RESTAURANT STRATEGY Podcast

Episode: Play By the RULES to Stay in the GAME

Host: Chip Klose
Date: October 13, 2025

Overview

In this episode, host Chip Klose addresses the increasing challenges faced by independent restaurant owners in 2025 and presents a mindset shift: understanding and embracing the unchanging rules of business as the path to survival and profitability. Focusing on the concept of "finite vs. infinite games" in business, Chip explores how recognizing industry constraints—and strategically managing them—can help restaurants consistently deliver strong returns, even as the landscape grows tougher.

Key Discussion Points and Insights

1. Running a Restaurant Is Harder Than Ever

• Chip acknowledges that operating a profitable restaurant in 2025 is the hardest it has ever been.
  • “If you're a restaurant owner and you feel like things are harder today than they were yesterday, harder today than they were 10 years ago, harder today than they've ever been before, it's not you. You're not crazy.” (00:00)
• He stresses that these increased challenges are real and not simply the result of operator error or perception.

2. Games, Rules, and Embracing Constraints

• Chip uses sports analogies to draw parallels between games and business:
  • “The rules are what make games fun.” (04:28)
  • He emphasizes that, just as in sports, the constraints and rules in the restaurant business create the structure for success and competition.
• Example: The futility of devising a football play with 12 players—no matter how effective—because the rules require only 11.

3. Finite vs. Infinite Games in Business

• Drawing on Simon Sinek’s “The Infinite Game,” Chip distinguishes between games that are won or lost (finite, like football) and those where the goal is to “stay alive” (infinite, like business).
  • “The whole point is not to destroy all your competition... The goal of an infinite game is to simply stay alive, is to be able to keep playing the game.” (07:47)
  • References to Alex Hormozi and car dealership clusters: playing the long game and seeing competitors as necessary to the ecosystem.

4. Industry Rules Have Changed—Legacy Restaurants Must Adapt

• The episode discusses why many legacy restaurants struggle with profitability today:
  • “The rules were different in the 90s, the rules were different in the 70s than they are now.” (13:04)
  • Three key costs—rent, cost of goods (COGS), and labor—have changed dramatically, often rendering old business models unsustainable.

5. Deep Dives Into Rent, COGS, and Labor

• Rent: Lease terms and occupancy costs have increased, making it crucial to secure rent below 8% of revenue.
• Cost of Goods (COGS): Target blended COGS of 25-27%, with food under 30% and beverage around 20%.
• Labor: Should be below 30% in most states, or up to 35% in high wage states (e.g., California).
  • “Prime cost”—the sum of COGS and labor—must not exceed 60%.
• “Danny Meyer once said, our industry was built on the promise of cheap rent and cheap labor. So what happens when neither of those things are true anymore?” (15:17)

6. Strategic Response: New Concepts for New Rules

• A restaurant concept built for the prior era may not function under today’s constraints.
  • “The concept you have in your mind may not be sustainable. You have to come up with a concept that can work within those frameworks.” (24:35)
• Highlights the necessity for adapting business models, sites, staffing, and menu design to new financial realities.

7. Benchmarks for Restaurant Success

• Rent: <8% of revenue
• Total Occupancy: 10–12%
• Blended COGS: 25–27%
• Labor: <30% (or up to 35% where required)
• Prime Cost: <60%
  • “If you are not right, you're running a Ford dealership and people are coming down for Toyota, maybe put your Ford dealership right next to Toyota... They are playing an infinite game and they understand that their competition are also collaborators in their success.” (11:12)

8. Survival Through Systems and Community

• Stresses the importance of using systems and ongoing education (like Chip’s P3 Mastermind and membership site) to help operators effectively “play by the rules.”
• He acknowledges the shifting demands of customers—especially Gen Z—and the importance of restaurants evolving alongside those changes.
  • “Dining habits have changed. Expectations on the part of the diner have changed. And Gen Z, the new generation, wants different things...” (21:41)

Notable Quotes & Memorable Moments

• “It's never been so difficult to run a profitable restaurant than it is right now in the year 2025.” (00:15)
• “You could make the very best restaurant in the world, but it wouldn't last very long... We do have rules.” (05:51)
• “If a landlord is trying to get you to sign a lease, where your rent is going to be more than 8% of revenue, you walk away. It’s just a losing proposition.” (22:44)
• “There's a reason there are a million Chili's. There's a reason there are a million Taco Bell. Because they learn the rules, they understand what they have to do in order to be profitable.” (25:10)
• “If you're not making 20% profit, I promise you it's a lot more fun when you're making money and you're making serious money.” (29:14)

Important Timestamps

• 00:00 – 02:00: Setting the stage—why restaurant ownership feels harder now
• 04:28 – 06:30: The importance of rules in games and in business
• 07:47 – 11:12: Finite vs. infinite games and application to restaurant business
• 13:04 – 17:50: How industry rules have changed (rent, COGS, labor)
• 17:51 – 22:44: Deep dives and actionable benchmarks for rent, COGS, labor, and prime cost
• 24:35 – 26:00: New concepts needed for new rules and examples from chain restaurants
• 29:14 – 30:38: Encouragement—making 20% profit is both achievable and crucial

Takeaways and Action Steps

• Acknowledge the real challenges in today’s restaurant industry; beating yourself up over “why it’s harder” misses the structural changes.
• Recognize that business is an “infinite game”—the goal is longevity, not annihilation of the competition.
• Benchmark your numbers (rent, COGS, labor, prime cost) ruthlessly and refuse to accept deals or models that violate those rules.
• Embrace systems, education, and peer support to continually adapt and stay in the game.
• Understand that adapting your business concept to fit current economic realities (not nostalgia or legacy thinking) is a necessity for survival and profitability.
• Remember: restaurants succeed not by bending or ignoring the rules, but by mastering and thriving within them.

Resources Mentioned

• P3 Mastermind: Group coaching for independent restaurants
• Restaurant Foundations Membership: Systems, playbooks, masterclasses—free 30-day trial
• RestaurantStrategyPodcast.com/schedule: Schedule a free 30-minute call with Chip

Summary prepared for those eager to adapt, thrive, and “play by the rules to stay in the game” in today’s demanding restaurant industry.