--:-- Ryan Hanley: The part that people don't understand about franchising... There's the power washing business, and then there's the franchise business. Those are two completely separate businesses. They take different skill sets, different capital requirements, different infrastructure. Everything is different. I don't pretend to know how to own and operate a power washing business that I've never learned anything about, or an HVAC business I've never learned anything about. What I do know is how to create a franchise business that can replicate any other business that has the right systems and processes in it.
--:-- Aaron Harper: Hey, I want you to keep running your great business. And your business is so great that I want to put it in every single market across the country and potentially across the world.
--:-- Ryan Hanley: Before we get into some of the parts that I really want to examine today, for my audience's information, just give them the quick 10 cent tour. We don't have to go back to childhood or anything, but just give them some relevant highlights. Then I want to get into the meat and potatoes here with you.
--:-- Aaron Harper: Sure. So I've been in franchising for years. People often don't know what franchising is, but franchising is this small industry that leads a small group of people, it seems, that lead a large industry of franchise brands, not just fast food. That's only about 50% of franchises out there. I specialize in home and commercial service franchises, and have had the opportunity to help build three home and commercial service franchises to become the largest brand in the world in their respective industries.
--:-- Aaron Harper: So a carpet and floor cleaning brand that we helped build to about 3,000 units, 55 countries. Then a drywall repair brand that I built from 98 units to 323 units nationwide in about two years. Then I decided to venture out on my own instead of working for other people and making them a bunch of money. I was like, "Wait, I can do this on my own." I looked at a bunch of different brands to franchise that were non-franchise, that had good bones that I could replicate.
--:-- Aaron Harper: I met the founders of Rolling Suds in September of 2022, and it was the best business that I looked at. A family business started in 1990, focuses on residential and commercial power washing and specifically those services. I knew I could replicate it in any market. So I raised capital, I acquired the brand in January of '23, we took the brand to market that year. Since then, we've grown to 326 units operating in 35 states with 115 trucks on the road.
--:-- Ryan Hanley: What I love about the space that you're attacking specifically — and I have so many questions around franchising — but I love that you're attacking these physical businesses. With everything that's coming with AI, you look at McDonald's. That business is changing rapidly. I was in one the other day that was brand new, or looked brand new, maybe it was a full remodel. There was only one person in back handling the food, and all the orders were being taken by a machine. Instead of six people, there's only one.
--:-- Ryan Hanley: But with what you're describing, these are businesses that will not be replaced by AI. For the foreseeable future, hopefully in our lifetime, AI is not repairing drywall. It's not power washing the outside of buildings. It's not doing those things. It's not carpet cleaning. Was that part of your methodology? Was that something you considered when you went into the space?
--:-- Aaron Harper: Yeah. I specifically like blue collar businesses because they're need-based. They'll happen no matter what. Technology will only continue to get more advanced. My thought was, "This is the space I've been in, and it's even more of a safe space to be in now than it was when I first started," due to a lot of those technical changes. When I was looking at different brands, it was only service. It wasn't food or health and wellness or beauty. It was just services around the home.
--:-- Ryan Hanley: When you say "looking at brands," I'm very interested in that. When I think franchise, I think most people listening think, "I'm considering whether I want to buy into a franchise." But where you have expertise that is so interesting — and this is where I want to dig in — is you found a business that wasn't franchised, and then you packaged it up into a franchise that now has 326 units. So when you're going out, one, why start your own franchise that way versus just finding something you thought you could own a geographical region for? Something that was already together? And how do you go about finding that if someone listening is super entrepreneurial and wants to follow your path? What are you actually looking for when you dig into a business like that?
--:-- Aaron Harper: Yeah. I had a very specific methodology for how I approached the search. I said, "Alright, I'm going to get a checklist of things that I'm looking for in a business." Some of those things were unskilled labor, high margins for franchisees so there was still enough margin for a franchisor to take a royalty and a franchisee to still make money. There was a whole list: recession resistant, large total addressable market, both residential and commercial customers.
--:-- Aaron Harper: Once I had that list, I had the framework in which I could go look at businesses. It was a less emotional decision because it was, "Okay, how many checkboxes does it check?" I established my list based upon recent acquisitions in the franchise space from large capital companies. I went and called large companies that I knew acquired these types of businesses and said, "What do you look for when you are acquiring a three, five, six, 7,000 unit franchise system?" Whatever they told me, I included in my list. So now I had my rubric.
--:-- Aaron Harper: Then I basically let everyone that I knew know that I'm looking for this type of business — service-based, blah, blah. My goal was to have that business owner continue to run their great business while I create a different business. This is the part that people don't understand about franchising. There's the power washing business and then there's the franchise business. Those are two completely separate businesses. They take different skill sets, different capital requirements, different infrastructure. Everything is different.
--:-- Aaron Harper: I don't pretend to know how to own and operate a power washing business that I've never learned anything about, or an HVAC business I've never learned anything about. What I do know is how to create a franchise business that can replicate any other business that has the right systems and processes in it. It was very specific: "Hey, I want you to actually keep running your great business. And your business is so great that I want to put it in every single market across the country and potentially across the world."
--:-- Aaron Harper: That business is largely my business. I'm the majority shareholder and lead investor in this business that I own. And they keep owning 100% of their business, which gives them upside in the new business that they didn't have before.
--:-- Aaron Harper: To answer your second question of why wouldn't I just go buy a geographic location and own and operate a brand in Nashville, open a bunch of locations... It's not my skillset. Running corporate owned units of a power washing business is significantly different than running a franchise. A franchisor is a coach, a mentor, has legal knowledge of how to structure these things. They're oftentimes a therapist, a marriage counselor. There are a bunch of different roles you would wear as a franchisor in any given day. Those are typically much different hats than you would wear as the owner and operator of a local service business.
--:-- Ryan Hanley: One of the things you said when you were putting your framework together — and the framework itself allowed you to be less emotional in decision-making. Why is that important, and how does a framework help you do that?
--:-- Aaron Harper: Yeah. I always tell anyone who's looking at buying a business that they should have a checklist. Think about it like this: if you're going to go buy a house, you're going to know you want a yard in the backyard. You're going to know you want to be in this type of neighborhood with this type of school district. You want this range of square footage, this many rooms, this many bathrooms. You have your checklist. If you didn't have that, you're just like, "Hey, realtor, show me houses." And they're like, "What kind of houses?"
--:-- Aaron Harper: With franchising, we don't bring in people who have power washing experience. We bring in sophisticated people coming from a white collar background. They've maybe worked at a business where they've been an employee, or they've owned other successful businesses. Often it's their first business. I tell them, "You don't need to be passionate about the business. You need to make sure you feel comfortable doing the needs of the business."
--:-- Aaron Harper: What is the actual means of a power washing business? We're a B2B sales and marketing company that does power washing. We do 60-70% of our business commercial, which takes a longer sales cycle. It's being in your community, shaking hands, being the mayor of the town. That's a sales business. If you get into commercial cleaning or residential cleaning, it's a recruiting business. You're going to lose people and you need to keep recruiting. There's demand for cleaning, but you're going to lose people.
--:-- Aaron Harper: So it's like, what is the actual business doing? What do you like doing? What are you good at on a daily basis? That's how you become less emotional. "Do I want to do that thing? How many of the boxes does it check?" I know the business will be successful if it checks 70% or 80% of the boxes.
--:-- Ryan Hanley: I want to dig into this idea that you don't need to be passionate about the business. That feels very contrarian. I think most of the talking head people you'll see on Instagram say, "Find something you love to do. If you don't love to do it every day, you're not going to show up every day."
--:-- Ryan Hanley: I will tell you, as someone who has built their entire career inside the insurance industry, insurance is boring as hell. I am not passionate about insurance. I appreciate its value and what it does for the people who use it. I have an understanding and appreciation for it, but I'm not passionate about insurance. I don't wake up in the morning and go, "Geez, I hope Travelers has a new rate filing today that I can read. I can't wait for that."
--:-- Ryan Hanley: So how did you create this contrarian idea? And how do you break it down for people who are sitting there going, "Well, geez, Aaron, if I'm not passionate about it, how do I not get bored in 12 months or 24 months?"
--:-- Aaron Harper: Yeah. I think there's a difference between being passionate about owning a business and being passionate about the thing that you're doing in that business on a daily basis. I'm passionate about building wealth and providing value to my employees and the franchisees that join. That gives me joy. I'm passionate about that. But it doesn't matter if it was lawn care or power washing or roofing or whatever. Being excited about business doesn't necessarily need to be, "I'm going to be in senior care because I love working with my grandfather who died, blah, blah, blah." I think that can really get in the way of which business is going to make the most amount of money and whether I'll be successful at it on a daily basis.
--:-- Aaron Harper: The other thing is, when someone owns their first business, they're learning the game of business as much as they're learning whatever business they're in. Your first time owning a business doesn't need to be some passion project that's going to change the world or be Habitat for Humanity. You just need to learn how to operate a business. The more simple the business is, the fewer learning curves there will be in the other part, which is just learning how to be a business owner.
--:-- Aaron Harper: That's what we really try to help our franchisees understand. We can give you all the systems and tools you need to be successful, but you still have to have the stomach and the ability to go through the pains of being a business owner. It's going to be scary and terrifying, but once you get through that, you're going to be a stronger person on the other end. I don't think it's necessary to say, "I've got to believe in cleaning people's homes and making them feel better about their homes." Sure, that could be part of it, but how are you going to operate and successfully run a business?
--:-- Ryan Hanley: I think this is such an incredible point. We have never dug into this idea this deeply on the show. This is really exciting for me because I love when we get into stuff that I believe in, but we've never actually dove into it inside the insurance industry. I've talked about this a little bit where what I see when I'm working with a new insurance agency owner — I've worked with a lot of owners outside the industry now, but for a long time my primary experience working with business owners was with insurance agency owners.
--:-- Ryan Hanley: I got absolutely lambasted one time. This was about a decade ago, mid-20-teens. I was doing a keynote, and they wanted a Q&A portion. We get to the end and I get this question: "With everyone you've run into, what do you see as the defining characteristic between a successful agency and an unsuccessful agency, or a stagnant agency?" Most insurance agencies print money, but they either grow or stay stagnant. A failing insurance agency is really one that just isn't growing. It's a wonderful business model, incredibly hard, but wonderful.
--:-- Ryan Hanley: My answer was: there are insurance agency owners and there are insurance business owners. Those are two very different people. What I hear you saying — and I completely agree — is whoever is at the top of the pyramid, whoever the buck stops with, needs to be a business owner. When I see major problems in insurance, and I'm sure this is what you see in franchising, I see agency owners who still believe they're the best salesperson in the business or the best customer service person. They haven't relinquished the task of the business for the running of the business. Is that what you're saying?
--:-- Aaron Harper: Ultimately, if you start a business, your single goal is to hire great people that will build the business eventually without your direct involvement. Learning how to do that is harder than learning the insurance business. What a business owner has to do with their first business is learn how to run a power washing business successfully, and then how to be a business owner successfully. Those are two very different skill sets again.
--:-- Aaron Harper: What we try to help our franchise owners do is think about your business like an asset. You are creating an asset. If you don't want to create an asset, honestly, business ownership might not be the right thing. Just get a job, dude. You don't have to carry all the weight, the terrifying element of, "Is this going to work out or not? Everything's on the line." Just keep staying a job.
--:-- Aaron Harper: But if you're going to invest in a franchise and spend two, three, $400,000 getting into a brand, the idea is that you're buying into systems that you can execute on. Over time, they will help you remove yourself and create layers between you and the business. Where most business owners struggle is they don't let go of those things. They don't create the barriers because the risk associated with pre-investing in the business — hiring people before you need them, taking profit you don't even have yet and putting it back into the business to grow for where you're going to be two years from now versus right now — is scary. Most people don't have the risk tolerance necessary to do that.
--:-- Aaron Harper: It's evidenced by the fact that out of 100 people who start a business, nine of them will get to a million dollars in revenue. 9%. If you have a fast food restaurant, you're doing 11% margins. So now you have a business doing a million dollars with 11% margins. That's a little over a hundred grand in net profit. It's going to take significantly more capital investment than $111,000 to get that business to a million dollars in revenue because you need people, marketing, all these different things.
--:-- Aaron Harper: Then you've got to go from a million to three million, which is the death zone for any business. You don't have enough capital coming in from a profit standpoint to pay for the team necessary to get you to three to five million dollars. You're potentially raising capital, reinvesting, doing whatever it takes. This game of "How do I remove myself? How do I create barriers?" is hard enough. Trying to make the business so complex because you're passionate about it? Who cares? It's going to be so hard. You might as well put it on as close to easy mode as possible by picking a simple business that doesn't have a lot of complexities.
--:-- [Ryan Hanley delivers a sponsored segment for Go High Level.]
--:-- Ryan Hanley: What do you think it is from a psychology standpoint that so many business owners fight creating systems like this? I've done enough interviews, I'm sure you have too, with guys like yourself who see the world in systems. You see things happening and you think, "I think I see the system this person is using to get to this thing." The highly successful people — you will not meet a highly successful person who doesn't have many different systems they're using to automate activities. But that's a tiny little portion.
--:-- Ryan Hanley: Then you have all these other people, both owners and leaders, non-owners, etc., and they just fight and scrape and don't document anything and create from scratch every time. They sit there and buy workshop after workshop and $27 PDF after $27 PDF, and they never actually implement those systems. One, maybe break down why you see that happening, what the mental barrier is. And then how do you start to crack those people open and convince them that even very simple systems in some of the easier places can create massive lift in your day?
--:-- Ryan Hanley: The biggest thing for me when I started diving into systems in my business and my life was the amount of stress and anxiety that went away. All of a sudden, you're only anxious about the things you should actually be anxious about, not the hundred little tasks happening throughout the day.
--:-- Aaron Harper: Yeah. I think most business owners don't have the necessary foresight to create the systems. Think about the business owner who is the top salesperson at the insurance agency and also the agency owner. That person needs to sell all day long to get enough revenue to pay potential team members. For him to get out of that role, he's running the business in the morning and at night when it's not during business hours where he can be selling. That's a 16-hour day. And he doesn't even know what systems need to be created because maybe he himself in the sales process isn't using any systems. He's just using his personality to close deals.
--:-- Aaron Harper: I think the amount of work necessary is not necessarily an amount of work that everyone wants to do. I also think there's a lack of knowledge around what you need to build in order to not be doing this all day long. What you're talking about could be an ad for franchising because you don't have to do all of that. You can just say, "Tell me what I need to do to execute." You have the marketing vendors, the call center, the bookkeeping company, all your technology. All that stuff takes a lot of time and a lot of money to create. You're not going to do it as well as someone who's done it 326 times nationwide.
--:-- Aaron Harper: How do you remove these potential risky elements of owning a business? You either have to do them yourself, which means you have to have the intuition and foresight to create something meaningful that you can step away from. Or you buy into a franchise or a mastermind course where they tell you exactly how to do it. But then you have to have the humility to not be the person driving the business forward.
--:-- Aaron Harper: I'll give you a very clear example. I hired a professional CEO to run my company about two and a half, three months ago. I knew when launching this business that once we hit 300 units, I would not be the one to get us to 600 units. It's a different skillset. I am a founder that creates things from scratch. I'm a zero-to-one guy. A 300-to-600 guy who's systemizing a 300-unit franchise system that's going to have three to 500 trucks on the road within the next four to five years — that is a different human. If I didn't have the foresight to know that wasn't going to be me, my business would stall out. It wouldn't grow because it would be limited by my own belief that I'm the only person who can make it grow.
--:-- Aaron Harper: Another example: I needed to come in and help build a department out. Since he's taken over, I've said, "Okay, there's this department." He's asked me, "Let's build this out the right way." So I'm getting in this department. I'm doing the work in the business. I'm recording all of my calls. In the morning and at night, I'm pulling the transcripts from those calls. I'm creating scripting. I'm recruiting team members in the morning and at night. I'm making sure they have the scripting. Then I'm training them on how to do it. Then I'm qualifying and making sure they've done it. I know that in January, February, I won't be necessary in the business again. But that takes an incredible amount of foresight and an incredible amount of humility to say, "Yeah, my business doesn't need me, and I'm going to prove it."
--:-- Ryan Hanley: I love that. Humility to me is the key. I did an entire TEDx talk on ego, and I couldn't agree with you more. What I've seen over the course of my career is that the reason most businesses stagnate at best or fail at worst can ultimately be derived down to ego. You could say it's a market shift. You could say there's a million reasons that get categorized in McKinsey studies. But if you really dig all the way down, my personal experience has been ego is always the reason. Someone somewhere couldn't put their ego aside, made a decision, didn't make a decision, did something, didn't do something that ultimately led to the demise because they couldn't set aside their ego.
--:-- Ryan Hanley: It is literally a superpower to be able to be confident in yourself while being humble. We're not trained on this at all. There is no class you can take in school. There's no class you can take in college that trains you on how to be a confident, high agency, assertive person while still having the humility to say, "I don't need to do everything to own this business" or "I don't need to do everything to be the CEO."
--:-- Ryan Hanley: One of the things I talk to some of my coaching clients about is, "What's your job title?" They'll tell me what it is, and most often it's CEO or president or founder. I tell them, "That's a job. That's not an identity. That's a job. So what is the job of a CEO? Is the job of a CEO to do all the business development stuff?" Granted, there may be a season where you need to help, but what is the actual job function? If you're the best business development person, then you need to consider what you did: find someone who is the best CEO for the business, and then you go be the head of business development or the head of sales if that's what you love doing every day. It doesn't take away from your equity. It doesn't take away from your position on the board or whatever decision-making structures you have in place. But own the job that you're in.
--:-- Ryan Hanley: If you're trying to have that title that makes you feel good about yourself but then do all the work, you're not actually that thing. You're not actually a CEO. You're actually the head of customer service, or worse, you're just a customer service person because someone else is actually the head and just giving you service stuff to do. It's bananas.
--:-- Aaron Harper: I think just to put a recap on the psychology of why people don't do this — some of it is the pain we know. We would rather deal with the pain of the lack of systems that we already know than the possibility of putting this system in place and getting a new problem that I'm unaware of. The pain we know, we'd rather live with.
--:-- Ryan Hanley: So let's say someone's sitting out there. Let's start from scratch. Let's use me as an example. I'm at a point in my career where I have started thinking about, "Do I want to be in insurance forever?" I don't know that the answer is yes. I've been in it for a long time. I love it. I'll probably always have one foot there, but I'm very interested in other challenges, other businesses. I also have felt disconnected from my local community because for the last 15-plus years, my work has been national, not local. I haven't really done business in this area that I live in. Other than going to a few charity events, I don't do too much here from that standpoint.
--:-- Ryan Hanley: Let's say you have someone like me who feels fairly confident in running a business, but honestly, it might take me a day to figure out how to unscrew a light bulb. Zero handiness.
--:-- Ryan Hanley: Don't want to own a food business. If I were going to look at a franchise, I would probably want to go someplace in the direction that you're in. How should I start my journey? Deciding: do I own, do I start? How does this journey start for someone like me who's thinking, "I got 20 to 25 years of really solid, hardworking business years left. I'm considering franchising." How does that journey start for me?
--:-- Aaron Harper: Yeah, so I always say figure out what you're good at. It sounds like in insurance, as an insurance person, you're probably doing a lot of sales, I would imagine. So whatever you've been good at that people have paid you a salary to do for a long time is probably a good indication of whatever the function of the business is to get it going is what you're going to do first.
--:-- Aaron Harper: But I would tell you to identify a checklist of things you're looking for in a business. This is not a checklist of "oh, home services, wellness." It's: does it do well through recessions and why? Is it skilled or unskilled labor? And why would you go with one or the other? Think about it through that lens and get that checklist down.
--:-- Aaron Harper: Then, whether you want to start or buy really depends upon you. I think there's this mentality — and I think a lot of it's been put forth by influencers — that you can just go buy some existing business for zero dollars down that someone's just going to give to you right out the gate. You just step in, it's got $300,000 in cash flow, and all you have to do is reinvest that cash flow and build the business from a million to four million. I think it's a bit of a fallacy. Candidly, if someone's willing to give you their business for $0 down, then it really probably doesn't have a significant amount of value anyways.
--:-- Aaron Harper: What people don't understand is if they're buying someone else's business, they're buying that person's constraint. They have to learn how to figure out that business owner's constraint and also learn how to start a business at the same point. If the business owner, after owning it for 10 to 15 years, can't figure out the constraint — meaning getting it to the next level — what makes this first-time business owner think they're going to be able to figure out the constraint in a business they don't understand? And there are employees that have to go along with buying someone else's business. The seller can compete with you afterwards. They can take their brother-in-law from there. There are all these things that can go wrong.
--:-- Aaron Harper: Now, there's a lot of things that can go wrong in any business, even a franchise when you start one up. The thing I would recommend is that if you are going to invest in starting a business, find one that you're going to enjoy doing — meaning you're going to enjoy what the day-to-day is going to look like. If it's sales, in this case, that would make sense.
--:-- Aaron Harper: But also, think about the opportunity cost associated with starting something from scratch versus starting something with a franchise versus buying an existing business. Starting something from scratch is going to require a lot of innovation, a lot of luck, a lot of things have to go right, and obviously hard work. Starting a franchise means you have to find the right brand that you believe in. And you have to believe that brand has the ability to continue growing and create value nationally so that you can then focus on growing your local business. Figure out how many boxes a brand checks, which helps with that framework.
--:-- Aaron Harper: Or if it's an existing business, expect that you're going to spend 18 to 24 months of your life looking for an existing business to buy. That's just the reality. And it's getting more and more competitive now to buy an existing business than it's ever been. There are more buyers than there is supply of great businesses. Those are the things I would think through.
--:-- Aaron Harper: I think AI is a really good lens to look at things through. What is the business going to look like? "Oh, I'm going to go buy a marketing company. This marketing company is doing $1.2 million. So I'm going to buy it for a multiple of its 400 grand in cash flow." I think that maybe in two years that marketing company could be run with one employee and 16 ChatGPT agents doing things 24-7, not eight hours a day, like 24-7. So you have to really consider these things before you decide to make a life-changing decision and which bucket to go toward.
--:-- Aaron Harper: But I think starting with your skill sets — what someone's currently paying you to do — and then thinking through the lens of what kind of checkboxes you're looking for would probably be a good place to start.
--:-- Ryan Hanley: One of the concerns that comes to mind would be, let's say I'm looking at a carpet cleaning franchise. I'm saying, "Hey, I think this is going to continue to be an issue. People's lives are busier. Parents, especially two-income households, there's no stay-at-home person. Simple things like making sure the carpets are clean, making sure the drapes are clean — it's incredibly difficult to have the time." Okay. But I don't know that business at all. I know sales. I know how to run a business. I feel very confident in my ability to turn a profit out of a business and grow. But man, I don't know if my employees are doing a good job or not. How would someone like me who doesn't have an expertise in that thing, isn't necessarily passionate about the thing, but sees the value — how do I ensure quality? How do I feel confident that I have the right people doing a good job? How do I get past that hurdle?
--:-- Aaron Harper: It's systems. That's all you have to have — the systems in place to do quality control. You have to have the systems in place to recruit good team members. You have to have the systems in place to have a bench of potential other team members that are working part-time that you could put in full time when someone doesn't show up. And expect to turn over.
--:-- Aaron Harper: If we're talking specifics around franchising, a lot of this stuff should be created in terms of job postings and what you're talking about. What are they doing on a daily basis? SOPs. How are you checking up on them? What kind of quality control? Ideally, this should be created by a franchise brand.
--:-- Aaron Harper: But people — no matter what business you're in, it's a people business. People will always be your biggest problem, whether it's employees or bad customers. It's generally a people problem. Finding great people is the single biggest leverage thing you can do to build a business that doesn't need you. Finding great people and inspiring them to do great work. But it is still your job to inspire them to create great work. A CEO's job is to create a vision that's large enough for all of these other people who are going to help you grow that vision to fit their vision inside of.
--:-- Aaron Harper: When you start something from scratch, you are doing everything because the business needs you to. If you're coming in with venture capital or a product that you've got to build for two years and burn cash on — generally, a service business is going to require you to be the salesperson. With our model, they hire two people that are going to run the truck so that the business owner is focused on sales and revenue-generating activities on a daily basis, at least initially. But you're going to be working 18 hours a day.
--:-- Aaron Harper: I have conversations with some people that pop on my calendar. I don't know how they get on my calendar, but they'll be like, "Oh, I've got 15 hours a week and 250 grand. I want to put it towards a business." And I'm like, man, if I could run a business and build a $2 to $3 million business with 15 hours a week of a team member, I wouldn't franchise my business. I would just hire four or five team members and pay them 15 hours a week to do the work. It's crazy that people think they can create great businesses without actually putting everything they have on the line to make that work.
--:-- Aaron Harper: This person you're talking about — that's been in a company for X number of years, has an income and a mortgage and three kids and private school and car payments, making $225,000 a year — that is one of the hardest places to be as someone who wants to start a business. Because you have to be willing to forego all of that, put it all on the line, work harder than you've ever worked, have an almost unrealistic belief in your ability to execute, and then you have to wake up every single day not knowing it's going to work but work your life off like it's going to have to work. Meanwhile, you're going to have pressure from bills and your wife all of a sudden is changing her lifestyle. There are so many things you have to do to make it work.
--:-- Aaron Harper: But you get to a point where you're the chairman of the board of your own company and you can leave for four weeks and go to Michigan with your family and no one's calling you and the business is making money while you're existing. It is the greatest possible thing you can get to, but it's going to take really hard work to get there.
--:-- Ryan Hanley: Yeah. It's funny. You see a lot of stuff about golden handcuffs online. You see people talking about this. I've struggled with this at different points in my own career — do I start another business? Multiple exits, multiple businesses. I have this entrepreneurial spirit. There's also part of me that loves coaching and helping people. You get caught in this place where you get used to that lifestyle. You build a business to a certain level, you get used to a certain lifestyle. And now you're like, "Do I want to kick myself in the nuts again for another three years starting a business from scratch? Do I want to do that?" These are real questions.
--:-- Ryan Hanley: I think what isn't talked about enough, particularly on this topic, is what it almost goes back to — the ego issue. What do you actually want out of your life? Do you want to be a business owner? There is tremendous fulfillment, tremendous reward. Your brain is going to be popping all day — sometimes with good stuff, sometimes with bad stuff — but you're going to be engaged. If that's what you're looking for out of life, then starting a franchise or starting a business from scratch is a wonderful path to do that. But at the same time, you're not going to have the country club membership. Your kids probably aren't going to be able to go to private school or whatever luxury things you want out of your life.
--:-- Ryan Hanley: The flip side is if you're okay not being the shot caller necessarily, you can go get a nice corporate job, which can still be engaging and fulfilling. But yeah, you're going by someone's hours. You get to choose whatever you want to do. You have three weeks of vacation and that's what it is. But in exchange, you have these other lifestyle issues. I think too often we get caught in the ego of "I want to be a business owner. My two friends over there, they're business owners. People want to ask them questions and invite them to things. I want to be that." But they don't want to trade the lifestyle for what those guys had to do or those gals had to do in order to get to that position. No one talks about the 10 years it took for them to be in that position. That part of this conversation gets lost so often — what do you actually even want your life to be on a day-to-day basis? Because this decision dictates that, and there's no way around it.
--:-- Aaron Harper: Well, yeah. And these people — this is one of the biggest challenges that franchisors and franchising as an industry faces. These people you're talking about with the country club membership, with the three Escalades at their house, the kids in private school, the $400,000 a year salaried folks who have been in the same industry for 20 years and have built a great life — they're looking for ways to diversify because they've heard online that the richest people in the world have an average of seven streams of income. They're like, "Well, I've done stocks and I have some real estate holdings. So now I'm going to go franchise." They'll type "semi-passive franchise opportunities near me" into Google. All of these brands will pop up because these brands want to get more franchisees in.
--:-- Aaron Harper: But what ends up happening is they can't leave their job because they have $400,000 worth of expenses annually. So they come into a brand, they hire a manager — which, just to be clear, a manager is not a business owner. If the manager was a business owner, he wouldn't be a manager, he'd go start a business. Then they say, "Well, I can just do some business development, one to two hours a day." They invest $300,000 into a semi-passive franchise opportunity. And the franchisor, maybe through either ignorance or just downright lying, signs them up thinking they can be successful or telling them they can be successful.
--:-- Aaron Harper: Then you have a person who's in a worse situation than they were before because now they have to pay out of their $400,000 salary a manager and all of their normal expenses with the hopes that that manager is going to get them a return on their $300,000 investment. We've already talked about the math. A million dollar business on a 20% margin is $200,000. It's going to take a lot more than $200,000 to get to a million dollars. The likelihood that the first manager you hire — or really any manager you hire — is going to be able to take that business from zero to one with an $80,000 to $100,000 salary is just crazy to me.
--:-- Aaron Harper: Oftentimes this will happen where it's like, "Well, I can't leave my job." And it's like, well, then don't sign a 10-year franchise agreement that's going to obligate you to royalty minimums and opening schedules and capital capex expenses. But a lot of the franchisees that come into franchising are coming in under that guise and under that assumption. It's one of the biggest problems that we face as an industry.
--:-- Ryan Hanley: So you're one of the largest influencers. You have one of the largest platforms in the franchise space. I'm sure that a lot of people come to you with opportunities, ideas. I'm sure you are in the nexus of what's happening. When you look out over the space, what are you the most excited about? Is there a certain type of business? Is there a technology? Is there a concept? What's got you jacked up about the space in general?
--:-- Aaron Harper: Yeah. So I'm super excited about this next generation of franchisors and franchise professionals. I think in a lot of ways, since franchising started and was commercialized in the mid-50s and McDonald's became like, "Oh wow, this can really actually work as a business model" — what ends up happening is during that time you have people that are like, "Oh, this is a get rich quick scheme for me as a franchisor or franchisee." Over time, as a result of the way these things have been structured, you've had a lot of really big flops. You've had Quiznos. You've heard about Subway. Everyone hears about these things. No one ever hears about the franchisee that's got 28 Two Men and a Truck trucks that's making $16 million a year and has been a lot of money. No one hears about that guy because he's just running this great business. They hear about these terrible, terrible things.
--:-- Aaron Harper: What I'm really excited about is I don't believe that the next generation of franchisors has the same mentality as two generations ago of franchisors or even the Gen X generation. I think the millennial generation of franchisors and franchise professionals thinks about the franchise business model in a much more opportunistic way versus a more "sit down and shut up and eat your vegetables" kind of way.
--:-- Aaron Harper: I lead a mastermind — I don't charge anything for it, but it's invite only for other franchisors that are in the service space. Collectively we meet, there's like eight of us, and we collectively have like 4,000 units. We meet for 90 minutes per month and then twice per year and talk about different topics. The innovation in the way that they're thinking about things is unlike anything I've seen in any of the previous generations of franchising. This isn't to knock the other generations. We wouldn't be here without the other generations. But us as millennials, older millennials, whatever — we just think about things differently because we were raised in a different environment.
--:-- Aaron Harper: You're seeing some of these people — I'm one of them, I've got some other friends — building really great brands with the right amount of money coming into it, with the right idea, with the right amount of infrastructure, and really setting an example for future franchisors that are like, "Oh, that's the way we're supposed to do it." "Oh, it's going to cost over a million dollars to franchise a business. I don't have that amount of money. Maybe I shouldn't franchise my business." Or franchisees hear, "Oh, I'm going to have to be full-time and I'm going to have to leave my job that pays me $400,000 a year. Maybe I'm not going to do that because I'm not ready and prepared and I don't have the risk tolerance to do it." That's good, by the way. That's great for franchising that those two people — that franchisor and that franchisee — don't franchise. That's great for it.
--:-- Aaron Harper: But I think where we've had this "oh, everyone should get into franchising" — that's not the case at all. So I'm excited by that. And a lot of the friends I have in the space that are thinking about things differently.
--:-- Ryan Hanley: I would definitely say the uneducated understanding of franchising is that you show up with a suitcase full of cash and you get a business that runs itself with you putting limited effort in. That's not correct. I love that we've kind of blown that up today. What I've heard today in many regards is that running franchises is no different than running a regular business, a non-franchise business, in so much as it's going to take a ton of work. It's going to take capital. It's going to take attention, focus, operating in your particular zone of genius, hiring out the rest. It's just a different type of business. If you don't feel like building the brand from scratch, if you don't feel like building the systems from scratch, but you believe in what the business is doing, then you can kind of skip the line on a few of those things. But ultimately, the labor of getting it to escape velocity is exactly the same. You're going to have to do all these things.
--:-- Aaron Harper: Yeah. The only difference is, if you think of a business as a job and you're going to bring tools to the job — the business is the job in this metaphor — you're going to have significantly more tools with a franchise than you would otherwise. That means individually, that business is going to take longer and be more risky because you have to create all this. You have to create the hammer. You have to create the wrench. You don't know what a wrench looks like yet. Whereas if you buy a franchise, those tools exist. Maybe you have to iterate on one of them or tweak one of them because it's different in your market versus Pennsylvania or whatever. But you still have the tools. All the SOPs are written. All the suppliers are chosen. All that kind of stuff.
--:-- Aaron Harper: But the actual stomach you have to have in order to build a successful business does not matter whether it's a franchise or a non-franchise business or you're acquiring it. You're still going to have the same amount of mental unease starting this company. You're still going to have to get it to escape velocity. You just have more tools in your toolkit with a franchise than starting from scratch on your own.
--:-- Ryan Hanley: What question haven't I asked you? What's something relevant here that we've missed? Is there anything that we haven't dove into in terms of maybe who shouldn't franchise?
--:-- Aaron Harper: Yeah. So a franchisee has to be entrepreneurial, but not too entrepreneurial. A franchisee has to be able to follow systems and not go against and want to create all their own systems. The best franchisees I've seen — and I've been responsible for helping over 700 businesses start across the country — they're like, "Give me the playbook and then I'm going to do exactly that." Then after they figure out how to do exactly that, they're going to iterate on different things. Then we're going to learn from them and implement it across the system.
--:-- Aaron Harper: If the person who's wanting to start a business enjoys creating things from scratch, coming up with ideas, breaking things until they work — a franchise is not good for them. They should not buy a franchise because what you're paying a royalty for — which, by the way, you pay forever. It's not like you only pay for a year. You pay your royalty forever. What you're paying a royalty for fundamentally is to not have to create that stuff from scratch.
--:-- Aaron Harper: I've seen franchisees buy into a brand and they will immediately start questioning all of the things that the brand is doing. It's like, there's no reason to buy into the brand if you're just going to say, "Tell me why. Tell me why. I need to understand." Just say, "Does this work for other people? Yes. Okay, great. I reasonably expect that this will work for me if I do the same thing." That person shouldn't franchise.
--:-- Aaron Harper: A franchisor who has a great youth enrichment brand — if they are not 100% able to step away from their youth enrichment company where they are no longer needed at all in the business — that person should not franchise their business because they're going into a different business now that they have to learn from scratch, which is the franchise business. If their business isn't systemized enough and they haven't learned how to open another location somewhere else on their own, there's no reason to go start a franchisor.
--:-- Aaron Harper: Oftentimes, franchisors will think, "Oh, I'll just sell like five, ten franchisees and they'll just pay me royalties forever. It'll be mailbox money." No. You need to get to $50 million in system-wide sales to make franchising worth it. $50 million. It doesn't make sense if you can't get there. And that's going to take all of your time. The franchisor is a complete startup again. You're starting up a completely new business. These are things that people don't know when they think about franchising because they're just typing in "semi-passive franchise opportunities near me" or "how do I franchise my business.com" and they are not being told these things.
--:-- Ryan Hanley: Aaron, I know there's going to be a lot of people listening to this who are interested at least in learning more. Where do they go? How do they connect with you? How do they get deeper into your world? They have questions about franchising or even Rolling Suds and that kind of stuff. Where do they go to go deeper into your world?
--:-- Aaron Harper: Yeah. So anyone who's interested in becoming a franchisee — we're looking for empire builders and people who want to build sizable pressure washing businesses. Those folks can go to rollingsudsfranchise.com and see if their territory is still available. If it is, you'll get on the phone with someone from my team.
--:-- Aaron Harper: If you want to just continue to learn more about the journey and franchising in general, you can follow me on Twitter, Aaron Harper CEO. You can look up Aaron Harper, Rolling Suds on LinkedIn. I post every day. I share experiences of what's going on. I try to synthesize the knowledge that I'm getting and put it into understandable, readable content. You can follow me on YouTube. If you type in "Aaron Harper, Rolling Suds YouTube" — they don't come up. So those are some places to follow along. Even if you don't want to be a Rolling Suds franchisee or even if your territory is sold out, I try to put out as much value as I can as it relates to franchising in general.
--:-- Ryan Hanley: Dude, I appreciate you. I could go — we didn't even get into general business stuff. It was awesome. They can go listen to the show that we did together for your podcast.
--:-- Aaron Harper: My podcast, The Scaling Podcast. Yeah, exactly.
--:-- Ryan Hanley: So guys, I'll also have the link to Aaron's podcast and specifically the one that we did together where I was on his show. Bro, appreciate the hell out of you. Look forward to next time we connect.
--:-- Aaron Harper: Thanks for having me on, Ryan.
