How Franchises Can Boost Real Estate Profits | Real Estate Investing Pros

Cliff Nonnenmacher (00:00)
And with, and I’m not insulting them. It’s a, it’s a societal trend. have nothing to do with the trend. I’m just calling out the trend as an investor saying, where should I put my money? What’s going on in society? Well, you have 70 million millennials that were never taught by their parents how to use a screwdriver that need to make a phone call to fix literally everything in their number one asset, which is their primary residence.

Michelle Kesil (01:58)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Cliff Nonnenmacher, who started Franocity, supporting people in buying franchises nationwide. So excited to have you here today, Cliff.

Cliff Nonnenmacher (02:19)
Thanks so much, Michelle. I’m happy to be here. Appreciate it.

Michelle Kesil (02:22)
Awesome, so let’s dive in. First off, for those not yet familiar with you and your work, can you share what your main focus is?

Cliff Nonnenmacher (02:30)
Absolutely. Our main focus is so we’re a boutique consulting firm.

And we advise investors on what franchises they should be invested in or should be investigating, right? Based upon their investment objectives. So, you know, your audience is primarily real estate people. So real estate people like hard assets. They may say, you know what I do? I spend a ton of money on one hundred got junk. I spend a ton of money on HVAC work. Why don’t I invest in something like that and not only handle my own investment properties, but obviously I could take those services and expand them out.

So we assist people with buying franchises. We represent approximately 600 different franchise brands across, I would say, to 70 different industry categories. ⁓ And you’re correct, we operate throughout the entire United States.

Michelle Kesil (03:23)
Awesome. Can you give an example of how the consulting process works if someone’s looking to invest with you?

Cliff Nonnenmacher (03:31)
Definitely the services are free which nobody believes so I say I say it twice always because I once like no No, it’s not it is it’s a free service to the investor. We’re compensated by the seller No different from a real estate transaction, right? The realtor is compensated by the seller So I operate very similarly to a real estate compensation or a headhunter instead of matching the investor with a job or a piece of real estate I’m matching them with a business

The process would begin by really understanding the investor’s objectives, meaning what are you comfortable investing? Do you already have a job? Many people already have a full-time career.

They’re just not making enough money to pay for life. Life has gotten very expensive as everyone listening knows. Like everything is expensive. And most people’s, earnings have not kept up with the pace of inflation. So they’re looking for, I mean, if you think about where we’ve come as a society, we came from a single head of household earner and one spouse stayed home and raised children.

Right. We even had a one car garage. There was no need for a second car garage today. Both people are working and they need a and it’s ancillary revenue stream, which would be me. That’s crazy. So people are just like maxed out, stressed out. They’re at capacity and we helped them identify that next income stream, which could be a non brick and mortar brand. could be a brick and mortar brand. You know, it could be a super cuts.

It could be something, say it could be a UPS store, it could be something like that, just giving you examples of things that people could do. I do a ton in what I would call the real estate vertical, which would be all things home services. When I say I do a ton of it, I do it because they’re the most asymmetrical investments that you could look at. ⁓ Asymmetrical being.

Look at HVAC, look at plumbing, look at locksmithing, look at electricians, look at roofing, look at painting. These are all non brick and mortar brands. They’re all very low investment, all under $200,000, right? They all have very high margins to the bottom line, very high seven figure average top line gross revenues. They require very few employees relative to revenue.

Right, if you look at like senior care, what are you doing? You’re doing a hundred grand a year in revenue per employee versus roofing where you could do three, four, 500 grand, you know, in revenue, let’s say per employee. So I like businesses again, that asymmetrical comment, very few employees, high top line, very fast break even high margin recession, resilient, highly scalable. ⁓ so that’s really what we do with the investor. What are you willing to invest? What do you need to earn?

Where do you want to operate? What are the demographics of that community? What works? What doesn’t work? And what’s your bandwidth? Are you working in a corner office? Or are you working at home with a ton of bandwidth today? So it just depends on the investor. And then we’ll match them with a minimum of five opportunities that fit.

Michelle Kesil (07:29)
Yeah, amazing. And do people need to operate these franchises or what does the job look like when you’re the investor?

Cliff Nonnenmacher (07:37)
Great question.

Great question. So the assumption is for most people, most people have an employee mindset, let’s say, especially the ones who come to me, because most of them are coming from a place of employment, they’re thinking,

I know it therefore I’m only going to look at it. Right. Cause that’s what you do. If you were a job seeker, you would only look at jobs that fit your background and skillset that you stand a remote chance of even getting that job. Franchising is totally different. You could be an it professional. You could be a kid out of college. As long as you have a desire, right? You have obviously liquidity and the ability to make the investment. But if you have the burning desire to be self-employed and you can follow a proven system.

The brand doesn’t care as much about direct industry experience. And I always exaggerate this point. I think it’s a very good question that you asked because a lot of people do believe I’m not going to look at roofing because I’m not a roofer. I’m not going to look at the trades because I’m not a tradesman. So like kill those brands. Show me things more within my background of, you know, finance or I used to be a mortgage broker. I used to do this or he’s still real estate. It’s like time out.

Franchising is a vehicle where it could take you anywhere you want to go and the point that I was making when I exaggerate the point is you and I Assuming you’re not a doctor because I’m not you and I can purchase an urgent care center in franchising with no medical background and the reason is back to your question the reason is because the Franchise or Doesn’t want you working as a doctor. They want you owning building scaling hiring firing managing acquiring patients

for the urgent care center, not going room to room to room dealing with people’s illnesses. So yeah, I mean, anyone listening, I don’t care what your background is. I’ve owned 12. I don’t know anything about any of them. I’ve owned multiple gyms. I’ve been in the water fire mold and biohazard business, right, which is a good real estate tie in. Mold remediation, which is a big issue.

You know, just water damage or hurricanes and catastrophes on, real estate. I’ve owned businesses in Annapolis, Maryland that would remediate those disasters. I’m not a remediator. I’m none of those things, but yet I owned a multimillion dollar business in that space. So yeah, great question. Not enough people ask it and not enough people believe in themselves to say.

You know what? Like that answer, yeah, I’m willing to reinvent myself with a stroke of a pen, which is the check to buy the business. Most people lack that, that self-confidence to say, I could do anything I want to do. No, they end up staying in their lane, limit their upside, bang their head on a glass ceiling, never create wealth, never retire on time. It’s actually a total disaster for most people.

Michelle Kesil (11:06)
Right? That makes sense. And so when someone invests and they go for it, what are kind of the obstacles that most common that they face that maybe they weren’t planning?

Cliff Nonnenmacher (11:23)
Yeah, so I think obstacles right now, the labor market is rough, right? I mean, this is just my opinion. I think that the labor market has changed significantly over the years. ⁓ I think that the average employee today is lazier than they were, let’s say 10, 20 years ago. And if nobody believes that, just go out and go try and buy something. Go any retail location.

I don’t know that the employee gives half of a shit that you’re there honestly a matter of fact in many cases when I do ask for help I feel like I’m a disruption to their day I’m not the purpose of it and that’s the problem today with retail and why online is killing them So labor is your biggest issue the employee needs to understand that the customer is the purpose of my job and my existence of this company They’re not a disruption to your day and the end you know this if you’re a

and you go retail, you know exactly what I’m talking about. And anyone listening that’s walked into any retail outlet in America, like they’ll barely make eye, most of them are on their phone, matter of fact, when you walk into the building, and then you’re disrupting them by asking a question. So labor is always going to be your issue with any business. I don’t care what it is, right? Labor will be your issue. ⁓

Today because the real estate being so expensive site selection lease negotiation and understanding those terms. That’s also a reality check for a lot of business people. They also don’t understand how one side of those commercial leases are and personal guarantee exposure, et cetera. And then I think some of the other surprises would be. you, are you able as I know this may sound simple, but it’s actually more deceptive because most people feel like.

Well, that just seems simple. Let’s just follow the model. Most people can’t follow basic instructions like just putting their seatbelt on when they get in the car or stopping at a red light or a stop sign, right? The average person just cannot follow simple rules even in society. So when we’re asking someone to execute a franchise model flawlessly, it’s actually more challenging than you would think. Because what most people do is they’ll say, I like that.

I don’t like those other things. Well, what do you mean you don’t like those other? Well, I don’t want to cold call. Okay, well, cold calling is 90 % of how you’re to get new customers. So what’s your plan to get new customers? So I think a lot of people are caught off guard. They think they can work around some of the disciplines that are required to acquire customers. You with me?

So that creates a bit of a rub because it’s like, know what? I don’t want a cold call. I don’t want a cold walk and I don’t want to network. You know what I’ll do instead? I’ll just do three posts a day on Instagram. You are not acquiring the rate of speed of new customers by posting three times on Instagram. It’s never going to happen. Like never going to happen. Like you have to do some, depending on the brand, there are certain things that you need to do to acquire customers. And I don’t think enough people obsess.

over the only three ways that you could build a business in this country. Number one is acquire customers. Number two is to increase their frequency of purchase. And number three is to increase the average ticket. Those are the only three ways you could grow and build a company in America. And guess what most people do? They spend their time on stupid things that have nothing to do with those three. They really don’t. They’re just doing silly things like doom scrolling on Facebook.

Right? You look at people’s time and where they put it. It should really be obsessing over the three things that I just said.

Michelle Kesil (14:55)
Yeah, you’re right. I think it’s a bit of a group mind thinking that this is the one way to do it because we see some people but it’s not like an overnight thing.

Cliff Nonnenmacher (15:09)
Right, people think you could build a business just on social media and I just respectfully disagree with that. I think it’s one of many arrows in your quiver. It’s not like a silver bullet where I’m gonna buy a business, I’m gonna go on social media, I’m gonna acquire customers. It’s not gonna work that way. It’s one of many things that you need to do.

Michelle Kesil (15:26)
Right.

And so do the people that consult with you and continue to move forward, are they all making profits, would they say? Like they’re getting their ROI.

Cliff Nonnenmacher (16:21)
Yeah, that’s a good question. You know, how many people actually follow the system, move on to be successful. I don’t have data on exactly, you know, how many people went on to succeed. A lot of people never quit their full time job, right? So they kept it as a side gig, which means it never really got their full time and attention to become the full potential the business should have been. ⁓ and that’s an issue with a lot of investors. They, call them half pregnant. Today we live in a society where everyone wants to be half pregnant.

They want to have one foot in corporate America for quote what they believe is safety and security Even though most of them are going to be terminated soon due to AI and I’m dealing with this problem every day with people They don’t realize how fast AI is replicating and replacing their job

It’s crazy. A matter of fact, I just had a conversation yesterday with an immigration attorney that has been doing this for over 25 years. And I said to him, go, you know what I’m hearing a lot lately? I’m having people come to me that had work visas in America whose work visas are being terminated. And they’re like, look, I have a family here. I own a house that my kids are in school, but I just lost my job to AI. What do I do? And of course an E2 visa is a great solution to that problem.

Because once your work visa expires, you’re literally told to leave the country like you’re done. Employment’s over. You have no reason to be here. You were here to work. Work ended. Goodbye. Crazy concept. But that’s what happens to a lot of these folks. So we live in this time now where people are more risk averse.

So they keep that career and never give that brand the attention that it deserved to really scale it and create wealth and build it. But for the most part, if you look at franchising as an industry or methodology, franchising with a solid item 19 and good unit economics, you could be successful.

And I don’t speak for food because I don’t like food and I don’t think there’s any money in food. So I take that entire category and put it to the side. And that’s why my focus is mainly real estate home services because of that asymmetrical investing, that high margin, high net. And if you wanted me to expand further on why I like home services, we’ve spent the last 20 years feminizing men in America. Like literally, men can no longer use tools.

Than they used to be their sperm count is 50 % of their grandparents their testosterone is 50 % of their grandparents like think of that Like the average male one from James Dean leather jacket on a Harley Davidson To now today’s male in tight jeans on an electric scooter. That’s where we’ve come

And with, and I’m not insulting them. It’s a, it’s a societal trend. have nothing to do with the trend. I’m just calling out the trend as an investor saying, where should I put my money? What’s going on in society? Well, you have 70 million millennials that were never taught by their parents how to use a screwdriver that need to make a phone call to fix literally everything in their number one asset, which is their primary residence.

Think about that. They can’t even do a basic drywall repair, like literally nothing.

So they’re making dials and that’s why the handyman services, HVAC services, name the service that relates to a primary residence or a commercial property and that industry’s on fire. And I truly believe tomorrow’s millionaires are going to be plumbers. They’re not gonna be lawyers and they’re definitely not gonna be doctors. Because a lot of those industries will be disrupted.

by the smartest person in the room, which is going to be a humanoid and artificial intelligence and quantum computing. So your white collar jobs are about to get kicked in the nuts and the blue collar jobs are the furthest distance from disruption due to hand dexterity, climbing on roofs, crawling and crawl spaces and doing things that right now only a human can do. So I’m long all things tools, all things blue collar. I’m long and heavily invested.

Michelle Kesil (20:21)
Yeah, definitely. That’s so fascinating and a good way to look at things. And yeah, I can see how the AI disruption is really driving us in that direction.

Cliff Nonnenmacher (20:32)
Totally. mean, Elon just said in the next 48 to 60 months, that’s four or five years, his optimist bot will be smarter than the smartest doctor on the planet. And his optimist humanoid will be better than the best surgeon on the planet. Like unpack that. That’s coming from the guy that is about that just shut down what a factory that was making automobiles and shut it down to just make humanoids. That’s what’s about to happen.

So people are not ready for what he’s about to unleash on planet Earth. They’re not ready for what’s coming. You will not call. You will not do telemedicine. You and I will not. You will turn to your $20,000 humanoid that you bought from Tesla, and you will ask it a question as to why you have a rash, why you feel the way you do, and exactly how to remediate that problem. That is fascinating, and that is a complete disruption to…

to the medical society, you will also turn to it and say, Hey, how do I, how do I evict my tenant in Scottsdale, Arizona? How do I evict my tenant in Tampa, Florida? You are now a Florida bar attorney, by the way, the humanoid is better than any attorney that passed the bar in any state. And think about what I’m saying. Right. I’ve already done it just in full disclosure. I’ve already used AI to evict a tenant in, in a singer Island, Florida.

Michelle Kesil (21:48)
Right.

Cliff Nonnenmacher (21:57)
I just basically prompted it. You are an attorney, real estate attorney, right? In the state of Florida. You need to give me step-by-step eviction instructions by the law, by Florida statute. It gave me step-by-step, including how to tape the notice on the door and how to videotape it as I walk away and knock on the, like every granular that tenant was out in two weeks, two weeks gone. No sheriff required. It even gave me that detail of how to contact a sheriff, how they get paid.

$200 and how to evict a tenant. That’s where we’re headed. It’s crazy.

Michelle Kesil (22:33)
Yeah, definitely an interesting time. Thank you so much for sharing your wisdom and perspective.

Cliff Nonnenmacher (22:36)
I know, I know. Yeah. Appreciate

it, Michelle. Thank you for having me.

Michelle Kesil (22:43)
Yeah, and before we wrap up here, someone wants to reach out, connect, learn more, where can people find you?

Cliff Nonnenmacher (22:49)
My website franocity.com F R A N O C I T Y .com and you could you could schedule a call or have access, you know, get our phone numbers and everything right off the site.

Michelle Kesil (23:02)
Perfect, we’ll appreciate your time and your story. Thank you for being here.

Cliff Nonnenmacher (23:05)
Thanks a lot. Appreciate it.

Michelle Kesil (23:07)
And for those tuning in, you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Cliff who are building real businesses and we’ll see you on our next episode.