Todd McGlamery

00:00Welcome to Nashville Restaurant Radio, a podcast for and about the people of the Nashville restaurant scene. Now here's your host, the CEO of New Light Hospitality Solutions, Brandon Styll. Hello Music City and welcome to Nashville Restaurant Radio. My name is Brandon Styll and I am your host and welcome back. First show of the week's coming out on a Wednesday and my guest today is Todd McGlamory and I had this idea. Everybody keeps telling, you hear these stories, you say half the restaurants are going to close or three quarters of the restaurants are going to close or I'll bet there's a lot of restaurants that are going to change hands. So I've got a friend, he sells restaurants. If you want to sell your restaurant, he sells restaurants. So I thought it'd be interesting. Let's give him a call. Let's see if he could give us some insight. Is he busy? People calling him? Is he selling a bunch? So hopefully you enjoyed this. Hopefully it's interesting to you. Thought it was interesting to me. Cheers. Hey everybody, we are joined here now with Todd McGlamory and Todd, you are the owner of National Restaurant Properties Tennessee Market, right? That is correct.

01:19How you doing, man? Doing great. It's interesting times these days but the weather's warming up a tad bit and we're starting to get back to business as 50% of the, or not 50%, but you're allowed to open 50% occupancy today. So that's a good thing here for Nashville. Yeah, so we've been kind of waiting, anticipating this day. A lot of restaurants are opening. A lot of them are choosing to stay closed and I got you one because I feel like a lot of people are, I hear a lot of conversations where people say, well a third of the restaurants are going to close or Tom Coleco came out a couple months ago and said 75% of the restaurants are going to close and I've known you for, I think about 10 years now. We haven't hung out in a long time but we keep threatening to go play racquetball. Yeah, very close. Yeah, we definitely have to go do that once this whole thing, once with the gyms reopen. But let's, for our listeners sake, as the owner of National Restaurant Properties, what do you do? So we are a full-fledged commercial real estate firm that deals almost exclusively with hospitality related businesses. So that could be restaurants, bars, food trucks, restaurant property, and we straddle commercial real estate and business brokerage. So if you are a restaurant owner and you own the building and you wanted to sell the business, we could do that type of work. Or if you're a landlord, just have a building that's restaurant related, we could sell or lease that building. And then on the flip side of that, we do a lot of tenant representation where we're representing different restaurant owners in the market and finding space. And then we also help businesses transition out or sell their business when that time is ready. So there's really two different types of sales that we get into on the business

03:20brokerage side, which is goodwill sales where we're selling brands that have brand recognition, cash flow, things like that. And we also have another type of sale that is called an asset sale where people are trying to get off the lease and get some income back for the assets. So that is a rundown of what we do. So when you say an asset sale, like you're saying, let's go through some hypothetical situations for kind of examples of what you mean. So if I have a restaurant and I buy all the equipment inside of it and let's just call it shenanigans and I'm not making it, I'm going to fail and I want to get out of it, you can do, you can sell the actual restaurant, you can sell the full shenanigans restaurant in the name and the menu and all that stuff, as well as if I don't want to sell that, I just want to sell the equipment inside of it, you'll do that? Well, we don't get into selling their equipment, but when we define an asset sale, you're really just selling the assets and the buyer would be taking over the lease. So as an example, let's just say you're a restaurant owner, you open up from scratch and you drop a million dollars into the build out as far as the plumbing, the electrical, the grease trap, the hoods and all the money it costs to open up a restaurant. You've got a decent amount into it and you also signed a 10-year lease that you might have a million dollar obligation to pay back that lease over a course of 10 years. So instead of, you're tired, you're having partner problems, you want to transition to a different way of life, whatever the case may be, you've got a lot of money wrapped up and you need to get off the lease. So what we can do is we can come in confidentially and actually sell the assets for a heck of a lot more than you can say an auction company and then also get you off the lease. So you get some take home money, you're not going

05:22to get all the way back whole, but the main thing is to get you off that lease obligation. So we navigate the waters of getting somebody that will replace the existing restaurant tour that first built out that restaurant, if that makes sense. Yeah, I know that absolutely makes sense. So fast forward to a time like right now and I don't, I want to do this episode today with you because like I said, I think that there's a lot of hearsay as to what is happening out there in the market. Are you a very busy guy right now? Yes, and the market's different. Obviously we're in unprecedented times as far as the restaurant business. We've never seen anything like this, you know, where the government's required us to shut down and just be on pause. So that's brought in a lot of problems, you know, there's you can't generate revenue, but then you have obligations as far as lease obligations. But we're busy, but it's a different type of business and you're just going to see the restaurant business going to survive and it's going to come back bigger and better, but it might look a little bit different in the future than it has in the past.

06:32We don't know exactly how that's going to play out, but people are still going to eat and drink and have a good time. It just might be in a different level than it used to be. When you say that, what are your hypotheses? What part do you think is going to be different? The main thing I think is full-service restaurants. Locally here we're seeing a huge impact. So Logan's, Old Chicago, these big full-service restaurants that are six, eight, ten thousand square feet probably are not going to exist at a strong level in the future as they used to. Just customer habits have changed and they were changing before the COVID-19 and you're seeing like, hey, we're just not going to be able to make it going forward. And you're seeing some of these bigger companies and bigger footprint restaurants just not make it. So I think you're going to see commercial real estate and restaurant space actually go to a smaller footprint in the future. It's just the way people are eating home more. I think this has given them a taste to say home even more. So I think we're just going to see a smaller footprint in commercial real estate when it comes to restaurant space going forward. And it's not going to change overnight but, you know, are the Ryans and the Golden Corrals of the buffet 12,000 square foot buffet restaurants going to exist after this? Gosh, I have no idea. Yeah, so it's hard to fathom that they will but they might but it just doesn't seem that way at the moment. So what's the number one reason that people would call you to sell their restaurant? When they're ready to transition.

08:12So that either they want to sell and retire for a profit, they are tired, they've got spouse problems, they've got partner problems. Whatever the life event and they want to transition out, they'll call us to help them facilitate a sale. And you do that, you said you do that confidentially? Correct. So we go, initially everything all our meetings are confidential in the beginning. We just have a conversation with the restaurateur about what they want to accomplish and then we go into evaluating the restaurant is really the first step that what we do. So evaluation is just say, hey, let's look at it and see what we think that the market would bear. So we look at three documents to do that. We look at the profit and loss of the business. We look at the balance sheet or if a restaurateur doesn't have an accountant doing their books, look at their equipment list, and then also their lease. So once we get those three documents back, we do an evaluation. Usually we'll meet the restaurateur in the office, discuss what we think the market would bear based on the information that they give us. And then we go and talk about listing terms and things like that. But yes, we do quite a bit of our listings confidentially because we don't want to disrupt the ongoing customer base or the staff of a restaurant when they're wanting to transition. Because it can just cost the restaurateur a lot of money if they employ a lot of people and they get spooked. So it's interesting having this conversation with you today because I don't want to come across as advantageous or of any kind of way because I know that these are people's livelihoods and their dreams and this COVID-19 thing has been absolutely crazy. But if somebody did want to sell their restaurant or if you're in a restaurant right now and you want the potential to sell your restaurant, what's the thing that devalues a restaurant the most besides just straight unprofitability?

10:11I think all restaurants still hold value to a certain extent because they just hold so much. I mean it just costs a lot to open a restaurant. So they still, I don't know if you know, because we still sell restaurants that are just closed. But like we sold, it was a pie in the sky in Lenox Village and it was just a closed restaurant. It was a restaurant group that owned it and they were just like, hey we're just moving on to different projects. So they cleaned the restaurant up, left the restaurant equipment in. We came in and we found a buyer and a new tenant and everybody was happy. Somebody got to transition out. Another person got to start a new business. So to answer your question about this, what devalues it? I mean... If there's a restaurant that's open right now and I want to sell my restaurant and you come in those three documents, is there something like if I sell a house and they come in and I've got mold in the basement, they're going to go ah that's a red flag or if I've got, you know, so what's the thing? I mean is it a really bad P&L? That's the thing because if you're unprofitable, it still holds value in the market because the asset sales will trade at a certain level. They always will because restaurants just cost a lot and the valuation can't even compare that to residential because real estate will hold its value because of the real estate itself. Restaurant equipment doesn't necessarily hold the value once it's not operating and another thing is if a restaurant tour drops a lot of money into a build-out, well they don't own that real estate. The landlord does. So these are factors. That's why we asked for the three documents to get a roundabout figure of what we think that the market would bear but regardless, it's still going to hold some value and if most people are not

12:13profitable, usually, not all cases, but usually their lease obligation is going to be their highest liability by far just because if you signed up for three, five, or seven-year lease and as an example, you're paying 10,000 a month or something that can add up pretty quick if you're not profitable. Oh yeah. Super best. So how'd you get into this? I used to be a restaurateur myself. I had five bars and restaurants in South Carolina and my family moved here to Tennessee probably about 10 years ago and I had lots of experience with restaurants and had looked at hundreds of spaces just with our own ventures so one thing led to another. I just got involved with national restaurant properties so took my skill set and applied to this and it's been a great fit. It's been a good market. A lot of great people and restaurateurs here in Nashville. I mean the city has exploded in the last 10 years so that's been awesome. What's kind of your take on what's happening, what's pre-COVID-19, kind of what's happening with the restaurant business in Nashville?

13:26You know we have an explosion of restaurants in the market you know which has caused rents to rise rapidly and with not much slowdown here in the last couple years as far as rental rates, I think one good note that will happen out of this recession is that rents will reset at a lower rate and I think some of the players will leave. I know you mentioned maybe 70% of restaurants are going to die. That's not going to be the case. Will there be 20 or 30 percent of restaurants that transition out and new people come in? Yes, that's going to happen. They just might be different models. There could be more takeout, ghost kitchens and things like that that replace different concepts. So I think once we get over a low of six to nine months, I think the city will come back stronger than ever. I mean and the people that have been wandering around the city, I mean building is still going on quite strongly with the hotels and the infrastructure of the city. So that's not slowing down and the restaurant business is going to come back better than ever. But it's going to take a minute for the customer's habits to come back to what they were in the past. So if I owned a restaurant and I was on the verge of wanting to sell it or if I just wanted to talk to somebody, how would I get a hold of you?

14:58You can reach us at nashvillerestaurantstore.com. You can always inquire there or be happy to shoot me an email at todd at nashvillerestaurantstore.com or you can always just give us a call on the phone the old school way 615-730-6529. So let me ask you a question. So as you're seeing and interviewing with the podcast, what are you hearing from the front lines as far as chefs and different people that support restaurants as we go through this unique time? You know I'm hearing a lot of positivity and I'm hearing a lot of people banding together. You know it's a very unique business where it's the competitive nature is there and everybody competes but it's really a family. It gets really kind of a brotherhood and everybody's been checking in with everybody. Everybody's sharing and liking each other's stuff and I think that there's the the big question right now is safety and is this too early in opening back up the restaurants at 50%? Is that something that's going to be a profitable model with you know you don't have to pay 50% of your mortgage? You know when you're 50% open it's just a it's a challenge. I think there's a lot of people there's a lot of unknowns out there that some people are jumping in and trying to figure out what to do and some people are hanging back and waiting. So I think that's the number one thing is that the the community of restaurants of the independent restaurants has really stayed together and everybody's been promoting each other and if anything I think it's brought everybody closer and I think that it's made everybody realize how special each individual place is but there's a lot of fear. There's a lot of uncertainty and I think as a community the restaurant community has gotten stronger but that this thing has still time to

17:02play out. Yeah it's definitely going to take a take a minute to get the consumer back to stormwater routines. Yeah I think it's been this weird wave you know I think initially there's a lot of sadness because we've had to furlough all these people and nobody wanted to let people go. I mean when you work in a restaurant it's really like a family and then now bringing that people back into the restaurants is a fear because you know are we going to introduce reintroduce our staff to a dangerous situation but I think everybody's really excited to see each other and I think everybody wants to get back to work but I don't know I think there's still a lot of uncertainty but we're ready I think everybody's ready to get back after it really bad. Yeah we're ready to go out at least I am. Yeah seriously. Yeah it'll take a minute to play out so you know it'd be interesting to see what how they do sports coming back up to Nashville as far as SEC, Pratt's, Titans are going to get full swing here in August back to normal life that'll be uh I'm going to make a decision here pretty quick and all that. If we could at least watch sports at home I would be pretty cool with that that's been something that has been I've been missing pretty badly. So hey man thanks again for coming on the last question kind of as we're getting along as we're kind of moving forward here is there any are people are you getting busy are you having a lot of phone calls where do you where do you kind of stand right now what do you have to tell people? You know for me I think the activities have been about the same you know in my office has been here I think this is going on eight years and you just have a you know we do have seasons as far as uh you know when people are transitioning but for the most part the phone has been a little quieter just because you know the city's been shut down but we're still having about the same amount of buyers and sellers in the market just transitioning out so some people

19:07are doing all right with the to-go business and they know it's not going to last for forever the way it's set up now and they're going to have a chance to to expand here in the future and some people are been in the restaurant business a while and they're had time home with their families and thinking about hey you know I'm ready to do something else so that that triggers like hey let me talk let me go talk to Todd at NRP and you know see what the process is as far as transitioning out so um I think activities are consistent as it as it is it's just a uh different time as far as uh what the public's reaction has been with all this Do you think that there's an opportunity for let's just say that before that let's say in January I had a couple restaurants or a restaurant and I wanted to expand and I wanted to open one more or maybe two more is this a buyer's market now hey yes it is a buyer's market because people some people are just going to say hey I'm willing to transition out of the lower level than I was maybe six months ago and people are still coming in the market we just finished out a lease with the regional um two weeks ago and they're not you know afraid as far as what the future holds but uh things are things are going to come come down maybe the stock market has been going wild but restaurant business the valuations are going to come down and on a good note as far as signing leases the lease the leases are going to come down so that is that's that's great for the city and in my opinion as far as from the rest restaurant tours perspective uh you know it just enables you to operate at a better level maybe lock your lock in a longer term lease at a lower level while we are in buyers or a slight recession here uh so I think there could be some positives out of the negative that's happened in the market Sweet I was thinking that same thing like if you are in the market for something

21:12so I know if you had people calling you right now saying hey man let me know when you got a deal let me know what you got of people that you're actively looking for absolutely you know what's been booming um and I've talked to a couple different owners is the liquor business people that have owned liquor stores are setting records and looking to put that cash to work uh in the restaurant business uh you know and liquor stores are a hospitality related business so there are there are pockets of strength in food and drink uh it's just uh you know it's not all restaurants that are um are doing terrible you know liquor is doing quite well so that's uh that's interesting but one thing I'd love to hear is like those people want to put their money to work back into food related businesses so I think you're going to see cash put to work here as we open up to full strength here as we get through the phases we're going to see a influx of people to spend pretty pretty aggressively well that's positive news absolutely definitely hearing that well man thanks for coming on today I really appreciate you taking 20 minutes to uh kind of give me an update just I hear a lot of people talking about what's happening out there and these people are going to do this like well let's talk to the guy that talks to them every day and find out what he thinks so thanks again man yeah thanks for having having me on it was good catching up and chatting for a minute and uh we'll uh we'll hit racquetball here soon thank you Todd Mclamory for joining us on Nashville Restaurant Radio hopefully that just gave you a little insight into another aspect of this business that people are working on every single day uh tomorrow we are going to be talking with David Andrews from D Andrews Bakery and he's going to be reopening his business uh on Thursday so we're excited to talk to him learn all about what he's got going on so very excited to have him and um if you like listening to this podcast

23:14please click subscribe and uh look forward to hearing from you tomorrow hope that you are all being safe hope that you're social distancing and doing the right thing love you guys bye