What they did for a deal—Trump, camels and other ‘super hairy’ acts
Steven Parker was in his early teens when he watched a documentary about a successful entrepreneur, who for his first deal ever had to meet with his bankers. The bank’s president wanted to come to the construction site to see progress on the project.
The film was highly influential to the young Parker, as you’ll see at the end of this column, and also the first thing that came to mind when I asked him and other dealmakers in our cover story this month: What’s the craziest thing you’ve done for a deal?
But in the film, they weren’t ready. “And this entrepreneur said, if I show this banker this empty construction site, there’s no way in hell I’m going to get the financing,” Parker recalls. So the entrepreneur hired a bulldozer driver and said to make it look like they were building as fast as possible—move dirt to one side of the site, then move dirt to the other side. The entrepreneur set up a table in the middle of the site, and when the banker showed up he got a good show.
And the banker said, “This is the greatest thing I’ve ever seen,” and ignored his VP, who pointed out the obvious, that it looked like they were simply moving dirt from one side to the other.
The entrepreneur? Donald Trump, and Parker, who is now in his early 30s and the co-founder of K9 Resorts, remembered the lesson when his own do-or-die deal came up at the ripe old age of 20. (Keep reading to the end to find out.)
The Star Wars waltz
Other winning dealmakers were happy to share as well. “We do crazy things all the time. I bought a 26,000-square-foot center that was completely screwed up,” says Elie Khoury, head of KFK Group, just to be able to get the site and put in a 7,000-square-foot restaurant, a TGI Fridays, in New Orleans.
What to do with the other 19,000 square feet? He lucked out, landing Aveda as a tenant, the beauty services and products provider. “Otherwise it would have been a super hairy deal,” Khoury says.
Michael Haith, CEO of Teriyaki Madness and the former co-owner of Franchise Sherpas, a franchise consulting firm, had this to say about his craziest deal-maker: “I have done hundreds of deals over the last 20 years with multiple brands I have owned and here are a few of the ones I can actually share.
“It was either eating roasted baby camel in Saudi Arabia to get a master franchise deal done, or it was collecting a shoebox full of cash in a dark smoky bar from a well-known nightclub owner buying (I mean granting) a multi-unit franchise, or it was touring a candidate’s strip bars while discussing the intricacies of a regional developer agreement. (That deal didn’t happen as he wasn’t good at focusing).”
Kevin Hein, an attorney and chief development officer at Alexius, a provider of legal services in Denver, is Haith’s attorney, and he recalls the delicate timing it took to get the Teriyaki Madness deal done. It involved selling Haith’s Maui Wowi franchise to a new buyer, then buying Teriyaki Madness from its three original owners, one of whom didn’t want to sell. All of it had to be done within a certain time window under the rules of a 1031 asset exchange, which allows tax-deferred transactions when like-kind assets are bought and sold.
“We would get to a point that we thought we were getting a deal, and the third guy would say ‘nah,’” Hein recalls. Eventually the two founders “conveyed this message the right way to the third partner, who reluctantly decided to play ball, but it was nip and tuck.” In the meantime, he says, he and the other side’s attorney were doing “the Star Wars waltz,” as Hein called it, in late 2015.
Over the Thanksgiving holidays, he would be dipping in and out of the recently released Star Wars movie to take a call, and she would be doing the same thing.
He says he prefers to be more focused on the present when he’s with his kids. But in this case, like in many M&A deals, striking while the parties were in the mood was a must.
A lot of Blizzards
Andrew Hirsekorn is a principal at Eagle Merchant Partners, which he co-founded in 2013 and they’ve done three multi-unit or franchise deals since: investing in Chicken Salad Chick to become the franchisor; bringing together five separate operators and recapitalizing all of them into United PF, the largest franchisee of the Planet Fitness gym system; and investing in the second-largest Dairy Queen franchisee.
Even though the United PF deal, in particular, was complex, involving five separate operators with independent businesses, he doesn’t have any crazy tales to tell about getting deals done. “We’re more boring. We’re pretty conservative,” he allows.
But he does go to extremes when vetting restaurants. “We’d go on covert road shows, where we’d sample the food at 10 to 20 restaurants in a couple of days,” he says. “It’s a lot of Blizzards, or a lot of hamburgers.”
That brings us back to Steven Parker, who was trying with his brother to get financing for his first high-end hotel (also known as daycare and boarding) for dogs. They had opened the store, but the landlord gave them a lease with the option to buy, and the option to buy was only for one year. “He figured, ‘these are two kids’—we were teenagers. ‘There’s no way in one year they can get the money together’ to buy it,” Parker recalls.
Parker invited the president of the bank for a visit. “We were busy, and we were profitable and successful, but I wanted to impress that banker. And we thought back to that movie of Trump, and we got every employee, all hands on deck. I said, ‘I want to make this place look like it’s Grand Central Station.’ I said, ‘I want controlled chaos.’”
The banker visited, immediately said he’d seen enough and approved the loan, for $475,000, the amount needed to buy the building, and K9 Resorts was in business, in 2005. And how old were the brothers?
Steven was 20, his brother Jason, 17. Crazy, indeed.
Beth Ewen is editor-in-chief of Franchise Times, and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy cases to firstname.lastname@example.org.