SPEAKER_02 0:22

We have a bunch of people here today. I think Tim as well. And then we have Chris and Kerr. And I think Justin just dropped off, so he might be popping back on. There he is. Um, Kevin, you've got a whole bunch of people here today that came to see you. Hi, Chris. Um, so thanks for being here today. I know you've done these in the past for everybody else that is. Um, I think we only have one new person on the call today. Um, but for everybody else, you guys know the drill. We're gonna let Kevin introduce himself. Kevin, if you can share with us what you were doing previous to Citywide, um, hi Jensen, and tell us a little bit about you know your location today, anything you want to talk about, kick it all off. And then um, everybody else should come prepared with their questions and they will start asking you their questions after that. Sound good?

SPEAKER_04 1:15

Sure. Hey, good afternoon. My name is Kevin McGrath. Uh, I am in the west side of Houston. So our franchise name is Houston West. My partners and I also own Pittsburgh, Pennsylvania. Uh, we are three former co-workers. We are all mechanical engineers by background that came from the oil and gas industry. Uh, our third and oldest partner uh was also in global management and did a lot of sales management. Uh, my middle-aged partner and myself, I got a lot of gray, but it's hard to believe, but I'm the youngest partner here uh by a little bit. And so both the middle-aged partner and myself were more operations focused, although we had sales management responsibility as well. Uh in excuse me, 2019, my partner Terry, so I can quit calling the old guy and the middle-aged guy. Terry is the middle-aged guy, John is the older gentleman. Uh, John had retired, he was Terry's direct supervisor. Uh, Terry did not like his life as much at our company anymore. So he decided to retire and pursue other things. He and I had stayed in touch. Uh, Terry and I were co-workers. Terry was my supervisor, John was both of our supervisors alternatingly. Uh, I handed John my letter of resignation when I resigned from our company and went to work for a competitor. Uh, we had just stayed close. So we started to look around at different franchises and different other business opportunities at that time. Uh, being frank, I was not in favor of a franchise in the initial look. Terry was. Uh, we looked through some other things and eventually we came to citywide as one of our top three options. Um, we had some decision criteria because we're nerds, and we had agreed on what that those criteria would be so that we could score each opportunity fairly and not get emotional about one thing or another. Because there was an ownership group, nobody wanted to really have an emotional connection to the idea that maybe we had brought along or that we had nurtured along more than any of the other folks. So we tried to be as fair as we could about what types of lifestyle, what types of business opportunities, what we didn't didn't want to do. Uh, so uh when City Midewide made it to the final three, we wound up doing the discovery days and the due diligence on different uh franchises. Probably what set us aside uh was Citywide, too, at least for me on my end of it, I can speak to the decision process. Um, one of our criteria was we did not want to personally manage a lot of entry-level employees. The next item was we did not want to carry a lot of overhead on a PL. We didn't want to carry a lot of balance sheet overhead. And the third item was we didn't we wanted to have recurring revenue that was uncapped. So as we looked into some of the franchise concepts, at least on my end, the ones where you had to, and this is no knock on anybody else, right? If you're looking at other things and you go do a God bless you, and I wish you the best of luck in whatever you do. But we didn't want to, what the famous one we always bring up was there was one where it's a dumpster concept that also has a bathroom on it. And you were so instead of hiring a the revolutionary market principle that this was going on was you used to have to call a dumpster guy and a uh urinal guy or a Portageon guy. Now you just call one guy and they do the dumpster and the Portigon and they're bolted together, right? But you had to buy, instead of it being a revenue requirement, it was actually independent of your own revenue, there was a purchase requirement, and you had to buy the dumpster Portageon combination from them, and you had to buy an escalating number year over year. So, if regardless of if you rented one of them zero or whatever, you were tied in to buy, and there's a few concepts out there if you're looking at different franchises. I'm sure you're gonna see ones like that. Um, there's other ones that are structured more like citywide where your revenue scales as do the royalties that you pay a franchise or scale. And so that was one of the things that kind of crossed us off as well. We wanted to not be on the hook to buy a bunch of I that that was the craziest one that I immediately said no to because you also had to have a big inflatable bladder full of human waste on a field somewhere that you rented and had to get it permitted and pumped and all this jazz. But there's a lot of ones out there, like there's different versions or variations on the moving pod idea, and they're you know, ours are smaller and more maneuverable, and we have a custom truck or whatever. But at the end of the day, you had to buy more X and it was divorced from what you were actually selling. So some of the other items out there, I'm sure you're gonna run into. So those are the three things that started us off or made us, you know, pointed us in this direction. Um, the other thing was when we visited the home office, we liked a lot of what we had heard. It was a different office at the time than what it is now, uh, which kind of speaks a little bit to the growth that the franchise has done. We were for reference, we are number 68 in the franchise uh sequence. And I think we're ladies, what is the number now? It's like 119.

SPEAKER_02 6:15

115, 115.

SPEAKER_04 6:18

So the first 68 took for what was the first year you sold a franchise?

SPEAKER_02 6:22

2001.

SPEAKER_04 6:24

So the first and and our other franchise in Pittsburgh, I think, is like 61 or something like that. It was weird, it was a weird numerical thing. But if it was it took from 01 to 2019 to sign 61, and then from whatever 2019 till now to catch the other 60. So that's a pretty pretty quick burn. Um, what do we think? So we started in 20, we signed in 2019, we started in 2020. Pittsburgh was a cold start, so we had no if there was never a citywide there, nothing. Houston West was uh a split territory from the larger Houston Territory, which was one of the original territories. I think Houston's like number five, or what I would have to double check that. But the original Houston was an early adopter of the citywide system. So in Houston, Texas, we had already uh recurring contract revenue, and Houston was it was a little more than financially neutral at that point. So it was throwing off what it was absorbing. Pittsburgh was a net consumer of startup costs. So the reason that we bought both was with the hope was to maintain the contract revenue in Houston and use it to offset the startup costs in Pittsburgh. I spent six months there with my partners to get that one off the ground, and then I moved back down here to run Houston. Our first day on the job was February of 2020, and in March of 2020, COVID uh hit. So we have we bought a commercial facility maintenance company and all the commercial facilities closed the following month. So um we did a lot of soul search and had a lot of hard discussions, but it turned out that that was across the network was one of the better growth years for citywide because of the nature of the services that the franchise provided. Specifically, the back then it was electrostatic disinfecting, and there was a lot of COVID-related cleaning and sanitizing going on. Unfortunately, being transparent with you, you couldn't buy any equipment. So, for the newbies out there, for the folks that had existing relationships that were already in the business, they had the EDT machines, electrostatic discharge uh cleaning machines and things of that nature. I drove to Norwalk, Ohio, and put four 55-gallon drums of sanitizer in the back of an F-250, drove back to Pittsburgh, dropped it off, and then drove to Texas with it. It was they were filling it up out of a barrel. Citywide got a deal where we bought a custom batch off that company and that supplier and drove it down. So it was an inauspicious start, I think, probably to our career. But uh, we are that far in now. I'm not that skinny, so we're eating. Uh the lights are on in here in case you can't see it. We have the internet. So I think we're growing according to prescription right now. Uh, our Pittsburgh location had a pretty big year of growth towards the end of the year last year. So they right now are a little bit larger than what we are in Houston, which was a major, uh, major win to get them up and running and going. And then in Houston, and the last uh five, well, from the beginning of May till the first of June, we will increase our monthly recurring revenue by 25%. So we are now dealing with all the good problems of a quick hiring. And that came uh, I'm not sure if you've talked to the other for any of the other franchisees, but uh NBD can be a hairy subject for some and a good subject for others. $60,000 of that growth came from it directly from an NBD account that was sold uh surprisingly and through very little effort on on our part, other than pricing approval. So we were thankful for that to kind of fall in our lap. Um so I think that's probably enough of me talking to start things off, unless there's specific questions um or anything that I missed from the ladies that you think I should be saying at this point. Um, I'll just open it up there. Rodney.

SPEAKER_05 10:12

Hey Kevin, nice to meet you. Thanks for the time today.

SPEAKER_04 10:15

Yeah, same.

SPEAKER_05 10:16

So uh I'm up in Buffalo. Um, so I kind of think about Buffalo and Pittsburgh as not two different cities. So I'm interested to hear your perspective from a cold start. Um kind of two questions. Number one, how long did it take from the cold start to get to break even in Pittsburgh? And then the NBD accounts you were talking about, were those in Pittsburgh or your Texas franchise?

SPEAKER_04 10:39

Okay. Um, so uh I I actually have you heard of Dressor Rand Corporation? No, I haven't. Well, uh the Western Tier of New York in Wellsville, Painted Post, and only I know Wellsville.

SPEAKER_05 10:53

Yeah, my brother went to Alfred State, so did my father.

SPEAKER_04 10:56

Okay. That my former employer got swallowed up by Siemens Dressor Rand. They were a turbo machinery manufacturer, and uh, I've spent a lot of time in your area of the country. It was it's enjoyable up there. So, and I like Josh Allen, but I don't root for you in the AFC because I'm from Pittsburgh. Um go Bills, got my bills up. So the the first question was about um how long it took Pittsburgh to break even. Yes. Uh Pittsburgh actually did a million dollars in their first 12 months of operation because we started in February, it crosses the imaginary, you know, annual tax line or whatever, but in 12 months. However, uh they had a large, they had a $40,000 a month account that they lost shortly after that. So when you when you're new, um you devote a lot of the resources to where you're making money because you're like, hey, you're paying me, I'm doing it, right? Within ethical reasons, you know, the integrity, blah, blah, blah, all that jazz. But if somebody's gonna pay you to do something, you're gonna do it and your business is gonna take that shape, right? You're gonna be like water, you're gonna surround it to continue making money and to self-perpetuate until you get the structure in place that you'll eventually want to have. Unfortunately, that business was lost, uh, not due to Pittsburgh, but due to some things that happened in some other locations. And now the business kind of so it took them a while to recover from that. I would say that Pittsburgh was about three years in by the time they hit, you know, truly broke even. But we planned on that also. We hired more heavily than what was recommended in terms of the sales side and the operation side. And there's a lot of um, you know, you all are looking at, I hope you're looking at other businesses besides this one. Otherwise, you should. Not that you shouldn't buy a citywide, but don't just look at one. When you're talking to owners and they're like, we were profitable here, we broke even there. I probably don't have to tell you, you know, does that count your wife's car? Does that count your car? You know, you're paying yourself a dollar, you're paying yourself a million, how did you finance your business? What are you throwing into that PL? For us, we paid ourselves each as managers, and all three of our partners paid ourselves the same wage. So we paid ourselves a car allowance, we paid ourselves a salary out of that. So when we say, you know, where whether Pittsburgh broke even or didn't broke break the broke even or didn't break even, we divided the costs from our we have a holding company that owns these two LLCs that operate, you know, the two operating companies. We rolled up our, you know, board of directors, even though we were general managers and sales directors there, cut that salary in half, paid our own health insurance, et cetera, out of that. So you might take that three years with a grain of salt, or you might consider that our company has broken even every year since we started with the exception of year one in the collective, because we only pay income taxes. We have two disregarded entities in case you guys are finance nerds. So the LLCs are disregarded entities and we pay uh federal income taxes at the holding company level. So our holding company is broke even every year, broken even every year, except for year one or exceeded break-even points. If that I don't mean to evade your question, but it took Pittsburgh to get rolling. Houston has never lost money. Uh, one year I think we lost like I don't know, a thousand dollars and we showed a thousand dollar loss in Houston, and it was because we wrote off a bunch of bad debt. And so we just that was the year we elected to write off the bad debt. You have all those startup costs that you'll be able to offset against future taxes when you go through there. So we went, we were originally a C corporation because we funded with a with our 401k through a Rob's rollover. Um, and you have to be a C Corp at that point. It was a good way to start a business, but later on in life, you know, through your evolution, you'll start to notice some limitations about what you can do from the double taxation perspective. So we rolled to an S corporation. We bought ourselves back out of the C corporation, we bought all of our shares and then rolled into an S Corp here. So we utilized, we we rolled to we bought ourselves out of the Robb's rollover two years ago, and then we had some unused startup losses still from our original taxes that we utilized last year, and then this year we became the S Corporation. So um that was that first part of it. And if you want to get further into the weeds, yeah, I don't want to put everybody to sleep, but if if there's other questions you have, just give me a call. Uh the second question was on the NBD accounts or those in Pittsburgh or what or West Texas?

SPEAKER_05 15:23

The one I just talked about, or the Yeah, I think you said it was 60,000 a month in it that you got from the MBD.

SPEAKER_04 15:30

Yes, so that's in Houston. Ironically, uh it we were we were given a verbal by the client via our NBD team that Pittsburgh had won their location. We were two of, I'm gonna make up a number, we were two of eight locations in the country that were, you know, well, had the chance to to bid on these things. And uh we were told Pittsburgh was gonna win it. So, you know, my partners, you know, you couldn't have driven a straight pin up their rear end with a sledgehammer. They were getting ready to staff a large job, right? And so I was down here Cadillacing, just watching them run and scurry around. And then the at for what for reasons unknown at the national level, they pulled that one. And I got a phone call, I don't know, uh three weeks ago from the NBD. His name is Austin, so I can quit calling him this guy or that guy or whatever's name's Austin Ernst. Called and he goes, Hey, uh, you you probably want to pick up. He texted me, he goes, You probably want to pick up the phone call I'm about to give you. He's like, Pittsburgh didn't get it, but Houston did, and you have to start in a month. So we're like, Whoop, all right. Uh, so that came through to us. And we also in the past have gotten larger NBD jobs as well. That's what you would call a you know, that we might be splitting too many hairs here, but in in internal kind of uh acronyms, that's a top-down job. So that's where the folks locally here, my team that's out there trying to connect with our neighbors on a daily basis, they really didn't have anything to do with that job. And if you started your own facility company, if you did, you know, Rodney Resdorf Incorporated up in Buffalo, you wouldn't have had a chance to bid on that job because they're not talking to Aldi's not talking to you know 87 people in 50 states. They're talking to four companies that can manage the whole portfolio. So that's that's a top-down job. And then we have other jobs that are kind of called preferred jobs where there's a master services agreement established. So the rules and the tools are in place, what our payment terms are, limits of liability, how we work with one another. Maybe there's a scope of supply agreed upon at a national level, but we at the local level have to go out there and make those connections with local management teams. And they have the we're on their approved vendor list, is probably a good way to put it. So that's I draw a differential between those two. This this uh recent job was kind of you know pennies from heaven. It just fell out of the sky for us, which is nice to have every once in a while. And also, if we're being honest, you'll lose jobs that way too. Because when they pull it, you could be doing a great job in Buffalo. Uh, Chris and Judson, where are y'all from? So I can quit talking only about Buffalo.

SPEAKER_06 18:01

I'm all right with that. I'm uh based out of uh Mobile, Alabama.

SPEAKER_04 18:06

Okay, I love your town. Hank, is that the home of Hank Williams?

SPEAKER_06 18:10

It is. You know, yeah, you know your stuff.

SPEAKER_04 18:13

I spent New Year's Eve in your time one time walking around that statue in the museum. It was a fantastic time, and I tell everybody Mobile is awesome. And Chris, where are you from? Greater Houston area. Oh, okay. So where are you that? You're the other Texas guy. Where are you looking at?

SPEAKER_03 18:28

Savannah.

SPEAKER_04 18:29

Savannah.

SPEAKER_02 18:30

Savannah, Georgia.

SPEAKER_04 18:32

Oh, another great town. Another great town.

SPEAKER_02 18:34

Yep. And so is Kurt. Kurt's on the line as well. Uh he's here as a partner of Chris's, and he actually lives in Savannah, Georgia right now. Um and then he's one of those things.

SPEAKER_01 18:48

It's a mobile album, I'm actually from Pensacola, Florida, so we're coming full circle here in the Gold Coast, man. Okay.

SPEAKER_02 18:57

And then we have Tim on, and Tim is in the Trenton, New Jersey market.

SPEAKER_06 19:03

Okay.

SPEAKER_02 19:03

I know Kurt and Tim are both driving, um, I think with clients today. So they're both um off camera, but they they're present and here.

SPEAKER_04 19:11

Okay. Chris, if you're if you're close by in Houston and you ever want to stop by and kind of see the operation or whatever, just we're right off Tidwell and 290. So about halfway between the Beltway and 610. I'm not sure what area of town you're in.

SPEAKER_03 19:24

Um, I'm actually in Lake Conroe, but uh I I I go to Houston all the time. So yeah. Okay. I thanks for the offer, and I'd definitely take you up on it.

SPEAKER_04 19:34

You pass the other citywide on your way into town, you probably drive right by their sign. They they're right off 45. They're between 45 and 59, right inside of Beltway 8.

SPEAKER_03 19:42

Well, I was I was waiting for them to split uh Houston again and have Houston north, but uh no, I'm just joking.

SPEAKER_04 19:49

That's fine with me because that's not in my territory. Just stay out of the west side. We're good.

SPEAKER_03 19:53

How can that not be in how can that not be in your territory?

SPEAKER_04 19:56

It's uh any any resemblance, any any similarity between the map of our territory and common sense is purely coincidental. It was a it was a carve out according to it was the first one they did. It was a carve out according to population and who wanted to keep what accounts or whatever. We walked in on it, it had been divided out prior to us even looking around. We happened to come in and do a qualifying call, just like what you're doing with the owner of Houston at the time. And I was like, hey, it would be great if I could stay in Houston and not have to move back up to Pittsburgh. And he's like, Yeah, it would have been, but we've already got a deal going. And then we were halfway through Pittsburgh, and he called and he's like, Hey, you guys still interested in Houston? And I was like, No, it depends. And it wound up coming together that way, so yeah. Anyway, so single finger of fate. That's the way it is, right? There's a big watch and it's not on any of our wrists. None of us know what time it is. Exactly. So, Rodney, did I catch all your questions?

SPEAKER_05 20:52

You you did, yeah. Thank you, Kevin. I appreciate that.

SPEAKER_04 20:55

The one thing I would say that you might have that Pittsburgh also has as a potential unique consideration is uh Pittsburgh's a big union town, and I'm pretty sure Buffalo is a big union town as well. You might look to see what the agreements are on in your central business district and your larger buildings, which um either bolster or exclude unions because that will have an impact on your business.

SPEAKER_05 21:20

Okay. Actually, I do have another question since you mentioned it. Have you found or did you find any ways to navigate around that or just kind of coexist with that in Pittsburgh?

SPEAKER_04 21:30

There are um there are other cities that have done that successfully. Pittsburgh is again a little bit unique because the business owners in Pittsburgh Central Business District, and that's what you see from the blimp when they're showing you the Steelers games on Sunday night, right? It's where the rivers come together, and Pittsburgh has a very small triangular shape downtown. Um, that's called the central business district. And any building over 100,000 square feet within the confines of the central business district, inexplicably. Has an agreement that's voluntarily signed by the owners of the building that they will only use union labor in those buildings. So we are we're excluded from that particular area. However, that really hasn't uh in your first couple of years, unless you're buying a I don't want to cuss in front of these girls if they feel differently about it. But if if you think that you're gonna get a 275,000 square foot you know office building in your first week of having citywide, uh, I'd like to sell you a piece of our territory maybe for a couple of bucks. If that that's not you're not gonna have the operational wherewithal at that point, you're not gonna have the team built out. Now, if you're buying something that's already up and rolling and and you know they've got it, like the the guy that bought San Diego, yeah, he could walk in right away. San Diego was a I think an eight or a ten million dollar business when he bought it in terms of revenue. He had a team that was built out there that you know he was ready to rock and roll. And if any of you want to make a real stupid offer for West Houston, I'm listening, and you'll have a team here that can do those same kinds of things as well. But uh it just pragmatically speaking, you're gonna have to put one foot in front of the other and build the pyramid before you can get there. So those central business district, the the agreement in Pittsburgh didn't impact us at all. And we're doing 75,000 square foot uh buildings directly across the street, 175,000 uh square foot like warehouse mixed use spaces that are just not technically in that footprint of the central business district. So they're free to make their own decisions.

SPEAKER_05 23:33

Got it. Thank you. Very helpful.

SPEAKER_02 23:35

I'll add to that just a tiny bit as well. We have a lot of individuals that are on these calls that deal with unions or maybe don't deal with unions in that aspect, but our union heavy cities and um are Detroit and Arbor, Ryan Tompkinson and David Klinger. Obviously, Detroit is big for them at Bumpson and the bump summers, he's on next week. So Romani, I mentioned that specifically because I know you have talked with both of them. So if you want to follow up about any of those pieces, absolutely do so. Otherwise, um we can connect you with Terry as well in Pittsburgh, and they can and he can always talk to you about some um specifics with that.

SPEAKER_05 24:12

Great. Thanks, Ivan. I appreciate it.

SPEAKER_02 24:14

Of course.

SPEAKER_03 24:16

Got a question for you, Kevin. Sure. So you talked about building your team. Uh what is the what does your SE count look like? And how did that how did that grow in the last six years or seven years really, right?

SPEAKER_04 24:30

So we started with in Pittsburgh, we started with one one of my partners was a full-time SE. Right. Uh we hired a part-time S E and a full-time. And actually, is this Jessica Creasy, Josh Crazy's wife?

SPEAKER_02 24:47

I don't believe so. Jessica is um on our marketing team, so I don't know Josh Crazy now that I'm thinking about it.

SPEAKER_04 24:55

Okay, Josh Crazy was a sales ex. It's a crazy unique. I thought I thought his wife's name was also Jessica. So and I've only seen her years ago, so that picture's not helping me. But uh so Josh was.

SPEAKER_03 25:12

Okay. And all this all this time I was thinking Man on Fire. Wasn't that his name?

SPEAKER_04 25:18

I love it, maybe. I was just on a call with Josh Crazy yesterday, and I asked him if he saw Man on Fire, and I guess he's over it in terms of the references because everybody was calling him, but so it didn't go over very well, but luckily I don't care. Um, so the the SE count in Pittsburgh was my business partner, John. Uh, we had a part-time SE and we had a full-time S E, so two and a half. In Houston, we had one full-time SE down here. Uh we we didn't get it to two, and and I actually had this conversation earlier today. It was part of my weakness in terms of understanding what makes the engine go here. I saw I when when I advocated for the Houston existing location to offset Pittsburgh's operating losses. I saw my job as maintaining our recurring revenue and growing it from a base of account management, growing with our existing clients more than I focused on driving hard and reinvesting in acquiring new clients because I felt like the things that I could control, especially during that COVID time frame, people weren't answering the door if you didn't have a name in Pittsburgh. So there was no new business getting, you know, there was people weren't coming to the office. You couldn't knock on a door, you couldn't, you called somebody like, hey, do you need your office clean? Like, I haven't been in my office in two and a half months. We may never go back again. So Pittsburgh, you know, it was very difficult to get things up and rolling in Pittsburgh. Now you got some of the what were they called? The not critical businesses, um essential businesses, essential businesses. Thank you for the assist here.

SPEAKER_03 26:55

And that's always a sign by somebody else that said that thinks it's essential.

SPEAKER_04 26:59

That's correct. I remember driving back and forth with a when that period of time where you had to have a letter that said you were an essential business that had to be over. I drove between Houston and Pittsburgh with a letter written by me with my name on it. That's like I'm part of an essential business in case I got pulled over or whatever from the curfews we were on. Um, in any event, so in Houston, I didn't properly understand that you have to have an operating sales engine constantly acquiring new clients, because which sounds like common sense, right? And that's how dumb I am. But I saw it as holding down the fort and not spending too much money here because I was trying to divert resources to Pittsburgh. And that was a mistake. Number one, because we had the resources and I was just trying to hoard. You can't save your way to succeeding, right? You've got to invest and you got to do it. And number two, all it did, you're gonna, there's only one way to keep a job, and it's everything to go right. There's a thousand ways to lose a job. The your client starts to have a financial issue, right? Their building situation changes, you know, something stupid happens with the vice president's garbage can on a Wednesday night and they come in on a Thursday and they're mad at you, and they go, get these people out of here, or whatever it is, in terms of janitorial. And if you're not sticky enough in that client with a bunch of other services that you're providing, or you don't have kind of those multi-level relationships, it's very difficult to weather those storms. So no matter what you do, you're gonna have some bad luck. And you're gonna, hey, this client's, you know, a lot of the tariffs for us in Houston, a lot of our manufacturing clients were dependent. They saw their material costs rise significantly, but they were in capped end price type industries. So when something has to go, you know, you cut non-essential staff. And unfortunately for us, it was like, hey, we're going down to one day a week. Well, there's nothing you can do about that, right? I can't, I don't have the geopolitical international tariff stick that I can beat the janitorial services back into the right place for our for our local businesses. So you have to be out there. And after that, we had a sales manager here as well as a sales executive. Uh, the sales manager was from a past life in Houston. Uh, he had to leave for personal reasons. And frankly, here in Houston, we have chased good quality sales executives ever since. Right now, I have two. I was on a team of I had a team of three. Um, I've been recruited for quite some time for that third one. Houston is a unique market, uh, I believe, for sales executives because we have so many long, um, long lead time, long fuse, slow burn energy projects going on here where salespeople, good quality salespeople, have to get paid before the sale gets consummated. And they have a smaller base of clients because they're dealing with the majors and they have longer projects. So their base salary is much higher, but their bonuses are typically capped, right? They have one gangbusters awesome year where they can you know max out everything, max their bonus. And then the other three years, they're waiting for the Federal Energy Regulatory Committee to approve a natural gas offloading facility and you know outside of Freeport. And when as soon as that thing goes, every chiller manufacturer, every compressor, every coupling, every electric motor manufacturer, they're selling everything into there, but they spent the last three years paying salespeople to go back and forth and maintain the communication and the relationship with a client who ultimately may never have a project come to fruition. So, to relate that to what we do, we our sales executives are uncapped commission, right? Which means, but I'm not basing you at $200,000. You can make $200,000 and you should, right? But I'm not going to pay it to you just to show up to work. You have to close jobs and close deals because it's in your control. We don't have a three-year burn on our projects. We have about a four-week average from quote to close. That doesn't mean the first time I talk to you, we close you four weeks later. That means you know who we are. There's an opportunity, and we close that opportunity four weeks later. So a lot of the relationship building, right? That free work that you get your salary for that the energy sales executives are doing for three years before they may or may not have success, we're doing for maybe three years, but we better be closing a bunch of other jobs in between because we don't have to give that same level of focus and attention to your janitorial contract quote preparation as you do to a $37 million ethylene plan, if that makes any kind of sense. So right now we're at a long answer to you, Chris, but right now we're at two. Uh we're getting up to three. I have an inside salesperson right now as well. And in Pittsburgh, we have two full-time sales executives plus my business partner who is uh pretty much three days a week. Uh, my partner John on the sales side focusing his attention. So I think that's about the right number for us. I'll duck when I say this because the I think the guy current guidance from the home office is you need one sales executive for every three human beings in your territory. So they want obviously the home office wants to see you have a thousand sales executives out there, and you have to make whatever the right choices are for you to grow your business and to calibrate your investment, right?

SPEAKER_03 32:08

Hard to find a happy medium there, huh? Uh I I don't know. I didn't want to stop you in your uh soliloquy there about the uh the the uh you know sales executives in the oil and gas industry because I'm very familiar with it myself. We have the same background, you and I. So uh yeah, mechanical engineer in oil and gas. Yeah, my career. So um, but I know the others probably hadn't heard that before. They're in other areas of the country.

SPEAKER_04 32:38

So yeah, it's a unique. We have a different I talked to my partner Terry quite a bit. He has the same role as as I do, but in our Pittsburgh business. And for the first three years, where I'm like, are we running the same business here? He puts out a he he puts an ad for free on Indeed for 11 minutes, and he has 15 highly qualified sales executives that all want to get interviewed. He puts it down to the three shining stars among them. They're all fighting to get the job, and he's like, Man, this is the hardest decision I've ever had. And he finishes it up in a week. But if he needs to staff a job, he has a heck of a time finding independent contractors up there. I could scream out this window right now in Spanish. Yeah, I need someone to help me clean, right? Yes, and I would have independent contractors here, quality ones and good people to work with out the door. But sales executive is a bit more of a challenge. I have an easier time finding qualified operations people because there's a thousand project managers hanging around Houston and they're all hanging onto the back of an up and down commodities market in the oil and gas industry. And when it's down and they find a home that treats them right and a good company that cares about what's going on in the community, and you're, you know, the people around you care about you. They're like, I don't want to ride this roller coaster anymore. I want to go someplace where I can make a good living and stay. So we have an easier time picking up that particular job description as well in Houston.

SPEAKER_03 34:00

It's definitely a roller coaster for sure in this industry.

SPEAKER_00 34:04

Hey Kevin, um, you and I have talked a lot about um, you know, the variations in the business. I'm curious to know, can you share with the group um how do you how do you go about making the accounts a little bit more sticky? What's what's the fundamentals of good, strong account management with your FSM team?

SPEAKER_04 34:22

Uh I mean we we're a managed services company, right? So we start with a janitorial contract typically or a day porter on rare occasions, maybe lawn care, something recurring. And the account manager, we're managing one contract for you. It's already sold. So by the time you meet your account manager, they have a job to do. There's a scope of supply, there's a qua a level of quality that's required to continue on. Um, we, at least in in our side of Houston, I'm not sure about the other ones, we have a 30-day cancellation. So we have all volunteers and no hostages. We don't have anybody that's trying to get out of their contract beyond 30 days. So if we're not doing what we're supposed to be doing, we usually get fired. But we're in an industry that's a pretty uh the the variance in cost is pretty the bid ask spread if you're investors. The bid ask spread in our industry is pretty tight. Uh, meaning the most expensive person, the most expensive company, and the cheapest company, there's not a lot of space in between those because the market dictates kind of where you are, and you'll find that out pretty quick. So you can have some bumps in the road at that price point for the human beings that are actually doing the work. And how you manage through those bumps in the road is going to be how much your client trusts you to go on and manage that contract. Hey, I feel good about Chris managing my janitorial contract here. We have some other things going on. I'll trust you to manage that. But if you're not doing that well, I've told you three times about this garbage can, or you guys can't seem to keep the floors clean here. There's no way that that customer is gonna let you bid on their bathroom renovation or putting new floors in a place. So we right now we're doing a we have a large manufacturing company in town. Um they they came from one of the other locations where they were a recommendation because they're a national company. It wasn't an NVD account, but it was from one of the local other citywides, and they shared a contact with us. We've been working with them for about three years now, or three and a half years, on a janitorial perspective or from a janitorial scope of supply. Every once in a while, they'll change people's offices around, they'll give us the drywall and paintwork. Uh, this year they decided to renovate eight bathrooms, a break room, and a closet. So we're in that building right now, do it as we speak, managing those on a schedule. So we got the Gantt chart, we're you know, finishing one, updating the client to as to what's happening. There's nothing that makes you no one can quote against you if you're doing that kind of work and you have someone that you trust in there. You'll lose, you'll lose an account on price all day. If it's, hey, we're racing to the bottom. There's other people that are going to do it cheaper than you are in every town that you're in, the very few exceptions out there, right? You'll there'll be a lower cost provider out there. But once people realize that you're not just that they can count on you to do these other things, you're much less vulnerable to somebody coming in and going, hey, you know, on a $2,000 a month account, someone else coming in and going, hey, what are you paying? Like two grand. Like, I'll do it for $1,900. Okay, cool. People are going to think about, well, what happens when I've got a leaking sink on a Wednesday at six o'clock? The janitorial crew catches it. In citywide world, that janitorial crew calls the account manager. In our world, it's an FSM, but they call the account manager, say, Hey, I have a leaking sink going on here. They catch it at 6:30 at night. So, number one, you didn't have a flood. Any janitorial company will do that for you. I like to think like 80% of them would be smart enough to shut the water off, too. So we're not standing any higher than anybody else in that, in that regard. But that client may say to the account manager, hey, we have a national team coming in tomorrow. Can you get an emergency plumber out there and sew this thing up? Yeah, we absolutely can. So we'll have that fixed up, cleaned up, and ready to rock and roll by the time your boss comes in from Omaha, Nebraska, or wherever the heck they're flying in from. Whereas very difficult for another company, whether they're a franchise or not, to come in and have a cleaning crew have the wherewithal with an approved vendor that has, you know, a background check, fully insured certificates, you know, and you're standing behind their certificate of insurance with your own. I think that's a service or at least an approach to service that a lot of direct competitors in our highest volume market, which is janitorial, can't really match up with.

SPEAKER_07 38:41

So that really explains for you.

SPEAKER_06 39:09

You know, uh for either using or teaching or kinda wish you had no idea.

SPEAKER_04 39:15

I can't hear you. That's a good question. Um I guess I I I did my my partner Terry is a lot more amenable to uh uh some level of control over his day-to-day activities. And I think I'm probably less so, if we're being honest. Um, and I probably would have maybe I I had never owned a franchise before. Uh, so I think everybody needs to be okay with the fact that you're trading away some of the freedom that you have to run a business because you're operating a model for a lot of really good business practices and a lot of um, I guess uh the NBD part of things, for one example. And some of the value, I guess I would say for the accumulated value that citywide offers you as a franchisor that you're you're paying some money for, just also understand that that's going to impact how what you do on a day-to-day when you run your business and make sure that you're okay with that. Right. And so that means read your franchise agreement and and understand what the implications of the sentences in that franchise agreement are, because it's it's not out of a spirit of meanness or I don't believe it is, right? I don't have a finger on the pulse of Jeff Odo and the you know leadership board there, but I think you know they it's a contract and they expect you to do the things in that contract. And you know, everybody's nice people, but at the end of the day, you've got to kind of this isn't we're not running a lemonade standard and you're not selling it to Aunt Sally, right? This is it's you have a contract with franchise or you're expected to hold up your end of the deal, and you better be okay with operating a business within those guidelines and those boundaries, right? Now, in return, you get the value of the business, right? You have some predictability in, you know, we're at five million dollars right now, so call anybody in the citywide system, they'll go, everything was different once we hit five million dollars, right? I don't think you get that if you open Judson Yates Plumbing Incorporated, right? You might have a couple buddies that are plumbers, or if you open an electrical business or you open a bar or restaurant or whatever, they may give you some guidelines and you get on Facebook, blue-collar millionaires, or whatever. And you know, hey, once I had 10 guys and 11 vans, or whatever that goes, or you know, Chris and your industry and oil and gas, you know, once we had 15 guys in a lathe that could swing 62 inches, we really started to take off, or whatever it is. It's it's you you might get that by chance, but you're really not gonna get the value of you know, uh this conversation excluded, right? But there's a lot of smart people that actually own these franchises that'll tell you how it works and kind of, hey, at this at this stage in the game, you're gonna want to hire, you know, this is what worked for us, and this is when you start to get bigger. This is when the hockey stick started to take a uh much more vertical in terms of revenue or in terms of retention or things of that nature. So there's a lot of value there as well. I don't want to just kind of I don't want to tell you just about the cage, I want to tell you or just about the fence, I want to tell you about the pasture inside, right? You know, it's it but recognize there are both, right? You're you're you can eat what's inside, but there's a fence around the outside, there's a boundary on it, and you got to be all right with that. You're not you're not out there renegating and and doing those types of things. There's there's some things that you have to uphold.

SPEAKER_06 42:50

Appreciate that. Yeah, yeah, that's good stuff. Who did who uh I like your your accounting setup? Was that was that your own personal accountant uh who set you up like that, or did you uh use the uh franchises uh accounting and your holding companies and everything?

SPEAKER_04 43:04

So that was that was a mixture of CPA and legal um in terms of that setup. We we were we stumbled into you're gonna meet a bunch of pieces of crap and you're gonna meet a bunch of awesome human beings, right? Just like you have the whole rest of your life, except you're gonna do it real fast at the beginning, and you're not gonna know which one's which because you're not unless you've done this before and you have a network of people. So we somehow, through a franchise consultant, we got hooked up with a company in Philadelphia that was an accounting company. They were called Urbine and Associates, and they were they had some locations throughout the rest of the country, I think. But Philadelphia, we somehow just called the office and they transferred us to a senior partner. I have no idea how it worked. His name is Ken Frebowitz, and I talked to him this morning. I swear to God. He became a great friend of ours. He retired already. He set up, he had a huge hand in buying us out of that. You guys need to buy yourselves out of the C Corporation. You guys need to get yourself into an S Corp. Corp, you need to do it this way. Uh, you should be set up this way to minimize your risk. And then we had a business attorney. But uh, to be honest, I would love to take some kind of credit and say I'm some type of idiot savant from the coal mines up near Pittsburgh that just drew this up on a whiteboard one day, but it wasn't that way. It was a highly intelligent senior partner. And ironically, also, once Ken retired, so we flew up there for his retirement. That's how highly we think of the guy. And I've still talked to him, so I thought I'd tell you something too. He transitioned us over. Another company bought their company and Ken retired. And he goes, Hey, he goes, guys, I just want you to know we're going to transition your account over. I'm retiring also. But uh, don't feel any, you're not gonna insult me if you transition out and go to a different company or whatever. And we now have the representation we deserve due to the size of our business and not the representation we lucked into. And thank God we had him for the first five years or six years, because now we know what's going on. But had we gone with who we have right now, we would have never been as fortunate to know these things and to be able to do those setup things. So when you when you have somebody that's willing to work with you and explain to you how it goes, uh, I mean, we we stuck pretty close to him. Uh that he was just highly intelligent. We didn't deserve him. Uh, and and we got him, so thank God. And he came at the perfect time for us.

SPEAKER_06 45:19

Hey, thanks. Yeah. Maybe you can put in a good word for me, even if he's retired. Maybe we can kind of talk to him.

SPEAKER_04 45:26

I'll tell you what, I there's a I swear, there's a notepad on my desk right now. I called him, he's having some health issues, and so we were texting back and forth, and I and we were playing phone tag this week. And he said, Um, hey, what's going on with the business? Like he's always one of those guys. He's like, Hey, tell me what's going on with the business. How's it going in Pittsburgh? How's it going in Houston? I'm like, hey, we're actually looking at uh a couple investments on a personal level, like so blah, blah, blah. And he goes, wait a minute. He's like, stop. He goes, tell me exactly what you're doing. I have a notepad full of like a page and a half of notes from what he told me today while he was eating breakfast when he called me just because we were going back and forth. So yeah, maybe you might get lucky.

SPEAKER_07 46:02

You might get lucky.

SPEAKER_05 46:09

Kevin, I have a question about finding um contractors. You said something interesting where it was easy in Pittsburgh to find SEs but not contractors. Any strategies or tactics that you guys found or developed to find qualified contractors in the Pittsburgh market?

SPEAKER_04 46:28

Um shoot, that's probably a better question for Terry. That's probably a little more weeds. I can tell you the dumb stuff we did when we first bought the franchise. And and when I was our night manager, he was our FSM or our account manager, and our partner John was the salesperson. And we were driving around to car dealerships and office buildings at midnight, checking out whose car was in the parking lot and dropping off our business cards, right? Well, we had like five dollar Starbucks cards, and we're like, hey man, you probably got to stay up all night here. I know you don't know me, but this is probably a creepy approach. But uh, here's a business card. We have a facility management business, and we're looking for great contractors right now. I mean, you can do the old you know, tear-off sheets. We did those, the ones where you like sit there like an idiot and you do the scissors and you put your phone number on the bottom, right? Like, who wants to have flute lessons? It's like nobody, nobody, nobody, nobody. So we did that. Um, I think now Terry's best luck has come with getting connected with community organizations. Um, so he's he's set himself up. His best contractor came from us in Houston West. They moved up there and they worked with Citywide before, and they they have a huge family, and they're all in the same industry. So they they do a bunch of work with him now. But he's set up with the Latin American community center up there. He's set up with uh uh go to your local Janet, uh, what do they call them, Jansen houses where they're selling supplies, excuse me, and tell them, hey, I'm I'm starting out. Do you have any recommendations? I'd love to give you my business, but I'm not gonna have a business unless I get some people to get into business with me. Um, you know, can you recommend some good folks that subcontract for the larger companies? Uh, that's that's a good way as well. You can always get out there on Indeed and see what companies are hiring cleaners on Indeed and then call those companies out there. So you'll get to know kind of what your scale of cost is. If you're a direct operator that's that's hiring direct, or if you're somebody that's subcontracting out and you'll learn in your market, hey, you know, if somebody's uh, hey, I'm selling you a building, do you want janitorial buildings out there? That's probably someone that's subcontracting that workout. So they're probably not going to work out with you. But if it's somebody that's hiring uh individual cleaners out there and they're not a building owner or a real estate company, you'll be like, Hey, I see a lot of ads for these folks out there. They must be a pretty big player. You'll catch with them. There's the janitorial subcontracting network is out there as well. So, like the internet connects every, you know, whatever weird hobby you're into, right? Like I collect old gum wrappers or something from the 70s. There's a Facebook group out there, an Instagram group where people are sharing pictures of themselves, like gum wrapper t-shirts or stuff. It's no different than uh janitorial companies. It's the same that there's a market out there for connection, and you could pretty well find people. For Terry, his his main issue up there initially is that Pittsburgh is so geographically dispersed and so inconvenient to drive around because of not only the bridges but tunnels, natural terrain, and not a real well-thought-out uh highway system because of the way it grew up, that you may have 10 great contractors, but they're not gonna, they only work within a very small geographic radius because it takes too long to transfer. Whereas in Houston, we've got the highway equivalent of like the space center, right? Where you can get around Houston in an hour and you can go 55 miles as long as you're not in traffic because of the highways. So our contractors can cover a much larger, we get a good contractor, they cover a much larger radius geographically just square miles than what Terry has because of the inconvenience of getting from point A to point B. Thank you. And I think that's gonna be an issue that you're gonna have too. You're gonna have to have a lot more from being in Buffalo here and there. I think you're gonna have to have a lot more uh local contractors in different sub-regions for you or whatever, for lack of a better term, than having, you know, a couple base large contractors that cover a lot of ground.

SPEAKER_07 50:39

Got it. That's helpful. Thank you. Or you born out already. 52 minutes is easy.

SPEAKER_02 51:01

I'll give you guys a chance to jump in if you if you want to ask anything.

SPEAKER_00 51:07

And Kevin, you've got to give us at least one more analogy. You have so many good ones out there.

SPEAKER_02 51:12

I I you know what? I already wrote down um you can't save your way to success because that was that was quite wisdom. That was some wisdom.

SPEAKER_04 51:24

Listen to a lot of podcasts around a little early in the morning.

SPEAKER_06 51:29

Kevin, what's your um what's your what's your turn rate? Like uh, I think we we were on the last e-call and they were priding themselves on like 95% or something like that, 95% retention. So how are you doing all that?

SPEAKER_04 51:43

So the the way that uh it's calculated here, the total revenue retention, there's there's couple there's total revenue retention, contract revenue retention. I think 95 is like the system average. I think in our marketing material, because it can change given a month, I think we're like 94. Um, we're probably in that area. Here's the way it works, though, to be to be honest with you, Justin. If you have a big account and you lose it for whatever reason, right, they run out of money or they have to shut down operations. And it's, you know, if you got 350k of monthly contract revenue and you lose a $15,000 monthly account for whatever reason, that hurts the way the calculation works, it hurts you in a disproportionate way because it multiplies it by 12 months. It acts as if you're never gonna sell another job for the next year and you've only lost this revenue, and it doesn't factor in new revenue that you bring in in the same month. That's the way that's a more of a net gain, that's a uh net for net. But yeah, that's uh that's that's about the right number, right? Uh, across the our life in Houston at least, we're probably 94 to 96. When you first start, you're not gonna lose anything. You know why? You're not gonna have anything, you're gonna spend every night of your life at these five accounts that you've got. It's gonna be those are gonna be the cleanest five buildings that anyone has ever seen because you're gonna have a bunch of human beings out there, with the exception of your sales team, who's out trying to get you the next five, right? You're gonna be all over it with both feet. You're gonna be an inch away from every mirror, you're gonna learn how to speak Spanish and learn aspirar and espejo. You're gonna know what mirrors are called in Spanish, you're gonna know how to vacuum, all that stuff you're gonna know, right? But as you get larger, you're gonna settle into the right rhythm of inspection, putting the right amount of resources out there, visiting a client the right amount. We had one client in Pittsburgh when we started. It was uh they were called WabTech, it's an air, it's Westinghouse Airbreak Technologies, and they're all around the country, several others out there. And part of the job, it's a rubber factory, so they have their own rub. This it's a two-story rubber funnel of rubber powder, and then that goes down into a furnace where it melts the rubber, and then it runs through insulated pipes to all the different extrusion machines in there. So, consequently, there's dust everywhere, it's rubber dust in this place, and it's black. I had nothing to do. We had one account. I went there every single night and we'll just walked around behind the dude running the scrubber with the crew, walked around the offices. I spent every single night at that place. So, consequently, every morning, the place to spot, they're like, We've never seen service like this. I'm like, Yeah, I got nothing else to do. I just bought this business, I'm scared we're gonna lose one account, right? I'm an inch behind the screen. The crew was not amused, right? They were like, This dude's here every night. I'm like, I'm gonna be here every night for the next six months. And they're like, we're quitting. I was like, all right, I'll give you a couple days, I'll give you a couple days off. But I I also would brag on our Google reviews. So for a business our size that's been in business this long, uh, we're I think we're 54 or 59 Google reviews. We have a 4.9. I have two non-five-star reviews out there. One of them is from an independent contractor who we had to fire. Uh, although Google says you're not allowed to leave a review if you're in a contractor working for somebody, they won't take it down. And then just recently, in the last month, I had a four-star review from a client that was like, We love Citywide. And I was like, You gave us a four. Like, what are you doing, man? You're killing me here. But that's the way it runs. Uh, we're we're proud of that as much as we're proud of anything else. And we've over the years, we've had a this year, actually, um, we're down a little bit on our what's called an NPS score. And I don't know if your previous industries had NPS in there, but the average NPS across the janitorial industry is like in the 20s. Um, ours was we did two years of 60 plus NPS. This year we're at 50, and I screwed us up last month, to be honest with you, because I sent I sent surveys to three clients who canceled and didn't tell us why, with the hope that they were gonna tell me why they can't, they wouldn't take calls anymore or whatever, and there was no major event. I have to assume it was because something financial related because we had no complaints from them, but they came back and gave us a crappy uh NPS. So I called them again, they didn't answer. I was like, what are you doing, man? Like, at least give me, at least tell me why here. Like, there was no blow up, there was no anything major, but so I I but I own that. I own us probably having a crappy NPS score last month, but I'd rather take the chance to at least get some kind of feedback from them than continue to wander.

SPEAKER_07 56:16

That was hard. Yeah.

SPEAKER_02 56:19

All right, y'all. That was a fantastic hour. Kevin, we'll rate you five stars on Google reviews to get that average back up. But um thanks so much for your time today. It was so helpful, so educational. And thank you guys for coming with the questions. If you have any problem with it all, let me know. I can always connect you with Kevin, and you guys can continue to touch base. But other than wise, we'll see you guys next Thursday. And Kevin, thank you, thank you, thank you.