In this episode, we're talking with Neel Parekh from MaidThis Franchise who helps homeowners and short-term rental hosts with their cleanings. You will know about how franchisor systemized their business where it helps customers what to expect and to have a business where employees and team members know what to expect for excellence from them.

Neel-Parekh-squareNeel Parekh is the CEO and Founder of MaidThis, one of the top-rated national cleaning franchises. MaidThis offers hassle-free house cleaning for busy individuals and vacation rental hosts (Airbnb, VRBO, etc.). MaidThis has been called “the franchise for millennials”, given its fully remote model and new-age spin on an old-school cleaning industry.

As he built his business to reach millions in revenue, Neel traveled for five years while managing a fully remote team — he is now on a mission to help others achieve the same! A renowned business expert, Neel mentors other entrepreneurs on the do’s and don’ts of managing a company, essential tips for franchise operators, how to be a successful digital nomad, and much more.

 

Transcript

Narrator:        Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.

In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh Patrick:   Hey, how are you today? This is Josh Patrick. And we're Cracking The Cash Flow Code. And my guest today is Neel Parekh. He's from MadeThis franchise. And this is a real treat for me. I love to bring franchisors on the show because they have a different way of looking at things and folks who are either agents or franchisees. So, let's bring Neel on and we can start the conversation because I know we're going to have a lot of fun today.

Neel Parekh:   I'm excited to be here.

Josh:                Hey, Neel, how are you?

Neel:               Very good. Thank you for having me here. Excited to be here.

Josh:                My pleasure.

So, you started your business from scratch, you wandered all over the country, and you did this whole thing remotely. So, how did you end up deciding that what you were doing was a good idea for a franchise or was that how you started from day one?

Neel:               No, I definitely was not even thinking about franchising. So, my business is called MaidThis. It's a residential cleaning company focused on two niches, one, residential cleaning and the other one is vacation rental cleaning like Airbnb, so vacation rental turnovers. So, a little bit coming out the old school cleaning industry in kind of a new age way. You know, we're doing a lot of like online marketing, making things very easy. Someone once called it a franchise for millennials, right. And it's that type of business model which is focused on that crowd who just doesn't want to pick up a phone, wants to book online, wants convenience. That's the pitch and the schtick.

So, no, I actually started it just because I just wanted some sort of side hustle. I was working in finance and private equity and I wanted to quit and travel. And I thought, you know, I tried a bunch of things. I came across a post online of a guy who started a cleaning company. I thought, “Hey, this could be a good way to make some cash” and just kind of got going that way. And I didn't really expect much of it.

And then, you know, a couple of years down the line, which we'll talk about, it started to really, really grow. And, eventually, in 2018 ‑ 2019, I was trying to figure out what would be the next phase of growth. I originally started the company in 2013. And that's when I was exploring how to expand and different ways of expansion. I came across the concept of the franchise model and decided to take that route instead of the other routes.

Josh:                So, it sounds like-- um, you know, most franchises have, you know, areas that they focus in. And it sounds like your type of business, you could work any place in the country or book places any place in the country. Is that correct?

Neel:               It's essentially correct. Yeah, I feel like there's advantages of being in a location. But just a little bit of my story. I started it in Los Angeles just because I'm from Los Angeles. My job was there. It was easier to do the initial round interviews with cleaners there. But quickly after, you know, I did two years part time. And then, I took my side hustle full time. I booked a one‑way flight to South America and I thought, “Look. I'm going to make this work remotely because I want to travel.” It's a local company but let's figure out how to do it remote. And we figured out the systems from then, this was 2015, to make the company completely remote where the cleaners just go from straight from their home to the job site. And that's the way the system is built.

So, the way it is now, you technically can be anywhere you want. Like I'm currently in Los Angeles just because where my family's from but all I'm doing is looking at a computer screen. A computer screen here versus in Africa is still a computer screen. So, in reality, you could kind of be wherever you want as long as you're within the parameters of the business hours, things like that. So it is, I would say, a newer age way of running this older school industry.

Josh:                Okay, so that's great for running your business but how do you keep your franchises or franchisees straight? I mean, are-- do they-- are they allowed to step on each other's toes? Is it a free for all out there? Do they get protected areas or how does it work?

Neel:               Yeah, they get protected areas. Um, so we give house-- we give it based off a certain number of households and we give pretty large territories because we want everyone to have room to grow. I know some franchisees give small territories and have their franchisees like buy additional households from them which sounds like a very convoluted model. You know, for me, I want to grow when our franchises grow so we give ‘em hunting room, right.

Here's one mistake I made early on in the setting up. I've made this for myself which I want to make sure my franchisees don't do. I went after all of Los Angeles. There's 10 million people here. It's massive. Like it takes an hour to get from one side to the other without traffic, right. So, going after the whole city was a terrible decision because all I'm doing is spreading my marketing dollars very thin.

So, I knew, with my franchisees, I want to give you, first of all, protected territory that's big enough but I don't want it to be big enough where it's the same as what I did going after all of one city. So, we usually give territories which are maybe 150,000 to 200,000 households. And the reality is this type of business model is you just need a few hundred, a couple hundred recurring customers in order to make a good chunk of money, right. And we give ‘em 150,000 to 250,000 households to hunt from.

So, they have protected territories. There's enough room to grow. They don't step on each other's toes.

Admittedly, you know, we're an emerging franchise system, right now. Like, I don't know what's going to happen if we're like McDonald's and there is one in every other block and how that's going to work, but I feel like that's a problem for another day.

Josh:                Yeah. You're looking not like you could ever become McDonald's because it's a different model and--

Neel:               No.

Josh:                --they have more than one McDonald's per 150,000 households.

Neel:               Yeah, definitely. And all of ‘em are still profitable. It's wild.

Josh:                Yeah. I live in this relatively small town. I think there's eight or nine of ‘em--

Neel:               Geez.

Josh:                --for about a hundred thousand people, so that's a little bit less than 100,000 franchise-- I mean, households.

Neel:               I feel like I should know this. I wonder if there's more McDonald's or Starbucks that exists, at least in the US. Do you have any idea on that one?

Josh:                I'm not sure but my guess is Starbucks.

Neel:               There we go.

So that's a good point to mention. Those are two different models. McDonald's one with the franchise model. Starbucks is not a franchise model. They did corporate expansion.

So, when I was thinking about expanding, Josh, I was thinking, “Okay. Do I want to go with the Starbucks model and open up a bunch of things myself or McDonald's model which is franchising?” I chose the McDonald's model. I do know a lot of people who chose the Starbucks model but there's specific reasons I do not want to do that.

Josh:                Yeah. I actually like the idea of the McDonald's model if you have the ability to document and systematize every little piece of your business, because you have to do that if you want to be a franchisor.

Neel:               Yep.

Josh:                So, let's go. Let's talk a little bit about that because that's a big deal.

And I'm going to bet there are some people listening to our podcast today that have thought, in the back of their mind, “Gee, maybe I should become a franchisor sometime.” Your franchise is a great idea of a business that had been running for the last five or six years. I'm going to bet that you had a challenge to really get yourself in a position where all your systems were tight enough for you to go out into the world and become a franchisor. So, can you talk a little bit about that?

Neel:               Yeah. Yeah, absolutely. And I would say we were pretty well systemized, not as good as some companies, but probably more than most local companies. And we still were not ready to franchise, right. I think it took up probably a year of just kind of back and forth, cleaning up stuff, figuring everything out with the legal documents, actually getting ready to go franchise.

But when someone's buying a franchise from you, this is what your promise is, “Hey, I have systems documented. I have an easy to access operations manual for you. I have a training program for you. And I have a loose support system set up for you.” Beginning, that's just going to be you, right? If anyone listening, if you're like, “Okay. Who's going to do that?” That's you. You're the support system for the franchisee. You're probably going to put the ops manual together. So, it is a lot of work.

But something you should be thinking about, even if you don't want to franchise, if you ever want to sell your business, you're going to get the highest valuation if you have these things, anyways. You need an ops manual for the new owner. You need to systemize your business. You need a training program. Now, you're going to need this for existing business, anyways, so the reality is, if you're going to franchise, this kind of just forces you to do that.

Now, there's other things you have to do which you normally wouldn't need to do, for the franchise world, like register in each state. All these legal docs. All these regulations that we get to file every year. That's the kind of extra stuff. But the pure systemization, you're going to have to do it anyways. Especially if you want to sell this business in the future, it's going to have to happen. So it is, you know, I did it for the purpose of franchising. But, in hindsight, I realized, “Oh, this is hugely helpful for just my existing business as well.”

Josh:                Yeah, one of the things that we talk about when you create it, what I call a sale‑ready company, is step four in creating the sustainable business, is systematize your business.

Neel:               Yep.

Josh:                And, you know, from my world, I’d like to get your comment on this-- in my world, the reason you want to systematize your business is because you want to have a business where your customers know what to expect and you want to have a business that your employees and team members know what you expect for excellence from them. And you can't do that without systems.

Neel:               A hundred percent right. From a pure consumer level, that's a thousand percent right.

And like we talked about, there's even other levels of like why you need systemization from a sale perspective, from a growth perspective. But just from the pure foundational aspect, you need systems just to even be able to support your customers, right? So hugely, hugely valuable.

Josh:                So, what does your business look like, you know, as far as number of employees, and revenue, and that kind of stuff when you decide to actually go down the road of franchising?

Neel:               Sure.

I think we were in the low seven figure, so probably like 1 to 1.5 million is kind of where we were in revenue, before we decided to go franchising. I don't think that's always needed. But for a lot of local service companies, I think-- this is what I've seen. A lot of franchisees say, “Can I make a million dollars in revenue?” Now, I love the quote, “Top line is vanity. Bottom line of sanity,” right?

Josh:                [laughs]

Neel:               Even though you look at the top line and you’re like, “A million dollars, it sounds cool.” But the reality is, it could be a very low margin business. Who cares? But, regardless, people want to know they can make a million dollars in revenue. So, if you like being able to prove that out, at least, for my type of niche is valuable for the purpose of selling to franchisees.

So, we were around that dollar mark. Employee count, at least in terms of cleaners, fluctuated quite a bit. I'd probably say between 25 to 40, you know, some part time, some full time. It just varies. And ops staff, we probably had around nine people running ops. And my ops team is around the world, right? So, we're across six or seven different countries. So, everyone's-- it's a completely remote system. Everyone's everywhere. There's no office space.

So, that was kind of one thing that's a little bit more attractive about our model as well is there's low overhead. Something like COVID happens, I don't have a lease. I don't have as many fixed cost which I am worried about. You know, there's a lot more variable cost, outside of the labor.

Josh:                That's kind of an interesting thing. So, are your franchisees also all virtual?

Neel:               They are. They are.

Now, I tell them like, “You can have an office space, if you want.” No one opts to get an office space, right? Because you don't need it, unless you-- unless you want to get away from the wife and kids and you're like, “All right. Well, I want to go get an office space.” You could go ahead and do that. Most people, um, would just work remotely. And I think a lot of their goals are work remotely and then, eventually, be able to work while traveling. If they want to go on an extended vacation, their business still functions. They could work from wherever they are. So that's a lot of the reasons why people buy into a MaidThis franchise to begin with is that kind of dream, right?

I did that for five years. I was backpacking around for about five years, I came back because of COVID, all working remotely from my laptop. And I think a lot of people would want that. So, it's not a requirement but I think that's why people get into this to begin with.

Josh:                So, how do you make sure that the people you're hiring as cleaners are honest, trustworthy, and all that kind of good stuff because you're not doing-- you're not doing personal interviews? I mean, you’ve got to find some way. You're sending them into houses and businesses--

Neel:               Yeah.

Josh:                --and they're going to want to make sure that people come in to their place are honest and trustworthy.

Neel:               Yeah. It was funny, Josh, I was about to say, “That's the million‑dollar question.” I feel like the million dollar has gotten so diluted, we’ve got to say that's the billion‑dollar question, now, right? It just doesn't make sense to say a million‑dollar question anymore.

Anyways, the billion dollar-- that's the billion‑dollar question is how do you get proper labor, right? I think anyone who's in business, especially for local services, you might be listening to this, especially if you've been in business a while. The issue isn't in getting sales, it's the labor. That's going to be the bottleneck for growth no matter what. And that's always-- it's a funnel that no one's ever truly mastered because it's tough. You're dealing with people. It's very fickle.

So, the key is having a proper funnel to test the people out. And I'll explain our exact recruiting funnel. We have a pretty awesome job ad, right? Funny, it hopefully pushes away the people who don't fit our core values and attracts people who do. There’s a lot of people who call us say, “Hey, your job ads seem really fun so I want to give you guys a call,” right? Already, the right type of person. We’ll do an initial phone screening. After that, we'll go straight to second video interview. After that, we will either send them on a test cleaning or go straight to an onboarding.

And this whole time, we're requiring them to go through hoops. For example, email this person to, say, “Let's set up an X round of call or please call me on this day at this time,” right? There's kind of multiple hoops and tests within this process. Then, we find them and send them out to a test cleaning with an existing cleaner just to make sure they're actually doing the work and seeing how they are. Then, after that, we'll get into a phone onboarding process and actually do a background check and things like that. It's not foolproof but the goal is just to make a lot of hoops for them to jump through.

Josh, one interesting thing is like we used to do in‑person group interviews, pre‑COVID. Like, we'd meet at a Starbucks and say, “Hey, we're doing a group interview.” Everyone comes over here. You know, you have a 50% show up rate and just go that way.

What's kind of nice is, since COVID, a lot of people who were not very tech savvy became tech savvy out of necessity. Everyone knows what Zoom is now, right? Even cleaners. Before, it'd be like, “Hey, do you have a smartphone or not? Do you know how to use a smartphone or not?

So, it's kind of cool because now we could actually fully shift to remote where we don't even need to do a group interview in person because everyone knows what Zoom is, right? So, now, we could say, “Let's hop on a Zoom call” and cleaners, who maybe barely know how to use the phone, say, “I know what Zoom is. Let me hop on a Zoom call.” So, it's actually made things a lot more streamlined and efficient for us.

Josh:                So, you mentioned something which is near and dear to my heart which is core values. How did you develop your core values and how do you use them in your company?

Neel:               So, it's a-- Josh, I feel like it's-- I remember when I worked in corporate people would be like-- the company would say, “Hey, here's our core values. We made nice posters. We put it on the wall and it's over there.” And like that's it. And then no one even knew what it was. They didn't exemplify them at all.

So, it is-- the concept of core values is interesting. But ours is, Keep it positive. Own it. Deliver on promises. And Kaizen which is a proverb which means constantly improve. We developed them by kind of looking at-- it starts from the leader so I kind of looked at, “Hey, what are the things that, when they don't happen, they just piss me off?” Right? People often think like, I feel like it's easier to identify that than it is to identify what you value because everyone values trust. Everyone values caring, right? Like, it's tough. But if you figure out like, if someone crosses this line in your company, you get pissed off. What is that? So, I kind of broke it down that way.

And then how we actually integrate them into the company is, for example, all of our job ads exemplify the core values. We talk about it. Every quarter for our quarterly reviews, with my team members, I grade them based off the core values. If they violated the core values, we'll bring it up, discuss it at the time and give them up to three months to kind of fix it before the next review.

So, it's always top of mind. And, you know, if you're trying to decide if you need to hire or fire someone, look at your core values. Did they violate a core value or not, right?

And it’s an iterative process. And, Josh, I'm curious about what you think about this. We had our first set of core values and kind of figured out, “Ah, this not really working.” Like, this isn't it. So, it took us maybe two or three iterations to get through the point where we're like, “Ah, this is us to a core.” Like this represents us. But it is ongoing process. And it's something you’ve got to really integrate into your company. What are your thoughts on that?

Josh:                Yeah. My experience, when we did our values, it was a six‑ or seven‑year process before I finally got to the point where people would actually believe that what I'm saying was a core value. Most of it was my bad behavior but that's a different story for another day.

But the truth is you're doing what you need to do with core values which is you're using them as a tool and you use them on a daily basis because you talk about it. If you don't talk about your core values day, after day, after day. In fact, if you're not sick of talking about your core values, nobody's even hearing you in the first place. Does that make sense?

Neel:               Mm-hmm. Yeah, 100%, you're attracting the wrong person, right? We're not-- if you're not telling them what you value then the communications is just unclear.

Josh:                Yeah. And if they don't exhibit it and if you can't test for it, during your interview process, there's a good chance you're going to hire people that are a value mismatch. And values mismatches always cause problems in companies, at least in my experience.

Neel:               Yeah, a hundred percent. That's probably the biggest cause of tension, I would say.

I think a lot of business owners forget like this is your company, you could hire or do whatever you want. Like you're setting the tone of the company. There's no playbook where it says, “You must set the tone this way because this is how all corporate companies do it.” Like, this is your business, do whatever you want. Meaning, you should probably attract people who want to be like-- who exemplify the same values as you, right? You get to design this whole thing which is the coolest part of being a business owner. Pick your core values because this is you. Your company, in some aspect, can be an extension of you. Why not really push the values?

So, I agree. I think it's-- it's, it's probably one of the most critical factors.

Josh:                You know, the other thing, I'm going to bet that you have a pretty good recurring revenue stream that happens. Once you get a house, I'm assuming people want you to keep coming back week after week?

Neel:               Yep, that's what I like about the cleaning business model, especially for Airbnb’s and vacation rentals. It's not a nice to have, it's a need to have. You need a cleaning after someone checks out, before the next guest checks in, right? It's not up for debate. So, there's a very good recurring revenue built into the model.

Josh:                So, do you-- have you contacted Airbnb to see if you can do a joint venture of some sort now that you're a franchise and assumably you have national, maybe international, coverage?

Neel:               I have not contacted them yet because I actually want to get to more locations. But we're the first and only short‑term rental focused franchise that exists for cleaning. There's no other one. There's Molly Maid and like a lot of companies who maybe would do it on the side but that's not really their focus. So, we're actually the only ones that exist, but I want to get to proper like kind of critical mass instead of a handful of locations so, that way, we could actually go out to them and say, “Hey, we service these 50-- hundred 100 locations. Let's start partnering now.” So that's ideally in the pipeline but not yet.

Josh:                Okay. So, how many franchisees do you have now?

Neel:               Yeah.

So, we launched the franchise operation with this last year. So, I have two corporate locations and two franchise locations at the moment and, currently, vetting more. Yep.

Josh:                Okay.

Neel:               Early on.

Josh:                And if somebody wanted to become a franchisee of yours, how would they go about doing that? How would they find you?

Neel:               Yeah. You could go to maidthisfranchise.com, mention you came from Josh’s show and, you know, we will do a vetting process and figure out if this is a good fit for both sides. You know, it has to be a core value match is what we're talking about. We have to make sure that this the right type of model for you. So, it's usually a one‑ to three‑month process to actually get there.

Josh:                Cool.

So, when you guys were putting the franchise together, can I ask you how much you had to spend on this because this is something that people, who are thinking about franchising, need to know. It’s expensive.

Neel:               Mm hmm. I will say-- and I hope I could save people a lot of money just with this tip over here. I spent a lot of money because I hired consultants when I did not need to. I probably spent over a hundred grand. And I’d probably say maybe that's what you should budget. Think about spending $100,000. And I'll give you the cost breakdown. If you are not--

The first thing you need is the FDD, which is the legal document, from any reputable franchise attorney. It’s going to cost between $20,000 to $25,000 for that document. After that, you probably need to systemize your operations because they're not done yet. This is kind of what I'd say is you got to do this anyways but, you know, think about documenting everything, putting into place. The hiring people could help you do that, making videos, 10 grand, right? Roughly.

Then, you think about, “Hey, you need to create training modules.” When someone signs your franchise agreement, they want to get going. You need to create training modules for this. Then, you have to think about, “Hey, you have to license in certain states” where some of which cost money and ongoing fees. It adds up. And that's even besides-- that's not even keeping account like any consultants you have to hire. So, I'd probably say budget $100,000 to get going if that's what you want to do.

Josh:                And when somebody signs a franchise agreement with you, can I ask you what your fee is?

Neel:               Sure. We charge currently 35,000 for the initial buy‑in.

Josh:                Okay.

Neel:               And the royalty is 6% of revenue.

Josh:                Okay.

So, you only need four or five franchises before you covered your cost?

Neel:               Correct. Yeah. A large chunk of-- I pretty much put all that money back into marketing again for new franchisees. But, if I wasn't, then that would be-- yeah, you'd be able to cover it. And the reality is like you could eventually-- even if you have one location, you know, over time, you should be able to cover it if that location is doing well, you're collecting a royalty on that location. Of course, the goal is to get more locations, right? Yeah, you could actually cover your cost.

Josh:                Well, that's cool.

Neel, unfortunately, we are out of time. And you already told us once how people can find you. And if you're watching this on Facebook, you know it's www.maidthis.com. Is there someplace else people could go to find you to have a conversation?

Neel:               Of course. You can go to my website, neelparekh.com. Contact me there. Anyone who messages me, I'll respond to you directly, offer whatever assistance I can. And-- yeah, for anyone listening, I'm actively on the hunt for our next franchisees. So, if you or someone else you know might be a fit would definitely, definitely appreciate your help here.

Josh:                And just to let you know, this is a really cool idea. I mean, this is something which I-- you know, I've talked to a lot of franchise peoples. I've talked to them, you know, about different ideas and this one is an unusual idea which, if you're in the cleaning business, or you're thinking about being the cleaning business, or you run a vending company like I used to, this could be a good side thing for you to do. Give Neel a call and see what you think.

And, Neel, thanks so much for being with us.

And I've got two things I would like you to do. The first one you've heard me ask about 360 times now because this is close to where we are for podcast episodes and that's going to wherever you are listening to this podcast and please, please, please, please leave us an honest rating and review. If you love us, you can give us five stars. If you hate us, you'll give me one star and you have to watch me cry for a little bit. I'll get over it.

And the second is I have a-- my second book came out a couple of months ago. And it's a whole lot of fun. It's a continuation of my first book The Sustainable Business. This is what it takes to create a sale ready company and our friend John Aardvark has tons of new challenges to face. And you'll have a great time reading this. Even people who have read the book, who have nothing to do with being business owners, tell me, “I can't wait for the third book to find out what happens.” I'm not telling you but I do know.

So, if you want to get a copy of the book, I happen to be selling for half price. You can have a free 20‑minute conversation with me, if you're so inclined, if you buy it off our site. And to get it, it’s www.salereadycompany.com. That's www.salereadycompany.com.

And this is Josh Patrick. We're with Neel Parekh. You are at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

 

Narrator:        You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at jpatrick@stage2solution.com.

Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: sale ready company, Business Systems, franchising

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