YouSaid · the spoken record

Matt Perelman

lines on the record: 72
first: 2024-10-15
most recent: 2024-10-15
sittings or episodes: 1
sources: podcast

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“Her brainchild. She was the one who really suggested we start working together 12 or 13 years ago. And then look, the guys at RBI, restaurant brins international who owns Burger King, they gave us a shot to enter their system and become franchisees when every single other tier one franchise or shut the door on us when we were 26 years old. And I don't think they did it out of the goodness of their heart. I think they thought that we were onto something and we could help them consolidate their system and grow their royalty stream, but we are forever grateful. Dan Schwartz, Paul Friborg, Alex Macedo, we simply wouldn't be sitting here today had they not seen something in us back then. It's so true, Paul Friborg, who's been my mentor for 20 years and was on the board, Daniel, Josh Cobza as well, Macedo. And Brian Feinstein, by who I know you know and have interviewed who was extremely helpful in that as well.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Grateful to my incredible wife, but also partners in life. And Matt is much more than just a business partner, family, and I want to make sure I add that to the list. I also should mention my wife has known Alex longer than I have. They went from preschool through college together. And it's true story. GSB.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“And parents helped us with homework. They were home for dinner every single night. Very loving, supportive family role models. They were also extremely tough. And their bar for success, ambition, hard work was always extremely high and is extremely high. And we're forever thankful to them, for our siblings. And we talked to our parents, our siblings, our family, each other every single day. forever grateful. Yeah, I would certainly agree with that. My parents are as important, impactful, and meaningful, and motivating as Alex is, who I know very well and love dearly. My wife and Alex's wife have also picked us both up off the floor many times over the last 11 years of doing this together, and we'd be broken destitute certainly without them. I do have to add one of the best learnings from my parents was picking the right partner. And certainly my wife, I'm not sure I could say I picked her. She more picked me forever.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Benefited massively from our LPs over the last 11 years. And we were originally put in business by a number of family offices of people who had built asset management firms and those people have, I'm sure, forgotten more about investing than we'll ever learn. And we did and continue to lean on them and rely on them for everything in terms of guidance and mentorship and being as thoughtful as possible about building the team and whatever the problem children in the portfolio are. And Royce Yudkoff, who is our HBS professor, or professor of business school rather, who founded Abrey, who's the RY and Abri. He took us under his wing twelve, thirteen years ago and forever changed our life by his guidance and introducing us to Abriel P. and just being there for the darkest days of COVID on the phone and we wouldn't be here without people like that.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“We also both recognize that there's a 0% chance we could do this by ourselves. Some people can find that incredible to be able to withstand the woes by yourself and still fight back to the highs. I couldn't do it. I think Alex would agree that he couldn't do it. And having the other person to balance, yes, this is awful, but here's the light at the end of the tunnel and we got to fight. And by the way, you have to fight. There's no alternative. If we were ever very low at the same time, that'd be really bad, but that hasn't happened yet.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Disagree every single day about everything. That's the process that hopefully drives at least the outcomes we've had so far. But I would say it's never personal, but it's always personal because we know each other so well in a loving way, like here is your bias that you're bringing into this, you effing idiot. And because we've known each other for over 30 years, you can say those things and go out to dinner that night. And that's Tuesday. You have to remember we have three meals together, four days a week, every Monday through Thursday, breakfast, lunch, and dinner every single day for 11 years. There's things that I could say to him that if I said to my wife, I'd be living on the street.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Never wasted a good crisis. Some of our best deals were done in April of 2020 in the depths of the COVID crisis and God bless undrawn debt financing and committed equity capital, but we have the luxury of being able to go on offense at those times. And that's where, at least in our experience, you can really generate the excess return per unit of risk you're taking. And we certainly wouldn't be able to do that in 2015 as much as we can in 2024 because we didn't have a fund back then. We didn't have committed capital. We probably weren't able to get the size of undrawn committed debt facilities as well as obviously equity as we can today. But today with 2.3 billion of AUM, tons of undrawn capital, both in the fund and the portfolio level through DLOX development lines of credit and that sort of thing. Shame on us if we can't take advantage of crisis.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think a couple thoughts on sickleity. One is private equity, at least in the US, has a tendency towards recency bias, both in terms of what they think the underlying cash flows of a business is, the distribution of outcomes tends to skew towards what's focused a lot on the last 12 months and less so on three years ago in terms of underlying earnings, as well as what is the right multiple for this business. It's the last 12 deals of traded X, so it's probably close to X. I think both those things ignore that, at least in our world where everything we touch touches the US consumer, there's cyclical elements to both those things, both in terms of the underlying cash flow and what the appropriate market multiple. for these businesses is and so we like to diligence not only the earning streams over cyclists but also the valuation across cycles the other reason why we're so focused on cyclicality and it's probably because our portfolio was so in the eye of the storm of COVID is”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think I would sum it up in terms of liquidity in downside scenarios is always worth. And zeros, both of which we actively try to avoid.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that people our age don't have a full enough appreciation for what Michael Milken both built and set into effect in terms of his creation, in terms of high yield securities, spawned the ability for private equity to exist at the speed, size, and scale that it is today. And we always get disappointed when we interview younger people. And we ask about that time period and they look at us like blankly. And I think a lot of the thoughtfulness of that era and obviously there were excesses too, but a lot of the thoughtfulness is lost amongst people in their 30s and 40s today. And I think it's important to reread that and appreciate it. And since buyering, you had people in that book who are our age who built some of the most incredible, successful companies on earth when they were even less experienced than we were at the time with far less of a roadmap. We stand on the shoulders of those giants and benefit from that. They didn't have that.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“That we have massively benefited from that. And because of that, we are students of history. You've seen some of the books in our office and we've sent you them. We have pretty much every finance book written from 1979 to 2023. We read them religiously. We reread Predator's Ball, which is the story that started them all every January. And we have a very healthy appreciation of cycles. And having an appreciation of that and how it informs capital structure and valuation and liquidity, I think we have a better appreciation of that than most people our age and certainly not nearly as good of appreciation of it of people who have lived it. But fortunately, we have mentors around us who have.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“And we give a list to every prospective partner of everyone we've ever done a deal with. And we say, call them all. And we encourage them mostly to call founders and partners of companies we've sold so they can see they all work with us. There's no longer any sort of incentive for them not to tell the truth. And what they'll say is we do what we say we're going to do and we work really hard. We are difficult. We're rigorous. We're analytical. There are bumps in the road, but our incentives are aligned and we have funnel on the way. The other thing which relates to that in terms of sourcing deals is we're relatively young. We're both in our weight 30s. And a lot of people who graduated college at a similar time period that we did. We graduated during the GFC. The world's been pretty up into the right since then. There's been a lot of investors who have incredible track records since then and how much of that is beta versus alpha. A lot of it tends to be levered beta. And I think we're smart enough to know.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think a lot of our best deals come from the virality of relationships within the portfolio itself. We've had a number of really successful deals and ultimate outcomes that were sourced by relationships driven by CEOs and founders that we had previously done business with. That's gotten a lot easier today where we have 27 of those people times X amount of network and Y amount of phone calls versus seven, eight years ago there were five of them. Our goal is to be the capital partners of choice for founders and business owners around the country. And that is how we built our firm. And that's how we approach every relationship. It's a repeat game for us part of why we tell founders we're going to disagree and they're going to be ups and downs. But if we screw you somehow, it's not just about this one deal. It's about how you talk about us in the market.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Every quarter along with our quarterly letter, we talk about it all the time maintaining that culture for us is the thing we worry most about as we grow and we're extremely focused on it. That's right. The only other thing I would add is I think to the extent we've been successful over the last 10, 11 years, we've been able to price quality. And sometimes that means X free cash flow and sometimes that means a lower free cash flow for higher quality. And I think to the extent that we can continue to price things well and not overpay, I think that's driven a lot of the results so far.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“We believe our culture is a huge part of what has driven the returns and what allows us to win deals and build value for our partner businesses. And Matt and I are very focused that as the team has grown, we have 25 investment professionals, 20 operating partners and operating executives, got a team of 11 in a back office. How do we maintain that culture and make sure that we maintain the ownership culture, the values that we believe have made us successful? And we send every year our two favorite books as a holiday gift to all of our partners. And one of them a few years ago was the Michael Dell autobiography, Play Nice But Wynne. It's a book we loved. And one of the takeaways from that book was as he was growing his business, he felt that the Challenger culture was what allowed him to win against the sort of coastal larger players. And he wrote down his core values and he sent it out to the whole team. That really inspired us. We did the same thing and our core values document hangs and the bullpen in our office. We send it out.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Learned so much from staying on the boards of businesses that we've sold and rolling over and watching some of these firms and how they create value. And our goal in anytime we travel, we make a point to go see every one of our competitors, even if we're not traveling for that business and discipline we learned early on from an incredible operator in franchise world was very easy to hate on your competitors. The goal in every single competitive site visit is to take three nuggets, three positives. You can't walk out of a competitor without seeing three positive things from that site visit. We do the same with sponsors. Sometimes we'll joke that you don't want to meet your heroes because we feel good about proud of our own firm, but we always try to take what are the positives away from it. And every one of the boards that we've been involved with and the businesses we've been involved with after we've sold a business, we've learned a lot that we can then take to our businesses.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“But that we have a consistent track record of doing it across markets. So we'll start a roll up that's in two DMAs and four years later. It's in seven. And importantly, the band of outcomes within those 70MAs is very narrow. So they can underwrite. Yes, I'm going to pay a higher price on a free cash flow yield basis or a lower free cash yield basis than perhaps these guys created it at, but they've built the professional engine for me to take this business from 50 to 200. And we've gotten paid.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have call it 2.3, 2.4 billion of AUM. On average, we are selling these businesses to people who have two to four times that amount. So they're five to $10 billion private equity firms. We are typically scaling these consolidations up to, call it $15 to $40 million of free cash flow. That's where we found is a real sweet spot where you have just very large addressable market of potential buyers. You have all of the U.S. middle market that spends time in these businesses looking at them, and you even have some of the larger guys who are coming down market to start a consolidation and then grow it dramatically. So we build these businesses up to 15 to 40 million of EBITDA, and then we sell them to larger private equity firms. I think in large part what they're looking for is consistency, professionalization, and scale across multiple markets. And at least in our rollups, we've gotten paid historically to show that it works not just in one micro market or”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“The secular growth is unparalleled. There is just more people spending more money every month to put their kids into extracurricular programming than there was the same month last year. And that's been consistent. Obviously, take away a few months from COVID. Over the last 10 years, and the vast majority of the growth in that category has been driven by traffic, not priced. You can't ignore that. You have to spend time on it.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Very afraid to invest in the next curves, which had X amount of thousands of units in 10, 15, 20 years ago. And today, obviously, does not. One of the reasons why we like Planet Fitness, it's so big. The ad budget is so much bigger than the next five guys combined that there's real moat in terms of the fact that they have 20 plus million customers across the US. And the brand really does mean something.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“We love auto services businesses that take advantage of the fact that the US has an 11 and a half year average age of car on the road. This is a car economy. There's almost as many cars in the country as there are people, and they tend to be very old. And so we like auto services businesses that take advantage of both the age of the automobile, the car park in the US, and the fact that for the majority of the US, a car, particularly in 2024, is their largest asset and they're going to be inclined to need to fix it to get to work and that sort of thing. And we focus on mission critical auto services businesses. And the one business we lost money on that we referenced earlier that was focused on what we call Cosmo, cosmetic collision or changing the paint color of a car or things that are discretionary in cosmetic today in auto services everything we own and invest in is mission critical and it tends to be paid for by the insurance company.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“We're not trying to bring that down to 25. But if the industry averages 130 and we're at 110, that 20% point gap is worth an unbelievable amount of money to us. It is one of the benefits of investing in businesses that perhaps are fifteen or twenty percent EBITDA margin businesses and not forty-five percent margin businesses. Obviously 45 is better than fifteen. But the difference being if you take a 45% margin business and you make it 48% you certainly have grown equity value and that's great. But if you take a 15% margin business and you grow up to 18%, that has a far more outsized impact on the underlying equity value just because the swing as a percentage in terms of EBITDA growth and overall free cash flow conversion is much more meaningful. And that's where we play.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Fore We're not power law people. Sounds great. We're more driven by consistency. And I think it's part of like we've never had a zero. We certainly don't plan to. But if you look at our returns, it's the opposite power.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Seeing the incentive structures that we put in place alongside the family or the CEO pay out, we do all the obvious stuff in terms of management option pool and that sort of stuff. But over the last 10 years, we've come up with, I think, additional creative ways to incentivize people. And for example, for any team member, CEO down to regional manager, every new dollar, not rollover, but every fresh dollar that they write into a deal, which is obviously same security as us side by side with our security, we give them one-to-one additional options on that dollar. So put aside your base management option grant. If you write a check, not roll over, if you write a check for another 100 grand, we will give you on top of that another hundred grand in terms of option allocation and seeing people do that and then three, four, five years later when it pays out and holy shit, it worked. That never gets old.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“The other best part, I guess there's a lot of best parts, it's like Howard Marx is the most important thing. There's like 40 things over and over.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Would say the most fun part is that we get to do it together doing this shoulder to shoulder side by side, which is awesome. I would say the other most fun part, I think you agree with this, Alex, is getting to know the entrepreneurs, getting to know their families, and then figuring out with them what the path the success is. And we've been fortunate that we've had some unbelievably impressive partners over the last decade. And just getting to know them and seeing whatever the crease is in terms of what the opportunity to grow and scale their business and for whatever reason why they need someone else's help or counsel or capital or whatever it is, that's super fun. And then ringing the bell with them at the end of that rainbow.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“It is, that's enabling us to continue the consolidation and to do it in a really capital efficient way and to de-risk it because A, we've replaced our equity with someone else's capital. And B, the business is bigger, more scaled, more professionalized, and more able to absorb the things that come along with leverage.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's unusual. Yeah, I think it's probably unusual. It's also just because. We've done 27 of them and more and more from the one that didn't go well, certainly than the other 26. But in large part, that did not go well from leverage up front. And by the way, had we used more leverage over the last 10 years, at least in Microsoft Excel, our returns would be a lot higher, but we probably wouldn't have the sub 1% loss ratio that we have today. I think that certainly would have tripped us up in COVID. And so oftentimes we're starting these consolidations with zero leverage, but we're entering a start small scale fast consolidation at a nearly 20% in place for cash flow yield. So you don't need a ton of leverage to make the math work. Once we get these consolidations scaled and professionalized to call it north of $10 million of cash flow, then we're back covering the business and swapping our equity cost of capital for debt costs of capital and whatever that is today, 8, 9% or so. And that undrawn development line of credit revolver, whatever.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Investing in businesses at two or three times the going in valuation that we do just because you have free cash flow yield. If you're buying something at 50x is going to be pretty low, super simplistically one divided by 15, knock off some taxes and working capital and that sort of thing. You need to really grow the hell out of that business to generate a 3x. In our world, perhaps oftentimes because we're starting smaller and a smaller less diversified business is just fundamentally more risky and worth not fifteen times. Our view is we've been doing this for 10 years. We're pretty good in terms of professionalizing and scaling these businesses. We should be able to beat that 3x on the right.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Look, we always say our mission at GSP is to generate excess return per unit of risk and to do it with consistency. So whenever we're looking at a deal, we price it to generate a 3x. That's our underwrite, a 3x MOIC in five years. We've had 10 exits. The weighted average of those exits has been meaningfully above 3. That's happened in a shorter time period than five years. So historically, we've beat that. We've also had the benefit of investing behind the U.S. consumer for the last decade, which is a terrific place to be for all the obvious reasons. Our view is if you're investing in any of these brands and you can create the new unit for sub three times or you can buy the next incremental bolt on and attractively high free cash flow yield, you should be generating 3x plus. We certainly don't feel like that's heroics. I think it's far more heroic the people who generate 3, 4, 5x outcomes”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Rainbow, and we're not smart enough to buy things at 20 times EBITDA and generate 3x MOICs off of that. That's really hard. I love how in your deck it says roll-ups are really, really, really, really...”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Not take those brands to new markets. That's really hard. Dalex's point just because everyone in Pittsburgh loves Permante Brothers, which is one of the brands we own in that consolidation, that doesn't mean that people in South Carolina are going to just because perhaps the demos in certain submarkets may look similar. It's also why we tend to focus a lot on purchase price. Our view is if you buy something at a really high in-place free cash flow or a relative high in-place free cash flow to generate a really attractive return, you don't need to believe that you're taking it to new markets and convincing consumers to try it, meaning if you buy something at $12, $13, $14, $15 times cash flow and you're underwriting making three acts, particularly when an environment where perhaps you can't get as much leverage as you used to, you need to really grow that business to make that return. Whereas if you're buying something for, let's say, six and a half or seven times cash flow, there's just obvious mathematical, obvious reasons. You need to grow it far less to make a similar MOIC at the end of that.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Us, when we look at a concept and think about underwriting growth, the quartile analysis is one of the most important parts of our diligence process. So we try to see how dispersed are the unity economics. Is it Cortile one is driving all the returns and is there inconsistency, I should say, in the quartile analysis? And that's because if we're underwriting growth and we're growth investors, is the next unit going to look more like a quartile for a unit or a quartile one unit? We won't invest in concepts that don't have consistent quartile analyses because we just our view is again, it's really hard to predict the future. We're not going to take that risk. Yeah, we have a consolidation, a roll-up. We call them regional fortress restaurant brands. It's called Authentic Restaurant Brands. We go around the country buying these regional businesses that are beloved by their customers and their core geography. We always say if a brand has customers who have tattoos of that brand on their arm, that's an ARB authentic restaurant brand type of brand. But importantly, we do.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“So you would win based on service, reputation, and brand, not price, if you get, God forbid, into a serious collision wreck, your insurance company is paying for it, whether the Dow's at forty thousand, thirty thousand, or ten thousand. And I think that's critical in terms of driving a cyclicality. I will say though, Patrick, I think it's really hard to build a brand, build new economy. We're not smart enough to do it. Plenty of your guests who are, and that's amazing, we would say we're not that smart. We love what we do is we feel like it's very simple. And the US consumer, what a consumer likes in Texas may not be what they like in Ohio, may not be what they like in Arizona or in California or in other parts. And we have a few of our friends in public markets investing and it cracks us up. We call it hedge fund math when they're looking at, oh, Chipotle has X number of stores per head in this market and Pro forma run rate looking at other sort of public restaurant or other multina concepts and trying to apply those growth rates. It was like, it is really hard to scale these businesses. And for us.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“To focus on or think the most about? I think the things that drive success in a lot of these multi-unit businesses is both obvious statement, the unit level economics I mentioned earlier that we're only investing in concepts that are north of 20% at the store level in terms of store level cash flow. And so building a business that has a cost profile that enables that, I think, is critical. I think being on the right side of tailwinds, whatever those tailwinds are for a particular industry is critical. Everyone knows the Buffett quote of the management team with a great reputation meets an industry known for difficulty and the industry survives with its reputation intact. Yeah, I think that's critical. Don't bet against tailwinds. I think figuring out who the ultimate end market in pay or is critical, the collision repair business we invested in, we love businesses. We're the customer, the decision maker, is not the ultimate payoff. So in that scenario, insurance companies were the payers.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Every decision we're going to make is so that when that private equity partner sits around their investment committee table, they're talking about this platform that they have to own. We want each of our companies to be at the very top of our private equity firm's hit list. As I think about the features of these different unit level businesses, I'd love to take everything you've learned and apply it to somebody that wants to start a new concept, something that doesn't exist yet. And I'm curious what variables pop to mind too for me or obviously brand I'm sure is really important, but I'm curious what you've learned about what a good brand is in this kind of space. Something like frequency of use could be interesting, auto repair. I'm not doing that very often. Burger King, maybe I'm doing it three times a week or something. So here's how something like frequency plays into this. But if you were just teach a class at Harvard or something, like, okay, everyone in this class wants to launch a new concept that hopefully can get to thousands of units or something. What advice would you give them about the variable?”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Felt like we were in the wilderness the wrong side of what LPs were looking for in institutional firms. We cared a lot about purchase price. We talked about that. We use very moderate amounts of leverage, tons of liquidity. And we sell things. We sell companies, all of our funds. They have been top five percent in each of the fun vintages in terms of DPI. DPI is returning capital. That's a big part of our model. And the first thing we do whenever we invest in a business at the first board meeting is what we call writing the sim exercise. So we actually write the sale. We write the sale memo, the sale document that we want the investment banks to take out to private equity firms and strategics five years later. And every single decision that gets made over the next five years, or in our case, three years, refers back to that document. And we are constantly thinking about the exit and the sale. And our sourcing process is very clear with our prospective partners. That is the goal. Investors give us a dollar. Our goal is to give them $3 back.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Position their businesses to maximize value. And just to provide some color there. So we've done 27 different DLs or 27 different businesses. We've been the first institutional capital into 25 of them. So the vast majority of the time we're partnering with a founder or with a family or with an entrepreneurial management team and we're buying anywhere from 50 to 90 percent of the business. And then we are helping them not only turbocharge the growth of that business, perhaps the family over the last 30 years built up 50 unit business and we're saying over the next five years we're going to build it to 200 units. It's obviously a different trajectory that requires meaningful investment in terms of G&A, but we're also professionalizing the business and diversifying the sources of those cash flow streams across markets and geography. To Alex's point, to sell it to a private equity firm, typically one or two notches above us on the size food chain of private equity. The first seven or eight years of doing this.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Common rule of law, financing. And we estimate for the size companies we target, again, we don't really invest on the coast, it's over a trillion dollar TAM. It's a massive market. And in some sense, we're building a firm to serve as real partner capital to baby boomers and small business owners. There's 10 trillion of business value that is expected to transition over the next two decades from baby boomers. There's six trillion, whatever the number is, of private equity going after that market. One of our mentors and LPs calls us a bill to suit firm for the Leonard Greens, odd axes, sentinels of the world. And we love that framing. We're building a firm. We want to be the partners of choice to these founders, business owners, entrepreneurs throughout the country, and bridge that bridge to Wall Street.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Double click and dig in, but everything we've invested in, every multi-unit business we've invested in over the last few years has been the number one highest average unit volume, sales per box in its category. Every concept has at least 20% stroll of a margins. This is true of the last five or six years, which is top decile for multi-unit. Everything we invest in has sub three-year paybacks on new builds, which is important for us because it provides both downside protection in terms of capital deployment at high returns, but also meaningful equity value, growth potential. And on the consumer side, they all have the number one net promoter score in their category. The category could be Las Vegas car washes or our wild business is one best car wash in Vegas the last five years in a row, and they have to have the number one consumer intent return in their category or micro category. And all multi-unit businesses, different verticals, but wildly similar in terms of how you can think about investing in them, how you can think about underwriting, building versus”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“We've invested across a number of different multi-unit categories. You mentioned food and beverage, auto services is our second biggest one with car wash and collision repair. Health and wellness, particularly gyms and fitness, is a category we've played in a bunch and then pet services you mentioned as well. Look, obviously the end market or the end consumer of a burking business versus one of our more successful deals was a funeral home roll-up, for example. There's obviously very different end markets. The ways that we go about driving value in those businesses in terms of professionalizing them and thinking about building versus buying the next location, that's identical. And we overlay our quality bar onto these various multi-unit businesses, which we can do because they're simple businesses. And so when we think about what quality is to us, there's a couple heuristics we use before we.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly by May or June, we knew at least that the investments we had made in March, April, and early May were working. Alex mentioned, but we had a lot of insights as to what was going on in the economy because we own and operate several thousand locations. We get daily sales on them. One of our better investments during that period was we bought 60-something million dollars $65 million of the first lien debt of the largest pizza and Wendy's franchisee, which entered bankruptcy immediately as COVID began. And that's a business we knew well. We had diligence it. We had looked at buying it previously. But when we really started what was going on in our Burger King, the drive-thru part of the business where people were destocking their pantry and they were heavily utilizing drive-thru. And because the dying rooms were closed, we had pretty minimal labor costs and profitability was going through the roof. We really tripled down on that pizza. And Wendy's investment. And that ended up being, I think, probably our.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think by May we were seeing green shoots in the portfolio and for our businesses that were located not in northeast west coast major metro, which is the vast majority of our businesses. There was real opportunity to reopen and start recapturing all that share. We knew by May that we were going to make it, I think.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Burr King CEO at the time, Dan Akardino literally stood up at distribution and refrigeration business outside our stores with frozen food trucks in the span of three days because our distributor went chapter seven. Wow.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Leverage, but when your portfolio goes to revenue zero, any leverage, a dollar of leverage is over levered, obviously. And”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Some people say COVID wasn't a cycle, it was only a couple months. If you aren't owned our portfolio, it was a cycle. I think literally other than owning perhaps a cruise ship or a Hudson newsstand in LaGuardia, we had about the scariest portfolio in the history of private equity standing in our March 13th, 202”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's been the only deal we've ever lost money on, which I do think is a huge testament to Howard. He has helped us. Think through structure and plan around contingencies that, frankly, Without him having joined the team, I doubt we could say that. Was the last time we ever lost money?”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Believe experience really matters. And today we only hire people with decades of experience building value in exactly what we're trying to go and replicate. Also, no one had ever consolidated this franchise system before. We were the first ones to ever do it. It had historically been one unit, one owner. In our view, some businesses just aren't meant to be consolidated, perhaps. And we weren't able to benefit from the technology that had been invented to manage these businesses in a multi-in a way. We couldn't draw from boards of directors or management teams to learn from their mistakes, to benefit from their successes, or ultimately to sell to one of these successful players. We call it tuition because this was.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“Your badge is very funny. Matt and I were entrepreneurs, we're founders, we run an investment firm, we invest for a living, we run a business. And the initial auto service is franchise deal, I think that's when we first realized, and again, I said it was the best thing that happened to us because it was early on. On the one sense, the Burr King investment went really well, really quickly. And that in retrospect actually wasn't great because we thought, oh, this investing thing, we could do this. And it was very humbling to get beaten up and very quickly. And we moved too fast in that investment. We used too much leverage up front. So he's back some stores that shouldn't have been sale. He's backs. And we can get into that. But we couldn't have made more poor decisions if we tried, which was truly impressive. We hired young people, put them in positions of power, gave them tons of incentives. And it turns out, at least in our opinion, these operating businesses, that's very challenging to do. I think people can do it well. And that's a skill on its own right. But for us, we very much.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source
“For us every single deal has to stand on its own. That's our underwriting. We're not going to justify one deal by saying we could buy the next one at a cheaper multiple and pro forma and run rate. We're creating this thing for X, Y, and Z. We've really pretty much since 2015-2016 evolved our investment philosophy, although we still very much believe purchase price matters and we're very value-oriented. also really believe quality matters. And we have a saying you don't get paid for degree of difficulty. And we really believe that. So if we're going to do a roll up and do a consolidation, we're only going to do it in industries and in businesses that are high quality. And we have very clear definitions of that. But I would say we've missed Taco Bell. We always said, oh, it's so much more expensive on a relative basis from a valuation perspective, but we sort of miss the very important part, which is also higher quality.”
2024-10-15 · Invest Like the Best · Matt Perelman & Alex Sloane - The Art of Franchise Investing - [Invest Like the Best, EP.393] · IDENTIFIED FROM THE TRANSCRIPT · source