WEBVTT - Authentic Restaurant Brands’ CEO on M&A Strategy 0:00:13.520 --> 0:00:14.720 Welcome to Chopping It Up. 0:00:14.960 --> 0:00:17.200 I'm your host, Mike Halon, the senior Restaurant and Food 0:00:17.200 --> 0:00:21.080 Service analyst at Bloomberg Intelligence. Our Research and that a 0:00:21.079 --> 0:00:23.560 bi's five hundred analysts around the globe can be found 0:00:23.600 --> 0:00:25.759 exclusively on the Bloomberg terminal. 0:00:26.239 --> 0:00:27.760 If you enjoy the pod, I'd love it if you 0:00:27.760 --> 0:00:30.600 could leave us a review on Apple or Spotify. 0:00:30.720 --> 0:00:34.159 Today we're joined by Alex Mercedo, co founder and CEO 0:00:34.360 --> 0:00:36.080 of Authentic Restaurant Brands. 0:00:36.240 --> 0:00:37.960 Thanks for joining us, Alex. 0:00:38.080 --> 0:00:39.680 My pleasure. Michael, good to be here with you. 0:00:41.040 --> 0:00:43.280 Please tell me a little bit about your career journey 0:00:43.320 --> 0:00:48.320 and then how Authentic Restaurant Brands or ARB came to be. 0:00:49.560 --> 0:00:52.280 Well. I've been involved with food and beverage since I 0:00:52.320 --> 0:00:57.000 started my career at ABNBEV. For the last fifteen years 0:00:57.080 --> 0:01:00.920 or so, i've been working mostly with restaurants, and twenty 0:01:00.920 --> 0:01:04.720 eleven I joined burg King, where I was president for 0:01:04.760 --> 0:01:08.759 about seven years of North America. After that, I became 0:01:08.800 --> 0:01:11.440 the global president of Tim Morton's for a couple of years, 0:01:11.480 --> 0:01:14.280 and then for the last four years, I've been a 0:01:14.319 --> 0:01:18.440 partner at Garnett Station Partners, with private equity group based 0:01:18.440 --> 0:01:22.360 out of New York where I work in several of 0:01:22.400 --> 0:01:26.800 our investments. In one of these investments is Authentic Restaurant Brands, 0:01:26.800 --> 0:01:29.800 which I co founded with Alex and Matt and the 0:01:29.840 --> 0:01:34.479 Garnet Station Group about four years ago. And it's become 0:01:34.520 --> 0:01:38.800 so exciting, so big, and really so successful quickly that 0:01:40.000 --> 0:01:42.080 about a month ago I stepped into the role of 0:01:42.160 --> 0:01:45.039 CEO of Authentic Restaurant Brands. So I've been working with 0:01:45.120 --> 0:01:49.160 restaurants now for the most part of my career. 0:01:49.480 --> 0:01:54.520 And you have a unique kind of niche here with ARB. 0:01:54.720 --> 0:01:57.640 Can you talk about how you're looking for brands but 0:01:57.640 --> 0:02:01.800 it's not necessarily the next big thing, you know, it's 0:02:01.840 --> 0:02:04.520 it's it's brands that you know, maybe aren't going to 0:02:04.560 --> 0:02:06.120 be national brands at some point. 0:02:06.640 --> 0:02:10.080 That that's that's exactly it. So in our thought process 0:02:10.120 --> 0:02:13.880 when we put together ARB was that there is some 0:02:14.040 --> 0:02:19.880 magical brands that have very deep ties with their communities, 0:02:20.120 --> 0:02:22.880 but their regional and scope right and because of regional 0:02:22.880 --> 0:02:25.600 in scope, sometimes they get overlooked by the big groups 0:02:25.720 --> 0:02:28.560 or by you know, someone from California will never know 0:02:28.600 --> 0:02:31.639 what the good brand is to get pizza in Ohio 0:02:31.760 --> 0:02:34.200 and the good sports bar in Philadelphia and so on, 0:02:34.840 --> 0:02:37.639 and we thought that we'd build a holding company to 0:02:37.760 --> 0:02:42.480 acquire regional brands that are extremely extremely well run, uh 0:02:42.720 --> 0:02:45.280 and then have our team of experts and veterans work 0:02:45.320 --> 0:02:47.680 with these brands, you know, to bring the latest in 0:02:47.960 --> 0:02:51.600 data science technology, you know, financial practices and so on. 0:02:51.639 --> 0:02:55.239 Because we thought, listen, these brands, even if they're very 0:02:55.280 --> 0:02:58.400 well run, because they're limited in size and regional, perhaps 0:02:58.440 --> 0:03:00.320 they don't have the latest and greatest when it comes 0:03:00.360 --> 0:03:04.000 to the latest systems to run restaurants. And sure enough, 0:03:04.000 --> 0:03:07.280 that's what we found. And we've been very successful in 0:03:07.320 --> 0:03:10.400 partnering with these brands, keeping the management teams which are great, 0:03:10.440 --> 0:03:13.679 and just deploying more resources when it comes to you 0:03:14.240 --> 0:03:17.560 than the latest technology to find new sites, or the 0:03:17.600 --> 0:03:20.680 technology to analyze your menu architecture and find the gaps 0:03:20.680 --> 0:03:24.400 in the menu architecture, perhaps to organize your data your 0:03:24.480 --> 0:03:26.600 data management system a little bit better so that you 0:03:26.639 --> 0:03:29.880 can find some insights on everyday sales. And that's what 0:03:29.880 --> 0:03:32.520 we've done now for three and a half years, and 0:03:32.600 --> 0:03:35.680 we're up to five brands. We just acquired Tabin the Square, 0:03:35.680 --> 0:03:39.720 which is a very successful Polish casual brand from you know, 0:03:39.800 --> 0:03:43.200 the New England area that gets US a billion in 0:03:43.240 --> 0:03:45.440 sales and around one hundred and fifty million dollars in 0:03:45.480 --> 0:03:48.000 EP of that. So it's a fairly relevant business made 0:03:48.080 --> 0:03:51.000 up of relatively small regional brands. 0:03:52.240 --> 0:03:54.880 Yeah, the first time we spoke at the ICR conference 0:03:54.960 --> 0:03:57.720 back in January, I thought this was refreshing. You know, 0:03:57.840 --> 0:04:00.280 I kind of got tired of hearing everybody trying to 0:04:00.320 --> 0:04:01.320 track down the next. 0:04:01.160 --> 0:04:05.800 To pole, which is not an easy thing to do, clearly. 0:04:06.240 --> 0:04:08.400 And you know what, I think a lot of this 0:04:08.480 --> 0:04:12.720 thought comes perhaps from my experience managing very large and 0:04:12.840 --> 0:04:16.600 complex restaurant systems, mostly of which we're building the eighties 0:04:16.600 --> 0:04:18.480 and nineties. So if you look at the big national 0:04:18.520 --> 0:04:21.000 brands in the United States, you know, the vast majority 0:04:21.040 --> 0:04:23.040 of them we're building the eighties and nineties, and then 0:04:23.080 --> 0:04:25.440 a few in the two thousands and so on. It's 0:04:25.480 --> 0:04:30.720 become increasingly difficult to scale up and build national brands 0:04:31.320 --> 0:04:35.440 in a cost effective way. Media costs are extremely expensive, 0:04:35.480 --> 0:04:38.320 it's difficult to find sites like it was easier back 0:04:38.320 --> 0:04:40.760 in the day. So our thought is, you know, let's 0:04:40.800 --> 0:04:43.080 take these brands that are national, make them better where 0:04:43.080 --> 0:04:46.280 they operate. Certainly, start building more but you know, we're 0:04:46.320 --> 0:04:48.480 not going to take a brand that's in Pennsylvania and 0:04:48.520 --> 0:04:50.960 take it all the way to Arizona. What we'll do 0:04:51.040 --> 0:04:54.240 is we'll find what the authentic restaurant brand is of 0:04:54.320 --> 0:04:56.760 Arizona and we'll try to acquire that brand and we 0:04:56.920 --> 0:04:59.120 just you know, build it media. So we want to 0:04:59.120 --> 0:05:01.520 be national, but we're going to get there by being 0:05:01.600 --> 0:05:04.000 regional all over the country. That's kind of our mandrend 0:05:04.800 --> 0:05:06.559 where we think about going. 0:05:07.160 --> 0:05:07.600 That's cool. 0:05:07.600 --> 0:05:10.440 Well, expanding it in concentric circles is back. 0:05:10.600 --> 0:05:13.640 I guess, well, it's about twenty minutes and not twenty 0:05:13.640 --> 0:05:15.320 hours a way. That's what we always tell our teams. 0:05:15.440 --> 0:05:18.200 If you can drive twenty minutes, that's okay to get 0:05:17.839 --> 0:05:20.680 the next site. Now if you have to drive twenty 0:05:20.720 --> 0:05:22.640 hours or take a two hour flight there, that might 0:05:22.680 --> 0:05:23.280 be a little bit. 0:05:25.040 --> 0:05:25.160 You know. 0:05:25.200 --> 0:05:27.440 We have a great example. We acquired this company called 0:05:27.640 --> 0:05:29.640 Poetropic Call. I don't know how familiar you are, but 0:05:29.800 --> 0:05:35.080 Poetropic Call is like the original you know brand in Florida. 0:05:35.400 --> 0:05:39.039 We sell grilled chicken. It's it's a mix of fast 0:05:39.120 --> 0:05:43.039 casual and drive through. And I'm in QSR because there's 0:05:43.040 --> 0:05:45.760 a big drive through component, but it's an elevated quality 0:05:45.800 --> 0:05:48.560 of food served quickly, fresh and hot. And you know, 0:05:48.600 --> 0:05:50.760 we have around one hundred and twenty locations in Florida 0:05:51.080 --> 0:05:54.719 right and this brand has tried to expand naturally in 0:05:54.720 --> 0:05:57.400 the past without much success. And then we get asked 0:05:57.440 --> 0:05:59.400 all the time. So we bought Poetrypic, are you going 0:05:59.480 --> 0:06:01.720 to try to take it to Texas or California and 0:06:01.720 --> 0:06:04.360 Arizona again? And said, no, we're not. And people get 0:06:04.400 --> 0:06:07.360 really surprisable. So I wonder why did you acquire it? Well, 0:06:07.400 --> 0:06:09.240 first of all, because we've thought a lot of saw 0:06:09.240 --> 0:06:11.000 a lot of opportunity to make it even better where 0:06:11.000 --> 0:06:13.080 it is. But second, if you think about it, in 0:06:13.120 --> 0:06:15.320 the state of Florida alone, we have one hundred and 0:06:15.360 --> 0:06:17.920 twenty Poetry Pic calls which have more than average, more 0:06:17.960 --> 0:06:20.960 than three and a half million dollars a box. There's 0:06:21.040 --> 0:06:24.320 nine hundred and fifty McDonald's, there's over five hundred Burgons, 0:06:24.320 --> 0:06:27.240 and over five hundred Wendy's. We could probably double the 0:06:27.279 --> 0:06:30.120 size of Poetry Pical in the state of Florida without 0:06:30.160 --> 0:06:32.600 taking you know, many risks at a very high volume. 0:06:32.640 --> 0:06:34.760 So so that's kind of the mindset that we have 0:06:35.640 --> 0:06:39.360 you know, to be nimble. We have been able to 0:06:39.360 --> 0:06:41.800 stay under the radar until this last acquisition, but now 0:06:41.839 --> 0:06:44.560 we've become sizable enough that we're starting to tell our 0:06:44.600 --> 0:06:47.120 story and it's been it's been a lot of fun. 0:06:47.440 --> 0:06:50.080 Can you talk about just name the other brands that 0:06:50.120 --> 0:06:50.760 are in your. 0:06:50.720 --> 0:06:54.400 Portfolio, so we have we have five brands. The first 0:06:54.440 --> 0:06:58.240 brand that we acquired was Primanti Brothers from the western 0:06:58.240 --> 0:07:03.000 Pennsylvania region, mostly focused on Pittsburgh. Primanti Brothers has been 0:07:03.000 --> 0:07:05.680 around for more than ninety years. Is a very iconic 0:07:05.720 --> 0:07:09.680 sandwich and it's a true namestake where it is right 0:07:09.760 --> 0:07:13.120 so that's where people go to hang out and watch sports, 0:07:13.160 --> 0:07:16.560 and you know, it's really a staple of that part 0:07:16.600 --> 0:07:20.640 of the country. We have Mambo Seafood, which is, you know, 0:07:20.680 --> 0:07:23.680 a Mexican theme family restaurant based out of Houston that 0:07:23.720 --> 0:07:27.640 we recently expanded into San Antonio. We have PJ. Wellhelm's, 0:07:27.640 --> 0:07:31.840 which is a sports bar casual dining concept for families 0:07:31.880 --> 0:07:35.160 that's based out of Philadelphia and the region. We have 0:07:35.200 --> 0:07:38.080 Portrait Pical one hundred and twenty locations in Florida, primarily 0:07:38.440 --> 0:07:41.640 grilled chicken, rice and beans. And then we recently acquired 0:07:41.720 --> 0:07:44.960 a tavern and is where which is in New England 0:07:45.000 --> 0:07:47.400 right now? What all these brands have in common? We look, 0:07:47.480 --> 0:07:51.120 we have a very very very difficult criteria for a 0:07:51.160 --> 0:07:54.600 restaurant to become an AARB restaurant. So first of all, 0:07:55.840 --> 0:08:00.480 high volumes relative to the pure set. Second, high margins 0:08:00.960 --> 0:08:04.440 relative to the pure set. Third, we look for brands 0:08:04.480 --> 0:08:07.440 that have been around for more than twenty years. And 0:08:07.480 --> 0:08:08.880 this for us is key because we don't want the 0:08:08.920 --> 0:08:11.680 latest fad. We want, you know, brands that have survived 0:08:11.680 --> 0:08:14.400 the test of time and the different cycles. But most 0:08:14.440 --> 0:08:18.360 of all, most important for us, we look for brands 0:08:18.440 --> 0:08:23.160 that have fans, not guests. So we have a proprietary 0:08:23.640 --> 0:08:27.080 way of measuring brand loyalty that we roll out in 0:08:27.880 --> 0:08:29.720 each one of these brands that we're measuring, But we 0:08:29.760 --> 0:08:32.520 also do by Google reviews and so on, and we 0:08:32.600 --> 0:08:35.880 take brands that people truly love and that are truly 0:08:35.920 --> 0:08:38.640 part of their routine. We have evidence of at least 0:08:38.640 --> 0:08:43.520 three of our five brands people having tattoos that are 0:08:43.559 --> 0:08:46.800 about the brands swihear in their body, So it's kind 0:08:46.800 --> 0:08:49.240 of unique. You don't get that a lot for most 0:08:49.520 --> 0:08:51.200 restaurant concepts in the world. 0:08:52.000 --> 0:08:53.040 Yeah, that's very cool. 0:08:54.160 --> 0:08:56.520 I've never been to a Primanti Brothers, but I've heard 0:08:56.559 --> 0:08:59.839 that they especially have a very strong cult following there. 0:09:00.520 --> 0:09:04.000 They do. It's it's wild, and it's tied, you know, 0:09:04.080 --> 0:09:06.560 to the Steelers and to the Pirates, and there's a 0:09:06.559 --> 0:09:10.000 whole there's a whole thing. It's you step in. You know. 0:09:10.080 --> 0:09:14.120 Our guests in that area, they have their permit, is right, 0:09:14.120 --> 0:09:16.480 because you know, we have more than forty locations, but 0:09:16.559 --> 0:09:19.720 it's like their permane is as an extension of their 0:09:19.720 --> 0:09:24.040 living effectively. So it's a really really cool relationship that 0:09:24.320 --> 0:09:25.959 a lot of our guests have with our brands. 0:09:26.360 --> 0:09:30.199 Yeah, and they are avid sports fans. Between the Steelers 0:09:30.240 --> 0:09:31.160 and the Penguins. 0:09:33.320 --> 0:09:35.520 Great market, it's a great market for a brand like 0:09:35.520 --> 0:09:36.480 Promants for sure. 0:09:37.960 --> 0:09:38.439 Very cool. 0:09:38.640 --> 0:09:41.200 So are you keeping the founders on to help run 0:09:41.240 --> 0:09:44.120 the business or is that you know, I guess. 0:09:43.920 --> 0:09:45.640 A case on a case by case basis. 0:09:45.800 --> 0:09:49.800 That's on a case by case basis we do because 0:09:49.840 --> 0:09:52.480 we only buy great brands, or we tied to only 0:09:52.520 --> 0:09:55.480 buy great brands that are very well run. You know. 0:09:55.640 --> 0:09:59.600 Our our mode is to keep the management team on board, 0:09:59.640 --> 0:10:03.520 so we do that all the time. Now the founder 0:10:03.600 --> 0:10:06.600 staying that really depends on you know, where the founder's 0:10:06.600 --> 0:10:10.360 mind's at. And you know, so for example, at Tavern 0:10:10.360 --> 0:10:12.600 in the Square, which we just acquired earlier this year, 0:10:12.640 --> 0:10:15.960 the founder state he remains a CEO. He's now a 0:10:15.960 --> 0:10:18.800 partner at ARB, not only a partner at Tavern in 0:10:18.800 --> 0:10:22.439 the Square, and it's great working with him. A true entrepreneur, brilliant, 0:10:23.000 --> 0:10:28.040 full energy, great team leader for Mombo for example. You know, 0:10:28.120 --> 0:10:30.960 the founder, we still talk to him once or twice 0:10:31.000 --> 0:10:34.480 a month. We when we have questions. He's still very present. 0:10:34.520 --> 0:10:38.160 He's very proud of what he built at PJ. Wellehems, 0:10:38.200 --> 0:10:40.480 you know, not the founder, but you know the CEO. 0:10:40.679 --> 0:10:42.800 Now we have a new CEO, which was part of 0:10:42.840 --> 0:10:45.400 the natural process, but the CEO when we bought the business, 0:10:45.480 --> 0:10:48.720 that was the CEO for decades before. He's on our board, 0:10:48.960 --> 0:10:50.800 so you know, I get to speak with him at 0:10:50.880 --> 0:10:53.120 least once a month. So we try to keep we 0:10:53.200 --> 0:10:55.320 try to keep everyone that wants to stay along for 0:10:55.400 --> 0:10:57.959 the ride along for the ride. Now it's that's on 0:10:58.000 --> 0:11:00.760 a case by case basis, and but we do we 0:11:00.800 --> 0:11:04.160 do try to keep for sure, the management team entirely 0:11:04.200 --> 0:11:05.720 when we acquire one of these brands. 0:11:06.080 --> 0:11:09.080 Great, what's the sweet spot for a target in terms 0:11:09.080 --> 0:11:10.160 of annual ebada? 0:11:10.920 --> 0:11:13.720 So our sweet spot has changed a little bit now 0:11:13.760 --> 0:11:16.040 that we've gotten a little bit bigger. But I'd say 0:11:17.160 --> 0:11:20.280 we look for you know, fifteen to twenty five million 0:11:20.320 --> 0:11:23.480 dollars and edit, that is probably where we would feel 0:11:23.480 --> 0:11:28.160 comfortable now. And it looks like we can acquire a 0:11:28.200 --> 0:11:31.120 brand every you know, nine to twelve months. Is I 0:11:31.160 --> 0:11:33.280 think something that we can do and when we can 0:11:33.320 --> 0:11:36.800 digest very easily. Now, one thing, Michael, that happened that 0:11:36.840 --> 0:11:41.720 we've learned that happens is we have we've built a 0:11:41.760 --> 0:11:45.120 system that actually is self learning. So you know, our 0:11:45.200 --> 0:11:48.920 playbook from the first business was based on our previous experience. 0:11:49.000 --> 0:11:50.840 Right when we acquire the second business, we had our 0:11:50.840 --> 0:11:55.240 previous experience plus the first business. And so now that 0:11:55.320 --> 0:11:58.680 we're we're on the fifth business, it's become like a 0:11:58.720 --> 0:12:02.160 lot more intelligence. So we get to the results that 0:12:02.240 --> 0:12:05.599 we need to get much quicker and you know, with 0:12:05.960 --> 0:12:08.400 less friction. And I think this is just going to 0:12:08.400 --> 0:12:11.840 continue to evolve. Right. So the other thing is we 0:12:11.840 --> 0:12:14.760 don't we built a corporate team at the ARB level, 0:12:14.880 --> 0:12:18.120 So I have you know, reporting to me a team 0:12:18.160 --> 0:12:20.560 that provides full support to the brands. We don't operate 0:12:20.600 --> 0:12:23.360 the brands. We don't tell them what to do. We suggest, 0:12:23.800 --> 0:12:27.040 we encourage, and we recommend based on industry best practice. 0:12:27.120 --> 0:12:30.360 So we have a team on marketing analytics, we have 0:12:30.440 --> 0:12:34.000 a team on technology, we have a team on finance, 0:12:34.040 --> 0:12:36.640 and then we have a team that doesn't interact with 0:12:36.760 --> 0:12:39.040 current brands but looks for the next big things on 0:12:39.120 --> 0:12:43.480 business development. And then we bring to the brands, you know, 0:12:43.559 --> 0:12:46.400 solutions for problems that they don't even know they have. Right, so, 0:12:46.480 --> 0:12:49.000 let's say a brand wants to run a launch of 0:12:49.040 --> 0:12:53.160 loyalty program. We say, listen, Brands like yours have followed 0:12:53.160 --> 0:12:56.160 this path with more success than that path. If you 0:12:56.240 --> 0:12:59.280 choose to follow this path, which we encourage, this is 0:12:59.480 --> 0:13:01.560 this is the place book we recommend. Or sometimes you 0:13:01.600 --> 0:13:04.400 say listen, we don't think you're ready to follow this path. 0:13:04.480 --> 0:13:06.520 Now you have to hire more people, you have to 0:13:06.520 --> 0:13:08.880 bring in a new system or whatever it is. So 0:13:09.000 --> 0:13:12.400 it's not like just do everything at once or the playbook. 0:13:12.760 --> 0:13:15.319 It varies depending on the stage that the brand when 0:13:15.320 --> 0:13:16.040 we acquire it. 0:13:16.960 --> 0:13:20.199 So also i'd imagine part of your process is when 0:13:20.240 --> 0:13:22.600 you're analyzing some of these chains, is like, who needs 0:13:22.640 --> 0:13:26.560 help in these core competencies, whether it's you know, finance, 0:13:26.720 --> 0:13:28.520 marketing or whatever, it might be. 0:13:28.559 --> 0:13:32.200 Right, Yes, so that's the mat you just touched. For us, 0:13:32.240 --> 0:13:35.880 what's the magic sauce, which is this if we can 0:13:35.920 --> 0:13:39.880 find brands that are very well run with amazing guest 0:13:39.920 --> 0:13:45.520 satisfaction scores and high margins, but still during the diligence process, 0:13:45.840 --> 0:13:51.000 we find gold everywhere. Right. And the sense that you know, 0:13:51.040 --> 0:13:57.240 whether it's database management, you know, back of the house, technology, accounting, whatever, 0:13:57.880 --> 0:14:00.840 the perfect scenario for us is something that's already magical 0:14:00.880 --> 0:14:02.920 that we find that we know that we're going to 0:14:03.000 --> 0:14:05.000 find so much more to be able to drop drop 0:14:05.160 --> 0:14:07.800 you know. The top line and the reason that I 0:14:07.800 --> 0:14:10.720 think we can do this perhaps better than some of 0:14:10.720 --> 0:14:14.960 our peers is in my team, my direct team, we 0:14:15.040 --> 0:14:19.400 only have restaurant veterans and you know, industry experts, so 0:14:19.480 --> 0:14:22.920 we are not, uh, we don't have a private equity mindset. 0:14:23.040 --> 0:14:26.000 We're very proficient in finance by all means, even you know, 0:14:26.040 --> 0:14:29.640 we just got John Howie uh as our CFO, who's 0:14:29.680 --> 0:14:32.480 done amazing things in his career. But John is a 0:14:32.520 --> 0:14:34.880 restaurant guy, Like I'm a restaurant guy. Now we're partnering, 0:14:35.080 --> 0:14:37.400 you know, we're owned by their Net Station Partners, which 0:14:37.440 --> 0:14:39.480 and they're wiz you know, they're like wizards when it 0:14:39.520 --> 0:14:42.120 comes to finance. So we have the advantage of having 0:14:42.160 --> 0:14:45.560 them structure the deals and put together the deals. But 0:14:45.800 --> 0:14:49.360 for us, but we kind of see things that perhaps 0:14:49.640 --> 0:14:53.520 you know, other financial sponsors don't because we are true 0:14:53.560 --> 0:14:55.840 restaurant people, and so we look at it from a 0:14:55.840 --> 0:14:59.280 different angle. And when we see like the opportunity to 0:14:59.360 --> 0:15:01.360 do a small tweak and the menu board or a 0:15:01.360 --> 0:15:04.120 small tweak and how they run operations or start a 0:15:04.160 --> 0:15:07.600 small tweak in operating hours, whatever it is, that's gold 0:15:07.640 --> 0:15:10.240 for us when we're evaluating to buy a company. 0:15:11.080 --> 0:15:13.640 Yeah, that's cool man, And I could just see it, 0:15:14.000 --> 0:15:18.080 you know, when you talk about your passion for the operations. 0:15:18.240 --> 0:15:20.560 No, there's things you might you won't believe. Like we 0:15:20.560 --> 0:15:23.600 were looking at Poetrop McCallen. It's a seventy percent drive 0:15:23.640 --> 0:15:27.440 through business, right, and then we went through to drive 0:15:27.480 --> 0:15:30.120 through ones and we noticed that they didn't have numbers 0:15:30.280 --> 0:15:34.360 on their top selling items, right, and that pretty much 0:15:34.480 --> 0:15:38.040 fifty percent of the order taking was customized, which I 0:15:38.040 --> 0:15:40.640 mean you can keep it customized. We'd imagine that one 0:15:40.800 --> 0:15:43.280 out of every two cars, the guest has to relate 0:15:43.440 --> 0:15:49.040 to the order taker in Spanish or Spanglish or English. 0:15:49.040 --> 0:15:52.600 So it's very difficult through the order taking. So what 0:15:52.640 --> 0:15:54.800 we did was the most basic thing ever. I mean, 0:15:55.800 --> 0:15:58.800 you've ordered by number at burriy K McDonald's and Wendy's 0:15:58.840 --> 0:16:00.920 for sure in your life. So we grew up. We 0:16:00.960 --> 0:16:02.640 know what a number one is, what a number two is, 0:16:02.680 --> 0:16:04.760 what the number three is. Guess what. They didn't have 0:16:04.800 --> 0:16:07.560 that at puy trp call, so you know, we're very 0:16:07.600 --> 0:16:10.960 shortly in. We ran our data engineers figured out on 0:16:11.000 --> 0:16:13.720 that particular on our tropic chop goals and some of 0:16:13.760 --> 0:16:16.320 our sandwiches, which were the top sellers and which combinations 0:16:16.320 --> 0:16:19.600 work the best. We ranked them, we assigned numbers to them, 0:16:19.680 --> 0:16:24.280 We tested it. We increased order accuracy by double digits, 0:16:24.600 --> 0:16:28.840 and we shaved fifteen seconds off of dive dive drive 0:16:28.920 --> 0:16:31.840 through times on average a day. Fifteen seconds on average 0:16:31.880 --> 0:16:33.720 on one day with the amount of cars that we have, 0:16:34.200 --> 0:16:38.160 that's a mountain, right, So it's doing It's not rocket science. 0:16:38.200 --> 0:16:40.840 It's just based on our experience what we can see 0:16:40.840 --> 0:16:42.160 that perhaps some others can't. 0:16:42.720 --> 0:16:43.520 Yeah, it's impressive. 0:16:43.560 --> 0:16:47.200 And fifteen seconds, right, that could eliminate a car or 0:16:47.240 --> 0:16:49.080 two from the line, and it could be the difference 0:16:49.120 --> 0:16:52.960 between somebody driving past the store or pulling in and ordering. 0:16:53.040 --> 0:16:56.200 Right, that's exactly I'll tell you another one, very simple one, 0:16:56.360 --> 0:16:58.680 not rocket science. Again, we got the Puyer Trupic call 0:16:58.760 --> 0:17:02.720 and during co COVID, you know, like most people, they 0:17:02.720 --> 0:17:07.520 had reduced their operating hours from closing down at midnight 0:17:07.600 --> 0:17:11.119 to eleven pm, right, but they had never moved it 0:17:11.160 --> 0:17:14.720 back and everyone else did. Right, So we're like, any 0:17:14.760 --> 0:17:17.000 reason why you guys didn't move back to twelve pm? 0:17:17.359 --> 0:17:21.840 And no, we just fell through the cracks. We didn't, Okay, 0:17:21.880 --> 0:17:25.199 so let's do that. And we did ensure enough, you know, 0:17:25.280 --> 0:17:28.320 sales took off the roof and so it's it's not 0:17:28.920 --> 0:17:30.600 but again there you have to be able to look 0:17:30.600 --> 0:17:33.360 at it with those eyes, and it's you know, you're 0:17:33.400 --> 0:17:35.080 not going to get that from a spreadsheet. You're going 0:17:35.160 --> 0:17:37.320 to get that by visiting the restaurant, by understanding how 0:17:37.359 --> 0:17:39.640 they operate, and by you know, interacting with the team. 0:17:40.520 --> 0:17:43.680 Yeah, it's awesome, that's why I tend to lean towards 0:17:44.160 --> 0:17:48.400 strong operators in the CEO CEO role of the companies 0:17:48.400 --> 0:17:51.960 I cover, although some there's some marketers that have done 0:17:51.960 --> 0:17:54.680 a phenomenal job too, especially with franchise brands, all right. 0:17:54.720 --> 0:17:58.000 So I'd imagine there's a lot of targets out there, right. 0:17:58.040 --> 0:18:01.200 I mean, this is such a frag minted business across 0:18:01.240 --> 0:18:02.520 the United States. 0:18:02.880 --> 0:18:06.520 It is. So there's two things that really help us. First, 0:18:06.600 --> 0:18:11.080 it is a fragmented business. And you know, for whatever reason, 0:18:11.200 --> 0:18:14.719 you know, some of the some of the players in 0:18:14.760 --> 0:18:17.800 the market and the financial sponsors, space and all, they 0:18:17.960 --> 0:18:21.240 kind of stay away from restaurants and casual dining in particular, right, 0:18:21.280 --> 0:18:24.520 And we love that because we think that, you know, 0:18:24.560 --> 0:18:26.640 we know how to operate in the system. So there's 0:18:26.840 --> 0:18:30.159 I think we're in active conversations with you know, about 0:18:30.200 --> 0:18:34.320 twenty brands. We're in real conversations with about five or 0:18:34.359 --> 0:18:37.480 the twenty because this is a long term game, right, 0:18:37.520 --> 0:18:41.360 And what's changed over time as you know, the founders 0:18:41.400 --> 0:18:43.359 talk to each other and people see a little bit 0:18:43.400 --> 0:18:45.840 of what we're doing is we're getting a lot of 0:18:45.880 --> 0:18:48.720 incoming and a lot of inbounds, which we didn't in 0:18:48.760 --> 0:18:51.800 the past. To be honest, when we started this it 0:18:51.840 --> 0:18:53.440 was only three and a half years ago, but we can 0:18:53.440 --> 0:18:55.760 feel the difference. People. Some of these founders of the 0:18:55.760 --> 0:18:57.840 regional concepts, they kind of know who we are now. 0:18:58.080 --> 0:19:00.879 They know that we keep the culture, that we the businesses, 0:19:01.040 --> 0:19:03.560 that we actually add cost to the business, right, we 0:19:03.560 --> 0:19:06.439 don't remove costs of the business, not our platform. And 0:19:06.480 --> 0:19:09.960 they're all about growth and getting something that's already amazing 0:19:09.960 --> 0:19:12.960 and making it just a little bit better. And that's 0:19:13.520 --> 0:19:16.159 that's how we operate. We don't force store openings. Some 0:19:16.280 --> 0:19:18.280 brands we don't even want to open right now. With 0:19:18.320 --> 0:19:21.080 boetropycause since we bought it, we close fifty locations. We 0:19:21.119 --> 0:19:23.520 have an open one maybe next year were an open 0:19:23.560 --> 0:19:25.920 one or two and start that path. But we don't 0:19:25.960 --> 0:19:28.399 have to follow you know, a standard you know, private 0:19:28.400 --> 0:19:31.639 equity playbook by brand that you know come in slash 0:19:31.680 --> 0:19:36.119 GNA open restaurants. No, we we can do whatever the 0:19:36.200 --> 0:19:39.200 brand needs. At this point, Tavern and Square, we're probably 0:19:39.240 --> 0:19:40.680 gonna open three or four this year out of a 0:19:40.720 --> 0:19:43.199 base of twenty five. So that's really relevant right in 0:19:43.240 --> 0:19:45.240 the percent phases. So it's going to depend from one 0:19:45.280 --> 0:19:46.639 brand to the other cool. 0:19:47.200 --> 0:19:49.760 So it sounds like you're saving some money on investment 0:19:49.840 --> 0:19:50.960 banking fees, which is good. 0:19:51.040 --> 0:19:52.359 What kind of multiples are you paying? 0:19:53.800 --> 0:19:56.640 We were able to get into these brands for very 0:19:56.680 --> 0:20:01.680 attractive multiples. M'd say, on a blended average, we're below 0:20:01.760 --> 0:20:07.240 seven times, which is kind of remarkable for the quality 0:20:07.320 --> 0:20:11.439 of the brands that we're acquiring. And you know, just 0:20:12.000 --> 0:20:15.919 if we continue to be an elite player and you know, 0:20:16.560 --> 0:20:19.280 grow the top line on the bottom line how we've 0:20:19.280 --> 0:20:20.800 been able to do in the last three and a 0:20:20.840 --> 0:20:24.120 half years, I think that we could probably look at 0:20:24.119 --> 0:20:27.399 some multiple expansion. But we're not a financial engineering impact. 0:20:27.520 --> 0:20:32.280 We're an operating engineering company. We're not a financial engineering company. 0:20:32.280 --> 0:20:36.320 We're focused exclusively on making the businesses better. Right, the 0:20:36.400 --> 0:20:40.399 financial outcome, the multiple expansion, that's all. That's all a 0:20:40.400 --> 0:20:41.920 function of running the companies better. 0:20:42.760 --> 0:20:44.359 Yeah, and I like that you're running them for the 0:20:44.400 --> 0:20:46.359 long term, which is how they should be run. 0:20:47.160 --> 0:20:49.720 Who's your primary competition for these deals? 0:20:50.000 --> 0:20:55.119 You know, I get us that question a lot. I 0:20:55.119 --> 0:20:57.520 don't think there's anyone that does it in a structured 0:20:57.560 --> 0:21:00.680