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Power+1 Chapter 31: Integration, Initiation, and IKEA Frustrations

🕑 Added 2025-05-25 11:18:14 +0000 UTC

Comments

coffeetime

Completely agree, the low equity does put Ethan off a bit, but it does go through the reasoning a little more in the next chapter. Ethan was very much between a rock and hard place though, so didn't really have that many options. In terms of the land, none of the businesses (Maria's, Old School, Bubble Tea Express) own the actual land. They are all on leases. If the purchase of those business included the land itself, absolutely correct, the purchase price would be a lot more expensive! Land is expensive, anywhere! The reason the first two purchases were low, were essentially cause they were losing money. A business that is losing money can be a hard sell, as the secure long term lease could potentially become a liability unless there is a good turn around plan. But yeah agree, a good lease can be worth a lot! In terms of running those businesses without +1, thats a good point. And likely something cautious Theo would look to plan for, so I'll jot this down in my notes and keep it in mind! Thanks for the details!

Jason Chang

Thoughts: 15-20% equity is low enough for Ethan that it will be a very hard sell. He comes into it with a lot of fixed assets, most chiefly the location itself. Unlike the other two acquisitions, the brand is also actually valuable for product quality, just slow at service. If Bubble Tea Express is in a prime location (e.g. near a university campus), the cost should completely dwarf the first two acquisitions, potentially by a full order of magnitude. He doesn't have the capital yet, but can leverage a loan using his existing assets (1 mil projected net income/year makes negotiating loans far easier). Even the first two purchases were actually unrealistically low because the land/lease is one of the most expensive parts of any low end restaurant. Can chalk it up to incompetence; he got lucky on the first two deals. For reference, a normal mcdonalds franchise location costs the franchisee somewhere in the range of 1-3 million dollars to set up, and they don't even get to own the land. If Ethan owns the underlying land (probably not), controlling interest is completely out of the picture without millions to separately buy the land up. On another note, the best financial protection against losing the system (I don't expect this to ever happen in the story since it's the primary gimmick draw) is to get to the point where the businesses are all viable without +1-ing. He's going to be in a position to do that soon, but not yet.