Episode Transcript
Speaker 1 00:00:06 I am, uh, elated to have back on the show who was initially one of my first guests when I started the podcasting channel. All things considered franchising. Jason Olsson. Jason is the president and founder, C E O C F O, you name it, he does it all, uh, has a great staff. He is, uh, with, uh, image Studios, and we wanted to get caught up because I have a lot of activity with Image Studios and, uh, continue to do so. Jason, welcome to the show,
Speaker 2 00:00:34 Scotty. Thanks again for having me. I love being here. Yeah,
Speaker 1 00:00:37 Just seems like yesterday we recorded the first podcast and here we are six months down the road, and, uh, we're, uh, kind of catching up with each other and it's great to have you. Um, you know, image o uh, image still is one of those ideal opportunities, especially in today's, uh, uh, scenario with people looking for options, uh, in businesses that don't require a lot of employees. And, uh, you know, one of the things that's always attracted me to, to the opportunity, besides the internal support, the brand itself, is the fact that somebody really only needs one to two employees. Or if they wanna do it themselves, they don't need any employees other than themself. Um, that's still the case with Image. Are we still looking at that scenario? Is that still working out well for you and the brand? Yeah,
Speaker 2 00:01:29 Yeah. I mean, and you know, when I started Image 13 years ago, years ago, my, in my prior startup, I was a car dealer. So I came from a business that was very heavy on employees, lots of inventory, low margin, high volume, super, super high competition. Um, I was trying to solve for the opposite of all of that, right? I wanted more stability. I wanted a business, I could scale, I wanted less employees. And I think it's important when anyone's thinking about starting a business, is to be really thinking about what they're solving for. And money's always one of the top picks of like what that solution looks like and what they're trying to find. But I think it's important that people think about what it is the work-life balance should look like. Right? Um, so for Image, you know, we provide, we're a lot like WeWork or Office Evolution or any other executive office suite where we build out these individual office suites.
Speaker 2 00:02:26 But instead of renting them to a startup, we rent them to a beauty professional who's looking to start their own salon or Nail Spa or Aesthetician Spa. So we're like a mini mall of hair salons all under one roof. So the Image Studio's owner is, is essentially a landlord who is leasing space to these beauty professionals. So it is a much less rigorous day-to-day than a typical retail business. There's no inventory, and most of our image studios owners are operating the, their stores themselves. So they have no employees at all. When I was building stores before I started franchising, I built five stores in five years and had one employee at the end of that five year run. So it was me doing back office and operations, and my employee was doing leasing together. We were running five stores, um, which was pretty incredible to see. Coming from a, a different business that doesn't scale like that, it scales with a lot more headache, right? So, um, it's definitely a lot more simpler. It's stable and it's much more scalable than most retail businesses out there that I can think of.
Speaker 1 00:03:36 So let's talk about the, the, that, that, that tenant franchisee relationship. 'cause I think that's important. Um, we talk about a lease. Can you give us any general idea how the terms, again, and I guess the, the, the, the, the rent price, so to speak, where the lease price is varied based on, uh, location. So we won't get into so many details about, uh, cost for somebody to come in and rent a spot. But what are the terms of the lease? How do you keep it simple or simplicity? So it's not complicated. I think we all know that, you know, when you go to lease a car or you wanna lease an apartment or a house, uh, it, there's so much complication, so many words, and you know, it, it's just a long, long process. So how do you keep it simple between the relationship, between the franchisee and the person and and, and the, uh, tenant, so to speak?
Speaker 2 00:04:31 Yeah, so, you know, our lease agreements vary. There isn't just one size fits all for every tenant, but our standard lease agreement is typically 12 to 24 months in length. Um, sometimes they can be as short as three months, sometimes as long as five years. Um, but every person has a different situation. So we encourage our image owners to, to approach each situation uniquely and figure out what is the best fit for this professional who's looking to lease space. They're, look, you know, most of these professionals when they come over to Image, they're, they're leaving a salon or a spa. They've most likely been a W two employee or commissioned employee, or a 10 99. And so this might be a new thing for them. So we want the lease agreement to be simple and straightforward. It's not 65 pages long. It's very short and concise and covers just the basics.
Speaker 2 00:05:22 You know, I think any contract is a great document that spells out what both parties agreed to in the event of most likely a worst case scenario, right? So contracts have to spell out this pre-negotiated friction. And so I think a good contract always is very clear about how each party is to behave in an appropriate setting, and you wanna make sure that expectations are aligned, aligned. So we try and take that, we try and simplify it, and we try and let people know as clear as possible that this is what they're signing up for. We have very, uh, very forgiving termination clauses to allow people, if situations don't work out when they start a business, we don't look to make their life very, you know, very challenging in that process. We want to help them exit as clean as possible, right? So that they can move on to the next step or get a job somewhere if it doesn't work out for 'em. Luckily, that doesn't happen very often, but we do, we do try and simplify it and keep it very simple, and we provide a lease template that all our owners can take, and then they have it customized with a local attorney just to make sure that all the local rental laws are adhered to. Um, but yeah, we make sure that's very turnkey, very easy process to jump into.
Speaker 1 00:06:33 That's interesting. We're talking to Jason Olsson, president and founder of, uh, image Studios. And, uh, Jason, one of the things that's always attracted me to image and presenting to my clients is that not only are you a business for the franchisee, so to speak, but you are also, um, involved in training and helping people on the, um, studio side that are renting the studios, uh, the cosmetologists, whatever industry they're in that's renting the space, grow their business, and manage their business. And I think that works as a benefit to the franchisee because they're keeping their tenants there longer because they're successful. And two, that works for the cosmetologist, the person who's renting the space, because now not only do they have a spot to start a a starting point to start building their own business, but they're kind of getting that assistance and someone to lean on about growing their business. Can you talk a little bit about that, because I think that's a win-win for both sides.
Speaker 2 00:07:39 Yeah. Um, my philosophy in business has always been to be the person I wish I would've had when I was at that stage. And so when we look at who we're helping and how these pe where these people are coming from and how they're starting a business, and most of them for the first time, we've, we've been really bullish on how do we create an education system that helps people understand and navigate all these major foundational pieces of starting a business that really matter, right? So we want them to start with the right foundation. We want them to be successful, we want them to thrive in their new endeavor. But the reality is, a lot of our tenants just, they didn't go to business school. They went to beauty school to learn a, a skill. And at beauty school, they just don't teach a lot of business.
Speaker 2 00:08:26 It's just not a priority because it's a trade school. And so what we look at is we have all these entrepreneurs in beauty that, that want to start a business, but they've, a lot of them have never done it before. And we wanna make business exciting. We wanna make entrepreneurship sexy and fun. And how do you do that, right? You have to, you have to break it down to the fundamentals. Just like when you learn anything new, you've gotta go down to the basic building blocks and then work your way up. And so we really help them understand that some of the best basics of just understanding, break even the fundamentals in science behind pricing, how to raise prices, how to plan for taxes, how to plan for retirement, um, how to serve your customers with great customer service, just all the things that really help them understand how to get even better.
Speaker 2 00:09:11 And then we work with them on advanced courses to really take their business to the next level. Our goal is to help all of our beauty professionals retire wealthy. So we'd love for all our beauty pros at Image Studios to retire as a millionaire one day, and we help them understand what that path looks like. That sounds like a big push, but when you look at how that, how you can get to a million dollars in assets over 20 or 25 years, it's a, it's really a plan of dedication and consistency Yeah. And saving. And it's actually not a lot that it takes to get there. It's like $17 a day in savings and in an index fund over 25 years can get you, I think, $1.4 million at the end of the day, right? Thanks to the benefit of compound interest, which is something else we help them learn about, which is understanding and leveraging the power of, of compound interest and letting it work for you.
Speaker 2 00:10:04 So, so we're really, we're really hopeful that we're, we can push a lot of these professionals to hit levels in their career that wouldn't have been possible if it wasn't for the training and support that they get. And most importantly, though, is that image owner on the ground in Boca or in Atlanta or in Dayton, Ohio, that they're really an advocate and a mentor and a coach for these professionals. We don't expect our image owners to do the trainings on behalf of Image studios. We have a training team that will deploy those every month. Uh, but we want our image owners to be advocates and to be, uh, to be cheerleading this process and to get them aware of what tools and resources are available to help them succeed in business. And so we ask that, you know, all our image owners just really, really make sure that everyone knows what's available, because it really is a great program that really sets image apart from all the others.
Speaker 1 00:11:04 Yeah, I think that that's kind of, that, um, that separation, uh, point. And I think the internal, uh, operational support that you have, and I've gotten to know over the years now, uh, is, is I think second to none. Um, you know, the image studio investment level, or what we call the item seven, uh, isn't for the faint of heart. I mean, it's obviously, you know, it, it's, it's a long-term gain. Uh, the validation, uh, the r o i, uh, speaks for itself. It's, it's, it's strongly validated. Uh, and I know you're typically looking for someone that has a minimum net worth of about one and a half million, 1.5 million, probably liquidity in that 500 as a minimum thousand and up. Um, but one of the things today in the franchising space is that, um, uh, financing is starting to be a little bit of a, an arm bender, I call it, you know, uh, the S B A as you and I were chatting about before we started recording is, you know, probably close to 13%. But the exciting news about Image and the people that do qualify initially is that you have secured external funding that, um, could be a benefit to somebody who wants to consider a a a an Image Studio franchise. Can you talk more about that? Because I think that's exciting and really helps open the door up, uh, to, uh, maybe not a 13%, uh, uh, interest rate?
Speaker 2 00:12:34 Yeah. So there's, there's a couple of components that go into an Image Studio's project. So you, you look at your initial build costs, which can range anywhere from 800 to $1.1 million, but then you have ti the tenant bu tenant improvement reimbursement that the landlord gives. So most landlords will contribute 15 to 20% of your build out and give you that money back once you are open. So typically that ranges anywhere from 25 to $45 a foot. So on average, people are getting back 200 to $300,000 from their landlord. So to build an image studios you typically need, it's gonna cost around 600 to $900,000 on average. Then with our lender in place that we have, who has funded over $20 million of loans for each studios owners over the past year, they will finance up to 70% of that net build out cost. So you could take 70% of 600 to 900, and that amount can be financed.
Speaker 2 00:13:34 And they're financing right now at 9.1, 8.9 to 9.1%. Um, so it's a couple points lower than SS B A, which a lot of people think SBA A is the best deal out there, which it's not, right? It's just the best deal if you don't have a lot of cash to put down. 'cause usually they'll do 10% down, right? Um, but the terms for SBA A aren't that great. There's big prepayment penalties, and again, the interest is super high. So this is really a great product. It's, it allows people to get in without putting in so much cash, but then allows them to really cashflow even after that debt service really well. So on average, based on our 2023 F D D item, 19, you know, franchisees on average are making around 41% ebitda. So they're making 41 cents of every dollar in revenue as profit.
Speaker 2 00:14:25 Um, and, you know, there's, the investment itself has some great opportunities, uh, to really make sense, especially when you look at, again, the simplicity and the scalability of the business model and why that's so appealing is obvious for a lot of investors. But, you know, again, I think people who are at a point in their career or their, or their entrepreneurial life where they're like, look, I'm looking for something new. I'm looking, looking for that next opportunity. But I doubt anyone is going, and I'd love to have and manage a huge team of people. I think most people that are looking for opportunities have already done that, right? They've been managing people mm-hmm. <affirmative>, um, we're all looking to simplify. We're not looking to make more complexity or entropy in our life. And so, right. Uh, that's what drew me to this business was I wanted more time and freedom personally.
Speaker 2 00:15:16 And if I wanted to grow my business as a car dealer, I had to sacrifice those two things. And unfortunately, those two things were non-negotiable. And so that's where I, I changed directions 13 years ago and went down this path to, to really grow and develop image studios, which I absolutely love this business. I love our image owners. I get, I have the best job in the world. I get to work with entrepreneurs all day long. <laugh>, that's my job. So our team, a lot of us are entrepreneurs, including myself, our image owners who start Image Studios are all entrepreneurs. And then the coolest part about this whole thing, every customer of Image Studios is an entrepreneur and a lot of times right? For the first time. So our whole community is entrepreneurial, and as you know, Scotty, entrepreneurs are just a little different right there.
Speaker 2 00:16:04 Yep. There's something, there's something to 'em that is like, super appealing, very attractive, and we just, we all have that little bit of crazy in our eye that we just, despite the risk, we all move forward and want to, want to want take a chance and prove that we can do it. And a lot of times we do really well. And so it's, uh, it's a fun group to work with. And the thing that I love most about franchising is that when people join this brand, they also join this network of like-minded individuals that is like this mastermind group of other image owners across the country. And that is a, that is a really powerful fact of, you don't just get the expertise of me and the corporate team who we've been doing this for 13 years, but you also get the expertise and background and diversity of thought from another 145 image owners that are running image studios all over the country. And that is what I think is the huge value of this whole thing, is, you
Speaker 1 00:16:58 Know, you're ab into that network. You're absolutely right. I mean, you know, I mean, just to be able to attend a, meet the Team day with other potential franchisees or entrepreneurs, you know, the comments that I get back. Yeah. You know, they had a couple of these guys on, you know, where we're at, meet the Team Day, and they're, they're multi-unit, multi, you know, multi-business owners, multi franchisee owners. They own several brands and to listen to their questions, it really, you know, really kind of motivated me and gets me pumped up, or, or even vice versa, Hey, look, you know, listening to some of the other business people, maybe it isn't for me. So there's a lot to do, a lot to learn when you go through these steps. I mean, I always tell my clients, put yourself in a position to wanna learn and know K n o w.
Speaker 1 00:17:42 It's, it's as simple as that. And then once you have all the valid, all the information to make a validated decision, that's when you can say yes or no. Mm-hmm. <affirmative>. So lemme ask you a couple other quick questions. Um, you touched on the, the m o o of your franchisees coming in, uh, to the system. Mostly people that are entrepreneurs looking to simplify, uh, a business from maybe a lot of employees to one or two, depending on how many, you know, obviously that's one or two per location. So if you have three or four locations or five locations, depending on the areas, you may be able to put one person in two, but as you grow, you're gonna, may need a couple of more people. Are there any other, any other qualifications or what I call those, uh, uh, qualitative, um, uh, uh, personalities that you're seeing, uh, as franchisees coming in? We talk about the entrepreneurship, but is there anything else that you kind of seen that commonality, uh, among franchisees that are coming into the system now?
Speaker 2 00:18:49 Yeah, lots of it. I mean, the, the, the person that we're working with mostly is 45 to 65 years old. A lot of 'em have kids that are getting to the age. They're about to leave hou leave the house, or, or start college, or they're getting towards the end of high school. Um, one of the two spousal partners usually has a corporate job, um, and has done really well. Maybe both have a corporate job, but they're both at a point in life where they're starting to feel like, this is maybe not my desired career trajectory. Like, I think we all have those moments where we wake up and go, I don't know if I'm doing what I wanted to do when I grew up, you know, <laugh>, right?
Speaker 1 00:19:29 Wow. <laugh>.
Speaker 2 00:19:31 And that's a, I have, I had that feeling 13 years ago. I, I think a lot of people have that feeling. I think the thing that is the most, the common pattern of our people is, is it comes down to what they're solving for, right? I think every entrepreneur is scratching their own itch, whether they know it or not. But what we are solving for as entrepreneurs matters, that's the formula you're trying to complete. X plus Y plus Z equals one, two, or three, right? Whatever you're looking at. And what our people are solving for is freedom of time. They're solving for wealth creation. They're solving for access to a network that will inspire and motivate them, right? And they're solving for this need or desire to also help and empower other people. So there are people who enjoy helping others. Again, this role as an Image Studio's owner is your, you are basically helping and coaching other people to start a business.
Speaker 2 00:20:33 And it's, it's not a very hands-on like 24 7 approach that you have to do. But your job in leasing spaces to beauty professionals is also helping them understand the process of entrepreneurship, right? So you get to tell them your story, you get to evangelize the image brand, you get to evangelize your personal entrepreneurial journey. Um, that is so rewarding, I will tell you. So I think, you know, when you look at what the patterns are, it's personality traits Yeah. That, you know, people want to, people want to follow a process, and they, they, they wanna scale. But really it comes down to, I see this like identical, almost identical pattern, but between all of our owners, which is, it's the formula they're solving for, right? They've worked really hard, they're really smart, they're just feeling like they're not in the right spot at that point in life, and they're solving for freedom and time and wealth creation. So, um, if that's anyone who's listening, you know, I think that's where it'd be great to reach out to Scotty and, and find out more about how he can help with that. Because someone like him, and this is what I love about you, Scotty, is you're so well connected, you know, not just with our brand, but other brands. And we're not always the perfect fit for everyone, right? No brand is perfect for everyone.
Speaker 1 00:21:49 No brand is perfect. You're absolutely right.
Speaker 2 00:21:51 But there is a perfect brand for everyone. Yeah. And that's where Scotty will really help with that, that process. So, yeah.
Speaker 1 00:21:57 Yeah. Hey, look, you know, I always tell my clients, look, if it was easy, everybody would be doing it. I mean, uh, exactly. <laugh>, you know, <laugh>, it's, uh, you know, uh, owning your own business, being an entrepreneur is not easy. I mean, it's, uh, it does take time, effort, energy. Uh, unfortunately, there probably will be some pain along the way. Um, but the beauty of franchising, I had a guest on one of my other podcasts, uh, uh, and, and I asked him, can you explain franchising to our, to our audience? And he said it was, it's pretty simple if you think about it. He says, and he used a sports analogy. He said, you know, if you are an independent or wanna start your own business, that's great. I mean, all for you. But to use a baseball analogy, you're getting up to home plate and you gotta get around all the bases. Mm-hmm. <affirmative> in franchising, you're starting on third base.
Speaker 2 00:22:50 Yeah.
Speaker 1 00:22:51 And then you gotta get home. And the home being the r o i, the success. So, uh, so it's interesting. Jason, one last question for you before we close out here. Uh, we've been talking to Jason Olsson, who is, uh, president and founder of, um, image Studios. I'm Scotty Milo, your host of All Things Considered Franchising. You know, we look back two and a half, three years, um, the pandemic, the upside to franchising, uh, the Great Escape I call it, out of corporate America, we've seen to have leveled off over the last six, seven months. I mean, I'm sure you have seen it in your lead flow or the, the, the, uh, it isn't everybody looking at it, it's now more of a select few, the people that you just got done describing. Uh, but now we're seeing an uptick in unemployment. Uh, there's been some layoffs. I mean, we, we, we just heard about Yellow Freight going bankrupt and, you know, other companies to follow. Um, is the, the dream of entrepreneurship, uh, that, uh, motivation to own your own business as we go through these ebbs and flows, and hopefully never another pandemic, but at least in our lifetime. But is franchising still alive and well in your eyes?
Speaker 2 00:24:08 I mean, for us it is. We're having our best year ever. You know, we'll open 40, 40 to 41 stores this year. We opened 16 last year. So that gives you an idea of great. The, the velocity that we're at. Um, we're, our pipeline is set to open 50 stores next year. Um, we brought on a record number of owners year to date. You know, I think one of the things that really stands out about the image business model is, again, when you look at any business, you gotta look at the customer base and realize what does that customer base susceptible to in a downturn? So in beauty, beauty is one of the few industries that tends to actually go up during a recession or a depression. And that is because of economic malaise and ego depletion. So what happens is, you know, the, the general public, especially the the middle class, upper middle class who have historically had a lot of financial freedom to remodel their kitchen or buy a new car every two years, or go to Europe for a vacation, you know, they may have not been able to exercise a lot of that financial freedom.
Speaker 2 00:25:10 So that's where this economic malaise comes in, is they start to feel, gosh, I don't have any of this freedom I used to have. So what do people do? They still will spend money, but they can't spend large amounts of money. So they tend to actually go see their beauty professional a bit more frequently than they do when things are good. So beauty as an industry tends to thrive when things get tough for everyone else. What I love about that is, that's why, that's what first drew me into this industry was coming from the car business. A recession means buckle in and pray that you survive. Like, right?
Speaker 1 00:25:45 Yep. That's a great way of putting it. <laugh> like
Speaker 2 00:25:48 Weight recession was horrible to be in as a car dealer. I mean, if you're a real estate agent or a car car dealer, like you were, you were on the chopping block. And luckily we survived that, but I, I got P T ss D from that, and I promised myself I would not be around for the next time that happened because I was not interested in that kind of, that kind of up and down again. And so with, with Image, your customer base, our, our first and foremost, primarily beauty professionals, but their customer base, which is your secondary customer base, 'cause they're indirectly your customer, but those are the people that are feeding the beauty professionals that are renting space from you. So when you look at the stability of the tenant base, it's an incredibly strong tenant base. So we actually do better as a brand, as an industry of salon suites.
Speaker 2 00:26:38 We do, we tend to do better when the, the economy is not thriving because more people are, are spending on beauty, which is keeping more people in the beauty professions, which are then keeping people in suites. So it's a very, there's, there's not a big difference for us in our leasing activity during a good economy or a bad economy. It's, it's interesting, it's kind of steady the whole way through. Um, which I think there, there's not a lot of industries that are like that. I mean, it's pretty rare to see that kind of consistency in, in customer traffic. So, you know, I think the, the thing we do see is seasonality changes in lead flow. You know, back to school is obviously a very slow time for us. A lot of people have kids. Um, holidays are really slow, but New Year's is really busy. Um, you know, Q three is really busy, you know, the rest of the year stays pretty busy. But other than the cyclical seasonal parts, which is normal for any business, we typically don't see any big change to that's dependent on the economic, like strength that's going on at the time, which is great. I love that.
Speaker 1 00:27:49 Yeah. No, hey, look, I mean, I, I, I, I think the, the, the beauty, uh, cosmetology industry itself is a, uh, it's definitely Amazon proof technology proof for sure. Um, it's, I do believe that and, and agree with you a hundred percent to everything that you just said, that it tends to be recess and resistant because everybody wants to look and feel good. I mean, it, it's, you know, most people just, you know, they, they, you know, during a recession, they don't want their, their image <laugh> to be jeopardized, uh, because of a recession. So, you know, even guys like you and I who <laugh>, we still wanna look at minimal minimalists. And I think, and I think, you know, and, and when you look at your studios, your, your, the places of business, these, you know, uh, entrepreneurs, it's almost a one stop shop for the customer because one person can go in and go get their hair done, and then they can go over and maybe get a, a, a, you know, back therapy, maybe get their nails done.
Speaker 1 00:28:54 So it's, you know, not going from, you know, block to block to block or two, three miles down the road and then parking the car again. It's a one-stop shop. So mm-hmm. <affirmative>, that's great. We've been, uh, talking to Jason Olsson, president, founder of, uh, image Studios. Uh, for more information on Image Studios, please reach out to me or reach out to the Image Studio's, uh, website. Uh, I am your host, Scotty Milas of All Things Considered franchising and founder of Scott Milas franchise coach.com. Uh, reach out to me directly, as I said Scott at scott milas franchise coach.com, or gimme a call at (860) 751-9126. For more episodes of all Things Considered Franchising, please visit all things considered franchising.com or Apple or Spotify, or any of the other podcast channels. Jason, great to have you. And I gotta tell you, I'd love to have you back in another 6, 7, 8 months and see how things are going, but it sounds like you guys are doing really well and having an awesome time, uh, and a lot of fun doing it.
Speaker 2 00:29:53 Yeah, let's do it. Thanks for having me again, Scotty. It's always a pleasure.
Speaker 1 00:29:56 Thank you.
Speaker 0 00:29:58 <silence>.
