Jon Ostenson - Adding Income Streams Through Franchise Opportunities
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Many entrepreneurs like the idea of blazing a new trail and doing things themselves. What if you were strategically able to grow your businesses faster because you partnered with great people that have figured out solutions to the problems you're likely to face. Welcome to the world of non-food franchising. Jon Ostenson serves as the CEO of FranBridge Consulting and helps thousands of entrepreneurs and investors get into business ownership and investment opportunities. He is the author of the book "The Book of Non-Food Franchising" and was previously the President of ShelfGenie, a franchise with over 200+ locations. If you already own businesses in real estate, it's likely that there are some opportunities out there to add additional streams of income with vertical integrations of businesses that pair well with what you're already doing. Tune in and find out what opportunities might be out there for you.
In this episode, hosted by Mike Swenson, we discussed:
- Business ownership allows you to grow an asset, build cash flows, and write off expenses
- When exploring franchise opportunities, they set up a screening process to evaluate options
- Next steps involve reviewing Franchise Disclosure Documents and a discovery day with the franchisor
- Depending on the franchise you choose, your revenue stream can be more active or passive depending on your time involved in the business
- Franchising is similar to real estate where you can create semi-passive revenue streams that diversifies your income
- Building a business commonly use loans and leverage
- Franchising provides wonderful opportunities to leverage your talents, passion, money and build a stream of income
- When considering franchise opportunities, think about the needs in the market, to ensure there is ample opportunity to grow your business
Timestamps:
0:00 - Intro of Jon’s Career
1:43 - Jon’s career path
6:14 - Types of franchise opportunities
8:14 - About franchising
13:05 - Time commitment
16:13 - Benefits
19:49 - Advice
22:08 - Franchising concept
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Full transcript here:
Mike Swenson
Welcome to The REL freedom podcast where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson, let's get some real freedom together.
Mike Swenson
Hello, everybody, and welcome to the real freedom podcast where we talk about building wealth, and gaining time and financial freedom through different opportunities in real estate. And one of the things that people may not naturally think of when they're thinking about real estate is franchises. And so as you're buying, you're investing in real estate as you're thinking about maybe quitting your day job and, and working and investing full time or other opportunities full time. There's this whole world of franchising that is at your fingertips. And for entrepreneurs, people looking for leverage in their life, there's a lot of opportunity there.
Mike Swenson
And so today, we have Jon Ostenson sin here. And Jon is the CEO of FranBridge Consulting. And he's going to talk with us about exploring opportunities in franchising, and just ways that you can leverage your time leverage your money and continue to build and grow your businesses inside of real estate or even outside of real estate. He just has a wealth of information to share with us, Craig, Mr. FranBridge, Jon was the president of ShelfGenie franchise system with 200 Plus locations. And so you've been doing this a long time, you've got a lot of great stuff to share. We're so excited to have you on the show, John.
Jon Ostenson
Yeah, Mike, appreciate you having me on love the show and excited about our conversation.
Mike Swenson
I always like to know how you got started, how you got into that space? Why don't you just share a little bit about your career path leading up to where you're at today?
Jon Ostenson
Yeah, you know, like, so many of your listeners had the background in the corporate world and did the corporate ladder climb and grad school and all of that, and you have had a lot of fun, but really had that entrepreneurial itch should want to do something a little more entrepreneurial. And so for me, that meant leaving a public company to go to a private company, which happened to be ShelfGenie franchise system. And so I kind of stumbled into in franchising, and that was a very pivotal opportunity for me to see just all these different paths to business ownership outside of food. I always thought of franchising with food, which a lot of people do, but I just saw how people can leave the corporate world or business owners could help expand our portfolio through adding in additional businesses.
Jon Ostenson
So long story short, had the opportunity to lead our franchisees across North America. And I ended up partnering with the founder, we spun off and we've invested in franchises ourselves as the franchisees. Now we've said on that side of the table, I've had other business partners along the way that have also invested in franchises with us. So fortunately, we've got good people running those for us and allows me to spend about 90% of my time, helping others, you know, really navigate the world of franchising and what I call non food franchising, and I know we'll get into this, but probably 75% of my clients have investments in real estate or have a toe in the real estate world, whether it be through being a broker or mortgage lender or such. I invest in real estate myself, and there's just a lot of synergies between real estate, and small business ownership through franchising.
Mike Swenson
One of the things that's, that's interesting to me, you know, I had just a small background, we launched a small franchise inside of real estate a few years back, and got a chance to talk with people in the franchising world. And I think one of the things that was surprising to me is a lot of times people maybe outside of franchising, just think of these huge large franchises these big corporate entities, and it's, you know, us against the man, and that kind of thing. But what I saw is, it's really entrepreneurial, fam entrepreneurs, families that are putting all their assets into a family business that they want to build and grow and leave a legacy. And so yes, there are those franchises out there that are really big entities, they have 1000s and 1000s of locations and, and the head folks make millions and millions and millions and millions and millions of dollars.
Mike Swenson
But it's also the Bootstrappers the people that want to be entrepreneurs, they want to invest in a system and a process and proven people that have done this before versus trying to figure it all out on their own. And so it really is the kind of normal entrepreneur looking to build and scale and like I said, this, this is something where it's like, hey, we you know, we have a family that wants to do this together. And we want to leave a legacy for our kids. And so I think that was really surprising to me to see that. That really is the more the heart of franchise versus what people might read in an articles about, you know, these big huge corporations.
Jon Ostenson
Yeah, you're 100% Right. And, you know, frankly, if it's a brand that you've heard of, it's probably sold out in your market. So we're always working with emerging brands, we work with about 550 brands that we're always adding to that list, but no brands we vetted and have great leadership teams reason for being within their niches, great financial models. You know, franchising is not right for everyone. Yeah, there's some entrepreneurs, I have to explain your to entrepreneurial, you want to put your thumb prints all over all over the business. However, for so many, and I would say the majority, it is a better path to business ownership because you hit on it, it's a proven system, you've got a playbook, you're, you're starting on third base instead of first base, you know, you're in business for yourself and not by yourself, you get that franchisor on the sidelines, who acts as a coach, the better you do, the better they do. And oftentimes it goes overlooked.
Jon Ostenson
But you've got franchise owners within that system across North America that you're able to learn from, so you're exchanging best practices around marketing and hiring and such. And so really, you're in it together. And, and finally, from an exit standpoint, you know, with business ownership, you're building cash flows, you're able to write off expenses, but then you're also building an asset that should have exit value down the road. And, you know, there was a study done recently, by the Riker school of business that looked at 2000 transactions of businesses, and light kind of industries non franchise versus franchise, over a 10 year period, they found that franchise businesses traded a one and a half times multiple of non franchise. So you are building an asset, we all know the success rates, you know, over 90% for franchises versus 10% for startups. So it is pretty compelling once people dip their toe in the water and really start understanding the types of opportunities that are out there.
Mike Swenson
Because there there could be, you know, single locations, there could be territory opportunities. And so yeah, what what you're investing in is, like you said, you're investing in proven systems, proven people proven models. It's not, hey, I've got this really good idea, or I want to be in business for myself, and now have to go figure out how to do these 200 things that I maybe don't even like doing, or don't want to do, or don't know how to do. But it gives you an opportunity just to be able to plug in and contribute what you can. And then you've got all this back end experience, wisdom, knowledge, market research, and all that, that you can lean on versus having to do all that stuff yourself.
Jon Ostenson
Especially when you have a background in the industry, you know, over 90% of my clients end up in an industry that they didn't have a background in or was even on their radar. And so really, until you start peeling back the onion, I mean, just a couple of examples. You know, on the real estate side, we had a real estate broker recently filler, former Keller Williams, real estate agent, which is of course a franchise. Anyway, he wanted to start a property management business on the residential side didn't want to start from scratch. And so we introduced him to a property management franchise and you know, he's often running couldn't be happier. I just had a guy buy a commercial franchise over in Los Angeles commercial property management.
Jon Ostenson
And you know, it's been, we've done, I joke that coming out of COVID non sexy is the new sexy, it's things like roll off dumpsters, I mean, we've got guys killing it with a roll off dumpsters, we've got, we've done three deals in the gutter space recently, one was a Wall Street attorney outside of Boston know back that, but just great financials, you know, insulation, you know, the surf pro type models of the world, all these types of businesses that you can get up and running breakeven pretty fast, and then they're just cash flowing. And, you know, you're you're not having to reinvent the wheel, you're able to jump in and get going from day one with the marketing and everything else.
Mike Swenson
Why don't you just kind of walk through the process here of how that works. So I come to you. And I say, Hey, John, I've always thought about a franchise. You know, it seems interesting. Tell me more? What does that conversation look like for you to kind of get them moving in the right direction?
Jon Ostenson
Yeah, no, great question. And I'd say you know, you can go out there and start Googling around, you know, the challenge is going to be you're gonna see brands putting their best foot forward, you're gonna be reading their marketing messages, and you're not going to see what's going on behind the scenes. So, you know, I'm affiliated with the largest brokerage in the US, we, you know, framebridge is part of it. And we've done our due diligence, we've done the vetting, we have the relationships with all the development groups across the US that are working with these emerging brands. And, you know, we're able to take them through all of our screening process. And we're able to see the deal flow.
Jon Ostenson
I know what's resonating with other guys, Mike, that have similar background to you, I'm able to see you know, which ones have the momentum the I was talking with the one developer this morning, it's a parking lot maintenance business, they've done 25 deals in the past couple of weeks, if you go to the website, you would never see that. And so, you know, we spent some time on the phone, get to know you. And then we, you know, present opportunities to you that are available in your market that, you know, check the boxes on your end, but also that we see resonate with others that have a good reason for being typically we'll present nine or 10 opportunities will work with you to narrow that down to somewhere around two, three, maybe four opportunities, then have a call with entirely no obligation, but let's hear it from them.
Jon Ostenson
And then the franchisor will take you through a process where they get into the financials, they introduce you to other franchisees and their system so you get to hear about their experience. You go through the Franchise Disclosure Document defined territories, ultimately culminates in a day or day and a half on site with the franchisor. And their team has what we call a discovery day or confirmation day. And really, the whole goal here is to make sure it's the it's a good match for both sides. You're going in eyes wide open and to make that decision. It's a lot of fun for us to give Gonna play matchmaker and introduce you to opportunities you never knew about or may not have known existed.
Jon Ostenson
The great thing is, it's entirely free. So, you know, engaging with us that you'll never pay us a nickel, we get paid by the franchisors on the back end, for them, none of that gets passed on to our clients in any form or fashion. It's just a sales and marketing expense. So, you know, no obligation, you know, clean model. And, I mean, it's just, it's rewarding to be able to help people, I mean, we've been able to change lives, you know, on a regular basis for some time now.
Mike Swenson
So thinking about real estate in general, you know, thinking about some of those natural franchise opportunities, you already hit on one, the property management piece, you actually hit on another with Parking Lot Striping. I mean, you know, if you own buildings that have large parking lots, you're gonna be paying that person every couple of years or whatever, to stripe that parking lot. There's a lot of high margin, I guess, my limited knowledge and experience, but that's one of the ones that I've kind of heard over and over again, with high margins is Parking Lot Striping, because you can just go do that, you know, sometimes you see in a large department store parking lot at 10 o'clock at night, they're all ready to go. And they have that thing striped by the next day.
Mike Swenson
But that's, you know, look at your costs of who have who you're paying for what cleaning services, handyman services, all these are opportunities where you could leverage your portfolio that you already have, and build in an additional revenue source versus having it be an expense on the expense side in your real estate business.
Jon Ostenson
Yeah, you're 100%, right. And you know, whether it's striping, um, they're also out there fixing cracks and potholes and everything else and extending the life of that very expensive asset for the property manager. I'm an investor in a driveway franchise, and we only have, we only have enough to market with my business partners. I mean, the phone won't stop ringing. We're just trying to staff up right now to keep up with the demand. I mean, there's huge demand. But I've mentioned a few examples of services businesses, you know, just to give a little more well rounded perspective, you know, some of the other things we're seeing lots of interests in health and wellness and fitness. And some of the fitness concepts are tripping over each other. And that's we look for ones that are unique within that space.
Jon Ostenson
Yeah, but automotive, you know, we just did a 10 unit deal in Sharla. With guys, it's it's a, they use a prefabricated oil change building backed by an investor group, and then they use unused parking spaces in a retail shopping center. So additional revenue stream to the retailer, the landlord great street frontage, you're able to get in these for about 150 apiece, including working capital, all in investment, only two people per location from staffing standpoint, they're kicking off in a 340 and top line revenue about 135 on the bottom line. So it's not going to make you rich off of one location. But you get a couple of these going. And it's a very passive type income stream. You know, I always joke that people will spend on their kids eye on the things they love their kids, their pets, their health and their homes. And so any businesses that touch on those, there are a lot different types of do, I think are somewhat Amazon resistant, you know, in a lot of cases, COVID resistant, in many cases, definitely recession resistant.
Mike Swenson
So talk about the time commitment. You know, if a lot of people might be concerned of, hey, if I take on this franchise, now I'm going to be, you know, once again, going back to probably the food genre, you think like, oh, if I invest in this franchise, I'm gonna be there all day, every day, I'm opening, I'm closing, I'm finding all the staff and so just gonna suck up all my time. But there's a lot of opportunities out there that are really turnkey, where you don't have to be the entire person, the person there all day, every day, you know, building and growing the franchise yourself.
Jon Ostenson
You know, the majority of models out there lend themselves to what we call an executive model, or a semi absentee semi passive. Now, if you think it's going to take 10 hours a week, it's probably going to take you 15 You know, I try to be honest with my clients of you know, it is gonna take a little more time, especially out of the gate, but you can and we've got many case studies of this a putting instances where you put a general manager in place, day one, they go through training with you, and then they're running that day to day business. Now, most of my clients say, Well, where can I find a good general manager? How do I know if they're going to stay and, and we've actually started providing coaching that we fund for our clients as they lead up to launch. I've got a client, Nathan Bulcock, Who, us largest franchisee of two minute truck, you know, operates a $30 million plus business across 10 markets 39 years old.
Jon Ostenson
And he and I've done a couple of deals together in the past few years. In every case, he puts a young general manager in place incentivizes and aligns their interest. And I don't think we've done a deal yet where he hasn't come back and bought additional locations within the first 12 months and he's just doing great. And so he's now coaching our clients several coaching calls out of the gate to help them think through where do I find that General Manager? How do I set him up for success because it is doable, you know, obviously it comes down to having the right person but there are ways to find that right person and set them up. And so that is one of the things about franchising that is very similar to real estate in some regards is that you can create semi passive, maybe not entirely passive, but at least semi passive revenue streams that either complement your real estate portfolio or can help diversify.
Mike Swenson
And you brought up a good point there thinking about successful franchisees in that space coaching and mentoring and helping you. Yeah, it is one thing to bind to the business concept, to be able to invest in the other resources, but to have those people that have gone there, done that, and can can look back and give you an advice, advice on how to proceed, that really is helpful because if I'm, you know, the entrepreneur trying to do my own thing, you know, if I want to do it, right, I'm going to do it myself. And, and I want to be the the master of my own success. That's fantastic. And yet, the same time you look at, yeah, you've got a successful franchise, or who's built and grown multiple location continues to reinvest in those industries and helps others, the value of that is is extremely high, and it increases your chance of success. And and the faster you're able to build up because you have those people pouring into helping you along the way that are in the same shoes as you they're just further along.
Jon Ostenson
You're exactly right. And I think more and more people are waking up to that just the benefits are provided through franchising, and you know, we're certainly getting out there and sharing it. But I mean, Mike, it's encouraging right now, if you're an American, I know there are a lot of negative headlines out there in the news, you know, all over the place. But I mean, we get to have these conversations all day, every day with potential entrepreneurs across the US. And we have never seen so much activity, so much interest in business ownership. And I think it's there's cash on the sidelines, people are nervous about the stock market and down depending on the day, you know, in, in some markets, only somebody good real estate deals to be had.
Jon Ostenson
So I think more and more people are saying, hey, where do I allocate my funding, and, you know, a lot of cases, you know, in there, I'd say about 1/3 of my clients are paying out of pocket for a franchise business, probably a third are using SBA loans, you know, using leverage, that's very common. The government still support small business owners, believe it or not. And then about a third are using retirement plans through what we call a Rob's program, or they're using a portfolio loan, where they borrow against their brokerage account. So I know you're into leverage there a lot of ways that you can provide leverage getting into the business. And the majority of the deals that we do are between 125,000 to 300,000. You know, that's probably where 75% of our deals fall, some are a little higher, some are a little bit lower, but very, very common to use loans and leverage, you know, as you build that business,
Mike Swenson
yeah. And I think that goes in the face to have, you know, once again, people come back and they think of food, and they think, oh, a million dollars for a building. Like it's so expensive. No, there's all these fantastic opportunities out there for a good budget. And yeah, you can you can get loans to help leverage that. And so I think people probably aren't giving it a fair shake in terms of what opportunities are out there. And what is it actually going to cost me because you just go back to these preconceived notions, once again, of food franchises, it's expensive, you know, my time gets sucked up. And know, there's all these wonderful opportunities out there where you can leverage your talents, your passions, the money that you have the money that you can borrow, and build and grow a nice stream of income.
Jon Ostenson
Yeah, 100%, right. I mean, I mentioned the example of the gutter business, you know, just to give some perspective, and these are strong financials, that's why there's a lot of interest, not everyone's created equal, but 1.7 million average revenue per location that's across their all their franchisees, they're kicking off like 31% on the bottom line, EBIT, da end of the day margin. Now, if you're paying a general manager that's going to eat into some of that, but still, you're gonna be left with 25%. In most cases, that's, that's good money in a lot of markets. That's why we had a Wall Street attorney, 47 years old, leave his law practice that to go run one of these by one, we've got a great fencing company. And I'd say there's more interest probably in home and property services coming out of COVID than any other area.
Jon Ostenson
And that's probably where 60% of our deals are happening right now. People just love the fact that you don't have to have a retail location. And a lot of cases, you can run this business remotely, maybe in time, get some small industrial space set up, but scale your team skill your vehicles as you grow. And you made a really good point about think about your referral network, you know, maybe it's properties that you currently have today, or maybe you know, all the brokers in town, they'd be a great lead source for you. So you start creating this ecosystem, and a lot of people want to build out portfolio. So if you're already out there cleaning and customers pool, you know, you notice, oh my gosh, they also need to have XYZ work done, you know, the gutters or the roofing or, and so once you have that customer relationship, it's easy to cross sell, and then that just drops to the bottom line having getting to save on marketing. Yeah, I mean, yeah, the driveway company we're invested in Yeah, we don't even have to market. You know, there's such demand out there right now.
Mike Swenson
Awesome. What other advice do you have for people or what you know, if somebody's interested in exploring these opportunities, what's the next step?
Jon Ostenson
I think you know, some of the things to think about start thinking about your money. Get think about where what the needs in the market, you know, think about your referral networks, you know, who would want to run the business? You know, Would you do a day to day? Or could Is there a brother in law you can put in place or you know someone from your church. I mean, we've seen great lead source churches being great lead sources.
Jon Ostenson
Now, who are those that you can plug in? But no, like I said, entirely free to work with us, you know, if nothing else come out to our website franbridgeconsulting.com, franbridgeconsulting.com, we'd love to have you sign up for our newsletter, we deliver some great content every month, you and that's an easy first step, we'll also make sure that all of your listeners might get a copy of our book that comes out in the third quarter. It's called the book on non food franchising. But you know, if this is an area that you feel like the timing is right to take, the next step would be happy to jump on a phone call with any of your listeners and chat briefly and see if it makes sense to go down that path.
Mike Swenson
And I think the key is, is yeah, like, like you said, you know, how many people end up franchising in a space that they necessarily weren't thinking of right out of the gate? And like you also touched on, it's a matchmaker concept. So it's, you know, what are the skills abilities that I bring to the table? What is the lifestyle that I want to live as a result of the franchise? What are the funds that I have available, and you really go find a fit for them based on those things. And so trying to make it as easy as possible, as much of a likelihood for success as possible, because you're matching, what they have their interests, the time available with those opportunities out there.
Mike Swenson
And like you said, It's no cost. It's, you know, the, the franchise, or pays that on the back end to you. So, awesome opportunity to go explore those things and see and if it works out, fantastic. Thanks, Jon, so much and appreciate your wisdom, I would highly encourage people at least have an exploratory conversation, especially in the real estate space. There's all sorts of opportunity if you're already owning rental properties. If you're already owning or running a business of some sort in real estate, you bring the entrepreneur mindset, but now it's plugging into proven systems proven leverage to be able to build and grow other streams of income.
Mike Swenson
I love the franchising concept I love like I said, how its families working together, putting their time and resources together to grow something that they're building together. It's really cool. So appreciate you coming on and sharing all your wisdom with us.
