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Show Summary
In this episode of the Real Estate Pros podcast, host Kristen interviews Jon Ostenson, founder and CEO of FranBridge Consulting, about the world of franchising. Jon shares his journey from the corporate world to franchise ownership and consulting, highlighting the diverse opportunities available beyond traditional food franchises. He discusses the impact of AI on business ownership, common misconceptions about franchising, and the financial considerations involved. Jon also shares success stories of franchisees and emphasizes the importance of finding the right opportunities and support in the franchise world.
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Jon Ostenson (00:00)
Yeah, I think the drumbeat’s getting louder out there. mean, the Wall Street Journal has an article or two every single day now on AI displacing white collar jobs. And you see the big CEOs coming out there and being very bold about the statements you know of where things are headed. So I think people have reason to be concerned. I think you know it’s time to get aggressive though and not defensive. Instead it’s, hey, how do we adapt? How do we adjust? ⁓ No, but I think you’re exactly right. The knowledge economy, the agents, the brokers, I things aren’t going to evolve in the coming years.Kristen (02:01)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Jon Ostenson. He’s the founder and CEO of FranBridge Consulting, a two-time Inc. 5000 company. Basically, they connect entrepreneurs and executives with premier non-food franchise opportunities. So we’re gonna get all into franchises today. I’m excited. Thanks for being here, Jon. So this is a really interesting subset of kind of the real estate world. How did you become interested in this?Jon Ostenson (02:20)
Excited to be here, Kristen.You know, like so many of your listeners, I spent many years in the corporate world and had a good run and invested in a real estate on the side. But really fell into franchise about nine years ago. I had the opportunity to step in as president of Shelf Genie franchise system and support all of our franchise owners all across North America. And really for me, that was the light bulb moment and fell in love with the franchise model and just saw how all these diverse backgrounds could come together under a shared system and become business owners. And we supported them. So long story short, you know
up investing in franchises myself on the franchisee side and this has been on both sides of table and still invested there but started my consulting business about seven years ago and I just really saw an opportunity to help educate and introduce others to the idea of some of the opportunities out there that oftentimes aren’t top of mind when I say the f-word franchise.
Kristen (03:16)
Mm-hmm. Awesome. And what are some of these kind of overlooked types of franchises?Jon Ostenson (03:22)
You know, we see all types of backgrounds jumping into things like home and property services. A lot of real estate investors getting plugged in there. It’s kind of a lot of private equity flowing in there to home and property services. Health and wellness related concepts are really popular. you know business to business services, categories such as seniors or kids or pets. I’d say the general theme that we see are opportunities that are going to continue to do well regardless of the economy. know, things that people are always going to be spending on.And
I joke that when it comes to business ownership, non-sexy is the new sexy. People like, especially real estate investors, they love those niches, whether it be flooring or insulation or pool cleaning or cabinets. Again, things, restoration, I’ve got a franchise I’m invested in that provides asphalt paving and line striping, so parking lots. It’s those niches you don’t think about, dumpsters as an example. ⁓ AI is not gonna displace any of that.
Kristen (03:56)
way.Right, dancers are a bit…
Yeah, I think that’s a good thing to touch on, maybe expand a little on that, where I think a lot of people in the real estate community are a little nervous about AI and how it’s gonna affect their jobs, particularly agents. Talk about how this is kind of, you know, combating that.
Jon Ostenson (04:32)
Yeah, I think the drumbeat’s getting louder out there. mean, the Wall Street Journal has an article or two every single day now on AI displacing white collar jobs. And you see the big CEOs coming out there and being very bold about the statements you know of where things are headed. So I think people have reason to be concerned. I think you know it’s time to get aggressive though and not defensive. Instead it’s, hey, how do we adapt? How do we adjust? No, but I think you’re exactly right. The knowledge economy, the agents, the brokers, I things aren’t going to evolve in the coming years.So from where I sit, we do see a variety of different backgrounds, real estate backgrounds, know, folks with technology or consulting. Again, they see the writing on the wall or maybe they’re already being asked to do more with less and cut their teams. mean, there’ve been a lot of layoffs, even this past week, tens of thousands across several major companies. So, you know, that’s causing our phone to ring even more. So, ⁓ I mean, we’ve, we’ve never seen more interest in business ownership to begin with. And then you layer in the AI impact and, yeah, people are looking for.
There’s also that desire that most people have to build their own empire. They’re tired of building someone else’s. They want to work for themselves. That’s one of things I love about franchising is it provides essentially training wheels that allow you to get into business ownership where you’re not all by yourself.
Kristen (06:35)
Absolutely, and you don’t have to start from zero. There’s already a foundation there.Jon Ostenson (06:39)
Exactly. No, you’ve gotFranchise or on the sidelines that’s supporting you and obviously a playbook that’s been proven out there’s product market fit in other markets and ⁓ You know, you’ve got maybe bulk buying for some goods or services, you know Marketing that’s been optimized already because they’ve run it in other markets the technology stack that’s already there day one again just kind of Shortcuts your success allows you to start on third base if you will and you know one thing we’re talking about before the show is the idea of masterminds Really a franchise this oftentimes gets overlooked but it’s kind of a built-in mastermind
You’ve got other franchisees in the system running the same thing and their respective markets all bringing a diverse background to the table and different perspectives. And you’re really able to exchange best practices and learn from each other and ⁓ again, shortcut that path to success.
Kristen (07:27)
Absolutely, and I’m sure you you work with people You see these same things over and over. I’m sure what are some of the misconceptions about franchise ownership?Jon Ostenson (07:36)
Yeah, well, first off, I’ve got nothing against the food guys. know, people oftentimes associate Subway, McDonald’s with franchising. We need all of them, but my humble belief is there are easier ways to make money that may require less capital investment, fewer employees, less operating hours, less susceptible to consumer whims, as an example, you know, some of these other industries. And so I’d say I think the misconception is that franchising is all about food and hotels. And again, there’s so many other opportunities. Another misconception is that, you know, it’s so rigid that, you know,Kristen (07:42)
Great.Jon Ostenson (08:06)
⁓ You’re not able to be an entrepreneur and do your own thing. I’d say in most franchise systems, a good franchisee is going to allow their franchisees to try their hand at new things and run some tests and innovate. And that’s where the best innovation comes from is, know, oftentimes, you know, that ground level, you know, the tests that they’re running. So I’d say that’s a misconception sometimes that it’s so rigid and you know obviously they’ve got to protect the brand. can’t let you go too crazy. that’s why, you know, franchising is not right for everyone. Some people are so entrepreneurial, they want to put their thumbprint all over it. But I find for most people, it’s a betterpath to business ownership. um and I’d say, you know, misconception. mean, franchising is just like every other industry and that you’ve got good players, you know, out there they are providing great support, but you also have some franchises that don’t provide great support. And here you’re paying a royalty stream back to them. you know, I hate that, but I also haven’t found any industry that’s all perfect either. So that’s where we come in to try to help our clients identify the opportunities that do make sense, that provide that value and support.
Kristen (09:05)
Yeah, so you’re a real estate broker, but for franchises, how do you identify these opportunities? How have you built up your network?Jon Ostenson (09:13)
Yeah, so we’re affiliated with the largest franchise brokerage in the country. So we get a lot through that, but then we do a lot of arrangements outside of that too. So yeah, we work with over 600 different franchises. Really most of the companies out there, they’re looking to expand. They still have good markets to expand into. So I’m very well networked. I go to a lot of conferences. We’ve been very fortunate. We do more deals than just about anyone in the country. And so I’ve got those relationships on the consulting side as well as on the brand side. So we’re always looking to see what’s going on behind the curtain, what’s coming down the pipeline.Our biggest challenge today is that opportunities sell out in good markets very quickly. And so you have to have a close pulse on what’s going on out there to be able to position your clients for that next thing. So things that we look at, Kristen, obviously we’re looking at the competitive advantages, the business, it’s got to have a strong financial model. We’re looking at what current owners in their system are saying about their experience. Best indicator future results for our clients are people that have been there and done that and they’ve been running it successfully.
And then finally, you we look at the team around it. You we want to see both good industry experience as well as franchise experience on that leadership team. Again, people that have supported successful franchisees and their background. And so there’s a little bit of art, a little bit of science to all of this. But my goal is to not get too prescriptive too early on, but instead share with my clients that, hey, if I’m in your shoes based on what you’ve shared with me, based on what I’m seeing out there, here are the top.
even 10 or 12 opportunities that are available in your market looking to expand that I think could be interesting for you to evaluate. And they would then narrow those down and I’d hold their hand through the evaluation process.
Kristen (11:23)
Yeah, and like, what do people look for? What do you see over and over like that people are looking for in a franchise?Jon Ostenson (11:30)
They always tell me, we want the largest return on investment, fewest number of employees, right? mean, that’s just common out there. But I would say, right now, people are looking for those opportunities again that are non-trendy, things that are understandable, that will cash flow, they’re not going out of style. ⁓you know, oftentimes probably half of our clients are getting into things that do require a customer facing retail storefront, know, kind of what you traditionally think of, but about half of the opportunities don’t. And so you are able to work remote. It’s more field-based. You you think about like in-home senior care or, you know, some of these property services franchises, you don’t need a customer facing location. So businesses like that, oftentimes you can ramp up a little bit quicker. And so those are attractive to people. We’re seeing a lot of interest. A lot of people have a background in business to business service.
And so that’s translating into opportunities like everything from freight brokerage to industrial hoses, you know B2B services to business coaching to consultative type opportunities, whether it be cost mitigation or maybe it’s insurance adjusting. Again, there aren’t a ton of opportunities in the business and business services space, but the ones that are are very popular.
Kristen (12:44)
Yeah, that’s interesting to bring up that not all of these opportunities require a retail space, because that’s where my head went immediately. But that makes a lot of sense. And also dumpsters and all of that, like trash cans. That’s awesome. And so what if you could break down kind of maybe monetarily what people need to you know have a franchise themselves?Jon Ostenson (13:07)
Yeah. Well, first off, it’s entirely free to work with us. So you don’t have to pay anything. Very similar to a real estate broker model. We get a referral fee. None of that’s passed on. that’s, that’s upfront. But then once you get into it, you know, I mean, we have some clients that will get into 10 trampoline parks at $4 million each. You know, there are some really large deals. Most people though, when you look at the franchise fee and the startup cost and several months of working capital, all built in, you’re all in investment range. You know, oftentimes you’re in.in the 150,000 to 400,000 ballpark, ⁓ you know, more towards the higher end of that range would be more the retail based towards the lower end would be more the service based.
you know, but there are multiple ways to fund it as well. some people are using all cash, but most people like, like the idea of leveraging, especially those with the real estate investing background. And so SBA loans are incredibly common. Obviously banks prefer lending to franchises. So that’s a very common approach. and so you might put in 20 % leverage 80%. Another path that we see people use is the retirement plan. If you have a 401k or IRA from a previous employer, you can roll that over through what’s called the Rob’s program.
ROBS and avoid some of the tax implications and purchase the business with a retirement plan. And then you pay yourself a salary from that. Certainly real estate investors also tap into HELOCs at times as well.
Kristen (14:23)
That’s amazing. Yeah, there’s a lot of opportunity there. That’s awesome. And so you also have a book kind of breaking down all of the best practices. Can you talk about that as well?Jon Ostenson (14:31)
Yeah, I wrote a book called non-food franchising. It’s about 90 pages, made it very readable. And yeah, we’ve gotten great feedback over the last couple of years. A lot of people will start with that and just helps them understand franchising and fill in the gaps in their understanding. so yeah, in the book, I get into the financial piece of it. We talked about the different industries. I share client case studies. But then I’ve got some interesting chapters. I’ve got one on franchising versus a startup. What are the trade-offs, pros and cons? Got another one on franchising versus entrepreneurship through acquisition. The idea ofbuying a business. That’s a very common idea out there today, but for a lot of reasons we see people that will start off going down that path and then they come around to the idea of buying a franchise. But that’s a very common approach that people are taking right now and so we talked about the trade-offs between those two ideas.
Kristen (15:59)
Yeah, that’s really interesting and you don’t have to give away all of your secrets. People definitely should read the book, but what generally are like, you know, from the acquisitions versus franchises?Jon Ostenson (16:09)
Yeah, know, buying an existing business can be a great proposition if you find the right one and it doesn’t take you too long. Most, I see it every single day. People reach out to us and say, Hey Jon, we’ve been looking for an existing business and there’s a lot of content out there. A lot of people talking about buying an existing business.But oftentimes they’ve been looking for three years or four years. They’ve been under LOI a bunch of times. They’ve actually paid people in some cases to go find a business for them. And then it just hasn’t worked out. So all that time they could have spent building a business, they’ve been out there looking. And they feel like they’re playing the game, but they’re not building a business, right? And so I’d say it takes a long time. And then once you find a business, there’s risk associated with that. Just because it looks good on paper doesn’t mean things will continue the way they are. You’re inheriting someone else’s team.
someone else’s culture and whenever that happens, you may lose some key employees, may lose some key customers. So oftentimes people…
Overlook that and of course, they’re paying a premium for that business assuming nothing changes as well So once they start evaluating assisting business versus a franchise where they can kind of handpick their team day one And it’s a proven business model Oftentimes they kind of gravitate in that direction and I remind them whatever you do next probably won’t be the only thing you ever do So you can always start with the franchise learn the best practices of you know Standing up a business and then purchase the business down the road or purchase other franchisees within that system because you going get first debts when one of them looks the sales.
So a lot of different approaches, but of course I’ve got a little bit of bias, again, this is what I see every day.
Kristen (17:41)
Yeah, and you have people that repeatedly come back to you looking for more and more opportunities.Jon Ostenson (17:46)
Yeah, it’s what I call franchise stacking. It is very common. Oftentimes, you know, some will do it sooner, but usually around that two or three year mark that they were turned to, Hey, Jon, we’re, we’ve got a good team in place and we’re ready for the next thing. And sometimes they’re looking for businesses that will compliment their current franchise. In some cases, they’re looking for ones that diversify. So, know, plenty of client case studies around both of those approaches, but nothing gets me more excited than, you know, when I see them and a lot of them, again, we’ll buy other franchisees in the system too, and kind of expand that way. So.I always love keeping tabs on past clients and helping them ensure them on from the sidelines.
Kristen (18:20)
That’s amazing. think this is just so interesting. I have a question that might be a little silly. Maybe other people know the answer to this. But when you get into a franchise model, how does compensating yourself work?Jon Ostenson (18:34)
Yeah, you know, it’s just like any other business where, you know, you can pay yourself a salary, you know, every two weeks, every week you can do it. Yeah. For me, like in my businesses, I usually pay myself once a year at the very end of the year. ⁓ I’ll pay myself W2 and then that way I can strategize around QBI, qualified business income and maximize the deductions for this or that. So, ⁓ that’s my approach, but I will then take distributions throughout the year. again, your P and L is your P and L. It doesn’t matter if you distribute that money or reinvest it. doesn’t affect.ultimately your tax liability. Again, I’m not a tax accountant, but this something I’ve learned along the way. But now I’ll take distributions throughout the year and then pay myself a W-2 at year end.
Kristen (19:12)
Yeah, well that’s very interesting. Very cool. So do you have like a case study that maybe you can share with us? Maybe somebody who was in the investing space and was able to have a lot of success in franchising?Jon Ostenson (19:23)
Gosh, I mean, so many case studies, but, you know, one that I’ll point to. ⁓My client Nathan, he invests in a lot of different things, but he’s become the largest franchisee of two men in a truck moving service based out of South Carolina. Started with one or two locations over time, acquired other franchisees in the system and now has, I think 12 locations, does about 45 million a year across a number of different markets. you know, the reason I like to use him as a case study is because I love his approach. First off, he’s a great guy. I’ve got to know him personally really well, but he has built up an organization and built a culture that is so many
folks want to go work for and then once they prove themselves in that culture Nathan comes back to me and says hey Jon I’m raved to buy another franchise and so we’ve done several franchise deals together over the years where Hilden promotes someone young within his organization to go take on that responsibility and he gives them some equity and says hey go make us proud and so it’s just been neat to kind of see the way that he’s done that it’s something that a lot of other people aspire to and are on their way to achieving.
So it’s kind of a start with the end game in mind and build along the way.
Kristen (20:27)
I mean, I think this is just such a great concept, the fact that you can help people source these opportunities. It’s just a great way to have that entrepreneurial ship in your life without, because I mean, a lot of businesses fail, the startups. So this is a step ahead. You already have more, you have more success. The opportunities are a lot more.Jon Ostenson (20:50)
Exactly. Yeah. And nothing’s ever foolproof. You know, nothing’s a sure thing. There’s risk associated with everything, but you know, there is a reason why you can make outsized returns via business ownership. It’s because, you know, you’re assuming some degree of risk, but you’re also putting effort in, right? It’s not totally passive. And that’s actually a good point to make. A lot of franchises will market themselves as semi-passive or semi-absentee. Some call it an executive model. And the idea is that you put a manager in place and you manage the manager rather than getting hands on yourself. Now,I don’t want sugarcoat it. If it was easy, everyone would be doing it. It does take work. However, franchising does allow for that approach because you’ve got a franchise or on the sidelines that supporting that manager carrying a lot of the daily support water for you. So you’re not the go-to for every question. So it does make it doable. What it comes down to is a having a good franchise or on the sidelines. And then secondly, having a good operator in place. If you don’t have a good operator, you’re going to be leaning in, but if you have a good operator, then it can be very hands off for you.
Kristen (21:48)
That’s awesome. this is, I mean, I’m sure a lot of people learned a lot from this and are probably very inspired to look further into franchising. Can you tell people where to find you, to find Franbridge, and how to get a hold of your book?Jon Ostenson (22:01)
Yeah, come out to our website, FranBridgeConsulting.com. That’s F-R-A-N-BridgeConsulting.com. Share your email address. We’ll then reach out to you and share free downloadable links to our book, you whether you want the PDF version or the audio book, ebook, all that. Certainly if you’d rather buy it on Amazon, all the proceeds go to Hope International, a great nonprofit that we support. But no, come out to our website, FranBridgeConsulting.com for a free downloadable copy. And if you’d like to jump on a call, just indicate that as well. We’ll send you a link to my calendar. And I’d bemore than happy to jump on a call with all of your listeners and help them navigate their next steps and whether franchising makes sense.
Kristen (22:36)
amazing. I mean, I’m gonna look at that book. I’m very interested in this. So I really encourage everybody to check this out, you know, take advantage of the free resources. But thank you so much for being here, Jon.Jon Ostenson (22:48)
Yeah, I appreciate you having me, Kristen. I enjoyed it.Kristen (22:50)
and thank you everybody for listening. Hope you learned a lot, got some inspiration for maybe building your business, and we will see you back next time. Bye.
