The Exchanges

Q So did he knew that you were the one, a hundred got junk founder?

A He knew I was a one, a hundred got junk founder, which a little story about this. It's in the new book that I wrote called WTF willing to fail. And there's a chapter on Shaq shine. So I, I leave the team. I go out to go to work. These guys are about to come in and do my gutters, and I catch them behind the Shack Shine van. They're all standing there having a brief about the job and how they can't mess it up, but they got to get it just right. And I thought that's a little odd, but I learned from Dave Nottay after the job was done was this was an important job for him and his future.

AI assessment note: “He knew I was a one, a hundred got junk founder”

Q Why didn't it work? Cause actually my, my notion was actually that you would try and get people to do multiple of these because everyone's not always going to want painting. So you got to move them on Tuesdays and paint them on Wednesdays and move their junk on Thursdays.

A We had a mentor. I still have a mentor, Dina Dwyer, who's got a two billion dollar company called the Dwyer group with many franchisors. And she told us, do not do it. And we went against her advice, sadly, because we made a big mistake with With you move me, we launched overnight with 25 franchise partners. They were all one 800 got junk franchise partners who were ready for more. Why it failed, more than half of them are now gone from you move me and still running one 800 got junk is you've got to pick a focus. The thing, the spaces are too different. You take someone from one 800 got junk and you say, let's put you out in the you move me truck. They get out there. They're not just having to throw things into the back of the truck like one 800 got junk. They're having to be careful with things. They're having to try not to break things. The businesses are just too different. Love all four brands. It's like having kids. You can never pick favorites except on Sundays, but it's one of those things where it doesn't really work because someone is changing their focus and getting away from the one thing they do well. Now you might look at me and go, well, oh, two brands, you've got four brands. Yes. After 22 years and we have presidents or managing directors solely focused on Each one of these businesses. So it's working for us.

AI assessment note: “Why it failed... is you've got to pick a focus. The thing, the spaces are too different.”

Q Where did you start getting the most margin gains where you could really predictably, you know, take 20% to the bottom line? I imagine at the beginning you're reinvesting a hundred percent.

A Yeah, biggest margin gains have been in scale. Once we, we got on the Oprah Winfrey show, Wall Street Journal, New York Times, we got a bunch of press in the early 2000. That momentum really started to get us on the map, increase our footprint with the number of franchise partners that we had. Once we were over 50 franchise partners, it's way easier to bring 12 franchise owners, new owners to the junction to train them all at once than it is to train one or two. You have 12 people, they've all got the passion, they're learning from each other. They're asking the same questions. It's all about leverage. So our margin started to really take off once we hit a critical mass.

AI assessment note: “biggest margin gains have been in scale.”

Q got you 30% off along with a hundred dollars in free AdWords credit. To grab it, just go to HostGator.com forward slash Nathan, but you got to do it now. Again, HostGator.com forward slash Nathan. For people listening right now, I'm thinking about either buying one of your franchises or setting up a franchise model. How do you come up with this royalty rate? Why is this the sweet spot?

A Yeah, we just looked at what worked. When I ran my One 800 Got Junk, my own franchise, I said, how much money does someone need to make to the bottom line? And I called it 18 to 22%. And I said, how much can we take to make sure that we're healthy and we're profitable? Back in the early days, in the late nineties, we franchised as a student model, similar to College Pro Painters. We did a short summer model with One 800 Got Junk, We charged, ah, a royalty where it was, it was so low that the franchise partners made a lot of money. We weren't able to survive as a franchisor. So we had to change the model. We had some experience, and we believe it was set up to be a win-win.

AI assessment note: “how much money does someone need to make to the bottom line?”

Q And how do you decide what new industries to go into? So, you know, Shaq Shine, it sounds like there was a personal experience you had. That's what got you into that, and a connection. But do you do any kind of specific market research there?

A Well, my first brand that I expanded into was Wow One Day Painting, and that came from me looking to get my house painted, not being able to find someone. The first three people that showed up, cigarettes hanging out of their mouth, they were unprofessional, they were late, they were going to move in for a couple of weeks to paint my home is what it felt like. I find industries that are fragmented, mom and pop, that don't have professionalization yet, or, and haven't taken over, uh, the world and in home services in that space. So do we do research? You know, I mean, there's obvious industries out there that could be brand number five, brand number six when we're ready, but really it's just home service businesses growing where we're planted, sticking to our core and, uh, Generally finding a need. I mean, my wife hates when I bring in a contractor to do a new service cause they, uh, she says, oh, now you're going to go start a fifth brand. We're already too busy. Come on, don't do it.

AI assessment note: “I find industries that are fragmented, mom and pop, that don't have professionalization”

Q In terms of driving lifetime value of a customer, as the OTE kind of parent brand, will you take someone there, where they just went through, you move me, you know that then they're moving into a new house, they're probably gonna need painting. Is there any kind of marketing software you've built at the top to shift leads between franchise owners?

A Yeah, we're working on it. So the complexity in that is when you call up and Nathan says, Hey, I'm moving. And we say to you, Oh, well moving, we know that 95% of people that move have junk. We've also got a junk removal company. You're probably busy and stressed and focused just on the move. And you don't necessarily want to start to think about something else. And we find when we try and pitch customers on it, they're not ready. It's not like a Netflix, hey, people who watch this also watch that, and you pick a new movie. Um, so we're working through it. We're trying to figure it out. It's absolutely an opportunity. It's happening organically where people are saying, I used

AI assessment note: “Yeah, we're working on it. So the complexity in that is”

Q Got it. Got it. Okay, cool. Interesting. Okay, take us back to that moment, because I'm, we, maybe we have people listening that have their own business, they're thinking about franchising. Tell us about that decision. Why you decide to go into the franchise model instead of build it yourself and capture an additional 92% margin?

A I've always believed in building something much bigger together versus going at it alone. And if I look at sort of the grandfather of franchising, if you will, Ray Kroc, who founded McDonald's, he bought the business from the McDonald brothers and put a scalable system, very cookie cutter system and process in place to, to scale a business very quickly. What we've done is rather than making everything so cookie cutter with an absence of a culture, Is we said, let's be collaborative. Let's work together as entrepreneurs and let's build and support each other so we can grow more quickly together and that we can innovate faster. So our franchise owners, we turn to for advice, they turn to us for advice. And it's this crowdsourced model of really building something quickly together because We've got the, the best advice in the room and, uh, non-competing operations. Someone who's running a Shackshine business in Minneapolis or a Shackshine business in Seattle, they know that they're not competing with each other and they openly share their books, their learning, their challenges they have. And, uh, it's an incredible business model for us.

AI assessment note: “I've always believed in building something much bigger together versus going at it alone.”

Q So Brian, you must have Merrill Lynch, Goldman, a bunch of people all the time begging you to take this thing public. You continue to say no. I mean, is it really just you saying, I don't care about money? I mean, is that it?

A It is. I get, I get called all the time. I mean, we get private equity emails, I think on a daily basis. Uh, it's flattering. It's great. It's just not what drives me. I've seen people build businesses, sell them off and, uh, and either go start something else successfully or unsuccessfully, or, you know, go retire. Those things aren't motivating me. I'm not looking to sit on a beach. Uh, I got plenty of balance in my life, tons of time with my kids, my family, And I got good balance, and I got a great team, and I, you know, it's like children. I mean, you know, who wants to sell their children for any price? I mean, I think there's certain days where we might feel so, but, uh.

AI assessment note: “It is. I get, I get called all the time. I mean, we get private equity emails”

Q 46, yep, okay, so 46 years old. What is the, let me just put on my capitalist, I don't care about philanthropathy or helping the world, let me just put on that hat for a second. How do you personally generate wealth from this? Do you pull dividends out for yourself, or do you pay yourself a big salary? How do you do it?

A I pull out dividends over time. I mean, I'm not a big money guy. And, you know, I think a lot of entrepreneurs are driven by money. I'm driven by growth of people and opportunity and building a legacy, building brands that customers love. And, you know, I, I, I drive a Fiat. I've got a little Fiat 500. It's a pretty inexpensive little city car. Uh, but that's my, my, uh, you know, sort of showing you that I'm, I'm not a big money guy. I don't have a massive home. So pulling money out of the business isn't something that's important to me. I'd rather put it into the business, keep it there and watch it continue to grow. And to me, when you say build wealth, I know you've got a capitalistic hat on, but wealth to me is, uh, Watching people develop and evolve, watching our, someone who's in our call center grow up to a point where they end up wanting to start their own franchise with us. And, uh, that's what drives me. And I find that stuff pretty exciting.

AI assessment note: “I pull out dividends over time. I mean, I'm not a big money guy.”

Q And then, so what have you codified for me of the franchise model that is unique? Because you have some genius here, clearly, and it's my job to get it out.

A Yeah, thank you. I mean, you know, I think every entrepreneur has a genius or has a gift. So I would say We are about building something much bigger together versus what any one of us would build alone. I'm not a solopreneur. I want to build things with great people. We have an open office environment, about 500 people in the head office. What I think we figured out is how to take ordinary people who want to be an entrepreneur but don't know how to get their start, and we train them from the ground up, out on this, on the streets, how to grow and build a business, whether it's Shack Shine, Wow One Day Painting, you name it. We are taking people that have zero experience in running a business, but they know how to lead. They know how to market. And the rest is the partnership and the magic behind both of us.

AI assessment note: “take ordinary people who want to be an entrepreneur... we train them from the ground up”

Q Shaq shine. I come to you today. I want to sign up. What kind of deal am I going to be signing? How do you make money from me? What do I have to put capital wise up front?

A Yeah, we say that someone to start a Shaq shine franchise needs a minimum, 25,000 in liquid capital. Sometimes people will go to family and friends and raise that. We'll help them figure out how to get the rest, but you need to lease bands. You need to have money for marketing materials. Someone takes a territory. You know, they might have, uh, you know, 200,000 people, 500,000. It depends on how ambitious and capital resources they have. They're getting out there and growing a business, but like one, 800 got junk. We want our partners to get out there and make great margins and have great growth. This isn't about building a 100,000 dollar business. It's about building a million dollar business, a two million dollar business, and really scaling. We're looking for business builders. We're not looking for people who want to be in the, in the vans forever. They need to start there to master the craft, but then they're moving on.

AI assessment note: “needs a minimum, 25,000 in liquid capital.”