Justin Sloan: Real Estate Entrepreneur shares his innovative Franchise Model

In this episode of The Real Estate Entrepreneur Podcast, I'm joined by Justin Sloan, a dynamic entrepreneur who masterfully intertwines the realms of real estate and innovative business ventures. From his early hustle in the cell phone market to pioneering a groundbreaking restaurant franchise, Justin's entrepreneurial odyssey is a testament to the virtues of bold risk-taking and strategic diversification. Uncover how he leveraged his business acumen to build a formidable real estate portfolio and why he now is pivoting his focus to integrating franchise models into his real estate portfolio as a scalable approach to real estate investing. Tune in as Justin shares his unique perspective forged through his journey of embracing challenges and extracting lessons from setbacks... Welcome, Justin, to The Gould Mine.

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Transcript

•  What's up gould miners. Today. We welcome to the show Justin Sloan of Sloan Capital. If you want to get to places that no one else is at you have to be willing to make mistakes and have that mentality and that's what makes us better stand up for what you really believe in that thesis that maybe others don't believe in or every land oh my dad was a landlord and he lost his ass you know you should never go be a landlord. I heard that 100 times and if I would have listened to that one person I would never have a real estate. Portfolio Justin is a real estate entrepreneur that has spent the last 15 years grow growing a real estate Empire and has now transitioned that success into growing and scaling a franchise restaurant model. Justin's business acen definitely gives him a very interesting unique and fresh perspective and he shares all of that with us. In this episode we start off the episode by talking about his early success selling cell phones and how he pivoted that success into real estate investing at such a young age later on in the episode. Justin shares his bet sizing strategy as it pertains to real estate investing and how you can use it as well to prop ly allocate and diversify your Real Estate Investment Portfolio and finally we spend a good portion of the time talking about Justin's new Venture into evero which is a restaurant franchise model that he started investing in right. At the start of covid-19 July 2020 he decided to Pivot and go into this business model. Justin paints a vision in this podcast for all of us in how he sees businesses like everal and real estate investing melding together in the future and how syndications like his will eventually end up owning and managing the businesses as well as the real estate. This investment blend of business plus real estate lends itself nicely to diversification as well as economies of scale because in his words if you can do one or two of these you might as well do 50 to 100 really great stuff. In this episode he is a big thinker super strategic and quite impressive. You really owe it to yourself to listen to this one folks lots of gold nugets at this one without further Ado. Let's welcome to the show Justin slow Justin welcome to the gold mine hello sir thank you so much for having me appreciate it yeah. This is great man um you know. I'm actually really excited to talk to you you you've got quite an interesting background. You obviously have a a good business. Acumen plus a real estate Acumen and it's it's fun to be able to talk to people like you because I feel like my background also real estate and business and so when you you kind of get someone that can speak both languages. It's it's pretty refreshing and and it's usually a fun time. So I know that you started off selling cell phones in high school is that yeah. So I was a senior in high school and uh and every day um at you know about 1 in the afternoon when I would get out of my last class or so would go to the local mall and sling cell phones until 9:00 every night um even before that was working at radio track when I was 16 but I it was weird. Cuz I could sell cell phones to people but I couldn't actually sign a contract um. So I had to wait till I was 18 to actually be able to get my own phone and stuff like that but yeah that was my early business life of uh you know. I really School wasn't quite for me um. But I was pretty good at selling stuff so as much as I could and commission and go out there and hustle. There had to have been some skills and lessons skills that you developed and lessons that you learned in that time when you were selling that eventually translated into your success as a real estate investor. What would you say some of those like skills and lessons were yeah so when I started in cell phones uh. It was a really interesting time for me because I learned about commission and you know the more that you sell and the harder that you work if you put all those together. You can really make a lot you know a lot of money um I remember you know as a senior in high school. I grew up with a single mom three boys and when my mom saw my W2 or W4 or whatever it is um. It was more than she made um when I was a senior in high school and it was a really big Awakening moment for me of realizing that wait a minute if you not only work really hard. But you work really smart go hustle fight for every sale. Create relationships do all of this that magically more opportunities are presented in front of you right. It's really weird if you work harder good things come um and I took that into rework when the time came of you know. Even though I still when I got into real estate. I still had some of my cell phone businesses. I'm sure we'll get into that but that was ultimately taking that same hustle go out there eat. Everything you know that we kill go out. You know build another one buy another one flip. Another one do this as many as I could and all of a sudden you really get that compounding uh effect. What was it that caused you or what was that aha moment that allowed you to Pivot into real estate investing because what I I I'm not 100% sure. But it it doesn't sound like you ever sold real estate. Correct I actually do have my real estate license but that came later down and I um I really don't actually might have my domain call anyone but me.com um and it actually Google searches for other realter. So I I am not an a practicing realtor by any way shaper form. But you know so how did I flip from cell phones to real estate. Um I love that you say it was an aha moment because it was more like an oh moment um where I had I had a great cell phone. Business. I had a lot of locations we were doing a lot of Revenue. We were making a lot of profit and then the company that I was selling started making a lot of really bad decisions um Apple. Uh would not sell us the iPhone. The company had to sell off all of their towers and Lease them back just to be able to afford the upgrades. On those Towers um. There was this brick wall moment where my entire business came to a stop um and it was a point where I decided I no longer can open more cell phone stores. But I needed to find something else to invest in or something else to build. And I looked at every business that I could and everything um and then all of a sudden real estate just like hit me straight in the face. Uh it made a lot of sense. I could do it on the time that I had free from my normal business and uh so I just I did everything that I could to learn everything about real estate I interviewed a bunch of property managers talked to a bunch of agents and just Dove head in got it and so it was more yes. It was out of necessity. You're like oh shoot like I I really got to make this thing happen or like I mean I I might like lose it all kind of thing yeah. Absolutely yeah. My cell phone business was growing growing growing and then like I said brick wall um. The company lost a third of their customers in 18 months um. Like I said we weren't even allowed to sell the iPhone so the C the phones and devices that people wanted. We were no longer able to sell and I had my eggs all in that basket um. I'm not very shy. But I was in my low 20. You know I mean I of course I had everything in one basket I I was invincible um and then obviously that moment happened where you realize you're not invincible and I'm really actually kind of glad. It happened in my 20s. You know I don't want to be 65 and have everything in one basket and learn that lesson right. At least.
•  I had time to rebuild yeah 100% well that begs the question though like why real estate investing right because like you were in sales. I could very easily think of like at least a dozen. Other industries that you could go into right away same skill set go in sell. Maybe even start another business but like real estate investing definitely has some sales elements to it but like there's a lot of other things involved with it too so. What was it that Drew you to investing as opposed to like just like another commission type of uh position or or or business. That's a good question. I don't know if I've ever really thought specifically like that. I don't think the option of going in getting another job. Um was was on the table um you know I was still running this cell phone business and we still had locations and we still had leases and personal guarantees and all that kind of stuff so you can't just walk away from it and go to zero you know so we navigated and you know we obviously had to downsize and make some tough decisions and all of that. But then um you know the question comes. What do you do with the money that you've earned the money that you're still earning um and where do you put it. And so that's where again I researched anything and everything I mean an Italian Ice Company. I can remember in a cleaning franchise and all these other kind of businesses that I thought I could scale. But I remember being in Philadelphia actually with my cousin's husband um and was talking with him and just being brutally honest that like man like this sucks this world that I'm in this business that I chose. It's just we've reached that time and he goes well have you ever lo you know looked at real estate. I was like what do you. No I don't have time to go you know manage tenants and all this kind of stuff and he actually said to me well. Why don't you hire a property manager and I was so naive with real estate. I didn't even know what a property manager was. But at that moment I realized that there was other things out there where I could put money in if I could find the deal and create the deal flow that somebody else would run that deal flow for me and that's ultimately what I did. I went out. I interviewed a bunch of property managers I asked them their opinions on the markets what they thought was over rented under rented. What was opportunities. What would they do if they were going to buy some real estate because ultimately you want property managers to be managing properties. They like and asset classes they like um and we ended up buying two multi families just little small for plexes and I got my first dip into you know real estate and we didn't have to do anything for the first few months because it was eight units at eight units were full and then obviously as someone moved. Then I learned that process and the next process and um continue to grow from there. That's awesome so the first deal that you did what was that one so it was eight. It was two fourplexes is what it was okay two two fourplexes and you were looking primarily for cash. Flowing assets I'm assuming like things that were stabilized and that you could just kind of go in and start collecting checks absolutely lowrisk medium reward. You know something that I could put a property manager in place. We'd still cash flow and essentially I could learn the business without having to um take too much time away from my other business. You know I didn't want to you know I mean obviously on a fourplex that only rents for 600 bucks a unit you're not making thousands and thousands of dollars a month. We're making hundred hundreds of dollars a month but more importantly learning a skill set that allows me to go um compound and then find a better one and find another one I got to the point I was buying a regel house every month because I had this system where okay the second that a unit needs I learned this system in fourplexes. Right somebody moves out new paint new carpet update. This change this do this and all of a sudden you can rent it for 750 a month right and I just started doing that with renal houses. Hey I found this renal house. Three bed one bass slab. They all got the same paint color the same carpet. The same cabinets the same Appliance but nobody knew it um and so it's just all about creating that repeatable system that allowed us to scale and you know you. At some point you got to rip the Band-Aid off and learn the first time and we made every mistake. You know. I mean I believe me. I mean every mistake you possibly can in real estate but how do you learn if you don't try right and the important thing is that you took that first step.
•  Why do you think it is so difficult for most people to even take that first step. What is it like is it finances is it lack of education. Is it like what is it ego. I do I think in general people are so afraid to lose. Andor be thought of as someone who loses um. But the reality was was would. You rather be thought of as someone who never does anything you know and sitting by on the sidelines your entire life being afraid to play in the game. Um just doesn't sound that interesting to me. But the reality is if you find a good deal if you if you've analyzed enough properties. If you see enough things things. It's like if you're a baseball player when you see that right pitch you know it's time and investing's no different I think if people just simply educated themselves a little bit more saw a few more pitches than when that right one came in there that it'd be easier for them to act but um in general. You know. It's so easy to go invest in the stock market and do all the basic things. But when you actually go start your own business invest in a property stick your neck out there to do something that everyone around you isn't willing to do that naturally you're going to have people that point and and I think a lot of people's ego gets them uh in trouble and they're afraid to potentially fail or potentially fail in front of people that they know that's really interesting. That's a really interesting perspective. Let's go deep I do I think there's a lot of Personality treats that happen with investing you know. I mean I come from a poker background and a lot of people treat investing like poker you know and in poker people will sit out at the table and they'll Tre like Blackjack they're gambling right. They're putting all their chips in and they have the slightest little Edge but what they should realize is like hey. If I play enough hands I can get a lot more information. Then I understand where to go and put my chips in and I just think that the more and more that we see a lot of hands see a lot of pitches. See a lot of deals that naturally when those moments happen of opportunities that everybody is so much better prepared for them that's really interesting uh really really interesting thought and uh I like the poker analogy too and and wow yeah you know it's. It's it's fascinating because uh as you're saying all of this right like I'm trying to think about the people that I know in my life who have been talking about doing the thing for so long and then the people that actually do it and yeah. I mean I I don't I don't disagree with you. I think that ego or fear of loss really like fear of fear of losing in front of other people is is probably pretty high up on that list. Pretty pretty high up on that list. Yeah I mean I definitely don't want to say. That's the only reason I just know I know with a lot of people that I talk to that you know Comfort is. It's natural that we want to be comfortable right. We're human beings. Nature is I want to be in a 72 Degree room. I want to drink my delicious Celsius. I want to have my meal that's prepared right all this kind of stuff. But when you actually want to do things that if you want to get to places that no one else is at you're going to have to do things that nobody else does and to and when you're doing things. Nobody else does there's no book for it right. There's no book that tells me every mistake that I'm going to come across and I can read it and just learn I'm good to go so you have to be willing to make mistakes and have that mentality and that's what makes us better you know and then every mistake that we make let's just not make it again and if we do that then it's okay making mistakes. I want to make more mistakes. Now. I'm changing my entire mentality around mistakes to you know how many mistakes can I make because now. I've learned 20 more lessons than everybody else in the same game and you know I mean I can't tell you my entire career um. Let's be real. I mean you've started a number of businesses done a number of things whatever you will not have everyone around you be supportive right and even the people that you think will be supportive will just kind of get quiet and most people aren't used to that right. We're used to people supporting us and cheering from us and all of that. But if you want to go do things you have to be willing to to go against the grain and and to and to stand up for what you really believe in that thesis that maybe others don't believe in or every oh. My dad was a landlord and he lost his ass you know you should never go be a landlord. I heard that 100 times and if I would have listened to that one person I would never have a real estate portfolio. When I wanted to I mean I started restaurants in the middle of the pandemic. You want to talk about having people tell me. I'm an idiot. I mean I literally when restaurants were closing down and people were going out of business. I was going in and signing the leases of closed down restaurants and getting deals on them that nobody else could and that's part of the game so okay let let's let's talk about that since you brought it up and and I I was going to bring it up later. But we we let's just dive into it right now. So you you bought your first fourplex or your first two fourplexes in what year. In 200 910 it was really early right in the middle of when everyone said don't buy real estate. I mean that was literally everything that I've done from when I started my cell phone business to when I started buying real estate to when I started restaurants was always the absolute worst times to be doing it. So you you spent an entire decade bu building a real estate portfolio boom. Co 19 hits and a few months later you're like hey. I have a cool idea. Why don't I get into the restaurant business. I it quite go exactly like that. But let's um let's talk theory in big picture right so yes. So I have you're exactly right. I spent a decade plus um scaling from multif family to learning single family to starting to buy strip malls that I was located in my cell phone stores absolute trip net resturants uh things like Dollar Generals Perkins all that kind of fun stuff and uh really learning the real estate industry learning leases learning commercial real estate. You know all this kind of stuff um and then the pandemic happened and in one day I had 42 of my tenants call me and tell me that they were going to go out to business that they were going to lose everything that they were forced to close their doors. Etc. Like the whole world reminder of cell phone days where everything's going up up up and amazing amazing amazing and then like oh and it it created a lot of like whoa and so started looking around and you know we navigated that and all this kind of stuff and then as the world started to you know. Listen I mean about halfway through a year into the pandemic you've got to start to realize. One of two things is gonna happen. We're either all dead or we're gonna be fine and that's really like I mean that's just kind of. The two options that there were and I didn't I believe in America I believed we were going to bounce back. I believe we were going to do this. The government started in devising things rates were dropping.
•  My tenants were starting to go. And I said okay now is the time that we we look at in investing and doing some different things and that's when I found everbowl um. Everbowl is an assai Bowl chain. It's like a create your own fruit bowl kind of like Chipotle but fruit um and you go through a simple line and they're very small square footage and most importantly I actually loved the food. It started with just absolute love of the food and the process you know I come from Iowa meat and potatoes and I started eating this food. It was delicious um and then you know Drew Brees came in and he was buying the rights to a few States and I made an investment into the corporate company and it started to show this opportunity that maybe other than just real estate. We should look at some of the repeatable businesses and then merge eventually merging everything together. And I really think that's the future I really think if you look at where things are going you know Blackstone just buying tropical smoothie for $2 billion and orange theory getting purchased. All these big repeatable concepts are starting to be looked at really attractive and I think that that's going to continue to be the future. It's been my theory now for a while. There's so many ways that I could take it here but I I want to I want to talk about everol for a little bit more. What is it about that business model because here's the thing right like I know when we're talking highlevel restaurants and just like food and beverage in general. Low margins you know like raise within margins hard to truly make a profit. Only at scale. Can you truly make a profit and especially in the franchise model right when you're you know you're obviously like you're getting the benefit of the prop proven process. The marketing all that stuff but like you're also like you know a lot of your a lot of your paycheck a lot of your profits going or or revenues going um to the franchise or what is it about ever that stood out to you. That made you believe that it was a good business decision yeah. So for me is all about repeatability um you know and when I got into real estate I bought a lot of three bed one bath. One stall houses like I said before and I would paint them all the same color and I'd rent them all for 11 to 12200 bucks a p we just we knew before I even bought it what I could do with it and essentially with everb as we keep scaling. This we're able to predict a lot of those things and actually create the business model before we even open the business right so I can find the right square footage and we can actually know our buildout costs before I even sign the lease I can know my lease amount before I even signed lease I can know the traffic counts I can know the demographics I can know my other anchor I can know my competitive analysis. I could actually put a lot of different inputs in to get a pretty good idea where my sales will be before I even open and then on top of that I have National pricing on food. I have a national you know like I have all of these systems that help us with Labor Management scale cost of goods all of these kind of things and so while the restaurant industry is a very um it's looked upon very um poorly because most restaurants are owned by chefs and chefs have a creative mindset where they can make amazing pork belly but maybe line items on a p&l um aren't the top priority for them and so by using a business background with the food background. Restaurants are a hockey stick and once those expenses are paid yes. The margins are very thin upfront and you've got to get that rent paid and your employees and the cost of goods and yes you've got your franchise fee. But if you look at the prices I can buy things for for I could never do that if it was Justin oie concept and if you look at the systems I'm part of and the marketing and all these other things that we get as part of that. It actually is a very repeatable model and I can tell pretty I mean I can tell before I even sign a lease about where my profit margin will be on a specific range of sales and then on top of that we're debt-free because our same. Syndicate investor group that was buying real estate is also funding the restaurants and so we don't have to worry about interest rates or all these kind of weird things that go on and that's what really gives us that extra Edge is. All of our competitors are firsttime. Restaurant tours don't know their cogs are are learning marketing and then they also have an 11% SBA loan and if you're trying to figure out all those things that once that's really really tricky. Whereas with me. I've got the entire state of Texas you know if you look at just Dallas alone. We already have seven locations there. There's 7 million people. We could put another dozen Plus locations there and we can be really picky on location really. Picky on rent really picky on traffic flow and we know when we stick that that location in there that it will you know create X Revenue as all of our stores do okay um that makes all of that makes a lot of sense to me now how does this comp because this is where I'm this is where I'm trying to understand kind of like how this all comes together because you were saying. I think that the business concept with the real estate concept and like melding it together. So are you like eventually thinking like more of like a McDonald's model where like you own the real estate put the business in there right and then run the business but then also you're owning. The the the is that what you're thinking or yeah. So there's a there's a couple different things in play right here. So we still have our real estate arm. Obviously. We know that real estate's really tough right. Now deals are not penciling. You've got to come with a lot of capital to the table. So we're looking at acquiring real estate. We're also have our restaurant armed so we're always looking and we're actively opening more restaurants right now. But my long-term goal is to merge. These two um I would and and to be honest I really think we're going to actually add more Concepts into our portfolio over the next few years. Given the given the success that we've had with everb almost every week a new company is reaching out to me saying scale me in Texas scale me in Texas you know so I think about five seven years down the road what if we had three or four Concepts what if we had a Fitness Concept or a restaurant or this or multiple and then different things why couldn't we build. A piece of real estate put three or four of our Concepts in there from day. One now we not only own the real estate but we also own or you want to talk about real value. Ad why don't we buy a a strip mall that needs a little bit of love and we'll put a little bit of our Concepts. In there we'll give ourselves a little bit of TI and we'll stack the deck in our own favor and I just I really believe that the future is that people and Real Estate Investors will not just want to own the real estate. But they'll also want to own a piece of the businesses as well. And so we have the two arms right now and I think at some point you know I'm still really young. But in the long run we're going to merge this whole thing that will give people a bite of all of the Apple. If they'd like it and then people can drive around different communities and own a little bit of that building a little bit of that business and a little bit of this and what are they doing.
•  They're helping create jobs. They're helping add value to their communities and they're getting to be part of those things that are that are around them know man that's so smart and and now that like as you're saying it like the vision's already being painted for me because you're right like you know before Real Estate Investors. They're like okay. They're think about someone who owned a strip mall like in the 80s right. I'm thinking High nworth individual you know doctor engineer. Lawyer don't really have time to do a lot of the day-to-day stuff. But they just need needed somewhere to park their money. Nowadays what you're seeing is the birth of the real estate entrepreneur guys like you guys like me we're going out there. We already understand business because we've we've probably run a few businesses and now we're also getting into real estate and so having that Acumen going into real EST and like applying that to real estate investing and you can just apply it to different businesses that makes so much sense to me and by the way there's a tremendous amount of value there because if your Investment Group owns the businesses inside of the real real estate that you are uh operating in that is like dude the margin on the The Profit on that would could could be could be insane. Bing right so for a normal landlord gets about 10 cents. About 10% of rent goes to a landlord right. 10% rent to sales ratio is kind of what they're looking at but there's another 15 to 20% that comes out the end is profit margin so for every dollar that walks in and gets spent at that strip mall. There's 30 cents in there the landlord's only been getting 10 cents. The local small business owner has been getting X the rest of it. The reality is that as time scales on and as repeatable like why wouldn't you want to have 50 Evers and 100 Jimmy Johns and 200 of the you know there's franchisors out there that own 26 or 2,800 locations of different businesses. Applebees Chili's 400 Arby's all that kind of stuff and I really believe that creating a venue for people to invest into these repeatable models and get a chunk of that slightly bigger percent of of money is there and the C and then we don't like I said we don't have to worry about interest rates and those other troubles right now and are able to expand. One. Others aren't able to so you're buying into these franchises unencumbered then like you're you're buying the right or you're. You're you're not like I guess I I know enough about like everbowl or like those sorts of models to really like speak in like high level. But like I'm assuming some franchises could probably Finance part of it or maybe not but you're not financing it. Repeatable. Businesses are very financeable. You know there's I mean obviously there's small business loans. There's bank loans there's other things and then you know the more that something's been around you know like Taco Bell is considered the kemel a creme when it comes to qsrs right. You could they they have crazy sales you can raise prices by three % every year plus they grow sales by 3 to 5% every year what a great business to be in I think the biggest chunk of wing zones or Wing Stops. I'm sorry just sold for like a 13 multiple um like 50. Some Wing Stops really and it's becoming very very popular that if you've got a model that can do it times 10. Why wouldn't you do it times 50 or times 100 and you know and all of a sudden I mean every month we're opening another one I mean Nationwide. We're opening one every six days right now and you want to talk about being able to duplicate something really really well do it every six days for years yeah well and that's interesting too because like especially something like what you just said like the everb thing right. Like so it sounds like that's like a I I'm not going like Nam that like Vitality Bowl right like I'm assuming that's like a competitor or something like of yours or like yeah. Yeah okay so like Health Foods plus like Fitness Plus something else plus like I could see the stack happening already right. I could see the St and I can already see the Box being built out for it or if you've already got a pre-existing retail. Center kind of reach retrofitting it to like kind of be a box of what you want it to be um. That's that that's brilliant dude pick any chain. And it's I mean if the later you go the less territory you're going to get but let's let's take ever bable. You know everal. I really believe that there is a entire market for a build your own healthy um. Bowl um. It's been proven in salads. It's been proven with Chipotle. It's been proven with a number of different models. But there's nobody that had built a brand like everb had around this and that's what really attracted me to it um now obviously with it being a younger brand. There's more risk or whatever. But if we fast forward a few years I really believe that there'll be 500 and 700 and a th000 of these there's a thousand Tropical Smoothies already. They proved that people want to have a meal out of a smoothie. I'm proving that I believe people want to have a meal out of a bowl and they also want to hire and create your own type of experience with it on. I mean then go into the sandwich category go into the pizza category go to the fitness category. Whatever it might be. I would love to own little beats of these you know businesses that are in all of these areas across the country. Because the systems are all the same we can just change the ownership groups a little bit and provide these meals provide these opportunities provide these businesses to different communities at the same time yeah when you when you own the business too like I'm just thinking of it like if you own the business as well. You're obviously your margins improve on the business because obviously like when you own the real estate your overheads going to be lower so that that's like bonus number one number two uh I'm assuming you know in the restaurant industry. The the depreciation benefits can be pretty good so like there's there's plenty of tax incentives right uh for owning for owning something like that yeah yeah. So what I did so because I syndicated a lot of our real estate as we started. Growing. I also created a syn group for our restaurants and what we do is. We raise for three to six locations at a time in different markets and then people are actually owners in the LLC of those restaurants so if they own 4% every dollar that we make they get 4% of depreciation 4% of cash flow. They get a pay one at the end of every year for 4% and that's it there's no waterfall structures or this or whatever. It's just simply an equity play and then as people drive around Dallas or Austin or here or wherever it's like hey I own a couple percent of that a little bit of that a little bit of that. One of these you know and it becomes fun because they're literally helping us create jobs and then they come to our grand openings and they're standing in line and high-fiving. And it's like it's a different kind of investment. But it's also pretty lucrative and if we keep growing sales even 8 10 % every year um and eventually I really believe we're going to be a national brand that everyone will know who we are and how cool will it be to have the next Chipotle or the next um. You know whatever Pizza chain whatever it might be. That's a household name. I really believe that everol has a good chance of being that leader and that winner. And if we can create a Syndicate group with hundreds of people that are part of all of these um. It's a. It's a cool place for our company to to be part of so let's talk about The Syndicate real quick right so obvious ly you um you started investing presumably like that first deal at s like that was your own money yeah. So the first I think five or six years was my own. Money. I never really wanted any Partners yeah but you know eventually it happens go ahead and sorry yeah. No I mean like that that's that is what happens right like you can't do $50. Million deals 20 $20 million deals 100 Mill like without raising Capital like you know I remember. So when I was in my early 20s. I had this like you know aha moment I was sitting in a the baking all Buffet at C palis and um I'm like I want to own one of these one day from like that moment on dude like owning. A hotel on the Strip has been like my number one North Star and at first like for the first eight years of my career. I had it in my mind that I had to make $ billion to afford a hotel on the Tri and then need the mindset you know for real. I mean I grew up single mom with three boys okay like I mean I still haven't met my dad. Okay I I had a very minimal mindset. Let's be real like we didn't have food on our tables growing up. We had to buy our own clothes from age 15. You think I have a network about raising money and building a capital stack and all this kind are you kidding. Me give me a break. We need to was dollar Totino pizzas. That's what we thought about on Fridays. But the reality was you know. So when I built my first cell phone business. It was 100%. Me I was actually the only employee the first four months when I opened my first store. I worked open to close seven days a week for four months before I actually hired someone and then another person. Another person I literally grew it just like you said like thinking I had to grow to five billion dollars all by myself yeah. But the reality was. I didn't have to do that. So then I started doing real estate. What did I do I did it all myself again and then finally it was like someone like let me buy a little bit of that building. Let me go in on that one with you let me go on that with you and I just said okay well. If you do that I get a couple points on the deal for putting it all together. They said done absolutely. You're helping me. It's a it's a win-win. I'm like wait a second oh wait there's tons of people out there in the world that have money that need people to help them execute models right right and that's when it all changed for. Me was essentially when I realized that my skill set wasn't just how to make money in a restaurant or a piece of real estate or a cell phone store. My skill set was being able to Arbitrage dollars and a lot of dollars and if I could provide that skill set to other people.
•  Then all of a sudden I can scale whatever I want you know Gary ve calls it his death star. He has all these companies all. These investors all these whatever. But he calls it his death star because when he points his death star at something it's incredible how much that thing works right and I look at it as my Syndicate group but what we're building and what we're doing we point it. At something. We say everal grow. This company grow this real estate grow and we can go and put dollars and execute business models behind it. Now it gets really fun that's amazing man no. It's awesome and I love that your skill sets being able to Arbitrage dollars. That's um that's super important for people to understand like people who run syndicates like yourself like my. Like that's really. The skill set right when you're when you're putting together a fund when you're putting together whatever a syndication deal. So many people talk about vetting the sponsor right to make sure that they are who they say they are because if you're doing the vetting correctly then you should be thinking about it. As in those terms. Right like is this person going to be able to Arbitrage my dollars. Like do they have the skill set necessary to do that and can they identify opportunities that allow for others to be part of it as well right because saying I'll just take your dollars and yes we can scale everything but as you know when you look at you could look at five pieces of real estate and four and a half of them won't work if you put it outside money you know and so you have to understand the structuring of deals and how to manage them and how to take all that kind of stuff comes into play and I'm so glad that I started by doing everything myself you know because I learned how much that every one of those decisions mattered and I loved that I was playing and learning with my own dollars because you don't want to learn with other people's in um. Investments either and that's one. Thing you know if you want to talk about tips. You know a tip. I recently heard that I couldn't agree with more is investors do not want to help you build the rocket. They want to be your fuel and once I had the rocket built and I was buying real estate doing another one. All of a sudden people are like. Hey man can I put a little fuel in that and now the same thing's happening with restaurants as we grow one and add another and add another you know early on. I was like that idiot. Why would he be getting into restaurants all this and all of a sudden. Like two weeks ago. We just opened our ninth one and what happens every time we're post opening another one another one. It's like hey can I add a little fuel to that can I add a little field to that and that's really how we have to position ourselves is we're not necessarily the restaurant chores the real estate people. We're the rocket. Builders um and that's what we and that's what we need to do yeah that makes a lot of sense that makes a tremendous amount of sense. So obviously you've had a tremendous amount of success just in over the last call it 15 years or so but no Journeys without its you know share of challenges setbacks and whatnot. So what would you say has been the greatest setback in your investing Journey so far and we'll extend that you know investing Journey to the restaurants and the like everything right. What is what is been the biggest setback and and how were you able to kind of get to the other side of it. I think the biggest thing for me over my my long career has just been understanding proper bet sizing um and that goes back to my poker days. Right. You would never put all of your chips in one hand and hope for the best right um and even early in my career I went all in on cell phones and I had a disproportionate amount of my chips involved in cell phones and then as we've gone on and so I think that just one of the biggest things to remember as you're as you're going through life and going through building businesses and ups and downs and what happens if there's another pandemic or interest rates double or this or whatever is understanding bet sizing to different ass asset classes at different times when different things are in your favors and even though right now real estate might not be the best asset class due to high interest rates due to a lot of competition due to different things. Well guess what I have other asset classes that we can put some into and we can bet on different things that still help us win and I'm just really glad because I would have just stayed all in on real estate and bought at the top in 2021 and doubled and tripled out of real estate real. You know I would be nervous right now because a lot of my debt would be recycling a lot higher and um I'm I'm in. Unfortunately I'm in a completely different ballpark where I don't have to think about in that kind of stuff and it's just we're just turning and burning you know keep on growing. So what was that inner voice what was the thing that caused you to Pivot in 201 20 at you. Know when honestly buying real estate was sexier than anything right like the rates were so low. Everyone was like all in on real estate and you were like actually let me go to this like failing business model and uh and and see if I can kind of like well not saying. Everb was right but just saying restaurants in general. Like every every restaurant in America was closing down right so like for sure and not only that I started selling some of my real estate. I mean I started selling some of my real estate in 2020 2021 when everybody was buying it left and right and they were paying these crazy prices and you know. I mean in residential people were buying houses for 10% over ask with no inspections and no all this kind of stuff and listen when you've been in the game long enough. One of the rules that I always live by is if you're not willing to to sell it to someone for that. Then essentially you're buying it for that price. So if somebody's going to if I buy a strip mall for a million bucks and somebody offered me 1.6 for it. If I don't sell it to them. At 1.6. I just bought it myself for 1.6 okay and the reality is when things got really crazy. In 2021 I did not want to Reby my entire real estate portfolio at 2021 prices and there were many properties where we had executed great business plans. We had gotten our return that we needed to and it made sense to exit it and then when you exit that you begin to look at other opportunities and opportunities that maybe everybody's not paying as much attention to and as I said before I believe in America. I believed America would come back. I believed we wouldn't all die. I believe that people will still need to eat and on top of that I believe that they're going to look for healthier options better for you options. In reasonable price points you know and I didn't want to do a $100 a person steak dinner I wanted to do an $111 a person grab and go quickly in and out that everybody can be part of and and that was the moment for me where I knew I didn't want to Reby a lot of stuff and I thought I had a new thesis and if that thesis was right and so far we're a couple years down the road starting to really prove itself out um. But that's not to say the thesis doesn't change here's that you know and we just keep on making the best move every single moment whenever we can so the framing then was simply would I be willing to buy my portfolio at the price that I could sell it at today and at some point the answer became no and that was when you knew it was time to liquidate. Absolutely.
•  I really think it's that simple if I buy a house for 120 Grand and my plan is to make $400 a month on it in cash flow okay. Let's just throw a random deal out there okay. My goal is to cash flow five grand a year and somebody walks up and offers me 170 for the house that is 10 years worth of cash flow and I never have to hear about a leaky toilet. Somebody you know mowing the lawn improperly. Vacancy roof leak or what you're going to pay me 10 years and I have to do any of that sold. That's it. It's that simple to me yep because I executed my game plan. I bought something it you know and then listen now. I'm sitting here and I can Rey back that $170,000 house for 145 or 150 you know and that's just the reality was as as when people are acting irrational and doing irrational things that I told myself if I bought this house for 170 that would be irrational. So I should sell it because I would love to sell it to an irrational person but why not yeah I could not agree more with that with that mental with like that thought process. I mean. It's a very interesting thought process. I don't know that I've ever heard anyone articulate it quite like that before so in a lot of ways I feel like yeah yeah. Most people just want to buy real estate hold it forever but you know real estate is cyclical and listen you know when interest rates were really low um. People overpaid for things strictly because of what their monthly payment would be and I like to I like to liken this to cars or Vehicles. Okay I I have a nice GMC Denali truck okay. When I bought it was $70,000 and you know very low interest rate and my payment was $800. A month okay well all of a sudden um. You know the truck goes to be $110,000 but but interest rates are still next to nothing because there's no Supply whatever and people would pay hundred plus thousand for the same truck simply because well we can pay it interest rates are cheap all that kind of stuff well. Now all of a sudden cars you know interest rates are way up and nobody wants to pay $100,000 for a truck when your interest rates 9%. Yeah and I think the real estate is the exact same and I think people bought houses and properties because their payment shortterm was low. But but that doesn't mean the value of the property or the value of the vehicle is actually just because you can Arbitrage it and have a low payment does not mean that your actual price on that item that you bought was a good price and that's just the reality of it is that every like not everybody. But a lot of people overpaid for items in 2020 and 2021 strictly because their payments would be low on it. Not because the actual item was worth more and that's a great way to go. I mean there's a great space to go Arbitrage in any industry. If those are the metrics that people are buying yeah and I mean I I think as an investor so as an investor you're you're always looking at obviously you're looking at cash flows you're looking at you know um you know what the you know what the margins look like. But at the end of the day your think your lens is a lot different than like the average Americans and this is why I think investing in the residential space is so fascinating to me because in the commercial sector. It's it's purely numbers driven but in the residential sector there is an Arbitrage there that you just talked about where you are arbitraging on people's emotions absolutely. And it's super fascinating because you can absolutely you can make a lot of money playing that way and you can get totally totally burned doing it that way too well. You can also in commercial uh um you could absolutely play the same game so I like to look at Commercial Real Estate based upon price per square foot right because I can then look at three properties on the same block and get some sort of average on them. But a lot of people want to look at properties based upon cap rate well. What happens if if all the cap rates are the same but one property is has rents that are twice as much as the other properties. If I'm emotionally attached to a property that's over rented and and all of a sudden. There's a vacancy well. Now. I can't fill that vacancy for the same as everywhere else and so a lot of times people. Buy Trophy Properties in commercial real estate as well because they really want to own that corner or that mall or they love that restaurant or that tenant or whatever but and I've done that that's a mistake that I made early on is. I bought the corporate headquarters of a company that I loved and I thought it was a great company and all this kind of stuff and after five years they went belly up and I had a 10,000 foot office building vacant um and you just cannot buy off of emotions um one of those many lessons to learn absolutely well just so we're coming up on time. Here I have a couple other questions that I that I wanted to ask you the first one being you know this our audience. There's there's active investors. There's also people that invest more like LPS like in syndications and whatnot so what would like your top two three pieces of advice uh that you'd give to someone who's looking to you know diversify their Investment Portfolio. Um we'll start with active managers first and then might move on more to like passive investors. Uh and we'll we'll extend that to franchises and and restaurants as well. So like what what advice could you give uh for someone that's looking to kind of like diversify and and hedge heading into this next decade it sounds like you've been historically very right with your uh with your line of thought. So I'm curious to to hear what you say well. I think one thing that I would say to active investors and I needed to hear this 10 15 years ago is we're listen just because we're doing. Great. Things doesn't mean that other people aren't doing great things too and attaching yourself. Even a really small investment to other people that are doing great things is really really important because now we get to see things through other lenses and I'm invested into other franchises. Other restaurants. Other real estate deals deals that I don't even manage I'm I'm part of as many things as I can be because it gives me lots of different ways to see the market on top of that. As I be to Syndicate. Different things. I became a much better person with investor relations because I learned how companies communicate with me and I can tell you I hate it when companies don't communicate and so every quarter we send our investors updates every single quarter. We send them pnls of every single restaurant. We host you know uh town halls with even people. Brian pres CEO of everol to educate people on what we're doing and if you just do everything yourself and you don't see other deals out. There there. It's hard to know how great we really are and so go out and be part of other deals and attach yourself to other people that are doing amazing things and you'll end up becoming better and being better for your investors. Because of it yeah. I love that um that's actually you know. It's. It's another way of paying for education right but but instead you're you're actually like making money for your education right you you've invested money but theoretically if they're doing if you're investing correctly you're you're making a return on that investment and at the same time you're getting educated. That's really it's almost like uh. It's almost like being a mole right in someone else's or having a mole in someone else's business right because you're you're really getting to see it from the front lines. I can't tell you how many other restaurant tours or investors in my restaurants you know I mean I've got one guy and he his business is actually all like Mobile going and setting up parties and it's um a different uh item not in the same space. But he actually works with our tells. Some of our people how to do different things and we're telling him how to do different things and all of a sudden right. We're learning from each other for that exact reason. Why wouldn't you you know I mean I'm somebody with holds a bunch of cold. St all the kind of different things well. Hey listen. We're we're both wanting to win. We're not even in the same markets. What else can we learn from each other.
•  How do I look at things how do. They look at things and the more of those lenses are in place. The more we all get better what about like an LP right like some that's more passive uh. They're looking to maybe diversify their Investment Portfolio maybe. They only have their the you know they've got. A you know their their Ira set up and everything. But they're like they they finally realized. They broken free from The Matrix and realized the stock market isn't all that it's cracked up to be what advice would you give uh to someone kind of like looking to diversify right now yeah. So I mean if you raise your hand and just put on Linked. In you know hey I'm looking to invest in companies um you're probably not going to get the best intros to the best deals. But what I would recommend for people like if you're actively investing in real estate or looking to invest in real estate. You should find other people around you that are invested into that and then from that ask them what else they're investing in and what else they're investing in and always start with referrals. You know I mean with referrals you're instantly going to have someone that already has a relationship. You're not going to have to be the first person um and then if it happens to be a bad dealer bad Syndicate or whatever Hey listen that was part of the learning process that I went through and I went through it with other people um and this is what we learned and this is why we're in the future um you know and then same thing when it comes to restaurant or businesses or crypto or whatever it might be that you're interested in investing in you should find other people that you can talk to and have that kind of relationship and ask those kind of questions and you know there's crypto groups out there and there's small business people out there and there's all these kind of things um and then figure out how to get into those rooms get into those networks and see things through different. Visions or honestly just write the whatever the the smallest check is to learn um. I can't tell you know we lowered down our minimum to 25 grand for that exact reason for a couple reasons actually. But the main reason was I I actually agree with people you shouldn't have to pay 100 Grand to learn if an investment's a good one or if a company you're part of is a good one um and also on top of that I wanted to give people the ability to invest a smaller amount into more chunks of restaurants. So if you want to put 25 Grand into three different batches of restaurants. Now you have nine or 12 restaurants that you have divers vacation instead of one um and so go and make some small bets and learn you know I used the poker analogy earlier but like you know paying a couple dollars to see. The next card is completely different than putting all of your chips in blind and I think it's really important that we we make bets as we get information and start small with your bets. I'm loving the poker analogies by the way um are you ever are you ever yeah are you ever Vegas bro. We should go all right dude like we're going to link up then because I I definitely yep yeah. That'd be awesome man um. It's so funny the link between business people and poker player. I mean some of the best business people that I know are always in back room card games um because they do. They love it and they love the grind and they love the competition and they and it is. It's very very similar to business and making sure that you protect your pot you protect. All these kind of things. You you know you make the best decision every moment that you can and then not be results oriented. That's the biggest thing is sometimes we're going to make bad decisions. Sometimes we're going but we have to keep moving forward. We have to keep growing keep learning um. I love the analogies between poker and business as well. Yeah man um no that's awesome and I I definitely um you know as as I've got because I I've only been playing for like maybe like a year and a half now and uh and as I've started to develop the skill and everything I've noticed so much. There's just like a lot of of things that like you can apply uh in Boger to business. It's so it's funny like you just saying all these analogies and I'm like yep spot on spot on spot on so love it man well you've you've been awesome. This has been great and and uh I I feel like we could do this for like another hour or two you know uh. So definitely. I need to interview you sometime about all the hotel stuff because again. I think the more of us that are mixing together business and real estate and talking about how do we divide them but also merge them and create those opportunities for others. I think there's going to be some real opportunities for us in the future that are presenting these arbitrages for investors and and for people so congrats with what you're doing man and I appreciate you having me on yeah. This is this has been awesome Justin and uh in traditional Gold Mine fashion. We're going to have you leave the audience with one final gold nugget all right if I had to get one final nugget would be if you're going to do anything once or twice go do it 50 or 100 times um. We talked restaurants today but I've Got Friends that own restaurants and every one of them has a different menu and a different layout and a different everything and they're pulling their hair out. But when you own the same thing and you do it over and over and over again or real estate over and over and over again. It really does get easier each one and you get better with each one and then when you have problems you can fix it a lot sooner so rather than Zig and zag all over the place. F find one thing double triple quadruple down on it and get as many as you can I freaking love that man thank you so much. Justin you are are the man thank you sir.