Franchising Secrets Behind $60M+ Net Revenue, Growth Without Guesswork - Michael Ramsey

Proven Podcast

Michael Ramsey, co-founder of Strong Pilates, joins The Proven Podcast to dismantle common franchising myths and outline a data-driven approach to franchise ownership. He explains how AI automation

Key takeaways

• Michael Ramsey co-founded Strong Pilates seven years ago; it now operates 120 locations across 15 countries generating approximately $75 million annually.
• Less than half of all franchises reach 25 locations, and only 5% successfully scale to 100 units within a decade.

Main topics

• Franchising realities vs. passive income myths
• AI's impact on employment and franchise demand

Notable quotes

"AI does not stand for artificial intelligence. It stands for always incorrect."

Conclusion

The episode equips prospective buyers with actionable due diligence frameworks while

Transcript preview

Speaker 1 (0:00) Welcome to The Proven Podcast, where we don't care what you think, only what you can prove. Less than half of all franchises ever reach 25 locations, and only 5 % make it to 100. Michael Ramsey, co-founder of Strong Pilates, got there in seven years and now runs 120 locations in 15 countries. Today, he explains how to pick a franchise that lasts and why AI could push a lot of people toward owning one. The show starts now. All right, welcome back to the show. Michael, man, I'm excited to have you on. Speaker 2 (0:29) Mate, it's good to be here. Speaker 1 (0:31) So I wanted to chit-chat about the people because a lot of people don't know who you are. They don't know what you've done. Give them a quick debrief. Who are you? What have you done? Speaker 2 (0:38) Yeah, I think the most relevant thing here today, I own a franchise. I started seven years ago, co-founded it. Today, we have 120 locations in 15 countries. We do about 75 million per annum and we're scaling quickly across the US. I think the most important thing in this conversation is that I'm a huge advocate for franchising. I opened my first franchise at the age of 26. I scaled that with my business partner who's still my business partner today, 12 years. We scaled that to six franchises and then we got the multiple, got the exit. And the reason I'm advocating for franchising so much is I remember at 26 years old trying to climb the corporate ladder. I'm a marketer by trade. I had no financial freedom. I had no – and I think that's what – financial freedom just means time. right? I had nothing of that degree and I was sort of trying to drive further and further in my career and I really wasn't getting anywhere. And what franchising did was give me the opportunity to finally hit my financial goals, get some time back and actually like become really passionate about business. So, you know, this is why I like to have these conversations because it's something that changed my life and now I'm trying to do the same for other people. Speaker 1 (2:01) One of Speaker 2 (2:01) the Speaker 1 (2:01) things you were talking about before we started recording is why franchising is going to be so big in the future. And a lot of that's because of AI. And I think what people don't understand is some huge things about AI that people don't understand. First off, AI does not stand for artificial intelligence. It stands for always incorrect. So get that out of the way right now. The second thing is that AI is to us as the asteroid was to dinosaurs. It is going to complete. We wipe out employment and it's going to be wild. But we've done this before. This is, you know, this is during the industrial revolution. We had massive changes during the tech boom. We had massive changes when we went from being nomadic to, you know, agricultural based. These are things that we've done a lot of times. However, I believe it's going to change the entire platform. We were talking about this offline. Could you speak to how you think AI is going to kind of change the ballgame and why franchising matters? Speaker 2 (2:48) Yeah, I mean, there's already almost 9 million jobs in franchising in the US right now. Franchising accounts for about 3 % of GDP in the US. And I'm already seeing this in my own business where there are roles that you simply don't need a person to do anymore. And it's not that they're unskilled roles. These are very, very skilled roles in areas like legal, marketing, copywriting. There's a lot here that seems to be... just getting swallowed up by AI. I think, you know, not only are we seeing from a franchising perspective jobs growing year on year and compounding, but I think what we're going to see is very intelligent, very well-educated people that are no longer going to have positions and they're not going to be able to make similar income to what they're making. So this is where I see franchising coming into play. You know, I think... These people will have business experience, but they won't have experience in running a business. The best part about franchising is you are given all the tools. You launch with a great franchise. You've got the brand equity there, so you've obviously got an existing client base that will come and see you. And very, very quickly, you can make money, you can scale that business, and you can do quite well. So I think in probably two, three, four years' time, when jobs are being made redundant, people are going to look to franchising. And, you know, a good question to ask, I guess, I don't know if you have an opinion on this, Charles, but, you know, what do you think is the benefits of, you know, starting a franchise compared to, say, starting your own business, right? Because there's arguments for both, you know. I could just start my own business or I could, yeah. Speaker 1 (4:34) So I think there's a huge difference that most people don't understand. Being an employee is very different. than being an entrepreneur. And transitioning over is the equivalent of saying, hey, I'm an ice skater. Now I'm going to start swimming. Yeah, you did deal with water at some point. One was in a frozen state. One was in a liquid state. It is not the same. The people who are employees should not be entrepreneurs and entrepreneurs make... really crappy employees. We do. We have problems with authority. We think we're better than everyone else. It is what it is. We're workaholics. People are like, hey, I don't want to have a nine to five. Congratulations, you now have a five to nine. So it is what it is, is entrepreneurs. And that's 5am. So I think that transition that most people don't get, we're like, hey, I want to start my own business. If you're an employee, you don't have the knowledge and the reps in to go and do a business. So having something that does have that structure that you'd come into a franchise and like, hey, Here's the systems. Here's the SOP. Here's what you need to do. We've already handled the marketing. That makes sense. The part that I've always had resistance to is, hey, I'm going to do all this work and then I'm going to lose 40 to 60 % of it. So that's my hurdle. But if that's your cost of being, hey, I'm not an entrepreneur, because it's not the same. An employee is not the same as an entrepreneur. And it just is what it is. And I've always walked people through a test on how to figure that out. I think if you're an employee where your job is completely redundant, then it makes sense that, okay, let's look at franchises. But I've never seen a franchise model work out successfully long-term because you have to do it in multiple. Like if you have one franchise, one McDonald's, you're not making any money. It's adorable that you have one. You need a multiplier of that. You need three to five of them. And then how do you get to that point has always been my experience with it. Speaker 2 (6:15) Yeah, well, 60 % of franchises are owned by 20 % of franchisees, believe it or not. That makes sense. So Speaker 1 (6:22) it Speaker 2 (6:22) is a multi-unit play. Yeah, it's a multi-unit play for a lot of people. And I mean, that number is skewed because PE is now coming in and buying up franchisees and franchisors. It's Speaker 1 (6:34) a Speaker 2 (6:34) high cash flow business, so it's very attractive to PE to come in and do that. But the opportunity for a lot of people is... building those multi-units and you can do it off your own cash flow and then selling the PE, getting the exit and doing whatever you want, going and sitting on a beach, whatever you want. So, yeah, I find that all very interesting. And, you know, when you compare your own business to, you know, starting just a random business to a franchise, there really is no benefit beyond two years. So all the data tells us that from zero to two years, you're far more likely to succeed in a franchise than you are just starting your own business. You know, one in three businesses fail in the US. That's a fact within two years. So we know that, you know, franchising will get you that leg up. It will get you to a certain point, but it doesn't mean that you're not going to be doing the work beyond that. Speaker 1 (7:31) So I think, you know, when you have someone come in, let's say they're an employee, because I agree with you, AI is going to change it. You're an employee. You've never run your own business before. You have no idea. Like, let's say you're a marketing person. You have no idea about numbers. You have no idea about the accounting side. You have no idea about the customer service side. You're just purely the marketing dude. You don't understand all these other hats. How does franchising fill those gaps when you've seen this? And what are some of the major mistakes most people use when they go into franchising? Speaker 2 (8:02) Yeah, the biggest mistake people make going into franchising is thinking that it's passive income. You know, you are buying a PML, so you do have to work in some capacity. I'm yet to see a fully automated franchise. So that's the biggest mistake that people make. The biggest mistake that franchisors actually make is opening up the checkbook to absolutely anybody. You know, anyone that wants to buy into the franchise. It's a slippery slope. And culture is very, very important, right? I remember our first conversation, we talked a little bit about, well, no one's really going to care about Pilates, but they just care about making money, right? And that is true to some extent. But let's say, let's look at an industry like, geez, home services is flying right now. So think about like HVAC. you know, plumbing, you know, house restoration. It's effectively recession-proof. And that industry is booming right now in the US. But if you were to buy into that franchise, you know, it's sort of boring, right? Let's be honest. It's whether you're doing the work or you're managing it, it's boring, but it's going to make money. And then you look at the area that I'm into with wellness, it's a $7 trillion industry, and that's another booming industry. You get to be a hero within your community. You're doing things for people every single day that's making them healthier. And culturally, you're going to be more bought into that style of franchise, right? You can spend $2 million on a McDonald's, but you're feeding people burgers and maybe that doesn't sit well with you. Maybe it does. I don't know. But culturally, it's super important. And this is what stops the volatility within the franchise network breaking down. Because if someone doesn't want to be there, they're locked into a five-year franchise agreement and they're committed. So it is really, really important that you pick the right franchise that suits you. So I guess that's my biggest point in all of this. But yeah, I mean, there's plenty of things that franchisees get wrong that we can absolutely talk about. Speaker 1 (10:07) Yeah, I think we started with those, which is you're not buying a cash cow. You're buying a job for a little bit. You're going to have to work in it. And then as you take the profits from the first one to buy the second, third, and fourth, then all of a sudden you have more of that exit. But you have to understand this is very much like getting a