The Yard Milkshake Bar
The Yard Milkshake Bar is a retail food service company (otherwise known as a restaurant) that makes an even more decadent version of a milkshake. The name "The Yard Milkshake Bar", in fact, comes from the idea that "the milkshakes bring all the boys to the yard."[1]
According to the entrepreneurs, The Yard Milkshake Bar frequently has lines around the block waiting for their menu of special milkshakes that range between 640 and 1,800 calories per. These calories aren't free as the milkshakes generally cost consumers between $14 and $20 at the counter and cost the company between $4 and $9 per milkshake to make. They do have a $50 milkshake though.
The Yard Milkshake Bar started in a location in Gulf Shores, AL that had been home to several failed ice cream shops and their company is the result of trying to differentiate themselves from a typical such shop. So far, it's proved to be a success as they've expanded into Panama City Beach, FL, Fair Hope, AL, and Austin, TX.
The company has begun the process of franchising, with one franchisee already open and another already sold. To open a franchise, a franchisee must pay an initial $45,000 for a 10-year license. Additionally, they franchisee must pay back to The Yard Milkshake Bar original company 6% of sales and a 2% overall royalty in return for national marketing. The entrepreneurs estimate that it costs between $140,000 and $315,000 to open a new location.
The best store among them all has between 25% and 28% margins on $1,400,000 in single year sales. In total,[2] the company has lifetime sales of $6,400,000 with $3,400,000 in expected sales by the end of the year. The entrepreneurs state that the company expects to book $400,000 in profit.
The entrepreneurs clarify to the sharks that they want the deal to encompass only the franchise organization and not the four stores they have opened and operate which does not thrill the sharks. They claim that they were interested in having a shark on-board to save themselves a decade in organic growth
Making A Deal
Daymond drops out right away, citing his interest in (and potential conflict with) The Sugar Factory.
Lori says that she likes the idea and thinks the whole thing is very smart. But she wants a piece of it all, including the existing stores. For this, she offers the requested $400,000 but for 12.5% equity.
Mark agrees to leaving the existing stores out of the deal. But he wants a 25% interest in any new businesses instead of the original 10%. The entrepreneurs attempt to counter at 20% but Mark counters them at 22% instead, giving them a slight advantage in the split of the difference. Despite the $2,181,818 bite this took off the value of their company, they agree and leave the tank with Mark Cuban as a partner.
Analysis
There's not a whole lot to be said about this one that hasn't already been said last season with The Fat Shack and Doughp. But, suffice it to say, don't believe Mark Cuban when he says that he's attempting to build a portfolio of "healthy" food companies because, clearly, he is not. And when he declines to invest in a company because they don't meet with his desire to fund only healthy eating, believe that there's something else he doesn't like about the company and is just using the "health" factor as an excuse. We know this because with this deal and The Fat Shack we have proof of exactly the opposite.
Notes
- ↑
Your Stats Shark feels as though this reference is either a "Southern" thing or its some kind of sex joke. He hasn't settled on one but... is probably leaning toward the latter.Edit 8/31/20 - Showing just how clued in to things non-Shark Tank your Stats Shark is, apparently this is in reference to a Kelis song that he's never heard of. He hereby stands corrected. - ↑ This one is difficult to parse, whether these sales are just the stores that have been opened or whether this is what the franchise organization has booked or whether this encompasses both.