From Rock Star Regional Developer (1,000+ units sold in 3 years), to Out – Sourced Franchise Development Team, to Franchisor, to becoming a target for purchase by Private Equity, Jeff Herr has done it all. In the franchising world, Jeff has been one of the most successful sales consultants over the past five years, finishing in the top 1% of franchise sales year after year at St. Gregory Development Group. Over the same period of time, Jeff has been a multi-unit top producing franchisee and area developer.
A truly masterful storyteller, Jeff shares 6 lightbulb moments that became truly brilliant business ideas. You can tune into the full conversation on The Franchise Story Podcast #7: How to think outside the box, innovate and create equity with Jeff Herr.
Although his mode of scale may be area development, the underpinning model of growth for Jeff will always lie in the community. “When a customer walks through a door to join a community, they should get a great service and be blown away by the four wall experience to the point of A) they want to own their own [location], or B) they want to tell all their friends about how great the business is.” Jeff continues, “When I walk in to meet a founder, I’m not interested in the business model, it’s if the customer loves it. Do the hourly employees that work there wear the brand with pride, does the manager eat, sleep, and breathe this business because they love it.”
Lightbulb #1: Get Your Ideal Customer On the Golf Course
Jeff talks about his first lightbulb moment with Franchise Ramp CEO Brian Holmes and ilovefranchising.com founder Erik Van Horn.
Jeff starts, “There have been some lightbulb moments in my career. From the half a dozen deals that we did do, they were all basically the same person. They were typically a guy between 35-55, somebody that did not want to quit their 6 figure job but they liked the idea of a business that operated 4 months a year. Not expensive to open. It’s scalable, this pattern of these early buyers, they were all the same. So we asked, where can we find this type of person? We fit the mold even, where can we find people like us? So, we white boarded it one night and said let’s go on ESPN radio. This is 2005, nobody was advertising franchises on the radio. And so, we picked out a handful of our market- Dallas, Houston, Nashville, Atlanta, Tampa, and Orlando. And one conglomerate had all the ESPN channels in these markets that we wanted to check this out in… we want to run a 30-second commercial but we don’t want to tell people what it is. This is a great business that you don’t have to quit your job, it’s low-investment, those kinds of things. Put together a compelling 30 sec. opportunity with some of those buzzwords… the call to action at the end of the day was “it’s a lifestyle thing, it’s low-investment, if you want to know more, go to tenfortyzone.com. As soon as you arrived on the website, you saw a guy swinging a golf club. Owning a business should be fun, it should provide you a better lifestyle, it should provide you with some fulfillment. That’s what we were saying here. Any form of marketing or advertising, frequency matters…. So we went back and asked our rep if we could run it all in 4-5 days straight…. We got tens of thousands of leads in a few days. Then came the next problem- What are we going to do with all of them? “
Lightbulb #2: The Deadliest Catch
Jeff voices, “We found some technology, GoToMeeting had just come out with their second product, GotWebinar. We want to run nonstop webinars, we want to blast this database several times a day with an opportunity to come on live. That year, we sold 350 franchisees… We opened 1,000 in 3 years.”
On top of selling, Jeff and his team had to help these franchisees with real estate, and with the opening of their location. From there, the franchisor would help with the support once the location was opened. In those dead months, Jeff realized he needed to learn more about franchising. At his first IFA conference, Jeff had his next epiphany. Looking at the sea of people in front of him, he suddenly saw that the image he held of franchising turned out to be false.
When thinking back on that moment, Jeff recalls, “What I realized, franchising is really a sea of small emerging franchisors just trying to figure it out. 80% of the franchisors out there are the little guys trying to figure it out.”
Lightbulb #3: Building on Necessity
Jeff saw his next opportunity. “There’s got to be something that we can do to help these people out. Let’s start a consulting company… what these “experts” were telling these people to do for franchise development, we would look at these ideas and say those are old-school ideas. People need to build databases… Let’s pocket this up and talk to some franchisors.”
At the next IFA conference, Jeff and his small team, who he affectionately called “4 guys and Emily” created an LLC and gave themselves a name; and thus, St. Gregory Development Group was born.
They pitched their idea to business owners, and ended up working with 3 separate business to outsource sales, working on a contingency basis.
At this point, Jeff started to see another gap that needed filling. “The franchising world is heavy on compliance and legal. We started doing so many deals, the franchisors we were working with couldn’t keep up on the compliance side of things. We’ve got a buyer that’s ready to go, and they’re working out addendums on these franchise agreements and it’s going on for 6 weeks. They didn’t know how to do sales, we stepped in. They didn’t know how to do compliance, so we said: “let’s get into the compliance business.” We gotta get things going!”
Lightbulb #4: Keep the Train Moving
Out of necessity, Jeff and his team at St. Gregory Development Group created another division in their company, just to keep the train moving.
“We got another franchise attorney, a couple of paralegals, and now when the buyer says we’re ready to go, we’re closing the deal the next day. We’re not waiting 4, 6, 8 weeks for the lawyers and compliance people to get their act together.”
As the company starts to grow, Jeff started looking at their client’s digital access. It was at this point, St. Gregory Development Group decided to provide their clients to build their website and web tools, handling IT support. The train was picking up speed.
Jeff laughs, “From real estate, product management, construction project management, grand opening assistance, marketing creative and execution side, operational, IT support, web development, legal, compliance, sales, and finance… over time, St. Gregory Development Group organically built this all-encompassing agency business that could provide 3rd party services to franchisors. It was very unique.”
As St. Gregory Development Group started expanding their business, Jeff made a crucial decision. It was time to start refining the type of brand St. Gregory wanted to work with.
Lightbulb #5: Finding Experiential Brands
When St. Gregory Development Group started, they had 3 brands in different spaces – fitness, medical staffing, and discount shipping. Jeff disclosed, “We exploded with 2 out of the 3 brands. In fitness, as soon as the locations opened, customers started saying, “I want one.” If you think about it, if you talk to anyone at Massage Envy, when they hit their inflection point, is when customers want to own a Massage Envy. You look at Orange Theory, they’re going to open 500 locations this year alone. A lot of people don’t know, in 2009, they just had one location. In 2010, they had two locations. It took 5-6 years to get to that inflection point. You can tie their inflection point to when customers wanted to start owning the brand. If your brand is making an impact on a customer in such a powerful and meaningful way to the point that the customer wants to own one, that’s pretty cool.”
Jeff continues, “We want to build brands. The type of brands we want to build are the types that provide something meaningful to a community of people. There’s a four-wall experience that’s just out of sight. When I look at a brand, I take a look at how are the customers talking about the brand on Yelp, on Facebook, on Google review. It’s that much easier to scale that business, because that business has built-in word of mouth from a marketing perspective. When I look at brands now, I start at the customer level, in the reviews… Service, especially when done really well, is very difficult to reverse energy and very difficult offer the same level of service over the internet or through Amazon.”
Lightbulb #6: The Birth of CycleBar
To Jeff, the boutique fitness is tapping into building a community of raving ambassadors. If you can package that kind of business up, you are going to grow a brand organically and exponentially.
Jeff goes on to explain the growth of boutique fitness concepts. “Fitness 20 years ago was Big Box. You go to the YMCA or 24-Hour, that was fitness. Then, came the little box guys- the Anytime Fitnesses of rural towns to big cities, they had their wave of growth. What really started to happen, what your seeing all the growth in fitness is class-oriented. Not because the class is great, not because you’re going to have a great before and after picture and sweat a bunch, because boutique fitness has tapped into something so much more powerful: building a community.
You’re never going to see someone walking around with a 24-hour Fitness T-shirt. Boutique fitness itself is more compelling at the customer level, the employee level, the franchisee level, because you’re building a community. If you can do that, and have some fun doing it, and make a little bit of money, those brands are going to grow.”
Jeff wanted to find another fitness brand. After the craze of SoulCycle hit the mainstream, Jeff realized how much spinning could make an impact in the boutique fitness space. When checking out Soul Cycle for the first time, Jeff realized, “People are writing books in Yelp, it’s all experiential, it’s all about how they connect with the community.” In 2004, St. Gregory group partnered with CycleBar founders Bill Pryor and his sister Alex Kremmer.
So what’s next for Jeff?
Jeff puts it simply, “continue to be innovative, come up with great ideas, execute, build that legacy, that’s the deal.”
And that he did. In 2018, St. Gregory Development Group moved onto the next big experiential brand. The same Cincinnati-based group that grew CycleBar to 130 locations launched a new social lifestyle club and co-working space at the Rookwood Exchange. St.Gregory Development Group launched Cincinnati’s first Fueled Collective at the Rookwood Exchange on Jan. 25.