WEBVTT - Shatranj Capital on Ample Mideast Opportunities 0:00:22.239 --> 0:00:23.360 Welcome to Chopping It Up. 0:00:23.680 --> 0:00:26.119 I'm your host, Mike Allen, the senior restaurant and food 0:00:26.160 --> 0:00:31.120 Service analyst at Bloomberg Intelligence. Today we're joined by Brandon Guthrie, 0:00:31.240 --> 0:00:35.559 general partner and co founder of CHATRNGE Capital Partners. I'm 0:00:35.600 --> 0:00:38.519 pumped to finally get you on here. Thanks for doing this, Brandon. 0:00:38.240 --> 0:00:39.639 Yeah, of course, I'm excited to be here. 0:00:40.120 --> 0:00:43.000 So what's up man, any recent prs in the squad clean? 0:00:43.120 --> 0:00:46.800 I saw you on LinkedIn throwing around two hundred and 0:00:46.800 --> 0:00:47.760 seventy five pounds. 0:00:47.760 --> 0:00:49.800 That's a lot of weight, my friend. Yeah, that's impressive. 0:00:49.920 --> 0:00:53.000 That's my PR so hopefully my back and my knees 0:00:53.040 --> 0:00:58.520 hold out. So no, recently. I think my big lift 0:00:58.520 --> 0:01:01.280 that I was happy about as I the two hundred 0:01:01.360 --> 0:01:03.720 club for at least in kg. So that's what four 0:01:03.760 --> 0:01:07.040 hundred and sixty five pounds on the deadlift. So that's 0:01:08.319 --> 0:01:10.360 for a desk jockey. That's not so bad. Definitely have 0:01:10.400 --> 0:01:11.600 some room to improve, dude. 0:01:11.640 --> 0:01:16.119 That's awesome. Yeah, that's awesome. Yeah. I hurt my back 0:01:16.200 --> 0:01:18.600 with doing deadlifts. I was doing. 0:01:18.400 --> 0:01:21.360 CrossFit for for a few years and I bought a 0:01:21.400 --> 0:01:23.679 reverse hyper changed my life. You might even be able 0:01:23.720 --> 0:01:25.240 to see I guess can see it, but you could 0:01:25.280 --> 0:01:28.360 see it in the background. It's a it's a game changer. 0:01:29.640 --> 0:01:31.119 So when did you start CrossFit? 0:01:31.920 --> 0:01:38.000 I started CrossFit actually during during COVID, so here in Dubai, 0:01:38.680 --> 0:01:42.000 the lockdowns were actually really really strict, so you couldn't 0:01:42.040 --> 0:01:44.520 leave your house for about a month. So rather than 0:01:44.560 --> 0:01:47.080 going stir crazy, the gym close to us was doing 0:01:47.960 --> 0:01:51.320 virtual classes, so we signed up for those, and so 0:01:51.360 --> 0:01:52.920 I just kind of pushed out all the furniture out 0:01:52.920 --> 0:01:56.120 of the living room and every morning would would beat 0:01:56.160 --> 0:01:59.800 myself silly doing CrossFit in the living room. And then yeah, 0:01:59.800 --> 0:02:02.360 when when lockdown ended, I was hooked, so I kept 0:02:02.400 --> 0:02:05.440 going back. So a lot of different ways to hurt 0:02:05.480 --> 0:02:08.720 your back during CrossFit though, so that's a good I 0:02:08.720 --> 0:02:10.240 think that's all they do is to come up with 0:02:10.280 --> 0:02:10.919 different ways. 0:02:11.680 --> 0:02:13.960 Yeah, the shoulders ended up getting me. 0:02:14.040 --> 0:02:16.640 I had bad shoulders from football, and then all the 0:02:16.680 --> 0:02:18.760 gymnastics stuff and the overhead lifts just. 0:02:18.760 --> 0:02:19.600 Kind of did me in. 0:02:19.680 --> 0:02:21.400 But I loved it when I was doing it, man, 0:02:21.480 --> 0:02:24.400 So yeah, yeah, keep it up, man, Thanks good stuff, 0:02:24.560 --> 0:02:27.400 thank you. All right, So you have extensive experience in 0:02:27.400 --> 0:02:30.400 international markets, whyn't you tell the audience about your career 0:02:30.520 --> 0:02:32.639 background before CHATRANJ. 0:02:33.360 --> 0:02:36.560 Yeah, of course, So I spent my entire career in 0:02:37.400 --> 0:02:42.480 essentially international consumer retail. So prior to Chatron's Capital Partners, 0:02:42.480 --> 0:02:46.600 I was with the head of finance for Wendy's for 0:02:46.639 --> 0:02:49.440 the Asia, Pacific, Middle East and Africa region, so based 0:02:49.440 --> 0:02:52.920 here here in Dubai, and I was responsible for all 0:02:52.960 --> 0:02:55.440 of our markets essentially east of Dubai. So hopefully I'm 0:02:55.440 --> 0:02:59.200 taking the record for longest distance from them from you 0:02:59.280 --> 0:03:01.920 guys for the pod cast. Definitely want to hold that 0:03:01.919 --> 0:03:08.160 for a while. And with that, just gained a really 0:03:08.240 --> 0:03:13.359 broad international background. Prior to prior to Wendy's and them 0:03:13.360 --> 0:03:17.240 shipping me out here, I was with L Brands again 0:03:17.280 --> 0:03:20.480 in their international division with Victoria's Secret and Bath and 0:03:20.560 --> 0:03:24.519 body Works supporting franchisees in the Middle East, in the UK, 0:03:25.840 --> 0:03:28.959 and before them, I was with a consumer package good 0:03:28.960 --> 0:03:33.120 company that also focused on international, but primarily Asia. So 0:03:33.919 --> 0:03:37.080 my entire career has been focused on international in some 0:03:37.240 --> 0:03:41.480 format of another and really found my passion specifically in 0:03:42.120 --> 0:03:44.960 F and B in the food and beverage industry. As 0:03:45.000 --> 0:03:47.720 a lot of people do you kind of I don't 0:03:47.720 --> 0:03:49.640 know if you necessarily seek it out, but once you 0:03:49.720 --> 0:03:52.400 find the industry, it's just it's just too much fun 0:03:52.480 --> 0:03:56.520 to leave. And so even with Chatrone Capital Partners when 0:03:56.520 --> 0:03:59.240 we started the fund that ended up being a sector 0:03:59.240 --> 0:04:02.920 focused private ACA be fund on food and beverage focused 0:04:02.920 --> 0:04:06.960 here in the GCC in the Middle East. So it's 0:04:07.640 --> 0:04:09.880 it's just a lot of it's a lot of fun 0:04:09.880 --> 0:04:13.480 to be in this industry and to work with people. Ultimately, 0:04:13.520 --> 0:04:17.400 food is just such an intimate thing and you can 0:04:17.440 --> 0:04:20.640 never take yourself too serious if you're working in restaurants, 0:04:20.680 --> 0:04:23.360 and so it's always good to remind yourself that, specifically 0:04:23.360 --> 0:04:25.520 with Wendy's, right, you're serving burger and fries. It's supposed 0:04:25.560 --> 0:04:28.440 to be fun, and so it's a good reality check 0:04:28.480 --> 0:04:31.560 and it keeps you waking up and doing something fun 0:04:31.560 --> 0:04:31.960 every day. 0:04:32.400 --> 0:04:35.920 Yeah, it's fun and humbling of course. Time. Yeah, and 0:04:35.960 --> 0:04:36.880 you had mentioned to me in the. 0:04:36.880 --> 0:04:41.160 Past that a previous podcast of ours, Bob Wright had 0:04:41.320 --> 0:04:44.000 been the one who had sent you overseas at Wendy's exactly. 0:04:44.080 --> 0:04:47.239 So in we were in Salt Paula at the time, 0:04:48.279 --> 0:04:50.320 in the back of the taxi and Bob pitched this 0:04:50.400 --> 0:04:53.640 crazy idea of me moving my family out to Dubai 0:04:53.680 --> 0:04:55.840 in the Middle East. So we had a really long 0:04:56.160 --> 0:04:58.400 taxi ride if you've ever been in Salt Paolo traffic, 0:04:59.000 --> 0:05:00.880 and so Bob had a lot time to convince me 0:05:00.920 --> 0:05:03.240 that this was a good idea. No, I wanted to 0:05:03.240 --> 0:05:06.000 do it. I mean, I was International has been my 0:05:06.440 --> 0:05:09.880 passion since since I started my career. It was always 0:05:09.920 --> 0:05:11.359 going to be something I was going to do. And 0:05:11.440 --> 0:05:14.640 so yeah, when the opportunity came to come out here 0:05:14.680 --> 0:05:17.320 to Dubai, I was working with Bob, who's very much 0:05:17.360 --> 0:05:20.480 Assault of the Earth guy, and he was the president 0:05:20.520 --> 0:05:23.320 of International Chief Operations Officer for Wendy's at the time. 0:05:23.880 --> 0:05:26.240 And then we made the move and that was ten 0:05:26.320 --> 0:05:30.000 years ago, so it's been it's been a whirlwind ever since. 0:05:30.680 --> 0:05:31.200 Very cold. 0:05:31.560 --> 0:05:34.159 So why don't you tell the audience what Chatran Capital 0:05:34.200 --> 0:05:36.719 Partners does and what inspired you to start the firm. 0:05:37.360 --> 0:05:41.240 Yeah, so Chatrnge Capital Partners. It's a sector focused private 0:05:41.240 --> 0:05:43.599 equity fund. Like I mentioned just a little bit ago. 0:05:43.680 --> 0:05:46.440 It's the sector that we focus on is food and beverage, 0:05:46.480 --> 0:05:51.400 specifically QSR and fast casual restaurants, and then geographically we 0:05:51.440 --> 0:05:54.960 focus on the GCC here in the Middle East, so 0:05:55.000 --> 0:06:02.560 the GCC being Kingdom of Saudi Arabia, United Arab Memorates, Oman, Kuwait, Bahrain, 0:06:02.760 --> 0:06:05.920 and Qatar, and then we also look at Turkey and 0:06:06.040 --> 0:06:09.200 Egypt as kind of secondaries to those markets, but our 0:06:09.200 --> 0:06:13.000 primary focus being here on the GCC, and we ended 0:06:13.080 --> 0:06:16.800 up we just saw so much opportunity here in the region. 0:06:17.120 --> 0:06:20.640 Iconic brands are no stranger to this part of the world, 0:06:21.600 --> 0:06:24.520 but what is a little bit different is the ability 0:06:24.600 --> 0:06:31.400 to properly grow those brands and scale them. There's a 0:06:31.400 --> 0:06:34.200 lot of opportunity with investments happening in Saudi Arabia and 0:06:34.279 --> 0:06:37.240 obviously here in the United Arab Emirates. And so this 0:06:37.440 --> 0:06:40.080 was a financial vehicle that we felt that provided a 0:06:40.080 --> 0:06:42.640 lot of liquidity into a part of the market that 0:06:42.920 --> 0:06:46.920 was underdeveloped. You know, private equity is a specifically sector focused. 0:06:46.920 --> 0:06:50.840 Private equity is relatively untapped. And then with us, we 0:06:50.880 --> 0:06:52.800 took a little bit of a different approach. We took 0:06:52.839 --> 0:06:58.120 it to as a operations first private equity vehicle. So 0:06:58.240 --> 0:07:00.000 rather than kind of a bunch of private equity guys 0:07:00.080 --> 0:07:04.240 coming together and making agnostic investments, we're actually primarily a 0:07:04.279 --> 0:07:06.800 group of restauranteurs people that have worked in the industry. 0:07:07.160 --> 0:07:12.200 Our advisors are people that have led global brands across 0:07:12.240 --> 0:07:15.560 the world, and this was going to be we brought 0:07:15.560 --> 0:07:18.640 our operations first kind of value creation levers to the 0:07:18.720 --> 0:07:22.440 fund and then utilize private equity as a vehicle to 0:07:22.760 --> 0:07:26.080 properly deploy capital quickly and efficiently, which solves some of 0:07:26.120 --> 0:07:29.360 the problems when you're commercializing markets. So it was really 0:07:29.440 --> 0:07:31.840 kind of a reverse engineering approach. We saw an opportunity 0:07:31.880 --> 0:07:34.840 here in the region. We leveraged our experience of how 0:07:34.920 --> 0:07:38.680 we've seen businesses grow efficiently across the world and establishing 0:07:38.720 --> 0:07:41.840 restaurant brands and started on that journey. And that was 0:07:41.960 --> 0:07:42.680 a year and a half ago. 0:07:43.640 --> 0:07:45.920 Cole, And do you have any updates on the funds 0:07:45.920 --> 0:07:46.720 first capital race. 0:07:47.520 --> 0:07:51.400 We're constantly raising capital. We have about one hundred million 0:07:51.560 --> 0:07:54.920 in pipeline ready to deploy, and so we're just finalizing 0:07:54.960 --> 0:07:58.280 those investments and hopefully we get working on that sooner 0:07:58.360 --> 0:07:58.920 rather than later. 0:08:00.280 --> 0:08:00.760 Good stuff. 0:08:00.760 --> 0:08:02.560 And and can you talk about maybe some of the 0:08:03.040 --> 0:08:05.520 you know, the five thousand foot view, what what's kind 0:08:05.520 --> 0:08:07.640 of created some of the opportunities that you're seeing there 0:08:07.640 --> 0:08:08.320 in the GCC. 0:08:09.240 --> 0:08:11.440 Here in the GCC, I think like I said, there's 0:08:11.480 --> 0:08:14.000 there's never been a You have a couple of large 0:08:14.040 --> 0:08:18.120 players that have been here for a while, but largely 0:08:18.600 --> 0:08:22.960 there's there's a lot of money here and there's a 0:08:22.960 --> 0:08:28.200 lot of family groups or privately owned groups. Private equity 0:08:28.280 --> 0:08:31.360 is a vehicle and as a as a financial instrument, 0:08:32.360 --> 0:08:35.320 it hasn't been around for very long, and it's it's 0:08:35.360 --> 0:08:38.520 really underpenetrated here in the region compared to the West. 0:08:39.160 --> 0:08:42.560 And so what what's happened is you have people that 0:08:42.800 --> 0:08:45.280 experience brands, that love brands, either when they're going to 0:08:45.320 --> 0:08:51.480 school or traveling into into the US or Europe. They 0:08:51.800 --> 0:08:54.840 they're well capitalized, and they bring those brands back to 0:08:54.880 --> 0:09:00.319 the region working with franchisors and then it's a part 0:09:00.320 --> 0:09:02.439 of a family group that it's kind of the sixth 0:09:02.600 --> 0:09:10.680 arm of their company's expansion. It's and it's just it 0:09:10.760 --> 0:09:14.160 ends up being not more difficult than they expected, I 0:09:14.200 --> 0:09:16.120 guess would be a good way to say. And so 0:09:16.800 --> 0:09:20.200 where in the West, there, like I said, private equity exists, 0:09:20.280 --> 0:09:23.360 or there's this middle market where you're able to drive 0:09:23.400 --> 0:09:28.200 some efficiencies and these groups would typically just offload them 0:09:28.880 --> 0:09:31.719 or shut down. These brands are still very emotional and 0:09:32.160 --> 0:09:35.000 highly regarded because they're iconic global brands, and so rather 0:09:35.040 --> 0:09:38.520 than kind of losing face or just shutting them down, 0:09:39.000 --> 0:09:41.920 typically they just hold on to them. And so similar 0:09:42.040 --> 0:09:44.440 how you kind of have zombie companies, you kind of 0:09:44.480 --> 0:09:47.280 end up with some zombie brands. And there's a lot 0:09:47.280 --> 0:09:52.880 of examples here of major major brands, global brands almost 0:09:52.880 --> 0:09:55.720 everywhere else in the world that would be successful, that 0:09:56.040 --> 0:09:59.000 are definitely in default of the development agreements. They've been 0:09:59.000 --> 0:10:02.120 stagnant for far too long, and you end up getting 0:10:02.120 --> 0:10:04.280 frustration on both sides of the equation. Frustrations with the 0:10:04.280 --> 0:10:07.440 franchise ease because they're they're a little bit frustrated with 0:10:07.440 --> 0:10:09.720 the support potentially they're getting from the franchise oors that 0:10:09.880 --> 0:10:13.960 don't understand this part of the world, and obviously frustration 0:10:14.040 --> 0:10:16.120 with the franchise ors that see all the amazing things 0:10:16.120 --> 0:10:19.320 that are happening here in Saudi Arabia and UAE and 0:10:19.360 --> 0:10:21.599 all the investment that's happening and the population growth and 0:10:21.640 --> 0:10:25.240 the strong economy, and then your restaurants aren't moving, and 0:10:25.320 --> 0:10:29.160 so you end up with kind of frustration on both ends, 0:10:29.200 --> 0:10:31.200 and that just causes a lot of a lot of friction, 0:10:31.760 --> 0:10:37.240 and so we our goal is to be the utility 0:10:37.280 --> 0:10:41.280 that comes in and unsticks that right, that releases that friction. 0:10:41.320 --> 0:10:46.040 We understand the West, We understand how governance and transparency 0:10:46.040 --> 0:10:48.800 and all those things need to be established for franchise 0:10:48.840 --> 0:10:52.960 oors and for investors. But we also understand the franchise's 0:10:53.000 --> 0:10:54.640 point of view and kind of the boots on the 0:10:54.679 --> 0:10:57.840 ground perspective, and the restaurant industry. So I think those 0:10:57.840 --> 0:11:02.120 two those things coupled together create a unique proposition for people. 0:11:02.520 --> 0:11:04.040 Yeah, for sure, it's interesting. 0:11:04.480 --> 0:11:06.320 So are you looking to be a franchise or a 0:11:06.360 --> 0:11:08.760 subfranchise e or is it going to depend on the 0:11:08.800 --> 0:11:11.600 situation and what sized deals are. 0:11:11.520 --> 0:11:13.000 You and your partners interested in. 0:11:13.320 --> 0:11:16.840 Yeah, I think at first, master franchise e is it 0:11:16.880 --> 0:11:21.320 tends to be the opportunity that exists here. The most 0:11:22.360 --> 0:11:26.720 most brands that exist here, if we're involved in buyout situations, 0:11:27.080 --> 0:11:29.280 have master rights for multiple countries. They may be in 0:11:29.320 --> 0:11:31.920 default of those rights, but they still have the rights. 0:11:31.920 --> 0:11:35.880 So any buyout acquisition would come with the entire territory 0:11:35.920 --> 0:11:39.880 most usually the GCC as a whole, maybe some additional 0:11:40.200 --> 0:11:43.800 shoulder markets, but with a platform company like that there's 0:11:43.800 --> 0:11:47.840 also opportunity to bring in iconic brands who have yet 0:11:47.840 --> 0:11:51.160 to make the jump into the region and plug them 0:11:51.200 --> 0:11:54.320 into an existing portfolio that is leveraging your supply chain 0:11:54.320 --> 0:11:58.920 efficiencies and some of the challenges that come with establishing 0:11:58.920 --> 0:12:02.200 a market from zero. You can do that much better 0:12:02.200 --> 0:12:05.400 in a portfolio company, and then you get the transparency 0:12:05.480 --> 0:12:09.400 and an EESG that comes with Western back private equity 0:12:09.480 --> 0:12:13.480 compared to partnering with a local group which will run 0:12:13.559 --> 0:12:15.559 like a local company and come with some of those 0:12:15.559 --> 0:12:19.760 frustrations and frictions compared to what people might be used 0:12:19.800 --> 0:12:21.360 to in doing business in the West. 0:12:22.160 --> 0:12:23.720 Do you have any deals lined up right now? 0:12:24.160 --> 0:12:27.480 There? We have about one hundred million I think it's 0:12:27.520 --> 0:12:29.880 five different groups, about one hundred million, between one hundred, 0:12:29.880 --> 0:12:31.640 one hundred and fifty million, depending on how many groups 0:12:31.640 --> 0:12:34.800 we look at of groups that are either through diligence 0:12:34.960 --> 0:12:40.240 or in process of diligence. So to be honest, it's 0:12:40.280 --> 0:12:45.040 a little overwhelming. Like I said, there's a strong lack 0:12:45.080 --> 0:12:47.720 of liquidity in this market, so there's actually quite a 0:12:47.720 --> 0:12:50.520 bit of room to come in and evaluate different groups, 0:12:51.160 --> 0:12:54.080 and so there's a lot of people who are wanting 0:12:54.120 --> 0:12:56.560 to work with us and who want us to take 0:12:56.600 --> 0:12:59.440 a look at their businesses, and so it's more a 0:12:59.440 --> 0:13:03.160 matter of getting through all those groups versus having a 0:13:03.320 --> 0:13:05.200 you know, needing to find deals, which is a good 0:13:05.280 --> 0:13:07.679 problem to have, but it is a little bit overwhelming. 0:13:08.600 --> 0:13:09.760 Yeah, high class problem. 0:13:09.880 --> 0:13:11.200 Ye, I'll take it. I'll take it. 0:13:11.200 --> 0:13:15.720 Good. Yeah, good stuff. And you had mentioned, you know, fast, 0:13:15.720 --> 0:13:20.880 casual and quick service. Does casual dining work in that region? 0:13:21.920 --> 0:13:24.800 A casual dining works, It depends on It's a really 0:13:24.840 --> 0:13:27.480 diverse region, so I think it's a little It differs 0:13:27.520 --> 0:13:30.400 a little bit depending on your market. So if you 0:13:30.440 --> 0:13:36.319 look at UAE, casual dining actually works pretty well generally, 0:13:36.360 --> 0:13:38.600 at least with the data that I see, sales sales 0:13:38.640 --> 0:13:43.840 are up, sales are strong with casual dining. In Saudi Arabia, 0:13:43.920 --> 0:13:49.040 for example, sales are down, they're trending downwards. So it 0:13:49.160 --> 0:13:51.680 really depends you have different and when you look at 0:13:51.720 --> 0:13:54.520 the dynamics of that. Your your infrastructure is very different 0:13:54.559 --> 0:13:58.480 in the UAE compared to a developing infrastructure in Saudi Arabia. 0:13:58.520 --> 0:14:02.080 Traffic patterns are very different in Saudi compared to to 0:14:02.120 --> 0:14:05.480 other parts of the world. So I think your casual 0:14:05.520 --> 0:14:08.920 dining is under pressure, and generally what I see at 0:14:09.000 --> 0:14:11.640 least is where you have more of an ability to 0:14:11.720 --> 0:14:13.640 leave the house not get stuck in traffic for a 0:14:13.640 --> 0:14:19.400 long time. There's actually some interesting cost pressures that I 0:14:19.400 --> 0:14:22.960 think are favorable to casual dining at the moment if 0:14:22.960 --> 0:14:27.040 everything lines up like that, compared to Fast Casual or QSR. 0:14:27.480 --> 0:14:30.400 But ultimately QSR and Fast Casual delivers very well. And 0:14:30.480 --> 0:14:32.600 so here in this region, delivery has always been really, 0:14:32.640 --> 0:14:37.080 really big. Even before delivery got big in the US, 0:14:37.760 --> 0:14:40.960 delivery was thirty or forty percent of sales for restaurants 0:14:41.000 --> 0:14:44.160 here in the region, and before the aggregators came in, 0:14:44.680 --> 0:14:47.240 everybody had their own call centers and their own bikes 0:14:47.280 --> 0:14:50.480 as part of franchise e systems. So delivery is part 0:14:50.480 --> 0:14:53.560 of this region and it's just something you have. 0:14:53.520 --> 0:14:56.680 To work through. Yeah, all right. 0:14:56.720 --> 0:14:59.800 So when I analyze international strategy for the companies that 0:14:59.800 --> 0:15:02.800 I can cover, I prefer to see franchisors target the 0:15:02.840 --> 0:15:06.640 best market possible for their brand and then find the 0:15:06.640 --> 0:15:09.280 best partner. So let me know if I'm off base, 0:15:09.360 --> 0:15:14.760 because you know, I'm willing to take criticism, you know, 0:15:14.880 --> 0:15:17.200 Am I thinking about this correctly? And as a franchise e. 0:15:18.640 --> 0:15:21.000 You know, how are you identifying your targets? 0:15:21.840 --> 0:15:24.880 Yeah? Yeah, so I think you're one hundred percent thinking 0:15:24.920 --> 0:15:30.040 about it correctly. Ideally, you I think where brands get 0:15:30.040 --> 0:15:36.200 into trouble when they begin their international expansion journey is 0:15:37.080 --> 0:15:39.320 that generally the thing that starts them on that path 0:15:39.400 --> 0:15:42.560 is is an opportunistic point of view rather than a 0:15:42.600 --> 0:15:45.440 strategic one. And so you might have a partner that 0:15:45.520 --> 0:15:48.240 comes in or potential franchise e again with a big 0:15:48.320 --> 0:15:50.880 check or a lot of interest, and it you just 0:15:50.960 --> 0:15:52.600 convince the brand that this is the time you need 0:15:52.640 --> 0:15:57.400 to go international, and so the brand decides to do that. Generally, 0:15:57.440 --> 0:16:03.160 that's a recipe for disaster because the brand will lack 0:16:03.240 --> 0:16:06.080 the support that it needs to support that franchise e. 0:16:06.840 --> 0:16:11.000 They're not necessarily ready to take that jump. And having 0:16:11.000 --> 0:16:14.840 a strategy, having a plan, having the infrastructure from a 0:16:14.880 --> 0:16:18.480 people perspective, those things are really really important when you're 0:16:18.480 --> 0:16:22.680 setting up your first international expansion plan. So there definitely 0:16:22.720 --> 0:16:25.080 is a place where you need to be taking advantage 0:16:25.080 --> 0:16:28.280 of opportunistic things that come across, Like if there's a 0:16:28.320 --> 0:16:32.400 great potential partner who has a strong track record, well 0:16:32.440 --> 0:16:36.240 capitalized and is wanting to expand your brand. There's cases 0:16:36.280 --> 0:16:38.760 where you would want to look at that more heavily 0:16:38.800 --> 0:16:42.000 and maybe leapfrog that market over another one that you 0:16:42.040 --> 0:16:45.400 had strategically planned. But in my mind, ideally you would 0:16:45.400 --> 0:16:47.440 tier out your markets and say this is the part 0:16:47.440 --> 0:16:49.280 of the world, or these are the group of markets 0:16:49.320 --> 0:16:51.560 that we're looking for, and this is where we think 0:16:51.600 --> 0:16:53.400 fits best, and then you go try to find the 0:16:53.440 --> 0:16:56.160 best partners that are in that tier one set of 0:16:56.200 --> 0:16:59.240 markets and then partner with those and so that order 0:16:59.240 --> 0:17:01.280 in that tier one sector might change a little bit, 0:17:01.800 --> 0:17:04.639 but ideally you're not taking somebody from a tier three 0:17:04.640 --> 0:17:08.080 because an opportunity came up and leapfrogging them up to 0:17:08.160 --> 0:17:10.560 your tier one sector. And if you don't have a strategy, 0:17:10.600 --> 0:17:11.880 you're not going to know that, and you just kind 0:17:11.880 --> 0:17:14.840 of go wherever the windblows and causes quite a bit 0:17:14.840 --> 0:17:15.360 of problems. 0:17:15.960 --> 0:17:18.320 Okay, cool, and so yeah, and so how are you 0:17:18.400 --> 0:17:22.560 identifying as the master franchise, How are you identifying your targets? 0:17:22.560 --> 0:17:26.760 How are you ranking your potential targets in the marketplace. 0:17:26.960 --> 0:17:29.000 So we look at I think there's two ways, and 0:17:29.040 --> 0:17:32.280 we have the benefit at least with private with the fund, 0:17:32.560 --> 0:17:35.520 So we're looking at potential acquisitions which we're ranking and 0:17:35.560 --> 0:17:39.480 looking at from in terms of iconic. But then with 0:17:39.520 --> 0:17:41.720 our experience, and I think we're in a unique position 0:17:41.840 --> 0:17:45.280 compared to other franchisees and other other funds in the world. 0:17:46.080 --> 0:17:49.199 With our industry experience, we also get to rank the 0:17:49.200 --> 0:17:52.199 franchise oors. So we actually have a pretty good idea 0:17:52.840 --> 0:17:56.160 of what we're looking for when we're evaluating franchise oors. 0:17:56.200 --> 0:17:58.119 And part of that we you know, we want to 0:17:58.160 --> 0:18:00.360 fly in and meet the team just like we would 0:18:00.400 --> 0:18:02.120 with a franchise e when we were on the franchise 0:18:02.200 --> 0:18:04.639 or side. We want to see what the support is, 0:18:04.680 --> 0:18:08.040 we want to see what the international infrastructure look like. 0:18:08.800 --> 0:18:11.560 We want to make sure that they understand the challenges 0:18:11.680 --> 0:18:17.199 and opportunities that come with international and the people that 0:18:17.240 --> 0:18:19.120 we're going to be working with. And so I think 0:18:19.160 --> 0:18:22.600 sitting across the table from the leadership teams of the 0:18:22.640 --> 0:18:25.440 brands that we're talking to, you get a really good 0:18:25.480 --> 0:18:29.600 sense for brands that would be a good fit for international, 0:18:29.640 --> 0:18:32.680 whether they've expanded or not. Sometimes even if they haven't 0:18:32.720 --> 0:18:34.639 expanded yet, and they have the right leadership team and 0:18:34.680 --> 0:18:41.879 the right mindset and positioning. It can still be a 0:18:41.880 --> 0:18:45.000 good fit. But I think more often than not, you 0:18:45.040 --> 0:18:47.480 see some of those red flags and you say, Okay, 0:18:47.480 --> 0:18:49.560 this is a great brand, it's working really well in 0:18:49.600 --> 0:18:52.480 the US. They're not ready for international expansion in our 0:18:52.520 --> 0:18:55.040 mind and we don't necessarily want to be the first 0:18:55.080 --> 0:18:57.480 ones to go through that learning curve with them. So 0:18:57.880 --> 0:19:00.840 obviously they're welcome to expand anywhere they want and potentially 0:19:00.880 --> 0:19:05.400 even in the same region with somebody else. But ultimately, 0:19:05.440 --> 0:19:09.080 these are very very long term relationships, specifically with international 0:19:09.080 --> 0:19:14.919 master franchising. Generally, the master franchise e is investing a 0:19:14.960 --> 0:19:19.040 significant amount of their capital into developing these markets for 0:19:19.080 --> 0:19:21.679 the long term, and so you really want to make 0:19:21.680 --> 0:19:24.320 sure it's it's a good long term partnership and doing 0:19:24.320 --> 0:19:27.919 all that due diligence upfront is really really important in 0:19:27.920 --> 0:19:30.520 our eyes. So I think we're uniquely positioned. Not too 0:19:30.560 --> 0:19:33.600 often I think you get groups like it that are 0:19:33.680 --> 0:19:36.600 that are franchisees that are doing as much diligence and 0:19:36.720 --> 0:19:40.440 interviewing of the franchise oors as we do. But ultimately 0:19:40.800 --> 0:19:43.080 we come from a franchise or background. You know, we're 0:19:43.200 --> 0:19:45.439 used to doing this with potential partners that we were 0:19:45.440 --> 0:19:49.119 looking at expanding with as franchisees. It's only fair to 0:19:49.119 --> 0:19:49.960 do that in reverse. 0:19:50.240 --> 0:19:52.240 So yeah, yeah, that's great. 0:19:52.880 --> 0:19:54.840 All right, So several years ago, I'm going to start 0:19:54.920 --> 0:19:57.640 asking you about some of my question my companies. Now, 0:19:58.760 --> 0:20:00.240 you know, they don't don't give us a much much 0:20:00.240 --> 0:20:02.800 information as we'd like about international since I have. 0:20:02.840 --> 0:20:03.640 You here, that's fair. 0:20:04.040 --> 0:20:07.520 Several years ago, restaurant brands they tried the supercharger international 0:20:07.520 --> 0:20:12.200 growth by pairing some big PE groups with with operators. 0:20:13.480 --> 0:20:15.960 How how is that? You know, what do you think 0:20:15.960 --> 0:20:18.760 about that model? How is that done over the last 0:20:18.800 --> 0:20:19.639 handful of years? 0:20:19.800 --> 0:20:22.879 Yeah, yeah, I think I think the model works well. 0:20:23.359 --> 0:20:28.959 There's actually there's obviously some some significant benefits that private 0:20:28.960 --> 0:20:34.240 equity solves as a financial instrument for international expansions, specifically 0:20:34.240 --> 0:20:36.800 for brands. One of those being, you know, the efficient 0:20:36.840 --> 0:20:39.879 deployment of capital. So that really solves your scale issue 0:20:40.640 --> 0:20:43.639 and your scale challenge very effectively. You know, private equity 0:20:43.640 --> 0:20:48.120 groups are incentivized to deploy capital quickly, efficiently, and generally 0:20:48.359 --> 0:20:52.040 by definition they're they're well capitalized, so that really solves 0:20:52.040 --> 0:20:54.440 that issue. When you look at it as an example, 0:20:55.160 --> 0:20:59.040 you know, I think Burger King got to entered India, 0:20:59.560 --> 0:21:02.840 you know, the same time as Wendy's. The main difference 0:21:02.920 --> 0:21:07.600 there was they entered with a joint venture with Everstone Capital, 0:21:07.600 --> 0:21:10.159 which was a private equity group. Wendy's entered with a 0:21:10.160 --> 0:21:13.000 franchise with a master franchise e. And so if you 0:21:13.040 --> 0:21:16.119 look about, you know, three to five years in, you know, 0:21:16.160 --> 0:21:19.560 Burger King had over two hundred restaurants and growing, Wendy's 0:21:19.640 --> 0:21:23.040 was still stuck at the five restaurant mark. That's expanded 0:21:23.080 --> 0:21:27.320 since they've partnered with different people and different partners post COVID, 0:21:27.880 --> 0:21:31.960 but it still highlights the expansion potential with private equity, 0:21:32.400 --> 0:21:35.760 you know. On another positive example, you look at what 0:21:35.800 --> 0:21:37.800 we did, and this is something that I was involved 0:21:37.800 --> 0:21:41.159 in and led with Wendy's, is we partnered in Japan 0:21:41.920 --> 0:21:45.200 with a private equity group called Long Reach, led by 0:21:45.240 --> 0:21:49.960 Mark Chiba and Tomoya Sujimoto, so both excellent, excellent human 0:21:50.000 --> 0:21:53.800 beings and mentors of mine, and we worked with them 0:21:53.840 --> 0:21:56.879 to acquire a legacy business called First Kitchen. It was 0:21:56.880 --> 0:22:00.959 owned by Sun Torri, which is the Mega Ridge conglomerate 0:22:01.240 --> 0:22:04.360 mostly known for whiskey, and they had created that business 0:22:04.480 --> 0:22:06.840 First Kitchen to compete with McDonald's, and they had about 0:22:06.880 --> 0:22:10.240 one hundred and sixty restaurants. McDonald's, though in Japan, has 0:22:10.480 --> 0:22:13.680 three thousand restaurants, and so this was just an afterthought 0:22:13.720 --> 0:22:16.840