How Industry Reached $2.4M in Austin but Failed to Land a $300K Deal

Alright. We are here in East Austin, we're about to meet the owner of Industry, a big, restaurant and bar. It's airy. There's foot traffic. The food is yummy, but Harlan, the

owner, has some other stuff going on. I've maxed out all my personal credit cards. I get up every morning. I get email from my banker, and it says, you have until noon to find this amount of money or we're going to bounce this check. I'm currently $25,000 in overdraft in one of my accounts.

How expensive is your money?

7% interest. Jesus. If we close, I lose everything. I'm waiting tables. The question is, can my money help solve some of his problems so we

can get this thing back on track? You've got $200,000 of credit card debt that's compounding monthly at a 25% rate. Yeah. That's the boulder. Yeah. Yeah.

It is. I just... I don't... I... The business is worth zero today. I understand. It's an installment.

How are you? Hey. How are you doing? I'm Nathan. Harlan. Harlan, really good to meet you. Likewise. This is your baby,

Yeah. We're here in East Austin, which I'd say is kind of the hottest zip code in the country for dining and going out. We're just a couple blocks from downtown. We opened this in 2022. Okay. I opened the original location in San Marcos, which is a wonderful little town about 30 south of here, College Town. That's where we started.

What year did you open that first one?

2018. Ever since I was a little kid, I wanted to wait tables, did it all through college, and they made me a manager. And they said, hey. You you wanna take a semester off and be a general manager? And, of course, I never went back. I waited on the president of The United States one day, and then that same evening, I'm bailing a busboy out of jail and then plunging vomit out of a urinal all in one day. And that builds character.

So to take us back to opening day 2022, this location. So how many square feet are we in right now?

A lot. 4,500 square feet.

Okay. And how much did it cost you to open this location?

Well, we we we opened this in San Marcos for 3,500 square feet, and it was $800,000 in 2018. Okay. We knew we needed more square footage because we were booming down there post COVID. We average out about a little million and 0.5 a year, but post COVID, we were doing 2,500,000 a year. So we were the busiest restaurant in town. And we thought that was the new normal. It was amazing year and a half until all the fun ran out.

Okay.

And so we took that confidence, and we opened here. This cost 2,700,000 to open.

Wow. What was the most expensive parts? Walk us through it.

500,000 on HVAC alone. Wow.

I mean, now you can see it all.

300,000 on electrical.

Just the storefront cost 250,000 And and what is now rent here? Imagine that's not cheap. You're in a prime location.

It is $35,000 a month.

Okay. And are you clearing enough to at least... No. Okay. You're not. You're underwater there.

Big time.

So you guys know on YouTube for context, I mean, we are right where there's massive redevelopment a couple years ago down the line where Chipotle moved in So a food

target a hopdoddy, a snooze. All... I'm the only independent business in the shop.

I was gonna say that. I mean, is like commercial, commercial, commercial.

Cell phone stores and then this little guy. I spent a year and a half looking for an organic space in Austin in 2021. But back then, with everything being real estate being cheap, money being cheap, everything got bought up by developers. I lost out on three different leases, and I took what I could get.

Yeah.

And, the only reason I thought that was gonna be okay is because 1,000,000 square feet of office buildings were being built around me at the time. Well, as we stand here right now, every one of these buildings, completely empty. Yeah. They're all... I mean Completely empty.

These people are losing more money than you're losing. I'll tell you that. You you can park at 747 in the street

right now in front of my restaurant. There is no foot traffic. I had to make the food great. We've been on Diner, Driving, and Dives. We've won five food awards this year. Bloody Mary Fest, Mac and Cheese Fest, Chili Fest, Best Salsa, Best Hot Sauce. Our food's extraordinary. Mhmm. And now we've become destination. Centerpiece of our menu, by the way. This is a old hickory rotisserie smoker. We we smoke everything. Our vegetables, our starches, our tomatoes,

our chicken, obviously, our brisket. Mhmm. And the idea is this is a prep heavy kitchen. When you walk into a barbecue restaurant, you only see two people working there. One person slicing, one person scooping. Cause the food's already cooked.

This is all cheap. How much was this? $30,000. Yeah. Is this the most expensive piece of equipment you have Yeah.

Back Okay. Yeah. So the build out was 1.8 with soft cost. It was 2.5. We had to put 300,000 down just as a deposit as a letter of credit because we're not Chili's and they don't know who I am. So I had to sell two of my homes. I used to have real estate. I made other smart decisions before I made a dumb one of being in the restaurant business. I liquidated all my assets. The bank has a personal guarantee from me on all this. So if we close, I lose everything. I'm waiting tables.

What was going through your head when the bank said we need a full personal guarantee here?

Well, we didn't know. Right? Because we were getting an SBA loan, and we're told it would only take a couple months to go through. It ended up taking thirteen months. So by the time we opened, we still didn't have the loan. I took out two $500,000 bridge loans from friends of friends at a decent interest rate, a million dollars in bridge loans to get it open, and then they're like, you don't have enough cash, you gotta you gotta sell a property. So we had to get it open because at this point, the only way out was through. I haven't worked out in two years.

I haven't dated in two years because I don't have a choice. I I have to get through this. It's really hard for a founder to execute their vision if they're worried about paying their personal bills. Are you worried about that kind of thing or have you compartmentalized? How are you thinking?

I get up every morning, I get email from my banker and it says you have until noon to find this amount of money or we're going to bounce this check. I'm currently 25,000 in overdraft in one of my accounts. The bank that lent me this money for this project, my SBA loan, they're kinda in it with me. I have to make hard decisions, but everybody gets paid. Everyone's always get paid. My credit cards are maxed out.

I don't have any money in my account. I haven't paid myself, in two years. You know, I eat food out of this restaurant, and my one remaining home I live in has a side unit, and the tenant pays most of my mortgage, and I barely get by.

2,300,000 on the San Marcos location in 2021, I think, or 2022. You should have had a lot of profits there. Were you able to put some money away for a rainy day?

We used it to pay off our investors. They were printing money with with sales, and so immediately paid off all the debt. And quite frankly, they gave us quite a bit of hubris. A lot of my colleagues went through the same thing. We're like, man, we're good at this. And so we we doubled down, and instead of getting investors for this, so we did get a 500,000 from investors. I decided to take out a bank loan,

which is way riskier. Like investors, they can't pay them. They just gotta wait. The bank does not wait. When we were starting to open this, sales in San Marcos were declining 20, 30, 40%, and it was happening everywhere. And we realized that the business model we had built was not built on a realistic economy. That economy evaporated, and San Marcos has been in deep recession. The combined household income in San Marcos is 47,000 a year, and people can't go out on a Tuesday night and pay for a babysitter.

Yeah.

Gas, groceries going out, pick two. We live in a bubble here that's somewhat insulated, though I'd say half my regulars have lost their tech jobs in the past, you know, you know, eight months. Sales are up 40% here. They're up 50% since we opened. They're up 25% this year. We're going in the right direction, but you cannot pay bills with momentum. And in the interim, I borrowed money. You know what a poison pill is? Someone says, hey. I'm gonna give you some money, but the money that you're getting is so expensive that it could also put you out of business. That's what I had to do.

How expensive is your money?

I have a credit line that I've accessed at 70% interest. Jesus. 70% interest. I've maxed out all my personal credit cards.

What's your all in debt service monthly today?

The SBA loan payment is $17 a month.

How much principal do you owe?

1,800,000.

On me, just on the SBA loan.

I owe investors 500,000. I... They're just glad they haven't lost the money yet. But when they get paid back, they're gonna have gray hairs.

Yeah. Yeah. Any other debt on the balance sheet besides the 1,700,000 with the SBA today? $200,000 on an unsecured loan.

That's a high weekly payments. Post also has about $100 on me, and then my personal credit card's probably $200.

Okay. So all in you're at like $2.32400000 total debt on the books.

Yeah. This is a tough situation but the bigger issue is the interest. The interest on these loans and credit cards alone are probably $67 a month. I could have closed at any point logically in the past two years and everyone's like, why don't you? And I tell them that whether I close two years ago or close now, bankruptcy is still the same.

So what would it mean to you if you could find a way to restructure your debt stack?

If I could restructure my debt, I could I could be working on more things to help this business grow and stabilize as opposed to barely surviving. Focus on

the positive stuff here for a second. What was... What what do you think you do revenue wise this month here at this location?

We're gonna do about 275,000. Okay.

Okay. That's actually more than I thought. I thought I thought you were saying something much less.

This is our busiest time of And and we're up 25% from a year ago.

Okay. We were

up 25% last year from that time. And we need to do about we need to about 3,000,000 a year to break even. 20% of my revenue comes from catering partners and Uber Eats and DoorDash, and they all take 30%.

I'm just gonna look. I'm curious what you look like on Uber Eats while we do this. Me the growth story. Okay. So you opened this in 2022, just this location first year revenue. How much?

We we only did, 1.6, I believe, 1.7 our first year.

That was 2022. And what about 2023? Did 2.1. Okay. That's good growth.

Yeah. What drove that growth? It took us about a year, and then we started making the food good, if you will. And it took about another year for people to realize the food was good. Mhmm. 2024 was 2,220,000. 2,000,000. 2025 last year, we did 2,400,000. Okay. This year, we're on track to do 2.8 or 2.9.

Will you lose or make money if you do 2,800,000 this year?

If it wasn't for the debt service, I would break even.

But it feels like you should be able to be profitable if you're doing 2,800,000 for your... And more than debt service. Let's say we solve that. Why is... What's... What am I missing in the cost structure?

So my marketing budget was $22 a month in my pro form a. I'm now spending $12,000 a month in marketing. On what? The main thing that moved the needle is Google marketing. We are... We we dominate SEO. Like, our lunch business, we're packed.

I'm on your profile right now on on on Uber Eats. Yeah. You have to pay for exposure or sponsorship here? Yeah. What does that cost per month?

Oh, do they want you to do buy one, get one free on top of the fact that I'm giving 30% commission to them? I mean, it's basically a race to the bottom on these apps.

So this month in April, we're shooting. You're gonna do $270,000 this month. Yes. Let me correct the name of math here. Okay? We're gonna take $35,000 off for rent. Yes. Right? Start subtracting off the other stuff. Okay. Help me out here together. Yeah. We'll do it all together. So debt service

$17. Wages. It's 25% of my revenue.

So that's another $70.

Keep the other 25% for cost of food. Now we're

gonna subtract 75 k for food. Now we're down to about $70 left a month. Yes. Where does that money go?

Okay. I pay, 7% of my liquor sales. I pay an additional tax on it.

That's another $109,000. Okay.

9,000. My electric bill, is $6. My my payroll taxes add another $10 there. The credit cards, $10 a month. Health insurance, $5 a month. Also, I'm paying back the Toast loan. It's 10% of my revenue.

Oh, so 10%, and they and they draw that daily or weekly? Daily. It's it's daily take rate. So on $300 of top line sales

$30 and It's

$30. Okay. So now we're down at zero.

But now I'm upside down. I'm I'm underwater on my my my SBA loan I paid this month out of a different account that I just drained.

It doesn't sound like there's a story here about expansion. It's really like you wanna get profit where you're at right now. You can't do anything else unless you fix the current issue.

Right. Right. You you crawl before you walk. Industry was always built to scale. If this stabilizes, the very next thing I would do, is open a third location. And once I have three locations, at that point, you have proof of concept in different markets. Now the multiplier on what a business is worth is way more than two and a half x, which is how you usually value a restaurant. Industry number three, I know exactly where it

would go, but, it would be irresponsible for me to think about that right now. I'm thinking about how to make this payroll and and how to, you know, not have my doors locked. I'm $300 behind on rent. You know? So you're

ten months late about on rent.

My rent's $35. I usually throw him a 20, when I can. The reason that, we're still open is the landlord's been candid about how this area, 5th Street, and the way it developed did not go according to plan.

Yeah. If he kicks you out, he's not... Who's he gonna put here? I mean,

all these things empty. Restaurant spaces in my shopping center that have not been able to be released.

So why don't you try to renegotiate with them? That's what we're doing. Okay. So, I mean, I I feel like you have more leverage maybe than what you think there.

I do. So what are

you asking them for? Are you saying please restructure this lease to $20 month? Yeah. Okay.

If I had more money now, I could I could do things to help this business grow now. Otherwise, I'm probably going to be on life support.

I'm thinking of ideas in my head as I hear about what the problems are. Let me ask you a couple of questions. Uber Eats, do you control what items get listed there?

I could. Yeah. I mean, I list my whole menu.

I'll tell you, sir, what I'm thinking. I'm thinking about is there some way to structure a debt deal here where I can get you capital take out the other expensive debt and extend your payment terms. But there's so much other stuff that we gotta get right with the business, like renegotiating the rent, things like that. I'm trying to think of other value add... I could add to sweeten the deal for me to get comfortable doing this.

Yeah.

I made an investment in a company called Whims, Whims Chocolate. Mhmm. Locally owned here by a group that husband, wife, team, Jesse and Leanne. I'm trying to figure out ways to get them into more Uber Eats checkout flows Oh, easy. At restaurants like yours. Yeah. If I made you an offer that was contingent on you including them in an upsell in your Uber Eats, would you be open to that?

I could include this also in my San Marcos restaurant. I'll sell chocolate out of my house for you, man.

Okay. How much debt do you currently have on Toast and personal credit cards?

$200,000 on personal credit cards.

Okay.

100,000 with Toast. Do you want me

to make you an offer just for the... See, what I'm trying to figure out is what do I collateralize against your... I don't wanna I don't wanna get in the... Your personal stuff Uh-huh. If I can help it. But you... I mean, it's very much the same thing at this point.

As I say, it's one big pile of shit.

I can't collateralize anything here because you've already given the collateral to other debt providers. Let me see. So... And and you don't have any personal assets. So I... Basically, what I'm doing here, my only offer that I can think of making here is basically

a cash flow loan. Yes. If I could just if everybody could just chill for like a year and a half and I could get this business right which I'm doing then I could pay back those loans much easier, but because I'm having to pay them back now with sometimes 1020% interest. That's that's what's making it hard for me to get off the treadmill.

I'm gonna try and make you an offer here, but I need to be very... I'm gonna try and articulate it because it's a lot. I don't wanna take a ton of risk here because it's a very risky situation. It is. I'm willing to do a loan. Mhmm. Which is equal to one x your monthly revenue.

Okay.

So about $300,000. Uh-huh. Here's what I want in exchange for that today. The use of funds will be to take out the Toast loan. Uh-huh. Take out your personal credit card exposure. Uh-huh. The way I get paid back is what will be a fixed fee. So we'll do... I need to think about what the fee is gonna be. Let me tell you the contingencies though before we go over the fee. I wanna be able to put

one of my other investments in your checkout flow on Uber Eats. That's whims. Sounds like you're open to that. A chocolate brand. Yep. Are you open to... If I if I make you pay back a lower rate, lower interest rate on the 300 k, are you open to me asking for a warrant or equity in the business?

It would just depend on how much equity.

What what are you valuing the business at today?

Usually about three to four x your cash flow, and we don't have any cash flow. Or you could or you could you could say one and a half x your yearly revenue.

So if you're doing... If you did 2.8 last year, one and a half x would be like $3,000,000, something like that.

Yeah.

There's a lot of stuff going on here. If someone came to you today and offered you just a million all cash today to walk away and sell the business, would you sell?

No. Because I couldn't pay the debt off. Yeah.

Yeah. What interest rate do I need to come in under to be materially a better deal than your current debt?

I mean, under 10?

Mhmm. Well, know, that's that's really cheap money. I mean, that's hard for anybody to get. Yeah. My brain is exploding, to think about a really creative way to make this work, but there's so much going on here. I don't know how to create a clean structure here where I can still make money and also save you money at the same time.

The interest rate on credit cards is 25, 29%. Right? And I have, you know, $200,000 of credit card debt. If I could wipe that away tomorrow and pay you back at a lower interest rate, you'd be paid you'd be paid back within a year and a half.

Okay. I'll offer you $300,000. You pay me back 1.4 x that $300,000 with... In in twenty four months. So you have twenty four months to pay it back, and I also want 5% equity in the business.

Man, 5% equity for 300,000 and I just... I don't...

The business is worth zero today.

I understand. It's an insolvent. So 300,000, I'd be paying 1.4 back. So that's 40% of 300,000. So that's $420,000 payback.

Around there. Over two years.

On three... That's a $60,000. I can't I can't I can't pay that back.

So do $420 divided by twenty four months. That's your monthly payment. Your monthly payment will be 17,500. Is that more or less than how you're currently servicing that same 300 k of debt with Toast and personal credit cards?

I I think it's six one way, half dozen the other. That's gonna be tough. I would need a lower interest rate. I would need a lower fee. You know? I mean... And I get it. What would you counter with? Well, I I would counter with a 1.2 payback, and I could do a faster loan payback.

What is... So 1.2 o payback over twelve months?

360,000 k. Divided by $1,230,000 a month. It's tough to make it work either way.

$300,000 at a 10% interest rate is you paying back $330, right? Over twelve months. That's $27 a month, but that's a cheap... Mean, it's a 10% interest rate with no collateral. That's super cheap. I mean, no one's offering that with no collateral.

I mean, are, you know, going into the summer months, even though we're trending up, I I would end up borrowing from somewhere to pay this during some of the slower months, you know, and so then it becomes, you know, the the debt cycle.

Yeah. You don't wanna stack debt. That's a dangerous...

Mhmm. I'm I'm eight weeks away max from paying off the total loan here, and then all of sudden, my cash flow goes up 11%.

Yeah. The bigger issue though is you've got $200,000 of credit card is compounding monthly at a 25% rate. Yeah. That's the boulder. Yeah.

Yeah. It is. Right?

I mean, I don't know what that monthly payment is. The problem is you're not making that monthly payment right now because you're just adding it to the principal balance, and then they're charging 25%. Yeah. On on that every month. It's just growing. Yeah. Like, that... That's that's what you have to figure out a way to knock out.

I would counter back with 3% equity and, you know, a little bit lower rate. Mhmm. Now I could do that.

I just don't think I can do that. It's not enough reward for the risk that I'd be taking.

Yeah. Yeah. The... I mean, the intangible reward, course, is getting your products into my businesses and selling them that way. That is true. We also sell them here as well, like in the cold case.

How many Uber Eats orders do you deliver a week? We do about

$5,000 a week in third party delivery sales.

The math I'm thinking about is if there's a 100 feet orders a week you're processing, right, that's 300 every two weeks times two is 600 orders every month. If if my chocolate is selling through at a 10% rate on the checkout, that's 60 new sales of chocolate at $5 a chocolate. Mhmm. It's not... It's just not meaningful enough. Look. I think where I'm at right now, one, I'm starving. So I'm about to put in a massive order at the restaurant. Can't wait to spend a lot of money. Harlan, I love the story you've built here, but I just don't think there's a way to make the map work today. So for that reason, I don't think I can make a deal.

Yeah. I understand.

Alright. Yeah. Well, listen. I appreciate you sharing your story. It was really good getting to know you. And look. We'll come back in six months. We'll come back in three months once the Toast loan is paid off and see where things are at. Sure. Okay.

Absolutely. I mean, I know I know I know I'm gonna find a way.

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