My Deal Has Come Apart

Introduction:

This week, we start with an update of how 21 Hats has been doing since its sale brought new resources and new ambitions (Spoiler alert: It’s not going great!). Then, Dana White tells Shawn Busse and Jay Goltz about the progress she’s made on multiple fronts: attempting to sell franchises to revive her struggling Midtown Detroit location, to open new salons at Fort Bragg and in Dallas, and to secure financing. The owners discuss Dana’s financing options—venture capital, private equity, bank loan—assessing, in Shawn’s words, their “degrees of evil.” Plus: Shawn explains how his views on remote work have been evolving, and Jay explains why he’s tired of being called a tyrant (even though no one’s actually called him that).

— Loren Feldman

Guests:

Dana White is founder and CEO of Paralee Boyd hair salons.

Shawn Busse is co-founder and CEO of Kinesis.

Jay Goltz is founder and CEO of The Goltz Group.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome Shawn, Jay, and Dana. Great to have you here. We’re going to start this week by talking a little about me. As you know, in January, I agreed to sell 21 Hats to the owner of a venture-backed software company, Womply, that processed a lot of PPP loans for very small businesses.

The idea was that I would get a nice salary and the resources to turn 21 Hats into a real media company. You may also recall, I’ve been having some discussions about whether the business would continue to be called 21 Hats, or would assume a name that serves to promote the parent company. Well, the good news is that 21 Hats is going to remain 21 Hats. The bad news is that that’s because I’ve basically been fired.

Dana White:
What?!!!

Loren Feldman:
As you might guess, I’m a little disappointed by this. I do feel as though an opportunity has slipped through my fingers. But I actually have to give my now former boss some credit. When we first started having serious discussions, he brought up the possibility that, “You know, you just never know. We could reach a point where we would have to agree to disagree.” And at that point, early in the discussions, we agreed that if things didn’t work out, I would get 21 Hats back, and I would also get a nice cushion to go on. And that’s what has happened.

It turns out, we were not as aligned as we thought we were. And to his credit, my now former boss has stuck to his commitments. And even though the course of my employment for him lasted barely long enough for me to get a cup of coffee, I get that nice cushion that was promised. So, I’ve been fired before. This is a new land speed record, even for me. It is disappointing. But I’m in a better position today than I was when we first started talking. And I’m kind of excited that 21 Hats will remain 21 Hats, and I’m gonna keep plugging away.

Any questions?

Shawn Busse:
Oh, yeah.

Jay Goltz:
I’m going to argue with the phrase, “It’s an opportunity that slipped through your fingers.” No, it wasn’t the right opportunity. It wasn’t the right fit. Good for your boss and you to figure that out early on. Disappointed? Okay, fair enough. But that certainly wasn’t an opportunity that slipped through your fingers.

Loren Feldman:
Well, it sure seemed like an opportunity.

Jay Goltz:
I got it. But after fleshing it out some more, the two of you figured out early on that this wasn’t this wasn’t going to work. So that happens.

Loren Feldman:
It was nice feeling financially secure for a month or so there.

Jay Goltz:
I’m sure.

Dana White:
You scared me. I was afraid that that meant you got fired. So I was like, “So does that mean no more Loren hosting the podcast?” You know how I am about that. I don’t know the next person.

Jay Goltz:
You realize all this has done is put you back in our game of feeling insecure every day. So it’s okay. It’s an okay place to be. Welcome to our world. That’s the world we live in.

Loren Feldman:
Well, you guys are a little further along than I am.

Jay Goltz:
Yes.

Loren Feldman:
But I hear you.

Jay Goltz:
In hindsight, you didn’t do anything wrong. There was no way of knowing, and you gave it a shot. It wasn’t a bad decision. It just didn’t work.

Loren Feldman:
I do feel like an opportunity has slipped away. But I also agree with what you just said. It was too good an opportunity not to give it a shot. You know, I’m sorry it didn’t work out. But if it was not going to work out, better quickly than taking a long time.

Dana White:
Yeah, five years from now.

Jay Goltz:
Or five months from now. Right. Okay, shake it off. We’re moving on.

Dana White:
So I have a question, Loren. How did it feel transitioning back to being an employee? Because I know entrepreneurs. Like, I could never be an employee again. And so I wanted to hear how that felt.

Loren Feldman:
It wasn’t completely comfortable. Going back was a little bit difficult. I think it would have worked out fine if we had been more aligned. We had significant differences that emerged very quickly once we had signed the documents. And that made it harder.

Shawn Busse:
I don’t know, Loren. Man, I think you had significant differences long before you signed the documents.

Loren Feldman:
You know, we said the right things to each other. I think maybe we both heard what we wanted to hear. There was reason for optimism, in my opinion, but the history of it kind of proves you right.

Shawn Busse:
When we were talking about this, before you closed the deal, for me, I was looking at the profile of the owner. And I was like, “He really strikes me as the antithesis of what you passionately believe in,” which is the owner-operator who’s really kind of built it from nothing, often does not have outside funding—really, the small business owner. And really, he’s the profile of a Silicon Valley—came out of an elite college, got a bunch of money from other people, and continues to get money from other people. So it was like, yeah, he did something innovative with PPP, to his credit. But really, that profile did not line up, from my outside perspective.

Loren Feldman:
You’re right, he does come from a venture-backed, Silicon Valley background, and that is very different from what I’ve been trying to do and trying to promote through 21 Hats. That said, he devoted a lot of time and resources and effort to supporting very small businesses, not unlike mine. So again, I think there was cause for optimism there.

Jay Goltz:
This falls under the category of “nothing ventured, nothing gained.” You gave it a shot. It didn’t work. You’re back. Here we are. We’ll find another opportunity,

Shawn Busse:
Yeah, I’m glad you came to this conclusion quickly. You know, slow death is really awful when it comes to partnerships.

Loren Feldman:
Well, thanks for hearing me out. [Laughter]

Shawn Busse:
We could keep going.

Jay Goltz:
It’s all been said and good for him that he was smart enough, that you were smart enough—really, I give the guy credit.

Shawn Buss
I agree. He did right by you, and that says a lot.

Jay Goltz:
Yeah, no harm, no foul. I don’t think anyone had bad intentions.

Loren Feldman:
Next topic. Dana, we haven’t talked to you in a while. How are you doing?

Dana White:
I’m doing great. We have started selling franchises. We are in the sales process for seven locations around the country, and so that’s going well.

Loren Feldman:
Have you sold any?

Dana White:
Nope, we just started that process. And you know what, I’m glad we took our time, because there were some cultural things for the business of the salon that I wanted to just hammer down. And I still have some work to do. I’ve still got some work to do with operations and the marketing. But as far as contacting people who are interested, we’ve scheduled and had calls with about seven people so far.

The Fort Bragg location is being white-boxed, and I’m moving forward with that—hopefully with the help of PNC. There’s a great team of people over there at PNC who are kind of helping me and supporting me, from senior vice presidents to the loan coordinator to everybody. They’re all emailing me, really supportive.

Loren Feldman:
What does white-box mean?

Dana White:
White box means they’re getting ready, getting it ready, putting the drywall up, making sure everything’s running so that when I do go in there, we can decorate it and make it our own, put the equipment in there and do the rest of the build-out. And they’re doing the same thing in Dallas.

Jay Goltz:
And just to be clear: PNC, you’re talking about PNC Bank?

Dana White:
Yes. PNC Bank. So this is my first time going to a bank, and we’ll see what happens. They say I’m perfectly situated. They said, “The key is the fact that with your business plan, you’re submitting a military contract.” That’s huge. And so the new news, which is going to be released soon, is that I’ll be the first African American woman to receive a multi-base, global contract. So we’re looking at Germany, the UK, Italy, South Korea, Japan.

The military has been really great putting me in locations that are going to work for me. Some of their smaller units aren’t going to work. Their revenue is just too low. And even though I could come in and increase that revenue, that’s just a low starting point.

Nexcom has also reached out to me—the Navy—and they’re interested in two salons in North Island and San Diego. So we’re going to see. I’m slow and steady, as a pace. I’m not in a rush. Unfortunately, my Midtown location is not doing well. It’s just not. My team and I have evaluated, “What is it? What is it? What is it? What is it?”

Loren Feldman:
Not doing well from a revenue perspective?

Dana White:
From a revenue perspective and jobs. You know, when you go to Dallas, there are no hiring signs anywhere. When you’re here in Michigan, they’re everywhere. And people are having a really hard time. I remember listening to a previous podcast [episode] on this show about the hiring. And it’s really, really, really challenging, and I’ve been committed to not just hiring a pulse. I want somebody who’s got a strong work ethic and who’s committed to delivering the service we want to deliver for our staff. That means we’re going to be short-staffed for a while because the people who are applying are not always those people.

So we’re actually taking our time and evaluating these people to make sure they’re a right fit. And if they’re not, they don’t show, and we’re okay. If they’re not, we don’t hire them, and that’s okay. But because we’re short-staffed, we’re no longer seven days a week. That sends a message to our customers about when they come and get their hair done. So our revenue is down, and we’re really trying to come back.

Detroit in and of itself is not a typical metropolitan city. It’s not a walkable city. Even though we have ample parking available, this is a suburban metro area. They want to park in a parking lot and go into your building. And they don’t want to park on the street, and they don’t want to park in the structure. So people are like, “Well, if you validated parking, we’d come.” And I said, “Yeah, but we have to have the volume to validate parking. That volume takes time to get to, which I’m not sure I’m willing to keep putting money into the salon for a market that’s not ready. So I’m ready to try my hand at a larger market.

Loren Feldman:
Is that what you were referring to with Dallas?

Dana White:
Yes.

Loren Feldman:
You told us about it a little bit the last time you were on. That’s not a military or a franchise location. That’s a Paralee Boyd location.

Dana White:
Yep. Separate company and everything.

Loren Feldman:
And that’s moving ahead?

Dana White:
Oh, yeah. That’s moving ahead splendidly. We’re looking for a mid-June, July open, so I’m getting ready for all of that now. And that will better equip me to pay what I need to pay what I need to pay. You know, I have debt service getting ready to come up from the EIDL. It’s quite a ways away. But I need to have a corporate salon generating revenue more than what Midtown can do. And I’m convinced that Midtown was a great place to start a business, but it is not a great place to grow a business. And I’m not the only personal care service brand that feels that way in this area.

Jay Goltz:
Wait, just to be clear, when you went to PNC Bank, they’re lending you against a signed government contract, correct?

Dana White:
Yeah.

Jay Goltz:
That is the collateral?

Dana White:
I believe so.

Jay Goltz:
Yeah, because my guess is, no signed, government contract? No loan. But I just want to clarify that. They didn’t give it to you because you got a nice business plan.

Dana White:
Yeah, no, no. They still haven’t given it to me yet, so they still may not give it to me. But they’ve strongly encouraged me to submit my application. I included my banker on the pre-performance conference with the military. So he not only was able to hear what their expectations are for Fort Bragg but what their expectations are for other military bases around the world. And he was extremely excited. I will say that, again, after listening to past episodes of this show, and doing some thought—really thought-provoking sessions with myself—I’m gonna throw my hat in the investor world.

I’ve talked to a friend of mine who just closed a $6 million round. I’ve talked to a private equity person who has reached out to me, a major private equity person. And these people, the right people around you, will help you find the right investor. If you are just throwing your hat in the VC world just to throw it, yeah, you’re gonna get VCs that want your firstborn child. But the people who I’m working with have no need for a little bit. And they know which VCs would work and which private equity would work and which wouldn’t.

And so when it comes to scaling these military locations, scaling the franchise and corporate locations—not to mention scaling the product brand, which I’m signing the paperwork for those to be on exchanges across the military even before I even have a salon on base. Taking a loan, paying it off, taking a loan, paying it off, that’s the slow roll. I would much rather scale it quickly and sell it. Done.

Shawn Busse:
Hey, Dana, I need a little context, in terms of: Was your first salon in Detroit?

Dana White:
It was.

Shawn Busse:
So that was the prototype?

Dana White:
Yes, Southfield.

Shawn Busse:
Okay, and then you’re selling franchises. Have you built another salon outside of Detroit? Or is that the only location?

Dana White:
Nope, so I had two locations here in Metro Detroit. And after COVID, I closed the Southfield location, and then I just kept with the Midtown location. So I have the Midtown location currently, but it’s not doing well. And now that we understand, after months of trying to understand why this just hasn’t launched, we understand why. So it’s like, “You know what? It’s the market. We’ve just got to go to another market where we know.” And I know more now. I know more now than I did in 2016, 2017 when I opened: the numbers, the demographics. So for example, within three miles of the door of my Dallas location, there are 14,195 people who are in my market. That’s within three miles. That’s huge. Give me 10 percent of that.

Jay Goltz:
Wait, how does that compare to Detroit?

Dana White:
They’re not as close, and the Detroit customer doesn’t want to drive more than 15 minutes to go get their hair done. And so my Midtown location is located by where they work, but they’re no longer working downtown anymore. They’re all at home. They’re still working from home. So I’ve talked to several of my customers who have said, “When are you opening in Southfield? Because I’m not driving 25 minutes to Detroit.”

And it’s the stigma of driving to Detroit. They feel it’s bombed out Beirut, even though Midtown is gorgeous. It’s just not like downtown Chicago. It’s just not like the Loop, or the South Loop. It’s not like that here yet. We’re about 10 or 15, maybe even 20 years away from Detroit being a city like that.

Jay Goltz:
Okay, I think that’s a legitimate analysis that they’re not going downtown like they used to. I think that all makes sense.

Shawn Busse:
I think we all need to acknowledge COVID really effed up your business model. And so we need to have a lot of empathy there. But if I put my banker hat on—and I hate banks, I don’t trust them, I’m sure Jay is with me on this—so you’ve got a struggling business that has some debt. I don’t see how the bank is going to loan you money on that. But it sounds like they will loan you money on the military work?

Dana White:
Again, this is all speculation. They might say no. The only good news is that an SVP has reached out for me from their corporate office. Everybody’s really excited. They want to be a part of the story.

Jay Goltz:
Okay, I think you’ve got your head on straight with that. But I’m glad that you’re being qualified because you’re dealing with the bank salespeople, and I’ve been through this 20 times: “Oh, we all want!” And then they send it down to the dungeon where the person who makes the decision makes the decision is like: “Nope! Nope! Next!” And then they come back: “Dana, I feel bad, but…”

Like I said, good for you that you say you haven’t gotten it yet. You’re not sure you’re gonna get it. I think that’s all true. The fact that you have a government contract, I think definitely makes it more than likely, but who knows? And to be fair to banks, they make a tiny little percentage. Really. They’re not venture capitalists. They can’t afford to be giving bad loans. They’re only making a couple points spread on it. I get it.

Shawn Busse:
So what Jay just said, it sounds like this is why maybe you’re going to explore the VC/outside investor route, because they don’t necessarily have the constraints of the bank.

Dana White:
Yeah, it’s like, I’m tired of the challenges that face me, as someone whose dad isn’t Elon Musk or Jeff Bezos or Jay Goltz. You know what I mean?

Jay Goltz:
Whoa, wait, I just got into the category of—

Dana White:
See how I threw that in there? Isn’t that cool?

Jay Goltz:
Whoa, I did see that.

Dana White:
No, but seriously, it’s just, you get tired of the capital question. Now, I’m not saying that the capital question is gonna go away.

Jay Goltz:
Can I help you with this? This is the reality. You’ve recognized that trying to scale up a business that’s as hot as yours, with such a strong, good concept that has proven to have a market waiting and willing to go, you’ve recognized that it’s not practical to think that you’re going to do it the bootstrap way.

Dana White:
Exactly.

Jay Goltz:
Okay, I can’t argue with that. I can’t argue with that.

Dana White:
It’s just not going to happen. And so instead of saying, “Well, all VCs are bad,” months ago on the show, we all got off the line. And, “Hey, Dana, what are you doing today?” Loren asked me. And I told him, “Hey, I’m speaking to private equity.” And I gave him the man’s name, and Loren knows who he is. And Loren was like, “Wow, that’s a big call.” And I said, “It is.” Well, we’ve kept in touch. And I had a call with him, and I said, “Listen, I need to be set up so in five to 10 years, I grow this business so you will buy me out in the end. Who can we talk to now?”

He cuts checks for $300 to $500 million, so I obviously wouldn’t be in his portfolio. But there are people in his company who work with companies my size. And he said, “I’m glad to hear it. Give me your deck, and we’ll go from there.” My friend who just closed a $6 million round, he said, “I don’t introduce many people at all to this company, but I’m going to introduce you. Give me your one-pager,” and we have a call scheduled for next month. So it’s all about getting connected through your network, that people who know you and know the type of VC who you want, or the type of private equity that you want.

Jay Goltz:
And they’re not in the time-wasting business. Those guys do not want to waste a lot of time with people, whereas banks have nothing else to do. They spend their entire day going out and calling on customers, going, “Oh, we want to build a relationship with you. And we want to lend you money.” And then they leave you at the altar.

Dana White:
Yeah, with nothing. Exactly. And so I’m expecting to be left at the altar. And I’m expecting, I go, “Okay,” and I walk out, and then there’s a limousine with like five other people in it, saying, “Hey, we all want to give you this amount of money so you can scale this out.”

Loren Feldman:
Can you tell us more about the franchising opportunity, now that you’re actually in the process of trying to sell them? Can you give us more details on what exactly you’re selling?

Dana White:
Yeah, so we’ve started talking to about seven people who we think may be good early adopters for this franchise. So the sales process takes about, they say, 60 to 90 days. And we’re in the first couple of weeks of that process. It’s a lot of background checks. It’s a personality test. It’s meeting, having them come here for a discovery day, giving them a quick one-two-three of the salon, or to go to Dallas, a one-two-three of Dallas, and then sitting down and say, “Hey, do you like me? Do I like you? If so, let’s turn to this franchise agreement together.” And that’s it. So we’re still early days yet.

Loren Feldman:
How did you find those seven people?

Dana White:
Once the announcement was made, and up until about a week ago, we’ve had about 98 people email us saying their interested in the franchise. So of that 98, we’re talking to seven.

Loren Feldman:
Can you tell us what the sale price is?

Dana White:
I think I can, now that I’m registered.

Jay Goltz:
Well, Loren’s looking for something to do. So this might be an opportunity for him. [Laughter]

Dana White:
Our franchise fee is $45,000. And then from that, you receive financing. So you can own a Paralee Boyd with a $45,000 franchise fee, and then after that, you would probably need to have financed—or if you have it in your account—anywhere between $400,000 to $600,000. That number is very appealing to seasoned franchise people because you’re the quality of Drybar with the Wingstop price point. They really like that.

Jay Goltz:
So how does that compare? I really don’t know. You go buy a Subway or something. How much is that compared to the typical franchise? Is that pretty much in the mid-range?

Dana White:
It’s competitive.

Loren Feldman:
And then they’re obligated to pay you a percentage of revenue going forward?

Dana White:
Yep. Every week they gross, I get a percentage of the gross.

Loren Feldman:
You’re getting a positive response from the people you responded to?

Dana White:
Excited: “We’ve been waiting for this.”

Loren Feldman:
They’re okay with the terms?

Dana White:
Oh, yeah. Because they’re standard. It’s not like I’m asking for so much more than any other franchise. You know, McDonald’s is less but you spend more money on the financing. I think McDonald’s is 35.

Loren Feldman:
Wait, it costs less to buy a McDonald’s than a Paralee Boyd?

Dana White:
Mhmm. Look how much money you’re spending to open a McDonald’s, though.

Loren Feldman:
It’s less in terms of the initial fee, but more to actually build a location.

Dana White:
Exactly, and so for personal care brands, you’re looking anywhere between $45,000 and $55,000 for your franchise fee.

Jay Goltz:
I mean, when you do the math, if they finance the half a million dollars at 6 percent even, it’s 30 grand a year. Not bad. And then you pay the fee to her. I’m just gonna guess: What are you guessing they need to gross in order to come out well? Eight hundred grand? A million dollars?

Dana White:
No, way less than that. If they can do five or six, they’ll be fine.

Jay Goltz:
Okay.

Dana White:
$500,000 to 600,000 in annual sales, so that’s why the locations are key. We’ve got people who are interested here, and we’re just gonna say, “We’re really, just not interested in opening in the metro Detroit area.” I might go north to Flint. I might go west to the west side of the state of Michigan. But just the metro Detroit area, we’re gonna leave that alone and then maybe come back in a couple of years.

Shawn Busse:
Are these people who are interested, have they owned franchises before or owned salons before?

Dana White:
Three of them, I believe, have owned franchises before, and then one of them has owned a salon before, but that’s our concern. Again, this business hasn’t changed in decades. And so when we have a hair stylist or salon owner say, “Hey, I want to own one,” we’re really on pause. We’re like, “We don’t know, because are you going to be able to adapt to the way we do it?” I had a lady say, “Well, I’m interested, but I want to change the name and I want to do this.” Then you don’t want to own Paralee Boyd.

Shawn Busse:
Why even buy a franchise at that point?

Jay Goltz:
My guess is most people who bought McDonald’s were never in the restaurant business.

Dana White:
Exactly.

Loren Feldman:
Well, that’s changed over the years, obviously.

Dana White:
It has. It has.

Jay Goltz:
Why do you say that?

Dana White:
Oh, because people have the expectation that has been set, for over 30 years, for what it’s like to open a McDonald’s. But when McDonald’s first came on the scene—and that’s what my franchise consultants said—”You’re like McDonald’s early days. You’re gonna get people who are gonna want to serve pork chop dinners and meatloaf dinners out of your salon, because it’s so new. It’s not a standard.” And the standard franchises that are for hair salons are Great Clips, SuperCuts. They just don’t cater to this market.

Loren Feldman:
You compared the economics of your deal to those of Wingstop and I forget who else. How does it compare to others in the salon business?

Dana White:
It’s comparable. I mean, for Drybar, we’re less. I think their franchise fee is $50k. And then you have to have between, I think, $700,000 to 1.2 million to open one. There are several personal care brands that are a little higher. So my cost of entry is low. But they’re not surprised, because I’ve leaned out everything. I’m very lean. Not cheap, but lean. And so I know where to get certain things sourced that bring that cost down.

Loren Feldman:
Do you require a certain amount of resources? What does someone have to have to do this? Or is it okay, just to finance it?

Dana White:
It’s okay just to finance it. We would like to see some liquid, but we haven’t determined what that number is. Because we don’t want to make the bar too high without evaluating who our earlier adopters are. And then, of course, you may have to put some down on your loan, but again, you have to pay the franchise fee. So the franchise fee is $45,000 non-refundable, and that’s cash. It’s not in installments. That’s upfront before we move forward with you.

So most people who are going to be going forward are going to be able to pay that. So we’ll get that and then we will use that $45,000 to help them through their process, get their opening kits together. But there are still a lot of things that they have to pay for. So yeah, I won’t say it’s inexpensive, but you’re not going to break the bank. And that’s the other thing. I want to set my franchisees up to succeed. I don’t want them at zero when they open.

Loren Feldman:
Did you pick those seven people primarily because of who they are and what their experience is and what you think they can accomplish? Or because they’re in the right location? Or both?

Dana White:
The first one, and then the second one. It was like, “Okay, who are these people?” I think two or three of them have owned other multi-unit franchises. So I think two or three of them are probably just gonna want five out the gate. And then where are they?

Loren Feldman:
They’re gonna want five locations?

Dana White:
Yep, so we have a single unit sale and multi-unit sales available. And so two, I believe, of these seven people are interested in multi-unit sales. And that means they’ve just locked down a territory. And I think there are people who are interested in Georgia, which is hot, the Atlanta area. There’s the Texas area that’s hot. I think in California, in Virginia. Those are where we’re getting interest from, and then Michigan as well.

Jay Goltz:
If someone’s just started listening to your story, there are some people out there probably thinking to themselves, “Wait a second. You’ve got one location that’s not doing well, and you’re franchising? And then you said something that totally makes sense to me, that you’re in a product that isn’t going to compete with hamburgers. It’s a need in the marketplace. It’s a breakthrough service that isn’t available, that there’s tremendous demand for. And as a result, the normal rules of franchising don’t necessarily fit what you’re doing. You’re not opening another Subway kind of franchise. So even though you don’t have five locations that are doing well, this service is so needed in the marketplace, that it shouldn’t need to do that. And I buy that.

Dana White:
I’ve had naysayers, respectfully, say, “Dana, your salon in Detroit should be grossing over a million before you consider this. You should have several locations.” Again, this is not a million dollar hair salon market. When I spoke with Regis—and Regis is the largest franchise personal care company in the world—they’ve even said, “Metro Detroit does not have salons grossing over a million dollars.” So then I asked, “Okay, understood. The black and white of your argument makes sense. However, give me a salon that’s a franchise where women with thick and curly hair—primarily African American women—what salon chain caters to them?”

Shawn Busse:
Let me play the other side of that. Okay, so I actually think that this might be a case of multiple people being right, in that I think what Jay is saying is you have a remarkable insight around a product market fit. And then the other side of the coin, the folks who are critical, are saying, “Well, you haven’t proven the model.” And this is the entrepreneur’s dilemma, right? Which is, most entrepreneurs are doubted because it hasn’t been done before.

So I would take a third tact, which is, there’s the vision and the idea, but then there’s the execution. And I’m really curious: Is this all on your shoulders right now? I mean, other than these consultants, do you have somebody who is your lieutenant who’s out there getting stuff done, communicating with these franchisees—”This is what you need to do”—and this person is in lockstep with you?

Dana White:
Absolutely, so the young lady who’s working with me opened 226 Sports Clips. She was the director of operations for Lady Jane’s Haircuts, and she was a regional manager for Great Clips. So she’s the one.

Shawn Busse:
Wait, I thought she quit?

Dana White:
No, she did. But remember—that was an old episode. [Laughter]

Shawn Busse:
Wait, so she quit and then came back?

Dana White:
Yes.

Shawn Busse:
Ohhh. Okay, okay.

Dana White:
Yeah, it wasn’t, “I don’t want to work here.” There were some things going on in her personal life that made her freak out for like two seconds.

Shawn Busse:
Okay, okay. All right. Sorry about that.

Dana White:
That’s all right.

Jay Goltz:
Yeah, I have to tell you, Shawn, thank you for saying that, because I was thinking that and I’m glad that was out there. All right. We’re all caught up.

Dana White:
Yep, and now everything is copacetic. So she’s handling that splendidly. She’s been a part of the sales training with me, so we know how to take one person from one phase to the next together. And then we have our calls going over the who, what, when, and where of it. But that frees me up to go do the other things that I need to do.

Shawn Busse:
Have you thought through, like, “Hey, how do you make it a win-win for her if this is successful?”

Dana White:
Yeah, we talked about it. She’s told me what she wants. And I told her, “Okay, if that’s what you want, I’ll give it to you”—and made sure that what she was asking for wasn’t unreasonable, and it’s not. And her and my manager have said, “Listen, we really believe in what you’re doing. Because we’re in the industry. We see what you’re doing. Because we’ve been here for a long time, over 20 years. We’re just gonna sit tight until this blows up.”

I’m 45. When I’m 55, I want to sell this company for $1.2 billion. That’s it. Like, I’m just saying, I put it out there. I mean, when you look at my products, the military contracts, the franchises…

Loren Feldman:
Dana, would it be okay if it were a little less than $1.2 billion?

Jay Goltz:
No, if she sold it for $800 million, she’d be a loser.

Dana White:
I mean, $800 million, fine, but I’m gonna do my best to be the first personal care brand that sells as a unicorn.

Jay Goltz:
Ouch. Ouch. I’ve gotta tell you, for one who’s binging shows, the unicorn thing’s taken a little hit lately, between WeWork and the rest of the them…

Dana White:
Elizabeth Holmes.

Jay Goltz:
Yeah, all of them. Get rid of the unicorn.

Shawn Busse:
Oh my gosh, Dana, your mission of who you want to support and the women who can feel heard in your place—that is so much more valuable than all the bullshit that gets held up.

Dana White:
No, no, no, no. You’re absolutely right. But when we’re talking about the numbers, the unicorns are the one-point-something billion dollar companies.

Shawn Busse:
Who cares?!

Dana White:
I care.

Jay Goltz:
Please stop using that phrase. Please. Please stop using that phrase.

Dana White:
But I care. I care!

Shawn Busse:
Why? Why? Why?

Dana White:
Because in order to give those women a voice, iIn order for those women to be seen, I have to be in places. I have to be in a lot of places in order for that to happen. I can’t do that with two locations in Michigan. I can’t do that.

Jay Goltz:
Okay, there’s somewhere between having two locations in Michigan and being a unicorn. Can we just say “wildly successful” with 3,000 locations?

Dana White:
Okay, so to me, 3,000 locations and all the locations on bases, and a product with a valuation of that—to me, that is wildly successful, right?

Jay Goltz:
Great. Let’s go with “wildly successful.”

Dana White:
I won’t say “unicorn”—even though there aren’t any other personal care brands that have sold for that much. But, and again, all things considered, it may not happen. But if I don’t put it out there, if I don’t reach for it…

Jay Goltz:
No one’s arguing with that. I’m just telling you, the unicorn word has taken a major hit.

Dana White:
No, you are spot on Shawn. You are absolutely spot on.

Shawn Busse:
Make that your North star. Make your North star helping women, being out there creating a voice. Don’t make it money. Because honestly, employees are so cynical of that idea. And quite frankly, it’s not inspirational. Tack to the thing you care about.

Dana White:
The reason why I get up is because I want young girls to walk into a space that is reflective of them. You are beautiful. You are enough. That’s what gets me up every day. But I’m not a non-profit.

Shawn Busse:
No, and you don’t have to be. You can make money and have a great purpose.

Jay Goltz:
Which is why “wildly successful” covers it all.

Loren Feldman:
Can I get into this conversation? [Laughter]

Jay Goltz:
No! “Wildly successful” covers both financial and all those other touchy-feely good things that are so important.

Shawn Busse:
What do you want to say, Loren?

Loren Feldman:
Dana, here’s my question—I guess there are a couple of things. One that throws me off a little bit is hearing you talk in the same conversation about wanting to sell and wanting to be a unicorn. Those things seem to be in conflict to me. Why are you thinking about selling?

Dana White:
Because there’s only so much I can do. And I think once I sell, it could be sold to people who are more capable of taking it—the same reason why the lady who did Carol’s Daughter, there’s only so much she could do. But guess what Estée Lauder did?

Jay Goltz:
Okay, can I play your attorney again? Here’s what she’s saying: The reason she’s planning on selling is she’s got to take in private equity, which means she’s not running her own show any more totally, and she’ll put up with all that stuff for a while. And then she’ll get enough money that it’ll have been worthwhile to have done that. Whereas if she just owned it 100 percent herself, maybe she wouldn’t be so hot to sell it.

Loren Feldman:
Let me ask about that taking in private equity thing then. Do you have enough capital right now, Dana, to do the things that are already on your plate? Meaning do you have enough capital now to open Dallas, to open Fort Bragg, and to proceed with selling the franchises?

Dana White:
Well, to proceed with selling the franchises, yes. To open Dallas, yes. To open Fort Bragg, no. I have to get a loan.

Loren Feldman:
But that’s the one that’s easiest to get a loan for, presumably. If you have that military contract, you should be able to get a loan to build one location.

Jay Goltz:
No, no, you’re not listening, Loren. They’re banks. Nothing’s easy. You don’t know.

Dana White:
You don’t know. And then there’s private equity that’s already excited. There’s private equity that’s like, “You know what, we’re not a shark. We’re a dolphin. We know who Dana is. We’ve been talking to her for months. Let’s find the right partner.” And it still may not be, but I can’t sit and wait for the banks.

And I think to further Shawn’s point, I think pushing for growth is in furtherance of my commitment to the vision and the why. Because like I said, if you only have one location, and you have this great vision, well, that helps the women around that location. It doesn’t help the young women who want to join the swim team but have to fight with their hair every week in California. They’re not flying to Michigan to get their hair done.

And so when I am thinking about scaling, part of the reason why I’m thinking about scaling is because this is an answer that needs to be solved for women with thick and curly hair everywhere: Walk in, walk out, pay a good and fair price, and keep it moving. And it’s not out there right now.

Shawn Busse:
See, I like that, and I think that kind of thing gets people excited to be part of your cause. And if you can connect the dots between, “I need capital because I can fulfill my mission in a more powerful way,” that tells me that your number one goal is to find money that is values aligned, and I promise you the banks are probably not going to be it.

Dana White:
And guess what? Private equity may not be it either, because the problem I’m solving for doesn’t hit home for them. No, I’ve got to say, “Hey, listen, I need you to get out of your lane and see what I see.” And it wasn’t until I said that, that they said, “Oh, I’ve never thought of what it was like for a black woman to get her hair done. I didn’t know.”

Jay Goltz:
Shawn, I love you. You’re a little naive. That whole thing that you’ve got to find someone whose values align—no, they want to make money. I think they need to make money, and I think she’s got a way of doing that.

Shawn Busse:
No, I get it. But hey, I am fresh off of a conference that just opened my eyes to a whole world of capital and purpose-run businesses that are connected to each other. And I was stunned.

Jay Goltz:
Totally. I totally get that. I totally agree with that. Those two things work together nicely. They work together.

Shawn Busse:
I guess I would say that it’s degrees of evil. You know, they are out there. I have seen it poorly. I have some clients where they thought all the best things in the world, and then afterwards, it was like, “Wow, that really changed that business profoundly.” You’ve got to watch out for that. But I do think it is changing.

Loren Feldman:
Let’s stop here on this topic.

Dana White:
I knew that would happen though. I said,”Oooh, as soon as I say the PE/VC word on the show…”

Jay Goltz:
No, you’re wrong. No, that wasn’t the problem. I’m telling you, the second you said the word “unicorn,” Shawn and I said, “Oh my God.” And that was the problem. It wasn’t private equity. No one’s arguing about private equity.

Loren Feldman:
I would argue about private equity.

Jay Goltz:
Maybe, okay. But the unicorn thing. I just got done with watching eight episodes of We…

Dana White:
WeCrashed.

Jay Goltz:
It was hard to watch.

Shawn Busse:
Painful.

Loren Feldman:
Before we go today, I want to move on to something else, which is something we’ve talked about in the past: remote work. We’ve talked about this a lot. But I sense that as this whole thing has dragged on, there may be some evolution in people’s thinking about it. Jay, let me start with you. I know most of your people have to be in the office or in the factory. Do you have people who work from home?

Jay Goltz:
I’ve got 130 employees, and maybe there’s two or three who are doing some work from home. And these particular people have been here for many years, meaning 10 years-plus. I would just as soon everyone come back to work. My issue is reading some of these articles from people who don’t run businesses. There’s no right or wrong to this. For some people, it’s going to work out lovely.

Loren Feldman:
Well, tell me about you. Has it been working, having these people out of the office?

Jay Goltz:
I would rather have everybody at work. I can walk down the hall and have a conversation. I can have a meeting.

Loren Feldman:
What is stopping you from requiring that?

Jay Goltz:
Well most people are back. COVID is not done yet, and it’s still floating around, and now my people are back to wearing masks in my factory because the numbers are up in Chicago. COVID’s not over yet, so I’ve been holding back to make an edict that everyone needs to come back to work.

My point is, this doesn’t make you a bad boss or a good boss. Everybody has rights. People have a right to go to work at a company that has the ability to work from home. That’s their right. And as a business owner, I have the right to want everybody to be at work every day. And will it lose me some employees? Maybe. But again, that’s my right. And it’s everybody’s right who works for a living to decide where they want to work. I’m just getting a little frustrated reading articles from people who are talking about anyone who doesn’t let their people work from home as some kind of dinosaur or tyrant or whatever.

Loren Feldman:
I’m not sure what you’re reading.

Jay Goltz:
It’s in your report, baby. It’s right there in 21 Hats. It was a whole article from a guy that did kind of put the word tyrant together with letting people work from home.

Loren Feldman:
No, actually, that wasn’t in the Morning Report. I know the article you’re referring to. I chose not to highlight that.

Jay Goltz:
I stand corrected. Maybe I did. Okay, you’re right. I sent it to you, actually. All right, take that out. Edit that out. It was on another online thing. I just signed up for that. I did sign up because of 21 Hats.

Shawn Busse:
So ultimately, it’s your fault, Loren.

Loren Feldman:
Agreed. Shawn, you early on sent your people home, allowed them to work remotely. You gave up the space that you had, the offices. Where do you stand now? What’s your thinking?

Shawn Busse:
Wow, I mean, it’s kind of fresh in that I’m looking at Slack this morning, and I see another employee got COVID, and his family has it. I think Jay brings up a good point. It’s not over—even though every conference I go to now, nobody’s wearing a mask. So I think that’s a consideration. I was just reflecting on all the things I had done in my office to make work efficient and to get rid of the friction: fast networks, fast servers, lots of monitors, ergonomic desks. And you see people hunched over their couch working on laptops.

I think there’s gonna be a lot of hidden consequences to it that we’re not really seeing right now. I think long-term, we’re gonna get another office. I think we will probably try to do the hybrid model, where there’s an expectation of people coming in a couple of days a week to collaborate in teams, but not the expectation of five days a week. I have seen some folks really actually thrive in the work-from-home and actually probably get more work done than when they were in the office, because we had an open office environment. But then I’ve also seen other people, like even myself—I’m like, “I hate this.” It’s just not enjoyable over the long-term.

Loren Feldman:
Do you have a feel overall, in terms of productivity? Do you think the company productivity has gone up or down over this period?

Shawn Busse:
Yeah, I mean, this is a good case for using some scientific process, because our productivity, if you just purely measure it, is down. And we do measure it. It’s really hard to separate though. Is it down because people had to teach their kids from home, and they don’t have daycare? And if we fix those problems, will it go back up? Or is it down because fundamentally, it’s just not as efficient? I don’t know. But at least the numbers right now tell me that all of us working from home does not match all of us working in the office, from a productivity perspective.

Jay Goltz:
There’s another issue here, which is, the results aren’t going to be instantaneous. Like for instance, you can have 100 people start smoking, and everyone’s not gonna get lung cancer after three months. That’s not how it works. Well, you can start having work-at-home, until you start to have employee turnover. And now all of a sudden, 30 percent of your employees have churned, and they’ve never worked in the office. What is the long-term effect gonna be when all of a sudden, you’re not taking your 10-year veteran employee, and they’re working from home? Now, all of a sudden, half the people who work for you have never been at the office. It’s gonna make a profound change over time.

Loren Feldman:
I think that’s a great point, Jay. I think the flip side of that, that you do hear occasionally, is there are businesses who believe they’ve benefited by expanding their talent pool. Instead of just hiring locally, they’ve been able to hire around the country.

Jay Goltz:
I’m sure there are cases of that, sure.

Loren Feldman:
Shawn, I think you’ve done a little bit of that, right? Have you hired around the country?

Shawn Busse:
I went through a period of optimism around that idea. And I’ve since decided it’s terrible.

Loren Feldman:
Why?

Shawn Busse:
I think to Jay’s point, I didn’t realize that smoking was bad for me. So here’s the thing: I have an employee who has been with me eight years. She’s amazing and wonderful. Before the pandemic, she went and worked remote because of lots of life reasons. And I was like, “We’re gonna make this work.” It’s her eight-year anniversary. So she’s been four years remote, four years on premise.

I think her success working remote is directly tied to the four years of being at the office—versus employees we hired right before the pandemic or even in the pandemic. It’s been really hard to create a connection with those new employees. I don’t know them as well. They don’t know me as well. And so I think I’m not excited about the idea of hiring folks who have never spent meaningful time within the culture.

Jay Goltz:
Wait, wait. That’s only half of it. There’s another half. How many times do we hire people, and we’re with them every day, and after six months, we realize they’re not very good? They’re at home. You don’t even know what they’re doing. I mean, you can’t really assess someone’s quote-unquote work ethic, talent, anything, if they’re not with you. And that’s a problem.

Loren Feldman:
Dana, you obviously can’t allow your stylists to work from home. But you’ve had a couple of key people working from home, haven’t you?

Dana White:
I have, and I agree with Shawn. I’m gonna go to a hybrid model. I used to work in a job that I hated going to every day, and I just got more done when I wasn’t in the office because I liked the job, I just didn’t like the people in the office. It was bad.

Anyway, so we’re gonna go to a hybrid. I’m just not a micromanager, and a lot of my work-from-home views come from being in bad work environments where they use keeping you at work as a way to micromanage you. And I’ve just never wanted to be that person, that leader.

Shawn Busse:
This is another example of tech sector hegemony. So we look up to the tech sector as being like the thing, and they’re largely the ones who have made the case for work-from-home for years. And now this is their moment to say, “See, I told you so.”

But if you look at the tech sector—I mean, just setting aside its social impacts on our society—like you look at the profile of the worker, you look at the kind of work that’s being done, it’s very different than a lot of businesses out there. A lot of businesses where the human collaboration, the support, the training, the management, the kind of interface in the millions of unspoken communications that happen in a day, body language, gesture—

Jay Goltz:
Coaching, meltdowns, support.

Shawn Busse:
All of that, yeah. You don’t get that, and I think this is another great case of, we’re looking to the tech sector in many cases, and the media loves to look to the tech sector. But I would argue that’s not necessarily the sector we want to admire for lots of reasons.

Jay Goltz:
Or follow. It kind of goes under the category of “mind your own business.” Like if that works for you, great. Just stop telling me what I should be doing. Because you don’t understand what I do for a living.

Shawn Busse:
Okay, let me let me play a little devil’s advocate just for a minute, even though I threw it all under the bus. I do know a few companies that are doing it well, and here’s the one secret trick that I have seen, which is: They are investing heavily in bringing people together in the real world for meaningful moments. So if they are all remote, they’re bringing them together to a space, and they’re having a weekend together, or they’re kind of going through experiences. I think if companies want to do this, if they really want to be highly remote, they’ve got to reinvest in that. They’ve got to spend money to bring people together to make that happen. Otherwise, yeah, all the bad stuff.

Loren Feldman:
All right, we are out of time. My thanks to Shawn Busse to Dana White and to Jay Goltz. As always, really appreciate it, guys.