#178 – Franchising Demystified With Erik Van Horn

The Transcription is done with Otter and uncorrected so it will not be completely accurate.

Krisstina Wise [0:01]
Welcome back. This is Christina wise your host and this episode I interview Eric Van Horn. I met Eric through good friend Jeff Hayes. And the moment Eric and I met we were long lost friends. Eric has a business that helps people well get into business. He’s a franchise expert and I mean expert expert.

He started around bought, sold and exited

many franchises in his career. And now his business is a franchise consultant who helps others through his consulting and programming make wise choices when it comes to buying, selling or creating a new franchise. Eric is a model example of the wealthy wellthy lifestyle. He’s hit his freedom number. He has a franchise business that completely runs without him. He enjoys teaching others through his popular franchise podcast, and he lives the good life in the Black Hills of South Dakota on an 80 acre playground of outdoor fun with his wife and three daughters. If you’re interested in secrets to smart business, wealth and passive income, you’ll wish to listen to Please enjoy my conversation with Eric Van Horn.

Unknown Speaker [1:04]
Eric, thank you for being on the wealthy, wealthy podcast.

Erik Van Horn [1:07]
I’m happy to be here.

Krisstina Wise [1:09]
And so it’s Eric with the K, right? That’s right.

Erik Van Horn [1:13]
Most people spell it with a C and half the time people do spell it with a C and it doesn’t bother me because I just got used to it.

Krisstina Wise [1:20]
Yeah, my name is Christina with a K and two s’s. So it’s either a C or one s but a CH one s and it doesn’t bother me either. Well, this I’m super excited to have this conversation today. I got the honor of meeting you through our mutual friend Jeff Hayes. And when we hang out with Jeff there’s always a really nice bottle of wine attached to it and some late evenings and so I just remember leaving and thinking oh my gosh, Eric is just good people. I want to get to know him and get to know your work. So here we go. This is me getting to know you and letting everybody listen in.

Erik Van Horn [1:50]
I love it. No, that was a fun a fun evening. I’m so glad that you were there and we did. We just got to hang out and that was the best settings to get to know people like you really get to know people over a glass of wine. No expectations and you just get to know who people are.

Krisstina Wise [2:03]
I love Jeff too. We call it hotel haze, because everybody just spends the night under his roof and he’s like, Why get a hotel just come out and drink wine late into the evening. Anyway, well, let’s get started. First of all, just let everybody listening in. What’s your background tell a little bit of life story, not just business, but who is Eric Van Horn.

Erik Van Horn [2:21]
I grew up in a small town in South Dakota. I moved here when I was with my family when I was in first grade. And I basically moved away when I was early 20s. And I grew up my dad owned a small construction company and I grew up in the construction world. And I got 14 years old, working all day all summer long. And towards the end of the my high school, I thought, Man, I do not want to be doing this for the rest of my life. So I picked my college based on the fun factor of Could I hike and bike and mountain climb and rock climb and snow ski and so I went to Montana State For a bit, and that’s I got my education, graduated with a degree in business administration that I really didn’t use just about went to law school, quit that before, during registration time, and started up a little lawn company. And I was doing that working for some older lady and planting flowers mowing her lawn. And she came out of the house and said, Eric, basically, what do you want to do when you grow up? Because she’s, you know, she gave me a glass of water. I said, I’m going to be a real estate investor, because I was taking real estate courses. And the guy that was going to mentor me, was helping me understand the real and that real estate investment side of things. And I said, Really? Or she said, Really? I said, Yeah, and she said, Well, we did that 20 years ago. What do you mean? And she said, We bought a condo down by the beach. I was in Virginia Beach at this time. And she said, we did it and we did it for tax reasons. And now we don’t want it any More and we want to sell it and your I didn’t have any money at this time like zero money. And and I said, How much do you want for it? And she said nothing. We just want someone to take over the mortgage for us. I’m thinking You got to be kidding me. And so long story short, I call it my parents. And I’m like, I know you guys don’t really want to go into business with me. But here’s the deal. And I showed them the deal structure and they said, that sounds too good to be true. And I said, I know but it’s not. And my real estate investor that was going to help me said, Guys, if you don’t do this, I’ll do it with Eric. So long story short, I ended up getting my first large chunk of money within about less than 90 days out of that. And that’s what I use to start my first real business which is a franchise and so that’s how I got started into the franchising world. I can go on from there when I bought my first one in my 20s but that’s how I got my start in business.

Krisstina Wise [4:56]
And why franchise what was the interest there? Why didn’t you just continue being a real estate investor.

Erik Van Horn [5:02]
I was I was. So I was selling, I was buying houses and selling houses and taking deals that people didn’t, didn’t want, but there’s still money to be made. And then I found by accident, this franchise, and the founder of it had been successful in another franchise. So I thought, you know, there’s somebody there that can mentor me that’s been there, done that some of my friends were getting involved with it. So there was a lot of younger people that were involved with it. And and so some of it was just community. Some of it was I didn’t have to figure things out because it was already done for me. And so that was the reason I originally originally did it.

Krisstina Wise [5:40]
So you’re actually the first guest I’ve ever had on that actually is in the franchise business and, and when we look at maybe two types of businesses, the same business business ownership in a way, that one business ownership really is entrepreneurial mean, you come up with the idea might bootstrap it might raise some funds however you do it but it’s really your idea, it’s your innovation, you invent the business system and, and that’s one way of going about business. The second is to buy the business in the box where the business systems already built the offers already there, the training is usually built in. So it may or may not be a quicker way to become a business owner. But I think a lot of people when they think business are only thinking entrepreneurial side, they might be completely missing the boat that there’s a whole other way to invest in becoming a business person, correct?

Erik Van Horn [6:30]
Yeah, there’s a whole nother way out there. And there’s even from doing it yourself to even between that and becoming a franchisee there’s licensing models or having a business coach that’s been in the industry and is coaching you along the way or just a coach in general to help you get started in business. That’s, that’s done it before. But I’ve been since then that first one, I was in it for 10 years, and then I had a really nice exit. And in that model, even within franchising, Christina there’s different there’s different Models one of the best things that I did was I bought a region regional development in area development. So in Austin, Texas, I bought the rights to sell franchises in that market and support franchisees. So I was selling franchises supporting them and getting half of the royalties so I was getting 7% of their top line in turn for doing that. And I ended up selling that back to the corporate office when I had 42 locations around the Austin market and and so then I learned how to coach people and train people and help people and help their businesses grow and help them solve problems. So I exited that so my first 10 years was with was with one company my second 10 years I’ve had a six different brands over seven different states. And so I really accelerated after I you know, spent 10 years learning how to do it. And now I’m not only you know, franchisee with some different brands, but I’m a franchise or in the roofing space, so I’m helping bring in franchisees Training support them and my team is and we’re looking at acquiring more franchise brands and helping mom and pops like you were talking about just a normal business owner out there that’s really entrepreneurial. And they built a really good business and they don’t know how to grow and expand it, they either are going to open up additional units or they’re going to grow it in some way or scale it in some way and one of those ways is through the franchising model and so they can choose to do that now it’s not right for most people but for some founders it’s it’s a great way for them to grow and expand depending on on what they want to do so I’m helping people do that as well.

Krisstina Wise [8:37]
On just in my my business career being a business centered many business many businesses over the years never well I was I helped a franchise model but I was never a franchise or franchisee I just coached in and help the franchisees start there get their businesses set up kind of similar to you but with no real franchise tax. Experience anyways, regardless, is that what I found when I’ve coached and trained business owners and a lot of startups over the years is where the entrepreneurs, innovators lack is their ability to build systems like this systems slps and really what a real business is, it’s a business system. And we as owners own the system or the business and maybe we’re employed by the business and the bit in, in, you know, in business operators, we operate the business system. So that tends to be a big when I found like it just a big point of contention or place where the business owners never quite get it together. So just out selling and selling and selling and making offers and fulfilling offers without any real systems. So that would be a real benefit of a franchise is that mostly what a franchise is? It’s a business system. So the business in the box is already built and you bring your unique abilities, your talents, your entrepreneurial mindset, your kind of risk tolerance, you know, whatever that is to the equation.

Erik Van Horn [9:55]
That’s that really is at the end of the day and a lot of franchise ORS when you’re going through this sales process they’re going to tell you like they have proprietary this or you know, this is the secret and whatever. And some of them do have some of that some of them have some a unique patent or a unique selling proposition of some sort. But at the end of the day, that’s not going to make you a great business owner. And that and I think the best franchise ORS have the best systems. I think they have mindsets at the franchisor level of not trying to make more money at the franchisor level, but how do I help my franchisees make more money, they have a mindset of how what can I do at scale as a franchise or that my franchisees don’t have to do individually themselves. So the franchisees can focus on the things that they need to focus on. And the franchisor provides them the systems and the processes to do all of this stuff that they should be doing effectively. And not only that, but the franchisor should be learning from all of the franchisees on best practices. So it’s not just a franchise org, giving the best systems and processes they Start out with that. But then they learn what’s working, what’s shifting how they’re pivoting, and then they bring that and expand that system might as well. So the best franchise ORS listen to their franchisees and help the entire base get better through systems and processes. But yeah, that’s it, I mean, the end of the day that and that combined with some grid and and some of the, you know, people’s unique skills, that’s what makes the great franchisees the great ones

Krisstina Wise [11:27]
I was thinking of like, you know, we’re in this COVID time, maybe incomes have gone down or maybe business as usual is taken a dive and and kind of grind, tired of the grind or whatever the case is, wherever anybody might be just brand new, looking for new opportunities or looking for something different. What would be the pros and cons of looking at or choosing a franchise model over I want to go build my own business.

Erik Van Horn [11:54]
There’s nothing but pros. No, I’m kidding. I like I can’t stand it when people Selling franchises, it’s always the best time to buy a franchise you know, in the middle of COVID or whatever it is. So some of the I’ll give you some stories of some of the people that I’m talking to, and why they and they’re very contrasting people, some of them come to me and I help people buy franchises so people come to me and I help franchise ORS become franchise ORS and I help people that want to come out of corporate America or they own a business now and they want to get into a franchise I help them find really good franchises to buy. But so someone came to me recently and they owned a lot of Planet Fitness is so Planet Fitness is a franchise and it does very, very well and, and I and they were looking to expand into something else. And they and because they sold that they wanted something different. But they said you know what, I’m sitting on a pile of cash. I’m not in a hurry to get into anything. And they were looking at something that was fulfilling to them something that was really a passion project for them. Money was important, but that wasn’t the highest thing for them. And so their stance is I’m going to wait to see what happens. I’m going to see if we’re doing social distancing for for two months or 12 months or whatever that is, because they’re not in a hurry. I’ve got other people that came from the internet world, our world, you know, people that are that are helping people online and they have, they’re doing conferences and conventions and masterminds, and that’s how they make their money and they know that that has been impacted for who knows how long or how much but it’s been impacted and they are looking at diversification. So they want deals, they said, Eric, I’ll take I know there’s some fitness franchises that will be struggling and there will be fitness franchises that struggle through this any brick and mortar is they may have they will have some struggles just how much and so they are looking for deals. And they said I will take a deal pennies on the dollar to help somebody exit and I will I will hold that and I will take the risk of holding that for however long and then I will sell that to private equity at some point and that’s happening right now private equity is buying out or was buying out franchisees large franchisee groups. So that’s another one and then I’ve had somebody else then they are in fitness right now or they’re in the beauty space, whether they’re franchisees or not I’ve been working with both and they want to get out of brick and mortar into like the ugly service based businesses think hv AC plumbing, I just talked to a plumber that is a franchisee of a plumbing company. And he bought it two years ago and I said, Well, how did it go? And he’s like, you know, I said, What were your expectations and where they met. He’s he said, I was expecting to do X amount based on what I was thinking that from the franchise ORS expectations that were set for me. He’s like, we did way better than that. And then I set these expectations for me in training. 20 and we’re already exceeding that by far. So he’s in the service space needed businesses right now that were never interesting to people. You know, they all wanted fitness and cool things like that. But now these service based businesses are super interesting to people because they’re in need. And I think it’s, they’re really interesting to people that want to diversify. That’s the that is the, one of the bigger things or they’re coming at it from corporate America. And they they don’t want to do the grind and they’re okay working blue collar employees.

Krisstina Wise [15:35]
And it’s like, why why would when? How would why would one choose not to go franchise versus just let me bootstrap my business or start my own business.

Erik Van Horn [15:46]
Sometimes people are too entrepreneurial, or they think they’re too entrepreneurial. So and that’s both. So I’ll kind of explain the difference between those two. If you’re to entrepreneur, let me back up. It like I’m an entrepreneur. I like to build Things I like to grow things I like franchising as the way to do that. Because I can get into a franchise and they train my employees, they train my team members, and they do a lot of it. So I like to be more of the investor into the business versus the principal of the business, the person that’s the entrepreneur in the business. So from an investor standpoint, I don’t care if it’s a mom and pop business or a franchise business. So I, as an investor, I like franchise businesses, because it’s already figured out or it should be figured out. But some people are too entrepreneurial. They don’t want to be the investor, they want to be the person that is making the decisions. They want to be the head person, they want to be the one that’s innovating in the business or can make different pivots in the business as they want to. In a franchise system. You’re limited on some of that. So you want to be the person that’s calling the shots like that. franchising is probably not for you. So that’s the entrepreneur that wants to get focused on their business and be the main person in that business me as an investor I don’t care about that I want the person the person leading the business to just make the business successful. And so that is the negative from that standpoint I think the negative of what other negatives are you think and what what the reframe that question for me so I want to get it

Krisstina Wise [17:27]
mentioned one was a little bit of the limitations and, and those that I know own franchises, they’re really great operators, they can just operate the system, some work efficiencies and really just nail down those slps and, and they love the operational aspect. It’s been a principal of a really working system. And you know, so they are the operators of something versus trying to build you know, build something which tends to be a different type of, of public interest. narky well, another question I would ask you are what type of capital requirements are required? Meaning could that be could that be just the cost of entry might be?

Erik Van Horn [18:11]
That’s all over the board. I think the people that see the value in in the systems are going to pay more for that the cost can be anywhere between on the low end 100,000 hundred 50,000 to you know, we paid more than a million dollars a store to open up our solo salon studios. I owned 12 Solas solo salon studios in Orange County, and each one was about a million dollars to operate. Now here’s here’s like, one of the negatives. Could we have done the salon suites without, without sola, we absolutely could have we would have we would have learned some very expensive lessons. And so we were very happy with the franchisor because they told us things that saved us money in the process. Have the build out. And so they didn’t have a proprietary anything. But what they had is experience and they’ve lost money before before. And they saved us money. I mean, we I think one of our first builds, we saved 100 grand because they caught something that we were about ready to do. And then like, you guys don’t want to do that, make sure you get the landlord to put this language into the lease. So you don’t have to, you know, makes the same mistake that we made two years ago. So it saved us, I think about six figures in that. So sometimes it’s not even just like they’re making you more money or the brand or whatever, but there’s things that they’ve learned along the way that can save you money. Now, after being in that system for two years. We wish we had never done it because we knew everything now, you know, we knew the playbook. We could have done it ourselves. But but then looking back, you know, we wouldn’t have been able to get to where we were without that. The other interesting thing on the pro side is you we sold to the private equity company that bought the corporate the corporate friendly ties or so, there’s some unique things that you can do when when an exit does come because there’s a built in built in buyer with neighboring franchisees or property, you know, certain private equity. So that’s another one of the advantage. I think one of the biggest disadvantages to some of that is just, you’re being told what to do. You got, you have to follow a system and the best people added our system followers, and I’m not the best system follower there is. And that’s why I have to put people in place that are good system followers. And so again, if you’re going to be the person running the business, and you’re going to buck the system all the time, you probably shouldn’t go franchising, but if you at the end of the day, I don’t want to be the guy doing all that I want to be the guy that has people doing stuff for me, so I can go scale other things. And they have to be system followers, your employees, at the end of the day, have to be system followers and do what you say. But anyway, there’s those are some advantages and disadvantages. Some more

Krisstina Wise [21:01]
Um, if you’re looking at options between franchises some of them have pretty tight restrictions as far as regions or how many what can be too close to someone and and I’ve had friends that have bought into a franchise and they were really disillusion because or the opposite that the franchisor sold another the same thing like two blocks away or something so now they’re competing really with them as their own brand and a different owner. So what is your advice for if you’re looking at franchises different questions or things you would want to consider?

Erik Van Horn [21:32]
Yeah, that’s a good point because that absolutely does happen and that’s the difference between bad franchise doors and good franchise ORS. And so to get to your question to find out if it’s a good franchise or or bad franchise or, or even just has good systems, you want to, you want to ask the franchisees these questions. You the franchisor is selling you you’re going to be here things from the franchise or that is part of the sales process and what that you just need to recognize it for what it is. And it’s not always just them selling you, but you but but you need to sell them too. So don’t forget that you are selling each other. So with that, just recognize that the franchisor we’re selling them themselves, so you want to buy it, but they’re also watching to make sure that you’re going to be a good fit for their system. So that make no mistake about that. But then you need to validate what they’re selling you is it is there any substance behind it? And the way that you do that is talking to franchisees, you you know, you don’t in any franchise system, I think there’s the the third of franchisees that are just they’re horrible, they probably never should have been a franchisee they’re the bottom performers. They’re never going to be happy and they just shouldn’t be franchisees. Then there’s the average performers. That’s the middle third and you And then there’s the top third the top performers, and they’re always going to be top performers, they’re probably going to be top performers. In any system, whatever they do, they’re going to be top performers, because that’s who they are. So as you are talking to franchisees, it’s important to know who you’re talking to. So you have a grid to, to filter their comments. And example, if you’re talking to a, it’s hard to ask them about if you’re a top performer or not, they’ll probably tell you so you just need to figure that out. Are they top performers, so you know who you’re talking to? And then ask them broad questions. You just can’t get into it right away. How much money did you make last last week or last month or last year because they don’t know you from Adam. So just talk about the franchise or you should have had a conversation with them about like the key numbers that the KPIs and things that they that they measure in the business, whether it’s a number of customers, average value of the customer, whatever it is, that’s what you start to talk to the franchisees about. Make sure that that is all lining up with the expectations that you’ve been given. And then then to dig deeper, ask the franchisees questions not directed at them, but ask them hey, what are the top performers are, you know, are they kind of doing this? middle performers doing that bottom performers this that way they don’t have it’s not an invasive personal question to them, and you’ll start to see them start opening up or you’ll see the ones that start to open up where you can do a little did a little bit deeper into into them, but franchisees, Christina, they’re the best the best place to get accurate information. You just need to know who you’re talking to, though.

Krisstina Wise [24:37]
He makes a good point there. It’s just remember that it’s a sales process and the pitch is probably going to sound really great. And, you know, in any sales process, it’s listening and then just validating like, okay, let’s see if these numbers are real and, and what they’re promising is real and the performance is measured against those that are actually performing according to those set promises. And yeah, just do your homework. Yeah. If what would be some examples of maybe franchises that people wouldn’t even know their franchises different brands that are maybe out there?

Erik Van Horn [25:12]
I think like the there’s some like unique ones out there. Like sola sola salon studios. Are you familiar with who sola is? Or the Salon Suite concept?

Krisstina Wise [25:23]
Oh, it’s funny you say that? Because when you said so I’m like, Oh, I just saw so long ago up in Austin not too long ago. And I thought it looked really pretty. And I thought, Wow, those owners did a good job with that location. So now it’s like, Oh, that makes more sense. In a way. Yeah.

Erik Van Horn [25:37]
That’s a franchise and that is because a lot of people think food, right. When you think of a franchise, people go to subway, or Jimmy John’s, or you know, all of those or chick fil a, which is really not a franchise, but they go to all of those types of franchises. And that’s what they think of franchising most of the time. Now, there’s brands out there and I’ll just use solar as an example and we can talk a little bit more More about that but the folks that started sola they were in the mobile home park business for the longest time. And then one of them had experience in franchising before that. So they had this idea that like, why don’t we just, you know, have have a big building with like 7000 square feet and, and chop it up into 100 square foot sections that we can lease out to salon professionals. So it’s like office suites for salon professionals, estheticians massage therapists, nail techs, you name it, if you find them in a salon or the beauty world, they can rent us their own spot and sola. And that business really isn’t the beauty business as an owner. I wasn’t in the beauty business. I was in the real estate leasing business. And I was in the business of helping mostly women become successful entrepreneurs because where the customers were coming from, was they were let’s say they were cutting hair. They were at, you know, whatever salon it was. And they had a choice either to keep doing that working for somebody, or they could go out on their own. And if they were to go out on their own there before solo or the salon suites, they would have to go find a lease, negotiate that lease, get equipment, paint it, refurbish it, and then sign a long term, probably five, maybe 10 year lease on that three years, probably at the at the earliest. And then they were on the hook for all of that. And then salon suites came in, and they they basically said 400 square feet, we will build it out for you. We’ll put all the equipment in there for you. And now you own your business and you can you You are your own business owner now and it’s an easy transition into business ownership for them. So there was a need for that in the salon space. And that’s what sola filled. A lot of people you know, they would never they would never think of a business like that. And this was now A lot more common back, you know, 10 years ago when we first started almost 10 years ago, it was very uncommon back then.

Krisstina Wise [28:08]
So that’s a really good example let’s use that one of Okay, I cut hair I was working at some I was working for another owner and then I want to go out my own and I come across the sola what what would it what would the conversation sound like look like and walk me through how much money I would need and just what some of the terms might look like and ultimately what maybe I could expect is bottom line. So this is

Erik Van Horn [28:33]
a real soft sell. You know, some franchises are hard sales and you know, at the consumer level, this is a really soft sell. Because you got to know your customer and and in this space, by the way this to back up a little bit. One thing that’s unique about it, you really need one person working for a handful of these studios, so there’s not we had 12 Studios, and I think we had six full time employees. So it was just a great business from that standpoint. But back Your question, someone would come in. And usually there’s something that they’re running from or running to, to make them want to transition. And in the beauty space, if you ever talk to your hairstylist, they will validate this without a doubt. But it’s a disaster out there. It’s like, it’s a, it’s the Wild West, it’s they don’t like this. It’s caddy. If there’s gossip, it’s just it’s just an absolute disaster they hate, they hate a lot of things about where they are. Eventually, they get to that point in most places. And so they and now they have a book of business because they’ve been doing it for a while. So they have their own following. And, and they look at sola but the initial call comes in, like, you know, I’m interested. And then we call them and we don’t ask and I’m not in the business anymore. So I’m kind of talking like I am I sold the business at a nice eight figure exit about a year ago, but but the call would come in, and we would not ask their name, we would not ask where they work, we would not ask anything about them. Because if it ever got back to their, where they were working, it’s bit I’ve seen it, they’ve had that person that made that call the salon owner found out their stuff was on the curb, like just done. And, and so that is common in the beauty space, it’s very difficult like that. So we had a treat, we just did, like I said, it was a real soft sell. And so eventually they would come in and they would, we would just give them a tour. And we would let the let the building and there and speak for itself. And we’d show it to them, they would see it, they would envision themselves in there. And then we’d make it very easy for them to transition, we give them a bunch of product that they could have, we would paint the room for them. So they could just all of a sudden go out of where they were into the new into the new spot. And then they can now make money off of all the product they sell. And they could and and with all the technology, you know, they’re all making their own appointments anyway, so it was is a really easy transition. So they could go from, I think we were charging a few hundred dollars a week and they’re used to paying by the week, we pay, we would charge a few hundred dollars by the week for an under month a month contracts. So we wanted them to be there. We didn’t want to make them stay there. And there were some that were under one year contracts. But that’s besides the point they they wanted to get to a good place where they could make more money, be happier, create their own schedule and be a business owner. And that’s what we provided for them and their businesses exploded and some of them have gone on to start their own salons because that’s what they wanted. And I know franchise owners that support that there’s like a celebration when they leave to go do their own thing because that’s the kind of business that you want to be known for. So it gives you a little story there.

Krisstina Wise [31:49]
I love that. Thank you and what would be the capital requirement to say to start is there one or is it just you start paying monthly or in from

Erik Van Horn [31:59]
franchisees standpoint that is it’s over well over a million dollars now to open up one.

Krisstina Wise [32:07]
Tiffany per franchise What What about a be a saloon on so I’m the I’m the so you’re saying okay if I want to open a soulless suite it’s probably going to be a million dollars to own that franchise. Gotcha. Yep. And then for the salon rent or whatever they are so so that’s

Erik Van Horn [32:27]
just a couple hundred dollars a month a week. Yeah, so it’s super easy for them to get into it. But then a lot of the a lot of these other franchise, there’s some unique ones out there that I work with now that are in, you know, in the, you know, half a million dollar range, but that’s a lot of its equipment, and they’re buying equipment. And some people are buying those because of the section 179 in the tax code where they can write off a lot of this stuff. And there’s unique and some of these have unique, unique aspects of the business. That that the The barrier to entry is is a equipment and so not a lot of people do it and there’s barrier to entry of having certain requirements or your employees have to be have certain certificates to be able to work in different things. So some people like those high barrier to entry type businesses and others in the paint. I mean, there’s a lot of franchises that are in the painting space that paint houses, but you’re just given the playbook on that. I don’t do you know Cameron Harold? Yeah, so Cameron, he got his start in the painting business and then went on to one 800 got junk. And, and I’ve had Brian Scudamore on my podcast. And, you know, it’s just amazing how, how well some of those businesses actually do but the barriers to entry are really low there. So those ones you need to have a solid system and Brian with 100 got junk has just one of the you know, Best Places to Work and, and Cameron was, you know, helpful in making that happen and it’s and it’s continued to this day. It’s one of the best boat one of the best places to work. One 800 got junk?

Krisstina Wise [34:02]
And how does it work with with the business model as far as I mean, I believe the business model then from the franchise or sand standpoint would be you collect some capital upfront to buy really the rights and then royalties and then it’d be royalties paid so it’s capital out from the franchisee, and then royalties paying in for the use of the IP how does how did what is the economics of how these models work?

Erik Van Horn [34:27]
So from the franchisee standpoint, they’re paying, they’re paying an upfront franchise fee, and they’re paying monthly royalties. And in reality, in a, in a, in a service based business, the franchisee can start having revenue come in right away because they leave training they pay their franchise fee, they they start generating revenue right away as soon as they get home and hit the ground running because they don’t need an office some of its home based and and, and so that’s great for both the franchisees And the franchisor. And let’s use like a gym concept or the beauty concept for the pay franchise fee. And now the franchisor has to do a lot of support. And this is what a lot of franchisees don’t see. the franchisor is spending money and time helping that franchisee get opened probably six to 12 months later. And so they’ve spent all this upfront time getting them ready and getting them open, and they’re not making any money until they do get open and that’s probably 12 months from the time that they signed the franchise agreement so I so that’s difficult for the franchise or when they’re when they’re early on, but once that person is opening up their second location or the third or fourth or 12th they don’t need much help from the franchise or so that’s really when the franchisor starts making good money from that franchisee is once they open up those other ones without a lot of the franchise or resources, the franchise or makes money from the royalties so those royalties start coming in. And that’s a big line item on their pain. Now they make money and let’s say there’s some suppliers that they were able to buy it they were able to get a certain product or something added bulk discount because they have so much, they’re going to probably make some some margin on some of that and hopefully they pass on some of that margin to the franchisee. The best models pass on some savings to the franchisee, and the franchise ORS need to make money even like we’re in the middle of COVID right now their franchise ORS that are shut down our franchisees that are shut down some of these franchise ORS. Have you elected to turn off their franchisees royalties? And I think I I’m not involved with that right now, but I would rather pay my royalties if I have income coming in. I would want to pay my royalties to the franchisor so they could keep staff paid, they can keep supporting me and I’ve talked to franchise ORS that have done both and I and and the franchise, the needs to make money it needs to be a fair deal for both sides and, and part of the agreement is to pay your royalties and I know one of the best franchise ORS and he’s like, I’d had a call call with him, he’s got, I think four to 600 locations of a fitness brand. He’s like I had to keep I have not laid off one person through COVID I’ve not done that once and this is and I told the franchisees you need to pay royalties, and this is what we’re going to do for you. And then we’re just adding more value helping the franchisees so franchise ORS you know, they make money different ways and I think as a franchisee you look at the franchise owner like gosh, they’re just making so much money and they’re not doing anything for me anymore, but that you want your franchise or to make money so they can support you like that at the end of the day. They need to make money different ways as long as it doesn’t hurt you as a franchisee let them make money.

Krisstina Wise [37:54]
Absolutely, absolutely. Is there more or less than average. I know. It’s I’m sure it’s all over the map, but it’s a really kind of a rule of thumb a benchmark an average of what a typical franchise would make, you know, maybe if it’s like it’s 100,000 a year so you can make a million a year if he owned 1010 franchises or is there any Is there anything like that? Or is it just all over the board based on the type of franchise?

Erik Van Horn [38:22]
Well, let me give you a very non helpful range. So there I mean, you can lose money in any business you can lose money so that’s the you know, that’s the down that’s the downside. You can lose money talking to people in service based business today that are making really good money and it’s and that’s so it’s hard to answer that because it’s relative and it’s it’s dependent on the brand and the industry, and how big you are and how many you buy and then I was talking to somebody else in a in a large fitness franchise or and they were and I don’t work with this particular one decided Just make that clear as someone that I don’t work with, but this is just anecdotal information, they have about a dozen locations. And they’re going to net about eight to $9 million out of that. And I don’t I don’t own this one. I have friends that own it. I don’t work with it. But you know, and that’s on that. I would say it’s a really good really good franchise. And I know other ones that they say, Eric, the underperformers are making 200 to 250 and the top performers are making 600,000. And again, I don’t work with that one either. But that gives you just some type of you know, going from nothing, like losing money to that kind of money and and there’s just different skill sets that go involved with it and different risk and whatnot. I think that’s, you know, I think just in business in general, the risk factor, just being a business owner, especially, you know, all of those brick and mortars right now that are making that kind of money, you hear nine $9 million off of, you know, 1012 million Unlike that’s a no brainer, but they’re sitting with the, you know, members not coming in right now and rent to pay and guarantees on all of that stuff. So, you know, that’s, that’s the downside of a lot of this stuff. And I think that’s where some people that have expanded very rapidly whether they’re mom and pops or franchises, you’ve expanded too rapidly in the last year and you’re highly leveraged, you’re, you’re in a difficult position. So I think there’s going to be a lot of interesting acquisitions coming up, you know, just in general with brick and mortar.

Krisstina Wise [40:37]
Oh, what what is your real role now? Are you basically a franchise coach? So if somebody’s listening and says, you know, I’m really interested in buying a franchise right now, do they call Eric or what do you recommend?

Erik Van Horn [40:48]
Yes, go to franchise secrets.com and that’s where that’s where you can get in touch with me. If you are looking to buy a franchise and you just want some honest feedback, the thing that makes Is I’m probably one of the most authentic honest guys out there that I don’t believe franchising is for everybody. It’s been incredible to me and my family. But But I haven’t done everything perfectly either. And I’ve made mistakes, and I have some, you know, bruises to show for it. But, but I probably know more than, than then a lot of people out there, and I’ll be very, very straight with you on that. So if you are looking at buying a franchise, whether I work with them or not, I could probably help put you in touch with the right people. And then I’m helping people that have really strong businesses that are non franchise, but they’re thinking I want to scale that thing, and I want to go regional or nationwide. And the dilemma is, do I turn it into a franchise? Or do I do do I expand it myself? Or do I just keep what I have? And those are really good, good questions. And I’d love to have conversations with people like that. And again, I will probably try to talk people out of franchising that just to give them the real story on what it’s like and you’re, you know, long longer in your business anymore. You are in the business of helping other people get into your business as a franchise or, but sometimes Christina, the people that want to expand and grow, they just want a piece of the upside. And one of the things that I do is I’ll help brands grow and I’ll take the majority equity stake in the franchise company while they keep their original company. And they can participate in the upside nationwide expansion with equity, but they don’t have to be involved with it from the franchisor side of things. So there’s a lot of different options, but anyone that’s interested in talking about franchising, franchising secrets is probably the best place to reach me and I’m starting to coach people in a mastermind that are franchisees as well.

Krisstina Wise [42:44]
Awesome. Well, thank you. Well, just a few closing questions that I like to complete with so everybody can even get to know you a little bit better and just what a what a good guy you are. So the first question is, if you said Christina, this is Eric speaking, Christina. If you really, really knew me, you would know that.

Erik Van Horn [43:03]
Christina, if you really really knew me, you would know that I am a family man first, like my family takes priority over everything for me. And I’ve got my wife and three daughters, younger daughters, and I placed them the family as a priority marriage as a priority being a father as a priority. And that is and that’s who I am. I’m very authentic. And what you see is what you get my strengths and my weaknesses. So I think that’s what you really got to know me and and yeah, that that’s probably it and I’m not perfect with that too. Like that’s what i what i said like family man first. That’s what I strive for. I’m definitely have not arrived with that yet.

Krisstina Wise [43:52]
That follow up question is, give me a brag moment when something you’re really proud of.

Erik Van Horn [43:58]
Boy, I am I’m really not That good at bragging on myself. Maybe that’s a brag in itself. That’s my that’s my brag I’m not bragging on myself. Um, gosh, that now you stumped me.

I don’t even I don’t even know I don’t even

Krisstina Wise [44:15]
can’t reach in, which is something that you say, you know, if I’m really honest, I’m really proud of x.

Erik Van Horn [44:23]
If I’m really honest, I’m proud of

I’m really proud of this goes back to my family. And you know, I’m just proud of my family, proud of my wife. I’m proud of just the the culture that we’ve created in our family. I’m proud of me not caring what people think about me, that’s probably yet and that’s something that is come over time. Because it’s, I guess, fear of man fear of what people think is, is is normal, at least it was for me, and I’ve gotten to the point where I care less and less of what people think and I make decisions, not based on what people are going to say or people are going to think but what’s best for me and my family

Unknown Speaker [45:07]
wasn’t so hard. No, it wasn’t.

Krisstina Wise [45:12]
All right. And one final question is, I like to complete with a little myth busting. Is there one big fat lie out there that you believe isn’t true that you’d like to call out?

Erik Van Horn [45:24]
The big fat lie

the people on the left aren’t aren’t right and the people on the right aren’t right is like, everyone thinks they’re right. So right with everything and then that that that does that bothers me. I guess I’m, I can I like to look at things from both sides. And that’s not really a myth out there. But But yeah, that’s probably one of my my pet peeves is this, watching people that just don’t take the time to look at something from somebody else’s perspective and Because they are so interest that they just want to prove their point and, and I’m finding that people haven’t points and I have my beliefs and, and and whatnot but you’ve you’re not looking at things from somebody else’s perspective then you’re not really, really growing

Krisstina Wise [46:16]
right on. Well, Eric, thank you so much for your time and all all the expertise and genius and experience that you’ve shared with us and we’ll make it really easy for anybody to find you that is intrigued by the franchise idea.

Erik Van Horn [46:29]
This was a lot of fun. Thank you.

Krisstina Wise [46:35]
If you’re inspired by today’s show, and you’re the kind of person who likes to help others, there are some easy ways that you can help me first, please subscribe to the wealthy, wealthy podcast by doing so. It helps both of us. You’ll never miss an episode and it helps me and my ratings. And if you’re able to leave a review, hopefully, five stars even better. Finally, if you think your friends and family would enjoy the show I invite you to share the wealthy wellthy podcast with everyone you know. If you have any questions I’m here you can email me at support at wealthy, wealthy calm, and I may even use your question or suggestion for a future podcast episode. Also, if you want to be motivated and inspired more regularly connect with me on Instagram or LinkedIn at Christina wise, that’s k ri es es TINAWIS I believe we are all on this journey together towards finding our sovereignty and freedom. And I’d love to be part of your journey. I’d love to help you and especially on the financial side. So learn more at sovereignty Academy calm as always, thank you so much for listening and being part of the wealthy, wealthy community.