¶ Success in Small Business Growth
All right , everybody . Welcome back to another episode of Big Talk About Small Business . I'm here in the studio with my co-host , eric Howerton , and a very special guest . Today We've got Tom Gordon , who is the founder and CEO of Slim Chickens . Hi there .
Welcome , Tom . Thank you Glad to be here . Man , it's good to have you here . I'm glad to have a great episode we are . This one actually might be a good podcast .
We got one of the most successful business-building entrepreneurial guests I think we've had on the show . Yes , without question .
Unless you put you , myself and a few other folks together .
No , yeah , I'll happily take the distant third , that's totally fine , but no , Tom's company , you've gone basically in 20 years , yes , From one to what ?
286 locations , something like that , maybe 289 . Now we're open about one week right now .
Wow , that is amazing . I just want to point out something that means that Mark did a little bit of homework and fact checking . Yeah , he did , that's impressive bro , is that rare ?
I just have a good memory truthfully for certain things Business stuff and numbers . I remember that's true . Things my wife says to me . I get in trouble for that . But no , tom has been very successful building this company and I just want to say I think it's a great product , thank you .
There are so many different chicken places out there and you see new ones come on the market and you're like how are you going to differentiate yourself ? And you guys have managed to really do that and I think part of that has been just having a superior product .
I think so too . I mean , it's a crowded space and is much more crowded today than it was 20 years ago when we first started .
That's true .
But you know we have the product . You know we own . You know great sauces and you know variety in sauces . And you know that's been the foundation . Then we just got to stay ahead with restaurants , marketing , stores , service , All the things you got to do to run the restaurant business . But you know the product's always foundational .
I laugh and joke people all the time because you know we all have been to some barbecue restaurant that's dirty and slow right but , the food's amazing yeah you know and I don't want to be dirty or slow , and I don't think we are but the food is still the bedrock , which brings people in , and that's the main key . It's so true .
Well , because I mean well , I mean like , actually to that point , like you go to those and there's actually an experience because the food was so good and the place was so bad .
It was so bad . Yeah , I mean really like you're like there was something special about it , you know . But it is true , I mean the consistency that you guys are able to put out what you do . I mean I've never had like an inordinately long wait time .
I've never had my order screwed up at the window , which routinely at other places with a drive up window , I mean some of them it's wrong , half or more .
And some of those are some big chains .
Yeah , yeah .
How do you do that ?
We're certainly not perfect . We have plenty of problems and you know , humans are fallible and that's just an issue . And I , you know , I require all of my top level executives to receive all the negative comments in their email , so everybody has to read them and sift through them wait .
Say that again . I didn't really . I like that .
You require all your top executives to receive via email all the negative comments that come in .
Oh , so they come into corporate and you push them back and they go to everybody .
We all see them .
Oh , the whole group . It's like a 360 thing right .
Yeah .
Don't disconnect from the customer . It can be a bit depressing sometimes some days , but what we don't do is is is we don't turn on the positive comments , which is fortunate for us because there's so many more . It would just flood everybody's email , yeah .
But we try to attack the negative comments and the problems and look , we get , we get in order wrong every now and then . We get a drink wrong every now and then . Sometimes it's long , but generally I think what you experience is right and exactly what I want .
How did you create that kind of a culture ? Because obviously you know the business you're in is very competitive . You can't just pay whatever you want to pay people to get really , you know , the best people in the field ? I would think Yep , especially based on your prices , which are very competitive .
So how do you do that ? Well , to get the people to buy into the culture of what we're trying to accomplish , it's always got to be more than the hourly wage or the salary right , it's got to be what are we delivering to the community ? And all these things are so business .
Cliche , you know , but cliches are there for a reason , because they're generally true . But it's cliches are there for a reason because they're generally true . You have to make it about a team and a family and a commitment inside that restaurant to deliver the products that people want to the community that's outside of that restaurant and we always talk about .
You got to own your two miles . Like you want to be catered to the schools and the churches and town halls and you got to make sure that the customers that live there know who you are . And from there you branch out beyond the two miles and you start really building the brand . But in our business , you know , we're proud to be a job for younger people .
The first job people have often Right the way they break into the restaurant business and we don't shy away from that . Like you know , people that come into our restaurants at 17 or 18 , we try to hire at 18 . We have a few 17s but , you know , at 18 or 19 or whatever and want to work , we're happy to have them there .
And we know that they may not be there when they're 30 or even 25 , but that's okay . You know we are working through the community , we want to be a part of it and I get lots of you know people come up to you like , hey , I worked at one of your restaurants eight years ago or whatever . Yeah , and I that's super like .
I think it's wonderful and I'm glad to be a part of that ecosystem of kind of first jobs , like entering the workforce and helping people do what they want to do .
I mean , I applaud that and also agree to an extent that we're like there is something like we're all been in business , right , and there's a lot of things that aren't the most rewarding things along the way , but I would say that what's always been the most rewarding thing to me is to watch people grow and become more than what they thought they could be right
in a way , or they didn't really understand , but you can actually point them in a trajectory . There's just something fantastically rewarding to that to me .
That's why I like it . I totally agree with that and I , you know , in my younger days I was more , I was doing a lot more of that because I didn't have as big of an organization .
You're on the front lines , yeah and we're on the front lines and you know I kind of look back and I was a little hard on some people , pretty tough in the beginning , and I , you know , could take them to the edge of sanity .
But could take them to the edge of sanity . But then you realize , then they realize what they can do , that's right .
You know people ask me that question like what would you tell your younger self , like I say , not to be as tough or as much of a prick ? But then you wonder , like what you've gotten here If you would not have been so hard as nails to get what you had to do to survive . That's true , hard enough .
That's true . That survive , it's true . Hard enough
¶ Entrepreneurial Origins and Partnership Success
, that's true , that is so true . So tell us a little bit about your background .
I know you went to TCU , right , went to TCU . I grew up in Little Rock , arkansas . Oh , you grew up in Little Rock , okay . Went to Central High public school kid and went to TCU in Fort Worth . Had a great time there , got a finance and real estate degree , okay .
And I went to work for Merrill Lynch back when Merrill Lynch was a thing , not Bank of America , thinking that I would be a wealth advisor stockbroker guy . Back then , before there was a no-call list , my job was to cold-call old folks for bonds , which was terrible , and after two weeks of that the bond book goes out the window and I need to have a job .
So I went to work for a restaurant . I moved back to Little Rock and I worked for the breaker flagged macaroni grill concept Back when mac grill was a big thing . Sure growing and growing and it was fun and I learned a ton in that restaurant and you really kind of learned it .
And from there I went on and worked for a few years in Los Angeles at Sunset Conglomerate restaurants . We had the Miyagi Sushi bars and Sutter's Chop Houses . How did you end up ? From Little Rock to LA ? Well , interesting story .
But in my macaroni grill time , um , you know they wanted me to move to a different market and do a bigger job right and you know it was an entrepreneurial itch that I didn't know that that was . I couldn't have articulated it then . But I just didn't want to . I just didn't want to do it . I was afraid of the paycheck .
Really , I mean , I was gonna have a house payment and a car payment , like man , let me , man , I'm gonna get trapped . And you know , I mean they were going to pay me a fortune , like you know , $31,000 a year .
I was about to be rich .
Yeah , I mean set , but that's funny . But I just didn't want to do it and I knew some TCU guys that were in LA and I thought , you know , I'll go out there and carve out a life out there for myself , try it out and be out there , which I did . I love LA . I had a great time out there . Yeah , Did almost four years .
But then halfway through that time Greg Smart , my co-founder , and I started talking about this concept and he had seen some of the early ones on the East Coast and in the South and said look , no one's doing this right and no one's doing it in Northwest Arkansas . At the time , I mean , there wasn't anybody doing it up here .
He said he was doing retail stuff . He said come back , let's combine forces . You're doing restaurants , I'm doing retail . Let's put it together and do this right and create a brand that we want to have , that we're proud of .
So how did you know , greg , before that ?
Man , we were all high school troublemakers . Yeah , yeah , I got you Duck hunting buddies together , I think I had his girlfriend in my very first class .
I taught at the Walton College . You know she was a friend of my ex-wife's little sister .
That's who I think it was Sounds like a space bulls .
Yeah , like she grew up yeah , she grew up in bettenville , bella vista , but anyway , and that was great . I think that was his anyway he's .
He's been a great part . We're still partners . He's in the office with me , you know , and uh , it's been a .
You know partnerships are hard as we all know sure we've had a great 21 year run . You guys had four partners . I thought at one point didn't you Early on , it was just the two of you .
We had a third guy that was with us at the very beginning .
Okay , but for the vast majority of our 21 years .
It was just the two of us , so I think that's kind of cool .
That combination is just interesting . Looking back , right , You've got a retail person and then a restaurant . You bring that together . There's going to be some magic in that . You know , with that kind of understating experience . There was , you know we didn't know at the time , but yes , exactly .
Yeah .
And that's what we . That's exactly what we did . You know , greg kind of took the retail merchandising , branding you know , the visceral and visual experience of the guest is what he was always great at and I took the operational stuff and some of the finance stuff .
But I can make an order , I can make a schedule , I knew how to organize a restaurant , I knew how to get it going and all the other bits and pieces . But we all did everything , just the two of us , for years .
So when you guys got together , you both moved back to northwest Arkansas and then how did you start your first restaurant ? What was that time span ? How did you start your first restaurant ? Like , what was that time span ? Like , how did you actually because that's one of the bigger barriers for Getting going , getting going .
Yeah , people talk , talk , talk , plan , but they don't do , yeah , 100% , you know .
You know , for us it was truly like a wing and a prayer . No pun intended . With the wing , no pun intended .
Now was North College the first location .
First location . That's what I thought . It's still there . Yeah , they're still cranking out dollars and doing fine .
Yeah .
Now that building is 60 or 70 years old . Yeah , it drives me crazy . Something breaks in there every week , you know . But , you know it's there . It's the first one . It's iconic . We're due to do another remodel on it soon . It's always kind of falling apart .
But you know it's where we started . Do you own that ?
building . No , we don't . I wish we did . I ask him every year you want to sell it ?
He says nah yeah yeah , so you guys got that thing going . Did you have a family at that point in time ?
I did not .
Okay .
It Not Okay , it's a good thing Made it a little easier . Yeah , when you're working 100 hours a week and not making any money . It's tough to support people .
Like I look back and wonder how we did it Right .
We'd grab a $20 bill out of the register on Fridays and buy a six-pack of beer and eat chicken that we cooked ourselves , and that was it yeah , no kidding .
That was one of the pros of having a restaurant . You could eat , you could eat . It's the truth .
That is such a common theme , though , I think , for so many successful people . As you start out , you got nothing , nothing , and you live on nothing if you're smart , you live on nothing .
And you play this whole shell game with all the credit cards .
We call that the dance , I call it floating .
And Greg and I would sit there like hey man , I got to pay this one this month . Can you wait two weeks ? And I mean , we did this for years , Sure I ?
understand . I love when I've talked to you know . I'll tell our best and I told a group of them I probably shouldn't . But I was like , look back in the day I mastered 7.01 pm on a Friday . I knew I had until 6.59 on a Monday . I had an extra $200 in overdraft carrying it . You wouldn't penalize me , Owen . I was like rich for the weekend , man .
Man , you depended on that , Hell yeah . But then a Monday morning the first thing I was doing was calling and collecting whatever bills , Like , hey , man , Mark , can you pay ? Pay the 500 invoice that's been out for you know about six months .
well , you , know we did the exact same thing , which and I had a great banker that really kind of bent the rules and helped me . But we did the same thing because I we have payroll on friday , we'd say you can't go to get paid until after six , right after you pick up your checks paper checks too .
They want to do electronic because that comes faster .
I would pay for groceries or bills and I would call my banker who took care of me . I said , listen , I paid a bunch of money but none of it's going to clear . But if you can hang on until Monday , we'll have sales from the weekend . We'll have Saturday and Sunday going in the back Boom .
Just look at the history . This has worked out every week for the last two weeks .
I mean , you know everybody . I just I saw something on facebook from somebody I don't even know , but he's a quote friend , but anyway . It said , um , like don't ever start a restaurant . You know we did it and it failed , or whatever . Um , and you hear people say that all the time . You know . So what possessed you ?
I mean , yeah , you worked for some companies that knew how to do it right , that had a real system . But here you are , a guy with a finance and real estate degree from a good school , tcu . What made you want to go into a business that has a high failure rate and a low inherent margin ?
You know it's interesting , people ask that question . I think it's because , with all the things I've done , like you know , getting into TCU , which you know stretch and paid for by my family I didn't grow up with a job .
It's a lot of money .
TCU is expensive and then you know , moving to California and then starting a restaurant company , like you know , if it's not borderline impossible , it's not really interesting to me .
So you know , we're like you , like proving people wrong . Yeah .
I like proving people wrong , yeah , but also , if there is a way to create sustainable income and then eventually you know we hoped years ago sustainable wealth from it , then all the better . Sure , yeah , then all the better .
But a lot of it for me , whether it's restaurants or whatever we do , is I never I managed to get away with really not ever having a boss for the most part .
Yes , I understand .
That was always the freedom was always what I craved , and Greg and I always said if we could ever make any money at this , this lifestyle would be great . But now it's been much different . I laugh and joke that we were broke for the first 10 years . We did this , and that's the truth .
I mean broke , but we kept it together and persevered in the second half .
So you guys , when you started the first restaurant there at North College , was it part of your vision to grow this into the international company that it is today ? Or was that just something that kind of opened up as a possibility as you went along ? We were young guys .
I mean , we were just 28 , 29 years old when we did the first one and we always wanted it to be big . We didn't want to do one restaurant . Now , I don't know if we always wanted it to be big . We thought we didn't want to do one restaurant , yeah . Now I don't know if we could have defined what big was that ?
Tens at 50 , like you know , we're just trying to survive , sure , but we believe we did believe , after seeing some other restaurants around like you know , chick-fil-a was going at that time and there were some Zaxby stuff that they and I'm like I mean , if we could do this right , and I remember thinking , if we could ever have 10 restaurants that were working ,
we'd be set .
Yeah , yeah , sure , make it up .
¶ The Success of Slim Chickens
But the ability again to kind of control your own destiny and be your own boss and not have anybody control your time , was the most compelling piece of the puzzle , and you know , and now it's great .
Yeah , when was ?
the— .
As you all know , yeah , yeah , no , I mean there is , I mean it's yeah , there's a payoff I think that you know like when we do this show , like mark means like there's some realism here that I think that people might skip over if they're thinking about being an entrepreneur . They don't like when we say it was hard .
We're not saying it was just a hard job , we're saying that like literally . In my experience it was like devastatingly difficult , to the point in highly risk . You know lots of risk , no misunderstanding .
You know you would get some support here and some wins there once in a while , but it was at the clip hanging moment , Right , right , you know , seriously , I need this Right . But I mean , you know , I think that it's just important for people to recognize that because you know a lot of this .
I mean , would you agree with this time Like where I think a lot of the business and my experience has been more about emotional intelligence as much as anything else , Like the ability to see vision and to you have all these problems that are stacked up , but you're able to persevere through that with that attitude and that drive when numbers don't make sense .
Yes , of course the numbers never make sense . I mean everybody's woefully undercapitalized , and that's true . You've got to press through and prioritize problems . That's what I always say , I tell my guys . Still , I said you have the right to prioritize , please do so . Love that and you know , getting through it is the key .
You know , you just made a statement that I think is very interesting . Everybody's woefully undercapitalized . I think that is very important for your long-term success in business , because you develop a discipline you would not have if you guys started out . We're going to go raise a bunch of money . Here's our thing . We got $5 million .
We're going to open up 10 slims . Okay , you would not have built the discipline and the systems that allow you to be as successful as you are now .
Well , I was going to say . The second piece of that is everybody is well undercapitalized and those who are not typically burn through their money and fail .
Exactly . And that's not a blessing to have the money .
It's generally not .
And it just you know .
You think it would be ?
oh , I can be disciplined , but it's like being a rich kid you don't develop the work ethic .
Those who've started . They just rip through it and then suddenly it's over , and that's tough .
Yep , so I think that's bold . I agree , I really . You know , it's like it's inadequate vision , yeah .
Inadequate problem solving skills .
Yes , Inadequate work .
Yes , you know long and hard and smart .
Work , work , yep , but so back on on slims though . Well , back on on slims though . Um well , what do you ? Do you like to call the business when you refer to it as the full name , in order to be consistent in your branding , or do you call it slims , or like me , or just , or anybody , anybody , what , what do you guys ?
Is there like some mandate in-house that you know there's no man because mark likes to call it slims ? Everybody does , but I know it's not really , but you know people you hear people say slims chicken , which is not what we have .
Right , it's not really . But you hear people say Slim's Chicken , which is not what we have . It's Slim Chickens with an S . But that ambiguity has , I think , been good for us . Is it possessive ? Is it a name ? I don't know what is it . It's obviously a play on words which lends itself to the short , tired vernacular of Slim's , which everybody says .
I mean everybody in any market , once you get into a market , that's what they call it . What ?
is the fascination . It seems like chicken today is absolutely taken over Like when we were kids , it was burgers .
Right .
You know , you had KFC out there . Sure , that was it . That Chick-fil-A didn't exist as far as I knew , like it wasn't anywhere . I lived , yeah , as a kid . But today it's the chicken on campus where I , a couple nights a week , I eat there because I teach at night . Yeah , the only two places that have these unbelievable lines are slim's and chick-fil-a .
Yeah , the rest of the food services have almost nobody there . Yeah , what do you think that is is ? Is it like health consciousness that it's not as cholesterol-laden as beef , or what is it ?
I think that the first thing is typically just tenders are easy and chicken sandwiches are pretty easy to manage . I mean , burgers are too , of course . But the ease of the use with , I think , the perception of health and I think there's less calories and less fat than beef I mean that's a fact , right ? Does it make a giant amount of difference ?
Hard to know , but I believe it to be healthier than beef . At least . I'm willing to eat chicken four or five times a week , or I'll eat a burger , maybe once , maybe not , but of course we're all older too .
We can't eat like we used to process , though the way you guys fry seems healthier to me than the other guys . There's less , I agree , fried coating .
We have light breading which doesn't hold that oil ? Yes , and we and the flavor you can tell we use a non-trans fat oil and that's we could be go cheap and use a cheaper one , but it has trans fat and the cloudy stuff in it that you don't really want . So , look , you know it is fried , but it's not terribly unhealthy .
It is good quality protein , that is . You know , there's no political or religious veto on chicken . There is on beef . That's a good point , and it allows us to appeal to everybody .
Well , Chick-fil-A has that cross to bear . No pun intended , Okay , I mean , there are people I know who will only eat there because of their policies and practices , and there are people I know who will never eat there because of their policies and practices . They seem to have been successful in spite of the objections .
But it is interesting that you made that comment . You're agnostic .
Yes , like , for example , we want to be agnostic . I want to appeal to everybody .
I don't want to be politicized .
I just like no way . We're here to sell food .
I want you to be satisfied and I want you to come back . We can all agree . We like good food , right ? You all not disagree , right ? By the way , though , I said this to Tom once , I think in an email or text but I love your mushrooms . Oh , thank you , me too . You guys do , you cannot .
Most people don't know , I think that you even offer them Now they're on the menu . I tell people have you tried the mushrooms over at Slim's ? They're so good Like the fried mushrooms . No-transcript .
We do it all by hand .
It's so good .
I think that so many people and we've been at Northwest Arkansas for 20 years they just know what they want . Like you , listen to the drive-thru and it's like you know some sweet honey mustard go on .
Yeah right , I mean look at them in here , you know .
But yes , those products are great . The fried pickles are amazing . We still love them , you guys do it . We do a lot of that everywhere around the country , but I appreciate you saying this . I think the mushrooms are amazing .
¶ Overcoming Hurdles in Small Business
When you were like rewinding back to , like your first store , your first restaurant . What do you think , like if there is an entrepreneur listening here , they're about to get something going , or maybe in the middle of their kickoff .
What do you think were some key decisions that you guys made that allowed you to get over those startup hurdles , like I mean , it can be really generalized . I mean , uh , but what helped you get through that painful era ?
well , there are . There are key decisions that we made kind of midway through that allowed us to get a lot , lot bigger , but in the beginning I think the key to our success in the beginning was mostly the fact that greg and I were inside the store every single day . We just saw the guests . If something was wrong , fix it , yep .
And we had this totally ridiculous schedule where I'd work on mondays and he'd be at this little office I wouldn't be bigger than this table probably trying to pay bills . Tuesday we'd switch . One of us was there at night and then we both there wednesday , thursday , friday , saturday , so busy sunday .
One of us goes half office morning and then we'd switch and the other guy had half office at night and monday . So there's no days off like you're in the restaurant or a little box about this big every day and and we did that for I mean two , three years . So that means there was not .
I mean , of course you know every now and then like , hey , I'm leaving for a day or two and you cover it , but generally week to week it was , was every single day for years . I mean every day and look some people and this is not a disparagement , just they'd rather have their job and know they can hang it up at 5 o'clock .
Oh I know , and that's fine , if you want to sign up for this and do something that could be , I think , amazing and great , it often takes a further commitment .
Did you have a lot of people believing in you in those times Like ? Were your bankers there ready to help you ? Hell no .
Like what bankers ready to help ?
Well , I think it's an important thing , right , because I found myself going what the hell is wrong here , like this is not what I'm hearing is what happens .
Right , like you know it becomes frustrating because you know you would talk to folks and if you hear the word no , no , no , no over and over again , right , like that can be really demotivating for people .
But if you're in an entrepreneurial space , like I don't know , I found that like the no's would encourage me , would actually make me , like what you said earlier , prove them wrong a little bit .
I mean we tried to . We have a business plan and we're going to go borrow money . We went to every bank in the city of Fayetteville . Everyone said no One guy laughed at me , asked me how old I was and told me to get the hell out of his office .
Oh my God , that is a fact . I hope that guy regrets it now . Oh , he does .
You know , and because this is such a public forum , I won't name the guy , but I often have and I said look , if you would like your dreams to be killed , don't seat this spiker .
Yeah , that's funny . I want to hear who that is at some point , just to see , if I know .
I think that's the point , though , right Like I mean like there's something to the fact that , where most people are taught okay , you want to start your own business they can learn all these different things , these pro formas , and they do all this work , and then they start going out trying to try to exercise that and you're gonna get doors put in your face
always . But you guys were able you and greg were able to like to bootstrap it to bootstrap . But you , but you hear those words like get the hell off is how old are you guys ? Right ? I mean , that's pretty freaking raw and I never heard negative .
Yeah , you know what I'm saying , but then to be able to walk from that situation and then show up to work .
Well , you know , we stood up and I said I'm 28 and fuck you .
That's when I sit . That's funny . And that right there is the entrepreneur , that right there is the entrepreneur .
That right there . You know you touched on something that struck a chord with me , though you know I think all of us would agree . I read a lot of stuff all the time , Like all of us .
I'm just reading , reading , reading and you see , like this government program is going to help small business , or this business failed because of the such and such tax policy , or whatever I mean . Honestly , I think it's a lot of bull where .
You know , I don't feel like I've ever been put out of business by the government , nor helped by the government , Either one . It's like whatever they do , fine , I've got to make it work .
I would agree with that 100% . People ask me all the time , you know , is the election going to do anything for you ? The answer is no . What's really going to happen ? Maybe 24 months later there's a tiny adjustment to tax policy who knows ? But does it change the day-to-day business ?
No , Keep your head down , keep going . You've got to succeed in spite of all that .
You've got to succeed in spite of all that , you've got to succeed in spite of it , and we talk about this a lot in our world and in my office with my team , because , look , what has impacted us is the current economic environment and higher interest rates , not to this giant detriment , but what we have is money costs more .
Construction's expensive , as you well know .
Yeah , that hurts your growth , and so , because of that we have is money costs more . Sure , construction's expensive , as you well know .
Yeah , that hurts your growth , and so because of that we have franchisees not all , but some that say , hey , can I wait six months to do my next store .
Can I do it ?
next year . You know , nobody's running away , but like there's this sort of management of pipeline and how you deal , with the dollars . Yes , so that is impactful , but I don't really fault it . It's not wholly unnecessary . I mean it just sort of is what it is .
And typically , what we've seen over 21 years is you have an 18-month or 24-month kind of clunky cycle which we're right in , and then you have a three or four-year pretty good one . Now can I guarantee that ? No , but that's what I'm seeing . I'm already seeing , you know just recently , like construction inputs have been going down a bit .
You know commodities are going down , industry is going down .
So I see a good year next year . You can see it starting .
Yeah , I see it starting to kind of come back to normal . But we say that that's a real thing , but I say that doesn't make any difference to the guests , they don't care Right ? External excuses are meaningless . Meaningless , like we still have to find a way for franchisees to make money , build restaurants , and we got to support them .
Yeah , and it doesn't matter what's going on outside .
well , the great thing about your business too is , I mean , if you just kind of take the macro view , people gotta eat and you're not expensive , so it's like you've got a really good you know formula there for sustainability , I think .
so We've had some price raises in the last 18 months just to cover the inflationary cost of products , it's still not expensive . Everybody's had that , everybody's had it . But you still see a little traffic blips when you raise price and the burger segment's down a whole lot this calendar year and we're actually moving up . It's been a pretty good year .
Last year was a little trickier for us , but you know you still got to do it , you got to deal with it and even with our , I think , very reasonable good pricing , whenever you pop it up a bit you see a tiny little retraction in traffic and you got to build it back . But but we know that and that's fine .
I want to ask you a question that hopefully you'll answer it the way that I believe . But you just mentioned the macroeconomics are not really affecting you . You just keep your head down , you just roll with it , right , and that's not really what's impacting . But is there something that's a little bit broader , that might be impacting your business ?
That's not necessarily economical , you know , or maybe even law changes or whatever it might be , but have you seen something that goes on from like the broader level that does actually impact your business that you have to counteract with ?
From a broad level , the answer is is no . I mean not not anything that just has this massive wave of change . You know the rate of the kind of the , the policy of of raising minimum wage , kind of and and having it set for three years , regardless of the economic environment around you . It doesn't make any sense to me .
I you know I don't want to get political , but I think it is . It's crazy . I mean it just it's . It eliminates jobs .
I mean that that is a fact . You just can't legislate a higher standard of living . You can't .
Everything will just go up , then I mean and and so , and . So what we do is the same thing . It eliminates jobs . And look , I'm no crazy right-wing conservative by any stretch of the imagination . Sure , but that is an issue . And we pay people , I think , very well . But we pay them well when they advance in their careers .
When they become indispensable , we want to be able to do it , that's totally fine . Their careers , when they become indispensable , we want to be able to do it , that's totally fine . But legislating , and especially having it throw in that stone three years out , when you don't know what's going to be going on , that has an impact .
It has an impact on franchisees and what we do .
It's like rent control . It doesn't work . You can't just say you can't charge more rent . What's going to happen ? They won't spend any money on the building , right ? So you got to pay more for labor . What do we do ? We hire less labor , I mean , or raise prices .
There's only so far you can go with that , and you got to find your ways around that to survive and make the margin work for the franchisee .
And remember , we're in the service business , we're taking care of franchisees . Yeah Right , and that's happened in more than one municipality . And we're like , okay , we've got to plan this out three years in advance . What's it going to impact ? And then suddenly you have a . Then in the third year interest rates go way up and then it's really problematic .
That's one issue that I'm seeing , but I wouldn't tell you that I wouldn't hang my hat on labor . That's not an alleyway , just like anything that's sort of legislated into the future without any consideration of what the future may look like .
It causes problems Because you could have compounding effects . Yeah , compounding effects Makes it bad .
I got two questions for you that I've always wondered . One is like when I go to McDonald's in New York City and buy my Big Mac or whatever , it doesn't really cost any more significantly than I pay here in Fayetteville , arkansas . How the heck can they do that when you know the rent is staggeringly high and the labor cost is higher ?
Well , I'd argue that it's probably a little more , with child paying attention , like 50 cents 30 cents .
Yeah , I'm sure it's a little bit more . Yeah , it is a little more .
And the math , that little bit more with a quadrupling of volume makes it work .
Okay , so the volume is just so much higher in some places . I mean , you're obviously in some higher cost locations and so I just wondered
¶ International Expansion and Second-Stage Growth
about that . I guess the other thing I wondered about is you've made this push into international markets . Now , what motivated you to do that ? Versus saying you know , obviously this is a huge country to do that , versus saying you know , obviously this is a huge country .
Right , we could quadruple the size of the company and never leave the confines of the lower 48 . Right , what's possessing you to go international ? You know it's funny .
Every international experiment we've done and I experiment every international effort we have been a part of has come to us first through some person . We know some connection of one of my partners or one of my C-level guys and they've come to us and they see the brand somewhere .
Typically , the international piece of the puzzle has really gotten big because we have a big presence now in London and you know it's great for me I get to london several times a year love london , love london yeah , um , but everybody goes to london , so people see it and then they call us , say what is this ?
yeah , and , and so we have an opportunity to capitalize on just that positioning in , you know , the major city in the world that people kind of centralize and go to . Yeah , interesting .
And that's allowed us to step into Europe and we'll be into .
Asia and then do the things that we're doing today Now , was it a good idea back when we first started this ? I don't know , maybe , but I'm glad we did it , because the UK partners have been exceptional for us . They've been great . They are the tip of the spear with .
Europe and they run great restaurants and allow us to go over there and host other people from other countries there and it's been a great partnership and I couldn't say enough about them .
Interesting . How did you make that ? Like , how did it happen specifically for London ? Like , how did that actually ?
come about . We had . I think this is right and and you know it's been a long time and there was lots of different connective points , but we had two restaurants in Kuwait that there were the first two international we ever did in Kuwait . Yes , wow , wow .
And it's interesting , at some point before COVID they were seen by our team in the UK because they have other restaurants in the Middle East , in Dubai and , I think , in Kuwait too . They were up there for some reason . So they saw the brand , liked it and then found their way to us and contacted us .
And I remember very clearly Sam and I were in the UK about to close the deal with the guys and we had the two stores in Kuwait and I said , man , should we be messing around with another country ? Like , I think we had like 70 restaurants at the time or something and plenty were to your point here in the us .
Yeah , we said , look , let's do one more country and let's work on it . There'll be plenty of work . And again , I I am so glad we did and and you know , and so you know the kuwait guys we're still in touch with and they deserve the credit for having the first two and helping us get to the UK so there's no bad blood there .
I just the London group was capitalized , but they've been in business a long time . They're very sharp , they have lots of restaurants . They've just done an amazing job .
It just seems like you know , as a franchisor , it would be hard to supply these overseas companies with the same stuff that you can give somebody here . You know whether that's training or whether that's all the packaging and everything else , because of different laws and all I mean .
And just getting you know , like in a normal situation , I don't know , do you provide any food products to your franchisees or do they all buy their stuff ?
No part of the work when we go into a country is sourcing supply chain locally ? Yeah , I would think that , and most countries , especially in Europe . They don't import much food from the US . And the US doesn't really either . I mean it's , you know , furniture is imported and electronics , but food typically isn't as much .
Furniture is imported and electronics but typically as much . But we do have to export talent and people and send folks over to train and they come over here to look at architecture and how you build and right , whatnot .
But the the exportation of talent and getting people over there and buying plane tickets is what we have to do , yeah , but we help them source products . We'll do food shows , we'll test , you know , the breading manufacturer over there or whatever . And then , once we agree on the lineup , we just did this in another country .
Okay , these are all approved products and typically they're very similar . Now , every country has a little nuance and some oddball stuff that's on there it's okay , but typically it's real similar . And if you go to a store in London in the UK we have 58 in the UK , 59 in the UK now generally it doesn't taste the same .
Tenders are great , fries are great , sauces are very similar . They've got a couple other sauces that we don't have here but that's okay just preferences . I remember when we were doing the first show , they had this what do they call it ? This garlic parmesan . But it was like this gross mayonnaise .
And I looked at the guys and I'm like y'all can't sell this in my restaurant . This is bad . And they're like just let it dry . Number one seller .
That's killing it , that's wrong . The local culture it , that's just us , the American's wrong the local culture .
That's it . Yeah , it drives some of that stuff , but generally you know they barbecues , honey , mustards , ranch , those sorts of stuff . Yeah , it's great .
You guys have really good barbecue sales . I've always liked it .
I agree , I got a question . So I don't know that we've ever really talked about on the show the pain of starting up , that hustle right and all those barriers . But then what I don't think a lot of folks know and I sure the hell didn't know until I hit it , was the second stage growth area , right .
So you start up , you get one restaurant , so all those pains get that going , you get up to two , three , but then there's always this like glass ceiling that you can't see as entrepreneur and it's like why the hell can I get past this line ? And that requires a different level and a different type that's more of that .
Corporate management practices start coming out .
Yeah , now I see where you're going . Yeah , it's like does the entrepreneur have to step aside and hire the professional management ?
Right , right , but the entrepreneur ? There is a transition of the way that you're working and how you're doing that .
The entrepreneurs these two are still with the firm .
Yeah , exactly , and so they made . I guess my point is you made it obviously through a second-stage growth scenario right , and you're still with it , so it doesn't require somebody from outside . But I think that there's a transition to mindset , thinking that you guys you and Greg had to make .
Can you remember when that second stage really hit and where the hurdles were ?
Yeah , and it's funny we talk about this now because I think our company is at kind of a third stage now . Mm-hmm , yes , do , because we were thinking about , like you know , here we're about to hit 300 , we got a punch here , there you go to a thousand . Yeah , I think that's the next section .
And are we equipped with talent , people , yeah , diversity to do that like open question ? But in the beginning , when we had six , seven , eight restaurants in Northwest Arkansas , people would start coming to us and saying where did you buy this franchise ?
Yeah .
We'd say well , it's not it's ours . Yeah , and we started getting real legitimate interest , and by legitimate I mean not an out-of-work guy sending an email wanting to buy something that he can't afford .
Right .
What I mean is People with resources ? Yeah . Is people with resources ? Yeah , what ?
I mean is a ?
group with 20 Subways or 50 Wendy's or 30 Sonics operators Right who had capital , ability and experience . And those were the people we targeted because we didn't want to teach them the restaurant business .
It's hard enough , but if they had people and capital and experience and wanted to plug in another brand , their portfolio and often what happened is they had built out whatever territory was named brand wendy's sure , and they didn't have any more to do yeah and they didn't want to hopscotch states or whatever right yeah , right but they can add another 10 restaurants
in that same swath with us and they can have their 21 days . They can have 10 or 12 slims and they may have six of this and eight of that , but right , we're additive to the portfolio and additive to the cash flow of their enterprise .
Sure , that model was what has worked for us , the best interesting um and so to do that , when we started getting this legitimate interest , we found our chief financial officer and then he helped us kind of get the dollar situation straightened up . He was the first big hire we ever made . He's still with us 13 years later .
That's cool and you know , good at forecasting and cash management and all things entrepreneurs aren't that good at . And then we I'm guilty Totally guilty , totally guilty .
And then we , as the franchising kind of fervor kept growing , we found a guy named Sam Rothschild who was the COO for Applebee's and was kind of the architect of their franchising system , I see , and it was perfect yeah sure was kind of the architect of their franchising system , I'd say . And it was perfect .
You know he came in the office and you know we had a good time . We laughed , we loved the guy immediately and we toured the restaurants and he wrote this big SWOT analysis up on the board and he said this is good , this is good , this is good . We've got to fix this . We've got to change this . We've got to fix this . We've got to change this .
We've got to hire this guy and all this stuff . And I'm like , well , okay , what will it take to get you to stay here and do this ? And he goes well I know this is a job interview . I said I didn't either , but I like you and I like the plan .
So what will it be ?
And we worked out a deal and he's in with us it was 11 years Monday , so somebody who's experienced it , totally experienced , yeah , the UFOC and all that . Right Now it's called the .
FDD . But yes , that's right . Yeah , and somebody who knew how to do that , knew the attorneys to do it and had a Rolodex of people to call to start and kick us off and to get the whole system organized , Because franchising is a systematized thing .
Yeah , system organized , because franchising is a systematized thing , it's a business and it can . It's what it should be , and so our job is to support .
When chicken prices are high , people get aggravated and I wish I could control the chicken market so I'd be a lot richer than I am today , but I cannot . But when things are good , things are great . And to build that system of support , that's what we're all about , that's what we live for .
So I think kind of your answer in summary is you started making key hires the right key hires to kind of help get through that glass ceiling right . And I agree with that . That's what happened to my experience too .
Like JS .
Bull , my partner was , is pivotal to me , absolutely pivotal . Yeah , like he , he was able to bring in and hone in direction .
Yes , and put goals to the team and was really a team player , like a true team leader , which , you know , I'm just the the crazy train that comes running the door saying let's do all this you know and everybody's like , why you know , but JS was able to take a lot of things and that sounds like I mean it's kind of interesting .
I mean , would you share the same experience , mark , that there's these key hires or there's people that join in that can help you lift over ?
I think you know . I mean , obviously , both of you guys did a good job at that . I think , though , what happens to a lot of entrepreneurs is they bring in enough of those people that at some point , those people kind of get together and it becomes us versus the entrepreneur .
I've seen that phenomenon develop too , where it's like well , he's too crazy , he's too radical , we're , we're smarter , we're more planned . Why are they wanting to take that risk ? And it's sort of you know , and the battle forms for control of the future direction . Many times , and sometimes the entrepreneur ends up exiting and sometimes this group takes over .
Sometimes they do well , sometimes they falter . Yeah , Because they don't realize that that spark plug out there was really more essential than they thought .
Yes , and you're still plugged in .
Oh yeah . I mean luckily , we haven't found that , and I think the reason that we— you must have seen that , though A little bit . But the team that we have brought in , the C-level team , I think that we did a good job of giving them a real meaningful piece of the business . There's a meaningful carrot .
Destruction of the C-level team means destruction of everything typically , and for us we didn't want to do that . So everybody's aligned , organized and going towards the same goals . Now I think that there's— You've done a good job .
Clearly you keep those key players Totally .
Yeah , I agree , that's actually a really yeah , I agree , but as we grow we need more of them though .
And you find this other interesting paradox with the third wave and this is an interesting one we've talked about a lot it's like okay , to break through to the next level . What other C-level or leadership level , vp level , svp level people do we need to be hungry and really chase a carrot at the end ?
Because the current crew of guys suddenly , after 21 years , they're in pretty good shape .
They're in pretty good shape . It makes total sense . I can see that .
How are you going to motivate ?
You might be a little too rich and a little too lazy shape , in pretty good shape , and I got yeah , it makes total sense , and you might , you might . How are you going to motivate you ?
might be a little too rich and a little too lazy .
Yes , to push the agenda right , it's like , why take that risk ? Yeah , I totally get it and and so . So how can you create that ? We have that discussion a lot . How do you ?
how do you create the ? Next wave to go the whole way , because and look , I I mean you work and it's .
¶ Entrepreneurial Success Strategies and Expansion
It's funny , it's not bad , it's just a paradox . Like I'm proud of the success we've had , right , I'm proud that we're not broke 21 years later after doing .
But it's human nature , but it's human nature . Yeah , you can't change that . And people do get satisfied .
That's right , sure well , you get satisfied , you get older , you get risk averse risk averse . You have family .
I'm much more risk averse now than I used to be .
Oh , my God .
You look more tired after the end of the day .
That's all I think about now .
That's all my kids say . All you say , dad is about risk , eliminate risk , eliminate risk . I'm like , how didn't you say that 20 years ago ?
I got it because you have nothing to lose . You have nothing to lose , that's right .
Once you actually got something to lose , you're like stop .
Yeah , you have nothing to lose .
Dude , that is so true . That is very interesting and I think there's a lot of good lessons here for our listeners .
Oh man .
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You know to the journey that Tom's gone through and you know it's a unique journey for Tom . But it's not unique . In a lot of ways there's a lot of commonality with some of the other successful people we bring in here . We look for successful business people . I'm so tired of everybody saying we learn more from failure than we do success Bullshit .
Stop God saying that . Okay , it just pisses me off . Failure is painful . The goal is avoid it . Amen . Learn from other people .
Okay , failure sucks . Yeah , I've been broke and I've been not broke , and not broke is better .
Yes .
But just to recap some of the things you know , tom made a lot . First off , he worked outside of the business , but in the same industry yes , from some bigger players and you learned things .
I learned a ton . You learned what ?
you wanted to do and you learn what they didn't want to do and value education . Yes , that's super valuable . Then you know , when they got into business , you had a good partner that had a different background . Okay , complimentary , so they're not treading in each other's territory . Yep , worked their asses off for 10 years .
Okay , didn't bring in outside ownership Right .
Freaking chicken strips , okay , over the weekend to survive the weekend , yes , you know 100% .
So that's , that's , that's piece number two , right there , right ? Piece number three is to have a bigger vision for what the business can do and then starting to bring in people who had experience in building a company like they wanted to build , that had the expertise to do that . The franchising person , the CFO , understands capitalization .
Yep , okay , Yep , and I think you know that's a really good model . I think yeah .
And you know , the last piece of that puzzle which you'll appreciate , was our chief marketing officer . Sure , because none of us operations finance , none of us knew anything about how , to you know , really run a P&L through good media and marketing . And so we finally got that piece , and once that whole crew was together , then it was gone .
That's right . How long has she been with you ? He , he .
That's eight years , so a long , long tenure .
You've had a very good , unusual low turnover .
I got my ways to keep them all together . That's right .
I forgot the one fundamental thing in the recap Start with a really good product . That's very simple . Yes , you know , you've got a simple business in a way . I mean , at least you don't have like crazy menu . But simple can be hard variation but it can be hard yeah , but you can't do everything .
Well , you know , it's like I go into these asian restaurants or whatever , and you look at this menu , you're like holy cow , there's no way , and I want to order everything . Good , you know . Or even like , um , you know , uh what ? And you're like holy cow .
There's no way this little hole in the wall can make all this .
Good , you know , or even like you know . What is it ? What's that crepe place that started out ? It's got a huge menu . I can't remember it , anyway . Alzheimer's is kicking in . I can't remember it , anyway , alzheimer's is kicking in .
But no , you know , I think having that very simple menu and doing things really well and consistently was the underpinning too of it to have a product that's just fundamentally good .
Before we exit , I do want to give Tom one big thank you to you and Greg , thank you for taking really great sweet tea and spreading it across the country .
That's quite well , I forgot about that . The best sweet tea .
You know what I'm saying . There's a way to make it . I used to work in restaurants back in the day . You don't just throw sugar . There's a way I hate it . When I go to a restaurant , it's like you got sweet tea , no , but we have sugar packets .
I'm like not don't have anything , yeah no , you're out .
You don't even know what I'm talking about , but I go until they're spreading the sweet tea . Message from well , from arkansas , spread the tea or spread the dipping sauces , spread the variety .
I I am I always mix the two , and when I go cheesecake factory , that's what I was trying to think of . Their menu is so huge .
I don't know how they could do it but um , but yeah .
Well , you confuse us when you said a crepe I know , I don't know why it was cheesecake , cheesecake factory um you know . One last thought , Tom Are you familiar with Ken's salad dressing ?
Yes .
He must be in your business . You know , Ken's Steakhouse was a really weird restaurant in Framingham , Massachusetts . I used to live up there and they had like four or five restaurants in one building that were basically all the same Right . It was like Old People Steakhouse versus another old people's steakhouse and yet another old people's steakhouse .
But their salad dressing business is huge it's like a four or five hundred million dollars a year .
We buy salad dressing from them . We use .
We use some of their stuff for salads too if you guys obviously you're you've moved to some distribution of some of your stuff into the retail market . Have you thought about doing that with your dressings .
Yeah , we've thought about it . We have some inherent challenges because we make so much and we don't make 100% of them there , but most of them are made there and they're not shelf-stable .
They're fresh and we believe in fresh . Yeah , that's been a quarter of a fresh and we believe in fresh it becomes a bit tricky .
So if you've got to have fresh , that means you've got to fight for shelf space in refrigerated aisles and slotting fees there because there's less space or more . We may do that someday .
It is my intent to focus on building 1,000 domestic restaurants , 500 international restaurants first Sounds like a plan and you know those are the goals for our organization and congratulations for getting focus , as an entrepreneur , on a goal .
I'll just take that . That's awesome . I mean seriously .
I guess you are You're right . I mean , it's like that's the hardest thing .
I've experienced is like just focus , just focus on this , do this Right .
Well , everybody's a little ADD out there that does what we do . Let's be honest A little bit .
But I think you think about . You know what's important , like what do you want out of this particular enterprise ? I mean , you know whatever it is right . Do you want freedom ? You know whatever it is right . Do you want freedom ? Do you want money ? Do you want lands and titles ? You know who knows right .
But I think that for me , anyway , for our team , we're like if we can execute the goals and the vision that we have today , it is beneficial professionally and financially for everybody . That's right .
And if we can bring everybody along which you know , there's 86 people in our corporate office and over 10,000 people that work for the brand around the world it's awesome . Wow . We want to bring that entire team of people along on this ride with us , and that's my focus .
That you know they're doing it . Yeah , if you're doing it , and it's got to be motivational for you because , let's be honest , you could cash out at this point if you wanted to and never work again , but you're still out there working your butt off . Okay , and and again . Another misconception about entrepreneurs .
They just want to make as much money as they can for themselves and their greeting . Okay it all , so many people tell us it comes down to helping all these other people you work with , and seeing them succeed is the greatest gratification . People tell us it comes down to helping all these other people you work with .
That's right , and seeing them succeed is the greatest gratification .
It is the greatest gratification All our people , all our franchisees . And look , we have issues with some and there's always tension and battles , but if a franchisee can build 20 restaurants and have a $50 million , $60 million business , I mean that's amazing . And I'm proud of that they're proud of , that They've created wealth , they've created a business .
We all benefit . It's very important that those are the goals Because , yes , sure you make a bunch of money , can you sell it ? Of course , I mean , people call me all the time You're going to sell it , but the answer is not yet . I mean someday maybe . But , there's more to do . There's more goals to hit .
It's fun to hit the goals , yeah , and we want to make sure we're doing it Well . Congratulations , yeah , thanks . Thanks for being here . It's been great .
Thank you guys , for having me .
It's been fun so well . I guess , without further ado , we're going to have to sign off .
I hate to say goodbye , I'll come back .
All right , good Mark , did you feel sorry enough for him to come back and see you ?
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