How to Vet a Franchise Deal with Matt Stevens

Matt Stevens walked away from his first closing table controlling two duplexes, having put nothing down, holding a check for forty seven hundred dollars. He was young, he had been reading Carlton Sheets and Ron LeGrand, and he had assumed that kind of outcome belonged to other people. "It made me realize that things I didn't think were possible were actually possible," he told me. That single deal opened a nineteen year run in rental property and a lifetime of looking at structure before looking at price.

I invited Matt on the podcast because very few people in the franchise world have sat in every seat at the table the way he has. Known as The Franchise Guy, Matt has more than 30 years in the industry. He has been a franchisee, a franchise coach, a franchisor, and now a franchise consultant. He was rookie franchisee of the year, turned around struggling divisions, and served as a board member and partner inside a two billion dollar franchise group. He is a franchise gold and century club member, a Business First Columbus 40 under 40 honoree, and the author of a three hour course on thorough franchise review. He holds three business degrees from Florida Southern College and Wake Forest University and is a MENSA member. Whether you are evaluating a franchise, building a system of your own, or simply trying to understand how proven playbooks create leverage, this conversation is full of the kind of detail that never makes it into a glossy brochure.

Zero Down and a Twenty Five Percent Royalty

Matt found franchising by walking down a hallway at Wake Forest and reading an advertisement on the wall. He had a personal rule in college of saying yes to almost everything, so he said yes to this too. That took him into the business that became CertaPro Painters, back when there were only 67 operators running territories across Canada, New England, and the Mid-Atlantic.

The deal terms are worth pausing on. There was a zero dollar investment to get in, paired with a 25 percent royalty. That is an enormous royalty by any standard, and Matt is direct about the trade. The franchisor wanted people with ambition rather than capital, and the operators paid for that access on the back end with their time and their margin.

I talked about this exact dynamic in a recent solocast on the sayings and accepted wisdom of dealmaking. Give me a price and I will give you a structure. Give me a structure and I will give you a price. Nobody in that arrangement was being taken advantage of. Both sides made a deliberate choice about which side of the transaction they wanted to carry the risk on. Matt spent about ten years with that system, moved into coaching, and eventually onto the franchisor side.

Every Seat at the Table Changes What You See

Matt has a line that stuck with me. Every piece of human behavior is driven by inputs and outcomes, not by rationale or common sense. If you want to understand why a counterparty is behaving a certain way, you have to look at what outcome that behavior produces for them.

I have lived a version of this myself. When I left big law and medium sized law to hang out my own shingle at 30, I had a long list of things I thought the firms were doing wrong. Roughly eighty percent of that list held up. Then there was the twenty percent where I got to the other side of the table and thought, that is why they do that.

Matt describes the same arc. As a franchise owner he was frustrated by several things his franchisor did. Once he became a franchisor, those same decisions made complete sense. His advice to candidates now is that you will never see everything from the other side, but you should assume every rule exists for a reason and you should feel free to ask why.

Why First Rights of Refusal Vanished From Franchising

One of Matt's favorite examples of a rule people misunderstand is the first right of refusal on territory or growth opportunity. It used to be common. Today it is essentially gone, and Matt's read is blunt. The only reason a franchisor offers a candidate a first right of refusal now is that they are desperate to sign that franchisee.

What replaced it is healthier for everyone. Serious operators secure their territories early, and good franchisors will not let a candidate bite off more than they can chew. The candidate signs a development schedule tied to what they can actually execute. If one location satisfies them, they take one.

I see this differently in the corporate world, where rights of first refusal remain common in shareholder and operating agreements because owners do not want unwanted partners showing up on the cap table. There is also the right of first offer, which listeners hear far less about. Under a right of first offer, the seller has to bring the opportunity to the holder first, with an agreed process for determining value. If the holder passes, the seller is free to go to market without the second bite of the apple problem that a matching right creates.

The Math of Controlling Territory Early

Matt made a point about territory that applies well beyond franchising. You can buy out another franchisee later, but you have no control over when that person wants to sell or what they will ask for. Territory secured up front is what he calls growth insurance.

The economics are the reason. One territory costs you X. Three territories cost roughly 1.6X. Five territories cost roughly 2.2X. You can service six territories with the same phone number and the same van that you use for one. In fast moving markets like Dallas Fort Worth, Charlotte, Atlanta, Nashville, and Denver, if you do not take what you want when it is available, it will not be there later.

That is classic economies of scale, and it is the same logic I walk clients through when we design an acquisition strategy. The incremental unit is almost always cheaper than the first one. The question is whether you have the operating capacity to absorb it.

The Due Diligence Most Candidates Skip

Once investment level, likely return, and territory availability are settled, Matt says the real work begins, and it has nothing to do with spreadsheets. It is behavioral. What patterns of daily behavior does it take to get from A to Z in this specific business, in the time frame you have in mind?

Validation calls with existing franchisees can confirm almost everything else. The territory is confirmable. The investment is disclosed in the FDD and verified in conversation. What candidates fail to interrogate is their own willingness to replicate someone else's daily habits. If you can look in the mirror and say you are ready, willing, and able to do that, you might be a franchise owner. If you cannot, you probably are not.

There is a mirror image to this that Matt points out and most candidates never consider. While you are wondering whether the franchisor will live up to expectations, the franchisor is sitting across the table wondering whether you will follow the behavioral patterns the system requires. That question is far less verifiable, which is why franchisors care about it so much. Matt also flags what he calls the four Ds, meaning death, divorce, disability, and distraction. Distraction is the one that grabs people most often.

Sifting Four Thousand Options Down to Four

Matt has talked to people who spent ten years looking for the right franchise. His first question is always what they are looking for that they cannot find. AI, he says, will give you good questions to ask and useful things to consider, but it will not get you where you want to go, because much of the relevant information is not public. It comes from direct research with franchisors, their developers, and their franchise owners.

He runs roughly two and a half dozen ownership criteria with every candidate. Money available, territory, timeline to income, ability to sell or manage salespeople, comfort with white collar versus blue collar labor, and one question I found especially sharp. How long can you go at zero income before you hit the panic button? Each criterion sifts more options out.

The examples he gave show why the non-public information matters. Some brands are excellent but only three years old. Some are 30 years old with no territory left, and will not show a resale to anyone outside their system until that person already owns a new location. Some will not take a call unless you are buying seven locations for eleven million dollars. For one candidate in Texas, Matt sifted four thousand options down to four. The candidate narrowed it to three and is now struggling to put any of them down, which Matt considers a good sign.

What Actually Separates Successful Franchisees

Matt's list starts with the most cliché advice in franchising, and he knows it. Follow the playbook. He also knows it is true, because over a six year period he found, recruited, signed, trained, and mentored 167 franchise owners across nine states in the same system. The people who followed the system succeeded. The people who did not burned time and money.

Second, engage with the business. Reach out to other franchisees, build friend groups inside the system, stay in contact with the franchisor. Third, exercise your ABS, which Matt uses as shorthand for attitude, ambition, behavior, and skill.

Then there are the traps. Do not compare yourself to average, because average is a C student and nobody Matt has ever recruited wanted to be a C student. Compare yourself to the B and A performers and decide whether you are willing to behave the way they do. And do not sign warm bodies. Candidates coming out of the professional world are the most likely to hire without vetting, and Matt says those owners are mentally out within a year to a year and a half.

I brought up an oil change I got the day before we recorded. Three bays running at once, every technician saying the same things in the same order, pulling the air filter out to show me it was fine rather than just telling me. That level of consistency is rare in independent businesses and common in decent franchise systems. Matt learned the same lesson at 20, when he started instructing his painting foremen to knock on the customer's door each morning with a written plan for the day and repeat it at the end of the day. Fear and anxiety come from not knowing what to expect. Remove that and the relationship changes.

Cliff Nonnenmacher made a related point in episode 329 about who is not a fit for franchising, and Greg Mohr covered the franchisor side of that matching process in episode 333. Matt's perspective adds the operator's daily reality to both.

Where the Growth Is Going

Two categories dominate the current gravitational pull. Health and wellness was growing before COVID, jumped during it, and roughly six years later has not slowed at all. Matt is 58, and he framed it personally. His father looked older at that age. His grandfather looked 70. Expectations about aging have shifted and the market has followed.

The second is property and home services, and Matt considers it the least appreciated opportunity in franchising. His framing turns conventional wisdom inside out. The fastest way to turn five figures into six or seven is often a mundane service business in a market with 400 competitors within 30 miles, because you are not competing against 400 people. You are competing against the two other companies the customer called.

That is exactly how he did it at 20 years old in the painting business. By May of his first year he was the largest buyer at his Sherwin Williams store in Keene, New Hampshire. Not because the industry was novel, but because he and his team executed differently. Devan Gonzalez talked in episode 336 about building an emerging fitness franchise from the franchisor side, which pairs well with what Matt is seeing in the wellness category.

Knowing Yourself Well Enough to Opt Out

I will say plainly what I said to Matt. I would be a horrible franchisee. Not because I do not respect the model, but because I do not like operating under other people's rules. I understand the value of proven systems, access to expertise, and having a large chunk of the operational load handled so you can focus on growth. Intellectually I agree with all of it. It would still drive me crazy.

That self awareness is a business asset, and it works in both directions. When I help clients design growth models, whether through acquisition, joint venture, or licensing, I tell them to get very clear on their target, their value proposition, and the psychographics of the person they want. You want people to be able to opt themselves out. That saves everyone time and makes you more attractive to the people who should opt in.

Matt sees the same thing on the franchisor side. Every franchisor has a playbook and a culture, and the good ones protect it. They know exactly who they are looking for, and when they find that person, they move.

Freedom Through People, Time, Money, and Purpose

When I asked Matt my closing question about freedom, his answer had been stable for a couple of decades. Freedom means he gets to engage with the people he wants to be with, doing something that fulfills him. The impact shows up as a social base, a support structure, and a reason to travel, because most of his circle is in franchising and scattered across the country. He summed it up as freedom of people, time, money, and purpose.

Tune in to this episode to hear Matt Stevens break down how to evaluate a franchise opportunity honestly, what franchisors are really assessing when they assess you, and why the most boring service businesses often produce the best returns.

FOR MORE ON MATT STEVENS https://heisthefranchiseguy.com 
 https://podcast.heisthefranchiseguy.com/DQ

FOR MORE ON COREY KUPFER https://www.linkedin.com/in/coreykupfer/ https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

Get deal-ready with the DealQuest Podcast with Corey Kupfer, where like-minded entrepreneurs and business leaders converge, share insights and challenges, and success stories. Equip yourself with the tools, resources, and support necessary to navigate the complex yet rewarding world of dealmaking. Dive into the world of deal-driven growth today!