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Show Summary
In this conversation, Jon Ostenson, founder and CEO of FranBridge Consulting, discusses the intersection of franchising and real estate investment. He highlights the benefits of franchising for new investors, the characteristics of an ideal franchisee, and the importance of diversifying income streams. The conversation also delves into innovations in property management and strategic opportunities in home services and senior care, emphasizing the potential for growth and success in these sectors.
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Investor Fuel Show Transcript:
Jon Ostenson (00:00)
business ownership isn’t easy.I’ll never sugarcoat it, but it does provide that path to that independence and that flexibility and that desire to build your own empire instead of someone else’s. And so we see more and more guys and gals reaching out saying, hey, we want to diversify our income streams. We don’t want to be reliant. In a lot of cases, they’re making several hundred thousand, doing pretty well. You know, they’re driving nice cars or kids are in private school, but they’re like, gosh, I’m trading time for money. I’m missing out. I don’t want to be traveling as much. I want to be at home with my family.
Dylan Silver (00:21)
Right.Jon Ostenson (00:29)
Don’t want to be putting in the hours. don’t, to your point, I don’t see where this is leading me. And, you know, wish I’d started a business yesterday.Dylan Silver (02:08)
Hey folks, welcome back to the show. Today’s guest, returning guest, Jon Ostenson is the founder and CEO of FranBridge Consulting, a two-time Inc 500 company. He’s a top 1 % franchise consultant. He’s an author of the bestselling book, Non-Food Franchising. He draws on his experience as a former Inc 500 franchise president and multi-brand franchisee and helping his clients select their franchise investments. You can find him at franbridgeconsulting.com or across social media, including LinkedIn, Facebook, and YouTube.Thank you for taking the time today, Jon, and welcome to the show.
Jon Ostenson (02:39)
Excited to be here, Dylan.Dylan Silver (02:40)
Now I want to dive right in here and talk about franchising within real estate. And I mentioned this to you before hopping on. I wasn’t previously aware. And I think most folks are not aware that they have opportunities to invest in real estate or get started within the sphere of real estate through a franchise model.Jon Ostenson (02:59)
Yeah, absolutely. I’d say probably two thirds of those that we work with invest in franchising as well. I personally do both directly and indirectly through funds and syndications, directly through Airbnb. you for me, it’s an all of the above approach and I love having business ownership, albeit through franchising within the portfolio. I think it’s a great addition from a tax play standpoint. And yeah, franchising just really resonates with a lot of real estate investors. I think it’s a similar mindset. Again, the tax benefit side of it, you know,strategies you can do around that. ⁓ So I think it’s a good compliment. And like you said, some of the franchises directly pertain to real estate in different ways. You know, I think about a client of mine that had a large real estate brokerage and he came to us and said, Hey, we’d love to get into property management. keep referring all of our clients out. He’s like, do I start that directly or should I buy a franchise that specializes in already has the systems in place and the team in place to support us?
Anyway, he ended up going with the franchise and has had tremendous success and it just makes it a little more turnkey for you. you some great options in property management. You know, there’s some great options around wholesaling, you know, real estate. We’ve had clients get involved there. And then I’d say where the vast majority in, and we have real estate investors jumping into everything from health and wellness, categories like seniors, kids, pets, a variety of different things.
⁓ But I’d say a lot of times they gravitate towards home services, property services, everything from insulation to flooring, to cabinets, to restoration, to pool cleaning, a variety of different types of ⁓ business. There’s so many different niches out there.
Dylan Silver (04:28)
Now for folks who are maybe unfamiliar with real estate and they’re looking at a franchise model and they think, well, I haven’t wholesale before. Interestingly enough, Jon, you my background is wholesale. So I understand how to take a deal from the cradle to the grave, but I could see someone walking in saying, you know, I don’t know too much about that space, but I’m interested. Can folks get started with a franchise and will most franchises kind of train people up or do you have to come in with some preexisting experience or maybe having done a couple of deals?Jon Ostenson (05:45)
Yeah, a hundred percent. No, most people enter in, I’d say in real estate, mean, some people have experienced, but for the most part, probably 80%, I would guess if our clients get into industries that were never even on their radar, much less they had experience in. So it is fun to expose them to the types of opportunities that are out there. And I’d say what makes a successful franchisee from a franchisee’s perspective would be one, you’ve got to be halfway decent with people, right? Someone that people want to work with, work for. mean, that’s just business 101.And then secondly, you’ve got to have the humility to follow a system. I’d say where people get in trouble is when they enter into a franchise system and think they’re the smartest guy in the room and want to change everything. I’d say, you know, franchising may not be a fit for those individuals, but for the vast majority of people, they’re looking to get into business ownership. Franchising with a good franchise or can really shortcut that success path where to your point, you get the training, you get the support, not only from the franchise or in their team, but you’re stepping into a built in mastermind.
And I’m a big believer in masterminds. I’ve been a part of several over the years myself, where you’re marching in the same direction, running the same business day in day out as all of these others all around the country, all around North America in some cases, and you’re learning from each other. So again, you get that, you know, support, but also the learning so that you don’t have to make the same mistakes yourself.
Dylan Silver (06:58)
Yeah, I mean, when I think about my personal journey, you know, if we take wholesale specifically, think, gosh, would it have been great to have been part of a group that was literally invested with me. I mean, when you’re a franchisee, the greater business, of course, wants to see you succeed. So they’re invested just as much as you are.And so, when you do have not just a mentor, but someone who’s literally in it with you, they’ve got like an equity stake in there with you, you’re not gonna feel like you’re left out on your own to figure things out. And on top of that, you’ve also got a built-in network, a built-in mastermind, because you’ve got other people who are doing what you’re doing within the same business.
Jon Ostenson (07:40)
Absolutely. I think those are just some of the quick reasons. I mean, that we see so many people gravitating towards franchising. You know, I’ve got nothing against the food guys, but my humble belief is there easier ways to make money outside of food. And I think more and more people are realizing that when they hear the F word franchise, you know, it doesn’t necessarily mean fast food, but it’s all these other industries that they can participate in. And I think for a variety of reasons, I mean, we’re seeing more interest than we’ve ever seen in franchising. It’s an exciting time to be in the game. So many different new franchise companies coming online, differentcoming down the chute. So we’re always working with our clients, trying to position them ahead of other candidates in the pipeline, because in a lot of cases, it’s competitive. A lot of people are going after the same opportunities in the same markets. so we’re always working with our clients, trying to position them and work our relationships on the back end to get them bumped up.
Dylan Silver (08:25)
What’s the ideal avatar, is there an ideal avatar of someone who’s going to become a franchisee? Is it someone who’s got maybe ⁓ some extra time? Is it someone who is particularly passionate about ⁓ one segment of the real estate space? Or have you seen people who maybe are full-time professionals or in the medical field also open a franchise?Jon Ostenson (08:49)
Yeah, now we have quite a few physicians and dentists and others that step into it and they say, hey, we want to stretch our intellectual curiosity into something new. ⁓ There’s two paths to get involved. One would be what’s called an owner operator and some franchises require owner operators. The majority though require or are open to what’s called semi-passive or semi-absentee.I like to call it semi-involved. think that’s a better term. The idea there is you put a manager in place day one, and then you continue on with your W2 or whatever else you’re doing. And about half of our clients go with that path. And I’ll never sugar coat it. If it was easy, everyone would be doing it. But there’s a reason why you can make outsized returns in franchising. It’s because you put forth a little more effort than you would in a passive syndication or real estate fund, for instance. So what it comes down to is having a good operator that you put in place.
And then you have a good franchise or supporting them on the sideline. And that franchise or can carry a lot of the daily support water for you, but you still have to have a good driver in that seat. As far as the avatar goes, speaking to kind of the financial side, I had a client the other day that bought 10 trampoline parks. That was a big investment, right? But most people, when you look at the franchise fee, the startup cost, several months of working capital, all built in.
some of these home services we’re talking about the property management dimension, businesses like that, you can get in for maybe 150,000, 200,000. That’s where we see a lot of people’s entry point. Some are using cash. Most real estate investors I know like the idea of leveraging. So SBA loans tend to be the most common path. That’s what a lot of our clients will do. You can also use a retirement rollover through what’s called the Rob’s program and purchase the business with a retirement plan. Then you pay yourself a salary. So, you know, I’m happy to go deeper on any of those topics, but that’s kind of a brief overview. And we see people of all, all
Dylan Silver (10:19)
Hmm.Jon Ostenson (10:28)
ages getting involved, but I’d say quite a few in their 30s, 40s, 50s would kind of be the sweets.Dylan Silver (11:07)
Yeah, you know, one of the things that I think about specific to building your portfolio, your wealth at a young age is that I think there’s a lot of young people right now that can really identify with feeling like, how am I going to retire? They’re not seeing, or let’s forget retiring. How am I going to build wealth? Because they’re seeing in many cases this Henry phenomena, high earner, not yet rich, right? And so they’re seeing like, okay, well,If I continue to make the money that I’m making at my current expenses, am I gonna have enough money reasonably to retire with inflation? And I think a lot of, I’d include myself in this, a lot of us may be getting into real estate because we’re not so bullish on the idea of just scrolling money away and waiting and seeing what happens. And we feel like while that may work, we wanna have a more active role, even at a younger age, even if that’s stretching us.
in our retirement plan, quote unquote, or just our wealth building world.
Jon Ostenson (12:06)
Yeah, you’re exactly right. No, and these are the conversations I have every day and I’m in my mid forties. I get calls every day from guys in their mid forties that have been thinking about business ownership for some time and they’re starting to look around. They’re like, Hey, the guys I know they’re taking the bigger vacations and upsizing their house and have a little more free time on the golf course. Common trade is their business owners, right? And they’re, they also plan on retiring well before I do. ⁓ and you know, again, business ownership isn’t easy.I’ll never sugarcoat it, but it does provide that path to that independence and that flexibility and that desire to build your own empire instead of someone else’s. And so we see more and more guys and gals reaching out saying, hey, we want to diversify our income streams. We don’t want to be reliant. In a lot of cases, they’re making several hundred thousand, doing pretty well. You know, they’re driving nice cars or kids are in private school, but they’re like, gosh, I’m trading time for money. I’m missing out. I don’t want to be traveling as much. I want to be at home with my family.
Dylan Silver (12:51)
Right.Jon Ostenson (12:59)
Don’t want to be putting in the hours. don’t, to your point, I don’t see where this is leading me. And, you know, wish I’d started a business yesterday.No, an interesting dynamic is a lot of people are looking for an existing business to buy. They’re like, Hey, if I can step into cashflow day one, that’s great. Well, that can be great if you find it. But what I see is people reach out saying, Hey, I’ve been looking for three years or four years. I paid someone to go out and try to find a business for me. Due diligence didn’t shake out. You know, we got outbid been under LOI five times.
over and over. I’ve had that conversation with several Harvard MBAs this week even. you know, my feedback to them is, hey, get in the game. That’s what I love about franchising a lot. get in the game, start building. Over time, you may buy other franchisees in the system, scale that way, or you may buy another franchise or you may buy an existing business or start one. You have optionality. So I always encourage people to think about what’s right for the next season that allows them to get in the games. They start building instead of sitting on the sidelines talking about it, thinking about it, consuming content.
Dylan Silver (13:36)
Bring it.Jon Ostenson (13:55)
go out and start building and then you’ve got that platform and you can go a lot of different directions.Dylan Silver (14:00)
I want to ask you maybe a granular question about the property management space. It does seem like there’s a lot of change and disruption in a good way happening in the property management space. And I’m seeing it both from investors who feel like, we need a better solution. And I’m seeing it fromindividual operators themselves who are realizing, you know, the old way of doing things may not be the best way. And that also too, you know, if you’re a multifamily investor and you’re acquiring a property, probably the biggest bottleneck is going to be the property manager.
Jon Ostenson (14:35)
Hey, I’m smiling because I’m thinking about a mountain house that we have and we’re limited on the property management options where it’s located and it is so old school. It’s painful. ⁓ No, I think there’s a lot of innovation. You see that really across home services in general, too, know, with franchising. It’s, know, when you step into a space and there’s a lot of fragmented, unsophisticated competition, you’re able to come in with a more professional approach, a white collar approach to a blue collar industry, if you will. ⁓you know, just from a technology standpoint, what you can do from a systems inefficiency standpoint, you know, all the vendor relationships that you have and how you can kind of serve as a quarterback. No, I think there is, to your point, there’s a need in the market. You know, I really like how some of the franchises in the property management space have positioned themselves and just the track record that they have of, you know, gaining market share very quickly because of how they go about things. So again, you can go out and start a property management business or you could
step into one in franchise where the marketing has already been optimized because they’ve opened up a lot of other locations. You don’t have to recreate the wheel and waste marketing spend. You’ve got a technology stack day one. You don’t have to piece that together yourself. You’ve got the training, you’ve got the relationships, the vendor relationships, you’ve got the ecosystem of support like we talked about within the franchise. So again, it’s a trade off. Anytime you’re evaluating a franchise, you want to say what kind of value am I getting for this royalty stream that I’m paying back?
Dylan Silver (15:35)
Yeah.Jon Ostenson (15:57)
many cases, it makes a lot of sense for lot of entrepreneurs.Dylan Silver (16:41)
Yeah, I mean, when I think about some of the businesses that I’m personally very bullish on, I think about some areas of real estate where people might not traditionally think about, yeah, that’s an amazing opportunity or huge cashflow opportunity within real estate, something like property management. I’m a realtor in Texas and one of the funny things is no one is talking about apartment rentals.but myself and a buddy of mine have been realizing like, hey, there’s all these people that are renters by necessity, literally like hundreds of thousands, millions of people in Texas that are renters by necessity. And all the realtors are focused on like, hey, how do we represent buyers and list homes? And sure, we may have to do volume, but there’s definitely business there and no one is tapping into it. And I think a lot about that in some of these services. I don’t know if you’re involved in any of these spaces, but things like,
home repairs, handyman services, even roofing, which honestly is such a big business in Texas that can be little bit competitive, but there’s certainly opportunity there.
Jon Ostenson (17:34)
We’reinvolved in all of those. I’ve done multiple handyman deals in the past three weeks, multiple, and there’s one that we really like that caters to kind of the older population. You know, that’s a big macro trend is people aging in place, staying in their homes. And this is one that provides a recurring revenue handyman service to them that we really like. And kind of speaking to that demographic, again, I would step back. We like to look at macro trends. We don’t like things that are trendy, but we like to see where the puck’s going and then kind of skate to it as Wayne Gretzky would say.
Yeah, I think the senior space, there are number of ways to play that beyond just in-home senior care, know, whether it be like senior fitness, whether it be ⁓ serving as a guide to different senior facilities where you become the expert on the placement side ⁓ with those, or ⁓ one that we really like, it provides wheelchair ramps and stair lifts and bathroom retrofits and really mobility solutions in the home, allowing people to age in place. That’s a great tag on business too.
in-home senior care business to a property management business. So a lot of our clients will kind of, like I mentioned, the real estate broker earlier, you know, we had some other clients that had an in-home senior care business, then they got into this mobility solutions business. You’ve got the same customer base. So it’s fun to kind of get creative strategically and how you can leverage either the customer base or the operational synergies on your backend. One of our clients is the largest franchisee of two men in a truck moving service. operates, over time he’s bought up other franchisees in the system. He now operates in 12 markets.
Dylan Silver (18:38)
Yeah.Jon Ostenson (19:03)
does about 45 million a year in revenue, early 40s. And every year or two, he comes to me and says, hey, Jon, I’ve got a young guy in my organization that’s really done a great job. want to buy a franchise for him to go run. Typically he gets into property services, whether it be waste management, whether it be more traditional home services, gives him equity and says, go make us proud. And he’s had a great track record. So a lot of different ways that you can play franchising into that overall strategy.Dylan Silver (19:19)
Yeah, brilliant.Yeah, that’s an amazing, I’m thinking about that, you know, young guy or gal who’s got that opportunity. I mean, that’s just really an amazing opportunity to grow, you know, really be mentored by someone who themselves, you know, had the blessing of, ⁓ you know, being in a system where they have mentorship within the franchise model and now they’re opening up their own franchise. I mean, that’s if they’re, you know, when people are describing the American dream, that’s it right there for me, for my money’s worth.
We are coming up on time here though, Jon. Any new projects that you’re working on and then as well, what’s the best way for folks to get in contact with you or your team?
Jon Ostenson (20:03)
Yeah, first off, it’s entirely free to work with us. It’s very much like a real estate model. I’m a franchise broker, just like you’re a real estate broker. So we simply get a referral fee. None of that’s passed on to our clients in any way. So no obligation there at all. But we’d love to share a free copy of our book, Non-Food Franchising. I think it could be a great way for people to kind of fill in the gaps in their understanding of franchising, kind of get the juices flowing. So we’d love to share a free copy. Just come out to our website, FranBridgeConsulting.com, F-R-A-N BridgeConsulting.com. Share your email address. We’ll then reach out to you withlinks to the book as well as a link to my calendar. You know, would be happy to jump on a call with any of your listeners and talk about the types of opportunities that are available in their market and what it may look like.
Dylan Silver (20:41)
Jon, thank you so much for coming on the show. Thanks for taking the time today.Jon Ostenson (20:44)
Thanksfor having me, Dylan.
