Pressure washing profits: You'll never believe how much these guys make! Ep. #020. Small Business Ideas and Entrepreneurship

And we can do a 3,000 square foot house in 20 to 25 minutes, start to finish, set up, tear down everything. That's a 4 to $500 job. So the economics is, they're just incredible.

What's going on everyone? Welcome to another episode of the Kerner Office. Today is my first interview. So I'm obsessed with both franchisees and franchisors and how that whole business kind of works. And I'm also obsessed with pressure washing. I, I think it's a cool business. And so I talked to my friend Aaron Harper. He's the CEO and founder of a franchising company called Rolling Suds. And they have a couple hundred plus territories. They just launched like a year or two ago. They're growing like crazy. And I thought this was an interesting conversation because A, you get to learn how a hundred plus million dollar businesses run. He's not quite there yet, but he's getting there really fast. And B, you get to learn how a $500,000 business is running. So you get the best of both worlds because Most people run $500,000 businesses and not $500 million businesses. I'm interested in both. And so I got to hear about the pressure washing business from both a franchisees perspective and a franchisor's perspective. We broke down some numbers, talked about his origin story and I think you like it, so let me know what you think. And we get into the conversation talking about how he got started in franchising. So enjoy.

And so I called a buddy of mine that I went to college with and he was like, you should get into franchise development. And I was like, what's franchise development? Because like many of the people who are watching this, listening to it, I thought that franchising was just McDonald's and chick fil a. And I had heard horror stories about like Quiznos and Subway and stuff like that. But he opened my eyes to like this whole home service realm where you can buy into a service company. And I love the idea of helping people become business owners. And so emailed his boss every three weeks for six months until he hired me, that worked at the largest carpet cleaning company in the world, helped grow that.

You were selling territories for them?

Yep. And what was wild man is I would sell a territory or sell franchise. You'd buy two, three territories or whatever. And I would call him a couple weeks after and just see how his ramp up processes are going. And he'd be like, no one's contacted me yet. And I think I'm supposed to train in two weeks.

Holy cow. And he just dropped 50 grand per territory.

70, $80,000 on startup expenses. So I would push back obviously on the network and be like what the heck? And they'd be like oh blah blah, blah or whatever. And. And it was just, it was brutal. Then eventually this organization was like, yeah, if you don't get in line were you're not going to rise up in this company. You need to make, make right with the other. Because I, I care about franchisees. These people are taking very seriously. They're giving us.

You have to develop a relationship to sell something for 60 grand. Right.

It's.

And then you're kicking them to the curb or at least your bosses.

Yeah. And it was, I think and this is one of the challenges that I just see in franchising is like we had our sales arm and then operations and then there was like marketing and no one was talking to each other. And so I'd go in to be like hey. Anyways. So it just drove me crazy. I still believed in the model of franchising and there were still people who did well despite it all and they had support that they wouldn't have otherwise had. And that company was then purchased by a private equity backed restoration company that does a couple billion a year. And they wanted to deploy capital and build a portfolio of brands. And so they bought the company I was working for. Cash said this isn't a buy and flip type situation we're buying and holding for. And so I was encouraged by that. They bought a brand in the drywall repair space. They bought it from a founder who exited immediately. There were 100 locations, sold 40 franchisees and I was the first full time employee on the business that after the acquisition I was like I'm not putting anyone in this system. We don't have a system. We got to fix it. We got to figure out exactly it's needed. Yeah. Like it was, think about it, if you've got a hundred locations and they all need to get profitable and you have no employees. So we basically we hired a brand president and him and I, what did.

He sell for the drywall company at least.

I don't know exactly but at least a few million thing.

So he was just. This owner was just slanging territories, just, just slinging. People would fly to him every month or so and he would just do this training and say good luck, call me if you need anything.

So he would. So he had no experience in franchising. He had a cool idea which was drywall holes in walls need to be repaired. And there's not a niche company that. That does that. So had a great idea, was a phenomenal salesperson, and he would fly to them and train them and. And then. Yeah. Like, no. No support.

Really?

Yeah.

Wow.

And. And so there were some franchisees who were doing well, but they were doing well because they were. They persevered and that's who they are. And they would have done well at anything.

Yeah.

So I think a good p. A big piece of being a franchisor is being a listener. So before we started selling territories, we hired a brand president and him and I went on a listening tour and asked everyone what they needed from us. What did they think they were going to get that they didn't get? Where is their business today? Where do they want it to be in five years? What do they need from us in order to help them get there and really just let them know that, like, we're there to support them. And that's what. What. That's why we bought the company. And we built systems around everything the franchisees needed. We reverse engineered it. We put our first franchisee on the road. This was all happening in Covid, by the way. It was 2020 and the franchisee was cash flowing. His first month after training, we turned leads on for him at training. He had a full time skilled laborer hired prior to going to training that we helped him recruit. And he did just under $30,000 his first month in business with a 30%.

Just patch and drywall holes.

Literally.

And really, he wasn't even doing the work. He was growing the business. But his skilled laborer was doing everything.

Correct, which is, I think, the right way to do things.

Yeah.

Just in general, a lot of franchisors are like, no, you go do the drywall repair. And my thought process, I'm. I think franchising should help people build assets and not job. And if you're the worker, be doing it like you're the job. Build the business when you're the one doing the job. So I felt we were prepared to grow that company at that point. We didn't. We built a business not from scratch, from negative scratch. You know what I mean? Like, we hadn't. It was a cold.

You'd have been better off from scratch.

100%. 100%. So anyway, we. We then. I then grew that company in two years by 223 locations across the country, three franchisees who bought 223 territories. We became the biggest drywall repair company in the world. And all Those franchisees opened with jobs on the calendar and an employee hired per training.

Wow, that's awesome.

Thank you. It was. Took a village. We put teams in place like we. There were some things that I definitely would have changed had I been in control of the operations. I was running the kind of development side of things, but with the. Within the confines of what the. What we were given, I think we did a really good job.

What were the unit economics of that business from the franchisor's perspective? What were your territory fees? Did you give discounts for multiple territories? What were your royalties?

So they were. The territories were I think 29,5. But they finance all of them. The territory, I think 50%, if I'm remembering correctly, it was like 50 or 60% would be financed. So like we could get someone in for three territories with 45 grand out of pocket and then the rest would be financed. There's really no inventory or equipment even for that business. There are some like sales businesses where it's a painting business or something like that and you just have a truck and you go sell. It was pretty similar in, in time in terms of you only bought the mud and the putty. It wasn't like high inventory. So it was good. It was, it was, it was a good business. It wasn't like a you're gonna build a multi million dollar enterprise business, but like someone leaving a corporate America job where he's making 120 grand a year and like wanting to get up to that like relatively quickly. Like we're able to accomplish that.

Yeah. What is an average repair or a patch cost and then what are the margins look like on that?

Yeah. So the average. So it was either a half day or a full day job. Okay. Half day was about 400. If it was a full day, it'd be about 800. So you basically be able to make about $800 per technician per day.

Wow.

The average job size when I Left was like 442. And that's four hours of work. So not bad. You're operating at about a 30% margin after franchise fees on that business.

Wow. So even if your kid put. Puts a hole in the door with the doorknob, that's a half day job. Minimum.

Yeah, there was a minimum. So there'd be a minimum. And then they'd go out there and see that there's cracks in the ceiling or see that there's. Okay, is there anything else? Because we have a minimum. Is there anything else that you, you wanted? There's always more stuff they'd have stuff behind paintings that their spouses did. So, like, it would get up higher, but yeah, that's smart.

I like that model. And so you just, you had a proven, like a marketing system. You knew that you could generate leads, paid ads or whatever they're buying into the handholding, the support, the system. And you just say, hey, follow this playbook and you'll be good.

Yeah, exactly. And we were doing that all across the country. When I left, we were signing up a new franchisee and then we were training a new. We were training a new group of franchisees and putting seven franchisees on the road every seven to eight weeks.

Wow.

And so we had it humming and we basically became, we became the biggest travel repair company in the world. And other companies tried to follow along. And there's now six or seven patch franchises that have tried to ride the wave. So to finish your question, the company I was working for, which we had grown them to 12 brands, so 4700 locations, 12 different brands in 55 countries. And so we became the second largest portfolio of service brands in the world. And they came to me and they're like, aaron, love what you did. We want to put you on, like, track for a higher level role within the company. We're going to buy a business at the end of the year. It's not a franchise yet. We want you to franchise it. We'll double your salary. We'll give you a really fancy title. And I was like, wait a minute, I can do this on my own. I could build a team, I could raise capital, I could find a business that I believe in and I could franchise that business real quick.

When you say do it on your own, do you mean buy a business and make it franchisable or start a business from scratch and make it franchisable?

So acquire the. So there's two separate businesses when you franchise. There's the franchise business and then there's the actual core business. Those are two separate businesses. My plan was to start a franchisor based upon a good business. So I didn't want to. I didn't want to go acquire a restoration company. And now I'm a restoration professional trying on a restoration company. I wanted to say, hey, and that I've tweeted about this, but you have a good restoration business, or in my case, you have a good power washing business. I want you to keep running your business because it's a good business. And then I'm going to create this other business which is the franchise business. And you're going to have upside in that business. I'll take all the risk, I'll raise all the capital, I'll build the team and you get to keep doing what you've done forever. And so that's the way I did it.

And so they keep doing what they're doing, which I imagine that enables you to get a better price. But then they do get an upside in the franchisor side of the business as well.

Yeah, so I, I didn't, the way I structured the deal is I didn't pay anything to them for the bit like I'm acquiring the systems, the franchise rights, the trademarks, but the business that doesn't have any real value necessarily until we have franchisees. So they get to keep 100% of their business, the systems and the.

Right.

So yeah, so I raised capital for that. I invested. They actually also invested the founders of Rolling Suds. I raised a significant amount of capital so that I could build the system the right way and also put people on my cap table that I could always bring more capital in just from the people who are already there if I needed it. And I knew exactly when we'd be profitable as an organization. I knew exactly how much money it was going to cost to get us there because I modeled out five, six years of what a franchisor looks like at a certain royalty rate and all that kind of stuff. And so we finalized, I finalized the acquisition in January of last year. In 2023 we took the brand to market end of February and then I now have 28 employees. I have turned away 59 people who wanted to become franchisees, had the capital and weren't right for our system, which is a little over $10 million in revenue that we've turned down. And then we have signed up now 51 franchisees who have purchased 187 territories in 26 states. We've done that in 15 months. And on the personal side, I live in Nashville. My wife and I have been married almost five years. We have a three year old son and my daughter is 18 months. So if you didn't think I was nuts after everything I just told you.

Yeah.

How pregnant my wife was all this.

Time, 2019 to 2021 where that was a crazy time period for you then.

Yeah, 20. So 2022. Oh, 2019 to 2020. So this.

Yeah. Even to 2022. I guess it's just been a crazy five years for you.

It's been nuts. Yeah, that's a great way. Yeah, exactly. It's been Nuts.

It's cool to see the effects of compounding. Right. Like you were just all of the 2010s you were just grinding, compounding, slanging territories. And then 2019 you just saw an opening and, and then here you are. 187. So three to four territories per franchisee.

Yep. We do a minimum of two because we're not looking for single unit operators. It's just a different mindset in my experience. And I'm only. I should clarify that everything that I'm saying about franchising is from the lens of my experience.

Yeah.

And my experience is different than a lot of other people's. And in my experience single unit franchisees fail more frequently. They have a different mindset. They're like let me stick one toe.

In and see side hustle.

Yeah.

And great if I could make 80 grand a year. Yeah.

And that's just not, that's not our buyer. Our buyer is the entrepreneurship through acquisition. I want to build a multi million dollar enterprise buyer. That's our buyer. So we do a minimum of two and then the maximum for most people is three territories to start. However, we've brought in some. We've brought in folks who have had nine figure exits. We brought in like the largest fast signs franchisee that does 42 million a year. Like we brought in some larger operators who have. They don't want to take any dollars out of the business for like years or a decade until they have 12, 15 trucks on the road. So we've allowed those types of buyers to buy more four or five ish territories. Six maybe.

Yeah. Because you got to find that happy medium between someone that wants to scale and someone that's not just going to get crushed by scale.

Correct. Which that's hard to figure out. I've just done it long enough to where I have a pretty good intuition and I did all of those. I think this is important for anyone who's like listening and maybe does or doesn't understand franchising. Like I did all the franchise sales myself up until about five weeks ago. So all 51 of those franchisees. I single handedly walked through the process and made sure that the right expectations were aligned of like what our responsibilities are, what their responsibilities are. And, and that was really important to lay the groundwork because candidly a lot of the franchisees that have signed up are similar in terms of like mindset and goals to me. Which is slightly crazy as, as entrepreneurs are.

Yeah. It's like when I hire people, I tend to hire people that are like me, you know, and it's, that's my tribe and that's normal. That's human nature. Diversity is good. But as you grow, like you need, like in those early stages, you need people that are like you so you can grow. And then you get to a point where it's like, all right, now you have to specialize. And either that person's going to work in that in a specialized role because he's been doing everything, or sometimes people just don't scale with the business.

Yeah. And that happens that I say a company that's growing like this, if you've got employees that are just like plateauing, they're holding the company back and fast growing company outgrows people. And there's no way around that.

How much did you have to raise to get the franchise zor off the ground?

So I'll tell you, I'll tell you what I'm so a good franchisor needs, in my opinion at minimum half a million dollars and realistically closer to a million to $2 million to actually properly franchise a business. And I should provide some additional clarity. I'm able to be profitable from franchise fees because we do the franchise sales in house, raised enough capital to where if we didn't sell franchises for X period of time, we'd be fine. But I've been profitable since April of last year. We've been able to take the capital that franchisees give us and reinvest it into infrastructure. A lot of franchisors might outsource their franchise sales to franchise sales organizations or and in those cases, they could potentially be losing money on franchise sales because they pay the whole franchise fee out to the sales organization. So that would then mean they need two to three or four million dollars to do it. And the reason is because the way franchising works, the business model is we make money on royalties. But until the franchisee gets launched and up and running and has multiple trucks on the road and has opened other locations like the royalties aren't meaningful enough to support the actual growth that the actual support that's necessary on the front end of the business because where franchisees need the most help and support is, is in those first six to 12 months. Now, don't get me wrong, they need help and support through the entire life franchise. And my goal is to continue to add value throughout that. But if you don't have the infrastructure to support the growth, which costs money and you're not and you don't have franchise fees to invest in that, it's Going to be hard to get to where every franchisor wants to get to, which is royalty self sufficiency. That is when the royalties are paying for the. That just to be super clear, royalty self sufficiency is when royalties are paying for the infrastructure to run the business. And everything else at the top is.

They need the most support. When they cost the most to you and are providing the least. It sounds harsh, but they're growing their business and the royalties amount to 50 to 100 bucks a month. And you're investing 10x that into them.

Correct. And that's the way it needs to be done. And I think that if more franchisors knew that before they went in to being a franchisor, they might decide not to franchise. Which honestly wouldn't be a bad thing. If we had less franchisors out there, we'd have. I think the franchise industry in general would have a better reputation because I don't necessarily know that. It means that there's a lot of like, it's just a lack of education. They think, they think they have a good hot chicken business and it needs to be a franchise. And they don't know anything about how to franchise a business. So it's like they're taking a risk, a startup. But there's all these other franchisees that are also taking a risk on them figuring out how to be a franchisor.

It's crazy that there's so many bad franchisors out there when it costs so much to become a franchisor, you know?

Yeah. And if you don't know what you're doing, it costs even more. And so if you don't have that capital, which is what mostly the case is, that's why they can't be a good franchisor. Because they didn't know going into it that they needed a million or $2 million.

Let's just keep it a million to keep the numbers easy. What, let's say four. Like what four buckets would you put that million dollars in? What does that mean?

There's going to be like legal and startup. So getting all of the franchise documents together, the operations manual, that could be on the low end, 50. On the high end, 150. And during that time you may. And I'm just talking about cash outlay. I'm not talking about the cost of time. Right. So that's a different, that's a different dollar amount because these people who have a good business are now no longer spending time on their business. That's returning them that's giving them a return on their investment because they're allocating their time elsewhere. So I want to be clear, I'm not talking about the cost of time, I'm just talking about cash outlay. You need another probably 200 to get to stand up a franchise sales either department or hire a company to do it. You're going to need an operations team member at to start. I would not recommend bringing anyone in for less than 100 grand a year. And ideally, if you don't have any experience in franchising, it's higher than that, like 150 plus. Because you need someone who can operationalize a franchisor and get units open and get them profitable. Like it's a different type of operations person than just someone who's like a general manager at a store. And. And then you've got to assume that it's going to take you, let's just say six months minimum to get a franchise sold and open. So you need to be able to support that whole infrastructure of the business for those six months at least. And then you need to know how many people do I need to get that one unit open and then. Or get from open to profitable and what does that infrastructure cost? So all of that's going to come out of that million. And the more units that you sell, the more people you need to support and open the units, which is going to probably supersede that million.

If you sell a ton of units right off the bat, then great. But you're not going to see any fruits from that for a year or two.

And you have to have the support necessary for them to actually speak positively about their experience.

Yeah. Because they're going to talk to the other owners.

Yeah. If they're not. Right. Like if people are. That's the first thing people want to do is I'm going to talk to franchisees and it's. If they're not getting the support they need or whatever, like you, you struggle. We. I've been directly or indirectly involved now with 14 different residential and commercial service brands and not one of them has had 28 dedicated employees to the brand. Like fully dedicated, like 100% of their time. And we have 36 operating franchisees right now. We have 51 total. They'll all be open by July. So we have 36 operating franchisees and 28 humans to support them at our home office. It's just the way we're building this is different than anything else I've ever seen before. And that was a big Reason for me for doing it because I'd like to help reset standards in the franchise industry of, no, this is actually what it takes. Costs a lot of money. You probably shouldn't do it. And if you do it, this is the struggles you'll have. And that's why I write about it all the time. I create content about it all the time because I want to impact that in a bigger way.

Here's one question. So I feel like a lot of franchises, especially the ones that grow really fast, can become victims of their own success.

And.

And the territories start cannibalizing each other. How do you prevent that? And what is like, how many territories can the US support for rolling suds?

So realistically, about 900. So we do a quarter million people roughly per territory, which is larger than the colleagues that I have in this space in home services, which are typically around 200. Or they'll do it by like households. And it's just like a predominantly residential business that might give 60,000 households to one person. The challenge that you get into in that situation is if you give someone one territory and then you sell all the other units around them, they can't grow. And so I was very intentional about choosing the size of my territories and then allowing people to buy multiple territories to start so that they could develop those territories and add trucks within those locations. So I look at it from a perspective of trucks versus territories, because a really aggressive operator could have as many trucks as they want within a 250,000 population area. And our model is not just residential power washing, it's commercial. In fact, the majority of our business is commercial. So $20,000 parking garages and $40,000 courthouses, that's our space. And the total addressable market, when you factor in commercial buildings, is, is massive. It's huge. So if someone comes in and buys three territories, which is the max that your average person, let's just call it, could buy, they can still build a big business within that. And then what ends up happening is in a good system, consolidation happens typically faster. And what I mean by consolidation is franchisees end up buying up other franchisees. So you'll have mediocre franchisees that perform and they're happy, and maybe they cash flow 200 grand on the business, but they're like, I'll just go, I was making 200 grand salary. I'm going to go work at a job again. This is a lot more work than I thought. And the franchisees next to them who now have multiple trucks within their three territories will buy those three territories. And so I'm. I've prepared for that in how I've built this under the expectation that consolidation will happen when my. In my network faster than others. Just due to the nature of how sophisticated our operators are, we're already starting to see that. There's people who haven't opened yet and they're going to training together and they're like, I'll buy your markets for double what you pay them, and I'll pay you a quarter million dollars to run the business for me.

Like, literally, they're just so eager. Yeah, just like, they're just so excited.

It's crazy. So cool.

And you allow that, right? Like 100.

Yeah, yeah, 100. I want. I want to help franchisees build wealth. That's why I'm doing this. And so if it's not right for someone that came in, because there's no way I can bat a thousand, there's absolutely no way. Like, not everyone's out for business and that's like, totally okay. But if that person who decides I want to go get a job can get a return on their investment, even if they're just getting out similar to what they paid in, and now this other person can double their potential output with double the amount of territories all day long. I'll do that. That's great.

What is the Persona? Hindsight's 20 20. You sign a guy. What is the Persona of someone that you sell a territory to that just crushes it? Top 5%, top 1. What does that person look like?

So one of the biggest surprises for me at the beginning of this was how heavy we were, how heavy we became so quickly on the commercial side of the business. So I went into this under the expectation we'd be like 80, 20 residential to commercial. And in fairness to me, it was because it took Our founding location 27 years to have any real relevance in the commercial side. They've gone in the last five years from 32% commercial to 56% commercial, which was last year by revenue or by number of jobs by revenue. Okay. So we've been 60 to 70% commercial in a lot of the markets we've entered right out the gate month one. So a big part of the business is B2B. We generate. We generate outbound commercial leads, but you got to be able to go out, talk to the customer, develop the relationship, close the deal.

It's a harder close.

And yeah, they're calling because they need the service or they're asking, they're requesting information. So it's still a warm lead, but there's still cold elements to it too. You got to go sit down with the guy who has an $8 million painting business and say, hey, you don't want to power wash into these buildings that you're clean or that you're painting. Give them to me. This is a very relationship oriented business. So someone who's comfortable being out in their community, shaking hands, kissing babies, the person who wants to be behind the scenes is going to really struggle unless they have a business partner or a spouse that can do that role. Especially initially because it's such a big part of the business. It. The way our model is, you just start stacking commercial estimates on top of each other, on top of each other every month. And then six months, 12 months, 18 months later, they start to drop. And so you do residential, which pays the bills. You, you add more trucks within those six to 18 months. And then when the commercial jobs start to hit, then you, they're more profitable because you have more trucks. So from like a goals standpoint, these are people who want to build big businesses. If someone comes to me and they're like, I just want one, maybe two territories, one truck, gonna try this out with my son, see how it goes. He's just not our buyer. And people who align with our core values, Our mission statement is actually this is a relationship. Because I believe that the relationships that we have with our franchisees and that our franchisees have with their customers and employees will really help define us as an organization. And then there, these are people, I, I call them goalpost movers. It's a lot of the people, most of our franchisees have, have come from SMB, Twitter. They want to, if they get to this benchmark, then they're like, that's cool. What's the next one? Or what's the next one? Or who can I acquire to get to 20 million? Or how do I get to 100 million? Or what other businesses do I need to buy? Or what other brands, Aaron, are you going to launch? Because, like, those are the types of people that have worked well in our organization.

It's funny because I just tweeted about this an hour ago of finding your white whale. I don't know if you saw that, but I gave a keynote speech on it last month and I, I gave a speech to these guys that are looking to acquire like $500,000 H Vac businesses. Right. They're searchers.

Yeah.

And I just told them, like, take 20% more risk, feel 20% more uncomfortable and you can have a 200% outsize outcome. So what you're telling me is like someone that's, see how it goes, like they're going to get what they ask for, it's just going to be okay. And someone that wants to just conquer the world, they're going to get what they ask for. It'll become a self fulfilling prophecy, it'll be confirmation bias and they'll, they won't for sure accomplish their goals, but they're going to be much more likely to accomplish their goals. So it's just, it's funny hearing that because it's, I completely agree. What are they looking for? Right?

Yeah, yeah. And that's such a big piece of business is attitude and risk tolerance. I try to stress to people who look into franchising like it is not a get rich quick scheme. It is not a passive business. Like it's, you're, it's, when you buy a franchise, you are still starting a business from scratch. You have some more tools than if you were to do it on your own. We provide help with marketing and recruiting and training and systems. And we've done this for 34 years on the power washing side and I've done this for almost a decade on the franchise side. There is less risk, but there's still risk. And any franchisor that tells you there's not, or you can just like phone it in kind of thing and collect, collect some money, that's just not, that's not how it is. Like it's just the same as any other business. You're going to learn how it works. Our franchisees are not power washing. We don't, that's not our, like we talked about earlier, that's just not our buyer. They're going to hire a general manager in training and a junior technician prior to going to training. But it's still hard and you need people who are understanding of that and still willing to come in and take a really big swing. And if we all know that it's going to be hard and we're all working together towards marching in the same direction, we can grow up 100, 200, $300 million plus company.

Yeah. So you see a strong correlation between people in sales, people that are extroverts, people that aren't afraid to get their hands dirty even if like they're not going to be the one power washing themselves. Those are the people that are usually the most successful.

Yes, people that are extroverts for sure. We do have introverts as well, it's not like sales experience is necessary because we teach that. And it's not. It's not like pharmaceutical sales where you're trying to get someone to switch from one medication to the other. Like, these people have a dirty structure that they either own or manage and it needs to be cleaned. And it's not as bad from a sales perspective. So it's what the main thing we're looking for is grit. Are they gonna. Are they gonna do whatever it takes and not let anything fail? And how has that looked in the past based upon the experiences that they've had thus far? And how do we judge what the future might look like based upon that? And we've been super selective.

Yeah. Do you see a correlation between former business owners versus lifelong W2 owners and how successful they are?

It's funny because you would think that it would need to be business owners and that would be the higher success rate through entrepreneurs. People who are like me, we're just going to start. Or maybe like you, like, we're just going to start something from scratch and it's going to turn into this big thing. They'll actually, they might struggle more in a franchise system.

A lot of pushback.

Just think about it. They've been rewarded for doing completely operating outside the box and they have X number of dollars in the bank or X number of net worth because of their ability to do that.

Yeah.

And while we have operators like that, we try to remind them, listen, this is why you brought us in. This is why you trust trying to skip all of those things. And it's not perfect, but let's focus on the thing that's going to provide the most leverage on the business instead.

Yeah.

And let us. Or everything about this just varies on the type of buyer and how they operate. So someone who's really good at. Here's the manual. Follow the manual and like figures out the manual or whatever it is. Or if they've been at a job and they've just excelled and continue to rise the ranks, that person will do really well in a franchise system because it's just, give me the playbook, I'll just go do it. And so that. Yeah. So that. It varies though. We've, like I said, we've got other people who have exited businesses before. We've got people like, it's all over the board.

Yeah. I have friends with a crumble franchisee and he went to their training and someone made a comment like, yeah, we should try. And they were just like, we don't want you to be creative. Yeah, don't be creative, please. You're going to be a robot and you will have the most success. Just trust the process.

And that's hard for a lot of people.

Yeah, that would be really hard for me, honestly.

It would be hard for me, too. It would be hard for me, but I'm like a true entrepreneur. I like to create things from scratch, conjure things up. When you buy a franchise, you're buying proven processes and systems and they're not always going to be perfect, but it's going to be better. Like when you buy a business or buy. Like, that's why searchers work really well in our. That's why a lot of our franchisees have been searchers, because they're like, okay, there's this business, it works, which is why I'm buying it, which is why I'm taking on this loan. And all I have to do is just run the play and maybe add some value and that those. A lot of those people will say, God, I've been looking for a business for 18 months and I haven't found that perfect H Vac business yet. Why don't I consider franchising where I can pay less, come in, get a similar return, or get a similar outcome for less capital and potentially less risk?

Yeah. Even though that's becoming more popular, I still feel like we haven't even scratched the surface. It's just they're so set in their ways of buying something that they just. They overlook franchising completely.

Completely. And we're very much scratching the surface of what the possibilities are of searchers and considering franchise ownership. And I can't stress this enough, though. They have to find the right brand. It just has to be the right thing. Because we've talked about a couple experiences where it clearly wasn't. And that's sucked for franchisees in those situations. And. But if you think about the people who bought into, like, Orange Theory Fitness, they probably got 7, 8, 12 studios that are each spitting out 4 to 5 million dollars or 3 to 5 million dollars in revenue. Like, they're good, you know, or like they're good, like they're fine. Or you think of the average McDonald's owner is worth $22 million. Like, they wouldn't have achieved those returns theoretically on their time and capital without the right brand.

Yeah.

So it's really important to find the right one.

When you talked in the beginning, you talked about how you disqualify a lot of people more than maybe makes you feel comfortable. Do you how often do you talk to someone like me and you're just like, listen, man, like you've bought into power washing clearly. But I think you're just better off doing this. Like, just start this from scratch. Because I feel like there's going to be a lot of conflict between us over the next couple years.

Years.

Do you ever have that conversation?

I get to that situation because of my background and because I have the capital, not have to worry about getting that franchise fee, which is a big piece of it, by the way. If you, if I didn't have that, it'd be a different mindset. Got to make payroll. Which is another reason why franchisors struggle. But I will. I have no problem saying this isn't the right fit like you. Not is it only that rolling suds isn't the right fit for you. I don't think you should buy a franchise. I think you should go start something on the side, see how it works. And the other thing I'll say is a lot of people come to franchising, a lot of franchisees or prospective franchisees come to franchise and think, I don't really have to work because the franchisor will just do it for me or they'll hire the people or they'll generate the leads and I don't have to do anything. And that's also not something that's true. And. But yeah, I've told many people like, this isn't the right fit for you. You. And it's nothing. It's not offensive by any means. It's just you need to go conjure something up on your own.

A lot of the time you're thinking, man, this guy's going to crush it too. Like he's going to crush it. But it, it's just not the right fit for us to crush it together. It would long term do more harm than good.

Yeah, it wouldn't make sense for either of us. It's not a good return on, on either of our times to try to make this work. It's just go, go do it. Like this franchise isn't the right thing. But though the people who are looking and searching for a business I feel have already recognized that they don't have a new idea that they want to like start from scratch or that they came up on. They're looking for something with proven systems in place and they can go buy that. And yes, there's risk associated with a personally guaranteed loan or whatever, but they have, it has cash flow and the challenge is that there's more searchers right now than businesses for sale. Like, I think it's a considerable difference. I don't have the data to support that, but I'm pretty sure it's a considerable difference based upon my experience in talking to these folks and how long it takes them to find this business. And if they could potentially say all right, instead of the opportunity cost of spending 18 to 24 months in due diligence and lawyer fees and spending time researching opportunities and not working during that time, if they found the right brand and invested 24 months and all of the capital they would have spent doing all that due diligence on a franchise system. Get that up, promote people, look at other businesses at that point you've got a cash flowing business at that point.

I talked to searchers. They're like, yeah, I've been at it for 18 months. And I'm like what have you been doing? I could literally and I'm not exact, I've done this myself. I could scrape a bunch of businesses, give them a call, shoot them a text and have be discussing prices within an hour. Like there are tools out there like publicly available. Literally within an hour. Like, all right, it's 3x EBITDA, let's go have breakfast tomorrow. Like what is taking 18 months? I don't understand it.

I think by the time it hits the Biz Buy sell like, or whatever platform like it's too late.

Yeah.

You've got people with way more resources that are identifying these businesses before they hit the market. And so by the time it hits Biz by sell it's already being bid on. It's already, there's probably already a buyer and it's, it's a seller's market right now on business.

Yes, there's, I still think there are deals on Biz by sell. Like we found one before. They are harder. They're more pick through and the brokers don't even answer their phone. But forget Biz by sell. You just calling cold business owners. It's just a numbers game. If you talk to a hundred there's going to be five ready to sell. And of those five there's probably going to be a pretty good price in there.

Yeah. And you've got, I've got a guy who does my pest. Like he comes here every quarter. He does stuff and it's just an expense. I have every single quarter. I can't pay the bill and it's not on auto draft. I have to call in and, and tell him my card number over the phone and we're wasting time trading calls and that'd be a great place if I didn't have all the other stuff going on, but that'd be a great place to start. Listen, how much are you making annually? And what if I just gave you three times that and then you put like an app or, like payment structure in place? So there's creative ways to do it. But most of my franchisees are coming from the Twitter slash searcher for a lot of the reasons we're talking about.

Yeah. In your system, of all your franchisees, how much is the best one making, like, the highest performer?

So we don't have franchisee performance yet in our franchise disclosure document, so I'm limited as to what I can say publicly just by the Federal Trade Commission. We are the first franchisees launched in July of last year. So just for people who are listening to this, you have to have 12 months of a franchise performance. So 10, 10 months in the franchise disclosure document. And franchises are heavily regulated for a good reason. Because someone could just be like, this is how much money you're going to make and there's no recourse. What I will tell you is we launched multiple franchisees last year and the majority of them ordered another truck and expanded to another truck within the first six to seven months of operation. One of them did it in two months. We've got two franchisees that just launched last month. They've already placed their order for their second truck. So the model is working. But in terms of any, like, realistic data for someone who's interested in becoming a Rolling Suds franchisee, we don't have it yet. And that's a part of the reason why it does take a special type of person to buy into an emerging brand, because you're really buying into, like, me, my team.

Right.

Our vision for becoming the biggest power washing company in the world, the culture we've built, the goals, the franchisee number 150 is not the same buyer profile as franchisee number 20.

Yeah.

It's just not now. Two, three years from now, we'll have more data in our franchise disclosure document to disclose, but a lot of the territories, the main territories will be gone by then.

Yeah. How much gross revenue do you expect to get from a truck per year?

Yeah, so I can give you that number. Our average gross revenue per truck is $422,000. As of last year, we had a jump from the year prior from 373,000 to 422,000 just due to increasing efficiencies.

On that truck and more commercial jobs than expected.

Correct. And our, our trucks and just our equipment, like a lot of people talk about, they're looking for a business with a moat. When I was analyzing businesses, there were two things on my kind of checklist that were impossible to find without, with like with other businesses I evaluated and I looked at H vac and plumbing and solar. Like I, I did the whole kind of like searcher gambit. And the two things were, were a difference in product offering. So something that is a better product objectively than the rest of the competitors. And, and so we power wash five stories from the ground with the equipment that we have. And we can do a 3,000 square foot house in 20 to 25 minutes, start to finish, set up, tear down everything. That's a 4 to $500 job. So the economics is they're just, they're just incredible. And we manufacture, we make that equipment, we build the trucks. You cannot buy that equipment. We have a lock on the manufacturer and the way we run that equipment is the opposite of what power washers are taught to do. So really we do have a moat. And that, that was really interesting to me. The other thing that was really hard to find was little to no competition in the franchise space. So in my experience in the franchise industry there's typically a bunch of local people that do the thing, do the service and then there's five to ten other franchise brands that also do the service. But they have a different logo and a different tracker app and a different name and whatever. And they're all coexisting and capturing market share. When I looked at power washing there were local guys but there was no national leader. There was no Serve Pro, no Terminix, no Stanley, no name. Very similar to 1, 800 got junk in the junk in, in the like early 2000s, like there was no junk leader. They came in with a wrapped vehicle and they showed up on time and they built a billion dollar system wide sales company and paved the way for college hunks hauling junk and junk king and junk lovers. So anyways we're doing to the power washing industry right now, what 2,800 got junk through the junk business in the 90s. And so we basically have a truck that produces more revenue and more profit than other power washing trucks. And we're the first professionalized service offer provider in the space. So those were two things I couldn't find in any of the other businesses I evaluated.

Yeah and it is nice because there's some, there's going to Be guys going and buying a 500 machine at home Depot, but you not really competing with them. Right. There is some barrier to entry by way of that massive truck. What do those trucks cost?

About 150 grand. Wow.

Okay. And then if I've got a truck that's doing 400 grand a year, I'm looking at my second truck. How much of that could I expect to be net profit?

So you're operating once you have multiple trucks. Right. Because there's economies of scale at a 30, 40% EBITDA margin. Wow. And we're basing this off of our most recent franchise disclosure document which we released April. And it's based on our founding location. So they have four trucks that operate full time, which full time in The Northeast is 205 days out of the year, which is where the founding location is based. And they're operating with that scale at between a 30 to 40% EBITDA margin. And the thing that changes those numbers is based upon the amount of commercial work you're doing as a business owner, as a rolling sets franchisees, you're talking $150,000 EBITDA per truck. Once you have three, four, five trucks on the road.

Could a territory of 250,000 people support four trucks?

That is a wonderful question. It depends on a ton of factors.

How many commercial jobs have.

Listen, we've got. There's a recurring element to. To what we do that like we got a lead for one of our franchisees because we turn on commercial leads a month before going to training and it's 26 shopping centers and they have to be cleaned every year.

Beautiful.

And that's a six figure contract with a 3% renewal annually on a two year contract. That's one customer that has 26 shopping centers. That same customer manages other shopping centers.

Yeah.

And if he does a good job there, he'll get the rest of them. And that that one customer could theoretically become one truck annually in terms of revenue performance.

Yeah.

So I just don't have enough people operating on my model in enough markets right now to tell you what the average is. And. But it's not one.

Yeah. It. When a lead comes in like that to corporate, do you charge the franchisees to take that lead or you're just taking the royalties and they just.

So what? The way we do it is we have vendors that we've pre approved and then we manage those vendors for franchisees. And so we have six different marketing agencies that generate leads for franchisees. Four of them are inbound residential leads. We have a call center that's based in Utah. And that call center, of course it is, answers the calls and books the appointments. And then we have two outbound lead generation companies that do outbound research outreach to property managers, facilities managers, maintenance companies, and then they generate warm leads. And so we centralize all of that in what's called the Rolling Suds lead center, which where we track and everything. And then those companies bill less, we bill franchisees. And then they don't have to try to figure out where to spend their ad dollars. And if a vendor isn't doing well, we can fire them, we can hold them accountable. There's economies of scale when we're doing that. And they don't have to sit there and say, okay, I want to spend 800 this month on Google Ads instead of 700 or I'm going to spend 1200. Like we can just use data to drive decision making making. So it's they bill us, we bill them kind of thing.

Okay, so how much is it per territory? 150 per truck. How many what? I'm going to ask a zillion questions. You're not going to remember them all. What percentage of your customers are financing versus paying cash? Like what is like an average ticket size to get two territories and then what are your royalty fees for two.

Trucks and two territories? And working capital affects. Franchisee is going to need about 300 grand. Okay, you are not buying the cat, you are not buying the truck. So we have financing options for the trucks. Okay, so basically the down payment on the truck, equipment wrap, shipping everything to get the truck to them is about 35 grand and territories 549. And then we do a minimum of two, which would be half a million people. They're going to need some working capital in there, which would be some additional startup expenses. So that gets them to 300 number. And that's going to basically get them to their second truck within the first six months because they have the down payment for that second truck included in that 300. And then our development schedule is to add that second truck six months. So they order that four months in, they have the truck on the road six months in. And two trucks, if operating at what our average day is per truck is $80,000 a month. Month. If they're operating 20 days a month at $2,000 per day, which is what our trucks do on average per day based upon our franchise disclosure, our current franchise disclosure document. So the goal is to get franchisees up to as much utilization as possible on those trucks within the first 12 months of operation. Now we've got franchisees that are like we're going to have three or four trucks with within the first 12 to 16 months. But that's our, our path that we're putting franchisees on each territory additionally would be 54,9. So because our kind of like maximum for your average operator is about three territories, people are usually coming to the table with about 360 and they need to have a net worth of at least 900. I personally don't think someone should invest more than a third of their net worth into a business. I think it's just too, I think it just mentally doesn't work. Yeah, if you're investing half your NET worth or 90% of your net worth in a business. So we're really careful about making sure that the people that we bring in are a right for us but also B, have the kind of capital to, to do this the right way and the risk tolerance associated with that. We have not done any SBA loans. The cost of capital right now is like 11% and the debt service on an SBA loan for our size business is like 7 grand a month. So it just makes, it just makes it a little bit challenging to have capital to then grow because you're really not taking any kind of things out of the business for a while. So we haven't done that. We're not entirely opposed to it, but the person would still have to have the capital to support an SBA loan for, to pay a year anyways. So it's like a.

So what?

Matter of what you want to, how you want to use capital. Yeah. And then we've, like I said, we've brought in some really high level operators that have purchased five or six territories. And so it's just an incremental 54, nine per territory from there on.

Then what about your royalties are like a marketing fee? Is there like a percentage marketing fee?

Yep. So there's an 8% royalty. And by the way, the numbers that I gave the 30 to 40%, that's EBITDA, that's not gross margin. And that's not like before franchise fees. Yeah, that is, those are numbers like after they've paid these numbers. Yeah, I'm about to tell you. So 8% gross revenue goes towards the royalty. There's a 2% brand fund which goes towards national advertising. We don't really have a sizable enough bucket there. But Once we're doing 100 million or 200 million in system wide sales, we'll really be able to allocate that capital towards like national ads. And then they are required to spend a minimum of $2,500 per, per truck per month on local ad spend, which is going to go towards those six different marketing vendors that we work with.

Okay.

We try to shoot for 15 to 20 ish percent cost per customer, acquisition cost after 12 months of performance. And a truck at max capacity, if working 20 days out of the month is doing $40,000. Now, a lot of our franchisees will work nights, they'll do weekends. So that could, that number could change. But if you extrapolate out 2500 per truck to 40,000, it's still not going to get us to the amount of money necessary from an ads perspective. So that's just a minimum. So we try to set the expectation that franchisees will spend more than that. And yeah, so awesome.

Like, I could probably talk for another hour. I just geek out over this stuff. I've never bought a franchise, but I love the concept of franchising, both as a franchisor and as a franchisee. I think it's a brilliant model. And yeah, I just love geeking out over these numbers with you. So thanks for coming on. Where can people find you?

I'm on Twitter. Aaron Harper CEO. Send me a DM there. And you could also just go to rolling suds franchise.com and learn more information. I mean the. You could just Google my name and Rolling Suds and there's a ton of content online. There's. I put out a video per day, at least on Instagram, which is Aaron Tharber. Aaron T Isn't Timothy. I will say a lot of the content I put out is not Rolling Suds specific though. It's just franchise specific. So if you want specific details, you can either message me and I'll connect you with someone from my team or go to rollingsudsfranchise.com and just submit information there, say you heard about me here and that would be great.

Okay, awesome. Thank you, Aaron. Appreciate you coming on.

Thanks so much for having me, Chris.

Yeah.