Why I'd Rather Own 10 Average Shops Than One Home Run | 356

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Transcript

SPEAKER_00 0:00

Welcome back to the Business of Beers Podcast, your daily dose of strategies, tools, and tips to help you build an eight-figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.

SPEAKER_01 0:16

I would rather have 10 locations each doing a very consistent number than saying, hey, we got this one master like Cash Cow. It's like, A, I guess A, understanding the business model, B, understanding like what are the downsides, what is the current cash flow, and then how do I scale it? Like, is it all worth it? I think that's for me like the biggest thing. It's like if I'm gonna put the time and the effort and take the risk and hire the people and do all the work, whatever I do, I want to make sure the juice is worth the squeeze. Because there's lots of ways to make money, there's lots of brands out there. And so you want to make sure that whatever you're gonna do is gonna be worth it. Eight units is a good, is a pretty good number in terms of like you gotta have a good ratio between between uh district managers to locations. Now, in our business, in these businesses, it's it's probably gonna be like like five, six-ish, maybe seven locations, kind of kind of like max, maybe eight. It it really depends on how much hands-on work they need. You know, our DMs in our business, I mean, we have uh they they each cover about six to seven locations. And you know, the DM in in the model is the one who's directly responsible for hiring people, holding everybody accountable, like dealing with like you know, if there's customer issues to resolve, uh, payment issues, just like they're like the main point of contact at the multi-unit level, and then the five DMs report up to the to the you know CEO, CO uh CFOs, and um, and then they report to me. And so if you're gonna start with a package, right, it is kind of nice to have enough stores that can support then you know the salary of the district manager. So I think that's like that's like a pretty good established thing. Maybe you have two people or you have like a senior one and a junior one to be able to cover eight, you'd have to figure all that out. Uh and this is how I like this is how I think about it. Like this is like my whole whole business. It's like if I can if I can get to 150,000 a store, if I have seven stores, right, it's a it's a that's a million dollars a year. Then if we can get to 175, right, we could pick up another location, and you know, whether we're at 14. And it's the same, it's the same idea of like I I view it as what can I get each location to on a on a per profit per year location, and then can we scale it, you know, from you maybe you start one or two or five or whatever it is. If you can do five, then can you get six, can you get eight? Can you can you start to stack these where all of a sudden there's other guys that want to get out or gals that want to get out? And you know, we can build a business with 20 or you know, I mean 30, 35, right? Like, and and then you focus, maybe at a certain point of iron, we have like enough locations for volume, but then but then the real levers are you know, can we get to to 220 a store, 230 a store, 250 a store, and you know, multiplied by a number of locations, that's where that's where it really that's where it really starts to add up. But so it's somewhat of a mentality, right? Of like in the franchise business where it's this per unit game. And if you can, if you can conceptualize that, you know, I I personally don't care about, you know, I I care more about the consistency across the board. Like I would rather have you know a bunch of locations making 200k each, right, than saying, all right, I got this like one location that makes a million dollars or whatever, and then I have a bunch of locations that make like nothing. Because in a you you do think about like you diversify your risk. And what when you have m more locations at a consistent number, you're less like susceptible to like you know, single point of failures. Where if if you have another business that's say, hey, you know, if if I was like, let's just say uh the other way, one, two, three, five uh uh, let's just do this. Um and I and I've and we've had this in the past where you know we had one location making eight hundred thousand dollars, and then something happens or whatever, sales don't go as good the next year, right? And and this is kind of how some people operate. They'll have like one store that like makes you know 50% of the money versus you know, can we have a bunch of stores that do you know consist consistent numbers? And at the end of the day, it's like the same amount of money, but it's it's it's it's also where do you put your efforts, right? And and and how do you view the whole business? Um, and so a lot of how I approach it is is like this. And so when I see, when I think about new concepts or like partnering with people or investing in things, you know, what I what I really want to model out is like what is like the single unit box look like. And so for this case, it's like what do we think this thing could cash flow as it is today? And the day we buy it, is it profitable? In this case, it is close to being profitable. Uh, it's not that far off. And then, you know, if we can get the revenue up to average numbers, how much money can we make? Right? Like, I think a good, a good like barometer for for any franchise is an and I heard this once from a like a really successful franchisee. It's like you want an average performing franchisee running an average volume location and an average like geographical location to make a good amount, uh, you know, an a good return on their money is like the easiest way to think it. Like you want you you want an average, average person, so like you don't you don't want to have to be like a rock star to be able to be successful, right? Doing average volume, so the the volume that you're gonna do at your location is consistent across the other. And so you don't have to be like, you know, a top 10 thing in an average location. Because like there's some brands that you look at in some of these deals that that um, and then all this should equal, like, you know, uh I'm gonna say suitable, right? Like a suitable return on your on your investment that that that you are happy and willing to willing to willing to take. Otherwise, like if a franchise is like you gotta be the best performer in the country with doing the top quartile and volume at a killer like A plus location that not many exist to be able to equal a suitable return on your investment, that means like otherwise you're gonna like not do very well at all if if you're not the best at all. And like part of the goal of a franchise, right, is that is this that like not anybody, you know, but like people who are good leaders and are driven and want to be entrepreneurs and are willing to do the work, but like, you know, the average entrepreneur can can can make it can make it work. And so if you're gonna buy, like if you're gonna get into a value add situation, like you want to like do the roll-up play. Even a lot of the stores that I bought, like, you know, the 35 stores, like I want to say a good, I mean a good amount of them were below average volume. So like not terrible, not terrible, terrible stores. Some of them, I mean we've we've we've purchased literally the worst store in the market that is now doing well and and profitable. Uh and so like we've proved it to ourselves that we can go and take bad stores and like make them better. Um But you know, overall, you you you want to be able to prove it. So that's what I would look at. I would if if you're gonna look into like I want to impl, I want to copy Brian's like roll-up play, uh, know that like a lot of times, at least what I was buying and what you would probably have to buy are below average locations that are barely making money, and you have to have the ability to go and turn them around and like get them up to you know average. Or right now, you know, we're we're above average uh in terms of Midas. I don't think I I think the system average might be you know one three, something like that, and we're like one, four, one five. So we're like we're above it, but we're not like cr crushing it. And you know, our locations are you know average, like we don't have killer A plus locations, and and you know, we we get a good return. So um that's what I would work to to to start modeling out if you said, Hey, I want to I I'm like interested in getting into this. I think Burger King could be an opportunity. Uh it's like making sure we we model out and you're like super comfortable with it, uh, and then we go from there.