Franchise QB

Episode 71: Mike Aiello- Director of Franchise Development, Top Rail Fence

• Mike Halpern • Season 1 • Episode 71

Share episode

In this episode of the Franchise QB Podcast, host Mike Halpern interviews Mike Aiello, Director of Franchise Development at Homefront Brands and Top Rail Fence. 

They discuss the journey of Homefront Brands from its inception to becoming a leading property services company, the various services offered by Top Rail Fence, and the characteristics of successful franchise owners. 

The conversation also covers the operational structure of franchise ownership, investment requirements, and the financial performance of franchisees, highlighting the potential for success in the home services industry.

Takeaways

-Homefront Brands has rapidly expanded in the property services sector
-Top Rail Fence offers diverse fencing solutions and services
-Franchisees benefit from a low overhead business model
-Successful franchise owners often come from sales backgrounds
-The importance of building relationships in the B2B space
-Franchisees can achieve significant sales in commercial projects
-Operational efficiency is key to franchise success
-Consistent effort and determination are crucial for franchise owners
-The home services industry has seen tremendous growth since 2020

https://homefrontbrands.com/

https://toprailfence.com/franchising/

Free Resource for Franchise QB Listeners:

The Franchise QB Playbook will guide you through the process of finding your perfect franchise fit.
https://docs.google.com/document/d/1XlbD8oyl3uyeiqaM73poH67BX1jRRyCGR7l7qB-3Nz0/edit?usp=sharing. Also, you can view the Franchise QB podcast at www.youtube.com/@franchiseqb.

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 on the huddle today is Mike Aiello, Director of Franchise Development with Homefront Brands and Top Rail Fence. Welcome to the show, Mike. Thanks, Mike. I appreciate you having me on today. Absolutely. Thank you for joining me. So I'm going to talk you up a little bit. So after you graduated college, you had a BBA in finance and entrepreneurship. That's a really interesting dual major. You became the Director of Operations for Mosquito Squad. So I'm looking forward to talking about that. That's a franchise that's been featured on the show before I had Jason Henshaw on and it's been on our podcast. And then he became one of the founding employees of Homefront Brands, which is a home services platform franchise or Homefront Brands at that time was just an idea when you joined. And today it's among the fastest growing property services companies in North America. So that's really cool. So before we dive into Homefront brands and Top Rail, tell us a little bit about your backgrounds and how you eventually found Homefront brands. Awesome. Yeah, I appreciate the kind words, Mike. But so yeah, a little bit more background on me. I actually, I was a Division I football player in college at a school called Elon University. That's actually where I met Zach Dudan, who's now the Chief Growth Officer of Homefront brands. But before that, my uncle, Tom Heineman, actually was an early adopter of Mosquito Squad in northern New Jersey. He's been in that business for about 12 years today. It's totally changed his life. He's a million dollar guy on the bottom line. It's awesome. Like I said, just totally changed his life. And I got to see that over the course of 12 years. Do you know how he got into Mosquito Squad? Like, what was he doing before he became an owner? Yeah, which that's actually a great question, Mike. He was a plumber by trade. So he was not an astute business builder. He had never built a business before. And to be honest, when he started going into the process with Mosquito Squad, me, my dad, we were skeptical. We were like, who's going to pay for a service like that? Yeah. And it took him about three years to really get it ramped up. And again, it's a lower ticket size model, but a reoccurring revenue model. But built it up over the course of 12 years. And like I said, it's totally changed his life. I got to see it change my cousin's lives as well. from a financial perspective. if you ask him today, he could not have done what he's done without the franchise model. Yeah. mean, just the fact that he's a top owner doing millions in sales with that product is really impressive. Not a lot of people can get to that scale. So hats off to him. And you mentioned you ran into, was it Zach Dudan when you were at Elon? Yeah. Yeah, okay. Cause I know that Jeff, his father, he played ball for Appalachian State back in the day. And I'm actually, this is a true story. This weekend, I'm going to Appalachian State for the very first time in Boone, North Carolina, because my 18 year old was admitted there as a student. We're going to check out the campus. That's awesome. Congratulations. Thank Yeah, it's a beautiful campus. I've been up there a number of times. Actually, when I was back at Elon, we played App State at least once when I was in college. So, yeah, beautiful university in the mountains in Boone. So I'm a JMU graduate. now that we're with App State in the Sunbelt East, it's like a rivalry, but I'm excited to go check out the campus. So, so let's take us back to 2014. So you, kind of work as director of ops with your uncle. You kind of understand the franchise business. So tell the audience kind of the origin story of, of Top Rail fence and your involvement with home front brands and really what's kind of evolved over the past 11 years. Yeah, absolutely. So. Basically, Zach and Jeff Dudan had approached me with the idea back in 2020. And I actually had said to them, I was like, hey, if you guys ever have an opportunity to be in business together, let me know. I'll clean the bathrooms. I'll do whatever you guys need me to do. And they took me up on it, funny enough. I had not to clean the bathrooms, thank God, but took an entry-level position. I was employee number two down here at Homefront Brands. I'll be very transparent. Everything that Jeff described to me in my interview about almost four years ago has come to fruition over the last three years. That's great. Tons of exciting things that have happened here. Just to give the Homefront brand background, we started with realistically nothing. Today we have about 250 franchisees spread out across the four different brands. Collectively, they own almost 700 territories in two different countries. And what's very nice about Homefront Brands is because we're in the property service space, we can get people open and trading very quickly. So about 93 % of our franchisees are all open and trading over the last three years. Yeah, I know that I've heard about Jeff's history with AdvantaClean and building that business. I was fortunate enough to be a speaker on the same panel as him about two years ago. And it was just really impressive to hear his story and that he parlayed all that knowledge and success into founding Homefront Brands. So I can see you know, how he's kind of stuck true to his word and built this company, you know, from the ground up over the past four years with those learnings from being in the restoration space. Absolutely. Yeah. And as it relates directly to Top Rail, so basically at Homefront Brands, we look for property service type businesses that we believe in simple terms are franchisable. We'll partner with the founders of a business like that. We'll enhance their model and we'll launch it to the franchise market. So it's exactly what we did with Top Rail. It was a fencing business founded back in 2015 by Tucker Berry and Chris Herman, two brother-in-laws, started a fencing operation, did very, very well, actually expanded to a few markets in the Southeast and kind of realized they had something that was replicable, which is what led them to partner with Homefront brands and bring that brand to the national market. So we've been developing Top Rail since January of 2023. So about two years of franchise development, we currently have about 64 owners spread out across the country. Again, majority, about 95 % of those owners are all open and trading for the last two That's awesome. Well, congrats on that success. 64 owners in a short period of time is great. So tell us a little bit more about the Top Rail brand. What are the actual product offerings that a Top Rail fence owner can provide to their customers? Yeah, great question, Mike. So there's really three main services that we offer. The biggest service line where 90, 95 percent jobs are going to come from is fence installations. Now, we offer any type of fence product you can think of, wood, vinyl, steel, chain link, aluminum, any type of product we can get our hands on. Fence installations makes up a majority of the business. Two other service lines though that we're very excited about and the franchisees are as well, is actually staining of a wooden fence. That's something we recently launched about three months ago to the franchise network. Guys love that service. It's a high margin, easy service that they can offer to homeowners. And because fencing is usually a one and done service, when you have a wood fence installed on a property, we now have a workflow set up where after six months, that homeowner is going to get drift into a staining campaign. So fence installations, staining, and then the other service line we're very excited about is railing. When I say railing, it could actually be interior buildings and commercial buildings like steel or aluminum railing. But franchisees have also started offering railing on wooden decks. So wood railing that goes around the deck or even stairs that go down from a deck. So yeah, main services are going to be fence installations, staining and railing. Yeah, I love that because you're going to get those big tickets on those jobs, but the one and done aspect, I know it can be a challenge. So the idea of having like a sticky maintenance concept where, and they need it. Like a lot of customers just don't want to get around to it. But if the company that they know and they trust that they worked with says, hey, in six months we're coming by, we're going to get this fence looking brand new. Then it's like, of course, you know, I want to maintain this investment I made. so that, that's a really exciting piece because you know, lot of candidates that are looking at fencing, they're like, well, yeah, I understand it's a big ticket, but where's the recurring revenue? Absolutely. Yeah. Very cool. So let's talk a little bit about the customer split. mean, I know there's residential applications. Tell me a little bit about B2B like, Do you do like a lot of commercial jobs? Is it a thing where when they launch the marketing's turned on to build the consumer side and then they focus more on B2B? How does that work for a new owner? How are they kind of, how do you suggest that they launch with those two categories? Yeah, that's a great question. Yeah, so as franchisees launch, a majority of your initial customers are going to be single family home residential customers. Now we have had franchisees get to have great success on the commercial side. A couple examples of that, actually, if you know of Urban Air is a inside amusement park and another franchise model. had a franchisee down in Tampa, Florida do an aluminum fence in the inside of an Urban Air that went around a racetrack. So that's a pretty cool commercial opportunity. you, you when we look at our item 19, the highest ticket that a franchisee had closed in 2023 was a $309,000 commercial job. Whoa, let's talk about that right now. What's a 309,000 commercial job look like? Was that an airport? No, was actually, so airports and agricultural fences are our fair game as well. As a matter of fact, our franchisee out in Salt Lake City, I think just put up a agricultural fence that stretched almost, I think over two miles on a big property. Now again, these are kind of unique opportunities for franchisees, but we still do them. So the $309,000 job was most likely an HOA project, a new development that was put up. But HOA presidents, even home builders, those are great referral partners for our franchisees. And in their first 90 days of becoming a franchise owner with us, as the business ramps, we actually identify specific referral marketing partners in their area and coach them and encourage them to go visit those people. Let them know who you are. See if there's synergies with what they do and what we do. So that's how that franchisee, he's actually right in our backyard in South Charlotte. That's he landed that $309,000 job was visiting a home builder, actually visiting an HOA president, introducing himself. And obviously it went a long way for those people. Yeah, that's great. Love to hear stories like that. And I think that's like inspirational across the system, like franchisees talk. And once someone like actually does that, it's like, okay, well then I can too. Let me go out there and build relationships with similar people that can kind of lead me to these kinds of jobs. You know, it's like you want to hit home runs, you want to hit singles, you know, and if you're doing both and you have a real successful business. so let's talk a little bit about the team. When an owner comes on board, you know, who do they need to launch successfully? And, and then I'm curious about, you know, the composition of the employment. they W2s? Are they 1099s? Are they a mix of both? What does that look like? Yeah, that's a great question. And what's really nice about this business is that it requires low fixed overhead to get started. So. The nature of the business we train our owners on how to install fences So they are subject matter experts on that side of the business Although we do not advise owners to get on their hands and knees and build fences themselves. That would be pretty silly We also do not advise new owners to go out and hire w2 installers right off the bat As a matter of fact the 60 65 guys that I mentioned all of them use subcontractors to do the installations for them. Okay, so the strategy as an owner operator becomes much more of a quality control position. Coordinating with the subs, coordinating with the homeowner, making sure that production's up to par and making sure that the homeowner's happy. And again, our thought with that is it keeps your fixed overhead very low, your job costs stay relatively fixed. So typically owners can easily identify margin from job to job. Just to kind of mention too, there's three main hats in this business is kind of what we categorize them. There's your owner hat, there's a sales hat, and there's your production hat. Now, most owners will choose, not everybody, but most owners will choose to be an owner operator upfront. And for whatever reason, I think it has to do with our profiles that candidates who have become franchisees, but a lot of the time the owner will wear the owner hat and wear the sales hat to begin with. In that model, we would encourage them to hire an operations person upfront. What is that operations person gonna do? They're going to work with the subcontractor. They're going to coordinate with them. They might even be on job sites with them daily. They're going to be ordering materials, managing inventory, things like that. And that allows the owner to focus on driving sales in the business. If the owner, and we have a handful of them, if an owner operator is sales averse, the first hire we're going to encourage them to make is a salesperson. Really nice thing about hiring a salesperson upfront is you can make that person heavily commission based. It's very popular in the home improvement space. So even our owners that have now continued to build out their team and hire hired another salesperson, they make that person highly incentivized to sell because they are heavily commission-based. very cool. So is there thresholds that you recommend volume-wise when they need to add another set of trusted subcontractors to kind of satisfy the jobs that a franchise owner books, or is that kind of case by case? Yeah, that's a great question. It can't be case by case. We do have benchmarks and thresholds, right, that we monitor or franchise performance coach, coaches monitor with the franchisees. What's great about this business is you want to be doing an install a day. Now, why we like the subcontractor 1099 model is because the fencing industry happens to be very fragmented, meaning that it's very disorganized. There's local competition everywhere and Mom and Pop businesses, and I'm sure there's some in every market that have been around for 10, 15 years, typically they've built their business in a W2 model. So they have W2 installers where they're now at the will of those installation crews. They can only do so much. Our model is a little bit different with the subcontractors because our owners in the top 20 % will build out a network of three to five subcontractors to bring back their turnaround time. So they're not getting booked out months and months and they can continue to add volume to their top line. Very cool. So what characteristics do you see in a franchise owner? You mentioned that sales is generally one of the hats that an owner wears. Are there certain skills or attributes that you feel kind of translates to a successful owner in this model? Yeah, absolutely. We'll take a chance on anybody with any background, but the two main candidate profiles that we look for Number one is folks that have come from a background in corporate sales, white collar sales, like technology sales, med device sales, pharmaceutical sales. For whatever reason, those guys are very skilled sellers and selling events is very different from what I just mentioned. But those guys are typically extroverted, so they're comfortable getting in front of a homeowner. And people come from that side of the corporate America. They're typically competing with guys that are recognized as blue collar guys in the home improvement side. So by looking clean cut professional being part of a national brand like Top Rail, that does hold weight for homeowners trying to spend thousands of dollars to have a fence installed on their property. want to give that business to somebody they know, like and trust. The other profile that we look for is somebody that's built a business before. somebody that's used to managing teams. because they're managing subs, they're typically managing an operations person upfront. And we can train really anybody to do the sales piece. I mentioned this too, out of the 60, 65 guys we have out there, none of them had any experience in the fencing industry prior to getting into this business. Yeah, that's one thing I talk to candidates about a lot. It's like when you get into a franchise, the franchisor has figured out the blueprint and you have to execute it. So you don't have to be an expert in the discipline that you're investing in. Can it help sometimes, sometimes get in your own way. If you already feel like you know everything and it's like, why do need a franchise system? If you've already done that before. So I do find that some of the top candidates that I work with that have success, they kind of go in with an open mind. Okay. Let me find one that has a really proven model and then let me just follow that. And you know, that's how they excel is they like put in the work to kind of. go downstream and collaborate with the franchise or instead of trying to reinvent the wheel, which wouldn't make sense to get into a system, Absolutely. And you know what, Mike? I'll mention one other thing because this is relative and something I've picked up on over the last few months working with Top Rail so closely. What I really love about this business for candidates, you don't have to be special. You just have to be what most people are not. Consistent, determined, willing to work for it, listen to the activities that we coach you to do. And if you do that in the franchise model, really in any business, the odds are stacked pretty high that you're going to be successful. So again, consistent, deliberate actions. Sometimes you can't teach those fundamentals. like when you're vetting a candidate, you want to make sure that they have that grit, determination. It's not just all about the money. It's about how can I collaborate with people and build a big business and put in the work and kind of succeed. So I mean, home services, as we know, that's what you guys do. has really flourished since 2020. What are some of the reasons that an entrepreneur would select Top Rail Fence as their franchisor? Yeah, absolutely. One of the biggest reasons why I think people have pivoted, and a lot of people from the white collar space have pivoted into the home service, property service space is, number one, you can get open very quickly. You're not waiting for a fitness studio to be built out over the course of eight to 12 months. You're not really waiting for anything. We make the commitment when somebody signs their franchise agreement, we can get them open in 90 days or less. Now, that sounds quick to some people, right? So one of the first things we do is actually set their open date and we'll work backwards from that date. But again, people like this business because they can get open and trading very, very quickly in less than 90 days. So that's reason number one. Number two would be that it's low overhead to get started. I'll relate back to my uncle's business and it took him time to get there. But in Mosquito Squad, he now has to hire about 100 seasonal technicians every year. And that's a challenge for him. Managing those people, finding those people year over year, and retaining the good ones year over year. In this business, low fixed overhead is what's key to know. Even the profit and loss statement in our item 19 that we can talk about here in a minute. But his team, he did over $4 million in gross sales in 2023. You have the owner in that business who does overflow sales. He has two full-time sales representatives and a director of operations. That's what he's got on his W2 side. Obviously he's working with crews of subcontractors. That's the nature of the business. We know you're going to need those. But again, to run a $4 million business with four to five people on payroll is pretty attractive to most guys. Yeah, absolutely. Those are really great economics. I'm going to talk about that more in a moment. So you mentioned there were over 60 owners in the system. How many territories does that translate to? Yeah, great question. collectively we've awarded about 190 territories spread out across the country. So our system average comes out to about 2.9 territories per owner. So about three territories per owner. Okay. Do you have a ballpark at how many of those will be launching in 2025? Yeah, as a matter of fact, we have a training going on here next week. I believe we have three actually not next with the following week and we have three new owners coming out the door there. We actually just awarded somebody else recently. So what's nice is We will have trainings at least six to eight times a year, but we will have more by demand of franchise owners. Obviously in this, you know, this, this time of year where we're right, right away from March, there's a lot of people out there that are looking to make a change in 2025 and there's still time to get open and get trading before, you know, the summer even hits here. Yeah. I know that a lot of new franchise owners don't want to take on that huge brick and mortar construction project where they have to wait. you know, three to six months to identify a site and then they have to hire a contractor to build out the space and then they have to get permits to open and all that. So what's kind of cool about Top Rail is once they sign their franchise agreement, go through training, they're launched, which is great. So let's talk a little bit about that investment. What does the Item 7 look like for the range of a Top Rail franchise? Yeah, that's a great question, Mike. And again, like you said, another benefit of a property service type business like Top Rail is you know, the investment level is typically going to be much lower than a fitness studio or a QSR restaurant. Those things can be hundreds of thousands of dollars or even close to a million dollars. Something like Top Rail is actually, in my opinion, a bit more affordable for people in North America. So everything needed to get a Top Rail Fence started, and this is everything in the item seven, from your initial franchise fee, any tools, equipment, technology, insurance, grand open marketing spend. I we do go as far to include things like additional funds in the bank as well. But everything included and you know things about the item seven, I never give the bare minimum low end. It'll never give the maximum high end. It's typically gonna be somewhere in the range. So everything typically anywhere between 130 and 170 to get started. Okay, yeah, I mean, that's a really affordable item seven for a franchise concept. That's great. So you did kind of hint at Item 19 before. What kind of financial performance representations can you share with us today? And I will just let everybody know as we get closer to April, we will have a new franchise disclosure document coming out with some really exciting information updated in the item 19. But because we're so new, the information we share is from 2023 is a bit limited. But like I said, specific to franchisees, We did have the highest ticket or the highest sale that somebody did in 2023, a franchisee who had been open for at least six months, closed that $309,000 job. The average ticket size across the system for franchisees that had been open for at least six months was right around $6,500. I think it was 6497, which is in line with industry average. Now, average ticket is going to depend a little bit more on market. The average ticket in Atlanta is different from Los Angeles and New York. So that's always key to know. What is most exciting about the Item 19 though is the profit loss statement that we share from the affiliate-owned location, the original founders location. And what? You guys share a full P &L? share a P &L in there. It's actually two profit loss statements in there. The Group A P &L is what I encourage most candidates to focus on because it's four territories that are all contiguous to one another, meaning that they're adjacent and they're run like a traditional franchise location. So in that P &L from 2023, and what's key to know is that location is still growing, but in 2023, that location did over 4 million in gross sales. What's incredible is even after cost of goods sold, after disclosed expenses, and even after franchise or fees, That owner showed an adjusted profit of 15.3%, which came out to just over $606,000. That's really impressive. I always want to mention, too, with that, because there is a footnote in the Item 19 that translates directly to that P &L. That owner paid himself $200,000 of W-2 income that was not reported in the P &L. Yeah, that's healthy. That is a healthy business. Very cool. And the other one that you show in like Group B, that's a non-contiguous market. So it wouldn't really look like what a franchise owner typically would develop. Exactly. Yeah, it's two territories in South Carolina, a territory in Tennessee, a territory in North Carolina. So again, just from an expense standpoint, not run like a traditional franchise location. Yeah. mean, those numbers are fantastic, especially when you're talking about getting to 4 million in revenue when you investing $150,000 to 200,000, give or take. mean, that's a really interesting way to ramp up quickly and the margins are clearly there. So, you know, that's great. So you've shared a lot with us today, Mike, anything else you want to add to the mix before we wrap up? No, I think we covered a lot, Mike. I mean, there's a lot of exciting things going on at Top Real Fence. And, you know, I know I mentioned the 60, 65 owners, we still have plenty of hot markets that are available. All of New Jersey, all of New York, majority of Pennsylvania, territory still available in Ohio, all of California, Huntsville, Alabama is another sweet spot market, Fayetteville, Arkansas. So still tons of available markets in the Southeast, the Midwest and the Northeast and out West as well. So I don't want people to be alarmed by the number of franchisees that we have. There are plenty of open territories that are very attractive for this business. Yeah, I was going to say a lot of really juicy markets, a lot of white space, and hopefully some folks listening will contact you to learn more. So if anyone listening wants to connect with Mike and his team to learn about becoming a franchise owner with Top Rail Fence, contact me at FranchiseQB.com or on X @QBFranchise QB. I'll get you guys connected. Thank you so much, Mike, for taking the time to get in the huddle to discuss Top Rail Fence with us today. Absolutely. Thank you so much for having me, Mike. I really appreciate the time and I look forward to working with candidates that are interested in Top Rail for the future. Feelings are mutual. Thanks, Mike. Follow us on Twitter @QBFranchiseQB and join us every week for a new episode. See you next time.