"Do My Partners Know Their Business Isn't Worth What They Think?"

0:00Hey, Alex, right here. >> Yes, sir. >> Alliance Jiu-Jitsu. >> Yes. >> I mentioned to you last night that we have 250 locations as a franchise model. >> Mhm. >> I also own two of my own locations and I want to now open 50. >> Mhm. >> Um with my franchise partner as opposed to just going after franchises, it's just better for us to own locations. We talked about that. >> Um but you mentioned, "Hey, uh we bought out our our franchises in one of your portfolios, I believe." >> Yeah. >> Um we've looked into that or I should say I've looked into that, but it just seems that there's kind of like a um a dilution to the value of those gyms, right? So,

0:34>> You go from most in pain to least in pain. >> Um in what sense? >> So, like of the 250 that are open, >> Yeah. >> number 250 worst performer, >> Yeah. >> I talked to him first. >> Got it. >> And then you just go to 249 and then 248, 247, 246. You just keep working away through it. >> Got it. >> Some of them have unreal So, you just wait. Like we I mean like it's it's coming from the perspective of like, "We don't need to buy you out, but if you want us to take over this thing for you, I can take it over for you."

1:03And then you can just swallow them up. Cuz a lot of them, I would assume the bottom 20% desperately regret the decision of being in business. Has nothing to do with the model. Like bottom 20% >> it. >> for whatever reason, right? And so then you say, "Cool, well, I can relieve all of this pain for you >> Mhm. >> immediately. And I'll take over all the liability of your leases and all the liability of the equipment and everything else that goes with that cuz you know that you know how to run the business better. And you might have to fire half the staff, but at least you don't have to like rebuild the facility. It's already to spec. And as long as you like the markets, cuz some of them we we close down like, "This is a market issue."

1:36Local. Calm down. Uh like some local markets just don't have enough to sustain. There's not enough of the ideal avatar, whatever. But um as long as you don't think it's a market issue, and we think this should be over-performing and this is being mismanaged, those are the ones that there are opportunities. >> Got it. >> Yeah. But I would do that first. >> Mhm. >> I would go mop up cuz I'll bet you out of 250 you can find 50 without even having to spend a dollar of opening new. >> Right. >> Just take over liabilities. Like if you take over like So, this is how you can talk through it with them, which is like you have $300,000 in liability, you have zero cash flow.

2:08I'm paying you $300,000 in debt that I will take on. >> Right. >> And so that way it's not like wait a second, this thing's it's like this worth is nothing. The opportunity was worth something, but you have no squat on it. And so we have debt. I'm willing to take that risk on. >> Mhm. Uh would you because they love the sport still though in this situation, they don't want to like necessarily walk away from their students. They still want to be there. So, I guess how um from just a high-level perspective do you have any thoughts on how to even work through that framework?

2:35>> mostly because they're going to still have authority. >> Right. >> Like in that in that world. >> ask them to walk away is like kind of a different conversation than like I think what you dealt with. >> I know I think I Yeah, I get where you're coming cuz they're like the master sensei or whatever for that. Yeah. >> But they do want that Sorry to interrupt you, but they do want that like kind of relief that you're talking about. >> want to manage the business. They just want to like teach classes or whatever. >> Yeah. >> The thing is like so this would be a test, honestly, cuz all the franchises we have like they're not they just on the location or whatever. Um I would go in and say like I would test on one of them and be like in front of the staff, this guy has to get up and then I will get up so that everyone understands like he's not the man anymore. I'm the man now.

3:15>> Mhm. >> He just teaches classes. He has no authority. If your check's [ __ ] up, he can't do [ __ ] >> Mhm. >> If you didn't like if you want to know if you can take off, he can't do [ __ ] >> Mhm. >> Like it's they that has to be like a clear transference of power not in a way to you know neuter the guy, but like be very clear that that you can take it over. I don't know like how well that'll go, but if he's bought in as like and he can sell the fact that like listen, I'm here to teach classes, that's what I want to talk about, but it's like hey, you want to talk about armbars? He's your guy, not me. I'm here for the dollars and cents to make sure the lights stay on and so we can keep this thing going so everybody can keep having fun.

3:53>> Understood. Thank >> There's like divi- like clear division of roles. And um and if you're like, "Hey." And like play out scenarios. So it's like, "Hey, by the way." Uh you're like, "Hey, that's not how we do things here." It's like, "Duh. That's why it's not working." >> Right. >> And so we are going to change things. >> Yeah, monetarily I think is where I'd run into the issue which I'm I'll have to think through of how to make sure that they also are paid something that they feel that's worth it. So to your point, I think we just need to maybe wait it out for the right right ones.

4:19>> If you talk >> all 250, I can almost promise you that there is >> There's for sure 25 that will sign their stuff over. >> Understood. >> To take to just just teach classes cuz that's what they thought. They thought when they bought into the opportunity that they were just going to make money doing something they loved. >> Understood. >> But then all of their day is doing stuff they hate and they barely get to do the stuff they love. So it's like, "I want to give that back to you." >> 100%. >> Okay. >> Thank you. >> Yeah, no worries. But a huge opportunity there taking back over.

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