Who Knew Hospital Gift Shops Were So Profitable?

Who knew hospital gift shops were so profitable?

I just fell down a rabbit hole after buying M&Ms from one. 2 quick topics to cover:

1. My OPP Framework (you down?)
2. An 8 figure PE gift shop buyout story:

Exactly 19 mins ago I was walking back from grabbing Chipotle on Rosedale and that tingly post-Chipotle thing started happening again...

I needed something sweet.

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You already know my go-to is Peanut M&Ms. As luck would have it, the hospital gift shop carries them!

I popped in before hopping on the elevator. Heck let's get a V-Day mug and plushie for my wife and daughter while I'm at it. Great husband, I am.

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My first thought:

"How does this place make any money?" It's run down with half empty shelves.

(Think Walking Dead grocery store scavenging scene)

So I chat up the cashier, as I am wont to do.

"Do you own this place?"

"Oh no no no, Lori's Gifts has 400 locations and sold to private equity 6 years."

How much?

No idea.

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Hmm...I thought. Open the MacBook, I must. (IDK why I'm going full Yoda. I think my Adderall kicked in)

I rushed back to the lobby and threw open my MacBook with the force to launch a thousand hospital gift shops and my researching began.

6 minutes later, I was an expert.

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Lori's is the nation's largest chain of hospital gift shops and sold to private equity for mid 8 figures.

Terms weren't disclosed, but based on the sizes of deals Atlantic Capital invests in, I'm thinking they sold for around $40m. A great deal for them, IMO.

If a new hospital opens, Lori's is gonna be in it.

It was founded by a DFW couple in 1981. Would you believe the wife's name was Lori? Crazy coincidence, right?

I always love married couples that found and sell companies together.

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Anyway, back to the numbers.

These gift shops only do about $30k - $50k /year in profit, but at scale, that's a lot of profit. Does this excite anyone?

Not really. BUT THAT'S THE POINT.

Those are basically Subway numbers, but with much much less buildout cost.

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Here's why I like this kind of business:

The OPP Framework™️.

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What's OPP?

ObscurePiggybackPredictable

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Obscure: No one freaking thinks to open a hospital gift shop. No one grows up telling his mom that's what he wants to be when he leaves community college.

It's overlooked, ordinary, obscure and therefore...opportunity-rich.

I like those kinds of businesses. That's the O, and Sketchers is the S.

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Piggyback: This type of business piggybacks on another, more stable business. What's more stable than hospitals?

New Walmart? New Gamestop out front.

New Starbucks? New Chipotle next door.

New car? Here, check these boxes for insurance, warranty and financing.

Piggybacking is easy, and fun.

Piggybacking is a great business model. It literally removes the need for marketing, AKA how you find customers AKA the way you stay in business!

And why else is piggybacking great?

Because of the 2nd P:

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Predictable: You better believe that Lori knew exactly what sales would look like when she opened a new location in a new hospital.

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I'd bet my Goldendoodle that Lori had a simple formula that looked like this:

of Hospital Beds X Average Occupancy * $100 = new store annual profits

500 beds * 80% occupancy * $100 = $40,000 profit expected per year.

As occupancy rises, so do profits!

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Where'd that formula come from? I completely made it up! Sounds about right to me, though.

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I also like:

1 employee on the clockOpen 24 hours400 standardized SKUsHigh margin

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Conclusion:

Look for OPP business ideas when starting and you'll save yourself a ton of headache.

Would love a follow @mhp_guy if you found this to be at least 3/10 content.