The best way to grow and franchise your brand is to use the roll-up strategy. You roll everything up, acquire new locations by making deals, and you plug-and-play. You’re combining smaller companies in the same industry under one roof. You’re cutting down on costs and increasing revenues. That’s the beauty of franchising, it’s just plug-and-play. Join Dru Carpenito as he talks to the President of Prenlyn Automotive Group and the host of Business with Beers, Brian Beers. Discover how Brian and his brother built a franchise empire by scaling to 30 Midas franchise locations (without ever fixing a car himself). Find out how he scaled his multi-unit business by strategically acquiring fellow franchise owners who are ready to exit. Also, get some insight into how he’s structured his organization, what’s inspiring him to scale, and his from-the-trenches opinion about the electrical vehicle trend and why he sees it as a “phantom menace.”
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How To Scale A Franchise To 30 Units Using A Roll-Up Strategy With Brian Beers
Welcome to the Franchise Masters show. I am joined by a fellow Philadelphian who is reeling in success after a big weekend of Philly’s playoff win and run to the National Championship Series and the bird waxing the Cowboys. Brian Beers, welcome.
Thanks for having me.
We’re not here to talk about Philly sports. We’re here to talk about your success and your journey as a franchise owner but I would love to kick it off to hear your story and your journey because you’re doing some interesting things. I think you have a very unique strategy that has worked well for you that we’re going to dive into. I would love to hear a little bit more about you and how you got into franchising and what you’re up to.
I’m almost 35 years old, living in the suburbs of Philly. My family has been in the franchising business. My dad has since 1976. He got started in Midas and the brand we were in now because his uncle was in Midas in the 1960s up in Boston. He got into it. He was having a ton of success. He was in 8 or 9 locations. He owned a bunch of the market, making a boatload of money. My dad was 22 years old. My grandfather had retired from being a teacher and was looking for something to do. They went into business together to open up.
It wasn’t the first location in Philly, but it was up there. It might have been less than ten stores. My dad grew the business and had success. His brother-in-law joined the business, my uncle. Together, over three or four decades, they bought locations. They sold locations. They opened up from scratch. They turned them around. I went to college and I joined the business in 2010 after I graduated. At the time, my dad had been it for 30-something years and was getting tired of it.
In 2008-2009, it had been rough. If I didn’t join, they would’ve sold. I joined, breathe new life into the business, start learning, connecting with other franchisees, and figuring it all out. I probably start taking over the company in 2016 or 2015, about five years in it to get to that point, and then separately started buying additional locations. My brother had joined right around this point.
Together, year by year, we bought two locations in 2016. In 2017, we bought another one. In 2018, we did another two. In 2019, we did another one. Over the last eighteen months, we’ve bought eighteen locations now. We’re up to 30 as of now. We do about $36 million, minus all auto repair. Philly, North Jersey, and Allentown is the unofficial territory. That’s where I’m at now.
Congratulations, Brian. That’s an operation. You had eighteen acquisitions in the past eighteen months?
Something like that. At the end of 2020, we had twelve. We decided what do we want to do. I called up and we said, “Let’s try to get this one location,” and it was in the Trenton area in New Jersey, which is the Philly market. I talked to this guy who has seven. That one and he had six more north of that in Jersey. He said, “How about instead of buying one, you buy all my locations?” I went out. We went down that path and we said, “Okay.” We bought those seven in June of 2021.
Once we were in the market now in Jersey, then there’s a whole bunch of these single stores in smaller groups that prior to this, I wouldn’t be interested. Once we’re in the market, we already have committed. We have district managers, payroll, and all the stuff. It’s easier growing it. We then bought another one in Jersey in December. We bought another three in February. That got us up to eleven in Jersey. A couple of months ago, we bought the Allentown market out, which was five locations, and then we opened up another two. That got us to eighteen.
We went from 12 locations to 30 from May 2021 until June 2022. What gets you where you’re at now doesn’t get you to the next level. That’s what we’re figuring out. It’s like as your company grows, you can read all the books you want, but learned knowledge is a lot different than book knowledge for sure.What gets you where you're at today doesn't get you to the next level. Learned knowledge is a lot different than book knowledge. Click To Tweet
We got a lot to unpack there. You guys took over a family business, and then you and your brother have been able to scale it to a new level. I’m curious about when you made the jump from 12 to 30. I guess the initial jump was from 12 to 19.
Yes, 12 to 19 then a couple of months later it was 20 then 24 then 29.
You took the big jump from 12 to the 6 or 7 that you bought first. What type of change did you have to go through? Was it a massive organizational change? Were you able to fold them in pretty quickly?
A couple of things. The first thing is it’s a mindset thing. We had believed for so long that our success was because we were hands-on and in the stores every day. I’d see these much larger organizations that are spread across the country. We look at average volumes per location so you can rank yourself and compare them to others. We were always pretty proud that we have one of the highest average volumes per location, compared to some of these guys who have a lot of stores that do much lower on a per-store basis.
We had this thing that, “If we get too big, we’re not going to be able to have the consistency.” It’s like an ego thing of being proud of everything. We had to break that mindset to say, “Instead of we can do it, it is possible. We just got to figure it out.” That was the first thing. Belief in ourselves that we could expand. We’re talking an hour and a half away. It’s not like it’s like California and has success. That’s what we saw.
Structurally, we had to hire some more people. We hired another district manager. We’ve built out a team. The beauty of being in a franchise is a lot of it is the same. A lot of it is plug-and-play, even these five new locations in now the third market. For the frontline guys who are in the stores every day, doing all the work and making it happen, nothing in their life changes, so it’s easy. For day one, they find out Monday morning and Tuesday, it’s all the same thing. That’s what makes it easy to scale and grow within a franchise. It’s plug-and-play versus if I was buying five different independent shops and I have to tell them, “We’re not going to do transmission work anymore. You’re going to start using these forms. We’re going to change our hours. You need to work on Saturdays now. We have this new point of sale.”
If I bought five different shops, I’d probably have five different points of sales to train through and comp plans. When you’re in a franchise system, generally, we have all the same points of sales. We all use the same forms. We follow the same core process. Now, we have things that make us unique and better performers but that’s not like day one changes. It’s cultural things and how we think and commitment to consistent execution in these other factors, which happen over time.
I think that’s what’s most exciting to me. That’s what I talk about on Twitter and the podcast and stuff. Franchises are easy to roll up because of the plug-and-play nature that they have. That’s why you see these companies like the Flynn Group or whoever has 4,000 locations and they can buy a hundred at a time. It could be almost impossible to do that with others that don’t have the systems in place already.
The biggest thing that change is for the employees who signs their paycheck.
Day one at least. We have our ways of doing things that are slightly different and better. In a lot of cases, it’s modern because we’re buying them from guys who want to retire. They’ve been thinking about selling for months then they’re not investing in the stores, and they’re not up on the latest things because they’re out with one foot out the door. Over time, there are changes. Day one makes for a much easier transition to build trust and get it going.
What was it that changed for you guys to want to grow the business the way that you’ve been growing from that first acquisition deal?
We want to win. I’m competitive. You get these opportunities and it’s like, “Why not me? Why can’t I do it?” I see these other guys doing it and having success in our brand and other brands. It’s an internal drive to win. It’s a big part of it, then that’s the scale thing. I can hire better people, and then their payroll costs to run the business gets diluted. For every location we can add, that overhead gets diluted by one more.
This has allowed us to hire five district managers. We still have about 30 stores, and about five district managers. Each district manager oversees about six locations. Each one of those district managers used to report to my brother and me, but now we’ve hired a COO. They all report to the COO who reports to me. Being able to make those investments of these multiple layers of payroll can only happen if you’ve got the sales and the cashflow to support it. For me, it has been a systematic thing of replacing myself with daily operational roles.
When we had six locations and all six stores reported to me like I was the district manager, then it was like, “If I don’t want to handle a hundred phone calls a day, I need to hire somebody, but to hire somebody and pay them $80,000 without me to take a big pay cut personally, I need to buy a couple more locations to justify the payroll.” You keep that stair-step approach where to continue to invest in this overhead, you need to add locations, and then you hit a limit like a max of what you can handle.
It’s an inflection point to decide, “Are we good at where we are at or we’re going to make the investment overhead and support the leadership?” If we do, now we have the capacity to take on another X amount of locations and volume. You continue until you reach a point where you’re comfortable and you have enough, then you can work on the other aspects which are like, how do we increase sales? How do we increase our margin? How do we squeeze another couple of points out of it once you have the infrastructure built?
It’s not just a matter of growing from 1 to 2 to 3 to 4? You have to grow in chunks at some point too, to be able to have enough revenue and enough cashflow coming in to be able to justify the organizational structure.
In our business, it depends. For us, it’s like a 5 to 7 number. One leadership district manager person can directly oversee it. It’s like the old thing. How many people can one person manage? It’s 5 to 7 optimally. It’s in that realm. It depends on the type of business you are in. Territory-based business is going to be different from a retail brick-and-mortar business.
That’s the big thing. You got to know what is the capacity, then you build to that capacity, and then you decide, “I’m going to invest.” Sometimes you got to invest in the better person before you can go and get the sales, and get the additional locations. You got to be able to weather the storm a little bit on the cashflow as long as you’re moving towards that bigger goal. If you stop and you don’t get those acquisitions, then you got to grow your same-store business to justify it. Part of it’s having that strategy laid out. What am I going to do? What’s the business going to look like a year from now or two years from now? These are short-term things. I’m not saying five years. These are short terms to try to give you some direction on it.
You’re very formulaic about it in a bracketing kind of way with the big 20% that drives 80% of it. You understand the levers. I know it took some time to figure all that stuff out. When you were in school, was this the plan all along for you to join the family business?
No, I’ve always been entrepreneurial. I’ve always had jobs. I worked in a music school. I was into doing software web development. I did database-driven software development in high school. Even in college, I had a job in South Beach for a couple of years working with this guy doing iPhone apps. I always have been big in numbers. Some of that stuff comes naturally. That’s how I think. I didn’t know what I wanted to do. I wasn’t like that good to be a developer.
I wanted something that was entrepreneurial. I wanted to go back to the Philadelphia area. I considered the finance investment banking side of it because I’m very good with numbers, but I didn’t want to go to New York. I decided to go back home. I saw there was a good opportunity and I figured, “I could come and this old boring business.” I could bring some of the technology, some of the reporting, all these software things I was working on to do. That’s what we’ve done too.
You had some perspectives from outside the automotive industry that you thought could benefit the business versus growing up in the industry. Sometimes it’s hard to have those outside perspectives. As it relates to how you are building your team and your organization, do you have a strong lean? Do you like hiring people from within the industry for your leadership side of things or do you look outside the industry to be able to bring somebody in and train them?
It’s both. The COO we hired came from twenty years in the military as chief of staff and special ops. A super organized intelligent guy. He’s been now three months in and he’s already picked up 90% of the job because he’s a smart and organized guy. A lot of it at the leadership level isn’t about fixing cars because that’s not our role. Our role is managing people. You need people who are good at managing people. Even in our district manager role, in that one, the key to success is being able to identify and hire talented people.The key to success in the managerial role is to be able to identify and hire talented people. Click To Tweet
If they can hire a good store manager, it’s a self-fulfilling prophecy versus if they hire a bad person who then needs a lot of attention. They have to micromanage them. There are always problems. They only have turnover at the store because they know how to manage their people. They create a lot more work for themselves versus a good manager that has low turnover, low customer complaints, and good sales. A lot of times, I always say we’re in the people business. We just happen to fix cars and I think that applies to almost every business.
It’s hiring people who are good at managing other people is by far the number one skillset. They can learn anything. I knew nothing about cars when I started. I learned the job to be the store manager, to be able to sell, work and communicate with customers. That’s what it comes down to. In that role, somebody walks in. They have an issue with their car. I have to be able to understand what the issue is. I have to communicate with the technician and confirm that whatever the technician is going to recommend to fix their car is truly going to solve their problem. Explain if there are any other things that we found or things they should be aware of.
Even in that role, if you have the right person, we can train them. Obviously, when it comes down to the person who fixes the car they need the experience, the education, the tools, and all the technical capabilities. I can’t fix cars but I can interview a technician. I could tell you pretty well if he knows what he’s talking about or not, just because I’ve been around so many of them that I know who’s bullsh*ting you and who knows what they’re talking about.
$30 million in revenue is what your company is bringing in?
$36 million is our run rate. That’s low. We should do $45 million.
With the same stores?
No, with some acquisitions. $40 million with the same because our best stores do $2 million a piece. Our worst stores do $600,000. There’s this huge variance. If we can get every store to our best store, which we know is possible, that’s $60 million. It’s a lot about the people. If we put a new good manager in a store, same staff, same customers, we can get a 30% increase overnight just by getting the right one person in there.
What happens is you have this opposite effect where if you got this carousel of people. You get somebody in and you give them a month or two and it’s not working out, then you put somebody else in. We get instability if there’s no consistency. The text is constantly changing from their perspective. The customer is a different face every time they come in. It’s this balance of we know that it’s the solid managers who make or break it, and then how much time we want to invest in the person to make sure that they’re the right person and they are trained.
If we’ve done a good job identifying if they’re the right person, then it’s a question, are they trained? If they’re not trained because we haven’t invested in time to train them, then that’s on us. We should fix that. Dedicate, block off time, work with them, have them train another store, whatever we got to do to get them up to speed. At that point, now we’ve invested X amount of hours training them and they still can’t do it, now we get the wrong person. We got to go from there.
Even the best stores in the country are doing about $5 million out of a single location. It’s the same square footage. They have more people because one person can fix so many things. It’s all about the consistency of the execution. The guys who are the best performers are very consistent in their execution. The ones that aren’t are doing half of the things they’re supposed to or something like that.
We were talking before we started recording about this semi-absentee thing. Are there franchises out there that can be run semi-absentee? Can is the keyword. There are but you nailed it in terms of that 20% that drives 80% of any of these “semi-absentee franchises,” and it’s how good the manager is that you hire. It’s the manager, the marketing, and the location. A lot of these are more location-dependent businesses. Those are the three things that drive the whole business model. If you mess up one of those things, it is not going to be very semi-absentee.
I’m in the boat that says, “You pick one thing and you focus the majority of your attention on growing that one thing.” I see guys on Twitter talk about the whole co and “I’m going to have seven different companies.” In the back of my mind, it’s like, “I’m going to be below average at each one of those seven companies. I’m going to have seven different staff, different business models, and different problems to solve.” In ours, there are not many new problems that come up that we don’t know how to solve. We’ve already proactively planned it. You have different payrolls and all these different entities. There’s all this overhead involved.Pick one thing and focus your attention on growing that one thing instead of having seven different companies. Click To Tweet
By diluting someone’s focus that you take all that energy and you put it all into one thing, your life is a lot simpler because you have fewer variances and you can grow a lot faster versus trying to juggle all these different balls. That’s my take on it. People do it out of fear of putting all their eggs in one basket. That’s what drives it. If you get good at something, you don’t have that fear because you know, “If it goes south, this is what we’re going to do.”
You know the game. You know the plays. You can predict maybe potentially some of the issues. It also helps you identify the fixes a lot faster. There’s probably a finite amount of solutions to those fixes.
If you’ve got a whole bunch of below-average stuff, your margins are maybe a little thinner. Those fears might come to fruition if you’re not performing as they should, and you’re distracted because you’re putting out fires over here.
I have an off-topic question but I’ve been curious about this. Brian has an amazing follow on Twitter. I didn’t even realize this whole small-business Twitter community existed. Do the people that talk about getting into a business actually do it or are they just talking about it? Do these people do anything versus what they talk about? Obviously, you do.
I’ve connected with a number of the guys who do. They’re the big guys. Part of the goal on Twitter too is to go beyond the tweets or whatever. I’ve called a lot of guys. I’m working on getting a bunch of them on my podcast too to learn about their business. It’s pretty amazing what some of these other guys do. There’s a whole bunch that have no idea what they’re talking about or it’s cookie-cutter vanilla advice.
You have a podcast separately. I was checking through it. It looks like you’ve had some pretty interesting guests that aren’t franchisees. They’re not necessarily automotive. It’s all things entrepreneurship.
I started it in April. I’m almost to a hundred episodes. I was doing two for a while. Podcasting is a great excuse to sit down with somebody for 35 minutes to an hour and get to know them. Honestly, the relationships you established with the guests are more important than almost anything else. I’m sure you might have experienced or you will experience that on your journey. It’s great for building your network. It’s built for a wide-varying opinion on things versus being narrowed.
It has been a lot of fun. I got Mike Michalowicz booked who’s the author of Profit First. He’s coming on. I’ve got another author, Steve Sims, Bluefishing, which is one of my favorite books coming on. I’m working on a couple of other bigger names as well. A lot of that is like what other excuse do you have to have to talk to somebody like Mike Michalowicz or whoever?
I don’t know when this is going to come out. I’m working on launching a separate second episode a week that will be dedicated to franchising. That’s every Friday. That’ll be 10 to 15 minutes of me talking something about growing a franchise, how you select, how you run due diligence, how you grow, and how you get owner financing. These are all the stuff I’m going to have two different flavors there.
That’s awesome. It seems like you got a growing audience. You threw out a tweet about franchise brokers. I had a nice positive opinion on that perspective. Buying a franchise, especially for the first-time entrepreneur, first-time franchiser or first-time business owner is a different ballgame if you’re not prepared because it’s quirky. It doesn’t follow the traditional business acquisition process. You’ve got to gather all this information that takes a long time to gather. Most importantly, you got to validate it all. Not that you can’t believe what the franchise company is telling you, but you want to validate a lot of this stuff. There’s a whole separate process for that.
You have a sales rep in your ear selling you the dream. You have this 300-page franchise disclosure document that if you haven’t seen one before, it’s hard to navigate through to pull out the high-level information, and then you got to talk to franchisees. That’s the step that most people don’t do. Isn’t that crazy? Most people skip talking to franchise owners when they buy a franchise.
I have a whole list of questions to ask franchisees and that’s a whole topic there.
There’s an art to having those conversations too, to be able to extract and validate the information. You can’t just call somebody and say, “How much money are you making with Midas?” They’re going to hang up on you. It’s not going to happen. That’s awesome.
I’m working on some courses to teach people about franchising. That is one of the topics. It’s how you handle those calls. You’re completely right, it’s an art. You have to make the person want to help you. You have to make them see themselves in you because that’s how people want to help each other. It’s when they think of a younger version of themselves. They’re looking to add value, not just take. It’s the way you approach those phone calls, the questions you ask, the order that you ask them, and not just calling all the good ones.
Call some of the ones who got terminated or are no longer with them, and get their perspective on why they left and what could have been done, and how was it different than what they thought it was going to be like. I think that’s the problem sometimes. When you’re going down that path, you’re so excited by everything and the opportunity. You want to make sure that you’ve covered all your bases, and that you heard the good and the bad. We bought into two other separate franchises.
I’ve made those calls and we went down paths of looking at other ones that we didn’t pull the trigger on. Some of the reasons why the guys failed are also what might make you successful too. It’s not just you’re going to hear bad stuff but it’s like you’re going to hear guys that say, “I was never involved in the business.” I treated it like a side hustle. The ones we’ve failed in, I’ve treated like a side hustle. If someone is full-time dedicated, it’s not going to be a side hustle. They say, “Great. This is not going to be a side hustle to me.”
It’s about trying to get all the angles to understand if the business is the right fit for what you want to be doing with this next chapter in your life, and whether it fits everything else you have going on, whether it’s a corporate W-2 job, another business or you’re going to go all in. One of the things that I see a lot of people underestimate is the sales like customer acquisition. What does it take to acquire customers in a franchise? It’s like one of the nerding out in the weeds type things. It’s like if you’re not going to do what it takes to acquire a customer, whether that’s over-investing in advertising, hiring a salesperson or being the salesperson if you don’t have revenue coming in the door. Revenue is fixing a lot.
Nothing else matters. That’s a good point. It depends on what the business is. In Midas, for example, we’ve opened new locations. On day one, the phone is ringing. The next month, we’ve been cashflow positive for that month, but the people know the brand. It’s been around for 60 years or whatever. For us, it’s less pressure, but if you open up another one and nobody knows the brand or more of a B2B thing and it’s all outbound sales, it’s a completely different business model that you’re going to have to work it. As you said, if the person you hire isn’t getting it done, what are you going to do about it? Are you going to go and make those calls yourself? Are you going to hire two guys and let them compete? There are different angles to go at it but you’ve got to know what you’re getting involved in. That’s a great point.
What’s your take on passion? There are people that come to me like, “Dru, I only want a business that I am super passionate about in terms of what the widget offers.”
It’s a personal stance. I don’t care about cars. I’m not a car guy. I don’t have to be passionate about it. I have to be passionate about running the business. It’s solving the challenges that the business delivers. For me, growing the business, solving the problems, and managing the team, whether that is selling auto repair, doggy daycare, washing trucks or homes or whatever it is. To me, the service itself doesn’t matter as long as I believe in the business model. I have to believe that this is a solid business model. It meets all the requirements that I’m looking for.The service itself doesn't matter as long as you believe in the business model. Click To Tweet
Besides that, I don’t care but there are some people who say, “It’s got to be fitness. It’s got to be food. It has to be pets. I want to do something I love.” It’s a personal preference but for me, find something that I could be successful in and my cards are dealt. It’s Midas and I’m being successful in this. If we happen to be in another business, I would be successful in that. It sounds like you have a passion for business. I think if someone has a passion for business, you can open the catalog to almost anything that meets the business model that they want to look for. I have this whole business model checklist of what I’m looking for. It’s more than what the actual thing we sell. If it can meet my minimum requirements on the business model checklist, then it’s an awesome opportunity.
I got to ask, what’s the checklist?
It’s you specifically. That’s part of it. What are you looking for? I don’t think there are any right or wrong answers. It’s just a matter of what’s right for the person.
I work with first-time business owners. It’s the majority of what I do. A lot of people think they know what they want but they don’t.
There’s a bunch of things. Number one, you’re looking at startup capital. How much money do you need to start up the business whether it’s franchisees, working capital or whatever? Looking at ongoing capital requirements, it’s like, is this a business that requires a lot of ongoing capital? You’re in heavy equipment repair and placement. If you’re in a fast food place or requiring to remodel every couple of years like car dealerships. Every ten years, they have to invest hundreds of thousands to remodel it. Is that something you want to be in?
Scalability, what is your target goal? Some people just want to side hustle and make $50,000. Some people want to replace their W-2 income, and some people want to grow to 30, 50 or 100 locations. I’m looking at whether the franchise allows multi-unit. Do they encourage it? Do they not? If you’re Chick-fil-A, it’s one max driven.
Are there existing franchisees in your target size? If you say, “I want to grow to a hundred,” and the biggest guy got ten. I’d be looking at that to say, “Is there a reason why nobody has done this already? Is the business not conducive to scale?” In Midas, it’s two groups that have over a hundred, so it’s possible. There are competitors. Look at Monroe Firestone. They have 2,400 locations or whatever it is. It’s not a franchise but it’s the same business model. Target customers, are you doing B2B or B2C? What would you prefer? Is it sales or ops driven? A sales-driven company would be door-to-door selling solar versus operations driven would be you’re the company that installs the solar panels once someone sells them.
Those are two different things though. If you’re ops focused and you don’t have a sales team and the sales dry up, what are you going to do? If you’re a sales team but then you don’t have the ops, who’s going to do the work? There are pros and cons there. This is a big one, which is what level of skilled employees do you want to work with? Whether it’s unskilled employees. You’re in the fast food. You’ve got a whole bunch of minimum wage kids and high turnover and high training development or is it more working with skilled? You’ve got a higher-paid, smaller applicant pool, and higher margin on their work. This would be like anybody in the trades.
Competition. Look at how much competition is out there, if it’s a niche business or if it’s a highly competitive business. Sales per employee. If you got to do $1 million in sales, how many employees does it take? Does it take ten people? If it’s $100,000, is it five people? You can get $200,000 per employee. That’s a big one. We looked at Little Caesars years ago. It was a below-average location doing $700,000 in sales. They needed twenty part-time kids to run it. To me, it was like you need a lot of kids, a lot of turnovers, then your sales per employee were relatively low compared to we can do $2 million with eight people. They need twenty people to do 700.
Is it more efficient, the higher revenue per employee?
Revenue patterns are recurring on-demand, project-based, seasonal, recession resistance, how often you get paid, and looking at a ten-year outlook. What does the business look like in ten years? Can it be replaced by robots?
Let me ask you a question. You know where I’m going to go on this one. In the automotive space, a lot of people, the head trash that people have is this whole EV or the electric vehicle thing. What’s your take on the EV stuff?
It’s the phantom menace. First of all, it’s way more popular in the media than it is in real life. I think 2% of the market is EVs now. Every single brand is coming out with a new one. We watched the Eagles game, every single ad break was for every single manufacturer pushing an EV. EVs still have issues. They don’t have engines but they’re still going to have battery issues, electrical issues, and motor issues of various kinds.
They burn through tires. You’ll go three sets of tires before you change the brakes. Tires will be a new thing. There will be a whole new line of other types of repairs like fixing battery cells. I hear stories of Tesla wanting $15,000 to replace the battery, then some guy will replace the single cell that’s bad for $700. It’s probably all labor. There are whole new things that we’re not even doing now that we’ll be able to do.
Those new cars have uncountable amount of sensors, lidars and radars. The backup cameras and the lane detection warning needs to be calibrated and readjusted because they fail. This is huge. We’ve been pitched on investing in this equipment to be able to recalibrate all this equipment. You spend $50,000 or $60,000 or whatever it is to buy this equipment, but then you’re resetting these things at $300 to $500 a pop. There’s no cost to it because it’s all labor and this computer.
I think the business changes but at the end of the day, we’re probably going to be fixing the same number of cars at a higher margin because it’s all labor based. It’s higher than if it’s parts based. There’s this other factor that nobody talks about, which is the infrastructure that would be needed to support a significant share of EVs. It’s just not there.
The recharging, are they charging?
With the amount of power that the grid has, I’ve heard stats that we could probably get to about 5% of EVs of market share before the grid is at capacity. To grow it higher, we need to generate more electricity. That’s the question. How do we generate more electricity to charge these cars? They are called micronuclear. These small nuclear reactors can generate. Not the big towers that you’ll see. It’s the smaller scale ones. I’ve heard stats that the US would need 50 of these things to get up to 20% share.
It’s then a question of how the public feels about it, especially now with all the Russia crap. There’s a whole bunch of new nuclear-related things being put in every city or every state in order to charge these cars. We’re in the city and there are all these people that park in the street. Where are they going to plug in their cars, on the telephone pole? Before, that thing is hacked, stolen or broken. I think we’ll see it in wealthy areas or high-income areas. There will be a large adaption.
People will have solar panels in their garages to charge their cars. It’s the self-sufficient model, but large-scale adaption that truly affects our business, I don’t see it happening anytime soon. Plus, the average car we work on is ten years old. There are millions of cars being sold every single day. It will take them ten years before we even see them at the core of our business. We’re working on cars that are twenty years old.
It’s a long tail. The oil change business is at more risk than ours. It is booming. Take 5, Valvoline, Speedee, and all these Grease Monkeys. People who are buying tons of locations and building from scratch don’t believe the business is going anywhere. I think what’s going to happen is we’ll see a mix of hybrid stuff coming out. The cars will be a mix between EVs and gas.
It’ll be primarily driven on motors but then the gas can kick in when it needs to. They’re highly efficient. We’re getting 50 miles to the gallon. People don’t feel like they’ll ever be stranded with the EV concerns, and the weather, extremely hot and extremely cold. There will be something in between. It’ll be a mix I think is what we’ll see.
It’s a very interesting perspective. There’s a lot of wisdom in the phantom menace and the hype that the media puts out there, and all the stuff we see versus from the trenches perspective of somebody who’s in the business and living it every day in terms of what you’re seeing down there. It’s fascinating. It’s interesting for somebody to say that because it could go off on a big tangent. As you continue to scale, what’s the grand vision for what you are building?
My brother and I talked about what we wanted to do and where we want to take it. We can take it anywhere we wanted. If we decide we want to start getting on plane rides, we could probably grow to 60 locations within 2 or 3 years. We could probably go to 100 if we are ambitious about it. At a certain point, you have to balance. Do you want to add these levels of complications to your life or can we just continue to grow out from our circle in the markets we’re already in between acquisitions, converting competitors, and geographically expanding slower?
We look at the same store volume and it’s like if we can get each one of our stores to $2 million and do 60 out of 30, we’d make way more money than if we had 60 doing $75 million because of the overhead involved. There’s so much opportunity to improve the profitability of the same stores because we already have the infrastructure. In one way, that becomes appealing but in another sense, it’s easier to have more average volume stores than it is to have lower but exceptional. It’s that question of what challenges you want to solve. Do you want to scale where we grow a lot of these things? As long as we’re hitting this total dollar thing, we’re okay versus we’re going to have less but they’re going to be extremely profitable. It’s a whole other angle.It's easier to have a more average volume of stores than to have a lower but exceptional number of stores. But it's really all up to you. Click To Tweet
Also, the lifestyle like getting on planes. What kind of lifestyle do you want to have as you guys leave this thing?
Our employees and our leadership team are the ones who have to travel between and get into different time changes and time zones. Is it all worth it or can we achieve a similar goal without complicating our life as much? I enjoy teaching people. I enjoy getting on podcasts. I have my own podcast and working on a personal brand. It’s seeing other people succeed, then there are opportunities that are arising from that. I can act more as an advisor, strategist, and coach to help someone else grow their business without the operational responsibilities that I currently have.
I think you have a powerful story in terms of what you have built is what people dream of, but you’re doing it and you’re figuring it out. The fact that you have that in your heart to share it with other people and help other people is really cool.
Franchising provides an amazing opportunity that a lot of people don’t think about. It’s not on the list of things. They’re talking about real estate, software, and all these things about how people make money. I think franchising is an awesome opportunity for people who are operations focused. They’re good at sales and working with people. I talk about it on Twitter like it’s speed to scale. If you want to grow quickly, franchising can be that or if you don’t, you want to stay at a certain size, and you’re good with that, it can be whatever you want it to be. You find a brand that you like with people that you enjoy working with and focus on making that thing as big as you can.
It is a mindset thing. That was one of the things that changed for you guys. It was getting into a different mindset of scale, but it’s easier said than done.
There’s a community aspect. I don’t know if people realize but once you’re buy-in and you’re a member of the country club, you have access to as many franchisees that exist. For Midas, there are about 800 of us or whatever it is. Maybe it’s less than that, but I could call up any one of them and we could talk about sales, profits, margins, payroll, best practices, and all this stuff. If you’re on the outside, no one wants to talk to you.
If you’re your own independent business and I called up Joe’s Auto Repair down the street and wanted to ask how business was or what success is he having with marketing lately, he’s not going to talk to me. If you’re in a franchise system, some of my best friends now are fellow franchisees. We’ll talk to each other about anything.
I’ve hosted live interviews with successful franchisees and the audience was 70 other Midas franchisees. Midas put that on. I put it on for the benefit of myself because I wanted to learn, but then to help everybody else around me. All that does is it strengthens my personal brand within the franchise brand. It runs the strategy and does the playbook.
If you say, “I want to build my own personal brand. I want to strengthen the community within it,” people are more willing to help you then, which allows you to grow faster, which is the speed to scale aspect of it. Once someone realizes the power within it, they wouldn’t want an independent business anymore. There are so many benefits that outweigh it. Once you realize that, it’s amazing.
You have to give in order to receive too. Help other people in some form or fashion, and find an excuse for asking for help. Humble up a little bit and say, “Do you mind if I pick your brain about this because there are a lot of people that have been through the stuff that you may be trying to figure out.” I think there’s a little bit of the four-minute mile mindset. Other franchise owners break through barriers that a lot of other franchise owners thought were unbreakable barriers.
What you’re doing, the other groups have rolled up to a hundred. Who knows what the ceiling is? It’s a lot easier to learn from other people who are willing to share it with you than trying to figure it all out on your own. I would also imagine that you are also a potential win-win opportunity for a franchise owner that’s thinking about exiting too. They know who you are. They know what you guys are up to.
It’s fully my intention of doing that. You establish a relationship. You help. You figure out, “How can I help you?” Whether it’s employment things because usually, the biggest pain point is hiring people, so the best practice around that and trying to help. When the day comes, you let them know, “We’re looking to expand into X, Y and Z. If you ever think about selling, please give me a call.” I’ve gotten those calls. That’s how we’ve grown and how we continue to grow.
We’ll see if we can figure out a win-win deal. Thank you for coming on and congratulations on the success that you’re having. If people want to get in touch with you, what’s the best way for people to find you?
I’m everywhere. Twitter, as you mentioned. Brian Beers, find me there. LinkedIn, I’m there as well and I have a podcast which is called Business with Beers, where I talk about entrepreneurs. We talk about growing their business. We talk about once you make money, where do you invest it? I have a lot of friends in the real estate space and alternative investing spaces that are interesting. I’m rolling out this franchise-focus series every Friday as well. Lots of good content are coming out there. BrianBeers.com, I have a newsletter too that I send out pretty frequently every week or so talking about podcast things I’ve learned that week, franchising, and everything in my world.
That’s fun. He’s good to follow on Twitter. That’s where I follow him. That’s where I heard about him. Good stuff, Brian. Thanks. I appreciate it. I enjoyed it.
Thanks for having me.