The Man Behind Biggest Franchise Community (Ft.Erik Van Horn)

Hello, ladies and gentlemen. Welcome to the On Try Podcast. Today's guest is Eric, someone who really needs no introduction. Eric started out in the franchising space at Liberty Tax, so he grew this business into multiple locations before becoming a master area developer. Eric has decided to help others in the franchising space, be it mentoring, be it helping. Eric, you have one of the largest communities. I'm myself a part of it, so kudos on that. You co-founded Horsepower Brands. It's a leader in home services industry. Also co-founded Mighty Dog Roofing, which is now a part of Horsepower Brands. You've also been the driving force behind Franchise Secrets, which is one of the largest communities in franchising, and co-founded Front Street Equity Partners, which I'm very curious about. Yeah, so Front Street Equity Partners about actually because of the role of private equity in franchising. It's a strategic advisory and private equity firm focused on scaling enterprise value in the franchise world. Eric, I'm really excited to, to have you on the show. It was in the cosmic making for a while now, and finally I, I get this to do with you. So welcome to the show.

Abby, I've been excited, and then we got some time before we even hit record, so we got to know each other. and have some good conversation. And that was amazing to be able to have that with you. And I'm super excited to hit the record button and keep going. So, thank you for having me on.

Thanks a lot, Eric. I truly appreciate you taking time and coming on the podcast. I would like to actually begin with your story. So, I read it somewhere on LinkedIn that you started into the franchising space in your 20s. And you read this book called Rich Dad Poor Dad, which made you dwell on life and you got into franchising. So can you take us through your journey? What was in that book that made you get into business and what were you doing before that?

Before that, I graduated university and then with a degree in business. Which I have not used much of that business degree as an entrepreneur, but that's besides the point. I did read the book Rich Dad Poor Dad, who Robert Kiyosaki is the author of that book. And it just made me think about you go from being an employee to being a business owner and are self-employed, then a business owner, and then ultimately an investor. And like, that's the track that I want to follow. I don't want to trade time for money. And the thought of punching in a clock and putting in 10 hours a day and getting X amount of dollars out of that, and then doing it again the next day and the next day, just did not sound very fun to me at all. I had some different jobs, you know, as I was in high school and university. One of them was a lifeguard. I was a lifeguard, and I thought that'd be a fun job. Pretty easy, pretty relaxing. You just sit and watch. But it was the most boring job. I counted every minute of that job. I'm just like, I'm making 1 cent a minute and I'm doing this over and over. So, that's how I thought about trading time for money. And I didn't want to do that. And I wanted my— eventually, I wanted to leverage my time and hire people and they could work and I'm making money by Leveraging them as employees or team members. And then, I thought even more than that, I want my money to work for me to ultimately get into that investor role where I have more passive income coming in than I do that covers my expenses, first of all, and then that would cover my lifestyle. So, I'm still on that journey of having passive income coming in to cover my lifestyle expenses. But that was the book Rich Dad Poor Dad.

Yeah.

And then I read another book called The E-Myth, which is basically working on your business, not in your business. And Michael Gerber wrote that one. And I thought, well, that's franchising, you know? And that's when I got into my first business was Liberty Tax Service. I knew nothing about taxes, had no passion, desire to do tax returns.

Yes.

And never did a tax return. But eventually, I had about 42 locations that I, started or helped start and then exited that business about 9 years later. So, that book was kind of— was really important to me as well. And to come full circle on both of those, Robert Kiyosaki was on my podcast, Franchise Secrets, and I interviewed him. And then, I remember I was in San Diego at some random conference for marketing and I ran into Michael Gerber, who just happened to be outside the conference. And I went up and introduced myself and I said, you know, I loved your book. Book, anything you would say to somebody like that that you were influenced by? And he looked at me and he said, I know you read The E-Myth, but did you do The E-Myth? And I just knew that I had done it. I had set up my business, my life to reflect what he described in that book. And I said, absolutely. So, it was kind of fun to come full circle on both of those 2 people who influenced me through writing books. But yeah, that's how I— Well, to really getting started in Liberty Tax, I was going to go to law school, decided not to because I'm not the greatest student. And then I started a lawn company, started investing in real estate, and made a lot of money for me at the time, invested in real estate. And then I used that money to roll into my first franchise. And then I started that franchise, Liberty Tax. As a franchisee. And then I sent an email to the founder of that company and I said, I would love to sell franchises. I'd love to be on the franchise development team once this tax season is over. So, in the month of May, I would like to start selling franchises. And he's like, we'll give you a try. And Abby, the reason I wanted to do that was not just to make money, but I wanted to learn a skill. And I learned that early on too. get a job just to make money, but get a job to get mentored, to learn a skill, something that can transfer and make you more valuable as a person in the future. And that's why I wanted to do that. And so then I learned franchise development and I learned franchise ownership at the same time. So that was my start into franchising.

Wow, that's a beautiful story and interesting that you wanted to get into franchise development. Did you have something in mind? Was it because you wish you So, you saw yourself, you know, going in the long run in the same industry, and then you thought this was extremely crucial for you to be successful. Is that why you chose to get into franchise development?

I think back then, if I had to like go back and see the reasons why, one was I knew that they were— I was always good at marketing and sales. At least I thought I was, or people told me that I was, but it had never really been developed. So, I wanted to develop. That in the real world. And I knew that salespeople could make a lot of money. So, I wanted to learn a skill that also was something that could make a lot of money and could be transferable to different industries in and outside of franchising. The main reason was the founder spent about an hour a day with the franchise development team coaching, mentoring them on how to do it. And so, I just— it wasn't just like, hey, here's a job and start doing And while we were doing it, the founder was actively involved and he had founded another franchise system and then founded this one. So, I'm like, this is probably the best guy to learn from because he's the founder of this company. He built a great company before that, was building another great company, and he was taking an hour to mentor us. And it wasn't like fluffy mentorship. It was, hey, what did you do? What did you say? How did you say it? What was the email that you sent? You should have said it this way. You should have tweaked this. This is how you You listen to people versus talking. He's like, "You're talking too much," and so then I learned how to just listen and and and understand the pain points of the person that's thinking about buying the franchise, and then taking those pain points and and then overcoming objections of why they might not buy before the objections were really the objections. So I just started to learn a lot about franchise development from this founder and other people on the franchise. development team that were way further along than I was, you know, 20 years ago. So, it was really about having access to these really smart people with a lot of experience. That's the main reason that I wanted to take that job.

That makes a lot of sense. And one of the things that you mentioned, listening, I've heard, I was reading, I believe, Aaron Harper's post, the founder of RollingSods, and he mentioned something about the franchise development process that he follows at RollingSods. And he said listening is a crucial part Part of the franchise development process, and you say the same thing. I totally agree with that. You've been in this industry for a while. What made you stick? What made you fall in love with franchising?

I so Aaron's a great guy. He's I know Aaron, and he's building a great brand over there at at Rolling Suds. Another friend of mine, Dan Claps, is building a great brand over at. Voda Cleaning and Restoration. They're both putting out a lot of content, and it's really fun to watch some of these younger people become franchisors, and they're doing things that most franchisors don't do. And so, I'm friends with both of those guys, and they're good people. And that's one of the things I love about franchising is it's a really small world. You know, from an outsider looking in, you're like, you don't realize that, but once you Once you're on the inside of franchising, everybody knows each other. We have competitors. So we are— one of the things that we do at Front Street is we help brands sell franchises like an FSO, like a franchise sales organization. It's outsourced franchise development. But that's not who we are. That's— we are brand builders at the core of Front Street. We help them with capital, we help them as an FSO, and then we help them with strategic advisory. So our— we have competitors out there that Like we will fight for business because we want a brand. They want a brand, but we're good friends at the same time. So you'll see us go to dinner together, have fun, laugh, and and and yet we're competitors. And that's one of the things that I I love about franchising. And there's some you know there's some great people out there in franchise, and then there's some there's some bad actors too. And that's why the thing that you really have is your reputation when you do what I do, and and you have to have a good reputation in franchise. But one of the things that I fell in love with franchising originally was you— some of my great friends today, people that I was texting with and had conversations with yesterday, I met 20 years in the tax business. They've gone on to create like amazing companies. They're vendors to franchisors. They're franchisors themselves. They're large franchisees making Many, many millions a year, and they're still going strong. But we were all friends 20 years ago, and we all helped each other get better. We weren't competing with each other because we were on the same team. And that's one of the things that I fell in love with, with franchising, is like, you don't just get the franchisor, you get the other franchisees that are doing the same thing, and you really help each other out. One of the things that I have coming up in one of my franchisee mastermind sessions is a friend of mine, Ryan Casey, who's an Orange Theory franchisee, one of the best ones in from, you know, making money and just having an amazing team and being an amazing leader and just an all-around great guy. Ryan Casey is— he's coming in to talk to them, to my members about creating an advisory board or like a community of franchisees yourself. In your own brand to help get better. And he locks it down. He's like, there's like 20 of them in there and they're not letting anybody else in because there's a culture that they created. And that's what we did back at Liberty Tax way back when. There was a handful of us that would learn from each other and help each other. It wasn't anything formal, but that's what we did. And I think people are starting to get more formal with that as franchisees. And they don't want complainers in there. They don't want people that are You know, trying to talk bad about the franchisor because franchisors aren't going to do everything right. So, as a franchisee, you focus on the things that are working. You focus on the things that you can control. You focus on the levers that you can pull to do better as a small business owner and and have more profit, have more freedom, and create you know larger enterprise value. And that's what a lot of these people are doing. But it all came from just friendships of people that are creating amazing businesses as franchisees. So. That was a long answer to that question, but that that's my answer.

I love your answer. I remember I was speaking with the founder of Driver Seat, so it's it's a it's an award-winning Canadian franchise brand, and the founder during the interview mentioned something which was he would not want to have franchisees that he has to run after in terms of accountability. So he said something that did stick with me, which was. You, you're not held accountable. You are an accountable individual. And in the franchising space, you have the control over the results. As you were mentioning, the franchise, it's not about the complaining mode, but it's about you as a person and selecting the right person that takes actions and knows that he's in control of the results of the brand. It's not an employee kind of a relationship where you get a paycheck It's more about you taking everything in your hands and working towards it. As far as your other point on in your answers concerned, which is people's business, I agree. When I entered in the franchising space, this was the first thing I was told that Abby, this is a people's business. You need to be very careful with your reputation. Do not burn the bridges. It's a very small world and everybody knows everybody, and that's. Very, very true.

Talking about just real quick on you know your comment about people taking accountability. One of the things I learned from that founder originally was he's like there's I think it's ten ten two letter words. Like these are the ten two letter words that you need to you need to understand as a franchisee. So he was telling me this as a he was a founder. I was a franchisee. He's like. This is what you need to understand as a franchisee. If it is to be, it is up to me. In other words, like, it's your responsibility. If this is going to be a success, I, as a franchisee, it's up to me to make this a success. The franchisor gives you the roadmap and helps out in a lot of ways, but at the end of the day, you are the franchisee. So I think franchise— people that are looking at buying a franchise, franchisors that are selecting people to buy their franchise into their franchise brand, Really need to find those people that are those go-getters, especially emerging brands. It's a lot of these founders don't know what this—they just don't know what they don't know, and that's okay. But they need to select people that are go-getters, that are self-starters, that are pioneers, and not somebody that wants a McDonald's where everything is just laid out for them and they just have to execute the system. So yeah, I think we needed to hit that point a little bit, a little bit harder because. That's a really good one. And so I'm glad, I'm glad you mentioned that. That accountability is a, is a big piece of it.

It is. And one of the things you also mentioned is he looks at the franchisee as a partner. It's, it's, you're a partner. So the way you think about things, the way, the kind of words you use does impact the kind of people you attract. So we're looking for a partner, not somebody who would think of just, I wonder what's your opinion on semi-absent absentee franchisees? What do you think about it?

Yeah, let's talk about it. Let's start with brands that say they're absentee. They are an investor model. There's brands out there that say that. I have not seen an absentee franchise system work out there. I'm not saying they can't or there are not ones that are out there that do work. I just haven't seen it personally. And I was talking to somebody yesterday about this very thing. I can't— and we were talking about absentee franchises and he lost a lot of money. On one, I think it was millions of dollars that he lost because he said, they told me I could just, you know, buy into this and we would— the franchisor would hire the managers and hire the people. And the franchisee was basically the investor. Well, it all unraveled and they lost millions of dollars. And he was just— he was sick. He was sick about it because he's like, how could I have been so foolish? Similar thing. So, that's absentee. Semi-absentee, the way I would kind of define that is a franchise system where you could manage the manager. And I think people have different definitions of semi-absentee. Some people think, oh, I don't even have to, I just work an hour on the business and the business takes care of itself. And other people are like, I want to work on the business 10 to 20 hours a week and manage the manager. And that would be kind of my definition of semi-absentee. When I think of a semi-absentee business, I think the owner, the franchisee, putting in 10 to 20 hours a week working on the business. And as long— and early on, that franchisee is probably working 40 hours a week or might need to work 40 hours a week. So, could it be semi-absentee? The answer is yes, it could be semi-absentee. But if your manager quits or you have to replace a manager, then you have to work 40 hours that week to whether it's finding a replacement, hours yourself or whatever the fire is that you have to put out, then you have to do that. I think I'm a silent investor in a franchise that is semi-absentee. And my founders are very active. My partners are very active in the business. And I got a text yesterday that says, hey, we just put someone, a manager, on a performance improvement plan, a PIP, and they're probably not going to make it. And so, he's like, I'm probably going to have to fly down there and put a new manager in place. And so, he's not local, but he knows that he's successful in that business, knows the business, knows that somebody's probably not going to make it. So, he's going to have to fly down there and get some replacement in there and probably fix some things that are broken because someone that's not making it means there's other things broken in that system. So, is that a franchise that's semi-absentee? I would say yes. But are there times when you have to be full-time? And the answer is yes. The other time that I think even semi-absentee, you have to be more active in the business. business is early on and then as you're growing. If you're continuing to open up more locations, adding more trucks, hiring more people, it's just going to be more active. Then you get to the point where maybe you have 3 locations, you have a district manager that oversees all of them, and that district manager will be with you for 20 years. That's the life. Then you pro— then you are semi-absentee.

Mm-hmm.

If that— if it plays out like that. But more than likely, that manager will probably quit at some point or go to a better opportunity. Or for us, like in the salon suite business that we We had 12 solo salons and our manager came to us and he was amazing. His name's Mirko. He was amazing at managing that for us. We were semi-absentee in that business. We were working a couple hours a week at the most and doing very well, making lots of money, growing. He was doing it all. Then he came to us and said, hey, I'm going to become a franchisee myself. I'm going to open up my own location. So, I'm not going to be working for you guys any longer. And so, you know, that can happen. And I love the guy. I still love the guy and he's a good friend of mine, but that stuff happens. And so, you can go from semi-absentee living a great life to something like that happening, and then you have to get more active in that business. So, I think people want— either they're sold the dream that says this is semi-absentee, they validate or they talk to a franchisee who is like I was. If I was to validate at the peak of my success at Solo Salons and someone was to ask me, are you making a lot of money? Yes. Are you working more than 2 hours a week in the business? No, I'm probably working 1 to 2 hours a week in the business. Are you continuing to grow? Yes. Are there any issues? No. Would you say this is semi-absentee? Yes. I would've said all that then. And, but early on, I wouldn't have said I was semi-absentee because I was growing that business and spending a lot of time dealing with leases and dealing with buildouts and dealing with hiring and all of that stuff. So, I think it depends on what stage you are at in the business and when that business can become really semi-absentee. And then just realize that might change at some point too. One last point in regards to semi-absentee. You will have to give up something to have that semi-absentee. We had lower-level managers before we hired Mirko that were making, let's call it $50,000 a year. And we wanted them to do the things that a $130,000 a year manager would do. And this is, you know, 10 years ago. They couldn't do that. So we had to make the decision like, okay, let's pay $130,000 a year with bonuses so we could really not have to work in the business. So we had to give an expense, you know, a decent amount of expense to be able to have the freedom of semi-absentee, which is really what that partnership group was after. So there's some give and take with that as well. And usually it's the owner making less money, but you also get freedom.

My takeaway from your answer, first of all, thank you. That was very elaborate. Is A, first of all, you need to set the right expectations when you are partnering with a franchisee to let them know, even if it's a semi-absentee model, you need to work. So the graph looks like somewhat like this, you know, you need to work in the, in the first few. Okay. And, um, the second point that you mentioned, um, um, hang on, I'm, I'm unable to—

I'm hanging on, I'm here, I'm not going anywhere.

Um, so you mentioned, uh, the second point, who was it? I, I'm, I'm literally trying to process what was the last point that you mentioned.

Now you're making now you just as because you're the host, you can throw it back on me to make me have to remember stuff. Come on, Nanny. Rather be the host and not have to have to be the guest to remember. So we talked about the semi-absentee. The we talked about the time that it takes to become semi-absentee, or you have to trade money. To pay someone, there you go. To get that.

There you go. Thanks a lot. So incentives. We're pros, aren't we?

We're pros at this stuff.

I've been, to be honest, traveling since the old day. So it's it's a my my mind is a bit foggy, but 100% it's incentives. How can I forget that? So that's equally important because. Because just like you are a partner to the franchisor, the person that you're managing is also a partner to you. I mean, what's the vested interest of that particular individual to take care of your business while you're away? So totally, it makes a lot of sense. You've worked with so many emerging brands. What do you think is the most— is the biggest challenge for emerging brands when they're just starting out as far as franchise development is concerned?

And how can they tackle it? Yeah, we we talk to 200 brands a year, so at least 200 new brands emerging brands a year. And I say emerging anything less than 100 locations. A lot of them are just about ready to franchise, just about ready to get their FDD, or they have less than 50 locations. That's the majority of who we talk with. And so we talk to people. That are early on and they have a great business model and they say, boy, we are going to— we have like 50 people that want to buy this franchise. So we don't need your help at Front Street. We don't need anybody's help because we got a line of people that said they're going to buy this franchise. You talk to them a year later, how many of those bought? 3 of them bought. How are they doing?

They're disasters.

They don't really—they don't—they're not really wanting to run the business. They're wanting to, you know, have a trophy business, or they—it's not what they thought it would be. And then you talk to them, and they are humbled. The franchisor is humbled. They're way behind where they thought they would be, and they have franchisees that are a pain in their side. They are not excited and and and happy about their franchisor. The franchisor is not happy about them. That's typically what we see. So how do you avoid having? franchisees that are not the right fit. I think that's probably one of the bigger challenges that emerging brands face is they see someone that wants to buy their brand and write a check for whatever the franchise fee is.

Yeah.

Well, here's another little point. Sometimes franchisors charge too little for the franchise fee, and they think that's the way to help franchisees is by charging $10,000 versus $60,000 for a territory. I mean, that's kind of like US-Canadian, you know, there's some brands, same service, same everything, new brands charging $10,000, existing brands charging $60,000. They're attracting a different type of candidate. The candidates that are kind of like what you really want, the franchisees that you really want, are the people that are like, I'm going to pay $60,000 for a territory even though you are a franchisor with very few locations because I believe I'm going to get a higher ROI on my $60,000 And my royalties and everything versus just, you know, trying to get in the least expensive way. So, they're looking at their investment into the brand as what kind of ROI am I going to get? How quickly can I break even? How much money can I make? How much support am I going to get versus just like how much money am I saving going with this particular franchise? So, I think some franchisors make the mistake of having too low of franchise fees. So, they're not capitalized enough to be able to offer really good support and help help to the franchisees that are in their system now. So, I think that's one mistake that some franchisors make. Um, and then another mistake is their territories are too large. So, as a franchisor, um, it's, it's really interesting. Franchisors that we talk to, most of them that we talk to, we just talked to one this morning in the, in, in the beauty space. Their territories are, I think, 8 miles, like 8-mile radius. And they—

Wow.

Came from another— they were franchisees of another system before that, and their radius was 2 miles. And And they're like, we don't want to do that to our franchisees. So, they swung the other direction and offered too large of territories. There's a number of reasons why you don't want too large of territories, and there are a number of reasons why you don't want too small of territories. You want the right size territory.

Mm-hmm.

So, competition doesn't come in and take market share, but you also don't cannibalize your existing franchisees if a new franchisee comes in. So, there's right size territories to have, and it's going to be different for different types of franchises. So, I think that's one. That's one, another area that emerging brands make a mistake on. The other mis— and I'll get back to franchise development as well, but this stuff's just coming to mind.

Mm-hmm.

The other thing that franchisors make mistakes on early on is franchisee comes and says, well, I want first right of refusal on this. I want this, that, and the other. So, then, the franchisor is really wanting to get this person as a franchisee because they think they're going to be really good. That may or may not be true. But they will offer concessions, they will offer addendums, they will offer things that they normally wouldn't do because they want that franchisee in really bad. And so, we're not fans of doing that because we want franchisees that buy 6 months from now, 12 months from now, 5 years from now, knowing that everybody gets the same deal.

Right.

Because you don't want franchisees to think, oh, I negotiated this great deal. At least I thought it was great. I wonder if somebody else got a better deal than I did. You don't want that culture in there. And then you don't want that if you're eventually going to sell to private equity because they look at all these different addendums that you have and they're like, there's nothing standardized about this and everyone is on a different agreement. And private equity loves it when everybody's on the same agreement and it's very clear from that standpoint. I think at the end of the day, the biggest mistake franchisors make is bringing in the wrong franchisees. I think if, real simply, as an emerging brand, you want to attract pioneers, you want to attract people like what you were saying earlier, you want franchisees that are going to put in the work, that are going to have that mindset of, if it is to be, it's up to me, that are accountable for their own actions, that are going to spend the money on marketing. And I'm going to spend the money to hire the right employees that are going to spend the money to have amazing pre-opening marketing spend, grand openings, and then just continue to listen to the franchisor on what has worked. So, I think, you know, that's what I think one of the biggest mistakes franchisors make when they're first starting out.

It's interesting you mentioned private equity. From my conversation with Alicia Miller, she mentioned that oftentimes she collaborates with private equity firms to call randomly the franchisees to assess how the brand is performing. That's one of the tactics they use, and you'd be able to expand more on that. And it's true, if it's the wrong kind of franchisee— and imagine if private equity firm is calling you and trying to assess, you know, how the culture is, and they receive really bad feedback just because it's not the right kind of partner a brand could work with. that would have a really bad impact on the brand itself. So if you were to think about the, you know, how things would turn out to be in the long term.

Yeah, I think we talked to private equity companies a lot because that's really who ends up buying the brands that we're part of is these large private equity companies. And, and we're always talking to them to see what they're seeing in the industry, what their appetite is for certain industries, where is their appetite decreasing in certain industries like fitness Fitness right now. Fitness is not the strongest. Fitness as a whole is declining in franchising. And there's some reports out there that are, I don't know if they're public reports or not, but that's an area that, you know, before fitness was amazing. 10 years ago or 5 years ago, fitness was just on the rise. Right now, certain health and beauty, specifically kind of health, that's on the rise right now. So you want to talk to private equity companies to see what their appetite is for particular industry and why. But yeah, I think if you want to position your brand to be able to sell, or at least have a brand that's sellable, you need to think about franchisee validation. A couple of reasons. One, happy franchisees will make your life easier as a franchisor. Happy franchisees that are successful is what private equity wants as well. They don't want to take over a brand with a bunch of unhappy franchisees. Now, they'll do it. They'll do it. But your valuation, you're going to get knocked on your valuation. So, it won't be worth as much.

And then— Mm-hmm.

Franchisees that are happy, that are making money, that's how you sell more franchises. Like, the biggest thing for franchise development is having happy, successful franchisees. Now, not all franchisees are going to be happy and successful. There's like the 80/20 rule. There's the—

Right.

33% are below average, and you got 33% that are average, and then the top 33%. But, you know, it just breaks out in that bell curve like everything else does with franchisees. So, you just want to make sure that you're keeping an eye on your franchisees. You have a good culture. You're supporting them the right way, and you know validation isn't important just for selling franchises. There's a lot of reasons why you want to have good validation.

Very important and interesting that you mentioned valuations as well. I think you can give a good sneak peek into how private equity thinks. I really wanted to touch base on okay the boring businesses. So I've been following Cody Sanchez for a while. And, you know, she's been really trying to emphasize on how much people can benefit if they invest in the so-called boring or unglamorous sectors. And you co-founded Horsepower Brands, which is a big home service brand. What made you get into home services? These are recession-resistant sectors, but what made you get into this industry?

Cody's awesome, by the way. People should be following Cody. I know Cody. She's getting bigger and bigger, and I'm sure she's just going to get bigger and bigger out there in the influencer space and having boring businesses. And she's amazing. She's good friends with one of my good friends. They're neighbors. And so, I just, I can't say enough good about Cody Sanchez. Her husband is amazing as well. Former military in special operations and just a smart guy. They're just a power couple.

Didn't know that.

She's definitely the face of that brand, but he's brilliant. Okay. So, boring businesses. I knew I wanted to get into home services. This was before COVID happened. I wanted to get into home services because I knew that retail was— I felt retail was— let me say it this way. I was a consultant at the time. I knew franchise consulting, brokering. So, I worked with a lot of different brands. And I knew that service-based brands were probably going to be becoming more and more popular. And I knew people that were in the roofing space, and I knew that they made a lot of money as having solo roofing companies as just their own company. So I knew that. I knew that there's also big rebates in the material in roofing. And so, and big rebates means you could pass savings along to franchisees and the franchisor is making good money off of that as well. And so I loved the roofing space for all of those reasons. And in franchising, there were not many roofing franchises out there at that And so, that's those are the reasons I love the the roofing space, and I still do. And and so, that's why that's why we targeted that one. That's why we ended up taking that brand, turning it into a franchise, and and doing really well with that brand. It's also yeah Front Street Equity Partners right now. We have a few brands in our in our portfolio, and we just added our first service-based brand. And when does this podcast go live? Do you know?

Actually, this week.

Okay. So, I can't name the brand right now, but soon we'll be able to name that particular brand that's going to launch in January. But it's our first— it's a Canadian brand that we are bringing to the United States and we're doing that. And it's a service-based boring business. COVID really helped that as well, you know, so everyone was at home. So you look back and you see roofing and fencing and driveways and garages and, you know, and blinds and all of that really helped service-based stuff. I don't know that that's like the future. I don't know what that's the big trend in franchising right now, because if you think about it, a lot of the home repairs and things like that were done kind of all of a sudden done right away in during the time that we all experienced COVID. So, I think they're, you know, that where those services would normally be done over like a— it's called an 8-year period, they were done in a 2-year period. So, there was an influx of stuff getting done in and around the house. We like things that boring businesses where there's recurring revenue, where things have to get done, and it's not just a want, but it's a need. That's not— we don't want just want a need-based businesses because a lot of, you know, we also appreciate want-based businesses, but in the service space and what we have right now, it's a need. People need it. People should have it. And we like recurring revenue. And so, I think we're going to be getting into more boring brands like that. I think HVAC is really interesting to get into. I'd like to get into some more HVAC. I'd like to get into restoration. Always a solid business, always solid for franchising because when a home floods, a home has a fire, there's a, you know, something happens with your pipes and they burst like happened at my house, it doesn't matter the price. You need to stop. You need to get that water out of the house.

Yeah.

So, those are some of the reasons that I love boring, boring businesses. And it's a different type of buyer. Some people gravitate towards those types of businesses. Another advantage of a business like that Abby, is retail businesses. You sign a franchise, and one of our brands is called Go Glow. It's a spray tan. It's like a healthy sunless tan. And they got proprietary equipment and processes and all of that. But they, you get a franchise that's signed, they pay you the franchise fee, and then the franchisor has to get them trained, find a location, build out a location, and takes a long time before you're actually open.

Mm-hmm.

Before the franchisor is actually making royalties off of that franchisee.

Right.

Service-based business, you leave your training, you know, weeks after buying your franchise, you have a truck and you have ads going. And you know that in marketing. And now you have a business revenue that's happening in your business. Franchisors making money off of that right away. So, that's one of the great things about being a franchisor of a service business. You start making revenue right away. Advantage of retail, once you have the franchisees opening up their second or third location, that doesn't require a whole lot of work from the franchisor because they've done it before. When we had Sola, it took the— we were working with the franchisor quite a bit for the first 2 locations, but location 3 through 12, like they barely heard from us because we just were just cranking them out and opening them and we really didn't need much of their help. So, So there's just 2 different, 2 different reasons why people like retail and people like service space. But from a franchisor's perspective, those are 2 reasons. Those are some, some different perspectives on those 2 types of industries, retail versus service.

Interesting. I've never had this perspective before. Thanks for shedding some light on it. Quick question, you know, because we were talking about home services space. What are the trends you've observed as far as Gen Z is concerned? I'm Gen Z and I've seen this trend going around, you know, people interested in home services. And I think how much percent of Gen Z? I think 9% of Gen Zs in the US are taking over the franchising space. Have you observed any such thing as far as franchisees are concerned and Gen Zs being attracted?

Now you're making me feel really old. Old now, you know all you know I have. You can see the gray in me and realize. Come on, Eric. I'm not James. No. I am probably not the the the best to speak to that, but I do think it's important. We do look at that. We've talked to some different maid services like Maid This. Do you know Neil with Maid This? If you don't, I should make that introduction to to Neil.

Neil. Okay.

He's a great, great guy. But he's got this like kind of Airbnb type, they do cleaning for Airbnbs. And he's like, hey, this is great. I'm a nomad. He travels all over. He's probably in India right now for a month, but he's running his business and he's the franchisor. And so, when I think about Gen Z type owners, I think about Neil over at MaidThis because Because he's younger and he's designed his business to be freedom. And it may not make as much money as some of these other capital-intensive businesses that you're spending so much time in, but he's kind of attracting that type of buyer. And we talked to some other brands that have that type of business model as well that just allow for a lot of freedom. freedom and flexibility as an owner of a franchise like that. And I think that's the type of franchise that really attracts that Gen Z type owner. But what do you think? Like, that's my answer, but you tell me, being Gen Z, like, where am I right on that or off on that? Or just give some perspective on that.

I think you're 100% right. As a Gen Z, I think one of the trends that I've observed speaking with fellow Gen Zs they don't really like the idea of 9 to 5, so they are really looking at alternatives. And franchising is, is quite attractive for Gen Zs. And Cody Sanchez, I would say, in today's world has been a big influencer. I would like my personal story. I really started thinking about these boring businesses when I started following Cody Sanchez. And I've mentioned her a couple of times. And so I think we really started seeing value in those businesses. You know, you always try to go after shiny objects, especially in entrepreneurship. You know, you would say, okay, I would be the owner of the next big tech company, for example. But you realize how much time it would take to scale that business. Also, it's quite saturated, hyped up. I think think home services or these boring businesses, they offer a very realistic model for people with no background in entrepreneurship or less background in entrepreneurship to come up with something new because Gen Z is equipped with technology. We know the latest trends. These kind of industries are not— I'm unable to get the word here, but they're not revolutionized. They're quite old in the way they operate. So I think there's a huge scope for the younger generation to step into these kind of industries and bring about a change, bring the brand on top of the brand and yeah, and scale it. That's my perspective. I love that perspective.

We are interested. We talked to some brands that are Gen Z founders and Gen Z kind of more focused. And I think that is something, even from a customer standpoint, I think that is something that Franchisors need to be thinking about a lot more than they're thinking about it now. I talked to another brand that is perfect for this. It's more of kind of a SaaS business in dealing with high-end bags and clothes and things like that, but it's a franchise. And so, I think that's interesting because it's a heavy-tech business, but they do want to have an aspect of franchise. franchisees out there doing some work as well. So I think that is a perfect Gen Z type business as well. So I think we'll be seeing more of that. And again, I think that is a trend that most in franchising probably aren't aware of, or at least putting in as much weight as they should be. So I'm glad— that was a great question. I'm glad you asked that.

Yeah, yeah. I was speaking with— so there's this company called Nice job. And what they do essentially is help franchise brands— just franchise is one space that they help with— with reviews. And I was speaking with the director of franchise relations there, and he said he has observed from his research that Gen Z typically looks at reviews, a lot of reviews, and that does impact the way they, you know, take a service from a franchise brand. And so brands, franchise brands, not just home services but any industry for that matter, of need to keep Gen Z in mind because at the end of the day, they are kind of even the direct consumers. And yeah.

Nope, that's 100%. Reviews are a big thing too. And I don't know that I've put that together with Gen Z and reviews. I've just never thought about it like that. But I'm big on reviews and big on like net promoter scores, how happy your customers are, how happy your employees are. And, and so, but even if they're happy but they're not sharing it, that's when you want them to share it and make it through technology, make it easy for them to share how happy they are with it. Because if you have happy customers and they're not saying anything about it, does you know the world doesn't know how happy they are? Like at Google, I can't remember what our net promoter score is, but it's off the charts. It's it's extremely high net promoter score.

Uh-huh.

From customers. And so, something that we're starting to do more of is just push getting them to share more on social and give those reviews where those customers live. Because some of those are going to be Gen Z customers because they— people before they get married, some of these people will go come in with their bridesmaids and get tanned. And then, they come in and sample it and they love it. And then, they're going to come in before they go on vacation again, or they're just going to do it all the the time. So, yeah, it's really important.

Yeah, yeah. And it's funny that you mentioned technology. Quick question on that. How much would you say is the role of AI important in franchising? I saw a post of yours on LinkedIn, and I was thrilled to see that somebody is talking about it.

I, so I have, I'm setting up more calls next week to learn about some more stuff with AI. As soon as it— I remember when ChatGPT just came out and a friend of mine's like, Garrett, you know, this is what I've been telling you about. And I'm like, oh. And it made sense because— and he's like, AI goes way beyond ChatGPT. And this was like that ChatGPT came out, what was it, 2 years ago at this time? Or was it last year at this time? 2 years ago, I think.

2 years ago. Yeah.

Yeah. And, um, and I'm like, wow, this is, this is what— he's like, we've been working on this, you know, a, a solution for franchisors for a while now. And so, ChatGPT is just the beginning. Before ChatGPT came about, I was using a company called Jasper. Jasper.ai.

Okay.

Yeah. And they were basically using ChatGPT technology and making it available to people like you and me for social media and content and copywriting. Writing and things like that. So, I was using it before it was out. And then, I had friends that are influencers or beginning to be influencers in that space. And I was bringing them into my masterminds and things like that to talk about how to have the right prompts when prompts were, you know, really important back then. And so, I followed it. Conversations that I had. And then, so, to move forward just a little bit more, One of the CRMs out there, GoHighLevel. I have friends that are really into GoHighLevel. They're really, really smart with that, and they're some of the power—power—I don't know what you call them—influencers or whatever of GoHighLevel. Like they—they are at the GoHighLevel conference, and they're the ones on stage. So they um so they're—they're—they're amazing at that. They're also into AI, and so I know GoHighLevel is starting to do a lot more like integrating AI. I also know like one of our brands called Hello. Sugar is has AI was one of the things that attracted us to it. The founder is like, "We don't need to have necessarily have receptionists everywhere." If if these leads are coming in through social media, why don't we have AI take that lead and turn it into a conversation and turn that into a booked appointment? And so they tested all that out, and they had higher conversions from a lead to a paid appointment than through AI using AI than. They do through a human interaction. I have another friend, and that's one of our brands. So, I love AI, and Brigham over at Hello Sugar is the one that spearheaded that. He's the founder of that brand. It's one of the Front Street brands. We have another— I have another friend of mine that is probably doing it beyond that. He's got technology that he's been working on. This is the guy that I was talking to when I first learned about ChatGPT, and he was going to all the AI conferences before it What's cool? And they have technology that goes in and will be that front desk person for a brand. Let's call it a fitness brand. They go in there, lead comes in through multiple different sources. They have communication with that brand. They book that brand or that customer, book an appointment, take payment, and then nurture that lead. And that lead then goes in and has their appointment at that particular—

Yeah.

studio or location, and they're doing that, have better conversion rates than they would if it was a human doing it. So, his is more robust than Hello Sugar, but Hello Sugar's just doing that for their franchisees. And we're just at the beginning stages of all of this. I think there's going to be noise out there and people that are overpromising and underdeliver on what they can do.

Yeah.

So, I love it when people are just kind of honest with what it really is and what they're really doing. With AI, there's people that are doing amazing things out there, and there are people that are not doing that amazing things that act like they are, and you're really not getting that much value from some of them. But I am continuing to go deeper into AI, and that's just the beginning of it. You know, there's a lot. You, I'm sure you know way more about it than than I do. But I'm pretty excited about it, and I see the real use cases. Now franchise owners are are using it to help their franchise.

I love that, Eric, and I truly believe that franchising as an industry has to have AI. Obviously, as you mentioned, not as fluff, you know, but something that brings a real impact. And one of the use cases that you mentioned, I advocate for the same use case, which is how can you increase the speed to the lead to speed or speed to lead and streamline your franchise development process? Which was, you know, the baseline of our conversation today. As your final words, Eric, I know that you're huge on community. You're honestly, you have a huge community and I'm a part of it. What made you start this community and how is it making a difference in the franchise space? I personally learn a lot from your content.

So just before COVID happened, I started a Facebook group and I started it for franchisees, basically my friends. And I had like 50 people in there. So that's how it started. Before that, about 3 years before that, I had a friend, his name's Aaron. He's got a company called Shop Fix Academy. He's like, Eric, you need to start a Facebook community. And then out of that community, grow that into, uh, then you'll have influencers and then you'll grow that into masterminds. And life will be amazing, and have a lot of value beyond what you you just get paid for having a mastermind. So I didn't listen to him for three years, and he was always he he would get on a call with me and tell me exactly how to do it. I didn't do it for three years. I started my podcast three years after I originally was supposed to start it, and I thought I was late. I thought I was late to the podcast. I wasn't. I thought I was late to the Facebook group. I wasn't. So I started that, and then co. COVID happened. I was skiing, snow skiing in Park City. COVID happened. I'm like, oh my gosh, the world's going to end. I left there early to come home. And then at that point, I was in this room where I am now, my office, and all these influencers, the Cody Sanchez's of the world, Alex Hormozi's, they were giving like a lot of help for free, as was I. I'm not a big name like they are, but I had—

Right.

I had communities that I was giving to. I was also like, I sent Alex Hormozi a message. I'm like, hey, can you come in and do a podcast and speak to my community? He's like, sure. Cameron Herold, same thing. A lot of people like that. So, anyway, I opened it up to anybody in franchising. And then, all of a sudden, it was 500 people. It was a big deal to get to 1,000 people. And it was a lot of— it took time and a lot of work to get there.

Yeah.

And now, it's over 7,000 people. People, and I'm— and I learned how to manage it. You— it's— I realize that it's my stage. Like, if you go to a, a seminar, a conference, there's a stage, and people are allowed to speak on that stage. And people in that Facebook group, whenever they say something, it's the stage. And, and I wanted a group that was positive. I didn't want people in there that were just talking about all the negative things about franchising, because there's other groups for that if you to be around that. I don't like to be around that.

Me either.

So, I don't let that happen. I don't let people come in and sell their services in the group. If they start to pitch themselves, soft pitch themselves, and, you know, people think they're really good at that, like, you know, soft pitching themselves, all those posts get taken down by my virtual assistant. So, I wanted to create this group that was franchise buyers, franchisors, franchise vendors, franchisees, where they could come in, ask questions, get help, and people were just giving value. Not selling things, and and then that just continued to grow. About six months after COVID happened, I was spending a lot of time giving free value in that group, and I said, "Who's interested in paying me $200 a month to have special meetings with me and my friends?" And I think there's about sixty people that raised their hand, and that's how I started the franchisee mastermind. And then about a year after that, I started the franchisor mastermind. That was more more money than that, and both of those. still continue to this day, but it all started from the Facebook group. The group is the stage that has given me more influence than I ever, ever thought was possible. People know me because of that. That's probably how, you know, you probably listened to my podcast and got in the group.

Mm-hmm.

And the other thing I did in there too, Tommy Mello, he's got a great group called Home Service Secrets or Home Service Advisor or something like Home Service Experts. He has Home Service Experts by Tommy Mello. I'm like, oh, Tommy's smart. And so, I did that by Eric Van Horn so people would associate that with me. So, it's all branding. It's all community. Then out of that, I can put a post out there that says, hey, we are looking for a franchise development rep for one of our new brands. And I had about 75 5 applications come in from franchise development people that wanted to sell for one of our new brands. So, it's my stage. I announce that I'm looking for this or I want that or I need help with this. Then all of a sudden, I have a large reach out there. And so, that Facebook group was something I never thought it would turn into what it has. The other thing, Abby, it's a moat. Like nobody else can go create a Facebook group with 7,000 people that are really interested in franchising right now because it just took time to build. Now, they can do it other places and LinkedIn and whatnot, and they will create as good or maybe even better communities than I have with that, but that's how they're going to do it. So, anyway, you know, I'm so glad I did that. It was somewhat on accident. I wish I would have started it sooner, but I didn't. start it too late.

And, and you are an inspiration for anybody listening to it. Um, it's better late than never, and you've done a great job at it. I mean, the very fact that young people like myself are really following you and, and inspired by your content, it, it makes it worth it. And, uh, really, I, I love your content. I follow your newsletter. So, Eric, you're doing a great job, and you're truly, um, a role model in the I am really thrilled to have you today and get this opportunity to speak with you about franchising.

Abby, this was a very fun podcast. It was— you made it very easy for me. We've talked about things that I've never talked about in a podcast. So that says a lot about you as a host asking really good questions. And I'm looking forward to getting to know you better as a friend. And that's one of the things that's great about podcasts. You get to know people and then become friends and then And you just never know what happens. So thanks for having me on.

Same here, Eric. Same here. It was a pleasure.