Morven Groves with 10 Point Capital

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Lee Kantor: [00:00:32] Lee Kantor here, another episode of Franchise Marketing Radio, and this is going to be a fun one today on the show, we have Morven Groves and she is with 10 Point Capital. Welcome.

Morven Groves: [00:00:44] Thanks very much for having me, Lee.

Lee Kantor: [00:00:45] Well, I’m excited to learn what you’re up to. Tell us a little bit about 10. capital. How are you serving, folks?

Morven Groves: [00:00:51] Absolutely. So at Ten Point Capital, we focus on investing in franchise. We’re looking for brands the potential to become dominant nationally. So oftentimes we’re investing with brands. Their founder leads. They’ve proven themselves in their home state. They’ve probably gone to a few adjacent states. And now really, it’s just a question of scaling. So that’s the kind of businesses that we work with as a team where we like to think of ourselves as fairly holistic in our understanding of the franchise world. So we’ve invested in over 40 franchise transactions. We’ve been franchisees or seven concepts, and we’ve even worked for four franchise owners. So we really feel like we have an understanding of what it takes to both be a successful franchise or what franchisees need, and then ultimately what it takes to make a franchise or a good investment for private equity group such as ourselves.

Lee Kantor: [00:01:49] Now do you work primarily with franchises that are B, the C B to be a mixture?

Morven Groves: [00:01:56] We are mostly mostly B to C, not for any. Particular preference, and in a sense, it depends how you define that, so we currently have two restaurant chains in our portfolio and slim chickens, which is a better chicken QSR. There are about a hundred and thirty five locations. We have walk on sports bistro. That’s another restaurant chain. They just opened their 60th location and then we have Phenix Salon Suites, which is essentially we work for beauty professionals. So if you’re a franchisee, you’re really a landlord and you’re renting space to beauty professionals. So to be to be clear on whether it’s B to C, B to to B, it really is a slightly complicated question in the board.

Lee Kantor: [00:02:44] And then so you’re just are you looking at franchise doors of a certain size before you get involved? Like, do they have to have some sort of escape velocity or are you kind of launching brand new brands?

Morven Groves: [00:02:57] Typically not launching brand new brands, probably the sweet spot for us is a brand that’s cash flow positive or on the verge of it, where they’ve got significant number of locations enough that, you know, the concept works. It might still need some tweaks, but you can see that it’s not just the the the local Arkansas concept. It’s, you know, in the case of a brand like slim chickens, that it really does have national national appeal. So we’re we’re coming in at that point where the proven the brand, but it’s about scaling.

Lee Kantor: [00:03:30] So what are some kind of elements you’re looking for when you see a brand that you go, Hey, this is going to be a good fit for ten point capital?

Morven Groves: [00:03:38] Absolutely. So for us, we believe it starts with strong unit economics. It’s quite possible to sell franchises, but they have to work, and that’s the only thing that is going to make a franchise or endure. And so we really need to understand the franchise economics. We spent a ton of time up front as we look at investments, understanding the units that work, the units that don’t work, why they don’t work and what really the model is. And so that’s that is the first thing for us. The second piece is really understanding how they they think about their relationships with franchisees. Growing a franchise is a partnership, and so you want franchisees who are supportive of your brand to talk well about your brand to future franchisees. And so we really want to see franchise owners who understand that. A key to success here is putting in place a support that your franchisees need to to grow in and survive. So that’s that’s a huge piece for us.

Lee Kantor: [00:04:47] Now regarding unit economics, are there are certain metrics you’re looking for the guy to hit a certain percentage of sales or recurring or year over year. Like what are kind of the metrics that matter to you?

Morven Groves: [00:05:00] We look a lot at the investment costs of what’s the out of pocket cost for the franchisee. And then we’re looking at. The returns they can get, so how long does it take them to get their money back? I agree investment for us is one with a three to one investment ratio. That’s that’s kind of where we look. But I mean, that’s that’s a fantastic investment that probably puts you in the top five to 10 percent of of franchise brands. So that’s a that’s a pretty high bar.

Lee Kantor: [00:05:29] Now, as part of you know, when you’re working with brands, is is part of your relationship, obviously is investing money, capital, things like that. But you know, for a a person who has talked to a lot of VCs and investment, they’re smart money and dumb money like money just for the sake of money is OK, but money with connections and skills and and tools that help me grow or better is that more along the lines of what Ten point Capital offers?

Morven Groves: [00:06:04] That’s definitely our approach. We we probably do one deal every 12 to 18 months, and that’s very deliberate. We want to have the time to partner with the brands that we invest in and to really help them grow. It would be rare that we’re not talking to our our franchise or brand partners. Daily might even be multiple times a day. We like to think of ourselves as alongside them, helping them to scale and grow, helping them figure out who they need to add to the team. What areas of the the organization perhaps needs some some additional investments or some additional partners to help them to find the right vendor or or the right third party to help in that area. So we spend an awful lot of time working with our with our companies, and I think that’s where our background really helps because we have been there. You I’ve I’ve been there trying to get permits from the city. I understand that pain and I understand that only so much of that is under your control. But I also understand that once you have those in hand, you can be very systematic about how long it takes to then open your unit so. And I’m, you know, set yourself milestones along the way, and so that that really is where we can get into the details in a way that perhaps someone who’s not as familiar with the franchise space might struggle.

Lee Kantor: [00:07:31] Now, if you don’t mind, do you mind sharing some advice for these emerging brands that are out there that maybe they’re not ready for you, but maybe they will be if they implement some of this advice? What are some of the kind of I mean, this is the beauty of your organization and your team is you. You’ve seen a lot of case studies in real life and not hypotheticals. You’ve got scar tissue and you’ve have successes and failures, so you have a lot of key learnings that you can share. So do you mind sharing some of this with emerging brands, just general brand growth conversation? A little bit.

Morven Groves: [00:08:10] So what? And oftentimes we we start talking to the brands we invest in several years before we actually invest. We love that we will love forming the relationships early on and watching the brand grow. Walk ons is a great example of that. We probably started talking to the team there two years before we invested. At the time, they might have been 15 units. As I said, they’ve just opened their 60th. So we like to follow them along that journey. What what we like to understand is how does the leadership team think about the brand and growing it? And that’s along a few dimensions. So what what is the brand’s differentiation from competition? What is the culture they’re trying to build that’s ultimately going to be what differentiates you? And we want to understand how you’re distinctive. I think the other piece that’s good to see is when brands are investing with the understanding of what it takes to be a great franchisor, so they might be putting in place some senior people before before they have enough franchisees, that that’s truly justified. They might be putting in place really good operations manuals, very clear brand standards. They’re just. Thinking of where they will be. 18 months down the line from where they are at that point in time. And that’s because that’s what differentiates great franchise laws from from many others that they’ve really thought about. I am now going to be supporting my franchisees in growth so I can sell franchises. But once those guys open, I need them to be truly successful, so. I think just really understanding what it’s going to take to be successful over time is is a critical part for a smaller, smaller franchisor.

Lee Kantor: [00:10:02] Yeah, I think that transition can be difficult for some folks going from the mentality of, you know, I’ve got to make one more chicken sandwich, how do I do that and turn into this kind of sales and training company? It’s a different or different business, really completely.

Morven Groves: [00:10:18] And that’s why a lot of brands aren’t suited to franchising. It’s a very different skill sets and mindset to. Supports others in running your brand and also to attract franchisees, so to to sell versus owning and operating units. Totally different skill set. Obviously, there’s there’s things to learn from both, but you need to be prepared to step back and be in that support and guidance role as a franchisor.

Lee Kantor: [00:10:51] Now is your role sometimes to install kind of a new CEO of the organization in terms of, OK, they’re in charge of really the franchise. You know, somebody founded it and got it off the ground, but now you need more of a CEO, manager type person to run the this new enterprise.

Morven Groves: [00:11:11] It really depends on on the concept. So I’ll take a few, for example, so Tropical Smoothie Cafe was one of our investments. We extended that last fall to live in Lincoln Capital Partners, where we are. In fact, the founder of Tropical Smoothie Cafe is an operating partner with 10. Capital Forever. After our investment, he was ready to take a role on the board rather than running the company. And so they added a CEO and Charles Watson is the current CEO there at Slim Chickens, another one of our investments. One of the founders, Tim Garden, is still the CEO and walk ons. Brendan Landry is the CEO. But we have a president that he brought in before we invested, who takes on a lot of the day to day operational. Pieces as well. And then Phenix on suites is is a little bit of a mix on that front, the founders Gina and Jason are still very involved. But we also have Brian Kelly there as our our CEO. So it really depends on what the founder wants to do. We don’t have any preconceived notions on what that would would typically amount to. And I think that’s that’s just typical of how we approach investments. It’s it’s a partnership. And so we spend a lot of time talking before investing with the with the founders about what they want and what they want over time.

Lee Kantor: [00:12:48] Well, that’s great, because it is a partnership, and that’s important for the the founder in the organ and the organization to decide, OK, what what outcome do I desire? And then in certain cases, you know, that way you’re both getting what you want out of this and it’s eyes wide open. Exactly. Now any advice for that emerging franchise or to help them attract the right franchisee because there just seems to be so many tactics when it comes to growing your franchise brand and getting leads in there and just you want to get the right folks, especially at the beginning, I would imagine that’s like critical because they’re the ones that are going to be telling the story to the next folks.

Morven Groves: [00:13:34] Absolutely, and figuring out who the right franchisee is for your concept can be a journey for a new franchise laws. So there’s some basics that I would say most people understand the financial qualifications relative its investments. There’s probably also just the mindset or the cultural fits. There there’s this kind of open question of what experience does the franchisee need to have? So take Phenix and Suites, for example. Should the owners be hairstylists who want to to own a bigger business? We find over time that that’s probably not the best profile of franchisee for or that brand that is typically a business professional. They may even have another another job. And so there’s it’s defining that really, really matters. As you think about how to grow.

Lee Kantor: [00:14:33] So now what is kind of that white boarding meeting look like when you’re discussing this with your clients? How are you determining, OK, this works. This is obvious. Maybe they’re not. Maybe this person is the right fit and it isn’t obvious. How do you kind of like, do you have any exercises that you work through to identify that ideal franchisee?

Morven Groves: [00:14:58] Typically, we look at historical units, so that’s part of why I say we when we invest, they tend to be brands that are proven in a few different markets and then we sit down with the management team and go unit by units and we understand the quality of the location. The the weather, the market is a good fit for that brand. And when I say location, it’s the market, but it’s also things like ingress and egress. It can be very specific. We’re also looking at who are the franchisee partners who. What was their? What was their history beforehand in the case of some chickens, for example? We find that QSR. But franchisees have sought concepts for other brands, make really good. Franchises for some chickens, but initially we had some casual dining franchises and they weren’t necessarily as good a fit. And so we’ve we’ve changed who we’re looking for in that profile over time.

Lee Kantor: [00:16:02] And that’s just part of I mean, that’s just good business, right? That’s just as you evolved, you become clearer on who’s the right fit and who’s the wrong fit and then you can, you know, react accordingly.

Morven Groves: [00:16:14] Absolutely. It’s course correcting as you go.

Lee Kantor: [00:16:17] Now for you, what’s the most rewarding part of the job? Haven’t been in franchising for so long and then being on this side of the table. The winds may feel different.

Morven Groves: [00:16:29] I think it’s some level. For me, it’s always the relationships. So I love seeing. Brands grew I love seeing the teams grow, the people on the teams advance in their positions and their responsibilities, and that’s that’s the super thing about working with fast growing brands the way that we do. You really see them transforming people’s lives. It can be a restaurant server who becomes a training manager who ultimately takes on the responsibility for a section of the operations team. So it’s really exciting to see that, and that’s very rewarding for me.

Lee Kantor: [00:17:10] Now is part of the council. You’re offering your clients or your partners help when it comes to employees because this seems to be a really challenging time for a lot of folks when it comes to attracting the right folks or maybe moving to some automation where they hadn’t had it before. Is this part of kind of the the things you bring to the table?

Morven Groves: [00:17:38] We’re probably less involved. And that made we certainly have all the conversations about labor and hiring. That said, our franchise or partners are running the business day to day, and they’ve all built really strong cultures within their company. And I think are doing a great job of translating that down to their franchisees. So truthfully, they’re they’re better at doing that than we will ever be.

Lee Kantor: [00:18:06] So you’re you’re giving them resources and advice as they needed, but ultimately you’re partnering with brands that probably are already doing a pretty good job in this area. Absolutely. So what do you need more of? How can we help you?

Morven Groves: [00:18:24] We just love hearing from people who are building great concepts and looking to grow. That’s as I said, we’re happy to talk a long time before you’re even considering. Speaking on a financial partner, we love to see the brands grow and we love to build those relationships and to start learning how you think and. For us to start that, that kind of dating relationship in a sense. But that’s that’s really where we. We love to partner.

Lee Kantor: [00:18:55] Good stuff. Well, congratulations on all the success you’re doing. Important work and we appreciate you. Thank you so much. Now, if somebody wants to learn more about Ten point capital, what’s the website

Morven Groves: [00:19:08] At 10. Capital dot com?

Lee Kantor: [00:19:10] And that’s the number.

Morven Groves: [00:19:11] That’s the number

Lee Kantor: [00:19:11] 10, right? One zero point pointy capital capital. Yes. Well, thank you again for sharing your story.

Morven Groves: [00:19:23] Thanks for having me.

Lee Kantor: [00:19:24] All right, this is Lee Kantor. We’ll see you all next time on Franchise Marketing Radio.