Dealquest Episode 281 - Jon Ostenson - FULL AUDIO
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Corey Kupfer: Jon Ostenson is the CEO of Fran Bridge Consulting, a top one, a 0.1% franchise consultant, and the bestselling author of non-Food franchising. Jon draws on his experience as a former Inc 500 franchise president and multi-brand franchisee in helping his clients select their franchise investments. Jon is a frequent contributor on franchising to publications such as Forbes and Bloomberg.
Jon, welcome to the DealQuest podcast.
Jon Ostenson: Thanks for having me, Corey. Looking forward to our conversation.
Corey Kupfer: So listen, I'm so excited to talk about franchising and your various experiences with it and what your company does. Especially because, I talk about all the time on this podcast on how this is a deals podcast, not just an M& A podcast, not just a capital raising podcast, as some others are, but we talk about all types of deals.
Now, we tend to get more guests in the M& A and capital raising world because that's where a lot of deals are done, but we talk about licensing and, Joint ventures, strategic alliances, and certainly franchising is another type of deal. But before we get into all that, I want to take you back, to when you were a [00:01:00] little kid, maybe 8, 10, 12 years old, because of, my guess is, a franchise consultant probably wasn't what you were dreaming of being back then.
So, what did you want to do when you were a little kid? What were you thinking?
Jon Ostenson: Great question. Yeah, thinking back, my, my father was an estate planning attorney. He was out on his own. And, you know, he did enough to pay the bills, but we, we never got ahead. We're probably the, I was probably the poorest kid in our little private school at the time.
And, yeah, certainly that created drive, but it also showed me, Later on, I would realize the need for a system, a framework for him to follow. And that's, probably one of the reasons I'm endeared to, to franchising. But I know it's been an amazing run, had a lot of opportunities to support successful franchise owners across the country.
And, you know, love helping audience members like yours step into business ownership, either for the first time or to add to their portfolio. So yeah, excited to jump in here.
Corey Kupfer: Love it. Love it. Yeah. So it's interesting that early experience, a lot of people have the misperception that every lawyer makes a huge amount of money.
And the truth is, if you look at the stats, a lot of them don't get me wrong. They, they make a better living than a lot of [00:02:00] people, certainly around the world and even in this country, but it's not, most of them, are not, getting rich or, You know, so it's an interesting experience to that and have that be a driver for you to like have a system around it, because yeah, a lot of, that is a missing in a lot of attorney's business models.
One other, one other question. Looking back, what was the first deal of any type that you ever did that could be something small when you were a kid early in your career, or maybe it was in the franchise world, maybe it wasn't, you tell me.
Jon Ostenson: I'd say the first deal that comes to mind would be shortly after college, it was the 05, 06 period, a couple years after school, and, real estate couldn't go down, and, partnered with another guy, fortunately he maintained solvency as well through, through this, but, we bought some raw land, it was pre development, and of course then 07, 08 happened, and, it became worth the Pennies on the dollar.
And at the time it was a huge number to us, but we just continued to make those monthly payments and, you know, stayed up to date, eventually sold it to put tax benefit from the loss. But, a lot of learnings, through that experience.
Corey Kupfer: Yeah. Trust me. Yeah. We all had a lot of learnings at that point.
We, I had raised, two real estate [00:03:00] investment funds, not huge, but you know, like, a million here, a million out there, whatever. And, we had done some, small condo conversions that we've been invested in some multifamily buildings and obviously through 2008, nine, it's 10 got her on that and we're able to recoup, a majority of the investment for our investors, but definitely, a loss of money.
So, that was a time of a lot of lessons for various of us, investors and dealmakers.
Jon Ostenson: Now, when you've got investors behind you and it's other people's money, I mean, that does add to the pressure and keep you up at night, right?
Corey Kupfer: No question. No question. If you care at all. So, which I did. So, all right, so listen, let's hop in, I don't want to waste any time because I'm sure there's hours of content we can talk about franchising and we've only got about 40 minutes more.
So. Talk about this and you know, one of the things that's interesting in your bio is, you know, this cut and obviously your book is about non food franchising because I think the default thinking for most people when they think about franchises is, you know, McDonald's and Burger King and Wendy's and Subway and, and on, right?
I mean the most prominent, at least in terms of [00:04:00] brands, as a category are often the food franchises. So talk to us about, why don't we just start, like, the differences between food, non food, and why you focus in non food franchising.
Jon Ostenson: Absolutely. When you look at the landscape out there, there's roughly 4, 000 franchise brands in the U. S.
today across different industries. If you cut out the food side, that cuts out about half the market, but that's automatically what comes to mind, right, when you hear the F word franchise. And so, I've got nothing against the food guys. You know, I'm good friends with them. CEO of Chick fil A and others, but end of the day, we need to, when you step back from an ownership standpoint, I mean, we're all consumers of food.
We need those guys, we support them, but my humble belief is from an ownership standpoint, there are easier ways to make money. There are ways to get involved in business ownership that require less capital up front, oftentimes fewer employees, less operating hours, oftentimes less susceptible to consumer whims, let's say.
It's certainly from a trend standpoint. And then finally, lighter investment, higher margins as well, because, yeah, [00:05:00] you don't have perishables and such. So, again, just easier ways to make money. We support food guys, but love some of these other industries, which I'm sure we'll jump into.
Corey Kupfer: Yeah, I love that. So, in terms of the people you work with, are they mainly, owner operator types or investors who are buying maybe multiple franchises, or even if they're not doing multiple franchises, they're not. Operating in the business because there is this perception again, which has truth in it in various areas that, you know, franchising is an opportunity for somebody who is, looking to was an employee, and looking to basically, you know, become a.
The critics would say semi entrepreneur, like you don't really, yeah, it's supported, but you will have these controls by the franchisor and the critics would say you're buying yourself a job, but you know, you feel independent, right? On the positive side, people would say, even for the owner operators, well, listen, it's great.
It's a headstart on starting a business, a lot of stuff you don't have to figure out. You got a franchisor model, you got support, you got advertising, you got, you know, a proven model on how it works. But again, a lot of [00:06:00] people think about, I'm trying to hit some of these sort of automatic misconceptions of people who don't know franchises.
They may default to, oh, this is something for owner operators, people who are going to be in the store, at the printing franchise or whatever it is, right? So talk to me about that, who are the people you work with and, do they vary from that?
Jon Ostenson: Yeah, directionally, I would say about one third of our clients are looking to fill an owner operator approach to the business and probably two thirds are semi absentee, semi passive, some call it an executive model.
So on that owner operator piece, kind of you started touching on this. Yeah. You know, when you compare it to a W 2 job, A, you're building your own empire, not someone else's, you know, I hear that. Oftentimes, but it's beyond the cashflow. You're building an asset that should have exit value down the road.
You're also able to get a lot of tax benefits. I mean, the tax code is written for real estate investors and business owners. That's what the government incentivizes. Yeah, but when you look at the semi passive approach, which again, I'd say, we have clients that are doctors and lawyers and existing business owners that don't have a ton of time, or, in some cases, W 2s of larger companies, in their [00:07:00] case.
They can put a manager in place day one to run the business for them. Most franchises allow for that. Not every one, but most of them do. I try to never sugarcoat it with our clients. There's still a lot of work that goes into standing up a business manager. I think it's going to take you five hours a week.
It's probably going to take you 10 out of the gate. I want people to go in eyes wide open and get to hear from other franchisees experiences within that same system of how they run their businesses and the time that they put in. But the nice thing about franchising is it is doable and it's very common out there.
And part of the reason there is if you have a good franchise or on the sidelines, they're able to support that manager with a lot of their day to day needs. And so they carry a lot of the water for you. Buck still stops with you as the owner, but they're able to really lean in and support you in a big way.
Corey Kupfer: Right. So two thirds of the folks you work with are not on our operators, which is interesting. So who, you know, you mentioned doctors, you mentioned, so who's the demographic like obviously on this spot, you and I have the, the [00:08:00] EO entrepreneurialization, connection.
A lot of those folks, a lot of my clients, a lot of these listeners here are entrepreneurs of various types. They're already running their own businesses. And, you know, some of them are looking for diversification outside of, having all of their, capital and network tied up in, in one business.
Certainly, that's, people look at real estate investment as, one opportunity to diversify. Especially in situations where it's allegedly passive, more passive, and nothing is as your point is, so, is that the demographic that, I also know like, yeah, well compensated high end executives, as well, but talk to me a little bit about who's that demographic who is not on the operator side, but more on the, executive, as you said, side of things.
Jon Ostenson: Yeah, I'd say, you know, probably 80 percent of our clients fall between 35 and 55, certainly some on either side of that, but you know, what I oftentimes hear as a common thread is again, wanting to build their own empire, wanting to diversify their investment portfolio. Probably two thirds of our clients invest in real estate as well.
I mean, me personally, I'm multi brand franchisee now. Yeah, I've [00:09:00] been a franchisor, You know, I also invest in a bunch of real estate syndications, a little more passive than active, but across a number of different vehicles. And, so I'd say right now we're seeing a lot of real estate investors moving over because, you know, there's limited inventory in the market.
You've got high interest rates and they're saying, what are other tax advantaged? investment opportunities to diversify outside the public markets. And, so I go on a lot of real estate shows and I've worked with a lot of real estate clients. And I do think there's a lot of parallels too, from a mindset standpoint and how they think about that, involvement in the business and creating cash flows that, are there even when you're sleeping, you know, but also there's a lot of direct tie in just the type of business oftentimes compliments maybe some of their real estate holdings.
Yeah, I'm happy getting into examples as well.
Corey Kupfer: Yeah, no, that's great. So what, yeah, so let's talk about that a little bit. What, what are the types of, you know, so we say non food, right? Are there any particular, sectors or industries in the non food space that you guys really focus on or that you think, there's [00:10:00] this, what are the opportunities that are showing up right now?
Jon Ostenson: Yeah. I personally represent over 600 different franchise companies. You know, kind of played matchmaker, our clients never pay us a nickel. It's very much like a real estate model. I'm a real estate broker. And so, it's a beautiful, clean model. We'll work with. All these different companies spanning a number of different industries.
And I'd say what we're seeing right now, a whole lot of interest in things like home and property services. That could be everything from insulation to floor coatings to, gutters to dumpsters. I personally, I'm invested in a driveway franchise. I'm invested in another one.
That's a concrete striping business for parking lots. These non sexy niches. Yeah. Other, you know, others like, as well as myself, you know, oftentimes it's bringing a white collar approach to a blue collar industry that's, it's not going to be susceptible to trend. You're always going to need some of these services.
You know, it's industries like health and wellness. I mean, we all care more about health than ever before and, that can play out and everything from men's testosterone clinics to, maybe to more senior care and specialized care. Things like kids, pets, you know, the aging population, things [00:11:00] that people will spend on regardless of the economy is where we're seeing a lot of interest.
And so, I mean, we've all been talking about a recession for a decade now, but if the economy ever does go South, what kind of business do you want to be in? That's going to be resilient during those times.
Corey Kupfer: Right. So let's say you're one of those folks who, and you know, I'll focus a little more on those executive folks.
Cause that's more of our audience. I think then somebody who's going to. Look to be an owner operator in a franchise. So when they start looking, for, so they come to somebody like you, they say, Hey, I'm interested in diversifying. Maybe they have an idea of industry, maybe they don't, maybe they just think it's a good, opportunity.
How do you guide them? And then what kind of due diligence. I mean, I know, and you might wanna give the basics to the audience about it. Yeah, that there is a, something called a disclosures and all this kind of stuff, whatever. But that and then beyond that, practically, what should be people be looking at when they're considering and doing their due diligence on different franchise opportunities?
Jon Ostenson: Yeah, I'd say, first off, when people come to us, they oftentimes don't have any type of idea of what they want to get involved with, and that's what's fun. We love those light bulb moments, if they keep an open mind and [00:12:00] a blank slate, those light bulb moments take place and they end up, you know, getting involved in something that was never on their radar.
You know, but we have a very streamlined process where we get, curate the top 10 or 12 opportunities in their market from our perspective, based on their situation, based on what we're seeing out there, we do more deals than anybody else in the country. And so we get a lot of perspectives, but we bring those to them and say, Hey, here are the 10 that we think are the best fit for you across different industries that are available in the market.
Take them through that. They pick three or four to have a conversation with, and then we kind of hold their hand through, a series of calls and presentations after that. Your question around the due diligence side. So the goal is to get them as much information as possible during the process.
I give enough information to kind of give them an indication of whether this is one they want to pursue. But then once they get into that process with the franchisor, every franchise system is regulated by the Federal Trade Commission. They've got what's called an FDD or Franchise Disclosure Document, 23 different items within that.
Two that we pay a lot of attention to, yours off the bat would be your item seven, which is your all in investment [00:13:00] range, their item 19, which is their financial representation, but then you've got all these other pieces too. So, yeah, those are audited numbers. So you have a lot more than a back of the napkin envelope, a calculation to go off of in building your performance, that would be one data point.
The franchisor can guide some, but they have to be pretty tight lipped as far as not making representations outside of the item 19. But then they get a chance to talk to other franchisees in their system. It's what we call validation. So you get to have conversations and hear about their experience and ask them questions and how fast was your ramp up?
What were surprises? How is the franchisor supporting you? So your goal is to get these different data points prior to What's called a discovery day. And that's where you'd fly into their home office, spend a day or two with their team, make sure it's more good culture fit. Get all the questions answered.
Any final due diligence. So again, is it entirely foolproof? No, is it a whole lot better than what you have going into a startup? Yes. And because, you know, in like kind markets, this model's already [00:14:00] proven profitable, right? And so it's just about going out and executing on it.
Corey Kupfer: So just to be clear, because I use the term that might not be valid anymore.
I am not a franchise attorney. I've. I've certainly helped folks like set up entities that they need for franchises, and look, but, you know, we have people refer on the legal side, but there used to be something called a uniformed franchise offering. Sorry, Golo, Is that the is now this disclosure document you mentioned?
Yeah. What they call it now, the replacement or whatever the new name on it?
Jon Ostenson: Yeah. The FED is the new standard, right? It used to be the ufo. Yep. Yeah.
Corey Kupfer: Got it. Okay, great. So you see I love this 'cause I learned stuff as well, from my guests on the on the podcast. So, okay, great. So somebody comes to you that's great.
You narrow it down. Listen it's like, when I look at, we do obviously a lot of m and a. We work with the investment bankers and brokers. They're doing that as well. What the difference is, which is really interesting, the difference is most of the cases in that case, well, not always, but more often is a particular industry, a particular, you know, whatever that the buyer, the potential buyer knows they want to go in and they hire a banker or a broker to do that.
But I actually know some folks who it's similar. They're just [00:15:00] looking at the boy capital, looking to get into a new business and, and they're doing it more generally, which is, sounds like it's often the case here that people don't have it, like you said, they don't have that specific idea.
Corey Kupfer: What let's break down, some of the things, some of the elements of a franchise deal, right. I mean, because there's the way, the enough I know to be dangerous in this area. Like some key items, right? You're looking at, okay, what are you paying the franchisor and for what, right?
There's licensing, there's advertising commitments, there's, other things like that. So you wanna break that down for us a little bit more on what these, what the elements of these, franchisor, franchisee deals look like.
Jon Ostenson: Yeah, typically you're paying the franchisor somewhere in the neighborhood of six or seven percent give or take And what we call a royalty and that's off of gross revenue.
Now that gets built into all the financials that you review leading up to that. That's an expense, you know, but you want to ask the questions you go through the process. What am I getting in exchange for that? Is it something that I'd be paying for on my own if I weren't in a franchise system?
There can be huge value out and not every franchise or is a great one, just like any industry. They're really good ones. And there's some that aren't [00:16:00] so good. And I'd say of the 600 that we work with it. 60 that I personally feel are the best of the best. And they've got the profit model.
They've got the leadership team with industry and franchise experience. They've got, competitive advantages, current owners and their system are loving their experience. So those are some of the filters that we use on our end to kind of narrow it down before giving them to clients. But,
yes that's kind of how we think about it. Hit on that question one more time. I apologize.
Corey Kupfer: Yeah. Just like, what are the elements of the deal? Like I know, you know, there's like what's the, you know, give me a national advertising commitment to it. You know, any other elements like
Jon Ostenson: that?
Yeah. Typically your franchise fee would be upfront. Oftentimes that franchise fee where you're buying the rights to a, restricted market that you can then market to. Yeah, typically your franchise fee is somewhere in the neighborhood of 50, 000. Your second location or second territory is probably like 40, 000.
Next one might be 35. So it is very common to buy multiples to give yourself that path to scale. But, that'd be your upfront cost. The royalty would be the ongoing, we also build in what are the startup costs where the, working capital [00:17:00] requirements for three months or so that's given as a range.
And, oftentimes our clients are getting into things between 150, 000 and 400, 000. Certainly some are well north of that, but a lot of opportunities to kind of all in fit, those categories. So the royalty, like I said it's typically around 6, 7%. It's all about what are you getting in exchange for that?
You know, in understanding, oftentimes there's like an extra 1%, 2 percent advertising cost. And so, again, it's just making sure that those make sense to you.
Corey Kupfer: Let's talk about the level of freedom slash control, right? Because. That's the thing that could be the double edged sword, depending on how good your franchisor is, right?
On the critics. Who've had bad experiences will say, Oh man, I couldn't, like, I wanted to do, I was restricted from doing all this stuff because my franchise wouldn't allow it. And then the people who are positive about it are going to say, Oh my God, they've created the system that they know works.
And it was a great thing to follow. So talking about like how much, and listen the people [00:18:00] who wouldn't might make the argument, go open your own business, don't be a franchise, or they're going to say, you get to be the king or the queen of the castle. You can make all the decisions you want to, you have nobody looking over your shoulder.
But obviously there's a trade off in terms of risk and whatever for that. So, yeah,
Jon Ostenson: as you mentioned, we're both in EO entrepreneurs organization, and I've done a handful of deals with EO members more often times than not. I have to explain to them, you're too entrepreneurial. You want to put your thumbprints all over everything.
You don't want to stay within the lines. But what's really fascinating, Corey, is some of these existing business owners that have been there and done that. They come to me and say, wait a minute. We love the idea of starting on third base. We don't have to figure out our technology stack. We want to optimize our marketing because it's already been optimized.
We love the fact that we can put a manager in place and diversify our portfolio and they've got a support system on the sidelines. We love the fact that there are others living the same experience in other cities that we can learn from because that's a huge value add. And we love the fact that there's multiples on the end of the deal from an exit value standpoint, oftentimes higher than non franchised in like minded industries.
[00:19:00] There's been some research that shows that. Typically they traded a higher multiple. So, once they kind of put that together, I'd say the majority of them have an interest, but there are quite a few that are too entrepreneurial and think they're the smartest guy in the room. You know, when I go back to my days at Shelf Genie franchise system and I was, franchise president there.
I support franchisees all across North America and I looked at our top performers and our middle of the pack and our bottom performers. I'd say the two things that differentiated our top performers, one, they were good with people. I mean, that could be their employees that, that could be their vendors, the franchise or, I mean, that's a given.
And number two, they followed the system and that sounds cliche, but If you come in and you execute on that playbook, your, your success is, it's not guaranteed, but it's pretty good chance.
Corey Kupfer: And the other thing that, that I guess not everybody, what a lot of franchise systems have is training available as well, right?
Jon Ostenson: Yeah, absolutely. And you can send that manager off to train, let the franchisor train them. I mean, we have a lot of clients that are very hands off when they get involved in the [00:20:00] business again, and I own multiple franchises myself. I'm very hands off. Early on, was I somewhat hands on? Absolutely. You know, until the business was stabilized in a good place.
So, I think you have to go in eyes wide open, understand everyone's situation is different. I will say we're seeing more interest than ever before in franchising. Our biggest challenge is the good opportunities move fast and really good markets. And, our challenge is always trying to get our clients to the front of the line.
And then I'm calling the franchisors a lobbying on their behalf as to why they should get the first Dibs on the territory. So, that happens more often than not these days.
Corey Kupfer: Let's talk about where it goes bad and I'm sure it goes bad a lot less, when you're involved because you help the clients through this process, et cetera.
But you know, I'm sure nobody in business has a perfect record, so I don't know if you have particular stories, obviously without any names, or just even in general in the industry, like, where are people who are interested in, in, in become franchisees. Make mistakes when the deals go bad.
Jon Ostenson: Yeah, you know, I'd say certainly it is a much lower, the stronger success rate than in just [00:21:00] entrepreneurship in general. But, there are times that it doesn't work out. Most of the time what I see is it's more the individual versus the system they bought into. Granted, there are exceptions and there are some systems out there that, we're not putting in front of our clients.
We don't think the franchisors were ready to franchise maybe when they started offering it. And, you know, they didn't have the. I want to see franchise experience on that leadership team in addition to industry experience. So, I'd say some of the ways that it goes bad, you know, would be, I mean, end of the day, it's a small business, right?
And so it could be personnel issues. It could be that, you had a relative gets sick, you have to go care for them. You don't have anyone to watch, that over things while you're away. I think if you come into a franchise system, you. Again, try to be the smartest guy in the room, try to reinvent the wheel.
It's like, well, why'd you buy into a franchise to begin with? And so those would be some of the biggest reasons. But more oftentimes the common denominator is that individual. And maybe it is that they're too tight and not willing to spend on marketings. They can't drive the business, but they're incurring fixed costs along the way.
And they need the volume to leverage those fixed costs. It's just basic business one on [00:22:00] one. I'd say it's the biggest reason. But every now and then you'll have a franchise system that just. should have been offering franchises in their life cycle just yet.
Corey Kupfer: Right. And listen, I've seen that with, a clients in the R's.
And friends, where, and I remember I was in a, this years ago, we were, thing, Michael Gerber, was running, obviously method and everything, you know? And we had somebody that happened to be a food business for those in the R in a food business. And, he had, Came up with this concept.
They had one location, he had a regular restaurant, but then he had sort of a more quick serve kind of, concept and he had one running successfully and he was ready to tell you about franchises. And I remember Gerber said to him, you need to go replicate this yourself another, one, two, three times before, you should even think about.
Becoming a franchisor. So, I know, we're mostly focusing on the franchisees. So let's talk about a little bit about what it takes to become a franchisor. When is it appropriate for a business to not even think about franchising?
Jon Ostenson: Yeah, no, it's a great avenue for a lot of businesses, not for everyone.
And what I counsel. [00:23:00] Potential franchisors on is, there are advantages. I mean, private equity loves franchising. So if you build up, I mean, you can provide for great growth on someone else's dime with a very nice exit down the road. So there's incentives on the franchisor side.
They've just got to keep a tight eye on, bringing in the staff and the support for those franchisees. They're going to have expectations and, you know, otherwise they're going to wake up one day and have kids across North America with expectations of them. And they're trying to keep the kids playing nice and happy.
And that's not the world you want to live in. Right. So, I, what I encourage a lot of newer franchisors to do is partner with the franchise group, let them handle the sales part. You focus on supporting onboarding. Don't. Because it could be a full time job trying to sell new locations.
So we've got some great groups that we connect people with there. I encourage them to bring on franchise experience again on that leadership team. Someone that has a track record of supporting successful franchisees and knows what that looks like, not just the industry experience. And I'll give a small case study here because we talked about, Hey, if you only have one location, [00:24:00] I wouldn't say it's always the case.
You shouldn't go franchise. I'd say. You just have to take a very critical look. Now, I think of business right now that I've got a lot of clients doing well in, and it's a business that's wall containment systems, like temporary walls around construction sites. You know, which is so many different industry verticals that have these temporary construction sites going for several months, oftentimes, airports, hospitality, retail, hospitals, doctor's offices.
And, they only had one location when they franchised this business. There was a lot of meat on the bone from a margin standpoint. So even if you took a conservative approach. Because of the small sample size there were still the numbers look pretty good. But what they did was they partnered up with a franchise group who actually took an equity interest in them.
A franchise group that has Produce multiple successful franchise brands, a lot of successful franchisees over the years. And so now you have that blend of the two and they've been off to the races.
Corey Kupfer: That's great. Good example. Let's talk about your personal journey a little bit, because, in the beginning I guessed and, you know, was shockingly right that at eight, 10, 12 years old, you weren't planning on being franchised [00:25:00] in the franchise industry.
Now insightful of me, but, so, like, how did you come into this industry? What was your journey?
Jon Ostenson: at age 35, I wasn't planning on being in the franchise industry. So, I had a great run on the corporate side, worked for Accenture for many years. And then, did some international stints, went back to grad school and then, fortune 1000 company, Carter's Oshkosh B'gosh, children's apparel, never thought it'd be in that industry, but had a good 10 year run with those guys and that just increasing responsibility.
But like so many of your listeners, I had that desire to do something a little more entrepreneurial, didn't know what it looked like. So I kind of sidestepped. And so I left public company world, stepped in as president of shelf genie, which was a private company. And for me that's when I really fell in love with the franchise model.
When I saw it up close and personal, I saw all these different backgrounds that are now business owners. They're living, you know, living their dream, in different stages of progress, of course. But fell in love with the model. Ended up partnering with the founder. We spun off. We've invested in franchises ourselves.
I've had other partners. We invest in franchises though [00:26:00] most of those for me at this stage are, fairly passive, you know Though I was more hands on in the beginning But started the consulting side about five years ago, and it has just been hockey stick growth, to be honest It's been able to help I think 80 clients, that, that actually stepped into ownership last year.
Just me personally. So very active and, love getting out there and sharing perspectives and thoughts and educating. And, like I said, we're seeing more interest than ever before. And I think there's many reasons for that, but, love being able to help people. It's very fulfilling for
Corey Kupfer: me.
So you've been only doing the consulting side five years.
You said previously that you'd done, you do more deals last year than anyone in the industry. How do you, because there were other players doing this before you got into it, right? So how have you been, like, what are the keys to your success that have created, your company in five years to be the largest, you know, doing more deals than anybody else in this industry?
Yeah. I think,
Jon Ostenson: Again, not to, I don't want to make. too stark of comparisons, but I'll just say the way I go about it [00:27:00] is, definitely looking out for my client's best interest. And, I think we could sit on the sidelines forever talking about types of businesses and theorizing. And I think some people do take that approach.
My clients are executive level. They want to see real opportunities available in their market. Let's get the conversations going. They're short on time. So I think because of my background, I can relate. So, I've just kind of structured my processes to get them, kind of meet them where they are.
And I just work with a lot of really good people. I've been very blessed. I mean, franchise world recognized that our clients are really strong candidates oftentimes. And, a lot of them are referrals. A lot of them come from different sources. I put a lot of content out on LinkedIn, again, trying to educate, never trying to be salesy.
That's not me. And, to me, I really view myself as a consultant sitting on the same side of the table as them, but it's certainly my book, non food franchising has driven a lot of business as well. And, it's been able to educate a lot of people.
Corey Kupfer: Yeah. So let's talk a little bit about the process of writing a book.
I wrote a book on, called authentic negotiating. And, I will tell you, I'm, you know, obviously over my years, I've read a [00:28:00] lot of business books and, I was, and I, also, you know, nonfiction and fiction, right. And I've always appreciated authors, but until I wrote a book, I, like I, I got a much deeper level of appreciation, especially because.
We have this thing that we talked about like forum and radio where, you know that, most business books could be an article, like they have an article worth of quality content, and then they have another 150 pages because, you can't. You know, because it's better to have a book.
And I was intent on my never being able to say that about my book. I have every page up quality. So, it was a process for me. I gotta tell you, I got a lot of respect for, authors, and people who do that. Talk to me a little bit about your process around creating, the book, writing the book.
Jon Ostenson: Life is, you know, life doesn't slow down while you take the time to write a book. And when you've got young kids, I mean, I was up early Saturday, Sunday mornings, cranking out content. I did have a great kind of co writer that our ghost writer that pieced it together. I pumped out the content. He helped it flow together.
And just a great book publishing company too, that, that had leaned [00:29:00] in and helped. And I'm. I'm happy to refer them to whoever, but, no, I, it felt good when it was out the door, but like you, I wanted to make it very readable. We're right about 90 pages and, try to pack it with content.
Jon Ostenson: It's kind of great feedback. So it's an easy read. You can read it on an airplane, but you get a whole lot of content. So a lot of my clients have read it by the time that we have our first call. And so it just helps us again, start a little bit further down the path.
Corey Kupfer: Yeah. Yeah. And listen to the, you know, the whole being top of mind, authority marketing, that's something that I, you know, for me as a business, as a lawyer, right.
We did fortunately built a very successful and great firm, but, before I wrote the book, I was looking to say, now, how do I really keep top of mind? How do I create myself, have more people understand outside of my direct context that I. I'm an authority in this area in terms of deals and negotiating on our, one of the reasons I do this podcast, honestly, I mean, for me, this is the fun I have every week is just talking about deals with people.
But, it really is, a great way to do it if you, you know, if you do it right and I'm [00:30:00] assuming, and, we'll just because. Doing books is a deal, right? Whether you do it with a major publisher or probably, it sounds like you probably went with a hybrid business publisher like we, like I did.
I happen to be, do Advantage Media which is, for me, you know, Adam Witte. Adam Witte and those guys, absolutely. Yeah, and you know, there are others out there who I've worked with. But, my point is that, I'm guessing that you're a business model around the book, like you're not getting rich off the book, right?
Jon Ostenson: No, a hundred percent of proceeds go to Hope International. It's a great nonprofit that we support. But I give out free copies all the time. That's how I justify paying my kids in the business. They package the books and send them for me. So, let them flow that money into Roth IRA. I love business ownership.
So many tax advantages. But no, I, you know, in all seriousness, I also send a lot of downloadable links. Any of your listeners, if they come out to our website, share their email address, we'll respond with, you know, whether it be the audible version or PDF version, multiple formats that they can download.
Corey Kupfer: Love that. So, I'm just going to open it up. Talk to me about it. It is, like I said, there's going to be hours [00:31:00] of questions and content we can talk about here, but. Anything particularly going on in the franchise world now, trends, developments, key things that you think the audience would be interested in?
Jon Ostenson: Yeah, I'd say, right now, I've always got an eye on the tax code just, is, whether it be QBI or what other topics are coming up, of course, it's an election year. I know there's some legislation currently underway right now that. That just passed the house. And so, you know, I keep a close eye there.
As far as things that could really impact the industry, not a whole lot. We do see some variance by state. There are 13 states that we call registration states where the state government has to sign off on new licenses every year. To be able to. And go off and sell new licenses. So, I'd say they're as slow as usual in those 13 states as you might imagine.
But no, again, more interest than ever before. And I think that, you know, people just want to, they want that control. Yeah, I just had lunch today with a gentleman. He's been in W 2 for many, many years. But he's like, maybe now's the time to scratch the itch. Maybe now's the time. There's a little bit of FOMO, they look [00:32:00] around and it's like, gosh, most of the successful folks I know are business owners, of all different stripes.
And what I love seeing, and this is part of what I educate on is just the types of businesses out there, things that people never had on their radar. The riches in the niches, I mean, we've got one, it's tiny homes now. It's great. It's, you know, just concepts that you're like, wait a minute, there is a housing shortage need out there.
Also Airbnbs, you know, that can be a great Avenue for tiny homes. And so, and that's where I get a lot of joy is seeing the light bulbs go on.
Corey Kupfer: Love that. Let's talk about, financing because it's certainly, and the full way people think around food financing, if you go buy a McDonald's, Franchise, you know, you got significant investment.
Some of the stuff you do may be at that level, or maybe it's a lower capital cost, because not only are you buying into the franchise, but you also got to deal with real estate, building, or whatever, and some of these things. Obviously a lot of non food franchises, I'm guessing a renting space, so you don't, maybe you don't have that.
Corey Kupfer: But still, I mean, access to capital, right? Financing opportunities. And so, talk to me about [00:33:00] that landscape is, our franchisors, the most of them have financing arms, you know, are people getting outside capital? What's been, we talked about the impact, obviously, on real estate investment of interest rates.
Has that played a role here?
Jon Ostenson: Yeah, you know, certainly there's some very large placements out there similar to real estate or similar to food placements. However, oftentimes these companies don't require a custom customer facing retail location and therefore you're able to So again, that range I gave of 150, 000 to 400, 000, probably 80 percent of our clients fall into that category as far as what they're spending, and that could even be for multiple territories in some cases.
But to fund that, some are using cash, but I'd say probably half of our clients use an SBA loan, and that's where you put in maybe 50 to 100, 000 in cash. Then you leverage and finance the rest. Obviously rates have gone up. They're around 10 percent today, which, they're still a little bit sticker shock, but of course that interest is tax deductible.
Jon Ostenson: We've got some great funding partners to help our clients. They work with franchise friendly lenders. So yeah, we're doing these loans all day, [00:34:00] every day. One thing I was going to mention too, that we hadn't hit on Corey, when we think about food and we think about these different industries.
Brand is so important in some categories, fitness, food, hotels, right? But in so many other industries, what you're buying, it's less about the brand. It's more about the systems and the support and the training and everything else. The procurement, the supply chain, let's say. I think about the insulation industry as an example.
That's a 53 billion industry. And most people couldn't name a single insulation company, much less two companies. And so, there are industries like that are just ripe for. A brand to come in to do things a little more professionally and the bar is usually pretty low in the industry.
Corey Kupfer: Got it. So, yeah, so I guess, so it's interesting because obviously at this, Let's say on average maybe lower buy in opportunity and the fact that especially with your executive, Investors, I guess a lot of them, the financing I guess is less of a it's not you know, it exists.
It's a but it's less of a hurdle or an issue, than some other businesses.
Jon Ostenson: Yeah. And one other [00:35:00] thing I failed to mention outside of SBA loans, it's also common to use an old retirement plan, a 401k or IRA from a previous employer and rolling that over. It's what's called a ROBS program.
You have to set up as a C Corp. There's a few hurdles you have to jump through, but that's very common too. I'd say even, I'd say as many as a third of our clients will use the ROBS program.
Corey Kupfer: Well, that's great. That's a great, that's a great point. Do you find, I don't know why it's popped into my mind a couple of times in this name.
This is like, so I'll just trust and ask it. So we had somebody, we had a guest on, I don't remember what episode it is, but the listeners can look back. Bruce Marks, he's, he's at a bank. He does a lot of SBA lending and he works with a lot of searchers, right? That's his focus.
Like people who are, either coming out of the military or coming out of corporate America, whatever, and, like, they have this desire to be a business owner and they're searching, for a product. Like, that's his niche on who he works with, so that was a fascinating interview.
Listeners, you might want to listen back on that. Do you find that there are, that those kind of people are part of, who are looking for these franchise opportunities?
Jon Ostenson: Yeah, absolutely. And again, everyone's starting from a different spot, but I mean, we've had everyone [00:36:00] from school teachers, a lot of military personnel, who know how to follow a system.
They've got the discipline. Franchise orders love them. They, and they usually give the military a discount as well on the franchise fee. But we've got healthcare professionals, a lot of IT professionals, a lot of B2B sales folks, so many different backgrounds, but a lot of doctors, a lot of lawyers, getting involved.
And so, yeah, and They want to be a business owner, but they just feel like they need almost like the training wheels of a franchise system. And what I tell them is over time, let's start with the end in mind over time, it's very common to build out a portfolio of companies. They may compliment or they may diversify from each other.
It's not that everyone has to be a franchise, but if you start with the franchise, then you're going to have some really good building blocks and a framework of how you stand up a business that you can then go replicate with others. But a lot of our clients do stick with the franchise path. And I call it franchise stacking.
I've got one client he's got. He does 35 million a year in revenue across 30 different territories across six different franchise brands. And he's just kind of perfected standing up a business, giving a young [00:37:00] person, some responsibility and some equity in his case. And, and he actually coaches some of our clients.
He always set them up for some calls with them, but, yeah, they're different case studies, but everyone's at a different spot, but all different types of backgrounds.
Corey Kupfer: I love that. You know, it's funny. You mentioned doctors several times and back in the eighties and nineties. It used to be when companies were looking at what raise money, I'm talking about startups, through, private, private placements, like that was to go to, people, it was doctors, right.
And there was a, behind the scenes sort of joke that it was. It was smart people with dumb money, because they were really smart, doctors were smart in terms of what they do, but in terms of investing, they just had this excess cash, they had no time to really do due diligence or whatever, and they just, if they got excited about something, they'd write a check for 50 a quarter of a million or whatever it is.
And so, it was smart people who had done money, and then that dried up because the doctors and over, a decade or two or 15 years, whatever, they figured out their return on investment wasn't so good because they weren't doing a good job [00:38:00] figuring out where to put their money.
Right. So it's interesting that doctors are a good, and I'm guessing, I don't know this, but I do know it, that they've got to be doing a lot better investing in franchises than they were on the, on the roulette wheel of, of, picking, startup companies with no due diligence.
Really?
Jon Ostenson: I would think so. And there's so many resources available to doctors and medical professionals now. Yeah, I think I'm like the White Coat Investor podcast and he puts out a blog. Jim Dolly and yeah, I went on their show a while back and that led to a lot of interest as well. And so, but they do a great job at financially educating them.
What I found is a lot of medical professionals, just like others maybe in other industries, say hey, I've got an entrepreneurial itch also have a business itch, you know, they're not going to utilize business in their day to day lives, but there's still a part of them that loves out. I had two doctors recently.
It was a couple that bought into a property services company. Their plan was just to have a manager run the business. Well, the wife decided she, she started falling in love with the business and she actually left her medical career to get more hands on. And so, [00:39:00] everyone's wired differently, but yeah, we, doctors, I mean, it's still a small percentage of our total, but I'd say it's been an ingrowing number.
Corey Kupfer: Sure. Love it. Okay. Before I ask you my final two questions any last thoughts, anything else you want to share with the audience? I think we covered a lot of ground. I
Jon Ostenson: mean I'd love to share a free copy of the book. With all of your listeners, so we can touch more on that at the end, but certainly come onto our website and make sure
Corey Kupfer: it's a perfect segue.
Cause my second to last question is where could people find out more about you and the book and everything else? So
Jon Ostenson: where can they go? Yeah, come out to our website, franbridgeconsulting. com, F R A N, bridgeconsulting. com, and just leave your email address and name, and we will reach out to you with links to download the book and add you to our newsletter list.
We put out great content, once a month as well. Yeah, but follow me on LinkedIn as well. That's my favorite social platform and trying to put content out there most days. And we've gotten good feedback on that.
Corey Kupfer: Great, Jon. So my final question on the podcast is always about my highest value in life.
I say deal, which is freedom. And for me, that means everything from freedom from oppression for all people around the [00:40:00] world to why I've been an entrepreneur for decades and haven't had a boss, what does freedom mean to you and how does it impact your life and business?
Jon Ostenson: Yeah, I pinch myself every day, not only that I live in a free country and we thank the men and women that, that, that gave that to us, but I believe it's God given freedom, but also pinch myself every day because I'm free from working for a boss, for so many years I was in that corporate environment, had a good run, could have done it forever, but I have not one single day looked back and wish I hadn't made the decision I made.
So, feel very blessed and, trying to help others find that same realization.
Corey Kupfer: I love that. And listen, yeah, that's a great thing about what you do. I mean, I do it in a different way because we help so many people launch new businesses, whether it's our investment advisor clients who are leaving, warehouses, Merrill Lynch wanted to become independent entrepreneurs, or it's the folks we do in other industries.
And, And yeah, just, supporting other people to get free, is a fun thing, right? Yeah.
Jon Ostenson: I love it. Absolutely love it. And when we have clients come back and buy additional territories or additional brands or they refer their brother, that's where I get my validation.
I know, Hey, [00:41:00] what I'm doing is really making a difference.
Corey Kupfer: Love that. Jon Ostenson said, thank you for being such a great guest on the deal quest podcast.
Jon Ostenson: Thanks for having me.
