Dennis McKinley With Detroit Equities

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Lee Kantor: [00:00:32] Lee Kantor here, another episode of Franchise Marketing Radio, and this is going to be a good one today on the show, we got Dennis McKinley with Detroit Equities, home of the original Hot Dog Factory and Cru Hemp Lounge. Welcome Dennis.

Dennis Mckinley: [00:00:49] And they thank you for having me, I appreciate it. Look forward to chatting about franchising today.

Lee Kantor: [00:00:54] Absolutely. So how did you get into the franchise business?

Dennis Mckinley: [00:00:58] Well, the short story is I was on the other end of the stick. You know, I originally was a Subway franchisee. And you know, I thought, totally, you know, something totally different when I wanted to say, Hey, I want to open a subway. Right? I thought it was, Hey, it’s subway, but I’m doing my own thing, right? And I quickly learned that’s not what franchising is about. So Subway was my first university into what franchising really is.

Lee Kantor: [00:01:23] So what is it? How was it different than you anticipated?

Dennis Mckinley: [00:01:27] Well, you know, you see a subway on every corner and you kind of really don’t realize that, you know, even though you are an owner or franchise partner, you know, Subway sets the rules. They set the menu, they set the pricing right. They set the hours of operation. So really, you know, it’s not Dennis McKinley subway. It is Subway. So I was introduced to really, you know what a franchise model really is. You know, you got rules, you got regulations, you have brand standards, really introduced me. What a brand really is, right? And it’s not so much about you as it’s managing and understanding what a system is.

Lee Kantor: [00:02:07] So did you sell that? Is that how that story ended?

Dennis Mckinley: [00:02:11] Yeah. You know, I got up to four locations and I quickly realized that, you know, Subway is probably making a little more than me. So I sold that and look for some other opportunities. But I say, you know what? My ultimate goal is? I think I want to be a franchise. All right. I’ll see some things that could probably be improved. Some things that I thought that weren’t too fair for franchise partners, and I said I always wanted to be a franchise or if I got the opportunity and found a brand, that would work.

Lee Kantor: [00:02:42] So then how did you did you kind of come up with your own brand or did you find kind of a mom and pop that you thought was doing good work and partnering with them?

Dennis Mckinley: [00:02:52] Yeah, a mixture of both. So what happened was, you know, I’m from Detroit, and if anybody out there been to Detroit or understands Detroit food culture, they know that we love our Coney Island hot dogs, right? There’s a Coney Island on every corner in Detroit, basically, which is a a beef hot dog with, you know, chili onion mustard. But, you know, after I graduated from the University of Michigan, I traveled all around this country and I quickly noticed that one. But for one thing, everybody loves hot dogs, right? But but the second most important thing is it doesn’t matter where you go across this country. Everybody likes something different on their hot dog. So with the Chicago, you know they got the Chicago dog, right? You go to New York. They love some sauerkraut and brown mustard. You go out to Seattle. They put cream cheese and onions on their dog. And I said, Man, you know what? If I could just put every hot dog originally from across this country? Put it under one roof? That may work. So I was in Atlanta at the time. You know, so, you know, one of my businesses and I would try to find my next thing and I had a craving for a hot dog. I went into this place called the original hot dog factory, and they only had, you know, three or four dogs. I said, this may be my opportunity. And I went in there and I talked to the owner every day until he sold it to me. He sold it to me. I changed the menu. I put every hot dog that I’ve experienced personally and I can find regionally. That’s that was the new original Hot Dog Factory. Twenty five hot dogs from across the country. And it was reborn in 2015.

Lee Kantor: [00:04:26] So then you took an existing it was a mom and pop a single location.

Dennis Mckinley: [00:04:30] Yes, single location, mom and pop. And I scaled it.

Lee Kantor: [00:04:36] And then you just kind of used your franchise magic to improve it and then take it to a new level.

Dennis Mckinley: [00:04:43] Indeed. You know, what happened was, you know, we changed that menu. People started rushing through the door and people were asking, Hey, why don’t you have one on the east side? Hey, why don’t you have one down here in Columbus, Georgia? Hey, I’m from Detroit. This would work up there. And I said, You know what? There’s a demand. And you know, franchising is the the fastest way to scale.

Lee Kantor: [00:05:05] Now, when you took them over, did they have kind of the playbook that most franchises have or is that something you had to develop and you kind of used your previous knowledge on how to build that?

Dennis Mckinley: [00:05:17] Yeah, not at all. I mean, they were just a mom and pop. They didn’t even even have recipes. So we started from scratch. You know, we took some time to, of course, perfected menu, get our vendors together. And then we we developed the franchise playbook from scratch.

Lee Kantor: [00:05:33] Now is that something that emerging franchises kind of don’t put enough time into?

Dennis Mckinley: [00:05:40] You know, I think so. You know, I talked to probably, you know, five or 10 concepts a week with people saying, Hey, I got a great idea. You know, this is good, I think, you know, we could franchise and the most common thing I always miss is just, first of all, menu development, right? You got to have a real good hold on. If I take this out of my city and go to another state, am I going to have the same vendor relationships, right? That, you know, they don’t put enough time into just mean you develop and making sure that this is going to be able to scale? Not only are people going to like your concept when you go to a different state, but can you make sure it tastes the same, right? And that vendor relationship is critically undervalued. You know, when you talk about franchising

Lee Kantor: [00:06:27] Now in your work, you kind of went from hot dogs to hemp. How did that transition happen? Was it the same thing? You found something out there. There was a mom and pop that you said, Hey, I can scale this.

Dennis Mckinley: [00:06:40] Well, I got to be honest with you. Just, you know, franchising crew was. That was that just happened because of, you know, also also demand, you know, when I was when I had another business crew was across the street from my office. So admittedly I got to tell you, Lee, I used to go there, you know, pretty much every day after work and I would entertain clients, et cetera. And one day I looked at my bill and I said, Man, I just spent a thousand bucks on here. If I owned the place, maybe just maybe I would spend as much cash in here. So I talked to the owner and I bought it right. And you know, another thing I was inspired by a club out in New York City and I took, you know, a piece of what they had going on and I remixed it and we called it crew. Now down south and just, you know, culturally around the country, like hookah is like becoming a phenomenon. You know, all the kids like to smoke hookah while they drink, you know, and eat foods. So we’re not a club, right? We’re not a lounge. We’re like a we’re not a restaurant, we’re a hybrid of all three. And I concept work, right? So, you know, we were getting very popular in Atlanta and people used to come from all over the country. You know, Atlanta is a hotbed for transients and entertainment. They call Atlanta Black Hollywood. People were like, Hey, man, why isn’t this in Houston? Hey, we will this work well in Charlotte? And the light bulb went off and enough people start asking me and I say, You know what? Let me replicate this model as well. And that’s how crew helped launch a franchise and was born as well.

Lee Kantor: [00:08:12] Now is crew stand alone, or is that something that if I have maybe a restaurant or a bar, I can just have a crew inside of my existing location?

Dennis Mckinley: [00:08:21] No, when we look for a second generation, you know, restaurants and bars, you know? So no, you cannot have that as a standalone. I mean, that’s an entire package.

Lee Kantor: [00:08:32] So it’s the entire package. So you have to kind of go all in.

Dennis Mckinley: [00:08:37] Yes, sir. Yes, sir.

Lee Kantor: [00:08:38] Now is it different kind of scaling a hemp crew rather than a restaurant or is it kind of the same? It doesn’t matter now. Now that you got the recipe to scale, you can just plug and play whatever concept you’re dealing with.

Dennis Mckinley: [00:08:55] Yeah, you know, at the end of the day, you know, franchising, you know, in my opinion, is all about the real estate. You know, your concept has got to work with landlords. You know, landlords already have an idea when they build something out, they already have square footage. If you know that information before you get a concept going, I think you’ll win big time. That’s what I really didn’t understand. What the hot dog factory, right? Hot Dog Factory. We prefer spaces that are about eight hundred square feet. Well, guess what? No landlord has spaces, you know, eight hundred square feet. They’re normally about a twelve hundred. So, you know, look, when you’re franchised, you’ve got to understand both sides of the game. And I think real estate is very important. You need to understand that Game two so crew a little easier to find space where about three thousand square feet, second generation restaurants, you know, do the Koven. I mean, there are tons of opportunity out here for those spaces, so it’s been a little easier skill versus the hot dog.

Lee Kantor: [00:09:56] So now what’s next? Are you just looking for brands?

Dennis Mckinley: [00:10:01] Oh, definitely. I mean, we’re always looking for brands. We do about again, about five to seven interviews a week just, you know, looking for different opportunities. I’ve had some, some good graces here in the past where we’ve got into some brands helped them scale and ultimately exit. So we’re always looking for brands. You know, I’m pretty agnostic, but definitely I’m a foodie, so I do love concepts that are centered around food. But I look at anything we’ve invested, you know, into CBD stores and party bus transportation businesses. We’ve also did some meal meal planning work as well. So look, I’m really foodie centric, but I love culture, so I love things that are hot or you know that we will be hot tomorrow. So definitely if anybody’s out there and they have a concept that they think that could scale or they can franchise, definitely contact us

Lee Kantor: [00:11:00] Now when they work with you. Is that something that you just buy them outright or you do a joint venture? What is the relationship typically look like?

Dennis Mckinley: [00:11:08] Yeah, normally we do 50 50, you know, based on, you know, what’s really involved in, you know, how far they’ve already scaled, right? You know, I am, you know, founder and entrepreneur friendly, right? I think if you, you know, have more than one location that takes a factor. How long have you been in business that takes this factor, right? How much work we need to put into fixing, you know, what’s needed to get to that next level? Oh, that’s always a factor. But we try. We try to normally go in and say different departments.

Lee Kantor: [00:11:37] Now, when you’re working with folks or working with your own brands, how do you attract other franchisees? How have you cracked the code on that? Because a lot of folks struggle in that area?

Dennis Mckinley: [00:11:48] Yeah. Well, I’ll tell you what you know, I always ask during this interview process with new brands how many people have already asked about franchising? I mean, you wouldn’t believe how many of our franchise partners are just fans of the brand. They just love the brand, right? That’s where are you going to get the most traction, right? Because you have people who are not just in it for the cash, right? They actually love the brand. It’s a difference. You know, people can throw money around, but you know, if they’re just looking to make a buck out of it and they don’t have a passion for what you’re doing, that makes getting even tough.

Lee Kantor: [00:12:25] Now, is there any kind of sweet spot in terms of the investment that you typically work with or the investment could be anything depending on the brand?

Dennis Mckinley: [00:12:35] Yeah, it could be anything depending on the brand, you know, that is very, you know, from, you know, twenty five grand, which is normally average PhD, work up to half a million bucks depending on what’s needed and what stage they are in their development. Of course, every brand the investment, initial investment to get location to open are different, so it depends on what kind of infrastructure that they have, right? We need that employee employees, et cetera. So it varies. But look, there is a sweet spot. You know, at the end of the day, it’s all about the brand, it’s all about what you’re selling and it’s all about, you know, that fan base that you created from what you’re doing.

Lee Kantor: [00:13:16] Now, any advice for the person that maybe is a mom and pop and how do they know if they have something that could scale?

Dennis Mckinley: [00:13:26] Yeah. Well, I mean, people always ask me like, OK, I gave you all this stuff. We’ve done all these interviews. You’ve been to my location five times. Like, what’s the mathematical equation to know? You know, being an investor, right? And really, to be totally honest with you. Look, we can do spreadsheets and all that stuff, which is important to investors and banks. You know, analysts, et cetera. But really, it’s about the good right where you go in there and you can kind of tell, you know, is this owner passionate? You know, when people coming through the doors, are they excited to be here? Do they really love the food or is it just, you know, a convenience for them, right? Those things matter way more important in, you know, how much revenue you’re doing, how much cash you’re putting on the table, because that’s going to make the difference between, you know, 20 locations and possibly getting to that magic number of 100. Right? That’s the difference.

Lee Kantor: [00:14:18] Now what about advice for that franchisee like you, when you started out, you had some. I don’t want to call it a misstep, but a learning opportunity. How do you advise a franchisee to choose the right brand for them?

Dennis Mckinley: [00:14:37] Well, look, you know, a lot of people say, you know, hey, I want to own a restaurant, but. But guess what? That’s not enough, right? You got to really dig deep into what you’re passionate about and let your passion lead your choice of your venture. Because look, there’s a ton of franchise opportunities out here. Some better than others. And you got to really be careful, you know, when you dove in because these are not, you know, overnight projects. I mean, most franchise agreements are ten years. Ten years is a long time, right? So you got to make sure you understand that you’re doing these deals. You’re married, right? You guys are married. Of course, you can sell your franchise, et cetera, but it takes that initial work to get off the ground. You know, nothing is going to be profitable overnight, so you’ve got to really dig in and put work in if you expect to be successful.

Lee Kantor: [00:15:28] So now. So what? How do you kind of see the future? Like you said, there’s a lot of opportunity now with real estate because of COVID as we come out of COVID. You know, it seems like people are, you know, yearning for some back to normal stuff. What do you see in five years for Detroit equities?

Dennis Mckinley: [00:15:49] Well, I think we need to move where the future is going, right? I mean, if you look at a lot of real estate technology around where restaurants are doing with third party delivery, ghost kitchens, food trucks, you know, I really think, you know, any restaurant tour or any franchisees in the food business has got to take that part of business very seriously. You got to understand some of the trends going on right now. Vegan food is extremely popular. You know, look, we’re right around the corner from, you know, marijuana being legal here and probably the next three to five years. So I think that’s going to be a big part of the food industry as well. And also, look, every restaurant, every foodie. Really, it doesn’t matter what business you mean, everybody is having a tough time hiring. So I think you got to really look at really look at technology as it relates to automation and robots and how that’s going to affect your brand moving forward. If you’re a restaurant that’s going to make things from scratch, et cetera. Look, I don’t know, he may be in trouble long term, right? Technology is really going to take over for automation, flipping hamburgers from scratch without employees here in the next three or five years, I believe. So that’s that’s going to take a toll on some of these concepts.

Lee Kantor: [00:17:14] And the same goes with franchisees as well. Don’t don’t you need to have like kind of an app that you can do the whole transaction and then the franchise door can kind of keep track of things through that.

Dennis Mckinley: [00:17:24] And there’s a technology that’s coming out right now is making it very easy for franchise owners to to get data right. And that’s the big word right down to, you know, how is used, how is it going to be used in the future? What is going on now? Real time? So, yeah, most definitely.

Lee Kantor: [00:17:44] Well, congratulations on all the success if somebody wants to learn more about any of your opportunities or Detroit equities, if they have a brand they want to share with you. What is the best way to get a hold of you?

Dennis Mckinley: [00:17:54] No, I appreciate that. They go online at Detroit Equities. Click on the form. Submit your brand. I go out about three times a week all across the country just looking at brands and tasting food, you know, looking at different concepts. And it doesn’t have to just be, you know, food again. I mean, we’re pretty agnostic. We’ve invested it into a wide range of things. Looking at a kid brand right now, that’s very exciting. So look, it doesn’t matter what you have if you think that your business can be scaled. Reach out to us and we’ll see if we can work together.

Lee Kantor: [00:18:28] Good stuff. Well, thank you again for sharing your story. You’re doing important work and we appreciate you.

Dennis Mckinley: [00:18:32] I appreciate being on the show. I appreciate it. All you guys. Good luck. Keep at it and I’ll see you on the road soon.

Lee Kantor: [00:18:39] All right, this is Lee Kantor. We’ll see you all next time on Franchise Marketing Radio.