Dan Rowe (00:00)
All right, welcome back to Smart Franchising with Fransmart. Today we’re talking with Jack Johnson of Franserve and also Franchise Insiders.

And today we’re talking about franchise resales.

Both how to grow a company that you can eventually sell for a ton of money and then also where you go to find resales in case you don’t want to start from scratch with a new franchise. Everyone’s always talking about buying new franchises, but there’s big opportunities in resales.

Jack and his amazing wife Jill create great content that I follow on all things franchising and are actually successful multi-unit franchisees themselves and help people get into franchising.

But lately I’ve seen you guys posting about resales and so with that I’m excited to talk to you. But Jack, about introduce yourself and tell everyone a little bit about you.

Jack Johnson (00:49)
Dan, thanks for the great introduction. Thank you for having me on the podcast and any opportunity to talk shop with you in regards to franchising is, I’m glad to be here to do it.

So my name is Jack Johnson. I’m the CEO of the Franchise Insiders. We are franchise consultants. We help people identify the right franchise to invest in, whether that be a new franchise or even an existing franchise over the past, gosh, eight years, Dan.

my wife, Jill and I have helped over 600 people become franchise owners. We’ve actually saved them $2 million in franchise fees along the way. and we love it.

We love helping people do this. and just to kind of dovetail into this whole conversation, just before I got on this, podcast with you, I was speaking with a client about determining, their unit package in, ⁓ in Salt Lake city and.

They are looking at right now doing six units and we talked about the benefits of six versus four, not just for today, but exactly what you said before. For building a business, they can scale and sell one day. So happy to be on here and talk about all of this with you today.

Dan Rowe (01:53)
Good, good. And you, I mean, you’ve brought us franchises. So we use you. originally, think I met you originally with Rise. You brought us who turned out to be our most successful Rise franchisee, Rise Biscuits and Donuts.

Franchisee’s a good dude, but no, it’s been a wonderful relationship. But that was a brand new franchise. So I wanted to get your thoughts. Like, why have you guys been posting lately about resales? Why is this important to you?

Jack Johnson (02:19)
Yeah, and just before we go on to that, Dan, I’m actually in Chicago showing a client right now, SwingBase and Paymore. So just two of your brands right before we got on, I was putting in their deck. on to resales. So more than ever, this is being talked about by people.

And I think some of it has been spurred by Cody Sanchez, who any of you out there who follow me on LinkedIn, you know I’m an owner of the Pinks Windows franchise. We have all of Palm Beach County.

Dan Rowe (02:30)
Thank you.

Jack Johnson (02:46)
We are scaling this business like crazy. But Cody Sanchez is one of the co-owners of Rezzy Brands. And before she became involved in franchising, she sort of rose to fame with this whole contrarian thinking, hey, you don’t have to stay in your job.

You can go buy out some mom and pop who are ready to retire and buy their million dollar business for pennies on the dollar if you get them to sort of sell or finance it to you. So this whole notion of, hey, wait a second, I could buy a cash flowing business.

and not have to come out of pocket for millions of dollars is a possibility? Well, the truth is probably maybe not. People, if they’ve got a valuable business, if it’s worth something, they want what it’s worth.

But even so, Dan, as you know, you still can have your cake and eat it too, because you can go to the SBA if the numbers are good, and you can do a great finance deal where you’re still paying it for it on a monthly basis. So I think it makes sense for certain types of entrepreneurs

whether it be first time entrepreneurs who wanna come right into a cash flowing business, or even for people like you and me, who we might be out there looking for other things to diversify into. Like right now I’m looking at a business that has multiple locations, does millions of dollars, and if I can get the right deal on it, I’ll buy it.

Dan Rowe (03:57)
Yeah. And then immediately you have sales and cash. You’re not waiting six or nine months to open another six or nine months to get to profitability. The minute you close in that business, you actually have something that’s already up and running and profitable. And then the profits of the business fund the acquisition in the first place.

Jack Johnson (04:09)
That’s right.

Right, mean, just so look at it like this. So let’s say theoretically I wanted to buy a $5 million business and I come to the table with $2 million and I take out an SBA loan to do that. I think my monthly note would be somewhere around say 50 grand or something like that.

But the cashflow of the business, I’m still going to be even after I pay the note and with the profitability of the business, I still might have another 50K to 100K in profitability.

which I can then use to scale the business and grow it further. So yeah, if you find the right deal, now that’s a bigger deal. There are some other types of deals out there and it’s all shapes and sizes. There are some people who get into franchising, Dan, and they’re not the right fit. And that’s okay, it happens every single day. I think it’s better to identify that sooner versus later, but you have to be careful because I think, and you’ve probably seen me post about this on LinkedIn, about month six, think most people probably wanna quit.

Month six is a really hard place to be. But by month 12, you should be really happy. You should feel galvanized. Your business should be getting profitable, we hope, and you’re ready to go next level.

But if at that point the business still isn’t where you want it to be, and maybe the numbers still aren’t the best, you can work with people like me to help you sell your business. And there’s someone who already knows how to take that business and scale it. But there are little things you can do as a prospective franchise owner.

to make that process easier on the negotiation front, we can get into that too, if you’d like.

Dan Rowe (05:36)
Yeah. Now the truth is this business franchising is for the operators. The operators are the ones that get wealthy, not always the P E guys. It’s really the grinders, the people that know how to work.

And I know so many people who started with nothing because they’re good operators, took over a struggling business and there’s, you know, turned it around and made it successful. Last week on my podcast, we had this, this lady, Catherine and Jacob from, ⁓

from Toronto. She got her start with a bunch of, think, 12 struggling Wendy’s, 12 struggling Wendy’s that she got for next to nothing down. She raised the store sales a million dollars per location, right? So she takes these Wendy’s. Wendy’s is already a brand name. It’s like, are the odds that you’re going to be able to go get a Wendy’s that are struggling and raise your sales a million dollars? She went through the whole thing and it’s just like, all she did is went back to operations.

just clean the stores and was nice to her staff and focused on the basics and a million. So 12 million more dollars in brand new sales she created. And now she’s got, I don’t know, 50, 60 franchises like, but a lot of examples of where people start, there’s so much money. You know, you take a good franchise, it’s profitable. The wrong person buys it.

The wrong people do the wrong things. At some point they’ll run the business down. There’s nothing wrong with the franchise. It’s just that particular person ran it down.

Jack Johnson (06:43)
Wow.

Dan Rowe (06:58)
great opportunity for someone to go in and turn around.

Jack Johnson (07:01)
Well, I think you said something really smart at the beginning of our, of the podcast, which was it’s playing both offense and defense. And I think franchisors also need to be very mindful of if it’s not a right fit with a franchisee.

And I think it’s both parties being honest about that. And the sooner people can be honest, the sooner one franchisee can get on to selling it to the next and bring someone in who can take the business to the next level. And you’re right.

If you look at the value and this is so biz by cell, it’s interesting. If you put an ad on biz by cell, the quality of perspective business buyer that you get is probably a hundred times what you might see on someone filling out a form on franchise opportunities or something. And that’s not a shot at franchise opportunities because they’re great. You have to do it all if you’re a franchise or, but it’s because people love this idea of an existing business.

and they feel like it’s easier to run, et cetera. Now, a franchise can put these guardrails in to help you. Like you said, if I’m more operationally minded, that actually might make me a better franchisee because now all of a sudden the franchisee is watching my back at all times.

Like last week, we got a call from our franchisor and they said, look, a certain number of your leads haven’t been followed up on. You guys need to follow up on these leads because if you did that, you would be here.

So immediately we were able to make the changes. If we didn’t have someone having our back like our franchisor, that might’ve been something that went unnoticed for weeks. So I really do think it’s a team sport.

Dan Rowe (08:33)
Yeah, where I was at offense and defense. So you think about it in a perfect world. know, Jack, you’ve been in this zone before, right? You feel like you’re in this zone. You’re you’re moving. Everything seems to be going great. You’re happy.

You’re excited. You’re focused that that zone a franchisee buys a franchise. And at that moment, that franchise is the shiny toy in that frame in his toy box, right? This thing that he’s excited about. He’s on a honeymoon period, whatever you want to call it. He’s focused and excited about the brand.

And as long as he is, and he keeps executing and he keeps following the playbook enthusiastically, he’s going to have good success. Life happens, divorce, partnership problems, worse problems. Like there’s other issues that drive people not to be the same.

And so for some reason, that shiny toy is not the shiny toy in your toy box anymore. Now you’re onto something else. Maybe you’re thinking about something else. And if you’re not careful,

little by little by little, your business starts to atrophy and starts to go down, down, down to the point where it could be a turnaround.

That’s why I think franchise or need to have an active resales program like the, they need to coach their franchisees about having like an active resale program so that the minute someone starts to get tired or fatigued, how do we get in a new franchisee to now get back in a honeymoon? So that business continues to stay with people that are in the zone.

Jack Johnson (09:55)
It’s a really good perspective. There’s a staffing franchise called Express Staffing, and they have a whole resale website. That’s a business where their item 19 shows some pretty robust revenue numbers, but I believe that that franchise is, it’s a lot of hard work. It’s not a passive investment. It’s not a diversification piece. It is mainly for an owner operator who

can operate at a very high level, but I think can burn out. so Express has done a great job of being proactive with it and having a site where boom, you put your Express up for sale and they can get it moved along. And I do think you’re right. think it’s a, people haven’t looked, people have looked at resales in the past and sort of a knee jerk reaction. And I think if we can just look at it as a normal part of the ecosystem, both parties will win.

that much faster. But to franchisees, and this is where you see a lot of times, you’ll have big fish franchisees in a system, right? That will have multiple locations. Like I have a client that owns, you know, like 30 exponential fitness franchises. And they’re good at going around and buying out single unit operators because they’ve got a team and they’ve got a system in place.

Dan Rowe (11:09)
Yeah, it’s not a negative thing. like like you said, Greg Flynn was on our podcast, biggest franchisee in the world. He hasn’t built in his thousands of stores. He hasn’t built everyone from scratch.

He goes and buys them. So it’s good for him to buy. It’s also good for sellers to sell, right? So one of the things that we do with all of our franchisees, we start with the end in mind. So anytime anyone buys a franchise, you know, you’re allowed to talk about whatever you can talk about. Tell the sign up. We don’t want to go afoul of the

of the rules. Soon as they’re in the franchise system, we actually help them come up with business plans and financial strategies about selling their business, right? So it’s sort of counterintuitive. Most, most of the times you think about sell someone the franchise and teach them how to run the franchise. We don’t, we actually start with the end in mind. We talk about the business that they want to sell and we get franchisees way more engaged in the idea of open a couple and then keep executing.

executing at a high level, compound your returns and go build more and more and more more and more. And eventually look at this asset that you have to sell. And it’s really good technique because now franchisees aren’t look, they’re not, you know, buying a franchise and cutting corners. And a lot of times franchisees think of every time that they write a check, it’s a cost. And the way we do it, they think about it more as a investment and investment in a big exit. So as long as you make selling the franchise,

selling your franchise a positive thing, then you kind of get that. Like at Five Guys, every single person who ever bought a Five Guys had to sign knowing that the franchisor could buy you out at a certain multiple. And you’re like, why would anyone do that? It’s like, well, 2,000 stores later, everyone did it because the truth is at some point you want to get bought out. And at Five Guys,

you built a couple stores, those would self-fund to 10 or 20 or 30 stores. And all of a sudden, the franchisors buying you back, buying out 20 or 30 stores, when you’ve only funded a handful of those, it’s an extremely positive thing. It’s not a negative thing at all.

Jack Johnson (13:09)
At the risk of upsetting franchise or is one of the things that, ⁓ Jill and I advise our clients on when they’re negotiating a friend, you know, most things in a franchise agreement that you’re not getting those changes, right? They are what they are. But one of the things historically that you’ve been able to negotiate is transfer fees. And one of the, the, the suggestions I make to my clients is ask if you can make a modification to where, if you are selling to an existing franchisee, if you can get the transfer fee waived. ⁓ now again,

Not everyone’s gonna approve that, but it’s a question to ask. again, it’s us looking to the future that benefits both the franchisor and the franchisee because the franchisee says, okay, if in the future this isn’t the right fit or I can get a good deal and a big fish can come along and buy me out, it also makes it more attractive for that existing franchisee who’s really good at operations to do a much better deal. So again, like you said, think we always, it’s just like territory. Now I never want a client to buy too much territory.

I’m not a proponent of someone buying more territory than they can handle. Trust me, as someone that owns five units, that knows what it’s like to write a really big franchise fee check, you only do that if you have the right amount of cash or another business or a job that can supplement that business as it grows. But having anything you can as you acquire these businesses to have more cashflow to help you get to profitability faster, that helps. So, I think it’s again,

It’s, looking at, and as you’re building a franchise, Dan, and I think this is key. If you buy too small of a territory, just one unit or so, when you’re in the trenches of building that business, sometimes it may not give you that thing that you need, right? We’re like, man, even if I become a top performing franchisee, I’m not going to make life changing money. Whereas if like with us, with our pinks Palm beach, I can see a future where we have 20 trucks. I can see a future where we hit.

you know, X amount of revenue to where it’s like, okay, this was all worth it. So that’s why I think it’s so worth it for someone to work with someone like you, to work with someone like Jill and myself to really look at this thing from a multi-dimensional level.

Dan Rowe (15:10)
Yeah, and I mean, some of the things that like just like we start off every franchisee with a business model or financial model, like every franchise or should incorporate in their training and their relationships with the franchisees, helping their franchisees shape a business that can be sold.

Right? So whether it’s a checklist of what the franchise or is going to want to see for an easy transfer, right? You want to sell your business. How do you make sure the franchise or doesn’t just, I mean, I actually have a brand right now where franchisees that want to get out their deals are dying because the franchise or it’s not responsive enough. And it’s just crazy. It’s crazy. So, you know, what’s the list of things that are franchise or needs to see so that that’s an easy transfer. Here’s another thing, Jack, what if someone comes and knocks at your door and says, I want to buy your

pinks. Everything that is about that business should be kept in a folder is if you are waiting for that knock on your door, right? Everything should be current, your insurances, your agreements, your leases, your whatever, whatever, everything it takes to run that business. Run the business as if you’re always ready for someone to knock on your door.

Jack Johnson (16:15)
I think that is such great advice. You know, I had a, there was a moment in my life where, and this is sort of related, sort of not, but it changed my thinking on how I would handle everything in my life. I went about a year without weighing myself on the scale. And one day get on the scale and I’m 30 pounds heavier than I thought I was. And I’m like, my God, how did that happen?

And I made a promise to myself that every day moving forward, I would weigh myself. know I don’t want to. know I went out last night and I ate too much pizza, but every single day I weigh myself. And I noticed I was able to hit my goals. And so I said to myself, what if I do the same thing in business? What if every single day I check all my bank accounts? I checked my cashflow, I checked my P &L. That may sound like a lot, but once you get in the routine, and I was just having this conversation with my GM for Pinks this morning, block off time.

And it may be for your point, Dan, make sure that our business, everything we need to sell, make sure everything is dialed in and we have everything. So if the question is ever asked, you’re ready. so with your business, check on everything every day, make sure your P &L is dialed in, work with a good accountant who’s plugged into your QuickBooks so that everything looks perfect. If you pay attention to your numbers every single day,

You’re exactly right. You will be ready when that person in every single day is a business owner, your life can change. That’s the absolute truth.

Dan Rowe (17:35)
Yeah. And I don’t know why. Like I always think sometimes this topic is negative. Like, ⁓ it’s a franchise for sale. What’s wrong with it? It’s like, that’s not the case. That’s not the case. There’s, mean, again, the Greg Flins are, you know, I had another guy on my podcast, 400 and something Taco Bells. And it’s just like half of them have come from acquiring. It’s not a negative thing. And he didn’t buy, he doesn’t want to buy struggling stores. He wants to buy successful stores because he’s just a big aggregator. So

No, it’s, think we got to shift the thought that it’s a negative thing and that somebody who has a franchise, the only reason you’re getting out of is that if you’re going down in flames, absolutely not. You basically got in this business to get wealthy. So open your business, figure out how to make so much profit that you want to just compound your profit by reinvesting and growing. And then you’ve got this business that, you know, you’re going to sell for a life changing amount of money, generationally life changing amount of money.

But at the same time, like I can tell you, was with part of my very first business. was a guy selling franchises for a bagel chain and they actually had an offer. Someone wanted to buy them. And this is 8 million years ago for 50 something million dollars, which is a lot of money. Then there’s a lot of money, you know, I mean, it’s a lot of money now. It’s a lot of money then. It was like a, maybe felt like a hundred million dollar check.

they lost that deal because of how long it took them to get all their files and everything working. They weren’t ready. They didn’t have, like you said, your accounting, your paperwork. They didn’t have their lease assigned. Some of the franchise agreements weren’t even current. And so, you know, this is, and it taught me that it taught me that my second brand was Qdoba. And we literally said, we’re running this business from day one to sell it. And so it was just, you know, you sort of learn from your mistakes.

Jack Johnson (19:16)
I have a client that they bought a few franchises with us and they were telling me about a conversation they had with their accountant. And the first year of their newest franchise, they had a loss of 120 grand. To someone out there that’s not familiar with owning businesses, multiple businesses, they might hear that and say, my gosh, that sounds terrible. To this guy, it was.

my gosh, it’s, I was one of the best phone calls of the year because essentially it’s going to, it’s going to knock off the profit of my other business and it’s going to mitigate my tax burden. and so again, that’s what I’ll say to all of you is that building business assets has so many advantages, from the vehicles you might buy, to even having like little things like, wow. Business had a loss. Yeah, but that benefits my other business. this is the other thing that I’ll say.

dovetailing into this whole topic. Look, the way that our tax structure is right now is, I mean, we may not see too many other times like this in our lifetime. So in my opinion, we’ve got five years, because who knows what the future may hold, and let’s put all politics aside. But the way that it’s structured right now, all of us need to be going out there and making as much money as we can, because you may never see taxes as low as this again in your life.

Dan Rowe (20:28)
Yeah, I agree. And by the way, I introduced you to, had a friend of mine from Toronto. He’s so disenchanted with Canada. He wants to move to America. I wanted to move to Florida and I, and he, and he said, he called me and I said, okay, which franchise do you want to go? no, none of them, unless they’re resales. He goes, I don’t want it. I can’t afford nine to 12 months to get open another nine to 12 months to get up to speed. want to, he had money. He has money in, in,

He goes, no, I want to buy a business that that’s already going and he was really taken you actually had a personality test or you had a profile test run me through how like how that went I just I just simply made an introduction knowing that he’d be in good hands and knowing that you and I are talking about resales, but how did all that go?

Jack Johnson (21:10)
It went really good, you know, and actually the way the conversation went, because he’s a former franchisor, I had another thought on it, which was down here in the United States, home services, like the franchise I own, Pink’s Windows, home services are booming. for anyone coming out of restaurants, you know the capital, need to scale something like that. I said, here’s another thought for you.

Let’s have you take our franchisee personality assessment, the Zoracle meta analysis, I should say. And let’s see where you compare to high performing franchise owners. And my thought is, is to show you some franchises that fit the bill. And the thought then is, is to have you own one of these franchises to see how they do this, what it’s like to run a home services franchise with the thought that you then come down here to Florida and then you could identify.

And by the way, Dan, all you have to do is hang out in your neighborhood. There is a mom and pop right now in everybody’s neighborhood delivering whether it’s new turf or insulation or windows or paint. Somebody out there has a brand that’s franchisable and can be done for very little money, unlike a brick and mortar. And that’s not to say brick and mortar is bad. Brick and mortar is great. Owning real estate is an amazing thing. But anyways, Dan, that’s where we are with him. As I said, in addition to looking at resales like you suggested,

Let’s have you work with one of these really successful home service franchisors and get a sense of what they’re doing and give you a flavor of how to be successful in it. And that way you can make that be your next franchise.

Dan Rowe (22:39)
Yeah, and what was that personality profile or the personality test? So what is it? What does it measure?

Jack Johnson (22:43)
It’s called Zoracle.

So there’s a couple of things that Zoracle looks at. looks at your, pardon me, I’m just pulling it up here. You ever have so many tabs open that you can’t find anything? So here’s what it does is first, it shows us where their strengths are. So for example, here’s the latest client that I’m working with. It says their top strengths are in marketing and human resources.

It says sales is where they are least effective. So it tells us that if they are to become a franchise owner, that it shows us where they need to hire. So dude, you’re not going to be the salesman. You need to hire a strong salesperson. It also helps the franchisor to understand their pace. for example, again, this particular, this is not your client. This is a different one I’m looking at. This particular client has a pace that is what they call slower relaxed, meaning

This person doesn’t want to move super fast on their franchise search. They want to take their time. If you had me take it, you’d see that I’m a fast spontaneous, meaning that I move very fast. It doesn’t bother me. I like to move at a faster pace. And so it shows us where people’s skills apply in a franchise. But then also down on the back end, it shows me where they compare to top performing franchise owners who have also taken this assessment.

So franchisors use the Zoracle assessment and they have their top performing franchisees take it. And that way you can see, look, I have similar traits to a top performing franchisee at this system. Now, generally speaking, what I do is I show them then out of that, the category, right? I don’t necessarily have them focus on a brand. say, here’s the categories where you compare it to high performers. And that’s just another sort of piece we have in the roadmap. But Dan, with AI now,

I can take all this data, I can feed it into AI, and I can come up with more things to help franchise owners these days faster than I ever could before. This is an amazing time to be a business owner.

Dan Rowe (24:45)
What AI tools do you like?

Jack Johnson (24:47)
I like all of them for different purposes. So I like Claude, I like Perplexity, and of course I like ChatGPT. I think if you’re doing creative writing, Claude is great. I think if you want more fact-based data than Perplexity, and if you’ve got to just use one, then ChatGPT is probably the one to sort of use for all.

Dan Rowe (25:06)
Yeah, I’m just learning all those. what why else do you like resale? like what what’s another argument for somebody buying? Let’s talk about the people getting into franchising. Why would they do it with the resale versus something that’s brand new?

Jack Johnson (25:18)
Well, I think if it’s franchise specific, a lot of the work is done. Like we’re right now helping a client in Nashville who he bought a franchise. It wasn’t for him. He did it for a year. It’s not for him. It’s not what he wants to do. He has a couple of trucks. He’s got a nice little base of clients. It’s an underperforming franchise. It’s a great territory. It’s an opportunity for someone to come in to a business that already has those clients in place.

It’s a fair asking price. Actually, the asking price is similar to what they would have paid in franchise fees. So sometimes it can be a shortcut to dialing right into a business that already has pieces in place.

Dan Rowe (25:49)
and it’s hard.

Where do you find resales? like if you were, if you, mean, obviously they can go to you and you’ll help them, but what, what tools are out there for the average person to go sift through? You know, I’m in Cincinnati. What are some resale possibilities near me? Like where, where, where would you go start looking for that? And then how do you whittle that down? Right.

Jack Johnson (26:13)
Yeah, well Dan,

of course, thefranchiseinsiders.com is the first place you should go. Okay, I think the gold standard is BizBicell. But I would never search BizBicell, just me. I would get my franchise consultant. I think you had another franchise consultant on a few weeks ago too. So it doesn’t just have to be me and Jill. Find yourself a good franchise consultant.

interview like three, four of us, right? Take your time. Find someone you really want to work with and then have them help you navigate this, have them bring you because look, I have things that don’t make it to BizBuySell or I get them and I’m the one that places the ad on BizBuySell. So truth be told, at any given day, I probably have at least five of these things before it goes public. So it is in your best interest to contact a franchise broker. But if you just want to get a sense of it, Dan, I think BizBuySell is a good place to start.

There you can find all kinds of businesses for sale. But again, I will caution you, 90 % of those resales are junk. And that’s again, where you need a professional to help you understand what you’re looking

Dan Rowe (27:14)
Yeah, not only junk. mean, it’s just overwhelming. Like if you, it’s like, it’s, if you go into business by sell, there’s so many, could use your eyes will cross looking at all the different opportunities. So, um, but, so how, how would you help somebody narrow down their focus aside from that test? mean, you, you just simply, you’re a Frank, you’re a successful franchisee. So you’re already different than

you know, 95 % of the brokers that I know. And so, but how would you, how would you be able to take someone and help them really synthesize down what makes sense for them?

Jack Johnson (27:48)
Yeah, I mean, I think we have to be very mindful of capital. Building a business is not cheap. Whether you’re buying a resale or you’re buying a new franchise, whatever the number is, if it’s me personally, let’s say a franchise says I can do this for 200K, I know I probably better have 250. Now, of course, we all have clients. I’ve got a client, Hector, who owns the senior helpers.

He, in his third year, did three million gross, whereas if you compare that to Senior Helpers locations open 60, and I’m gonna make sure we’re FTC compliant here, Dan. In Senior Helpers FDD, they show locations open 60 months or more. The average is a million four. So that means Hector’s results were unusual, but they do happen, right? But I would always tell our clients, look at the FDD, look at all of those different sectors of an item 19,

and always be conservative in your planning. Talk to franchisees, get a real sense of what it costs. But that’s the number one thing. I hate to make it about money, but Dan, it’s so much about money. If you want to succeed at this, do not get out over your skis. Have enough money for working capital to build a successful business.

Dan Rowe (28:47)
Yeah.

Money does weird things to people. The lack of money does a lot of weird things to people. So if somebody bought a franchise and all of sudden it costs 15, 20 % more than they thought and they’re feeling strapped, like all of a sudden they start to cut corners and they start to react, right? Instead of being proactive, they start to get reactive, cut corners and then box themselves into more of a corner. So that’s really good advice for people like…

You don’t have to over commit upfront. Some of the biggest franchisees that I know started by a close started small and just kept acquiring. Like I said, this is an operator’s business. Even in your your window cleaning business or in my, you know, five guys. mean, there was the best franchisee and the worst franchisee. There’s they’re not all the same. So.

What other advice? like if I were buying a franchise, if I were buying an existing franchise, I would want as much seller financing as I could. That’s a Codyism. So she wants as much seller financing as you can get because it’s off balance sheet, no contingent liability, no personal guarantees. the truth is if I’m selling a business, I want none. So my trick has always been, and I’ve sold a lot of companies,

But if I’m ever selling a company, I actually put financing together first, right? So I’m coming to you, Jack, with my business and my financing tool right in place so that I tend to wind up getting more than I probably would have gotten anyways. And it takes the conversation off of someone trying to negotiate my price down. And now the fact that I’ve got a business that makes sense and I’ve got financing already in place, it’s like, that’s the cleanest way, in my opinion, to sell a business.

for a lot of money, someone’s not gonna chew you down in price, plus try to get you to do seller financing. But what do you think about that?

Jack Johnson (30:39)
No, I think that’s exactly right. And I think you can end up doing like an SBA loan or something like that and end up, you can do your financing over time with that. And it just pisses people off. I mean, look, sure, there are some people who, I mean, again, you got to know who your buyer is. If it’s a buyer who’s well established and has lots of units and is a known commodity, perhaps seller financing has some advantage from a taxation standpoint, meaning that

If I’m selling my business, if I my business for sale for 5 million bucks and I want my 5 million bucks this year, I’m going to pay a hefty tax note. Whereas if I can spread that over 10 years, I get to keep more of my money, but there’s only so many people I’m going to be interested in doing that kind of deal with. But I think again, Dan, it’s like when we speak to new candidates who are looking for either new franchises or existing franchises, I pretty much mandate that they have a financing conversation with one of our financing partners.

to get a sense of what’s possible because there are certain things they may never have known that they could do. And it also gives me that the financing partner does not give me the confidential details, but they will give me sort of a 30,000 foot overview of what this candidate is capable of doing. So yeah, I mean, I think at the end of the day, my mindset when I’m buying a business, I wanna get it for nothing. I wanna find a way to get it for nothing. And of course, like you said, they wanna find a way to get it for everything.

So it’s figuring out where you can meet in the middle and where everybody can win.

Dan Rowe (32:03)
Well, access, the prearranged access to financing works, works for buyers and sellers. So you get yourself pre-approved, find yourself a lender who likes lending, get yourself really, really scrubbed and not, I don’t mean just that pre-approval email that everyone sends you within 15 minutes of talking to them, but actually going through your taxes and filling out some forms and, you know, doing the whole thing so that you’re authentically pre-approved for a certain amount of money. And now all of a sudden you’re armed with that. Somebody like you,

or even if I’m selling a business, like, I’m going to take that person very, very seriously because they come either with money or with access to money. Not, not just I’ve been pre-approved to BS.

Jack Johnson (32:42)
Well, and there again is where you want to have a good finance partner. You want to have a good CPA who can advise you because look, there’s different seasons. Like there’s different seasons of life. There’s different seasons of business ownership. There are years where you can be very profitable and it’s advantageous to you. And there are years where not being as profitable is, is advantageous to you, but you have to look at this, you know, with an end game and you want to make sure, you say, like someone

someone could really try to make themselves not look profitable, but that’s gonna hurt you in the long run if you’re gonna go try and do a big deal like that. So you need someone, I think, from a financial standpoint that understands what your long-term goals are so that, like you say, when you go to do a good deal, you’re gonna look good to the bank, you’re gonna look good to the seller. So you kinda have to, I always look at it like, know, when you see the puppy with the big paws, you’re like, you know that’s gonna be a big dog.

In many ways as you start to build your business portfolio, you need to build it for the business you want to be versus the business you are today.

Dan Rowe (33:43)
Yeah. And you said something I was about to say something. I was about to say the same thing. People run their companies day to day not to pay taxes. Right. Like we have an airplane. We travel like crazy. We run everything in the world through the business not to pay taxes. But that works against you when you go sell the company because all of a sudden it’s like, Dan, you’re not that profitable. And it’s like, well, how do you explain that? So that’s why you need a really good accountant. So you’re keeping almost two sets of books, you know.

Jack Johnson (34:12)
Right,

well, and it’s being strategic, right? Because you know, if you have a year, and again, it’s like there’s two sides of it. Where you have a year where you really make a ton of money and you have to pay a lot in taxes and yeah, that’s hard. But that’s your year to go do a lot of stuff. Okay, hey, look at how much money I made this year. This is my year to go buy another business. This is my year to go buy another house or whatever it is. Be strategic and then okay, now we’ve got this new business in place.

Now we know for the next few years, we’re gonna stay with our current assets and we’re gonna build this thing up and then we’re gonna do it again. And so again, I think as long as you can understand that all of this is fluid, right? It’s all, you know, it’s a long game. Being successful in business ownership is a long game. you know, I’ll give you another quick story. My first venture into franchising was with a home healthcare concept and Christmas Eve, 2000,

Seven, the owners of the company were worried about making payroll, right, for that week. 2015, they sell the company for 135 million. I think to all of you out there who are listening to this, and this is the reason I bring this up, it’s topical. Some of you may be saying, okay, great, now I can sell my business. Sometimes just understand.

that it can all change a lot faster than you think and you find out a lot more about yourself and those hard times and how you react. I keep Captain Kirk up here for a reason. And people make fun of me, my wife calls me a geek. But Captain Kirk was at his best when it was hard, right? You gotta figure things out, you’re under duress. And I think all of us need to just remember that as business owners, our life can change a lot faster than we think, but we’ve gotta keep our head in the game, we’ve gotta stay cool.

We’ve got to know that this is our shot to build something very, very, very valuable.

Dan Rowe (35:52)
Yeah, and never underestimate the role luck plays in all of our success, right? So like when interest rates went down like crazy in COVID.

multiples went sky high because people were getting cheap access to capital. so interest rates, the political climate, even comps, right? So like, what’s a business worth a business? First thing people do is say, are the multiples? So all of a sudden someone in the category has a high multiple that rising tide lifts all boats. So you it’s, all the more reason to be ready to sell your business at any moment. So when it strikes that you don’t lose a deal like this,

Bagel chain. mean, they wasted six or eight months trying and this owner was followed it down. said, Hey, we’re going to now come in at 45, 40, 35. And finally they got to the point where they’re like, you guys are a bag of nails. And they just laughed and they wound up selling the business for a small, small percentage of what they originally were slated for because they weren’t ready. So I learned a lot from that. was a good, I mean, it’s a good thing. I learned that, learned that lesson, but yeah, you got to be ready at a moment’s notice. Someone wants to buy your business.

Be ready to sell.

Jack Johnson (36:59)
Well, and the other thing, Dan, is this, and it’s so interesting. I made a comment on LinkedIn two days ago because there’s a lot of people in franchising right now that want to talk about how hard it is and how you better be prepared for how hard it is and how much it sucks and this and that. And I said, you know what, stop scaring people because in all honesty, sometimes we need a little bit of naivete. It’s easy for some of the government and things like that to say, you know, people are out there trying to sell things.

The truth of the matter is this is that you have to be a little bit crazy to become an entrepreneur, but at the end of it, when you can make it through the hard stuff, you can do so many more things than you ever could working for someone else. And truly the ability to make, like you said, life-changing wealth really only happens in business ownership. But here’s the other thing I would say in terms of resales. And again, another bad word in franchising right now is absentee.

Truth be told, you wanna get maximum valuation for your franchise, it better run without you. You better have a great team. It’s such a better story, Dan, for me to be able to say, I can go to Maui for a week and my team can run the business versus, no, I could never leave and I gotta man the phones. No one’s gonna buy that. That’s a shit show. What they wanna hear is, yeah, Jack’s off in Maui and he’s there and his companies run. My companies can run without me. So build your team so that when you’re sitting at the table trying to get maximum value.

Don’t make it sound like you’ve got one guy that does 10 different things. I have this person doing this, I have this person doing that, I have that person doing this. We have infrastructure. We’ve built this the right way, and when you buy this business, it’s going to keep running. So when they come to kick the tires on your business and they meet your people, they see this as something that will easily transfer. It’s not just a one-man show.

Dan Rowe (38:37)
Yeah, we, that’s good advice. We, for both franchisors and franchisees, like the minute I work with a franchise or we’re already talking about the company they’re going to sell. Every time we sell a franchise, we talk about the company that they’re going to sell. not only organizing and the profit and the compounding, but you hit the nail on the head. You have to be talking about a business that can do as well or better without that owner.

Right? So like a buyer buying the company, like they’re going to pay you a high multiple if they think that they’re going to grow it into the next turn. Right? Well, they can’t do that if the whole business rises and sets on you. Right. And in that works, most entrepreneurs or most people have ego. Right. They’re trying to, they, they try to say, I remember when I first met the five guys, guys, they’re like, no one can do this. Like our family, like no one can do this. Like, uh, like our family. I’m like, no one can make a hamburger fries. Like, but that, that’s what they, that’s.

kind of what they thought in a way and then think fortunately for them that proved not to be the case because there’s 2000 of those now. But yeah, I mean, you got to build the company to the point where the owner is not necessary.

Jack Johnson (39:40)
It’s the biggest mistake I made with franchise insiders is that it’s too much me and Jill. and truth be told, that’s why I bought pinks because franchise insiders should have a great valuation, but it’s evaluation is zero because without me and Jill, isn’t the franchise insiders.

Dan Rowe (39:55)
Yeah. Well, you’re doing just fine. You’re doing just fine. So what else can buyers do to try to learn more about this subject? to go out and I mean, I’m now wondering of all the franchise locations that are currently in business, how many of them actually were Reese Holdings?

Jack Johnson (39:59)
We’ll survive.

Dan Rowe (40:21)
I bet it’s, I mean, I bet that might be one for your Chad GBT.

Jack Johnson (40:25)
Yeah, you know, and be careful with chat GPT by the way, because it like, you have to ask it. Like it’ll give you an answer and you’ll be like, chat GPT, where did you get that data? And it will say, oops, I don’t know where I got that. Let me, you know, it’s so be careful if you’re looking for item 19s or things like that on chat GPT, you still need, I think Dan, all this comes back to working with a professional. That’s why, you know, with company like yours, with Fran Smart, with consultants at Franserve or my company, the Franchise Insiders,

work with a professional. It’s like buying a house, work with a realtor. When you get on the airplane, that pilot up front has literally thousands of hours. You want to work with a professional. I know we all wanna do this ourselves, I get that. But the beauty of working with someone like you or working with someone like me is that we know who the real ones are. We know where the support is. Because something might look good on paper. And I know it’s…

We had this conversation, it’s a funny story. Took my mom to a, I don’t want to call it a fast casual, but it’s a place in San Diego called Urban Plates, where you can, you choose, right? Have you been there? Choose your protein, choose your veggies. She freaked out. She’s like, I don’t know what to do. I want someone to tell me what I should have. And so her generation wants everything prepackaged. The younger.

Dan Rowe (41:27)
Yeah.

Jack Johnson (41:41)
seems like the younger, younger we go on the generations, the more they want it customized. So I get that and I know why people want to search and it’s fine. You should search. You should see what’s out there, but bring on a professional to help you do a business or franchise search.

Dan Rowe (41:53)
Yeah, no, I agree. But that’s this is good stuff, man. I appreciate it. And I want to talk to you more about this subject. You know, we ought to check in more and more on this because I mean, if I have my way, more franchisers are going to be focused on resales as a positive thing, not a negative thing. And more franchisees, I can even think of our franchisees like one of the things we do, we sell, you know, like we sold a

Jack Johnson (42:09)
I agree.

Dan Rowe (42:16)
Five guys in DC, had six or eight franchisees. At some point, the best one buys out the worst one. It’s like, that’s a good thing, right? It makes the better, gets rid of the weaker ones. It makes the better ones bigger and better. We make more money. So it’s not a negative thing. And I think, I think that was sort of an eye opener for me is, is that this is a positive thing that we need to be more proactive about. So I appreciate you coming on and riffing with me on this.

Jack Johnson (42:39)
Well, and you know what the other thing is, Dan, I’ll just leave it with this, is that I think where you are from a mental state is really important as a business owner. You need to get good sleep at night. And so I think if you’re in a place where you’re feeling like it’s a challenge and you’re worried, talk to your franchisor, put your business up for sale. Likely the advice they’ll give you is just like when you go to sell your house, better fix all the things that are wrong with that house. Better make sure it’s show ready if you want to get maximum price. And so.

what will happen is that you’ll actually turn your business in, probably have it running the best it’s ever run. And so by the time you get an offer on the table, you’re in the best of all positions because you might just say, you know what? Nah, I wanna keep it. It’s a great business. And now all of sudden your asking price just went higher.

Dan Rowe (43:19)
Yeah, and all the money that I have, I think about it, all the money I have or I’ve accumulated have actually come from a sale, getting bought out of a brand or selling a company or something like that. The years where I make more money, I just spend more, right? I get weird habits. So, but good stuff, man. This is awesome. Where can people learn more about you?

Jack Johnson (43:36)
Well, the best place to go is to thefranchiseinsiders.com, but even better, go to our podcast. It’s called We Bought a Franchise, where my wife, Jill, and I, we share on a weekly basis conversations with top performing franchise owners. But we also share our everyday adventures as franchise owners. The good, the bad, and the ugly, you’ll get it all on the We Bought a Franchise podcast.

Dan Rowe (43:57)
An audience, you know the drill. you like this episode, like it, share it, and we will see you soon. Thanks again, Jack.

Jack Johnson (44:04)
Thanks, Dan.

Dan Rowe (44:05)
That was good. I don’t think you’re going to need much editing on this one. This is a good riff. What do think, Jenny?

Jack Johnson (44:08)
Great.

Dan Rowe (44:10)
your job. I just had an AI one earlier and it’s like, don’t, I don’t know if we’re going to be able to save it with editing because it was just a funny one because I’m dumb as hell about that stuff. And the guy we’re talking to looks like he’s right out of a basement.

Jack Johnson (44:27)
It’s Dan, think we’re going to see our, telling you with AI, has, it has changed my productivity. I can do 10 times like, ⁓ for, for pinks, I take on the weekend, I take, I take our leads. and, ⁓ I just feed in the form that it’ll say, I want power washing and window washing into chat GPT. I say, okay, give me a text and give me an email to this person with their needs and.

I just cut paste, put it into our CRM, gone, booked. And I don’t make one phone call and I can close 70 % of those people who are looking for services. So it doesn’t even impact my day.

Dan Rowe (45:01)
I got to learn about this. Jenny, we might need an AI day in our office.

I figured you guys were, I figured you guys were, I’m just, I’m old. So, hey Jack, thanks so much, man. We’ll keep it going.

Jack Johnson (45:05)
How can you not?

Thanks, man. Talk to you. See ya.