Parker and Scott: $150K to Open Two New Sustainable General Stores

(00:00) Nathan: People say the general store is dead, but Parker and Scott is betting it’s not, and they’re betting big on sustainability. How long did it take you to make your first $10,000 in total sales? Ian/Jess: 30 days. Nathan: You did it in 30 days. Can you share first-year sales? Ian/Jess: It was something just around like 95. Nathan: My question is, is the business sustainable? Does this thing make money? Ian/Jess: Last month was 40. Nathan: You guys are doing 40,000 bucks a month in revenue. I want to make you guys an offer. $150,000 at an effective interest rate of 12%. (00:24) Nathan: If we haven’t met, I’m Nathan Latka at Founderpath. Over the past 3 years, I’ve invested $200 million in 500 software companies just sitting behind my computer. Today, that all changes. I’m hitting the streets looking for small business owners that have a big idea. If their idea plus my capital could equal big returns, we’ll do a deal right on the spot. Let’s see if we can make something happen. (01:02) Nathan: So, super cool setup, but as you guys know, strip malls are just getting crushed right now. You can see some of the signage back here. They’re just ripped out. But Parker and Scott is still doing well. Again, betting big on sustainability. The question is, is sustainable retail — saving plastics — an actual sustainable business model? Let’s go in and find out. (01:21) Nathan: All right, so here we are. Hey guys, I’m Nathan. How are you? Ian: How’s it going? Ian. Nathan: Ian, nice to meet you. Jess: Jess. Nathan: Really good to meet you guys. When did you launch this business? Ian: It’ll be three years at the end of this month. Jess: In 2017, we took a trip together to the UK and stepped into this beautiful store called Utility. It was this chaotic but organized mess of a ton of utilitarian goods. We were like, “Okay, this is it, but how do we build on it and make it our own?” We knew we wanted to be a space where people could come regularly and pick up toilet paper or a special gift. Nathan: Show me where they would do that. Where would they grab toilet paper? Jess: That was sort of our goal — to build a space that wasn’t just a gift shop. Certainly there are things in here that can be considered gifts, but also your daily needs — toilet paper, tissues, paper towels. (02:11) Nathan: Like on this thing of toilet paper here. What do you sell this for? Jess: $3, which is more than you’re going to pay at a big-box retailer. But you know that from beginning to end, this is made from recycled goods. There’s no plastic in the process. I think that’s an important piece of the store: it reflects not just products that we like, but products we use, right? Ian: These are the things we use in our home. (02:27) Nathan: Can I ask when you opened the store? Obviously, you can’t open with an empty store. There’s a lot of shelf space here. What did you spend on day one to fill it up? Ian: Roughly 40K. Nathan: Was 40K sort of nothing for you guys? Was this all your life savings? Jess: It was a lot. It was our savings. Ian: We’ve got three kids — one college-age now, one college-age in three years. We got things to think about. So this was an investment, but we believed in it. We knew that if we didn’t do it now, when were we going to do it? So we were taking the plunge. Nathan: So Parker, Scott — those are your boys? Ian: Yes. Nathan: Is the third one going to feel left out? Jess: Third one has a star. She’ll eventually get something maybe down the road. The name was decided before she was. That was the first thing we decided. (03:20) Nathan: This is obviously, if this door doesn’t open on launch day or the day after, you’re going “I just spent $40,000 on inventory.” What’s the lease? Are you comfortable sharing what you pay per month? Ian: We pay just about $3,700 a month. Nathan: And how many months or years were you committing to? Ian: Five. Nathan: Who signed that paperwork? Jess: Both of us. Ian: We went in with our fingers and toes crossed and knew we were hoping to build something. Jess: A lot of faith. And then people just came on day one. We started building out our Instagram presence and things maybe 6 months before. Nathan: How do you post in a way that gets attention to actually drive people right through this exact door to purchase? Jess: We do a lot. We do it all ourselves. We obviously create content constantly — about the store, about our own journeys, about the brands and the folks behind the brand. (03:52) Ben (vendor): I’m Ben. I’m a jeweler and metalsmith here in Austin. My work is also here. It’s called Year 901. Jess: This is her jewelry. Year 901. Nathan: Those are her booby earrings. Jess: I love that she calls them her booby earrings. Nathan: So can you walk me through the economics on these? This would be a $69 sale. What does Ben make? What do you keep? Jess: About half. So it’s 50/50 pretty much. With the exception of snacks. Snacks are a lower margin. Nathan: So it’s fair to say anything I’m seeing here that is not edible, you’re making somewhere around a 50% margin. Jess: Yep. Nathan: What’s your most popular snack? Jess: This is a really fun brand, Rotten. Fun branding, fun name. Nathan: And what would this sell for? Jess: This one is five bucks. Nathan: And what does the margin look like on that for you versus the brand? Jess: Snacks are typically more around 30 to 35%. Nathan: So they retail for $5 top line, you keep about 35% (about $1.50), and the other $3.50 goes to Rotten or the brand. (04:59) Nathan: How long did it take you to make your first $10,000 in total sales? Jess: 30 days. Nathan: You did it in 30 days. What surprised you about the 10,000? Jess: We sold a lot of candles, and we were like, man, where are the candles? Nathan: Did you almost pivot to a candle store? Jess: We were like, should we be a candle store? Candles are still our number-three category in the shop. We partner with a local Austin candle maker, Gemma — actually one of our first candle brands in the shop. We’ve worked with him to create our scents each year. Nathan: Can you share first-year sales? Jess: At the top of my head, it was something just around like 95, and I felt really good about that. Ian: Yes, we were. Nathan: So was that faster than or slower than your expectations? Jess: I don’t know that we had a ton of expectations for the first 6 months. We were just feeling it out. (05:39) Nathan: When did the refill bar get added? Jess: Right away from the beginning. We noticed this uptick in refill bars opening across the U.S. and we loved the idea. So we have laundry soap, lotion, hand and body wash, shampoo, conditioner, surface cleaner. Nathan: I’m trying to see how you bill for this. So you’re charging $1.30 per ounce of lotion. People bring in random bottles, right? Jess: We weigh it first. Nathan: If we go back to last month total sales at the entire shop, how much did this refill bar make percentage-wise? Jess: 15% maybe. Nathan: Oh, that’s pretty big. So 15% of total last month sales came from this sort of square footage in the bar. Are you comfortable sharing the actual number? What does 15% represent? Jess: 15% of last month was 40 — 40,000. Nathan: You guys are doing 40,000 bucks a month in revenue. Guys, I’m actually pretty surprised. I would not have thought that a general store, which many people consider dead, in a strip mall, where you’re selling a combination of aroma therapy, snacks, and refill bars, is doing that kind of revenue. Are you guys paying yourselves? Jess: We’re not yet. Ian: Jess and I both work full-time. This is our side hustle. (06:49) Nathan: What would it take for you guys to quit your full-time jobs and go all in on this? Jess: Five stores. Nathan: You need five stores. Why is five stores the number? In your head, I imagine you’ve come up with a number and you reverse-engineer. Ian: Her number is probably lower than that. Nathan: What’s your number? Ian: Three stores. I think we would need to hit a million of total combined revenue across all stores. Nathan: So $83,333 per month across the combined stores. Why do you think you would need five stores when this one is doing 40? Jess: I just want to feel comfortable. This guy likes a buffer. (07:35) Nathan: If you guys had extra capital, how would you use it? Do you have a second location already staked out? Ian: We actually have an outpost currently. It’s a store within a store. It lets us dip our toe into it without taking on all of the cost. We’ve got a 10-foot-tall structure built inside and then some wall shelves as well and a table or two. Nathan: What is the dream 10 years from now? What does Parker and Scott look like? Ian: I think it’s multiple locations. Nathan: If you could wave a magic wand, what’s the right amount of capital for the next year or two to expand? Jess: I think over the next year, we would love to open another two stores. It was easy to do the first one on that 40K. That wasn’t easy — it was all your own money. 40K of your own money. Scrappy. It was a scrappier approach. I think we have to take a bit more of a refined approach on the next two. So the cost would be a bit higher. Probably around 75 a store. Nathan: 75 per store. So 150K total. (08:23) Nathan: Is there some way that I can put in capital where my capital plus their ideas can lead to 3x growth quickly? Is the equity in something like this valuable? Because when I think about getting equity in something, you would have to have a vision where you’re going to grow it really big and then exit it. That’s the only time I get paid and you guys would get paid. Would you ever actually sell this to somebody? Ian: I don’t know that that’s the vision for us. Our goal, our life goal, is largely to be a part of this for a long time. Nathan: If I offered you a deal that was a debt deal, how much time would the second and third locations need to generate enough free cash flow to start paying down the debt? Ian: We don’t have the benefit of just the two of us working in the store and having no payroll. They’re going to be payroll from day one. It would take a few years for sure. Nathan: What’s a few years? 5 years, 10 years? Ian: Three to five. I’m going to say five. (09:24) Nathan: Is this model repeatable? Can you launch a new store, grow from 10 grand a month to 40 grand a month in 3 years? Ian: I think we can. Nathan: When I make offers like this, I’m invested in a lot of companies. I like to go deep and get involved, but I really can’t be the charging force. I’m a bit concerned that you guys aren’t full-time. Ian: I think we know how to do it. And I think we can make it feel like we are there even. Nathan: That’s a big statement because you’re effectively saying you can replace yourself. Ian: It’s about hiring, right? We hire slow, we hire right. (09:55) Nathan: So with your guys’ permission, I’m just going to step outside, talk to my audience, think for maybe 2, 3, 4 minutes. Let’s see what happens here. What do you think? Cool business, huh? I’m willing to write a check right now on the spot, but my concern is they’re not full-time. I do not like putting money behind founders and entrepreneurs that are not full-time. But I also understand they’ve got three kids. They asked for $150,000 to open up two new locations. This current location does $40,000 a month. What should I offer as a return? Should I do a debt deal here? $150,000 in, they pay me back some amount of interest. Do I do $150,000 and ask for equity? What do you guys think I should do? (10:37) Nathan: What I want to do is, I want to make you guys an offer. So there’s $150,000 paid back over 5 years at an effective interest rate of 12%. So what that means is — and that’s an annual percentage rate. So $150,000 bucks. Let’s make the math easy. That’s basically $17,500 per year in interest, multiplied by 5 years, is about $92,500ish in total interest over the 5-year period. (11:07) Nathan: The question to you guys is, do you think that second and third location could generate that free cash flow to make those payments? Because my offer, if it is debt, remember, I’m not getting any equity upside. Ian: I think it’s feasible for sure. Just given the growth rate that we experienced here. Nathan: And if my money is going in the business, I want you guys fighting for it just as hard as I fought to make it. If we did do a deal, one of you or both of you committing to go full-time can figure it out. Jess: This is our family. Our boys’ names are on the door. This is home for us. We call this our fourth baby. Nathan: Are you writing a check and disappearing and we’re not going to see you for 5 years? Are you going to show up frequently? Ian: Where could you use the most help? Jess: There’s an audience that just keeps needing to be built. We’re competing against Target. We’re competing against Walgreens. So reach is really, I think, the biggest thing. Nathan: Audience, but we’re doing this on YouTube and X and social, right? There are local businesses that you can get behind that can grow as fast or faster than software companies. You guys have great branding, so I’m excited to help contribute to that. (12:07) Nathan: Do you guys want to look at the $150,000 offer at a 12% interest rate paid back over 5 years for the purpose of opening a second and third location, as long as you’re willing to commit to spending more time on the business? What do you want to do? Ian: Let’s go for it. Nathan: You like the idea? Jess: Yeah. Nathan: All right, Ian, Jess, I can’t wait to work with you guys. It’s going to be a lot of fun. (12:40) Nathan: I always get asked, did you really wire the money? Here’s what happens after we’re done shooting. I work with the founders to set up an account on my platform called Founderpath.com. Ian and Jess click the capital raiser card. They connect their data via APIs — in this case, it was QuickBooks. I verify their data, and then my AI agent, which I’ve trained, writes a full memo on the business, recommending how much capital we should invest and on what terms. If Ian and Jess like the deal, you can see they type yes. They connect their bank account and tell us where to wire the money. We wire the money and they go back to running their business. It’s that simple.