I ALMOST INVESTED IN SALAD AND GO. THEN IT FILED FOR BANKRUPTCY.

Years ago I had the chance to invest in one of the hottest brands in Arizona, and it filed for bankruptcy.

Popularity is not underwriting.

Salad and Go is gone. Every location closed permanently. If you live here, you know exactly what that sentence means. Started in Gilbert in 2013, built around a genuinely great idea, fresh healthy food at drive-thru speed and fast-food prices, it served more than 60 million meals over thirteen years. People did not just like it. They loved it. It was part of daily routines. Mine included, for a stretch.

Let me say this first, because it matters: real people lost their jobs, and founders and employees poured over a decade of work into something customers genuinely valued. Their CEO put it plainly in the announcement: "this is a painful day for everyone who built, worked for and loved Salad and Go." The company cited sustained pressure on consumer demand, past strategic growth challenges, and rising costs, and noted that a Cyclospora outbreak, which Salad and Go was never linked to, still shook confidence across the whole category. Nothing in this letter is a celebration. Building anything is hard. They built something rare.

Here is my confession. When the opportunity came to me, I passed, and I cannot even tell you it was superior analysis. I did not model their unit economics and find a flaw. The honest version is simpler: it was outside my lane, and I did not act. Meanwhile, the case for jumping in was everywhere I looked. Lines wrapped around the buildings. Everyone I knew was a customer. Growth was on a rocket. It had every marker we are trained to treat as proof.

That is exactly the problem. Popularity is a fact about today. Durability is a claim about the future. When you are buying into a hot brand at a hot moment, you are usually paying for the first one while telling yourself you bought the second.

I did not have the ability to tell the difference, and here is the uncomfortable part: neither did most of the people who said yes. The saves and the wrecks in my investing life have rarely come from out-predicting anyone. They have come from having a lane and staying in it. My lane was boring, cash-flowing real estate. It did not feel like genius at the time. It never does. The lane does the work that prediction cannot.

The Second Lesson, and for Allocators It Is the Bigger One

Salad and Go leaves behind roughly seventy purpose-built locations, those small distinctive drive-thru-only buildings. No dining room. A few hundred square feet. Built for one very specific way of doing business. Somebody owns every one of those parcels, and properties like these are typically built to suit and sold to investors as long-term single-tenant income, priced at a premium precisely because the tenant was the hottest brand in the state.

Then something happened that I want you to sit with, because it looks like good news and it teaches the opposite.

Within days of the filing, Dutch Bros announced it is buying the real estate and related site assets of 65 former Salad and Go locations across Arizona, Nevada, Oklahoma, and Texas. Price undisclosed.

So the second user existed. Drive-thru coffee was the obvious answer, and the obvious answer showed up almost immediately. That is genuinely the best case.

Now read it the way an allocator has to read it.

There was essentially one credible buyer for a sixty-five-unit package of a very specific box, and that buyer bought it out of a bankruptcy, on his timeline, at a price nobody has disclosed. His own CFO called it "a great opportunity for us to get a hold of some fantastic real estate" and explained that converting second-generation space cuts buildout cost and time to opening. That is the language of a buyer who got a deal. And he should have. He did the work, he had the format, he had operators ready to run the shops. Nothing about that is wrong.

It is simply not the same thing as a competitive market for your asset.

That is the whole lesson compressed into one transaction. The second user determines your outcome. When there is exactly one of him, he sets the price and you take it. The tenant's credit is the yield. The building's second life is the collateral. Underwrite the second user, not the first tenant.

Why My Lending Box Looks the Way It Does

This is exactly why we lend against ordinary single-family houses at no more than 70% of finished value. Not because I lack imagination, because a three-bedroom house in a Phoenix neighborhood has the deepest second-user pool of any asset in America. Every family in the Valley is a potential buyer. Nobody has to share my thesis for the collateral to hold. Boring collateral is a decision, not a default.

Your challenge: walk through your portfolio and ask one question of every asset. Who is the second user, and how many of him are there? If the honest answer is one, you do not own an asset at a market price. You own whatever that one person decides to pay.

What is the shiny object you are glad you passed on, or the one you wish you had? Reply in one line. I read every response.

P.S. I still think about the deals I passed on. The honest scoreboard says passing has cost me some winners and spared me some wrecks, and I cannot always tell you which was skill. What I can tell you is that the lane, not the predictions, is what kept compounding.

Newsletter Edition #208