#383 - Hunter Pond - Founder @ Vandelay Hospitality Group - The Hottest Restaurateur in America

Summary

POWERS Podcast #383 – Hunter Pond (Vandelay Hospitality Group): The Hottest Restaurateur in America

Host: Chris Powers
Guest: Hunter Pond – Founder, Vandelay Hospitality Group
Date: April 15, 2025

---

Brief Overview

In this episode, Chris Powers welcomes restaurateur Hunter Pond, founder of Vandelay Hospitality Group (East Hampton Sandwich Co., Hudson House, and more), for a candid, in-depth conversation about the realities of building a standout restaurant business in America. Pond details his unorthodox journey from law school dropout to founder, shares hard-won lessons on scaling multiple concepts, and offers raw, practical insights on leadership, operations, managing creativity, the science of site selection, and the relentless grind behind hospitality at scale. The discussion is peppered with real numbers, honest failures, notable wins, and the irreplaceable value of both art and science in the restaurant business.

---

Key Discussion Points & Insights

1. From Law School Dropout to Restaurateur

[03:20–07:01]

• Pond quit law school impulsively after realizing he was passionate about food—despite family and girlfriend skepticism.
  • Quote: “In the middle of my tort final, I just stopped taking the test. No shit, no bullshit. For real. Just said, ‘f*** this,’ picked up, turned in the test, went to the registrar’s office, dropped out...” – Hunter Pond [05:22]
• Faced disapproval and practical challenges: moved home, lost his girlfriend, worked a dishwashing job at Eno's Pizza, Dallas, to learn the ropes.

2. Building East Hampton Sandwich Co.: From Idea to Execution

[09:03–22:20]

• Saw a market gap between casual sandwich chains and high-end eateries like R+D Kitchen; conceptualized a premium fast-casual sandwich shop.
• Started at the very bottom: “Day shift, washing dishes and salad station... at night, I'd work on my business plan.” [09:20]
• Importance of learning back-of-house dynamics, especially with non-English-speaking staff.
  • Quote: “They’re the hardest working people in the business by a mile... learning how to communicate properly and their value structure I think helped.” – Hunter Pond [11:54]
• Chose brand name for aspirational effect: “Sounded waspy as hell. That's truly how I came up with it.” [12:56]
• Faked professionalism initially to raise funds; “fake it till you make it” with branding [15:32–16:09]; bootstrapped on ~$300k.
• Early real estate lesson: had to give up 30% of the business to secure a lease guarantee [16:55–19:17].

3. Menu Development & The Art/Science of Restaurants

[23:10–28:14, 29:46–34:33]

• Pond personally conceptualizes 95% of the menus—emphasizing creativity but admits to logistical naiveté at the outset.
  • Quote: “Ignorance is bliss when you’re trying to be creative sometimes. And then I figured out what food cost was.” [20:13]
• Hard lesson: too many SKUs (ingredients/dishes) kill profit—East Hampton peaked at 140, optimal is less than half that.
  • Raising Cane’s cited as a model: “Probably the lowest SKU fast casual I can think of... less than 30 [SKUs].” [28:30]
• Restaurant design: seat counts paramount; “If you don’t have the seats to maximize your space, you’re leaving money on the table.” [31:02]
• The model shifted as delivery apps took over—originally 70% dine-in, flipped to 70% delivery/takeout by sale time [34:31].

4. Navigating Third-Party Delivery & Changing Customer Behavior

[35:06–36:57]

• Delivery platforms (DoorDash, Uber Eats) slashed margins, but necessary evil—eventually a net industry positive for brand exposure.
  • Quote: “Still made some money. Yeah. Right. They don’t take it all. I think it’s a necessary evil.” [35:28]
• Delivery quality control is difficult; public perception has shifted so that drivers/third parties, not restaurants, are largely blamed for cold or delayed food [36:43].

5. Operations: Scaling, Systems, and Turnover

[42:43–48:04]

• Scaling requires focusing on both “art” (brand, experience) and “science” (operations, systems).
• Major vulnerabilities are lack of inventory/accounting controls: theft is pervasive unless actively prevented.
  • Quote: “Leakage and theft is just a major problem… If you don’t have the proper systems in place, you’re just a sinking chance.” [46:00]
• Weekly inventory checks are best practice; most places do monthly.
• Pooling tips and moving to cashless helps reduce theft and accounting risk [48:59].

6. The Science of Real Estate & Expansion

[55:00–58:43, 67:15–71:11]

• Real estate is the single most critical determinant of success.
  • Quote: “The ones that haven’t worked have been either we misjudged the parking, we misjudged… traffic,… egress, ingress.” [67:32]
• Expansion pace and new concepts are driven heavily by available real estate—especially after COVID-19 created a land grab. This aggressive expansion almost led to burnout/bankruptcy.
• Presently, the group is selective, focusing on acquiring existing brands rather than founding from scratch.

7. The Art of Acquisition & Scaling

[73:45–76:23]

• Looking to buy mid-sized groups (3–10+ locations) whose founders may not want to make further scaling grind.
  • Quote: “1 to 5 is hard. 5 to 10 is really hard. 10 to 20 is effing impossible. I always compare it to [Shawshank Redemption]... that’s what it felt like to finally get to 20. It was so hard.” [74:33]

8. Private Equity, Leadership, and Learning

[61:07–65:43]

• Brought on private equity (CIC) after being courted by major players; experience was invaluable for learning financial discipline, analytics, and accountability.
  • Quote: “I was probably 90% art, 10% science. And [CIC] really helped educate me... I probably got all the way up to the 50, but then I’ve offloaded so much on Rick that I’ve gotten to be able to get back on the artistic side…” [61:53]
• Private equity board discipline was a “badge of honor” and forced Pond to mature as a business leader.

9. People, Hiring, and Organizational Culture

[66:28–66:53]

• Use of personality tests (Culture Index) and culture-fit assessments for hiring.
  • “It is remarkable how well it works for sure.” [66:48]
• High turnover most often comes from poor leadership, followed by over-complexity in operations and menu.

10. Admiration and Industry North Stars

[78:31–80:34]

• Hillstone is Pond’s self-described north star: “Consistency. Their dedication to maintaining their spaces, their eye for talent, their obsession with aesthetics, their training systems.” [78:47]
• Acknowledges it’s “impossible” to truly replicate them, but they serve as inspiration for operator excellence.

---

Memorable Moments & Quotes

• On Navigating Growth:
  • “1 to 5 is hard. 5 to 10 is really hard. 10 to 20 is effing impossible. That… almost killed me.” – Pond [74:33]
• On Real Estate:
  • “Real estate is such an important element of this business... looking back on the failures I’ve made… the ones that haven’t worked have been either we misjudged the parking… traffic… decisions like that.” [67:32]
• On Food vs. Service:
  • “Incredible food, mediocre service [survives longer]... Real estate, food, service—in that order.” – Pond [37:13]
• On the Artistic Edge:
  • “I think the approach is just kind of unique… I think gave me just kind of a unique lens to look at menu curation through and dish curation, honestly.” [23:25]
• On Menu Design:
  • “You maximize profitability by cross-utilizing ingredients. Minimize your SKUs.” [27:07]
• On Hillstone:
  • “They are my North Star. You have the exact same experience at all their restaurants across the country. That is so hard to do. In my opinion, they’re the Michael Jordan.” [78:50]

---

Timestamps for Major Segments

• Origin Story and Law School Exit: 03:20–07:01
• Early Restaurant Days & Menu Creation: 09:03–22:20
• Lessons in Operations and Menu Complexity: 23:10–28:14
• Site Selection and Real Estate: 29:46–34:33
• Delivery Apps’ Impact: 34:31–36:57
• Opening Day, Scaling Systems, and Turnover: 42:43–48:04
• Growth through Acquisition: 73:45–76:23
• Private Equity Lessons: 61:07–65:43
• Organizational Culture and Hiring: 66:28–66:53
• Admiration for Hillstone: 78:31–80:34

---

Tone & Style

The conversation is direct, energetic, and brutally honest—Hunter Pond holds nothing back about failures, grind, and luck, with plenty of humility and humor. Chris Powers plays both curious insider and challenger, pushing deeper on crucial business trades and personal lessons. The tone is gritty but approachable, with practical wisdom for operators, leaders, and anyone fascinated by what it really takes to build and scale a standout restaurant group in modern America.

---

For Listeners

This episode is packed with hard-earned, timeless business insights—essential for anyone interested in hospitality, entrepreneurship, or high-performance leadership. Pond’s open-book style and willingness to discuss both art and science make for a compelling, educational listen for aspiring founders, operators, and investors alike.

Transcript

[A]

You can grind. And I've got some friends in Dallas who own between one and five restaurants and they run a tight operation. It's them, they might have like an assistant or, you know, one or two people work, working for them. And you can make a lot of money doing that. You cannot run that type of operation without proper infrastructure to get to 10 locations. If they're, if they're busy, restaurants can't do it. Um, I've experienced this. 1 to 5 is hard. 5 to 10 is really hard. 10 to 20 is effing impossible. That, and I mentioned this earlier, it almost killed me, like, and my partners, like, we grinded. I always say, I always compare it to. You've seen Shawshank Redemption. Yeah, you know, and Andy Dufresne is crawling through that human waste and comes out at the end, does that. Like that's what it felt like to finally get to the scale of 20. It was so hard and I don't think a lot of people are cut out for it.

[B]

Y' all have heard me talk about this company, Better Pitch for a long time. FORT has been using them to build decks over the last six months. And I have to say I thought we were good at building decks until we started working with Better Pitch. They have an awesome service, highly recommend using them. If you reach out to them and mention the FORT podcast, they will work with you risk free on as many iterations as you would like. So go Visit them at betterpitch.com that's B-E-T-T-E-R-P-I-T C H.com to schedule your call today. Okay. If you are a real estate company or an operator of a business with multiple entities or bank accounts, listen to this. So at fort we just solved one of our biggest problems by hiring a company called Vesto. And that problem is we have over 20 different banks we work with. And so that is over 20 different logins. None of them share information with each other. And it takes our team hundreds of hours of every month to log in and not just see our account balances, but all the transactions associated with those balances. Now insert Vesto. Vesto is a one stop shop where you, you can log all of your bank accounts onto one screen and see everything in one visual. Now if you are a company like ours where you have multiple people that have access to each bank, that's giving everybody access to one screen and it makes it one easy to see all your cash balances and saves the time of having to literally log in to 20 different bank accounts. So I strongly recommend you go to vesto.com fort and and when you're there, remember to tell them that fort sent you. And you'll get a call with my friend and founder of the company, Ben, and they'll work with you directly. Hunter, welcome to the show.

[A]

So glad to be here.

[B]

I am so glad you're here.

[A]

You know, I have a voice for radio.

[B]

You do? You have a voice for radio and an eye for good restaurants.

[A]

Try.

[B]

I was easy number one investor. Which was how long ago? 10 years ago.

[A]

12.

[B]

12 years ago.

[A]

That's right. You were.

[B]

So we'll start there.

[A]

Yeah.

[B]

You were on track to be a lawyer.

[A]

Fact.

[B]

And then you're like, I'm going to make expensive sandwiches in Dallas, Texas.

[A]

Fact.

[B]

How did you go from I'm going to be a lawyer to I'm going to make premium sandwiches?

[A]

Well, you've never been to law school. It sucks pretty bad. And, you know. So you graduated 08 or 09?

[B]

I graduated high school early, so I'm 38. I should be oat class of 09, but because I graduated high school early, graduate 08 class. We're the same age.

[A]

Yeah. Yeah. So as you know, economy was terrible getting out when we did so. And my dad's in the used car business, so there was no going and working for dad.

[C]

Yeah.

[A]

I had average grades at tech, and so I thought, okay, let's go back to school. Let's stall out getting into the real world. And everyone always told me growing up that they thought I would be a good lawyer because I'm very argumentative, opinionated, loudmouth sometimes, et cetera, and so took the lsat, did pretty well, but I had to pay for law school. So when I applied to the schools I went to, the one that gave me the most financial aid, which was St. Mary's San Antonio. Living in San Antonio compounded with law school was an interesting experience for me. I had a great roommate, but it was just really tough. And so I'd be locked in the law library daydreaming, what I really wanted to do. And just kind of through that process, I realized restaurants, like, it's passionate about food. And then my college roommate's dad was the chairman CEO of Brinker international at the time. So I had a bit of a good view into big business hospitality. The pretty unique view.

[C]

Yeah.

[A]

And then literally in the middle of my tort final, I think I had three finals in one day. And then middle of tortoise, I just stopped taking the test. No shit, no bullshit. For real. Just said, f this picked up, turned in the test, went to the registrar's office, dropped out, went to U Haul, rented a U Haul. I mean, I only had my bedroom full of stuff, packed my dog, my stuff. And it was a bad move, too. I think I even texted my roommate, like, before he got home from work, like, dude, I'm out. I was so done with the whole thing and drove back to Dallas. And I remember I did all of that before telling my parents, before telling my girlfriend. And on the way home, U Haul, packed, driving, told my parents, I'm coming home. I want to get in the restaurant business. They said, okay, well, you're an idiot and what a giant waste of time. Good thing you're paying for it. And we didn't. And you better find a place to live and you better go get a job working in a restaurant. Lauren, now wife, broke up with me over the phone on the way back. And so, I mean, it was. It was a wild drive home, get back, and then started looking for jobs in restaurants.

[B]

Wait, so when you woke up that morning, you didn't know you were dropping out of law school?

[A]

I mean, I had a gut feeling that it was coming to get the hell out.

[B]

But not like mid test that day.

[A]

No, it was as impulsive as it gets.

[B]

Okay.

[A]

Yeah.

[B]

What about the restaurant business? Did you like? Because most people. Is it fair to say, like, you probably went to a lot of people and they're like, don't get into the restaurant business. Or we're mostly everybody. That for some reason the restaurant.

[A]

It's hard.

[B]

You either do really well in that business or it's a hard business.

[A]

Well, I mean, it's a hard business even if you do well.

[B]

Correct.

[A]

Right.

[B]

But everybody told you. No. So what about it? Did you actually want to get into, like, the ide. The designing all the different concepts and menus and how you made people feel, or were you just like, this could be super profitable. It seems like a good thing. I just want to do that.

[A]

It was kind of a balance of the two. Being in such a hellhole of law.

[B]

School, law library, that anything sounds good.

[A]

Like anything sounds better than that. I don't care how hard it is. I don't care what the failure rate is. Like, anything's better than this. And if you're going to try something so difficult, try it when you're young.

[C]

Yeah.

[A]

So there's that. And then coupled with just being passionate about food. So, like, my dad is awesome. He's one of the Most popular people you'll ever meet. But growing up, he hated taking us out to dinner. So he was like a traveling salesman in his 20s and early 30s, I believe my math might be wrong, but at least for 10 years. And he had to always take clients out to dinner. So later in life, when he had his own company, mom cooked every meal, birthdays, Christmases, whatever. So I think that was kind. There was some, like, deep rooted love for dining out because I never got. I did it very rarely growing up.

[C]

Yeah.

[A]

So I think that was kind of the, the subliminal win behind the sales, pushing me towards it, I think.

[B]

Got it.

[A]

Yeah.

[B]

Okay. So you get back, you get to Dallas. Do you go take a job in the restaurant industry?

[A]

Yeah. So I move in with two buddies and I get a job at Eno's pizza.

[B]

This was 2000 and what, 12 maybe?

[A]

No, this would have been 2011. Yeah.

[C]

Okay.

[A]

Get a job. Day shift, washing dishes and salad station. After two months at Eno's Pizza Bishop Arts District, meanwhile. And then at night, I'd work on my business plan. The. The idea came quick. It was because I would. My mom would take me to lunch occasionally at R D Kitchen.

[C]

Okay.

[A]

Hillstone Group Restaurant. And I would always get these big, beautiful sandwiches. I just thought there should be a place where you can order at the counter and get this quality of a sandwich. Well, that's pretty much impossible, but I did my best trying to execute on that.

[C]

Yeah.

[A]

And that was the, the original thesis behind East Hampton. I mean, it was filling the gap between Jersey Mike's, Jimmy John's, Pot Bellies, and going to R D hosted by your mother because you can't afford the, you know, $22 sandwich. There was nothing really in between. There was Mendocino Farms in California, and then East Hampton really kind of were the first people attempting to do it at a larger scale. And then, you know, I was 24 years old trying to compete in that realm. It was, it was interesting. Yeah.

[B]

Okay. Buddy of mine owns a restaurant in Alabama. And the last few weeks, as they've been ramping up this new one, he's just to, like, fill roles. He's been working the dishes and he's like, it's been the greatest thing. He's owned restaurants for 20 years, but he goes, you learn a lot doing the dishes. You see what people are eating and not eating, the, the amount of portions that are left behind. Like, you just, like every dish comes in, you can just kind of see what people liked and didn't like. And he's like, I've learned more doing the dishes than I have owning. So my question for you is, are there things that you learned doing the job you did there that gave you a lens into the restaurant industry that like, looking back, you're like, I'm glad I did those two jobs. I wouldn't have known X. Or was it just a shitty job that paid the bills?

[A]

Well, it didn't really pay the bills. I mean, it was like 10 bucks an hour. I think there, there was a guy named Matt Spillers, man, I have not thought of his name in a long time who gave me the job because he was friends with or the landlord. Do you know Scott Lake? Jim Lake?

[B]

Yeah, I know Scott Lake with Davidson Bogle.

[A]

Yeah.

[B]

Yeah.

[A]

Scott Lake grew up with him. His dad, Jim Lake, owned the building. Therefore that's how I got the job. Washing dishes.

[C]

Yeah.

[A]

And I mean, Yeah, I paid 10 bucks an hour, but so when I was back there, I guess I was only back there for four months.

[C]

Yeah.

[A]

Or maybe five. As much as I. As long as I needed to justify. On the business plan of which you received way back in the day. Experienced restaurant tour. But looking back on it, really, I would say how to converse with backhouse employees because that is still to this day something that is an ever evolving education. I mean, they're the hardest working people in the business by a mile. And I don't speak Spanish, which predominantly Spanish speaking culture in the back of house. So I guess learning how to communicate properly with them and their value structure I think helped when opening East Hampton.

[B]

Okay, so you're going home at night, you're like, there's a gap in the market. I want to sell premium sandwiches. 1. How did you come up with the name East Hampton? It just sounded like.

[A]

Sounded waspy as hell. That's truly how I came up with it. It's, you know, I thought that if I tied the name to a geographic location that dictated a fluency, people's expectations would be elevated. And if you can meet those expectations, then you'd have yourself a loyal customer.

[C]

Yep.

[A]

That's what it boiled down to.

[C]

Yep.

[A]

And you know, wrote down Southampton, West Hampton, North Hampton, East, Southwest Hampton, North. Exactly. And luckily I picked East Hampton because there's a few of the names I wrote down that didn't even exist. I still have that original notebook. And I looked back at my business partner and I were looking back on the other day and was like, man, what if you tried to, you know, pull off some dumbass Northampton sandwich company? It would have been real embarrassing, but that was pretty much it.

[B]

All right, so the business plan's done. What was the business plan?

[A]

I looked for it. I wanted to bring it.

[B]

Really?

[A]

Yeah. But I couldn't find it.

[B]

Like, I actually want to go through, like, the day by day of, like, what did the days look like from the day that you decided you're going to do it? You've never opened up a restaurant, you've never built a menu, you've never sourced food, you've never leased us. Like, you've never done anything. And to be clear, you'd only worked at a restaurant for four months and grew up not being able to go to restaurants.

[A]

Correct.

[B]

So we'll. We'll title this part of the conversation. Like, what did you do right and what did you do wrong? But, like, what did those days look like? So the day you gave yourself the green light, like, I'm doing this. I got to raise money, Come up. Come up with this whole thing and make it happen. What did you do?

[A]

I called one of my lifelong best friends, Will Gruy, and explained to him what I wanted to do, and he gave me 20 grand. And I had no money. Like, zero. And not only does he deserve that shout out, but it is an integral part of the story because, like, without that, I wouldn't have been able to take that next step. I remember my parents were real pissed at me, and they ended up actually participating, and I think they invested 50,000 in the first one.

[C]

Okay.

[A]

But that was down. I had. I think I at least had 100. 150 already raised. But. So, yeah, old Will grew, gave me 20 grand.

[C]

Yeah.

[A]

And that allowed me to pay for a branding firm because in order to take, like, to raise even more money, I needed to look super professional. Y. I mean, it's a kind of a classic fake it till you make it.

[C]

Yeah.

[A]

Story. So there is a group called Switch out of Dallas. I. I think I paid, you know, I. I stretched that 20 grand so far, got them to do a professional logo, and then I just out of a pen and paper, wrote the menu, handed it to them. They designed a menu, and then kind of the original business plan was like a financial model that was such bullshit. I mean, not even close to what. How it ended up operating, but it was a good guess, you know, you know, how to start a restaurant for dummies, you know, basically, you know, that kind of stuff.

[C]

Yeah.

[A]

And then put the business plan together with that 20 grand, which then I felt confident enough in sending out to my parents and to you and other friends that we grew up with and friends, parents and I think the total cost of the first one was around 300,000 bucks. Maybe 350. Yeah. I mean, talk about bootstrap. Yeah. Old Chinese restaurant in Snyder Plaza.

[C]

Yep.

[A]

Petrified rats in the walls when we were demoing it. It was disgusting.

[B]

And that was, I mean Snyder Plaza was obviously a thing at that time, but to get into Snyder Plaza today as like a brand new restaurant that has never done anything in the business would be damn near impossible, wouldn't it?

[A]

Yeah, it would. It would not be possible.

[B]

So it was like, that's. We're going to put that in like good timing bucket. Like it was a good time in the market to be at an affluent.

[A]

There are mo. I'm sure we'll get to different times along the. Along the way where timing was everything. Getting started in 2012, fresh out of a terrible recession. Downtime in the market. Texas had not exploded yet really. The, the culinary scene had been dormant outside Austin. Had not been. But outside of Austin, the culinary scene had been really dormant in this state for, for over a decade. And so yeah, the timing was impeccable. But even then I couldn't get the lease in Snyder Plaza. My very first. This is an interesting anecdote that we can come back to throughout the conversation. But I gave away 30% of the entire business day one because I didn't have any money to guarantee a lease. And you'd like that as a real estate guy. Yeah. Take notes of that one. Yeah. So I had to go to one of my investors, a kid I grew up going to church with. He was blessed and came from a multi family. And I just said, hey, I didn't even know what a lease guarantee was. I mean that's next level ignorance. Trying to sign a lease and not knowing a lease guarantee. And so actually it boiled down to East Hampton and Capriotti sandwich shop out of the Northeast. I remember this like it was yesterday. And Bob Teeter, who's. Who owns the piece of property in Snyder Plaza said, okay, we're going to choose between the two of you. We need to see your financials. What financials? I have like two grand of my bank account. No trust fund. Sorry, what? And I remember asking my dad, I was like, hey dad, you know, can you all guarantee this lease for me?

[B]

Like it was nothing.

[A]

Like, yeah. I mean I had no frame of reference.

[C]

Yeah.

[A]

And he was like, buddy, no, they want to, they want to. I think they wanted a five year guarantee.

[C]

Yeah.

[A]

And yeah, he's I mean, I would tell my son no, too. And he's like, but no. And so I went to this investor of mine knew, and I said, hey, will you guarantee the lease for me? I know you got the cash. He said, I'll do an exchange for 30% of the class A shares. I had no choice. And so I did it.

[B]

It's easy to give 30% of zero away.

[A]

Yeah.

[B]

All right. Did you even look at anywhere else or was Snider Plaza always the. The one.

[A]

We looked around or. I looked around, but I mean, it was number one choice by far. Yeah. I mean, it's stones. Stone's throw from where I grew up.

[B]

You said you wrote the menu. When you were writing the menu, were you thinking, like, at that point, like, what is this sandwich going to cost? Like, what's my margin going to be on a lobster roll or a turkey avocado?

[A]

Not really. When I. When I wrote the menu, it was more not from a chef's perspective, but just from, like, a customer's perspective.

[C]

Yeah.

[A]

You know, if I wanted to come to the still this day, love sandwiches. If I wanted to go to this place three times a week, you know, I'm not going to get turkey every. Every single time. Just wrote the menu from my perspective on what would bring me back over and over again.

[C]

Yeah.

[A]

And that was not some sort of, you know, contrived approach. It was just straight from the gut, I guess ignorance is bliss when you're trying to be creative sometimes. And then I figured out what food cost was.

[B]

Okay, well, wait, so then how did you source your vendor that was going to sell you food? Because I'm imagining, like, same thing. They're like, yeah, you're gonna need to put some money down like you've never bought.

[A]

It gets even better. Okay, let's. So once I write the menu, I get the business plan done. I think I've raised almost all of the money. And then so I hit Craigslist. I need a chef, and I didn't know where to find a chef. So Craigslist did a job ad and this guy named Ozzy Samano answered the. I mean, I think I interviewed, like, four people. All of them were sketchy. I mean, you can imagine chefs off of Craigslist and meeting me at Starbucks, 24 years old. You know, I mean, I'm sure they thought I was big of a joke, as, you know, I thought some of you know them.

[C]

Yeah.

[A]

And this one guy, Ozzy, had been a chef at Bob's Steak and Chop House up In plano for a few years, and Bob's Dallas institution. It was as legit as. It was the closest thing to legit that I could get.

[C]

Yep.

[A]

So I hired him, and it was pretty much that simple. I was like, all right, so what do we do now? And he's looking at me like, you don't know? No, we gotta open. We gotta open this thing. So, like, he had all the relationships with the vendors or he knew exactly who to call. And so him and I just got in the lab and started getting after it.

[B]

Is the lab like a metaphorical lab, or is it like you went to some place where there's food production, and they put you in a room with. It's like a lab.

[A]

There was no. And then the next part is, after ozzy and I had been working for a while, I hired a consultant named Roger Kaplan. Man, this is memory lane.

[C]

Whoa.

[B]

Let's go, baby. We're titled in this thing memory.

[A]

Yeah. Roger Kaplan. He let us use his test kitchen at his house because he was a chef consultant. And that's where we built the menu and just got in there. And, I mean, I didn't know what I was doing. I let them do most of the stuff, but I was paying the bills, so I would just tweak it. And it's honestly how I still do the menus today. So I write every menu we do. I conceptualize, I would say, 95% of the dishes at all the restaurants across our whole portfolio. That's the operative word. I conceptualize them, and then our chef teams will just, like, back then, do the heavy lifting, put the recipes together, and then I'll just tweak. So, like, I'm a constant flavor tweaker.

[C]

Yeah.

[A]

Until it tastes the way I want it and looks the way I. How I want it to look and go from there.

[B]

So the menus of all the concepts you own pass the, like, hunter likes to eat it test. That's, like, the ultimate test.

[A]

For sure.

[B]

It's not.

[C]

Okay.

[B]

So we would say, like, you've got a good flavor profile, obviously. Like, you know, what things.

[A]

I think so.

[C]

Yeah.

[A]

Yeah. I think I just. I think the approach is just kind of unique. You know, most restaurateurs or former chefs or former general managers. Right.

[C]

Yeah.

[A]

Where they've cut their teeth in the industry for a while. And me not having done that, I think gave me just kind of a unique lens to look at menu curation through and dish curation. Honestly.

[B]

If you were, like, giving people advice on how to build a menu, no matter what genre of food. Like what are the to do's and not to do's? Like when I say Cheesecake Factory, does that menu like freak you out or are you like. No, I get that. I Understand why it's 9 pages and spans the whole globe of types of food. Or would you say like, that's a disaster, it should all fit on one page and like, how do you build a menu? Because it can't just be like what Hunter likes to eat, because that still might not be the right thing.

[A]

Yeah. So as far as Cheesecake Factory goes, I mean, they're a beast and they're, you know, a multi billion dollar company. So I have mad respect for them. I would never suggest opening up a new restaurant as a new restaurateur. With the nine page menu. Yeah, that's silly.

[B]

Why? Because you have to hold too much food.

[A]

Yeah. Way too many skus. Weight dependency on labor. I mean, nine page menu, that'd be impossible to hit optimal labor numbers. From a business perspective, it's just not smart. You won't make any money.

[C]

Yeah.

[A]

For us, I like to have small menus. Okay. Because what?

[B]

Small.

[A]

One page.

[B]

Okay, one page. Just as you're saying.

[A]

Yeah. Food on the front, drinks on the back.

[C]

Okay.

[A]

That's what I like.

[C]

Okay.

[A]

Keeps operations simple. You know, we're in the people business, obviously, and so turnover can make or break a restaurant success. The more simple you can keep your operations, the less effect turnover, negative effect turnover can have on you. And so I, especially since I started, you know, with no experience, I had to minimize my risk at all times. And I went through, I mean, back to Ozzy, you know, the, the day we opened East Hampton, he got a car crash. I don't know if I'm allowed to. Well, it doesn't matter. I don't care. He got in a car. He got in a DWI car crash on the way to work. Day one of opening East Hampton, I didn't even have the chef the first day we opened. Me and Will, the first, my first business partner were delivering food and we look like you. We are in dress pants and button down shirts, you know, delivering plates of sandwiches with line wrapped around the block. It was wild time. But yeah, the turnover is really, if you can minimize turnover, then you have a chance of making good money in the business.

[B]

Okay, we're going to talk about turnover in a second. I want to go real quick back to the menu. So small menu, do you want, if you were to say like at the end of the week, do you want there to have been equal sales amongst everything on the menu, or is it always going to be the 80, 20 rule where like 80% of the menus coming from the lobster roll that everybody loves? Or do you want to build a menu where there's not a, like a clear loser on there that nobody ever orders? Like, you want everybody to kind of be ordering everything.

[A]

Yeah. I mean, yeah. Of course, ideally, you want there to be a balanced product mix.

[B]

Okay.

[A]

That's because you can cross utilize ingredients there. I can nerd out on you and explain why. I mean, you. You maximize profitability by cross utilizing ingredients.

[C]

Okay.

[A]

That's. You minimize your skus.

[C]

Okay.

[B]

So, I mean, so it'd be like grilled chicken. However many things.

[A]

Tex Mex restaurants are notoriously profitable.

[C]

Yeah.

[B]

Cause it's all meat, cheese, and tortilla.

[A]

How you can Chicken, chicken and beef.

[C]

Yep.

[A]

Rice and beans. But then just, you know, a couple sauces. You make the. The mixed combo plates and really minimal amount of skus.

[C]

Yep.

[A]

So.

[B]

And so if you're looking at sales and you're like this sandwich.

[A]

The gourmet sandwich business was actually, in hindsight, a bad business.

[C]

Yeah.

[A]

I mean, it was a really strong brand, and I did, I think, as well as anyone could have done with it with minimal experience. Obviously, it's a major hiccups along the way. But the brand was strong, the product was great. But because every sandwich had a unique set of ingredients for a fast casual. Fine. Fast casual brand. You know, I think we were at 140skus at one point. Which you're not gonna make much money doing that.

[B]

What would be an optimal number? Like 70? Like half that or like, even less fast casual?

[C]

Yeah.

[A]

Oh, gosh. Yeah. Half that. Less than half that.

[B]

How many skus does, like, raising canes have? Like, they have sauce, bread, fries, and chicken strips. Is it.

[A]

I don't know there. AJ's a good buddy of mine. I'll ask him. I bet you that's less than 30.

[C]

Okay.

[A]

Raw ingredients. I bet it's less than 30.

[B]

And you put them in like the.

[C]

Okay.

[B]

Low skew end Raising canes. Is there anybody that has less skus and raising canes?

[A]

Dude, I don't know.

[B]

Like, what's the least skus you've ever run across? And I only ask about raising canes because my buddy that runs founders podcast just did one on the founder of raising canes.

[A]

Oh, Todd Graves.

[C]

Yeah.

[B]

And he's. They're always trying to be like, you should do a chicken sandwich. He's Like, I just put chicken strips on a bun. Like, I'm not making a chicken breast. I'm just gonna make chicken strips, fries, raising cane sauce, and bread.

[A]

Yeah, I get he. They're probably the lowest skewed fast casual I can think of. I'm just wondering if there's a smash burger place now. Kanes is it?

[B]

When you were building the East Hampton menu, were people telling you along the way, like, this is too many skus. And you were like, I don't care.

[A]

Yeah, that consultant I hired, Roger Kaplan, was telling me that, but you were.

[B]

Kind of like, I don't care.

[A]

Yeah, I was taking the artistic approach.

[B]

Yeah.

[A]

I just wanted to make sure that we made the large enough splash on the culinary scene to garner enough attention to. So we can have momentum. And then I'd figure out the math later.

[B]

How much does, like, restaurant design matter? Just the layout of the restaurant on a scale of 1 to 10. 10. 10.

[A]

Yeah. Seat count is 10.

[B]

Okay, explain that. So you want to maximize seats without making it feel crammed.

[A]

Correct. So I always say our business is half art, half science. So now we're getting into the science part of it. Yeah, Seat count. And I never realized how important it was until Rick came along and his scientific brain exposed this to me. And it was, shout out to Rick. Oh, he's gonna get lots of shout outs. It is wild. How predictable. If you have an existing brand and you. And you kind of understand within a 20% margin of what your sales could be, seat counts, everything. It really is. And it's about throughput, obviously, and a lot of other variables. But if you don't have the seats to maximize your space with, you're leaving money on the table. And a lot of times it can be hundreds of thousands to millions of dollars. It's crazy. That's the number one most important thing in our business, in our opinion of C count.

[B]

Okay, wait, I would have never thought that, because my next question.

[A]

Well, because there is an optimal seat count, just like optimal size. I'm not saying.

[B]

What do you mean optimal seat count?

[A]

The maximum maximization of space. So I'm not saying that you need to go maximize the square footage so you can have the most seats. It's going to drive the most sales. That's not it.

[B]

Max seats per square foot.

[A]

And that's where the half artistic side comes from. So, like, you want to maximize the seat count within a space that is artistically designed to give customers the emotional experience that they're wanting.

[B]

So is there, like, a number? Is it by market? Is it literally just based on the space available? Or you would say we need at least 50 seats. Like we can't.

[A]

Dependent on square footage. I know, brand.

[B]

But then I guess my point is, would you not take a space at a square footage that only yields you 40 square feet? I mean, 40 seats. Like, do you ever go into it going, we can't build this concept unless we have 60 seats. I don't care how big or small. So if it can't have 60 seats, we can't even.

[A]

Yes.

[B]

Okay. What's like, is there, is that art or science? Like, is it by genre or by types of restaurants or food? Or like what's the, what's the line in the sand of like you always have to have this many seats?

[A]

Let's just. So let's just say Hudson House. Right?

[C]

Okay.

[A]

Right. So we have now nine Hudson Houses. They we have the ideal square. Square footage, the footprint. We know exactly within 5,000 to 8,000 square feet, we'll know exactly how many seats we need within that threshold to maximize our dollars.

[C]

Okay.

[A]

That's what it boils down to. And that is science. And then once we know that, once we know that math, then it gets handed over to me and I design the space with a group of other really smart people now to. So it doesn't feel cookie cutter. It doesn't feel like it. We're just stamping them out. Right. Does that answer your question?

[B]

Yeah, I mean, kind of, but it's okay. But maybe you don't want to say the amount of seeds because that's your secret sauce. But it's like how. No, like if you took an East Hampton, like, what's the minimum amount of seats that East Hampton would have needed? And what's the minimum amount of seats that a Hudson House, which is a more of a family restaurant that you go spend a longer time in East Hampton, you're more kind of in and out.

[A]

At least that's East Hampton's tough because from when I first started it, you know, Uber Eats, favor, all that stuff, the third party delivery services didn't exist.

[C]

Oh yeah.

[A]

So the business model completely changed. I mean, you saw that firsthand as one of our investors, like practically overnight, we had 8 to 10% of our EBITDA just evaporate when it first came online because they weren't regulated. And everybody and you know, it was everyone switched over to those services and really screwed our margins up. But when we first started building, we needed dine and seating because people were still eating at fast Casual restaurants. Now no one eats at fast casual restaurants. Very few. I think the. When I first opened, we were doing 70, 30 dine in to go and then we'll probably get to it. But when we sold East Hampton, we were at the exact opposite, I think 30% dine in, maybe, maybe 25%.

[C]

Wow.

[A]

It completely changed the game and it changed the business model. So it's a long winded answer. But as you were asking with fast casual, seat count stopped mattering. But we had, we had eight lo. Nine. Eight or nine locations that were all built for dine in. And then over the course of six months, we didn't need almost any of that square footage.

[B]

So I know it's probably, I'm not. If it's Ty D. Sampton, you might say we don't like them. But like Net Net is the food delivery. Are all these apps, like, do you love them?

[A]

Do you.

[B]

It's just somebody you have to deal with. They're like, we're just going to learn to deal with them. Or are they a net positive to the industry now? They've been around for, you know, 10 years.

[A]

I think it's a net positive to the industry.

[C]

Okay.

[B]

Why?

[A]

I mean, they cost me a lot of money.

[C]

Okay.

[A]

And so I'm a little bitter about that. But what are you gonna do? I mean, it's not like you still.

[B]

Make some money though.

[A]

Yeah, still made some money. Yeah. Right. They don't take it all. I think it's a, I just think it's a necessary evil. And I think that for full service and now that it's, it's regulated, I think that it drives brand awareness to the groups that really put an emphasis on packaging delivery and providing a higher end experience.

[B]

And on that note, do you have any control over like, like if I go order Hudson House from Doordash and let's just say Doordash, he decides to go drop off a few other meals before he gets to my house and the food comes and maybe it's not as hot as it. You would have, you would have thought it would have arrived in better condition.

[C]

Yeah.

[B]

Does.

[A]

That's why Hillstone doesn't do it, as.

[B]

I was going to say. So traditionally, is it still like Hudson House takes the brand hit if it's not good or does DoorDash take the brand hit for it not being delivered properly?

[A]

You know, I think that the narrative has changed dramatically.

[C]

Okay.

[A]

I think at the beginning, before the customers were knowledgeable, how the whole system was going to work in the long run.

[B]

Yeah, the.

[A]

The restaurants would take the blame. And I think by now everyone has. Has used the services enough. And had they, for the most part, know that if something's really messed up with their order, it's going to be the driver's fault.

[C]

Yep.

[B]

Gotcha. Going back real quick, you said seat count is the most important. What would survive longer? A restaurant with mediocre food and incredible service or a restaurant with incredible food and mediocre service?

[A]

Incredible food, Mediocre service.

[B]

Really?

[A]

Yeah, without a doubt.

[B]

So food is food over service.

[A]

Real estate. Food service.

[B]

Really? Yeah, I was actually not expecting that.

[A]

Yeah, for sure. Yeah. Because I just, I think that, I mean, I'll get deep with it. People are becoming less. I'm not saying that there is not a level of importance placed on service. It, of course, is integral to our business. But to answer your question directly, I do think that food quality and food consistency matters more than service. If you're going head to head.

[B]

Is that always been the case or is that more of a recent phenomenon?

[A]

I think it's a recent phenomenon because people are so engaged with their phones. I'm going to oversimplify that. The answer. But they are so engaged with their phones. The. Everybody is engaged with each other when they're dining out, but they're mentally elsewhere a lot as well. Because I think of technology, because of people's this overbearing access to social media and everything else that's pulling on their attention, that they're not as engaged with the human element that service provides. Food, man, I don't care what's on your Instagram or Tick Tock, whatever, you know, you're gonna know. You know it's bad, right? So that's. That's why I believe that that's more of a.

[B]

Just a view into society now. We're just so scrambled up that a hundred percent on the concept of service. There's some places I go to and I'm like, man, I'm so glad we had that waiter there. Just made the whole experience. And then there's some places I go to, I'm like, wow, why can I not just order my food from an iPad at the table, have it just brought to me, pay on the iPad. I have one interaction with the server. When they deliver it, they refill my drink, and it's very simple. I'm sure you've heard that a lot, but it really hasn't caught on. Like, we're really technologically advanced and very few places do you go.

[A]

It's coming.

[B]

Is it?

[A]

Yeah.

[B]

Not as I figured it would be here by now.

[A]

Yeah. Not as intensely as you're suggesting it could be in terms of the lack of human element with. With ordering.

[C]

Yeah.

[A]

But we just started using this new technology out of Europe at. I think they're at three of our brands now, where it's contactless payment. And so everyone. That's been a concept for a while.

[C]

Yeah.

[A]

And the big boys have used the kiosks at the table and whatnot. But this is literally just a tiny QR code that you scan with your phone, pops up, click your percentage pay with Apple pay, and get up.

[B]

I did that supply the other day. It was the first time I've ever done it.

[A]

Was it called Sunday?

[B]

I don't know. Is it QR code on a little.

[A]

It's called Sunday. It's the one that I'm referencing.

[B]

Okay.

[A]

Yeah.

[B]

There's a first time I've ever done it was literally yesterday, actually.

[A]

Did you like it?

[B]

Yeah, it was awesome. But I interacted with the waitress the entire way until the very end. She's like, you can pay right there.

[A]

So that's my job.

[B]

I was like, yes.

[A]

I'm a huge fan of this, just from a customer standpoint, because I hate waiting for my check. Like, how many times. I'm just so obnoxious. But I still like engaging with a waiter or waitress when I'm trying to decide on what I want to order, get recommendations. And also, I don't want to dehumanize the art of eating out. Right. I hope that never goes away.

[B]

I agree.

[A]

But there is no art to paying a check.

[B]

There's no art to paying a check.

[A]

So pay, get out. And also, it helps throughput. So if you. If you're lucky enough to own a busy restaurant, you want to turn those tables. There's no reason that technology shouldn't explode, in my opinion.

[B]

Okay. Turning tables, if somebody's like, they're done, but they're like, we just want to sit and chat.

[A]

I did this the other day at.

[B]

Hudson House with my buddy Chris Huckabee. We sat there for three hours.

[A]

Well, we have enough seat. The seat count there is real, real prime.

[B]

But you technically can't go to people and be like, you've overstayed your welcome. It's time to go.

[A]

I mean, you can so. But we just opened a little French bistro in. In Dallas, and it only has 40 seats. Terrible seat count. But it's really hard to get a reservation. And. And we let people know whenever they make the reservation. You have the table for an hour and a half. After an hour and a half, at our discretion, we are able to ask you to move along. And 99 times out of a hundred, if we have to do that with people, we'll just buy em a drink at the bar. Yeah, it's worth it.

[B]

Okay, so it's. It's food over service any day. Okay. Want to go back real quick. And I want to close the loop on East Hampton. So you designed the menu, you hired the chef, you, you did all the things. Opening day was a disaster because chef didn't show up. Like, how. I don't know how to ask it. Like, how long into being open did you finally wake up one day and go, okay, I, I kind of understand the restaurant industry at least a little bit now. Like, was it almost immediate? Was it like years into it that you kept picking up all these lessons, or do you kind of pick it up pretty quickly?

[A]

Two part answer. Because I think it was pretty quick with fast casual. Just because it was. It's just a lot of black blocking and tackling. Like, I got the artistic side done and then I was immersed because, I mean, I was running payroll, you know, the lab, hr. Sure. I mean, I was, I was fielding the text messages of complaints, you know, but it was. It's a pretty easy business if you nail the art. Right? And so luckily the food was really good and people loved it. Full service. I'm still learning. It is the most complicated industry. I mean, I don't want to offend other industries, but maybe the engineering world would crush me. But it is so complicated because of the amount of moving parts and then the amount of people you have to deal with. It is intense. I mean, I'm part of psychologist.

[B]

What's so hard about it?

[A]

Back to the art and science. Balancing both. You know, you have to maintain the artistic side of the business in order to draw in the customers, but you have to respect the scientific side of the business in order for enough money to flow to the bottom to stay alive.

[B]

Okay, so where do most people. Where do when, when. I'm sure you've seen restaurants that you're like, if I owned that, it would have made it and it would have been profitable, like, all the time. Where do folks that have great art but no science, like, where do they end up losing it all? Like, where's. Where's all the money flowing to that takes them down?

[A]

Lack of systems, technology or accounting, meaning, like, they don't have proper inventory management software. Okay, maybe they can't afford It. But there's, there's rudimentary versions that are available and aren't that expensive.

[C]

Yeah.

[A]

You know, you have to understand both front house and back house right there. So many chefs open restaurants and don't succeed because they understand the art half of the business, you know, at an elite level, but have no idea how to run the scientific side of the business. Now some figure it out, but that's most of the failure that I see with great food is just lack of attention to detail on the scientific side of the business. It's as simple as that. Like, or they won't invest properly in good accountants. Like, okay, fine, if you want to be. If you want to be a chef and open your dream restaurant, make sure you budget for two to $3,000 for someone who can keep your books.

[B]

Okay, so who, if. Let's say you are that chef and you're only. You don't have an operation like you do where you now have like a corporate office. You've got like people that can do this. But a lot of people, they got one restaurant. Restaurant. They don't have a big. They can't afford a corporate team. So if, if, if somebody's listening to this, it's either opening up their first or they're a chef and they are like not getting the science right. It's like, who is the person that you hire to get the science right? Because is the answer just like, I know you're an artist, but you kind of got to learn how to become a scientist. Or is there like a certain hire or type of person they could go higher in the marketplace that could kind of help them out? A consultant.

[A]

Yeah. I really think that if you're going to open your first full service restaurant, forget any restaurant, you got to have a decent accounting team behind you because there's just so many moving parts and so many ways to steal in that business. You know, I don't want to paint a negative picture about humanity, but, you know, especially with AI coming on and taking on a lot of people's jobs, there's. Everyone get desperate and people are desperate. And you know, leakage and theft is just a major problem in this industry. And if you don't have the proper systems in place, if you, at least you don't have somebody on the bookkeeping side making sure the X's and O's match up, I mean, you're just a sinking chance.

[B]

Where does the theft usually come from?

[A]

Back a house like the kitchen.

[B]

They're. They're selling inventory like on the Black market. They're taking steak that's in the freezer.

[A]

And we're not selling it. No taking it, just taking it home. Yeah.

[B]

Okay, so they're just taking the food.

[A]

Lobster, shrimp, steak, the expensive stuff.

[B]

How do you stop that?

[A]

Bottles of wine if you're not doing inventory properly?

[B]

So do you guys do inventory every day at every restaurant now?

[A]

Once a week. But that even, that is in my opinion, best in class. Like most groups don't do once a week inventory. They'll do bi weekly or monthly.

[B]

How would you know if something. So you would just know we had a hundred lobsters, it's showing that we only sold 20. So we should have 80 in there and there's only 75. So five are missing.

[A]

Right.

[B]

Okay. What system's in place?

[A]

So there's an actual versa. Theoretical that we track in our own system. And by at the end of the week when you do inventory, it's, it's impossible for it to not be accounted for. The only way it would be you could finagle the system is if the general, like the entire management team was in on it. But they're so well compensated, it doesn't make sense for them to be in on the scam.

[B]

So just doing inventory is like gets rid of 90% of your problems. Because if it did happen on a regular basis, even in one of your restaurants that you're doing inventory once a week, you'd go, all right, there's five missing. It's one of the three of you. Or would you also see it on camera? Or is there one other check?

[A]

Man, you don't go, you, you go check the cameras long after you see it. I mean, that's like step three. Yeah, but for us at this point, you know, we have an army of accountants that would come and swarm. I mean, that's the, that's the Rick side of the business now.

[B]

So scale, scale helps you prevent fraud or prevent stealing?

[A]

Oh, without a doubt.

[B]

Like, it's, it's harder.

[A]

That's why, like, again, like if you're opening your first restaurant, at the very least, budget for a legitimate restaurant bookkeeping system or bookkeeper.

[B]

So what about tips? Do you make everybody pool their tips or do you get. Does everybody keep their tips? That seems like a place where theft could happen.

[A]

No, we pull.

[B]

And is, is it just on the, the, the honor system that if I tip somebody a $20 bill or a hundred dollar bill, they're going to put that in the pool and it's not going to slide into the back pocket?

[A]

Well, that would be the case if we took cash.

[B]

You don't take cash?

[A]

No cash.

[B]

Not even for tips?

[A]

Nope.

[B]

When did you stop doing that?

[A]

I believe we stopped taking cash at full service restaurants like over five years ago.

[B]

So even if I pay with card but leave like a $20bill in the fold, you would say, please take that back and write your tip in?

[A]

No, I mean, we would. Yeah, that, that's the system. I mean, it's impossible to police that 100%. Yeah, but we do, I mean, we do a pretty good job of that.

[C]

Yeah. Okay.

[A]

Yeah.

[B]

Because I feel like that's where you could game it a little easier is like, write me a little less credit card tip.

[A]

Yeah, it's frustrating for the older demographic. They love paying with cash.

[B]

At what point did you sold Easthampton? It was your first baby. You expanded. Was the reason you sold more on what you said, which was people weren't dining in like they used to or had tastes changed and people moved in a different direction of how they. They wanted to be sold, or is it. Was it just more like, we've been a good run, we're going to move on to other things.

[A]

A lot of different reasons for selling. The main one is that we got a great offer and the off the. We took it to market and the best offer we received was from the guy who was managing the business for us. So as the director of operations for East Hampton asked us if he could participate in the bid process, we said sure. And Rick and I were kind of confused. Like, I don't know why, why he. He wants. He actually, he managed the business for us, but also played a significant role in the corporate accounting team as well. Guy's the hardest worker. He's a machine. But he came in with the best offer. And so we sat down and said, okay, well, if you want to pay that price, then we'll go through the process and sell you my baby. Another reason why I wanted to do it is because as we're evolving, we're getting into the acquisitions business. And I wanted to really. When as you're getting into acquisitions, you need to be able to balance that out and also understand the. The mechanics of selling a business as well. So that was one of our main goals for the past year. Sell a business and also buy a new business. And so that presents. So not only do we get a good offer from him, we could sell it to somebody that we trusted, provide a little bit of seller financing as well. So we could still, you know, we still have our closet a Little bit.

[C]

Yeah.

[A]

And then also acquired a new business as well, because that's how we really want to continue to scale, because creating new concepts all the time is a workout.

[B]

How many restaurants do you need to kind of start building a corporate team?

[A]

I wouldn't say number of locations. I think it's revenue driven.

[C]

Okay.

[A]

I would say probably corporate team is in. Anyone besides yourself. Yeah.

[B]

I mean, well, now you've got a cfo and you. Sure.

[A]

But just like anyone besides yourself, where.

[B]

You basically have people on staff that aren't working at the restaurant day to day.

[A]

If you are at. If you're doing fast casual and you have more than four locations, I would say that's one of the thresholds. But the average unit volume of fast casual is much lower than full service if you have good restaurants.

[C]

Yeah.

[A]

And so let's just say on the flip side of full service, if you have, I don't know, more than more than four lo. Three locations, doing over 15 million, I would say, would justify hiring a couple people.

[C]

Okay.

[B]

And then real quick, total sidebar. We don't have to spend a lot of time on it. Did Cloud Kitchens, like, ever take off where if I order a Chipotle burrito, there's a chance that it's coming from some warehouse that I don't really know, because when I go to Chipotle, there is 15 people in the front waiting to pick up food. So I'm always like, maybe it just worked out better for them to come to this location and get the burrito or Cloud kitchen's actually a real thing that are happening.

[A]

How many times did you get approached to invest in cloud Kitchens?

[B]

Did you never.

[A]

Oh, I got. We got all the time up front. Yes, Yes.

[B]

A lot. But then I never heard about it again.

[A]

Right. Because I don't think it worked.

[B]

Okay. That's what I. Okay, so you guys aren't using cloud kitchens.

[A]

No, and I don't know anybody who is.

[B]

Okay, fair enough.

[A]

Do you lease in your industrial space to Cloud Kitchens?

[B]

No. We used to own the one thing that I did get a good peek inside the food world was we owned a cold storage building on 23rd street, and it was like a. It was almost like a 3 PL. So it was lots of small businesses that would each take. I guess it's cubic feet in that world. But you. You might have 20 local Fort Worth businesses that are each taking up their section of the cold storage building.

[A]

Gotcha.

[B]

And what you realize is most cold storage developers want one huge tenant in there. Like the risk of having lots of small tenants, but there's a huge demand for them. So there's an imbalance of how much space is available for a smaller business that only needs a. A few pallets worth of space.

[A]

Gotcha.

[B]

And if you're going to go build a new building, most people want you to build it knowing you've got, you know, Campbell Soup taking the whole Damn thing. Not 50 small DFW businesses. But no, never. We've never done a cloud kitchen. At what point? Like, I think now, I'm like, when I think about your world, you get to, you get to stay focused on restaurants, but you also kind of have the dream of shiny object syndrome, where you can kind of open up new concepts and it keeps you kind of. What was the next concept? Was it Hudson House?

[A]

Yeah, Hudson House was just a pet project. Started out like it was so random. Piece of real estate in Park Cities came available, which did. Piece of real estate, yeah. And parks is on the corner. Lomo Alto dead ends into it. It's on Lovers Lane.

[C]

Yeah.

[A]

And it was an old Mexican food, fast casual place. A Chipotle knockoff, enchiladas and then a ravioli shop called Holy Ravioli. And they both went out the same time. And this was again back to the timing thing we brought up earlier. Dallas had been real dormant on exciting openings for at least six, seven years. Maybe there might be one or two that I'm forgetting about, but not, not to my knowledge. And so I just thought, and I had, at this time, I had cic private equity shop coming back East Hampton. And so I had. Obviously I couldn't just go peel off and go do another project. But we were first hitting the headwinds from third party. And so I went to the managing partner of the firm was awesome guy Fouad Bashur. And I went to him, I said, Fouad, you know, I've got this idea to do Hudson House concept in Park Cities. And so we did a little carve out for that outside of. What was it? East Hampton holdings at the time. He's like, all right, just don't make, don't let that be a distraction. We're still going to be growing this thing. And we opened it and exploded day one. Just like when the East Hampton opened in Snyder Plaza. And it was again, it was like starting all over again. I had no idea how to manage a bar. I never managed a bar, never sold a. A mixed drink in my life. I bought a few experience on the other side. But yeah, I mean, it was start it was like starting a master's program all over again.

[B]

And were you naive? Did you think you'd get it would be easier because of the success with East Hampton or did you know?

[A]

Totally. Yeah, totally. I thought because East Hampton was a success, that, and I was pretty confident my abilities to create the menu, the aesthetic, the design, but in terms of managing the business grossly underestimated how. How tough that would be. I even hired one of my good friends I graduated high school with to be the opening general manager. Yeah, that was funny. Yeah. I mean, I did a lot of things wrong. But luckily, again, just like East Hampton, the artistic side of the business was a hit. The menus was really unique. The design of the space was cool. I had no idea. The seat count ratio was one of the best. Even to this day, it's one of the best in the whole company.

[B]

Really.

[A]

So lucky.

[B]

So lucky.

[A]

Yeah.

[B]

Who determines the seat count ratio? The architect or you? Or like, I would imagine there's these architect firms that are like, you need 75 seats.

[A]

Well, architects are a fickle bunch because they're always covering their own ass. And like, yeah, they, they want it to look beautiful so they can put it on their page. And they want to, they don't want to get in trouble with the, with the city. They don't want to cause any delays if there's any sort of like, you.

[C]

Know.

[A]

They want to do everything that's their best interest, which I understand. But we have a mathematical equation that we must hit for seat count ratio. And if they're not going to play ball with us, then we'll go somewhere who will.

[C]

Yeah. Yeah.

[B]

What's the hardest part about selling alcohol? And do people care about the personality of the bartender?

[A]

Yes.

[B]

So you got to have a lively bartender.

[A]

Lively bartenders matter, you know, I don't know. The hardest thing about selling alcohol would be. I don't think customers would notice this most of the time, but I don't think there's a lot of great sommeliers out there.

[C]

Yeah.

[B]

So on wine.

[A]

Yeah, Wine. I think there's a lot of great salesmen and a lot of great servers who can act like they're psalms, but there's so few truly knowledgeable ones. So wine is, is a tough one for us, though. It's always been, honestly, kind of easy because we were the first to really popularize the half off martini thing.

[C]

Yeah.

[A]

And that's, to be honest, that's what put Hudson House on the map, was our happy hour. And it was such a foreign concept. To do half off martinis, half off oysters, half off cheeseburgers. That's the very first one. It's evolved since then. But yeah, selling vodka for us has been, we've been blessed.

[B]

Vodka's. Is vodka the number one seller at Hudson?

[A]

Yeah, in general. In general. Yeah, it is. Tequila has made a huge run. But the Vandalay portfolio, vodka is king.

[B]

And how much, even with wine, like how much of this is. Because you talk to people, they think they're these great winos that have this great palette and then you blindfold them and put them in different cups and like nine times out of 10, they're always wrong about which is the nicest one.

[A]

I mean it's the same thing with, I would fail at that too. Correct. Everybody would.

[B]

So a lot of the, the, the alcohol market is just a big marketing play.

[A]

100%. Yeah, 100%. I, I, I think to keep, in my opinion, I think wine is the easiest to differentiate quality within, you know, broad categories. Yeah, I think tequila is the second vodka. I, I don't know how anyone can taste the difference in rest of this stuff. It's, it's marketing. I'm a Chopin drinker. Why? I think it's my, that's how my mom takes it. You know, she always drank Chopin martinis, so I drink Chopin martinis.

[B]

What did private equity teach you? Like, do you still have private equity in your business? Did that go away when you sold East Hampton?

[A]

No, before then. We bought, I bought CIC out like two and a half years ago.

[B]

But if you had to say, I'm glad I did it because I learned X, I think, which might be what to do, not to do, but like, what was the, what'd you get from it? Would you ever go back to private equity?

[A]

The two people I've learned the most from in my career have been, and Rick, who's my business partner, who I brought on. And then right behind him would be Fouad, who was the CIC managing partner. He, him and his right hand man, Baird. Friedman. You know Baird?

[C]

Yeah, yeah.

[B]

Cheney's older brother.

[A]

That's right. They're so smart and smart about everyone. Everyone's. Well, they taught me a lot about the analytics of the business. So about the science, as you know, if I had to, you know, describe myself, if I'm more of the art side of the science side, I'd say I'm 70% art, 30% science. And before I got with CIC, I was probably 90% art, 10% science. And they're the ones who really helped educate me and get me. I probably got all the way up to the 50, but then I've offloaded so much on Rick that I've gotten to be able to get back on the artistic side and, like, just take care of that, please, God. Yeah. I mean, just simple learning how to manage P. Ls. The importance of. I mean, the stuff that I mentioned earlier, the importance of inventory management, software, you know, maintaining consistency, hiring practices, the importance of training, like, all that stuff I didn't really have until I paired up with them. They had. They have a great history with F and B investments. And so it was probably a total of four years we were together. And I mean, I didn't have a board before them. You know, if they ever watch this, they'll probably laugh because even with them, our board meetings were quite funny. There was only like, four of us sitting around the table. But still, it was. It was a good education on how serious businesses run.

[C]

Yeah.

[A]

Because it's one thing to raise money and, you know, pass the hat when you have private equity dollars. I mean, that shit's serious.

[C]

Yeah.

[A]

And when I think we did our deal at 30. I was 31 years old.

[C]

Yeah.

[A]

And closed a private equity deal and, you know. Or no, I was. Yeah. Around 31. And yeah. With, you know, starting out, opening a little sandwich shop to, you know, raising money from. And only that they're like some of this respected old school. And it's Rusty Rose's original shop. So like, talk about the OGs of private equity in Dallas. So it was a badge of honor and a lot. A great sense of responsibility.

[B]

Why'd you go to them? You just wanted to scale and you needed more money.

[A]

No, they came to me. I. So I was being. We won some award. National Restaurant News. I think it was like, top 50, hottest, fastest new concept, you know, one of those bullshit awards.

[C]

Yeah.

[A]

And Roark Capital reached out. And this is a long time ago, but, like, the big boys of the industry, you know, you know, put their hound dogs on me. And so I went through the process with them and one other group I took kind of seriously out of Connecticut. And the whole process turned me off to private equity. I mean, the guys I dealt with were. Yeah. Not optimal. I. I could smell the sharkiness on them. So I just kind of killed it. And, you know, raising money wasn't that difficult.

[C]

Yeah.

[A]

And then I got connected to Baird somehow. Baird got connected to me somehow reached out, and it was bizarre. I think it all from my first meeting with Baird. To my last meeting with Mike Rawlings was like, two months. And then we had a deal done and closed and went and did the thing.

[B]

That's awesome.

[A]

Yeah.

[B]

Real quick on going back when we were talking about simplifying the menu, you had just said it creates less turnover. Like, what is the number one source of, like, turnover in the restaurants where employees start? Like, you can't kind of keep the machine going. Is it just too complex of a menu? Too many things going on. Like, how do you. Yeah. And what causes the most stress?

[A]

Complexity. And what complex? I would say number one is poor leadership. Number two would be complexity.

[B]

So, like, that would be a poor gm.

[A]

Yeah.

[B]

The person that's.

[C]

Yeah.

[A]

Or whoever your direct report is. So back a house. Poor kitchen manager. Front of house or floor manager, assistant gm, gm.

[C]

What.

[B]

What are your. What's kind of your lens for hiring people? Like, how have you gotten better at hiring? And it can't be. We now have the ability to offer more money. That's obvious.

[A]

That is obviously part of it.

[B]

That's huge.

[A]

Yeah.

[B]

You got to get the scale to do that. But is there something else you learned that you could tell?

[A]

We do personality tests.

[C]

Okay.

[B]

So, you know, that was one of.

[A]

That's one of the. The big YPO things I learned.

[C]

Yeah.

[B]

Culture index. Culture. And we use culture index. Do you know this?

[C]

If.

[B]

If it's this type of profile, It's a socializer. We're putting them at the front.

[A]

Yep.

[B]

That we want them.

[C]

Yeah.

[A]

You can guess exactly how it works. And it is remarkable how well it works for sure. Yeah.

[B]

Why do some concepts work really well in one city and they don't travel to the next city? And, like, is that something you've learned? Like, can you say, without a doubt, I know this works in Dallas. It will work in Houston, or it won't work in Houston. Or sometimes, like, have you been wrong where you thought something would really work in a city and it just didn't?

[A]

Absolutely.

[B]

And why is that? Is it people's taste buds? Is it literally just nostalgia and what people are used to.

[A]

It's. I don't know. I. I can't speak from experience on conceptually if one would work. I have all my bad decisions where I've. Where I've drilled dry wells.

[C]

Yeah.

[A]

Is bad real estate decisions, really? Yeah. Yeah. Real estate is such an important element of this business. I mean.

[B]

Well, you said it's number one.

[A]

Yeah. Yeah. Don't geek out on me. Real estate, bro.

[B]

I know we're working on something to be tbd. Stay tuned, people.

[A]

That's right. Because there's just the way people spend their dollars and the optionality these days, it's getting harder and harder to attract that credit card swipe. And so it's, you know, looking back on the failures I've made, I would say, I don't mean I don't think I've opened an ill conceived concept yet, but the ones that haven't worked have been either we misjudged the parking, we misjudged the way that the traffic was going to work, the egress ingress, decisions like that.

[C]

Yeah. Okay.

[A]

I mean, most of our concepts are pretty, I would say outside of Bar Sardine and then Teyon that we just bought, pretty American. So I can't imagine that it's the, it's the concept that doesn't resonate with people.

[B]

So what did you. Is this just kind of what happened and there was no grand strategy? I think you have what, nine concepts now or seven?

[A]

Yeah, nine brands.

[B]

Okay. Is that just because you're a freak and like lots of concepts or did you think this is a better way to build the business as opposed to like Hudson House was working? I'm going to spend all my time to build a hud, a hundred Hudson Houses. And you might say we're still going to do that. We're going to do all these other things like what you have.

[A]

We are still going to do that. Okay. That's our number one goal.

[B]

So with every concept or just with like one or two of the horses.

[A]

Now again, you're going to love this answer. I'm being Dr. Real Estate.

[B]

Come on, baby.

[A]

It is. It was real estate dependent. So coming out of COVID there were so many class A locations that became available because the evil landlords would kick out tenants before their leases were over because they owed back rent from COVID I say that facetiously because we were there to swoop up a lot of great real estate. I can't put a Hudson house on every corner.

[C]

Yeah.

[A]

And so it's truly a byproduct. A lot of our brands are a byproduct of the available real estate. So Preston Hollow, Park Cities, Lakewood, you know, there was a huge gold rush in real estate for great locations. And so, I mean, it almost killed me. It almost bankrupted the company.

[B]

Covid.

[A]

No. Taking on so much at once, signing so many different leases, starting so many different brands all at the same time. And you know, it was just pure ignorance. Honestly, I didn't realize I had no clue how hard it was going to be, and I didn't realize how expensive it was going to all be. But that's how we kind of. We wound up in the position of having so many different brands.

[B]

So you will scale to the extent that the real estate's. It's not capital constraints. It's not a lack of ideas, It's a lack of good real estate.

[A]

Correct.

[B]

And I'm assuming you're now in a point where you're getting the call going, hey, we got this space opening up. We really want you here. Or is it still a dog fight for every space?

[A]

We get called constantly. I mean, one of our partners, guy named Matt, he's the. He runs all the real estate. And I think his phone is the busiest phone I've ever seen in person. Uh, yeah. I mean, not. We have a great balance sheet. So obviously, you know, guys like you want, you know, great credit tenants. We now fit that category. Um, and then obviously, we're considered one of the most creative groups within the region. So if you couple great credit, high levels of credit with creativity, and I think we're also known for being consistent operators. It's kind of like the trifecta. And so we're us. You know, Fox Restaurant Group is up there. There's. There's a handful of groups that are probably on a very short list of first calls.

[B]

So when you wake up in the morning, are you still thinking about the 10th concept or, like, it. Will there come a day where you're not thinking about the next concept, but you're thinking about the day's here days here? So you're.

[A]

Yeah, I mentioned it earlier. I'm. I'm worn out creating.

[B]

We're gonna stick with nine for now.

[A]

Well, no, because we're getting into the acquisitions business.

[C]

Okay.

[A]

But creating from scratch. I'm taking a breather.

[C]

Okay.

[A]

You have it on record, but that.

[B]

Is that.

[A]

Do you hear that, Rick?

[B]

Did you hear that, Rick? Rick? This is. This is on. On notice. You play this.

[A]

And Doug Brooks, there's a few.

[B]

Anytime he comes up with Ray, replay this. And that's more just because it's hard.

[A]

It's so hard.

[B]

You don't need to, like.

[A]

It's emotionally draining. It's. It's. And not just for me, because I lean on. Because the organization is so big now, I lean on a lot of people to help me create. And we've got a great arsenal of brands right now, almost all of which I think are scalable. Few exceptions. Not that I'm just not being the best steward of everyone else's career that's dependent on me if I'm not driving the bus down the fastest lane towards success. And it used to be creating was the fastest lane and now it's scaling. And so that's why.

[B]

Okay, let's talk about acquisitions.

[A]

Yeah.

[B]

Are you looking to buy one off like diamonds or are you looking for chains that you could still put them in the diamond category, but you bought the Taeyon.

[A]

Yeah, Taeyon.

[B]

But that's a.

[A]

That's rare.

[B]

That is premium de la creme Japanese food. It's one restaurant that's beloved by many.

[A]

Right.

[B]

Or are you looking for like the next Hudson House that might already have 10 locations and you're going to come in and grow it to 100 or both?

[A]

I would say we're looking for midsize to. I would say midsize groups to buy.

[C]

Okay.

[A]

I have seen it. I've experienced it. Growing from five locations to ten is so hard.

[B]

Really. And harder than one to five.

[A]

Yes.

[B]

Why?

[A]

I'll. I'll rank them one to five. If you're capable of the art and science piece, you can grind. And I've got some friends in Dallas who own between one and five restaurants and they run a tight operation. It's them. They might have like an assistant or, you know, one or two people work, working for them. And you can make a lot of money doing that. You cannot run that type of operation without proper infrastructure to get to 10 locations. If they're busy restaurants can't do it. I've experienced this. 1 to 5 is hard. 5 to 10 is really hard. 10 to 20 is effing impossible. That, and I mentioned this earlier, it almost killed me, like, and my partners, like, we grinded. I always say. I always compare it to. You've seen Shawshank Redemption.

[C]

Yeah.

[A]

You know, Andy Dufresne is crawling through that human waste and comes out at the end, does that. Like, that's what it feels felt like to finally get to the scale of 20. It was so hard. And I don't think a lot of people are cut out for it. That's not me like patting my own back. It's just we worked so hard to get there that now if someone's at that, you know, 3 to 10 range and doesn't. And maybe it's age dependent, maybe they're in their 50s or 60s, have a great brand, just don't have the fortitude or. Or the desire to really grind to get it to 20. Then we'd like to be One of the groups called to submit a bid to take it from because we've done it before and have the experience six to 20 locations or beyond. So that's it. And then if Tayon was a special deal because it's my favorite restaurant in the United States.

[B]

So that was more of like a crown, just going to have some fun and I obviously want to do really well. But yeah, yeah, it's close. I'm a member. Okay.

[A]

Yeah.

[B]

How do you value a restaurant? Just multiple of ebitda. Is there any other factors that come in multiple of epidem and going back to real estate. And this was a big thing during COVID and I think it's just a big thing in general. A great restaurant, especially one that's not it even if it's in a single location, but if it's in a strip center and it's crushing it and bringing in a ton of traffic, that landlord's waiting for that lease renewal and they're going to just eat that margin up come lease renewal.

[A]

You guys are the best.

[B]

We're the best. But I imagine you want to own some stuff or have. How do you de risk not creating the greatest location and then being a victim of your own success where they take all your margin at renewal? Or is there no answer? You just gotta. Well, because they don't want to lose you either.

[A]

I would love to. I would love to be buying the real estate. One of the problems with class A real estate is that majority of them are owned by legacy holders or REITs. So you can't buy. It doesn't matter. You just can't.

[B]

So you just have to sign like a 10 year lease.

[A]

10 year lease with two 5 year options. And options are usually the first tapped to some degree. The first five is usually tapped last five is at market and that's when they'll get, you know, if we're doing our job appropriately, then it is a partnership. I don't care. I mean the only way it goes from partnership to them wanting you out is if you're not doing your job properly.

[C]

Yeah.

[A]

So there, there's a balance there. I mean, we're so young and early in our careers, we don't have an immense amount of experience with renegotiating existing locations that are crushing it and being squeezed hard. But I do know from my experienced older friends that it does happen. I mean happens to Hillstone all the time. That's crazy. I've seen landlords try to get, you know, snarky with them and they'll Just pick up their bag and leave. And they're the best. I mean, they're the. They're the preeminent operator in the entire country.

[B]

Why?

[A]

Consistency. Their dedication to maintaining their spaces, their eye for talent, their obsession with esthetics, their training systems.

[B]

So are they kind of your North Star?

[A]

They are my North Star.

[B]

Really?

[A]

Oh, yeah. I mean, I have a lot.

[B]

I was going to ask you that question.

[A]

I have a lot of.

[B]

Who do you admire the most in the industry? It's Hillstone.

[A]

They're kind of mad at me, so it's hard to say yes, but. Yeah, I mean, I just hired a lot of former Hillstone people.

[C]

Yeah.

[A]

But Hillstone is. It's weird. You have the exact same experience at all their restaurants across the country. That is so hard to do. In my opinion. They're the Michael Jordan, so. Yeah.

[C]

How do you.

[A]

You don't know. You probably aren't going to be able to be them. But it's a great North Star. That's a good way of putting it.

[B]

It's one of those things like, you know it when you see it. Even if you. Like, you can see it, you can walk into one. But to replicate it is like a lifelong.

[A]

You can't replicate it. Yeah, there's been a lot of groups try to replicate what Hillstone does. Um, and, you know, I make. You know, I don't try to hide it at all. There's. There's a lot of elements of their program systems, even on the. Some of the food items that we've replicated or tried to use as our basis for things. But our business model is different in that we use them as a North Star on some things and then try to. We put our own creative spin and narrative on it. There's some groups out there, you know, the J. Alexander of the world, the Doc Bs, and they're just trying to, like, literally replicate it.

[C]

Yeah.

[B]

Charleston it.

[A]

Charles. Yeah. It's. It's impossible. You can't do it. There's. There's just. Sometimes there's magic. It sounds cheesy, but there's just magic to the artistic side of the business. That's just. You can't replicate.

[B]

All right, dude, this has been awesome. You're the. You're the guy.

[A]

This is great.

[B]

I'm. It's. It's been awesome to watch you grow this thing.

[A]

Appreciate it, dog.

[B]

Thanks for spilling the beans today. All right, I hope you've enjoyed this episode of the Fort Podcasts. Be sure to follow us on your favorite podcast platform or hop on over to YouTube to watch full video episodes, if that's what you prefer. For more information, you can check out thefortpod.com.