The “Boring” Business Model Making Regular People Millionaires

- December 30, 2025 (2 months ago) • 01:09:04

Transcript

Start Time	Speaker	Text
00:00	Alex Smereczniak	Franchising is one of the most overlooked paths to wealth in America.
00:04	Sam Parr	"That's a very bold statement."
00:06	Shaan Puri	"They said."
00:06	Sam Parr	The most overlooked.
00:09	Alex Smereczniak	There are more millionaires generated from franchising than all combined players ever in the NFL. There's a number of private-equity family offices starting to get further and further into franchising, and they're buying both large franchisees, or they're doing roll-ups.
00:23	Sam Parr	"You made this bold claim. I wanted to fight you about it; now I'm totally on your team."
00:26	Alex Smereczniak	Traditionally, franchising gets looked at like, "alright — it's either McDonald's or Subway, and you have to have $3,000,000 to do it," so only the wealthy can actually do it. But there are 4,000 franchise brands. If you're willing to do the research and willing to do the work, there are a lot of hidden gems — brands and industries that are really taking off. </FormattedResponse>
00:43	Shaan Puri	"So, explain the path. What's the game plan?"
00:45	Alex Smereczniak	This is such a good hidden gem. I don't want to talk about how I did this. </FormattedResponse>
00:54	Shaan Puri	Alright, what's up? Welcome, Alex. Alex is the "franchise guy" that we have invited on the pod. I don't know if that's what you normally get called, but that's what we're calling you. This podcast is called "My First Million." One of the reasons we originally called it that was because there were all these different ways people made a million dollars. In my first 10 episodes I think I had a guy who did it in real estate, a guy who did it with Amazon FBA, and a guy who did it playing poker. I was very fascinated just to hear all the different ways you can win in business for two reasons. One, I wanted a menu of options I could choose from—how can you know which one sounds most appealing to you, which one sounds like it fits you? And second, I like just hearing that you could be doing it in all these different ways because it makes the impossible feel extremely possible. I remember when I was sort of pre-success it felt like winning was just this needle in a haystack—I couldn't find it. Then, as I've been doing this podcast, I realized it's a haystack full of needles. There's so many to choose from.
01:46	Alex Smereczniak	There's.
01:46	Shaan Puri	So many different ways to win. You're going to talk about, kind of, retail and franchising. Did I do you justice there—setting that up?
01:52	Alex Smereczniak	Yeah, absolutely. I honestly—up until four or five years ago—was a bit of, I think, a franchise hater and thought, "Is that really entrepreneurship? Or are there viable paths there?" The more I've gotten into it, the more I've realized it's probably the most overlooked path to wealth creation in America, and I've become a big... [trails off]
02:12	Shaan Puri	Fan of
02:13	Sam Parr	"That's a very bold statement," he said. "The most overlooked—overlooked. Alright."
02:18	Shaan Puri	[Interviewer] "Yes. Well, let's start with who you are. You're a guy who made your initial wealth in the laundry business. Can you give us the fast-forwarded, quick version of your story?"
02:30	Alex Smereczniak	Yeah, I'll try to be short. I'm originally from a small town in Minnesota, a town of 15,000 people. I ended up in North Carolina for college — I went to Wake Forest and studied finance. I was about to have a pretty kind of boring, plain life, and then I bought a laundry business my freshman year of college. I did seller financing; I had to learn what that was at 18. I learned what a discounted cash flow analysis was at 18, just by talking to business school professors before I got into the business school. I ended up buying that business and learned more doing that than any class I took at Wake. We ran it, we grew it, and we sold it for a little over ten times what we bought it for. We had an exit our senior year — I got about ten times what we bought it for — and that set the path to complete addiction.
03:16	Shaan Puri	Why did you buy a laundry business as a college freshman? Who does that?
03:20	Alex Smereczniak	I was working for them as a way to make a little extra beer money, and I was hooked. I thought this could work at Duke, Chapel Hill, and Vanderbilt. "You guys are graduating — I want to buy it," they said. They asked for $30, and my jaw hit the floor. I was like, "That's the most money I've ever heard of," and I had maybe $2 saved up, so I had to get creative and figure out how we were going to buy this and structure it.
03:43	Sam Parr	That's sort of like one of the three businesses a college student could start. It's usually some type of app where college kids could sell stuff to other kids, or a roommate-matching app — which I did — or a laundromat, a laundry business. I know Blake Mycoskie — I think that's his name — the guy who started TOMS Shoes. His first business was the laundry business.
04:02	Shaan Puri	What were you doing? You just go pick up the laundry from students' dorm rooms? You said, "Hey... you know, I remember when I went to college. I didn't know how to do laundry. I had grown up and my parents did my laundry, and by the time I got to school I was a little confused. My roommate had to teach me: 'What is a dryer sheet? Why do you use this? What are all these different components? How long do you leave this in?'"
04:23	Alex Smereczniak	Yeah, so Tuesday was pickup day. You'd leave your stuff outside your dorm room door. We'd have runners—mostly football players—that could hold like 200 pounds of laundry at a time. They would just run up and down the hallways and grab your bag. We partnered with vendors off campus; they would clean it and we'd return it Thursday. But the big unlock for us was that kids aren't paying for this. It's a bunch of broke college kids—it's their affluent parents, or parents worried about them being at college and not knowing how to do laundry. The big thing that changed it for us, that allowed us to go from—call it—$30-ish thousand in revenue when we first bought it to just under $300k a school year in revenue, was getting a booth at orientation week. For whatever reason, Wake gave us a booth next to where you got your meal plan, your parking pass, and your keys to your dorm—like all the marquee things you need to do. We went full ShamWow guy: "Step right up! We're the premier laundry service at Wake. Your kid's gotta have it. You don't want them going clothes-less—sign up." They loved it; they thought it was the cutest thing. Parents were like, "Yeah, that's true—my kid's screwed going here and not knowing how to do laundry, and I want them studying or having fun." So we went from, yeah, $30k a year to like 02/14464 [unclear] our first year.
05:40	Shaan Puri	"Is this still a business that any college kid could do today? Has this been a solved problem, or does every campus just have a version of you who hustles and makes the campus the freshman laundry service?"
05:53	Alex Smereczniak	Yeah, I think Sam's right. The number of people I've met who have gone on to be serial entrepreneurs—and who say, "Oh, I did that in college too"—is huge. I thought I was so cool and special and unique, then I met, like, 30 other college kids who had a laundry business at their school. So I don't think it's been systemically solved or scaled. The business we had was called WakeWash, and it's been owned by nine other groups of college kids. It's changed hands that many times, and it's been such a cool launch pad for all these other entrepreneurs because it's a safe, fairly simple business model. You learn so much: how to hire people, manage them, fire people, work with universities on your contracts and agreements, market to customers, and sell to people. Again, it changed my life entirely. I don't think I would be an entrepreneur at the level that I am—or have the level of obsession I have over it—if it wasn't for that college laundry experience that I had.
06:48	Sam Parr	How old are you now?
06:49	Alex Smereczniak	Just turned 34.
06:51	Sam Parr	And so you sold that for what—$600,000 or $700,000? You said "mid-six figures."
06:57	Alex Smereczniak	"It was like, yeah — it was like four... a little over 400,000."
07:00	Sam Parr	Oh, that's badass. So, in college, you sold a business for $400,000?</FormattedResponse>
07:04	Alex Smereczniak	I thought I could retire.
07:06	Sam Parr	Well, you know.
07:07	Shaan Puri	I'm not.
07:07	Alex Smereczniak	"That good? No—you didn't. No. As a 21-year-old, you're like, 'Oh my God, I don't have any college debt,' and I..."
07:12	Sam Parr	You didn't pay attention to finance class, so it's a good thing you did go down the finance career path.
07:16	Shaan Puri	Well, the funniest thing is—like any good laundry man—he ran another cycle. He goes and starts another laundry business right afterwards, right?
07:24	Alex Smereczniak	I sold out for a little bit — I went and worked for Ernst & Young. I thought, as far as corporate jobs go, consulting's gotta be entrepreneurial: you're jumping from project to project and working with different teams. I loved the people I worked with and did learn a lot, but it was soul-crushing work. I hated the type of work I was doing. In 2014–2015, when all the "Uber-for-X" businesses were taking off — Instacart, Shipt, Wag, Rover, Drizly, DoorDash, and all of these — I thought someone's going to do this for laundry and dry cleaning. If it's not me, I'm going to hate myself, so I needed to at least throw my hat in the ring. I quit my job and started a company called 2U Laundry in January 2016. We had a pretty wild rollercoaster of a ride from there, and the story is still being written to a degree.
08:18	Shaan Puri	Hey, real quick — if you... [sentence trails off]
08:19	Sam Parr	If you like this episode and want more ideas on overlooked businesses, I have something you might like. A while back, Chris Corner came on MFM and we called him the "Side Hustle King" because he built so many businesses. He ended up giving us a list of 200 ideas and the blueprints to build them. It's a great resource and totally free. If you want it, just click the link in the description to get it. Alright — now let's get back to the episode. You made this bold claim. You said that franchises are... what? Can you phrase it exactly? I'm going to try and prove you wrong, but I want — we're going to have a fun debate. Tell me the exact phrase. </FormattedResponse>
08:58	Alex Smereczniak	"Yeah, so I think franchising is one of the most overlooked paths to wealth in America, and I think it deserves more attention and people giving it a shot."
09:08	Sam Parr	Great. I want you to be right, but we're going to have a cool conversation about that. The reason is: you have a software company that's like a marketplace for franchises, so you have, perhaps, one of the best bird's-eye views of the industry. What are the numbers that would make you make that claim?
09:25	Alex Smereczniak	Franchising is a business model first. I think a lot of people think franchising is an industry, but it's a business model that spans food to hospitality, health and wellness, and early childhood development. Most of us probably don't even realize we're using franchises on a weekly basis. Hotels—Marriott, Hilton—are franchise businesses. There are the food brands we all know: McDonald's, Subway, Chick-fil-A, etc. Then gyms we go to—Orangetheory, F45, Barry's—are some form of franchise. Home services like gutter cleaning, painting, and pest control are all franchised as well. About 8% of our country's GDP is produced from franchise business models. Traditionally, franchising is viewed two ways: either it's the big brands like McDonald's and Subway that supposedly require you to have $3,000,000 to get started—so only the wealthy can do it—or it's those slimy operations popping up without systems that promise to sell you a dream. There are about 4,000 franchise brands. If you're willing to do the research, do the work, and look, there are a lot of hidden gems—brands and industries that are really taking off and that have valuable systems and supportive peer groups. The everyday, average entrepreneur could benefit from them. If you're someone who doesn't have the original tech idea or doesn't want to raise venture capital but does want to build a business and create wealth, franchising is one of the most underrated, overlooked paths to doing that.
10:56	Shaan Puri	"Alright, so explain the path. I'm a person—explain a blueprint or a model that I could see. Say you take $X that you have saved up or raised from somebody: what type of franchise do you buy? What type of returns do you get? What's the game plan?"
11:12	Alex Smereczniak	So, I always use analogies, and I think a good one for franchising is that it's akin to real estate. You could buy a single-lot trailer and rent that out, or you could buy a 100‑door multi‑unit deal. There's everything in between. Of those 4,000 brands, some are as affordable as $10,000 to get into. Chick‑fil‑A's franchise fee is actually only $15,000 because they want to pick from the best crop of operators, but they're a lot more restrictive on how many units you can open, how you operate, and how involved you need to be in the business.
11:44	Shaan Puri	Isn't Chick-fil-A—you can only have one?
11:46	Alex Smereczniak	Right. Yeah—you can only have one. There are unicorns that are allowed to do two or three more. Then there are brands like R Mark, or food-service providers that do stadiums and campuses. They’ve got dozens, if not hundreds, because they have agreements for those venues. But some of these franchises are smaller—10 locations—all the way up to $4,000,000+ swim schools where you’ve got six pools to build. It’s much higher stakes, but higher reward.
12:09	Shaan Puri	Is the franchise fee the same thing as the build-out? So, let's say you said Chick-fil-A costs $15,000, but then you have to build the restaurant, right? </FormattedResponse>
12:16	Alex Smereczniak	So, the franchise fee: every brand will have one, and that can range from $10,000 to $70,000 in some instances. That's basically your ticket in line—it's your "I now own the rights to this territory" or this 10-mile drive radius, etc. Then there's the build-out cost—just like if you were to do it on your own. How much is this going to cost to upfit the location, buy equipment, boilers, stoves, and all the stuff you need for a restaurant? That's another investment cost. Chick-fil-A is a little bit of a pseudo-franchise. It's $15,000 for the franchise fee, but Chick-fil-A actually buys the site and pays for all the build-out. In return, they're taking a 15% royalty instead of the 6% which is standard. Six percent of your revenue is standard; Chick-fil-A takes 15%. They also take 50% of your profits as well, which no other franchisor does—most take 0% of your profits. So, you're effectively, with Chick-fil-A, buying yourself a high-paying job.
13:11	Sam Parr	Did you guys read about this? This article went viral—or at least it was popular in the business world. I think it was in the Wall Street Journal [March 1, 2025]. It was about these two buddies; I think they're only 35, to be honest, and they had started a business called Garnett Station Partners. Did you read about this?
13:27	Alex Smereczniak	No. Yes.
13:29	Sam Parr	Okay, so correct me on the story: two guys — I think they were about 35 to 37 — two buddies who raised a fund and bought a bunch of franchises. They now have a multi-billion-dollar fund, and I think they've taken out hundreds of millions of dollars from the business.
13:44	Alex Smereczniak	There are a number of private equity family offices starting to get further and further into franchising. They're buying both large franchisees and doing roll-ups. One good example: they're buying multiple smaller owners and consolidating them. Essentially: > "Alright, Sam, Sean, and Alex own five Jersey Mike's. They find six of us, and they go buy all 30 of them." These were kind of one-off deals, but now they own a 30‑unit portfolio that's averaging about $2.5 million per location. That adds up to close to $100 million in annual revenue via acquisition. It took five or six acquisitions, so there's a lot of that happening.
14:19	Sam Parr	And so, The Wall Street Journal phrased it so differently. When I think of "franchise," I think a little bit blue-collar — or an ex-NBA basketball player. That's who I think about. The headline was, "Meet the Best Friends Who Are Private Equity's Newest Young Stars." It said they have so far raised $3.5 billion. They're only 38 years old. They bought everything from gyms, funeral homes, and car washes — hundreds of these — and they've just operated them really well. I think their big win was betting on Little Caesars. I think they bought a bunch of Little Caesars maybe eight years ago, and now it's been really popular. The way they've rebranded it was actually amazing. </FormattedResponse>
14:58	Shaan Puri	What do you mean by "rebranded it"? What's the "rebrand"? </FormattedResponse>
15:01	Sam Parr	The rebrand is... it's just like they made it a lot more white collar. When I think of "franchise," I think of a mom-and-pop business that just wants to get into it. They put together $40,000, work for 15 years, and slowly acquire one or two locations at a time. Hopefully they have their... it's almost in the same category as a dentist — you know, middle-America, wealthy people who have done it year after year and been very consistent. These guys were 38-year-old Manhattanites who raised $1 billion, and they've just crushed it. It kind of reminded me — I think there's been a handful of things like this, Sean — where it's like things that serious operators don't take seriously. That is how I kind of read it about these franchises: yeah, mom-and-pops have done well owning three or four of them. What would happen if you owned 3,000 of them?
15:43	Alex Smereczniak	And that's why there's a lot more smart money coming in. Using that real estate example again: there are all these folks who might own five doors, or a duplex, or a quadplex. Private equity, family offices, or ex-investment bankers are saying, "What if I roll up a hundred of these? Two hundred of these?" That's exactly what Cal did — the story that I shared with you guys.
16:02	Shaan Puri	Tell that story. Who's Cal?</FormattedResponse>
16:04	Alex Smereczniak	Yeah, so Cal Gulapalli — he's a franchisee based in Florida. He's a former investment banker; I think he worked in New York or in the Northeast. He decided he wanted to do something for himself. He said, "I know how to put deals together. I know how to structure and analyze a business," so he bought a few independent butcher shops at first — more like a search fund — seven or eight years ago. That went okay; he learned a lot about being an operator and learned some retail. Then he was at his Orangetheory gym — the one he goes to — and he's a curious guy. He asked the manager, "Is the owner around? Can I get in touch with him?" He got in touch with the owner and asked, "How much money are you making?" The owner was forthright and shared his financials. I think he was making $400 or $500 profit from that one location. Cal was like, "You make that from one gym?" The owner said, "Yeah, I own three of them." Cal thought, "So you're making over $1,000,000 a year off of three locations." He went and bought two Orangetheory locations immediately. That was in 2018.
17:02	Sam Parr	"Dude, an ex—an ex-banker doing this is sorta like a young gay couple gentrifying a neighborhood. You're like... and outsiders are like, 'Something's up. It's starting. It's happening.' Yeah, this is like that story: a retired New York baker in Florida who's on his second—his second thing."
17:23	Alex Smereczniak	Well, so he started doing this in 2018. Seven years later, at the peak, he had 120 locations open.
17:31	Shaan Puri	Of Orange Theory or of other things.</FormattedResponse>
17:33	Alex Smereczniak	Eight different brands: "Marco's Pizza", "Restore Hyper Wellness", "European Wax Center", "Papa Bagels"
17:41	Sam Parr	"Did he raise money?"
17:43	Alex Smereczniak	So what he's done: I have a podcast as well called "How I Franchise This," and he talks through exactly how he finances it and how he structures the deals. A lot of the time, he owns 30% to 60% of the equity in these kinds of sub-deals. He's using private equity, family offices, and independent investors, but he's the operator and owns 30% to 60% of a system that likely does over half of $1,000,000,000 a year in revenue across all of his units in seven years. </FormattedResponse>
18:12	Shaan Puri	"Who the hell could operate 100 different franchises? I mean... that's so difficult. How is he doing this? What is the model that lets this happen?"
18:24	Alex Smereczniak	So, as he was scaling — and usually going from 6 to 10 is the really challenging part — you start having district managers managing units. He's now so far removed from the day-to-day that he's put in a system and line of defense. Each brand basically has a COO in that organization, there are multiple district managers, and underneath them they manage 4 to 5 stores each, with GMs and assistant GMs. Once that system is in place, there's so much redundancy that when people call out you don't get the same headaches you'd normally worry about with a business like this. He has a couple thousand hourly employees across the system, and that sounds like a massive headache. But because of the system—and the things that come with franchising—it is much easier for him to have these playbooks for training and "how do you handle employee turnover..."
19:11	Sam Parr	How much profit would it make per year, or what would the cash flow be? And how would you value it? Is the value in the equity you build up, or is it just the profitability?
19:20	Alex Smereczniak	So—both franchising and real estate investing... this is something that opened my eyes a bit: a real estate investor would be jumping up and down about 12% to 16% IRR [internal rate of return]. A franchisee is upset if they're not north of 25% IRR. The cash-on-cash return is, in many cases, double—or at least that's the expectation of the floor. Yes, there's more risk. Yes, in some cases there's more risk and there's more. </FormattedResponse>
19:43	Shaan Puri	"Well, you're running the business."
19:44	Alex Smereczniak	Right, yeah. But as you get these systems in place, it becomes similar to owning a portfolio of 100 doors in commercial real estate. The cash-on-cash return from the business's cash flow is north of 25%. That's not factoring in the enterprise value when you go to sell. Franchises trade at 1–2x more of EBITDA than an independent business because the risk is de‑risked across the hundreds or thousands of units in the brand. Banks de-risk it that way, investors de-risk it that way, and you have this peer group and franchisor to rely on.
20:20	Sam Parr	25% cash-on-cash. What was the cash? I don't even know what it would cost to have a 120.
20:25	Shaan Puri	Well — do it. Do it in a simple way: do one, right? So, yeah — one location. Let's walk through the economics of a single location of pick your favorite franchise. If you were advising your little brother or your cousin to go do one of these, where would you guide them? Then let's walk through the one-location economics.
20:42	Alex Smereczniak	Yeah, so it—and I know people hate the answer "it depends"—but there really is a franchise for everyone. I'll pick, let's just pick, Dave's Hot Chicken, a brand that a lot of people know and that has had viral growth over the last few years. The average Dave's Hot Chicken location is anywhere from $650,000 to $1,800,000 to build. That depends on size and the market you're in. I know it's a big range. The average revenue of a Dave's Hot Chicken is over $3,000,000, with roughly a 20% cash-flow margin, so we're talking about $600,000 in profit.
21:16	Shaan Puri	Okay, but we gotta slow down. So, Dave—you... tell him, "Hey, Dave's Hot Chicken. Great, great brand."
21:21	Alex Smereczniak	Yep.
21:22	Shaan Puri	> Your little brother says, "Okay, what am I gonna need to go build this, to start a Dave's Hot Chicken? So I gotta apply, and then I have to pay a fee, and then I have to come up with $1,000,000 or $1,500,000 to build this thing. How am I gonna do that?" </FormattedResponse>
21:35	Alex Smereczniak	Yep. So, in Dave's Hot Chicken's case they now require you to do at least five [locations]. In this example, you need $2.5 million liquid, $5 million net worth, or to have raised that money from investors. So if it was my little brother and he didn't have that cash, I'd say, "Hey, we gotta go find some investors. You're going to be the operating partner, just like what Cal does today across his system." Little brother: can we prove that you're a good operator? That you have experience managing a Chipotle or whatever it may be, to go raise this capital if he wasn't capitalized?
22:05	Shaan Puri	So he's got to go raise $5,000,000.
22:08	Alex Smereczniak	Yes. Yeah. So, to get started, he would need $2.5 million in liquid assets in this case to build the first... one or two. SBA is a great option as well. Cal—even someone at his scale is still using SBA, because it's designed and meant for buying a small business like this.
22:22	Sam Parr	For getting us all to eat hotter chicken—that's what the SBA—yes. Do you also have to be good at spotting a trend? Because, for example, if "Dave's Hot Chicken" was a thing 20 years ago: I lived in Nashville when hot chicken got started, and it was not that popular. Then something happened on TikTok where hot chicken got cool. But then, I don't know—is it a phase? Do you have to get good at picking what a winner is?
22:48	Alex Smereczniak	Yeah, absolutely. One of the things I think about a lot is what makes some of these franchisees wildly successful versus the ones that aren't. I think, when picking an independent business—whether it's trash or these other unsexy businesses—you need to find something that, I think, carries long-term value. Unless, of course, it's a trend and you're like, "as long as I get in early, I can build a substantial business and ride the wave." I think that's very similar to buying an independent business as well. Cal is an example. He spotted Dave's early. He also spotted Pop-Up Bagels early, and they're taking off right now.
23:20	Shaan Puri	Okay, so let's redo this. Because you gave us Dave's Hot Chicken, and now your little brother needs $5,000,000. I think we've hit the... so let's do something that's not going to require that. Let's be more realistic. I don't have friends or family who will give me, you know, $2 million to $2.5 million — or even $5,000,000 liquid. And I don't have the operating experience of running a Chipotle for three years yet. So what else would I do? European Wax Center — what are we thinking?
23:43	Alex Smereczniak	So let's do—let's do another nine. That's one that, in full disclosure, I'm developing five other nines in Minnesota right now. It is indoor.
23:50	Sam Parr	"What's an other nine?" </FormattedResponse>
23:51	Alex Smereczniak	"Another nine. Another nine."
23:53	Shaan Puri	Is that the name of a franchise?
23:54	Alex Smereczniak	It is fully unattended—no employees, no food and beverage. It's an indoor golf simulator franchise. Golf is very, you know, trendy and popular right now. It's making a comeback. You got the "Netflix effect" with Full Swing this past year. Actually, more Americans played off‑course golf—so like Topgolf, simulators, etc.—than actual green‑grass golf for the first time.
24:17	Shaan Puri	That sounds substantial. Okay, so you basically say, "Hey, there's this trend and this movement — indoor golf simulators." You said yourself you're building five of these out. Okay, so let's walk through again the one-unit example. Does little brother need some special sauce to do this? What does he need? What are the steps?
24:34	Alex Smereczniak	Yep. So, in this case you're going to need an SBA loan. That's what we're using to finance some of these. The build-outs are substantially lower than a Dave's. They don't require you to build five of them, so you can get into one or two of these.
24:46	Shaan Puri	When you go to get that SBA loan, do they need you to have proven anything yourself? Or can you just say, "Look, this is a franchise I'm going to operate; I've had this corporate job and I'm ready to go do this"? Do you need something to qualify for that SBA loan?
25:01	Alex Smereczniak	Yeah. Typically, depending on the brand you're getting into, you need $50,000 liquid [liquid assets] and over $150,000 net worth. I think that's attainable for a lot of people who want to escape corporate or add on to their real estate portfolio, etc. The SBA (Small Business Administration) will lend you up to $5,000,000 across multiple loans over time. They will make you sign personal guarantees, so if you own a house, that's considered collateral. Lenders are looking at two things: does the individual have enough collateral, and does the brand have enough data and proof points to show this is a concept they want to back and be involved in? Also, most banks specialize. Some love food — they're the "food lenders" — while others love fitness and are the "fitness lenders." You need to find the right lender that is comfortable with the concept you're pursuing. </FormattedResponse>
25:47	Shaan Puri	"So, how much does it cost to build one of these?"
25:49	Alex Smereczniak	Yeah, so one of these is anywhere from $320,000‑ish to $800,000, depending on the number of private bays you want. Another one is different from these social experiences you see where it's food and beverage and staff. This is like Anytime Fitness: you fob in with your phone, you can go at three in the morning if you want — they're 24/7 — and you go play sim golf [simulator golf] on some of the nicest equipment out there. The guys that started this out of Cincinnati said they have surgeons who go three times a week at three in the morning when they're off shift. They go play "Pebble Beach" for an hour before they go home and call it a day, because that's their routine and that's when they can get away and do it. They don't have five hours to go play an actual round.
26:29	Sam Parr	So I'm on Another9.com. It looks really fun. I don't even golf, but this looks like it would be really fun. It seems very new. I think their headline says, "Just two dads are gonna play more golf." That's who founded it. It's got pretty funny language. It actually says, "Did we mention that we're BYOB?" It seems cool, but it also makes me wonder: why would I need them? Why would you pay them money versus doing it on your own?
26:56	Alex Smereczniak	Yep. So one thing I always tell people if they're thinking franchising — and again, here's another analogy — it's like a lot of brokers or people will say, "I know Sam and Sean," and they just assume they want ice cream. So it's like, what flavor do you want? I said we gotta take a step back. Maybe they don't even want ice cream; maybe they want cookies or cake. And, you know, the dessert type being franchise versus real estate versus buy your own business. So I usually tell people: if you're going to do franchising, you need to think about this over a ten-year horizon, because most franchise agreements are ten years. You need to ask: in five years, what value is this brand going to be providing me that justifies this ongoing 6% royalty? In food, it makes a lot of sense. McDonald's is going to give you ten-per-pound burger meat versus a dollar that you get on your own. You're getting more value in the bulk purchasing power of the brand — the menu innovation, the marketing, etc. — than you are keeping that 6%. And so a brand like Another Nine — because a lot of the value is front-loaded — they're getting breaks on equipment and build-out and helping you with site selection and design. How do they create value over time? For me, it was: I'm doing Franzey full time. They are going to provide resources on an ongoing basis — training. They're building software that I don't want to spend time building or investing in that allows better scheduling, easier marketing, and lessons to go partner with existing golf courses to drive volume from that channel. They're building this really cool league software where Sam could be in New York and Alex is in Charlotte and we could be doing a fantasy-football–type league where all of your high school or college buddies could play against each other in your respective markets and have this fun, ongoing competition. So they're investing in technology that I think creates stickiness within the consumer base, makes operations a little bit easier — maintenance contracts, right — and that's probably one of the least value-add five years from now kind of examples versus a restaurant. But even then, it's worth it to me to not have to think about all that.
28:47	Shaan Puri	Okay, so finish up the economics for me. You said you're going to build this thing out for—let's just round it to $500—and you're going to franchise this from these guys. You'd have a 6% royalty. What are you... and you've got that $500 from the SBA?
29:02	Alex Smereczniak	"10% down."
29:03	Shaan Puri	Yeah, 10% down. So you put $50,000 down and you're going to get the rest as a loan. So what are you looking for and how do you—why are you... you know, I guess you're trying to do five locations. Maybe it takes five for this to really be meaningful. Is that right?</FormattedResponse>
29:17	Alex Smereczniak	So I always tell Bill: if you're going to try to replace your income or have, you know, a side hustle or some side income, you can do that with one or two units. If you're really looking to fully replace income and you are a high earner—$250k+ in salary—you'll need three-plus locations to replace your income and eventually build wealth beyond that. For me and my partner, it was: let's do five. They're very passive. There's no employees, there's no food and bev [food and beverage], and we can run five essentially as a side hustle without having to be super involved in the day-to-day. One unit on average is doing just under $300k a year in revenue, which might not sound like a lot, but they have 55% margins because there's no labor, there's no food and beverage—it's just the build-out cost and rent, essentially. You don't need high occupancy to get to a meaningful amount of profit. So we're expecting each one to do $150k in profit after all expenses. Get to five of those and you generate $750k in relatively passive income. It's a lot of work for us upfront to find sites and build, but meaningful cash flow in the long term. </FormattedResponse>
30:19	Shaan Puri	And Sam had a good point a second ago where he was like, "Do you have to almost think like an investor and spot things a little earlier than the curve and figure out what's going to have staying power?" You had this interesting thing—you texted us and said "turf businesses." I think of this one: you were saying there's almost like a regulation that you will benefit from. Maybe you said, like, Vegas, for example, is prohibiting new homeowners from just growing grass, so they have to go turf. Can you talk a little bit about that idea and how you would capitalize on it?
30:49	Alex Smereczniak	Yeah, so Waterloo Turf is the brand. He's a former private equity guy, and this is a big thing that I look forward to. Just like Sam said: find trends. You're betting on people as well, because this is a partnership. I think another thing people might discount in franchising is that I'm not just buying Sean's old business. We shake hands, and Sean and Alex don't really interact beyond that. No — I'm looking at Sean as a ten-year partner. We're going to work together. You guys are going to make investments in the brand, help me with marketing and problems that I have, and build a system of other franchisees that hopefully can all benefit from and learn from one another. I think people maybe take that part for granted, so I just wanted to stress that. The founder of Waterloo Turf is phenomenal — a former Cal-like guy, very deal-driven, an investment banker, very analytical. He's looking for this trend and sees the turf industry in the United States as $4 billion today. It's going to grow by another $1 billion next year, and there's no clear winner. There's no national brand; no one's dominated this. Why don't I go build a franchise brand around it, build capabilities, and create bulk purchasing power for materials? There is ongoing maintenance to re-turf and make sure the grass is still enjoyable for young kids and not wearing out quickly. It's a pretty affordable business to get into: it's only $105,000 to $150,000 to start because you don't have the overhead of a retail store. There's no physical location required and you don't need a lot of equipment. So for $100–$150k, you can own a business that on average is generating $1.3 million in annual revenue with profits around $270,000 a year. One location in this example could replace a lot of high-earner incomes, but now you're your own boss — you're an entrepreneur with a playbook and a team behind you, versus having to come up with a completely original idea to convince yourself to leave your corporate job.
32:40	Sam Parr	"Why are you selling software to this? Why don't you just go buy a bunch of these? That sounds great." </FormattedResponse>
32:45	Alex Smereczniak	So I'm trying to do both, which maybe sounds like a not-great idea. I have partners on the franchise side that are my version of Cal — I'm more of a capital partner. I have operating partners in the franchises because I can't physically build a software company and operate a franchise portfolio. The goal is to get to a 50- to 100-unit portfolio, just like Cal's doing...
33:08	Sam Parr	And yeah, if—oh, let's just say hypothetically—let's say you get to 50 to 100. What are you telling yourself? You're like, "Oh, that'll make $5,000,000 a year off of that?"
33:16	Alex Smereczniak	Yeah, at least. And then the enterprise value — so, like, Cal with Papa Bagels or Dave's Hot Chicken. I mean, the exit multiple for him would be 6–10x on EBITDA, compared to 3–5x if he just owned Cal's chicken shop. Orangetheory, at its height, was trading for 21x EBITDA. It was insane — I mean, it was like a software-business multiple on a gym. But because it was part of a system, they had some recurring revenue, and investors and private equity groups rolling them up treated it like a software business.
33:46	Sam Parr	"Sean, have you heard of Papa Bagels?" No? They were started in this little town I used to live in — Westport, Connecticut. They have this crazy model where you can only buy 12 bagels at a time. I think you have to pre-buy them, or sometimes they change their rules, but it was like you had to pre-buy 12 bagels in advance. Now I live in Manhattan, and two things: one, they're better than the normal mom-and-pop bagels — they are phenomenal; and two, every time you see one there's a line. The pop-up bagel phenomenon is incredible. I've never seen anything like this. I think it was just a husband and wife who started making bagels during COVID, and it kind of turned into this… they could have been a $1 billion+ brand at this. But what's your, Alex, what's the calculus here — both in terms of emotion, work, and money — on starting a pop-up bagel shop or starting Orangetheory, versus owning a bunch of them as a franchisee?
34:46	Alex Smereczniak	So you're saying starting as, you know, the franchisor—like what the husband and wife did with Pop Up?
34:52	Shaan Puri	Sam's saying, "Should I shoot to own 45% of someone else's chain, or should I shoot to create the franchise and then franchise it to 1,000 people?" Right, Sam — is that kind of what you're asking about?
35:03	Sam Parr	"Yeah, exactly. For example, we had Brian Scudamore on MFM a while ago. Brian started this thing called 1-800-GOT-JUNK? It was a horrible business for—like—I think fourteen years. I think it took him fourteen years to do $1 million in revenue. Then, like, around year five after we decided to franchise it, it took off. Now he's—he's a multi... he's a multibillionaire. And I'm like, 'That sounds cool,' but you're advocating toward the other stuff of owning someone else's franchises."
35:30	Alex Smereczniak	Yeah, I think it goes back to the entrepreneur archetype. If you're that builder, creator type—you're probably less than one or two percent of the population that thinks that way, has those aspirations, and doesn't want to have a boss. You're likely the kind of tech/software entrepreneur or creator type. But I think 99% of the population is not like that. They want to do something entrepreneurial; they just don't know what or how. That's why I'm such an advocate. Had I not had that small college entrepreneurial experience, I might not have learned the things needed to be a successful entrepreneur later on. The more people we can get some of these reps—like, "alright, go build a team, go find a location, solve problems in real time," and experience some of the shitty stuff that happens to you as an entrepreneur—the more you learn how to take those punches and become an operator and an entrepreneur. That's why I'm an advocate for it. As an individual, I like the creator path: higher risk, higher reward. Let's go try to build this system to a thousand locations—I started that. The reality is, I don't think that's the majority of America or the majority of people.
36:36	Shaan Puri	What do you think is the thing to look out for — who's lying to me? So, in any legitimate way of making money, if there is a legitimate way of making money, there are going to be a bunch of people who come in and decide, "You know what? Let me ride the back of that legitimate way of making money." They will over-promise, under-deliver, and try to, you know, sell a lemon to somebody. This happens in real estate. I could tell you the same about tech investing and startup investing — that sounds great, right? You can invest in the future of entrepreneurs. Well, there are people who are going to... basically, it's not a scam, but it's like, "Dude, you're going to lose your money if you do it that way." And there are people who do it in a certain way where you have a good shot of making money. There's a clear difference when you're on the inside — you know who's who. So, in every industry — I think this exists in the franchise world — what are the red flags? Who's lying to me? Who's out there trying to take advantage of you? What should you look out for? Those would be the sorts of signs to run away from.
37:37	Alex Smereczniak	Yeah. The reason I was kind of smirking is there are so many, and it is one of the main drivers behind Franzia: regulation. I'm not a big proponent—or, you know, a fan—of over-regulation, but it is the wild west in business brokering, and especially in franchising. There is no licensure to become a franchise broker. With real estate, you have to get licensed, register in the state, take coursework, disclose your commissions and fees, and how you make money. In franchising, it is absolutely insane what's allowed. The three of us—boom—we're all franchise brokers in this moment. You're done. That's it. You don't have to get registered in the state, you don't have to take a course or an exam, and then you can go charge a 60% commission on the franchise fee, "$6.00" [sic—likely "$6,000"]. For anyone that's ever done sales—outside of insurance—does anyone else know a sales commission that's that high and that incentivized? I mean, no. I can't think of anything else that's that high of a commission. So what does that attract? A lot of people who are going to say what they need to say to get a huge payday. If they close a couple deals a year, it's $200,000–$400,000—some of these brokers are making a million dollars a year—not having to run anything other than convincing someone to buy the right business.
38:47	Shaan Puri	"So, was the brokers?"
38:49	Sam Parr	Yeah, it's like brokers.
38:53	Alex Smereczniak	"So, I hope some regulation happens and at least pushes it to tell people how you make money and how much, so that you know. Half the time they're not telling you, and you think, as the person receiving their services, 'This person's smart — they're gonna help me, this is great, it's free for me.' And yes, they're making some money on the back end, but you don't realize just how much. The bigger issue on top of that is they might only be showing you the 15 to 20 brands that they have an agreement with. There are 4,000 brands, and you're being shown this universe of 15 to 20, having no idea what's happening in the background. It'd be like buying a house from a real estate agent who's also the listing agent on the house, and them only showing you the listings that they're also the listing agent."
39:29	Shaan Puri	Many brokers work—so where do they sit in this ecosystem? Are they cold-calling people? Are they running webinars? What are they doing to get in the middle of the transactions? How are they generating the transactions?
39:43	Alex Smereczniak	You guys probably both get a lot of LinkedIn messages. I'm sure you've got a bunch of franchise brokers in your inbox saying things like, "Hey Sean, have you ever thought about owning a car wash franchise? You'd be a great entrepreneur — a great operator in this business." There's a lot of LinkedIn outreach: webinars, and some of them make YouTube channels, right?
40:00	Shaan Puri	"Telling you how easy it is."
40:02	Sam Parr	Wait — is it? And is this Franzi's business model: "You get 60"?
40:06	Alex Smereczniak	No, no. So I wanted to build Franzi's, yeah.
40:12	Sam Parr	"Wanted these fucking brokers to accept me. They suck."
40:14	Shaan Puri	"I'm trying to disrupt that broker model."
40:17	Alex Smereczniak	I'm trying to disrupt the broker model and democratize it. Instead of the 20 brands that a broker might show you, we show all of them — 4,000 — because we scraped what are called FDDs (franchise disclosure documents). It's like what Zillow did with the MLS. Now every brand is out here: the good, the bad, the ugly — which ones have failed, shut down locations, or have declining AUVs [average unit volumes] and revenues. We charge a flat dollar amount to the brand. So instead of 60%, it's about half of that — it's flat across all brands — and we disclose that upfront to our clients. Think of us as more of a franchise fiduciary: "Here’s how much we make. Here’s how it works." We have AI that's matchmaking you with the right brands based on all these unique things about you. Then we help you find the right fit, get financing, get your entity formed, and get the right franchise CPAs and franchise attorneys involved, etc.
41:03	Sam Parr	"What brands would I have bought fifteen or twenty years ago that just crushed it today? Like, what can we look back on and put together some dots for the — [unclear: 'or you ten fifteen']?"
41:14	Shaan Puri	Years, yeah.
41:15	Sam Parr	Yeah.
41:15	Alex Smereczniak	Yeah, Nothing Bundt Cakes is still one of the best unit-economic businesses there was. I mean, Roark Capital is this kind of hidden behemoth that owns the majority of brands most people don't realize they own — Driven Brands, which includes Meineke, Maaco, and Take 5; and Inspire Brands, which includes Auntie Anne's and Cinnabon.
41:34	Sam Parr	Roar Capital, according to Wikipedia, has 1.4 million employees and $37 billion under management. It's just a huge company that owns tons of franchises.
41:46	Shaan Puri	So, when I'm on their site and I see "Dunkin' — like Dunkin' Donuts", what does that mean? Do they own some locations, or do they own part of Dunkin'?
41:53	Alex Smereczniak	They are the franchisor, so Rourke's playbook is: "Let's go buy up the franchisors." Now they have that 6% royalty stream in perpetuity across all of these brands.
42:02	Shaan Puri	What? So they have Splash Swim School, Jimmy John's, and Dunkin' Donuts.
42:06	Sam Parr	"Sean, are you going to let—are you going to let these guys come after the Patel mob? Everything you worked for... they're coming at it."
42:13	Shaan Puri	No. Everybody needs exit liquidity, and this is ours. You guys love Indians.
42:20	Sam Parr	Okay, so... which other businesses were cool ten or fifteen years ago? "Nothing but cakes." I've never heard of that.
42:29	Shaan Puri	That was hilarious.
42:30	Alex Smereczniak	A nice choice — you've gotta try it. It is really good. And again, the economics are... I mean: low food cost and very good AUVs. I think it's about $33,000,000 or so. The box is small and simple.
42:43	Shaan Puri	There's one near me. This location could, on average, do $3,000,000 in revenue selling these cakes, yes.
42:51	Alex Smereczniak	Selling cakes.
42:54	Shaan Puri	"What the hell is a Bundt cake?"
42:55	Sam Parr	"I don't even know what a Bundt cake is. This looks horrible."
42:57	Shaan Puri	"It looks... it looks disgusting."
42:59	Alex Smereczniak	Don't, don't knock it till you try it. I'm telling you, they're...
43:02	Shaan Puri	Dude, if they just changed the name from "Bundt cake" to something else, I would be so in.</FormattedResponse>
43:07	Sam Parr	This looks awful. Okay, but Nothing Bundt Cakes—that one was a winner. What else was a winner?
43:14	Alex Smereczniak	A lot of home services, like Benjamin Franklin Plumbing, Mister Smart, Mister Sparky, your electrician. </FormattedResponse>
43:20	Shaan Puri	Oh, wait — you could just use Benjamin Franklin's name.
43:23	Alex Smereczniak	Apparently... what? Yeah, the home services businesses.</FormattedResponse>
43:28	Shaan Puri	"George Washington's gutter suckers."
43:32	Alex Smereczniak	You guys talked about 1-800-JUNK as well. Then Omar Soliman from College Hunks Moving Junk did really well — same thing as 1-800, very similar to 1-800-JUNK. Obviously, hotels — Marriott and Hilton — have done incredibly well.
43:48	Sam Parr	We had this guy named John Morgan. He's a billionaire. He's with the Morgan & Morgan law firm. He, you know, owns crazy amounts of stuff and he's got all these stories. Two or three times he said, "I don't know if you remember this, Sean," and he was like, "yeah, we own some Marriott hotels." He just made these comments fairly offhanded, but it was probably an eight- or nine-figure thing. It was probably a pretty big deal. I'm shocked at how many ballers are in on this. It's pretty amazing.
44:18	Alex Smereczniak	They — I've found, with the podcast, the ones that have more than 50 units open don't want to come share what they've done because they're like, "this is such a good hidden gem; I don't want to talk about how I did this or that — it's out there." Because, again, it is substantial wealth creation. I know a guy who, when I first met him, owned 47 McDonald's and was producing, I want to say, about $35 million a year in cash flow. He's paid like an NFL quarterback. He told me, "I don't remember the last time I stepped foot inside of McDonald's unless it was one I was looking at buying. I haven't eaten here, I haven't worked here. I've got one COO who runs the whole thing for me. I've got two private planes because one's not enough, I guess." He just does whatever he wants and has this thing cash flowing. I talked to him recently — he's up to 90 McDonald's now — and I don't know the math on that, but that's probably close to $70 million or so in cash flow a year.
45:12	Sam Parr	"You're doing a good job of proving your thesis to be true. What's the — nothing Bundt Cake, but today?" [Note: "bunt cake" in the original may refer to a "bundt cake" or the bakery "Nothing Bundt Cakes".]
45:19	Alex Smereczniak	"Oh, but this — like the one that's just taking off. I mean, we mentioned it earlier, but, you know, the pop-up bagel has this cult-like following: a phenomenal brand, great revenues, and a simple business model."
45:32	Sam Parr	Is food the best? Most of the best ones you've mentioned are food, but food seems a little bit more fatty.
45:37	Shaan Puri	Yeah, exactly. It seems like I would want to own the plumber-type business, or, like, home services or turf or whatever. Those seem—naturally I'd try to go to the unsexy, maybe recurring, maybe higher-ticket, maybe kind of a local monopoly. It's not a fashion choice; it's not a trend. I don't need two people to keep coming to the gym and stay motivated. I don't need people to change their diet habits. Am I wrong in that? Is that the wrong lens for this sort of thing?
46:03	Alex Smereczniak	No — I think home services does phenomenally well. Food is tough too. If you don't get the right brand and hit the right trend at the right time, it's very expensive. It's harder to get in and out of, but if you find the right one, they're highly profitable. There's a lot more systemization and tools that the franchisors are providing in that peer network. But if you're looking as, like, "Hey, I'm the everyday kind of average person that wants to get into franchising and still have pretty significant upside," you're right — home services. You're not building a retail location, so you're not constrained by, "What if I picked the wrong location and now I'm stuck here with this huge investment and I can't move this box?" It's, you know, a million-dollar / $2,000,000 investment. But if I owned Benjamin Franklin Plumbing, or there's one called Garage Kings that, you know, I think Daymond John from Shark Tank was hyping up at one, they epoxy your garage and kinda pimp out your garage — custom shelving, epoxied floors, racking and all this stuff — they'll do $1.3–$1.4 million a year in revenue and very high margin. Again, not a lot of variable costs or fixed costs either, and you're just going around pimping out garages and cash-flowing half a million a year.
47:10	Sam Parr	Dude, Sean — we have this guy named Tommy Mello coming on. Have you ever googled "Tommy Mello"?
47:14	Shaan Puri	Tommy Mello sounds like...
47:15	Alex Smereczniak	Ah, so.</FormattedResponse>
47:17	Sam Parr	Yeah — he’s gangster. Wait till you talk to him; he’s cool. I think he’s coming on in a couple weeks. One garage... one garage. I think all they do is garage doors, and he sold half the business, give or take. I think, for sure, it was a billion‑dollar-plus valuation. And his garage doors... I think they do something; he shares everything. I think it was like $250 million or $300 million a year in garage‑door replacement.
47:45	Alex Smereczniak	That was the thing with Garage Kings too. You know, the average unit volume is $1,300,000, and they're like, "We're not even doing garage doors or other fixtures yet," and that's going to add another $500,000 per territory annually. So it's just these unsexy, overlooked things that, you know, if I...
47:59	Sam Parr	But I do think that a lot of people make a mistake there. I have a friend named Chris who took over his father's HVAC company, and he scaled it from $10 million to $200 million in revenue. Wow. He was—yeah, it's called Hoffman Bros, and it's in St. Louis and now Nashville. He was telling me, and he was making fun of me: "All you tech bros think that it's so cool to get in this business. You don't know the half of it—what I have to deal with when you're working with a blue-collar HVAC guy." What he said was his competitors are a lot smarter now because a lot of the young guys have taken over. But he explained, "We give our guys iPads, and we teach them. We literally have a checklist for them. When you go to the door, pet the dog. We ask permission, and say, 'May I come inside? I've got these things I’ll put on my feet.' When you leave you say something like, 'Hey, I'll get a $50 bonus if you leave me a Google review here.'" It's just this checklist of things that a lot of mom-and-pop businesses just don't do. So on one hand I do think that people like us say, "Yeah, it's just an overlooked thing—you're so smart, you went to a good college, just go start a garage-door business," when in reality it's way more challenging than that. But also at the same time, I do think that there are a lot of people who don't sweat the details—maybe a little bit more of a militant operator would...
49:13	Alex Smereczniak	Yep, no — that's completely fair. But I think whether it's a corporate job, a tech startup, or one of these unsexy, blue-collar things, there is no shortcut. It is all going to be hard work. For me, it's the person that's willing to work hard: they're smart, they're capable, and they have capital — they have access to capital. You can go do this; most people can go figure this out. It's not going to be a cakewalk, and it's not completely downhill. But if you've got the work ethic and you're willing to do it, franchising is a great, de-risked way. And... what is this? Wait.</FormattedResponse>
49:48	Shaan Puri	This should be the only thing in the MFM merch shop: this giant flag you put up on your wall that says, "We do this not because it is easy, but because we thought it would be easy." This is like the story of my life. All entrepreneurial ventures for me start this way. </FormattedResponse>
50:04	Alex Smereczniak	We get dozens of people that come through. They're like, "What's a good business I could invest in where I don't really have to do anything?" I'm like, "Not this." So I say, "I don't know — maybe buy Bitcoin." I really don't know.
50:15	Shaan Puri	"I'm just unique in that I want a lot of money with the least amount of work, but I really don't want to take a lot of risk either. So, what have you got for me?"</FormattedResponse>
50:23	Alex Smereczniak	"I'm like, nothing, Sean — I was thinking of another. I was thinking of another one when we were talking. You're like, 'What other kind of trends?' I think one that we haven't talked about is seniors / the aging population — baby boomers. There is a ton of pent-up demand right now for senior care. You'd think everyone else has this idea and will go build more facilities or expand in-home care, but that's not happening fast enough. Every once in a while, for market validation, we'll call providers and say, "Hey, my grandmother, my mom," etc. And they're like, "Oh, we — we're booked out. We have a list that's eight months long, twelve months long." This is true in most markets. There is not enough supply for the level of demand. Another franchise that's been around for a while is called Homewatch CareGivers. Total investment: $120k to $177k. Average yearly revenue: $2.5 million doing senior care.
51:12	Sam Parr	What about funeral homes? Are funeral homes franchises? </FormattedResponse>
51:17	Shaan Puri	"I'm just gonna... I'm just gonna roll up."
51:19	Sam Parr	The sleeves are here.
51:19	Shaan Puri	And get into.
51:20	Sam Parr	The mud.
51:21	Alex Smereczniak	Cut the whole thing.</FormattedResponse>
51:24	Shaan Puri	Cremation right now.</FormattedResponse>
51:27	Sam Parr	Well, I was asking for a bunch of reasons. One: baby boomers are at that age. But also, Sean has this thing called OneShark Businesses. A few years ago he showed us the charts of cremation, and it was just—astronomical how many people preferred being cremated now versus 20 years ago.
51:41	Shaan Puri	It went from about 10% to 50% of the market.</FormattedResponse>
51:45	Sam Parr	Wow. And you said that — or did you say that a large percentage of the stuff we work with, everyone we know about, are franchises or funeral homes?
51:52	Alex Smereczniak	I haven't actually seen—I'm sure there is one—but I haven't seen a funeral home franchise. If you're trying to do a vertical play here, there are crime-scene cleanup franchises, so you could start there. What's it called? Bio-One is one of them. There are a few. Oh yeah... literally, I think. </FormattedResponse>
52:09	Sam Parr	"We talked about that."
52:10	Alex Smereczniak	Yeah, they're going and cleaning up crime scenes and everything that comes with that.
52:15	Sam Parr	Wow, that's incredible.
52:16	Shaan Puri	Yeah. There definitely are franchises for this in both funerals and cremation. There's also pet cremation— that's become a big one now; it's everywhere. I don't think there's any space where you're like, "Is there a franchise?" The answer is pretty much yes. It's just a question of... blanking.
52:32	Sam Parr	Check this out.
52:33	Shaan Puri	How good is it?
52:33	Sam Parr	"Go to aftermath.com, Alex."
52:36	Alex Smereczniak	Aftermath. Oh, gosh.
52:38	Sam Parr	Do you know this business is doing really well if they bought "aftermath.com"?
52:43	Shaan Puri	This is the crime scene. Crime-scene cleanup.
52:46	Alex Smereczniak	"Yeah. Oh, wow."
52:47	Shaan Puri	By the way, you said you scraped the data. These disclosures — they basically have to say the good and the bad. It's a required set of financial reporting that these franchises have to do, similar to how public companies have to report their numbers. It's almost more structured, because you specifically... I've seen this with MLMs. MLMs also have to publish all of their data about what their associates are doing. When you look at the table, it's like—98% generate less than $1,000—and then after that, the rest of the people do well. All the numbers and data are very structured because they're legally required to do that. Is it the same thing with franchises? Can I get very clear pictures? I tried. I looked into this one activity place and I thought, "Oh, this is great. This is going to crush." I was thinking about buying a franchise for my sister or for my trainer — a business in a box that they could run. But they were evasive. I shouldn't say evasive, but it was not easy to just get clear answers to three questions: - What is the range of revenue to expect? - What is the range of profit to expect? - How many of the locations are profitable versus unprofitable? For example, is it 2% unprofitable or 50%? I asked those general questions, and their answer was: > "Well, it'll all be in the packet." But it wasn't in the packet, because they're not required to report in certain ways. So I guess — what have you found in scraping all this data?
54:18	Alex Smereczniak	Yeah, so every brand is regulated by the FTC — the Federal Trade Commission. They're required to have this ~200-page legal document called an FDD (a Franchise Disclosure Document). It's very structured, kind of like a public company's filings. There are little tricks and adjusted EBITDA, and you have to read 30 footnotes to figure out what the hell is going on. Brands are doing the same thing, and we help people navigate those. The reason we built Franzi again was just like Zillow: you can go here and see, "What's this gonna cost? Is there bankruptcy? Is there litigation? How many have shut down?" I tell people to go look at Item 20 — it's where they show how many units they've sold, how many are open, and how many stores have shut down. It's the best way to see whether the system is relatively healthy. Are a bunch of people selling? Are they actually opening the units they've sold, or is there a huge delta? It's a good indicator of whether they have, you know, their shit together — basically whether they can sustain this and do it well. And then the best validation is just go talk to other franchisees — people who are actually doing it, who are in it. What you described is a red flag: if a brand is not willing to share certain things that they're allowed to share, it's a red flag.
55:24	Shaan Puri	What's the best practice for contacting? Is it just: you cold-call and say, "Hey, I'm looking into franchising in a totally different territory"?
55:30	Alex Smereczniak	Yeah, I look at it like hiring someone. You ask them for their references and they're going to give you their mom and their best—right—boss they've ever had, and they're going to say all these great things. But then you should go talk to the bosses or employers they didn't give you but mentioned in the interview. That's really how you get validation. Same thing here: the brand is going to serve up their top two performing franchisees. They're going to say all these great things and you'll feel like, "I have conviction." You should go on LinkedIn and find two or three others they didn't list and do a thoughtful, cold outreach. If you reach out thoughtfully, they will spend 20 to 30 minutes with you, telling you "the good, the bad, and the ugly."
56:03	Shaan Puri	Let's say you have a 20-minute phone call with them and you get to ask three questions. What are the three questions you would ask one of those other franchisees?
56:11	Alex Smereczniak	Yeah. Immediately—"Would you do this again knowing everything you know now?" That should be pretty telling, because they're either knee-deep in it. Like, "This sucks—I'm spending way more time, I've lost money; this is brutal." Or they're still in the hard part—the J-curve—and they're coming out saying, "I see light; I'm super bullish on this, and yeah, would do this again." Or they're killing it and they love it. So that question usually gives you a lot. I then would ask about support and what it's like working with the brand, because a lot of the reason you're franchising versus going on your own is: is the team actually providing value? Is that 6% worth it, or would you have been better off doing this on your own? That's a good indicator of whether you should franchise this or be a franchisee of this. Lastly, I'd ask, "How much money are you making? How profitable is this? Is it what you expected? Is the juice worth the squeeze?" They might be making some money, but it could have required a lot of investment and time—time they could have spent producing returns in the stock market, real estate, or something else.
57:09	Shaan Puri	"I'm just looking for the pain in their voice, regardless of what they're saying. I was trying to detect the underlying pain that I could sense." </FormattedResponse>
57:17	Alex Smereczniak	Well, the good thing about doing these validation calls is: yes—while they have an interest in the brand, you aren't going to compete directly with them. You aren't necessarily going to add value to their location, and so they have no incentive to protect the brand in-line. Like Sean: "I would do this in a heartbeat—all over again—because it doesn't actually directly benefit them." So you are going to get real, raw responses most of the time, because they don't want someone else to go make the mistake that they made. They have, you know, they want to help you out; they're hopefully not vindictive people for the most part, and if they're doing well, they're going to be happy to share that too.
57:55	Sam Parr	The franchise industry seems kind of cool to us as content people because we have these guys who are kind of cowboys. They're Midwestern or Southern guys who are really wealthy. You know, it's like that meme: when you get on an airplane and you see a guy in baggy blue jeans and loafers with a fat Rolex—he's reading prospect reports on paper. Do you meet a lot of people like that? Because it seems like there are a lot of really cool stories here.
58:28	Alex Smereczniak	There are so many, and that's part of what we're doing with our show: how do we highlight these? We have to get people comfortable enough to even tell their stories, because they've got such a good thing going. They don't want to mess it up and, you know, attract more private equity than is already flooding the franchise model today — and it's only growing. There are a lot of stories like Cal's. Five years ago they weren't doing this, and now they've got a business doing a couple hundred million dollars a year in revenue. That's where my flip happened. I used to be — again — a franchise-model hater: "I should just go do this myself and everyone should just go do it themselves; you can extract 6%," and so on. Then you realize how many corners—not that you're cutting them—but just how much value is created in that system: bulk purchasing power, branding, etc. I've become, you know, a believer for the right person and the right brand. I mean, there are still a lot of "ifs" and things you need to check off to make sure it's the right fit. But yeah, there are a lot of these cowboys out here who are kind of unassuming and running massive businesses.
59:28	Sam Parr	One of my favorite characters was the dad in the movie The Blind Side. Do you remember that, Sean?
59:33	Shaan Puri	"Wait, what was your... was your franchise wrote?"
59:35	Sam Parr	The joke in the movie was Tim McGraw's character. It was based on a real character, and he ended up selling this for nine figures. But he was like the kid with the dad-brag—he goes, "My dad owns 50 Taco Bells."
59:46	Alex Smereczniak	I was going to say it was like Jack in the Box or Taco Bell. </FormattedResponse>
59:48	Sam Parr	I think it was Taco Bell — like Domino's Pizza or Pizza Hut. Are they the same, like Yum Brands? </FormattedResponse>
59:53	Alex Smereczniak	Yeah. Yum Brands — KFC. Oh, it's Pizza Hut, Taco Bell, and KFC.
59:58	Sam Parr	Yeah, they bragged about it, and I thought—in my head—that has been what the franchisor is. Basically, a franchisee is an ex-high-school quarterback who married his high-school sweetheart, is a good guy with kids, and he owns about 10 KFCs and three Taco Bells. He brings food to school for his kids to make the class like him.
01:00:20	Alex Smereczniak	You guys should try to get him on — I think his name is Greg Flynn. It's the Flynn Group; they own thousands of franchise locations. It's a family-run business. Don't hold me exactly to these numbers, but a report came out in the last couple of months from the Flynn Group. I think it was $6,300,000,000 in revenue last year — about $6.3 billion — from owning franchises and supporting their franchisees. That was more revenue than KFC, Domino's, Popeyes — huge brands. This group of franchisees is doing more revenue than the franchisors of those very well-known, very large brands.
01:01:05	Shaan Puri	Their homepage — when you go to the website, the hero banner is just onion rings falling from the sky, which is the first thing...
01:01:15	Alex Smereczniak	"Doesn't want that? Who doesn't? Onion rings falling from the sky."
01:01:19	Sam Parr	Now that I think about it, there are so many more ballers than I thought. Sean, do you remember Lorenzo Fertitta, the guy who was the founder and CEO of the UFC? Well, he came from a wealthy family, so they've been ballers for forever. But before he was the CEO or founder of the UFC, he was the CEO of Gordon Biersch, if you remember those guys. It's a brewery — it's a franchise, I believe — but it's a brewery and bar is all it is. I didn't...
01:01:42	Shaan Puri	"I know that. I thought they were like hotels in Vegas." </FormattedResponse>
01:01:45	Sam Parr	They were—the mom and dad. The family was rooted in that. For some reason, in 1995 he bought controlling interest in the Gordon Biersch Brewing Company, and I think they had franchises.
01:01:58	Alex Smereczniak	Here's an interesting one I saw the other day: "There are more millionaires generated from franchising than all combined players ever in the NFL."
01:02:08	Sam Parr	"Dude, you made this bold claim, and I wanted to fight you about it. Now I'm totally on your team."
01:02:14	Shaan Puri	My first mentor in college — when I was in college — we entered a business plan competition and were trying to win. They assigned us a mentor. The first team got matched with this guy who was, like, a biotech entrepreneur; he sold his company for about $4 billion. The second team that got up was matched with the guy from Mint.com, Aaron Patzer (or whatever his name is). You know, he's a tech entrepreneur worth hundreds of millions. Then they were like, "You guys are gonna be with Michael." We were like, "Who's Michael?" They said, "Michael owns the number one..." I was like, "What is it gonna be?" He's like, "Largest chain of Applebee's in North Carolina." I was like, womp womp. So I was expecting... I was like...
01:02:57	Sam Parr	Pulled up at a Rolls-Royce.
01:02:59	Shaan Puri	We pull—exactly. We go outside. Michael's got the best car. Michael's got the freest schedule. He's like, "I'll meet whenever you guys want to meet." This guy owned, I think, like 13 or 30 Applebee's or something like that, and...
01:03:09	Alex Smereczniak	I know exactly who you're talking about. I'm in Charlotte. It's Michael — I didn't even know his last name.
01:03:14	Shaan Puri	"That's his last name."
01:03:14	Alex Smereczniak	Yeah, that's right. Yeah.
01:03:16	Shaan Puri	He was such a good guy, and his story was so cool. It was kind of inspiring because up till then my frame was that if you wanted to make it as an entrepreneur you needed a genius invention. Here was this guy who was clearly living a wonderful, successful life—and what was his genius invention? Not much. He basically said, "I will take what to me was the most boring food franchise you could imagine." Literally, Applebee's would have been my punchline if I were making a joke. I remember noticing on the Flynn Group timeline that it says, "1999: Our journey begins with eight Applebee's." Now they have 5,000+ units—or thousands of units—and they're expanding into New Zealand territories because they're dominating the globe. That guy broke my frame because he really had built a wonderful life without doing what felt like pulling a rabbit out of a hat or catching lightning in a bottle—without inventing a new product that sets the world ablaze. There are so many different ways to win; it depends on what you're suited for. He was a great executor and manager. He was excellent at building up and developing people so they could run the locations, and that's what he needed to be great at. It's not that it was easy or that he did nothing—he was simply great at those things, rather than coming up with a game-changing concept.
01:04:35	Alex Smereczniak	Well, you're saying—you asked me earlier: why don't you just go open a hundred of these? Why are you building a tech company? And what Sean just said is the tempting part of it. It's like all these tech entrepreneurs I meet—they sound smarter, they sound more sophisticated than the multi-franchisee people I meet. They're working way harder. But maybe we got it all wrong, because 90% of them are going to fail, and they're wasting all this hard work, talent, and brain time on something that has such a small chance of outsized success. Then I'm meeting the wild-west cowboys on the plane and they're like, "Yeah, I just followed the playbook." Not to make it sound like it was all a cakewalk, but they're like, "I am good at finding real estate and making deals with the landlords. I started with one and now I got 50, and I make $20,000,000 a year," and I don't...
01:05:21	Sam Parr	Risk. Yeah — the look: the grass is always greener on the other side. Like, someone who worked in fast food and one of these jobs — you wouldn't have wanted to hang out with me, you know what I mean? You would not have wanted to manage me. I was a kid. So, like, there's the grass-is-always-greener thing. It sounds dope. My brother-in-law owns a moving company, and I hear the numbers and I'm like, "That's awesome." He's like, "Dude, I had to fire a guy the other day because he was doing heroin," like, on the job. So, you know, pros and cons. Pros and cons. But I tell you what — there seem like a lot of pros right now. Where do you—where do you live?
01:05:56	Alex Smereczniak	Charlotte, North Carolina.
01:05:58	Sam Parr	"Are you building the company there or remotely?"
01:06:00	Alex Smereczniak	Yeah. We're building it in Charlotte. We have—well, we have team members in South America and Philly, but the majority of us are here in Charlotte.
01:06:08	Sam Parr	"How much did you raise?"
01:06:09	Alex Smereczniak	We raised $3.5 million in our seed round, and we launched in January. We're up to 35,000 unique visitors a month to the site, and we're starting to build out a second product. Our goal is basically Salesforce but for the franchise model. We help you buy a business, we help you operate your suite of franchises or your portfolio of franchises, and then we help you sell those back on our marketplace.
01:06:32	Sam Parr	"What's your revenue range now? Have you crossed eight figures?"
01:06:36	Alex Smereczniak	Not yet. No — we're less than 11 months in, so we'll do seven figures this first year, which, for a startup in its first year, we're happy with.</FormattedResponse>
01:06:45	Sam Parr	Sorry. I thought you said you'd start a while back. I thought maybe... you just hadn't. I mean, you said, "You don't have — you don't have $10,000,000."
01:06:51	Alex Smereczniak	"I was like, 'Wait—where are you finding these companies? Because I want to invest in this.'"
01:06:56	Sam Parr	"It's pretty cool. I didn't know what we were getting into when we started this. I thought, a) you were just going to pitch your company — in which case that wouldn't have been great — and you didn't do any of that; and b) I was like, 'Franchises? I don't want to hear about this.' It turns out it was actually one of my favorite episodes. These are the type of people you get to hang out with and the stories you get to hear. Frankly, the type of personality you have — these are some of the stories that Sean and I like uncovering: maybe people who aren't in the SF–New York scene, which Sean and I both are in. So it's really fun to hear your perspective on stuff. It's pretty cool."
01:07:32	Alex Smereczniak	Thank you. You know what—that goes a long way. I know you guys see a ton of business models and people, and I felt the same way. Sometimes I still even feel a little crazy about what we're doing. It's like, is this something that can really help people? I want them to have the same entrepreneurial experience I had. They just might not want to do a tech company from scratch, so how do I show and educate people that this is a path if you want to walk down it? I know I'll probably overuse analogies, but when you think about the financial housing crisis, people ask, "Who's to blame? Is it the banks? Is it the administration?" Using that as an example: banks started originating a ton of mortgages because Fannie Mae and Freddie Mac said, "we'll take the risk off your balance sheet." So, of course, the banks are going to originate a ton of mortgages. Was it unethical? Yes, but their incentive got taken away. I look at franchise brokers the same way. Is it their fault? I don't know. No one's regulating them, everyone else is doing it, and there's no cap on it—so they're going to go sell businesses and make 60%. My thought is: let capitalism do what it's good at and level the playing field and democratize things. Hopefully that's what we're able to do here at Franzey.
01:08:36	Sam Parr	Well — sick, dude. Great stories. You're a great guy. You've got a great goatee and a great podcast. This is it — that's the pod.

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The “Boring” Business Model Making Regular People Millionaires

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