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Episode Summary
You’re staring at the place you built. You poured $500k into the buildout. You worked the line every Friday night for a decade. You’re tired. You want out. And the guy who’s going to make the most money on this deal is the one who walks in after you’ve waited two years too long. Matty O’Reilly has opened 11 businesses in 16 years, sold seven of them, and on one deal he walked away with 40 times what he paid in. He’s never paid more than $80k for a place. He works 10 to 3, Monday through Friday. He doesn’t manage anything himself. I wanted him on because he proves the restaurant business isn’t broken, owners are. We got into why second-generation spaces are the only ones worth buying, why he doesn’t design a concept until he walks the space, how he restructures rent so the landlord wins when he wins, why he sold at the peak of every brand he built, and the line he draws between ownership and employment. The Robert Smith story near the end is the one I keep thinking about. The Viking who retired at the top because he wanted his career to compound into something else, not get hurt holding on too long. That’s the whole episode.
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## Top 10 Takeaways- The restaurant business has no barrier to entry, which is exactly why most owners walk into a deal they shouldn’t.
- Someone else already paid to build the restaurant. Your job is to buy that buildout for pennies after the life cycle has run.
- Don’t bring a lifelong concept into a space. Walk the space first, then design the concept reactively to the neighborhood.
- Pick emerging neighborhoods where you can be the hero, not saturated ones where you’re just adding to the mix.
- Switching counter service to table service can quadruple revenue without you spending a dime on the buildout.
- Negotiate rent structures tied to performance so the landlord wins when you win, not before.
- The restaurant multiple is roughly 2.5x cash flow. You make your money on the buy, not on the exit multiple.
- Sell at the peak, not when you’re burned out. Every owner who waited too long handed Matty their best deal.
- Separate ownership from employment. If you can’t take summers off with your kids, you don’t own the business, it owns you.
- Watch the numbers monthly or your food cost creeps two points at a time until the business is gone.
Sound Bites
“The restaurant industry has no barrier to entry. So if I wanted to be a plumber and I went to a bank with a half million dollars, they would just laugh at me. But if the plumber wanted to open a restaurant tomorrow with a half million, no one would stop that plumber. Nobody.” (@TBD) — Matty O’Reilly
“I have made a living off of people waiting too long to sell restaurants. Everything I’ve ever bought, at some other point in time, was worth way more than I paid.” (@TBD) — Matty O’Reilly
“I don’t design something that I have any personal attachment to. I’m actually just building out the model reactively to the needs of that neighborhood. So if you can be that thoughtful, you’ve got an advantage because none of these restaurants were a lifelong dream of mine.” (@TBD) — Matty O’Reilly
“I’ve clarified the difference between ownership and employment. I don’t manage anything for myself. I’m not overworked. I basically work 10 to 3, Monday through Friday for myself, and focus on the things that I need to focus on.” (@TBD) — Matty O’Reilly
“I don’t want you to give me a huge check to help you launch a place. I want you to give me a super small check every month so you don’t go out of business.” (@TBD) — Matty O’Reilly
About This Episode
Matty O’Reilly is the founder of O’Reilly Custom, a restaurant holding company that clocked over $10M in revenue in 2018. He was named one of Twin Cities Business Magazine’s 100 People to Know in 2019. In 16 years working for himself, he’s opened 11 businesses, sold seven of them, and is currently finishing his executive MBA at St. Thomas while running Republic, Bar Brigade, and Delicata Pizza. His approach is the opposite of how most restaurant owners think about the business: buy second-generation spaces for almost nothing, design the concept reactively to the neighborhood, and sell at the peak with seller financing so the brand keeps performing. He’s launching a coaching practice to help restaurant owners stop running their businesses on intuition and start running them on the numbers.
Resources Mentioned
- The E-Myth by Michael Gerber — Ryan referenced it for the entrepreneurial seizure concept: technicians who don’t realize the business is a machine that kicks out cash.
- Twin Cities Business Magazine — 100 People to Know in 2019 — Where Matty was featured.
- Republic — Matty’s beer-forward food bar on Seven Corners, Minneapolis. He took over a 38-year sports bar called Sergeant Preston’s, put $50k in, and quadrupled sales by realigning the concept to the neighborhood after the Metrodome came down.
- Bar Brigade — Matty’s French tavern in the Mac-Groveland neighborhood, St. Paul. Total investment: $25k.
- Delicata Pizza — Matty’s neighborhood pizza spot in the Como neighborhood.
- Ripcord: How to Grow and Exit Your Company — Ryan’s book with Jim Carlisle, launching September 2019.
Connections
Phase + Module:
- Module 1 — Ownership Goals — Matty designed his ownership life around being a great dad. Time and role goals drove every sell decision.
- Module 9 — Operator Transition — Selling at the peak with seller financing is operator transition done right.
Milestones:
- Milestone 1 — Time & Role Goals — Matty’s 10-to-3 schedule is the cleanest example of role design driving the business model.
- Milestone 25 — Operator Transition Plan — Seven exits, all to operators he still talks to, all places still open.
Concepts referenced:
- The Owner-Operator Trap™ — Matty’s whole career is a case study in not falling into it.
- The Multiple & WACC — The 2.5x cash flow multiple Matty cited for restaurants.
- Independence by Design™ — Decoupling ownership from operating the line on a Friday night.
- Value Gap — The gap between what owners think their restaurant is worth and what a buyer like Matty will actually pay.