Inside Keyrenter's 14,000 Door Franchise Model with CEO, Nate Tew | Peter Lohmann's Podcast

75 to 100 doors is a big trap. And it is a trap for those that are not willing to hire. Oftentimes they wait to hire until they have enough revenue and all these different things, or they're ready for it, or they've got all their processes dialed in, or everything's perfect like we talked about earlier. And so they'll stall out because they just can't manage on their own anymore. But they've got to be focused on building a team and getting out of the weeds. If they don't, they're going to stop networking. And I also see similar traps at other levels, 200 to 300. There's some traps. It's kind of an awkward growth phase. They're building the team, but it's not fully complete. We see kind of a complete team, so to speak, with a single pod around 300 doors, 300 occupied doors. And so there's all these awkward phases of growth where you just don't quite have the revenue, but you got to make a decision and sacrifice a little bit to get there. And so those that are willing to do that and take that leap of faith and just jump in, they do very well.

Welcome back to Peter Lohmann's podcast. I'm thrilled to introduce today Nate Tu, the co-founder and CEO of Keyrenter Property Management. How are you today, Nate?

So good, Peter. Thanks for having me on. It's good to be here with you.

Yeah. It's great to have you on the show, Nate. You and I have gotten to connect at conferences and industry events over the years here and there, and always enjoy chatting with you about franchise dynamics and industry trends. And you know, you're a well-connected guy and got your finger on the pulse. For folks who may not know about you or Keyrenter, I'd love to have you share just a little bit of backstory, maybe like 1 or 2 minutes on how you got to your current position and how Keyrenter has, has grown to— I think you told me about 94 total locations, which is amazing, right?

Right. Yeah. Yeah. In fact, got started in 2007, kind of fell into property management as a lot of people do. A lot of people have a story of either starting in real estate or starting flipping houses or different things, buying rentals. Mine was very similar. Started working with my, later became my business partner, working with Aaron Marshall, who was a very successful real estate REO broker and started helping him to sell bank foreclosures. And as a part of that, we just really connected and we started actually flipping houses together and doing some other side projects together. And this was kind of at the time that the real estate market was shifting. Some of the houses that we were flipping weren't actually flipping. They were turning into a rental.

Yeah.

Because we couldn't sell 'em. And so we started to get, get this small portfolio and the management needs became more and more necessary. We weren't finding some great providers. And so we also saw the writing on the wall for the foreclosure business and saw that as we were part of Keller Williams at the time, some of the foreclosures were starting to dry up. So we started talking about property management, what that could look like for not only our portfolio, but as we started getting more and more referrals from people that thought we did property management because we were doing bank foreclosures. And there's an element of property management with that.

Where was this?

This is in Salt Lake. In Salt Lake City. Yeah. And out of, based out of Utah as some of the other franchisors got our start here in Utah.

Yeah. I think it's federal law actually. If you wanna start a property management franchise, it really is. You gotta start in Salt Lake City.

You have to move.

I used that joke with Steve Hart a few weeks ago and I didn't get, I didn't get a good laugh out of him. So I'm glad that worked for you. Good.

No, really, you know, it's funny. I mean, of course our PM is based out of Dallas now because of the Dwyer Group and Neighborly and everything, but it's a great place to start a business, man. We, we were an incubator for franchises and multi-level marketing companies. Okay.

Okay. Yeah.

But, but I haven't seen multi-level work yet in property management. We'll see. There'll be some sort of spinoff from these.

We can collaborate on that. Yep. We'll get that going.

But we, we ended up kind of moving into property management naturally, but didn't really understand what that meant. You know, we just started bringing on some clients here and there, and I took the lead on that as my partner was running the real estate side of the business and kind of winding down foreclosures. And he had a retail business as well. And fast forward a few years, we had a pretty substantial client base and property base, and we were looking at opportunities to expand and go even nationwide. So this is kind of 2010, early 2011, started trying to find a better name because the name we had in the beginning was actually very generic. It was Premier Management of Utah, and Premier is just such a generic name. We can't really trademark that and move it forward. And so we found an opportunity to buy a company named Keyrenter, and they had a small portfolio here in Salt Lake. And we loved the name, we loved some of the IP, we changed some of the colors and that sort of thing. And initially we were actually going to just expand into Arizona, Colorado, Nevada, and just have our own offices. But then we started to look and see what other opportunities there were for us to grow and expand. And I actually watched an episode of Undercover Boss. This is in October of 2013. I was super inspired by the CEO of Menchie's, the frozen yogurt shop. And on this episode, he was talking about the franchise model and talking about the power of growing the business through people that are invested in their own businesses. Went to my partner and said, hey, what do you think about franchising? You know, there's a couple other groups doing it. And, uh, this get just kind of a funny side note to kind of tell you a little bit more of the personality difference, differences between me and my partner. I, I let him know, I'm like, hey, let's, let's consider this. Let's write, I'll write down, we'll each write down a list of 10 or so reasons why we should or shouldn't do it. And then the next week we come together with that list. He says, I don't have a list, but I already hired the attorney. I already got the website. We're doing this, man. We're going. And so in 2013, we made that decision. In 2014, we started the legal process, sold our first franchisees the very tail end 2014, had our first training with 4 locations early 2015. And we've grown, you know, up to this point, like you said, 94 sold locations. We have 80 open locations, about 13,500 properties under management right now.

Really awesome. Yeah, I love the story. I want to take us back to that conversation around starting the franchise, and I'm curious about a couple things there. One is, what did you guys think about— you mentioned you knew, you've obviously researched and you knew there was other franchisors in our space at that time. Maybe there was one or two. How did you relate to that? Like, to me, that would've been intimidating. Like, wow, these guys are already doing it. They're already like, have this head start. What were your thoughts?

Yeah. Yeah. Interesting. In fact, at the time we had PMI, RPM, Renters Warehouse was still franchised at the time. And I think All County was starting to come out, but we just didn't know those guys. And we connected even with the founders of RPM. It's like, I just wanted to learn what it was like for them and experience, and they, They were helpful in some of the discussions that we had. And I think we, we saw, you know, we connected very closely with some other franchisors not in our industry. And we saw the power of the franchise model and we saw what it was doing for them and the people that were involved, the franchisees. And I think the decision was pretty, pretty easy after that point of just, we just got to do this because there's such an opportunity. In our industry in particular and the way things were going with the market and the growth of rentals in general. And it didn't, it didn't scare us at all that there were other franchisors in this space. We see that there's a lot of space, a lot of room. There's hundreds of thousands of people that are looking to get into a new business every year. And there's a lot of franchise data that just supports that you can have a growing franchisor even if there's a dozen or two dozen, you know, quote-unquote competitors in our industry.

Yeah, and that's clearly correct because it seems to me that all of the franchise— franchisors have grown in unit count. And it's funny we use unit count, but like location count.

Yeah.

You know, over the year. So there, there obviously is, you know, a big, a big ocean there. My second question was about So you mentioned you got, what'd you say, 13,000-ish doors total or homes?

Close to 14,000. Yeah.

Yeah. And that, so if that were, if you were a single company, that would put you in the top 5 largest PM companies in the US, I think, or top 10. And I'm curious about like why you chose to go on through the franchise model versus the you know, corporate model where all of the— so if you look at like Everness, for example, they have, they're in, you know, dozens and dozens and dozens of markets. Those, those stores, so to speak, are corporately owned to use kind of like franchise language from like retailing or whatever. But, but in the franchise model, of course, every individual location is, is individually owned and operated. Now you may have an operator who owns a few locations, but they're not corporately— or do you guys have any corporately owned locations?

You know, we did for a number of years. Um, that's how we started with our Salt Lake location, and then we converted that to a franchisee location in 2023.

Okay, got it.

But so either way, own that— I have a partner in that business.

Oh, nice.

But it's considered a franchise— franchise— franchisee— franchise location.

What I'm interested in is Like, why? What are the conditions under which a franchise model thrives? And this is getting back to that show that you watched that you found inspirational, the Undercover Boss episode. Like, what are the conditions of an industry or a type of business where an individually owned and operated location is going to thrive versus like, you know, Apple, right? If you think about Apple's retail locations, they own all those locations, right? You can't franchise with Apple. But you can franchise with Keyrenter and you can franchise with McDonald's. You can franchise with hundreds and hundreds and hundreds of other companies. Why? Like, why does Apple not franchise? Why did you franchise? Why did Evernote— Evernest not franchise? Why did RPM franchise? I'm fascinated by the conditions under which individually owned and operated stores can be more successful than a corporately owned location. And like, why? And does that change? And like, I feel like I don't there's like a part of my understanding here that isn't quite clicked in.

You know, I think certainly the service industries are, are much different than, than a product-based retail business, right? So when you're comparing Apple, they're selling a product and they can do that at scale and, and their locations, that makes, it makes sense to not, in fact, I don't know how they would franchise that, but for us in a service base, Industry, you know, and when you think about franchises in general, restaurants and even, even like H&R Block taxes and other sorts of industries, you're providing a service locally. And I think that's where it really makes sense is we can't do really online sales to our folks from Salt Lake to New York or other parts of the country. In a sense, we have clients that are kind of shopping online, but they're, they're their physical asset is locally. And for us, we just, there's a couple things that come to mind. First of all, with Evernest, Matthew Whitaker, great friend of mine.

He's awesome.

Hugely intelligent, right?

And I'm just kidding. He'll laugh when he hears that.

But, but he is. And some of the other guys too. I mean, Charlie Riska and, and some of these guys have really built some great consolidation groups, man, they've got tougher stomachs than I do, I think. And I think that there's a level of complexity with—

I think that's a polite way of saying they chose the wrong path, but yes, go on.

No, I'm not, you know, I'm just, I'm putting words in your mouth. You're putting angles. In fact, I shared with you before that we started with the intention of starting, of opening up these different locations. But I recognized that that would, the, the, it would require much more kind of boots on the ground from us being there locally initially when we're just starting them up. We didn't, you know, we didn't have a strong base of people to work with at that time. I think their acquisition method works very well in that strategy because they can actually acquire a company and keep on the operator for a while. 2, 3 years to keep that moving forward. But for us, it was like, you know, franchising, there's something to be said about, you know, even the valuation of a franchisor that was in that decision-making process as well. They're valued much differently than normal businesses. And so that was attractive for us. And then being able to really lean on very smart, hardworking, dedicated people they could come in and they want a piece of that business for themselves. There was something just really powerful about that. And when we think about the backbone of the country and the engine and really of our economy being small business, being able to bring in folks from corporate America or law enforcement, we've got folks, you know, corporate refugees, just a lot of people from all over the landscape coming in and building something that they then have their own enterprise value, they have their own cash flow, they have so much going for their own lives. It's so much different. And I think that's probably one of the things I didn't recognize as much early on is how big of an impact our business and the business model and the opportunity that people have, how much impact that would have in the lives of these franchise owners. And I think, you know, our franchise partners, I got to be— I got to brag here for a second. We have the best franchise partners, franchise owners that you could ever imagine. And I say that not just because I'm a proud, you know, papa, so to speak, in the franchise network, but also it's not like, you know, kind of like talking about my kids and how they're the best, but it's actually validated in some ways. When you look at our Item 19, which is our scorecard, that we present out there in our FDD. It's, it's public. Our unit economics are strong. And also, as I'm in various masterminds with franchisors and just hearing about the challenges that they have with their franchisees, I just step away and just have this sense of gratitude for the great people that we have that are coming on. And they're coming in intentionally. We're not, we're not signing every franchise agreement we can sign. We could be 2, 3, 4 times our size right now if we were doing that. But we're very stringent. We're very intentional about the people that we want to have come in that match our, our core values, our attributes that we're looking for, the traits that we need to have in a franchise owner so that we can actually have successful units, right? Have successful locations. And we're not batting 1,000 here, right? We're not we're not perfect, but I feel like we have a very strong and unified network because of the alignment that we have in some of those core principles.

This episode is sponsored by Doorloop. They recently put out an ebook called The Property Manager's Guide to Time and Getting Sanity Back, based on a study of hundreds of property managers across the US. And one number from that research really stood out to me. The average property manager is spending 76 hours a month on administrative work and rent collection alone. Think about that for a second. That's basically 2 full weeks of work each month just to keep the machine running, not growing the business, not improving operations, just chasing rent, updating spreadsheets, and dealing with manual processes. How can property managers solve these costly issues? The answer is simple. Switch to a more automated system, something you know I'm big on. The study showed on average, time spent on property management tasks was reduced by about 30% and cut rent collection time by more than 40% when making the switch. In practical terms, that translated into 23 hours a month saved. That's almost 3 full workdays you can get back every single month. A lot of that came from pretty straightforward tools, online rent payments, automated payment reminders, maintenance request tracking. Integrated accounting and reporting, and centralized tenant communication. Nothing magic, just systems that remove the manual work most operators are still doing, which again is something I have a huge focus on in my business. If you want to dig into the numbers and see how other property managers are reclaiming their time, DoorLoop put the full guide together. You can download the ebook for free at doorloop.com and we'll link it in the show notes. Thanks again to DoorLoop for sponsoring this episode. I want to go back to that item 19 that you mentioned, the unit economics. What are some of the specifics there that you see as the strengths of Keyrenter?

Yeah, I mean, there's some things that will be published in this next round of our FDD that's kind of going through revision. That's something that franchisors have to deal with every year. It seems like February, March, April are just FDD months, right? And going through and revising and making changes and updating things. And so we're pretty excited that our, you know, our revenue growth for the last year was 23%. You know, we feel like that's still pretty strong.

So it's like per— that's like the average store, same store location revenue growth?

Yes.

That's really, really good.

Yeah. And then 17% jump in our RPU. Is strong, and that's one of our key metrics. Of course, we want to see that we're revenue leading.

Yeah.

That will then fuel other elements of the, the economics of the business. We had a 15% jump in door growth, not as strong as we wanted. In fact, this year we're targeting 33% growth in door, door count. But some of those things are, are impactful, right? Profitability. We're still kind of gathering some of our measurements on that, but we, we're, I think we're the only in our industry that, that publishes how profitable our franchisees are. And that's, you know, that, that's something that we, we're proud of and just being able to have our, our, our net owner benefit public and available for people to see what sort of opportunity they can get into.

Yeah, I really admire that. You know, I'm a data guy and I'm, I'm, very transparent and as much as I can be, as it makes sense to be. Everything from publishing at the bottom of every newsletter, you can look and see how many people got the last issue and the open rate and the click rate. I don't know anyone else doing that. So that kind of thing's important to me. And I, I really like that you're sharing the specific numbers and the FDD gets updated, even including things that aren't required by law. Like you don't have to include the profit by law, but you can put it in there anyway 'cause you want people to be informed and Yeah, it's also a way of holding yourself accountable. So I think that's really great.

Even things that, gosh, we're not entirely proud of, right? Some, some, some black eyes that we want to publish out there so that we can have some meaningful conversations with people looking to get in the business. Because this is not a bait and switch, you know, sales process that we have. We're really trying to create a partnership, and that partnership has to be built on trust and transparency and clarity and people coming in as eyes wide open as they possibly can get, which there's always things that, you know, they, they didn't realize or they didn't recognize. It's like trying to explain to someone what it's going to be like for them to be a parent. They don't really know, truly know until they become a parent, they start experiencing it. But if we can show some data and show some metrics and show the highs, the lows, the good, the bad, the beautiful, the ugly, then people can make their own decisions.

Yeah. And I want to come back to this, you know, the franchisee experience and some of what you've learned about what makes them successful. But first, I want to— you mentioned something really interesting to me, which is that you've— you don't accept every application. Kind of reminds me of Crane, right? We don't accept everyone who applies to Crane. There's a pretty rigorous application process. You mentioned you could be 3 or 4 times the size if you accepted anyone, you know, who could write you a check. Tell me about some of the harder decisions that you've made there. Like, what are— where are the decision points most painful when it comes to turning away potential franchisees?

You know, I think when people really want it, And, you know, they may even have some of the background that could support that they can do it, but you recognize that their life may have some things that are happening that are just going to prevent them from winning and being successful, whether that's, you know, just even things like in their marriage, you know, and their family situation. You know, we try to stay out of the weeds too much, but it's important for me. And that's one of the reasons that I have, I have a one-to-one for a minimum of 30 minutes to an hour with every candidate that wants to come to Discovery Day. And I'm asking them questions about their background, their life, you know, their sometimes their upbringing, sometimes You know, you know, talking about their, their marriage and their kids. I show them pictures of my kids. We have some time to connect on that because I've got to make sure it's really important that they understand that we are a family-first organization. We're family first, and our culture is built on that principle. And when someone comes in and they just don't care about culture, They don't care about values. They think all that's just huff and puff and, you know, it doesn't matter in terms of growing a business. It absolutely matters to us in terms of growing a strong, aligned franchise system. And so I think some of those conversations, we just recognize that, like, we really adopted Patrick Lencioni's ideal team member attributes. You're familiar with those? Have you read his Ideal Team. I think it's called The Ideal Team Member.

I haven't read that one. I read The Seven Dysfunctions of the Team, which I like a lot, but I haven't read that other book. Yeah.

It's great. And, and so I think it's called The Ideal Team Player and he talks about humble, hungry, smart, hungry. I mean, smart being like emotionally intelligent. And we really focus on those three elements. They gotta be humble so they're not arrogant. They're teachable. They're willing to give. Give the kudos and the recognition to team members and not just take it all for themselves. If they're not teachable, it's gonna be really hard in the franchise system, right? They think that they come, they know everything. And being able to be emotionally intelligent, ask good questions, you know, be able to connect with people. Sometimes we'll get candidates in where it's just like, this is like talking to a robot, or this is— I'm having a really hard time connecting here. And it's just not going to be a good fit. And then our fourth one we added is being aligned and aligned in our vision of where we're going, how we're getting there, what we believe in, what our mission is, and values. And so we kind of use that. There's some subjectives there. Of course, there's financial things that we go through and just making sure that they're qualified on that front. But then we have to put them through kind of the grinder of screening and just making sure that we can actually grow them and develop them into a successful franchise owner.

Got it. So for the folks who come through and are, you know, successfully onboarded, they start and open a location, what are some of the early signs that you've noticed over all these years of, you know, 100-ish locations What are some of the early signs that someone's going to be really successful, you know, within those first 90 days? And what are some of the, some of the signs that it's, ooh, this is going to require some extra effort because this isn't looking good?

You know, we really focus in the early stages of their business on a few KPIs, and they're different KPIs than if they're more established. They're more established, we're really focusing on the 6 Door Diometrics, right? And primarily profit and RPU and, you know, DLER, client acquisition costs, you know, but when they're early on, some of the signs are, are they all in in the business? Are they, are they trying to side hustle this or are they all in? We require that our franchise owners are all in. They're not working a full-time job. So, but sometimes that doesn't translate the same, being all in, burning the ship, so to speak. Yeah, means something different for different people. So that's important. And then they've got to be in the market actively networking. We have a 20/20/20 program that requires that they're putting a minimum of 20 hours a week in business development, creating 20 new meaningful connections and 20 repeat connections. It's hard to do, especially when you're building inventory and growing. But we found that those that are able to do that and hiring the right people to help support them so that they can do that, they're more successful. We also find that folks that really focus on growth through a team and growth through advertising and networking, those are the ones that grow. Those are the ones that don't stall out and they, they continue to build their business through great people. It really is in this business, as you know, Peter Lohmann, like this is a who, not how kind of business first. I believe that there's some folks who would say you got to have the how first, but I think you bring in the people that can help you build and develop the how, and you're going to get there a lot faster. And so we love it when new franchise owners come in and they, they really embrace the idea that they've got to bring in their first— we would call it a first RTM. It's an office coordinator. It's So they can just keep bringing in doors, pass them on to the office coordinator to onboard and handle those functions. If they can't do sales, they gotta bring in a BDM. So if they're stalling out, it's because they're not focusing on building and sales and advertising.

100%. What I imagine, or what I make up, that a franchise like yours provides these folks is a whole stack of SOPs and documents and forms and contracts that have been fine-tuned over many years and battle-tested. And I got two questions for you about that stack of intellectual property. One is, what's the— out of all of those things, what do franchisees get the most mileage from? What's the most useful thing that they get that they reach for all the time and they love? You're getting feedback about. My other question is, what's the diamond in the rough buried in there that no one is using or reading, but you wish they were?

That's a cool question. So last year, I mean, over the course of 10 years, you know, we launched the franchise in 2015 and we have our first franchise owners and they come for training week and training week then looks so much different than it does now. In fact, now they're going to certified training locations and they're spending a week in the business with other franchise operators. But, you know, I sometimes joke around with, you know, some of the early franchise owners and just some of them are my greatest friends, you know, in the world and, and just say, hey, thank you for believing in Keyrenter at the time when we didn't have some of the things that the new franchise owners today get to experience. And it's because of them. It's because of them and their early just belief and success. And we kind of were building the airplane as we were flying it, so to speak, a little bit, just in terms of a franchisor perspective. We thought we had it all dialed in, Peter, before we franchised. And we quickly realized, wow, this isn't translating the exact same way as how we are operating it here. And so what we did is we allowed gratefully, and it's one of the things that our franchise owners appreciate the most, is we allowed some flexibility in how certain things were being done. In fact, there's, there's a book that, that I read early on that is part of the EOS library. It's called The Checklist Manifesto. Have you, have you read that?

I've read it. Yeah, it's great.

Okay. Yeah. And man, when we were franchising, was like Let's have a big manual. We had this manual that went through all the steps and everything in paragraph form, as you think a manual would be. And The Checklist Manifesto just turned all that on its head. And in fact, there was a phrase that I remember that was like, the only people that benefit from a big, you know, handbook are the people that wrote it. They feel really good about it. So we created what we call the Keyrenter method, which is just some checklist kind of most important elements of the process and then allows the franchise owner to then build upon it. And a lot of them have implemented some tools and systems like LeadSimple workflows and, and different things to make that more effective and more efficient. And I'm just sitting there behind the scenes watching them go. And that's one of the most beautiful things as a franchisor is when you're, when your ear is to the ground and you're watching and learning and listening, and you're not just sitting up on your pedestal shouting and talking and telling, but you're able to learn, ask questions, then you can actually iterate and create something even more powerful. So over the course of 10 years of doing that, and even talking with other industry experts and working through a lot of things, even with Profit Coach, we developed what we call now the Model 300. And we actually just launched it last year and then created a print version right here. This is the Model 300.

Oh, nice.

And this goes through, this is the model for growth and success. It's the system, it's the framework for a franchise owner and really any property management company in the SFR niche to grow their business to 300 doors and beyond. And that's really our vision, is having 300 franchise owners that get to 300 doors under management in 2 to 3 territories. And so about 800 to 900 units, properties under management across 300 franchise owners. We don't want to get to 400, 500, 1,000 franchise owners. We want In fact, this is part of our vision. I'm, I'm bleeding some vision stuff into this segment, Peter. Hope you don't mind.

Sure. No, that's okay.

Our vision is to have the wealthiest franchise owners of any franchisor system, and we believe we can get there. The data all supports that we can have a billion-dollar brand across— that's billion dollars of system-wide sales or franchise owner franchise partner revenue across 300 franchisees, that would be enterprise value across all of our franchisees of about $1.5 billion that their businesses are worth. So when we think about that, that's roughly, if you do the math, but 250,000 homes under management, that's where we want to go.

Yeah.

In the next 10 years to get there, there's a lot of work. There's a lot of work to do. And so this, this handbook, this manual, this playbook lays out how to build that. We didn't have that when we started. And so that's, that's gold right there. And I'm so grateful to our franchise owners who put so much time and effort into getting their businesses to a place where we could really watch, learn, observe, and then package it all up for everybody else. So that's one thing. And then I would say, what's something I wish people would use more? Was that your other question, right, Peter?

Like something that you guys know, either you know it would be really helpful if only people would read and implement it, or something that you spent dozens of hours on and you don't think anyone's ever even seen it.

Well, it'd probably be the same answer. Like we have a lot of folks that are just embracing the Model 300 and using that, and that's their north star. You know, they're pointed towards that. And then we have others that are still just stuck in the weeds, their, their heads in the sand, or they're, they're stuck too deep into the, the daily grind. They're just not even paying attention to that. And I would say that's one of the biggest challenges of really any franchise system, not just in property management, but getting stuck in the technician and operator phase to where you're not building and developing a business. It's kind of like the E-Myth Revisited.

Yep.

Where, you know, what's her name, the baker, is just stuck doing everything and not really focused on building the system, building the team, and being able to delegate and elevate, as they say in EOS.

Yeah, I find there's two mindsets that hold people back most into that technician role. One is the sort of perfectionist no one can do it better than me mentality. And I had that, which is like, listen, no one else is going to talk to these owners the right way. They don't know everything about the business. The owner's not going to want to talk to some salesperson. They're only going to want to talk to the business owner. I'm the only one that can prepare a PMA because what if there's a mistake? I'm the only one who knows all the details that need to go on leases, right? It's the only I can do this problem. Of course, we know that that's all solvable with documenting your business and hiring good people and training them well and having a little bit of humility. The other problem I see that holds people here is it's like a Puritan work ethic thing that where they almost feel guilty if they're not in the trenches with everybody. Like, what do you mean take a week off? You know, my people are here working. Why do I deserve to do that? They're working harder than I am. And I know they're having trouble making ends meet with gas prices. That would be so selfish and unbelievably rude of me to go take 2 weeks or a month off or even an afternoon to go see a movie or something, right? This idea that like effort is a moral good, right? And that, I think that mindset, which I also had some of that, is very—

I'm right there with you, Peter.

Yeah, it's a powerful thing. It's part of our culture in some ways. And that's also a challenge for people who are trying to step back. From the day to day?

It's really, really hard. In fact, when you think about glass ceilings or things that are holding back, you know, business owners in general and, and of course our franchise owners, I would say it is leadership. And so we've developed leadership courses. You know, we, we have a library of leadership books that we ask them to read because, man, I've been stuck in that trap so much and Isn't it amazing, for me at least, sometimes I get stuck doing something or behaving a certain way that I thought I got over 10 years ago, but it creeps back up.

You relapse.

Yeah, I relapse. Some people will point it out to me or I'll recognize. I'm like, why am I doing this? Right? You know, one of the things that we talk about is not expecting perfection from the team and not even expecting that they do it to our level of, of excellence, right? But training someone up so that they can do 70%, right? They do it at a 70% quality level. I think it's Daniel Pink that talks about this in Drive or one of his books and getting to 70% and then hiring someone at 70%, training them to 80%.

Yep.

And then praising them to death, just praising them for getting to 80% and not even thinking and focusing on the other 20% of growth they need to have, but just praising them for everything they're doing. Because what happens is what Daniel talks about. They will want to improve the remainder 20. They will work tirelessly to get better, especially when you ask questions like this. You know, Peter, you're doing excellent with this. What other areas do you want to improve in? And they start recognizing— when we hire people that have some self-awareness and they can understand a little bit more of their gaps, and maybe we have to ask questions and lean them in a certain direction, but it's amazing how they get to 100% and even beyond, far better than we would have done it. And so I think the biggest issue, like you're talking about, is just like they're waiting too long because they're expecting perfection. They're expecting people and and they have high turnover in their team because that extra 20%, they're just harping on them instead of praising them for getting to 80%. They're harping on the extra 20% that they're not there yet. Yeah, the people get frustrated and they, they leave.

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The bar was— yeah. Yeah. The movies that we play in our heads sometimes are very powerful and oftentimes are steering us in the wrong directions. And so, you know, just that who, not how concept. It's like, if we need to figure out how to figure something out, or if that doesn't make sense, we need to figure out how to— well, maybe it does— how to figure something out and what, how to get through a challenge or an obstacle or a roadblock. Let's not try to figure it out first and then hire someone to run it. Yeah, let's bring in some smart people that can help us with that challenge, right? And I think even too often in my team and, and our teams in general, like, we kind of sit in our office and work through problems instead of just saying, hey, here's this situation, or here's this challenge, this obstacle, what do you think about it? Or even better, here's the data, what are you seeing with it? And see if they can identify the problems, the challenges, what's getting in the way, and those sort of things. And I think our role is really— in fact, there's a book I read, I'm trying to remember the author, but it was called like Great CEOs Are Lazy, something like that.

It's very on brand for me. I love this.

And I'll look it up and send it to you. But the whole premise is you focus on a few things and, and just get really good at elevating the team and, and asking questions and pushing the team in a direction where they're not only just solving problems, they're identifying the issues, they're solving it, all without you having to be involved.

There's a saying in computer science that great programmers are lazy. That's an old trope, and it has to do with because in programming you wanna, you don't wanna like be writing all this code that's doing the same thing. You wanna find the similarities and write a small piece of code that can like iterate in a loop and do something repeatedly like a function. Whereas if like, you know, you, you're the, it's not, it's not necessarily a good thing to be writing many, many lines of code. You wanna write a smaller amount of code that's more efficient. And I think that translates very well, just like you said, to the title of that book, to being a CEO. Of course, I have another podcast called Lazy Leverage, which is really all around this theme of how can we get more done with less? How do you get maximum output with minimum input? There's no extra points for effort. Kind of getting back to what we were talking about earlier. So really, I really like that.

Well, I think it relates to property management too. Like, can we also write a book eventually that's called Great Property Managers Are Lazy? Because yeah, built systems that just continue to work through these workflows and allows them to spend time, you know, maximizing the relationship and just seeing that we've got strong trust and credibility with our clients and residents. And, and, uh, I think, I think we're making progress in that direction. It's still a little clunky in my, my, in my eye. You probably, you know, you and some of the Crane members have probably mastered that more than a lot of folks, but I think there's a lot of opportunity there still as technology continues to enhance for us to be able to step a little bit further back from the weeds of the process.

Yeah.

And allow things to happen.

That's all about, that's what CRANE's all about is time freedom.

Yeah.

For property management business owners. And we support CRANE members through CRANE breaks, which is 1, 2, and 4-week disconnects from your business where you get to think big thoughts or go on vacation or plan or read. And I, I find that, you know, it was true for me and it's true for a lot of our members that That time is some of the most productive and most impactful time you spend all year in terms of the long-term outcomes for you and your business and your family. So we're, we're huge about Crane Breaks. Everything we do at Crane is oriented around offerings and member benefits and conversations and communities about supporting this time freedom. That's, you know, I'm super passionate about that, of course.

We have some franchise owners that one took like 2 months off, 3 months off, another one took a month or 2, and they come back. And what's amazing, and I know you see this in your business, I think you even wrote about it, and some of your members, they come back and they find that the team was actually really glad they were gone.

100%.

Yes. They were more effective. They were more they problem solved, right? But instead of the operator coming in and solving things and trying to, you know, Superman everything, and, and they come back like, wait, maybe there's even a little sense of loss of like, am I not needed as much in this business as I thought I was? Yeah. Where's the validation for me, you know, and what I'm— and that's the beauty of a business owner, right? The business owner, the bigger and stronger the business gets, and the team and the revenue, they can make more money with less time input, which is very different from a W-2 where generally in corporate America, if you want to make more money, you have to move into higher positions that require more and more time and, and sacrifice and travel and different things. And so that's one of the things that we love about franchising is we're able to create, you know, and build business owners that have never experienced. Some of these, some of these folks in our system, like, I'll get texts saying, Nate, thank you, man. Like, this is hard work and property management is a grind, and especially in the early days, but this is 10 or 100 times better than what I was dealing with at XYZ company in, in these high-paying executive type roles, you know.

That's got to feel great getting those messages. That's what it's all about. I love it.

Yeah. I tell them all the time, if you're going on vacation, you gotta send me a selfie with your family. I want to see that. I want to see some of the fruits of their labor. And, and, uh, one, one gentleman said, Nate, this is because of Keyrenter and you and Aaron. And I'm like, no, dude, this is because of you and the grind. And, and you didn't give up when it got hard. You kept going. You built something that allows you to to travel, you know, 20, 30 weeks out of the year if you want to.

Yeah, that's really cool. I'm really interested in what you said a little while ago about your goal is to, is to have the, the wealthiest franchise owners. You wanted to have maximum success for them and you laid out a really specific vision. I always like specifics when people have that as part of their vision of, I think you said 300 franchise owners who each have 2 to 3 locations with 300 units each. Love the specificity around that. I, I'm, what I'm curious about is like a couple things on this theme. One is when you talk about franchise owners being, you know, profitable, what are you seeing your most profitable franchise owners do differently than your less profitable ones? Because I'm guessing it's not just size. It's not just like the bigger you are. I know that that's not true. It's not just like the bigger you are, the more profitable you are. No.

And I think that's one of the, one of the great misconceptions in our industry is that more doors solves everything and it really doesn't. Right. In fact, if, if your systems aren't in your team and everything isn't at least organized well enough, then more doors is just going to amplify the chaos.

And so, yeah.

It's not just about growing doors, but it, I would say the most successful are really focused on those 6, you know, KPIs in their business, their profitability, their expense allocation ratios of their revenue.

Is this the 6 Do or Die Metrics from Profit Coach that you're talking about? Yes. Okay. We'll try and get a link to that in the show notes. 'Cause that's, they, they've done some really great work around that and beautiful work. Yeah. They, they did a whole webinar series years ago now. They should probably rerun it, run it back. About those 6 DoorDie metrics.

What's cool about that, Peter, is just when we thought we had heard all that we, we could hear about that, Brad Johnson comes out, uh, to our Keyrenter Summit. It was in Orlando late February and spoke for an hour or 90 minutes or something like that about the 6 DoorDie metrics and blew our freaking minds. You know, big shout out to Brad.

He's, he's great.

Not just on like, you know, what they are, because we knew what they, what they were, but how to really— what they really truly mean and how to really maximize those. And sharing some later, you know, more recent industry data and trends and things. I know there's some things that are going to be coming out in the next several weeks on that piece, but I think that those, those metrics and focusing on those truly do lead to success in our industry. And there's, there's just some other things too that we'd add into that mix. And one of those being real true strong leadership. You know, I think leaders, that's the, that's the greatest skill that any business owner can acquire and grow and strengthen. Because we will always be capped at our level of our ability to lead people. And influence people and inspire people. And I'm absolutely a work in progress and nowhere near the finish line. And I feel like every time I get better and stronger in my leadership, I recognize how much further away that finish line is and that it doesn't even really exist.

Mm-hmm.

Right. And I think that our best franchise partners, owners are great leaders. And they've built a great team and they get out of their own way. They get out of the team's way and they focus on those metrics.

Is there like a book or two or three on leadership that you give to new franchise owners or maybe after they get their feet under them?

Absolutely. Yeah. I mean, just off the top of my head, Traction by Gino Wickman, an EOS kind of implementation book. There's The 5 Minute Manager, 5 Minute Manager, 1 Minute Manager. And Turn the Ship Around is a great leadership book by Captain David Marquis, I believe, and a few others I'd have to look up, but happy to look them up and you can add them.

Yeah, no, that's great. I mean, that's— and you mentioned the Patrick Lencioni book earlier. Yeah.

Oh yeah. Five Dysfunctions or Six Dysfun— I think it's Five Dysfunctions.

I think it's Five. Yeah.

You know, some of his books are just awesome. you know, story narratives and fables that are just great for business owners to wrap their head around.

So fantastic. Last sort of tactical operational question about— I'm always interested to talk to guys like you, Nate, because you just have this ability to look at 100 PM business owners and you see some of their accounting and their books and their performance over time and everything. That's a unique perspective that you have. So I always try to take advantage of that. So I wanted to ask about plateaus. So I know a lot of franchisees start, they grow, and then they hit a certain size where I'm guessing you notice, oh wow, like a bunch of our franchisees are stalled out around 80 doors or 120 doors or 300 doors or whatever it is. Like, what is one of the most common plateau points that you see? And then What are the franchisees who blow past it doing differently?

You know, I'd be curious if this is just a very similar answer that you get as you asked this question before, but from my perspective, 75 to 100 doors is a big trap and it is a trap for those that are not willing to hire.

Okay.

They're hiring or they're hiring too late. Oftentimes they wait to hire before, you know, you know, until they have enough revenue and all these, these different things, or they're ready for it, or they've got all their processes dialed in, or everything's perfect like we talked about earlier. And so they'll stall out because they just can't manage on their own anymore. They've tried leveraging some tools. We have had some successful owners that got to like 130, 140 all by themselves because they're using some third-party vendors for things. But most of the time they're hitting that stallout period between 75 and 100 doors, sometimes earlier, especially with the business development constraints that they'll, they'll have. And they're not able to grow because of that. But they, they've gotta be focused on building a team and getting outta the weeds. If they don't, they're gonna stop networking. They're gonna stop having those conversations with investors and real estate brokers and agents and everybody that's really important for their business development side. And I also see similar traps at other levels, you know, 200 to 300, there's some traps. It's kind of an awkward growth phase. They're building the team, but it's not fully complete. We see kind of a complete team, so to speak, with a single pod around 300 doors, 300 occupied doors. And so there's all these awkward phases of growth where you just don't quite have the revenue, but you got to make a decision and sacrifice a little bit to get there. And so those that are willing to do that and take that leap of faith and just jump in, they do very well. But it's, it's, it's hard for people. It's really hard for people to do that. That's what I would say, Peter. How does that relate to kind of some other answers you've gotten on that?

Yeah, I mean, that tracks. I think not hiring, you know, is what you mentioned there around that 75 to 100 doors for sure. I mean, I vividly remember hiring my first employee ever and it was terrifying. The, you know, you look at the expense on your forecast or on your budget. And of course, people are the most expensive part of running a management company by far. It's not even close. So when you're hiring that first person, right, every other expense you've had is like $20 a month, $100 a month. And now you're preparing to add somebody who's going to cost you thousands of dollars a month. You just can't even believe it.

It's—

yeah, it's a big step.

So I think, you know, well, and what, what's going into our new FDD this year is the requirement of hiring as they open their doors. Interesting. We want to get them, you know, the target is 25 new doors. Some of them will come in with some inventory, but new doors outside of acquisition. So organic doors, new doors within 6 months. What we found that's preventing people from doing that is they'll bring on a door or 2 or 3. And then they gotta spend time, you know, managing those and leasing those. So we're now gonna be requiring that they bring in a remote team member, at least a remote team member early on as they open the first 90 days so they can just do business development. And we have a training platform and people that will train that RTM to know how to do office coordination, leasing coordination, and maintenance coordination. So they wear those 3 hats. Early on in the business so that the owner-operator or, you know, BDM franchise owner can bring on doors and hand it over and just keep on bringing on doors so they can get there and grow faster. So there's things that we've had to really learn and look at what are these traps and how can we, you know, and of course we got to increase the investment requirement because of that, right? And setting an expectation that they're going to be funding that position before they even have revenue, right? But that's the bar that we're trying to set, you know, in our brand is setting a high bar for getting to profitability quicker, scaling, you know, faster and more efficiently, more effectively. So love it.

Last question. I want to know what's a, what's a sacred cow in our industry that you just disagree with, or what's some conventional wisdom that You, you take the opposite position.

Can I, can I give you a few and you can pick which one we want to kind of hash out? Maybe lower fees win business. That's one I would say very common in our industry. And I'm adding some color already, but I think it, it's a big problem that we have as an industry is fee. You know, fee discounting is our value proposition. Number 2 is, we already talked about it, more doors solve everything. I think oftentimes we talk about doors and how many doors and all that stuff, and rather, I'd rather have a conversation about, you know, profitability, revenue per unit, like how strong is the business.

Yeah.

Although I still talk about doors. I mean, I talked about it here, like that's an important measuring.

Yeah. The right answer is it's both, right? It's both.

Yeah. And then, Probably something I hear that I just, it just bothers me every time I hear it, Peter. It just feels like we're in this business and it's such a relationship business and we know that it is and we're, we're, we're built on a foundation of, you know, we're managing properties and everything, but we're really managing relationships and expectations and I don't like it when our industry says that. Owners and tenants are the problem. I really don't think that's the case. Yes, there's going to be those owners that are, you know, just not fit for being rental owners, or maybe they should DIY it and everything. But I think that the vast majority of issues with owners and tenants comes down to just poor leadership and management on the property management side of not setting the right expectations, not working hard enough to bring everyone on the same page. And having a written page of what that page is, and then being able to really manage, manage those relationships in a way that keeps everybody on, on the same team working together. It's amazing to me, even within Keyrenter and our franchise owners that have these challenges, it's amazing to me how often the relationship goes off the rails and it didn't have to. It didn't have to. We could have been a little bit more careful and proactive and using like the herd method of conflict resolution and just little things to be able to help keep those relationships strong. Because these bad owners that everyone's talking about, I guarantee you that if some of us that believe the way I believe were to work with those owners, it would have been very different outcomes.

Hmm. That's pretty strong position. I like that. And I think from my experience, I mostly agree. I mean, I started my journey as a systems and process maximalist, and I believe because I have engineering and that's just how my brain is wired. So I thought everything could be solved with a great system and a great process. Now, most property managers underweight on systems and process. So I had a lot of success by doing more systems and process than the average property manager, and it took me a pretty far. But when we hit around the 600, 700 door mark, I ran into the limits of my philosophy and we plateaued in growth. And I've had to dial back that perspective and increase my belief in people and relationships. And in fact, we recently made a change from departmental to like a pod hybrid where now every owner gets assigned to a specific property manager. We created a new position called Property Manager, and we have 3 of them now. And that was a result of a long—

I love that, by the way.

Lot, lot of thinking and reflection on my part. And we're early days, but I think the change has been notably positive for our owners, and I think it's going to take us to the next level of growth as owners' churn is gonna drop, and I believe referrals are gonna go up as well. So I'm really excited about that, and I, I think it's been a fun journey for me to calibrate on how much of this business is systems and process, how much of it is those people and relationships.

Yeah. And there's really a balance there. And, and just validating a little bit what you're, what you're doing, I've seen that work very well. And one of our most successful locations shifted from pure pod to pod hybrid. And now our model is actually built. There's a whole section on team structure, departmental structure.

Love that.

And, and we have two kind of models. And the first level of growth up to 300, 350 is pod, because really it could— you could call it departments as well, but it's one little team. Yeah, right. And then you can either replicate that team and do multiple pods, or you start to break out to have leasing, maintenance, finance departments with the property manager who's over owner relationships. And we've even seen it where you have a resident coordinator, right? And so you have someone managing the owner relationship, someone managing the resident relationship, and then these departments that are doing a lot of the nuts and bolts work, right?

Yeah.

And that just seems to be working to both balance scale with departmental and relationship with portfolio. And I love that marriage of things, and I'm seeing that work very well within Keyrenter.

That's awesome. Well, we— I appreciate your time. We're, we're over an hour, which is amazing. This has been a really fun convo, Nate. Thank you for coming on the show. And for people who want to follow along with your journey and Keyrenter, where would be the best place for them to do that?

Yeah, so you can find Keyrenter at keyrenter.com. You got links to different locations as well as a link to, you know, our franchise process there. So That's the best place.

Awesome. Well, thanks again, Nate.

Peter, it's been fun. Good being with you. Thank you.

See you soon. I hope you have enjoyed this episode. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, PeterLohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.