(00:00) Nathan: I had no idea that cereal could be a seven figure business. You're saying you're doing four or five thousand individuals at thirty bucks a pop each. I mean, that's like a hundred fifty thousand bucks a month in revenue. Is my math right?
Michael: Yes, your math is correct.
(00:18) Nathan: Michael has launched Spelled Milk here in Dallas, Texas. You come in, buy cereal, milkshakes, ice cream, you name it. His revenue shocked me. Last year we did close to, I'd say, about $800,000.
Nathan: What?
Michael: Yes.
(00:40) Nathan: Now he's got a massive expansion project, but he needs some cash. I am not exaggerating when I say I get emails daily asked to be opened up in other states. Where's it going to come from? Well, that's where I come in. Do you want to try and open one new location this year?
Michael: Love to do that.
Nathan: And what would that cost you think? If I see an opportunity to write a check to speed up his growth, we'll make a deal on the spot.
(00:58) Nathan: Hey, how are you?
Michael: Hey, good. Thank you.
Nathan: I'm Nathan. Nice to meet you.
Michael: Michael.
Nathan: Michael, very good to meet you. This is Spelled Milk, your creation, huh?
Michael: Yes, it is. We are all about cereal, basic desserts, ice cream, but our main thing is cereal from all around the world. I've always loved the art on cereal, but I've had this idea for at least 20 years.
(01:19) Nathan: When did you officially open this physical location?
Michael: We've been open a little over 2 years.
Nathan: Walk me through what you actually sell. I feel like I'm in a cereal museum when I walk in.
Michael: Good. That's a good thing. I love that. So we have collector boxes all around. This is our main wall of 100 cereals. And we constantly rotate this out week by week.
(01:37) Nathan: Can you take me to the rarest cereal box?
Michael: Ooh, that's a really tricky one. This box itself right here was in the movie Pulp Fiction.
Nathan: So this is a one-of-one. It was in the movie. There's only one box.
Michael: One of one box.
Nathan: When did you buy this? How much did you pay for it?
Michael: I paid close to a thousand dollars for it.
Nathan: For a cereal box?
Michael: Yes, for a cereal box. Unopened.
(01:56) Michael: It really meant a lot to me.
Nathan: Do you try and sell this for ten thousand dollars or is it just purely out of joy you collect them?
Michael: I wouldn't sell them for a million dollars. It means that much to me.
Nathan: I offer you a million dollar all cash today for this cereal box and what do you say?
Michael: Say no. Yeah, I really would.
(02:11) Nathan: This is going to be a tough episode. Tough negotiator right here. Michael, when most folks come in, what are they buying?
Michael: All desserts, but a lot of cereal and a lot of ice cream. The combination together is the most popular.
(02:28) Nathan: So 2025 was your first full year last year?
Michael: Yes.
Nathan: How much total revenue did you do?
Michael: Last year we did close to, I'd say, about $800,000.
Nathan: What?
Michael: Yes.
Nathan: In this location and the website?
(02:53) Nathan: $800,000. Break it down for me. How much is catering?
Michael: I'd probably say about 20% of it.
Nathan: So about $150,000, that would be 20% of your $800,000 came from catering, and the other $650,000 came from people coming right in these doors and buying something here in person.
Michael: Yes.
Nathan: There is no e-commerce play. You're not selling anything on your website?
Michael: Well, I do sell a little bit on my website. I haven't focused that much at all. I would say probably 10%.
(03:10) Nathan: Can I actually go through like a customer and order something?
Michael: Of course you can. So Michael, what kinds of flavors should I look at? If I want to order something today, what do you recommend?
Michael: One of our most popular right now is our Cinnamon Toast Crunch Mexican Hot Chocolate. This is a must try. One of the best cereals that have come out the last 2 years.
(03:32) Nathan: How much will you sell just of that one this month do you think?
Michael: Couple thousand dollars worth.
Nathan: Wow, okay.
Michael: Yeah, definitely.
Nathan: I'm going to do the Cinnamon Toast Crunch Mexican Hot Chocolate.
Michael: You're going to love it.
(03:48) Nathan: Do I need to pick an ice cream with the cereal?
Michael: That's up to you. You can do your cereal by itself, you can add it with the ice cream, or you can do a scoop of ice cream with the cereal mixed in, or you can do a milkshake.
Nathan: So what percent of the $600,000 of sales that you did last year, what percent was people coming here just ordering cereal versus cereal with ice cream or something else?
Michael: I would go with about 50/50.
(04:10) Nathan: What do you recommend? I'm getting the Cinnamon Toast Crunch Hot Chocolate Mexican. What ice cream should I try?
Michael: We do a killer milkshake right now. It is called a Mexican Cinnamon Toast Crunch Hot Cocoa milkshake.
Nathan: That is exactly what I want.
Michael: That's exactly what we're going to make for you.
(04:25) Nathan: What do you sell that for?
Michael: We have a 16 oz and that goes for $9.98. And then we do a 24 oz and that goes for $12.25.
Nathan: Okay, I'll do the 16 oz for 10 bucks.
(04:43) Michael: This one isn't even on the menu, but has become one of our most popular milkshakes. It's made with our signature handmade homemade chocolate ice cream. We added some of the Mexican Cinnamon Toast Crunch Mexican Hot Cocoa, some of our secret marshmallow fluff. We are going to blend this to perfection and put our handmade whipped cream on top.
(05:09) Nathan: All right, so it's $9.98. How much did it cost you to make this thing?
Michael: Our total cost on this milkshake would probably be about $2.25.
Nathan: Okay, so that's about a 65% margin.
Michael: One of the most profitable things is our milkshakes.
Nathan: What's your second most profitable?
Michael: It would be cereal. It smells a bit like cinnamon, but I'm going to dig in here, make sure it's mixed. It's delicious.
(05:26) Nathan: Michael, obviously when anyone goes into a traditional convenience store, you see a bunch of stuff to check out as they're waiting to order. Is this the version of that for Spelled Milk?
Michael: Our cereal merchandise is constantly rotating out. We've learned that a lot of people love the old retro toys.
(05:42) Nathan: Are any of these like super rare items where the price point would surprise me, or are these all four, five, six bucks kind of thing?
Michael: There are some that might actually surprise you a little bit.
Nathan: YouTube, here's a challenge. We've got three items. One of them is going to shock us. This is like Prices Right, the Deal Edition.
(05:59) Michael: This is going to be a Cocoa Crispies lip balm. This is Kellogg's Chapstick, which is a really popular item that we sell a lot of. And this is going to be a Franken Berry action figure.
Nathan: All right, YouTube. So here you have it, the three items. The price on one of these is going to shock you. Leave a comment below and let me know your guess. Michael, reveal. Which one's the least expensive?
Michael: The least expensive would be this right here. So you're looking at $9.99. This one is going to be the one that's going to shock you.
(06:20) Nathan: I would have a hundred percent guessed this one cuz you loved it so much.
Michael: I had a feeling you would have. This would actually go anywhere from $40 to $50.
Nathan: What? For lip gloss?
Michael: Yes, but the reason why — it is a very rare lip gloss. This isn't something that you could go online right now and order just anywhere you wanted. So there were very few made and it is also vintage.
(07:00) Nathan: Best day ever?
Michael: Our best day ever we did close to $10,000.
Nathan: What made that the best day ever?
Michael: It was our second year anniversary.
Nathan: The only way that you'd sell a lot that day is if you had something online where you have a community where you got everyone to come in to celebrate the anniversary. What is your marketing strategy there?
Michael: We do a little social media, of course. Instagram. We do some TikToks. But really it's word of mouth.
(07:20) Michael: We have a big huge Pokémon pop-up this Sunday.
Nathan: Is this your event? You organized it?
Michael: Yes.
Nathan: That sounds like a lot of logistics.
Michael: It's a lot of work.
Nathan: Now I'm curious — you're not just a cereal guy. You have logistics experience. Where do you come from?
Michael: I've always worked in the restaurant business. Always. I thrive off of getting to meet new people, talking to people, and just — I'm a people person.
(07:54) Michael: Here, this is where we always keep our most current US cereals. These three shelves change at least once or twice a week.
Nathan: To get a human addicted to something, to capture their attention, you want to deliver a fixed experience but with variable rewards. In other words, they know they're going into a cereal place, but then they also want to be surprised. That's the variability. It feels like that's what this is. They come back cuz they know they're going to see something new every week.
Michael: You're exactly right. We constantly are changing things up and that's one of the things the guests love.
(08:10) Nathan: Michael, I see shoes hanging from the ceiling over here. What's going on?
Michael: These were given to us from Post Malone.
Nathan: What? Like the artist?
Michael: Yes. We have quite a few people you'd be shocked at — our cereal heads that have come in and have really backed us up. I was just working one night, setting a milkshake down, and there was a gentleman that came in and handed me a box and just said, "I love what you're doing. Keep doing what you're doing."
(08:46) Nathan: Did you know that it was Post Malone?
Michael: I did not. I have a Travis Scott box up here autographed by him.
Nathan: The orange one with the crazy hair?
Michael: Yes. He was like, "You should have me sign that box of cereal up there. Trust me. I know I'm famous. You should let me. Don't ask questions. Just let me sign." But in my head I'm just thinking, "Okay, these people are really, really drunk tonight that are coming in like wanting to sign boxes of cereal." But when he got up to leave the store, half the crowd went running out after him. So I asked one of the customers who it was and that's when I found out.
(09:38) Michael: We have Tyler the Creator who supports us very much as well.
Nathan: Very museum-of-ice-cream vibe, but even more curated. This business doesn't work without you.
Michael: That means a lot. Thank you.
Nathan: You would agree with that, right? If you're gone, like, it's the curation. That's what makes it special.
Michael: I agree with you. I don't want to feel like fast food. I want everybody to feel individually recognized.
(10:01) Nathan: What's the biggest investment you've made in a single cereal box?
Michael: Close to $10,000.
Nathan: Why? Which one?
Michael: It is an original unopened box of Frosted Flakes off the first line of Frosted Flakes ever made.
Nathan: Which year was that?
Michael: 1963, I do believe.
Nathan: 1963. Do you have that framed at the end of your bed in a high security personal box?
Michael: That one is at home in a plastic case.
(10:24) Nathan: We've spent a lot of time talking with a lot of passion about all these other cereals that you curate. When are we going to see a Michael cereal?
Michael: We actually have four cereals out right now. Four Spelled Milk cereals. All originals. We have a horchata chocolate, a strawberries and cream, a tres leches, and a dulce de leches. And we are working on a fifth right now. That one is top secret. The only secret I'll give you is the packaging is very unique. It comes in an old metal oil can.
Nathan: What?
Michael: It is going to be the first cereal I've ever seen packaged this way.
(11:05) Nathan: Where do you manufacture these cereals?
Michael: All my cereals are made in Europe. I get them shipped over and they are packaged 10 miles north of here.
Nathan: What does it cost you to launch a new line of cereal, your own cereal?
Michael: I started out small because I didn't know what to expect. So I ordered 500 of each. And I ended up spending about $10,000 roughly on the cereals, getting all four made. And I've been really impressed on how fast we sell our cereals out. It's an honor.
(11:26) Nathan: How many individual customers come through on a weekly basis on average?
Michael: I'd probably say anywhere between 3 to 5,000.
Nathan: Okay, wow. And the average checkout value, is it about what I paid, $10, $12 bucks?
Michael: No, I'm actually more in the $30 range usually.
Nathan: You're saying you're doing 4 to 5,000 individuals at $30 a pop each. I mean, that's like $150,000 a month in revenue. Is my math right?
Michael: Yes, your math is correct.
(12:01) Nathan: So do you think you'll break a million, you know, a million and a half, two million in revenue this year?
Michael: That is my hope.
Nathan: What did it cost you to open this location in 2023?
Michael: This location cost me $40,000.
Nathan: How long did it take you to save up the $40,000?
Michael: Close to 10 years.
(12:22) Michael: I am constantly getting emails to open up new ones. The next building I started looking at is actually double the size and the rent is half the price. But that is up in North Texas. My rent here is actually $4,300 a month.
Nathan: Is the right way to scale this to add new locations? My thinking would be — no, the more locations you add, the less rare this one becomes.
Michael: There are so many people wanting to come to this, and I feel like some people don't come because they know they have to drive an hour, hour and a half to come.
(12:42) Nathan: Will it cost you about $50,000 to open those locations as well?
Michael: It probably would be even a little bit cheaper this time. It depends on if I do end up making my own ice cream and built deep freezers inside. That depends on if I do that or just keep the ghost kitchen and make all my ice cream like I do now.
(13:00) Nathan: You use a ghost kitchen today?
Michael: Yes.
Nathan: How many people do you have working for you?
Michael: There's me and one other person.
Nathan: How do you cover the hours that you're open with just two people?
Michael: I make the ice creams in the morning. My business partner, Keana, she works in the mornings, and then we meet up together at night, work together at night.
(13:17) Nathan: I mean, on $800,000 top line revenue, I'm hearing there's only two employees. Rent's $4,300, $5,000 bucks a month. You've got your ingredient cost, but you told me earlier margins on that are like 60%. You must be printing profits.
Michael: Yes. It is one of those where as fast as it comes in, it kind of goes out.
(13:35) Nathan: Any equity investors?
Michael: No. So you and Keana own 100%.
Michael: 100%. I want to expand. I am not exaggerating when I say I get emails daily to open up in other states.
(14:00) Nathan: Do you want to try and open one new location this year?
Michael: I would love to do that.
Nathan: What would that cost you think?
Michael: I think it'd cost about $50,000.
Nathan: Are you already so rich that you can just do that and fund it yourself, or are you open to a partner?
Michael: I am definitely open to a partner. I need somebody that's going to be passionate, hard working, that would believe in what we're doing. That's the thing that means the most to me.
(14:35) Michael: I have deep belief that people are going to seek out curated custom experiences in this age where everyone's trying to date on apps and they're behind a computer on AI. People crave a kind of in-person experience.
Nathan: I will not even pretend to be an expert on cereal. And I obviously won't be in here working every day. Does that disqualify me as somebody you'd want to have as a partner?
Michael: Absolutely not.
(14:55) Nathan: If you had $50,000 sitting in front of you today with a goal of opening a second location, what specifically would you spend that money on tomorrow?
Michael: The main thing would be the walk-in freezer. That would be the main thing. And the equipment.
Nathan: $50,000 the right number, or does it need to be more or less you think?
Michael: I think $50,000 is the right number. I really do.
(15:12) Nathan: And if you had that money today, how long would it take you to open that second store and have it actually start having customers you can serve?
Michael: I would say six months.
Nathan: If we do a deal together, what would make the most sense in terms of thinking about paying me back? We could go an equity route where you don't pay me back at all, but I buy a chunk of the company. Or we could go a debt route where I write a check and you pay me back over time.
Michael: I really like the debt and paying back. Not because I don't want to give up ownership.
(15:46) Nathan: So if Kellogg comes in and says, "Michael, look, it's going to be a $5 million all cash check up front. We want to buy 100% of the business," how do you respond?
Michael: Ooh, that's a tough one. I don't think I would do it. That means that much to me. I really wouldn't do it.
Nathan: I can feel that.
(16:02) Nathan: Okay, so let's go the debt route then. How many — what I like to think about when I'm doing a debt deal, the biggest question is the cost of the money, and then how long you have to pay me back. I like to try and align how long you have to pay me back to the use of the funds. So it's going to take you six months to open the store. How much time do you think it'll take you to get meaningful revenue out in that location?
Michael: I would say six months to a year.
(16:18) Nathan: What do you think you could do with first year revenue at the new location?
Michael: With that area, I think I could hit a million. I know I could.
Nathan: What gives you that confidence? It's taken you three years to make this one hit a million. Hopefully this year.
Michael: I just know by the location and the word of mouth and the way it spread.
(16:32) Nathan: Well, look, I've heard enough. I'm excited about what you're doing. I want to make you an offer. It'd be $50,000 up front today. The use of funds will be to open that second location. And what we'll do is we'll structure the payback. You pay me back one payment per month until I'm paid back 1.2x what I put in. So 50,000 times 1.2.
(16:49) Nathan: And then what we can do, so that it doesn't hurt your cash flows — that location is not going to be generating any money the first six months while you're building — we could structure the repayment as a percent of monthly revenue or weekly revenue that the new location generates. Are you open to that structure?
Michael: I love that structure.
(17:11) Nathan: What percent of weekly revenue do you think would be appropriate? Maybe like 10% of weekly revenue?
Michael: That sounds great.
Nathan: The real question is, will your margins support it? It sounds like they will based off your margins you have here.
Michael: Yes.
(17:28) Nathan: So the offer will be $50,000 until I'm paid back 1.2x, which is $60,000. And the way the payments will be made is 10% of weekly revenue at the new location.
Michael: I love it.
Nathan: Want to do the deal?
Michael: Let's do the deal.
Nathan: Let's do it. Good stuff, man. I'm excited for you.
(17:50) Nathan: Okay, where's my milkshake? I want to finish this. Let's go. If you guys liked that deal, remember, new episodes drop every Wednesday. Click here to subscribe so you don't miss out. Also, want to see more deals like this one? Click here to see the next deal immediately.
