BiggerPockets Business Podcast

BiggerPockets Business Podcast 46: From Flea Filled Trailer to Flipper to Master Franchiser with Logan Hand

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Do you feel like you’re too young to take on huge business challenges? Are you trying to figure out the best way to break into entrepreneurship but want the support of a big team behind you? Have you considered franchising but are looking for something a little bit bigger—that also won’t break the bank?

After this episode, you will find that you have a whole new perspective on what’s possible with scaling up a built-for-you system.

Logan Hand—master franchise developer for the new restaurant concept Mahana Fresh—learned at a young age that not only was it possible to break into franchising in a big way, but it could be done without a ton of cash in his bank account. 

In this episode, he teaches us how he went from real estate wholesaler and house flipper to running a four-county, 30-franchise development for an up-and-coming restaurant brand. And he explains the ins and outs of this little-known franchising concept called master franchising or area franchise development.

Logan recounts his days of hustling to generate sales commissions and wholesaling fees. He came to realize, at the young age of 27, that building a business that could generate passive income—and eventually be sold—was the better path. He talks about how he decided to go the franchise route, buying a franchise that he could own and operate himself. Then, he realized that he could do the exact same thing—but on a much bigger scale. 

If you’ve heard of franchising and want to learn more, or if you’ve considered franchising but want to learn how to do it bigger and better, this is the episode for you. Logan tells us how we should be evaluating franchises, how we can get money to buy one (or 30), and who that one person is who can provide you the support you need to make the right decision when it comes to buying into a franchise.

Make sure you listen to the end, when Logan provides some amazing tips for all the young entrepreneurs out there looking to get—and stay—motivated!

Check him out, and subscribe to the BiggerPockets Business Podcast so you won’t miss our next show!

Click here to listen on Apple Podcast.

Listen to the Podcast Here

Read the Transcript Here

J:
Welcome to the BiggerPockets Business podcast show number 46.

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Logan:
For me it was I've got to get these systems and seeds planted of cashflow systems that just continue to come in. And I wanted a business that made money every single day.

Speaker 3:
Welcome to a real world MBA from the school of hard knocks where entrepreneurs reveal what it really takes to make it. Whether you’re already in business or you’re on your way there, this show is for you. This is BiggerPockets Business.

J:
How’s it going all my favorite podcast people? I am J Scott. I am your cohost for the BiggerPockets Business podcast. And I am here with my other favorite podcast peep, Mrs. Carol Scott. How are you doing today Carol?

Carol:
Oh you’re one of my favorites too J. Thank you so much. Having such a good week. We are having an absolute blast over at Scott Silver Staging. Tell you what, we’re sourcing furniture, we’re stocking up on furniture and accessories and art work and décor. We’re bidding out all these amazing oceanfront properties. We are just loving every little last bit of it. And I’ve been running around so much I forgot to grab lunch so I am starving. I’m so hungry.

J:
Well, don’t eat just yet because we have an amazing show ahead of us for the next hour or so. So, last week we talked a little bit about franchising. We talked to a franchisee, somebody who owned six units of a franchise. And for anybody out there that’s interested in franchising, we’re going to continue that discussion today. But today we’re going to talk about kind of the next level up. Let’s say you might want to be a franchisee, you might want to own a franchise, but you want to do something a little bit bigger than just owning one or two or five or six stores. Well, our guest today, his name is Logan Hand and he tells us all about he is an area developer for a franchise. And basically what that means is he owns an entire area, and within that area he has multiple stores of the franchise that he runs himself. And then he has a bunch of franchisees underneath of him. So he’s basically a mini franchisor. He’s controlling a whole area, a whole bunch of stores, and so it’s kind of like the next level up for anybody that wants to get into a franchise.

J:
So this discussion is absolutely awesome. Logan is awesome. He’s a 27 year old and he is wise beyond his years. I mean literally just actionable tip after actionable tip for the next hour. So I am really looking forward to jumping into this episode. If you want to find out more about either Logan or the stuff he’s doing, feel free to check out our show notes at biggerpockets.com/bizshow46. Again, that’s biggerpockets.com/bizshow46.

J:
Okay, now without any further ado, let’s bring on Logan Hand. And let’s welcome Logan to the show. How are you doing today Logan?

Logan:
I’m doing fantastic guys. Super stoked to be here. Thank you so much for having me.

Carol:
Thank you for being here. We’re so looking forward to talking with you. We’ve been talking a lot about franchises these past several episodes and we know that you have a lot to contribute to the discussion so we are so excited to hear what you have to say.

Logan:
Well I’ll do my best.

J:
Awesome. Okay. So before we jump into the franchising piece of your story, let’s hear your backstory because you actually have a really interesting backstory and I think a lot of our listeners will be able to relate to your backstory. So tell us a little bit how you got started in business and investing and kind of being your own entrepreneur from the start.

Logan:
Yeah, for sure. I grew up in a house where my dad was an entrepreneur and struggled for a while until he finally kind of started succeeding. So I always wanted to be an entrepreneur my whole life. That was what I was kind of taught was the way to do things in this world. That was what I always thought I was going to be. It was never a thought of doing anything else other than doing a business or being a business owner. I just had no idea what I was going to do. So I graduated college in 2014 and my background was actually insurance so I had my insurance license when I was 18. And what I used to do over the summers was I would sell insurance … Final expense, burial insurance. And I would make all my money for the school year during my summer just from selling stuff. And so I had a really rich sales background at a really young age. So when I graduated college I naturally gravitated towards what I knew because that was all I knew, that’s how I made money.

Logan:
So I was in sales and it took me about a year and a half of doing that before I really woke up and realized, this is just something that I know how to do, but it's something that I have absolutely zero interest and no passion about doing. I just happen to know how to do it and I have a very good background in it. And so I really just didn't like my life at all. I was in and out of trailers and I had entered into my last trailer of just being with a place full of fleas and all these chihuahua's running around and people that were just not the people I wanted to surround myself with. So at that point I said … This was about late 2015. I was like, I've had it. I don't want to do this anymore. I've had enough. And I said, and what the heck does it matter if I change because I don't have a paycheck anyways. I'm 100% commission. All I do is go out and figure out how to make money.

Logan:
So at that point, that was when I started kind of going through the Google and the YouTube of learning how to invest in real estate and I was getting bombarded with all these ads of the typical zero money down flipping houses. You know, everyone's seen it and heard it, blah, blah, blah. So eventually I took one of those courses and I just said look, this is what I'm going to do now. This is what I'm doing full-time. This is my new identity. I'm going to figure out how to get a deal. And so I went full-time from day one and just switched and did my first wholesale deal, if you will, in about 90 days of making that kind of epiphany decision. And at that point in my life I had about $4,000 or $5,000 to my name. And I actually paid a mentor about $2,500 of that to mentor me and teach me kind of how to learn wholesaling.

Logan:
And then from there it was just doing one deal to the next deal to the next deal. And then basically just snowballed as most investors start. And then basically in my first year I did about 26 deals I believe it was and I got into my first rehab, started flipping properties from there. And then that led into apartment buildings and re-stabilizing them and reselling them. And I’ve been doing that now for about three plus years. And when I sold my last apartment building about a year and a half ago, I just had a moment to sit back and really look at my life and where I’d gone in real estate and the market was heating up as you guys know and people that probably listen, if you’re in real estate you know, margins are really thin and they’ve been getting thinner and thinner over the past two plus years. And I saw that that was going to continue to happen. So I thought to myself, look, I want something that is going to give me some higher returns. It’s really hard to find apartment building deals right now. So I wanted to reposition the money that I had into more of a business.

Logan:
And that kind of led me into investing in franchises because I didn’t have to start from scratch and build the business from ground zero. I was investing in systems and processes and the people that build that brand and are leading that brand. So I decided to kind of take some of the money that I had from real estate, put it into franchising and go from there.

J:
And so let me interrupt you real quick. I apologize for the interruption. But, this is kind of an important thing because you’re … How old are you?

Logan:
27.

J:
Okay. So you’re relatively young. And I remember when I was 27 and I didn’t know what the word franchise meant. I guess maybe I knew what the word meant, but I never would have thought at 27 years old that I’m ready to get into franchising. So what made you choose franchising? Did you have any background there? Did you know anything about it? What led you to franchising?

Logan:
That’s a great question. No, I didn’t have any background in it. It’s one of those things where you start paying attention to all of these things. I knew that these certain brands and concepts that you could actually buy them and own them, but I never started kind of digging into researching all of it. And when you start kind of looking into the costs to buy these particular companies and what they make and so on and so forth, you’re like okay, this is actually an investment that has a higher return rate, presuming you succeed, than buying an apartment building or investing in most real estate vehicles. So that’s kind of how I looked at it. And I said, I can go borrow and make 12% on a rental or I can borrow and try to make significantly more because you still have access to debt with franchising, which is very unique like real estate compared to hey, if you want to go start your own business from scratch that has no proven track record, a little bit harder to go and borrow money for that. So that was part of the attraction.

Logan:
And the other part I would say is the franchisor in the particular business that I invested in, has actually been one of my long time mentors. So I kind of had that initial relationship and they were teaching me how franchising works as well. So research and other people that have mentored me kind of teaching me as well.

J:
Got it. And just for the listeners out there, we’ve discussed the last couple of weeks, but franchisor is the person that’s creating the brand, creating the concept that is basically saying I’m looking for people to franchise my brand and open different stores if it’s a physical store. So when you say the franchisor was your mentor, the person that came up with the brand, came up with the concept, came up with this idea and was no looking for franchisees to open up his stores, this was somebody that you had a relationship with.

Logan:
Exactly. And that’s why … We’ll talk a little bit more about looking into franchise underwriting and how you underwrite them. This particular situation for me was a little bit different and unique, where I had a long relationship with the franchisor and he had funded some of my real estate deals. So we already had a very trusting relationship with each other so it kind of created a unique environment to where I felt comfortable to make an investment into this type of thing.

J:
Got it. Okay. So now you’ve gotten to the point where you say okay, I’m interested in franchising. Something about franchising. What was your first step or what was your next step?

Logan:
Yeah. I mean in this particular instance, I was talking with the franchisor and saying, “Hey, I’m at a pivotal point in my life where I have cash and I also have access to cash. And I want to kind of divert from where I’ve been going and put it into a different place, how can I get involved?” And this particular person that is the franchisor in this business, very successful individual. This is not like a guy that created his first restaurant and he’s trying to raise money with other franchisees. This guy used to run QVC for the Asian markets and so very, very high advanced level of business skills. You know, managed 8,000 employees. Very, very successful guy. So it’s someone where you can feel confident kind of parking money and say, hey, this guy knows what he’s doing with this. And so from there it was starting a conversation. And basically when you go through the franchise process they start with … You know, they give you their pitch and they show you kind of the whole thing. You sign a document that’s called and FDD or a Franchise Disclosure Document. And all franchises legally have to get you to sign this before they can start engaging in potentially selling you a franchise or anything like that.

Logan:
So, typically depending on the state, there's like a two to three week time period where they can't even close a deal with you after you've signed that FDD. You have to wait a two to three week time period before they can actually close. And the typical song and dance, if you will, is the process. You sign the FDD, you go through things, you start your underwriting, you can call other franchisees. You can do all sorts of things to do your due diligence. And then they fly you in or if you're local you can go. And they have what's called a discovery day. And that's where you meet the team. You get to try whatever their product or service is. You get a feel for everyone that's involved. If they have a headquarter office, you get to go there and see everything and it's kind of like a courtship if you will.

Logan:
And then typically once you’re done with the discovery day, at that point the franchisor can accept or deny you as a potential franchisee. They can say, “Actually, you know what? Since I’ve gotten to know you, I don’t really like you and I don’t want you to be a part of my brand.” Or they can extend their hand and say, “If you want to invest with us, we would love to have you basically as one of our brand partners or franchisees.” And then you go into some legal back and forth to sign the actually franchise agreement. And then you close, just like you would a real estate transaction. And so it is a little bit of a long process, but that’s essentially how you kind of go through it.

J:
Got it. And so I assume you decided, I want to be a franchisee of this particular franchise and feel free to mention the franchise. You haven’t mentioned it yet.

Logan:
Yeah.

J:
We’re not shy about that here if you want to give a little shout out.

Logan:
No worries. Yeah, it’s called Mahana Fresh.

J:
Okay.

Logan:
And it’s a fast casual, gluten free, build your own bowl concept focused around not only delicious food, but health conscious eaters. People that have dietary restrictions or people that are just really healthy in general but want a affordable yet fast casual bowl they can eat and still be healthy.

J:
Now for anybody out there that’s listening to this, that was a perfect example of what we call the elevator pitch. Being able to describe your product or your service in about 20 seconds. So that was good, I like that.

Carol:
Beautifully done. Perfect.

Logan:
Thank you.

J:
So you’re thinking okay, I’m going the franchise route, I’ve got an in with somebody that does this. You sign the franchise disclosure document to get the process started. You go to discovery day to kind of meet the team, let the team meet you. You decide you want to work together. You sign a franchise agreement. So does that mean you now are a franchisee? You run a Mahana Fresh store?

Logan:
I mean technically on paper it makes you a franchisee, but there’s still a lot of hurdles to get through before you’re running a store.

J:
Okay.

Logan:
Yeah. And so I can definitely say especially a part of my age and the generation I grew up in is we think everything happens instantaneously. And in this business, and as well as many other businesses, these things take time. And so I've learned a lot of patience going through the franchise process. For example, it took me nearly nine months just to get my lease done. Just to find the right space. And I probably negotiated 15 different spaces before one actually went to lease that checked almost all my boxes that we're looking for. Then from there you have permitting and if you're using … Most people use SBA loans to open franchises. It's some of the best debt out there that you can get. Very inexpensive. But it's also the biggest pain to get an SBA loan. It takes forever. So you have the real estate process, then you have filing your permits, and you have architectural plans. These things all take probably months at a time. Then you have getting the loan closed. Because you can't even pay the people to build the place until you get the money from the bank. So then you have that happening simultaneously.

Logan:
And then after you build for however long your construction timeline is, then you can start opening and now you have a whole new set of problems, which is running your store. Or whatever business it is that you decide to invest in.

Carol:
Okay great. I want to follow up on that for a quick second. I think you said Logan, it was about a year and a half ago you started this process of going down the franchisee route?

Logan:
Yes.

Carol:
Then you’re talking about all the building permits, the SBA loan, all of those things. How long did that piece of the process take for you to get from engaging with the franchisor to physically opening that first store?

Logan:
Okay, well let me give you an example. So, it’s been a year in a half, I am just now getting into construction.

J:
Wow.

Carol:
Okay.

Logan:
Now, let me give a caveat to that thought. I had a little bit of a unique situation though. Because in the beginning my goal was, I wanted to go after the most prime of prime real estate. Because you know, it’s all about location when you open these types of businesses. And so I probably spent four or five months kind of learning that I wasn’t at a point where I could get the prime A+ real estate yet for two reasons. One, the brand was still growing. It’s not like I’m Starbucks coming in and saying, hey we’re going to put a Starbucks here. And a lot of times I would get out bid by these huge national companies. So it was hard. So I probably wasted four or five months in just trying to learn the real estate part of it. And when I learned, okay, let me try to go to like a B market, I then got a deal within two or three months. I have franchisees underneath me inside of my area and they got their real estate locked up in like two months. So it’s different.

J:
Okay. So I want to talk about that little bit. You mentioned you have franchisees underneath you. How does that work? I thought you mentioned that you were a franchisee and you were opening a store.

Logan:
Yeah. We probably should have started there instead of reversing. I did a unique deal. Because I was looking at it like this is the biggest investment I've ever made. And in order for it to really make a lot of sense for me, I also wanted to go big. I wanted to own more than one store and I wanted to figure out what was the most lucrative thing that I could invest in that would give me the largest return? Because I'm going to dedicate five to 10 years of my life to building this. And so, what we did was we did something … In franchising, they have this structure. Not all brands offer it, but some that are growing do. And it's called an Area Developer Agreement. Also known as a Master Franchise License. And basically what happens is the franchisor who developed the concept and they own the concept, they will partner with key individuals to build out an entire marketplace. So like for me, I own all of the Tampa Bay metropolitan area. So I own the four major counties in and around Tampa Bay. And so what happens is, we basically become 50-50 partners in that particular geographic area.

Logan:
And all of the locations, whether I own them or another franchisee owns them, if they fall inside of that area, me and the franchisor, we split our revenues 50-50. So I make half of their royalties, which they make on the gross sales of every location. And then I also make half of the franchise fee that franchisees pay up front.

Carol:
This is so cool. Okay. I just want to do a quick recap here for our listeners. There are so many pieces to this, but it’s actually very linear and I love this and I think a lot of our listeners will relate really, really well. So you graduate college, you become an entrepreneur from the get go, you start investing in real estate, you realize the margins are thin. You want to put your money elsewhere. You realize franchising is a great way to do that. You sign on with this franchisor to become a franchisee of your own store. That’s one piece of the puzzle. Then the other piece is to develop out an entire area and you bring in additional franchisees and you split the royalties and the ongoing revenue stream with them or something to that effect right? So you’ve got two distinct yet related income streams going on there right?

Logan:
Right.

Carol:
You’ve got your own store and you have all of these people underneath you. That is incredibly cool. What a really cool way to blow this out. This is fascinating. So as this franchise area development in that role, how do you go about finding those potential franchisees?

Logan:
Yeah. That’s a great question. And just to kind of touch further on. The reason why this structure makes sense for the franchisor … And so my job is not only to, like you said, bring in new franchisees, but also help them go through the process. Like when you heard me talk about that process, there’s a lot of moving parts. So if you have someone that’s kind of in the middle between the franchisor and the franchisee, my job’s to get them open, help them with their problems, make sure they’re profitable and really create a great group of people that we’re all helping each other and helping each other succeed inside of the franchise brand. In terms of finding new franchisees, you know it’s crazy, we do joint marketing efforts with the franchisor. So we kind of kick back money to help pay for marketing to bring in new franchisees. But we also do trade shows and we’ve closed deals, believe it or not, from trade shows. The craziest stuff happens. We do trade shows and we work a lot with franchise brokers. So there’s people that all they do is broker deals between franchisors and franchisees that want to buy franchises.

Logan:
And so these people will bring potential customers to the table and then they get a commission and blah blah blah. So we’ve got brokers, we’ve got trade shows, we’ve got our own internal kind of digital marketing if you will. And then for me personally, believe it or not, this is going to sound crazy, but I have two franchisees already. One of them bought a three store deal. So they did a three pack. And then the other one did a one store but he’s actually going to do three anyways. But the guy that I sold first, I sold from Instagram, which is going to blow people’s mind. It’s real. It’s out there. So I met this guy from Instagram, we built a relationship. He was also a house flipper by the way. So flippers actually are learning this whole franchise thing and so he wanted to come aboard and believe it or not, I brought him in four or five months later and he’s open before me.

J:
So basically you’re sitting kind of in between the franchisor and the franchisee. You’re a mini franchisor.

Logan:
Yeah.

J:
So you’re a franchisor, but instead of the entire brand, the entire country, it’s that brand but in your area. And for you right now it’s a four county area.

Logan:
Yep.

J:
So you’re kind of doing the equivalent of a franchisor opening corporate stores. You open your own stores. And then you’re managing other franchisees under you. And the benefit to the franchisor, if I have this right, is they don’t have to go out and find these franchisees, you’re doing that. They don’t have to manage these franchisees. They don’t have to have a general manager who manages that area and takes care of them. They don’t have to deal with the day to day problems. If there’s a flood in one of those stores, they’re not going to call the franchisor, they’re going to call you, the middle man. So basically, you do most of the day to day work. In return, you get 50% off all the profit that the franchisor would get.

Logan:
You’re 100% right in all of that. And I will even add to it. The other thing you have to think about is, when they go to expand initially … So if they sold 10 masters or 10 area developers … So for example, my area development schedule is 30 stores. I have to own and operate three of those stores as an area developer. And then I can franchise out the rest of them. So if they sell 10 area developers and each one does … They’re technically supposed to do 30 to 50 stores. Well now all of the sudden, in one to two years, they’ve got 100 stores in development between just 10 to 20 people that are going to be key developing these. So it’s a great way for them to grow and also it allows them to only be managing with a handful of people instead of managing with 100 franchisees. If that makes sense.

J:
That makes perfect sense. Okay, so you signed a contract that basically said, here’s your four county area. In that four county area you can have either up to or you must have 30 stores and at least three of those have to be run by you and your team.

Logan:
Correct. Yes. So typical area developer agreements will have some sort of time table. Like for example, mine says in 10 years you should have around 30 stores. Or 30 stores over a 10 year development schedule and then you have to own and operate three yourself or your team. However you want to put it.

J:
Okay. So can you give an idea? We’ve talked in other shows, like the cost of being a franchisor can be up to a half million dollars if you want to be the big guy at the top starting a brand new brand from scratch. If you want to be a franchisee, we’re looking anywhere from like, 20 to $100,000. Maybe hundreds of thousands more if you want to actually do the build out of your stores. Can you give us an idea … And you don’t have to go into exact numbers. But are we talking thousands, tens of thousands, hundreds of thousands, millions of dollars? What are kind of the costs associated with being this area developer as opposed to being the franchisor or the franchisee?

Logan:
Yes. So let me break that down in a couple of parts. I like to look at it like there’s area developer, which is almost like its own separate business on this hand. And then there’s franchise units, like one store we operate separate business on this hand. They’re really not the same. So area developer … Every brand’s different. But the way that they do it or at least in my case, they sell you the area based on the population of the people inside of that area. So typically they’ll sell you … Every price is different. But they’re going to peg a price to each person. Whether that’s five cents or 10 cents, it’s all going to depend. But basically it’s somewhere in that range. So in my area, I think we did a population of like three and a half million people. So that investment cost me … I think it was $240,000 roughly, to buy the rights for the master area. Somewhere in there. And then, let’s talk about a one unit franchise. So one unit franchise, every brand’s different. Every cost is different. There’s so many variables. There’s sizes of the space. But on average, an entry level low end franchise I feel like is going to cost somewhere between 200,000 and 300,000, all the way in. And then can range all the way up to five, six, 700,000. Some of them are millions.

Logan:
Taco bell is a couple million bucks. McDonald’s is a couple million dollars. But what you really have to look at … For those of you that know real estate, is you really have to look at how much cash you actually have to pony up to get a loan or get the debt in place to finance that whole thing. Most people don’t pay for it with cash. So the SBA loan is going to be anywhere from 10 to 20% down. It is amortized over 15 years instead of 30 like in real estate so the monthly’s a little bit higher. But like for us, we got 15% down. We borrowed $365,000. So really we only had to come up with about $70,000 bucks to get into the deal.

J:
Got it.

Logan:
So that’s not totally unreachable for a lot of people if they can just make sure they qualify for a loan, an SBA loan or something like that.

J:
Excellent. So basically, you didn't let the enormous amount of upfront cash stop you. Again, like real estate, you can use leverage, you can use loans and you can buy something that's bigger than what you presently have available in cash.

Logan:
Exactly.

Carol:
Okay Logan, that is really cool. So, overall, if you had to sum up the whole financing piece of the situation in one snippet, in one kind of overall the way you approach it, what would that be?

Logan:
Yeah. And this is something I try to live by in all of business is like you just can never let, I don’t have money or I don’t have enough money be an excuse for you to not get into some type of deal or some type of opportunity. Once you start kind of really learning what financing options are out there, there’s always a way to come up with the money that you need to get into an opportunity or a deal. And we live in a world right now where A, debt is cheaper than it’s ever been, even since I’ve been alive. And not only that but we need more opportunities. Money can be found if there’s opportunity. So if you can find the opportunity, the money is out there. So don’t even consider that as an excuse because it’s just not real.

Carol:
That’s excellent.

J:
Absolutely love that. Before we move on to the next part of our show, let’s hear from one of our show sponsors.

J:
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J:
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J:
Cool. So are there any drawbacks of being an area developer. I mean the benefits are clear. There’s more upside, you get a bigger area, you’re not just like owning lots of franchises or parts of lots of franchises. Any drawbacks that anybody listening that’s thinking, okay, this is for me, I want to go do this? What should they be thinking about on the negative side?

Logan:
Yeah. I mean, you’re having to deal with a multiple of different people that are in high stress environments. You got money moving around. You’ve got a risk that they’ve never taken before. That’s the difficult part. And you are going to have to have some sort of team that you build to kind of help take care of and deal with all the day to day. So really, no major giant drawbacks than running a typical business. You do have some more financial obligations than just owning one store. You have to spend money on marketing to bring in new franchisees. But you also get more of a say in what’s happening with the overall brand. Which in my opinion in franchising, one of the ways you can help mitigate a lot of your risk, is to put yourself in a put yourself in a position where you have an opinion and a say in what happens with the brand.

Carol:
Excellent. I would like to know additionally, we mentioned a while back, like all these ways you are … All these very creative ways … That’s the reality. These creative ways you are finding these franchisees. You found somebody on Instagram for crying out loud. I mean that’s really cool. What other tricks do you have up your sleeve to find these franchisees?

Logan:
I just continue to try to make a lot of great connections and build awesome relationships on social media. The other franchisee that we sold, we did a three store deal with, he came to a trade show in Tampa, which is super old school. And sometimes the universe just aligns correctly in all honesty. I wish I could explain that there’s exact methods. The only thing I can say is, if you just keep constantly beating away at something that works, it will at some point produce results. If you keep putting yourself out there on Instagram and … Like what I’m trying to do now is I’m trying to tailor a lot of my content towards teaching people about franchising and getting a younger demographic to realize like hey, this could actually be a career path or a business for them to invest in. And if I can kind of position myself as oh, that’s that guy on YouTube or Instagram that’s about franchising and he started with real estate and got into franchising. Eventually those opportunities will just kind of start flowing towards you. It’s just kind of the nature of how it’s worked.

Carol:
I love that. That’s really cool. And you mentioned, in addition to that, that so much of it in the beginning, you felt like was really the stars aligning and then once that started you consciously grew that and made sure that your reach really went after that type of situation, which in overall, it worked out for you. I mean, you Logan found the perfect franchise for you, Mahana Fresh.

Logan:
Right.

Carol:
So how do others go about finding the franchise that is really the absolute right fit for them? How do they underwrite a potential franchise?

Logan:
Oh yeah. This is such a great question. So a couple of things. I would always recommend if you’re first going into a franchise, I would suggest finding a franchise broker. And the reason why is because they serve as like a neutral party between a franchise brand and the purchaser, the franchisee. Because obviously if you yourself go to these franchises, they’re kind of biased. Because they want to sell you a franchise. And so even though it may not be the best opportunity for you, they want you to think that it is the best opportunity for you. And so it’s nice to kind of have that neutral person and it’s free to you as the franchisee because they get paid by the brand that you end up buying. So they don’t take money from you. And so what they do is they actually look at your life as a whole. What would actually fit into your lifestyle right now or the lifestyle you want and what brands might do that and what type of time commitment do you have, money commitment, all those things. They look at it from that lens instead of someone just wanting to sell you their brand. So definitely look into a franchise broker. I’ve always used a company called Franchise Consulting Corporation, the FCC. They’re great. And connect with someone that you actually really like.

Logan:
And then underwriting wise, there’s a lot of steps that you can do to mitigate your risk. Just remember, look, there is more risk profile in franchising than real estate. It’s not near as tangible as an asset, a real estate asset. So you do have to underwrite a little bit stronger in my opinion. It’s better that you know that hey, there is a chance of failure. I mean, it’s a business. But if you follow the steps, you should reduce that change of failure the most that you can. So things you can do to reduce that in underwriting. In the FDD some brands will have … I believe it’s called an item 19. Item 19 is tricky. Basically it’s supposed to tell you the average revenue or profit per unit that they do on average of their current existing stores. Now, if this is a newer brand that doesn’t have that many stores, they’re probably not going to have this. But if you’re looking into an established brand, they’re going to have an item 19. And you want to comb through that. You want to see what are they making? And you want to see, what are these locations? Is this a relative location to what yours could be or is this like Park Avenue so you’re never going to hit those revenue numbers?

Logan:
You know, so really look at that. The other thing you can do is when you get through the process, you do have the right to call other franchisees and talk to them about their experience. Do they like what they bought? Are they making the money they thought that they made? You can literally call as many people as you want that got into the brand and get a good feel for, is there problems that the brands are not telling you about? With management? Is the management on top of things? What is the support like? And you can try to mitigate a lot of that risk and future problems by doing your due diligence. So you want to take the time to go through that process and also the broker will help you too because he’s probably sold other clients this brand that he’s talking to you about and he can tell you, “Look, they’ve had a great experience. They’re making this amount of money, blah, blah, blah.” So on and so forth. So those are the things that I would definitely recommend.

Logan:
And everyone that I’ve seen that’s an experienced investor in franchising, they all will sit down, they’ll call the franchisees. As many as they can. Do you love this? Why did you invest money in this business? What is it that you see that I don’t see? And they’re really getting a feel for what’s the core of this business when you peel back all the layers of the sales part. And just like if you’ve heard other episodes, people talking about buying businesses, this is the stuff they’re trying to uncover. Like, what’s going to happen when I become the owner and all this stuff goes away? So make sure that you’re getting into what you think you’re getting into.

J:
That’s great. Okay. So just to summarize your three big tips. And these are all awesome when you’re underwriting a franchisee. One, item 19 in the franchise disclosure document. Is it called that because it’s actually the item 19 in the contract or in the document always?

Logan:
Yeah. It’s always the item 19 in the FDD. I might be off between 16 and 19, but it’s somewhere in the late teens where they disclose income.

J:
Awesome. And so that basically tells you the average revenue per unit. So make sure you scrutinize that and make sure you verify that that information’s correct and it makes sense for what you’re expecting to get out of the franchise. Number two, call other franchisees, get references, ask tough questions. Ask about, what are all the things that management hasn’t helped you with that they’re supposed to have helped you with? What are all the problems that you’ve had? What are the struggles you’ve had? It’s just like calling references in a job interview or anytime you’re calling references. You don’t want to ask about the good things because people can always come up with good things. You want to ask about the bad things because these are the things that are ultimately going to hinder you moving forward if you decide to move forward. And then number three, go back to that franchise broker. You mentioned earlier having a franchise broker that can help you. And not just help you find a good franchisee that fits, like you just mentioned, that broker can also, once you find that franchise, they can help make sure that you’re asking all the right questions, you’re doing your due diligence and they can answer the final questions. So I love it. Three great tips for underwriting a franchise when you find one.

Logan:
Yeah. Absolutely. And I would just say, that’s kind of on a micro level when you get into the deal. But on the macro, make sure this is something that you’re going to see lasting for the next 10 years. You don’t want to buy into a dying brand if you think it’s a fad or a trend. Just make sure you feel confident that you’re investing in something that’s where the market’s moving and not already past it.

Carol:
I love it. And I think it’s worth noting once again, as we’re going though this part of the discussion, again, just really calling out how many beautiful parallels there are to real estate investing.

Logan:
Absolutely.

Carol:
I mean we’re talking about, right … We’re talking about the risk tolerance. We’re talking about really going above and beyond on your due diligence. Really looking at the profits that come to the table but comparing those locations to your locations. There are so many of those things that parallel so nicely. So similarly to that, of course when you began scaling your real estate investing business, you had a plan. What are your plans to scale this business?

Logan:
Yeah. I’m very excited. I have some key reasons why I kind of backed away from trying to scale my flipping business that attracted me to franchising. So, my plan is … So right now between myself and the two other franchisees, we basically have nine stores to get in the ground and open. I could almost not even bring in other people at this point and just focus on getting those nine stores open. I’ve got to do two more. I’m entering into the construction of the one I have now. There’s a period of getting those operations dialed in with all the employees and stuff as well. And then, with the two guys I have now, I just want to pour energy into them to give them the most support, because they have everything that they need and what it takes for them to continue to develop the stores they’ve already basically purchased or are getting into. So I think just really spending time with those guys to make sure that over the next year to two years, that we get those nine stores open and functioning and profitable. And then the key for me, I really would rather have less people that buy more stores that are more profitable than to have more people that only own one store.

Logan:
For me it’s like, I’d rather be able to go out to dinner with four people and be like, between all of us, we have 20 stores in this area and every store revenues a little bit more than an average store. To me that’s much better than having 30 mediocre stores.

J:
Love it. Love it.

Carol:
Totally. And then you’re really investing your time, energy and resources into those specific people. To grow that out rather than having to reinvent over and over and over. That’s really wise.

Logan:
Correct. Yeah.

J:
Okay Logan, this has been absolutely fantastic and we’re almost getting to that point in the show where we’re going to jump into the last segment. But before we do that, you’ve had so many amazing tips for our listeners. I imagine there’re probably a couple of more that we haven’t gotten to. So do you have any other just like thoughts or tips you can provide for our listeners who are looking to just kind of scale to the next level, to take it to the next level, to do big things?

Logan:
Yeah, for sure. And I mean, I definitely would love to kind of relate to some of the maybe real estate guys here that are listening. And you know, if you feel like … I had a feeling with my real estate business and I was doing well and I felt always constantly like I had to get that next deal. And even though I had some cash flowing properties, I just always kind of felt like I was on this rat on a wheel chase. Like it always was like, okay, there’s got to be three deals in escrow and the next deal. And what I felt like was … The reason that drew me to kind of reposition into more really tangible businesses, I felt like my real estate business had no re-sellable value. So no one’s going to acquire my wholesaling or my house flipping business. No one’s going to pay me three to five X on my earnings because as soon as I go away and the sales guys go away, there’s no business. It’s just a sales business. So if you really truly feel that way, start thinking about what you can do with the skills that you have because you understand business. And by the way, real estate, especially wholesaling is a very, very difficult business to scale. One of the hardest out there in the world, because there’s so many moving parts.

Logan:
Think about, you want to devote your five, 10 year time to something that can be acquired for a significant amount of money when you’re done putting that time in. So that’s kind of one of the tips that I had was, put your time in a place where when you’re done five years down the road, you have something to turn around to sell other people.

J:
You’re building a company, not just a job.

Logan:
Exactly. And my thing and in full transparency, I had mastered learning how to make a couple hundred thousand dollars a year. And I’m sure a lot of you guys that are listening have figured that out. But the bridge between there and a million bucks a year is a difficult bridge. And so for me it was, I’ve got to get these systems and seeds planted of cashflow systems that just continue to come in. And I wanted a business that made money every single day. Not something that made money every 90 days, every 60 days, because a flip is waiting or whatever. You’d be surprised, you can make a lot of money $15 at a time. You know what I’m saying? That was kind of one of my key factors. And my second tip is something that’s really defined my entrepreneurship journey. Really, it truly has. Is proximity. And I know a lot of people say this, but it’s a real thing and what I mean by that is, you have to … Even if it’s just two or three key people that you’re surrounding yourself with on a weekly basis, that are either where you want to be in life or so far ahead of where you think you could be. And you have to figure out how to get close to them.

Logan:
You have to be in proximity because the projects that they work on are at such another scale. When they start to bring you in or even bring you in on a sliver of the things that they’re doing, that tiny chunk is still bigger than the things you’re able to do at the level that you’re at because they’re just on a whole nother playing field of business. I owe getting into Mahana to the relationship I had with my mentor years prior to this opportunity happening. And then when it happened, I was at a position where I could take action. And when opportunity hits you guys, like just figure out how to make it happen. It may not happen for another year that you get a good opportunity or years that could not happen. So when it comes, take it, figure it out. Figure out how to get the money. Figure out how to make it work. Just jump in and just do what you have to do to create the opportunity and change the way that you’re living.

J:
Absolutely love that. There’s some amazing wisdom for a 27 year old in there. Plant the seeds that are going to pay you over and over again in the future and keep yourself close to people that are doing the things that you want to be doing. Not necessarily the people that are doing the things you’re doing.

Logan:
Yeah.

J:
Absolutely fantastic. If I had that wisdom at 27, I’d be somewhere else right now. So absolutely amazing. Okay, Logan, we have gotten to the point in the show that we want to do our four more segment. And this is the segment where we’re going to ask you the four questions that we ask all of our guests and then after that, we’re going to give you an opportunity to tell our listeners a little bit more about where they can connect with you, where they can find out what you’re doing, and where they can learn more about all the awesome things you have going on. So are you ready for that?

Logan:
I’m ready. Let’s do it.

J:
Excellent. Okay. So you started out being an entrepreneur early on, but it sounds like you had at least one or two jobs early on. What was your first or your worst, I’ll let you decide, job that you ever had and what did you learn from it that you’re still using today?

Logan:
That’s a great question. I actually have never had a formal job where I got like a paycheck, but I’ve had like different sales things that I really hated. I once worked for this guy that owned a car audio shop in my area. And I was supposed to call and basically bring in business for people to work on their car stereos and all this different stuff. You know, I just really didn’t like it and I think I quit in maybe six weeks. I don’t know if I lasted that long. I mainly just worked there because I wanted work on my car audio system for a discount. Because that’s like the big thing, is who has the cool system and blah, blah, blah, when you’re in high school. But yeah, I learned don’t ever take a sales opportunity in something that doesn’t allow you to get paid handsomely when you actually do a sale. That’s a great waste of time.

Carol:
That is a great learning. Once again, wise beyond your 27 years. It’s kind of blowing my mind. Okay, number two question is, when did you Logan, truly have that defining moment that was what you said, I’ve got that entrepreneurial itch?

Logan:
Yeah. It’s weird. I will tell you, my therapist will tell you the same thing. For me, it’s a lot of psychological. So my childhood was spent a lot of trying to get time with my dad who was extremely busy working on businesses. And so the real true honest answer to this is, my psychology kicked in and said oh, well what I have to do is be good at the things my dad thinks are cool, which was business. And so at a young age I would just listen. I would be at his meetings. I would go through sales things. You have to understand, I was cold calling financial planners at 14 years old over the summer to learn how to be good at what my dad was doing. And then from there I fell in love with business. But I was always … Like I understood business and sales and I loved talking to people. But in all reality, that’s the true answer, is I wanted to be great at something that my dad was great at and what I thought he thought was cool. That is the answer.

J:
Wow.

Carol:
You know you’ve got my crying over here right now. I’m just like oh my gosh, that is the sweetest thing ever.

Logan:
It’s crazy though. Trust me, I’ve had like hours of therapy and yeah, when you trace back the reason why you are the person you are and how these things work … But that’s the real answer. That’s really the real answer.

J:
That’s awesome. Okay, I’m going to go a little bit lighter on this question. Question number three. What’s the best business book or any book if you’re not into business books, that you’ve read recently that our audience should be reading?

Logan:
Well you know, one of the last episodes, Brit, he took one I was going to use, which is Scaling Up. And that thing is literally like the bible of growing companies. It is incredible. But I will say, Traction is like a easier to digest version of that book. And Traction is a fantastic book. So I highly recommend that one.

J:
Big fan of Traction. Absolutely.

Logan:
Yeah, great book.

Carol:
Excellent. And here is the fourth and my personal favorite question, what is something that you have splurged on in your personal or work life along the way that was totally worth it?

Logan:
That’s funny. I remember listening to this question and saying, oh I know what I am going to say. Some people are going to laugh at me for saying this. I’m pretty cheap actually with my money. I only typically buy stuff that makes more money. But the one weakness I have is fine dining. I love really great food and wine. Me and my wife did this … We ate at this restaurant called Meat Market in Tampa and I think I got like this $90 wagyu steak or something. But it was just like to die for. It was so good. I think we spent like 400 bucks there. I felt almost guilty but at the same time I was like, oh it was so good. It was so good.

Carol:
I love it. I’m laughing because that is J to a T. He buys nothing ever but there is no expense spared on good food and good dining experiences.

Logan:
Exactly. Nothing. And hence why I’m investing in food because it’s like my weak spot. It’s my weakness. I love it so much.

J:
Oh, I get it. People always ask me like, “Why don’t you drive a nicer car? Why are you driving a car that’s 12 years old and another car that’s eight years old?” I’m like, “I spend a nice car worth of money on food every week.”

Logan:
My dude. I love you for saying that. I’m still driving my old beat up Hyundai that’s like, I don’t know, probably worth like 3,000 bucks. But I’m buying a strip mall in two weeks and my friends are like, “I don’t understand.” I’m like, “Well this doesn’t make money.”

Carol:
I’m right there with you. I love it.

J:
Logan, I am going to make sure my nine and 10 year olds watch this episode because if they’re half as wise as you are when they’re your age … This is awesome. Okay, I’m going to finish up the four more segment with the more part. And this is where I’m going to let you tell our listeners where they can find out more about you, what you’re doing, where they can connect with you or anything else you want to talk about.

Logan:
Awesome. Sweet. Actually, one of my big goals this year is to try and grow my YouTube channel and so you can find me on YouTube. It’s called Make It Happen TV and if you subscribe there you can catch weekly videos and then I’m super active on Instagram and my handle there is @mogul_in_Themaking. And just look for the guy with the big glasses and you’ll find me.

J:
Awesome. And I’ll make sure those links and a whole bunch of other that you provide to us will go in our show notes. So anybody that wants those links, check out our show notes.

Logan:
Sweet. Thank you so much.

J:
Excellent. Logan, this has been absolutely fantastic. Thank you so much. Carol, I’m going to let you have the last word here.

Carol:
I truly don’t even know what to say. I know we keep going on and on about the fact that you’re 27, but J totally hit the nail on the head. If either of our children manages to do half of what you’ve done and have the insight and wisdom and good sensibility and even more importantly, the willingness to share and teach others and spread that knowledge, I will be just so incredibly grateful and proud. So thank you so very much for devoting your time today. You’re absolutely amazing.

Logan:
I’m extremely flattered and humbled. I struggle to think of myself that way. I’m just trying to do more every day as it is. But it’s like, we’re all just people here trying to figure stuff out. So I’m glad to help and guys seriously, I’m super flattered you would invite me on the show, so thank you so much.

Carol:
Thanks for being here Logan. You’re incredible. We’ll see you soon.

J:
Yeah, thanks so much. We’ll talk to you soon.

Logan:
Thanks guys.

J:
So how awesome was that? I hope our kids grow up to be as wise beyond their years as he was. I mean, honestly if I had that level of perspective back when I was his age … Yeah, wow. I can’t even imagine.

Carol:
Just incredible. Not only the depth and breadth of different things that he’s done, but just the overall perspective he has about surrounding yourself with the right people, planting seeds to grow things later in your life. Not buying yourself a job but figuring out ways to generate money each and every day even if you’re not working. Again, just absolutely phenomenal information and expertise that he shared every minute of that episode. I thought it was absolutely phenomenal.

J:
Yep. Absolutely. Okay well, I’m going to let you go get something to eat because I know you were hungry an hour ago so I imagine you are starving by now.

Carol:
I wish there were a Mahana Fresh right up the street. Seriously, that sounds so delicious.

J:
It does sound really, really good.

Carol:
We have to drive up to Tampa which we will do. So thank you for turning us on to that Logan. All right, baby, let’s wrap this up.

J:
Yes. Everybody, thank you so much for tuning in. Have an amazing week and we will see you again or you’ll see us or you’ll hear us or something like that. Hopefully next week. All righty, she’s Carol, I’m J.

Carol:
Now don’t let, I don’t have money stop you today. Everybody thank you so much for tuning in and we’ll see you next week.

J:
Thanks everybody.

Carol:
Bye.

Watch the Podcast Here

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In This Episode We Cover:

  • How he got into franchising
  • The parallels between real estate and franchising
  • Signing a franchise disclosure document
  • How he recruits new franchisees
  • Why location is important
  • How investment cost is based on a price per person in the area
  • How to work with franchise brokers
  • Why there’s more risk in franchising than real estate
  • His tips for underwriting
  • Why you shouldn’t buy into a fad or trend
  • Why he keeps close proximity to great people
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “We need more opportunities. Money can be found if there are opportunities.” (Tweet This!)
  • “I wanted a business that made money every single day.” (Tweet This!)

Connect with Logan

What does it take to start, scale, and sell your own business? Every Tuesday, J and Carol Scott ask this question to entrepreneurs of all stripes and delve into stories that go beyond the launch. F...
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