Josh Skolnick is the co-founder and CEO of Horse Power Brands, a home services franchisor and the parent company of Mighty Dog Roofing. Josh founded Monster Tree Service in 2008, and grew the brand to a multi-million-dollar U.S. network
Zachery Beutler is the co-founder and CDO of Horse Power Brands. He began his career in franchising as a young franchisee with Nebraska-based Complete Nutrition, later becoming a multi-unit franchisee of Color World Housepainting, Inc.
Interview by Kieran McLoone, editor for Global Franchise
KM: You’ve said that Horse Power Brands was founded due to the ‘lack of accountability’ in the franchise industry. How is your group providing a solution to that?
JS: There are a lot of people who get into franchising with little to no franchising experience, and don’t really know what they’re getting involved with or truly understand the amount of support that’s required to protect a franchisee’s investment.
Oftentimes, the purchase of a franchise business for a franchisee is one of the largest purchases that they’ll make in their lifetime; outside of buying a house, an automobile, or putting a child through their college education.
More importantly, there are people that are in franchising that don’t understand the best ways to expose themselves to the general public to sell franchises. What they do is, traditionally, attach their wagon to an FSO (franchise sales organization), and there’s a lack of accountability or alignment. You’ve got two sides to it: the franchisor wants to sell franchises, and the FSO is only compensated when selling franchises, so they’re aligned on that. But the franchisor is often not well-capitalized enough.
Franchisors may then have a moment when they realize they’ve attached their wagon to an FSO and have sold lots of franchises, but they don’t have the capital or knowledge to support a large network. At Horse Power Brands, we fill that gap. We do all of our development internally, we run all of our operations internally, and we’re backed by over $100m in capital that is personal capital that we have put into this project between Zach and I to grow responsibly.
ZB: If you look at business in today’s world and go back five years, things have changed so much in the franchise world. How do you drive leads to a franchisor? How do you market and advertise?
“We have more employees before we’ve sold even one franchise, than most franchisors do with 100 franchisees”
People often forget that a franchisor was often a mom-and-pop business that grew and then began to franchise. But how they built their business no longer applies in today’s world, because that growth period may take 10 to 15 years.
When Josh and I look at the previous brands that we’ve created and grown, there’s one big thing that remains consistent, which we call ‘intellectual capital’. This includes the key attributes of the individuals in your organization, so things like work ethic, resourcefulness, and financial acumen.
Right away, when we launch these franchise brands, the level of intellectual capital is unmatched. We have more employees before we’ve sold even one franchise than most franchisors do with 100 franchisees.
KM: Why have you both remained in the home services industry for your franchising careers?
ZB: I built up a company and lost everything, and it was in an industry that wasn’t sustainable. At the time, I thought, ‘What are people going to live in for a very long time? A home. And those homes are going to need maintenance to keep them protected from the elements.’ I recognized it was a recession-resistant industry.
Josh and I also come from blue-collar upbringings, with Josh’s dad owning a hardwood flooring business, and my dad was a cattle buyer and owned auction barns. We’re blue collar-guys, and you’d never catch us wearing a suit and tie to work.
JS: Service is really in its infancy within the franchising space. People view franchising as food and retail and storefronts. When I got into my first franchise eight or nine years ago in the tree care industry, people raised an eyebrow as if to ask, ‘How are you going to franchise that?’
The experience that we bring to the table is helping us to build these concepts. We believe that focus creates wealth, and diversification preserves it. We’ve had such a long-term focus in the services space, even though we’re in an industry that has so many sectors. We get people outside of this industry who reach out to us on a weekly basis pitching their franchise for Horse Power Brands, but we say no and don’t lose sleep over how much money we may be leaving on the table.
That doesn’t mean to say that we may diversify into those things long-term, but we’re currently aiming to acquire 10 to 12 brands within this space and truly grow them.
The reason private equity doesn’t do this is because it’s hard. It’s the riskiest place to be. Private equity has to provide more of a guarantee on return to the investors that they’re investing money for. For us, we’re betting on ourselves.
KM: What should franchisees look for when entering the services industry for the first time?
JS: Franchise buyers are either looking to be part of a legacy brand, or they’re looking to join an emerging brand to play a role in what the future of that brand will look like.
Typically, the people coming to our operations are looking at one or two other emerging-type brands. It’s very common that we hear from those individuals that they went through somebody else’s process, and they were told that when the brand gets to 20 or 30 franchisees, they’ll add a CMO or consider getting into national accounts.
When you come through our process, you’ll never hear that; we invest in the infrastructure upfront. When we launched Mighty Dog Roofing as the first portfolio brand for Horse Power Brands, we had over 20 employees on our corporate staff to support those franchisees that came in early on.
“The reason private equity doesn’t do this is because it’s hard. It’s the riskiest place to be”
Our franchise candidates often have an empire-builder mentality. They are looking to get in at the ground floor and know that as they build their portfolio of brands, it’s going to be more than an opportunity to buy one concept.
When you think about the way that we make our acquisitions, we create white space across the country for our existing franchisees so that they can acquire other verticals and grow their portfolio. A very established franchisor that’s making acquisitions of big brands with 200- to 300-units already, isn’t creating additional opportunities for existing franchisees to then take on new brands.
ZB: I’ve done this three times, and I often say to people: imagine if you were a franchisor and could go back in time with as much money as you’d need, and could perfect everything the first time you did it. How much better of an opportunity could you make for people buying into the franchise?
Again, we’re the only company out there that’s going out and acquiring these brands in their infancy and putting a lot of capital behind them. We know how to grow these brands. Having access to this level of experience and knowledge is unheard of.
KM: What would you say to an entrepreneur who is looking to enter the services industry for the first time in 2022?
JS: As you look at the way the world has shifted as a result of COVID, people are spending more time at home and investing more money in their homes than ever. Home prices have drastically increased, and people have a new pot of money that they’re investing into the most valuable asset that they have.
There’s no better time than now, with what’s happening in the economy. It’s like shooting fish in a barrel. There’s so much work out there. We hear every day on the news about labor shortages, but our franchisees have not experienced anything like that.
“When we launched Mighty Dog Roofing as the first brand for Horse Power Brands, we had over 20 employees on our corporate staff to support those franchisees that came in early on”
Gyms have always been big in the last few years, but so many people I know have canceled gym memberships and are now working out at home. It’s the same in the workplace; people are going remote, and the number of renovations that are going to happen will just climb. Right now is the time to stop building somebody else’s dream and focus on your own.
ZB: When Josh and I met, it was very apparent that we both knew what we wanted and were on the same wavelength. That gave us a different type of relationship as business partners. If you know what you want, and you’re looking to be entrepreneurial, then service-based businesses can offer a lot of value to executive-type or talented business owners.
JS: If you’re retail, then a customer could get your product from Amazon. If you’re a restaurant, they can get your products through a third-party delivery service, which takes a cut. If a customer wants our services, they can’t get them in any other way than picking up the phone and making that initial point of contact. We make it so easy for them, and it ends up with our franchisees making a business as large and successful as they want to.