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Brief Summary
In this foundational episode of The Homefront, Jeff Dudan sits down with Steve Murphy—former x of Franchising at Winmark Corporation and advisory board member at Homefront Brands. With decades of experience scaling franchise giants like Plato’s Closet and Once Upon a Child, Steve offers a rare look behind the curtain of responsible franchising, operational excellence, and the growing resale economy. It’s an episode rich with wisdom for franchisors, franchisees, and entrepreneurs at every level.
Key Takeaways
- Trust before transformation. Franchisee buy-in starts with listening, consistency, and delivering on small promises.
- Great franchises are built on foundational habits. Systems that scale aren’t one-time rollouts—they’re a sequence of compounding initiatives.
- The resale market is thriving. As values shift toward sustainability and smart shopping, the resale economy continues to expand—even in a digital age.
- Pilot first, scale later. Testing initiatives in top-performing and average stores before system-wide rollouts ensures relevance and success.
- Private equity must balance profit and purpose. Big capital in franchising isn’t inherently bad—but without long-term thinking, support can suffer.
- Success isn’t just financial. Steve shares how a full, purpose-driven life includes family, travel, values, and service—not just bottom-line wins.
Featured Quote
“There’s always another dollar. But if you're not fulfilled in the rest of your life, it's not a happy existence.”
TRANSCRIPT
Meet Steve Murphy: Retail, Resale, and Franchising at Scale
Jeff Dudan (00:01.156)
Welcome everybody. I am Jeff Duden and we are on the home front. As always, this podcast is brought to you by home front brands, simply building the world's most responsible franchise platform, encouraging entrepreneurs to take action, to transform their lives, impact communities, and enhance the lives of those they care the most about. All the while delivering enterprise level solutions to local business owners out there on the home front, where it counts. If this sounds like you.
Check us out at homefrontbrands.com today and start your next chapter of greatness, building your dynasty on the home front. I will be looking for you here. And today we have an exceptional opportunity to learn a lot about franchising and big business and the resale industry. We have with us Steve Murphy. Welcome, Steve.
Steve (00:51.207)
Thank you. Welcome. Good to be here.
Jeff Dudan (00:52.724)
Awesome, so excited. Yeah, it is, it is. This is gonna be great and really honored that you chose to be on with us. I'll do a little background on Steve so he can be humble in his, in there. But Steve is a graduate of Northeastern University with a sports marketing and management degree, bachelor degree at Holy Cross in economics and accounting. Steve has 20 years experience in retail, in retail management. He helped lead Windmark Corporation.
from a $40 million market cap to a company over $750 million prior to retirement. Now Steve is focused on participating in strategy and leadership opportunities through board of director or advisory seats. Steve is a member of the board of directors of Basecamp franchising. And Basecamp is the parent company of gently used retail apparel kids brands, Kid2Kid, and Uptown Cheapskate with over 200 locations in the United States.
He's also the managing director of 10K Island Investments, which is a private investment company focused on minority investments in private equity, real estate and venture capital, with particular emphasis on emerging franchise concepts. They also manage a current portfolio of real estate investments, including multifamily, mobile home, RV parks, and the like, also commercial properties. Windmar Corporation, where Steve was the president of franchising, focused on sustainability and small business formation.
And Windmark was known as the resale company. It was a leading multi-channel retailer in the resale industry. For more than 30 years, they've been at the forefront of sustainability movement, recycling millions of items back into their respective communities and guiding entrepreneurs. Welcome Steve Murphy.
Steve (02:38.763)
Thank you. That's quite an introduction.
Jeff Dudan (02:41.752)
Well, you lived it. It's yours. You got to own it. I'm so excited to talk about Windmark Corporation. And people probably don't know Windmark, but they do know the brands. Plato's Closet, Once Upon a Child, Play It Against Sports, Music Go Round, Style Encore, a bunch of great brands that we see on Main Street USA, everywhere across the country. Before we get into that, Steve, would you share a little bit about your background, how you grew up and where you grew up?
From Small-Town Roots to Soviet Railroads: How Travel Shaped Steve’s Worldview
Steve (03:11.862)
Sure, sure. Yes, I was born in 65, so I'm a, barely, I think, Gen Xers, just missed the baby boomer crowd. So I was one of the first Gen Xers and grew up in a little town called Hingham, Massachusetts, about 20 miles south of Boston, and spent the better part of my young adult life there. Graduated from Hingham High School, the harborment of Hingham High School. And there I...
Did pretty well in school, played some sports, played lacrosse, but basketball, captain of the football team there. And then went on to Holy Cross, where I was an economics and accounting major. I spent four years at Holy Cross, as they say, up on the hill in Worcester, Massachusetts. And did not go into accounting. Realized by about my junior year.
I loved the school, I did not love my major, but later in life I look back and I think it was a great opportunity, a great major to have, just couldn't see myself in the public accounting shoes. So like a lot of young people, I graduated and had no idea what the heck I wanted to do. So I went, did some traveling, most people do when they get out of school and went across Europe, was lucky enough to have a very adventurous buddy.
my college roommate and we ended up extending our trip and spent four weeks in Russia back in 1988 when that was the Soviet Union. This is pre kind of fall of East German wall and then spent another four weeks in China which was very interesting and then came out all the way back across countries. We went across the Atlantic, came back across the Pacific and settled back in Boston and then was there for about a week and a buddy of mine said hey do you want to move to California?
and I had nothing else to do. I said, why not jump in his car with him? And we spent a month driving across country and hitting all the things I'd never seen in our own country, realizing at that point in time for all the travel I did, what an absolutely great country we have here. I think probably with all the things I've seen, still this is probably one of the most interesting places in the world to travel. And then I spent the better part of about three years out in California.
Lobsters, VW Vans, and Starting From Nothing in California
Steve (05:29.458)
I started a seafood wholesale business with a buddy of mine. We quickly became the number one importer of live main lobster in the Southern California area. And we were doing it for when we began, just like most entrepreneurs, we had no money, but we had a lot of ambition, a lot of energy. And so we began deliveries on the back of this VW Raptor.
So we used to go to the airport and pick up the product, and then we'd go out and we'd deliver it, we'd park around the corner. We delivered all these high end restaurants and supermarkets and hotel chains, and we would park around the corner because we didn't want them to see it. We didn't have a truck. And we would bring the product around in the hand trucks. And we did that for the first year. And we finally realized, okay, we've got to make some investments. We invested in a truck and tried to professionalize it a little bit. But
We had a lot of fun doing that. We did that for two or three years. He went on to Wall Street, became an investment banker, and I went back to grad school, as you mentioned, and went to Northeastern, and got out of Northeastern, and was looking at sports marketing, thought I wanted to go into the agent world and maybe try to represent somebody or represent them, at least on a marketing front. At that point in time, it was right around, oh, that was probably 91, 92.
And not a very good job market took the first job that I could actually get because I did have bills to pay I put the second half of my graduate degree on my credit card and Had a no interest credit card over six months so I thought I was pretty good and Went out and when I finished up I said well I gotta go job start paying for this and took a job with a small marketing agency in Boston and stayed on that side of the world and I did get a chance to work with the Nikes and Reeboks of the world and
parlayed that into working at a bigger agency. And from there, I actually ended up getting married, having a couple of kids. And then I got a call one day from a headhunter that had an opportunity out in Minneapolis, which is happened to be where my wife was from. So we just felt like it was a good time to move. I had a father-in-law that was ill at the time. And I said, you had two young boys. And I said, you know what? I'm going to
Steve (07:45.474)
take the chance and move and went out and worked in this turn around operation called Windmark. So it's kind of where it all started, where it all ended.
Jeff Dudan (07:55.816)
So I tell my children that you need to have, everybody needs an adventure in their life. And you went to Europe, then you took a flyer out to California, and did your family have a history of moving around like that? Or was it just kind of wonderlust? Or you had a buddy that had an idea and you just said, I'm going with you? But that's fascinating and really developmental to be able to take an opportunity to travel like that at a young age.
Steve (08:23.366)
Yeah, it's funny. My family had no history of that. I had never been west of Mississippi. I had been to Florida, I think, once for Disney World. I had been to Bermuda maybe once. I had a very sedentary family. They were New Englanders. You were going to go from school to school in New England. You were going to live your life in New England. That's really kind of how they felt. And I think it was mostly the influence of
Very influenced by my friends. I have a great group of guys growing up and one friend in particular that really loved to travel. And when we had the opportunity, you know, when we did the European thing, we actually had looked into it and the travel person that we're going through, it was on one of those, you know, 28 countries and 40 days kind of Europe tours. And, and he said, well, if you bring along some, some classmates, we'll commission you for everyone you bring.
And we bartended all the way through college. We always loved money. So we said, well, we think we can scrounge up a few people. And we ended up getting about 40 of our classmates. And we went for free. Actually, we ended up with an extra about $10,000. And I was ready to start my life with some money in the bank. And my buddy looked at me and he said, what are you talking about? No, we're going to keep going. And we ended up on the tour in Greece.
Jeff Dudan (09:30.304)
Oh, you guys went for free.
Steve (09:48.638)
And he said, we're going to fly up to Helsinki, Finland and jump on a train and we're going to go on to Russia. And, you know, back then, this is 1988, there was no internet. So we grabbed photos, travel books, and he gave me Russia and he took China. And, uh, we, we figured out how to get through there. We had to write the embassy to get a visa and, and we just kind of figured it out. And, and, you know, that was the bug. I mean, once I got bit, you know, I, to this day in my life.
This is still the majority of what I like to spend my time doing is going to a different part of the world. I just got back from Uganda and Rwanda and, you know, seeing as much as I can, and I try to impress out upon my boys as well as, you know, we've got a very small world really, and especially in this day and age where the ability to travel on the internet and all the things you can learn is, I just said never stop, just keep going until you can see every part of this planet that you can.
Jeff Dudan (10:42.776)
That's great advice. So Windmark Corporation, you show up there, and you described it as a startup. What was going on?
Windmark Corporation: A Broken Franchise System in Need of Rescue
Steve (10:55.799)
They had actually been around for a little while. They had some really good brands. They had taken the idea of buy, sell, trade, new and used stuff and applied it in a number of different kind of vertical channels in retail. Some of them worked extremely well. Some of the others as they attempted to grow didn't work. And they also got into doing more corporate locations. They acquired a couple of brands that had.
a large number of corporate locations and that really welcomed their area of expertise. They were franchisors, they were better at franchising than they were at running retail outlets and they kind of got a little bit upside down. They had gone public and in their zeal to grow, they had taken on things that didn't work out. Cashflow was becoming really a difficult challenge and they were good at selling franchises but maybe not as good at supporting them. And so...
Because of all those reasons, they got themselves into some trouble. And at that point in time, a fellow named John Morgan, who became the chairman and CEO of the company, came in as an investor. And as we kind of peeled back the onion and saw what was there, he decided that changes had to be made. And he changed up the board, he changed up the management team. And when we came in, it was really starting from scratch again. It was really taking a, when I walked in the door, it was a-
you know, $40 million market cap, $7.20 stock, and with a lot of brands that were, had potential but weren't realizing that potential. And a lot of the team that came in did not come from franchising. We came from the world of agencies and small business and consulting. And all we knew was we had a lot of folks that had put a lot of money in, in the hopes of building a business.
and we had a responsibility to them to help them turn that business around.
Jeff Dudan (12:50.236)
What were some of the first things you identified that needed to be fixed?
Fixing Franchising From the Inside: The First 100 Days of Turnaround
Steve (12:57.206)
Well, the first thing was nobody was doing the same thing inside the four walls of any of our locations. So no consistency across the board and really no plan from the franchisor. You know, the training that they had at the time was was not adequate. The performers that they had were not putting them in a position to win and be profitable. And you know, we had to go in and literally just kind of peel it all back and say,
Jeff Dudan (13:01.554)
Mm.
Steve (13:26.45)
Okay, let's number one make sure that the model that we're selling here as a franchise is working and Once we got that kind of peeled back and took a look at that and we took a look at one of our Those that did have success What were they doing that we can teach and train the others in the system to do and once we kind of realize? Okay, we've got really good models. These models work when executed properly then it just became a whole rewrite of
the training, the operations, the support, the marketing, everything else that went along with it.
Jeff Dudan (14:01.064)
You know, it's interesting. I was first exposed to franchising and dealership models in the mid 90s. And I had went down to hurricane Andrew and cut my teeth in the insurance restoration business. And after about 18 months, I was trying to decide, was I going to join one of these groups or was I going to start my own business? And I took a look and I went through a day or two of training with one of these dealership models. And.
when I went to the training, the manuals were at least 20 years old. I mean, these things were from the 70s. I could just tell by the size of the lapels. It was, you know, when you see a light blue suit with a lapel the size of a pancake and bell bottoms and white shoes, that was not current. Those pictures were not current. Oh, yeah, it was everything. There was, you know,
Steve (14:40.782)
Thank you.
Steve (14:48.738)
Yeah.
Steve (14:53.737)
The hairdos too, right? That 70s hairdo, yeah.
Jeff Dudan (14:58.192)
Yeah, pork chops everywhere. I mean, it was great. But more importantly, the training didn't reflect the reality of the business. What I had learned in a baptism of fire processing, roughly $20 million of work in 1992, $93, with a company that was helping the people recover. And then I looked at the training manual and I said, well, this thing needs a complete rewrite.
And I was at my 20 something year old, to me, I realized. So that was really a turn off to me. But I don't think it was untypical. I think a lot of franchise models back then had, you know, before technology was so available and so accessible that a franchise was a business card, a three to five day training and good luck, we'll see you maybe at conference or maybe we won't. Is that kind of what you found at Windmar Corporation?
Steve (15:57.71)
Yeah, in fact, that's a great way to put it. They felt like once they got the initial training, everybody would be done and the relationship would basically be a holiday card and a hello at conference. Maybe you remember their name, maybe you didn't, but you want to make sure you got that royalty check every week. And that really, I think, technology has actually changed for the better, but also to make it even more challenging for franchisors.
The expectations now are different because of that as well. The expectation is that this is really a 24-7 world that we live in. And you need to be available to your franchisees either via live or via technology at all times. You know, when they send an email, it's 8 o'clock at night. They don't expect a reply by 5 the next day. They would love a reply that night, but certainly by the next morning. And so I think as franchisors, there's...
There's a higher bar now to cross.
Jeff Dudan (16:57.792)
I think that's fair. The word disenfranchised, I believe, comes from the franchise industry. And it comes from just that. People got involved speaking with somebody who had a business brokerage franchise. And literally, once they left training, they almost never heard from the home office again. And any relationship that you're in, especially maybe your spouse relationship, if you spoke once a year,
that would, you would become disenfranchised from that relationship. And it's no different in the franchise world. And we, we had something that we, it's gone by the wayside, but early in the early days of Advantage Clean, we have something called the five E's and it was, uh, you know, engagement, education, empowerment, um, emulation, and all of them had to do with being a high engagement model, meaning
when we considered rolling something out, whether it be a call center or how we were doing our marketing, we always tried to consider whether it would increase or decrease engagement with our group. And we wanted a lot of touch. We didn't wanna waste time and dollars and we didn't want it to be frivolous or meaningless, but we did wanna make sure that we could hear the whispers, we could keep a good pulse on the network. Of course now,
We're a big net promoter score company, and we impress upon our franchisees that we need their feedback every month. And it's critically important that we get it that way. So I think good franchising, which we're going to talk about, is generally high engagement, has a strong data forward type bent, meaning you're talking about real numbers and the reality.
You're not just using words, tough market, hard time type stuff, you're looking at real data. And then you can help the people figure out what to do, which I think is a lot of what you did at Windmark. So you're at this $40 million market cap. A company that's got a $40 million market cap is probably already burning a lot of calories, just staying compliant, being a publicly traded company that's very expensive to do, and it puts a strain on small businesses when they go public too early, so I don't know.
Jeff Dudan (19:20.016)
why they were public or what led to that. So what are some of the things along the way, because Windmark is now a billion dollar market cap company. So from where you joined and became the president of franchising for 18 years through your tenure, it went on this journey of excellence and this journey of franchisee success. What were some of the things that you found along the way that made the biggest difference?
Steve (19:32.831)
Yeah.
Trust, Not Tactics: How to Win the Middle 60% of Franchisees
Steve (19:50.318)
Well, I think some of the first things we found actually were the challenges and, you know, not having any experience in the franchising world prior to that for a lot of us. We went in thinking that you set out a plan, you put the capital behind it, you communicated that plan, you executed and the franchisees would follow. And you know, what we didn't realize was there was a history of plans that had been put out there before.
And the franchisees had put their capital into those plans and they hadn't worked. And so we were probably about a year and a half to two years into it. And we had, you know, in franchising, you always have your top 10 or 20% that they're your leaders. They're going to jump on board and follow. They were, they were extremely excited about new management coming in. Uh, they were excited about what they were hearing. So they were, they tended to follow a little bit closer to what we were talking about.
But then there was the middle 60% that really, they'd seen it, they had heard it before. They were not gonna jump on board. They were gonna wait and see if it worked. And so they were kind of sitting on the sidelines and the bottom 20%, you know, they weren't gonna listen to what you had to say anyways, because they had already heard that and wasted their money. So they were really gonna be the last ones to come along. And we were about 18 to 24 months into it and we realized that was the situation. And...
And so we actually had to almost slow down a little bit and say, you know what? The first thing we need to do is we don't need to give them a plan. We need to build trust and we need to build a relationship. And we need to know who these people are. We need to know who their families are. We need to know about their kids. We need to know why they got into the business in the first place. Because if you don't understand their motivation and why they came into the business, how are you gonna help them achieve the results they're looking for? So we started there and
you know, slowly over time, you know, you go out and the trust and being likable and having people listen to you was one thing. But it was another thing to kind of say, okay, now we're going to tell you what we're going to do. And we're not going to tell you we're going to do 20 things, even though there's probably 100 things to do. We said we might get 100 things done. But let's pick the three biggest things that make the most impact for them. And that's asking them questions. That's working with your franchise advisory council. That's finding out
Steve (22:14.186)
Okay, we think these are the important things, but it doesn't matter what we think. What do you guys need? And as they told us what they need, sometime that job with what we were thinking and sometimes it didn't. And we would say, okay, we're going to go out this year and we're going to accomplish, we'd get out conferences. We'd say, we're going to accomplish these two or three things. And this is going to be the major initiatives for the year. And then we would try to deliver four or five because we could, we knew that if we just delivered three, that's good. And at least we're living up to our promises.
If we could over deliver, we could build that trust a little bit faster. Right. They would then look at us as a team that was actually over accomplishing our goals. And, and they knew that what we said we were going to do, we would actually go out and get done. And so that's really how we kind of started. And, and a lot of it was really kind of fundamentally getting back to, okay, what are the things that are holding us back right now? And there were some things in the business that, um,
in our business and I don't think we're rocket scientists. I think we're very average joes when it really, when it came down to it. But there's no business I think out there that's that difficult to figure out what are the things that really drive this business financially. There's a lot of things emotionally connected to a business. Entrepreneurs are passionate, there's a lot of emotion that gets involved in that business. But if you really strip away all of that, you'll find there's two or three things that really drive the financials.
And we had to get in touch with what are those things and what are the things that are inhibiting us from getting to that stuff. And the biggest thing for us was really the acquisition of the inventory that would then turn into the sales for our business. So in the first few years, really, it was all about how do we make everything about this business about acquiring more used inventory so we can get more sales. And there was a lot of things that layers underneath that that were challenging.
we had franchisees that didn't have the capital to go out and acquire that inventory. So that became a difficult challenge for that percentage of franchisees because we said, well, the first thing we need to do is help them figure out how to get that capital. And a lot of them had aged inventory on the walls. And so getting that aged inventory, giving them access to other financing so they could get the capital to do the things they needed to do to grow was their initial plan. Others that had capital, that was a little bit easier. Then it was acquired more used inventory.
Steve (24:36.002)
So they were going out and buying more used inventory to help them grow their sales and put more money in the front end of the marketing. And then we had our top guys and our top guys were already doing all that, but they wanted to grow. So the challenge there was to dig into their operations and say, you're doing a lot of things right. What are the few things you could be doing better? And then how do we help you guys grow? And that was really about the first, probably eight to 10 years we were in the business was just buy more and then help them grow more.
And then it became after that a lot more sophisticated.
Jeff Dudan (25:07.844)
Yeah, fine tuning. So rolling out four to five new deliverables, initiatives, whatever they happen to be, what did you learn about how to roll something out successfully to a franchise network? Was it all on mass? Was there a piloting strategy, a test and prove? What did it look like at Windmark?
The Franchise Rollout Playbook: From Pilot to Systemwide Success
Steve (25:31.282)
Well, first thing was we made sure that the ideas that we generated, the initiatives we undertook were not just solely the initiatives and the thoughts of our team internally. You needed to get buy-in from the franchisees or you needed to take the idea right from the franchise system. So talking to your franchisees, talking to your franchise advisory council, making sure that they knew you were asking of them what it was that they were.
thinking was what was needed. And then getting behind that and figuring out how to bake that in and then how to re-communicate that to the system that, hey, this is what we're gonna be going out and doing. That was really probably the biggest challenge. And then I would say secondly was, learning from your franchisees, we went out and actually, we said the model is working in bits and pieces, but nobody's doing it perfect. But there was a group at the top that was doing it as close to perfect as we could see.
And we didn't have a lot of corporate stores. We had a few, we didn't run them very well. So there wasn't a lot we could learn from ourselves in that manner. So it was really going out and studying that top 10%. And then taking some of those ideas and saying, okay, now before we put it out to the system, we do need to test it. And we tested that in the corporate locations we had. And we tested that with a group of franchisees that a lot of your high performers that you knew would execute well, but also some folks in that middle 60%.
that we knew that would execute probably closer to the reality for what our average franchisee would do so we could see what the results looked like in each one of these different classes and figure out what was the best way to kind of refine that then before we rolled that out to make sure that really it was clean, it was concise, it was as easy to execute as we could make it, and it had the quickest results because anything we could do in that
format that we knew could get quick results. We knew the next initiative that jump on a little bit quicker.
Jeff Dudan (27:32.996)
Yeah, so what we've learned to talk about here when we have franchise advisory councils is we like to do one first, then one to five, five to 20, and 20 to everybody. And it's not always exactly like that, but the point is you're doing a staged rollout where you find the best franchisee, if you don't have a corporate store to pilot in, and some of the brands that I'm involved with, we have corporate locations. So we will...
pilot everything in a corporate location. Doesn't mean that we're gonna be the best executor, to your point. But then what we'll do is we'll find the franchisee that we think can execute on the strategy, the program the best. And if they have success with it, then we will bring them on to the monthly call and talk about the results of it. And we'll identify the next three to five franchise owners that would like to roll it out. Of course, with the adjustments that we learned from rolling it out the first time.
Steve (28:07.35)
Yeah.
Jeff Dudan (28:31.684)
And then if we have success there, we'll look for the next cohort. And they're usually, of course, gonna be the people near the top of the system because they're the ones that have the capacity and the management acumen to be able to onboard a new idea and roll it out. And they're chopping it to bit because they're looking for those incremental ways to improve their business and generate more revenue and more profits. And at that point, if it's working well, then the franchisees generally clamor to have it pulled in.
So the more that you can be collaborative, if not make it the franchisee's idea to ask for something, then they want it. That's where we like to be. We never want to find ourselves unilaterally jamming things down their throats. Because if it doesn't work, then to your point, all the trust that you built with the system is now compromised. Your relationship equity is, you burned some points there.
So we've been, we made that mistake several times early. Like to your point, you said, hey, we had a bunch of programs we rolled out, but they just didn't get up to it. And they might've been decent, but they just weren't rolled in the right way. And Charlie Chase said one time, which I found to be so interesting and so accurate, he says, you really don't fully understand the impact of a new strategy for 12 to 18 months after you roll it out.
Steve (29:31.55)
Yep.
Steve (29:41.45)
Yeah.
Steve (30:00.523)
Yep.
Jeff Dudan (30:01.168)
because everybody's, you know, many people are going to try it. It's going to work for some, it's going to work less well for others. But, but at some point after a period of time, everybody thumbs up or thumbs down it. And if it's not working, they're not going to waste time and money and energy on something that's not helping their business. So, um, you have to be really careful as a franchisor with genius attacks inside of your echo chamber. Where you're sitting around the conference table and you think you come up with something that's going to be amazing and, um,
Steve (30:18.855)
Yeah, yeah. Yeah.
Jeff Dudan (30:31.096)
you short circuit this process. So patience and research is really important. Well, that's fascinating.
Institutionalizing Progress: How Winmark Tracked 10 Years of System Upgrades
Steve (30:33.978)
Yeah. One of the other things too, we one of the other things we learned, which was, which actually probably had the greatest impact over time. Uh, and that was as we rolled out these initiatives, we would kind of memorialize them in a, just a kind of one sheet that we showed every year at conference. And we would say, okay, and this year we rolled out these initiatives and we bucket ties them, we put them in operations bucket or a marketing bucket or a.
bookkeeping bucket. And we said, here's the things we put out there to help you drive guys drive sales and profit. And we wanted them to learn that these were building blocks. You can't jump in in year four and then decide I'm going to jump on board now and start doing what when Mark's telling me to do. We wanted to show them the history to say if you're not doing the things from year one to three, then you're really not executing the model at the level that we're expecting to execute the model.
And that worked very well because every year we roll out the new initiatives, we would start that conversation by showing them what we had already rolled out and what was already done and what was already successful. And we could point to franchisees in the crowd that would support that. And so I talk about whether it was on a panel or whether it was in a conference workshop, talk about some of those things we had done in the past to remind the franchisees that, Hey, these are all building blocks and we want to be doing all of these things really well. And it's not.
inundate them with things, but it's to give them a roadmap to say, start with this stuff that was a low hanging fruit, make sure you're doing this really, really well. I'll throw an analogy out like it would be in any sport. If you're getting up there for a golf swing, there are some real basics before you get to that advanced swing that you really need to have those fundamentals down. We wanted them to have those fundamentals because at the end of that span of everything we did, we began to then take...
all the things they were doing operationally, and we monetize that by tying it into what they were getting in terms of financial results. And we could then say, okay, we can help you make another $30,000 a year because this is one of your issues. Here's the three or four initiatives we rolled out in the last 10 years to help you get better here, and we can help you improve your gross margin basis points or whatever it was that they were challenged by, by pointing those things and saying, these things you're doing well.
Steve (32:57.718)
These things may be okay, these things you're really not doing, but here's the programs we're going to institute now to help you. And even your best operators, when people say, what do you do for guys doing $2 million, $3 million? I mean, do you just give them more? And a lot of times it was like, yeah, sometimes they require more, but a lot of times it was just helping them go through the operation at that size and saying, what are the things you're just not doing as well as you could be? Because if you can help them pick up 200 basis points on a $3 million operation, you're going
That's a lot of money they put in their pocket at the end of the day. So tying all those things together and continually reinforcing what you had already done was important to get them on the same page.
Jeff Dudan (33:40.028)
So what is the trends in the resale industry today? The gig economy is growing. Franchising is accelerating. More things are becoming franchised. It's a shared leverage business model that gives people an opportunity to create some freedom and some economic incentive in their life, and in some instances, even create generational wealth inside of a franchise network.
As all that happens, I have to think that the resale industry is expanding. Is that the case?
The Resale Industry Boom: Why Smart Shoppers (and Franchisees) Are Flocking In
Steve (34:16.774)
Yeah, you know, the there's been a lot of changes over the last decade, especially with some of the business there going online. And at one mark, our franchisees were concerned. I sit on a board now, as you mentioned, of a company called Basecamp franchise and with two great brands in themselves with Uptown Cheesecake and Kid to Kid. And a lot of those franchisees were in that brick and mortar world when things moved online were concerned because they, you know,
Everybody was talking about, oh, if you're not Amazon and you're in brick and mortar, you're dead. And whether it was Target or whether it was any of our retail operations. And I think the number one thing to do was to make sure that we gave them the confidence that the business that we do each and every day is not going away anytime soon. People still love to come out and shop. In the resale world especially, people come out and every time they walk into a resale store, most of that inventory is changing up every single day.
So there's always new things to come in and shop for. It's very unlike any other retail where they've kind of got their standard assortments and standard skews. Every day you walk into an uptown sheep's gate or a kid to kid or any of a woodmark brands, all of that merchandise or a lot of that merchandise may be new on the shelf. So, um, it's that whole idea of that, that treasure hunt of getting those people back in and, you know, in, in, you know, we're still facing some challenging times even in this economy. And the one thing we knew was people are still going to have kids.
Those kids are still going to grow. They're going to outgrow that stuff before it's used up. And you have a younger generation now that's really into the recycling. They are doing everything they can to help save our planet, which is great. And they're realizing that a lot of this stuff that we just traditionally have thrown out, put in the landfills, donated, a lot of this stuff had secondary use. And
Not only could they get some good value and good money for that, but they could put that in the hands of somebody else that could really use it and buy it at a great value as well. So that world really hasn't changed in the last 20 years or so, and I don't think that'll change in the next 20 years. And as long as a person in the resale business is executing, and by that for them means bringing in that fresh inventory, buying that used inventory that they know is good quality resellable inventory every year.
Steve (36:41.57)
they're going to grow their sales. And we've seen that situation kind of occur over the last decade. The resale industry, there's a lot of different numbers people throw out there. I don't think there's any definitive expert in the resale world. But if you look at the number of units that have grown, you look at the goodwill of the world and the number of units that they've added over time. You look at the online competitors that have raised literally hundreds of millions of dollars and a few of them have gone public.
And as well the marketplaces that have popped up like Poshmark and Sideline Swap and others where they're just a mini version of eBay maybe in an actual market. I think what it's done really is kind of, you know, they say rising time lifts all boats. It's really lifted up the resale industry. The people now don't look at resale and say, oh, it's dirty and it's dingy and you have to walk into the store in a bad part of town to go shopping.
Now they're seeing resale as these beautiful retail environments or beautiful online environment and the merchandiser buying looked brand new, but they're paying half the cost. And I think we're just finding out that we're creating a much smarter consumer that they don't have the same hesitancy to shop secondhand as they did before. And that just begins to proliferate over time.
Jeff Dudan (37:58.476)
I would agree. Supplements, protein shakes, I'll subscribe and save and I'll just let them come to the house and let Amazon drop off a box. But I don't buy clothes. I don't buy shoes. The things that I want to touch and feel and see what the fabrics like, see if it fits. I don't want to have to process. What am I going to do? Put it in a box and have to go drop it off. I might as well just go into the store and got the right thing the very first time. So.
Steve (38:22.423)
Right.
Jeff Dudan (38:25.224)
And this stuff does need to be used. And I'm actually in our family, we've gotten very good about cleaning out our closets and taking it to Goodwill or somewhere else so that other people can have access to it. I mean, it's good stuff. It's just, you know, it doesn't fit. Now I do keep all of my fat, medium and skinny clothes because I vacillate between all three phases every, every, I just, I just rotate them. I got different color hangers.
Steve (38:47.2)
Yeah, we have to at this age
Jeff Dudan (38:53.404)
further, my large, medium, and whatever, and then we go back. But look, that's just life. I appreciate that insight. So moving over to franchising in general, there's
Steve (38:55.804)
Yeah.
Steve (39:02.05)
Yeah, yeah.
Jeff Dudan (39:16.008)
private equities had an impact in franchising. And my old econ professor, I remember what he said was, well, anytime anybody ran over somewhere in an open field and started waving the green flag of profits that everybody would then run to that flag. And that's happened in franchising quite a bit, not only with the impact of family offices or private equity, but also these investor types.
appreciating the franchise business model for the consistency that it provides and going down into the boxes to grab 20 of this or 30 of that or 10 locations or 20 or 30 million dollars of revenue inside of different franchisees locations and putting putting that together so so maybe that accelerates franchising because People we can now talk with franchisees about outcomes of course after they've
signed their franchise agreements and they're in training, but we can have a conversation with them that I couldn't have 10 years ago about building a business that's dynastic in nature, that can be larger, leveraging enterprise level solutions, all of those types of things. But what impact have you seen on the industry in terms of franchising? For as far as responsible franchising goes and...
maybe some of these things that are getting franchised a little bit earlier than maybe they should.
The Private Equity Wave in Franchising: Boon or Bust?
Steve (40:50.074)
Yeah, you know, and Tony, you and I come from an age where private equity wouldn't have even looked our way when we started out in this business. And I think the one thing that probably was that green flag waving in the field was cash flow. You know, these guys saw that there was a tremendous amount of cash flow being created by these franchise companies, and private equity loves to buy cash flow. And, and I think, you know, it was a trickle at first.
And then all of a sudden the floodgates opened up and there was now, you know, there's, there's so many multi-brand franchisors out there. There are so many private equity guys coming in and funding early stage franchisors, private equity company and buying multi-unit franchisees, which I never thought I would have seen that. I would have thought that would have been too small and too restrictive, but you know, there's a lot of different private equity forms out there too. A lot of home office places that are looking for that type of operation. So.
Like with anything, I think there's a ton of good that came from that. And then there's some real challenges that it's created for the franchise industry. And I think on the good side, franchise-ors now have an outlet. It's not just going public. It's not just maybe selling to a competitor. They've got some real players now out there that can come in and we'll pay them a significant amount of money for that cash flow.
And so if you're a franchisor and you do a great job and you build up those unit level economics and you make sure your franchisees get a great return and you yourself get a good return and because of all of that, you can expect that, you know, you're going to be a very wealthy person one day. There's going to be not just one buyer, there's probably going to be a lineup of people that are going to wait to come in. The challenge will be finding the one that's the right fit because it is going to be your legacy.
and you want to make sure you leave that in the right hands and or stay involved so you can influence that in the right hands. On the negative side, I do think that that kind of money is spurred on two other things going on in franchising right now. One is that private equity is coming in and buying these franchisors, maybe at times overpaying for some of that cash flow, and they do what they think they need to do to survive and provide a return to their investors.
Steve (43:12.65)
And that is that they're going to look to cut expenses. They're going to look to try to grow fast. And sometimes that formula is not necessarily the best formula for their existing franchisees. And so that's one influence of that money. The other influence is you've got a lot of franchisors that have jumped in with the goal of flipping and selling to private equity. And they are coming in and doing a lot of things wrong in the beginning.
They're moving too quick. They're not building a strong foundation. They're really not testing out the model even. I see too many that are out there that are, you know, one market, two market locations, and then they are going national overnight. You know, it used to be, you know, we used to open up in several different markets across the country before we would, you know, we'd start local, go to regional, and then begin to spread out into different regions before we would open up nationally and really try to grow the brand. Now, you know, you've got...
single person in, you know, Jamesboro, Wisconsin, and they want to start franchising in their first franchise they chose in Hawaii. And I, you know, how they support that and what they're going to do, I have no idea. But you know, it's that it's that lure of that big money payday that they think about the end result of being a franchise or, and they forget that that journey from start to finish maybe two decades long before they're going to be in a position to sell that. So
You really got to have the franchise or enter this for the right reasons and you can't be thinking about an exit strategy the day that you enter this. You might hope for that exit strategy, but you really have to get into this thinking, I don't have an exit strategy. I need to build the best franchise and the best model I can for my franchisees.
Jeff Dudan (44:56.628)
Yeah, and you are an advisory board member to Homefront Brands. I didn't mention that in the intro, and we very much appreciate that. And when we start our meetings here with our team, we were very open that, you know, we're building, we're making decisions as if we're a hundred year brand. And our management team is committed to 10 years to do it. And now that doesn't mean that we don't need to find a way to
fund growth along the way, maybe in some minority capacity or bank debt or whatever it is, because businesses, growing businesses consume cash, like a teenager eats pizza pockets, man. I mean, you need cash to grow, especially when you're growing fast, but we make long-term decisions. And I think the biggest impact of depending on when you get into a fund,
And what the life of that fund is and how long they're going to hold the investment and what their targets are, that's what impacts some short-term decision-making that might be cash flow focused. And a lot of times those will have impact to the services that the franchisees are getting. And I think that's where you can go so far to be responsible and to run a more profitable business, but then you can also go a little bit too far.
Steve (46:03.96)
Yeah.
Building for 100 Years: How Homefront Brands Is Taking the Long View
Jeff Dudan (46:21.42)
And now you start reversing some trends, like you start having a higher attrition rate from your franchisees and you lose your pipeline because validation is not quite what it used to be. So when you start having higher attrition rate and you don't have a pipeline to replace the people that are wanting to sell or move on for whatever reason, because there is a continuity rate, even the best franchise systems only have a 93 to 95% continuity rate. Life gets in the way, people are doing great, they wanna sell.
So you got to have that pipeline. And if you're in this reduction of services mode, that's a trend that you're going to have to invest more money to get back in the franchisees good graces and to restore the support level. So here at Homefront Brands, I mean, we were taking an extremely long view of this and we set out to build the world's most responsible franchise platform. And those are the types of decisions. While we accomplish it, we'll see, but
That is our aspiration and that is our goal.
Steve (47:24.134)
Well, I think the other thing, one of the things that I see you do, Jeff, and I really appreciate this in franchising, is you put your money where your mouth is. Most franchisers are always chasing the dollar.
They're selling them all as franchise so that they can invest in the business today. And, you know, the one thing I've noticed is that, you know, you're building the system first, which most franchises are, let's be honest, they don't start with a lot of capital. And you started this very, very differently. So they don't have the means or the wherewithal to do what they need to do to really build. If they have a single unit or maybe four or five units that they've been running, they've got maybe some infrastructure in place.
Jeff Dudan (47:49.437)
True.
Steve (48:03.086)
But there's a lot of things we both know that when you become a franchisor, you need to add before you can take that out to the market and sell that as a business concept. And that's one thing I think I've watched you guys do is to put those things in place first. Now, sure, there's plenty you're building along the way too, but you're putting those things in place first and that allows you to grow faster. When you're adding 30, 40, 50 units in a year and you're a franchisor that doesn't have
the means from a capital standpoint, that's going to be exacerbating your situation to the point that that might put you out of business. When you're a franchisor and multi-brand franchisors, you guys have done and you build that system and you've built your team, you are prepared for that capacity when it comes down the pipe. And that's really, I think, the most important thing for early stage franchisors to realize is it isn't just about what you're selling today, it's what you got to support tomorrow.
And all the onboarding of all of those franchisees is important, especially when you're early stage. Every one of them being successful is important. And you got to make sure you have the capital to do that.
Jeff Dudan (49:10.132)
I was there the first time around and you know you you would hire somebody who didn't have experience but it was somebody that you could afford and you say I want you to be in this project manager role or this franchise business coach role and you were trying to get people that you could afford and then make them into what you needed and which is extremely dangerous when you're at the executive team level or you're at the C-suite
Steve (49:12.61)
Yep.
Jeff Dudan (49:36.376)
And but I had to do it. Look, hey, I know that this person can get us. I'm hoping this person can get us 24 months down the road till we can afford a real president or we can afford a real chief marketing officer, a real, you know, chief, you know, whatever, whatever the position is. And what that does is you've just given yourself a project. So now you're having to manage that person more tightly. You're having to.
Steve (49:53.866)
Yeah.
Jeff Dudan (50:05.076)
hope that they can grow quick enough into the role. They're not clear and concise with the franchisees when they're answering questions. And it creates this friction all around the organization. We're at a luxury now at Homefront Brands where we're not cash constrained. So the only thing that we need to do is just make a decision that that's the way we want to go with it. And we've been very courageous so far in decisions that we made to get the C-suite and the advisory team that we have.
And we feel very lucky and honored to be in this position. Um, but that's, I mean, that's exactly it. It's, it's not, it's not typical and it's not common, but I'll tell you what, it sure, it sure feels good to have people that have run multi-brand, multi-billion dollar platforms because they've, they've already made all the mistakes. They understand exactly what it needs to look like. So now it's just a matter of execution. And will, will people execute against the strategy that they may know is right? And, uh,
Steve (50:56.187)
Yeah.
Jeff Dudan (51:02.384)
you know, will we will will we continue to resource them in that ever endeavor to do so. So I guess that was a little home front brands plug right there. We usually don't do it on the show. But there you go. We did. You walked me. Yeah, man.
Steve (51:14.006)
Well, we're talking franchising, so we can talk about plenty of good ones and plenty of bad ones, and we both know that. I think, you know, for candidates that are out there looking, though, all of that that you mentioned is really important. You know, when you're looking at a franchise to invest in, those are all of the things that you need to be very cautious of. Are you doing your own due diligence? You know, I think a lot of them think that it's an honor for them to be awarded that franchise.
But they don't understand that that Discovery Day, that Meet the Team Day, is their opportunity to interview their franchisor and to ask all those right questions to find out what happens if. Tell me about what this will look like. Tell me about, here you are today. Tell me what you look like tomorrow and then three years and then five years. And what will that support look like? And all those things are incredibly important to getting a solid return on that investment. And so they've got a job to do as well.
And their job is to make sure that they pick the right franchise or that it fits them as well.
Jeff Dudan (52:17.32)
So the economy is cyclical, and you've been in this long enough to have gone through some recessions and some zero interest rates and now some higher interest rates. How do you think about franchising in the current economic climate where we have really confusing employment numbers? We have a confused stock market. We've got high interest rates. I think we got our debt ceiling taken care of. We're sitting here in June 23.
Steve (52:36.653)
Mm-hmm.
Jeff Dudan (52:46.392)
So I think we've got our debt ceiling raised for the next 18 months or so. How do you think about franchising and what do you expect going forward in the next six to 12 months as it comes to the velocity of franchising in the light of this very perplexing economic time?
Economic Crossroads: What High Interest Rates and Credit Tension Mean for Franchise Growth
Steve (53:08.094)
Yeah, I think, well, I don't know if the debt ceiling deal was good or not. You know, part of me thinks if you look at things on a personal level and you say, okay, would you personally be comfortable every year, increasing the amount of debt that you have, knowing that you maybe you didn't have as much revenue coming in? I feel like on the balance sheet side, that we as a country continue to get upside down. And that's overall a concern.
I find it funny that the market reacts on Friday extremely positively to the news that we're taking on more debt. Normally speaking, I would not react extremely positively if my wife came home and said, you know, I just spent another $100,000 on something without me knowing about it. So I do worry about that. I do think the signals are very confusing for the Fed. I think that because there's, you know, the job market reports, some are positive. And I think
That's going to be challenging for them to not continue to increase interest rates in this environment. I think that they will. I think that there was almost a hope on their part that they would see more negative news so that they could stop increasing interest rates. But as long as that inflation continues to tick up, they're going to have to address that. So and I think taking on more debt is only going to exacerbate all of that. What does it mean for franchising? You know, high interest rates are never good when people are going in to find money.
A lot of franchisees out there are getting their money from small banks. They're not getting from big national banks. If there's any kind of restrictions now being placed on the money that they're lending out, if they're going to start tightening up credit policy, that's going to really make it challenging for franchising. But I think at the end of the day, if you look at the historically, there's always about 18 to 25,000 transactions a year in franchising amongst the 4,000 franchisers.
And that number doesn't really change. It goes up a little bit in the recession because people are out of work. It maybe comes down to Earth a little bit more in good times when people are happy in their jobs and they don't want to leave the comfort of that salary and that benefits package. But I think for franchisors, it's really always a game every year, regardless of the macroeconomic conditions. It's a game of being ready to compete. It's a game of you're going out there every day, you got 4,000 competitors in your league.
Steve (55:34.046)
If you break that down, you begin to look at who are the people in your industry? Within the industry, you look at who are the people within my price point. That's really the folks that you're competing against. And you're going to say, this, this slew is going to get X number of transactions. I need to get my fair share. And the way you do that is be a great franchise or is as you were saying earlier, is execute, execute, execute, provide the best level of support, have the most attractive item 19, have the best franchisee validation.
If we as franchisors do those things, you know, we may not hit our lofty goal in growth numbers because maybe we just have some pie in the sky numbers, but we will be just fine if we can execute at that level and bring that home every year and continue to make that our focus. I mean, again, we go back to private equity. You know, one of the challenges is the amount of time that they hold these things. If you're not holding these for a long time, you have a gun to your head on getting results.
in an early timeframe. And if you can take that away as a franchisor and say, the only thing I have to worry about is the next 10 to 20 years, you make smarter decisions along the way with that. And then you can go out there and focus in on those franchisees, focus in on your network, on your infrastructure, on your support, on your team. And if you do those things and provide all the best support in the world, you're gonna have the best model, you're gonna provide the best return to your franchisees and you're gonna attract the most eyeballs.
Jeff Dudan (57:02.084)
Well, Steve, this has been incredible. And if I was an emerging franchisor, I would have learned a lot from you today. And I really thank you for being with us today on the home front. Last question, if you had one sentence to make an impact in someone's life, what would that sentence be?
Success Redefined: The Life Advice Steve Gives His Sons
Steve (57:21.726)
Boy, you know, it's funny. I've got two boys. I've got a 27-year-old and a 24-year-old. And I'm suddenly smart again, Jeff. I don't know if you're, I was dumb for a number of years. I'm suddenly a little smarter today. But it's one thing I tell them. I know a lot of people say follow your passion. You know, they're young men. They're graduates from college. They're out in the world now trying to find their own way. They're not following my footsteps. They're doing their own things. And...
Jeff Dudan (57:31.336)
Ha ha.
Steve (57:50.258)
The first thing I said to him was, find something you're really passionate about. Find something you wake up every day and you just enjoy doing that. And that's easy, I know a lot of people say that. But I think the other side of that is, don't forget to stop and do other things in your life. Have a complete life. And when I was a young man, it was kind of that late 80s, and it was that everyone coming out, all my friends talked about was, who can be the first million ever before the 30?
And it was a race and really the goal, the end goal was money. We measured our success financially. And, you know, for my kids, I said, you know, there's a number of ways to measure success and, you know, financial is only one. And financial is not going to be a guarantee of happiness in life. So you really have to have a lot of other metrics when you look at the bigger picture in life and say, have I lived a full life? Have I lived a purposeful life? And I think that's a...
Have you picked the right soulmate that you're gonna spend the rest of your life with? Have you raised your kids to be good citizens and good people? Have you found success in your career in your own way, whether you're a teacher or a plumber or a billionaire? But have you found success? Are you at the top of your game doing the best you can and what you do every day? And I think if you are on your deathbed one day and you look back and can say, check, check, check, and maybe you didn't get all of them, but you got...
Nine out of 10. I think you're going to be a lot more fulfilled than the person that was just chasing that dollar. There's always going to be another dollar, there's always going to be another job, there's always going to be a little bit more here or there, but if you're not fulfilled in the rest of your life, let me tell you, it's not a happy existence. I've been fortunate that I've had some success in business, but I've had just as much success in life. I think I look at that and value that far greater than anything I might be able to put a dollar into.
Jeff Dudan (59:47.812)
We are 100% aligned on that. That is great wisdom. Thank you for sharing that.
Steve (59:54.371)
Thank you. Thank you for having me.
Jeff Dudan (59:57.052)
So if anybody's interested in reaching out to you for advising, investing, or board member interest participation, how can people reach you, Steve?
Steve (01:00:08.774)
The best way to reach me is find me on LinkedIn under Steve Murphy. Or you can reach me at my email. It's samurphy0001 at yahoo.com.
Jeff Dudan (01:00:22.572)
Awesome. Steve, thank you again. Thank you for the impact that you're making at Homefront brands and in franchising in general and for investing your time with us here today on the Homefront.
Steve (01:00:36.307)
Well, pleasure to be here. Thanks for having me.
Jeff Dudan (01:00:39.096)
Absolutely, sir. And as always, this podcast has been brought to you by Homefront Brands, delivering enterprise-level solutions to local business owners out there on the homefront where it matters. So if this sounds like you, check us out today at homefrontbrands.com and start your next chapter of greatness, building your dynasty with us right here on the homefront. I will be looking for you here, and thank you for listening.
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