The Path to Franchise Success with Greg Mohr - REIA 494

Welcome to Streams to Impact, the podcast where busy professionals are empowered to develop multiple streams of passive income built on solid, secure, hands-off commercial real estate investments. This show is not just about wealth development. Every episode, we dive deep into inspiring conversations with professionals who are living life to its fullest while making significant and meaningful impacts on a world in great need. Engage with us each week and discover how you can thrive and flourish abundantly in all areas of your life. Now here is your host, Dr. Allen.

Hello and welcome to Streams to Impact. I'm your host, Dr. Allen, and as always, delighted to have you with us. We have a very fascinating topic today. Uh, most of you on the show have experience with real estate investing, But we like to help you diversify and branch out into different aspects because diversification is certainly the best way to risk mitigation and also an avenue to further wealth development. So with us today is Craig Moore, and he is a veteran of the franchising space. He started running many franchises, and then he shifted over to being a franchise consultant. Where he has been named the top broker multiple years in a row. Craig has helped nearly 200 entrepreneurs and corporate holdouts to create wealth, financial freedom, and security through opening over 450 franchises. What a record that is, Craig. So take us into the show and just start off by sharing just a little bit about Thank you, Allen.

I appreciate you having me here today. Well, I got my start back into the franchising world a long time ago, back in my high school days. Most of us back then got jobs at fast food places, and mine just happened to be at Taco Bell of all places. I think I knew the owners at the time on that. So I got into that and started moving up in the Taco Bell world. And come to find out, as I became a manager, I was working for a master franchisor. Her name was Kathy, and she owned about 50 Taco Bells. Throughout the Sacramento, California area. So, I went around to her different restaurants there to help her build her teams up. I enjoyed that thoroughly, a lot of fun, great, you know, processes and procedures in place, step by step. So, step into any one, and it was the same thing just over and over again. So, it was real nice to do, a lot of fun. I went on to manage other restaurants. I did restaurant management for about 15 years, got bored with that, got a degree in electrical engineering and physics, became a microelectronic circuit engineer. I did that for about 15 years. Got a degree in business, master's degree in business. And then while I was doing that, a friend of mine and myself, another engineer, we bought dry cleaners, privately owned. Storage units, privately owned on that as well. And then I had some rental properties on that. So, with a lot of fun but big challenge when, you know, you don't have anybody there to help you out and you don't know anything about the business. But we learned and we were doing that as a semi-passive type opportunity there. You know, going over there checking it on weekends or weekend, weekdays, lunchtime after work that we did. So, very interesting. But fast forward there, did about 15 years as a microelectronic circuit engineer. We both got out of the corporate world at about the same time, me and my friend Robbie and myself. I decided at that point in time that, you know, I really like that franchising thing and this dry cleaning business is a bit of a challenge when you don't know anything about dry cleaning. So, I sold off all my shares. stuff to Robbie and said, you take over the dry cleaners and the storage units. I'm going to go back and do that franchising thing again because I had a lot of fun doing that on there. So, I went out and I searched around franchises. Finally found a franchise consultant to help me out after having about 20 different people from franchises calling me up. And he got me into a great franchise. So, I did that for a couple years. But then I started thinking, you know, I really like what that guy does as a franchise consultant. He He gets to work from home and work with people all over the world, all over the United States for the most part, and yeah, all over the world as well. I said, show me how to do that. I got to learn how to do that. So I got out of my franchise, went back to him and said, teach me everything. He did. And that was about 12 years ago, and I haven't looked back since.

Wow, what a diverse background you certainly have and a fascinating journey. And along the way, certainly you've picked up a lot of knowledge, a lot of A lot of skills in a variety of areas. And it's interesting to me that you have had a real estate investing background and have come from that to really pretty much dedicating your whole entrepreneurial experiences to the world of franchising.

Yes.

So you've had experience in real estate, you've moved to franchising. Tell us, you know, what is— why is it that real estate investors are good candidates for franchising?

Yeah, great question, Alan. I get a lot of real estate investors that come to me looking to get into franchising to diversify, for the most part, on that, because there's, you know, there's fixed income with the real estate. You know, you have a— you have your renter, and that's the income level that you're going to be at there. You do build equity and all that good stuff, but if you're looking for a regular income on that My real estate people are looking to diversify out to increase their level of income on that, so the potential is a lot greater there. They work with real estate investors, and myself when I was doing it, we work with a lot of people that are in the world of franchising as far as taking care of the house. Home improvement type franchises, electrical services, heating and air conditioning services, plumbing services, you know, roofing, maid service, all sorts of groundskeeping, all sorts of things. So most of my real estate people work with these folks, or at least know what they do on a regular basis. So they're really familiar with those types of businesses. So it's really easy to just get them into something that is compatible with what they're doing in the real estate world at this time on that. And it's kind of funny, I had one lady that she ran her— I had actually a husband and wife team doing it, and the husband was going to do this business. He was going to do it, you know, Semi-absentee because his wife took care of all the rental properties. They had about half a dozen rental properties on that. And then as we went through the process and they started learning about the electrical services business that they were interested in, and he was going to do it semi-absentee, she goes, no, we're not going to do it semi-absentee. She goes, I've learned enough about that business. I realize I can do that business myself and run the rental properties at the same time. So she took it over and they ran it full-time, and she made Rookie of the Year on that. Easy to step into from a real estate investor's point of view because you already know those businesses. You don't have to know the, you know, how to do the work. Somebody else is going to do the work for you, but you're familiar with those people and how they do business.

And the, and the processes there, which is, which is important from a management perspective. That's what you need to know. Um, and so many in our audience are, are interested more in the passive investing in real estate. Rather than syndicating. And so certainly they would be interested in that time trade-off in terms of if they're going into franchisees or franchising, how passive is that?

Allen, generally speaking, if you're looking at semi-absentee, which we have semi-absentee franchises in just about every industry out there, You're probably looking at around 10 to 15 hours a week depending on your management skill and style. And we have 4 franchises out there that you can run almost completely passive because they'll have a management team in place that'll run the business for you.

So what are the, the mistakes that most people make when they are looking at going into franchising and they have never done it before?

Just a few of them off the top of my head there, Allen. Or one thing is don't let what's that popular, it clouds your judgment at this time. There's a lot of franchises that'll pop up and they'll seem like they're really busy and the next latest greatest thing, but really look and take a look at the business model and how— where they're going to go in the future, how they get their money on that, and don't let what's popular at the moment cloud your judgment on what you're going to do on that. Also, one of the other things, and I've got 7 mistakes listed on my website, I'll just go over a few of them here. But take advantage of free people like your Chamber of Commerce. I took advantage of my local SCORE chapter, S-C-O-R-E. That's a free service. I asked them about the different franchises that I was looking at. They are business people that are in your neighborhood or your area, and they've been there for a while, so they really know the area. Good people to talk to on that. Make certain that you have enough funds for it. Don't, don't get into something that's over your head on that. Most good franchises will have a net worth requirement on that because they don't want you to run out of money, so make sure you don't. And always look into funding. You can use your money, you can use other people's money, but take a look at funding. Franchises in general are really easy to fund because they have that proven track record of success, so it really just comes down to your credit score on that one. And also, when you're investigating the franchise, always, always talk to as many franchisees as possible that are running that business so you get a good feel for that business. And if you're going to do it semi-absentee, you want to get on the phone with those folks who started that business semi-absentee and really find out from them what exactly for that particular franchise does semi-absentee mean and make certain that it, you know, fits with the schedule that you're looking to do.

And those can be found on your website. So tell us about your company and how it is that we can find you.

Certainly, Allen. So what I do is I help ambitious entrepreneurs and investors find a great franchise, great franchise fit for themselves, and also flip businesses into franchises. On that also, on there, there's no charge for my services. The franchisors pay me a referral fee for that. I work with a few hundred different franchises, and most people, Allen, will come to me because they don't really know exactly what type of business they want to get into or franchise in particular. They just know they want to get into it on there. So that's where I come in, and we go through a nice process where I'll get to know you as well as possible so that I can come up with a few different opportunities for you. Generally speaking, 5 or 10 different opportunities after I get to know you a little bit on that. And I take you through the entire investigation process, not only finding franchises for you, but then investigating each one as we go through the whole process. I've got CPAs, I've got franchise attorneys, I've got I've got funding people along the way, everybody that can help you out, and not just one, I've got 2 or 3 in each category so that you can compare and contrast to see which ones you like on that. And you can get more information about me if you'd like on my website, FranchiseMaven.com. That's FranchiseM-A-V-E as in Victor-E-N.com. That's where you'll find the 7 mistakes, and there's also a link to my book in there. Wall Street Journal bestseller, really cool. Real Freedom: Why Franchises Are Worth Considering and How They Can Be Used for Building Wealth. And that's a step-by-step guide that I put together showing people what to look for in a franchise, everything that I'm going to take you through with some real-world examples of people that I have worked with.

Well, that sounds wonderful, Greg. There's different types of franchises, and you just mentioned some that I really wasn't aware of, and particularly those related to the real estate industry. So really explain to us, give us an overview of the different types of franchises that are out there and kind of what is the difference between the various different categories.

Great, great question, Allen. That's what everybody comes to me, the first thing that they think about, Allen, is what you and I see when we're driving around all the time. We see those brick-and-mortar franchises, the McDonald's, Taco Bell, Meineke, Mako, Supercuts, Great Clips. We see all those, so we don't realize how many different franchises there are. Those are the ones that we see out there, or what we call the brick-and-mortar type franchises on those. Basically, you build it and they will come is the general theme on those. And they're going to be around $250,000 to $300,000 total investment on up from there on that one. Many different industries, of course, as you know, out there with the brick-and-mortars. on that one. On the other end of the spectrum, what we have is the service industry franchises. That's where your clients don't necessarily know you exist until they need you, and that's where you need a great franchise system to drive people to you when that need arises on that. Those are going to be around $150,000, give or take, depending on what kind of equipment you need. You generally either work from home, or your manager does if you do it semi-absentee, or you have a small office on that. So the total investment is going to be a lot less. It's going to be— it's not really going to matter which one you get into, the brick-and-mortar versus the services industry, as far as how much money you can make. Most franchises are really looking for you to make a good 6-figure income, which is what I also tell the people that want to turn their business into a franchise. It's good to be able to be at that 6-figure income level because you attract more people to you on that one. And within the services industry, we already talked about the home services. You know, anything from outside lawn care, pest control, roofing, kitchen remodeling, all sorts of different things that you can do in there. But we've also got, you know, doggy daycare, we've got, you know, dog walking, pet walking, pet daycare, senior care services, tutoring services, sign companies. So just about any industry that you can think of out there, Allen, there's a franchise for it. And within each industry, there's some that require you to do full-time, and then there's Several questions arise there.

One is that, of course, when you're talking about this $150,000 entry level, is that— I mean, how many actual units would you have with a $150,000 investment?

One is what you generally start out with. So you're going to be looking at your total investment. It doesn't matter if it's a brick-and-mortar Or a service industry franchise, the franchise fee is generally going to be around $50,000. The rest of it is then going to be what it costs to build that franchise up and to get it going on that. So the rest of the money is just advertising, marketing, that sort of thing. But this is all for one unit. If you decide to do more than that, generally what happens is the franchise will reduce the franchise fee itself for the additional unit.

Okay.

On that. With a brick-and-mortar, it's not going to make that much of a difference because you may be $50,000 for the first unit, $30,000 for the second, $20,000 for the third. That's not that big of a deal compared to how much the total investment is when you have a build-out to do. Mm-hmm. So each one, you're still going to have that big build-out. Now, if you get into the service industry, $150,000 is one unit. However, if you want to pick up another unit, which in this case is territory size, So you may have a territory of 200,000 households with $100,000 or more income on there. If you're going to pick up another territory with another 200,000 people, again, you'll get a reduction in the total franchise fee itself. So instead of $50,000, again, $30,000 for the first one, $20,000 for the second, whatever the franchise does, they're pretty similar on that one. You've got another territory, but now with the service industry, the total investment is going to be pretty much the same. It won't be too much more unless you need a truck to go out there. You just have a larger area that you're servicing on that. So with the service industry, it's more advantageous to pick up more than one unit, or in this case what they call them is territories, because now you've got a wider selection of audience to choose from. You've got more of an area to do. I generally recommend just start off with one, you know, just see how that one works out and get that one going before you go into others. But I've got quite a few people that just really like the franchise enough to where they pick up 2, 3, 4 territories at one time.

Well, yeah, I mean, it would seem to me like— I mean, you can certainly, I guess, if you're going into a franchise, it's an established business and you may be able to increase your revenue by picking up additional customers, but chances are you're purchasing a franchise that is pretty well saturated, I would think, within that area. Not always.

Not always. It depends on the franchise, and if you ask me to find one for you where you have the opportunity to pick up more than one territory, we have enough great franchises out there where we can. When we get into the saturated ones, those are the ones that have been around many, many years, which just lowers the risk level for you. But yeah, like you said, Allen, the chances of them not having multiple territories is a little bit greater. Sorry for interrupting.

Oh, no problem. So, I mean, it would seem to me your best avenue for increasing your income through franchising would be to purchase more units. I mean, you may start off with one, but you would probably want to grow that. Is that a good assumption?

Excellent assumption, Alan. That is definitely the way to go. So that is growing horizontally. Horizontal growth, where you have the same franchise system, now you're just taking over maybe your whole city or your whole state, as the case may be. The other way to grow is to grow vertically, whereas you're keeping the same territory, but you pick up another franchise. So, if using the home services, for example, you're already doing the yard work for them, well, now start doing the maid services for them. Start doing their electrical services, their plumbing services. their windows, that sort of thing. So there are 2 different ways to grow.

Okay, so the $150,000 is pretty low entry level, and so— but you're saying that it is easy to get financing on these. What is the loan-to-value, generally speaking?

Pretty much the same as if you would buy real estate on the house or something like that. They're good rates that they have out there for those because the franchises really have that proven track record of success. So there's really nothing to it. So just think of it as just like buying a piece of property or a house or something that you do. It's going to be about the same.

So, I mean, with commercial real estate, that's generally 30/70, 20/80 from time to time. Of course, if you're purchasing your single-family home, it can be like 95% to 97%, depending on the package you're getting. So what are we talking about here?

So I'm trying to skirt that answer because I don't have an answer for you. Sorry. If it seemed like I was trying to skirt that answer, it's because I don't know exactly what that number is. I apologize for that. I can get it for you, but I do not have it off the top of my head.

So real estate investors are familiar with syndication. Is that a common thing in the franchising area? Could we syndicate a franchising operation?

What do you mean by syndicating, Allen? Sorry.

Well, a syndication is bringing a group of people together to purchase a property.

Yep, I get that every once in a while on that where we have different people that'll do it. The only challenge I would say that I've had with those is when you get— the more people you get to look into franchises, the more different opinions you have and the more challenging it becomes to find a franchise that everybody likes. But I've done it. I've done it a few times on that where I've had groups of people go in on a franchise together. You all have to— if you're all going to be on the franchise agreement, keep in mind that, you know, by law you have to be disclosed to that franchise. So everybody that's going to be on that agreement, franchise agreement, is going to have to go through the process with me. So the other challenge, of course, that I had is when I have, you know, 3 or 4 different people doing it is putting everybody's schedule together so I can get everybody scheduled so we can I'll talk at the same time. But if you're willing to help me overcome those challenges by, you know, everybody finding common ground for a franchise, which I've done before, and then putting everybody's schedule together so we can get you disclosed and go through the investigation process in a timely manner together, yes, I've done it before. A little bit of a challenge for scheduling and all that, but absolutely we can do that.

Well, of course, what I'm— what I would be thinking of would be like forming an LLC And within that LLC, there would be, I don't know, anywhere from 2 to 3 or 4 principals and then a number of passive investors. Have you worked with something like that?

Yeah, everybody puts together an LLC or C corporation depending on how they want to structure their business as well on that. It's just a matter of who's going to be responsible for the franchise as far as who's going to sign that franchise agreement. If you put together an LLC and you've already got that in place and you've got one particular partner who's going to be the one that's going to sign everything and be on that franchise agreement, then we just have to deal with— just work with that one person that's going to do it, which makes it a whole lot easier, you know, with the scheduling. And as long as they can decide, you know, which franchise is best for the group.

Sure.

Yeah.

Well, tell us a little bit about the investigation process, the due diligence, and what all goes into that? We're probably familiar with that from a real estate investment process, but what's the difference between that and that process with a franchise?

Allen, it's going to be pretty similar to what you do. The only real big difference is what I referred to earlier, is when you talk to the— when you get to the point where you're talking to the franchisees, you've got a proven system and other people have already done it. On there as well. So, you know, a lot of times you hear out there, you know, you get into my plan or you do this certain thing and, you know, so-and-so made a million dollars at it, you can too. Well, that's not very transparent because you can't talk to the other people who have done it before because, you know, they just don't let you or they just don't have that information. Whereas with a franchise, you do. Inside the franchise disclosure documents, you have a list of franchises, of people who started the franchise, And are running it, and you can call upon any and all of them if you want to. And then you have a list of people who started the franchise who are no longer running it, and you can find those people too. I did when I was looking at my franchise. I searched them out and I found the people that started it and are no longer running it. So, great transparency on there. But from the start, from the due diligence process, what you want to do is— we'll put you together with the franchise development person. They're going to teach you and show you everything that there is about how they're going to find you clients. clients, how they're going to find you employees if they need to. Electrical services and plumbing, you have to have a master— most states, master electrician or master plumber. They'll show you how they're going to find you that. And in general, they show you how they're going to help you find employees on that, what to look for, where to go. So you're never guessing as far as what you do. But you're going to go through, as you go through the due diligence process, and find out how they're going to do that. How do they do the marketing? What role do you play in that? Generally speaking, they've got all the marketing material there for you. You just pay for it and they're going to show you exactly what they do. They're going to show you how the operations work, what they're going to teach you to do. They're going to get a pro forma together with you so that you can take a look at, you know, what it's going to take to build that income up, what it's going to take to hit the break-even point. With the Federal Trade Commission, there are certain restrictions about what franchises can say and what I can say about how much you can make As a franchisee. Inside those franchise disclosure documents, which will be one of the steps in your investigation process, is going through those together. They may have in there their financial disclosures under item number 19 in the franchise disclosure documents, which gives you a breakdown, an overview of what the different franchisees are making. Putting the pro forma together, as I was referring to that, they can't necessarily tell you exactly what you're going to do because they don't know exactly what you're going to do, but they can show you what other franchisees have done. So once you get to the point where you start going through that franchise disclosure document, after that you've learned enough about that franchise to have some great questions for everybody. And I'll have a list of questions for you for the franchisors and the franchisees as well. But once you get to that franchise disclosure document and you've gone through that, then you start talking to the other franchisees. They're going to help you put your pro forma together as well. You can find out from them, you know, how long did it take you to start making money? What do you have to do to get it? And then what you want to do really is picture yourself doing what the other franchisees are doing, especially the ones— if you want to be really good and one of the best, then talk to the best ones. Find out what they do on a regular basis. Picture yourself doing it. If you can, you're in the right direction. You're going the right way. If you can't, well, 2 options: you find somebody to do it for you, or you move on to another franchise and say no thanks to that one, depending on what you're going to do. After you're done with the franchise disclosure documents, talk to as many people. You're making friends with those franchisees. As we were talking about earlier, when you referred to the units, the territories we're talking to, about most franchises, not all of them, but most franchises give you a protected territory, so you're never competing with other franchisees. You're all a team building that franchise system up together. So these are the people that are going to help you grow that business as well as the franchisor. So make friends along the way, great people on that. After you get through with all that, then you're going to go meet the team in person at the Meet the Team Day. They were doing it online for a while back in COVID, but I think we're back to doing it in person these days again as well. So you go out there and meet them at their offices, get to know them. It's a great way to really find out, are these the type of people that I can trust, that I can believe in, that are going to help me grow that business and become what I want to be over the next 5 to 10 years? Then they send you home and you decide whether or not you want to get involved in that franchise. And again, along the way, I've got CPAs, franchise attorneys, funding people that can answer all your questions.

Well, Greg, fascinating information and very informative. Well, Stream to Impact listeners, we're so glad you're with us, and I hope you have enjoyed this as much as I have. Learned a whole lot about franchising that I had no idea about, and it's given me a lot of things to think about in terms of the way that, that I want to take my future investments, and also giving me some thoughts in terms of how it is that I could franchise My own entrepreneurial endeavors here. So, Greg, it's been wonderful having you. Tell us one more time how we can get hold of you. I think one way we can find you is certainly go to LinkedIn and just search for Greg Moore, and I think we'll find you there. But what are other ways to find you?

My website is a good place to go. Lots of great information there, franchisemaven.com. That's franchise Email me at greg@franchisemaven.com or just pick up the phone and give me a call at 361-772-6401.

So once again, Streams to Impact audience and listeners, thanks for being with us. Please take a moment to like, share, and subscribe and leave us a rating and a review. Until next time, live abundantly. And we'll see you in the next episode.

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