Acquisitions Anonymous - #1 for business buying, selling and operating - Challenges of Buying a $12.5M Refrigerated Trucking Company - Acquisitions Anonymous 316

Episode Date: July 19, 2024

In this episode, we talked about a $12.5M refrigerated trucking company for sale. We discussed the business's challenges, like dealing with both employees and owner-operators and the tricky financing involved. We also compare this company to big players like Cisco and US Foods and how they handle inventory differently. Businesses like this can be tricky, so tune in if you are interested in acquiring a similar one,Listing: This deal is on Axial. You'll have to sign up to check it out.Thanks to this week's sponsor:CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.Get more deals like this every week. Subscribe to our NewsletterSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

So maybe this is a good question for Heather. Heather already is out. I can see her feathers. I'm running away. I'm leaving now. And then Michael, to your point, I mean, it could be that the revenue is just this volatile. Like, they could have done 10 million in sales in 2018. We don't know.

Welcome back, everybody, to another episode of Acquisitions Anonymous, Mill Snell. We have all four co-hosts today. We talk about a really interesting axial.com deal. It's a cold refrigerated storage and transportation logistics company based somewhere in the, I think, mid-Atlantic. And we have a few years worth of financials. We talk about food supply chain. We talk about logistics. We talk about the Cappex related to businesses like this. A little bit of a spoiler. It's not very financible because it's mostly rolling stock. But, you know, businesses like this, it can be really tricky. If you're an outsider, like all four of us were, we're totally

speculating about a bunch of things related to this industry. And one insider could come in and absolutely poke holes in it or could blow the deal wide open in a good way. And so you'll hear us banter and talk about some of the different elements of this. And I think it makes for a good high level overview of this type of deal, but you obviously would have to double click and drill much deeper into the specifics of this industry, the volatility of labor, the volatility of pricing, the volatility of CAPEX, and the supply and demand dynamics could be all over the place. So hope you enjoy the episode. Stick around for a quick word from our sponsor. All right, taking a quick pause here, I have something to tell you. This is Michael. I hate

bookkeeping. I hate bookkeeping. I hate doing HR. I hate doing all that kind of stuff. But for bookkeeping, I have found a solution. It is my friend Charlie's business called cloud bookkeeping.com. So that's cloudbookkeeping.com. They are your perfect partner if you want to get bookkeeping out of your hair and focus on making your company, your customers happier and more successful. So please give them a call. Call Charlie, cloudbookkeeping.com. Tell them we sent you. They're a great way if you're a business buyer, if you're a business owner, you're tired of hassling with getting your bookkeeping done. He's got a whole fleet of people that are well trained and work for him. He's located here in St. Antonio, so I can tell you because of that, he's awesome.

And they're a great partner for you to potentially call to help with all your bookkeeping needs so you can do the important stuff in your business rather than worry about getting your books right. So give Charlie a call, cloudbookkeeping.com, and now back to the episode. All right. So guys, I'm gone for like a week and you guys managed to get the entire astroturf industry mad at us with the astroturf. Yeah. What happened? I totally missed this. Is this on Twitter or off Twitter? What's happening? I don't know if it was publicly on Twitter, but somebody was upset that I didn't really love the product personally. I wasn't talking so much about the deal. I was talking about the product. And they didn't like that. I said, I guess, I wouldn't even say it again.

I'm not going to say it again. I'm not going to say it. I decided I'd like it now. I like it. Wait, okay. So it was the artificial turf. It's the artificial turf episode. And you live in Southern California, which is basically like living in paradise.

So being, being biased and from Southern California, you're not a fan of artificial turf. You want real grass, sunshine, ocean waves. Right. Yes. Right. Right. Like beautiful weather. Rangbos.

Yes. Unicorns. Unicorns. Unicorns. All. of it. I thought that was what we all had. Come on. Well, it's interesting because this whole thing precipitated a discussion where there was a discussion internally. It's like, do we need to remind people that this is an entertainment first podcast? Like, do not. This is not a podcast that you should

count on for your business analysis. Like, we are here first and foremost to entertain. And if we teach you something along the way, like, great. But anyway, so it precipitated that discussion. So anyway, that's a disclaimer for today's episode. We know nothing. about these deals before we look at them. And if we say we don't like something, it's not an indictment against, you know, your livelihood. It was just my personal thing, you know, sorry. I'll try to like it more.

You're not, hey, you're not their target customer. That's all you have to say. That's right. I'm not the target. There you go. That's what I should have said. I mean, why do you think, do you think you get a higher percentage of people being very critical and man I mean I don't know a better way to say mansplaining you in the DMs like nobody you

I don't get that many so I will say it's not like there's numbers but I do think that as a woman sometimes they approach is a little more aggressive than they might approach a man you know they do definitely talk down a little more and you know kind of like put you right in your place so yeah there's a little bit of that but I don't get a lot of negative I really mostly get positive so I'm happy about that's good plus one for good people. To me, it would be a little bit like somebody saying, I don't have a dog and I don't like Bill's dog products.

And it's like, okay, well, you're not like, you're never, you're never going to buy one. It's okay. Try them. They taste terrible. Absolutely vile. Can't believe you sell this. It's so funny. Oh, yeah.

Well, so I guess it's an invitation for the listeners. If you do want to mansplain somebody, do it to Mills. Yeah, he's the one. Bring it on. I love it. That's what I get all day every day. He's the one that needs it. I'll just delete your crap.

Oh, man. All right. Well, hey, Bill. Welcome. Hello. I'm glad I got in just in time for you guys to say my dog, my dog treats taste like crap. I put it on, I put it on pizza. It doesn't, didn't help.

It did not work at all. Very upset. All right. I brought a deal that is something unlike anything we've done before. And I think it's also going to be super interesting. So that means that's why I think it's perfect for us. So it's off of Axiol. So I was I was browsing through there and it is a cold chain transportation and warehouse company. And the summary is it's a 25 year old established asset based refrigeration transportation company with a hybrid fleet of owner operators and company drivers. The company specializes in delivering frozen and temperature controlled freight. The client base consists of over 75 direct client accounts with an average of 13 years of service relationship. The company also owns at operates a state-of-the-art cold storage facility. So when I first, like, started in our fireworks business, like 20-something years ago, we had a

bunch of trailers that we had bought, and the old timers used to refer to them as reifers because they were refrigerated. I'm so glad. I'm so glad you brought this up. That's the one thing I know about cold storage is refer trailer. So I don't know if they're still called refers, but they are. Like all the greatest generation people I work with are like, go out there to refur trailer number 18 and see if you could find ex-Wazi. It's like, okay. So why, why are they called refers?

Refrigerator. Refrigerator. Yeah, they have the refrigerator units on the front. This reminds me of something from Gen X. We used to put in the files a little short note about following up and we would say F you as such a certain, certain date. And my daughter caught me writing that out on a deal because I'm still stuck I don't say it but I'm still stuck in that habit of jotting that note down she's like F you mom yeah F you Tom no follow up with Tom thanks got exactly reifer F you follow up on the reefer okay so refer does not refer to any sort of marijuana transportation or any of that kind of that we know of that we know of so it mean an interesting interesting data point for you. We used to use, we used to ship a lot of fireworks back in the day

on refrigerated trucks because we had a store out by in Nevada. So basically there's all these freight lines that were refrigerated trucks and they would basically bring all the produce from California to Texas, but then they would go back and they would be empty. So like we hooked up with that call your fireworks? Back call fireworks. Yeah. So they brought us strawberries to Texas and we set up fireworks to Nevada. is perfect. All right. So investment thesis, strong demand fundamentals. It's a cold chain storage and transportation subsectors are experienced a robust demand with limited supply side opportunities. It has sustainable cash flows and the company generates reliable cash flows through exceptional

service and long-term customer relationships and a high-barred entry industry. Growth and synergy opportunities. Significant untapped growth and value creation opportunities exist that can provide immediate cost and revenue synergies for cold chain logistic portfolios. They have a facility, that is a 43,000 square foot warehouse, 38 foot clear height, six dock doors, and 5,650 variable height pallet positions, premium refrigeration system in the state-of-the-art facility. It's under five years old. Certifications, CFIA and HACCP. I don't know what those are.

The equipment they own is seven straight trucks, two tandem and two reefers, two tractors, and 12 trailers that are reefers. Owner operator fleet is five tractors, two tandem, and nine five-ton trucks, and cold storage equipment supports the various warehouse activities. Financials, 2019, they did approximately $6 million in revenue and $1.2 million in EBITA. 2020, they did $7.6 million in revenue and $1.7 million in EBITA. So then 2021, they did $7.5 million in revenue and $2.5 million in EBDA, and we don't have 2022 or 2023. So the financials here are three years old, which is interesting. And it's located in the U.S. Middle Atlantic and the transaction they're looking for is a sale or change of

control. So what do you guys think about this cold chain transportation and warehouse company? So am I right in seeing that their revenue from kind of T minus two years to T minus one year went from basically flat seven-half million, but their EBITDA went from 1.7 to 2.5, a 22% margin to a 33% margin on the same revenue, which is pretty interesting. I wonder if trucking is a little bit like sea and ocean freight where the fixed costs are kind of the same. And then the rates move with the market. And you know, see an ocean freight, people crushed it during COVID because prices were insane. I wonder if this is there's kind of some market dynamics.

If you think about 2021 and 2020, that maybe 2021 was just a much stronger year for demand. That was when freight rates were going nuts also. I do know one thing. This is a trucking business, and I have a buddy that knows a trucking business, and you know what? He can't get a business loan. No bankers want to loan money of these companies as far as he was telling me. So maybe this is a good question for Heather. Heather already is out.

I can see her. I'm running away. I'm leaving. Heather, why don't banks, Main Street banks, want to give unsecured loans to a cyclical cap-ex-heavy, slow to get paid? a sketch quickly can grow and quickly can shrink with high fixed cost business like trucking. I mean, why wouldn't they want to do that? I don't know.

I mean, it is a mystery to me too. But yeah, it's a very cyclical market. And the cycles are fast. And they're not even really that predictable, I don't think, especially anymore. I think after COVID, I think the predictability of the cycles in this market got a lot tougher because other things came into play like labor shortages. You know, there was a lot going on at the same time that really made this a volatile industry to be in. And this is a company that owns their own trucks. It's not a brokerage. You know, they've got more risk in it because of the equipment. And I agree totally with Bill. That's probably why we see the not only the top line growth a little bit, but also the margin growth. It was COVID. And it would be really interesting to know what 22, 23 and, you know, current looks like now.

because I'm sure I would guess it's not as good. You know, the margins are probably down. But these are tough businesses to get financing on. Some people think wrongly that they'll be easier because they've got fixed assets, but this is rolling stock. So what a lender looks at is, you know, this is assets that depreciate pretty quickly. And also a lender has to think through what's going to be left if I have a loan in default. In default, I have a failing company, and it's probably been failing for a while by the time the bank gets their hands on anything.

the rolling stock rolls away and it's not it's not there. It's sold before the bankruptcy. Yeah, pretty much. So there's a lot of good reasons. Let me throw a curveball on this one though. So the facility, we don't know if they own it or not, but let's just assume that they do because they're talking about it's state of the art and their HVAC is under five years old. If you own the warehouse, if you own the cold storage here,

think it gives you a huge leg up because you could somewhat theoretically control who comes to pick stuff up from you. I've talked about my brother's moving business a lot, but he does a lot of storage and receiving, but he owns a moving business. He just happened to get a handful of warehouses, and then people ship him boxes. And he's like, guess what? I'm bringing them to you when you're ready. You can't send somebody else to come and get them. And so I wonder if they're able to protect some of their market share in, you know, this U.S. Mid-Atlantic market by, you know, at least having cold storage is incredibly expensive to build. Like the replacement costs on this is probably many multiple times, you know, more than what what it's worth on their balance sheet.

I have a friend who actually they build when you want to build a cold storage facility or any of those like giant walk-ins or any of that kind of stuff. Like they're, they are contractors that build and maintain those systems. It's pretty fascinating. Very, very specific. The roofs are like, they're much more complicated than a normal roof. And the entire building envelope is very, very owners. So this may be a dumb question about this deal. Are these people only, it's refrigerated trailers. Are they only hauling food?

Or are there other things that are refrigerated when they're transported? I have worked with a client that transported like medical items that had to be refrigerated. But I think they use very specialized carriers because they're usually a bit smaller. and the temperature control has to be a little bit more precise. So my basic knowledge of this is that this is probably mostly food because the medical type stuff, the other stuff that needs to be refrigerated, it's got to be temperature controlled a little more specifically. Are those body parts, Heather?

Did you look at a body factor? They are in part. Yes, there are body parts, tissue, samples. Yeah, yeah. Yep, all that fun stuff. blood. It's just a matter of time until we, we do an organ brokerage as part of this whole thing. We're right away. We did. So in our business, we did have a brand that did wax-based products, think like

chapsticks, things like that that would melt. And occasionally in extreme summer heat, we would use refrigerated storage to truck, or not store it, but to truck it. Because when you ship something, if it is in transit, it can get left on the dock from Friday through Monday until it gets picked up again, just baking in these climate, these warehouses that are not climate control. You can ruin all kinds of things, supplements, creams, wax-based stuff, whatever it may be, especially in the summer. So back to this deal, like, it's going to be tough to get it financed. Banks and folks don't want to do this stuff. One thing they don't really talk about is who the customer base is, because I think there's a number of these companies that contract out and they're on big

you know, big contracts with grocery chains or different folks like that and they've got relatively consistent recurring revenue there. Though there is a danger there which a lot of these big grocery chains and retailers, a lot of them run their own trucks. So it's just a matter of time until they decide, hey, like once demand goes down, they run their own trucks first and they cut you out. So, but that's where something I would be curious and maybe that's where a lot of whether this is worth something or nothing really comes down.

to like who are your customers like how likely is the consistency going to be there going forward? Because if if for example there's a corporate guaranteed, you know, contract here with two different high-end grocery stores that are medical supply places that I know are not going to go anywhere for the next five years, that's a very different business than, oh, I'm hoping that this month-to-month contract that I have with three different groups doesn't get terminated when the economy goes south. Yeah, I'm interested about their facility. because I get the sense if it's like new state of the art, I get the sense they probably built it later.

So they probably built it very on purpose to deliver margin to their trucking business. I wonder if the facility came online maybe during COVID. And that attributes the margin bump. Because you have this stuff, you can either, it's frigidate, right? You can store it in the truck like overnight while the truck is not driving.

But that's very expensive because your truck's not driving. If you want, you can't just offload it in any warehouse. because the warehouse has to be climate controlled as well. So I imagine that you end up paying for overnight cold storage or a couple day cold storage as you match loads, right? If you need to transload cargo and it needs to wait a couple days, you can suddenly do that if you have your own cold storage warehouse,

but it's not on the table. You know, you either got to drive straight through or the truck's got to sit and burn gas all night to stay refrigerated. So I wonder if they added this as more of kind of a hub and spoke cold chain distribution model, whether cross-stocking stuff or how much of their revenue actually comes from the strategic asset that is the facility versus just the trucking. So one thing that is kind of interesting that CFIA is the Canadian food inspection authority. And then the HACCP is hazard analysis and critical control point certification that is a U.S.

standard. And it says it instantly demonstrates to customers your commitment to producing or trading in safe food. So I do think it's on the food side and less on the medical side. But you think about it, there is some control that has to be kind of end to end with this. It's not like, you know, you can just say, oh, yeah, the ice cream, you know, it melted on the way here, but then we refroze it. Oh, ice cream. That sounds good. You lost me.

Forget this business. I was thinking about going to get some ice cream later. It's like 140 degrees a same time. That's hot in Texas. There's another thing I know about cold source facilities, which is really interesting. A ton of them get built in opportunity zones because they are, it doesn't really matter where it is, right? And they're really expensive to build. And you can also accelerate a depreciation, depreciate them.

So if you are looking for a tax shield, building a really expensive. capital asset that can be accelerated, depreciated in a opportunity zone gives you this kind of triple tax advantage where you get to expense the entire cost of building up front and then you don't have to deal with the recapture because when you sell an opportunity zone asset after 10 years, it's capital gains tax free. So for a while there were these funds, there were these opportunity zone funds running around raising money from people just to build cold storage and other kind of expensive storage type stuff, specialized storage in opportunity zones to appreciate a ton of it and say you basically get to expense the whole purchase price of the building right away,

wait 10 years and no recapture because of OZ. So I wonder, I wonder considering this is state of the art recently built, I would bet money this is in an opportunity zone. Makes a lot more sense than the hotels that they were building in Opportunity Zone fund areas where it's like nobody wants to go there. Like the hotel is going to go belly up right away. but I don't care if my ice cream is stored there overnight. Yeah.

Yeah. Well, so maybe another question I have about this deal. How should I look into the fact that there's only financials through three years ago? Like, it's interesting that it's the teaser's not relatively near that. And that is 25 years old. Like that this is, this business has been around for quite some time, arguably bill to your point, like before the state of the art facility. Yeah. I think they built the facility as kind of a margin accretion play and tax shield.

I mean, like, what a triple whammy, right? Drop additional margin to the bottom line in your business, shelter a ton of current income from taxes today and deal with no recapture in the future through opportunity zone. Like, brilliant play, if that's what happened. And then, Michael, to your point, I mean, it could be that the revenue is just this volatile. Like, they could have done 10 million in sales in 2018. We don't know at this point. They show us the EBIT a number.

I'm interested in what your NOI and free cash flow numbers are. A lot of these things are, as Bill talks about, amazing tax shields. Why are they tax shields? Because your CAPX is like ridiculously high. You're generating lots of book profits, but no cash profits. But probably just to build, right? I mean, there's a huge outlay to build it. Is the maintenance super high on these things?

On the trucks, for sure. The trucks, yeah. The trucks. Yeah. Yeah, the trucks has got to be, I mean, these are, you know, and they're not even like normal trailers. They're trailers with refrigerators attached to them that drive down the highway at 75 miles an hour and all kinds of rain sleet and snow. And, I mean, the risk associated, like, if we have a trailer go down, no big deal, right? If you have a trailer go down and the refrigeration breaks, then you got spoilage on things that all of a sudden you're having to eat the cost of.

side note we just sold insured right i don't know i don't know if it would be i mean you could probably insure some of that risk but what insurance carrier is going to say yeah will indemnify you from you know i don't know 250 000 worth of inventory loss that's not on your books and what would the premiums and the deductible be for something like that i've only been adjacent to this market i've never actually been in the food hauling market i do know people to do it, but not me. But I have seen cargo get insured like that by the carriers stuff. Now, getting, if there's a claim, getting them to pay you, totally different story. But they at least pretend it's insured. In our business, we just sold a semi with 1.3 million miles on it. Like something

tells me these, you know, if something breaks in the roofing business, it's like not the end of the world. Like we could, you know, get another in the downtime isn't catastrophic. But for this, these guys are probably having to really keep up with their maintenance capbacks drastically differently than any other industry you're almost at a size here where it makes sense to have a teammate be a full-time mechanic on all these vehicles you're changing fluids that often dealing with all that kind of stuff change of tires i bet you could keep a mechanic busy full-time with this with this size of fleet right you have 12 trailers seven trucks and then the owner-operator fleet is nine trucks and seven tractors and trailers.

So, so well, speaking of, that's the other thing you have to do diligence here is the quality of the rolling stock. Yeah. You know, does it have 1.3 million miles on it like the trailer mills just offloaded, you know,

or is it relatively fresh and new? And, you know, it works. Do the refrigerators have a reputation for breaking down every 100 miles or whatever it may be? You know, just what are you getting here?

Because if your tractors aren't and your trailers aren't working, you don't have any revenue. And that's probably loan, probably those are the only assets of your business. I know Heather, they don't like to borrow, you know, banks don't like to lend against them.

But this is your only hard asset, I would think, right, for collateral at all. Yeah. Yeah. And usually it takes kind of a specialized lender to replace the fleet. You know, that's the other thing.

If a lender wants to be the senior lender on the acquisition and a company like this, they have to usually enter some kind of inter creditor agreement with the other lender, the specialized lender that lends on the fleet because they're not the same. You know, they're completely different specialties. And so that adds a little wrinkle of complication. That comes up in other industries too.

There's a lot of industries that need specialized financing and to work together with that and the senior lender on an acquisition is tricky. So what do you guys know? If you go back up the listing, I noticed that it said some of their loads, they have W2 employees. that they run. And some of their loads are owner operators. Do you guys, you know, what are, what's kind of the tradeoffs here in economics? I mean, obviously an owner operator is somebody who owns his own truck and kind of takes contract loads versus somebody that you employ. I imagine there's economic differences, but also kind of operational and convenience differences

there too. Well, the owner operator would have to be a contractor. So that means they have to bring their own equipment. They have to own their own tractor. They have to maintain it. They have to be able to refuse jobs and accept jobs. They have to potentially be able to take a loss if they, if you want to qualify as a 1099. So that, that comes there. And obviously, I think the tradeoff is for you as an owner of this business, right, you don't have all the risk of owning the fleet and maintaining it and the truck blows up while it's the owner-operator's fault or their problem and they can deal with their insurance on it. But at the other, the other end of it, you don't get the dependability and the reliability that you get owning your own stuff.

So I don't know. I don't know if about logistics to know if this mixture is optimal. I don't even know if it's good or bad. That's how little I know about it. I feel like they would use the owner operators as kind of overflow. Like they'd probably primarily rely on their own fleet. And then as they grow like they had here, you know, they can't add to the fleet as fast as they could just call up owner operators

and kind of see if that growth lasts before they buy more CAPEX to sustain that growth. So I think that's how I would use it if I were. in this business. Yeah, margin's probably better on the company-owned loads versus the owner-operator loads, but the owner-operator stuff scales up and down really fast. I bet there are whole marketplaces where you can put out the load to the marketplaces, and the owner-operators will bid on it. And I'm sure there's probably even a cost calculation to figure out, do I strike,

do I outsource this load, or am I willing to drive it with my guy? So one of my favorite TikTok channels, by the way, is a guy who's a trucker out of Louisiana. and he's got a very strong Louisiana, southern Louisiana accent. And he goes on those marketplaces where people post loads that they are brokering out and trying to get hauled and stuff like that. And the whole thing is he takes one phone and he records himself on his other phone. And the phone that he records actually has a crack screen on it and it's all greasy, kind of what you can imagine a trucker having.

And all he does is on each little TikTok video, poop on how stupid the posting. He's like, look at this dumbass post in there. They want to pay me 50 cents a mile to drive from Tulloc, to Tuscaloosa all the way to Seattle, Washington. I highly recommend it. So, yes, there are all these marketplaces and somebody's turned around and turned into a media business bill. It's just the best TikTok channel ever. Everything's the media business, especially at TikTok. It is really interesting, though, because there are actually people that, like, high-frequency trade freight loads.

You know, based on how many miles it is, what the corridor it is, then they're inefficient. Like somebody's got to drive home and their truck is empty or somebody needs something to go right now. And if you can pair those, you can make a decent spread. Yeah, it would be great if we had Craig Fuller, Mr. Freight Waves here on this one. He would have, he would have learned some stuff. So how is this business? He won't yell at us for saying stupid stuff about this business. How is this business different than like Cisco or US foods?

I mean, Cisco's publicly traded 70 plus billion dollars in revenue. I think they operate their own distribution. facilities. I'd much rather be in that business. I mean, you have you have economies of scale in terms of buying and distributing stuff. If you're Cisco or any of these big food distributors, like you, you know, the same reason Home Depot wins, like you have buying power like crazy. A business like this, this logistics thing, like it's just pure straight up commodity like totally subject to the whims of everything. Like you have no I can't other than some of the tax advantage stuff where you can maybe talk about like with the warehouse being in the OZ. Like you're subject to. straight up commodity price fluctuations. And at some point, no matter how good an operator you are, this business may just start losing money just because of that's what there's too much supply for the amount of demand. Well,

this business is materially different than Cisco, right? I mean, Cisco is a distributor of food. 100% and they probably carry the food on their balance sheet, right? Like, that's a distributor. I'll have come back to an interesting thing about the way Cisco really influences your life in a minute. But these guys are just transporters, right? This is pure trucking.

Yeah. So what's interesting about Cisco is in speaking with friends who own restaurants, if you, like you want to open a restaurant, you call up Cisco or performance foods or one of these, their competitors and you go, I'm opening a bargey restaurant. And they go, no problem. Here's your menu. Here's all your signature dishes. Here's all your cocktails.

Here's the PDF. Print this out. And this is your menu. This is the actual menu. Here's the sign. Here's 10 suggestions for names like barbecue restaurant in a box. We know that based on a barbecue restaurant, like in your area, you're going to need this many pounds of pork shoulder every week. And they just like roll you out.

So like you can open a restaurant. You can go to Cisco. They have all these example menus like in that they think play different, you know, in different cities like launch this menu and we carry all the skews. And here you go. Restaurant and a box. But like for everything. Sushi, barbecue. Coffee drive-s.

Whatever it is. Coffee drive-thrus. They'll give you a recipe. Really? They'll make your signs. Did you? Yeah, yeah. Well, I mean, that's the thing.

Okay. Bill, you and I talked about this. Like, full disclosure, all the coffee drive-thrus, whether it's scooters, Dutch brothers, the one we sold. The top five selling drinks are all the same crap at every single place. Like, they're all the exact same thing. Same ingredients. You go to Dutch Brothers is exactly the same as what Starbucks sells you. Like, it's all the exact same crap.

It all comes from Cisco. It's the same flavors, same everything. It's like frappuccinos and mocos. Is that basically? basically. The number one seller is a is a caramel chocolate frappuccino like iced frapicino like if you go to any one of those stores ask for the number one seller. That's where it's got like two pumps of caramel and two pumps of chocolate in it and like 14 scoops of sugar. Like that's in two espresso shop. They all sell the same crap.

You know what's also interesting is Cisco can trend set. So they can go like some sales manager at Cisco can be like, we are sitting on way too many sweep potato tots right now. And then the sales guys at Cisco, they make up like some recipe that's like super trendy. And they push it out to all the restaurants. They're like, hey, scream and deal on sweep potato tots. This is how you should make them, you know, present them this way. Put it on your menus and special of the week. Here's the PDF that you're going to hang in your window. It's, you know, special on cinnamon, sweep potato tots, et cetera. Here's your social media posts. Yeah. Yes. And these trends start up because Cisco's got to move inventory. I mean, it's wild.

That is nuts. So, yeah, you bring up a good point. These folks don't own the inventory. They're just a hauler. But they own a warehouse, or at least they lease a warehouse and will sub-lease space, you know, in these 5,560 unique pallet locations inside their building. But Cisco is acting as a distributor. So they're taking, you know, they're taking inventory of the 12-ounce prime rib and then having to move it. Yes. And in a lot of cases, I'm sure that Cisco's business is far more complex at this point because they're huge. And, you know, maybe they have all sorts of weird futures contracts on prime rib. Oh, I'm sure. I'm sure they head. I'm sure it's really got out of everything. Yes. But fundamentally, Cisco has a balance sheet. These guys don't. So I'm just wondering like, in what cases are you, and I don't know enough about the food supply chain, but in what cases are you procuring something that's not through Cisco and U.S. foods and you need it through these guys. Is it?

I think that it's wholesale. Well, these guys might not be restaurant and consumer. I mean, this could be grocery. I mean, it could be all kinds of different things. But I think of your restaurant, it's specialty. Like, it's local or like you want a specific branded thing from Minnesota, your hometown. You know, you want to bring it in. You know, who knows.

But like there could be, this could be tortillas going to Costco, you know, and it's the same load every time. Like, you know, you don't really know. There's a lot of use case for this outside of restaurants. Yeah, that's a good point. All right. Well, we lost two of our... That's the new thumbs down. You just leave.

It's just a salute. See you later. And I mean, I do think we covered everything kind of interesting about this deal. Any other thoughts from you? No, I think it's a tough one. You know, it's also, yeah, it wouldn't get financed, let's say that. And I wish they would have told us more about whether, you know, there were. some tax advantages in the in the teaser that might have been helpful and what the end markets are but

from what i saw i have to give a thumbs down it's kind of an awkward size too where it's too big for you know like friends and family around but it's it's probably even if it was i don't know it's hard to tell based on that the years you know if they had 22 and 23 that were similar to 2021 then you're outpricing probably in some cases the sba but if it's this volatile, maybe not. So hard to tell with the information we have. Yeah. Well, thanks, everybody for tuning in to our, you know, hilarious, entertaining episode. We're entertaining ourselves, if nothing else. So we're glad you joined us and you made it to the end. And me and Heather will see you out. If you enjoyed the episode, please leave us a review. And also like Bill

has plugged faithfully, check out our website. You can look for specific industries and tags and really drill down into the type of business that you're thinking about or looking at and do some research that way. And people are doing it because they email me about the episodes of a company they're looking at. So I know they're doing it. So that's great. Oh, good. Good. We'll see you next week.