Franchise Models and the Power of Incentives

An Interview with Rick Hermanns, the CEO of HireQuest

I think you should listen to an interview I did with Rick Hermanns, the CEO of HireQuest (NASDAQ: HQI), a franchise staffing company. Why in the world would you want to spend the next hour listening to a conversation with the CEO of a small staffing company? Well let’s start off by talking about pizza. In the past ten years, Domino’s Pizza is up over 4000%. Why? Because they have perfected a franchise system that provides value to everyone in the ecosystem. A properly built franchise is a cash flow machine with incredibly high margins and when it grows can provide incredible returns for shareholders.

I interviewed Rick because after three decades in the staffing industry, I believe he has perfected a franchise system that aligns incentives and creates value for everyone involved in staffing. I also believe he is one of the best CEOs I’ve come across. Please note that I’m an investor in HireQuest and last year, I posted an in depth research report here:

HireQuest Research Report

This interview is my attempt to understand why Rick and HireQuest went public. After all, his private business was already printing cash flow. And how he went public was remarkable, he bought Command Center, an underperforming staffing company and then converted it to his franchise model. And when you look back through the numbers, you will find that HireQuest was able to go public and buy a much larger company for free with no debt.

In this interview you will get a sense of the size and breadth of the opportunity that Rick sees. HireQuest is not only growing in the commercial staffing industry, but also looking at potentially expanding into security guards, landscaping, janitorial sectors and more.

Pay close attention to his idea of rolling down an industry, not rolling one up. That is where you are trying to bring agency and incentives to the people are actually running the local staffing branches.

This interview is my attempt to learn from Rick. And I hope you enjoy our conversation.

Here is the interview: