The Franchise Model Most People Still Don’t Understand with CEO of Homefront Brands Jeff Dudan

A good franchisor is a marketing organization. It's a branding organization. It's an adult learning organization, and it's a mergers and acquisitions organization. We at Homefront Brands have been very successful. I mean, we, I launched, I bought, I went out just for context, what is Homefront Brands? I went out and bought 4 businesses in the end of '21, beginning of '22. We had 20 franchise owners. We platformed them, all of 22. We went to market in '23 and we did about $30 million in franchise sales, about 230 new owners, about over about 800 markets and 17 in Canada over the next 30 months. So we— and that's, and that's exceptional. But, you know, we went out and hired the chief legal officer from ServiceMaster. We went out, we went and got an executive team that had all built or worked at multibillion-dollar multi-brand property service platforms. Then we hired brand presidents that had all built national companies before. So we, we went with leadership, we filled in 70 people around them, and we— so we looked good, we looked the part, and we were able to attract just this wonderful cohort of sophisticated, committed, well-capitalized, serious franchise owners. And we aspire to— and the brands that we all got that we went for have the ability to do. They're, they're, they're large businesses. They're complicated businesses. So if you're a sophisticated business owner and you've made money and you have other businesses, perhaps you're gonna look at these businesses and say, those are worth doing. You know, so we had to have the right offerings. So every, from the, if we, if we start with the decision that we want to be a $5 billion company in half the time that it took the closest competitor to get there, then it starts with these are who the owners need to be. Well, then the next decision working backwards from that future is then what are the brands they're going to be interested in? We can only have those brands. And then what is the team we need around to support it? What is the capital structure that we're going to need to build it fast? And, and then what are the mechanisms to create transactions? Because what happens over time in a franchise system is you get onesies, twosies, family operators in there and they they're allowed to muddle along for a long time. But at Homefront Brands, we're a brand of outcomes. So we, we are looking to take advantage of this very frothy consolidation, you know, M&A, PE-type search fund-type environment that we're in and let people invest and build their franchise to a certain point. But if there's a way for them to have an incredible outcome and sell their business in year 3, 4, 5, 6, or 7, then we wanna bring that to them and they've just changed their life in that way. Or We would love to have franchise owners grow big and stay in the system for 10 or 20 years. So at Homefront Brands, you know, we had to, working backwards from that future, the people, the brands, the marketing support, the systems that we put in place had to scale from day one. We couldn't have a switching cost of bad systems or, you know, siloed type systems. So we had to really invest ahead of revenue in that, had to get the people involved, but we also had to create the expectation with our owners that we're here for your outcomes in that, you know, we, we need to drive twice as many transactions, sales, consolidations, mergers in half the time to accomplish the goal we needed to accomplish. So, you know, for me, it all, it all really what franchising has done, uh, with AdvantaClean and now with Homefront Brands, it's just given me, you know, the, the workshop and the laboratory to really understand scale and how to unleash capital for people who are courageous enough to start a business with us. The problem that you're speaking about is generally in retail-based locations. So QSRs, food, fitness sometimes. I think, you know, I can name a fitness concept that had lots and lots and lots of locations stacked on top of each other. And they do— they cannibalize the customer base a little bit. And now you've got— yeah, you've got you know, hey, I want to move to this gym or studio, I want to move to this one, or— but I mean, generally people will travel 12 minutes, 12 minutes to go to a workout. Like, that's the rule of thumb. So if it's outside of 12 minutes, you probably need another gym. And as far as QSR goes, for me, it's about access. I mean, I'm not going to drive even 3 miles to go to Wendy's up at Exit 28. If I'm at Exit 25, I'm going to pick something at Exit 25. So just because, you know, you're You know, if you think about it, like you're, you're just, in many instances, I would, I would side with the franchisor because they're just gonna go to Jack in the Box as opposed to drive up to your Wendy's, or we can keep it in the family and we can put a Wendy's right down here at exit 25. But I mean, I've, I've seen it, there's been some cases where, with some oil change places where they get really saturated and stuff like that. But generally, in our business because we're home and property service. We do have one of our brands, the Designery, which is a kitchen, bath and closet brand, does have a physical location. It's like a very cool Apple Store and it's got teledesign that we can do remotely and it's got VR headsets and, you know, very cool look and feel if you go into a Designery. But it's not in a very expensive lease. It's in a Class B space. It's a destination. It doesn't have to be in the most expensive strip center next to, you know, Needless Markup or any of these other retailers. So that's what my dad used to call Neiman Marcus, but bless his soul. Yeah, he was great. I never knew what he was talking about, but now I do because they have great shoes. But so, you know, so like, you know, for us, we have a territory structure that's very intentional and deliberate. So you buy, you know, 1, 2, or 3 of our territories, they operate as one business and you're just buying basically access to more zip codes inside of that. So that's how, that's how it works for us. We can't put somebody right on top of you. And then we have very insightful 30 years of experience territory guidelines that help our owners all be successful together. You know, I work with emerging brands all the time. I just did it, went out and did a keynote for a really sharp brand out in Tulsa, Oklahoma last Friday. And there's so many great little brands, but like they just kind of, they make these fundamental mistakes. Territories are too big. You don't have the right language for how if somebody can't service something, how somebody else comes in to serve it, because that's good for the brand. So when you have all the right mechanisms in place, it's— it creates an environment to where resales— you haven't cut your resale market off. At the end of the day, you know, we have 260, 270 owner groups operating now. We're just a population. We've had cancer, we've had divorce, we've had rehab, we've had a suicide, we've had a family die in a plane crash. Like, there are reasons that people need to get out of their business. And a franchise gives people the opportunity to play Monopoly within our system, grow, acquire territories, add trucks, add salespeople without adding a location, continue to gain market share and to play this game of Monopoly and build wealth. And that's one thing I work with is, is the role that a business plays in your family's wealth strategy. And it gives you the ability, if, if it's a good franchisor, that there is demand for your business. If you are forced to sell it for some reason, some people say, I got to move halfway across the country. My mom's got cancer. I'm going to spend the last 2 years with her. I just can't run the business anymore. So if we're focused on outcome, then we say— we don't say, well, you're abandoning the business, you lose it, which a lot of franchisors would just say, you lose it, we'll sell it to somebody new. We say, We're going to work day and night, night and day to sell this business and get you the money out of it that you deserve to go on to your next thing. And we'll forego that money ourselves to put that money in the franchise owner's pocket. And that's a precedent that we know that we want to set and that we want to be known for. Look, man, people are always fine as long as they know where they stand. From the very first call, I do a Monday, Monday night call, and anybody who's in our pipeline, we sometimes have 300 people in our pipeline. There might be 20 people on this call every Monday night that are getting ready to come in and visit us here in Huntersville, North Carolina, I tell them this from the beginning. As long as people are told the consistent truth and reality of what's going to happen, they never become disenfranchised. So, as long as like, "This is what we do. This is what we stand for. This is the opportunity. We're going to push you. You're hiring us to push you. You're hiring us to build a big business." And we don't expect you to come here and work with us until you die. If you can build this in 3 years, 5 years, 7 years, 9 years, take all the capabilities that you've gained, take all the money you made along the way and take whatever you can get for the business, which is whatever outcome you've earned and deserve at that point in time, and go and leverage that into a balanced portfolio for your family and your life. Then you have used this business to accomplish what you needed to. And like, that's the goal. And we're going to work whatever, whatever your personal outcome is, that's what we're going to work towards. And it is refreshing because most people are just like, get in, do the business, pay us royalties, we get paid on top line. So we'd appreciate if you do more. But like, that's not, that's not what the business is about. It's about making a material shift in this family's economic future. Yeah, look, and sometimes we love each other like spouses and other times we fight like brothers. People talk about franchisee satisfaction. I don't want you to be satisfied. The best business owners are irritable. They're urgent. They're impatient. They want to push. They want to demand and say, why is this number not what it needs to be? Or where do I get the right information? So we, we, we replace franchisee satisfaction with franchisee experience. There are a thing out there called franchise brokers and consultants. Sometimes they call themselves coaches. They take a fee from the franchisor for placement. They can really help and they can be really educational. Sometimes they'll just push you to the biggest fee for them. So I think you have to really, but they have tools and many, the best ones that do lots of deals, they get referrals from their previous customers. So they do a good job of understanding who you are and then putting you, they do the work on the brands to make sure that it's just not this looks good on paper or looks good in the marketing brand, but they've really got the, underlying support, coaching, infrastructure, all of the things, the performance. They'll teach you how to read the FDD and make sure that you understand what you're looking at and how to evaluate it. So, you know, and maybe 20% of the deals outside of hotels and restaurants are done with these consultants. Otherwise, you're going to be on your own working with the brand and you need to do a full— follow the process and do kind of a full evaluation of, you know, what is the financial performance? Does the business meet your financial needs and goals? Is it going to, does it fit your lifestyle? I think Brian Tracy said the easiest way to ride a horse is in the direction that it's going. So is it something that you're already good? Do you have like, if it's a sales business, okay, do you have sales capabilities that are going to make it a home run for you? And here's something interesting. I don't want the best salesperson in my businesses that would require great sales. I look for somebody that's been a sales manager. So sales management jobs. So they come in right away. They're like, I know how to recruit, train, hire, hold accountable, kick out and manage. And they grow teams of salespeople and they are honestly our best performers if you have sales management capabilities. So that's really interesting, an interesting distinction, right? Oh, let's just teach them sales. But no, let's teach them sales management and give them the tools for that. So But if you, if you, you know, the worst reason to buy a donut franchise is because you like to eat donuts. I mean, it's, you know, you, you, I mean, yeah, you know, the worst reason to buy one of our designeries is because, you know, you like, you like to make the carpet match the drapes. I, you know, it's, you've gotta, you gotta look at the mechanics of the business, what it's gonna take, and, you know, do you have, Is it a good fit? Look, this keynote I did was at this amazing dog training franchise. They have twice the numbers of everybody else in the industry. They're, they, they have 29 franchise owners. It's like a big family and they all are passionate about training dogs in this method. So passion does help, but that will be a brand that may struggle to scale with many of their owners because they got into it. To do the thing. So there's a reason that finance people make a lot of money is because they speak the language of money. So just know if you go into a business, take an honest assessment of what your capabilities are, what your role in the business is gonna be, but then make sure surround yourself with good marketer or salesperson. If you don't have it, surround yourself with good finance or learn financial IQ, focus on that as a capability. But You know, the good news is, is that once you step across the line, like onto a football field with a, you know, when I came off the road, I coached over 30 seasons of my kids' sports. That was one of the things. And it was the time in the car was instrumental to our family and what it's meant to all of us. And, you know, once you step across the line, do not allow yourself to recontract with yourself. Whatever it is you choose to do, like you, like it's like when you start a podcast, don't expect results for 3 years. You know, I mean, you, you, you need to, you need to build an audience. So, you know, once you step across the line, you got to block, you got to tackle, you got to step, get on the loose fall. You don't re-contract with yourself. And, and that gets to the kind of the business athletes thing. I saw you had a question on there. You know what, you know what, what is a business athlete and why did I write the book Discernment? I wrote the book Discernment so that people at inflection points could understand what are the filters that you should personally build and use in making the most important decisions of your life. And that's what discernment is. It's, it's wisdom is discernment is simply wisdom accumulated over a lifetime based on your experiences. And now you have the ability to make better decisions. But if you're not disciplined and intentional about what are your personal values, I have a set of values that we had on our family refrigerator for 15 years, and you don't think that they were listening. Until one falls out of their mouth in making an important decision in their life. Then you realize that underlying it is they understand what our family values were and how they execute, how they prosecute those in their lives. So that's what decision. And then the thing about being a business athlete, why would people come in and they invest half of their 401(k) in a franchise and they show up to training and they haven't even watched the damn videos. Like it, you know, how much do you need to train and prepare if you want to win in building a team to be a top rail fence franchisee or designery franchisee? Like you, you can't just show up. You're not an employee anymore. Like I'm gonna wait to be told what to do and then do the minimum and think it's gonna work for you. So business, you know, my observation is I always look for the best athlete on the field. And that's who I hire. And I have ways that I test for that. And I don't care if they have the skills, because if they have the capabilities and the drive, that's who I'm going to pick. Because the best athletes will always make the biggest plays in the big games. A new business owner will scale their business to their level of comfort, their level of competence, their level of commitment, and their level of capitalization. Okay, so comfort, just call it fear. All right, you build this model. The math is the path. Okay. There's, here's a, here is a stack of numbers that says leads come in the top, a bunch of things, conversions happen. There's an average cost per lead and average job size. And at the bottom comes out a revenue number. Once you get that built, if you double the number of leads and everything else stays the same, you're going to double the money you're making on the top line and the bottom line. So once you have the mechanism built, now are you courageous enough? But you can't just buy the leads. You know, not all leads are created equal. So some of them are going to have to be earned. Some are going to be referred, but some are going to be bought. You can't just buy the leads. At the same time, you have to hire another salesperson. You might have to invest in another truck. You might have to invest in another production crew because you can't just have more leads and no more capacity. So, you know, we have a performance coaching grid that goes up through 5 levels that says, okay, when you're going to get into the next level, you've got to do these 5 things at the same time and you got to have the guts to do it. And what happens is people that are uncomfortable, they nibble at it and they— it's not working because they didn't, they didn't invest all at the same time. So then they fall back to their previous level of sales. And that money maybe becomes wasted or not optimized. So, you know, where is your level of comfort to be too stupid to fail to say, well, it's working here, I see the plan, I'm just going to do it and I'm going to commit to it. And, you know, I will— I refuse to lose. And I know that things are going to break when the new volume starts coming in and I might have to switch some people out. But like, I'm— I am going to rush to the conflict and deal with it. And those are the people that just that, that, that just grow infinitely. They just follow the plan to the next logical level. From a, from a competency perspective, if, if math is science, then people are art. And so you're— every business is dollars per person. So as the business owner, it's your job to collect referral partners, employees, installers, loyal customers, All the people in your community that need to know who you are personally, why you did this business, and what the experience is gonna be like when it goes well or doesn't go well with your business. Why should they refer you? The more people that you can put inside of your dream where their, some of their dream gets serviced within it, the bigger business you can grow. So your competence as a leader in being able to articulate, speak, to do things like we're doing here today. I'm a massive introvert. I had to grow the ability to speak in front of people, to speak publicly. I don't care where this is going. I don't even think about it. You and I are having a conversation. I don't know how big your audience is or what you're going to do with this, but there could be hundreds of thousands of people that ultimately listen to this thing over time. And sometimes that happens. But, you know, I have to build competence in all the things to grow an organization that's capable of scaling and to put and have more people for my dollars per person to serve. And then commitment. You know, don't get into a business and think, you know, one business is good, three businesses is better. I mean, sure, like people grow collections of businesses, but like not from the beginning. You gotta be fully committed to make sure that your business has independence and has the SOPs and has the performance and that you've, you know how to manage to that outcome. And then capital, but capital's the easiest thing to solve for. I, I don't know that you agree with that or not. Build a business that makes money, show a 6-month trajectory of a positive trend with all the things, somebody will give you money. If it's not a bank yet, after, 'cause you haven't been in business for 2 years, somebody will give you money to invest in those leads. There's always a way to fund positive, healthy growth, and you might have to share some of it and you might have to do it, but like I have found that capital is the easiest thing to get and is also too early in a business. The worst thing you can have because you will waste it. The Power of Broke, buddy. I mean, Daymond John, I just, I just met Daymond John for the first time at a, about last month. And dude is, I didn't appreciate how good his story was until I heard him speak. And, you know, he's, he, that man understands it and he's lived it and he did it. Overnight success, begging people to take pictures with his clothes on for 10 years. Yeah. And nobody should give money to a crappy business because you can't scale dysfunction. Well, you, you can, you can scale dysfunction only if, only if you have more money than you need and then you will waste it. And cash is like oxygen. You don't know how bad you need it until you don't have any. They go to homefrontbrands.com and you have all of our brands on there. Information about who we are, many ways to get in touch with us at Homefront Brands. Just go to homefrontbrands.com. If you want a free copy of my book, which is Discernment, you can go to my Instagram. And I have a link on there to get it. It just says, I guess it's one of those links that shows the other links and then it gets— get a free copy of my book, put your email address in, you get an electronic copy immediately sent to your email. Of course, it's available on Amazon. You can get it there too. LinkedIn, if you want to watch my Undercover Boss episode, connect with me, just Jeff Duden, J-E-F-F-D-U-D-E-N on LinkedIn. And in the Vimeo showcase, we put a Vimeo up there, so it's free. 42 minutes of your life you'll never get back, but it's a pretty good episode. It plays a lot. I know, I know what it plays overseas because I, my social media, I'll get some direct messages from some ladies occasionally. I don't know, I was a younger guy, you know, so you, but it was a really great episode, kind of a tearjerker, and, and they do play it all the time, uh, here domestically and also abroad. So it was worth doing if you're into that show and you didn't happen to catch the Vanikleen episode. With me on there. And then, man, if you want to hear more about what I talked about here, I got 250 episodes sitting on Unemployable Podcast. You can go there, YouTube, Apple, Spotify. We drop a large episode with a great guest. I hope to get Matt on if they'll come on the Unemployable Podcast. And we drop a big episode every Tuesday. And then we do a Franchise Friday, something specific to franchising every Friday. Unemployable with Jeff Duden, anywhere you get your podcasts.