Buying a $200m Franchisor (Not Units, the Whole System)

But just to put some numbers around, the unit economics again. So you said 200 stores, about 200 million in aggregate system value. So call it a million bucks-ish.

Let's just call it a million dollars for easy math per store. So that's $3,000 a day, assuming seven days a week. $3,000. And so how much is the average item in the store?

$20?

Average item at Uptown is $12 or $13. Average item in Kit to Kit is about $6. So that's another, I'd say, very important...

reality of this business which is that um the residual value we're talking about um it's not unlimited uh just because to use tyler's example of trying to sell uh individual items one by one on the internet um you can't make any money selling six dollar items on the internet and actually from the customer's perspective even at uptown with the you know average uh price per item of 12 or 13 bucks…

The whole point of the exercise, which is to get a really great price on the item, would already be defeated just by virtue of that shipping cost.

And what you're addressing here is why you got comfortable that the internet wasn't going to undermine this business model or eventually kill the business model.

Correct, in terms of the financial performance of the stores. But then also it gets to what you were asking earlier. Hey, if I'm a vendor and I'm walking out with $40 and I just brought in multiple bins worth of stuff, how should I feel about that?

My point is that you should feel actually pretty good because there's so much friction in this business or in just turning what is at the point in time you're going to sell it stuff that no longer has value to you. There's so much friction that. really nobody else in our view is able to wrangle quite in the way that we do.

Yeah. Yeah. I would say what's interesting is who do we view as our biggest competitor for these items of clothing? It's not some other brick and mortar concept. It's not some platform on the internet.

It's either the dark and dusty corner of somebody's closet or the landfill. Yeah.