Well, this is quite juicy or should I say quite Savory Mr Beast is teasing us with a potential IPO for his chocolate chip cookies brand feastables as well as potentially a beast Burger That's right, Beast a burger as well. Given this tweet from Mr Beast maybe I should IPO festivals and Beast burger. While they're relatively small so you guys could share in the growth, feel pretty confident we can easily 100x the revenue that we're doing. But I don't know if that would make my life too stressful or not.

That, of course was met by an outpouring in support of people blindly saying they would love to invest in Mr BEAST's food brands no matter the profitability or the numbers they want in. an equal number of people shouted at Mr B saying no, you don't want The Regulators in your life, that's too stressful and then of course you have some other people like. well as long as you do the right thing. Having Regulators in your life isn't stressful, just do the right thing.

So let's try to break all of this madness down because there are some very important things that we have to understand about the restaurant industry, the ghost kitchen industry, and how all of it works. Let me give you a very simple example here: Mr Beast Tweets that Beast Burger has shared over 100 million dollars in Revenue with restaurants Across America Heart face and flattered face. They keep most of the revenue from the orders they fill for US Ah, what a wonderful structure of a tweet to somewhat mislead the audience. Now I'm not trying to bag on Mr Beast here, but I'd like to add some perspective that I think you might find useful.

I'm going to make up a scenario here and then I'm going to show you real scenarios. Let's say that you sell 100 of Mr beef's burgers and Mr B says Hey in order for you to license my name, you just have to pay me 10 bucks. We'll call it a little 10 royalty fee, right? right? So that's going to go over to Mr Beast right away. But from this 100 you've got to pay labor supplies, packaging, rent all of the things that would go into the cost of actually making the burgers right.

and so all of these costs. Let's say with your operating expenses, your Administration your rent, your advertising for your restaurant everything included ends up leaving you with about 85 and then you pay Mr Beast his ten dollars. Now you're left with five dollars. Now you pay taxes to the Ah, the Ah, and the S and maybe you're left with three dollars for every one hundred dollars you sell in.

Revenue Now when you look at Mr B's tweet, it looks a little bit different because here it makes: Mr Beast Continue the image of being the philanthropic Creator He is the giveaway individual. Hey, you know what? The hard-working restaurants keep mosting most of the revenue right from the orders they fill for us? that's right. But if there are net margins are terrible and let's say your licensing fee is ten dollars, you might be making 10 bucks for every three that they are making because that, after all, is the nature of the restaurant industry. Most of the cost goes into actually having the facility.

the employees, the chefs, the uh, the cleanup staff, the tables, the advertising for the building, everything. Now the idea of a ghost kitchen model is really interesting and it looks really complicated when you look at it like this. So I'm just going to go ahead and make this very, very simple. Basically, let's say that you are a restaurant owner in Los Angeles California and you've already got Three Chefs a couple line folks, a couple servers.

You've got a small all Mexican burrito place, but you've also got grills and you're easily able to whip up french fries and burgers. So you reach out to Mr Beast and say hey, we'd love to have some more order flow come in. That's great, but every Ghost Kitchen produces or manufactures or should I say Cooks the Beast Burger slightly differently. This is potentially why the reviews for Beast Burger are somewhat mixed.

The app has an average review of about 4.3 out of 5 stars, and when you go to Yelp for individual locations across the United States you tend to be a little bit closer to a two or two and a half star rating. There's a lot of variability in the kind of product that you're actually getting. That's because individual restaurants are simply taking. Oh okay, somebody wants a burger and fries.

We'll go ahead and put that into the Mr Beast Burger bag that they had to pay for. We'll use the burger, buns and burger patties that we had to pay for the restaurant right. and then we'll go ahead and deliver that to the person. and Mr Beast and the Beast company, which might be a partnership, ends up getting his fee off of the top line revenue, not necessarily off of the profitability of the restaurant.

The restaurant could be losing money on every single burger, but the Beast brand and partnership continue to potentially make profit. Now, if you IPO that sort of franchise model, what you're really doing is you're ipoing a McDonald's style of business model and in this video, we're going to review whether or not that business model is profitable and then we'll look at some risk factors. So let's first look at a business that does not do a lot of this sort of franchise model because after all, a ghost kitchen is really a style of a franchise. You're really putting the work of the actual restaurant on somebody else.

But you're giving them the packaging The Branding of Mr Beast. You're giving them everything. Essentially, they need to succeed, but they now have to deliver on the quality and the purchasing and the delivering. And the Fulfillment of the customer complaints.

And and everything right? Hey, quick interjection. If you like the way that I explain things about fine Finance or money, check out my programs on building your wealth. Link down below. They're the only sponsor for this channel.

My goal is to help you build your wealth Whether you're looking to make more money as a hustler, whether you're an employee or self-employed you're looking to make more money by investing in real estate or buying your first home. or you're trying to learn more about the stock market and beginner. Finance or Advanced Finance Check out the programs link down below. But then again, most people order through the Mr Beast app and that is why Mr Beast and the company that's working with Mr Beast get their revenue split, right? Okay, fine, so what do you have here? Well, this is cheesecake.

This is one extreme of the restaurant model where you actually have a business that does not franchise. Now, what's really interesting about that is if you go to the Cheesecake Factory and you and your family spend one hundred dollars on food at the Cheesecake Factory how much money do you think the Cheesecake Factory actually makes? Remember in my Mr Beast made up example I said maybe the restaurant brings three dollars to the bottom line after everything? Well, let's take a look at this red revenues of 784 million dollars in the three months ending in September and net income of oh Dear Lord. negative The Cheesecake Factory Actually lost money? Okay, fine then well let's go to the nine months ending in September because they were profitable there so we could actually see hopefully some profitability right? So the Cheesecake Factory made 46 million, four hundred and twenty one dollars if I divide that by how much money the company sold in terms of product Revenue right? How many times did they sell you that miso salmon, right? rice lunch portion So good? Well, 2.4 billion dollars worth. And if I divide those two into each other, you get 1.92 That means for every 100 of product that Cheesecake sells you, they only keep 1.92 The restaurant business is very, very unprofitable.

Let's look at another business and this one happens to do burgers. This is Red Robin Gourmet burgers. Hey, I happen to have worked for that company before. They barely have any any kind of franchise Revenue because most restaurants are corporate owned in the three months ending in October or ending October 2nd they had 282 million dollars of Revenue if we look at their net income.

Oh oh dear. Oh, they also lost uh, 12 million dollars that quarter. Oh dear. Actually, they not only lost 12 million that quarter, but they lost money last year.

they lost money in the nine months ending this year, they lost money in the nine months. And okay, uh, Red Robin's actually not making any money selling hamburgers. Okay, let's go to a different company like McDonald's Ah, what do we have here? So take a look at this. McDonald's is an interesting one.

They make the bulk of their net income from franchise restaurants. See in company owned restaurants, they have a gross margin of only 16. Which means basically, if you go 100, you go down to 16 percent before you actually start spending money on like your corporate offices and your advertising and stuff. And that would bring your net even lower.

So if they were only a corporate owned restaurant chain, McDonald's would probably be in the same boat as cheesecake or Red Robin. In other words, negative. In fact, if I subtract out their franchising revenue and franchising costs, they'd be negative. 300 million dollars of income.

Okay, so the restaurant business itself not very profitable. But McDonald's isn't negative because they have the franchise model which has an 83 percent gross margin because of the McDonald's brand. In other words, the individual franchise owners. The individual restaurants are the ones who get screwed.

It's the franchise model that's profitable. That's where the money is made. In fact, look at this: The net income for McDonald's is nearly 2 billion dollars on revenues of just under six billion dollars. That is thirty three percent net income.

Why folks? Because they use the franchise model, they don't run the kitchens, They don't make the food. They don't deal with the customer complaints, the fear of spitting the food. They don't deal with the returns. They don't deal with all of the garbage that goes into Running a Restaurant Running and owning a restaurant is a terrible, terrible business model.

But Mr Beast could actually be onto something with an IPO of Beast Burgers or Feastables because guess what? and I don't know this about feastable. But I know this about Mr uh, at least Beast burger. and I'm assuming it about feastable. They aren't actually making the food, they're selling you the brand.

they're selling order flow to restaurants. And that is actually a profitable business model now. Mr Beast claims that at one point he made about three million dollars from Beast Burger in 2021. and as you can see here, this Forbes article suggests that three million dollars of profit for Mr Beast and probably his well actually says his stake generated about three million dollars in 2021 represents just four percent of the company's sales that year.

That's Honestly though actually pretty dang good because think about it, none of the stress of running the restaurants and you're taking four percent to the bottom some line potentially as the franchise fee. Although I expect the franchise fee is probably closer to 10 percent and maybe Mr Beast takes four percent and the other people who operate the app and everything takes six percent. So really all Mr Beast has to do is throw his brand on hamburgers made by other restaurants and an app made by an outsourced company and Boom! you have a revenue stream for Beast Burger. Now, if Beast Burger were to IPO you would expect that that would be a partnership between the brand that made the app Beast burger and Mr Beast and so you would have an ownership in that franchise model that franchise model.

If they can keep their reviews up, which right now are kind of mixed, could rival a McDonald's in the future. However, you have a little bit of a risk factor. the big lines come to In and Out because they keep prices low. The average cost of a Mr Beast Burger is between nine to eleven dollars, whereas the average price of a McDonald's Big Mac in the United States is 4.65 less than half of the price.

So there's definitely a lot of competition in this space. and there's also a risk that what happens if people multiple times try Beast burger and local restaurants are either doing the orders wrong or people don't like the quality of the ghost kitchens that were chosen and then they don't come back. I Hate to say it, but I've got a seven-year-old and a five-year-old that love Mr Beast They watch his videos. I'm a big supporter of them watching Mr B's videos and I'll watch Mr B's videos with my kids in bed or on the couch.

Whatever. We've tried Beast Burger a few times and we personally wouldn't try it again. but could the IPO of Mr BEAST's Beast Burger be wildly successful? Maybe not in this market because I wouldn't recommend anybody IPO anything really in this sort of Market But could it potentially be successful against a McDonald's Absolutely. the franchise model is where it is at and so I'm a big fan of this.