Wednesday, December 14, 2011

Valuing the Halal Guys

Anyone who has been to the Halal Guys stand on 53rd street and 6th avenue knows why I am writing this article. There are hundreds of food carts in NYC, but only one that serves halal (others are proprietors of inferior lamb and rice).  As per Halal Guys’ slogan: “we are different.”

Get involved with the sauce
For those of you who have not been there, the Halal Guys is good enough to kill for (see 2006 stabbing incident ). It boasts long lines at all times of day. And the food is well worth the wait.

I have constantly wondered about the state of their business. How long is the average line? How many plates of halal do they serve? What are their margins like? What is their enterprise value? After over a month of observation (timing and counting the number of plates served per minute), here is what I have come up with:

The locations will be defined as follows:
cart 1 – 53rd and 6th on the south west corner of the street from 7:30pm – 4:00am
cart 2 – 53rd and 6th on the south east corner of the street from 12:00 pm – 4:00am
cart 3 – 52nd and 6th on the south west corner of the street. from 12:00pm – 4:00am
cart 4 – 53rd and 7th on the south west corner of the street from 12:00pm – 4:00am

Note: all carts are open until 5am on Friday and Saturday.

The first metric to discuss is the number of plates served per minute (PPM). All of my observations were performed at cart 2 during lunch and late-night hours. My assumptions on volume are as follows: (1) cart 1 is more popular while open, and averages about 20% more volume and efficiency than cart 2; (2) carts 3 and 4 are less popular and average about 30% less volume and efficiency than cart2; (3) Each cart’s PPM shows the same sinusoidal curve throughout open hours with peaks during lunch and late-night hours.  My findings are shown below:



Hour 1 corresponds to the hour between 12:00 and 1:00pm. Hour 17 is the hour between 4:00am and 5:00am.

Note that the PPM numbers are for an average day. Weekends obviously have more customers and more plates of halal served at night than do weekdays. There is seasonality and other factors (huge demand on New Year’s Eve, Halloween, etc.) that also affect the number of plates served.  My observations were made in October and November, fairly temperate months, and indicate a good baseline for an aggregate day of halal.

From the PPM metric we can derive the total number of plates served per hour:


In order to derive profit information I had to make some assumptions about the halal guy’s expenses. Since most halal carts are profitable selling their lamb and rice for $5, it follows that the actual cost of goods sold is less than $5 (even though the Halal Guys serve bigger plates and thus more food. See thisarticle, which estimates a 10% margin for DC food trucks). I assume cost per plate of $4.25, which includes all costs associated with producing a plate of halal besides staffing. I also assume a generous salary of $10 per hour for each employee and three employees per stand each operating hour.

It is important to note that aside from the $6 price charged per plate, the Halal Guys allow customers to cut the line for $10. Due to this higher price option, the average price per plate is a function of demand. The average price per plate is assumed to be $6.05 (about 1 in every 100 skipping the line) at lunch, and $6.20 during peak late-night hours. Multiplying the plates produced per minute by the assumed hourly halal prices, and applying the expense assumptions highlighted above, we arrive at the following revenue/expense numbers:


Note the higher margins during the late night hours, where larger PPM volume discounts the effects of labor fixed costs. Calculated metrics are below:

Time
Avg Price
Revenue
Expenses
Margin
Profit
12:00
6.05
1011.05
800.24
20.9%
210.81
13:00
6.05
1112.16
871.27
21.7%
240.89
14:00
6.00
954.95
766.42
19.7%
188.53
15:00
6.00
907.20
732.60
19.2%
174.60
16:00
6.00
861.84
700.47
18.7%
161.37
17:00
6.00
818.75
669.95
18.2%
148.80
18:00
6.00
777.81
640.95
17.6%
136.86
19:00
6.00
1225.05
987.74
19.4%
237.31
20:00
6.00
1310.81
1048.49
20.0%
262.32
21:00
6.00
1402.56
1113.48
20.6%
289.08
22:00
6.00
1500.74
1183.02
21.2%
317.72
23:00
6.05
1664.57
1289.33
22.5%
375.24
00:00
6.10
1930.08
1464.73
24.1%
465.35
01:00
6.20
2059.80
1531.96
25.6%
527.84
02:00
6.10
1925.25
1461.36
24.1%
463.89
03:00
6.05
1623.05
1260.16
22.4%
362.89
04:00
6.00
1207.23
975.12
19.2%
232.11

Applying the average day numbers obtained above results in the following yearly performance metrics:


Per Day
Per Year
Plates
3,686
1,345,544
Avg Price
6.04
6.04
Revenue
22,292.90
8,136,907.92
Expenses
17,497.29
6,386,512.48
Profit
4,795.60
1,750,395.44
Margin
21.5%
21.5%

The results here are much higher than I expected. The Halal Guys serve over 1.34 million plates of halal per year for over $1.75 million in profit. Not to mention the 21.5% margin!

Valuing the Halal Guys now becomes easy (using Discounted Cashflow Analysis). The only assumptions left to make are the growth rate and the rate at which to discount future cashflows. Given that the Halal Guys have been increasing the number of carts in the area by about one every two to three years, a 5% per year is a fair and conservative estimate for growth.

As for discount rate, the weighted average cost of capital for other fast food vendors is as follows:

Chipotle
10.96%
McDonald's
6.83%
Yum Brands
8.52%
Wendy's
8.55%

These companies are public and have high transparency. The Halal Guys ostensibly presents more risk to future cash flows, as there are many unknown factors in play (fights amongst the proprietors, disagreements with the city, etc.) they could just shut down shop; we don’t know what is going to happen. I am applying a 15% discount rate to account for this additional risks.

You are free to determine your own appropriate growth and discount rates, with the sensitivity matrix shown below (discount rate on the x-axis, and growth rate on the y-axis):


10.0%
12.5%
15.0%
17.5%
20.0%
0.0%
$17,503,954
$14,003,164
$11,669,303
$10,002,260
$8,751,977
2.5%
$23,922,071
$17,941,553
$14,353,243
$11,961,036
$10,252,316
5.0%
$36,758,304
$24,505,536
$18,379,152
$14,703,322
$12,252,768
7.5%
$75,267,004
$37,633,502
$25,089,001
$18,816,751
$15,053,401
10.0%
NA
$77,017,399
$38,508,700
$25,672,466
$19,254,350

The other potentially dubious assumption made is in the cost of goods sold. My $4.25 estimation could be off, so I have provided some additional valuations keeping all other factors constant (5% growth rate and 15% discount rate), while adjusting the cost per halal plate produced:

COGS
Valuation
5.25
4,250,938.95
4.75
11,315,045.54
4.25
18,379,152.14
3.75
25,443,258.73
3.25
32,507,365.33

The value of Halal Guys: $18,379,152.  

P.S. the red sauce is unreal. 

33 comments:

  1. Team white sauce or Team red sauce? The great debate of our time.

    ReplyDelete
    Replies
    1. There's no debate that they have the worst health standards.

      http://adamshalit.com/?p=255

      Delete
  2. That looks so good. The guys seem to be running an extremely successful business from your findings. Good for them!

    ReplyDelete
  3. It's like they take the hottest hot sauce they can find, then boil that down to make it hotter. A couple drops makes it burn so good.

    ReplyDelete
  4. The Halal Guys are the worst in the city. It is only a matter of time before Mayor Bloomberg cleans up their, literally, dirty business http://adamshalit.com/?p=255

    ReplyDelete
  5. When considering non-movie numbers for estimating present value, one is then also acknowledging the fact that the Force, indeed, has been awakened. This intangible asset has been valued at infinity.
    determine the value of a company

    ReplyDelete
  6. Getting home loans online with bad credit is nothing to feel uncomfortable about. Online lenders are a viable alternative to traditional mortgage sources. It is just a matter of meeting the set criteria. no credit check loans

    ReplyDelete
  7. I have spent a lot of the time in different blogs but this is really a unique blog for me.
    Loan Advisor

    ReplyDelete
  8. Great details here, better yet to discover out your blog which is fantastic. Nicely done!!!
    broker

    ReplyDelete
  9. The act of arranging is a powerful approach to truly become more acquainted with your business and you may wind up finding some critical things about your organization and about yourself. advisor add value

    ReplyDelete
  10. You guardians do an astounding web diary, and have some unfathomable substance. Continue doing extraordinary. stock education

    ReplyDelete
  11. 3monthloanlenders.com is very useful for me when I need a short term loan urgently

    ReplyDelete
  12. There is no house on this planet that doesn't need frequent maintenance and as a home owner if you're having trouble organizing your plans regarding home improvement, there is absolutely no need to worry for you. There are a many home improvement TV shows that impart enlightening knowledge to home owners about undertaking home improvement projects. Catia Composer R2020

    ReplyDelete
  13. If you are viewing come up with alter in most of the living, starting point generally L . a . Weight reduction cutting down on calories platform are a wide stair as part of your attaining that most agenda. weight loss solidworks cost australia

    ReplyDelete
  14. hi!,I like your writing very much! share we communicate more about your post on AOL? I need a specialist on this area to solve my problem. May be that’s you! Looking forward to see you. cheapsoftwaredownload.net

    ReplyDelete
  15. Nice post. I learn some thing very complicated on different blogs everyday. Most commonly it is stimulating you just read content off their writers and rehearse a specific thing from their website. I’d would prefer to use some while using content on my small weblog whether or not you do not mind. Natually I’ll provide you with a link on your web weblog. Appreciate your sharing. 먹튀디비

    ReplyDelete
  16. Have you tried twitterfeed on your blog, i think it would be cool. https://royalcbd.com/product/cbd-capsules-25mg/

    ReplyDelete
  17. I saw something about that subject on TV last night. Great post. 먹튀토토

    ReplyDelete
  18. Spot i’ll carry on with this write-up, I honestly think this website needs much more consideration. I’ll oftimes be again to read much more, appreciate your that information. 먹튀

    ReplyDelete
  19. Wonderful beat ! I would like to apprentice while you amend your site, how can i subscribe for a blog website? The account aided me a acceptable deal. I had been tiny bit acquainted of this your broadcast provided bright clear idea 먹튀검증

    ReplyDelete
  20. This may be the appropriate blog for everyone who is would like to find out about this topic. You realize a whole lot its virtually tricky to argue on hand (not that I personally would want…HaHa). You definitely put a fresh spin on the topic thats been revealed for a long time. Wonderful stuff, just great! 먹튀

    ReplyDelete
  21. Wonderful beat ! I would like to apprentice while you amend your site, how can i subscribe for a blog website? The account aided me a acceptable deal. I had been tiny bit acquainted of this your broadcast provided bright clear idea Mega888 apk download

    ReplyDelete
  22. Hello mate, .This is a great post for such a tough subject to talk about. I look forward to reading many more excellent posts like this one. Thanks 918kiss pussy888 ios

    ReplyDelete
  23. girls really feel the influence of only a second’s pleasure, for the remainder of their lives. 918kiss kiss918 apk download

    ReplyDelete
  24. girls really feel the influence of only a second’s pleasure, for the remainder of their lives. 토토사이트

    ReplyDelete
  25. May well appear to be a lot until you’re in the placement that i’m. Your blog alerted me to thinking that I had earlier missed. Thanks so much. 파워볼사이트

    ReplyDelete
  26. I’m not sure exactly how I discovered your blog because I had been researching information on Real Estate in Altamonte Springs, FL, but anyway, I have had a pleasant time reading it, keep it up! 918kiss

    ReplyDelete
  27. you've got got carried out a terrific interest on this newsletter. It’s very readable and pretty sensible. You have even controlled to make it comprehensible and clean to examine. You've got were given some actual writing information. Thank you. I'm for the number one time right here. I discovered this board and i in finding it actually beneficial & it helped me out a lot. I hope to provide some aspect decrease lower back and assist others which include you helped me. With out issue, the factor is virtually the extraordinary situation matter in this registry related hassle. I fit in together with your conclusions and could eagerly stay up for your subsequent updates. 안전놀이터

    ReplyDelete
  28. Useful info. Lucky me I found your site accidentally, and I am surprised why this twist of fate did not took place earlier! I bookmarked it. An impressive share! I have just forwarded this onto a co-worker who was doing a little homework on this. And he actually bought me dinner simply because I stumbled upon it for him... lol. So let me reword this.... Thanks for the meal!! But yeah, thanks for spending time to discuss this issue here on your internet site. Wonderful story, reckoned we could combine some unrelated information, nonetheless truly worth taking a appear, whoa did one find out about Mid East has got much more problerms too 토디즈

    ReplyDelete
  29. "Hello, I read your blogs like every week. Your humoristic style is awesome, keep it up!" Appreciation to my father who shared with me concerning this web site, this weblog is genuinely remarkable. I am genuinely pleased to glance at this web site posts which consists of lots of helpful data, thanks for providing these information Took me time to read all the comments, but I really enjoyed the article. It proved to be Very helpful to me and I am sure to all the commenters here! It’s always nice when you can not only be informed, but also entertained! Once I initially commented I clicked the -Notify me when new comments are added- checkbox and now each time a comment is added I get four emails with the same comment. Is there any method you can take away me from that service? Thanks! 토토서치

    ReplyDelete
  30. right post. I analyze some thing new and difficult on blogs i stumbleupon normal. It’s continually exciting to observe via articles from other writers and exercising a hint some aspect from other net web sites. Right day! This weblog post couldn't be written a great deal better! Analyzing thru this placed up strikes a chord in my memory of my previous roommate! He constantly saved speaking approximately this. I'm able to ship this put up to him. Quite certain he’ll have a tremendous observe. I admire you for sharing! Greetings! Very beneficial advice on this particular article! It’s the little changes that produce the largest modifications. Thank you plenty for sharing! 슈어맨

    ReplyDelete
  31. superb article. Thanks an excessive amount of for the breakdown you've got supplied here. I am still kind-of an illiterate on this topic. So this post became certainly beneficial to me in my opinion. My husband simply launched his personal ebook in this problem and that i suppose a few things learned out of your post might permit me in my opinion to present him the vital assist. Thanks! trying to say thank you may not surely be good enough, for the fantasti c clarity to your written paintings. I'm able to without delay snatch your rss channel to remain educated of any updates. Thank you for the best records and really helpful. It's very thrilling. I love all the stuff you percentage and thank you for the best facts and very useful. It's very thrilling. 카이소

    ReplyDelete
  32. Thanks , I have recently been searching for information approximately this subject for a while and yours is the best I have found out so far. However, what about the bottom line? Are you positive about the supply? That is the excellent mindset, nonetheless is just not help to make every sence whatsoever preaching about that mather. Virtually any method many thanks in addition to i had endeavor to promote your own article in to delicius nevertheless it is apparently a dilemma using your information sites can you please recheck the idea. thanks once more . It is an excellent blog, I have ever seen. I found all the material on this blog utmost unique and well written. And, I have decided to visit it again and again 안전놀이터

    ReplyDelete