In this powerhouse episode of Executive Connect, Melissa Aarskaug sits down with Cliff Nonnenmacher,
former Wall Street pro turned franchise empire builder. Cliff dives into the truths behind franchising —
what works, what flops, and how high-income earners can use franchising to escape the grind and build
real wealth. From cartridges to closet companies doing $9M a year, Cliff pulls no punches in sharing
what’s hot, what’s dying, and why passive income is a myth.

Chapters:
00:00 – The Harsh Truth About Franchising
01:18 – Meet Cliff: From Wall Street to Franchises
04:43 – First Franchise Win: Printer Cartridge Empire
07:21 – What Wall Street Taught Him About Scale
10:01 – Franchising Trends You Need to Know
14:25 – 5 Winning Franchise Categories (Tools, Pets, Aging, Biohacking, Education)
21:03 – Why Franchises Really Fail
25:11 – The 41 Principle of Hiring and Leadership
28:29 – Should You Quit Your Job to Franchise?
32:36 – Passive Income Myths and Airbnb Reality Check
34:04 – Franchise vs. Building From Scratch: Who Wins?
40:14 – Exit Strategy: Multiples & Liquidity Explained
45:11 – Eye-Opening Franchise Funding Strategy (ROBS)
49:34 – Final Thoughts + Where to Find Cliff

00:00:00:00 – 00:00:17:19

There is an inherent risk and there’s a failure rate to franchising. A lot of this falls on the prospective franchisee or business owner and a lot of it falls on the franchisor who’s doing the vetting. You cannot buy a franchise in this country. Let’s start with that. Say you cannot buy one. It has to be awarded to you.

00:00:17:21 – 00:00:49:15

So if you’re awarding franchises to the wrong people, well, that’s on the brand. Like you did that to yourself, right? So if you awarded a franchise to someone who is marginally capitalized or doesn’t have the personality or the intestinal fortitude to be self-employed or you fail, if you awarded a franchise to someone and you didn’t really dig in deep on site selection, demographics, psychographics, discretionary spending, a135 mile radius of household income, you felt and I see this a lot, I see a lot of brands that don’t have a tight discipline when it comes to site selection.

00:00:49:17 – 00:01:17:19

I see a lot of brands and a lot of lawyers and a lot of commercial brokers who don’t protect the franchisee in terms of lease negotiation. Ever dream of ditching your 9 to 5 and owning your own business but not sure where to start. Today on the Executive Connect podcast, we’re joined by Cliff Nahmad Mature, a former Wall Street pro turned franchise powerhouse.

00:01:17:21 – 00:01:48:22

Cliffs built and scaled everything from fitness brands to Baba T Empires. And now he’s here to answer the big questions. Why does some franchise crush it and others flop? Do you need to quit your full time job and go all in and you can really buy an urgent care franchise without being a doctor? Buckle up. Cliff’s about to demystify the world of franchising and show you how to build your own wealth on your own terms.

00:01:48:24 – 00:02:19:07

Welcome, Claire. Well, thank you very much. Appreciate it. Happy to be here. Excited to talk to you. Now, your career started in an investment banking at Morgan Stanley before you made the bold move into franchising. What inspired you to pivot? That’s a great question. I was an entrepreneur my whole life, and I might say my whole life going back to age eight, breaking golf balls and doing random things, entrepreneurial thing.

00:02:19:07 – 00:02:37:16

So I knew I always wanted to be an entrepreneur. I started to make a little bit of money. I bought a satellite system and started trading day trading. My handle was Blue Chip. I was very early in the day, trading days going back in the nineties. And then I took my portfolio to Wall Street because now I’m like, I got to become an investment banker.

00:02:37:16 – 00:02:54:04

This is great. And I did love it. And I also viewed it as very entrepreneurial. I didn’t view becoming a financial planner or a broker as as a really a job. I didn’t view it that way because I wasn’t getting paid a salary. It’s like, look, you, you, you hunt and kill and drag back something to the cave.

00:02:54:05 – 00:03:24:19

You’re basically creating your own income stream. So I ended up taking a job with at the time it was Salomon Smith Barney who, as you know, is no longer around. It was acquired by Morgan Stanley. And I was with a team there called Comprehensive Wealth Management. We managed around 250 million. And I had my, you know, strange boss moment where I asked this very simple story that everyone listening can relate to, whether it I mean, leadership is just gone, in my opinion, in corporate America.

00:03:24:19 – 00:03:40:17

It’s just I don’t know what happened to it, but it’s gone. And I ended up working for a guy and I asked him for a printer. Now, remember, we’re million dollar producers and there’s about 60 brokers in the office. And I said, Could we get a printer on our side of the building? And he said, If you want a printer, you buy it.

00:03:40:19 – 00:03:59:06

So I did, not knowing that the printer cartridge was $250 every time we bought the cartridge. Now I know why they didn’t want to do it. They wanted one network, one printer for 60 brokers. In Naples, Florida, that’s where I was at the time. I lived in Marco Island and I was a investment banker at in Naples on Fifth Avenue.

00:03:59:08 – 00:04:20:19

So I bought the printer. I figured out with a soldering iron and a little copper pipe that I cut. I melted a perfect circle into the toner hopper, and I filled it up with aftermarket toner, put electrical tape on it, put it back in the printer, and yes, it printed three or 4000 more pages. So, Mike, what the hell?

00:04:20:21 – 00:04:43:05

So I went to Barnes and Noble and found a franchise in Australia that reverse engineered printer consumables, including the secret handshake, which is the chip on the tip of the cartridge that recognizes that to as OEM original equipment manufacturer. I bought the rights to the company from Australia and expanded the brand and the entire state of New York and Connecticut.

00:04:43:07 – 00:05:05:06

And that was my introduction to franchising. I literally left my investment banking job, bought the franchise. It was a master. So there’s layers of franchising. There’s the franchisor, which is the highest level, and then there’s the master, which is the second highest. I bought a master, which meant I had the right to open up as many locations in the state of New York and Connecticut as I wanted.

00:05:05:08 – 00:05:32:19

But uniquely, I also had the opportunity to sell the business to you or to anyone and generate a royalty and to keep part of the initial franchise fee. So it’s a little different model. And then I would support you, not the corporate corporate office, not the franchisor. I would. So there’s different layers of franchising Master And then below that would be an area developer, below that would be a multi-unit owner and then a multi-unit franchisee and then just a single unit franchisee.

00:05:33:00 – 00:06:05:16

So that’s kind of the hierarchy of franchising. That’s how I started. Ready to lead Smarter and Invest Wiser. On the Executive Connect podcast. We unpack executive strategies for wealth and influence. Hit the subscribe button now. Don’t just watch X. I love it. And I remember buying some of those cartridges at, you know, not HP cartridges. Back in the day I did turn my HP cartridges in and get, you know, the generic refilled cartridges in my office.

00:06:05:16 – 00:06:28:20

I totally remember that there were crazy times. If you extrapolated a if you extrapolated that in the nineties and early 2000s, if you extrapolated the ink in the cartridge, you were paying around 3 to 5000 a gallon. I mean, everyone was complaining about the cost of, you know, milk and the cost of gasoline. And it’s always amazing how we focus our attention on all the wrong areas.

00:06:29:00 – 00:06:53:16

Meanwhile, you’re buying a black or a tri color, you know, inkjet cartridge from Canon, Lexmark, HP. And if you extrapolate the milliliters of ink, you’re paying thousands of dollars a gallon. And it’s primarily water and it’s anticoagulation agents, anti corrosive agents. I mean, come on. It’s more expensive than Chanel number five. No. Right, Right. It’s not all of it.

00:06:53:18 – 00:07:21:11

So I did love the business. So tell me a little bit about let’s talk a little bit at how that time on Wall Street really shaped your approach to building a franchise. Like, what did you learn at Wall Street and that really helped you succeed in the world of franchise? That’s a good question. You know, do I attribute a lot of the teachings from Wall Street versus, you know, because I’ve owned businesses prior and let’s just say I made a living, right?

00:07:21:11 – 00:07:43:07

And I thought I was successful. Of course I was doing well, but I didn’t start creating wealth until I got involved in franchising. And and I think I would give franchising the industry and the brands most of the credit for how to scale a small business, how not to operate in it, but on it. Very big difference, right?

00:07:43:12 – 00:08:04:18

I don’t want to be standing behind the counter refilling check cartridges. I want to be working on the business. Great book. Written on that topic is Michael Gerber’s The E-Myth. Great book, because it’s a huge issue in our industry. People go, I’m a business owner. I bought a business and I have to tell them, No, you’re not. All you did was buy yourself a job because I went to your store and you actually make sandwiches.

00:08:04:20 – 00:08:29:16

The fact that you call yourself an entrepreneur and you’re making sandwiches tells me that you bought a job, not a business. Right? Because anything that requires your day to day involvement is defined as a job versus buying a business and hiring people and delegating. And the reason that the E-Myth is so important and the reason why working on the business, not in it is so important is because almost everyone is raised by someone that said this.

00:08:29:18 – 00:08:52:15

If you want something done right, you have to do it yourself. And that one line literally destroyed the thinking of, you know, tens of thousands of entrepreneurs who felt like they needed to drive their van, They needed to make the sandwich, they needed to advertise, they needed to wear all these hats. And it all it really does is suppress you and keep you poor and keep you in one one location.

00:08:52:17 – 00:09:17:07

That’s what it all it does. It just really suppresses the entrepreneur arena and keeps you down and keeps you bogged down in the weeds doing a $10 an hour job. So franchising gets you out of that. It is a huge mind shift that takes quite a while to get away from really the corporate indoctrination of thinking. Grid square Stay in your cubicle, stay in your lane.

00:09:17:11 – 00:09:40:01

You know, don’t do this. Be a team player. Let me distract. Like corporate America has their own talking points and then then there is entrepreneurship. And that’s a huge mental exercise to transition from a cubicle or a corner office to a small business owner. They don’t realize that until they do it. Yeah. Now, you said that I’ve heard that comment so many times in my career.

00:09:40:01 – 00:10:01:12

If you want to do, you know, do it yourself. So that’s so spot on. I love that. Now, I don’t know what it is. It seems like franchising is hot right now. I know there’s not a day that goes by and my social media on LinkedIn and someone’s not hitting me up to buy a franchise. So I know franchising is constantly evolving.

00:10:01:12 – 00:10:25:10

So what’s hot in the franchise world right now? Are you a high income professional looking for smarter ways to protect your wealth? The Texas Freedom Fund gives you the opportunity to invest in energy assets, leveraging proven fracking technology and prime access to global markets. With strategic oil and gas investments, you can build real wealth while benefiting from tax advantages under laws dating back to the Reagan era.

00:10:25:12 – 00:10:46:16

Take control of your financial future. Visit Texas Freedom Fund dot Executive Connect Podcast dot com. It’s a great question. Everyone wants to know what’s hot, right? So they want to know what’s selling, what’s moving. We help people. So at four an hour city, which is a Coke, the consulting firm that I co-founded with my partner Justin, we help people navigate the process.

00:10:46:20 – 00:11:08:23

What you just ask is the number one question, and then we have to kind of ground them a little bit and say, Right, what? What’s hot for this? What’s hot for an ex pharma rep is very different from what’s hot from an X engineer from Amazon, right? They’re very different business models and a lot of people just want to chase what’s hot instead of really saying, Well, what do I want?

00:11:09:00 – 00:11:26:20

What are my investment objectives? What’s my risk tolerance? What am I willing to invest? What do I need to earn? What I need to earn is very different from what the other person needs to earn, right? What phase of life is my And that guy has little kids chirping in the nest and I’m an empty nester, right? So these are very different phases of life.

00:11:26:20 – 00:11:53:07

And what we try and do with the investor is to say, time out. Let’s not talk about brands. Let’s talk about you, your spouse, your phase of life, your income needs, your retirement assets, and really just get big picture. And we wrap that up into what are your investment objectives? Let’s committed to writing. And now we have a strict adherence to say, okay, you want to be a dance recitals and soccer games, but yet you’re looking at a fast food franchise.

00:11:53:09 – 00:12:24:14

Those two stories can’t be true. You’re not going to be at any dance recitals, the soccer games, if you want to get in the food industry, you know, and things like that, or a white tablecloth food concept, it’s not happening. These are seven day a week, 10 a.m. 11 p.m. type businesses that do not bode well for a lifestyle versus a five day a week business, you know, kicking off six figures of net income that could give that parent or that spouse the, you know, the freedom and flexibility that they wanted when they got here, because right now everyone wants their life back.

00:12:24:16 – 00:12:47:06

And COVID was a reset button and everybody realized how they adapted in a miserable situation like flying every week or commuting every week and doing all these crazy things for work. And then when COVID hit, they were like, Wow, I never realized and we’re human. It’s the human condition. We acclimate to terrible situations, people acclimate to being physically abused and really like they acclimate to it.

00:12:47:06 – 00:13:04:20

It’s nuts. It’s because it’s a self-preservation mechanism that makes us say, I have to provide for my family. Therefore, standing on a train platform in the snow at four in the morning is good. No, it’s not. It’s a horrible life. It’s the shittiest life ever. I mean, I don’t know why anyone would do that, but they do. And I grew up in Long Island.

00:13:04:20 – 00:13:22:20

I used to see these guys standing on the train platform at four in the morning. I’m like, You’re better than I am. I’m not doing that. Like, that’s never going to happen. You’ll never see me catch in a train to then catch a bus to then catch a subway. I’ve always said, if you want to destroy instantly the quality of your life, commute period, just commute, you know, destroy.

00:13:22:22 – 00:13:43:21

Absolutely destroy the quality of your life. And I deal with these people every day, two hour, two hour round trip to our each way commutes to work in a car like these people are miserable. They’re absolutely miserable. And they’re only doing it, obviously, to provide. But to your point, because people want answers, they don’t want that answer. They don’t want the investment.

00:13:43:24 – 00:13:56:22

Right. It’s like how to lose weight. They just want a pill. They want to pick a McGreevey. They don’t want to hear you got to go to the gym. They don’t want to hear. You have to they don’t want to hear the long haul to get what they want. They want instant because we live in a time with instant gratification.

00:13:56:22 – 00:14:27:17

No one wants delayed gratification that no one. So in my world, what we’re seeing is trends. And some of those trends are buying businesses that require the use of tools, a tool being a squeegee or a pressure washing wand or a drill or roofing siding, plumbing glass, right window replacement, flooring, wallpaper removal, anything requiring a tool you’re going to win because we have destroyed a man’s ability in this country to use a tool.

00:14:27:18 – 00:14:46:16

We feminize them, and we’ve been feminizing men over the last 20 years, right? It’s just the reality. We have feminized them to the point that their testosterone levels have plummeted, their sperm counts plummeted, and they can’t even reproduce anymore. And now you have two presidents talking about IVF at the same time. Think about that name one time in your history.

00:14:46:17 – 00:15:11:07

I’m 53. Name one time, one presidential election that you had two sides of the aisle talking about IVF at the same time. That’s how bad it has become. A male sperm count has dropped 50% in the last decade in this country. Think about that. So what’s happening? I don’t know. I just know what is occurring and how to hedge it and how to hedge it is to invest in anything requiring the use of tools.

00:15:11:11 – 00:15:35:01

You’re going to win. A lot of people don’t know this. I ask them this all the time. I go, I represent a closet organization franchise. Okay, That’s on its face. Sounds cute and fun. I go, What do you think the average revenues are? Every client answers the same investment range, 750000 to 1 million. That’s the answer. The answer is 9 million.

00:15:35:03 – 00:15:59:20

9 million is the average revenue of a closet organization franchise. So people don’t realize that these non sexy businesses are the ones that make the money. So there are five trends I’m going to go through with you. One, anything involving the use of tools, we refer to it as the feminization of men in America. Second category, since we can’t repopulate and a lot of them don’t want to repopulate, we humanize pets and animals.

00:15:59:22 – 00:16:28:20

So anything involving the humanization of pets and animals, you’re going to win, whether it’s boarding, grooming, daycare, training, retail, it doesn’t matter to me. It’s a $150 billion market cap. Pet care, right? Third category. This country is aging and it’s aging rapidly and we’re not repopulating. You’re starting to see a theme here. And these themes are destructive, which is why Elan stands on the high as hell, telling everyone, have babies.

00:16:28:23 – 00:16:48:03

We don’t need to depopulate, we need to repopulate because we’re an aging population. And if you want to know if anyone wants to know, well, what’s the problem? If we don’t have babies, then what’s the problem? If a country ages look at Japan because they have now lost two decades of productivity to decades of creating wealth, their real estate market has been annihilated.

00:16:48:08 – 00:17:08:16

Just look, if you want to look at an ancient civilization at one way older than America and you want to know what happens when you don’t repopulate, look at Japan and really study Japan for the last 20 years. It’s not a pretty picture. The government is paying people to get married. They’re paying people to have babies. They have to repopulate because you need youth to care for the elderly.

00:17:08:16 – 00:17:30:07

It’s obvious you can’t have seniors caring for seniors. It’s like one’s breaking a hip trying to save the other one from break. It doesn’t make any sense. So anything involving the humanization of pets and animals. Next is the silver tsunami, the aging of America right there. They claim that there will be more diapers, adult diapers sold in America than baby diapers in the next decade.

00:17:30:11 – 00:17:58:05

Think about that. That’s frightening. That’s just scare the crap out of everybody. So anything involving assisted living, assisted living doesn’t mean a hotel. It means a residential property. You could get involved in residential assisted living for the price of of of a single family home that you convert into assisted living. Have plenty of brands that do that or home care non brick and mortar home care right or mobility or non-emergency medical transportation there or daycare, adult daycare.

00:17:58:05 – 00:18:25:15

There’s so many ways and franchising that is backfilling all these trends that I’m sharing with you next would be because we’re aging once again, you’re seeing this theme. You now have anti-aging, you have biohacking, and you and I are doing a podcast right now, and we live in a time with Huberman, the Asbury Attia. You have all these anti-aging experts running podcasts, teaching people how to biohacking, how to live longer, and how to reduce their metabolic age.

00:18:25:17 – 00:18:46:00

There’s a program right now on Netflix, which is called Don’t Die by Brian Johnson, who spends $2 million a year basically biohacking and anti-aging and reducing his metabolic age by, I don’t know, between ten and 20 years. He’s so someone met with him and said he has the skin of a ten year old, the skin of a ten year old.

00:18:46:02 – 00:19:05:09

I mean, you have to see this guy. And he posted. So if you have if you’ve not seen it, he posts everything he does on his website. The Brian Johnson don’t Die website. So anti-aging, biohacking, beauty, vanity. I don’t care if it’s hair, nails, eyelash lounges, Botox injections, hair extensions, I don’t care anything. And I want to feel good.

00:19:05:09 – 00:19:33:07

I want to feel proud. I want to feel sexy. I want to feel better about myself. That whole category. I want to feel young. I’m in. And then lastly, and again, this is my opinion, I think that public schools have failed miserably. A lot of the feminization of men has a lot to do with public schools. They have killed home economics, they have killed art, they have killed sciences, they’ve killed sports, they killed welding, they killed woodshop, they killed everything to make you a productive human being and to make a man manly.

00:19:33:12 – 00:19:56:20

And with all that being said, franchises are now backfilling all of this stuff. So any you want science, technology, engineering, math, art, architecture, robotics. What do you want to do today with your child? Franchising has now backfilling all of it, including music, including cooking everything. So those are the trends we focus on. Why? Why do we focus on those five?

00:19:56:22 – 00:20:21:17

They are A.I., which is the biggest risk to everyone employed and self-employed is A.I. is a massive risk to everyone and Amazon, of course, any online commerce, the businesses I gave you have really nothing to do with AI risk for at least the next ten years, I would say. And Amazon. And that’s one of the reasons why we advise our clients prudently on focusing on those five areas.

00:20:21:19 – 00:20:44:09

I know it’s a very long winded answer. No, that’s great. I love it. A lot of it I agree with. So let’s talk a little bit. So that’s kind of a areas to focus on what people should be paying attention to. But I know in our area I see a lot of franchises stirred up in less than a year or, you know, once their lease space is done, they close.

00:20:44:09 – 00:21:03:16

So let’s talk a little bit about you know, I know you talked a little bit on why it’s a golden ticket, but I think what’s the biggest reason that franchises fail and how can, you know, aspiring owners avoid these pitfalls? It’s it’s a great question. And I’m glad I don’t want to go on shows and it’s all like perfect world blue sky.

00:21:03:16 – 00:21:23:16

Right. That there is there is an inherent risk and there’s a failure rate to franchising and a lot of a lot of this falls on the prospective franchisee or business owner and a lot of it falls on the franchise or who’s doing the vetting. You cannot buy a franchise in this country. Let’s start with that. Say you cannot buy one.

00:21:23:21 – 00:22:01:11

It has to be awarded to you. So if you’re awarding franchises to the wrong people, well, that’s on the brand like you did that to yourself, right? So if you awarded a franchise to someone who is marginally capitalized or doesn’t have the personality or the intestinal fortitude to be self-employed, well, you felt if you awarded a franchise to someone and you didn’t really dig in deep on site selection, demographics, psychographics, discretionary spending, a13, five mile radius of household income, you felt and I see this a lot, I see a lot of brands that don’t have a tight discipline when it comes to site selection.

00:22:01:13 – 00:22:21:24

I see a lot of brands and a lot of lawyers and a lot of commercial brokers and a lot of who don’t protect the franchisee in terms of lease negotiation. So there’s a lot to unpack in this one. QUESTION Okay, There’s a lot here. We could start with runway. Why did this person fail? It’s a great brand. Why did they fail?

00:22:21:24 – 00:22:43:16

Great brand, great location. They ran out of runway. They were undercapitalized. They should never have done that deal of that size without gathering assets, gathering funding from either third parties. The SBA or someone like you just didn’t have enough runway. And I see it a lot in this business where a great brand, great person, excellent location. Why did they fail?

00:22:43:16 – 00:23:01:21

They ran out of capital. They could not get through the long break even cycle. They couldn’t get through whatever cycle. Some people start businesses during recessions. Some people started during COVID. Like you have to be able to weather that cycle and a lot of people aren’t prepared for it. They also understand their global debt service of their personal life.

00:23:01:23 – 00:23:21:21

I buying a business how many kids you have to they’re both entering college. Time out like that is a huge financial burden you’re going to pay for. Two kids are in college and you’re starting a new business all the same time. Like, do you have the capital for that? Let’s talk about it. So number one reason why a lot of people do fail, they just run out of gas, they run out of runway, they run out of capital.

00:23:21:21 – 00:23:44:00

And the sad part is the finish line is right there in front of their face. That’s the saddest part that I see. They’re so close to break even, but they can’t handle it anymore. Lease negotiation, the ability to bounce from a bad space, they just don’t have those options. A lot of these brokers will jam people in straight ten leases with personal guarantees.

00:23:44:04 – 00:24:10:23

You’re going nowhere. And it’s sad because a lot of times people recognize this location’s no good. They recognize that the anchor tenant is moving a Whole Foods in L.A. Fitness, a big box retailer, is leaving, which is driving it all the foot traffic. The small business owner can’t pivot. They signed a crappy lease. When you work with us, we have a 22 point mandate for negotiating commercial leases to mitigate manage those risks, including personal guarantee risk.

00:24:11:00 – 00:24:33:12

Another thing is, and I love this, by the way, attitude is everything. When you talk about failure, people for self preserving reasons like to blame everyone else for why they failed, like the woman or the person at McDonald’s that burnt themself that wanted to sue McDonald’s because the coffee was too hot. Like you hear these stories saying, you go, Is anyone accountable anymore?

00:24:33:15 – 00:24:52:14

And the answer is no. Well, is everyone to blame for everyone else’s failures? Yes. Like, that’s all we do today is blame. But let’s start with this. And it’s one of my favorites. And it’s from Jack Welch. Jack Welch wrote a book called Winning, and he stated in the book that the number one question from the audience is how do you hire people?

00:24:52:16 – 00:25:13:11

And he came up with a formula that I have been using my entire career, and I want to share it with you. He calls it the 41 principle. This has a lot to do with a successful human being, a successful business owner or employee. The $0.41, the first E is energy. Do you have energy? Yes. Great. You check that box, but you’re and you have energy.

00:25:13:17 – 00:25:35:05

Can you energize others? Can you energize the team that’s supposed to be following you? You’re either the leader or the business owner. You’re running your own culture. Can you energize others? Yes. Okay. Thirdly, can you execute? Franchising is all about flawless execution of a proven business model. It’s a roadmap. It’s a blueprint. All you have to do is execute.

00:25:35:10 – 00:25:53:23

You don’t have to create the logo. You don’t have to federally registered the trademark. You don’t have to do anything. You have to create a website. You literally don’t have to do anything but execute flawlessly off the model. Third E is execution Next E, which I find most leaders are weak in this category. Do you have edge? Can you have difficult conversations with people?

00:25:54:02 – 00:26:08:12

Most people are cowards. They don’t want to have difficult conversations. You know what’s sad? Most small business owners will let someone crap on them and I’ll ask them, Go. Why do you let them come in late every day? Why do you let them leave early? Why do you let them sit on their phone when customers are walking by?

00:26:08:15 – 00:26:23:08

You want to know? The answer is I don’t want to have a conversation with them. What if they quit? My attitude is what if they stay right? So there’s such a different logic here. You have to have a little bit of edge to say, Come here, you’re demoralizing the staff. You’re coming late, you leave early, you’re on your phone.

00:26:23:12 – 00:26:44:21

I’m not going to tolerate it. You’re going to either get in line to our culture or you’re going to get out. But most people can’t do it. And the last one is P for passion. You have to believe in something. Everyone wants to straddle the fence. They want to be neutral. They want to they don’t want to say half the things I just said because they don’t want to offend anybody and they want to silence the intelligence so we don’t offend the stupid.

00:26:44:23 – 00:27:17:14

You can’t live like that. You can’t run a business, you can’t run a department, you can’t run a company like that. So that has a lot to do with why did that local restaurant fail? There’s a lot to unpack there. I don’t know the answer to it, but I do know why people fail. And what I just said has a is a lot of the reasons why people don’t make it, whether it’s energy, whether it’s being a leader, whether it’s creating the right culture, whether it’s having difficult discussions, whether it’s being passionate about what you’re doing or what you’re executing at the local level, you need buy in from people to execute your business.

00:27:17:20 – 00:27:39:04

And a lot of people just don’t know how to do it. They’re weak to to you. It’s so true. I you’re maybe think about my one of my first bosses. He was 100% Italian and he told me asked you need to do this. And he was so direct. I loved it because I still to this day, what, 20 something years later, he’s my first boss I ever had.

00:27:39:10 – 00:28:00:09

I still do things the way he said. And one of the things was I would show up exactly on time. And he’s like, Ask OG if you’re on time, you’re late. You got to put your stuff away, fill up your watch, do all these things before you start your day. And that simple person talking to me, 20 what was it, 25 years plus ago?

00:28:00:11 – 00:28:29:22

And now I show up everywhere early and I’m always ready at the exact time. But had he not had that conversation with me and had he not taught me to do more than what I’m paid to do by him because he was a franchisee owner, he was the owner of where I was working, I would not be. I’ll have a lot of the same characteristics you talk about today, but it quite it’s switching gears.

00:28:29:22 – 00:28:57:00

I know a lot. I see in Austin we have some people that are doing full time ownership, part time absentee ownership. You know, tell us the story of like, do I quit my full time job and go buy a franchise. Now, what does that look like for people that are, you know, maybe high income W2 employees that are interested and, you know, they do have that cash in the bank and they are ready to make that jump.

00:28:57:00 – 00:29:17:06

Talk to me a little bit about the three differences. Yeah. So I think the right way to answer it is if you’re going to buy a business, depending what you invest, let’s just say you’re investing several hundred thousand dollars, you know, three or four or five. I think you should quit and you should fully immerse yourself in your investment and get that business successful.

00:29:17:07 – 00:29:42:06

So I think that’s the the right answer. Is it is it realistic? Right. Is it realistic? Is now the next thing? And in reality, now a lot of people now it’s like I’m head of household or I have the health care benefits or we need the cash flow. But there’s just their risk appetite is different. So a lot of people do want to be what we refer to as being half pregnant, right?

00:29:42:11 – 00:30:06:04

They want to keep their career and they want to own a business on the side. It is very normal. It’s it’s common. And and we allow it with the right person. So I’ll work with someone like that if they have the right amount of capital, of course they have the right amount of cash flow coming in. There’s no there’s no sense in keeping your day job if you’re making 60 and you have to hire a manager that you’re paying 80 like that doesn’t even make mathematical sense.

00:30:06:04 – 00:30:28:10

So sometimes these are just simple math problems. Sometimes their risk appetite problems, sometimes our phase of life problems, it’s all sorts of things that we have to navigate. So you have I’m going all and quitting my job, fully immersing myself. Then you have I’m going to I have 20 hours a week of bandwidth. I’m going to hire a manager and I’m going to be semi absentee.

00:30:28:12 – 00:30:47:06

Thirdly, would be fully passive and I don’t believe in it and I talk everyone out of it. I don’t have commissioned breath. I’m not here to hurt anyone. I’m not here to put people in business to destroy their life. If someone believes truly that business ownership is fully passive, I mean that that they’re just naive to what business really is.

00:30:47:06 – 00:31:04:20

And, you know, they don’t understand the inner workings of actually running a small business in their community. So I don’t let people go fully, fully passive, which is keeping my career just making investment. I’m going to hire someone to let them run it. It’s never going to work. Chances are, I would say 90% of the time we’re probably going to fail.

00:31:04:22 – 00:31:22:06

So and I don’t even think running an Airbnb today is fully passive. Think about that. So if I’m if I’m building my argument for running a small business that’s not fully passive, someone would build an argument. Go, You know what? He’s right. I should just go buy a piece of real estate that’s fully passive. Good luck with that.

00:31:22:08 – 00:31:43:08

Good luck with that. If you’re going to do a high frequency turnover at Airbnb, a lot of those people got a lesson and the definition of passive. Now they’re all. You’re in Texas? Yeah, you’re in Texas. Austin is a ton of people dumping their Airbnbs. The amount of properties for sale right now for these Airbnb investors is at an all time high.

00:31:43:08 – 00:32:07:04

They’re getting crushed. For for that reason, I thought this was passive. It’s not passive. So anyway, so real. That’s a real good example because I know a lot of people during the pandemic that had a place that moved out in the suburbs because they didn’t want to be where they were at and they rented out their place and now they’ve Airbnb did exactly what you just said is happening.

00:32:07:04 – 00:32:36:12

It’s like every day they’re trying to flip a house, clean a house, change the sheets. You know, tenants are breaking stuff. They’re taking stuff, keeping track of everything, replacing the forks. So I hear that’s happening a ton in Austin. You’re spot on right now. Now, compare that to compare that to I bought an ETF, compare that to I bought the S&P 500, compare that to I bought a piece of art or I bought crypto or I bought a mutual fund or a bond that you want passive that’s passive.

00:32:36:14 – 00:32:58:18

Just invest, set it, forget it, hire a broker, let them deal with it. So that passive word is we’re writing a book right now called Beyond the Brand for this exact reason. Everything you and I are talking about today is beyond the brand. Like you don’t hear me riffing brands. Your audience needs to buy this. They need to buy this brand, that brand brand A, B, and C, no brands.

00:32:58:20 – 00:33:17:21

Prognosis before diagnosis is malpractice. There’s no reason to talk about brands. Brands are like prescriptions. I don’t even know what you need yet. I don’t know what’s wrong yet. I don’t know where your pain is yet. Let’s not talk about brands. Let’s talk about you, what you want, your investment objectives and that that to me is the best part of what we do.

00:33:18:02 – 00:33:44:00

And that’s why we wrote the book, is to really get people thinking differently and expand their mind and to semi absentee write all in passive, all that stuff. It’s a good conversation. Yeah. And it made me think about some people. I know the kind of what you were talking about got you know realize that they’re paying dumb tax and they lost a lot of their savings on, you know, starting a business or buying a business.

00:33:44:00 – 00:34:04:15

And they really jumped in headfirst without a plan. So I want to talk to you a little bit about the value of talking to a franchise consultant and before making that purchase, can you share a little bit about the benefits of that? Definitely, yeah. We’re not all equal like every profession right now. No accountants equal, No doctors are equal.

00:34:04:15 – 00:34:25:06

We’re not all equal. I think a prospective investor wants to align themselves with someone that has been there, Right. Has that wisdom, has that business experience? Their heart needs to be in the right place. Too many people today are just so comfortable lying to your face and not advising you properly. And I think that we bring all that to the table.

00:34:25:08 – 00:34:42:21

We bring a lot of integrity to the table. We bring our battle scars to the table. We bring a lot of brands that we’ve I’m on my 12th, you know, company in my fifties now, and I will continue to invest in brands and sell brands and scale brands. I love it. I’m obsessed with it. So I think we bring a lot of that to the table.

00:34:42:23 – 00:35:02:12

I’m huge. On managing risk. It’s a huge thing that, yes, I’m entrepreneurial and people view me as a risk taker. I, I spend a lot of time identifying and managing risks. I spend a lot of time on the unintended consequences to try and manage some what if scenarios, not all of it. You’re not going to manage all of it.

00:35:02:17 – 00:35:19:21

You’re never going to be 100%. But I do spend a lot of time on managing risk and I share that with our clients. Like I said, about the least negotiation, I’ve learned a lot over the years about brick and mortar lease negotiation, especially starting my career in New York, was some of the most difficult landlords on the planet are in New York.

00:35:19:21 – 00:35:44:00

I mean, they’re very challenging to deal with. I’ve learned an awful lot and then reshaped that and created my 22 point mandate for lease negotiation. So the you know what you’re asking, Who do you hire? Number one, they should work for you for free. Let’s start there. No one should be charging for their services in my world. So my world of franchise consulting is a free service.

00:35:44:04 – 00:36:02:10

No different from a realtor. Okay, Realtors are paid by sellers. So we’re franchise consultants. Franchise consultants are compensated by the seller, not the buyer. So let’s get that out of the way. It’s a free service. You don’t sign anything. You don’t. You’re not. I tell every client you’re not buying anything. I want to get that out of their vernacular.

00:36:02:10 – 00:36:21:04

And I think it’s powerful to tell everyone, even listening. If you work with us, you’re not buying a franchise. You are not number one. You can’t buy a franchise. The brand has to like you and award it to you. So let’s get buy out of your vernacular. All we’re doing is determining over the next three, four or five months is franchising an investment vehicle for you?

00:36:21:09 – 00:36:40:11

Is this the right fit? Do you want to follow the model? Do you want to stay inside the curbs? Are you too entrepreneurial? Many of the people listening are so entrepreneurial that I would tell them do not do this. You’re going to be miserable. Elon Musk does not belong in franchising his way to entrepreneurial. All these successful business people that we know do not belong a franchise, that they’re too entrepreneurial.

00:36:40:16 – 00:37:01:13

They want to reinvent everything. They want to play with the widgets. They want to invent things like a franchisee that joins a franchise, doesn’t want to do those things. They would just want to execute. They want to collapse time, create wealth, replace their income, right? Create generational wealth, have a legacy for the kids, secure spouse’s future, intervene in a life of a child.

00:37:01:13 – 00:37:21:02

They want to invest for those reasons, they don’t want to reinvent things and create patterns and and all that stuff. So working with a consultant will keep you out of trouble. They’ll help have you focusing on brands that align with your investment objectives. They’ll help you manage risk. They’ll hold your hand through the whole process. They’ll tell you that you need get that evaluated by an attorney.

00:37:21:07 – 00:37:42:00

They’ll guide you in the right way. The right attorney, not a divorce attorney, not a real estate attorney, a franchise law attorney. Very big difference. Very big difference. Traditional attorney will tell you to run. If they read a franchise agreement, a franchise attorney will say this is ordinary, customary. How could those two stories be true? Run for the hills and this is normal.

00:37:42:02 – 00:38:03:03

That’s why you want to make sure you align yourself with the right professional advisors so you don’t have all that unnecessary fear. And what’s very interesting, if you work with the right consultant, they have experience in dealing with fear. Fear is is the reason most people don’t move forward with literally everything in their life, whether it’s approaching a woman or whether it’s approaching a guy.

00:38:03:03 – 00:38:25:11

Right. Or whether it’s approaching your boss for a partnership or a raise, or whether it’s buying a business or whether it’s having a baby. It’s all fear. It’s all fear. And you need to learn how to observe it, not let it control you and overcome those fears and a good franchise consultant will say you’re entering the stage where it gets real and now you’re feeling the fear.

00:38:25:13 – 00:38:45:09

And a lot of people will manifest fear in different ways. Their number one way is to blame their spouse. That’s just letting you know double. It really is number one out to doing anything is the spouse say, well, let me do it. They think it’s a horrible idea. You know, whoever he or she, it doesn’t matter. The spouse always brings a hand grenade to the closing table.

00:38:45:11 – 00:39:07:01

Then it’s blaming the accountant, her lawyer, then it’s blaming their brother in law, who’s a plumber, who’s very excited. Like we hear all these stories and it goes in this order. It’s interesting how fear manifests itself. And what they don’t realize is we already know what you’re going to say because we know all these things that people do to get out of changing their life and they want to live in the past.

00:39:07:05 – 00:39:27:16

Fear is a big deal. We don’t spend enough time on it. We really don’t, because it really just stops people from living the best life that they could possibly live. Retiring on compromise and living the best life and creating a legacy for their children and grandchildren. These investment fears hold them back. I’ll tell you, as you hear talking about my husband just was fearless.

00:39:27:16 – 00:39:46:20

He just assumed he was my husband. I’m like, great. So it is spot on. And he that’s how he does business. Fearless. Go, go, go. And it really a muscle. And it’s amazing to see what happens when one can live out of place, of being fearless and really sit in that. So now you got to help me answer.

00:39:46:20 – 00:40:14:01

I need some for our dinner parties. We have this debate at our dinner parties. We have friends that own franchises and friends that have built businesses from the ground up. And we get into this debate on who is smarter and who’s making more money. And so maybe you can give me some insights on the advantages of franchise ownership versus building a business from the ground up.

00:40:14:07 – 00:40:36:03

Yeah, that’s a good question. So I commend all of them. Anyone who is entrepreneurial, I have the utmost respect for. Right. So I’ll just as a blanket statement, I commend both them. Who’s better or whose wedding really largely comes down to the person that’s executing the model. I know people that own one subway, I know people that own 100, I know people that own one tax accounting service.

00:40:36:03 – 00:41:00:01

I know people that own 250 Liberty, Liberty tax franchises. So a lot of it has to do with the person, I believe. I believe that franchising is the probably the best methodology for creating wealth ever that has ever been created. If you think about wealth creation. Second, that would probably be life insurance, right? But you have to die to receive the benefits of it.

00:41:00:03 – 00:41:20:21

So if you look at like a methodology of creating wealth, I think franchising is unparalleled to anything, you know, out there. Why collapse as time? Time is not your friend, it’s the only commodity you can’t recycle and it will take your friends at the dinner table will go on and pontificate about how they spent 30 years building their business.

00:41:21:00 – 00:41:38:05

The franchisee comes and going, I only own this for five years and I’m making as much or more than you are and you spent 20 years doing it. So do that math. It’s like, Yeah, but we’re more proud. We created everything. Well, I’m proud that I’ve collapsed. Time leverage, leverage collective intelligence to scale my business and create wealth.

00:41:38:07 – 00:42:01:06

So who’s right or who’s wrong? I don’t know that there’s a right or wrong. What I could tell you is this your friends at the table that created their own brand? That is a unique breed. It’s a unique breed of entrepreneur. They created something. The person that bought the franchise, but they’re also unique in their own way. But they bought someone else’s bright idea and just scaled it.

00:42:01:08 – 00:42:26:09

And I think that franchising provides a pathway to wealth creation without having to invent anything. Think about that. Like, to me, that is that’s one one plus one equals four. I’m sorry. It is a force multiplying effect when you can say, I have been in corporate America my whole life, okay, I’m not entrepreneurial, okay? I always wanted to do something on my own.

00:42:26:15 – 00:42:45:12

Great. Why don’t you buy a franchise? And then they do. And then they have the ability to call someone in Arizona. Hi. My name’s Cliff. I bought the same franchise you have owned for 20 years. I heard you’re doing 8 million. 4 million? 2 million amid zero. Do you mind if I fly out there? Could I take you to lunch or dinner?

00:42:45:12 – 00:43:02:15

Can I pick your brain? Can I leverage your intelligence to find this path, too? Well, that’s the beauty of franchise. You can have two 300 people now, your friends at the dinner table that created their own brand. Who were you calling? Well, we rely on each other. So it’s just you two. Here’s the other thing you need to know.

00:43:02:17 – 00:43:24:01

Exit strategy, which most people do not put enough emphasis on. There’s a lot of things to talk about that no one wants to talk about. Right. Rest, tolerance, right. Appetites. So who’s this exit strategy? Is everything build the plan with the end in mind is critical, right? We all heard that book, Build the Plan with the end in mind.

00:43:24:03 – 00:43:50:08

This is proven, by the way, this is not for the cocktail party discussion. You will get a greater premium on ibotta and a franchise than you will in an independently owned business. It has been proven by buyers buy, sell, aggregating data over decades. Franchise doing netting 100 is getting. I’m just going to use an example, a three time multiple same business that’s not in a franchise netting 100.

00:43:50:10 – 00:44:11:15

They’re getting a22 and a half time multiple It’s been proven franchise have got to hire multiple because when the person buys it they know that if the seller bails on them, they have the ability to call the franchisor in 150 to 300 other franchisees to get the answers to the test. How do I do this? How do I compensate my manager?

00:44:11:21 – 00:44:29:01

How do I retain my talent? How do I have to I how do I Everything is there for the asking where that independent business what is the first thing we do as a buyer of an independent business? We put in writing. You were going to stay on as a consultant five days a week for the next how many months?

00:44:29:03 – 00:44:50:00

I’m right. That’s the first thing you put in that deal. Reps warranties and you will be here for a smooth, seamless transition of the business over the next 90 days. That’s in writing in the contract. Some people even hold back money in escrow so that the seller fulfills that 6090 day obligation because that is the pain point of the buyer.

00:44:50:03 – 00:45:11:12

What if you leave? You don’t have that worry and franchising, that’s why we get a greater multiple multiple, and that’s why we also have more liquidity. We have more the forget the multiple, even if the multiple was the same, you will sell way more franchises as compared to way more independents because of the liquidity factor. This is this is like insanely important when you’re an investor.

00:45:11:16 – 00:45:45:19

Exit liquidity risk, all of it. Net margin. Yeah, 40%. So let’s talk let’s talk funding strategies. Are there any kind of unique funding strategies that you want to share or, you know, financing options that people could explore when they’re looking for franchises that no one has ever asked me that question, interestingly enough. So I was an investment banker, as you know, and I used to come back to my branch manager and say I met with the doctor’s office and they own their building and their form.

00:45:45:19 – 00:45:59:11

Okay? He goes, It’s impossible to impossible that I would then I’d go back out in the street because that was a retirement plan executive with Salomon Smith Barney. And I would go back to the street. I made a lawyer and the lawyer is like, Yeah, we own our building, we own real estate, We own all the stuff in our retirement plan.

00:45:59:14 – 00:46:18:06

I’d go back to my branch manager, Can’t do it. It’s impossible. You can only buy stocks, bonds, mutual funds. Baba, this is so. Here’s Wall Street’s talking points. If you have money, you need to give it to us. That’s simple. That’s Wall Street. If you have money, you need to give it to us. Stocks, bonds, mutual funds, proprietary products and all their horse crap.

00:46:18:06 – 00:46:40:14

Right? So all that stuff, that’s what they say. What they don’t tell you is that since Orissa law was enacted in 1974, the Employee Retirement Income Securities Act, you and I have the right and your listeners to self direct your retirement assets. Right. You could do a self-directed IRA or you could do something that no one probably has ever heard of on this call called and Probe.

00:46:40:14 – 00:47:01:07

Yes, it’s called the rollover for business Startup. And what it allows is allows you and I forget our age. Forget our age because I know you’re not 59 and a half and neither am I. So so that being said, you’re laughing. But that being said, you know, you’re not subject to a no. Excuse me. You know, you’re subject to a penalty because you’re too young and I’m too young.

00:47:01:08 – 00:47:25:20

Yes. Yes. There is no early withdrawal penalty. It is a dollar for dollar distribution. It is not alone. There are no federal income taxes. You can take dollar for dollar out of your IRA for 57 for three, be IRA rollover SEP. Simple. Any qualified retirement plan that is not connected to your current employer. Right. So you can’t be employed and do this.

00:47:25:24 – 00:47:46:17

You have to have your IRA on the side of your job or an IRA rollover or something like that. You could take a dollar for dollar invested in a franchise or in a business zero or I want to repeat zero penalty zero federal zero state zero oil, which are all penalty and still maintain tax deferred status. Now, why do I love this?

00:47:46:17 – 00:48:02:08

So people are going, that’s cool. Why do I love this when I here’s what I ask people and I’m going to just give it to you simply I’ll ask people, what do you have in your checking account? 100 grand. Is that what you’re going to use to buy the franchise? Yes. Okay. 100 grand. Your checking account. What’s in your IRA?

00:48:02:11 – 00:48:29:11

100 grand. Yeah, but what do you have in your IRA? And they go, 100 grand. I go, No, you don’t. If you have 100 grand right now in your IRA and you live in a tax state, you have less than $70,000 in that account. This is the big misunderstanding with IRAs. So I go, why would you use 100 grand in after tax dollars in your checking account to buy a franchise when you can let the state of California and the federal government.

00:48:29:13 – 00:48:49:20

Right. Invest in your franchise because your IRA, a little bit of it belongs to the state of California and state income tax. When you take the money out and $0.30 in the dollar guaranteed belongs to the Fed. So why wouldn’t you use their money to buy the franchise? And at that moment, once your mind is expanded by new ideas, it never goes back to its original shape.

00:48:49:23 – 00:49:10:19

And that is a moment where people go, Holy crap, if I was so then I tell them, If you lost that 400 grand your IRA, you only lost 70 or less in a state tax state, you lost less than 70 grand because 30, 35 or 40 of it never belonged to you to begin with. It’s not your money.

00:49:10:21 – 00:49:34:12

I’ve got at least people. I got $1,000,000 in my IRA. No, you don’t. You less than 700 grand. This is like a wake up call. A lot of people don’t realize when they start taking distributions from these retirement accounts that money is not there. It belongs to the state and the Fed. Anyway, that’s my eye opening funding strategy, is to use the Fed in the state to fund your franchise using an robust strategy.

00:49:34:14 – 00:50:00:22

This is amazing. It’s been an awesome deep dive and different franchises now tell our listeners where they can find you and how can connect with you for an asset icon. So my name is Cliff, not a mark you can find me at for now. Sitcom that’s f, r and 0city. And for any listeners that have an interest specifically in franchising my podcast, Pursuit of Profit only discusses franchises.

00:50:01:02 – 00:50:27:04

That’s it does not compete with Melissa or, you know, nothing like that. So it’s a clean, clean show. Just I appreciate that. Thank you. But also Cliff, thank you so much for being here. It’s my pleasure. you’re going to motivate our listeners to look into franchising strategies. We appreciate your knowledge and your time. And that’s the Executive Connect podcast.

00:50:27:06 – 00:50:28:22

Thank you for having me.

#FranchiseSuccess #BuildWealth #ExecutiveConnect #CliffNonnenmacher #FranchiseTips
#BusinessOwnership #WallStreetToWealth #PassiveIncomeMyth #EntrepreneurMindset
#FranchiseModel #EscapeThe9to5 #FranchiseGrowth #BusinessStrategy #InvestSmart
#FranchiseFunding #ROBSStrategy #FinancialFreedom #FranchiseVsStartup #SmartInvesting
#SemiAbsenteeOwner