Season 4 Episode 12: 2022 M&A Wrap-Up



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Rick Ormsby:

Welcome to the Restaurant Boiler Room, season four, episode 12. I'm your host, Rick Ormsby, managing director at Unbridled Capital today in the boiler room. I will give an M&A wrap up for 2022, as well as give you some talking points over the holidays when friends or family make the comment that they want to own a franchise. The restaurant Boiler Room is a one-stop shop for multi-million dollar merger and acquisition activity and financial complexities affecting the franchise restaurant industry. We talk money, deals, valuations, and risk delivered to the front door of franchisees, private equity firms, family offices, large investors, and franchisors on a monthly basis. Feel free to find our content at Unbridled Capital's website a Now let's enter the Boiler Room.

Well, okay, here we are. This is being taped or however you call it. I think that's an old '80s word we used to say, like let's tape a movie or whatever. It was, getting dubbed or taped, whatever, on about the 15th of December. So we're close to the Christmas holidays. Merry Christmas, ho, ho, ho. Merry Christmas. My wife and I were watching Miracle on 34th Street last night. It's like this from 1949, I think. It's kind of an old school post World War II movie about trying to prove that Santa Claus is real or not real in a court of law. It's quite a kind of heartwarming and entertaining little movie there. I'm sure we'll hit up It's A Wonderful Life. I wonder what your favorite Christmas movie is, right? By the time you hear this, it may be after Christmas though, so you'll be like, this is old news, Rick. But a couple of things. I like to put up the Christmas tree ornaments early in the mid-November range before Thanksgiving. That's number one.

And number two, I like to bring them down early, but now that we're in Florida and close to New Orleans, I've kind of got this idea that we're going to keep the Christmas trees up, take the lights and all the decorations down and replace them with purple, yellow, and green kind of decorations and make them Mardi Gras trees and keep them up through March. My wife looks at me like I'm speaking a different language to her, but doesn't that sound cool? There's a big Mardi Gras tradition in Pensacola, so we may try to do that, but I may look a little bit like Clark Griswold on Christmas Vacation, but we'll get ahold of that movie sometime soon.

By the way, European Vacation is probably the most underrated in that series. That's a hilarious one. But I was watching ... It shows you how out of style I am. A couple of years ago I was watching Christmas vacation and Susan, my wife, says, "Rick, you've got the same plaid, flannel green shirt that Clark Griswold has in the show." And I'm looking at it, I'm like, "No way. You're right." And so I walk up into my closet and immediately throw it away. But this was like, I was like, "Man, that was from the 1980s. Where has time gone, man?" That's pitiful. Maybe you get a giggle out of that.

I thought it might be fun, I was sitting, it was a pretty cool thing and I was sitting with some friends here locally, a guy, a buddy of mine says, "Hey, all the guys that you know, let's get together, put $100 in a pot and then go bless somebody over the Christmas holidays at a restaurant, a place where people are oftentimes struggling for money." And so we sat down at a restaurant with some guys and we drummed up $3,400 and it was a blessing. And while I was eating lunch with some of these fellas, I had two guys ask me what it would be like to own a franchise. And both of them had brothers in law, okay, so maybe you have a brother-in-law or maybe have a sister-in-law who's like saying, "I want to quit my job and start a franchise. Or I may want to be a franchisee one day."

So a little bit of humor here over the holidays with a cup of eggnog in your hand. And you get that question if you're in this industry like, "Gee, I thought I'd want to be a franchisee maybe one day." Here's some answers for you. And this is what I told them at the lunch, and this is what I'd probably tell a lot of people. Franchising is not easy, is it? It is true that if you are working in some of the tier one brands across the world that their failure rates are really, really low. It's not that all of them do really well, but the failure rate of a tier one franchise, franchise that's got lots of units and a big national presence is way lower than just an independent business.

Most independent businesses, what do they say? I mean, this is not a stat, this is something I've heard. 60 to 80% of startup companies fail over a five year period. So getting into a franchise, you are indeed investing into a proven system with procedures and buying power and a plan and hopefully some franchise or support, which is somewhat questionable these days. And if you're buying into a new franchise or something that's new, you're not going to get much marketing support either, because they probably don't have enough units to justify big advertising budgets either with print advertising or much on digital, but certainly in the way of television advertising. But nonetheless, you get some of these services.

What I've noticed over the years though, is the people that ask these questions don't think about the basic premise of what has happened to the franchise business over the last 10 to 15 years. And 10 to 15 years ago, someone could still, with their family, operate one or two units of something and they could make a really good living for themselves and they could make the decision whether or not to be working in the business as a job and making a really good living or backing away from a one or two unit business and kind of managing it a little bit, but still even doing that make a decent enough living to support their family. That was the deal.

Now, fast forward 15 years later and all it takes is for you to look at what you're paying for your own insurance, your medical insurance, just as an example, or what you're paying and property taxes versus what it used to be. And it's no surprise with all the food inflation and the cost of labor and everything else that it's just not the same. The penny profit and the margin percentages of these businesses have just shrunk dramatically over the past 15 years.

And so maybe some people who are trying to get us start off and think they're going to be a 55 year old pilot and might may want to retire and start a franchise and be a Quizno's franchisee or whatever in the heck they would want to do, aren't thinking about that. But the average franchise companies, especially ones that are easy and quick to get into with not a lot of net worth, if you were going to do a sub shop, for example, and you could get a one-unit franchise and it would do on average 700,000, $800,000 in sales, and by the time you sign up for a lease and a personal guarantee on the lease and the personal guarantee on the franchise agreement, and now you've run food and paper and labor costs, it's 60% of sales, more or less, you're paying royalties and advertising that exceed a total of 10%, maybe 5 and 5 or 6 and 4%. You're paying 7 or 8% in lease payments. You've got utilities at 3% or 3.5% And R&M at a point and a half or two points.

And then you've got other fixed costs, cost of employees' uniforms and cleaning supplies and da, da, da, da, da, you add all of this up. And your average low cost franchise to get into is going to eat up 80% of your 85, probably 85, 90 even percent of your revenues in costs, leaving you with maybe a 10 to 15% margin. That's before paying off any loan that you have to take out. And then let's say the loan you you're paying back is a million dollars or what have you over a 15 year time period, maybe you get an SBA loan if you're just starting out and it's over 25 years, so the payment's pretty low.

Still, that's four or five points probably in sales in terms of the principle and interest, interest payments. And you're left with a business that maybe is making 5% at the bottom line on 800,000 in sales, that's 40 grand. So really what you're doing in that case is buying yourself a job. That's what you're doing. You work that business, you're not going to be able to sit on the beach while it's cranking out money. You're instead going to be either actively involved in the business, drawing a $50,000 salary out of it, and then $40,000 in distributions, and maybe you're eking out 100 grand, or you're sitting on the sidelines and having other people do it. And basically you're not making much money at all.

So now our industry is driven pretty heavily based on top line sales volume. So if you can do a million two, a million three, a million four, a million five in sales, then if your profit margin may increase because your variable costs are lower, well, or maybe the close to the same but lower, but your fixed costs have stayed the same, so your margins increase and maybe you're running a 15 to 20% margin on a million five, you pay three or four points to P&I payments and maybe you got a net margin and you're making a couple hundred grand a year, and maybe that's a better model.

But I tell people in most cases, if you're looking at starting one franchise number one, no one really wants one franchisee, one unit franchisee in a premier brand. So people will go to me and they'll say, "Oh man, I'd love to own a Taco Bell one day." And I say, "Well, fat chance of owning one Taco Bell. Taco Bell doesn't want a one unit franchisee coming new into the system unless it's a really special circumstance." And even then you got to pay 2, 2.5 million dollars just to get the thing open and float startup costs. So instead what you're looking at is something smaller with a smaller footprint that has slower sales, that's going to be a tougher, hard-nosed deal. And so people just don't do that. I probably get, I mean, no kidding, five phone calls a year from people who want to buy one restaurant, maybe less, maybe two or three calls a year.

Isn't that crazy? So back in the good old days, when I first was getting into the business in the early two thousands, I mean, people wanted to buy one or two restaurants, it probably, I'd probably get 100 calls a year, and now it's only 1, 2, 3, 4, 5 calls a year. So it's just not a common thing to do unless you want to buy yourself a job, unless you just absolutely love working as a franchisee, as a manager, and putting up with all the headaches that have to happen and then squeezing it out and making a profit that way. Instead, what we see is if the good old boy who's just retired from being a pilot wants to get into a franchise business, first of all, it's unrealistic. They all talk about it, no one does it, but for the ones who do it, they're going to pull together money and a couple investors and go buy 10 of something, right?

Because if you buy 7 to 10 of something or more, you've got a big enough G&A structure to then be able to hire what we would call an area coach who's above the restaurant managers who can field and take all the concerns and calls. You may have to pay them 100 to $110,000 a year, whatever the number is with salary and bonus, but at least you're not taking that 4:00 AM call when someone slipped and falled in the bathroom. So that's kind of the sweet spot for what used to be the one or two unit operator is somebody who wants 7 to 10 of something that's kind of like the entry point, unless there are in a couple of instances where you have maybe some foreign people coming in and they want to bring their family to fully work in the restaurant, that that's a rare case where it's different.

Or you see people who are this 55 year old pilot who are migrating and turning towards different types of franchises. For example, you see the mosquito type franchises where you only have six people working for you and you're scheduling it and they're walking around and they're spraying the grounds for mosquitoes, and it's kind of a low labor, high scheduling model with low product cost and pretty high margins. That would be something you see someone getting into outside of restaurants if they want to stay smaller with the lower capital investment. It's just one example I've seen people get into distribution businesses. I've got two friends actually who have in the last year gotten into the package delivery model where they're like a licensee of Amazon or a FedEx or something where they're running trucks to deliver packages as a separate business. I know that's a very hard model with really low margins and it's really hard to find people to drive trucks and there's liability with it too, but I have two buddies who've done that. One, I think somewhat successfully, and the other not so much, but that's a model you see.

But that's the first thing I say, no one really goes into anything looking to be a one unit franchisee anymore. Therefore, your brother-in-law's comment is an unrealistic comment and he's going to fall on his face, or he's going to buy himself a job, which I know he doesn't want at 55 years old. And the industry has indeed become one of more professional management, more systematization, larger franchisees, consolidation. So there you go. Now, I'm not saying that that's all that good in many cases. I mean, in many cases it is. The consistency is probably there on a bigger scale than what it used to be back in the good old days when you had two unit franchisees from here to everywhere, and you didn't know exactly what menu products you were going to get when you were going into a store in Montana versus a store in Texas.

But also the failure rate is also more, a bigger percentage of your system is now dependent upon a smaller number of franchisees succeeding or failing. So the concentration risk as a franchisor is quite a bit higher, which is why, you start to see, I think at the franchisor level, a little bit of a pushback from large private equity groups getting into a system and trying to roll up and be too big within a system. I think I had to characterize my opinion of how franchisors feel, and I know this is just my opinion, but many of them would probably say, "Well, the one in two unit franchisee is not the future of our brand, probably. We need an avenue to get those franchisees out of the system and a way to consolidate, to get more sophisticated, more capitally, stable franchisees to own more units and have more control."

But at the same time, they probably don't want too many stores in the hands of too few operators because then if there is a systemic issue or even just a one franchisee issue in their brand, guess what happens, man? Then all of a sudden, 400 of your 4,000 stores go down, or you go into bankruptcy or something terrible happens in the stores, shut down that meaningfully impacts your brand. I think there's also a quiet way to be thinking about the, where we were in the early, I'd say the early teens of 2010, 2008, 2007, 2012, kind of in this timeframe where you had a lot of 20 and 30 unit operators that still knew the restaurants, still knew the people who managed their businesses, but yet had a more sophisticated from a capital perspective and an operations perspective with better teams. So that's kind of a sweet spot that I know a lot of franchisors want to be aiming towards.

Okay, so I don't know, does that help you? Is that a way to get cousin Eddie off your back when you're meeting with them over the holidays and he says, "I want to own a franchise. Another thing is if their cousin Eddie and cousin Eddie's 45 years old, tell him to put on a pair of non skid shoes and stand for 10 hours in the back of a restaurant and then that'll pretty much fix that issue.

All right, a couple of other things I just note for the end of the year. First would be we do have some more information on the Fast Act that's coming out in California. It looks like, at least from what I'm hearing, that they have gotten enough votes to get this quorum of franchisees, franchisors and people in the industry on a board in California to figure out wages that most assuredly will raise minimum wage up to $22 in steps. It looks like that is probably going to get postponed. I mean, I think it has to be asserted that those votes are indeed votes, but it sounds like there's way more than enough votes needed to delay putting it this team together in this process together until 2024, which will give franchisees and franchisors a little bit more time to think about their strategy.

Maybe their strategy involves raising their prices a little bit, which is always difficult to do during a recession. Maybe it should cause most people in California to be evaluating, and I say evaluating fairly soon actually in the next 90 days, evaluating their M&A and strategic plans. A lot of people, if you were going to get out of the business, there's no sense in sticking around for another two years and then have it go to a ballot with the presidential election in California, and then maybe it gets passed and then you hit the big wage increases potentially. And at that point in time, EBITDA takes such a tremendous drop that the value of the business could be in bad shape, but if it could be an opportunity for a buyer, it could also be opportunity for somebody who's a seller to get out in front of it. They may have been given a reprieve if this does get delayed, and it may be something to take advantage of.

Let's see, we continue to see a pretty big bifurcation of performance across brands. Man, some brands are doing really, really well right now, and some are struggling both with costs, with revenues. So traffic is continuing to be a bit of an issue, as you might expect, not as many boots coming into the restaurants, but pricing has come up so much that we do have some brands that are really hot from a sales perspective, and I'm really encouraged by that. That may portend really well for 2023, but then you have some that are still maybe really languishing in that regard. So you just got to be careful in different areas of the country as well.

And then depending on whether you were a brand that was like right now, chicken wings are noticing a massively significant reduction in food cost, big time reduction in food cost, but some franchisors who have locked in prices and they locked them in from November to November for example, may be looking at another 10 or 11 months of really high pricing. And prices are still really high, but I think some of the prices are coming down depending on the type of commodity that you're most in, if you're a cheese, if you're chicken, if you're beef, so that obviously has a big role to play for the profitability of these brands, brand to brand. And you can see some major differences in the P&Ls because of it.

ERC money is an interesting one. So a lot of this is employee retention, credit money, a lot of big franchisees, depending on the state they were, were able to petition the federal government because it was money, it's taxable if you receive it, I do believe, check that, but I'm pretty sure it is. So if you get a big ERC, if you're a big franchisee and you get a $5 million ERC check, don't spend all it in one place, you've got $2 million, it's probably due back to the government in the form of taxes, ask your CPA about that. But I do think that people are starting to get their ERC checks in a lot of cases for large franchisees. It is a lot of money. And my hope and my kind of intuition here is that that's going to mean that they're going to be reinvesting in deals in 2023.

So I do think once we get into Q2 of 2023, as these ERC credits continue to roll through, you're just going to see people flush with more cash. No real place to put it in a lack of deals on the market from an M&A perspective. And I think you're going to see people that have a little bit of money in their pocket and want to burn it and spend it. So that's a good thing. That's maybe an external factor for the M&A industry that maybe people aren't thinking about as much that might be able to combat a little bit of the rising interest rates. So obviously rising interest rates are a thing. The Fed moved the Fed funds target rate up 50 basis points today on what, the 14th of December, and they're targeting 4.25 to 4.5%, and they see another 75 basis points or so increased by year end 2023.

That might kind of drift towards the 5 to 5.25% range. I think that's a little bit more of a push for increased interest rates and maybe what people were expecting. So I think we're probably going to see the first quarter of 2023 bring another interest rate hike. And so cap rates are steadily rising as that happens in valuations. I mean, I think valuations from an EBITDA perspective have moderated a little bit, not a ton. We don't have enough data. I think I've said this before, there's not enough data still, it's really quiet in the marketplace at the moment to know exactly how much pricing has changed for most businesses because we just don't have enough data. So I think we're going to see that switch around a little bit in 2023 as things open up a little bit. But I mean, any man's guess or any woman's guess would be that EBITDA multiples, the valuations of these businesses themselves are probably coming down just a little bit, depending on the brand.

But again, if I've said it before, if you've got a great asset with a great brand and it's really in demand, I don't think you're going to see a price drop at all on the EBITDA multiple kind of front, maybe some of this flush with cash stuff that I talked about earlier is the reason why. People are sitting on a lot of money and their businesses are doing okay and they have nowhere else to spend it, right? And so as the system across the country gets loaded with larger franchisees who have investors, I mean, these investors are looking for growth. And one of the ways you grow, I mean, there's multiple ways you can grow your investor's return. You can buy a business and operate it more profitably, pay down debt aggressively, and you can hit a single doing that. Another way to do it is you buy a business and then you start building. And that's obviously difficult and slow. That's the problem with that. And if you have a big business, building 10 units on a base of 200 stores doesn't really move the needle a whole lot. But that's another way you can clearly grow your portfolio and grow your investors' returns.

And then obviously another one is to grow through mergers and acquisitions. You know, pick up a business that you add on as a tack on acquisition. It might fit in because it's in one of your tangential markets and you don't have to really add a whole lot of G&A structure to it in order to fold it into your business. And then maybe there's an opportunity to improve margins and grow sales. And that's largely, not in every case, but in most cases going to be the way that people are growing there returns to their shareholders.

So hopefully we get more into that because I mean, gosh, in the third and fourth quarter of 2022, it has been pretty bone dry, man. There hadn't been a ton of activity. And so you know, start pivoting to more long-term projects that you haven't been able to think about because you're just with the here and now, right? 2021 especially was such a crazy year, but there are times in the afternoons where I have some time on my hand now because the deal flow has been so slow in the third and fourth quarter. Let's expect and hope that that'll pick up.

I think a couple more comments I would make that I've seen in the last couple of months that maybe I haven't talked about recently, is that franchisors are becoming much more heavy handed in the approval process. There are agendas abound depending on the brand and depending on the circumstance, some franchisors though, are becoming much more conciliatory and easy to work with because they realize they have to kind of relinquish some of their old ways in order to get franchisees, new franchisees attracted to their brand because their economics aren't what they used to be.

And so a lot of this is just the normal push and pull of a relationship. When you think you're on top of everybody and you have an asset that everybody else wants or a brand that everyone else wants to get into, you can pretty much dictate the terms and the attitudes of what happens. If it's the other way where maybe you're eating some humble pie and you had a brand that's kind of fallen from grace and has fallen on really hard times, you have to change the way you do business. You can't do business the same way, expect to be the kingpin in the ivory tower and have people want to get into your brand and do the good things that makes your brand succeed, right? You've got to negotiate, you've got to listen, you've got to concede. So that is happening in I think, more rapid ways than I've ever seen it in my business.

Okay, how about this? That was a tall statement. In 20 years of doing this, I think I've seen the influence and the attitudes of franchisors change more now and in the last six months, let's say, than it has in the prior 20 years. And that's either tightening or loosening, either more demanding and borderline threatening or open-minded and conciliatory and amiable or whatever the word is. So take that for what it's worth, but keep in mind, keep that in mind as you think about franchising.

A couple other points. Let's see. Yes, starting to hear about distressed deals. So in the last month or so, I've quietly heard of a couple of bankruptcy processes that are happening for large franchisees and several brands that have not done well. Typically, it's one of these things where there's a bankruptcy in place and they're trying to shed creditors. I guess probably landlords, clearly the lender that can't pay the lender anymore.

They're trying to get out of some of the franchisor obligations to potentially, who knows? But there's just a bunch of obligations they can no longer fulfill. So we've seen and heard of a couple bankruptcies here in the last month or so, and then a couple of quiet deals or banks are calling around trying to shop their debt and are willing to take a haircut for somebody to step in and take them out of their position. If you are a bank and you have had a lot of recent restaurant investments and they haven't done well, it is it a surprise? I mean, what strategy would you use if you're in the pickup truck with me and we're sitting looking at each other and we're like, okay, we've got 50 loans to franchisees and maybe 20 of them are missing their covenants. And of those 20, maybe 10 of them are in pretty bad shape and five of them are in awful shape.

We'd look at each other and I think what we'd probably say is, "Okay, well let's loosen the burden on these folks and try to buy more time to get them to get them turned around." So maybe you might loosen the financial conditions for them. Maybe you might take out the penalties or reduce the interest rates. I mean, it's hard to do some of these things, but you may do some of these things and then you may say, "Okay, well if we're going to take a whack on five to 10 franchise deals that may go into bankruptcy, let's get in front of it and try to do one or two at a time." So you wouldn't choose to blast all of them on the market at once, I wouldn't think. You would try to slow walk it and sprinkle them out so that your portfolio, which is probably backed by a public company of some kind, doesn't take a massive hit at once. So I don't know, this is just my opinion, but that's kind of what I think we are seeing and we'll continue to see in the start of 2023.

Remember that January and February of last year was omicron. So once we get past the January, February timeframe, deals still typically trade on a trailing 12 month basis. And I think if you're looking at March 2023, or maybe February 2023 through March of 2022, that kind of rolling 12 month basis, you're going to start seeing, I think more obviously during that time period, you're going to have really elevated commodity costs because of inflation, but at least you've cut out probably a couple of months of really bad sales performance. If you remember how bad it was with omicron at the beginning of 2022. For a small three or four week window things kind of semi shut down at the beginning of the year, if you remember that. If not, maybe government shut down. But just in the hearts and minds of people, it's like, "Oh crap, here it comes again."

So I think you, you've got that going. So I think that'll precipitate a little bit more deal flowing 2023, and hopefully it'll be met with buyers that have capital from, that they've kept on the sidelines from the last year, year and a half or so. It's hard to believe, but a year and a half or so.

Let's see, what else would I, would I say to expect going forward? Yeah, so I guess I made another point here that I'm not sure what deal flow will look like. I mean, I don't know. My gut tells me that we're going to be up in the first quarter. It might start slowly, but probably by the time we hit March, we'll maybe will be at maybe 75 to 80% of normal kind of activity. And I think I said this on a prior podcast. I mean, who knows if all those deals close. Advisors like Unbridled are going to tell you, they're going to give you a conservative view of your valuation and be realistic because we're in tune with the interest rate environment and the somewhat difficulty of the lending market and the underwriting market at the moment, and what the ongoing business conditions are like.

So I mean, make sure you understand the setup pretty clearly if you're going to enter into a process of selling your company, because the worst thing you can do, the biggest mistake you could make is to put something up for sale and have everybody in their neighbor find out about it, and your employees get pissed off and decide to start quitting, and then the deal doesn't happen, or it flounders and languishes over a too long of a time period because your decision was built not on a brick foundation, but on a foundation of straw, right, or sand. You don't want that to happen. So be cautious and be careful who you receive advice from.

Cash offers are going to be a thing, and no contingency offers are going to be a thing. So if you listen to this, and let's say you're a, and I think there are a lot of you who listen to the podcast who are like this, a 33 year old Gucci shoes wearing, Wall Street guy on a subway with a Rolex watch and AirPods in your ears headed to the office and you're a private equity vice president, or maybe you're a senior associate or something like this, and you're trying to listen for deal flow and figure out what the market in the industry's going to be like. I just think that's a takeaway that that's going to increase your strength is if you can make offers that are not so contingent upon financing. Cash offers, even for smaller deals and even for mid-size deals are going to be the ones that I think that in 2023, if they exist in a process like what we run, I think you'll find that sellers are going to be more receptive to that than they have been in the past just because they see it as less of a risk.

And specifically with real estate financing, because cap rates have changed so much. Real estate financing with changing cap rates introduces risk. So if sale leasebacks are a portion of financing and acquisition that you look at, just know that a seller should be, if he's not, should be wary of what type of assumptions you've made and what type of pricing you're basing your price on. Because changing cap rates could, in a real estate rich deal, can obviously have a big impact on price if there's a miss, there's a miss. So that's something to keep in mind.

And then I think I continue to see more and more non-restaurant brands popping up and people, that I've become a little bit surprised, but people kind of diversifying away from restaurants and I was just talking with a guy who's getting into in the car wash business pretty substantially, and that's a model that's starting to get built out. Now who knows whether the car wash model specifically is something that does well during a recession or does well as people. I don't know if going to electric cars has anything to do with car washes, probably not, but maybe it's a luxury during a recession in some places, I'm not sure. But that market has been one with a couple of national players and a lot of consolidation that's been out there, high margins, and then also low, low number of employees, which is something that every business owner really kind of smiles when they warms their heart when they can invest in a business model that has high margins, predictable revenues, and low employees. I mean, makes the business easier to run.

I ran into a guy the other day who's fairly well capitalized and he's into the detailing business, detailing franchise business and has a number of these locations, and I just think you're going to continue to see more of that as we push forward. So keep your mind open to other types of franchises. Now, if you're a large consolidator or you're a family office or private equity firm, or you already own a big business, it's kind of hard to start into a new brand that's only going to have two or three or four units, or you have to grow it from scratch, right? That's just kind of like what we call a slow boat to China.

So that might not be the right model for you, but for somebody who already has 10 units of one brand to pick up like a five unit kind of non-restaurant brand and a contiguous market to be able to grow that out to 10 units and to have two legs of your stool that are totally kind of different in nature, I just think that's something that we'll see more of in 2023 because the labor situation has been a pressure and the labor situation is one that I think, and the corresponding profit swings in heavy labor model businesses. It's just something to keep note of as we move forward, as we look towards automation and as we look to other investments and other franchise businesses that are less labor centric to deliver the profitability in the business model.

I think that's about it for this year. I just maybe make a shout out and a big thank you to all of you who faithfully listened to this podcast. I hope you find it encouraging. Maybe I throw in a little bit of humor in there. I don't know about the cheesy humor, but I know a lot of franchisors also listen to this podcast, so I'm thankful for that too. And franchisees, lenders, private equity groups, family offices, if there's anything we can ever do for you, all you have to do is holler. In this business for the long term. Love it. We're going to see some changes in 2023, and just hope you have a merry Christmas and a happy New Year and look forward to catching you on the backside and when we're fresh. Take care.

Thanks so much for entering the Boiler Room today. You can find our podcasts on iTunes, Google Play, Stitcher, Tune In, and Spotify. If you like these podcasts, please listen, rate, and review. I also encourage you to visit our website at for the best franchise M&A and financial resources in the industry. Our website includes webinars, podcasts, videos, white papers, and a list of our past m and a transactions. Please note that neither Rick Ormsby nor Unbridled Capital Advisors LLC give legal, financial, or tax advice. These podcasts represent opinions that have been prepared for informational purposes only. We expressly disclaimer any and all liabilities that may be based on such information, errors therein, or omissions there from.