This is Matt Reustle and today we are breaking down the fitness franchise, Orangetheory. I have wanted to do a deep-dive on franchising for a while now and I always knew who the guest would be. I’m joined by a man fully dedicated to all things franchisee and franchisor - the Wolf of Franchises.We talked through the origin story of Orangetheory and the tech-enabled concept that helped differentiate them during the boutique group fitness boom. Wolf walks me through the economics for both the franchisees and the franchisor – and he helps compare this to the rest of the franchise system throughout the conversation.If you’re in any way curious about franchises – I think you’ll enjoy this episode. And if you do, make sure to check out Wolf’s work at wolfoffranchises.com – it’s the exact type of niche dedicated content that I love. Enjoy this breakdown of Orangetheory. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:55] - [First question] - What makes Orangetheory unique from their competitors[00:04:47] - Orangetheory’s founder and origin story[00:06:53] - What it looks like going from an initial concept to a franchise [00:08:56] - Whether or not early franchises have pricing and adjacent benefits [00:11:17] - How their franchisee numbers rank compared to their competitors [00:13:09] - How their location numbers rank compared to their competitors [00:15:39] - What it would look like applying for and becoming an Orangetheory franchisee[00:17:52] - How much Orangetheory cares about their franchisees being good operators[00:20:35] - Upfront franchise fees and other parent company revenue streams [00:23:15] - How much revenue is actually going back to the Orangetheory parent company[00:25:41] - Whether or not the parent company helps with upfront costs[00:28:01] - Overcoming the barrier of up front capital for a franchise [00:29:33] - Unit economics and business models for fitness instructors [00:30:53] - Rules of thumb and variables to break even on an Orangetheory franchise[00:34:04] - The average cash flow generated by a mid-tier Orangetheory franchise [00:35:16] - Where an owner might have to reinvest their profits into the business[00:37:14] - Additional marketing and mandatory costs required of an owner [00:38:47] - How franchisees are protected by new locations [00:40:47] - The main risks to an ecosystem like Orangetheory over the next five years [00:44:17] - Key takeaways for operators and investors from Orangetheory’s story

Today, we’re breaking down one of the most important apps in the world, WeChat. WeChat is the default operating system for life and business in China. Founded inside of Tencent in 2011, it is the original super app and its 1.3 billion monthly active users can order food, message friends, play games, pay bills, shop, and more on the service.To break down WeChat, I’m joined by Connie Chan. Connie is a General Partner at Andreessen Horowitz and is well-known across Silicon Valley for her deep knowledge of the Chinese consumer technology landscape. We discuss WeChat’s legendary founder, how trust is integral to the app’s success, and why we haven’t seen super apps proliferate in the West. Please enjoy this breakdown of WeChat. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. -----Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:40] - [First question] - Overview of the super app model[00:04:43] - How apps and software from the Western world differ from WeChat[00:06:19] - WeChat’s history in China and why it dominates[00:08:27] - Seeing WeChat as an OS within an app[00:09:19] - How service unification in WeChat affects privacy, identity, and marketing[00:13:16] - High-level analysis of their business model and reach[00:16:53] - What Westerners would find surprising about using WeChat[00:18:04] - History and functionality of WeChat Pay[00:23:14] - The importance of their integrated Mini Programs [00:25:56] - Factors impacting their margin structure[00:28:51] - Holistic design philosophies for maintaining user engagement and trust[00:30:44] - WeChat’s saturation point and how future growth might look[00:32:02] - How they leveraged mobile-only coding, self-disruption, and internal competition[00:37:21] - Initial app build - simplicity for steady growth[00:38:36] - How her understanding of WeChat influences her investment decisions[00:41:47] - Western companies that have super app potential[00:43:52] - Exporting the philosophy of treating your app users like friends to Western developers[00:44:25] - The relationship between WeChat and the suppliers on their platform[00:47:14] - Uncertainty caused by software regulations in China[00:47:53] - Attributes of her typical investments[00:49:42] - Lessons for operators and investors when studying WeChat’s story

Today’s breakdown has been at the top of our to-do list since the show started. There are few brands as strong as this one and the way the Dumas family has nurtured it over six generations is remarkable. We are, of course, talking about one of the ultimate status symbols, Hermès.What began as a specialty saddles business in the mid 1850s has become famous for iconic handbags and other luxury items. Last year, the business earned $9 billion at 70% gross margins. It does things differently and to explore the details behind its difference, I’m joined by long-time shareholder, Mark Urquhart. Mark is a partner at Baillie Gifford and head of their Long Term Global Growth team, which he co-founded in 2003. Hermès was in the original portfolio when it launched in 2004 and has been held since then. Please enjoy this breakdown of Hermès. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:29] - [First question] - The iconic Birkin and Kelly bags explained[00:04:41] - New price and resale price for a Hermès bag[00:06:13] - Production and distribution dynamics of Hermès bags[00:08:11] - Overview of the company’s scale and structure[00:09:52] - The basic margin structure and history of Hermès[00:12:10] - Defensibility of investing in a luxury brand like Hermès[00:15:48] - Market size and potential for future growth[00:21:20] - The power of Hermès’ long heritage history[00:26:37] - His definition of luxury and the role of luxury products in culture[00:30:49] - The Hermès manufacturing model and their focus on craftsmanship[00:35:28] - Strategies that Hermès has chosen to avoid[00:38:51] - The importance of their six-generation family stewardship[00:42:42] - How the family has maintained the business for so long[00:45:41] - Overview of retail sales and their distribution model[00:48:28] - Learnings from Hermès’ marketing strategy[00:52:08] - How he would set up a brand if he needed it to compete with Hermès[00:54:28] - Companies that come close to Hermès from an investment perspective[00:56:20] - The complexity of Hermès’ valuation and growth potential[01:00:59] - Why Hermès maintains a conservative capital allocation model[01:03:07] - The importance of their consistently simple products and business model

This is Matt Reustle, and today we are breaking down the personal care giant, L'Oreal. Founded in the early 1900s by a French chemist, L'Oreal and its long list of iconic brands have been driving cosmetics innovation for over a century. To break down the business, I am joined by Zehrid Osmani - Head of the Long-Term Unconstrained team at Martin Currie. We cover the history of brand innovation, global expansion, and all of the dynamics that played a role in L'Oreal's success.I'd mention this episode is an excellent pairing with our Founders podcast episode 217 on Estee Lauder. The two dominant players in the beauty market have fascinating beginnings, and their stories clearly aren't over. Please enjoy this breakdown of L'Oreal. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes [00:02:27] - [First question] - Origins of L’Oreal and its scientific approach[00:04:01] - Structure and market share of L’Oreal today[00:04:36] - Outline of L’Oreal’s brands and consumer products[00:07:30] - Licensed agreements versus fully owned brands[00:08:48] - Market split between mass market, high-end, and professional products[00:09:31] - Strategy-driven growth by division since 2014[00:11:03] - Reasons why acquisitions are a key part of L’Oreal’s strategy[00:14:26] - Noteworthy competitors in the same markets[00:16:03] - Sales and marketing strategies within stores and e-commerce[00:19:47] - How L’Oreal deals with the logistical challenges of e-commerce[00:21:59] - Margins and long-term growth[00:24:40] - Overhead costs and the proportion spent on advertising[00:25:57] - Advertising campaigns and legacy of L’Oreal’s advertising strategy[00:30:03] - L’Oreal’s R&D strategy and budget[00:33:09] - Breakthroughs in the development of new products[00:34:42] - L’Oreal’s global presence and price stratification to serve diverse geographies[00:39:59] - The company’s potential future growth opportunities[00:42:19] - Operating margin and profitability over time from an investor’s perspective[00:44:39] - Re-investment in the company versus dividend payout[00:45:14] - More on acquisitions as a piece of the overall model[00:46:25] - Key risk categories for the business [00:51:43] - L’Oreal’s commitment on sustainability and ESG broadly[00:55:52] - Lessons learned from analyzing L’Oreal

This week is the second half of our mini-series on the two major levers to reduce the impact of climate change. Last week, we covered Carbon Removal with Nan Ransohoff. Today we're focused on Carbon Reduction. To break down the business of decarbonization, I'm joined by Christian Anderson. Christian is the co-founder of Watershed, which helps companies like Monzo, Spotify, and Walmart measure, report, and act on their emissions. We discuss the impact on financial statements, why debt financing is key, and why people say no to climate programs. Please enjoy this breakdown.For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:14] - [First question] - Climate change as a result of the inertia of capital[00:03:44] - Financing a capital stock transformation for decarbonization[00:05:22] - Decreasing dependence on legacy tech to mitigate humankind’s energy debt[00:08:32] - System of incentives to use and invest in clean technology[00:10:59] - Banks and debt financiers getting into the climate effort[00:12:46] - How Watershed’s individual corporate customers approach decarbonization[00:15:30] - Complexity and recent progress to decarbonize industry[00:18:25] - How more effective energy will accelerate the decarbonization of supply chains[00:20:58] - Surprising cost curves for various clean energy processes[00:24:16] - Energy solutions for the most energy-intensive applications[00:26:44] - The impact on corporations’ balance sheets and stakeholders[00:29:49] - Why sophisticated companies are needed to drive the decarbonization transition[00:31:46] - How companies measure and then modify their carbon footprints[00:35:00] - Companies getting serious about climate issues in the past year[00:37:29] - Capital flowing to tech niches and the problem of infrastructure regulation[00:40:35] - Digital tools for decarbonization projects[00:42:43] - How new businesses approach the climate issue from inception[00:44:39] - Structure of Watershed’s buyers[00:46:53] - Why people and businesses say no to Watershed[00:48:55] - Perspectives across Watershed’s global markets [00:51:36] - The most worrisome aspects of the climate crisis[00:53:26] - Simplicity in the complex domain of climate change[00:54:39] - The overall sentiment toward the climate movement [00:57:37] - Forces that antagonize the climate movement[00:59:25] - An exemplary case study of Apple’s climate work

This week and next week we will break down the two biggest levers we have in the fight against climate change. Carbon reduction and carbon removal.Today, we will focus on carbon removal. To break down where we stand and what needs to be done, I’m joined by Nan Ransohoff. Nan is Head of Climate at Stripe and she also leads Frontier, which is an advanced market commitment of some $1 billion to kickstart a market for carbon removal solutions. We discuss the broad climate picture, the state of technology today, and the potential for good if we can scale up low carbon energy sources. Please enjoy this primer on Carbon Removal.For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:14] - [First question] - Overview of the presence of carbon in the environment[00:03:35] - Relevant trends in carbon emissions and energy use[00:05:17] - How to handle a continued rise in energy consumption[00:06:49] - Energy demand and electricity grids as supply chains[00:08:09] - Why carbon removal is important[00:09:52] - Current state of carbon capture technology and methods[00:13:10] - Promising carbon removal concepts for the future[00:14:02] - Demand level for carbon removal solutions companies[00:15:22] - Carbon offsets versus proper removal[00:16:53] - Constraints on arable land for removal projects[00:17:24] - How Stripe Climate sparked interest and showed that demand exists[00:21:17] - Logistics of engaging companies to build carbon removal solutions[00:24:39] - Governments are gradually accelerating decarbonization efforts[00:28:03] - Her personal motivations for decarbonization[00:29:49] - Roles of for-profit and nonprofit entities in carbon removal[00:31:50] - Frontier’s philanthropic motives[00:32:16] - The role of geopolitics in global carbon pollution[00:34:31] - Key geophysical attributes of different regions in the world[00:35:24] - Increasing investment in hard tech for climate problems[00:36:57] - Biggest technological players today in the space[00:37:30] - Best and worst potential outcomes of decarbonization efforts[00:39:24] - Resources to learn more and the positive side effects of decarbonization[00:41:58] - Lessons learned from creating a marketplace for carbon removal[00:43:21] - What it’s like working as a climate-focused branch of a big company[00:46:40] - What she’s most excited about in the near future for carbon removal

Today, we are running a bonus Business Breakdown borrowed from the newest Colossus series, Return on India. Saahil Goel, founder of Shiprocket, joins Romeen Sheth to break down the business. If you enjoy this episode and would like to learn more about the Indian business landscape, subscribe to Return on India.   ----- My guest today is Saahil Goel, founder and CEO of Shiprocket. Over the last decade, a number of startups that have reached escape velocity in India have followed the X for Y startup model. They've taken influence from something that works in the US and western markets and applied it to India. The next generation of winners will build Native India use cases, and Shiprocket is a perfect example. The business started out as Shopify for India and eventually pivoted to an e-commerce logistics aggregator when they realized the underlying infrastructure that made Shopify successful in the west didn't exist in India. Fast forward, and Shiprocket is one of the fastest-growing and most well-positioned technology companies in India today. We unpack how to build for India, from India, how to capture value from India's long tail merchant segment, which is over 60 million businesses, and the common headline pitfalls investors fall into when evaluating startups in India. Please enjoy my conversation with Saahil Goel.   For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.   -----   Return On India is a property of Colossus, LLC. For more episodes of Return On India, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @RomeenSheth | @joincolossus   Show Notes [00:02:47] - [First question] - The first iteration of Shiprocket back in 2012 called KartRocket [00:08:26] - What drove the pivot from KartRocket to Shiprocket [00:12:13] - Examples of why US eCommerce models just don’t take off in India  [00:19:28] - The challenges of building businesses for consumers outside of India [00:25:54] - Courrier aggregation and capturing value in this type of business model  [00:31:22] - Why the large pre-existing couriers aren’t attacking this space successfully  [00:34:35] - Unpacking what RTO is and its scale and challenges specifically in India  [00:39:56] - How software and intelligence drives the ability to know the consumer in a way that larger infrastructure and couriers can’t in India  [00:43:31] - Similarities between the rise of Shiprocket and the prior evolution of the Chinese eCommerce and tech ecosystems    [00:46:59] - The next pieces that need to be built for Shiprocket for them to continue growing and succeeding at the rate they are [00:53:07] - The tension of vertical integration without building out capital-intensive infrastructure  [00:55:53] - Thoughts about the opportunity set for India going forward 

This is Zack Fuss, an investor at Irenic Capital. Today, I’m joined by Matt Newberg of HNGRY to help us break down DoorDash, the popular food delivery service. DoorDash was founded in 2013 by 4 Stanford students who saw an opportunity to make it easier for people to get the food they love delivered to them. Today, DoorDash’s three-sided marketplace serves as one of the largest local delivery companies in the world. It serves millions of customers and partners with hundreds of thousands of restaurants across 27 countries, run-rating at over $50 bn of gross merchandise value. We will discuss how DoorDash is working to build the infrastructure for local commerce; expanding its offering beyond restaurants, introducing a vertically owned convenience channel, ghost kitchens, and advertising to build a durable competitive advantage and work towards a sustainably profitable business model. We hope you enjoy this breakdown of DoorDash. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. -----Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:52] - [First question] - The size and scale of DoorDash and the industry today [00:04:35] - Early growth and business history[00:08:33] - Unit economics of a DoorDash order[00:11:37] - Creative ways DoorDash is maintaining margins and driving growth[00:13:33] - Optimizing delivery operations to minimize overhead[00:16:45] - White-labeling versus first-party logistics[00:20:03] - How restaurants maintain their own margins and customers while using DoorDash[00:23:04] - Overview of their recruitment and labor model for delivery drivers[00:24:36] - Implications of new legislation treating delivery drivers as employees[00:27:51] - Positive and negative impacts of DashMart, ghost kitchens, and automation[00:30:53] - The importance of ghost kitchens and how they work[00:36:23] - Automation and its role at DoorDash[00:39:15] - Virtual brands in the restaurant industry[00:43:18] - Advertising sales models on DoorDash and similar apps[00:45:20] - What ads look like on these apps[00:46:22] - How grocery store profits from slotting fees translate to delivery[00:47:33] - Main takeaways from studying DoorDash as a business

This is Matt Reustle, and today we are breaking down the specialty retailer, Floor & Decor. Now prior to this Breakdown, I cannot say that I thought much about Floor & Decor. It felt like the stereotypical specialty store that sat somewhere between a mom-and-pop shop and a home improvement giant. Little did I know....Floor & Decor had compounded revenue at nearly 30% over the past decade, and it was another business driven by the things you "don't see," like an inventory and logistics strategy that feels proper for a brick-and-mortar business in the 21st century. To break down Floor & Decor, I am joined by Drew Cohen of Speedwell Research. I hope you enjoy the episode.For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:54] - [First question] - The origin story of Floor & Decor [00:04:41] - Size of the flooring market and the ongoing battle between hard surface and carpet flooring[00:07:26] - A shift in ownership in 2009 and how much that changed the business[00:08:08] - High level overview of the business today writ large[00:09:30] - Independent players and their competitive landscape [00:12:34] - Unique differentiators that give them a competitive advantage [00:15:42] - Their customer split between pros and DIY consumers[00:16:30] - Key drivers that allow them to leverage their position with inventory providers[00:18:46] - Whether or not they’ve considered doing private label or in house products[00:19:45] - Their store model from top to bottom and the economics involved [00:22:03] - What their maturity looks like and what metrics they’re watching [00:22:46] - Existing commercial opportunities for Floor and Decor[00:26:04] - Overview of their earnings profile from a bottom line perspective [00:27:05] - The Home Depot: The Pro Builder’s Choice; Drivers of their 500 basis point differential in terms of their mature margin profile[00:29:17] - Nick Sleep’s 2005 Letter; Considerations about franchising [00:29:48] - How he thinks about growth beyond their existing footprint and potential growth impacts from the economy [00:32:06] - The level of revenue generated from the Decor side of their business[00:33:02] - How ecommerce might impact their growth, if at all [00:35:44] - Overview of their good, better, best pricing strategy [00:37:56] - Variance of store level performance from region to region [00:39:20] - The chemistry of all their strategies that contribute to sustained growth [00:41:37] - The general investment sentiment around their brand  [00:44:37] - Other potential risks to Floor and Decor [00:45:48] - The Secret of our Success[00:47:24] - Key lessons for investors when studying Floor and Decor

This is Jesse Pujji and today we're breaking down Netflix, the pioneer in entertainment streaming. Founded in 1997, Netflix has evolved over the years to become the leader in streaming entertainment with over 200m subscribers globally.To break down Netflix, I'm joined by Ben Weiss, the Chief Investment Officer of 8th & Jackson. In this breakdown, we go into detail on Netflix, from their culture and tech advantages to how content drives the business to how they may start generating substantial free cash flow in the future. Please enjoy this Business Breakdown of Netflix.For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt Show Notes[00:02:14] - [First question] - What Netflix is and their size and scale today[00:03:49] - What portion of their content is original versus pre-existing licensed content[00:05:01] - Netflix’s founding story and the three stages of their evolution [00:07:06] - Their culture and leadership from an investor’s perspective[00:08:50] - Examples of courageous decisions Reed Hastings made [00:10:08] - Overview of the streaming market and how it’s impacted Netflix[00:11:28] - How to think about the competitive landscape as it exists today  [00:15:36] - Overview of their P&L starting from revenue and working down to EBITDA[00:17:51] - Thoughts about unit economics and customer churn [00:20:28] - Evaluating how much pricing power they have [00:22:47] - How much headroom there is in the US for incremental subscription growth [00:25:43] - Other big revenue drivers and potential opportunities to sustain their trajectory [00:27:21] - The impact on Netflix’s churn rate when Disney Plus launched [00:28:31] - Capital allocation and profits spent producing original content [00:31:25] - Content spend compared to their competitors and the economics of licensing existing content [00:36:09] - Noteworthy numbers and strategies when it comes to marketing [00:38:19] - R&D spend and technology advantages that Netflix has[00:45:34] - Other unique aspects about Netflix that are worth mentioning  [00:46:44] - The bull case for Netflix and what would allow for their continued success[00:49:54] - The biggest risks for Netflix and the bear case for the business [00:51:12] - Lessons for builders and investors when studying Netflix’s story[00:55:10] - Where to go to learn more about Netflix