Interview with Jerry Eulentrop, Sport Clips - Advantages of Opening a Franchise Business, Haircutting Franchise Information

Jerry Eulentrop’s diverse franchising experience spans 30 years. He joined Sport Clips as director of franchise development in July 2012. Prior to joining Sport Clips, he served as area development manager for MBE/The UPS Store for 14 years. Eulentrop’s franchise career started in 1992 as franchise sales manager for ERA Franchise Systems, where he had development responsibilities throughout the Midwest. He developed a system to target the conversion of large independent real estate agencies. He holds a Bachelor of Science in Business Administration with a minor in philosophy from the University of Missouri, St. Louis.

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About Steven Denny: Steven Denny co-founded Innovative Business Advisors in 2018 and serves as a Managing Member of the firm. Steve has been actively engaged in M/A activities in a wide variety of industries for the last 14 years and has developed specific products to assist clients in growing their profitability and enterprise value. His specialty is working with established private companies in the lower middle market with annual revenues from $1 – 50 million.

Transcript

00:02

Welcome to the You Don't Know What You Don't Know podcast, by Innovative Business Advisors, successful business owners who have started, grown and led businesses share their journey and direction for the benefit of those traveling the same path.

00:18

Well, today we're talking with Jerry Eulentrop. And Jerry is the director of franchise development for Sport Clips, located here in Greater St. Louis, Missouri, and Jerry helps people become business owners. So Jerry, we're delighted to have you today. And really looking forward to this conversation. I'd like to begin by just asking you how in the world did you happen to get into franchise sales? Oh, wow. Okay, so I guess you could say, I'm an SOB son of a broker.

00:53

My dad sold real estate on kind of on the side growing up, but once I got into college, he said, Hey, Jerry, go get your real estate license. That's when I was in school. And I'm like, What, are you crazy? I mean, I don't have two nickels to rub together. I think I'm gonna sell houses. But I did to honor him, I guess. And then after college, job market wasn't that great. didn't find anything I really liked. All right, I'll give this thing a go. Started selling real estate a little bit, had some marginal success right out of the gate, and then got married. And shortly after I got married, things dried up pretty bad. I was like, could have sold a dog house for commission, I would have been like, okay, what are we gonna do now. But I interviewed and got hired by ERA Real Estate to sell real estate franchises. That's 25 years old. And it was like,

01:52

really green didn't know what he didn't know. Hey, don't know what you don't know. I don't know. Yeah. But by God's grace, I had some good mentors who helped me and saw something in me. And from there, you know, that was the beginning of a 30 year, this year is my 30th year in franchise development. So let's just touch on franchises for a second, right? There are lots of path to business ownership. And, you know, the baby boomers, my generation, they a lot of those, those folks came back from the World War II, and there weren't enough jobs. And a lot of them started their own companies. And then the franchise world kind of kicked off and began to come around. So give us give us a quick one or two minute, how would you describe the difference between somebody that's got an idea and goes out and starts a business versus somebody that might be interested in buying a franchise. And getting into business ownership via the franchise is a great question because you can be wildly entrepreneurial, and kind of be a visionary or something, and you probably are not going to fit into a franchise really well, at that point. As a franchise, we like to say you're in business for yourself, but not by yourself. You've got a system that should be proven over time, what we like to call a business format type system, which just a very fancy way of saying a very turnkey type system, and where franchise owners are typically going to kind of drift away and it can happen without you realizing it so much is that you suddenly are not following their system. In my system, we attract a lot of really high caliber people who've already been highly successful in Fortune 500 companies, and sometimes they don't think themselves they get in their way.

03:47

So yeah, in a franchise system, you want to take advantage of what they're bringing you because you're paying for that support.

03:55

Yeah, but it's it's fascinating business owners that start from scratch. So a traditional person that has an idea and says, Hey, I'm going to start a business, I'm gonna go lease a space and open a door, right? The SBA studies this pretty extensively every year, and the statistics haven't changed much over the last 25 years. And the bottom line is that somewhere in the neighborhood of two thirds of those fail by year five, right? Correct. But franchise doesn't have anywhere near that failure rate. What do you think that's attributable to?

04:30

The entire franchise world there's IFA, National Franchise Association, we work together very well. I attended a Franchise Development Leadership Conference in Atlanta recently. We share what we're doing well, what we're not, so it's come a long, long way to where you know, still do your work, vet it out, make sure because we're not certainly not all created equal, but as a whole, we've developed our franchise

05:00

his system model very well to where

05:03

if it's if you're finding it's the right fit for you, you know what you're looking for, you're checking all the boxes off that you should be looking at, you should come in with a very strong sense of confidence that you're going to be reasonably successful. At the same time, with those reasonable expectations, there's that component of time, right, involved in it, too. Because a lot of people want to get in and go, like, what's my first year going to, you know, how much money am I going to make my first year? Well, you need to understand and know that based on your own personal financial situation, you're going to be able to be in a strong enough financial position to keep that business going. But you should be looking at a three to five, five to 10 year horizon. And if you're doing it the right way, you should have a whole lot of confidence that your success rate’s gonna be pretty high. Yeah. And it's having the system to follow, right? I mean, you guys in the Sports Clip model, in particular, Sports Clips is known as, I don't know, probably the most successful haircutting or haircare franchise in the country, isn't it? I mean, yeah, definitely gonna be in the top two or three anyway. Yeah, it is. And that's great. But honestly, they make it really tough on me, because it's a pretty rigorous process, when you come through. But, again, when you do, you're going to have a lot of confidence that like, hey, they, it's got to be a mutually beneficial fit, going both ways. And so yeah,

06:43

I believe we have a continuity rate ongoing now for past five years, somewhere around 92%. Phenomenal. So even through the last three years, we've come back very, very strong. Yeah, even through COVID. Come back very, very strong. Yeah, we, you know, because we can see the other franchises, franchise disclosure documents and everything, we're actually the only franchise that increased in units since 2019. Well, the wonderful thing about your model is that,

07:18

you know, what I experienced, and I'm sure you experienced as well is COVID didn't stop our hair from growing right. And it became difficult there to get get our hair cut. I've been going to the same lady for many years. And, you know, her shop locked her out. Right? So we had to, we had to figure out how to make it happen for a few months there until things kind of opened back up again. Well, those are some of the testimonies that we'll have within our our system, is how aggressively we ramped down during that time. Because at one point, and March, April of 2020, we literally had zero franchises open. And then as we aggressively re ramped back up, but to try to navigate all that and then go through the PPP money and what you could and what you couldn't do, and sharing best practices and all that, you know, we have some really, really great stories of our owners.

08:12

Just how well we were able to help them navigate all of that. And, you know, today we have 98% of all of those owners back open. That's fantastic success story, when you sit down and meet with somebody that has expressed an interest in, in a franchise, right? What walk us through real, you know, kind of in a in a concise manner. What's that process like? What, what do you guys see as an ideal owner profile or the ideal fit? And what are you looking for when you're talking to folks along that line? And, and I'd love to kind of go down the road of what are some of the disconnects that you tend to see, right, what people expect when they initially come in to talk to you. And I'm sure they learn a lot through that process and maybe learn some things they didn't know when they first started. Yeah, and you know, it's changed. I've been there now over 10 years. And more and more of our candidates are coming are just raving, fanatical customers who love and have had great experiences in Sport Clips. So they already know, they already have an idea that it's about the experience they get when they come in

09:30

to the business and what we're looking for, really in the fit and again, 98 99% of all of our owners don't come from this industry or anything. So I literally do start them off with you don't know what you don't know, which gives me a great opportunity then, for them to follow the process. I need them to follow to make sure that they're taking a hard look at us while we're also taking a hard look

10:00

at them. So there will be, if they've been in corporate America, often they've already achieved a fairly high level of success.

10:09

They could be facing burnout, early retirement, some kind of storm clouds, even especially today in this economy. And when you're looking at recession, you start hearing the L word layoffs. More and more. And so

10:25

they are tired of that stress. And at a point when they've said, Okay, enough, is enough, I'm gonna really take a look at what my options are out there. And so again, we come on the radar, but also lots of other business owners who

10:46

are looking for a diversification we've definitely been a go to on the diversification side of things, because again,

10:55

hair doesn't care what the economy's doing.

11:00

Jeff Bezos hasn't figured out the technology to automate hair cutting.

11:06

Yeah, it's interesting there, I got to, I got to think that part of

11:11

part of what's going on is, you know, it's a big adjustment for business owners that have worked for somebody else, to figure out that, you know, a paycheck every other week is, is not guaranteed, if you're the owner, right? Maybe guaranteed to your employees. And if you're an employee in corporate world, you know, we kind of take that for granted. Now, all of a sudden, I heard you say earlier, you come into the model, you know, they're concerned about how much they're gonna make at the end of the first year. Well, they may not be in a position in a in a startup scenario where they can actually draw a check every other week. Right? Right. So this is where it becomes more of a is this a transitionary? If you like to say, entrepreneur, yeah, opportunity. So everybody, almost everybody in our situation is going to keep their day job in the short run while they do that. And it's imperative that we set realistic expectations. What does that mean, though? You know, okay, is this an absentee business? No, some like to call it a semi absentee. A lot of my operations, folks don't like me, they even knew that they want to say more of a manager manage type model might be a little more accurate, but we actually even give them what's called a, our owners are called team leaders. So like, we we give them what's a team leader, time commitment, expectation sheet, and we just go the extra length just to say like, okay, 30 weeks before, you're going to be scheduled to open week by week, here's kind of what your activity and what a reasonable time commitment is going to be like. And my first call is going to be exploring, you know, are you tied to a desk job 50, 60 hours a week with very little flexibility.

12:52

You know, without any help, this might be a really tough gig, you know, probably not going to be recommended. But you know, today, so many people are working from home have a lot more flexibility from their job at home, we have lots of husband and wife teams that do this, also, together divide those kinds of roles and responsibilities. And at the same time, it's nowhere near the equivalent of a second full time job.

13:21

It has its peaks and valleys, depending on getting your first store open, it's just gonna take more effort.

13:28

Even though there are a tremendous amount of support that goes along with that a lot of hand holding, that goes along with that. It's still your business, you're doing the work.

13:38

And so then after you get that first store open, kind of can take a breather, got a good staff, hopefully a really good manager in the store. But then it's time to rinse and repeat and do it all over again. And so that's part of the franchise model, if you're gonna get into one that is particularly multi unit oriented, then it's got a very high scalability factor to it. And again, you should be going along the track to where eventually, you're almost exclusively focused on working on the business. Since you don't have a cosmetology license when you do our franchise, you can't work in the business. Right. So yeah, you're not hiring people to cut hair you're hiring people to to lead the team that cuts hair, correct? Yeah.

14:29

And I think I understand Jerry, that most of your store owners do have multiple locations, is that correct? Yeah, we've typically been multi enough by requirements. There's one off situations and unique circumstances and a more rural market where there might not be three licenses, but it's typically awarding you know, three license on a development schedule of three stores and three years, okay. But having three stores you can do pretty well once those stores are established. I mean, you could

15:00

You could build a fortune over time, right? versus, you know, living on a wage someplace. It's a great service business. Yep. And there's good margin in haircutting. But it's like any business, you know, you really have to mind the mind a business well, and,

15:19

you know, in franchising, you're paying for the support you're getting.

15:24

Some of the best advice I ever got was like, you'll never regret paying for good financial advice, right? I think is the same. And if you're gonna go into a franchise, a franchise is worth its salt, for the support fees that you're paying for that support,

15:40

everything that you're getting in return is ultimately going to lead to a much better longer term, more stable success. Eventually, for somebody that's thinking about going into it, are there some strengths that they need to bring to the table? Are there some things that you would say they they gotta have going for him to really seriously explore this and end up becoming an owner in that space? I would, in our particular system, different models are going to require obviously, different skill sets, but its people at the end of the day here, will check all the bona fides, you know, reasonable business acumen, but all the things that can be taught can be taught, the intangibles are the are the ones. And because our mission statement

16:32

is to create a championship hair cut experience, exciting sports environment, who delivers that? That's the stylist, when they're sitting down in a chair. And so as an owner of that business, the most important person to you really is the person doing the cutting. And how do you create that championship haircut experience? Well, you can't run the business anyway. Because you're not allowed to be a manager, since you don't have a cosmetology license. So your manager, is going to be the most important. So in any particular business, I don't care if it's construction, or accounting, or IT or whatever, it attracts certain people. And in a stylist environment, that's very true too. I married a stylist, I know.

17:19

Before you were in the stylist business, right? Yes, for 30 years. So you have to really want to impact people's lives. In this particular type of an environment. It can be drama in any business, but there can really be drama. And some of the so it's kind of the best and worst of both worlds. It's I don't like to say worse, but you know, there's situations that arise that you deal with that are difficult, but it's the best because you reach these people at a different level that allows them, maybe they're single moms, and you really can help them out of tough situations. Maybe you help them buy their first home. Those are the rewards beyond just the return on investment that really, ultimately make the most difference. Yeah, so

18:12

having the people skills is key, right? I mean, in your business, the stylists themselves there, they got to have people skills, you're not going to be a stylist very long if you don't have very good people skills. Right. Right. And we like to say that, you know, KISS principle, keep it simple, stupid, simple, but not easy. Yeah. And how does that relate to what you just said is basically that most stylists are really outgoing, you know, they have, they like to engage and talk to their clients.

18:46

But in a franchise system where you're building brand value, that's not necessarily enough. That doesn't differentiate you from somebody else who also has stylists who have great personalities, too. So for Sport Clips, that caters particularly to men and boys. It's a training that they go through, that makes them you know, guy smart, and a lot of ways and delivers a consistent customer experience. So there'll be training like what's called a five point play. And this time of the year when talking to some of our owners and going like man, 2022, great year, congratulations. What are you gonna have to do next year to take your business to the next level? I know, invariably, I'm gonna say a lot. I need to make sure every one of my stylists is doing the five point play with every client every time. And that's what our best owners are going to, they're going to reinforce and reinvest back into their stylists. Their manager, really work to develop their manager, and not that their manager can just do the mechanics of opening closing and

19:51

running reports. But the dynamics manager knows how to motivate high level people skills, can really facilitate fun.

20:00

Fun’s a big deal nowadays in business and especially with the millennial generation, they want to work, you want to be that employer of choice, you got to bring the culture within those four walls. You got to live your core values, you got to be authentic. You got to care about your people at a whole nother level. So let's kind of go the other way for franchisee. What do you guys see that would be a red flag for you that would cause a franchisee to struggle? And what do you guys try and look out for to keep from getting in a position where you've put the wrong person into a franchise location and they're struggling and and you guys as the franchisor? You don't, I'm sure don't want to put your brand at risk, right? Even if it's in a local town someplace. Because the, right now with social media and everything else.

20:47

Bad news travels fast. Right? Right, faster than good news. Well, and at a lot of different levels. So even what I was just saying about stylists coming to work for you, you'll get a reputation in the stylist community as a whole. And it's either like I love working for this guy. He's wonderful. And you know, we have a lot of fun and Sport Clips is amazing, or, you know, stay away from him, you know. And that's going to be one of the biggest detriments. Ultimately, the brand is gotten stronger and stronger. It's really been amazing in 10 years. I used to get on an airplane and wear my Sport Clips stuff and that and I got like Super Clips, let's see, do you show sports videos? Or what do you do?

21:32

Today, get up late, like it's workloads. Love you guys. Yeah. So the brand is really strong. And the demand is definitely there too. Our wait times are really. So the most frustrating thing for an owner is going to be being understaffed. Yeah. And so that's our main focus as a franchise is to be that employer of choice to get the right people to have an environment where we can keep them and then to give them continual opportunities to grow. So get, keep and grow. And cosmetologists, do they have to be licensed across the country? Is it more than, more than just in our state, every state require that every state? I don't, I believe Mississippi may not have had cosmetology license. Okay. I don't. I'm not 100% sure on that. But yeah, for the most part. And so yeah, one of the things our chairman and founder, Gordon Logan is really focusing on now is the legislative side that we're doing. Effectively, we've been able to get it consolidated in many states. But five now, I think, where the requirement is down to 1000 hours. And we think if we can get that in almost all the states that's going to really help open up the cosmetology industry to more people. Yeah, because right now, your Sports Clips, I guess, is competing with every other haircutting shop in the city or state for those graduates coming out of the training schools, right? And those that are already licensed and have already met that qualification threshold. Right? Correct. So we're actually working with some of our other competitors on those initiatives too. Nice. Yeah. Nice, making the pie bigger.

23:18

Just before we went on air, we talked a little bit about how your franchise applicant pool has begun to change, would you would you speak a little bit more about that? You were saying, traditionally, it was, you know, people kind of at the midpoint or two thirds of the way through there, through a corporate career something and now you're beginning to see a change, talk a little bit more about that, if you will. Yeah, more and more. So younger, just starting their families got maybe two, three kids starting to get into school activities are all ramping up. About that time, usually, somebody's corporate career is really starting to take off, you're starting to make really decent money. And you're getting promotions and deeper and deeper into corporate America. So we usually don't see those folks until they get later on. And they're kind of like, done, burnt out. But more and more, a lot on the front end before they ever get into that corporate,

24:16

corporate claws get into them too far. They're looking at exploring options and opportunities, their values just also are are different than us in our 50s 60s.

24:31

And they value their time a lot more, which I appreciate. They value the flexibility. They're not chasing every single dollar that they they can get. They're looking for things that are they believe are going to be more meaningful and their life that centered around the values that are important to them. Now the challenge on, depending upon the investment level, you have to go into a certain business.

25:00

They haven't established a financial track record or accumulated enough wealth to really do that. So, we are seeing a lot of family situations where parents or relatives are stepping in and becoming part of that picture to help them do that is the you know, I always think in terms of the the resume component, you and you mentioned earlier, right? Having some managerial and some business savvy and some business experience, and some and you guys have a qualification process to make sure your potential franchisees meet, you know, your minimum standards, as you get a younger and younger group of folks coming in looking to acquire the franchise you touched on, they may not have accumulated the wealth yet, maybe they have to borrow from other family members to get over that financial hurdle. But what about the resume hurdle as well, you guys see that also? And I'm talking about being business savvy, having experience managing teams of people, things of that nature as well. Yeah, certainly can be. I mean, if they're really just fresh out of college, I really have not had experience around people in that, especially in, in this industry, where it is really labor intensive. You think about the stylists that would come to work for you. You have to be sensitive but strong, you have to make sure that you're still holding them accountable, but compassionate. And a lot of people just aren't at that point yet where they're necessarily equipped to do that. Obviously, if they haven't had any business experience, they're not acquainted with business financials yet. Those sorts of business basics that they need to have. And that's why having parents, relatives who've been there done that, obviously. Yeah, I mean, you know, that there's tremendous amount of resources out there that can get them there. And mentors that they can step into and resources that are available to help them, educate them and get them up to that level. But there's really no, there's no replacement for experience. Yeah, as a franchise already, you guys have a team of folks that helps them as well. So if a franchisee let's say their market is declining. For the sake of example, sometimes we see like St. Louis, the St. Louis City in the St. Louis County, they are losing population, right. As we look at our metro area out here, St. Charles County is, is growing at a faster rate than than the St. Louis County is losing it. So we know that some people are moving out of the city out into the, into the county, if you will, and then a lot of the new people that are moving into the metropolitan area are choosing to live out in the county versus the city. So, so I would imagine in situations like that, you know, if you've got you got a franchisee that's got multiple stores in a city that's declining. Even when they put their best game on the table, the business as a whole may be struggling just to maintain, you know what it did in prior years? Do you guys have various resources that you can deploy to help owners in situations like that to help them cope with things that perhaps they'd never coped with before? Yeah, for sure. When our real estate team for example is going to, we go through optimization exercises on an ongoing basis all over the country. For example, in the St. Louis area, you're gonna break that down county by county, St. Charles County, St. Louis County, Jefferson County, and based upon a whole host of different demographic psychographic information that you can pull, we’ll be able to identify and say, based upon these markets that should support this many stores. And that's how many licenses we award. When we get there, we're done. Only so many heads to cut.

28:53

Especially when you're typically dealing with half the population. Yeah, right.

28:59

And for some of us, I haven't experienced this yet, my brother has, but you know, as you get older the sometimes the hair begins to slow down and and you don't have quite as much of it but yeah, so I can imagine the the age of the population has some impact on. Yeah, I just keep saying my forehead keeps growing. Yeah.

29:18

It's the back of mine that keeps growing.

29:23

what do you see as the, as the things that business owners struggle the most with in their business? I say what business owners struggle the most with is, again, in our in our model, it's going to be the people aspect side of it. Again, go back to having enough but at the same time, not sacrificing that quality. Because you're building teams of stylists. It only takes one really negative stylist to drive away half of the other ones at the same time. It only takes one manager who

30:00

are not really feeling well supported and not happy to have her leave and then suddenly have a bunch of other stylists leave at the same time. This isn't unique to our industry, right? I mean, we're hearing about labor across, the challenge of staffing. And so that's going to be the main, the main thing I would say, on the other side of that, what do you think are some of the success secrets that maybe new franchisees don't appreciate coming in that they learn over time? What are some of the markers of success that you think that if you see early and say, Man, that that person is probably really going to do well here?

30:37

Early on in our, in my process, when I'm asking them why they're doing this, otherwise, you're going to be really, really important to what they're looking at what's going to check the boxes for them, what kind of vehicles is going to be the right thing to get them where they want to be? In a 135 year timeframe, I'd say when I know that this person potentially is going to be a great fit is when, again, they're saying they want to invest back into the people side. You know, what we're, what we're trained to do when we ask about a business is like, Okay, what's your bottom line? What's the IRI? What are all the spreadsheet questions, here and everything. And my typical answer is going to be my job is going to be to help you get there. And we do get there, you have to decide if you want to make that commitment is about a four to six week process to walk through multiple meetings with me receiving our Franchise Disclosure Document, having additional meetings with our franchisees themselves, having meetings with our operations team that's going to support you and your real estate teams can help you find a side ultimately attending a discovery day with our leadership team. And through all of that, my commitment to you is that you'll get all your questions answered. But they have to be willing to be patient, go through that process. And I tell them, a wise man once said, trust, but verify.

32:06

And so there's gonna be multiple ways they're going to be able to verify all the information. They don't know me yet, I hope they get down the road, they go like, well, dude seems like a pretty straight shooter. I like the way Sport Clips does business. But you know, we're required to give them a thing called a Franchise Disclosure Document that will help them out, talk to some of our owners, meet with some of our support staff, ultimately engaged with the senior leadership team. And through all of that, they're going to have a pretty good idea. Are these guys singing out of the same song? But is this the right fit for me. And, you know, obviously, we're taking a very, very close look too at the same time, it's interesting how I've had people who have been very, very successful come through that entire process. And at the end of the discovery day, our leadership team would just look and say, Look, you know, really nice guy, probably not going to be a really good fit for us at the same time. But once they are and they're approved, then they have a huge sigh of relief. And then they're pretty excited. And generally your franchisees stay with you guys for a long time. Right? I do. Yeah. And it's, it's fascinating we, in these podcasts, we always talk to business owners about their successes and their failures as they're working through their business. And then we kind of end with, you know, where are you going to go from here? Every successful business is going to transition at some point. One thing we know for sure is 100% of business owners are going to leave the business at some point in time. You guys have got a really interesting model in that regard. And that many times if you have Joe's barber shop, and you might be very successful, as successful as a franchise hair salon. But at the end of the day, if you're Joe, and you want to exit, you only got basically three ways to go. And in your model, it's a little bit different. Would you speak to that a little bit? Yeah, yeah. If the business is you and surrounds you and everything, a lot like you were saying, a lot of that value is tied up into you. Here, you don't have a choice, you can't do that. You're not working in the business. You're working on the business.

34:21

If you have multiple units that you've paid down your business debt on, that's showing good positive cash flow, and the fact that most of them are all selling already internally to our owners. So we have owners that are going from three to five to eight to 15, to 25 we believe. We have five owners that are over 50 stores today. Amazing. So literally, you know somebody wants to sell they pick up the phone, call a few of our owners and say like hey, you want to you want to talk and then ultimately come into an agreement. And so yeah, we're really really proud of that, of the brand. Now a lot of them also, in this,

35:00

makes us feel really good too, is that second generation. It's a legacy business too. We have lots of them who, today who their children are coming in, taking over and running the business doing really well taking it to the next level and everything. What more from a parent's standpoint, you know, could you want? To know your children, actually do? I mean, and I know a lot of those stories, because, you know, at the very beginning children, you know, they might have been in grade school or high school or whatever going, looking at mom and dad, and like, I never have no interest in doing that. And then suddenly, after they get out there in the work world a little bit.

35:41

That's not too bad. Hey, mom, dad, you know, what do you think? I might be interested? Yeah. Yeah, it's, it's such a completely different model. I just love this. That's one of the reasons I'm so interested in sitting down and talking with you about this. We work primarily with business owners, as you know, helping them buy and sell businesses on both sides. And non franchise owners are typically what we call technical experts. So what distinguishes them from a franchise owner, I think, is that they are the expert in that business, whatever that business is, they know the technical aspects of that business. So in a haircutting salon, they're not normally thinking like an absentee owner, or a manager's manager kind of a model. They're thinking more along the lines of the hair cutter type of model. And the business aspect of it is kind of secondary, you guys are exactly the opposite for your business owners in that regard. And the other key difference is that the vast majority of business owners that we work with, never plan their exit, they don't put any thought into it until the day arrives, that all of a sudden hits him in the head and they say, We want to go retire and go do something. I can tell you story after story of business owners that hope their kids would come in. And eventually their kids had a dinner table discussion with their parents and said, you know, Mom, and Dad, this is not for us, we're not going to do it, right. And their whole secession plan went out the window, and now they had to figure out what they can do. So secession is a huge issue for business owners, and you've helped them build the value over time. So there's not a huge question as to what's the business worth? Right? Correct. You've got some established parameters about, you know, what, what a business in your model will trade for. And that's, as you said, if they've done this right, they step out, having realized what they had hoped to achieve. Yeah. And if they want to hold on to it well into their retirement years, they've put good structure. I mean, once you get to three to five stores, you might put an area manager in place to manage managers, and still have that additional income stream coming in as another retirement income stream for you. So we have many people who who do that. Obviously, once you're getting up to eight to 10 to 20 stores, some of our owners are multistate at that point. Some of them like up here where it's 30 degrees today in St. Louis, what's available in Florida, right?

38:17

Yeah, that's for sure. Well, what advice would you have for folks that might be listening to this and thinking, you know, I really had not thought much about a franchise model, what advice would you have for them? And how would you recommend they begin to investigate a model like that?

38:33

Yeah, a lot of people, and the old saying goes, of people like to think, you know, do what you love you don’t have to work another day in your life. And that sounds great. But if I had to make a living off of playing golf, I’d starve. So there's gonna be really important factors that you want to take into consideration on what type of vehicle is going to get you where you really want to be, what boxes do you need to check. In that model, again, you may have technical expertise that you want to leverage. And that's the model that you need to go into. Or you may have, you know, a certain passion for people. Or you may, your financial situation may be of such where you have to start at certain levels. So there's all kinds of considerations that you need to take into account. But when it comes to, you know, a franchise model, what has differentiated us and what is going to continue is the level of investment we're putting in and the support on the ongoing basis. You're going to start off typically as, what, an unconscious and confident, as you'd like to say, you don't know what you don't know. You don't know what you don't know, right? And then and then that's where I get them at the very beginning and I take them through a process if I do my job right by the time they sign franchise agreements, they become a conscious, incompetent.

40:00

They at least know what they don't know. And they know this is what they want to do. And then through that part to the opening process where we're finding them real estate, taking them through training, getting their store ready and opening, they become a conscious, competent, right. So they know what they're supposed to know. But they have to think about it all the time. Yeah. Where franchisors can lag is that next part is, they're trained. They're open. Yeah, good luck. Let me know how you're doing. If you need anything. In ours, it's going to be no, no, no, no, no, no, no, you know, that level of support that continued hand holding to where you become an unconscious competent, where you're executing at a very high level, and you're really not having to think so much about it. That's why I mean, again, like I say, it's haircutting. It's not rocket science. Okay. We do want to keep it simple, here at the same time, but that's the hardest thing to do in business, right? People talk about it, it's so easy to complicate. And think like, wow, you know, isn't this really sophisticated. So because it's all about execution, and executing at a high level, rinse and repeating, doing it all over again, and our model, that's the scalability that you can get to, if you can build a good team successfully, once or twice, you can go again, at three to five to eight to 10. Yeah, it's all about execution at the end of the day. I love your model, though, because you can, as you said earlier, start by keeping your day job, so you've still got, you know, a level of income that could sustain you, right. And at some point in time, you can build enough income on the other side, so that you can very easily, you know, make the transition and you're you don't have to downsize, you don't have to, you know, start eating canned tuna and, and, you know, change your lifestyle, as you're building into this model, which has got to be very, very attractive. For people you talk to, you can, you can, but you know, to put my head on the pillow every night and sleep well, you've got to give them a very realistic idea what that is, it doesn't happen overnight. And it comes with, you know, and I also don't like saying this too, because like we're retailing oriented as a retail bricks and mortar business. The goal is to get out of the gate as quickly as possible, we got some great stories of owners who just like, you know, hit cashflow really fair really quickly, too. But that doesn't always happen. And sometimes the first one gets started off really slow. And then you have to make this decision is really interesting, too, because I know of a couple different stories where like, first one, like I'm not too sure this one hasn't gotten out of the gate as quick. Well, here's another site, what do you want to do? You know, because you've got three licenses, well, okay. And they get that set going, and then boom, you know, they've taken off. But if they would have made that decision, that's why the whole multi unit focus is kind of unique to it. There's a little diversification out there it does. And it helps up your commitment level of what you're doing in the business on one hand, but it also forces you to make sure you're systematizing and doing the first ones, right. Like, I have six kids, right? So that didn't happen by accident.

43:21

I knew. We knew we knew like we want we knew we wanted a fairly large family. But I said like, as in the franchise system, we got to do right by the first ones, if we're ever going to hope to want to continue to have four, five and six. Yeah, yeah, Debbie and I are the same way we wanted nine. But we were blessed to be able to have two. And I always tell new parents, you know that what we focused on was raising adults, right. And we're very proud of the fact that both of our kids are adults, and they've given us beautiful and wonderful grandchildren that we can now enjoy. But we did have a lot of heartache that a lot of our friends did. And we didn't, you know, we didn't have to worry a lot. But

44:02

you know, thankfully, my wife, I give her all the credit in the world. She's the one that made that happen, I think by and large, right? Because I was on that corporate wheel for there, you know, the hamster wheel there for a while and was doing a lot of that traveling and so forth.

44:17

But yeah, you're right, you kind of systematize it, you figure out which one you know what works well, and you and you set the fence posts out there and you keep doing the things that work and you eliminate the things that don't work and all of a sudden things start flowing the way you want them to. Right. So in the short term, you just be prepared. Anything worth doing, typically it's going to have its own set of challenges to it. So it's important that we set a very realistic idea and preview on what you're getting yourself into. So this is not a normal question, but we're kind of an unusual period here where it seems like our economy is headed into a recession. I mean, some people would

45:00

say we are technically in a recession, sometimes it feels like it sometimes it doesn't. And turn on the news media, they tend to think, you know, 2023 could be a downturn year and kind of batten down the hatches. A lot of folks haven't experienced that. I mean, it seems the last recession, I remember was, 07 going into 08 09. Correct. That was pretty difficult. And specifically for a lot of industries. The blessed thing about haircutting is hair continues to grow. But are there specific things that you guys talk to your owners about as we're heading into what might be a little more uncertain economic climate? Yeah. And, you know, typically in franchising as a whole, again, with that kind of uncertainty, especially in employment situations, you start hearing the L word, a lot more layoffs, and people are thinking about how do I secure an opportunity there? Eventually I can get off that hamster wheel, eventually, I don't have to be beholden to just this corporate job. So

46:05

and you know, at the same time, what are your investment choices? When the markets are gangbusters and economy's strong, and you can get your return to the financial markets. That's one way. Real estate's been really, really hot, you know, and people almost seem like I can't miss on real estate, I'll just buy. And I think there's a lot of talk about, we're reaching a peak now in many parts of the country. So what's the other way? Well, it’s usually investing in yourself. It's usually taking control of your own destiny in that sense, and allowing yourself to get the results through your own efforts. And a franchise is obviously one of those ways that you can do that with still a track record, that you can look back on a model that's been proven to work out. Awesome. Well, Jerry, if somebody wants to learn more, particularly about Sport Clips, and would like to talk to you about this, how can they get in touch with you? What's the best way for them to do that? Well, if they went to SportClipsFranchise.com that's the franchising website. There's a lot of content, a lot of information, a lot of videos of owners just talking about their experience in the business and you can take a pretty deep dive to get a good feel for that. Otherwise, if they want to get a hold of me,

47:27

Jerry.Eulentrop, I need to spell that.

47:32

Well put we'll put a link in the description. Well, Jerry.Eulentrop@Gmail is fine. They can get a hold of me that way. Fantastic. Well, listen, thank you so much for making the time. It's an honor to speak with you. And it's very, very interesting information. I think it'd be very, very meaningful for folks that listen to me. So I just want to thank you very much for your time. I appreciate it. Thank you. I've really enjoyed it.

47:57

Thank you for listening to the you Don't Know What You Don't Know podcast. We invite you to visit www.youdon'tknowwhatyoudon'tknow.com and sign up to receive updates on upcoming episodes. You can also let us know if you'd like to be a guest or recommend a business owner to be interviewed. Find us on LinkedIn, Facebook and YouTube where you can like follow, share and join our efforts. Thanks for listening. We hope you join us again.