40 Stores vs 330 Stores: Which Gets You to $100M?

0:00 We are Vietnamese Coffee Company. We own one flagship cafe, two hybrid model franchises. We're doing 2.1 million in the cafe. The two franchises we make about 60 to 70k net. >> Are they like super small, like little >> They're hybrid models as in we're plugging in our cafe into their food service. >> Oh, you're selling to existing stores. Got it. >> Their revenue is 700k. >> Got it. >> And about to launch D2C coffee subscription. >> Why?

0:26 >> We sell retail, like why not bring it online? Subscription >> models sound I I would mean the world to me if you didn't. >> [laughter] >> Yeah. >> For your own sake. >> Yeah. >> I'll be fine. So, they do 700k top line, the hybrid model, right? What's their bottom line? >> They're probably netting about 20%. >> After your 8% or before? >> After 8%. >> Okay, got it. They're making like $200,000 a year or somewhere in there.

0:48 >> Yeah. >> Okay, what does it cost to open those? >> Under 50k. >> And then the franchise fee is >> 40-50k. >> Okay, so 100k all in. >> Yeah. >> Bro, I like the business. >> Mhm. >> Why do you hate this business? This is a good business. >> No, I hate the business. >> Well, you hate it because you're trying to start another one. Your offer is do pay 100k, make 200k profit over and over and over again. That's a pretty good deal.

1:11 >> Mhm. >> Let's pull the timeline all the way out. Do you want to exit this at some point? >> Yeah. >> Okay, great. What do you want to exit for? >> 100 million. >> Right now we're kind of in that position to think about what kind of model we want to choose to scale, like self-owned versus franchise. >> Great question. Love this. You're starting yourself as you're trying to build more of the 2.1 million dollar locations, correct?

1:29 >> Yeah. >> What's the margin on that? >> 400. >> So, you can make 60 on the hybrid, or you make 400 on your own store. This is a math problem. So, if you want to exit for 100 million and you've got your coffee stores, let's say you get an 8x multiple, means you're going to need $12 million in profit. $12 million in profit, you're going to need 30 stores of your 400k profit, assuming all of them perform like your flagship.

1:49 Probably won't. So, let's assume it's 40 stores. Option one. Option two, >> One moment. >> let's say we have $60,000 per location. Let's say that because it's a franchise, you're going to get a 12x. Let's call it 40% margins. So, you'll need 333 stores open to do that. So, does opening 40 stores on your own sound harder than opening 330 stores with other people who are partners without fronting capital? >> Uh maybe we'll do a hybrid model of both.

2:18 >> [laughter] >> Why not, right? >> No. >> I see it all the time. >> Most of the time, it's because the franchisor couldn't make up their mind. When I have these decisions that I do this on a lot, I write when I make the decision, I write out a letter to myself of the exact reasoning of why I'm making the decision, so that I don't have to retrace the path over and over again, cuz otherwise you waste so many cycles in your mind about Oh, you know what?

2:41 And then you have one bad day here and you're like, I should have done the hybrid thing. You're going to have bad days here, and you would have had bad days over here. Put your blinders on. There's a reason that horse races have them. Keeps you focused on the goal, and then go all in.