Had a meeting about a month ago, a couple wanted to talk to me about their investment in Resting Rainbows, a pet crematorium franchise out of Miami, FL. They were a week away from signing the agreement, it was a $500,000 investment which they were going to largely finance.
There are not a lot of franchised units with this brand, most of them in FL with zero presence in TX, so the financials available were of the corporate location. Running my numbers, it didn’t look like the worst investment in the world, but numbers only tell one side of the story. (Part of my calculations include figuring out how much the franchisor would make off the franchise, and for Resting Rainbows, it came to about 15.25% of top-line revenues.)
In talking to them, I learned more about the business model, which is as follows:
- Buy a crematorium
- Put it in an industrial location
- Open a small storefront in the wealthier part of town - this is where you sell high-margin urns and shit.
- Reach out to local veterinarians and sign agreements with them so that when they put pets to sleep, you are the business they refer as a crematorium.
So I’m listening to this and they tell me they’ve gone through the discovery day process, done their due diligence by calling the (few) franchisees, etc., but were still hesitant as it seemed like a life-changing decision where they would now be committed to working on this thing at the franchisors pace and not theirs.
So I told them: “Well, you now know the business model. You even know you can buy a pet crematorium, something you likely never thought was a thing for sale prior to this process. So I have two questions for you:
- This company has zero presence in Texas. There is no brand identity, nothing. So what are you getting for your 15%?
- One of my favorite sayings is “God gave you eyes. Plagiarize.” Now that you know the business model, the inputs, even the pricing structure, what is stopping you from not signing this agreement and just starting your own pet crematorium business, one where you keep ALL your revenues, one where you own ALL the equity value, one that you can build out at your own schedule?”
They looked at each other with dawning realization. Told me that they never thought of this. To which I responded that perhaps, with their acquired knowledge, that they would be best to take their time, put together a business plan w/ projected financials, do some market research (call vets and find out if there is a demand for this service, and if so, who is currently filling it), and start their own crematorium business, save the 15.25% top-line revenues, and tell these guys to bugger off.
I talked to them last week and that’s exactly what they are doing. They didn’t sign the agreement, and are in a much better (and calmer) mental space now that they can do this at their own pace, not the franchisors.
Another crisis averted!