Business Breakdowns

Today, we will break down Wyndham Hotels, the world’s largest and most diverse hotel franchisor with more than 9,000 hotels across 20 brands in over 80 countries.

Wyndham is a brilliant example of a ubiquitous business that often goes unnoticed. In this breakdown, we’ll start by looking at just how vast Wyndham’s portfolio of hotels and brands is, how the Highway Act of 1956 played an important role in developing that scale, and explore the economics of hotel ownership, both from the franchisee and franchisor’s perspective.

Then we’ll dive into Wyndham’s growth algorithm, the factors that make the business resilient to external shocks, and the ways in which green programs are helping to drive higher cash-on-cash returns for franchisees.

To help break down Wyndham Hotels, host Patrick O’Shaughnessy is joined by Lauren Taylor Wolfe, co-founder and Managing Partner of Impactive Capital and a Wyndham shareholder.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, Inc. 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

Show Notes

[00:02:48] - [First question] - What Wyndham is and the scope of their hotel franchise

[00:04:17] - Defining what select-service hotels are compared to traditional ones

[00:04:49] - An overview of what the hotel business is and their important levers

[00:06:44] - Why Wyndham’s business model is so advantageous

[00:09:22] - Franchisee expectations and the pros of franchising the brand

[00:12:22] - Whether or not Wyndham participates in loan and debt generation

[00:13:36] - Overview of their award-winning loyalty program

[00:17:36] - Customer acquisition for their loyalty program and how it drives spending

[00:19:16] - Wyndham’s corporate history and how it affects them today

[00:22:17] - Driving growth beyond their current real-estate footprint

[00:24:30] - Possible positive or negative nonlinear events that could affect them

[00:26:09] - Overview of the sales functions inside of their business

[00:28:05] - Changes in hotel use trends as of late

[00:30:05] - What hotel management means as a business

[00:33:05] - Capital allocation and abundant free cash flow without much need for it

[00:35:48] - Considering the ESG implications when evaluating the hotel industry

[00:38:17] - Aspects of the business that make it both resilient and competitive

[00:42:14] - Big variables that could cause Wyndham to fail

[00:44:10] - What it is about Wyndham’s economic opportunity that is favorable for franchisees

[00:46:19] - Unit economics and expenses at the individual hotel level

[00:47:40] - Lessons learned about brand, investing in a brand, and identifying new brands to acquire

[00:50:22] - What she’s learned most as an investor working with Wyndham

[00:52:19] - Attractive opportunities Hilton could offer that Wyndham couldn’t

[00:53:46] - What she’s learned about being a strong operator while working at Wyndham

Today, we’re breaking down HelloFresh. HelloFresh delivers weekly meal kits to people’s homes. With eight million active customers, the Berlin-based business is the most popular company of its kind in the world.

To break down HelloFresh, I’m joined by its CEO and co-founder, Dominik Richter. We discuss the challenges of scaling an operationally intensive business, why HelloFresh is more like CPG companies than grocery stores, and what he’s learned about brand building.

Meal-kits are a notoriously difficult business model to get right and this is a great example of process power; a competitive advantage you don’t come across often. Please enjoy this great breakdown of HelloFresh.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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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

Show Notes

[00:04:07] - [First question] - What HelloFresh does for its customers

[00:05:53] - How many meals are delivered a year and the scale of the business today

[00:07:08] - The full customer experience of ordering a meal kit for the week

[00:08:03] - What the original service was and the original version of their product

[00:10:26] - Overview of the business from a P&L standpoint

[00:14:09] - Their centralized and widespread manufacturing plants

[00:16:35] - Attributes of a good recipe that benefits both the customers and the business

[00:18:32] - Thoughts on the cost of ingredients and how they impact everything

[00:20:43] - How the HelloFresh supply chain differs from traditional ones

[00:23:58] - The magnitude of waste and its impact on gross margins

[00:27:38] - Identifying customers, acquiring them, and retaining them

[00:30:52] - Why other meal kit companies have seemingly done poorly

[00:35:53] - Differences in the customer experience of HelloFresh subscribers that allowed them to thrive

[00:38:38] - Managing a business that’s dependent on process power and balancing which levers to pull and when

[00:41:24] - An example of a decision made to improve tiny percentages of performance

[00:44:17] - How a world returning to normal might impact their pandemic propelled growth

[00:47:22] - Thoughts on potentially expanding to private supply and distribution

[00:50:23] - Lessons learned about successful advertising, branding, and marketing

[00:52:41] - Key variables in HelloFresh’s growth for the coming years

[00:57:10] - What drives the decision to acquire and build a portfolio of brands

[01:00:01] - The biggest risks that the business might face in the future

[01:02:27] - What his favorite meal is from their menu and why

This is Zack Fuss and today we’re breaking down European-based payment business, Adyen. Adyen was founded in Amsterdam in 2006 by a group of payments entrepreneurs who had already built and sold a business in this space. Adyen was their chance to start afresh and build a modern solution to displace the patchwork legacy system that merchants were being forced to use.

To break down the business, I’m joined by Michael Willar, a portfolio manager at Stenham Asset Management. Our discussion covers Adyen’s single platform solution in detail, the driving force behind their track record of profitable growth, and why payments isn’t a winner take all market. Please enjoy this breakdown of Adyen.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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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

Show Notes

[00:02:55] - [First question] What Adyen is and what they do

[00:05:54] - General overview of how payment processing works

[00:07:29] - Flow of a transaction and how they manifest

[00:09:52] - How the business generates revenue and their revenue model

[00:11:25] - Where Adyen sits in the industry and the size of it today

[00:13:37] - The reality of processing 50-60% of their addressable market

[00:16:19] - What about their culture and founding story makes them so nimble

[00:21:18] - The competitive strengths of the business and their innovative solutions

[00:24:07] - Key revenue drivers for Adyen

[00:26:01] - What is it about Adyen’s business structure that enables them to grow so rapidly while still being profitable

[00:29:34] - Key growth drivers

[00:32:44] - What gives Adyen its competitive advantage over other payment providers

[00:35:56] - Having one platform is beneficial but why isn’t it a more popular approach?

[00:37:42] - The secret sauce behind their successful growth trajectory

[00:39:25] - The essence of Adyen’s culture and how it manifests in their day-to-day work

[00:42:04] - What Adyen plans to do with all of the cash they produce

[00:43:35] - What keeps him up at night and potential threats to the business

[00:47:54] - Is there a chance anyone could build a platform comparable to Adyen?

[00:50:06] - Key differences between Stripe and Adyen

[00:56:23] - Lessons learned from studying Adyen and what payment service builders can learn from them

Today, we will be breaking down pet care giant, Petco. Founded in 1965 as a mail-order business, Petco has evolved into a one-stop-shop pet care solution across its nearly 1,500 locations.

To help break down Petco, I am joined by Greg Kamstra, current CEO of pet care provider, Riverdog and former private equity investor. We will discuss how Petco evolved into its current big-box model, how pet care store economics differ from grocery economics, and what impact e-commerce has had on the industry. It’s always fascinating to learn about secular growth stories, and the pet care industry falls into that category. I hope you enjoy this breakdown of Petco.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, Inc. 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

Show Notes

[00:02:19] - [First question] - What is Petco?

[00:03:06] - How much of their business is solely eCommerce

[00:03:40] - The scale of the market today and what that space looks like

[00:05:24] - Pet ownership in the US and how much it’s grown over the decades

[00:06:28] - The spend-per-pet metric and how it continues to grow

[00:06:49] - Sales channels for Petco and the big players in this industry

[00:07:31] - When and how Petco started and unique insights that led to starting the business

[00:09:09] - Unit economics for specialty brands versus generic brands

[00:09:42] - General thoughts on the economics of Petco

[00:11:03] - Viewing their revenue and customer base through the lens of a single-store

[00:13:15] - How they drive same-store sales growth and customer frequency

[00:16:22] - The ways they’ve invested in services to incentivize return customers

[00:18:13] - Conventional retail strategies and how they’ve performed for Petco

[00:20:42] - Ways they are trying to compete with their eCommerce competitors

[00:23:50] - What their eCommerce growth could look like over the next few years

[00:25:20] - Early days of a mobile app and working on their digital-first footprint

[00:26:18] - How good of a deal Chewy was for Petsmart

[00:27:48] - Other big deals Petco has made and why they’ve mattered

[00:28:52] - Unique private equity aspects of Petco

[00:31:07] - What happened to their business during the pandemic and what trends might be here to stay

[00:32:03] - How many non-pet owners became pet owners because of COVID-19

[00:33:11] - Reasons why their market cap could double in the next five to ten years

[00:34:19] - Reasons why their market cap could be cut in half over the coming years

[00:35:10] - Lessons for builders when studying Petco’s story

[00:37:14] - Lessons for investors when studying Petco’s story

Today, we will be diving into Facebook. A business that requires little introduction, Facebook was launched in 2004 from Marc Zuckerberg’s Harvard dorm room. Zuckerberg has since grown Facebook into the largest social network in the world and continues to operate the business today. To break down Facebook, I am first joined by Robert Cantwell, founder and CIO of Upholdings. Rob’s unique background makes him an ideal person to speak on Facebook. Rob shared a dorm with Zuckerberg, went on to work at Elevation Partners, a large private investor in Facebook, and eventually became CFO of Everlane, where expansion was closely tied to the growth of Instagram and its advertising tools. We touch on how Facebook successfully navigated the transition from desktop to mobile, what drives the value of the network, and where Facebook may drive value in the future.

I am then joined by Jesse Pujji, a familiar voice as a host of Business Breakdowns. Jesse’s time as co-founder and CEO at Ampush make him ideal to break down the advertising business of Facebook. During our conversation, Jesse outlines the basic dynamics of the Facebook ad ecosystem, the economic proposition to an advertiser, and how to assess risks to Facebook's control of the digital ad market.

Facebook is such an interesting business, and we could likely speak for hours on the potential opportunities for growth. We decided to focus on the core advertising business today, given it represents 98% of revenue. In the future, we want to dedicate individual Breakdowns to WhatsApp, Oculus, and potentially other Facebook initiatives that are worthy of their own deep dives alone. I hope you enjoy this conversation on Facebook.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, Inc. 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

Part 1

[00:03:20] - [First question] The size and scale of Facebook and how we interact with it

[00:04:59] - The best way to describe what their true core business is

[00:07:21] - Observing Facebook’s growth as an operator and how it impacts his view of it

[00:10:46] - The ad model that they offered that wasn’t historically available before

[00:12:49] - Competitive advantages they have today that makes theory moat impenetrable

[00:15:44] - Potential impacts of the decentralization of the internet

[00:19:20] - One of the biggest risks to Facebook over the coming years

[00:23:33] - Future asset optionality that investors should be excited about

[00:28:16] - Thoughts on whether or not Facebook abuses its power given its size

[00:31:19] - Whether or not plans to establish themselves as a super app holds true

[00:34:14] - What Facebook is today and where they’re going

Part 2

[00:36:25] - Why Facebook has such an effective ad system for digital marketing

[00:41:28] - Overview of how an advertiser uses their ad platform

[00:45:39] - Key dynamics that impact bidding on certain keywords and customers

[00:49:22] - The types of companies that are being built on top of Facebook’s ad railway

[00:52:13] - What data they have and common misconceptions about it

[00:56:15] - Things Facebook could learn about cross-app system tracking

[00:59:07] - The competitive landscape of digital advertising today

[01:01:52] - What would have to play out in order for them to stop growing

[01:04:05] - The ways in which commerce plays into Facebook’s story today

[01:07:39] - How having access to a user's payment information is a value unlock

[01:08:55] - The most important thing to Facebook and lessons to be learned from their story