Jon Ostenson is a Consultant, Owner/Investor, and Author specializing in Non-Food Franchising. He draws on his experience as a former Inc. 500 Franchise President and Multi-Brand Franchisee in serving his clients.
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FranBridge Consulting – Visit and learn more about opportunities in franchising.
Jon’s Email – Connect with Jon via email!
3 Value Bombs
1) Activity breeds activity. Get in the game, and when you do, doors will open.
2) Franchising isn’t for everyone, but anyone can consider it.
3) Franchising is definitely worth considering, and there are unprecedented levels of growth and interest currently. Franchising offers a better path to business ownership for many.
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**Click the time stamp to jump directly to that point in the episode.
Today’s Audio MASTERCLASS: Why Non-Food Franchise Opportunities Are Resonating With So Many Entrepreneurs Today with Jon Ostenson
[1:12] – Jon shares something that he believes about becoming successful that most people disagree with.
- He believes that activity breeds activity. Get in the game, and when you do, doors will open.
[2:15] – Who is buying these non-food franchises, and why are they doing it?
- Candidates are from different generations, full-time and part-time operators, and all different age brackets.
- The pandemic caused many people to realize that they want more control in their life, and now is time to be an entrepreneur.
- People nowadays are looking for more opportunities.
[3:47] -What are the pros and cons of franchising versus starting a company from scratch?
- People tend to be too entrepreneurial, and if you’re not open to following a franchise’s system and framework, then it’s not going to work.
- You will have a proven playbook.
- Sales, marketing, operations, and coaching.
- You can exchange best practices with other franchise owners.
- You can check and see the numbers easily.
- You will have a proven playbook.
[6:30] – What sectors are there, and which are resonating the most?
- Business Quadrant:
- Simple Retail
- Complex Retail
- B-to-C Services
- B-to-B Services
- Many interests are observed in aging, education, technology, health, wellness and fitness, property services, professional services, and automotive.
- Non-sexy is the new sexy – non-sexy but essential.
- Pool cleaning
[9:01] – A timeout to thank our sponsors, Wordtune and BrandCrowd!
[11:55] – Jon talks about the essentials of financials: Cost, Revenue Potential, etc.
- Franchising isn’t for everyone, but anyone can consider franchising and see if it fits them.
- Types of Funding:
- Small Business Loan
- Portfolio Loan
- 20%-50% margins
[16:05] – How has Jon helped his clients select the right franchise for their situations?
- He used to be a corporate refugee. He had an opportunity to go to a smaller private company, and they opened him up to a non-food franchisee’s life.
- Jon is with his clients the entire way – he helps them figure out the funding and getting the right resources.
- He loves what he is doing – playing the match-maker.
[20:17] – Jon’s parting piece of guidance.
- Franchising is definitely worth considering, and there are unprecedented levels of growth and interest currently. Franchising offers a better path to business ownership for many.
- FranBridge Consulting – Visit and learn more about the opportunities in franchising.
- Jon’s Email – Connect with Jon via email!
Boom, shake the room Fire Nation. JLD here and welcome to Entrepreneurs On Fire brought to you by the HubSpot Podcast Network with great shows like the shakeup. Today, we'll be focusing on why non-food franchise opportunities are resonating with so many entrepreneurs and to drop these value bombs. I have brought Jon Ostenson into EOFire studios. Jon is a consultant owner, investor and author specializing in non-food franchising. He draws on his experience as a former Inc 500 franchise presidents and multibrand franchisee and serving his clients. And today we'll be talking about why franchising is on fire, the pros and cons, because of course there are, we'll also be talking about the financial side of franchising and so much more.
When we get back from thanking our sponsors,
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2 (1m 23s):
Nation excited to be here, you know, becoming successful. So oftentimes I find that people feel like you have to have all the facts when you're analyzing a big decision option, a versus option B. And what I found in my life and in the lives of others, if you start moving towards one or the other very tight, oftentimes out of left field comes option C. And so really activity breeds activity. That's a motto that I live by get off the sideline, get in the game. And then when you do doors open and fire
0 (1m 53s):
Nation, by the way, you're not the type of person that's not in the game. If you're listening to this podcast because you're consuming the right content from the right people, you're being inspired by greatness, take action and never stop. Now, Jon, I do want to talk about what we're focusing on today, which is non-food franchise opportunities. And I want to call a spade, a spade. I mean, franchising right now is simply on fire. And we're talking especially the non-food side of things. So who is buying these non-food franchises and why are they doing it year to date? I've done deals with millennials, with generation X, with baby boomers. I mean, we're placing candidates across the board with great opportunities.
0 (2m 35s):
And really we see owner operators coming from the corporate world, those in their twenties, through their forties, I think COVID has caused a lot of people to question the path they're on and realize maybe they want a little more control in their life. And, and maybe now's the time to scratch that entrepreneurial itch. So we see a lot of people going full-time we also see a lot of what we call semi-absentee. Those who want to keep their jobs, maybe put in 10 to 20 hours a week, a little side hustle. You know, of course it always takes a little more effort than you think going in, but there are opportunities where you can get in on the side. And so have quite a few clients doing that.
2 (3m 9s):
I think part of that is you've got so much cash built up on the sidelines. Stock markets run up. Interest rates are low, only so many good real estate deals to be had. People are looking around saying, what is that opportunity that I may be missing out on Fire Nation
0 (3m 23s):
Opportunity bounds us. It is everywhere we look, but the reality is not all opportunity is the right opportunity to you, which is why you've got to listen to and consume the right content from the right people. Like I love to say Mike, perfect mentor is always somebody who is currently where I want to be in life. And I look for those individuals to bring me there. Now, Jon, again, I like being truthful and transparent and open and honest with my listeners. And I liked to talk about the pros and the cons because there's pros and cons to everything in life. So share the pros, share the cons of franchising just versus starting a company, say from scratch, starting
2 (3m 59s):
With the cons. The biggest one I see oftentimes is people may be too entrepreneurial. You want to have your thumb prints all over your idea, and you're not willing to follow the system and the framework of a franchise and live within the guard rails, if you will. However, and I, and I tell my clients that from time to time, you are too entrepreneurial at the same time, I see a lot of people that recognize what franchising does bring to the table. And that's really an ability to start out on third base instead of first base. And, you know, it goes, it goes beyond the brand, as far as the benefits go. I mean, in a lot of cases, I worked with emerging brands where there may or may not be an awareness in that local market. However, when you look at franchising, really what the benefits are, you know, you've got a proven playbook in areas such as sales and marketing and operations.
2 (4m 42s):
You've got a coach on the sidelines in that franchise, or you're not in this alone, you know, you're in business for yourself, but not by yourself and really in alignment with other franchise owners across the country, you know, you're exchanging best practices, you're testing different marketing vehicles, sharing that knowledge with each other. The better that you do, the more valuable there a franchise is, is valued in their market. And while it's not entirely de-risked going the franchising route, certainly it does. De-risk it to some degree, partly because you have visibility going in, you're not just putting together performance on the back of a napkin. Instead you have, what's called the item 19 within the FDD, which shows here's how all the other franchise owners in the system are performing here.
2 (5m 27s):
Here are the top ones. Here are the lower ones. You're able to understand the numbers. And you're able to have conversations through what we call validation, leading up to making that franchise purchase. You're able to actually talk to them, ask about their experience. They can open up their books to whatever degree they're willing. And so you really go in eyes wide open. And finally, fifth, I would say, you know, benefit would be that exit value. The Rinker school of business recently did a study of over 2000 businesses. Looking at those that are franchise versus those non-franchise on of an apples to apples comparison, looking at industries and sectors and what they found over 10 years. Those 2000 companies, franchise businesses actually traded at a one and a half multiple of the non-franchise counterparts.
2 (6m 10s):
So, you know, there definitely is a tangible value that others see as far as resale value as well. Again, nation
0 (6m 16s):
Hope. You can see why we bring the top experts in every industry to talk the talk, because these are people who are currently where you want to be, if this is an area that you're of interest in. And so let's talk about the sectors outside of food, of course, that are especially in specifically on fire right now. Like what are you seeing that is just absolutely crushing it, Jon,
2 (6m 42s):
Very high level. I think of these businesses really in a quadrant, you've got your simple retail, your complex retail, your B to C services and your B2B services, and some concepts kind of straddle between two or more sectors. However, you know, we're seeing a lot of interest in, you know, areas that have a lot of macro trends going for them. You know, you've got the aging population, so, you know, the S anything senior related, you've got a huge amount of attention being given to children and education, especially coming out of COVID stats, a hot area, anything where technology has a large component of the business, you know, health and wellness and fitness property services has been really hot over the past year. It's deemed an essential service in a lot of cases.
2 (7m 22s):
And then you've got professional services, automotive, you know, really over the past year, if I could characterize the trends that we're seeing sexy is non-sexy is the new sexy, you know, people are loving the businesses like dumpsters or driveways or pool cleaning, or, you know, I think if like an oil change concept, I've got a lot of clients looking at right now where they use prefabricated buildings and they use unused parking spaces in a landlord's shopping center. Well, they love that additional revenue stream that the landlord does. It's just a great setup. And, and so it's kind of those one-off concepts, you know, car washes, people are eating that stuff up right now, versus some of your more traditional like food concepts that that would people would think of when you think of franchising.
2 (8m 5s):
We do see fitness coming back, obviously that did take a hit during the, the COVID era, you know, but I see other concepts, like I've got a couple of clients. I did a deal recently in New Jersey for the entire state of a brand that does Ivy drips, that boost immunity at the cellular level. You know, they, they fright fight free radicals and reduce heavy metals in the blood. So, you know, th there's some neat businesses out there that would not be on your radar. In fact, I'd say probably over 80% of my clients end up going with a brand and a concept and even an industry that they never would have thought of and certainly was not on their radar. Wow. And
0 (8m 41s):
I love that phrase, Fire Nation non-sexy is the new sexy, I mean, think driveways, think pool cleaning, think non-sexy, but think essential. These are essential services. These are services are going to be needed and will be around for the future for all the obvious reasons. So I do love that non-sexy is the new, sexy and Fire Nation. We're going to really dive into the financials. We're going to talk about selecting the right franchise for your specific situation. When we get back from thanking our
1 (9m 13s):
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0 (11m 22s):
So Jon we're back and I really want to do a deep dive now into the financials of franchising. I mean, I think a lot of people don't really understand why franchising makes so much sense for somebody that's thinking about potentially doing a startup versus just jumping right into franchising. I mean, there's a lot that goes into it. Break down these essentials of financials, not start
2 (11m 44s):
By saying, you know, again, franchising isn't right for everyone. But I do think anyone that's considering business ownership or businesses as an investment should least consider franchising and looking into it to see if it's a fit on the financial side. You know, I love talking about this area, because again, you have visibility going in, nothing is a sure thing, but you do have what's it called the item seven within the FDD or franchise disclosure document, which every franchise system has because they're regulated by the FTC. And so they're required to, but in that item seven, the franchise, or gives the range, the investment range. And it's usually a pretty wide range because, you know, things can change by market, but ultimately it includes your franchise fee.
2 (12m 26s):
It includes any build-out costs that you may have. If it's a brick and mortar concept marketing out of the gate, you know, your legal and setup costs, you know, all those little pieces, maybe your systems and technology. It also includes typically working capital for three to six months. They build that into that range. And so when you look at that, I'm seven number, which is what I quote off of. I mean, there are a lot of opportunities out there where it might be a single territory. Let's say it's not brick and mortar for as low as a hundred thousand dollars all in. And then certainly you range up to 500 plus 500,000. Most of the deals that I do, I'd say average, you know, between the one 50 and two 50 range. And that might be for two or three locations where you start out opening up one day one, and then you open up the second one, you have that protected territory, but you open it up maybe 12 months later.
2 (13m 13s):
And the next 1, 24 months later. So very common. It's what we call a multipack and franchising common for people to buy in that way. But, you know, from a funding standpoint, so someone may say, well, gosh, even if it's on the low end, let's call it one 50. How do I fund that? If I don't have the cash sitting on the sidelines? Well, there's multiple ways. Obviously the SBA loves promoting small businesses. So, you know, we work with some great partners on the SBA loan side. There's, what's called the Rob's program, where if you have retirement funds sitting in your 401k or IRA, there's a way to roll those over where you don't have the tax impact. We've got some great partners that set clients up with that. And then there's one that I'm really excited about to portfolio loans.
2 (13m 53s):
So for those that have maybe 150,000 in non-retirement accounts, they're able to tap into their portfolio and not have to liquidate anything, but they can use that as collateral and take a portfolio loan, which acts as a line of credit for as low as three and a half, 4% interest. And so it really is a great vehicle that a lot of my clients are latching on to. So that's on the cost side, on the fund side, the investor on the investment side of what potential is. I see EBITDA margins oftentimes in the 20 to 50% range. And it really raises people's eyebrows when they recognize what can be made, maybe not in year one, but once you're fully developed, let's say year two, year three, you can really get some attracting operating margins on the bottom line.
2 (14m 36s):
In addition to that cashflow, because a lot of people think, oh, I'm just buying a job. No, you're also building an asset that will have exit value down the road. In most cases, typically for multiple times what you paid for it out of the gate. So you're building an asset along the way. And then obviously as most of your audience knows if you're a business owner, it is different than being, let's say in the corporate world W2 employee. And that you can also write off expenses along the way. So you really have to take all three of those considerations. And when you're analyzing salary versus a business owner, wow. Fire Nation,
0 (15m 7s):
That was a basic masters level class on the financials of franchising. And of course, Jon is a specialist when it comes to this stuff. So you are learning from the best in Jon. I want to really focus right now on how you help specific clients choose the right franchise for their situation. You have a very dialed in process. You've been doing this for a long time. You have a lot of success stories, which actually by the way, I think it would be pretty cool to move into next would be maybe share one of those success franchise stories. You don't have to say this specific franchise or name, if you want to keep that quiet or private, that's totally cool. But talk to us about how you specifically help those clients, your clients select the right franchise for their situation.
0 (15m 54s):
2 (15m 54s):
And I'll start by saying, I've been in the shoes of many of your listeners. I'm a listener myself. And, you know, I'm a former corporate refugee, you know, had a great run in the corporate world where I spent most of my career. But then I had the opportunity to go to a smaller private company, step in service, president of shelf, genie, and as a national franchise system. And that's really what opened up my eyes to, to the life of a franchisee, really outside of food, you know, this was custom plus shelving for kitchen kitchens and pantries. And I got to support franchise owners on a day-to-day basis. See what works, see what didn't and long story short ended up partnering with the founder of shelf genie. And we are now multibrand franchisees ourselves and we've got some good people to run those forests.
2 (16m 36s):
So we're not involved on the day to day aspects of the business, which allows me to have my consulting practice, but, you know, so I bring that perspective of the former franchise or now multi-brand franchisee. So I've been in those shoes. I'm also that corporate refugee. So love trading stories, you know, with clients. But our process is really streamlined because if you go out there and start doing some Googling today, you're going to be overwhelmed. There's over 4,000 franchise brands in the U S you know, for us, we have vetted those down to roughly 300. These are brands that, you know, they're at different stages of growth. Some may have 500 locations, some may have five, but they have some key components. The leadership team, the profit model, they've got a unique niche.
2 (17m 20s):
We're proud, proud to represent them, put them in front of our clients. And with these brands, the way I work with clients first off, it's an entirely free process. I get paid by the franchise or is on the backend. None of that gets passed on through the Fran. The franchise fee is a franchise fee. So it's really a sales and marketing expense for the franchise or so entirely free for my clients. But we go through a process where I, I hop on call, you know, we'll do a brief introductory call. And then after that, I'll have them fill out a questionnaire and really dig into understanding, you know, what they want, how much time do they have to put into the business? What do they want that day-to-day to look like? Do they like large teams or small teams? Are they adverse to any specific industries?
2 (18m 1s):
You know, where are they coming from? How could we utilize some of those skills? They built up over the years and ultimately of course, you know, what can they invest? You know, what's their financial setup today. We talked through that and ultimately I bring them five to six opportunities that are available in their local market. That kind of check the boxes of the criteria that we discussed for their review. We get on a zoom call. We look at the websites, we talked through the backend of the businesses together. And then we try to narrow those down to two or three to really dig in and get off the sidelines, get in the game with let's start having the conversations. And it gives you some points of comparison. As you talk to these franchise stores, they take you through a very streamlined process on their end to presenting the brand and the FDD and letting you talk to other franchise owners, ultimately culminating what's called a discovery day, but you know, all through that process, I'm holding my client's hand, helping them figure out the funding side and the right resources, getting them plugged into the franchise attorney at the right point, and really serving as a sounding board me and holding their hand through it.
2 (18m 59s):
So I love what I do. I love playing matchmaker. I could cite so many success stories if I were to pick just a couple, you know, I, I've had a few where, you know, I'm 41 years old, you know, there I've had quite a few clients kind of at that same stage of life that, you know, we're wealth managers and they jumped into, let's say the dumpster business, something just totally out there. And in some cases, they even moved their family. In most cases, they stayed where they were and utilize that local network got plugged into the chamber of commerce, sponsored a little league baseball team. You know, they love kind of exercising these muscles. They never got to when they were wealth managers or in corporate work, wow. Fire
0 (19m 38s):
Nation, as you can see, there is a plethora of opportunities and there are people out there like Jon, whose job it is, whose career it is to help you through that process. So, Jon, here's what I want to do as we kind of start to wrap this up here, give us the one key takeaway that you really want to make sure Fire Nation walks away with when it comes to this topic about non-food franchise opportunities. And then give us the way that we can connect with you. Any call to action that you have share with us now. And then we'll say goodbye for many
2 (20m 7s):
Out there that are considering business ownership, or maybe you're already a business owner, and you're looking to diversify your portfolio or are maybe looking at a complimentary type business to what you're currently doing. And, you know, franchising is definitely worth considering. And you know, we're just seeing unprecedented levels of growth and interest right now, which is a lot of fun. It's really competitive to, you know, a lot of times we have candidates fighting over the same territory for certain brands, but you know, ultimately in a nutshell, you know, it's my belief and I've seen it firsthand. The franchising offers a better path to business ownership for many, and really there exists a wide world of opportunities that are, that many don't have on their radars. Any
0 (20m 43s):
Ways that we can connect with you, any calls to action that you have for us
2 (20m 47s):
Today. Absolutely love to connect with any listener out there. Let's hop on a 10, 15 minute call and get the conversation going. You know, you can connect with me at franbridgeconsulting.com. My email address is email@example.com. Would love to get in contact, sign up for our email distribution list on our website, if nothing else, but would love to get the conversation going and see if I can help you in any way. I absolutely love it.
0 (21m 15s):
Wow. Fire Nation. What an offer. I mean, Jon said, shoot him an email. He'll jump on a 10 or 15 minute call with you. You can tell him your situation and he will walk you through the process, the opportunities that you have. And you'll be talking to this individual that you're hearing right now, who's dropping these value bombs, who was a true expert in this industry, firstname.lastname@example.org, Fire Nation. That's email@example.com. Shoot me an email, jump on a call. What do you have to lose? Let them know what your situation is, who the opportunities are for you today. So, Jon, I just want to say thank you for hanging out with me today.
0 (21m 57s):
Cause Fire Nation realizes that they're the average of the five people they spend the most time with. And you're a pretty cool JO and JLD. So Fire Nation, keep up the heats and head over to EOFire.com. If you type JON and the search bar, the show notes page for today's episode is going to pop right up. And one more time, Jon, at franbridgeconsulting.com, shoot me an email, make it happen, Jon, thank you for sharing your truth, your knowledge, your value bombs with Fire Nation today, for that we salute you and we'll catch you on the flip side. Hey, Fire Nation today's value bound content was brought to you by Jon and Fire Nation, successful entrepreneurs. They accomplish big goals. That's why I created the freedom journal to guide you in accomplishing your number one goal. And we're just talking a a hundred day step-by-step visit the FreedomJournal.com use promo code PODCAST for a $15 discount.
0 (22m 43s):
And thank you for listening to my podcast and I will catch you there, or I'll catch you on the flip, the flip side. Are you looking for a proven business coach who has helped thousands of entrepreneurs, just like you to increase their profitability by an average of 104% per year, all for less money than it would cost to hire a full-time minimum wage employee schedule your free consultation today with Clay Clark, a former small business administration entrepreneur of the year at ThrivetimeShow.com/fire.
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