8/1/2022 â Sean Tuohyâs Franchise Journey
DEEP DIVE
Sean Tuohyâs Franchise Success
If youâve seen the movie The Blindside, youâll recognize the above picture of Sandra Bullock & Tim McGraw. The Hollywood stars play the role of Leigh Anne and Sean Tuohy, a married couple with a family in Tennessee.
The film itself has nothing to do with franchises, but instead is an adapted exploration of the experience of the real-life Tuohy family, as they adopted Michael Oher, a homeless teen who went on to play in the NFL.
The part Iâm keying in on is Tim McGrawâs character, who in the movie was shown driving by a few Taco Bellâs and talking about them. I did some research, and it turns out that in real life, Sean Tuohy is a massively successful multi-unit franchise owner.
He recently sold most of his portfolio for over $200 million!
Letâs explore his portfolio, and 5 lessons he learned building his franchise empire.
Tuohyâs Franchise Portfolio & Deal Terms
Sean Tuohyâs portfolio consisted of the following:
- 115 Taco Bellâs and KFCâs
- 7 Freddyâs Frozen Custard franchises
- The underlying real estate on 64 of the locations
Aside from 11 Taco Bellâs, he sold all of his real estate and franchises in six separate transactions that totaled approximately $213 million.
Clearly his journey was a major success, but he says that he almost went bankrupt twice along the way. The first reason is something many multi-unit franchise owners can resonate with..
1. Leverage is a Battle
Itâs extremely common for franchise owners to expand the number of locations they own via leverage (i.e. debt), because itâs more cash-efficient.
Even if you did have the cash to fund opening a franchise location, oftentimes business owners prefer to apply for a loan so that they can preserve the dollars they have in their bank account.
Assuming the franchise location performs well â you can use the cash-flow it generates to pay down the loan over a multi-year timeframe, while the cash in your bank account can be used for other investments, thus giving you a much higher total ROI!
But for Sean Tuohy â he took on many loans, so much so that his income didnât necessarily change as his portfolio grew.
âYouâre fighting leverage the whole time. Even though your top line keeps growing, your bank account doesnât show itâ.
2. Donât Get Ahead of Yourself
As I just indicated, Tuohy was incredibly aggressive in expansion, and admitted that he took too much risk on a few separate occasions.
So much so that he was 5 days from bankruptcy (twice).
âIt was going down the cafeteria line, and my eyes got bigger than my stomachâ.
At one time, he said he had as much as $70 million in leverage on a $200 million operation!
3. Give Your Employees a Chance
Tuohy had a hands-off management approach in his organization. This may be uncomfortable and scary for some owners to do, but he gave them autonomy and allowed them to make mistakes.
The goal was to make sure they learn from their mistakes, and the âgood onesâ would grow into great leaders in his organization, who were happy employees due to the trust and freedom Tuohy gave them.
âYou have to allow them to to get there. Iâve tried to let people become who theyâre supposed to beâ.
Iâve found that many of the most successful franchise owners have taken a similar path as Tuohy did.
4. Liquidity Events Accelerate Your Cash Return
This is obvious in some ways, and less obvious in others.
When you sell a portfolio of cash-flowing franchises, especially at the size of Tuohyâs portfolio, you make a LOT of money much quicker at the finish line than you did in the entire journey to get there.
Simply put, liquidity events are lucrative, and Tuohy isnât shy in expressing his enjoyment at the money he made.
Growing up in a middle-class family, his success has been well-earned, and he disagrees with some common rhetoric around financial successâŠ
âThe people who say money isnât important are the people who already have itâ.
Of course there are certain things money canât buy, but hereâs 1 thing it does buy: the freedom to do what YOU want to!
And perhaps more importantly, with the level of wealth Tuohy achieved, it removes many financials stressors that can impact relationships a personal level. Things such as: putting enough food on the table, paying for kids college, being able to take vacations, helping out loved ones in need, etc.
You canât pour anything out of an empty cup!
5. Selling Isnât That Simple
While Iâm sure the Tuohy family is now enjoying the fruits of their franchise riches, it wasnât that easy to sell the locations.
âItâs harder to unwind a company than to build it. You have to stair-step it down. Thereâs many people involvedâŠI thought you just turn the the lights off and leave, but no such luckâ.
A transaction of Tuohy side involved investment bankers, lawyers, multiple buyers, and of course, all the employees who would be working under new ownership.
Beyond the technical side of being acquired, Tuohy also learned about the emotional side of leaving behind something he worked on tirelessly for decades.
Thereâs a void that is left when an entrepreneur sells their business.To help with this, he decided to keep 11 Taco Bellâs so that he could remain somewhat involved with the empire he built for much of his life.
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To read an article that was used to distill the above overview, check it out here.
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