I Lost $300K On This Business… Do I Close It?
The one thing to remember
A great road and a familiar brand cannot save a location if the unit economics and the store manager do not work.
What happened
Brian Beers describes buying a Midas auto repair shop in New Jersey about five years ago. The shop was already the worst-performing store in its market, and since the purchase it has lost over $300,000. The biggest problems he describes are weak or unstable store management, high rent and overhead, franchise fees, and cash tied up in inventory. The business is still operating, but he is facing a lease-renewal decision: close it or commit to another five years.
Who's telling it: the buyer/operator of a Midas franchise shop This is the buyer/operator’s account; the seller’s, franchisor’s, landlord’s, employees’, and customers’ perspectives are missing.
Timeline
- Thesis
The buyer considered a turnaround of a historically underperforming Midas location with strong road traffic and prior volume potential.
- Closing
He bought the shop about five years before the video; the purchase price and exact year are not stated.
- Operations
The store generated about $70,000 in an average month but lost about $5,000 after parts, payroll, royalties, rent, and overhead.
- Operations
Over five years, repeated monthly losses added up to over $300,000.
- Operations
The buyer identified unstable store management and customer trust erosion as major reasons the location did not turn around.
- Exit
With about six months until lease renewal, the buyer is deciding whether to close the store, renegotiate rent, or double down for another five years.
stage where a mistake was made
What went wrong 6 issues
No stable store leader
The narrator says the shop’s location and historical volume were promising, but the business lacked the right team and leader. He identifies management quality as the central operating problem.
Mistake made at Closing → showed up at Operations
“what it's missing is is the people inside of it”
Warning signs
- The narrator says the location had potential but lacked the people needed to deliver it.
- The comparable successful turnaround worked when they promoted a strong employee to run the other store.
How to prevent it
- Before closing, the buyer’s operations leader should identify the exact general manager who will run the shop and confirm that person’s compensation, authority, and start date.
- During the first 90 days after closing, the owner should review a weekly manager scorecard covering sales calls, customer retention, technician productivity, and profit.
- Before buying another turnaround shop, the buyer should maintain a bench of trained assistant managers ready to step in if the first manager fails.
Manager churn hurt trust
The shop went through repeated manager changes. The narrator says each change disrupted customer relationships and the store would briefly improve, then fall back into losses.
Mistake made at Integration → showed up at Operations
“That has been one of our biggest struggles here has been the carousel of managers”
Warning signs
- Revenue improved temporarily under some managers, then dropped again.
- Customers kept seeing new faces, forcing the shop to rebuild trust repeatedly.
How to prevent it
- The owner should track manager tenure, customer complaints, repeat visits, and revenue changes by manager starting on day one after closing.
- If a manager leaves or underperforms, the regional operator should install a trained interim manager within one week rather than restarting the business with an untested hire.
- The buyer should create a customer handoff process whenever managers change, including calls to top customers and notes on recurring customer vehicles.
Fixed costs were too high
The store carried a heavy fixed-cost load, including approx. $100,000 a year in rent plus franchise costs and overhead. At the reported revenue level, the economics produced a monthly cash loss.
Mistake made at Closing → showed up at Operations
“we have almost $100,000 a year in rent”
Warning signs
- At $70,000 of monthly revenue, the store still lost money after parts, payroll, royalties, and overhead.
- The narrator later says a $50,000 rent reduction could make the store break even.
How to prevent it
- During due diligence, the buyer or accountant should model break-even revenue with actual rent, royalties, payroll, parts cost, taxes, utilities, and insurance.
- Before signing or renewing the lease, the buyer should negotiate rent down or add a termination option if current revenue cannot support the fixed cost base.
- At lease renewal, the owner should present the landlord with store-level financials and a close-or-reduce-rent proposal before committing to another five years.
Bought a known laggard
The buyer acquired a shop he describes as the worst performer in the New Jersey market. The turnaround thesis depended on unlocking potential from location and past performance, but the store kept losing money.
Mistake made at Thesis → showed up at Operations
“this store was the worst performing store in the entire New Jersey market”
Warning signs
- The narrator says he did not even want to buy it at the time.
- The store had a history of not doing well before he bought it.
How to prevent it
- Before LOI, the buyer should require a written explanation for why the worst-performing store will improve, including which problems are local management versus market demand.
- The buyer should value a losing store based on current losses and required investment, not on historical peak volume or traffic counts.
- The buyer should set a maximum cash burn budget and stop-loss date before closing a turnaround acquisition.
Cash tied in inventory
The shop had visible slow-moving inventory, including dusty tires. This tied up cash in a business that was already losing money each month.
Mistake made at Operations → showed up at Operations
“all this money that just like literally sits on the shelf”
Warning signs
- The narrator points out dust on tires as a bad sign.
- Each tire cost cash up front, but slow-moving stock sat unused.
How to prevent it
- During due diligence, the buyer’s operator should review inventory aging and identify tires or parts that have not moved in 90, 180, and 365 days.
- Within 30 days after closing, the manager should set reorder rules based on actual unit sales, not shelf-filling habits.
- The owner should run a monthly slow-moving inventory report and discount, return, or transfer stale inventory to reduce cash tied up on shelves.
Exit decision came late
This is an inference: the business appears to have continued losing money for years before a hard lease-renewal deadline forced a decision. Earlier stop-loss rules may have reduced the accumulated loss.
Mistake made at Operations → showed up at Exit
“we know we have a deadline, like a very hard deadline to to give the renewal”
Warning signs
- The store had been losing roughly $5,000 per month for years.
- The renewal deadline forced a close-or-double-down decision after cumulative losses had already exceeded $300,000.
How to prevent it
- Before closing, the buyer should define objective milestones for continuing investment: revenue, profit, manager tenure, and cash burn limits.
- The owner should hold a quarterly keep/sell/close review for any store losing money, rather than waiting until a lease renewal forces the decision.
- Six months before any lease renewal, the operator and finance lead should prepare three options: close, renegotiate, or renew with a funded turnaround plan.
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Thesis
Due diligence
Closing
Operations
Exit
Transcript 324 lines · 2340 words · auto-generated captions
Since I bought this business behind me,
it has lost over $300,000.
Right now, we're at a crossroads because
in 6 months from now, I have a decision
to make. Do we close this down and walk
away and give up, or do I double down
for another 5 years? Look at all these
cars behind me here. This is a major
road. There are thousands and thousands
of cars that pass by every single day.
All of them need brakes, tires, oil,
exhaust, all the things that we do. So,
why aren't they coming into our shop?
What have we done? How can we get this
fixed? So, I bought this shop 5 years
ago. Honestly, at the time, I didn't
even want to buy it because this store
was the worst performing store in the
entire New Jersey market. It just kind
of had this this history of of not doing
well. One of the worst signs is there's
a lot of dust on these tires. Every one
of these single tires cost me $80,
something like that, of like cash. So,
think about this, like $80, 80, 80, 80,
80, 80. And so, then you have all this
money that just like literally sits on
the shelf. Look at these. And like this
is not a low-cost business to operate.
Our our costs are very, very high. We
just get eaten and eaten by all these
expenses. So, you're probably wondering,
how the heck do I lose $300,000
here?
Let me show you. Let's take an average
month where we're doing $70,000
in revenue. We have a number of big
expenses. The first one is our cost of
goods. We spend $18,000
every single month on $70,000 in revenue
for all the parts that we stick on cars.
This is like the tires and the brake
pads. Our next biggest expense is
payroll for the manager, the
technicians, all the taxes and insurance
that we have to pay. There goes another
$22,000.
Then, because we're a franchise, we have
to pay a percentage of our revenue up to
Midas in the form of royalties and
national advertising. That's another
$10,000
every single month on $70,000 in
revenue. And then finally, we have all
the overhead for this place. We have
almost $100,000 a year in rent, we have
property taxes, we've got insurance,
we've got all the utilities and
softwares and subscriptions and all
those things add up to about $25,000
every single month. And so, if you were
to look at a typical month, we'd start
with 70, we take away all these
expenses, we're left at the end of the
month with a $5,000 loss.
That means that like, you know, our bank
account is going down by $5,000 every
single month and that we have to take
money, you know, from our other
profitable stores to put into this bank
account just to to make ends meet. And
that $5,000 every single month add up to
$60,000
for the year. And you know, we've owned
this store for 5 years and it's kind of
been the same for a while now, which has
got us to the $300,000
in loss, which ultimately leads to me
being
not happy. And one of the things that
hurts the most is I've never closed a
store. So, I've been on like a bender of
winning for, you know, honestly, the
last 10 years that I've been a business
owner. Every single year I've grown by
buying more stores, opening new ones,
buying failed abandoned shops and
turning around. And to be honest, this
is like the first like store that I'm
that I'm ever even talking about that
we're we're not currently winning. We're
we're losing here. Not just saying,
"Hey, this is like a fairy tale. We've
turned this thing around and like, yay."
Uh and I think it's like really hard for
a couple reasons. One is it's so easy
just to talk about the wins and it makes
you feel good and it's really hard to
talk about like the losses and the and
the failures. And even for me, like even
just thinking about like we have never
closed a store. I think that's probably
the biggest, I don't know, ego hit in a
in a sense is like, you know, we do so
well, but then we've got this and we
just can't make it work is is what is
going through my head. You know, if this
store was available and it had the
history that it did of being really good
and then failing and just getting to the
brink of making money like as we're on
the brink now of making money, I
probably would do this again, you know,
like I would lease this store up. I'd
probably pay 100 grand a year in rent. I
would I would still
buy this business today if given an
opportunity. We have done this right so
many times. We have another store up in
this this market that was the second
worst. Like these two stores were neck
and neck to be the bottom two worst
stores, both losing money. The other
store we promoted one of our employees
who's an assistant manager up to to run
that store and like literally overnight
he he doubled the revenue. You know, we
started making some money there. We
decided, "Hey, we're not going to close
this store because we see potential with
this with this team and with this
leaders." What is it? It's like 18
months later, that store, that other
store, is absolutely crushing it. We did
almost $200,000 in revenue. This store
has that same potential, if not greater
potential. This is a bigger store.
There's more traffic. This store in like
I want to say it was 2010, it used to be
the number two volume store for Midas in
the state of New Jersey. I own now the
number one volume, which is still like
one of the top stores, and this store
was number two. And so what that says to
me is like it's got the bones, right?
Like it's got the the customer that live
in this area. It means that like it has
the capacity, but what it's missing is
is the people inside of it.
The people to actually like be able to
to to to to deliver on it. And it is our
fault. It is my fault for and and our
entire team's fault for not getting the
right people in here. There's an old
proverb in the automotive repair
business and it goes like this,
"It's the manager, stupid."
What does it mean? It means that you
could have the best location on the best
road and a great size and amazing paint,
but at the end of the day, if you don't
have a great manager, if you don't have
a great leader and team, none of that
matters. And you know, we could have all
the the best mechanics in the world and
do a really good job, but if the
customers don't feel that because
they're not getting the right, you know,
vibes from the the team that we have,
then none of it none of it none of it
none of it matters. That has been one of
our biggest struggles here has been the
carousel of managers where, you know, we
will have a good manager, he'll do a
great job for a period of time and then
it it just it just drops, right? And
then we're back to
losing money again. And then we hire
somebody new, they bring in some new
energy, and then we see an uptick, maybe
we start to make a little bit of money,
and we're like, "Yeah, we got it. This
thing's going just as it should." And
then boom, we're back in the toilet.
That's probably been the most
frustrating part. And then you think
about from the customer's experience,
which is like every time they come into
this place, there's a new face, and then
we got to reestablish trust and like the
rapport and knowing the cars. And so now
customers over time start to lose trust
just because of the the constant change
of people. Uh we're going to see what
happens. I don't know. Like I I my team,
you know, we know we have a deadline,
like a very hard deadline to to give the
renewal on this place.
And a couple options we got. Here they
are. One, we've got a we've got a pretty
good team in here now. We're going to
keep rolling with them and hopefully,
you know, within a couple weeks this
place is just we're going to be super
excited and this is not a factor. Number
two is, you know, increasing the
marketing and trying to get some more
customers in here to like really ramp it
up. Number three is like we could go
back on that lease renewal and just
negotiate really hard, too. You know,
instead of a 100 grand in rent, you
know, we could go back to him and say,
"Hey, listen, we're either going to
close the store or we'll do 50,000 in
rent or something." If I could get the
rent $50,000 cheaper, like and now I'm
breaking even, honestly, I'd keep it.
Like I would keep the store. Not a
problem because then at least I have
upside. You know, we do have options
here. I think that's, you know, the
thing that I always like to focus on.
What are the things that I can control
and not worry about anything else? You
know, because the rent so high, maybe we
do have some options. Maybe there are
some ways that we can look in other
parts of our business to be more frugal.
One of the biggest concerns I have
honestly is I saw a K-Cup machine in
there. If you know anything that about
me is like I hate K-Cups. Every one of
those those coffees is costing like a
dollar. Those dollars add up. That's
probably like $30 a week we're spending
on coffee that, you know, honestly is
like literally coming out of my pocket.
Like there's this really nice diner next
door. If people want to drink a coffee,
they could probably just go next door.
I'm sure they they'd help them out. So,
that's one of the changes. I'm going to
go do that right now while we're here
and and find some other ways maybe we
can save some money. So, funny enough,
we are having a pretty good day here.
We've got about 7 or 8,000 dollars sold.
I don't know if it's all going to go
today, but, you know, at the end of the
week it all adds up. And so, as I
mentioned, we got a good manager here in
place now. I'm excited. He's really good
on the phones getting customers in,
building those relationships. And so,
it's nice to see some life into this
place. So, I tried something very unique
today to try to get some guidance on
what to do here. But, maybe there's just
like a bad, I don't know, aura or
something here that we need to break.
And so, today I went to a psychic to try
to
>> [laughter]
>> This is a serious topic. And so, I went
to Sarah. Now, Sarah has a four
>> [laughter]
>> She has a 4.9 on Google with like 200
reviews. Everyone said that Sarah is an
absolute, I don't know if genius was the
right word, but she everything she said
came true. And so, my plan was really
simple. I was just going to go see
Sarah. I was going to try and lay out
all the problems that we have and try to
understand and see if she could help me
see what was going to happen to see if I
was doing something wrong that I could
fix and ultimately help me on my
decision of of what to do here.
Unfortunately, Sarah was not available
to do it with the with the camera here.
Apparently, it messes up the
interference with the with the beans or
whatever.
And so, then I just went back to ask if
we could do it with no with no camera,
but unfortunately she's declined me made
up something about being on a phone
call. I think she just doesn't want to
do it, but
she wouldn't let us record here for the
for the video and it was kind of a deal
breaker.
So we left but then when we went back
she said she wouldn't take us because I
guess my aura was bad and then I called
another place and she wouldn't take me
either and then I called another and
they wouldn't take me so now I think I'm
blacklisted from the
>> [laughter]
>> the psychic community here in New
Jersey. If anybody out there though
could help me and maybe do a
consultation over the phone that would
be really really awesome cuz
if if there's anybody who could help me
get some of the bad juju out of place
I I could really use I could use it cuz
we got to do something. I can't keep
losing all this money here. It's killing
me. All right, we have another room to
explore here.
Oh my god, look at this. Another reason
this store should just crush it. You
have an entire
room up here. Look, but you can play
deer pong. So I found this deer pong
game and if I get it in then the store
is going to make tons of money and we
have to keep it open and if I miss then
I guess we're going to have to close it.
Here we go.
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