Alex Faigel, Dr. Dental Founder and Co-CEO

“There’s no such thing as failure. You just didn’t get there yet.”

Alex founded Dr. Dental in 2004 with the vision of retailizing dental care by providing convenient, accessible, quality care via retail dental clinics in convenient neighborhood locations. Now with 57 locations across the northeast, Dr. Dental isn’t a franchise in the strict sense, but a fascinating, franchising-adjacent model for entrepreneurship and scaling.

Listen along as Alex shares with Ab and Vini the core business competencies that power effective repetition and scale. Why the partnership model that fueled Dr. Dental’s beginnings is “a great way to grow but a challenging way to manage.” How being your own competitor (and identifying LITERAL “ground-floor opportunities”) can accelerate market share capture. And how to know when to “take the rocks out of your back pocket.”

Transcript

 Hi everyone, welcome and thanks for joining us for Stars of Franchising. Get ready for a roller coaster ride through the world of franchising as we bring you the best stories of inspiration and entrepreneurial grit and turning dreams into franchise realities. That's right Vinnie. From emerging to global brands, we'll chat with the genius minds behind the magic. All brought to you by the Tariq Farid Franchise Institute at Babson College. I'm Ab. And I'm Vinnie. Now buckle up for some serious inspiration.



 Really excited to have a member of the Babson family and alum Alex Fagel here to join us and tell us his story. Welcome Alex.



 Thank you so much Ab and Vinnie. Thanks for having me. I appreciate it. We're going to kick it off Alex with a question we'd love to ask our guests for our audience to understand who you are and tell us a little bit about your why and what caused you to do what you do and a little bit about your journey.



 Yeah, so I was born in Russia. I'm a first generation immigrant to this country and so when our parents brought us here at the age of two and a half and my sister was a few years older, they made it very clear to us that they left everything and a full life in Russia to come here for an opportunity for their children to be successful, an opportunity that didn't exist there. So I feel a great advantage all through the decades growing here and to make good on the sacrifices that our parents made for us for leaving their life in their mid 40s. I'm in my mid 40s now with three children and I couldn't imagine leaving and going to a foreign country where I didn't have any language, any money, any relatives to just start over. That seems like a very daunting challenge. So I've had that fire inside me to make good on those sacrifices that they made. Wow.



 Wow.



 Alex, let's start about maybe your entrepreneurial journey. Okay. You finished your undergrad in 1999 and here we are today speaking with Alex.



 Tell us what have you done? What was the why behind what you're doing and what has brought you this far in your journey?



 Yeah. So when I was at Babson, my parents told me after I maxed out on all of the college loans I could take, they said that they would help to pay for the remaining tuition. I still remember, I think at the time it was about $6,500 a semester if I'm not mistaken. But I would be responsible. I was living off campus. I'd be responsible for paying my living expenses. One of the jobs that I was doing was I was typing medical reports for various physical therapists and doctors. That was a job I did at night to make money. So I would pick up the cassettes. I would transcribe it onto paper, drop it off and do that once a week and they would need that for their billing, et cetera, for their practices. After college, I approached one of the doctors who I had worked for. He was a physical therapist and I was looking for something entrepreneurial to do. I was probably about three years out of school. I worked for a large firm for one year, a market research firm. I tried something else, small with a college friend. And then ultimately I approached one of my old contacts who I was typing medical reports for and I told him I was looking for something entrepreneurial. He knew my sister was a dentist and he introduced me to dentistry and said, "Why don't you take a look at this? Take a look at this business." And in hindsight, it feels reckless.



 I hired a dental broker.



 I worked for two days behind the counter, behind the front desk where my sister was associating at the time and learned how to run a dental front desk for a whole two days and purchased this office in East Boston, Massachusetts, our first dental office in the company back in 2004.



 I had an apartment in Brighton where I was living.



 I maxed out a home equity line of $150,000 for this apartment and purchased this practice from a retiring 35-year dentist. Had a full two days of experience in managing dental at the time.



 And I set off on this journey. It took me about 18 months to learn the business.



 I remember in January of 2006, almost two years later, I opened up the second location. And that was the location we opened from scratch. So I leased the space, built it out, hired a dentist.



 I still remember having our first patient and we were off and running. Six or eight months later, I opened a third location. And actually at that time, we did a case study at Babson where that was an inflection point of how to grow from there. And that was the first sort of decision where in hindsight, it was a quasi-franchise model through partnerships. It wasn't a formal franchise model. What I did to begin growing at that time and ultimately to begin growing at that time is I began bringing on old friends and colleagues who I had worked with. And I said, "Here's this entrepreneurial thing that's actually working. I have three locations now that are generating positive cash flow." I remember at Babson, the definition that President Spinelli, who was my professor at the time, said, "Happiness is defined as positive cash flow." I still remember that statement. Cash is king, right?



 And so there was a level of happiness. Something was working. There was positive cash flow. And I brought an old friend on, a friend of a friend, a colleague who I had worked with, and I said, "Let's open an office together.



 I will give you the know-how. I will help you to get it open and to get going with it." They were also looking for entrepreneurial ideas. This was in our 20s when we were young, almost 20 years ago now.



 And over the years, I brought on eight partners, almost a similar analogy would be like eight franchisees. And together, over the last 19 years, we've opened 57 dental offices across the Northeast. What?



 What?



 There's more to the story, but I'll pause there. That's great. That's great. Well, you know, we love the entrepreneurial spirit. And I think one of our messages we're hearing too for our audience is there's a lot of different ways to scale. And you mentioned the variation on franchising, but really partnership and kind of almost like a joint venture or even a licensing agreement. But early on, Alex, when you're running two to three, and my question would be, was it called My Doctor Dental then?



 And then two, what did you see there that you thought there's something here to scale? Was it that practices were fragmented? Was it efficiencies? What did you see that made you believe you could get to where you are today? Or maybe you didn't, but tell us your thinking.



 So Ab, we were called Family Dental back in the day.



 We around 2009, I believe we wanted to launch, we had some hardships where we had some insurance. We were facing some insurance tightening of eligibility, and we were concerned about our patient base, and we wanted to go out and market for a larger patient base. We wanted to go on the radio, go on television, begin regional, local mass media marketing. And we realized that we can't go on the radio and promote Family Dental because there's a Family Dental in every town and in every street that we would be sending our competitors to. We needed a name that we could own, whatever it was, but something unique. Family Dental wasn't a unique name. We sat in boardrooms as a partnership group, and we came up with one name after the next. We stood in supermarket exits surveying people when we had our top four or five names.



 One of our lead names at the time was Mr. Dental.



 Somebody I remember came out. One of my partners called me. He was surveying some people that Saturday, and a customer came out from the stop and shop and said, "Well, what about Dr. Dental?" There's a liberation there, and we loved the name.



 That's how it became Dr. Dental. We went on the radio with a mass marketing campaign that year, Dr. Dental, and that was a name that we could own and capture market share by going to the market. So Alex, when you look at the way you scaled from just one unit to 50 plus units now, what is that code that you kept replicating?



 Because even though it's not like a franchise system, the traditional franchise system, but within your unit, it's more like a franchising within the house.



 So what is that code thing that you've been replicating? Because I'm sure it's something you understand very well. You know how one and one and two becomes four?



 I say, "Okay, I'm going to invite this former colleague, this my other friend, and you explain to them." I say, "Okay, I mean..."



 What is that code knowledge that you've been replicating over the years?



 I think it starts with the focus on unit economics. One of the things I learned at Babson was it doesn't matter how big or we have to focus on making sure each location is profitable, focus on unit economics. But besides that, in hindsight, I think one of the core competencies that we developed and we had early on was real estate competency. We understood what to look for in locations and what to look for in replicating locations. So one example I'll give you is we began opening in supermarket-anchored shopping centers. We realized our first locations were on busy main streets. And then one day we stumbled into supermarket-anchored plazas and exterior strip plazas. And we realized that there's nowhere that mom and dad go as frequently as to the supermarket. Walmart might be a once a month, Target might be a once a month supermarket eight times a month. You're going to a supermarket-anchored plaza to get your groceries. We also realized that people are loyal to their supermarket. They typically go to the same location, the same grocer time after time for whatever commuting, convenience, et cetera. So over the years, we had a number of markets where we had multiple locations, even in the same town, as long as the market size dictated allowing it. Because there was a unique set of consumers going to the stop and shop on one side of town and the market basket on the other side of town. We could capture both. We used to say that if we thought a competitor could go into that secondary plaza and be successful, then we ought to be our own competitor and capture that market share. So then I think it was a focus on real estate competency.



 And then it became a staffing model. It became hiring a core staff for the office, having the strong marketing. Over the years, we did little to no marketing. And that's because we always said that our strong real estate locations being near that market basket entrance, being near that strong supermarket anchor plaza, we never had any second floor locations. All retail today, you see every urgent care and every multi-site healthcare and all these busy plazas. That didn't exist 20 years ago the same way where healthcare had retailized in that same way. So I think we were doing it before it was popular.



 We would open and we would have a tremendous inflow of new patients from our very first month and we knew we were onto something. Wow.



 This is interesting. Great stuff. A lot of similarities to the franchise world, Alex, and how you've scaled. Love to hear your perspective on partner selection, right? As you've grown and presumably as you've shown success, you've had probably more people come to you, but talk a little bit about what a potential partner looks like for you and those attributes to be successful. Because I think there's a lot of similarities to maybe franchising so that you can ensure that you can scale the way you want to scale and there's success for everybody.



 Yeah. So I think we've talked again, if we did it all over again, or we've changed models over the years. I had bought all my partners out at a certain point a few years back. So my model has changed over the years. The partnership model that I used was a great way to grow, but a challenging way to manage. How so? And so, well, it was a great way to grow because you had similar to the benefits of a franchise model. You had all these people opening stores. I had one store opening in Massachusetts the same week as Connecticut with competent operators on site launching. And I had strong leadership to grow in a rapid manner. It's a great, great attribute as we know of franchising.



 Because I didn't have, because people weren't contractually bound to a very specific tight operating model that allowed no leeway, over the years, people had differing needs. Some people needed more centralization. Some people needed less. Some people decided to use this color counter or that color counter. So over the years, it became a challenging way to manage because as we were thinking about developing centralized costs, somebody with eight locations really needed that centralization to help them manage their business. Well, somebody else with two locations said, "I want to take all the profits for myself. I don't want to put it into a centralized fund to fund centralized services." And so it became a challenging way to manage.



 Over the years, some people worked less hard. And so when we were looking for institutional investors, we ultimately sold the company in 2019 and partnered with a private equity firm that we're still with today. But in going to that next round of professionalization, having a partner network like this created challenges where an institutional investor, a private equity firm was looking for a classic top-down centralized management structure where results could be relied upon. Not where somewhere someone was working harder, somewhere somebody was more checked out because they were happy with average returns and it didn't rise to a level where we were going to separate. Obviously, we had a contractual relationship for a number of years. But those are some of the challenges. Interesting. So Alex, if you look back since 1999 or maybe 2000, 2001, what would you do differently and why if you had to do it all over again?



 So it was challenging transitioning from the structure I have been speaking about to a centralized top-down structure that we were able to ultimately attract institutional private equity. It was a challenging transition that came with bumps and other things. In hindsight, could I have grown to the same size? Had I not embarked on that type of a structure?



 I'm not sure.



 I don't have regrets in that regard. I think if it wasn't these set of challenges and these bumps, then there would have been other sets of challenges and other bumps like every entrepreneurial journey has.



 Yes, Alex. So you don't have regrets, but there are things, there are bumps that you say, "I learned from it. It was not a failure." It was things that I took action that made me to face some things that I got exposed to certain things that made me to grow as a person. So if you look back, all these years, what would you say are the top two or three things that this was what I learned thanks to getting burnt? Even though you don't see it as getting burnt, but you say, "Okay, I learned something valuable here."



 Yeah. So I completely agree with you, Vinny. There's no such thing as failure. Even in our pursuit to get liquidity with private equity, we had to go through challenges. And so I would just concur and say that there's no such thing as failure. There's only, "We didn't get it done this time and let's keep pivoting until we get it done." So I would encourage anybody who's listening to the podcast, who's on their journey, there's no such thing as failure. You just didn't get there yet and to keep trying.



 Really on a couple of things to talk about, I think having specific requirements of how much full-time involvement, having your franchisees, having your partners, having the business, having very tight guardrails around expectations and what minimum metrics have to be, whether it be from a customer satisfaction standpoint, whether it be from an employee satisfaction standpoint, whether it be KPIs in the business, not allowing somebody to grow faster than they're capable to grow, being able to say, "No, you know what?



 We've had many instances where somebody made a lot more money owning two locations well, growing to four locations, and one losing location wipes the profit out of two winning locations." Yeah, wow. Right?



 And then I would also say knowing when to sort of take the rocks out of your backpack. At some point, you have to look at a location because there's ego, there's blood, sweat, and tears in that location that you put in, but it hasn't made money ever. It hasn't made money in three years. And being able to say, "You know what? I'm going to shut that location and I'm going to move on, and I'm going to keep my focus on my winning locations. I'm getting the whole ... It's going to get there one day." Well, setting a firm timeline of when that one day is over, you get two years, you get three years, and that's it. If it doesn't get to profitability, close it. Let somebody else give it a try. Sell it, get short dollars for it, and get out of it and focus your attention to where you're making money and make more there.



 Alex, before I pass it over to Ab, you talked about the strategy of locating your practice in a next to a place where there's heavy food traffic, especially something that draws people



 from different things, whether to buy a piece of clothing, to eat, or to just shopping malls, type of setting.



 During the pandemic, this was a place where there was no go.



 How did you survive the pandemic period? And what was your major, any major innovation during that time that you feel will continue to shape the way you run your business today?



 So Vinnie, luckily we were located ... 80% of our locations were located in exterior supermarket-anchored plazas. So I think the interior malls took a bigger hit than the exterior strip plazas. So I will say we got nervous when Amazon bought Whole Foods, and the predictions became that over the years, less and less people are going to visit these plazas as well, that home delivery is going to go to some huge amount. We haven't seen that affect us materially, materially. But the pandemic, we were mandated to close for two and a half months per the various states that we're in. All of the protective equipment was needed for the hospitals, and dentistry was not allowed to function except for emergency services for two and a half months.



 Incredibly challenging to get on a conference call in the morning with 400 employees and to tell everybody that we're not opening at 4 Friday.



 To furlough hundreds of people, to keep your team engaged day after day. We began doing daily calls, the executive leadership team, about 15 of us, which we've actually kept since the pandemic ended because it's been so helpful to have that daily pulse of meetings. This morning I was on the line with my team, we meet every single morning, and that started during the pandemic because we needed that level of pulse of meetings.



 Just many learnings, learning how to do more with less, really just having your back against the wall and needing to fight for survival.



 Love it. Give that example of the innovation from the pandemic that stuck, and you're using it to continue to improve, Alex. Let's talk a little bit about where you are today with the number of locations, as you mentioned, over 50, a private equity partner. Alex, can you share a little bit about that selection of a partner and that process for our audience and listeners that may be considering outside capital?



 Sounds like you made some pretty forward thinking thoughts about your organization to get to that point, right? To be in a position to do it. Can you tell us a little bit about that, Alex, and then where you go from here?



 Yeah.



 My sister and I found ourselves in a situation where all of our family net worth was tied into this business. The best opportunity for us to take some chips off the table and to create some liquidity was through a private equity partnership.



 We hired an investment banker. We went through an entire process, and we had some options. One of the thoughts that I was going through, 2019, just before the pandemic, still early in my career, meaning maybe I'm 40 years old at the time, as I said to myself, I had a 100% offer from some firms that wanted to acquire our company 100%-- Mm-hmm. -strategics. Then I had the 70-30s where they wanted to acquire a majority share but still leave us, the management team, with a material share to continue driving the business forward. I remember dropping my child off at daycare in the morning and saying, "What if I had nowhere to go right now?" I realized very much that I wanted to work. I wanted to keep driving. I wanted to keep driving to the next level.



 That was very impactful for me in taking a decision of who I ended up partnering with.



 The other factor that I used in choosing our partner, because even there, there were multiple choices, is I worked with a partner that had a dental asset prior to us.



 They had just worked for about six or seven years with another dental firm that they partnered with and grew. They were in the last year of that investment planning on selling that investment and looking at us as their 2.0. That's how they operate also, is they say, "If we know how to do a certain sector, let's keep doing it. We know what we're doing." Just like I think there's a private equity firm in-- I've heard Rourke, I believe, that does a lot of investments with franchises.



 They know what they're doing and they have a playbook and a model that they can apply. Got it. Alex, what keeps you awake at night with regards to doing business, managing growth, and making sure, again, not keeping your eyes off the unit economics in each location?



 What keeps me up at night is compliance risk.



 I think about making sure-- and I think about what the fatal or what the really critical parts of the business are, it's compliance risk. It's making sure that we do the things we're supposed to do each and every day across all of our locations.



 I also think about how to keep key leadership. Interesting. We're in the people business.



 Like I've said many times before, at the end of the day, when the lights go off at night, it's four walls and painted walls, carpets, and dental equipment. What makes one location great versus another one average? Within the same location, we've had results be through the roof and average and go in all different directions. It's the team that we have there.



 It's how do I retain my key leaders? How do I make sure to retain our key dentists and all of our teams and our support staff for the long term? Wow. Alex, one final one for me on the next level or scaling, if-- and whatever you're comfortable sharing with-- how Franchising could fit into that or how you look at it. I've seen some brands where maybe they get to the point where they're 50 company stores or they decide Franchising is right as a way to maybe infuse that same and keep employees. Is that on the table for you or what do you guys think given, as you described it, the late entrance after you pioneered it, whether it's AFC Urgent Care and others that have come in? Just love your take on that given how you were one of the first ones to locate in certain areas and then Franchising followed with some other health care related ventures.



 What are your thoughts on that?



 Yeah, so when I spoke to the gentleman from AFC, I visited him in Birmingham one time, and one of the things he said to me was, "Don't franchise with your dentists. Franchise with business people." Got it. Was one of the takeaways I remember he said.



 I think there's an opportunity to Franchise certainly. I think I stepped away from a partnership model to go into a centralized top-down model.



 I think more than one business model can work, certainly.



 I love the Franchise model for the type of growth that it creates and the type of opportunity that it gives the owner operators in each respective location to thrive.



 Let me take this on. Just a quick one. Alex, is there any major trend in today's world with a social technological regulatory that you think is going to shape the future of the model that you currently have?



 Yeah, today, AI is being...AI and robotics are two things that are coming into dentistry and already in dentistry. There's a number of firms, and we've trialed some of the products with AI, where they'll overlay their software onto all of our images, all of our x-rays, to help our younger associates to be able to identify caries and other dental diagnosis risk areas. It's still required for the dentist to diagnose, but it gives them something to look at and consider when they're making their diagnoses.



 AI is playing a large role in dentistry in that regard.



 The promise is, of course, that you'll be able to do better comprehensive treatment and planning with your junior associates as they ramp up and get educated in that process as well.



 As well, robotics are starting to play a role in implants.



 We're seeing that now there are, just like in medicine, there are robots that can do a lot of these procedures with, guided, and assisted by general dentists, and that's only continuing to evolve. For now, they still need the general dentists. Okay. So Alex, maybe the next time I meet Steve Spinelli, I'm going to say, "Alex, starting your class



 did not go to the franchisor out.



 What did Alex see?" So I'm going to ask Alex now. Alex, you have a group of students in front of you, and they are thinking franchising.



 I know that's not the way you took.



 So what would you say today?



 I love franchising. I genuinely do. What I love about franchising is I think a lot of the risk is in the proof of concept early on in the model. And I think if you can get past that proof of concept and take something that has unit economics demonstrated already in the marketplace, then now it's about operational excellence and it's about execution risk, which we as BAPs and graduates should be able to manage. We should be able to manage a store and manage a team. Not everybody can do everything, but for those that can, managing the location, then learning. We started with one location, right? When you're there 100%, that's one skill set. Then you go to a second location and you can manage 50-50 of your time. At some point, you learn to lead through others. So I would say, but you can take those steps one step at a time. You don't have to swallow that whole watermelon and say, "How do I manage 10 franchises one day?" You'll address that one day. You start with one in one location and you grow from there. But I love it. The other thing that I learned interesting from President Spinelli was that I heard him say, and I hope I'm not misquoting him, is that the money's made by the franchisees, not the franchisor. I once thought that the top of the pile, the top of the heap is the franchisor. Interestingly, he commented that franchisees make all the money. From that perspective, I think it's an amazing opportunity to start with one location, find the right industry, find all businesses have warts, find the warts that you can deal with,



 and then go to a second, go to a third. You can be all that you want to be, whether you want to live in one or two locations and have a...and not go any further than that or grow to 100 locations. There's no wrong answer. You see, Alex, I know giving you an understanding of franchising, which, I mean, from listening to you, it's just amazing how you use franchising within what you do, and then it's not the traditional thing, but it's still franchising in its own respect.



 What would you say people misunderstanding most about franchising?



 I wonder if people are looking for something perfect, or whether they think that there's something that's much, much better than something else. I think that there are better and worse businesses, but my sense is that a lot of the successful businesses have some similarities in ratio of how much it costs to open versus how much it'll make. If it costs 300K to open for each box, maybe that box makes one or 200K a year. If it costs $3 million to open that box, then you're going to have a proportionately higher income in ratio.



 I think you want to think about what is the payback period per location, and what, therefore, allows you how fast you can go to a second location. If you don't have a tremendous amount of capital, you might want to start with lower...one of the things that benefited us in our early years was each location back 20 years ago was $200,000 to $300,000 to open.



 It was reasonable. Once cash flow started with two locations, I could open up a new location every six months, and with three locations every four months. Begin thinking in that regard of how much cash flow can I get from my locations to then be able to open up the next one and the next one, and be able to scale that way versus something that costs $1 million to open per box. Maybe the return isn't always commensurate with that. Hopefully it is.



 Back to the earlier point, Vinnie, I just think that a lot of things will work versus just one thing.



 Wow.



 That's great. Great insights. Alex, thank you so much for your contributions today and in the past. You really do epitomize the Babson entrepreneurial spirit. It's great to see you create an economic and social value. You really touched upon a lot of things that really resonate for our audience seeking to have the success you have. Thank you on behalf of the Tariq Farid Franchise Institute and Babson. It's always great to have one of our family that we're proud of out there doing great things but more importantly sharing with others. We look forward to continuing to collaborate and helping you any way we can here at Babson as you continue your journey.



 Thank you so much. Thank you, Alex. Thank you for having me up today. Thanks for joining us on this episode of Stars of Franchising.



 Stars of Franchising was produced at Babson College, engineered by Travis Gray. Aaron Soway is our guest coordinator and music by Ralph Taylor. If you like Stars of Franchising, be sure to review us wherever you get your podcasts and swear the word and share these stories any way you can.