SNM255: Turning Clean Air Into A Franchise withTim Swackhammer

Jonathan Green: We're in clean air into a franchise with special guest Tim Swackhammer on today's episode. Today's episode is brought to you by Book arbitrage profits. If you want to start the ultimate side hustle, I can't recommend book flipping. Enough used books are continually going up in value. If you want to learn how to flip books and make six and even seven figures, please join our free training at Servedomaster.com baps. Announcer: Are you tired of dealing with your boss? Do you feel underpaid and underappreciated?

If you want to make it online, fire your boss and start living your retirement dreams now, then you've come to the right place. Welcome to Serve No Master podcast where you'll learn how to open new revenue streams and make money while you sleep. Presented live from a tropical island in the South Pacific by bestselling author Jonathan Green. Now here's your host. Jonathan Green: Now, I'm really interested in the franchise model because most people think of franchises, think McDonald's, Burger King and that's it.

But there's a whole different world of franchises. So how did you kind of first get involved in this world? Tim Swackhammer: Yeah, so great question and thanks for having me on. So, franchising, I really like talking about it because it is such a gigantic space and there's so many different types of businesses, different models in it, that it really is all over the place and everybody's experience with franchises is a little bit different.

So some people have really kind of wild, preconceived notions about what a franchise is or what it isn't. And I think that's just something kind of cool to talk about. My experience actually started even before I was born, so I'm a second generation entrepreneur and franchising entrepreneur. My father was involved in a number of different independent businesses before I was born, as well as some franchises. And I really initially got my start at the age of about seven. He had me working in his dollar stores.

They were through a franchise called Dollar Discount that's now defunct and I was stocking shelves and working the cash register and just kind of continued to evolve from there. So we're still active franchisees in right now two, technically three systems because we're about to be opening some units with another brand as well as being franchisors for mold medics. So been doing it for quite a while and got to see a number of different sides of it.

Jonathan Green: What kind of separates the type of person that's a regular entrepreneur versus a good franchise entrepreneur? What's kind of the difference between the two types of people? I know there's a lot of intersection, but some people, maybe they're great for franchises but not so great from starting their own and sometimes the opposite. Tim Swackhammer: Yeah, and that's really great question.

On the franchising side, what really is a bit different, it's a little bit more of a hybrid between sort of a great employee and a great entrepreneur because with a franchise where it's a little bit different is you do have to follow the system. Every franchise has some sort of some systems in place, whether it's in home service or retail or hotels, doesn't matter. They've got systems, they've got branding that needs to be followed.

There's already a process in place and your focus is on the execution side. And that's a big difference from being an entrepreneur and starting your own independent business where it's all on you. You have to at least either provide or account for every different aspect of the business. Whereas on the franchising side you're more focused in what you're actually doing. So it really is a little bit different.

And sometimes there are really great entrepreneurs that own their own businesses that go into franchising and find it's too restrictive. They find it chafing. They don't like only having control over certain aspects of the business. But what I really love about it is it does open up the space of business ownership to a much wider group of people because there's a lot of people that just aren't quite cut out for the full on entrepreneurial.

They're wearing every single different hat there could be and there's some people that just aren't cut out for that lifestyle. So franchising provides a much easier intro to that. Jonathan Green: I guess it kind of depends if you're the type of person who really likes a clean set of instructions or you really want to kind of make your own way and have your own decisions. Is there any freedom with a franchise owner?

I know that if you have like McDonald's franchise you could never add your own item to the menu. But is there any freedom with smaller types of franchises or are they all quite strict? Tim Swackhammer: Yeah, so that's a really interesting topic. It really comes down to brand by brand. There's a wide, wide, wide berth within that. So I mean, you do have your big well established franchises where it is very much like a job in a lot of ways.

You are following their exact playbook, you cannot step out of it and you know exactly what you need to do. But on the opposite side, a lot of your smaller franchises, especially your emerging brands, which is what we are, they're smaller, they've got a handful of units, but they're not necessarily as established as something like one of the big household names. And generally those do have a lot more freedom.

It's really interesting because especially the earlier on you are in a franchise's life cycle, the more entrepreneurial you kind of should be because there's going to be more freedom. They're going to have a lot of stuff figured out, but not everything.

And it's really helpful for a brand, for those 1st 1020 franchisees to be more on the entrepreneurial side of the spectrum and be willing to try things out and discover more best practices and processes that can then benefit the franchise system as a whole there's a lot. Jonathan Green: Of opportunities in franchises.

I see so many there seems to be thousands and thousands of different type of franchises, even ones that seem like kind of a hole in one or a guarantee like Subway or Long John Silvers. These chains that were huge when I was younger, they seem to be shrinking now. And other brands seem like they're invincible, like McDonald's, Burger King. And I wonder what are the signs that someone should look for when they're kind of thinking about a franchise?

What are the kind of maybe red flags for you when you're looking at a franchise? You go, oh, no, definitely not this one. What are the things that make you kind of jump away? Tim Swackhammer: Yeah, obviously nobody likes to see shrinking. That's never good. Subway is a perfect example of that. They are dropping doors at a fairly alarming rate.

And whenever you look at why that's happening, a lot of it comes down to oversaturation in the market and some branding that just I mean, the $5 foot long thing is permanently embedded in just about everybody's mind. And while that was really, really great for them for a while, it creates some issues as we have inflationary pressure and everything, to change pricing models. So there's a lot of challenges there.

But really, whenever I'm looking at a brand, it's not necessarily, is this a good brand or bad brand? It's Is this a good brand or is this the right fit for me and what I'm looking for? And that's really where it gets very interesting because there's so many different not just brands, but even within a space, there's a number of different offerings.

So if you look at, like, we're in the home service space and within that home service space, there's a wide variety of different franchises that all do similar or slightly different things or operated in a similar way. But might be better or worse for somebody based on how they're modeled, how they're structured, and what's really required for somebody to be successful in that business.

Jonathan Green: I've noticed that some businesses are better at selling franchises than they are at operating because the leader is really exciting and gets you engaged and makes you go, wow, I really want to go on this journey with them.

So I feel like sometimes people, especially the people who kind of save up ten or 20 years in their career and they jump into a franchise because they want to do that transition, which I love and it's totally awesome, but sometimes those people are a little overly emotional. What are some things you do to check yourself before you go, wait, is this a good idea or am I just really into this person?

Tim Swackhammer: So I'll be honest, I am the worst person to ask when it comes to that. I am so unemotional whenever it comes to especially the business side of things. It takes takes a lot for me to get that blood pumping excitement side. With that being said, the biggest thing anytime you're considering a franchise brand? Validation. So validation is part of the franchise discovery process.

It's when you're contacting and talking to existing franchisees within the brand and that is a step that should not be taken lightly. It's a step that should not be skipped by anyone. And you really want to take your time and dig in and talk to as many different franchisees that are in different situations as you can.

Because a lot of times you may be talking to the franchise or and they may provide a list of some of their franchisees and they may not be people that have a background similar to yours. And if you talk to more of that come from, if you're coming from a very corporate type of environment, you'd want to talk to somebody who came from that type of environment and is jumping into it and not somebody who's been involved in franchising for several years.

They're going to have a very different experience and what they like or don't like about the brand is probably not going to mirror your situation and your concerns. Jonathan Green: I think that in a lot of different entrepreneurial business models, it sounds really exciting, right? Like it's the same thing where people say, oh Jonathan, you're an overnight success. I'm like, yeah, if you don't count the first ten years before the overnight. And that's so many people, right? No, they were for ten years before anyone noticed.

And I think it's the same thing sometimes for people, they don't realize that there still is work involved. Tim Swackhammer: Like that having a franchise. Jonathan Green: You get an instruction manual, you have kind of a playbook, but you still have to execute. You still have to hire staff and manage staff and run the money and choose the location and keep their location clean. And there's so many other moving parts that sometimes we think we look at the glitz and glamour and forget it's still work.

Like running a franchise is still a job. It's not like you start the franchise and just leave and it runs itself. Tim Swackhammer: Yeah, and that's something I really emphasize whenever I'm talking to anybody who's looking into any franchise. And a lot of it comes with the validation, but get a good understanding of what does the actual operations, what does your day to day life as a franchisee look like? Because you're 100% right.

There's a lot of preconceived notions, there's a lot of I hate all the different marketing terms that people use. Turnkey business, completely passive, business model, all those kind of things. I have never seen that to be true in pretty much anything. In my opinion, real estate is about as close as you can get to passive, and that's if you're having a property management company come in and do it. And that's obviously a different situation.

But whenever we're talking about franchising, yeah, it is work and you want to have a good understanding before you get into it. What does that work actually look like? What are the key elements that the franchisee, whether they're going to be doing it themselves or they're going to be hiring somebody as a day to day operator, what does that actually look like? Because that can vary greatly.

And some models are going to be flexible, and there's going to be and again, it comes back to that validation point, because you're going to have some that are going to be very involved. In sort of the direct operator. And you're going to have other franchisees that are able to hire that out and come in with more of an organization behind them where their role is going to be a little bit different. Jonathan Green: What about capital expenditure?

Because sometimes people go, oh, I just have to pay the franchise fee. But there's also, whether it's location set up or if it's a mobile thing, you have to pay for the vehicle and you have to have there's a certain amount of time before you become profitable. Like maybe a really great franchise. It only takes a few months, but you still have to pay all of your bills, pay for electricity, pay for the employees until kind of those numbers hit. And it can take a while.

Tim Swackhammer: Yeah. And that's, again, going to vary greatly brand by brand. But one of the great things about franchising is whenever you're considering a franchise, you're looking at one fairly early on in the process, you'll receive a FDD, which is a franchise disclosure document. And this is a gigantic legal compliance document that the franchisor provides to any prospective franchisees. And it goes through there's a whole bunch of very specific sections for what the franchise or is providing.

And one of them is the item seven that's going to break down. What are the actual costs of starting up the business. So it's not just the franchise fee. If it's a retail model, you're going to have your real estate build out, you're going to have your rent, you're going to have personnel and all the costs there. If it's home service, you're going to have vehicle and outfitting and all those kind of things.

With a franchise, if you know how to read those and you take the time to really analyze that document, you can get a very good understanding of what the costs are going into it and what you can anticipate. And then same thing. There's the item 19 in that document, which is their financial performance representations. So this is basically what the franchise or is saying our average units do, or there's a number of different ways that they can present that information.

And from there it comes back to the validation side. So you're taking that information, figuring out where your gaps are, and you're going back to the franchisees that you're talking to to try to fill in okay, I was able to learn this, this and this from the franchise disclosure doc. What about this cost? And you can get that kind of information there long for like a good franchise opportunity.

Jonathan Green: Do you think it takes for you to recover your investment to actually become overall profitable rather than month to month profitable? Tim Swackhammer: Again, it's so broad. There's no real great answer there because if you look at the food service space, for instance, a lot of these restaurant structures have massive initial investments from your build out and everything like that.

Whereas something like where we are, where it's a home service business, you're going to be looking at a much more modest initial investment that you'd be able to recoup a lot quicker. Jonathan Green: So is there a timeline that you would jump away from if they're like, oh, you'll make your money back in 20 years, that's way too long.

Or ten years, what's the number where you go, okay, that's definitely too long, and you pull away from it and there's ones that you go, that seems too fast. It makes me a little nervous. You still be profitable and month and a half. Tim Swackhammer: The latter for sure. I definitely always get a little nervous whenever I hear, I mean, the age old saying of if something's too good to be true, it probably is. And my experience is very, very accurate.

So if I see something that is very marketing heavy and they're promising obscene returns in a ridiculous timeline, that definitely throws up a whole bunch of red flags for me. But the other side of it, the profitability end, really comes down to the individual and what your expectations are, what you're really looking for out of a business, because there is a very wide spectrum for me, I am going to be looking at something that within a few years we're going to be profitable.

But also there's a lot of stuff in franchising and in business in general that's very trendy. If there's something that I'm looking at that feels a lot more trendy and it's something that I think will have a good run and then it's going to kind of fade away and not be as popular, I'm going to be looking for a much better return initially than something that I know has legs and staying power. Jonathan Green: Yeah, that makes a lot of sense to me.

I see there's so many changing trends, like in types of gyms, right? Like it was all Aerobics and it's all I've seen Trampoline gyms and these like different things, but they only have a three to five year window of time, so it makes sense. Need the faster turnaround. Now you run several different types of businesses, right? You have your main franchise, but you're also I know you've been involved in wireless technology and also something to do with skate park.

I'd love to hear about that, about balancing multiple businesses and a business that's like all business and a business that's got a little bit of fun to it. Tim Swackhammer: Yeah, so we do have a bunch of different stuff going on it's. Myself, my father and my brother, we're partners in pretty much everything that we do. And yeah, we've got Mold Medics, which is a home service franchise. We have wireless own, we're franchisees there. We've got a number of stores with them.

We have a lot of vacation property, real estate, we have a Motel Six property. And then the last one you mentioned there is Funslides Carpet Skate Park, which is a children's entertainment center, a family entertainment center. And that's kind of an interesting one. We basically came upon it during COVID They were shut down due to all the government mandates and everything didn't look like they were going to be able to reopen. So we were able to come in, purchase the assets, get it reopened.

And it's definitely been an interesting experience. And yeah, I've never previously been involved in a more like trendy or sexy type business, like a lot of restaurants and things like that tend to be. And it is interesting, it's different. The marketing is probably the biggest thing that is just way different. It's really cool to see and to get to experiment with, okay, what worked over here and what works over here?

And there's no similarities because with something like a family entertainment center, there's a lot of people that are interested in sharing it. There's a lot of people that are interested in talking about it, home services and mold removal. But I think it's interesting, obviously, but it's not something that naturally people discuss a ton on social media and share a lot about. So it's really cool to see the differences that can come into there and the similarities.

Jonathan Green: I guess that's what's interesting to me, because they seem so different when you first glance at them, because it's an event type business versus the need type business versus a home versus this is where we go on a birthday party, or this is where we go on vacation. So it seems really different. But are there a lot of things the same as far as managing the books, as far as managing the staff, as far as looking at the overall structure of the business?

Are there some similarities there? Tim Swackhammer: Absolutely. With any business, in my experience, the core is the same. I mean, it's all basic economics. It's figuring out how do you generate revenue, how do you control costs and combine those two to make sure that it's profitable. And yeah, so, I mean, we're able to share a lot of our back end for like our HR and our accounting and all that kind of stuff is all pretty similar.

There's some different KPIs and metrics that we're looking at, but overall it's pretty much the same core. And from an operational perspective, the part that I really enjoy and like digging into the people end. We're dealing with different types of people, but it's still dealing with people. It's managing employees, keeping them motivated and recruiting. And there's definitely a lot of similarities there and just understanding what can we do to take care of our people, keep them happy, so they're taking care of our customers.

Jonathan Green: Now with the transition from the wireless business where you're a franchisee, to the home services business, Mold Medics where you're the franchiser, what kind of have you learned as you transition from one end of the conversation to the other end of the conversation? What things have kind of really make you guys unique because you've been on the other end of it. Tim Swackhammer: Yeah. So, truth be told, we've not always been great franchisees.

We're definitely better than we have been at sometimes, but we've been the squeaky wheel from time to time. And I definitely have a little bit more understanding and patience for some of the challenges that the franchiseor was experiencing. But also I think it's been really instrumental in how we designed Mold Medics to make sure that it is very franchisee focused and friendly.

One of the best examples I can come up with there is we've been in franchises where the franchiseor doesn't actually operate any locations, so they're just the franchise or. And that, in my opinion, is always to the detriment. Of the system because they it tends to be a situation where the franchiseor is sort of in this ivory tower, for lack of better analogy. Very removed from the day to day operations and making a lot of the decisions without understanding what the franchisees are going through.

So from day one with Mold Medics, that was one of my promises to myself, is we will continue to operate our own location so we really understand what things are like on a day to day basis and know what the franchisees are experiencing. Jonathan Green: When did you start mold medics? Tim Swackhammer: So we originally started back in 2018 and it was a successor business from a previous home service business that we were involved in.

Jonathan Green: And was your idea from day one that you were going to franchise it? Tim Swackhammer: Honestly not yes and no. We didn't intend to franchise it right out of the gate. The plan was to just really grow it. And as we were growing it, because of the experience with franchising, a lot of the pieces just kind of fell into place.

I understood from my experience with the other businesses that in order for us to be successful, we had to have really good processes and systems in place. And that naturally scaled well for franchising. So then whenever we looked at, okay, how can we grow this thing beyond just our market, franchising seemed like the obvious choice for us. It's been hugely instrumental in my life, in my father's life, and in my children's life.

And really when it came time for growth, the ability to present those opportunities to other people was kind of a no brainer for me. Jonathan Green: Yeah, I've seen some people who are convinced they have a good franchising opportunity because they've run a single location of something. Often it's like, oh, we ran a business on Times Square and it worked really well. And it's like, well, yeah, but that's not the same as running a store in Minneapolis, right. It's so different.

And sometimes that first location has such an advantage for the person's, like a local celebrity. So I've seen sometimes where it's too soon or they think it's a franchising opportunity because they're able to make it work, but they haven't really designed all the SOPs or thought of it as an instruction manual. So from your experience in your process, what are the things that you specifically put in place? What was that moment where you go, oh, yeah, this is franchisable. Like, how long into the business?

Tim Swackhammer: It was really about two years in that we started seriously considering it and looking at that as a growth model, and a lot of it came down. I mean, probably the biggest example, something we really, really struggled with was pricing of jobs. How do we properly price and bid our services so that they're priced competitively and also they're competitive. Excuse me. They're priced competitively, and they're also profitable for us.

Unfortunately, a lot of times whenever you're in home services and contracting, there's a lot of businesses that they'll price kind of just based on what everybody else in the market is doing. And when you run a business that doesn't work because your costs may be different, you may be more efficient, maybe less efficient, you may be doing other things that they're not.

So just going off that model, a lot of these businesses end up at the end of the month looking at their PNL and going, where did it all go? Pricing things the way that I think I should. And it just didn't work. So we really kind of scrapped the process that we were using and designed one from the ground up, that's very, very systematized to make sure that we're accounting for what all of our costs are that are going into it.

What is the competitive landscape looking like for pricing and building all that, so that the actual pricing process is pretty far removed from our sales reps. So whenever they're out in the field, they're just basically punching the measurables of a job into the program, and it's providing them with the price for it.

And that was really something that most other companies in our space weren't using, and it was a big game changer for us because that's something that is so immediately scalable and really started building a lot more systems around that process. Jonathan Green: I think that's something that's really important for any business model. A lot of new entrepreneurs don't factor in their costs or their overhead.

When my wife and I were running a hotel for a while, and she started making more and more food and adding the restaurant as part of the business. I was like, well, what does it cost you to make a breakfast? And she was like, I don't know. And I was like, that's not what. Tim Swackhammer: I want to hear. Jonathan Green: How much is an egg? How much is a piece of cheese? And it's the same thing.

I had a friend who was a jewelry maker, and she was like, here's what the parts cost. And I was like, yeah, but how many hours did you spend making it? And that's a really common early mistake, is to not factor in your own time, and then you end up basically working for free for your business, which is a really nightmare. Or there's people that, like you said, are really competitive when running a hotel.

A lot of the businesses would price based on each other, and then what you get is a race to the bottom. And there was a 90% drop in what a lot of people were charging. And I was like, all these rooms are run at a negative. It's like, not how I run a business. So we pivoted at, fortunately, the right time, right before all the hotels got shut down for two years. With COVID We said, let's pivot out. Tim Swackhammer: But that's really important.

Jonathan Green: That figuring out pricing, because I think that's where a lot of new entrepreneurs are really nervous to charge the right price or to say what their time is worth. So I think that's really I think one of the big vibes of a franchise is that you can say, no, the price is the price. I'm not allowed to offer lower price. It removes that ability to negotiate against your self. Now, when you're looking at someone who says, oh, I want to jump in.

I'm really interested in home service, or I'm interested this type of business model, I want to be a franchisee, are there certain things that you go, this person's not the right fit? And there are certain things you go, these are features we look for. But what are kind of the red flags or the not the right fit signals that you look for? Tim Swackhammer: So franchising is not all dissimilar from a marriage. It is very much a partnership.

You are signing a binding agreement that binds the two of you together for, at minimum, the length of the term and probably longer. So franchise agreements can be 5710 years. So first and foremost, it needs to be a personality fit.

It needs to be somebody that I can work with, that we feel comfortable talking and interacting and passing feedback back and forth that needs to be there before anything else, because if there's not that kind of fit, it just is naturally going to devolve at some point or later. So that's the biggest one. The second thing is really understanding what are their goals and what are they trying. To get out of the franchise experience?

Are they somebody who thinks that, yeah, I'll work it for a month or two and then now be sitting on a beach sipping my ties for the rest of my life and never have to really check in on it? Do they actually understand what the model is, what it's going to take, and how the operations work? There's nothing too crazy, but it's really about just making sure it's a good fit for both personality type and a good fit for the model itself.

Because at the same time, somebody who's a good fit for a mold medics franchise may be a terrible fit for a Jimmy John's. Jonathan Green: What's a good length of time for the get to know you period? Like between when you first start being interested in franchise or maybe you first call them, have their first meeting and when you sign a contract, because I see some people, they do it in like a couple of days or weekend. I'm like, that seems really fast.

Ask for a huge decision, but what is the right length of time, what's too long and what's too short in your experience? Tim Swackhammer: Again, it's going to come down a lot to the individual just because some people are excited, they're ready to pull the trigger and they want to move very quickly. Others are a lot more cautious. But within that realm, on the shortest side, you're going to be looking somewhere around 45 days.

Typically if it's moving much faster than that for the entire process, something a little strange is going on because during that process you're going to have a series of different calls, webinars to really get to understand and know what the business is. At some point you're going to have a discovery day, which is where you actually go out, and it typically is a day in the life of the franchise.

So you go out, you see what the business actually is, you get to meet everybody at the corporate office and really get to know and understand what's it actually going to be like once I sign. So that process just takes time. At the same time, if it's over nine months or a year for that process to go through, in all likelihood there's something else going on. There's some conflicting interests for the prospect or the prospective franchisee or they're just not terribly serious about moving forward.

Jonathan Green: I think that's really helpful because a lot of people entering their first franchise wouldn't know the window to look for and they can easily jump too fast or take too long. So that's really, I think for me, a really interesting piece of information. So that's really amazing. Now if people are excited by hearing about what you're talking about, like, oh, I think I could get into franchising, or this is kind of what I'm looking for.

They're looking for something where there's already a system that works and they're just taking that system to a new location or a new region where can they kind of connect with you online and find out more about the types of things you do and the types of things you teach about.

Tim Swackhammer: Yeah, so Moldmeticsfranchising.com is the best website that'll take you right to all of our franchising info where you can learn a lot more about specifically what we do, what our processes are, and really start that process of just learning how to become a franchise either. Well, that sounds really cool. Jonathan Green: Thank you for so much for giving so much of your time and talking so much about the entire world of franchises, something I find very interesting.

So I really appreciate you giving me so much of your time today. Tim Swackhammer: No, thank you. Thank you. I really appreciate it. I listened to a number of your podcasts before this going into it and I'll definitely be listening to a lot more going forward because there's some amazing content there. Jonathan Green: Oh, thanks so much. I really appreciate it. Thank you again. Tim Swackhammer: Awesome. Well, appreciate it. Thank you. Jonathan Green: Thank you for listening to the Serve No Master podcast.

Tim Swackhammer: Make sure to subscribe so that together. Jonathan Green: We can achieve true freedom. Announcer: Thank you for listening to this week's episode of the Serve No Master Podcast. Make sure you subscribe so you never miss another episode. We'll be back next week with more tips and tactics on how to escape the rat race. Please take a moment to leave a review@servknowmaster.com. Itunes. It helps the show grow and more listeners means more content for you. Thanks again and we'll see you next week.