Q: What is Consumer Capital Partners?
A: We do three things. We are in the business of managing money. . . . Another business that we’re in is private equity. We have a private investment arm that is solely focused on consumer businesses. The third leg is a philanthropic arm. We’re trying to come up with what we call “causal capitalism,” a way to take business principles and create ways of giving, mainly around homelessness and poverty.
Q: How is your money currently invested?
A: We’ve committed about $100 million toward private-equity investing in the consumer business. We’re really trying to do what we call “disruptive consumer concepts,” and I think our first investment in Smashburger is a good example of that. We’re also looking at the retail wine and spirits industry. . . . We’re looking at things that we can start from scratch or invest in small growth businesses.
Q: What do you mean by “disruptive consumer concepts”?
A: Burgers are a $60 billion category. It’s dominated by McDonald’s, Wendy’s, Burger King, Sonic and Hardee’s. They’re selling premade hamburgers for $3 to $4. Then at the top you’ve got Red Robin, T.G.I. Friday’s and Chili’s. . . . But when we did our research, there was nothing in the middle . . . that steals market share from McDonald’s and Chili’s. That’s what we mean by disruptive. It changes the landscape.
Q: What is “causal capital”?
A: The idea is, how do you apply business principles about sustainability, profitability, accountability to nonprofit pursuits? We’re trying to help organizations apply business principles to their mission of doing good.
Most fundraising is done at the corporate level. We’re trying to have more at the grassroots consumer level. If you’re a user of Starbucks or Smashburger, how can we get you as a consumer to take the money you give us to help make profits and turn that back into donations?
Q: You’re starting a restaurant to raise money for the homeless?
A: Rick Schaden and his dad, Dick, (majority owners of the Quiznos restaurant franchise chain and investors in Consumer Capital Partners) donated about $1.5 million to Denver’s Road Home. . . . We’re redoing a building at East 13th Avenue and Grant Street. In the basement we’re going to build something called the Test Kitchen. It will be a training center for people who can learn to become chefs and cooks and servers. We provide capital, but the business is going to create profits that will go back into training. It goes from making a one-time donation to turning it into a business that’s sustainable over time.
Q: How does the current economic climate factor into your investment strategy?
A: It’s a tough stock market and a tough bond market, so we scaled back our exposure starting about a year ago. We’ve also been buying some things people are most scared about. We’ve started to buy bank loans, and we’ve bought into some of the mortgage dislocation. We also got out of most of our U.S. real estate holdings and started to invest offshore.
Q: What do you recommend for average investors?
A: Buck the conventional wisdom that says to be in the stock market all of the time. We wouldn’t put more than 20 percent of any of our eggs in any one basket. Most traditional advice doesn’t get people diversified enough. The second thing we’d say is for those people who aren’t fully invested, buy things when they are cheap. . . . Put your toe in the water when you feel least comfortable because that’s when you will find bargains. Third, work hard to pay your house off early. Taking an extra $100 a month to pay down your mortgage can be a much better investment than some of the things that are out there.
Edited for length and clarity by Greg Griffin.
