Acquisitions Anonymous - #1 for business buying, selling and operating - Pet Cremation - Is It Worth Franchising?

Episode Date: August 27, 2024

Thinking about investing in a franchise but unsure if it’s worth it? In this episode, we analyze the pros and cons of franchise investments using a pet cremation business as our case study. We talked about what to consider before saying yes, like the importance of brand recognition, the support you can expect from the franchisor, and how to understand market demand in your area. Thanks to this episode'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.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]

On the face of it, this has the look of something that does not have economics of scale at all. You don't really need national marketing if you're still just doing the route business to the local veterinary offices. I wouldn't want to be paying a franchise fee at all at this point because what are you getting for it? Very, very little. $36,000 for a business to size is a huge commitment. And you're outsourcing your marketing to them? Like, have they proved that they can really do it? Welcome back, everybody to another episode of Acquisitions Anonymous.

I'm Mills Snell, one of your co-host, me and Bill and Heather have a fascinating conversation today. I like go way down the rabbit hole on this FDD. This is a business that I don't think we've ever looked at before, but I've definitely heard in SMB circles, people love this type of business. It is a pet crematorium and it's a franchise. It actually seems like the owner of the franchisor is selling their only corporate location and divesting it to focus more on the franchisor side. It's really interesting to get a ton of detail in the FDD certification about revenue by month, revenue by category, how many new stores they're planning on opening. It talks a lot about walk-in versus vet, you know, referrals. It's a really deep dive, way more information than we normally

get. And this is, we didn't sign an NDA. This is all publicly available information because of their franchise status. We talk about the industry as a whole, bills coming on, coming to the episode off the heels of a pet trade show. And so we had a ton of discussion about the different dynamics and the growing kind of macro trends, but also just the complexity of, is this a deal that's really viable. Who could do something like this? Why would you buy this versus building it de novo? So it's a really fun, fascinating conversation. Hope you enjoy and stick around after a quick word from our sponsor. Hey, Michael here. Want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and I can

attest that he's a real human being and a good person. And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your quickbooks online set up in the right way, and a number of things around payroll as well.

So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast,

it would help us and help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode. Hey, everybody. Hello. We hit record right after we started making fun of your home state, whoever you are, listener. Yeah, we won't disclose it, but how's everybody doing? Doing well. I am back from a week on the road.

I was traveling internationally to see a supplier, and then we flew to Vegas for our biggest trade show of the year, Super Zoo, last week. And I didn't get home until like midnight on Friday night. So I am so buried in email right now. What happens at Super Zoo? Super Zoo is the largest pet trade show of the year. So it is the entire Mandalay Bay Convention Center. If you've ever been there, you know it is a large convention center. And it's just pet, pet, everything. There is a grooming competition. So I saw a poodle made to live. look like a tiger. I saw a poodle made to look like a unicorn. There's a lot of poodles because the way their hair grows, it's easy to groom them. But there's like, this thing is huge.

I mean, it is the super zoo. And there's also some one of my friends who sells frog stuff online is there and live frogs. So he's there with like all the aquariums. So it's not just companion animal dog and cat. It's all this reptile. There's whole, there's equine. It's like, it's huge. Oh my gosh. Dude, that is amazing. It's fine. I don't even think about the categories of animals that you guys would, like, segregate into, but companion animal is probably- So companion animal is dog and cat. Yeah, biggest category. But, I mean, could a, like, a lizard isn't a companion animal?

Not technically, I guess. I've been sorry to the lizard people out there. We just made a few thousand people. We just made a few thousand people really angry, but that's right. That's right. Especially if you say a horse is not a companion animal, Heather, might come through the screen at me. Exactly. My emotional support horse would have to say otherwise. Horses are their own category. They're their own thing.

Equines are own. So yeah, companion animals, dog and cat, and then there's like small, there's like reptile and small lizard and there's birds and then there's like a whole other grooming section, which is technically separate. And then, yeah, so there's all kinds of stuff. And then there's the equine and like farm animal stuff. Did you come away with, with a million or a billion dollar idea that you can talk about on air? Uh, no and no. Maybe and no. I don't know.

I would think that there was like you would just come away with like burst of creativity. And also I can't believe somebody is probably making money with something that stupid. All of those things from very insane things. Um, and also though, like you, you find people who stumbled into gold mines all the time. And you, I can't believe like, for example, the pet hair, the grooming vacuum thing. We did on the show. Like I didn't see them, but I bet they had a huge booth in the grooming section. I don't spend a ton of time in the grooming section, but they had a huge booth.

So there's, I mean, and every business industry is there. So like we look at acquisition targets, you know, like everybody's there. And anybody who's anybody who wants to invest in pet is there. So you get a ton of private equity reaching out. We have a big booth. So this is our biggest booth yet. We had a 20 by 20, which is like an island booth. So we have paths all around on all sides.

So we were very busy this year, which is. you try to catch like wholesale buyers is that that is substantially the main reason everybody is there um but you know we'll meet with like all of our big retailers there a ton of small retailers will just walk up to the booth to place an order some that we already know some that are being introduced just for the first time but also all of our suppliers are there so we see all of our suppliers which is great um it's just the whole industry gets together and so you don't have to get on airplanes it's really really useful that's great well i have the perfect segue in the history of the entire Acquisitions Anonymous podcast,

I might have the perfect segue. Let's hear it. Bill, would you say that people spend a lot of money on their pets when it comes to pets? I would say people spend a ton of money on their pets. What about when their pets pass away? I would think they would be primed to spend a lot of money. Because I have got a deal that I'm going to pull up.

I'm going to share the screen. But it says no competition, huge territory, pet cremation, franchise in Opelaka, Florida. Okay. Does that not sound like it hits every key? Well, if there's no competition at all, I'm very intrigued.

Yeah. Might be too good to be true, but surely not. All right, this is in Opelaga. I'm going to read it. Miami-Dade County. It's a franchise. Mills, you left off that it's a franchise. That's even more interesting.

Maybe not. Okay. I'll listen back to the recording and stand corrected. The asking prices $1.5 million. The cash. flow is $50,000. Gross revenues. And I'm guessing this is a new franchise territory.

So these might be representative, but we'll get into it and see. Gross revenue, $980,000. Inventory of $20,000. Ebit Daub of 127. They say the rent is $3,200 a month. Oh, no, maybe this isn't de novo. This is existing. It's been established since 2018, FF&E of $290,000.

They say this is the only. pet cremation facility in Miami-Dade County guaranteed 20 years. I'm not sure how that works. Very profitable pet cremation, pet crematory in business for the past eight years, which that math does. I think the territory is guaranteed exclusive for 20 years. Probably so. We've got a couple YouTube videos here. It's called Resting Rainbow Pet Memorials and Cremation. There's a YouTube video of a lady. I can't tell. This is from the franchise life. I'm not going to play this video because it gets kind of weird if we do like video and video.

But episode 51 of the franchise life, there's a link to the FDD certification, which I'll pull up in a minute, which is how franchises worked. And we've talked about those some in the past. Then there's also another YouTube video about from Be wildly wealthy about Franchise Minute, Resting Rainbow Pet Services franchise. So they say we're in a light industrial warehouse. that services the public and veterinarian's offices. We own all the equipment and furniture in the office, including a large walking cooler and incinerator and a huge inventory. There's no local competition in the market.

This office is very capable of reaching $3 million in one year. I'm guessing that's revenue. Support and training. We thoroughly train everyone and support is vital for life. Reason for selling, we need to focus on the franchise. This is our corporate location and we are two, maybe two spread thin or something like that. There's also a website here, Peaceful Pause Memorial. I'll pull that up in a second, but they show us where they are.

And the broker looks like it's listed by Joseph Castronova. So not a ton of info. I'll pull up some of this and I'll scan it while you guys give me your thoughts. and then we'll dive in from there. Okay. So what I think is going on here is this was or is a pet crematorium and they decided to franchise. That has ostensibly been going well enough that they no longer want to actually be in the business of cremating pets themselves. They would rather be in the interest of or the business of selling franchises to other people who cremate pets.

and they want you to buy their founding location, their corporate store, the one that they basically cut their teeth on, and to basically sell it out of being a corporate store and turn it into a franchise, I would assume. So that's what's going on, right? Is that how you guys read it? Yep. Yes. Yeah. But it's been around six years, the original location. And the first thing that I question is it's not making a lot of money for something that's been around six years without much competition around it. I would have thought the cash flow would be higher than this, especially if they've gone out and franchised it from here. And it's also especially because the period from 2018 to 2023 has been just the most gangbusters period in pet, you know, the best five years in pet in the history of pet, pretty much.

And the business is still doing $50,000 in cash flow, which is $127,000 of EBITDA. I wonder what's between EBITDA and cash flow here. it seems a little weird to me. Yeah. Now, of course, it requires pets to die. And this is a weird question, Bill, but that boom in pets, has it been people mostly buying young pets that, you know, so they haven't quite become customers of this business yet? Hopefully still alive.

Yes, that's true. So in 15 years or 10 or 15 years, you know, that should, that wave would help this kind of business, I guess. Yes. Yes. That is true. So the thing that is tough for me here, and we just get this out of the way, the asking price, right? So I actually, I like this industry.

I don't know that I want to pay $1.5 million for this location because it's doing $50,000 of cash flow, and it says it has FF&E of $290,000, which, you know, you can imagine the fixed assets you would need to run a crematorium, right? It sounds like it's a walk-in cooler and incinerator. and that you probably add those up and it's about $290,000. So the return on the assets themselves is not terrible, right? You got $300,000 of FF&E and it's yielding 50 grand a year. You know, that's 18% or something.

You know, not terrible, but that's a lot of work. But I don't know where they get $1.5 million. It just is not worth that. Okay, well, this is publicly available information. So I'm going to share a different screen based on their FDD. which is going to give us a little bit of a snippet into this. And this is the way that FDD certification works is if you're going to solicit franchisees and become a franchisor,

you have to go through some regulatory hurdles to do that. And it, in essence, whether or not it's valid, the goal is to provide a level playing field in terms of access to information on the entry of the investment. So to make sure that nobody has an up, you know, uphand advantage or anything like that in making the investment. So we've got on this table that is on the screen, we've got 2022 and 2023 income expense and franchise adjustment line items that get us to EBITDA for it says gross revenue and certain expenses of the affiliate owned outlet for each year. So that would be this one, right? I think so. I mean, it's affiliate owned. It's one of their kind of, you know, corporate locations. And the numbers are a good bit lower than what is on biz by sell, which there could be a lot of reasons for that. It could also. In some ways, the revenues lower, but the EBIT dies higher. Yes. It's an interesting, I'm just looking. So, I mean, the business basically has like less than 10% cogs, which kind of makes sense, right? I mean, there's not a lot of cogs related to.

Now, one of the components of sales, this isn't just a service-based business. They also sell products, earns and, you know, things, memorial items and things like that. So there would be dogs associated with those product sales, but not the services themselves. Yeah. And you can see their payroll jumps significantly from 54,000 in 2022 to 127,000 in 20203. Their EBITDA remains roughly the same. So on its face, this business, if you're not watching on YouTube, it goes from 531,000 of sales in 2022 to 715,000 of sales in 20203, and EBITDA goes from 202 to 221. Yeah.

Whereas payroll more than doubles from 54 to 127. So on the face of it, this has the look of something that does not have economics of scale at all. I mean, this thing got 50% bigger. and all of the additional revenue spent on payroll and almost none of it dropped to the bottom line. Now, the margin percentage is great. I mean, it's in the mid-30s. But at the same time, there's something else going on here. Like, this is probably not representative.

Like, it shouldn't be that way. You know, your same staff should be able to cremate more and more pets. Like, there should be a fixed cost component to this. There is some data here that's kind of interesting. So, like, they say in here, this is table two is, is 20. 2022 revenue and cases by month. I'm guessing a case is a cremation because they're showing kind of average revenue per transaction. But, you know, it looks like it's barely smooth revenue.

Like the low monthly revenue, February was 23,000. It gets as high as 66,000 in December. I don't think there would be seasonality, but it looks like it's, now this is interesting. interesting. The vet versus walk-in, vet almost tripled between 22 and 23. So the total cases, you know, almost doubled while walk-ins stayed the same. I would think that vets is obviously your, you know, high volume, but probably lower margin customer segment versus walk-ins that are kind of more retail. And probably requires a salesperson to go out to those vet offices. And that's to me is where the payroll increase might have been, you know, someone that's incentivized

to bring on those additional cases from the veterinary clinics. I've actually visited a crematorium for animals before. It was actually kind of a combination. A veterinarian actually owned it. So it had a little bit of both. They were veterinarian on one side and had the cremation on the other. And what I understood of that business is they drove, you know, they had salespeople who got different vet clinics to sign on. And basically, you brought the vet clinic a freezer. And when the dog or cat is put down or passed away, they put them in the freezer. And then these vans go out and pick them up on a schedule and bring them to the crematorium and do the rest from there. So I think there's, it's kind of a route business in a weird way. And there is some sales involved.

Interesting. Because they're, I mean, unfortunately, crudely, right, some people want to give their dog a funeral and sometimes it's a disposal business. Yeah. And you can imagine, so the low figure, they have like the high figure and the low figure for how much they charge for cremation. The low figure in almost every month is $15, which strikes me as sort of the disposal fee, you know, the no frills. But it can be as high as eight or nine hundred or over $1,000 in some cases.

And I would imagine the vets are more of more of the route-based business, low margin stuff. but they've grown significantly in that. And the walk-ins grew from like 1,100 a year to 1,200 a year, but the vet business grew more than double. So I imagine that's how they're growing, and that's why their payroll is going up along with their revenue, but the margin is not going up, the even on margin. Right.

What we're finding is, this is indicative of looking at a franchise and looking at an FDD, a disclosure, is a franchise disclosure document, FDD. There's so much data here. We can spend like three hours looking at the details of this. Now they have pulled up on the screen, income revenue percentage per service category. So they're showing us revenue per kind of service line.

Cremation fees make up 74% of it. And then they show us memorial items, same day cremations, pick up and delivery fees, home euthanasia. I mean, you guys hit the nail on the head. There's so many different ways that your personal preferences can come into the mix here. It's not just a one size fits all. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions.

Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Vizzo Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at VisoCAP.net, then click Zoom sign up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom sign up. So, and this FD is 179 pages.

Yeah, we can't process that all here. But I also wonder, anytime you're buying a business from somebody to go do a different business, you kind of wonder, oh, well, is the new business they're doing? the business I really want to be in. And these guys are going from running the crematorium to franchising the crematorium. And it makes me go, anytime I see this with a franchise that's kind of not proven out, I go, is this a hustle? Like, does this really need to be franchised? There's so many of like these low-end franchises.

Like, franchised drain cleaning, franchised, drier vent cleaning. Dryer vent. Yeah. And you're like, does this need to be franchises? or is this like, you know, just a local business? You know, what is the franchising actually bringing to it? And the answer to the question needs to be national scale marketing, right?

And maybe access to like if you can't buy the furnaces and the coolers, you know, on your own. So maybe like access to a supply chain of some kind. Or SOPs, if it's like a very SOP heavy type of business. I don't know that I see this here. No. You know, national marketing, access to a supply chain or SOP heavy type business. And it makes me go, why does this need to be a franchise? Yeah.

So this is the website that it links to. And it looks like there's maybe a couple of things going on. There's resting rainbow up in the top right. And then there's also a peaceful pause over in the left. So I'm confused as a prospective, you know, franchisee looking at this information and makes me think, okay, is there something going on here that is, if I'm confused, right, are customers confused by this? Is there just this is their website? So there's two customer facing elements here. How is the water getting muddy?

As far as I can tell Mills, peaceful pause is the corporate location. was like the one-of-one location. And you can see in the Peaceful Paul's logo, there is the rainbow. And I am willing to bet that then Resting Rainmo became the name of the franchisor. And if you go to RestingRainbo.com, you will see that they have franchise opportunity on there. And they have apparently eight locations, all of which are in Florida, except one is in Philly. So I think Resting Rainbow is the franchise brand. It is weird that they change the brand so much, though.

I do find that even confusing. So I have seen that happen. I'm actually invested in a laundromat franchise. And they were called to you laundry at first. And they had to change their trademark for the franchise to Laundra Lab for trademark reasons as they went to scale nationally. So it's possible, I don't know, it could possibly be a trademark thing. I got you. I think you're right.

So, and this will be the last thing. This is just like catnip right now. I can't stop. this FDD. So what they show in their disclosure document is status of franchised outlets. So they basically show one outlet, one location at the start of the year in 21, 22, and 23, which is the one in question. And then they say in Florida, they have projected new franchise outlets at the end of last year. they're anticipating

I guess they've signed two franchise agreements in Florida but they haven't open they project 10 to be sold in Florida, 5 in Georgia and 5 in North Carolina so they're anticipating opening 20 new locations in 2024

so at least kind of tells us right I think you hit the nail on the head Bill and Heather I think they started with one location they realized hey maybe we're on to something or we feel very bullish about this let's franchise it and just wear the franchisor hat and quit operating and just collect a 7% royalty, shared marketing fees, all the, you know, all the different things that go along with being a

franchisor. But let's get out of the day-to-day operations. But they did it with one, you know. Hard to blame them, right? I mean, it would be nice to just sit back and clip franchise fees. But it seems like you're getting in here at the very beginning of a franchise. So, right, it seems like they've contracted to open several, but they're not open yet. If you're going to jump into this franchise, you are kind of on the cutting edge to some degree. Now, I would be really nervous if you were saying buying a Greenfield franchise in Philadelphia, right? Yeah.

Because there's no national marketing footprint or anything, and you're going to pay a franchise fee that kind of assumes you're getting all that and you're not. You are in this case buying an existing business, right, that has contracts and veterinarians in place and some market awareness. So I think that de-risks a little bit. Again, price aside, you know, paying $1.5 million so this is crazy. So, but still, though, you're, I wouldn't want to be paying a franchise fee at all at this point, because what are you getting for it? Very, very little.

Right. And I think just the mix of their customers tells me something that is kind of less desirable. The wholesale customers, if you will, are the veterinarians. And that is the vast majority of their business. And you think the value of a franchisee getting, marketing, you know, they'd have to show that their marketing is effective in reaching the pet owner directly, not the, not just the veterinarian. And it doesn't look like it's been all that effective. Like, you know, this is still seems like a business where most of it's going to

come from the veterinary offices. And it's going to be hard to get people to bring their dead pets. I mean, I wouldn't want to. I think I would, I would prefer the whatever, go through the veterinarian office and whatever they say. So I think that's a challenge right there that I see. is you don't really need national marketing if you're still just doing the route business to the local veterinary offices. Yeah. Is there anything that invites competition more than saying, look, we have no competition? So what I don't know Mills is if this is licensed or not, because it does say on the website the only licensed pet crematorium in Miami-Dade County. So, and now the bar for that could be very low.

It could be fill out of form and you're good to go. They're also very big on, oh, there's no competition and, oh, maybe there's not going to be another resting rainbow in Miami-Dade County. But as we've already established, the CAPEX to start one of these is under 300 grand. So like if you are crushing it, here comes the competition. Yeah. Right. This is really tough. It's not really protectable.

And that brings me back to the criticality of branding at the franchisor level and national marketing. And I just don't see it because that's your only mode, right? that people got to know resting rainbows where you take your pet and the experience is fantastic, you know, et cetera, et cetera. And I don't want to take it to some hole in the wall pet crematorium. But I don't know that they've established that yet. Especially not outside of Florida. All their locations they've sold are in Florida.

And there is this interesting thing in multi-unit, the people who are really good at franchising, they kind of know the segment of the market that they are good at. There are certain folks who are really good at going from zero units, kind of like this, one unit, up to, maybe 10 to 15. Then there's folks who are really good at that kind of growth catalyst and saying, hey, you're at 15 units and I want to grow from 15 to 50, which is kind of the prime, you know, steep part of the learning curve for the franchisor. But then there's folks like Rourke and multi-unit just like masters and PE-backed folks who they come in and they blow these things out.

And it's like, you know, Orange Theory Fitness and all the big franchise names that they go from, hey, I've never really heard of that, or maybe I saw it one time when I was on vacation to now they feel like they're everywhere. That's all PE driven. Those folks know how to roll out units. They know how to do franchise territory development and they have mature systems at the franchise or. What you hear is most franchisees and folks who are good at multi-unit, they have to know where in that life cycle they play best. And you have to kind of set your expectations accordingly. You know, if it's a big national name, you expect big national. benefits. If it's a very new, very green, you kind of have to, like you said, Bill, it's like, what am I paying for? One of these things was a $3,000 monthly marketing fee. $36,000 for a business to size is a huge commitment. And you're outsourcing your marketing to them. Like, have they proved that they can really do it? Yeah. This is also an interesting market for marketing. It's is almost pure demand capture. So, you know, the two types of marketing are demand creation and demand capture, right? You can't convince me that I need to cremate my pet

if he's still walking around, right? So you, it's pure demand capture. Like, you have to be there. The moment. Yeah. The moment that they want you. I mean, it's a lot like disaster recovery. You know, if you have your basement floods, like you need it right now and you do not need it before and you don't think about it before. What's nice, though, is the ROAS can be very, very good. The return on ads bank can be very, very good on pure demand capture businesses because people need it. They need it now. And they're probably fairly price indifferent, right? You can kind of charge whatever you want to charge, especially if there's not a lot of competition in the market.

The problem is there's an inherent ceiling, right? Like you can't make more pets die than die naturally, right? So you grow with the market. And if you want to grow faster, you got to take share. You know, you got to slug it out with other people. So then you end up in maybe Google. ads, bidding more, right? Who's willing to pay the most for a pet cremation? And it's kind of this balance between your cack and how much can I charge before consumers go elsewhere. So it's that

type of marketing. I would be wary of a franchise that says, oh, we can just dial up your marketing spend and 5x your business. You know, I want to understand, I don't know how you figure this out, but like how many dogs die in Miami-Dade County every year? Because that's your ceiling. Which in the in the human death care industry, you can find those things out. out, you know, and yes, it is a very fixed ceiling. Like, I used to have some clients in the funeral home business. And it's, one, it's highly regulated, but it's very predictable. You know, even when COVID comes and things like that, death is fairly predictable in every zip code.

And then it's just a battle for who gets, you know, their share of the pie of this. One interesting regulatory thing that I wonder if they're hitting on is in order to have the cremation machine, which I can't remember exactly what that's called. it's a, it has a very specific name. I'm drawing a blank on now. But talk about every like Facebook business horror story, every like HOA horror story.

If people find out you are petitioning to get one of these, they come out in droves because they think that like ash is going to be coming out of the building. And, you know, that like it's going to, like they're going to smell it and all kinds of things. And so if there is one already in place and you don't have to petition to get a new one,

I know from hearing about some people's experience, that's a very important thing. Yeah. And what was the, I mean, the asking price of a million five, let's throw that out and say, maybe this is worth 3x. And I don't know exactly what the cash flow is, but it's 200 something maybe. So maybe this is six to 700,000 enterprise value. How does that compare to the total all in cost of starting one of their franchises? Did the FD make that clear?

problem, right? Because the FF&E is $290,000. I haven't seen in the FD, but, you know, why would you pay any more than $290,000 to own this business when you could just start your own? There'd have to be some substantial brand value that, you know, this brand of crematorium was better. But honestly, though, the cash for the business does not even justify even the replacement cost of the assets at the moment. If, in fact, the cash flow of the business is $50,000, you know, you basically made a poor investment with your $300,000 to buy that equipment, unless something is going on in Mills's FDD is right, in which case the cash flow is a little over $200,000 a year,

which, okay, then maybe it commands $600,000, $500,000, $5 to $600,000 of enterprise value, which is a nice little premium over the replacement value of assets of $290,300 or so. And then you've got to decide, do I want to pay $600,000, five to 600,000 for this business with the assets in place running, or do I want to go buy, you know, the furnace and the walk-in freezer and all that stuff for 300 grand and try to make a go of it and build a business and compete with these guys. That's the decision here. Yeah. For those reasons, I'm thumbs down. For those reasons, you're out.

I agree with that. Yeah, I don't know this industry well enough to understand what type of penetration they have in Miami-Dade County. The other thing, too, is Miami-Dade County is big. Like, that's a high population county. So you can't translate that. Like, you can't just open one of these in somewhere else in Florida that is lower population. Or maybe you can, because Miami-Dade is very urban, maybe fewer people have dogs.

You know, maybe more of a mid-sized city that's more suburban is better, right? Where people can, people have more yards and more dogs and can drive. that's the problem with early franchising is just none of this stuff is proven out so you don't really know which makes me nervous all right as we wrap it up who do you think who do you think signs the NDA and gets the sim and is the right fit for this type of business there are other so here's the problem there are other pet crematorium businesses i don't know if they're franchised or if they're just all corporate owned um so like you could try to do this as an add-on except i don't think these guys are going to sell their crown jewel corporate store to a competitor and give a

competitor a foothold in their biggest market Miami-Dade County. So that's kind of the problem. Like it doesn't work as an add-on. And it's a little tough, you know, for an operator, unless you just want to be an operator, make $200,000 a year and like, this is it. You know, the only scenario I'm thinking that makes sense is a vet. That's what I was going to say. The same thing I looked at. Yeah, A vet owning it as kind of a diversification of revenue. You know, and they know all the other vets. So the ability to sell into that network, you know, they have more knowledge of what's really going on.

And yeah, that's it, a veterinarian. But if you're a vet, then once you just spend the cap X and attach it to your current building and you're ready to rock. Right. Only at the right price should a vet buy this. Otherwise, I agree with you. But sometimes a working doctor might find it easier. just to kind of buy something that looks turnkey than to try to start it up.

That's true. I think also the like the distinction of it. You know, it's like you don't want to be a vet who it's like, well, you come in, you know, this door in the same building, you know, for us treating your pet humanely and we love it and we will do anything to save it. But if that didn't work out, just go next door and it's under the same roof. I went to a place like that. I think that that would kind of money the waters.

You probably, you probably want the, you know, clearly distinct different brand. not even like any association. Yeah, that's fair. It's a little morbid where they're like, yeah, we don't care. We make money coming and going. Which you could do it de novo, right? A vet could do it on their own and do it, you know, two blocks away or whatever and it not be under the same brand.

But that's the only scenario I could imagine where somebody would say it's worth me really like pulling this apart and getting into the conversation with the franchise or about, you know, where they're maybe right and wrong and actually spending the effort on it. I like this end market. I mean, more and more people are getting pets. More and more people are treating them, you know, or humanizing them. This market should have tailwinds. My question, though, is how do you, and I don't think these people are crazy either to try to build a brand and franchise in this market, right?

You know, there are going to be brands built in this market. The question, though, is what is the right strategy to build a moat around your pet criminatorium business? And is this the one, do you want to be a franchisee here in Miami-Dade County? How's that compared to other cities? How's like, you know, do I want to pay a franchise fee to an ad is yet unproven franchisor at this point in the maturation of the market? That's the question for me. I think that's a great note to end on. And we're kind of running up against time.

Bill, I'm so glad we had you for this episode too. And coming off the heels of, was it, what did you say it was, pet zoo? Super zoo. Super zoo. I just love the way they named it. Like the other big one of the year is Global Pet Expo, which is just like so boring. but like super zoo, and it is that way. Well, thanks everybody for tuning in.

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