From banking executive to successful multi-brand franchise owner, Tony Cortina walks us through how he made the transition from the corporate world into full-time entrepreneurship by purchasing multiple existing franchise sales.
Tony started his entrepreneurial journey by acquiring a Cleaning Authority franchise. A few years later he acquired sixteen SuperCuts franchises that the corporation was selling.
From how Tony analyzes deals to what he’s done to improve the performance of the franchises he bought, Tony walks us through it all.
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How To Buy An Existing Franchise
Tony Cortina is a banker turner multi-brand franchise owner who shares how he’s purchased multiple franchises that were resales
I am joined by Tony Cortina. Tony is a corporate refugee from the banking world turned serial franchise entrepreneur with a keen focus on acquiring existing franchises, turning them around, and growing them. He can’t stop. Tony, welcome to the show.
Thanks, Dru. I’m glad to be here.
I remember you, and I got connected a while ago on your second venture, which was Supercuts but prior to that, what was your story? How did you get into franchising?
I love the term corporate refugee because that’s a pretty accurate description. I had spent a good portion of my career, probably almost fifteen years, in banking. All different roles within the bank. In small businesses, medium-sized businesses, and large corporate, I have done everything. I ascended the ladder to middle management, which is probably where I made the realization that I didn’t want to work for anybody anymore. When you are an individual contributor, you aspire to be the boss. Once you become the boss, you are like, “This is tough because I’ve got to balance the loyalty to my team and also the wants, needs, and objectives of the hierarchy above me.”
It’s a difficult place to be if you have been a solid individual contributor to yourself. Also, again, you are balancing that loyalty between your team, your employees, and at the end of the day, your bosses and the people who are going to determine your future. That was when I started to think about doing something else. There was a friend of mine who I had known for a long time, we were out grabbing a beer and happy hour. It’s funny. All the bankers know one another because they’ve all worked together or switched and gone to other competitors at one time or another. He was joking. He is like, “You are never going to be happy until you work for yourself.”
He was 100% right. That’s what got the gears turning. I started looking at going out on my own. You asked about franchising. I’m pretty good at business development. A Jack of all trades, master of none but definitely not smart enough to come up with anything on my own. That’s why I started looking into franchising. That’s where I found an existing franchise that was for sale. The other owner decided to move on. He had taken it as far as he could take it, and it needed a little help. I was in the right place at the right time. I took the leap, and that’s what I did.
What was that like? Did you know right away?
It was scary.
Have you vetted a bunch of deals before the one that you found?
Yes. I had looked at a couple of other deals. Some of them were franchises, Denovo or startup franchises in industries that I didn’t have enough capital to invest in at the time. If you wanted to do, let’s say, a fast-food restaurant, you’ve got to have a seven-figure net worth. At the time, when I was 38 years old, I didn’t have a seven-figure net worth to pull that off or I wasn’t in necessarily an industry that I was terribly interested in. I found one. It’s called The Cleaning Authority. They’re headquartered in Columbia, Maryland. This one seemed to be the right fit for me anyway. As a banker, you start to understand fundamentals and what makes certain companies work.
What I liked about The Cleaning Authority model is that it was reoccurring revenue. There was low overhead, so you don’t have a ton of investments in fixed assets and not carrying a whole lot of inventory or receivables. It wasn’t terribly capital intensive but I loved the reoccurring revenue model. The Cleaning Authority, as a franchisee, had a good management team in place and great technology. It was scalable.
The territory size was great. It was much larger than some of the competitors. I decided to take the leap. I said, “I’m going to be 40 years old at this time, and my kids are still young. This is the only time I’m going to be able to do it. As they get older and start getting closer to college age, my risk tolerance is going to continue to decrease.” That is when I made the leap. That was 2017.
There were certain businesses that you couldn’t get jazzed up about but you got jazzed up about residential home cleaning.
It was funny because I didn’t think I would get excited about that. It’s not a terribly exciting business but I started to think about my own needs, married, two kids, dog. My wife and I both worked. There was no time to clean the house. We had had a cleaning service for years. I knew family members and friends that had cleaning services. Pretty much, I realized just about everybody had a cleaning service at one point or another. It was a service that was needed. It was in demand. It wasn’t dominated by any one huge goliath.
For example, with The Cleaning Authority, we are the largest residential cleaning company in Rochester. That’s with a 2% market share because there’s so much business to go around. I started thinking about those fundamentals, and the cashflow was good. It wasn’t like I was going to have a ton of overhead. It made sense. I got excited about all the other stuff, and it so happened to be a cleaning company.
It was funny. When I started franchising, this was probably 2007 or 2008, I was with AdvantaClean, and we were trying to figure out how to expand this thing through franchising and get connected with good people. We started getting going to these trade shows. One of the first companies I met was The Cleaning Authority. It was Sexy-wexy. I knew nothing about franchising. I was still learning about it. I’m like, “Residential cleaning? I don’t get it.” I remember Wexler took me through their business model in a five minutes pitch. I’m like, “You are that good at direct marketing.” They used to print the direct mail, the stuff that you get in the mailbox. That was tried and true.
These guys were more than a cleaning company. They were an amazing advertising company, is what it boiled down to. They had all this sophistication with the software platform, and they had a call center and all this stuff. My mind was blown. I was like, “Now I get it.” Anyway, The Cleaning Authority has been one of the leaders in this space over the past several years.
Overall, if you take the entire network, we are now the largest residential cleaning company in the entire country. We do that without a ton of brand recognition in the sense that the offices are not required to have company-branded vehicles. I don’t think we do any television advertising or anything on Spotify. It’s all through direct mail and digital. It’s targeted. Our team will hone in on who our particular customers are. We spend quite a bit of money on it but we are able to acquire those customers.Get very targeted. Hone in on who your particular customers are and spend quite a bit of money on it. Click To Tweet
Hammer them until they tell you to stop calling.
“I finally got your mailer now for the eighth time and decided to call you.” They have the data that says that after somebody gets it six times, they usually pick up the phone and call. Whereas some of the other brands like Molly Maid or Merry Maids are two of them, have higher brand recognition because they are required to own vehicles that they drive around. They are branded, so a lot of people see them. As far as overall revenue size, their offices aren’t as large as ours are. I’ve since invested in vehicles. We have company vehicles that we use. It’s an additional form of marketing and helps raise some local brand recognition.
We are targeted in what we do, and it’s effective. It’s crazy too to see how it’s evolved over the last few years, whereas we are almost 100% mailers, and now we are moving more towards the digital realm. Paid search, Pay-Per-Click, and Google local service ads are a home run and good return on investment of those as well. We got a diverse marketing team. We’ve got some smart people in Columbia that do that work for us. We pay for it but I could never do it on my own. Maybe I could do it on my own now, but I couldn’t do my own a few years ago.
On that deal, you had an existing cleaning authority franchise in Rochester. For anybody that might be reading who’s thinking about looking at an existing business or franchise for sale, are there any nuggets you can share about how you vetted that deal to figure out that it was the right thing for you?
For me, being that I had spent so much time in banking, the first thing I look at is the financials. I go right to the income statement and look at the historical financials. I want to take a look at the revenue trends and the margins. If anything jumps out, obviously, I’m going to ask questions about it. If I had any concerns, that was the time to address them. For me, that’s the first place I will go. You can take a look at the balance sheet but again, the cleaning company is not asset-heavy, so there wasn’t a whole out there. That was the first place that I went. Afterward, I did a google search and took a look at their Google reviews. At the time, there weren’t a whole lot of them.
Again, that’s amazing to see in the last few years how that space has evolved as well. That’s how I did my due diligence. I was prepared when I had my initial meeting with the seller with a list of questions. That goes back to my time as a banker. I treated it like it was a prospect call, somebody I was trying to bring in as a new client. I’m asking good questions and then following up. He knew that I wasn’t like a tire kicker.
I was generally interested in the business. It was because of that he was much more willing to invest time in answering those questions and spending more time with me as I was doing my due diligence. Being it was the first thing I was ever going to do and was leaving a lucrative career. I was doing well. I was comfortable making good money. To make that leap is how to make sense.
I built that rapport with him. He spent a lot of time with me and was able to move it along. There are a lot of other people who would call. You probably even see this in your space. You talked to a lot of people on a regular basis who are tire-kicking or asking questions. Usually, within their first 5 or 10 minutes, you can tell if somebody is serious or not. I was well prepared when I did my initial due diligence. That helped to get the thing right off the ground and went some credibility as well.
If you don’t have that background, start talking to banks. Find a good lender and talk to them. They are going to have questions for you and will probably help you get some questions that you should be asking and hopefully have answered. If you don’t have a CPA, find a good CPA right out of the gate because it’s going to save you a whole lot of trouble down the road. They can help you with some of your due diligence as well.
It’s good advice. With your background, it was natural for you to know what questions to ask and stuff like that. Taking a look at the historical performance of the businesses, that’s the advantage of looking at any existing business is that it’s there, versus opening a new franchise, you’ve got to build projections and whatnot. You mentioned it. It was subtle but it’s a big thing.
You gain the respect of the seller, where it’s not just a one-way transaction like, “I’m the buyer. I expect you to give me all this information because I’m the buyer.” You earned it. You got the respect. It’s an emotional deal from your end. It’s also an emotional deal from the seller’s end, too, in terms of them letting go of this thing that they’ve spent a lot of time and a lot of blood, sweat, and tears building. There’s the personal piece of this thing that’s important.
Plus, they are sharing tax returns and, in some cases, bank statements. That’s all real personal stuff. That’s a good point. You mentioned it being an existing franchise. For me, at the point in my life and where I was, that’s what I was willing to do. I know many people that have been successful that took the leap and said, “I’m going to start this from scratch with no customers and no revenue.” I give those people all the credit in the world because I would like to consider myself a risk taker but I don’t know if I would have the guts to do something like that. Who knows? I don’t know.
I’m sure you paid a little bit of a premium for the existing piece of it.
I did. To me, it was worth it.
Tradeoff. When you were doing your due diligence or maybe when you took ownership of the business, did you know that you had the opportunity to grow it or were you going to plan to take it over and keep it on the same course that it was on?
You mentioned Iric Wexler. He happened to be the business development person at The Cleaning Authority. I talked to Iric quite a bit. He had connected me with some other owners in similar size markets. I was able to talk to them and recognize that there were some things that the owner had done well, and there were some things that he needed to focus on to improve.
Talking to some of those other owners and figuring out what it was that they were doing to be successful and thinking to myself, “I can do that.” Some of them were simple things, and some of them were a little bit more complicated. At that point, I said, “I’m ready to make the leap,” because it was at a point where even if I sustained it, it was fine.
It was a decent income, and I was my own boss. The opportunity to grow it and the way that we’ve grown it over the last couple of years was an added bonus. It was something I was confident that we could do after talking to other Cleaning Authority owners. These are people that have been in the network, some of which were probably going on at the time, 20 or 25 years. These were long-term owners. They’ve done it and seen it all. A lot of people I talked to were long-term owners. Few people flamed out. Most of the people had hung onto it. They had been there for a long time.
The great thing, most of the people I talked to, they weren’t in their offices. They were playing golf or one person was like, “Meet my buddy. We go to the bar and play darts every Wednesday at 2:00,” or something like that. They were doing all the stuff that I wanted to do, which is one of the spoils of being an entrepreneur. You work hard, you put in a ton of hours early on, so down the road, you don’t have to do those things. The fact that those people were doing that reinforced to me that it could be done and made the decision that much easier.Work hard and put in a ton of hours early on so you don't have to do these things down the road. Click To Tweet
I can imagine. What were some of the things that you saw as an opportunity that the previous owner could have been doing better?
The most important thing was taking a look at the profit margins. The profit margins that the other owner was realizing were about 5% lower. The gross profit margins were about 5% lower than the average Cleaning Authority office. Looking at the way he was running his business, the way that he was scheduling his customers, some of the things that he was doing with his insurance, and some of the ways that he was staffed didn’t align with the way some of the more successful offices were operating. I asked him flat out, “How come you haven’t done this?” He’s like, “I can’t do it. It can’t be done. We can’t do it.” I’m thinking to myself, “All these other offices are doing it, how come you can’t do it?”
It turns out that sometimes there’s a fine line between can and want. He said he couldn’t do it but in reality, he probably didn’t want to do it. Sometimes that involves having difficult conversations with long-term employees and employees in general, being much more flexible with your customers, and even paying your employees. In the process that he was using to evaluate his employees and grant them raises, employees had to beg to get a raise. I’m thinking to myself like, “In this business, your people are your product. That’s everything. If you don’t have good people, you don’t have a good product.” Right out of the gate, I gave people raises. We put a matrix in place to allow people, if they hit certain target metrics, they would get raises.
At the time, we were doing it twice per year. What I found is that the more we paid people, the better quality employee we had. The better quality employee we had, we had less customer terminations, had better productivity, and made more money. It was a simple thing. Sometimes it’s counterintuitive because if you are looking at numbers and saying, “I can’t afford to pay these people more money because I’m going to make less money.” The reality is, if you pay people more money, sometimes you are going to get better people. If you get better people, you are going to have a better overall company and product. That’s what we did.
It’s funny. It’s different now with the job market and the labor market being the way that it is. Wages have increased substantially. Even now, we will take employees that after a couple of months, if we feel they are doing a good job, going above and beyond, we will give them another raise because they’ve earned it. It’s important to be proactive like that sometimes.
The people, especially in the service business. Were there any skeletons in the closet?
When I bought the company, there were two long-term employees. There was a manager and a quality inspector. There were some things that the quality inspector was doing during working hours that I was shocked to find out and apparently been tolerated for a long time. It took me about a month to figure that out. I terminated her. It’s tough to be the new guy to come in and terminate this person who had been there at the time for twelve years. There was some employee backlash because there were some people that she was close with but at the same time, it was a clear violation of our company policies. That came as a little bit of a shock. The good news is that the other manager that had been working on the business she’s going on seventeen years and is phenomenal.
She started out as a cleaner. She had worked her way up to manager but she was more of an assistant manager where the old owner was still working 80 hours a week doing a lot of stuff that he probably didn’t need to do, and over the last few years, I have given her increasing amounts of responsibility as she’s earned it. She has done a phenomenal job. If you can buy an existing franchise with an existing manager that’s capable of being there for a long time, that is worth its weight in gold.Buying an existing franchise with an existing manager who’s capable and has been there for a long time is worth its weight in gold. Click To Tweet
Did you see that as a big potential benefit when you were doing your due diligence and vetting it?
I did. I was also worried that she was going to quit because there was some new person coming in and got to train this new owner, and not sure if the personalities were going to fit. It’s worked out great. She’s an awesome employee.
For seventeen years, that is no joke. That’s cool. That’s awesome.
She’s ten years younger than me, so she will be around until I retire. Maybe she will own it someday. We will see.
It sounds like The Cleaning Authority was the combination of there was a good business, maybe not great, and you had the opportunity to make it great without doing a major overhaul. Still a lot of work but nothing crazy that you had to turn around. You had a quality franchise system as well.
I was fortunate, too. The Cleaning Authority at the time had these operation representatives who would get assigned to your office. I had one official franchise or ops rep, Tim Bridges, and another unofficial who I had latched onto because he was from Rochester, where I am, Pete DeLorme. They were instrumental in helping me through the first 3 to 6 months.
There was a combination, a business coach, a business consultant, and a psychologist. I called and was like, “You are never going to believe what happened now.” The funny thing is they usually do believe what happened that day because they have been there, done that. There are always some crazy things that tend to happen in this space. They help me through those six months. They are awesome people, and I am lucky to know them. They helped me get to where I am now.
You leaned into the support that was out there for you.
I’m glad it was there, 100%.
You didn’t stop there. One existing franchise you bought and got to the next level wasn’t good enough. That’s where we got. That’s how we got connected. What was the next venture that you got involved with?
I wasn’t actively looking for another opportunity but wanted to see what else was out there. I found The Cleaning Authority, the office. It was listed by another broker on BizBuySell. I would occasionally go on BizBuySell. I still go on there to see what’s out there. Sometimes I will look at a profile and see if I can guess what the business is, see if I’ve known them either as a customer or if I’ve worked with them in my career in banking.
There was this general listing for salons in the Rochester market. It didn’t give the name. They were well established and all this other stuff. At the time, I’m like, “I don’t know who this is but I’m going to look into this. It’s a salon. This is cool. It’s different.” I don’t have to know how to cut hair because it didn’t say absentee ownership but it was implied that you didn’t have to know how to cut hair to run this.
I filled out all the stuff, and you called me, and we talked. You called me back, and it was Supercuts, as it turns out. You were like, “I talked to them.” As it turns out, there were many people that were interested in this that they were going to hold off. They are not going to sell it.” I’m thinking to myself like, “That’s bullshit. I guarantee this guy got my info, and now he is going to start peppering me with unsolicited emails for all these other franchises he’s trying to sell.”
You swore that wasn’t the case, and they were super overwhelmed with perspective franchisees. As it turned out, you were correct. You were not lying. You said, “If this comes back around, and it’s going to, I will call you back.” We originally probably talked in the early part of the summer, May or June. By August, you called me back and said that they were interested in entertaining other franchisees.
You introduced me to Mike Welch. We hit it off on the phone right away. He’s like, “We are doing a Discovery Day in Minneapolis in two days. Can you be there?” I’m like, “Yes.” I’ve got a manager at The Cleaning Authority. She’s doing a good job. I hopped on a plane and went out to Minneapolis. I met Welch and stayed the night. I was originally only going to buy 3 Supercuts, and that turned into 16.
You have sixteen now?
We have thirteen now. We closed a couple during the pandemic. They were some leases that were maturing. It’s not that they were underperforming stores but we didn’t need as many. Thirteen was a good number. We could probably open 1 or 2 more in different parts of the Rochester area. That’s what it was.
It’s funny how our worlds got connected. The backstory here is that Regis Corporation was getting out of the operations side of all the salons that they had been operating. They got a new president or a new CEO that said, “We are getting out of the operations business. We are going to focus on being a franchise company,” was the general gist of it. They sold off their corporate portfolio over a period of a couple of years, which is pretty rare. You don’t see that often.
Every week, the information changed and all this stuff. This was a completely different deal than an independent owner selling the business. This was a large corporation that was offloading its stores. In terms of the due diligence, how was it different? How did you go about figuring out if these things were a good deal or not?
That one was a lot different because you are not relying on audited financial statements for each individual location or tax returns. You are taking these internal financials that Regis had prepared. They sign off on it. Their finance people say to the best of our knowledge that these are all accurate. There wasn’t as much historical data to go off of. You were looking at the current financial performance and the operating margins and saying, “This is the price.” At the time, Regis was much like, “Take it or leave it. We’ve got people lined up out the door to buy these.” It was different in the sense that you had to trust that what you were looking at was accurate.
We were also, in our case, buying salons, some of which have been in existence for 30 years. I had been to a lot of them before, too. I was familiar with their location and the quality of the services they provided. It was different because you are dealing with this large, at the time anyway, there was Fortune 1000 company. The people there were great that we were dealing with. They were super helpful and gave us a lot of information when we needed it. Putting that deal together, structuring that deal from a banking standpoint if you are relying on SBA financing, which unless you are coming to the table with $5 million, you are going to need some SBA financing to cover that collateral.
That’s not typically how an SBA deal works. Fortunately, I found a good banking partner. Live Oak Bank is the best. Hands down, they are the best bank in the country to deal with. They understood the business. They were able to process the financial information that we able to provide to them. We were able to get the deal done. It was a little bit different because you are carving out this small portion of a large business. Find that good banking partner, and they make your life easy.Find that good banking partner, and they’ll make your life easy. Click To Tweet
If you get into the resale world, Live Oak comes up all the time in the franchise resale.
I am not a paid endorser. I could tell you that they are a phenomenal bank to deal with, miles above anybody else I’ve ever dealt with.
It’s funny you say that because my buddy went from 5 Supercuts to 15 in 12 months. The ten new ones were existing Supercuts. He used Live Oak. Now he’s on the first name basis with him. He makes a phone call. It’s a lot easier to transact than dealing with other banks.
They are so responsive. Their technology is second to none. Lots of great things to say about them.
Was that 2019 when you closed on the Supercuts?
It was 2019, and then on the one-year anniversary of closing our first store is when COVID hit. I’m in New York State, so our brilliant governor who’s no longer our governor, forced hair salons to close for two months.
What was that like? How did you fight through that?
It sucked. It was a scary time, especially considering we were doing so well and the business was humming, and we were in such a great place, and then that happened. You are like, “Crap. What is going on here?” We all live through it in different ways. In my case, it’s like, “I’ve got two companies. I’ve got all these employees. I’ve got kids at home that can’t go to school anymore. Is the world ending?” All this other crap. You put your head down and figure out a way to plow through it.
There’s no roadmap for that.
The PPP program certainly helped tremendously. The SBA was great to work with during this process with Supercuts. Do they have Wegmans now where you are?
Not yet. They haven’t made their way to Charlotte.
Wegmans is headquartered in Rochester. We have a couple of stores in other plazas. They are such an amazing landlord. They were great to deal with. Some of our other landlords were total pricks, and I would never want to do business with them again. Wegmans was great to deal with. We got through it. Profitability is great. Our volume is still not back to where it was pre-COVID but that’s because the landscapes have changed. There are still people who have not been to their office in two years. There are other people who still are afraid to leave their houses. The landscape has changed a little bit but we’ve adapted and gotten through it.
Pre-Covid when you guys took over the Supercuts. Were there things that you were able to see? Did you see a lot of room for improvement once you got in and started operating a little bit more? Did you keep it on the same path that it was before?
Yes and no. We hired one of the District Managers from Regis. She had been with the company for, at the time, 27 years, Janice. She lives and breathes Supercuts. She’s probably forgotten more than I know about how Supercuts is run. I have a business partner with Supercuts. He’s a good friend of mine. It started out as a joke that he wanted to partner up, and I told him no. As the opportunity grew, I brought him in, and we ended up buying all of them. We got a great partnership. Kyle and I give Janice a lot of autonomy to run the business the way that she has in the past.
We made some slight improvements like little things where Regis was paying their employees bimonthly. We pay them weekly. We try to do a little bit more around staff recognition. We are not always great about it. Those are things that we need to improve on. We freshened up the stores, changed the paint colors, cleaned them up a little bit, and then tried to hone in on the operations.
That’s where your big opportunity is in that space. You want to make sure that your labor costs are aligned with your peak volumes. Regis was keeping the stores open until 9:00 at night, and they had a lot of dead payrolls. There were people who were not coming in the stores after 8:00 but they were paying two employees there to close.Make sure that your labor costs are aligned with your peak volumes. Click To Tweet
We tightened up some of the hours and tried to be a little bit more efficient with our staffing. It’s paid off. The same thing, we gave everybody raises, too. In 2021, we gave everybody significant raises. We raised our price. Almost all of the price increase was absorbed by the increase in wages but it worked out great. We haven’t seen any decrease in foot traffic. The employees are happier. Any of the customers who said something about the price increase, we made it clear to them like, “Guys, we are passing this all on to you.” They would share that with the customers, and everybody seemed to be okay with it.
You have a golden touch.
It’s dumb luck. I swear. That’s what I tell people, too. Much of it is luck. The other thing that we are doing too though is we are trying to refine our marketing. Supercuts is a strong brand. They are the name in walk-in salons but their marketing hasn’t been all that great or prevalent. We are trying to do a similar approach that The Cleaning Authority does. We are trying to be targeted with our marketing and be efficient with how we are spending our money. We will see how that goes. We rolled it out. We are in the process of doing it now with a local firm that we are working with. I’m optimistic that it’s going to go well.
It’s ironic. Young emerging residential cleaning franchise that understood what moved the needle in their business and got good at it with the marketing and advertising. It’s toe to toe, aside from the brand name effect, probably better customer acquirers than it sounds like than Supercuts was.
To a certain extent, there’s some truth to that. The other thing too with Supercuts with the Regis at the time is they were owned by a private equity firm and totally in growth mode. They were trying to get as many stores opened as possible. Picking the right location, if you’ve got a good location, you don’t have to do any marketing whatsoever. People are driving by, seeing that sign. If it’s in a convenient location, it’s going to do well.
What they maybe lacked in marketing prowess, they certainly made up for with some of their real estate selections. That helped with that growth. Now, Regis, there’s new management in place. They’ve replaced the old marketing folks. We are pretty confident that they are going to put things in the right direction. That is a good observation. Part of that too is The Cleaning Authority at that time with a much smaller operation, leaner, and nimble.
The theme that continues to weave throughout what you said is the people. Take care of your people. Don’t be afraid to pay them more. Understand your numbers and your margins. The people piece and don’t be afraid to promote people that are demonstrating an interest in being a part of the company and giving them a chance to see what they can do.
It’s simple but you have the people skills to be able to help pull that off. Sometimes the leadership skills. There’s a lot of wisdom in everything that you’ve shared. I’m going to ask you two closing questions. The first one is, for anybody who’s thinking about buying an existing business or franchise, what are the 1 or 2 pieces of advice you might have for them?
The cliché thing to say is to do it. I’m going to say do it but with the caveat that you have to be prepared to fail. Go into this saying, “Here’s how much money I can afford to lose. Here’s how much time I can go without bringing in income.” This is what I can do without significantly impacting my family’s way of life.” You’ve got to be in the financial position to take that risk. A lot of times, some of the best ideas and companies fail because they run out of time or capital. You got to make sure that you are in a position where you are not going to be bringing in a ton of debt. You are not going to be living off that debt.
You want to make sure that you are in a position to put in as much equity as you can, cover your expenses, and then your repayment terms are stretched out long enough that you can afford some lean cashflow at least early on. That’s going to eliminate a whole lot of stress. The other thing I would say is don’t buy the first thing that you look at. Honestly, sometimes start looking at stuff. It is going to go against what I said earlier but go in as a tire kicker. Start looking at things. Start talking to people. Start looking at concepts. It’s important to have things to compare it to so you can see what you like about certain ideas or concepts and things that you don’t like.
For me, it was a long process. I was probably looking for 2 or 3 years before I made the first jump. It helped me get into a situation that I knew was going to be successful. I shouldn’t say knew but I was pretty confident I was going to be successful. I don’t think I would have been prepared to do that if I had jumped at the first opportunity that landed in my lap.
You had reps under your belt. You had a background that helped but you had kicked the tires a little bit and gotten familiar with what the process would be like so that you weren’t surprised when you got engaged with the business that you were interested in. You calculated risks in terms of being able to size up the risk factors and also the upside and weigh them both to figure out if it’s the right thing for you or not. There’s always a little bit of delayed gratification going into any business venture.
The other thing I would say is, early on in the process, find a good CPA and a good attorney. When I say find a good one, don’t ask your friends, “My buddy does this. My buddy is a CPA.” Ask some of the businesses, maybe some of the larger businesses or anybody you know as a business owner. Ask them who they use. If they’ve got a good successful business and probably got a pretty good CPA, it might cost you a little bit more money but it’s worth it early on. The funny thing is that just about every attorney will read a franchise agreement and say, “There’s nothing you can change in this agreement.”
The franchisor will tell you, “There’s nothing you can change in this agreement. Feel free to share it with your attorney but there’s nothing you can change about it anyway.” The attorney will always go through it. It lets you know what some of the risks are and exactly what you are signing up for. It’s good having that person to lean on, and it gives you a little bit of peace of mind that you know exactly what you are signing. I’ve read through the franchise agreement. After a while, your eyes start to glaze over because they are so long. It’s repetitive.
It’s completely one-sided. What you said is there’s a lot of wisdom in how you get connected with the right team of people is ask other entrepreneurs, other small business owners and who they use because a good accountant should help you make whatever fee you pay them back by some X factor in tax savings and all kinds of stuff. At least what I’ve found is that they need to understand your personal situation as much as your business situation, too, so they can help you mesh the two together to take advantage of some of this.
To that point too, find a good insurance agent as well, a good insurance broker, somebody that’s at a good size commercial firm that’s got the marketing team behind them that can go out and can shop for a policy. God forbid if you ever do have a claim that they can handle it for you and handle it efficiently. Also, make sure you get employment practice and liability insurance.
I’m fortunate, I have not ever had to draw on this policy but EPLI policy covers you in the event that somebody wants to sue you for a range of potential offenses that you could have or one of your employees could do to another employee. It’s important to have that insurance in case an unfortunate situation like that does come about. It hasn’t happened to me, knock on wood but I know other people that it’s happened to, and they are grateful to have that insurance.
You like the independent insurance agent route, so they can talk to multiple carriers.
Locally, in Rochester, and they are a larger national firm but I use Brown & Brown locally. They have a local office and local rep. My agent, as it turns out, is a good friend of mine. He does a great job. They are able to shop for multiple carriers. Every two years, he takes me out to market. He’s shown me significant cost savings from shopping the policy. That’s no work for me other than him saying, “Do you want to go with this carrier? It’s going to save you 30%.”
That is great tactical advice, for sure. I know what’s next but what’s next for you? What’s cooking under?
My business partner and I are looking at diversifying a little bit. We are in the process of looking at some FedEx routes that we might be acquiring. We are going to dip our toes there and see how that goes. If that becomes something that’s scalable, we will continue deploying our resources there. It’s funny, every couple of years, I feel like I want to do something. I tell myself this is the last one but I’m sure there will be something after that. I have a great management team underneath me that helps a lot.
You’ve proven yourself for whatever you get involved with. You know what to get involved with, number 1). Number 2) You’ve got a great track record. Well done. I appreciate you joining the show and hopping on here.
It’s great to catch up, too.
You have a more amazing story than you know. Congratulations.
Thanks. I appreciate it.