Acquisitions Anonymous - #1 for business buying, selling and operating - Is the Smash My Trash Franchise Really Worth $2.9M? - Acquisitions Anonymous 311

Episode Date: July 2, 2024

In this episode, Heather Endresen and Mills Snell take a look at a Smash My Trash franchise for sale at $2.9 million. They go over the numbers, the technology involved and debate if this business is worth the asking price. This episode could help you figure out if this franchise is a smart buy or not. Tune in to get their final thoughts and some great tips on buying a franchise.Thanks to this episode's sponsor:Acquisition Lab and their team have been longtime supporters of the pod.Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director, Chelsea Wood, [e-mail] and mention us ;)Learn how to buy a business.If you are interested in buying a business but unsure how to start, you should check Michael's Buy a Business Course. Subscribe 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]

I wonder also, I think we ask this a lot, why doesn't another franchisee buy this? That is the biggest question to me. That's the biggest question. Welcome back, everybody, to another episode of Acquisitions Anonymous. I'm Mills Snow, one of your co-hosts, me and Heather talk about a kind of interesting business today. We've talked about something a little bit similar. It's a franchisee for sale, and it's an individual territory. We've actually talked about this franchisee before, but it was a de novo territory. So this is existing.

It's a trash compaction service in Las Vegas. So it's kind of B-to-B services. It's a little bit of a hot market, Las Vegas. It's kind of interesting. It's of some size, 1.7 million in revenue, 600,000 in SDE, $2.9 million asking price. We talk about franchise, whether or not, you know, that's an easy or a more difficult path to first-time acquisition and ownership. We talk about working with franchisors.

How do lenders kind of get into the mix when it comes to dealing with franchisees? And we talk about kind of some of the nuances with asset-intensive businesses like this can be seen as a pro, but is it really? So I hope you enjoy the episode. Stick around for a quick word from our sponsors and thanks for tuning in. This episode of Acquisitions Anonymous is sponsored by Acquisition Lab. Acquisition Lab and their team, they've been longtime supporters of the pod and they provide a really great service for people who are looking to acquire a business. So it's created by Walker Dival, who's become a friend, the author of Buy, Then Build, How to Outsmart the Startup Game. So Acquisition Lab is an accelerator with a highly vetted, cohort-based, educational,

support community for people who are serious about buying a business. So a lot of our listeners like you, you tune in every week to our deal reviews, you want to get in on buying a business. You know, you're on this podcast because you're trying to learn how to buy a business. But if you're not quite sure where to start, Acquisition Lab is a great place to start. So they exist to help people buy a business and to navigate all those complexities of the process, everything you hear us talk about on the show. They provide a proven framework, tools and resources that support you all the way from search to close. it. There's a whole bunch of educational material and support. So if you're serious about buying a business, check out AcquisitionLab.com or you can actually email the program director Chelsea Wood directly.

Her email is Chelsea at buy then build.com. Hey, Heather, how are you? Good morning. Good. How are you, Mills? Good. Another day in paradise in sunny California. You know, still kind of cool. I don't know why. I'm sure it's coming. The heat is coming, but we haven't had it yet, really. So it's nice. Yeah. What's your deal pipeline look like? Is there things staying busy? I know you're always talk about the calendar and how it influences it. It's always a little slower. Well, we're getting to the end of the quarter. So a bunch of deals are closing now as usual. And I would say it's, it's, it's, deals are taking longer to close just for a lot of reasons. So I think that just that that's the one main trend that I'm seeing. And then it's summertime. So new deals under LOI usually slows down a little bit. I'm seeing that. I don't worry about it in the summer. I'd worry about it if it was that way in September, but it's always a little slow in the summer, which is great for me because I'm in the middle of an automations project.

So it gives us a little bit of breathing room to work on that. Yeah, well, good. Well, we'll see if any fun kind of deal, quirks come up on this deal for today. I'm going to share the screen and you can read for us. This one is kind of interesting. We've looked at something similar to this in the past. It was this franchise, but we looked at de novo territories, just territory rights.

So, yeah, take us away. Yeah, this one looks like it's an existing franchisee, which I think it's always an interesting, you know, possibility to buy. Mobile waste compaction in Vegas, 87% recurring, 88% growth, 608KSDE. So it is in Las Vegas. It is an asking price of $2.9 million, cash flow of $600,000. and $1,000,000, gross revenue, $1,709,000. And, well, we already said, EBITDA, $608,000. So I guess they're not saying SDE.

They're saying EBITDA. It was only established in 2020, so that's kind of interesting. High growth margins, recurring revenue, customer diversification. Mobile waste and dumpster compaction company saves businesses money and cuts greenhouse gas emissions with state-of-the-art technology, fast-growing sub-industry with an ever-needed waste industry. Well, that was an awkward sentence. Sorry.

The current owners are rapidly growing the business, but have taken an executive job at a large technology company. Interesting. Trash and technology. The Las Vegas market is poised for extreme growth with new ownership. Highlights of the financials, 87% recurring revenue, 88% compounded annual growth rate from 21 to 23. And 608 is the trailing 12.

Now they're saying it's SDE. So $608,000 is the trailing 12 SDE. Customers, highly diversified customer base, top customers satisfaction and loyalty and testimonials, what the growth opportunities are to approach large accounts in Las Vegas strip and convention hotels. Marketing, only 2% of customers are aware of this sub-industry and operations. Let's see. Current owner and spouse are part-time, can be replaced with one full-time owner-operator, full-time salesperson in place, operations efficient and easy to manage, sales operations support, and a team of well-trained operators, drivers, to execute service. Fleet maintenance outsourced to a third-party, innovative, disruptive

technology. There's the technology, I guess, connection there. Environmentally friendly, up to 70% reduction in dumpster weight volume, 65% reduction in CO2 admission. emissions. Highly effective AR collections of 98%. That means they're losing 2%, I guess. Facility, 6,000 square feet office warehouse fits all of our trucks and room for a fifth. Eight employees, let's see, they've got trucks, two Kenworth, 21 and 22, two international 23 and 22. And then they've got the office space. Let's see what else there is to say here that's different. I think that we covered most of it. Yeah.

And it's got a business website there. Yeah. So this is a smash my trash franchise. And they are nationwide. I've seen these. We have some in our area. I'm going to pull up. There was a link to a, let's see, mobile waste compaction.

I think it's this one. Yeah. There's a little teaser here with a picture of the truck. So if you're just listening, imagine a, a semi with a flatbed on the back and then this massive crane arm with a huge roller wheel that they back up to a construction dumpster or to a roll-off container and it smashes and compacts. It looks like one of those. Do you remember those shows that was like you would build your own like robots and they would

battle until the death in the arena? That's what these always remind me of. and yeah, it's a, it's an existing franchise. We had talked about a de novo one of these. I think somewhere in the Northeast in an episode, probably like 100 episodes ago. And it was somebody had bought the franchise rights next door to an existing franchise, but they never executed on it.

So it was just like, hey, we paid $50,000 for the right to develop next door. You know, well, somebody buy it off our hands. But this is existing, revenue four years old and free cash flow. Right. And I like the idea of buying an existing franchisee business like this just in general for a lot of first-time buyers. I think being part of a franchise system on your first deal adds a lot of support. There's training. There's systems. You know, you're a lot less seller dependent in most cases because of all that. So I really like that. The downside of buying into a franchise system is you're sort of, you know, limited, usually on your growth potential because you've got a territory.

And the next door territory may or may not be available. So, you know, that's something to kind of look at is, you know, where are the adjacent territories? What's going on there? I have seen people buy into franchise systems where most of the existing franchisees are of retirement age. And their thesis is that, you know, once they get in, they'll, they'll expand by acquisition within the network. So that's another thought. Now, this is obviously a newer, you know,

this is just a newer technology, if you will, right, with trash. I'm curious, do you know how do they make the claim of reducing CO2 admissions when all they're really doing is compacting the trash? So you bring up an interesting point, which this, to me, I don't love this business because, I think it's a fundamentally uphill battle because you're having to go to somebody who already spends, you know, $450 or whatever on their container that sits in their yard or their lot or outside of their warehouse and say, hey, we know you're used to spending $450, you know, per can per month or whatever the interval is. But if you get us to come in and smash it for you twice a month or once a month or something like that on a regular schedule, then you can, reduce the number of pulls. So I don't think it's that there is less waste. It's just that the

freight and the fuel involved in switching those cans out, you're cutting down on the number of trips. But okay, now you reminded me because I did look at someone, you know, that came to me was looking at buying one of these. And one of the ways that they sort of had a threat to their business was the trash companies started to push back because it's too heavy. You know, so they are using more fuel and more strain on the trucks because now the dumpsters that they're picking up are twice as heavy as they would have been. Well, and you bring up, you hit on like a real big nerve there because the people who are, the smash does not own the can. And the owner of the business, right, like let's just say you're an auto body shop and you have one of these, right? Or you're an office and you have a bunch of cardboard.

They don't own the cans, the actual, you know, 10 yard, 15 yards. 20, 30 yard dumpsters. And so the dumpster owners like waste management or Republic or any of these others, it's added wear and tear on their equipment because you're smashing this thing down and it's not, you know, gentle on the container. And you are directly eating into their margins because they, when they go to the dump, they're charged by weight. So not just is it, you know, consumptive for them in terms of adding, you know, more fuel to the

trip. But it eats into their margins because if that container was like only a third of the way full, but there was a lot of dead space in it. It's good for them. It's good for their margin. Because when they go to the dump, they're charged by weight. So there was a brewing kind of legal battle that was happening where the republics and the waste management and all these people of the world, the container owners were saying, hey, it is, it's not your can. It's our can. And you can't do whatever you want with it in the meantime.

And I think what I heard was that these, and this is not the only one, there's a couple others that are in this franchise network who were doing a similar service, but under different brands, they were kind of saying, hey, we're going to have to get into the container business. We're going to now have to start owning containers and leasing them to people or renting them to people and smashing the trash. So you don't necessarily know that looking at it, but I think the inner kind of dialogue among the franchisees was a little bit of some concern. Yeah, they're at odds with the hauler, basically, that's got to, you know, take the trash.

It seems like this would make more sense being integrated at some point, you know, somehow, because it does make sense, you know, just like having a trash compactor in your kitchen. You make fewer trips. You use less plastic, you know, out to the trash. But, you know, this is just on a commercial scale and industrial scale. But the fact that there are two different companies and it, you know, the service, you know, the service, kind of hurts the trash hauler. I think that's a that's a pretty big point. So I guess that would be the first thing you would diligence here is what has the relationship been, you know, how hard a

sell has it been? I wonder, you know, a little bit if the trash company doesn't kind of sell against you. You know, you're out there trying to sell at these hotels and convention centers in Las Vegas. And maybe they already know, you know, the trash company is going to charge them more or whatever, So there could be sort of some headwind on growth from that. And my concern is, you know, these are typically like three to five year agreements that people sign with container providers and all off companies like this. And so is there kind of an impending cliff where when you go to renew, there's a new provision in your contract that says you can't smash trash in it? Right. And then all of a sudden, you know, you can't see that cliff around the, around the bench.

so to speak, but it is coming. There are certain use cases for this too that make a lot of sense. It's typically a lot of cardboard or a lot of pallets or a lot of like just kind of organic trash like that. Yes. We like we when we tear off roofs, we might have five 20 yard containers or 5 30 yard containers out at a job site. They get pulled every day because the weight is so significant. We're not filling up the, we're not filling up the container, but we're adding so much weight that it's not, it's not really a practical application for us. But I've heard of, you know, larger manufacturing organizations like, you know, automotive manufacturers, they may have 20 containers lined up outside. And if they can reduce the number of pulls in and out, it can be a fairly efficient thing. So I think there is a use case, but it's just there's some external threats that I think would,

I'm wondering how comfortable you could actually get with some of those things in due diligence. The franchisor is going to have a great answer for you, you know, and the selling franchisee is going to have a great, you know, answer for you. But, but how comfortable could you really get around that kind of catastrophic risk potentially? Right. And then this is a franchisee that they gave us their reasons. You know, they've got, obviously not retiring. They're going off to some technology jobs. But, you know, they haven't owned this business very long. So, you know, maybe they've been a little disillusioned. That's very good possibility. It's only been four years.

And they may be disillusioned with the growth potential there. I have to say this, though. Okay, we're talking about Las Vegas and the trash business. And, you know, there's sort of this like, you know, there's the mafia and the trash business have always been sort of known to be somewhat connected or organized crime or whatever. And then, you know, there was that whole Lake Mead situation. in Vegas in the news, I think it was this last summer where they were finding all these bodies that were thrown in Lake Mead, you know. So I would have to say, I would be a little

nervous getting into the, you know, a kind of a competitor to the trash industry in Las Vegas. I mean, I think you'd be kind of a tough person to do that. Yeah, that is so funny. One thing that comes to mind on a deal like this, too, anytime you're looking at a franchisor is to think about the age of the franchisor and the maturity. You know, if you're going to be a franchisee, you're on the receiving end of whatever maturity, sophistication, scale they have. And, you know, you, there's pros and cons depending on where you are in the spectrum. If you are the biggest franchisee of a mature franchisor, that can be a really beneficial

kind of scenario. But if this is, and I think Smash My Trash is more developed. now. But if you're an early adopter, you know, if you're within the first maybe 25 or 50 units of a franchise concept, they are still figuring it out as they go. I mean, they are still on a learning curve. And you kind of almost have to predict what a lot of these franchisors do is they get to a certain level of scale, a certain number of franchise units. And then they sell a market to somebody who is good at taking a 50 unit franchisor to a 500 unit franchisor. And so, you know, you You know, you don't necessarily have a lot of leverage as a franchisee.

You have a lot of leverage around and a lot of autonomy operating your business as long as it's within their bounds. But, you know, there's a lot of decisions they get made at the franchise or level that you don't really get, you know, much say or input on. And you just kind of have to take it. Things like pass-through costs. Some of them are, you know, bound by your franchise agreement. But, you know, you have to allocate, right, royalties back. to them, but you also have to pay a certain percentage of revenue, typically for things like technology or marketing spend and things like that. And what if they're not good stewards of it? What if

they're not spending those dollars well? You kind of have to know what you're getting into. And the age and the maturity of the franchisor is something I hear a lot of multi-unit folks talk about because it can really make or break the success of the franchisee because of how little control they have. you how lenders deal with franchise systems. You know, so, you know, that's as a buyer, you've got to think all of that through. Well, lenders have to do the same thing. What typically happens is the lenders will just have a few concepts. They'll usually kind of have a franchise, they'll eventually kind of have a franchise lending group. And their job is to kind of pick the concepts that they'll be lending into. And then they go on site to the franchisor, you know, somewhat regularly,

and learn everything there is to know about that franchise system. I've been on a couple of these meetings where the franchisor kind of gives the dog and pony show and you get to ask questions about every franchisee they've got, you know, just every metric they've got all their operations. So a lender has to like become an expert. They can't just lend to every franchise system because they don't have enough time to become an expert in all of them. So what you find if you're if you're thinking of buying into one or you're, even a de novo, you should ask them who, even if you're not going to borrow, who are their preferred

lenders? A more mature franchisor system will have cultivated a few preferred lenders, like three, maybe, three or four. And they've done all that work with those lenders. And so you can go talk to those lenders and ask them questions. They should be somewhat of an expert, maybe more so than you will be at that point in that franchise system. That's a great point. It also reminds me that, you know, whenever part of the franchise agreement that you have with the franchisor is you can't just sell it without their approval. So, you know, there's a lot of instances where these franchisors, they get, and I think every instance, they get veto power. You know, if you aren't capitalized sufficiently, if they, you know, don't think, you know, for whatever reason, I have a train that's

about that sound like it's running through my building. So I'm going to mute myself in a second. But they get, they get veto power. And a lot of times they veto, you know, kind of P.E. backed or more institutional folks because they want to be more kind of mom and pop. Yeah, absolutely. I've seen that. And I've seen some franchise systems having, you know, multi-week training programs. So you're under LOI. You're spending money.

And part of like getting approved is flying somewhere and living there for several weeks to, to get through the training program. So it's quite a commitment, you know, for a buyer to to buy into an existing franchisee. Yes. But it does give you a head start over. you know, the de novo, right? It's, you know, it's probably a little bit lower risk. You've already got the cash flow and the systems. And this has got a little staff of eight people and some trucks. You know, they've already made the investment in that. And these trucks are expensive from,

from what I've seen. I mean, they're, I think over, I think there may be between $175,000 and $250,000. It's a, it's a rig. You know, this is not just a stock kind of piece of equipment. The one thing that is beneficial about them that I remember is that you don't have to have a classic. ACDL to drive them. And so your, you know, kind of your hiring pool is a little bit broader than somebody who, you know, would be driving a full size semi over the road. And that is a very fickle market. It had been historically very, very hard to find class ACDL drivers. Then there's been a massive bust within the trucking industry. And there's a lot of drivers out there looking for work now. So it may be a favorable hiring environment. But that, that is a benefit that you don't have to have

a real specialty operator. The key to this business for the people who do really well in it, I think Las Vegas would check this box is route density. And so, you know, if you're in an area where you have a very wide geographic area and not really tight clusters, they, you know, they're not having the whole stuff to the dump, like the actual container provider. But if you're, you're kind of downtime, you know, between smashes is an hour or a couple hours and you just get less, you know, smashes per day or less, you know, activity per

day that really drives down margins. And so I would think that the Las Vegas market is probably pretty favorable for density. But, you know, they're, they even say, they allude to the fact that only 2%, you know, of customers are even aware of this niche. I think that's just probably some extrapolation to say how many containers are in, you know, a given market and how many people actually know of us or use us. But I think it is a little bit of an uphill sell. Yeah, right. They've got a full-time salesperson. That does show you that, you know, this is, this is a lot of effort to sell a company this small sometimes doesn't have a full-time salesperson. So that would be the other thing you'd want to diligence. Who is that? What, you know, are they staying? How effective are they? And, you know,

is there some more marketing spend that needs to go in, you know, potentially or just another sales body that you might need to really grow it. But I agree. This is not the easiest service to sell, because first of all, you have to understand what it is. And then we have that concern about the actual trash companies pushing back against it. But, you know, it's got the trucks. So how often do you think you have to replace trucks like this? What's the maintenance CAPEX? I think that the usable life on these is probably, if I had to guess, maybe plus or minus six or seven years. So, you know, they mentioned that they use a third party for maintenance, which you absolutely would have to do unless you had a massive fleet of these. It just doesn't make sense to have somebody in house.

So all their equipment is relatively new, but it's because they're only four years old, you know, as an entity. So yeah, I do think that it's going to be out there and you would have to, I think they mentioned they have four. So that kind of tells us, you know, from a revenue per truck standpoint, if they're doing, you know, it's ballpark $400, $425,000 per year per truck, you know, on the revenue side and maybe about $150,000 net. I mean, it's not a bad kind of gross margin, net margin scenario. The skeptic in me is like, what tech job is this person taking that is better than $600,000 a year in SDE? And there could be other variables. I'm almost thinking there have to be other variables because, you know, I think that's a pretty hard thing to walk away from. Yeah.

And they said something about proprietary technology. Where is that? I'm trying to find it. Innovative disruptive technology. And I don't know whether they're talking about at the franchisor level or this franchisee thought they I think it's just overblown kind of hype about what the truck actually does and smashing. Yeah. Yeah.

Yeah, you're right. I think that's right. Okay. So, yeah, I think you're right. Why are we selling $600,000 of SDE that you're only having to work in part-time? Yeah. Yeah. Yeah.

So interesting. I'd like that they at least pointed out that they are working part-time. There's two of them and one person could replace them. I think it's one of the questions that's more murky in a lot of deals that I see is, you know, how many people do we have to replace? What does our replacement salary situation look like and what are the roles? I wish we saw more sims and teasers that made that really clear because it's something we kind of have to usually drag out of them and find out sort of later on. But I like that they at least pointed that out. I wonder also, I think we've asked this a lot,

why doesn't another franchisee buy this? That is the biggest question to me. That's the biggest question. If you think about Chick-fil-A kind of as like a standard, right, in terms of the operator model, and they're so selective and they regulate the supply so heavily. But it like you could be the perfect candidate. And Chick-fil-A, the other operators in my area are not going to let me open a store. And Chick-fil-A corporate, right? Or in this case, smash my trash corporate or, you know, Subway or any of these major franchisees, franchisors, they're going to give it to the known operator who has shown that they can do

really well running one store or two stores or two territories. And they say, yeah, it's not that hard for you to add a third. It almost undercuts their existing installed base to give it to an outsider like me. Yeah. So I'm almost wondering, Heather, like, who nearby passed on this, you know, and it's probably everybody nearby has looked at it and passed on it. Yeah, there's a reason. Exactly. There's a reason this is out in the, in business. buy sell. I guess that's where we found it. And not being sold within the franchise system. So yeah, that's the other downside. I said, I like it when people buy franchisees, but that's one of the reasons I don't like it is because we wonder a lot, especially a newer system like this.

Sometimes the answer to why another franchisee didn't buy it is that they're all older and nobody's in a growth mode anymore. Okay, I will buy that in certain scenarios. This one, everybody should be in a growth mode still. So that is an interesting question. something to to really be a little skeptical of if you're if you're interested in this deal. Yeah. What do you think about the price on this? So I got to go back to that. What is the multiple here? It's like just under five times. I think they're pricing. I think that's too high, you know, for any business of this size, you know, sub a million dollars of EBITDA. And by the way, you know, I hate, I hate pricing off of SDE. You need to take a salary. We're not going to pay a multiple

for the salary. So, you know, the ebidah is probably $450, you know, something like that. So I think that's minus, minus KAPX. Even if you say conservatively, that's $75,000 a year. Yeah. Right. So now we're down into 300 something, you know, after you, after you save up for your next trucks, which you're going to have to buy in a couple of years. Yeah. So I think that's way too high. And I think what they're doing is some kind of math in their head where they're factoring in the value of the trucks. And I see that a lot with heavy KAPX type businesses, is they don't want to, they don't want to have to sell for just the cash flow because that's not enough to get back their investment in the KAPX. But the problem is if you're not generating enough cash flow off that

investment, that's, that's the way it is. Yeah, you're not going to get paid. It's just poor asset efficiency, you know. Yeah, exactly. So I see a lot of brokers and sellers with, you know, unrealistic valuation expectations centered around the investment that they had to make in equipment, machine or equipment. Yeah. I think that the tool that probably helps you on this one is, you know, what will a lender actually provide? And I think, I don't think it's anywhere close, you know, to what they're asking price and

what their target valuation is. Right. So, you know, I think that you kind of stress test the model and say, what will the debt service, what debt service coverage am I going to be allowed? And even if I, you know, don't max it out, there's just, there's just a purchase price where this probably makes some sense. But, but my guess is it's, you know, it's at least a million dollars less than what they're suggesting. So let's do that. What were we? We're at 450 minus 75 of maintenance cap. So we're at 375 of what we think maybe adjusted EBITDA would be. The rule of thumb about the most SBA debt you can borrow

where you're going to have a decent DSCR at the most, this is at the high end, is four times adjusted EBITDA. So that's a million five. And they're asking 2.9. So there you go. And that's, that's total purchase price or that's total debt. That's total debt. So let's say, let's say it's about a million five in SBA debt and it's, you know, half a million dollars in equity. Yep. You're at a $2 million total enterprise value. Yep. And that's, I think, think if you look at your monthly debt service obligations, you know, and your monthly cash flow, I think it's going to be, it's going to be very, very tight. Yeah, that will be even be tight. Like the million five is as high as you ever want to go. You probably want to go a little bit

lower once you do your diligence and kind of understand the business a little bit better. But yeah, that's it. So 2.9 is too high. And, you know, and I, I, people ask this question a lot. They think, well, it's got collateral. The lender will like the collateral of the trucks. No, not really, because how is the lender, what's the lender going to realize in terms of liquidation value from these kinds of trucks? Who are they going to sell them to? They have to sell them to other franchisees. They're used. They're probably at the end of their life.

And by the time a deal goes bad where a lender is actually liquidating, the reality of rolling stock still being there is, it's not. So lenders will not look at it as, oh, good, we've got all this collateral. They will look at it as just a regular cash flow loan like anything else. Yeah. Only a little more complicated because we got to estimate maintenance cap X. That's 75,000 is we're shooting from the hip on that. We could be wrong. And lenders know that that could be wrong. And they don't have enough history really to substantiate, you know, how my guess is, right, they've said, I think they threw out the number 88%, you know, revenue growth from 21 to 23. And that's an impressive stat. But we could do the math. And I'm not good at. doing math live while we're recording, but they only had 2020, you know, and they started in 2020. So the growth from year one to year four should be astronomical, right? Like they did what I would, I'll give them credit because I've been maybe a little bit more negative. They've done exactly what this is a slam dunk year zero to year four franchisee performance.

They are doing fantastic to go from zero in revenue to, 1.7 million in revenue with $600,000 in SDE in four years, my guess is their top, you know, maybe quarter of, you know, kind of percentile, top 25 percentile in terms of performance of franchisees. I think they're doing great. Yeah. It's just very, very difficult to transition that, you know, at this level of maturity. If they had, you know, not just one territory, but if they had five or ten, all of a sudden you can kind of start to see, okay, you could have six million dollars, in, you know, ebada here, that that's something that's worth transferring, but that's not where they are. They've just got one. So I would think who should buy this is someone who's great at

B2B sales. Maybe in some, you know, they've sold something kind of similar to like the type of people, the parts of the hotels and the convention centers that they're going to be selling this to, someone who's just a great salesperson who can come in and grow that side of it with, you know, the equipment and the people that they've got. But I would say it's much lower valuation, but that kind of person could get an SBA loan and probably do okay. Yeah. The other person that I've seen do these is somebody who owns something that's kind of adjacent. Maybe they own a home construction or remodeling business that's, you know, of maybe a similar size or slightly bigger.

And they go, hey, I could use the service. I could kind of jumpstart it. And, you know, I see them kind of signing up as franchisees for these types of, you know, know, these types of vendor kind of like not fully arms linked relationships and it's beneficial to them. So yeah, somebody in this market is like a medium size home builder and they go, heck, I mean, we could we could blop on, you know, another $500,000 in revenue just smashing our own and kind of, you know, serve ourselves. Those are great scenarios. Or a roofing business. Yes. Only residential, I think would benefit from this. Yeah. But even then, like you're tearing off shingles and they're really

heavy. Yeah. And you're not smashing. Like you said, it's not smashable. It has to be something like pallets and boxes. That makes sense. Yeah. Yeah. But I like where your head's at, Heather. Well, do we, do we like it or do we not like it? I know Gustavo wants us to do a thumbs up, thumbs down. I mean, for me, I'm, I'm halfway across the country from this. It's definitely a thumbs down in terms of, you know, does it fit for me in any way? And I don't want to live in Las Vegas. So I think I'm thumbs down. If this were in Charlotte, North Carolina, totally different scenario. I think I would be more inclined to look at it and kind of test the market and see what will they actually, what is it actually going to transact for?

So I'm kind of middle of the road. Yeah. And I have to say, I think I like it if the leverage or the price was quite a bit lower for the right person. But my biggest reservation is the market. I think it's a rough market and it's not easy even for a really great salesperson. So maybe someone who's already in the market and does this kind of sales, then I'd be thumbs up for them. Yeah.

Yeah, totally agree with you there. All right. Well, that was a fun one. Thanks, Heather. Yeah. Thank you. Thanks for listening to everybody. If you enjoyed the episode, please leave us a review or pass along this episode to a friend.

I think I did. I forgot to mention there is a guy on Twitter or on X who is a franchisee of this. I can't remember who he is off the stuff. head. But yeah, if you enjoyed the episode and the conversation, please pass it along to a friend or leave us a review. And thanks to our sponsors for this episode. We'll see you next week.