Heather Elrod on the Franchise Investment Show

Heather Elrod talks with Laura Michaels, editor-in-chief of Franchise Times, about the start of Conscious Capital Growth and what makes for a good investment, including the industries, market segments, and qualities of an investment-worthy franchise brand. Watch the video or read the transcript below.



Laura Michaels, Franchise Times

Thank you, everyone, for joining us today for the franchise investment show. I'm Laura Michaels. I'm the editor of Franchise Times. And I'm excited to have with me today, Heather Elrod. Heather is a managing partner of Conscious Capital Growth, which she launched. And we'll get into how she launched that when she launched it as a platform to provide founders and CEOs with financial and strategic resources. I was able to get to know her a little bit when she was the CEO of Amazing Lash Studio. And we'll get into again, her background. Heather is a recognized leader in franchising. And so, we're fortunate to have her with us today. So welcome to you, Heather.


Heather Elrod, Conscious Capital Growth

And good to be here.


Laura Michaels, Franchise Times

Wonderful. If you could start by telling us, you know, a little bit more about your background. Of course, you know, it runs the gamut of industries a little bit, of course, specializing in beauty and wellness space, and then talk a little bit about the formation of the new platform.


Heather Elrod, Conscious Capital Growth

Yes, absolutely. So, I've been in franchising for nearly 30 years now; I cut my teeth when I was in my 20s, after graduating college, and worked my way up in a number of different businesses, ending up as an executive for Mailboxes, Etc. (MBE), which we sold, of course, to UPS, and it became the UPS Store. So, MBE was very large, is a very large franchise of 4,500 locations worldwide. So, I've done the large scale in a multibillion-dollar company, but also with small, emerging franchisors, helping those businesses and leading them to grow to a point where they can experience a transaction with private equity or strategic buyer for the benefit of all stakeholders. And so, I find the growth stage of franchising really fulfilling. I love working with founders to help them grow their businesses and realize their dreams. That's partially why my partner, Christo Demitriades, and I formed Conscious Capital Growth.


Laura Michaels, Franchise Times

Fantastic. And so, you know, tell me a little bit about the formation of the company and what you hope to accomplish. I know, you know, it wasn't too long ago that you made your first investment in Main Squeeze Juice Co. So, tell us just a little bit about the goals of the company and what you want to accomplish.


Heather Elrod, Conscious Capital Growth

Christo, my partner, as I mentioned, and I we've known each other for a number of years. And we have shared values in terms of how we approach businesses and people, and always knew we wanted to invest and start a business venture together. And the timing worked out last year for us to do just that. He was exiting a business venture, his investment in Lunchbox Wax. I had left my CEO position at Amazing Lash Studio to focus solely on transactional work. And so, we launched Conscious Capital Growth in Q4 of last year with the intent of connecting founders and C-suite executives with the right capital sources to fuel their growth and accelerate their growth.


But also, we have a platform of services to help those leaders within the business units achieve that outpaced growth in a really healthy way. And so, it starts, of course, with growth, with franchise development and real estate, getting those locations open. Then our primary focus is on unit profitability; the franchisor and franchisee success are inextricably connected, as we know. And you know, unfortunately, there are some franchisors who lose sight of that. And that has to be the first priority. So, we're always looking at how to increase the average unit volumes and how to increase profitability at the unit level because the franchisor will then be successful as well. So our support after an investment is largely behind the scenes in terms of providing business intelligence to the business units and covering and unlocking the growth potential that optimizes performance for the franchisor and the franchisees.


Laura Michaels, Franchise Times

Wonderful, and so speaking of, you know, growth potential, what is your thinking behind a brand that, you know, potentially does have that opportunity to grow? You know, how do you spot that concept that you know has that potential that you're looking for?


Heather Elrod, Conscious Capital Growth

We predominantly look for businesses that are at the bottom of the hockey stick of growth. So typically, these are businesses first and foremost in the right industries. We're industry agnostic. So, we focus predominantly on wellness, on lifestyle, on a health, on beauty. We love the pet space as well. But irrespective of that, it's really the opportunity, the business, and a market segment that is positioned for high growth that there's a lot of attraction for the consumer. Then we look for ways that Conscious Capital Growth can accelerate the franchise for growth. And that is through consumer insights. It's through the business intelligence. And it's the capital.


You know, often, particularly the younger franchise systems, they just don't have the capital for growth. And so, we can inject that. Then, you know, all of us here at Conscious Capital have around 30 years’ experience in franchising. And so, we've had, you know, some wonderful mountaintop experiences for which we're all pleased. And, you know, we've had our pitfalls, too. We've learned a lot through the University of Hard Knocks. And so, just sharing that institutional knowledge with franchisors helps them to avoid those mistakes we've made along the way and achieve outpaced growth as a result of that.


Laura Michaels, Franchise Times

Fabulous, yeah, that is, you know, having a line into people that have been there and done that is hugely beneficial for those young franchisors. And so, you mentioned a few segments, you know, that the group is interested in. Can you talk about why those areas specifically? I know you said you're technically segment agnostic, but are there particularly high-growth segments within franchising that you're paying attention to?


Heather Elrod, Conscious Capital Growth

Certainly, so you mentioned our investment in Main Squeeze Juice Co., and that brand is just a phenomenal focus. Well, I view it, of course, it's food & beverage, but I view it more as a wellness investment as well because it's cold-pressed juices. So, you get the full nutrient load from unpasteurized. It is smoothies that are all plant-based food menu items that are all plant-based and gluten-free. And so, it really is about wellness and staying healthy, which clearly is a focus for all of us on the other side of COVID. And so that brand has 30 locations now, another 60 sold, and we are accelerating that growth, but also working on a number of things like reducing food costs and labor costs that benefit the franchisees. So that's an example where it really, in our view, is more of a wellness play. So we look for those, as you know, it's our mission statement “to improve people's lives,” we look for those investment opportunities that do just that. Obviously, we have a background in beauty, and so that's something, a segment I know very well. And so, we're looking for those investments also. You know, we have five deals in our pipeline right now that are in some stage of due diligence, progressing to the transaction closing. So our pipeline has been quite robust, and we look first and foremost, as we always encourage franchisees to do, to look at the opportunity for success at the unit level. And then how can we build on that? And how can we assist the franchisor? And those founders in that C-suite team to accelerate that growth?


Laura Michaels, Franchise Times

Yes, that wellness kind of lifestyle, halo—I see so many brands, you know, trying to touch on that no matter what segment they're in, whether they're a restaurant or whether they're, truly a wellness brand, in massage or something. But especially the restaurant side, we're seeing so many brands in that health space that are looking to attach themselves more to a lifestyle halo or wellness halo, which I think will be a big boon for them going forward.


Heather Elrod, Conscious Capital Growth

Oh, absolutely. And part of what drew us to the Main Squeeze brand, first and foremost, the team. You know, an exceptional leadership team there. And speaking with the franchisees and their passion around the brand. I think it's largely what you're saying here, there's this emotional pull because, in the case of Main Squeeze, it's transformational for the consumer. In fact, every single one of their franchisees to date was a customer first. And were so drawn to the brand by how they felt that they invested as a franchisee, and I think that's a fabulous litmus test for any franchisee looking for investment.


Laura Michaels, Franchise Times

Yep, absolutely. And, you know, thinking about our audience of existing franchisees and prospective franchisees, do you have any insight or advice that you would want to share as they're evaluating brands? You know, given kind of the uncertainty that's still out there in today's environment?


Heather Elrod, Conscious Capital Growth

Certainly, I mean, I think every investor is, and including us, looking at opportunities with a lens, a recession lens. And, you know, is this a business model that we'll be able to sustain during the recession—that seems every economist has a different opinion on whether we're going in or coming out with it—but it's something to be cognizant about for certain. And so we're looking there. Then, you know, the responsibility of the franchisor is to ensure that the business model works. And so that should be the starting point for any evaluation as a franchisor or institutional investor: does the business work? Do the unit economics work? And from there, my recommendation is that then it's all about the people, the culture. And this is something we are very purposeful about at Conscious Capital. That every entrepreneur, at the young stage of business, the growth and emergence stage, that there's this soul of the business, the culture, the energy, the innovation.


And, sadly, often, when there's outside investment, particularly when it's an institutional investment, that soul is ripped straight away. But that's what made it special, to begin with. And so, we are very purposeful in ensuring that we don't do that. And that we're enabling the growth, which includes applying the systems and the processes that are requisite to grow in a healthy way while enabling the business to retain that culture. Because it is franchising to me, really beyond any other business model is about relationships. The relationship between the franchisor and the franchisee is so essential. The franchise business model enables the franchisee to achieve the American dream and the franchisor. You know, and I have said for many years, that the beauty of the franchise model is that you're in business for yourself, but not by yourself. So, it is a partnership, and retaining the health of that partnership and that relationship is just critical to the success of both the franchisee and the franchisor. I think it’s essential to get to know the team, understand the culture, talk to the franchisees look at that top quartile in the system, and identify how they got there and how you can get there.


Laura Michaels, Franchise Times

Yeah, those top performers are a great place to start, and then looking, you know, depending on what brands disclose, looking throughout, you know, their Item 19, of course, is always helpful, trying to look at people across the spectrum, depending on who's being highlighted. You know that relationship piece that you talked about has become—it's always been important—but the last couple of years has really put that to the test. And so, I think franchisees are definitely thinking about that, as they're going into and evaluating brands is, you know, what is this going to look like if we hit some hard times. That's definitely a consideration. I'm hearing a lot more about.


Heather Elrod, Conscious Capital Growth

100%.


Laura Michaels, Franchise Times

Wonderful. Well, I wish we had, you know, all day to keep talking. I appreciate so much your time and your insights. And so want to say thank you to Heather and thank you to our audience for joining us. We'll definitely have you for more coverage of the moves that you guys are making over Conscious Capital Growth as you continue to add brands, so look forward to staying in touch. And our audience can, of course, check out FranchiseTimes.com for news within the industry. Our September issue is now out with our cover story on rapper 2 Chainz and Crystal restaurants, and their partnership. So, head over to FranchiseTimes.com to check that out. And stay tuned for our three presenting brands Fazzoli’s, Mugshots, and the Toasted Yolk Cafe.


Heather Elrod, Conscious Capital Growth

Thanks, Laura. Great to be with you.