Host: Today we've got another interview with an acquisition entrepreneur who bought a restaurant, or five in this case, and it's going great. Like Jarrett Burke, the Acquiring Minds guest from May who bought a decades old diner on a main street in a college town, today's guest, Jackson speaks acquired restaurants whose customers feel connection and loyalty to them. That's brand, in short, and Jackson and I spend some time on that theme, the idea that the nostalgia niche within the larger restaurants category is an attractive place to make acquisitions. Matter of fact, Jackson and his partner now have a thesis around it. We unpack a lot today about buying, improving and owning a portfolio of restaurants, including low hanging Fruit, AKA what levers to pull as a new owner, how to manage multiple locations, the power of a growing geography, and much more. But through all this, let's not lose sight of the human story here, which is a couple young guys who wanted to be entrepreneurs and to live by the beach at the ripe old age of 27. They've done that. Here is Jackson speaks, owner of Pizza by the Sea and Cowgirl Kitchen Announcements don't forget the webinar this Thursday, September 12th how big a business should you buy? It's a theme that comes up over and over in Acquiring Minds interviews and Acquisition Labs. Chelsea Wood is going to host a live Office Hours to help you arrive at an answer for yourself. Come with your questions. We're going to leave a good chunk of time at the end for Q and A. The link to register is at the top of this episode's show notes or right on the Acquiring Minds homepage. Acquiringminds Co. If you can't make it, you can register anyway to ensure you'll be emailed a recording of the webinar after the fact. How big a business should you buy? And office hours with Acquisition Labs? Chelsea wood this Thursday, September 12 noon Eastern Register on the Acquiring Minds homepage or at the link in today's notes. Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast I talk to the people who do it. What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and in an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buythenbuild.com Jackson speaks welcome to Acquiring Minds.

[3:48] Guest: Thanks for having me.

Host: Jackson, you're building a portfolio of what you called to me in the pre call nostalgic restaurants. You've done two acquisitions buying one such nostalgic restaurant, then another with four locations. I think I have that right. So five restaurants total in the portfolio. Fair to predict that number will grow. Now we all know, Jackson, that restaurants are terrible businesses. So you're gonna disabuse us of that today. But start us off with some background on you, please.

Guest: Sure. Well, Will, thanks for having me. I listen to your podcast probably at least once a week. So super exciting to actually be a guest on here. Feel very honored. So thank you for that. I'm from Auburn, Alabama. I'm the oldest of four boys. My father is a land broker. He sells big tracks of hunting land. So I grew up, grew up learning really from his clients. And he would, we would always have dinner at night and my dad would tell me about his clients in his truck that he had that day. And when you're showing a thousand acres to 10,000 acres, you really get to know the person in your truck. And these individuals are some of the most wealthy individuals in the state of Alabama, mostly blue collar. So these guys own plumbing companies, subcontracting companies, electrical businesses, and they're buying these pieces of property for 5 to 10 million, all cash. So from a very early age I just knew about the blue collar individual and how well they did at business. And I think very early on I just wanted to be a part of that.

Host: Man, that detail, that lesson would have served me well if I learned it sooner. And so many of my guests, we, we learn late that small business is actually a place where you can build real wealth. I think many of us go through life thinking that small businesses aren't good businesses. Many of them are not. But there are of course, enormously successful small business people, which. This passes it out. Great. Well, that was, that was great. So, so carry on. So you, you, that kind of sets a frame for you about small business. Tell us more about your background. Carry on from there.

[6:18] Guest: Sure. So went to Auburn High, went to Auburn University, graduated there, met my wife there. And I was always an entrepreneur at heart. I was eliminating stand kid, selling power balances at school out of my backpack in the eighth grade. Tried to start an app when I was in college. Failed dramatically. But I learned more through starting that app than I did at college. My friends always joked around that I was never in class, but learning on YouTube and reading books left and right. So, yeah, around senior year of college is when I really got interested in real estate and investing in real estate. And I really just wanted to try to figure out a way to buy equity and hold equity. And really it. It spurred from my father. He, you know, I saw him working so hard to sell land day in and day out, and, you know, he was kind of always on the hamster wheel. But over time, he invested and bought a few pieces of property, rental property, and I saw how much time he spent on that and where and how much wealth he had accumulated just through buying a few pieces of property. And that's when in college, I was like, okay, I really want to buy equity, get in the game instead of go take a job somewhere. So me and him, we. We bought our first house for $45,000, and we actually seller financed it, and we can get into seller financing later, but we actually seller financed it, and that was very successful. We actually sold it for 71,000. So nice little profit for a senior in college. And after that, raised some capital from family friends and on a private note. So then I went off and bought some properties, some real estate properties in Montgomery, Alabama. And that kind of spurred on. We can get into it later. But that, but that spurred on the restaurant acquisition.

Host: Okay, yeah, well, I get the picture that in college you were learning rather than getting good grades. I mean, as you said, your friends joked you weren't in class, but given that you did this real estate investment, this first one with your father, it sounds like he was encouraging of your entrepreneurial side projects.

[9:08] Guest: Very encouraging.

Host: Even though it may be distracted from your studies.

Guest: Very encouraging. And I think just in the back of my mind, just hearing about all of his clients all growing up, you know, honestly, subconsciously, I. It was just very difficult for me to really dive in to school.

Host: Yeah.

Guest: And he's been very supportive, him and my mom and my wife of all of the endeavors that I've taken. And so not just. Not just financially a little bit, but also supportive. So.

Host: Yeah. Yeah, yeah, great. Okay. Well, you're on a path to become a real estate guy. So connect the dots between how you've now bought businesses from starting out in real estate.

Guest: Property, yeah. So real estate guy, for sure. Post college, I sold land post college for my dad and then again started buying some properties with a private note. And after that, I really just didn't see as much rental income as I wanted to. And I, I started to run the math and go, wow, I'm gonna need to have thousands and thousands of properties to really get to the cash flow that I would love to have. And that's when me and my wife, we moved to the beach, to Santa Rosa Beach. And a buddy of mine from college, or he went to a different college, but we were friends in college and he moved down. Carter Andrews, he moved down to the beach about a year after I did. And Carter, he grew up in the restaurant business. His parents own a restaurant. He has a ton of restaurant experience just from growing up in the restaurant. He struck up a relationship with a lady who's owned a nostalgic restaurant here for the past 15 plus years. And it's in Rosemary Beach, Florida. It's called Cowgirl Kitchen. And around that same time, I was actually selling my portfolio in Montgomery. And really the stars just aligned. I mean, it was. We talk about it all the time and just how funny it was. But I had my portfolio under contract and this was kind of in the craze of After Covid. So real estate prices are here. And to be honest, the portfolio that I had under contract to sell was way overpriced, but rates were low and everyone wanted rental property. And I truly believe that that contract allowed us to be able to just somehow get in the game of having a conversation with this individual, with this owner.

[12:11] Host: Rosemary beach, give us more about where that is.

Guest: Yes, A Rosemary beach is on 30A. It's in Santa Rosa Beach, Florida. 30A is a scenic highway in between Destin and Panama City. It's really comprised of a few mixed use urban developments, one being Seaside, Florida, one being Alice Beach, Florida, and the other is Rosemary Beach. So that's where it is.

Host: Great. So this is the, the Destin. The Destin area, which people from that part of the country will certainly know. Others may not have been there, but it's scenic and it's the, the panhandle of Florida. Pretty far west, right?

Guest: Northwest Florida, right?

Host: Yeah, yeah, Northwest Florida. Okay, great. And can you give us some hard numbers around what your real estate portfolio was worth and what you stood after selling it to have in your pocket?

Guest: Sure. So I was all in for this Portfolio for about a million dollars. And that was my cost basis. I had the portfolio under contract for 1.9 million. It was realistically probably worth 1.4 at the time. And I actually did not sell that portfolio, so. Yes. So it was under contract and I was going to roll the capital into the building in Rosemary and the business, and so glad that that did not happen. Looking back, but a few of the properties I was able to refinance fairly quickly to come up with the down payment for the business.

Host: So you thought you were going to have about $900,000.

Guest: Right, exactly.

Host: And then you didn't because the deal didn't close and instead you pulled cash out of your portfolio by refinancing it.

Guest: Exactly.

Host: Or refinancing a few of the properties.

Guest: Yes.

Host: And. And so that cash, then how liquid were you?

Guest: About 300,000.

Host: Great. And do you still own your portfolio today?

Guest: I do not. I sold it this past October, so.

Host: Ah, okay.

Guest: Yep.

Host: What'd you get for it?

Guest: I got 1.4 million.

Host: So there's the 1.4.

Guest: Around what. What, what it was worth, so. Yeah.

Host: Okay. Okay. And how many units was it? Just curious.

Guest: It was 31.

Host: 31 doors. And what kind of property was it?

[15:00] Guest: All single family homes.

Host: Single family homes.

Guest: Okay. Yeah.

Host: All right, great. And you and Carter are buds from college. How old are the two of you?

Guest: We're both 27.

Host: You're 27 now?

Guest: 27 now.

Host: And at the time this story is taking place, you were 24. 25.

Guest: We were 20.

Host: This was 2021.

Guest: 25. Okay. We really started conversations around buying a business around, you know, we started maybe doing a ghost kitchen. That's what we were really excited about. And really. And really the ghost kitchen idea led to the. The. The relationship of the Calgary kitchen owner through Carter. And so, so then that was around July, two years ago.

Host: 2020.

Guest: So 24 months ago.

Host: Oh, okay. So 2022. Because of course, Ghost Kitchens. The hype around Ghost Kitchens was peaking in the wake of COVID or right around after Covet. I. I actually thought it was earlier than 2022. Kind of 20. 20. 20, 202021 time frame. But anyway, 2022. So you guys thought you were going to do kind of a startup, Ghost kitchen startup.

Guest: We did.

Host: But you. You meet this in your 25 is you meet as you plot this, you meet this woman who owns Cowgirl Kitchen.

Guest: Right.

Host: That's where we are. Okay, so, so, so carry on. What. How did that. How does that conversation evolve, please?

Guest: Yeah, so Carter met her. They had lunch. She owns a few other restaurants as well here on 30A. And she owns a lot of real estate. She's been here forever. And Carter and her had lunch and she, she said, hey, you know, would love for you to come and work for me as a manager. Just letting you know though, I am selling my Rosemary location to someone else. And she kind of gave a few of the numbers away. And then a few days later me and Carter are at the beach and he's telling me these numbers and I'm going, man, this, this is, this could be a great multiple. It seems like it's cash flowing fairly well. And me and, me and Carter were frequent, frequent customers at Cowgirl. We love Rosemary, we love going there with our wives. And we saw a lot of inefficiencies, we saw a lot of wait times, long ticket times, old school technology, no management in place. We began to become very interested even

Host: though she wasn't, she had already said she has a buyer. Yes, okay, but you thought that you would raise your hand and say, well, we're interested and you thought she might be open to that.

Guest: Exactly. And you know, at 25 we were, we really didn't know what we were doing. And at, at 27 it's not like we really know what we're doing now. But, but we came to her and we got on a Zoom call and we said, hey, we want to buy everything. We want to buy your real estate, we want to buy all your restaurants. And at the time all. I didn't have really any cash. I didn't, I never sold the portfolio at the time. And so we were just shooting for the starts. We were just going for it and it doesn't hurt to ask. And I think she really loved that. She really loved that about us. Obviously she did not sell everything to us. She only sold one asset to us. But I think she kind of enjoyed, you know, hey, these young guys are actually wanting to build some high and make something happen. Exactly.

[18:52] Host: August Felker is a two time successful searcher. First with a traditional search fund. The second time around he did a self funded search. Today August runs Oberle Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under Loi, Oberly will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberle is a specialty insurance brokerage for searchers by a former searcher. Check out oberle-risk.com O B E R L E- risk.com link in the show notes and so, so you guys. So you had no money lined up? You did not, you had not done your refinancing? You had no money? No, you just, just. I love it. I love it too. We want to buy, we want to buy everything. Okay, so before we get further along in the story, tell us about Cowgirl kitchen. Tell us, tell us the, the numbers first and then I want to hear just about the kitchen and where it sits, sits in the market, kind of how big it is, et cetera. So what were these numbers that so impressed you?

Guest: Yeah, so the numbers, I can't go into all of the numbers for this sales price just out of respect for the previous owner and some people in the community. But we, it was doing, you know, at least around half a million from what we could tell in ebitda. We didn't really understand the whole picture of the finances and we, but we really saw that, that there was a lot of low hanging fruit again like I was saying, really not a ton of technology. They were working off really old iPads, no management in place and owner was never around. And at the time we're 25, so we were like, okay, we're just going to be here a lot if we do buy this place and we can really manage well, even though we've never managed before in our lives. Yeah, we, we, we just thought that we could be present and Cowgirl is a very laid back restaurant within a very high end area. So our competition is really high end restaurants that are very expensive and Cowgirl is more of a kickback cuisine where even, even if you do own a house on the beach for 20 million, you still love to come up and come to Cowgirl. Grab a pizza, grab a burger in your bathing suit, sandy feet, no shirt on and grab a beer. That's Cowgirl. So that's how we've been able to I feel like differentiate ourselves from the competition. Is our competition really is the high end market so.

[21:59] Host: Well, it's, it's so, it's wonderful doubly that you're so clearly differentiated that you have a, a clear value prop and also, also how convenient to be the lowcost option in a moneyed, in a moneyed place where I mean all these people walking through the door shirtless with sandy feet are, are well to do. So great market with no competition. Can't complain. It's obviously if they're Walking with sandy feet. It's on the beach.

Guest: It's about 150 yards from the beach. You can see the beach from the restaurant.

Host: Okay. And how many seats, like, or square footage, however you might gauge the size of a restaurant. How big is it?

Guest: So it's really small. The first floor is only 1200 square feet, so we only have about 60 or so seats, including outside.

Host: Okay.

Guest: So it's pretty tiny.

Host: And to the EBITDA number is about half a million in ebitda, or so you thought. And. And on revenue. On revenue of. Of what. What do margins look like in a pro. Nicely profitable restaurant?

Guest: Right now we're seeing our margins around 30%.

Host: Oh.

Guest: And so at the time, we didn't really know what the sales were just because of the point of sale system. It included tips and in sales tax, and we just couldn't really understand what. What the true net sales were. So that was a huge question. And that kind of goes into the financing of the business, which she did sell or finance a decent amount of. Of the business to us at a great rate. So more of. More of a real estate loan, so to speak, compared to the typical SBA loan which we took out for the next restaurant.

Host: Okay, well, I, Well, I want to hear about that in. In just a sec.

Guest: But.

Host: 30%, but. So call it whatever, but somewhere between one and a half and 2 million bucks in sales in revenue. That's very broad range. Does that feel right?

[24:10] Guest: Somewhere between one and a half and two and a half, probably. Oh, okay. Yeah.

Host: Okay.

Guest: Yeah.

Host: Why was she selling this asset from her portfolio? She.

Guest: She had recently moved to a different part of 30A and her other restaurants were in that area.

Host: Okay.

Guest: So she just wanted to be more over there in, in the, in that section. And Cowgirl is a very. It just, it just takes a lot to run it, and you need a lot of management, and I believe she had a few. A few. A few managers come in and come out.

Host: Yeah.

Guest: Some turnover. So that was the main reason.

Host: Great. Okay. So, yeah. Can you now say a little bit more about the. The deal? If you can't say multiple. But the. Maybe the terms and, and seller financing you were alluding to.

Guest: Yeah, the terms were very interesting. So since we were. We were originally under contract on the building and the business, I believe this is how we were able to get such great terms. So she amortized the loan, the private note to us, over 30 years at a 6% interest rate, and we didn't really have to come down with a ton. We really. We really had to come to the table with 10%. So not too bad. 90% loan to value for the business. And that got us in the game. That got us in the game of owning a business. So.

Host: And sorry, the real estate was part of that.

Guest: It was going to be part of it if my deal had closed, but the deal did not close, so we ended up just buying the business. And she still owns, she's building. Yep. And she's great to work with, super easy to talk to, always a phone call away.

Host: But yeah, 90 seller financing on a 30 year AM at 6% fixed.

Guest: It's 6% fixed. And we really saw that as, you know, obviously we bought it and we secured a loan and we signed personal guarantees. But she believed in us. She, I mean, wasn't a gift, but it was great terms. And we also have to remember at the time that rate was a little above market. So. Okay, like now, now it seems really nice, but at that time rates were really low and, but still, as far as the 90 LTV goes, we took that as, hey, she's, she believes in us. She, she's gonna, she's gonna still make us pay for it over time, but she's taking a chance on these young guys who have never been in the restaurant business or have never owned a business and never owned restaurants before. Carter obviously has a ton of experience, but we really saw it as her believing in us. So very thankful.

[27:17] Host: But I just, I, I want. She may believe in you, but it's still like, you know, who cares? Like why, why give you guys such a deal? Especially when she claimed to have this other buyer on the hook. She could have. And you know, you and I talk in here, you guys would have gone higher. You would have, you would have or done something for less generous terms. So it's still curious to me why, I mean, to say she believed in you. You could say that like just giving you the deal at like a market rate would have been believing in you. But she gave, but she not only gave you the deal, but and gave you good terms. I mean, it just, I just wonder if there's more to it than that.

Guest: Yeah, we.

Host: Because screaming. That seems like a screaming deal.

Guest: It was a screaming deal for us at the time because it allowed us to get in the game. I do think the market, we, we probably did overpay for the business, but after owning it for a year, we were definitely okay with overpaying because we, we increased EBITDA dramatically. Okay, so, so the multiple we.

Host: That we, that we can't Say was actually, of course, that's, that's the big detail here. That's, that's missing from the picture. The multiple was maybe a little bit rich, very rich.

Guest: And if, you know, if we would have got an SBA loan, it probably wouldn't have worked. Um, a 10 year a.m. or looking at it now, 10 year a.m. maybe at a 7, 8, 9% interest rate probably wouldn't have worked and we wouldn't have been as comfortable. So we both kind of met in the middle, us and her on agreeing on terms. So.

Host: Okay. And how old is she?

Guest: She's in her 50s. Late late 50s.

Host: Okay. So she's going to be pushing 90 when you pay this thing off.

Guest: Yeah, yeah.

Host: Okay.

Guest: All right.

Host: Okay. Well, really cool. And oh, by the way, Jackson, you know, I, I recall from the pre call you saying something I thought you were going to say, but I haven't heard you say you guys, you, aside from having the dream or the aspiration of becoming an entrepreneur, a guy in business, you wanted to live by the beach, right? And Carter too. So maybe that's implied because you moved to the beach. But maybe say a little bit more about that because you, because, because this is kind of double dream actualization. Business owner and business owner in his flip flops by the beach.

Guest: We did so both of us separately have just when we were both in college, we had always imagined owning our own business and living at the beach. I grew up in Auburn, love Auburn to death, could potentially move back at some point, but don't have any plans of moving back and have always wanted to move here ever since I was in college. And this area is a really, I mean it's growing a lot and I think just I saw a lot of the business owners here that did the exact same thing as business owners in Auburn, but they were making five to ten times more than everyone in Auburn and they live at the beach and it's a small town, Southern values. So it just really made sense for us to move for those aspects. For me personally, it really didn't make sense at all from a career standpoint. I own properties in Montgomery, Alabama and me and my wife are going to move to the beach and she got a job. She's an architect, so she got a job here. Great job. But we didn't really move for that. We, we really moved just because we wanted to beat the beach. So we did. Yeah.

[31:00] Host: Well, I feel like the, the story in the interview could end there and it would, it would feel like a nice victory just buying cowgirl Cowgirl Kitchen, and. Which seems like a strong business and is next to the beach. But that is just chapter one. But before we hear about the next acquisition, how did it go? Like, once you got in there as owners not knowing the first thing about restaurants, what was that transition like? What did you learn?

Guest: So we learned a ton. Carter was operations, so he was full time at the restaurant. He was coo, so to speak, chief operating officer, and I was more behind the scenes in the finances. We learned a ton. And we really learned how to work together and how to communicate, which I think was huge. Me, me, my wife, Carter and his wife. Right before, right around the same time we closed Cowgirl, we all had dinner together. And hopefully this would be helpful for some of your listeners being partners and going into business together. We sat down and we really said, hey, all four of us are partners now. It's not just me and Carter because we're all a team. So there are going to be times where, you know, I stay late at the office. There are going to be times where Carter stays late at the restaurant. And my wife might be upset at Carter because I'm working and he's at home, or vice versa. And having that conversation with the four of us, I feel like really laid a foundation for the wives, not just us, because me and him, we can get along very well. We're first off friends, and we're business partners. We talk all day. But the wives don't necessarily do that. They're at home or they're at their own job, you know, So I feel like that was a great foundation for us to lay at the beginning and which really, I feel like put us on a great trajectory of a great partnership between the four of us.

[33:10] Host: Yeah. Yeah, that's a. That's a really. That sounds like a very healthy, healthy dinner to get to the two families together, the two couples together, and really engage the partners and talk about how they're going to. They're in this, too. And what about this fact that you guys had no restaurant experience? Excuse me. Carter grew up in restaurants, obviously why he was tapped as the. As the GM or operations guy there, but probably didn't have the experience of running a restaurant. So, you know, I said at the top. Restaurants are notorious as not good businesses. One of the reasons is, is because they're very hard businesses, just operationally intense. A lot of moving pieces, a lot of moving customers and plates and food. Just. I just break a sweat thinking about it. So. So how was that trial by fire?

Guest: It was a trial by Fire, for sure. You know, Carter really dove in and just became a sponge. And he's great at learning on the fly and asking a million questions whenever you discuss anything with him. So he was able to learn very quickly how to manage. Um, and. And first off, he's. He's great with people, so he's great with relationships and communicating in person. So I feel like that just really helped out a lot, no matter what his experience was. Plus, given that he had some experience with his parents, really helped out a lot as well. So he understood the restaurant lingo, the restaurant market, so to speak. And the great thing is the actual restaurant there. Cowgirl. I joke around, but we pay. We don't spend any money in marketing, but the money we do spend in marketing is our rent, because our rent is so high. But what's great about our rent being so high is we have people. We open the door and people show up.

Host: Yeah.

Guest: And we just have a ton of. Ton of volume at that tiny little restaurant. So we can't afford to have great employees, and now we have great managers there. So it is really able to stand on its own now without us. Yeah.

Host: Yeah. And the fact that it's small, it's got such a small footprint. Is that a good thing?

Guest: It was good for us at the beginning. Just a huge restaurant would have, I feel like, been very difficult for us to take over. But this was, you know, we could touch mostly every table if we wanted to, and we didn't have a ton of employees either.

[36:05] Host: And the finances of the business, the numbers, this. Half a million dollars in earnings and the revenue, the sales that it generated. What did you learn once you got into the books, and they were your books?

Guest: We. We learned that cost of goods, the cogs were way too high. Employees didn't have any incentive to order the amount that we actually needed. So we started really checking the cogs. Checking labor. Labor was next to nothing because most of the servers would want to just be. Would just schedule themselves and be over six to seven tables and running the restaurant and taking all the tips. But the customer wasn't really satisfied. The customer wasn't getting their food on a timely manner. So that was very, very difficult to change. So we hired more people, had some turnover, but overall, the restaurant really became a lot more profitable just because we were able to hire more people and focus on the cogs.

Host: Okay, so you. You reduced your cogs.

Guest: The.

Host: The food costs, Essentially.

Guest: We did.

Host: And you kind of basically got some new team members in there and tightened up how money was Flowing through. Kind of flowing through from the customer to your cash register. Okay. And that doubled earnings without doing anything to sales.

Guest: Sales did increase. We. So a huge part of this was we, we did raise prices 10%. The prices hadn't been raised for five plus years. And just given the market, we raised them 10 and didn't see anyone complain. We were still less expensive than the so and so competition, the high end restaurants. So yeah, yes, that was huge. And then we did increase sales by, we estimate around 10%. So total, we had a little, a little over 20% increase from the year before.

Host: Okay. Anything more to say about that before we move to your next acquisition?

Guest: I think that's about it.

Host: Great. Okay, so then how does Pizza by the Sea come on your radar?

Guest: So Pizza by the Sea came on the radar. Me and Carter have always been customers of Pizza by the Sea. We love Pizza by the Sea. We saw something very similar to Pizza by the Sea, just like we did at Cowgirl at the beginning. So not a lot of technology. Their point of sale system had no data. You had to call, and each location only had one line. So if someone was on the other line, you couldn't get through to place an order. You couldn't do any online ordering. And around this time, Carter, we found a manager for Cowgirl. So Carter had more time on his hands. So he wasn't operating, he wasn't in the restaurant all day. And what, what me and him have learned is whenever we sit down and really have long form conversations over and over and over again, we can really spin up and try to figure out other opportunities. Which this was around July of last year and we really got on the topic of Pizza by the Sea and estimating what they do in sales, estimating what they're worth. And we actually just found the previous owner's phone number on the second page of Google. And we're sitting in a coffee shop and Carter just called the guy cold, called him, and he was able to. He was available for lunch. So we, over a few lunches, we struck up a deal. And then five months later, through sba, we purchased Pizza by the Sea in December of this past year.

[40:25] Host: Okay, hold on, hold on, hold on, hold on. For a couple of laid back beach guys, by the way, you're. You are hustlers. Hustlers masquerading as beach bums. So again, you are bold with an owner and, and basically say, raise your hand out of nowhere and say, we want to buy you. This reminds me of the Godfather scene where you go in Godfather 2, I think, where he's in Vegas and he just goes around to all his competition and says, I'm gonna buy you. Buy you. Which leads to a war. I'm butchering it. But anyway, maybe somebody will catch the reference. But just, it's so bold to be like, I'm gonna buy your business.

Guest: Well, that's not, that's really not how the call went. The call was just like, hey, we own Calgary Kitchen. We bought it about a year ago. Would love to sit down with you, learn more about Pizza by the Sea and hear about what the future looks like for you. So he somehow knew where we were going with that. Yeah. Without.

Host: It was respectful, though. It wasn't, it wasn't audacious. I'm going to, you know, buy you out. But I will say, though, Jackson, like you guys, you guys, your self confidence, having now being a year into Cowgirl Kitchen, I guess is. It's about a year later, to be clear. Is that what you said?

Guest: It was actually less than that. It's probably eight months, nine months, I guess.

Host: Clearly you felt like you were capable restaurant guys now that you could buy not only another restaurant, but a portfolio of a handful of additional restaurants. So you'd really gotten your, like I said, your self confidence around restaurant operations up in those eight months.

[42:10] Guest: For sure. For sure. We, we definitely felt a lot more confident about the product that we owned.

Host: Yeah. And, and also implied here is that turns out, yes, you like the restaurant business. So despite its bad reputation, you buy Cowgirl Kitchen, you get inside it and you find that it is a strong business. And restaurants can indeed be strong businesses. And you like the category. I mean, you're basically kind of making a thesis here as you go.

Guest: Right, right, exactly.

Host: Okay, well, and why Pizza by the Sea? You said that there were some, some similarities. You were a fan of the restaurant, a patron of the restaurant. But I assume in a tourist area like this, there's a lot of restaurants. So why specifically this one?

Guest: This one, again, you know, we, we really want to buy nostalgic restaurants. And what we saw with Pizza by the Sea is customers coming down for a week vacation and they're at least going to eat at Pizza by the Sea once. And it's, it's. This is a very family friendly area. A lot of people rent large homes and bring two to three families in that house with kids. And Pete's by the Sea is just great to feed a family quickly instead of going out to eat or going to the grocery store and cooking food. You can easily Get Pizza by the Sea. So and when people do it once, they do it again, especially if it was really good. And what we're so blessed with is this restaurant has been doing this for 15 years. So there's a lot of nostalgia, a lot of history with, with the customers. So customers that have been eating here for 10 years and they might not even own a place here, but they've been vacationing here for 10 plus years. So that coupled with each location only having one line, you know, we, we saw some low hanging fruit that could potentially be very, very lucrative.

Host: And is it at this point where you, your thesis becomes this nostalgic thing, this nostalgic restaurants, or was it kind of like you do Pizza by the Sea? We're gonna go through that and then you look back at your portfolio and you say, oh, we have Cowgirl Kitchen, we have Pizza by the Sea. These are kind of neighborhood institutions. Everybody in town knows every, you know, people, the patrons come back again and again sort of thing. There's a, there's an emotional connection between these brands and their customers. Let's do more of that. Like when does that crystallize that thesis?

[45:01] Guest: It was around this time whenever we made the cold call to the previous owner, you know, but we had also seen that at Cowgirl. We had seen the same thing. People come to Cowgirl for years and years and years and loving it. And they love certain, certain dishes, certain salads, the pizza. At Cowgirl, they love the quesadilla, which I didn't understand why people like the quesadilla. It looked like I made it. I mean, look, but people love it. And, and, and, and it's nostalgia and that's, and that's what we saw in Pizza by the Sea as well. So.

Host: Okay. Okay. And on this point, actually about people loving particular dishes, I would guess that not being much of a cook can barely cook anything. That the, one of the weaknesses of a restaurant business is that the quality of cook, line cook, chef. So you know, you know, there's a restaurant will have recipes, no doubt, but still, you know, the execution of those recipes matters and can vary. So is there, is there a weakness in fact in key man or key person risk in losing one of your cooks or not really? Is this, is this food basically, you know, this isn't high cuisine. So is this, is this food basically serviceable enough that any competent replacement cook could come in and do it? Well, sort of thing, yes.

Guest: And that's what, and that's what we loved about it, is there wasn't A ton of key man risk, especially with the pizza restaurant Cowgirl. You know, you do have to have some experienced people in the kitchen, but nothing like these high end restaurants at all. So that was very enticing for us.

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[48:31] Guest: Sure. So around this time we, we started getting on Twitter and we had, we had met Matthias. I actually met him over Twitter and found out about the SBA process.

Host: Matthias Smith, Sponsor Smith, yes. Who introduced us.

Guest: Yes. Great guy. And he. So then we started figuring out, okay, I think we can potentially afford this. I think we can get qualified with the profits that we've made from Cowgirl along with our credit scores. So that got us even more interested in Pete's by the Sea. It took the seller a while to send us all of the financials. His point of sale system was even worse than Cowgirls. It was, you couldn't gather any data. We actually had a quality of earnings on it and it was doing a little over 5 million a year in revenue.

Host: And this is across four locations.

Guest: This is across four locations, across 30A.

Host: Keep going. Was there more?

Guest: So, yes. So then we, we hired Chris Barrett, who Matthias introduced us to, to do the quality of earnings. And Chris is now our accountant. He's great. And around this time we were trying to figure out, okay, should we raise money to bring the down payment, should we have an investor or can we do this on our own? And we ended up doing it on our own. But, but around this time we had, we had made a decent amount of Profits from Cowgirl. Me and Carter are both 26. We didn't want to buy a house, we didn't want to. We, we don't spend a ton personally. So we really wanted to double down and invest into another business. And so we basically just parlayed the profits of Cowgirl into our down payment

Host: for beach by the Sea and Pizza by the sea. On $5 million in revenue. What are those margins in STE look like?

Guest: Around a million.

[51:00] Host: And can you share terms of that deal?

Guest: Yes. So the seller was pretty strict on his price. Our original LOI was based off a multiple just in case anything came back on the quality of earnings that weren't accurate. This, this seller, great guy, he's really good to all of his employees, gives back in the community, family man. And he, he actually did offer us some seller carry and that allowed us to not bring as much capital down to acquire the business. Matthias found us a banker first Internet bank and they were great to work with, but the red tape of the SBA process was a full time job for at least three months.

Host: Really?

Guest: Oh yeah. Yeah.

Host: Wow. I hadn't heard. I've never heard. I know it's, I know it's bad, but not that bad.

Guest: It wasn't, it, it, it wasn't all on the bank or it wasn't all on us. A lot of it had to do with the seller, but. Yeah, and there were some negotiates, negotiations back and forth, but it did take a while.

Host: And can you say what its multiple was or what the purchase price ultimately was?

Guest: Yeah.

Host: On that million dollars in FD. 5. 5. $5 million for a $1 millionSte business. Okay. And so you are going to bring what, 10% to that transact. Can you share what the terms were, how much equity you brought and how much seller note there was and then what the SBA did and the rest?

Guest: Yes, there was an 8% seller carry. We bought. We, we brought around 300,000 to the table of our own capital and the rest was SBA.

Host: 300,000. So that's just over what? That's like 6%.

Guest: Mm.

Host: Okay. And so they counted. His seller is a like a seller standby note. So they counted it kind of the bank counted it as equity sort of thing.

Guest: Kind of.

Host: Okay, and how much did the bank look at your experience and success to date with Cowgirl? Was that a big part of the narrative to the underwriters?

Guest: That was a huge part of it.

Host: Say more. What, what did they push you for that information? Did you guys come out of the gate Selling yourselves on that information. What was that dance like we did?

Guest: We came out of the, out of the gate saying, really what I just told you, like, hey, this is very similar to the restaurant that we currently own. This is how we believe we can grow it. This is what we've done. This is what sales were, this is what sales are now at the restaurant that we currently own. So we really tried to sell ourselves as good operators. And, and I do think that went a long way compared to us just having a pile of cash laying around saying, hey, we can afford it. They still want to see whether we do have experience, whether we can run a restaurant, especially buying four more restaurants.

[54:20] Host: Yeah. So, yeah, and you know, it's your cowgirl experience too is like you didn't have a J curve. You and, you know, in very short order started, you know, juiced the, the Ebitda that was coming out of the business.

Guest: So, yeah, that's also the business.

Host: No decline in profits for you. Thank you very much for the first little bit.

Guest: Right, right. That's also the, the beauty, the beautiful thing about restaurants, which not a lot of people talk about is, you know, you, you, you sell your product and you receive the capital right when you sell it.

Host: Yeah.

Guest: So, you know, there's no accounts receivable in our business, which, which allows us to really move at a fast rate and, and allows us to make changes very quickly. So.

Host: And the other thing I like that you said is like, at least given the location of cowgirls, like, you know, you open for business and then revenue just starts coming in. People are just, I mean, cash all day. People are coming in from the moment the place is open till it's closed again. You pay for that. That's your marketing expense. It's not any cheap to have that kind of real estate, that kind of location.

Guest: Not at all.

Host: And, and then. Okay, so how did it go once you got into a 4 location business? How did, I mean, you're, you're really kind of advancing through the levels of business and restaurant ownership quickly. So, so how did it go From a little 1200 square foot restaurant to now owning four pizza joints spread out?

Guest: It was very different. We, you know, with four restaurants, you know, we can't be there at all, at all times. There were four managers at each restaurant and then two general managers. We let one of the general managers go and we have moved the other general manager more into an executive coordinator role. So she handles all onboarding. She's been working at Pizza by the Sea for the past 12 years. She's the longest standing tenure employee. So there, there was a lot of that, A lot of tenured employees who've been with Pizza by the Sea for a long time, who really care about the product, but maybe didn't have as much coaching from the owner. So that's what we really became, were coaches and really just a soundboard for people to come to us and really try to understand what to do, how to bring down cost, how to manage their labor, how to deal with customers. So that more so became our job. Around the same time, we started renting out an office space to where the managers could come to us and have meetings, which has really helped out a lot.

[57:24] Host: Oh, say more. Why?

Guest: Well, just in the past we didn't have an office space, so we would meet, you know, at a coffee shop or at the restaurant. And at the restaurant, it's just very distracting. Now the managers can come to us. We can really sit down at a quiet place and really just understand what their issues are, what their problems are. And, and it allows me and Carter to be much more efficient.

Host: So. And when you say that your roles at Peace by the Sea with the staff were very kind of coaching, were you, did you have the direct experience that they were asking about? I, I, sometime where I'm. The context here is that I sometimes hear about coaching mentorship and it's like, is the person or often my guests who are looked to as obviously as the leader of the businesses they buy and look to as the experts for certain things, even if they have never done the thing their team is looking to them for judgment. Do you feel like you always had a good answer? Is it because Carter had experience as a kid growing up in restaurants? Or was some of this, some of the coaching that you were doing kind of just your own instincts and maybe being a little bit more business minded than the staff, how did you have. And you're, and you're still young. So even though you are business guys, but budding business guys, you don't have years and decades of experience as business people or in careers. So I'm just curious the nature of this, of this coaching. Did you feel like you. What, what was the nature of it? And did you feel like you were kind of faking it until you made it, or did you feel like you were a good coach to your staff?

Guest: I am not saying that we had all the right answers at all. We definitely didn't. We made a ton of mistakes throughout the process because we were learning how to coach as we were coaching. Yeah, But I do think there was a, a huge part of it was a lot of tenured managers and they, you know, me and Carter came in with completely sober eyes to the issues at hand. So just from more of a common sense standpoint, we were able to coach and make a few changes that to us were just very necessary. And around the same time, it was very clear to me and Carter that we are, in order to grow the business, we are best. Our, our best position is when we are sitting together and trying to create opportunity, just like we did at Pizza by the Sea. That is where we're able to grow as a business, grow as an organization, and truly continue to increase the EBITDA that we're trying to do. So around the same time, we were like, okay, we can afford to hire a director of operations who has a ton of experience. So we became, we began hunting and we actually hired a, a headhunter and he found us a rockstar guy with experience who is now our director of operations over all five restaurants, over Cowgirl and all the Pizza by the Seas. And we're obviously still very involved, but more so now implementing culture, implementing some guidance and some financial guidance as well. But from the get go, we knew that we are not going to have the experience of someone that has 20, 30 years of experience, which is the individual that we, that we ended up hiring, which has been huge for us.

[1:01:11] Host: Well, that starts to feel like, I have to say, Jackson starts to feel like you bought a business and put in operators. And not that, I mean that's, that's, that's the magical thing. But, and maybe with, maybe with restaurants, that's actually counterintuitively more viable as a, as a formula because there are a lot of managers out there with restaurant experience because there are so many just restaurants in the world and people who have managed them. So if you're, you can find, you can find that talent and maybe if you're willing to, you know, pay a little extra, you can find great talent. But it's just, I'm just kind of, I'm just kind of struck that you buy what are notoriously difficult businesses, I. E. Restaurants, and you kind of, you put in managers in operation, operational and manage managerial talent. And, and it just, it works. It, it seems like it, it has a. You're kind of not spending, you're not pulling your hair out. You're not there at the businesses. You can't be because you now have five locations. So it's, it's starting to feel easy, which of course it can't be so respond to that.

Guest: Sure. It's definitely not easy. And you know, I think we wouldn't even have looked at these restaurants or looked at these opportunities if we didn't think there was margin to hire a rock star. So we weren't, we weren't interested in buying these businesses to create jobs for us. We, I, I personally love deal making. I love the process of it. I love sitting down with a seller who's owned a business for 20 plus years and having them believe in us that we're gonna carry on their legacy and buy from them. That's really special to me.

[1:03:09] Host: Yeah.

Guest: And special to Carter as well. And we both feel the exact same way on that. So our goal was never to be full time restaurant owners within the restaurant making, food managing. So I don't think we, we would have even taken a look at these businesses or made offers if we didn't see the margin to truly hire a few great rock stars, which we have. And we, we have a great team now. They have a ton of experience, much more than we do. So it's been truly a blessing.

Host: Well, the thing, the good thing about buying a restaurant with multiple locations or any business with multiple locations, some sort of scale is that it has demonstrated that it can be scaled somewhat. It's already demonstrated that its business model can be scaled somewhat and survive. You know, you didn't have that confidence necessarily with Cowgirl Kitchen. Maybe you're not looking to do more cowgirl kitchen locations, but this one, it's like, well, if you can do, if it has four locations, then you know, each individual location shouldn't be super, super fragile because it's already gotten to four and continued on. Speaking of that was part of your thesis also a Pizza by the sea that you would. Or part of the plan that you would keep growing locations or. Not necessarily.

Guest: No, not necessarily. We really, we, we do feel like there is a, a few locations here on 30A that could, that could be a potential for a pizza by the sea.

Host: Mm.

Guest: But really as of right now, we're, we're focused on offering delivery. So we truly believe that that could increase sales. We have implemented online ordering which is dramatically increased sales. We have, we purchased new pizza ovens which are now stone conveyor pizza ovens. So you know, there's a lot of people that love stone stone ovens to where instead of just the typical Papa John's or Pizza Hut conveyor, but there's just been this new pizza oven built out in Italy where it's a stone conveyor so we're able to really produce much more pizzas, around 150 pizzas per hour for these pizza ovens, which really has increased sales a lot. So instead of opening up a new location, we, we, we, we truly invested in new technology in new pizza ovens.

[1:06:09] Host: And so where do sales stand today in aggregate for Pizza by the Sea? The four locations across the four locations.

Guest: So it looks like we will do a little over what they did last year, a little over 5 million. But EBITDA will increase around 200 to 300,000 from last year.

Host: And so your sales will have grown a little bit. But given your introduction of delivery and your capex investment in these ovens, that can do higher volume, are you expecting to get much beyond 5 million or a little over 5 million?

Guest: Hopefully, so. Hopefully. So we'll see. Yeah.

Host: Okay. Well, you're a little over 5 million there. And cowgirl Kitchen is. We didn't get the final number. What, two million?

Guest: Well, I, I can disclose the total acquisition EBITDA and then where we currently are. So we. So with Cowgirl and with Pizza by the Sea, at acquisition for both of those restaurants, total was 1.5 million. Today, we're a little over 2.2 million in EBITDA. So. And that's been over the past less than 20 months. So we do feel like there's a little bit more room to grow there. But again, me and Carter's most important roles are opportunity and growth. So we do feel like we can grow with some new acquisitions as well.

Host: Well, Jackson, this, this is. I'm sighing as if it's a bad thing, but this just seems like a fantastic, fantastic story, amazing outcome. The only reason I'm sighing is because, you know, I'm always, I'm always so careful about not overselling the dream, but it seems like you're living it at the beach Portfolio. Five restaurants, super young guys. No J Curve. Both. Both businesses. Cowgirl and these four Pizza by the Sea locations immediately saw EBITDA growth under your management. It's only been 20 months. Couple of partners who are friends doing 2.2 million in EBITDA. I mean, what's not to love?

Guest: We. We wake up.

Host: Am I missing something? Am I, Am I missing something? Seriously, Jackson, is there some negative that my audience is going to say, hey, why didn't you ask him about this?

Guest: Well, I think, you know, I mean, yes, it's, it's a great story and we feel so blessed to be in the position that we are. Feel very undeserved at times. Of the position that we're in. But also we do understand that we are highly levered. So this is, this, this has had, you know, we, we're able to get here because of debt and we're very aware of that. So we have a lot of goals in place in the future to pay down debt, especially this high interest SBA loan. So fully aware of that. But yes, you're right, it's. We are so blessed and really excited to wake up every day and do what we do. It truly doesn't feel like work. I feel like we, we work all the time, but it truly doesn't feel like it because it's just so much fun.

[1:09:42] Host: Well, that is the, the true dream. The, the, the meta dream that regardless of if you like the beach or the city or this type of business or that type of business, we, those are all minor tastes compared to the big picture goal that anybody would love to achieve. That work feels like play. And interesting about the debt point. Although of course that such a feature of all of these stories and deals. But you're now really in this capital allocation position where you've got a lot more cash coming out of these businesses than when you finance them. So the question is do you know, do you plow that forward into the equity of your next acquisition or do you start paying down some of that debt? How do you think about that?

Guest: We really think about it from a standpoint of how can we invest cash to produce, to produce the highest rate of return. So for example, with the pizza ovens we're we should do around 200% based off the investment in those speed sevens which will then allow us to be in a better position to pay down debt in a few years from now. But our goal right now is only Capex really trying to grow these businesses the best they can with the highest rate of return on the Capex to then in turn pay down that debt.

Host: You said we're and we're going to start wrapping up here Jackson. So I want to kind of zoom out and overall just ask about restaurants. Your story. You said one of the beautiful things about restaurants is the cash conversion cycle is nearly instant. You know, it's, it's the length of time it takes somebody to eat a meal, then they pay for it as they walk out the door. The. Any other beautiful things about restaurants? Beautiful features of restaurants as businesses that maybe we overlook when we, when we recoil in horror from owning one.

Guest: I honestly think there's not a lot of people that want to buy restaurants. So competition really Isn't there? I think that's a huge aspect compared to an H VAC business. I mean, I have great point. I have a lot of friends in investment banking and private equity and they're all interested in moving to the beach and buying an H VAC business. And you know, that's just not a reality. It's. It's really very difficult to do that because H Vac is obviously very saturated right now. But they're so great businesses. They're amazing businesses. But you very rarely hear of the P. IB Guy saying, all right, I'm gonna move to the beach and buy a restaurant. That's right. So I do think that has been an advantage to us because we're not the smartest guys on the street, but we're able to be in this niche that really produces a lot of cash. You can acquire great multiples and you can really increase the EBITDA at a fairly quick rate for what we've seen. And obviously timing has been great. We're in a great location. 30A is growing. The area is growing a lot. So there's that aspect as well. It's not. It's not just the businesses.

[1:13:06] Host: Very important point that comes up from time to time. I've had more than two, I think North Carolina or Charlotte based guests talk about how just being in Charlotte has been a key feature of their success and growth. Charlotte being a growth market, of course. And so while you're in. You're not in some metropolitan area, you're in kind of a tourist small micro market. It is one that is growing. So growth. You really feel that?

Guest: We do. And there's less. Obviously the summers are our busiest time. But a lot of people are moving here full time. Similar to us. People are moving from Atlanta, Nashville, Birmingham, even Charlotte and moving to the beach. They love this area. They love what the beach life has to offer. Great restaurants, great community, small town. So we're. We're definitely seeing less of the low season and it's in. And it's more even across the year than it has been in the past.

Host: And thank you for that. I had meant to ask about that and forgot seasonality of these businesses being in a tourist town. Anything more to say about it than. Than what you just said that yes, revenue is concentrated in certain months and thinner in other months. But manage cash flow and it's okay sort of thing.

Guest: So we're actually. So occupancy is actually down this summer from last year. And this area is becoming more of a. More of a third home. Area. It's not just a second home where people have a beach house. It's. It's a third home where people have. They might have a mountain house and a beach house. So it's becoming even more just. Just because of how expensive everything is. Some of these owners aren't even renting their house out at the beach that they just own it. And if they want to come, they come. They don't want anyone else staying there because they don't need the capital. So that has, that has hurt the summer a little bit. But also in the fall, fall break has become very popular. These families that own these beach homes, they come for Thanksgiving, they come for Christmas, they come for other holidays, they come for wine festivals in February. So it's again, summer has dropped off a little bit, but our low, low season has actually increased a little bit

[1:15:37] Host: as well to compensate.

Guest: Very nice. Which we're great with that. You know, I would, I would actually rather have it that way.

Host: Yeah, yeah, exactly. Smooth out the revenue some. You said that these businesses are. You can really do a lot to improve Eida as you have demonstrated. Give a. And you've already touched on it or said them in passing, but give us kind of a top three top five list that for the searcher looking at a restaurant where classic low hanging fruit lives. You've mentioned POS for a while a few times. I assume that's one of them. What would be on this list?

Guest: Yes, definitely. Point of sale system. And then, and then. So for Pizza by the Sea we did not increase prices but for cowgirl, um, for. For anyone listening looking to acquire a restaurant, look at the competition and what those prices are and just match the competition. So that was huge for us. Point of sale system, raise prices and really, really focus in on purchase logs and your cost of goods. So we have just recently implemented that. Our director of operations has implemented it. And so each manager really understands what the purchases are, what they're for and that can really crank down your cost of goods.

Host: And so sorry, what was happening there, Jackson? There was just kind of like stuff being ordered like and not nobody was minding that it was on kind of auto ordering. So all this stuff was being ordered automatically that the business didn't need or over ordered sort of thing.

Guest: Right. There was really no data. So you know, the manager would say, oh, I think we're going to be busy next week. Let's just order this many dough balls for pizza without any data backing it. So.

Host: Okay.

Guest: Really, really. I mean as much data as you can gather and analyze. It's, it's very helpful.

Host: The other thing I would say about restaurants is if you buy a restaurant like the nostalgic restaurant like you guys are going after is the, the role that brand plays. And as we know, Warren Buffett is a huge believer and advocate of strong brands. So, you know, brands are great when they're strong only, but if they are strong, there is this, there's a lot of value locked up in that and a lot of kind of customer loyalty, etc, and that seems like a big feature of the businesses that you've bought and likely will buy in the future. Indeed, your whole thesis, that's, that's really. When you talk about nostalgia, that kind of implies brands that people have an affinity for.

[1:18:31] Guest: It is, it is. You know, I was listening to your podcast with Garrison Snell and he talked about Warren Buffett. You know, the greatest brand in the world is probably Harvard.

Host: Yeah.

Guest: And you know, that's so interesting. But really for us, the great thing about having, having a great brand is it gives you the margin to learn and the margin to make mistakes. So if we were to just start a new restaurant with a whole new concept with, you know, let's call it Jackson and Carter's Restaurant, we, it better be good and the food better be rock solid. I mean, it better be great because for our market, we only get a week for our customer. Mostly we, our customer is coming down on vacation and they're only here for a week. So we have to capture them very quickly in order to stay in business. And we've seen that with the new restaurants here is, it's very difficult to capture a night of the week from someone else who's been here for 15 plus years. So that's great about the customers that we have and it really, truly does allow us maybe, maybe their quesadilla wasn't great or maybe they didn't have the best experience with that server. But they've been coming here for 10 years. So you know what? We'll give them a second chance next year.

Host: Yes.

Guest: Compared to, hey, we tried out this new place. Server was rude to us. We're not coming back because there's no memories there. There might be memories of conversations that were had at our restaurant 10 years ago. Stories of kids when they grew up. They, they would eat ice cream or they would eat our cookies at Pizza by the Sea. And the parents love that. Maybe, maybe this, maybe the cashier isn't very friendly. But hey, there's a ton of memories there. So that, so that's the customer that we were able to inherit. And if we can, if we can just cut down on those bad experiences, we're going to be in a great spot.

Host: That was so powerful. That is so. That is such a compelling argument for your thesis. I love that. And specifically, of course, around entrepreneurship through acquisition as applied to restaurants. So we talk. Of course. This whole podcast is about the value of buying a business versus starting one. And here you've just articulated such a strong reason why the ETA model, when applied to restaurants, it can be such a big, big advantage in over, you know, in the landscape of restaurants, the highly competitive landscape of restaurants. I'll even give you, I mean, you. As I listened to you talk, I was like, wow, he just told my story. I grew up going to a place. We would go to the Charlottesville area a lot in Charlottesville, Virginia, little town outside Charlottesville called Crozet, which has now kind of become a suburb of Charlottesville. But at the time it was a little standalone country town place called Crozet Pizza. Probably anybody who to Darden or UVA knows it, but I, I've been going there since the 80s and anytime we're down that way these days, I still insist on going, even though the place has changed and expanded. It's more of a bar now that you know. But my, my childhood nostalgia keeps me going back. And again, even in the face of the experience, today is, is nothing like what it was as a kid, frankly. The quality's gone down. It's less cozy, less cool, less funky. But I still insist Crozet Pizza, we're

[1:22:23] Guest: going and that's it. And that's how people feel. That's awesome. That's great. And I'm sure a lot of people can relate. I mean, I'm obviously you like you haven't had great experiences there recently, but there's so many memories built in that you're. Yeah, you're a lifetime customer and.

Host: Exactly.

Guest: You know, they probably acquired you for a very low amount back in the day and, you know, someone new can acquire you as a lifetime customer for a great multiple. And that's what people I feel like, don't understand with restaurants is, you know, you can buy these lifetime customers and the value of them is much higher than even the multiple that you're paying for.

Host: So. Yeah, yeah, yeah. Well, and, and, and another just kind of to reinforce this point, the guests of mine that have bought restaurants or the the big standout episodes was a recent episode with Jared Jared Burke in Hanover, New Hampshire, home of Dartmouth and He bought Lose which is a diner that anybody who spent time at Dartmouth has passed through Hanover knows is likely eaten at. So again a neighborhood institution. You know these neighborhood institutions, these brands. Which is again kind of another way of saying brand. Andrew Sieve bought a, bought a restaurant in Colorado. Same thing restaurant everybody in the neighborhood knew and loved. So, so that really seems to be where what the formula is. I'm sure there are exceptions of course. I've also had guests who bought restaurants that are in franchise systems but that's a whole different kind of type of business because it, because it's about franchising at that point. But so, and, and so it sounds like you're such a believer in this that your go forward plan you and Carter is to buy brand nostalgic restaurants. That is the type of business you're going to go after and build your whole holds co and portfolio around for sure. Or am I over or am I overstating it? Are you looking at other businesses?

[1:24:35] Guest: No, that's it.

Host: That's it. That's it.

Guest: Restaurants that have long customers who have been going there for a long time and the value of those customers are, are high.

Host: Yeah yeah. And just I don't want to belabor, belabor this but this is so such a again a thing that scares people off about restaurants and I kind of started at the top pointing this one out. I want to close with it operating them. Your what is your encounter's time on site at these businesses today? And so answer that and then kind of again just give me a little bit more on how people can think about finding operational talent to run these businesses for you.

Guest: So on site we're not even once a week so we're, unless we're eating there or, or, or something really bad has happened. So yeah, probably less than once a week.

Host: And, and you feel like that's a model that if I wanted to buy neighborhood institution here in Arlington, Virginia I could replicate this model of you know, I probably want to first time doing it. Probably want to get in there and get some operational experience, frontline experience. But eventually there's talent out there who can run these restaurants for you.

Guest: There is and, but it, but, but also comes at a price. You know we overpay. Not we don't overpay, we, we overpay compared to our competition in managers for sure. But again we, we would not have even been interested in the businesses if we didn't think that there was margin to hire these people.

Host: Jackson, I'm going to let you go here but didn't you go to Harvard Business School, HBS's ETA conference?

Guest: I did.

Host: And, and what was your experience there?

Guest: It was, it was great. I, I had a great time. I went with a buddy of mine and that, that's where I met Matthias in person and Chris Barrett, our QV guy, now our accountant. But it was interesting. I met a lot of the Harvard students, met a lot of XPE guys and whenever I would explain to them, you know, what I do, there was really no interest in restaurants and nothing wrong with that. I didn't get offended by it at all. But it was just very interesting that, you know, people wanted to buy the, you know, the, the now sexy plumbing company, which, those are great businesses, obviously that's why they're interested in them. But I wouldn't, I would really just recommend to people that, hey, just take a look at restaurants and especially the nostalgic restaurant in the city that you live in. You would probably be surprised at what they do per year.

[1:27:36] Host: Great. I just, I just so love that coming from kind of tech land as I do. I'm going to make an analogy here, which might be a bit of a stretch, but you know, you just hear often, you know, there's some herd mentality with VCs and what they want to invest in. Of course now AI would be AI, but it's been before, it's been crypto and mobile and etc. Go on back through the, the years of tech trends and there's very much a herd mentality there. As smart as all these VCs are, at least on paper, there's a lot of herd mentality that goes on with those investing decisions and the entrepreneurs and the ones who are often later heralded are the ones that are tinkering over in this neglected area. Maybe the thing is too new. So there's some of that, you know, they're, they're just so ahead of the game. But, but often it's, you know, the people who do really well in maybe all investing are those who are looking in unsexy, undiscovered, neglected, overlooked, unloved areas and the supposedly smart money is really just competing with itself over, over here where the action is. So I don't know, I, I just, I feel like it just your story of being at HBS and all these people wanting the same type of business, the H Vac thing and the H Vac business, and there you guys are making a killing in, in restaurants at a beach town. It just feels like there's a, there's A. There's a. There's a model there that I've seen before. That, that, that dynamic. So kudos to you guys for. For being on the right side of that. The right side of that. That story.

Guest: Well, well, thank you. I mean, so far so good, you know. Right. Could change, and we're very well aware of that, but so far so good. Yeah.

Host: Right, Right. Final point. To make or to remake? Just how you guys just ask. You know, you. You approached Cowgirl Kitchen, the Cowgirl Kitchen owner. You approached the Pizza by the Sea owner. And doesn't hurt to ask. Seems like a philosophy, a credo that you all really live by and you have been rewarded for doing so.

Guest: Doesn't hurt to ask at all, especially ask for seller financing.

Host: Okay. Okay. Jackson, if people have questions, audience remember, if you're going to ask for Jackson or Carter's time, do so very respectfully. Having done all your homework, Jackson, how can people reach out?

[1:30:10] Guest: Sure, me and Carter are both on Twitter. Not as active as we set out to be, but we're both on Twitter. Just Jackson Speaks and Carter Andrews. And we also have a website where you can find our email if you want to get in touch with us. It's Cowboy Group co. And that's it.

Host: So Cowboy. You're going with the Cowboy brand, huh? For your Holdco.

Guest: Going with the Cowboy brand. That's right. So feel free to reach out to us with any questions and we'd be happy to get back with you. So.

Host: All right.

Guest: Yeah. All right.

Host: Jackson speaks. Great interview. Fascinating and inspiring story. So thanks for coming on. Thanks for sharing it.

Guest: Thank you. I appreciate it. Party.