Episode Transcript
Speaker 1 00:00:04 Hello everybody, and welcome to another episode of All Things Considered Franchising by Scotty Milas, powered by Scott Milas franchise coach.com. All Things Considered franchising is a podcast devoted to the entrepreneur person who is seeking to diversify a business portfolio, investigating, researching, franchising, or independent opportunities, mostly in the franchising space. Scott Milas franchise coach.com is a consulting organization that I founded and run. What we do is help people build a business model and then introduce them to franchise opportunities that potentially fit, helping 'em through the process, learning, educating, validating, and of course working on financing and the legal side. Um, I, you know, there are certain people that have a great story in the industry and there are certain people that you probably just don't wanna listen to. The guests that I have today, uh, Zachary Butler, um, is just one of those great stories. Um, just, uh, you know, he, he, he's a founding partner for Horsepower Brands. Uh, I'm sure some of you would be listening to some of the other, uh, development stories on, uh, uh, about horsepower, the brands, whether it's Blingo, mighty Dog Roofing, iPhone, I mean, you name it, it's out there, really oriented to service. But Zach has a, uh, just an interesting career path, I mean, and how he got into franchising, and it's always a story I never get bored hearing. So, Zach, uh, welcome to the show.
Speaker 2 00:01:33 Oh, thanks. Thanks, Mr. Milas. It's always good to see
Speaker 1 00:01:36 You, <laugh>. Yeah, we've rubbed elbows over the years and, uh, you know, uh, I've always found your story fascinating. Um, it's just one of those, you, you know, I think everybody in the franchising space, especially on the development side of consulting side, should hear. And, uh,
Speaker 2 00:01:54 You know, uh, I always liked the lead off with, uh, my favorite quote, which is, good decisions come from experience and experience comes from bad decisions. Um, I've been in franchising for, this is my 16th year, and I started when I was really 18. I, uh, I started working for a company by chance, that was in the nutrition space. And the story was the guy that owned those, uh, uh, previously owned the top grossing GNCs in the country, was forced to sell them back and started his own chain. And I started there as a part-time associate right when they opened. Fast forward, two week, two weeks later, everybody quit and the store, and I became the manager by default. Yep. And I just said, well, how much does the manager make? And I remember they said, like, 80,000. I said, well, I'll, I'll do that
Speaker 1 00:02:38 <laugh>.
Speaker 2 00:02:40 And, uh, did that for about a year, and then they began to franchise. And I knew that I wanted to do that, so I saved up enough money and I convinced the founder to co-sign an SBA loan. I moved down to Florida, opened up my, uh, first location in Tallahassee when I think I was just 21 years old. And it was awesome. I mean, I did 1.3 million first year open, made more money than I never dreamed of, and, uh, then opened another location. And that one did about 900,000 the first year open. And then I opened up two more and then acquired three. And within about three years from opening my first location, uh, I, I had seven locations on the path of doing 8 million in gross revenue and really had no business acumen. I was great at finding people, coaching people, sales and marketing, but didn't really have the ops or financial, uh, background.
Speaker 2 00:03:28 And that really, really was a detriment. And I ended up building that business and then lost everything. It all came across Wow. Around me, filed bankruptcy, had, you know, really no money at Rock bottom. And another franchisee at that time had, uh, 10 or 15 locations. And I know, never forget, I convinced him to, uh, uh, gimme, uh, equity on future brands, um, uh, for, uh, a fixed salary of $23,000, which was just enough money for me to pay my bills and live. And we took that business up to 68 locations and 40 million in revenue in three years. Wow. Did that for about a decade. Uh, sold equity there and left and got into franchise development and consulting. And, uh, my partner now, Josh Konik, his first brand Monster Tree Service, was the first brand that I really worked on, and we really hit it off, you know, and I think, uh, Scotty, I think there's people that you meet in your life that you're just destined to work with. And Yep, Josh and I have probably talked every day for six years, and it's been an awesome partnership. And we built that business and built another one. And then those businesses sold the private equity, and we decided to start our own portfolio company, which is now Horsepower Brands. And just over two years ago, we awarded our first franchise location, and as of today we're, uh, we're over a thousand territories across the country with 17 different entities.
Speaker 1 00:04:49 Wow. You know, the it, first of all, I mean, Josh is just, Josh is just one of those guys, you know, much like you, and, and you can see the synergies and you could see why, uh, it resonated the partnership or why the partnership is resonating. And the success is because, you know, he's just, he's just an even keeled guy. I mean, he, he, he knows about franchising, he knows what franchisees need, and putting together horsepower brands, and then your expertise on that development side is really, you know, like I said, resonated really well. And you know, the first question I have for you, you know, it's interesting because the F s O and to our audience that really doesn't ha ha may not know what the term is, franchise sales organizations, there are organizations out there that their main goal is just development sell, and that's it.
Speaker 1 00:05:41 Let's walk away. And, you know, I, I, I guess, you know, you have to be careful what you wish for. But as an a, a franchisee coming into a system, you exemplify, at least in my opinion, what an FSO should be. And it's not only offering the franchisee and the franchisee accepting the franchise, but getting that person off the ground. Um, you know, from Franchise Rocket to, uh, your operations, marketing support, uh, franchise rocket, getting people open, the equipment, everything. So touch on that and, and, and, and maybe share with the audience why that is important cuz you can hear the enthusiasm when you speak to Terp and Carrie and Courtney and Joshua. But talk to the importance to our audience who are considering franchises, how important that is in somebody making a validated decision.
Speaker 2 00:06:38 Well, I think you hit it on the head, is that the fra the FSOs are really good at selling franchises. That is their a goal and they're good at it. And that's the future of franchising for sure. I mean, that's where, when you wanna look at who's doing a lot of the placements, it's coming from those organizations and they do a great job. And that's one of the problems is they do a great job at selling locations. Uh, being a franchisor is expensive, and it's extremely difficult, and it's stressful. And most people have never been a franchisor before, and they just fail to recognize how much capital and infrastructure is gonna take to actually succeed when you're growing aggressively. And so for us at horsepower, we're built like an fso and we can award a lot of locations, but we own the brands. So as they say in the, uh, as the FSOs say, we have to make the babies and take care of the babies, right?
Speaker 2 00:07:28 And, uh, what we've learned is that when you are growing aggressively, there's not many vendors or, or, or, uh, or partners that you can partner with that can support that type of growth. And so we had to either, uh, create, invest, or acquire our own vendors to maintain our growth, our growth trajectory. And what we've learned is because we no longer have this triangle relationship of, well, it's the franchisee's fault, or no, it's the franchisor's fault, or No, it's the vendor's fault fault for us, it's the franchisees not getting the support, it's our fault. Right? And so we can really focus on delivering a better overall experience, better support at lower costs.
Speaker 1 00:08:07 And, and, and, and if I step outside the box here a little bit, it would seem to me that having all of those tools, and because character and personality kind of fits in awarding someone a franchise and vice versa, someone investing in a franchise. So is it safe to say, Zachary, that you have the ability to kind of tie in that personality character with the services of support and, and, and kind of that extra checking point to say, yes, this person's gonna fit in, or no, this person's not gonna fit in. Uh, because obviously in the, in the due process, the due diligence of a franchisee and your due diligence, you're really connecting these people with all the different departments?
Speaker 2 00:08:52 Well, we're very different as a portfolio company. Josh and I are the sole owners of the organization. We still talk to every candidate coming through the process, um, prior to a discovery day. And so we're heavily involved making sure that we're bringing in the right people. Culturally. Uh, I think one of the biggest differences, uh, Scotty, is when you think about an Fs o their goal is to sell franchises, right? If they, if they, if they sell a franchise to the wrong person, you know, hey, the brand's gonna be gone in a couple years anyways, for us, we live with that franchisee forever. So, uh, we have to make sure that, or the directors have to make sure that they're bringing the right people through the process to discovery day, and then the brand has to approve them. And if the directors keep bringing the wrong people, it, I mean, that, that brand president can walk right over to their office and go, what the heck's going on? What I Right.
Speaker 1 00:09:46 Well, you know, it's funny because I, I try to explain to my clients, you know, uh, the, the, that franchise wars, their income, how you pay your bills, how you feed your families, how you hire the staff is all based on royalties. Now, there may be some, a few little ins and outs along the way, but in most cases, your income is driven by royalties. And if you can't bring on board people who are gonna generate sales, i e royalties to you, you know, the franchise fee is not really an income driver. It's to help people to help and reward the people within those different departments to help the franchisees get open. I mean, I, I try to educate, educate people that they need people that can generate sales. So you can generate royalties, and not to make this about you, but if somebody's generating sales, they're making money, but you're also making royalties.
Speaker 2 00:10:43 Yeah. I becoming royalty sufficient is by far the most important objective as a franchisor. And you, you're not gonna have franchise fees forever. So you have to get the royalties to a place, and the more royalties you collect, the more the franchisee are doing in revenue, which should be dropping to their bottom line, which again, helps sell more franchises, right? Uh,
Speaker 1 00:11:03 You know, the service based businesses, uh, you know, pre covid, um, I think, you know, when pre covid and you look at, and then when Covid came in, everybody was like, oh my god, you know, uh, w do we have our disaster plan? Nobody expected homeowners or people to go all of a sudden work from home and start fixing out their, fixing up their homes and everything. But the service-based business is still strong and continues to be strong. Um, a as far as a revenue driver for business owners, franchisees,
Speaker 2 00:11:39 Well, I mean, I, my look at my view on franchising is what better industry to get into than home services, which is extremely a competitive, yet very fragmented, where you can leverage franchising to bring an improved level of technology, an improved level of, of communication with all better overall experience for the homeowner. What better place for, for franchisees to be successful than in a mad environment?
Speaker 1 00:12:03 Right? Yep. And, and, and, and, and, and as far as the franchisee, the support, but one of the unique things about your brands, you know, when you look at Bring Old Mighty Dog Roofing, iPhone, some of the other ones, um, and, and I was mentioning this to, uh, one of your development managers and another podcast that I was doing, is that I'm fascinated how you have more than one revenue driver if it's not two or three within each company. So when you look at, um, when you look at Groovy use, you're not just painting outside or inside, there's gutters, there's all the other things that you're doing. Mighty Dog Roofing, the same thing. So there's a lot of scalability within each brand, and then the scalability for a Mighty Dog Roofing franchisee to become a franchisee in another one of the horsepower brands. Is that correct?
Speaker 2 00:13:01 Yeah. So when you look at all of our brands, the primary service line is, is already very scalable. So one of our requirements is the primarily service line, and we'll just use Groovy as an example, interior and exterior residential painting is a big business. Uh, that's a multi-million dollar business opportunity. Now you add commercial onto that gutters, uh, the facelift program, you're in power washing now. You're allowing for a franchisee to not just build one bigger, have not just one focus, but they can diversify a little bit of their energy. And one of my favorite sayings is, uh, focus creates wealth and diversification preserves it so they can build a big business with a singular focus and then start to diversify these other service lines. And then interesting, I think when you take a, when you take, what we're really pushing is multi-brand ownership. There are some, there are specific franchisees that are able to build their own portfolio underneath ours that is going to build significantly more wealth for that franchisee than having one brand with multiple locations. Uh, that's something that the, you know, venture capital is really looking for is something that can scale across, uh, multiple different service lines, leveraging the same real estate, same leadership team equipment, but more manageable by being in the same area.
Speaker 1 00:14:20 It's interesting because franchising, you know, a lot of people look at the franchising industry, you know, the, well, I shouldn't say a lot, but the people that look at franchising negative negatively look at it as a, a, a income grabber because of the royalty streams. And, you know, as a consultant, when you're trying to explain that it's gonna cost you a lot more money yourself than the 5, 6, 7, whatever it may be on royalty structure, um, then you throw in local and national marketing, it's gonna cost you a lot more money than what a franchisor is gonna be able to do in helping you setting up the systems, the best practices, what I call quote the menu. Um, any thoughts on somebody listening out there today that just, you know, has thought about it, um, just, you know, can't get past that negative, you know, that whole thing on royalties? Any thoughts about that? Because you, you've been around, I mean, you've been around and been and, and have built some great brands, and now with horsepower, I mean, you, you, you're making a lot of franchisees through, well, I mean, you're, any thoughts on that?
Speaker 2 00:15:32 Well, I think a lot of people that are scared of that have never went out and built it themselves anyways, and are probably never going to, but good point. The people that have, and so we own a beef company and we had to build that website ourselves from scratch over time, and we still spend every month, 10 to 15 hours on the website. This is three years later. Franchisees don't have to do that. And then you look at some the logistics and buying power, we don't have it yet. We are a franchise. We'd have, we'd have multiple locations all pooling the resources together to get better rates on shipping. And so building a business from scratch is so much more difficult from a time, energy, and stress level than a franchise now take about all the time, time and capital wasted on creating processes that don't work. And then 'em, to go back to the drawing board. Having a franchise allows you to get from point A to point B at a much faster pace with less stress. And the goal is to create wealth, and the goal is to scale things. And if you're trying to create your own business, more power to you, but you can also do a franchise and do it a lot faster with less stress and also get a great return on your investment.
Speaker 1 00:16:44 Yeah, that's interesting. Um, I I, oh, I, I'd like to ask this question because, um, I, I don't wanna think that all things considered franchising is, um, you know, trying to, uh, you know, push people into the deep end, into franchising all the time. Uh, and you have built a number of brands, you've seen your horsepower f s o grow. If you were gonna pick one or two characteristics of somebody that should not get into franchising, what do you think they would be?
Speaker 2 00:17:20 I think that there's people that get into franchising that don't have the grit to handle the stress, and owning a business is still gonna be stressful regardless it's a franchise or not. But, uh, one of the things that we have really found is what makes a low performer. And the one thing that's, that we, that we can prevent is if you have a hard time making decisions with, without enough information, you're probably not gonna be a very good business owner. As a business owner, you have to be able to make decisions without all of the information, stick it, go out there and get it. And if it's not the right decision, deal with that consequence. But some people just cannot get over that aspect of being able to make a decision.
Speaker 1 00:18:07 And yeah, the procrastinator right, you know, the person that just can't, it's not a question of making a decision, it's, it, it is a question of not, but it's a question of not making that yes no decision. Correct. It, it, it's not about, you know, should I buy this? You know, it's just, it, in simplistic terms, it's yes or no.
Speaker 2 00:18:25 Well, and so when you get, and if there's, and pe some people were just wired that way, and they're not wired to own a business, which is, which is fine, they can still make a great living in doing something else. But when you're wired that way, you get into the business world and all you're focusing on is the things that you can solve quickly and easily versus, hey, you have to make a decision to take your business in one direction, but you don't know if it's right. But, you know, you've gotta make a decision. Those people just don't make the decision. And then by the time they need to, it's too late. And, uh, you know, those are tough personalities, uh, and we try to be as good as franchise or we can, but we can't run their business for 'em. And so that's somebody that shouldn't own a business, but there's people that look themselves in the mirror and go, I can do this with the franchisor behind me and the support that they provide. I know I can do this. Those are the people that go out there and they, they drive it home.
Speaker 1 00:19:17 Yeah. That's interesting. Uh, running outta some time here, um, great information, but I, I, I have to ask you about Butler beef, something you're running with your wife, or I should say your, your, your wife is really probably taking the lead on this because you're busy with horsepower, but tell us a little about it. I mean, it's really interesting. I think you, I remember when I ran, uh, sat at the table with you at a conference out in Austin a few months ago. We kind of chuckled and, and, and said, there's nothing like a great steak for people who own, who love, uh, eating meat. So tell us a little about it, because I think it's, again, another one of those great stories about you.
Speaker 2 00:19:54 Yeah. Uh, you know, we were feeding catalyst and investment and I was the only person in my family that didn't stay in agriculture and, uh, as I was feeding cattle for investment, or, you know, my dad buys cattle for a living, so we bought 'em cheap, uh, and uh, uh, we got the connections to feed 'em for cheap. And, uh, I remember the one time we had probably a quarter million dollars invested in, we made $1 on the PeNAT and they bought right fed, right. And the packer made more money in the history of the industry per animal, which doesn't make any sense to me. And so there's a lot of corruption within the, the packer industry. And so we don't give up. So we went, started going farm to table, and we specialized in a lot of corporate gifts and high-end restaurant quality steaks.
Speaker 2 00:20:37 And, uh, we really just started taking it out there. And my wife's really taken the bull by the horns per se, <laugh>. And, uh, uh, she is, she's so fan, she's so fantastically talented, and our customer service and attention detail is unmatched. And she's built that up into a big business now where, uh, she's just opened her own storefront. We have a shipping facility, uh, and, uh, it's, it's becoming quite the ordeal, but we still raise our own cattle. We have a cow calf operation, we do a lot of high-end genetics. So I, that's where I like to play. I would, right. I could do anything. I'd be a, a broke cowboy all day, for sure. <laugh> and, uh, my wife run all the businesses.
Speaker 1 00:21:14 Um, knowing you guys, knowing you and Josh, as long as I have, um, there's always something I, ID like to use the term something always up your sleeve. Uh, what's next in the, in the franchising space for you? Or is, you know, any, any hints you can give us as far as horsepower and, you know, cuz I know you guys enjoy what you do. I mean, I'm sure there's some, there are days that are headaches and like you said, it's not always fun, but, um, what, what's next for horsepower and, and you and Josh in, in the franchising space?
Speaker 2 00:21:47 Well, we're still on our mission for 25 concepts by 2025. Uh, uh, I'll announce it here first. I don't think we've even pulled this publicly yet, but we did just, uh, sign on a fe a fencing franchise brand that will be, um, rebranding and launching here in the next few months, as well as, uh, an H V A C company. Wow. And so we'll have H V C later this fall. So, uh, that's what's on the immediate radar. Besides that we're, you know, we're trucking along as fast as we can go, heads down hitting our feet in the mud.
Speaker 1 00:22:18 Wow. Interesting. Well, we've been talking to, uh, Zachary Butler, founding partner, chief development Officer over at Horsepower Brands, um, Lingle Mighty Dog Roofing, um, uh, uh, uh, groovy use, uh, iPhone, just to name a few of the brands in the portfolio. Um, best way to check out the brands, go to the horsepower.com, uh, website, uh, reach out to me. Um, but, uh, if anybody has any direct questions for you or wants some information, I guess they can reach out to you on LinkedIn. Shoot me a message. Best way to get ahold of you. Yeah,
Speaker 2 00:22:56 I think, uh, Scott, I think it's important for people to understand that working with a consultant gives you a lot of advantages. Um, if they come, if they come introduced through you, they're, they're really going down a different level of our process because that they've been vetted by you and you're looking at their backgrounds or financial qualifications and making sure that they're the right fit for us, and you know, what we're looking for. So I think its important for people to understand the value that you bring to the equation.
Speaker 1 00:23:21 Well, thank you. Well, if anybody's interested in learning more about the service-based businesses, horsepower, uh, horsepower and inventory, please feel free to reach out to me. I'm Scotty Milas, the host of All Things Considered Franchising, uh, and of course, uh, powered by Scott Milas franchise coach.com. Zachary, great to have you with us. I hope, uh, sometime in the next three to six months we can get you back and maybe we even get Josh along and, uh, we can, uh, have another great conversation. But I, I I, I, I honestly have to tell you that I wish you and Josh and everybody over there the, uh, continued success because as a consultant and working with your developers and your brands and, and the people that I know that have kinda walked in that path to become business owners are, are appreciate all your hard work and support that you're giving them. Appreciate that, Scotty. Yeah. Lemme see you in person one these days. Yeah, we'll see you soon, uh, hopefully in, uh, our conference coming up. So, uh, yes sir, we'll do there. Uh, we'll be there. Hey, listen, thanks very much again. Scotty Milas, host of All Things Considered Franchising. You can reach me at scott milo franchise coach.com or gimme a call at eight six oh seven five one nine one six, um, or fill out my inquiry form on my website. Again, this is Scotty Milo. All things Considered franchising. Have a great day, and until next time, we're signing off.
