Would You Buy a 101-Year-Old Food Business?

0:00Michael here. Welcome to Acquisitions Anonymous. Today's deal was in our nation's capital, Washington, D.C. and involved barbecue, a converted old house, and a seller with a listing that if you said it out loud was a very bad word. So I think you'll enjoy this one. Here's the episode. We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. Thumbs downing on just the plus inventory link. One of the biggest risks in entrepreneurship through acquisition is buying a business with fragile systems. Unclear demand are a single owner who holds all the knowledge.

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1:06If you are exploring ETA and want to understand whether franchising fits your acquisition strategy, visit franzi.com. That's F-R-A-N-Z-Y.com. And thanks to them for sponsoring today's episode. Brad, you know that meme on the internet, the one where like the mad scientist is in front of like a board full of like a bunch of pieces of paper? I knew where this was going right when you started. One of my favorites. I can never find it when I'm looking for it. It's Charlie from It's Always Sunny in Philadelphia. I love that. Plus a beautiful mind. Does anybody else on the podcast right now remind you of that?

1:42I need to dishevel my hair and look like this a little bit better. If you're not on video listening to this, that was really, really perfect. 10 out of 10. Brad, thanks for being here, man. Special returning guest host. We didn't scare you off the first time. Thank you. Glad to be here. So what's new with you guys at Quiet Light? You know, we're in the summer season. It's getting ready to end. So probably our busiest season of the year starts around Labor Day, just after. Summer's kind of weird. You get different buyers in the summer. And a lot of your larger deal buyers are a little bit gone.

2:31So you do see some strange behavior in the summer. It's not always consistent. You get different types of deals sold in the summer. So I'm looking forward to kind of hitting the fall running. We're doing quite well. At Qualite this year, we matched our 2025 revenue in the month of June. So things have picked up pretty dramatically across the board. And we've added some new advisors. We've got 15 advisors on the team now. That's crazy. Does revenue for brokerage usually fluctuate that much, Brett? Like where you could have a full year and then six months of the year, but back and forth? I've never seen us do the previous year's revenue in six months.

3:13We're on record pace for all time. So we've been down a little bit since 2021. Really, as interest rates went up, our market kind of froze a little bit. And we've kind of been fighting that. We do some private equity deals, not super large. We like to do deals maybe from like$10 to$50 million. We do a handful of those a year. And those deals, when we talk to the PE firms, a lot of them have kind of been on hold. They really, you've probably seen the stats that M &A activity was down 80 % in private equity and in venture since 2021. I think that must be changing. But the really interesting thing that's going on is we've really seen the mid-size to large deals open up like crazy this year.

4:03We're closing more of the$2 million to$5 million deals than we ever have, and then we're closing more of the$5 million and above than we ever have. The actual place where we're having trouble is the sub$1 million deals. Never seen that. Why do you think that is, Brad? I don't know. I do think that there could be something interesting going on in the sort of what is this market good for? And I just, anecdotally, amongst friends, colleagues, things like that, there is a constant talk about how everything in the world costs twice as much as it used to. I don't think our CPI and things like that really account for the real on-the-ground cost of some of these things.

4:49So I've actually wondered if your solopreneur type buyer has felt squeezed and feels like capital's tight because I think a lot of them were using things like their home, using things like their 401k through a ROBS, their home, different types of things like that to finance deals. and without that being available and with interest rates being so high, there's just not a lot of liquidity for the smaller player. That's what it feels like to me. I don't have any real proof except just sort of anecdotal experience. So if you're a small buyer, you're squeezed. If you're a big buyer, you don't want those deals.

5:27That's right. And the big buyers, I actually think that what's happened with the larger buyers from midsize and up is what has happened is they've sat around long enough to realize, is, hey, we may not be going back to those rates, and they've just gotten comfortable with, we are in a higher interest rate environment. You got to think, when you think about private equity, you think about venture, this is not a very old industry. We're talking about an industry that, when did it come on the scene? Within the last 50 years completely in the structure that we see. And so it's never really lived through high interest rates.

5:59The bulk of the activity was done in a very low historical interest rate environment. And so those deals where you do equity and you do debt. I think the debt side got squeezed in this and they've had to kind of recalibrate and figure out, well, how are we going to do deals if we don't have sort of what we would consider kind of free debt or cheap debt. We don't have 8x leverage. Yep. Not available. Yep. And can't cover it. It's not available. And even if it were, you can't cover it, which is not, it's not available. I also wonder if one of the reasons that smaller deals are more challenged is, you know, in AI, generally, everybody is asking kind of, is this business durable?

6:38Is this business going to be here in 10 years? And I think kind of just that uncertainty has never been higher. And just structurally, you know, the durability, the moat of a small business is less than that of a big business. So I wonder if, I mean, I know this is true for me, I just see small businesses as more fragile today than they were two or three years ago. They definitely are. And if you break that down a little more nuanced, like we do online deals. So when you break that down even a little bit further, just think about some of the levers that are being challenged right now. So meta ads may be performing better from a conversion standpoint than ever before, but at what cost?

7:18You know, profits are kind of unnatural for businesses. And so I think we have a major profitability concern that kind of goes along with what you're saying about the AI concern. Fees have just gotten to be extremely expensive from the meta cost to on Amazon. Amazon has raised their fees every single year. We've just seen the sellers get squeezed on Amazon as well. So we're seeing it kind of across the board. Everything is higher priced in terms of the costs. And so in a world where profits are kind of unnatural for businesses, I feel like it's more challenging out there. Yeah, I agree. I think it's one of the hardest times, or I should say one of the most K-shaped times for e-commerce, at least in my career.

8:03The costs for advertising, the middleman extraction, Amazon, Meta, Google, etc., is at all-time highs. if you are a gorilla and you have great models for your LTV and you have plenty of EBITDA to absorb startup costs and customer acquisition, etc. I think people are killing it. I think a lot of small businesses are really struggling to absorb all that middleman value capture. We see it as well. I don't mean to focus too much on meta, but this is just interesting because what I see from sellers is that they're generally not very creative. So a lot of them use the same playbook over and over again.

8:39And so this idea of like, how I'm going to prospect on meta and then I'm going to retarget to it has been like, that's been the model for a very long time. One of the things we've done with the farming course that's been really interesting is we're posting videos to a Facebook page. And those videos have started to go viral on there. So we have one this month that got like 1.6 million views. Well, after the 1.6 million views, I throw an ad behind it. I'm getting visits to the site for four cents a click. It's a game changer. So what I see out of a lot - If you have a viral video first. You got to have a viral video, but the other thing is, is what I see out of a lot of sellers is they're not really testing a lot of things.

9:19They're using that playbook that's been used for a long time. I think we're going to have to see people be a lot more creative. Like if you want to be the gorilla, you got to go out and do the gorilla things. You got to be testing all these different things. And honestly, I think a lot of entrepreneurs fall into this trap of trying to play the playbook. I don't think the playbook works anymore. I think you've got to really try to think outside the box about how am I going to acquire customers? How are you going to segue that one to our deal? Well, let me pivot exactly to exactly what you guys are talking about, a charcuterie plate business, which is totally not something dealing with interest rates.

9:57So this one I found because, well, frankly, I just wanted to say the word charcuterie a lot, which is amazing. But it's a specialty food business that's in the District of Columbia. And Mills, it looks like they have a charcuterie table as the picture. Is that what you're seeing? Yes. I have some experience with this. I have a funny story later that I don't think I've ever shared on the pod. Did you read an interview once? Is that your experience with this? No, it has to do with Harry and David's. Okay. I mean, far be it for me to tell you not to tell a funny story. I mean, let's hear it. All right.

10:38I'll make this very quick. We used to do client appreciation gifts when I was doing financial planning work and sales side M &A work. And we would always order Harry and David's boxes. Well, we placed an order for Christmas gifts to our clients, which was like, you know, a hundred people or something. and the owner of the firm looks at the Amex bill the next day, and there's like a multi, you know, it was like$100 ,000 charge. It was supposed to be like$5 ,000 or something. And somebody at Harry and David's accidentally fat-fingered the order, and because the 3PL that they used, like nobody caught it, and instead of sending one box to our clients, it sent 67 boxes to each client.

11:22To everybody? Like a pallet of Harry and David? No, every one of our clients. So it was the exact same box 67 times. So people are getting like 60 boxes on their porch of like pairs and like charcuterie things. And I had friends of friends of friends who were like, oh, I got some of your Harry and David's. It was like a$100 ,000 charge. And somebody lost their job. I think at Harry and David's that day. But every time I see a charcuterie board like this or something that's very stylistic, I think of that poor person at Harry and David's. That's hilarious. Man, Mills, you have set the bar. You have the most Harry and David you've ever sent me is 20 boxes.

12:01So please up and get up my game. All right. So this business, speaking of Lindy, is 101 years old. 101 years old. they're asking$950 ,000 EBITDA is$205 ,000 on$3.3 million in gross revenue is a specialty food business that's a rare opportunity it represents the opportunity to acquire a century old establishment with deep roots in the DMV metro area so that's what does DMV stand for that's district Columbia yeah that's Washington DC area right DC oh DC Maryland Virginia like You know what I'm showing about? Yeah. Brad? It's correct. But what's that in Sanford? DMV. DC, Maryland, something? Virginia.

12:53Okay. I thought you knew it. I was like a greenie. I was like, yeah, that's what it is. So it's DC Metro. All right. Founded in 1925, this American restaurant and specialty food operation has built an unparalleled reputation for quality food and drink for nearly 100 years of continuous operation. it generates 3.3 million annual revenue with 205 000 in ebita demonstrating the strength of established customer base and operational efficiency located in washington dc this well-established location benefits from limited competition in its specialty food niche they offer premium baked goods artisanal charcuterie mills perfect for you to provide to your roofing staff specialty sandwiches frozen food products prepared foods comprehensive food and beverage selection.

13:38It's cultivated trust and confidence amongst consumers through decades of consistent quality and service excellence. Reputation built over nearly a century represents significant and tangible value that would be extremely difficult for competitors to replicate. Seller financing is available with the owner being willing to hold a note, providing flexibility for qualified buyers, and it demonstrates the seller's confidence in the business' continued success. They have a number of furniture, fixtures, and equipment, FF &E,$200 ,000, and they're holding $130 ,000 worth of inventory. The current owner is selling due to retirement after decades of successful operations.

14:15Support will be provided as needed to ensure smooth transition and continued success. They have 22 employees, 15 of whom are full-time and seven are part-time. It has an A-plus location and it's a high income demographics. And the business is currently home-based. What? all right you threw me for a loop on that one yeah yeah dude does this person live in the restaurant how many employees do they have 22 22 15 full-time seven part-time and this is a home-based business but it also says facilities a plus location high income demographics all right So this business, this business is for sale by owner.

15:02Um, I Googled the number and it does, it does lead to a business's website. So I don't think we're outing them. Um, it looks like, it looks like they are more of like a distributor of other people's food, but the website does not look as old as you would anticipate, but like they'll sell pre-made things because on their website they have like a reheating instruction thing like hey you know come pick these things up or we'll send these things to you and here's how you can like you know reheat the oysters rockefeller that we sent you but i think that they're uh they're not they're not prepping all this food i think that they're uh an intermediary so i mean that's very common with a lot of these kind of gift basket businesses i mean i would guess that's probably the case with even Harry and David's as well.

15:52Like they buy all of the components and then you put them together into a gift basket. Like they're not slicing in the meat. They're not growing the pears, like, et cetera. You just buy all that stuff and put it in a basket. I wonder if this is a business that, you know, at some point was a traditional brick and mortar restaurant that, you know, has, was there for, you know, 90 years in the last 10 years, they've, you know, repurposed to something like this. I've seen where people will do this, you know, like you're hosting an event and you don't want to build your own charcuterie board, but you just like kind of order one from somebody local and they'll box it all up and either drop it off or you go pick it up.

16:32And I mean, Oh, cool. So they have a retail location. Yeah. It's in this converted, it looks like a converted home. So that's maybe where they got confused. It's home based. Okay. But there's, um it's there's a wag shawls grand bodega which includes a bodega burger bar inside of wag shawls so this is like a converted home that is now basically like a bougie charcuterie restaurant type thing that has a happy hour so this is a i mean okay it's a local business with a gift basket business attached right site visit i think we need a site visit well so that you know that is one of my first diligence questions is how much of this is me running a burger bar and how much of this is me selling gift baskets because those are very different businesses you know one of which i'm maybe other people feel differently i'd be more excited about the gift basics business than running a bar in dc but maybe other people would feel differently because apparently this place is an institution i'm on their website and it says legends who have been wagshall's customers include presidents george hw bush gerald ford richard nixon and dwight asenhower supreme justices, several, Nancy Reagan, Alice Roosevelt, Chief Justice John Roberts, AG Robert Mueller, and so on and so forth.

17:51So I think this is a DC institution, which could be very attractive to some people. Wow. That link that Brad sent, yeah, this, I mean, scroll down the page, it looks like a very curated, interesting place inside. Yeah. Man, it looks gorgeous. And the cool thing about this, because they put their phone number, it's not like we're outing them. You can kind of look it all up, to your point. Hey, everyone. It's Bill. And I want to talk to you about Quiet Light brokerage. I was so psyched when Quiet Light agreed to sponsor the podcast because I am a customer. I have used Quiet Light to sell three businesses.

18:25And if I were selling an e-commerce or a SaaS business, I really would not consider anyone else. Like I said, I went back to them three times. I work with three different brokers at Quiet Light, had a great experience all three times. Even on one occasion, they found a buyer for a business that I just didn't know it was even going to be possible to sell. So they have pulled rabbits out of their hats several times for me. They've been in the e-commerce and SaaS business brokering game a very, very long time. They really know what they're doing. They have great reach with both buyers and sellers.

18:56And the other thing I really love about Quietlight is all the brokers there are former operators. So you can't just show up and go, hey, I'm a lifetime business broker. I want to work at Quietlight, you have to be a former operator. So they all know what it's like to be in the operator chair. So if you go to quietlight.com, they have free business valuation calls, which they'll do with you. No obligation. Just tell you what they think about your business, what they think it would be worth, and then what you might need to do to kind of get it ready for market. Those guys over there are great, great SOPs, great systems.

19:26I just felt like I was in really good hands all three times with Quietlight. So if you're interested in selling your business, especially in e-commerce or SaaS, hop on over to quietlight.com, fill out their onboarding form for a free valuation call, and you can tell them Bill or Acquisitions Anonymous sent you. So what I think is interesting is, I'm not from DC. I'm not a DC insider, but let's assume that this is a DC institution with a great brand. There is very much a business in taking institutions and turning them into cpg brands that scale via e-commerce right kind of trading on that brand it seems as though like they've kind of thought about it a little bit with the the gift basket stuff but there is a well-trodden path around kind of like making a line of salsas making a line of so on so you know honeys or figure out what your package goods thing is that you're known for and don't make it fresh deli meat because that doesn't work so good, you know, and trying to scale out on the reputation of kind of the DC legend Wagshaws.

20:33So to me, that sort of seems like the growth lever here because it's been around since 1925. You're not going to grow business in the brick and mortar anymore that it's already been grown, I wouldn't think. The play here is to figure out how to trade on that and create expansion outside of the core line of business, I think. Or go multi-location, which is sort of the same thing. So Brad, take a look at this line. 1998, I was pulling up their story. An NBC4 TV, the local NBC affiliate, awarded Wagshaws the contract to run their employee cafeteria. Wagshaws continues to provide this service today.

21:11You think they would mention this in the listing? I think it's funny that in the listing the When somebody takes a thing that is not positive and tries to spin it as a positive, like they've got less than 10 % EBITDA margin. And they say that demonstrates the strength of their established customer base and operational efficiency. I mean, this is a small business that is inherently very fragile, that is not doing that much in terms of profitability. And I think it's a reasonable multiple, I guess around, they're asking$950, right? And they're doing$205, so it's roughly four times, a little bit less than four times.

21:58Is the real estate included, Michael? They have not mentioned it. They said it's home-based, unless the owner is living there. Yeah. Yeah. And it even says facilities, A plus location, high income demographics, home-based, but there's no way that includes the real estate. Not at that price now. Yeah. Not in Bethesda, Maryland. I don't know. I just, the other thing that jumps out at me is I like that this business is actually a hundred years old. You know, you get a lot of those businesses that like try to legitimize themselves and they're like, we have over, you know, a hundred years of experience and it's like well you have you have 20 people who all have five years of experience you know like this business may actually have existed right based on the history on their website they're actually a hundred years old brad what do you think well i just said a few minutes ago profits are unnatural and you know this is kind of a case in point uh it never ceases to amaze me how many businesses look just like this in the world I mean it has a lot of revenue For not a lot of profit Of course it's providing employment For a bunch of people 22 people make a living I'm wondering since it's self-listed I'm wondering if possibly the owner's taking a salary That might not be included in those earnings Sometimes you'll see that Especially on a self-listed kind of thing I do think strategically they were pretty smart to say, hey, if we find the right kind of buyer, we're willing to carry a note.

23:39They weren't specific about it, which tells me they're probably willing to carry a very large note. So this is one of those businesses that someone can sort of sign up to buy. They may not have to have a whole lot of capital to take on this never-ending job of running this place for the rest of your life making nothing? It's a succession plan question, right? Like this person wants to retire. It's a DC institution. It's been around for a hundred years and they're looking for somebody to grab the baton, right? I'm sort of surprised there. I mean, there's no son or daughter, maybe, maybe none of the employees is up for it.

24:19And they're just kind of trying to figure out what happens next at Wagshall's. You know, seller comes to me and says, I got this business. I've never had anybody come to me and say I've got a business 100 years old but I've had some people come to me and say I've got a business that's 20 years old and it's not super attractive for like a typical listing first thing I would say to them if you want this to be attractive is offer a bunch of seller financing the problem as we all know is offering a bunch of seller financing bypasses one of the most important and inherent things in a sale, which is a transfer of risk.

25:00So William, the owner of this place, is willing to exchange some level of risk to someone else, but really maintain a lot of it himself if he's willing to take on a giant seller note. And so he's going to lose control, but he's also going to still maintain the risk he has today of owning the business, which is just not a great marriage, but in the right scenarios, that's what you have to do. I think it's astute that they're sort of like seeing that. I have a feeling that this person would take a very high level of seller financing. Now, sometimes it's there, just as a quick note, the advantage there is he might get to call the shots.

25:46You're gonna take a bunch of seller financing, but hey, I get to pick the interest rate. I get to dictate the years a little bit. They get a little bit of control over some of those factors. But when the closing happens, they're not going to be celebrating. They're going to be worried. Well, or they may be relieved, Brad. I mean, I was talking with a founder a couple of days ago about whether it was the right time to sell his business. And the financial transaction aside, the one thing that you can't have when you own the business is the ability to walk away. So even if the guy does not get a check at closing and it's just a seller note, he at least doesn't have to go to the store every day anymore and he can retire right so at least there is that so y 'all there's also a weird dynamic here on their website they have like six locations so they have the deli they have like washington dc one two three four locations in Washington, D.C.

26:46and I think two in Bethesda. And like when you Google them, I was trying to see like Google reviews. They have multiple, they even have multiple locations on Google, my business. So, and it may be that some of these are co-located, but I mean, surely this is not the revenue from all four locations. I mean,$200 ,000 VivaDot across four and a half locations or whatever this is. I mean, 50 grand a net per location, like that is wicked. There's some story behind this. It's got to be that like, you know, it's brothers and one brother doesn't want to sell to the other or something. And this is just one location or like it was an employee owned location that they're going to spin off or something.

27:30There's something here. Well, so if it's that Mills, I'm immediately out because I do not want to own one location of Wagshaws and be totally exposed to the other people completely ruining the brand. Uh, also they probably wouldn't want me, you know, to be exposed to me, totally ruin the brand either. Not that, you know, I'm some saint, you know, who knows? Uh, I mean, and it's also DC, like you look at somebody the wrong way, you get canceled. So like, you know, like, you know, you don't, you, you serve someone the wrong cut of meat. You're in trouble. Um, so I w and also like you own one of the four wag shawls.

28:04You're just a vassal to the, you know, the broader wag shawls empire. No thanks. Brad I like having your perspective on here because we can you know poke holes and deals a lot and like say hey here's how we would have written the you know the the teaser but I do feel like you know you've even made this point already on this listing but like I think what this person has messed up is they should have addressed head on the fact that like we could very quickly realize that something doesn't add up and when you're looking at a lot of deals and something doesn't add up, you just quickly pass. Like you put it in the too hard pile.

28:39Like, I don't know, is it worth, you know, two hours worth of phone calls with the broker and the seller and stuff to figure it out? No, just toss it to the side. I wish they had like spent a little bit more time getting out in front of what looks like an apparent discrepancy or something like that. That is, there's probably a rational explanation. Totally agree. You know, as I'm, I mean, I will say this in DC, there's no way that$3.3 million is the total revenue for all those locations. You wouldn't even be able to pay the rent, I don't think. It would be a very small operation in D.C. across that many places.