Dental Fix CEO learns lessons one sip at a time
“You have to motivate yourself to the point that you drink your own Kool-Aid, because the second you don’t, nobody else will either,” says David Lopez, CEO of Dental Fix RX and an investor in many other ventures.
FT: You got going in business at a young age.
David Lopez: I’m 34 now. I started when I was 19, when I was in college. I worked as an intern for a very large publicly traded company. They laid off a thousand people. I was cheap, so I somehow stayed. I remember witnessing that process and it sunk in.
I started dating my now wife when I was 15, and I went home and said I wanted to open up my own business.
FT: Wait, you were 15 when you met your wife?
Lopez: I met her and—I’m a guy who knows what he wants. [laughs] I had worked and I took out student loans, maxed my credit cards, and opened a juice bar inside the college cafeteria.
FT: That became Froots, which grew until you sold it in 2008, and now has about 40 units.
Lopez: We grew the company, but what I learned in that first business was really what obstacles there are in making a franchise very successful. When I looked at the restaurant business, you look at the personnel you have and then you look at the inventory. And what’s the worst type of inventory that you can have? An inventory that goes bad, that spoils. Plus you have personal guarantees with landlords. I just learned from that business what I didn’t want to do.
I also felt that in franchising you can’t just provide someone with a business model and expect to get a royalty for that. Over time people feel they’re paying the royalty but don’t feel they’re getting value.
FT: So then you found Dental Fix RX. What was attractive about it?
Lopez: I had a friend who was going to go to dental offices and fix dental equipment on-site. I looked at the inventory—it doesn’t go bad. Most of our franchise owners are getting in for $25 grand down. If you don’t make it, your life isn’t being destroyed. Being out $25,000 or $30,000 is a lot different than being out $300 grand.
I thought, what services can I provide to you in a truck, that I can make money on and you are better off by my outsourcing those services to you, and you’re going to be more profitable as a franchisee with me, better than you would be as an independent? Then it’s a good franchise.
Also, don’t go multi-unit either, that’s a Ponzi scheme. How many of them open all those in the agreement? My idea is, once you’re profitable, you can open another one.
FT: A Ponzi scheme? That’s a provocative statement, which we’ll come back to. You recently bought into Tikiz as well.
Lopez: Dental Fix is a phenomenal business. Tikiz is another one. We made an investment and acquired a minority position. The guy who’s running the business is one of my closest friends. It’s a very low investment, it’s easy to execute.
FT: It is food, though, which you had sworn off.
Lopez: Hence my hesitation. What overrode it was proof of concept that he showed me. And I now have three children, 4, 6 and 7. It’s something about kids and family. We’re in the process of completely revamping the product. Mostly it’s sugar water. We’re revamping that to make it a healthy shaved ice product.
FT: And what about Dr. G’s, a weight-loss business? You started to franchise it but are no longer doing so.
Lopez: We were selling to doctors, and doctors didn’t want to put Dr. G’s on their clinic if their name is Dr. Johnson, or whatever. It’s a great business to add onto an existing practice. If I’m an OB/GYN, I can put 10 patients on my weight loss program.
FT: Earlier you said you don’t sell multi-unit deals and even called them a Ponzi scheme. That’s pretty harsh.
Lopez: When somebody buys a franchise, the reality is you think because you give them an FDD they’re making an informed decision. That’s just not the reality. The reality is when people buy a franchise, it is an emotional sale.
If I was saying to you, quit working for Franchise Times, take your life savings—because that’s what 99 percent of the people are doing—and invest that into a cookie store, it’s completely an emotional decision. The problem is as a franchisor, you can’t control the ability of the franchisee to be successful or not.
If you bought a Dental Fix franchise, and were in the top third of operators, you would be in the top third of any system.
FT: So how do you deal with that bottom third?
Lopez: You’re going to have a certain percentage of franchisees who are going to fail. What’s going to happen? I’ve been with franchisees crying, saying ‘my wife is leaving me, my landlord is suing me.’ I do not want to be in that situation. I look for systems where that doesn’t happen.
My conversation is, if it’s not working, I say get out now. I want it to be as painless as possible for anybody to get out. And before it ever gets to that point, at the beginning, I say if you don’t make it you’re going to lose $35,000 to $40,000.
FT: You emphasize the possible down sides.
Lopez: My salespeople don’t like it when I say that. To me, I’m at a point now where I don’t need the money.
FT: You’ve said you’re a partner in 46 different companies, and many of those have done very well and some have failed. What happened at some of the failures?
Lopez: I’ll think of one called Battery Fix, it’s a playoff of Dental Fix. Why didn’t it work? The entrepreneur running the business wasn’t all in. So on that one, we lost money. The partners that invested in that also lost money. I won’t make that mistake again. By the way, look at Froots, the biggest nightmare in the world.
FT: Froots is doing well now, but you mean because you were closing so many stores in the 2000s, before you sold the chain?
Lopez: Yet we didn’t have any franchisees suing us. You know the attorney Robert Zarco, who represents only franchisees, but he also represents me and he represents any company I’m involved with. I call him up, and he says, ‘David, do the right thing.’ At the end of the day, you have to live with yourself.
FT: So what’s the common denominator in all your businesses?
Lopez: If you’re in the business of selling business opportunities, you need to be providing a very good opportunity. And that needs to be easy to run and you need to be able to provide value to the franchisee, and value is they’re more profitable with you than on their own. Dental Fix, we had our best year this past year. We sold 70 franchises. I could have sold 140.
FT: You didn’t because you don’t sell multiple units?
Lopez: You’re playing off their fears to get them to buy another franchise. My franchise fee is $40,000. If I would have sold another 70 franchises, I would have had $2.5 million, and David Lopez would have made $2 million. But if I don’t think I should do it, then I don’t do it.
FT: What’s one lesson you’ve learned about being an entrepreneur?
Lopez: It is hard, hard work, and if you quit you’ll never succeed. When I started Dental Fix, I thought it would cost me $250,000 and a year to franchise. It took $4 million and four years. Every decision you make that’s wrong costs you money. I don’t think most people are emotionally prepared for the days I would sit in my driveway and burst into tears because I didn’t know how to make payroll on Friday.
A lot of people can’t handle that. You have to motivate yourself to the point that you drink your own Kool-Aid, because the second you don’t nobody else will either.