← Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
The REAL Future of Home Services: Chick-fil-A, Handyman Businesses, and Industry Consolidation
00:36:51
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- [00:00]
A
Chick Fil a is entering home services, and they're focusing on home maintenance and handyman services.
- [00:06]
B
Oh, too funny.
- [00:07]
A
If I ever got bored and did handyman again, I would limit it to, like, 10 or 15 things. Yeah, that scope creep was the problem.
- [00:15]
B
Definitely issues. Unless they're able to really box in what exactly they're doing.
- [00:19]
A
The word handyman is a devalued word.
- [00:23]
B
Yep. How many more institutional buyers are going to end up moving into this direction?
- [00:28]
A
So. So the first wave was like the COVID The next one is AI. The third one is venture capital comes into home service.
- [00:34]
B
So to be able to change that in the next few years would be, like, I think, the big uphill battle for them.
- [00:39]
A
I think that it might be weird in the next 10 years, but in the next four or five, like. Welcome back to Owned and Operated. I'm your host, John Wilson. I run a plumbing H vac and electric business in Ohio and Indiana. And for fun, I run a podcast where we talk about the home service industry and how to grow businesses inside of it. Today, I'm rejoined by my good friend Jack Carr. Jack Carr is the CEO of Rapid down in Nashville, Tennessee. What's going on, dude? We're. We're talking.
- [01:14]
B
We're talking Chick Fil a. I am Jack Carr. I run a H Vac plumbing and electrical company in Nashville, Tennessee. Significantly smaller than John's, but still, I don't think significantly.
- [01:26]
A
I don't think significantly significant. Significantly is like apex to both of us.
- [01:33]
B
Typical.
- [01:34]
A
We're just a couple.
- [01:35]
B
We're just a couple of guys trying to make it, running a couple services.
- [01:38]
A
There's a couple of plumbers. So today we're talking something kind of odd. Chick Fil a is entering home services.
- [01:48]
B
I thought this was a joke. When someone sent this to me.
- [01:50]
A
I actually thought this was a joke. When I was handed this prep paperwork, I was like, what?
- [01:55]
B
Yeah, I was like, not. Not April Fools yet. Is this, like, an internal joke from, like, the industry? What's going on?
- [02:02]
A
Yeah.
- [02:03]
B
No, real. This is real. It's already started.
- [02:06]
A
Okay. Like, where?
- [02:10]
B
Atlanta.
- [02:11]
A
Atlanta. Hot.
- [02:12]
B
Lana.
- [02:13]
A
Is it already launched or launching or. Oh, my God. Okay. All right. So. So, okay, let's talk about. Let's talk about it. Okay, so Chick Fil A. I feel like I'm delivering news. How now, Ronco? Good morning, San Diego. It's me, Ron Burgundy. All right, so Chick Fil a has launched a home service brand. Or is it Chick Fil A Or
- [02:33]
B
is it Chick Fil a owns Red Wagon Ventures. Red Wagon Ventures isn't a venture arm of Chick, the Chick Fil A operator. So I don't think it's Chick Fil A launching.
- [02:44]
A
So Venture army of the people who launch a home service.
- [02:49]
B
Correct.
- [02:50]
A
This is literally back to our last episode.
- [02:52]
B
Still super weird from the sense of,
- [02:54]
A
like, why is a venture arm doing this?
- [02:56]
B
Well, it's the venture. I don't.
- [02:58]
A
Well, venture.
- [02:58]
B
That's a good question.
- [02:59]
A
Yeah. I mean, so this literally was our last episode. Yeah. Where we were talking about, hey, I think so the first wave was like, the COVID And everyone's looking for businesses that are essential and safe from COVID So multiple spiked. The. The next one is AI. Everyone's looking for businesses that are safe from that. And, like, my theory was the third one is venture capital comes into home service and to. To build. Like, if Uber's a technology company, then so. Am I right?
- [03:26]
B
Yeah.
- [03:26]
A
And, okay, so Red Wagon Ventures, a VC arm of Chick Fil A, has launched a home service brand.
- [03:34]
B
I don't think it's of Chick Fil A. I could be wrong here. I think it's of the. The owners own both. So, like, I don't. I don't.
- [03:40]
A
Classic rich guy story.
- [03:41]
B
Yeah. I mean, it's. It's like, I just don't want to. I just don't want to come off as, like, hey, this is Chick Fil A being the main entity, and then Red Wagon Ventures.
- [03:48]
A
And what's the Chick Fil A? My pleasure. Or something like that.
- [03:51]
B
That's what they say. Yeah.
- [03:52]
A
Okay.
- [03:52]
B
Okay. Yeah. Which is funny.
- [03:54]
A
I've actually never been to a Chick Fil A in my life.
- [03:56]
B
But. But the interesting part is, like, the way that they've. So first off, I don't want to write this off as a joke just because, like, I remember the start of Chick Fil A, and Chick Fil A was written off as a joke. Like, you can't sell chick chicken sandwiches at this price with this menu. Like, nobody thought it was gonna work.
- [04:12]
A
I mean, I think that, like, what's the. What's their face? The handyman. Ace. Like, yeah, Ace has roughly done this now, I think. I don't know how big their. How big is Ace Hardware's home service arm? Because. Because they've begun consolidating. I think it's kind of a big platform.
- [04:29]
B
It is. They bought. They paid quite a few multiples. I mean, that. That's public. And, like, they're actively paying for businesses
- [04:36]
A
and platforms across the thing.
- [04:38]
B
So.
- [04:38]
A
So, to me, no, I take this. I mean, they're approaching it with a ton of funding.
- [04:42]
B
But like, ACE makes sense because right, if Home Depot did the same thing, like, Home Depot subs out its H Vac work to vendors. But ACE was like, okay, you need this. You come into our store, you say, you need this. You will be the one who subs it out.
- [04:57]
A
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- [06:42]
B
Yeah, yeah, something.
- [06:43]
A
And he. And that is a venture. Like, he used VC money with this thesis. Hey, I'm gonna go create a tech enabled plumbing company which like the, the joke is. Yeah, no, we all are.
- [06:54]
B
It was, it was the next door guy.
- [06:56]
A
Yeah, but like we're, we're all like, yeah, all of us exclusively run on technology now. Like, it's not like this is 2010. And so, like, all he did was probably like, put service titan into place. You know, hey, we're.
- [07:07]
B
Yeah, we got data now, but hey,
- [07:09]
A
you can multiples of revenue instead of ebitda.
- [07:11]
B
What I find interesting about this, though, is this, this actually the, The. The placement which makes this interesting for me is I feel like the. What's forgotten a lot about the home service industries that we are service. We're service company. I like to draw parallels to like, the hospitality industry. And so that's what they did at Chick Fil A, right? They. They said, hey, we're going to charge a premium price, but we're going to provide a premium service with great hospitality.
- [07:35]
A
Chick Fil A is a premium price.
- [07:37]
B
Yeah, they're definitely. At least they used to be a premium price. I don't know with all this inflation if they've increased to match premium pricing. But like, they originally were. They're filling up your water cups for you. They're saying, my pleasure. Like the, the premium status that they're providing was there. Interesting. And so coming into the home service industry, like that same hospitality industry aspect or wrap, is going to be interesting to see how they change the market. Because historically it's been pushed by, like, best practices groups. Like, here's how you do these things and these processes. But moving forward, are they going to defer from, like, traditional best practices and come up with their own? Because, like, no one else at any McDonald's or Wendy's says, my pleasure. Like, that's a specifically Chick Fil a thing. So it's going to be interesting, man. I'm really.
- [08:25]
A
I think.
- [08:26]
B
Because I think that the market has the ability to do it. It's just that my downside is going to be different, but it's. Let's see.
- [08:33]
A
Yeah. Okay. All right. So it's called a crew, which, I mean, I feel like that's pulling from Chick Fil A. A crew Chick Fil A. Okay. Oh, I mean, I feel like that's like them being like, yeah, we're the same. I guess. I guess that's how I'm reading that.
- [08:47]
B
So.
- [08:48]
A
And they're focusing on home maintenance and handyman services. So not really plumbing H vac, but like, maybe a little bit of plumbing. Handyman tends to, like, touch a, you know, change some outlets, maybe replace a toilet. Yeah, they're launching in metro Atlanta first. Any reason? Like, is Atlanta Chick Fil A's headquarters or. Yes, it is. Okay.
- [09:05]
B
Yes, it is.
- [09:06]
A
Apparently John says, yes, it is.
- [09:07]
B
Yeah. So the things they offer, they offer drywall patching leaks and clogs, fix trim and wood, repair fence and deck repair TV mounting fixtures, install home smart home setup, furniture assembly and pressure washing.
- [09:17]
A
A crew is targeting. I like this sentence. So this is actually. Okay. This is kind of. I have a funny story about this. A crew is targeting small home service jobs that most companies ignore. Yeah. Did I ever tell you that I built a handyman business?
- [09:32]
B
I think you did. No. No.
- [09:35]
A
So in 2019, I had like, this sentence cracks me up because this is the exact same sentence that I used as my thesis. So I, I built. I. I had like a bunch of different names for it. I was going to call it like handy or whatever, but like somebody bought it. So I don't know. But I, I ended up. It was just like Wilson Home Repair. And it was kind of surprising numbers off the rip. And I. And I did it on the back of Wilson. So we just like told people, like, hey, we have a handyman division now. Like, do you want something done? And I don't even know if we did lsa. Maybe we did a little bit of ppc. Like, I don't, I don't really think we did much, but it did like 15, 20 grand in the first month and like back in 2019. So that's like pretty good.
- [10:25]
B
Yeah.
- [10:25]
A
And we did, I want to say 300 or 350 or something like that in, in the first 12 months, which again, felt pretty good. Like Wilson was only like a three. Some million dollar operation. So that, that was a kind of a meaningful part of what we were doing. And it was the same thesis like, hey, can we fix drywall? Can we do tile repair? Can we do some fencing? Random bullshit. Can we fix some decks? And it did work. Yeah, it worked. And like, I bet it would work way better. I bet if we did it today, it would explode because we know how to drive leads way better. We ended up shutting it down a year in. And I'm curious how a crew solves for this problem because we ended up shutting it down a year in because the problem that we found was it's very. Like, handyman is general as hell.
- [11:20]
B
Yep.
- [11:21]
A
And they get into everything. Like, they'll get into toilet repairs. They'll be asked about, can you side my house? Like they will. They will have to do anything. Can you bathroom model? And it was really challenging to, to do that. Well, yeah. And like the talent pool was kind of tough. Like the, And I talked to. I. I made friends with a bunch of people that ran Mr. Handyman franchises and I would ask him and like a big franchise for Mr. Handyman. There's one in South Bend. And he was like four or five million dollars. And that was like, holy. He's like one of the biggest in the space. And he had like three tile guys, three drywall guys. So it was kind of hard to start. And maybe like, maybe they'll get past that because it's funded differently than I was funded where I only had two guys. But they, they were able to. They had like specific people to do specific tasks. And that was our biggest challenge and ultimately why we shut it down is, hey, this worked. It was profitable. It was a 50% gross profit handyman business. Like, we did well with it. The challenge that we had was it's really hard to scale on the back of like all these very hyper specialist things. And what happens if there's a callback on tile? You know, what happens if there's a callback on drywall? And how do you hire an expert in each one of those things?
- [12:45]
B
Do you remember our conversation about me trying to buy a handyman business?
- [12:48]
A
No, I don't.
- [12:49]
B
So three years ago, we ran into the same thing you actually. Or two years. And you told me this because we. We found a 1.5 million top line handyman business. I think it was like 400 SD or something like that.
- [13:00]
A
Yeah.
- [13:02]
B
And that was it. It was like, hey, two guys who did siding and wood and carpentry. One guy. And my thesis at the time was, hey, if they don't have H vac because like it's extremely specialized. So we mix handyman with H vac and like now.
- [13:16]
A
Oh, was this in Nashville? Oh, okay. So this would have been like an ad.
- [13:19]
B
It would have been an add on.
- [13:20]
A
Oh, yeah.
- [13:21]
B
The problem that we ran into with it in the specific issue was that the reason that they were able to grow so big was wasn't that they were doing lead gen. The issue that they were or the, the reason that they were able to get so big was that they were working with property management companies. And we didn't want to become an H Vac property management group.
- [13:39]
A
Yeah.
- [13:40]
B
But yeah, it, it was interesting. The amount of labor they had and the different specialties of each person and then the amount of subs that they brought in to be able to handle kind of the auxiliary work.
- [13:49]
A
Well, you end up. You end up having to build market construction business.
- [13:54]
B
Yeah.
- [13:54]
A
And so we started with the same idea that that sentence starts, with, which like, hey, we're going to be like the honey do list. We're going to do a bunch of random things. Like I remember our. In the first week or something. One of the first jobs that we did was we hung. We hung picture frames. Yeah. And it was like a $2,000 job of hanging picture frames. And that was one of the first jobs we did. And I was like, holy shit all. Yeah. And it's. I mean, I think it was like fancy frames and like, you know, it was deserving of a. Yeah, but talk about margin.
- [14:28]
B
I mean like.
- [14:29]
A
Oh yeah.
- [14:29]
B
Time.
- [14:30]
A
And I think that might. It was either the first or like.
- [14:32]
B
Yeah.
- [14:32]
A
Second job. And I was very memorable. But we wanted it to be small jobs. But the. The more we sort of like got into it, the more we kept doing bath remodels. Like it. It became a construction business, which I think if that's what you're signing up for, that's great. Honestly, for Wilson today, that would probably be a very profitable arm because we have restoration so we could do the build back. We have plumbing, H vac and electric. So we could do a lot of it. I just think it's.
- [15:02]
B
Yeah.
- [15:02]
A
It's so messy.
- [15:04]
B
Yeah. Then the line is messy. The line of like where kind of specialty falls. Like the box of. Where does. Where does TV mounting turn or. Yeah. Where does TV mounting turn into? Oh, also I'm doing low voltage wiring.
- [15:19]
A
Electrical total.
- [15:20]
B
And where does leak and clog fix turn into. Hey, now I'm doing full blown blown plumbing.
- [15:25]
A
Yep.
- [15:26]
B
And so those. Those lines are really difficult and I. There's an easy way to get out of that box really quickly and then shoot yourself in the foot.
- [15:33]
A
Yeah.
- [15:34]
B
That being said, again, they have a lot of. If they're able to staff up with a tile guy, a good carpenter, some good. Just overall handyman that are able to do odds and ends, some light electrical knowledge on the team. Like there's a way that you could build the team pretty quickly. Um, I think you could hit most of the house.
- [15:52]
A
Yeah.
- [15:54]
B
What.
- [15:54]
A
There's. What their. Their business model here. This is kind of interesting. I have a few friends that have tried to build this and it's like a managed home. So that's the idea. So like I don't have a ton of time and I have more money than time. So I'm going to go hire this firm that I pay $5,000 a year and they just deal with all my shit. 400 bucks a month. Like you figure it the out. Like if something's broken, go fix it. Charge me if there's more. I guess I don't personally have that, but honestly, the more I talk about it, the more I'm like, yeah, that would be sick. But I have a friend in Chicago that built this. Yeah, I have. I've just. Over the years, I've talked to people on Twitter that have done this, and it was like an app based, you know, home maintenance subscription because there's other
- [16:42]
B
versions, like in Tahoe. I've seen this as well, where they. It's essentially a house manager. And so it's less about a handyman side. It's more of a house manager who just handles the subs internally and you pay the fee. I don't think that's how these guys are, but definitely see the value to that.
- [16:57]
A
Now, I got to remember, there's a friend here locally that has this and he told me it's five grand a year. And I don't know why I didn't hire him because that is a great deal. I'm like, I'm thinking about this because we're trying to find someone to do my landscaping. And this is, this is so aggravating. We're, we are trying to. This is like embarrassing to admit on the podcast, but I'm already too deep. We're trying to like, upgrade our landscaping and we're try, we're trying to do. I think we spend like $10,000 a year or something on like lawn care, snow removal, like spring cleanup, fall cleanup. I don't know if that's good or bad. That's currently what we spend. And we, we want to add like a flower. Like, hey, can you deal with the flower gardens? Because I really don't want to weed anymore. I'm like, a little tired of it. And can you like, plant seasonal? So, like, it'll pro. Probably go from like 10 to 20.
- [17:42]
B
Yeah.
- [17:43]
A
And I'm having a really tough time. Like, we've called like five landscaping companies in my mind, like, $20,000 for a house a year is kind of a lot of money. Yeah. And we're not having, like, people are just like, no, like, we can't add you to the route. So I'm like, okay, now I'm back to maybe we should buy a bunch of landscaping companies because why would you say no to that? Yeah. I don't know. It's kind of wild. Dude.
- [18:08]
B
There's a, there's a guy up in Virginia, Ian Smith. He was on the, the Jack positions the other day. Okay. Like, that's what they do. And they have like a high end version and a low end version. They buy different ones. And they have a whole irrigation department.
- [18:22]
A
Totally.
- [18:22]
B
Like, it's a great business.
- [18:23]
A
It's a great business. And the ones that we've called are literally doing exactly what we want at our neighbor's house. So we're just like, I'm pretty sure you could add us to your route. There's this one company, there's called Lewis Landscaping and they own the neighborhood. So. And there's some people, which is. This is kind of funny. There's a guy down the street from me and he's the CFO of Smuckers, which is like a food, you know, they make peanut butter.
- [18:48]
B
Jelly.
- [18:48]
A
Jelly. Yeah, yeah, yeah. So CFO of Smuckers is my neighbor. And he there at his house every single day.
- [18:55]
B
And like, no wonder why they can't get you into the room five days.
- [18:58]
A
And we're like, are you serious?
- [18:59]
B
That's because.
- [19:00]
A
Give me one of those days.
- [19:01]
B
I was talking to Ian. He's like, some of these contracts are like $200,000 a year contracts and stuff. Some of these big states, I mean, and talk about labor. Like locking up for 200,000 is.
- [19:11]
A
Yeah. I mean, this guy locks up a crew every day for two hours a day.
- [19:14]
B
Yeah.
- [19:14]
A
Like, it's crazy. 8:00am to 10:00am every day. I drive by it every freaking day. And I'm like, you can't have one
- [19:20]
B
guy animosity down the road, you know?
- [19:22]
A
Come on, Tucker. Yeah, yeah. So. But okay, so subscription, like sort of a house manager thing. I. I think I'm into that. Like as a consumer, like, I want that. I'm. I need stuff done.
- [19:35]
B
Yeah. Well, and then that, that's usually like, that's why it's called a honey honey
- [19:39]
A
do or honey do honey do list.
- [19:41]
B
Honey do list is because there's usually a list. And so like if you could send someone over there or handyman, knock it out every time.
- [19:47]
A
It was like five items on that invoice. Yeah. It was never like that thing.
- [19:50]
B
So that was what the company said too, is like, I was going to buy. It's like there is a bunch of stuff on each one of these rentals that needs to be done every single time. And it just becomes kind of a reoccurring list of items. So I can imagine that the, that the actual average ticket tends to climb just because there's like, hey, even though this is a $200 touch up paint job, there's also six other jobs. Hang pictures, move furniture, build a bed. You know, you start to add up these things really quickly and it gets to 2,3000 bucks for four hours of work.
- [20:19]
A
Yeah, yeah.
- [20:21]
B
But I could definitely see it working. And then on the back end right there, they're coming in with that. Again, top of the line experience, customer experience, which. That's where I'm going to be really interested to see if we can pull anything for the H vac plumbing, electrical
- [20:35]
A
industries, as they're not like, what are they delivering different.
- [20:38]
B
Yeah. How are they delivering the difference that actually makes the home service experience better.
- [20:43]
A
Yeah.
- [20:44]
B
Because that's going to be interesting for me.
- [20:46]
A
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- [21:24]
B
The downside is, like, I'm.
- [21:26]
A
I'm gonna.
- [21:27]
B
I'm gonna be very interested to see how they're right. Because I'm glad they went into this space as well. Not like a high trade. High. I should say high license trade as well, because again, I think that their specialty is in, I mean, bluntly, like a chick fil A. You're getting served by, again, high school kids who are getting paid decently well, who come, you know, from whatever. That's really hard to create in a home service industry, especially with licensing. Like, your pool of talent is just so. It's just so restricted that trying to find, like the same level of service is going to be fun.
- [22:05]
A
Yeah.
- [22:06]
B
Fun for them. But the fact that they're not doing licensed work allows that pool to be bigger.
- [22:11]
A
Yeah, Yeah, I think so. And I think maybe if they get more and more specific, if, if it's like SKU specific. Because I think that was our big challenge. And like, we've learned that over the years just in our core services. But he. If, if we, If I ever got bored and did handyman again, I would limit it to like 10 or 15 things. Yeah. Because I think that scope creep was the problem in handyman, where it can
- [22:33]
B
be anything and that messes with everything. Right. Like, I mean, you've seen that with Capacity planning.
- [22:38]
A
There's. Yeah, capacity is weird, sales is weird, pricing is weird, materials is weird. You can't like go get a great relationship with anybody because it's always just going to be Home Depot.
- [22:47]
B
Yep.
- [22:47]
A
And yeah, it's a, it was a, it was a strange business.
- [22:50]
B
And how do you provide top level service? I'm assuming that there's some level of, hey, we're going to be at your house at this specific time on this specific date when the honey to do list, I'm going to keep calling it that on accident. The honey do list keeps growing while you're there on site. And are you able. You're going to burn that customer, you're going to burn the next one?
- [23:07]
A
Yeah.
- [23:08]
B
So definitely issues. Unless they're able to really box in what exactly they're doing and how much of it before they get on site.
- [23:15]
A
Yeah, this will be, this will be really interesting. So do we know how. I'm. I'm assuming they're attempting to go national. Is it, is it privately owned or is it a franchise brand?
- [23:24]
B
I think it's privately owned.
- [23:25]
A
Huh.
- [23:26]
B
Yeah. I mean at least I've not seen any franchise opened up or franchise opportunities from.
- [23:30]
A
So maybe the concept starts. Yeah.
- [23:32]
B
I mean mostly, almost for all franchises start as a singular location.
- [23:35]
A
Yeah. Yeah.
- [23:36]
B
And then they, you know, company owned. Anyway. So maybe they go franchise just like Chick Fil A. I mean, they have the model.
- [23:40]
A
Right.
- [23:41]
B
So they have the model.
- [23:42]
A
Okay.
- [23:43]
B
But that being said, it'll be interesting because like you said, it's an extremely fragmented market. Right. Handyman is probably one of the most fragmented market because how do you classify exactly what they're doing at any point in time?
- [23:54]
A
I mean, they touch everything.
- [23:55]
B
They touch everything or they have the ability to touch everything at least. And then you have like the ones that are out there, Chuck and trucks. Single guys. Yeah, a lot of them are aging just like the rest of the industry. It's, it's good. Guys who know how to do tile and woodwork and drywall and electrical and plumbing. Like they're 70, they're 60. They've been handymanning for the last 20 years. My father in law does it. He just travels around handymaning for RV sites.
- [24:19]
A
Yeah. Yeah. I have like five friends whose dads retired and then launched a handyman business.
- [24:26]
B
Exactly. That's. He does it just for fun. Funsies. Because it's like very easy.
- [24:31]
A
It's very easy to get like booked out. You're just like, hey, I launched handyman business.
- [24:34]
B
Boom.
- [24:34]
A
Full.
- [24:35]
B
Yeah. I mean And I. I like it for them. Like, hey, that's great. But from a business standpoint, like, running a handyman business does create, like, this downward pressure on pricing.
- [24:46]
A
Yeah.
- [24:47]
B
Because again, no overhead for Joe Schmo to go do a bathtub, do a toilet. We see it in our core business as well, all the time, that the handyman can drive down pricing.
- [24:59]
A
Well, the handyman pricing gets driven down. And I think that's one of the dangerous things about this industry is the word. Handyman is a devalued word. And I have friends that actively run handyman businesses, and they cannot get what a contractor could get.
- [25:17]
B
Yeah.
- [25:18]
A
For the same thing. And when they ask why, it's like, well, you're a handyman. It's like, well, I'm a handyman with 20 guys. Like, we are a contractor business, and, like, we're doing full bathroom models. But, like, this guy's getting a premium because he doesn't have handyman in the name.
- [25:33]
B
Yeah.
- [25:34]
A
So I do think it's kind of a dangerous word.
- [25:36]
B
Yeah. Which is interesting. I mean, does a. Does their. Their logo say that? Does it say handyman anywhere on it?
- [25:43]
A
I just saw the picture earlier.
- [25:45]
B
Yeah. I'm wondering if they're. They're pushing handyman services as.
- [25:49]
A
Yeah.
- [25:49]
B
What they do, or is if just home service.
- [25:52]
A
Yeah.
- [25:52]
B
Help.
- [25:53]
A
So do you think this is the start of, like, you know, you brought up Home Depot. Ace Hardware is interesting. Walmart, Lowe's. Like, it's so Home Depot. So we're a retail partner with Home Depot. It's been a good experience. They used to control more of the process, and then in. I don't know when it changed. I want to say it was the late 2000 teens. They used to control the equipment. It used to be their salespeople. So they actually used to have it. And then they went and found partners to deal with it all.
- [26:29]
B
Yeah.
- [26:30]
A
They almost went the opposite way.
- [26:31]
B
How difficult it is.
- [26:32]
A
Yeah, totally. So they went the opposite way, which I think is kind of like breaks the theory. I mean, maybe they decide to, you know, go backwards, but it doesn't feel likely.
- [26:42]
B
Yeah. I mean, it's a. It's a big lift to get that up and running. Like, hands down, huge lift.
- [26:47]
A
I mean, I think a good example, Geek Squad with Best Buy, because I feel like that would tell us, hey, on the retail business, how much does the services provide?
- [26:57]
B
The interesting part will be there's a lot of op. So it comes back to that distribution question. Like, you have to have distribution first.
- [27:04]
A
Right.
- [27:04]
B
Home Depot has Distribution. Ace has distribution. But what will be interesting to see is there's lots of companies that have this distribution that are kind of hiding in the shadows. So a great couple of great examples are Costco. I mean Costco sells Costco H Vac.
- [27:17]
A
Yeah.
- [27:17]
B
They could do it. Yeah. One point something billion.
- [27:19]
A
Yeah. That's a lot.
- [27:21]
B
That's a big 4% of. Then you go what's the actual number? It's $1 billion revenue company.
- [27:27]
A
That's a lot.
- [27:28]
B
Yeah, but that's what I'm saying is like as a percentage of total revenue and maybe why Home Depot moved away.
- [27:35]
A
And I bet margin, I bet margins are higher too because like what's the contrib. Yeah. On services probably a lot higher than product. Yeah, that's really interesting.
- [27:45]
B
I think also electronics have higher margins in terms of electro electronic sales to installation process.
- [27:52]
A
Yeah.
- [27:54]
B
But yeah man, like I think that that's a. There's a huge value there. I don't think that that.
- [27:59]
A
So most of our. Most of the big box, whether it's Ace or Home Depot or Lowe's or even like big flooring places, I don't think they tend to install too. They usually like sub that out. But maybe that'll change in the coming years as like. And to me that does make sense like if you're a flooring company, like a big flooring company. Like there's a. There's one here locally, it's north something I don't even know and it's freaking huge. Like the square footage wise and the business seems to be like large. If they added an installation they would probably double I would imagine because it's like the. In someone's cogs in their cost of goods. Like the flooring is only 20 probably so the other 80 is in the services side. So yeah. It feels like a big opportunity.
- [28:46]
B
Yeah, it just, it's just a big lift. Right. Like it's a big Home Depot to focus on doing what does best versus like hey now we're running a multinational.
- [28:55]
A
Yeah.
- [28:56]
B
H VAC and plumbing company.
- [28:58]
A
What is kind of funny is Home Depot counts your revenues. Their revenue.
- [29:02]
B
Hey yo.
- [29:02]
A
So. So they. They sort of do still get the revenue.
- [29:06]
B
Yeah. So they still get the valuation from it.
- [29:08]
A
Yeah. Because the. They count. They get to count all of your sales towards their budget for their store. So they're. Yeah, they're still repping it.
- [29:16]
B
There you go. Yeah. I mean so I mean the big question becomes how many more institutional buyers are move. Going to end up moving into this direction whether it's like Chick Fil A or the Chick Fil A owners.
- [29:30]
A
Yeah.
- [29:30]
B
Whether it's a diversification move, whether it's trying to grab, I mean like our last Home Depot 800 billion.
- [29:37]
A
What if Home Depot bought Apex?
- [29:38]
B
I mean that's actually probably good and
- [29:40]
A
like that would make a ton of sense.
- [29:42]
B
And then I mean, honestly, they could consolidate the craziest part of that. And I know we're just talking like wild left field things. Yeah, yeah. But they could consolidate all that buying power straight into Home Depot.
- [29:52]
A
Oh yeah, It'd be humongous.
- [29:54]
B
It'd be humongous because I mean we spend a million plus a year and like we're a small company.
- [30:00]
A
Yeah, yeah, yeah.
- [30:01]
B
Like I can't imagine. Apex is 500 million in EBITDA, which means that at 10% they do. Was it.
- [30:11]
A
I'm sure that, I'm sure they're 20, let's say two and a half billion in revenue.
- [30:14]
B
Yeah, two and a half billion in revenue at 25 to 30%.
- [30:19]
A
So like half a billion of hearts.
- [30:23]
B
Like that's wild. To be able to increase. If Home Depot buys that, you increase your internal sales by. Of Home Depot.
- [30:29]
A
Yeah.
- [30:30]
B
Parts and equipment by billions.
- [30:34]
A
Yeah. Service experts has, I think it's service experts. They have. It was some egregious. It was like 500 Home Depot stores or a thousand Home Depot stores. Like they have the retail relationship for that and when Home Depot hasn't bought them yet, but that feels like that makes sense because they're already in the system. Yeah, I mean, I feel like that makes a ton of sense. I do think, you know, I was talking to my. This is like a 10 year old conversation with my attorney, but it was memorable and I think consolidation had just started and the biggest company in our market was sold to Heartland. And I was just like a little like, okay, what does this mean? I was really scared of private equity at the time and I think that's even recorded on the show of just like me being like, I don't know what's going to happen. And we know now, but his, his comment was industries that get consolidated don't get unconsolidated, which to me makes sense. And like, I think we can point to a lot of different examples of that. But yeah, industry, like we are a industry that's been consolidated and we're at the tail end of it and it's probably not going to unconsolidate. And I think we're just going to see more and more big, big brands which I think for the next couple years is probably good for the contractor. I think that it might be weird in the next 10 years, but in the next four or five, like as if Home Depot bought Apex or if Lowe's bought whatever, that would probably be good because that gives everyone a public company that's a buyer. It's. It's exactly what's happened with pest control where there's Orin and Terminex and like, there's a public buyer for your business at some point.
- [32:15]
B
And, and I don't think it actually goes away. We've seen it. I mean, I used to work for Pepsi Frito Lay and like Frito Lay still doesn't do R and D unless they started in the last few years. But they don't do R and D. They don't start up a new chip brand. They go to market and see who did well, who's doing well, doing what. Kind of just buy it and just buy it. Yeah, it's much easier for them to buy a drink brand or buy a chip brand or snack. So just. You are now part of Pepsi.
- [32:40]
A
So Ferguson. And actually Ferguson would be an interesting one. I wonder if they would go down market and buy up because that feels like. That makes sense too. Of like they could, you know, get high in their own supply and like go buy a big consolidator. But they grew like 3 to 5% last year and they did eight acquisitions. I don't know how big those acquisitions were. I don't know if they were like absolutely tiny or absolutely gigantic, but they grew 3 to 5% and they did eight acquisitions. So I think, yeah, the, the bigger, the, the bigger the end buyer, like, the more they need the incremental growth that M and a provides. Because 3 to 3% is, is probably a good year for a, you know, $40 billion business. That's a lot.
- [33:24]
B
I think the hard part becomes the biggest hard part is changing consumer habits. Right. Obviously, you know, consumers are changing their habits. They're not going directly to contractors. They are going through Home Depot that you are put in front of customers. But I think on the, the mass, most customers go direct to their H Vac.
- [33:43]
A
Yeah.
- [33:44]
B
Person they go to their plumbing person, they go. And so to be able to change that in the next few years would be like, I think the big uphill
- [33:50]
A
battle for them is for the VC money.
- [33:52]
B
How do I get the average person to not go to Google and say, hey, Google, how? You know, contractor near me, plumber near me, and go straight to Google and say, hey, Home Depot service department.
- [34:04]
A
Yeah.
- [34:05]
B
So I don't think it's out of the question though, like that. That's going to be interesting to see if more out of the box contractors
- [34:12]
A
move in to more who ends up buying the big. Because that's always been the question mark for the P backed consolidators is who's the buyer at the end?
- [34:22]
B
My. I mean, wasn't. Wasn't Silas buyer or one of the other buyers. Like Morgan Stanley though.
- [34:29]
A
Yeah, but that's just an investment bank in between them and their next buyer. Like there's still an end buyer. Yeah, because like Morgan Stanley or Goldman I think was Sila. Like they're just gonna grow it and then what are they gonna do with it? They're gonna sell it or they're gonna take. Take it public. Yeah, but which is still selling it.
- [34:47]
B
Yeah.
- [34:47]
A
So they're either selling it to the public or selling it to, you know, someone privately.
- [34:50]
B
Like Chick Fil A was a left field one, which is why this Chickfila
- [34:53]
A
is a left field.
- [34:54]
B
But I'm curious, the mindset behind whoever made that decision. Is it. Is it a diversification decision based on like, you know, data data, or is it just like. I mean, you and I both know plenty of operators who are just squirrely. Oh, like you're just squirrely.
- [35:10]
A
Like an idea six months ago.
- [35:13]
B
We're like, john, should you buy a magic the gathering business? And the answer was yes.
- [35:18]
A
The answer was yes. The answer was, I deeply regret completely,
- [35:21]
B
squirrely operators who cannot decide on one single thing. And that's like one of the traits of any operator who I've ever met is like. I mean, even myself, I run multiple businesses. You run multiple businesses. Like, we just get this itchy squirreliness. And so I just. I wish I was in the room when he's like. He's like, hey, buddy, I got an idea.
- [35:42]
A
Yeah. Here's what we're gonna.
- [35:43]
B
Here's what we're gonna do. We live in Atlanta. I cannot get a home service guy to patch my drywall in my giant mansion. Let's just make a company, man. Let's just do it. Like zero data.
- [35:54]
A
Chick Fil A. A crew.
- [35:57]
B
We'll call it the A crew because they're the number one a crew. And they're not gonna work Sundays and they're gonna say they're awesome. My pleasure. Like, hilarious. But like, that's. I honestly, there's probably some level of chance that that's exactly how it happened.
- [36:13]
A
Like, I believe it.
- [36:14]
B
So it's just like, why are these guys on the Internet putting way too much into this. It is just me not having service like you. I want to go start up a landscape company because I can't get landscaping at my home. That's our next vertical.
- [36:25]
A
To me, it's, like, clearly, like, hey, we're intentionally constraining our growth. Why Just, like, hire another crew. This is crazy.
- [36:32]
B
Oh, too funny.
- [36:34]
A
Yeah, this. This was hilarious. If you know why Chickfila has launched into home services, comment below. I would love to hear it. That sounds hilarious. If you know of anybody else that's getting into home service that's kind of left field also, let us know. That would be. That would be equally funny. Besides that. Like and sub.
- [36:49]
B
Like and sub.
- [36:50]
A
Like and sub.