But if I'm a really engaged owner who's really following the systems, who's making the right investments in team and otherwise, You know, should I reasonably expect to be in the first or second quartile, which Tyler and I actually, before we got involved at the franchisor level, we're considering becoming franchisees for fully a year of these two concepts. And so for us, if you.
Acquiring Minds
Buying a $200m Franchisor (Not Units, the Whole System)
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you can't see a path to becoming a first or second quartile franchisee, then maybe the return on brain damage is something you want to spend a little bit more time digging into. But if you look in particular at our first and second quartile performance at Kid2Kid and then especially at Uptown, that's where these yields start to, you know, forget about the 20% yield, start to get materially higher…
And these yields, by the way, are EBITDA yields, not SDE yields. So these would be after paying yourself a proper market salary as an operator?
No, so they're equivalent to SDE. One thing I would note, though, is for multi-unit, it does include any above-store corporate infrastructure. And so, hey, if you own five stores, you're not the person who's the manager of every single one of those five stores.
Typically speaking, you'll have a good manager in each one of those locations, and you'll have a district manager sitting on top of it. And so the SDE or EBITDA numbers are fully burdened by that corporate level of infrastructure minus owner's income.
You just said, Zach, that you guys were considering being franchisees. So let's let's get into the part of the story where you think you want to be franchisees. And then here you are owners of the franchise or the entire franchise or system.
Yes, I would say fully for six plus months, the path we were charging down was just to be franchisees exclusively. And so we talked to Basecamp, which is the parent company of our two brands, Kid2Kid and Uptown Cheapskate. We also have a competitor, a public company called Winmark, which has two analogous brands, Plato's Closet and Once Upon a Child.
So we actually spoke to their franchise development team. team as well. And what we wanted to do was identify within the systems that we were evaluating, hey, are there markets where we could get to five, 10 plus stores? Because look, there's two of us.
At a minimum, it wouldn't have made sense for us to have one store, two stores. We wanted to build really an enterprise. As you would see in QSR, there are actually not that many onesie, twosie franchisees in QSR.
these skilled QSR brands anymore. We wanted to get, you know, to something I would say more relevant in terms of unit count. And it turns out that for our two brands, and this is still true today, there are a lot of markets with a lot of white space where you could get to five to 10 stores actually reasonably easily and quickly just within one individual DMA.
um so we were looking at a couple in particular i would highlight houston uh denver was one that we uh that we considered uh we're from new york and we spent a lot of time a lot of time out on long island long island is one that we looked at as well um so we were actually yeah looking at territories you know how would we build this out uh what roles would each of us play and how would we think…
Yeah, I would just say it ended up being, it's interesting, if you fundamentally view that there's complete alignment between the franchisor and franchisee over a long-term time horizon, which we completely do, the analysis around becoming a franchisee is actually more or less identical to the analysis that you would do, or there's a large amount of overlap. Yeah. when you're looking at the…
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