Franchise QB

Episode 63: Cory Lyons, Brand President, and Pete Trexler, Franchise Development, Koala Insulation

• Mike Halpern • Season 1 • Episode 62

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In this episode of the Franchise QB Podcast, host Mike Halpern speaks with Cory Lyons, Brand President of Koala Insulation, and Pete Trexler, Director of Franchise Development at Empower Brands. 

They discuss the growth and support structure of Koala Insulation, the benefits of being part of Empower Brands, and the current trends in the insulation industry. 

The conversation highlights the importance of franchisee satisfaction, innovative training methods, and the future vision for Koala Insulation as they aim for significant growth in the coming years.

Takeaways

-Koala Insulation focuses on both residential and commercial insulation
-Empower Brands provides extensive support to its franchisees
-Franchisee satisfaction is crucial for business success
-The insulation industry is growing, with many homes under-insulated
-Training for franchisees has been revamped to include hands-on experience
-Koala Insulation has a strong partnership with Lowe's for installation services
-The company aims to reach $300 million in annual revenue
-Franchisees can expect a supportive network and resources from Empower Brands
-Investing in a franchise can be more cost-effective than starting a traditional business

https://koalainsulation.com/franchise

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Contact me and my team with any questions along the way. www.calendly.com/franchiseguy
Mike Halpern, CAFC
mike@franchiseqb.com

This is the Franchise QB Podcast, where we empower entrepreneurs to win big in franchising. We huddle up weekly to educate our audience about the most successful small business model ever created. Franchise it! Welcome to the Franchise QB podcast. I'm your host, Mike Halpern, a 20 year industry veteran and entrepreneur. My mission is for listeners to achieve their American dreams of creating wealth and independence through franchise ownership. Every week we speak with franchisees, franchisors or vendors that support the industry. Thank you for joining us and let's get started. Joining us in the huddle today is Cory Lyons, Brand President at Koala Insulation, and Pete Trexler, Director of Franchise Development at Empower Brands. Welcome to the show, guys. Thank you. Thanks for having us, Mike. Thanks, Matt. Absolutely. So before we kind of dive into Koala Insulation, which is the brand we're here to discuss, and Empower Brands, which is the portfolio company, let's learn a little bit more about your background. So let's start with you, Cory. You spent over a decade in various franchising and operational roles, Snap Fitness, Lift Brands, Perspire Sauna Studio, and Steele Brands, to name a few, before being named brand president at Koala. Tell us a little bit about your journey that led you to Koala. Yeah, perfect. First and foremost, Mike, thanks for having us today. Yeah, I've got a vast history of working with franchisors. the end of the day supporting franchisees from both operational and as well as business development standpoint. I've led multiple different teams at different organizations that I've been with in the past. You're really putting these brands on the map as well. And at the end of the day, Empower Brands found me. I picked up the phone call from a recruiter and About 60 days later, I took the seat as the brand president here at Koala Installation. Awesome. Thank you for that, Cory. Appreciate it. Pete, let's shift gears to you. You spent almost a decade with Kohl's running a $350 million business unit and focusing on maximizing profitability. Then you became a franchise owner yourself in the residential cleaning space, which is really cool. before you joined Empower Brands. Tell us a little bit about your background and your journey that led you to Empower. Yeah, Mike, thanks again. Great way to kick off the new year. Spent that time in retail operations and feel leadership was really important in segueing into business ownership. I had to itch for a while, tried a couple things myself, didn't work out well, then franchising. Because I had an operational mindset, it was perfect from a process-oriented standpoint. and working with a concept. I grew that business into a semi-absentee business, then exited that business. During that journey is when I met actual people from Empower. I didn't have a of support. And ultimately, the CEO at Empower had provided me some mentorship in my business ownership. And I'd also met three other owners in B &I groups while I owned my my business. That's kind of how and why I transitioned over in power after I exited. I love the franchise space. It was a very personal journey and coaching and mentoring and teaching has been something I've been attracted to. So being able to help people through the process, once we get great candidates from people like yourself, that's very purposeful for me and it's been very important to me. ultimately I've got to Because I went through that, have to believe in the brand. And I've had a great experience with another brand in our portfolio, and now, Coal Installation. Yeah, I appreciate that, Pete. And it's kind of nice that you have the experience as a business owner, now that you're within power doing franchise development. You can really size up the candidates, make sure that they have what it takes to be successful, and then kind of educate them about all the things that Empower brings to the table. So let's start there. For anyone listening that's not familiar with the portfolio company Empower Brands, can you guys tell us a little bit more about that? Yeah. Now, Empower Brands, we have 10 brands underneath our umbrella, eight residential and two commercial brands, all industry-leading brands on both residential and commercial brands as well. You know, the power of having a portfolio portfolio company like Empower Brands, adds additional layers of support for the franchisees through marketing, shared services of marketing, IT, legal and such as well. So being able to really spread out our services across all of our brands. Now, one really big factor with a portfolio company like Empower Brands is the peer net. Right, you we've built our own miniature B &I groups per se amongst franchisees. I'm a firm believer and you know, I've said this many, many times before, the most underutilized aspect of franchising is that peer network, utilizing your peers. And so not only do we have that peer network built in for Qual installation, but we have nine other brands that franchisees can, you know, utilize as well. Empower Brands is an absolute great organization that we're continuing to grow year over year. Yeah, that's one of the best kept secrets in franchising. People that are getting in don't realize the benefit of having people going through the same thing. You can go to the top performers in the system and figure out, okay, we're given the same playbook, but why are you so good at doing this? And a couple shortcuts to success, which is really cool. So let's focus on your brand. We're here today to discuss koala insulation So what does koala insulation do and what are some of the key value? Propositions that help your brand win with consumers. Yeah, great question. So your Koala Insulation we are the premier Insulation contractor in the United States You know to sum it up You know, we focus on Your residential and commercial or B2B we call it insulation. residential, you're going to be doing residential retrofits, adding insulation or removing and replacing insulation in existing homes. But also we have additional modalities that we can make our homes more efficient through air sealing or dense packing the walls and modalities like that. Now, we also focus a lot on ventilation. know, homes need to breathe if they've got an open, vented attic. And so we focus a lot on ventilation through our solar attic fans. Now what that does is really helps take that hot air out of the attic and circulate it to really help drive more additional comfort for the consumer as well in the home. Now, our B2B business, it's a major, major focus for our organization moving forward. We've got a lot of our franchisees are highly successful with B2B, and now we're rolling that out to all of the other franchisees as well. Kind of like what you said, Mike, you know, all franchisees are purchasing, are acquiring the same business model, well, let's maximize that business model together as well. So B2B really is relationship driven. And we focus on the how to develop these relationships with contractors, with new home builders, with commercial contractors and such as well. I'm originally from Minnesota and in northern Minnesota dog sledding is pretty prevalent right on the Canadian border and there's a saying there, unless you're the lead dog your view never changes. Well, we will continue to be that lead dog. in our space and we will continue to push the envelope to remain that number one spot. Yeah, that's really cool. And to your point about the residential versus B2B, can see residential is what you launch with. I don't want to call it low hanging fruit, but those are jobs that out of the gate, out of training, you can land. Commercial, like you said, it's a relationship game. So it takes a little bit more time to show. how you're performing in the market and you're capable of taking on these bigger jobs. But they need to be working towards that so that when the time comes, whether it's six months in or a year in, we're starting to land those exciting and larger commercial projects. you talked a little bit before about being the lead dog. So let's talk about that exciting data. Like what are system-wide sales? How many franchise owners do you currently have operating within the model? And kind of what do you see regarding growth. Yeah. Yeah. So, you know, we've got about a hundred active franchisees at this time with, you know, 20, 24 system wide sales came in at about a hundred million. So we'll that math. You know, we're averaging a million dollars per location of top line revenue. Now, you know, continuing for us to be that lead dog, we, we know the opportunity and B2B. There's no questions about that. And, you know, historically our brand, was formed as a residential retrofit brand, right? Just getting into existing homes. And we produced extremely great numbers with that, but now we've got this whole other arm of our business to go after in the commercial space as well. So that's something that we're really excited about and projections will continue to grow our brand. You know, hitting that $100 million mark as a brand, really exciting, really, really big value for us in 2024. We take a look at the brand in 2023, we did about $80 million. So, you know, growth just right there off the top, you know, it's 25 % year over year growth. We'll continue to have amazing growth with our franchise network for two reasons. We're growing up and out. What I mean by that is we're adding more locations every single month. We're awarding franchises to entrepreneurs and getting their businesses launched very quickly as well. That's something that's really important franchisees. And then secondly, our existing locations, they continue to grow year over year with unprecedented growth as well. And refining our modalities is key. Up until about 18 months ago, less than half of our franchisees utilized spray foam, spray foam insulation, which is half of the business, right? Well, we've got that, you know, number very close to 100 % now. And that's been another big trigger to grow revenue because spray foam insulation, you're going to it's going to be a higher ticket size than the traditional blown in or bat insulation to. OK, so in order to support. all of this growth and getting from 80 million to 100 million, you have to have a great team at corporate that's gonna support these owners. So tell us a little bit about the team and what new franchise owners can expect to be positioned for success, for success rather, when they join the system. Yeah, so we've grown our team tenfold over the course of the last year as well, really focusing on three factors there. One, that business operations support, right? And that's through our franchise business consultants. And we've added layers of support on that operational side. So the FBCs, franchise business consultants, they support about 35 locations each. 18 months ago, we had one, right? And so we've identified, you being able to add additional layers of support on the operational side, a director of operations to the team as well. So that's the first factor. Second factor is our marketing, right? We need to continue to drive leads to the top of the funnel for our franchisees. And we're doing that, and we've done that by adding talent to the team that's done that before for franchisees. So we've doubled the size of our marketing team internally, from pre-empower brands as well. And then lastly, with the additions of the team is we've added field support. It's a department we call Koala Tech Services that we've got traveling techs that go out to the franchisees for that continued training. and as well as ensuring that best practices are being completed on each and every job for our franchisees. So, you know, very proactive visits in the field with our franchisees. you know, adding those three factors of business operations, marketing, and field support, you know, has really been a big factor on, you know, continuing to grow that year over year business too. And Mike? I mean, go ahead, Pete. Yeah, just Cory's humble. We added an extremely active brand president to support the brand that has the experience that you've already kind of referenced. One of the things that Cory has been manic about is really focusing on our purchasing power as well. And that rolls back to Empower brands as a whole and vendors wanting to be partners with a$1.4 billion portfolio company. And starting that is getting your foot in the door and offering, you know, better pricing to one of those concepts. And just recently, has been successful in negotiating with Lowe's, is a huge player, but that's one of the national pieces of presence that comes with the brand of Empower and also the size that Cory and team has built Koala up to. Yeah, that's a really good point. Like having great vendor relationships and... You know, going to bat for your owners and negotiating great price points. mean, that's really what separates a good brand from one that doesn't really have their act together. And it's often you get day one. Yeah, that's pretty cool. So over the past year, year and a half, what are the things you guys are most proud of? Clearly there is growth in terms of new franchise owners joining your sales revenues across $100 million mark. Anything else that comes to mind? You know, one thing that really sticks out to me is that in set instant validation from what we're doing is the right things, right? Is franchisee sentiment, know, franchisee satisfaction. Our franchisees are continuing to become more more satisfied with our brand because of the layers of support and the offerings that we're providing our franchisees to. So, I love rolling out new initiatives, but that's only half the battle, right? is getting that buy-in is the other half. And we're continually getting that buy-in because we're winning. Business is a lot of fun when you got a great tailwind, right? We've got a great tailwind now, but we're doing it the right way. And we're having our franchisees are winning every single day with the services that we're providing. Yeah, I you just mentioned tailwinds. Can you talk a little bit about... the macro, the overall market dynamics, the trends that are happening in the insulation industry? Yeah, yeah, no questions. Most people don't think about insulation, right? It's above you in your attic or it's in your wall. People don't really see it, right? So a lot of the marketing that we have is educational. But for one reason or another, the insulation industry has done a really good job of keeping tax credits that are available to the consumers is secret. Well, we're not that. We're pushing the envelope and promoting the great tax benefits for making your home more efficient through the Inflation Reduction Act or the 25C, providing tax credits to every single U.S. consumer for making their homes or businesses more efficient as well. So that's something that's just started. The Inflation Reduction Act, it's a federal program, but it's managed on the state level. And not every state has completely rolled it out yet. And this is billions and billions of dollars that are available to the consumers all the way through 2031 at a minimum. And so this is something that's been a huge factor. We just completed our videos, our educational videos for, know, with a call to action, now's the time, right? You know, in finishing that up in November and December to get those tax benefits, you know, for the consumer on the 2024 taxes, right? So, you know, that's something that's really big and it's, drove a ton of revenue to our locations as well. Now, you know, the industry itself is, It's a massively growing industry, over about $60 billion a year industry. And we're charging every single day to get a bigger piece of the pie for us, right? Now, a recent study came out that 90 % of homes are under-insulated. So you talk about a market, right? 90 % of homes can use our service. Now, again, that's just an educational marketing play to continue to inform the consumers that we're here to assist them, make their homes more efficient, save money on the front end with tax benefits, but also save money every single month with reduced power bills as well. Yeah, that makes sense. I that's a really high percentage. But when you think about America's housing inventory is aging and there's all these retrofits out there and you guys are in the comfort business. So you can't just get a new HVAC system and solve all your problems. You're going to have to address the insulation if you want to have that efficiency. I know you're not going to share all your special sauce with us, but tell us a little bit about some of the exciting innovations and changes that you're working on with your franchise owners. Yeah, yeah. There is a lot of secret sauce there, Mike. No questions about it. But you know, At the end of the day, we are focusing on our franchisees and their teams being properly trained. Training is key. That's something that we have completely redone all of our franchisee training versus previous times of it's classroom. We still have the classroom. Every single franchise has that classroom training. But now we're hands on, know, our franchisees are spraying foam and their teams are spraying foam during training. They're insulating attics, they're insulating walls and such as well, teaching every modality out there that we offer so they can launch their business offering every single modality, is big. And that's where our Tech Services team comes into play, that traveling team, because... our tech services, they're gonna be out on those first jobs for our franchisees as well with them to ensure that everything is proper. Now, as we look again in innovating the brand B2B, right? That's huge, that is an absolute huge opportunity for our brand because at the end of the day, commercial building never stops, it never slows down. There's no seasonality to commercial. to commercial building. you know, being able to focus on those commercial contractors, new home builders and such as well. This is something that you can really grow the business for the brand as well as for our franchisees. Lastly, innovation, Pete mentioned Lowe's. You know, we are the preferred installation provider for Lowe's. We currently have presence in 872 Lowe's locations with signage, with Qual Installation signage right there. A great partner with Lowe's. We've doubled the amount of business we've done with Lowe's two straight years each year as we continue rolling this out. So this is just a built-in opportunity for our franchisees to hit the ground running from the get-go with that partnership through Lowe's. So no other brand is working on a level like we are. Yeah, that's a pretty exciting innovation. mean, that's obviously one of the big boxes. It's a brand name everyone knows. So congratulations on that partnership. let's look forward. What's your vision for the brand? Last couple of years have been really big milestones for the concept. What are the next couple of years going to look like? Yeah, the next couple of years will continue growth, right? I think that that's one thing that when this opportunity presented itself to lead this great brand. One thing that really focused, I focused on was we have yet to see what a location looks like when it's mature. Our oldest franchise location's four years old. We haven't seen that maturity yet, so the sky's the limit for our brand. More than half of our locations are less than two years old. as well, so we're continuing to push the envelope on driving additional revenue to these locations too. So we're very bullish on the future as we continue to grow our brand, adding new franchisees, but then also making the existing franchisees continue their growth trajectory as well. I foresee our organization doing over 300 million dollars of annual revenue. And we're gonna get there by focusing on training, sales, marketing. Those are the big factors to our growth. Yeah, that's ambitious. mean, you already hit a big milestone and to triple that over the next couple years is gonna require a lot of trends going in the right direction, great franchisees, great training, a lot of stuff we already touched on today. So if someone listening is really interested in the model, What's the Item 7 look like? What's it take to come in and launch a Koala turnkey? Yeah, so, you know, we're turnkey, you know, in item seven, we are a overall lower investment, you know, compared to brick and mortar and such as well. You know, the vast majority of our franchisees, including operating capital, are launching their businesses for under $400,000, and that includes operating capital. We've got some great financing opportunities as well. Total investment out of pocket, assuming our candidates put like 20 % down for their rigs and their trucks. They're looking anywhere from $185,000 to $220,000 of initial investment as well. that lower investment, because we don't have the brick and mortar space, a lot of our franchisees have warehouses, but you don't need prime real estate for a warehouse, right? There's no walk-in saying, hey, I need to look at installation, right? So no storefront. So you're able to keep the cost lower for our franchisees to be able to get that higher ROI once they get their business launched. OK. And you did talk earlier about the fact that you have $100 million in revenue. roughly with about 100 owners, about a million AUV. Are there any other Item 19 financial performance reps that you can share with us today? Yeah, so you know, one number that really sticks out to me is our gross profit, right? Average across the system is 49.2 % gross profit. That's huge. mean, that's almost 50%. of all revenues is going to be coming in as a gross profit for our franchisees. know, with the average of total revenue, less disclosed expenses is 32%, 32.2%. So, you know, very strong ROIs for our franchisees. And is that broken down in the FDD so they can get a better sense of the line items? Yeah, we have an extremely robust item 19. You we have We have our averages and our medians and such that we put the tables for. But we also add tables for individual locations too. And ultimately provides an open look at what are our locations doing revenue-wise as well. So we have a very, very robust item 19. It's one of the most in-depth I've ever seen. And yeah, just one of the things to piggyback on Cory is, is not only we provide that in I-19 with a look under the the covers, but part of this diligence process, I'm going to provide them with a, a performer that has the things listed for the I-19. So they're able to do financial model themselves in a very short amount of time and to figure out if it's the right opportunity for them or not. And that's really a big introduction to the franchise system because You know, if you're opening up your own business, you gotta build your own pro 4-in-1 file. You start to understand what's included in part of the structure and process of a franchise to have things like that are done for you to get started and make great decisions. Yeah, that's a point, Pete. And I also, to Cory's point about the fact that a lot of these franchise owners are maturing and they're entering years two, three, and four, those numbers when you refile in this year are gonna be pretty exciting to check out because... That's when they really start to hit their stride. They're kind of out of the startup phase and they're building those relationships and the commercial accounts start to roll in and you know, they just start really investing in marketing and doing the things that they're taught from day one, but might be a little bit hesitant because they just made this huge investment. so that's pretty cool. So what advice would you guys give to candidates that are exploring business ownership and really within the home services space? Yeah, you know, home services is a Incredible industry, there's no questions about it. You know, as far as advice to candidates, you know, obviously, our business model is very simple. It's a, I'm not saying it's easy, I'm saying it's simple, right? It's a very simple business model where entrepreneurs are easily able to grasp what is important and what we do and what is important in their business. As far as franchisees go, it's really important that franchisees, they own their business. You're choosing to have a franchisor. Now, the choice to have a franchisor is you're choosing to get that support on every single aspect. Now, support is different than doing it for you. You know that, Mike. The advice that I have for any franchisee who's looking at any system, You know, just from my tenure in franchising, don't reinvent the wheel. You're purchasing a proven business model. You know, follow the system, follow the play per se. Doing that, you know, you're going to be a successful Koala installation franchising. So Pete, anything you want to add to the mix before we wrap up today? Yeah, real quick, Mike, thanks again for having us both. I really do appreciate. the exposure to our great brand. As people decide on business ownership is going to be right, whether it's in home services, two things that I would encourage you to look at is past performances. It's a future predictor of future performance. So how have you done when it wasn't your business? How did you do when you were working for corporate and you did, or how long did you work with them and what were your evaluations like? That's going to be a good indicator of how your performance is going to happen when you own your own business. You probably need to uptake it a little bit because when it's you on the line, everyone's passion and drive is a little bit quicker. And then secondarily, believe in the concept. Understand what the business is. This model is about savings, and it's also got an environmental impact, both of which are top of mind of people, especially in these times and these moments. So look at that and believe in the concept. And part of believing in that concept is when you're evaluating and looking at companies, get quotes. See what your competition looks like. See what your pricing looks like. See what the real actual need is for consumers. Believe in it yourself and that confidence will really take you through. Yeah, that's a really good point you both bring up that you can't confuse simple for easy because you guys have the playbook. You're really laser focused on the services you provide. But the franchise owner has to step up and do the work. And that's why there's a variance in any system between the guys that are doing you know, 30, 40,000 a week in sales and the ones that doing five or 10 grand a week in sales. So I appreciate you both joining me today. If anyone listening would like to connect with Cory and Pete to learn more about becoming a Koala insulation franchise owner, contact me at FranchiseQB.com or on X @QBFranchiseQB. We'll get you guys connected. Thank you so much, Cory and Pete for taking the time to get in the huddle and discuss Koala Insulation with us today. New Year. Happy New Year, Mike. Thank you having us. Absolutely. Visit FranchiseQB.com to take the next step of your journey towards wealth, independence, and franchise ownership. And remember, when working for the man gets old, you must do something bold. Thank you for listening.