S1 E11: David Schuck, Spartan Fitness Holdings – Using A Low Cost Franchise Strategy to Open 39 Franchises
Early on in his banking career, David Schuck realized he really needed to be his own boss. He picked up a low cost franchise and hasn’t looked back.
If you’re unwilling to give up the day job straight away, owning a seasonal franchise like Liberty Tax that’s really only on during tax season, is the way to start.
The Wolf and David get into how he picked up his first low cost unit, how he eventually went all in on franchise ownership, and how he scaled by acquiring other franchisee’s businesses.
You’ll hear how he still owns 12 Liberty Tax franchises to this day, using them as a stepping stone to open 27 Club Pilates centers, and why he partnered with a private equity firm to fuel his growth.
David also shares his long-term vision of building an empire worth $100,000,000.
Follow David:
LinkedIn: linkedin.com/in/david-schuck-spartanfitnessholdings
Episode Text Transcription:
David Schuck:
As you move from being that sort of solopreneur and individual that has multi units to running a, a large organization that is sophisticated. What I’m finding out is you get into a whole new world of, of business. I mean, it’s, it’s a whole other world out there.
The Wolf of Franchises:
Welcome to franchise empires. Where aspiring entrepreneurs learn exactly what it takes to become a successful franchise owner from one location to 10 and beyond. I’m the Wolf of Franchises.
The Wolf of Franchises:
Hey everyone, it’s the Wolf today. We have David Schuck, David started as a Liberty tax franchisee, a very low-cost franchise, and he worked his way up in that system and then expanded into club Pilates where he is now the largest owner of that brand in the system. He’s had quite a journey and quite an experience growing as a franchise owner. And I think you’re really going to love to hear how he strategically transitioned from a smaller franchise and, and a more affordable one and how he parlayed that into a, a bigger franchise where he’s ultimately partnered with private equity and has ambitions to build a hundred million dollar holding company. Thanks. And I think you’ll enjoy it.
Narrator:
The Wolf of franchises is the CEO of Wolf pack franchising, as well as a creator at work week media, all opinions expressed by the Wolf and podcast. Guests are solely their own opinions and do not reflect the opinion of Wolf pack franchising or work week. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. The Wolf work week and Wolf pack franchising may maintain positions in the franchises discussed on this podcast.
The Wolf of Franchises:
I remember the last time we talked, you mentioned like you played college basketball, played overseas after that and came back, but can you kind of start at where you decided you wanted a career change and what led you to franchises in the beginning?
David Schuck:
Yeah. Great question. So when I came back from Europe and started doing real world stuff and <laugh> not playing basketball, you know, I was obviously just like, most people wanted to try and figure out what I was good at, what I wanted to do, what I liked. I tried teaching and coaching for one year since that’s what my parents both did. So I tried that for a year and enjoyed it, but I wanted to make money. And so looked to get into something else, found a, a job in sales with AIG. So I was in bank their mortgage banking division. So social insurance and banking products to community banks and cut my teeth in sales with I mean it was a worldwide company. So you had all the sales training and it was a really solid company at the time.
David Schuck:
So did all that really quickly learned? I didn’t like having a boss, so I didn’t like I didn’t like the, and it’s sort of ironic because I was always a team player and sort of easy to coach at least, I think. But then I just didn’t like having that daily call where I had to explain myself to somebody, you know, sure. That never fit with me and maybe it was because I was with you know, over the, over the three or four years I was with a number of varying degrees of micromanaging. Right. And so the bottom line was I realized I didn’t like being managed and I wanted to do something on my own, had that itch to have my own business. And so the next step is what do I do? And you know, like anybody you look at, oh what about McDonald’s right?
David Schuck:
Or what about whatever the hot business that seemed really cool to do. And then I realized that I didn’t have the money for stuff like that. So it came down to two things. What was something that was low cost to get into? And then the second one was, is it something that, that I felt resonated with me and made sense? Franchising made perfect sense because I’m not that creative of a person, I just can’t create things. So I like the idea of executing on a proven play. Right. So it’s yep. That the idea is sort of a paint by number. So I mean, I, I can make something look really good if it’s paint by numbers, but I couldn’t create the painting right. If it was by scratch. So those three things really resonated with me. So, you know, I took the leap into Liberty tax at the time that was back in 2007.
The Wolf of Franchises:
And, and with Liberty tax, were you looking at others? I know you mentioned, you know, the money was obviously a big factor for the startup cost. So, you know, Liberty tax is on the lower end.
David Schuck:
It came down to snap fitness and Liberty tax at the time. That’s what I recall. I made a decision early on. I didn’t want to get into food. Food was obviously expensive, but also
The Wolf of Franchises:
You
David Schuck:
Low margin enough. Yeah. So service based made, made sense and Liberty at the time made sense also because I could keep my sales job for that first, first bit while I started up the business. Right. So I could keep having cash flow and all that good stuff, so,
The Wolf of Franchises:
Oh, okay. Did you hire an ops manager or were you just able to
David Schuck:
No, I did it all and I was everything and I woke up and got to the office super early, bounced it around nine o’clock did my day job would work for an hour at lunch at the tax office and, and then try and leave early from the day job <laugh> as soon as I could get off and then stay there till, you know, 9, 10, 11, 12 at night. So, oh,
The Wolf of Franchises:
Perhaps
David Schuck:
The thing is that just during the tax season. So that first year was, was a master class in, in overwork I guess is a good way to put it.
The Wolf of Franchises:
Yeah. I mean that that’s hustle right there, full time job and, and building the franchise and you obviously transitioned at a certain point to club Pilates. What was the tax journey like? And when were you like, let me go for something bigger.
David Schuck:
Yeah. So the tax journey was, you know, realized I was good at it. Liked it there’s, there’s no feeling like having, putting work in to start a business and creating it from ground up and then seeing a customer pay you money for your service and product. Right. I mean, it’s, I still remember those, those first customers that walked in my door and was, you know, both my parents were teachers, so government employees, I never was, you know, exposed to that entrepreneurial or business mindset. And so it’s still just, I can remember how it blew my mind. Like this is the coolest thing I put a lot of work in and all of a sudden somebody, some random person I’ve never met before walks through the door and pays me money <laugh> yep. <Laugh> and then they do it over and over again. So that’s pretty cool.
David Schuck:
So grew with it. I quit, I quit my job into, to second season. So the second tax season, I was full time into the business, took the leap and had success and continue to expand had over the years, cut my teeth, both opening new units and acquiring. So I got some experience in both ways to develop and had a lot of fun with it developed out the central North Carolina area. So the, the triad and basically got to a point where I was like, all right, I’m sort of, sort of tired with this. This was about six years ago, I guess, six, seven years ago. And I said you know, I want something bigger, better, more exciting for me, a another leg in the journey. Right. So, I want to go to the next to the next step and the option was all right, do I go bigger in Liberty tax and try and do something even bigger with that? Or do I look at a new concept? And I just, at that point, I wanted to look at a new concept. So started looking and was clued into club Pilates by buddy that lives in California. And he said, Hey, this came across, across my radar. I’m going to look at it. You want to look at it with me? And I think there’s something to it. So looked into it and I mean, yeah, here I am fast forward six years. So
The Wolf of Franchises:
Sweet. And on your Liberty tax journey, I mean, when you were acquiring the locations and you, you said you did some new builds, but you know, were you using brokers like business brokers or how’d you kind of navigate that as a first time franchisee did, were you getting help or you just figuring out as you went?
David Schuck:
Yeah, really? I don’t want to say rudimentary, but it was, it was really just the team, the team at that time was myself and my attorney.
David Schuck:
Okay. As far as acquisitions and, and that’s a lesson I learned early on networking, you, you hear people that talk about networking, but when you’re in a system for franchising, it’s, you almost have built in networking. Right. Cause you already know who all your peers are. Right. But you can either do nothing with that network that’s built in or you can develop it. Right. And so I always have made a point to communicate and build relationships with local neighboring franchisees in the same brand. As well as just making sure that I’m connected. Right. And so what happened and, and the way it happened was people come to you. They’re like, Hey, I see you’re doing a good job. You’re a top performer. I’m looking to exit, you know, you want to have a conversation. Right.
The Wolf of Franchises:
Oh, beautiful.
David Schuck:
And so that happens. The other one happens where you, you let people know what your growth plans are. Hey, I’m looking to expand. And when you have that relationship, those conversations go a lot easier. Right. And so that sort of takes the broker out of it in the, in the franchise system, you know, you already know you already have a list, right. You have the name and numbers of everybody that that’s existing. So, so yeah, it was just my attorney and myself that were making deals and drawing up the contracts and, you know, the acquisition purchase agreement contracts that I have today that I use for my club Pilates. I mean, they stemmed from that those initial lessons learned and you know, every time I’ve done an acquisition, I try to improve, do a look back and, and improve what, you know, what can we improve on the APA or the letter of intent process.
The Wolf of Franchises:
Yeah.
David Schuck:
And use some lessons learned from, from each deal. So that should be fairly buttoned down.
The Wolf of Franchises:
Gotcha. Yeah. I, I like how you kind of just leveraged the, the franchisee network to basically get the deal flow to yourself. That’s, that’s really smart and we’ll obviously get into club Pate’s, but would you recommend almost that, you know, you mentioned the money that you had to start, right? Like, like a lot of franchises are expensive. Do you think almost finding a starter franchise to kind of work your way up is, is a good move. Because I see some franchise owners maybe like, you know, one in particular that’s in my head is five guys owner, five guys, pretty expensive, you know, like we talked about with food and he raised our friends and family around and also took out some debt. What are your thoughts on more just kind of year path where you started a smaller one, but use that as a base and a stepping stone to move on to something bigger.
David Schuck:
Yeah. It’s funny. And it’s a smaller one, but it, I mean it, yeah, it does. Does great and did great. And there was a lot of, there’s a lot of folks that I still consider friends today that started out with Liberty tax, you know, in the same sort of couple year period that I got started that are wildly successful now. So I would say I wouldn’t let low cost franchises be a be off of your radar. You know, a business is a business just because it doesn’t cost a lot to start up. Doesn’t mean it can’t be a, a successful fit business. I, I think the more important thing is find the fit for what, you know, works with what you’re looking for, if you’re looking for a franchise, right? Yeah. some people like low employee CA headcount, right. They wouldn’t get into a Liberty tax business. Right. Some people like service based marketing based. I mean, so what do you think fits with your management style leadership style sort of your drive at that time? And regardless of its low cost or high cost? I don’t think low cost should be off the, off the table, especially somebody beginning.
The Wolf of Franchises:
Definitely. And, and did you sell your locations prior to getting into club Pilates or do you still retain some of that?
David Schuck:
Yeah, still retain it. I’m not involved in any of the day to day. So I have a team that, that runs that
The Wolf of Franchises:
Beautiful. Okay. I didn’t realize that. And I mean, so when you got into club Pilates, you know, I know it’s a lot to cover here, but as far as phase one, I think you, you mentioned in a previous conversation, we had that you built it up to, to six studios in Raleigh before expanding further.
David Schuck:
Yep. Built it up to six studios in Raleigh. That was with the partnership. At the time I got into club Pilates <laugh> it was brand new. It was just starting. I think they came out with the franchise disclosure document in, you know, the turn of the year 2016. I went to discovery day in June, signed a franchise agreement in August. So it was very limited, limited number of studios open, you know, you could validate easier because everybody that was there, you, you sort of knew, all right. I only have 40 people I can call. So, it’s pretty, you know, it’s not like a massive, you know, 500 people, you got to figure out which one to how to get a good picture. So, but it still was early on. And therefore the risk was a little higher. It’s harder to validate what the franchisor was putting up as numbers because it was so new on build out cost and things like that. So yeah, it was, it was early on and I forget what I was going with that, but you’ll have to cut that part out.
The Wolf of Franchises:
<Laugh> no worries. Yeah, yeah, no worries, man. Well, I guess when did you,
David Schuck:
Oh yeah, about the six. So, so I bought the, bought the rights to the Raleigh Durham market with a, in a partnership developed that out and it, I mean, it went so well and it wasn’t because of me, that’s the cool thing. Like one of the best things that, that I love about club also and I love about fitness in general is if you get with the right and wellness, if you get with the right concept, you’re actually able to provide a product that really does change people’s lives, right? So it’s not a, anything about what I’m doing. It’s about what’s happening with our members or you know, our customers, right. And they’re being impacted positively. And when you have that, that’s a huge piece of having a successful business. The other piece that’s really awesome is, you know, our team, everybody in a studio loves working in fitness and that’s their passion, right? So I almost feel a little lucky because not every business gets that right with your staff. Not every company has staff, that’s passionate about what they do. So definitely. I mean, I, I, I’m just saying, for example, in retail, it’s not the most fun thing to fold clothes and check people out all day. Right. So this is something where everybody that works in our studios from sales reps to teachers really have a passion for fitness and have a lot of fun for it. And it, it makes the world go round a lot easier.
The Wolf of Franchises:
I hear you, man. Yeah. I, I get that a lot from the fitness owners I’ve spoken to, I’ve had an F 45 franchisee on this, as well as orange theory. And both of them, you know, say the same thing that like the sense of community that these brands provide, you know, the, the, the, that you guys are providing and just like the, the, the change you’re able to kind of cause yeah, via the fitness classes, it’s like a lot of, a lot of fun and seems to make it a lot more meaningful, which I think is what you were getting at there.
David Schuck:
Absolutely. And so once, you know, real Z developed out the Raleigh market and said, all right, I want to keep on growing with this and, you know, have options. You can, you can go out and continue to try and find one off areas to develop right, with new studios or you could go into some other markets and look to acquire. And so I started looking to expand and in networking, you know, there was a franchisee in the Dallas market that was looking to exit and so had conversations and one thing led to another and you know, was able to make that first deal. And I think that that was a big learning step. Being able to prove to myself that I could operate units in two different states. Right.
The Wolf of Franchises:
Yeah.
David Schuck:
And figuring that out and going through that process and growing in Dallas while having North Carolina and growing North Carolina at the same time, you know, was a really big, I guess, proof of concept to my management style and the way I wanted to scale my business.
The Wolf of Franchises:
And how many locations was that that you acquired in Texas?
David Schuck:
So, yeah, it started with one, it was one open and two, two areas, two licensed to be developed. But since then I have, so now in Dallas I have 11 studios open and several licenses to be, to be developed there. So it’s really turned out to be a great move.
The Wolf of Franchises:
And how, you know, just regarding your management style, how, how do you think about doing that remotely? Right. Because a lot of people do have doubts about the ability to actually successfully run a location. When you, as the owner, can’t be in there day in and day out, how have you been able to successfully do it?
David Schuck:
Yeah, I think it’s, you know, it’s something it’s sort of like the, the sum of all the years that I’ve been doing multi-unit franchising. Right? So the toughest learning that, that I remember having, and that I talked to people about is going from one to two, going from one to two is a lot harder from than going from two to six. It’s not a linear learning curve. It’s yeah. It’s really a really heavy lift to figure out how to manage multiple units and lead multiple teams. And so my management style is nothing unique, but I I’m, I aboard micromanaging and I’m, I’ve fought tendencies. I mean, not, yeah, I’ve been a micromanager before. It’s, it’s a normal tendency for new business owners to have and new managers to have. But building teams is something that is crucial when you want to be a two-hour flight away, right.
David Schuck:
You have to have leadership, you have to build teams, you have to build a culture. You have to trust folks. And sort of, I think the biggest thing in the management style is if you set up a culture and an atmosphere where people understand what their roles are and they understand what that they’re expected to make decisions and run business units, you’ll be surprised how, how people perform, you know, rewind back to when I had one unit at Liberty tax. And, and I see it a lot with single unit, new franchise owners, you have this tendency to think that you’re the only one that can do everything right. And Riley. So, because you put a lot of money into it. Right. So there’s that for sure. There’s that nervousness of man, I got to make sure it, I have a lot of responsibility, but there’s that tendency to think that you’re the only one that can, you know, do great with a customer or solve problems.
David Schuck:
Right. And you’ll be surprised. You know, if you set expectations that a manager or a sales rep or whatever position you have in your business unit is expected to make decisions and perform and produce. And it’s not all about David or whoever the owner is, you know, people do good jobs and it works. So I think, I think more about myself just trying to stay out of the way. Right. So my management style is, is if we can, I’d rather pull people back than drag them along. And then I love people that are proactive problem solvers, right? So there’s two type of people that you see in leadership and one is, and then you can flow this down to the line level, right? Yeah. But when you hit an obstacle, there’s people that stop and there’s people that figure a way to get through it. Right? So you want, as many of those people that get through the obstacle and persevere as possible because that, that gets stuff done that moves your business forward, that produces results. Right? So absolutely that mentality, that mentality produces results. Also those type people just by that one trait tend to be successful people.
The Wolf of Franchises:
I agree with that. And I guess to retain those employees, right? I mean, do you, and this is like part of the benefit I think of building a multi-unit system is that you can promote the fact that it is a growing system it’s not stagnant. And hopefully there, there should be room for upward mobility as things grow. Is that part of your pitch with, with your employees?
David Schuck:
Absolutely. It’s especially as we’re growing that’s, I mean, we’re a growing company there’s opportunity for growth. We love promoting and, and from within, so absolutely. That’s a message. I think about things like that differently. Like, so one of my principles is want to create a great place for members to do business and for employees to work. Right? So on the, a great place for employees to work side of the principle, that’s what we want to focus on. If somebody I’m not oblivious to the fact that somebody may outgrow our company, there may be better opportunities. So you can’t keep everybody the way I want to think about it is, and I know this is on audio so we can sort of visualize. But if you have the path of the business and the path of the employee, right over time, you’re going to be connected for some period of time.
David Schuck:
You don’t know if it’s three months, a year, five years forever, right? It won’t be forever. Right? Because we all retire at some point, but you’re connected for whatever period of time, the way I like to think about it. And we talk about it is however long we’re connected. Let’s grow together both personally. And as a business, let’s use the business. If I’m the employee, let’s use the business to improve your job skills, to get the experience you want to reach your goals. And as a business, let’s, let’s support that growth. And let’s, let’s go as far as we can with, with our staff. Right? And that way, when you have a jump off point, which is inevitably going to happen, right then you’ve helped your staff, you know, grow. There’s a good, good will component to it.
The Wolf of Franchises:
Absolutely.
David Schuck:
You’ve created a good culture to where that next person is ready to step up. I learned a long time ago, you can’t, people are going to be people and people are going to always want to, they have their personal goals and you can’t control that as a business. Right? So let’s work together. And as long as we’re aligned, let’s be super aligned. But when, when we don’t get aligned and let’s, let’s have that jumping off point and hopefully you’ll have a great future and we’ll find somebody that can take the ranks from you. So
The Wolf of Franchises:
Now that’s amazing. I mean, I’ve been on the other side of that. Where earlier in my career, just being at an employer who maybe isn’t understanding of, of that reality, that most employees aren’t going to stay at your company forever. It’s uncomfortable. So I could see that just that you’re transparent with that and, and willing to say, Hey, for however long we are together, let let’s make the best of it for, for me as a, as the owner and you as a, you know, as a person and an employee and, and a professional. Yeah.
David Schuck:
There’s a level of pride that I have that, I mean, I’ve had employees become franchise unit owners. So to me that’s cool.
The Wolf of Franchises:
That’s
David Schuck:
Not, not to mention, you know, you have, you have your, your normal growth where you have people go from a sales rep to a manager and, and so on, but for people to become owners in the same system, whether it be members or, or staff, that’s a pretty cool thing. And a lot of folks might sort of think that, okay, that’s, that’s not good because that’s, you know, competition, but way I think about it, people are going to do what people want to do. It’s their personal goals. It’s their business goals. Let’s, you know, you can’t stop, you can’t stop that from happening. Right. So let’s do what’s right for, for our people and be aligned when we can be aligned. And in the end, things are all going to work out. So it’s a lot better in trying to control somebody into not doing or not growing. I mean, that never works.
The Wolf of Franchises:
No, definitely man. I mean, you’re, you’re kind of fighting against the current at that point. I’d say, and like you said, certain things are inevitable, so you can either embrace it and make the best of it or, you know, you can fight it, which, which is just a struggle. I’m curious to know. So, you know, today you’re at what? 27 club Pilates,
David Schuck:
27 open.
The Wolf of Franchises:
Yep. 27 open. Okay. And I know private equity gets involved at a certain point in your journey, you know, when did that happen?
David Schuck:
Yeah. Coming out of COVID. So leading up to COVID I had, you know, a vision and sort of a roadmap for how I wanted to scale with, with club Pilates and what I wanted to do. And, you know, the vision was to build a hundred million dollar company and a multi multi-brand multi-unit franchise platform. Right. So that was the vision I was going about doing that with, you know, the help of, you know, lending relationships that I had and also just self-funding and using cash flows COVID came and, and really, really threw a wrench in it. Right. So, banks did not want to lend in fitness. And that was really clear to me. I had a, I had a deal where I acquired this is January of 21. So, about a year and a half ago, I closed on an acquisition that was one of the top units in the country.
David Schuck:
Great numbers, pre COVID. Right. But they took the hit and they were recovering. And so it made perfect sense to me. I had a great deal at a discount was lined it up for the banks and they didn’t want to touch it. Right. So ended up getting that deal closed with a lending relationship, but it added about 10 years to my life. Right? So, the thought was, man, there’s this opportunity to really put some fire on this, to grow and grow at some scale and at some speed and I’m not going to get there with debt financing and with cash flow that would, that would take too long to get where I want to go. Figured I was at a time of my life where I was like, all right, let’s, let’s start looking at some opportunities to, to partner up with the right, with the right partner to, to take it to the next level.
David Schuck:
And that’s where private equity came in. You know, I did my research, I went to several conferences. I went to a financing and growth conference and met with family offices, you know, lending solutions private equity, the whole nine yards, and really tried to understand what, what that whole game is. And I, I don’t think I’ll ever understand the, the full <laugh> breadth of that game, but I did realize, you know, okay, here’s, here’s a good, a good bargain, right? And the bargain is you bring on capital, you partner with a group that provides the dollars for growth and lets you go and execute and capitalize on some opportunities that might be there. And so, the tradeoff is you give up some equity but you get speed and, and results and a whole lot, whole lot of other stuff, to be honest. And so I am ecstatic that, that I made that choice back in June and it’s really been a cool opportunity, a cool learning opportunity. I’m, I’m learning new stuff every day and really excited about the future.
The Wolf of Franchises:
What changes once the deal is like officially signed and they’ve taken their equity position? Or do you like, is it a sense of stability where maybe before, when you’re self-financing and leveraging those lending relationships now you kind of have this PE firm, which presumably I’m going to guess they have a, a lot of money on their balance sheet. <Laugh> right. Like, you know, is it a sense of stability and just sure you own less of the pie, but you’re just very confident that they can make the pie much bigger than you ever would’ve on your own.
David Schuck:
Yeah. I don’t know that I’ve ever thought of it as stability. The way I think about it is, is the part, you know, a partnership right. Works when every partner brings value relative to their, you know, whatever percentage of ownership. Right? And so the way I view this is the value they’re bringing is allowing us to, to have speed and they’re giving perspective and insight and experience on how to scale business. You know, there is something that happens. I can tell you, there’s something that happens when you get over 25 units. And when you want to know that, get to 25 and you’ll see <laugh>, it’s just some fundamental ways that you run your business and, and problems that you have and things that come up are different when you’re, you get to a certain size from where it was, you know, even at 10 or 15.
David Schuck:
And so going through some of those growing pains and learning lessons and, and being in a world where you can say, oh, okay, well, I’m not doing it on my own. Let’s see. You know, here’s what some of our other peers in the industry that are, you know, at 50 units or here’s some groups that are in orange theory, fitness that are doing the same thing. Here’s, here’s how they’re going about doing it. Here’s how they’re staffing their support team up. Here’s, here’s some of the platforms technology wise that they’re using, you know, they have all of that insight and perspective to sort of steer you, right. Here’s Hey, here’s, here’s some people you might want to talk to about how to build out, you know, your team. Here’s some people you might want to talk to about, you know, how to plan for the future and, and some bigger trends in fitness, blah, blah, blah. So I view it as more than more than money. It’s really interesting. The, the value that, that this partnership is provided and it’s, it’s produced so far and I’m, I’m super excited about the about the future with it. So
The Wolf of Franchises:
Yeah, no, I mean, it seems like a, just pour fuel on the fire and any franchise you have talked to that has done this, you know, selecting the right partner and matching, it seems to be critical. But as long as that choice is, is the right one, it seems to be like light. I mean, not to be dramatic, but life changing.
David Schuck:
The other thought that comes with it is as long as is the results in what we can build together, right. The sum of the parts needs to be greater than the sum of each or whatever, the sum of the whole greater than the sum of the parts. Right. Yeah,
The Wolf of Franchises:
I
David Schuck:
Know. Yep. And so, as long as we can outpace the, basically with speed, the dilution that happens when you bring on, you know, capital mm-hmm <affirmative>, as long as you can outpace that, then everything’s awesome. Right? Because you’re able to continue to build a larger pie, like you’re saying, right. And so a smaller piece of a larger pie. And one of the things I’ve learned is when you go from, I don’t know if I would call myself a solo entrepreneur, but like a, you know, one man multi-unit franchise operator, right. When you go from that to building a, what I would say a quite a bit more sophisticated business operation, right. That what is what we have now that we brought on capital and, and we’re scaling. So as you move from being that sort of solopreneur and individual that has multi-unit to as multi units, to running a, a large organization that is sophisticated. What I’m finding out is you get into a whole new world of, of business. I mean, it’s, it’s a whole other world out there and you throw in the finance piece there’s so, and what I mean by a holding world, you have access to a secondary market, right. So, you know, if every business they teach you and you, you like to think what’s my exit strategy. Right.
The Wolf of Franchises:
Of course.
David Schuck:
And so in every, every business, the exit strategy is pretty, pretty simple. When you’re talking franchises, it’s just, you know, you probably sell to another franchise owner or somebody else that’s maybe leaving the corporate world, trying to get into franchise. Right. A broker will set you up. Things like that. This is a whole other world where there’s, you know, you have private equity, they get into to get out. Right. And so, at some point there’s going to be, you know, a change of sponsors. Right. And so the cool thing is, is it does provide a mechanism for liquidity at some point in the future at a different scale, at a different level than what would be available to most normal, you know, franchise owners. Right. just because of the size of the business and that’s exciting.
The Wolf of Franchises:
Oh yeah. I mean, you’re, you’re pricing out at like kind of the smaller buyers, right? Like individuals just can’t be gobbling up themselves, you know, dozens and dozens of franchises at a clip, but yeah, it’s also a second bite at the apple for you. I feel like right. Where you probably had that first bite when they initially buy in and that probably provides a little liquidity for you, but then you have more upstream coming your way. Hopefully.
David Schuck:
I mean, the first bite was a, I mean, it’s a tradeoff. I mean, it’s a, you know, it’s try you try to align it with your goals. Right. So if my goals were just to have as much yearly income as I wanted, then I would not have gone into the private equity partnership. Right. Cause I had everything and I could, I could take a withdrawal to whatever I wanted. Right. Yeah. So that’s that, but also I’m limited on what I could go out and do, I couldn’t go and do something hugely big at, at a, any type of fast pace. Right? Yeah. And so there’s that trade off. And so it’s sort of, you know, deferring that massive payday and keeping everything in the business until, until we have that that event. So, and for me, it’s going to be sort of a roll in, right. I want to, I want to keep building something. So the, I think the sponsors will change, you know, there may be some chips off the table or whatnot, but I love what I do. I want to keep on doing it till I’m 70, 80, whatever. I don’t view trying to retire at 45 or 50. That’s just not something I,
The Wolf of Franchises:
It’s not for you. Yeah. Now. Yeah. I mean, what you’re saying too, I, I, I was reading about if you’ve seen the blind side, that movie with Sandra Bullock that the husband who’s played by Tim McGraw actually is in real life, that person owned at one point, like 115 taco bells and KFCs. And he sold them a few years ago, but that was one of the things he said was, you know, you, and he used a lot of leverage. I don’t think he really got involved with PE and much at all, but he just said, he’s like, you make a lot of money a lot quicker, you know, when you have the exits and its kind of just sounds similar to, to what you’re saying, where maybe your cash flow in the short term won’t be as big, but as long as you hit get those liquidity events, it’s obviously going to make up for it.
David Schuck:
Yep.
The Wolf of Franchises:
Like, well, overalls does the PE firm actually do for you now, like beyond the capital, right? I mean, are they providing you with almost like a CFO of all your locations and overlooking your, your financial statements to make sure you’re not that like everything’s in order? I mean, they’re not hiring managers. I wouldn’t imagine like that’s probably falling on
David Schuck:
You. No, no. And you know, I like that. I, you know, I, I view myself I’m, I’m the operator I’m, I’m running the business. So I would like it if they would not hire my managers <laugh> but no, they, I think there is an alignment on sort of roles. You know, when I think about it, it’s, it’s obviously on the capital side, right. Making sure that we’re structured and we have the capital to continue to grow. That’s really key. The last thing you want is to, to be, you know, killing with your business and then you run out of money or you you’re set up wrong with, with how you’re structured with on the finance side, you have you a big value that they have in like what I said earlier, it’s sort of that perspective and guidance and, you know, they’ve been there, they see how businesses are scaled.
David Schuck:
They’ve helped businesses scale before. And I can tell you, I mean, I could go a whole other another episode with you about the changes that we are making are just very intra. I thought I knew stuff. I thought I was pretty, pretty cool until, you know, some of these changes were going through to go from, you know, the double A’s to the major leagues. Right. And it’s, it’s exciting and you learn, and, but I think helping through that process okay. As you grow and scale, I mean, the connections that they have are, are very you know, this private equity firm is, is well entrenched in fitness and wellness. So there’s a connection there that, you know, if there’s a problem I’m having, there’s somebody that, that I can talk to or, or to help solve that problem. The third thing is, is they do have a role in some M and a, and, and future expansion and growth opportunities. Right? So, as we grow and expand, at some point, we’re going to add a second concept. We’re going to obviously continue to grow. And so I think, I think the opportunities that, that they have access to, you know, together, we can, we can make some bigger, bigger, more awesome deals than I would’ve ever been able to make on my own. Right. So
The Wolf of Franchises:
Definitely no. Yeah. I mean, look on the I, I can see that just the connections that have the insight, I mean, right. You, you’re an operator and it’s just, it’s kind of like division of, of just the roles where that’s what they do day in and day out, whether it’s for you or other folks and other businesses. I mean, they just, that’s their area of expertise. So it, it kind of makes sense to, to lean on them when it comes to those deals and acquisitions and expansion plans regarding your second brand. Yeah. I’m just curious, do you have any idea of, of like what you’re looking at or, you know, is it going to be fitness for sure.
David Schuck:
It’s going to be in, in fitness or wellness, health and wellness. Sure. You know, I’ll leave individual concepts names out of it, but I can tell you I’m I have a board meeting next Wednesday and, and we’re actually, we have some slides we’re going through some opportunities and, you know, some diligence and, and things like that, but there’s so much opportunity out there and, and wellness and, and the thing is, there’s some dogs out there too, right. So <laugh> just because a franchise exists and you see it on the side of the road doesn’t mean that at the unit level, it makes a ton of money or it’s a good business. Some franchise concepts can be a form of indentured servitude. If you think about it, right. You know, where you’re just paying royalties, the, the franchise or doesn’t feel any pain, but you’re just not, you’re, you know, sort of treading along. And so, you know, I said that, well, there’s, there’s concepts. I really like the recovery, I guess, sector, whatever you want to call it. These recovery concepts. So sort of the leader in that would be like a restore hyper wealth.
The Wolf of Franchises:
Oh yeah, yeah, yeah. Like restore
David Schuck:
Yeah. That’s a big trend that I’m keeping an eye on. I love, I love some of the concepts that are in that space and some of the things they’re doing, I like the idea of physical therapy or chiropractic
David Schuck:
Yeah. Units, it’s those type businesses. They, I mean, I could, I could list off a whole bunch more, but fitness is great. I mean, there’s, there’s a lot of opportunity there. So, I think, I think the rule, when I think about what the next brand is, is I just don’t want to make a big mistake. Right. So, there’s going to be enough opportunity to do something, right. Let’s make sure it aligns with sort of our mission statement as a company. Let’s make sure it fits well with the support team that we’ve built to operate all these club Pilates. Right. And let’s make sure that we see a pathway for future growth and pretty consistent, you know, operational execution. And, and let’s, let’s, let’s pick one and, and go with it and have a lot of fun. So
The Wolf of Franchises:
Alright, David, well, thanks. A lot for coming on, this has been a great conversation. I, if people listening, want to follow along on, on your journey, you know, is it any, any handle or, or link from LinkedIn or Twitter that they can find you?
David Schuck:
Yes, I do have a, a LinkedIn. You can put it in your show notes. We’ll get it to you. Yeah. I wouldn’t be able to recite it. I just probably,
The Wolf of Franchises:
I gotcha.
David Schuck:
One or something. I don’t know. I don’t do social media personally, so I’m not
The Wolf of Franchises:
Smart man, all
David Schuck:
That stuff. So, but we do keep an eye on my LinkedIn. As something I started recently, Ashley, my assistant does, does all the LinkedIn for me, she, she makes sure nothing, nothing slips by somebody reaches out for, for a connection. But I mean, you can provide my email. We have a website, Spartan fitness holdings.com, you know, welcome to go there. So would love to help anybody anywhere I can.
The Wolf of Franchises:
Sweet. Yeah. Well we all appreciate that. And yeah, we we’ll include the website, Spartan fitness.com,
David Schuck:
Spartan fitness,
The Wolf of Franchises:
Spartan fitness, all looks okay. Yeah. We’ll include it all the show notes, but yeah, David, thanks again. And we’ll talk soon. Awesome.
David Schuck:
Appreciate it.
The Wolf of Franchises:
Thanks for listening to franchise empires. We’re coming to you soon with actionable insights to take the next step on your franchise journey. So make sure to subscribe on apple, Spotify, Google, or wherever you listen.