The Franchise Insiders "Inside Scoop" Podcast

15 Crumbl Stores with Shideler Bennett: The Real Scaling Playbook

• The Franchise Insiders • Season 5 • Episode 24

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Scaling a franchise sounds glamorous — until you're staring at three simultaneous buildouts and a contractor who just walked off with your materials.

That's where Shideler Bennett started. Today he operates 15 Crumbl stores.

In this episode, we dig into the real levers of franchise profit:

→ Labor at 25%, COGS under 25%, occupancy below 12% → Why one sold-out cookie can erase your margin → Weekly scorecards that make underperformance impossible to hide → The "hire slow, fire fast" rule that protects your sanity → Build vs. buy — and why acquisition beats ground-up once you've proven the model → The "always PE-ready" mindset: clean books, clear KPIs, documentation you can hand to a bank tomorrow

Whether you're buying your first unit or building a platform, this is the playbook.

Visit www.thefranchiseinsiders.com to subscribe.
Send us your questions for an upcoming episode at 305-710-0050.
From your pals in franchise ownership, Jack and Jill Johnson.

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SPEAKER_03:

Hi everyone. Welcome back to the We Bought a Franchise podcast. I'm Jack Johnson.

SPEAKER_05:

I'm Jill Johnson.

SPEAKER_03:

And today we have a guest that I think all of you guys are going to be so excited to hear from. We have Scheidler Bennett, who owns Scheidler does many things in franchising, but we're going to start off with his crumble story. I think Scheidler, is it 12 or 15 crumble units that you own?

SPEAKER_02:

Yeah, we've got 15 now.

SPEAKER_03:

Wow, what a platform. I can't wait to dig in on this. But before we do, I want to make sure that I introduce our esteemed franchise consultant panel. Of course, we have Katherine Allen, Morgan Noller, uh Jay and Carolina Arrosa, Brian Gross, and uh, of course, my lovely co-host.

SPEAKER_05:

You already introduced me. We're good.

SPEAKER_03:

All right. So, Scheidler, let's dive in. Um, and I want to hear all about you, but let's let's kind of get into sort of a working podcast here. So, two things. First, we'd love to hear your story and how you got into franchising and why crumble. And then the second part will be when did you know that you guys were going to build such a large platform?

SPEAKER_02:

Well, my entrance into franchising was not the intelligent one where if they had smart people like you helping them, I would have just done it more intelligently. We met people, uh, and when I say we, I've got my partner Taylor that were running business services. We were doing stuff in tech and insurance, and we knew some early crumble franchisees. We live in Utah, and that's where the brand had started. And those early days, the brand was, you know, it was scrappy, right? They're figuring things out, and so they were opening stores for far less than what they do today. And we were actually trying to convince someone to sell us their business uh so that they could go do more crumples. And as they were explaining the financials behind it, we're kind of looking at each other, being like, why are why aren't we doing that? That that seems like a better use of our time. And so we never did a discovery day, we never did anything. We literally went, raised money from friends and family, found operating partners, and we were off to the races. So initially we signed an ADA for three locations in Southern California. So right from day one, we're like, well, if we're gonna do one, we should do a bunch of them, right? And ultimately ended up having more investors that had approached us wanting to do more locations. And so over the next year or two, we had signed, ended up being three different ADAs, and we were off to the races building all of those out. This is coming out of COVID, though. So excuses all over the place from contractors and from cities and all of these things of what's gonna happen. And banking was still really hard to get for Crumble because it was early on. So we had to get scrappy. Um, this is what taught me how to broker debt because not only was it raising equity from people, but it was trying to find any available debt that we could do. So we did, we used SBA loans, we used lines of credit, credit cards, even, wouldn't recommend doing most of what we did. Um because ultimately it got to a point that we were way over our skis, we had been taken advantage of by contractors and had to dive in to literally do the construction and oversee the projects. And uh this kind of probably a longer answer than what you had needed, but just to set the tone of we did everything wrong, but it also required us to learn all of it from the nuts and bolts to hiring, firing, everything. And um yeah, at that point it was well, if we're learning all these hard lessons, we better grow this as big as we can.

SPEAKER_03:

Okay. So and I and Catherine, I know you have a question, but before you do, I have a quick follow-up because Scheidler, everyone talks right now about they want to find an existing business for sale, right? That is the all over LinkedIn. I'm sure you see it every day, from Cody Sanchez, and we love Cody, to you know, people who aren't quite as established saying all you have to do is go find some retiring baby boomer, they're gonna hand you their business, million-dollar business, and it's so much easier that way. You opened all your crumbles from scratch, correct?

SPEAKER_02:

Correct.

SPEAKER_03:

Now, while you did learn a lot of hard lessons, some people think building a business is so stinking hard. Um, what would you say after going through all the lessons and being where you are to the crew that is just looking purely for the existing business, which is like a diamond in the rough, truly?

SPEAKER_02:

Yeah, I get asked this question all the time of how we were able to raise money and how we were able to get people excited about something. And to I had tried to raise money for different businesses, different real estate projects, other insurance agencies that we had tried to buy. And when I'd go to investors and it was just a financial return, there you got to remember I signed this back, it was 2020, and the money printing from the Fed was going crazy, interest rates were super low. Everyone felt like they had more money with stimulus. So it's a it was a totally different time. And when I presented Crumble to people, it was a brand that people recognized, so that helped a ton. They love the idea of being a part of that, and we did, we looked for equity. So they were saying, hey, I get to own a cookie shop that's super viral. I love that. Crumble does a lot of things well on top of the marketing, which is the technology, and every store that we would hear about opening, because now we knew a lot of these franchise owners, it was only getting better. The returns were the the stores were only doing better. They were paying themselves off in a year, and it was like nothing was telling you that things could go bad, right? So we tried to set conservative expectations, but a lot of it had to do with timing. And I always tell people now you've got to understand where your advantages are. What did you grow up around? Were your parents professionals? Did they go around these businesses? Things that you might understand or might have connections to that others don't. And we all have done things in our lives that we'd probably have more of an expertise than someone else. So I'd always recommend to start there to find that person that's trying to retire. And they might not be a sexy business that you want to own, but at the same time, if you're willing to also go work in that environment to get comfortable in an industry with a lot of retiring people, I feel like that's where you find the luck. You now have the skills, you can confidently say, hey, I've been working at this business, I know how to make it profitable. If someone approaches me as an investor and they can show that they are running a business already, well, yeah, why wouldn't I help you buy this? It's a lot easier to raise money than say, yeah, I'm just some person really excited about business. I think I found an opportunity. Will you back me? It's just a much harder sell. And it's this is the same for the banks. As I brokered debt, I found it's very similar to equity, even though people try to see it differently. They're trying to understand, are you actually capable and how are you going to do it? What is your buy-in? Are you putting equity in? What's your risk on this? Why are you gonna make it happen no matter what? And how do I get my money back? And what do I make off of that? If you can answer those three basic things, you'll be surprised how many people would be willing to give you money, help you find opportunities, or you know, point you in the right direction, at least.

SPEAKER_03:

That's great.

SPEAKER_04:

Hey, it's Catherine. Thank you for sharing your story. I truly am impressed. Uh it takes a lot to impress me, but that you that wow, that showed a lot of great the fact that you were in there doing the actual construction. I think that was that was the cherry on top. Um, my question for you is what treat did you need on day one that you didn't fully appreciate until later?

SPEAKER_02:

Um I think it the part of the story that we get to after getting these open was in 23, we saw sales decline month over month pretty drastically to the tune of almost 20% month over month. I guys, I I have everything into this my whole life. I'm having we're having a small family that's being grown at the same time. My wife's hustling, we're separated because I'm in California for a lot of it. She's at home working a job, taking care of the kids, and then to see their house is on the line, because again, we took debt plus the equity, everything was there. And I didn't know I had not been through something like this. And so I think you have to say grit is probably what that is. But at the same time, I would have in what in that really scary time, I probably would have just given it away. If someone would have given me a lifeline and said, Chatter, I'll take your equity and I'll take all your risk away and I'll just make it easy for you. I would have gladly say, yes, just make sure my investors are made whole. I don't care to make a dime. And it really changed my perspective on money and relationships because in my moment of biggest pain, all I wanted was to help save my relationships. I could care less about money. As long as me and my wife's relationship was still good and she'd still love me, even if I lost our house. You know, it was kind of like now if I make anything off of this, it's gonna be a win. Right. And so I wake up now, the grit to make it through, and that now has turned into gratitude for every day that I didn't lose at all, is kind of like, wow, I I just am grateful for the opportunities that I have.

SPEAKER_04:

I love that. I would also add resilience closely to grit.

unknown:

Awesome.

SPEAKER_01:

Shaderhead, it's Brian here. So start to talk about like you're trying to scale, right? So what are the the financial discipline that really mattered most as you start adding locations two and three?

SPEAKER_02:

Well, we were horrible on all money discipline initially because the contractor lied to us and said, Well, we can't get the permits done for one of them, so we might as well start construction or at least demolition on all of all three of these locations that we have now figured out. So we were exposed as much as you could because we had three simultaneous projects going, and we were working in California, which you I couldn't tell you why things took so long or how we were gonna get them through. And it wasn't until I was going to the city myself, begging them, saying, like, look, I don't know what it takes to get this through. We'll do whatever. We'll work all through the night to get an inspector to come out the next day and do that. But what we really learned was no one cares about the money more than you do. So, you know, when we started realizing how much the contractor was spending time and attention and these things, it really gave us an appreciation because we lost all this money to the tune of hundreds of thousands of dollars to this contractor. He's walked off with our materials, with our supplies. I mean, it's as bad as I couldn't even describe how bad it was when I walked in. Um, and then our team really rallied. We worked together, and you saw how if you are willing to put in the work early, you can save yourself so much money and a lot of pain. And then you really can keep contractors and people accountable moving forward. So I think the discipline that we learned was you need to be the one that sets everything up. There is so much of, especially in a new business, you just can't outsource it.

SPEAKER_05:

Yeah, I agree that the contractor nightmare um continues, I think. We we see it everywhere. So I totally agree. You know, being on top of it early is key. And it's a hard thing to do, but you know, it's your baby, it's your business. So, you know, it's it's important to do that from the beginning. Um, so my question for you is as you were scaling, was there a system, an early system or something that helped you um, gave you the most leverage as you were scaling? Was there anything that really kind of stood out um that you could share with us?

SPEAKER_02:

Yeah. And, you know, this is kind of the where the selfish plug comes in a little bit because there weren't specific softwares that we found that that really helped do everything that we needed. And since we were doing multiple locations all at the same time across multiple states, we had to create scalable systems from day one. So it was obviously we're using systems like Slack. We've now kind of shifted away from Slack to another software. We could go over tech stack as long as you guys want, but technology in this so that we can oversee operations, so that we can check milestones. Um, I mean, if you're familiar with what a Gantt chart is, became huge for us to make sure that we were holding people accountable to sticking to these timelines. Because you know, if you let one piece of the puzzle get behind, it holds everything else up. And we had to get revenue coming in, which meant I have to get these projects open and on time. And so documentation, obviously, early on, it was just documents in the emails and documents all over, and now we pick one centralized location. So early on, all of your EIN information, all of your certificate of occupancies, insurance, all of those things set up into one place so that not just for simplicity of these early days, but when you're going to get debt, when you're raising money in the future, everything is so much easier. And then seeing all of your financials and bank accounts in one place, it's just the things that can take extra time that are unnecessary.

SPEAKER_06:

Hi, Tidler, it's Morgan here. Um, what was the first operational break that you had as you were growing beyond the three stores that you started with?

SPEAKER_02:

Um one of the biggest uh breakpoints was when we found out that some of the operating partners were just not cutting it. And that was really hard because it was also, these are people that are close friends, and um we had systems good enough to say, here's the numbers, here's the KPI scorecards. You're not meeting either, and that can only come back to you. Like somebody always has to own these different KPIs or metrics. And if they don't hit those, then that comes back to me because I'm accountable to the banks and to the investors. And so it was really cool when you have clarity on where you're hitting your numbers financially and operationally through the KPIs or the scorecards. It's hard to hide from where the break in operations are. And obviously, we spent plenty of time trying to fix those things, but it was then saying, I now need to do the hard work of saying either I didn't do a good enough job helping you succeed at your role, or you're not the right fit. And unfortunately, most of the time when you see early that it's not a fit and you're wanting to just make it work because you love these people and I truly enjoy the people I work with, I always take way longer than I should to fire or to you know move positions. And again, firing usually is what leads to the success. And so the more that we've been willing to track that, move quickly, and get the right people in the right seats, it's funny how the KPIs improve, the financials improve, and you go, oh, we should have done this a long time ago.

SPEAKER_06:

Thank you for that. That's something I struggle with too, firing faster. I it just hurts every time, but you got to do it.

SPEAKER_03:

Hire slow, fire fast. Scheidler, my question is this a couple of years ago, maybe it was 2023, probably coincides with the the revenue dip that you guys saw. I think the item 19 of that year showed a pretty big discrepancy between the average crumble franchisee and the median crumble franchisee. Now, I know you're not crumble corporate, but it's really curious. I think it was like 250,000 net for the average and then like 85 for the median. Where did those underperforming owners go wrong? And where did the sort of overachievers go right?

SPEAKER_02:

Um, when people look at crumble, there's a few things to really consider. Is one that they do exceptionally well is again the branding, which is a blessing and a curse. Because when we have something that works well, um, like a partnership, like the Kardashians, right? You can't, it's hard to comprehend what how do I forecast what that will do, right? That's a massive partnership. And so good operators obviously say, you know what, I think maybe it'll be 20% up. Well, we have to do specialty ingredients for these specific cookies, right? And if you underestimate it and you run out, your revenue is destroyed, which that is obviously where the profit is at, right? It's that increased amount that you're getting. Because for our business, once you get above a certain amount, that's why people are so impressed with criminals, because good operators can go get exceptional percentage returns where we're, you know, 30%. And in QSR, people are like, that's unheard of, right? Um, but to that same end, if you are not forecasting correctly or your team is wasting a lot of material, because again, you if you run out of specialty, some of these items aren't things that I can just run down to the store and get. Maybe it's like some obscure piece that goes perfectly with that cookie. And then what other people don't understand is if you have one cookie that's a good seller, well, it's really easy for someone to buy six cookies and they say, I want one of each. And then you say, Well, we're out of that one, unfortunately. That's like the the rule. Like if you're out, it will hurt yourself. Because now they say, instead of six, I'll just get four because I only wanted these four really. But they would have gotten six if you had them all in stock, right? So operationally, it is extremely difficult. And so you will see the very impressive operators see outsized returns in doing this system, which makes people really excited and they believe that they can go achieve that, which if someone puts their mind to it, I'm sure they can, but they don't see all of the stuff that goes on the back end to make that possible. And then if you've got a lower performing store, there's obviously lots of things that can contribute to that. But you would then have to be that much sharper to just get a minimum level of profit. So hopefully that helps answer that question.

SPEAKER_03:

No, it does. And I think this Jay and Carolina are coming up with their questions, and and it it sort of reminds me of the business that that we were in together at home at a company called Home Care Assistance, which is in the senior care space. And it's interesting, every time we coach a senior care client, they'll ask, Man, am I gonna be able to get clients? And the answer is don't worry about getting clients in that business. You will have clients. The the game, the The thing you need to be more worried about is making sure you have enough caregivers to take care of those clients. Because if in the beginning of January somebody calls you and says, My mom now needs 24-7 home care, and you don't have the staff to take to take on that case, you might have just cost yourself$100,000 because you weren't stepped. Same sort of thing. The strong home care operators understand how it important is, how important it is to get to a almost as close to two to one caregiver-to-client ratio as you can. Um, so same sort of thing. It sounds like we're we're saying the same thing, which is operationally know how your business works and anticipate you know, need. And with that said, Jay, I'll kick it over to you for your question.

SPEAKER_00:

Hey, uh Jack, we're having connectivity issues. So hopefully you guys can can hear me. But uh Scheidler, really appreciate your your story um and hearing it, uh having gone through similar challenges uh in the past. But what I wanted to know was what should emerging franchisers learn about how crumble built consistency across hundreds of stores?

SPEAKER_02:

So I would say Crumble grew at a pace that most people can't even fathom, especially for a retail brand. I mean, to go from zero to a thousand open locations in seven years is pretty unheard of. And make no mistake, there was plenty of things that were breaking along the way, and and they are more like a software company than a franchise. The things that we've learned, and that now we talk to all franchisors about on the cover panda side is financial consistency from day one. Not only do franchisees can they understand what success looks like, can you really outline a scorecard? What are the most important things from an operational perspective that they have to do? And you have to keep it simple because there are so many things that they need to worry about. But like, what are the top five most important things that you always are talking about? And then financially, do they understand? One, are they getting their financials done correctly? And then can they understand the story behind those and how that translates into the operations? If if they have any inconsistency there or any gaps in understanding, it will be very hard for you to see the financial performance across the board, which breeds more growth, right? If your franchisees are succeeding, they're gonna want to grow with you, they're gonna be happy, they're gonna attract more people to your brand, your customers are gonna have a better experience. It's a win across the board. And so those very simple things from day one, if you have to ask a franchisee and they can't tell you what benchmarks they should hit financially to see success, you've got a problem, right? Same thing with the KPIs. If they don't know exactly what's most important to you, the franchise or if I was looking into a new brand, those are the things I'd say, tell me that. Help me understand that. And if they can't be clear on those things, to me, that's a major red flag on the franchiseor side that they need to go back to their systems and make sure there's clarity.

SPEAKER_07:

Um Hi Chadler, it's Carolina here. So, I mean, you alluded to this earlier, right? There's a lot of excitement around the crumble brand, right? So a lot of people are attracted to um food franchises because of the brand, because of the customer excitement. But when theory meets reality, right, on day one, what do you think are sort of the most common misunderstandings or struggles that they have with transitioning from that dream into reality?

SPEAKER_02:

Well, there's a lot, a lot of different directions we could go on this and different uh clients that we work with. But I would say the biggest thing is if you're the investor or you're playing the position where you're not the operator, do you really understand how to keep the person in operations accountable? I I always recommend if you're gonna go do food or almost any franchise, if depending on your financial situation, you you probably need to be the person that really understands the day-to-day so that you can keep people accountable. And I know I'm hypocritical in saying that because I started with operators and had to learn the hard way that I couldn't keep them accountable. And if I can't keep them accountable, it's not fair for me to hold them to expectations where I'd look at the financials and I'd say, guys, you're not hitting what my expectations are, and I don't know how to help you do that. And then it's really uncomfortable because they're like, Well, I'm doing all the hard work, right? So I would say if you're doing it, do whatever it takes to understand how to get success before you pass it off, or to keep someone accountable to reaching that. Because it's not fair to you, it's not fair to them if you don't understand how to do that either.

SPEAKER_03:

I love it. This is great. Morgan, you you're up.

SPEAKER_06:

Yes. So how do you hire and keep these good people? Because you're talking about these operational um in different stores, like the operations, right? You have these managers, and so how are you finding these people and how are you how are you keeping them accountable and keeping them happy?

SPEAKER_02:

Well, I think you need to understand what pros and cons your business has. In Crumble, ours is very trendy in the way that like it's fun for people to tell their friends and family that they work there. We give them a cookie, a shift that they can go. We encourage them to give it to somebody. And they get to go make someone's day. That's pretty easy to keep people happy when they're working with sweets all day and they're listening to fun music and putting smiles literally on people's faces all day as they pick up their cookies. It's it's very different than like their back of house, you know, flipping burgers or doing whatever else where they're just not getting a lot of social interaction. It's a totally different environment. There can be smells, there can be different things. So you gotta just know what your advantages are. And so our challenge has been uh operationally, we need to be growing to give people things in leadership that they can look forward to. All right, hey, we grew these stores. I'm wanting to keep growing to give you more leadership opportunities. Um, and that's something that I didn't understand in the beginning was I'm now really motivated to grow to keep my team happy because now they're so good that I would hate to lose them because I'm incapable of growing and they have to go somewhere else to find someone to do that.

SPEAKER_05:

Yeah, that makes sense. I think you know, you have multiple locations, you have 15 locations, right? So keeping everyone's morale up and everything I you know, the brand is great. Free cookies would make me excited too. Um and also crumble addiction here. But anyway, um, how do you keep that culture aligned between all of your locations? Like, do you have a rule or something that you apply to all locations just to make sure? Because we know each location can be different, a different staff. Is there anything that you do in particular?

SPEAKER_02:

Honestly, that's something I would say I still need a need a lot of work on improving. Um, you know, we've really tried to just make sure that everything is standard across, not just every store, but every manager is held to the same standards and every area manager. And then they all get to communicate and hopefully we foster that we're all trying to improve, but there are expectations of performance, how we carry ourselves, and um ultimately a franchise is a unique business to work within because there's so much of the culture of the brand itself that you're trying to keep. And so for us, it's doing things the crumble way, which means you want it to be brand standard, everything has a place, and the other thing is always you know, smile and customer first. And so it's kind of like those are the three core things that we try to emphasize across the board because if they'll do that, the store should be clean, they should be doing things right, and the customer should be having a good experience. And if we can do that, the rest of the KPIs should fall into place.

SPEAKER_03:

Well, and your guys' numbers, Scheidler, Crumble's numbers, come you could combine all the other cookie franchises, and I don't think they still hit your average yearly revenue. So you guys have just done something that is so unique. And it's it's what Carolina said it's the branding. It's the fact that you guys, you know, and you're not the only ones to bury your menu on a weekly basis, but it's fun, right? I go on the app, I can choose my cooking. It's it's it keeps you coming back, which as we look for what makes a business valuable is recurring predictable revenue. And that's what I think Crumble has done. They've gotten the branding right, they've gotten the packaging right. Um, and it's it's clear in the numbers. It's it's unlike anything else. So, Karen, sorry, or Catherine, sorry. I guess you're gonna be Karen from now on.

SPEAKER_04:

Oh no, I don't know how I feel about that, Jack. No, you're right.

SPEAKER_03:

You can't be Karen. That's no good. Okay, sorry, Catherine.

SPEAKER_04:

I do feel like you've touched on this a little bit already. Um, but what what separates great owners from burnout cases and high volume operations?

SPEAKER_02:

I think you got to know what you're signing up for. We knew from day one we wanted to grow to a place where our team can handle the day today. If if I owned even three stores and I was still heavily involved in the day to day that didn't allow me to do the other businesses and family things that we were working on, then it just wouldn't have worked, right? There's still a lot of consolidation that's gonna happen because uh an owner with one or two stores, even if they're high volume and they're making good money, it can take your time. When you know that you're the one that's going to have to answer if something breaks, it makes it hard to go get another job, right? Your job doesn't want to hear that you're gonna leave to just go take care of something. And so there really is just um, you know, uh a real opportunity for those that can get to the level. I think it's around five stores that can take yourself out of the day today and allow you freedom.

SPEAKER_07:

And so Shatler, um, you know, again, this is something that a lot of um new franchisees don't think about till much later on. But I mean, in our experience, that was something that we were very particular about and it served as well. So I wanted to ask you, what financial habits do you think brand new franchisees should start building immediately?

SPEAKER_02:

I think it comes back to the goals. Um I do think that there is no financial literacy or no help on, well, once cash flow does start coming in, what do I do with it? Um and I think that totally depends on what your goals are. Um, for us, we had investors, but we did utilize debt. And since we had a lull in sales at one point, we are now extremely prudent. And it's kind of like, hey, I'm gonna take minimum distributions, we're gonna try and pay down debt because man, it's not like the best thing to do from a return standpoint, but you've got to account for the peace of mind that you can have when things slow down because it's never gonna be even all the way through. You're never gonna have perfect consistency. I mean, I think we're all seeing today the macro economy is slower than what we want. There's a lot of fear in the markets, and I feel so much better about our situation because we did. We paid down debt, we've got long-term debt in place that's safe. We're not doing any high interest money anywhere. And then I'm looking at this much longer term, and that brings a lot of you know comfort. And so I would just say if if more people could understand how to be prudent that way, I think it helps the franchise or because now they're not having somebody stressed to death and coming after them because they felt like they didn't get what they needed from the franchise, or it you know, breeds high uh stress for everybody.

SPEAKER_01:

So as we're thinking about the numbers, you know, in your business, what are the KPIs that you watch that you feel like actually predicts long-term success?

SPEAKER_02:

Um my mentor in the cromble space is John Gothier, and he was a little Caesars or is a Little Caesars large multi-unit franchisee. And he always was just like Scheidler, do not sell out. Do not sell out and make sure your people have a good attitude. The other things will basically take care of themselves. And then obviously you have to watch your financials, but it again is coming down to those very few things that you say are the non-negotiables for your team. And for us, that's if you're known as a store that sells out, customers will stop coming. It and it it kills the whole thing. Like we talked about, you're not gonna hit that increased revenue amount that um you know was needed, and it's just kind of that downward spiral. Uh customer experience is poor, all sorts of things. So make sure that you have what the customer wants so you can sell them when it comes.

SPEAKER_03:

That's great insight. It's you know something I hadn't thought about before, but you're right. I mean, how many times it's like what was it like with the the Dubai, the Dubai cookies that we could never get?

SPEAKER_05:

Yeah, there were there were there's like three locations by us, and I won't go to one of them because they're always sold out. Um, and they just lost our business.

SPEAKER_03:

So weren't there like stories on TikTok of people who were like eating too many of the Dubai cookies and like getting sick? Am I making this up?

SPEAKER_05:

There's that rating. I even made it a lot of people. Yeah, they were saying it was making them sick, but it was making them sick because they were eating the entire, you know, cookie plus one, and that's what was making it.

SPEAKER_03:

If you eat an entire box of crumble, your tummy might feel a little off. But uh, you know, Scheidler, it's interesting you talk about debt. And we we before we started the show, we were talking a lot about, you know, just kind of managing financials and knowing your numbers, which for all of you who are thinking about becoming a franchisee, please, please, please have a spreadsheet, discipline, get your QuickBooks going from day one and get a good accountant, right? Don't don't stop on those things. But um the thing I'm shocked by that I've seen now happen so many times is when our clients go to do an SBA loan and uh they do, like, say, a home services franchise like Pinks, like what we had. And the SBA will say, okay, you're supposed to get three vans. Use your SBA money to buy all three vans right now. And to me, that's the dumbest thing in the world to kill your working capital early on on vans that you don't even have enough business to support. So that's something we coach our clients on from day one. We say, if the SBA says you've got it, it's got to be a hard note. Because here's the thing utilizing smart debt, you can put nothing down on those vans and still capture the Section 179 by financing it over time. So it is, especially in those early years, I agree with you. Sometimes you have to use debt to your advantage while you're building your business. And then once revenue starts coming in, um, then you can start to pay it off. But aside from that, um, you talk about de-risking without losing upside. What does that look like?

SPEAKER_02:

Well, I think you you outlined it perfectly. Um, when I talk to someone who's just getting started, my biggest advice is always one franchise will not make you rich, most likely, but it can really set you back. And and a lot of that is emotionally, right? If you feel like you failed on your first one, it's gonna be really hard for you to pick yourself back up and go try things again. So I always encourage them to be open to partners or be open to things that would help lower their personal risk. Because let's say a partner, for example, they come on, and even if it's 50-50, if the location works really well and you've now proven that this is something you want to go do, yeah, you might have to buy them out and it might be more expensive that then you wanted. But man, they helped you eliminate so much risk. Because then the uh on the other side, if it failed and they put up the money, but they knew that that was their risk and you did everything that you could operationally, that's just a lesson that you learned, right? Rather than like what you're saying, putting three vans on an SBA loan and then realizing that the SBA loan potentially leaned your home, and now you're trying to move, and now life gets really complicated and way more stressful. And then, yeah, I mean, there's so many other things that can go bad. I think we underestimate how negative things can go and want to just be optimistic. But especially in the beginning, especially the earlier the brand is on number of franchisees and how proven it is, that's the more risk I would be scared to take personally in doing it. I think there's massive potential for an emerging brand if you get in early and you do it right, because then you could be positioned to say, great, this is a home run. I'm now gonna go to a bunch of territories, right? I'm gonna buy my partner out. I've got debt lined up. You know, it's way easier to go fast once something's proven than from day one. We got just very lucky with Crumble. I would never recommend what we did. Crumble being so exceptional made up for so much of my shortcomings.

SPEAKER_03:

Well, and you know what else? It's it's everybody, I shouldn't say everybody, but there's a lot of people that want to grow a big uh empire. And we were that way too. I mean, when we bought our Pinks franchise, we we started with five units. Um and I would suggest people that are considering franchise ownership, look, the best thing you can do is buy into a system like Crumble where you have exit and acquisition partners. And what I mean by that is start with one or two units, get 18 months in, see where you are. If you're a rock star owner and you got this, there will be other owners who are ready to sell. Life happens, right? Family changes, people need to move, and probably you might even be able to get a seller financing deal and you can buy from within. So you don't have to start with a million territories. You can start with one or two, you can still get there, and you probably get there a lot more smartly by acquiring existing locations. But this is the thing most people don't realize. And Jill, Jill and I get these types of calls every single day. Hey, um, is there a Jimmy Johns for sale that I could buy? The truth of the matter is that if there is a Jimmy Johns for sale or Jersey mics for sale, it's gonna go to an existing owner. It's not gonna go on VizBy. It doesn't need to because the network has happy franchisees, just like with Crumble, who understand how to run it and probably can even run it from afar. So, for all of you listening, that's where I would say the easier path is to start. With a new unit. And then once you do and you gain the trust of the franchisor and you've proven you can do it, the whole world opens up. Five to ten percent of any franchise system is for sale on a given day. So Jay, I'm gonna I'm gonna just throw it right over to you. You're you're up.

SPEAKER_00:

Along the lines of like going beyond one location and expanding, like how do you validate um that a brand is truly scalable and not just like hype cycle?

SPEAKER_02:

That's something that um if in retrospect, it's easy to see why crumble was not just some trend. Um it's because they do so many things in a world-class way. Where I look at some brands um that are growing extremely fast, and and I hope that they've got more to them. But when I hear someone say, Oh, it's just they've got really good people, or they've got um, you know, the brand's just really good, or you know, kind of like things that are really hard to verify. I just think, man, that's a lot that you're again on the on the risk. I have zero desire to go do something in that realm unless I could very easily de-risk the opportunity. Um, so for example, I really want to understand what technology they are building? Is that something that gives them scalable differentiator between the next brand doing the exact same thing? Because everyone believes that their people are amazing. And I I mean, amazing people obviously cause a brand to be successful, but when you're hinging on that and it's like, well, their marketing's fine, but I'm not seeing anything extra special. I'm not seeing that they've got more followers than everybody else or some influencer that is really going to drive everything. I think it's you really have to look at the fundamentals of business. What is different that they have? Is it technology? Is it uh a category that they're creating for themselves? And if it's not, you really have to look and understand who who can beat them, right? Like I look now at anything, and I'm saying it would hurt a lot worse to lose at this point than it would be to win, you know, some find that emerging brand and write it to the moon. I it's just not worth that risk. Um, so I I look at things very closely for quite a while, and I'm okay being the 500th franchisee in if then it's really proven itself and they've gone across multiple states and they've got, you know, a hundred plus units. You know, again, just much more willing to miss the initial jump than to jump in early.

SPEAKER_03:

Calling five to ten franchisees will do the trick every time as well. Make those validation phone calls. You gotta talk to owners at all levels. And guys, we've got about 10 minutes, so we've got to speed through this here. Brian, you're up.

SPEAKER_01:

Great. So talking about leverage. What uh what do you think about leverage when you're trying to scale responsibly?

SPEAKER_02:

Well, I think there's a lot in leverage. Um obviously there's debt that you can talk about, there's relationships that you can talk about. The further you get into franchising, the more you realize there are plenty of ways to do partnerships that can make leverage work. So if I get into a brand, let's say Crumble, for example, I'm gonna meet some incredible operators and very quickly think, wow, maybe I don't have an opportunity in my territory to grow, but maybe they do. It would almost make more sense for me to maybe try to help them grow. Maybe we can combine forces. Maybe there's a leveraged buyout situation where they can buy some of me, I can buy some of them, and we can get economies of scale that way. Um, same thing with investors. There's plenty of people looking to put their money to work. And a lot of people say, Well, I don't want to give up any of my stuff. And you go, well, if you could go from five to ten by giving up some of what you already have, would that be worth it? If that helped you get out of the day today and do those things. And so I think there's a lot of different leverage that can be utilized. Just go find mentors. Anyone that's gone to 15, 20 plus units, they're gonna have had to do something that gave them leverage to get that.

SPEAKER_07:

And so, Shadow, just back to the financials. What do you think is the biggest financial red flag that first-time franchisees often overlook?

SPEAKER_02:

I think really the benchmarks for us, I David or Brian, I probably needed to give you more clarity when you asked uh, you know, specifically financial KPIs, but for us, we are trying to target 25% labor or less, right? But not too much less, because then I know I'm running my team either too hard or I'm not paying them well enough. Then food cost and box cost is the other big piece to that that makes up our cost of goods. And that's again something that's trying to be sub 25% all in. So if I can have a gross profit of 50% and an occupancy cost, which would include my lease utilities, those types of things, of 10 to 12% or less, you know, preferably much less than that, it I'm going to hit the net operating income that I want, which for us in Chrome is very realistic to be at 20%. For high performing stores, it can be well north of that. But if you're not and you've got lower performing stores, you might be okay where you're saying, look, I just have an expensive lease here. So 15% is is really what I should be looking for. And I think that's the other thing is understanding what your percentages could or should be, and then being realistic with where you should be landing.

SPEAKER_03:

Perfect.

SPEAKER_05:

So now that we're kind of talking about like the systems and automation, is there any automation that's kind of saved you hours each month? Is there anything that you've done that's really like been a game changer?

SPEAKER_02:

Yes. Um uh a few big ones have just been uh tracking the receipts and doing everything to be able to close out our books more quickly. And so that part of that is the software that we've created, and then we also work partnerships with RAMP, which is transaction management. So you give your employees cards, you can set budgets on it, you can approve expenses. But then what I love is it will text them, it will remind them they have to put these receipts in. And the closer I've watched my financials that way, not only have I got my financials, like every month, I'm getting my financials before the 15th, or at least by the 15th. And I talk to people all the time, they're not getting their financials for a month or a month and a half. And then how am I supposed to make operational decisions if I'm so far behind on getting your financials back, which really should drive how you run your business. Um, so there's that, and then um, from just moving money uh with investors, we were cutting physical checks to pay distributions. And it's not, it sounds like it's not a big deal, but when you've got multiple investors and then you're spending all of this time, we've now created payments that we can do within the platform where we can pull a management fee across all of our stores that goes into a management company. And then that just makes it easy for the team and the softwares to get paid in one place, and then there's easy ACH transfers that we can do when distributions come about. So a lot of these little things that you're like, oh, it's not a big deal. But if you just go ask people that are already doing it, you can just save yourself so much time. And then with your team as well, like the reporting for investors. Um that's another big thing that we've gotten much better at now is every week we have our operational call, and then by the end of the week, we send out the report to the um investors where we're gonna highlight what our cost of goods sold were for that week so they know exactly how performance is going. A screenshot of the um scorecards, so operationally they see how we're doing, the amount of money that's in the bank accounts, and any other housekeeping items. You know, this needed to be fixed. We promoted this person, we did that. So now our investors every week are getting an update that they can spend as much time as they want on that, but they're gonna get that and then financials every month. And I can't tell you how much that's improved the relationships and not taken any more time from us. So those are just those things for operators. If you can set that up from day one, you're gonna build so much more trust with your team, with investors, which only makes growth. And again, going back to the leverage question, that's another thing that really does give you leverage long term.

SPEAKER_03:

Awesome.

SPEAKER_00:

Hey Schedler, um, just a follow-up question to that. So, what should franchisers be doing today to make their system like private equity ready?

SPEAKER_02:

I love that question because uh what we've started to live by is always exit ready, is our motto at Cover Panda. And what that it's setting up correct from day one. And then the other things that I said is each month, are you getting these financials ready? Because as soon as someone asks you, hey, I'm a private equity group that either wants to give you debt capital, I want to buy you out, I want to do these different things. If you could just hand them all of your documentation, your financials, where you're at with your bank accounts, your debt, all in one place, I will tell you, you are so far ahead of everyone else. They will be so impressed. We've got multiple people I'm working with today that have either a partner buyout that they're wanting to do that they can't because we've got to do a ton of cleanup work for them. They've got private equity wanting to buy them, or there's opportunities to buy that they're gonna miss out on because financially they weren't ready, they can't get money from the banks. There's just so much that slows you down if you're not PE ready all the time. And people always say, Well, maybe I don't want to sell the private equity. Guess what? You'll also make a lot more money if you're PE ready. And who doesn't want that?

SPEAKER_03:

That's a great point. Yeah. Exactly. Okay, so I'm gonna switch my question based upon where this conversation is is gone. And I'm gonna kind of combine what mine and David's would have been. And so, Scheidler, I mean, obviously, this dovetails into why you started CoverPanda. And our team is doing a lot of work with franchisees who are, you know, becoming a part of roll-ups and selling to private equity, and it's exactly what you're talking about. A lot of them are just not prepared, frankly. And so they have to go back, and before they can get the real valuation, they've got to do a lot of cleanup and it takes time. A deal that could have gotten done in two months is now getting done in four months. And nobody likes that, right? Everybody hates uncertainty. So, my question for you is um for what you guys do at Cover Panda, when is it too early? When should we start, you know, introducing what when would it make sense for you guys to meet uh a franchisee that is building their business? Because I agree with you. Whether you plan to sell the private equity, to exit to the private sector, um, you still should build your business to sell from day one. And if you can embrace those fundamentals, you're gonna have a great asset. But when should people start talking to you?

SPEAKER_02:

Yeah, I would say there's a few different uh customer avatars that we work with. We worked with the first time uh franchisee, where as they're going through the process, we work with other brokers and people that are saying, I need this person to have a business in a box that they can go to so that my client can set up their entity, can do their EIN, be ready to get the funding in place. And we can plug and play that entire thing so that when they choose the franchise, not only is all of the stuff ready, the bank accounts are ready, it's funded with their uh franchise fees. They can pay that. And then we've got the payroll ready to go. Their QuickBooks is set up, it's set up to the franchise or standard, they're compliant on the insurance. We help guide through all of the back office business stuff. So for that new person, they're coming in and they're saying, Man, you guys really just made my life super easy. Looks good on you, looks good on the brand. And we have brands now using us as part of their closing to say, we are actually preparing you for success from a financial perspective and training you how to make money with our brand and all of these things, right? So that's the first time for anyone who's got existing units, there's always an evaluation that you need to do of is it clean? So we'll look at someone's QuickBooks and say, here's some feedback. Maybe you're already doing things really well. If not, we can provide CFO level services to give them um feedback or improvements that they can make. But ultimately, anyone that's wanting to improve or grow, there's plenty of ways to use that, simplify your life, and consolidate it all into one platform.

SPEAKER_03:

I mean, it's almost like you should be a member of our team. You are a franchise owner helping franchise owners.

SPEAKER_02:

Exactly. And we really function in that way, where we can also help the broker understand very high level or as high level as you want, where your clients are in that process so that they're not getting held up. And then as much as you want, you say, wow, they got through that brand's uh system pretty quickly. That was a good experience for them. And then, as well, hey, we were able to set up their, they're now opening their location. Might be a good time for you to reach back out and say hello and make sure that it was a great experience, see who else they know that you know wants to do that same thing, or even just get you know consumer feedback on how it was to work with you guys. Like, there's a lot of ways from that broker world that we can plug in super easily, and also then if someone's trying to buy stuff, it's really easy to plug it in day one, it turns into units on the brand, and it's all put in one place. Anyone who needs to see things can.

SPEAKER_03:

It's fabulous.

SPEAKER_02:

I appreciate you guys asking. Of course, yeah. You you know, KPIs and scorecards, a lot of that is just do you know what it is? And if your franchiser has a hard time giving you those, again, that's where we always encourage people, we'd love to talk to them. You know, like it's a bigger problem if you as a franchisee don't have clarity on that. And so it's saying, like, there's something that you know, the communication maybe could be the issue, but there's a lot that could be done.

SPEAKER_06:

No, I've tried to buy a couple more companies and our parent umbrella uh with soccer stars. And every time I've looked at the financials, I can't pull the trigger because I don't know enough. They don't they didn't do their research, they didn't track anything, and I couldn't do it.

SPEAKER_04:

All right. Um, last question from me is what operator habit or mindset has served you most as you've scaled.

SPEAKER_02:

I think franchises are so unique in the fact that you can connect with other franchise owners. And I always am saying, utilize that. Like Jack had said, call people. Like you want to be friends with everyone around you. And I am totally fine with sharing my financials with other franchisees, saying, what are you doing better? I'd love to come out and visit you to see how you do things. I've been blown away at how kind people are. And and in return, I want to do that same thing. I have taken so many phone calls giving free advice of like, hey, I don't know if this is worth it for you, but here's my thoughts. Even just sentiment on the brand, these different things. I it has changed my life. I'm extremely grateful for the opportunity. And I feel like if I can help someone pull the trigger or not pull the trigger in some certain circumstances, um, you know, to me, it makes my day if I can help someone or, you know, we can share notes on things.

SPEAKER_04:

I love, I love that you just said that. I actually had a franchisee in our system reach out to me yesterday and I talked to him for an hour. He's a year in and he's struggling. And thinking what he thought financially he could achieve, he it might not be possible. And so I I just was very grateful he reached out. And I just I agree that that's why I love franchising and being able to help other people. Um, and and yeah, anyways, so couldn't agree more.

SPEAKER_03:

Scheidler, you've given us so much great content that we are at we we don't even have time for our rapid fire QA. This has been for all of you listening who are thinking about becoming franchise owners who who are franchise owners, Scheidler, where can people find you?

SPEAKER_02:

You know what? I am posting on LinkedIn probably too much uh for a lot of you. And so, but I've that's a great place to find me is come on over to LinkedIn, send me a message, I respond to everything, and again, more than happy to help anyone who's listening to it.

SPEAKER_03:

You're posting great content. That's what brought us together. I kept seeing all your stuff, and I thought it was was so great. And as it turns out, we're working on similar projects where um certainly I think you can help our clients, you can help us. So I love what you're doing because there are so many franchisees out there, bless their hearts, they're working their butts off, but they need to be more mindful of their books. Um, you know, it's like when when we sold home care assistance to private equity two years before, our CFO said we have to make fundamental changes. We have to embrace spreadsheet discipline. We have to be mindful of all this if we want to get a maximum valuation. And all of you who own franchises or who will own franchises, you are building scalable, sellable assets. And like Scheidler said, maybe, maybe today it's not what you want to do, but you still should build your business that way. Perfect. Okay, everyone, thank you so much for your time. This has been an amazing podcast. For all of you listening, thank you for joining us on another episode of the We Bought a Franchise podcast. We'll see you next time.