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When someone presented a fat-reducing countertop grill to two-time world heavyweight champion and Olympic gold medalist George Foreman in the 1990s, he wasn't impressed. "I didn't want to use it," he admitted to Graham Bensinger (1) in his 2013 In Depth interview. "But my wife insisted."
Little did he know that this modest grill would lead to one of the largest payouts of his career.
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"I never expected it to be so successful," he told Bensinger. "I got a check once for $1,500 and I said 'what!?' [I] couldn't believe it. Then I get a check for $15,000. And then all of a sudden the checks just start rolling in. This thing sold over 100 million [units]."
At its peak, Foreman estimated he was receiving $5 million a month in royalty checks. However, because of the way the deal was structured, his largest payout was still ahead of him. Here's how a simple tactic led to a nine-figure windfall for the heavyweight champion.
Unlike his previous endorsement deals, Foreman told Bensigner the George Foreman deal didn't involve any upfront payments. Instead, it was structured as a joint venture, with the athlete receiving a "lion's share" in exchange for promoting the product.
A 2004 Businessweek report (2) confirmed that Foreman received a 40% royalty from every sale. His stake and naming rights were eventually acquired by the manufacturer, Salton Inc., for $127.5 million in cash and $10 million in stock. When combined with all his royalty payments, Foreman is estimated to have generated $240 million altogether from this deal.
A traditional endorsement deal would have paid him once. Owning equity created a stream of recurring cash flows and a big payout at the end.
The lesson is simple: ownership is the key to building wealth.
And the good news is anyone can replicate this tactic.
Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here's where their money is actually going
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