Franchise Ownership: Listen To This Before You Buy | Jon Ostenson

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The smartest money in franchising isn't buying burgers.

It's buying septic. Dumpsters. In-home senior care. Pool cleaning.

My son and I have been kicking around buying a business, so I asked a guy who helps people do it for a living.

Jon Ostenson is the founder of FranBridge Consulting and author of NON-Food Franchising. He's been a franchisor, he's a multi-brand franchisee, and his firm has made the Inc. 5000 a couple of times.

His line stuck with me: "Non-sexy is the new sexy."

What you'll learn in this episode

• What it really costs to buy a franchise—and how most people pay for it (hint: not cash)
• Why franchising beats a 3-year hunt for an existing business
• What private equity is buying, and why it's boring on purpose
• The dumpster truck dropping half a million to the bottom line
• The 3 things every franchisor wants to see in you (I went one for three...maybe two)

The best lines from Jon

"I joke that non-sexy is the new sexy when it comes to business ownership."

—Jon Ostenson

"They feel like they're in the game...but they're not building anything."

—Jon Ostenson, on people who spend years hunting for an existing business

"You've gotta have some humility and be willing to follow a system."

—Jon Ostenson, on what franchisors look for

Like this one? You'll also like St John Craner on selling big-ticket tractors in rural New Zealand and Navy SEAL Andy Stumpf on getting back in the game.

Full transcript (lightly cleaned)

Skim the chapter headings and jump to what you care about.

0:00—Why "non-food" franchising

Wes: Jon Ostenson all the way from Atlanta, author of NON-Food Franchising. Maybe I can say that without getting a frog in my throat. Welcome to The Sales Podcast, man. How the heck are you?

Jon: Hey Wes, doing great. Excited to be here.

Wes: So what the heck non-food franchising, why the differentiation?

Jon: You know what I found is when I say the F word franchise, you know, people think fast food. And we got nothing against the food guys.

Wes: They think Burger King, McDonald's.

Jon: A lot of them are good friends of mine, but my humble belief is there are easier ways to make money. And oftentimes when people think of franchising, they don't think of all the other industries that we specialize in, that we think are great paths for people to go down.

Wes: You know, it's interesting. We're having this conversation now. My oldest, he's in tech, he's been in San Francisco for years. My second, he's in real estate. He's kind of followed my entrepreneurial path. And it's hard. He has been kicked in the teeth.

COVID hit during his last semester in college. He was doing an internship with some friends of mine who had a brokerage, but he could only be a buyer's agent. Well, being a buyer's agent during COVID was not good. There were twenty and fifty bids on a house. He was hustling, and now he's making it work, he's doing some flips, and he's a constant reader, studier, listener.

This guy did an analysis of someone who inherited real estate from his dad, and they ran the numbers and it's like, should've just put it in the S&P 500 and left it. So now I'm like, well, let's buy a business. I literally ran an analysis with AI and said, "Hey, here's my parameters. Something close, services business, find me something."

'Cause I'm thinking baby boomers retiring, kids don't want the job, maybe I can pick something up for a song, throw some technology at it, bring it up to the twenty-first century, make some money. But why should we look at franchises versus buying a seventy-year-old dude's HVAC company and firing it up?

2:14—Franchise vs. buying an existing business

Jon: Yeah. Well, franchising's not right for everyone. Some people are too entrepreneurial. They want to put their thumbprints all over it and don't want to live within the lines. But in my experience, I get to see a lot of case studies, and my humble belief is that franchising is a better path for a lot of folks.

I have so many guys, some really smart guys, multiple Harvard MBAs I'm working with right now. They've been looking for an existing business for three years and four years. They've been under LOI a number of times, due diligence didn't shake out, someone else outbid them.

I wrote an article on Forbes a few weeks ago comparing entrepreneurship through acquisition, the idea of buying an existing business, versus franchising. There are trade-offs both ways, but one of the things I love about franchising: it allows you to get in the game.

So many guys out there looking for an existing business feel like they're in the game. They're having conversations, they're playing entrepreneur. But they're not building anything.

Franchising allows you to get in, start building, and it gives you optionality down the road too. Whatever you do next probably won't be the only thing you ever do. You can still buy an existing business, but why don't you go ahead and start building something?

And one of the cool things is once you're in a franchise system, you're going to get first look at any of the franchisees that may be selling their business down the road. So you can do what I call an internal M&A and acquire other locations. A lot of our clients do these roll-ups over time.

Wes: Yeah, we know some people. Funny enough, I know the manager of a local Chick-fil-A. She's my age, a little bit older actually, and a young couple that my son knows bought the branch that she works at. So I've looked at that a little bit from a distance. But that's a food franchise. Are you saying I shouldn't look for a Chick-fil-A? You're saying I should get what? A muffler shop? Talk to me.

Jon: Hey, Chick-fil-A's based down the road from us...

Wes: Can you drive down there? I'm gonna fax you an application. Can you hand carry it in for me?

Jon: We are good friends with the Cathy family. Our kids go to school together. So we can certainly try, but no, it's a competitive space. It's a very different model. They want you in the game, operating that business. They kinda cap what you can make. You're not gonna sell the business one day, but you can make a good living along the way. We hold them in high respect. If you're going to do food, Chick-fil-A's a good way to go.

4:41—Private equity and the industries it's buying

Wes: So what's prominent right now? Correct me if I'm wrong, but is it the whole PE game, where they're going around gobbling up all the local mom-and-pops and bundling them together? Is that what we're up against?

Jon: Private equity does love franchising. They love the model. You see a lot of smart money flowing into franchising. Where we see a lot of it going is into industries that are understandable, cash flowing, things that AI is not going to replace, but maybe enhance.

Think home services and property services: flooring, dumpsters, restoration, pool cleaning, cabinets. Businesses like that aren't going out of style. They're non-trendy. They're needs-based.

Maybe you infuse AI into the lead generation or the truck routing on the back end, and you can really differentiate, because oftentimes you're up against mom-and-pops. Fragmented competition that's not very sophisticated. Come in with a white-collar approach to a blue-collar industry, to be cliché, and you can see it play out.

Other areas we see a lot of interest: health and wellness. That's more important to people than ever, from a longevity and recovery standpoint. And certainly anything related to seniors. You've got this massive demographic with a lot of needs that can be addressed through different types of businesses.

I always go back to: what will people spend on regardless of the economy? Their health, their aging parents, their kids, their pets, the things they care about.

I joke that non-sexy is the new sexy when it comes to business ownership. Things like septic. We've got some guys we really like in the septic space. One in five homes in America is on septic. That's not going out of style.

Or a business with a truck that carries 200 gallons of fuel and goes around fueling equipment at construction sites and fleets of vehicles, reducing the downtime. Things you don't have on your bingo card when you hear the word franchise.

Wes: I sold mobile homes in Mobile, Alabama, and a good referral partner of mine installed septic tanks. Didn't service them, installed new ones. He had one helper and a backhoe. He made a lot of money. This was thirty years ago. And I was the kid in the family in Houston when we had a septic and had to dig it up.

Jon: Riches in the niches.

Wes: I don't mind owning a septic service business. I don't want to service a septic tank.

Jon: I was talking with a client last week from that Mobile area. Ironically, he's down in Fairhope, which isn't too far away.

Wes: Yeah, my dad's out near Fairhope.

7:36—The dumpster truck dropping half a million to the bottom line

Jon: We helped him get into a franchise a few years ago. It's a truck with a big old crane arm on the back. It goes up to dumpsters and compacts them, which reduces the number of trips to the landfill. Huge savings to the end customer. It's a B2B recurring revenue business.

He's dropping half a million to the bottom line, and he isn't having to put that much time into it now. Early on he did, but now he's got the right people in place with aligned interests. So now he's ready for his next franchise.

We see a lot of that. It's what I call franchise stacking, where you start to build a portfolio of businesses that either complement or diversify from each other.

8:12—Can you own a franchise in California?

Wes: I've lived in California twenty-two years. My wife's from here. And I am scared of this state. Employees, workers' comp, everything. It is so anti-business. Is that irrational? Can I buy something in Arizona and just drive over and check in on it?

Jon: We do a lot of business in California, but I'd agree with you: California is very restrictive. In franchising there are fourteen what we call registration states. Once you're up and running you're mostly fine, but on the front end they want to sign off on everything every year when the new franchise disclosure document comes out. And California is the one that moves the slowest.

Some businesses don't go into California, or it's the last one they go into. But at the end of the day, there's a lot of money in California and people are looking to spend. If you can figure out the game, it creates a barrier to entry, a moat around you.

We've done a lot of different client deals there, everything from pool cleaning to in-home senior care to longevity and peptide-related health and wellness businesses.

Wes: Peptides are exploding. I do Jiu-Jitsu. Everybody's on peptides. I'm like the only one not. My cousin's selling them, retired cop. I'm like, dude, I don't wanna buy stuff out of the back of the trunk of your car and stick it into my body. No offense. But it's popular.

Jon: I throw everything against the wall. I've done peptides, stem cells, PRP. I could talk about this stuff all day. I find it fascinating.

Wes: My Jiu-Jitsu instructor tried all that, PRP and more, but he ended up having to do surgery on his shoulder. I need to find an orthopedic surgeon and get him to sponsor Jiu-Jitsu schools, because everybody's banged up.

Jon: I know all the ortho shoulder surgeons in town. I can introduce ya.

10:14—A franchise the whole family can run

Wes: So give me an example, 'cause I'm legit interested. I've got seven kids, four grandkids now, and most of my kids are not entrepreneurial. What could we do together as a family in a non-food franchise?

Jon: We do see families get involved, whether it's a couple or a parent and child. I was talking with a client just yesterday. His son just graduated from grad school in Southern California, and the father is in Arizona.

A lot of times the parent is the capital partner. They want to be the advisor on the sideline, and it gives them a lot of confidence to know there's a good franchisor supporting their kid, keeping them marching in the right direction with training, ongoing support and accountability. Which I know is big in your world.

Now, the caveat: not every franchise is created equal. It's a big industry of several thousand companies. There are ones that provide great support and set people up for success, and there are ones that don't, unfortunately. That's where we come in, to help clients identify the right ones and set the right expectations up front.

What I like to do is get on the phone. If you said, "This is the kid I'd bet on first," let's jump on a call. I'd get to know them: their background, the skill sets they bring, what they enjoy doing, what they don't.

• Some people love having a large team. Others want to be a lone wolf.
• Some have a sales orientation. Others say, "That'll be my first key hire."
• Some say, "I don't care how much money I make, I just want to serve the community." Others say, "I'd love to serve the community, but really it's about the bottom line."

Once we understand what's most important, I share what we're seeing out there. I check availability with a whole bunch of franchisors. I was in South Florida last week with about 200 franchise companies looking to expand, understanding what's going on behind the scenes.

There's a lot of noise online. Every franchise puts its best marketing foot forward. It's important to understand the team behind the franchise. Are their franchisees happy? What is the franchisor doing on innovation? Then: here are the top 10 or 12 opportunities open in your market, here's a little about each one, let's pick a couple and have a conversation.

Wes: So you work nationwide?

Jon: Nationwide. Canada as well.

13:05—How franchise consultants get paid

Wes: So how does that work? Would I retain you? Does the franchise retain you? Are you a free agent wheeling and dealing on our behalf?

Jon: I'm part of the largest franchise network in the country. We work with over 600 franchise owners looking to expand. I consider my client to be the individual I'm helping, but I actually get paid by the franchisor on the back end. A referral fee, just like a real estate model. If you bought a house with a real estate agent, you wouldn't pay that agent.

Nice thing is, none of that ever gets passed on to the client. The franchise fee doesn't change whether you use someone or not.

My background: I've been a franchisor, I've run a large national franchise system, and I'm a multi-brand franchisee myself. So it's entirely free to work with us, and you can drop out of the process at any time.

We've got funding resources if you want to look into SBA loans or retirement rollovers, and franchise attorneys to review the agreement. I'll invest time pulling together what I think are the best opportunities for you, take you through them, and hold your hand over the next two months or so as we explore.

14:39—Why not just use AI to find a deal?

Wes: My son has been burned in real estate. Someone works with him, then goes to an open house on their own: "We found this, we don't need you." And you mentioned AI. Can't I just use AI and the SBA and go find these deals myself? Why do I need some dude in Atlanta? I mean, you're a Georgia Bulldog.

Jon: When you're making a big decision, you want more than what the AI algorithm's spitting at you. It only has access to public information.

I was with the CEOs of some of the largest franchise organizations in the country last week. I know of companies getting ready to open franchise opportunities that are not published online. I know who on a leadership team is about to move to another franchise group.

We had a client recently get into a business that provides wheelchair ramps, stair lifts and mobility solutions, so people can age in place. Look at their website and they've got three locations. But the franchisor, who I've known for seven years, built a very similar business in a similar industry and brought some of his top franchisees over. Rising tide raises all ships.

I never try to sell myself, and hopefully it doesn't come across that way.

Wes: Hey, this is The Sales Podcast. I'd be sad if you didn't sell yourself.

Jon: I do it in a very consultative way. If a client gets halfway through and says, "Jon, the time's not right for me," totally fine. Oftentimes they come back a year later, or they refer their brother. I'm playing the long game. It's an entirely no-pressure situation.

I love opening people's eyes to ideas they never would have thought of. 90% of our clients get into an industry that was never even on their radar. They look at their spouse and say, "Gosh, I never would have thought we'd be in XYZ. But it makes a ton of sense for us and our family."

16:54—Buy near home or far away?

Wes: Is it advisable to own something you're not near? If I bought something in Phoenix, a five-hour drive, is that foolish just to avoid California? Or do I bite the bullet and get something in my backyard I can keep an eye on?

Jon: It depends. If you had a son-in-law or an old business partner who lived in that market, I'd say that makes sense: you're the capital partner, they're the day-to-day. But if you're going to be really hands-on, even managing a general manager, I strongly encourage people to consider their own backyard. One less point of friction.

I never sugarcoat it. If business ownership was easy, everyone would be doing it. There's a reason you can make outsized returns if you do it well, and a reason the government incentivizes it through the tax code.

But it takes effort. It's not a passive syndication. Half of our clients go into what some people call semi-passive, but at the end of the day it takes work, either by you or by someone acting on your behalf.

18:12—Resales vs. new locations

Wes: How often is someone opening a new location versus buying one from somebody who's retiring, or a location that failed from bad management?

Jon: We do handle resales, and often they're cash flowing well. If one failed, people aren't usually looking to buy it, though there are turnaround situations. But probably five percent of the time we're doing resales.

Buying an existing business looks great on paper, but there's risk in inheriting someone else's team. You come in with a different culture, assume everything continues as is, and you may lose key clients. In franchising, most of the good resales are sold to other franchisees in the system.

Think of my client Nathan. He's the largest franchisee of Two Men and a Truck, based in South Carolina but now operating throughout the Southeast. Over time he bought up other franchisees, and he now has about a dozen locations doing over forty million a year in revenue.

Every year or two he comes to me and says, "Jon, I'm ready to buy something else, because I want to promote this young person who's proven themselves, give them equity, and set them up for success." Once you're in a franchise, you get first look at anyone else that's selling. That's a great path to scale. But in most cases, it's a new location.

20:05—What's working in California

Wes: I'd love to know what's working in California. I'd say road repair, but they don't ever get repaired, so I don't think that's a good franchise out here.

Jon: One of the franchises I'm invested in as a franchisee does something similar: asphalt paving and line striping. There are parking lots everywhere, and there are needs behind those.

Depending on where you are in California, there's an older population that prefers not to go into a senior home until they absolutely have to. So what do they need while they're aging in place? I've done a couple of placements in in-home care. You need a larger team, but you can be doing seven figures in the first 12 to 18 months. Those things ramp up really fast.

If you don't want a large team but want to serve seniors, there's the wheelchair ramps and stair lifts business, or a franchise we place clients in, including in San Diego, that does recurring home services for seniors.

We have a client who just signed with a franchise where they become almost like a real estate agent for senior facilities. You've got an aging parent, you've never been through this process. Wouldn't you love an expert who knows all the facilities, assesses what your parent needs and points you in the right direction?

21:43—What it costs to buy in, and how people fund it

Wes: What's an average buy-in someone would have to bring to the table?

Jon: Take the franchise fee, the startup costs and about three months of working capital. That's the all-in investment range.

• Retail, customer-facing, a location you drive to: probably $300,000 to $600,000 all in.
• Service-based and more remote (in-home senior care, home services, property services, consulting): more like $100,000 to $200,000. About two-thirds of our clients go this direction.

Most people are not funding these with straight cash.

• SBA loans are the most common. People like leverage, especially real estate folks, and banks prefer lending to franchises.
• Retirement rollovers (ROBS): you set up a C corporation and buy the business with your retirement plan, pay yourself a salary, and can buy it back over time.
• HELOCs are another popular mechanism.

23:03—The 3 things franchisors look for

Wes: What is the SBA or the franchisor looking for? I'm a sales guy, a coach, a consultant, and I wanna buy a moving company or a septic business. Are they gonna say, "Dude, you have no expertise in that"?

Jon: Oftentimes they want people without the industry experience, who don't bring that baggage in. What they're looking for are transferable skill sets. The first two are obvious.

#1: You have to be halfway decent with people. Someone people want to work with and work for. It's a high bar for some people.

Wes: Hell, I'm done. Never mind.

#2: You have to have a work ethic. That's just business 101.

Wes: Crap. Zero for two. Is one for three good enough? What's the third? Come on.

Jon: I don't know if you wanna hear number three. Number three is unique to franchising.

#3: You've gotta have some humility and be willing to follow a system.

Wes: Hey, I'm the most humble, handsome guy I know. That'll overcome the other two.

Jon: I'm sure there's a place for you, Wes. Obviously you've got to be somewhat capitalized and check those boxes. It's a two-way street; they're evaluating you as well. But in most cases you don't need industry experience because they'll train you. There are some exceptions that need a specific background.

24:26—Where to find Jon

Wes: So you've got your book, got your website. Where do you want people to go?

Jon: Come out to FranBridgeConsulting.com and share your email address. You'll immediately be able to download the book, ebook or audio. If you'd rather buy it on Amazon, all the proceeds go to Hope International, a great nonprofit we support.

We've sold thousands of copies and given away even more. It's a great way to dip a toe in the water and understand the world of franchising. And if you want to take the next step, it's entirely free to work with us. When you share your email, my assistant will reach out with a link to my calendar.

Wes: Where'd the name FranBridge come from?

Jon: It's my company. Dip a toe in franchising and you'll see a lot of things start with "Fran." Our funding organization is FranFund. Our goal is to be the bridge, helping people step into business ownership through franchising. Started the company in 2019, and we've been on the Inc. 5000 a couple of times.

Wes: I gotta ask. John Lee Dumas. How did y'all work together?

Jon: Good old JLD. He wrote comments on the book, and I've been on his show eight or nine times now. His listeners have really resonated with the franchise world.

Wes: He moved to Puerto Rico, right? We used to meet for lunch, had a crew, Pat Flynn, him, some other up-and-coming dudes, probably fifteen years ago. And then he left me behind, man. Like my kids.

Jon: He's a father now. It's crazy.

Wes: Isn't that cool? Have a bunch of babies. Then you have grandkids. I got four grandkids, man. All right, Jon Ostenson, FranBridgeConsulting.com. Thanks for coming on the show. It's been great catching up with you.

Jon: Enjoyed it. Appreciate having me.

Wes: GEAUX TIGERS!

Jon: About them dogs.

27:11—Faith, family, fitness and finance

Wes: I'm gonna send him a fax. I need to get in with Chick-fil-A. I need me some Chick-fil-A and I need Sundays off.

Hey, I hope you liked that. Told you he's a good guy. If you're interested, get his book. It's free. He is not gonna spam you or hard close you.

If you need help figuring out how to grow, what path to run down, reach out to Jon, reach out to me. Find somebody you can trust. Get their take on it. Pay them if you have to.

I've got a pick-my-brain option for a few hundred bucks if you just want to bounce some ideas around. And my 12 Weeks To Peak™ is truly twelve weeks: daily accountability and weekly one-on-ones to push you in all four areas.

Faith. Family. Fitness. Finance.

It's just like a car. If you've got one flat tire, that car's not going anywhere. At least not very fast, and it's probably gonna create damage as you push it. We don't operate in silos. Everything is interconnected.

I've trained Jiu-Jitsu at noon, Monday through Friday, and eleven on Saturdays, almost nonstop for going on ten years. I've slowed down a little lately so I can get to the gym, but my goal is to get back to six days a week and lifting six days a week. You gotta get after it, and you gotta stay after it.

I served at Mass this morning. I've coached my kids in their sports and helped them with school. My son lives in my neighborhood now, my daughter lives ten minutes away, and we have Sunday dinner. Faith, family, fitness, finance. You need all four.

There may be an intense period here and there where you're out of balance, but it should not be sustained. That should not be the norm.

So as you listen to these episodes, they're not just to entertain you or distract you. They're to inspire you to take action. To light that flame. To help you understand yourself, get some hope and see the path you can follow.

But then you gotta take that step. Call Jon, call me, call somebody and get after it. That's why we're here.

Thanks for listening, thanks for watching. Go sell something.

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