Invest in a Franchise and Break Through Your Discontent

Transcription PNC Podcast Episode 426

Invest in a Franchise and Break Through Your Discontent

- Interview with James Hilovsky

John: I'm always looking for options for physicians who are looking to maybe diversify their income or transition to a different business. And I've talked about this before, but I think franchises are often a good opportunity for physicians to consider. I invited today's guest to talk about some of these issues and learn what we can from him. With that, James Hilovsky, welcome to the PNC podcast.

James Hilovsky: Thank you so much, John. I really appreciate you having me.

John: This should be fun. As I mentioned before we got on the interview, my wife ran a franchise for 16 years, and I thought it was fun. I didn't get actively involved, but I could certainly hear about the pros and cons from her perspective. Now, you've been doing this for a long time. Give us a little bit of your background, how you got into franchises, and then we'll get into maybe picking your brain for a while.

James Hilovsky: Absolutely. Yeah, I started out in the restaurant industry. Oddly enough, I worked many years in corporate with a corporation, fast food corporation called Del Taco. 25 years, working my way up from manager, regional manager, and was loving life at Del Taco. And then another company said, hey, come build our company, work with our franchisees. We have one store now we want to grow really fast. I was like, well it's time for a change. That sounds very interesting.

I went from there to the company. It was in the Pieology, Pizza Wars. So we started with one store. When I switched companies, it was about to be the same company, which I'll get into, but we had grown it up to 100 units. I helped support franchisees. I helped open their stores. Just really was their liaison between franchise world and the corporate worlds.

I love that. But then the largest franchisee came and said, hey, why don't you partner with us? I have a sports background and they were owned by two NFL football players. They needed someone to run their operations and be a partner. And that was really a no brainer. And so we did that. We kept the restaurants. We did our another ice cream franchise. We did our own coffee shop, did our own cookie dough concept as well.

Then one of the brothers, he retired from the NFL. And then the other brother got hurt, couldn't fulfill the rest of his contract. And they were what they were going to decide to do. And we all kind of decided it all kind of had enough of the restaurant business. It's a really tough business. And we just really decided, hey, it's time to do other things.

They wanted to go into tequila business. And that's what they did wind up going into. And I have nothing against tequila, but I have very limited knowledge of how to help them with that. And I then decided, hey, I'll go my own way. They're doing well with what they're doing. And I was going, well, should I buy into another restaurant?

Should I get into a different business? And then I was kind of looking at that. And then I decided I think really I saw the people that I worked with in the restaurant business that were franchisees and said they had no business owned in a restaurant.

They didn't have any idea what was coming. They had no idea what they were in for. And it was like I think I'm going to be a franchise consultant and help people find the right fit and franchise, which is really great because they don't really have to sell anything.

It's really here's the options. I think this is a great deal. Let me introduce you to the franchisor and let's talk about if it's a great fit for you. So that's how I kind of evolved into doing what I'm doing now.

John: Very interesting. Yeah. There's so many ways you can go in franchising, I guess, in terms of your participation in it. I guess I think I saw that maybe you've also helped some people convert their current business to a franchise. Are you doing much of that these days?

James Hilovsky: Yeah. Yeah. No, I still do that. I do a little bit of that still. Last one we did was a young lady in Utah. She has a pickleball. They build pickleball courts. Wow. And that was her business. And she decided, hey, I want to take advantage of this and get this out to franchise. So we helped her do that. And she's doing well.

Yeah, help small business owners that are looking to expand their business. Turn that into a franchise. And that's a really great model, too, because if you think about it, what it's going to cost me to open my second unit or second territory, or you can franchise it and build your brand using other people's money. That's pretty good. That's pretty good system.

John: For sure. Tell us about just to get to the basics for some of my listeners. What's the advantage of using a franchise? Let's say I'm interested in whatever topic it may be, whatever field it might be. I mean, I can open a business doing something consulting or selling a product or service. But what's the advantage of going the franchise route?

James Hilovsky: Yeah, that is a great question. A lot of people will go, wow, why should I franchise? Why am I going to pay them all this money to do this? It's a waste of money. I can do it on my own. Well, I would strongly disagree because in the franchise world, that franchise is already went through the potholes or the ugly part of the business when you're starting it.

They perfected that. They've been able to come up with systems and forms and just standard operating procedures of how that works and what the best system is going to be to do that, as well as helping with marketing, excuse me, or just getting their business off and going. They know like the tricks of the trade.

What I look as a franchise, they are the guardrails to keep you from going off the road. And to have that support, not only during opening, but ongoing support, it really makes a lot of sense as well as the franchisees in the system. They're like your teammates and you're going to learn a lot from the franchisees because they've gone through the same thing that you're going to go through. Really, you're getting support from the franchisor, but the franchisees as well.

John: Yeah, my wife would agree with that. In fact, every once in a while, I would ask her as she was going through this, building this job or this business, I said, if you're going to do it again, now you know everything about running this business. Would you go through a franchise again, or would you just want to start your own? And she always said, no, I like being part of that franchise. I get together with all these other franchisees. We share ideas, corporate helps. They have things that they've vetted for me. I don't have to go through that. So what you said it was certainly confirmed by her experiences.

James Hilovsky: Well, that's good. Yeah, definitely. I really, I think the way you also, you forget the part that the franchisees in the system are going to be very valuable of bouncing things off and just being great teammates really.

John: Okay. Now this might be a little tougher question for you thinking about physicians because my audience is mostly physicians, some dentists and others, but oftentimes either they're looking to diversify their income because they're kind of anticipating maybe retirement, or they want to slow, slow down a bit because they're burned out or something like that, or they're just ready to get out completely. Have you come across certain types of franchises that would appeal more to a physician or someone in healthcare?

James Hilovsky: Yeah, absolutely. I will say too, when, when you're looking physician that diversify the portfolio and all that, when, when you think of a franchise and semi passive in full disclosure you're going to have to put effort into it. And it's not the franchise isn't going to run the system. You've got to put the, you got to put the time and effort into it, get it up and going and hire the right people and manage the people. But yeah, definitely. There's lots of ways out there.

I had a nurse that was getting ready to retire. And she was, well, she wanted to retire probably she's very young, but she wanted to leave the leave the nursing world. And she was like, well, what do I do? And she fell in love with a franchise that does IV drips, administering IV drips and that. And she just loved that business. And she got into it, opened it up.

Her whole goal is to open three of them. So she opened her first one, but really appealed to her because she's still going to be able to meet clients and just talk to people and just kind of help them stay on the healthy side in that. So that's just kind of one example, but there's many in the physician's world of float therapy, chiropractic therapy, home care. Yes. The home care industry and senior care, that's a booming industry.

John: Have you run across lately these residential assisted living? I think there's at least one franchise. I don't think it's all that old, but it seems that's another thing that is becoming popular with healthcare related people who want to help seniors.

James Hilovsky: Yeah. That one, that one's a very popular, it is brand new where it's an actual facility. It does cost a little more. There's actually a franchise that came out, which is senior care, where it's like daycare for seniors. And that's actually, it's actually done pretty well. It's first year out of place in a couple of years. I personally haven't, but you just see different things that pop up that might be of interest.

John: With all your experience, what is it that you spend most of your time doing? If I'm a physician and I'm thinking of doing something, maybe I've already slowed down a little bit. Can I contact you? Will you help me find a franchise? Will you help me decide how I'm going to select a franchise? How does that whole process work for you?

James Hilovsky: Yeah. So they contact me, we work on one thing is a budget. We got to find out a budget and what are the goals? Is it going to be diversify that portfolio where we want to get a semi-passive, meaning we're going to hire a team to run the business to where maybe you could transition out of it once you, once it's up and running. Or if you're going to just totally transition we'll look at different options that are out there. Like I said, the budget support, and then look at industries.

There's some physicians that get out of it and go I love pets. I want to do something in the pet industry and they've done dog grooming. And, and it's just been just a great match of like, wow. And just so fulfilling because they're relaxed in comfort zone of spending all their time with dogs.

John: Now I can imagine someone would get online and say, I'm going to just start looking to see what kind of franchises are out there, but yeah, that would take forever. You can definitely, from what I know narrow down their search in terms of the area they want to go into, but you can, do you have like a list or do you have access to, let's say, purchasing an existing site for a franchise?

James Hilovsky: Yeah. I do new builds that I have. There's about, I work with about 600 franchise, many different industries, all different industries that are out there. Home based, brick and mortar you name it, that's there. And then resales, like you said, resale opportunities are those, those are kind of hit or miss because it's obviously got to hit the right territory and then be of interest to the client that's looking at resales, but absolutely they can, they can be had for sure. And that's a great way to get, get into, water it and the business has already grown. So it's not a bad idea.

John: And I think you kind of function somewhat you're like a type of broker, I guess, is one part of it so that you provide a lot of service. What do you provide and where does the cost to do that whole process come from? Who pays that?

James Hilovsky: So much like a real estate broker, but you do not pay any higher fees for using a franchise broker. It costs the client absolutely nothing. They don't pay any higher fees, like I said. And really some of the services really is, Hey, let's dial down. Let's help. I'll help you discover. Is this the right franchise? You might go, Hey I'm going to get into a medical billing franchise where all they do is bill medically, which is a great franchise because so few people really know how to bill properly. It's really tough.

John: It's like a nightmare.

James Hilovsky: A nightmare. Exactly. So really I would help them discover that like, okay, let's read in franchising. That's a document called the franchise disclosure document. And that gives you all the fees that are in there, different maybe some earnings claims and, and just kind of maybe help you review that. Give you kind of advice on this is how you read it.

I'm not going to read it for you because it really can't do that, but I can tell you how to read it. And then, okay, I understand that. Now, really how much money can I make? Because the franchisor saying this, the FDD is kind of unclear. So really let's talk with existing franchisees. It's listed in that document and ask them, would you do this again? How much money did you, when did you break even? What kind of support are you getting? Those are great questions.

And then taking that back to the franchisor and if they have any questions on the process there to answer, they need help funding. I get help hook them up with a funder. Really, really when you look at funding and franchising, it's, there's a HELOC you could do on your home.

You could do a 401(k) rollover. You could self-fund it or do an SBA loan, which typically requires about 20% of the purchase price down. But you know, I know all those lenders and can make a lot of introductions with that.

John: Maybe you can give us some examples, but there might be a small franchise fee and ongoing royalty. I mean, I imagine if you're talking like opening a McDonald's franchise, it's a whole lot different from opening a dog grooming franchise. So what is that scope of that possibility?

What does that look like in terms of, I'm assuming you have to kind of, it would depend on what the, let's say in this case, a physician, what kind of resources they have in terms of the money they want to invest, how long they can leave it in the business. And like you said, using a bank an SBA loan or something, maybe kind of give us a little feel for that.

James Hilovsky: Yeah. Let's just take dog grooming for instance, really in that franchise is going to be a brick and mortar. One of the more successful ones or newer ones that I dealt with is brick and mortar. And it's a subscription-based model, which is great because it's much like a car wash. It's, I take my dog in, this is what I'm paying a month. I could take it as many times as I want.

Really, really great model. The fee's really going to be a franchise fee. They're typically right around $50,000 for that. That's a one-time fee you pay the franchisor. And then royalties, they'll range from 5% to 8% typically, depending on the franchise and what that is. And then they might have a marketing fund of 1% or 2% that's out there.

And then they'll have a local spin that they're going to want you to locally spin, which you're going to want to do anyways to build your business. So other things the franchise is going to help you do, they're going to help you with finding that right location. They're going to use analytics. And here's the type of people we're looking at. We think this site would be great. You help with that too.

You could bring two sites to them and go, does this site work? And they'll say, yes, based on the analytics, absolutely. It's a go. That works out typically well. There's other dog roomies where there's mobile as well, where now you're building, you're just built, they're you do the build out of the vehicle and helping you secure that purchase as well out there. So really kind of depends on the franchise of where you dip into. Home service market is maybe home care and senior care. The biggest thing I think is really finding that person that's going to help you run the business and be the basically office manager and that person doing all the calls and setting everything up.

John: Yeah. Each person probably is kind of thinking, at what level do I want to shoot for something that's huge from the get go and requires a lot of planning? What would be the, let's say for the dog versus let's say some bigger one, what would be the timeframe one would take to go through once they decide, okay, here's the one I want to do. Would it be three months, six months, a year?

James Hilovsky: Yeah. Assuming we have the site, the site's going to be the biggest thing, finding the site and then the build out. You probably get the dog grooming up in three months, maybe six months max on that.

If you're looking at a preschool, you're probably looking at a year build out just because it's going to take a long time to get a bigger box and finding that right location is going to take a while longer. If you do a work at home one, that's 30 to 60 day turnaround where you're in business and going. When you look at the senior market of senior placement, that's right after you sign, you're doing that out of the home, that's fairly quickly. And then senior care as well, that's just basically getting the team up and getting out there and going. I would say on the senior care, the biggest thing, your holdup would be if you have to acquire the license.

John: Yeah. And I've mentioned the podcast before, My Wife's Business, but it was interesting because she signed up for the franchise and that year the state imposed the licensing process. They didn't even have one. That just automatically added another four or six months to the whole process. That was a surprise, but I'm sure the franchisor knew that because other states had already had the licensing requirements. So things happen.

James Hilovsky: Yeah, absolutely. And license, there's some things that are typically not out of the franchisor's control because they can't make the state work any faster, unfortunately.

John: Nope. Oh, let me ask you this. What are the things can people expect to happen? Does everyone in this process generally need to have an attorney review the legal part of the documents?

James Hilovsky: I would recommend it. I definitely would recommend having an attorney review it. A lot of the clients just kind of do it themselves because a lot of the FDD is really kind of straightforward. And then once you get to the franchise agreement and sign, I would have an attorney look over that. But there's different things that you could look at. You go, okay, well, it's straightforward.

It kind of depends on the franchise system. But yeah, it always is good to do that. I have that resource too that could give you a quick read over because it's always that peace of mind of like, oh gosh, what am I really signing? But there's a lot of people now that just go out and do a web search on it or pop it into ChatGPT and they give it the go and they're signing it.

John: Interesting. Okay. So if we go to your website, tell us about your website and what we can learn there about this process and about what you're doing.

James Hilovsky: Yeah. Well, it's really, you can find out my contact information, but on my website, there's a business assessment that anybody can take. And what that does is just kind of really gets really your skill set of, hey, you know what, you're a really great person in marketing or you're really great at customer service or just really all those skill set.

It can kind of tell me now they're great marketers. So anything that has to do with marketing, that would be a great one. And also we'll say, hey, you're an achiever, which means you could probably go into any franchise that's out there because you just have that attitude of, yep, I'm going to do this.

I have no fear. Let's go. And there's just really certain franchises that you might pick different, having that information of that, of that Zorical is what it's called, of a little assessment there that's really, really, really helpful on there.

There are some where you can do a franchise search where you can actually go through, it's just a few, but it's probably like 200 of the six out there, but you can look at the different industries and go, oh, wow, there is golf, indoor golf simulator franchises out there. I would love to do that and, and just look at the different industries or go, gosh, there's a red light therapy or different therapies that's out there. I have no idea that there was rejuvenating stem cells. That's a franchise that's out there and, and just a different if it really a franchise, just as a restaurant there, there's a lot of franchises for almost probably anything out there.

John: I remember seeing a few at a conference because, and they were kind of promoting this for physicians, but again, it wasn't necessarily healthcare, like lots of educational type of franchises, whether it's teaching supporting kids that are in school, need additional help or teaching something totally different languages.

James Hilovsky: Yeah. Anybody, as long as it can be replicated and you have great systems and you're going to be able to offer great support. Absolutely. You can franchise it. You mentioned the education and kids that, that is, that's a really great industry and preschools are just really great. They're there. The margins are super strong on and it's something that that parents always there's, if you're a really good preschool, there's usually a waiting list for you if you're in your, in your city. So, I mean, I really, that's a great one. Just anything that really has to do with kids is parents spend a lot of their money on kids.

John: Yeah, that's for sure. I think one of my kids went to a tutor was a franchise when she was in high school. Okay. Now what if I took you back to when you were, let's say, maybe you had all this business knowledge and you were back in your twenties, but I, when I asked you this now, so if you knew then everything now, what franchise would you go into? Would you go into the food again? Would you do something different?

James Hilovsky: I definitely would stay away from food. I wouldn't do that. And, and if I'm honest, I will tell you, I've never placed a client into a food franchise. I know that's weird. It is very weird, but I mean, the margins are really tough and you've really got to have the right, you have to really have a team that really be successful in the restaurant business. And it's a tough business. And I wouldn't do that. You know, really, it didn't exist back then, but I would go into something like now, if I was 20 years old, I'd go into something now.

My first franchise probably would be an indoor golf simulator franchise, just because I would have a lot of fun with that. I make a little bit of cash and then I would move on to diversify the portfolio and go into maybe dog grooming or into the kids education market or even health and wellness, all great, all great, great industries.

John: Now, do you help people get on the other end, get out of their franchise? Are you in that side of it?

James Hilovsky: I typically don't do that side of it. No, I don't. Really, if they go into the franchise or the franchise or obviously has a vested interest of who's going to take over. They'll help advertise it and they'll put it out to us, the franchise brokers. Hey, there's this great opportunity in this painting business in Michigan that does a million dollars a year. Here's the sale price. And then we can help with that.

John: That's sounds great. We're getting towards the end here. I've learned a lot. Boy, we hit a lot of topics in a very quick period of time, but I I know there's just, it's such an interesting thing to me and you can spend hours and hours just trying to look at like the different fields and different types, the setups and, and you know, what might align with someone's personality or their skills or the amount of money they have. So it's kind of almost endless. So, all right, tell us again, the website is the frandream at thefrandream.com. Is that right?

James Hilovsky: thefrandream.com is the website. And then my email is james@thefrandream.com. Happy to answer any questions or just hey, let's go on a search and look at different industries that are out there.

John: If someone's just feeling antsy and they maybe want to try something new, it's certainly not going to cost them anything. Just spend some time and explore that. And they might be surprised. They might see something that they'd never imagined doing. And if there's a way to do it and someone's already figured it out, why not?

James Hilovsky: Absolutely. You get all the support that you need and, and it really is a great system to get into and to try something else, try something new.

John: All right, James. Thanks a lot. I really appreciate being with us today. With that, I guess I'll let you go. I'll say bye-bye.

James Hilovsky: Thank you, John, for having me. I really appreciate it. And we'll talk soon.

John: All right.