Patrick & Kathy Terry (P. Terry's): "Why We Said No to $100M"

Patrick Terry (0:00)

I'll tell you, it was between 70 and 100 million dollars.

Daniel Berk (0:03)

And you turned it down?

Patrick Terry (0:03)

I did turn it down.

Daniel Berk (0:05)

That is Patrick and Kathy Terry. 21 years ago, they opened a 500 square foot burger stand in Austin selling $1.60 hamburgers. When the offer came, they were rich on paper, but it felt like nothing.

Patrick Terry (0:17)

We took a little less than 10 million out. That's the only money we've ever taken out in all these years at P. Terry's in 21 years.

Daniel Berk (0:23)

Today, the business does between $150 and $200 million a year, and instead of selling it, they're giving it slowly and deliberately to their 1,800 employees.

Kathy Terry (0:32)

There's no dollar amount, no dollar figure on relevancy. What this business has allowed us to do is feel significant, feel relevant.

Patrick Terry (0:41)

And love.

Daniel Berk (0:41)

Why would anyone walk away from $100 million twice? I asked them everything. This is the whole conversation. In 2005, Patrick and Kathy Terry, who were married for three months at the time, opened a 500-square-foot burger stand in South Austin. In the first year, they did about $600,000 in sales, which was actually in the red after depreciation. Kathy didn't take a real salary for over a decade. Then in 2016, with 10 locations, a buyer offered them between $70 and $100 million.

They turned it down, pulled out just under $10 million, the only money they've ever taken, and went back to work. Today, P. Terry runs 37 company-owned locations, employs 1,800 people, and does between $150 and $200 million in revenue, growing over 20% a year. And now they're doing something fewer than 100 American companies have ever done, selling the whole thing to their employees. The conversations I get to have on this show are because of the Hampton community. It's a private network of founders and CEOs doing on average $25 million a year, where conversations about what your business is worth and what enough actually means happen all the time. I just get to bring them out into the open.

If that is your world, check it out at joinhampton.com. In today's episode, first, we're going to walk through the numbers. From $1.60 hamburger to the nine-figure offer that they turned down. Then we get into the machine they built, an employee ownership trust, tenure-based profit sharing, and $900,000 in interest-free loans with almost zero defaults. Finally, the question underneath it all, how two people sitting next to $200 million in assets, decided that $10 million and mattering to 1,800 people was more important. This is Moneywise. I'm Daniel Berk. Here's Patrick and Kathy Terry.

Welcome back to another episode of Moneywise. Today, I have not one guest, but two guests, which is unorthodox and very exciting. I have Patrick and Kathy Terry, who I'm excited to learn from and to hear about some of their exciting business ventures, but also some unique perspectives of what they bring to the table and how they've built their business together. Kathy and Patrick, thank you so much for joining me on Moneywise today.

Patrick Terry (2:52)

Thanks for having us.

Kathy Terry (2:53)

Yeah, thanks.

Daniel Berk (2:54)

Absolutely.

I'm super excited. I wanted to start with Kathy. Kathy, could you kind of walk me through what it was like growing up in your household and what money was like, but also the entrepreneurial spirit? Kind of what prompted you to want to be an entrepreneur with Patrick later in life?

Kathy Terry (3:12)

Oh, gosh. Okay. I hope I can condense this down. So I grew up in West Texas, in a small town, Midland. Both my parents, I guess what you would call entrepreneurs, but I didn't even know what that word was back then. But working class, my dad started industrial laundry on his own when I was around seven. My mom was working at the newspaper, but then went on our own and started bookkeeping service. But from an early age, all we did was work.

I thought for the longest time in December and spring break that that's what you did. You worked. So I would work in the laundry, or help my mom do books. And then for me, school was really not something we talked about much growing up, but I figured everybody else was going to school. I might as well. I stayed in Midland because the community college there gave the school, it was free to go if you graduated from high school. So I stayed there for a year and finally escaped the second year and I went a couple of hours down the road to a small state school, Angelo State, and just happened to be dating a guy and his sister said, you really shouldn't be chasing my, following my brother to A&M, go to UT and make something of yourself, do your own thing. So that really changed the trajectory of my life. I went to UT, ended up working at a law firm while I was at UT, and when I graduated from UT with an accounting degree, I didn't want to go into accounting. So I stayed at the law firm and just got lucky, met a woman who had kind of traveled the world. And I was like, who does this? Like I didn't even have a passport, didn't understand any of it, but she inspired me. And so I switched law firms, was working at a IP firm, grinding, and decided I was working, I was in between big cases. I worked on a lot of high tech cases, patent infringement, litigation, and took a six month leave of absence and traveled around the world by myself for six months and came back. And that's when I decided, I'm gonna do my own thing. I eventually quit and said, okay, you can hire you back tomorrow, but at my rate. And so I gave myself a 500% raise over. Here you go. And started working on my own and would hop from firm to firm and work on cases. So that was kind of when I got my entrepreneurial legs under me realizing that I had value. I just had to figure out where my value was.