Aziz Hashim, Managing Partner at NRD Capital

Daniel Blaser (00:06):

Hello, and welcome to On the Clock, presented by Workstream. If you care about hiring, managing, and paying hourly workers, this is the podcast for you. I'm Daniel Blaser, and today we're clocking in with a Aziz Hashim managing partner at NRD Capital. Aziz has a wealth of experience as both a franchisee and franchisor that goes back decades During our conversation, Aziz shares how he's reinventing the relationship between franchisees and franchisors with his new endeavor called Experiential Brands. We also discuss how franchising can be such an incredible opportunity for those looking to build wealth, the important role of technology in the quick service restaurant industry and more. Enjoy! Aziz, it's really great to have you here and to speak with you. I'd love to hear, to get things started, just a little bit about your background in the restaurant industry and franchising. And then also NRD Holdings and NRD Capital.

Aziz Hashim (01:04):

Sure, sure. Look, happy to be here Daniel. Thanks for having me on. So, you know, I got into franchising, you know, quite by accident. You know, we, my parents moved to the United States when I was a teenager. I actually grew up in London, England. And so for me, moving to a new country new land was a completely different you know, experience. And I didn't have any friends or anything to do. So I got a job at a fast food restaurant because that was also during those days, sort of a rite of passage. If you're a teenager, you know, you kind of work in fast food. That's how you pass your summers. There were, there were no internet <laugh> you, you couldn't drive an Uber or become an influencer. You know, basically the only job you could do is work at a, at a grocery store or a fast food restaurant.

(01:45):

So I started working in fast food at a, as a teenager. And next thing you know, I spent the better part of eight years, all of my high school years and all of my college years working in the QSR industry and, and growing from just an entry level employee, you know, washing dishes and mopping floors to finally becoming a multi-unit manager. And so when I graduated with my degree in electrical engineering you know, I felt like, you know, I, I didn't wanna be confined to a cubicle. I missed sort of the, the hustle and bustle of, you know of the QSR industry. So I made a very, you know, difficult decision. And luckily with the support of my parents who, you know, you know, would've been right to have been very concerned about that because that was an expensive degree and, you know something that I'd really wanted to do.

(02:36):

And now that I have it, I'm sort of abandoning it and saying, you know, I want to go into the restaurant <laugh>. But they were super supportive. And so they they gave me some seed capital and allowed me to go off and, you know, find my find my dream in, in the QSR industry. So I started by, you know, opening one restaurant. And of course, when you start a restaurant, you know, you have to incorporate you know, and that's best practice. You don't put it in your personal name. So being very aspirational, I called the company National Restaurant Development. 'cause I felt I had national aspirations and I was dealing with national brands, and so I called it that. So as time went on, national Restaurant Development grew and then it became a franchisee of multiple brands.

(03:28):

And so at some point I decided to do the IBM or Hewlett Packard thing. I contracted the initials National Restaurant Development into NRD and turned it into NRD Holdings, because it was now a holding company of a number of brands that I was a franchisee of. So that continued for a long time. And then later when I decided to try my hand at being a franchisor then further it was an evolution and NRD holdings turned into NRD capital because now we were, you know raising money through our private equity fund and investing that money into brands. So that's the evolution <laugh>. And it's sort of, you know shows both ends of the spectrum that I've been very privileged to be a part of. It's, it's very few people who have been a franchisee multiunit and then a franchisor multi-brand and, and also had the privilege of representing both sides of that industry. I think I I'm one of the few people if, or the only person that has been a chairman of the International Franchise Association, which is largely a franchisor you know, association, although it, it, it does include franchisees. And on the other hand, being the chairman of the multi-unit franchisee conference. So I've been very privileged to have been elected to both ends of the spectrum from a service point of view as well. So it's been a, it's been a really interesting, interesting ride. Yeah.

Daniel Blaser (04:58):

Yeah. That's very cool. So you kind of talk about how you, you know, you kind of started with this rite of passage working in a restaurant Yeah. And that, that paved you the way to where you are now. In between there, you know, the, what was it about developing and expanding franchise restaurants that was just something that, you know, kept dri you driving forward that you wanted to dedicate your life to, so to speak?

Aziz Hashim (05:24):

You know, so I think the, the primary thing is that I realized very early because when I was working in these fast food restaurants, I was working for franchisees, and I saw the transformative impact of franchising. I mean, you know, it changed the trajectory of my family. I mean, we came from very modest, you know beginnings. And there is no way that, you know, someone should be able to, in, in business, you know, go, unless you're, you're Steve Jobs or something, and you invent Apple or some, you know, crazy technology it's difficult with a very small amount of capital to actually become successful entrepreneurially. And so I realized that, that franchising is probably, in my opinion, the most important and impactful business invention in the history of, of mankind. And not only that, it's a very human invention in the sense that when you franchise, you are in essence borrowing for a fee, but you're licensing someone else's idea.

(06:24):

Someone created a brand, it became successful, and they're willing to share that with you so that you have that opportunity. So it's an incredibly powerful tool. And I've seen, you know, in, in my own experience, dozens of people achieve financial independence. And broadly, there are tens of thousands of you know, families in America that through the power of franchising, have become, you know, sort of masters of their own financial destiny. So I see franchising as sort of the quintessential way that an ordinary person with limited means who doesn't necessarily have to be an expert in the restaurant business or the pet services business, or the home improvement service. Someone will show you their model and let you use it and achieve success for yourself. So to me, this is, it's, it's a passion because I've seen what it's done for my family, and I want to help other people achieve it as well.

Daniel Blaser (07:20):

Yeah, that's really cool. I love the way that you put that and very powerful you know, kind of the way that you framed that as well. Mo more recently, I know you've been making some waves with experiential brands. Yeah. Can you talk a little bit about what is experiential brands a brief overview?

Aziz Hashim (07:39):

Yeah. So, you know, now having done this for 40 years you know, obviously you developed some sense of, you know, the the business and what's going on. And what, what I found was that, you know, almost every aspect of our lives has changed in material ways, right? I mean, the way we book an airline ticket today, the way we do bank, there are banking banks that don't have any physical branches right. The way we shop, you know, Amazon didn't exist, you know, 20 years ago. You know, everything has changed. But one thing that has been sort of slow to change has been the business of restaurant franchising. And what I've realized is over my 40 years of being in this business there, you know, very seldom do we see kind of a significant change in the way franchising is done.

(08:27):

And that doesn't take into account the modern realities. So I felt, and my team felt that we need to do like a franchise reset if you will, restaurant franchising 2.0. I don't wanna use the word disrupt because I don't think that's quite appropriate here, but it needs to be reset. Food is still food feeding people is still feeding people. So we're never gonna go down, you know, a, a road where, you know robots create food and stuff like that. But we still have to cook the food and make sure that it's, it's tasty and people wanna buy it. But there are many other aspects of franchising, which I felt have been left behind, and do not take into account the modern realities of the economy and where the consumer is going. So, experiential brands was, was designed to start with a fresh piece of paper.

(09:14):

Let's say we had to start restaurant franchising brand new and get rid of all the old notions, assumptions whatever, you know, sacred cows, there may have been in the past. How would you build a franchise today? And what we came up with is that, you know, one of the most important things is for franchisees to manage their risk. You know, when I started, there were a fraction of the number of outlets that there are today. You could open anywhere, you could do anything, and your chances of success were pretty high. I mean, you could throw, we had, you know you know, the anecdote was you could just throw a dark on a map somewhere, open a, a restaurant branded restaurant, and it'll do fine, because America was growing population wise in every way you know, income wise. And it would work in the last few years, particularly after the great financial recession of 2008, 2009.

(10:03):

You know, it's been a different story, but franchising hasn't adapted in a way, you know you know, the, the, the metrics for franchising haven't really you know, worked out for the franchisees of the way that I would like to see it. For example, the notions that are still used today to measure whether a franchise is, is good or not good, is, for example sales to investment ratio. Okay. You know, that metric to me doesn't work anymore. It worked 20 years ago, maybe worked 10 years ago. It does not work today because you can have really high sales and lose a lot of money. So sales to investment ratio and things like that don't really work anymore. So we had to come up with a new way of thinking about how do franchisees make money? Because remember, at the core, I'm a franchisee, you know yes, I'm a franchisor now, but I started, you know, with, with the shoestring budget, you know, 35, 40 years ago.

(10:59):

And so I really feel for the franchisees, and I think that, you know, we should try to figure out how to make franchisees investment in a particular brand more to work more worthwhile. So, for example, to me, a metric that is not used in our business is that, you know, is return of invested capital, right? I mean, who cares what the sales to investment ratio is? Ratio, you know, what matters is if you put in money, how fast can you get your money back? Isn't that the point of business? There should be a return on investment, you know? And so at experiential brands, we said we're gonna design a suite of brands that focus on franchisee profitability. That is the one and only metric. There are no other metrics. Hmm. Everything we do is dependent upon whether or not we achieve more franchisee profitability.

(11:52):

Or if we don't, then that's not something that we should be pursuing. So that's what brought about experiential brands and other assumptions, for example, over the past few years, is that if it's fast food or fast casual, the quality must be low. Because what can you expect for eight or $10? You can't expect quality. But that's also a false notion. So we've created a suite of brands which people eat, and they say, this is ridiculous. How can you sell me this for $7? You know, this is, you know, this is nuts. But, you know, when you design a business for franchisee profitability, what happens is the cost to open goes down. And when the cost to open goes down, the menu goes down, simplification of menu items, that means the labor cost goes down, which means that you could sell food for a lot cheaper, you know, because you have a lot fewer costs to overcome. So these are ways that experiential brands sort of seeks to evolve the, the business of restaurant franchising and make it more appealing to today's investors.

Daniel Blaser (12:58):

Yeah, makes a lot of sense. And a lot of what you said that's, you know, it's exciting 'cause it's, it's something new or, or a shift in the paradigm, like you're saying. I feel like, you know, I've, as I've been speaking with different people for this podcast and other stuff at workstream, I've heard examples of like a really good franchisee franchisor relationship, and I've heard less good examples. What do you think is, like, ultimately, what, what makes a good partnership between franchisors and franchisees? And I, I think some of the stuff you already said is, is a great place to start, but what are some other things that you feel like really make a good partnership there?

Aziz Hashim (13:38):

So, so I think that, you know any, any relationship whether it's a franchisor or franchisee or whether it's a a, a familial relationship or anything is, you know, really based mostly on trust, right? So trust is at the, at the very, very core. And if you don't have trust, then it's very difficult to be aligned. And when you're d difficult to be aligned, then the relationship is not going to go well. You know, Daniel, a lot of people don't understand that, you know, while franchising is an incredible business model, you know, at its core, the financial goals are diametrically opposed. Franchisors take royalties on the top line, not the bottom line.

Daniel Blaser (14:25):

Hmm.

Aziz Hashim (14:26):

So imagine that you could actually be losing money, but the franchisor still gets paid in the same way the landlord still gets paid and your mortgage still gets paid, and your employees still get paid, right? But the franchisee makes money off the bottom line. There has to be something left after all the expenses, including the franchisors, royalties, and marketing expenses, right? So on the surface, it, it is a very diametrically opposed right relationship. And there have been a lot of the relationship problems in our industry have been caused by decisions made by the franchisor, which the franchisees deemed to be insensitive to their bottom line concerns, such as over discounting or creating you know, expensive or more complicated products with ads to their labor, you know, et cetera. So I think the first thing is trust. Do you trust each other? And if you trust each other, then you know that sometimes the franchisor will make decisions for the good of the brand, which may not be particularly you know appealing today, but it's the right thing to do.

(15:29):

And you then, the franchisor would also trust the franchisees when they say, look, man, this is just not gonna work. This is adding levels of complexity to our operations. We're already finding it difficult to stop. Please don't do this. Right? So there has to be this dialogue that's based on trust. And I think if you have trust, then you can work with each other. When you have this trust, then even if someone's working with good intentions, you're not gonna, you're not gonna get anywhere. So I think that the trust is, is really critical. The other thing to keep in mind is franchisees usually sign very long franchise agreements, 10, 15, 20 years. There's not a lot of franchisor management teams that are gonna be around for the duration, right? The average, I don't know what the latest statistic, but the average C-O-C-E-O lifespan is like four to five years.

(16:16):

You know? So if you sign a 20 year franchise agreement, you may see four different management teams, right? So as a franchisee, you're a little vulnerable, you've already made the investment, right? And now you're kind of at the mercy of, you know, whoever comes in, right? At the same time, the management teams have to be sensitive that, you know, they may have just come on the job today, but these people have been here perhaps for decades, you know, and so that they should listen to what the past experiences have been. So I think trust is a huge component. If you show me a really good relationship between a franchisor and a franchisee, I will show you a very strong franchise advisory council or committee where they're in regular dialogue with the management. And you'll see that there is not a lot of egos there, that we're all in it, you know together.

(17:02):

So I would say, you know, trust is probably the number one factor in, in creating success you know, over the long, long term. And trust, as you know, takes a long time to build and can be broken, you know immediately. Now, we, we recently had a pandemic event where a lot of those trusts relationships were tested. The behaviors of the franchisors during the, the pandemic really you know, shed a light on which, which management teams cared about the franchisee, and, you know, and some of them just went all out. I mean, the support was phenomenal, you know? And others played very hardball, say, look we're sorry, whatever, but, you know we're not gonna be able to extend, you know any forbearance to you. You're gonna have to figure it out. I must say though, that was in the minority, most franchisors really stepped up and you know, helped.

(17:56):

And I think actually the pandemic, by and large, this is anecdotal, I don't have numbers for it, by and large, improved franchisor, franchisee relationships by huge measures. I think people really got to know each other and to figure out that the whole world is in this mess together, and how are we gonna survive? How's the brand gonna survive here? Let's figure it out. So I think it was, you know, an unfortunate, obviously global event, but in some ways you know, it, it really did help solidify the relationship in, in many, many companies.

Daniel Blaser (18:30):

Yeah. Well, that's that's really good to hear that perspective. I have kind of a follow up question

Aziz Hashim (18:35):

Yeah.

Daniel Blaser (18:35):

That, that maybe relates to kind of that, you know, the aftermath that we've experienced mm-hmm. A couple years. I've heard a lot of people just kind of, you know, random comments, people talking about how the the level of service that they've been receiving at restaurants has kind of gone down. And there's a lot of factors obviously, that play into that. But because you were talking about royalties a little bit, I've kind of been doing some research before our conversation. I've heard that you had some interesting perspectives on how some of the rising royalties might actually contribute to some of the falling service. I'd just love to kind of get your your perspective on that.

Aziz Hashim (19:13):

Yeah. So I think, you know the, the franchising in general, as I said at the outset, is a really good deal. The average royalty in a franchise system is 5%. You know, if I had a secret of how to make money and I let you borrow that secret for 5%, you would take that deal all day long, and that's a great deal. But what happens when you achieve saturation? If you're a franchisor and you've achieved a certain level of saturation, and now growth has slowed down, you're not getting any more royalties, but expenses keep going up, right? So just because you're a franchisor doesn't mean your expenses don't keep going up, right? So, what's happened is, again, in the evolution of franchising is a lot of franchising franchisors have realized that, you know, the only way we can improve our bottom line is to cut service, because we're getting the same amount of royalty no matter what, you know?

(20:09):

And so where do we find savings? Because I can't charge the franchisees anymore because we have a contract, right? And so this is what leads to a reduction in service sometimes. And that's an unfortunate, you know situation. When it comes to the, the royalties and the service part. On the other hand, franchisors that are growing and and developing new royalty streams are, are often able to reinvest that and, and to, you know, to hire more people and to get more help. So I think it's the business realities of being a franchisor today, that growth has slowed. During the pandemic, people weren't rushing out to open new stores. After the pandemic, the interest rates went up, as we know. So there was no financing for new stores. So if you're a franchisor and you have two or three years of kind of stuck revenues, you gotta find cuts.

(20:59):

And sometimes, unfortunately, those cuts are in the level of service that you provide to franchisees. And that can be irritating, you know at best. And, you know, at, at worst, it can cause confrontation because the franchisee feels like, you know, we're not getting the same level of service that we used to get, you know you know, prior difficult problem to solve. And especially for franchisors that are not, like I said, growing. And so they're not getting new sources of revenue. But still the trust element comes in, right? So this is for where you have open and candid dialogue between the franchise advisory council and the management of the franchisor and say, look, how can we do a better job? Now, the good news is that there are offsets such as technology, you know, if, you know, if you have to reduce an FPC span, you know, where it used to be, you know, a person was managing 50 and now they have to manage a hundred for whatever reason.

(21:56):

But does that mean that they can't get on a Zoom call? Yeah. It's not the same as a personal visit, but at least you're in touch, right? I mean, we hear franchisees saying, look, we don't hear from our FPC, but once a year, that's kind of unacceptable, you know, that, you know, that's a level of service that we really can't, you know work with. So I think that there are compromises, there are ways, again, if you're, if you have trust, and we all believe we're in it together, and the franchisees have to understand that the franchisor is a business too, you know, that's a business too. They've got to make money too. You know? And so if you don't, you know, have that core understanding that, you know, empathy for both sides then you're gonna have these issues. So I think there's a lot to work out there, but I think it's possible to have positive dialogue, you know?

Daniel Blaser (22:43):

Yeah, absolutely. I wanted to ask a question. You, you know, you, you brought up technology obviously that's where workstream kind of fits in, is, you know, kind of provide that, that kind of forward looking technology for quick si service, restaurants to hire and all that good stuff. What would you recommend, like, I mean, that's, that's a little bit more of technology on like the worker side of things. But how should franchisees and franchisees work together as they're optimizing kind of the labor side of things and using technology in that regard?

Aziz Hashim (23:23):

Yeah, so I think, you know, labor is probably the challenge of the day. And I believe it that it will continue to be the primary challenge for years to come, because we're not growing the labor force nearly as fast as we would like. And there are alternatives, as I mentioned, to working in restaurants and other franchises. Now, young people have lots of options, and no, I don't know about you, but most of the Uber I take I like to talk to the drivers. And more often than not, maybe 80% of the driver had worked in a restaurant at some point in their past, but they don't anymore. And when I ask them why, for, they say a variety of reasons but, you know, flexibility and the ability to work when they like, and, you know things of that nature always, always come up.

(24:05):

So that means that the labor force is not growing, but we still need to staff our restaurants. So technology has to be you know, involved. So here again we have a situation where the franchisor can provide leadership in identifying as part of their tech stack technologies that really work. You know, and I remember, you know, our interaction with workstream was such that, you know, our when we used to own fuzzies taco shop, which we don't anymore, but our team found fuzzies for our corporate restaurants, and it worked so well that they passed it along to the franchisees. And that's sort of, you know, how I even became aware of workstream in the first place. So here's an example of a franchisor looking out for technologies that can help, and then making those technologies available to their franchisee base.

(24:57):

So now, you know, every brand has a tech stack, and a big part of the tech stack is labor, but it's also food cost. It's also many other, you know areas of the business, scheduling and, and whatnot. And so technology will play a huge part moving forward. But all technologies, as you know, Daniel, are not created equal. And part of the franchisor's responsibility is to identify and vet tech solutions that work, that actually work, you know, and negotiate good deals for their for their franchisees. At the same time, franchisees are becoming more and more sophisticated, and sometimes our franchisees bring tech to us, and they say, look, we found this. We would like to try this. Okay? and on our side, we're quite open about that. There are some brands that are a little bit more, you know conservative there.

(25:52):

And, and rightfully so, you know, if, if they need, we need to protect what comes into our ecosystem, our technology ecosystem, to make sure that it doesn't you know, cause unintended, you know harm. But franchisees are now becoming more and more sophisticated. They have it departments of their own. You know, back in the day we didn't have that, you know you know, there was the, the, the fact the, the, the notion of a franchisee having a head of information technology was a crazy notion. Like, that's what we pay the franchisor for, you know, but not anymore because of the sheer amount of technology that's being brought into the restaurants, a lot of the larger franchisees are having to bring in their own technology officers, and sometimes they uncover solutions which they bring to the franchisor. So once again, we are talking about synergy, collaboration, dialogue, communication, trust, working as a partnership, you know, not like, Hey, I'm gonna tell you, you know what to use. Those days are like long gone, you know? So important. Very important.

Daniel Blaser (26:53):

Yeah. I had kind of a, a follow-up question. You know, obviously, like you said that the trust element is super important when it comes to a franchisee adopting that new technology that's been vetted. What would you say, like, from a practical standpoint, like you know, logistically, what would you say is like the number one obstacle for a franchisee not wanting to adopt new technology that's been recommended by the or?

Aziz Hashim (27:21):

I think there's a number of a number of factors. One is comfort, right? So not everybody is as comfortable with technology as the next person, right? So we, we can't assume that if you're a franchisee that somehow, you know, you'll be comfortable you know, downloading some software and doing something. So that's number one. Fear of change is always there. It's like, I don't wanna change anything. I don't wanna break anything, you know, I don't wanna make make a mistake. And I think those are very important things. Number three is just resources, right? I don't have the time, so busy, you know I always, I make a comment that, you know, I encourage franchisees to work on their business versus working in their business. If you work in the business, and sometimes you have to, because you know, you're short of help or whatever, but long term, you're not able to then expand your horizons because you're, you're too far, you're too deep in the weeds, you know of the business to be able to actually find solutions to help your business, you know?

(28:18):

So I think there are a number of reasons, but eventually I think people do catch on you know, peers, peer pressure in this, in this way works positively when people talk about it, you know, they can encourage their colleagues and fellow franchisees, look, I'm using it. It's great. You know, you should really try it. You know? And I think one of the things that we can do more is encourage franchisees to share their best practices with their colleagues, because there's nothing better than hearing it from your fellow franchisee, your franchise, or could say it's the best thing in the world, but, you know you'd much rather hear it from those who are actually using it, who are similarly situated to yourself and can provide you with, you know, candid feedback on Yeah. You know, this tech really works.

Daniel Blaser (29:01):

Yeah. Yeah. That makes a lot of sense. I have one more question for you if you have time.

Aziz Hashim (29:07):

Sure.

Daniel Blaser (29:08):

So this podcast, a lot of the people that listen to it are existing franchisees for different brands. Yeah. But we also have other people that maybe they're, they're employed by a franchisee, and that's like a kind of a dream down the road, right? They wanna open their own store at some point. Yeah. in the future, based on kind of our conversation today, and based on your perspective and your experience, what recommendations would you have either for the existing franchisees or those people that that's kind of a, a goal somewhere down the road?

Aziz Hashim (29:39):

No, I think one of, one of the things I was very keen in creating experiential brands was making it accessible to those who otherwise get cut out. For example, you know, if I were starting again today with the modest resources that my parents gave me 35 years ago, I wouldn't be able to make it because most franchises cost too much to open so on in experiential brands. What we decided is that, look, one of the primary ways that you will achieve the return on invested capital quickly is to make the invested capital low. I mean, it's not rocket science, right? If it costs less to open, you know, so what I tell, you know, so today, you know, we are entertaining franchisees that are huge multi-unit franchisees, some global that are coming to us and saying, Aziz, we want the suite of experiential brands because, you know, for the first time we can see that the capital required will be so you know, minor in comparison to, to other opportunities that we really like it.

(30:42):

But we're also getting people who work in the restaurants saying, look, I could never see my way to open a traditional franchise 'cause I would never qualify. The franchisor would never qualify me. I just don't have enough net worth to do it. And so what we've done is we've created a solution for both the very well-capitalized, experienced, large franchisees, but also for first time franchisees that are in the business, though they have to have, you know, the operational you know, expertise, but we can find ways for them to get into one of our in one of our brands at you know, surprisingly affordable prices that would appeal to many people. So I would say definitely to look us up and see if we can help you. And if we can't, you know, we can certainly provide direction and support to people if they're looking in other areas, you know, so

Daniel Blaser (31:33):

Areas. Yeah. Well, I wanna make sure that, is there a website you'd recommend people go to that they can learn, learn more?

Aziz Hashim (31:40):

Yeah, I think that the, the easiest way is to go to our primary brand, which is the original hot chicken. So just Google the original Hot chicken and just click on there for franchising and we'll get back. And our broader one is Experiential Brands, which has all of our brands in it. So those are at least two ways to, to, to get ahold of us and failing all of that, they can always reach out to me at nrdcapital.com and find us there as well.

Daniel Blaser (32:06):

Awesome. I'll I'll include some links in the show notes and everything. Perfect. So people, that can be easy. But well, Aziz, this has been a great conversation. I personally have learned a lot and I feel like the people that listen to this are gonna just really eat it up. So thank you.

Aziz Hashim (32:20):

Thanks for having me.

Daniel Blaser (32:27):

Thank you for listening to On The Clock. For more info, visit workstream.us/podcast. Until next time, we're clocking out.