From Single Store to Fully Franchised with Peter Holt, The Joint Chiropractic

Peter, welcome to the show. It's great to have you here today.

Great to be here, Clint. Thank you.

So you're the CEO of a publicly traded company in the health care market? I bet you have a lot of hurdles you got to navigate at times. Right. So tell us a bit more about your company, The Joint Chiropractic, what makes you unique in the world of adjustments and activators.

Sir, and there's, there's a lot of unique pieces to it is, first of all, what makes it so unique is we are the first franchise system in the world to actually franchise chiropractic care, our revolution, what makes us unique is not that we're changing chiropractic care, what we're doing is changing access to chiropractic care, we ended the year with 706, clinics and operation of that. And that thank you very much. We're on our way to 1000. And more than anything else, it's about accelerating growth through those retail just to your points of distribution.

Yeah. And I got to think as you're saying that, how did how did COVID lockdown hit you guys? It's not like you can do chiropractic over zoom, right? Well, you can figure that one out, that's a heck of an innovation.

No one knew was going to happen. We certainly didn't. And if you looked at just some of the forecasts, we were looking at Eric, the whole world shut down. He's like, wow, what's going to happen to us. But for all practical purposes, we stayed open. And what was remarkable is our doctors truly saw themselves on that frontline of health care in this country. And so they knew as they were treating patients, helping them keep out of pain, they could keep them out of the traditional medical system that was being overwhelmed by the impact of pent up COVID pandemic, our patients saw this as essential to their health now in that initial period are the probably the most negative impact that we had was on our new patient count. Because again, remember, we were all in lockdown. And so that the KPI that was most negatively impacted for us in that initial period was new patient counts. And that kind of makes sense. Because, you know, again, I'm, I gotta be in a lot of pain, if I'm going to take that risk and went outside my door. Sure.

How many new doors Did any of us go through during the pandemic? Not only what you knew?

Yeah, exactly. We went where you felt safe, or where you felt essential to you had to get to the grocery store, you know, you there's certain things you have to do. And so that was important. And so that if you look at the other metrics that we measure, we are a membership based model. So that 85% of the sales of the average clinic is generated from subscriptions, we measure the number of conversion. And what we found is that during the pandemic, our conversion rate absolutely was the highest in the history of the company. And then the next thing we measure is what we call attrition. And what we found is that it either improved or it was flat. So people were staying with us longer, people were converting at a higher rate, but the new patient count was down. And that was in 2020. So then, as we moved into 21, we saw the new patient count come back up, and we had 107,000 people open the door to The Joint for the very first time on that basis. 706 clinics. So you see, we had record breaking new patients as they're recognizing this is essential to their health. And they'll continue to use this service regardless of the pandemic.

And we want to get back to that. But I want to actually go back to you now. So we know more about The Joint. We've got that intro from you. What about you, though? What, how did you become the CEO?

Well, it started when I was a little baby that I have a career of actually building and managing franchise systems for 35 years. And it's kind of a funny story. The only thing I ever wanted to do was policy analysis of us Latin American relations. That's, that's that was my that's what I was going to do. That was my career. And through a series of funny coincidences, I got hired by the International Franchise Association. Now, the only thing I knew about franchising at that point was that McDonald's is a franchise and I don't like their food even today. And I even knew less what a trade association did. And so in that process of working there, my job was to sell memberships. And so I was running around the country meeting with companies like a joint and asking them to join as a member, pay their dues, and then make sure that they renew their dues each year because it's a voluntary association. And so, in that process, I absolutely fell in love with the business model of franchising. It is just remarkable. It is the most unique relationship you'll have in business. There's just so many interesting attributes to it. It's got like anything else there's so many different ways a business can grow franchise is just one of the methodologies. And so I was working for a concept out of Nashville, Tennessee, doing frozen desserts, which I absolutely love. It's a wonderful concept. And it was owned by private equity got sold and then I was recruited away to The Joint and that's how I got started.

Right. Nice career path. 35 years.

It goes quick. Just hit 50 This year, and I'm thinking to myself, what happened? Where did that go?

Well, you know, what they say, actually, I'm 63. And what they say inside every old person is a young person wondering what the heck happened.

That's how I feel too often. I think we all so So Peter, the theme of this show is all about what fuels a company's next stage of growth. As a franchise, what is it that fuels growth for The Joint?

That is such a great question. And what what is it fueling growth more than anything else for The Joint is the market itself is expanding? And a retail concept, there's really two ways you're going to be measuring performance or growth and what's fueling that growth. One is your comps, your same store sales compared a year ago? Because what you'll understand is a growing as a flat as it is it actually decreasing, all giving you really important things about that business concept. The other side that you want to look at is gross sales of the system. It's great to see your performance, but is the concept itself growing? That's giving you an indication of that growth? And so what is behind that? Why is that growing? And it's because more and more people are understanding the value and efficacy of chiropractic, because by moving it in a place where they can try so you're sitting there and you're going to grocery store and Oh, there's The Joint, that's not cannabis. That's chiropractic. I'll try it. And that what you find is that it really is that storefront is one of our most powerful ways to educate the consumer to trial.

That must be such an empowering concept for for a franchisee to open their own store and to be part of your brand. And to do what they love and to be part of something bigger. That's, that's probably going to be a huge part of your growth is is just bringing on board those new franchisees to get them to commit to opening a storefront. Yeah.

Without question is that and again, if you really look at franchisors is what we are, is we fulfill people's dreams. Because we have so many of us have this dream of ownership, we want to be in our own. We want to be our own boss, we want to be in control of our own destiny, we want to do something that's important to us. And the failure rate of new businesses is just astronomical. And just because it's a franchise doesn't mean it's automatically successful. But what you're really doing I have so many ways to talk about franchising. But if you really understand franchising, you're franchising is, franchising is the business of selling mistakes. The franchisees still make mistakes, but you're minimizing them or you're allowing them to make different mistakes, which helped them accelerate that growth.

So I have a question for you, Peter. So we're talking about accelerating growth and fueling growth for The Joint? What about you professionally? And personally?

Well, it's, to me, that's one of the s. The essence of life questions. One of the most horrifying statistics I've ever read about this country, is 75% of the workers are disengaged from the work that they do. And that's the power of franchising. This is one of the reasons why I cannot get out of this franchise model because I'm just going to tell you, if you're putting your life savings on the line for this concept, whatever it is, is that you're engaged. I've never had a franchisee say, hey, you know, I've got a half a million dollars here. I'll sign the franchise agreement. If it works, it works. If it doesn't, yeah, I got another one. Never had that conversation. And I've had a very strong idea what my purpose of life and it's very simple one, and this is what fuels me this is why I'm in franchising for all these years is my purpose in life is to help

people professionally and personally, that's that's your especially

in person, okay? All right, then it's been my life motto from as long as I can remember. And it's really important to me, I think about it every day. This is what again, what I love about the franchising is just think of all the entrepreneurs over the years that I've helped. It's a it's a it's hard, it's hard to scale. It's hard to get to scale. And if you look at all those young franchisors, they're in this race of cash versus time to get to critical mass.

It takes resources to get to scale it takes capital to grow and you're with us today you're leading a public company, how did The Joint go about raising that money to go public or raise, go public and then raise the money and drive everything forward? Back in 2014? With What's the going public story for?

Sure. Are you it's it's a great story, and I'm going to back it up a little bit because it's it's another story about franchising is that we got started in 1999 in Tucson, Arizona. And we had a doctor while he was a doctor who had this brilliant idea of in his mind as he wanted to take chiropractic to the masses. And it was unbelievable success. And what happens so often in these retail concepts when you have whatever your product or service that you're offering, they come in. And they're like, oh, my gosh, I love this product or service so much. Are you franchised? And Dr. Gertz and looked around and said, why not? What a great idea. So he started franchising. So in 2003, he started franchising. Now, he was a great doctor, and he had a brilliant idea. But I'm gonna tell you, he was a lousy franchisor. Do you see it over again, all over. And again, because you come in through concept, and you think that that's enough. And in the world of scale, it's not. And so in our case, we had these two brothers who was seeing one of these, one of these clinics operating in Austin, Texas. And this is now in 2010 is like, oh my gosh, this is the concept I had been looking for. So we reached out to Dr. Gertz and he ultimately bought it from So in 1999 2010, eight units. That not franchisee Ray, not is way, way, way, way too hard. Dominique franchising, a very complicated way to run a business, trust me. And so now fast forward when we went public, in November of 14, less than four years later, we had 242 units in operation that's franchising that scale. And that's really then the reason we went public again, because it's, it's really, there's just two pieces to business. And it's true for every one of them, is you have its capital, and its management. Those are the two pieces, those are two variables that you have to be able to manage if you're going to survive to thrive.

I'm curious from being a privately held company to a publicly held company, Peter, was that a big culture shift for the company? What did it mean for your employees? Would it mean for the franchisees then add now it's

a unique space to be in, and it comes with its own benefits, it comes with film costs. And so in our case, what was the benefit there $31 million, allowed us to open it, you know, have the resources to get the units up and operating gave us a greater reach, accelerate our growth. And but it comes at a cost, it comes at a cost of transparency. And so what we have to create what's called a Franchise Disclosure Document, and that it has 23 parts to it. And these are the parts that laid out that you must provide this information to a prospective franchisee within two weeks before they sign the agreement. You also have it states who have their own requirements. So if you actually want to sell franchises nationally, there's 45 different agencies that I need to comply are filed with to be to be operating nationally franchise system in the United States today. Now, don't think the SEC has anything to do or talk to the FTC because the FTC is governing the you know, the franchise, side SEC is a public company. And believe me, it's two worlds. And what I would tell you is that we all have stakeholders that we've got to manage to and you know, you personally or professionally, you know, your wife, your children, your friends, you know, those are all stakeholders. And in a business in like us, we have a lot of stakeholders and you know, my shareholders are stakeholder. My board is a stakeholder, my patients are stakeholder, my franchisees are a stakeholder, my staff is a stakeholder, all our different stakeholders have a vested interest in the outcome here. And what I've learned is that you you need to manage those stakeholders, but in a franchise model, if you can take care of the needs of your franchisees, then you can manage the other stakeholders as well.

I described a few different levels of complexity around managing a franchise business, managing a publicly held franchise business. You know, in starting my own company, I've only dealt with the private markets. I've raised venture capital, private equity, never went out to the public markets. What would be your recommendation to a company? That's maybe a franchise company that's considering going public, but what advice would you give them?

Here's my number one advice, get good counsel. I don't mean just legal okay. Because I'm gonna go back to the concept of making mistakes is that you can be act like you're the very first company in the planet that's tried to go public, you know, and you can try to make all the mistakes yourself and try to okay, I've got to deal with an investment banker, because they're gonna have me I gotta have my SEC attorneys involved. So I got to have all the paperwork. I mean, those are the obvious pieces. And so you want to have good counsel and creating your documentation. You want to have good counsel with investment banks who are going to be supporting this, but you also want good counsel in your IR firms or your investors. Lessons from because you can learn on your own. But there are people like I've just spent 35 years on franchising, but you know, I haven't done 35 years of investor relations. But we work with an investor relations firm that actually does have 35 years it's build

a great team around you. Certainly one of my big lessons in life is is there certain things I do? Well, certain things I don't do, well learn to recognize that and then hire the people around you who don't do the things who do the things that you don't do well, or don't want to do so build a great team, right.

But the key there Clint is, and this is where the Key of Life again comes to it, is you actually have to listen to it, there's really only one thing you have to do. If you want to survive and thrive in a business only one thing now there's a lot of things you have to do. But if you do not do this one thing, you will not survive. This one thing if you can get it now, what do you think it is,

you got me on the edge of my seat? One thing,

and it's pretty common, and it's a lot of my stuff is just common sense. I'm going to tell you right now, if you want to survive and thrive, if you want to stay in business, you have to you have to do a lot of things. And we talked about raise capital and manage and all this. But if you don't get this right, you will not be there. And that is stay relevant to your consumer. It doesn't matter if you're a consulting firm, it doesn't matter if you only

have a business if your customers, right,

and we need to make sure you are meeting their needs. Because if you are not meeting your needs, they go away. It's that simple.

I heard a fascinating or a very relevant quote along these lines. What is the purpose of the company? Why does a company exist? A company exists to create customers? I think it's kind of along the same lines, right? Absolutely.

What's the most important now there's a lot of things you have to do, there's only actually one that you have to do if you really want to be able to

talk to your customers, you got to listen to your customers, you got engaged now. Now. You tell me,

if you had half of you, the first thing you said is talk to your customers, which is actually the opposite. And then you said listen to your customers, which is actually the you have to listen because they will tell you now I say this to every new franchisee we have, because this again is one of the power of listening to my franchisees, my customers so I can make sure this concept stays relevant to the consumers that we're serving. And I say to them all the time and I say okay, I want you to write this down, write this down. So they're all ready to write down. I said, every idea that a franchisee has is not a good one. Now write that down. Every idea franchisee is like an All right now let me give you the corollary, the best ideas come from our franchisees. That's a dynamic tension that you have to tap into to keep your concept current, because I have a whole bunch of employees on my own payroll, and they're operating the same clinics, and they're hearing the same conversations from my customers. How does that translate up to me?

That's an interesting point. Peter, I'm very curious to know what The Joint is doing. Because you have your franchisees are your customers as well, obviously, and I think that's the message that you're sending now. How do you reach out? Or is The Joint reaching out proactively to each franchisee.to? Listen, or is it that the franchisee locations or management's typically coming right up the funnel or right up the channel excuse me to ask or give information to The Joint

as a franchisor I have just a couple of primary responsibilities and one of them and it's really important one is to actually provide an operating model. And And if people come up to me all the time and say hey, I have this great idea. I want to franchise it. And I'm like, Okay, well talk to me about the model. And that and that operating model changes over time because we're learning and growing make getting more sophisticated. So if you look at the services and support the systems that we have in place today in 2022 and compare that if you were a new franchise or a franchisee with us back in 2010 or 11 worlds apart, because we're continually learning growing this another way I talked about franchising is franchising is the business of accelerated growth through excellence. Because what you're doing is taking those experiences not just this one units of learning, oh, if I do that, I get better sales. If I do that I get better, happier customers. You take those best practices, you put them back into the system, you you systematize it, roll it out, teach the franchisees they use it and all boats, right?

Well, let's let's shift gears here for me. Peter talked about something a little different. We've been talking a lot about franchises. Right. So this is the segment of the show that we call know your franchise. Lizzie is going to read off three different stories for you about franchise companies and your job is to pick which one did not happen. All right, are

you ready? I'm ready. All right. Okay. a three story Story number one, back in 2001 Russia's Mir space station was scheduled to deorbit were effectively make a crash landing back on Earth and was targeted to happen the Pacific Ocean franchise restaurant Taco Bell decided to turn this into a publicity stunt by floating a huge Bullseye in the ocean and promising a free tap to everybody in the US if any part of the mayor hit the target. The mayor missed the target and Taco Bell didn't have to pay out the tacos, but they received huge coverage for the stunt. That story number one. Story number two, the world collectively grimace when they heard the beloved breakfast location International House of Pancakes was changing its name to the International House of salads. The restaurant launched the public relations stunt to raise awareness of the brand salad options in addition to breakfast plates. The Start resulted in more than 20,000 media stories and huge spike in you guessed it, salad sales. The third story as part of their efforts to expand their brand beyond donuts and be recognized also for their coffee. Dunkin Donuts came up with a campaign called flavor radio where an advertisement with a Dunkin jingle would play on public transportation vehicles like buses. And with the ad a local device would actually release the pleasant aroma of coffee for the passengers. The result was that more than 350,000 people experienced this ad and sales increased by nearly 30% Those are the three stories.

Okay, Peter, what do you think which one did not happen? We've got number one talk about and the space station target in the middle of the Pacific.

Right That sounds like what a franchisor would do we've got

I hop becomes i Hoss with salad

becomes more problematic because again a franchise system is actually all about brand building can yes you can in fact, you know change brands over time like KFC used to be Kentucky Fried Chicken, but fried became the dirty word and so that they condensed it to KFC. Another unbelievable story is no box etc. was bought by UPS and to make a long story short, they converted it to the UPS store. Those are really really complicated transactions and so far I have to go from pancakes to sell as with their trade name.

When you get Dunkin Donuts with flavor radio and and these rather odd sounding devices that would release the pleasant aroma of coffee.

It does seem hard to imagine how that would function but that sounds like a really crazy idea that a franchisor Okay, and so I if we're saying of those three what didn't happen is the i salad.

Well, you picked Correct. I hot did not run a campaign to say that their name was changing from International House of Pancakes to International House of salads, but rather to the name International House of burgers. They ran out of campaign. Sales hamburgers, they didn't do it though. Think thank God. All right, we're all we all love our IHOP

Zach and you don't want to mess around with the brand? Well, you're

going right to the heart of the question and why and why we why we did this little segment here because it's about brand and building brand. And and that's such an integral component of your business model as a franchisor to build brands. So tell me, tell me your thoughts. Give me your guidance. Give me your advice on building brand. What do you talk about with your team? And how do you make it happen?

Yeah, and I think that again, as you're right as what if I told you that one of the obligations of a franchisor is right, that operating model which will change over time. The other is to build a brand. Because again, this isn't just a bunch of clinics, any name out there all run really well and using the same systems, this is a brand building exercise and now not all franchising is retail so that there are some exceptions in terms of what that brand can mean utilizing the methodology, but the majority of franchisors are actually operating in that retail space. And that brand building exercise is essential to their business. Now I operate most of my career in that what I again call that small box retail space and so it gives us 1000 square feet in line at the supermarket. And what I would tell you is that I am not Procter and Gamble, I don't have $75 million to get you to change your toothpaste. What I have is that storefront that you are noticing finally that you actually open the door. And so again, those storefronts are one of the most powerful tools I have to build that brand We also know is you have to be very thoughtful because you can destroy a brand like that. You get a bad experience. And this is again, the power and the costs of being a brand. Because if you have a bad experience of The Joint that didn't just cut shut you off from that one joint that is there in your community, that may shut you off with all 700 year. Now it's changing as well, because it's not just storefronts out the more of my early career today with a technology with internet with Well, the way consumers are accessing information and using it to make those consumer decisions is so profoundly changing. If you're a millennial or younger, you're not going to friends and family to make these decisions. Where are you going Instagram, you're going to doctor and you're doing you know, pain, chiropractic close to home, and then you're doing the search and then you're looking at what comes up and you're looking at the validation. You're looking at the reviews. You're doing the same process, but it's all

online. You're right. I said Instagram just to try to sound cool, I don't use Instagram.

Well, or no, if you really wanted to sound cool, and I don't I don't try but you'd say tick tock.

I haven't caught on to that one yet. No, I

haven't either. But my marketing people were about to do a test on tick tock and, and again, it's just changed over time. Because

I remember the media channels change and you got to change with them. And faster

and faster and faster. And again, and I'm not my customer and your customer are millennials are and younger are our median age is 36.4. And so you know, so it is it is that younger customer who's coming into the clinic, they don't have the stigmas associated with chiropractic, that generation like myself as and that those are the people who are going online. And so that that we do have to find different marketing channels to reach them.

Absolutely. Oh, those are good thoughts about how to build brand coming from the master of The Joint Chiropractic brand. Peter, Holt CEO. We appreciate you joining us today. Thank you so much for your words of wisdom. And we look forward to connecting with you again sometime in the near future.

Absolutely. Clint, Lizzy. Thank you. It's been a real pleasure. Very much. Yes, I agree.