🍟 8/1/2022 – Sean Tuohy’s Franchise Journey
Sean Tuohy’s Franchise Success
If you’ve seen the movie The Blindside, you’ll 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 I’m keying in on is Tim McGraw’s character, who in the movie was shown driving by a few Taco Bell‘s 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!
Let’s explore his portfolio, and 5 lessons he learned building his franchise empire.
Tuohy’s Franchise Portfolio & Deal Terms
Sean Tuohy’s portfolio consisted of the following:
- 115 Taco Bell’s and KFC‘s
- 7 Freddy’s Frozen Custard franchises
- The underlying real estate on 64 of the locations
Aside from 11 Taco Bell’s, 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
It’s extremely common for franchise owners to expand the number of locations they own via leverage (i.e. debt), because it’s 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 – 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 – he took on many loans, so much so that his income didn’t necessarily change as his portfolio grew.
“You’re fighting leverage the whole time. Even though your top line keeps growing, your bank account doesn’t show it“.
2. Don’t 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).
“It was going down the cafeteria line, and my eyes got bigger than my stomach“.
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 ‘good ones’ would grow into great leaders in his organization, who were happy employees due to the trust and freedom Tuohy gave them.
“You have to allow them to to get there. I’ve tried to let people become who they’re supposed to be“.
I’ve 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 Tuohy’s 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 isn’t 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 success…
“The people who say money isn’t important are the people who already have it”.
Of course there are certain things money can’t buy, but here’s 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 can’t pour anything out of an empty cup!
5. Selling Isn’t That Simple
While I’m sure the Tuohy family is now enjoying the fruits of their franchise riches, it wasn’t that easy to sell the locations.
“It’s harder to unwind a company than to build it. You have to stair-step it down. There’s many people involved…I thought you just turn the the lights off and leave, but no such luck“.
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.
There’s a void that is left when an entrepreneur sells their business.To help with this, he decided to keep 11 Taco Bell’s so that he could remain somewhat involved with the empire he built for much of his life.
To read an article that was used to distill the above overview, check it out here.
CMG Finds Success In QSR
The multi-unit group at one point owned 8 different concepts, some franchised and some not. But today it owns just a few brands, including 196 KFC’s and Taco Bells, 103 Sonics, and 30 Genghis Grill units. The group credits the franchise system with enabling quicker acquisition. With $354 million in sales in 2021, this group is doing it right!
Pizza Hut On The Rise Again?
Pizza Hut was once the top of the pizza world, but has been on a steady decline as they failed to adapt to a world where convenience of ordering is the #1 priority from consumers. Today, Domino’s is the biggest pizza franchise in terms of revenue, and Pizza Hut sits at a distance second. But the brand is now growing as it tries to balance a modern approach while maintaining it’s nostalgic essence that made it initially successful. Read more here.
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