Ep 170 - Vertical Integration for Freedom Building with Franchise Opportunities with Bob Bernotas

Bob Bernotas is a seasoned entrepreneur and franchise expert dedicated to unlocking financial, time, and locational freedom. With over 30 years in franchising, including owning multiple concepts, Bob passionately helps investors evaluate opportunities to transition from corporate life into semi-absentee franchise ownership.

Bob explains there are active, semi-passive, and passive franchise models to match investors' lifestyle goals. He advises pursuing emerging brands backed by experienced franchisors, focusing on resilient categories like home services. Bob stresses finding an expert consultant familiar with the franchising landscape to avoid costly mistakes.

When assessing risk, he analyzes potential pandemic impacts, Amazon-resistance, and recession resilience. Strong unit economics and a clear exit strategy are also key, with realistic returns being 2-3X the initial investment over 3-5 years.

As an example, Bob highlights a client couple who left corporate jobs after launching a fast-growing home services franchise. Following his advice, they rapidly expanded territories and added a complementary brand, propelling revenue over $3M in under two years.

Bob emphasizes that while not as glamorous as trendy opportunities, selecting the right evergreen concept with an experienced leadership team can lead to outsized returns. His goal is empowering burnt-out corporate workers to secure the time, location, and financial freedom franchise ownership can provide.

Connect with Bob thru the social links below and learn more about his business:
LinkedIn: https://www.linkedin.com/in/robert-bernotas-a62290102/
Website:https://franchisewithbob.com/

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

• on our website for blogs & other podcast interviews! elevateequity.org
• our YouTube channel! youtube.com/channel/derekclifford
• our book/audiobook! amazon.com/dp/ebook

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Transcript

0:01

Welcome to the three degrees of freedom podcast, where we explore lifestyle engineering with our expert guests to bring you in alignment with your own three degrees of freedom, location, time, and financial independence.

Derek: 0:14

Hello, everyone. Welcome back to the three degrees of freedom podcast today. We've got Bob Bernardus on the call. He is a seasoned entrepreneur and franchise expert dedicated to unlocking the doors to financial time and locational freedom. He's got history as a serial franchisee since 1986, and he brings a wealth of expertise, particularly in navigating the transition from corporate life to successful semi absentee business ownership. Bob passionately connects investment minded individuals with top performing franchise brands, offering a pathway to exit corporate constraints and build lasting wealth. Today, we're going to be talking about entrepreneurship and the art of evaluating opportunities, so that you can be empowered to step into a life of purpose and autonomy on your own using either franchises or any other business concepts that I just don't know about yet that we'll find out from Bob here in a minute. So, Bob. With that introduction, that very hefty introduction. How are you today? I am

Bob: 1:12

well, thank you, Derek.

Derek: 1:14

Very good. Nice. Great to have you on the show. So the first thing that we're going to do is we're going to start where we always start. And I'm going to ask you right now, which of the three degrees of freedom, since it's the three degrees of freedom podcast, location, time and financial, do you feel that you're in the strongest right now? And which one do you feel you want to pursue more of?

Bob: 1:32

I think the one I want to pursue more as location, I think at the time, I can choose when I work, if I decide to work, and financial freedom, I'm, I would say I'm in a good place right now, location, we talked a little bit about that before we started, and I'd love to be in some other parts of the country, if I can get away with that from a tax perspective. But, yeah, I would say location is the one I want to pursue time and financial freedom. I think I'm in a good place now, built by franchises that I've owned and operated over the years, multiples that I've built and sold. And I currently. Carry a couple now, and I also do consulting and probably in the next three years, I'll retire from consulting or at least back off and maybe go to 10, 15 hours a week. But I don't want to give this up. I love this too much.

Derek: 2:19

This is so cool. Usually, Bob, we have people on here that are pursuing. Time and financial freedom, but they have location freedom. So this is a really cool, swap. And so potentially if there's room for it in our conversation, we can talk about location freedom to self serve you basically. Let's go ahead and get started here. So I want to ask first how you made this shift into franchise. I'm sure you told the story many times, but we want to hear it one more time. How did this

Bob: 2:46

all happen? I just didn't make it in corporate America. I think I spent all of four years of my entire adult life working for someone else. It just did not work out well for me. Either I got fired or either I just couldn't keep my mouth shut. And that's what caused me to get fired. Or I just decided, this isn't for me. I always felt that I could do it a little bit better. A little too much ego, probably, but decided that I'm going to try my hand as an entrepreneur, started a small computer software, hardware company back with, I don't know if you remember, but the company, you're too young, but the company Compact first computers they came out with. Like

Derek: 3:26

I saved up on my very first job. I saved up, I think for like four or five months or something, working my 8 per hour job back in high school. Younger than you look. To buy one of those. So

Bob: 3:38

there you go. It was a suitcase size computer with a screen about yay big, right? I remember. And yeah, and I didn't even know how to run the damn thing. I had to hire somebody to do it for me. But yeah, that was my first. Foray into owning my own business. But in my later twenties, 28 years old, I managed to put some funds together, borrowing, begging, and open my first West coast video franchise, if you remember the video industry, and that, that unit opened in December of 1986. I'm aging myself here, but opened in December of 1986 and that January the next month, it ended up being the top unit in the chain. It was about a hundred. 140, I think units in the chain at the time, it just rocketed, which allowed me not by any special skill that I had. It was just good location. Everything just fell into place and allow me to open a 5th unit. And then I lost my mind and went up to New York with them as well. But that was my first foray into franchising. I did several others and I built and sold over the years, been consulting for a couple of decades. Primarily in the past, I consulted on the side of franchisors, helping them position for growth over the last 10 years. I morphed exclusively into, helping prospective franchisees find the right franchise fit for them. And I was CEO of a national chain, smaller national chain, but they had a national footprint about 100 units and sold that to a bigger. A bigger chain. So that's pretty

Derek: 5:08

much my history. I love it. So I know, Bob, that you flew over this real quick, but I want to dive a little bit deeper in the beginning of how you got into franchising because Maybe there's someone out there right now that's listening to you that's saying, Hey, I like the, I like this model, or maybe they'll finish listening to this episode and then come back to this point in time. You said that you scraped together some capital and put together like a, you opened up a franchise for specific, I think it was a video in the video industry, right back then. Correct. Right. Correct. But where did you, like, where did the spark for franchising come? Cause you know, just. listening to it from my untrained two ears. It seems kind of random, right? You're like, Hey, I'm going to try to open up this franchise. I know, maybe you can see the McDonald's model, but I wanted to like, see, learn more about how you got inspired to actually do this.

Bob: 5:56

Yeah, well, Derek, it was as random as you can possibly consider. Yeah, I just happened to see, I mean, it seemed like a pretty cool category, a little sexy category, video rentals. It was really hot back then. I just happened to fall into a pretty good category. I could have easily made a bad mistake and pick something, picked the wrong one. Not that video was great. It had its run, but you. Of course know what happened to that industry. So purely by happenstance, I happened to start looking at that. I looked at several different, video store franchises landed on, on West Coast video that was really right before Blockbuster, emerged. In retrospect, I wish I got into Blockbuster. It was a stronger model, but it is what it is. But my foray into it initially was just purely a random act. I wish. At the time, I mean, I got lucky, but I wish at the time I had someone like myself that would guide me and talk about the, you know, the pitfalls, the potential upsides and guide me to the right franchise concept. It worked out pretty well, but could have probably

Derek: 7:02

been better. Yeah. No worries. Well, I'm just glad that you didn't get into Blockbuster in the early 2000s, because that was when stuff started changing very rapidly with the rise of Netflix. And, again, you know, don't, we don't need to hash this. I think it becomes part of, it's like now in everyday vocabulary for every single person, just like Blockbuster was that Netflix is out there now. And so just a lesson that things do, change things, shift and change over time. You gotta be

Bob: 7:27

a student. Got to be very careful of things that are involved, that involve technology because it's changing so quickly. And that's one of the things I should have watched out for. But of

Derek: 7:37

course, but you came out on top, which is pretty well. So, okay, let's go ahead and talk a little bit more about some practical things for audiences, right? Shortly before the show, you mentioned to me that there's actually different types of franchising and opportunities. The franchising model that I'm familiar with is more like what I learned on The Founder, from, you know, the McDonald's story, right? Love that movie, by the way. Yeah, the movie's great. Like he, they did a really good job. I think it was, who was the actor? It was, Michael Keaton. Michael Keaton. He did an amazing job. He was good. Anyway, about that, I always thought that if you open up a franchise, like Subway or some sort of like food model, right, that you basically have to be the one quote, unquote, doing it for quite some time until you can eventually, hire a store manager and then start growing into different, you know, you can take that franchise model and then do that elsewhere, but it seems very active, but you mentioned to me that there's also passive models out there. And passive models kind of more aligned with our audience because they're very busy people that probably wouldn't be able to start a business. And so franchising never even crossed the mind. So maybe can educate us a little bit on the difference between active and passive franchising models. Sure.

Bob: 8:48

I mean, first of all, virtually every franchise or 98 percent of them will become passive or semi passive over time. Once you have the right people in place, your systems are running smoothly and you can start, you can start backing off it. Food is difficult. I will tell you that up front. I generally don't steer my clients towards food concepts. You're not starting no matter what anybody tells you, you are not starting them on a semi passive or passive basis unless you have a really experienced team and you're going into it already understanding the whole food model. But you know. There's certain types of franchises that are linear models where you're a consultant, and when you're doing it, you're making money. When you're not doing it, you're not making money. To me, that doesn't make sense. That's not a business. You're a consultant in those types of scenarios, but there's concepts, especially over the last 10 years, more and more. Franchise companies now have developed platforms to support people on a part time basis. Now, question becomes, why would they do that as opposed to having people jump into it full time? Because they want to cast a wider net. They want to bring in people like. You know, perhaps in your audience that have higher net worths, they're smart. Maybe they're, they have a full time job, a high paying job. They're not going to walk away from that job, but maybe they're putting in 40, 50, 60, 70 hours a week. They don't want to maintain that pace forever. So they look for some potential off ramp at some point and start building something on the side. That and a semi passive franchise simply means the franchise company has developed tools necessary to allow you to operate on a part time basis. For instance, it's a service related business. It may be a national call center. So instead of employing multiple people to answer phones, reply to emails, they can't do it around the clock. You need multiple people to do it. Plus people quit. They get sick. The company handles all that for you. So you plug into their prescribed marketing and advertising, the phone rings, the emails come in, go direct, they go directly to the national call center, which converts them into an appointment for your salesperson. If it's a, if it's a service related type of business. That's 1 example. Then you have concepts that are. Passive models, that you really could put maybe a few hours a month into and those types of concepts exist as an example, salon suite concepts. Now, they're more expensive to get into. Typically, you're going to be a million or north of a million dollars to open. Nice return on investment, not phenomenal. It's not going to be a great ROI compared to some of the semi passive concepts where you're trading some of your time to get a much better return on investment for, but still these models are in my opinion, a lot better than most real estate. No offense, my friend. Look, many of my clients are in real estate and I always suggested him, this is not something, as an alternative to real estate, but as an adjunct. Semi passive or passive franchising, typically what you'll see. And you tell me if I'm wrong, most investors that are getting into real estate, most are getting into residential first and, typically they're not making money from a cashflow standpoint, they're riding the equity. If they got in before COVID and they had to run up on equity, it's a beautiful thing, right? If they didn't are getting in now to dealing with higher interest rates. And so maybe if they hire a management company, that's operate, it's running their properties, three, four, five properties for them most of my clients are not making money on other losing a little bit of money.

Derek: 12:21

Correct. And I would agree with you there on that. I, because I think real estate has always been a defensive. type of long term wealth building and tax preservation strategy, because on the commercial side for me, I'm operating on the commercial side. I'm running at a loss every year on paper because of the incredible amounts of depreciation. So that's why, you know, investors as a whole are looking at. The combination of this tax preservation strategy with these offensive, you know, I would say riskier plays because you can never escape the high risk high return model, right? That's why the returns exist in that. In right structure, right? Is it if it's risk, it's high return, if it's low risk, low return, but with real estate, it's depending on what you get into. You're absolutely right. Like for a single owner, just buying single family homes, it's a very tough place to be in. And we even recommend that people buy portfolios of single family homes. Just they operate like a portfolio. Tax benefits. And you can at least have some of the income offset your expenses. Anyway, I'm digressing here to your point. I just want to say that, I understand what you're putting down here. And I don't disagree for sure. I think that, real estate is awesome. And it's the main asset class that I like to build into because I'm active in it. That's my job. People. that are passive in it, they should have a well rounded portfolio, which is why we have people like you on the show. So, yeah.

Bob: 13:42

And to your point, that's exactly what I'm suggesting. I don't, a lot of my clients, again, that are into a residential and have a handful of properties. It's again, if they had to run up during COVID, it's fantastic. It's a longterm play 15, 20 year play. It's an equity play. The people that I know that are doing including myself that are in some type of syndication. Especially commercial. It usually is a really nice return on your investment. But there's other opportunities. There's, I mean, that's one thing in your portfolio. I would suggest that, you know, a franchise, the right franchise concept in your portfolio that is operated by a manager, a manage to manager model. And more and more of these franchise companies are now developing platforms that some will do your hiring for you. Okay. Some will handle your books for you. So they really become closer to a passive or a super semi passive type of, type of concept. To me, that makes a lot of sense. I'll give you an example. And this is a semi passive concept. I bought one recently myself about two and a half months ago. It's actually one of the fast, it is the fastest growing brand in the country right now. Everything's selling in six months, 650 units sold with this. With this concept, I'm in the southeastern Pennsylvania area about 45 minutes west of Philadelphia. I couldn't even react quick enough and everything got sold. So I put together a small investment group, there's several of us, and we bought six units in New Jersey, northern central New Jersey, closer to the coast. But, and we'll have a, we'll have a, a general manager that's going to operate for us. We'll put a little time in with site selection, things of that nature, but then we're just going to back off once it's up and running, but the reason I bought this concept is strictly because of the financial opportunity. When I'm looking at franchises, considering for myself. And a lot of my franchise investor clients, I'm looking at ROI earnings. I don't give a damn what the widget is as long as it's ethical and provides a valued service to the community. And it has to have a semi passive model. So just to give you an example of this, it's a men's health concept, not going to name it. But, it's in the 3 to 325 range. Typically their item 19 under FDD shows a range opening range of 224 to 389, but their item, I'm sorry, that's the item 7 in their franchise disclosure document to item 19, which talks about income shows a top line of 1. 8 shows a bottom line of 627. Okay. That's a unicorn. How many things can you get into that you're going to invest 300, 325, 000 into that by your third year, you could pull that kind of income out of it. Now that's assuming you have an, it's an owner operator. So you plug in a manager, pull out a hundred. 100 K, but you can see by building a portfolio of things like that. If you have the right manager, it can be incredibly lucrative. And we're positioning, for a transaction in the future. And that transaction I anticipate happening somewhere between 3 to 5 years. But when you look at a model like that, it's throwing off and even round the number down to 500 K, let's say it's throwing off a single unit. And you say, you know, unit economics wise, or I should say as a resale, you can see a four or five, six multiple out of it. It's a sexier model. So you should call it a five multiple on a 300 plus thousand dollar investment to be able to sell for two and a half million dollars is realistic with a concept like that. And I don't know anywhere in real estate where you're going to have that type of run up in that period of time, but that's a unicorn. Okay. Again, there's not many things I can show you like that, but once in a while, they

Derek: 17:27

come along. Yeah. And I appreciate you saying that. I will say in real estate, just to defend it, that there are opportunities where you can do this, where there's a ton of distress, but you have to spend a lot of time. Like you can buy a property for dirt cheap, and then you're basically all your construction expenses, if it's in the right area, you could triple your money in three years and still keep it. Like you can basically pull money out of the investment and still keep it and then have your renters pay your mortgage for you and then, you know, sell it in five years. Okay. That's, but that's also a unicorn deal. And so I think they all these industries, but my main question for you is

Bob: 18:00

I'm actually, I believe in it and I have, I'm part of a syndication right now with commercial real estate. So absolutely. I think everybody should have a piece of that in

Derek: 18:09

there. I appreciate that. Now, talking about the risk here for. This right? I'm a big fan of mentioned before high risk, high return, low risk, low return. So whatever risk you're taking on the scale, that's the reward that you should be expecting for taking that risk. And the only way that you can asymmetrically turn it into your favors by getting educated and partnering up with the right people, right? I was going to ask you, how would you advise people to look at risk when making an investment like this? Because right now I, I still don't even know how all of the mechanics work when you're mentioning line items on the franchise document. All of that is new to me, but as an investor looking for a semi passive or a passive sin franchise opportunity, Can you explain like what we should be looking for in terms of risk? And like, what are some things that just, you know, if you're looking at it from a new person's point of view, things to be aware of before learning more.

Bob: 19:03

Yeah, well, first of all, you have to look at what the threats are to whatever the category of franchise, franchising happens to be on my client's behalf. I always try to look at evergreen concepts, things that aren't trendy. They're not going to go away. But you have to also look at things like a pandemic. What kind of impact is if we run into another pandemic, they're already talking about some other disease going on in China right now, and it's gonna make its way to our assures, who knows? But if it's, if another pandemic hits, what kind of impact is it going to have on your business? If you're in retail, if you're in something, beauty, fitness, especially food related hospitality, you're going to get. Killed again. So that's something to look at. Look at Amazon. Is it Amazon resistant product based franchises at this juncture? I wouldn't go anywhere near unless it's a product service combination that Amazon or online shopping cannot duplicate. And then the 3rd thing you want to look at is recession. If we go into a recession, how is the business going to fare? There's some that will be. Pretty severely damaged by recession. There's others that will take a little hit in recession. Some will take no hit and there's actually some that tend to do better during a recession. Anything that's would fall in the home service category. A lot of things tend to be did weather recession pretty darn well. I mean, during covert, those things that category was growing very rapidly to begin with. But during covert, that category actually got stronger and has maintained it. since COVID and is continuing to grow. So those are some of the things you need to be cautious of, whether when I'm working with a client, whether, you know, I get into the, with them or not, I'm always cognizant of that. And I'm always putting, and usually I'll explain to them why I'm putting these types of concepts in front of them. But there's also the factor of, are you working with the right person? Okay. I would suggest to anybody who wants to consider a franchise. Find an expert, find somebody who understands franchising, not somebody. And I hate to disparage my own industry of franchise consulting, but look, there are so many people in this industry and that's been the in vogue thing. So many people jumping into this and companies taking advantage of that, charging them typically anywhere from like 20. 25 grand up to maybe a hundred grand they pay as an upfront fee to get in, to get training, to get up and running, get a little platform to operate with. These people don't know what they're doing. They don't have a franchise background. Most of them wash out in six months, a year they're out of it. And they wasted a lot of money, but more importantly, they ended up hurting people. By, they're not franchise experts and they're giving advice on franchising. So if you find, if you're interested in a franchise, find somebody who has owned franchises in their past, maybe has also a background on, in corporate, they were at a high level with a franchise company. A lot of consultants may have owned franchises or a franchise in the past, but they don't own one now. Yeah. Ask them why. if you're offering franchises and you think it's such a great opportunity and you're saying it's semi passive or passive, why aren't getting high on your own supply, so to speak?

Derek: 22:13

Great. I love that. Yeah. No, that's a wonderful takeaway there. Let me ask you too. So, I understand real estate well, obviously, because that's what I do. And usually there is, when you're holding a business like this in real estate, there is a cash flow. And then at the end is when the property sells. And that's when you get all of the original capital back plus a nice little gain. Talk a little bit about how franchises are structured. Is it similar to that in which You know, you have a cashflow and then an exit. And if that's the case, can you tell us a little bit about what a good benchmark for a healthy business that you would call a realistic business would be for cashflow and then for the exit. Yeah,

Bob: 22:55

fantastic question, by the way, because most people when I'm working with them, they're not even thinking about that. I want to get into a franchise. I anticipate, but it's always important to look at the sale ability of the franchise that you're getting into. Okay. And in my, there's 3 buckets of franchises. There are the. Big brands that are all over the country already. And there on the other end of the spectrum, there's the emerging brands. And then in the middle, there's brands that have grown to a certain point, but they stopped growing. Okay. They're just not, they're not growing anymore and they're not all over the country. Those are the brands. Typically you want to avoid. There's a reason why they're not growing. And usually it comes down to validation. Their franchisees aren't doing that well. And when other. When people, prospective franchisees speak to them, they ask them how things are going. They don't say nice things about the franchise company. That's going to bring the growth of that company to a grinding halt. The big brands that are already all over the country trying to find territory. For them is nearly impossible. You're looking at resales and if somebody's going to sell their business, typically they want to get top dollar for it. They want to get a three, four, five, six multiple for it. Maybe they paid 200, 000 and they want to get a million dollars back for it. To me, that often doesn't make sense either. When you can get into a franchise at a much lower cost and get to that level within two. Potentially 3, 3 years. so I think the best opportunities in franchising lie in the emerging brands, but I never put a brand in front of any of my clients unless there's something bigger behind that brand. There's an entity that owns it. That has experience in developing franchises. Okay? Because I will argue all day long. You have the widget. You have the service, whatever it is. A lot of people might be able to open that business and be successful with that type of business. The trick comes in duplicating that business, making it work for the lowest common denominator. So, if Frank, I can tell you that so many franchise companies, fledgling franchisors, they start, they maybe opened a couple of units or a couple of territories with something, they franchise the concept, get a lawyer, Spend 150, 000 and they end up falling on their face. It falls apart. They just, they're never able to get launched. It's the hardest thing trying to launch a franchise company. The ones that have the experience and have launched multiple companies, I trust them much more, even if it's a fledgling brand, because if it's not a fledgling brand, Typically, if you're hearing about an opportunity already, the opportunity may be over because it's already sold in your marketplace.

Derek: 25:38

That's right. I think that's very common in tech and also in the stock world as well. That's pretty much what it is. Once, once it's in the news, it's already too late at that point. And I can understand conceptually what you're saying here, because if you have a giant company, that's got all the research, right? They know. They know their key avatars. They know who they're targeting. Well, they know how big their specific, total addressable market is their TAM, right? And all of these ideas, and they're that acronym. I know, right. I learned it from a tech entrepreneur that I talked to a couple of weeks ago. So I'm kind of flashing some of that knowledge. Very cool. But no, I I could, it totally makes sense to me that you want to have a, the backing of a bigger brand, or at least in a franchise model for someone that's done the work and knows that this is going to be a worthwhile investment for them and the franchisees, right? And so they know the demographics, they know the real estate, they know the market movements, they know how energy and other parts of the economy are going to impact it because they have people that are doing that full time, right? Within a second. And so I love that advice with the emerging sub, you know, small brands within a big, a big fish behind

Bob: 26:47

it. What other caveat to that? I always counsel my clients also, because a lot of people ask me, well, they want brands that are first to market. They want something unique. And there you go. That's not a safe place to be. It just, I mean, look, it could be a home run, but more likely it, it probably won't be. Well, Hey,

Derek: 27:08

my space was first, you know, in that, in social media, wasn't it? My space was first and look what happened to them and four square, right? Like all those first prototypes. I love it. Okay. So I appreciate that by the way, to help complete the question, what type of returns, and maybe this is a nonsensical question that doesn't make sense, but what type of turn of returns would investors expect for, I don't know, maybe like a five year hold, comparable to real estate where, you have some capital component and then an exit, like what would be a reasonable target for you to consult for your clients? Just to get to what you think would be appropriate. Yeah,

Bob: 27:43

The one that I gave you the example of the one that I bought that's a unicorn. You're not going to see that in many companies at all. But I think, and I always look in terms of that, which you just mentioned a 3 to 5 year exit strategy for franchise investors. They're often looking for that. But to get into, if you get into the right franchise, so it's going to be all over the map, but if you get into the right franchise, it could be extremely lucrative. I'll give you, I'll give you an example. I've placed a lot of my clients into a concept. I almost hate to say what it is. It's not a sexy concept. They do gutters. They install gutters on homes or buildings, but they also do the gutter caps and everything to keep debris out of somebody wants that and all the way up to copper gutters and heated gutters on high end homes and so forth. But, the average franchisee, it is disclosed in their. Franchise disclosure document out of 19, 1. 7 top line. And typically it's 25, 30 percent dropping to the bottom line on an investment. That's going to be between two and 300, 000 to launch. So that one, again, that's unicorn ish, but if. You sell a concept like that and it's dropping, half a million dollars to the bottom line. Even if you've got a three multiple, that's not a reoccurring revenue model. And it's not a sexy model. So call it a three multiple, but a million and a half to sell something like that, that you may have paid two 50, 300, 000 for. I don't think that's

Derek: 29:06

too bad. No, that's pretty good. And is there any, like, for instance, a typical model for this? I understand that the multiples three. So for those out there who are listening, it means that for, Just on a fractional basis, 100, 000 in, it means over five years, you can expect to basically get 300 back out. So your profit is two, unless I'm misunderstanding that, Bob. Well,

Bob: 29:27

what I'm referring to as multiples of earnings. So if someone's getting a three multiple of earnings and you're dropping, 200, 000 to the bottom line and you sell for three multiple, it should be worth 600, 000. In something you may have spent, you know, two 50 to get up and running, had cashflow all during that time, three years later, four or five years later, you sell it and it should be a really good return on your investment. Conversely, if you get into the wrong franchise, you could end up, you know, just giving it away. I mean, usually you're not going to, you're not going to, it's not like real estate. Okay. So there's more risk in it from that perspective. So things just don't work out. You may not have much to sell. Usually get some of your money back often if it's a growing brand or it's a brand, it's all over the country already. If you get in it the proper way, getting your money back usually isn't a challenge because there's demand for either your territory or there's demand. If again, or if there's no territory available and there's a line of people wanting to get into a brand is selling it is usually not a challenge.

Derek: 30:29

Makes sense. Yeah. And that's why people need to talk with you, Bob, right? You can avoid,

Bob: 30:33

please,

Derek: 30:34

please. Yeah. All right. Last question that I have today. I could talk to you for hours. I can tell, but last question that I've got here for you today, before we head into the rapid round to talk a little bit more about mindset things. Is, can you talk about someone that you've helped, in finding and funding a franchise and how it's transformed them and helped them break away or get closer to getting away from the time equals money equation? Just talk about a story if you've got one. For a previous,

Bob: 31:02

yeah, this ended up, it's a semi passive. In fact, I'll go back to that concept that gutter concept. Yeah, I had a client. He is in Austin, Texas. He and his wife both had 6 figure income jobs. They work for the same company. I introduced him to this franchise. He bought 3 territories with this franchise. I think it was his investment was in the 250 to 300 K range once they completed training and they started their business and again, he's doing it on a semi passive basis. He saw the upside pretty quickly and they decide they quit their jobs. Like, are you kidding me? Like, you're jumping without a neck guys. You're sure you want to do this as quickly, but they did a first year. They finished up first year at 1. 6 million in revenue. He, I talked to him a couple of months ago and he said he was anticipating finishing this calendar year off at somewhere between 3. 2 and 3, 4, 3. 4 million dollars in revenue.

Derek: 31:57

That was a wonderful, that's an awesome exit. Oh my God. Keep going. Yeah, sorry. Yeah. it's

Bob: 32:02

look again, it's not a sexy brand, but sometimes these brands that aren't sexy. I mean, would you just look at the category of service at home service, whether it's. B to C, or we can look at B to B to B things too, and many of them have developed these semi passive platforms, but there's not only the opportunity to scale horizontally, you open up, you open a, orange theory, it's roughly 1. 3 million dollars on average to open an orange theory. Okay. You open a second one, guess what it's going to cost? 1. 3 million. You open a third one, 1. 3 million. They top line average, I think it's 1. 1 with maybe a couple hundred K dropping to the bottom line. To me, even though it's sold out virtually all over the country, it doesn't make a lot of sense when there's so many other things you can get into that just aren't sexy, like that gutter concept. There's a lot of things that are like this. That you're talking about, you know, one territory up and running, it might be 200k. But if you buy a second franchise, second territory, it's 40, 000. Now you doubled your territory and doubled what your financial upside could be. A third territory, 30, 000, triple the size of your territory, tripling what your potential upside can be. So that the guy and him and his wife that I had mentioned to you, Kip and Brooke, they. Originally bought three territories. Once things took off, they turned around and came back and bought two more territories from the,

Derek: 33:26

from the course, of course. I mean, congratulations to them for making that happen. And you can tell, you know, people that are dedicated are going to make that happen. They're going to create value. And if you don't mind me asking, and, you know, I'm just curious, what type of things did they do when they left to, to create that kind of growth, was it operations and marketing? Were they trying to get more business? to support the top line or I'm just curious like how they were able to make that growth happen. Yeah,

Bob: 33:51

well, with that particular company, they are really good at marketing and advertising, the company, the franchise or so they just plugged into their marketing and advertising, and they just up to spend. A lot of people go into it very. Tentatively, and they'll say, okay, what's the minimum I have to spend that they saw the opportunity they spent. They quickly scaled into a 2nd truck, a 3rd truck, and they got a trailer. Oh, and by the way, he just came back to me. 5 months ago. I want to say he just is just finished training. With a second franchise concept that he just acquired, with me because he had so much success in his first one. And that's one of the beauty with these types of concepts, because you can scale vertically as well by a second concept, introduce it to the same customer base that already knows and trust your first service should gaining economies of scale. Cost of customer acquisition is going down. Yeah. What

Derek: 34:44

if you do like the gutter business, but then also acquire like in one of your test markets, that seems really aggressive with like. You know, new construct, not new construction, but like older homes and you do a roofing business in the same market. Oh my gosh. I imagine what you could do. You have one guy come out there and be like, Hey, got your gutters fixed, but man, your roofing needs some issues. You want us to quote that too. That'd be amazing.

Bob: 35:07

Well, you, you nailed it. Those are two things to go together really well. I mean, he went into fencing. Fencing's a really hot category right now as well. And again, these, you put a general manager in place to run this. You don't have to spend a ton of time with this concept. Most of these companies help you find that person. Some one brand family, they'll actually do the hiring for you. They do your books for you. Things of that nature.

Derek: 35:31

Incredible stuff. This is great. man, wish that we did that. We had some more time to talk about this, because this is great. I just love all this stuff and, I'm really excited to talk to you about

Bob: 35:41

real estate, by the way, do it off the line conversation,

Derek: 35:44

but what we're ready to do now is the five questions that we ask every one of our guests, which is called the rapid round, and they're meant to be answered in about a 30 second duration, but no pressure. So it'll be okay. If you're ready, I'm going to wrap them to

Bob: 35:57

you. Fire away. I'm intrigued. What the heck is this going to be?

Derek: 36:01

Number one, name any resource, including a book or courses or whatever that was, or is still essential in your journey to pursuing freedom. E Myth

Bob: 36:11

or E Myth Revisited. The

Derek: 36:12

books. Both very good books.

Bob: 36:14

Yeah. Yep.

Derek: 36:16

Yep. Michael Gerber. Basically, for those who don't know about the gist of it, there's, there's a story in there about a baker who opens up a business and finds out that they're better at being a baker than they are a business person. And so you can see kind of where this starts heading down. So there's a difference between a technician and a business owner, and so you just have to figure out where you are.

Bob: 36:37

Yeah. You know, I get to jump in for one second because I will tell you, and I always counsel my clients is. Yep. Yep. In this direction, there's a spectrum of people I work with, and some I term as, for lack of a better term, not in a derogatory way, but ideologues, people who are into baking, they're into pets, whatever it happens to be, and that's what they want to see in terms of a business. And I always politely try to ask them the question. Do you want to make money? Is it important to you to make money? Some people, it really doesn't matter if they just make a little bit of money, that they're fine. But I will tell you nine times out of 10, somebody who goes into something that is not a lucrative category ends up hating what their passion. Is over time and on the other end of the spectrum, I have my clients that I call my show me the money clients. They don't care what the widget is as long as it's ethical, provides value service to the community. I love working with, and it sounds like that probably aligns with your, a lot of your investors.

Derek: 37:30

Yeah. I was going to say for, I'm thinking for me, if I could get in the roofing business and get myself. And in with property managers and owners of commercial buildings, man, I could vertically build in my, you know, in my real estate business alongside of that. So it's just very interesting how, like the way you think anyway, number two, if you, Bob, you woke up and your entire business was gone one day and you had 500, a laptop, a place to live in some food, what do you think you would do first to rebuild? Oh my goodness.

Bob: 37:58

That's a great question. I think I would attack. The consulting, I'm a franchise investor. It takes money to do that. I may try to put together a small investment group to restart that, but I would get, I mean, based on my knowledge base, if I still had that, I would get into consultant consulting again, because I think I have a lot of knowledge to impart.

Derek: 38:20

Wonderful. Yeah, that's right. Warren Buffett. He is quoted with saying that education and knowledge and experience are the only things that never go down in value. So he always recommends education, knowledge, beautiful experience, because those things you can't, no one can take it away from you, right? There's no downside to them. Number three, what does your self reflection and goal setting practices look like each day?

Bob: 38:44

Man, I am so embarrassed to say that I really, I have my goals, but in terms of self reflection or following KPIs, I am really bad at that. It doesn't

Derek: 38:57

sound like you need it though.

Bob: 38:58

My I'm of the school of, I never count my money when I'm sitting at the table, the Kenny Rogers school of business, and sometimes I need to sit down and reflect. I usually don't do that on a. Only basis at all. I think I should have list of tape enough tapes and whatnot on that. But usually I'm analyzing on an as needed basis, a handful of times a year. I love

Derek: 39:21

it, man. I love it. All right. Number four, what are the core work habits that are naturally in your personality that you attribute most to your success? Uh, uh,

Bob: 39:31

tenacity, I, when I start something, if I'll get ton of tunnel vision with something and I may, all else may fall to the side, but that one thing I'm going to get done no matter what. And I think that's over the years, sometimes to my detriment, but usually it served me pretty well. Yeah.

Derek: 39:50

You know, that's also, I can very much relate with that. My wife tells me all the time that like. I have this laser focus that she could like, wave a flag in front of me or smack me on the side of the head while I'm focusing on something. And I still wouldn't notice what's going on. And I noticed that in my grandpa too, when he was watching football back when he was still alive. It was like, forget it, like you can't do anything. He was just locked in like on the TV. So it really cool stuff. I love it. All right. Last question I have, second to last question I have for you today. Is what tool or process has become one of your most important time, money, or energy saving ninja magic tricks that you use nearly every day? If you have. Oh my goodness.

Bob: 40:30

Yeah. It's employing somebody. My, my oldest daughter, I hired her a few years back. I think this is her third year, and she basically keeps me on zoom. All day. That's her job. And she is much more technically inclined than I am. She understands technology a couple of better than I do. I get frustrated with it very quickly. So she's been working with me full time, I think for two and a half years now. And that's been that's been a

Derek: 40:55

godsend. Hey, that's awesome. And then also it's, she gets some insight into what you do and, I guess he is

Bob: 41:02

grooming her. I am grooming her to get into what I'm doing. Plus, she'll be involved in franchises with me as

Derek: 41:08

well. I love it. I just, I thinking, I'm just thinking like over the last 20 minutes, the last, the theme of these last 20 minutes is just vertical integration, right? Like integrating businesses, you know, together with your talents and other businesses and where you want to grow. And with real

Bob: 41:23

estate, a lot of these things go hand in hand with real estate. Yeah. I've

Derek: 41:26

always wondered too, You know, if you own a, if you buy a franchise and you have real estate experience, why couldn't you talk with the landlord and be like, Hey, you want me to buy the, then it becomes a combination of these two things, right? You're really into that service piece and you know, the real estate there. So lots of cool stuff there. That's opening my eyes here. I love it, Bob. All right. Well, so Bob, I, like I said, I wish we had some more time to talk on the air, and spread some more knowledge to our audiences here. It's been fun. It's been great. But before we go, why don't you tell people a little bit about how they can find you, what you've got going on right now, how they can become a part of your world more.

Bob: 42:03

Sure. Anybody go to my website, it's franchise with bob. com. Pretty basic franchise with bob. com. I have a, an ebook on there on semi passive franchising. We can also talk about, about passive franchising, but anybody wants to reach out to me via my website. Can certainly do so. I'm more than happy to take a take 30 minutes with anyone. We jump on a zoom call together. We assess your situation pretty quickly. We'll see if it makes sense for us to work together. If it does, then we can proceed. I'll take them through a structured process to hopefully find the right franchise

Derek: 42:36

fit. That sounds wonderful. Well, thanks, Bob, again, for coming on the show. And, for all of you guys that have gotten to this point in the podcast, I want to thank you as well. This was a fascinating episode and I know that I'm going to be going back and listening to it again, not to hear myself talk, of course, but to hear Bob talk a little bit more, please, wherever you guys are listening to this or watching it on YouTube, please like subscribe, comment. Let us know how we're doing. And, the more that you help comment and get involved, the more people will get like Bob on the show. And we'll get other listeners like you as well, to appease those algorithm gods and make sure that they're sending out our episodes to more people out there who may not have heard of us before. So thank you, dear listener. And we'll see you next week. And Bob, thanks again for all you do.

Bob: 43:23

so much. Really enjoyed the show and love your style. I

Derek: 43:26

appreciate that. Thanks everyone. We'll see you next week. Yeah.