Zach Sherman (00:11)
Hi everyone. And welcome back to handling the heat, the podcast by restaurant equipment dot bit, where we dive into the real stories behind the people powering the food service industry. Today I’m joined by Neil Sherman, founder and president of tag X brands, which for nearly 40 years has built one of the world’s largest marketplaces for surplus and pre-owned restaurant equipment. Tag X is not only where I work and the company that sponsors this podcast, but if you couldn’t tell by the name, Neil also just so happens to be my dad.

Neil shares his journey from launching a business in the late 1980s to building one of the most trusted platforms for food service asset recovery. talk about the early pivots that shaped the company, what it was like selling equipment before the internet and the massive Red Lobster project that tested our systems at scale. Neil reflects on the importance of focus, the culture he and his partner, Bob, have built and why the aftermarket still has enormous untapped potential.

If you’ve ever wondered what it takes to build something that lasts, or are curious about what I’m up to when I’m not in the podcast studio, this is one you won’t want to miss.

Zach Sherman (01:17)
Neal thank you so much for joining us here on Handling the Heat. Super excited to chat with you today.

Neal Sherman (01:25)
Great to be here, Zach. Very excited.

Zach Sherman (01:27)
Yeah, we should probably address the elephant in the room that obviously, you know, handling the heat, you’re my boss, you’re sponsoring this, but you know, I don’t know if there probably should, ⁓ address the other elephant in the room too. ⁓ Niels obviously. Yeah. Coincidentally.

Neal Sherman (01:36)
I am.

which is, which is that we share the last name, same last name. Coincidentally,

yeah, we can handle that. That’s fine. I’m good with that.

Zach Sherman (01:48)
Yeah, no, it’s all good.

Me too. ⁓ well, we’ll hold this as any other podcast episode that we do here. What has, ⁓ tickled your fancy recently, Neal? What’s something you’ve eaten recently that you’ve really enjoyed?

Neal Sherman (02:03)
So last night in Fairport, New York at Bonnie and Clyde’s, I had grilled asparagus with a chickpea paste and a eggplant paste and it was just Great chef, great

Zach Sherman (02:17)
that sounds great.

Rochester, great food

Neal Sherman (02:21)
Can be.

Not just, didn’t just give the garbage plate to America and the world.

Zach Sherman (02:25)
Yeah. It’s a bit of a juxtaposition. The asparagus grilled asparagus to the garbage plates. you said asparagus. No, we’ll, we’ll, we’ll keep that in. I’m sure the asparagus was good as well. Awesome. Well, Neal, think, you know, let’s start this, ⁓ at the beginning because I think obviously Tag X brands has been around for.

Neal Sherman (02:30)
grilled octopus.

Did I say asparagus? Sorry. You’ll have to edit that out. Okay.

There was no experience.

Zach Sherman (02:53)
Over 35 years now gone through a lot of different iterations of what the business has done in and around the food service and adjacent spaces. But I want to talk initially about your going out and starting something that has had the longevity that it’s had. So can you talk a little bit about your going off and starting the advantage group, the precursor to TAGeX brands.

Neal Sherman (03:17)
Sure. Well, originally I worked in brand management and marketing for General Foods, now Kraft, in the Maxwell House brand. Great experience. Met a lot of great people, still friends with many of them. But I felt that the corporate environment wasn’t for me. It had an entrepreneurial bent ⁓ and moved to Washington, D.C., which at the time and even now is not the epicenter of food marketing.

And so at the time, I took on some consulting projects in the food space. And one of them was frozen yogurt machines in the supermarket, self-service, near salad bars in the early days of prepared foods. And what happened over time was I took on more and more responsibilities, ended up running that company. And one thing that was consistent, which was the

clients, supermarkets would ask us to get rid of whatever we were displacing. So as a courtesy we got rid of the equipment, cleaned it up, sold it, brought back the proceeds and…

supermarket said no one ever helped us with that headache before. And so it was only five years later that it took us to realize that was really the business. It wasn’t placing food service equipment, which we placed soup bars and salad bars and coffee kiosks, but it was really the frozen yogurt machines that took us nationally. And then their ultimate demise became the genesis for a broader service to help with displaced equipment.

Zach Sherman (04:50)
So I think what’s interesting for a lot of the people that we’ve had on the podcast and a lot of people that I find to be successful is this nimbleness of. You know, entrepreneurship or of how you think about your business. So how quickly, I mean, obviously once you took you a minute to, you know, get hit over the head with, Hey, maybe our business is more on the displacement versus the placement of, of equipment. But once you have that in your head, what is the process of

rearranging your business process, your go-to-market model, your interactions with clients or potential clients to, make that transition. Cause I think that that’s one of the marquee, you know, values of, of a successful entrepreneur.

Neal Sherman (05:36)
Well, your name of your podcast, Handling the Heat, is what it’s all about. So the heat was get rid of people’s equipment that they were asking you to displace. Then the second round of heat was the demise of self-service frozen yogurt, largely driven by the growth of prepackaged frozen yogurt in the early 90s. And the not.

necessary to have a soft serve machine in your supermarket to dispense it. And so that became another

you know, kind of apocalyptic change to that business that you ended up with 1,500 soft serve machines in a warehouse outside of Washington, D.C. and you had to figure out what to do with it. And so I don’t know that even at that point I knew or understood that that was the business. And it was at the next phase of that when Bob Tassone, my partner of 30 or so years, came in and we started closing restaurants as a service for people. People saw that we liquidated the machines. They asked us to do this. And then we realized

that placing equipment or handling marketing programs for food service companies was not the business, it was this kind of aftermarket.

Zach Sherman (06:46)
the concept of a marketplace today is ubiquitous in all aspects of, of, you know, customer and B2B kind of businesses. have Uber, you have Airbnb, but back then a market or developing out of marketplace or an aftermarket is, was really not something that was as glamorous, I would say as, as it is today. So what was your

process of you have a lot of intake, you have a lot of supply coming in, but now how do you build up the demand for something like this? Cause my guess is, especially back then, it was a lot of guys with a lot of space, with a lot of cash, just trying to pick stuff up and pick and choose, then, you know, build up their own markets.

Neal Sherman (07:13)
Right.

So there was no

internet, there was no eBay in the 90s. It was an old school, get a list of targets where you had equipment and start getting on the telephone, pre-cell phone and call them up.

or send out postcards. was the early stages of the fax machine. And so all those things became our tools, which now are much more efficient in the world of, as you refer to it, as a more efficient exposed marketplace with the internet and all the evolution of those things. And it wasn’t until the late 90s that eBay came on the scene, and we started using eBay as a channel to sell equipment.

guy that I had known who was a mentor was the then president of eBay and he said, you know, you should sell this equipment on eBay. initial reaction was who’s going to buy any equipment on the internet. then we started selling it in the early 2000s, became the largest seller of restaurant food service equipment during that period. But it was still the wild west of things. So you had, as you do today, the conventional sale, you know, via telephone or postcard, and then you have the

sale online.

Zach Sherman (08:44)
think one of the things that I appreciate about your, ⁓ business model and about your drive for success is the trial and error test and learn kind of mentality that I think you and the company embody, very well. it’s led to the success that you’ve had. What do you think was the biggest, you know, push? was the biggest test that ended up being successful? Was it eBay?

Was it buying and building up these massive warehouse spaces around the country, particularly in the finger lakes are

Neal Sherman (09:23)
old army depot.

Zach Sherman (09:24)
the

old army Depot with a thousand acres and a hundred thousand square feet of, of usable warehouse space. But what do you think was the biggest push to that next level of success from a test and learn kind of perspective?

Neal Sherman (09:36)
I think that there’s a couple things. ⁓

And obviously handling the heat is something that I can relate to for two reasons. One is it’s the catalyst of our business. People come to our company when they’re in the heat, when they’re closing locations, when they have surplus inventory, when they don’t have the dollars to buy in the aftermarket. Those are difficult situations. The constant change, closure, pressure on labor, on cost of goods, on real estate, on competition in the food space. There’s a million to look

in the US. So every day is the heat for that industry that we serve. We chose to pick the aspect of their business, which is always going through heat. So it’s a challenging sector that is high, high failure rate, depending on what statistics you believe there’s 60 % or so of restaurants don’t last more than three to five years when they’re launched, including known brands are in that category. ⁓ I think that we were

forced to test different aspects.

because the client feed was in there. And we made huge mistakes and we still make huge mistakes, not as many. ⁓ But we would be asked to take on business that was outside the food space and still are asked to do that. And there’s a desire to serve the client and at the same time, there’s the need to stay focused in the sector, in the space. So I think many of those mistakes we got asked, GE had a division that did franchise finance and

We did some great work for their closure situations, their challenge businesses, and then they asked us to liquidate medical equipment. ⁓

Somebody I knew from my days at Kraft was in the vacuum business and had literally 50,000 square feet of brand new consumer vacuums. And the assumption was we were complimented because these companies came to us and said, look, we have confidence in what you can do. Why don’t you take that on? But those actions set us back very, you know, there were lessons learned. They were the heat. And then they ended up being very challenging, cost us a lot of money.

Zach Sherman (11:51)
So would you say the biggest challenges to overcome of the 38 years or so of Tag X is taking on projects that are outside of the scope of expertise of the company, or is it something

Neal Sherman (12:08)
the

biggest challenge is focus and distraction when you do something that resonates in the marketplace because you don’t really know what it is. And so, you know, I track a lot of these technology CEOs and founders who move at this.

amazing pace of growth and development and build billion dollar companies. ⁓ And one I heard the other day, which was this wisdom of the group in a dynamic marketplace. Certainly technology is much more dynamic than food, but food is pretty dynamic. But in a changing marketplace, the biggest risk is not taking any risk. In other words, you have to at various points in time, you become more measured over time and more thoughtful and more practical and don’t bank everything on it.

But there have been various points in time in our business where we took on responsibilities for people in the food space doing liquidation or, you know.

management of physical assets that cost us a lot of money. And then we had a lot of receivables with big clients. know, there’ve been seismic changes over time in the business. When we bought the Army Depot in 2000, we had 36 warehouses around the country that we were managing storage as small as a couple hundred square feet, as big as 150,000 for the then demise of Boston Market and a project we were doing for Olive Garden. And we knew we needed a central spot.

because it’s very challenging to manage inventory, especially in the aftermarket, in one location, as you well know, let alone all these locations. And that’s when we had this opportunity to move into an old army base in the Finger Lakes.

Zach Sherman (13:51)
So I think the business story is interesting and it touches on a lot of pieces that I think the broader public find interesting. It’s big names. It’s a lot of chaos. It’s a lot of trying to mold something out of nothing, but I’m curious about you, Neal. And I think, you know, we’ve had many conversations about this over the years, but

What is your drive to keep going, especially during those kinds of seismic changes, both in terms of the test and learn kind of positive things of, let’s try out this eBay thing and see if it works. But also in terms of, Hey, you know, we have X million dollars worth of equipment sitting in a warehouse in Oklahoma. We got to figure out what to do with it now. Or, you know, it’s going to be a pretty tough couple of months.

Neal Sherman (14:32)
What is my personal drive?

So I think the one thing that I’ve learned from studying business people’s successful and failures, yes, there’s these amazing stories of instant success, but if you look at the stories of people that are…

role models of success, it’s relentless pursuit every day. And it’s continuing to refine your priorities every day and showing up every day. So if you look back at Starbucks, it wasn’t an overnight success. It took decades. Microsoft took decades. Dell took decades. In the early, you can look back on these seismic growth stories, but it was relentless pursuit every day and refining it every day and trying to learn every day and get better each and every day. And I think my drive is there’s two things.

that drive you. One is the desire to build something that has economic benefit, not just to me and the other principals, but other people who work at the company or are vendors of the company or clients of the company. But it’s also the necessity of

putting food on the table. mean, you have to be in a position to control your own destiny. The difference, it’s interesting, many of the people that I started out with in corporate America went on to lead multi-billion dollar companies and at the same time have a certain envy, although I, you know, there’s this mutual envy in the world. I envy them for what they built and the economic success they’ve had, but they envy me that I started a business from scratch.

which is in retrospect, the role model I had in that was my father who bought a bankrupt auto parts store. And his mentor said, it’s much easier to add value to a business that’s struggling than it is to start a business from scratch. And my business from scratch was not because I had any pride in it, it was just the path that I took. And so in retrospect,

it might have been a different path. I still believe, I approach it with enthusiasm every day. I, ⁓ another guy who was in the financial business said that when he was working, ⁓ most people love Friday, hate Monday. He loved Monday, hated Friday, because he wanted to work all the time, because he was so passionate about it. I feel very similar to that.

Zach Sherman (16:58)
No, I think it definitely shows in your, mean, I see it the office and behind, you know, closed doors, all of the hard work and effort that goes into it. And I think, is a good leader to have in a company, especially because the company has been around for so long. You’ve touched so many people and I think, you know, externally with vendors and clients is one thing, but building a culture over time and building a business over time that has the lens.

Longevity that, you know, tag has had, is commendable. And I think the question that I’d have as a result of that is what’s your approach to building up that culture because you can’t, you know, come into work with a blank sheet of paper every day. It’s a lot of, you know, 1 % better over time. We hear about a lot on this podcast. What is your process or thought behind.

the longevity and how you’ve built that up over time to be what Tag is today from a culture perspective.

Neal Sherman (17:55)
I think you learn that ⁓ in the early states of your experience in business that there’s a lot of people that ⁓ might be incredibly competent, incredibly strong, could add a lot of value, but they’re not the kind of people you want to work with every day. And I think at the end of the day, there’s a couple of fundamentals for my partner, Bob and I. ⁓

that permeate our organization. One is you have to be a good person.

He has a rule, although we haven’t printed it, no assholes, right? We don’t want to work with people who are not optimistic, who are ⁓ negative, who are spiteful, no matter how competent they may well be in their function or their role or the industry. And we’ve had a lot of those people over the years. So we’ve learned through trial and error that’s something we don’t want. I think integrity is key. ⁓

I think loyalty is key. Oftentimes at the expense of competency, which is not a lot of, you know, a lot of people don’t talk about that, that I would rather have somebody that is, has integrity, a good work ethic, is upbeat and positive, respectful of others than somebody who’s a really successful person who doesn’t possess those skills.

Zach Sherman (19:17)
Yeah. And I think, you know, it definitely is important for longevity, but I want to talk now a little bit Neal about how the business operates today, because I think, you know, we’ve talked a little bit about. You get a bunch of stuff in a warehouse somewhere and you call up every dealer from here to Timbuktu and try to sell it. Talk a little bit about,

Neal Sherman (19:37)
Sure.

Zach Sherman (19:40)
What TagX does today through the use of its marketplaces and its, its service offerings.

Neal Sherman (19:46)
I think that our vision is to be the most dynamic aftermarket of restaurant and food service equipment in the world. And ⁓ that means that we have to help people who have surplus in a very inefficient market monetize it with least headache. And we have to help people that are looking for equipment to operate. ⁓

to get good value. And I think that the constant process of refinement, and you’ve added an incredible dimension of vision and technology and systems in place so that we don’t have to recreate the wheel all the time. So in the, you know, go back in the, you know, we view ourselves to be, even though I’m not a baseball fan, the top of the third inning of a long ball game. Even though we’ve been around a long time,

Zach Sherman (20:40)
They have 40 years top of

the third. It’s going to be a long game now.

Neal Sherman (20:43)
makes it a 120 year game, right? So, but if you look at these companies, they over time improve by 1 % a day. They continue to do things that are more beneficial. But today the vision is that anybody that has surplus or facility headaches,

that are remodeling, closing, have surplus in whatever condition can monetize that as efficiently as possible. And those looking for equipment or other furniture fixtures, equipment, small or supplies can source that efficiently. Bill Gates called it the disintermediation, that technology would get rid of all these middlemen along the way. And the order of magnitude of the new equipment business, there’s 1.2 million food related outlets in the US. It’s a 15 billion

dollar industry new. No one tracks the aftermarket. We speculate it’s about five billion because it’s every used piece or non-used new piece of equipment or other related items going back as many years as it is. And it’s not necessarily based on age because some people argue that a 20 year old Hobart mixer is worth just as much as you know a five-year-old one.

Zach Sherman (21:55)
Yeah. I think the two way marketplace is a very interesting business model. And it’s something that you’ve pioneered, especially in this space over the last 40 years.

Has the demand on both sides of the equation changed at all over time, especially as it comes to sustainability is, is top of mind for a lot of companies, this circular economy of providing people with more access through lower costs.

maybe slightly lower condition pieces of equipment to, to open up their restaurants. how has, I guess the trends of the business world had an impact on

the supply side demand and the demand side demand of, of what TAG has done over time.

Neal Sherman (22:42)
I think that it’s just broadened it. mean, in the early stages, we had X number of soft serve machines that we had to find ice cream shops or delis to buy. And so fast forward, I think.

as challenging as business can be, especially in the businesses we serve. So it’s not just our businesses in the heat, part of the equation that we’re supporting are our clients in the heat. And then the other side of the marketplace are people buying it. And I think.

One thing that we learned was not necessarily to take an economic position in buying the inventory. I think that was a huge milestone that we weren’t going to buy it and sit on it the way other people do all across America and around the world. know, hey, I got a good buy. I’m going to sit on it, but then I’m going to hold it until I can monetize it at a good turn. We’re in the turn business. We’re in the business of making the marketplace as fluid and as efficient as we can make it. And so the challenge of the people with the

source of supply is to monetize it as quickly as possible or get it out of a location. The people on the other side that we’ve built, you know, we have tens of thousands of people that have live credit cards on the restaurant equipment dot bid site and buy from us. So obviously they buy from us because they have faith in the marketplace we’ve created. Even though there’s pain of both sides of that equation, you know, they have confidence in who we are. And we have, I think it’s 65 percent

of the people that buy on restaurant equipment dot bid or use us are past clients or past customers for a number of years. So that that is really tells it all that whatever we’re doing is correct in that regard and that we make the right decisions. And nothing’s ever pleasant in any business. You know, when someone gets something that they don’t think it’s what it is. So we try to be as transparent as possible in the marketplace. So I think that growth is part of it. And then there’s on the client side, there’s exactly

Zach Sherman (24:38)
Yeah.

Neal Sherman (24:43)
is with companies over the 30 year horizon that have taken us to different brands. And that tells a lot.

Zach Sherman (24:53)
I think that’s a good transition into talking about a recent case study that we went through last year that made a lot of waves on the media ⁓ publications and whatnot was the Red Lobster project. And I think the pace of play that you’re describing comes into consideration a lot when you have ⁓ that type of project going on. So could you talk a little bit about how that project came to be and ultimately what happened from your perspective? ⁓

Neal Sherman (25:22)
Sure.

Zach Sherman (25:23)
for the Red Lobster project.

Neal Sherman (25:25)
So a lot of these situations, ultimately it was the bankruptcy of Red Lobster. They’ve since come back very aggressively in terms of their performance post-bankruptcy. They were in a lot of debt. They brought in a turnaround firm whose responsibility is to get them through this.

transition from really ⁓ great debt and challenged revenues, et cetera. And the gentleman there who’s kind of an icon in managing these transitions, Jonathan Tibus from Alvarez and Marsal called us up and said, look, normally, know, handful of locations, we don’t need an outside resource. But he was brought in as the chief restructuring officer. I think he was the acting CEO and said, we need help with this. We’re going to close X number of locations.

The initial X was about just under 100 locations and we need to do it in a short period of time and you can either do a sale from site or bring it to your warehouse. We ended up doing both and in a matter of five days we launched and sold 48 locations worth of content and brought the rest to our warehouse for liquidation to self-fund the project. And so that became a big challenge here is that the opportunity to help people that are in economic distress

Because a lot of people that are in economics of stress don’t have the resources to go hire somebody to go manage all this. So many of our projects have to have a creative self-funding mechanism that can allow the actions to take place in the field for facilities and equipment, and at the same time not further pressure the entities, you know, very challenged working capital. So that came about. We managed it, launched it. You know, the…

RestaurantEquipment.Bid team led by you did a stellar job. The client team did a phenomenal job. Lisa and her team were just amazing. And we have a systematic process to deal with these things now. So there’s not a lot of people that can manage one location efficiently but manage 100 locations simultaneously in five days. I would put up our team that there’s very few that can handle that.

Zach Sherman (27:41)
Yeah.

And I think, ⁓ when you ride that wave and you’re able to execute successfully across all those different, aspects of a project like that, that has so many complex moving parts, ⁓ it’s impressive. It’s fun, you know, by the end of it, it’s maybe not fun in the moment, but by the end you can look back and yeah.

Neal Sherman (27:59)
stressful. I mean,

it’s stressful to deal with because that’s, you know, the nature of what we do. There’s no easy street in business or in life or You know, they say sometimes it’d be easier to be a lawyer or a doctor or engineer. All those places have challenges. So it’s just a function of this is our challenge. And we like the fact that we’re pioneers in this space.

Zach Sherman (28:28)
Yeah. So Neal, as you said, we’re in the top of the third of what the business can be. Have gone through a lot of different iterations of developing out different capabilities and how we service our clients and how we provide value to the people that are purchasing from us. What excites you the most about the future of TagX?

Neal Sherman (28:53)
The fact that we have only scratched the surface of the available marketplace of aftermarket restaurant and food related equipment. The fact that if it is, it’s empirical that the new market is 15 billion a year and the aftermarket we estimate is 5 billion, either one you talk about.

We’ve only scratched the surface of tapping into that marketplace. And the fact is that our unique business approach has a combination of physical locations in upstate New York, a day’s truck run from half the US and Canada’s population, LA, Dallas, and Orlando. And we see the opportunity to roll out five, 10, 20 of these hubs around the country to support people in a given market who have surplus that they can’t

from site or that they need to bring to us or people that are sourcing ⁓ value restaurant and food service related equipment. The fact that we haven’t even scratched the surface yet, that’s what drives me every day is how minimal we are. And our client and customer team, which you’re a leader of with our…

other colleagues are unique in our approach. And so not everybody’s going to be happy when they’re closing a location. Not everybody’s going to be happy when they get stuck with equipment. Not everybody’s going to be happy that they got exactly what equipment they want. But if you make more good decisions than bad decisions, it’s a positive thing.

Zach Sherman (30:33)
Yep. I agree. ⁓ well, Neal, have one final question for you. And I think the longevity of the business and your drive throughout the 35 plus years is, ⁓ commendable. And I think it plays into a lot of the work ethic that I think I’ve, I’ve built over time as a result of, ⁓ but if you could go back to the late eighties, Neal, in an office, what would be a piece of advice looking back now that you think would,

be helpful for someone in that position, you in that position, but I think applicable to anyone looking to go from zero to one as you did.

Neal Sherman (31:11)
So it’s the same advice I’d give myself today, which is to stay focused on what you do that’s special and do it better than anybody else and grow it bigger than anybody else. And what we do that’s special is food related. We’re humbled and honored to be asked to get into other sectors. And I think had we stayed more focused.

maybe some of the momentum of growth. We have the longevity and now we have the growth, but maybe that would have amplified ⁓ to stay in the food space. not think, but by the same token, we needed to test those boundaries to see were we a liquidation company, were we a logistics company. Those big lessons learned helped to narrow the focus. We didn’t know exactly what we were. Now we have very clarity around what we are and what our unique selling proposition is.

But I think stay focused on the thing that you do best. And then it’s a day by day process. There’s no one seismic thing. My partner Bob, who you report into, always says, we don’t get a lot of home runs. We get a lot of singles and doubles. And we get them every day. And we got to just do everything we can to build on that.

Zach Sherman (32:26)
Awesome. A lot of baseball analogies, Neal for, yeah. Awesome. Well, Neal, thank you so much for joining us here. Excited to, ⁓ to share this story and appreciate you taking the time.

Neal Sherman (32:28)
For a guy who doesn’t like baseball. Yeah.

Alright, thanks Zach. Keep it up!