Speaker 1: And this is a huge issue in franchises that people go.
They sell like great businesses and they're making great money,
like like the I have a custom closet. Franchise does
nine million a year. Wow, No, no one knows this.
They all think the money's in food or fitness. No,
nine million doing custom closets.
Speaker 2: You are listening to Carrie Lutz's Financial Survival Network, where
you get valuable information you just can't find anywhere else
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Speaker 3: And welcome you are listening to and watching the Financial
Survival Network. I'm your host, Carrie Letz. Well, if you're
thinking of a franchise, think, think hard. Things are changing.
You need to be up on the trends. But one thing,
maybe there's a hope make America healthy again. How's that
going to work on the franchise food sector. And well,
we have with us today returning guests and a literal
franchise guru. He's doing what he loves and we're thrilled
to have him it's.
Speaker 4: Cliff, not a mocker. And but we got your name right,
Cliff always, Yes, you did.
Speaker 1: Many free, Thank you, good to see you, too, good
to be back.
Speaker 5: So make America healthy again? Maha. So do I sell.
Speaker 4: McDonald short and buy Chipotle? What do I do here?
Speaker 1: That's a that's a great statement, you know, you know,
it's funny about these things. When you talk about food
and you talk about Maha and you talk about virtue signaling,
what we're seeing is a bunch of people saying, I
want to eat clean, I want to do this, I
want non genetically modify food. And then where do they
go to? The drive through at McDonald's or a quick
service restaurant. I mean, we all have opinions, right, but
you can look at the earnings of McDonald's and it'll
it'll prove that that business is not necessarily slowing down.
While we all say I'm going to eat clean, I'm
not going to eat that shit anymore. I'm going to
do this, I'm going to do that, the reality is,
you know, Carrie, when I'm inside of a asa ebowl
brand or a juicing smoothie, cold pressed, clean, non GMO,
no artificial or anything. So yeah, but I'm usually alone.
I'm usually into one or two other people. Unfortunately, every
time I travel and every time I go into a
healthy eatery, I look around and say to myself, the
world keeps telling me that they want these food categories,
but I'm just not seeing it in terms of, you know,
the revenue, the volume, and the acceptance of that. I
see people going to the cheap quick service restaurant space
and eating that genetically modified garbage is what it really is.
It's fake food.
Speaker 3: Yeah, it's not so cheap anymore, and it's but definitely convenient.
I remember I traveled from New York to Florida, drove
along I ninety five, and I couldn't find any healthy alternatives.
I had to go like fifteen miles off at one
point to find like an organic barbecue place that was delicious.
But you know, when you're driving down the highway trying
to get somewhere, you don't necessarily want to get off
the beaten path. And hey, our president, for all of
his pluses and minuses when it comes to dietary habits,
he's not really the.
Speaker 5: One you want to be emulating, is he.
Speaker 1: I know, did you see like RFK you know, he's
going through his whole inquiry whatever is going on there, right,
And that's right, That's that's right. And it's like, hey,
my boss likes that kind of food. He likes a
fast food cheeseburger with a diet coke, you know. So
he actually brought that up today during all the questioning
from senators and whatnot. So yeah, I mean, look, there's
a there's a place for everyone, and everyone wants to
eat clean. The reality is is an economic structure to
eat and clean. Everyone knows this. There's a camp of
people who go to Whole Foods, and there's a camp
of people who can't afford it at all. Organic eating
clean is a lifestyle and you really can't put a
price tag on it because it is. It's actually an
expensive lifestyle and you just have to say, look, I'm
disciplined and this is what I'm going to eat. There
are brands for everyone. What we're seeing though in the
food space post COVID is that inflation has really taken
a huge bite out of restaurants tour profitability. And I
don't care if your white tablecloth or quick service, it
doesn't matter to me. You're feeling the pain post COVID
of increased labor expenses, increased cost of goods, supply chain disruption.
There are restaurants who actually ran promotions and ran out
of the product, Like you don't want to run out
of a product when you're doing a promo. I mean,
that's it's not a bragging right exactly. I mean you
could say it was so popular, ran out right, but
you're losing money. So there's been a lot of issues
post COVID in the food space. And I also believe
that food is a very expensive endeavor with a very
low return. And I'm talking about what I believe is
single digit net and I have really no interest in
businesses of the single digit net. Yeah, I mean they
killed it.
Speaker 5: They killed it, uh.
Speaker 1: I mean inflation has absolutely killed it. I think if
you look at inflation, if you look at supply chain,
if you look at cost of goods, if you look
at increased their rent, if you look at their increase
in their insurance, everything in that world has gone up exponentially.
And yeah, well that's the issue, and that's why AI.
The only the talk now in our industry is the
future of a QSR will have no seating. There is
no value proposition to seating, there will be no seating.
It will be an inline space or drive through, and
it's grab and go. That's it. Grab and go, order
on the app, come in, grab your food and leave
and eat it elsewhere. And it's going to be all
AI driven. So either app where you ordered it. If
you do walk into the brick and mortar location, you'll
probably end up facing a kiosk and place your own
order and someone will either yell your name or just
your bag will just appear in a window. I'm seeing
it now. Already in Florida and Western Popeyes, inline space
didn't speak to a soul. There were flat screen tea monitors.
You place your own order and leave.
Speaker 4: No, it's around the app, or you order on the app.
Speaker 1: That's right, that's where we're headed.
Speaker 3: You order on the app and they say hello, and
you're like, somebody talking to me. But you know, Starbucks
trying to pull this, or they tried to pull it,
but they misread their place in the community, you know,
because you go into a Starbucks now they're brightly lit, nos,
the's no warmth. They're trying to discourage people from hanging
out there socializing, and I think it's been to their detriment,
not to mention the fact they got this rewards program,
which I call it the customer disloyalty program, because they
keep cutting it back and cutting it back. And I
call it the inflation Cafe because their prices have increased
way beyond the stated rate of inflation and they're failing
at it right.
Speaker 5: Business is going down.
Speaker 3: It's not just inflation, it's lack of warmth and their locations.
Speaker 1: I hear you, and I get all that with not
a fan of the brand. Quite frankly, I don't even
think they really have that great of a product and
they charge a premium for it. They have lipped the
script on what made them successful. And I think a
lot of brands forget where they came from, and they
forget how they became so successful. You know, this is
a brand that I felt like they were America's you know, restroom.
Now they want to charge you know all these things. Well, yeah, yeah,
you had locations on every street corner and people would
come in, pop in, use the restroom, buy a cup
of coffee, tea, or a little snack, and leave. So
I agree with you. The experiential part of business. Brick
and mortar is in question. It really is. And then
look at Dutch Brothers, look at Ziggy's, look at all
these other brands in the coffee space. They're just sitting
in the middle of a parking lot and it's drived
through only zero experience. It's all about rice, right, and
it's all about a good product. And there's nothing with
leather back chairs, there's no Wi Fi like they reversed
all that. So if you look at Scooters, if you
look at Dutch Bros. If you look at Ziggy's, you know,
these brands scattered across the country, totally different business model,
and their unit economics are enviable and the price is right,
and that's what people want right now. People have price
increase fatigue, they really do. They're done with the price increases.
They're just they're voting, as they say, with their feet
and they're voting with their wallet and they're saying absolutely not,
I'm moving on. So the restaurant space is somewhat in trouble,
if you will, white tablecloth, definitely fast casual. Different story.
Speaker 3: So yeah, and then it's this thing called the third place,
which refers to a physical location outside of your home,
which is first place office and still go to one
which is second and it's like a place where people
go to socialize and connect with others. And you know,
after COVID you would think, Wow, everybody wants to do that,
but diminishing. So getting away from food, we talked about
top trends last time you were on.
Speaker 5: What has changed, if anything? They are We talked about.
Speaker 3: Healthcare, pet care, handyman, home services. We're still looking there
is there more entrance into that area.
Speaker 1: We yeah, are top. Just as a quick recap on
the categories that we tend to focus on, You and
I spent some time on AI and Amazon and Amazon
and AI proofing your business. We talked about anything evolving tools.
We refer to it as a category. The feminization of
men in America right where sperm count has dropped, testosterone
levels have dropped, that a lot of these people, young
people can't have babies, many have ed because of these issues.
It's a war on men. And we talk about why food.
I think food has a lot to do with why
there's a war on men and elly boys. Yeah, and
that's actually what you said. Yeah, and it's like, okay,
how did we get here? Franchises are now backfilling and saying, hey,
we have solutions to some of these societal problems. We
have testosteronotherapy. Most men can't use tools any longer. The
tool category or the service industry is a massive market
to be in. I argue that if anyone got involved
in HVAC, plumbing, electrical, anything evolving the home structure, you're
going to win. That's just my attitude. We have shit
on the trades far too long, and there's now a
huge gap missing with people who can. Actually there's no
craftsmen anymore. I mean, please that those days are over
and we need to get back to that where we
start to embrace the trades, encourage our kids that don't
want to go to college, go to a trade, go
to a vocational school, become a welder, be you know,
fix the infrastructure, all these things that think are huge.
Next is, as I said, pats and animals, huge category,
one hundred plus billion dollar market cap, whether you're training dogs,
grooming dogs, boarding them, daycare, retail, ton of money to
be made in that. We talked about the graying aging
of America and people could capitalize off of this massive
baby boomer population that is turning seventy to eighty every
single day in the thousands in this country, whether it
be mobility, or whether it be just transportation, or whether
it be assistant living through residential real estate. We didn't
speak much about another huge trend, which is child enrichment.
Anything involving services removed from public schools. The public schools
have failed miserably, and I think that art is missing,
and the stems are the science technology engineering at math,
and I think music is missing. And again, franchises are
backfilling and providing these services inside the public school. It's
not like you're creating a brand, you're down the street.
These services operate inside the public school system. The reason
that the schools are killing it but yet embracing it
from a third party is there's no tenure, there's no pension,
there's no medical benefits, there's no HR none of that.
So they're like, Okay, you want to operate a franchise
in the school for music and art, no problem, but
we are not going to provide it through you know,
through the city or through the local municipality. So I
also see a huge move. You know, I've been in
the gym business for years. Of my business partner, Justin
and we've all often said what the client really wants
is just a pill. Nobody really wants to be there.
They just want to pill. They want to lose weight,
be done with it. Well, that that time has come,
with semi glue tides, we're starting to see money moving
away from traditional When I say traditional gyms, I'm talking
about treadmills, strength training equipment, just what we call me
too products. Every gym has that. It's like me too,
Hey does your gym have treadmills? Me too, Like we
all have millsen strength training equipment. Those gyms, in my opinion,
are are going to grossly underperform in an era of
all these scientific achievements with weight loss like ozepic, wagovi right,
the semiglue tides that GLP disruptors, people are losing weight
for doing nothing, like literally doing nothing. So we also
live in a time where we have a tea and
osprey and you have Huberman teaching people how anti aging, biohacking, right,
your sicania rhythm, just all these different things that people
can do to get centered, to get balanced, to increase
their tests that we just talked about testosterone to increase it,
you know, natural lights so there's so much going on
in the biohacking space, and I think it would become
even more popular in this administration if RFK gets you know,
gets the top job.
Speaker 3: You know, my prediction is if he doesn' get it,
someone else will get it, who they hate worse, who
will actually have more impact because they'll be a scientist.
But hey, what about if we come up with a
franchise here, Cliff, where we call it a remasculization, where
we teach guys how to change tires, how to change
the oil on their car, how to do you know,
minor household repairs like changing a lamp or putting in
a switch, or you know, changing light bulbs.
Speaker 1: Isn't it scary like we've gone so backwards with these topics.
When you and I were growing up and went through school,
I was in welding wood shop, I was in home economics.
I made breakfast, I learned how to break an egg,
I learned how to sew, I made pillows. I mean,
we did all this stuff that just killed all of it,
anything that made a student a productive human being and
a good member of society. They eliminated all those things.
It's really frightening. So what you're talking about is like
getting back to the basics. Listen, we just needed an
executive order to restate that there are only two genders.
So when you're talking this kind of nonsense, we're going back.
Speaker 3: Wait wait, there's only two. I thought that Biden said
they were at least two.
Speaker 1: Yeah. Yeah, I mean, come on, we're going We're going
in the wrong direction. We've got to get back to again.
Common sense isn't so common. You've got to get back
to the basics. And again, we have these cooking classes,
the cooking academies for the kids to give them life skills.
So I agree with everything you just said. There needs
to be first of all, we have to acknowledge the
fact that our kids are not prepared for life. All right.
So once we get there, then the parents can start
to say, all right, I need I need to help
this child. I need to give them the skill sets
to be able to go to college, I live on
their own and do laundry. I'm amazed at the stories
and my goals, my friends, my family of how ill
prepared the generation is to deal with life.
Speaker 5: Yeah, well that's a whole nother story.
Speaker 3: And I was guilty not showing my kids, my son
in particular, how to do this stuff. I mean, you
come into my house and I've got like, you know,
closets that's like loaded with tools, and you know, there
are things that I can't do or that I won't do,
like I'm not going to do plumbing, although I did
change a flapper on my toilet and that was a disaster,
but eventually I got it. Now, I say, when I
can actually change a toilet, then I'll know that my
handyman skills are there.
Speaker 1: Right, I feel blessed. I happen to be extremely handy woodworking.
I've done some electrical, I've done a little bit of everything.
I actually enjoy and I find it therapeutic and rewarding
to not have to call anyone, you know, to do
the work. So I think it's great. And again, franchising
provides a place for everyone. There is an asset class
for everyone, and you know, listeners should say, hey, whether
you put in your child or grandchild or yourself in business,
we provide all these different services.
Speaker 5: So let's put on your hat.
Speaker 3: If you were looking to buy a franchise now and
you can get as specific as you want.
Speaker 5: What area would it be in?
Speaker 4: Is there a particular company and how much would you
put into it?
Speaker 1: Interesting? Great question?
Speaker 5: All right, So.
Speaker 1: I view myself as a very disciplined investor, and what
I look for are asymmetrical investments, meaning I look for
a really low investment. Really low. To me, enfranchising is
sub two hundred thousand. So if I could find a
business that is under two hundred thousand, again, we're back
to that asymmetrical comment. I want a very short ramp
to break even. Short ramp for me is three to
six months maximum maximum three to six months to break even.
And when I say break even, I don't mean getting
my two hundred grand back. I mean stop the bleeding
of my current burn rate to own the business.
Speaker 5: Right.
Speaker 1: Everyone always views break even as ROI versus breaking even
on your burn rate nextll, So you're that's right, that's right.
The business needs to cash flow enough money to cover
my current burn rate of the business. If I'm spending
five thousand dollars a month to keep this business operating,
it needs to be making five thousand of me to
break even. My ROI is my two hundred grand. I'll
deal with that under a separate KPI, a different, whole,
different metric. Next, I want as few employees as possible.
Love people, but employees are a problem, and they're one
of the thousinesses their liability. We have a lazy workforce,
have a culture now that just doesn't really want to hustle,
and we have the kind of a I would say,
the worst labor market in the history of the country
at the current moment. So I like businesses that don't
require a lot of employees, and if they do that,
it needs to be unskilled labor that I could quickly replace
and train and put into the field and do their thing.
Next is I do not like inventory. I don't like
my money sitting on shelves. I do not like account receivables.
I want cash paid to demand on service. I do
like either contractual recurrence or built in recurrence. Meeting a
gym is a contractual recurring fee. Hey sign here, La Fitness,
pay me thirty dollars a month for as long as
you're here. Great, it's a contract. I pay you monthly.
Hair nails, makeup, write other things. It's a built in
recurring revenue stream. Right, hair grows, it gets cut, grows again,
it gets cut. There's things like lawn tree. The things
like that are built in recurring revenue models. So I
do like recurring revenue, whether it's contractual or if it's
just built in inherently to the business model. I like
highly scalable, and everyone loves to say highly scalable, like
six hundred thousand dollars. Franchises are not highly scalable. You
need six hundred grand every time you scale the business.
That isn't highly scalable, especially if it needs thirty employees
as well. That's not highly scalable.
Speaker 5: We got to go into debt every time you that's.
Speaker 1: Right, expensive debt. So I like highly scalable business, and
I put emphasis on highly scalable, meaning I could just
maybe buy another van. I could buy a vehicle. I
could hire a tech I could hire maybe two employees
in a vehicle. That's my definition of scaling the business.
Keep the marketing machine on, hire two employees, get another vehicle,
and send them out to perform a sell a product,
or provide a service. So I do and I have
no interest. This is important. I have no interest in
businesses with single digit razor. Then march none. If I
can't net fifteen to twenty plus percent to the bottom line,
I'm out. So when I talk about waiting, if you said, okay,
that was a lot, I need you to wait them,
the margin is going to be heavily weighted above everything.
If you said, if you checked every box right now
and said, oh I've got everything you just said with
an eight percent net, I'm probably out. I just don't
see myself doing it. I mean, it's it's just there
is no room for error in eight percent. And that's
and that circling back, and that is where the food
industry finds themselves. They find themselves spending a million dollars
to get a food concept open with a five to
eight percent net. It's just not worth it to me.
Speaker 5: Yeah, and you want to avoid rent right.
Speaker 1: In this example, yeah, under two If that's thank you
for saying that, Carrie, Because when you're sub two hundred grand,
you're absolutely not brick and mortar franchising. You're not paying rent,
You're not in class a space next to whole food
or next to a large grocery chain. You're not in
a strip mall. You're operating out of a office, which
is cheap because nobody works in a storage unit, bengo
or mixed multi use industrial park exactly, a flex space exactly.
Speaker 3: Yeah, yeah, cheapest rent. You don't want location the centric business.
So what does that leave us with here?
Speaker 1: It leaves us with a ton of business is the
problem with most of the audience. They go, Oh, I
was always told it takes money to make money. That's
just not necessarily true. Non brick and mortar brand sub
two hundred grand can change your life, and you can
scale them into the millions, so you don't have to
spend a half a million dollars to make a living.
You could spend under two hundred thousand and make an
enviable living and one that you've never had before, you know.
Speaker 3: So one I always thought about and I haven't really
thought of doing it. But you know, you got all
these airbnbs here, and you know, generally the owner, especially
if they're remote, cannot manage it effectively. The biggest, the
biggest problem, and I know a bunch of Airbnb people,
the biggest problem that they encounter is actually cleaning, getting
high equality cleaning service like you would get at a
top notch hotel, and.
Speaker 5: One little specadert will ruin your rating as an Airbnb host.
Speaker 1: So true, it's the truth. It's a tough space residential cleaning.
No one's ever happy. The client is always in play.
They're never happy, Like, there's always movement in that space.
And it's like you go to a bank. You go
to a bank, all the bank like's just say old
banks sock right, Like they're all basically the same. These
large banks they do all their crazy things. Once you
start setting up all your bill pay they have created
very sticky relationships. Are you happy at your local bank? No,
I know you're not happy because you're getting paid nothing.
There's really no value proposition at a local bank. They
really never know what they're doing behind the counter. They
can't get you what you need. A lot of times
I walk into a local bank, it's just fifteen offices empty. Yeah, Like,
I don't even know what they're there for. I guess
it's the vault and the tellers.
Speaker 5: They don't do cash anymore, right, what do they gass?
Speaker 3: You go to the ATM and yeah, I don't quite
get the whole concept of banking.
Speaker 5: It's exactly dated.
Speaker 1: But nobody leaves. But no one leaves them where In
residential cleaning, there is no sticky relationship. There's no client retention. Strategy.
The client is never happy. There's always dust in the corner.
They never wipe something down, they always break something. They
always come late or don't show up at all. That customer,
to your point, is always moving. They're always ready to
be acquired by the new cleaning company. That is a
very My business partner and I owned a high end
residential cleaning company and Palm Beach. We were classified as
master franchise oors for this brand and it was probably
the worst business that we ever invested in, and could
not wait to get that people.
Speaker 5: It's all people. You don't have.
Speaker 3: It was measure and you leave one speck of dust
and you got a picky customer and you're dead man walking.
Speaker 5: You're done. They're finished with you. I know myself.
Speaker 3: You know I had the same cleaning person for years already.
But you know so many times I said, man, the
only good thing I could say about her is she
doesn't steal that.
Speaker 1: You know, for everyone listening is saying, wow, I really
like that space. I would challenge you with this thought,
if you really wanted to do residential cleaning that has
a very challenging retention rate and an unreasonable homeowner as
your customer consider commercial cleaning. You could scale commercial cleaning
way faster. Name one time, Carrie, you were upset at
your corporate office because the cleaning company didn't do No
one seems to care in the commercial environment.
Speaker 3: Really, offices are filthy as a rule. I mean, if
you tried to clean an office the way you'd clean
your house, like moving stuff around and vacuuming under there, you'd.
Speaker 5: Be totally disgusted, you know.
Speaker 3: But you know, as long as it appears to be
clean on the it's just surface cleaning. So all right,
So what's your top pick after all that criteria tell us?
Speaker 1: Yeah, well, I mean my top pick in that category,
which I just said, if you said right now you
got to pick an industry, it would be home services.
I think home services has a ten twenty year runway
before it's disrupted by optimists and you know what I'm
talking about the AI bots at Tesla, and I think
you have ten twenty year runway before home services, which
means feet on the street, you know, fixing your HVC system,
fixing something whether it's a roof or whether it's striywall repair,
whether it's plumbing or flooring. I think that the home
services category is huge. I think it's also important to
mention to the audience that no one expects you to
do the work. And this is a huge issue in
franchises that people go they sound like great businesses and
they're making great money, like the I have a custom
closet franchise does nine million a year. Wow, No one
knows this. They all think the money's in food or fitness. No,
nine million doing custom closets, right, So that people go, man,
it sounds sounds like a great Probably that's probably going
to be like ten. I'd say it's going to be
by ten. So it's very labor intensive.
Speaker 5: You have a.
Speaker 1: Massive you're doing custom woodworking in a large warehouse facility,
a lot of it's prefab a lot of it could
be ordered through third party, and you still have your
installation crew to come into your home, which you know,
once you enter someone's home, right, the hair in the
back of their neck stands up and it's like watch that.
Take your shoes off, do this rust the rugs don't
scratch the walls, So you have all that to deal with.
But again, nine million a year as an average, not
the top twenty five percent your average, So it's really
an incredible revenue number. I do. I love home services
for those reasons. And it's not just me. Private equity
firms are gobbling up all home services brands that they
could get their hands on because they see what's happening
not only in society, but they see what's happening with
AI and the disruption it will bring to white collar jobs. Like,
what do you want to invest in a graphic design company?
You're dead. You just don't know it yet. AI is gee.
I think I may have shown to me you. I
don't know if it did. We're working with Forbes right
now in a book called Beyond the Brand, and of
course this is Forbes. They have teams of people doing
artwork and graphic design, all this stuff. So they produce
some artwork for the cover of our book and we
were like okay. It was just okay, we want to
chatch EPD paid a premium for their service. We told
them we're in the franchise industry. We're writing a book.
This is the title, Unbelievable Unbelievable Results. So it's like
we're going with our We're going with our you know whatever.
One hundred and fifty dollars a month subscription with an
AI model versus hiring a quarter million dollar firm Forbes
to do this stuff. Listen, if you're writing code, if
you're a wordsmith, if you're doing copyright work, and man
like you're I think you're out of business. You just
don't know it yet. It's time to reinvent yourself.
Speaker 5: Yeah, so the AI is really going to have an impact.
You know. When we have you on next time.
Speaker 3: Cliff, we're going to talk about AI more and how
you AI proof or how you benefit from AI in
your franchise.
Speaker 5: Just tell us where we find you. How do we
connect with you on the web.
Speaker 1: Thank you phrenocity dot com, f r A no ci
t y dot com. They can reach me direct at
Cliff n at brnosity dot com.
Speaker 3: All right, links in the show notes this interview on
Financial Survival Network dot com. We just asked when you
go there, you please sign up for your free newsletter
always like share, subscribe and all that good stuff. And
maybe this will be the year with the new administration
that we're no longer throttled or censored on a certain
platform that everybody watches. We can only cross our fingers
and hope. Cliff, we'll talk to you again soon. Any question, thanks, comments,
question for Cliff myself kl at Carrie LUTs dot com.
Speaker 5: Cliff, we'll talk to you again soon.
Speaker 2: All right, Well, thanks Kerrey, thanks for listening to Carrie
Letz's Financial Survival Network, your solution to today's trying times.
For the latest, go to Financial Survivalnetwork dot com. Financial
Survival Network
Speaker 4: Now more than ever,