Private Equity Experience

Swimming with the Sharks: The Leslie’s Pool Mart Cautionary Tale

• Emily Sander • Season 1 • Episode 38

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In Episode 38 of the Private Equity Experience, hosts Ed Barton, Rory Leaphart, and Emily Sander break down the cautionary tale of Leslie's Pool Mart. They dive into an Inc. Magazine feature detailing how a successful regional brand expanded nationwide through the classic private equity playbook, only to find itself mired in debt as market conditions shifted.

The crew uses this real-world case study to unpack critical financial concepts, including the dangerous intersection of high operating leverage and high financial leverage. You'll learn the core differences between fixed and variable cost structures, how corporate store roll-ups risk brand dilution, and when a franchise model might protect a parent company from overextension.

Stick around until the end for a lightning round on "shark strategies" and an exciting personal update on Rory's journey to the amateur Strongman nationals!

Key Takeaways from This Episode

  • The COVID Boom & Reversion to the Mean: Many industries experienced unprecedented growth during the pandemic, resulting in inflated 2021–2022 valuations that did not hold as consumer behavior normalized.
  • Operating vs. Financial Leverage: Operating leverage represents your ratio of fixed to variable costs. When a business stacks high operating leverage (such as owning 1,000 retail leases) with heavy debt, a minor dip in revenue can create a catastrophic cash crunch.
  • The Pitfalls of National Expansion: Taking a local or regional business national often dilutes the unique brand DNA and eccentricities that made the founder successful in the first place.
  • Franchising as a Risk Mitigator: Licensing intellectual property to independent franchisees shifts capital expenditures and lease liabilities away from the corporate level, protecting the overarching brand during downturns.

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Who Are We?

Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).

Through the Private Equity Experience Podcast, our book On‑Ramp to Exit, and a library of free tools and templates, we share real‑world stories, practical strategies, and insider insights to help you navigate every stage of the PE journey — whether you’re leading a portfolio company, joining a deal team, considering PE, or just PE‑curious.

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Podcast Welcome

Welcome to the Private Equity Experience Podcast. Your backstage pass to the strategies, stories, and secrets that drive value in the PE universe. No filters, no fluff, just straight talk and expert insights to help you navigate the private equity world with confidence. And now your hosts, ed Barton, Rory Leaphart, and Emily Sander.

Lightning Round Shark Talk

emily-sander_1_06-18-2026_130219

Let's dive in with some, uh, with some lightning round questions here.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

emily-sander_1_06-18-2026_130219

Let's go with What's your shark strategy? Stay calm, get out fast, or hope someone slower is swimming next to you

cloudRecording_Rory Liebhart_Take_1_audio (1)

Ooh. Certainly the the latter or the third one would be pretty much like my, my thought. Or, you know, if you had a way to, um, yeah, put out some other blood bait so you could go away and swim away while the shark's eating some sort of like dead fish that you have and is bleeding, which is unlikely, but it's possible.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

It, it truly depends on the shark. You know, there's a lot of sharks that

cloudRecording_Rory Liebhart_Take_1_audio (1)

Oh, that's a

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

are actually fairly in- fairly innocuous and, you know, I'd like to just swim with them and enjoy my time in nature. Now, if it's a great white, then I, I'm going to, I don't know, I'm probably gonna pray a lot and know that my maker's close. Yeah. And, you know, other than that, I, I anticipate most, most other shark are, are not deadly, and many of them will just leave you alone. So it's important, I think, to understand the shark you're swimming with before you

emily-sander_1_06-18-2026_130219

ம்ம்.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

to jump out of the, jump out of the water, throw chum at them, or calm and hug the shark

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. Yeah.

emily-sander_1_06-18-2026_130219

If someone offered you $10,000 to cage dive with great white sharks, would you do it? Are you in?

cloudRecording_Rory Liebhart_Take_1_audio (1)

Oh

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh, yeah. Easy

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. That'd be a peak life experience. I mean

emily-sander_1_06-18-2026_130219

You, I'm sure you'd feel alive if you actually survived

cloudRecording_Rory Liebhart_Take_1_audio (1)

do that, not be paid for doing that,

emily-sander_1_06-18-2026_130219

Mm, you would have to pay me to do that. Yeah. Okay

cloudRecording_Rory Liebhart_Take_1_audio (1)

yeah, fair enough. Fair enough.

PE Firms as Sharks

emily-sander_1_06-18-2026_130219

Uh, uh, if, if a private equity firm were a shark, what species would it be, to your point, Ed?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Well, it, it depends on the private equity Some of them are definitely more predatory than others. Um, of them are like little nurse sharks,

emily-sander_1_06-18-2026_130219

Little baby sharks?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

nurse, nurse sharks. Um,

emily-sander_1_06-18-2026_130219

Really? All right

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

so

cloudRecording_Rory Liebhart_Take_1_audio (1)

ones like whale

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

just sort of eat, you know, eat the ocean's krill, like big wide mouth and just eats krill.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

they're harmless to people like me.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

So yeah, they're, they're of all varieties

emily-sander_1_06-18-2026_130219

Okay.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

varieties.

emily-sander_1_06-18-2026_130219

We have an article

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

It's not Shark Week, uh, that I know of, so I, I have not studied up on my shark facts animal

cloudRecording_Rory Liebhart_Take_1_audio (1)

shark article

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

shark, shark zoology or piscology.

emily-sander_1_06-18-2026_130219

what is the title of our article du jour, Rory? Rory, what is,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Oh.

emily-sander_1_06-18-2026_130219

what are we getting into here?

Leslie’s Pool Mart Case

cloudRecording_Rory Liebhart_Take_1_audio (1)

It's, called Swimming With the Sharks, as a matter of fact. it's it's called Swimming With the Sharks. It was basically, um, an article in Inc. Magazine, and I've picked it up my feed as it seems to be curated at this point. And it's about, uh, a company called Leslie's Pool Mart, uh, and it, uh, it expanded nationwide from like a really, uh, regional or like local footprint and it basically went through all the machinations of growth and through the typical private equity go public playbook and it had survived ups and downs through various economic cycles. And more recently as of like 2026, the stock's below a dollar when at two-- in 2021 was over $33. So it's basically a, a... It was an article that says, once very interesting company is now in the tank and here's what happened." So kind of cautionary tale, so to speak. And of course, private equity being bad, private equity is roped into it because along the way, know, it had been owned by I think two different stints of private equity groups, um, employed, you know, various tactics around acquisitions of additional businesses in the pool space. Like we-- when we're talking pool, we're not talking billiards, we're talking about like backyard pool style. and machinations of that and use of, use of financial leverage and all those things to engineer returns. So it was a kind of a interesting article. Um, but you know, like it's pretty representative of a lot of companies out there that have these journeys, you know, going from one owner all the way to being listed on stock exchange, to being taken back private you

emily-sander_1_06-18-2026_130219

Well, is,

cloudRecording_Rory Liebhart_Take_1_audio (1)

circling the drain, so to

emily-sander_1_06-18-2026_130219

is, this why PE gets a bad name? Is this like the scenario where PE gets a bad reputation

cloudRecording_Rory Liebhart_Take_1_audio (1)

Well, I, I think so. I mean, like, it, it, it's, I, I'm s- I sense a pattern these days where these articles just basically cast a certain vibe or light on what's just basic business management, but that's tied to private equity tropes, right? Like, so use of leverage, shutting down stores, things like that. It's like not just, uh, relevant to private equity, you know?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

No

cloudRecording_Rory Liebhart_Take_1_audio (1)

large conglomerates do the same damn thing, even at a larger scale oftentimes.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

uh, and, and the other part is really private equity brings... A lot of these businesses needed it. You know, they, the private equity looked at it and said, "Hey, we've got an opportunity here to really improve margins, to..." Now, sometimes it goes too far, but I... The other, the thing that private equity does, I think that, that, you know, one is they op- they'll optimize. But with optimization, the risk is you then don't have a lot of, you know, there's, there, the safety net removes in terms of cash.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

safety net

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

removes 'cause you've added leverage. The sa- so when you do have a situation, and again, the one that, that we're, we're talking about here with, with, uh, with the pool company or the pool supply company was, look, they, they went gangbusters during COVID and,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

so it's

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

great.

cloudRecording_Rory Liebhart_Take_1_audio (1)

the sporting goods industry

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah,

cloudRecording_Rory Liebhart_Take_1_audio (1)

about a few

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

it's,

cloudRecording_Rory Liebhart_Take_1_audio (1)

back

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

great. The problem is they structured so that they would stay gangbusters and it doesn't work. And so,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

they-- But there's so many businesses, whether they were public, private, private equity, that went through the exact same cycle and they, you know... And again, I'm seeing it now with some of my clients who are in the automotive industry, where they, they thought that, you know, it's a, it's a new tomorrow and everything's changed and the entire industry is flipped on its head. And that's all just, you know, wishful croc, crap thinking. But, you know, generally everything reverts to the mean. But,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yep

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

most of the time these things are, like Rory said, they're necessary, and private equity probably in a lot of cases, and I, I kind of go back to my time at the steakhouses. Private equity, yeah, we, we gutted the steakhouses, but they survived the f- past the, the, the downturn, you know, in 2008,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

where a lot of the other ones didn't because, you, they didn't, they had, they were too fat and bloated, and by the time they got, you know, to the other side of that, they had run out of cash

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. I mean, the thing with this situation, as well as many others like it, is like ownership groups oftentimes c- just can't help themselves. They're not satisfied with nominal regular growth. Like, you know, outpacing GDP, outpacing, you know, normal benchmarks. They just, they have to strive for that much more. And when you do that, you start to then justify things that in hindsight turned out to be wrong. Like, like Ed said, you know, this whole boom all these industries, coming out of COVID and whatever pandemic related thing or, you know, other macro shift that you think is gonna just be permanent. I don't know. History repeats itself. It generally isn't. So it's like if people place big bets on these things, they justify it with these theses that turn out to be wrong. And, you know, if you actually go back and look at PE valuations, that 2021 timeframe, 2022 timeframe was like the peak valuations in our recent times for multiples on, on, um, on EBITDA. What that means is like people were so bullish during that timeframe. First off, they saw that, oh, you know, the economy didn't totally get crushed by the pandemic, and then we've got- found all these cottage industries of just going gangbusters, and so we're gonna aggregate them up and just grow, grow, grow, grow, grow. Well, that doesn't happen forever. And so all of these massively overpriced assets, which again, oftentimes the leverage you have on a business is based on that purchase price or like a percentage of that, that then becomes more the looming thing, right? And so then you have to address that. Oh, well, where do you get more cash? You either have to grow more or cut costs, so then you... This is where you start to see these cycles of these companies that are

emily-sander_1_06-18-2026_130219

Yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

hands every five to seven years or four to five years in some cases because somebody's gotta take it over 'cause the cash has run out of one well, so somebody with a new well has gotta come resuscitate it and try to figure out what to do with it. It's been interesting. I've seen-- I've personally been part of one journey that... Well, the company, we all worked at together, like I was with the same company for, don't know, uh, t- almost 10 years, but like under many management groups that had to go through these same things. It's not necessarily analogous to, you know, consumer goods businesses, but like different theses based on economic times like justify people having these and, and valuations and stuff like that, and then somebody can't figure out what to do with it, so then they sell it again. Like it's, it's wild.

emily-sander_1_06-18-2026_130219

So it sounds like it, uh, PE backing can fortify a company, especially through downturns. Uh, but it also, like depending on the combination of things that happen, it can weaken the underlying business. If you're, if you're buying and selling and adding debt and doing all these things, and maybe your time horizon is different than other people's, you can actually erode the underlying asset

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

and some of the times the private equity go, goes into these transactions with, as you, as you just mentioned, Emily, like a fixed time horizon. And, you know, and

cloudRecording_Rory Liebhart_Take_1_audio (1)

Exactly

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

all of a sudden the market is not where it needs to be time at which that time horizon is, you know, there all of a sudden you got COVID hits and, you know, so your entire investment thesis is, is spun on its head. And in some cases, like in this particular case that we're talking about today, the, the... It took off. It went crazy because, you know, 21% increase in pool, in pool, uh, the construction, because you had people stuck in their backyard. On the flip side, you know, you had other folks where their businesses, restaurants cratered because you couldn't- Yeah you know, you couldn't function. And, and if the private equity folks, they had timed everything out so that, you know, combination of fund life and funding and loan maturities all hit

emily-sander_1_06-18-2026_130219

Oh, yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

you got problems. I mean, legit big problems that might've been fine otherwise

When Bigger Breaks

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yep

emily-sander_1_06-18-2026_130219

When, when does b- bigger not equal better? Like when does a bigger company not equal stronger company? Like, you, you think like traditionally it's like add more stores, make more acquisitions, do all these things, and it's like more and more and more. But w- when does that hit a tipping point or what characteristics say actually no, more is not better in that particular

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

That's a

emily-sander_1_06-18-2026_130219

case?

cloudRecording_Rory Liebhart_Take_1_audio (1)

Gosh, there's so many

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

that question. It's a good one. I mean, we could spend a whole podcast on that one, but, you know, the thing that comes to mind for me is, like, the analogy, you just can't, you can't turn an aircraft carrier on a dime.

emily-sander_1_06-18-2026_130219

嗯。

cloudRecording_Rory Liebhart_Take_1_audio (1)

So, like, if there's momentum working against you on many different things, like, many different dimensions, you can't just, like, you know, make certain changes and expect the whole thing to, to pan out. Like, where you could do that with a startup is, you know, startup we were talking about, "Oh shit, we need to pivot this sucker. All right, well, we'll pivot it." And like, "Oh, we figured it out," you know? But like, imagine being right now Meta or Google or, you know, any of these big tech companies and all of a sudden, like, AI is not a thing, and they've invested hundreds of billions of dollars in that. Like, that would be a problem, you know, if AI became not a thing. Now, that's probably something I wouldn't bet on, but like, that's just a very blatant example that's maybe relevant to the time. But like, here's the thing, if, you know, like, how much, how many hundreds of billions of dollars did flush down the toilet when it bet on the metaverse like three years

emily-sander_1_06-18-2026_130219

Oh my gosh.

cloudRecording_Rory Liebhart_Take_1_audio (1)

A lot.

emily-sander_1_06-18-2026_130219

Yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

But, you know... But they're, they're big enough where, you know, it, they figure it out. But, um, but like a, know, the average company can't just like, you know, reinvent itself on a dime, you know, like a, like a small company kinda could

emily-sander_1_06-18-2026_130219

What do you think, Ed? Is there a certain industry that lends itself or a business model that lends itself

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I mean,

emily-sander_1_06-18-2026_130219

t-

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I, I hit-- I, I basically gave the initial answer, it depends. It, it truly is. I kinda... The larger they are, the, I normally would say the more resilient, but I've actually seen the larger companies blow up faster because again, when you take that safety net away, you know, elephants fall harder than mice. And so it really is like, look, if it, if it's going off the tightrope, it's gonna fall hard, fast, and crush stuff you know, some other, some other, you know, versions of, of businesses that can't. And so the, the issue tends to be if you look at a business, those that have, even if they're large, if they've got high operating leverage and high financial leverage, you're screwed. It doesn't-- Because you can't scale up and down your expense. However, in order to maximize profitability, most of the time your, your financial or your financial engineering is designed to optimize and to, in some cases, not just optimize, but actually of push to max financial leverage and operating leverage. So an operating leverage is gonna be, you know, when I talk about operating leverage, it's your-- It's really, to simplify it, your ratio of fixed costs to variable costs. So in an accounting firm like mine, got,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Mm-hmm

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

or a law firm or something like that, the bulk of my costs are personnel. Highly variable. I could cut, I could cut my costs in, by three quarters tomorrow

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

In a f- in a auto manufacturer, the bulk of their, bulk of their costs are fixed costs. And so they have factories, they have, you know, and things like that, that you... It's much more difficult to structure a, a downturn, to ride a downturn. But on an upturn, they tend to really optimize

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

emily-sander_1_06-18-2026_130219

Hmm

cloudRecording_Rory Liebhart_Take_1_audio (1)

I don't know, this Leslie's, Leslie's Pool Mart story is very interesting because, you know, you had, you had the same, the founder was involved for a long time in different capacities and so, the trajectory of the business, you know, kind of ebbed and flowed, but he got kind of, um, whipsawed by the market and also the different financing structures. But you did have the same sort of DNA in that company, so it never truly, truly lost its way. right now the company is simply... it's just under a mountain of debt. So the question is, can they restructure out of that, you know,

emily-sander_1_06-18-2026_130219

Didn't, didn't you start in like the 1980s as well? Is that... Okay

cloudRecording_Rory Liebhart_Take_1_audio (1)

by some, you know, the guy, you know, was very like an eccentric person, that sort of thing, which oftentimes successful founders are. Let's remind ourselves of that. Um, yeah, it's, it just, I guess it, it, the merry-go-round stops when you can't manage the debt you have on your balance sheet really a lot of times. So, um, if you continue to refinance, refinance, refinance, and the market moves against you, to be able to service the debt becomes insurmountable, at which point, you know, you basically, you, you might be in a position to have to file bankruptcy, which I was actually gonna say like when you were asking about the, is it, at what point is being b- big bad? Well, I would say like, you know, think about the airlines, all the airlines that have filed bankruptcy so many damn times to restructure. That is, that is a, that is a little safety net that companies do have, um, is to be able to restructure without dying completely, um, through the US bankruptcy court system. So, I mean, that is, it is actually a safety net for sure.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Mm-hmm.

emily-sander_1_06-18-2026_130219

in previous pods we've talked about there's, there's good debt and there, like, that's the smart move many times. And so you've gotta, gotta balance, you know, you can't really predict things like COVID or thing, uh, things that are just out of the blue. But in general you can say, "Hey, this, this tends to be a pretty savvy move," or, "This tends to get us, um, a time horizon where we have chances for, like, all these options to move in our favor.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

emily-sander_1_06-18-2026_130219

don't, then we'll have to deal with that." But I mean, not to, not to completely badmouth taking on debt, 'cause debt can be

cloudRecording_Rory Liebhart_Take_1_audio (1)

No,

emily-sander_1_06-18-2026_130219

helpful

cloudRecording_Rory Liebhart_Take_1_audio (1)

at all. it's

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

clarifies

cloudRecording_Rory Liebhart_Take_1_audio (1)

extremely it's extremely useful. I mean, for businesses that need working capital, they're maybe asset heavy, but their cash flow, you know, um, seasonal call, let's call it or something like that, like you have to have working capital lines of credit to be able to pay your employees and buy inventory. Absolutely. Very important. I think the key is just always to be able to scenario analyze, well, what happens if interest rates move this way and maybe you have unhedged interest rates? Um, or what happens if there was a shock to the regulatory system and 20% of our business went away? What would we do? Would we have enough cash flow to manage this debt really? That's, that's it. And I mean, and, and management teams that know their business well, um, which is very important to understand the, the business and the, the industry can plan for even edge case scenarios and then assign probabilities that say, despite all this, does it make sense to take on this much debt? Can we service that even if these bad things happen? 'Cause no one really should be spending that much time saying, "What happens if we crush it?" You know, like, uh, we, we outperform. Well, that's, that's great, you know, but I usually don't spend a lot of time on that side of the ledger. I'm always like figuring out where the, where, where are we gonna get screwed? you, you know, inherently there's always gonna be risk, but, you know, you'd actually be very inefficient if you didn't use debt responsibly in most cases, you had the ability.

emily-sander_1_06-18-2026_130219

And, and a lot of it is the terms you can negotiate up front, right? 'Cause if you have a loan package or you're going back and forth with a bank, there's different terms you can set up that work, you know, in your favor. "Hey,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Absolutely

emily-sander_1_06-18-2026_130219

think there's moderate risk here, so we're gonna put these things in place," but it still makes sense for the bank to do for a myriad of reasons. Um, and Ed, you were saying something. So you were saying, uh, operating debt and finan-

cloudRecording_Rory Liebhart_Take_1_audio (1)

Operating,

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Operating

emily-sander_1_06-18-2026_130219

operating leverage.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

leverage. Yep

emily-sander_1_06-18-2026_130219

Okay. So operating leverage was the fixed versus variable, um...

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Cost structure essentially

emily-sander_1_06-18-2026_130219

Yes. So that's, that's like b- it, it, that's like determined by the business model primarily, yes?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Um The, yeah, it, it can be the b-- the business model will tend to dictate what type of operating leverage you have and kinda how extensive you can have it. But most businesses, all businesses have some degree of operating leverage You know, even, even yours, Emily, as, as a, and you're a, you know, essentially

emily-sander_1_06-18-2026_130219

what would a, uh, like give me an example of high versus low operating leverage. You mentioned you can get rid of half your expenses tomorrow

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yep. Because of personnel. And so I can fire everybody and go, "Okay, we don't have enough business. You're fired, you're fired, you're fired, you're fired, you're fired." Now my cost structure is lower.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

However

cloudRecording_Rory Liebhart_Take_1_audio (1)

can sell a data center the next day

emily-sander_1_06-18-2026_130219

Oh, okay.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

However, if you're Ford Motor Company

emily-sander_1_06-18-2026_130219

Yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

and you all of a sudden have spent a billion and a half dollars to build, to build a plant, to build the Ford Lightning that no one wants to buy, now you're stuck with this plant. You have you have that special build, you have a bunch of equipment that is special designed to build specialized equipment, and you have the people that you hired under union contracts, and you've got property taxes, and you've got... And so that's high operating leverage because if that thing was pumping, the variable costs are relatively low per truck. You might be sp- selling them for $80,000 apiece. You might have, you know, $25,000 of hard cost in that as far as, you know, the, the other pieces. Then you got the overhead components I just talked about, including labor because of the unions in that structure. Or, you know... A- and so if Ford goes, "Well, they're not selling," you can-- You're still stuck with a plant, and you're likely stuck with

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

fairly high labor costs as well as you work through those contracts

emily-sander_1_06-18-2026_130219

So if you banked on Ford Lightning early, you got screwed

Leverage Double Trouble

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Uh, I, I would say you probably were in a... Well, I, I use that as an example. Ford li- Ford is trying to get those kind of issues resolved. But yeah, the original Ford Lightnings were, were rough truck

emily-sander_1_06-18-2026_130219

But, but it's kind of like, um, you're betting big and you're putting, like, all your chips in one, uh, one roulette, whatever you call it. Um, and if it hits, then you get that much more return for it

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah, you're, you're

emily-sander_1_06-18-2026_130219

Or-

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

shape because operating leverage, again, is, is like financial leverage. So you go, "Okay, do well, my return on equity, my return on investment's a lot higher. But

emily-sander_1_06-18-2026_130219

Yeah. Okay

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I've taken that safety net away."

emily-sander_1_06-18-2026_130219

So when people stack high operating le- uh, operating, oh my gosh. Say it again. Operating

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

leverage?

emily-sander_1_06-18-2026_130219

s- leverage and financial leverage and it goes bad, they're just like double stacked in, in, in the shit

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. What if you used a ton of financial leverage to invest in these major infrastructure projects that require a ton of capital, and the market moves against you both ways? Let's say the interest rates go up, and you have a bunch of variable interest rates on your debt, and the industry moves against you so that obviously, like, let's call it compute now. We'll just use that as the example since it's very relevant. becomes commoditized, and it, you know, you can't sell it for shit And so your, your, your cash flow from revenue gone to the craters, and your, you owe more on your debt. You're double F'd. So yes, high operating leverage and high financial leverage is not a great combination if they're

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I had no

cloudRecording_Rory Liebhart_Take_1_audio (1)

correlated

emily-sander_1_06-18-2026_130219

Okay. Okay. Um, so

Pool Roll-Up Fallout

emily-sander_1_06-18-2026_130219

let's go back to our Pool article here. What s- what sequence of events happened to, um... I don't know. It, it's, like it seemed like the m- the mission of the company got diluted. Is that

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah, there's, there's a, there's kind of like a... That was-- I'm guessing why they chose this particular instance as the centerpiece of the story, 'cause it's kind of got a little bit of all the things, right? So, know, it's got some element of, um, you know, the growth in the business slowed considerably based on people no longer wanting to buy and invest in pools 'cause they could outside and go to the beach again. Um, you had elements of like taking on quite a bit more debt to finance growth and acquisition. So the, the roll-up strategy, one of the things we talked about here as well, is buying businesses that are in fragmented industries and rolling them up into a single strategy to, know, theoretically eke out economies of scale and efficiencies. So they did a bunch of acquisitions. Um, and then, you know, what we talked about when we dissected the Sims article, the, the sport, you know, the fishing company, um, fishing gear company is like the brand dilution part of it. So like

emily-sander_1_06-18-2026_130219

Okay.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Leslie's had its own approach to the market that worked locally and regionally, and when you start nationally- nationalizing that, expanding it, it, gets diluted and people sort of lose their touch with it and their connection with it, and so they're like, "Well, what, what makes this special now?" Um, so it's pr- and I'm, I'm... I bet if I look deeper, probably some price gouging, whatever, you know, those types of things that all kind of feed together. So I think, I think all the pieces of the puzzle go together, but that's not... That's a pretty, typical, journey for a company

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah.

Retail Footprint Risk

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I think the, the other piece is, you know, they, they talked about they had 1,000 retail locations point. That's high operating leverage. Again, you've

cloudRecording_Rory Liebhart_Take_1_audio (1)

Big time

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

you've got leases, you've got staffing and those kind of things, and leases are tough to get out of. so once you've-- once you're kinda in that spot, you know, it's good for distribution and for growth and all those other components. But, you know, it-- once-- if you've got a downturn, you're stuck with a lot of that overhead

cloudRecording_Rory Liebhart_Take_1_audio (1)

That's right

Franchise Model Explained

emily-sander_1_06-18-2026_130219

Where does a franchise model sit in all this?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh

cloudRecording_Rory Liebhart_Take_1_audio (1)

Ooh, boy

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

So, you know, franchising is a, is a pretty interesting

cloudRecording_Rory Liebhart_Take_1_audio (1)

don't know, enough about the business model, honestly, to intelligently answer that

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah. I'll g- I'll give you...

cloudRecording_Rory Liebhart_Take_1_audio (1)

he does

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah, I was about to say, I'll give you s- I'll give you some. The, uh, 'cause I, I had had a franchise for a while and kind of went through the pros and the cons. Franchising essentially would be, they've got a, they've got a model that works kind of sitting at each one of those locations, and they go, "Okay, in- instead of us using factory stores, um, you know, or, or us going out and building new stores or building new or adding additional footprint, we're going to license other folks to do that. what we're gonna do instead is we're gonna go, well, instead of, you know, we get all the profit here, we're gonna set up the systems and the processes and the tools and the, this is how everything looks. And, you know, when someone walks in, they shouldn't know whether we own the store or whether a local franchisee owns the store, 'cause the treatment is the same, the products are the same, the systems are the same. However, the capital requirement is significantly lower because we're essentially going, you, franchisee, pay us a franchise fee.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. Yeah.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

a flat fee up front, and in return, we're going to protect your market. So we're gonna give you a geographic area where you're gonna have a non-compete.

emily-sander_1_06-18-2026_130219

Mm-hmm.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

You know, essentially, we're gonna not compete with you, and other franchisees can't compete with you in that space to sell, you know, Leslie's Pool products. And

cloudRecording_Rory Liebhart_Take_1_audio (1)

Mm-hmm.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

you, you're gonna send us 8% or 12% of every, of the top line of everything you get a licensing fee, and the rest of it you get to keep." Now, the issue is if your gross margin is, or your net margin is only 18% to 20% at the store level, and you gotta pay 8% to 10%, again, now the franchisee has gotten to a relatively high operating leverage business.

emily-sander_1_06-18-2026_130219

What about corporate though? Is that protect them from getting overextended?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

On the corporate side, yes, it's because you've got much lower capital outlay and, you know, these guys blow up. If a franchisee blows up, yep, you've lost that revenue stream of, you know, 12% of the top line or whatever the franchise fee was or the licensing fee, the monthly fee. But what you didn't have was the lease, you didn't have the people, you didn't have... That's all up to the franchisee, which is

cloudRecording_Rory Liebhart_Take_1_audio (1)

Mm-hmm.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

the independent

emily-sander_1_06-18-2026_130219

Okay, interesting. All right. What else do we need to know about Wesley's pools?

cloudRecording_Rory Liebhart_Take_1_audio (1)

I would just say that um, it is not atypical. So I expect we'll be seeing more of these stories you know, we're kind of like two cycles off of the... Well, one, almost like one full cycle off of the pandemic acquisition. Like, I call it boom, where private equity is extremely active. Now you're in that like seven, six, seven year timeframe since that point in time. So I you'll start to see more stories like this where,

emily-sander_1_06-18-2026_130219

Yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

change hands and sort of thing. But, uh, you know, I know, I will 'cause my feed is now curated for it, so,

Culture Shock and Strongman Wrap

cloudRecording_Rory Liebhart_Take_1_audio (1)

yeah.

emily-sander_1_06-18-2026_130219

Well, I think too, like, one other small note is when you were like, they tried to take something that worked locally and, like, the brand and the approach and the style and the kind of, uh, eccentricities of the founder and do that nationally, you, you can't do that somet- a, a lot of times. And, um,

cloudRecording_Rory Liebhart_Take_1_audio (1)

No.

emily-sander_1_06-18-2026_130219

know Ed, you and I were

cloudRecording_Rory Liebhart_Take_1_audio (1)

in Manhattan, New York's not the same as in Biloxi,

emily-sander_1_06-18-2026_130219

I was just gonna say, like Ed and I, we were, uh, headquartered in Lakeland, Florida for our last stint, and there was this guy named, uh, Grady Judd. Was that sheriff, Sheriff

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Grady Judd

emily-sander_1_06-18-2026_130219

Judd? YouTube this man, listeners. Like YouTube Lakeland, Florida Grady Judd, and he's a sheriff who is

cloudRecording_Rory Liebhart_Take_1_audio (1)

Oh, my girlfriend's from there, Lakeland, literally,

emily-sander_1_06-18-2026_130219

No.

cloudRecording_Rory Liebhart_Take_1_audio (1)

this guy. Yeah,

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Brady Judge

emily-sander_1_06-18-2026_130219

He's

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

I mean, he's,

emily-sander_1_06-18-2026_130219

hilarious.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

he's a

emily-sander_1_06-18-2026_130219

He's

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

he is the heir

emily-sander_1_06-18-2026_130219

h-

cloudRecording_Rory Liebhart_Take_1_audio (1)

he was like, "I don't give a

emily-sander_1_06-18-2026_130219

his press conferences were like hilarious. And you'd h- you know, like the sheriff's at the microphone with like the doing the debrief of the crime, and the people behind him are like trying to be serious, and he's saying stuff, and they're trying not to laugh 'cause the way he's...

cloudRecording_Rory Liebhart_Take_1_audio (1)

so funny.

emily-sander_1_06-18-2026_130219

Oh my God

cloudRecording_Rory Liebhart_Take_1_audio (1)

this and I thought, "You're blowing this out of proportion.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh,

emily-sander_1_06-18-2026_130219

No,

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh,

emily-sander_1_06-18-2026_130219

but if you try to take... No,

cloudRecording_Rory Liebhart_Take_1_audio (1)

public there loves him,

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh,

emily-sander_1_06-18-2026_130219

it...

cloudRecording_Rory Liebhart_Take_1_audio (1)

being who

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Yeah,

emily-sander_1_06-18-2026_130219

Because he keeps people safe

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

He g- he runs on a Pose

emily-sander_1_06-18-2026_130219

He keeps people safe too. Like, like don't mess with Grady. Like that's the saying down there. You don't mess, you don't fuck around with Grady Judd 'cause he will destroy you. But

cloudRecording_Rory Liebhart_Take_1_audio (1)

I'm gonna tell her,

emily-sander_1_06-18-2026_130219

if you try to take Grady Judd and put him in any other state or metropolis or big city or God forbid, like the West Coast, oh my God, yeah.

cloudRecording_Rory Liebhart_Take_1_audio (1)

do actually. Get his ass over here. Fuck yeah.

emily-sander_1_06-18-2026_130219

Yeah. But that's what it reminded me of. Yeah,

cloudRecording_Rory Liebhart_Take_1_audio (1)

Oh my God, I'm gonna tell her about

emily-sander_1_06-18-2026_130219

That is cool. That is cool.

cloudRecording_Rory Liebhart_Take_1_audio (1)

small world.

emily-sander_1_06-18-2026_130219

All right. There we go

cloudRecording_Rory Liebhart_Take_1_audio (1)

sold, uh, her house, uh, that was in just, like, this last week, and it kind of reminded me of some of the houses I've seen you guys have, so yeah

emily-sander_1_06-18-2026_130219

she moving up here?

cloudRecording_Rory Liebhart_Take_1_audio (1)

Uh, we live together here?

emily-sander_1_06-18-2026_130219

All right, there we go. All right.

cloudRecording_Rory Liebhart_Take_1_audio (1)

yeah

emily-sander_1_06-18-2026_130219

This episode has a lot in it. Little, little

cloudRecording_Rory Liebhart_Take_1_audio (1)

It does.

emily-sander_1_06-18-2026_130219

tidbits of all sorts. Lakeland to Seattle. Has she... Did she grow up in Lakeland?

cloudRecording_Rory Liebhart_Take_1_audio (1)

Uh, she grew up outside Tampa, so Lakeland's kind of

emily-sander_1_06-18-2026_130219

That's a big change then all the way across the country. That's a big

cloudRecording_Rory Liebhart_Take_1_audio (1)

moved here two years ago as a nurse practitioner,

emily-sander_1_06-18-2026_130219

Ah, yes.

cloudRecording_Rory Liebhart_Take_1_audio (1)

life there, um, and then just, like, picked up and, like, got off the plane with a suitcase and her dog and, like, started a life here. She got transferred to Virginia Mason, and she's a advanced cardiac failure nurse practitioner. So anyway, she started, you know, started, um, you know, started a life here, and it's cul- y- it was culture shock for her going this way, as it is for a lot of people going that

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Oh boy, I can only imagine

emily-sander_1_06-18-2026_130219

yeah,

cloudRecording_Rory Liebhart_Take_1_audio (1)

funny.

emily-sander_1_06-18-2026_130219

Oh yeah. Oh yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. Yeah, so yeah it's funny. She's... And so, Emily, you'll appreciate this. She's a, she was a very high-level Strong Woman, Strongman competitor, so she did that at, like, the Arnolds.

emily-sander_1_06-18-2026_130219

Wow

cloudRecording_Rory Liebhart_Take_1_audio (1)

so she's my coach in Strongman

emily-sander_1_06-18-2026_130219

No way. OMG. Okay. Okay. She was your coach. Okay. And then she

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah, she's a beast.

emily-sander_1_06-18-2026_130219

and then

cloudRecording_Rory Liebhart_Take_1_audio (1)

real.

emily-sander_1_06-18-2026_130219

she

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah, Sh- yep, she is

emily-sander_1_06-18-2026_130219

said,

cloudRecording_Rory Liebhart_Take_1_audio (1)

today.

emily-sander_1_06-18-2026_130219

"I see that.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah, and I actually have

emily-sander_1_06-18-2026_130219

I like that."

cloudRecording_Rory Liebhart_Take_1_audio (1)

that I'm h- I'm leaving here in about 15 minutes to drive down to Woodland, Washington, uh, and compete in Woodland's Strongest tomorrow.

emily-sander_1_06-18-2026_130219

What are the events?

cloudRecording_Rory Liebhart_Take_1_audio (1)

Uh, we have a press medley, so an axle clean to press overhead,

emily-sander_1_06-18-2026_130219

Okay.

cloudRecording_Rory Liebhart_Take_1_audio (1)

a log clean and press overhead a, a sandbag clean and press overhead to a keg clean and press overhead. That's, so that's one event. get through all that in 60 seconds. And then second event is deadlift for reps, uh, in 60 seconds. The weight for my class is gonna be 360 pounds. And then the last one, which is my strongest event, is, like, a frame carry at 400 pounds, 40 feet, drop that, pick up a yoke and run that back 40 feet, and that one's gonna weigh 485. So did I tell you I won the Strongman event I was in last

emily-sander_1_06-18-2026_130219

No? I didn't know that.

cloudRecording_Rory Liebhart_Take_1_audio (1)

won it.

emily-sander_1_06-18-2026_130219

No shit. You won, Mari? Holy shit.

cloudRecording_Rory Liebhart_Take_1_audio (1)

yeah. Viking Pro-Am. Thank you.

emily-sander_1_06-18-2026_130219

Dude,

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Wow

cloudRecording_Rory Liebhart_Take_1_audio (1)

My, my first one, yeah.

emily-sander_1_06-18-2026_130219

How many peop-

cloudRecording_Rory Liebhart_Take_1_audio (1)

in the novice division,

emily-sander_1_06-18-2026_130219

many people competed?

cloudRecording_Rory Liebhart_Take_1_audio (1)

uh, in that one, altogether, like 15. In this one, there's gonna be, like, 30. So kinda small, but I got an invitation to nationals

emily-sander_1_06-18-2026_130219

No, you didn't.

cloudRecording_Rory Liebhart_Take_1_audio (1)

I won,

emily-sander_1_06-18-2026_130219

Come on

cloudRecording_Rory Liebhart_Take_1_audio (1)

in, I'm in this st- sport at least another year,

emily-sander_1_06-18-2026_130219

my gosh. That's amazing. Congratulations. I did not know that. Yeah

cloudRecording_Rory Liebhart_Take_1_audio (1)

Arizona for another competition

emily-sander_1_06-18-2026_130219

You're getting serious about this then.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Yeah. Yeah, I am. it's it's become

emily-sander_1_06-18-2026_130219

like prize money or is it just for pride?

cloudRecording_Rory Liebhart_Take_1_audio (1)

it's full-on amateur. I get a competitor's T-shirt and medal.

emily-sander_1_06-18-2026_130219

I got this T-shirt from I was thinking

cloudRecording_Rory Liebhart_Take_1_audio (1)

and

emily-sander_1_06-18-2026_130219

deadlifts.

cloudRecording_Rory Liebhart_Take_1_audio (1)

free booze

emily-sander_1_06-18-2026_130219

Yeah.

cloudRecording_Rory Liebhart_Take_1_audio (1)

so yeah.

emily-sander_1_06-18-2026_130219

okay. Well, good luck on your competition, and from all the events you described, I think you probably will not be able to feel your shoulders or upper chest afterward if you're lifting stuff above your head and then-

cloudRecording_Rory Liebhart_Take_1_audio (1)

wreck a 47-year-old dude, I'll tell you. that. I

emily-sander_1_06-18-2026_130219

But you're looking good, man. You're d- you're doing great.

cloudRecording_Rory Liebhart_Take_1_audio (1)

feel good.

emily-sander_1_06-18-2026_130219

That's amazing.

cloudRecording_Rory Liebhart_Take_1_audio (1)

Life

emily-sander_1_06-18-2026_130219

now we know it's 'cause of your good coaching who took some extra care

cloudRecording_Rory Liebhart_Take_1_audio (1)

coaching/girlfriend is offsetting the divorce mediation process that I'm also in at the same time, so. I don't know. Life, life is short. Life is good. We make it what it is, right?

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Amen,

emily-sander_1_06-18-2026_130219

There we go. There we go. All right.

cloudRecording_Rory Liebhart_Take_1_audio (1)

right.

emily-sander_1_06-18-2026_130219

All right. That's a wrap.

cloudRecording_Rory Liebhart_Take_1_audio (1)

All right,

emily-sander_1_06-18-2026_130219

Big Rakes.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Very

emily-sander_1_06-18-2026_130219

Thanks, Eddie B

cloudRecording_Rory Liebhart_Take_1_audio (1)

thank you.

ed-barton-and-the-child--has-them-_1_06-18-2026_130216

Thanks, um

cloudRecording_Rory Liebhart_Take_1_audio (1)

Thanks, Sam

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