Second Act Success Career Podcast
Season 1 - Non-Food Franchising Is At An All Time High
Episode - #96
Host: Shannon Russell
Guest: Jon Ostenson
Transcription (*created by Descript and may not be perfectly accurate)
[00:01:12] Shannon Russell:
Welcome back to the show, my friend, whether you are a longtime listener or just discovering Second Act Success. I am so happy to have you here. As some of you may know.
My first venture into entrepreneurship after I left my television career was as a franchisee. I purchased a Snapology STEM Education franchise, and I actually still own it today. It's been seven years now. During this time I have learned so much about business that I've gone on to open another business as a career transition coach, which is probably what you most know me for, which is my Second Act Success business. And of course, this podcast. So now I own two businesses. One is a franchise and one is an independent business. That is just my own.
I am a fan of [00:02:00] franchising because I feel like it really taught me the basics of launching a business with a great deal of support from my franchise or and from other owners that you just don't get when you launch a business completely on your own.
So, if you are curious about the franchising world, then stay tuned. Today I have a franchising expert with us to talk about why franchising maybe the best way for aspiring entrepreneurs to launch into business. Jon Ostenson is the founder of Franbridge Consulting. He is a top 1% national franchise broker and the author of the book Non-Food Franchising.
Jon says franchising is at an all time high and I'm excited for us to learn more. So let's meet Jon Ostenson.
[00:02:45] Shannon Russell: All right. Welcome to the show, Jon Ostenson.
It's so great to have you.
[00:02:50] Jon Ostenson: Thanks for having me, Shannon. Looking forward to our conversation.
[00:02:52] Shannon Russell: Me too, and I've been a big fan of yours. I'm a fan of Entrepreneurs On Fire. You've been on a lot of episodes with John Lee [00:03:00] Dumas, and I was like, okay, I have to speak with you because I feel like you have this experience in both the business side of things and the franchising.
And I think it's just really interesting for a lot of my listeners who are sitting here wanting a career change and they just don't know how to do it. As a franchisee myself, I feel like franchises are, kind of the way to go when you don't have a lot of other business experience
. So I really wanna get your take on all of that.
But tell me what you do as the c e O of Fran Bridge Consulting.
[00:03:31] Jon Ostenson: Yeah, so at Fran Bridge Consulting we have the opportunity to work with clients all across North America. we represent over 600 different franchise brands across a wide array of industries in what I would call non-food franchising Little. Goofy sounding term that I've coined out there, but it's really stuck because so many people want to get into business ownership and they think of franchising and associated with fast food, yet there's so many other opportunities in these other industries I'm sure we'll touch on.
, so I get the opportunity, to introduce them to, [00:04:00] you know, businesses in their area that are available that check all of our criteria. It comes down to about 10 or so opportunities that we would say based on your situation and what you've shared with us, based on what we see from a strength of franchisor out there, financial model, competitive advantage, you know, momentum wise in the market.
And we bring all that together with what's available and we say, Hey. Here are the 10, let us walk you through 'em. And then our clients will say, here are the couple that I wanna engage with. And we'll tee up +introductions and then, you know, we, we've got an ecosystem to support them along the way. And, you know, I'll get on touch base clients with our calls, with our clients every week or two and just serve as a sounding board and help them process what they're hearing.
And Shannon, you probably know this, but the great thing is our model's entirely free, for clients to. Participate in. So, it's very much like an executive search model where we're funded by the franchise brands. So it's a very clean process and, we love exposing people to different opportunities.
[00:04:48] Shannon Russell: So you're really just matching people to business opportunities because you also work with the franchisors.
[00:04:54] Jon Ostenson: Correct. So we've got relationships and we've been very blessed. We do more placements than anybody else in the country. And so we get to see [00:05:00] firsthand what's resonating with different backgrounds, and why is it resonating. So we kind of bring all that, into consideration. But we know a lot of these franchise or leadership teams and, you know, if you go out and Google their brand, you know, You'll see their best foot forward.
You know, they're putting forth their marketing message, you know, but it's important to understand what's really going on behind the scenes. You know, is this a franchise system that has only signed two people in the past six months, or have they signed, you know, 150 and why is it they that they have and can they support it?
And so, you know, those are the questions that we really dig into. We spend a lot of time with these franchisors, oftentimes face-to-face, building those relationships and really understanding their businesses.
[00:05:36] Shannon Russell: And so when a client comes to you, do they say, I wanna work in this space, or do you find that the majority of people don't know what they want to do and they're relying on your expertise to give them the best options?
[00:05:48] Jon Ostenson: Definitely the majority say, Hey, we're pretty open-minded. You know, we're we'll kind of rest on, you know, on your judgment, and that's what's fun. I'd say 90% of our clients on average, end up in a field that they had no [00:06:00] experience in. And that they really didn't have on their radar. And so, oftentimes you don't know what you're looking for until it's right in front of you and then you say, wait a minute.
Actually, that could be really interesting. I never thought about that niche. And so, that's probably the most fun that we have is, just exposing them to these different types of businesses. I was, on a show earlier this morning, we went through the top 10 opportunities of just different types of businesses, variety wise.
And, his jaw was on the ground of, Hey, I didn't know that businesses even existed in there. And you can make money doing that. Sometimes I'd say massive industry like. 50 billion industry, but there's not a national or global dominant player. It's very fragmented. And so you can come in and bring maybe a white glove approach to a blue collar industry.
So, all that to say, people that come in open-minded, oftentimes even when they get into the process and they say, Hey, there's four that I wanna speak with, of the ones you presented, the one that's number four in their mind pops up to number one because somebody gets brought up on call, they haven't thought about.
So, it can be a lot of fun to go through it.
[00:06:57] Shannon Russell: I love that because I think when you want to [00:07:00] get into business, become a business owner, and I've said this on the show before, I. I am very pro franchise because I feel like as a first time business owner, you're getting that extra help from the corporate office, from the corporate level, from you and your team to kind of really vet the process out, and it's just easier to have that.
Format in place than just try to build something from scratch and keep your fingers crossed. At least in my experience, it was very beneficial. Although I find it interesting because I jumped into the children's enrichment space, kind of like a little niche of building with Legos, like how cool is that?
But you talk a lot about how. The non-sexy businesses are the ones that really do a lot better than maybe the more fun, exciting ones. So I'd love to have you speak to that kind of, the most profitable franchises maybe, and if they're not the most exciting.
[00:07:53] Jon Ostenson: Yeah, and, I do like the kids space too, that that's one that I'd have high on my list. So, yeah, you know, I talk oftentimes about boring, [00:08:00] you know, non-sexy cash flow in businesses, things that are understandable, non trendy. They're not gonna be the latest fad. And so it's things like property services.
Insulation, gutters, dumpsters, or maybe oil changes, things that are, aren't going anywhere, anytime. You know, we have a lot of interest, I'd say in health and wellness, and I do think fitness is a subset of health and wellness is a little bit crowded. I mean, there are a few concepts that we like, but I think some are duplicative.
But we like health and wellness. We've been talking about a recession for the past, I don't know, 10 years. And so if the economy ever does eventually go south, what kind of business do you wanna be positioned in?
And, I always go back to what are you going to continue to spend on, regardless of the economy? It's, the things you care about your kids, to your point, it's your pets. It's your aging pet, it's your health, your homes. So I think businesses that operate in those kind of spaces. And what's fascinating, Shannon, is when.
We look at, you know, I mentioned property services. I mean, that's really been growing like wildfire and, and I'm invested in a number of them myself, primarily in property services. So I love that space. But, I had a doctor [00:09:00] in Portland yesterday sign for a gutter business.
I had a former corporate executive down in Florida yesterday, signed for a property management business. You know, they don't have any background in those spaces. But they love kind of the qualities around it. So, the, doctors with the
gutters, I mean, that's our fourth doctor that we've placed with that same gutter business.
And so, they put a manager in place and then they manage the manager with that franchisor. So it's almost like that manager can come to them for their coaching needs or, some basic decision making. But if it's a good manager and it comes down to having a good person running it, yeah, that franchisor can also lean in and provide them, you know, the technical resources and the answers to questions.
So it takes a little bit of the burden off of you. And I don't wanna sugarcoat it. I mean, nothing's easy. This isn't a passive investment, though. There are four out there that are truly passive, or the franchisor will manage the business for you, which our clients are absolutely loving those. I'd love to see more businesses do that.
But. It is very doable, and I'd say probably a little over half, maybe two thirds of our clients are going with that semi-passive, semi-absentee arrangement where they manage the manager and then the other half are saying, [00:10:00] Hey, we wanna jump in, run the business ourselves, at least for a period of time, and then maybe put someone in place and kind of move on to our next thing.
[00:10:07] Shannon Russell: I think that's great too. I started, as an owner operator and then I just, within the last couple of years, I switched over to more of a passive role. And it's, nice because you get in, you get to get. Your hands dirty, learning the business, and then you say, okay, I'm gonna pass it off.
And for a retired doctor, you know, they're not gonna wanna get their hands too dirty in a new business, so
[00:10:27] Jon Ostenson: Yeah. And actually these doctors aren't retired. They're still running. Running full steam. They, their W2 s too high. They don't, even though they're tired times, and this is really interesting, but. They may be tired of doing what they're doing, but they say, Hey, you know, I wanna diversify my income.
You know, there's only so many good real estate deals to be had right now, so maybe I get into business ownership and I get the tax write offs and I get the exit potential down the road and it can be intellectually stimulating to try something new. Whereas they've been doing, you know, medicine, let's say for many years and have never owned a business.
And I love the point that you made. It [00:11:00] does kind of give you that support system. Versus just a startup, you're starting on third base. A lot has been done for you. There's a path to profitability. You've got other franchisees living the same thing day in, day out, providing great, best practices and insights.
That franchisor is, you know, is coaching you from the sidelines. So you're in business for yourself and not by yourself, to be very cliche on you. Which I think is comforting to a lot of people.
[00:11:23] Shannon Russell: Oh it is. And you know, it brings me up, uh, to a question I did wanna ask about management. And a lot of people want to go into business, but managing people is not something that, a lot of us like to do. So to be able to open a business that is just, you know, one manager who's kind of running it, and I bet and Property services and you know, if you have dumpster business or gutters, whatever it might be, it's not a huge team of people like you might have at a McDonald's.
[00:11:51] Jon Ostenson: Yeah. You have to think about that. I mean, sometimes we have a white collar workforce that says, Hey, I'm not sure I'm comfortable with hiring blue collar employees. I just haven't been there. Others say, Hey, I love the idea of, you know, not [00:12:00] have hiring premadonnas, and people that are more hourly or what have you.
So it's fascinating to see people's mindsets and a lot of that's based on their previous experiences. But, I'd say the common thread I hear around the country is, how can I make the most money with the fewest number of employees? You know, that's very common. Where some people say, Hey, that's my superpower is managing people and building a team and the culture, and they thrive on that.
But I'd say the majority do like the smaller teams and you know, maybe it's over time it'll be a bigger team, but they can start small and very scalable. Some of our models actually allow for 10 99 contractors, you know, in.
[00:12:32] Shannon Russell: Yeah.
[00:12:34] Jon Ostenson: If you bring them consistent work, they'll do a good job for you. And you know, you may have to face a few headaches early on, but over time you can build out a bench and maybe it's part-time or it's subs.
I used to be a franchisor at Shelf Genie, uh, for instance, and on that side of the table. And you know, we had a large group of franchisees across North America that I was responsible for supporting day in, day out. And we found that stay at home moms were a great, group of designers for us.
They were non-salesy. [00:13:00] They loved to go in and have conversations about kitchen and how you use the kitchen and pull out shelving, offer these solutions. And those were a great resource and they're all part-time, very flexible for them. Uber drivers for a great source for employees as well, that, if they, you carry a good conversation, you know, ask 'em what they're doing outside of Uber and, sometimes you don't know those best practices until you talk to other franchisees within the system.
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[00:13:52] Shannon Russell: Franchising is kind of at an all time high? Do you think it's because of the pandemic, or what is it about this world that really interests [00:14:00] people more so now than in the past?
[00:14:02] Jon Ostenson: I think it's a combination of a few things. It was thriving largely before the pandemic, but I think that accelerated things, you know, people questioning the path they're on and you face this, you know, in, in your practice I, I'm sure, but you know, kind of saying, Hey, maybe now's the time to make that, you know, the famous P word pivot.
I think, I think that's part of it. I think it's also you've got record levels of cash on the sidelines. And again, only so many good real estate deals, stock markets all over, but where are you gonna put your cash to work? And I do think there's also just a, you know, there's so many negative news headlines out there, and I follow all that stuff with the Fed and, the talking heads, you know, talking about politics or where the market's headed. I, that is a complete contrast to what I see on the ground. I mean, we're doing deals in Los Angeles, Chicago, Seattle, New York. Places are not getting positive headlines. We're. But I mean, we're literally doubling our business in the first quarter of this year over q4, which was a record quarter itself.
We're just getting an amazing amount of interest. And I think part of [00:15:00] it is there are a lot of really great models out there, different franchise businesses that people are learning about and things like, you know, my book that came out or other resources we're getting out there and talking about, hey, franchising is so much more than fast food and it's really.
It's resonating and people see the successes and a lot of times it's their friend or family that had a successful franchise and then they come back to us. We now have clients that are coming to us, you know, saying, Hey, we've got the first opportunity in a good place. We're ready for round two.
We have a client signing tomorrow up in, uh, New Jersey actually, that's, he lives in Philadelphia business, New Jersey, but you know, he's got a great team in place. On the first one he said, Hey, I'm ready for the second one.
[00:15:35] Shannon Russell: multi-brands, multi-business owners as well. So let's talk about your book then. So non-food franchising,
[00:15:43] Jon Ostenson: Yeah.
[00:15:43] Shannon Russell: where did you come up with the idea for this and what is it all about? It's the better path to business ownership.
[00:15:49] Jon Ostenson: Absolutely non food franchising. I'd be happy to give a free digital copy to all of your listeners if they come out to our website. You know, we can talk about that later on in the show. But, no, it's, it's, it's been out a few months now. We've had a [00:16:00] great response and really it's just furthering the education.
and we get into topics in there about, the financials and what does that look like. We talked about the industry. talk about considerations, you know, things to think about during the process. Yeah. But we also have a chapter on franchising versus startups, and we talk about the pros and cons both ways.
You know, traditional startups, we talk about the success rate of franchising versus startups. We have a
chapter that talks about franchising versus acquiring an existing business. That whole acquisition through entrepreneurship is very popular. Well, There's a lot of trade-offs. Oftentimes people don't think about when they're going through it.
So, we get into that. We have a chapter on the legal side, chapter on, kind of the long term strategy side. We also have a chapter on, if you have a current business, should you consider scaling it through franchising. that's not something that we. Handled in-house, but we have a great partner that that does.
And, you know, we're always open to having those conversations, to share some thoughts. But, no, it's really been helpful. We try to make it an easy, I say we larger than me, try to make it an easy read about 90, 95 pages and, [00:17:00] using it to, to help educate and, you know, if anyone wants to go buy it and actually purchase it on Amazon, all profits go to a great, nonprofit that we support, hope International.
So, which helps /entrepreneurs all throughout the world.
[00:17:11] Shannon Russell: That's wonderful. Oh, it just sounds like it's a great starting off point for people interested in the franchising world you know, there's a lot about this industry that people don't know about what franchising is and to go back what you said, you know, a lot of people think franchising is McDonald's or Subway or something like that, but there's so much more to it to really explore and it sounds like your book really lets people dive into that.
[00:17:34] Jon Ostenson: No, and nothing against food. I mean, we, I'm very thankful for all those that do get into food. We certainly need them probably 5% of our clients do want to get into food, but. The vast, vast majority just feel the same way that I do, that there are easier ways to make money.
And part of that is the employee count, which you mentioned. Part of it's the initial capital investment, the operating hours, you know, the potential for inventory to go bad. In the lower margins, there's just easier ways to make money in my humble [00:18:00] opinion. That being said, very thankful , for our food friends.
[00:18:03] Shannon Russell: Yes. You mentioned earlier that there were four franchises that were booming?
[00:18:07] Jon Ostenson: Yeah, they're booming and, and they, bring in that passive. Model. So everyone's question is, they go through the processes. How passive is this opportunity? I know it can be run semi passively, but what does that really look like on a day-to-day basis? And we talk about that. We introduce some other franchisees in the systems.
But ultimately, the holy grail for a lot of people would be, Hey, I've got zero time to put into a business. I would love to have exposure to business ownership, whether it be, for the cash flow, the exit potential, the tax write offs that you get as a business owner, which, I'm a big fan of, a lot of different strategies around that.
They say I want exposure to franchising, but I just don't have any time at all, and. There exist in very rare circumstances, a passive investor model where the franchisor will actually manage the business for you. They will hire the people, they will run the business, they will do everything you get on one call a month, [00:19:00] review KPIs, key performance indicators with their team, and make decisions that need to be made.
Talk strategy. But you are not running the business. So it's really a corporate managed model, but using the investor funding. And so there's four of the five I like, two in the pet space, one in the, installation, property services space.
One, just recently that came on board with the investor model and kind of the health and wellness space. It's custom orthotics and insoles. we do a, uh, kind of an exclusive arrangement with them that don't wanna work with all big broker groups. We just do a one-off with them. Yeah, but, and that's actually one that I'm personally investing in myself.
So, yeah, I live in Atlanta, but we're putting a couple locations down in the Miami area, which is where I love to vacation anyway. So now I've got a business reason for being down there. But they're gonna run the business for me, and so I've had clients buy into each of these, very popular models.
And typically you would pay the franchise or somewhere in the neighborhood at 5% of revenue to run the business for you. So it decreases your margin a little bit. [00:20:00] But
[00:20:00] Shannon Russell: That's on top of franchise fees.
[00:20:02] Jon Ostenson: Yeah, in the case of the, the one that I'm buying down in Miami, they actually don't have a royalty. Instead they've got an advertising fee, but no royalty.
So it's just a different model, which is unique. But anyway, even with the royalty on the other ones, the math still checks out.
[00:20:15] Shannon Russell: / so for a lot of my listeners and people who, I work with, women in their late thirties, forties, fifties, maybe new moms that are looking for something different.
They realize that their career no longer fits them and they're looking for a change. What would you suggest the first step maybe be for these women to explore, franchising and kind of want to get into the world where they can be their own boss?
[00:20:39] Jon Ostenson: very easy first step would be, you know, come out to our website, franbridgeconsulting.com, sign up for our monthly newsletter entirely free. I'll have my assistant then reach out and share digital copies, whether they wanna listen to it or read it. Digital copies, of our book.
Certainly feel free to go to Amazon. It. Supports a great nonprofit. But I think the book, you know, it's fairly easy to read. I think that's gonna fill in a lot of gaps in understanding and [00:21:00] kind of get the juices flowing on the types of ideas out there. And then if you'd like to take a next step, you know, would love to get on a call and, share some thoughts and, kind of hear about your situation and we decide if it makes sense to take further steps, at this time.
So, I'm more than happy to, to help in any way we can, but I, I'd say, Getting a book, listening to some other podcasts that I've done, could be a good, very small, toe in the water first step.
[00:21:22] Shannon Russell: Do you find that people have to figure out their financing first? Cuz there might be a new mom that's out there and she knows she doesn't wanna go back to work she might want to open a franchise. Business and she's worried about the money. Can we talk a little bit about how the funding for a business like this gets started?
[00:21:38] Jon Ostenson: to kind of level set on what that investment looks like. And certainly, you know, we'll do laundromats or you know, oil changes or other big, very large investments, but I'd say the majority of our clients are getting into. Placements today. And opportunities somewhere in the 1 25 to 300 range.
And that's all an investment. That's your franchise fee. Startup cost, working capital for a few months, all kind of [00:22:00] built in. I'd say directionally, probably a third of our clients are using cash. To fund it. A third are using SBA loans where maybe you put in 50,000 in cash and then you finance the rest.
Probably a third are using an old retirement plan. It's what we call a Robs program where you can roll over an old IRA or 401K without the tax implications and purchase the business with your retirement plan. Yes, some are using a HELOC or other avenues as well. We try to make it fairly turnkey because we know that most people don't have experience in these areas.
And so, we've got great partners to kind of help them, whether it be franchise attorney down the road or they need a recruiter or a coach. We can certainly help them in, in those avenues.
[00:22:38] Shannon Russell: I think what you provide is something so, so valuable because when I was starting out, I had a three-year-old and a one-year-old at the time and I knew I wanted to leave my career and I wanted to open a business but I did it all on my own. It was messy and it was confusing.
And I definitely know a lot more now than I did then, but I feel like having your team to know that, you know, the people to [00:23:00] direct me to would've been. A lifesaver at that moment. Because there is the legal side, the money side, there's just so many aspects that you wanna get right when you start.
[00:23:10] Jon Ostenson: No, and kudos to you on what you built. And I mean, it's, it can be done on your own, but you know, if you're able to start on third base instead of first base, it just makes it a little easier,
[00:23:18] Shannon Russell: Absolutely. My franchise Snapology it. Was amazing it's almost seven years now and that's what gave me the confidence to open Second Act Success and start my career coaching practice in the podcast because I had that experience in place from my franchise that I was like, I can open another business.
I know how to do it now. So that's why I'm so pro franchise in the work that you do, John, because then. People have that experience, they have that knowledge, they have those go-to people to help. And then you feel like you can take on the world and open, a million more and you just have that confidence that I think you need to be your own boss.
[00:23:54] Jon Ostenson: I love how you say that. I often say, you know, if you ever get tired of building someone else's empire, you know, let's go build [00:24:00] your own. And, I think that's a mindset and I just find in, in good people all across the country, I mean, they really have that entrepreneurial desire and some will. Walk up to the ladder and climb up to the diving board, someone will get to the very end and decide, it's not for them or the time's not right because the timing is never right.
The timing is never right to start a business. There's always a reason not to, but, for so many of our clients that have done it and look back, they're thankful that they have. And, uh, so no, we love what we do and getting to help people kind of in that journey.
[00:24:27] Shannon Russell: That's fantastic. Where can my listeners contact you again to get your book? To get on your email newsletter? What's the best place?
[00:24:35] Jon Ostenson: Yeah, come out to our website, franbridgeconsulting.com. franbridgeconsulting.com. It should be fairly easy to access, uh, our newsletter. And like I said, we'll then reach out to you and, share the book and, if you'd like to take a further step, we'll send you a link to our calendar as well and we can have a conversation.
So yeah, I'd be more than happy to help.
[00:24:52] Shannon Russell: I'm gonna link to everything in the show notes too, so my audience can get to it. And I just really appreciate you taking the time to kind of explain all of this [00:25:00] and show the pros and cons of this industry that you know so well. So thank you very much.
[00:25:05] Jon Ostenson: Thanks for having me. Enjoyed it.
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