Lessons from a Serial Franchise Investor: Tips for Aspiring Business Owners

Free Agent Podcast with Meg Schmitz – Guest: Eric Van Horn, Franchise Investor, CoFounder of Front Street Equity Partners, and Host of the Franchise Secrets Podcast

Meg Schmitz
Well, hello everyone and welcome to or welcome back to my podcast. It’s called the Free Agent. My name is Meg Schmitz and if you’ve been here before, you know that this is where the discussion is all about free agency and taking control over your financial future.

The mission of my show is to share inspiring conversations with real people who took the leap into self employment, business ownership, franchising and freedom from corporate refugees and executives tired of the desk job.

To entrepreneurs and investors looking to share camaraderie and inspiration through their own business journey. My podcast aims a spotlight on real people who stepped into the unknown, took control over their destiny and became their own boss.

And today, Eric Van Horn and I go way back, so I’m not going to do a big lead in a big intro as to who the man is, because if you find him on the Internet, just type in his name. You’ll see that he is all over the place in the world of franchising and business advisory positions.

Eric, thank you for coming on my show. I’m so excited to be able to talk to you today.

Eric Van Horn
Meg, I’m so excited. This is going to be fun.

Meg
This is going to be fun. So you just flew back from a ski trip. You’re. You’re living the dream. You’ve got. Your family is way out in the middle of nowhere. You are an avid hobby. What did you call it? Hobby rancher.

Eric
I’m a hobby rancher. I’m a fake rancher. Definitely not real. But my neighbors are all real ranchers. I’m a hobby rancher.

Meg
Yeah. So. And here you are invested in so many different franchises, different, but business entities. You’ve got great comfort in. In investing in. In businesses that aren’t right under your nose.

And so you break a lot of rules already on what people think they have to do in order to own a business and be successful.

Let’s reel this thing. Way back before I ever met you, which I was trying to think, you were at Franchoice, when I first met you, I think it was a meeting in Arizona. So that would be 15 years or so.

Eric
Do I think you’re right? 12, 15 years ago. Yeah.

Meg
Okay.

Eric
It’s been a while. Yeah.

Meg
And I thought back at that time, you’re just this young little whippersnapper. But you, you got my attention right away.

I remember you and I were talking, getting on a transport bus, and you were talking about what you had done prior to coming to Franchoice, which is an elite group of consultants. We’re. We’re not just the average run of the mill. You can’t buy your way in. You have to come in with a reputation.

You got started in franchising at a young age. But take me all the way back, Is this part of your genetic code?

Eric
My parents, my. My parents became entrepreneurs when I was in first grade and. And they started a small construction business.

And so I remember being in the house when the landline would ring and it was like, shh. Business call. And us kids would just like, whatever we’re doing, we would just shut up, close our mouths, and just quiet as a mouse. And then business call would happen.

And I didn’t realize it at the time, but I was starting to learn entrepreneurship and I was starting to learn how to talk to contractors, to talk to customers, to try to sell something, to try to win. Win a bid.

And. And so I grew up in this entrepreneurial family, like small business ownership, and I always wanted to do that.

And then I graduated college with a business degree, and I ended up traveling through Europe and stuff for a while. And then I’m like, I better get back to America.

And I started to pursue a law degree and meaning I had taken the lsat, I got accepted to law school and I was a C student. So even though I, you know, I knew that was going to be just a disaster for me, I wanted to be an entrepreneur.

I didn’t enjoy school. I enjoyed learning about things like economics and stuff like that, but I did not enjoy law. So I did not even. I went to orientation. I never went to a class.

I started a lawn business and I started taking real estate classes. And so I had a small truck, couple shovels and wheelbarrow and I and a mower.

And I was working on this lawn for this older lady in Norfolk, Virginia. And she came out 100 degrees that day and gave me some iced tea and said, basically, you know, what are you doing with your life in a, in a positive way? Like, who are you? What do you want to do?

Is I want to be a real estate investor. And she said, well, we did that 20 years ago. And so, long story short, I walked away from that ice tea meeting with this lady with an option contract in hand to buy her condo out by the beach, not on the beach, but by the beach, for putting no money, no money, giving her no money.

She just wanted me to cover the cost of the transaction. And then she was going to assign her mortgage, which is an assumable mortgage to me. She paid 20 years on this mortgage and assigned it to me.

I called my parents, I said, I got this deal. And they said it sounds too good to be true.

I said, well, if you don’t want to do it, my real estate broker will do it with me. I will you pay for the closing costs, I will give you 50% of the equity and then I’ll pay you back the, my portion of that closing cost when I have the money.

And so I ended up doing that with them. They ended up buying it from me within a month or two. My parents did so, bought it from the lady. They bought me out.

I had 20 something thousand dollars, which back then was a lot more. And, and I put that into my first franchise. I used that money to buy a business because some of my friends were looking at this particular franchise in the tax industry in Virginia beach.

And, and so I went to some discovery days and I did. I probably did everything wrong that you’re supposed to do when you’re buying a franchise. But I was young, hungry, willing to do what it whatever it took to be successful.

So I had the right ingredients to be successful and I had the right brand. And there was enough people around me that I listened to, to make it successful. So that’s how I bought my first one.

And there’s a long story after that, but that’s my journey to buying my first franchise.

Meg
Okay, that was Liberty Tax that you got into.

Eric
That’s right. That’s right.

Meg
And I didn’t realize that you were living on the East Coast. I always think of you as a Midwest kind of a guy. Was that college that got you out there?

Eric
Yes, I was going to. I was going to go to a school out in Virginia Beach. So I grew up In Spearfish, South Dakota, a town of like, right now, 10,000 people in the Black Hills. It’s a beautiful area, but it’s out in the middle of nowhere.

Meg
And that’s where you still live.

Eric
And. And I move. I. Yes, I moved back here about 15 years ago.

Meg
Okay, so what was it that attracted you back to the realm of franchising?

You had studied and you weren’t a great student, but you were obviously a sponge in the world of business. What attracted you to franchising?

Eric
It was peers that are doing the same thing, and we could learn together.

So at that time, there’s a lot of people my age up that were buying into that business or already owned that business. It was somebody that had been in the business for years, meaning John Hewitt, the founder of that brand, had had a proven track record in the industry.

And so I could learn from him. I could learn from other franchisees who were successful. Some of them are my age, some of them were older, and there was just a proven playbook, or at least that’s what I taught. 

And it was. But there still had a lot of room to grow. And I grew with that company. But that’s. It was like, okay, it’s just a. It’s a business in a box, and I can just go execute versus trying to. I couldn’t. I couldn’t do that on my own at that time. I could have scaled a lawn business.

But the other thing that attracted me to that one is I didn’t know taxes. And they said, you don’t need to know how to do taxes. Like, you don’t want to do taxes.

This is a marketing. You need to go no marketing or operations. You don’t do. You don’t need to do the thing that they’re doing. In other words, I don’t need to do the taxes. I don’t need to be a tax preparer.

And as a matter of fact, they’re like, franchisees that are doing taxes are not out generating business. They’re not hiring the right people because they’re in there doing the thing that they’re not supposed to do.

So it’s a whole EMA thing with Michael Gerber that work on your business, not in your business. So I thought, okay, here’s a business that I am not supposed to work in, I’m supposed to work on. I buy into that.

I read his book in college and, and I loved it. And I read Rich Dad, Poor dad as well, and I love that. And so it just seemed like the right fit.

And little did I know there are some other things that I accidentally got into with that that were great. I went in, I started to own remotely, and, and I couldn’t be the one doing the taxes.

I started to expand rapidly. So I, and you can’t do that if you’re the one working in the business. So, and that even all of that, Meg, allowed me to move wherever I wanted.

Like we were going to move to Denver or actually Evergreen, and we ended up moving back to Spearfish, South Dakota because of family. But it was a choice.

And I knew I’d never opened up a business in Spearfish, South Dakota, but I could open up businesses in Southern California, in LA, in San Diego, Orange county, which, you know, I eventually did.

So all those ingredients of that first brand being able to operate it somewhat remotely and then eventually get into it with different partners and it being a business that lends itself to multi unit ownership, all of those ingredients were, were perfect and, and allowed me to fully understand franchising the benefits of that.

So when I bought into more brands later on, it just, you know, I could do that without it impacting the current business that I was in.

Meg
So you held onto those while you expanded, diversify.

Eric
I had, I was a franchisee with Liberty Tax in Kansas City is where I started. And I had a few of those there.

And then I bought the area development and I was partners with my parents at this time. So we bought the area development in Austin, Texas, which basically you help sell franchises and then you help those franchisees become successful.

So I bought that region of Austin when it had four locations. I ended up selling my Kansas City stores, focusing on the Austin market. I owned, I think nine franchises there myself personally. And then I helped grow that to 42 locations overall in that, in that region.

And then I sold that at two different times back to the corporate office. So I sold all my locations to other people. And then over two year period I sold the area development region back to the Corporate office and that was the plan all along.

So nine years into it I had sold everything out of, of Liberty. And that’s really when I met you. And that’s when I opened up a senior care business, I opened up a salon suite business and all of those, those were all in, in California and but it, you know, my history of seeing how franchising worked allowed me to do that and own multiple business.

I owned an eyelash company, multiple multiple businesses all at the same time.

Meg
So you said something a little bit ago that I wanted to go back to.

Did you, you were young. Did you get in with an exit in mind? I don’t, that’s a pretty mature point of view to say I’m going to get into this and sooner or later I don’t want to own these forever, but I want to, I want to divest and, and sell them off.

Eric
I wouldn’t say I got into it thinking I’m going to exit, but very shortly I, I started to think about exiting because we’re always talking about valuation and I saw the trading of, of locations.

Buy, buy it when somebody needed to get out and then buy that one on at a low price and then run it, increase it and then sell it. So then I got really used to the buying and selling of these, of these businesses personally and helping other people do the same thing.

As an area development or regional development or master franchise, we would get valuations on that every year. And then, so then it became really interested in to see what levers you could pull to increase that valuation or what caused that valuation to decrease.

One of the things that caused valuation to decrease is decline in revenue which meant decline in royalties. So royalties were 14%, we got 7%. So when top line revenue was decreasing then valuation was going to start going down.

So let’s say it was a 4x or 5x multiple on, on revenue. If you are losing revenue as a trend even for one year, that multiple would probably go to three. And so I just saw big, a big discrepancy there.

And so I was watching our growth and I said we are going to sell this whenever it is, but we’re going to sell before we start declining. So one of my top franchisees I Austin was split up into two regions.

One region I had a franchisee that was selling and I figured if he sold then the, the numbers were going to go down and he owned a large chunk. So as he was selling I, I knew the price that we could get for it and we sold it because I knew revenue was going to go down and the same thing on the other one.

Now, the corporate office probably could understand some of that, but they weren’t as involved as I was. So I don’t to. I don’t even know if they even took that into consideration. I don’t think they did.

But that’s. I wanted to leave it the maximum valuation and also I, Let me rephrase that. I want to, I want to leave it a really good valuation. I don’t have to leave at the max valuation. I don’t have to sell at the maximum valuation.

Because I would see too many people hold on to things too long where they would, where they would start to have decline in revenue as a franchisee or as an area developer and valuation would go down and then they would try to hold on for another year and it would go down even more or something changes in the industry, like in the tax business, there is legislation that changed the way the revenue was generated and it had impact on revenue. And so I didn’t want. I just felt like it was a good time. We had a good run, we had a good exit and I took advantage of that.

And that’s just been the way I’ve done things all along. I don’t try to sell at the very highest. I try to sell when we’re 80% there and it could go higher. But I don’t need to be greedy and try to get the maximum that I could.

Meg
Yeah, and that’s a slippery slope because nobody’s got a crystal ball. But it’s a great mentality going forward because then it allows you to be objective about your investments and, and divestments because as we know in the world of angel investing and private equity, you put a lot of trust on what you think you see and what you hope is accurate reporting.

And sometimes these franchise brands that now you’re investing in with your, with your front street partners, you probably look at as many deals as Pete and I look at on the angel side of things, and some of these entrepreneurs are pretty squirrely.

So if you go in within that idealistic view, though, we’re going to get the maximum for this. We’re really going to turn this thing around. It doesn’t happen all the time. The numbers just aren’t there.

So talk a bit about what you learned with private equity and observing the trends there.

Eric
So this is a good, this is a good story that includes a sale and private equity. And this is Solo Salon Studios.

So I had seen as a franchisee, I started to understand what, what was going to happen when private equity came in or a franchisor was going up for sale?

I started to see management changes at the top and they’re bringing in somebody to maybe juice up the revenues a bit or just to change structures or just to just to tweak things. But somebody being brought in and they have a history of coming in before a company sold.

And so that happened at Sola about a year before they actually sold. They had somebody that came in and he had a history of doing this. So we as franchisees who had about 12 locations open and we were, and we opened those up within five years.

So here’s just a little side Note. We had 12 locations that we had to open up within a five year period. And that’s a development schedule. Each one was about a million dollars to open up and we had to do it.

So franchisors out there, I think it’s good to have a development schedule and hold your franchisees to it. Franchisees commit to a development schedule that you can actually open up. From financing standpoint and resource standpoint.

I knew I couldn’t open up 12 on my own, so I was able to get three other partners so the four of us could open up 12 together versus me trying to do it all on my own. And so, so that’s what we did. And we, and we did well.

They were making money, we were very happy. And then this management came in and they said, hey, we’re looking at your area. You have the rights to Orange county for another six months.

We think there needs to be a lot more dots on the map. In other words, we think you need to open up a lot more locations. And I’m like, I’m sure you do think that.

We don’t think that that’s going to be the best for the market as a whole because we think there’ll be some cannibalization. So they thought more dots on the map. And we’re thinking that’s less, a lot less revenue for us.

We do think as a franchisee that you do need to open up in markets that make sense near you and, and not have a big, wide open space between you because your competition is going to come in and take market share.

So there’s a balance. And I love it when franchisors have a balanced approach to this. They’re not just thinking about dots on a map, but they’re thinking how do we dominate a market as a brand and allowing all these locations to do well.

So we felt a misalignment with what his expectations were versus what our expectations were. And so we basically put out there on the table. And it was a meeting in Austin, Texas.

We were all there for a meeting and the conversation went like this, hey, we either want to double down and, and continue to grow or we could sell and let you grow that market.

You know, so we’re open to both. And we wanted that message to go out to him that we’re open to selling, but we’re also wanting to, to grow that way.

Because once a franchisee says we’re wanting to sell, franchisors are like, their mind is, is gone and they’re not really active in the system anymore. And that wasn’t the case for us.

Like we really did. We were going to either grow, but we needed to do it intelligently or we would sell. And that’s when the conversation was, well, hey, we’re interested in buying you out. And then that was a six month process.

And eventually it was originally the corporate office that was going to buy us out. And then it changed to private. They changed hands. So they sold to private equity. Just like what, what they thought, what we thought was going to happen.

And then now we were dealing with a private equity company that was buying us out. So private equity, we still could have pulled out of the sale at any time.

Just because private equity came in to the franchise or at SOLA did not make us nervous like, oh, private equity’s in, we want to get out. That wasn’t the case at all.

Because they can bring really good things to a brand. They bring resources, they bring financial resources, they bring human resources that their original founders probably don’t have access to to be able to pay them for that they have experience in other brands, many cases that they can bring knowledge, they have systems and technology that original founders have, not implemented.

And so they’re looking at with a fresh set of eyes to help grow. So those are all positive things and there’s some negative things too because they might try to squeeze out a little bit more from the franchise here or over there.

So it, you know, there’s some good things and there’s some things that are not so good. It, it just, it just is what it is.

So we would have doubled down with them and continued to grow, but it was obvious they wanted to buy us out. And it was a very painful process, Meg, going through that because there’s a big data room, they’re anal.. like it’s us as franchisees with our attorney that we spend a lot of money on and them in their, you know, all of their SE suites, just diving into our numbers and we ended up having a nice sale to them, which allowed me to buy multiple brands after that and have a nice exit. And it was a very good experience overall. Sola was probably the best experience that I had with a franchisor from beginning to end. And it had different stages in it from dealing with Matt Stratton, the founder, to dealing with a just the sea level executives, to dealing with private equity to an exit.

It was, it was a really good experience overall.

Meg
It’s a very professional experience and definitely elevated over what most franchise exits look like.

Private equity can be all over the board and I’m sure that, that. I’m guessing that that informed you, Jeff, her and Bobby Brennan, as you were creating Front Street Equity Partners, what was the time frame between when you left Sola and when you created the new entity? This. This new entity?

Eric
It was a number of years. I was doing a lot with you over at Franchoice, which by the way, just for the listeners know, I don’t do any of that anymore.

I send all people that want to buy a franchise to really smart, helpful, nice people like Meg who have. Who are full of integrity and knowledge to be able to help people buying a franchise. So I don’t do that anymore.

And, and I was. So then I started a franchise with a friend, Josh, and, and we did that. We started that. And then I took an early exit out of that franchisor about when we had our first handful of franchisees.

I exited that. I started conversations with Jeffer, who had an exit and was looking for what’s next. And it was probably a year and a half of conversations before we formulated, what eventually became Front Street Equity Partners.

So me, Jeffer and, and Jim Jaggers formed Front Street Equity Partners. And we’re like, we’ve done a lot in franchising, all of us. What do we want to do and what do we want to do differently?

We don’t want to be selling franchises. None of us, Jeff, nor I wanted to sell franchises because we’d done that before.

And I remember having a conversation, we were like, okay, to do this, somebody’s got to sell franchises. And I said, I don’t want to do it. I can, but I don’t want to. He’s like, I can, but I don’t want to either.

So then we said, we need to get somebody that can. And that’s when we recruited Bobby Brennan, who worked for an amazing company. And then came, came on with us as a partner.

So we’d been working on Front Street for a year now, Meg, putting hours in. We brought in Bobby as an equal partner with us, 25% partner even after working on it for a year because we knew he was the right fit for us.

So that’s when it was the four of us. We all have our kind of things that we do in the company.

We are a non traditional FSO, so we’re franchise sales organization, but we’re not your traditional franchise sales organization.

What that really means is when we were talking about it early on, we’re like, we want to do things differently and we want to be aligned with brands long term, not short term. And we want brands that want to be aligned with us like that.

Because a traditional FSO, there’s some great ones out there, they work with brands that want to grow fast and, and they’re ready to grow fast and that’s what they do.

So they hire an FSO and, and they, that’s what they hire them for. Sell a bunch of franchises and then the brand opens up a bunch and does really well and everybody’s happy. That’s, that’s the plan that works.

We want to take a brand that needs even more handholding. And so we do that part. We sell franchises, but we probably will not sell as many right away as, as, as we could because we know the brand can’t have that, can’t handle that amount of growth right away.

So we’re okay with that. Where most FSOs don’t want that yet. So that’s where we’re non traditional.

And then we help out with a lot of advisory we call it, you know, we’re in the trenches with them. We’re crawling through, through glass. We are chopping wood with these brands. We are on the calls, we’re on calls with these brands every week, all the time.

It’s like, it’s like, you know, we’re part of that, part of that, that brand as they grow up and there’s always things with these new brands that they need help with.

So we’re looking around corners, we’re helping with hires, we’re helping with anything that they need.

So, so we do both. We do the FSO work and we do advisory work and we don’t charge any retainer fees and we don’t.

Because these brands need to save as much money as they can early on. The types of brands that we work with. So everything’s just performance based and it’s worked really well for us.

So one last thing with that is we can’t take on too many brands at any given time because we’re so hands on with them. You can’t be hands on with 10 different brands.

So we only take on two, maybe three brands a year at this point. So it’s been fun. But that’s the latest and the greatest with what I’ve been up to. And it’s just been very enjoyable.

Meg
It’s enjoyable to watch you at the conferences because you’ve been part of the Franchoice family for a long time. So have Jeff and Jim and Bobby been a big part of the Franchoice family and yeah, it’s full of integrity and we like to watch who’s doing what.

What I’ve enjoyed about what I’ve learned, Jeff is such a huge personality. Jeff f bomb her. It’s there, it’s right there all the time. Bobby with that smile, you’ve got the economic and financial experience. Jim is more legal. Is that right?

Eric
Jim’s legal. Jim is very operational, I would say. Jim is, he’s operational, he’s financial. He’s all behind the scenes.

Like, he’s, he helps them with their SOPs, helps them with, with technology. He’s. He’s all back and ops. That’s why people don’t see him very much. He doesn’t want to be. He doesn’t, he’s just, he’s just in his little office behind the scenes getting stuff done.

He keeps us, keeps us in check. And that’s what’s great about a partnership too. You want partners that are different than you and can and think differently than you, that do things differently than you and have different, you know, expertise.

Their zone of genius is different than you. And so the four of us really kind of balance each other out with it with a lot of that. We have a lot of similarities, but it’s nice to have that, that balance.

Meg
Well, you all have achieved so much. Such huge. It’s really elevated the world of franchising.

When I look at our portfolio of companies, I know where I want to send my leads. I want to send them to a company that has been well vetted.

Look at the, the, I was going to say the youth, the fresh entrepreneurs that you have gotten behind. And I’m sure that amongst the four of you, you’ve looked at hundreds, if not thousands of brands because you want to be in a portfolio like Franchoice.

You want to bring the best of the best. How do you four balance out your criteria for companies that you want to bring in, how to create that checklist of, of what really matters to you.

Eric
Yeah, that’s a good question. I think it’s always evolving as well. You learn things as you, as you are just in franchise in general.

That’s why people want advisors, that’s the way they want to work with some, the, the various different FSOs out there. That’s why people want to work with amazing experience consultants like you because of the experience, because of the things that you’ve learned and have learned a lot the hard way.

And so what we really look for with brands is one, we want to have an amazing founder and, and that’s becoming, we want a founder that has good leadership skills. We want a founder that is very confident in who they are and what they’ve built but is also very teachable and coachable.

Because if they’re not going to listen to us, we can’t make them listen to us. But if they’re not going to listen to us then we may, may as well not be in that relationship. So they need to be teachable.

Understanding there are other people that know a lot about franchising that can help them make really good decision what we’re there for. So they being teachable and coachable is a really big piece of it.

We look at really strong unit economics meaning we want brands that have high revenue and high net profit margins and, very verifiable.

Like we don’t want to just cherry pick, let’s say they have 10 locations and just cherry pick three locations and be like oh, those are the three that are amazing, the rest are garbage. And cherry pick those and put those into the item 19 or the FTD or, or whatever.

Like we want something that’s just proven and, and it needs to have high margins for us to get involved because that’s what franchisees need. They need high margins.

I think low margin businesses are difficult for, difficult for franchisees to make money and franchisors to make money. And so those are some of the things that we look for.

We don’t, we’re not interested in, there’s certain categories that we’re just not interested in. We’re not interested in food, not because food’s bad. We just don’t know food. And if it’s not in our area of expertise we’re not going to go in there.

We’re not super bullish on fitness, not because we don’t think fitness is great or that industry is great. We’ve just been in it for a long time and so we can’t be in it right now.

We are, we like, we like wellness. There’s certain things in wellness that as a category that we like so we can find or pets or children or service based stuff.

Like, so we look at categories just. I mean it’s so funny, Meg, because just like you as a consultant helping people look at categories, we start with categories too.

So we have this list of categories that we want. Okay. Then we break it down into brands and then it needs to be brands that have a founder that is amazing.

The other thing is they need to have the financial resources to be able to fund it. So we’ve seen some amazing brands, but they just don’t have any, any money and you need money to be able to, to do it.

We need brands and their founders to be franchisee focused. And what’s really cool as from my standpoint, I’ve been where you are and now I’m where I am and I get to talk to hundreds of brands a year.

So many of these young founders or early founders, they may not be young in age, but they’re young in franchising. They really do care about the franchisee.

And it’s so refreshing to hear that because too many people in franchising hear about franchisors who are so greedy, they don’t care about the franchisee.

Most of these founders that we talk to care about the franchisee. Some of them care about them too much. One of our brands cares about them too much.

Too big of territories, too generous here, too generous there. But I love that when a founder really cares about franchise, franchisees and they’re not out there just talking about how they do it, they just actually are behind the scenes just taking care of franchisees.

I love it when franchisors are talking about internally having conversations about how do we increase revenue for franchisees and profit margins for franchisees.

Like how do we help them with marketing, how do we help take things off of their plate that we can do at the corporate office so they don’t have to do it, whether it’s technology like using AI to help with answering phone calls or things like that.

So I love it when franchisors are doing franchisee friendly things, not just talking about it.

So I know it’s a kind of a long list, but those are, those are some of the things that we, that we look at when we’re talking to franchisors.

Meg
Yeah, it’s good to know your lane, if you will.

Pete, my husband and I, we have our angel investing arm. We’ve got about 125 that we’re invested in right now. So you can imagine my dinner table conversation is probably a lot like conversation going around your house.

What are you looking at? What do you like? Who do you like? Where you got the jockey and the horse. It’s the right jockey on the right horse.

You might have a great system, great operations, but the person who’s leading it is just not the right one to get it over the finish line. Those are the ones that we stay away from. And probably you do too.

Eric
100%. Finding the jockey. That jockey is so important.

And we just have, and you have to have from our standpoint because we’re, we are compensated by performance.

Like we, we just, we ask so many questions, we have to get aligned and you have to almost have these hard conversations to see how you can have hard conversations early on to see how they, how they react and how they respond and just a lot of open, openness and honesty early on in that relationship.

So 100% agree. Agree with you.

Meg
We’ve got just last week an exit from one of the companies that we’ve been invested in, probably too long. But the trajectory has been strong and steady.

And KKR bought them out. Major investor. Now we’ve got the buyout that we were looking for and those are really rewarding. As you know, when you have the right circumstances and it finally comes to fruition.

What do you or you and your partners do when you sense that something is going not the right, right direction, corrective action, pulling out, pulling back. It’s going to happen at some point.

Eric
Those small things going in the wrong direction. Let’s say same store sales are going the wrong direction.

We are like, let’s start looking at things daily. Like one of our brands has same store sales in January. They’re going the wrong direction. And it’s not like 911 emergency.

But we see this and the conversation internally is we don’t want to wait till the end of February to see if this trend continues.

So we’re like, let’s look at this on a daily basis and course correct now. So that’s a small example of something going wrong. And there’s always things that are going to go wrong or in the wrong direction. Sure.

So, so we look at that. Our conversation yesterday was what do we do? We don’t want to wait to see what’s going to happen end of February. So why don’t we start tracking day by day now so we can, so we can help.

So that was an example of  something not going right.

Something larger that’s not going right. You, you have to do what’s best for you as and the franchise system in general. And that might mean a relationship gets terminated.

It might mean a franchisor has to terminate a relationship with a franchisee that’s toxic. It might mean an FSO might have to terminate a relationship with a brand that is, is not beneficial.

So we are good at making decisions. Like we have to make decisions whether the, the market likes it, the franchise consultants like it, whoever. Certain people might not like it.

But as at this level, you have to be able to make decisions and know that you did it for the right reasons. And I think that is for everybody in business.

I mean, go down to the franchisee level. I was just before this I was on a call because I’m an investor in a franchisee company.

So they, we have four locations open of this particular franchise and it’s in the health and wellness industry. And we were going through the P and Ls and he’s like, we’re down. I’m like, what are the three things we’re doing to fix that?

And then he went to the three things that we’re doing to fix that. And I said, said okay, we have four managers. Tell me about each of these managers. And so what do we like, what do we not like? How would you rate them?

And so we’re, you know, and he’s like, we hired this one. They’re doing amazing. But I waited too long to fire the last one. And he’s like, lesson learned. I’m not going to do that again.

So I think making decisions and being decisive and, and, and just going with it, you just, you just have to do that no matter what level.

If it’s dealing with the brand, if it’s dealing with an employee or if it’s a franchisee dealing with an employee. You just have to get good at making decisions and executing.

Meg
Yeah. Lessons in life. You’re a parent, you’ve got your..

Eric
Got three daughters. 

Meg
The hard thing about hard things is that somebody’s got to do it.

There’s a book called The Hard Thing About Hard Things. You don’t need to read the book. Measure it and take action on it and don’t let it fester because when it does, you devalue your own.

Well, you devalue your own reputation. Number one, they know oh, she’s going to give me more time. It’s good. And the longer the leash, the harder it is to reel it back in.

Eric
So lessons in life, other thing you devalue, Meg. I learned this 20 years ago from my original mentor in business, who I was skiing at his amazing house in Breckenridge. Full circle.

He was a mentor of me early on in Kansas City. I’m skiing at his house in Breckenridge. And I reminded him, I’m like, you taught me a lot of lessons, Bob.

One of the lessons he taught me back 20 years ago with a, you know, a probably an eight dollar an hour tax preparer. He’s like, Eric, if you don’t fire them, you’re. You are devaluing everybody else that is putting in the work.

Like you are devaluing the good employees because you’re hanging on to this bad one. And that reframe, really. I’m like, I learned these lessons 20 years ago and I’m talking about it today.

So, you know, got to make these right decisions because you can’t devalue the rest of your employees. You’re treating them the wrong way if you’re, if you’re letting the wrong people continue to work for you.

Meg
It’s so true. I learned that lesson as well a long time ago.

I was 30. The only employee I’d ever had was my son. I hadn’t had any. And then we got into Great Clips and we didn’t have cameras and we didn’t have point of sale software to see what was going on.

Sure enough, we were just bleeding to death because they were stealing out of the drawer. And to your point, exactly.

As soon as I pulled the trigger, pardon the reference there, I called the police department. They said, you have two choices. You either let it go or you stop it. If you want to stop it, we’ll send somebody over right now.

So they sent somebody over right now. I was like, oh, my God, I’m really doing this. This is a big girl britches moment.

But the really telling thing, especially for you in the audience listening, is once she was let out in handcuffs to the squad car, my other employees turned and looked at me and said, what took you so long?

To which I said, that’s a tell. You’re telling me you knew this? Why didn’t you tell me? If you see something, say something. I can’t deal with something. I don’t know what’s going on.

So we had this whole distrust environment where we were able to put it back together. Again. But don’t think for a minute that you turning a blind eye means that they’re going to, they’re going to pay attention to it.

And in a way, the longer it goes, the more they all pile on and the harder it is to bring to right the ship again. So get on it right away and take care.

Eric
Learned the same lesson again. Three years ago in another franchise that I was involved with, great manager, so we thought turned into a be a bad manager.

And then one of the other managers there is like, what took you so long? And it’s like, you know, I mean, I, it’s something that you always have to, you have to sharpen, sharpen the saw there.

You have to, I have to continue to remind myself to hire slow and fire fast. It’s so basic, so simple. But I, but I still think there’s room for improvement in myself and my direct reports.

Meg
And the bottom line is that people are people and there are traits that are not immediately obvious. But once you start to see the pattern, then believe the pattern because it’s going to continue. We all get fooled.

Eric
I think one of the things too is having that relationship with the other employees. So I know multiple times as I’ve heard other people talk about it and dealing with my own stuff, sometimes other employees, there’s, there’s no chain of command or workaround to come up to me.

So there needs to, there needs to be some type of relationship with employees that are below your director of operations or your direct report manager. Otherwise you’re going to get hidden from stuff.

Whatever that feedback loop is. There should be some type of feedback loop and it, and it could be as easy as a survey or anonymous survey or something like that.

Meg
Yeah. So here you are with this great opportunity. Now you’ve got your podcast, you’ve got some other mastermind groups that you are leading, and I will go ahead and put that in the show notes.

What else are you going to do? Do you ever get tired? People say that to me like you’re 61 years old and you’re still going. Don’t you ever get tired?

I get tired just thinking about what you’re doing. Like, I don’t ever get tired. But what about you? What’s next? Are you thinking more slow down or stay the course or speeding up?

Eric
I have a very good lifestyle right now. I get to do the work that I enjoy doing, so I really enjoy what I do. And I’m not working insane amounts of time. I’m with my family a lot.

We were in, in Boca and then Disney World. So we’re in Florida for a week. I just got done being in Breckenridge and Vail for a week.

Oh, I’m going to Guatemala with John Maxwell who’s a great leadership guy. I mean he’s amazing leadership guy. Me, John and 15 other people. And he’s gonna, and I’m with him for three days.

And then I just learned we are going to be meeting with the president of Guatemala and having dinner at the White House. Their White House thing, it’s called the, the Presidential Palace.

But the coolest thing about that is I get to bring my 15 year old daughter with me so we get to go do that together. It’s the first trip that we get to take and I get to be with this leadership amazing guy that I just have so much respect for.

I spent quite a bit of time with him over the recent years and I get to do it with my daughter. So I’m always, I am continuing to just focus my family’s number one and just putting time into the family.

Like you look at your calendar, that’s where your priorities are. So I do the things that are really important that only I can do on my calendar. I have assistants that do other stuff that I enjoy doing.

I spend a lot of time with my family. I focus on health and then I’m also looking at trimming things like what can we do in my calendar?

And I’m getting to your exact question right now there. I look at my calendar and I have a lot of phone calls with franchise brands and I think how can I not have as many phone calls with franchise brands and get to know them outside of just one on one Zoom meetings or Google Meets and, and help them more than I’m helping them now.

So we are going to be doing some like workshop conferences for emerging franchise brands. Really inexpensive and very helpful. And then we’re going to be doing a more robust like group coaching program for franchise brands because we do it a lot anyway.

But like why don’t we just start doing this and offering it to them so we can talk about franchise development, how to build up a team, how to scale a team, how to look around corners, how to teach them how to be a franchisor because they’re good at their business, their industry, the thing that they’re doing but they don’t know franchising and nobody is really teaching them the business of franchising.

So we’ve got, it’s going to be called Franchise Accelerator. We’ll do it in the fall. But I’ll go, I’m going to start, we’re going to start doing that and it’s going to be at a price point that was a no brainer for them.

But here’s a value for us. Like we get to help them, we get to create content out of that, we get to put some of that content out there for free.

But you pay attention to, if you pay for it, right, if you’re paying for something, you pay attention to it.

So what we’ve seen is some, our franchisors were part of my mastermind early on and I got to know them, I got to learn about them and now they, they became portfolio brands.

So we can be helping a bunch of brands. Most of them are never going to be right for us. We’re not going to be right for them, but we’re going to be able to help them.

And some of them are going to be like, we want you to help Front Street. We want an FSO and we want a strategic partner. We want you. And we’re like, and they’re the right fit for us and it’ll be easy.

So we get to help a bunch of people and, and not have just a bunch of random phone calls one on one time, which was starting to drain me.

And as soon as something starts to drain me, I’m like, it’s time to switch it up. So that’s what’s new.

Everything else is the same. I got these daughters, they’re 11, 12 and 15 and just living, living a good life out here on the ranch with horses and chickens and mountain lions and elk and deer and, and get to travel a lot.

We’re going to Europe this summer for the first like real international trip just to expose them to Italy and Switzerland. And so, so that’s kind of the plan.

I’ll say this, I have friends that they’ll have a hundred million dollar exit and, and, and they go right back into doing something else or they have a $200 million exit and they want to do more.

And some of these people have grandkids, they have a $200 million exit. They have grandkids and they’re going back to working 50 hours a week, 60 hours a week.

And that’s not me, that’s not what I want to do. So I live a very simple life out here.

The ultimate goal, I think for most people, they should have enough passive income coming into their lives where they’re not working for their income. They make money, they invest money. That money is making money for them to cover their bills.

And then that’s freedom. And true freedom is when they have enough passive income to cover their lifestyle. And so. And I want to help more people do that. And we do that as well.

Meg
So anyway, so it sounds to me like what you’re doing in order to tighten things up is to take the one, the singles and put it into multiples.

Economies of scale. Now they’re learning from each other. It’s a better use of your time. And that’s actually an exercise that I went through two years ago.

I’m laughing, laughing because it was personally painful, but it was professionally rewarding.

My husband is the chairman of the board of our group of companies. And I looked at him one day, I said, yeah, this is not going the right way for me. And no offense, but effective immediately, I resign from the board.

And he pulled back and looked at me. Tears started to form in his eye. He said, does this mean you want a divorce? No, I’m preserving my marriage. Yeah, by pulling out of the things to your point.

If it’s draining and people aren’t being respectful, there’s who’s zoom and who going on, and this one isn’t bothering to do with corrective action, then life’s too short.

If you’re in a family business, there are ways of, of extricating yourself, of creating those buffers so that you can, like I do, enjoy my life.

As soon as I’m done talking to you, I’m going to grab my two dogs. A little while ago, one bust in here. She’s going to. She’s asking for a walk already.

I’ll put on my resale shop fur coat, ankle length. I go walking around, knee length. I walk around my prairie with my two dogs. And you’ll get a kick out of this.

I’ve got white earmuffs and my mink coat. And one of our employees came out and said, you look like a white tailed deer. So I am now forced to wear a blaze orange vest over my mink coat when I go.

But this is what I do for fun. I’m not tied to my desk. I’m not locked in my office. Monday through Friday, 9 to 5, I’ll work when I want to work. But it’s for joy, fun, and yes, otherwise it’s no.

Because why, why work that hard? You learned that lesson early on. I love what I see. Your posts on Facebook with your daughters and the lessons that you’re teaching them.

The one in particular that I’m thinking of, Eric, is when the it the truck stalled and they figured out how to jump it?

Eric
Yeah, so. So good.

Yeah, they. And before that, the truck installed, my wife’s Yukon had stalled and they didn’t know what to do.

And so I got home that day and instead of just doing it, I said, okay, it’s lesson time. I’m going to teach you guys how to do this.

So if this happens again, you know what to do. And so all three of them were huddled around and I showed them exactly what to do two different ways.

One, the thing that you plug in and then you charge it or using a vehicle to do it.

I told them how to. You put in the one that’s running. You put the black on first and the red and blah, blah, blah, blah.

And so a few days later, we had a problem with the Yukon. The battery died because of the electronic thing that they had to fix, but battery was dead.

I was playing pickleball, I think, and I was. My wife is like, girls, the battery’s dead. My two youngest ones, like, we know what to do.

My middle one, very much a leader like, Sadie, go do this. Go get this one. Put it here. Do this. I’m going to get in here. Dad said to get in.

So we had a Jeep. Jeep, a Jeep Rubicon that they was the one that worked. So they. One of them got in there, started it up, and the other one was in the other car. And then they knew to push the gas to give it a little bit more juice to get the battery going. And sure enough, they started. They started it up.

And, and it was so cool. My wife was just like, yeah, I. You taught them. I knew they would do it. And the two youngest ones just went out and did it.

And I just like, it made me think, I’m so glad I didn’t come home and just do it. But I was teaching them how to do it.

And I love teaching them how to do things like that so they can just, you know, this just empowers them and, and it’s so fun.

And they were so proud of themselves for doing that, and I was so proud of them for doing it.

So I’m like, I’m getting better at posting some of that stuff. I went for a couple of years without posting anything personal like that, vacations or things like that.

But I’m like, no, I’m going to start doing some of that just to give people like a little bit behind the scenes and, and so sounds like I, I need to keep doing that.

Meg
Well, it’s, it’s amazing how powerful social media is, particularly I would say for our industry and getting to know who’s who and what we do in our personal private time.

I am the franchise fashionista. You see me out at the meetings and that, that’s my nickname and I wear it, I wear it fashionably.

I get it back out here, I can be the franchise guru during the day.

But then to be able to expose your family, your kids — to daughters in particular. Daughters in particular.

I am shocked at how many people don’t know the difference between a Phillips head and a regular. And if listener, you don’t know, then you’re one of those people.

It’s just not hands on and not going to be fixing things. But it’s. You can’t live out here, live where you do without knowing how to self-preservation and really how to take care of yourself.

Eric
And the other thing, it’s time. It’s time with them. And I. And they. And one of them really enjoys that, but the other do as well.

But like if they’re building something, to me, handing me something, doing something, I’m teaching them something — like that’s, that’s time that we get together and that’s bonding, bonding time.

Even though it may not seem like that big of a deal, but it absolutely is.

And it’s funny, the other day I had one of my youngest — 10. I’m like, hey, can you go get the bobcat down in the barn to come up and get some of these big flower pots? And so sure enough, she goes down there and brings this thing, a little thing in there driving this bobcat up. But so proud to do it.

And they drive the. I don’t let them drive the four wheelers because I don’t like them on four wheelers. But they drive the Defender around, side by side, and they just, they just have so much fun.

But I start. I wish I would have taught some of that stuff younger, but like, it’s always on the, always in the back of my mind — like how can I spend time with them?

What can I teach them? How can I, how can I help them? Because it’s, it’s — looking back, I’m, I’m glad I made some of those decisions that I did.

Meg
Yeah, I’m glad that you moved back to Spearfish and got, got out of the big city.

You’re obviously very comfortable where you are and obviously very comfortable too balancing your personal life with your professional life and maintaining this lifestyle that I also enjoy.

I didn’t realize how much I would enjoy it until the pandemic more or less forced it on me.

But it’s great to talk to you — like-minded business person — and what you do for relaxation and fun is very similar to what I like to do as well.

And I’m amazed at how many of us in franchising are really backwards people. Just, I didn’t know it, I lived in the city. But I come to find out that driving a bobcat is really very pleasant experience.

Eric
And it’s interesting after the pandemic, people that I never thought would be having a house on acreage or animals, horses and pigs and all of that kind of, I don’t have pigs. But you know, they have that stuff now.

Like they went from the city life to that and they love it. And it just became a lot more normal for, for people.

So I’m comfortable wherever I am and I’m very comfortable being me, the guy from South Dakota.

When I go someplace, you know, like Vail, Colorado, which is, you know, there’s not a lot of South Dakotans out there, you know, it’s very different or New York or wherever it is.

I’m very comfortable in being who I am. I, I used to be embarrassed that I’m from South Dakota. I used to not be. I used to like not ask people where they were from because they’d ask you where you’re from.

But I’m so comfortable in my own skin now, it doesn’t matter.

And, and so most of the time I’m like the first person they’ve ever met from South Dakota. And I, and I, and I found out, you know, a number of years ago, like that’s how people will remember me.

Like powerful people, like a John Maxwell will, will remember a kid from South Dakota — or when I was a kid or a, or a guy from South Dakota that lives on a hobby ranch.

So I just got comfortable, you know, kind of owning the things that I wasn’t early on in my life. And so I found that, that interesting.

Meg
It’s, it’s a great lesson in, in self-acceptance.

One of the, one of the points of view that I bring strongly to my business is my degree’s in counseling. My mother was a hospice nurse and my dad was a very well known surgeon.

But he looks at life through a little itty bitty little lens. My mom the nurse, hospice nurse. What is the end of life? It’s the scariest thing any of us is ever going to do.

So I bring the sensitivity of counseling to the business.

And owning the decision is one thing. Making sure that you’re doing it the right way is another.

Follow a great leader, align yourself with really good people, and be honest with yourself about how it’s going.

And, and yeah, own it. Because you can’t fix it if you don’t own it. And you can’t revel in the bliss if you don’t own it.

So I think that’s a great way to end this little interview right there. You’ve owned it and gosh, you’ve owned it in so many different ways, Eric.

It’s really, it is mind boggling to categorize — not categorize, but go through all the different iterations you’ve been through in so few years of your life.

I can’t wait to see what you’re going to do next and I’m just delighted to be in the same company with your companies. Mel is totally freaking awesome and I can’t wait to see who else you’re going to bring on board.

So thanks for sharing your story with me today and I hope that whatever you do next is fun and four-wheeling.

Eric
Meg, it’s so fun to be able to do this with a good friend and have these types of conversations. We had nothing planned and I just knew it was going to be easy, it was going to be fun.

And, and it’s, it’s, it’s great when I get to come on podcasts with people like you who have the depth of experience, have the right kind of heart to really help people and have the ability to take people through a really good process to help them find the thing that they’re looking for.

And you’re not chasing the dollar. And so I appreciate you and what you’ve done for the industry.

Meg
Thank you. I love what Front Street is doing and I think we’ve got a good one this week and we should have a really good one by the end of the month.

Eric
I get it.

Meg
I like it too. Thank you.