In this episode, Jeff Dudan delves into the intricacies of franchising, emphasizing the importance of personal control and decision-making in business. He discusses the high failure rates of franchisees, the passion required for successful franchising, and the growth potential within the service industry. He also touches on the transition from being an operator to an entrepreneur, the significance of personal standards, and the quest for purpose beyond business success: the importance of community and the positive effects of successful business practices on individuals and families. Don’t forget to register for Tommy’s event, Freedom 2025! This is the event where Tommy’s billion-dollar network will break down exactly how to accelerate your business and dominate your market in 2025. For more details visit freedomevent.com For more information about Jeff Dudan, visit https://www.dudangroup.com/founder 00:00 Taking Control of Your Business and Life 02:39 The Reality of Franchising: Success and Failure 05:50 The Passion Behind Franchising 09:06 The Growth of Service Franchising 10:56 Transitioning from Operator to Entrepreneur 19:23 Finding Purpose Beyond Business 32:43 The Importance of Personal Standards and Growth 38:51 The Importance of Choosing the Right People 42:00 Navigating Franchise Business Dynamics 44:42 The Value of Long-Term Thinking in Business 48:20 Understanding Equity and Control in Deals 51:07 The Role of Leadership and Accountability 55:40 Teaching Financial Literacy and Generational Wealth 01:01:04 The Impact of Money on Relationships 01:06:11 Encouraging an Outcome-Focused Mindset 01:09:13 Celebrating Success and Community Impact
Chapter 1: Who is Jeff Dudan and what is his franchising background?
All right, guys, welcome back to the Home Service Expert. Today I got a good buddy in town. You're always in town. He's Jeff Duden, the CEO of Homefront Brands. He's an author, podcast speaker, expert at franchises. He leads one of the largest franchises I know of. And here's what's crazy about franchising, Jeff.
Chapter 2: What are the challenges and realities of franchising success and failure?
is the more I learn about it, a lot of people start a franchise, but the same amount of franchises exist every year. So that means people are failing just as quick as people are coming in.
Now, are you talking about franchisors or franchisees?
Franchisors.
Oh, yeah.
Yeah.
Yeah, so 4,000 actively growing franchise brands, 90% of franchisors fail within 12 years, and there's good reason for that. So, yeah, every day roughly one comes into business, and every day roughly one goes out of business. Which is crazy. But I don't know. Is that any different than traditional small business, stuff like that? Maybe not.
But look, franchising is a – it has to be a certain passion play because there is so much collaboration that has to happen with these franchise owners. They all have, they come from different places. We have a high sophistication, high net worth franchise owners, and then we got people coming out of corporate America for their very first business.
And you've gotta be able to meet them all where they're at. So a lot of times people franchise their business and they don't realize that it's gonna take upwards of maybe a couple of million dollars of investment ahead of their revenue to be able to build the systems and the processes and put the people in place to meet these franchise owners when they're emerging.
So unfortunately, a lot of brands get 5, 10, 15 owners and then they realize what it is and then maybe they decide to discontinue it. But ultimately, look, franchising is accelerating at an accelerating rate. There's 829,000 franchise establishments in the United States. One out of every nine people employed works by or for a franchise system, almost 9 million people.
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Chapter 3: Why is passion important for franchising success?
And it's a significant part of small business GDP, which is generally 46% to 60% of our GDP. So franchising is giving people entrepreneurial opportunities on Main Street USA for their families. So, you know, when you're scaling a big direct business, you can go fast because you make the decisions. You say, we're going to implement this. I'm going to pay for this. This is the way it is.
But if you took your employees here, your cross-section of your employees from your C-suite to your directors all the way down to your techs, and you gave some random 50 of them a franchise, think about what you'd be dealing with.
Oh, no. Well, here's the biggest thing, Jeff, that I think about is it's not uncommon that I'm at an event or I'm at a meetup or just around a company. And they say we're thinking about franchising and like it should be a passion project. Here's what I know is going on in their mind. I can't make it in the real world. I haven't taken market share.
I'm going to franchise because people will pay me for my business idea. And then I'll get to take 7% off the top. And they don't have a website that works correctly. They've never taken market share. They only got one location. You should have at least a few franchised or owned to prove it's possible. Right.
I just, if it's for the right reason, you know, I'm good buddies with a guy named Kevin Wilson, Mosquito Joe's.
Yeah.
Sold to Neighborly. Yeah. And I'm friends with, really good friends with Mike Davis. And he just took over as the CEO of Neighborly. And I just think you've got to start a franchise, but you need to know you're no longer in the garage door business or the roofing business or the gutter business. You're now in the people turnkey business.
That's right.
And I think that's just— I don't think people are starting. Some people do. I think you started it. You knew what you were getting into. You started it for the right reasons. You knew. You got with the right lawyers. You built the right systems. You have the right meetups. You have the right prizes and gamification.
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Chapter 4: How does franchising in the service industry differ from retail franchising?
And what's happened is private equity has gone – first of all, private equity loves franchisors.
Yeah, I think the multiple is even higher than – I've heard of it going into the 20s. Oh, yes. Yeah, absolutely. Because think about it. 20x on EBITDA, 25x on EBITDA, crazy numbers.
Yeah. So think about it, the diversification of risk. You've got – Hundreds or thousands of families that are out there. They're deeply invested in the business. They're deeply invested in their communities. They're working hard. And, I mean, it's hard to kill a franchise system because everybody's out there with the ownership mentality right at the point of attack.
So once at scale, franchise systems are very profitable. They're very durable. But the great thing about property services, and I mean like you've proved it to an extreme, is that these businesses can get large every year by taking more market share. And I mean our businesses cost $150,000 to $200,000 to get into. So it's not – and there's no big lease guarantee.
So people can get into business in a home front brand and they can liquidate their investment relatively quickly. And then really it's this monopoly game, right, where – and you'll see it over time as we evolve and you'll get people that are buying their neighbors or they're stacking more than one home front brand on top of each other, building $5, $10, $15, $20 million businesses.
And when I first started franchising really in earnest in 2006 and 2007, there wasn't a big private equity market for the boxes. But now if you can cobble together some amount of EBITDA and some amount of top line, they love it being in a franchise system because of the leverage and because of the systems and that.
So it's really – and I guess that comes down to like – I mean I sold my business in 2019. I was a restoration contractor there. built a national and even international restoration business and then decided to franchise it.
It was a personal family decision because we were working in the Caribbean and Hawaii and Canada and all over the place and I had three small kids and I decided that I wanted to be home. So I decided to risk all of that and really turn it into a franchise system and then we ended up over nine years.
We had about 160 owner groups operating 240 markets and I sold it to Home Franchise Concepts in 2019. But, you know, coming back to operate again, it's it is all about being outcome focused. Right. So I'm sitting here in 2019, 20. I'm comfortable, which I fight every day. I'm comfortable. I'm doing investing, advising.
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Chapter 5: How do you transition from an operator to an entrepreneur in franchising?
It is great. And it's great, like – I get a lot out of this, and a lot of it for me is just reminders. Like sometimes you forget the simple things about business. When you said no retail store, one of the things I talked about when I briefly was on with Tom Howard was the way you pick your Google My Business location matters. Right. People, when they lease...
a building, they're looking for something that's gonna suit their needs rather than thinking about it as a marketing play. And I just feel like if you knew, you don't wanna be close to big competitors with 10,000 reviews. You wanna be in an affluent area where you can get a lot of clients. And that's the gift that keeps giving.
You can get 15 to 20 leads a day if you pick the right location for your Google My Business page to get enough reviews and citation sites to make it rank.
Yeah. Well, one of the things that you've demonstrated over and over again is this concept of regression analysis. Many people start in business, and if you think back to when you started and probably I think back to when I started, it was the same way. I was trying to figure out, okay, what's the next step? What's the next step? What's the next step?
If you work backwards from a very specific future, it'll be a completely different set of steps than had you tried to work forward to it. And that's just it. It's like, okay, well, I'm going to pick the location not based on a proximity to a highway or traffic or storefront or drive-bys. It's like, where am I going to get the business from?
Yeah, and it's just – but here's the one thing too is I give it all away. A lot of people go into a situation of how do I win? Yeah. And I think about like how can I help them win? And I think that that's like the hostage or not the hostage negotiator. That's Chris Voss.
Michael Francini.
Yeah, Francini. Yeah. So I said, hey, listen, I got a really good podcast. It's number seven in the country for business. I'd love to have you on. And if you like me, maybe you'd have me on yours.
Yeah.
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Chapter 6: How can personal standards and leadership impact business growth?
Well, yeah.
I'm a visionary and I'm letting you know that I'm telling you to call me that. But but, you know, like like our our job is to be on the cutting edge. Like what's you know, we're both in the genius network. Like what's happening six to 12 months from now that we need to make sure that we're ahead of.
Yeah. Well, that's that's what I do is like. So Dan Martell, I had to meet with my team to explain who I was because my team doesn't really understand this entrepreneurial itch. And he goes, I'll tell you one thing about Tommy, and Tommy doesn't even know this about himself. But, Tommy, anything you ever tell them to do, you never forget.
Some days you wake up in the middle of the night and remember it, and did it get done? And how often do you remember? I go, every freaking time. He goes, now, guys, listen, he needs to feel heard, and he needs to get documented, and he needs a plan. It might not even be important. You might have to tell him it's going to start in six months, but you've got to document it.
Now, here's the deal, Tommy. Your team is going to help you buy back time. Your job is not to fill the void every single time like I know you do today. You fill the void every single time. And you make yourself busier every time they buy back your time. So this is something I've been working on.
But I'll tell you, Dan Martell taught me to – I'm very good at business, but he said, why not get a driver? And I said, because I'm humble. He goes, Tommy, how often do you drive? We did some math. It was 10 to 12 hours a week. He goes, what could you be doing in that 10 to 12 hours? Do you love driving? No, I don't. Okay. Okay. Then I got a chef.
And so everything I've done in business, he said, why don't you apply this to your personal life? And I'll always have coaches around me. And by the way, I'm always going to be curious and I'm always going to ask questions. I'm always going to have mentors. The day I stop is the day that I want you to be like, okay, Tommy, he's lost his purpose. I want to be the dumbest guy in the room.
And there's a different mountain to climb every time.
Where was the inflection point where you were an operator of a garage door business And then in the next day or the next week, you were a business builder, a visionary, and an entrepreneur.
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Chapter 7: What role does choosing the right people play in building a franchise business?
Let me ask you this, man. Three years from now, who's the CEO of A1?
So I've been doing a lot of thought on this. Like, my team came to me, my whole C-suite, and they sat me down and they said, why do you feel like we need a president? Or why would we need a chief of staff? And I looked at them and I said, you know, potentially. You know, I'm not married. I'm about to be married. Yeah. Congratulations, by the way.
I want kids.
Thank you. I want to be a great dad. I said, you guys don't need me to run this company, but I'm not going to be able to give you what I give today. But I need to make sure the vision stays because it's a growth mindset. And so there's a few choices I have. I could be the head of the board. I can switch to a chief growth officer. Mm-hmm.
Or my preference would be to be a co-CEO, where I'm the glue. I'm the orientation guy. I'm still handling the marketing side and going to look at deals and still inputting. But I'm not flying out to New York, to Manhattan, to go to all these quarterly and monthly PE where they're talking about the financials. That's not fun for me.
So, you know, the deal is, as the way I see it today, you know, I've got a family office that A1 pays. Tens of thousands of dollars to a month. That team does a lot for A1. I've been able to use this instrument to make A1 grow faster and excel way quicker. So the question is, can this entity live alongside of it as a sister and continue to scale it?
Because look, I'm still going to roll $400 million to $500 million into the next deal. I got to stay relevant in the business. It's my face on the side of the truck on purpose.
Well, I think you're going to be like the Empire Carpet guy. You know who I'm talking about?
Yeah, Empire Today.
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