Lance Hood (FranPro): 0:09

Hi everyone. Today we have Doug Schadle from Rhino 7. Doug, welcome to the call.

Doug Schadle (Rhino7): 0:16

Thanks, Lance. I appreciate it. I've been looking forward to it.

Lance Hood (FranPro): 0:19

Well, thank you, Doug. Can you share a little bit about Rhino 7 and what you guys do?

Doug Schadle (Rhino7): 0:27

Sure, lance, I appreciate it. I suppose the easiest way for me to help everybody get a good feel for Rhino 7 is to take you back in time, right, I went to school to be an engineer industrial, got out of college and then I shocked my parents really good when I didn't do that and I really stumbled into franchising mid-90s the , not too long after I got out of college. And I spent the 90s in hotel franchising, marketing type franchise systems, and I always thought that there was ways to do things better to help franchisors grow, especially grow effectively. And an old saying that my dad used to pound into me when I was young. He'd say, Doug, you just don't know what you don't know yet. I don't know how much attention I paid to him back then, but that old saying kept ringing in my ears and that was a catalyst, I think, for my partner, John Cohen and I to launch Rhino 7 in 1999. And when we first got started, grape Clips was really our first client, so to speak, and it was very helpful for us because they were already I don't know probably 1800 open units at that time, lance, and they wanted us to help them make everything better that we could get inside of operationally. And then they wanted us to help them grow, especially where they were struggling. And we did that and that was kind of a kickoff for us. And we realized pretty quickly also that emerging brands these were smaller franchisors that were maybe 50 units or less, or in a lot of cases, people that had built really special businesses, that were independents, that thought maybe they could franchise them and then we would help them do all those things.

Doug Schadle (Rhino7): 2:34

So as times progressed over the last 20 years really plus for us we have been in senior care and urgent care, varieties of different industries. This sounds a little strange but we don't really focus heavily on a specific industry. We've done a lot of medical it's really gone well. We do a lot of pet stuff, but I'm not really so concerned about the industry, more so that I'm concerned about the unit economics. So if the unit economics of the business or the franchise are good, then we have a good opportunity to wrap a very powerful franchise solution around it and then go grow it across the country.

Doug Schadle (Rhino7): 3:21

So today at Rhino 7, we're obviously a development firm. In the last five or six years franchise sales organizations have become FSOs. When we started in 99, it was just us right and we were a development firm. Obviously we're an FSO but we're also franchise source. We own multiple franchise companies. We're also franchisees. We own three different franchise that we operate here in Raleigh, North Carolina, where we're based. We also have operational divisions that support franchisees. And then my partner, John Cohen, who I'd mentioned earlier. He heads up our real estate business. We're a real estate division.

Doug Schadle (Rhino7): 4:12

So when we have brands that are retail-based lands or medical-based and we need to go find sites and build them out, we literally do that for the franchisees. We construction project, manage that and we do a lot of that. So we are kind of everything and whatever is needed to franchise or some franchisees we need a lot of assistance and others just need specific things so we can do about anything that's really needed out there. I had mentioned before Raleigh. We're headquartered here in Raleigh. We've been here since our start. Wonderful place. If you haven't ever been to North Carolina in the Raleigh market you should come visit. You might stay forever. It's awful, nice. But kind of wrapping up here to not get too long-winded, we are what I would call really a full-service franchise or development firm and we can take people that aren't franchises and get FDDs and operations manuals and build systems and policies and procedures for them. Or we can take mature brands like a great clips and continue to grow it, depending on what they need.

Lance Hood (FranPro): 5:32

Quick question here. When you talk about growing a brand, I think some brands get into it and you know they're not always ready to be franchisable, but they also don't necessarily understand the costs associated with it, and I know that's very custom. But what would you give is like a, like, a range, like a low to a high number on a typical person that's converting to a franchise. So at least they can just have an expectation.

Doug Schadle (Rhino7): 6:01

That's a really good question. I think it's much larger than people believe, right? So let's say that a franchise or Lance is offering a franchise that's all in investment is $400,000, right for a franchisee to get it up, running staff at Stockett, train it and have working capital to get to positive cash flow. Well, a lot of times, especially independent businesses, they've got an awareness of franchising but they really don't understand it and they think that franchise fees are going to make them rich. Right, and it's really the opposite. Franchising is all about royalty revenue and helping franchisees get up and successful and then sharing in their success and doing that over and over and over. So make a long winded answer shorter here. We've really never seen a franchise or right that we've been involved in or that has come together that it doesn't take probably every bit of $400,000 to $500,000 on the low end, depending on what type of franchise. It is up to over a million to get to a positive cash flow.

Doug Schadle (Rhino7): 7:19

And I want to explain to get it, to get it to positive cash flow and that's enough. In in franchising term that's royalty, self sufficiency, in other words, where all the bills are paid via royalty, so that can be offset by some of the franchise fees and that four to 500,000 to a million isn't something that most people are going to plop right in a checking account, even though if they can do that, it will help them with registration states and things along that lines. But that's gradual over time. So when you're a slow growth franchise system, you're, you're slowly growing. You're really not spending a lot except for registrations and stuff like that because you're not growing. It's when you're successful in growing rapidly, right that you've got to hire people, bring in marketing, all the different things that need to happen, that you need a bigger infrastructure to stay ahead of your growth. That's what costs the money.

Lance Hood (FranPro): 8:21

That makes sense and you know you're going to have those overheads that are going to compound with the more franchise fees you bring on because you have to service and take care of them.

Doug Schadle (Rhino7): 8:31

Yes, it's a good thing right.

Doug Schadle (Rhino7): 8:33

Right, it's a good thing, it's a good problem to have, and a very effective franchisor will look at what they're doing and how they're growing and then get out in front of it with staff. Because if you're bringing on staff a lot after the fact, after you've grown, you're playing catch up all the time. So one of the reasons that we got into the Construction Project Management side of the business for our retail and medical franchise systems was so that we could help them absorb the growth. So if we're helping them find the franchisee, bring the franchisee on, and then we're picking that franchisee up at Rhino 7 and doing their Construction Project Management, that's kind of a cushion for the franchisor that helps them focus on helping the franchisee get their staff in place and get in them all trained, rather than being so focused on just trying to get them open. And it's worked really well.

Lance Hood (FranPro): 9:35

Well, I talk with some of the young franchisors and I explain that you're going from doing one thing, which is running your personal business well, to now having to sell this concept, which is completely different and has its own list of things, and then replicating it with strangers who you vetted, who are not you and may not know anything about it. So these are you've exponentially expanded your skills and, which is hard, the shortcut is to find a company that's been able to do this in the past, and I normally ask people how they're different. But while you've really kind of laid into it with not only your experience, but you're currently running franchises, not just developing them, and you are a franchisee, or so, yeah, anything you want to add to what makes Rhino 7 different from the other FSOs?

Doug Schadle (Rhino7): 10:25

I think that by being all aspects of franchising so not only being a franchise sales organization but actually supporting franchises, helping them get their sites open, software solutions but one of the things that's pretty easily overlooked is being a franchisee because we're paying royalty, we're doing all these things and in a lot of the brands that we're franchisees in, we're early, we're the pioneers, we're really adapting and getting in and we're helping to tweak those things to make the system even better, because we know what we're looking for and we know where we need to go, and so that's been really helpful, I think, a lot with us in helping franchisors not only grow but be successful at it.

Lance Hood (FranPro): 11:26

Well, and if somebody wants to say, get your help with being a franchise, whether it's starting from scratch or whether it's somebody who is looking to have you take them on and move them to the next level, what's that general process they would go through?

Doug Schadle (Rhino7): 11:45

First we get to know each other, right, and then it's pretty easy for us. What we really need to do is look at what talk through, what type of infrastructure they'll have or they have, and what they're going to need, lance, depending on the growth. But how we can really predict what we might be able to do and growth with them is really reverse, engineered off the P&Ls that will be in their item 19, right? So a lot of times in franchising well, let me rephrase it most of the time in franchising it's an attorney that came up with the strategy to develop the growth of the franchise. And especially in emerging brand, they don't really know that.

Doug Schadle (Rhino7): 12:32

You tell the attorney what you want to do, not have them tell you what you're going to do, right? So one of the big things that really makes a huge difference is we need to strategize on how we're going to make that brand unique, especially if it's in an industry where there's already a lot of players in it. So how you do that is you create a different type of franchise model for it and then take those numbers of all the units, see what you've got there, and then that tells us what we really will be able to do Whether we can grow it methodically, whether we can grow it pretty rapidly. So it sounds strange, but I think my engineering's past has really come out to help us right. Because that's what we do we reverse, engineer everything off the numbers and then that builds the entire changes that we need to make in an FDD.

Lance Hood (FranPro): 13:34

Yeah, I've noticed that over the years of talking with you and working with you is that engineering side comes out. You're very organized, you have a lot of details and you just seem to be on top of it. Well, thank you for that.

Doug Schadle (Rhino7): 13:49

I'll let my parents know that you said that tonight at dinner They'll I'll get a kudos on that one.

Lance Hood (FranPro): 13:56

Well, how long does it typically take for things to get implemented working?

Doug Schadle (Rhino7): 14:01

Well, once we've learned what the system is and then we come with an agreement with a franchisor or a business that we're going to turn into a franchisor, then it usually takes us about 60 days. Right In 60 days we can build a strategy, tweak the FDD or create the FDD into what we need it to have, or get it from scratch. We've got operational templates so, if we need that, we can put together operations manuals in a quick fashion that are very effective, and then we build what's called an educational portal, which is a website just for people that are investigating the franchise company, not the general public, and then we break the business down into categories and then we're able to put everything in place. So about 60 days we can do all that. We get all that information from them, build it all and then we take it out to the different consultant groups and then start to promote it from there. So I would say 60 to 90 days we're really rolling with the brand.

Lance Hood (FranPro): 15:06

And is there anything the franchise or can do on their side to kind of speed up or shortcut the process?

Doug Schadle (Rhino7): 15:14

A little, the quicker they can get us the information. So we'll give them a template with everything that we're going to need to be able to learn the business from the inside out and create not only the portal but the sales system. We've got to create a sales system what we're saying, how we're doing it, how we're presenting it to everybody. So the more organized they are, the better it will be for us, and the quicker they get us that information, the more we can build it. But we have teams of people here that are sitting right and are implementing these different pieces of the pie every day, so we can move pretty quickly.

Lance Hood (FranPro): 15:55

Well, I would just say that anybody out there that wants to work with Doug, he's a great guy. Go to https://Franpro. vip/GoRhino7. Doug. I appreciate having you on and talk again soon here.

Doug Schadle (Rhino7): 16:24

Thank you, lance. Have a great weekend coming up here, Take care.