Your Business Isn’t Sellable... Yet - @EmpiresPod

What if I told you most small business owners are building their business the wrong way? If the business depends on you, your family, duct tape, overwork, and tired employees, you might be building your business in the exact opposite direction you actually might want to be building it in. Now, today I had the pleasure of talking to Patrick Buckley, and he's worked with small business owners and franchise owners exit their small business and build a business that is actually built on systems that is scalable and that is sellable. We talk about what buyers actually look for, capital management structures, and the soft skills required to grow a successful business. I think you're gonna like this conversation. Give it a listen. All right, everybody. Welcome back. Another episode of the C-Suite Unfiltered, and I'm very excited to have on Patrick Buckley. Uh, he is the host of the Empires Podcast, and I think he sits at a really cool intersection of small businesses, franchising, and deal-making, things that we're all interested in making more money, potentially exiting. So Patrick, thanks for being on the show, man.

Yeah, thanks for having me, man. Excited to be here.

Cool, right on. Well, we'll jump straight into the content. I'm not going to get into any fluff. Um, one of the main things that I really wanted to ask you and start with was, on your podcast, you interview a lot of top kind of brick-and-mortar operators and franchisees. Um, across all those conversations, when you talk to all these different people, are there common threads that you see about, like, the best owners? Are there certain aspects of whether it be their leadership, their asset allocation, their capitalization, the way they're handling their finances? Like, what threads threads do you see as commonalities among the best people you talk to?

Yeah, I'd say, uh, a few things. I mean, they generally pick good brands, um, and I say that by good brands, I just mean like brands with economics where you can build a foundation off of. Uh, it's very difficult to go anywhere if your first entryway into franchising, and really any entrepreneurial endeavor, if you can't make if you're not generating cash flow, I mean, there's no way to expand, whether it's debt, equity, just redeploying cash. It's hard to do that when, um, when you, when you don't have some engine. And so that, that's kind of like a theme I've seen with a lot of the successful owners. Like, I interviewed a guy who owns 120 Dunkin's, but he also is building like Dave's Hot Chickens and a few other concepts. But Dunkin', and he literally said this, His name's Raj Patel. He's a great guy. He's like, he said, he's like, Dunkin' was my engine. So he, he got big in Dunkin' because he, like, it was working. There was ability for him to expand to new locations, uh, within that brand by buying up smaller owners. And that was like his base. And now that he has that base, he's willing to go outside of it a little bit. Um, and yeah, that, that's a common theme. So, and I think they're operators at heart too, right? Like, they're not, they're not in this to like I don't know, get on LinkedIn and be an influencer or get, you know, use it for something else, right? Like, they, they actually really enjoy the game of owning franchises, scaling. They care a lot about their people. They, they invest into their, their team, right, and, and their culture. And I think a lot of people who think about franchises kind of assume they're like, the franchisor has everything figured out for them, which, which their job is to give you an operating model. But if you're becoming a franchisee, I mean, these people who really make it far definitely think about their business as if it's like, uh, like it's like, like it is their own, right? Like, like it's a personal company. And in the— like, for Raj Patel, his company just so happens to operate a bunch of Dunkin's. But like, he's hiring his own team members, he's building his own employee culture within Raj Patel's Dunkin' Donuts. That's different than the one I go to down the street here in New York City. So, um, yeah, I think that's a much different mindset than the people who just buy a franchise and think like, oh, like, I'm gonna have a lot of stuff figured out for me. Like, I don't have to maybe work as hard. Like, no, you still have to hustle. And when you match that hustle with a great concept, that, that's when these amazing things can happen. But, um, yeah, yeah, those are just a few kind of comments.

No, that's awesome. And I think what you highlighted there is a lot of like ownership is that I am the business owner. Yes, I'm a part of a greater brand. And that's one of the things that, you know, I tell our prospects because I'm kind of the gatekeeper to Augusta, as I tell them like, hey, it is your business. Like, think about it more as a partnership, but it's your business and we're here to help you in your business. Yes, it's our brand. Yes, it's our systems. But like, you have to own it at the end of the day. So one of the questions that kind of stems from that, I appreciate kind of what you highlighted there. From your particular perspective, you know, you work with a lot of multi-unit owners or multi-location owners, um, that are trying to scale and potentially exit. Um, can you tell early on when someone is or is not qualified for multi-unit ownership? Like, what are some of the red flags that you see, or the green flags that you see?

Yeah, uh, I, I mean, it's obviously a little subjective, right? But I, I think just the way they maybe approach and show up to whether it's like calls, uh, you know, if they're evaluating brands, right, and they're consistently late for calls or, uh, don't follow through on things, uh, as far as like, you know, like maybe they said they'd have something filled out by a certain date and then it comes and goes. You can start to see like the organizational, uh, habits that have been ingrained in someone, and it also shows their seriousness about an endeavor. So Um, yeah, I think, I think beyond that though, there's a lot of soft skills that, again, these are hard to measure, right? Like, right, but ability to be motivating, ability to potentially— not potentially— to be a leader. Um, like, that's another— I mean, kind of does answer your, your first question too, right? Like, that's— those are the people who are successful because, um, you have to have that— I don't know if salesmanship's the right word, but Uh, it probably is because anyone who doesn't have the soft skills, right, like it's going to be tough for on location number one to hire and retain good people, right, who, who you want to be able to communicate, hey, like I'm building a multi-unit organization, but like this is location one, but there's a bigger vision here. Um, and so like executing on these things, like these interpersonal people skills, I mean, those are the best, the, the, the a lot of the best operators. It's like, wow, you're, you're actually like, you could have done— I'm like, you could have done other things. You didn't have to do franchises. But like, I got like, you, you pump me up just by talking to you. Like, I would, I would go ride with you whether it was franchising. Maybe you were going to do some technology thing, like, who knows? But like, um, yeah, so I think, you know, if someone doesn't have the personal skills, like, it's gonna be tough to be a business owner. You're dealing with customers, you're dealing with your own employees, probably more than the customers. Maybe you're dealing with investors or banks, what have you, like your ability to manage that stress, all those different relationships. I mean, you have to wear a lot of hats and I know people say that all the time, but like if you can't handle that from a personal perspective, like it is difficult to build a successful organization, which any multi-unit franchise organization, that's what it is.

Yeah, yeah. No, that's great. And that's one of the things we talk about internally, especially at Augusta, is we talk about like the 3 capacities that every owner needs to assess. At any given point. And that's going to be your labor capacity. So how many employees do you have and that are high quality, high performers? And then we're looking at your asset capacity. What assets do you have for the business? And then the third and final one that you're really touching on is what is your personal capacity? Meaning like, how many hours a week do you want to work? Like, what are your family obligations outside of work? Are you a single guy that's 27 and just wants to grind and work 7 days a week? Okay, well, your personal capacity is drastically higher than the 45-year-old franchise owner with 3 kids in school. And like, he wants to be a present father. Right. Those are two very different personal capacities. Right. And so to your point, I think that is, that is the big thing that most of us need to figure out. And, you know, here at Augusta, we are hardcore Jocko Willink fans and we love the extreme ownership principle of like, it all comes back to you. And so if you can't define your personal capacity, like, how are you going to ever grow the business if you can't figure out that definition, if you're always just kind of yo-yoing back and forth in terms of effort? So I really appreciate how you hit on that, that it is those soft skills that people need to, to gain. Now, kind of pivoting from some of the soft skills and more to, I guess, kind of the numbers or how you evaluate businesses. Obviously, FD Capital, I know you advise, you know, multi-unit franchise owners looking to exit. They want maximum value when they exit. Um, is there like a switch that flips when a multi-unit owner goes from someone that owns multi-unit owner or multiple units to this has real enterprise value? Like, is there a switch? Is there a series of events that happen? Is there a certain structure that you see when they go from I own a bunch of franchises to this has real enterprise value? This is an ecosystem within a franchise?

Yeah, no, that's a really good question. I think, I mean, it obviously varies somewhat depending on the brand and maybe the region, but generally speaking, I'd say, I mean, once you cross 7 figures in EBITDA, uh, that's, that, that's starting to become a different business than, right? Like, if you own, if I own a couple Dairy Queens and I don't know, they're doing like $150, $200 in EBITDA, I mean, I sell it for 2x, right? Probably 2, maybe 3x. I mean, it's just not that big of a platform, even if it's a known brand. Um, but the higher the EBITDA is, that the bigger multiple you're going to get. And so once you start crossing the 7 figures, like, there's— you'll probably— I mean, at least the franchisees we speak to, like, you'll start getting outreach at that point. Um, you know, I mean, there's tons of PE firms that are trying to get into franchising and it's become so competitive that they're going further, further downstream. But then, you know, really once you're at like 3 for most concepts and 3 to 5, that's when it's like, oh, like you can, you could sell that most likely for a lot of money. And the contingencies are though, it's like you need, you need to, you want a solid management team in place. And this goes back to why it's so important for like the interpersonal skills to be able to build like a proper organization and a proper structure within your business. Because a lot of, you know, sometimes we speak to owners where the numbers look great on— well, they look good on paper maybe, but then you, you dig through the financials, you start, you know, we start seeing the labor numbers or, uh, you know, whatever the case is, we're peeling back the layers of the business and it's like they've kind of duct taped it together. Like the owner's working 90-hour weeks, um, you know, the family's involved, like maybe it's a husband or a wife or just brothers, sisters, whatever. It's like there's just a disjointed labor that's keeping this ship afloat. And it doesn't mean it's unsellable, it just means if you're going to sell a business for a lot of money, like, the buyers at that stage aren't dumb people. They're gonna need verified— they're gonna want to know what ex— what exactly. Like, I mean, these sales take a long time. That's another thing. If you think you can sell a business in a month, I mean, if it's a real— if we're talking 7-figure EBITDA, no chance. Like, these things take multiple months, you know, depending on the scale, it's gonna— it could take a year. We, we have a 41-unit package that we're working on right now.

Okay.

Engage with the client in the QSR space. And so yeah, I mean, 41 units, 41 lease transfers, like it's going to take a long time to get that deal done. But, um, yeah, I, I think this, uh, uh, that disjointed labor, right, if you don't have like store managers and then maybe an area manager representing the cluster of stores, and if it is really tough, then the buyer is gonna have to underwrite the ability to— they're gonna say, well, we're not buying your family, like, that's all leaving, so I'm gonna have to hire a bunch of people, and that's going to draw down the EBITDA actually a lot more. So yeah, it's, it's, uh, things like that that can definitely, uh, change the equation. So it's not just about, like, you know, whatever the owner decides to present their financial story as.

Yeah, yeah, no, that's interesting. And that was kind of— honestly, you hit on one of my planned follow-up questions, which is, like, how much does the buyer care about, like, the owner being removed from operations or the owner, the owner's immediate family, or, you know, whoever the ownership group is? How much does the buyer care about them being involved in the business versus, okay, have they built out such a systematic structure that like when I buy this, I won't have to be there? Yes, I'll have to be there for the transition period and the management and the hiring and training and orienteering of the actual brand itself. But like, okay, maybe 6 months post that transaction, can I step out?, as the buyer? Like, how much do they care about that, um, operational structure? Do they— do buyers want owners more involved when they purchase, or do they want owners more removed?

I guess that's subject to the buyer, but yeah, yeah, it's subject to the buyer, subject to the brand, right? Because like, the more established the brand is, um, it likely depends less on the owner, whereas if it's an emerging concept with 100 to 200 units, um, you know, the brand might not be super— still might not be super well known. It probably isn't, so So, uh, you know, maybe having an owner in place to be able to call, uh, or, you know, not in place but just at least available by phone, uh, to, to figure things out. But like, you know, if we're talking like the tier 1 QSR, even like a Planet Fitness or some of these big international franchises, I mean, uh, a lot of them, I mean, they're just constantly getting job applications. And, uh, they say you have enough franchisees in the network where you, you can call a bunch of people. You kind of know— the buyer should know at that level of the game, like, what the playbook is, whether or not the owner's involved or not. But, um, yeah, I mean, look, it's, uh— I think if I was a franchisee, I mean, you want to have it as buttoned up as possible. You, you want to build yourself out of the business as much as possible, um, because it just makes a transition— it makes your life a lot easier during the sale process. It also gets you the most value, enterprise value, at the end when you do exit. So it's, it's incredibly difficult, right? It's so easy for us to say this on a podcast, but, um, it's very difficult to really do that. And again, like, back to my first comment where you want to find that engine for your platform, like, you do need substantial capital, uh, and cash flow coming in to be able to make, make the right hires. Because oftentimes you have to hire early. You have to get— you're, you know, you're building, you're about to open a location number 2, you, you don't want to necessarily work in that just by yourself, like leading the charge while you have the other, look, 7 or 5 or however many locations, right? You want to be able to hire your next GM and train them. A lot of, a lot of the good owners do that. They'll train their GM at, say, a location, and then as soon as their next one opens, that GM is— it's like, hey, like, now this is your store. Um, you need money, right? You need the money to be able to make that hire 3 to 6 months in advance.

What would you say— and this is more like a forcing you into a corner. Like, short, short answer would be like, what do you think is the biggest bottleneck for that expansion to get to a sale? Is it undercapitalization? Is it the lack of leadership, those soft skills? Or is it potentially like poor system implementation, like from the franchise, like kind of out of the systems, if you will? Oh, I think I might have froze, or you might have froze.

Yeah, I— you froze at undercapitalization, or I assume that's what it was, like undercap. Yeah. I don't know.

Apologies.

You're good. Mine or yours?

You're good. Uh, so I said if you had to pick one of these kind of three categories or throw out a fourth or a fifth if you see different areas, but I was kind of thinking like, what are the core bottlenecks that I see for multi-unit growth in my experience? And, you know, just observing franchises, do you think which, which of these three bottlenecks is the most, I guess, painful to get you to where you could potentially exit? Is it like undercapitalization? Hey, I just don't have the money to continue expanding. Is it too like lacking those soft skills or those leadership skills? Or is it 3, potentially just like poor system implementation? Like you're kind of that wildcard franchise owner where you're like, well, I like this system, but my adaptation of it is better, right? Like which of those 3 do you think is the worst bottleneck or the hardest bottleneck to overcome for some owners?

Uh, I definitely think undercapitalization. Like you're SOL if you don't have the money. Um, if you're— if you do have the capitalization and you don't have the interpersonal skills, you can hire, you know, like if once you get to a certain point, you do unlock, uh, maybe a talent pool of like operators who— they're, they're employees, but they have experience operating stores of various concepts. So, um, yeah, it's definitely, definitely the, the first thing, you know. And I think undercapitalization is— there's not really good stats on this, um, but I mean, I believe it's the number one reason a franchisee fails, uh, is because they didn't budget enough capital, um, and maybe they didn't get profitable as fast as they thought they could. So Yeah, it's, you want to be capitalized. You want to have more than enough runway to be able to invest in the business the right way and build it for the long term. And yeah, so without it, it's very difficult to expand. It slows down all facets of the business.

Yeah. Yeah. 100%. And I think having capital can cover for lack of leadership skills, can cover for lack of system and implementation. Maybe you're not effectively deploying that capital because you are misusing a system, but a certain amount of capital can cover those sins for a certain amount of time. And so I agree I agree with you. And that was one of the mistakes we made as a franchise early on was we launched because we were very much in this hypergrowth mode. We have a large following. Our CEO and founder has a large social media following and we wanted to tap into that. And so we offered effectively an express franchise model similar to, you know, you can open a McDonald's in a mall or you can, you know, open a Panda Express in a mall or whatever it may be where it's like, hey, maybe it's a slightly lesser fee. You're not going to make as much money in terms of annual revenue because you don't have the drive-thru access, delivery access, XYZ.. And so we kind of launched a similar model to that. We called it our solo model. Uh, in the home service industry, there are a lot of solo operators. They dominate most of the industry, um, because they have the technical skills, but maybe they don't have the capital or the soft skills to scale. And so we launched that, and to be 100% transparent, people know this now, uh, the overwhelming majority went out of business. And we didn't realize until after the fact, it was like, it was literally just undercapitalization. They weren't bad owners. They weren't following certain systems. It was like, we were not verifying that they had enough money for a 12 to 24 month ramp and we were just betting on them and they were kind of betting on themselves, not in a bad way, to just like outperform certain market conditions. And when you just look at it from a numbers perspective, like sometimes it always does come back to that.

Yeah. No, no, it 100% does. I mean, uh, yeah, I think I, I remember I spoke to one QSR operator, very successful, uh, within this fried chicken brand, and he said that most of his acquisitions, uh, of other franchisees' locations came because they were, they were out of money basically. And so the option was they're going to sell for pennies or they're going bankrupt. And I mean, it's like kind of dark, but that's, that's the reality of business unfortunately. It really is a— yeah, it's, it's a just a brutal game of dollars and cents sometimes.

And that, that is the difference Yeah, I want to like tug on that thread a little bit. Do you see like a certain timeline for when franchise brands start to have that consolidation? Because, you know, we've obviously— we're starting to mature in our franchise growth. Like right now we have just under 200 units, like active selling and operational. We have signed but not open another 30 to 40 that will be launching in the next year or so. So by the end of this year, like goals, 260-ish. Is there like a timeline? I'm not asking for us specifically, but we are starting to see, okay, like there is starting to be a gap of, okay, now we have, you know, 4 owners in Augusta that have 6+ locations. Okay. And then we have about 20 that have between 2 and 5, and then the rest are still single-unit operators. But I feel like that gap is going to start growing. Is there a timeline that you see for franchises? Is it a certain amount of units? Is it a certain, you know, holistic system-wide revenue marker that you see where that consolidation starts to happen? Like, or is there a pivot maybe that the franchise brand makes? Like, just looking for kind of your expertise on that.

Yeah, no, it's a great question. I mean, I mean, there are, uh, it's sometimes it is franchisor dependent, like, because there are brands, you know, we know brands that, uh, have 1,000+ units and the biggest owner has like 10 stores, which is crazy. Uh, it's very whatever the opposite of consolidated is, like, it's fragmented. Um, it's very fragmented ownership within the franchisee base. But, um, I don't know, I think generally speaking, probably around 500 units or so is when things start to become consolidated. Uh, or at least wave 1 of consolidation, and I'll get to wave 2 and what I mean by that. But like, you know, if you don't have that volume of units, it's just, you know, it's hard to grow fast, uh, as a franchisee if you're constantly having to build out new territories, new locations. Uh, it just takes longer, and, and it's very different than if you can acquire existing businesses that have, have cash flow already and have some level of an employee base there. And so without a high enough volume of units, like, the M&A activity within your brand just can't be— can't be— there's not enough of it to help those, those top operators really gobble up more. And so, you know, the bigger it becomes past 500 units, the more of that you usually see. And I'd say if the brand is really, really doing well and there's— the EBITDA margins are healthy enough, that's when you'll see the second wave where maybe there's operators who came in early to the brand, they took a chance, it worked, and then they become these massive franchisees. But again, if the EBITDA margins are there and the model's proven and there's, you know, like, meaning there's heavy proof of concept, like 700, 800, 900 units, like Nothing Bundt Cakes kind of is going through that right now in wave 2 because there are owners who own a bunch of stores, uh, but now private equities all over it. And they want— they, they're rolling up locations, uh, mix of private equity and family offices, uh, you know, with, with hired operators. So, uh, that's kind of wave 2 is like— then that's like, you know, if you want to look at like the end result of that, uh, I mean, a couple different end results. There's negative ones where the brand goes downhill, but like Taco Bell has plenty of big private equity-backed operators, um, because it's just such a proven model and it's, and it's been It's just been around for decades. So like you have groups that own hundreds of Taco Bells. Um, and, uh, yeah, so, but again, you need, you need that volume of units open and operating for the consolidation to even take place.

Yeah, that makes sense. And, and you mentioned kind of private equity, and I wanted to, um, pivot towards one of your recent LinkedIn posts, which, by the way, you're a great LinkedIn follow. So if anybody's interested in learning more about franchising exiting strategy, uh, I strongly recommend give you a follow on LinkedIn. Um, but you recently posted about Roark Capital's massive portfolio earlier how Inspire Brands has this confidential IPO filing. Driven Brands is facing some, some pressure from activists. So I kind of want to like not necessarily zoom in on that, but like pull back to that independent operator or that smaller franchise owner who maybe has 1, 2 units. Like they're watching these Goliaths, if you will. They're watching these private equity firms, these family offices come in and start to consolidate the market or take over. What should these smaller and maybe independent operators or smaller franchise owners take comfort in when they see these Goliaths moving? And what should, I guess, scare them?

Yeah, I mean, are you talking from the perspective of like if I'm a franchisee of a brand and then private equity buys my brand?

Let's do both. Let's say like I'm a, I'm a franchisee of this brand and maybe I only have 1 or 2 units, but then maybe I'm an independent business owner in kind of competing in that industry. Like there's kind of advantages and disadvantages to both, I believe.

Yeah. Yeah. I think. All right. So if you're a 1 or 2 unit owner and private equity buys your brand, I mean, Uh, I would look at the track record of the PE firm. Um, you know, that should, in my opinion, be— that, that's the only gauge you have to know what's really going to happen. Um, as far as like, yeah, are they gonna just up your royalty fee and find these other ways to, to make money, uh, that are at your expense, right? Or are they franchisee-friendly? Um, I would take that very seriously. Like, see what other brands they've invested in in the franchise space. Um, like research what— like, how of that— how has the brand been, uh, since that transaction. And a lot of times, right, a lot of the press that you see on brands, it's all about— it's really all about the franchisor. They're not really speaking to the franchisees. And this is a big reason why for my content I've kind of anchored it from all the franchisee perspective, because it just— there doesn't seem to be that much, uh, media that like dives into that, right? It's all about like how much the franchisor is worth. But like, end of the day, there's been some really, really successful franchisors where franchisees didn't make any money. Um, I think there's like— I mean, Subway is probably example number one. Uh, they definitely had— I, I interviewed a longtime Subway owner on my podcast Empires, and like, they definitely had a period where like things were good, but there's been a lot of carnage there, and the franchisor sold for nearly $10 billion. Um, even more recent examples like the, uh, the, uh, fast casual pizza brands. There's some franchisors, like, uh, I don't want to name them, but like, you know, that did very well, but like not many franchisees did well. So there's a disconnect there. Um, so yeah, you definitely want to pay attention to like the franchisee unit economics if you're going to try to see the track record of a private equity firm. And then, yeah, I mean, look, if you're, if you're a small business and you're going against a private equity-backed franchise brand I think you can win because you can pivot, you can be nimble. A lot of these brands can't, and in fact, it gets very difficult to like stay relevant, stay on the cutting edge, so to speak, right? Like, I think there's a reason why Pizza Hut just got sold. Like, they got distracted. They have this massive brand. They couldn't make changes quick enough. You know, like Domino's was ahead of the curve. They were like, all right, we're gonna invest in technology. Like, convenience matters more than anything else. That's why we're gonna go all in on delivery, and we're gonna have the best technology to make delivery as seamless and frictionless as possible. I mean, Pizza Hut was the king in the 1990s. Like, they were— they were the biggest pizza concept by a wide margin, and they lost the lead. And then they, you know, I mean, Yum Brands just sold them recently, so If you're a small business, I mean, you can change things. You can market in a way that your local franchisee can't. They have a lot of limitations. They're really stuck to what they have to do, especially the bigger the brand. So yeah, I mean, don't get me wrong, there's a lot of pros that come with like brand standards and yeah, consistency and all that. But you know, if you're a small business owner, I think you can actually like, if you're creative from a marketing standpoint, you should be able to differentiate yourself.

Uh, yeah, yeah, no, that's great. And I've thought that the same as like you can differentiate, like obviously you can change kind of your unique selling proposition to very heavily focused on personalization or that personal touch to the customer. There's always going to be kind of that customer base, whether it's 10%, 20%, 30% of your market, like the customer base is always going to be there. Um, especially for certain demographics, they want to know like this is locally owned and operated, no one has say in this company, and that the owner lives down the street from me. Nothing wrong with that. There is that customer base, and then there is that customer base that is like, I just want convenience. And that's where, like, Augusta, we're trying to find our niche, and we found it. It's more the latter, which is you can go into any Augusta location's website right now, get a price for services, put your credit card on file, and never talk to anyone.

Wow.

And that is what some people want, right? They're just like, I just need my grass cut. I just need my bushes trimmed. But then we can also flip it where it's like, well, the owners are local and they can call you and you can set up an in-person estimate. So we're kind of finding that niche. We, we optimize a little bit more for the convenience as a franchise because we have the technology and we can do that. But there is still that element of personalization. So we're trying to balance that as well, specifically with home services, because we are going to be on your home. So there's always going to be an element of personalization that has to happen in our industry. Whereas brick and mortar, they're coming to you. So I would assume, or I guess I would assert that there's a little bit less trust necessary to make the transaction happen. Would you agree or disagree with that?

Uh, yeah. I mean, I think like when it comes to the franchise perspective, right? Like people have an expectation of what they're gonna get if they walk talking to, a Little Caesars or McDonald's or, uh, what have you. Um, but yeah, I think, uh, it is different than like, you know, someone coming into your home for sure. Uh, it's, it's a totally different type of transaction. It is frankly more transactional. There's, there's no— you don't need to court someone to like buy lunch at your spot, right? Like there's just a default assumption that the food is safe, you know. Who knows if it's good or not, people might have to take a chance on you they've never heard of your brand if you're like a family-owned or a small business. But, but, um, yeah, I mean, I mean, even just hearing you talk though about convenience and like what you guys are focusing on, what you found to work, I think like the biggest just mistake and I see with a lot of small business is really like structural where they try to be everything to everyone. Um, it's really hard to fight it because like you're afraid that you're not going to make enough money or whatever. But you end up like kind of, you end up accomplishing what you're afraid of because if you just offer too many things, right? It's like the— there's like a bodega, or I don't even know what it is by me. It's, I think it's, it's a bodega restaurant, but yeah, they're like a convenience store but they sell fried chicken, pizza, burgers, chicken tenders, like everything. It's like you want to be known for something, so you kind of have to pick your lane, and you need to pick a lane that can— where that if you do execute well, it drives enough volume in your business where it's sustainable just off that alone. And only once you like own a lane, whatever that lane may be, uh, you maybe start to add on adjacent service lines there or adjacent products. Um, but yeah, I think, uh, a lot of people just— they, they want to be too much too fast, and, uh, the customer can't really comprehend what, what should I be going to you for? What are you What should I trust you for? If you have a million different things you're offering.

Yeah, no, it's a great perspective. And I think it's like, it kind of comes back to like mastery. It's like, do the one thing, master the one thing, offer that one thing better than anyone else, and then try another vertical, try another lane. But like, let's master this one thing. Let's get known for this one thing, and then we can do something else. I love that perspective. And I think a lot of small business owners get distracted by the new shiny object, the new technology, the new rollout. Versus like, dude, you're crushing the thing you're already doing. Just keep doing that thing.

So that's actually another thing. Yeah. Sometimes they are doing the thing well, but they just, I think they get bored, right? Like they're just like, I've been doing, and I get it. I mean, it's like an entrepreneur myself. Like sometimes you wake up, you're like, I'm doing the same thing every day. But yeah, you kind of got to find a way mentally to get past it because yeah, shiny object syndrome is real. I mean, I'm obsessed with Raising Cane's. I don't know, you know, how much you know about them, or your pure audience, if this is totally foreign, but like, just, I mean, they've been around for like nearly 30 years. All they sell is chicken tenders and fries. And yeah, um, not even, they don't have multi— it's just one type of chicken tender too. Um, like, it's not like they have a bunch of different spice versions or like a spicy tender and then a honey barbecue tend— like, it's just one chicken tender and french fry. It's the most simple model. It's, you know, Doesn't mean it's easy to execute, but that is just, to me, it's the best example of just relentless focus on being the best at one thing.

Yeah, 100%. And that was kind of one of the final things I wanted to ask you about is a similar business model. Maybe not as simple as Raising Cane's, but yes, I've done some research on them, watched some of their videos. Very cool brand, how they scaled. But I want to talk a little bit about some recent news. Jersey Mike's filed their S-1 last week. Kind of wanted your expertise on that. I don't know if you have a pending post, so I don't want to spoil anything. But from your perspective, like, you know, the industry that you're in, you're helping all these business owners exit. Like, what data points do you immediately, immediately look at when someone like files an S-1? You're like, okay, this will be a good IPO, or this is a good franchise system, this is a great product, whatever. Like, what data points are you looking at? Because I've been combing through that S-1 and it's like I'm just eating it up. I love looking at that data when it is a simple concept. It's like I can understand this concept, so I don't have to be a financial expert to understand. I can sell more sandwiches, make more money.

Yeah. Um, I mean, so to answer part of your question, I don't have like a framework just because restaurant IPOs are— and franchise IPOs aren't very common, right? I think, uh, I mean, what is it called, uh, BlackRock Coffee, which I believe they formed out of England originally, but they don't, they don't even have that many locations. I think a couple hundred. I should know this. But anyway, they went public like 5 months ago. Um, and then before that, I think the most recent one was like Cava, which is like 3 or 4 years ago, uh, if I'm not mistaken. But, but, you know, anyway, the point is it's not like super common. So it's kind of interesting that we have Jersey Mike's and then we also have Inspire Brands, well, is likely going public soon. So that'll, that'll be really interesting to peel back the onion on, uh, you know, uh, all those brands have been inspired— Dunkin', Arby's, Sonic. Uh, but yeah, as far as Jersey Mike's, man, uh, I mean, look, I can speak from the franchise perspective. Uh, you know, like, I, I saw that they're, you know, I'd have to really dive in to understand. Like, it's not just like, is it a good business, is it going to grow? It's like, what valuation is the stock opening at? And if the market cap is out of control, which seems to happen a lot of times with these IPOs, like, you know, the, the, uh, multiples, uh, the PE multiples get just really out of control on on the first few days of trading. And so you could actually have just a bad entry price, and even if the business is great, like, you may have just bought in too high at a valuation. So, um, yeah, but look, the concept's phenomenal. I mean, Peter Cancro, you know, shout out Cancro, he's a Jersey guy and so am I, uh, like, just built that business the right way, you know, really focused on quality over quantity, uh, made sure that's with the product, with the franchisees and the way he grew. Like, it's— I mentioned Subway earlier. It's the dead opposite of Subway. Like, Subway was like, we want to be everywhere and anywhere. And like, let— like, right there, there's Subways that have been on the same street, which is just insane. Uh, because it was all about just, let's just grow as a brand, let's get more units than McDonald's. And, uh, obviously again, that came at the cost and the financial detriment of many franchisees. Where Peter Cancro, I have never heard a franchisee say anything bad about and I've DM'd with many, I've emailed with many, I've spoken in person with many. I had a 25-location owner on my podcast recently, um, and, and so, and that, that conversation's live, and he shares a lot of cool stories about Peter Cancro and what he means to their franchisees. So obviously they're owned by Blackstone now, um, and I think a key thing there is they're looking to ramp up unit count considerably. It took Peter, uh, and I don't say this is a negative, I mean, it's an amazing accomplishment, but just, just to give you context in the momentum the brand has, uh, took him until 2015 to get, break 1,000 locations open in the US. And he began franchising in 1987, and from my understanding, he only had like a few stores of his own at that point. Um, maybe he was like 10 at most, but it wasn't a lot. And Heading into 2026, they had over 3,000 stores. So he tripped— they tripled location count in just 3— in 10 years. Um, and Jersey Mike's just throwing out numbers like 7,500 units in the US, 10,000 units in the US. And what happens to the franchisee economics during that time span? Um, from the stock perspective though, again, this goes back to like mainstream media and what you should care about. Uh, if you're investing in a stock, you really only care about the franchisor to some extent. Obviously, like if franchisee economics get bad and they're closing, that's a problem. But they just need to be good enough to stay open because it's the royalty stream of the franchisor that's really keeping them in business. And that does highlight a little bit of a, uh, maybe misaligned incentives that can appear in the franchise model. It's not perfect, but it can, it can be misaligned at times. And so, um, look, they have plenty of runway in the US. Um, they— I don't know where this— what unit count makes sense before it like becomes too much of a negative on franchisee economics, because the more units you open, it will drag down nearby franchisees. Um, and then the ton of international growth too. Uh, so yeah, yeah, I mean, look, they have plenty of growth, but again, I'm not like, uh, the biggest financial— like, I'm not a stock picker, so— but I would be paying attention to that, that market cap, uh, because it could be a great business, but it could still be too high of a valuation.

Yeah, no, I appreciate that perspective. I'm not, not asking you for financial advice or stock picks in any way, shape, or form. That's, that's a, that's a bit I've done on this podcast. It's like, it's not financial advice, so I'm gonna give you advice, but it's not financial advice. So, um, that's, that's what I was asking for, just more so your perspective. Kind of trailing off on that a little bit, and I guess, like, you know, I'm kind of answering my own question in my head before I ask you, um, because I do think it comes down to the potential franchisee's goals what they are trying to get out of their relationship with the franchisor. But do you think there is like more benefit to being kind of an early adopter, early majority, say Jersey Mike's owner in 2012 versus like now you're like, hey, this brand is so established, like what are kind of pros and cons, I guess, of both of those perspectives?

Yeah, yeah. I mean, I definitely think more valuable to be a Jersey Mike's owner in 2012. Um, because you're just— you're, you're like— it's, it's like, uh, it's like you're, you're at a— you, you entered a party before, like 5 hours before anyone else gonna show up, and it's gonna be the sickest party ever. Like, you're early to the spot. Like, that's what you want to be. Uh, you know, like, I think the sports analogy I want to use is like, you want to skate to where the puck is going or something. That's what— if you're a Jersey Mike's franchisee in 2012, you're ahead of the game. You have the opportunity to build locations. The AUV is going to keep going up. You're going to have acquisition opportunities. Uh, the hard part is like, right, in 2012, nobody is that confident. Not to say they're not confident. I'm sure there's franchisees who already love the brand back then, and it was already going very well for them. But like, it's easy to look back in hindsight and be like, damn, I wish I could have gotten in like 10 years ago. The hard part is knowing what that next brand's going to be. Um, yeah, so unequivocally though, it's better to be a franchisee in 2012 because today it's just so competitive, man. I mean, yeah, so many big franchisee groups looking to get in. I know from what I've heard, Blackstone's gonna, gonna let, uh, like some, some consolidation happen, which Peter Cancro generally, right, like given this, given the scale of the system, he could have had guys. I'm sure there were guys who wanted to come in and be 100+ unit operators, but he didn't— he never let it happen. They have a pretty strict training program, or at least they have had one. Um, like, you need to have someone trained for a minimum of, I think, 3 months before a store opens. And like, a lot of brands don't do stuff like that. So, um, yeah, uh, it's just tough nowadays. Like, I would love to be an owner, but I mean, it's a dogfight to get in. And then, uh, yeah, who knows what's gonna happen with the unit count and like what happens to the brand. So, so to me, it's like, now there's some uncertainty if you're starting from from one unit today.

Yeah, yeah, no, that makes complete sense. So one of the words I want to really zoom in on that you said there is the confidence that the franchisor gives the franchisee. And this is 100% a biased personal question, you know, from, for me and my team and our CEO, because obviously I'll share the link, uh, to this interview to him. Um, like, how do we better instill confidence in our franchisees? Because we are still at that early adopter, early majority phase, right? Like I said, signed but not open, we're at like 240, somewhere around there.

Yeah.

Um, so like we, we see the growth curve, it's consistent, like CAGR across, you know, uh, revenue for all of our locations is consistent year over year. But really, like, how do we instill that confidence? Because that is more of a soft skill, I would argue.

Yeah, yeah. Well, it definitely isn't like communicating it, but I think, I mean, the easiest way is, uh, to, to back it up with the way you guys structure your agreements, I'd say, right? Like I mean, I obviously don't know. I mean, look, there are brands out there where it doesn't make sense to maybe have large multi-unit owners, or, you know, there's different situations where, you know, like, like, I think a lot of people in the brick-and-mortar world, they want to get in, they want to be that mini Greg Flynn, right? They want to own a lot of locations, and because, because they want to make money at the end of the day, you know, the financial motivation is real. And I think sometimes franchisors honestly hide behind, like, you know, they, they almost paint that as a negative where it's like, we're looking for the right people and the right partners, people with the passion. And like, that's all great, but like, end of the day, this isn't a charity. Like, you're asking people to invest money. And so if I look at a franchise agreement and I'm limited to this small area, this a tiny amount of zip codes, and that's all I'm being the opportunity to to open a location in is here, then to me it's like, I don't care what you're telling me on a call. Your, your agreement speaks for itself. You are not giving me the ability to build a legitimate, like, a sizable business. And so, uh, again, I don't know, I'm, I'm speaking in the brick-and-mortar world, so I realize it's different in the home services world where, uh, you guys aren't building physical locations. You know, you're probably like securing territories, but I think just showing like, you know, the operators that like, yeah, like look, if you execute, like look at the— like whether it's territory size or something in the agreement, in the actual, uh, franchise negotiations, that they do have the ability to, to do well for themselves. I, I feel like that would go a long way to instilling confidence because otherwise it's just like, you just gotta trust me that like I'm not gonna sell, sell the location right next to you and Yeah, that kind of stuck.

Yeah, no, that makes total sense. Awesome. Well, I want to ask you one last question, Patrick. I really appreciate your time. This could be a short answer, but I'd love to end with kind of this hypothetical. Say you were talking to a single-unit franchise owner right now, any industry, um, they want to build to a sellable multi-unit business, not necessarily specific location count, call it 10, 20, I don't really care. They want to build a multi-unit business over the next 10 years. What are you going to tell them to focus on in the immediate? What does their focus need to be on?

I'll just take the assumption that the brand is a solid brand and they can— I would say stay relentlessly focused. We talked about shiny object syndrome before. I really think that's the number one thing that— I mean, well, besides capital. If you don't have the capital, you want to find a way to secure yourself there. But yeah, stay focused. I mean, it is, it should be monotonous. It should be get to a point where you know it down like the back of your hand and don't chase other opportunities. Again, the best franchisees, the biggest, they stick with a brand and they just rinse and repeat. And that's the beauty of it because once you know it, you should be able to scale faster. You know, I mentioned Greg Flynn before. He got into Applebee's in 1999. And stuck with it till 2011 before he ventured into another brand. So that's like, what is that, 12 years of one brand? That's over a decade of just being in the Applebee's business. I, I guarantee you he woke up some days and was like, I'm a little sick of Applebee's, I'd love to like look at some other concepts. But he stuck with it, and by the time he bought his second brand, I forget what it was, uh, you know, which of the 6 he owns today it was, but He had 450, about 450 Applebee's. So go deep, stay focused, take care of your people, right? And yes, just try not to get distracted. It's the hardest. I think it's very underrated from a mental perspective. It's one of the hardest things.

Yeah, that's awesome, Patrick. Well, like I said, I really appreciate your time. We can wrap it up there. Make sure to check out the Empires Pod. Anything else you want to plug while I got you here, feel free.

Yeah, no, I mean, if you, you know, if you want to listen to some of the brick-and-mortar operators, head to Empires. And, um, yeah, if you're a multi-unit franchisee, feel free to speak to us at FT Capital. Uh, even if you're not ready to sell, we're happy to have a conversation and just help, help, uh, help you think about things going forward. So, uh, yeah, appreciate you having me on, man.

This is fun. Of course. Awesome. Thanks, Patrick.