Why a Searcher Opened a Franchise Business Instead | Jacob Lee Interview

Jacob Lee, thank you for joining me today on Acquiring Minds. Happy to be here. Thanks so much for having me, Will. I'm honored. Jacob, you were at one time a self-funded searcher. So, you were attracted to and well understand the opportunity in entrepreneurship through acquisition. But, eventually you decided against it and chose a different path, that of becoming a franchisor of a growing franchise brand. So, we're going to hear that journey today and really dive into this assessment you made about franchising on the one hand versus search on the other. Mhm. Start us off, Jacob, with some personal background on you, wherever wherever you really want to begin. Sure, I'll I'll just go briefly over my childhood. I grew up on a farm in Middle Tennessee. Um my family has always been in business. My great-grandfather started a business in home services industry that um has been in my my family ever since. And so, kind of always been around um small business and a farm is a small business as well. So, always was appeal appealing to me. Studied mechanical engineering in college. I worked for an as an engineer for a couple of years out of college and then went back and got my MBA. Um after MBA, did the traditional consulting path and worked for a firm called BCG for a few years after business school and was really a a phenomenal opportunity for me. Changed my career trajectory. Got to work with people way smarter than me and um learned a ton and really built my confidence. You know, people ask, "How is that relevant for what you're doing today?" You know, it's not directly relevant, but I after business school, I didn't have that confidence to go and jump and do my own business. After spending a few years at BCG, I did and I think part of that is you get thrown into projects in which you don't really have a lot of context or expertise and you learn really quickly and you just figure out how to get it done. And so I felt um like I could do that in a small business. So So about a year and a half ago um a friend of mine that I'd met at Darden in business school um was working at an investment banking firm at Wall Street. He's from Birmingham, which is where I'm at at now. And we started talking about what it would be like to go into business together and you know, I I may talk about it later, but um someone came and spoke at a class at Darden who had done something very similar, had gone into consulting, spent 5 years, and then left, found a business to buy. And that was just always in the back of my head as something that sounded really cool. Um So anyways, we took the plunge, left my job. And yeah, we'll get into the whole search thing and everything, but we kind of started out as self-funded searchers, but um that's kind of my short professional background. That's great. Thank you, Jacob. So and Darden, just most folks will know, but just in case not is UVA's uh UVA's business school, near and dear to my heart. I'm in Arlington, Virginia right now. A lot of family that went to UVA. Um So you and and let me just press on this this consulting um phase of your career. BCG also will probably be familiar to folks, but if it's not, BCG is really kind of one of the most prestigious uh consulting management consulting firms in the world, often mentioned in the same breath as McKinsey or Bain. Um those were kind of the the big three, at least they were back when I was in in college and and people were applying to those places. Um why not continue Well, we're we're going to get into like how you chose what you did, but um um what you're doing now is is probably not the traditional path for somebody who was at BCG. Why not either continue at BCG or go to what I assume is the next step for a lot of kind of BCG grads, which would be a you know, Fortune 500 or I don't know, maybe leadership at a at a at a high-potential, high-growth startup or something like that. For Take the first question first. Why not Why not um continue on, you know, aspire to be that that partner at BCG? Yeah. For some people, it's a great path. You know, some people thrive in that environment and they love the continual change and the high-stakes engagements and working with senior senior clients and big dollar signs and everything. It's exciting to them. They like to be in the room where the decisions are made. For me, I think part of my personality, I it it was very stressful. I mean, it was um it it was like my my personality, I always wanted to be at the top of the performance, but you're working with people that for me felt like a a lot smarter than me. And so, just the competition and there's this every 18 months you're up for promotion. It's kind of an up and out culture, so you're always thinking about the next review and um you're always thinking about the next presentation. And so, you know, that part of it and then also um you know, we had our our first son when I was at Darden at business school. And so, the travel aspect of it, you're traveling typically 4 days a week every week. Um so, you know, it probably never was going to be uh career for me. It was always going to be a place to go and learn and totally fulfilled that purpose, but um I mean, some people love it. Again, some some people they get in it and it's exhilarating for them and they love that environment. Just not for me. And then your your second question on why not the traditional path? I just really enjoy um building something. I really enjoy solving a problem. I really enjoy owning something. Um and the idea of going and owning a business even if it's smaller owning something and being able to have full control over it and build it myself versus going and being a part of a big corporation, spending 80, 90% of my day in Zoom calls. Like and I and I know, you know, uh in the in the large corporate world a very small portion of your time at least when I was at BCG, a very small portion of it was spent on what I felt like was extremely high-value activities and a lot of the time was spent on like the presentation aspect of the job and I think that continues on into the corporate world, the Fortune 500 world and so yeah, it's just not a great fit for me. Um and this small business, this um building a business has been from day one a clearly a a good fit for my personality and my goals. So and then it just really fits in with my goals for my family. You know, I really want to be a part of my community. I really want to build relationships in my community, my church. I really want to be a good father. I've got twins that are three and a five-year-old son and so um those items in my life were they were hard to prioritize when I was working at BCG and working 60-hour weeks and traveling all the time and now I'm able to really prioritize and put a lot more time into those things that are important to me. Mhm. Excellent. Great. That that was phenomenal. Thank you. Okay. So, let's get back to the story. So you uh reconnect or your friends with one of one of one of your classmates at Darden. You had you had at there had been a visiting lecture of somebody of essentially an acquisition entrepreneur searcher who'd bought a business that was kind of in the back of your mind. But did you know what kind of you know entrepreneurship through acquisition or search was were you well acquainted enough with the concept that you like had the vocabulary down or did you just kind of remember this remember this cool story you you learned about at Darden? Well, after that guy came and spoke, I read a book um by HBS professor and it's called like I can't remember the title but LBO the small business or something. It's one of the like original from the from the early 90s. And when I read that I was like, "Wow, the economics here are really strong, you know, you can buy a business and what in that book he makes it sound a lot easier than it is now. And it probably was a bit easier back in the day. Um I I don't know. It's hard for me to speculate but I would imagine back in the day before private equity was going into the lower lower middle market and some of these you know, founder owned small businesses were out there. It's probably a lot easier to find a high quality business for like four times EBITDA. And so I read that book and I was like, "Wow, I can really build I mean for one, the economic outcome of this this is something I think that people at BCG also don't understand is um I think a lot of people have this idea of like path to financial success means X Y and Z, you know, become partner at BCG or become CEO or or start a technology company and have like an exit. But I think um reading this book sort of unlocked this idea of like I can have a really great economic outcome by buying a small business using debt. And so anyways, that that book was a big influence. And then, yeah, I I started following people on Twitter like Brent Beshore was someone I followed early on if and I read all of his stuff. Um I'm trying to think what else. You know, I started networking a little bit. The guy that I mentioned who's in our class, his name is Adam Duggins. I think I mentioned him to you before. Yeah. Yep. Um connected with him and had a few phone calls. Just had you know, that's part of the beauty of of having a network like Darden. Um there are probably six or eight people that I was able to connect with that have kind of done that. So, yeah, that's how I that's how I learned about it. So, you you really were kind of starting to immerse yourself in search. So, you you you understood the principles, you had the vocabulary, you were talking to former searchers. Okay. Um and so, you reconnect with your uh this classmate, this friend, and so you guys basically you're kind of done at BCG, you're looking at what the next chapter is going to be, and you decide let's do search. That's right. And and fortunately, BCG has a phenomenal program where they allow you to sort of pursue your next opportunity while still getting paid like half your salary and benefits. So, I had I think it was four months runway um to do that. So, I quit my job a little earlier than my partner did. Um he was in New York City, he moved back to Birmingham to do this. And yeah, we just shut up set up shop in my shed in my backyard and I can get a little bit if you're interested in a little bit of like kind of our process as we got started. Um we I like I said, we were kind of focused on self-funded search, so we had conversations with people in town, had some meetings with um an investment bank an investment banker that worked at a lower middle market firm in town. Um had a phone call with a guy who was also a Darden guy that had done a search in Birmingham a couple of years. Um he had started a couple of years before us and he was still searching for a business. I think for me that was probably the biggest um that was probably the moment where I was like, "Wow, this guy went to the same school I did, extremely smart, well-spoken, energetic guy, probably did exactly what I'm planning to do. He's been doing this for over 2 years, still hasn't found a business to buy." And Brett and I just started saying, "Hey, what if we went 2 years and couldn't find a business to buy? Like that's a terrible outcome. That That outcome is something we really need to try and avoid. So that's really what got us kind of started looking at franchise businesses." Okay. And how long did you actually search? Um well, we didn't like we never set up meetings with companies, so I would say a month or so of conversations. And this was all Brett was still working, so I say a month or so conversations. You know, we like built a website, had a logo made, kind of started to form our thesis. And meanwhile having conversations. And I guess as we're forming our thesis and like when I'm working at BCG, I don't really have the mental bandwidth to really think these things through. And so it wasn't until I left BCG and and we're having these conversations that it sort of became clear like man, this um searching for a business to buy is going to be a lot harder than we thought it would be. We also had a a call with a guy who um also a Darden guy who works at a private equity firm here in Birmingham. And sort of told him our whole idea, our whole pitch. And then he's he told us he had been working at this firm for six or eight years. And he's and he said um kind of told us his process for generating deal flow. And how just how hard it was even for this guy who has the backing of this really, you know, well-known firm in town um to get business owners to even pick up the phone. Um and and and he kind of challenged us like, "What is it about you two that will cause a business owner to to take your call and to be like, 'I want to sell my business to these guys.'" And especially because in the world of, you know, million-dollar EBITDA home service businesses or whatever, those guys see investment banker and consultant and have a really probably negative image. So, even though Yeah, even though we we may think we have what it takes to go and run this business, these guys are like, "What experience do you have? You built PowerPoints and you built Excel models." And some of that's probably valid, but um all those things together sort of scared us. And then we concurrently started looking at franchise opportunity and what we found there really started to excite us. And so, it it quickly became something. And I think what happened was there was a moment where we said, "Hey, we'll go look at franchise concepts and we'll spend two or three months doing that. And if we spend two or three months and don't find something that really excites us, then we can go back to the search. It's it's kind of like we need to take the time to go look into this because what we found here is is interesting and if what we find is not what we expected then we can always go back to search. Well, it it sounds like I was going to ask you the parameters for your search. So, it sounds like you were looking for million-dollar EBITDA. That was that was going to be your key parameter, your size parameter. Which of course those those businesses are are hard to find anywhere. And I I'm getting the feeling that you basically were are both settling back into Birmingham, Alabama. So, you were geographically constrained in a not huge metropolitan market. What what what is the kind of the population of metropolitan Birmingham? Under a million. Yeah. So, you're exactly right. You know, we we constrained ourselves geographically and it needed to be a big enough business for two people, you know, so it couldn't be And you know, I think we're flexible on this on the the EBITDA amount, but as you know, anything sub million-dollar EBITDA it starts to get blurry between an actual standalone business and just a sort of cobbled together job for the founder. And so, like when when that founder leaves is there really an entity with systems and processes and management in place to go and buy. Is it is it something worth paying a multiple of EBITDA for? And so, yeah, anything when it gets real small that's a tough a tough thing. And yeah, it had to be big enough for Brett and I to both have a good outcome. So, it was Yeah. It was constrained um and that was definitely another factor that played into our decision to look at franchise businesses. Yeah. Yeah. Okay. And so, as you turn your attention to looking at the many many many franchise concepts out there, what do you find? Well, and before I ask that, did you have any There there's kind of a bias against franchises for for a lot of people, I think. I mean, I I know that I hear it. I probably have a little bit of it myself. And and the theme I return to over and over as I talk more about franchising on Acquiring Minds is like there's a step where you one needs to get over that bias. Um and they just they don't have they don't have the same romance or maybe they they feel um less personal than an independent business. Did you have any of that hang-up? Oh, yeah, for sure. So, I had I had this image of franchise is what a middle manager who wants to be their own boss does. You know, they go start uh they go buy a single unit franchise and they run their own shop. Um And I actually had a a meeting with the guy that I really respect and I was kind of telling him about this this franchise idea and he was like, man, I I I think you could do something more than that. And so, like I think there's definitely uh perception thing you have to get over. Um but I also same time had guys like my brother-in-law who I really respect. He's an investor. And another guy that we know who works at Roark Capital that invests in franchisors. And in those conversations uh we we really learned like, hey, yeah, there's franchising as a broad category means a lot of things. And maybe 95% of the businesses out there are probably not investable businesses. But here are some examples of some franchises that have been phenomenal investments for even on the franchisee side cuz a lot of people think about the franchisor, you know, private equity investing in in the franchisor, but there's a lot of examples of um the franchisee side being successful. And I think the first thing that piqued our interest was we learned about Orangetheory Fitness um and learned about the economics there, which were from what we heard at the time, um you could build a shop for three to four times stabilized EBITDA, which is similar, you know, economics to buying one of these small businesses. And so um you can you can build a business for three to four times EBITDA and then Orangetheory Fitness has been one of those brands that has taken off and attracted a lot of interest. And so those businesses can sell in the high single digits EBITDA if you have enough units. So there's the low cost of entry and then there's the opportunity to potentially exit down the road and kind of have that multiple arbitrage. Um and so that was the first thing that got us interested. The second thing was the idea of I mean when you go buy a million-dollar EBITDA small business we're going to take out a huge SBA loan. Um the downside situation there is a lot more severe than like what we're doing right now with Sit Hound. You you buy 10 stores, you build your first store, you take out it's a, you know, $300,000 investment, you take out a $200,000 SBA loan. If it totally blows up, then we could go get a W-2 and like pay off that loan if we had to. They're not going to come take our houses. So that was the other thing that really attracted us to this multi-unit model was you can sort of stair-step your investment and you can do it without raising a bunch of outside capital. Like you can especially if you're able to stretch it out over time where the earnings from the early stores are able to fund development later on. Um it really is like a compounding. So there's a high opportunity for reinvestment. Whereas if you buy uh landscaping company in Birmingham all the reinvest all of the growth is going to come organically most likely. Which which could be great. You could have a lot opportunity for growth, but with something like Scenthound um it's still organic growth, but you have this pathway to build a lot of units, you know, so you can Yeah. um we signed up for 10, but in theory you could take the whole state of Alabama and every medium-sized town could hold a Scenthound. So that was the other big thing was like the opportunity for a high rate of reinvestment, which you don't really find in the in the search fund kind of realm. Mhm. Mhm. That's that's excellent. And and I just want to going back to the the um the person who said to you, you know, you should be doing something more. Um did you any of your former BCG colleagues, did they did they give you a similar reaction? I could imagine that. Well, I mean it's mostly like "Hey, what are you going to do next?" And I'm like, "Well um we're starting a dog grooming shop." And it's like, "Oh, okay." Like they don't really have a framework they don't really know how to respond to that. So yeah you definitely have to swallow your pride and you know, but there are some people I mean I think this whole search fund thing has become really popular and so there's a lot of people now from business school from BCG that sort of get it and especially when you explain What's going on? Yeah, you explain the economics and you explain the the lifestyle, you know, like cuz my colleagues are are burnt out too of work of traveling all the time and working crazy hours so I think once they kind of understand it all they're like, "Wow, that's actually interesting." Yeah. And then I've actually had a colleague from or a classmate of mine from from Darden that we referred and that signed on as a franchisee of Tint World so There you go. Yeah, I think it's I think it's really interesting once you kind of learn the whole deal. Yeah, yeah, totally. And that's kind of a big part of what Acquiring Minds the entire podcast is about. The and I don't want to beat BCG to death but one more question on BCG just to give us a to give us a point of contrast, if you were to devote your life to the partner track becoming a partner at BCG, what could you expect to earn? What what do the people at the top of the game in consulting earn? Yeah, I don't I don't know exactly but like I would guess the top the top partners are earning like five plus million dollars a year. Oh. Um so Okay, hold on. good outcome. Okay. But I mean these guys are these these guys are they're really good at what they do, you know, they're they're like some of the smartest people I know, you know, they run circles around me so these are really talented people. And they and they they've devoted their lives. I mean their their lives are probably consumed by their role for better or worse. And these guys these guys that I'm talking about are like the ones that have like personal relationships with the CEOs of these big companies and are advising them on big matters so it's not every partner at BCG. Yeah, yeah. Okay. I want to get into how you chose Scent Hound and we haven't even introduced what franchise you chose. So, so give us a just a minute on Scent Hound. We're going to return back to it and the numbers of and the opportunity with Scent Hound, but just a couple bullet points, what is it? Sure. So, Scent Hound is a dog wellness franchise. So, we have brick and mortar stores about 1,200 square feet. Think about the size of a Great Clips or Supercuts. And we offer membership-based grooming services. So, our membership in our market starts at $35 a month. You get a bath, ear clean, nail trim, and teeth brush once a month for that price. And then you can add on services like a haircut or a brush out blowout. Um about half of our revenue comes from the membership, about half of it comes from the add-ons. And so, we um our we have we have our our franchise, we have the rights to 10 stores, four in Birmingham, six in Nashville. Um the first store we built in February of this year. We just crossed over 800 members in that store. And then the second store we opened in November, about a month ago. Um and we just hit we just crossed 300 in that store. So, it's been um it's been a great It's beat our expectations from from a market from a market fit. Yeah. Well, and and we're going to get into that more, but let's hear your analysis on why Scent Hound. So, so if anybody considers franchising, you know, the first thing they see is this universe of uh of options. I I was talking to Will Franchises the other week and I think he said 4,000. There's kind of like 4,000 franchise opportunities. Many of which are really kind of dismissible out of hand. They're not high quality business opportunities. So, there's 4,000 options and kind of pitfalls everywhere. Uh tell us about your analysis on choosing the brand that you did. Sure. So, we spent like I said, we spent a couple of months on this. So, a few of the things we looked at in no particular order. One was the great thing about franchises is they have the FDD that they're required to publish and a lot of franchisors will publish pretty good financial performance information in the FDD, the item 19. And so And just to FDD is the financial disclosure document. Yeah, and so you know, there there's a range of information that franchisors will publish in those documents, but the good ones that are proud of the results will, in my opinion, the ones that are proud of the results will publish uh P&L like the the earnings you can expect from a store or from a territory. And so, we used that heavily. So, we downloaded 100 FDDs. We look we use thing like to source ideas, we use things like uh Franchise Times list of like top franchises. Um we would go on we would kind of like find all the private equity firms that buy franchisors and then we'd go look at their portfolio companies. Hm. And we would use that as a list. We also spoke with guys from Roark and um L5 Capital and some other firms that are in the franchise world to kind of get ideas. So, we had this big group of ideas and then we started to gravitate, like we kind of crossed off the non-brick-and-mortar businesses. I guess one bias I had was like I said, my family's in the home services business. So, we have a HVAC and plumbing um business in Middle Tennessee. And so, I kind of like crossed that one off that whole category of like territory type franchises off because I just sort of thought like if we're going to do that, we could just kind of expand that home the the the family business. At at least that's how I thought about it in my head. Um and also um so, back to like the growth story like when you have a territory, you're kind of expanding your geographic territory. When you have stores, it's a bit more of a clear path for growth, at least in my head. Like you build a new store, you get it up to maturity, it's a standalone business. Whereas like the territory, like let's say you have a landscaping franchise, it's it's a lot more like buying buying incremental truck, hire a new crew, kind of expand into this region of market. Um which may be fine. But anyways, we kind of crossed that off. And then we started looking at I'd say a range of sizes. Like we were really interested in one called Tommy's Express Car Washes. Um Tommy's Express Car Washes. Yeah, and we loved a lot a lot of things about that business. For one, it had been family owned for a long time. Um had a really great management team. Um had a really serious support team. So, like that's another big element of a franchise always like the quality of the support they offer. And they and we had like the super day or whatever they call it um with them, and we we met a lot of their support team. We're really impressed. That business is totally different than Scent Hound. It's like a four to five million dollar um car wash, and it's a little bit more of like a real estate kind of hybrid. So, and it takes a it takes a couple of years just to get one built. So, it's hard to get all the permitting, and construction ground-up construction. So, but you know, if you look at their FDD at the time, I think they averaged almost $2 million in revenue per car wash, and almost a million dollars of EBITDA. So, incredible margins. Um we So, that that's an example of one we looked at we really liked. Mhm. We also looked at another uh business that was a window tinting business, automotive window tinting. Um it was it was just one we kind of stumbled upon. This is kind of on the other end of the spectrum. It only costs like a couple hundred thousand dollars to build a window tinting shop. Um it's a super high margin product. It costs like five or six hundred dollars to get your windows tinted, but it's just basically some labor and some like plastic film to apply. So, um really high contribution margin. And the the competition in Birmingham seems pretty weak in that area. So, um similar to dog grooming, it's like all mom-and-pops. And so, but at the end of the day, kind of leading up to what attracted us to Scent Hound was this idea of a growing market. So, like a a market with tailwinds, like an industry with tailwinds. And the window tinting business just doesn't have that. And it also probably has this like um this risk that it may just go away completely. Like we found, for example, this technology where you can flip a switch, and your car windows will like automatically tint. Um and so, we like did a lot of research into that, and we we actually found the There's like a publicly traded company that owns the IP for that technology. And it So, at one point, we like floated the idea of buying stock in this microcap company to like hedge against our investment in the franchise. Like if this became mainstream and it tanked our franchise business, at least we'd own the stock and like that would be good. Yeah. Anyways, uh Probably a sign that you should just choose a different franchise. Yeah, exactly. Yeah, yeah, exactly. It At the end of the day like window tinting it was it was really high, you know, so you look at the investment cost versus the stabilized EBITDA and in that situation you know, the return on investment could have been like 50 to 75%. You could have made your money back in like a year and a half. Mhm. So that's kind of like what was really appealing. Scenthound was kind of the best of both worlds. Like so economics is it takes about $300,000 to open a store and that includes a $200,000 build-out of your physical location $50,000 of equipment, $50,000 of working capital, like wait wages and advertising and everything until you hit profitability. So, um and at the time they only had five stores on their FDD. So they had five corporate stores. It's a a South Florida West Palm Beach based franchisor. So they had that average P&L of those five stores and for those five stores they averaged around $100,000 of EBITDA. Um so we looked at that and we said, "Okay, anything over 25% return on investment like really meets our investment criteria." And then so it checked that box and then we really looked at like the management team and the industry. Um the industry as you as you may know so there's uh long-term growth in dog ownership over the past 20 years and there was a huge bump during COVID. And then there's a long-term growth of spend per dog. Um so those two things just with a growing market, it's just hard to fail, you know? And so we we really liked those two trends. And then we felt like Sit Hound um serves a unique niche within the pet services space, which is grooming focused. And there's a lot of great players. Like we looked at another business, Dogtopia, which is a great franchise that's got an awesome management team and they seem to have a really cool product. Um but that's a pretty competitive space, especially in Birmingham. We've got They do dog daycare. Um we've got six or eight really quality competitors in the daycare boarding world. And so there was a little bit of fear of us I Does that market become saturated? And the other interesting thing about this discussion is like you can look at national averages, but what really matters to your stores or is the competition in your local market. Yeah. And so, you know, in local market may mean like within a 3-mi radius of your shop. So we um anyways, the the dog grooming in Birmingham typically happens at vet clinics or a few a handful of mom-and-pop shops. And so we we really liked the niche they're focused on. And then finally, the management team um they've put together a really quality management team and we went down and met with them and we're really impressed. So Yeah. Can I can I poke at your sense of the trend uh a little bit just to just to talk it out? So the the first thing is um the the very well-publicized growth in spend on pets. People who have pets and then the spend on those pets. And and you know, I feel like every couple of years there's like some headline about how ridiculous it's become, you know, like doggy braces are next sort of thing. But um but you know and and and it's and it's got people wondering like well at some point we're probably going to reach you know peak pet or or at least peak pet spending. Mhm. And um and you know I I and I feel like grooming is kind of I don't I don't know. I mean you do have to wash your dog. You you mean but you know grooming does feel uh and and I guess I'll just tie this into like where we're at macroeconomically. It does feel pretty discretionary discretionary pretty Right. you know you know like uh pamper pampering your dogs and so um if there was ever a pullback in pet spending it seems like that would be kind of that would be in there that would be threatened uh and similarly like if there's a recession and people are belt tightening just in general again um maybe pet grooming. So I'm sure you consider these factors. How do you how do you respond? So I think about the franchises that we looked at. But for one to kind of talk about um spending on grooming versus other pet services categories. Yeah like dog food is like the least discretionary. I'd say I would argue that like dog boarding is probably dog boarding and daycare are probably more discretionary than grooming. Like your these dogs do need some level of grooming whether they need a bath every month uh is a question but um a lot of these people consider their dogs their children. I mean I read some survey and and one of the questions was yeah do you consider your dog a part of the family and like I it was thinking it was like 80 or 90% said yes. So Mhm. to a lot of people it's really not discretionary. To a lot of people this is like a basic need for their child. So Mhm. Yeah maybe they cut back and they don't do their unlimited membership they do something less but um so and And I also think about SitHound compared to like we spoke with Exponential Fitness. They're a I think they're a big publicly traded company that owns a bunch of boutique fitness brands like Pure Barre. Um when I think about SitHound compared to them or SitHound compared to even car wash or window tinting or some of these others like I think dog grooming is is much um more resis- recession resistant than those others. So, um it's a good question. I don't know exactly what will happen if there if and when there's a recession, but I feel pretty good about it relative to other businesses that we looked at. Well, I think when we when we chewed on this on our pre-call, you also said that you this is targeting people with more discretionary earnings. So, you you also pick your market you and you and you target dog owners who have who are whatever upper middle class or have a little bit more to spend. And so, those folks are going to be less impacted by a recession as well. So, there's that there's that insulating you from larger market forces, right? Mhm. That's right. Yeah. And we're we do feel like our product cuz we're not super expensive. We're right in line if not cheaper than most of our competition. Um so, we are sort of curious how our stores will perform in not the highest income areas. So, like our first store is in a high income area. Second store is a high income area. Most of the system there's about 30 SitHounds open across the country. Most of them are high high population density high income. But, um we do feel like we're approachable from a price point. I mean, $35 a month um again for people that consider their dog as a member of the family is not crazy. So, we we are thinking about like moving into some of these lower I mean, still upper middle class, but um lower income than what we're in now. and if if those are good markets then it really does open up the state of Alabama, you know, for a whole lot more of these stores. So, we're kind of interested to learn about them. Yeah. Yeah. Uh, another follow-up question to your decision on your your decision to go with Sentown. So, when you first started looking at them, they only had five stores and they were all owner operated or or or what what what's the phraseology? Owner Yeah, corporate stores. Yeah, corporate stores, yeah. Right. Um, so did did that give you any pause that there that the actual model of third-party franchisees making it work didn't appear to be proven yet? Yeah, so they they had other franchisees. They probably had 10 or 12 stores open at that point, but they weren't on the FDD because they hadn't had like a full year of earnings or whatever. So, um, they they had just started franchising a a year or so before. Um, it certainly does it's way more com it it would be great if we had 5 years of history of franchise stores to look at. The issue with franchising, and this is something we hadn't talked about yet, but there's a balance between finding a mature brand and then finding a brand that is still selling markets you're interested in. A lot like we looked at we looked at this for us. Yes. Yeah, we looked at like the Joint Chiropractic Clinics and we loved that business. It's a it's actually a small publicly traded um, franchisor and um, we loved that business and we felt like it's kind of a similar, you know, most chiropractic clinics are all mom and pop. This was more of a professional offering and they had a lot higher volume than a traditional mom and pop because of superior systems, but they didn't have any available territories where we wanted to be. Um, they had like two in the state of Alabama and they were in random towns. And I really think that probably as important as picking the right franchisor is picking the right markets to be in. Um and the franchisors are especially these mature ones, I'm guessing, are trying to sell units. So um they'll sell you a unit. They're not going to sell a unit that they think is going to be a failure, but the you know, they start to push probably they start to push the boundary a little bit of like, "Oh, yeah, you can open a store in like Anniston, Alabama." Or some kind of random town. Um so anyways, we felt like we wanted to be in a brand that we could go into markets we believed in. And and obviously we live in Birmingham, so that was kind of priority number one. I'm from Nashville, and Nashville is a booming market right now. And so um when we found that Sinema had available territories there, we secured that as well. So that that's definitely the balance. We We looked at a lot of mature brands, and you just don't have available markets to go and do. Maybe you can do one or two units, but again, we needed to do enough units to make it big enough for to support the both of us. So that was a big aspect of our search. Well, going back to the mature franchise brand question, like the play there might be blending franchising with ETA at that point. So you acquire established businesses that are under a franchise brand. Mhm. And we're seeing more and more talk of this on on Twitter and and I'm I'm going to be highlighting it myself a lot. That's why I had Wolf of Franchises on for the interview. Um so uh so did you consider that, you know, buying, you know, 10 Midas locations in Middle Tennessee or or Northern Alabama? You know, we did not really have any serious conversations about that. Maybe because we didn't really know anyone who had done it. Maybe because we didn't really know that there was a great market for it. I also think we're probably a little bit intimidated by um like at least the way I see it is like if you if you're you're willing to buy into uh successful franchise system, a lot of those successful franchise systems, when they go to sell their stores, they're selling to other franchisees. And so at least at least kind of like what I've heard at least. Um so to get into a great system, I I I think might be difficult to do through the acquisition. But again, I think this is kind of out of my wheelhouse, so that's probably why we didn't really explore it cuz we didn't really know a lot about it. Yeah. Well, and just to answer that question not my own, but this what Wolf of Franchises has told me, true. Uh it is it is that much harder to break into a brand, but if you can swing it, then it's good because precisely it's like there's a barrier to entry and once you're on the inside, then you as the acquisition entrepreneur can become the acquisitive player and if you you know, prove yourself and other owners around the country know you, you know, you the the deal flow just becomes quite easy and then you can, you know, quickly roll up because the the systems are all integrated and adding another location is is trivial compared to buying a bunch of independent businesses. So, yes, harder to break in, but once you're in, like way less friction to expand through acquisition. Mhm. Okay. Um th- this is this is really great, Jacob. Let's get into some some numbers. You've we've already got into it a little bit. So, you had said that when you looked at these five locations or So, they had they had two or three other franchised locations, third p- third party franchisees. They weren't yet on the FDD cuz one full year hadn't gone by yet. So, you were looking at these five locations, corporate owned, and they were each doing about $100,000 in EBITDA. So, as you know, that $100,000 is way too small to buy a business according to the traditional like self-funded search model. So, this only makes sense if you really have a plan to own multiple, like a minimum of five. Um and and so, what you did is agree to 10. So, talk us through that, like how you thought about um why 10, why not seven, why not 15, um how much that cost, what you have to commit, just, you know, where where how did all this come together into a concrete, you know, investment? Sure. So, I'll start by saying what we know now. Um for these early franchisors, the numbers in the FDD are good guidelines, but they're not like you can't expect that's what you're going to earn. So, in this case, um we think we could do a lot better than $100,000 in EBITDA. Possibly like the the stores that were earning $100,000 in EBITDA in this FDD had like 500, 600 members. We've already got 800 at our first store, and there's no reason that we can't have a thousand. Um however, like the also the late the labor figures that they had in that FDD were a lot lower than we're we're experiencing now. So, it's not like we're just printing money in our first store, and I think I mentioned to you that we invested in a really high-quality manager, and a really um and we also invested in a groomer trainer, which are not you don't need those two people if you're just doing one store. So, all that to say, if I were to go back and evaluate the FDD numbers, I would take it with a bigger grain of salt than I did because I think it's a good it's probably a good like basis to get you interested in the business, but like what it works out to is is very different, at least in our experience, from what we saw there. So, yeah, we saw those numbers and we thought, "Okay, we need to probably do 10 to make it equivalent to the search fund million-dollar EBITDA business that we were kind of considering. And if you think about it, like we signed on for 10 stores to develop over a 4-year time period. So, two stores in the first year, three in the second, um two and then three. So, you know, in theory, at the end of 4 years, you built your 10 stores and then maybe by the fifth year, you're able to hit that million-dollar EBITDA number. So, if you compare that and then it takes about $200,000, you know, for us, we invest about $200,000 of uh of of debt. We get a SBA loan for about $200,000 for each store and then about $100,000 equity. Um so, yeah, you you invest a million dollars of equity, two million dollars of debt, you have a business that does about a million dollars of EBITDA. You compare that to buying, like let's say your landscape company for like four to five times EBITDA. It would it like in our minds, it probably takes you, by the time you start your search to when you execute the deal to when you're like kind of like comfortably managing the business, it probably does take three to four years anyway. So, if you kind of look at the end of four years, it's a pretty similar outcome, we felt like. Um one of them required a lot bigger risk up front and you're also diving into an existing business where you are the outsider and um you're having to adapt whereas like we're sort of building this business from scratch and building the culture and selecting the team and everything. Um So, kind of that was kind of back to comparing this against Yeah, that's great. The numbers So, I I don't know what the latest numbers are to buy a 10-pack as they call it. So, I'll just say like to buy a single unit, you pay $50,000 for the rights to a single unit. I think it goes down to 30,000 if you buy multiple. And again, I don't know what the latest is. Um so, I won't share what we what we did, but um say about 30 50,000 dollars per unit to secure the rights. And then you have a multi-unit development agreement that states the timeline in which you'll develop those stores. Um and if you miss the timeline, then like in theory, I think you could lose um some of those units or or have to sell them back. I think in in practice, most franchisors are pretty flexible as long as you're actively trying to build units and as long as you're like let's say you go and look for a site, you put out you put an LOI, like you work and then you the lease blows up last minute and then you have to start from scratch and it puts you behind a couple of months. The franchisor's probably not going to take away your territory, you know? So, if it takes 5 years, I don't think the franchisor and it's probably depending on who you're working with, which franchisor, but um So, you you you secure the rights and then you pay a royalty, you pay a brand fee, you pay um technology fee. It usually adds up to about 7-ish percent of revenue. Mhm. Um but you got to think about you know, one, the support getting and two, would I have ever gone into the dog grooming business if had it not been for finding Scent Hound? No, you know, like they they're the most valuable for the first couple of years of your operation when you don't know how to operate a dog grooming shop and they're basically teaching you. Yeah. And, you know, once you like we're we're about a year into our first store. We like we've learned a lot. We we we know how to run these stores pretty well now. Um probably less value the franchise or probably less valuable in teaching us that, but um it certainly is worth all the money that you pay in fees, I think to like get to this place. Well, and also that 7% it's not like you're not getting anything from it. I mean, if you were to completely independent business some of those costs you'd have some of those costs anyway, the marketing costs, the CRM, the whatever. And so, I think part of the analysis of choosing which franchise you're going to go with is if if if you feel that your license the licensing fee, right? That's what we call this? The licensing fee? Or no, Uh royalty. The royal the royalty is whatever you're getting in exchange for it makes sense and is is and is fair and is is value for what you're getting. So, it's not a tax. I mean, you you should be getting something in in return. Um and just going back to the the uh that that $30,000 fee and sorry, what was that one called again? The that that outlet? I don't know what they call it. The rights the rights to a unit? this is just like the rights to a unit, right? And what is that? Just a one-time kind of reservation? Like you're That's right. Okay. Okay. And that's financeable? Um yeah, so like for us we counted that toward our equity. Like the SBA loans want to have a certain percentage of your total investment as equity and so, we're able to count that fee as a part of our equity. Okay. And when you were talking about how every every new build is 300 grand, 200 loan, 100 equity is how it broke down. You the the point here in tying into kind of the the effects of compounding you touched on earlier is that the profits from every existing store will go into the to this equity cost for subsequent stores, right? So you're not coming to build your $3 million empire of 10 stores, you're not coming out of pocket a million bucks. I mean, you are, but gradually. Yeah, and and SBA loans you can borrow up to I think 90 and that the percentage goes up the more equity you have. So like our banker told us that in a couple of stores we probably could finance 100% of the store. So if you were to try and minimize the amount of equity, maximize the amount of debt you're going to use, then you probably could get away with our development schedule and it only investing like maybe 400 or 500,000 dollars of equity um because you have cash from early stores to finance the later stores and or you can use more debt in the later store or a higher percentage of the the total investment in debt in later stores because the bank will like count the the cash flow and equity of your early stores when when looking at the later stores. So Yeah, so it's it's in that sense can be I mean, the return on equity can be obviously enormous if you're only investing you know, 400 or 500,000 dollars of equity and then in theory like it let's say St. Charles turns into an Orange Theory Fitness and you have a market in which you can sell these stores into um you know, I think for franchises that don't blow up and don't become um you know, invested in by professional investors, uh from what I hear, the market to sell those stores are like, you know, three, four, five times EBITDA, but if it becomes something where there's some private equity investor that has some strategy of rolling up 150, like um L5 Capital in Atlanta bought a bunch of Orange Theory Fitnesses. They bought like 120 of them. You know, it well if that activity starts to happen, I think it drives up the multiples in the store. So, like in theory, we could potentially sell our tens at a 10 times EBITDA multiple. So, if you did the math on that, the return on equity would be enormous. Obviously, a lot has to go right between now and then. And we And we also like we don't have any we don't have any stated intention of building these and selling them. So, like that's the other beauty of this is they do generate good cash and so it may be that we just want to build this business and we still have a great relationship with our franchise partner and want to hold them and sign on for another 10 years. Mhm. Mhm. And going back to the multiple that you said if you don't have big private equity coming into buying up your buying up your your brand, three, four, five multiples on EBITDA are basically the same as what you'd see on in an in independent businesses. So, are you saying that in your experience, there's no penalty for in in terms of resale value for being part of a franchise brand? I I think this is hearsay for me. I don't have any direct experience in this market. I But I do I have heard that they're actually I think it depends on what market you're talking about. Like if you're talking about for one, the things that influence it are the number of stores you have. So, if you have three stores, that's not really a stand-alone business. Like At least in our in our in our industry, $300,000 EBITDA, you can't afford a area manager. And that goes That's another big part of our decision to do 10 was that we needed enough EBITDA to support an overhead structure. And for us, that really meant an area manager. Um so that we could not be running the stores day-to-day. Um So, if you're looking at that like small store count range, again, I don't I don't I haven't been in this market, but I think it's like low low single digit EBITDA multiple. Um I have heard that there can be a penalty for franchise brands versus independent brands. Like let's take a burger chain, you know? Um if you have an independent brand that has some potential to grow into a new market, then that might have a higher multiple than um than like let's say some Burger Kings that the the potential to like expand that um that business is is lower. So, I think it all depends on probably the individual market and kind of situation looking at. Yeah. Okay. Okay. Um I want to get a a little bit into just the operational stuff that you're talking about and and the management layer. But but first just uh meant to ask this earlier when when we were talking about how you chose Scenthound. Uh just coming at that question from the perspective of kind of new business idea, you know, pure on you know, spitballing on the whiteboard. Like wouldn't this be a cool idea? Wouldn't that be a cool idea? And probably um you've engaged in that. I know I have. And one of the things that you always stress test your your shiny new idea with is well, if this is such a good idea, why hasn't it been done before? And and I feel like you could ask yourself the same about a new a new franchise concept. So, with Scenthound, it's like their doggie grooming isn't isn't brand new. As you said, to the extent that it exists, they're kind of very small little independent mom and pops here and there. What about the question of like, well, this would already be a sizable business, or there would be more bigger, more mature players, or a more mature market at least, if doggie grooming, if there was an app a bigger appetite for doggie grooming. How did you answer that for yourselves? It's a good question. I think that the players in the industry like Petco, PetSmart, they're they're kind of our big competition from a, you know, national chain perspective. I think that those And so, they have the services that we offer. They offer those in their stores. They offer bathing and grooming, and they offer um they offer everything we do. In a different format, they don't do like the membership, um and then and we also um we're pretty different from our kind of focus. We're more focused on health and wellness. So, a part a part of our brand is really uh health and wellness focused. So, your dog needs these basic hygiene um services to stay healthy and to live longer. And we also give a report card of we call it a scent check of skin, coat, ears, nails, teeth with every visit on a score of one to five and some notes. So, um anyways, we do feel like we're positioned pretty differently from Petco, PetSmart, but I think um to answer your question, for one, I think that those guys are big box retailers primarily, and they're more just focused on where most of their money comes from, which is being a great big box retailer. Um so, it kind of makes me think about like Walmart, you know, you know, Walmart may sell like hardware in their stores, but um that's not their focus. I think Petco Pet Smart, they do dog grooming. It's not their focus, so we think we can do it better than they can. Um but it is a good question. I I don't I don't know exactly the answer to your question on like why why they're not why are there like a Great Clips and a Supercuts and five other human haircut chains, but there's no chain of dog grooming chains. I I I think it's a good question and I I don't know why, but I'm glad that we're doing it cuz I I think it could be I could I think it could be in 10 years that there are that that many different options. Yeah. Yeah. Well, you um it seemed like you entertained a little bit of that doubt. Uh and feel that the the results so far, I mean, as you said, like the the um uh those five initial locations, what did you say they had 500 customers and you have eight and think you could you get to a thousand, so that certainly suggests that there's there's more demand than, you know, even your most optimistic projections, but um I want to just Jacob, indulge me cuz cuz I I love this um when I was preparing for our call, this Twitter thread you had from September 6th. Uh so I did I just cuz this is in your own words, you already put it out there for public consumption, I just want to read it back to you cuz it's just it's cool and kind of exciting. So you say, "We're opening February 1 of this year." Um and you opened in Feb 1, 750 members. Um and you say, "I'm convinced picking them the market was the important part." Uh you talk about the dog dog services have serious tailwinds with a lack of high-quality competitors, we've talked about that. Um most pet services are focused on bigger ticket products and services, so that that's the boarding, and you found it an underserved niche. Uh and you say, "I now feel extremely confident in the model. The biggest risk and barrier to successful execution is people. Um and and then you and then you get into into saying basically a apologies for the cliche, but you know, this is a people finding people is the hardest part of this business. So, um so anyway, a lot of that was stuff we've already touched on, but I I liked reading just seeing that um that that Twitter thread of yours uh and the energy behind it. So, let let's uh start wrapping up here Jacob with a little bit more about the people question and and what your layer uh and operations operational layer looks like to the extent it exists at all. I if I recall, your business partner is not full-time in the business, you are, but you guys are not yet paying paying yourselves. So, what does that look like today? Sure. And it's funny you bring up that thread. I think my evolution of how I think about this business went from like when we started looking at franchise opportunities, it was way more like looking at it as an investment. And then it was looking at it as development, building out the store, Facebook ads, marketing, trying to build uh the membership, and now it's like culture and people and how do we build the best team, which again is cliche, but um And do you like that progression or or are you like, wait, this isn't what I signed up for? No, I like it. I I don't think of myself as And I think this is where I need to develop into like the culture builder, the leader of people. I think of myself more of as an engineer, a problem solver, uh like evaluator of problems, but um yeah, I'm enjoying it and I I really do believe that, okay, the market's there, the model is great. If we can build if can attract the best, you know, hourly worker team and build a family environment. And then culture, like when I think of culture, it's like when you look at your co-worker, what do you see them doing? What is the expectation for how you behave in the store? Is that I complain, I'm on my phone, I'm just like kind of looking for ways not to work, or is it I'm I'm competitive like against myself and I'm like happy to be here and like my co-workers are optimistic and like this this this competitive positive environment. I don't think it matters that it's uh hourly worker or BCG. I think having that like sort of healthy competitive and family feel within the store is what will allow us to attract great employees and retain them. Um and at the end of the day like when our customers come and the service they expected to get, they got and it happened on time, then they're going to keep coming and they're going to keep recommending it to their neighbors. So, um So, kind of back into the the management and how we thought about setting this up. So, it's it's different than a lot of our fellow franchisees. Like a lot of fellow franchisees dove in as the manager of the store day-to-day. Um we like purposefully didn't do that because we didn't want to get stuck kind of in that role because I do think there's a risk of you know, it's easy to think about like I'll I'll serve as a manager for 6 months and then I'll hire someone to replace me, but uh I think that's from what I've observed like harder said than done. So, we we went and found a guy who had 15 years of experience managing movie theaters and hotels and uh vitamin shop. Um not dog industry, but like retail management experience. And he's been the best thing that happened to our business. Like, the best thing that happened to our business other than picking Scent Hound. He just um, has taken on this role and like kind of like acts like an owner and has led to the success of both of our stores. And he's going to be the guy that steps into that area manager role. And so, he does all the hiring and firing. He sets all the schedules. He He manages the business day in and day out. I'm a lot more focused on So, my partner and I started together full-time. We quickly realized that it wasn't full-time for both him and I to do this with Bobby, our manager, um, running the day-to-day. So, he went back, got a full-time job. He's still involved. Um, I mean, we still talk all the time. Um, but we have we have Bobby, who started as store manager number one, stepping into an area manager role. And um, yeah, I mean, it's been And so, and then the other big The other big thing that we did was we hired a groomer trainer. So, I think hiring groomers is the hardest part of getting started. And we we found that if we wanted to be able to scale this business, open new stores, we had to find a way to create our own groomers because the haircut that we do for one is not a breed-specific cut. It's not a fancy cut that most groomers are used to performing. We provide like a wellness cut, which is a single-length cut. It takes less time and it's um, it's a lot more efficient. So, we can take someone who's never groomed before and we can take them through as a bather and then take them through our training program. And, you know, within 6 months or so, um, they can do the haircuts. So, we invested in that in that groomer trainer. She has 20 years of experience as a groomer. And that's been a game-changer for us. We've been able to to train six groomers since we hired her like 6 months ago. That all sounds awesome. Um but, you know, a fully mature store makes a 100 grand. And even if yours are over-performing those those five stores in Florida, let's say you're doing 120 or 50 grand optimistically, I feel like that just that all just was spoken for with these two hires and then some. Yep. That's right. So, okay. So, so maybe store number one and store number two So, store number one probably wouldn't be profitable even at full capacity full customer capacity with these two hires to store number It's a little bit profitable. So, we have all of that labor loaded on the store number one and it's a little bit profitable. Okay. If If we were to pull out that extra labor, it would be it would be a great store. Um store number two, like store number one, we're kind of considering as our loss leader. You know, it's like helping support And then store number two is where we should start hitting those those numbers that we expect. Yeah. Yeah. Well, that's that's great. Um okay. And so, store number two, you'll you'll you'll you're aiming for 100 or 100 more 100 or or more than 100,000 in EBITDA. Um and then So, what was it? One the first year, two the next year, three the next year, four the following year? It's two, three, two, three. Okay. So, we we have a we have a lease signed for our third store. We're planning to open around March. And then, honestly, we hope to open a store every three or four months from that point on. And you know, if if we again, if we love the business and we we're two or three years into this, we could definitely see ourselves signing up for a a new territory and doing and doing more because the beauty is once you get into a rhythm and once you have your area manager and once you kind of have like sort of the structure for the business to for the area manager to manage the existing stores then the each incremental store is not that hard. I think the key is like making sure you're building in really good markets because we picked like the very best markets for our first two stores. I think it's important not to like dip your your threshold down um just because you want to build more stores. Yeah. Yeah. Well, I guess you and well and the other thing maybe this is different way of saying what you're saying is that like you worry that your first store your inclination is going to be to put your first store in the most desirable location. And so you just worry that maybe your first store isn't uh you know, representative of what store seven and store 10 will look like. Right. Right. But the other on the flip side store seven okay, you already have six stores um you already you already have an area manager that could in theory cover an additional store. And so I do think that the threshold for you know, the quality of the market might be a little bit lower but um yeah, it's important I think something we haven't talked about it's important to find like what geographic area is is is too big um for your area manager to like support. So to be able to do day trips and to be able to actively manage those stores. So yeah, we're not we're not there yet and we know that doing four in Birmingham is going to be fine. There's plenty of great markets there. Doing six in Nashville is going to be fine. So I think if we were to go sign up for more that would really be where like do we want to go into a new city? Do we like do we will we need to hire a new area manager for that new city or would we rather infill a couple in Nashville Birmingham? So I think that's all TBD. Mhm. And then going to your salary or salary and or the money that you the EBITDA that you're able to take out your your dividend your distribution. What what does that look like? What's the plan for that? Are you you're not paying yourself now I I assume based on my understanding of where the numbers are. right. So, I think we like we're really fortunate to to be able to have income to be able to pay the bills outside of Sit Hound. Um which I do I mean I do think is a a huge part of this equation, you know, um and allowed us to pursue this option um and and and we really just wouldn't be able to pay ourselves um the income we need to to do that otherwise. So, um I I think that within a couple of years we hope to be able to pull start start pulling cash out and again, it's kind of a it'll be a decision at that point whether we want to keep reinvesting in these stores because honestly, the return on equity in investing in Sit Hound stores is higher than anything that we could find elsewhere especially given that kind of the knowledge and and the risk of once you get three or four stores in the risk on that investment I think is a lot lower than once you start out. So, it'll be a kind of a question of like do we want to pull money out um or do we want to use that money to keep building stores? So, yeah, we don't have a definite plan on when we're going to start pulling money out, but I guess for me um as long as the stores are profitable, like that's kind of a like whether we use that money to pay down debt or whether we use it to build new stores or whether we use it as a dividend, it it'll be a it'll be a question at the time of like what makes the most sense, but the most important thing is that the business is generating cash, you know? Sure. Sure. Sure, but I but I also do think it's under it's important for the listener to consider like if they if they need to be taking salary out of their acquisition. Yeah. What what that would look like or not look like in your case. Um Well, I do think you know, kind of like if I were to do this um and I needed a a salary, I do think that there are a lot of people interested in investing in opportunities like these. And so, I think you could structure something similar to a um a traditional search fund where you get paid a salary or some kind of management fee and still have a really attractive return on an investment or return on equity for your investors. So, um I do think this this sort of business could lend itself well to um having an outside investor. Interesting. Especially like a single like if you were to have like a wealthy individual because the check sizes are not huge, you know? So, it doesn't need to be like some fund or something. Yeah, because the actual cost here to get something going are not super high. Yeah, I think you could certainly structure something especially if you were not partnered up. I think you could certainly structure something with a investor. Um let's say you had an investor provide all of the equity um and co-sign the loan with you. I I think you could certainly say something like where you took like a low salary for a few years and then you shared you earn an equity um portion over time and it still would be an attractive investment for an outside investor. So, I I definitely think you could set this up kind of like a traditional search fund to make the economics work. Mhm. Interesting. Well, Jacob, let's close on um uh a brainstorming a little bit. So, I I just did a quick search for Scent Hound in my area. I'm in the DC metropolitan area. I'm in Arlington, Virginia, specifically. And I see one Scent Hound only in Fairfax, about 25 minutes from me. 47 reviews, 4.9 stars on Google. So, people are happy. Seems to be doing well. Um but I would imagine my area is a very strong area for something like this just cuz it's a the DC area is very healthy economically. A lot of counties here are always on the top 10 list for for for income per capita. Um so, and then there's Baltimore to the north. So, we got a lot of population. Um what's the play here? Do I Do I go to Scent Hound corporate and say, "Let me build out new territories."? Should I do an ETA uh approach and approach the the Fairfax owner and say, "Let me buy your location." and and then go and then be the only game in town and start building out units after learning from this successful operator? You know, what would you do if you were sitting up here in DC? Yeah, I think the ETA route is probably too early in this brand. There may be some opportunities of franchisees that want to exit for some reason or the other, but you're basically buying their territory. They may have like one or two stores that are up and running. Um but it's not like you're buying a Midas or something like and being able to roll up a bunch of stores. There's just not really many mature stores out there. So, there might be an opportunity here and there. I don't think in your area there is. Um but yeah, setting up setting up a phone call with Scent Hound Mhm. Um they'll be able to tell you more on available markets, available territories. They're also looking for certain candidates, you know, so that they do have a process of evaluation. They're looking for, you know, people with the right financial um background, like they they need to have minimum liquid net worth, things like that. And then also they're looking for people with the right experience. Um so in theory they're not going to just let anybody sign up for one of these. Um but you set up a call, you'll have an intro call with sort of the salesperson there, and then it's sort of a process. A lot of people will reach out to existing franchisees like me. Sometimes I'll host a call with six or eight prospective franchisees and do a Q&A. Um that's the best way because the franchisor is not allowed to tell you a lot of things because there's like certain rules around um what they can and can't say cuz they can't like you know, make any performance claims. And so the best thing to do is speak with the existing franchisees and get their experience. Um so you'll talk with franchisees and then you'll have a I can't remember what they call meet the pack is what they call it. Um you go down to South Florida and you spend a day or two with the management team and you do like a short presentation and um that's kind of the final step of you get approved for your um territories you're looking for. And yeah, and then it's you know, maybe six or eight months between then and when you can open your first store. Mhm. Mhm. Or for the listeners out there, they're happy to reach out to me directly. J Lee at senthound.com. I'm happy to answer any questions or help get that process started. And so are you you had I think you said there are 50 locations now around the country, 50 Scent Hounds around the country? Um I think it's more like 30. Um it changes every month, but it's more like 35-ish. And so have you been reached out to by many of these folks because Yeah, and and I've already just seen franchise you now. I did um I we did we used this process heavily when we were evaluating franchises. We spoke with a ton from a bunch of different systems. So, I try to be as open and um available as possible to help people out. And then we also do like a Sit 'n Hound will designate a franchisee for doing these um you know, get to know you phone calls. So, I I'll do that for a few months where every every 2 3 weeks I'll host like a 30-minute phone call to help people out. So, I've done six or eight of these. Cool. Well, Jacob, you in that Twitter thread that I that I uh referenced earlier, you ended by saying um "On a side note, professionally, this has been the most rewarding {slash} fun thing I have ever done. A 100 X better than management consulting even though washing even though washing dogs is much less glamorous." So, is that that still pretty much how you feel? Less glamorous, but more fun? Yeah, it really is. I mean for a lot of reasons, you know, personally um you know, being able to prioritize the things that I care about you know, being able to build relationships with guys like Bobby who's our our manager and invest in him and like see him grow and um like have an opportunity to have a real leadership role in this growing company that and to be able to like sort of be a part in creating that is really fulfilling to me. Um being able to go into the store see something that we could do better go back to the office and like think about it and build a process document or whatever and then go and implement it and see that thing improve is is like my favorite thing to do. Uh like another example is um you know, we have a sales process of people click on a Facebook ad, they put in their information, we get a lead. And I'd spend a couple of weeks like building out a better CRM process where the lead will fall into the CRM and then we can automatically text and email them. And then going from having a Google Sheet to manage that to having the CRM and seeing the efficiency we gain and like the the improvement in conversion and results, that's the sort of stuff I love to do. So Totally. um Me, too. All for all those reasons and then also just yeah, the the whole idea of building a business that you own. Like this this is a cool thing um and to have you know, hopefully a business that has some outside value um is an exciting proposition to me. So 100% you know, even if Yeah. This is is probably the end of my career in the corporate world if I had to guess. This is probably it. I don't think I can go back. And the question of franchising that we already that we touched on at the top and and and um you know, the the bias against franchising that so many people have, is that all a distant memory for you? It's like it doesn't matter. You're you're under the Scent Hound umbrella. You're like you don't even think about it. No, I think I I like I was at a Christmas party the other night and you know, hey, what do you do? Oh, I'm uh insurance broker. What do you do? Oh, I just opened a dog grooming shop. People are like, oh, okay. Like it's still kind of funny, but I like sort of take pride in it a little bit. Like I I don't know. I I I try and I think we talked about this before, you know, one of my personal um goals is to not let the world, not let other people sort of define what's valuable to me and I think this is a exercise in that like I tried to you know stay true to what is what I think is valuable and this this extends to to my career you know like I don't want to care about what people think when I tell them I work at or I have a dog grooming shop instead of like I'm a consultant at BCG so yeah it's it's kind of funny that I get the looks from people when you say you own a dog grooming shop in in that setting. Well we we could all stand to be a little less tied to our egos I know I I could so it's awesome that you're that you're proactive about that in yourself. Jacob what a fun and interesting conversation and story. Thanks very much for coming on and and just being so transparent sharing so much about your thinking here the numbers your plan all of it. Great great conversation. Thank you very much. Absolutely I'm honored Will. And and congratulations. I mean I I I it's a it's a a really neat path that you're on now too so. Yeah thank you so much and and again if anybody wants to talk more or wants to hear more details I'm happy to exchange emails or hop on a phone call um and my email is jlee@sahand.com so I'm always available. All right Jacob thanks very much man until next time. Absolutely have a good one. I hope you enjoyed that conversation with Jacob Lee. Make sure you subscribe to the channel here. Once sometimes twice per week I'm releasing new interviews with people who have bought businesses. So lots more great stories to come stories that will help you along your journey to buy a business.