1: So true, it's the truth. It's a tough space residential cleaning.
• 24:31
  Speaker 1: No one's ever happy. The client is always in play.
• 24:35
  Speaker 1: They're never happy, Like, there's always movement in that space.
• 24:39
  Speaker 1: And it's like you go to a bank. You go
• 24:40
  Speaker 1: to a bank, all the bank like's just say old
• 24:42
  Speaker 1: banks sock right, Like they're all basically the same. These
• 24:45
  Speaker 1: large banks they do all their crazy things. Once you
• 24:49
  Speaker 1: start setting up all your bill pay they have created
• 24:52
  Speaker 1: very sticky relationships. Are you happy at your local bank? No,
• 24:56
  Speaker 1: I know you're not happy because you're getting paid nothing.
• 24:59
  Speaker 1: There's really no value proposition at a local bank. They
• 25:02
  Speaker 1: really never know what they're doing behind the counter. They
• 25:04
  Speaker 1: can't get you what you need. A lot of times
• 25:07
  Speaker 1: I walk into a local bank, it's just fifteen offices empty. Yeah, Like,
• 25:10
  Speaker 1: I don't even know what they're there for. I guess
• 25:12
  Speaker 1: it's the vault and the tellers.
• 25:14
  Speaker 5: They don't do cash anymore, right, what do they gass?
• 25:18
  Speaker 3: You go to the ATM and yeah, I don't quite
• 25:22
  Speaker 3: get the whole concept of banking.
• 25:24
  Speaker 5: It's exactly dated.
• 25:26
  Speaker 1: But nobody leaves. But no one leaves them where In
• 25:29
  Speaker 1: residential cleaning, there is no sticky relationship. There's no client retention. Strategy.
• 25:34
  Speaker 1: The client is never happy. There's always dust in the corner.
• 25:38
  Speaker 1: They never wipe something down, they always break something. They
• 25:41
  Speaker 1: always come late or don't show up at all. That customer,
• 25:45
  Speaker 1: to your point, is always moving. They're always ready to
• 25:49
  Speaker 1: be acquired by the new cleaning company. That is a
• 25:53
  Speaker 1: very My business partner and I owned a high end
• 25:56
  Speaker 1: residential cleaning company and Palm Beach. We were classified as
• 26:01
  Speaker 1: master franchise oors for this brand and it was probably
• 26:06
  Speaker 1: the worst business that we ever invested in, and could
• 26:10
  Speaker 1: not wait to get that people.
• 26:12
  Speaker 5: It's all people. You don't have.
• 26:13
  Speaker 3: It was measure and you leave one speck of dust
• 26:18
  Speaker 3: and you got a picky customer and you're dead man walking.
• 26:22
  Speaker 5: You're done. They're finished with you. I know myself.
• 26:25
  Speaker 3: You know I had the same cleaning person for years already.
• 26:29
  Speaker 3: But you know so many times I said, man, the
• 26:34
  Speaker 3: only good thing I could say about her is she
• 26:35
  Speaker 3: doesn't steal that.
• 26:37
  Speaker 1: You know, for everyone listening is saying, wow, I really
• 26:40
  Speaker 1: like that space. I would challenge you with this thought,
• 26:43
  Speaker 1: if you really wanted to do residential cleaning that has
• 26:46
  Speaker 1: a very challenging retention rate and an unreasonable homeowner as
• 26:51
  Speaker 1: your customer consider commercial cleaning. You could scale commercial cleaning
• 26:56
  Speaker 1: way faster. Name one time, Carrie, you were upset at
• 27:00
  Speaker 1: your corporate office because the cleaning company didn't do No
• 27:03
  Speaker 1: one seems to care in the commercial environment.
• 27:07
  Speaker 3: Really, offices are filthy as a rule. I mean, if
• 27:11
  Speaker 3: you tried to clean an office the way you'd clean
• 27:14
  Speaker 3: your house, like moving stuff around and vacuuming under there, you'd.
• 27:18
  Speaker 5: Be totally disgusted, you know.
• 27:20
  Speaker 3: But you know, as long as it appears to be
• 27:23
  Speaker 3: clean on the it's just surface cleaning. So all right,
• 27:27
  Speaker 3: So what's your top pick after all that criteria tell us?
• 27:31
  Speaker 1: Yeah, well, I mean my top pick in that category,
• 27:33
  Speaker 1: which I just said, if you said right now you
• 27:35
  Speaker 1: got to pick an industry, it would be home services.
• 27:38
  Speaker 1: I think home services has a ten twenty year runway
• 27:41
  Speaker 1: before it's disrupted by optimists and you know what I'm
• 27:44
  Speaker 1: talking about the AI bots at Tesla, and I think
• 27:48
  Speaker 1: you have ten twenty year runway before home services, which
• 27:52
  Speaker 1: means feet on the street, you know, fixing your HVC system,
• 27:57
  Speaker 1: fixing something whether it's a roof or whether it's striywall repair,
• 28:01
  Speaker 1: whether it's plumbing or flooring. I think that the home
• 28:04
  Speaker 1: services category is huge. I think it's also important to
• 28:08
  Speaker 1: mention to the audience that no one expects you to
• 28:12
  Speaker 1: do the work. And this is a huge issue in
• 28:15
  Speaker 1: franchises that people go they sound like great businesses and
• 28:18
  Speaker 1: they're making great money, like the I have a custom
• 28:21
  Speaker 1: closet franchise does nine million a year. Wow, No one
• 28:26
  Speaker 1: knows this. They all think the money's in food or fitness. No,
• 28:31
  Speaker 1: nine million doing custom closets, right, So that people go, man,
• 28:35
  Speaker 1: it sounds sounds like a great Probably that's probably going
• 28:38
  Speaker 1: to be like ten. I'd say it's going to be
• 28:40
  Speaker 1: by ten. So it's very labor intensive.
• 28:41
  Speaker 5: You have a.
• 28:42
  Speaker 1: Massive you're doing custom woodworking in a large warehouse facility,
• 28:48
  Speaker 1: a lot of it's prefab a lot of it could
• 28:50
  Speaker 1: be ordered through third party, and you still have your
• 28:52
  Speaker 1: installation crew to come into your home, which you know,
• 28:55
  Speaker 1: once you enter someone's home, right, the hair in the
• 28:58
  Speaker 1: back of their neck stands up and it's like watch that.
• 29:00
  Speaker 1: Take your shoes off, do this rust the rugs don't
• 29:03
  Speaker 1: scratch the walls, So you have all that to deal with.
• 29:06
  Speaker 1: But again, nine million a year as an average, not
• 29:10
  Speaker 1: the top twenty five percent your average, So it's really
• 29:13
  Speaker 1: an incredible revenue number. I do. I love home services
• 29:17
  Speaker 1: for those reasons. And it's not just me. Private equity
• 29:20
  Speaker 1: firms are gobbling up all home services brands that they
• 29:24
  Speaker 1: could get their hands on because they see what's happening
• 29:27
  Speaker 1: not only in society, but they see what's happening with
• 29:30
  Speaker 1: AI and the disruption it will bring to white collar jobs. Like,
• 29:34
  Speaker 1: what do you want to invest in a graphic design company?
• 29:37
  Speaker 1: You're dead. You just don't know it yet. AI is gee.
• 29:40
  Speaker 1: I think I may have shown to me you. I
• 29:41
  Speaker 1: don't know if it did. We're working with Forbes right
• 29:43
  Speaker 1: now in a book called Beyond the Brand, and of
• 29:46
  Speaker 1: course this is Forbes. They have teams of people doing
• 29:49
  Speaker 1: artwork and graphic design, all this stuff. So they produce
• 29:53
  Speaker 1: some artwork for the cover of our book and we
• 29:55
  Speaker 1: were like okay. It was just okay, we want to
• 29:59
  Speaker 1: chatch EPD paid a premium for their service. We told
• 30:02
  Speaker 1: them we're in the franchise industry. We're writing a book.
• 30:05
  Speaker 1: This is the title, Unbelievable Unbelievable Results. So it's like
• 30:09
  Speaker 1: we're going with our We're going with our you know whatever.
• 30:12
  Speaker 1: One hundred and fifty dollars a month subscription with an
• 30:15
  Speaker 1: AI model versus hiring a quarter million dollar firm Forbes
• 30:21
  Speaker 1: to do this stuff. Listen, if you're writing code, if
• 30:25
  Speaker 1: you're a wordsmith, if you're doing copyright work, and man
• 30:29
  Speaker 1: like you're I think you're out of business. You just
• 30:32
  Speaker 1: don't know it yet. It's time to reinvent yourself.
• 30:34
  Speaker 5: Yeah, so the AI is really going to have an impact.
• 30:37
  Speaker 5: You know. When we have you on next time.
• 30:38
  Speaker 3: Cliff, we're going to talk about AI more and how
• 30:43
  Speaker 3: you AI proof or how you benefit from AI in
• 30:47
  Speaker 3: your franchise.
• 30:47
  Speaker 5: Just tell us where we find you. How do we
• 30:50
  Speaker 5: connect with you on the web.
• 30:51
  Speaker 1: Thank you phrenocity dot com, f r A no ci
• 30:56
  Speaker 1: t y dot com. They can reach me direct at
• 30:58
  Speaker 1: Cliff n at brnosity dot com.
• 31:01
  Speaker 3: All right, links in the show notes this interview on
• 31:04
  Speaker 3: Financial Survival Network dot com. We just asked when you
• 31:08
  Speaker 3: go there, you please sign up for your free newsletter
• 31:10
  Speaker 3: always like share, subscribe and all that good stuff. And
• 31:15
  Speaker 3: maybe this will be the year with the new administration
• 31:18
  Speaker 3: that we're no longer throttled or censored on a certain
• 31:22
  Speaker 3: platform that everybody watches. We can only cross our fingers
• 31:26
  Speaker 3: and hope. Cliff, we'll talk to you again soon. Any question, thanks, comments,
• 31:30
  Speaker 3: question for Cliff myself kl at Carrie LUTs dot com.
• 31:34
  Speaker 5: Cliff, we'll talk to you again soon.
• 31:35
  Speaker 2: All right, Well, thanks Kerrey, thanks for listening to Carrie
• 31:38
  Speaker 2: Letz's Financial Survival Network, your solution to today's trying times.
• 31:44
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• 31:48
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• 31:50
  Speaker 4: Now more than ever,