1284: Restaurant Profit Breakthroughs with Robert Sloop: AI, Kaizen, Tech Stack Implementation, and Fractional CFO Support

Summary

Podcast Summary: Restaurant Unstoppable #1284

Restaurant Profit Breakthroughs with Robert Sloop: AI, Kaizen, Tech Stack Implementation, and Fractional CFO Support

Date: August 3, 2026
Host: Eric Cacciatore
Guest: Robert Sloop, CEO of Kaizen Management LLC

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Episode Overview

In this in-depth episode, Eric sits down with industry veteran Robert Sloop to dissect the biggest challenges and opportunities facing independent restaurateurs today. Drawing from decades as a CFO, tech stack implementer, and management advisor, Sloop outlines why the classic restaurant business model is obsolete (the so-called "1905 model"), how technology and AI are reshaping the industry, and what the Kaizen approach—centering on continuous improvement—can do to double or even triple restaurant profitability. There’s also frank discussion around the perils of private equity, the future of automation, and how to engineer true career paths and ownership tracks for restaurant employees.

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Key Themes & Discussion Points

1. The Restaurant Industry’s Broken Model

• Obsolete Approach: Sloop contends that most restaurants still operate on a model dating back to the early 1900s: high hours, low profit margins (often 5–10%), and resistance to systemic change.
  • “Most every single client I’ve ever had in 29 years…was pretty much underperforming or following the typical 10–15% business model.” (04:50, Sloop)
• Prime Cost Breakdown: Traditional model: ~30% cost of goods, 30% labor, 10% occupancy, 20% overhead, leaving 10% profit—if run well—before any mistakes erode it to 5%.
  (65:00–65:37)
• Systemic Resistance: Restaurants are notoriously change-averse, slow to adopt new tools or business models until crisis forces their hand (see Covid).
  • “It says that they are terrible at adopting to change.” (29:49, Sloop)

2. What is Kaizen Management?

• Continuous Improvement: Kaizen is “a Japanese philosophy that translates into gradual continuous improvement…1% better every day.” (05:42, Sloop)
• Multi-Tiered Service: Kaizen Management acts as a fractional CFO, offering advisory, tech stack implementation (done for the client versus just training), plus accounting and bookkeeping—all built on a written business model (which most clients lacked at the outset). (04:41, 07:46)

3. Profit Breakthroughs: The Kaizen Model

• Reverse-Engineering Profit: Set profit as the target first (Sloop recommends a minimum 20% EBITDA), then build costs around it—mirroring Fortune 500s.
  • “If you and I were opening up…one of the very first questions I would ask you is how much do you want to make… and develop the model from the bottom up. That’s the way Fortune 500 companies [do it]. The restaurant industry doesn’t work that way.” (63:09, Sloop)
• The “New Model”: Lower cost of goods (25% target), bring labor down (ideally with automation), add non-operating revenue (memberships, loyalty, gift programs), and employ service-included/no-tipping models with revenue sharing. (66:01–67:52, 69:35–71:19)
• Results: “We were fortunate enough to double those EBITDA bottom lines about 80% of the time.” (04:50, Sloop)

4. Tech & Software Evolution—History Lesson

• From POS + Middleware + Ledger…to ERPs:
  • Early 1980s–1990s: Micros (POS), ReMax (middleware), Real World (general ledger).
  • 2000s: Compete, Radar, Restaurant365 become category leaders; Restaurant365 eventually consolidates much of the market via acquisition. (20:03–24:41, 25:48–36:05)
• Concerns with Consolidation: Fewer, larger players (R365, CrunchTime, Merus) now dominate, making it harder for new solutions to compete and limiting choices for independents.
  • “I agree with you…four or five big companies controlling the world. It’s not a good thing—Not for the independents.” (37:33, Sloop)

5. AI, Automation, and the Restaurant Tech Stack

• Future is AI-Powered ERP: Tech stacks have to align with the business model, not the other way around. Sloop sees a winner-take-all coming for whoever creates the first genuinely affordable, AI-powered, all-in-one ERP.
  • “Somebody innovative is going to go into AI and build a real enterprise solution…for $100–$150 a month, they’ll own the market.” (52:19, Sloop)
• AI Will Replace Niche Apps: “All those guys building little apps…they’ll be out of a job. Nobody will buy their product [when you can do it all with AI voice].” (102:43, Sloop)
• Robotics in BOH: Major labor savings and consistency improvements already manifesting in kitchens (Miso Robotics, Hyper, etc.). Sloop predicts humanoid robots in BOH within five years. (85:16–90:13)
• Reallocation of Labor: Automation “raises the bar”—redirect people from repetitive BOH work to hospitality and guest experience, building ‘food service professionals’. (92:43, 93:07)

6. Redefining Revenue and Compensation

• Non-Operating Revenue Streams: Memberships, cover charges, retail, loyalty—low marginal cost offerings that can dramatically boost profits.
  • “Add a non operating revenue stream…Gift cards, cover charges, membership fees, loyalty programs…all of those things you could sell with almost no expense.” (66:47, Sloop)
• No-Tipping, Revenue-Share Models: Advocate for eliminating tipping and using revenue-share to create more equitable pay and foster stronger careers.
  • “Portion of the top revenue share covers not only the differential of what the tipped employees would [make], it does away with that back and front of the house discrepancy.” (70:57, Sloop)

7. Talent, Ownership, and the Middle Class

• Formal Pathways to Ownership: Proposes tenure-, performance-, and/or attitude-based options for employees to earn/buy small equity stakes.
  • “You’re going to teach people how to build wealth by making them part of all the solutions regarding the performance level of the restaurant.” (82:34, Sloop)
• Stock/Profit Sharing: When you reach 20% EBITDA, start granting equity/shares—attracts talent and creates genuine food service professionals. (79:05–80:05)
• Career Development: Concierge-level hospitality skills, financial literacy, and proactive communication/personalization are required going forward. (94:44–94:53, Sloop)

8. Private Equity Pitfalls

• Dangers for Independents: PE has the money to outspend everyone on real estate, can squeeze out independent competition, and frequently upends company culture, turning restaurant groups into inventory items for trading between funds.
  • “You're not going to win that war [against PE].” (97:14, Sloop)
  • “You have little or no say in the sale of the entity. Basically they write a check and they say, we own you.” (97:51, Sloop)
• Future Prediction: “You become an inventory item…Buy, fix, and sell, dude.” (101:13, Sloop)
• Silver Linings: Some industry-born funds (like Danny Meyer’s Enlightened Hospitality, Branded Hospitality) are more long-term and culturally aligned, but short-term PE still dominates for now.

9. Industry Culture & Change Adoption

• Cultural Inertia: Most restaurants only adopt new models out of necessity and want to see proof first.
  • “Restaurateurs only do things when they're forced and nobody wants to be first to the party.” (62:15, Sloop)
• Eric’s Mission: Use Restaurant Unstoppable’s network to facilitate candid knowledge-sharing, benchmarking, and to champion merit-based, local-first solutions.

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Notable Quotes & Timestamps

• On Underperformance:
  "Most every single client I’ve ever had in the 29 years...was pretty much underperforming or following the typical 10–15% business model...the amount of stuff that’s left on the table is what I’m talking about." (04:50, Sloop)

• On Systems:
  "If your business, if your restaurant, doesn’t work without you being there, you’re lacking systems." (30:22, Sloop)

• On Restaurant Tech Power:
  "Whoever controls technology controls the narrative." (38:00, Eric, citing 'Power and Progress')

• AI's Promise and Threat:
  "Somebody innovative is going to go into AI and build a real enterprise solution...they’re going to own the market." (52:19, Sloop)

• On Change Aversion:
  "They are terrible at adopting to change...would much rather stay in old school for the rest of their lives." (29:49–30:03, Sloop)

• On Employee Ownership:
  "You’re going to teach people how to build wealth by making them part of all the solutions regarding the performance level of the restaurant." (82:34, Sloop)

• On Burnout and Quality of Life:
  "If you want to run three restaurants at 2%, 3%, 5% profit, I would tell you to sell them tomorrow. Don’t waste your time." (105:52, Sloop)

• On the Power of Community:
  "What you’re building is invaluable. The industry desperately needs it." (114:19, Sloop to Eric)

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Important Segments & Timestamps

• **Kaizen defined, origins and business model—**05:42–07:46
• **The broken “1905” restaurant model—**10:56–14:43, 65:00–66:01
• **History of Restaurant Software (POS to ERP)—**20:03–28:00, 25:48–36:05
• **Big Tech Consolidation & App Traps—**36:05–40:01
• **The mechanics of a profit-first restaurant—**63:06–66:40
• **Implementing no-tip, revenue-share compensation—**69:35–71:19
• **Ownership pathways and profit sharing—**79:05–82:34
• **AI & Robotics in kitchens—**85:04–93:25
• **Perils of Private Equity—**95:50–101:10
• **Community, benchmarking & adoption challenges—**110:00–112:36

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Memorable Moments

• Sloop’s candid explanation of how PE works: Buy, fix, and sell—leaving ownership, control, and even company culture as secondary considerations.
• Eric’s transparency on sponsorship vs. integrity: “…I turned down sponsorship in the past month and I’m not in the position to do it, I’ll be honest.” (53:26)
• Sloop’s take on automation freeing up staff: “Now you’re making food service professionals because you’re going to raise the bar on expectation … Not chopping carrots.” (93:07)
• Sloop on cultural reluctance: “Moneyball, first guy through the wall gets bloody.” (104:06)
• Affirming community: “What you’re building is invaluable…The industry desperately needs it.” (114:19, Sloop to Eric)

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Actionable Takeaways

• Get Out of the 1905 Trap: Adopt a written business model, aim for 20%+ profit, and review your tech stack for alignment—not just utility.
• Invest in Tech Smartly: Don’t get locked into “app traps”/redundant software; look for (or demand) affordable, truly integrated ERPs with real AI.
• Build Non-Operating Revenue Streams: Activate the “hospitality platform”—memberships, retail, cover charges, loyalty, etc.
• Move to No-Tip, Rev-Share Compensation: Create sustainable, dignified work by building labor costs into menu prices and revenue-sharing top-line income.
• Develop Formal Ownership Pathways: Let your talent buy or earn in, with profit-sharing and clear tenure/performance-based equity options.
• Embrace, Don’t Fear Technology: Automation and AI can free you, your people, and your business to aim higher—if you design systems right.

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Closing Thought

If independents hope to thrive, they must architect their own future—starting with business models, people systems, and tech stacks by design, not by default. Don’t wait to be forced by crisis. Begin your Kaizen—continuous improvement—today.

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To connect with Robert Sloop:
Email: [e-mail]
Phone: [phone]

Join Restaurant Unstoppable’s network Thursdays at 11am EST for live discussion and peer learning.

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(Ad content, show intro, and outro omitted. All summary points directly reflect the original tone, language, and messages of the speakers.)

Transcript

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Welcome to restaurant unstoppable. For 10 years and over 1, 000 episodes, I've been traveling the country chasing word of mouth leads and having in person only long form discussions with the industry's finest owners and operators. Our mission is to inspire, empower and transform the restaurant industry and by bridging the gap between this generation's leaders and the next, listen to today's guests and so many others and get one step closer to becoming unstoppable. Private event inquiries are coming in and you're losing them. Unanswered emails, ignored calls, Leads that vanish before you can close. You're not losing to the competition, you're losing the to the clock. Meet Mia, an AI agent built specifically for private dining. She responds to every lead within seconds 24, 7 with personalized human like messages. She knows your venue inside and out, handles the back and forth, updates your CRM automatically, and converts leads you forgot about into bookings. You didn't expect all of this without touching your team's play. Actually, MIA takes 85% of the busy work off your event team and gets fully integrated in under 10 minutes. Start Stop leaving private dining revenue on the table. Head over to Hermetic AI that's H e r m e t I C a I to learn more and tell them I sent you.

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[B]

Allow me to introduce to you today's

[A]

guest CEO of Kaizen Management llc, Robert Sloop.

[B]

My man. Robert, are you feeling unstoppable today?

[C]

As always, yeah.

[B]

I'm stoked to have you here. This is a conversation that is long overdue. We've had a lot of conversations. I already have an idea of the things that are going to come out of your mouth today and it's going to be really, really good stuff. You're a longtime member, I think going on over five years now. You've been a part of our community. We've known each other. You're constantly just dropping gold in the community. You're you, you make more of the live events than you miss. And we're just lucky to have you there, man. I really do feel fortunate to have you in our corner. I can't wait to dive more into who you are and what you got going on today. But let's get that motivational inspirational ball rolling with a success quote or a mantra. What do you got for us?

[C]

Well, it's, it's old, but it still applies. It's not how much you make, it's how much you let get away get into that. Most every single client I've ever had in the 29 years that were in existence was pretty much underperforming or following the typical 10 to 15% business model. And we were fortunate enough to double those EBITDA bottom lines about 80% of the time. The amount of stuff that's left on the table is what I'm talking about. And it's usually because they don't have proper systems in place or proper tools to manage the decision making process.

[B]

Yeah. And I mean, so at the end of the day, what is Kaizen management?

[C]

Okay. Kaizen management was. If you're not familiar with the term, kaizen, it's a Japanese philosophy that translates into gradual continuous improvement. It's the concept of we need to be 1% better every day. If you ever took up martial arts, that's their, that's their mantra.

[A]

Yeah.

[B]

It's a quote that I've been kind of referencing a lot, or not referencing, but reflecting on. I recently had Chez Panee on the show and they, one of their core values is show up, step up. And I always say, show up, show up. But it's not enough to show up. You got to step up. You got to get better every day.

[C]

No, you need, you need to dig it, dip your big toe into the water and not be afraid to change.

[A]

Yeah.

[C]

Albert's, Sanchez's. Embrace the, the grind.

[A]

Right.

[C]

I love that.

[B]

So you're, you're explaining what, you know Kaizen means, but what is Kaizen management today?

[C]

We, we're a firm that was formed in the late 90s and it was after the beginnings of my career in finance. And I saw a great opportunity back then in acquiring a multitude of clients. And we, we would offer a three to four tier service model advisory, which was just performance improvement, tech stack implementation. Unlike the software companies, we actually did the implementation for the client and actual bookkeeping accounting. Because the first part of the engagement was to develop a written business model for these guys. 75% of them didn't have a business model, which I found unacceptable because without a road map of where you're going, you're shooting in the dark.

[B]

Right. So you're a firm that, that supplies or offers advisory, tech implementation and bookkeeping and accounting. Would you call yourself a fractional cfo?

[C]

Yeah, yeah, that's really. Mick used to describes me as. Bob Sloop is your bookkeeper, your controller, and your cfo. Yeah.

[B]

So who, who was doing this back in the 90s? Was this a popular business model or were you just way ahead of it?

[C]

No, I was just way ahead of it. Yeah.

[B]

So, I mean, one of the things,

[A]

I just can't help but think that

[B]

we're moving in the direction where you're going to see more fractional executives than ever before, mostly because of how far technology has become where you can now Work remotely and be in the restaurant industry where the technology is within the past 10 years really allowing that to happen.

[C]

Yeah, the, the old days of, of sitting in an, in a open space office and you know, working with a, with an accounting team and, and, and the executives for that restaurant group are changed after Covid. Covid just changed the game.

[B]

Yeah.

[C]

And remote became normal and looking to benefit without having to spend 2 or $300,000 on a C level executive. So both parties benefit from this. The more experience you have with the various levels of restaurant type, the more intricate the, the involvement gets. So if you're in quick serve, it's one strategy. If you're in casual, it's another. If you're in fine dining, it's totally different.

[B]

Right. So I, I know a lot of what you believe already because we've had like literally so many conversations, about 50 conversations is a year for the past five years. Because you're, you show up to the majority of the Coffee with Eric sessions I host. So I know you stand on a lot of things. You know, today I really kind of want to with you, break down what's broken. I mean, I can't count how many times you've said that the restaurant industry is operating on 1905 business model. Some of the things that I say in the show is in reference to what you say because I really do think you know your shit. So we know that the current restaurant business model is broken. I want to get into your mind to understand why it's broken. We also know that the. I believe, I don't know if we necessarily know this, but I believe that the ecosystem around the restaurant industry is broken. Not just restaurants from a four walls economic standpoint, but the ecosystem that restaurants currently exist is kind of fucked up. Part of my language. And then beyond that, you have proposed the Kaizen model. The Kaizen business management approach. So we're calling that the future of restaurants through the lens of Bob Sloop. So that's what we're going to cover today. But before we get really into all that, I mean, is there anything we need to know about you and your story that lends you credibility that you think the listeners should know?

[C]

Well, I mean I, I started my career in, in the 70s and I used to build nightclubs for a living. I, I work with a company called Design Circuit. We did like 75 projects over a seven year period and some of the biggest nightclub things that you've ever heard of. I mean the underground, the Copacabana Regimes, Le Jordan, the underground. I Mean, crazy stuff. You know, that was before the liquor liability laws changed in 82. When, when that happened, I turned back to Wall street and, and worked private equity and was CFO of five institutional hedge funds. I, I remember having a conversation with a celebrity chef one time and he said to me, bob, you got an MBA in finance, you worked Wall street, you did all this stuff. What the hell are you doing in the restaurant industry? And I kind of smiled at him because we were friends and I said, because they need the most help.

[B]

There's truth to that. Yeah, this industry needs a lot of help.

[C]

You know, even in 97, when I started to become internal as a CFO of like five different restaurant groups working 80 hours a week for 10% just didn't sit well in my head. And all the other, anybody that's an operator, it's inherent drama. It's, you know, dealing with the public. It's the toughest business in the world. One half of it is retail, the other half is manufacturing. And all of it has to meet on the, you know, on the dock in Hong Kong at the same time. It's incredibly difficult. Incredibly difficult. And without systems, you're going to fail. That's why the failure rate is what it is.

[B]

Yeah. So how long have you been toting this Kaizen business like model that you're going to talk about today?

[C]

Since about 2008. 2008, when the first economic crash happened.

[B]

What was going on? I mean, obviously that crash, what was it about? Was it the crash that triggered you just being like, this isn't sustainable?

[C]

Correct. That's, you know, after the real estate market blew up and the banks blew up and everybody was like in a panic and the government's writing trillion dollar checks. You know, I took another look at, you know, I was working as CFO of a company at that time of a hospitality group. And, you know, it was a big hospitality group. It was John George and he was in a growth pattern and he still followed the old model. So when I started working there, we, we did an entire tech stack implementation from scratch. He actually brought me up to 111 Prince St. Was an empty space and said, build it, Bob. And we did. And we built the entire tech stack internally. This was before the cloud. Okay. Compete was one of the tools of choice at that time and we were one of the very first users of that platform and it grew tremendously.

[B]

Over what year did you adopt this platform? I'm sorry, when did you adopt compete?

[C]

2001.

[B]

2001. I didn't know it was around that long ago. So you. I mean, this is one thing I love about Bob is that he. You are really plugged into the world of technology more so than I am. This is like kind of like the. The stuff you geek out over and. Yeah, you have a lot of opinions. I'm sure we're going to get into it. You keep on. Like I've referred to it. You've referred to it. The old business model. John George was using this model. What in your mind, like, spell out what the old broken model looks like.

[C]

Well, I mean, again, you've got. You've got a condition of working 78 hours a week if you're lucky at 10% margin. And most guys are even lucky to get to that level. And it's important to understand that if you really take a look at the applications, just prime cost with the proper tools in place. And that's why the tech became important because as an accountant I. I sat there and said I had to learn how my tools work and now I need the best tools I can find. So that's. We did a survey at that time to find out what applications were available and they weren't as robust as they are now. In fact, I still say software or any software has holes in it. But we spent 20 years with compete giving them R D and watch them grow from maybe 2030 users to 18,000 users. Wow. Over that time period. And that's why 365 bought them, because they were the major competitor. And I agree with you on your. On your aspect about too many big companies controlling the issue because companies like that are controlling the market. And when they bought Compete and Radar, they just took the software and put it on a shelf.

[B]

What do you mean by that?

[C]

All the users that were Compete or Radar users were contacted when they purchased those entities and were convinced to transition over to 365.

[B]

So basically they weren't adopting and making their platform better restaurant 365. They were just killing their competition instead of.

[C]

Well, they. It's a little both. They. Morgan Harris, who's the original founder of 365 in 2010, came and visited me here in New York and offered me a position on his board. And at that time, I was 10 years into compete. I said, that's conflict of interest. I can't do that. I appreciate the offer. Obviously, when, when they bought Compete, I called up Morgan and said, isn't karma a. And he set me up on all his people and the marketing things and what have you. Because a lot of Our work comes from referral and software companies. Even though it's agnostic. Because if you're restaurant isn't suited for the bandwidth necessary to manipulate our 365 I won't recommend it if your restaurant

[B]

isn't suited for the bandwidth necessary to implement.

[C]

In other words, what I mean is if you can't maintain it, if you

[B]

can't maintain or implement, I think the implement is the hard to maintain.

[C]

Well, yeah, it is except that if you're dealing with Kaizen, we implement it for you.

[B]

Right back to the firm advisory, tech, implementation and bookkeeping and accounting companies that

[C]

want to sit there and train your people to do the implementation. We don't believe in that at all. We'll do it for you.

[B]

Right. It takes up to. If you're cooking, it takes up to six months or as long as a year or a year and a half to get the full benefit of an enterprise solution or what you call an erp. What does ERP stand for?

[C]

Enterprise Relationship Progress.

[B]

Okay, so an inter. So can you use that those that

[C]

enterprise relationship 365 and compete and even Radar to extent at the time of the purchase 365 I think had 14,000 users and. And Radar had nine and could be that 18. So now you're going to roll up all of those users or at least 80% of them into one big company. And the way they built after they acquired those other software companies, yes, they did adapt things from those other two platforms. When Compete bought Radar, they bought Radar because they wanted the 200 templated reports that came with Radar that Compete didn't have. Because Compete's report writer was just basically a Excel add on. Okay. And you could build anything you wanted. It's, you know, I used to have fun building those. Avero told me one day that they wanted to have John George's business and you could produce all those. I said why should I pay you on a monthly basis reoccurring for a template a report that I can build myself? And Avero salesman laughed. He says, not everybody's Bob. Yeah. I said, yeah, okay, I get that. But it didn't make sense to incur, you know, an app trap. You've heard me talk about app traps. You know, these reoccurring software applications that do niche things isn't the answer. The answer is an erp. And there's only a couple of them out there and they're, you know, 365 is taking over the market.

[B]

Right. So when you, when you're saying Erp. You're talking about an enterprise solution. I think you shared a podcast with me that I listened to. It was very insightful. This idea of as a shadow software or shadow AI.

[C]

Oh, yeah, shadow.

[B]

We might be getting a little ahead of ourselves right now with this, but,

[C]

like, maybe like, I'll Shadow it is a different discussion. But the. The. The old configuration, like 1985, was a POS, a piece of middleware, okay. That did your inventory and rescue masters and that stuff, and then a general ledger program. And that used to be like, micros. ReMax was the number one at that time, and Real World was the general ledger of choice for the industry.

[B]

So Micros, Real World, and what was the other one?

[C]

ReMax.

[B]

ReMax. And these are all general ledgers. And for people who don't know a general.

[C]

No, no, no, It's. No, the POS is micros, right?

[B]

Yeah.

[C]

ReMax was the inventory and.

[B]

Oh, middleware.

[C]

Yeah, the middleware.

[B]

Got it.

[C]

And. And. And Real World was the general ledger.

[B]

I'm happy you correct me, because I was gonna say I didn't realize Micros was also a general ledger. So I'm happy that you.

[C]

Nah, micros is a POS.

[B]

So again, it was for POS, micros, for the middleware, it was ReMax, right? And for the general ledger, it was worldwide.

[C]

Real world.

[A]

Real world.

[B]

That's what it was. So, and this is like, in the. From like the 2000s. Like, like, what time period were they leading the show?

[C]

That's like 1985 to 1995.

[B]

Okay. And then compete.

[C]

Khabi came on the scene.

[B]

2001. When did Radar come on the scene?

[C]

2004, 2000.

[B]

What about restaurant?

[C]

365, 2010.

[A]

Here's the painful truth about private dining inquiries. Most of them die in your inbox. Your team's already spread thin, so when an event lead comes in, especially after hours, nobody jumps on it fast enough. The prospect moves on, the booking goes to the venue down the street, and you never even knew you were in the running. Now let's play the what if game. What if you had a team member who never clocked out, who responded to every private event inquiry in seconds and every single time, no matter the hour? That's mia, an AI agent built specifically to convert private dining leads into booked events. Mia gets trained on your venue and integrated with your CRM in under 10 minutes. From that moment on, she is working. She sends personalized human, like, messages to the leads. The second they come in, she answers questions about your space menus. The availability with the confidence of of your best tenured salesperson. She nurtures the leads that when cold and reactivates past guests year after year automatically. No input from you, no follow up reminders, no dropped balls. Mia handles 85% of the busy work your event team dreads so that they can focus on what actually requires human touch. She doesn't sleep, she doesn't forget, and she is constantly refining her approach to close more deals over time. This is not a chatbot. This is a purpose built AI agent that treats your private dining room like the revenue engine it's meant to be. Stop leaving private dining revenue on the table. Head over to Hermetic H E R M E T I C AI to book your demo today. Tell them I sent you. If you're an independent restaurant owner building next week's schedule probably comes down to gut feeling.

[B]

Guessing if Friday is going to be

[A]

slow, guessing how many cooks you need, hoping you're not overstaffed and bleeding labor costs. We've all been there. That's why I've invested in Hot Shift Restaurant Unstoppable community member and founder of Hot Shift. Albert wanted to stop guessing and he wanted to stop paying five different subscriptions that never speak to each other. He built Hot Shift because he needed it himself, running his own restaurant. And here's the cool thing. Hot Shift does not replace your manager's judgment. It feeds it. It pulls in your local event calendar, weather, even ticket sales for nearby concerts and games, and weighs that against your historical sales for that exact day alongside the eight weeks leading to it to actually project how busy you'll be. I'm telling you, Albert's a smart dude. Then it shows you the forecasted labor cost percentage before you publish anything after the shift. Hot Shift shows you forecast versus actual. So you're getting sharper every single shift, not just guessing. Next Monday. If you want to stop guessing and start scheduling with actual data, go to hot shift dot pro, slash unstoppable. That's hot shift dot pro, slash unstoppable.

[B]

So what was it about R365? I mean, I think you said the. The numbers were 14, 000 compete, 9,000 radar. And then was it.

[C]

No, it's what that. It's 9,000 radar.

[B]

Yeah.

[C]

18,000 compete and 14,365. Okay, so when 365 first rolled out, what they did was they took Great Plains, the Microsoft, and they got a license from them to reconfigure it for the restaurant industry. So basically it was great planes and we were a Microsoft Gold partner at that time, so we were dead on implementing that stuff. We used to do it for the financial world and they just put a restaurant cover over it. Okay. But since those periods of 10, 11, 12, that David, they've morphed that into their own custom kind of application and they are constantly upgrading the system. But it's very, it's, it's a, it's cumbersome to run a little bit. It's marketed, engaged to like 10 user, 10 locations and above. They're not big on single independent users.

[B]

Got it. So I mean, I think this stuff is fascinating. I think 99 of the people listening to this right now have. I think this history is important. Nobody knows the history behind the software in the restaurant game. And it kind of sheds light to like where we are today. And there's these patterns that happen, you know. So I just recently read the book Generations and it basically looks at like every 80 years there seems to be like this re, like occurring pattern of like a peak, a high. And then there's like an awakening where, like where these institutions that are formed out of the high start to crumble. And then there's like a, I think it's a, it's a high awakening. There's another phase that's like, where things really start to like, you know, break down. And then there's the crisis phase where things, and we are in the phase now. We're in the crisis right now.

[C]

Yes, we are.

[B]

And it's, you know, the, the last high was the golden age, 50s and 60s. And you know, it takes, it usually takes a massive crisis, a war. The last, the last crisis was World War II, you know, and you know, just like there are generational phases, I think that, you know, I, I Wonder if that 80 year period, the coincidence is that people are usually alive for 80 years. So it takes a whole person's like lifetime for us to forget about things and to be like, oh, let's start like, let's fix what was broken and start all over. And then usually that will crumble over 80 years. Right, that.

[C]

First of all, thank you for giving me my nine more years to live. Second, Second of all, you missed the crisis. The most recent crisis wasn't World War II, it was covet.

[B]

Oh well, they predicted Covid, I think in the most recent book, or maybe I'm getting my wires crossed, I listened to it on audio. It might have been at the end the first book. But yeah, we're, we're in the crisis right now and Supposedly it will be around 2030 is when it's all going to go to. And then we're gonna, this is their prediction. And then right by like the mid-2030s, we're gonna start with a new high.

[C]

Right. Well, I mean we, we were in a situation, we were doing advisory for a group out of Singapore in December of 2019 and I had, I used to have a weekly zoom call with those guys and we were helping them with the hospitality section of their business. And I got on the, on the line for the weekly call. It's a. Well, Bob, we're going to have to end the contract. And I said, okay, what the hell did I do? And they said, no, no, no, it's not you, it's the government's shutting down the city and we're not going to be able to operate for a while and blah, blah, blah. Now if you ever had to deal with a Chinese company, they're not open to be talking about anything because every single company there has the government as a partner.

[B]

Right.

[C]

But in an almost encrypted fashion, they let me know. Oh, by the way, Bob, it said it your way. I said, that's interesting. I thought about it for about a week and I said, wait a minute, are we talking 1918 all over again here? Is that what we're talking about? And I went on LinkedIn and offered all our services for free and we got 1697 views and not one phone call. Wow. So December goes into March of 2020. Covid hits. I contact a whole bunch of software companies and make them put together a program of 12 months of free E commerce, setting up your website, doing the E commerce structures so that you could do takeout and delivery. Well, that was 691 views in no cost models. It says a lot about the industry.

[B]

What does it say?

[C]

It says that they are terrible at adopting to change. Yeah, they, they don't do change. Well, no, they would much rather stay in old school for the rest of their lives.

[B]

Yeah, so we're, we're kind of, we got down this path talking about like what is the broken model?

[C]

And here we go. Yeah.

[B]

And what is the 1905 model? And it's, you know, it's, it's how many hours a week? 60 plus hours a week and struggling to get, you know, 10, 70.

[C]

Yeah. 70, 80, 90.

[B]

Yeah.

[C]

If you're working, you've heard this from other influences as well. If, if your business, if your restaurant can't work, doesn't work without you being there, you're Lacking system.

[B]

Yeah, that, that's what my dad used to say when we owned our restaurant. Like you're, you don't own a restaurant, it owns you. And that's another way of saying that, like if you have a. David Scott Peters talks about this like it's a system dependent operation versus a people dependent operation. My parents 100% had a people dependent operation. If they weren't there, it didn't run. So, you know, and that's the cool thing about technology today is that you can be handed an operating system and you can follow the step by step rules and use the systems that are engineered and just kind of follow those guidelines. But a lot of the systems that were engineered by these software companies were built off of a broken business model. Is that safe to say?

[C]

Well, again, you talk about the tools, right? You talk about the, the tech above the tech is that business model. Okay. The tech is programmed and, and structured to accommodate the business model. And that's the major problem. The restaurant business model. And I used to call it the 1905 model because it's the same model they used in 1905 when restaurants began. And the outside influences that you like to talk about, right. The environmentals make it unstable, make it.

[B]

What influencers are you talking about?

[C]

Which influences or what influences you said?

[B]

The, the outside influencers that I like

[C]

to talk about government regulation, you know, things that are out of their control. The, the minimum wage increases, the, the, the cost of, of the supply chain variations, the commodity variant labor cost of goods. Yeah, all the time cost stuff. And rents. Real estate.

[B]

Rent. Real estate. And software.

[C]

Yes, and software.

[B]

I think it's another one. I mean, granted, I do think that if you implement the software correctly and you work the systems, it will pay for itself. I think there's some truth to that. But let's kind of, I think kind of talking about the evolution of software is interesting because I'm just one fascinated by it. So what we learned where we landed off, we talked about how compete in radar compete with 18,000 users. Radar with 9,000 users was purchased by a restaurant 365 with 14,000 users. So essentially R365 and Radar and compete. And we went from what, 14,000 to 23,000. And now the most recent acquisition of restaurant 365, which was in 2016.

[C]

Yeah, 16.

[B]

No, 18, 18. 2018. They went from 23,000 users to approximately 40,000 users. So they doubled their size in that period.

[C]

Yeah, yeah. I remember going to the user conference and compete in Austin, Texas and I remember Compete when it was Harry and a dozen people. And I walked into the facility and there were like 300 people that worked there. I was like, wow, they got an army. And John Taffer was there that day because he had chosen Compete to run Taffer's Tavern. So we had a nice long conversation, me and him.

[B]

And what was he like in person?

[C]

A lot calmer than the television personality. He's playing a character. Anyway, the. The funny part of all of that is, you know, I had gone to the Compete conferences several times, and they. They knew I always used to go there with a wish list. So at that time, they asked me, bob, what's on the wish list this year? And I said, it's real simple. I want to buy Compete. And everybody left except one of the senior coding, you know, programming guys. And he looked at everybody, said, guys, he's not kidding.

[B]

Meaning you wanted to purchase Compete?

[C]

Yeah.

[B]

What year is this?

[C]

Yeah, I did. For the same reason that you would. Because I didn't want it to get gobbled up by a big guy. Because I saw it coming.

[B]

Because what year was this?

[C]

Not 10. It was like 14 or 15.

[B]

Okay, so you saw it coming. What?

[C]

Oh, yeah, so we're coming. The reason why I saw it coming is because before Compete got acquired, they acquired Radar. And they got the money from an old friend of mine called saran capital. That's Mr. Frick.

[B]

Say that again. What capital?

[C]

Serrant.

[B]

Serrant Capital. And did you say Mr. Prick Capital? Would you call a Serrant Capital?

[C]

I. I know that was run by my old friend Mr. Rick.

[B]

Oh, okay. I thought you're calling somebody a prick.

[C]

That's the head guy there.

[B]

Okay, gotcha.

[C]

In any. In any event, they. They got capital from them to buy Radar. And of course, what they did, like typical PE guys, it's a buy, fix and sell playbook. I know because I was CFO of five of them. And I went to the user conference and they had introduced a new CEO. His name, his last name was Stone, and he was.

[B]

And this is the new CEO of Sarin Capital?

[C]

No, this is the new CEO. Compete got it because the capital guy put their CEO in place, okay? And he was the typical smiling jack, investment banker type that I know and. And love so much. So the very first question I asked him was, when are you selling the company? Oh, we have no intention of doing that, Bob. Blah, blah, blah. I go, yeah, okay. You couldn't convince me otherwise. I knew what was going to happen, so I contacted Saran outright and asked him if he was interested in selling. Interesting. Compete. And he didn't want to talk to me. Obviously he already had a buyer in mind because that's what they do. Yeah, they buy a prop, they buy an act, they acquire company, but they already have it sold.

[B]

Got it.

[C]

So he knew, he knew what he was doing. He was buy, fix and sell as the playbook. So they had to purchase the, the entity, they had to streamline it or raise the revenue to a certain milestone or whatever the calling was. I know because I've done this. And at that point they make the sale. So that's exactly what happened. So it was predestined that this is all going to happen. And I agree with you on, you know, four or five big companies controlling the world. It's not a good thing, right? Not for, not for the independence. It's not good at all. No.

[B]

And that's what scares me. And I, and when I look online and I'm forced to be on social media to do whatever I have to do there and then I get sucked into like the, you know, the news feed and I'm just like, oh, like, I see this stuff and I'm like, it's, it's almost impossible. If you wanted to create a better solution or a different solution, the biggest challenge you could have the most talented, you could be the most talented programmer designer, you have the most talented team. But the problem isn't building solutions, it's distribution. Because the name, like whoever has, whoever controls the technology controls the narrative. And that's a line straight from the book Power and Progress from. I always have the book right behind me. Duran Akmaglu and Simon Johnson. You know, I think Doron is a MIT professor in economics. And the, basically the narrative in that book is that whoever, whoever controls technology controls the narrative. And that's what you're seeing right now. Because who controls the technology right now? If you had, if you had to make a list of the top players who control the technology right now, who are they?

[C]

If you're talking ERPs, it's going to be, it's going to be 365, it's going to be crunch time, it's going to be Merus. There are other players, but they're not as robust as those few.

[B]

Right. And I've never even heard the other

[C]

thing that, the other thing that I'm seeing now which really disturbs the hell out of me is software companies that want to add bookkeeping and accounting to their service levels.

[B]

Like, give me an example of some companies that Want to do that?

[C]

Razzie.

[B]

And what would you call razzie right now? Middleware.

[C]

No, they're. They're an erp.

[B]

Okay.

[C]

They do, they do the full through general ledger and financial.

[B]

Where would you throw Restaurant Systems Pro on top of this list?

[C]

They're on. They're on the same list with erp. Restaurant Systems Pro, in my opinion, was really, really good middleware. And I've told this to Fred. You know, I'm running one of his applications now. And for the longest time, Restaurant Systems Pro was a middleware. His whole team is, you know, geared toward improving prime cost.

[B]

What are the things that middleware does? Just to make it clear for our listeners, it's like list. Like what would fall under the, like the. The things that middleware would do.

[C]

Middleware could be your labor. It can be your cost of goods in a declining budget, application, reverse labor, you know, conditions regarding, you know, the prime cost for labor by category and by. By type, full inventory, recipe masters, everything up to the general ledger. When you add the. At the. What was a couple of years ago when I first got to talk to Fred at Restaurant Systems Pro, I told them, you know, you need to get a general ledger in order to compete with Compete Solution. And he said, yeah, we're working on that, Bob. I said, okay, good. And I offered my services to him. I said, when you're ready to do that, I'd be glad to help. And I said that because that's what I did for Compete. You know, we gave Compete a million and a half dollars worth of R and D for free. And the reason why is because they would give us, you know, referrals like there was no tomorrow. Because they knew that we were going to implement the product to match the culture of the operator. So we would build the implementation to match their condition. Because they're unique, they're not all the same. And tried to make it as simplistic we call baby steps so that they're trained properly. Because if they're not, they reject the usage of the thing and they try to go around it and that's worse than not having it, right. So yeah, garbage in, garbage out.

[B]

And that's a huge fear in point of resistance for restaurateurs is if they invest in the asset, the tool, the software, and they spend all this money to get it, they spend all this time and energy implementing it and they don't implement it right, and then the team doesn't benefit from the hard work of developing these new habits.

[C]

The ROI is non existent.

[B]

Try Getting your team to do it again. If you don't do it the first time, try getting your team to do it again. So you really got to hit it out of the park the first time. Did you say that you were helping create custom solutions for custom restaurant concepts? Did I hear that right? Because they're not all the same.

[C]

Yeah, in some, in some instances, yeah. We had some applications that we had built that connected to Compete. That was. I, I even mentioned this one to Fred. He's not ready for it. But, but you know, we built an application that allowed you to tap into the USDA market to get the market price on the commodities that you were buying. And one of the screens for ordering and Compete had a drop down and you would get. And Compete had something that nobody has anymore because of politics. They had a bidding system there. So you could take three or four bids from different vendors and when you went to the order screen there was a little drop down and all the prices for that item would pop up by, by vendor. So you knew which was the low price that was and you can make the preference choice. You could say, I don't care that it's lower there. I need that product because they, they have the quality that I like. It gave you flexibility. But we built an application that connected to that, that include. We basically created a vendor called Market and uploaded the information automatically every day. So you knew what the market price is. So I was a vendor for five years in Florida. I know how they work. I know how that whole system works. Yeah. And if you don't know your market price and the commodity you're buying, you have no clue whether you're getting a good price.

[B]

Right. Yeah. So I mean we're covering a lot right now. I'm really enjoying, I think this is enlightening stuff. The, the, you know the history of these companies and where we are today. So I guess where, where were you in Kaizen, say in 2016 when R365 purchased Compete? You Were you still using their features or were you no longer able to use their features?

[C]

I was. They, they kept. Because they were in transition and they were trying to get people to move over. And I told Morgan at that time, I says, you're not going to convince somebody that's been looking at a specific screen for five years to switch over. That simple. Right now it's, it's, it's monumental difference in applications here. 365 does a lot of good stuff, but it's a lot harder to run. You know, it's it's, it's a lot more complicated. And unless you got somebody like me sitting there that can handle that. Tommy's a good example.

[B]

Our guy that's on the call, Tommy Seto.

[C]

Yeah. He's, he's running 365 because he can.

[B]

Yeah, he's an exception.

[C]

Not everybody has Tommy or me or somebody that can.

[B]

Right.

[C]

If you do, then, you know, I would recommend you taking a look at it.

[B]

Yeah. And that's a director of operations, I think, all in. They are running eight locations and not everybody, not a two, three unit operator can have the somebody on staff to do that. And I think that's kind of where a fractional CFO like yourself comes in, where like, hey, we're at three locations, we're killing it. We have the potential to get to 10 locations and we need somebody to help us, you know, beef up our, our systems a little bit.

[C]

Well, if you got it, if, if your operator's got a growth mentality, if he's looking at, to scale, then my Recommendation would be365 because you, you can 5 year grow into that, no problem.

[B]

Right. So you're open to other software. Like, why do you think it's so hard for other solutions to come up there and compete with R365 today?

[C]

You know, there are a lot of guys that go to the restaurant shows. Two of them come to mind. One was in Chicago, another one was in California where they went to the show and they talked to the salesman at 365 and they got bamboozled into, into doing it. Little realizing that they had to implement it themselves. And once they started doing that, you know, I would get calls saying, bob, could you do this? I go, yeah, I could do it. I already know the software. That's not the problem. But once we started to tell them what was involved in doing it, they left. They didn't stay with 365. And if you talk to Fred Langley, he'll tell you a lot of the people that are going over to Restaurant Systems Pro are former 365 users.

[B]

So what is it?

[C]

Help us understand the bandwidth isn't there, Eric.

[B]

The bandwidth on the onboard and implement it.

[C]

But yeah, yeah, yeah, they, they don't. The Fred's got a good team of, of customer service. That's his plus. All right, 365 is sort of like my analogy would be there, like adp, you know, your number.

[B]

I'll be honest. I mean, like, I obviously. Fred, long time sponsor, Restaurant Assistance Pro, longtime sponsor of the Podcast. And not only do I, I think his heart's in the right place. And it's, it's what I've heard from the users of Restaurant Systems Pro about the customer support that made me really want to work with that company, stick with that company, promoting that company. Because I think we need more companies like Fred out there, more restaurant. I mean Fred was a restaurant owner. That's kind of his whole story. He was a restaurant tour. He linked up with David Scott Peters who was doing a lot of restaurant coaching, consulting, advisory and he implemented David Scott Peters systems. He was able to really just was a natural restaurant coach consultant ended up partnering with David Scott Peters where David was out on the road promoting the systems that they were teaching and then Fred was implementing the systems, traveling, being a restaurant coach and consultant. Those systems that were like analog like operations manual systems evolved into a software as a service and. Or I always get back as a service as a software or software as a service. Software as a service, software as a service. And that's what. How Restaurant Systems Pro evolved. And you know, I think it. One of the reasons why I wanted to see RSP scale is because I think R365 needs competition. You know, like a competitive marketplace is good for the end users, it's good for the middle class. I don't see us going in that direction with technology right now. I, I like, like who, like what direction do you see the world of restaurant software going right now? Like how many, who are the big players? You mentioned the big players at the top when I asked were crunch time merits and restaurant365. But like that's just an enterprise solutions or what you call erp.

[C]

Yeah, they, they are and there's a definition to make an ERP too. Because Fred would argue probably that he was an erp, but he, his when he was running prior to the, I guess a little over less than a year now, he developed a general ledger. Didn't take me up on the, on building it, but he, he added the general ledger into, into beta and in the same time he bought the license for the, the POS serve. Because my discussion was a real enterprise solution would have all three components together.

[B]

Pos, general ledger and yeah the whole thing.

[C]

Piece of software.

[B]

Yeah.

[C]

Nobody has that. There is no enterprise solution for the industry.

[B]

Would you say Toast is the closest thing with what they're trying to build?

[C]

No. Toast. Toast has got a different game plan. You know, Toast made their bones by having you know, 300 push button APIs. So they integrated what they Spent their life integrating with everybody. The problem is they need more revenue streams. So now they create what? They create their own payroll system. Okay. And disconnect the APIs for all the other payroll systems. So you know that that's inevitable. They're going to want to slowly take over every single module that's part of the erp.

[B]

So, like, Extra Chef would replace

[C]

Extra Chef.

[B]

What's that?

[C]

Extra? Extra Chef's founder came to us for financing. Okay. I met with him when I was consulting for the. For the Four Seasons restaurant. And he met me there one day and he told me all about Extra Chef. And I said, yeah. And I did. He did a quick demo on his laptop. And. And I told him right there, I said, we're not interested in this, because why not, Bob? It's a good application. It does this, it does that. I go, it's redundant. Compete does it all. I don't need to have another piece of application that is redundant. You know, and guys that were doing those apps back then, again, do the app, get a thousand customers, sell it to a bigger guy. That's exactly what they did. They sold to. They sold the application to Toast. So now Toast has Extra Chef as a module if you want to play with your inventory. All right? So they're slowly adding modules to their platform. When you start seeing them do general ledgers, then you can get. You can say that they're aiming for an enterprise solution.

[B]

Got it.

[C]

But there's a big liability in doing that, so not everybody wants to do it.

[B]

What do you see happening in the next couple years if we continue on this trend? I'm curious, in terms of, like, somebody,

[C]

somebody innovative is going to go into AI and build a real enterprise solution using AI. And if they're smart, because I said this in our last call, somebody comes out with a real enterprise solution for a low cost, 100, $150 a month, they're going to own the market. They're going to own the market.

[B]

My concern is that that happens with one clear front runner and that everybody in the restaurant industry goes with the same solution. I think we're hardwired to go with word of mouth. And today word of mouth manifests in marketing, in marketplaces. And the major marketplaces are Meta and Google. And we all know that that isn't true word of mouth. That's. That is marketing. And whoever has the most money in marketing wins. Whoever. Whoever can get the most venture capital, whoever can get back the most money can go out and they can buy up the influencers. And create this illusion that they're the only best, best option out there.

[C]

Welcome to capitalism.

[B]

I'll, I've turned down sponsorship in the past month and I'm not in the position to do it, I'll be honest.

[C]

Because I, I can, I can understand there's other revenue models that you can follow but, and not everybody has your integrity.

[B]

Well, thank you. I just feel like it's really important that there is a resource out there because I wouldn't be able to have these conferences, conversations that you're sharing with us today, Bob. Right, no sponsorship model. You know, and I want more people to talk like this. I want you to tell me who these other people are and I want to, I want to have these types of conversations. But I think what, I don't know, I don't want to get too far ahead, but I think we really need to be conscious capitalists. We talk about as restaurant owners, hey, support local, you know, support our local restaurants. Meanwhile, you're a San Diego restaurant buying a Boston pos.

[C]

Right.

[B]

You know, it's just like what, like. But the, the truth is that in this, this, it's, it's hard because these companies, they are technocracies that kind of absorb each other. So you really don't have a lot of options. But I think with AI there's going to be an abundance of options. But this, the truck, the struggle isn't options. It's, it's discoverability and it's in its.

[C]

Well, meta and, and Google and the rest of them are all shifting anyway because, because of AI, people are using more of AI to do their searches. So the world of SEO guys, right, they're, they're, they need to pivot something fierce now.

[B]

Well, the one thing I do think is promising about some of these AI platforms is that they're pay gated and I think that's a good thing because the, the, you know, meta and Google option or model is the freemium model. And that was prior to people realizing that it's not actually free. Like you're the product, your data. Like you are the product. Somebody is being sold something and they're being sold you your habits, your beliefs, your like everything about you that you type into that platform every click you make, everything you are a product. And we were wholly ignorant 10, 15 years ago.

[C]

Oh yeah, they were gathering data and look at China, that tick tock and all of that. That's scary, right? The, the, the, the funny part of all of this is that, you know, we're going through these evolutions and we're, you heard me say it on the last call. AI is exponentially bigger than the Internet was, right?

[B]

And it's only getting bigger.

[C]

And here's the part that I, I find interesting. AI comes to, to light, it comes to the surface and you got Albert, you got this guy and that guy, all these guys reaching in to develop their own stuff, okay? Their only customer is for people that don't have that bandwidth, okay? But eventually, eventually AI is going to progress where it's just voice and when it gets to that point, all the AI influencing small app builder kind of guys because you can't hear somebody send you an email with saying it's AI driven. It's AI driven. It's all I hear and I like it. I spent the last year playing with AI and yes, I love it. It does marvelous things if you know how to prompt and if you know how to build stuff. And from a financial end, if you don't give it all the details, it lies to you. You got to be careful, okay? It will hallucinate on you. It doesn't necessarily follow the rules. You gotta, you gotta tell it what to do. And yes, it'll learn over the course of time. But here's the evolution of technocrats, right? Somebody is going to come along and own that, that tool. Somebody. Now how that evolves, I don't know. I don't have my crystal ball with me today. I can guess, I can guess. A couple of big players take over the sector pretty heavily.

[A]

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[B]

there's chat GPT or open AI. Claude and Gronk I think are the three front runners.

[C]

And yes, those are the big three.

[B]

The big three. And I wouldn't be. I know Chat GPT was the leader. I think they got in trouble with some ethical things. Clyde. Kind of a lot of people went from Chat to Claude because of that. But I think the other one is Perplexity is kind of on the rise. I think they're getting a lot of good press.

[C]

That's a different app. That's.

[B]

That's more for research, correct?

[C]

Yeah, that's more for research. I know you could use Perplexity or some of those other, what I call sub applications if you want to use multiple LLMs.

[B]

Okay, right.

[C]

If you want to use open AI, Grok and anthropic all at the same time, you would use a concept like Perplexity.

[B]

So one of the arguments that I've heard an expert on the subject talk about is that these companies should be regulated to share a little transparency on how they're doing it so that more the money and resources they, the money and resources that went into getting them to where they are today, that should be shared. So like the collective, some more people can create similar options to have some optionality on the marketplace. Yeah, I can speed up the race a little bit.

[C]

Yeah, no, I posted that on LinkedIn. I said to myself, you know, I've been posting on stuff on the Internet for what, 30 years and 25 years that I can remember right off the back of my head. AI's got all that data. AI's got everything I've ever wrote.

[B]

Yeah.

[C]

Should I get paid for that?

[B]

I don't know. Oh man. What were the things we wanted to talk about? I know I made a list of the broken model which we go into this deep like rabbit hole, like the, of the history of the software around that.

[C]

Yeah, let's talk about the broker model. Okay. The, the controversy in regards to all the technology. How, how, how the industry is going to counteract that. They're going to change the business model. They have to change.

[B]

Who's they? They, the restaurant owners, the software.

[C]

The restaurant owners need to change their business model. It's not sustainable. It's low margin, it's failure ridden, it's non systematic, it's old school.

[B]

You know, many people would say lacks dignity.

[C]

Oh, I wouldn't go that far.

[B]

I would go that the far. Like I think we're an industry that doesn't have a lot of dignity in how we choose to treat people.

[C]

And remember, remember my comments about the two things that get me in trouble? Right.

[B]

What's that?

[C]

Restaurant tours only do things when they're forced and nobody wants to be first to the party.

[B]

Yeah.

[C]

That means that they wait for the big boy to do it, spend the research and then hybrid it or copy it or buy it.

[B]

Yeah.

[C]

That's what they do. They, they don't have the initiative or the capital. Hell, they don't have the capital to pay me. And the reason why is because their business model sucks.

[B]

Yeah.

[C]

It doesn't generate the kind of margin that they should be earning.

[B]

So you in 2008 start to have this revelation of like the bros, the business model is broken. Or you know, you known for a while it was broken, but you start to formulate a new approach.

[C]

Right. And I just thought about it and said, what if I took a Fortune 500 business model and plugged it into a restaurant? What would it look like?

[B]

What is a Fortune 500 business model?

[C]

Okay. If you and I were opening up, if, if you were my client, the very, one of the very first questions I would ask you is how much do you want to make percentage or cash flow and develop the model from the bottom up. That's the way Fortune 500 companies, I CFO of two public companies. So I could tell you how they do it. Okay. The restaurant industry doesn't work that way.

[B]

Right.

[C]

The restaurant industry is about sustaining a tremendous overhead that's constantly changing, labor that's constantly demanding and cost of goods and commodities that are constantly rising and they have only F and B to fund it. That's not going to work. That's why you have what National Restaurant association says it's between 5 and 8%.

[B]

Yeah.

[C]

But yeah, I don't think you should work that hard for that much money. Right. Unless you're in love with it. But that's why people do it.

[A]

Right.

[B]

So really the Fortune 500 companies take the profit first approach of start with profit. What is the target? You want to make 15%. You want to make 20%?

[C]

No, no. Minimum 20. Because without it being 20, you're not going to get funding.

[B]

How do you make that happen? What is the. The picture of the Kaizen model that you say can help people or guarantee? They assume they're doing it right. Assuming they have a product that people want, they're good at what they do, they can hit 20 plus percent. What is that?

[C]

So you talk about the old business by the 1905 model where it's 30 cost of goods, 30% labor.

[B]

Yeah.

[C]

Right. That's 60, right?

[B]

Yep.

[C]

And then another 10 for. For occupancy, right? That's 70. And another 20 for overhead. That's 90. That leaves you with 10%.

[B]

Wait a second, you said 30, 30. That's 60. 10 would be 70 and another 70

[C]

and another 20 for the other overhead.

[B]

Got it.

[C]

You know, ops and, and, and gna.

[B]

Yep.

[C]

So there's your 10%. Screw up a little bit and you're making five.

[B]

Right. So that's the old model.

[C]

Right. That's the 1905.

[B]

So you got your prime cost. Cost of goods, labor, 30. 30 rent below 10. I. I've heard you should aim for seven, but in a market like New

[C]

York, in New York, it's 12, right.

[B]

And then your overhead, that leaves you 20% to cover everything else. What is. I asked you what the Kaizen model looks like.

[C]

Kaiser models are 25% cost of goods, right?

[B]

Yep.

[C]

And depending upon the kind of restaurant you have, let's say it's casual dining, that could be 28, 29%. 10% is the occupancy. And 15% is the overhead. What does that give you?

[B]

So you said 25%. 28% and 10%. 15%. So you got 25, 50, 78%.

[C]

You got it.

[B]

And that leaves 2325 for profit.

[C]

Yep. Now here comes the scary part. Want to go into the future, add a non operating revenue stream. What's a non operating revenue stream? Gift cards, cover charges, membership fees, loyalty gift programs. All of those things you could sell with almost no expense associated with it. So when you're paying for access one, you're paying for, you know, a loyalty program, a real lot. I don't mean a discount program. I mean a real loyalty program. So now you've got another 20 profit there. Add that to your 25% Kaizen model and what do you got? You got a restaurant hospitality platform that can generate the same return on investment as a SaaS company.

[B]

So the, the, the key to the Kaizen model is to find non operating revenue models.

[C]

That's, that's one of them. Yeah.

[B]

So, and you've seen it, you've seen

[C]

restaurants do this, right? How many of them decided to put on a surcharge for credit cards? How many, how many of them put, you know, love the kitchen, you know, gratuities on their, on the check as an option. This is their attempts at trying to do stuff to cover that labor expense or cover the overhead expense. Now doing that and doing it all, you know, line by line so that the customer can get upset is not the approach.

[B]

What is the approach?

[C]

One item, one number for menu price. That's it. No disclosure, not necessary.

[B]

Do you allude to not tip?

[C]

I, I, I believe that the rest of the world has it right and the United States should drop tipping.

[B]

I agree. But why do you think we are struggling with that so much?

[C]

It's embedded in the culture.

[B]

I feel like I, if I were to tell all people, consumers, yeah, good news everybody. You don't have to tip anymore, right? Do you think that there'd be resistance, people wanting to tip? Or do you think that is it the restaurants that are, or the people that work in restaurants specifically that are kicking and screaming?

[C]

Okay, so they shouldn't be kicking and screaming because what you would add here, and my buddy Danny Mars didn't do this, but he should have, is institute a revenue share, a top line revenue share, just like a 5500 account that big corporations use. Okay? So if I've got a ten dollar, you know, app, appetizer, and I'm going to raise the price to $12, but I'm going to tell my customers there's no tipping. So for the customer, there's no increase in distribution of money. They're paying the same amount of money except the tip. The service is embedded in there already. Now do you need to tell them that? No, all you need to tell them is that there's no tipping.

[B]

Yeah, you're welcome to tip, but we are factoring in everything we need to pay our staff a livable wage and security.

[C]

Our menu price is service included. Have a nice day.

[B]

Yeah, service included. Like you don't even have to list that, just service included. If anybody says, I mean, I don't know, the best practice, I don't know, we have to unpackage that today. How to approach educating people not to tip. But I mean at the, the core of what you Shared is instituting a, a revenue share and I think profit sharing. So you said above line item top.

[C]

Well, here's. Yeah, here's top line revenue share.

[B]

So. Meaning. So institute top line top.

[C]

Yeah. Portion of the top revenue share covers not only the differential of what the tift employees would, it does away with that back in front of the house. Discrepancy of income.

[B]

So you're saying revenue, you're saying the share. Just to make sure we're on the same page. Income. The money that comes into your income account, the money that hits that income account. You're doing revenue share from that.

[C]

Yep.

[B]

You're taking a percentage of that income and you're putting it towards

[C]

giving it to the employees.

[B]

What, what's the percentage that you would recommend giving to the employees?

[C]

20 to 25%.

[B]

So 20 to 25% of income, meaning the money that hits your, your checking account before it gets distributed to operational expense taxes, profit owners pay.

[C]

Yep. It doesn't cost the customer an extra dime. They're already giving you that.

[A]

Right.

[B]

So that's one thing you have to keep in mind. It's not coming from the income that you would have before tipping. You're, you're charging them, you're eliminating tipping so that, so you're in, you're increasing your revenue 20% percent.

[C]

Right. So now that takes care of benefit programs, it takes care of raising. You could even go as far as eliminating hourly employees depending upon the state you're in. Because the, the laws are written for the current condition that doesn't allow you to do that all the time. And that's why I say where possible and institution of. How many people in this industry talk about burnout? How many, how many do you talk to? I mean they all suffer from burnout. Okay. They're in the top, one of the toughest industries on the planet. So why not introduce a four day work week? Why not do that?

[B]

Right.

[C]

So you get to, you get to improve the condition of your employees, which we both know improves the revenue line time. Happy employees equal happy customers. Happy customers mean loyalty and revenue being generated. So you get the benefit of both sides. And one of the, one of the extra marvelous things is because you've got a revenue share, right. Your employees. In the past, you know, every time you had a problem, you would throw a body at it. The employees in that model aren't going to let you hire anybody because it's going to come right out of their pocket. So now you're promoting proficiency and efficiency. No, we got this. Please Bob, don't hire anybody. We got this. All right.

[B]

We've covered a lot in terms of what your new proposed business model is. And if I'm keeping up with you, we talked about adopting a no tipping model. Instead, use revenue share in service, inclusion in the in char, have that service included in the menu charge or whatever the price is and then just kind of set the bar, set the standard 20 plus EBITDA. Just call that the new standard going forward. Instead of selling for 10%, which I

[A]

think is really important, just that little

[B]

gesture of saying no, 20 plus percent is possible. Here's how you do it. Like once you say that you can. If you're doing 10%, you're doing good, your brain stops trying to figure out how to do more.

[C]

Right. Well, here's the, here's the, here's the argument. You know, we've been pushing this model since about 2012. Right. Trying to get our clients to follow this model. And they follow about 25 or 30% of it and then they get to the 20 EBITDA, all right. Which in most cases double their bottom line. Okay. But they won't adopt any of the culture changing factors that would change the game. Okay. Because it's, they don't adapt. They can't adapt that well. It's a culture change. It's not something everybody's got to do it. Otherwise I'm not doing it. Okay. It's follow the leader mentality. All right. If they did would put pressure on software companies. It would change the restaurant model. It would, you know, that 20 EBITDA is already proven that we can do it. I've done it, God, hundreds of times. Okay, now add the, the non operating revenue streams to that and now you've got, you know, a business that competes with software companies. Right.

[B]

Relative to developing non operating revenue streams. We talked about memberships. I think that's the best way to go personally. Memberships cover charges. There's some really cool.

[C]

Go back to the time when restaurants had cover charges. Yeah. That's all.

[B]

Have you ever heard the app line leap?

[C]

No, I'm sorry, I haven't.

[B]

It's cool. It's basically if you're a restaurant that regularly has a line and maybe you do like live shows or whatever, like you're, there's a line to get in your spot. There's an option to basically give your guests the ability to jump the line at a premium.

[C]

Oh, yeah, okay. I have heard of this. Yeah.

[B]

So it's just paying the guy at the door, but creating an App for that. So if you don't want to wait in line, you can. Depending on how long the line is, it's the, it will determine the, the value of the jump it. Right. So if you're at a 20 minute

[C]

wait, it's a velvet rope concept.

[B]

Yeah. But they've created software so like it's big in college towns where there's like clubs and stuff like that. You can get ahead. You just don't want to stand a half hour in line, pay 50 bucks, you know, it's no different from what Nick Hakonis did with Talk or. Yeah, Talk. Was it Talk? Yeah, Talk, which is now owned by Resi. That's a whole nother discussion we didn't even get into in terms of the, these companies.

[C]

Oh no.

[B]

Yeah, but like a table on Friday night at 7:30 is more valuable than at 4:30 on Tuesday. They shouldn't be the same cost.

[C]

And now you, now you're going to get into dynamic pricing and all this other nonsense.

[B]

What would that fall into? Develop non operating revenue.

[C]

Yes and no. It depends on how you, it depends on your concept. See, if you take, if you take a concept like Brooklyn Fair had, where it was 20 seats, two turns a night, $400 a chair and only 12 employees. That's a 6, 7, 8 million dollar model with 12 employees. Everybody's getting paid real well there. Yeah. So the business model is the step above the technology and the technology has to follow the business model for it to be effective. If you change the business model, that's going to force the software to adopt. They don't, they're big chocolate elephants. They don't adapt that well.

[B]

So I've said a few times on the show that the tail's wagging the dog. The software companies control the restaurant industry right now. And what, Give me some examples of how that's happening.

[C]

Well, when you talk to me about the tail wagging the dog, it's, it's about your employees in a restaurant telling you, I, I can't work that day. I, I want to trade shifts. I want to do all this accommodation because you can't find good people. I love that. 43, 42% of the industry said they can't find good people. They can't find good people because you're not offering them a career, you know?

[B]

Yeah, I kind of get a kick out of some companies that are like, oh, we offer so many jobs. Jobs. I'm like, when? Last time I checked there wasn't a shortage of jobs.

[C]

No, there's not.

[B]

Like, there are plenty of job opportunities in the market now.

[C]

There's, there's a shortage of talent. And you have to understand why is there a shortage of talent? Because they, Most restaurants don't have a formalized training program. They don't.

[B]

Yeah. I would go even further. And this is where I think I start to lose a lot of restaurant owners, where I think a better future, a future that builds the middle class is a future of, of a pathway to ownership if you want a career. I think the, the. I mean, if you want security, the best way to have security is through owning assets. Do you agree or disagree with that statement?

[C]

No, I, I agree. And part of the Kaizen model is that when you get to that 20% EBITDA, then you could start authoring stock options.

[A]

Right.

[B]

If you want to attract talent, give them an opportunity to own something.

[C]

Yeah, no, you can do that, but you've got to have an established revenue base and an established profit structure and all the systems in place because you can, you can, you can project and forecast how much is going to be, you know, earmarked for stock participation.

[B]

Yeah, I would say you need to have established revenue, established profit, and an established pathway to ownership. You can't just get hired and, you know, hey, you want to buy 1%? Like, no, no, no.

[C]

Yeah. You don't have to buy anything. We. After a certain amount of tenure. Some people do it on tenure, some people do it on performance.

[B]

I think it should be. Sorry, some people do it on tenure, some people do it on performance. What else?

[C]

And some people do it on literally attitude.

[B]

I think that'd be under performance. Right? I think attitude, how you perform, you

[C]

could have a positive. You could have a positive attitude in a shitty performance.

[B]

I think that energy, it makes the company better, though. I mean, you don't have to like, like you could be like the worst at doing something, but an amazing coach because you see, like, you could be a promoter. I'm a promoter. Somebody who is very optimistic, very optimistic can see that the, the abilities and strengths and others can have a high standard. I'm not a chef, I'm not a line cook. I'm not a server, I'm not a bartender. I will that up. But I'm a great host. I'm a phenomenal host because I'm good at seeing what other people are good at. And I'm. And I'm very enthusiastic, you know, and I think there's a. So point being, I think, you know, you said revenue, some people base it off revenue, some people Base it off of. Of Prof. I think profit, performance, performance. Thank you. And 10 tenure. But I do think that there should be skin in the game too, in terms of putting money up. But say you have a restaurant that's valued at $2 million. You, you, you know, and you want to become a partner in that restaurant, you don't ask them to put up 20% to buy in. You ask them to put up 1% or half of a percent.

[C]

But you're, you're proposing a buy in

[B]

option, which I think it should be, you know, you, you should be your ability, your. What was it? Our. I wrote down our performance. What was our. I was trying to shorthand everything so I could keep up with.

[C]

That's okay.

[B]

It was tenure, performance and attitude.

[A]

But why not?

[B]

I think if you. Most 30 year olds, 25 year olds, people that might want to make a career in this can go. They can save $10,000, they can save $20,000. If you're working for a company as a bartender or manager for five years and you are putting money away, you, you can buy 1%. That's a low bar. You can go to the bank and get a loan for $5,000 to close the gap.

[C]

No, you could get a credit card for $5,000.

[B]

Right. And then you say, okay, now I have 1%, I'm getting 1% of profit or whatever it is that just goes into a high yield savings account. And then you don't touch it until you're ready to buy another percent and another percent. And like you teach people how to build wealth.

[C]

You can do that, right? You're going to teach people how to, you're going to teach people how to build wealth by making them part of all the solutions regarding the performance level of the restaurant. You're going to teach them how to read in PNL Sell. You're going to teach them how to budget, you're going to teach them how to forecast. You're going to teach them how to open their own joint.

[A]

Yeah.

[B]

And that's when they do guess who's investing in it.

[C]

You wish them well and, and how much do you need?

[B]

Right. You wish them well and. But you open that their own joint as a partner. You, you bought into my vision, my concept at 1%. You're gonna go on and do this yourself. I know you are. I gave you all the skills you need. I gave you the culture you need to be successful. You want to do your thing. What do you need? Let's do this.

[C]

Now.

[B]

You're operating a whole other concept that you wouldn't be able to do on your own because you've literally multiplied yourself.

[C]

Right.

[B]

And we all win. Right.

[A]

I don't know.

[B]

I think when people hear giving up equity, it's so scary because it's like I put my blood, sweat and tears like nobody cares. Like I do.

[C]

How many, how many restaurateurs opened up with spread equity?

[B]

A lot. Wait, wait. Well, I mean, I would still. I'll go back to. A lot of people have. Yeah, that is a password.

[C]

Yeah, yeah. So that they're familiar with the, with the reasoning here, I think.

[A]

What?

[B]

Yeah, go ahead.

[C]

If, if you've got a high performer, okay. With a good attitude and he wants to do a buy in, why would you say no?

[A]

Right.

[C]

There's no reason to say no. Now if you've got a low performer but with a good attitude, that's different. I would tell you he has to earn his way.

[B]

Yeah. So I'm looking and I have this like little cheat sheet here. This list of things you gave me to talk about. I know in terms of, you know, the future, the Kaizen model, this idea of putting more meat on the bone for profit and for creating career paths like career wages.

[C]

Yeah. We're looking for food service professionals. We're looking to create them.

[B]

Well, a couple things we haven't discussed yet is introducing automation in the back of house specifically. Also like deploying AI tech solutions to get more.

[C]

To get more. That's already happening. The, the pos. If you got toast, you're. You've got IQ in the upper right hand corner. Go, go hit the button and ask it questions. You'll be amazed at what it tells you.

[B]

I do want to talk about, you know, where we are with technology and automation and AI and robotics. I think that's going to be a big part of the future. Where are we going to see that first, do you think?

[C]

And you're going to see it in the kitchen. You already see it. Company called Hyper. Okay. Has an automated like kitchen set up where the, the line is, is being cooked.

[B]

Is that Hyper? Hyper, yeah.

[C]

Then there's the guys at Miso Robotics. The guys that are, that are doing that used to do the, the spice concept that was bought by Sweet Greens. That's a salad line, industrial, you know, treadmill, literally. I've seen robotic prep cooks, robot with AI installed.

[B]

How long before you see humanoids in the kitchen?

[C]

Less than five years.

[B]

I mean, I, I don't even know if it makes sense to have a humanoid in the kitchen. Because the reason why they want to have humanoids is so that you can put robots into human environments or you can put humans into robot environments, like to make it interchangeable. Right. That's the whole benefit of having a humanoid. But if you're truly trying to optimize for efficiency and throughput and like what like you, you look at like Flippy right now.

[C]

Those are armatures though, that they don't present any threat to the human.

[B]

Well, I would say, you know, with Flippy, they, it started off with the like frying essentially. Right.

[C]

In burgers. Yeah, yeah, yeah, yeah.

[B]

But I mean they, they don't. You're saying that they, they don't pose a threat to humans?

[C]

No, because they look like a piece of equipment,

[B]

but they're still threatening the job. Semens.

[C]

Yeah, they are, but they're still a human being that works and can co. Works with those pieces of equipment. A fully humanoid robotic prep kitchen doesn't need a human. That's a big difference. Yeah, it's different if I use a knife as a tool versus the tool doing the job for me.

[B]

Well, right. But when we talk about spice, for example, like that isn't a humanoid, that is just like machines.

[C]

That's a vending machine.

[B]

Right. So I think that's what kitchens of the future are going to look like.

[C]

Like that's possible. Depends on the application. The robotics that handle saute are different than the ones that hire fryers, that are different than the one that, how does the grandmonier, the, you know, the salad preparation. They're different, they're different machines right now.

[B]

But like what's the redundancy in that situation? Right. You, you're, you know, robots don't get sick, but they break down. A robot that breaks down, like, would you need to have a whole separate line on like standby?

[C]

Let me ask you a question. You drive around for a living or you did anyway. How many times you break down?

[B]

Not that often.

[C]

That's your answer? Yeah, not that often.

[B]

I mean it would create opportunity for mechanics and stuff like that. I suppose.

[C]

Yes, yes it would. So you're worried about the human, human factor.

[B]

And, but that's where the. No, no, that's where the humanoid. That's where the, the.

[C]

Yeah, but no, the argument there is what do I do with all those guys in the kitchen? Right. What do I do with those guys? We direct them toward the experience in the front. Yeah.

[B]

But not all the back of house. Guys want it to be consumer facing. They like the back because they don't like to deal with the human side.

[C]

Then like the horse buggy whip producers, you'll need a new job, just like all the white collar guys that are going to get replaced with AI eventually. What I do as an accountant, that'll be totally automated. I'm out of a job.

[B]

But I think what we're going to see is there's going to be robots that will be able to be deployed to go and fix the broken robot. That's where I think you'll see.

[C]

Yeah, you're starting to sound like Will Smith's iRobot. Remember that movie?

[B]

Well, I think that's where we're gonna see the humanoids. Like the mobile. Like, I don't know, it's. And it sounds crazy, but like that's when you combined the, the human structure, the human body with AI with machine learning, with like, with a hive mind. Right. So if one robot figures it out, they all figure it out exponentially.

[C]

Right.

[B]

You put that into a humanoid, right? And then that humanoid will be able to work 24, 7. It will have backup battery packs that will carry around with it and it will swap out its own battery and it will constantly be. Have a battery charging in the back burner.

[C]

Optimus already does that. Yeah, the Gen 3 model of V lines robot does that. He backs up, takes out his battery, puts it in a while he stands there, recharges and goes back to work. Yeah, yeah, it's scary. And what's really scary is you should look at the Chinese stuff. They're building military robots. They're scary. I, I don't even want to go down that street.

[B]

Did you hear about the drones that. We know they were using drones in Ireland?

[C]

Of course they were already, but they

[B]

just deployed their first ever boat drones into the harbor.

[C]

You know, we haven't, we have not seen anything yet.

[B]

Yeah, it's going to be.

[C]

Anyway, they did, they did an interview on, on YouTube with one of the AI godfathers, right. And they say, what's going to happen when I'm walking down the street and there are eight robots going this way and four going this way? And you know what his answer was? It won't even bother you. It'll be, that'll be the norm.

[B]

Well, part of what, yeah, part of what I was thinking is like if we're talking about like these different line items, like we had 25 cost of goods, 20 labor, 10 rent, 15 for overhead, right. When we start taking that 28 labor and shaving points off of that with robotics. Yeah, you could, I feel like what you're going to start seeing. Well, I mean again now this is where AI comes in. Where I was seeing a lot of partners who were. Their role was marketing and they were a partner in the business. I think because marketing is becoming so important to restaurants, it is an equity worthy position within the organization. But then I think of AI and what can AI do for marketing?

[C]

Well, think about, think about it from a financial viewpoint. If without automation and without the robotics, you're hitting a 28 to 30% labor number, right. And now you introduce the automation and now you've got a 20 or 25% labor number. Right. Well what are you going to do with that extra profit?

[B]

What would I do with that extra profit?

[C]

Yeah.

[B]

Invest it in assets or.

[C]

All right, that. No, that's a good answer. You're going to invest in assets. What's your number one asset?

[B]

People.

[C]

Bingo. The people that work there are should embrace the automation as long as they're not involved with its destruction.

[A]

Right.

[C]

Okay. So that means that people that are sitting there making 60 or $70,000 a year are not going to make 85.

[A]

Right.

[C]

So now you're making food service professionals because you're going to raise the bar on expectation. You're going to, you're going to look for people that know how to do extraordinary hospitality. That's the training that you need to do. Not chopping carrots.

[A]

Right.

[B]

So we talked about a lot. I'm just gonna go through the list of the things we have talked about and then I'll start to list off the things that you wanted to talk about. Talk about. So we covered, you know, setting a new standard of 20 plus EBITDA. We need to develop non operating revenue streams I. E. Memberships, cover charges, gifts, programs, retail. We need to adopt non tipping model with revenue share service inclusion in menu or sorry, sorry service inclusive in menu. Introduce automated automation to front of house and back of house to reduce headcount into enhanced customer turnover. I'm assuming that's robotics. We kind of just. Not even just robotics, but automation in general. We also have on this list build real time enterprise AI tech solutions to establish decision making data slash communication. I think we're kind of talk about, about AI a little renegotiating to a percent rent lease. I think that's something we can touch on. We haven't talked about yet. Prefix personalized menus. We haven't touched on that. In creating a proactive hospitality program. We haven't touched on that. We have not touched on customer personalization and experience programs. I E CRM profile databases. And we have not touched on formal online retaining development programs.

[C]

Right. Well, all of that as part of the model goes back to the conversation I had about trying to convince our clients to adapt the model. And they only do 20 to 25% of it now. You know from talking to me for a while that we kind of got disgusted and said, guess what, we're going to do it ourselves. So we're in the process of raising the money to do this. And one of the downfalls of dealing with PE is they have, they're demanding traction, which is not impossible, but it delays things. But we believe that once this model has been shown to the industry, there will be adoption like you've never seen. So they'll realize really quickly that the model that they've embraced for years is unsustainable and they're going to try something new or they will get eliminated. One of the two.

[B]

So that's something I want to talk about today.

[C]

Yeah. Okay.

[B]

Private equity problems.

[C]

Yeah, my favorite. Go ahead.

[B]

So recently had a conversation with a franchisee whose name will stay out of the conversation. He pointed out that one of his struggles in scaling his franchise operation in the Northeast is that CAVA has private equity behind it and it's just going up and just purchasing all the good real estate because the private equity just has buku bucks and just, just buys everything. Why is that bad?

[C]

Bad? That's bad as as much as PE

[B]

buying up residential areas, driving the cost of real estate.

[C]

Correct.

[A]

Right.

[C]

So now you're gonna, you're gonna create a condition that sort of self protected by the PE guys. They've got money to burn and believe me, they do burn it. They'll take losses forever. And you know, it won't affect their nav too much because they've got 16 other investments that counteract it. But. And they're in for the long term. Okay. So it depends on the PE firm and whether they're long term or short term. Most of them are short term. They want to buy, fix and sell. And again, they probably have a buyer already.

[A]

So is that.

[C]

So you're not going to win, you're not going to win that war.

[B]

Win the war of trying to get real estate over private equity?

[C]

Yeah. You're not going to win that war.

[B]

No, you're not. So before getting into any of the details of what's wrong, the problem with pe, can we just list the bullet points? So real estate.

[C]

Yeah, real estate's one.

[B]

What's another one?

[C]

Control. Control of what you may Be the owner of it now. But accepting PE money, all of a sudden you got a CEO.

[B]

Okay, what were the other issues with pe?

[C]

You have little or no say in the sale of the entity. Basically they write a check and they say, we own you.

[B]

This kind of came out in my conversation with the hunt brothers in Via 313 where they had something special. In Via 313, the pandemic hit. They got scared. They went to private equity and they lost a lot of their identity.

[C]

Of course they did.

[B]

Yeah. So I feel like these, these problems, these challenges of private equity are relative. You know, the, the real estate and the technology they're controlling. Literally like the, the, the playing fields and the technology. The, the, the, I guess the.

[C]

Yeah, they're the architects of tomorrow.

[B]

Right. As somebody who is an advocate for independent restaurant owners, this really scares me. Back to this idea of we need more owners. And, you know, how do we have more owners? I think, you know.

[C]

Well, here comes the good part. Guys like Danny Myers that have enlightened hospitality that started his own fund. Yeah, that's 500 million under management. Right. Branded hospitality that has access to $2 billion worth of private equity money. Savory fund, kitchen fund, the list goes on. I can tell you them all, they're operators with money. Now there are operators who became private equity guys. Now are they still tainted by the buy, fix and sell model? Some of them are. And some of them are not researching what their, their philosophy is, what their investment criteria is, is omnipotent here because if they're short term buy, fix and sell guys, I wouldn't recommend restaurant people doing that because it's a long term play. It takes time to build traction. It takes time and money and, and effort to put the teams together. It's not a short term play. Granted by the nature of the beast, it is an equity investment. I see a lot of guys doing it with debt. That's dangerous. That's really dangerous. It's like putting debt on an infant. Can't do that. Very dangerous. Leveraging restaurants to the health is like. There comes a line where you can't go over whether you like it or not because it will destroy you.

[B]

What do you think the angle is?

[C]

Actually in a declining sales environment like

[B]

we're experiencing now, what is the angle for private equity? Like what is their end game? What are they trying to do?

[C]

If you had a guess, buy, fix and sell, dude.

[B]

So they buy low.

[C]

They're gonna buy it for 2 million? Yeah, they're gonna buy it for 2 million. They're gonna beef it up so it, it does 5 million in sales and they'll sell it for 2 times sales.

[B]

Who are they selling to?

[C]

Another private equity firm. Just like the, just like you guys at Tao. Tao sold their interest in the private equity to Sphere. Right. And the Mahari guys bought it from Sphere.

[B]

What's the future of the industry? Make a prediction right now.

[C]

You become, you become a inventory item.

[B]

What is the future five years from now? Where's the restaurant industry?

[C]

I'm hoping that, that automation and AI gives more power back to the independent and you don't need private equity.

[B]

What happens when private equity owns automation and AI?

[C]

The funny part about AI is the guys like Albert are going to build product and, and his customers become his competitor.

[B]

Because when you're saying the guys like Albert, we know who we're talking about, but we're talking, we're talking about Albert Sanchez, recently guessing the show restaurateur, developed his own restaurant software, Hot Shift. So continue that train of thought with the context.

[C]

Right. There's other guys that are, that are doing that too. Is there's another guy that was on YouTube the other day, he's doing an application called Shift Works and he's approaching the scheduling and all of that the same way that Albert Sanchez does. If you change the business model, his software becomes redundant. It's not necessary. But that's not the issue. The issue is that slowly but surely AI is going to be developed where it's totally voice. And when it gets to that, all of those guys building little apps that do this and that, they'll be out of, they'll be out of a job. Nobody will buy their product because everybody can do it themselves.

[B]

Right. My concern with that is where is everybody building this product like they're building?

[C]

They're building it for the small independent. Your favorite section.

[B]

Well, they're building for the small independent. But I think part of my point is you have everybody who's going out and developing their own software is going to be using the same tool to do it. So we're not really eliminating, we're not buying power back from software companies. We're just making an even bigger, more powerful software company.

[C]

You're, you're making a big and powerful AI company. AI will rule the world.

[B]

Is AI not software?

[C]

No, it's, it's a, it's a big, long algorithm that I can't begin to

[B]

describe, but it's built on software. At its core. It is software.

[C]

It's built on software, but it's data that's why they need data centers the size of America.

[B]

Yeah.

[C]

All right. Because it's processing. Yeah. The process to do all of that is astronomical. All right, so you know and I know that it's like a drug dealer. He's going to give you AI for free. You're going to get addicted to it, and then the next thing you know, it's a hundred dollars a month. Yeah.

[B]

We've covered a lot today. Do you think everything came out that you wanted to come out relative to your vision of the new business model, the Kaizen model?

[C]

Yeah. I mean, you know, it's. It. Unless the. The industry sees it work. You know, I've talked to plenty of. Of guys that are operators. They. They really can't wait for me to do it because they want to see it, they want to touch it. They don't believe it until they. And they see someone else do it. Nobody wants to be first to the party. Right. Moneyball, first guy through the wall gets bloody. Yeah, right. The. The killer here is that they could adopt some of this stuff right away. Okay. And they do. And when they double their bottom line, it reminds me of a conversation I had with John George when he got to a certain EBITDA level. I said, oh, you only got five more to go. His reply to me was, we might not want to work that hard, but up. Okay, so Robert Simmons, the guy that was on the call this. This morning, he's old school. He doesn't want to scale. He doesn't want to do any of that. Right. That kind of operator has the option of not listening to any of this. Okay. Will he. Will he survive? I don't know.

[A]

Is.

[B]

So that's the thing, though. I think there's a fundamental issue or like this, the fact that some people just want to be restaurant operators because they love serving people. They love doing what they love. They love their craft, their art. You know, different people look at it differently. They want to get to two or three units. They want to have balance. They don't want to scale beyond that. They don't want to scale out of their market. Is that necessarily wrong? If you don't have that mindset, it's

[C]

not wrong at all. But at what? Profitability.

[B]

So, I mean, scaling doesn't necessarily mean more locations. It just means.

[C]

No, no, no, no.

[B]

Maximizing efficiency, profitability.

[C]

If you want to run three restaurants at 2%, 3%, 5% profit, I would tell you to sell them tomorrow. Don't waste your time.

[B]

Yeah.

[C]

Do something. Do something that gives you a return on your investment or a different business model that doesn't include tremendous amounts of drama. 90, 90 hours a week and a demand that you, it doesn't run with it unless you're there. That. That's crazy.

[B]

Yeah.

[C]

That, that's just. You're. That you're gonna burn out in less than five years.

[B]

Yeah. I do think there's a balance we can find. I don't think you should have to be at your restaurant for it to run. I think you should want to be at your restaurant because that's what you love. But you should have the option to go on vacation. You should have the option to watch your kid play.

[C]

You should have a life.

[B]

You should have a life. You know, but you, your, your, your restaurant should fill your cup. You know, if you're going to work

[C]

that hard in a business that's hard to run, then the return needs to be there.

[B]

Part of it is having the option to step away when you need it.

[C]

You know how many influences and coaches that you've talked and over the last five or ten years that tell you it's about systems?

[B]

Oh, 100%.

[C]

So that's what I'm saying. Yeah.

[B]

You gotta, you gotta be.

[C]

What?

[B]

Yeah, I'm not arguing that. I do think that there's a certain something to be said about just presence, the, the operator who wants to be present because it's what they love to do. They love their people. They're not looking for that mailbox money. They're not looking to have this asset that makes some money so they can just live on the beach. You know, it's nice to get away and to see and travel and experience cultures. Like to give yourself that option. But I do think I'd like to see a world where more people want to be mentors, where more people want to be engaged with their communities.

[C]

The truest statement ever heard was do something you love. You never work a day in your life.

[B]

Yeah. Anything that didn't come out of today's conversation that you think would be fun to come out? Like, in terms of looking to the future, I want.

[C]

I, I would ask the industry not to be so scared of technology.

[B]

Yeah, I'm not afraid of technology. I do worry about certain laws like Ziff's law and, you know, being in a global and national marketplace and.

[C]

Right.

[B]

The rich getting richer and the poor getting poorer. That's what scares me. Relative to technology. Technology.

[C]

Well, you base the base the. In independent. Remember all of my conversations about small independent, under five locations increasing their profitability? So that increases your middle class because not only do you going to increase your own return on investment, but all your workers as well.

[B]

Yeah.

[C]

And you're going to create another era of entrepreneur.

[B]

If the folks. Actually before I ask this question, is there anybody out there that you respect and admire that's doing it right that should be made an example of? Who's that for you?

[C]

The two people that come to mind is one's, one's my partner and chef, culinary consultant. His name is Craig Shelton. He's a Princeton economics professor. But he ran the Ryland Inn for years and is a three star Michelin Chateau reload shot. He's. He's an anomaly like I am. He has. You'll need a five hour conversation with him because he. He talks more than I do. And the other person would be Rudy Mick, because Rudy Mick's got. Both of those guys are now my partners in crime in the application we're trying to build. And both of those guys are invaluable to me. Rudy's the authority on culture. I haven't met anybody that understands culture better than Rudy, man.

[B]

I think he's got like four degrees in organization psychology.

[C]

Yeah. Well, yes, he does. And he was an operator and it's a pleasure to work with. The first couple of months that we worked together, he was apprehensive. He was worried that my financial background wasn't going to be a match. He quickly found out that it was and you know, it's because I'm adapted.

[B]

But I gotta say. Sorry, did I cut you short?

[C]

Nah, you're good. Go ahead.

[B]

I'm kind of stoked that I'm in this privileged position to bring the Rudy mix and the Bob Sloops together. I don't know if you two would know each other if I didn't introduce you both.

[C]

We would have ran into each other eventually, but you just, you just accelerated the process. And that's why I stay loyal to restaurant Unstoppable for the length I have. Because I think your ambition and what you're trying to build is absolutely necessary.

[B]

What is absolutely necessary?

[C]

That it exists. That there's a forum for the operators to come and get expert advice without it having to be a contract.

[B]

Right. Without having it to be political, without no politics.

[C]

No, I mean, I'm agnostic, man. I'm. I refuse to be married to any one platform. Okay. I could tell you 15 different ways to do something, but I'm going to leave it up to you to which one you're going to do. Yeah, I can give you my recommendation. Okay. But I'm not going to tell you. You have to do it that way.

[A]

Right.

[B]

And I think there's a lot of truths out there. Two truths can be true at once. You got to find the truth that makes sense for you. And that's really what the, the network is about. It's about creating space to share perspective. And you have to listen to all those perspectives. Only you can decide what makes sense for you. But you gotta, you gotta go wade through it. And I think a lot of people want to hit the, the easy button. They find something that they like online and they do just exactly that person says, here is the pathway to success. That is one path. And you, yeah, you gotta hear what different people have done.

[C]

You gotta hear, I used to complain that there are no standards in the restaurant industry. There are benchmarks.

[B]

Yeah.

[C]

But there are no standards.

[B]

That's a big part of what steers. The questions I ask is like, hey, I'm talking to these restaurateurs and I'm asking them to lift up their skirt and show us everybody, you know, show everybody what's like under the hood, you know.

[C]

Right.

[B]

And that's vulnerable. It gets, it's hard for people to get vulnerable. But I think the reason I do that is because we need to share those benchmarks because we don't know how we're doing compared to others unless we start sharing those, those numbers.

[C]

And that's what the networks are, unfortunately, data is and margins and percentages are our KPIs. And I, I noticed over the course of five years, you, you actually start asking the guys what their margins are. And I, I find it enlightening because they could be happy making 5 or 6 or 8 or 10. They might not want to work that hard. Bob, you know, I've learned that that's you your prerogative.

[B]

Well, you know, you are in the network. Rudy. Mick is in the network. We are in the process of, of growing the network. I'm actually partnering with Albert Sanchez, the gentleman we talked about today, to develop our own app for the network. There's visions to create our own marketplace where we put all of the word of mouth, referred software services vendors, manufacturers in a marketplace. And it's merit based. You get invited to be a part of this if you've been referred to us organically. And that's what I want to build. And I'll be honest, it's been hard to build that because I put all my eggs into a sponsorship bagnet bag or basket.

[C]

Yeah, I get it. And I think. I think what you're doing with. With Albert is. Is the right move for you.

[B]

So Bob is always there. If you want to engage Bob, he's literally their most than anybody else. That. Your consistency in showing up for the network has been amazing. You've been supporting what I've been trying to do for a long time. I'm lucky to have you in my community. If you want to have conversation like we had today, every Thursday at 11am Head over to restaurantstoppable.com live. We are. We need the help. I need the help to build this thing because, you know, it's.

[C]

What you're building is invaluable. And thank you. I'm an advocate for what you're doing. I think. I think the industry desperately needs it.

[B]

And if you want to work directly with Bob, how do we find you?

[C]

It's our [e-mail] or if you really want to get me Right away, it's 917-282-0124. You could hear the thing going off in the background. I'm notorious for answering phones.

[B]

Yeah.

[C]

And text messages.

[B]

Well, it's been a lot of fun, man. Thank you so much. This is where I say there is no questioning my dude. You are unstoppable. Cheers.

[C]

You ain't seen nothing yet.