Guest: Brad Williamson
Topics: LOI, commercial real estate

Transcript:

Chris Ressa 0:02
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris dresser, and I invite you to join my conversations with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management. First, I’d like to thank one of our sponsors credit Intel, knowing the financial health of retailers is crucial for the success of your retail related business. That’s what credit Intel is for credit Intel analyzes the financial health of hundreds of publicly and privately held retailers in different sectors. With a subscription to credit Intel, you have access to comprehensive analysis of retailers, financial condition, and their Expert Analytics team. Visit credit intel.com for more information.

Welcome to retail retold everyone. Today I’m joined by Brad Williamson. Brad is the Executive Vice President and Vice President real estate for HTO. He has been in HTO. For since 2015. He has been in a variety of supply chain jobs and retail jobs. Before that he brings a wealth of knowledge. I’m excited for him to join us. Welcome to the show, Brad.

Brad Williamson 1:24
Chris, thank you so much for for thinking of us and having me on board.

Ressa 1:28
So Brad, tell us a little bit more about who you are and who HTO is.

Williamson 1:34
Yeah, so Brad Williamson. As you mentioned, executive vice president HTO currently leading our real estate division, got a background in in supply chain and some various sales roles, did a little retail ski shop business back in back in my late high school early college days. And came on board with our our CEO Justin Howe and the team at what then was called Texas D back in 2015. We eventually became HTO and started franchising and early to mid 2018. And our company HTO is primarily ice based. So we have 26 flavors of fresh brewed broadly I see we carry a an auxilary line of retail products and healthy food line as well. So really, really cool business very dynamic. We play Texas country music inside of the store and the vibe is is off the charts.

Ressa 2:44
That is fascinating. So the store’s primary primary business is selling iced tea, which you don’t see a lot I don’t know if there’s another chain that does that. How many locations are you up to these days?

Williamson 2:59
We I believe that they are at 31 locations open. We have about 35 under construction. And behind those 6566 ish we have about 160 to 170 additional units under development across about 12 states now. Unbelievable.

Ressa 3:26
I love ice tea I had I’m a big I like unsweetened iced tea basic I do like some of the flavors when I go to a restaurant and they might have black berry or infused or something but had no idea there was this demand for iced tea like this that is fascinating. And you guys growth is incredible. Are you venture capital private equity backed just growing from cash flow and maybe some bank loans have how have you guys grown like this this is

Williamson 3:58
unbelievable growth. Now we a thank you for the kind words so we are we’re still funded. We are primary growth has been from franchisee we, we opted through a series of of different tests, really that started back in early 2008 2009 With amidst the financial crash. And that led to a point probably around 2016 2017 When franchising became a reality for us to leverage that vehicle for growth and, and it really, Chris if you go to the core of our company, and really the vision that our executive team has put in place, it’s based on sharing this opportunity with a multitude of resources and, and really just given other people an opportunity to work for themselves and And so that that has been the main vehicle for our growth is through our franchisees and our resources through our franchisees have enabled us to grow as rapidly as we have, wow,

Ressa 5:15
how big are these locations these HTS? How big are they?

Williamson 5:18
So the building footprint is, is right around 2000 square feet. In some instances, we’ll have to get creative in our in a conversion or retrofit space to be flexible on something larger and even in some cases smaller, but our target building footprint is going to land in the 2000 to 2500 square foot range.

Ressa 5:42
Got it? And are they across the board freestanding buildings and caps in between? Are they mostly one type of building?

Williamson 5:51
Great question. I believe 27 of the 31 locations are all freestanding. All of our stores do have a drive thru. Four of those 31 are what we consider a co tenant space. So a space that is essentially split in half or close to half with another user. But yes, primarily freestanding stores with a drive thru is what we’re hunting.

Ressa 6:20
Unbelievable. Okay. I want to bring us before getting too much business. I want to bring us into a segment we call clear the air. I’ve got three questions for you. They’re personal. Are you ready, Brad?

Williamson 6:31
Yes, let’s do it. Chris,

Ressa 6:33
the audience wants to get to know you more. Okay, question one, Brad, what is one skill you don’t possess, but you wish you did.

Williamson 6:40
So this is a tough one. But after much thought, I think I have to nail it down on patients.

You know, commercial real estate is an industry as a whole in especially the retail segment of the industry seems to move as quickly as molasses at times. And so it’s very difficult for me, but but also for our franchisees to, at times navigate the transaction with patients. And so you know, if I could, if I could look in the mirror and coach myself every morning to work on one thing, it would be patient,

Ressa 7:21
I will tell you though, some of the most successful leaders in business in the world, one of the things they all have in common is they don’t wait for things to happen. They go make them happen. They have a lack of patience. So you are not alone in the successful business leaders in the world that don’t have patience. But I understand this industry, we all talk about moving faster. And it seems with technology as fast as it is and email and whatnot. And I remember the days we used to FedEx the least comments back in and they got done quicker. So I understand

Williamson 7:53
your question to what is one

Ressa 7:57
thing most people agree with, but you do not.

Williamson 8:00
All right. So I had to bring in the experts on this one. And so I posed the question to my kids this morning, on the way to school. And we all agree that most of the world thinks that it’s okay to have dessert after the meal. And we disagree with that. We think it’s way okay to have dessert for the meal.

Ressa 8:24
That is great. So, ice cream before pizza is okay.

Williamson 8:29
100% We’re all in on that. We did not phone a friend. We all agreed we have five and they cannot wait to hear this live there.

Ressa 8:39
I can’t wait either for them to listen. That is great. Okay, question three. Brad, when’s the last time you tried something for the first time?

Williamson 8:47
All right, so this is a good one. I’m a coffee drinker. Believe it or not, I love I love tea. But I also love coffee. And yesterday morning, the barista asked me if I would like to try my coffee with almond milk instead of the normal 2% that she makes my coffee with. And I said yes. And it was a big lead to jump off. I did it. I loved it. And I will probably do it again in the future.

Ressa 9:19
So I’ve done it. Here’s what I will say, at least for me, it is a noticeable difference. Some people are like, Ah, it’s the same. I’m like, No, it’s not. This is a noticeable difference.

Williamson 9:30
It was good. It was really I was nervous. manok I’m, I’m caught in a bunch of routines and try to you know, try to try to stay stay in my lane and I stepped out and it was worth the risk. I like

Ressa 9:43
it. Yeah, so I think it’s good. I just would say it’s noticeably different. That’s all Yep. Well listen, that was great. I really appreciate the insights and getting to know you better. I want to pivot a little bit more about HTO. So been an interesting year. They’re talk to us about the business and what’s going on in how you guys are thinking about the future, I guess, given what’s happened in the recent past?

Williamson 10:09
Yeah, absolutely. So, you know, I think omit most of your conversations with with professionals in the industry, you’re probably not able to navigate around the obvious pandemic and how that’s affected operations and, and even development and, and financing even from that perspective. So we are no different. We’re having to navigate all of the challenges that have come from a majority of our customers now. Shifting from walking in to the drive thru. I think we’ve we’ve seen a tapered down, especially in the last six months from drive up versus walk in traffic, but there’s still a large number of people that are not getting out of their car, they’re they’re staying in their car, and they’re wanting to go to the drive thru. So for us specifically, that has forced us to evaluate the basics, site plan, design, double stacking, you know, we’ve implemented a new strategy at our stores called Keep it rolling. And, you know, similar to the Chick fil A serving style, although they don’t have it in extremely fast, actual serving time, the customer in their car is consistently moving. So it doesn’t feel as though you’re sitting there for a long time. So we’re, again, we’re trying to not necessarily reinvent the wheel from a customer service standpoint. But we are always trying to get better. And I think you know that any any QSR on planet Earth is having to ask themselves, these same questions, how do we serve our customers better? How do we serve them faster? And most importantly, for us, Chris, is how do we recreate the environment that we have inside of our store, which by the ways is incredibly important for us to be able to interact with our customers, we’re forced now to figure out how to bring that inside the store experience to the drive thru. And so that’s what our team is really focused on right now.

Ressa 12:30
I love that bring the in store experience to the drive thru. I haven’t heard that before. That is really unique perspective, I’m going to steal that and share that with some of my tenants.

Williamson 12:42
Man, do it if, you know, we’re, as I mentioned earlier, you know, the Texas country music and, you know, relationship building face to face interaction is incredibly important for us and our brand. And that’s, that’s going to be a major focus. Maybe maybe now until the end of time. We we don’t know, I think that, you know, as we adapt to the way the pandemic has affected us, hopefully, we will. Hopefully, we will see more of the customers get out of the cars and come back inside like they used to, but for the time being it’s it’s something that we’ve got to deal with. And so we’re we’re facing it head on,

Ressa 13:22
been able to sell a significant amount of franchise deals and bring on a bunch of franchisees in it in a short time period. I would think the the unit economics as you’re talking to these franchisees must be pretty compelling. So is it similar to a Starbucks, a Dunkin? Talk to me about like the store business and how it does? And because I think people are probably wondering, they’re just selling iced tea?

Williamson 13:51
Yeah, this is a great question. We’re faced with it often. And so legally, in our FTD, we actually do not have an item knighting. And so we are actually not allowed to share financial information with our franchisees. And what I think personally, that has allowed us to do is connect with the franchisees that are, you know, brand focused more than they are financial focused, there’s obviously got to be a financial component of the business that’s enticing enough for, for them to, you know, to stay involved and, and want to be a part of our brand. And so that’s, you know, that’s what’s really, really unique for me, is our franchisees are not able to see financial information. So after they’ve actually executed a franchise agreement with us. And, wow, we have Yeah, we’ve got a In fact, I think just last week, one of our early franchisees, he’s just signed on Do another four stores, he’s got to open. These are under construction on his third. And he just signed on for an additional four. So he’ll have, he’ll have him and his group will have about seven units within the next couple of years, so exciting to see not only a wide variety of franchisees, and personalities, and just a ton of really, really good people. And they bought into the brand more so than they have the financials and to see, even some of the early adopters that probably were, you know, arguably taking on some more risk than anyone else because it wasn’t new brand. It was up and coming. But we knew from day one, when we offered our, our brand as a franchise that unit level economics are absolutely the focus of our executive team we make decisions to, to support the unit level economics of every store individually. And so we’re also focused completely on the brand and building that brand, not just for us, but but for our franchise partners. So very exciting to see just some success stories from some of our early adopters, and then taking on some more stores is really, really neat.

Ressa 16:16
I would assume based on the growth today that many of us have the ability to get franchisees many of them are profitable. Is that a fair assessment?

Williamson 16:25
That is a fair assessment. Great to hear. And

Ressa 16:28
I think the last thing is that I would ask on this front majority of the sales iced tea, you said other things are sold but our majority of the sales iced tea,

Williamson 16:38
yes, absolutely. 80 to 90% of our volumes are are from ice water and ice. And again, as I mentioned earlier, we we carry some retail products, most notably YETI Coolers and Pelican coolers are some cool outdoor centric brands that that we offer. Along with with our T products. So you know the idea, Chris is that we want our customers to be outside to be enjoying life with their friends and their family. We don’t have any Wi Fi in our stores. There’s no seating with the exception of some small patio seating in a few of our locations. But again, the idea is to be outside we want we want our customers to be enjoying life with their family and their friends. And you know Justin said something early on that really resonated with me and you know we want we want to be we want to be at the parties with with all of our with all of our friends and our families in their in their coolers in their. In their ice chests. We want want there to be a gallon of tea at every party. And that’s that’s been a big focus of ours as well.

Ressa 17:56
I like that that is you want to be at every party. I would assume now that family gatherings are starting to happen again and we’re coming into summer this is you guys are hoping for a big summer as it relates to that.

Williamson 18:07
We cannot wait for summer 2021 new flavor that I think is is absolutely going to fly off the shelves. Very excited about that. And then what flavor it’s it’s called Strawberry passion. I like it. Yep, yep.

Ressa 18:26
Can I buy things to either? You mentioned the gallon so if I walk into an HTO Can I buy tea like a gallon put in my fridge? Or can I buy loose leafs to brew on my own? Great question

Williamson 18:39
and you can do both. We offer Yeah, we offer a mini gallon in our stores now which is fantastic for the kid. And then we also offer a half gallon and a full gallon one of our most popular products is the gallon. And so yes, you can take that home with you and and put it in your fridge and it’s it’s a great way to have tea by your side all day long. And then we do offer a few of our flavors in a broadleaf retail back. So yes, absolutely. You were able to take that the home and brew it at your house. That is

Ressa 19:20
incredible, very cool concept. I am loving hearing about the growth and excited to see where you guys are this time next year and hoping you have a great summer. Now a message from one of our sponsors. Our friends at East End group offer true National Facility Services. Their professional staff and elite service partners are in place and currently serve all areas of the United States. Additionally, East End group’s current coverage extends to rural communities, areas that other service companies often overlook with a multi service platform that includes all of the basic price property maintenance services such as landscaping, snow removal and janitorial East End group also includes more than 25 additional services such as plumbing, electrical and mechanical. East End group takes pride in its work and uses state of the art technologies to report conditions with pictures and timestamps in real time, giving you peace of mind that the work is being performed as requested. Visit e send group.net to learn more.

I want to bring us to a story you want you’re gonna bring me to Georgetown, Texas, you have a story about that. HTO once you take us to Georgetown,

Williamson 20:41
I do I’ve got a really cool, unique story. And I think the question you posed was, how did how did that store end up here? And so this that’s where I need one because it really intertwines also, with some of the timing of me personally learning about commercial real estate and just the process of, you know, submitting an LOI, which, at that time, by the way, Chris, a little plug here. I didn’t even know what an LOI was, I had heard it used a lot. And, you know, as a matter of, you know, not looking dumb. I didn’t really ask anyone what an LOI was, until about the time it came to actually submit one kid. So great story at Georgetown, Texas. And I see this, I see this piece of property and I think I do what a lot of people do I start wondering why Why is there nothing there? Why this is a great quarter, it’s a stoplight, there’s a ton of traffic, the vibe is really cool. You can tell there’s, there’s just a buzz about the air here. And I started asking myself, why is there not a store here? And then more importantly, why is there not a T store on this corner? And so I started digging in, I call a broker that was helping me on on this particular market. And I said, Hey, man, I just, I just found this corner, we got to be there. We’ve got to be on this corner. And he says, it kind of gives me a background on the on the deal and says let’s submit an LOI, but let’s get this thing going. And it was that moment in time i i had to, you know, I had to put my pride aside, and I said, Hey, man, I don’t what is an LOI? I’ve heard this used a bunch. But what is what does that mean? I said, Oh, well, it’s a letter of intent. It’s a shot off the bow. It’s a it’s a way to start the conversation, figure out where the deal points might be. And so I said, Oh, yeah, great. Looks, let’s do it. Let’s send an LOI. Right. And so you know, to fast forward a little bit, we fire the loi, we get feedback that it’s actually already been leased, the land has been leased. There’s, you know, at that point in time, there’s no way that we can, we can get in on the deal. So the broker and I just kind of stayed in, in communication with that particular landlord. And Chris over the course of, I’m gonna estimate a year and a half to two years, we, we consistently called this landlord just to stay on his radar. And ultimately, what happened is that that previous tenant did not perform. The landlord, I think, at that point was probably more annoyed with us than he was ready to do a deal. But he called us back and he said, Hey, this is a bit of a long shot. But you guys may have already found something in the market. We’re going to end up terminating, and we want to, you know, we’d like to explore an opportunity with you guys see if you’re still interested. And so we immediately went to work, we put a deal together. And we and we, we started building a tea store in Georgetown, Texas. And so the unique part of the story is really towards the very end, there is a protected salamander in Georgetown, Texas that we weren’t aware of, until we applied for our certificate of occupancy. In this little this little guy is a big deal in Georgetown. And there was a specific I’m going to call it a salamander catcher, but it’s a it’s a protection device that is required to be in place prior to the city issuing a certificate of occupancy and there were a series of events that this salamander device was overlooked. And so we at the last minute had to put together a deal and and basically have this, this salamander protection device constructed Then put in place on the site before we could start selling I see and so that’s what makes the story really unique. How did the store get there? Well, it was years of grinding and, and a short battle with with the protecting Salomon and and Georgetown. So the store is open, it’s super successful. And our franchisee their dear, dear friends of mine, I was I was in his wedding. So it’s been really, really cool to see their success. And the battle that they had to overcome to get that store open was it was a big one. A really cool story.

Ressa 25:33
unbelievable story. That was fantastic. You know, there’s a lot of things that I took away from that story. I think one putting aside ego in any business deal, right? You weren’t didn’t know what an LOI meant common real estate terminology. And you put that aside and told your team, your broker that you didn’t know what it was. And so, you know, I think important in business deals to put aside ego, so kudos to you for doing that. I think, number two, just the persistence and the stain on it, you knew what location you had to be at, you weren’t stopping until you had it. And when the opportunity came, you took advantage of it. So that’s point two, and then point three, you know, just the continued resilience, right? When I think Hillary Clinton says, you know, resilience is the most important trait, a human can have the ability to adapt to change with confidence. And along comes this salamander in Georgetown, Texas, that is pretty important to Georgetown, and you guys had a, you know, make sure that you handled everything that related to the salamander, in order for you to get a certificate of occupancy so that you could open the doors. Really cool story. So tell me about the salamander, you mentioned, is the salamander still on the site? Did you have to like catch them and move them? What did this protection service do? Exactly?

Williamson 27:06
No, he’s, he’s an endangered species. And I personally have never seen one. But this device, as I understand it, is, in the case of a rainstorm, if he’s washed onto the site, this is this filtration device essentially catches him and prevents him from being washed into the gutters. And so yeah, just you know, it’s just also one of those unique development pieces that no one could have really predicted it. You know, and that’s another just a great, I think, characteristic of, of the commercial, real estate industry. There’s curveballs all the time, you you’ve got to be on your toes, you’ve got to be ready to solve problems quickly and efficiently. And that’s, that’s the beauty is you, you just you can’t predict stuff like that. So it was really unique to see that perspective as well. I

Ressa 28:04
couldn’t agree more. What a great story. Thank you for sharing that. I want to bring us to the last part of the show called retail wisdom. Are you ready?

Williamson 28:13
I think so. Chris, fire away.

Ressa 28:15
All right. Question one. What extinct retailer Do you wish would come back from the dead?

Williamson 28:20
All right. Tough, tough question. But I absolutely have to go with blockbuster. I can vividly remember riding my bike through the neighborhood. And then across a busy street to enter the doors of the nostalgic smell and plastic wrap. Brand new PHS clearly smoothie right and walk in. And the new releases are the first ones you see and you work your way through the store. And you can you can pick from some of the older movies and then you and you grab a Twix or a Snickers before you check out with your with your your plastic laminated blockbuster card. And so you know I just I thought there were a bunch of the the retailers that I wish I could still go and visit there was just something about blockbuster that was cool. To certainly

Ressa 29:14
was have you seen the Netflix show?

Williamson 29:20
Yes. Thank you. Thank you for the plug there. Yes, we’re now avid Netflix subscribers and Apple TV is a huge deal at our house. So certainly the convenience factor was not there with blockbuster. But hey, one of those. One of those experiences I’ll never forget as a kid.

Ressa 29:38
No on Netflix now. There is a documentary The last blockbuster. You have to check it out. Oh,

Williamson 29:44
no, I have it. I absolutely will.

Ressa 29:49
It’s fascinating. Please check it out. Oh, yeah, yeah, good.

Williamson 29:52
Check that out tonight. Awesome. All right. Question two.

Ressa 29:57
What is the last item over $20 You bought in the store.

Williamson 30:01
We had dinner the other night. And afterwards the kids had to have ice cream. So we drove. It was a there was a CVS right around the corner. So we drove to CVS. They have a pint of this specialty. It’s an Italian gelato ice cream that we had to kids just had to have. So we went and spent 30 bucks on ice cream the other

Ressa 30:27
day. I’m gonna come see how we have five. Wow, that is a lot of ice cream.

Williamson 30:36
Lot ice cream.

Ressa 30:38
All right. Last question. Brad. If you and I were shopping at Target, and I lost you,

Williamson 30:44
what aisle would I find you in? Man, I got a huge smile on my face. This is the easiest to answer. We have a an 11 month old little girl and I had no problems answering this quickly. You would find me on the baby aisle. Probably buying either a single package or a box of baby wipes. She’s just an animal. She leaves a mess everywhere. I love her to death. But we’re constantly cleaning so you would absolutely find me on the baby aisle buying baby wipes and targets. I get it.

Ressa 31:21
I I have a two and a half year old and a soon to be four year old so I know baby wipes. Well, Brad, this has been fantastic. I want to thank you for coming on. And listen man you and I got to stay in touch and stay connected and when I’m in Texas we I got to get to an age to you give me

Williamson 31:44
a call when you’re in the area Chris and I’ll meet you firsthand in the store and walk through and give you give you firsthand experience. They’re so excited. Excited to meet you in person for sure.

Ressa 31:56
Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at Intel retold DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retell retold so you don’t miss out on next Thursday’s episode