Latest / Choppin’ It Up by Bloomberg Intelligence / Authentic Restaurant Brands’ CEO on M&A Strategy

Transcript

Authentic Restaurant Brands’ CEO on M&A Strategy · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up.
0:14
Speaker 2: I'm your host, Mike Halon, the senior Restaurant and Food
0:17
Speaker 2: Service analyst at Bloomberg Intelligence. Our Research and that a
0:21
Speaker 2: bi's five hundred analysts around the globe can be found
0:23
Speaker 2: exclusively on the Bloomberg terminal.
0:26
Speaker 1: If you enjoy the pod, I'd love it if you
0:27
Speaker 1: could leave us a review on Apple or Spotify.
0:30
Speaker 2: Today we're joined by Alex Mercedo, co founder and CEO
0:34
Speaker 2: of Authentic Restaurant Brands.
0:36
Speaker 1: Thanks for joining us, Alex.
0:38
Speaker 3: My pleasure. Michael, good to be here with you.
0:41
Speaker 2: Please tell me a little bit about your career journey
0:43
Speaker 2: and then how Authentic Restaurant Brands or ARB came to be.
0:49
Speaker 3: Well. I've been involved with food and beverage since I
0:52
Speaker 3: started my career at ABNBEV. For the last fifteen years
0:57
Speaker 3: or so, i've been working mostly with restaurants, and twenty
1:00
Speaker 3: eleven I joined burg King, where I was president for
1:04
Speaker 3: about seven years of North America. After that, I became
1:08
Speaker 3: the global president of Tim Morton's for a couple of years,
1:11
Speaker 3: and then for the last four years, I've been a
1:14
Speaker 3: partner at Garnett Station Partners, with private equity group based
1:18
Speaker 3: out of New York where I work in several of
1:22
Speaker 3: our investments. In one of these investments is Authentic Restaurant Brands,
1:26
Speaker 3: which I co founded with Alex and Matt and the
1:29
Speaker 3: Garnet Station Group about four years ago. And it's become
1:34
Speaker 3: so exciting, so big, and really so successful quickly that
1:40
Speaker 3: about a month ago I stepped into the role of
1:42
Speaker 3: CEO of Authentic Restaurant Brands. So I've been working with
1:45
Speaker 3: restaurants now for the most part of my career.
1:49
Speaker 2: And you have a unique kind of niche here with ARB.
1:54
Speaker 2: Can you talk about how you're looking for brands but
1:57
Speaker 2: it's not necessarily the next big thing, you know, it's
2:01
Speaker 2: it's it's brands that you know, maybe aren't going to
2:04
Speaker 2: be national brands at some point.
2:06
Speaker 3: That that's that's exactly it. So in our thought process
2:10
Speaker 3: when we put together ARB was that there is some
2:14
Speaker 3: magical brands that have very deep ties with their communities,
2:20
Speaker 3: but their regional and scope right and because of regional
2:22
Speaker 3: in scope, sometimes they get overlooked by the big groups
2:25
Speaker 3: or by you know, someone from California will never know
2:28
Speaker 3: what the good brand is to get pizza in Ohio
2:31
Speaker 3: and the good sports bar in Philadelphia and so on,
2:34
Speaker 3: and we thought that we'd build a holding company to
2:37
Speaker 3: acquire regional brands that are extremely extremely well run, uh
2:42
Speaker 3: and then have our team of experts and veterans work
2:45
Speaker 3: with these brands, you know, to bring the latest in
2:47
Speaker 3: data science technology, you know, financial practices and so on.
2:51
Speaker 3: Because we thought, listen, these brands, even if they're very
2:55
Speaker 3: well run, because they're limited in size and regional, perhaps
2:58
Speaker 3: they don't have the latest and greatest when it comes
3:00
Speaker 3: to the latest systems to run restaurants. And sure enough,
3:04
Speaker 3: that's what we found. And we've been very successful in
3:07
Speaker 3: partnering with these brands, keeping the management teams which are great,
3:10
Speaker 3: and just deploying more resources when it comes to you
3:14
Speaker 3: than the latest technology to find new sites, or the
3:17
Speaker 3: technology to analyze your menu architecture and find the gaps
3:20
Speaker 3: in the menu architecture, perhaps to organize your data your
3:24
Speaker 3: data management system a little bit better so that you
3:26
Speaker 3: can find some insights on everyday sales. And that's what
3:29
Speaker 3: we've done now for three and a half years, and
3:32
Speaker 3: we're up to five brands. We just acquired Tabin the Square,
3:35
Speaker 3: which is a very successful Polish casual brand from you know,
3:39
Speaker 3: the New England area that gets US a billion in
3:43
Speaker 3: sales and around one hundred and fifty million dollars in
3:45
Speaker 3: EP of that. So it's a fairly relevant business made
3:48
Speaker 3: up of relatively small regional brands.
3:52
Speaker 2: Yeah, the first time we spoke at the ICR conference
3:54
Speaker 2: back in January, I thought this was refreshing. You know,
3:57
Speaker 2: I kind of got tired of hearing everybody trying to
4:00
Speaker 2: track down the next.
4:01
Speaker 1: To pole, which is not an easy thing to do, clearly.
4:06
Speaker 3: And you know what, I think a lot of this
4:08
Speaker 3: thought comes perhaps from my experience managing very large and
4:12
Speaker 3: complex restaurant systems, mostly of which we're building the eighties
4:16
Speaker 3: and nineties. So if you look at the big national
4:18
Speaker 3: brands in the United States, you know, the vast majority
4:21
Speaker 3: of them we're building the eighties and nineties, and then
4:23
Speaker 3: a few in the two thousands and so on. It's
4:25
Speaker 3: become increasingly difficult to scale up and build national brands
4:31
Speaker 3: in a cost effective way. Media costs are extremely expensive,
4:35
Speaker 3: it's difficult to find sites like it was easier back
4:38
Speaker 3: in the day. So our thought is, you know, let's
4:40
Speaker 3: take these brands that are national, make them better where
4:43
Speaker 3: they operate. Certainly, start building more but you know, we're
4:46
Speaker 3: not going to take a brand that's in Pennsylvania and
4:48
Speaker 3: take it all the way to Arizona. What we'll do
4:51
Speaker 3: is we'll find what the authentic restaurant brand is of
4:54
Speaker 3: Arizona and we'll try to acquire that brand and we
4:56
Speaker 3: just you know, build it media. So we want to
4:59
Speaker 3: be national, but we're going to get there by being
5:01
Speaker 3: regional all over the country. That's kind of our mandrend
5:04
Speaker 3: where we think about going.
5:07
Speaker 1: That's cool.
5:07
Speaker 2: Well, expanding it in concentric circles is back.
5:10
Speaker 3: I guess, well, it's about twenty minutes and not twenty
5:13
Speaker 3: hours a way. That's what we always tell our teams.
5:15
Speaker 3: If you can drive twenty minutes, that's okay to get
5:17
Speaker 3: the next site. Now if you have to drive twenty
5:20
Speaker 3: hours or take a two hour flight there, that might
5:22
Speaker 3: be a little bit.
5:25
Speaker 1: You know.
5:25
Speaker 3: We have a great example. We acquired this company called
5:27
Speaker 3: Poetropic Call. I don't know how familiar you are, but
5:29
Speaker 3: Poetropic Call is like the original you know brand in Florida.
5:35
Speaker 3: We sell grilled chicken. It's it's a mix of fast
5:39
Speaker 3: casual and drive through. And I'm in QSR because there's
5:43
Speaker 3: a big drive through component, but it's an elevated quality
5:45
Speaker 3: of food served quickly, fresh and hot. And you know,
5:48
Speaker 3: we have around one hundred and twenty locations in Florida
5:51
Speaker 3: right and this brand has tried to expand naturally in
5:54
Speaker 3: the past without much success. And then we get asked
5:57
Speaker 3: all the time. So we bought Poetrypic, are you going
5:59
Speaker 3: to try to take it to Texas or California and
6:01
Speaker 3: Arizona again? And said, no, we're not. And people get
6:04
Speaker 3: really surprisable. So I wonder why did you acquire it? Well,
6:07
Speaker 3: first of all, because we've thought a lot of saw
6:09
Speaker 3: a lot of opportunity to make it even better where
6:11
Speaker 3: it is. But second, if you think about it, in
6:13
Speaker 3: the state of Florida alone, we have one hundred and
6:15
Speaker 3: twenty Poetry Pic calls which have more than average, more
6:17
Speaker 3: than three and a half million dollars a box. There's
6:21
Speaker 3: nine hundred and fifty McDonald's, there's over five hundred Burgons,
6:24
Speaker 3: and over five hundred Wendy's. We could probably double the
6:27
Speaker 3: size of Poetry Pical in the state of Florida without
6:30
Speaker 3: taking you know, many risks at a very high volume.
6:32
Speaker 3: So so that's kind of the mindset that we have
6:35
Speaker 3: you know, to be nimble. We have been able to
6:39
Speaker 3: stay under the radar until this last acquisition, but now
6:41
Speaker 3: we've become sizable enough that we're starting to tell our
6:44
Speaker 3: story and it's been it's been a lot of fun.
6:47
Speaker 1: Can you talk about just name the other brands that
6:50
Speaker 1: are in your.
6:50
Speaker 3: Portfolio, so we have we have five brands. The first
6:54
Speaker 3: brand that we acquired was Primanti Brothers from the western
6:58
Speaker 3: Pennsylvania region, mostly focused on Pittsburgh. Primanti Brothers has been
7:03
Speaker 3: around for more than ninety years. Is a very iconic
7:05
Speaker 3: sandwich and it's a true namestake where it is right
7:09
Speaker 3: so that's where people go to hang out and watch sports,
7:13
Speaker 3: and you know, it's really a staple of that part
7:16
Speaker 3: of the country. We have Mambo Seafood, which is, you know,
7:20
Speaker 3: a Mexican theme family restaurant based out of Houston that
7:23
Speaker 3: we recently expanded into San Antonio. We have PJ. Wellhelm's,
7:27
Speaker 3: which is a sports bar casual dining concept for families
7:31
Speaker 3: that's based out of Philadelphia and the region. We have
7:35
Speaker 3: Portrait Pical one hundred and twenty locations in Florida, primarily
7:38
Speaker 3: grilled chicken, rice and beans. And then we recently acquired
7:41
Speaker 3: a tavern and is where which is in New England
7:45
Speaker 3: right now? What all these brands have in common? We look,
7:47
Speaker 3: we have a very very very difficult criteria for a
7:51
Speaker 3: restaurant to become an AARB restaurant. So first of all,
7:55
Speaker 3: high volumes relative to the pure set. Second, high margins
8:00
Speaker 3: relative to the pure set. Third, we look for brands
8:04
Speaker 3: that have been around for more than twenty years. And
8:07
Speaker 3: this for us is key because we don't want the
8:08
Speaker 3: latest fad. We want, you know, brands that have survived
8:11
Speaker 3: the test of time and the different cycles. But most
8:14
Speaker 3: of all, most important for us, we look for brands
8:18
Speaker 3: that have fans, not guests. So we have a proprietary
8:23
Speaker 3: way of measuring brand loyalty that we roll out in
8:27
Speaker 3: each one of these brands that we're measuring, But we
8:29
Speaker 3: also do by Google reviews and so on, and we
8:32
Speaker 3: take brands that people truly love and that are truly
8:35
Speaker 3: part of their routine. We have evidence of at least
8:38
Speaker 3: three of our five brands people having tattoos that are
8:43
Speaker 3: about the brands swihear in their body, So it's kind
8:46
Speaker 3: of unique. You don't get that a lot for most
8:49
Speaker 3: restaurant concepts in the world.
8:52
Speaker 1: Yeah, that's very cool.
8:54
Speaker 2: I've never been to a Primanti Brothers, but I've heard
8:56
Speaker 2: that they especially have a very strong cult following there.
9:00
Speaker 3: They do. It's it's wild, and it's tied, you know,
9:04
Speaker 3: to the Steelers and to the Pirates, and there's a
9:06
Speaker 3: whole there's a whole thing. It's you step in. You know.
9:10
Speaker 3: Our guests in that area, they have their permit, is right,
9:14
Speaker 3: because you know, we have more than forty locations, but
9:16
Speaker 3: it's like their permane is as an extension of their
9:19
Speaker 3: living effectively. So it's a really really cool relationship that
9:24
Speaker 3: a lot of our guests have with our brands.
9:26
Speaker 2: Yeah, and they are avid sports fans. Between the Steelers
9:30
Speaker 2: and the Penguins.
9:33
Speaker 3: Great market, it's a great market for a brand like
9:35
Speaker 3: Promants for sure.
9:37
Speaker 1: Very cool.
9:38
Speaker 2: So are you keeping the founders on to help run
9:41
Speaker 2: the business or is that you know, I guess.
9:43
Speaker 1: A case on a case by case basis.
9:45
Speaker 3: That's on a case by case basis we do because
9:49
Speaker 3: we only buy great brands, or we tied to only
9:52
Speaker 3: buy great brands that are very well run. You know.
9:55
Speaker 3: Our our mode is to keep the management team on board,
9:59
Speaker 3: so we do that all the time. Now the founder
10:03
Speaker 3: staying that really depends on you know, where the founder's
10:06
Speaker 3: mind's at. And you know, so for example, at Tavern
10:10
Speaker 3: in the Square, which we just acquired earlier this year,
10:12
Speaker 3: the founder state he remains a CEO. He's now a
10:15
Speaker 3: partner at ARB, not only a partner at Tavern in
10:18
Speaker 3: the Square, and it's great working with him. A true entrepreneur, brilliant,
10:23
Speaker 3: full energy, great team leader for Mombo for example. You know,
10:28
Speaker 3: the founder, we still talk to him once or twice
10:31
Speaker 3: a month. We when we have questions. He's still very present.
10:34
Speaker 3: He's very proud of what he built at PJ. Wellehems,
10:38
Speaker 3: you know, not the founder, but you know the CEO.
10:40
Speaker 3: Now we have a new CEO, which was part of
10:42
Speaker 3: the natural process, but the CEO when we bought the business,
10:45
Speaker 3: that was the CEO for decades before. He's on our board,
10:48
Speaker 3: so you know, I get to speak with him at
10:50
Speaker 3: least once a month. So we try to keep we
10:53
Speaker 3: try to keep everyone that wants to stay along for
10:55
Speaker 3: the ride along for the ride. Now it's that's on
10:58
Speaker 3: a case by case basis, and but we do we
11:00
Speaker 3: do try to keep for sure, the management team entirely
11:04
Speaker 3: when we acquire one of these brands.
11:06
Speaker 1: Great, what's the sweet spot for a target in terms
11:09
Speaker 1: of annual ebada?
11:10
Speaker 3: So our sweet spot has changed a little bit now
11:13
Speaker 3: that we've gotten a little bit bigger. But I'd say
11:17
Speaker 3: we look for you know, fifteen to twenty five million
11:20
Speaker 3: dollars and edit, that is probably where we would feel
11:23
Speaker 3: comfortable now. And it looks like we can acquire a
11:28
Speaker 3: brand every you know, nine to twelve months. Is I
11:31
Speaker 3: think something that we can do and when we can
11:33
Speaker 3: digest very easily. Now, one thing, Michael, that happened that
11:36
Speaker 3: we've learned that happens is we have we've built a
11:41
Speaker 3: system that actually is self learning. So you know, our
11:45
Speaker 3: playbook from the first business was based on our previous experience.
11:49
Speaker 3: Right when we acquire the second business, we had our
11:50
Speaker 3: previous experience plus the first business. And so now that
11:55
Speaker 3: we're we're on the fifth business, it's become like a
11:58
Speaker 3: lot more intelligence. So we get to the results that
12:02
Speaker 3: we need to get much quicker and you know, with
12:05
Speaker 3: less friction. And I think this is just going to
12:08
Speaker 3: continue to evolve. Right. So the other thing is we
12:11
Speaker 3: don't we built a corporate team at the ARB level,
12:14
Speaker 3: So I have you know, reporting to me a team
12:18
Speaker 3: that provides full support to the brands. We don't operate
12:20
Speaker 3: the brands. We don't tell them what to do. We suggest,
12:23
Speaker 3: we encourage, and we recommend based on industry best practice.
12:27
Speaker 3: So we have a team on marketing analytics, we have
12:30
Speaker 3: a team on technology, we have a team on finance,
12:34
Speaker 3: and then we have a team that doesn't interact with
12:36
Speaker 3: current brands but looks for the next big things on
12:39
Speaker 3: business development. And then we bring to the brands, you know,
12:43
Speaker 3: solutions for problems that they don't even know they have. Right, so,
12:46
Speaker 3: let's say a brand wants to run a launch of
12:49
Speaker 3: loyalty program. We say, listen, Brands like yours have followed
12:53
Speaker 3: this path with more success than that path. If you
12:56
Speaker 3: choose to follow this path, which we encourage, this is
12:59
Speaker 3: this is the place book we recommend. Or sometimes you
13:01
Speaker 3: say listen, we don't think you're ready to follow this path.
13:04
Speaker 3: Now you have to hire more people, you have to
13:06
Speaker 3: bring in a new system or whatever it is. So
13:09
Speaker 3: it's not like just do everything at once or the playbook.
13:12
Speaker 3: It varies depending on the stage that the brand when
13:15
Speaker 3: we acquire it.
13:16
Speaker 2: So also i'd imagine part of your process is when
13:20
Speaker 2: you're analyzing some of these chains, is like, who needs
13:22
Speaker 2: help in these core competencies, whether it's you know, finance,
13:26
Speaker 2: marketing or whatever, it might be.
13:28
Speaker 3: Right, Yes, so that's the mat you just touched. For us,
13:32
Speaker 3: what's the magic sauce, which is this if we can
13:35
Speaker 3: find brands that are very well run with amazing guest
13:39
Speaker 3: satisfaction scores and high margins, but still during the diligence process,
13:45
Speaker 3: we find gold everywhere. Right. And the sense that you know,
13:51
Speaker 3: whether it's database management, you know, back of the house, technology, accounting, whatever,
13:57
Speaker 3: the perfect scenario for us is something that's already magical
14:00
Speaker 3: that we find that we know that we're going to
14:03
Speaker 3: find so much more to be able to drop drop
14:05
Speaker 3: you know. The top line and the reason that I
14:07
Speaker 3: think we can do this perhaps better than some of
14:10
Speaker 3: our peers is in my team, my direct team, we
14:15
Speaker 3: only have restaurant veterans and you know, industry experts, so
14:19
Speaker 3: we are not, uh, we don't have a private equity mindset.
14:23
Speaker 3: We're very proficient in finance by all means, even you know,
14:26
Speaker 3: we just got John Howie uh as our CFO, who's
14:29
Speaker 3: done amazing things in his career. But John is a
14:32
Speaker 3: restaurant guy, Like I'm a restaurant guy. Now we're partnering,
14:35
Speaker 3: you know, we're owned by their Net Station Partners, which
14:37
Speaker 3: and they're wiz you know, they're like wizards when it
14:39
Speaker 3: comes to finance. So we have the advantage of having
14:42
Speaker 3: them structure the deals and put together the deals. But
14:45
Speaker 3: for us, but we kind of see things that perhaps
14:49
Speaker 3: you know, other financial sponsors don't because we are true
14:53
Speaker 3: restaurant people, and so we look at it from a
14:55
Speaker 3: different angle. And when we see like the opportunity to
14:59
Speaker 3: do a small tweak and the menu board or a
15:01
Speaker 3: small tweak and how they run operations or start a
15:04
Speaker 3: small tweak in operating hours, whatever it is, that's gold
15:07
Speaker 3: for us when we're evaluating to buy a company.
15:11
Speaker 2: Yeah, that's cool man, And I could just see it,
15:14
Speaker 2: you know, when you talk about your passion for the operations.
15:18
Speaker 3: No, there's things you might you won't believe. Like we
15:20
Speaker 3: were looking at Poetrop McCallen. It's a seventy percent drive
15:23
Speaker 3: through business, right, and then we went through to drive
15:27
Speaker 3: through ones and we noticed that they didn't have numbers
15:30
Speaker 3: on their top selling items, right, and that pretty much
15:34
Speaker 3: fifty percent of the order taking was customized, which I
15:38
Speaker 3: mean you can keep it customized. We'd imagine that one
15:40
Speaker 3: out of every two cars, the guest has to relate
15:43
Speaker 3: to the order taker in Spanish or Spanglish or English.
15:49
Speaker 3: So it's very difficult through the order taking. So what
15:52
Speaker 3: we did was the most basic thing ever. I mean,
15:55
Speaker 3: you've ordered by number at burriy K McDonald's and Wendy's
15:58
Speaker 3: for sure in your life. So we grew up. We
16:00
Speaker 3: know what a number one is, what a number two is,
16:02
Speaker 3: what the number three is. Guess what. They didn't have
16:04
Speaker 3: that at puy trp call, so you know, we're very
16:07
Speaker 3: shortly in. We ran our data engineers figured out on
16:11
Speaker 3: that particular on our tropic chop goals and some of
16:13
Speaker 3: our sandwiches, which were the top sellers and which combinations
16:16
Speaker 3: work the best. We ranked them, we assigned numbers to them,
16:19
Speaker 3: We tested it. We increased order accuracy by double digits,
16:24
Speaker 3: and we shaved fifteen seconds off of dive dive drive
16:28
Speaker 3: through times on average a day. Fifteen seconds on average
16:31
Speaker 3: on one day with the amount of cars that we have,
16:34
Speaker 3: that's a mountain, right, So it's doing It's not rocket science.
16:38
Speaker 3: It's just based on our experience what we can see
16:40
Speaker 3: that perhaps some others can't.
16:42
Speaker 1: Yeah, it's impressive.
16:43
Speaker 2: And fifteen seconds, right, that could eliminate a car or
16:47
Speaker 2: two from the line, and it could be the difference
16:49
Speaker 2: between somebody driving past the store or pulling in and ordering.
16:53
Speaker 3: Right, that's exactly I'll tell you another one, very simple one,
16:56
Speaker 3: not rocket science. Again, we got the Puyer Trupic call
16:58
Speaker 3: and during co COVID, you know, like most people, they
17:02
Speaker 3: had reduced their operating hours from closing down at midnight
17:07
Speaker 3: to eleven pm, right, but they had never moved it
17:11
Speaker 3: back and everyone else did. Right, So we're like, any
17:14
Speaker 3: reason why you guys didn't move back to twelve pm?
17:17
Speaker 3: And no, we just fell through the cracks. We didn't, Okay,
17:21
Speaker 3: so let's do that. And we did ensure enough, you know,
17:25
Speaker 3: sales took off the roof and so it's it's not
17:28
Speaker 3: but again there you have to be able to look
17:30
Speaker 3: at it with those eyes, and it's you know, you're
17:33
Speaker 3: not going to get that from a spreadsheet. You're going
17:35
Speaker 3: to get that by visiting the restaurant, by understanding how
17:37
Speaker 3: they operate, and by you know, interacting with the team.
17:40
Speaker 2: Yeah, it's awesome, that's why I tend to lean towards
17:44
Speaker 2: strong operators in the CEO CEO role of the companies
17:48
Speaker 2: I cover, although some there's some marketers that have done
17:51
Speaker 2: a phenomenal job too, especially with franchise brands, all right.
17:54
Speaker 1: So I'd imagine there's a lot of targets out there, right.
17:58
Speaker 2: I mean, this is such a frag minted business across
18:01
Speaker 2: the United States.
18:02
Speaker 3: It is. So there's two things that really help us. First,
18:06
Speaker 3: it is a fragmented business. And you know, for whatever reason,
18:11
Speaker 3: you know, some of the some of the players in
18:14
Speaker 3: the market and the financial sponsors, space and all, they
18:17
Speaker 3: kind of stay away from restaurants and casual dining in particular, right,
18:21
Speaker 3: And we love that because we think that, you know,
18:24
Speaker 3: we know how to operate in the system. So there's
18:26
Speaker 3: I think we're in active conversations with you know, about
18:30
Speaker 3: twenty brands. We're in real conversations with about five or
18:34
Speaker 3: the twenty because this is a long term game, right,
18:37
Speaker 3: And what's changed over time as you know, the founders
18:41
Speaker 3: talk to each other and people see a little bit
18:43
Speaker 3: of what we're doing is we're getting a lot of
18:45
Speaker 3: incoming and a lot of inbounds, which we didn't in
18:48
Speaker 3: the past. To be honest, when we started this it
18:51
Speaker 3: was only three and a half years ago, but we can
18:53
Speaker 3: feel the difference. People. Some of these founders of the
18:55
Speaker 3: regional concepts, they kind of know who we are now.
18:58
Speaker 3: They know that we keep the culture, that we the businesses,
19:01
Speaker 3: that we actually add cost to the business, right, we
19:03
Speaker 3: don't remove costs of the business, not our platform. And
19:06
Speaker 3: they're all about growth and getting something that's already amazing
19:09
Speaker 3: and making it just a little bit better. And that's
19:13
Speaker 3: that's how we operate. We don't force store openings. Some
19:16
Speaker 3: brands we don't even want to open right now. With
19:18
Speaker 3: boetropycause since we bought it, we close fifty locations. We
19:21
Speaker 3: have an open one maybe next year were an open
19:23
Speaker 3: one or two and start that path. But we don't
19:25
Speaker 3: have to follow you know, a standard you know, private
19:28
Speaker 3: equity playbook by brand that you know come in slash
19:31
Speaker 3: GNA open restaurants. No, we we can do whatever the
19:36
Speaker 3: brand needs. At this point, Tavern and Square, we're probably
19:39
Speaker 3: gonna open three or four this year out of a
19:40
Speaker 3: base of twenty five. So that's really relevant right in
19:43
Speaker 3: the percent phases. So it's going to depend from one
19:45
Speaker 3: brand to the other cool.
19:47
Speaker 2: So it sounds like you're saving some money on investment
19:49
Speaker 2: banking fees, which is good.
19:51
Speaker 1: What kind of multiples are you paying?
19:53
Speaker 3: We were able to get into these brands for very
19:56
Speaker 3: attractive multiples. M'd say, on a blended average, we're below
20:01
Speaker 3: seven times, which is kind of remarkable for the quality
20:07
Speaker 3: of the brands that we're acquiring. And you know, just
20:12
Speaker 3: if we continue to be an elite player and you know,
20:16
Speaker 3: grow the top line on the bottom line how we've
20:19
Speaker 3: been able to do in the last three and a
20:20
Speaker 3: half years, I think that we could probably look at
20:24
Speaker 3: some multiple expansion. But we're not a financial engineering impact.
20:27
Speaker 3: We're an operating engineering company. We're not a financial engineering company.
20:32
Speaker 3: We're focused exclusively on making the businesses better. Right, the
20:36
Speaker 3: financial outcome, the multiple expansion, that's all. That's all a
20:40
Speaker 3: function of running the companies better.
20:42
Speaker 2: Yeah, and I like that you're running them for the
20:44
Speaker 2: long term, which is how they should be run.
20:47
Speaker 1: Who's your primary competition for these deals?
20:50
Speaker 3: You know, I get us that question a lot. I
20:55
Speaker 3: don't think there's anyone that does it in a structured
20:57
Speaker 3: way like we do it. I think, you know, Matt
21:00
Speaker 3: Perlman and Alex loan. The founders at Garnett Station Partners.
21:03
Speaker 3: You know, they're they're so visionary and you know, and
21:08
Speaker 3: they're so thoughtful in the thought of them what they
21:10
Speaker 3: do that they they were they built the ARB team
21:16
Speaker 3: before or just as we were acquiring concerts, right, so,
21:19
Speaker 3: and that's a very bold, you know, initiative to take that.
21:22
Speaker 3: We talked a lot of people, Oh, I've always thought
21:25
Speaker 3: about doing the regional stuff. Oh, that makes so much sense,
21:28
Speaker 3: and we all, so, why didn't you do it? Because
21:30
Speaker 3: we really didn't know how to start. And it wasn't
21:32
Speaker 3: different with us. But you know, Alex and Matty, they
21:36
Speaker 3: build our team. They brought me in, they brought the
21:40
Speaker 3: team that reports to me, and you know, we put
21:43
Speaker 3: our money where our mouse were upfront and and that
21:46
Speaker 3: was the only way for us to really make sure
21:48
Speaker 3: that we proved out the pieces and and it's worked.
21:52
Speaker 3: From the beginning. We called the business Authentic Restaurant Brands, right,
21:56
Speaker 3: We didn't change the name. That's what we set out
21:59
Speaker 3: to do. We thought it made sense. You know how
22:02
Speaker 3: some things make a lot of sense in theory, but
22:05
Speaker 3: in practice they don't. Fortunately for us, this, you know,
22:08
Speaker 3: the real life turned out to be very similar to
22:10
Speaker 3: what we laid out on an Excel spreadsheet and a
22:12
Speaker 3: powerboard presentation. But it's all because, you know, I think
22:16
Speaker 3: Garnett's Station partners had really you know, the commitment to
22:22
Speaker 3: build the Arab team and to build the business even
22:25
Speaker 3: before we started operating as ARB. And that's really bold,
22:28
Speaker 3: and that's turned out to be a very good decision.
22:32
Speaker 1: Yeah, for sure.
22:33
Speaker 2: And it's a little bit of a mote because I'm
22:34
Speaker 2: sure others would like to kind of try to mimic
22:37
Speaker 2: what you've created here.
22:39
Speaker 1: It's it's exciting, man.
22:40
Speaker 2: I think that's a perfect spot to wrap it up.
22:42
Speaker 2: Thanks again, Alex, and I want to thank the audience
22:45
Speaker 2: for tuning in. If you liked our discussion, please share
22:47
Speaker 2: it with your friends and co workers. Check back soon
22:50
Speaker 2: for an interview with Zach Oates, the founder and CEO
22:53
Speaker 2: of Ovation.
23:00
Speaker 3: He