00:01:01

Here we are 1:00 and it's almost seemed to just pass one after. So I'll go ahead and kick us off and thank everybody.

00:01:07

For being here and you know.

00:01:08

Whether you're going to be listening on podcast or you know webinar, we've kind of done these things back a little bit. The webinars this year, it's kind of the deal flow has been a little bit less been observant of the information.

00:01:21

Coming forward, not being as fluid as it has been in prior years because of the lower deal flow, but if you're listening on podcast, I want to say welcome to the restaurant broiler and people thank you for listening, being faithful to listen along.

00:01:33

And if you're on webinar too, we're thankful that you're here. Today's topic is really to do kind of a mid year discussion of what the market looks like. We're going to dig into it with about 15 questions that we kind of have written out here. We're just going to answer them three and four minute blasts. Hopefully you're going to find that interesting and we're trying to keep it pretty dialed in and.

00:01:54

Narrow and focused on franchise investment banking emanating deal flow evaluation.

00:01:59

So there's going to be a.

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Have that kind of hard, more.

00:02:01

******** content that I know you guys.

00:02:03

Appreciate couple of.

00:02:04

Comments as we get going. I would say if you have any questions or want to ask any questions along the way, just buzz them up at on the bottom of the zoom screen here. We'll try to answer them, Derek.

00:02:13

Maybe you keep.

00:02:14

You keep up with it, and then afterwards we'll send out a webinar replay to everyone who signed up too, so you'll be able to get that to your inbox. And if you have any questions about deal.

00:02:22

Hello or you want to talk about valuations, call us, e-mail us, whatever go.

00:02:26

Turn Web page and on bridalcapital.com OK as we get started for 2024 mid year.

00:02:32

The first thing I'm going to say is we'll make a couple of quick comments because we're going to talk about a lot. But as I was just kind of penciling, what's the highlight of today, I would say a couple of things. You want to take away. One is we're going to talk about there being not a lot of businesses for sale right now. It is shockingly slow. You know, it feels like a desert in a way with new deal flow and so low amounts of deal flow, almost record low amounts of deal.

00:02:54

At the very moment, so that would be one thing to take away. A second thing to take away for I think today would.

00:03:00

The reasonable prices for buyers and sellers coming back towards more of a 10 year norm than down a little bit from the peak, but if you have a really good business to sell, you're going to get a really good price right now because they're in anything really good on the market. So good businesses with good ATV's and strong EBITDA or selling quickly otherwise there's not a lot of deal flow.

00:03:21

There and then the third thing I would say is we're going to talk about.

00:03:24

A store closure.

00:03:25

Example where we started off in the business that we're putting up for sale at let's say let's call it, but just to disguise a little bit, 100 units and then we couldn't sell it or we found one offer. We went back to the market months later with 80 units, 20 have closed and all of a sudden there's six offers. So that's a learning. We'll talk a little bit about that.

00:03:43

And then lastly, I would talk about.

00:03:45

You know, presidential election and politics with tax.

00:03:48

Cuts. So we'll expand a little bit about that and how that may be a factor with capital gains and ordinary income taxes possibly set to raise depending on what happens in the elections. With that all being said, Derek and Peter, I will let you guys answer the first question and it is give us a commentary please or what is your commentary on the current supply?

00:04:10

In demand for.

00:04:11

Buying and selling franchise businesses right now go for.

00:04:14

It what do you guys think?

00:04:15

Let's say and you kind of hit at the very beginning. Current deal flow as we speak over the past two to three months very.

00:04:22

Below the cover, you know for the rest of the years could be cover poor, probably might be a little bit higher or right at the same as it has been years past just right now as you mentioned the very first comment extremely should be low build flow going on. You know the ones that we have marketed you know buyers have been a little bit more careful and a little less aggressive and often more patience.

00:04:42

But it's going to be hard to argue with that when borrowing cost or you know where they are.

00:04:47

Right now you mentioned a lot of premium businesses, very attractive. Those are still the case. But what I really, really which is 1 brand individually, we're dealing in several different brands are the ones that we have marketed. So yeah, I mean it's just it's slow right now. But for premium business, it's going to bring a lot of demand.

00:05:08

You know, depending on pricing expectations, some of the more, less the desirable ones, we'll still bring in offers as.

00:05:14

Well.

00:05:15

I think you know, we probably have 10 engagements right now, active engagements across 7 brands, which is kind of been given where our business is is probably you know 20 to 30% lower than normal minimally. So what do you say to that question, Derek, about buying demand, supplying demand?

00:05:32

You know, there's a lot of people that want to sell today. There's just not a ton of people with the expectations that are in line with the market. I've told people recently.

00:05:44

We were halfway through the year. I think we've turned down over 30 deals this year. And when I say turned down that many deals, just expectations weren't line. If we're if we're 15 plus percent off in terms of our expectation on what the market will give and and what a seller wants.

00:06:04

Well, generally, just tell them we can't take your assignment unless you're expectations you're more in line with.

00:06:08

Market we take assignments, then we're going to get the best market price for the client. We hope to find that needle in a haystack, you know, and and get a crazy good price, but we won't sign on a client who's on the looking for that needle in a haystack. Time value of money for us, doesn't it doesn't work out that way. So there are a lot of people that want to sell, but there are.

00:06:28

A lot of people that have expectations that are in line with the.

00:06:31

Market and that's.

00:06:32

OK, everyone has a reason to sell and not holding that against anybody, just not the right time for a lot of people selling in terms of buyers. There are buyers out there. It's not like 2021 or late 2020 by any means.

00:06:46

You have buyers that want to take on premium businesses, like Peter said, when it comes down to just average businesses, they're just tougher to sell, tougher to finance buyers, see them as more risky in terms of any potential downturn. And you see the multiples in those businesses just really falling during COVID.

00:07:06

You could sell anything at premium multiples. Now when you get that average business and a average Tier 1 Tier 2 brand.

00:07:15

The multiples just aren't. There's a bigger dichotomy between the premium and the average deals in terms of the multiple and it's tough for a lot of franchisees to really hear that and accept it and go to market. So unfortunately, there's not a lot of supply. There's still demand. It's not premium pricing demand, but.

00:07:34

It's just, yeah, I.

00:07:35

Hope that answers that question that we had just came in. I think I would agree with Eric here like demand, I would say which is buyers and supplies the sellers in this case. I would say if 10 is a high incredibly high demand and 0 is low demand or load of four from the demand.

00:07:51

Endpoint and then from supply the amount of people who are selling businesses tend a lot zeros 9 we're at 0 to one, maybe 0.5 so if.

00:08:00

Yeah.

00:08:01

Yes.

00:08:02

That kind of.

00:08:03

Gives you for your your economists out there gives you.

00:08:05

A little bit of.

00:08:05

A feel from our perspective of kind.

00:08:07

Of what the market looks like, so the issue.

00:08:10

Is that the pipe?

00:08:11

Of sellers that we're running through here, the pipe is so constricted. That's the reason why there's no deals that are happening. There's more buyers than there are sellers. There's not a lot of buyers as it is over three years.

00:08:22

Ago, what about?

00:08:23

In line like.

00:08:24

We could have thrown 30 more deals on the market. Maybe we'd have closed five or six of.

00:08:28

It's not just not our model. Yeah, just.

00:08:30

Not.

00:08:31

You know the deals you see from us, we've hopefully vetted that client well enough to know that their expectations are still top in market, but market and not 20% higher than market. So that's why you're not seeing that deal.

00:08:43

Yeah.

00:08:46

Yeah, for sure. Well, let me. Thanks for clarification. Question #2. We'll go faster to the rest of these. Why aren't sellers?

00:08:52

Knowing right now, we kind of talked about this a little bit. I'll throw some comments in here about just one or two. You know the thinking that the future will be better than the present. But the question that we would ask you guys and maybe opine on this if you like to is what do you think? I mean, if you're operating a franchise business now, how do you think the environment be a year or two years, three years from now, knowing that when you sell a business, you're going to sell it?

00:09:14

Most readily on the trailing 12 month financial statement in rears from the most recent month looking backwards 12 months. So I mean, is the future going to be better than the present? I mean, I I think on this call here I'm I'm going to characterize us all. I'm probably neutral to slightly negative.

00:09:30

Derek is doom and gloom. Peter, I would say is probably neutral. Would that be kind of Fair so you know that psychology, you know that goes behind what you think about your.

00:09:36

Yeah, in the.

00:09:41

Future family that has a.

00:09:42

Lot to play with with how you think.

00:09:44

About the future.

00:09:45

Of the restaurant company too.

00:09:47

But why aren't selling selling right now? That's one reason. What's a couple other reasons real quick?

00:09:53

And trams, he's got it down across the board. You know, you've got some special brands that are still doing really well, but across the board even eyes down a little bit, kids are down usually even more. So there's no one selling bad neighbors. But like Rick said, you know it's tough to have a perfect trailing 12 P&L and when you get that perfect.

00:10:12

Trailing 12, PNL then you have to do a six month Transact.

00:10:15

Fiction.

00:10:16

Where your rollovers might continue to be might start rolling over good periods and you're going to get a retrace during the deal and not faulting the fire for that. Now I'm just saying what it is. You've got a lot of people that believe and we're not going to get political on this call.

00:10:30

When we are.

00:10:30

The other, you got a lot of people think that that Trump will get elected, you know, they'll fix all the problems.

00:10:36

I I kind of posed the.

00:10:38

Question back to people.

00:10:39

Well, what is he exactly going to fix in the near term? So again, not planning on getting political at all. It's more of a question it's you might agree with it.

00:10:49

It's set a different.

00:10:49

Way do you expect that your P&L is going to just go bonkers in the positive direction because of one political candidate or another? And I think all three of us would say that probably is overblown.

00:11:02

Don't put too.

00:11:03

Much weight on that, you know what?

00:11:04

I mean that we.

00:11:05

Hear that a lot from clients and I think it's maybe it's maybe a little bit of.

00:11:09

What would be the comment? What about what I mean? And then real quickly, let's.

00:11:12

Jump to the.

00:11:12

Next one, but lending lending market for buyers and sellers is not very good right now you have.

00:11:16

The banks that.

00:11:17

That are desperate to make loans, right, because you have all these people that we know that are in that commercial loan business, all big names and they're not doing any loans and they maybe close one loan in the last.

00:11:26

12 months but then.

00:11:28

They're they're you.

00:11:28

Know because they're posit situation or because of the, you know, they're constricting credit, you know, departments and the risk that they're allowing.

00:11:36

You know, they don't. They won't close deals. So if you just ask around some of these bankers, you're gonna find that no one's been close.

00:11:42

Deals. It's pretty dry. It's pretty hard to get money. 1:00 we we are hearing some alternate lender lending it and it you know well over 10% interest strike right now in a kind of a brand that's hard to get some answer for. So interest rates are high as well, but what about buyers, what do you think about buyers you know talked about sellers, it's evaluation issue for sellers?

00:12:02

Their values are probably at quarter to 1/2 a turn higher than they were 10876 years ago, but they're probably a time and 1/2 or at least a time one.

00:12:11

Turned lower than what?

00:12:12

They were in.

00:12:12

2021, right, so we're just we're so so that.

00:12:16

Creates time for.

00:12:17

A seller to have to get real.

00:12:19

About what their valuation will be or they say?

00:12:22

I'm going to wait until it maybe migrates back upwards if it ever.

00:12:25

Does, but what about the?

00:12:26

Buyers, why aren't they buying right now? Why? Why do we have kind of tepid buying?

00:12:30

Well, one reason is there's not a lot of sellers like we just talked about. That's one. Obviously if there's no sellers, there's no buyer.

00:12:31

Any.

00:12:37

There's, but the interest rates are tough. You've got more the financial institutional guys that their calculations are based on interest rates partially anyway, it's not as I would say, it's more dependent on interest rates than say an owner operator with family money, but they've been buying a lot of the restaurants.

00:12:59

Over the last 10 years, so if they're out of the market, you know it cuts out half your buyer pool, then it just doesn't work with their formula too well. And a lot of these groups just don't want to buy average businesses anymore. And at the end of the day, most businesses are average businesses. That's that's the word itself. But that's what.

00:13:16

Which means not every business is a premium business, but a lot of those types of buyers aren't willing to take the risk on an average business because of.

00:13:23

Downturn, you know?

00:13:24

It it it hurts, especially if you're already paying 8-9.

00:13:27

Percent interest rate.

00:13:28

I think that's a big point, don't you, Peter, that that like in, in the good old days you you'd expect a great business to get, you know, seven or eight offers on it. And the great business is now getting 46 offers. So not materially different, a little bit less, but like a mediocre business used to have three or four buyers for it and now it has one.

00:13:48

You know you.

00:13:48

Know you know what I mean? Or zero? Maybe.

00:13:50

So that's been a pronoun.

00:13:52

Change in the last couple of years. What else do you say? Peter got? Any other ideas?

00:13:57

Well, these are both two things you hit on. I think you're hiding the may one on the borrowing costs being high and and just when it's a business out of business with low EBITDA margins having to deal with you know leverage covenants with the banks, they're just not willing to take them. The risk we have sales insurance are kind of all over the place over the past, you know, year, year and a half.

00:14:16

And so we just, you know, some brands are killing it and some operators and certain brands are killing it. But you know, not knowing what it's going to look like, an impeach or just causes some problems. And I think another one is there, some just may have been approved two or three years ago, but with this downturn over the past year and a half, two years, they might not be as approved by the brand or by their lenders.

00:14:37

They were born in the borderline.

00:14:39

And maybe can't take on another transaction in another deal. They should not do it because they really focus on the organization.

00:14:46

Or not any?

00:14:47

Internal issues and you know, try to establish a more healthy business people sales so that when.

00:14:52

When they are ready they they're prepared for it.

00:14:55

That's a good point, I.

00:14:56

Mean some of our deals we've had franchise or stand in the way and say we're not going to approve that they're not approved, they're not approve. There's been a lot.

00:15:02

More of that than there has been in.

00:15:03

Past years, which leads.

00:15:05

Me to another question about the comment about the.

00:15:06

Franchise owners a.

00:15:08

Lot of them. Some of them are becoming more reasonable. Some of them are becoming more unreasonable and some of them are about like they always have been, but.

00:15:15

But some of the ones that have become more unreasonable are asking a lot more in the transactions, whether it be a relationship agreement, personal guarantees, or what you know, like the way you can buy and sell the assets the way that you have to structure your financial cover.

00:15:30

That's, you know, some franchisers are getting harder and but. And it's not just that the existing franchisees are in a state of affairs when their businesses aren't strong enough to acquire more stores, it's that the franchisor.

00:15:42

Is putting a collar on who?

00:15:44

Could buy a little bit.

00:15:45

By making it so restrictive in some cases, so that's a a comment too for certain brands.

00:15:50

About all brands and I think the I want to make one comment move on to the next question, which is about private equity groups not being involved in the market so much and it's very true. It's very much a cricket. It's kind of thing like you're grounds like man, where am I? I'm in the dark here where the private equity buyers calling and you know they're all gone.

00:16:06

And I think.

00:16:07

They look at multiple uninvested capital MOIC that is dependent upon a couple of things like they want to buy a business at low interest rate that has high growing sales and where you can build new locations because the new unit development is a huge piece of the way they get their MOIC calculation.

00:16:28

Well, in this market we have this little quiet thing called inflation that has caused the building of new stores to be kind of crazy expensive now and that alone has been like like crumbled this MOIC calculation for these private equity groups in our space, which is one of the unseen reasons why they backed.

00:16:46

Away from a lot.

00:16:47

Of restaurant.

00:16:48

Fields at the moment.

00:16:49

Do you think there'll?

00:16:50

Be more fewer distressed operators in the future. Did interest rates and required refis and billing payments. Will there be a triggering event? Yeah, I mean, we did some refinancings during COVID fixed rate five year, some seven 2.5%.

00:17:06

As those start to expire, then you've got to refire it potentially say 7 1/2 to 8 1/2 depending on where rates end up being. I mean that's a massive. Obviously when we're selling companies, we're looking at EBITDA. We aren't looking at the interest people are paying on their loans, but when they're looking at it and they're looking at their year end.

00:17:24

Review and what they're going to have to be.

00:17:26

Paying and what their net income is going to be and all that stuff. Obviously an operator is looking at that very intently. And if you have to pay an extra 6% in interest.

00:17:35

Going forward, even on a potentially smaller loan that impacts your bottom line quite a bit and that might impact some franchisees decisions to stay in the business or not regardless of all these other other items, if they're potentially their net income potentially gets cut in half because their interest increases. You know, they might just say, you know what, it's not worth continuing.

00:17:56

Here so.

00:17:56

I think there's going to be a too big to fail scenario though there are. I mean this is just one man's opinion. Too many people refinanced at 2 1/2 to 3 1/2 percent interest rates and then these balloon payments are come are going to all come due in like 18 to 36 months from now and it's going to be two that I I mean now like it's it's going to be.

00:18:14

It should be two months month long.

00:18:15

I'm not saying.

00:18:16

People are going to sell, but I think it will trigger to answer a couple of the specific questions. I think it will trigger.

00:18:21

Some people to.

00:18:21

Sell because the ongoing operations just might not.

00:18:25

Be worth it anymore?

00:18:26

That's it. It doesn't mean they're necessarily going to go bankrupt, but obviously time value of money. If you're 65 years old and you're making 1,000,000 bucks.

00:18:35

And suddenly, because your interest increases so much, you're making five or $600,000. Maybe you decide, you know, now is the time to sell it. It's it was worth working hard for 1,000,000 bucks a year. It's not worth working hard for half 1,000,000 bucks a year. That's my perspective. I don't think it's necessarily gonna bankrupt a ton of people it could bankrupt.

00:18:53

Don't don't get me wrong, but it's not going to be a mass bankruptcy of it.

00:18:57

Or anything like that.

00:18:58

But I think it could trigger some money.

00:19:00

Well, I think it could too. In the and you're you're very right. Like if you're especially if you're like kind of like a mid tier operator with a small loan to a bank and a bank that care about you and and your loans coming up due you would sell right and you're not going to have the benefit of being like one of the twelve $50 million Taco Bell loans that meet bank XYZ.

00:19:20

Bolts and all of them come.

00:19:21

Due in the next 36 month.

00:19:23

I mean that kind of the.

00:19:24

Scenario. If you're a borrower.

00:19:25

Like that, you're going to, I'm guessing, gonna have some leverage because you know this bank is not going to be able to just kind of all of a sudden default every single one of their enormous Taco Bell looks right. That's just not going to happen. So but I think if you're a 20 unit operator who's barred $10 million from XYZ Bank in Nebraska.

00:19:43

And then all of a sudden you're 5. You know, your term loan is up. That is a situation where you probably have less negotiating power, right? Or if you're with a high regional bank and you're one of only a few of their loans.

00:19:57

So I mean I.

00:19:58

Don't know, but Derek's right. I do think it will trigger some and they just from people who aren't over leveraged. But just say I don't want to work for this little money. What do we think about sales and transactions in our business right now just across our clients that we're seeing comments guys from the deals we're doing?

00:20:14

Yeah, I wouldn't say exactly create right now while big time value wars out there, we stayed all over pricing to use and commercials. But you know, obviously everyone's fight for for transaction.

00:20:27

Which is a kind of direct correlation to.

00:20:28

Roller coasters. All right, now.

00:20:30

You know, if it's going to cost somebody $1250 for a meal just for themselves, they've been hit hard over the past couple of years and with extremely high inflation.

00:20:40

You know they it goes back.

00:20:42

To my earlier comments about.

00:20:45

You know.

00:20:46

Making sure your operations are in.

00:20:48

Time and are trying to create as much of value for the customer. You know you can build as many stores if you want to, but if you're maybe you can buy as many or if you want to. But if your current operate it online, how much more value really creating for yourself? So really need to focus on you know your sales, your to you know because they're struggling right now.

00:21:08

You know you don't want to know.

00:21:09

Peter's comment and obviously we are not restaurant operators, but true.

00:21:13

Peter has been actually at one point we understand how difficult it is, but we're not. We're not ignorant to that with all the clients we have and and and all the things that we hear from them and how difficult it's been, not to mention the past four years since COVID.

00:21:27

So but I.

00:21:28

Was just thinking, you know, from a personal perspective, what would I want if I am a customer?

00:21:34

That's feeling squeezed. That already has very little disposable income.

00:21:41

And now my favorite QSR food is potentially thirty 4050% more expensive than it was a few years ago. What would I want to know, or why would I continue going there if I thought there was a 5050 shot that the service would be not great or my food would be cold or messed up? Or the operations weren't in line? If it was dirty?

00:22:04

I'd probably rethink going to that restaurant.

00:22:07

But if I knew I was going to have a good experience, that would probably be more likely to go, but I don't want to overspend if I'm already.

00:22:16

Height.

00:22:17

And have a bad experience. So that's just a a general comment. We want to see our clients continue to have good sales and trans and and all that stuff, but we're just trying to put myself in the shoes of of one of your core customers. I think that's something to don't, don't stray from obviously everyone wants good operations, but it might be more important now than.

00:22:37

Yeah, I think it's a great point and.

00:22:38

And you see.

00:22:39

It in our entity and it was that we see right the, the the good operators, the ones we know who are the good operators who have the strong volumes. You could see that their margins are really strong and it's likely because they're providing a good customer experience. People have a lot of choice and there are fewer customers and fewer transactions going now because of the times we're in.

00:22:57

Right. So we see the good operators doing well and then we see the ones.

00:23:02

That are not.

00:23:03

Good operators are really doing poorly, so they're losing probably an outsized number of transactions because of what Derek is talking.

00:23:10

About the other.

00:23:11

Thing. And this isn't just wiggle rooms visa.

00:23:14

Swag, OK, so I'm.

00:23:16

Again, that that we have.

00:23:17

10 to 15% too many franchise restaurants in our country right now, that's just a regular we swag. There are way too many restaurants for the amount of transactions that consumers we have.

00:23:26

I mean, it's just.

00:23:27

It's a every deal, all these 30 deals that we've turned down so far this year and I.

00:23:31

Hope you respect that about us, because I mean.

00:23:33

When I you.

00:23:34

Know our the way we work is you.

00:23:36

Know you know, for any of you who know it, us is like we're going to tell you what we really think. And if you don't like to.

00:23:40

OK, God bless you. But I we we're not going to. We're not going to get involved in a in a deal that we don't think is reasonable. But like as I you know as I think about just the over building of of restaurants I I think that's going to have every single one of the 30 deals you've seen has like 10% of the stores probably need to be closed and then we're starting to suggest this pretty strongly to our clients.

00:24:00

To to look at it.

00:24:01

Because people don't.

00:24:02

Want to buy restaurants that are break even losing?

00:24:04

Money. What do you think? Let's let's let's.

00:24:06

Franchisors are going to like that, but unfortunately that's just going to be reality for a little while. A lot of brands need to see a lot of closures in order to heal themselves and to get better.

00:24:19

Just franchisees that are a little healthier, but franchisors aren't gonna like that over the next couple of years, but it has to happen, I think.

00:24:26

Healthy franchisees, it's going to franchise all as well. So yeah, completely agree with that.

00:24:31

Well, let's talk about now. What have we seen in deal flow in 2020?

00:24:36

Four, I think we've kind.

00:24:37

Of hit, you know this one, haven't we? I think.

00:24:40

We're going to.

00:24:41

End up closing like I think we're gonna end up technically probably closing more deals than we did last.

00:24:46

Year. But a lot of the deals we.

00:24:48

Have have been since last year sensually deals that have dragged on longer than normal for various reasons, but of the deals that.

00:24:57

We currently have.

00:24:57

They all look like they're scheduled to close here in the next two months. Knock on wood, but some of them have just stand from from 2023 and it's taking quite a bit longer to close, but.

00:25:08

Not sure what the first half of 2025 is going to bring in terms of Closings.

00:25:12

Yeah. We haven't taken a new assignment, probably in.

00:25:16

120 days. What did you say?

00:25:18

No, we have.

00:25:19

A couple we we've had two deals in the last couple of months, one of which will go to market here in the next few weeks, one of which was a quiet off market process. But in terms of large marketing efforts, yeah, it it's it's been quiet. We've asked around, it's not just us which I guess makes us feel good makes.

00:25:38

At least we're not the only ones.

00:25:40

But lenders are telling us they're not seeing anything and you know.

00:25:43

I kind of warned.

00:25:44

People because of what we're seeing and the deals that we're turning down and it doesn't necessarily mean they're bad deals. It's just inflated expectation.

00:25:51

And then a lot of those expectations are due to the high prices of the past few years that you start bearing more and it takes a while for franchisees to accept that they may have missed that. But at the end of the day, it's what it is. So I tell you, if you're seeing a bunch of deals being marketed by someone and I'm not calling anyone out, I'm just saying it.

00:26:11

Be careful what you're looking.

00:26:12

At cause I I would be surprised.

00:26:14

If if we are in the anomaly and and everybody that calls us is on, you know, has inflated expectations but but other people are out there with 10 deals with reasonable sellers, so.

00:26:25

I'm always the counter cyclical guy, right? I'm always thinking about what? What is?

00:26:29

It that I'm?

00:26:29

Doing that, no one else is doing so. If I'm someone who owns a business and has thought about selling it, got a really good business, he said. Is at the beginning of the webinar here. A really good business that would attract a lot of interest in the marketplace doesn't have.

00:26:46

Any competition?

00:26:47

Like.

00:26:48

You know what I mean? It has no competition for other competing deals. It would just sit out there and field would be like a dead Buffalo with a million vultures coming on it. You know what I mean? So that is a positive element that you might be thinking if you are a would be seller. Obviously we have to dig into the to the actual numbers because that's only one.

00:27:08

Component, but I think that.

00:27:09

Might keep your EBITDA multiple from dropping it a little bit more than it otherwise would because of the supply and demand in balance.

00:27:15

Right now, what do?

00:27:16

We think will happen for the rest of 2020.

00:27:18

Or hard to tell as you've just heard from us, it's really slow right now. There's no compelling reason and I think any of our minds that it's going to improve tomorrow like we're going to roll out of bed and phones going to ring with clients who have great businesses and want to.

00:27:34

Sell a reasonable.

00:27:35

Price is relative to.

00:27:36

What the market is currently providing.

00:27:39

I don't think that's the case. Our calls have been increasing a little bit and there's certainly is this element of a pent up demand building. I always tell people like only 25% of the business that well 25% of the business that we do is is has no correlation with time.

00:27:57

Right, like people who sell something. I mean, 75% of them are selling it because it's really good.

00:28:02

And you want to.

00:28:03

Make a big profit or it's really bad and they wanna.

00:28:05

You know, jump out of it, but there's just 20.

00:28:08

5% of just people who are.

00:28:10

Like getting older in age or have health situations that come up that you don't expect, or there's a divorce.

00:28:15

But there's a death in the family where?

00:28:17

Partners have a split. I mean those kind of things just happen naturally kind of over the course of 20 years. And in that business.

00:28:25

It will will continue to be there, but the pent up demand is building for sure and at some point it's got pot, maybe it's 12 to 18 months from now. Conditions need to be a little bit better. Consumer needs to be a little bit stronger. So that EBITDA is up. But you know if we if it is 18 months from now that will be a full what you know five years from our.

00:28:45

May 2021 we had just a monstrous amount deal flow and the pent up demand at that point is going to be enormous. I would think any comments on what you guys expect for the rest of the year?

00:28:56

I would just say the only thing we need to add to that would be, you know, if the seller does decide.

00:29:00

It's time you know there will be.

00:29:02

Out there and it's to build a location right now is extremely expensive and you can most likely buy location for cheaper than that. So just reminder that if there are sellers out there that there are buyers still.

00:29:14

Couple of questions. Derek, you see this, what would a good EBITDA be? We typically look at things in terms of EBITDA numbers. So like if you're talking about EBITDA is they'll like it business, we probably would say it based on a 20% EBITDA margins pre GA EBITDA margin.

00:29:30

Some businesses are down in the mid teens, some in the low teens and some are as high as the mid 20s. Twenty percent is probably where we draw the line. It'd be a decent business and then it, you know, if it's trails below 15% it's like Yikes. Because when you're talking about EBITDAR, that's before G and a it's before paying your bank loans.

00:29:50

And it's also before rent. So with bellower than 15% or 14%, you're probably not made the the business. You know the franchise he's.

00:29:58

Not making any money, that's the bottom.

00:29:59

It comes up, I think 10% anything sub 8% on a post G and a basis.

00:30:04

Tougher but but yeah, Carmel post, you know you've been, you know specific question because obviously if you've got a a 15% EBITDA Wingstop business which probably doesn't, their numbers are better than that but.

00:30:05

Debit card debit dot.

00:30:18

They're paying 3%.

00:30:19

Rent. You know, it might be.

00:30:20

Equal, but you want.

00:30:21

To see ideally double digit EBITDA.

00:30:25

On a post Q&A basis, anything below 8 is going to be tougher. It's just a lot less downside protection really in in the event of some sales drop.

00:30:34

One of the questions here that we don't, I don't think we'll have an answer or paradigm shift amongst essentially consumers. Rumors move to retirement, Hispanics become more consuming days high.

00:30:45

Personally, I haven't done any research on that sort of thing, and I'm not gonna gonna act like I I know what the answer is and.

00:30:54

I don't have the answer either, although I have seen trends, you know, Hispanic population is now projected to be pretty soon. 20% of our of our country's population, I believe, which?

00:31:03

A big shift. You know this. A similar quest has been asked, like what is like Lego V and some of these, you know, like, you know, kind of inhibitor drugs that help you lose weight. What what is that going to do to our industry? You know, similar type of.

00:31:15

Thing right and and when?

00:31:17

I heard that for the first time like a year ago, I laughed about it.

00:31:20

Like. Yeah, right.

00:31:21

You know the person who's going to be on those types of medications.

00:31:24

That, you know, they're they're not gonna be on those medications and and eating, you know, Wendy's or whatever brand would be any QSR. But but I think now I think I was wrong about that. I think there's there's going to be some correlation of some kind people eating less fast food and getting on that weight management stuff so.

00:31:40

I don't know. Hard to tell.

00:31:42

But it probably will have an impact.

00:31:43

It's not just less fast food is just.

00:31:45

Less eating in general.

00:31:46

Yeah, less eating. I'll make one comment about demand. You know our supply and this is a political comment. And look, I you probably can hear, I mean, I'm not very political. I have opinions, but this is a political comment other than just like, how does it it helps you business and demand and.

00:32:01

What if Biden is reelected and the tax cuts expire and you're going to see, you know, like higher or reversion to higher ordinary income tax rates? I think what what, you know, someone tell me here on this, on this call. But I think they're 37% of the top right now. We'll go with 39.6, right. If the cuts don't get extended or or that the, you know, the.

00:32:21

Exploration doesn't get extended.

00:32:23

And then, you know, Biden's in in the news talking about, you know, capital gains tax increases. He tried to get it passed in 2021. And remember Joe Manchin. And then the the lady out at out in Arizona blocked it and he couldn't get it done. But that was probably a.

00:32:37

Third of the.

00:32:38

Push and and.

00:32:39

They've already in 2021, people thinking taxes were going to go.

00:32:43

So if like the conditions present themselves after November to where, you know, taxes will go up, I I, I do think you'll see that that's a very powerful reason why people sell things way underestimated reason why people sell things. So that could be the genesis of a Keck of business. Just a comment, but how about the next question?

00:33:04

Limitations on today's valuations. Let's talk about that for a.

00:33:07

2nd so if you're you.

00:33:08

Guys are valuing a restaurant business and non restaurant franchise business. What are you saying? What what are the limitations on today's valuations?

00:33:15

That that may not be not.

00:33:16

A video or years ago, four months ago.

00:33:18

I'll I guess I'll. I'll start sellers generally in terms of add backs and pro formas and things like that, you know if there's reasonable items in there, if you had a store shut down for six months and it's fully reopened, we're gonna proform to that store to a full year.

00:33:33

You know, that sort of thing, you know buyers understand and it will generally give you the ad back, but if you.

00:33:39

Just you get.

00:33:40

A lot of people calling us saying, you know, we're not operating these particular stores very well and the buyer is going to be able to do this, this, this and this buyers don't buy that. Thanks won't buy it. You won't get paid on it and and we won't.

00:33:54

We won't account for it. We can talk with buyers and tell them what the potential opportunity is, but there are no buyers out there, hardly that are actually going to pay you on that. Their responses if you think there's improvements, then they'll make them.

00:34:06

And then take it back to market with diary EBITDA. You know look at a lot of sellers calling us thinking buyers can can run stores for for crazy low GNA amounts. You know we might have a client running 6% GNA and they say well a buyer can do it for 2 1/2. So once again the buyer is going to want at least what a market GNA rates going to be whether that's a percentage of sales.

00:34:29

Whether that's just a fixed number, it just depends on the brand, how hard it is to operate from an above store level, how much more personnel you might need and the large guys are just gonna get a little arbitrage. Usually they're going to need a lot less cheating a than someone entering a brand, but.

00:34:45

Coming and and trying to throw out 25K a store for example for G and a it ain't gonna work. No buyer's gonna pay you on that.

00:34:53

That seems to be one that we hear more and more in this market. Maybe it's people trying to squeeze to get their EBITDA higher to get a higher price because the EBITDA is down and multiples down. But it seems like every deal we're fighting with our sellers about the G and a allocation and every one of them is like 2 1/2%. And we're saying no, every single time and it's like.

00:35:13

And then one 2 1/2 percent on a million two or million 180 VI mean like no one.

00:35:17

Is going to.

00:35:18

Sign up for that they used. Maybe somebody used to you know. You know what I mean?

00:35:22

But it's just, it's an unreal, reasonable ask in this marketplace where the demand is not there starting interruption there. What about?

00:35:28

With all these and you got $2,000,000 stores, 2 1/2 percent.

00:35:32

Might work. There are.

00:35:33

People out there that use the 50K, that depends. Again, every buyer is going to look at GNA differently. But what we try not to do is lead with a materially unreasonable number. What that does, if you're a seller listening, what that does is it.

00:35:47

Just turns your buyers.

00:35:48

Ohh.

00:35:49

If you lead and one of the first things they see is is something that they deem very unreasonable, they're going to assume the rest of the transaction is unreasonable. And when they assume that then it becomes a fight the rest of.

00:36:03

The.

00:36:03

Way. So just keep that in mind. You don't want to just be seen as blatantly unreasonable.

00:36:09

The start because you're going to turn off a lot of buyers that might have been good buyers and they just said, you know, we don't want to waste our time with the deal. We see that quite a bit. So one thing I just recommend is.

00:36:19

As hard as it might be, trust your advisor. Whether that's us or somebody else. If they tell you something, it's it's. It's what they do all day, every day. We don't operate restaurants, we don't have an HR team. We don't. We don't do all the things that your restaurant operators do on a daily basis. All we do is sell restaurant businesses. So trust us when we tell you.

00:36:41

Our buyers. You're gonna use something.

00:36:44

And it really is best to kind of look at a per store basis. You can use a percentage all you want, but like Derek mentioned, will go if it's a 1.2 AUB versus A2 million AUV where those aren't apples to apples and that's why we have seen some sellers push for 55 and 60 not sellers buyers push for 55 to 60 per location, but that's that's unreasonable.

00:37:04

As well, I believe that the 25 to 30 K is unreasonable on the seller side as well, so you know count that up to 45 to $0.50 more.

00:37:11

Kind of in line I.

00:37:12

Would say business is usually this usually have higher per store DNA because there's just more sales.

00:37:20

To go around.

00:37:21

And people usually use it if you're operating a $1 million UV business, you're going to try and minimize your DNA a little bit more just because there's less money to go around. But.

00:37:30

If you've got a.

00:37:31

Two and a half million dollar AUV business, you're probably trying to squeeze a little bit.

00:37:36

Less so it. It's just a little bit fluid deal to deal. There is no absolute rule, just kind of anger up.

00:37:43

On to the next point, if we could start.

00:37:44

Interrupt only gets to.

00:37:45

Do this some of.

00:37:46

These questions what can operators, franchisees or would be sellers due to?

00:37:50

Drive better value.

00:37:52

In their businesses and during this example, I'm going to, I'd like to talk about store closures, which I made this big comment earlier that maybe 10 to 15% of the stores across the country need to be closed.

00:38:03

And you know, we did have a deal and I just kind of reiterated that not talking about the brand or the size count, but we've had a recent deal.

00:38:09

There we, we.

00:38:10

Put the business up for sale at like 1, maybe two offers, you know, and and then we and then the franchisee took it upon themselves to negotiate about 20% closure of the 20% of the stores. We took it back out to the market and it was a robust situation with like 6 offers and high prices and the multiple is way higher.

00:38:29

And the franchisee we believe will get more money net of the closures than.

00:38:33

They would have dealing with the.

00:38:35

Selling the whole business with the poor stores and not the buyer not being able to get the financing anyway.

00:38:40

So anytime you come to us, you're going to see that new approach to us, which is and like like Derek said, Frank has something like that. But the reality is they're gonna have to contend with it because they're getting phone calls from their franchisees saying the store can't make it. I can't make out any money on $1,000,000 anymore this.

00:38:55

Isn't 1990.

00:38:56

Eight. You know what I mean? So that's.

00:38:58

One thing that we can do is is.

00:39:00

Pull the losers out of your portfolio.

00:39:02

Do you take?

00:39:03

Them out before we.

00:39:04

Even even call us, but we're happy to.

00:39:06

Help you identify those, that's.

00:39:07

A way to try out a lot of value if you can get negative and it's not just quantitative EBITDA. If you've got a lot.

00:39:12

Of low value stores and you're.

00:39:15

Layout a lot of math like if you have 50 locations and 30 of them are basically break even you think anyone in this market is going to want to buy a business like that you know, so it's not just the negative EBITDA stores we have to ask about, it's also.

00:39:28

The ones that are barely breaking.

00:39:29

Even it's a qualitative not just a quantitative exercise. What other comments you guys have?

00:39:36

Signing up your management, negotiating remodeling deferrals with the franchise or what are some other things you might think of to help?

00:39:42

Drive better value for your business.

00:39:44

You know, go back to your college a minute ago. It's not just this just to add to that, it's not just the ones that are losing EBITDA right now, but the ones that are trending negatively over the past three to four years and you just you can't seem to fix it lease expirations coming up, maybe try to be proactive if you then maybe you can to turn that store around.

00:40:05

But also get yourself in a bond and.

00:40:07

Another 10 year extension when you know the next year might come to House of war, you know before.

00:40:12

Extra.

00:40:12

About looking at not just the ones that are losing.

00:40:15

Money. But the ones that.

00:40:15

Are trending down big time.

00:40:19

I think driving better value too. If you think about what you.

00:40:22

Can do to.

00:40:22

Drive the value I.

00:40:23

Would say make sure you find a good attorney.

00:40:27

Because now that the deals have gotten more arduous.

00:40:31

Especially the purchase agreement negotiations, the lease transfers, franchisor stuff, all the due diligence, a lot of attorneys that are in this space may not have adjusted to the the greater difficulty in negotiating. Now buyers have more negotiating position than they used to because there aren't as many sellers.

00:40:50

Around and so their terms are many cases outrageous, but in a lot of cases less agreeable than they.

00:40:57

Were three years ago.

00:40:58

So if you have an attorney that is going to hold the line like they did in 2021 on a lot of the due.

00:41:06

Diligence.

00:41:07

You're going to lose your deal or the price is going to get ******** pretty significantly, so please hear this. It is important to find a deal making attorney and you need to ask that if you don't talk to us first before you, you know you do so you need to.

00:41:19

Ask them like to talk with the attorney and ask the questions. Are you prepared to be more reasonable than you were in 2021? Help negotiate these deals because if if you're not, they won't close.

00:41:29

Comment. Derek, what do you think?

00:41:30

About that, you're our.

00:41:31

Resident attorney, I think I'm right, yeah.

00:41:34

There's just a little bit less leverage on the seller's behalf in today's environment. You got to put up with a little more stuff than you otherwise would like to. And that's just the way it is. If you want to sell your Business Today, buyers are not so aggressive that they weren't willing to just potentially.

00:41:49

Walk away if the deal no longer suits them so.

00:41:53

It's unfortunate that's just where it is.

00:41:55

Led by Economy will.

00:41:56

Eventually shift and sellers should remember it when it does, but that's just kind of how it is today.

00:42:02

It's like a darn ship in the sea. It's rocking back and forth, baby. Right now, we're kind of like bouncing between the valley and the Crest of the wave, I guess.

00:42:09

Tell me what?

00:42:10

About EBITDA, let's do some of the sexy stuff. Eat it out both. Let's talk about that a little bit. How these things priced out and where are they relative to a year ago?

00:42:17

And that kind of stuff. Comments. Yeah. So my my overall thinking not having been in this business.

00:42:22

20 years. Of course. I think a lot of franchisees have a little amnesia from pre COVID knowing a lot of people that are looking this franchise.

00:42:29

Disease. I forget what life was like in 2019. Almost. But you know, multiples today, in my opinion.

00:42:37

Aren't actually that horrible, they just look horrible when you're looking at record highs from late 2020-2021, early 2022 when you could sell anything for seven times EBITDA.

00:42:50

I mean, you could sell below average businesses for record prices back then and that's just not how it is today. You've still got the Taco bells and the wing stops going for strong prices. I would say generally even those multiples over the last 12 months, it's probably still falling a little bit, but they're still selling. There's a huge amount of demand for those deals. You've still got Wendy's. That's kind of like below them, that's still.

00:43:15

Getting a pretty strong prices if it's a premium Wendy's deal, I think of an average to below average when you step.

00:43:21

It is going to be a lower multiple than people's think and then you've just got a lot of other regular tier one and Tier 2 brands you know that are probably in the 4 1/2 to 5 range. And if you're just an average business within those five is probably your peak. If you're a premium business within those brands, maybe you can touch six, maybe it's a five and a half five.

00:43:42

75 maybe 6, but again, it's going to depend pretty specifically on the business within those brands.

00:43:48

If you've got.

00:43:49

20 stores. I'll give you an example. If you've got 30 stores and all thirty of them are doing great, you're probably going to do pretty well and attract some buyers. If you've got 30 stores and you've got 10 premium locations, you've got 10 absolute dogs and 10 average stores. It's going to be a tough sell, to be perfectly honest with you, you've got buyers that aren't going to want to mess with those other 20.

00:44:10

They're going to look at their time value and money, and they're going to say, well, we're essentially buying a 10 unit deal here and not a.

00:44:15

30 unit deal.

00:44:17

So I would say generally across the.

00:44:19

Board. If you look at an average.

00:44:21

Multiples today are a full turn and a half less than they were two years ago.

00:44:25

In certain situations, I think there are even more than that. In certain situations it might be a little bit less, but I think it's at least a turn and a half lower than a couple of years ago and over a 10 year average, it's not really that bad. People have just forgot how it was pre COVID and five and a half was considered. Oftentimes are pretty decent multiple now people scoff at it.

00:44:45

Absolutely. There's good thoughts. I I want to answer a couple questions. So yeah.

00:44:48

I agree with you. I was going to split the staple in the in the paper saying about a one turn drop in EBITDA multiple. Maybe it's more than that there except point you know 1 1/2, maybe more, maybe less. Obviously for brands like Wingstop, Taco Bell and some of the big movers that are still selling for big prices here. A couple questions to personal guarantees impact feasibility by portfolios.

00:45:08

Franchisors waive personal guarantee for a buyer like that. The answer is basically a resounding no. That's why almost no private equity groups actually buy restaurant assets.

00:45:18

And that's why you got to ask that question at the beginning of every process because they're not aware of of how restrictive the guarantee is and the non compete agreement. So the person asking this question, if you're a private equity guy and you think you're going to, you know, set up some sort of non compete non personal guarantee you know.

00:45:38

No restrictions. I'll buying other assets. I would say good luck to you. Don't make that assumption. All things being equal, the relative.

00:45:45

And that depends on the brain. Some brands may be more stringent than others, but we have seen plenty of deals die.

00:45:52

Where we're told we're willing to do this or we can negotiate out of it. And then, of course, if they don't. So we are very, very in tune to that on current deals. And if we're being told that by a financial sponsor that don't negotiate out of, it's a massive red flag to us that they don't know what they're really.

00:46:11

In for and I don't want to.

00:46:12

Jeff, Peter. But I think that's.

00:46:14

A comment for.

00:46:14

Private equity people that are listening here, number one.

00:46:17

That kind of the jokes out everyone now knows that that you guys are mostly out of the market and they also know that a lot of your deals that you lock up over the last 6 to 12 months, you're right, you're walking away from. So if you are.

00:46:28

A private equity.

00:46:29

Buyer you need to counteract that. You need to have your power as your Superman powers in the other direction and you need to say, OK, I do know.

00:46:36

What the what, what the requirement is at the corporation at the franchise or and I am willing to do it. And here's.

00:46:43

What it is? That's one side of it, and the other is like, I'm willing to give you assurances that I'm going to close this deal with you because I know, you know, whatever those assurances are to bolster your confidence. And I'm willing to be more reasonable, that there, then maybe some of the prior deals. So yeah. And the other thing is, and this is old man Rick, ready for old man Rick's commentary, old man Rick.

00:47:03

This is it. There is a increasing amount of morality concern, you know, like integrity concerns in this business. And I would challenge all of you who listen to this. And I'm I'm talking to myself. I see myself in this mirror here as I'm looking at myself talking.

00:47:22

Not too. So this is for me too, and for both of you gentlemen, your reputation, your character, your integrity and what you say is like really all you.

00:47:31

Have at the end.

00:47:32

Of the day when things get difficult, when you get into a deal where you made a promise to somebody and then it changes, you know, like you just see peoples metal getting tested.

00:47:42

During somewhat difficult M&A environments and I've seen a massive uptick in lack of integrity and so don't be that man or woman like, make your word your body, it's not worth it.

00:47:57

To go back on what you said or to say, I didn't see that or try to say that you looked right through something and then change the terms of the price for no good reason. It's not worth it. You do it once everyone finds out about it. Ouch. Huh. And I'm mindful of that myself. I try to make my word. My bond people. You know, I've tried.

00:48:17

Whatever I say, I.

00:48:18

Try to look up to, you know, do my best to live up to.

00:48:20

It to great arts great.

00:48:22

Lengths and I hope you guys can.

00:48:24

Do.

00:48:24

That too, because it's.

00:48:25

We counsel about.

00:48:26

The lending market here as well and.

00:48:28

There's one question.

00:48:29

We get constantly and it's seller final.

00:48:32

That's what I think we said in our January webinar that we thought that seller financing would see quite a bit of an uptick. It hasn't, but we're not seeing it at all. I I think this is what it comes down to franchisees especially our typical clients and just long-term decades long, franchisees haven't really had a boss they would rather.

00:48:52

Not sell their business for the most part. Obviously the exceptions exist. Most of these people would rather not sell their buses.

00:48:59

This then risk their retirement with some new operator they will trust themselves to continue the operations and hold on until they don't have to offer seller financing rather than trusting some random person buying their business that they don't know. Not saying that when a person bad, but they just don't know them most of the time.

00:49:20

And when you're selling fully out and at the end of the day, doesn't really matter, you want to sell and you want someone to take care of your business. But when you're taking on seller financing, it's extremely important who's buying your business and these long term sellers. They'd rather just write it down.

00:49:35

And trust themselves, rather than trusting someone they don't know, because at the end of the day seller financing, it's going to be subordinate to the bank notes. It's not like they have first lien on anything, so there's risk there and they're just not willing to do it. So my current viewpoint is seller financing is never going to be a huge thing.

00:49:56

Unless the world is like quite literally ending, and even at that point I could see. So it's just writing it down before they trust someone else with their business and essentially their retirement and.

00:50:06

Not always the case. If they're forced to be that way. But. But you're right, it is a shock. It is kind of a surprising conclusion that we're not seeing much seller from Nancy. I mean, for sure. What are you saying, Peter? Yeah, yeah. Time to allow. I've got any comments, anything you've heard?

00:50:16

No, no agree silver financing gets brought up on just about every single deal for the number of bars. But you also think a lot of our clients like they've mentioned this, they've been doing their.

00:50:28

Whole life a.

00:50:29

Lot of their net worth is tied into this. So they're purpose of retiring is to take all.

00:50:34

The.

00:50:35

You know, eggs out of the basket.

00:50:36

And just retire and not have to worry about running the business anymore. But they can't do that when they have a note and they can't control of the operation of the business anymore. So.

00:50:44

So you know, cell phones, she just really isn't an option.

00:50:47

That we've seen, yeah.

00:50:49

Well, good one great question was that we do take into impact the remodeling costs in the comment and this is the comment in question.

00:51:00

Remodeling costs are factored.

00:51:01

In typically our model says something like buy brand it changes.

00:51:05

Our brand, but we're going to take a portion of the next two to three to four years to maybe even five years depending on the brand of future remodeling expenses. Take a portion of that, it gets the valuation that we come up with and that neutralizes the difference between a brand new store doing 2 million in sales and a 40 year old store that needs to remodel to $2,000,000 in sales.

00:51:25

It kind of depends if you've got a brand that can demonstrate some great ROI on.

00:51:30

Yeah. Then it's going to look a little bit better and you can argue for a little bit less of a deduction if you've got a brand that's got a 25% ROI track record on a remodel versus a brand with a 0% ROI. It's a little bit easier to negotiate a lower discount to the price on that 25% ROI brand. But at the end of the day, it's kind of hard to prove that.

00:51:51

It's going to be store specific, but usually we look out a few years and cut it in half, just as a swag number. That's usually what it is. Every buyer looks at it slightly different, but you got it. You kind of just assume it's 0.

00:52:03

Yeah.

00:52:05

Last question, good good answer, great answer, last question for you guys and then we'll end up here. But it's a it's a good one. So hang on here, if you're listening, why?

00:52:12

Would you sell now?

00:52:14

Why would you sound now? What if you're an operator? Why would you sound now? There's a good portion of people listening their operators. Why would they sell it?

00:52:20

Well, I mean victory still there, but while both those aren't exactly where they were a few years ago, historically speaking over the past 10 to 15 years, they're still similar to the average commodity prices are have eased over the past two years. So EBITDA should be improving if sales and trends are in line or flat or above. However, for the most part, it's not always the case with the sales insurance.

00:52:41

Now, what does the future reply? Do we expect it to get better? I really don't know. I don't think anybody knows. I do not think that's why we are discussing this right now. And then you got to take into consideration then certainly the election and sooner or later, you know could be your best option but.

00:52:57

You know, that's just my opinion.

00:52:59

You got one, Derek? Yeah. Thank you.

00:53:00

Peter, I think it's uncertainty. I mean, if you truly firmly believe the future is brighter, then hold on, wait for that, you're gonna probably experience some bumps in the road before that happens is my guess, but go ahead and hold on. And I often tell people.

00:53:16

There's got to be another reason outside of pure financial reasons that people sell often. It doesn't necessarily make financial sense to sell your company and retire and and have to live on the future investments of your proceeds. It it often doesn't make sense. There's got to be some other triggering event sometimes that could be a death, divorce, health issue.

00:53:37

You just simply want to retire and you're comfortable with where you are in life. But that triggering event could also be you're terrified of the future and you don't know.

00:53:45

What it holds?

00:53:46

We could be looking back in a year and say, wow, those 5 to 5 1/2 times multiple we were talking about last July. Sure sound nice. You never know. You know where we are today? You don't know where it is in the future.

00:53:58

If you feel good about the future and hold on if you feel a little worried about the future.

00:54:03

It's probably worth at least exploring your options and seeing what kind of value you.

00:54:07

Could get.

00:54:08

Yeah, if there's a tree, that's great. So certainty. And then I'd only add to that to just watch the tax considerations, OK, that taxes are definitely triggering that for someone who might decide to sell something within two years or three years or one year or two years.

00:54:22

Or zero year or one year you.

00:54:24

Would look at the tax maneuver rates. The taxes are set to increase.

00:54:27

Increase and increase substantially. Oftentimes you do the calculus and you might have been better selling now than you were selling next year because you give it all back in taxes. These are some things to talk with your professionals about, so that's it. In closing this time, we really appreciate you guys listening and watching. Hopefully it's been insightful. We hope that the deal flow environment will pick up. You'll see I'm bridled.

00:54:49

I'm going to be a guest speaker at the restaurant phase and Development Conference in a couple of months, so excited for that. So please come out for that and we'll see you at somebody's brain.

00:54:57

Mentions and we'll all just keep keeping the faith. If you have any questions about valuation or anything specific that we've said, you know, feel free to reach out to us anytime. And Derek and Peter wanted to thank both of you guys for for your time. Appreciate it everybody.