How One Bowling Alley Made Millions Through COVID

Speaker A: Hello everyone. Welcome back to Acquisitions Anonymous. This is the Internet's number one podcast on buying, selling and operating small businesses. Today we have a great one. I love this episode. This is in my hometown. This is a bowling alley, arcade, bar, entertainment venue in Charlotte that I have been to. Uh, and they included a picture of the logo in the listing. So we know which one it is. We can actually talk really specifically about the neighborhood, about the business dynamics, about the area dynamics. Uh, stick around till the end because I figure out a way to finance this deal and make it work, uh, with very attractive terms. Uh, so without further ado, we'll get right into it. Enjoy this episode of Acquisitions Anonymous. We'll set Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore.

Speaker B: I'm thumbs downing on just the plus inventory.

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Speaker A: for sponsoring today's episode. All right, Heather, lead us in.

Speaker B: Let's go bowling.

Speaker D: Let's go.

Speaker A: All right, we've got, we've got a fun one. And I actually know which one one this is. It's not hard to find out. Um, but this is a bowling alley. But not like your dad's bowling alley. Like a cool bowling alley.

Speaker B: Cool.

Speaker A: Um, so, and what I also like about this one is it has a project name. It is Project Kingpin.

Speaker D: That just sounds amazing. Hey, what are you working on today? Just Project Kingpin.

Speaker A: Yeah, so I'm going to read you guys the Biz by sell listing first and then I will get into the Project Kingpin teaser. So again, let me reiterate. Acquisition, uh, is Anonymous. We do not sign NDAs. This is all publicly available information. Uh, so this is an exclusive Charlotte Entertainment concept now available for purchase in Charlotte, North Carolina. This, I know which one this is. It's 10 minutes from my house. I've been there. Um, so it is uh, basically a bowling alley plus an arcade, plus a bar, like kind of these modern bowling alleys.

Speaker D: Um, looks like really, really nice machines, like vending machines, gaming machines.

Speaker A: Yeah, it's got, Whoa. Yeah, it's got cool, you know, it's a fun vibe inside. These are actual photos, uh, which is funny. They're actual photos. Uh, the bartender is wearing a shirt with the logo of the place. I did not have to sleuth. Like, I'm not like, you know, in case you want proof, I did not sign the NDA.

Speaker D: Is, is the business listed by the owner, you think?

Speaker A: I don't know. It's, it's.

Speaker D: There's no link to a broker, there's no headshot. So maybe, maybe.

Speaker A: So it says a proven concept, a rare opportunity. Uh, this business has 4.2 million in sales. 930k of EBITDA was established in 2017 and they're asking 3.65 million for it. So a little under four times. 3.75 times or so Large caveat, real estate not included in the asking price. Real estate valued at just under $9 million. So we got a business worth 3.6 or asking 3.6 on real estate, who knows what it's worth? Uh, we'll come back to that. Worth 9 million bucks. So the total package here is 12 and a half million on SD, about a million bucks. So that's like a uh, 8 cap if you're a real estate investor and you gotta run the business. So I wouldn't call this passive, but it is a rare opportunity to acquire a high performing, performing experiential hospitality brand in one of the Southeast's most dynamic urban growth markets. I will give you that. With strong cash flow, a loyal customer base and a unique concept that brands blends, entertainment, food and bev, the business is primed for scale. Buyers will see immediate value through steady profitability and brand equity, plus exciting upside through untapped growth levers like events, corporate partnerships and potential for new unit development, AKA franchising or expansion. Real estate is also available, offering further control and long term value for strategic operators and investors alike. This is a turnkey opportunity to own a proven platform with real momentum. Says they have eight full time employees, uh, indicates key staff, part time staff not included. So I imagine they got a lot of servers and cooks and things that may not be full time. So 8 full time, key staff uh, comes with kitchen and bar equipment, AV equipment, bowling equipment, furniture and fixtures, ops equipment and arcade equipment. The property is located in the heart of Loso, which is a very specific lower south end neighborhood here in Charlotte. Uh, it is, uh, it's very obvious which one this is. It's Queen Park Social. It's on the guy's shirt. Uh, it's across from old Mecklenburg Brewery, which is one of the most prominent craft breweries.

Speaker B: I've been there.

Speaker A: You've been there. Okay, great. So you know where this is? Um, great spot. Packed all weekend, every weekend. It's sort of this whole brewery district where there's probably five or six breweries and distilleries and this place, Queen Park Social, like all kind of packed into two block area. There's that uh, there's like one of those modern pickleball places with um, with like bar and, and court and stuff. Rally pickleball, etc. It awful. So this is like a very hot real estate spot. So I would, I honestly believe this real estate might be worth 9 million bucks. It's on, it's a corner lot, like kind of right in the middle of the path of progress with all this cool stuff going on. Uh, it says the area is known for rapid residential growth and thriving nightlife. It offers ample parking with on site spaces and nearby street options. Benefits from strong visibility and cross traffic due to its proximity to popular entertainment and retail destinations. The surrounding neighborhood is anchored by a large and growing base of multi family developments contributing consistent year round foot traffic. That is all true event sales. Upside focused outbound sales can activate substantial upside in a high margin underexploited revenue channel strengthen community and group loyalty. Gaps in management led to a loss of recurring bookings from sports team fan clubs and other groups.

Speaker D: So this would be like the, that

Speaker A: is fan club or whatever on Sunday, new um, ownership could help the team rebuild those relationships and recapture lost revenue. Uh, you should also work on the marketing technology systems which are underutilized. Enhancing campaigns and optimizing digital tools can boost event attendance and repeat visits. Existing management staff will remain in place ensuring a smooth transition. Current owners are available to support the transition and assist future growth planning. The owners are seeking and exit to focus on new business ventures, uh, offering investors a great opportunity. It is 18,000 square feet. Um, so picture like it's probably, you know, six bowling lanes, a whole arcade area where you kind of load up money in a card and you tap it and play games. Um, and then a full bar area, full kitchen, etc. Uh, any questions so far, I have. I have financials, which is cool.

Speaker D: Oh, wow, look at those.

Speaker A: Um, so here's the general trajectory. It's wild to see these hospitality businesses through Covid. If you're with us on YouTube, you can see it on the screen. Share. Uh, I will blow it up.

Speaker D: This is a lot of history.

Speaker B: Yeah, yeah.

Speaker A: This business has been around since 2017.

Speaker D: But, I mean, I'm shocked when a teaser in particular, we got 1, 2, 3, 4, 5, 6, 7, 8. We have nine years worth of financials in the teaser.

Speaker A: I mean, they don't bother hiding the name of the business. Why bother? Uh, so what's interesting is we also have revenue breakdown. So I'm going to give you the kind of revenue trajectory of this thing. So it's founded in 2017. It does 3.3 of sales and 845k of EBITDA that year at a 25% margin. It runs all the way up to 5.3 million in 2019 and 1.8 million of EBITDA. Then, of course, we have Covid. It still manages 2.6 million in sales and 645k even through Covid, which is saying something. So it does not lose money even in Covid. Amazing. Now, it does say adjusted ebitda, but m, you know, who knows? Uh, then right after Covid, it pops right back up. In 2022, it does 5.2 million. In 2023, it does 5.4 million, uh, and 1.9 million of EBITDA in both of those years. But then 2024, it drops to 4.2 million, and 2025, it drops to 3.5 million. Um, and what's interesting is its margin compresses also, as that happened from kind of in the high 30s on EBITDA margin to about a 22 and then a 27% EBITDA margin. So this is a substantial revenue drop in the last kind of 24 months or so, which is sort of surprising to me given the location. I would think this is. They say it's because they're not booking as many sports team fan clubs. I think this is competition. Just, uh, knowing the area. More things to do. Yeah, more things to do. Tons of stuff has opened up in this area. I mean, this area is just white hot. Charlotte is white hot. Like, there's just a ton of options.

Speaker B: And wasn't 21 and 22 probably a post Covid boom where everybody was just so excited to be able to get out more that they, you know, could be.

Speaker A: And that actually continues through 23. 23 was their best year.

Speaker B: That's true.

Speaker A: Almost 5.5 million and 1.85 of EBITDA.

Speaker B: Yeah.

Speaker A: Um, the thing that just blows me away is whoever owns this has owned it for eight years and has. I can't do math this fast, but probably has 10 million bucks of aggregate EBITDA.

Speaker D: Yeah.

Speaker A: Here. I mean, in a hospitality concept. And is sitting on property worth 10 million bucks.

Speaker D: So I don't, I don't think they own the real estate. I think it's not included in the sale price because they don't own it.

Speaker A: Oh, I think they do. Why do you think that?

Speaker D: Uh, well, I looked it up and it's owned by an LLC called Mech City Social Real Estate LLC. And it looks like it last changed hands in 2019.

Speaker A: Mhm. Interesting. I wonder if they bought it in 2019.

Speaker D: I don't. I don't know. I mean, I, I didn't dig into the llc. So Matt Livingston, whose name was on the listing, it's down at the bottom of this. He's a real estate agent. It's thrift commercial real estate. And they. If you look at their website, it's all like hot, you know, commercial property listings, leasing, uh, in Charlotte predominantly.

Speaker A: They're big here.

Speaker D: Yeah. But it's just interesting. So like, you have a commercial real estate person who is marketing the business. For a second I thought like, maybe this was like a chat GPT teaser, you know, um, that the owner had done for himself. But then when you got down to the thrift part, I realized it wasn't.

Speaker A: But see, that's mills. That's what makes me think they do own the real estate because the real estate is most of the value here. Right. And representing the transaction is a real estate broker. So.

Speaker D: Well, I just wonder if they're not actually selling it. You know what I mean? It's listed with a value, but let me see if I can search this address. We can keep talking about other things while you look for it. I'll.

Speaker A: I'll give you a little bit more about it. Um, um, what's interesting is they give us the revenue mix, so it looks like it is. Of course, this is like the worst char crime ever. They give us revenue mix. It's a pie chart with five slices and they're all five different shades of green. So you can imagine five different shades of green. Like how many.

Speaker B: Yeah.

Speaker A: Shades are between them? Not many. Um, but attempting to zoom in here, if you're with us on YouTube, uh, they look like they're going to do about 25% of revenue from food and non alcoholic beverage sales, about 36% from liquor, about 21% from beer and wine sales, and about 13% from games and retail, and 5% from other. And this is the aggregate over the eight years of history that we have. So if you add up kind of liquor and beer and wine, because, you know, I think that's roughly all the same, that's going to be 57, uh, of sales and then you got food at 25 and then the other entertainment stuff at our 20 or so. So that's kind of your rough breakdown. So this is a bar, right? Which is good because that's probably the good margin stuff. The food is probably less good margin. Um, and then the games is probably close to 100% margin, which is nice. Right. So that's probably what's driving the profitability of this. You've got 18% of the business at 100% margin.

Speaker D: Right.

Speaker A: So that if you got 18% net margin, there it is right there. Right. A huge portion of it is the games. Um, so I'd want to understand kind of the flow through by segment. So I'm guessing food is zero margin to negative. Games are close to a hundred percent and liquor is single digits, you know, 10% margins. I would think, after all is said and done. And that's probably how you end up with, you know, a business with 20% net margins. That's been remarkably resilient. Mills, do you find anything out about the property?

Speaker D: It's not for sale.

Speaker A: It's not for sale?

Speaker D: Well, it's not on the road.

Speaker A: All real estate is always for sale.

Speaker D: Yeah, right. Um, so it's not, it's not under their listings, uh, on their website. It could be that, yeah, it could be that maybe they've already sold the building or that. I honestly think that the existing owner of the building, the landlord of the building, uh, is probably keeping it. And I don't think it's related to the business owner.

Speaker A: Interesting. Um, it says limited owner involvement, proficient management team can enable new owners to remain strategically involved without being operationally embedded. Um, so we don't actually know.

Speaker D: Uh, but you know, the counterpoint to that is they've had management issues in the past where the business drops by what, you know, a million to $2 million top line.

Speaker A: So that's a great point, Mills, because they say in the teaser all the management will stay. You don't have to be that involved. And then they throw them right under the bus and go, management sucks and they've dropped the ball and we've had management transitions. So which is it?

Speaker D: Yeah, yeah.

Speaker B: For a business of this size, I think you have to be pretty hands on. And, uh, what's interesting about bowling centers is there's kind of two types anymore. There's the old school that have the league still and, you know, the food's not that good and the ambiance is not that good. And then there's this type. And I think I have seen buyers looking for the, the old school types to upgrade them to this type. So it feels like, you know, there's not as much opportunity to improve things because that's already what you're getting here. Um, and they talk about scaling, but they don't talk about like utilization. So how much more can you grow? I guess you could get back up to the 20, 23 level, but is there, is there much more than that? Can you, can you grow?

Speaker A: It's hard to know my sense, just kind of knowing the area this is in this. The guys who own the real estate and the guys who own the business. The business, remember, has put up 10 million bucks of aggregate EBITDA over eight years. Amazing. Uh, the real estate has gone from a backwater to worth probably 9 million bucks over about the same time period. So there have been close to $20 million of value creation here in the dirt. And the business, and whatever the business happens to be worth, it's probably not worth nothing either. Um, my sense though is I wouldn't want to be the one coming in to buy this business because I think most of the value's been created and I'm not sure this is the highest and best use of that parcel anymore. Um, given how long the neighborhood has gotten.

Speaker D: That's my concern is that like you're seven years in, maybe they had a five year lease and they extended for another five or re leased it for another five. But that's the tricky part of this.

Speaker B: Yeah. Ah. So if you're trying to get an SBA loan, the SBA is absolutely going to require you to have a 10 year lease, you know, five year remaining term with a five year option so that you can stay in this facility for at least 10 years, which is the term of the SBA loan. So. And they didn't say SBA pre qualified. Uh, and you know, they usually say it if they, if they want you to go that direction. And so I think maybe that could be what the issue is here, is that there's not 10 years left to go on this lease. And, uh, and there's a risk, you know, to buying the business with less than that to be able to stay here.

Speaker A: Heather, SBA aside, I'm not buying this business with no 10 years left on the lease. I mean, um, no one is like this. This is a local business. Like, this business loses its lease, it's over.

Speaker B: Yep.

Speaker A: You know, you, you have, you need a 10 year lease to buy this business. You know what's crazy is they're asking almost four year, four times cash flow for this business. I don't even think the lease probably has that much left on it, given Mills's m, you know, back the envelope math.

Speaker B: So, like, somebody bought it in 2019. So, you know, that's probably the time at which this new lease was created. And it probably doesn't have much left on it. Maybe it's to 2029.

Speaker A: Yeah, yeah, yeah, tough.

Speaker D: The other interesting thing in this space is that, um, Lucky Strike, or it was Bolero, but they've rebranded to Lucky Strike. They're a publicly traded consolidator in this space. And like, when I started searching for bowling alleys in Charlotte, like, there's Lucky Strike, you know, Pine Bowl, Lucky Strike, Uptown, like, they have, they have it covered, uh, in terms of the more old school kind of traditional type bowling leagues. Um, um, but I love when there is a public market comp when you're looking at a business, because you can go in and say, okay, how big is the tam? How many locations do they have? What is their revenue? What's their revenue per store? What's their net margin? I mean, like, the amount of data that you have at your fingertips is just like, captivating because you can do a lot of due diligence on the industry as a whole, especially something like this where, okay, maybe Bolero and Lucky Strike don't have arcade games to the same extent or the bar to the same extent as this, or some revenue mix. But there's still a lot that you can garner from that data.

Speaker A: Oh, yeah. I mean, I.

Speaker D: This is.

Speaker A: I mean, having been to both, like, Lucky Strike's a good comp here.

Speaker D: Okay. Yeah, definitely. Which they do. It looks like they do about a billion dollars a year in revenue. Uh, you know, Lucky Strike does, uh, the parent.

Speaker A: Well, Lucky Strike is they, um, they are like AMF bowling. I mean, they're giant. They're like. What's interesting is old school bad ones and the new sexy ones. They have both in the portfolio.

Speaker D: Lucky Strike owns the professional bowling league, which is like the ultimate play. You Know that you're the venue and you own the professional league. That's amazing.

Speaker A: Yeah. These guys are the bowling market. Lucky Strike is, um, and I would say, like, there is not a Lucky Strike across the street from this place. I don't know that there will be. What there is, is a rally pickleball, you know, sexy pickleball. There is a whole bunch of distilleries and brute. Like there's just a lot going on. So I just, I think personally, in order to do well with this, like, it's probably. And also this is a restaurant and kind of as a entertainment venue. It's eight years. Like not trying to pass judge around this place. Any place is getting a little long in the tooth.

Speaker D: Uh, right.

Speaker A: After eight years, it probably needs some refresh capex.

Speaker B: Yeah.

Speaker A: You know, just to compete. Because all the stuff around it is three years old, you know, and new and fresh and going in. So that's what I mean about, like, I think a lot of the, like the first phase of this parcel in this business are kind of extracted. And I think there very well may be another phase of this parcel and this business. But. But I don't think it looks like the eight years in the rearview.

Speaker B: So maybe it's not the, uh, staff's fault that they lost those relationships. Maybe they just went to a better venue.

Speaker A: Yeah. Maybe we don't throw the staff under the. Under the bus.

Speaker B: Yeah. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Viso Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q and a session on SBA loans at viso cap.net then click zoom. Sign up in the top right corner. That's V I S O C a p dot net and click Zoom signup.

Speaker D: One other interesting thing on the publicly traded side, Lucky Strike has lost money. They've reported negative, uh, net income for three out of the last four years.

Speaker B: Ooh.

Speaker D: Yeah. Now it seems like this business weathered Covid well and they've rebounded really well. Uh, in terms of, you know, may. Maybe there's some management issues and maybe the owner was not Completely attuned to what was going on until maybe it was too late or something like that. Um, or maybe that's just like the convenient thing to say. And there were other things happening, but the business, I will say in those financials, they, they specifically said 2025 estimate, not 2025 year to date. So right now it looks like the business is going to be off by about 20% year over year. I mean that's pretty substantial. Their revenue is going down by $750,000 and their EBITDA is going to stay the same projected. And this is a little bit old because that was 2025 estimates and we're obviously recording this in 2026.

Speaker B: That's three straight years of decline. And guess what banks feel about declines.

Speaker D: Not uh, warm and fuzzy feelings. Right?

Speaker A: You don't love it. You don't love it, but we can turn around. Heather.

Speaker B: Yeah, sure, sure.

Speaker A: It's going to be fine.

Speaker B: Yeah. So you're not going to be able to get financing for this. I mean I think there's probably a lease term problem and there's certainly a revenue decline problem, just that we can see right off the top. So. And they didn't offer seller financing but I think that's the only way anything like this trades.

Speaker D: I bet they can't. I mean I think this owner is totally stuck in a pickle where they have multiple years left on their lease, they have a falling knife and they can't sell it and can't continue. Maybe they can maybe maintaining it for the next few years, uh, and trying to just see out the end of your lease term. But this is one of those things where like Bill, you know this area better than me and Heather. But they probably got in before it was really cool and they got in at an attractive lease rate and maybe they had one option pre negotiated but you helped gentrify an area by being a cool business and the landlord holds all the cards at renewal. And now it's like hey look, we've got, you know, we're across from old Mec and there's a lot going on in this area and there's people who are willing to pay more. Maybe a national brand who can take a building this big bowling or not. The one thing I think this has going for it is the infrastructure for bowling. And now it's not, you know, it's not like an in ground swimming pool inside the building or something. But this would be very hard from a Capex standpoint for a purchaser to move somewhere else. So like we, we, you know, acknowledge that, but it would also be really difficult for the landlord to put something else into the space without a lot of tenant improvement allowance.

Speaker A: Mhm. So just kind of back the envelope. Right. So this business, it is still making a little under a million bucks a year. $973,000 of EBITDA. Adjusted EBITDA. So we get into it and see. But, so you might be able to run it out unless revenue is just totally crashing. Um, but to the point about the lease rate, Mills. So let's take the broker at his word that this Property is worth 9 million bucks. You know, I don't know, like if you own this property, I don't know what kind of cap rate you're going to demand. Right. But let's say it's 8%.

Speaker D: Yeah.

Speaker A: So that means your yield is like the, the rent here has got to be 720 grand. I don't know what it is now burned into the P and L, but

Speaker D: I mean that's what, 60 grand a month in rent. Yeah, I mean absolutely. That's a lot.

Speaker A: I mean this business has 973 of EBITDA. Let's, let's just say their, their lease is at half of market rate right now. So it's going to go from 350 to 700. So you're going to have another 350 of rent expense coming into it. So you're going to go from 3 or uh, from 975 to 600 of EBITDA upon lease re rate. It's still not terrible. I mean it's making money if, especially if you own the building, man, you're just printing like you've got this cover land play. The building's appreciating.

Speaker D: But like the issue is if you're adjusted, if your actual adjusted EBITDA gets down to 500,000 or 600,000, you can't pay $3.6 million for it.

Speaker A: No, no, I, I think you can pay. And also we haven't like, like the capex. If you got to refresh this thing, it might need half a million bucks of refresh, you know, so like you got to take that out of the purchase price too.

Speaker D: Yeah.

Speaker A: Can you pay a million bucks for it?

Speaker D: Probably.

Speaker A: Right. Um, but you got, what I would do is kind of the classic restaurant playbook, which is you close it, you put a new coat of paint on it and then you reopen it with a different name.

Speaker D: Mhm.

Speaker A: But it's not that different because this business, like the location is the Killer thing here. And either they're walking across the street to go do it, or they're typing by keyword bowling or arcade or like Queen Park. Social is probably not the key thing. You reopen it as low, so social, and it's sexier and cooler. And maybe you put a pickleball park at, you know, court in the parking lot, and it's new. You know, that's probably the play here. But you're going to need some landlord support to do that. And which seller support. You can't pay for it.

Speaker D: If the landlord is supporting you, guess what? You are paying for it. They're just amateurizing it over, you know, a certain period of your lease, and

Speaker A: then the lease will rewrite higher again.

Speaker D: Yes.

Speaker A: At the end. I mean, this is just so interesting, because God bless the entrepreneur. I mean, this Guy has made 10 million bucks in eight years in a hospitality concept through Covid.

Speaker D: Through Covid. Yes.

Speaker A: That is wild. Like, this guy deserves the platinum medal of restaurateur ing. I mean, incredible operational success here. Never had a negative year. Never had a year less than $645,000 of EBITDA, which was the COVID year. I mean, pick the neighborhood perfectly. Like, this guy crushed it. I just don't know that I want to be the next guy also.

Speaker D: I mean, look at this. They own all the bowling and the arcade equipment. I mean, there could be the balance sheet. Could have, you know, a million dollars worth of. Now they're. They're depreciated if they're seven years old, and maybe they've done some refreshes, but, uh, that's a. That's pretty significant. I think that a lot of people, when they're starting this, they go, oh, uh, that's going to be a lot more money off the rip. I'll finance my, you know, my arcade games or my pinball machines or whatever, you know, that are mostly all, like, digital now. And all of a sudden, yeah, it's. It's a lot less capital out the door to start, but, I mean, you're losing a lot of margin. So they. They do make that point, and I think they're very right about it. That's, uh, a. That's an asset for sure.

Speaker C: It is.

Speaker A: They don't list FF&E, but there is definitely real assets on this balance sheet, so. Interesting. All right, Heather, you're not giving me a loan to buy this thing, right?

Speaker B: You're not going to get a loan because of the revenue decline. Not even an SBA loan. No one's going to do that. Um, so it's like in the bank size. This is a turnaround. Like, what you're talking about is just kind of writing it down or letting it ride flat. And you could still make money at the right valuation, but even a bank won't go for that. Uh, they want to see flat or modest growth. They do not want to see declines. And this is the kind of industry where you need to have restaurant or bowling experience or both, preferably because this is not, you know, something that a newbie should come in and try to run an industry like this, period, but especially one where they've been having declining revenue for three years.

Speaker A: But, Heather, I have tons of experience going to restaurants.

Speaker B: And I bowled before.

Speaker D: I bowled before, and I have bowled over 200 once.

Speaker A: That's not true, but our, uh, Mills, if you had to do this deal, how are you doing it?

Speaker D: Would you do this deal, Man, I don't think so. I mean, I would much rather be the landlord, um, who it looks like, paid less than $2 million for the building, you know, in the last 10 years. I think my issue with this is, like, you're penalized by being, like, late to the trend, like, for the same reason that we've looked at pickleball stuff. And it's like, gosh, it just seems like you're. So maybe there's a few more years and may there is some durability to the. You know, to the nostalgia of it and the ambiance and the skill and the competition and all. I just would be, like, trying to figure out what's the next thing rather than being late to this. Now, bowling's been around forever. I don't think it's ever going to go to zero. Um, I just think that I would much rather be the guy who collects $10 million of EBITDA over the last 10 years or seven, you know, eight years, and is then trying to figure out what to do with it.

Speaker A: Yeah, you gotta hand it to the entrepreneur. All right, here's how I think I can make this work. This should be real estate Anonymous. This is the wrong podcast for this business. You kind of hinted at it, Mills. You'd rather be the landlord, the building. You gotta buy both or nothing. There's no version of this where I buy just the business. I have to buy both. So your purchase price is 12 million bucks?

Speaker D: No, I think you say it's. It's 10 million bucks, and I'll pay you 9 for the building.

Speaker A: Yes, something like that. Exactly. Perfect, Mills. Exactly. So you Gotta. You're buying the building at market rate. You're speculating on the neighborhood. It's functionally a covered land play here. You're gonna buy the business, you know, uh, and this is why I'm hoping the ownership is common, right? Where they're gonna want, or at least somewhat overlapping, where they're gonna want to sell both. They're gonna get more for the business and the real estate than they would for just the hollowed out shell of a building and say, okay, 10 million bucks. Heather, I want to, I want to do a combo 504, 7A for this thing. Uh, we're ascribe almost all the value to the building. All right, can I get a.

Speaker B: And you know what's going to happen? You're probably going to get that loan, right? There's no loan here but that one you're probably going to get.

Speaker D: See, Bill, spill. High five, dude. That's awesome.

Speaker B: Because real estate SBA loans are much easier to qualify for. And if you're only paying a million dollars for the enterprise, you know, there's probably a way to structure it so it's just mostly real estate covered in a 504 scenario, the bank is making a conventional 50% loan to value loan. So they're fine. And the SBA is making a direct 90%, you know, second. Uh, 90% LTV, second. And so if you can get a CDC, the certified development corporation that does the 504, and they like, they like bowling centers, they understand it, you can probably figure out the million dollars for the enterprise some other way, seller note or something else. You could even get a 7A loan for that. All right, because you've got so much real estate.

Speaker A: All right, so I've got $10 million of purchase price. I got. Can I get. I can max out my 504 loan at 5 million, right?

Speaker B: Yep, yep.

Speaker A: And I'm paying a million bucks for the business, basically. Right. So can I get a full million bucks of SBA on that, maybe?

Speaker B: I think so. I think for the right person, yes. So you could use that new combination where we get more than 5 million. Where, you know, you can get 5 million in the 7A and 5 million more in the 504. The 5 million in the 504, by the way, is not the total loan. It's just that 40% second. So when you look at a $5 million maxed out 504, the purchase price max is like 12 million.

Speaker D: So you have, um. What's the amortization period on this?

Speaker B: Those are real Estate loans, um, primarily. So they're usually 25 years. If it's equipment, it could be 10, 15, 20 years, depending on the useful life of the equipment.

Speaker D: But so, like, we're getting very good financing with a very.

Speaker A: Do I need, um, any equity to buy this business?

Speaker B: You do. Yes. You do need some equity.

Speaker A: And the building, the package.

Speaker B: Oh, yeah, you need. Yeah, you. In that $10 million package, I think you need probably at least 15% equity because of the declining trends and just because of the way we're going to have to structure the deal. I think you need 15%. So you need a million and a half dollars to come in.

Speaker A: So for a million and a half bucks, I own a building that's worth nine and a business. That cash flow is a million bucks a year.

Speaker B: I think we go make this offer.

Speaker A: Right. So it's gonna. So I'm gonna put down a million and a half. I got a million bucks of cash flow service on my. On my loan is probably almost all the cash flow. Yeah, I would think.

Speaker B: Right. Depends on how much market rent is baked into that ebitda. We don't know that, um, yet.

Speaker A: That's right. Good point. But probably not quite all the cash flow. Uh, so I'm probably still clear a couple hundred K of annual cash flow. And I own this, and that's prob. So I've got cash flow. I'm yielding on my 1.5 of equity, you know, probably 10%. Let's say I got 150. Maybe I got 300k cash flow. I might be yielding 20% cash on cash. And I'm free riding on the appreciation of the building.

Speaker B: And you're bowling every day.

Speaker A: And I'm bowling out. You guys can all come. We'll record the podcast and an arcade and everything.

Speaker D: I thought we were gonna own it, Bill. I thought we.

Speaker B: Yeah, we.

Speaker A: You guys want to go in? Heather, now do you want to finance my building now?

Speaker B: I do. Now that I get to come bowling. Yes.

Speaker A: And that, ladies and gentlemen, is why storytelling matters in underwriting.

Speaker B: It's true.

Speaker D: It's all about it.

Speaker A: I just flipped Miss Pessimist, and now she wants to finance my deal.

Speaker B: That's amazing.

Speaker D: And invest.

Speaker A: It's a lesson in storytelling. And probably more important than that, how much. Banks love real estate.

Speaker B: Yep, banks love real estate. You want an easy loan, have a bunch of real estate. You want a difficult loan, don't have any real estate. That's. That's the truth.

Speaker A: So there is a deal here. You can't pay 3.6 for the business.

Speaker B: Yeah, you need to buy both.

Speaker A: You need to buy both.

Speaker B: You just can't buy one.

Speaker A: And you need to bring that kind of real, sweet, sweet real estate financing to the table to make it cover.

Speaker B: But, I mean, I do think there's a clue here that the. The real estate must be available because why did they put the value of it?

Speaker A: And why is the broker a realtor?

Speaker B: A commercial?

Speaker D: Yeah, like I'm telling you, it's not. Maybe it's already sold, right? M. Maybe. Maybe they did like some kind of like. Hey, we executed a couple more years on the lease, but the building has already transacted.

Speaker A: Mills.

Speaker D: But it's not on the public closely.

Speaker A: Look, uh, real estate is also available, offering further control and long term value.

Speaker D: But see, it's not on their website. I think before we hit, before we publish this episode, you should float an offer to them.

Speaker A: 10 million bucks of right here. Here's the problem. I don't want to work.

Speaker B: You know,

Speaker A: this. This my like one rule in life. Never own a restaurant. Yeah, it's like the old.

Speaker D: Well, I think everybody has to do it once. Bill is the real rule.

Speaker B: And you've got kids, they love bowling.

Speaker A: That is the rule. Mills. I don't want to do that. That sounds like I want to be the exception to the rule. I don't want to be the dude who has to learn the lesson the hard way because everybody does it once and never again. If I wanted to own a bowling alley restaurant, that's how I'd structure it.

Speaker D: I still think you should reach out and float the offer just to see what info is out there. It's in your hometown.

Speaker B: Like, you can give it to somebody else.

Speaker D: Yeah, yeah, you could wholesale this deal,

Speaker A: get it under contract and wholesale it.

Speaker D: No, but you should. You should honestly try and float the offer just so we can see what they say, because you might like it more as you get further into it.

Speaker A: I guess I just can't sign any NDAs. Although I guess I've already podcast in the can, so anything I learn after this doesn't count. All right, well, hope you guys like that one.

Speaker D: Uh, that was fun, dude.

Speaker A: That was awesome. Um, all right, thank you for listening to this episode of Acquisition. Anonymous. This is the first bowling alley we have ever done, I think. But we have done 500 other episodes, uh, in different industries, different types of entertainment concepts, E commerce businesses, construction businesses, uh, music royalties, I mean, you name it. We've analyzed it on the pod. So you can go to Acquanon, Dot com. You can find the whole back catalog searchable by industry. You can also get on our email newsletter. We will email you the episodes twice a week. So if you're not an audio person, you don't like the sound of my voice, you can get it in text in your inbox. Also acquanon.com or find us on X All the hosts are individually on there or the pod is at that same handle. Thank you for joining us on this episode. We'll see you on the next one.