You Don't Scale a Business, You Simplify It — Transcript

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1. 0:00I want to build a very
2. 0:02a big restaurant chain
3. 0:04um
4. 0:04>> Okay.
5. 0:05>> built around a healthy concept but still
6. 0:07very good food. Maybe a billion dollar
7. 0:09enterprise value.
8. 0:09>> Fast casual and maybe a billion dollar
9. 0:11enterprise. Just throw it out. That's my
10. 0:13goal. Toss out a billion. Yeah.
11. 0:15We call that a casual billion, Savante.
12. 0:17Um okay.
13. 0:21All right. So, fast casual is what
14. 0:23you're you're focused on?
15. 0:24>> I'm I'm in fast casual. We do We do
16. 0:27potatoes. We do burgers. We do fish. We
17. 0:29do chicken. I I know a lot of like I
18. 0:30know a fair bit about those kind of
19. 0:31things.
20. 0:32>> you're going to want to You're basically
21. 0:33going to need to enter the franchise
22. 0:34world. Not have to. Um
23. 0:37That's not true. You don't have to enter
24. 0:39the franchise world. I don't want to say
25. 0:40that.
26. 0:41But the key to those models is huge
27. 0:44simplicity.
28. 0:45And nailing the very limited things that
29. 0:48you have on the menu.
30. 0:50Like I think the absolute like
31. 0:52I don't know. Have you studied
32. 0:53Chick-fil-A?
33. 0:54>> Oh, yeah. I Yes, definitely.
34. 0:55>> Have you studied Raising Cane's?
35. 0:57>> Sure thing. Yeah.
36. 0:59>> Like those
37. 1:00>> 12 12 item menu. I was actually watching
38. 1:01a video about this couple days ago.
39. 1:03>> Yes.
40. 1:03>> 12 item menu. Yeah.
41. 1:04>> Yeah. Like
42. 1:06those guys need to become your your
43. 1:08you know, your restaurant heroes. Like
44. 1:10you need to just only consume the stuff
45. 1:12that they put out, but it's all about
46. 1:13radical simplicity. Um
47. 1:15>> Okay.
48. 1:19>> You can absolutely become a billionaire
49. 1:21in the restaurant space. There are
50. 1:23there are there are people who have done
51. 1:25that. Um and in the fast casual space,
52. 1:27there are um
53. 1:31>> Just after 45 years.
54. 1:32>> Yeah, it's going to take time, dude. I
55. 1:33mean like yeah, sorry. It's not going to
56. 1:35be a 60-year billion dollar exit, man.
57. 1:36You know, there's only you know, there's
58. 1:38only 3,000 billionaires on Earth out of
59. 1:41eight eight billion. So, you know,
60. 1:43whatever. Um
61. 1:47I think the advice that I give is is
62. 1:48sound.
63. 1:49What it comes down to is you need to you
64. 1:52need to nail the model.
65. 1:54>> Okay.
66. 1:54>> Like you've learned from these three
67. 1:55stores. You've learned from these other
68. 1:56people, you have to have a unique model
69. 2:00that is as simple as humanly possible,
70. 2:02which is what it like you have to build
71. 2:03you have to build it day one for scale.
72. 2:06>> Okay. So, that's actually what I'm
73. 2:07working on. I'm I've acquired a fourth
74. 2:09location. Now, I'm also in trouble in in
75. 2:12like trying to figure out what it what
76. 2:13to do with my co-owners in the other
77. 2:14three places because they do take a
78. 2:16little bit of my time. And you know, I
79. 2:17own no equity in two of them.
80. 2:19>> Yeah.
81. 2:19>> Um
82. 2:20good you know, good profit sharing
83. 2:21there, but no equity.
84. 2:22>> you have the I mean, you will
85. 2:26the goal will be to fire them as fast as
86. 2:29you can.
87. 2:30>> Okay.
88. 2:32>> So, you can focus.
89. 2:33>> Okay.
90. 2:34>> Cuz you're not going to side hustle your
91. 2:35way to a billion dollar company.
92. 2:36>> It's Yeah, it's tough. I mean, I'm I'm
93. 2:38I'm going to try and just for this week.
94. 2:40I mean, very little sleep.
95. 2:42>> Yeah, you're Yeah, I mean, you can't
96. 2:44it's like it's not a thing, right? And
97. 2:47so, um
98. 2:49I think the fourth location is fine.
99. 2:50Build it as well as you possibly can.
100. 2:53Try to nail the model.
101. 2:55Once you nail the model, we'll probably
102. 2:56have another conversation, which is just
103. 2:58are we going to scale this privately or
104. 2:59are you going to franchise it?
105. 3:01Franchising works better for
106. 3:04food businesses because they literally
107. 3:06are recipes, and you can you can
108. 3:08standardize the outcome much more easily
109. 3:10than you can with like a service
110. 3:11business, which is why service
111. 3:11businesses are hard. Plenty of people do
112. 3:13franchise them, but they're just much
113. 3:14harder to franchise. Um because you have
114. 3:16to sell basically arbitrage on labor.
115. 3:18So,
116. 3:20yeah, I think
117. 3:22as like as soon as you can,
118. 3:25I would go all in on the fourth location
119. 3:27and make it your main thing.
120. 3:28>> So, quick follow up.
121. 3:30So, I'm going to focus on the fourth
122. 3:31location whenever as soon as I can. Um
123. 3:34my time I was getting, you know, a good
124. 3:36return on my on my time, and then I'm
125. 3:38going to have those let's say 70 hours a
126. 3:40week to focus on the fourth location.
127. 3:42What's the best way to spend those 70
128. 3:44hours? I'm not going to be, you know, as
129. 3:46little operationally, of course, more
130. 3:47building, but
131. 3:49>> In the fourth?
132. 3:50>> Yes.
133. 3:51I'm going to be there, of course, but
134. 3:52you know.
135. 3:53>> Yeah, I would I would for sure be there.
136. 3:55>> [laughter]
137. 3:55>> I'm going to be there.
138. 3:56>> Like you I mean you need to know you
139. 3:57need to understand where every fry goes.
140. 3:59You know what I mean? Like it has to be
141. 4:01like you need to know that thing like
142. 4:02the back of your hand so that you can
143. 4:03really make sure that like that you
144. 4:04don't have a a single square foot extra
145. 4:06that you don't need. Like what we're
146. 4:08what you're going to be building towards
147. 4:10is return on invested capital.
148. 4:13That is going to be the metric that
149. 4:15you'll need to optimize around and
150. 4:17payback period.
151. 4:18So just like you have a payback period
152. 4:20for a customer
153. 4:21when you chunk up a level to the
154. 4:23business side, it's it's payback period
155. 4:25per location.
156. 4:26And so if you spend $100,000 I'm making
157. 4:29simple math $100,000 to open a location
158. 4:31if you can get that $100,000 back in 3
159. 4:33months then it's like great I can open
160. 4:35another location, right? And so if it
161. 4:38takes you 3 years to get it back, it's
162. 4:39going to be very hard to scale this
163. 4:40thing, right? Which is why you need to
164. 4:41really really aggressively control costs
165. 4:44um on the build-out but also on the
166. 4:46day-to-day in terms of like how few
167. 4:47people can I use to make this run.
168. 4:50Um and I'm telling you you got to study
169. 4:52the like Raising Cane's right now
170. 4:54like he's he's the best in the game
171. 4:57right now in my opinion.
172. 4:59>> Yes.
173. 5:00>> Like just everything that he puts out
174. 5:02which is so little which is a [ __ ]
175. 5:03pain. But everything he puts out, that
176. 5:06would be the guy.
177. 5:08>> We're doing beef tallow chicken
178. 5:09actually. Very close so.
179. 5:11>> Yeah, just I mean
180. 5:13as simple as possible as few ingredients
181. 5:15as you can smallest you know footprint.
182. 5:17You going to drive-thru?
183. 5:19>> Yes, yes we do have a drive-thru. Yes,
184. 5:21that's going to be good.
185. 5:22>> All right and then as you come down to
186. 5:24location picking and then like no and
187. 5:26then crushing the grand opening.
188. 5:28>> Should I think
189. 5:28>> That's the big thing.
190. 5:29>> I actually don't know much about that
191. 5:30world. I'm sure
192. 5:31>> to. So brick and mortar
193. 5:33comes down to return on invested capital
194. 5:35like I just said. You need to have a a
195. 5:37career path structure so that you can
196. 5:39have some sort of call it pseudo
197. 5:40ownership of each individual location so
198. 5:43you have somebody who feels like an
199. 5:44owner who's worked there like
200. 5:45Chick-fil-A has mastered this. Um and
201. 5:47you need to have a banger grand opening
202. 5:49strategy.
203. 5:51Like these are the things that are
204. 5:52required in order to make uh brick and
205. 5:54mortar work at scale because remember I
206. 5:56said that payback period thing?
207. 5:58>> Yes.
208. 5:58>> If you If you crush the grand opening,
209. 6:00you can pull forward the payback period
210. 6:01so you can start opening the next ones.
211. 6:03>> Makes total sense. Makes total sense.
212. 6:04>> Cool.
213. 6:05>> And
214. 6:06>> I'll I'll give you one more thing, which
215. 6:07is just that once you do the grand
216. 6:09openings,
217. 6:11we should be able to sustain the store
218. 6:14off of word of mouth.
219. 6:16Because food the margins are so low.
220. 6:18There's obviously little things we can
221. 6:19do, but like the margins are low enough
222. 6:21that
223. 6:22we should we should be good enough the
224. 6:24chicken should be good enough that
225. 6:25people eat the chicken want to come back
226. 6:26tell their friends about it. So it's
227. 6:28like we want to spend the marketing up
228. 6:29front so that we basically have enough
229. 6:31people try the food and tell their
230. 6:32friends that the people who churn out
231. 6:35are equal to the amount of people who
232. 6:36come for the first time and then it
233. 6:38stays at that capacity and then it keeps
234. 6:39on printing money.
235. 6:41>> Makes total sense. Yeah.
236. 6:42>> Appreciate you.
237. 6:43>> Thank you, Alex. We appreciate you.
238. 6:45Thank you.
239. 6:45>> If you like this video and you're a
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