Insomnia Cookies at Temple University, PA with Dave Lasus
Guest: Dave Lasus
Topics: Insomnia Cookies, brick-and-mortar
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.
Welcome to retail retold everyone I am excited today we have the CEO of Heartland PA, David Lassus. Goes by Dave. Dave has been in the retail restaurant industry for over 20 years. He’s an expert at scaling companies. He’s about to really scale heart and Pa I am excited for him to be here. Welcome to the show, Dave.
David Lasus 0:43
Thanks so much, Chris. Appreciate it.
So Dave, tell us a little bit more about who you are and what you do.
Yeah, well, I mean, even as a kid, you know, everyone talks about side hustles. These days, when I was a kid, I had side hustles, they just weren’t called that. And it was always about entrepreneurship. And it was always like building businesses. When I was a kid, I started a thing called leaf it to us raking leaves was just me. But then I hired my brother. Right? Then I started in college and started a cleaning company. And it was like I was just going to make some extra money. It started growing, and I hired several people to start cleaning houses. And so that’s kind of like, then I got into the real world, although you could say that that was still the real world after college. And really, I’ve just been involved in growing companies. Every every, every place I’ve worked, has been growing a business. And I just love doing it. It’s like it’s it’s just my passion.
Leave it to us. That is fantastic. You know, you mentioned that growing businesses, one of the things today that I think is different than leave it to us today. It seems like and I’ve heard this before, I think Gary Vaynerchuk says it’s easy to raise money, it’s hard to make money, you know, I don’t think Leave it to us got venture capital. And today, there’s a whole lot of businesses that the way they scale is through private equity or venture capital. And what do you think about that, versus the leaf it to us model by growing through cash flow? And, you know, the old fashioned way, maybe getting a bank loan and that world versus what’s going on in the world with all this VC and private equity money? What’s your take on that?
You know, my last company Insomnia Cookies was not, it was private investors. It wasn’t VC, it wasn’t PE. And I mean, there’s a different culture around them. You know, when you when you have p and VC, there’s a lot of eyes on you lot of questions. And when the it’s a different type of money, you know, there’s just a different approach in the business. And having been through both I mean, I’ve been through where, you know, you’re putting everything on your credit card, and you’re hoping that you have more customers. That was some of the earlier days and insomnia, my myself and the founder and CEO, Seth, you know, there were times early on where because we did once we had money, we raised some money, he raised some money. And then the rest was just taking existing cash flow and pouring it back into the business. And there was no, you know, time horizon, or it was just like, let’s just keep growing this thing. So it’s just a different mindset. It’s a different mindset, you did bring up a good point about, it’s easy to raise money, but hard to make it. You know, I think the thing I like about growing businesses is that I’m not scared of the unknown. And a lot of people like consistency structure, a process in place. I like to build the structure with a team. That’s how I think about it. And like some people that’s just not for them, they want structure, they want the known, I’m sort of the opposite. And so that’s why I just thrive in it because I’m like, Okay, this is a problem. Alright, let’s solve it. Who do we need to help solve this and then we just go ahead and attack a tackle it and solve it.
Really cool perspective given you’ve been on both ends and the clear distinction between heart and paw and Insomnia Cookies, where you are today and where you were yesterday, so that I appreciate the insights. And we’re gonna come back to some things like this and but let’s talk about Dave for a second. Okay. So Dave, I got three questions. We call this section clear the air get to know you a little bit better. Are you ready?
I’m hoping I’m ready.
All right. Question one. When is the last time you tried something for the first time?
Well, okay, so I like playing baseball. But I’m not great at sports. So you know, my kids are signing up for baseball for you’re playing baseball. And it’s like, you get that email that says, Do you want to be the coach? And it’s like, it’s like, do I sign up or do I not sign up? So I did not sign up. But my fear was that I wouldn’t be a great coach. And actually, my youngest son’s team was short coaches. And it was like, there wasn’t going to be a fulfilling experience for the kids. So I volunteered and I is the first time I’ve ever coached, really any team, like, you know, in the sport. And I was actually surprised at how much I actually knew about it, and felt really comfortable. But it’s not something that I was like, I’m going to sign up, I’ll be the first coach. But that’s been
that’s been fun this spring. You hear a lot about people applying sports lessons to business world. Yeah. Were you able to do the opposite. You’ve run companies were able to take business lessons and apply them to sports coaching. Listen,
I don’t I don’t think my fear was like motivating little kids or like make like high fives. I actually know how to help a kid hold the bat, right. I mean, that’s, this was like, there’s a difference because both are team building. But I actually needed to be a subject matter expert to be a coach, or close to it or fake it right. And I realized that my my baseball skills at least for a five year olds T ball team, I can hang right. I don’t think I can coach my oldest son. I don’t I don’t think I know enough.
Understood, understood, and how old your oldest son. So I’ve
got five, seven and nine.
All right, all right. Okay, second question. What is one thing most people agree with, but you do not.
I got one, okay. People always say like, Oh, I like to sit down and read a book. It’s really relaxing, right? And say that I can’t sit still. I can read a book, I read like three lines. And it’s like, I’m on to the next thing. So I just that’s sort of the you hear things like someone has ADHD or they’re hyperactive, or they got lots of ideas, put, I guess, put me in that bucket. I just sitting down reading a book that doesn’t relax me. I’m just not relaxed at all. I don’t know why but not for me.
I understand. I am a voracious reader, but I understand the I can empathize with the struggle to sit there and just and just read. Have you gotten into audible or audiobooks.
I was just about to say like, if I’m in the car, and if I’m not on, you know, if it’s a if it’s a work time, I’m usually on the phone. But if I’m not audiobooks I can do, I can listen, but to sit down and turn the pages and stare at it, I just can’t doesn’t work for me. So audiobooks have been a win.
One of the skills that we’re going to talk about a skill next that I had really wanted to learn and never did was speed reading. I don’t know if it’s necessary today. But I, I think a little bit it might be and it would be interesting to be able to speed read. Anyway, that brings me to the following. What is one skill you don’t possess, but wish you did?
I can’t sing. When I was a kid, I played a musical instrument. And they were trying to recruit me into the chorus. And I was just like, really hesitant because I knew I did not have a singing voice. They put me in there anyway. And it wasn’t pretty. It didn’t last. Being karaoke or just like singing. I mean, I’d love to do it. I just I’m just it’s not for me. Yeah,
I’m not. I’m not good at the Arts. I’m not musically inclined at all. I like to listen to music, but not musically inclined. So I understand. Yeah. All right. So back to business heart and Pa tell us about who heart and PA is what you all are doing today. And what’s the future look like for heart and Pa? That’s a lot. Give me whatever you can on that? Sure.
Well, I mean, Hart and Paul was founded several years ago by by a group of, of veterinarian, you know, veterans of the veterinary industry. And the idea was to create a unique offering in the veterinary space. You know, if you look around at the veterinary space, you don’t see a lot of multi unit brands. Right? You mean, you might say, you know, Banfield is in PetSmart. Right? That’s, that’s most traditional. When you see multi unit, but you don’t say multi unit in most shopping centers. It’s a lot of a veterinarian started a business 1020 30 years ago, and then they sell to another veterinarian. That’s the most common. Now, there’s been some consolidation in the industry. And we can talk about that in a minute. But to actually build a retail brand, is what we’re doing at heart and Paul, now we, you know, sort of got our most of our growth started coming right at the height of like, COVID. We had three locations open last March. And so on the one hand, you’d say well, people Aren’t adopting pets like an all time high? Yeah, that’s, that’s true. But if you have no brand recognition, no one’s ever heard of you. And you can’t do a grand opening, because you can’t have really anybody gathering. It’s kind of like you running in somebody like putting your foot underneath, like, and tripping you. So, you know, everyone talks about the industry growing, but it is not an easy thing to do. In fact, similar to many other retailers, COVID has been really a somebody tripping you from behind. So you know, what, that what does that translate into most retailers if they had a robust pipeline, tried to delay deals, etc. We’re not alone in that. I mean, we had to everybody in the past 15 or 14 months had to rethink things, right? How do you go to market what services do you offer, and then they all hope to come out on the other side. And now, you know, some of these retailers, you know, like grocery stores, it seems like they did great, everybody was like, not going to restaurants, because most of them were closed in many parts of the country. So grocery was doing well. So the grocery retailers are like, Hey, we’re doing well, let’s keep growing, a lot of other retailers didn’t have that benefit. So we’re hoping to continue our growth, you know, in the last year has been tough. But we’ve overcome a lot of challenges similar to most retailers. And then we have another side of the business, it’s really like a completely separate side of the business, which is that we acquire practices. So we acquire the practices that I just spoke about, where it’s someone who started a practice 1020 years, and we help transition and then retirement, however, something we’re doing that other people are not, they’re part of that heart and Paul brand, we don’t, you know, immediately say, Oh, we acquired it, we’re calling it a heart. And Paul, I mean, a true heart. And Paul, it looks and feels very different. However, we do give them the tools to succeed, we have a website, they have a presence on it, there’s a booking tool, there’s systems that we install, that are the same in both places. So we actually have a bifurcated growth plan. And so you know, we’re trying to do something that other people are not doing. And if they are doing it, we’re trying to do it differently.
A lot of great stuff there, I have a few questions, I’ll start with the end, is the goal to end up putting heart and PA on the front of the on the sign band of those acquired veterinarians.
It’s not I mean, we have we keep their legacy alive. However we do, we do have like a, I mean, the most notable thing would be a plaque near the front door, that gets you know, attached to to the outside, where it says, you know, partner of heart and Paul, similar to the Starbucks, you know, licensed by Starbucks, or, you know, that type of thing. It’s not a franchise, I mean, we’re either owning them outright, or it’s a joint venture, etc. But it’s not like, you know, pull the label off, or there’s like a ticking clock where it like, you know, two years and we change it, we really just give them support systems and tools that they didn’t have,
if they want to convert it to a full heart and PA, will you work with them to do that?
We keep an open mind, and it hasn’t happened yet. You know, people bill, like, you know, most entrepreneurs have a single retail or service business. Got a lot of pride, a lot of legacy. It could be detrimental, actually. Sure, yeah. It can be detrimental, because you’re used to going to see a certain doctor, and if they change their name, you’re like, What is this place? So who who owns this? Is my doctor still here and all that and it like it actually create a consumer friction? You know, listen, there’s situations where we buy a practice that doctor retires, and you know, it’s years away, you know, years past, we may want to rebrand it. However, we want to bring in those like crucial elements of a heart and PA, which is, you know, modern, a flower design geared towards, you know, a specific type of consumer, etc. It’s got to really make sense to do it.
Understood. That’s helpful backing up a little bit. So pre pandemic, how many heart and paws were there in the United States?
Well, I’ll say total senators, there were six. And then we had, you know, ambitious plans, like, you know, most people do in the coming year, in the year 2000. And we said, you know, we’re gonna go to 20 to 25 in this year, and then the brakes, you know, just like, I mean, listen, the mid March. The world got really weird last year. Yeah. And you just, you’re like, Okay, this will pass, you know, everyone’s gonna be home for a week. Then it’s like, wait a minute, I don’t know if this is passing. What is gonna happen here and so we really put the brakes on everything. I mean, everything kind of got halted by the end of March. We weren’t acquiring anything. We weren’t opening any of the sites. Construction was underway in certain places, it was paused because, you know, cities and states just said you can’t build. And so I got really weird. It was like, What are we doing? And it’s like, it was like, freeze. But wait, you got liabilities, you need to pay for things you need to grow sites that you’re planning on growing, but people can’t come in. We’ve been curbside for 14 months. Hurt, like, and like the uniqueness of a heart. And Paul, among other things, is the modern facility, that we have a couple of facilities that nobody’s ever stepped foot in, as a consumer ever. Wow, you weren’t
in essential business. So you weren’t allowed to open your doors like a doctor’s office or a grocery store?
Yeah. I mean, you know, we look to the AVMA, which is, you know, the American Veterinary Medicine Association, and they’re the ones that gives this guidance on, you know, what is sort of the gold standard, right. I mean, there’s, you know, similar to the National Restaurant Association, and all the little statewide things, they’re really the guidance ship for what the expectation is. And, you know, we weren’t considered there was debate, or we essential in the beginning, and we couldn’t do certain, you know, surgeries. And it’s like, well, if you need to do a surgery, what’s considered essential, what’s not, I mean, every business faced some version of what I’m saying, whether it was a surgery or when you got it. Yeah, it’s like everybody was faced with this. And like, literally, it was like Groundhog Day, every day you woke up. And it was a new adventure, because, you know, you had states and cities changing rules, like literally overnight. And it’s really hard lesson you like, you know, if you hear about a law that’s going to affect your company, and it’s like six months to a year out, usually it’s a year, right, or like next, you know, next January, you have time to plan, you don’t have time to plan when the rules change every day. So it just makes it incredibly hard for anybody, not just our business, anybody. There’s not a single person who hasn’t been affected in the past 14 months, in some way, shape, or form, about how they go about growing their business, how they live their life, their kids are home from school, they’re not home from school camps get canceled. I mean, the entire world has been affected by this.
Totally. That said, we’re in April 2021. Now, are you seeing improvements?
We are seeing improvement, we do hope to open our locations in the next couple of months. It seems like, you know, vaccinations and case counts seem to be declining. Obviously, we’re optimistic like the most people in the in our country and in the world. So I you know, there’s rebounding happening. And, you know, it’s looking up, but I’m still I think we’re all sort of on eggshells, right. Because you just don’t, if you can start, you can see a huge spike, and then like the world could shut down again. And so it’s like, you want to be aggressive, but you’re also tiptoeing, and it’s like that balancing act between being super aggressive and being scared, can’t be scared and be successful, can’t be too aggressive and be successful either got to kind of find a midpoint.
Totally, totally. And how did Hart and Paul come to at six locations to be private equity backed? That’s interesting. That’s very small for private equity. You know, what was the average unit sales that must have been huge for private equity to get interested?
Well, actually, they got involved before it was founded. Yeah, so the private equity group we work with, which is wild capital out of Chicago, they actually, they load they find founders or CEOs, in an industry that they’ve done a lot of research on and back that to either start a business or acquire one and grow it. So it’s a very specific strategy, which is a little different than maybe traditional PE where they’re just, I don’t want to oversimplify p right. But they buy something, they grow out a bunch, and then they sell it, this is a different model in the marketplace.
Interesting. So they found you, well, actually,
so I was, I was at Insomnia Cookies, we had sold the business and I was there about a year and it was, you know, time to move on. And I was I’ll say I was hunted, which always makes people feel good, right. And so I joined this company to help the founders take it to the next level. And so I joined when there were six and then we’ve grown since that time, and now we’re starting to you know, gain some traction here as as things rebound in vaccines in case counseling.
Wow. So and so all six aren’t you know, pre pet not including pandemic where they all profitable?
No, no, I you know, it’s very hard to break even in a veterinary practice immediately. You know, there’s, I kind of think about this is why you don’t see veterinary practice popping up all over the country, right. You know, you think about restaurants. There’s a very low cost for entry if you take over an existing rush. Right, you can paint, change a couple pieces of equipment and boom, if your mom and pop, it’s not so easy with veterinary right, you got a couple $100,000 worth of equipment, you’ve got a big construction costs lots of plumbing, you know, it’s basically like a medical tenant. So it takes a lot, but you also have to build a clientele, which is not an easy thing to do. But that’s the reason that, you know, you’re not seeing a lot of people, you’ve seen people try to do that. But a free standing veterinary multi unit practice, you just don’t see many. I mean, I, I like I know the ones, but they’re very, very few. There aren’t many that have tried to scale it. Because it’s hard. It’s really hard. I mean, listen, a growing something past one location is hard. In general, when you add the veterinary element to it, it’s it’s hard, it’s really hard. You got to you got to build it efficiently. You got to operate it with a reasonable cost structure. And you got to build a customer base client base, and you got to have great doctors. I mean, if you don’t have great doctors, you’re not going to build that client base. It’s hard. It’s really hard. That’s why not everyone’s
doing it. Yeah. Yeah. You’re not You’re not getting me excited to want to jump into the veterinary business, that’s for sure. Listen, it’s
a great it’s a great business to you know, if you think about listen to think about, are you a pet owner? I am not. Okay, so listen, I wasn’t a pet owner, as a kid, I own a goldfish, because that’s all my parents will let me have. And then when I graduated college, I got a dog. And I’ve owned dogs ever since, right? But if you think about the evolution of pets, you used to keep your dog out back on a leash or in a fenced yard. And that’s where the dog lift, right? Then it went to like a dog house out back if it rained, right? That was the second evolution, then they moved inside. Right now people are like sleeping with their dog. And so a pet has become a member of the family. And that’s kind of the philosophy we’ve taken, which is to treat the pets in our care, like family in a way that like nobody else has in the marketplace.
Well, takes a little bit to get profitable, assuming what has gotten you all excited to expand is that you are starting to see growth in these locations, or you were pre pandemic sales were rising is that yeah,
yeah, it’s, it’s less than, you know, just if you get tripped from behind, when you’re in a pandemic, right. I mean, I couldn’t have anticipated a pandemic or told you what it would be like in a pandemic. But the reason that we have two separate businesses is like, you know, buying a practice that already has a successful track record, gives you some strength, right, while you focus on the things that take time to nurture and grow.
Got it? What is the long term plan? How many, how many locations can heart and Paul be? Well, I
mean, listen, if you if you look at, you know, the big players out there, you know, that are branded or consolidating, there’s really, you know, two that stand out to me Banfield, which has, I think, 1100 locations right there in PetSmart. It’s mainly, and they’re typically a lower cost provider, they’re not the top of the market in terms of pricing. And then you have NVA, which has consolidated very successfully. I’m not even sure what their last count is. So you know, if you think about that, yeah, you could say, you know, hardball, could have 600 to 1000 locations? I don’t know when, right, I don’t have a crystal ball about that, you know, we’ve got certain things that we want to achieve before we start saying, Okay, we’ve got it exactly right. You know, I still think, you know, if I if one of your big distinguishing features is you’ve never had clients in the door. Sorry, if one of your distinguishing features is that you have a unique offering inside your four walls, and people have never been in there. And you have people working from home, but yet you offer play, which we you know, you might call doggy daycare, like everybody’s working from home, that business line is very challenged right now, right? People who are back to work in an office or are at home, and there’s just too much noise. They’re sending them there. But it’s nowhere near we don’t know what its full potential is. So to say exactly what Hart and Paul, it looks like, you know, a year from now, two years from now, no startup, even at this stage can say I know exactly everything. And here’s the roadmap, and here’s what we’re gonna do. If you do, you’re basically making it up. I mean, listen, you’re gonna have a plan. That doesn’t mean it’s gonna become a reality. And in a growing business, you have to keep learning. Every day is learning. And then you take those learnings and you improve the business. And then you say, Wow, I wish I hadn’t done the these, you know, three things we did
a year ago. Yeah, I know that one. I know that one. All too well,
right. I mean, you lease something and you’re like, oh, I shouldn’t have divided to space because now I have this great tenant, I can’t put them in my shopping center, right? It’s, it’s the same thing. But when you’re trying to grow rapidly, and you’re trying to iterate on the business, it can be tough. It’s tough. Like I listen, I think heart and paw will be successful. I mean, it’d be crazy if I didn’t say that, right? I’m the CEO. But it’s hard when you have a new business, and you’re trying to grow something and build it into something special. Because you’re iterating and learning. If somebody says to me, like, tell me exactly what would be perfect in your business, right? Like what’s perfect. It’s like, Well, I’d say Nothing’s ever perfect. Even five years from now, I wouldn’t say things are perfect. You have to continue to iterate to evolve in the world.
Unbelievable insights, very honest. And I really appreciate that. Where are the heart and Paul locations today? Tell everybody, where are they today?
Sure. So we have three locations in the city of Philadelphia, close to the central business district, you know, where people are living, right? live, work, play. You know, as you see new housing growth, you know, most of these people are pet owners. We have to in the suburbs of Philadelphia. And we have to in the suburbs of Philly, on the on the Jersey side. And we’re set to open a location in Fells Point, Maryland, or Fells Point in Baltimore, Maryland. And then Boston, Virginia, which is Northern Virginia. Those are going to be opening. Boston, Virginia is in May, if else pointing is in June.
Terrific. Well, good luck with those. Thank you.
It’s it actually is an inspiring story. Right? You
got a brand that start up going into the pandemic got, as you say, I
think you put it nicely tripped from behind. And now you guys are coming back. So I really enjoy hearing the story. Thank you. I want to take us into the past and you have a story. You were part of scaling Insomnia Cookies from 4 million to $100 million, which is really impressive to scale a business like that. And you have a story about one of the locations at Temple University. I’ll let you take her away. Yeah.
So at one stage in the, you know, my, my, the founder of insomnia started with a couple of brick and mortar locations. And then he expanded and said, you know, we’re gonna do food trucks. And he was like, way ahead of the curve, right? He was way ahead of the curve on food trucks. But actually operating a business seven days a week, 18 hours a day in a food truck is really difficult, right? I mean, most food trucks are breakfast and lunch, lunch and dinner, just lunch, it’s really hard to operate 18 hours a day, you need a power supply, you need a commissary you need it’s just very complicated. And so we made a decision that we would create brick and mortar locations versus trucks in each of those locations, because we had successful trucks. And we knew that when we opened in a brick and mortar, like the revenue would go up somewhere between 50 and 100%. So we knew it worked. And I’ll tell you, you know, Temple University and Drexel University in Philly, were the last two, and Drexel, we found a retail space, you know, it was a fairly, you know, and say no deals ever easy, right? No one ever says a real estate transaction was easy. But the drugstore one, you know, was was quite easy in the scheme of it, right?
It’s true. No, no real estate deal is ever, right.
And so the Temple University, one just felt like it took forever. It ultimately opened, I think it was the spring of I’ll say, 2016, I could be off a year or two, right. But around Temple University, like they own everything, they you know, you get to some of these places where somebody or some entity, university, US private owner, they own everything in town. And so like, you have to work with them, you don’t have a choice, or you just stay in your truck. And so, you know, I think we talked to Temple University for two or three years to try to find something. And it was just like an endless pursuit. And, you know, listen, every landlord and every retailer, they’ve got like, their playbook, their rules of engagement, it’s the things you will do and the things you want to and everyone tries to stick to them. They say, I can’t have this in my lays, I gotta have I gotta do this. I gotta do that. Right. Everybody’s got the rules of engagement. But they also everyone’s some people are like, I’m never deviating for this. But then there’s some people are like, listen, I really want this tenant or I really want to be in the shopping center. And you like you break some of your rules. And I have to tell you, like Temple was one of those ones where we broke some of the rules of our standard playbook because we just said like, it’s worth these incremental risks to open this. And listen, it wasn’t it was a brand new building, but it was a fairly untouched practive retail space because it had four massive, massive columns to right at the window. And to like
set balance at the window.
Yeah. Because like, I mean, I listen, you know, architects would say, Oh, you’re crazy. Like there’s a beautiful building. Like, you know, we just think differently, right? These massive, massive columns. I mean, we were like, what do you do with these like one it’s an obstruction to seeing inside so we ended up wrapping them right I mean, we tried to make the most of it inside you know, everyone’s like how do I floorplan this I can’t get a column I need a column and I want to call him Colin can only be here it can only be ever 12 feet right? Crazy with this stuff?
They do. We put the bathroom
the shit, you know, the public bathroom like, we like use the that as sort of like a weed like designed to store around the columns, honestly. But so we dealt with challenging real estate and a challenging dealmaker. I won’t name names, right? That would be unprofessional. And, and I’m not going to do that. But it was one of those really challenging deals that just felt like it would never get done. And you had to deviate from your playbook. And it’s uncomfortable. No one likes to deviate from it.
Yeah, it’s really interesting.
About the deviation from the playbook. Everyone wants to stick to their playbook. And you know, you got to take risks in business, as you outlined before. What was it like? You have been involved? Forget about real estate, you have been involved over your career, and a lot of business deals all over the place. I don’t know how many business deals you made at universities. But this was probably one of a few you made more business deals with other businesses? What was it like doing business with the university? And like, they probably think a little bit different than a business owner or business on the other side?
Yeah. Well, I mean, most universities move slowly, right? Because there’s a lot of layers of approvals. You know, people talk about real estate committees. This is nothing like a real estate committee. This is like seven committees stacked and like, listen, it’s their, they want to make sure that they build a community for their students, and the professors and the community that fits their culture. And so you know, for insomnia, they loved it, because it was unique, but then they’re like, Wait, you’re open till three in the morning. And so like, you know, that’s like viewed as a negative. It’s like, well, we don’t serve alcohol. So like, what’s your risk? Like? Someone’s gonna eat a cookie? Like, what’s the problem here? So it was, you know, I think, you know, a business owner says, you know, I want to make sure I’m a strong tenant, and I want to get, you know, maximum rent or whatever the strategy is. A university sometimes doesn’t care about the rent as much. They want the amenity, and they want to make sure that the amenity is stable. I mean, listen, when we had 100 locations we had University was like, I’ve never heard of you tell us about yourself. And it’s like, we still had the pitch. It was like a pitch. Sometimes they would come to us, sometimes we go to them, I think we probably ended up with out of the 170, probably 15 to 20 were deals directly with the university. You know, we were probably on university ground and a lot of situations because, you know, they do ground leases with developers, and then developers leasing it, but the university is approving things. I mean, you can get really complicated with this stuff similar to any other transaction.
In the temple scenario, where are you communicating through a broker mostly? Or did you actually speak to the university?
So I will tell you my dealmaking philosophy, I have a lot of respect for the broker community. And we use brokers, I’ve used a broker, we use a broker at heart, we’ve used a broken heart and PA, we’ve used a broker at insomnia. In fact, we built a network of like 70 of them, and insomnia across the country, because listen, they know the market the best they know what’s going on. But what I found is, once you have one turn of an LOI, I like to get on the phone with a decision maker. If I’m the one doing the deal, make whether it’s me, or it’s a director of real estate or real estate manager, I like them to get on the phone because I find the deal happens faster. When you get to decision makers on the phone, you get too many cooks in the kitchen. Sometimes your broker thinks you care about something that doesn’t matter to you at all, or vice versa. Same thing with the landlord’s rep, and it can create friction, slow down the deal and even kill the deal. So I like to get hands on I mean, the first 50 Something deals and insomnia. I did myself, literally myself. And then we hired a director of real estate and said like, this is how we operate. It’s a little different. But it’s successful because only we as a retailer can know what we’re going to say like say is okay or not okay, at the end of the day. So at Temple it started with two brokers right and the landlord in us so there’s four parties, and then over time, it was like, you know, we kept like, you Just kept sending, like read marked up LIS each other back and forth, which gets old, it gets old, right? You just like you cross it off, we accept it, you cross it off, we accept it. Yeah, like, or whatever, you know, delete, whatever, like, it can be endless. It can be completely endless. And so I like call the alarm. It’s like the short, short, like short circuited, like, Hey, can I get on the phone with whoever? And sometimes they say like, no, no, you can’t do that, right? No, no, you can’t do that. Like, and then I explain, here’s why I want to do this, I want to get this deal done. And there’s something impeding these two parties coming together, I want to get on the phone with whoever my equivalent is over there. And sometimes they want to be on the phone. Sometimes they say like, you know what, he’s probably right. Like, you get different reactions, and of course, are used to it. But I like listen, I, at the end of the day, brokers are going to get paid, and they’re going to not be involved in that deal. I have to live with the landlord. For the next however many years 510 1520 something years, I unless naked, sell the property, right, and it’s totally different person. But usually, you’re gonna have a relationship with that person. And so you should know who you’re working with.
Totally spot on. It’s a great approach. I imagine it’s part of why you’re successful. I totally agree, brokers, very valuable, and they’re gonna get paid, and they bring a lot of value. But at some point, you need decision makers on the phone to make a deal in any business transaction, not even just real estate. That’s just the fact of the matter. One last thing on this temple thing you mentioned, you broke some of your rules.
What were some of the rules you guys broke to get into the temple, temples campus?
So I don’t like FMV deals after firm term. That’s one of them. That’s one that
and for those who don’t know, that’s fair market value.
Yeah, I don’t like fair market value deals, because I feel like it ends up creating a big mess, you know, you’re like, this is fair marketing, and then you get like, each person gets a representative, you know, it just can get really crazy. It’s just, I don’t want to be redoing the deal. 10 years from now, and arguing with the other party, I like to set the terms of the deal upfront. So that’s one of them, have you
gone through those arbitrations? Because I have on what the fair market value is, it’s painful. So I hear your pain. Maybe we should
switch places, and I can run the podcast one day on how fun and FMV deal is, and then we could educate everybody about how fun they are. So you’re probably the expert. I try to avoid them. You seem to go through them.
Very few and far between but I have been in the arbitration. So
Right. So that is one that really stands out in my mind. Um, I can’t remember exactly what the I mean, this was five years ago. I just remember it being that long deal that dragged out forever.
No, that’s, that’s, that’s, that’s great. I think my last question is you you did a lot of university deals. When you’re actually on the decision maker at the university. Who is that person? Who are you speaking to it? Like, is it a dean? Like, is it that, you know, I know it places like there are some universities that have these real estate teams, but like, who I temple? Who was it? Who were you actually dealing with? You know,
I’m not sure what her actual title was. It’s typically like a VP of real estate, a director of real estate, sometimes real estate and facilities fall under the same umbrella. Sometimes it’s separate, you know,
like, she still has to go through, she still had to go through, as you said, seven different committees.
You know, like, sometimes they don’t tell you, right, they just like leave it up to somebody’s imagination. I don’t know what the approval process was there, which is probably part of the that’s like the most frustrating part, right? Like, you know, when a landlord like, like yourself, like, here’s, like, Oh, I gotta go through committee. You’re like, Okay, what does that committee like, right? And you might have like, an image in your mind, like, Okay, once a month, they sit around, they talk about it, and marketing and operations and finance and everyone. And like, one person complains about the sign and that deals dead, right? Like, that could be one scenario. But like, it could just be one person is making a decision. You don’t know. Right? You just don’t know. I think that’s sort of the mystery. And when people love to use committee, listen, everybody has a decision making process. It’s rarely one person, right? It’s rarely one person at the end of the day is making a decision. The question is, how complicated is it? How many levels of approval are there? And that’s like, we like I think we almost intentionally don’t tell it we’re not transparent about it. It’s part of like real estate deal making like transparency on how the approval works on either side. We don’t talk about it. It’s like the place you don’t go.
So, you know, we I think we all talk about like we need to understand and empathize with the other person’s process, but it’s a great point. We all use this word committee. I think you put it in such an eloquent way, when you said, every company has a decision making process. And in real estate, it feels like we’ve, you know, called this word committee and there’s a committee and it means different things everywhere. But what a simple way to put it, which is it’s a decision making process. That’s what committee is. Yeah. Anyway, listen, Dave, this was great. I want to take us to the last part of the show called retail wisdom. I got three questions for you. Are you ready? I’m ready. All right. Question one. What extinct retailer Do you wish would come back from the dead?
Sharper Image? And the reason I say that is, I mean, at least my age, right? When I was a kid, and I went to a mall, sharper image was the coolest place to go. You would go and see like, the coolest electronics, the coolest things. And you’re like, Man, I want that. It was always expensive. And you never really saw people buying things, which is likely why they went out of business.
Yeah, people were playing around with things a lot. That’s for sure. Okay, question two. What is the last item over $20 that you bought in a store?
Like this grocery and takeout food count? Or like, that’s kind of boring, right?
Yeah, I mean, we do get a lot of tequila. That’s an answer. We hear a lot. But go ahead.
Well, I’ll try not to do grocery and takeout because that’s like such a generic answer. Or alcohol. Right. That’s, that’s what your point was. You know, we’ve become so fixated on buying online, particularly in the last year. Okay. I got it. We, we needed to get my son, baseball pants. And we went to a mom and pop sporting goods store. I love it. And bought pants there. And I mean, it listen, I respect Dick’s and you know, all these sporting goods stores, but we actually went to a mom and pop. And as I don’t know what the exact cost was, but it’s probably pretty close to $20. I’m guessing.
It’s great. They were they were good retailers. They did a good job. Yeah, it’s actually
I mean, that’s why they’re successful. They have a great lesson I you know, we talked about baseball or like, I don’t know exactly how a glove should fit a kid. Or like how high the baseball bat should be up to your waist when you’re like, I don’t know that stuff. They tell you there they walk you through like, Oh, what do you what are you here for? And then you tell them in there? Like, they could tell if you have no idea what you’re doing. Right? Like, I’m not gonna say any like, yeah, we’re looking for a bat. Like, could you help us? Like when you say like, I’m looking for a baton or like, Oh, would you like help? My guests please?
All right. Last question. Dave, if you and I were shopping and target, and I lost you, what aisle would I find you in?
If you went to Target and I got and we were okay. You know, I similar to my love and sharper image for just random electronics. There’s something about the lore of going to where all the TVs are. Right? They’re all showing. They’re either showing like some terrible TV show or some cool movie, it’s usually one or the other. And just like looking at all the electronics, it’s just like your eyes kind of like glow. Right? I would just be hanging out there. I’m not much for video games, but all the little electronics and so I don’t even own a lot of electronics. I just like to look at them. So I’d be hanging out there.
Terrific. Well, listen, Dave, this was great. I really appreciate you coming on. And your story’s fantastic. Not sure where you’re doing. We need to connect offline. I’m in Philly all the time. I’m gonna have to come and say hello and grab lunch with you. And if you want to connect share ideas, kind of what a large developer in the US is doing and just, you know, quarterly, something like that. We should set up a call and just continue to connect in spitball ideas what’s going on and I can give you some insights and you could probably give me a ton.
Yeah, that sounds great. Chris, thanks so much for having me on here. I enjoyed it.
Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode