How I Decide Where the Next Location Goes | 359

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Transcript

SPEAKER_00 0:00

Welcome back to the Business of Beers Podcast, your daily dose of strategies, tools, and tips to help you build an eight-figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.

SPEAKER_01 0:41

And what what I think about is how do I fill in the gaps? Like, how do I fill in, like, oh, we have this, we have a huge gap like right here. Like, it'd be great to get a store here. Or I just know, like, hey, it'd be great to get a store here because it's in between two of my stores. Like, I would much rather try to fill in gaps than I would say, hey, let me buy some random store up in up in Scranton. Um, and so for this store, it said it was in uh media. And let me just put media. Okay. Not no, that's not it. Okay, media is down here. So so that would be the first, I'm like, okay, it's like definitely within my footprint. It would really depend on how close it is to like an existing store. And you don't want to cannibalize yourself. So in our business, we we can generally go about 15-minute drive is kind of the like unofficial protected radius. And so if it's like 15 minutes here and 15 minutes there, I'm probably fine. But we would run we would run some analysis to figure out do we think we're gonna like uh lose customers over it. But uh generally people don't go that far to get the cars fixed, so it's probably fine. Yeah, they do acknowledge that it's a 33% margin. Uh uh owner train mechanic, it's because the owner is the mechanic, is is is the answer. Um okay, yeah. So it's got one full-time employee um who is the mechanic. And it's two bays, and it's got two lifts, and uh whatever, $100,000. It's 1,300 square feet. Oh, and you give us rent, $2,700. So so for for me, like our minimum is like five. And so if I was looking at this, I would immediately say, hey, no, this isn't gonna work. Two, I I can't make it work with with two bays. If it was four, I could I'd if it was like a really good spot, I I would consider it. Um but you know, in this in this case, it's too small and it's um you know, it's it's just too there's just like not enough money. And so for you, if like you were said, hey, I want to get an automotive, I want to buy an independent shop, I don't care about the franchise thing, like your challenge with this one is the owner is the technician uh and and the manager. And so if you have no technical skills, this one's gonna be pretty hard for you to make any money. Now, if you were an owner, if you were a technician or a manager and you had like the skills, and you know, you could buy this thing and make 120 grand a year. It's it's that's cash flow, but you still have to get debt. And so really you're making 70 grand a year, and so then it's this question of how much more revenue can you do um to know if it's to know if it's worth it. Similar for Jiffy Lube, like a couple things, or any, any, any uh quick lube place, they all have the same exact principles, which are it has to be a a really good location, like your entire business is volume, it's people going in and out and in and out and in and out. And so you would want to make sure that the location itself is on a very high uh a high traffic area. So, like by me, like uh like I know this one. So, so what you'd want to do is go around and look at find out where the all the other ones are. So, like this one's you know, it's a major road. Obviously, it's like construction. There's there's a Wendy's, there's a Chick-fil-A like right over there. There's there's just a there's a ton of traffic in these two major intersections, so perfect spot for like a high traffic uh location. So that that was that is like the first thing you would look at. Now you would hope that the it wouldn't be a location if it didn't already get vetted. Like that that would be the nice thing potentially about buying an existing one is uh you would hope that the brand has pretty strict ones, like this, for example, again, this is like 202, the King of Pressure Mall. If I mean this is like one of the biggest malls in America, is like literally right here, and so tons of traffic. Um so that would be that is gonna be one of your first indicator of success. Is do you have a lot of traffic on the on the nearby? Then the second you're gonna be looking at is you know the the the staff and in a in a especially in a quick loop business is an extremely uh process-driven business in terms of like you're gonna have high turnover of people, and what you're really looking for are um kind of the ability for people to to get in and out and in and out. How I'd scale, so to two to two different ways. One, if I was in an independent, um I would I would roll up other independents and I'd get them, I'd get them branded in my same brand. So, whatever if I called it Brian's Quick Lube, like I would try to buy up other ones and I would want to keep them under the same brand. It's easier for you to like build reputation and stuff. Uh there's a one there's a that there's a bunch that do build outs. Like I have a friend um who's the franchise or of a brand called Costa Oil. So this is a this is a franchise that does like affordable oil changes, and um he they have like a hundred, I don't know, I don't even I don't know how many locations they have. They have a lot. But but his model is he goes out and he finds like literally a plot of land on the outskirts of a thing and he builds a store from from zero. Like so he finds land and builds new stores, and he can he can he can build them at a very like affordable price. Um and so that that would be one way I would look to scale it a lot lot harder here in if you live in a major city, that is a that is very hard to do based just on the cost of real estate and like how much you can make. But um, you know, he his locations or his franchises are all over the country, and they are in some markets where real estate's a lot cheaper. And you know, his model is is like we're gonna buy real estate cheap, we are gonna build them cheap, and we are gonna we are gonna offer low low-cost oil changes to customers, and we're gonna do very high volume. And so I I think I think the big thing in here is just know what like where you're positioned if you're gonna do that model, or if you're gonna be like, hey, I want to be a premium, um, you know, a premium guy or like whatever. We've looked at doing some new builds, but it's like two and a half million dollars for like like just like a rough so so here's like bec becomes a challenge. So so let's say I had to go and I wanted to buy buy land and and build something out. Okay, this is like the rough number. So let's say I have a store that does um my my say my average store is like 1.4 million, so probably a little bit higher than that, but let's say we cash flow 200k a store, uh so like 14% roughly. So if if I had to go and and do a build out, so I had to go and buy land and build, or I found some like a CVS that I wanted to convert into an automotive shop or like whatever. Like I'd probably have to put 20% down. I'd probably get a 20-year term because we're buying the real estate, and and this includes construction and stuff too. Um it's probably gonna be 7%, maybe 6.8 or something. It's like not gonna vary that month. But like look at that, like my payment's gonna be $15,000 annual at $183,000. My net, even making cash flow in quote unquote $200K, my net $16,000. Now, granted, I I am gonna have this includes a my rent, back to that like whole rent thing. So let's say, you know, let's say I didn't have to pay rent, um, and I and I pay myself $100K, let's say I pay my hundred myself $100K in rent, whatever. So yeah, maybe I'm at what $116K after after debt payments, but like for me to really make this work, um, and to be to be worth the time and the effort and all the things, like I I mean, a the store would just have to make more money, right? It's like I would need the store needs to be uh, you know, whatever, making making 500k in order to make enough that I make it feels worth it. And the challenge for me is like I just don't know, I don't I don't have like a guarantee, quote unquote, that that store is gonna make the big money. I know it's gonna make at least 200k. Uh so if I can go and buy buy you know a shop for one 1.5 uh and this once again back, like this you have to add back rent here, so the numbers get better. But like now an average store, I could I can make a hundred grand a year, I have a 30% return. Like, okay, and it's in my market, and I'm buying real estate, like okay, like I'm I'm like like I would pay one five, right? Uh I try I try to buy them for like one four, one three, one two, something in that range, but it's much harder these days.