🍟 Week 27: Jay-Z Gets in the Franchise Game
PLUS: A franchise with revenue 12x it's investment!
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Good morning,
It was a big weekend in sports - Tom Brady might (?) have retired, team USA lost to Canada in a big world cup qualifier, and the Bengals and Rams advanced to the super bowl.
For today’s rundown in franchising, we’re talking Jay-Z’s hot new fitness investment, and breaking down a low-cost staffing franchise that averages $1.9M in revenue. Let’s dive in!
P.S.
If you follow me on Twitter or LinkedIn, stay tuned for a HUGE announcement tomorrow 👀.
Franchise Headlines
Jay-Z Backed LIT Method Launches Franchising
The Scoop
Marcy Venture Partners, the VC firm co-founded by Jay-Z, invested an undisclosed amount in LIT Method alongside former LA Dodgers All-Star Adrian Gonzalez.
Based out of LA, the founders of LIT started by developing their own low impact strength machine that combines a rower and pilates reformer in one.
LIT has brought in the former COO of Xponential Fitness to spearhead the brands expansion, with a development goal of 100 signed units in the next 12 months.
The Wolf’s Take 🍟
If a franchise wants to truly blow it out of the water, they typically need to raise money. This might sound obvious, but before a franchise is a franchise, they’re just a small mom & pop business with a very small balance sheet relative to national brands. Capital helps them compete and enables rapid growth.
LIT is going to be fun to watch because their model offers multiple revenue streams beyond just fitness classes. Franchisees are going to drive revenue through fitness classes on-site, virtual training, and DTC products such as the machine.
While I have yet to see any financials beyond a general investment range of $200k-$500k, this is brand that I have my eye on!
More Headlines
Pizza Hut Launches a Robotic Restaurant 🍕
The ‘restaurant-in-a-box’ can make everything aside from the dough itself
7-Eleven Introduces Subscription Delivery Service 🚚
The 7Now Gold Pass for $5.95/month enables 30 min delivery of 3k items!
Steve Young’s PE Firm Just Bought 13 Planet Fitness Locations 💪
Grand Fitness Partners now owns a total of 56 clubs across 5-6 states
Franchise of the Week
Dairy Queen
Founded: 1940
Units Open: 7,087
Investment Range: $1.2M - $1.9M
Average Revenue per Location: $1.3M
Did you know?
DQ was acquired by Warren Buffet’s Berkshire Hathaway in 1998. Does this make the oracle of Omaha the Dairy King?!
Is there a brand you’re curious to know the financials of? Reply to this email with the name and I may include it in a future newsletter!
Breakdown: NEXTAFF
Fast Facts
Background
Founded in 1998; franchising since 2004
Based in Kansas, 63 outlets as of 2021 (40 company owned & 23 franchised)
A staffing franchise that offers multiple verticals including IT, healthcare, and commercial sectors
Fees + Investment
Royalty: 5-8% of gross sales (the higher your sales, the lower the %)
Brand Fund: 0.75%% of gross sales
Franchise Fee: $40,000
Initial Investment: $118,900 - $156,000
Financial Performance
The gross sales and gross profit* information below is from 11 traditional franchisee-owned offices that operated the full year 2020
The chart is based on a survey of Nextaff’s traditional offices that have opened since 2017, to determine the amount of time after opening that it took to achieve “break-even” on a month-to-month basis**
*Gross Profit is defined as Gross Revenue minus Direct Payroll costs
* Breakeven is defined as Gross Revenue exceeding all the costs and expenses on a monthly basis
The Wolf’s Take 🍟
On a purely quantitative basis, average revenue of 12x the high-end of the investment is an eye-catching stat. Granted, gross profit comes in at a lower (but still impressive) ~3x that investment, but add in that the median breakeven point is at 7 months, and the fact that the overall investment is quite low for franchises, and Nextaff is worthy of looking into.
Staffing businesses can operate without brick & mortar, and aren’t dependent on any particular economic climate. They can also be an even bigger value add in the context of a broader portfolio of businesses. By that I mean a Nextaff can be the lower risk way to jump into entrepreneurship and generate some cash as an owner before pursuing a potentially riskier investment.
If you already have a portfolio businesses, this can be a part-time operation or have it supplement your existing ones, as a way to vertically integrate your hiring process from A-Z.
This is the first staffing franchise I’ve covered - but will look to dive deeper into this segment of franchises going forward!
Resources & Press
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The Wolf Of Everything Else 🌎
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Spotify takes down Neil Young’s music after his ultimatum 😯
Nadal won the Australian open, now holds record for most grand slams 🎾
The future of pizza concepts is here via the robot pizza maker that makes *chefs kiss* artisanal quality pies. Check out 800 GOº here*
This pet food company is changing the game with its healthy food for dogs AND carbon neutral shipping options*
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