Disrupting the Franchise Industry: Zach Beutler describes his forward-thinking approach

Transcription:

Leslie Kuban:
Zach, it’s great to have you. Welcome to the show.

Zach Beutler:
Hey. Great to be here, Leslie.

Leslie Kuban:
Zach, you are not new to franchising by any means, and I think you’ve got such a great story. Would love to hear, for our viewers who are meeting you for the first time, just tell us a little bit about your journey in franchising and where it started for you.

Zach Beutler:
Absolutely. I have a very unique background in franchising. I’ve been the part-time associate at a franchise, I’ve been the general manager at a franchise. I’ve been the franchisee. I’ve been the multi-unit franchisee, I’ve been the franchisee that’s failed and filed bankruptcy. I’ve been then rebuilt and built a $40 million multi-franchise conglomerate I guess you could say. Then I’ve been franchise development now franchisor, and we even own the marketing agency that we work with now. So I’ve kind of sat on every single side possible, I think that’s given me a unique perspective over the last 15 years.

Leslie Kuban:
Now that leads us to Horsepower Brands of which you are a co-founder, and you are what is called an umbrella company. We see this as a growing trend in franchising. Talk a little bit about what is that. What is in an umbrella company and why is that important?

Zach Beutler:
Well, there’s very few experienced franchisors. Most franchisors launch their franchise brand off of a corporate location that they typically have for 20 years. So once you get people to have the experience and the capital to scale, you can really as a franchisor provide a much more superior product to the franchisees by having multiple brands under the one umbrella.

Zach Beutler:
So Horsepower Brands, we currently have four active franchise brands. We’re about to make a new acquisition tomorrow in the glass space, and we are vertically integrated. We own the digital marketing agency that we work with, we own the call center, we have an accounting division, a legal division. We’re very much vertically integrated, and that allows us to provide a much more superior experience in the franchisees.

Leslie Kuban:
Now tell us a little bit about your … let’s go back to your history a little bit. You’ve been a part of brands when they were very young and worked to grow them to substantial companies that then experienced substantial exits. So, you’ve seen what it takes to grow and the investment that it requires for a franchise company to really grow to a point where the franchisees are succeeding and continue to grow in their success. Now, you’re bringing that forward into Horsepower Brands and the investment that you’re making into the brands that you continue to bring on.

Leslie Kuban:
I remember us talking about that and how it’s really head-turning what you guys are doing to prepare each of your new brands to launch as a franchise. I think that would be really informative for our viewers to hear, especially entrepreneurs who are thinking about franchising their business and are starting to learn about what it takes. So, tell us a little bit about what you guys are doing to acquire brands and then prepare them to grow into a nationwide franchise.

Zach Beutler:
At this day and age, Leslie, it has gotten easier and easier to technically start a franchise or franchisor business. I don’t know if that’s a good thing. Starting a franchise is very expensive, requires a lot of capital, and not just from a monetary standpoint, it also requires a lot of intellectual capital.

Zach Beutler:
On the franchise development side, and for those of you that aren’t aware of what that is, every franchise does three things. So, what I tell people is there’s the industry experience that it requires to be a good franchisor, then there is the franchisor model, which is to support the franchisees in helping them with their business in different climates and regions at different lifecycles, and then there’s franchise development. That’s how do you go out and find franchisees, take them through a process, educate them legally, and have them buy into the brand with the right expectations?

Zach Beutler:
So what I’ve noticed, and I’ve built out 10 different brands at this point past 100 territories, is that you really get to see the good and the bad on being on both sides. We just made an acquisition here in the last six months of a brand, Leslie, that they invested about $150,000 into franchising their business. We made the acquisition, built out the Item 7 and our franchisee investment is $500,000.

Zach Beutler:
So, the franchisees are going to be investing three times what that franchisor did to invest in launching a franchise. That’s just not how it works. So it takes you a while to not just award the franchise, but get them onboarded, trained, launched, and then have them grow in revenue for you to collect royalties. So a lot of people underestimate just how much cash it takes to do that, but also the type of people that you need to help you launch that franchise brand.

Leslie Kuban:
So, how many brands have you acquired now, Zach? What’s the plan that you are in the windshield here?

Zach Beutler:
Yep, so we have four current acquisitions that we’ve completed and a fifth one that hopefully should be done today or tomorrow. We’ve done that in a pretty short time, but my partner, Josh Skolnick and I have built two previous franchise brands to over 600 combined units. We did have the luxury of selling those brands off to private equity, and that’s given us the funds now to launch with Horsepower Brands, where we are the franchisor, we are the marketing company, we are vertically integrated and launched in every aspect. So that gives us, I think, a superior level of experience, typically a lot more capital than our competitors, but we have a unique perspective on how we build the franchise brand.

Leslie Kuban:
So, tell us about some of the brands, Zach, in your portfolio.

Zach Beutler:
Yeah, so I’ll tell you our things that we look for, Leslie. We look for service brands in proven industries where we don’t have to go in and figure out is this a new gimmick? You look at other brands out there that are in fitness or beauty that they might not be here to stay. We like service-based businesses. We want a proven market with a high customer demand, but a very fragmented competitive landscape.

Zach Beutler:
So in our past, we did trees, we did roll-off dumpsters, and we did those with success, but everybody told us that’s going to be really hard to franchise, and we had a lot of success doing that. At the end of 2020, we launched a roofing franchise and everybody said that it was too competitive and it wasn’t going to work, and we sold 200 locations in under 12 months of franchise development, launched that franchise and average unit volume is through the roof.

Zach Beutler:
So, that’s Mighty Dog Roofing and we’ve had a lot of success with that brand. The kicker is none of our franchisees are from roofing or construction, they’re executive-minded business people that want to further themself, create an investment vehicle that gets them to their goals. So, that one’s had a lot of success.

Zach Beutler:
Our second brand was Blingle!, which is an outdoor lighting company that offers landscape lighting, holiday lighting, and event lighting. We launched that brand about 90 days ago with a lot of success. I think we currently have around 12 to 13 franchisees with just under 50 territories.

Zach Beutler:
Our third brand is iFoam insulation, so spray foam insulation. I’m really excited about this one. If we could launch Blingle!, which is a lighting company right when LED lights became popular, that would be a significant advantage. We’re launching iFoam, which specializes in spray foam insulation, which is the most superior product in the space with the most fragmented competitive landscape in service brands that I’m aware of. So that business goes into existing homes, replaces the attic with new insulation and makes it more efficient. But that’s one that I’m really excited about.

Zach Beutler:
Then the fourth is Heroes Lawn Care. It’s an executive only model that offers the most profitable services in lawn care. So fertilization, aeration and over-seeding, irrigation repair, and then pet waste removal. So this is really three franchise brands in one, but it allows for an executive type owner to hire a GM and leverage those three services where you can cross-market and scale a little bit more aggressively.

Leslie Kuban:
You mentioned earlier at Horsepower, you also are providing shared services, and one of those is you own your digital marketing company. Talk to us a little bit about that. Why is that important? Why is that of benefit to the franchisees in any and all of your brands?

Zach Beutler:
Yeah, so the first thing is franchisors make their money on royalties, and to get money on royalties, you have to have gross revenue from the franchisees. So we’ve worked with the biggest franchise marketing company in the country, and we couldn’t ever get the results. So what we have learned is that the fancy agencies provide a great experience on the front-end, but the backend performance is there’s no accountability. So, that was something that we had to learn the hard way when we first started I think five years ago.

Zach Beutler:
We then kicked them to the curb and went out looking for the next partner. I bet we interviewed 12 companies and it was always the same story. They wanted to pass a large amount of fees on to the franchisee for no value, and they wanted to charge a lot for the website, which wasn’t necessary. So, it was really a money grab. When we asked about accountability, it was always the same thing, “Well, it depends, it depends.” We didn’t like that.

Zach Beutler:
So, we finally came across a company and they were so transparent that it made me want to puke. I remember me and Josh got off the call and I go, “This is the company.” We work with them with one of our brands, redbox+, and we turned that business in about 12 months to the largest lead generation platform in the roll-off dumpster industry in the country.

Zach Beutler:
What we realized when we started launching our next brand, which is Mighty Dog Roofing, is that we are not a typical franchise brand, we scale so aggressively. There are very few vendors that can keep up with that type of growth. So, we made the decision to acquire a controlling interest and move their entire leadership team here to Omaha, Nebraska, and it’s been an awakening.

Zach Beutler:
We’ve been able to pull back the curtains, understand what the margins are like, look at how do we guarantee performance, but provide a fair cost in the franchisee, but make it so that we’re the superior company within that industry? That led us to a fixed fee model where there’s no commissions. So, the franchisee spends a certain amount a month and all of their advertising budget goes to driving lead flow. For us, it needs to work, because we need royalties. So we’re in alignment with the marketing, with the franchisee. We both want the same things, and that’s results.

Leslie Kuban:
Would it make sense, Zach, for owners of one of the Horsepower Brands to own multiple brands in your portfolio? Some franchisors like that, some don’t. What camp are you guys in?

Zach Beutler:
We are all in on that aspect. So, one of the things that I often say is that focus creates wealth and diversification preserves it. So what we don’t want to do is have people get into this, that then start growing too fast and lose everything, which is exactly what happened to me as a franchisee. I grew from zero to an $8 million business at 20 years old and lost everything and then had to rebuild.

Zach Beutler:
So, what we looked at is how do we create a platform that attracts a different type of franchisee personality and acumen? That’s where we want multi-brand owners within our system, and we currently have two that own two franchise brands. Now, we have certain requirements that those franchisees have to meet. They have to be removed from their business, be in compliance and have to have 100% votes from the current leadership team of that brand. Then there’s certain financial requirements as well.

Zach Beutler:
But what we realize is to get to that point, we’ll have to provide a different level of support. So we get into a lot more entrepreneurship type activity, where in my experience a lot of franchisors give you a 200 page operations manual, and they expect you to just go out and launch that business model. Well, most franchisees are first-time business owners, and business ownership is not for the faint of heart, it’s not easy. It’s one of the most rewarding things you can do. So, we went to the drawing board and we say how do we provide more value and education to the franchisee to make better business owners, which allow them to own multiple brands?

Zach Beutler:
So, we came out with an entrepreneurship training platform that trains them on structuring meetings, compensation plans, to recruitment, all the way down to how do you host an actual meeting with your team and hold people accountable. So we get down to the basics and we follow what’s called EOS, which a lot of people understand and know about. So, we spend a lot of time on creating better entrepreneurs, people, and leaders to allow them to improve their skills so that their personal development always out-seeds their business development.

Leslie Kuban:
So, that’s the EOS Traction platform, yes?

Zach Beutler:
Correct. You can’t see it, but I have 15 books on my desk right now that we give out to every employee and every franchisee.

Leslie Kuban:
So that’s training people not just to be successful in a Blingle! business or an iFoam business, but it’s training on how to be a successful entrepreneur from day one. That’s very powerful. Congratulations on seeing how important it is for the entrepreneurial training, not just how to be in the outdoor lighting training.

Zach Beutler:
Yeah, Leslie, and you probably know. You have more experience than most anyone I’ve met in franchising, so you’re very well-versed. If you take the top 25% of performers in every brand, they could most likely have success in any franchise brand they pick, and that’s because they’re high performers. They’re the ones that are getting out there and they’re living, eating, and sleeping that brand.

Zach Beutler:
So, how do you make those franchisees not just more successful by giving them a better return on their investment, but how do you get them more return on their time? That’s one of our biggest focuses is that if we were to focus on a big return on their time, it’s much easier to get them a good return on their investment, because that means that we’re being very efficient and methodical with how we provide support.

Leslie Kuban:
Yeah, yeah. So we’re in Atlanta here, Zach, and I know you’ve done a lot of business in Atlanta over the years. Tell us about the brand opportunities in the Atlanta market for our Atlanta viewers on Atlanta Franchise Today.

Zach Beutler:
Yeah, we have a lot of space with every brand. I know with Mighty Dog, we have a few franchisees in market that are doing extremely well that can validate in the process. When we look at territory, Leslie, one of the things that’s unique about our brands is they are services needed by all forms of demographics. So a low income zip code, high income zip code, to commercial, to residential. There is good territory everywhere, but we are pretty much wide open with most of our brands in Atlanta and we’re going to have more brands coming out.

Zach Beutler:
So, one of the things that you’ll find in our process is our franchisees have one common thing when it comes to their personality or what their goals are, and that’s they have an empire builder mentality, they want to do big things. That’s how our organization is. We’re loud, we’re fast-paced, we’re aggressive, fearless, but we believe in creating structure and making sure that we can achieve that success long-term, and we pass that down to the franchisee experience.

Leslie Kuban:
Zach, I always like to close with a inspirational type question of who do you get inspiration from in franchising? You’ve met a lot of people, a lot of mentors, a lot of leaders along the way. Anybody that you tip your hat to that has helped you get to where you are?

Zach Beutler:
There’s a lot of people out there. Ryan Zink’s a fantastic individual that’s been a franchisor, runs an FSO. David Barr’s another gentleman that’s been with IFA and several others, Janet Bailey. Well, Leslie, I know you and I have known each other for a long time. You were there when I proposed to my wife for gosh sakes.

Zach Beutler:
One thing I like about franchising, Leslie, is that everybody helps everybody. Another franchisor that competes directly in our space could call us for advice and we give it to them. So, the more people that succeed in franchising just strengthens that industry. So, there’s a lot of resources in the culture and franchising is better than anything I’ve experienced in business.

Leslie Kuban:
You know what? Everybody says that, that franchising, it’s a big world, but it’s a small family at the end of the day and we’re there to help each other. Well, thank you. Zach, congratulations, and really look forward to seeing your brands continue to expand in Atlanta and the Southeast and nationwide. Good luck to you.

Zach Beutler:
Thank you. Thanks for having me, Leslie.

Leslie Kuban:
Folks, if our interview has inspired you to want to learn more about Horsepower Brands and their growth in the local market and the opportunities coming forth, you’re going to see a QR code come up on your screen. Just open up the camera on your mobile phone, and it will give you an opportunity to request information from Horsepower Brands and they’ll keep you informed of what’s coming next. Thanks folks for joining me on another episode of Atlanta Franchise Today, and I look forward to seeing you next week.