WEBVTT - Restaurants Pivot Amid Expensive Real Estate 0:00:23.040 --> 0:00:24.200 Welcome to Chopping It Up. 0:00:24.760 --> 0:00:27.000 I'm your host, Mike Hallon, the senior Restaurant and Food 0:00:27.000 --> 0:00:30.840 Service analyst at Bloomberg Intelligence. Our research and that of 0:00:30.920 --> 0:00:33.720 bi's five hundred analysts around the globe can be found 0:00:33.720 --> 0:00:38.160 exclusively on the Bloomberg terminal. Today, we're joined by Lauren Fernandez, 0:00:38.200 --> 0:00:42.040 founder and CEO of Full Course. Thanks for doing this, Lauren. 0:00:42.400 --> 0:00:43.040 My pleasure. 0:00:43.159 --> 0:00:47.040 Thanks for having us on sure thing. All right, you're 0:00:47.080 --> 0:00:49.600 a lawyer by trade. How did you get into the 0:00:49.720 --> 0:00:50.879 restaurant business? 0:00:52.240 --> 0:00:55.440 It got me? I caught the bug, you know. I've 0:00:55.480 --> 0:00:58.680 spent most of my career as an attorneys specializing in 0:00:58.680 --> 0:01:03.680 intellectual property and specifically product development. So I was in 0:01:03.720 --> 0:01:07.080 the land of Pharma, working for nov Artists and its 0:01:07.120 --> 0:01:11.000 Eyecare division, and had just launched a two billion dollar 0:01:11.120 --> 0:01:13.800 product in over one hundred and forty countries. It's the 0:01:13.920 --> 0:01:16.440 kind of stuff you dream of as a lawyer in 0:01:16.520 --> 0:01:20.800 this space. And the project was, you know, I think 0:01:20.920 --> 0:01:22.760 it would be fair to say, coming to a close. 0:01:23.440 --> 0:01:26.080 And I happened to get a call from Focus Brands 0:01:26.360 --> 0:01:29.240 and they were looking for someone to help run legal 0:01:29.360 --> 0:01:34.280 with specific background and brand licensing, product development, et cetera. 0:01:35.120 --> 0:01:38.480 And so we started a conversation and I was hooked immediately. 0:01:38.480 --> 0:01:40.679 I think the thing that impressed me the most was 0:01:40.720 --> 0:01:43.120 if I was going to make the jump from pharma 0:01:43.120 --> 0:01:46.319 to food, I needed to be a team in an 0:01:46.400 --> 0:01:50.720 environment that was welcoming and encouraging of me to learn 0:01:51.000 --> 0:01:54.160 and really get into this space. And indeed that's what happened. 0:01:54.200 --> 0:01:58.400 The team at Focus Brands at the time was just exceptional. 0:01:58.520 --> 0:02:03.040 Rusufenhower had just assembled this great talent, and that's where 0:02:03.120 --> 0:02:06.040 my journey began. I showed up on the first day 0:02:06.080 --> 0:02:08.160 and they were like, okay, great, here's your next sixty 0:02:08.160 --> 0:02:10.239 to ninety days. You're going to train in every single 0:02:10.240 --> 0:02:13.480 brand that we have. I was more like, show me 0:02:13.520 --> 0:02:15.760 your docket so I can make sure there's nothing burning 0:02:15.840 --> 0:02:18.520 down this house. And Russ was very clear about this. 0:02:18.600 --> 0:02:20.920 He's like, no, you are not tatching a single contract 0:02:21.200 --> 0:02:23.760 until you finish this training. And I said, yes, sir, 0:02:23.960 --> 0:02:26.000 and went and did it. And I think from that 0:02:26.120 --> 0:02:30.800 day forward, I was probably legitimately hooked. And that's the 0:02:30.800 --> 0:02:32.240 beginning of the journey. 0:02:32.280 --> 0:02:35.800 Really, all right, cool, well, why didn't you fill in 0:02:35.840 --> 0:02:39.760 the blanks from Focus Brands up up until full Course? 0:02:40.840 --> 0:02:43.960 So I did a solid run at Focus Brands. I 0:02:44.040 --> 0:02:46.560 was their general counsel and the head of Admin, so 0:02:46.600 --> 0:02:49.799 I ran both of those departments and had a lot 0:02:49.840 --> 0:02:52.240 of input to both international deals as well as the 0:02:52.360 --> 0:02:56.600 bizdev around licensing and product And you know, I think 0:02:56.639 --> 0:02:58.600 there was just a general shift in the company on 0:02:58.639 --> 0:03:01.720 the Focus level on on those initiatives, and it was 0:03:01.800 --> 0:03:04.320 time for me to move on, and I was looking 0:03:04.360 --> 0:03:08.280 for my next role and quickly figured out that there 0:03:08.320 --> 0:03:10.840 are not many CEOs out there who view their general 0:03:10.880 --> 0:03:13.440 counsel as a business asset and someone who can actually 0:03:13.480 --> 0:03:17.640 add strategic thinking to the discussions at an executive level. 0:03:17.800 --> 0:03:21.079 And I am a born entrepreneur. I think I started 0:03:21.120 --> 0:03:23.000 my first business at like fourteen. I think my dad 0:03:23.000 --> 0:03:26.160 will actually say thirteen. But I knew that I needed 0:03:26.160 --> 0:03:28.440 to do something different, and so while I was sort 0:03:28.440 --> 0:03:30.280 of sessing out what was going to come next for 0:03:30.360 --> 0:03:34.920 me professionally, I started exploring buying a franchise restaurant, and 0:03:35.320 --> 0:03:37.680 a lot of that is my desire. I'm first generation 0:03:37.840 --> 0:03:41.000 Cuban American, and I had seen so many of our 0:03:41.120 --> 0:03:43.720 multi unit franchisees kind of start with one and then 0:03:43.760 --> 0:03:47.160 do two and three and really create some serious generational 0:03:47.200 --> 0:03:50.160 wealth and that is one hundred percent where my heart was. 0:03:50.200 --> 0:03:51.840 I'm like, yeah, I'm going to invest in this and 0:03:51.920 --> 0:03:55.160 invest in myself and get some a first you know, 0:03:55.240 --> 0:03:58.440 front re view t ops. Never did I think I'd 0:03:58.440 --> 0:04:01.720 actually become an operator legit, Like, I was like, oh, 0:04:01.720 --> 0:04:04.200 this will be a great investment. And that's some advice 0:04:04.240 --> 0:04:05.600 I'd give to people all the time, like if you're 0:04:05.640 --> 0:04:08.280 going to buy a restaurant, beware, it's going to suck 0:04:08.320 --> 0:04:10.480 you in. It is not mailbox money. And that is 0:04:10.520 --> 0:04:12.800 indeed what happened. I took a partner, we started a 0:04:12.840 --> 0:04:16.799 development group. We ended up securing the rights to develop 0:04:16.839 --> 0:04:19.920 for Chicken Salad Chick in the Atlanta Augustine Athens market. 0:04:20.080 --> 0:04:22.680 So overnight we did a deal where we had to 0:04:22.680 --> 0:04:27.000 take over three underperforming units and stabilize the business, get 0:04:27.040 --> 0:04:29.640 it in the black. And then the development schedule was 0:04:30.320 --> 0:04:33.080 I think, in hindsight, I can say this punishing, you know, 0:04:33.320 --> 0:04:35.480 they just there was a lot of very rapid growth 0:04:35.560 --> 0:04:37.880 teed up. So I ended up opening eight units in 0:04:37.960 --> 0:04:41.400 twenty months and got it down to an absolute science. 0:04:41.560 --> 0:04:44.560 And that was in addition to building a catering program 0:04:44.560 --> 0:04:49.120 and testing delivery for the brand had a wonderful run. Honestly, 0:04:49.200 --> 0:04:51.440 don't know that I ever would have left that system 0:04:51.760 --> 0:04:55.320 and really enjoyed being part of it. And they needed 0:04:56.000 --> 0:04:57.960 different things from us. You know, we'd been a very 0:04:58.000 --> 0:05:00.240 good growth partner for them, but the brand needed to 0:05:00.279 --> 0:05:04.400 come to Atlanta as an HQ, and we were sitting 0:05:04.440 --> 0:05:07.680 on the territory, you know. So then we became a 0:05:07.680 --> 0:05:11.839 strategic acquisition and so we successfully exited in twenty eighteen, 0:05:12.680 --> 0:05:15.320 which then brought us to full course. So I took 0:05:15.360 --> 0:05:18.760 some time in nineteen to breathe for the first time. 0:05:19.040 --> 0:05:21.920 I turned forty, and I had that conversation with yourself. 0:05:21.960 --> 0:05:23.240 You're like, what do I want to do when I 0:05:23.279 --> 0:05:23.720 grow up? 0:05:24.200 --> 0:05:26.640 You know, I still have that conversation. 0:05:26.440 --> 0:05:30.080 Right right, And I really felt confident at that point 0:05:30.080 --> 0:05:32.920 I could build anything that I wanted for myself. And 0:05:33.640 --> 0:05:36.560 the thing I kept coming back to was what is 0:05:36.600 --> 0:05:39.520 the highest and best use of my talent, my education, 0:05:39.760 --> 0:05:44.800 my experience, my expertise, and how does that align in 0:05:44.920 --> 0:05:47.960 service to others? And I also was trying to solve 0:05:47.960 --> 0:05:50.200 for some problems that I had observed in the industry 0:05:50.200 --> 0:05:52.880 over my time in restaurants, and you know, one of 0:05:52.920 --> 0:05:54.920 them is a capital issue. We don't have a lot 0:05:54.960 --> 0:05:59.680 of emerging capital solutions for growing restaurants. We are devoid 0:05:59.760 --> 0:06:03.400 of what most other industries would have is venture capital, 0:06:03.480 --> 0:06:06.680 so to speak. That's just not really a great, exacting, 0:06:07.160 --> 0:06:09.840 very exact fit for us in terms of the restaurant 0:06:09.839 --> 0:06:13.200 growth models. You know, we also lack a lot of 0:06:13.520 --> 0:06:17.320 you know, development strategies for people, right like a reinvestment 0:06:17.320 --> 0:06:20.760 in people, especially the ones who often get overlooked, who 0:06:20.760 --> 0:06:23.599 are in the hourly wage positions, who are indeed where 0:06:23.640 --> 0:06:26.960 a lot of our diversity is trapped in our industry. 0:06:27.760 --> 0:06:29.320 You know, we look really great on paper at a 0:06:29.400 --> 0:06:31.320 high level, but you dig down and a lot of 0:06:31.320 --> 0:06:35.320 that talent is down at the hourly wage level. How 0:06:35.360 --> 0:06:38.280 do we elevate them into leaders? And you know, I 0:06:38.320 --> 0:06:41.160 also had a really clear vision on what the playbook 0:06:41.200 --> 0:06:43.039 needed to look like for growth, and it needed to 0:06:43.120 --> 0:06:47.400 include things like product manufacturer and development to create efficiencies 0:06:47.400 --> 0:06:51.600 in labor and operations and possibly even new revenue streams 0:06:51.640 --> 0:06:55.120 for restaurant brands. And it's easier to do that earlier 0:06:55.160 --> 0:06:59.600 than later. I can speak from experience. So Full Course 0:06:59.680 --> 0:07:03.160 was really born out of a need for capital solutions 0:07:03.160 --> 0:07:07.200 and reinvestment in people, but also a vision to sort 0:07:07.200 --> 0:07:10.720 of expand the ways that brands can grow and leverage 0:07:10.720 --> 0:07:13.160 some of the very proven techniques that we know work 0:07:13.240 --> 0:07:16.960 for large brands, but bring them at an affordable and 0:07:17.080 --> 0:07:20.080 accessible way to emerging brands who need that help too. 0:07:20.400 --> 0:07:21.800 And here we are today. 0:07:22.880 --> 0:07:23.440 Very cool. 0:07:23.560 --> 0:07:25.680 All right, So I go back it up a little bit, 0:07:25.680 --> 0:07:27.200 so I have a couple of questions. What was your 0:07:27.240 --> 0:07:27.920 first business? 0:07:29.240 --> 0:07:32.280 Oh? My goodness. So when I was fourteen, I figured 0:07:32.280 --> 0:07:36.560 out really quickly that we could knock on doors and 0:07:36.880 --> 0:07:40.760 talk about candidates who are running for local office. And 0:07:41.040 --> 0:07:43.560 you would do that with high school students. So you know, 0:07:43.560 --> 0:07:45.400 you get out of school at three and you've got 0:07:45.400 --> 0:07:48.880 these really articulate kids who are in debate, mock trial, 0:07:48.920 --> 0:07:51.600 and moot court. We'd put them in a candidate polo 0:07:51.640 --> 0:07:55.239 shirt embroidered name tag. They'd knock on super voter doors 0:07:55.280 --> 0:07:57.840 who were home because they were usually over sixty five, 0:07:58.480 --> 0:08:00.960 and they'd give their spiel about the candidate. We'd always 0:08:00.960 --> 0:08:03.440 send a boy and a girl together and they'd leave 0:08:03.480 --> 0:08:06.960 the materials. And we tested it on one campaign and 0:08:07.000 --> 0:08:09.440 we won by a landslide and a three way race, 0:08:10.040 --> 0:08:13.800 and I quickly became the accidental go to for those 0:08:13.840 --> 0:08:18.000 types of services for state and local campaigns all over 0:08:18.080 --> 0:08:20.400 the state of Florida. And I was like fifteen, I 0:08:20.400 --> 0:08:24.360 didn't even have a car, and my mom, to her credit, 0:08:24.520 --> 0:08:26.960 was so visionary. She's like, we got to make this scalable. 0:08:27.560 --> 0:08:29.880 And so what we would have is sort of like 0:08:29.920 --> 0:08:33.319 a campaign captain that we would train, we'd teach them 0:08:33.360 --> 0:08:36.240 the playbook, and we'd connect to the local high schools 0:08:36.320 --> 0:08:39.480 and kind of create this low key volunteer army. And 0:08:39.480 --> 0:08:41.760 we would pay them by the door knock or by 0:08:41.800 --> 0:08:44.320 the hour, depending on what it was. And it was 0:08:44.440 --> 0:08:48.480 wildly successful and I ran that business pretty consistently until 0:08:48.520 --> 0:08:53.080 I was about twenty one twenty two. Helped pay for college. 0:08:54.200 --> 0:08:57.440 Impressive. That's an impressive first business. Definitely beats a lemonade 0:08:57.440 --> 0:08:58.200 stand for sure. 0:08:58.320 --> 0:09:01.640 Yes it was. It was a no no advertising, no shingle. 0:09:01.840 --> 0:09:03.600 If you didn't know who I was and how to 0:09:03.640 --> 0:09:06.119 reach me, you were not able to book our services. 0:09:06.200 --> 0:09:09.439 So it was done through my network of other high 0:09:09.480 --> 0:09:12.240 school kids really across the state who competed in other 0:09:12.840 --> 0:09:15.720 similar events, like I did debate with cord et cetera. 0:09:16.120 --> 0:09:19.320 And that is really truly my first business that I 0:09:19.360 --> 0:09:22.840 ever ran before I came up to Atlanta from Florida. 0:09:23.440 --> 0:09:27.040 Very cool and chicken salad chick. They're crushing it. So 0:09:27.200 --> 0:09:31.240 what attracted you to that opportunity so early on? 0:09:31.480 --> 0:09:34.160 It? And it's, you know, development. 0:09:35.000 --> 0:09:39.720 Run by a woman, started by a female founder. It 0:09:39.920 --> 0:09:43.840 was one of the only fast casual restaurant concepts I'd 0:09:43.880 --> 0:09:48.320 ever seen that was specifically targeted to women. What I 0:09:48.320 --> 0:09:50.640 found out later is men love it too. We had 0:09:50.640 --> 0:09:53.520 one location in Atlanta, for example, that would pull in 0:09:53.679 --> 0:09:57.480 all kinds of really great guys from the local community 0:09:57.520 --> 0:10:00.080 and from business who loved that. It was keto and 0:10:00.120 --> 0:10:01.320 Paleo friendly. 0:10:01.600 --> 0:10:03.280 A crush chicken salad, crush it. 0:10:03.400 --> 0:10:08.160 Oh right, it's actually not too bad for you. And realistically, 0:10:09.280 --> 0:10:12.520 I really just loved the story that Stacy was able 0:10:12.559 --> 0:10:15.120 to tell about her founder journey and it was such 0:10:15.160 --> 0:10:17.640 a wonderful way to talk about the brand and its 0:10:17.679 --> 0:10:20.480 purpose and meaning. And I bought into that and to 0:10:20.559 --> 0:10:23.640 this day, that's how we build brands at full Course, 0:10:23.679 --> 0:10:25.600 like we are very careful to make sure that the 0:10:25.679 --> 0:10:29.680 founders why and their purpose is infused into everything that 0:10:29.720 --> 0:10:33.120 we do at the brand. Whenever and wherever possible, because 0:10:33.120 --> 0:10:35.440 I think that that makes brands a little stickier for 0:10:35.559 --> 0:10:38.280 consumers and it does help to generate a lot of 0:10:38.360 --> 0:10:41.600 loyalty and alignment with your consumer base when you can 0:10:41.640 --> 0:10:43.439 be clear on that and then deliver on it too. 0:10:44.160 --> 0:10:47.720 Yeah, I think you're right smart And as our audience 0:10:47.800 --> 0:10:51.680 can probably already tell full Courses in your typical private 0:10:51.720 --> 0:10:56.239 equity firm, so also the services you provide aren't typicals, 0:10:56.280 --> 0:10:58.320 can so can you talk about some of these those 0:10:58.360 --> 0:11:02.080 other services outside out of just making investments and restaurants. 0:11:02.679 --> 0:11:05.680 Absolutely, so. We are a three part business. We have 0:11:05.800 --> 0:11:10.560 a nonprofit side of our business that focuses on education, mentorship, 0:11:10.600 --> 0:11:14.079 and coaching for everybody in the industry. But it's also 0:11:14.240 --> 0:11:18.120 a resource that's available to our clients, to our investments, 0:11:18.200 --> 0:11:22.040 to their franchises, to their employees. We really want to 0:11:22.080 --> 0:11:25.480 help flatten that learning curve that makes it difficult for 0:11:25.559 --> 0:11:28.680 you to succeed as not just a business owner, but 0:11:28.760 --> 0:11:31.240 as someone who's a professional in the industry who wants 0:11:31.280 --> 0:11:34.160 to grow. So that is our contribution back to the 0:11:34.200 --> 0:11:38.040 restaurant industry, and that is the Full Course foundation. In 0:11:38.120 --> 0:11:41.240 the middle, we have a management company called full Course 0:11:41.400 --> 0:11:45.439 and that management company has a deep bench of experience 0:11:45.559 --> 0:11:48.040 with over two hundred and fifty years of subject matter 0:11:48.120 --> 0:11:52.960 expertise and everything from operations, supply chain, finance and accounting, 0:11:53.080 --> 0:11:57.520 marketing people. And then on the development side, we also 0:11:57.679 --> 0:12:00.880 have expertise and for a major t channels of growth. 0:12:01.000 --> 0:12:06.760 That's company store development, franchise development, product licensing and manufacture, 0:12:07.240 --> 0:12:12.079 as well as non traditional development into areas like stadiums, arenas, hospitals, 0:12:12.160 --> 0:12:15.520 universities and airports. And that is indeed at the hallmark 0:12:15.520 --> 0:12:18.520 of our investment strategy. We are an omni channel developer 0:12:18.600 --> 0:12:22.040 and we build brands that have very solid revenue platforms 0:12:22.320 --> 0:12:25.600 and a ton of runway for growth. Now, the third 0:12:25.679 --> 0:12:27.960 leg of this stool, if you will, is obviously our 0:12:28.040 --> 0:12:31.960 capital solution. So in the full course funds of which 0:12:32.000 --> 0:12:35.319 there is currently one about to be fully allocated, almost 0:12:35.320 --> 0:12:38.920 done completely choosing those deals which I'm excited to make 0:12:38.960 --> 0:12:43.559 some announcements soon, and our second forthcoming fund are dedicated 0:12:43.600 --> 0:12:46.880 to emerging food and restaurant brands. We typically come onto 0:12:46.920 --> 0:12:51.200 the cap table as a first major equity investor, and 0:12:51.240 --> 0:12:53.960 we are truly there as a value add investor and 0:12:54.040 --> 0:12:58.080 development partner. So we are here to inject into these 0:12:58.080 --> 0:13:01.920 businesses growth capital, and it's in a minority position on 0:13:02.000 --> 0:13:06.559 the cap table. So whether you need coaching or support 0:13:06.800 --> 0:13:10.040 in the growth of your business, or you're an established 0:13:10.080 --> 0:13:13.520 franchise or you need help picking better franchisees or training 0:13:13.559 --> 0:13:17.400 your franchisees, we have a wide range of consulting services 0:13:17.440 --> 0:13:20.320 that we actually offer and then we can always come 0:13:20.360 --> 0:13:23.880 behind as a fair and equitable investor as well for 0:13:24.000 --> 0:13:26.319 the clients who really need that. 0:13:26.320 --> 0:13:27.079 That's very cool. 0:13:28.120 --> 0:13:31.079 What size chains are coming to you for the consulting 0:13:31.120 --> 0:13:33.160 help and what are some of the topics I guess 0:13:33.520 --> 0:13:35.240 they need help with most frequently. 0:13:36.360 --> 0:13:40.360 That's a wonderful question. It's actually quite shocking what we've seen. 0:13:40.559 --> 0:13:43.080 So I think because of our deep experience in the 0:13:43.160 --> 0:13:47.000 land of franchising and the fact that I've run franchising 0:13:47.000 --> 0:13:51.800 for multi brand operations like Focus now called go to brands, 0:13:52.440 --> 0:13:55.880 it is very important to large franchisors to have us, 0:13:56.000 --> 0:13:58.559 you know, in their arsenal, if you will, and we 0:13:58.920 --> 0:14:00.680 take care of a lot of issues that you would 0:14:00.679 --> 0:14:04.280 often see in large franchise organizations with more than like 0:14:04.360 --> 0:14:08.600 three thousand units, where some franchisees need more help and 0:14:08.640 --> 0:14:12.600 support but sometimes the franchisors want to maintain that legal 0:14:12.640 --> 0:14:17.320 distance and boundary between the relationships, so those engagements tend 0:14:17.360 --> 0:14:19.600 to look a little bit more people heavy, right. It's 0:14:20.040 --> 0:14:25.720 leadership development, franchise selection tools, right, helping teach a single 0:14:25.800 --> 0:14:29.080 unit franchisee how to become a multi unit franchise owner. 0:14:29.560 --> 0:14:34.800 Helping take high potential corporate store employees and coaching them 0:14:34.920 --> 0:14:38.000 on how to become a business owner and basically become 0:14:38.080 --> 0:14:41.520 prepared to become a franchisee in the system. And those 0:14:41.640 --> 0:14:45.000 engagements can range anywhere from a three month to a 0:14:45.040 --> 0:14:48.520 three year process, depending on what kind of support they need, 0:14:48.560 --> 0:14:50.880 because it's let's be clear, it's not that the brand 0:14:50.920 --> 0:14:55.120 couldn't do this themselves. They understand it. It's a legal 0:14:55.200 --> 0:14:57.440 boundary that they don't want a cross where they are 0:14:57.520 --> 0:15:00.920 viewed as having too much control over the business. And 0:15:01.000 --> 0:15:04.640 I deeply understand and respect that as former counsel myself, 0:15:04.720 --> 0:15:07.680 so we can provide those kinds of solutions. I think 0:15:07.680 --> 0:15:11.760 the other end of the spectrum is mid size brands 0:15:11.760 --> 0:15:15.440 that are probably anywhere from one hundred to two hundred 0:15:15.560 --> 0:15:19.600 units where their growth has either stuttered, stalled, or plateaued 0:15:19.640 --> 0:15:24.240 and they're having issues either selling franchises or are looking 0:15:24.280 --> 0:15:27.560 at other alternative revenue streams. Now, I think in those 0:15:27.600 --> 0:15:31.200 situations we are also a nice bolt on for franchise selection, 0:15:31.640 --> 0:15:35.600 for management training, for leadership development. So there's always a 0:15:35.680 --> 0:15:39.200 people quotient to what we do. You see the theme here, 0:15:40.440 --> 0:15:43.080 and of course, in the early stage brands we work with, 0:15:43.160 --> 0:15:45.440 all these things are true, but they just need more 0:15:45.480 --> 0:15:48.360 heavy lifting. So we have a number of programs where 0:15:48.400 --> 0:15:52.160 we can come in and support field operations for franchisees. 0:15:53.120 --> 0:15:55.760 You know, we can do deep training for franchisees, we 0:15:55.800 --> 0:15:59.920 can help with franchise e site selection, whatever the needs are, because, 0:16:00.040 --> 0:16:02.480 let's face it, a lot of emerging franchise ors when 0:16:02.480 --> 0:16:05.560 they're south of you know, let's say twenty franchise units, 0:16:05.960 --> 0:16:11.000 it's expensive to try to provide that support with headcount 0:16:11.200 --> 0:16:17.520 and sometimes outsourcing some of those features, whether it's franchise sales, support, 0:16:17.880 --> 0:16:22.800 compliance operations, what have you, is actually more cost effective 0:16:22.840 --> 0:16:24.480 than trying to build a team out internally. 0:16:24.960 --> 0:16:28.440 Okay, good stuff, What size investments are you making? 0:16:29.760 --> 0:16:32.120 The average check right now for fun one is about 0:16:32.200 --> 0:16:35.360 two and a half to four million in range, with 0:16:35.440 --> 0:16:38.720 an average somewhere around three million, and so that's about 0:16:38.760 --> 0:16:41.320 typical for fun One. I think Fun Too we'll have 0:16:41.400 --> 0:16:45.600 a wider investment directive. We will always be committed to 0:16:45.640 --> 0:16:49.680 making investments in early and emerging food and restaurant brands 0:16:49.760 --> 0:16:53.240 that are anywhere from one to ten units, and I 0:16:53.280 --> 0:16:57.240 think that will be our core investment premise. However, you know, 0:16:57.600 --> 0:17:00.440 there are plenty of brands out there that maybe eleven 0:17:00.480 --> 0:17:04.600 company stores are fifteen and maybe they haven't even franchised yet, 0:17:04.640 --> 0:17:07.480 or maybe they're one hundred percent franchise, And those types 0:17:07.520 --> 0:17:10.880 of opportunities come across my desk often, and I love 0:17:10.960 --> 0:17:13.760 the founders and I love the brand, but they weren't 0:17:13.800 --> 0:17:16.760 just quite right of a fit for fun One. So 0:17:16.880 --> 0:17:19.560 I'm actually very excited to open fun Too, so we 0:17:19.600 --> 0:17:22.520 can let some of those prospects back into the funnel, 0:17:23.520 --> 0:17:26.000 because I think there's just as many awesome deals in 0:17:26.040 --> 0:17:27.119 that space as well. 0:17:27.960 --> 0:17:28.320 Very cool. 0:17:28.400 --> 0:17:32.600 Yeah, emerging brands, that's a fun segment of the business 0:17:32.640 --> 0:17:36.720 for sure. Let's talk about expansion in this environment. You know, 0:17:36.760 --> 0:17:39.960 how do these emerging chains do it without overextending themselves. 0:17:41.200 --> 0:17:44.560 It's a tricky environment, right, because I think the last 0:17:45.320 --> 0:17:48.680 let's say five to seven years, we've enjoyed some relatively 0:17:48.880 --> 0:17:51.760 low cost of capital. Right, Debt has been very cheap, 0:17:51.920 --> 0:17:54.320 so a lot of this growth was fueled by a 0:17:54.440 --> 0:17:58.680 very favorable lending environment, which is more than just evaporated 0:17:58.760 --> 0:18:00.800 to the extent that it even is this right now, 0:18:00.800 --> 0:18:05.400 it's you know, double digits. And further complicating the situation 0:18:05.840 --> 0:18:09.000 is that there is a very very low vacancy rate 0:18:09.080 --> 0:18:12.720 right now for commercial real estate that's appropriate for a restaurant, 0:18:13.400 --> 0:18:17.400 and when it is available, it's extremely expensive. So some 0:18:17.480 --> 0:18:20.919 of the things I've seen brands do extremely well is 0:18:21.160 --> 0:18:25.239 really start pushing into alternative formats. So they're taking what 0:18:25.400 --> 0:18:28.880 is this sort of perfect unit and trimming it down 0:18:28.960 --> 0:18:31.959 into a smaller footprint. They're looking at ways to co 0:18:32.119 --> 0:18:35.240 brand with sister brands if it's a multi unit concept, 0:18:35.840 --> 0:18:39.000 really trying to leverage the space that is available in 0:18:39.040 --> 0:18:42.399 creative and unique ways. I also am seeing a lot 0:18:42.480 --> 0:18:45.320 of what we would call omni channel development, so a 0:18:45.320 --> 0:18:49.160 lot of product lines coming out and being commercialized. We're 0:18:49.160 --> 0:18:52.160 seeing a lot of emphasis on non traditional deals, which 0:18:52.200 --> 0:18:56.320 you know, tend to be licensing deals, but nonetheless still 0:18:56.359 --> 0:18:59.480 generate revenue. So you know, I think the brands that 0:18:59.520 --> 0:19:01.320 are doing really well right now and are going to 0:19:01.320 --> 0:19:05.760 continue growth, are paying attention to the exorbitantly high occupancy 0:19:05.800 --> 0:19:08.280 costs they're in market right now and pivoting just a 0:19:08.280 --> 0:19:10.920 little bit. We'll come back to it, but they're not 0:19:11.040 --> 0:19:15.400 abandoning traditional brick and mortar by any stretching imagination. We've 0:19:15.400 --> 0:19:18.560 got a weait in some cases for the market to 0:19:18.600 --> 0:19:23.200 normalize not just with lending, but also available construction and 0:19:23.480 --> 0:19:27.000 you know, fresh real estate, so we'll see. I think 0:19:27.040 --> 0:19:30.200 this is actually fueling a lot of growth into other channels, 0:19:30.240 --> 0:19:32.600 which I love to see because that's been my investment 0:19:32.640 --> 0:19:36.679 thesis for over five years. So I'm like, welcome to 0:19:36.720 --> 0:19:40.440 the party, everyone, come on in. The water's warm. Yeah. 0:19:40.640 --> 0:19:43.359 No, that's really interesting. You know. 0:19:43.400 --> 0:19:45.560 It's interesting because what we're hearing is that some of 0:19:45.600 --> 0:19:50.080 these like publicly traded fast casual chains are just paying 0:19:50.160 --> 0:19:53.600 like crazy rents right that a lot of these smaller 0:19:53.600 --> 0:19:56.040 emerging brands just can't compete with and they keep getting 0:19:56.080 --> 0:19:56.640 priced out. 0:19:57.200 --> 0:19:58.840 I have so many thoughts on this, but what I 0:19:58.880 --> 0:20:02.760 will say is that tends to be a mandate when 0:20:02.840 --> 0:20:07.040 you are focused on the wrong KPIs for success, And 0:20:07.119 --> 0:20:10.520 you may ask yourself like, where is that KPI coming from? 0:20:10.560 --> 0:20:14.320 What is driving that goal of air quotes? Your units open, 0:20:14.920 --> 0:20:16.840 and I would submit to you that that is a 0:20:16.880 --> 0:20:20.240 typical private equity playbook. Right, So when you see these 0:20:20.320 --> 0:20:22.879 brands going units open, units open, and you're on the 0:20:22.880 --> 0:20:26.200 earnings calum that's what you're hearing. It's because that's how 0:20:26.240 --> 0:20:30.160 the multiple happens to generate any kind of return to investors, 0:20:30.800 --> 0:20:34.400 specifically as it relates to franchise units as well. Right, 0:20:34.520 --> 0:20:37.359 So you know, with the return model being what it 0:20:37.400 --> 0:20:41.000 is slightly better for franchised units over company stores for 0:20:41.160 --> 0:20:44.959 private equity, A lot of that push on growth, in 0:20:45.000 --> 0:20:47.560 my opinion, can sometimes be misdirected if you do not 0:20:47.680 --> 0:20:49.960 understand the consequences and you're only in it for the 0:20:50.000 --> 0:20:52.600 short term. If you are looking at the long term 0:20:52.600 --> 0:20:55.639 health of a brand, you can afford to take a 0:20:55.720 --> 0:20:59.680 few wammis on high rent when there is a legitimate 0:20:59.800 --> 0:21:04.160 mark play. A perfect example of this is time square. Right. 0:21:04.720 --> 0:21:07.840 You can drop a unit in times Square and easily 0:21:08.040 --> 0:21:11.119 argue that it is as valuable in marketing and brand 0:21:11.160 --> 0:21:14.240 awareness than it is for the actual sales and through 0:21:14.280 --> 0:21:17.359 put to the bottom line. But not every high rent 0:21:17.400 --> 0:21:21.000 package and every market has that kind of additional return 0:21:21.119 --> 0:21:23.760 to an investor. And so if you're focused on a 0:21:23.800 --> 0:21:27.000 short term return, which you know, not all private equity 0:21:27.040 --> 0:21:29.159 does this, but most of them hold these brands for 0:21:29.240 --> 0:21:34.000 between three to four years, that's a short time. So 0:21:34.080 --> 0:21:36.280 they're not going to let a little bit of rent 0:21:36.280 --> 0:21:39.080 inflation slow them down. They're going to keep banging out 0:21:39.080 --> 0:21:42.720 the units. Why because they want the cash flow. But 0:21:42.760 --> 0:21:45.639 if it's a franchise system in particular, they want the 0:21:45.680 --> 0:21:50.520 top line sales there to pull royalty. Right. So there's 0:21:50.520 --> 0:21:54.159 sometimes some conflicting messaging as it relates to growth and 0:21:54.160 --> 0:21:56.639 what is appropriate growth. And I would submit to you 0:21:57.240 --> 0:22:00.040 that that's what happens when the capital comes in and 0:22:00.160 --> 0:22:04.120 doesn't necessarily have the same depth of experience in actually 0:22:04.560 --> 0:22:10.440 operating a restaurant and suffering under those high occupancy costs. So, yes, 0:22:10.520 --> 0:22:13.120 that does happen. It doesn't just happen in restaurants too, 0:22:13.160 --> 0:22:16.119 by the way, it happens in other retail businesses as well, 0:22:16.560 --> 0:22:20.600 where there is a very blind faith and one kind 0:22:20.640 --> 0:22:24.800 of growth. You know, damn, the consequences go go go, 0:22:25.600 --> 0:22:29.040 And there is there are always consequences when you make 0:22:29.080 --> 0:22:32.200 those kinds of decisions with blinders on. And I do 0:22:32.240 --> 0:22:36.880