Franchise Investing Explained: How to Avoid Bad Deals and Exit Smart

Share via:

Subscribe via:

In this conversation, Jonathan Anderson, a franchise analyst, shares insights into the world of franchising, the importance of mentorship, and the value of relationships in business. He discusses his personal journey, the challenges faced in the franchise landscape, and the significance of adding value to people’s lives. The conversation emphasizes the need for accurate information in franchising, the role of adversity in growth, and the power of community and connections.

Resources and Links from this show:

Listen to the Audio Version of this Episode

Investor Fuel Show Transcript:

Jonathan Anderson (00:00)
There’s so much on the marketplace. What do I look at? I look at all these rankings and these listings online. I just can’t figure out which franchises are good or not. Everything online seems to be an advertisement, which it is. And so I help narrow down and get to get to the good, the bad, the ugly, and just try to figure out what it is that what’s real world look like in some of these franchise opportunities and making sure that people that I’m working with understand what they’re getting into going through a process with me to make sure that they’re making data driven decision as they’re going through the process with the franchise.

And make, and before they sign a franchise agreement, I want to make sure that they know exactly what they’re getting into and exactly where they need to go.

Quentin Edmonds (02:09)
Hello, everyone. Welcome to the Real Estate Pros podcast. I am your host, Q Edmonds, and I’m super excited to be here today. Have someone here that’s going to actually talk about a topic I don’t get to talk about that much. So I’m really excited about that. Sometimes my guests have way of firing me up right before we come on the show. And he did that same thing, you know, just kind of just a mutual respect, a mutual identity that we both share that.

We may get into, I don’t know, it’s probably going to seep out, we’ll see. But I’m super excited because he’s going to talk about franchises. He’s going to tell you probably about a lot of misinformation that comes to franchises. And also, he’s going to be someone that can tell you, help people buy commercial real estate, help people if they’re thinking about franchising, how to get started, and again, some of the misinformation and how we can avoid some of that misinformation. And so I am super excited to introduce you all to…

Mr. Jonathan Anderson. Mr. Jonathan, how you doing today,

Jonathan Anderson (03:03)
doing fantastic, Q. Thanks for having me today. So excited.

Quentin Edmonds (03:06)
Absolutely,

absolutely, man. And so you told me you just woke up right now. I’m just playing around. People don’t need to know that. Listen, I appreciate you being here. I appreciate you making time, Mr. Jonathan, look, I’m going to dive right in, man. I want you to tell the people what your main focus is. I want you to tell people maybe a little bit origin story of kind of how you got into this space, maybe how this became a passion for you. And then also, man, if you don’t mind, tell us what part of the world you’re in. We would love to know where you are, demographic.

or geographically, I guess. So Mr. John, sorry you got the floor, man.

Jonathan Anderson (03:40)
Hey, thanks for having me. So calling in from Burbank, California this morning, got up early. They had mentioned just got up, been up early, early on calls, working with investors from out of the country coming into the United States. But primarily, my main role is a franchise analyst for the last 15 or 16 years. I’ve been analyzing franchise opportunities and just making sure I think my main goal in life is just to make sure that people when they’re getting into franchise opportunities that they’re making the right

data-driven decision for themselves and their family. And so what I’ve done for the last 15 or 16 years is analyze franchises from the ground level, figuring out what the franchisees are going through on the day-to-day basis, what the day in the life of a franchisee looks like, are they successful, how much money can they make, what is the truth behind the glitz and the glamour that you see on the internet. So I utilize those superpowers after analyzing franchises, working with franchisors to match individuals who come to me saying, Jonathan,

There’s so much on the marketplace. What do I look at? I look at all these rankings and these listings online. I just can’t figure out which franchises are good or not. Everything online seems to be an advertisement, which it is. And so I help narrow down and get to get to the good, the bad, the ugly, and just try to figure out what it is that what’s real world look like in some of these franchise opportunities and making sure that people that I’m working with understand what they’re getting into going through a process with me to make sure that they’re making data driven decision as they’re going through the process with the franchise.

And make, and before they sign a franchise agreement, I want to make sure that they know exactly what they’re getting into and exactly where they need to go.

Because, you know, when any endeavor we start, especially in commercial real estate and real estate, right. You want to make sure that you have the end in sight. You need multiple exit strategies. You have to have a couple of different plans. And that’s what I think most franchises fail to do is figure out what their exit strategy is going to look like. And that doesn’t mean they need to know exactly how they’re going to sell their business and when.

needs to know that when they need to sell their business or when their life is telling them they are ready to sell, that they are ready to sell and having them be prepared to know what that means. So that’s my main role in franchising. I also work with franchisers to make sure that they’re developing or selling franchise in a responsible manner, making sure they’re not selling franchises, that they’re awarding franchises, that they’re not just looking for a pulse and the money for people coming in. And then one of my main

the most exhilarating things that I do is I love, I come from the world of franchise resales. That’s the franchise units that are existing and ready to sell. I stay ahead of the market. I try to stay in close contact with the franchisors to get to the franchisees before they go and work with a traditional broker. Traditional brokers don’t typically know franchising very well. And I like to give everybody their, their happy win and their exit as they, as they leave the franchise world.

And you know what, that also one door closed is another door open for another individual coming in, buying a great business that they know what they’re getting into and they can make the franchisor happy by hopefully everybody being successful in the business venture. So that’s my role.

Quentin Edmonds (07:45)
Man, I love it, man. Thank you, sir. Appreciate you, man. Talking to us about franchises. I know we’re going to dive probably more into it. it seems like, you are vital right now to what, you know, to helping people with franchise. Like the way you approach it, all the things that you said, they definitely need you on their side if they’re thinking about, you know, getting into franchising. And we’re going to get there. But I want to go a little bit back a little bit, Mr. Jonathan, because you mentioned the word superpower.

And I mentioned that word probably every podcast. I want people to find their superpower. And so you said for the last 15 years, you’ve been applying your superpower. I want to know how did you figure that out? So I have, I have a saying where I say destiny has no wasted moments, right? Meaning like, as we go through life, there are different things on our destination moments that make us who we are today. So you’ve been using your, your, your superpower for the last 15 years, but how did you figure out that was the superpower?

When did it click for you that this is what you wanted to do,

Jonathan Anderson (08:46)
Well, I think like everybody you wish you would have found your calling earlier, you would have found your main thing earlier in life. But I think as life goes on, it’s just the way that it works with age comes grace. 2009, I was sitting down at the dinner table with my mom and she was sobbing. She was actually sobbing because she was in the tears of joy because I was getting ready to take a buyout from the company that I’d helped build from zero to 100 million over the course of 28 months. It was called Silly Bands, the Animal Shaped River Bands.

So she down, she was so happy that I was going to have this windfall of money and I was trying to figure out like what I was going to do. Like it was going to be my second act, my second career. And her tears of joy quickly turned into tears of, you know, sadness. And she expressed to me that years ago they had sold their business and I had known that they had a small business that they had sold. They sold it off to a gentleman on an owner financing deal and they ended up not being able to collect on the rest of the deal.

And so they got, you know, basically a 10th of what they should have gotten for their business and they were devastated. So I started thinking to myself, what can I do to protect my mom and people like her in the future? You know, I did everything in the top. First thing came to mind was go to the guy’s house and just beat them up or throw a cheeseburger at them. You know, but ⁓ realized quickly that I couldn’t do that and that there was really no no point in that. ⁓ And so I thought maybe I wanted to be a business broker. So I picked up the Internet and I searched business broker franchise.

and spoke with a business broker who was in franchising and he was the franchisor of one of the largest franchise business brokerage out there for business brokerage. And he said, Jonathan, I don’t think you want to be a broker. And I said, why not? I think I’d love it. can protect people. said, brokers have a saying, buyers are liars. He says, you’re the liar. Jonathan, the brokers are the liars. They’re just trying to sell businesses. They don’t care. They just want transactions to go through.

He said, you’re more of a marketing person and the value that you need to add and you want to protect people. Here’s how you do it. You need to get into franchise development. But first I see a franchise marketing role in your future. Long story short is for about the next six weeks, I took some time and sat down and tried to figure out what it is that I really wanted to try to figure out. What can I do to apply? What is my calling? What are my superpowers? Number one thing that I wanted to do for the rest of my life and I love doing is adding value to people’s lives.

Second thing is I love business and I love strategy and I’m a marketing guy. Number three, I want to work from anywhere and number four, I want to work for myself. Not necessarily in those order. Number one, adding value is the most important. The other three kind of just came along. And so just the freedom to be able to do what I want to do when I want to do it and work with people and add value at the end of the day. In 2013, I took my first role in franchising behind the scenes.

behind the scenes role, I never thought I would get there. I had no idea if I’d ever get into franchising. But for the three years prior to that, almost four years, I’ve been doing SWOT analysis for private equity, franchising, and not directly working with the PE firms, but working with consultant firms where I was under an NDA. And I didn’t even know who I was working for. But I knew I was doing the SWOT analysis of the top 250 home service brands was the first one. And then after that, was

health and fitness and I went in to do other industries after that. But I realized quickly that in franchising, there’s a franchise development role and in development, it is not your job to sell franchises. It is your role to gatekeep, to make sure that the person that you’re speaking with on the other side of the phone is actually a good candidate for your brand, right? So when I got my first role helping people sell their franchises and resales,

I not only got to understand what it looked like to be a failure in franchising or not do as well as you had hoped you were going to do where expectations didn’t match reality, but also had the ability to help them get the win in selling their business and then help somebody come in and buy the business of their dreams at a great price and then take it to the next level. And so that’s where the value of that orchestra really, I loved it. And when I got in there and I realized it and now, know, 15, 16 years later and I realized I’m here,

I would have never been able to tell you how I was going to get to this journey. Had I gone back there, I had no idea how I was going to get here. And I don’t even know if I’m completely here yet, except for the fact that I’m physically here and mentally here. As we move forward, you never know. think when it comes down to it, my main goal in life is to add value. And if I can do that, then everything else just kind of falls into place.

Quentin Edmonds (14:01)
⁓ Mr. Jonathan, man, thank you, sir. Thank you for something I like to call it a gift of your vulnerability. can’t the gift of your transparency, right? You let us in on stuff that we did not have to know and you would not have known unless you shared. So thank you so much for sharing. And man, I think people need to hear this coming from you because you had silly bang, sold it for over 100 million. You just took us through the process of what you know, different things you had to go through. And so I

I try to tell people we just don’t want to talk about success. We want to talk about the journey to success as well, right? You just don’t want to show them a shiny object. You want to show the journey. And so I know you know this because everybody goes through it. Adversity. There’s times when things go sideways, times when you have to pivot. So how did adversity show its face within your journey and how did you overcome it? Because again, I’m looking at success and I want people who

going through the journey to know like, hey, it’s not always easy ever. Just say it like this, and you’re going to get this trials coming to make us strong, right? So which route that you had to go through that made you the strong person you are today, Mrs. Jones.

Jonathan Anderson (15:54)
Well, you know, we mentioned one of the successes right there. to clarify, Silly Bands did a hundred million in revenue. We didn’t sell for a hundred million, but I wasn’t even a minority owner in the business. was just kind of the right-hand man of the guy who had, we had done it. We had built a team and it had been great. But in that triumph also came adversity and the adversity was I didn’t, I didn’t feel like I was fully protected in as much in, with the ability to get as much money as I thought I was going to get from that deal. I had to fight for it. got.

you know, I got well taken care of in hindsight, but you know, nothing good comes easy. And so when we look at, I mean, adversity should be a part of everybody’s life if we really want to grow and be stronger. And we should, you know, they say that we should embrace, you know, uncertainty. And I totally unequivocally agree, but I also think we should embrace adversity in as much, in as many ways as we can, especially because, know,

the adversities that we don’t bring on and the adversities that are just kind of put in front of us, we need to embrace those. We don’t want to go and welcome them at any time, but inevitably we need to embrace those. And that’s what I did at the time. I just embraced it. I said, hey, listen, what’s the best that I can do in this situation? And what’s the best for everybody so that I don’t burn a bridge and that I keep a long-term relationship alive? And so the adversities that I’ve had along the way, I mean, there’s so many to name. And that’s the thing that most people don’t.

when we look at videos online and people give us a how-to or whatnot, they don’t tell you a lot about the backroom conversations or the tears on the pillow, the things that make us stronger. I think we should talk about those more. There’s just so many to talk about. Every day is about, if we could sit here and talk about our adversities.

Quentin Edmonds (17:45)
Nah, man, I definitely hear you. I have a saying why I say failure failure is fertilizer, right? That’s that’s all it is. It’s it’s fertilizer that helps you grow and majority of the time when you research fertilizer, some of it is just dung. Some of it is, excuse my language, shit. And sometimes we go do things that are just shitty. But in that but in that is the nutrients that’s going to help us grow is fertilizer.

Fertilizers sometimes it’s messy, it’s stinky. But if you get roots in that, man, you will grow up strong. And so I always say, the trials come again to make you strong. And so we can’t avoid them, like you said, it’s only gonna make us stronger if you allow yourself to take root in that, to let something grow out of that. You know what I mean?

Jonathan Anderson (18:34)
That’s the key. think you got to breathe into the pain. You you got to feel it a little bit. That way it makes it that much better at the end.

Quentin Edmonds (18:42)
Ah yes sir, very well said. So let me ask you this, what’s your next real goal? What are you looking to solve a scale next?

Jonathan Anderson (18:52)
You know, right now I’m seeing an influx of franchise resales coming on the market. Speaking with a lot of franchisers, they’re sending me contact information to franchisees who are looking to sell and they feel like they don’t have any hope or any way out. want to offer these people hope. And at the same time, what we really need to find is we need to find buyers for these distressed businesses that are out there on the market. And they’re not on the market yet. You know, that’s the thing. I’m getting to them early, which is great, but also, you know,

inevitably finding buyers for distressed franchises that are out there. And I’m not talking, you know, distress beyond repair. I’m talking about franchises that just need maybe the right person to come in with the right sweat equity, the right person to come in with the right capital and inject it into this actual business to have it start to grow the way that it should be, you know, flourishing and give some of these people their, their exit that they deserve. You know, they

A lot of people that bought businesses in 2020 made knee-jerk reactions. You know, we didn’t know where the world was going to be in 2021 and 2020. So people that were getting let go of high paying jobs didn’t want to bleed their money away. So they went and they spent it and they invested it in a franchise. And unfortunately, a lot of them made a bad decision and not in bad, not in bad franchises, but.

in a decision that just didn’t make sense for their for their lifestyle. And then life changed back a little bit. know, twenty twenty one came around and realized that life was going to go on and that businesses were going to reopen and that hopefully everything was going to come back to the same to the same. And they went back to their regular life. But they have this investment that’s just sitting there. As a, you know, a thorn in their side a lot of times in there and they’re just they want to get rid of it. And it’s it’s worth it’s worth someone coming in and buying.

⁓ at the value that they want, probably not, but inevitably like there’s a sale, a transaction that can happen there to stop that unit from closing and the new franchisee could come in, put some hard work and effort and capital behind these businesses and really make the turn them into viable businesses. There’s a great market for it right now.

Quentin Edmonds (20:58)
Absolutely.

Now, I heard you mentioned that the people, and I think I heard you say it like this, people are just not transactional, right? This is just not transactional. This is about really helping people, right? And so I would love to know your perspective on relationship building. Have relationships served you well within, know, relationship building within business? Has it served you well? What’s your outlook on it? How do you do it? So talk to me a little bit, Mr. Jonathan, about relationships within business.

Jonathan Anderson (21:28)
wow. mean, relationships, think in life are everything. Connection. are human beings looking to make connections, whether relationships or business, transactional, long term, romantic, whatever they are. It’s all about setting the proper expectations, adding value to people’s lives around you. How many friends have you that did you grow up with that you probably don’t have around you anymore because they just never really added any value or maybe they added the wrong value to your life. That’s a thing too.

Quentin Edmonds (21:57)
Yes, sir.

Jonathan Anderson (21:58)
Evidently,

connections and relationships are of the utmost important. And certainly I’m not going to get along with everybody and everybody’s not going to love me. And that’s just the way it is. Right. So at the end of the day, I’m to put my best foot forward, treat everybody like my brother, my sister, do everything I can do to help them. And really what’s going to translate in long term is going to be my actions, the proof of the proof of the value that I’ve added and then my relationships that I’ve built will then trend transcend into new relationships.

from word of mouth marketing. And that’s the key, you know? I try to do the best I can for everybody that I’ve got in front of me. Give them everything I’ve got. Listen to understand that what they’re saying is important. Look into their system to help them for corrections and see what we can do and see if I can actually add value to their lives. If I can’t, find someone else who can. I don’t need to a relationship just to be a hero.

I’m not trying to be anybody’s hero, but what I am trying to do is add value. And if I can do that, you know, I welcome any phone call, any conversation. I’m a huge proponent of long-term, mutually beneficial relationships, making sure that I’m passing on the good word. If someone does me well, I want to make sure I’m, you know, paying that forward right back to them. So.

Quentin Edmonds (23:12)
Yeah, I love it. I appreciate something that you said kind of sparked the thought. And I’m not trying to set it like this, but something that you said, it made something think in me. Because you said all relationships don’t have to get along. We don’t get along in every relationship. But there still can be some type of relating that we can do. Some areas we’re just not going to be able to agree on. And it made me think about what a ship is, like a ship that sails across the seas or whatever. There’s different types of boats.

There’s row boats, there’s cruise ships, there’s these great boaters when they ship stuff. And each ship needs different type of crew. And so a row boat don’t need 100 people on that little ship. It’s just the two of y’all, but y’all can relate just knowing the two of us are gonna row together. But then maybe when I need to move a Titanic, I might need a big crew with me. And then I relate with them when it comes to that, to how to move this Titanic.

whatever relationship, whatever ship you are relating with, with people, whatever movement you’re trying to move together with people is going to require sometimes a lot of people, a few people, different responsibilities. Some people got a horse to sail. Some people got a row to boat. How are we going to do this thing together? What are we trying to move forward together? And when we can agree on that and we can come in community, common unity on that, then we can move the ship together. But some people,

100 people can’t fit in the rowboat. It’s so, some of y’all, I hate to say it like this, I just don’t need you for this ship. Maybe I may come to you for another ship and we can have relationship. But right now, I just don’t need you. So when you said that, that kind of sparked in me like, I love that because everybody unfortunately is not always fit for the journey that you’re on or the stop that you’re on in that journey. When you port it, maybe you you switched ships. Maybe I have a different focus now.

And so I love that because that’s a way to keep a good line of communication open with people, but also be honest with people like, know, this is where we are. This is how we’re relating. And so I, you know, I don’t know if you want to comment to that, but that’s something when you said that, that kind of sparked something in me.

Jonathan Anderson (25:24)
Well, I mean, you know, and this is what I struggle with this all the time. I mean, if you watch the news headlines and everything that’s going on, you think that people hate each other. But inevitably, when you talk to anybody you talk to, if you if you just walk up to somebody with an open mind and start having a conversation, you’ll find out that we’re in this age old adage, we’re more alike than we are different. It’s the headlines and everything else that have made us divisive and want to argue. it’s none of those things matter because we can’t change. ⁓

Quentin Edmonds (25:44)
Yes,

Jonathan Anderson (25:53)
And if we could change them, they probably still wouldn’t matter. you know, so inevitably when it comes down to it, it’s timing is everything with, with relationships. I might, people that might be listening to this right now might be thinking, this is, you know, not a conversation they need to hear now. I’ll save it for the future. I think it’s everything. you’re ever, when you get to a point when you need to sell your business and you feel like you’re in a hurry, you know, that, that you’re, you’re, you’re, you’re automatically behind the eight ball if you’re in a hurry. So you gotta be patient.

You gotta go through the process. And again, coming back to it, relationships, we’re more alike than we are different and timing is everything, especially, you know, if you catch someone at the right time, you’ll really be able to add value to their life a lot of ways. So.

Quentin Edmonds (26:38)
So well said sir, me and my wife got a saying when we say time takes time. You can’t rush time, time just takes time. It is what it is and I love time, it is everything. Mr. Jonathan, let me ask you, if someone wanted to reach out to you, connect with you, collaborate with you, learn more about what you’re doing, how can they get in contact with you, sir?

Jonathan Anderson (26:58)
way to start go to franchiseanalyst.com you’ll find all my contact information on there you can email me at [email protected] easy to get a hold of just schedule a call and we’ll see where it leads

Quentin Edmonds (27:12)
Yeah.

Well, listen, I want to say three things to you, Mr. Jonathan. First, I want to say thank you for your time because time, we just talked about time, right? Time is everything. Time is our most precious commodity. So definitely, sir, thank you for your time. Two, thank you for your story. Like I said, man, know, stories, stories move the world. you know, before Kobe Bryant passed away, something he said in one of his final interviews is nothing in this world moves without stories.

There’s a story behind everything. There’s a story behind the mic that’s in front of you. If you look at it, it has all kinds of coding in it. It’ll tell a story of when it was created. You know, the hat you have on has a story. There’s things in it that lead back to where it was created, what factory it was created in. My glasses have a story. Everything has a story. So I thank you for coming and sharing your story with transparency, with honesty, with vulnerability. I greatly appreciate that. And lastly, man.

Thank you for your perspective. Thank you for your mindset and bringing that mindset to this platform. I greatly appreciate you being here today, Mr. Jonathan

Jonathan Anderson (28:16)
Thank you very much, I appreciate you.

Quentin Edmonds (28:18)
Absolutely. listen, y’all heard Mr. Jonathan, you heard the nuggets that he dropped. You can tell me you didn’t get great value from this. Learned about franchising. Some of y’all will be hitting him up like this is exactly what I needed. So definitely look in his show notes, hit him up. And I love Mr. Jonathan. That’s my man. That’s my guy. But definitely make sure you subscribe here. You won’t check him out. Definitely make sure you subscribe here. That way you can come back because we’re going to continue to bring up amazing people just like Mr. Jonathan. So sir, I say thank you again.

And to everyone else, y’all have a fantastic day.

Tags:

Investor Fuel

Franchise Investing Explained: How to Avoid Bad Deals and Exit Smart

Show Summary

Resources and Links from this show:

Listen to the Audio Version of this Episode

Investor Fuel Show Transcript:

Tags:

Ready to take your business to the next level? Take the next steps below