Episode 50: So You Bet the House?

This week, Stephanie Stuckey tells Paul Downs and Jay Goltz, both of whom have manufacturing operations, about her decision to buy a manufacturing plant and bring production of Stuckey’s snacks in-house. We talk about her conflicted concerns about a minimum wage hike, what it takes to build a strong culture in a repetitive-task environment, why she paid above book value for the company she bought, and how she managed to finance the purchase of a business that is four times the size of Stuckey’s. She’s very happy with the SBA loan she got, but it was not an easy process: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”

Episode 50: So You Bet the House?

Guests:

Stephanie Stuckey is CEO of Stuckey’s Corporation.

Paul Downs is founder of Paul Downs Cabinetmakers.

Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

Stephanie Stuckey: “If we want this company to grow more, we have to improve our margins and, frankly, improve our product.”

Stephanie Stuckey: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”

Stephanie Stuckey: “I read the Harvard Business Review’s book on mergers and acquisitions and would literally underline parts and reread them before I went into the negotiation.”

Paul Downs: “I think a partnership can be really, really strong—if each partner brings a different thing to the table and they don’t kill each other.”

Full Episode Transcript:

Loren Feldman:
Welcome Paul, Jay, and Stephanie. We’re gonna talk manufacturing today, and I’d like to start with you, Stephanie. A little more than a year ago, you bought back the Stuckey’s roadstop business that your grandfather founded, and you recently decided to buy a manufacturing facility so that you can start making Stuckey’s pecan snacks—let me make sure I got that right: “PEE-can” snacks—in-house. Tell us about that. Why did you decide to do that?

Stephanie Stuckey:
Well, first of all, let me say, I pronounce it however the buyer pronounces it. So if whoever I’m selling to says “puh-kaan,” I’m going to say “puh-kaan,” but I naturally say “pee-can” because I’m from middle Georgia.

Loren Feldman:
All right, let’s talk manufacturing.

Stephanie Stuckey:
Onto manufacturing! So what we purchased—what Stuckey’s bought two weeks ago—was actually two manufacturing facilities. One is a shelling plant, so it takes the pecans in-shell, cleans them, shells them, sorts them, processes them, and then as part of that shelling process, there are a lot of pieces. What most people want to buy, if you want a snack pecan, it’s a half. There are a lot of pieces produced in that process as a byproduct, and so the company that we just purchased in Wrens, Georgia started making those pieces into candy as a way to become more profitable, because the secondary market for the pieces was not very strong, and so it’s a perfect fit for Stuckey’s.

We sell raw pecans, we sell pecan snacks, and we sell candies, which feature the pecan. The facility also does a full line of snack products and healthy snacks, so everything from simply roasted and salted to habanero chili, lime, pepper—all the flavors. That’s the trend in snacks these days, is that you have a fusion of flavors, and then you also have a lot of international: teriyaki mix or Mexican mix. We’re working on all that, and we’re being diet-friendly, keto-friendly. We have the decadent, sweet stuff as well. We got everything covered.

Loren Feldman:
What have you been doing all along? How have you been making Stuckey’s snacks to this point?

Stephanie Stuckey:
Outsourcing them, and a lot of retailers do that. They have their product made for them, even products that are branded. You can have the product made to your specification. It’s called private labeling or white labeling, depending on the process, but you have the product outsourced. Stuckey’s was founded by my grandfather in 1937, but he sold the company in 1964, and along with it, he sold the Stuckey’s original candy plant. We have been out of the candy-making business since 1964—since before I was born.

The reason we wanted to make this move—the main reason—is it allows us to be vertically integrated and we can drive down the cost. If we manufacture in-house and we already have a distribution center, and we distribute in-house to the retail operations that we don’t own, but we franchise, then our business model is a lot more vertically integrated and we can drive down cost. It also gives us the capacity now: We can private-label for other companies, so if we want to sell Stuckey’s pecan snacks to Whole Foods, for example, and they want to have a 360 product for pecans, we can make that for them, and we can private label it for Whole Foods now. We could not do that before, because we didn’t make our own product.

Jay Goltz:
Can you just give us some perspective of what a machine costs to do that? I don’t know whether these are half a million dollar machines, $40,000 machines. What does a factory look like that does this? Are these machines a zillion dollars?

Stephanie Stuckey:
No, but I do not know the full cost. The range is usually… we’re looking at five figures. But this is the candy end of it, I’m more familiar with. The pecan-shelling equipment, I wouldn’t even begin to know, honestly. The reason I’m also hesitant is this facility we purchased was founded in 1935, so actually two years before Stuckey’s. My grandfather did business with Atwell Pecan Company, so there’s a long history there. They have equipment that’s pretty old, but it’s been maintained, and they keep adding new parts. I don’t know what the cost would be to buy a new one at this point. I also know we buy a lot of used equipment, and then just repair it and have people who repair on-site. So we have, I wouldn’t say a machine shop per se, but we do have a workshop there on-site and repair a lot of our own machinery.

Jay Goltz:
And what happened to that factory you bought? I mean, did it just shrink over the years because of import? I mean, give us a flavor of: Why did this company that’s been around for 90 years all of a sudden just sell?

Stephanie Stuckey:
This is not uncommon with family companies, right? You get down to the third generation, and there’s not a successor who wants to run the company. And that’s what happened.

Jay Goltz:
So it wasn’t the market?

Stephanie Stuckey:
It wasn’t the market at all, no. I’m learning this business, but it’s fascinating to me—the world of mergers and acquisitions. I definitely took a crash course in it this past year. I read the Harvard Business Review’s book on mergers and acquisitions and would literally underline parts and reread them before I went into the negotiation, so I would try to know what I was doing. But it was a lot. It was a process. We were not like a lot of the mergers and acquisitions where companies for sale are publicized. This was a very specific product that uniquely is aligned with Stuckey’s that we have a long-standing history with, and it’s a family business just like we’re a family business. It was very personal.

That was the interesting part to me with family business sales and mergers. There’s this whole component that gets emotional. And it came down, at the very end, where we really had negotiated to the point where we just weren’t going to negotiate any further. And we said, “That’s it.” And I realized it wasn’t the terms, at that point. It was letting go of a business that had been in a family for a very long time. It was not publicly broadcast. We knew because our families had done business together for a long time.

My grandfather’s old candy plant—I wish I could revive that. There are a lot of reasons why we can’t, the main reason being it’s in terrible condition. But it also happens to be on a railroad right of way, and the railroad’s Norfolk Southern, and I am not going to get into legal battles with Norfolk Southern about our old factory being on their right of way. We had to walk away from that, but the facility still has a lot of the old Stuckey’s candy equipment in there. I was there two days ago looking at the equipment, and we’re going to try to bring some of that original equipment to our facility in Wrens, GA and repurpose it. The cool thing is a lot of this equipment is the same equipment that was used in the 1950’s.

Loren Feldman:
Stephanie, I just want to be clear on exactly what you’ve purchased here. You’re talking about the original plant that your grandfather used. I assume you bought that when you bought the company?

Stephanie Stuckey:
No, no, no, I didn’t.

Loren Feldman:
You just bought that now?

Stephanie Stuckey:
I didn’t buy it. I bought a completely different plant. I bought a facility in Wrens, Georgia.

Loren Feldman:
So the one you’re referring to that’s in the railroad right of way…

Stephanie Stuckey:
That’s our original Stuckey’s candy plant that is shuttered.

Loren Feldman:
And do you own it?

Stephanie Stuckey:
No, my grandfather sold it in 1964.

Loren Feldman:
But you’re gonna go in and take equipment out of it?

Stephanie Stuckey:
The guy who bought it is wanting to get rid of the equipment.

Loren Feldman:
I see.

Stephanie Stuckey:
Yeah, sorry for the confusion. There are a lot of moving parts here. We have not made our own candy, or our own snacks, since 1964. And that facility in Eastman, Georgia—that was built by my grandfather—has been out of family hands ever since then.

Paul Downs:
I have some questions. First of all, are there a lot of these pecan-processing facilities? Is this just something where there are zillions of them and this happened to be one that was on the market? Or is it very unique?

Stephanie Stuckey:
There are a lot of pecan-shelling facilities. I don’t know how many have the pecan-shelling plus the candy-making component as well. I don’t know the exact number. My business partner would know that. He’s a pecan farmer. I think that is less common, that you do both.

Paul Downs:
The reason I’m asking is, I have recently been involved in the acquisition of a furniture-making business—not as any of the principles, but just sort of watching this happen. There are lots of furniture-making companies, and the way this particular deal went down is that the person who wanted to buy had been doing business with the person who wanted to sell.

Stephanie Stuckey:
Yes.

Paul Downs:
And the business itself had basically no value because it had not been profitable. But there ended up being money changing hands, because a business, whether it’s profitable or not, it was running, it had employees, it had customers, it had a culture. It was something that you could take over, and you didn’t just start with an empty room and a bunch of dead machines. Because I think that one of the things that doesn’t show up on book value in companies is the value of having employees who have some idea of… they know what they’re doing.

Jay Goltz:
Potential. You’re buying potential.

Paul Downs:
You’re buying capabilities. Even if the current business model isn’t working, there’s still the opportunity to shift it. So I guess the second question would be: Did you have the business appraised? How did you do it? And did you end up paying the book value?

Stephanie Stuckey:
Yes, we had the business appraised. But it’s hard. Like you said, you’re buying a lot of things that don’t necessarily appear on the books, and my business partner and I looked at the option of: What if we just built a new—not necessarily taking over that Eastman candy plant that had originally been my grandfather’s, because it’s in such bad shape—but what if we just built a big warehouse somewhere and filled it with candy equipment and made our own candy plant? But it was exactly the issue that you raised. It’s also a culture, its employees, its people with the knowledge and experience.

We also purchased their client base. They have some 800 customers that we’re transitioning and taking over all of that. We did an asset purchase where we’re physically buying the equipment, and we met with all of the high-level management team to make sure that they would stay on board, and we would have that transition. The appraisal was largely the value of the real estate, the value of the buildings. The machinery, we did as best we could. It is hard to get a good evaluation sometimes of this candy equipment. It’s a niche market, but there are people who do just candy equipment. We were fortunate that some of the equipment—especially the candy facility, [which] was brand new—had just been purchased.

We think we got a good deal. Did we get book value? We paid above because we looked at the brand value, the customer base, a lot of what is very important to us that you don’t necessarily see on the books. And I will say—because I know Loren’s probably going to ask me how much I paid for it—I’m willing to disclose that, but the seller did want us to keep that confidential, and I have to respect that.

Paul Downs:
Can you talk about a ratio of the sale price to the annual revenues?

Stephanie Stuckey:
Oh my gosh, I don’t know it off the top of my head, and I’m not good without a calculator. I will say we purchased a profitable company, and their gross is in the $8 million range. Stuckey’s grossed a little over $2 million last year, so our hope is that we’re going to hit $10 million this year. I hope I haven’t disclosed something I’m not supposed to disclose. The one other thing I think is so critical here to stress—something not on the books—is how uniquely well-aligned this business was with what Stuckey’s does, and it filled a gap in our business model.

If we want this company to grow more, we have to improve our margins and, frankly, improve our product. I’m gonna have a moment of vulnerability here, but we are known in large part not just for road trips and being this roadside oasis, but Stuckey’s is also known for pecan log rolls and our pecans. And the quality has gone down over the years. This is our trademark, iconic product. I’m very particular because it’s my family name up there, but our core product, the pecan log roll, has suffered in quality, and I just think we had to get the basics right.

If your company doesn’t have your core product be something that is absolutely the best… And especially now, with changing consumer tastes where people are being more health-conscious in their food choices, when they do decide to be indulgent and have a sugary sweet treat, it has to be absolutely delicious. I just felt so strongly we had to get that piece right, and when I went to the candy plant in Wrens, Georgia, and I had a sample of their product and I tasted their pecan log roll, I said, “We gotta do this.” You can’t put the taste of a pecan log roll on a balance sheet, but that was critical for me.

Jay Goltz:
So is the major issue about quality being more selective with the pecans that you’re picking and discarding the ones that aren’t up to snuff?

Stephanie Stuckey:
Yes.

Jay Goltz:
So it’s about being more selective with the pecans that go in there.

Stephanie Stuckey:
In part. It also is critical, in my opinion, that the pecan-processing facility is right on-site. You can’t get pecans any fresher than that. It’s like catching a fish and grilling it right there on the dock and eating it fresh. The pecans are the absolute best quality. We’re processing them, shelling them, and then they’re literally going to the next warehouse. The two warehouses are separate, but they’re right next to one another. It’s going right next door to the candy plant.

And here’s the other thing—and I know it sounds hokey, but I promise it’s true—you can taste the difference if candy is made by hand. In this facility, there are workers on the production line who are hand-rolling the pecan log rolls. The turtles—they are squeezing that chocolate out, and they’re pressing those pecans, and it tastes amazing.

Loren Feldman:
They’ve been making a competitive product, right?

Stephanie Stuckey:
Yes. Right.

Loren Feldman:
Are you going to rebrand it as Stuckey’s? Or are you going to continue to make a competitor?

Stephanie Stuckey:
We’re going to brand it Stuckey’s. And here’s the positive: We’re not buying a brand that has household name recognition. The Orchards Group is the candy side of it—sorry, the Orchards Gourmet. Even I got the name wrong! Atwell Pecan Processing is the pecan side to it. There’s actually a third business that we bought, all under the same umbrella, which is called Thames, like the River Thames. I don’t know what the origins of that are, but it’s a fundraising business. And so we have bought all of these existing accounts that buy wholesale bulk pecans for fundraising, such as Lions Clubs, Shriners, Boy Scouts, Girl Scouts, churches, schools, and a lot of these clients have been clients of Atwell for decades, so this is just a really good customer base.

There are a handful, actually, that are large accounts, but the vast number of them are smaller accounts, which I like because we’re diversified. It’s not as if one of these customers might, for whatever reason, quit buying from us, and then suddenly, we’re in desperation mode because we’ve lost a huge client. We don’t have a client like that. It’s a good balanced mix of customers. It’s been a well-run business that’s a stable part of that community. I just think it was a win-win for us.

Jay Goltz:
I’m gonna guess, what are there 50, 60 employees?

Stephanie Stuckey:
Actually, 100 during peak pecan season. We talked about culture—I do think that there are some culture issues that we need to address. To the extent that manufacturing still has a labor-intensive workforce with unique human hands to make the factory run, you have to deal with the culture issue. I’d be fascinated with some feedback from the others on: How do you create a good culture in a work environment that is repetitive? You’re working in a factory. You’re looking at a conveyor belt for eight-hour shifts of pecans and picking shells out by hand, all day long.

Jay Goltz:
I’ve got this picture of Lucy on the candy line.

Stephanie Stuckey:
Right! I swear to God, if you walk through the factory, there is actually a conveyor belt where the pralines come along and where the fudge comes along, and you have to make sure you’re putting the little pecan half in the top of the divinity button. Absolutely, there could totally be a Lucy and Ethel moment.

Jay Goltz:
I have to tell you, in my other life, I spend a lot of time working with a guy who is pioneering getting jobs for people on the autism spectrum. We started something called Autism Workforce. I’m telling you, this sounds like a perfect application.

Stephanie Stuckey:
Wow.

Jay Goltz:
A lot of these kids, they love repetitive work. They thrive in that environment, and he has successfully placed people into jobs. We started with Hart Schaffner Marx in Chicago. Every kid stayed there, zero turnover. Now that’s going to change eventually, but he’s got researchers from universities looking at it. We figured out how to align the company with the worker and adjust the work environment—just adjust it, not completely overhaul it—just make some simple adjustments, and it works. These kids get jobs, and they’re loyal, and they’re hardworking. You talk about corporate culture—he had a lady retire from Hart Schaffner Marx send him a handwritten note telling them how life-changing it was for her to be able to work with these kids and how she felt great coming to work every day. It would make you cry if you read it. It’s socially good and good for business at the same time. I will be happy to hook you up with him, because I know for a fact: 80% of adults on the spectrum aren’t working and they’re ready, willing, and able.

Stephanie Stuckey:
That’s terrific. The challenge also for Stuckey’s—and I think other manufacturers face this because of the high price of real estate in urban centers—many of these facilities are located in rural communities, so getting a strong workforce in some of these small towns that may have a population of 2,000 is also a challenge.

Loren Feldman:
Paul, did you have any thoughts on Stephanie’s question?

Paul Downs:
I have many. Let’s start with the numbers. You said $8 million. You’ve got 100 employees. Is that 100 full-time equivalents, or at peak during some point of the year, you have 100?

Stephanie Stuckey:
120 peak period, and then the core base is actually 20 management-level, supervisor-level. And then peak pecan season—which is August through… it’s wrapping up right now, so maybe the end of February—is going to be 120. Then year-round in the facilities round total, we’re right around 80-ish. And if my business partner were on the phone, he may be correcting me. He is the one day-to-day running the plant. He has moved to right outside of Wrens. He’s moved to Augusta and he’s running the facility.

Paul Downs:
In any case, let’s say it’s 80. You’ve got $100,000 in production per employee, and that’s low. And so it kind of implies that the wage rate is also relatively low. What is the hourly wage for a line employee—the one who’s doing Lucy’s job, let’s say?

Stephanie Stuckey:
It varies because they have a pay-increase scale. I’m gonna get this wrong. I want to say it is $8 to $12, but it could be as low as $7.25.

Paul Downs:
Okay, so I presume you’re horrified at all this $15 minimum wage talk.

Stephanie Stuckey:
I’m conflicted because… I don’t want to get political, but I’m a former state representative, and I was elected as a Democrat. I remain a Democrat, so I tend to support Democratic policies. I certainly want to have people earning a living wage. But the challenge is, for a mid-sized business like Stuckey’s, when you raise the minimum wage and we’re operating on tight budgets, then something has to give.

And so it’s: Do we lay off employees? Do we switch to more integrated processes? Become more efficient? Maybe get some technology in place that can replace some workforce? Or do we raise our prices? Do we do a mix of all that? I’m following that minimum wage debate as best I can while trying to work 12-hour days. What I’m hearing is it’s a four-year phase-in, so hopefully this isn’t going to happen to us overnight. But we’re going to have to think through it. It will affect our cost of doing business, and it will likely affect our price structure, and so I hope that people who support the minimum wage increase also support paying more for product, because we will likely see an increase in product costs.

Paul Downs:
Yeah, I agree.

Jay Goltz:
I have to stop you for one second.

Paul Downs:
Wait, I’m not done, Jay.

Jay Goltz:
No, I have to make a correction here that’s very important, that I hear all the time. You’ve conflated the words “living wage” and “minimum wage,” and they are two different things.

Stephanie Stuckey:
You’re right. Thank you. Yes, I’m sorry about that. You’re absolutely right.

Jay Goltz:
It happens all the time, and you know, that $15 an hour isn’t going to support a family of six. But that’s all.

Paul Downs:
Next question: What’s the average age on the production line?

Stephanie Stuckey:
I don’t know. I can only say from looking at the employees that I would guess late 20’s through 30’s.

Paul Downs:
And average tenure? Is there a lot of turnover?

Stephanie Stuckey:
Gosh, I wish I knew better answers, and I’m sorry if I sound ignorant, but my partner is largely running the company day-to-day. I don’t know the turnover. He has told me that turnover is a problem, especially with the newer employees, but there are employees who have been there for many years, and there’s a reward structure. You do get paid more over time.

Paul Downs:
The reason I’m asking these questions is because all this stuff is, in my mind, the foundation of a company culture. I don’t think it’s actually possible to make every kind of business meaningful, but you can make the reason people work meaningful. In other words, remove some of the negatives and just identify, “Okay, you get to support your family. You get to live in this place. You get to go fishing on Saturday.” That’s what happens when we have a successful business.

Loren Feldman:
Stephanie, I want to go back, you’ve mentioned a partner a couple of times, and I think it’s something that we should probably know more about. Correct me if I’m wrong on this, but it sounds like in this transaction, Stuckey’s is clearly the big brand. But you bought a much bigger company. I think maybe four times the size by revenue, if I heard you right. I’m wondering if that was difficult to finance and I’m wondering if that’s where the partner comes in.

Stephanie Stuckey:
The partner came in to help me run the plant, and he’s got the business acumen, and most importantly, the pecan background. My partner is R.G. Lamar, and he is well-known in the Georgia pecan community. He’s served on the Georgia pecan commission. He’s done trade missions with the Georgia Department of Ag. to Taiwan several times to promote export of our product. We just sold several container loads of pecans to the Taiwanese. We’re hopefully going to be selling some to the Chinese. Let’s hope some tariff relief is on the horizon. He has expertise in the pecan business and manufacturing. He had a lot of relationships that helped broker this deal.

Now, with regard to the financing, what I can say is, yes, on the books, the company that we bought is more profitable, but Stuckey’s has the brand recognition, and we’re a name. We’re the parent company. That’s what’s not on the books, is that we have a brand that has some very real value that we think, now that we’ve got the capacity to produce in-house, we can really start turning things around. It’s gonna make a big difference for us.

Jay Goltz:
You said a bunch of things that, together, might give you some relief on the minimum wage, in that you’re vertically integrated. You’ve got a strong brand name. You’re not selling to Walmart, where your margins are just going to be razor thin because it’s so competitive. The fact of the matter is, when you look at what you’re paying for labor as a percentage of the retail price, which in some cases you’re going to be selling retail, you should be able to absorb some of that increase, because there’s a big difference between where it’s being made and the multiple.

Stephanie Stuckey:
That’s right.

Jay Goltz:
You should be able to make up some here, make up some there. Maybe you’ll lose a couple of contract customers that are totally about price. But at the end of the day, given that you do have this strong brand name, that means margins, and you should be able to navigate this, I think.

Stephanie Stuckey:
I hope so, and I think another important point with a minimum wage increase, if it does go into effect, is that we’re all going to be impacted. It’s across the board. Everyone’s going to have to be managing how they deal with their pricing as a result of this. It’s hopefully somewhat of an equalizer. This is an unknown for me, and I turn to others on the panel for their feedback, but how does that impact employee morale and their ability to perform? If they’re making more, are they going to perform better? Is there going to be a correlation with productivity, if you pay workers more?

Jay Goltz:
I think the bigger issue is, you’re going to have a better selection of employees to hire. That’s what’s going to change, that there are going to be people who are going to take a job working for you who wouldn’t have taken a job at seven and a quarter. You’ll have a better selection of candidates. I think that’s the biggest impact.

Stephanie Stuckey:
Here’s the concern I have—now I’m getting very personal—but I have an 18-year-old son. I would love for him to get a summer job. Is it going to be harder for kids like my son or young men like my son to get employment?

Jay Goltz:
Absolutely, that’s where it’s coming from. Why hire a kid who’s gonna need more direction, when you can hire an adult for the same money? That’s absolutely gonna be one of the unfortunate… it’s gonna come from somewhere.

Loren Feldman:
I’m still curious about the partner. And, Paul, I’d like to throw this at you. You’ve had an experience with a partner that was certainly mixed. I’m wondering if you have any questions for Stephanie about this relationship.

Paul Downs:
It sounds like he’s a better partner than my partner would be, in terms of knowing the industry. I mean, the story of my partnership is really long, but let’s just say the person who made an offer to me didn’t know anything about furniture manufacturing, and I didn’t know anything about furniture manufacturing. That’s not a recipe for success. We didn’t have the brand. We didn’t have the community connections. We didn’t have any of the pieces that Stephanie described. I think a partnership can be really, really strong—if each partner brings a different thing to the table and they don’t kill each other.

Loren Feldman:
How’s that going so far, Stephanie?

Stephanie Stuckey:
It’s going great. We have compatible skill-sets. I am doing the marketing, the branding, and sales. And R.G. is managing the manufacturing, the integration. He’s supervising our budget because we have to do a whole new budget now that we’ve merged with three companies. He’s doing the export business as well. He also has experience with grocery channels, and what we call “alternate channels,” and is helping me navigate some of those waters as I’m pitching sales to larger retailers. But we are not pitching to Walmart for the very reasons that you articulated.

Jay Goltz:
Is he first-generation?

Stephanie Stuckey:
No, he’s a second-generation pecan farmer, and he and his father managed the Stuckey’s pecan orchard for decades. That’s another thing that we have: family connections.

Loren Feldman:
So you’ve known him for a while.

Stephanie Stuckey:
Our families have known each other for a long time. Here’s another thing. He’s—I don’t know the exact age—I think he’s 15 years younger than me. That’s a bit of my succession-planning. I still want to see if I can get someone on the Stuckey’s side of the equation to step up to the plate at some point and be the successor to the Stuckey’s side. But he’s younger than me, and I think that’s a really healthy dynamic. We’re not both dealing with retirement issues at the same time.

Paul Downs:
Getting back, I would think that this issue of, “Is a minimum wage going to price out the young,” what it’ll do is it’ll price out anybody who presents a problem. I don’t think that smart employers are going to look at it as young versus old. They’re gonna look at whether someone checks the basic boxes of being a good employee.

Stephanie Stuckey:
Isn’t that true already?

Paul Downs:
No. It depends on the unemployment rate, honestly.

Stephanie Stuckey:
Good point.

Paul Downs:
Employers will make more or less of an investment depending on what alternatives they have. And if they absolutely need a warm body, they need a warm body.

Stephanie Stuckey:
The other interesting factor to me is, throughout Stuckey’s, we have employees with criminal records, and I think it’s a great opportunity. I used to be a criminal defense attorney, so I’m a big believer in giving people a second chance. But I’m interested in how this minimum wage increase might impact that population. I have not read the details of the bill, but it would be nice if—I know that there are some government incentives at the state and national level if you hire people who have a criminal record. I hope that there might be some thought to increasing those benefits, because I would hate to see those individuals—that population—having a harder time getting a job. Actually, some of the best workers we’ve had have criminal records.

Loren Feldman:
I think there is a credit included in the legislation that passed in December that does give you a credit for hiring people from various populations, and the one you describe is among them.

Paul Downs:
I know of several woodworking businesses that—one in particular—hire exclusively ex-offenders. I’ve talked to the owner of that one about the issue of establishing a company culture, and one sort of interesting fact popped up in that conversation, which is that even though you would think that that’s a very motivated population, he still has about a 35-percent failure rate on hires. A pretty high proportion wash out very quickly.

The second thing, on autism, I’m going to preface this by saying I have an autistic son who struggles to work, and so I’m extremely sympathetic to Jay’s idea, just that there may not be a concentration of autistic people anywhere near what you need to staff a factory. It’s a nice plan, and I hope you do it.

Jay Goltz:
Even if it’s just five, great. That’s five more. That’s all.

Stephanie Stuckey:
Right? I think it’s terrific. The facility we bought is right outside of Augusta, Georgia, so there’s a pretty good population center. It’s like a 20-minute drive. There might be an opportunity to tap into that community there.

Paul Downs:
Then good. Great.

Loren Feldman:
Stephanie, I want to take a step back and take the larger view of this for a second. You took a big leap when you bought the company in 2019. This seems like an even bigger leap. You’re even further invested, taking bigger risks, but of course, bigger rewards.

Stephanie Stuckey:
Absolutely!

Loren Feldman:
What are you most worried about? What concerns you the most?

Stephanie Stuckey:
You know, there’s one thing I meant to mention earlier, when we were talking about the risk from the initial purchase of Stuckey’s. This is a multiple of that amount of money to purchase this manufacturing facility. I did mean to bring up how we financed it, and it was through an SBA loan. We did a 7(a) loan. And I think it is important—so many people with the Cares Act talk about the PPP, which of course is a benefit that has been a huge boost to businesses, but these loans for acquisition of facilities are also benefiting from the Cares Act round two. The first six months of our payments, the SBA is going to pay up to $9,000 of our mortgage payments. That’s a boost that’s not always mentioned in the news.

Loren Feldman:
Nice.

Stephanie Stuckey:
What keeps me up, or what worries me about this, I guess, obviously, it’s a financial investment. The SBA loan, it’s a great thing if you can get it—that’s a whole other episode: Trying to get financing on a big acquisition for a small business. Because it typically requires you having good credit, which my business partner and I are fortunate to have, but you also have to have collateral. The SBA loans do require you to put up personal collateral.

Loren Feldman:
So you bet the house?

Stephanie Stuckey:
My house is collateral now, yup.

Jay Goltz:
Welcome to entrepreneurship! I’m glad there’s some honesty out there, because that’s the way it works. Because I gotta tell you, especially now with the banks, it’s about collateral, collateral, and collateral.

Stephanie Stuckey:
It’s incredible. Not only did I have to put my house up as collateral, but then I had to make sure that the home insurance policy listed the bank. I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well. It was just phenomenal. Of course, everything gets reduced in value. Even though my home might be worth a million dollars, they’re gonna appraise it much lower for purposes of the collateral.

Jay Goltz:
The fact that you pulled it off, more power to you. Good for you.

Stephanie Stuckey:
It took six months of doing nothing but filling out paperwork and almost daily conversations with our bank. And then the dirty secret of these SBA loans—and they are good if you can get them—but you have to have a loan processor who gets a percentage. And so you have to not only get all the documentation together yourself and have daily conversations—I had the bank vice president on speed dial. I had his personal cell. He was home with COVID, and I was calling him.

Jay Goltz:
Let me ask you this: Did you have experiences with bankers, where you went through this for a month, two months, three months and finally they said no?

Stephanie Stuckey:
I did have a mini-experience like that, but it was only for a couple of weeks. But it is fascinating how conservative they are and what loans they will give out. Because to your point, I had one bank I was trying to get money from early in taking on Stuckey’s, and it was just to get some working capital basically. They backed out because they said, “Well you own and operate locations that sell gas. We don’t work with them because the oil prices are way too volatile, and we won’t do business with Stuckey’s.” And I said, “We don’t own any of our stores. We franchise them all.” I said, “We don’t even operate them. The licensees operate them. We do not own, we do not operate gas stations,” and they said, “We’re still not gonna do it.”

Loren Feldman:
Stephanie, how many banks did you have to talk to?

Stephanie Stuckey:
For the SBA loan? Just one. Now, I will give a shout out to small banks, local banks, because we went through Planters Bank in Hawkinsville, Georgia and my business partner had a long-standing relationship with them.

Loren Feldman:
Stephanie, I hate to do this. This was a great conversation. I appreciate your openness and all that you’ve shared. But I’m going to have to close the conversation. I had all kinds of other stuff that I was hoping to get to. We’re just going to have to save it for another episode. My thanks to Paul Downs, Jay Goltz, and Stephanie Stuckey. Thanks for sharing, everybody.