Keeping It Legal in Orlando, Family Business & Political Correctness

How are you doing, Felicia?

Hi, Chris. I'm great. How are you?

Good. You're in Orlando, Florida?

Orlando, Florida? Yes.

Awesome. So tell me a little bit about your business and your question.

Absolutely. So I recently, this past year, joined a family business of child care. My father and stepmom own for child cares here in Orlando, in which they sort of branded under the same name. Recently, unfortunately, they got divorced, and out of the four, each of them got two.

With that comes some legal challenges with the name. Everybody wants to keep the name because they've grown the business under that and reputations and. And so forth. However.

My challenge now coming in and starting to run the two my father has, is that the management style and the direction of the two we have versus the two that the other party has are very different. And there are, of course, licensing issues where in the state of Florida and how things are licensed and funded are all under that name. But we have. Between. I would say, my father and myself, we have a bit of. There's some disagreement of how important is it to maybe rebrand and change the name of our two to completely separate from the other, or does it make sense to find some cohesive middle ground between all four of them?

Okay, so did you always like your stepmom or did you always know that it would end in divorce?

I did not mind her, but I think.

I didn't mind her.

Yeah. I mean, I didn't mind her, but no.

Do you have any say in who your dad's dating now?

No, but I should.

Felicia, this is a great opportunity for you to step in and say, listen, dad, you might not be the best at this, but I know women. I have a great intuition. And so I'm gonna do your Tinder profile for you. Boy, how.

That would. I just can't imagine doing a Tinder profile for my mom.

Can you imagine that?

Oh, I think things got. Things got sexy on there that would be like. And throw my phone. Okay. How far apart are these locations?

They each range, let's say, about 15 to 20 miles apart.

15 to 20 apart.

But our. Let's say one of ours. Yeah. Is about.

10 miles to her closest one.

Okay. 10 to her closest. And as far as revenue and volume. Like, when you talk about childcare, do you talk about how many kids each one will hold or capacity? Or how do you. How do you measure?

Absolutely. So, yeah, there's. There's a certain. There's a couple different ways to measure that. So, of course, number of kids, capacity, and then some of some other criteria falls in whether they're going to be cash pay or they're funded by the government. And depending on if they're funded, where on a spectrum they fall is how much you sort of receive per child. So let's say socioeconomic area is going to play a part. If it's in a, let's say a nicer area, they're going to be more cash pay and some of them are going to be what we call 4C kids and that's the government funding.

So the two that you have, what is the capacity for those?

So one of them, the capacity is 155 and the other one, the capacity is 205.

And what are we at?

The one with 205, we're close to capacity. We're probably at 200. The one with 105, we're at 50.

Okay, and what's the area like with the one at 105? Is it more cash or more funded?

More funded. So we're about 95% board C or funded by the government.

Okay.

Now the parents still have to pay a portion of it, but it is predominantly funded by the government.

So coming in fresh, what is your strategy to get the one that is at 50% capacity full? Like, do you have a marketing plan?

How do you fill it?

Yeah, so I am now just now recently spending a little bit more time there. There is a transition of getting the right employees there and the right director. Partly we just did not have the right mix, I think of a team that was going to help grow that. Now from our standpoint, yeah, it's going to be a combination of marketing. We're also looking at a third party program that comes in and actually rents out the space or leases the space. And it's for school, kind of a separate third party. They call it Head Start program in which we've gotten qualified for because we have the space. Esthetically, the school is beautiful, so it's all there. There's just very low enrollment.

So the.

So part of it is using these third part, possibly the third party program, but then, yeah, putting a little bit more effort and energy into getting back out into the community. That area is less government and more cash pay.

So the one that's at capacity is more cash.

No, is more government funded.

Oh, is more government. Okay.

Yeah, so 95% government funded.

So you have the one that's at capacity. If you change the name, would it really matter because you're at capacity?

So from a marketing standpoint, no, but it would matter from a legal Standpoint. And we have to redo our licensing.

Oh, so you have to go back in and get license from the state all over again. And how long. How long and painful and costly is that process?

Well, that's. That's kind of the question, you know, from one thing, I mean, it would take time and, you know, I don't know if that would mean having downtime for us as far as from funding. There is a possibility of that and there's a possibility that getting relicensing. They have to come back out. You know, they're rechecking the facility. There's the possibility of hiccups coming up and not getting approved right away. So kind of opening a can of worms.

And there's nothing in the process where you can just change the name?

No, no.

Okay, so then your concern is that she will not manage hers. The step. Your stepmom. Ex Stepmom. That she won't manage hers well. And that the reputation will suffer.

Correct. Because there's already been a couple incidents now, of course, from my, let's say, insurance standpoint, I mean, you know, things are going to happen, but she's already kind of dropped the ball on some big things. Whereas if press got a hold of it, it would be a PR nightmare.

Because her management style is very different.

Yeah. And. And also she could be vindictive too.

Right, Correct. Which I would not put that past her.

Okay, so do we have. Besides the. The fact that it's painful, do we have a real idea of how much it would cost you and what the, you know, what the real pain level would be to change it? Because I would lean towards changing it, but.

Okay. And I. I personally feel that way.

But again, what does dad say?

Been in the business. Well, he's been in the business for a longer time. I think for him, he sort of believes that the process is going to be so painful that, you know, or if things. We don't get license for the same number, if things aren't, you know, we're somewhat grandfathered in, in some respect for certain things, so. And sort of looks at, maybe she'll be okay. You know, we can sort of separate ourselves with websites and social media, but at the end of the day, people associate the name and the logo and what they see.

Okay, what about different option about buying her out?

That's just trying to understand, like what the pain and the cost would be. Okay, what would the pain and cost be of buying her out?

Well, she would have to incur the same process of changing the licensing. You mean Buying her out of the business completely. Yeah.

It'S an option. We've talked about buying at least one. I think she would let go of one of them because she really doesn't care to deal with it. But. And that's absolutely on the table. I don't know that she'd be willing to let go of both of them.

But like, so what do give me an example of a daycare center. If it makes.

I don't know, in a year it makes a $10,000 in profit. Just to come up with a weird number. $10,000 in profit. What would it sell for? Like, how many times earnings does a daycare center or a child care center?

I don't know, three or four times.

Thanks. So if he was selling that. And here's the thing. So depending on if they own the building or if they're just leasing the building.

Well, the bill. Usually in those deals, the building is a separate transaction.

Yeah. It just depends. I.

Because she owns them. I, I really. I don't know the answer to that. Do you.

Do you think that you're a better operator than her and you can improve the business?

Yeah.

Okay, so let's say that they sell for three times earnings. So it's going to be. I'm guessing it's two to four times. But let's say it's three times. We'll pick the middle. So, okay, let's say it makes $10,000 a year and you pay her $30,000 on a note and you, you know, you pay her so much a year and you can increase the profitability. And there's synergy between having four. Right. So there's scale so that you're going to save money. So if you own all four, there's scalability, so you can buy more toilet paper, more this, you can share people across because they're close enough, where you can have one person that's a floater in case people call in sick or, you know, there's just, there's there's a lot of things that you can pick up by, by owning four that would save you money. And so if you can increase the profit per location and you can make her go away, and there's economies of scale. In three years, you're done with her.

Yes. Yeah.

I, I would personally buy, Buy her out, especially. Like, what, what are your ambitions, Felicia? Like, do you want to run this for your dad? And do you have kids?

Absolutely. That's. That's the plan to, to, to run it for him and to. If not, let's say she decides she doesn't want to be bought out and she wants to run the businesses herself. The idea is to either purchase additional existing ones or build from the ground up multiple locations.

Okay. Do you have kids?

Yes.

You do? How many kids?

One. Just one.

Just one. You stopping at one?

Yeah.

Okay.

Yeah.

What if? What if? So think about the startup cost and the licensing and all that that you'd have to go through to open a new location. Right.

Would you pay your stepmom four times earnings to make her go away and not go through the pain of licensing and getting another one? Would you pay her five?

Yeah. Yeah.

So why don't you make her a deal she can't refuse? Like, this happened in my divorce where I was like, I, you know, divorces, it's never 50 50, but there is brain damage. And so my divorce, it wasn't 50 50, but I didn't have a lot of brain damage, so I paid more, but I made it up because I didn't have brain damage. So I just went to work and made more money on my business.

Where I could have been down for two years fighting and spending hundreds of thousands of dollars with lawyers. I just like, hey, let me make you a deal. And you know, you can play the card on the other end where, hey, our reputation might ruin you.

Like, she's got liability in this too, right? So you can play that up too.

Absolutely.

So what do you think her fears are on her end of sharing the name with. With yourself and your father? What would be the downside for her? Let's step into her shoes for a second.

Into her shoes?

You know, the same. That we might do something vindictive to. To tarnish her reputation.

That's why I was hoping you'd say, I don't have a kid.

Yeah, because you could tell, like, I don't know anything about kids.

But that, that didn't work.

What do you do?

Yeah, but you could tarnish her reputation. What else would she be worried about? Could you undercut her on price?

We're not close enough. The way daycare centers work is basically your target market is going to be within like a 3 to 5 mile radius. People aren't going to be driving across town. Even if you're amazing for childcare, they either have to be close to home or close to work. And we're not so much in a close proximity to be direct competition.

Okay, well, how else could you affect her business negatively?

Could you steal her people?

I mean, we could steal her employees.

I'm just throwing Stuff out there. There has to be an angle where you can start the conversation with, listen, we don't want to ruin your reputation. We don't want you to ruin ours. We don't want to steal your best people, but we know who they are. And. And we don't want you stealing our piece.

They would work for us. Yeah.

And so I. And so just kind of say so. You know, really, the offer we'd like to make you is we would like to acquire the other two, make it worth your while, and then you can. You'll have enough to go open another one, if that's really what you want to do. But we'll be done with this and you can. We can all move on.

Yeah, no, it's true. It's. It's a. It's definitely a different way to look at it.

Because I think she's also running into challenges now of running it on her own because she did not handle all aspects of the business, and now that she has to. She's having. She's having some difficulty with it.

What is she. Is she not good at bookwork or the people part or which part does she struggle with?

She's not good so much with. Well, some of the people, but mostly the accounting, the insurance, the legal aspect.

Yeah. So bring that up. It's a lot of work, and there's liability.

A lot of work. And she's run into some problems because she hasn't done things correctly, and they've. And they've gotten her into trouble now. Legal trouble.

Yeah. No, that's perfect. So bring that up. Don't be afraid to bring that up before you make the offer. Like, I know you're in legal trouble.

And it can happen. You know, don't. You don't want to present it in a way where it's a fight. You're just like, I know you've ran into some things and you've had some bad luck, and that's just the nature of the business, but that isn't going to stop. It's going to keep going. And we want to make this easy.

So we're not.

Yeah. We're not diminishing the fact that she's entitled to it. We're not diminishing the fact that she probably could figure it out and go. We're just saying, like, hey, it's a lot of work and it's a pain in the ass, and you're learning that, and we'll. We'll pay you, and then, you know, structure a deal where you're Paying her out over three years or four years.

No, it's true.

So you don't have to come up with a lot of money up front.

Yeah, absolutely. And then you're not putting, you know, we're.

Acquiring the, the long term goal of having multiple locations and not having.

To change the name and you're familiar with the people there and it's kind of a win win.

Yeah, yeah, absolutely.

Because you're gonna have to hire people. You're starting from scratch.

Okay, well, that, I think that's a better solution is even if it's, you know, if child care centers sell for two times earnings, pay her three. But just make the terms where you're paying her out over three years and she'll, you know, she'll have enough to go start another one and she won't have the headaches. What will your dad say about that?

I think he would, he would love the idea. You know, I think it's more or less like you said, packaging it where it. It is in her benefit where we are paying a little bit more and she can look at it like we're doing her a favor.

Yeah.

Yeah.

And maybe you're presenting it, not your dad. So there isn't that weird ex husband, ex wife dynamic. That happens.

She already is on guard. Yeah. Thinking that he's going to screw her for something.

So you can say like, I always really, really liked you.

Right, exactly.

That you were always my favorite.

I never thought this would happen.

Sluts. My dad's dating now.

Yeah, exactly. Awesome.

Well, thanks, Felicia. I hope I helped.

Thank you so much, Chris. This is. This is fantastic. I didn't, didn't expect it to be so good. Thank you.

Okay, bye.

Ra.